Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-21237 March 22, 1924 JAMES D.

BARTON, plaintiff-appellee, vs. LEYTE ASPHALT & MINERAL OIL CO., LTD., defendant-appellant. Block, Johnston & Greenbaum and Ross, Lawrence & Selph for appellant. Frank B. Ingersoll for appellee. STREET, J.: This action was instituted in the Court of First Instance of the City of Manila by James D. Barton, to recover of the Leyte Asphalt & Mineral Oil Co., Ltd., as damages for breach of contract, the sum of $318,563.30, United States currency, and further to secure a judicial pronouncement to the effect that the plaintiff is entitled to an extension of the terms of the sales agencies specified in the contract Exhibit A. The defendant answered with a general denial, and the cause was heard upon the proof, both documentary and oral, after which the trial judge entered a judgment absolving the defendant corporation from four of the six causes of action set forth in the complaint and giving judgment for the plaintiff to recover of said defendant, upon the first and fourth causes of action, the sum of $202,500, United States currency, equivalent to $405,000, Philippine currency, with legal interest from June 2, 1921, and with costs. From this judgment the defendant company appealed. The plaintiff is a citizen of the United States, resident in the City of Manila, while the defendant is a corporation organized under the law of the Philippine Islands with its principal office in the City of Cebu, Province of Cebu, Philippine Islands. Said company appears to be the owner by a valuable deposit of bituminous limestone and other asphalt products, located on the Island of Leyte and known as the Lucio mine. On April 21, 1920, one William Anderson, as president and general manager of the defendant company, addressed a letter Exhibit B, to the plaintiff Barton, authorizing the latter to sell the products of the Lucio mine in the Commonwealth of Australia and New Zealand upon a scale of prices indicated in said letter. In the third cause of action stated in the complaint the plaintiff alleges that during the life of the agency indicated in Exhibit B, he rendered services to the defendant company in the way of advertising and demonstrating the products of the defendant and expended large sums of money in visiting various parts of the world for the purpose of carrying on said advertising and demonstrations, in shipping to various parts of the world samples of the products of the defendant, and in otherwise carrying on advertising work. For these services and expenditures the plaintiff sought, in said third cause of action, to recover the sum of $16,563.80, United States currency. The court, however, absolved the defendant from all liability on this cause of action and the plaintiff did not appeal, with the result that we are not now concerned with this phase of the case. Besides, the authority contained in said Exhibit B was admittedly superseded by the authority expressed in a later letter, Exhibit A, dated October 1, 1920. This document bears the approval of the board of directors of the defendant company and was formally accepted by the plaintiff. As it supplies the principal basis of the action, it will be quoted in its entirety. (Exhibit A) CEBU, CEBU, P. I. October 1, 1920. JAMES D. BARTON, Esq., Cebu Hotel City. DEAR SIR: You are hereby given the sole and exclusive sales agency for our bituminous limestone and other asphalt products of the Leyte Asphalt and Mineral Oil Company, Ltd., May first, 1922, in the following territory: Australia New Zealand Tasmania Saigon India Sumatra Java China Hongkong

Siam and the Straits Settlements, also in the United States of America until May 1, 1921. As regard bituminous limestone mined from the Lucio property. No orders for less than one thousand (1,000) tons will be accepted except under special agreement with us. All orders for said products are to be billed to you as follows: Per ton In 1,000 ton lots ........................................... P15 In 2,000 ton lots ........................................... 14 In 5,000 ton lots ........................................... 12 In 10,000 ton lots .......................................... 10 with the understanding, however that, should the sales in the above territory equal or exceed ten thousand (10,000) tons in the year ending October 1, 1921, then in that event the price of all shipments made during the above period shall be ten pesos (P10) per ton, and any sum charged to any of your customers or buyers in the aforesaid territory in excess of ten pesos (P10) per ton, shall be rebated to you. Said rebate to be due and payable when the gross sales have equalled or exceeded ten thousand (10,000) tons in the twelve months period as hereinbefore described. Rebates on lesser sales to apply as per above price list.

You are to have full authority to sell said product of the Lucio mine for any sum see fit in excess of the prices quoted above and such excess in price shall be your extra and additional profit and commission. Should we make any collection in excess of the prices quoted, we agree to remit same to your within ten (10) days of the date of such collections or payments. All contracts taken with municipal governments will be subject to inspector before shipping, by any authorized representative of such governments at whatever price may be contracted for by you and we agree to accept such contracts subject to draft attached to bill of lading in full payment of such shipment. It is understood that the purchasers of the products of the Lucio mine are to pay freight from the mine carriers to destination and are to be responsible for all freight, insurance and other charges, providing said shipment has been accepted by their inspectors. All contracts taken with responsible firms are to be under the same conditions as with municipal governments. All contracts will be subject to delays caused by the acts of God, over which the parties hereto have no control. It is understood and agreed that we agree to load all ships, steamers, boats or other carriers prompty and without delay and load not less than 1,000 tons each twenty-four hours after March 1, 1921, unless we so notify you specifically prior to that date we are prepared to load at that rate, and it is also stipulated that we shall not be required to ship orders of 5,000 tons except on 30 days notice and 10,000 tons except on 60 days notice. If your sales in the United States reach five thousand tons on or before May 1, 1921, you are to have sole rights for this territory also for one year additional and should your sales in the second year reach or exceed ten thousand tons you are to have the option to renew the agreement for this territory on the same terms for an additional two years. Should your sales equal exceed ten thousand (10,000) tons in the year ending October 1, 1921, or twenty thousand (20,000) tons by May 1, 1922, then this contract is to be continued automatically for an additional three years ending April 30, 1925, under the same terms and conditions as above stipulated. The products of the other mines can be sold by you in the aforesaid territories under the same terms and conditions as the products of the Lucio mine; scale of prices to be mutually agreed upon between us. LEYTE ASPHALT & MINERAL OIL CO., LTD. By (Sgd.) WM. ANDERSON President (Sgd.) W. C. A. PALMER Secretary Approved by Board of Directors, October 1, 1920. (Sgd.) WM. ANDERSON President Accepted. (Sgd.) JAMES D. BARTON Witness D. G. MCVEAN Upon careful perusal of the fourth paragraph from the end of this letter it is apparent that some negative word has been inadvertently omitted before "prepared," so that the full expression should be "unless we should notify you specifically prior to that date that we are unprepared to load at that rate," or "not prepared to load at that rate." Very soon after the aforesaid contract became effective, the plaintiff requested the defendant company to give him a similar selling agency for Japan. To this request the defendant company, through its president, Wm. Anderson, replied, under date of November 27, 1920, as follows: In re your request for Japanese agency, will say, that we are willing to give you, the same commission on all sales made by you in Japan, on the same basis as your Australian sales, but we do not feel like giving you a regular agency for Japan until you can make some large sized sales there, because some other people have given us assurances that they can handle our Japanese sales, therefore we have decided to leave this agency open for a time. Meanwhile the plaintiff had embarked for San Francisco and upon arriving at that port he entered into an agreement with Ludvigsen & McCurdy, of that city, whereby said firm was constituted a subagent and given the sole selling rights for the bituminous limestone products of the defendant company for the period of one year from November 11, 1920, on terms stated in the letter Exhibit K. The territory assigned to Ludvigsen & McCurdy included San Francisco and all territory in California north of said city. Upon an earlier voyage during the same year to Australia, the plaintiff had already made an agreement with Frank B. Smith, of Sydney, whereby the latter was to act as the plaintiff's sales agent for bituminous limestone mined at the defendant's quarry in Leyte, until February 12, 1921. Later the same agreement was extended for the period of one year from January 1, 1921. (Exhibit Q.) On February 5, 1921, Ludvigsen & McCurdy, of San Francisco, addressed a letter to the plaintiff, then in San Francisco, advising hi that he might enter an order for six thousand tons of bituminous limestone to be loaded at Leyte not later than May 5, 1921, upon terms stated in the letter Exhibit G. Upon this letter the plaintiff immediately indorsed his acceptance. The plaintiff then returned to Manila; and on March 2, 1921, Anderson wrote to him from Cebu, to the effect that the company was behind with construction and was not then able to handle big contracts. (Exhibit FF.) On March 12, Anderson was in Manila and the two had an interview in the Manila Hotel, in the course of which the plaintiff informed Anderson of the San Francisco order. Anderson thereupon said that, owing to lack of capital, adequate facilities had not been provided by the company for filling large orders and suggested that the plaintiff had better hold up in the matter of taking orders. The plaintiff expressed surprise at this and told Anderson that he had not only the San Francisco order (which he says he exhibited to Anderson) but other orders for large quantities of bituminous limestone to be shipped to Australia and Shanghai. In another interview on the same Anderson definitely informed the plaintiff that the contracts which be claimed to have procured would not be filled.

Three days later the plaintiff addressed a letter (Exhibit Y) to the defendant company in Cebu, in which he notified the company to be prepared to ship five thousand tons of bituminous limestone to John Chapman Co., San Francisco, loading to commence on May 1, and to proceed at the rate of one thousand tons per day of each twenty-four hours, weather permitting. On March 5, 1921, Frank B. Smith, of Sydney, had cabled the plaintiff an order for five thousand tons of bituminous limestone; and in his letter of March 15 to the defendant, the plaintiff advised the defendant company to be prepared to ship another five thousand tons of bituminous limestone, on or about May 6, 1921, in addition to the intended consignment for San Francisco. The name Henry E. White was indicated as the name of the person through whom this contract had been made, and it was stated that the consignee would be named later, no destination for the shipment being given. The plaintiff explains that the name White, as used in this letter, was based on an inference which he had erroneously drawn from the cable sent by Frank B. Smith, and his intention was to have the second shipment consigned to Australia in response to Smith's order. It will be noted in connection with this letter of the plaintiff, of March 15, 1921, that no mention was made of the names of the person, or firm, for whom the shipments were really intended. The obvious explanation that occurs in connection with this is that the plaintiff did not then care to reveal the fact that the two orders had originated from his own subagents in San Francisco and Sydney. To the plaintiff's letter of March 15, the assistant manager of the defendant company replied on March, 25, 1921, acknowledging the receipt of an order for five thousand tons of bituminous limestone to be consigned to John Chapman Co., of San Francisco, and the further amount of five thousand tons of the same material to be consigned to Henry E. White, and it was stated that "no orders can be entertained unless cash has been actually deposited with either the International Banking Corporation or the Chartered Bank of India, Australia and China, Cebu." (Exhibit Z.) To this letter the plaintiff in turn replied from Manila, under date of March, 1921, questioning the right of the defendant to insist upon a cash deposit in Cebu prior to the filling of the orders. In conclusion the plaintiff gave orders for shipment to Australia of five thousand tons, or more, about May 22, 1921, and ten thousand tons, or more, about June 1, 1921. In conclusion the plaintiff said "I have arranged for deposits to be made on these additional shipments if you will signify your ability to fulfill these orders on the dates mentioned." No name was mentioned as the purchaser, or purchases, of these intended Australian consignments. Soon after writing the letter last above-mentioned, the plaintiff embarked for China and Japan. With his activities in China we are not here concerned, but we note that in Tokio, Japan, he came in contact with one H. Hiwatari, who appears to have been a suitable person for handling bituminous limestone for construction work in Japan. In the letter Exhibit X, Hiwatari speaks of himself as if he had been appointed exclusive sales agent for the plaintiff in Japan, but no document expressly appointing him such is in evidence. While the plaintiff was in Tokio he procured the letter Exhibit W, addressed to himself, to be signed by Hiwatari. This letter, endited by the plaintiff himself, contains an order for one thousand tons of bituminous limestone from the quarries of the defendant company, to be delivered as soon after July 1, 1921, as possible. In this letter Hiwatari states, "on receipt of the cable from you, notifying me of date you will be ready to ship, and also tonnage rate, I will agree to transfer through the Bank of Taiwan, of Tokio, to the Asia Banking Corporation, of Manila, P. I., the entire payment of $16,000 gold, to be subject to our order on delivery of documents covering bill of lading of shipments, the customs report of weight, and prepaid export tax receipt. I will arrange in advance a confirmed or irrevocable letter of credit for the above amounts so that payment can be ordered by cable, in reply to your cable advising shipping date." In a letter, Exhibit X, of May 16, 1921, Hiwatari informs the plaintiff that he had shown the contract, signed by himself, to the submanager of the Taiwan Bank who had given it as his opinion that he would be able to issue, upon request of Hiwatari, a credit note for the contracted amount, but he added that the submanager was not personally able to place his approval on the contract as that was a matter beyond his authority. Accordingly Hiwatari advised that he was intending to make further arrangements when the manager of the bank should return from Formosa. In the letter of May 5, 1921, containing Hiwatari's order for one thousand tons of bituminous limestone, it was stated that if the material should prove satisfactory after being thoroughly tested by the Paving Department of the City of Tokio, he would contract with the plaintiff for a minimum quantity of ten thousand additional tons, to be used within a year from September 1, 1921, and that in this event the contract was to be automatically extended for an additional four years. The contents of the letter of May 5 seems to have been conveyed, though imperfectly, by the plaintiff to his attorney, Mr. Frank B. Ingersoll, of Manila; and on May 17, 1921, Ingersoll addressed a note to the defendant company in Cebu in which he stated that he had been requested by the plaintiff to notify the defendant that the plaintiff had accepted an order from Hiwatari, of Tokio, approved by the Bank of Taiwan, for a minimum order of ten thousand tons of the stone annually for a period of five years, the first shipment of one thousand tons to be made as early after July 1 as possible. It will be noted that this communication did not truly reflect the contents of Hiwatari's letter, which called unconditionally for only one thousand tons, the taking of the remainder being contingent upon future eventualities. It will be noted that the only written communications between the plaintiff and the defendant company in which the former gave notice of having any orders for the sale of bituminous limestone are the four letters Exhibit Y, AA, BB, and II. In the first of these letters, dated March 15, 1921, the plaintiff advises the defendant company to be prepared to ship five thousand tons of bituminous limestone, to be consigned to John Chapman, Co., of San Francisco, to be loaded by March 5, and a further consignment of five thousand tons, through a contract with Henry E. White, consignees to be named later. In the letter Exhibit BB dated May 17, 1921, the plaintiff's attorney gives notice of the acceptance by plaintiff of an order from Hiwatari, of Tokio, approved by the Bank of Taiwan, for a minimum of ten thousand annually for a period of five years, first shipment of a thousand tons to be as early after July 1 as possible. In the letter Exhibit H the plaintiff gives notice of an "additional" (?) order from H. E. White, Sydney, for two lots of bituminous limestone of five thousand tons each, one for shipment not later than June 30, 1921, and the other by July 20, 1921. In the same letter thousand tons from F. B. Smith, to be shipped to Brisbane, Australia, by June 30, and a similar amount within thirty days later.

After the suit was brought, the plaintiff filed an amendment to his complaint in which he set out, in tabulated form, the orders which he claims to have received and upon which his letters of notification to the defendant company were based. In this amended answer the name of Ludvigsen & McCurdy appears for the first time; and the name of Frank B. Smith, of Sydney, is used for the first time as the source of the intended consignments of the letters, Exhibits G, L, M, and W, containing the orders from Ludvigen & McCurdy, Frank B. Smith and H. Hiwatari were at no time submitted for inspection to any officer of the defendant company, except possibly the Exhibit G, which the plaintiff claims to have shown to Anderson in Manila on March, 12, 1921. The different items conspiring the award which the trial judge gave in favor of the plaintiff are all based upon the orders given by Ludvigsen & McCurdy (Exhibit G), by Frank B. Smith (Exhibit L and M), and by Hiwatari in Exhibit W; and the appealed does not involve an order which came from Shanghai, China. We therefore now address ourselves to the question whether or not the orders contained in Exhibit G, L, M, and W, in connection with the subsequent notification thereof given by the plaintiff to the defendant, are sufficient to support the judgment rendered by the trial court. The transaction indicated in the orders from Ludvigsen, & McCurdy and from Frank B. Smith must, in our opinion, be at once excluded from consideration as emanating from persons who had been constituted mere agents of the plaintiff. The San Francisco order and the Australian orders are the same in legal effect as if they were orders signed by the plaintiff and drawn upon himself; and it cannot be pretended that those orders represent sales to bona fide purchasers found by the plaintiff. The original contract by which the plaintiff was appointed sales agent for a limited period of time in Australia and the United States contemplated that he should find reliable and solvent buyers who should be prepared to obligate themselves to take the quantity of bituminous limestone contracted for upon terms consistent with the contract. These conditions were not met by the taking of these orders from the plaintiff's own subagents, which was as if the plaintiff had bought for himself the commodity which he was authorized to sell to others. Article 267 of the Code of Commerce declares that no agent shall purchase for himself or for another that which he has been ordered to sell. The law has placed its ban upon a broker's purchasing from his principal unless the latter with full knowledge of all the facts and circumstances acquiesces in such course; and even then the broker's action must be characterized by the utmost good faith. A sale made by a broker to himself without the consent of the principal is ineffectual whether the broker has been guilty of fraudulent conduct or not. (4 R. C. L., 276-277.) We think, therefore, that the position of the defendant company is indubitably sound in so far as it rest upon the contention that the plaintiff has not in fact found any bona fidepurchasers ready and able to take the commodity contracted for upon terms compatible with the contract which is the basis of the action. It will be observed that the contract set out at the beginning of this opinion contains provisions under which the period of the contract might be extended. That privilege was probably considered a highly important incident of the contract and it will be seen that the sale of five thousand tons which the plaintiff reported for shipment to San Francisco was precisely adjusted to the purpose of the extension of the contract for the United States for the period of an additional year; and the sales reported for shipment to Australia were likewise adjusted to the requirements for the extention of the contract in that territory. Given the circumstances surrounding these contracts as they were reported to the defendant company and the concealment by the plaintiff of the names of the authors of the orders, -- who after all were merely the plaintiff's subagents, the officers of the defendant company might justly have entertained the suspicion that the real and only person behind those contracts was the plaintiff himself. Such at least turns out to have been the case. Much energy has been expended in the briefs upon his appeal over the contention whether the defendant was justified in laying down the condition mentioned in the letter of March 26, 1921, to the effect that no order would be entertained unless cash should be deposited with either the International Banking Corporation of the Chartered Bank of India, Australia and China, in Cebu. In this connection the plaintiff points to the stipulation of the contract which provides that contracts with responsible parties are to be accepted "subject to draft attached to bill of lading in full payment of such shipment." What passed between the parties upon this point appears to have the character of mere diplomatic parrying, as the plaintiff had no contract from any responsible purchaser other than his own subagents and the defendant company could no probably have filled the contracts even if they had been backed by the Bank of England. Upon inspection of the plaintiff's letters (Exhibit Y and AA), there will be found ample assurance that deposits for the amount of each shipment would be made with a bank in Manila provided the defendant would indicated its ability to fill the orders; but these assurance rested upon no other basis than the financial responsibility of the plaintiff himself, and this circumstance doubtless did not escape the discernment of the defendant's officers. With respect to the order from H. Hiwatari, we observe that while he intimates that he had been promised the exclusive agency under the plaintiff for Japan, nevertheless it does not affirmatively appear that he had been in fact appointed to be such at the time he signed to order Exhibit W at the request of the plaintiff. It may be assumed, therefore, that he was at that time a stranger to the contract of agency. It clearly appears, however, that he did not expect to purchase the thousand tons of bituminous limestone referred to in his order without banking assistance; and although the submanager of the Bank of Taiwan had said something encouraging in respect to the matter, nevertheless that official had refrained from giving his approval to the order Exhibit W. It is therefore not shown affirmatively that this order proceeds from a responsible source. The first assignment of error in the appellant's brief is directed to the action of the trial judge in refusing to admit Exhibit 2, 7, 8, 9 and 10, offered by the defendant, and in admitting Exhibit E, offered by the plaintiff. The Exhibit 2 is a letter dated June 25, 1921, or more than three weeks after the action was instituted, in which the defendant's assistant general manager undertakes to reply to the plaintiff's letter of March 29 proceeding. It was evidently intended as an argumentative presentation of the plaintiff's point of view in the litigation then pending, and its probative value is so slight, even if admissible at all, that there was no error on the part of the trial court in excluding it. Exhibit 7, 8, 9 and 10 comprise correspondence which passed between the parties by mail or telegraph during the first part of the year 1921. The subject-matter of this correspondence relates to efforts that were being made by Anderson to dispose of the controlling in the defendant corporation, and Exhibit 9 in particular contains an offer from the plaintiff, representing certain

associates, to but out Anderson's interest for a fixed sum. While these exhibits perhaps shed some light upon the relations of the parties during the time this controversy was brewing, the bearing of the matter upon the litigation before us is too remote to exert any definitive influence on the case. The trial court was not in error in our opinion in excluding these documents. Exhibit E is a letter from Anderson to the plaintiff, dated April 21, 1920, in which information is given concerning the property of the defendant company. It is stated in this letter that the output of the Lucio (quarry) during the coming year would probably be at the rate of about five tons for twenty-four hours, with the equipment then on hand, but that with the installation of a model cableway which was under contemplation, the company would be able to handle two thousand tons in twenty-four hours. We see no legitimate reason for rejecting this document, although of slight probative value; and her error imputed to the court in admitting the same was not committed. Exhibit 14, which was offered in evidence by the defendant, consists of a carbon copy of a letter dated June 13, 1921, written by the plaintiff to his attorney, Frank B. Ingersoll, Esq., of Manila, and in which plaintiff states, among other things, that his profit from the San Francisco contract would have been at the rate of eigthy-five cents (gold) per ton. The authenticity of this city document is admitted, and when it was offered in evidence by the attorney for the defendant the counsel for the plaintiff announced that he had no objection to the introduction of this carbon copy in evidence if counsel for the defendant would explain where this copy was secured. Upon this the attorney for the defendant informed the court that he received the letter from the former attorneys of the defendant without explanation of the manner in which the document had come into their possession. Upon this the attorney for the plaintiff made this announcement: "We hereby give notice at this time that unless such an explanation is made, explaining fully how this carbon copy came into the possession of the defendant company, or any one representing it, we propose to object to its admission on the ground that it is a confidential communication between client and lawyer." No further information was then given by the attorney for the defendant as to the manner in which the letter had come to his hands and the trial judge thereupon excluded the document, on the ground that it was a privileged communication between client and attorney. We are of the opinion that this ruling was erroneous; for even supposing that the letter was within the privilege which protects communications between attorney and client, this privilege was lost when the letter came to the hands of the adverse party. And it makes no difference how the adversary acquired possession. The law protects the client from the effect of disclosures made by him to his attorney in the confidence of the legal relation, but when such a document, containing admissions of the client, comes to the hand of a third party, and reaches the adversary, it is admissible in evidence. In this connection Mr. Wigmore says: The law provides subjective freedom for the client by assuring him of exemption from its processes of disclosure against himself or the attorney or their agents of communication. This much, but not a whit more, is necessary for the maintenance of the privilege. Since the means of preserving secrecy of communication are entirely in the client's hands, and since the privilege is a derogation from the general testimonial duty and should be strictly construed, it would be improper to extend its prohibition to third persons who obtain knowledge of the communications. One who overhears the communication, whether with or without the client's knowledge, is not within the protection of the privilege. The same rule ought to apply to one who surreptitiously reads or obtains possession of a document in original or copy. (5 Wigmore on Evidence, 2d ed., sec. 2326.) Although the precedents are somewhat confusing, the better doctrine is to the effect that when papers are offered in evidence a court will take no notice of how they were obtained, whether legally or illegally, properly or improperly; nor will it form a collateral issue to try that question. (10 R. C. L., 931; 1 Greenl. Evid., sec. 254a; State vs. Mathers, 15 L. R. A., 268; Gross vs. State, 33 L. R. A., [N. S.], 477, note.) Our conclusion upon the entire record is that the judgment appealed from must be reversed; and the defendant will be absolved from the complaint. It is so ordered, without special pronouncement as to costs of either instance. Araullo, C.J., Johnson, Avancea, Ostrand, Johns and Romualdez, JJ., concur.

Separate Opinions MALCOLM, J., dissenting: An intensive scrutiny of every phase of this case leads me to the conclusion that the trial judge was correct in his findings of fact and in his decision. Without encumbering the case with a long and tedious dissent, I shall endeavor to explain my point of view as briefly and clearly as possible. A decision must be reached on the record as it is and not on a record as we would like to have it. The plaintiff and the defendant deliberately entered into a contract, the basis of this action. The plaintiff, proceeding pursuant to this contract, spent considerable effort and used considerable money to advance the interests of the defendant and to secure orders for its products. These orders were submitted to the president of the defendant company personally and later formally by writing. Prior to the institution of the suit, the only objection of the defendant was that the money should be deposited with either the International Banking Corporation or the Chartered Bank of India, Australia and China at Cebu, a stipulation not found in the contract. A reasonable deduction, therefore, is that the plaintiff presented orders under circumstances which were a substantial compliance with the terms of the contract with the defendant, and which insured to the defendant payment for its deliveries according to the price agreed upon, and that as the defendant has breached its contract, it must respond in damages. The current running through the majority opinion is that the order emanated from subagents of the plaintiff, and that no bona fide purchasers were ready and able to take the commodity contracted for upon terms compatible with the contract. The answer is, in the first place, that the contract nowhere prohibits the plaintiff to secure subagents. The answer is, in the second place, that the orders were so phrased as to make the persons making them personally responsible. The Ludvigsen & McCurdy order from San Francisco begins: "You can enter our order for 6,000 tons of bituminous limestone as per sample submitted, at $10 gold per ton, f. o. b., island of Leyte, subject to the following terms and conditions:

* * * "(Exhibit G). The Smith order from Australia contains the following: "It is therefore with great pleasure I confirm the booking of the following orders, to be shipped at least within a week of respective dates: . . ." (Exhibit L). The Japan order starts with the following sentence: "You can enter my order for 1,000 tons of 1,000 kilos each of bituminous limestone from the quarries of the Leyte Asphalt and Mineral Oil Co. . . ." (Exhibit W.) But the main point of the plaintiff which the majority decision misses entirely centers on the proposition that the orders were communicated by the plaintiff to the defendant, and that the only objection the defendant had related to the manner of payment. To emphasize this thought again, let me quote the reply of the defendant to the plaintiff when the defendant acknowledge receipts of the orders placed by the plaintiff. The letter reads: "In reply to same we have to advice you that no orders can be entertained unless cash has been actually deposited with either the International Banking Corporation or the Chartered Bank of India, Australia and China, Cebu." (Exhibit Y.) Prior to the filing of suit, the defendant company never at any time raised any questioned as to whether the customers secured by plaintiff were "responsible firms" within the meaning of the contract, and never secured any information whatsoever as to their financial standing. Consequently, defendant is now estopped by its conduct from raising new objections for rejection of the orders. (Mechem on Agency, section 2441.) The majority decision incidentally takes up for consideration assignments of error 1 and 2 having to do with either the admission or the rejection by the trial court of certain exhibits. Having in mind that the Court reverses the court a quo on the facts, what is said relative to these two assignments is absolutely unnecessary for a judgment, and even as obiter dicta, contains unfortunate expressions. Exhibit 14, for example, is a letter addressed by the plaintiff to his lawyer and probably merely shown to the counsel of the defendant during negotiations to seek a compromise. Whether that exhibit be considered improperly rejected or not would not change the result one iota. The rule now announced by the Court that it makes no difference how the adversary acquired possession of the document, and that a court will take no notice of how it was obtained, is destructive of the attorney's privilege and constitutes and obstacle to attempts at friendly compromise. In the case of Uy Chico vs. Union Life Assurance Society ([1915], 29 Phil., 163), it was held that communications made by a client to his attorney for the purpose of being communicated to others are not privileged if they have been so communicated. But here, there is no intimation that Exhibit 14 was sent by the client to the lawyer for the purpose of being communicated to others. The Supreme Court of Georgia in the case of Southern Railway Co. vs. White ([1899], 108 Ga., 201), held that statements in a letter to a party's attorney handed by the latter to the opponent's attorney, are confidential communications and must be excluded. Briefly, the decision of the majority appears to me to be defective in the following particulars: (1) It sets aside without good reason the fair findings of fact as made by the trial court and substitutes therefor other findings not warranted by the proof; (2) it fails to stress plaintiff's main argument, and (3) it lay downs uncalled for rules which undermine the inviolability of a client's communications to his attorney. Accordingly, I dissent and vote for an affirmance of the judgment. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 34098 September 17, 1930 ORIENT INSURANCE COMPANY, petitioner, vs. E. P. REVILLA, Judge of First Instance of Manila, and TEAL MOTOR CO., INC., respondents. Gibbs and McDonough for petitioner. Guevara, Francisco and Recto for respondents. STREET, J.: This is an original petition for writs of certiorari and mandamus filed in this court by the Orient Insurance Company against the respondent judge of the Court of First Instance of Manila and the Teal Motor Co., Inc. The object of the petition is to obtain an order requiring the respondent judge to permit the attorney for the petitioner to examine a letter (Exhibits 49 and 49-Act) part of which has been read into the record in the course of the examination of one of the witnesses testifying for the plaintiff in the case of Teal Motor Co., Inc. vs. Orient Insurance Company, now pending in the Court of First Instance of the City of Manila, civil case No. 35825, with which, for purposes of trial, have been consolidated several other cases of similar character. The cause is now before us for resolution upon the complaint and answer interposed by the two respondents. The respondent Teal Motor Co., Inc. is plaintiff in a civil action instituted in the Court of First Instance of Manila (civil case No. 35825) for the purpose of recovering upon two fire insurance policies issued by the Orient Insurance Company, aggregating P60,000, upon a stock of merchandise alleged to be of the value of P414,513.56, which, with the exception of salvage valued at about P50,000, was destroyed by a fire on or about January 6, 1929. In one of the clauses of the policies sued upon is a stipulation to the effect that all benefit under the policy would be forfeited if, in case of loss, the claim should be rejected by the insurer and action or suit should not be commenced within three months after such rejection. In the answer of the Orient Insurance Company, interposed in the civil case mentioned, it is alleged, by way of defense, that the company rejected the claim on April 15, 1929, that notice of such rejection was given to the plaintiff by letter on the same day, and that suit was not instituted on the policy until August 3, 1929, which was more than three months after the rejection of the claim. In a replication to the answer of the defendant, containing the foregoing and other defenses, the plaintiff admitted that the adjusters of the defendant company had, on April 15, 1929, notified the plaintiff that the Orient Insurance Company would not pay the claim, basing refusal upon alleged incendiarism and fraud on the part of the plaintiff; and by way of avoidance, it was alleged in the replication that, after notification of denial of liability by the insurance company, one E. E. Elser, as representative of the company, expressly requested the plaintiff to defer judicial action until after the following July 31, stating that three were

great possibilities that an extrajudicial compromise might be arranged in the matter; and it was further asserted, in the replication, that the plaintiff had deferred action, relying upon this request. It will thus be seen that the reason for the admitted delay in the institution of the action is an important issue in the case, or case, now in course of trial. It further appears that while case No. 35825 was in course of trial, as it still is, before the respondent judge, in the Court of First Instance of Manila, the witness E. M. Bachrach, president of the Teal Motor Co., Inc., while being examined in chief by the attorneys for the plaintiff, and speaking of the circumstances surrounding the institution of the action, said that he had reported certain conversations to plaintiff's attorneys, and he added: "I waited for about a week longer and not having heard anything about it, in the meantime, on the 13th of July, I received a letter from our attorneys, Guevara, Francisco & Recto, urging me to file these cases." The attorney for the defendant, Orient Insurance Company, thereupon interposed, saying: "I ask that the witness be required to produce the letter referred to from Mr. Guevara, or else his answer be stricken out. (To the witness) Have you got the letter there?" The witness replied that he had the letter with him and that he had no objection to show that part of the letter in which Guevara urged him to proceed with the cases. Upon being asked about the other part of the letter, the witness said that the other part contained private matter, "between the attorney and ourselves," meaning between the Teal Motor Co., Inc., and its attorneys. Thereupon the attorney for the defendant, Orient Insurance Company, said he would like to see the letter, inquiring as to its date. The witness replied that it bore date of July 13, 1929; and upon the court inquiring whether the witness had any objection to the reading of the letter by the attorney for the defendant, the witness replied that he wished to consult with his attorney. Upon this the attorney for the adversary party, the Orient Insurance Company, suggested that he would like to have the letter marked without his reading it, and it was accordingly marked as Exhibit 49. The attorney then said: "In view of the production of the letter, I withdraw the objection to the statement of the witness as to its contents," and he added: "I now ask the permission of the court to read the letter for my information." The court thereupon inquired of the attorney for the Teal Motor Co., Inc., whether he had any objection, and the attorney observed that he would have no objection to the disclosing of that part of the letter which referred exactly to the point of the urging of the filing of the complaints, and he added: "Unfortunately, the other part of the letter being a communication between a client and attorney, I don't think, if your Honor please, it can be disclosed without the consent of both." In the course of the colloquy which thereupon unsued between the attorney for the plaintiff and the attorney for the defendant, it was stated by the attorney for the plaintiff that only a part of the letter had anything to do with the urging of the presentation of the complaints in the cases to which the witness had testified, and that the other part of the letter referred to the contract of fees, or retaining of the services of plaintiff's attorneys in connection with said cases, a matter, so the attorney suggested, entirely distinct from the urging of the presentation of the cases. The attorney for the defendant thereupon insisted before the court that, inasmuch as all the letter refers to the case then in court, the entire document should be exhibited, in conformity with the rule that when part of a document is offered in evidence, the entire document must be presented. Upon this the respondent judge ruled as follows: "Objection of the counsel for the plaintiff and the witness, Mr. Barchrach, to the showing or reading of the whole letter in the record is sustained, and it is ordered that only that part of the letter which has been referred to by Mr. Bachrach in his testimony be read and transcribed into the record." To this ruling the attorney for the defendant excepted and the respondent judge then said: "Let that part of the letter pointed out by Mr. Bachrach be transcribed in the record;" whereupon the following part of the letter was read out in court and incorporated in the transcript. July 13, 1929 DEAR SIR: As you know, your attorney Mr. Basilio Francisco has turned over to us, prior to his departure, all the papers in connection with the insurance claim of the Teal Motor Co., Inc., on destroyed or burned merchandise, and everything is now ready for filing of the corresponding complaints in the Court of First Instance. When the matter above quoted had been thus read into the record, the attorney for the defendant made the following observation: "In view of the fact that counsel for the plaintiff has just now read into the record and presented as evidence a part of the letter of July 13, I now request that the entire letter be produced." This request was overruled by the court, and the attorney for the defendant excepted. After further discussion, upon the suggestion of the attorney for the defendant and by agreement of the counsel for both parties, the second page of the letter was marked 49-A by the clerk court. The incident was renewed when it came at turn of the attorney for the defendant to cross-examine the same witness E. M. Bachrach, when the attorney for the defendant, having ascertained from the witness that he still had the letter in his possession, and that he had not answered it in writing, formally offered the letter in evidence. The attorney for the plaintiff again objected, on the ground that the letter was of a privileged nature and that it was the personal property of the witness. Thereupon the court, receiving the letter in hand from the witness, observed that he had already ruled upon it, and after further discussion, the court sustained the objection of the attorney for the plaintiff and refused to admit in evidence so much of the letter as had not already been read into the record. The attorney for the defendant again excepted. At a later stage of the trial the attorney interposed a formal motion for reconsideration of the ruling of the court in refusing to admit the letter in evidence, or the part of it not already incorporated in the record. The court, however, adhered to its original ruling, and the attorney for the defendant excepted. Another incident that might be noted, though not alleged as a ground of relief in the petition before us, but set forth in the answer of the respondents, is that the attorney for the defendant procured a subpoena duces tecum to be issued by the clerk of court requiring the attorneys for the plaintiff to produce in court certain papers including the letter which gave rise to the present controversy. The court, on motion of the attorneys for the plaintiff, quashed said subpoena. The essential character of this incident, which we have perhaps narrated with unnecessary prolixity, is readily discernible. A witness for the plaintiff made an oral statement as to the substance of part of a letter which had been received by the plaintiff from its attorney, and when the fact was revealed that the communication had been made by letter, the attorney for the defendant requested that the witness be required to produce the letter in court, and if not, that his answer should be stricken out. This in legal effect was a demand for the production of "the best evidence," it being a well-known rule of law that a witness

cannot be permitted to give oral testimony as to the contents of a paper writing which can be produced in court. In response to this request that portion of the letter to which the witness had supposedly referred was read into the record. The respondent judge appears to have considered that the excerpt from the letter thus incorporated in the record was either proof of the defendant, its production having been demanded by defendant's counsel, or that at least the legal responsibility for the incorporation of said excerpt into the record was attributable to the defendant. We are unable to accept this view. The incorporation of this excerpt from the letter was a necessary support of the oral statement which the witness had made, and if this basis for such statement had not been laid by the incorporation of the excerpt into the record, the oral statement of the witness concerning the tenor of the letter should properly have been stricken out. But instead of withdrawing the oral statement of the witness concerning the nature of the written communication, the witness produced the letter and the part of it already quoted was read into the record. The excerpt in question must therefore be considered as proof submitted by the plaintiff; and there can be no question that, part of the letter having been introduced in behalf of the plaintiff, the whole of the letter could properly be examined by the other party, in accordance with the express provision of section 283 of the Code of Civil Procedure. It was stated in the court by the attorney for the plaintiff, in opposing the introduction of other portions of the letter in proof, that the other parts were privileged, because they related to the terms of employment between attorney and client, or to the fee to be paid to the attorney. With respect to this point it is difficult to see how a contract for fees could be considered privileged. Irrelevant it might, under certain circumstances, certainly be, but not privileged. Of course contracts between attorneys and clients are inherently personal and private matters, but they are a constant subject of litigation, and contracts relating to fees are essentially not of privileged nature. Privilege primarily refers to communications from client to attorney, an idea which of course includes communications from attorney to client relative to privileged matters. But, even supposing that the matter contained in the letter and withheld from the inspection of the adversary was originally of a privileged nature, the privilege was waived by the introduction in evidence of part of the letter. The provision in section 283 of the Code of Civil Procedure making the whole of a declaration, conversation, or writing admissible when part has been given in evidence by one party, makes no exception as to privileged matter; and the jurisprudence on the subject does not recognize any exception. Practically every feature of the question now under consideration was involved in the case of Western Union Tel. Co. vs. Baltimore & Ohio Tel. Co. (26 Fed., 55), which in 1885 came before Wallace, J., a distinguished jurist presiding in the Federal Circuit Court of the Southern District of New York. The substance of the case is well stated in the note to Kelly vs. Cummens (20 Am. & Eng. Ann. Cases, 1283, 1287), from which we quote as follows: In Western Union Tel. Co. vs. Baltimore, etc., Tel. Co. (26 Fed., 55), it appeared that upon a motion in the cause, which was in equity for a preliminary injunction, one of the questions involved was whether a reissued patent upon which the suit was founded was obtained for the legitimate purpose of correcting mistake or inadvertence in the specification and claims of the original, or whether it was obtained merely for the purpose of expanding the claims of the original in order to subordinate to the reissue certain improvements or inventions made by others after the grant of the original patent and before the application for the reissue. To fortify its theory of the true reasons for obtaining the reissue, the complainant upon that motion embodied in affidavits extracts from communications made by a patent expert and attorney in the office of the solicitor general of the complainant, to the president and the vice-president of the complainant, when the subject of applying for a reissue was under consideration by the officers of the complainant, and while the proceedings for a reissue were pending. After the cause had proceeded to the taking of proofs for final hearing the defendant sought to introduce in evidence the original communications, extracts from which were used by the complainant upon the motion for an injunction, on the ground that the parts of the communication which were not disclosed had an important bearing upon the history of the application for a reissue, and indicated that it was not made for any legitimate purpose. The complainant resisted the efforts of the defendant to have the original communications admitted, on the ground that they were privileged as made to its officers by its attorney, but it was held that the defendant was entitled to introduce them in evidence, the court saying: "The question, then, is whether the complainant can shelter itself behind its privilege to insist upon the privacy of the communications between its attorney and its other officers as confidential communications, when it has itself produced fragmentary part of them, and sought to use them as a weapon against the defendant to obtain the stringent remedy of a preliminary injunction. Assuming that the communications addressed to the president and vice-president of the complainant by Mr. Buckingham were communications made to the complainant by its attorney, and as such privileged at the option of the complainant, it was competent for the complainant to waive its privilege. It would hardly be contended that the complainant could introduce extracts from these communications as evidence in its own behalf for the purpose of a final hearing, and yet withhold the other parts if their production were required by the defendant. A party cannot waive such a privilege partially. He cannot remove the seal of secrecy from so much of the privileged communications as makes for his advantage, and insist that it shall not be removed as to so much as makes to the advantage of his adversary, or may neutralize the effect of such as has been introduced. Upon the principle it would seem that it cannot be material at what stage of the proceedings in a suit a party waives his right to maintain the secrecy of privileged communication. All the proceedings in the cause are constituent parts of the controversy, and it is not obvious how any distinction can obtain as to the effect of waiver when made by a party for the purpose of obtaining temporary relief and when made by him to obtain final relief." From the foregoing decision and other cases contained in the note referred to, we are led to the conclusion that the attorney for the defendant in the court below was entitled to examine the whole of the letter (Exhibit 49 and 49-A), with a view to the introduction in evidence of such parts thereof as may be relevant to the case on trial, and the respondent judge was in error in refusing to permit the inspection of the letter by said attorney. It is suggested in the argument for the respondents that the question of the admissibility in evidence of the parts of the letter not already read into the record was prematurely raised, and that the attorney for the defendant should have waited until it became his turn to present evidence in chief, when, as is supposed, the question could have been properly raised. We are of the opinion, however, that if the attorney for the defendant had a right to examine the letter, it should have been produced when he asked for

it on the cross-examination of the witness who had the letter in his possession. Besides, in the lengthy discussions between court and attorneys, occuring at different times, there was not the slightest suggestion from the court that the parts of the letter which were held inadmissible would be admitted at any time. Furthermore, the action of the court in quashing the subpoena duces tecum for the production of the letter shows that the court meant to rule that the letter could not be inspected at all by the attorney for the defendant. Objection is also here made by the attorney for the respondents to the use of the writ of mandamus for the purpose of correcting the error which is supposed to have been committed. The situation presented is, however, one where the herein petitioner has no other remedy. The letter which the petitioner seeks to examine has been ruled inadmissible, as to the parts not introduced in evidence by the defendant in the court below, and the respondent judge had not permitted the document to become a part of the record in such a way that the petitioner could take advantage of the error upon appeal to this court. It is idle to discuss whether other remedy would be speedy or adequate when there is no remedy at all. This court is loath, of course, to interfere in course of the trial of a case in a Court of First Instance, as such interference might frequently prolong unduly the litigation in that court. But this case has been pending before the respondent judge for a considerable period of time, and undoubtedly the probatory period will be necessarily extended much longer. Under these circumstances, the action of this court in entertaining the present application will either be conductive to the speedy determination of case, or at least will not appreciably extend the proceedings. It goes without saying that the subject matter of the contention is of a nature which makes the use of the writ ofmandamus appropriate, since the right from the exercise of which the petitioner is excluded is one to which it is entitled under the law and the duty to be performed is one pertaining to the respondent judge in his official capacity. From what has been said it follows that the writ of mandamus prayed for will be granted, and the respondent judge is directed to permit the attorney for the defendant (petitioner here) to inspect the letter (Exhibit 49 and 49-A) with a view to the introduction in evidence of such parts thereof as may be relevant to the issues made by the pleadings in civil case No. 35825 and other cases which have been consolidated with it for trial. So ordered, with costs against the respondent Teal Motor Co., Inc. Avancea, C.J., Villamor, Ostrand, Johns and Romualdez, JJ., concur.

Separate Opinions VILLA-REAL, J., concurring: I concur solely on the ground that the portion of the letter alleged to be privileged is not so.

Upjohn Co. v. United States, 449 U.S. 383 (1981)

Upjohn Co. v. United States No. 79-886 Argued November 5, 1980 Decided January 13, 1981 449 U.S. 383 CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT Syllabus When the General Counsel for petitioner pharmaceutical manufacturing corporation (hereafter petitioner) was informed that one of its foreign subsidiaries had made questionable payments to foreign government officials in order to secure government business, an internal investigation of such payments was initiated. As part of this investigation, petitioner's attorneys sent a questionnaire to all foreign managers seeking detailed information concerning such payments, and the responses were returned to the General Counsel. The General Counsel and outside counsel also interviewed the recipients of the questionnaire and other company officers and employees. Subsequently, based on a report voluntarily submitted by petitioner disclosing the questionable payments, the Internal Revenue Service (IRS) began an investigation to determine the tax consequences of such payments and issued a summons pursuant to 26 U.S.C. 762 demanding production of, inter alia, the questionnaires and the memoranda and notes of the interviews. Petitioner refused to produce the documents on the grounds that they were protected from disclosure by the attorney-client privilege and constituted the work product of attorneys prepared in anticipation of litigation. The United States then filed a petition in Federal District Court seeking enforcement of the summons. That court adopted the Magistrate's recommendation that the summons should be enforced, the Magistrate having concluded, inter alia, that the attorney-client privilege had been waived, and that the Government had made a sufficient showing of necessity to overcome the protection of the

work product doctrine. The Court of Appeals rejected the Magistrate's finding of a waiver of the attorney-client privilege, but held that, under the so-called "control group test," the privilege did not apply "[t]o the extent that the communications were made by officers and agents not responsible for directing [petitioner's] actions in response to legal advice . . . for the simple reason that the communications were not the 'client's'.'" The court also held that the work product doctrine did not apply to IRS summonses. Held: 1. The communications by petitioner's employees to counsel are covered by the attorney-client privilege insofar as the responses to the Page 449 U. S. 384 questionnaires and any notes reflecting responses to interview questions are concerned. Pp. 449 U. S. 389-397. (a) The control group test overlooks the fact that such privilege exists to protect not only the giving of professional advice to those who can act on it, but also the giving of information to the lawyer to enable him to give sound and informed advice. While in the case of the individual client the provider of information and the person who acts on the lawyer's advice are one and the same, in the corporate context, it will frequently be employees beyond the control group (as defined by the Court of Appeals) who will possess the information needed by the corporation's lawyers. Middle-level -- and indeed lower-level -- employees can, by actions within the scope of their employment, embroil the corporation in serious legal difficulties, and it is only natural that these employees would have the relevant information needed by corporate counsel if he is adequately to advise the client with respect to such actual or potential difficulties. Pp. 449 U. S. 390-392. (b) The control group test thus frustrates the very purpose of the attorney-client privilege by discouraging the communication of relevant information by employees of the client corporation to attorneys seeking to render legal advice to the client. The attorney's advice will also frequently be more significant to noncontrol employees than to those who officially sanction the advice, and the control group test makes it more difficult to convey full and frank legal advice to the employees who will put into effect the client corporation's policy. P. 449 U. S. 392. (c) The narrow scope given the attorney-client privilege by the Court of Appeals not only makes it difficult for corporate attorneys to formulate sound advice when their client is faced with a specific legal problem, but also threatens to limit the valuable efforts of corporate counsel to ensure their client's compliance with the law. Pp. 449 U. S. 392-393. (d) Here, the communications at issue were made by petitioner's employees to counsel for petitioner, acting as such, at the direction of corporate superiors in order to secure legal advice from counsel. Information not available from upper-echelon management was needed to supply a basis for legal advice concerning compliance with securities and tax laws, foreign laws, currency regulations, duties to shareholders, and potential litigation in each of these areas. The communications concerned matters within the scope of the employees' corporate duties, and the employees themselves were sufficiently aware that they were being questioned in order that the corporation could obtain legal advice. Pp. 449 U. S. 394-395 2. The work product doctrine applies to IRS summonses. Pp. 449 U. S. 397-402. (a) The obligation imposed by a tax summons remains subject to the traditional privileges and limitations, and nothing in the language Page 449 U. S. 385 or legislative.history of the IRS summons provisions suggests an intent on the part of Congress to preclude application of the work product doctrine. P. 449 U. S. 398. (b) The Magistrate applied the wrong standard when he concluded that the Government had made a sufficient showing of necessity to overcome the protections of the work product doctrine. The notes and memoranda sought by the Government constitute work product based on oral statements. If they reveal communications,

they are protected by the attorney-client privilege. To the extent they do not reveal communications, they reveal attorneys' mental processes in evaluating the communications. As Federal Rule of Civil Procedure 6, which accords special protection from disclosure to work product revealing an attorney's mental processes, and Hickman v. Taylor, 329 U. S. 495, make clear, such work product cannot be disclosed simply on a showing of substantial need or inability to obtain the equivalent without undue hardship. P. 449 U. S. 401. 600 F.2d 1223, reversed and remanded. REHNQUIST, J., delivered the opinion of the Court, in which BRENNAN, STEWART, WHITE, MARSHALL, BLACKMUN, POWELL, and STEVENS, JJ., joined, and in Parts I and III of which BURGER, C.J., joined. BURGER, C.J., filed an opinion concurring in part and concurring in the judgment, post, p. 449 U. S. 402. Page 449 U. S. 386 JUSTICE REHNQUIST delivered the opinion of the Court. We granted certiorari in this case to address important questions concerning the scope of the attorney-client privilege in the corporate context and the applicability of the work product doctrine in proceedings to enforce tax summonses. 445 U.S. 925. With respect to the privilege question, the parties and various amici have described our task as one of choosing between two "tests" which have gained adherents in the courts of appeals. We are acutely aware, however, that we sit to decide concrete cases, and not abstract propositions of law. We decline to lay down a broad rule or series of rules to govern all conceivable future questions in this area, even were we able to do so. We can and do, however, conclude that the attorney-client privilege protects the communications involved in this case from compelled disclosure, and that the work product doctrine does apply in tax summons enforcement proceedings.

I
Petitioner Upjohn Co. manufactures and sells pharmaceuticals here and abroad. In January, 1976, independent accountants conducting an audit of one of Upjohn's foreign subsidiaries discovered that the subsidiary made payments to or for the benefit of foreign government officials in order to secure government business. The accountants so informed petitioner Mr. Gerard Thomas, Upjohn's Vice President, Secretary, and General Counsel. Thomas is a member of the Michigan and New York Bars, and has been Upjohn's General Counsel for 20 years. He consulted with outside counsel and R. T. Parfet, Jr., Upjohn's Chairman of the Board. It was decided that the company would conduct an internal investigation of what were termed "questionable payments." As part of this investigation, the attorneys prepared a letter containing a questionnaire which was sent to "All Foreign General and Area Managers" over the Chairman's signature. The letter Page 449 U. S. 387 began by noting recent disclosures that several American companies made "possibly illegal" payments to foreign government officials, and emphasized that the management needed full information concerning any such payments made by Upjohn. The letter indicated that the Chairman had asked Thomas, identified as "the company's General Counsel," "to conduct an investigation for the purpose of determining the nature and magnitude of any payments made by the Upjohn Company or any of its subsidiaries to any employee or official of a foreign government." The questionnaire sought detailed information concerning such payments. Managers were instructed to treat the investigation as "highly confidential" and not to discuss it with anyone other than Upjohn employees who might be helpful in providing the requested information. Responses were to be sent directly to Thomas. Thomas and outside counsel also interviewed the recipients of the questionnaire and some 33 other Upjohn officers or employees as part of the investigation. On March 26, 1976, the company voluntarily submitted a preliminary report to the Securities and Exchange Commission on Form 8-K disclosing certain questionable payments. [Footnote 1] A copy of the report was simultaneously submitted to the Internal Revenue Service, which immediately began an investigation to

determine the tax consequences of the payments. Special agents conducting the investigation were given lists by Upjohn of all those interviewed and all who had responded to the questionnaire. On November 23, 1976, the Service issued a summons pursuant to 26 U.S.C. 7602 demanding production of: "All files relative to the investigation conducted under the supervision of Gerard Thomas to identify payments to employees of foreign governments and any political Page 449 U. S. 388 contributions made by the Upjohn Company or any of its affiliates since January 1, 1971, and to determine whether any funds of the Upjohn Company had been improperly accounted for on the corporate books during the same period." "The records should include but not be limited to written questionnaires sent to managers of the Upjohn Company's foreign affiliates, and memorandums or notes of the interviews conducted in the United States and abroad with officers and employees of the Upjohn Company and its subsidiaries." App. 17a-18a. The company declined to produce the documents specified in the second paragraph on the grounds that they were protected from disclosure by the attorney-client privilege and constituted the work product of attorneys prepared in anticipation of litigation. On August 31, 1977, the United States filed a petition seeking enforcement of the summons under 26 U.S.C. 7402(b) and 7604(a) in the United States District Court for the Western District of Michigan. That court adopted the recommendation of a Magistrate who concluded that the summons should be enforced. Petitioners appealed to the Court of Appeals for the Sixth Circuit, which rejected the Magistrate's finding of a waiver of the attorney-client privilege, 600 F.2d 1223, 1227, n. 12, but agreed that the privilege did not apply "[t]o the extent that the communications were made by officers and agents not responsible for directing Upjohn's actions in response to legal advice . . . , for the simple reason that the communications were not the 'client's.'" Id. at 1225. The court reasoned that accepting petitioners' claim for a broader application of the privilege would encourage upper-echelon management to ignore unpleasant facts and create too broad a "zone of silence." Noting that Upjohn's counsel had interviewed officials such as the Chairman and President, the Court of Appeals remanded to the District Court so that a determination of who was Page 449 U. S. 389 within the "control group" could be made. In a concluding footnote, the court stated that the work product doctrine "is not applicable to administrative summonses issued under 26 U.S.C. 7602." Id. at 1228, n. 13.

II
Federal Rule of Evidence 501 provides that "the privilege of a witness . . . shall be governed by the principles of the common law as they may be interpreted by the courts of the United States in light of reason and experience." The attorney-client privilege is the oldest of the privileges for confidential communications known to the common law. 8 J. Wigmore, Evidence 2290 (McNaughton rev.1961). Its purpose is to encourage full and frank communication between attorneys and their clients, and thereby promote broader public interests in the observance of law and administration of justice. The privilege recognizes that sound legal advice or advocacy serves public ends and that such advice or advocacy depends upon the lawyer's being fully informed by the client. As we stated last Term in Trammel v. United States, 445 U. S. 40, 445 U. S. 51 (1980): "The lawyer-client privilege rests on the need for the advocate and counselor to know all that relates to the client's reasons for seeking representation if the professional mission is to be carried out." And in Fisher v. United States, 425 U. S. 391, 425 U. S. 403 (1976), we recognized the purpose of the privilege to be "to encourage clients to make full disclosure to their attorneys." This rationale for the privilege has long been recognized by the Court, see Hunt v. Blackburn, 128 U. S. 464, 128 U. S. 470 (1888) (privilege "is

founded upon the necessity, in the interest and administration of justice, of the aid of persons having knowledge of the law and skilled in its practice, which assistance can only be safely and readily availed of when free from the consequences or the apprehension of disclosure"). Admittedly complications in the application of the privilege arise when the client is a corporation, which, in theory, is an artificial creature of the Page 449 U. S. 390 law, and not an individual; but this Court has assumed that the privilege applies when the client is a corporation, United States v. Louisville Nashville R. Co., 236 U. S. 318,236 U. S. 336 (1915), and the Government does not contest the general proposition. The Court of Appeals, however, considered the application of the privilege in the corporate context to present a "different problem," since the client was an inanimate entity, and "only the senior management, guiding and integrating the several operations, . . . can be said to possess an identity analogous to the corporation as a whole." 600 F.2d at 1226. The first case to articulate the so-called "control group test" adopted by the court below, Philadelphia v. Westinghouse Electric Corp., 210 F.Supp. 483, 485 (ED Pa.), petition for mandamus and prohibition denied sub nom. General Electric Co. v. Kirkpatrick, 312 F.2d 742 (CA3 1962), cert. denied, 372 U.S. 943 (1963), reflected a similar conceptual approach: "Keeping in mind that the question is, is it the corporation which is seeking the lawyer's advice when the asserted privileged communication is made?, the most satisfactory solution, I think, is that, if the employee making the communication, of whatever rank he may be, is in a position to control or even to take a substantial part in a decision about any action which the corporation may take upon the advice of the attorney, . . . then, in effect, he is (or personifies) the corporation when he makes his disclosure to the lawyer, and the privilege would apply." (Emphasis supplied.) Such a view, we think, overlooks the fact that the privilege exists to protect not only the giving of professional advice to those who can act on it, but also the giving of information to the lawyer to enable him to give sound and informed advice. See Trammel, supra at 445 U. S. 51; Fisher, supra at 425 U. S. 403. The first step in the resolution of any legal problem is ascertaining the factual background and sifting through the facts Page 449 U. S. 391 with an eye to the legally relevant. See ABA Code of Professional Responsibility, Ethical Consideration 4-1: "A lawyer should be fully informed of all the facts of the matter he is handling in order for his client to obtain the full advantage of our legal system. It is for the lawyer in the exercise of his independent professional judgment to separate the relevant and important from the irrelevant and unimportant. The observance of the ethical obligation of a lawyer to hold inviolate the confidences and secrets of his client not only facilitates the full development of facts essential to proper representation of the client, but also encourages laymen to seek early legal assistance." See also Hickman v. Taylor, 329 U. S. 495, 329 U. S. 511 (1947). In the case of the individual client, the provider of information and the person who acts on the lawyer's advice are one and the same. In the corporate context, however, it will frequently be employees beyond the control group as defined by the court below -- "officers and agents . . . responsible for directing [the company's] actions in response to legal advice" -- who will possess the information needed by the corporation's lawyers. Middle-level -- and indeed lower-level employees can, by actions within the scope of their employment, embroil the corporation in serious legal difficulties, and it is only natural that these employees would have the relevant information needed by corporate counsel if he is adequately to advise the client with respect to such actual or potential difficulties. This fact was noted in Diversified Industries, Inc. v. Meredith, 572 F.2d 596 (CA8 1978) (en banc):

"In a corporation, it may be necessary to glean information relevant to a legal problem from middle management or non-management personnel as well as from top executives. The attorney dealing with a complex legal problem" "is thus faced with a 'Hobson's choice.' If he interviews employees not having 'the very highest authority,' Page 449 U. S. 392 their communications to him will not be privileged. If, on the other hand, he interviews only those employees with 'the very highest authority,' he may find it extremely difficult, if not impossible, to determine what happened." Id. at 608-609 (quoting Weinschel, Corporate Employee Interviews and the Attorney-Client Privilege, 12 B.C.Ind. & Com.L.Rev. 873, 876 (1971)). The control group test adopted by the court below thus frustrates the very purpose of the privilege by discouraging the communication of relevant information by employees of the client to attorneys seeking to render legal advice to the client corporation. The attorney's advice will also frequently be more significant to noncontrol group members than to those who officially sanction the advice, and the control group test makes it more difficult to convey full and frank legal advice to the employees who will put into effect the client corporation's policy. See, e.g., Duplan Corp. v. Deering Milliken, Inc., 397 F.Supp. 1146, 1164 (SC 1974) ("After the lawyer forms his or her opinion, it is of no immediate benefit to the Chairman of the Board or the President. It must be given to the corporate personnel who will apply it"). The narrow scope given the attorney-client privilege by the court below not only makes it difficult for corporate attorneys to formulate sound advice when their client is faced with a specific legal problem, but also threatens to limit the valuable efforts of corporate counsel to ensure their client's compliance with the law. In light of the vast and complicated array of regulatory legislation confronting the modern corporation, corporations, unlike most individuals, "constantly go to lawyers to find out how to obey the law," Burnham, The Attorney-Client Privilege in the Corporate Arena, 24 Bus.Law. 901, 913 (1969), particularly since compliance with the law in this area is hardly an instinctive matter, see, e.g., United States v. United States Gypsum Co., 438 U. S. 422, 438 U. S. 440-441 (1978) ("the behavior proscribed by the [Sherman] Act is Page 449 U. S. 393 often difficult to distinguish from the gray zone of socially acceptable and economically justifiable business conduct"). [Footnote 2] The test adopted by the court below is difficult to apply in practice, though no abstractly formulated and unvarying "test" will necessarily enable courts to decide questions such as this with mathematical precision. But if the purpose of the attorney-client privilege is to be served, the attorney and client must be able to predict with some degree of certainty whether particular discussions will be protected. An uncertain privilege, or one which purports to be certain but results in widely varying applications by the courts, is little better than no privilege at all. The very terms of the test adopted by the court below suggest the unpredictability of its application. The test restricts the availability of the privilege to those officers who play a "substantial role" in deciding and directing a corporation's legal response. Disparate decisions in cases applying this test illustrate its unpredictability.Compare, e.g., Hogan v. Zletz, 43 F.R.D. 308, 315-316 (ND Okla.1967), aff'd in part sub nom. Natta v. Hogan, 392 F.2d 686 (CA10 1968) (control group includes managers and assistant managers of patent division and research and development department),with Congoleum Industries, Inc. v. GAF Corp., 49 F.R.D. 82, 83-85 (ED Pa.1969), aff'd,478 F.2d 1398 (CA3 1973) (control group includes only division and corporate vice-presidents, and not two directors of research and vice-president for production and research). Page 449 U. S. 394 The communications at issue were made by Upjohn employees [Footnote 3] to counsel for Upjohn, acting as such, at the direction of corporate superiors in order to secure legal advice from counsel. As the Magistrate found,

"Mr. Thomas consulted with the Chairman of the Board and outside counsel, and thereafter conducted a factual investigation to determine the nature and extent of the questionable payments and to be in a position to give leal advice to the company with respect to the payments." (Emphasis supplied.) 78-1 USTC 9277, pp. 83,598, 83,599. Information, not available from upper-echelon management, was needed to supply a basis for legal advice concerning compliance with securities and tax laws, foreign laws, currency regulations, duties to shareholders, and potential litigation in each of these areas. [Footnote 4] The communications concerned matters within the scope of the employees' corporate duties, and the employees themselves were sufficiently aware that they were being questioned in order that the corporation could obtain legal advice. The questionnaire identified Thomas as "the company's General Counsel" and referred in its opening sentence to the possible illegality of payments such as the ones on which information was sought. App. 40a. A statement of policy accompanying the questionnaire clearly indicated the legal implications of the investigation. The policy statement was issued "in order that there be no uncertainty in the future as to the policy with respect to the practices which are the subject of this investigation." Page 449 U. S. 395 It began "Upjohn will comply with all laws and regulations," and stated that commissions or payments "will not be used as a subterfuge for bribes or illegal payments" and that all payments must be "proper and legal." Any future agreements with foreign distributors or agents were to be approved "by a company attorney," and any questions concerning the policy were to be referred "to the company's General Counsel." Id. at 165a-166a. This statement was issued to Upjohn employees worldwide, so that even those interviewees not receiving a questionnaire were aware of the legal implications of the interviews. Pursuant to explicit instructions from the Chairman of the Board, the communications were considered "highly confidential" when made, id. at 39a, 43a, and have been kept confidential by the company. [Footnote 5] Consistent with the underlying purposes of the attorney-client privilege, these communications must be protected against compelled disclosure. The Court of Appeals declined to extend the attorney-client privilege beyond the limits of the control group test for fear that doing so would entail severe burdens on discovery and create a broad "zone of silence" over corporate affairs. Application of the attorney-client privilege to communications such as those involved here, however, puts the adversary in no worse position than if the communications had never taken place. The privilege only protects disclosure of communications; it does not protect disclosure of the underlying facts by those who communicated with the attorney: "[T]he protection of the privilege extends only to communications, and not to facts. A fact is one thing and a communication concerning that fact is an entirely different Page 449 U. S. 396 thing. The client cannot be compelled to answer the question, 'What did you say or write to the attorney?' but may not refuse to disclose any relevant fact within his knowledge merely because he incorporated a statement of such fact into his communication to his attorney." Philadelphia v. Westinghouse Electric Corp., 205 F.Supp. 830, 831 (ED Pa.1962). See also Diversified Industries, 572 F.2d at 611; State ex rel. Dudek v. Circuit Court, 34 Wis.2d 559, 580, 150 N.W.2d 387, 399 (1967) ("the courts have noted that a party cannot conceal a fact merely by revealing it to his lawyer"). Here, the Government was free to question the employees who communicated with Thomas and outside counsel. Upjohn has provided the IRS with a list of such employees, and the IRS has already interviewed some 25 of them. While it would probably be more convenient for the Government to secure the results of petitioner's internal investigation by simply subpoenaing the questionnaires and notes taken by petitioner's attorneys, such considerations of convenience do not overcome the policies served by the attorney-client privilege. As Justice Jackson noted in his concurring opinion in Hickman v. Taylor, 329 U.S. at 329 U. S. 516: "Discovery was hardly intended to enable a learned profession to perform its functions . . . on wits borrowed from the adversary."

Needless to say, we decide only the case before us, and do not undertake to draft a set of rules which should govern challenges to investigatory subpoenas. Any such approach would violate the spirit of Federal Rule of Evidence 501. See S.Rep. No. 93-1277, p. 13 (1974) ("the recognition of a privilege based on a confidential relationship . . . should be determined on a case-by-case basis"); Trammel, 445 U.S. at 445 U. S. 47; United States v. Gillock, 445 U. S. 360, 445 U. S. 367 (1980). While such a "case-by-case" basis may to some slight extent undermine desirable certainty in the boundaries of the attorney-client Page 449 U. S. 397 privilege, it obeys the spirit of the Rules. At the same time, we conclude that the narrow "control group test" sanctioned by the Court of Appeals in this case cannot, consistent with "the principles of the common law as . . . interpreted . . . in the light of reason and experience," Fed.Rule Evid. 501, govern the development of the law in this area.

III
Our decision that the communications by Upjohn employees to counsel are covered by the attorney-client privilege disposes of the case so far as the responses to the questionnaires and any notes reflecting responses to interview questions are concerned. The summons reaches further, however, and Thomas has testified that his notes and memoranda of interviews go beyond recording responses to his questions. App. 27a-28a, 91a93a. To the extent that the material subject to the summons is not protected by the attorney-client privilege as disclosing communications between an employee and counsel, we must reach the ruling by the Court of Appeals that the work product doctrine does not apply to summonses issued under 26 U.S.C. 7602. [Footnote 6] The Government concedes, wisely, that the Court of Appeals erred and that the work product doctrine does apply to IRS summonses. Brief for Respondents 16, 48. This doctrine was announced by the Court over 30 years ago in Hickman v. Taylor, 329 U. S. 495 (1947). In that case, the Court rejected "an attempt, without purported necessity or justification, to secure written statements, private memoranda and personal recollections prepared or formed by an adverse party's counsel in the course of his legal duties." Id. at 329 U. S. 510. The Court noted that "it is essential that a lawyer work with Page 449 U. S. 398 a certain degree of privacy," and reasoned that, if discovery of the material sought were permitted, "much of what is now put down in writing would remain unwritten. An attorney's thoughts, heretofore inviolate, would not be his own. Inefficiency, unfairness and sharp practices would inevitably develop in the giving of legal advice and in the preparation of cases for trial. The effect on the legal profession would be demoralizing. And the interests of the clients and the cause of justice would be poorly served." Id. at 329 U. S. 511. The "strong public policy" underlying the work product doctrine was reaffirmed recently in United States v. Nobles, 422 U. S. 225, 422 U. S. 236-240 (1975), and has been substantially incorporated in Federal Rule of Civil Procedure 26(b)(3). [Footnote 7] As we stated last Term, the obligation imposed by a tax summons remains "subject to the traditional privileges and limitations." United States v. Euge, 444 U. S. 707, 444 U. S. 714 (1980). Nothing in the language of the IRS summons provisions or their legislative history suggests an intent on the part of Congress to preclude application of the work product doctrine. Rule 26(b)(3) codifies the work product doctrine, and the Federal Rules of Civil Procedure are made applicable Page 449 U. S. 399 to summons enforcement proceedings by Rule 81(a)(3). See Donaldson v. United States, 400 U. S. 517, 400 U. S. 528 (1971). While conceding the applicability of the work product doctrine, the Government asserts that it has made a sufficient showing of necessity to overcome its protections. The Magistrate apparently so found, 781 USTC 9277, p. 83,605. The Government relies on the following language in Hickman:

"We do not mean to say that all written materials obtained or prepared by an adversary's counsel with an eye toward litigation are necessarily free from discovery in all cases. Where relevant and nonprivileged facts remain hidden in an attorney's file, and where production of those facts is essential to the preparation of one's case, discovery may properly be had. . . . And production might be justified where the witnesses are no longer available or can be reached only with difficulty." 329 U.S. at 329 U. S. 511. The Government stresses that interviewees are scattered across the globe, and that Upjohn has forbidden its employees to answer questions it considers irrelevant. The above-quoted language from Hickman, however, did not apply to "oral statements made by witnesses . . . whether presently in the form of [the attorney's] mental impressions or memoranda." Id. at 329 U. S. 512. As to such material, the Court did "not believe that any showing of necessity can be made under the circumstances of this case so as to justify production. . . . If there should be a rare situation justifying production of these matters, petitioner's case is not of that type." Id. at 329 U. S. 512-513. See also Nobles, supra at 422 U. S. 252-253 (WHITE, J., concurring). Forcing an attorney to disclose notes and memoranda of witnesses' oral statements is particularly disfavored, because it tends to reveal the attorney's mental processes, 329 U.S. at 329 U. S. 513 ("what he saw fit to write down regarding witnesses' remarks"); id. at 329 U. S. 516-517 ("the statement would be his [the Page 449 U. S. 400 attorney's] language, permeated with his inferences") (Jackson, J., concurring). [Footnote 8] Rule 26 accords special protection to work product revealing the attorney's mental processes. The Rule permits disclosure of documents and tangible things constituting attorney work product upon a showing of substantial need and inability to obtain the equivalent without undue hardship. This was the standard applied by the Magistrate, 78-1 USTC 9277, p. 83,604. Rule 26 goes on, however, to state that, "[i]n ordering discovery of such materials when the required showing has been made, the court shall protect against disclosure of the mental impressions, conclusions, opinions or legal theories of an attorney or other representative of a party concerning the litigation." Although this language does not specifically refer to memoranda based on oral statements of witnesses, the Hickman court stressed the danger that compelled disclosure of such memoranda would reveal the attorney's mental processes. It is clear that this is the sort of material the draftsmen of the Rule had in mind as deserving special protection. See Notes of Advisory Committee on 1970 Amendment to Rules, 28 U.S.C.App. p. 442 ("The subdivision . . . goes on to protect against disclosure the mental impressions, conclusions, opinions, or legal theories . . . of an attorney or other representative of a party. The Hickman opinion drew special attention to the need for protecting an attorney against discovery of memoranda prepared from recollection of oral interviews. The courts have steadfastly safeguarded against disclosure of lawyers' mental impressions and legal theories. . . ."). Page 449 U. S. 401 Based on the foregoing, some courts have concluded that no showing of necessity can overcome protection of work product which is based on oral statements from witnesses.See, e.g., In re Grand Jury Proceedings, 473 F.2d 840, 848 (CA8 1973) (personal recollections, notes, and memoranda pertaining to conversation with witnesses); In re Grand Jury Investigation, 412 F.Supp. 943, 949 (ED Pa.1976) (notes of conversation with witness "are so much a product of the lawyer's thinking and so little probative of the witness's actual words that they are absolutely protected from disclosure"). Those courts declining to adopt an absolute rule have nonetheless recognized that such material is entitled to special protection. See, e.g., In re Grand Jury Investigation, 599 F.2d 1224, 1231 (CA3 1979) ("special considerations . . . must shape any ruling on the

discoverability of interview memoranda . . . ; such documents will be discoverable only in a rare situation'"); cf. In re Grand Jury Subpoena, 599 F.2d 504, 511-512 (CA2 1979). We do not decide the issue at this time. It is clear that the Magistrate applied the wrong standard when he concluded that the Government had made a sufficient showing of necessity to overcome the protections of the work product doctrine. The Magistrate applied the "substantial need" and "without undue hardship" standard articulated in the first part of Rule 26(b)(3). The notes and memoranda sought by the Government here, however, are work product based on oral statements. If they reveal communications, they are, in this case, protected by the attorney-client privilege. To the extent they do not reveal communications, they reveal the attorneys' mental processes in evaluating the communications. As Rule 26 and Hickman make clear, such work product cannot be disclosed simply on a showing of substantial need and inability to obtain the equivalent without undue hardship. While we are not prepared at this juncture to say that such material is always protected by the work product rule, we Page 449 U. S. 402 think a far stronger showing of necessity and unavailability by other means than was made by the Government or applied by the Magistrate in this case would be necessary to compel disclosure. Since the Court of Appeals thought that the work product protection was never applicable in an enforcement proceeding such as this, and since the Magistrate whose recommendations the District Court adopted applied too lenient a standard of protection, we think the best procedure with respect to this aspect of the case would be to reverse the judgment of the Court of Appeals for the Sixth Circuit and remand the case to it for such further proceedings in connection with the work product claim as are consistent with this opinion. Accordingly, the judgment of the Court of Appeals is reversed, and the case remanded for further proceedings. It is so ordered.

[G.R. No. 105938. September 20, 1996] TEODORO R. REGALA, EDGARDO J. ANGARA, AVELINO V. CRUZ, JOSE C. CONCEPCION, ROGELIO A. VINLUAN, VICTOR P. LAZATIN, and EDUARDO U. ESCUETA, petitioners, vs. THE HONORABLE SANDIGANBAYAN, First Division, REPUBLIC OF THE PHILIPPINES, ACTING THROUGH THE PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, and RAUL S. ROCO, respondents. [G.R. No. 108113. September 20, 1996] PARAJA G. HAYUDINI, petitioner, vs. THE SANDIGANBAYAN and THE REPUBLIC OF THE PHILIPPINES, respondents. DECISION
KAPUNAN, J.:

These cases touch the very cornerstone of every State's judicial system, upon which the workings of the contentious and adversarial system in the Philippine legal process are based - the sanctity of fiduciary duty in the client-lawyer relationship. The fiduciary duty of a counsel and advocate is also what makes the law profession a unique position of trust and confidence, which distinguishes it from any other calling. In this instance, we have no recourse but to uphold and strengthen the mantle of protection accorded to the confidentiality that proceeds from the performance of the lawyer's duty to his client. The facts of the case are undisputed.

The matters raised herein are an offshoot of the institution of the Complaint on July 31, 1987 before the Sandiganbayan by the Republic of the Philippines, through the Presidential Commission on Good Government against Eduardo M. Cojuangco, Jr., as one of the principal defendants, for the recovery of alleged ill-gotten wealth, which includes shares of stocks in the named corporations in PCGG Case No. 33 (Civil Case No. 0033), entitled "Republic of the Philippines versus Eduardo Cojuangco, et al." Among the defendants named in the case are herein petitioners Teodoro Regala, Edgardo J. Angara, Avelino V. Cruz, Jose C. Concepcion, Rogelio A. Vinluan, Victor P. Lazatin, Eduardo U. Escueta and Paraja G. Hayudini, and herein private respondent Raul S. Roco, who all were then partners of the law firm Angara, Abello, Concepcion, Regala and Cruz Law Offices (hereinafter referred to as the ACCRA Law Firm). ACCRA Law Firm performed legal services for its clients, which included, among others, the organization and acquisition of business associations and/or organizations, with the correlative and incidental services where its members acted as incorporators, or simply, as stockholders. More specifically, in the performance of these services, the members of the law firm delivered to its client documents which substantiate the client's equity holdings, i.e., stock certificates endorsed in blank representing the shares registered in the client's name, and a blank deed of trust or assignment covering said shares. In the course of their dealings with their clients, the members of the law firm acquire information relative to the assets of clients as well as their personal and business circumstances. As members of the ACCRA Law Firm, petitioners and private respondent Raul Roco admit that they assisted in the organization and acquisition of the companies included in Civil Case No. 0033, and in keeping with the office practice, ACCRA lawyers acted as nominees-stockholders of the said corporations involved in sequestration proceedings. On August 20, 1991, respondent Presidential Commission on Good Government (hereinafter referred to as respondent PCGG) filed a "Motion to Admit Third Amended Complaint" and "Third Amended Complaint" which excluded private respondent Raul S. Roco from the complaint in PCGG Case No. 33 as party-defendant. Respondent PCGG based its exclusion of private respondent Roco as party-defendant on his undertaking that he will reveal the identity of the principal/s for whom he acted as nominee/stockholder in the companies involved in PCGG Case No. 33. Petitioners were included in the Third Amended Complaint on the strength of the following allegations:
[1] [2] [3] [4]

14. Defendants Eduardo Cojuangco, Jr., Edgardo J. Angara, Jose C. Concepcion, Teodoro Regala, Avelino V. Cruz, Rogelio A. Vinluan, Eduardo U. Escueta, Paraja G. Hayudini and Raul Roco of the Angara Concepcion Cruz Regala and Abello law offices (ACCRA) plotted, devised, schemed. conspired and confederated with each other in setting up, through the use of the coconut levy funds, the financial and corporate framework and structures that led to the establishment of UCPB, UNICOM, COCOLIFE, COCOMARK, CIC, and more than twenty other coconut levy funded corporations, including the acquisition of San Miguel Corporation shares and its institutionalization through presidential directives of the coconut monopoly. Through insidious means and machinations, ACCRA, being the wholly-owned investment arm, ACCRA Investments Corporation, became the holder of approximately fifteen million shares representing roughly 3.3% of the total outstanding capital stock of UCPB as of 31 March 1987. This ranks ACCRA Investments Corporation number 44 among the top 100 biggest stockholders of UCPB which has approximately 1,400,000 shareholders. On the other hand, corporate books show the name Edgardo J. Angara as holding approximately 3,744 shares as of February, 1984.[5]

In their answer to the Expanded Amended Complaint, petitioners ACCRA lawyers alleged that: 4.4. Defendants-ACCRA lawyers participation in the acts with which their co-defendants are charged, was in furtherance of legitimate lawyering. 4.4.1. In the course of rendering professional and legal services to clients, defendants-ACCRA lawyers, Jose C. Concepcion, Teodoro D. Regala, Rogelio A. Vinluan and Eduardo U. Escueta, became holders of shares of stock in the corporations listed under their respective names in Annex A of the expanded Amended Complaint as incorporating or acquiring stockholders only and, as such, they do not claim any proprietary interest in the said shares of stock. 4.5. Defendant ACCRA-lawyer Avelino V. Cruz was one of the incorporators in 1976 of Mermaid Marketing Corporation, which was organized for legitimate business purposes not related to the allegations of the expanded Amended Complaint. However, he has long ago transferred any material interest therein and therefore denies that the shares appearing in his name in Annex A of the expanded Amended Complaint are his assets. Petitioner Paraja Hayudini, who had separated from ACCRA law firm, filed a separate answer denying the allegations in the complaint implicating him in the alleged ill-gotten wealth. Petitioners ACCRA lawyers subsequently filed their "COMMENT AND/OR OPPOSITION" dated October 8, 1991 with Counter-Motion that respondent PCGG similarly grant the same treatment to them (exclusion as parties-defendants) as accorded private respondent Roco. The Counter-Motion for dropping petitioners from the complaint was duly set for hearing on October 18, 1991 in accordance with the requirements of Rule 15 of the Rules of Court. In its "Comment," respondent PCGG set the following conditions precedent for the exclusion of petitioners, namely: (a) the disclosure of the identity of its clients; (b) submission of documents substantiating the lawyer-client relationship; and (c) the submission of the deeds of assignments petitioners executed in favor of its clients covering their respective shareholdings. Consequently, respondent PCGG presented supposed proof to substantiate compliance by private respondent Roco of the conditions precedent to warrant the latter's exclusion as party-defendant in PCGG Case No. 33, to wit: (a) Letter to respondent PCGG of the counsel of respondent Roco dated May 24, 1989 reiterating a previous request for reinvestigation by the PCGG in PCGG Case No. 33; (b) Affidavit dated March 8, 1989 executed by private respondent Roco as Attachment to the letter aforestated in (a); and (c) Letter of the Roco, Bunag, and Kapunan Law Offices dated September 21, 1988 to the respondent PCGG in behalf of private respondent Roco originally requesting the reinvestigation and/or re-examination of the evidence of the PCGG against Roco in its Complaint in PCGG Case No. 33. It is noteworthy that during said proceedings, private respondent Roco did not refute petitioners' contention that he did actually not reveal the identity of the client involved in PCGG Case No. 33, nor had he undertaken to reveal the identity of the client for whom he acted as nominee-stockholder. On March 18, 1992, respondent Sandiganbayan promulgated the Resolution, herein questioned, denying the exclusion of petitioners in PCGG Case No. 33, for their refusal to comply with the conditions required by respondent PCGG. It held: x x x.
[6] [7] [8] [9] [10] [11]

ACCRA lawyers may take the heroic stance of not revealing the identity of the client for whom they have acted, i.e. their principal, and that will be their choice. But until they do identify their clients, considerations of whether or not the privilege claimed by the ACCRA lawyers exists cannot even begin to be debated. The ACCRA lawyers cannot excuse themselves from the consequences of their acts until they have begun to establish the basis for recognizing the privilege; the existence and identity of the client. This is what appears to be the cause for which they have been impleaded by the PCGG as defendants herein. 5. The PCGG is satisfied that defendant Roco has demonstrated his agency and that Roco has apparently identified his principal, which revelation could show the lack of cause against him. This in turn has allowed the PCGG to exercise its power both under the rules of Agency and under Section 5 of E.O. No. 14-A in relation to the Supreme Court's ruling in Republic v. Sandiganbayan (173 SCRA 72). The PCGG has apparently offered to the ACCRA lawyers the same conditions availed of by Roco; full disclosure in exchange for exclusion from these proceedings (par. 7, PCGG's COMMENT dated November 4, 1991). The ACCRA lawyers have preferred not to make the disclosures required by the PCGG. The ACCRA lawyers cannot, therefore, begrudge the PCGG for keeping them as party defendants. In the same vein, they cannot compel the PCGG to be accorded the same treatment accorded to Roco. Neither can this Court. WHEREFORE, the Counter Motion dated October 8, 1991 filed by the ACCRA lawyers and joined in by Atty. Paraja G. Hayudini for the same treatment by the PCGG as accorded to Raul S. Roco is DENIED for lack of merit. ACCRA lawyers moved for a reconsideration of the above resolution but the same was denied by the respondent Sandiganbayan. Hence, the ACCRA lawyers filed the petition for certiorari, docketed as G.R. No. 105938, invoking the following grounds:
[12]

The Honorable Sandiganbayan gravely abused its discretion in subjecting petitioners ACCRA lawyers who undisputably acted as lawyers in serving as nominee-stockholders, to the strict application of the law of agency.
II

The Honorable Sandiganbayan committed grave abuse of discretion in not considering petitioners ACCRA lawyers and Mr. Roco as similarly situated and, therefore, deserving of equal treatment.
1. There is absolutely no evidence that Mr. Roco had revealed, or had undertaken to reveal, the identities of the client(s) for whom he acted as nominee-stockholder. 2. Even assuming that Mr. Roco had revealed, or had undertaken to reveal, the identities of the client(s), the disclosure does not constitute a substantial distinction as would make the classification reasonable under the equal protection clause. 3. Respondent Sandiganbayan sanctioned favoritism and undue preference in favor of Mr. Roco in violation of the equal protection clause.
III

The Honorable Sandiganbayan committed grave abuse of discretion in not holding that, under the facts of this case, the attorney-client privilege prohibits petitioners ACCRA lawyers from revealing the identity of their client(s) and the other information requested by the PCGG.
1. Under the peculiar facts of this case, the attorney-client privilege includes the identity of the client(s). 2. The factual disclosures required by the PCGG are not limited to the identity of petitioners ACCRA lawyers' alleged client(s) but extend to other privileged matters.

IV

The Honorable Sandiganbayan committed grave abuse of discretion in not requiring that the dropping of party-defendants by the PCGG must be based on reasonable and just grounds and with due consideration to the constitutional right of petitioners ACCRA lawyers to the equal protection of the law. Petitioner Paraja G. Hayudini, likewise, filed his own motion for reconsideration of the March 18, 1991 resolution which was denied by respondent Sandiganbayan. Thus, he filed a separate petition for certiorari, docketed as G.R. No. 108113, assailing respondent Sandiganbayan's resolution on essentially the same grounds averred by petitioners in G.R. No. 105938. Petitioners contend that the exclusion of respondent Roco as party-defendant in PCGG Case No. 33 grants him a favorable treatment, on the pretext of his alleged undertaking to divulge the identity of his client, giving him an advantage over them who are in the same footing as partners in the ACCRA law firm. Petitioners further argue that even granting that such an undertaking has been assumed by private respondent Roco, they are prohibited from revealing the identity of their principal under their sworn mandate and fiduciary duty as lawyers to uphold at all times the confidentiality of information obtained during such lawyer-client relationship. Respondent PCGG, through its counsel, refutes petitioners' contention, alleging that the revelation of the identity of the client is not within the ambit of the lawyer-client confidentiality privilege, nor are the documents it required (deeds of assignment) protected, because they are evidence of nominee status. In his comment, respondent Roco asseverates that respondent PCGG acted correctly in excluding him as party-defendant because he "(Roco) has not filed an Answer. PCGG had therefore the right to dismiss Civil Case No. 0033 as to Roco `without an order of court by filing a notice of dismissal,'" and he has undertaken to identify his principal. Petitioners' contentions are impressed with merit.
[13] [14] [15]

It is quite apparent that petitioners were impleaded by the PCGG as co-defendants to force them to disclose the identity of their clients. Clearly, respondent PCGG is not after petitioners but the bigger fish as they say in street parlance. This ploy is quite clear from the PCGGs willingness to cut a deal with petitioners -- the names of their clients in exchange for exclusion from the complaint. The statement of the Sandiganbayan in its questioned resolution dated March 18, 1992 is explicit: ACCRA lawyers may take the heroic stance of not revealing the identity of the client for whom they have acted, i.e., their principal, and that will be their choice. But until they do identify their clients, considerations of whether or not the privilege claimed by the ACCRA lawyers exists cannot even begin to be debated. The ACCRA lawyers cannot excuse themselves from the consequences of their acts until they have begun to establish the basis for recognizing the privilege; the existence and identity of the client. This is what appears to be the cause for which they have been impleaded by the PCGG as defendants herein. (Underscoring ours) In a closely related case, Civil Case No. 0110 of the Sandiganbayan, Third Division, entitled Primavera Farms, Inc., et al. vs. Presidential Commission on Good Government respondent PCGG, through counsel Mario Ongkiko, manifested at the hearing on December 5, 1991 that the PCGG wanted to establish through the ACCRA that their so

called client is Mr. Eduardo Cojuangco; that it was Mr. Edu ardo Cojuangco who furnished all the monies to those subscription payments in corporations included in Annex A of the Third Amended Complaint; that the ACCRA lawyers executed deeds of trust and deeds of assignment, some in the name of particular persons, some in blank. We quote Atty. Ongkiko: ATTY. ONGKIKO: With the permission of this Hon. Court. I propose to establish through these ACCRA lawyers that, one, their so-called client is Mr. Eduardo Cojuangco. Second, it was Mr. Eduardo Cojuangco who furnished all the monies to these subscription payments of these corporations who are now the petitioners in this case. Third, that these lawyers executed deeds of trust, some in the name of a particular person, some in blank. Now, these blank deeds are important to our claim that some of the shares are actually being held by the nominees for the late President Marcos. Fourth, they also executed deeds of assignment and some of these assignments have also blank assignees. Again, this is important to our claim that some of the shares are for Mr. Cojuangco and some are for Mr. Marcos. Fifth, that most of these corporations are really just paper corporations. Why do we say that? One: There are no really fixed sets of officers, no fixed sets of directors at the time of incorporation and even up to 1986, which is the crucial year. And not only that, they have no permits from the municipal authorities in Makati. Next, actually all their addresses now are care of Villareal Law Office. They really have no address on records. These are some of the principal things that we would ask of these nominees stockholders, as they called themselves. It would seem that petitioners are merely standing in for their clients as defendants in the complaint. Petitioners are being prosecuted solely on the basis of activities and services performed in the course of their duties as lawyers. Quite obviously, petitioners inclusion as co-defendants in the complaint is merely being used as leverage to compel them to name their clients and consequently to enable the PCGG to nail these clients. Such being the case, respondent PCGG has no valid cause of action as against petitioners and should exclude them from the Third Amended Complaint.
[16]

II

The nature of lawyer-client relationship is premised on the Roman Law concepts of locatio conductio operarum (contract of lease of services) where one person lets his services and another hires them without reference to the object of which the services are to be performed, wherein lawyers' services may be compensated by honorarium or for hire, and mandato (contract of agency) wherein a friend on whom reliance could be placed makes a contract in his name, but gives up all that he gained by the contract to the person who requested him. But the lawyer-client relationship is more than that of the principal-agent and lessor-lessee. In modern day perception of the lawyer-client relationship, an attorney is more than a mere agent or servant, because he possesses special powers of trust and confidence reposed on him by his client. A lawyer is also as independent as the judge of the court, thus his powers are entirely different from and superior to those of an ordinary agent. Moreover, an attorney also occupies what may be considered as a "quasi-judicial office" since he is in fact an officer of the Court and exercises his judgment in the choice of courses of action to be taken favorable to his client. Thus, in the creation of lawyer-client relationship, there are rules, ethical conduct and duties that breathe life into it, among those, the fiduciary duty to his client which is of a very delicate, exacting and confidential character, requiring a very high degree of fidelity
[17] [18] [19] [20] [21]

and good faith, that is required by reason of necessity and public interest based on the hypothesis that abstinence from seeking legal advice in a good cause is an evil which is fatal to the administration of justice. It is also the strict sense of fidelity of a lawyer to his client that distinguishes him from any other professional in society. This conception is entrenched and embodies centuries of established and stable tradition. In Stockton v. Ford, the U.S. Supreme Court held: There are few of the business relations of life involving a higher trust and confidence than that of attorney and client, or generally speaking, one more honorably and faithfully discharged; few more anxiously guarded by the law, or governed by the sterner principles of morality and justice; and it is the duty of the court to administer them in a corresponding spirit, and to be watchful and industrious, to see that confidence thus reposed shall not be used to the detriment or prejudice of the rights of the party bestowing it. In our jurisdiction, this privilege takes off from the old Code of Civil Procedure enacted by the Philippine Commission on August 7, 1901. Section 383 of the Code specifically forbids counsel, without authority of his client to reveal any communication made by the client to him or his advice given thereon in the course of professional employment. Passed on into various provisions of the Rules of Court, the attorney-client privilege, as currently worded provides: Sec. 24. Disqualification by reason of privileged communication. - The following persons cannot testify as to matters learned in confidence in the following cases: xxx An attorney cannot, without the consent of his client, be examined as to any communication made by the client to him, or his advice given thereon in the course of, or with a view to, professional employment, can an attorneys secretary, stenographer, or clerk be examined, without the consent of the client and his employer, concerning any fact the knowledge of which has been acquired in such capacity. Further, Rule 138 of the Rules of Court states: Sec. 20. It is the duty of an attorney: (e) to maintain inviolate the confidence, and at every peril to himself, to preserve the secrets of his client, and to accept no compensation in connection with his clients business except from him or with his knowledge and approval. This duty is explicitly mandated in Canon 17 of the Code of Professional Responsibility which provides that: Canon 17. A lawyer owes fidelity to the cause of his client and he shall be mindful of the trust and confidence reposed in him. Canon 15 of the Canons of Professional Ethics also demands a lawyer's fidelity to client: The lawyer owes "entire devotion to the interest of the client, warm zeal in the maintenance and defense of his rights and the exertion of his utmost learning and ability," to the end that nothing be taken or be withheld from him, save by the rules of law, legally applied. No fear of judicial disfavor or public popularity should restrain him from the full discharge of his duty. In the judicial forum the client is entitled to the benefit of any and every remedy and defense that is authorized by the law of the land, and he may expect his lawyer to assert every such remedy or defense. But it is steadfastly to be borne in mind that the great trust of the lawyer is to be performed within and not without the bounds of the law. The office of attorney does not permit, much less does it demand of
[22] [23] [24] [25] [26] [27] [28] [29]

him for any client, violation of law or any manner of fraud or chicanery. He must obey his own conscience and not that of his client. Considerations favoring confidentiality in lawyer-client relationships are many and serve several constitutional and policy concerns. In the constitutional sphere, the privilege gives flesh to one of the most sacrosanct rights available to the accused, the right to counsel. If a client were made to choose between legal representation without effective communication and disclosure and legal representation with all his secrets revealed then he might be compelled, in some instances, to either opt to stay away from the judicial system or to lose the right to counsel. If the price of disclosure is too high, or if it amounts to self incrimination, then the flow of information would be curtailed thereby rendering the right practically nugatory. The threat this represents against another sacrosanct individual right, the right to be presumed innocent is at once self-evident. Encouraging full disclosure to a lawyer by one seeking legal services opens the door to a whole spectrum of legal options which would otherwise be circumscribed by limited information engendered by a fear of disclosure. An effective lawyer-client relationship is largely dependent upon the degree of confidence which exists between lawyer and client which in turn requires a situation which encourages a dynamic and fruitful exchange and flow of information. It necessarily follows that in order to attain effective representation, the lawyer must invoke the privilege not as a matter of option but as a matter of duty and professional responsibility. The question now arises whether or not this duty may be asserted in refusing to disclose the name of petitioners' client(s) in the case at bar. Under the facts and circumstances obtaining in the instant case, the answer must be in the affirmative. As a matter of public policy, a clients identity should not be shrouded in mystery. Under this premise, the general rule in our jurisdiction as well as in the United States is that a lawyer may not invoke the privilege and refuse to divulge the name or identity of his client. The reasons advanced for the general rule are well established. First, the court has a right to know that the client whose privileged information is sought to be protected is flesh and blood. Second, the privilege begins to exist only after the attorney-client relationship has been established. The attorney-client privilege does not attach until there is a client. Third, the privilege generally pertains to the subject matter of the relationship. Finally, due process considerations require that the opposing party should, as a general rule, know his adversary. A party suing or sued is entitled to know who his opponent is. He cannot be obliged to grope in the dark against unknown forces. Notwithstanding these considerations, the general rule is however qualified by some important exceptions.
[30] [31] [32] [33]

1) Client identity is privileged where a strong probability exists that revealing the clients name would implicate that client in the very activity for which he sought the lawyers advice.

In Ex-Parte Enzor, a state supreme court reversed a lower court order requiring a lawyer to divulge the name of her client on the ground that the subject matter of the relationship was so closely related to the issue of the clients identity that the privilege actually attached to both. In Enzor, the unidentified client, an election official, informed his attorney in confidence that he had been offered a bribe to violate election laws or that he had accepted a bribe to that end. In her testimony, the attorney revealed that she had
[34]

advised her client to count the votes correctly, but averred that she could not remember whether her client had been, in fact, bribed. The lawyer was cited for contempt for her refusal to reveal his clients identity before a grand jury. Reversing the lower courts contempt orders, the state supreme court held that under the circumstances of the case, and under the exceptions described above, even the name of the client was privileged. U.S. v. Hodge and Zweig, involved the same exception, i.e. that client identity is privileged in those instances where a strong probability exists that the disclosure of the client's identity would implicate the client in the very criminal activity for which the lawyers legal advice was obtained. The Hodge case involved federal grand jury proceedings inquiring into the activities of the Sandino Gang, a gang involved in the illegal importation of drugs in the United States. The respondents, law partners, represented key witnesses and suspects including the leader of the gang, Joe Sandino. In connection with a tax investigation in November of 1973, the IRS issued summons to Hodge and Zweig, requiring them to produce documents and information regarding payment received by Sandino on behalf of any other person, and vice versa. The lawyers refused to divulge the names. The Ninth Circuit of the United States Court of Appeals, upholding non-disclosure under the facts and circumstances of the case, held: A clients identity and the nature of that clients fee arrangements may be privileged where the person invoking the privilege can show that a strong probability exists that disclosure of such information would implicate that client in the very criminal activity for which legal advice was sought Baird v. Koerner, 279 F.2d at 680. While in Baird Owe enunciated this rule as a matter of California law, the rule also reflects federal law. Appellants contend that the Baird exception applies to this case. The Baird exception is entirely consonant with the principal policy behind the attorneyclient privilege. In order to promote freedom of consultation of legal advisors by clients, the apprehension of compelled disclosure from the legal advisors must be removed; hence, the law must prohibit such disclosure except on the clients consent. 8 J. Wigmore, supra sec. 2291, at 545. In furtherance of this policy, the clients identity and the nature of his fee arrangements are, in exceptional cases, protected as confidential communications.
[35] [36]

2) Where disclosure would open the client to civil liability, his identity is privileged. For instance, the peculiar facts and circumstances of Neugass v. Terminal Cab Corporation,[37]prompted the New York Supreme Court to allow a lawyers claim to the effect that he could not reveal the name of his client because this would expose the latter to civil litigation.

In the said case, Neugass, the plaintiff, suffered injury when the taxicab she was riding, owned by respondent corporation, collided with a second taxicab, whose owner was unknown. Plaintiff brought action both against defendant corporation and the owner of the second cab, identified in the information only as John Doe. It turned out that when the attorney of defendant corporation appeared on preliminary examination, the fact was somehow revealed that the lawyer came to know the name of the owner of the second cab when a man, a client of the insurance company, prior to the institution of legal action, came to him and reported that he was involved in a car accident. It was apparent under the circumstances that the man was the owner of the second cab. The state supreme court held that the reports were clearly made to the lawyer in his professional capacity. The court said:

That his employment came about through the fact that the insurance company had hired him to defend its policyholders seems immaterial. The attorney in such cases is clearly the attorney for the policyholder when the policyholder goes to him to report an occurrence contemplating that it would be used in an action or claim against him. xxx xxx xxx. All communications made by a client to his counsel, for the purpose of professional advice or assistance, are privileged, whether they relate to a suit pending or contemplated, or to any other matter proper for such advice or aid; x x x And whenever the communication made, relates to a matter so connected with the employment as attorney or counsel as to afford presumption that it was the ground of the address by the client, then it is privileged from disclosure. xxx. It appears... that the name and address of the owner of the second cab came to the attorney in this case as a confidential communication. His client is not seeking to use the courts, and his address cannot be disclosed on that theory, nor is the present action pending against him as service of the summons on him has not been effected. The objections on which the court reserved decision are sustained. In the case of Matter of Shawmut Mining Company, the lawyer involved was required by a lower court to disclose whether he represented certain clients in a certain transaction. The purpose of the courts request was to determine whether the unnamed persons as interested parties were connected with the purchase of properties involved in the action. The lawyer refused and brought the question to the State Supreme Court. Upholding the lawyers refusal to divulge the names of his clients the court held: If it can compel the witness to state, as directed by the order appealed from, that he represented certain persons in the purchase or sale of these mines, it has made progress in establishing by such evidence their version of the litigation. As already suggested, such testimony by the witness would compel him to disclose not only that he was attorney for certain people, but that, as the result of communications made to him in the course of such employment as such attorney, he knew that they were interested in certain transactions. We feel sure that under such conditions no case has ever gone to the length of compelling an attorney, at the instance of a hostile litigant, to disclose not only his retainer, but the nature of the transactions to which it related, when such information could be made the basis of a suit against his client. 3) Where the governments lawyers have no case against an attorneys client unless, by revealing the clients name, the said name would furnish the only link that would form the chain of testimony necessary to convict an individual of a crime, the clients name is privileged. In Baird vs Korner, a lawyer was consulted by the accountants and the lawyer of certain undisclosed taxpayers regarding steps to be taken to place the undisclosed taxpayers in a favorable position in case criminal charges were brought against them by the U.S. Internal Revenue Service (IRS). It appeared that the taxpayers returns of previous years were probably incorrect and the taxes understated. The clients themselves were unsure about whether or not they violated tax laws and sought advice from Baird on the hypothetical possibility that they had. No investigation was then being undertaken by the IRS of the taxpayers. Subsequently, the attorney of the taxpayers delivered to Baird the sum of $12,706.85, which had been previously assessed as the tax due, and another amount of
[38] [39] [40] [41] [42]

money representing his fee for the advice given. Baird then sent a check for $12,706.85 to the IRS in Baltimore, Maryland, with a note explaining the payment, but without naming his clients. The IRS demanded that Baird identify the lawyers, accountants, and other clients involved. Baird refused on the ground that he did not know their names, and declined to name the attorney and accountants because this constituted privileged communication. A petition was filed for the enforcement of the IRS summons. For Bairds repeated refusal to name his clients he was found guilty of civil contempt. The Ninth Circuit Court of Appeals held that, a lawyer could not be forced to reveal the names of clients who employed him to pay sums of money to the government voluntarily in settlement of undetermined income taxes, unsued on, and with no government audit or investigation into that clients income tax liability pending. The court emphasized the exception that a clients name is privileged when so much has been revealed concerning the legal services rendered that the disclosure of the clients identity exposes him to possible investigation and sanction by government agencies. The Court held: The facts of the instant case bring it squarely within that exception to the general rule. Here money was received by the government, paid by persons who thereby admitted they had not paid a sufficient amount in income taxes some one or more years in the past. The names of the clients are useful to the government for but one purpose - to ascertain which taxpayers think they were delinquent, so that it may check the records for that one year or several years. The voluntary nature of the payment indicates a belief by the taxpayers that more taxes or interest or penalties are due than the sum previously paid, if any. It indicates a feeling of guilt for nonpayment of taxes, though whether it is criminal guilt is undisclosed. But it may well be the link that could form the chain of testimony necessary to convict an individual of a federal crime. Certainly the payment and the feeling of guilt are the reasons the attorney here involved was employed - to advise his clients what, under the circumstances, should be done. Apart from these principal exceptions, there exist other situations which could qualify as exceptions to the general rule. For example, the content of any client communication to a lawyer lies within the privilege if it is relevant to the subject matter of the legal problem on which the client seeks legal assistance. Moreover, where the nature of the attorney-client relationship has been previously disclosed and it is the identity which is intended to be confidential, the identity of the client has been held to be privileged, since such revelation would otherwise result in disclosure of the entire transaction. Summarizing these exceptions, information relating to the identity of a client may fall within the ambit of the privilege when the clients name itself has an independent significance, such that disclosure would then reveal client confidences. The circumstances involving the engagement of lawyers in the case at bench, therefore, clearly reveal that the instant case falls under at least two exceptions to the general rule. First, disclosure of the alleged client's name would lead to establish said client's connection with the very fact in issue of the case, which is privileged information, because the privilege, as stated earlier, protects the subject matter or the substance (without which there would be no attorney-client relationship). The link between the alleged criminal offense and the legal advice or legal service sought was duly established in the case at bar, by no less than the PCGG itself. The key lies in the three specific conditions laid down by the PCGG which constitutes petitioners ticket to non-prosecution should they accede thereto:
[43] [44] [45] [46]

(a) the disclosure of the identity of its clients; (b) submission of documents substantiating the lawyer-client relationship; and (c) the submission of the deeds of assignment petitioners executed in favor of their clients covering their respective shareholdings. From these conditions, particularly the third, we can readily deduce that the clients indeed consulted the petitioners, in their capacity as lawyers, regarding the financial and corporate structure, framework and set-up of the corporations in question. In turn, petitioners gave their professional advice in the form of, among others, the aforementioned deeds of assignment covering their clients shareholdings. There is no question that the preparation of the aforestated documents was part and parcel of petitioners legal service to their clients. More important, it constituted an integral part of their duties as lawyers. Petitioners, therefore, have a legitimate fear that identifying their clients would implicate them in the very activity for which legal advice had been sought, i.e., the alleged accumulation of ill-gotten wealth in the aforementioned corporations. Furthermore, under the third main exception, revelation of the client's name would obviously provide the necessary link for the prosecution to build its case, where none otherwise exists. It is the link, in the words of Baird, that would inevitably form the chain of testimony necessary to convict the (client) of a... crime." An important distinction must be made between a case where a client takes on the services of an attorney for illicit purposes, seeking advice about how to go around the law for the purpose of committing illegal activities and a case where a client thinks he might have previously committed something illegal and consults his attorney about it. The first case clearly does not fall within the privilege because the same cannot be invoked for purposes illegal. The second case falls within the exception because whether or not the act for which the advice turns out to be illegal, his name cannot be used or disclosed if the disclosure leads to evidence, not yet in the hands of the prosecution, which might lead to possible action against him. These cases may be readily distinguished, because the privilege cannot be invoked or used as a shield for an illegal act, as in the first example; while the prosecution may not have a case against the client in the second example and cannot use the attorney client relationship to build up a case against the latter. The reason for the first rule is that it is not within the professional character of a lawyer to give advice on the commission of a crime. The reason for the second has been stated in the cases above discussed and are founded on the same policy grounds for which the attorney-client privilege, in general, exists. In Matter of Shawmut Mining Co., supra, the appellate court therein stated that "under such conditions no case has ever yet gone to the length of compelling an attorney, at the instance of a hostile litigant, to disclose not only his retainer, but the nature of the transactions to which it related, when such information could be made the basis of a suit against his client. "Communications made to an attorney in the course of any personal employment, relating to the subject thereof, and which may be supposed to be drawn out in consequence of the relation in which the parties stand to each other, are under the seal of confidence and entitled to protection as privileged communications." Where the communicated information, which clearly falls within the privilege, would suggest possible criminal activity but there would be not much in the
[47] [48] [49] [50]

information known to the prosecution which would sustain a charge except that revealing the name of the client would open up other privileged information which would substantiate the prosecutions suspicions, then the clients identity is so inextricably linked to the subject matter itself that it falls within the protection. The Baird exception, applicable to the instant case, is consonant with the principal policy behind the privilege, i.e., that for the purpose of promoting freedom of consultation of legal advisors by clients, apprehension of compelled disclosure from attorneys must be eliminated. This exception has likewise been sustained in In re Grand Jury Proceedings and Tillotson v. Boughner. What these cases unanimously seek to avoid is the exploitation of the general rule in what may amount to a fishing expedition by the prosecution. There are, after all, alternative sources of information available to the prosecutor which do not depend on utilizing a defendant's counsel as a convenient and readily available source of information in the building of a case against the latter. Compelling disclosure of the client's name in circumstances such as the one which exists in the case at bench amounts to sanctioning fishing expeditions by lazy prosecutors and litigants which we cannot and will not countenance. When the nature of the transaction would be revealed by disclosure of an attorney's retainer, such retainer is obviously protected by the privilege. It follows that petitioner attorneys in the instant case owe their client(s) a duty and an obligation not to disclose the latter's identity which in turn requires them to invoke the privilege. In fine, the crux of petitioners' objections ultimately hinges on their expectation that if the prosecution has a case against their clients, the latter's case should be built upon evidence painstakingly gathered by them from their own sources and not from compelled testimony requiring them to reveal the name of their clients, information which unavoidably reveals much about the nature of the transaction which may or may not be illegal. The logical nexus between name and nature of transaction is so intimate in this case that it would be difficult to simply dissociate one from the other. In this sense, the name is as much "communication" as information revealed directly about the transaction in question itself, a communication which is clearly and distinctly privileged. A lawyer cannot reveal such communication without exposing himself to charges of violating a principle which forms the bulwark of the entire attorney-client relationship. The uberrimei fidei relationship between a lawyer and his client therefore imposes a strict liability for negligence on the former. The ethical duties owing to the client, including confidentiality, loyalty, competence, diligence as well as the responsibility to keep clients informed and protect their rights to make decisions have been zealously sustained. InMilbank, Tweed, Hadley and McCloy v. Boon, the US Second District Court rejected the plea of the petitioner law firm that it breached its fiduciary duty to its client by helping the latter's former agent in closing a deal for the agent's benefit only after its client hesitated in proceeding with the transaction, thus causing no harm to its client. The Court instead ruled that breaches of a fiduciary relationship in any context comprise a special breed of cases that often loosen normally stringent requirements of causation and damages, and found in favor of the client. To the same effect is the ruling in Searcy, Denney, Scarola, Barnhart, and Shipley P.A. v. Scheller requiring strict obligation of lawyers vis-a-vis clients. In this case, a contingent fee lawyer was fired shortly before the end of completion of his work, and sought payment quantum meruit of work done. The court, however, found that the lawyer
[51] [52] [53] [54] [55]

was fired for cause after he sought to pressure his client into signing a new fee agreement while settlement negotiations were at a critical stage. While the client found a new lawyer during the interregnum, events forced the client to settle for less than what was originally offered. Reiterating the principle of fiduciary duty of lawyers to clients in Meinhard v. Salmon famously attributed to Justice Benjamin Cardozo that "Not honesty alone, but the punctilio of an honor the most sensitive, is then the standard of behavior," the US Court found that the lawyer involved was fired for cause, thus deserved no attorney's fees at all. The utmost zeal given by Courts to the protection of the lawyer-client confidentiality privilege and lawyer's loyalty to his client is evident in the duration of the protection, which exists not only during the relationship, but extends even after the termination of the relationship. Such are the unrelenting duties required of lawyers vis-a-vis their clients because the law, which the lawyers are sworn to uphold, in the words of Oliver Wendell Holmes, "xxx is an exacting goddess, demanding of her votaries in intellectual and moral discipline." The Court, no less, is not prepared to accept respondents position without denigrating the noble profession that is lawyering, so extolled by Justice Holmes in this wise: Every calling is great when greatly pursued. But what other gives such scope to realize the spontaneous energy of one's soul? In what other does one plunge so deep in the stream of life - so share its passions its battles, its despair, its triumphs, both as witness and actor? x x x But that is not all. What a subject is this in which we are united - this abstraction called the Law, wherein as in a magic mirror, we see reflected, not only in our lives, but the lives of all men that have been. When I think on this majestic theme my eyes dazzle. If we are to speak of the law as our mistress, we who are here know that she is a mistress only to be won with sustained and lonely passion - only to be won by straining all the faculties by which man is likened to God. We have no choice but to uphold petitioners' right not to reveal the identity of their clients under pain of the breach of fiduciary duty owing to their clients, because the facts of the instant case clearly fall within recognized exceptions to the rule that the clients name is not privileged information. If we were to sustain respondent PCGG that the lawyer-client confidential privilege under the circumstances obtaining here does not cover the identity of the client, then it would expose the lawyers themselves to possible litigation by their clients in view of the strict fiduciary responsibility imposed on them in the exercise of their duties. The complaint in Civil Case No. 0033 alleged that the defendants therein, including herein petitioners and Eduardo Cojuangco, Jr. conspired with each other in setting up through the use of coconut levy funds the financial and corporate framework and structures that led to the establishment of UCPB, UNICOM and others and that through insidious means and machinations, ACCRA, using its wholly-owned investment arm, ACCRA Investments Corporation, became the holder of approximately fifteen million shares representing roughly 3.3% of the total capital stock of UCPB as of 31 March 1987. The PCGG wanted to establish through the ACCRA lawyers that Mr. Cojuangco is their client and it was Cojuangco who furnished all the monies to the subscription payment; hence, petitioners acted as dummies, nominees and/or agents by allowing themselves, among others, to be used as instrument in accumulating ill-gotten wealth through government concessions, etc., which acts constitute gross abuse of official
[56] [57] [58]

position and authority, flagrant breach of public trust, unjust enrichment, violation of the Constitution and laws of the Republic of the Philippines. By compelling petitioners, not only to reveal the identity of their clients, but worse, to submit to the PCGG documents substantiating the client-lawyer relationship, as well as deeds of assignment petitioners executed in favor of its clients covering their respective shareholdings, the PCGG would exact from petitioners a link that would inevitably form the chain of testimony necessary to convict the (client) of a crime.
III

In response to petitioners' last assignment of error, respondents allege that the private respondent was dropped as party defendant not only because of his admission that he acted merely as a nominee but also because of his undertaking to testify to such facts and circumstances "as the interest of truth may require, which includes... the identity of the principal." First, as to the bare statement that private respondent merely acted as a lawyer and nominee, a statement made in his out-of-court settlement with the PCGG, it is sufficient to state that petitioners have likewise made the same claim not merely out-of- court but also in their Answer to plaintiff's Expanded Amended Complaint, signed by counsel, claiming that their acts were made in furtherance of "legitimate lawyering. Being "similarly situated" in this regard, public respondents must show that there exist other conditions and circumstances which would warrant their treating the private respondent differently from petitioners in the case at bench in order to evade a violation of the equal protection clause of the Constitution. To this end, public respondents contend that the primary consideration behind their decision to sustain the PCGG's dropping of private respondent as a defendant was his promise to disclose the identities of the clients in question. However, respondents failed to show - and absolutely nothing exists in the records of the case at bar - that private respondent actually revealed the identity of his client(s) to the PCGG. Since the undertaking happens to be the leitmotif of the entire arrangement between Mr. Roco and the PCGG, an undertaking which is so material as to have justified PCGG's special treatment exempting the private respondent from prosecution, respondent Sandiganbayan should have required proof of the undertaking more substantial than a "bare assertion" that private respondent did indeed comply with the undertaking. Instead, as manifested by the PCGG, only three documents were submitted for the purpose, two of which were mere requests for re-investigation and one simply disclosed certain clients which petitioners (ACCRA lawyers) were themselves willing to reveal. These were clients to whom both petitioners and private respondent rendered legal services while all of them were partners at ACCRA, and were not the clients which the PCGG wanted disclosed for the alleged questioned transactions. To justify the dropping of the private respondent from the case or the filing of the suit in the respondent court without him, therefore, the PCGG should conclusively show that Mr. Roco was treated as a species apart from the rest of the ACCRA lawyers on the basis of a classification which made substantial distinctions based on real differences. No such substantial distinctions exist from the records of the case at bench, in violation of the equal protection clause. The equal protection clause is a guarantee which provides a wall of protection against uneven application of statutes and regulations. In the broader sense, the guarantee
[59] [60] [61]

operates against uneven application of legal norms so that all persons under similar circumstances would be accorded the same treatment. Those who fall within a particular class ought to be treated alike not only as to privileges granted but also as to the liabilities imposed. x x x. What is required under this constitutional guarantee is the uniform operation of legal norms so that all persons under similar circumstances would be accorded the same treatment both in the privileges conferred and the liabilities imposed. As was noted in a recent decision: Favoritism and undue preference cannot be allowed. For the principle is that equal protection and security shall be given to every person under circumstances, which if not identical are analogous. If law be looked upon in terms of burden or charges, those that fall within a class should be treated in the same fashion, whatever restrictions cast on some in the group equally binding the rest. We find that the condition precedent required by the respondent PCGG of the petitioners for their exclusion as parties-defendants in PCGG Case No. 33 violates the lawyer-client confidentiality privilege. The condition also constitutes a transgression by respondents Sandiganbayan and PCGG of the equal protection clause of the Constitution. It is grossly unfair to exempt one similarly situated litigant from prosecution without allowing the same exemption to the others. Moreover, the PCGGs demand not only touches upon the question of the identity of their clients but also on documents related to the suspected transactions, not only in violation of the attorney-client privilege but also of the constitutional right against self-incrimination. Whichever way one looks at it, this is a fishing expedition, a free ride at the expense of such rights. An argument is advanced that the invocation by petitioners of the privilege of attorneyclient confidentiality at this stage of the proceedings is premature and that they should wait until they are called to testify and examine as witnesses as to matters learned in confidence before they can raise their objections. But petitioners are not mere witnesses. They are co-principals in the case for recovery of alleged ill-gotten wealth. They have made their position clear from the very beginning that they are not willing to testify and they cannot be compelled to testify in view of their constitutional right against self-incrimination and of their fundamental legal right to maintain inviolate the privilege of attorney-client confidentiality. It is clear then that the case against petitioners should never be allowed to take its full course in the Sandiganbayan. Petitioners should not be made to suffer the effects of further litigation when it is obvious that their inclusion in the complaint arose from a privileged attorney-client relationship and as a means of coercing them to disclose the identities of their clients. To allow the case to continue with respect to them when this Court could nip the problem in the bud at this early opportunity would be to sanction an unjust situation which we should not here countenance. The case hangs as a real and palpable threat, a proverbial Sword of Damocles over petitioners' heads. It should not be allowed to continue a day longer. While we are aware of respondent PCGGs legal mandate to recover ill-gotten wealth, we will not sanction acts which violate the equal protection guarantee and the right against self-incrimination and subvert the lawyer-client confidentiality privilege. WHEREFORE, IN VIEW OF THE FOREGOING, the Resolutions of respondent Sandiganbayan (First Division) promulgated on March 18, 1992 and May 21, 1992 are hereby ANNULLED and SET ASIDE. Respondent Sandiganbayan is further ordered to exclude petitioners Teodoro D. Regala, Edgardo J. Angara, Avelino V. Cruz, Jose C.
[62] [63] [64]

Concepcion, Rogelio A. Vinluan, Victor P. Lazatin, Eduardo U. Escueta and Paraja G. Hayuduni as parties-defendants in SB Civil Case No. 0033 entitled "Republic of the Philippines v. Eduardo Cojuangco, Jr., et al.".
*

[A.C. No. 5108. May 26, 2005]

ROSA F. MERCADO, complainant, vs. ATTY. JULITO D. VITRIOLO, respondent. DECISION

PUNO, J.:

Rosa F. Mercado filed the instant administrative complaint against Atty. Julito D. Vitriolo, seeking his disbarment from the practice of law. The complainant alleged that respondent maliciously instituted a criminal case for falsification of public document against her, a former client, based on confidential information gained from their attorney-client relationship. Let us first hearken to the facts. Complainant is a Senior Education Program Specialist of the Standards Development Division, Office of Programs and Standards while respondent is a Deputy Executive Director IV of the Commission on Higher Education (CHED).[1] Complainants husband filed Civil Case No. 40537 entitled Ruben G. Mercado v. Rosa C. Francisco, for annulment of their marriage with the Regional Trial Court (RTC) of Pasig City. This annulment case had been dismissed by the trial court, and the dismissal became final and executory on July 15, 1992.[2] In August 1992, Atty. Anastacio P. de Leon, counsel of complainant, died. On February 7, 1994, respondent entered his appearance before the trial court as collaborating counsel for complainant.[3] On March 16, 1994, respondent filed his Notice of Substitution of Counsel, [4] informing the RTC of Pasig City that he has been appointed as counsel for the complainant, in substitution of Atty. de Leon. It also appears that on April 13, 1999, respondent filed a criminal action against complainant before the Office of the City Prosecutor, Pasig City, entitled Atty. Julito Vitriolo, et al. v. Rose Dela Cruz F. Mercado, and docketed as I.S. No. PSG 99 -9823, for violation of Articles 171 and 172 (falsification of public document) of the Revised Penal Code.[5] Respondent alleged that complainant made false entries in the Certificates of Live Birth of her children, Angelica and Katelyn Anne. More specifically, complainant allegedly indicated in said Certificates of Live Birth that she is married to a certain Ferdinand Fernandez, and that their marriage was solemnized on April 11, 1979, when in truth, she is legally married to Ruben G. Mercado and their marriage took place on April 11, 1978. Complainant denied the accusations of respondent against her. She denied using any other name than Rosa F. Mercado. She also insisted that she has gotten married only once, on April 11, 1978, to Ruben G. Mercado. In addition, complainant Mercado cited other charges against respondent that are pending before or decided upon by other tribunals (1) libel suit before the Office of the City Prosecutor, Pasig City;[6] (2) administrative case for dishonesty, grave misconduct, conduct prejudicial to the best interest of the service, pursuit of private business, vocation or profession without the permission required by Civil Service rules and regulations, and violations of the Anti-Graft and Corrupt Practices Act, before the then Presidential Commission Against Graft and Corruption; [7] (3) complaint for dishonesty, grave misconduct, and conduct prejudicial to the best interest of the service before the Office of the Ombudsman, where he was found guilty of misconduct and meted out the penalty of one month suspension without pay;[8] and, (4) the Information for violation of Section 7(b)(2) of Republic Act No. 6713, as amended, otherwise known as the Code of Conduct and Ethical Standards for Public Officials and Employees before the Sandiganbayan.[9] Complainant Mercado alleged that said criminal complaint for falsification of public document (I.S. No. PSG 99-9823) disclosed confidential facts and information relating to the civil case for annulment, then handled by respondent Vitriolo as her counsel. This prompted complainant Mercado to bring this action against respondent. She claims that, in filing the criminal case for falsification, respondent

is guilty of breaching their privileged and confidential lawyer-client relationship, and should be disbarred. Respondent filed his Comment/Motion to Dismiss on November 3, 1999 where he alleged that the complaint for disbarment was all hearsay, misleading and irrelevant because all the allegations leveled against him are subject of separate fact-finding bodies. Respondent claimed that the pending cases against him are not grounds for disbarment, and that he is presumed to be innocent until proven otherwise.[10] He also states that the decision of the Ombudsman finding him guilty of misconduct and imposing upon him the penalty of suspension for one month without pay is on appeal with the Court of Appeals. He adds that he was found guilty, only of simple misconduct, which he committed in good faith.[11] In addition, respondent maintains that his filing of the criminal complaint for falsification of public documents against complainant does not violate the rule on privileged communication between attorney and client because the bases of the falsification case are two certificates of live birth which are public documents and in no way connected with the confidence taken during the engagement of respondent as counsel. According to respondent, the complainant confided to him as then counsel only matters of facts relating to the annulment case. Nothing was said about the alleged falsification of the entries in the birth certificates of her two daughters. The birth certificates are filed in the Records Division of CHED and are accessible to anyone.[12] In a Resolution dated February 9, 2000, this Court referred the administrative case to the Integrated Bar of the Philippines (IBP) for investigation, report and recommendation.[13] The IBP Commission on Bar Discipline set two dates for hearing but complainant failed to appear in both. Investigating Commissioner Rosalina R. Datiles thus granted respondents motion to file his memorandum, and the case was submitted for resolution based on the pleadings submitted by the parties.[14] On June 21, 2003, the IBP Board of Governors approved the report of investigating commissioner Datiles, finding the respondent guilty of violating the rule on privileged communication between attorney and client, and recommending his suspension from the practice of law for one (1) year. On August 6, 2003, complainant, upon receiving a copy of the IBP report and recommendation, wrote Chief Justice Hilario Davide, Jr., a letter of desistance. She stated that after the passage of so many years, she has now found forgiveness for those who have wronged her. At the outset, we stress that we shall not inquire into the merits of the various criminal and administrative cases filed against respondent. It is the duty of the tribunals where these cases are pending to determine the guilt or innocence of the respondent. We also emphasize that the Court is not bound by any withdrawal of the complaint or desistance by the complainant. The letter of complainant to the Chief Justice imparting forgiveness upon respondent is inconsequential in disbarment proceedings. We now resolve whether respondent violated the rule on privileged communication between attorney and client when he filed a criminal case for falsification of public document against his former client. A brief discussion of the nature of the relationship between attorney and client and the rule on attorney-client privilege that is designed to protect such relation is in order. In engaging the services of an attorney, the client reposes on him special powers of trust and confidence. Their relationship is strictly personal and highly confidential and fiduciary. The relation is of such delicate, exacting and confidential nature that is required by necessity and public interest.[15] Only by such confidentiality and protection will a person be encouraged to repose his confidence in an attorney. The hypothesis is that abstinence from seeking legal advice in a good cause is an evil which is fatal to the administration of justice. [16] Thus, the preservation and protection of that relation will encourage a client to entrust his legal problems to an attorney, which is of paramount importance to the administration of justice.[17] One rule adopted to serve this purpose is the attorney-client privilege: an attorney is to keep inviolate his clients secrets or confidence and not to abuse them.[18] Thus, the duty of a lawyer to preserve his clients se crets and confidence outlasts the termination of the attorney-client relationship,[19] and continues even after the clients death. [20] It is the

glory of the legal profession that its fidelity to its client can be depended on, and that a man may safely go to a lawyer and converse with him upon his rights or supposed rights in any litigation with absolute assurance that the lawyers tongue is tied from ever disclosing it. [21] With full disclosure of the facts of the case by the client to his attorney, adequate legal representation will result in the ascertainment and enforcement of rights or the prosecution or defense of the clients cause. Now, we go to the rule on attorney-client privilege. Dean Wigmore cites the factors essential to establish the existence of the privilege, viz:
(1) Where legal advice of any kind is sought (2) from a professional legal adviser in his capacity as such, (3) the communications relating to that purpose, (4) made in confidence (5) by the client, (6) are at his instance permanently protected (7) from disclosure by himself or by the legal advisor, (8) except the protection be waived. [22]

In fine, the factors are as follows: (1) There exists an attorney-client relationship, or a prospective attorney-client relationship, and it is by reason of this relationship that the client made the communication. Matters disclosed by a prospective client to a lawyer are protected by the rule on privileged communication even if the prospective client does not thereafter retain the lawyer or the latter declines the employment.[23] The reason for this is to make the prospective client free to discuss whatever he wishes with the lawyer without fear that what he tells the lawyer will be divulged or used against him, and for the lawyer to be equally free to obtain information from the prospective client.[24] On the other hand, a communication from a (prospective) client to a lawyer for some purpose other than on account of the (prospective) attorney-client relation is not privileged. Instructive is the case of Pfleider v. Palanca,[25] where the client and his wife leased to their attorney a 1,328-hectare agricultural land for a period of ten years. In their contract, the parties agreed, among others, that a specified portion of the lease rentals would be paid to the client-lessors, and the remainder would be delivered by counsel-lessee to client's listed creditors. The client alleged that the list of creditors which he had confidentially supplied counsel for the purpose of carrying out the terms of payment contained in the lease contract was disclosed by counsel, in violation of their lawyer-client relation, to parties whose interests are adverse to those of the client. As the client himself, however, states, in the execution of the terms of the aforesaid lease contract between the parties, he furnished counsel with the confidential list of his creditors. We ruled that this indicates that client delivered the list of his creditors to counsel not because of the professional relation then existing between them, but on account of the lease agreement. We then held that a violation of the confidence that accompanied the delivery of that list would partake more of a private and civil wrong than of a breach of the fidelity owing from a lawyer to his client. (2) The client made the communication in confidence. The mere relation of attorney and client does not raise a presumption of confidentiality. [26] The client must intend the communication to be confidential.[27] A confidential communication refers to information transmitted by voluntary act of disclosure between attorney and client in confidence and by means which, so far as the client is aware, discloses the information to no third person other than one reasonably necessary for the transmission of the information or the accomplishment of the purpose for which it was given. [28] Our jurisprudence on the matter rests on quiescent ground. Thus, a compromise agreement prepared by a lawyer pursuant to the instruction of his client and delivered to the opposing party, [29] an offer and counter-offer for settlement,[30] or a document given by a client to his counsel not in his professional capacity,[31] are not privileged communications, the element of confidentiality not being present.[32] (3) The legal advice must be sought from the attorney in his professional capacity. [33] The communication made by a client to his attorney must not be intended for mere information, but for the purpose of seeking legal advice from his attorney as to his rights or obligations. The communication must have been transmitted by a client to his attorney for the purpose of seeking legal advice.[34] If the client seeks an accounting service,[35] or business or personal assistance,[36] and not legal advice, the privilege does not attach to a communication disclosed for such purpose.

Applying all these rules to the case at bar, we hold that the evidence on record fails to substantiate complainants allegations. We note that complainant did not even specify the alleged communication in confidence disclosed by respondent. All her claims were couched in general terms and lacked specificity. She contends that respondent violated the rule on privileged communication when he instituted a criminal action against her for falsification of public documents because the criminal complaint disclosed facts relating to the civil case for annulment then handled by respondent. She did not, however, spell out these facts which will determine the merit of her complaint. The Court cannot be involved in a guessing game as to the existence of facts which the complainant must prove. Indeed, complainant failed to attend the hearings at the IBP. Without any testimony from the complainant as to the specific confidential information allegedly divulged by respondent without her consent, it is difficult, if not impossible to determine if there was any violation of the rule on privileged communication. Such confidential information is a crucial link in establishing a breach of the rule on privileged communication between attorney and client. It is not enough to merely assert the attorneyclient privilege.[37] The burden of proving that the privilege applies is placed upon the party asserting the privilege.[38] IN VIEW WHEREOF, the complaint against respondent Atty. Julito D. Vitriolo is hereby DISMISSED for lack of merit. SO ORDERED. Austria-Martinez, Callejo, Sr., and Chico-Nazario, JJ., concur. Tinga, J., out of the country. THIRD DIVISION [G.R. No. 91114. September 25, 1992.] NELLY LIM, petitioner, vs. THE COURT OF APPEALS, HON. MANUEL D. VICTORIO, as Presiding Judge of RTC-Rosales, Pangasinan, Branch 53, and JUAN SIM, respondents. Quisumbing, Torres & Evangelista for petitioner. Bince, Oficiana & Dancel for private respondent. SYLLABUS 1. REMEDIAL LAW; ACTIONS; EVIDENCE; PRIVILEGED COMMUNICATIONS; PHYSICIANPATIENT PRIVILEGE; RATIONALE BEHIND THE RULE. This rule on the physician-patient privilege is intended to facilitate and make safe full and confidential disclosure by the patient to the physician of all facts, circumstances and symptoms, untrammeled by apprehension of their subsequent and enforced disclosure and publication on the witness stand, to the end that the physician may form a correct opinion, and be enabled safely and efficaciously to treat his patient. It rests in public policy and is for the general interest of the community. 2. ID.; ID.; ID.; ID.; ID.; SUBJECT TO WAIVER. Since the object of the privilege is to protect the patient, it may be waived if no timely objection is made to the physician's testimony. 3. ID.; ID.; ID.; ID.; ID.; REQUISITES. In order that the privilege may be successfully claimed, the following requisites must concur: "1. the privilege is claimed in a civil case; 2. the person against whom the privilege is claimed is one duly authorized to practice medicine, surgery or obstetrics; 3. such person acquired the information while he was attending to the patient in his professional capacity; 4. the information was necessary to enable him to act in that capacity; and 5. the information was confidential, and, if disclosed, would blacken the reputation (formerly character) of the patient." 4. ID.; ID.; ID.; ID.; CONDITIONS. These requisites conform with the four (4) fundamental conditions necessary for the establishment of a privilege against the disclosure of certain communications, to wit: "1. The communications must originate in a confidence that they will not be disclosed. 2. This element of confidentiality must be essential to the full and satisfactory maintenance of the relation between the parties. 3. The relation must be one which in the opinion of the community ought to be sedulously fostered 4. The injury that would inure to the relation by the disclosure of the communications must be greater than the benefit thereby gained for the correct disposal of litigation."

5. ID.; ID.; ID.; ID.; PHYSICIAN-PATIENT PRIVILEGE; SCOPE. The physician may be considered to be acting in his professional capacity when he attends to the patient for curative, preventive, or palliative treatment. Thus, only disclosures which would have been made to the physician to enable him "safely and efficaciously to treat his patient" are covered by the privilege. It is to be emphasized that "it is the tenor only of the communication that is privileged. The mere fact of making a communication, as well as the date of a consultation and the number of consultations, are therefore not privileged from disclosure, so long as the subject communicated is not stated." 6. ID.; ID.; ID.; BURDEN OF PROOF AND PRESUMPTIONS; ONE WHO CLAIMS PRIVILEGED COMMUNICATIONS MUST PROVE REQUISITES THEREOF. One who claims this privilege must prove the presence of these aforementioned requisites. 7. ID.; ID.; ID.; PRIVILEGED COMMUNICATIONS; PHYSICIAN-PATIENT PRIVILEGE; INFORMATION GATHERED IN PRESENCE OF THIRD PARTIES, NOT PRIVILEGED. There is authority to the effect that information elicited during consultation with a physician in the presence of third parties removes such information from the mantle of the privilege: "Some courts have held that the casual presence of a third person destroys the confidential nature of the communication between doctor and patient and thus destroys the privilege, and that under such circumstances the doctor may testify. Other courts have reached a contrary result." 8. ID.; ID.; ID.; ID.; ID.; PRIVILEGE, WAIVED IN CASE AT BAR. while it may be true that counsel for the petitioner opposed the oral request for the issuance of a subpoena ad testificandum to Dr. Acampado and filed a formal motion for the quashal of the said subpoena a day before the witness was to testify, the petitioner makes no claim in any of her pleadings that her counsel had objected to any question asked of the witness on the ground that it elicited an answer that would violate the privilege, despite the trial court's advise that said counsel may interpose his objection to the testimony "once it becomes apparent that the testimony, sought to be elicited is covered by the privileged communication rule." The particular portions of the stenographic notes of the testimony of Dr. Acampado quoted in the petitioner's Petition and Memorandum, and in the private respondent's Memorandum, do not at all show that any objections were interposed. Even granting ex gratia that the testimony of Dr. Acampado could be covered by the privilege, the failure to seasonably object thereto amounted to a waiver thereof. DECISION DAVIDE, JR., J p: This petition brings into focus the rule on the confidentiality of the physician-patient relationship. Petitioner urges this Court to strike down as being violative thereof the resolution of public respondent Court of Appeals in C.A.-G.R. SP No. 16991 denying due course to a petition to annul the order of the trial court allowing a Psychiatrist of the National Mental Hospital to testify as an expert witness and not as an attending physician of petitioner. The parties are in agreement as to the following facts: Petitioner and private respondent are lawfully married to each other. On 25 November 1987, private respondent filed with Branch 53 of the Regional Trial Court (RTC) of Pangasinan a petition for annulment of such marriage on the ground that petitioner has been allegedly suffering from a mental illness called schizophrenia "before, during and after the marriage and until the present." After the issues were joined and the pre-trial was terminated, trial on the merits ensued. Private respondent presented three (3) witnesses before taking the witness stand himself to testify on his own behalf. On 11 January 1989, private respondent's counsel announced that he would present as his next witness the Chief of the Female Services of the National Mental Hospital, Dr. Lydia Acampado, a Doctor of Medicine who specializes in Psychiatry. Said counsel forthwith orally applied for the issuance of a subpoena ad testificandum requiring Dr. Acampado to testify on 25 January 1989. Petitioner's counsel opposed the motion on the ground that the testimony sought to be elicited from the witness is privileged since the latter had examined the petitioner in a professional capacity and had diagnosed her to be suffering from schizophrenia. Over such opposition, the subpoena was issued on 12 January 1989. LLjur On 24 January 1989, petitioner's counsel filed an urgent omnibus motion to quash the subpoena and

suspend the proceedings pending resolution of the motion. Before Dr. Acampado took the witness stand on 25 January 1989, the court heard this urgent motion. Movant argued that having seen and examined the petitioner in a professional capacity, Dr. Acampado is barred from testifying under the rule on the confidentiality of a physician-patient relationship. Counsel for private respondent contended, however, that Dr. Acampado would be presented as an expert witness and would not testify on any information acquired while attending to the petitioner in a professional capacity. The trial court, per respondent Judge, denied the motion and allowed the witness to testify. Dr. Acampado thus took the witness stand, was qualified by counsel for private respondent as an expert witness and was asked hypothetical questions related to her field of expertise. She neither revealed the illness she examined and treated the petitioner for nor disclosed the results of her examination and the medicines she had prescribed. Since petitioner's counsel insisted that the ruling of the court on the motion be reduced to writing, respondent Judge issued the following Order on the same date: "In his omnibus motion filed with the Court only yesterday, January 24, 1989, petitioner seeks to prevent Dr. Lydia Acampado from testifying because she saw and examined respondent Nelly Lim in her professional capacity perforce her testimony is covered by the privileged (sic) communication rule. Petitioner contends that Dr. Acampado is being presented as an expert witness and that she will not testify on any information she acquired in (sic) attending to Nelly Lim in her professional capacity. Based on the foregoing manifestation of counsel for petitioner, the Court denied the respondent's motion and forthwith allowed Dr. Acampado to testify. However, the Court advised counsel for respondent to interpose his objection once it becomes apparent that the testimony sought to be elicited is covered by the privileged communication rule. On the witness box, Dr. Acampado answered routinary (sic) questions to qualify her as an expert in psychiatry; she was asked to render an opinion as to what kind of illness (sic) are stelazine tablets applied to; she was asked to render an opinion on a (sic) hypothetical facts respecting certain behaviours of a person; and finally she admitted she saw and treated Nelly Lim but she never revealed what illness she examined and treated her (sic); nor (sic) the result of her examination of Nelly Lim, nor (sic) the medicines she prescribed. WHEREFORE, the omnibus motion dated January 19, 1989 is hereby DENIED." 1 On 3 March 1989, petitioner filed with the public respondent Court of Appeals a petition 2 for certiorari and prohibition, docketed therein as C.A.-G.R. SP No. 16991, to annul the aforesaid order of respondent Judge on the ground that the same was issued with grave abuse of discretion amounting to lack of jurisdiction, and to prohibit him from proceeding with the reception of Dr. Acampado's testimony. prcd On 18 September 1989, the Court of Appeals promulgated a resolution 3 denying due course to the petition on the ground that "the petitioner failed in establishing the confidential nature of the testimony given by or obtained from Dr. Acampado when she testified on January 25, 1989." Hence, the respondent Judge committed no grave abuse of discretion. In support thereof, the respondent Court discussed the conditions which would render as inadmissible testimonial evidence between a physician and his patient under paragraph (c), Section 24, Rule 130 of the Revised Rules of Court and made the following findings: "The present suit is a civil case for annulment of marriage and the person whose testimony is sought to be stopped as a privileged communication is a physician, who was summoned by the patient in her professional capacity for curative remedy or treatment. The divergence in views is whether the information given by the physician in her testimony in open court on January 25, 1989 was a privileged communication. We are of the opinion that they do not fall within the realm of a privileged communication because the information were (sic) not obtained from the patient while attending her in her professional capacity and neither were (sic) the information necessary to enable the physician to prescribe or give treatment to the patient Nelly Lim. And neither does the information obtained from the physician tend to blacken the character of the patient or bring disgrace to her or invite reproach. Dr. Acampado is a Medical Specialist II and in-charge (sic) of the Female Service of the National

Center for Mental Health a fellow of the Philippine Psychiatrist Association and a Diplomate of the Philippine Board of Psychiatrists. She was summoned to testify as an expert witness and not as an attending physician of petitioner. After a careful scrutiny of the transcript of Dr. Acampado's testimony, We find no declaration that touched (sic) or disclosed any information which she has acquired from her patient, Nelly Lim, during the period she attended her patient in a professional capacity. Although she testified that she examined and interviewed the patient, she did not disclose anything she obtained in the course of her examination, interview and treatment of her patient. Given a set of facts and asked a hypothetical question, Dr. Acampado rendered an opinion regarding the history and behaviour of the fictitious character in the hypothetical problem. The facts and conditions alleged in the hypothetical problem did not refer and (sic) had no bearing to (sic) whatever information or findings the doctor obtained from attending the (sic) patient. A physician is not disqualified to testify as an expert concerning a patient's ailment, when he can disregard knowledge acquired in attending such patient and make answer solely on facts related in (sic) the hypothetical question. (Butler vs. Role, 242 Pac. 436; Supreme Court of Arizona Jan. 7, 1926). Expert testimony of a physician based on hypothetical question (sic) as to cause of illness of a person whom he has attended is not privileged, provided the physician does not give testimony tending to disclose confidential information related to him in his professional capacity while attending to the patient. (Crago vs. City of Cedar Rapids, 98 NW 354, see Jones on Evidence, Vol. 3, p. 843, 3rd Ed.). The rule on privilege (sic) communication in the relation of physician and patient proceeds from the fundamental assumption that the communication to deserve protection must be confidential in their origin. Confidentiality is not to be blindly implied from the mere relation of physician and patient. It might be implied according to circumstances of each case, taking into consideration the nature of the ailment and the occasion of the consultation. The claimant of the privilege has the burden of establishing in each instance all the facts necessary to create the privilege, including the confidential nature of the information given."4 Her motion to reconsider the resolution having been denied, petitioner took this recourse under Rule 45 of the Rules of Court. In her view, the respondent Court of Appeals "seriously erred": "I. . . . in not finding that all the essential elements of the rule on physician-patient privileged communication under Section 21, Rule 130 of the Rules of Court (Section 24, Rule 130 of the Revised Rules of Evidence) exist in the case at bar. II. . . . in believing that Dr. Acampado 'was summoned as an expert witness and not as an attending physician of petitioner.' III. . . . in concluding that Dr. Acampado made 'no declaration that touched (sic) or disclosed any information which she has acquired from her patient, Nelly Lim, during the period she attended her patient in a professional capacity.' IV. . . . in declaring that 'the petitioner failed in establishing the confidential nature of the testimony given by or obtained from Dr. Acampado.'" 5 We gave due course to the petition and required the parties to submit their respective Memoranda 6 after the private respondent filed his Comment 7 and the petitioner submitted her reply 8 thereto. The parties subsequently filed their separate Memoranda. The petition is devoid of any merit. Respondent Court of Appeals committed no reversible error in its challenged resolution. The law in point is paragraph (c), Section 24 of the Revised Rules on Evidence which reads: "SECTION 24. Disqualification by reason of privileged communication. The following persons cannot testify as to matters learned in confidence in the following cases: xxx xxx xxx (c) A person authorized to practice medicine, surgery or obstetrics cannot in a civil case, without the

consent of the patient, be examined as to any advice or treatment given by him or any information which he may have acquired in attending such patient in a professional capacity, which information was necessary to enable him to act in that capacity, and which would blacken the reputation of the patient." Cdpr This is a reproduction of paragraph (c), Section 21, Rule 130 of the 1964 Revised Rules of Court with two (2) modifications, namely: (a) the inclusion of the phrase "advice or treatment given by him," and (b) substitution of the word reputation for the word character. Said Section 21 in turn is a reproduction of paragraph (f), Section 26, Rule 123 of the 1940 Rules of Court with a modification consisting in the change of the phrase "which would tend to blacken" in the latter to "would blacken." 9 Verily, these changes affected the meaning of the provision. Under the 1940 Rules of Court, it was sufficient if the information would tend to blacken the character of the patient. In the 1964 Rules of Court, a stricter requirement was imposed; it was imperative that the information would blacken such character. With the advent of the Revised Rules on Evidence on 1 July 1989, the rule was relaxed once more by the substitution of the word character with the word reputation. There is a distinction between these two concepts. "'Character' is what a man is, and 'reputation' is what he is supposed to be and what people say he is. 'Character' depends on attributes possessed, and 'reputation' on attributes which others believe one to possess. The former signifies reality and the latter merely what is accepted to be reality at present." 10 This rule on the physician-patient privilege is intended to facilitate and make safe full and confidential disclosure by the patient to the physician of all facts, circumstances and symptoms, untrammeled by apprehension of their subsequent and enforced disclosure and publication on the witness stand, to the end that the physician may form a correct opinion, and be enabled safely and efficaciously to treat his patient. 11 It rests in public policy and is for the general interest of the community. 12 Since the object of the privilege is to protect the patient, it may be waived if no timely objection is made to the physician's testimony. 13 In order that the privilege may be successfully claimed, the following requisites must concur: "1. the privilege is claimed in a civil case; 2. the person against whom the privilege is claimed is one duly authorized to practice medicine, surgery or obstetrics; 3. such person acquired the information while he was attending to the patient in his professional capacity; 4. the information was necessary to enable him to act in that capacity; and 5. the information was confidential, and, if disclosed, would blacken the reputation (formerly character) of the patient." 14 These requisites conform with the four (4) fundamental conditions necessary for the establishment of a privilege against the disclosure of certain communications, to wit: "1. The communications must originate in a confidence that they will not be disclosed. 2. This element of confidentiality must be essential to the full and satisfactory maintenance of the relation between the parties. 3. The relation must be one which in the opinion of the community ought to be sedulously fostered 4. The injury that would inure to the relation by the disclosure of the communications must be greater than the benefit thereby gained for the correct disposal of litigation." 15 The physician may be considered to be acting in his professional capacity when he attends to the patient for curative, preventive, or palliative treatment. Thus, only disclosures which would have been made to the physician to enable him "safely and efficaciously to treat his patient" are covered by the privilege. 16 It is to be emphasized that "it is the tenor only of the communication that is privileged. The mere fact of making a communication, as well as the date of a consultation and the number of consultations, are therefore not privileged from disclosure, so long as the subject communicated is not stated." 17 One who claims this privilege must prove the presence of these aforementioned requisites. 18 Our careful evaluation of the submitted pleadings leads Us to no other course of action but to agree with the respondent Court's observation that the petitioner failed to discharge that burden. In the first

place, Dr. Acampado was presented and qualified as an expert witness. As correctly held by the Court of Appeals, she did not disclose anything obtained in the course of her examination, interview and treatment of the petitioner; moreover, the facts and conditions alleged in the hypothetical problem did not refer to and had no bearing on whatever information or findings the doctor obtained while attending to the patient. There is, as well, no showing that Dr. Acampado's answers to the questions propounded to her relating to the hypothetical problem were influenced by the information obtained from the petitioner. Otherwise stated, her expert opinion excluded whatever information or knowledge she had about the petitioner which was acquired by reason of the physician-patient relationship existing between them. As an expert witness, her testimony before the trial court cannot then be excluded. The rule on this point is summarized as follows: Cdpr "The predominating view, with some scant authority otherwise, is that the statutory physician-patient privilege, though duly claimed, is not violated by permitting a physician to give expert opinion testimony in response to a strictly hypothetical question in a lawsuit involving the physical mental condition of a patient whom he has attended professionally, where his opinion is based strictly upon the hypothetical facts stated, excluding and disregarding any personal professional knowledge he may have concerning such patient. But in order to avoid the bar of the physician-patient privilege where it is asserted in such a case, the physician must base his opinion solely upon the facts hypothesized in the question, excluding from consideration his personal knowledge of the patient acquired through the physician and patient relationship. If he cannot or does not exclude from consideration his personal professional knowledge of the patient's condition he should not be permitted to testify as to his expert opinion." 19 Secondly, it is quite clear from Dr. Acampado's testimony that the petitioner was never interviewed alone. Said interviews were always conducted in the presence of a third party, thus: "Q I am asking you, doctor, whom did you interview? A I interviewed the husband first, then the father and after having the history, I interviewed the patient, Nelly. Q How many times did Juan Lim and Nelly Lim go to your office? A Now, the two (2) of them came three (3) times. As I have stated before, once in the month of April of 1987 and two (2) times for the month of June 1987, and after that, since July of 1987, it was the father of Nelly, Dr. Lim, who was bringing Nelly to me until November of 1987. Q Now, Dr. Lim is a fellow physician? A Yes, I understand. Q Was there anything that he told you when he visited with you in a clinic? A I would say that there was none. Even if I asked information about Nelly, I could not get anything from Dr. Lim. Q Now, when Dr. Lim and his daughter went to your clinic, was there any doctor who was also present during that interview? A No, sir, I don't remember any." 20 There is authority to the effect that information elicited during consultation with a physician in the presence of third parties removes such information from the mantle of the privilege: "Some courts have held that the casual presence of a third person destroys the confidential nature of the communication between doctor and patient and thus destroys the privilege, and that under such circumstances the doctor may testify. Other courts have reached a contrary result." 21 Thirdly, except for the petitioner's sweeping claim that "(T)he information given by Dr. Acampado brings disgrace and invite (sic) reproach to petitioner by falsely making it appear in the eyes of the trial court and the public that the latter was suffering from a mental disturbance called schizophrenia which caused, and continues to cause, irreparable injury to the name and reputation of petitioner and her family," 22 which is based on a wrong premise, nothing specific or concrete was offered to show that indeed, the information obtained from Dr. Acampado would blacken the former's "character" (or "reputation"). Dr. Acampado never disclosed any information obtained from the petitioner regarding the latter's ailment and the treatment recommended therefor. prcd Finally, while it may be true that counsel for the petitioner opposed the oral request for the issuance

of a subpoena ad testificandum to Dr. Acampado and filed a formal motion for the quashal of the said subpoena a day before the witness was to testify, the petitioner makes no claim in any of her pleadings that her counsel had objected to any question asked of the witness on the ground that it elicited an answer that would violate the privilege, despite the trial court's advise that said counsel may interpose his objection to the testimony "once it becomes apparent that the testimony, sought to be elicited is covered by the privileged communication rule." The particular portions of the stenographic notes of the testimony of Dr. Acampado quoted in the petitioner's Petition 23 and Memorandum, 24 and in the private respondent's Memorandum, 25 do not at all show that any objections were interposed. Even granting ex gratia that the testimony of Dr. Acampado could be covered by the privilege, the failure to seasonably object thereto amounted to a waiver thereof. WHEREFORE, the instant petition is DENIED for lack of merit. Costs against petitioner. SO ORDERED. Bidin, Romero and Melo, JJ ., concur. Gutierrez, Jr., J ., is on official leave.
Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 108854 June 14, 1994 MA. PAZ FERNANDEZ KROHN, petitioner, vs. COURT OF APPEALS and EDGAR KROHN, JR., respondents. Cruz, Durian, Agabin, Atienza, Alday and Tuason for petitioner. Oscar F. Martinez for private respondent. BELLOSILLO, J.: A confidential psychiatric evaluation report is being presented in evidence before the trial court in a petition for annulment of marriage grounded on psychological incapacity. The witness testifying on the report is the husband who initiated the annulment proceedings, not the physician who prepared the report. The subject of the evaluation report, Ma. Paz Fernandez Krohn, invoking the rule on privileged communication between physician and patient, seeks to enjoin her husband from disclosing the contents of the report. After failing to convince the trial court and the appellate court, she is now before us on a petition for review oncertiorari. On 14 June 1964, Edgar Krohn, Jr., and Ma. Paz Fernandez were married at the Saint Vincent de Paul Church in San Marcelino, Manila. The union produced three children, Edgar Johannes, Karl Wilhelm and Alexandra. Their blessings notwithstanding, the relationship between the couple developed into a stormy one. In 1971, Ma. Paz underwent psychological testing purportedly in an effort to ease the marital strain. The effort however proved futile. In 1973, they finally separated in fact. In 1975, Edgar was able to secure a copy of the confidential psychiatric report on Ma. Paz prepared and signed by Drs. Cornelio Banaag, Jr., and Baltazar Reyes. On 2 November 1978, presenting the report among others, he obtained a decree ("Conclusion") from the Tribunal Metropolitanum Matrimoniale in Manila nullifying his church marriage with Ma. Paz on the ground of "incapacitas assumendi onera conjugalia due to lack of due discretion existent at the time of the wedding and thereafter." 1 On 10 July 1979, the decree was confirmed and pronounced "Final and Definite." 2 Meanwhile, on 30 July 1982, the then Court of First Instance (now Regional Trial Court) of Pasig, Br. II, issued an order granting the voluntary dissolution of the conjugal partnership. On 23 October 1990, Edgar filed a petition for the annulment of his marriage with Ma. Paz before the trial court. 3In his petition, he cited the Confidential Psychiatric Evaluation Report which Ma. Paz merely denied in her Answer as "either unfounded or irrelevant." 4 At the hearing on 8 May 1991, Edgar took the witness stand and tried to testify on the contents of the Confidential Psychiatric Evaluation Report. This was objected to on the ground that it violated the rule on privileged communication between physician and patient. Subsequently, Ma. Paz filed a Manifestation expressing her "continuing objection" to any evidence, oral or documentary, "that would thwart the physician-patient privileged communication rule," 5 and thereafter submitted a Statement for the Record asserting among others that "there is no factual or legal basis whatsoever for petitioner (Edgar) to claim 'psychological incapacity' to annul their marriage, such ground being completely false, fabricated and merely an afterthought." 6 Before leaving for Spain where she has since resided after their separation, Ma. Paz also authorized and instructed her counsel to oppose the suit and pursue her counterclaim even during her absence. On 29 May 1991, Edgar opposed Ma. Paz' motion to disallow the introduction of the confidential psychiatric report as evidence, 7 and afterwards moved to strike out Ma. Paz' Statement for the Record. 8

On 4 June 1991, the trial court issued an Order admitting the Confidential Psychiatric Evaluation Report in evidence and ruling that

. . . the Court resolves to overrule the objection and to sustain the Opposition to the respondent's Motion; first, because the very issue in this case is whether or not the respondent had been suffering from psychological incapacity; and secondly, when the said psychiatric report was referred to in the complaint, the respondent did not object thereto on the ground of the supposed privileged communication between patient and physician. What was raised by the respondent was that the said psychiatric report was irrelevant. So, the Court feels that in the interest of justice and for the purpose of determining whether the respondent as alleged in the petition was suffering from psychological incapacity, the said psychiatric report is very material and may be testified to by petitioner (Edgar Krohn, Jr.) without prejudice on the part of the respondent to dispute the said report or to cross-examination first the petitioner and later the psychiatrist who prepared the same if the latter will be presented. 9 On 27 November 1991, the trial court denied the Motion to Reconsider Order dated June 4, 1991, and directed that the Statement for the Record filed by Ma. Paz be stricken off the record. A subsequent motion for reconsideration filed by her counsel was likewise denied. Counsel of Ma. Paz then elevated the issue to respondent Court of Appeals. In a Decision promulgated 30 October 1992, the appellate court dismissed the petition for certiorari. 10 On 5 February 1993, the motion to reconsider the dismissal was likewise denied. Hence, the instant petition for review. Petitioner now seeks to enjoin the presentation and disclosure of the contents of the psychiatric report and prays for the admission of her Statement for the Record to form part of the records of the case. She argues that since Sec. 24, par. (c), Rule 130, of the Rules of Court 11 prohibits a physician from testifying on matters which he may have acquired in attending to a patient in a professional capacity, "WITH MORE REASON should be third person (like respondent-husband in this particular instance) be PROHIBITED from testifying on privileged matters between a physician and patient or from submitting any medical report, findings or evaluation prepared by a physician which the latter has acquired as a result of his confidential and privileged relation with a patient." 12 She says that the reason behind the prohibition is . . . to facilitate and make safe, full and confidential disclosure by a patient to his physician of all facts, circumstances and symptoms, untrammeled by apprehension of their subsequent and enforced disclosure and publication on the witness stand, to the end that the physician may form a correct opinion, and be enabled safely and efficaciously to treat his patient. 13 She further argues that to allow her husband to testify on the contents of the psychiatric evaluation report "will set a very bad and dangerous precedent because it abets circumvention of the rule's intent in preserving the sanctity, security and confidence to the relation of physician and his patient." 14 Her thesis is that what cannot be done directly should not be allowed to be done indirectly. Petitioner submits that her Statement for the Record simply reiterates under oath what she asserted in her Answer, which she failed to verify as she had already left for Spain when her Answer was filed. She maintains that her "Statement for the Record is a plain and simple pleading and is not as it has never been intended to take the place of her testimony;" 15 hence, there is no factual and legal basis whatsoever to expunge it from the records. Private respondent Edgar Krohn, Jr., however contends that "the rules are very explicit: the prohibition applies only to a physician. Thus . . . the legal prohibition to testify is not applicable to the case at bar where the person sought to be barred from testifying on the privileged communication is the husband and not the physician of the petitioner." 16 In fact, according to him, the Rules sanction his testimony considering that a husband may testify against his wife in a civil case filed by one against the other. Besides, private respondent submits that privileged communication may be waived by the person entitled thereto, and this petitioner expressly did when she gave her unconditional consent to the use of the psychiatric evaluation report when it was presented to the Tribunal Metropolitanum Matrimoniale which took it into account among others in deciding the case and declaring their marriage null and void. Private respondent further argues that petitioner also gave her implied consent when she failed to specifically object to the admissibility of the report in her Answer where she merely described the evaluation report as "either unfounded or irrelevant." At any rate, failure to interpose a timely objection at the earliest opportunity to the evidence presented on privileged matters may be construed as an implied waiver. With regard to the Statement for the Record filed by petitioner, private respondent posits that this in reality is an amendment of her Answer and thus should comply with pertinent provisions of the Rules of Court, hence, its exclusion from the records for failure to comply with the Rules is proper. The treatise presented by petitioner on the privileged nature of the communication between physician and patient, as well as the reasons therefor, is not doubted. Indeed, statutes making communications between physician and patient privileged are intended to inspire confidence in the patient and encourage him to make a full disclosure to his physician of his symptoms and condition. 17 Consequently, this prevents the physician from making public information that will result in humiliation, embarrassment, or disgrace to the patient. 18 For, the patient should rest assured with the knowledge that the law recognizes the communication as confidential, and guards against the possibility of his feelings being shocked or his reputation tarnished by their subsequent disclosure. 19 The physician-patient privilege creates a zone of privacy, intended to preclude the humiliation of the patient that may follow the disclosure of his ailments. Indeed, certain types of information communicated in the context of the physician-patient relationship fall within the constitutionally protected zone of privacy, 20 including a patient's interest in keeping his mental health records confidential. 21 Thus, it has been observed that the psychotherapist-patient privilege is founded upon the notion that certain forms of antisocial behavior may be prevented by encouraging those in need of treatment for emotional problems to secure the services of a psychotherapist.

Petitioner's discourse while exhaustive is however misplaced. Lim v. Court of Appeals 22 clearly lays down the requisites in order that the privilege may be successfully invoked: (a) the privilege is claimed in a civil case; (b) the person against whom the privilege is claimed is one duly authorized to practice medicine, surgery or obstetrics; (c) such person acquired the information while he was attending to the patient in his professional capacity; (d) the information was necessary to enable him to act in that capacity; and, (e) the information was confidential and, if disclosed, would blacken the reputation (formerly character) of the patient. In the instant case, the person against whom the privilege is claimed is not one duly authorized to practice medicine, surgery or obstetrics. He is simply the patient's husband who wishes to testify on a document executed by medical practitioners. Plainly and clearly, this does not fall within the claimed prohibition. Neither can his testimony be considered a circumvention of the prohibition because his testimony cannot have the force and effect of the testimony of the physician who examined the patient and executed the report. Counsel for petitioner indulged heavily in objecting to the testimony of private respondent on the ground that it was privileged. In his Manifestation before the trial court dated 10 May 1991, he invoked the rule on privileged communications but never questioned the testimony as hearsay. It was a fatal mistake. For, in failing to object to the testimony on the ground that it was hearsay, counsel waived his right to make such objection and, consequently, the evidence offered may be admitted. The other issue raised by petitioner is too trivial to merit the full attention of this Court. The allegations contained in the Statement for the Records are but refutations of private respondent's declarations which may be denied or disproved during the trial. The instant appeal has taken its toll on the petition for annulment. Three years have already lapsed and private respondent herein, as petitioner before the trial court, has yet to conclude his testimony thereat. We thus enjoin the trial judge and the parties' respective counsel to act with deliberate speed in resolving the main action, and avoid any and all stratagems that may further delay this case. If all lawyers are allowed to appeal every perceived indiscretion of a judge in the course of trial and include in their appeals depthless issues, there will be no end to litigations, and the docket of appellate courts will forever be clogged with inconsequential cases. Hence, counsel should exercise prudence in appealing lower court rulings and raise only legitimate issues so as not to retard the resolution of cases. Indeed, there is no point in unreasonably delaying the resolution of the petition and prolonging the agony of the wedded couple who after coming out from a storm still have the right to a renewed blissful life either alone or in the company of each other. 23 WHEREFORE, the instant petition for review is DENIED for lack of merit. The assailed Decision of respondent Court of Appeals promulgated on 30 October 1992 is AFFIRMED. SO ORDERED. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 70054 December 11, 1991 BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner, vs. THE MONETARY BOARD, CENTRAL BANK OF THE PHILIPPINES, JOSE B. FERNANDEZ, CARLOTA P. VALENZUELA, ARNULFO B. AURELLANO and RAMON V. TIAOQUI, respondents. G.R. No. 68878 December 11, 1991 BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner, vs. HON. INTERMEDIATE APPELLATE COURT and CELESTINA S. PAHIMUNTUNG, assisted by her husband, respondents. G.R. No. 77255-58 December 11, 1991 TOP MANAGEMENT PROGRAMS CORPORATION AND PILAR DEVELOPMENT CORPORATION, petitioners, vs. THE COURT OF APPEALS, The Executive Judge of the Regional Trial Court of Cavite, Ex-Officio Sheriff REGALADO E. EUSEBIO, BANCO FILIPINO SAVINGS AND MORTGAGE BANK, CARLOTA P. VALENZUELA AND SYCIP, SALAZAR, HERNANDEZ AND GATMAITAN, respondents. G.R. No. 78766 December 11, 1991 EL GRANDE CORPORATION, petitioner, vs. THE COURT OF APPEALS, THE EXECUTIVE JUDGE of The Regional Trial Court and Ex-Officio Sheriff REGALADO E. EUSEBIO, BANCO FILIPINO SAVINGS AND MORTGAGE BANK, CARLOTA P. VALENZUELA AND SYCIP, SALAZAR, FELICIANO AND HERNANDEZ, respondents. G.R. No. 78767 December 11, 1991 METROPOLIS DEVELOPMENT CORPORATION, petitioner, vs. COURT OF APPEALS, CENTRAL BANK OF THE PHILIPPINES, JOSE B. FERNANDEZ, JR., CARLOTA P. VALENZUELA, ARNULFO AURELLANO AND RAMON TIAOQUI, respondents. G.R. No. 78894 December 11, 1991 BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner vs.

COURT OF APPEALS, THE CENTRAL BANK OF THE PHILIPPINES, JOSE B. FERNANDEZ, JR., CARLOTA P. VALENZUELA, ARNULFO B. AURELLANO AND RAMON TIAOQUI, respondents. G.R. No. 81303 December 11, 1991 PILAR DEVELOPMENT CORPORATION, petitioner vs. COURT OF APPEALS, HON. MANUEL M. COSICO, in his capacity as Presiding Judge of Branch 136 of the Regional Trial Court of Makati, CENTRAL BANK OF THE PHILIPPINES AND CARLOTA P. VALENZUELA,respondents. G.R. No. 81304 December 11, 1991 BF HOMES DEVELOPMENT CORPORATION, petitioner, vs. THE COURT OF APPEALS, CENTRAL BANK AND CARLOTA P. VALENZUELA, respondents. G.R. No. 90473 December 11, 1991 EL GRANDE DEVELOPMENT CORPORATION, petitioner, vs. THE COURT OF APPEALS, THE EXECUTIVE JUDGE of the Regional Trial Court of Cavite, CLERK OF COURT and ExOfficio Sheriff ADORACION VICTA, BANCO FILIPINO SAVINGS AND MORTGAGE BANK, CARLOTA P. VALENZUELA AND SYCIP, SALAZAR, HERNANDEZ AND GATMAITAN, respondents. Panganiban, Benitez, Barinaga & Bautista Law Offices collaborating counsel for petitioner. Florencio T. Domingo, Jr. and Crisanto S. Cornejo for intervenors. MEDIALDEA, J.:p This refers to nine (9) consolidated cases concerning the legality of the closure and receivership of petitioner Banco Filipino Savings and Mortgage Bank (Banco Filipino for brevity) pursuant to the order of respondent Monetary Board. Six (6) of these cases, namely, G.R. Nos. 68878, 77255-68, 78766, 81303, 81304 and 90473 involve the common issue of whether or not the liquidator appointed by the respondent Central Bank (CB for brevity) has the authority to prosecute as well as to defend suits, and to foreclose mortgages for and in behalf of the bank while the issue on the validity of the receivership and liquidation of the latter is pending resolution in G.R. No. 7004. Corollary to this issue is whether the CB can be sued to fulfill financial commitments of a closed bank pursuant to Section 29 of the Central Bank Act. On the other hand, the other three (3) cases, namely, G.R. Nos. 70054, which is the main case, 78767 and 78894 all seek to annul and set aside M.B. Resolution No. 75 issued by respondents Monetary Board and Central Bank on January 25, 1985. The antecedent facts of each of the nine (9) cases are as follows: G.R No. 68878 This is a motion for reconsideration, filed by respondent Celestina Pahimuntung, of the decision promulgated by thisCourt on April 8, 1986, granting the petition for review on certiorari and reversing the questioned decision of respondent appellate court, which annulled the writ of possession issued by the trial court in favor of petitioner. The respondent-movant contends that the petitioner has no more personality to continue prosecuting the instant case considering that petitioner bank was placed under receivership since January 25, 1985 by the Central Bank pursuant to the resolution of the Monetary Board. G.R. Nos. 77255-58 Petitioners Top Management Programs Corporation (Top Management for brevity) and Pilar Development Corporation (Pilar Development for brevity) are corporations engaged in the business of developing residential subdivisions. Top Management obtained a loan of P4,836,000 from Banco Filipino as evidenced by a promissory note dated January 7, 1982 payable in three years from date. The loan was secured by real estate mortgage in its various properties in Cavite. Likewise, Pilar Development obtained loans from Banco Filipino between 1982 and 1983 in the principal amounts of P6,000,000, P7,370,000 and P5,300,000 with maturity dates on December 28, 1984, January 5, 1985 and February 16, 1984, respectively. To secure the loan, Pilar Development mortgaged to Banco Filipino various properties in Dasmarias, Cavite. On January 25, 1985, the Monetary Board issued a resolution finding Banco Filipino insolvent and unable to do business without loss to its creditors and depositors. It placed Banco Filipino under receivership of Carlota Valenzuela, Deputy Governor of the Central Bank. On March 22, 1985, the Monetary Board issued another resolution placing the bank under liquidation and designating Valenzuela as liquidator. By virtue of her authority as liquidator, Valenzuela appointed the law firm of Sycip, Salazar, et al. to represent Banco Filipino in all litigations. On March 26, 1985, Banco Filipino filed the petition for certiorari in G.R. No. 70054 questioning the validity of the resolutions issued by the Monetary Board authorizing the receivership and liquidation of Banco Filipino. In a resolution dated August 29, 1985, this Court in G.R. No. 70054 resolved to issue a temporary restraining order, effective during the same period of 30 days, enjoining the respondents from executing further acts of liquidation of the bank; that acts such as receiving collectibles and receivables or paying off creditors' claims and other transactions pertaining to normal operations of a bank are not enjoined. The Central Bank is ordered to designate a comptroller for Banco Filipino. Subsequently, Top Management failed to pay its loan on the due date. Hence, the law firm of Sycip, Salazar, et al. acting as counsel for Banco Filipino under authority of Valenzuela as liquidator, applied for extra-judicial foreclosure of the mortgage over Top Management's properties. Thus, the Ex-Officio Sheriff of the Regional Trial Court of Cavite issued a notice of extra-judicial foreclosure sale of the properties on December 16, 1985.

On December 9, 1985, Top Management filed a petition for injunction and prohibition with the respondent appellate court docketed as CA-G.R. SP No. 07892 seeking to enjoin the Regional Trial Court of Cavite, the ex-officio sheriff of said court and Sycip, Salazar, et al. from proceeding with foreclosure sale. Similarly, Pilar Development defaulted in the payment of its loans. The law firm of Sycip, Salazar, et al. filed separate applications with the ex-officio sheriff of the Regional Trial Court of Cavite for the extra-judicial foreclosure of mortgage over its properties. Hence, Pilar Development filed with the respondent appellate court a petition for prohibition with prayer for the issuance of a writ of preliminary injunction docketed as CA-G.R SP Nos. 08962-64 seeking to enjoin the same respondents from enforcing the foreclosure sale of its properties. CA-G.R. SP Nos. 07892 and 08962-64 were consolidated and jointly decided. On October 30, 1986, the respondent appellate court rendered a decision dismissing the aforementioned petitions. Hence, this petition was filed by the petitioners Top Management and Pilar Development alleging that Carlota Valenzuela, who was appointed by the Monetary Board as liquidator of Banco Filipino, has no authority to proceed with the foreclosure sale of petitioners' properties on the ground that the resolution of the issue on the validity of the closure and liquidation of Banco Filipino is still pending with this Court in G.R. 70054. G.R. No. 78766 Petitioner El Grande Development Corporation (El Grande for brevity) is engaged in the business of developing residential subdivisions. It was extended by respondent Banco Filipino a credit accommodation to finance its housing program. Hence, petitioner was granted a loan in the amount of P8,034,130.00 secured by real estate mortgages on its various estates located in Cavite. On January 15, 1985, the Monetary Board forbade Banco Filipino to do business, placed it under receivership and designated Deputy Governor Carlota Valenzuela as receiver. On March 22, 1985, the Monetary Board confirmed Banco Filipino's insolvency and designated the receiver Carlota Valenzuela as liquidator. When petitioner El Grande failed to pay its indebtedness to Banco Filipino, the latter thru its liquidator, Carlota Valenzuela, initiated the foreclosure with the Clerk of Court and Ex-officio sheriff of RTC Cavite. Subsequently, on March 31, 1986, the exofficio sheriff issued the notice of extra-judicial sale of the mortgaged properties of El Grande scheduled on April 30, 1986. In order to stop the public auction sale, petitioner El Grande filed a petition for prohibition with the Court of Appeals alleging that respondent Carlota Valenzuela could not proceed with the foreclosure of its mortgaged properties on the ground that this Court in G.R. No. 70054 issued a resolution dated August 29, 1985, which restrained Carlota Valenzuela from acting as liquidator and allowed Banco Filipino to resume banking operations only under a Central Bank comptroller. On March 2, 1987, the Court of Appeals rendered a decision dismissing the petition. Hence this petition for review on certiorari was filed alleging that the respondent court erred when it held in its decision that although Carlota P. Valenzuela was restrained by this Honorable Court from exercising acts in liquidation of Banco Filipino Savings & Mortgage Bank, she was not legally precluded from foreclosing the mortgage over the properties of the petitioner through counsel retained by her for the purpose. G.R. No. 81303 On November 8, 1985, petitioner Pilar Development Corporation (Pilar Development for brevity) filed an action against Banco Filipino, the Central Bank and Carlota Valenzuela for specific performance, docketed as Civil Case No. 12191. It appears that the former management of Banco Filipino appointed Quisumbing & Associates as counsel for Banco Filipino. On June 12, 1986 the said law firm filed an answer for Banco Filipino which confessed judgment against Banco Filipino. On June 17, 1986, petitioner filed a second amended complaint. The Central Bank and Carlota Valenzuela, thru the law firm Sycip, Salazar, Hernandez and Gatmaitan filed an answer to the complaint. On June 23, 1986, Sycip, et al., acting for all the defendants including Banco Filipino moved that the answer filed by Quisumbing & Associates for defendant Banco Filipino be expunged from the records. Despite opposition from Quisumbing & Associates, the trial court granted the motion to expunge in an order dated March 17, 1987. Petitioner Pilar Development moved to reconsider the order but the motion was denied. Petitioner Pilar Development filed with the respondent appellate court a petition for certiorari and mandamus to annul the order of the trial court. The Court of Appeals rendered a decision dismissing the petition. A petition was filed with this Court but was denied in a resolution dated March 22, 1988. Hence, this instant motion for reconsideration. G.R. No. 81304 On July 9, 1985, petitioner BF Homes Incorporated (BF Homes for brevity) filed an action with the trial court to compel the Central Bank to restore petitioner's; financing facility with Banco Filipino. The Central Bank filed a motion to dismiss the action. Petitioner BF Homes in a supplemental complaint impleaded as defendant Carlota Valenzuela as receiver of Banco Filipino Savings and Mortgage Bank. On April 8, 1985, petitioner filed a second supplemental complaint to which respondents filed a motion to dismiss. On July 9, 1985, the trial court granted the motion to dismiss the supplemental complaint on the grounds (1) that plaintiff has no contractual relation with the defendants, and (2) that the Intermediate Appellate Court in a previous decision in AC-G.R. SP. No. 04609 had stated that Banco Filipino has been ordered closed and placed under receivership pending liquidation, and thus, the continuation of the facility sued for by the plaintiff has become legally impossible and the suit has become moot. The order of dismissal was appealed by the petitioner to the Court of Appeals. On November 4, 1987, the respondent appellate court dismissed the appeal and affirmed the order of the trial court. Hence, this petition for review on certiorari was filed, alleging that the respondent court erred when it found that the private respondents should not be the ones to respond to the cause of action asserted by the petitioner and the petitioner did not have any cause of action against the respondents Central Bank and Carlota Valenzuela. G.R. No. 90473

Petitioner El Grande Development Corporation (El Grande for brevity) obtained a loan from Banco Filipino in the amount of P8,034,130.00, secured by a mortgage over its five parcels of land located in Cavite which were covered by Transfer Certificate of Title Nos. T-82187, T-109027, T-132897, T-148377, and T-79371 of the Registry of Deeds of Cavite. When Banco Filipino was ordered closed and placed under receivership in 1985, the appointed liquidator of BF, thru its counsel Sycip, Salazar, et al. applied with the ex-officio sheriff of the Regional Trial Court of Cavite for the extrajudicial foreclosure of the mortgage constituted over petitioner's properties. On March 24, 1986, the ex-officio sheriff issued a notice of extrajudicial foreclosure sale of the properties of petitioner. Thus, petitioner filed with the Court of Appeals a petition for prohibition with prayer for writ of preliminary injunction to enjoin the respondents from foreclosing the mortgage and to nullify the notice of foreclosure. On June 16, 1989, respondent Court of Appeals rendered a decision dismissing the petition. Not satisfied with the decision, petitioner filed the instant petition for review on certiorari. G.R. No. 70054 Banco Filipino Savings and Mortgage Bank was authorized to operate as such under M.B. Resolution No. 223 dated February 14, 1963. It commenced operations on July 9, 1964. It has eighty-nine (89) operating branches, forty-six (46) of which are in Manila, with more than three (3) million depositors. As of July 31, 1984, the list of stockholders showed the major stockholders to be: Metropolis Development Corporation, Apex Mortgage and Loans Corporation, Filipino Business Consultants, Tiu Family Group, LBH Inc. and Anthony Aguirre. Petitioner Bank had an approved emergency advance of P119.7 million under M.B. Resolution No. 839 dated June 29, 1984. This was augmented with a P3 billion credit line under M.B. Resolution No. 934 dated July 27, 1984. On the same date, respondent Board issued M.B. Resolution No. 955 placing petitioner bank under conservatorship of Basilio Estanislao. He was later replaced by Gilberto Teodoro as conservator on August 10, 1984. The latter submitted a report dated January 8, 1985 to respondent Board on the conservatorship of petitioner bank, which report shall hereinafter be referred to as the Teodoro report. Subsequently, another report dated January 23, 1985 was submitted to the Monetary Board by Ramon Tiaoqui, Special Assistant to the Governor and Head, SES Department II of the Central Bank, regarding the major findings of examination on the financial condition of petitioner BF as of July 31, 1984. The report, which shall be referred to herein as the Tiaoqui Report contained the following conclusion and recommendation: The examination findings as of July 31, 1984, as shown earlier, indicate one of insolvency and illiquidity and further confirms the above conclusion of the Conservator. All the foregoing provides sufficient justification for forbidding the bank from engaging in banking. Foregoing considered, the following are recommended: 1. Forbid the Banco Filipino Savings & Mortgage Bank to do business in the Philippines effective the beginning of office January 1985, pursuant to Sec. 29 of R.A No. 265, as amended; 2. Designate the Head of the Conservator Team at the bank, as Receiver of Banco Filipino Savings & Mortgage Bank, to immediately take charge of the assets and liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefit of all the creditors, and exercise all the powers necessary for these purposes including but not limited to bringing suits and foreclosing mortgages in the name of the bank. 3. The Board of Directors and the principal officers from Senior Vice Presidents, as listed in the attached Annex "A" be included in the watchlist of the Supervision and Examination Sector until such time that they shall have cleared themselves. 4. Refer to the Central Bank's Legal Department and Office of Special Investigation the report on the findings on Banco Filipino for investigation and possible prosecution of directors, officers, and employees for activities which led to its insolvent position. (pp- 61-62, Rollo) On January 25, 1985, the Monetary Board issued the assailed MB Resolution No. 75 which ordered the closure of BF and which further provides: After considering the report dated January 8, 1985 of the Conservator for Banco Filipino Savings and Mortgage Bank that the continuance in business of the bank would involve probable loss to its depositors and creditors, and after discussing and finding to be true the statements of the Special Assistant to the Governor and Head, Supervision and Examination Sector (SES) Department II as recited in his memorandum dated January 23, 1985, that the Banco Filipino Savings & Mortgage Bank is insolvent and that its continuance in business would involve probable loss to its depositors and creditors, and in pursuance of Sec. 29 of RA 265, as amended, the Board decided: 1. To forbid Banco Filipino Savings and Mortgage Bank and all its branches to do business in the Philippines; 2. To designate Mrs. Carlota P. Valenzuela, Deputy Governor as Receiver who is hereby directly vested with jurisdiction and authority to immediately take charge of the bank's assets and liabilities, and as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors, exercising all the powers necessary for these purposes including but not limited to, bringing suits and foreclosing mortgages in the name of the bank; 3. To designate Mr. Arnulfo B. Aurellano, Special Assistant to the Governor, and Mr. Ramon V. Tiaoqui, Special Assistant to the Governor and Head, Supervision and Examination Sector Department II, as Deputy Receivers who are likewise hereby directly vested with jurisdiction

and authority to do all things necessary or proper to carry out the functions entrusted to them by the Receiver and otherwise to assist the Receiver in carrying out the functions vested in the Receiver by law or Monetary Board Resolutions; 4. To direct and authorize Management to do all other things and carry out all other measures necessary or proper to implement this Resolution and to safeguard the interests of depositors, creditors and the general public; and 5. In consequence of the foregoing, to terminate the conservatorship over Banco Filipino Savings and Mortgage Bank. (pp. 10-11, Rollo, Vol. I) On February 2, 1985, petitioner BF filed a complaint docketed as Civil Case No. 9675 with the Regional Trial Court of Makati to set aside the action of the Monetary Board placing BF under receivership. On February 28, 1985, petitioner filed with this Court the instant petition for certiorari and mandamus under Rule 65 of the Rules of Court seeking to annul the resolution of January 25, 1985 as made without or in excess of jurisdiction or with grave abuse of discretion, to order respondents to furnish petitioner with the reports of examination which led to its closure and to afford petitioner BF a hearing prior to any resolution that may be issued under Section 29 of R.A. 265, also known as Central Bank Act. On March 19, 1985, Carlota Valenzuela, as Receiver and Arnulfo Aurellano and Ramon Tiaoqui as Deputy Receivers of Banco Filipino submitted their report on the receivership of BF to the Monetary Board, in compliance with the mandate of Sec. 29 of R.A. 265 which provides that the Monetary Board shall determine within sixty (60) days from date of receivership of a bank whether such bank may be reorganized/permitted to resume business or ordered to be liquidated. The report contained the following recommendation: In view of the foregoing and considering that the condition of the banking institution continues to be one of insolvency, i.e., its realizable assets are insufficient to meet all its liabilities and that the bank cannot resume business with safety to its depositors, other creditors and the general public, it is recommended that: 1. Banco Filipino Savings & Mortgage Bank be liquidated pursuant to paragraph 3, Sec. 29 of RA No. 265, as amended; 2. The Legal Department, through the Solicitor General, be authorized to file in the proper court a petition for assistance in th liquidation of the Bank; 3. The Statutory Receiver be designated as the Liquidator of said bank; and 4. Management be instructed to inform the stockholders of Banco Filipino Savings & Mortgage Bank of the Monetary Board's decision liquidate the Bank. (p. 167, Rollo, Vol. I) On July 23, 1985, petitioner filed a motion before this Court praying that a restraining order or a writ of preliminary injunction be issued to enjoin respondents from causing the dismantling of BF signs in its main office and 89 branches. This Court issued a resolution on August 8, 1985 ordering the issuance of the aforesaid temporary restraining order. On August 20, 1985, the case was submitted for resolution. In a resolution dated August 29, 1985, this Court Resolved direct the respondents Monetary Board and Central Bank hold hearings at which the petitioner should be heard, and terminate such hearings and submit its resolution within thirty (30) days. This Court further resolved to issue a temporary restraining order enjoining the respondents from executing further acts of liquidation of a bank. Acts such as receiving collectibles and receivables or paying off creditors' claims and other transactions pertaining to normal operations of a bank were no enjoined. The Central Bank was also ordered to designate comptroller for the petitioner BF. This Court also ordered th consolidation of Civil Cases Nos. 8108, 9676 and 10183 in Branch 136 of the Regional Trial Court of Makati. However, on September 12, 1985, this Court in the meantime suspended the hearing it ordered in its resolution of August 29, 1985. On October 8, 1985, this Court submitted a resolution order ing Branch 136 of the Regional Trial Court of Makati the presided over by Judge Ricardo Francisco to conduct the hear ing contemplated in the resolution of August 29, 1985 in the most expeditious manner and to submit its resolution to this Court. In the Court's resolution of February 19, 1987, the Court stated that the hearing contemplated in the resolution of August 29, 1985, which is to ascertain whether substantial administrative due process had been observed by the respondent Monetary Board, may be expedited by Judge Manuel Cosico who now presides the court vacated by Judge Ricardo Francisco, who was elevated to the Court of Appeals, there being no legal impediment or justifiable reason to bar the former from conducting such hearing. Hence, this Court directed Judge Manuel Cosico to expedite the hearing and submit his report to this Court. On February 20, 1988, Judge Manuel Cosico submitted his report to this Court with the recommendation that the resolutions of respondents Monetary Board and Central Bank authorizing the closure and liquidation of petitioner BP be upheld. On October 21, 1988, petitioner BF filed an urgent motion to reopen hearing to which respondents filed their comment on December 16, 1988. Petitioner filed their reply to respondent's comment of January 11, 1989. After having deliberated on the grounds raised in the pleadings, this Court in its resolution dated August 3, 1989 declared that its intention as expressed in its resolution of August 29, 1985 had not been faithfully adhered to by the herein petitioner and respondents. The aforementioned resolution had ordered a healing on the reports that led respondents to order petitioner's closure and its alleged pre-planned liquidation. This Court noted that during the referral hearing however, a different scheme was followed. Respondents merely submitted to the commissioner their findings on the examinations conducted on petitioner, affidavits of the private respondents relative to the findings, their reports to the Monetary Board and several other documents in support of their position while petitioner had merely submitted objections to the findings of respondents, counter-affidavits of its officers and also documents to prove its claims. Although the records disclose that both parties had not waived cross-examination of their deponents, no such cross-examination has been conducted. The reception of evidence in the form of affidavits was followed throughout, until the commissioner submitted his report and recommendations to the Court. This Court also held that the documents pertinent to the resolution of the instant petition are the Teodoro Report, Tiaoqui Report, Valenzuela, Aurellano and Tiaoqui Report and the supporting documents which were made as the bases by the reporters of their conclusions contained in their respective reports.

This Court also Resolved in its resolution to re-open the referral hearing that was terminated after Judge Cosico had submitted his report and recommendation with the end in view of allowing petitioner to complete its presentation of evidence and also for respondents to adduce additional evidence, if so minded, and for both parties to conduct the required cross-examination of witnesses/deponents, to be done within a period of three months. To obviate all doubts on Judge Cosico's impartiality, this Court designated a new hearing commissioner in the person of former Judge Consuelo Santiago of the Regional Trial Court, Makati, Branch 149 (now Associate Justice of the Court of Appeals). Three motions for intervention were filed in this case as follows: First, in G.R. No. 70054 filed by Eduardo Rodriguez and Fortunate M. Dizon, stockholders of petitioner bank for and on behalf of other stockholders of petitioner; second, in G.R. No. 78894, filed by the same stockholders, and, third, again in G.R. No. 70054 by BF Depositors' Association and others similarly situated. This Court, on March 1, 1990, denied the aforesaid motions for intervention. On January 28, 1991, the hearing commissioner, Justice Consuelo Santiago of the Court of Appeals submitted her report and recommendation (to be hereinafter called, "Santiago Report") on the following issues stated therein as follows: l) Had the Monetary Board observed the procedural requirements laid down in Sec. 29 of R.A. 265, as amended to justify th closure of the Banco Filipino Savings and Mortgage Bank? 2) On the date of BF's closure (January 25, 1985) was its condition one of insolvency or would its continuance in business involve probable loss to its depositors or creditors? The commissioner after evaluation of the evidence presented found and recommended the following: 1. That the TEODORO and TIAOQUI reports did not establish in accordance with See. 29 of the R.A. 265, as amended, BF's insolvency as of July 31, 1984 or that its continuance in business thereafter would involve probable loss to its depositors or creditors. On the contrary, the evidence indicates that BF was solvent on July 31, 1984 and that on January 25, 1985, the day it was closed, its insolvency was not clearly established; 2. That consequently, BF's closure on January 25, 1985, not having satisfied the requirements prescribed under Sec. 29 of RA 265, as amended, was null and void. 3. That accordingly, by way of correction, BF should be allowed to re-open subject to such laws, rules and regulations that apply to its situation. Respondents thereafter filed a motion for leave to file objections to the Santiago Report. In the same motion, respondents requested that the report and recommendation be set for oral argument before the Court. On February 7, 1991, this Court denied the request for oral argument of the parties. On February 25, 1991, respondents filed their objections to the Santiago Report. On March 5, 1991, respondents submitted a motion for oral argument alleging that this Court is confronted with two conflicting reports on the same subject, one upholding on all points the Monetary Board's closure of petitioner, (Cosico Report dated February 19, 1988) and the other (Santiago Report dated January 25, 1991) holding that petitioner's closure was null and void because petitioner's insolvency was not clearly established before its closure; and that such a hearing on oral argrument will therefore allow the parties to directly confront the issues before this Court. On March 12, 1991 petitioner filed its opposition to the motion for oral argument. On March 20, 1991, it filed its reply to respondents' objections to the Santiago Report. On June 18, 1991, a hearing was held where both parties were heard on oral argument before this Court. The parties, having submitted their respective memoranda, the case is now submitted for decision. G.R. No. 78767 On February 2, 1985, Banco Filipino filed a complaint with the trial court docketed as Civil Case No. 9675 to annul the resolution of the Monetary Board dated January 25, 1985, which ordered the closure of the bank and placed it under receivership. On February 14, 1985, the Central Bank and the receivers filed a motion to dismiss the complaint on the ground that the receivers had not authorized anyone to file the action. In a supplemental motion to dismiss, the Central Bank cited the resolution of this Court dated October 15, 1985 in G.R. No. 65723 entitled, "Central Bank et al. v. Intermediate Appellate Court" whereby We held that a complaint questioning the validity of the receivership established by the Central Bank becomes moot and academic upon the initiation of liquidation proceedings. While the motion to dismiss was pending resolution, petitioner herein Metropolis Development Corporation (Metropolis for brevity) filed a motion to intervene in the aforestated civil case on the ground that as a stockholder and creditor of Banco Filipino, it has an interest in the subject of the action. On July 19, 1985, the trial court denied the motion to dismiss and also denied the motion for reconsideration of the order later filed by Central Bank. On June 5, 1985, the trial court allowed the motion for intervention. Hence, the Central Bank and the receivers of Banco Filipino filed a petition for certiorari with the respondent appellate court alleging that the trial court committed grave abuse of discretion in not dismissing Civil Case No. 9675. On March 17, 1986, the respondent appellate court rendered a decision annulling and setting aside the questioned orders of the trial court, and ordering the dismissal of the complaint filed by Banco Filipino with the trial court as well as the complaint in intervention of petitioner Metropolis Development Corporation. Hence this petition was filed by Metropolis Development Corporation questioning the decision of the respondent appellate court. G.R. No. 78894 On February 2, 1985, a complaint was filed with the trial court in the name of Banco Filipino to annul the resolution o the Monetary Board dated January 25, 1985 which ordered the closure of Banco Filipino and placed it under receivership. The receivers appointed by the Monetary Board were Carlota Valenzuela, Arnulfo Aurellano and Ramon Tiaoqui. On February 14, 1985, the Central Bank and the receiver filed a motion to dismiss the complaint on the ground that the receiver had not authorized anyone to file the action.

On March 22, 1985, the Monetary Board placed the bank under liquidation and designated Valenzuela as liquidator and Aurellano and Tiaoqui as deputy liquidators. The Central Bank filed a supplemental motion to dismiss which was denied. Hence, the latter filed a petition for certiorari with the respondent appellate court to set aside the order of the trial court denying the motion to dismiss. On March 17, 1986, the respondent appellate court granted the petition and dismissed the complaint of Banco Filipino with the trial court. Thus, this petition for certiorari was filed with the petitioner contending that a bank which has been closed and placed under receivership by the Central Bank under Section 29 of RA 265 could file suit in court in its name to contest such acts of the Central Bank, without the authorization of the CB-appointed receiver. After deliberating on the pleadings in the following cases: 1. In G.R. No. 68878, the respondent's motion for reconsideration; 2. In G.R. Nos. 77255-58, the petition, comment, reply, rejoinder and sur-rejoinder; 2. In G.R. No. 78766, the petition, comment, reply and rejoinder; 3. In G.R. No. 81303, the petitioner's motion for reconsideration; 4. In G.R.No. 81304, the petition, comment and reply; 5. Finally, in G.R. No. 90473, the petition comment and reply. We find the motions for reconsideration in G.R. Nos. 68878 and 81303 and the petitions in G.R. Nos. 77255-58, 78766, 81304 and 90473 devoid of merit. Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act, provides that when a bank is forbidden to do business in the Philippines and placed under receivership, the person designated as receiver shall immediately take charge of the bank's assets and liabilities, as expeditiously as possible, collect and gather all the assets and administer the same for the benefit of its creditors, and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution, exercising all the powers necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in the name of the bank. If the Monetary Board shall later determine and confirm that banking institution is insolvent or cannot resume business safety to depositors, creditors and the general public, it shall, public interest requires, order its liquidation and appoint a liquidator who shall take over and continue the functions of receiver previously appointed by Monetary Board. The liquid for may, in the name of the bank and with the assistance counsel as he may retain, institute such actions as may necessary in the appropriate court to collect and recover a counts and assets of such institution or defend any action ft against the institution. When the issue on the validity of the closure and receivership of Banco Filipino bank was raised in G.R. No. 70054, pendency of the case did not diminish the powers and authority of the designated liquidator to effectuate and carry on the a ministration of the bank. In fact when We adopted a resolute on August 25, 1985 and issued a restraining order to respondents Monetary Board and Central Bank, We enjoined me further acts of liquidation. Such acts of liquidation, as explained in Sec. 29 of the Central Bank Act are those which constitute the conversion of the assets of the banking institution to money or the sale, assignment or disposition of the s to creditors and other parties for the purpose of paying debts of such institution. We did not prohibit however acts a as receiving collectibles and receivables or paying off credits claims and other transactions pertaining to normal operate of a bank. There is no doubt that the prosecution of suits collection and the foreclosure of mortgages against debtors the bank by the liquidator are among the usual and ordinary transactions pertaining to the administration of a bank. their did Our order in the same resolution dated August 25, 1985 for the designation by the Central Bank of a comptroller Banco Filipino alter the powers and functions; of the liquid insofar as the management of the assets of the bank is concerned. The mere duty of the comptroller is to supervise counts and finances undertaken by the liquidator and to d mine the propriety of the latter's expenditures incurred behalf of the bank. Notwithstanding this, the liquidator is empowered under the law to continue the functions of receiver is preserving and keeping intact the assets of the bank in substitution of its former management, and to prevent the dissipation of its assets to the detriment of the creditors of the bank. These powers and functions of the liquidator in directing the operations of the bank in place of the former management or former officials of the bank include the retaining of counsel of his choice in actions and proceedings for purposes of administration. Clearly, in G.R. Nos. 68878, 77255-58, 78766 and 90473, the liquidator by himself or through counsel has the authority to bring actions for foreclosure of mortgages executed by debtors in favor of the bank. In G.R. No. 81303, the liquidator is likewise authorized to resist or defend suits instituted against the bank by debtors and creditors of the bank and by other private persons. Similarly, in G.R. No. 81304, due to the aforestated reasons, the Central Bank cannot be compelled to fulfill financial transactions entered into by Banco Filipino when the operations of the latter were suspended by reason of its closure. The Central Bank possesses those powers and functions only as provided for in Sec. 29 of the Central Bank Act. While We recognize the actual closure of Banco Filipino and the consequent legal effects thereof on its operations, We cannot uphold the legality of its closure and thus, find the petitions in G.R. Nos. 70054, 78767 and 78894 impressed with merit. We hold that the closure and receivership of petitioner bank, which was ordered by respondent Monetary Board on January 25, 1985, is null and void. It is a well-recognized principle that administrative and discretionary functions may not be interfered with by the courts. In general, courts have no supervising power over the proceedings and actions of the administrative departments of the government. This is generally true with respect to acts involving the exercise of judgment or discretion, and findings of fact. But when there is a grave abuse of discretion which is equivalent to a capricious and whimsical exercise of judgment or where the power is exercised in an arbitrary or despotic manner, then there is a justification for the courts to set aside the administrative determination reached (Lim, Sr. v. Secretary of Agriculture and Natural Resources, L-26990, August 31, 1970, 34 SCRA 751) The jurisdiction of this Court is called upon, once again, through these petitions, to undertake the delicate task of ascertaining whether or not an administrative agency of the government, like the Central Bank of the Philippines and the Monetary Board, has committed grave abuse of discretion or has acted without or in excess of jurisdiction in issuing the assailed order. Coupled with this task is the duty of this Court not only to strike down acts which violate constitutional protections or to nullify

administrative decisions contrary to legal mandates but also to prevent acts in excess of authority or jurisdiction, as well as to correct manifest abuses of discretion committed by the officer or tribunal involved. The law applicable in the determination of these issues is Section 29 of Republic Act No. 265, as amended, also known as the Central Bank Act, which provides: SEC. 29. Proceedings upon insolvency. Whenever, upon examination by the head of the appropriate supervising or examining department or his examiners or agents into the condition of any bank or non-bank financial intermediary performing quasi-banking functions, it shall be disclosed that the condition of the same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the department head concerned forthwith, in writing, to inform the Monetary Board of the facts. The Board may, upon finding the statements of the department head to be true, forbid the institution to do business in the Philippines and designate an official of the Central Bank or a person of recognized competence in banking or finance, as receiver to immediately take charge of its assets and liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefit's of its creditors, and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution, exercising all the powers necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in the name of the bank or non-bank financial intermediary performing quasi-banking functions. The Monetary Board shall thereupon determine within sixty days whether the institution may be reorganized or otherwise placed in such a condition so that it may be permitted to resume business with safety to its depositors and creditors and the general public and shall prescribe the conditions under which such resumption of business shall take place as well as the time for fulfillment of such conditions. In such case, the expenses and fees in the collection and administration of the assets of the institution shall be determined by the Board and shall be paid to the Central Bank out of the assets of such institution. If the Monetary Board shall determine and confirm within the said period that the bank or non-bank financial intermediary performing quasi-banking functions is insolvent or cannot resume business with safety to its depositors, creditors, and the general public, it shall, if the public interest requires, order its liquidation, indicate the manner of its liquidation and approve a liquidation plan which may, when warranted, involve disposition of any or all assets in consideration for the assumption of equivalent liabilities. The liquidator designated as hereunder provided shall, by the Solicitor General, file a petition in the regional trial court reciting the proceedings which have been taken and praying the assistance of the court in the liquidation of such institutions. The court shall have jurisdiction in the same proceedings to assist in the adjudication of the disputed claims against the bank or non-bank financial intermediary performing quasi-banking functions and in the enforcement of individual liabilities of the stockholders and do all that is necessary to preserve the assets of such institutions and to implement the liquidation plan approved by the Monetary Board. The Monetary Board shall designate an official of the Central bank or a person of recognized competence in banking or finance, as liquidator who shall take over and continue the functions of the receiver previously appointed by the Monetary Board under this Section. The liquidator shall, with all convenient speed, convert the assets of the banking institutions or non-bank financial intermediary performing quasi-banking function to money or sell, assign or otherwise dispose of the same to creditors and other parties for the purpose of paying the debts of such institution and he may, in the name of the bank or non-bank financial intermediary performing quasi-banking functions and with the assistance of counsel as he may retain, institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of such institution or defend any action filed against the institution: Provided, However, That after having reasonably established all claims against the institution, the liquidator may, with the approval of the court, effect partial payments of such claims for assets of the institution in accordance with their legal priority. The assets of an institution under receivership or liquidation shall be deemed in custodia legis in the hands of the receiver or liquidator and shall from the moment of such receivership or liquidation, be exempt from any order of garnishment, levy, attachment, orexecution. The provisions of any law to the contrary notwithstanding, the actions of the Monetary Board under this Section, Section 28-A, an the second paragraph of Section 34 of this Act shall be final an executory, and can be set aside by a court only if there is convince proof, after hearing, that the action is plainly arbitrary and made in bad faith: Provided, That the same is raised in an appropriate pleading filed by the stockholders of record representing the majority of th capital stock within ten (10) days from the date the receiver take charge of the assets and liabilities of the bank or non-bank financial intermediary performing quasi-banking functions or, in case of conservatorship or liquidation, within ten (10) days from receipt of notice by the said majority stockholders of said bank or non-bank financial intermediary of the order of its placement under conservatorship o liquidation. No restraining order or injunction shall be issued by an court enjoining the Central Bank from implementing its actions under this Section and the second paragraph of Section 34 of this Act in th absence of any convincing proof that the action of the Monetary Board is plainly arbitrary and made in bad faith and the petitioner or plaintiff files a bond, executed in favor of the Central Bank, in an amount be fixed by the court. The restraining order or injunction shall be refused or, if granted, shall be dissolved upon filing by the Central Bank of a bond, which shall be in the form of cash or Central Bank cashier's check, in an amount twice the amount of the bond of th petitioner or plaintiff conditioned that it will pay the damages which the petitioner or plaintiff may suffer by the refusal or the dissolution of the injunction. The provisions of Rule 58 of

the New Rules of Court insofar as they are applicable and not inconsistent with the provision of this Section shall govern the issuance and dissolution of the re straining order or injunction contemplated in this Section. xxx xxx xxx Based on the aforequoted provision, the Monetary Board may order the cessation of operations of a bank in the Philippine and place it under receivership upon a finding of insolvency or when its continuance in business would involve probable loss its depositors or creditors. If the Monetary Board shall determine and confirm within sixty (60) days that the bank is insolvent or can no longer resume business with safety to its depositors, creditors and the general public, it shall, if public interest will be served, order its liquidation. Specifically, the basic question to be resolved in G.R. Nos. 70054, 78767 and 78894 is whether or not the Central Bank and the Monetary Board acted arbitrarily and in bad faith in finding and thereafter concluding that petitioner bank is insolvent, and in ordering its closure on January 25, 1985. As We have stated in Our resolution dated August 3, 1989, the documents pertinent to the resolution of these petitions are the Teodoro Report, Tiaoqui Report, and the Valenzuela, Aurellano and Tiaoqui Report and the supporting documents made as bases by the supporters of their conclusions contained in their respective reports. We will focus Our study and discussion however on the Tiaoqui Report and the Valenzuela, Aurellano and Tiaoqui Report. The former recommended the closure and receivership of petitioner bank while the latter report made the recommendation to eventually place the petitioner bank under liquidation. This Court shall likewise take into consideration the findings contained in the reports of the two commissioners who were appointed by this Court to hold the referral hearings, namely the report by Judge Manuel Cosico submitted February 20, 1988 and the report submitted by Justice Consuelo Santiago on January 28, 1991. There is no question that under Section 29 of the Central Bank Act, the following are the mandatory requirements to be complied with before a bank found to be insolvent is ordered closed and forbidden to do business in the Philippines: Firstly, an examination shall be conducted by the head of the appropriate supervising or examining department or his examiners or agents into the condition of the bank; secondly, it shall be disclosed in the examination that the condition of the bank is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors; thirdly, the department head concerned shall inform the Monetary Board in writing, of the facts; and lastly, the Monetary Board shall find the statements of the department head to be true. Anent the first requirement, the Tiaoqui report, submitted on January 23, 1985, revealed that the finding of insolvency of petitioner was based on the partial list of exceptions and findings on the regular examination of the bank as of July 31, 1984 conducted by the Supervision and Examination Sector II of the Central Bank of the PhilippinesCentral Bank (p. 1, Tiaoqui Report). On December 17, 1984, this list of exceptions and finding was submitted to the petitioner bank (p. 6, Tiaoqui Report) This was attached to the letter dated December 17, 1984, of examiner-in-charge Dionisio Domingo of SES Department II of the Central Bank to Teodoro Arcenas, president of petitione bank, which disclosed that the examination of the petitioner bank as to its financial condition as of July 31, 1984 was not yet completed or finished on December 17, 1984 when the Central Bank submitted the partial list of findings of examination to th petitioner bank. The letter reads: In connection with the regular examination of your institution a of July 31, 1984, we are submitting herewith a partial list of our exceptions/findings for your comments. Please be informed that we have not yet officially terminated our examination (tentatively scheduled last December 7, 1984) and that we are still awaiting for the unsubmitted replies to our previous letters requests. Moreover, other findings/ observations are still being summarized including the classification of loans and other risk assets. These shall be submitted to you in due time (p. 810, Rollo, Vol. III; emphasis ours). It is worthy to note that a conference was held on January 21, 1985 at the Central Bank between the officials of the latter an of petitioner bank. What transpired and what was agreed upon during the conference was explained in the Tiaoqui report. ... The discussion centered on the substantial exposure of the bank to the various entities which would have a relationship with the bank; the manner by which some bank funds were made indirectly available to several entities within the group; and the unhealth financial status of these firms in which the bank was additionally exposed through new funds or refinancing accommodation including accrued interest. Queried in the impact of these clean loans, on the bank solvency Mr. Dizon (BF Executive Vice President) intimated that, collectively these corporations have large undeveloped real estate properties in the suburbs which can be made answerable for the unsecured loans a well as the Central Bank's credit accommodations. A formal reply of the bank would still be forthcoming. (pp. 58-59, Rollo, Vol. I; emphasis ours) Clearly, Tiaoqui based his report on an incomplete examination of petitioner bank and outrightly concluded therein that the latter's financial status was one of insolvency or illiquidity. He arrived at the said conclusion from the following facts: that as of July 31, 1984, total capital accounts consisting of paid-in capital and other capital accounts such as surplus, surplus reserves and undivided profits aggregated P351.8 million; that capital adjustments, however, wiped out the capital accounts and placed the bank with a capital deficiency amounting to P334.956 million; that the biggest adjustment which contributed to the deficit is the provision for estimated losses on accounts classified as doubtful and loss which was computed at P600.4 million pursuant to the examination. This provision is also known as valuation reserves which was set up or deducted against the capital accounts of the bank in arriving at the latter's financial condition. Tiaoqui however admits the insufficiency and unreliability of the findings of the examiner as to the setting up of recommended valuation reserves from the assets of petitioner bank. He stated: The recommended valuation reserves as bases for determining the financial status of the bank would need to be discussed with the bank, consistent with standard examination procedure, for which the bank would in turn reply. Also, the examination has not been officially terminated. (p. 7. Tiaoqui report; p. 59, Rollo, Vol. I)

In his testimony in the second referral hearing before Justice Santiago, Tiaoqui testified that on January 21, 1985, he met with officers of petitioner bank to discuss the advanced findings and exceptions made by Mr. Dionisio Domingo which covered 70%80% of the bank's loan portfolio; that at that meeting, Fortunato Dizon (BF's Executive Vice President) said that as regards the unsecured loans granted to various corporations, said corporations had large undeveloped real estate properties which could be answerable for the said unsecured loans and that a reply from BF was forthcoming, that he (Tiaoqui) however prepared his report despite the absence of such reply; that he believed, as in fact it is stated in his report, that despite the meeting on January 21, 1985, there was still a need to discuss the recommended valuation reserves of petitioner bank and; that he however, did not wait anymore for a discussion of the recommended valuation reserves and instead prepared his report two days after January 21, 1985 (pp. 3313-3314, Rollo). Records further show that the examination of petitioner bank was officially terminated only when Central Bank Examinationcharge Dionisio Domingo submitted his final report of examination on March 4,1985. It is evident from the foregoing circumstances that the examination contemplated in Sec. 29 of the CB Act as a mandatory requirement was not completely and fully complied with. Despite the existence of the partial list of findings in the examination of the bank, there were still highly significant items to be weighed and determined such as the matter of valuation reserves, before these can be considered in the financial condition of the bank. It would be a drastic move to conclude prematurely that a bank is insolvent if the basis for such conclusion is lacking and insufficient, especially if doubt exists as to whether such bases or findings faithfully represent the real financial status of the bank. The actuation of the Monetary Board in closing petitioner bank on January 25, 1985 barely four days after a conference with the latter on the examiners' partial findings on its financial position is also violative of what was provided in the CB Manual of Examination Procedures. Said manual provides that only after the examination is concluded, should a pre-closing conference led by the examiner-in-charge be held with the officers/representatives of the institution on the findings/exception, and a copy of the summary of the findings/violations should be furnished the institution examined so that corrective action may be taken by them as soon as possible (Manual of Examination Procedures, General Instruction, p. 14). It is hard to understand how a period of four days after the conference could be a reasonable opportunity for a bank to undertake a responsive and corrective action on the partial list of findings of the examiner-in-charge. We recognize the fact that it is the responsibility of the Central Bank of the Philippines to administer the monetary, banking and credit system of the country and that its powers and functions shall be exercised by the Monetary Board pursuant to Rep. Act No. 265, known as the Central Bank Act. Consequently, the power and authority of the Monetary Board to close banks and liquidate them thereafter when public interest so requires is an exercise of the police power of the state. Police power, however, may not be done arbitratrily or unreasonably and could be set aside if it is either capricious, discriminatory, whimsical, arbitrary, unjust or is tantamount to a denial of due process and equal protection clauses of the Constitution (Central Bank v. Court of Appeals, Nos. L-50031-32, July 27, 1981, 106 SCRA 143). In the instant case, the basic standards of substantial due process were not observed. Time and again, We have held in several cases, that the procedure of administrative tribunals must satisfy the fundamentals of fair play and that their judgment should express a well-supported conclusion. In the celebrated case of Ang Tibay v. Court of Industrial Relations, 69 Phil. 635, this Court laid down several cardinal primary rights which must be respected in a proceeding before an administrative body. However, as to the requirement of notice and hearing, Sec. 29 of RA 265 does not require a previous hearing before the Monetary Board implements the closure of a bank, since its action is subject to judicial scrutiny as provided for under the same law (Rural Bank of Bato v. IAC, G.R. No. 65642, October 15, 1984, Rural Bank v. Court of Appeals, G.R. 61689, June 20, 1988,162 SCRA 288). Notwithstanding the foregoing, administrative due process does not mean that the other important principles may be dispensed with, namely: the decision of the administrative body must have something to support itself and the evidence must be substantial. Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion (Ang Tibay vs. CIR, supra). Hence, where the decision is merely based upon pieces of documentary evidence that are not sufficiently substantial and probative for the purpose and conclusion they are presented, the standard of fairness mandated in the due process clause is not met. In the case at bar, the conclusion arrived at by the respondent Board that the petitioner bank is in an illiquid financial position on January 23, 1985, as to justify its closure on January 25, 1985 cannot be given weight and finality as the report itself admits the inadequacy of its basis to support its conclusion. The second requirement provided in Section 29, R.A. 265 before a bank may be closed is that the examination should disclose that the condition of the bank is one of insolvency. As to the concept of whether the bank is solvent or not, the respondents contend that under the Central Bank Manual of Examination Procedures, Central Bank examiners must recommend valuation reserves, when warranted, to be set up or deducted against the corresponding asset account to determine the bank's true condition or net worth. In the case of loan accounts, to which practically all the questioned valuation reserves refer, the manual provides that: 1. For doubtful loans, or loans the ultimate collection of which is doubtful and in which a substantial loss is probable but not yet definitely ascertainable as to extent, valuation reserves of fifty per cent (50%) of the accounts should be recommended to be set up. 2. For loans classified as loss, or loans regarded by the examiner as absolutely uncollectible or worthless, valuation reserves of one hundred percent (100%) of the accounts should be recommended to be set up (p. 8, Objections to Santiago report). The foregoing criteria used by respondents in determining the financial condition of the bank is based on Section 5 of RA 337, known as the General Banking Act which states: Sec. 5. The following terms shall be held to be synonymous and interchangeable:

... f. Unimpaired Capital and Surplus, "Combined capital accounts," and "Net worth," which terms shall mean for the purposes of this Act, the total of the "unimpaired paid-in capital, surplus, and undivided profits net of such valuation reserves as may be required by the Central Bank." There is no doubt that the Central Bank Act vests authority upon the Central Bank and Monetary Board to take charge and administer the monetary and banking system of the country and this authority includes the power to examine and determine the financial condition of banks for purposes provided for by law, such as for the purpose of closure on the ground of insolvency stated in Section 29 of the Central Bank Act. But express grants of power to public officers should be subjected to a strict interpretation, and will be construed as conferring those powers which are expressly imposed or necessarily implied (Floyd Mechem, Treatise on the Law of Public Offices and Officers, p. 335). In this case, there can be no clearer explanation of the concept of insolvency than what the law itself states. Sec. 29 of the Central Bank Act provides that insolvency under the Act, shall be understood to mean that "the realizable assets of a bank or a non-bank financial intermediary performing quasi-banking functions as determined by the Central Bank are insufficient to meet its liabilities." Hence, the contention of the Central Bank that a bank's true financial condition is synonymous with the terms "unimpaired capital and surplus," "combined capital accounts" and net worth after deducting valuation reserves from the capital, surplus and unretained earnings, citing Sec. 5 of RA 337 is misplaced. Firstly, it is clear from the law that a solvent bank is one in which its assets exceed its liabilities. It is a basic accounting principle that assets are composed of liabilities and capital. The term "assets" includes capital and surplus" (Exley v. Harris, 267 p. 970, 973, 126 Kan., 302). On the other hand, the term "capital" includes common and preferred stock, surplus reserves, surplus and undivided profits. (Manual of Examination Procedures, Report of Examination on Department of Commercial and Savings Banks, p. 3-C). If valuation reserves would be deducted from these items, the result would merely be the networth or the unimpaired capital and surplus of the bank applying Sec. 5 of RA 337 but not the total financial condition of the bank. Secondly, the statement of assets and liabilities is used in balance sheets. Banks use statements of condition to reflect the amounts, nature and changes in the assets and liabilities. The Central Bank Manual of Examination Procedures provides a format or checklist of a statement of condition to be used by examiners as guide in the examination of banks. The format enumerates the items which will compose the assets and liabilities of a bank. Assets include cash and those due from banks, loans, discounts and advances, fixed assets and other property owned or acquired and other miscellaneous assets. The amount of loans, discounts and advances to be stated in the statement of condition as provided for in the manual is computed after deducting valuation reserves when deemed necessary. On the other hand, liabilities are composed of demand deposits, time and savings deposits, cashier's, manager's and certified checks, borrowings, due to head office, branches; and agencies, other liabilities and deferred credits (Manual of Examination Procedure, p. 9). The amounts stated in the balance sheets or statements of condition including the computation of valuation reserves when justified, are based however, on the assumption that the bank or company will continue in business indefinitely, and therefore, the networth shown in the statement is in no sense an indication of the amount that might be realized if the bank or company were to be liquidated immediately (Prentice Hall Encyclopedic Dictionary of Business Finance, p. 48). Further, based on respondents' submissions, the allowance for probable losses on loans and discounts represents the amount set up against current operations to provide for possible losses arising from non-collection of loans and advances, and this account is also referred to as valuation reserve (p. 9, Objections to Santiago report). Clearly, the statement of condition which contains a provision for recommended valuation reserves should not be used as the ultimate basis to determine the solvency of an institution for the purpose of termination of its operations. Respondents acknowledge that under the said CB manual, CB examiners must recommend valuation reserves, when warranted, to be set up against the corresponding asset account (p. 8, Objections to Santiago report). Tiaoqui himself, as author of the report recommending the closure of petitioner bank admits that the valuation reserves should still be discussed with the petitioner bank in compliance with standard examination procedure. Hence, for the Monetary Board to unilaterally deduct an uncertain amount as valuation reserves from the assets of a bank and to conclude therefrom without sufficient basis that the bank is insolvent, would be totally unjust and unfair. The test of insolvency laid down in Section 29 of the Central Bank Act is measured by determining whether the realizable assets of a bank are leas than its liabilities. Hence, a bank is solvent if the fair cash value of all its assets, realizable within a reasonable time by a reasonable prudent person, would equal or exceed its total liabilities exclusive of stock liability; but if such fair cash value so realizable is not sufficient to pay such liabilities within a reasonable time, the bank is insolvent. (Gillian v. State, 194 N.E. 360, 363, 207 Ind. 661). Stated in other words, the insolvency of a bank occurs when the actual cash market value of its assets is insufficient to pay its liabilities, not considering capital stock and surplus which are not liabilities for such purpose (Exley v. Harris, 267 p. 970, 973,126 Kan. 302; Alexander v. Llewellyn, Mo. App., 70 S.W. 2n 115,117). In arriving at the computation of realizable assets of petitioner bank, respondents used its books which undoubtedly are not reflective of the actual cash or fair market value of its assets. This is not the proper procedure contemplated in Sec. 29 of the Central Bank Act. Even the CB Manual of Examination Procedures does not confine examination of a bank solely with the determination of the books of the bank. The latter is part of auditing which should not be confused with examination. Examination appraises the soundness of the institution's assets, the quality and character of management and determines the institution's compliance with laws, rules and regulations. Audit is a detailed inspection of the institution's books, accounts, vouchers, ledgers, etc. to determine the recording of all assets and liabilities. Hence, examination concerns itself with review and appraisal, while audit concerns itself with verification (CB Manual of Examination Procedures, General Instructions, p. 5). This Court however, is not in the position to determine how much cash or market value shall be assigned to each of the assets and liabilities of the bank to determine their total realizable value. The proper determination of these matters by using the actual cash value criteria belongs to the field of fact-finding expertise of the Central Bank and the Monetary Board. Notwithstanding the fact that the figures arrived at by the respondent Board as to assets and liabilities do not truly indicate their realizable value as they were merely based on book value, We will however, take a look at the figures presented by the Tiaoqui Report in concluding

insolvency as of July 31, 1984 and at the figures presented by the CB authorized deputy receiver and by the Valenzuela, Aurellano and Tiaoqui Report which recommended the liquidation of the bank by reason of insolvency as o January 25,1985. The Tiaoqui report dated January 23, 1985, which was based on partial examination findings on the bank's condition as of July 31, 1984, states that total liabilities of P5,282.1 million exceeds total assets of P4,947.2 million after deducting from the assets valuation reserves of P612.2 million. Since, as We have explained in our previous discussion that valuation reserves can not be legally deducted as there was no truthful and complete evaluation thereof as admitted by the Tiaoqui report itself, then an adjustment of the figures win show that the liabilities of P5,282.1 million will not exceed the total assets which will amount to P5,559.4 if the 612.2 million allotted to valuation reserves will not be deducted from the assets. There can be no basis therefore for both the conclusion of insolvency and for the decision of the respondent Board to close petitioner bank and place it under receivership. Concerning the financial position of the bank as of January 25, 1985, the date of the closure of the bank, the consolidated statement of condition thereof as of the aforesaid date shown in the Valenzuela, Aurellano and Tiaoqui report on the receivership of petitioner bank, dated March 19, 1985, indicates that total liabilities of 4,540.84 million does not exceed the total assets of 4,981.53 million. Likewise, the consolidated statement of condition of petitioner bank as of January 25, 1985 prepared by the Central Bank Authorized Deputy Receiver Artemio Cruz shows that total assets amounting to P4,981,522,996.22 even exceeds total liabilities amounting to P4,540,836,834.15. Based on the foregoing, there was no valid reason for the Valenzuela, Aurellano and Tiaoqui report to finally recommend the liquidation of petitioner bank instead of its rehabilitation. We take note of the exhaustive study and findings of the Cosico report on the petitioner bank's having engaged in unsafe, unsound and fraudulent banking practices by the granting of huge unsecured loans to several subsidiaries and related companies. We do not see, however, that this has any material bearing on the validity of the closure. Section 34 of the RA 265, Central Bank Act empowers the Monetary Board to take action under Section 29 of the Central Bank Act when a bank "persists in carrying on its business in an unlawful or unsafe manner." There was no showing whatsoever that the bank had persisted in committing unlawful banking practices and that the respondent Board had attempted to take effective action on the bank's alleged activities. During the period from July 27, 1984 up to January 25, 1985, when petitioner bank was under conservatorship no official of the bank was ever prosecuted, suspended or removed for any participation in unsafe and unsound banking practices, and neither was the entire management of the bank replaced or substituted. In fact, in her testimony during the second referral hearing, Carlota Valenzuela, CB Deputy Governor, testified that the reason for petitioner bank's closure was not unsound, unsafe and fraudulent banking practices but the alleged insolvency position of the bank (TSN, August 3, 1990, p. 3316, Rollo, Vol. VIII). Finally, another circumstance which point to the solvency of petitioner bank is the granting by the Monetary Board in favor of the former a credit line in the amount of P3 billion along with the placing of petitioner bank under conservatorship by virtue of M.B. Resolution No. 955 dated July 27, 1984. This paved the way for the reopening of the bank on August 1, 1984 after a selfimposed bank holiday on July 23, 1984. On emergency loans and advances, Section 90 of RA 265 provides two types of emergency loans that can be granted by the Central Bank to a financially distressed bank: Sec. 90. ... In periods of emergency or of imminent financial panic which directly threaten monetary and banking stability, the Central Bank may grant banking institutions extraordinary advances secured by any assets which are defined as acceptable by by a concurrent vote of at least five members of the Monetary Board. While such advances are outstanding, the debtor institution may not expand the total volume of its loans or investments without the prior authorization of the Monetary Board. The Central Bank may, at its discretion, likewise grant advances to banking institutions, even during normal periods, for the purpose of assisting a bank in a precarious financial condition or under serious financial pressures brought about by unforeseen events, or events which, though foreseeable, could not be prevented by the bank concerned. Provided, however, That the Monetary Board has ascertained that the bank is not insolvent and has clearly realizable assets to secure the advances. Provided, further, That a concurrent vote of at least five members of the Monetary Board is obtained. (Emphasis ours) The first paragraph of the aforequoted provision contemplates a situation where the whole banking community is confronted with financial and economic crisis giving rise to serious and widespread confusion among the public, which may eventually threaten and gravely prejudice the stability of the banking system. Here, the emergency or financial confusion involves the whole banking community and not one bank or institution only. The second situation on the other hand, provides for a situation where the Central Bank grants a loan to a bank with uncertain financial condition but not insolvent. As alleged by the respondents, the following are the reasons of the Central Bank in approving the resolution granting the P3 billion loan to petitioner bank and the latter's reopening after a brief self-imposed banking holiday: WHEREAS, the closure by Banco Filipino Savings and Mortgage Bank of its Banking offices on its own initiative has worked serious hardships on its depositors and has affected confidence levels in the banking system resulting in a feeling of apprehension among depositors and unnecessary deposit withdrawals; WHEREAS, the Central Bank is charged with the function of administering the banking system; WHEREAS, the reopening of Banco Filipino would require additional credit resources from the Central Bank as well as an independent management acceptable to the Central Bank; WHEREAS, it is the desire of the Central Bank to rapidly diffuse the uncertainty that presently exists; ... (M.B. Min. No. 35 dated July 27, 1984 cited in Respondents' Objections to Santiago Report, p. 26; p. 3387, Rollo, Vol. IX; Emphasis ours). A perusal of the foregoing "Whereas" clauses unmistakably show that the clear reason for the decision to grant the emergency loan to petitioner bank was that the latter was suffering from financial distress and severe bank "run" as a result of which it closed on July 23, 1984 and that the release of the said amount is in accordance with the Central Bank's full support to meet

Banco Filipino's depositors' withdrawal requirements (Excerpts of minutes of meeting on MB Min. No. 35, p. 25, Rollo, Vol. IX). Nothing therein shows that an extraordinary emergency situation exists affecting most banks, not only as regards petitioner bank. This Court thereby finds that the grant of the said emergency loan was intended from the beginning to fall under the second paragraph of Section 90 of the Central Bank Act, which could not have occurred if the petitioner bank was not solvent. Where notwithstanding knowledge of the irregularities and unsafe banking practices allegedly committed by the petitioner bank, the Central Bank even granted financial support to the latter and placed it under conservatorship, such actuation means that petitioner bank could still be saved from its financial distress by adequate aid and management reform, which was required by Central Bank's duty to maintain the stability of the banking system and the preservation of public confidence in it (Ramos v. Central Bank, No. L-29352, October 4, 1971, 41 SCRA 565). In view of the foregoing premises, We believe that the closure of the petitioner bank was arbitrary and committed with grave abuse of discretion. Granting in gratia argumenti that the closure was based on justified grounds to protect the public, the fact that petitioner bank was suffering from serious financial problems should not automatically lead to its liquidation. Section 29 of the Central Bank provides that a closed bank may be reorganized or otherwise placed in such a condition that it may be permitted to resume business with safety to its depositors, creditors and the general public. We are aware of the Central Bank's concern for the safety of Banco Filipino's depositors as well as its creditors including itself which had granted substantial financial assistance up to the time of the latter's closure. But there are alternatives to permanent closure and liquidation to safeguard those interests as well as those of the general public for the failure of Banco Filipino or any bank for that matter may be viewed as an irreversible decline of the country's entire banking system and ultimately, it may reflect on the Central Bank's own viability. For one thing, the Central Bank and the Monetary Board should exercise strict supervision over Banco Filipino. They should take all the necessary steps not violative of the laws that will fully secure the repayment of the total financial assistance that the Central Bank had already granted or would grant in the future. ACCORDINGLY, decision is hereby rendered as follows: 1. The motion for reconsideration in G.R. Nos. 68878 and 81303, and the petitions in G.R. Nos. 77255-58, 78766, 81304 and 90473 are DENIED; 2. The petitions in G.R. No. 70054, 78767 and 78894 are GRANTED and the assailed order of the Central Bank and the Monetary Board dated January 25, 1985 is hereby ANNULLED AND SET ASIDE. The Central Bank and the Monetary Board are ordered to reorganize petitioner Banco Filipino Savings and Mortgage Bank and allow the latter to resume business in the Philippines under the comptrollership of both the Central Bank and the Monetary Board and under such conditions as may be prescribed by the latter in connection with its reorganization until such time that petitioner bank can continue in business with safety to its creditors, depositors and the general public. SO ORDERED. Narvasa, C.J., Gutierrez, Jr., Cruz, Bidin and Regalado, JJ., concur. Paras, Feliciano, Padilla, Davide, Jr. and Nocon, JJ., took no part.

Separate Opinions MELENCIO-HERRERA, J., dissenting: I join Mme. Justice Carolina G. Aquino in her dissent and vote to deny the prayer, in G.R. No. 70054, to annul Monetary Board Resolution No. 75 placing Banco Filipino (BF) under receivership. Even assuming that the BF was not, as alleged, in a literal state of insolvency at the time of the passage of said Resolution, there was a finding in the Teodoro report that, based on that Bank's illiquidity, to have allowed it to continue in operation would have meant probable loss to depositors and creditors. That is also a ground for placing the bank under receivership, as a first step, pursuant to Section 29 of the Central Bank Act (Rep. Act No. 265, as amended). The closure of BF, therefore, can not be said to have been arbitrary or made in bad faith. There was sufficient justification, considering its inability to meet the heavy withdrawals by its depositors and to pay its liabilities as they fell due, to forbid the bank from further engaging in banking. The matter of reopening, reorganization or rehabilitation of BF is not within the competence of this Court to ordain but is better addressed to the Monetary Board and the Central Bank considering the latter's enormous infusion of capital into BF to the tune of approximately P3.5 Billion in total accommodations, after a thorough assessment of whether or not BF is, indeed, possessed, as it stoutly contends, of sufficient assets and capabilities with which to repay such huge indebtedness, and can operate without loss to its many depositors and creditors. GRIO-AQUINO, J., dissenting: Although these nine (9) Banco Filipino (BF) cases have been consolidated under one ponencia, all of them except one, raise issues unrelated to the receivership and liquidation of said bank. In fact, two of these cases (G.R. No. 68878 and 81303) have already been decided by this Court and are only awaiting the resolution of the motions for reconsideration filed therein. Only G.R. No. 70054 "Banco Filipino Savings and Mortgage Bank (BF) vs. the Monetary Board (MB), Central Bank of the Philippines (CB), et al.," is an original action for mandamus andcertiorari filed in this Court by former officials of BF to annul the Monetary Board Resolution No. 75 dated January 25, 1985 (ordering the closure of Banco Filipino [BF] and appointing Carlota Valenzuela as receiver of the bank) on the ground that the resolution was issued "without affording BF a hearing on the reports" on which the Monetary Board based its decision to close the bank, hence, without "administrative due process.", The prayer of the petition reads: WHEREFORE, petitioner respectfully prays that a writ of mandamus be issued commanding respondents immediately to furnish it copies of the reports of examination of BF employed by respondent Monetary Board to support its Resolution of January 25, 1985 and thereafter to afford it a hearing prior to any resolution that may

be issued under Section 29 of R.A. 265, meanwhile annulling said Resolution of January 25, 1985 by writ of certiorari as made without or in excess ofjurisdiction or with grave abuse of discretion. So as to expedite proceedings, petitioner prays that the assessment of the damages respondents should pay it be deferred and referred to commissioners. Petitioner prays for such other remedy as the Court may deem just and equitable in the premises. Quezon City for Manila, February 28, 1985. (p. 8, Rollo I-) and the prayer of the Supplement to Petition reads: WHEREFORE, in addition to its prayer for mandamus and certiorari contained in its original petition, petitioner respectfully prays that Sections 28-A and 29 of the Central Bank charter (R.A. 265) including its amendatory Presidential Decrees Nos. 72, 1771, 1827 and 1937 be annulled as unconstitutional. Quezon City for Manila, March 4, 1985. (p. 11-G, Rollo I.) The other eight (8) cases merely involve transactions of BF with third persons and certain "related" corporations which had defaulted on their loans and sought to prohibit the extrajudicial foreclosure of the mortgages on their properties by the receiver of BF. These eight (8) cases are: 1. G.R. No. 68878 "BF vs. Intermediate Appellate Court and Celestina Pahimutang" involves the repossession by BF of a house and lot which the buyer (Pahimutang) claimed to have completely paid for on the installment plan. The appellate court's judgment for the buyer was reversed by this Court. The buyer's motion for reconsideration is awaiting resolution by this Court; 2. G.R. Nos. 77255-58, "Top Management Programs Corporation and Pilar Development Corporation vs. Court of appeals, et al." (CA-G.R. SP No. 07892) and "Pilar Development Corporation vs. Executive Judge, RTC, Cavite"(CA-G.R. SP Nos. 0896264) is a consolidated petition for review of the Court of Appeals' joint decision dismissing the petitions for prohibition in which the petitioners seek to prevent the receiver/liquidator of BF from extrajudicially foreclosing the P4.8 million mortgage on Top Management's properties and the P18-67 million mortgage on Pilar Development properties. The Court of Appeals dismissed the petitions on October 30, 1986 on the ground that "the functions of the liquidator, as receiver under Section 29 (R.A. 265), include taking charge of the insolvent's assets and administering the same for the benefit of its creditors and of bringing suits and foreclosing mortgages in the name of the bank;" 3. G.R. No. 78766, "El Grande Corporation vs. Court of Appeals, et al.," is an appeal from the Court of Appeals' decision in CAG.R. SP No. 08809 dismissing El Grande's petition for prohibition to prevent the foreclosure of BF's P8 million mortgage on El Grande's properties; 4. G.R. No. 78894, "Banco Filipino Savings and Mortgage Bank vs. Court of Appeals, et al." is an appeal of BFs old management (using the name of BF) from the decision of the Court of Appeals in CA-G.R. SP No. 07503 entitled, "Central Bank, et al. vs. Judge Zoilo Aguinaldo, et al" dismissing the complaint of "BF" to annul the receivership, for no suit may be brought or defended in the name of the bank except by its receiver; 5. G.R. No. 87867, "Metropolis Development Corporation vs. Court of Appeals" (formerly AC-G.R. No. 07503, "Central Bank, et al. vs. Honorable Zoilo Aguinaldo, et al.') is an appeal of the intervenor (Metropolis) from the same Court of Appeals' decision subject of G.R. No. 78894, which also dismissed Metropolis' complaint in intervention on the ground that a stockholder (Metropolis) may not bring suit in the name of BF while the latter is under receivership, without the authority of the receiver; 6. G.R. No. 81303, "Pilar Development Corporation vs. Court of Appeals, et al." is an appeal from the decision dated October 22, 1987 of the Court of Appeals in CA-G.R. SP No. 12368, "Pilar Development Corporation, et al. vs. Honorable Manuel Cosico, et al.," dismissing the petition for certiorari against Judge Manuel Cosico, Br. 136, RTC, Makati, who dismissed the complaint filed by Pilar Development Corporation against BF, for specific performance of certain developer contracts. An answer filed by Norberto Quisumbing and Associates, as BF's supposed counsel, virtually confessed judgment in favor of Pilar Development. On motion of the receiver, the answer was expunged and the complaint was dismissed. On a petition for certiorari in this Court, we held that: "As liquidator of BF by virtue of a valid appointment from the Central Bank, private respondent Carlota Valenzuela has the authority to direct the operation of the bank in substitution of the former management, which authority includes the retainer of counsel to represent it in bringing or resisting suits in connection with such liquidation and, in the case at bar, to take the proper steps to prevent collusion, to the prejudice of the legitimate creditors, between BF and the petitioners herein which appear to be owned and controlled by the same interest controlling BF" (p. 49, Rollo). The petitioners' motion for reconsideration of that decision is pending resolution. 7. G.R. No. 81304, "BF Homes Development Corporation vs. Court of Appeals, et al." is an appeal from the decision dated November 4, 1987 of the Court of Appeals in CA-G.R. CV No. 08565 affirming the trial court's order dismissing BF Homes' action to compel the Central Bank to restore the financing facilities of BF, because the plaintiff (BF Homes) has no cause of action against the CB. 8. G.R. No. 90473, "El Grande Development Corporation vs. Court of Appeals, et al.," is a petition to review the decision dated June 6, 1989 in CA-G.R. SP No. 08676 dismissing El Grande's petition for prohibition to stop foreclosure proceedings against it by the receiver of BF. As previously stated, G.R. No. 70054 "BF vs. Monetary Board, et al.," is an original special civil action for certiorariand mandamus filed in this Court by the old management of BF, through their counsel, N.J. Quisumbing & Associates, using the name of the bank and praying for the annulment of MB Resolution No. 75 which ordered the closure of BF and placed it under receivership. It is a "forum-shopping" case because it was filed here on February 28, 1985 three weeks after they had filed on February 2, 1985 Civil Case No. 9675 "Banco Filipino vs. Monetary Board, et al." in the Regional Trial Court of Makati, Br. 143 (presided over by Judge Zoilo Aguinaldo) for the same purpose of securing a declaration of the nullity of MB Resolution No. 75 dated January 25, 1985. On August 25, 1985, this Court ordered the transfer and consolidation of Civil Case No. 9676 (to annul the receivership) from Br. 143 to Br. 136 (Judge Manuel Cosico) of the Makati Regional Trial Court where Civil Case No. 8108 (to annul the

conservatorship) and Civil Case No. 10183 (to annul the liquidation) of BF were and are still pending. All these three (3) cases were archived on June 30, 1988 by Judge Cosico pending the resolution of G.R. No. 70054 by this Court. Because of my previous participation, as a former member of the Court of Appeals, in the disposition of AC-G.R. No. 02617 (now G.R. No. 68878) and AC-G.R. SP No. 07503 (now G.R. Nos. 78767 and 78894), I am taking no part in G.R. Nos. 68878, 78767 and 78894. It may be mentioned in this connection that neither in AC-G.R. SP No. 02617, nor in AC-G.R. SP No. 07503, did the Court of Appeals rule on the constitutionality of Sections 28-A and 29 of Republic Act 265 (Central Bank Act), as amended, and the validity of MB Resolution No. 75, for those issues were not raised in the Court of Appeals. I concur with the ponencia insofar as it denies the motion for reconsideration in G.R. No. 81303, and dismisses the petitions for review in G.R. Nos. 77255-58, 78766, 81304, and 90473. I respectfully dissent from the majority opinion in G.R. No. 70054 annulling and setting aside MB Resolution No. 75 and ordering the respondents, Central Bank of the Philippines and the Monetary Board to reorganize petitioner Banco Filipino Savings and Mortgage Bank, and allow the latter to resume business in the Philippines under the comptrollership of both the Central Bank and the Monetary Board and under such conditions as may be prescribed by the latter until such time that petitioner bank can continue in business with safety to its creditors, depositors and the general public. for I believe that this Court has neither the authority nor the competence to determine whether or not, and under what conditions, BF should be reorganized and reopened. That decision should be made by the Central Bank and the Monetary Board, not by this Court. All that we may determine in this case is whether the actions of the Central Bank and the Monetary Board in closing BF and placing it under receivership were "plainly arbitrary and made in bad faith. Section 29 of Republic Act No. 265 provides: Section 29. Proceedings upon insolvency. Whenever, upon examination by the head of the appropriate supervising and examining department or his examiners or agents into the condition of any banking institution, it shall be disclosed that the condition of the same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the department head concerned forthwith, in writing, to inform the Monetary Board of the facts, and the Board may, upon finding the statements of the department head to be true, forbid the institution to do business in the Philippines and shall designate an official of the Central Bank as receiver to immediately take charge of its assets and liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors, exercising all the powers necessary for these purposes including, but not limited to, bringing suits and foreclosing mortgages in the name of the banking institution. The Monetary Board shall thereupon determine within sixty days whether the institution may be reorganized or otherwise placed in such a condition so that it may be permitted to resume business with safety to its depositors and creditors and the general public and shall prescribe the conditions under which such resumption of business shall take place as well as the time for fulfillment of such conditions. In such case, the expenses and fees in the collection and administration of the assets of the institution shall be determined by the Board and shall be paid to the Central Bank out of the assets of such banking institution. If the Monetary Board shall determine and confirm within the said period that the banking institution is insolvent or cannot resume business with safety to its depositors, creditors and the general public, it shall, if the public interest requires, order its liquidation, indicate the manner of its liquidation and approve a liquidation plan. The Central Bank shall, by the Solicitor General, file a petition in the Court of First Instance, reciting the proceedings which have been taken and praying the assistance of the court in the liquidation of the banking institutions. The court shall have jurisdiction in the same proceedings to adjudicate disputed claims against the bank and enforce individual liabilities of the stockholders and do all that is necessary to preserve the assets of the banking institution and to implement the liquidation plan approved by the Monetary Board. The Monetary Board shall designate an official of the Central Bank as liquidator who shall take over the functions of the receiver previously appointed by the Monetary Board under this section. The liquidator shall, with all convenient speed, convert the assets of the banking institution to money or sell, assign or otherwise dispose of the same to creditors and other parties for the purpose of paying the debts of such bank and he may, in the name of the banking institution, institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of the banking institution. The provisions of any law to the contrary notwithstanding, the actions of the Monetary Board under this section and the second paragraph of Section 34 of this Act shall be final and executory, and can be set aside by the court only if there is convincing proof that theaction is plainly arbitrary and made in bad faith. No restraining order or injunction shall be issued by the court enjoining the Central Bank from implementing its actions under this section and the second paragraph of Section 34 of this Act, unless there is convincing proof that the action of the Monetary Board is plainly arbitrary and made in bad faith and the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond executed in favor of the Central Bank, in an amount to be fixed by the court. The restraining order or injunction shall be refused or, if granted, shall be dissolved upon filing by the Central Bank of a bond, which shall be in the form of cash or Central Bank cashier's check, in an amount twice the amount of the bond of the petitioner or plaintiff, conditioned that it will paythe which the petitioner or plaintiff may suffer by the refusalor the dissolution of the injunction. The provisions of Rule 58 of the new Rules of Court insofar as they are applicable and not inconsistent with the provisions of this section shall govern the issuance and dissolution of the restraining order or injunction contemplated in this section.

Insolvency, under this Act, shall be understood to mean the inability of a banking institution to pay its liabilities as they fall due in the usual and ordinary course of business, provided, however, that this shall not include the inability to pay of an otherwise non-insolvent bank caused by extra-ordinary demands induced by financial panic commonly evidenced by a run on the banks in the banking community. The determinative factor in the closure, receivership, and liquidation of a bank is the finding, upon examination by the SES of the Central Bank, that its condition "is one of insolvency, or that its continuance in business would involve probable loss to its depositors and creditors." (Sec. 29, R.A. 265.) It should be pointed out that insolvency is not the only statutory ground for the closure of a bank. The other ground is when "its continuance in business would involve probable loss to its depositors and creditors. Was BF insolvent i.e., unable to pay its liabilities as they fell due in the usual and ordinary course of business, on and for some time before January 25, 1985 when the Monetary Board issued Resolution No. 75 closing the bank and placing it under receivership? Would its continued operation involve probable loss to its depositors and creditors? The answer to both questions is yes. Both the conservator Gilberts Teodoro and the head of the SES (Supervision and Examination Sector) Ramon V. Tiaoqui opined that BF's continuance in business would cause probable loss to depositors and creditors. Tiaoqui further categorically found that BF was insolvent. Why was this so? The Teodoro and Tiaoqui reports as well as the report of the receivers, Carlota Valenzuela, Arnulfo B. Aurellano and Ramon V. Tiaoqui, showed that since the end of November 1983 BF had already been incurring "chronic reserve deficiencies' and experiencing severe liquidity problems. So much so, that it had become "a substantial borrower in the call loans market" and in June 1984 it obtained a P30 million emergency loan from the Central Bank. (p. 2, Receiver's Report.) Additional emergencyt loans (a total of P119.7 millions) were extended by the Central Bank to BF that month (MB Res. No. 839 dated June 29,1984). On July 12, 1984, BFs chairman, Anthony Aguirre, offered to "turn over the administration of the affairs of the bank" to the Central Bank (Aguirre's letter to Governor Jose Fernandez, Annex 7 of Manifestation dated May 3,1991). On July 23,1984, unable to meet heavy deposit withdrawals, BF's management motu proprio, without obtaining the conformity of the Central Bank, closed the bank and declared a bank holiday. On July 27, 1984, the CB, responding to BFs pleas for additional financial assistance, granted BF a P3 billion credit line (MB Res. No. 934 of July 27, 1984) to enable it to reopen and resume business on August 1, 1984. P2.3601 billions of the credit line were availed of by the end of 1984 exclusive of an overdraft of P932.4 millions (p. 2, Tiaoqui Report). Total accommodations granted to BF amounted to P3.4122 billions (p. 19, Cosico Report). Presumably to assure that the financial assistance would be properly used, the MB appointed Basilio Estanislao as conservator of the bank. A conservatorship team of 78 examiners and accountants was assigned at the bank to keep track of its activities and ascertain its financial condition (p. 8, Tiaoqui Report). Estanislao resigned after two weeks for health reasons. He was succeeded by Gilberto Teodoro as conservator in August, 1984 up to January 8, 1985. Besides the conservatorship team, Teodoro hired financial consultants Messrs. Tirso G. Santillan, Jr. and Plorido P. Casuela to make an analysis of BF's financial condition. Teodoro also engaged the accounting firm of Sycip, Gorres, Velayo and Company to make an asset evaluation. The Philippine Appraisal Company (PAC) appraised BFs real estate properties, acquired assets, and collaterals held. On January 9, 1985, Teodoro submitted his Report. Three weeks later, on January 23, 1985, Tiaoqui also submitted his Report. Both reports showedthat, in violation of Section 37 of the General Banking Act (R.A.337): 2 1. BF had been continually deficient in liquidity reserves (Teodoro Report). The bank had been experiencing a severe drop in liquidity levels. The ratio of liquid assets to deposits and borrowings plunged from about 20% at end-1983, to about 8.6% by end-May 1984, much below the statutory requirements of 24% for demand deposits/deposit substitutes and 14% for savings and time deposits. (p. 2, Tiaoqui Report.) 2. Deficiencies in average daily legal reserves rose from P63.0 million during the week of November 21-25, 1983 to a high of P435.9 million during the week of June 11-15, 1984 (pp. 2-3, Tiaoqui Report). Accumulated penalties on reserve deficiencies amounted to P37.4 million by July 31, and rose to P48 million by the end of 1984. (Tiaoqui Report.) 3. Deposit levels, which were at P3,845 million at end-May l984 (its last "normal" month), dropped to P935 million at the end of November 1984 or a loss of P2,910 million. This represented an average monthly loss of P485 million vs. an average monthly gain of P26 million during the first 5 months of 1984. (pp. 2-3, Tiaoqui Report.) 4. Deposits had declined at the rate of P20 million during the month of December 1984, but expenses of about P17 million per month were required to maintain the bank's operation. (p. 6, Teodoro Report.) 5. Based on the projected outlook, the Bank's average yield on assets of 16.3% p.a., was insufficient to meet the average cost of funds of 19.5% p.a. and operating expenses of 4.8% p.a. (p. 5 Teodoro Report.) 6. An imprudently large proportion of assets were locked into long-term applications. (Teodoro Report.)

7. BF overextended itself in lending to the real estate industry, committing as much as 52% of its peso deposits to its affiliates or "related accounts" to which it continued lending even when it was already suffering from liquidity stresses. (Teodoro Report.) This was done in violation of Section 38 of the General Banking Act (R.A. 337). 3 8. During the period of marked decline in liquidity levels the loan portfolio grew by P417.3 million in the first five months of 1984 and by another P105.l million in the next two months. (pp. 2-3, Tiaoqui Report.)

9. The loan portfolio stood at P3.679 billion at the end of July 1984, 56.2% of it channeled to companies whose stockholders, directors and officers were related to the officers, directors, and some stockholders of BF. (p. 8, Tiaoqui Report.) Here again BF violated the General Banking Act (R.A. 337). 4 10. Some of the loans were used to acquire preferred stocks of BF. Between September 17, 1983 and February 10, 1984, P49.9 million of preferred non-convertible stocks were issued. About 85% or P42.4 million was paid out of the proceeds of loans to stockholders/ borrowers with relationship to the bank (Annex D). Around P18.8 million were issued in the name of an entity other than the purchaser of the stocks. (Tiaoqui Report.) 11. Loans amounting to some P69.3 million were granted simply to pay-off old loans including accrued interest, as an accommodation for the direct maturing loans of some firms and as a way of paying-off loans of other borrower firms which have their own credit lines with the bank. These helped to make otherwise delinquent loans appear "current" and deceptively "improved" the quality of the loan portfolio. (Tiaoqui Report.) 12. Examination of the collaterals for the loan accounts of 63 major borrowers and 32 other selected borrowers as of July 31, 1984, showed that: (a) 2,658 TCT's which BF evaluated to be worth P1,487 million were appraised by PAC to be worth only P1,196 million, hence, deficient by P291 million. (b) Other properties (collaterals) supposedly worth P711 million could not be evaluated by PAC because the details submitted by the bank were insufficient; (c) While P674 million in loans were supposedly guaranteed by the Home Financing Corporation (HFIC), the latter confirmed only P427 million. P247 million in loans were not guaranteed by HFC. (Teodoro Report.) (d) Per SGV's report, loans totalling P1.882 million including accrued interest, were secured by collateral worth only Pl.54 billion. Hence, BFs unsecured exposure amounted to P586.2 million. BF Homes, Inc., a related company which has filed with the SEC a petition for suspension of payments, owes P502 million to BF. 13. BF had been suffering heavy losses. a) For the eleven (11) months ended November 30, 1984, the estimated net loss was P372.6 Million; b) For the twelve (12) months from November 1984, the projected net loss would be P390.7 Million and would continue unabated; (p. 2, Teodoro Report) c) Around 71.7% of the total accommodations of P2.0677 billions to the related/linked entities were adversely classified. Close to 33.7% or P697.1 millions were clean loans or against PNs (promissory notes) of these entities. Of the latter, 52.6% were classified as loss." (P. 5, Tiaoqui Report.) d) The bank's financial condition as of date of examination, after setting up the additional valuation reserves of P612.2 millions and accumulated net loss of P48.2 millions, indicates one of insolvency. Total liabilities of P5,282.1 million exceeds total assets of P4,947.2 million by 6.8%. Total capital account of P334.9 million) is deficient by P322.7 million against the minimum capital required of P657.6 million (Annex F). Capital to risk assets ratio is negative 10.38%. e) Total loans and investment portfolio amounted to P3,914.3 millions (gross), of which P194.0 millions or 5.0% were past due and P1,657.1 millions or 42.3% were adversely classified (Substandard P1,011.4 millions; Doubtful P274.6 millions and Loss P371.1 millions). Accounts adversely classified included unmatured loan of Pl,482.0 million to entities related with each other and to the bank, several of which showed distressed conditions. (p. 7, Tiaoqui Report.) Teodoro's conclusion was that "the continuance of the bank in business would involve probable loss to its depositors and creditors." He recommended "that the Monetary Board take a more effective and responsible action to protect the depositors and creditors ... in the light of the bank's worsening condition." (p. 5, Teodoro Report.) On January 23, 1985, Tiaoqui submitted his report to the Monetary Board, Like Teodoro, Tiaoqui believed that the principal cause of the bank's failure was that in violation of the General Banking Law and CB rules and regulations, BF's major stockholders, directors and officers, through their "related" companies: (i.e. companies owned or controlled by them of their relatives) had been "borrowing" huge chunks of the money of the depositors. His Conclusion and Recommendations were: The Conservator, in his report to the Monetary Board dated January 8, 1985, has stated that thecontinuance of the bank in business would involve probable loss to its depositors and creditors . It has recommended that a more effective action be taken to protect depositors and creditors.

The examination findings as of July 31, 1984 as shown earlier, indicate one of insolvency and illiquidity and further confirms the above conclusion of the Conservator. All the foregoing provides sufficient justification for forbidding the bank from further engaging in banking. Foregoing considered, the following are recommended: 1. Forbid the Banco Filipino Savings & Mortgage Bank to do business in the Philippines effective the beginning of office on January, 1985, pursuant to Sec. 29 of R.A. No. 265, as amended; 2. Designate the Head of the Conservator Team at the bank, as Receiver of Banco Filipino Savings & Mortgage Bank, to immediately take charge of the assets and liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefit of all the creditors, and exercise all the powers necessary for these purposes including but not limited to bringing suits and foreclosing mortgages in the name of the bank. 3. The Board of directors and the principal officers from Senior Vice President, as listed in the attached Annex "A" be included in the watchlist of the Supervision and Examination Sector until such time that they shall have cleared themselves. 4. Refer to the Central Banles Legal Department and Office of Special Investigation the report on the findings on Banco Filipino for investigation and possible prosecution of directors, officers and employees for activities which led to its insolvent position." (pp. 9-10, Tiaoqui Report.) On January 25, 1985 or two days after the submission of Tiaoqui's Report, and three weeks after it received Teodoro's Report, the Monetary Board, then composed of: Chairman: Jose B. Fernandez, Jr. CB Governor Members: 1. Cesar E.A. Virata, Prime Minister & Concurrently Minister of Finance 2. Roberto V. Ongpin, Minister of Trade & Industry & Chairman of Board of Investment 3. Vicente B. Valdepeas, Jr., Minister of Economic Planning & Director General of NEDA 4. Cesar A. Buenaventura, President of Filipinas Shell Petroleum Corp. (p. 37, Annual Report 1985) issued Resolution No. 75 closing BF and placing it under receivership. The MB Resolution reads as follows: After considering the report dated January 8, 1985 of the Conservator for Banco Filipino Savings and Mortgage Bank that the continuance in business of the bank would involve probable loss to its depositors and creditors, and after discussing and finding to be true the statements of the Special Assistant to the Governor and Head, Supervision and Examination Sector (SES) Department II, as recited in his memorandum dated January 23, 1985. that the Banco Filipino Savings and Mortgage Bank is insolvent and that its continuance in business would involve probable loss to its depositors and creditors, and in pursuance of Section 29 of R.A. No. 265, as amended, the Board decided: 1. To forbid Banco Filipino Savings and Mortgage Bank and all its branches to do business in the Philippines; 2. To designate Mrs. Carlota P. Valenzuela, Deputy Governor, as Receiver who is hereby directly vested with jurisdiction and authority to immediately take charge of the bank's assets and liabilities, and as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors, exercising all the- powers necessary for these purposes including, but not limited to, bringing suits and foreclosing mortgages in the name of the bank; 3. To designate Mr. Arnulfo B. Aurellano, Special Assistant to the Governor, and Mr. Ramon V. Tiaoqui, Special Assistant to the Governor and Head, Supervision and Examination Sector Department II. as Deputy Receivers who are likewise hereby directly vested with jurisdiction and authority to do all things necessary or proper to carry out the functions entrusted to them by the Receiver and otherwise to assist the Receiver in carrying out the functions vested in the Receiver by law or Monetary Board resolutions; 4. To direct and authorize Management to do all other things and carry out all other measures necessary or proper to implement this Resolution and to safeguard the interests of depositors/credition and the general public; and 5. In consequence of the foregoing, to terminate the conservatorship over Banco Filipino Savings and Mortgage Bank. (pp. 126-127, Rollo I.) On March 19,1985, the receiver, Carlota Valenzuela, and the deputy receivers, Arnulfo B. Aurellano and Ramon V. Tiaoqui, submitted a report to the Monetary Board as required in Section 29, 2nd paragraph of R.A. 265 which provides that within sixty (60) days from date of the receivership, the Monetary Board shall determine whether the bank may be reorganized and permitted to resume business, or be liquidated. The receivers recommended that BF be placed under litigation. For, among other things, they found that:

1. BF had been suffering a capital deficiency of P336.5 million as of July 31, 1984 (pp. 2 and 4, Receivers' Report). 2. The bank's weekly reserve deficiencies averaged P146.67 million from November 25, 1983 up to March 16, 1984, rising to a peak of P338.09 million until July 27, 1984. Its reserve deficiencies against deposits and deposit substitutes began on the week ending June 15, 1984 up to December 7, 1984, with average daily reserve deficiencies of P2.98 million. 3. Estimated losses or "unhooked valuation reserves" for loans to entities with relationships to certain stockholder/directors and officers of the bank amounted to P600.5 million. Combined with other adjustments in the amount of P73.2 million, they will entirely wipe out the bank's entire capital account and leave a capital deficiency of P336.5 million. The bank was already insolvent on July 31, 1984. The capital deficiency increased to P908.4 million as of January 26, 1985 on account of unhooked penalties for deficiencies in legal reserves (P49.07 million), unhooked interest on overdrawings, emergency advance of P569.49 million from Central Bank, and additional valuation reserves of P124.5 million. (pp. 3-4, Receivers' Report.) The Receivers further noted that After BF was closed as of January 25, 1985, there were no collections from loans granted to firms related to each other and to BF classified as "doubtful" or "loss," there were no substantial improvements on other loans classified "doubtful"or "loss;" there was no further increase in the value of assets owned/acquired supported by new appraisals and there was no infusion of additional capital such that the estimated realizable assets of BF remained at P3,909.23, (millions) while the total liabilities amounted to P5,159.44 (millions). Thus, BF remains insolvent with estimated deficiency to creditors of Pl,250.21 (millions). Moreover, there were no efforts on the part of the stockholders of the bank to improve its financial condition and the possibility of rehabilitation has become more remote. (P. 8, Receivers' Report.) In the light of the results of the examination of BF by the Teodoro and Tiaoqui teams, I do not find that the CB's Resolution No. 75 ordering BF to cease banking operations and placing it under receivership was "plainly arbitrary and made in bad faith." The receivership was justified because BF was insolvent and its continuance in business would cause loss to its depositors and creditors. Insolvency, as defined in Rep. Act 265, means 'the inability of a banking institution to pay its liabilities as they fall due in the usual and ordinary course of business. Since June 1984, BF had been unable to meet the heavy cash withdrawals of its depositors and pay its liabilities to its creditors, the biggest of them being the Central Bank, hence, the Monetary Board correctly found its condition to be one of insolvency. All the discussion in the Santiago Report concerning the bank's assets and liabilities as determinants of BF's solvency or insolvency is irrelevant and inconsequential, for under Section 29 of Rep. Act. 265, a bank's insolvency is not determined by its excess of liabilities over assets, but by its "inability to pay its liabilities as they fall due in the ordinary course of business" and it was abundantly shown that BF was unable to pay its liabilities to depositors for over a six-month-period before it was placed under receivership. Even if assets and liabilities were to be factored into a formula for determining whether or not BF was already insolvent on or before January 25, 1985, the result would be no different. The bank's assets as of the end of 1984 amounted to P4.891 billions (not P6 billions) according to the Report signed and submitted to the CB by BF's own president, and its total liabilities were P4.478 billions (p. 58, Cosico Report). While Aguirre's Report showed BF ahead with a net worth of P412.961 millions, said report did not make any provision for estimated valuation reserves amounting to P600.5 millions, (50% of face value of doubtful loans and 100% of face value of lossaccounts) which BF had granted to its related/linked companies. The estimated valuation reserves of P600.5 millions plus BF's admitted liabilities of P4.478 billions, put together, would wipe out BFs realizable assets of P4.891 billions and confirm its insolvent condition to the tune of P187.538 millions. BF's and Judge (now CA Justice) Consuelo Y. Santiago's argument that valuation reserves should not be considered because the matter was not discussed by Tiaoqui with BF officials is not well taken for: (1) The records of the defaulting debtors were in the possession of BF. (2) The "adversely classified" loans were in fact included in the List of Exceptions and Findings (of irregularities and violations of laws and CB rules and regulations) prepared by the SES, a copy of which was furnished BF on December 1 7, 1984; (3) A conference on the matter washeld on January 2l, 1985 with senior officials of BF headed by EVP F. Dizon,. (pp. 14-15, Cosico Report.) BF did not formally protest against the CBs estimate of valuation reserves. The CB could not wait forever for BF to respond for the CB had to act with reasonable promptness to protect the depositors and creditors of BF because the bank continued to operate. (4) Subsequent events proved correct the SES classification of the loan accounts as "doubtful" or "loss' because as of January 25, 1985 none of the loans, except three, had been paid either partially or in full, even if they had already matured (p. 53, Cosico Report). The recommended provision for valuation reserves of P600.5 millions for "doubtful" and "loss" accounts was a proper factor to consider in the capital adjustments of BF and was in accordance with accounting rules. For, if the uncollectible loan accounts would be entered in the assets column as "receivables," without a corresponding entry in the liabilities column for estimated losses or valuation reserves arising from their uncollectability, the result would be a gravely distorted picture of the financial condition of BF. BF's strange argument that it was not insolvent for otherwise the CB would not have given it financial assistance does not merit serious consideration for precisely BF needed financial assistance because it was insolvent. Tiaoqui's admission that the examination of BF had "not yet been officially terminated" when he submitted his report on January 23, 1985 did not make the action of the Monetary Board of closing the bank and appointing receivers for it, 'plainly arbitrary and in bad faith." For what had been examined by the SES was more than enough to warrant a finding that the bank was "insolvent and could not continue in business without probable loss to its depositors or creditors," and what had not been examined was negligible and would not have materially altered the result. In any event, the official termination of the examination with the submission by the Chief Examiner of his report to the Monetary Board in March 1985, did not contradict, but in fact confirmed, the findings in the Tiaoqui Report.

The responsibility of administering the Philippine monetary and banking systems is vested by law in the Central Bank whose duty it is to use the powers granted to it under the law to achieve the objective, among others, of maintaining monetary stability in the country (Sec. 2, Rep. Act 265). I do not think it would be proper and advisable for this Court to interfere with the CB's exercise of its prerogative and duty to discipline banks which have persistently engaged in illegal, unsafe, unsound and fraudulent banking practices causing tremendous losses and unimaginable anxiety and prejudice to depositors and creditors and generating widespread distrust and loss of confidence in the banking system. The damage to the banking system and to the depositing public is bigger when the bank, like Banco Filipino, is big. With 89 branches nationwide, 46 of them in Metro Manila alone, pumping the hard-earned savings of 3 million depositors into the bank, BF had no reason to go bankrupt if it were properly managed. The Central Bank had to infuse almost P3.5 billions into the bank in its endeavor to save it. But even this financial assistance was misused, for instead of satisfying the depositors' demands for the withdrawal of their money, BF channeled and diverted a substantial portion of the finds into the coffers of its related/linked companies. Up to this time, its officers, directors and major stockholders have neither repaid the Central Bank's P3.6 billion financial assistance, nor put up adequate collaterals therefor, nor submitted a credible plan for the rehabilitation of the bank. What authority has this Court to require the Central Bank to reopen and rehabilitate the bank, and in effect risk more of the Government's money in the moribund bank? I respectfully submit that decision is for the Central Bank, not for this Court, to make. WHEREFORE, I vote to dismiss the petition for certiorari and mandamus in G.R. No. 70054 for lack of merit. Romero, J., concurs.

Separate Opinions MELENCIO-HERRERA, J., dissenting: I join Mme. Justice Carolina G. Aquino in her dissent and vote to deny the prayer, in G.R. No. 70054, to annul Monetary Board Resolution No. 75 placing Banco Filipino (BF) under receivership. Even assuming that the BF was not, as alleged, in a literal state of insolvency at the time of the passage of said Resolution, there was a finding in the Teodoro report that, based on that Bank's illiquidity, to have allowed it to continue in operation would have meant probable loss to depositors and creditors. That is also a ground for placing the bank under receivership, as a first step, pursuant to Section 29 of the Central Bank Act (Rep. Act No. 265, as amended). The closure of BF, therefore, can not be said to have been arbitrary or made in bad faith. There was sufficient justification, considering its inability to meet the heavy withdrawals by its depositors and to pay its liabilities as they fell due, to forbid the bank from further engaging in banking. The matter of reopening, reorganization or rehabilitation of BF is not within the competence of this Court to ordain but is better addressed to the Monetary Board and the Central Bank considering the latter's enormous infusion of capital into BF to the tune of approximately P3.5 Billion in total accommodations, after a thorough assessment of whether or not BF is, indeed, possessed, as it stoutly contends, of sufficient assets and capabilities with which to repay such huge indebtedness, and can operate without loss to its many depositors and creditors.
#

GRIO-AQUINO, J., dissenting: Although these nine (9) Banco Filipino (BF) cases have been consolidated under one ponencia, all of them except one, raise issues unrelated to the receivership and liquidation of said bank. In fact, two of these cases (G.R. No. 68878 and 81303) have already been decided by this Court and are only awaiting the resolution of the motions for reconsideration filed therein. Only G.R. No. 70054 "Banco Filipino Savings and Mortgage Bank (BF) vs. the Monetary Board (MB), Central Bank of the Philippines (CB), et al.," is an original action for mandamus andcertiorari filed in this Court by former officials of BF to annul the Monetary Board Resolution No. 75 dated January 25, 1985 (ordering the closure of Banco Filipino [BF] and appointing Carlota Valenzuela as receiver of the bank) on the ground that the resolution was issued "without affording BF a hearing on the reports" on which the Monetary Board based its decision to close the bank, hence, without "administrative due process.", The prayer of the petition reads: WHEREFORE, petitioner respectfully prays that a writ of mandamus be issued commanding respondents immediately to furnish it copies of the reports of examination of BF employed by respondent Monetary Board to support its Resolution of January 25, 1985 and thereafter to afford it a hearing prior to any resolution that may be issued under Section 29 of R.A. 265, meanwhile annulling said Resolution of January 25, 1985 by writ of certiorari as made without or in excess ofjurisdiction or with grave abuse of discretion. So as to expedite proceedings, petitioner prays that the assessment of the damages respondents should pay it be deferred and referred to commissioners. Petitioner prays for such other remedy as the Court may deem just and equitable in the premises. Quezon City for Manila, February 28, 1985. (p. 8, Rollo I-) and the prayer of the Supplement to Petition reads: WHEREFORE, in addition to its prayer for mandamus and certiorari contained in its original petition, petitioner respectfully prays that Sections 28-A and 29 of the Central Bank charter (R.A. 265) including its amendatory Presidential Decrees Nos. 72, 1771, 1827 and 1937 be annulled as unconstitutional. Quezon City for Manila, March 4, 1985. (p. 11-G, Rollo I.) The other eight (8) cases merely involve transactions of BF with third persons and certain "related" corporations which had defaulted on their loans and sought to prohibit the extrajudicial foreclosure of the mortgages on their properties by the receiver of BF. These eight (8) cases are: 1. G.R. No. 68878 "BF vs. Intermediate Appellate Court and Celestina Pahimutang" involves the repossession by BF of a house and lot which the buyer (Pahimutang) claimed to have completely paid for on the installment plan. The appellate court's judgment for the buyer was reversed by this Court. The buyer's motion for reconsideration is awaiting resolution by this Court;

2. G.R. Nos. 77255-58, "Top Management Programs Corporation and Pilar Development Corporation vs. Court of appeals, et al." (CA-G.R. SP No. 07892) and "Pilar Development Corporation vs. Executive Judge, RTC, Cavite"(CA-G.R. SP Nos. 0896264) is a consolidated petition for review of the Court of Appeals' joint decision dismissing the petitions for prohibition in which the petitioners seek to prevent the receiver/liquidator of BF from extrajudicially foreclosing the P4.8 million mortgage on Top Management's properties and the P18-67 million mortgage on Pilar Development properties. The Court of Appeals dismissed the petitions on October 30, 1986 on the ground that "the functions of the liquidator, as receiver under Section 29 (R.A. 265), include taking charge of the insolvent's assets and administering the same for the benefit of its creditors and of bringing suits and foreclosing mortgages in the name of the bank;" 3. G.R. No. 78766, "El Grande Corporation vs. Court of Appeals, et al.," is an appeal from the Court of Appeals' decision in CAG.R. SP No. 08809 dismissing El Grande's petition for prohibition to prevent the foreclosure of BF's P8 million mortgage on El Grande's properties; 4. G.R. No. 78894, "Banco Filipino Savings and Mortgage Bank vs. Court of Appeals, et al." is an appeal of BFs old management (using the name of BF) from the decision of the Court of Appeals in CA-G.R. SP No. 07503 entitled, "Central Bank, et al. vs. Judge Zoilo Aguinaldo, et al" dismissing the complaint of "BF" to annul the receivership, for no suit may be brought or defended in the name of the bank except by its receiver; 5. G.R. No. 87867, "Metropolis Development Corporation vs. Court of Appeals" (formerly AC-G.R. No. 07503, "Central Bank, et al. vs. Honorable Zoilo Aguinaldo, et al.') is an appeal of the intervenor (Metropolis) from the same Court of Appeals' decision subject of G.R. No. 78894, which also dismissed Metropolis' complaint in intervention on the ground that a stockholder (Metropolis) may not bring suit in the name of BF while the latter is under receivership, without the authority of the receiver; 6. G.R. No. 81303, "Pilar Development Corporation vs. Court of Appeals, et al." is an appeal from the decision dated October 22, 1987 of the Court of Appeals in CA-G.R. SP No. 12368, "Pilar Development Corporation, et al. vs. Honorable Manuel Cosico, et al.," dismissing the petition for certiorari against Judge Manuel Cosico, Br. 136, RTC, Makati, who dismissed the complaint filed by Pilar Development Corporation against BF, for specific performance of certain developer contracts. An answer filed by Norberto Quisumbing and Associates, as BF's supposed counsel, virtually confessed judgment in favor of Pilar Development. On motion of the receiver, the answer was expunged and the complaint was dismissed. On a petition for certiorari in this Court, we held that: "As liquidator of BF by virtue of a valid appointment from the Central Bank, private respondent Carlota Valenzuela has the authority to direct the operation of the bank in substitution of the former management, which authority includes the retainer of counsel to represent it in bringing or resisting suits in connection with such liquidation and, in the case at bar, to take the proper steps to prevent collusion, to the prejudice of the legitimate creditors, between BF and the petitioners herein which appear to be owned and controlled by the same interest controlling BF" (p. 49, Rollo). The petitioners' motion for reconsideration of that decision is pending resolution. 7. G.R. No. 81304, "BF Homes Development Corporation vs. Court of Appeals, et al." is an appeal from the decision dated November 4, 1987 of the Court of Appeals in CA-G.R. CV No. 08565 affirming the trial court's order dismissing BF Homes' action to compel the Central Bank to restore the financing facilities of BF, because the plaintiff (BF Homes) has no cause of action against the CB. 8. G.R. No. 90473, "El Grande Development Corporation vs. Court of Appeals, et al.," is a petition to review the decision dated June 6, 1989 in CA-G.R. SP No. 08676 dismissing El Grande's petition for prohibition to stop foreclosure proceedings against it by the receiver of BF. As previously stated, G.R. No. 70054 "BF vs. Monetary Board, et al.," is an original special civil action for certiorariand mandamus filed in this Court by the old management of BF, through their counsel, N.J. Quisumbing & Associates, using the name of the bank and praying for the annulment of MB Resolution No. 75 which ordered the closure of BF and placed it under receivership. It is a "forum-shopping" case because it was filed here on February 28, 1985 three weeks after they had filed on February 2, 1985 Civil Case No. 9675 "Banco Filipino vs. Monetary Board, et al." in the Regional Trial Court of Makati, Br. 143 (presided over by Judge Zoilo Aguinaldo) for the same purpose of securing a declaration of the nullity of MB Resolution No. 75 dated January 25, 1985. On August 25, 1985, this Court ordered the transfer and consolidation of Civil Case No. 9676 (to annul the receivership) from Br. 143 to Br. 136 (Judge Manuel Cosico) of the Makati Regional Trial Court where Civil Case No. 8108 (to annul the conservatorship) and Civil Case No. 10183 (to annul the liquidation) of BF were and are still pending. All these three (3) cases were archived on June 30, 1988 by Judge Cosico pending the resolution of G.R. No. 70054 by this Court. Because of my previous participation, as a former member of the Court of Appeals, in the disposition of AC-G.R. No. 02617 (now G.R. No. 68878) and AC-G.R. SP No. 07503 (now G.R. Nos. 78767 and 78894), I am taking no part in G.R. Nos. 68878, 78767 and 78894. It may be mentioned in this connection that neither in AC-G.R. SP No. 02617, nor in AC-G.R. SP No. 07503, did the Court of Appeals rule on the constitutionality of Sections 28-A and 29 of Republic Act 265 (Central Bank Act), as amended, and the validity of MB Resolution No. 75, for those issues were not raised in the Court of Appeals. I concur with the ponencia insofar as it denies the motion for reconsideration in G.R. No. 81303, and dismisses the petitions for review in G.R. Nos. 77255-58, 78766, 81304, and 90473. I respectfully dissent from the majority opinion in G.R. No. 70054 annulling and setting aside MB Resolution No. 75 and ordering the respondents, Central Bank of the Philippines and the Monetary Board to reorganize petitioner Banco Filipino Savings and Mortgage Bank, and allow the latter to resume business in the Philippines under the comptrollership of both the Central Bank and the Monetary Board and under such conditions as may be prescribed by the latter until such time that petitioner bank can continue in business with safety to its creditors, depositors and the general public. for I believe that this Court has neither the authority nor the competence to determine whether or not, and under what conditions, BF should be reorganized and reopened. That decision should be made by the Central Bank and the Monetary Board, not by this Court.

All that we may determine in this case is whether the actions of the Central Bank and the Monetary Board in closing BF and placing it under receivership were "plainly arbitrary and made in bad faith. Section 29 of Republic Act No. 265 provides: Section 29. Proceedings upon insolvency. Whenever, upon examination by the head of the appropriate supervising and examining department or his examiners or agents into the condition of any banking institution, it shall be disclosed that the condition of the same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the department head concerned forthwith, in writing, to inform the Monetary Board of the facts, and the Board may, upon finding the statements of the department head to be true, forbid the institution to do business in the Philippines and shall designate an official of the Central Bank as receiver to immediately take charge of its assets and liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors, exercising all the powers necessary for these purposes including, but not limited to, bringing suits and foreclosing mortgages in the name of the banking institution. The Monetary Board shall thereupon determine within sixty days whether the institution may be reorganized or otherwise placed in such a condition so that it may be permitted to resume business with safety to its depositors and creditors and the general public and shall prescribe the conditions under which such resumption of business shall take place as well as the time for fulfillment of such conditions. In such case, the expenses and fees in the collection and administration of the assets of the institution shall be determined by the Board and shall be paid to the Central Bank out of the assets of such banking institution. If the Monetary Board shall determine and confirm within the said period that the banking institution is insolvent or cannot resume business with safety to its depositors, creditors and the general public, it shall, if the public interest requires, order its liquidation, indicate the manner of its liquidation and approve a liquidation plan. The Central Bank shall, by the Solicitor General, file a petition in the Court of First Instance, reciting the proceedings which have been taken and praying the assistance of the court in the liquidation of the banking institutions. The court shall have jurisdiction in the same proceedings to adjudicate disputed claims against the bank and enforce individual liabilities of the stockholders and do all that is necessary to preserve the assets of the banking institution and to implement the liquidation plan approved by the Monetary Board. The Monetary Board shall designate an official of the Central Bank as liquidator who shall take over the functions of the receiver previously appointed by the Monetary Board under this section. The liquidator shall, with all convenient speed, convert the assets of the banking institution to money or sell, assign or otherwise dispose of the same to creditors and other parties for the purpose of paying the debts of such bank and he may, in the name of the banking institution, institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of the banking institution. The provisions of any law to the contrary notwithstanding, the actions of the Monetary Board under this section and the second paragraph of Section 34 of this Act shall be final and executory, and can be set aside by the court only if there is convincing proof that theaction is plainly arbitrary and made in bad faith. No restraining order or injunction shall be issued by the court enjoining the Central Bank from implementing its actions under this section and the second paragraph of Section 34 of this Act, unless there is convincing proof that the action of the Monetary Board is plainly arbitrary and made in bad faith and the petitioner or plaintiff files with the clerk or judge of the court in which the action is pending a bond executed in favor of the Central Bank, in an amount to be fixed by the court. The restraining order or injunction shall be refused or, if granted, shall be dissolved upon filing by the Central Bank of a bond, which shall be in the form of cash or Central Bank cashier's check, in an amount twice the amount of the bond of the petitioner or plaintiff, conditioned that it will paythe which the petitioner or plaintiff may suffer by the refusalor the dissolution of the injunction. The provisions of Rule 58 of the new Rules of Court insofar as they are applicable and not inconsistent with the provisions of this section shall govern the issuance and dissolution of the restraining order or injunction contemplated in this section. Insolvency, under this Act, shall be understood to mean the inability of a banking institution to pay its liabilities as they fall due in the usual and ordinary course of business, provided, however, that this shall not include the inability to pay of an otherwise non-insolvent bank caused by extra-ordinary demands induced by financial panic commonly evidenced by a run on the banks in the banking community. The determinative factor in the closure, receivership, and liquidation of a bank is the finding, upon examination by the SES of the Central Bank, that its condition "is one of insolvency, or that its continuance in business would involve probable loss to its depositors and creditors." (Sec. 29, R.A. 265.) It should be pointed out that insolvency is not the only statutory ground for the closure of a bank. The other ground is when "its continuance in business would involve probable loss to its depositors and creditors. Was BF insolvent i.e., unable to pay its liabilities as they fell due in the usual and ordinary course of business, on and for some time before January 25, 1985 when the Monetary Board issued Resolution No. 75 closing the bank and placing it under receivership? Would its continued operation involve probable loss to its depositors and creditors? The answer to both questions is yes. Both the conservator Gilberts Teodoro and the head of the SES (Supervision and Examination Sector) Ramon V. Tiaoqui opined that BF's continuance in business would cause probable loss to depositors and creditors. Tiaoqui further categorically found that BF was insolvent. Why was this so? The Teodoro and Tiaoqui reports as well as the report of the receivers, Carlota Valenzuela, Arnulfo B. Aurellano and Ramon V. Tiaoqui, showed that since the end of November 1983 BF had already been incurring "chronic reserve deficiencies' and experiencing severe liquidity problems. So much so, that it had become "a substantial borrower in the call loans market" and in June 1984 it obtained a P30 million emergency loan from the Central Bank. (p. 2, Receiver's Report.) Additional emergencyt

loans (a total of P119.7 millions) were extended by the Central Bank to BF that month (MB Res. No. 839 dated June 29,1984). On July 12, 1984, BFs chairman, Anthony Aguirre, offered to "turn over the administration of the affairs of the bank" to the Central Bank (Aguirre's letter to Governor Jose Fernandez, Annex 7 of Manifestation dated May 3,1991). On July 23,1984, unable to meet heavy deposit withdrawals, BF's management motu proprio, without obtaining the conformity of the Central Bank, closed the bank and declared a bank holiday. On July 27, 1984, the CB, responding to BFs pleas for additional financial assistance, granted BF a P3 billion credit line (MB Res. No. 934 of July 27, 1984) to enable it to reopen and resume business on August 1, 1984. P2.3601 billions of the credit line were availed of by the end of 1984 exclusive of an overdraft of P932.4 millions (p. 2, Tiaoqui Report). Total accommodations granted to BF amounted to P3.4122 billions (p. 19, Cosico Report). Presumably to assure that the financial assistance would be properly used, the MB appointed Basilio Estanislao as conservator of the bank. A conservatorship team of 78 examiners and accountants was assigned at the bank to keep track of its activities and ascertain its financial condition (p. 8, Tiaoqui Report). Estanislao resigned after two weeks for health reasons. He was succeeded by Gilberto Teodoro as conservator in August, 1984 up to January 8, 1985. Besides the conservatorship team, Teodoro hired financial consultants Messrs. Tirso G. Santillan, Jr. and Plorido P. Casuela to make an analysis of BF's financial condition. Teodoro also engaged the accounting firm of Sycip, Gorres, Velayo and Company to make an asset evaluation. The Philippine Appraisal Company (PAC) appraised BFs real estate properties, acquired assets, and collaterals held. On January 9, 1985, Teodoro submitted his Report. Three weeks later, on January 23, 1985, Tiaoqui also submitted his Report. Both reports showedthat, in violation of Section 37 of the General Banking Act (R.A.337): 2 1. BF had been continually deficient in liquidity reserves (Teodoro Report). The bank had been experiencing a severe drop in liquidity levels. The ratio of liquid assets to deposits and borrowings plunged from about 20% at end-1983, to about 8.6% by end-May 1984, much below the statutory requirements of 24% for demand deposits/deposit substitutes and 14% for savings and time deposits. (p. 2, Tiaoqui Report.) 2. Deficiencies in average daily legal reserves rose from P63.0 million during the week of November 21-25, 1983 to a high of P435.9 million during the week of June 11-15, 1984 (pp. 2-3, Tiaoqui Report). Accumulated penalties on reserve deficiencies amounted to P37.4 million by July 31, and rose to P48 million by the end of 1984. (Tiaoqui Report.) 3. Deposit levels, which were at P3,845 million at end-May l984 (its last "normal" month), dropped to P935 million at the end of November 1984 or a loss of P2,910 million. This represented an average monthly loss of P485 million vs. an average monthly gain of P26 million during the first 5 months of 1984. (pp. 2-3, Tiaoqui Report.) 4. Deposits had declined at the rate of P20 million during the month of December 1984, but expenses of about P17 million per month were required to maintain the bank's operation. (p. 6, Teodoro Report.) 5. Based on the projected outlook, the Bank's average yield on assets of 16.3% p.a., was insufficient to meet the average cost of funds of 19.5% p.a. and operating expenses of 4.8% p.a. (p. 5 Teodoro Report.) 6. An imprudently large proportion of assets were locked into long-term applications. (Teodoro Report.)

7. BF overextended itself in lending to the real estate industry, committing as much as 52% of its peso deposits to its affiliates or "related accounts" to which it continued lending even when it was already suffering from liquidity stresses. (Teodoro Report.) This was done in violation of Section 38 of the General Banking Act (R.A. 337). 3 8. During the period of marked decline in liquidity levels the loan portfolio grew by P417.3 million in the first five months of 1984 and by another P105.l million in the next two months. (pp. 2-3, Tiaoqui Report.) 9. The loan portfolio stood at P3.679 billion at the end of July 1984, 56.2% of it channeled to companies whose stockholders, directors and officers were related to the officers, directors, and some stockholders of BF. (p. 8, Tiaoqui Report.) Here again BF violated the General Banking Act (R.A. 337). 4 10. Some of the loans were used to acquire preferred stocks of BF. Between September 17, 1983 and February 10, 1984, P49.9 million of preferred non-convertible stocks were issued. About 85% or P42.4 million was paid out of the proceeds of loans to stockholders/ borrowers with relationship to the bank (Annex D). Around P18.8 million were issued in the name of an entity other than the purchaser of the stocks. (Tiaoqui Report.) 11. Loans amounting to some P69.3 million were granted simply to pay-off old loans including accrued interest, as an accommodation for the direct maturing loans of some firms and as a way of paying-off loans of other borrower firms which have their own credit lines with the bank. These helped to make otherwise delinquent loans appear "current" and deceptively "improved" the quality of the loan portfolio. (Tiaoqui Report.) 12. Examination of the collaterals for the loan accounts of 63 major borrowers and 32 other selected borrowers as of July 31, 1984, showed that: (a) 2,658 TCT's which BF evaluated to be worth P1,487 million were appraised by PAC to be worth only P1,196 million, hence, deficient by P291 million.

(b) Other properties (collaterals) supposedly worth P711 million could not be evaluated by PAC because the details submitted by the bank were insufficient; (c) While P674 million in loans were supposedly guaranteed by the Home Financing Corporation (HFIC), the latter confirmed only P427 million. P247 million in loans were not guaranteed by HFC. (Teodoro Report.) (d) Per SGV's report, loans totalling P1.882 million including accrued interest, were secured by collateral worth only Pl.54 billion. Hence, BFs unsecured exposure amounted to P586.2 million. BF Homes, Inc., a related company which has filed with the SEC a petition for suspension of payments, owes P502 million to BF. 13. BF had been suffering heavy losses. a) For the eleven (11) months ended November 30, 1984, the estimated net loss was P372.6 Million; b) For the twelve (12) months from November 1984, the projected net loss would be P390.7 Million and would continue unabated; (p. 2, Teodoro Report) c) Around 71.7% of the total accommodations of P2.0677 billions to the related/linked entities were adversely classified. Close to 33.7% or P697.1 millions were clean loans or against PNs (promissory notes) of these entities. Of the latter, 52.6% were classified as loss." (P. 5, Tiaoqui Report.) d) The bank's financial condition as of date of examination, after setting up the additional valuation reserves of P612.2 millions and accumulated net loss of P48.2 millions, indicates one of insolvency. Total liabilities of P5,282.1 million exceeds total assets of P4,947.2 million by 6.8%. Total capital account of P334.9 million) is deficient by P322.7 million against the minimum capital required of P657.6 million (Annex F). Capital to risk assets ratio is negative 10.38%. e) Total loans and investment portfolio amounted to P3,914.3 millions (gross), of which P194.0 millions or 5.0% were past due and P1,657.1 millions or 42.3% were adversely classified (Substandard P1,011.4 millions; Doubtful P274.6 millions and Loss P371.1 millions). Accounts adversely classified included unmatured loan of Pl,482.0 million to entities related with each other and to the bank, several of which showed distressed conditions. (p. 7, Tiaoqui Report.) Teodoro's conclusion was that "the continuance of the bank in business would involve probable loss to its depositors and creditors." He recommended "that the Monetary Board take a more effective and responsible action to protect the depositors and creditors ... in the light of the bank's worsening condition." (p. 5, Teodoro Report.) On January 23, 1985, Tiaoqui submitted his report to the Monetary Board, Like Teodoro, Tiaoqui believed that the principal cause of the bank's failure was that in violation of the General Banking Law and CB rules and regulations, BF's major stockholders, directors and officers, through their "related" companies: (i.e. companies owned or controlled by them of their relatives) had been "borrowing" huge chunks of the money of the depositors. His Conclusion and Recommendations were: The Conservator, in his report to the Monetary Board dated January 8, 1985, has stated that thecontinuance of the bank in business would involve probable loss to its depositors and creditors . It has recommended that a more effective action be taken to protect depositors and creditors. The examination findings as of July 31, 1984 as shown earlier, indicate one of insolvency and illiquidity and further confirms the above conclusion of the Conservator. All the foregoing provides sufficient justification for forbidding the bank from further engaging in banking . Foregoing considered, the following are recommended: 1. Forbid the Banco Filipino Savings & Mortgage Bank to do business in the Philippines effective the beginning of office on January, 1985, pursuant to Sec. 29 of R.A. No. 265, as amended; 2. Designate the Head of the Conservator Team at the bank, as Receiver of Banco Filipino Savings & Mortgage Bank, to immediately take charge of the assets and liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefit of all the creditors, and exercise all the powers necessary for these purposes including but not limited to bringing suits and foreclosing mortgages in the name of the bank. 3. The Board of directors and the principal officers from Senior Vice President, as listed in the attached Annex "A" be included in the watchlist of the Supervision and Examination Sector until such time that they shall have cleared themselves. 4. Refer to the Central Banles Legal Department and Office of Special Investigation the report on the findings on Banco Filipino for investigation

and possible prosecution of directors, officers and employees for activities which led to its insolvent position." (pp. 9-10, Tiaoqui Report.) On January 25, 1985 or two days after the submission of Tiaoqui's Report, and three weeks after it received Teodoro's Report, the Monetary Board, then composed of: Chairman: Jose B. Fernandez, Jr. CB Governor Members: 1. Cesar E.A. Virata, Prime Minister & Concurrently Minister of Finance 2. Roberto V. Ongpin, Minister of Trade & Industry & Chairman of Board of Investment 3. Vicente B. Valdepeas, Jr., Minister of Economic Planning & Director General of NEDA 4. Cesar A. Buenaventura, President of Filipinas Shell Petroleum Corp. (p. 37, Annual Report 1985) issued Resolution No. 75 closing BF and placing it under receivership. The MB Resolution reads as follows: After considering the report dated January 8, 1985 of the Conservator for Banco Filipino Savings and Mortgage Bank that the continuance in business of the bank would involve probable loss to its depositors and creditors, and after discussing and finding to be true the statements of the Special Assistant to the Governor and Head, Supervision and Examination Sector (SES) Department II, as recited in his memorandum dated January 23, 1985. that the Banco Filipino Savings and Mortgage Bank is insolvent and that its continuance in business would involve probable loss to its depositors and creditors, and in pursuance of Section 29 of R.A. No. 265, as amended, the Board decided: 1. To forbid Banco Filipino Savings and Mortgage Bank and all its branches to do business in the Philippines; 2. To designate Mrs. Carlota P. Valenzuela, Deputy Governor, as Receiver who is hereby directly vested with jurisdiction and authority to immediately take charge of the bank's assets and liabilities, and as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors, exercising all the- powers necessary for these purposes including, but not limited to, bringing suits and foreclosing mortgages in the name of the bank; 3. To designate Mr. Arnulfo B. Aurellano, Special Assistant to the Governor, and Mr. Ramon V. Tiaoqui, Special Assistant to the Governor and Head, Supervision and Examination Sector Department II. as Deputy Receivers who are likewise hereby directly vested with jurisdiction and authority to do all things necessary or proper to carry out the functions entrusted to them by the Receiver and otherwise to assist the Receiver in carrying out the functions vested in the Receiver by law or Monetary Board resolutions; 4. To direct and authorize Management to do all other things and carry out all other measures necessary or proper to implement this Resolution and to safeguard the interests of depositors/credition and the general public; and 5. In consequence of the foregoing, to terminate the conservatorship over Banco Filipino Savings and Mortgage Bank. (pp. 126-127, Rollo I.) On March 19,1985, the receiver, Carlota Valenzuela, and the deputy receivers, Arnulfo B. Aurellano and Ramon V. Tiaoqui, submitted a report to the Monetary Board as required in Section 29, 2nd paragraph of R.A. 265 which provides that within sixty (60) days from date of the receivership, the Monetary Board shall determine whether the bank may be reorganized and permitted to resume business, or be liquidated. The receivers recommended that BF be placed under litigation. For, among other things, they found that: 1. BF had been suffering a capital deficiency of P336.5 million as of July 31, 1984 (pp. 2 and 4, Receivers' Report). 2. The bank's weekly reserve deficiencies averaged P146.67 million from November 25, 1983 up to March 16, 1984, rising to a peak of P338.09 million until July 27, 1984. Its reserve deficiencies against deposits and deposit substitutes began on the week ending June 15, 1984 up to December 7, 1984, with average daily reserve deficiencies of P2.98 million. 3. Estimated losses or "unhooked valuation reserves" for loans to entities with relationships to certain stockholder/directors and officers of the bank amounted to P600.5 million. Combined with other adjustments in the amount of P73.2 million, they will entirely wipe out the bank's entire capital account and leave a capital deficiency of P336.5 million. The bank was already insolvent on July 31, 1984. The capital deficiency increased to P908.4 million as of January 26, 1985 on account of unhooked penalties for deficiencies in legal reserves (P49.07 million), unhooked interest on overdrawings, emergency advance of P569.49 million from Central Bank, and additional valuation reserves of P124.5 million. (pp. 3-4, Receivers' Report.) The Receivers further noted that After BF was closed as of January 25, 1985, there were no collections from loans granted to firms related to each other and to BF classified as "doubtful" or "loss," there were no substantial improvements on other loans classified "doubtful"or "loss;" there was no further increase in the value of assets owned/acquired supported by new appraisals and there was no infusion of additional capital such that the estimated realizable assets of BF remained at P3,909.23, (millions) while the total liabilities amounted to P5,159.44 (millions). Thus, BF remains insolvent with estimated deficiency to creditors of Pl,250.21 (millions). Moreover, there were no efforts on the part of the stockholders of the bank to improve its financial condition and the possibility of rehabilitation has become more remote. (P. 8, Receivers' Report.)

In the light of the results of the examination of BF by the Teodoro and Tiaoqui teams, I do not find that the CB's Resolution No. 75 ordering BF to cease banking operations and placing it under receivership was "plainly arbitrary and made in bad faith." The receivership was justified because BF was insolvent and its continuance in business would cause loss to its depositors and creditors. Insolvency, as defined in Rep. Act 265, means 'the inability of a banking institution to pay its liabilities as they fall due in the usual and ordinary course of business. Since June 1984, BF had been unable to meet the heavy cash withdrawals of its depositors and pay its liabilities to its creditors, the biggest of them being the Central Bank, hence, the Monetary Board correctly found its condition to be one of insolvency. All the discussion in the Santiago Report concerning the bank's assets and liabilities as determinants of BF's solvency or insolvency is irrelevant and inconsequential, for under Section 29 of Rep. Act. 265, a bank's insolvency is not determined by its excess of liabilities over assets, but by its "inability to pay its liabilities as they fall due in the ordinary course of business" and it was abundantly shown that BF was unable to pay its liabilities to depositors for over a six-month-period before it was placed under receivership. Even if assets and liabilities were to be factored into a formula for determining whether or not BF was already insolvent on or before January 25, 1985, the result would be no different. The bank's assets as of the end of 1984 amounted to P4.891 billions (not P6 billions) according to the Report signed and submitted to the CB by BF's own president, and its total liabilities were P4.478 billions (p. 58, Cosico Report). While Aguirre's Report showed BF ahead with a net worth of P412.961 millions, said report did not make any provision for estimated valuation reserves amounting to P600.5 millions, (50% of face value of doubtful loans and 100% of face value of lossaccounts) which BF had granted to its related/linked companies. The estimated valuation reserves of P600.5 millions plus BF's admitted liabilities of P4.478 billions, put together, would wipe out BFs realizable assets of P4.891 billions and confirm its insolvent condition to the tune of P187.538 millions. BF's and Judge (now CA Justice) Consuelo Y. Santiago's argument that valuation reserves should not be considered because the matter was not discussed by Tiaoqui with BF officials is not well taken for: (1) The records of the defaulting debtors were in the possession of BF. (2) The "adversely classified" loans were in fact included in the List of Exceptions and Findings (of irregularities and violations of laws and CB rules and regulations) prepared by the SES, a copy of which was furnished BF on December 1 7, 1984; (3) A conference on the matter washeld on January 2l, 1985 with senior officials of BF headed by EVP F. Dizon,. (pp. 14-15, Cosico Report.) BF did not formally protest against the CBs estimate of valuation reserves. The CB could not wait forever for BF to respond for the CB had to act with reasonable promptness to protect the depositors and creditors of BF because the bank continued to operate. (4) Subsequent events proved correct the SES classification of the loan accounts as "doubtful" or "loss' because as of January 25, 1985 none of the loans, except three, had been paid either partially or in full, even if they had already matured (p. 53, Cosico Report). The recommended provision for valuation reserves of P600.5 millions for "doubtful" and "loss" accounts was a proper factor to consider in the capital adjustments of BF and was in accordance with accounting rules. For, if the uncollectible loan accounts would be entered in the assets column as "receivables," without a corresponding entry in the liabilities column for estimated losses or valuation reserves arising from their uncollectability, the result would be a gravely distorted picture of the financial condition of BF. BF's strange argument that it was not insolvent for otherwise the CB would not have given it financial assistance does not merit serious consideration for precisely BF needed financial assistance because it was insolvent. Tiaoqui's admission that the examination of BF had "not yet been officially terminated" when he submitted his report on January 23, 1985 did not make the action of the Monetary Board of closing the bank and appointing receivers for it, 'plainly arbitrary and in bad faith." For what had been examined by the SES was more than enough to warrant a finding that the bank was "insolvent and could not continue in business without probable loss to its depositors or creditors," and what had not been examined was negligible and would not have materially altered the result. In any event, the official termination of the examination with the submission by the Chief Examiner of his report to the Monetary Board in March 1985, did not contradict, but in fact confirmed, the findings in the Tiaoqui Report. The responsibility of administering the Philippine monetary and banking systems is vested by law in the Central Bank whose duty it is to use the powers granted to it under the law to achieve the objective, among others, of maintaining monetary stability in the country (Sec. 2, Rep. Act 265). I do not think it would be proper and advisable for this Court to interfere with the CB's exercise of its prerogative and duty to discipline banks which have persistently engaged in illegal, unsafe, unsound and fraudulent banking practices causing tremendous losses and unimaginable anxiety and prejudice to depositors and creditors and generating widespread distrust and loss of confidence in the banking system. The damage to the banking system and to the depositing public is bigger when the bank, like Banco Filipino, is big. With 89 branches nationwide, 46 of them in Metro Manila alone, pumping the hard-earned savings of 3 million depositors into the bank, BF had no reason to go bankrupt if it were properly managed. The Central Bank had to infuse almost P3.5 billions into the bank in its endeavor to save it. But even this financial assistance was misused, for instead of satisfying the depositors' demands for the withdrawal of their money, BF channeled and diverted a substantial portion of the finds into the coffers of its related/linked companies. Up to this time, its officers, directors and major stockholders have neither repaid the Central Bank's P3.6 billion financial assistance, nor put up adequate collaterals therefor, nor submitted a credible plan for the rehabilitation of the bank. What authority has this Court to require the Central Bank to reopen and rehabilitate the bank, and in effect risk more of the Government's money in the moribund bank? I respectfully submit that decision is for the Central Bank, not for this Court, to make. WHEREFORE, I vote to dismiss the petition for certiorari and mandamus in G.R. No. 70054 for lack of merit.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 169777* April 20, 2006 SENATE OF THE PHILIPPINES, represented by FRANKLIN M. DRILON, in his capacity as Senate President, JUAN M. FLAVIER, in his capacity as Senate President Pro Tempore, FRANCIS N. PANGILINAN, in his capacity as Majority Leader, AQUILINO Q. PIMENTEL, JR., in his capacity as Minority Leader, SENATORS RODOLFO G. BIAZON, "COMPANERA" PIA S. CAYETANO, JINGGOY EJERCITO ESTRADA, LUISA "LOI" EJERCITO ESTRADA, JUAN PONCE ENRILE, RICHARD J. GORDON, PANFILO M. LACSON, ALFREDO S.LIM, M. A. MADRIGAL, SERGIO OSMENA III, RALPH G. RECTO, and MAR ROXAS, Petitioners, vs. EDUARDO R. ERMITA, in his capacity as Executive Secretary and alter-ego of President Gloria Macapagal-Arroyo, and anyone acting in his stead and in behalf of the President of the Philippines,Respondents. x-------------------------x G.R. No. 169659 April 20, 2006 BAYAN MUNA represented by DR. REYNALDO LESACA, JR., Rep. SATUR OCAMPO, Rep. CRISPIN BELTRAN, Rep. RAFAEL MARIANO, Rep. LIZA MAZA, Rep. TEODORO CASINO, Rep. JOEL VIRADOR, COURAGE represented by FERDINAND GAITE, and COUNSELS FOR THE DEFENSE OF LIBERTIES (CODAL) represented by ATTY. REMEDIOS BALBIN, Petitioners, vs. EDUARDO ERMITA, in his capacity as Executive Secretary and alter-ego of President Gloria MacapagalArroyo, Respondent. x-------------------------x G.R. No. 169660 April 20, 2006 FRANCISCO I. CHAVEZ, Petitioner, vs. EDUARDO R. ERMITA, in his capacity as Executive Secretary, AVELINO J. CRUZ, JR., in his capacity as Secretary of Defense, and GENEROSO S. SENGA, in his capacity as AFP Chief of Staff, Respondents. x-------------------------x G.R. No. 169667 April 20, 2006 ALTERNATIVE LAW GROUPS, INC. (ALG), Petitioner, vs. HON. EDUARDO R. ERMITA, in his capacity as Executive Secretary, Respondent. x-------------------------x G.R. No. 169834 April 20, 2006 PDP- LABAN, Petitioner, vs. EXECUTIVE SECRETARY EDUARDO R. ERMITA, Respondent. x-------------------------x G.R. No. 171246 April 20, 2006 JOSE ANSELMO I. CADIZ, FELICIANO M. BAUTISTA, ROMULO R. RIVERA, JOSE AMOR AMORANDO, ALICIA A. RISOSVIDAL, FILEMON C. ABELITA III, MANUEL P. LEGASPI, J. B. JOVY C. BERNABE, BERNARD L. DAGCUTA, ROGELIO V. GARCIA, and the INTEGRATED BAR FOR THE PHILIPPINES,Petitioners, vs. HON. EXECUTIVE SECRETARY EDUARDO R. ERMITA, Respondent. DECISION CARPIO MORALES, J.: A transparent government is one of the hallmarks of a truly republican state. Even in the early history of republican thought, however, it has been recognized that the head of government may keep certain information confidential in pursuit of the public interest. Explaining the reason for vesting executive power in only one magistrate, a distinguished delegate to the U.S. Constitutional Convention said: "Decision, activity, secrecy, and dispatch will generally characterize the proceedings of one man, in a much more eminent degree than the proceedings of any greater number; and in proportion as the number is increased, these qualities will be diminished."1 History has been witness, however, to the fact that the power to withhold information lends itself to abuse, hence, the necessity to guard it zealously. The present consolidated petitions for certiorari and prohibition proffer that the President has abused such power by issuing Executive Order No. 464 (E.O. 464) last September 28, 2005. They thus pray for its declaration as null and void for being unconstitutional. In resolving the controversy, this Court shall proceed with the recognition that the issuance under review has come from a coequal branch of government, which thus entitles it to a strong presumption of constitutionality. Once the challenged order is found to be indeed violative of the Constitution, it is duty-bound to declare it so. For the Constitution, being the highest expression of the sovereign will of the Filipino people, must prevail over any issuance of the government that contravenes its mandates.

In the exercise of its legislative power, the Senate of the Philippines, through its various Senate Committees, conducts inquiries or investigations in aid of legislation which call for, inter alia, the attendance of officials and employees of the executive department, bureaus, and offices including those employed in Government Owned and Controlled Corporations, the Armed Forces of the Philippines (AFP), and the Philippine National Police (PNP). On September 21 to 23, 2005, the Committee of the Senate as a whole issued invitations to various officials of the Executive Department for them to appear on September 29, 2005 as resource speakers in a public hearing on the railway project of the North Luzon Railways Corporation with the China National Machinery and Equipment Group (hereinafter North Rail Project). The public hearing was sparked by a privilege speech of Senator Juan Ponce Enrile urging the Senate to investigate the alleged overpricing and other unlawful provisions of the contract covering the North Rail Project. The Senate Committee on National Defense and Security likewise issued invitations 2 dated September 22, 2005 to the following officials of the AFP: the Commanding General of the Philippine Army, Lt. Gen. Hermogenes C. Esperon; Inspector General of the AFP Vice Admiral Mateo M. Mayuga; Deputy Chief of Staff for Intelligence of the AFP Rear Admiral Tirso R. Danga; Chief of the Intelligence Service of the AFP Brig. Gen. Marlu Q. Quevedo; Assistant Superintendent of the Philippine Military Academy (PMA) Brig. Gen. Francisco V. Gudani; and Assistant Commandant, Corps of Cadets of the PMA, Col. Alexander F. Balutan, for them to attend as resource persons in a public hearing scheduled on September 28, 2005 on the following: (1) Privilege Speech of Senator Aquilino Q. Pimentel Jr., delivered on June 6, 2005 entitled "Bunye has Provided Smoking Gun or has Opened a Can of Worms that Show Massive Electoral Fraud in the Presidential Election of May 2005"; (2) Privilege Speech of Senator Jinggoy E. Estrada delivered on July 26, 2005 entitled "The Philippines as the Wire-Tapping Capital of the World"; (3) Privilege Speech of Senator Rodolfo Biazon delivered on August 1, 2005 entitled "Clear and Present Danger"; (4) Senate Resolution No. 285 filed by Senator Maria Ana Consuelo Madrigal Resolution Directing the Committee on National Defense and Security to Conduct an Inquiry, in Aid of Legislation, and in the National Interest, on the Role of the Military in the So-called "Gloriagate Scandal"; and (5) Senate Resolution No. 295 filed by Senator Biazon Resolution Directing the Committee on National Defense and Security to Conduct an Inquiry, in Aid of Legislation, on the Wire-Tapping of the President of the Philippines. Also invited to the above-said hearing scheduled on September 28 2005 was the AFP Chief of Staff, General Generoso S. Senga who, by letter3 dated September 27, 2005, requested for its postponement "due to a pressing operational situation that demands [his utmost personal attention" while "some of the invited AFP officers are currently attending to other urgent operational matters." On September 28, 2005, Senate President Franklin M. Drilon received from Executive Secretary Eduardo R. Ermita a letter4 dated September 27, 2005 "respectfully request[ing] for the postponement of the hearing [regarding the NorthRail project] to which various officials of the Executive Department have been invited" in order to "afford said officials ample time and opportunity to study and prepare for the various issues so that they may better enlighten the Senate Committee on its investigation." Senate President Drilon, however, wrote5 Executive Secretary Ermita that the Senators "are unable to accede to [his request]" as it "was sent belatedly" and "[a]ll preparations and arrangements as well as notices to all resource persons were completed [the previous] week." Senate President Drilon likewise received on September 28, 2005 a letter 6 from the President of the North Luzon Railways Corporation Jose L. Cortes, Jr. requesting that the hearing on the NorthRail project be postponed or cancelled until a copy of the report of the UP Law Center on the contract agreements relative to the project had been secured. On September 28, 2005, the President issued E.O. 464, "Ensuring Observance of the Principle of Separation of Powers, Adherence to the Rule on Executive Privilege and Respect for the Rights of Public Officials Appearing in Legislative Inquiries in Aid of Legislation Under the Constitution, and For Other Purposes,"7 which, pursuant to Section 6 thereof, took effect immediately. The salient provisions of the Order are as follows: SECTION 1. Appearance by Heads of Departments Before Congress. In accordance with Article VI, Section 22 of the Constitution and to implement the Constitutional provisions on the separation of powers between co-equal branches of the government, all heads of departments of the Executive Branch of the government shall secure the consent of the President prior to appearing before either House of Congress. When the security of the State or the public interest so requires and the President so states in writing, the appearance shall only be conducted in executive session. SECTION. 2. Nature, Scope and Coverage of Executive Privilege. (a) Nature and Scope. - The rule of confidentiality based on executive privilege is fundamental to the operation of government and rooted in the separation of powers under the Constitution (Almonte vs. Vasquez, G.R. No. 95367, 23 May 1995). Further, Republic Act No. 6713 or the Code of Conduct and Ethical Standards for Public Officials and Employees provides that Public Officials and Employees shall not use or divulge confidential or classified information officially known to them by reason of their office and not made available to the public to prejudice the public interest. Executive privilege covers all confidential or classified information between the President and the public officers covered by this executive order, including: Conversations and correspondence between the President and the public official covered by this executive order (Almonte vs. Vasquez G.R. No. 95367, 23 May 1995; Chavez v. Public Estates Authority, G.R. No. 133250, 9 July 2002); Military, diplomatic and other national security matters which in the interest of national security should not be divulged (Almonte vs. Vasquez, G.R. No. 95367, 23 May 1995; Chavez v. Presidential Commission on Good Government, G.R. No. 130716, 9 December 1998). Information between inter-government agencies prior to the conclusion of treaties and executive agreements (Chavez v. Presidential Commission on Good Government, G.R. No. 130716, 9 December 1998); Discussion in close-door Cabinet meetings (Chavez v. Presidential Commission on Good Government, G.R. No. 130716, 9 December 1998);

Matters affecting national security and public order (Chavez v. Public Estates Authority, G.R. No. 133250, 9 July 2002). (b) Who are covered. The following are covered by this executive order: Senior officials of executive departments who in the judgment of the department heads are covered by the executive privilege; Generals and flag officers of the Armed Forces of the Philippines and such other officers who in the judgment of the Chief of Staff are covered by the executive privilege; Philippine National Police (PNP) officers with rank of chief superintendent or higher and such other officers who in the judgment of the Chief of the PNP are covered by the executive privilege; Senior national security officials who in the judgment of the National Security Adviser are covered by the executive privilege; and Such other officers as may be determined by the President. SECTION 3. Appearance of Other Public Officials Before Congress. All public officials enumerated in Section 2 (b) hereof shall secure prior consent of the President prior to appearing before either House of Congress to ensure the observance of the principle of separation of powers, adherence to the rule on executive privilege and respect for the rights of public officials appearing in inquiries in aid of legislation. (Emphasis and underscoring supplied) Also on September 28, 2005, Senate President Drilon received from Executive Secretary Ermita a copy of E.O. 464, and another letter8 informing him "that officials of the Executive Department invited to appear at the meeting [regarding the NorthRail project] will not be able to attend the same without the consent of the President, pursuant to [E.O. 464]" and that "said officials have not secured the required consent from the President." On even date which was also the scheduled date of the hearing on the alleged wiretapping, Gen. Senga sent a letter9 to Senator Biazon, Chairperson of the Committee on National Defense and Security, informing him "that per instruction of [President Arroyo], thru the Secretary of National Defense, no officer of the [AFP] is authorized to appear before any Senate or Congressional hearings without seeking a written approval from the President" and "that no approval has been granted by the President to any AFP officer to appear before the public hearing of the Senate Committee on National Defense and Security scheduled [on] 28 September 2005." Despite the communications received from Executive Secretary Ermita and Gen. Senga, the investigation scheduled by the Committee on National Defense and Security pushed through, with only Col. Balutan and Brig. Gen. Gudani among all the AFP officials invited attending. For defying President Arroyos order barring military personnel from testifying before legislative inquiries without her approval, Brig. Gen. Gudani and Col. Balutan were relieved from their military posts and were made to face court martial proceedings. As to the NorthRail project hearing scheduled on September 29, 2005, Executive Secretary Ermita, citing E.O. 464, sent letter of regrets, in response to the invitations sent to the following government officials: Light Railway Transit Authority Administrator Melquiades Robles, Metro Rail Transit Authority Administrator Roberto Lastimoso, Department of Justice (DOJ) Chief State Counsel Ricardo V. Perez, then Presidential Legal Counsel Merceditas Gutierrez, Department of Transportation and Communication (DOTC) Undersecretary Guiling Mamonding, DOTC Secretary Leandro Mendoza, Philippine National Railways General Manager Jose Serase II, Monetary Board Member Juanita Amatong, Bases Conversion Development Authority Chairperson Gen. Narciso Abaya and Secretary Romulo L. Neri.10 NorthRail President Cortes sent personal regrets likewise citing E.O. 464.11 On October 3, 2005, three petitions, docketed as G.R. Nos. 169659, 169660, and 169667, for certiorari and prohibition, were filed before this Court challenging the constitutionality of E.O. 464. In G.R. No. 169659, petitioners party-list Bayan Muna, House of Representatives Members Satur Ocampo, Crispin Beltran, Rafael Mariano, Liza Maza, Joel Virador and Teodoro Casino, Courage, an organization of government employees, and Counsels for the Defense of Liberties (CODAL), a group of lawyers dedicated to the promotion of justice, democracy and peace, all claiming to have standing to file the suit because of the transcendental importance of the issues they posed, pray, in their petition that E.O. 464 be declared null and void for being unconstitutional; that respondent Executive Secretary Ermita, in his capacity as Executive Secretary and alter-ego of President Arroyo, be prohibited from imposing, and threatening to impose sanctions on officials who appear before Congress due to congressional summons. Additionally, petitioners claim that E.O. 464 infringes on their rights and impedes them from fulfilling their respective obligations. Thus, Bayan Muna alleges that E.O. 464 infringes on its right as a political party entitled to participate in governance; Satur Ocampo, et al. allege that E.O. 464 infringes on their rights and duties as members of Congress to conduct investigation in aid of legislation and conduct oversight functions in the implementation of laws; Courage alleges that the tenure of its members in public office is predicated on, and threatened by, their submission to the requirements of E.O. 464 should they be summoned by Congress; and CODAL alleges that its members have a sworn duty to uphold the rule of law, and their rights to information and to transparent governance are threatened by the imposition of E.O. 464. In G.R. No. 169660, petitioner Francisco I. Chavez, claiming that his constitutional rights as a citizen, taxpayer and law practitioner, are affected by the enforcement of E.O. 464, prays in his petition that E.O. 464 be declared null and void for being unconstitutional. In G.R. No. 169667, petitioner Alternative Law Groups, Inc.12 (ALG), alleging that as a coalition of 17 legal resource nongovernmental organizations engaged in developmental lawyering and work with the poor and marginalized sectors in different parts of the country, and as an organization of citizens of the Philippines and a part of the general public, it has legal standing to institute the petition to enforce its constitutional right to information on matters of public concern, a right which was denied to the public by E.O. 464,13 prays, that said order be declared null and void for being unconstitutional and that respondent Executive Secretary Ermita be ordered to cease from implementing it. On October 11, 2005, Petitioner Senate of the Philippines, alleging that it has a vital interest in the resolution of the issue of the validity of E.O. 464 for it stands to suffer imminent and material injury, as it has already sustained the same with its continued enforcement since it directly interferes with and impedes the valid ex ercise of the Senates powers and functions and conceals information of great public interest and concern, filed its petition for certiorari and prohibition, docketed as G.R. No. 169777 and prays that E.O. 464 be declared unconstitutional.

On October 14, 2005, PDP-Laban, a registered political party with members duly elected into the Philippine Senate and House of Representatives, filed a similar petition for certiorari and prohibition, docketed as G.R. No. 169834, alleging that it is affected by the challenged E.O. 464 because it hampers its legislative agenda to be implemented through its members in Congress, particularly in the conduct of inquiries in aid of legislation and transcendental issues need to be resolved to avert a constitutional crisis between the executive and legislative branches of the government. Meanwhile, by letter14 dated February 6, 2006, Senator Biazon reiterated his invitation to Gen. Senga for him and other military officers to attend the hearing on the alleged wiretapping scheduled on February 10, 2005. Gen. Senga replied, however, by letter15 dated February 8, 2006, that "[p]ursuant to Executive Order No. 464, th[e] Headquarters requested for a clearance from the President to allow [them] to appear before the public hearing" and that "they will attend once [their] request is approved by the President." As none of those invited appeared, the hearing on February 10, 2006 was cancelled. 16 In another investigation conducted jointly by the Senate Committee on Agriculture and Food and the Blue Ribbon Committee on the alleged mismanagement and use of the fertilizer fund under the Ginintuang Masaganang Ani program of the Department of Agriculture (DA), several Cabinet officials were invited to the hearings scheduled on October 5 and 26, November 24 and December 12, 2005 but most of them failed to attend, DA Undersecretary Belinda Gonzales, DA Assistant Secretary Felix Jose Montes, Fertilizer and Pesticide Authority Executive Director Norlito R. Gicana, 17 and those from the Department of Budget and Management18 having invoked E.O. 464. In the budget hearings set by the Senate on February 8 and 13, 2006, Press Secretary and Presidential Spokesperson Ignacio R. Bunye,19 DOJ Secretary Raul M. Gonzalez20 and Department of Interior and Local Government Undersecretary Marius P. Corpus21 communicated their inability to attend due to lack of appropriate clearance from the President pursuant to E.O. 464. During the February 13, 2005 budget hearing, however, Secretary Bunye was allowed to attend by Executive Secretary Ermita. On February 13, 2006, Jose Anselmo I. Cadiz and the incumbent members of the Board of Governors of the Integrated Bar of the Philippines, as taxpayers, and the Integrated Bar of the Philippines as the official organization of all Philippine lawyers, all invoking their constitutional right to be informed on matters of public interest, filed their petition for certiorari and prohibition, docketed as G.R. No. 171246, and pray that E.O. 464 be declared null and void. All the petitions pray for the issuance of a Temporary Restraining Order enjoining respondents from implementing, enforcing, and observing E.O. 464. In the oral arguments on the petitions conducted on February 21, 2006, the following substantive issues were ventilated: (1) whether respondents committed grave abuse of discretion in implementing E.O. 464 prior to its publication in the Official Gazette or in a newspaper of general circulation; and (2) whether E.O. 464 violates the following provisions of the Constitution: Art. II, Sec. 28, Art. III, Sec. 4, Art. III, Sec. 7, Art. IV. Sec. 1, Art. VI, Sec. 21, Art. VI, Sec. 22, Art. XI, Sec. 1, and Art. XIII, Sec. 16. The procedural issue of whether there is an actual case or controversy that calls for judicial review was not taken up; instead, the parties were instructed to discuss it in their respective memoranda. After the conclusion of the oral arguments, the parties were directed to submit their respective memoranda, paying particular attention to the following propositions: (1) that E.O. 464 is, on its face, unconstitutional; and (2) assuming that it is not, it is unconstitutional as applied in four instances, namely: (a) the so called Fertilizer scam; (b) the NorthRail investigation (c) the Wiretapping activity of the ISAFP; and (d) the investigation on the Venable contract.22 Petitioners in G.R. No. 16966023 and G.R. No. 16977724 filed their memoranda on March 7, 2006, while those in G.R. No. 16966725 and G.R. No. 16983426 filed theirs the next day or on March 8, 2006. Petitioners in G.R. No. 171246 did not file any memorandum. Petitioners Bayan Muna et al. in G.R. No. 169659, after their motion for extension to file memorandum 27 was granted, subsequently filed a manifestation28 dated March 14, 2006 that it would no longer file its memorandum in the interest of having the issues resolved soonest, prompting this Court to issue a Resolution reprimanding them.29 Petitioners submit that E.O. 464 violates the following constitutional provisions: Art. VI, Sec. 2130 Art. VI, Sec. 2231 Art. VI, Sec. 132 Art. XI, Sec. 133 Art. III, Sec. 734 Art. III, Sec. 435 Art. XIII, Sec. 16 36 Art. II, Sec. 2837 Respondents Executive Secretary Ermita et al., on the other hand, pray in their consolidated memorandum38 on March 13, 2006 for the dismissal of the petitions for lack of merit. The Court synthesizes the issues to be resolved as follows: 1. Whether E.O. 464 contravenes the power of inquiry vested in Congress; 2. Whether E.O. 464 violates the right of the people to information on matters of public concern; and 3. Whether respondents have committed grave abuse of discretion when they implemented E.O. 464 prior to its publication in a newspaper of general circulation. Essential requisites for judicial review Before proceeding to resolve the issue of the constitutionality of E.O. 464, ascertainment of whether the requisites for a valid exercise of the Courts power of judicial review are present is in order. Like almost all powers conferred by the Constitution, the power of judicial review is subject to limitations, to wit: (1) there must be an actual case or controversy calling for the exercise of judicial power; (2) the person challenging the act must have standing to challenge the validity of the subject act or issuance; otherwise stated, he must have a personal and substantial interest in the

case such that he has sustained, or will sustain, direct injury as a result of its enforcement; (3) the question of constitutionality must be raised at the earliest opportunity; and (4) the issue of constitutionality must be the very lis mota of the case. 39 Except with respect to the requisites of standing and existence of an actual case or controversy where the disagreement between the parties lies, discussion of the rest of the requisites shall be omitted. Standing Respondents, through the Solicitor General, assert that the allegations in G.R. Nos. 169659, 169660 and 169667 make it clear that they, adverting to the non-appearance of several officials of the executive department in the investigations called by the different committees of the Senate, were brought to vindicate the constitutional duty of the Senate or its different committees to conduct inquiry in aid of legislation or in the exercise of its oversight functions. They maintain that Representatives Ocampo et al. have not shown any specific prerogative, power, and privilege of the House of Representatives which had been effectively impaired by E.O. 464, there being no mention of any investigation called by the House of Representatives or any of its committees which was aborted due to the implementation of E.O. 464. As for Bayan Munas alleged interest as a party-list representing the marginalized and underrepresented, and that of the other petitioner groups and individuals who profess to have standing as advocates and defenders of the Constitution, respondents contend that such interest falls short of that required to confer standing on them as parties "injured-in-fact."40 Respecting petitioner Chavez, respondents contend that Chavez may not claim an interest as a taxpayer for the implementation of E.O. 464 does not involve the exercise of taxing or spending power.41 With regard to the petition filed by the Senate, respondents argue that in the absence of a personal or direct injury by reason of the issuance of E.O. 464, the Senate and its individual members are not the proper parties to assail the constitutionality of E.O. 464. Invoking this Courts ruling in National Economic Protectionism Association v. Ongpin 42 and Valmonte v. Philippine Charity Sweepstakes Office,43 respondents assert that to be considered a proper party, one must have a personal and substantial interest in the case, such that he has sustained or will sustain direct injury due to the enforcement of E.O. 464. 44 That the Senate of the Philippines has a fundamental right essential not only for intelligent public decision-making in a democratic system, but more especially for sound legislation45 is not disputed. E.O. 464, however, allegedly stifles the ability of the members of Congress to access information that is crucial to law-making.46 Verily, the Senate, including its individual members, has a substantial and direct interest over the outcome of the controversy and is the proper party to assail the constitutionality of E.O. 464. Indeed, legislators have standing to maintain inviolate the prerogative, powers and privileges vested by the Constitution in their office and are allowed to sue to question the validity of any official action which they claim infringes their prerogatives as legislators.47 In the same vein, party-list representatives Satur Ocampo (Bayan Muna), Teodoro Casino (Bayan Muna), Joel Virador (Bayan Muna), Crispin Beltran (Anakpawis), Rafael Mariano (Anakpawis), and Liza Maza (Gabriela) are allowed to sue to question the constitutionality of E.O. 464, the absence of any claim that an investigation called by the House of Representatives or any of its committees was aborted due to the implementation of E.O. 464 notwithstanding, it being sufficient that a claim is made that E.O. 464 infringes on their constitutional rights and duties as members of Congress to conduct investigation in aid of legislation and conduct oversight functions in the implementation of laws. The national political party, Bayan Muna, likewise meets the standing requirement as it obtained three seats in the House of Representatives in the 2004 elections and is, therefore, entitled to participate in the legislative process consonant with the declared policy underlying the party list system of affording citizens belonging to marginalized and underrepresented sectors, organizations and parties who lack well-defined political constituencies to contribute to the formulation and enactment of legislation that will benefit the nation.48 As Bayan Muna and Representatives Ocampo et al. have the standing to file their petitions, passing on the standing of their copetitioners Courage and Codal is rendered unnecessary.49 In filing their respective petitions, Chavez, the ALG which claims to be an organization of citizens, and the incumbent members of the IBP Board of Governors and the IBP in behalf of its lawyer members,50 invoke their constitutional right to information on matters of public concern, asserting that the right to information, curtailed and violated by E.O. 464, is essential to the effective exercise of other constitutional rights51 and to the maintenance of the balance of power among the three branches of the government through the principle of checks and balances.52 It is well-settled that when suing as a citizen, the interest of the petitioner in assailing the constitutionality of laws, presidential decrees, orders, and other regulations, must be direct and personal. In Franciso v. House of Representatives, 53 this Court held that when the proceeding involves the assertion of a public right, the mere fact that he is a citizen satisfies the requirement of personal interest. As for petitioner PDP-Laban, it asseverates that it is clothed with legal standing in view of the transcendental issues raised in its petition which this Court needs to resolve in order to avert a constitutional crisis. For it to be accorded standing on the ground of transcendental importance, however, it must establish (1) the character of the funds (that it is public) or other assets involved in the case, (2) the presence of a clear case of disregard of a constitutional or statutory prohibition by the public respondent agency or instrumentality of the government, and (3) the lack of any party with a more direct and specific interest in raising the questions being raised.54 The first and last determinants not being present as no public funds or assets are involved and petitioners in G.R. Nos. 169777 and 169659 have direct and specific interests in the resolution of the controversy, petitioner PDP-Laban is bereft of standing to file its petition. Its allegation that E.O. 464 hampers its legislative agenda is vague and uncertain, and at best is only a "generalized interest" which it shares with the rest of the political parties. Concrete injury, whether actual or threatened, is that indispensable element of a dispute which serves in part to cast it in a form traditionally capable of judicial resolution.55 In fine, PDP-Labans alleged interest as a political party does not suffice to cl othe it with legal standing. Actual Case or Controversy

Petitioners assert that an actual case exists, they citing the absence of the executive officials invited by the Senate to its hearings after the issuance of E.O. 464, particularly those on the NorthRail project and the wiretapping controversy. Respondents counter that there is no case or controversy, there being no showing that President Arroyo has actually withheld her consent or prohibited the appearance of the invited officials.56 These officials, they claim, merely communicated to the Senate that they have not yet secured the consent of the President, not that the President prohibited their attendance.57 Specifically with regard to the AFP officers who did not attend the hearing on September 28, 2005, respondents claim that the instruction not to attend without the Presidents consent was based on its role as Commander-in-Chief of the Armed Forces, not on E.O. 464. Respondents thus conclude that the petitions merely rest on an unfounded apprehension that the President will abuse its power of preventing the appearance of officials before Congress, and that such apprehension is not sufficient for challenging the validity of E.O. 464. The Court finds respondents assertion that the President has not withheld her consent or prohibited the appearance of the officials concerned immaterial in determining the existence of an actual case or controversy insofar as E.O. 464 is concerned. For E.O. 464 does not require either a deliberate withholding of consent or an express prohibition issuing from the President in order to bar officials from appearing before Congress. As the implementation of the challenged order has already resulted in the absence of officials invited to the hearings of petitioner Senate of the Philippines, it would make no sense to wait for any further event before considering the present case ripe for adjudication. Indeed, it would be sheer abandonment of duty if this Court would now refrain from passing on the constitutionality of E.O. 464. Constitutionality of E.O. 464 E.O. 464, to the extent that it bars the appearance of executive officials before Congress, deprives Congress of the information in the possession of these officials. To resolve the question of whether such withholding of information violates the Constitution, consideration of the general power of Congress to obtain information, otherwise known as the power of inquiry, is in order. The power of inquiry The Congress power of inquiry is expressly recognized in Section 21 of Article VI of the Constitution which reads: SECTION 21. The Senate or the House of Representatives or any of its respective committees may conduct inquiries in aid of legislation in accordance with its duly published rules of procedure. The rights of persons appearing in or affected by such inquiries shall be respected. (Underscoring supplied) This provision is worded exactly as Section 8 of Article VIII of the 1973 Constitution except that, in the latter, it vests the power of inquiry in the unicameral legislature established therein the Batasang Pambansa and its committees. The 1935 Constitution did not contain a similar provision. Nonetheless, in Arnault v. Nazareno, 58 a case decided in 1950 under that Constitution, the Court already recognized that the power of inquiry is inherent in the power to legislate. Arnault involved a Senate investigation of the reportedly anomalous purchase of the Buenavista and Tambobong Estates by the Rural Progress Administration. Arnault, who was considered a leading witness in the controversy, was called to testify thereon by the Senate. On account of his refusal to answer the questions of the senators on an important point, he was, by resolution of the Senate, detained for contempt. Upholding the Senates power to punish Arnault for contempt, this Court held: Although there is no provision in the Constitution expressly investing either House of Congress with power to make investigations and exact testimony to the end that it may exercise its legislative functions advisedly and effectively, such power is so far incidental to the legislative function as to be implied. In other words, the power of inquiry with process to enforce it is an essential and appropriate auxiliary to the legislative function. A legislative body cannot legislate wisely or effectively in the absence of information respecting the conditions which the legislation is intended to affect or change; and where the legislative body does not itself possess the requisite information which is not infrequently true recourse must be had to others who do possess it. Experience has shown that mere requests for such information are often unavailing, and also that information which is volunteered is not always accurate or complete; so some means of compulsion is essential to obtain what is needed.59 . . . (Emphasis and underscoring supplied) That this power of inquiry is broad enough to cover officials of the executive branch may be deduced from the same case. The power of inquiry, the Court therein ruled, is co-extensive with the power to legislate.60 The matters which may be a proper subject of legislation and those which may be a proper subject of investigation are one. It follows that the operation of government, being a legitimate subject for legislation, is a proper subject for investigation. Thus, the Court found that the Senate investigation of the government transaction involved in Arnault was a proper exercise of the power of inquiry. Besides being related to the expenditure of public funds of which Congress is the guardian, the transaction, the Court held, "also involved government agencies created by Congress and officers whose positions it is within the power of Congress to regulate or even abolish." Since Congress has authority to inquire into the operations of the executive branch, it would be incongruous to hold that the power of inquiry does not extend to executive officials who are the most familiar with and informed on executive operations. As discussed in Arnault, the power of inquiry, "with process to enforce it," is grounded on the necessity of information in the legislative process. If the information possessed by executive officials on the operation of their offices is necessary for wise legislation on that subject, by parity of reasoning, Congress has the right to that information and the power to compel the disclosure thereof. As evidenced by the American experience during the so-called "McCarthy era," however, the right of Congress to conduct inquiries in aid of legislation is, in theory, no less susceptible to abuse than executive or judicial power. It may thus be subjected to judicial review pursuant to the Courts certiorari powers under Section 1, Article VIII of the Constitution. For one, as noted in Bengzon v. Senate Blue Ribbon Committee,61 the inquiry itself might not properly be in aid of legislation, and thus beyond the constitutional power of Congress. Such inquiry could not usurp judicial functions. Parenthetically, one possible way for Congress to avoid such a result as occurred in Bengzon is to indicate in its invitations to the public officials

concerned, or to any person for that matter, the possible needed statute which prompted the need for the inquiry. Given such statement in its invitations, along with the usual indication of the subject of inquiry and the questions relative to and in furtherance thereof, there would be less room for speculation on the part of the person invited on whether the inquiry is in aid of legislation. Section 21, Article VI likewise establishes crucial safeguards that proscribe the legislative power of inquiry. The provision requires that the inquiry be done in accordance with the Senate or Houses duly published rules of procedure, necessaril y implying the constitutional infirmity of an inquiry conducted without duly published rules of procedure. Section 21 also mandates that the rights of persons appearing in or affected by such inquiries be respected, an imposition that obligates Congress to adhere to the guarantees in the Bill of Rights. These abuses are, of course, remediable before the courts, upon the proper suit filed by the persons affected, even if they belong to the executive branch. Nonetheless, there may be exceptional circumstances, none appearing to obtain at present, wherein a clear pattern of abuse of the legislative power of inquiry might be established, resulting in palpable violations of the rights guaranteed to members of the executive department under the Bill of Rights. In such instances, depending on the particulars of each case, attempts by the Executive Branch to forestall these abuses may be accorded judicial sanction. Even where the inquiry is in aid of legislation, there are still recognized exemptions to the power of inquiry, which exemptions fall under the rubric of "executive privilege." Since this term figures prominently in the challenged order, it being mentioned in its provisions, its preambular clauses,62 and in its very title, a discussion of executive privilege is crucial for determining the constitutionality of E.O. 464. Executive privilege The phrase "executive privilege" is not new in this jurisdiction. It has been used even prior to the promulgation of the 1986 Constitution.63 Being of American origin, it is best understood in light of how it has been defined and used in the legal literature of the United States. Schwartz defines executive privilege as "the power of the Government to withhold information from the public, the courts, and the Congress."64 Similarly, Rozell defines it as "the right of the President and high-level executive branch officers to withhold information from Congress, the courts, and ultimately the public."65 Executive privilege is, nonetheless, not a clear or unitary concept. 66 It has encompassed claims of varying kinds.67 Tribe, in fact, comments that while it is customary to employ the phrase "executive privilege," it may be more accurate to speak of executive privileges "since presidential refusals to furnish information may be actuated by any of at least three distinct kinds of considerations, and may be asserted, with differing degrees of success, in the context of either judicial or legislative investigations." One variety of the privilege, Tribe explains, is the state secrets privilege invoked by U.S. Presidents, beginning with Washington, on the ground that the information is of such nature that its disclosure would subvert crucial military or diplomatic objectives. Another variety is the informers privilege, or the privilege of the Government not to disclose the identity of persons who f urnish information of violations of law to officers charged with the enforcement of that law. Finally, a generic privilege for internal deliberations has been said to attach to intragovernmental documents reflecting advisory opinions, recommendations and deliberations comprising part of a process by which governmental decisions and policies are formulated. 68 Tribes comment is supported by the ruling in In re Sealed Case, thus: Since the beginnings of our nation, executive officials have claimed a variety of privileges to resist disclosure of information the confidentiality of which they felt was crucial to fulfillment of the unique role and responsibilities of the executive branch of our government. Courts ruled early that the executive had a right to withhold documents that might reveal military or state secrets. The courts have also granted the executive a right to withhold the identity of government informers in some circumstances and a qualified right to withhold information related to pending investigations. x x x" 69 (Emphasis and underscoring supplied) The entry in Blacks Law Dictionary on "executive privilege" is similarly instructive regarding the scope of the doctrine. This privilege, based on the constitutional doctrine of separation of powers, exempts the executive from disclosure requirements applicable to the ordinary citizen or organization where such exemption is necessary to the discharge of highly important executive responsibilities involved in maintaining governmental operations, and extends not only to military and diplomatic secrets but also to documents integral to an appropriate exercise of the executive domestic decisional and policy making functions, that is, those documents reflecting the frank expression necessary in intra-governmental advisory and deliberative communications.70 (Emphasis and underscoring supplied) That a type of information is recognized as privileged does not, however, necessarily mean that it would be considered privileged in all instances. For in determining the validity of a claim of privilege, the question that must be asked is not only whether the requested information falls within one of the traditional privileges, but also whether that privilege should be honored in a given procedural setting.71 The leading case on executive privilege in the United States is U.S. v. Nixon, 72 decided in 1974. In issue in that case was the validity of President Nixons claim of executive privilege against a subpoena issued by a district court requiring the production of certain tapes and documents relating to the Watergate investigations. The claim of privilege was based on the Presidents general interest in the confidentiality of his conversations and correspondence. The U.S. Court held that while there is no explicit reference to a privilege of confidentiality in the U.S. Constitution, it is constitutionally based to the extent that it relates to the effective discharge of a Presidents powers. The Court, nonetheless, rejected the Presidents claim of privilege, ruling that the privilege must be balanced against the public interest in the fair administration of criminal justice. Notably, the Court was careful to clarify that it was not there addressing the issue of claims of privilege in a civil litigation or against congressional demands for information. Cases in the U.S. which involve claims of executive privilege against Congress are rare. 73 Despite frequent assertion of the privilege to deny information to Congress, beginning with President Washingtons refusal to turn over treaty negotiation reco rds to the House of Representatives, the U.S. Supreme Court has never adjudicated the issue.74 However, the U.S. Court of Appeals

for the District of Columbia Circuit, in a case decided earlier in the same year as Nixon, recognized the Presidents privilege over his conversations against a congressional subpoena.75 Anticipating the balancing approach adopted by the U.S. Supreme Court in Nixon, the Court of Appeals weighed the public interest protected by the claim of privilege against the interest that would be served by disclosure to the Committee. Ruling that the balance favored the President, the Court declined to enforce the subpoena. 76 In this jurisdiction, the doctrine of executive privilege was recognized by this Court in Almonte v. Vasquez. 77Almonte used the term in reference to the same privilege subject of Nixon. It quoted the following portion of the Nixon decision which explains the basis for the privilege: "The expectation of a President to the confidentiality of his conversations and correspondences, like the claim of confidentiality of judicial deliberations, for example, has all the values to which we accord deference for the privacy of all citizens and, added to those values, is the necessity for protection of the public interest in candid, objective, and even blunt or harsh opinions in Presidential decision-making. A President and those who assist him must be free to explore alternatives in the process of shaping policies and making decisions and to do so in a way many would be unwilling to express except privately. These are the considerations justifying a presumptive privilege for Presidential communications. The privilege is fundamental to the operation of government and inextricably rooted in the separation of powers under the Constitution x x x " (Emphasis and underscoring supplied) Almonte involved a subpoena duces tecum issued by the Ombudsman against the therein petitioners. It did not involve, as expressly stated in the decision, the right of the people to information.78 Nonetheless, the Court recognized that there are certain types of information which the government may withhold from the public, thus acknowledging, in substance if not in name, that executive privilege may be claimed against citizens demands for information. In Chavez v. PCGG,79 the Court held that this jurisdiction recognizes the common law holding that there is a "governmental privilege against public disclosure with respect to state secrets regarding military, diplomatic and other national security matters."80 The same case held that closed-door Cabinet meetings are also a recognized limitation on the right to information. Similarly, in Chavez v. Public Estates Authority,81 the Court ruled that the right to information does not extend to matters recognized as "privileged information under the separation of powers,"82 by which the Court meant Presidential conversations, correspondences, and discussions in closed-door Cabinet meetings. It also held that information on military and diplomatic secrets and those affecting national security, and information on investigations of crimes by law enforcement agencies before the prosecution of the accused were exempted from the right to information. From the above discussion on the meaning and scope of executive privilege, both in the United States and in this jurisdiction, a clear principle emerges. Executive privilege, whether asserted against Congress, the courts, or the public, is recognized only in relation to certain types of information of a sensitive character. While executive privilege is a constitutional concept, a claim thereof may be valid or not depending on the ground invoked to justify it and the context in which it is made. Noticeably absent is any recognition that executive officials are exempt from the duty to disclose information by the mere fact of being executive officials. Indeed, the extraordinary character of the exemptions indicates that the presumption inclines heavily against executive secrecy and in favor of disclosure. Validity of Section 1 Section 1 is similar to Section 3 in that both require the officials covered by them to secure the consent of the President prior to appearing before Congress. There are significant differences between the two provisions, however, which constrain this Court to discuss the validity of these provisions separately. Section 1 specifically applies to department heads. It does not, unlike Section 3, require a prior determination by any official whether they are covered by E.O. 464. The President herself has, through the challenged order, made the determination that they are. Further, unlike also Section 3, the coverage of department heads under Section 1 is not made to depend on the department heads possession of any information which might be covered by executive privilege. In fact, in marked contrast to Section 3 vis--vis Section 2, there is no reference to executive privilege at all. Rather, the required prior consent under Section 1 is grounded on Article VI, Section 22 of the Constitution on what has been referred to as the question hour. SECTION 22. The heads of departments may upon their own initiative, with the consent of the President, or upon the request of either House, as the rules of each House shall provide, appear before and be heard by such House on any matter pertaining to their departments. Written questions shall be submitted to the President of the Senate or the Speaker of the House of Representatives at least three days before their scheduled appearance. Interpellations shall not be limited to written questions, but may cover matters related thereto. When the security of the State or the public interest so requires and the President so states in writing, the appearance shall be conducted in executive session. Determining the validity of Section 1 thus requires an examination of the meaning of Section 22 of Article VI. Section 22 which provides for the question hour must be interpreted vis--vis Section 21 which provides for the power of either House of Congress to "conduct inquiries in aid of legislation." As the following excerpt of the deliberations of the Constitutional Commission shows, the framers were aware that these two provisions involved distinct functions of Congress. MR. MAAMBONG. x x x When we amended Section 20 [now Section 22 on the Question Hour] yesterday, I noticed that members of the Cabinet cannot be compelled anymore to appear before the House of Representatives or before the Senate. I have a particular problem in this regard, Madam President, because in our experience in the Regular Batasang Pambansa as the Gentleman himself has experienced in the interim Batasang Pambansa one of the most competent inputs that we can put in our committee deliberations, either in aid of legislation or in congressional investigations, is the testimonies of Cabinet ministers. We usually invite them, but if they do not come and it is a congressional investigation, we usually issue subpoenas. I want to be clarified on a statement made by Commissioner Suarez when he said that the fact that the Cabinet ministers may refuse to come to the House of Representatives or the Senate [when requested under Section 22] does not mean that they need not come when they are invited or subpoenaed by the committee of either House when it comes to inquiries in aid of legislation

or congressional investigation. According to Commissioner Suarez, that is allowed and their presence can be had under Section 21. Does the gentleman confirm this, Madam President? MR. DAVIDE. We confirm that, Madam President, because Section 20 refers only to what was originally the Question Hour, whereas, Section 21 would refer specifically to inquiries in aid of legislation, under which anybody for that matter, may be summoned and if he refuses, he can be held in contempt of the House.83 (Emphasis and underscoring supplied) A distinction was thus made between inquiries in aid of legislation and the question hour. While attendance was meant to be discretionary in the question hour, it was compulsory in inquiries in aid of legislation. The reference to Commissioner Suarez bears noting, he being one of the proponents of the amendment to make the appearance of department heads discretionary in the question hour. So clearly was this distinction conveyed to the members of the Commission that the Committee on Style, precisely in recognition of this distinction, later moved the provision on question hour from its original position as Section 20 in the original draft down to Section 31, far from the provision on inquiries in aid of legislation. This gave rise to the following exchange during the deliberations: MR. GUINGONA. [speaking in his capacity as Chairman of the Committee on Style] We now go, Mr. Presiding Officer, to the Article on Legislative and may I request the chairperson of the Legislative Department, Commissioner Davide, to give his reaction. THE PRESIDING OFFICER (Mr. Jamir). Commissioner Davide is recognized. MR. DAVIDE. Thank you, Mr. Presiding Officer. I have only one reaction to the Question Hour. I propose that instead of putting it as Section 31, it should follow Legislative Inquiries. THE PRESIDING OFFICER. What does the committee say? MR. GUINGONA. I ask Commissioner Maambong to reply, Mr. Presiding Officer. MR. MAAMBONG. Actually, we considered that previously when we sequenced this but we reasoned that in Section 21, which is Legislative Inquiry, it is actually a power of Congress in terms of its own lawmaking; whereas, a Question Hour is not actually a power in terms of its own lawmaking power because in Legislative Inquiry, it is in aid of legislation. And so we put Question Hour as Section 31. I hope Commissioner Davide will consider this. MR. DAVIDE. The Question Hour is closely related with the legislative power, and it is precisely as a complement to or a supplement of the Legislative Inquiry. The appearance of the members of Cabinet would be very, very essential not only in the application of check and balance but also, in effect, in aid of legislation. MR. MAAMBONG. After conferring with the committee, we find merit in the suggestion of Commissioner Davide. In other words, we are accepting that and so this Section 31 would now become Section 22. Would it be, Commissioner Davide? MR. DAVIDE. Yes.84 (Emphasis and underscoring supplied) Consistent with their statements earlier in the deliberations, Commissioners Davide and Maambong proceeded from the same assumption that these provisions pertained to two different functions of the legislature. Both Commissioners understood that the power to conduct inquiries in aid of legislation is different from the power to conduct inquiries during the question hour. Commissioner Davides only concern was that the two provisions on these distinct powers be placed closely together, they bein g complementary to each other. Neither Commissioner considered them as identical functions of Congress. The foregoing opinion was not the two Commissioners alone. From the above-quoted exchange, Commissioner Maambongs committee the Committee on Style shared the view that the two provisions reflected distinct functions of Congress. Commissioner Davide, on the other hand, was speaking in his capacity as Chairman of the Committee on the Legislative Department. His views may thus be presumed as representing that of his Committee. In the context of a parliamentary system of government, the "question hour" has a definite meaning. It is a period of confrontation initiated by Parliament to hold the Prime Minister and the other ministers accountable for their acts and the operation of the government,85 corresponding to what is known in Britain as the question period. There was a specific provision for a question hour in the 1973 Constitution86 which made the appearance of ministers mandatory. The same perfectly conformed to the parliamentary system established by that Constitution, where the ministers are also members of the legislature and are directly accountable to it. An essential feature of the parliamentary system of government is the immediate accountability of the Prime Minister and the Cabinet to the National Assembly. They shall be responsible to the National Assembly for the program of government and shall determine the guidelines of national policy. Unlike in the presidential system where the tenure of office of all elected officials cannot be terminated before their term expired, the Prime Minister and the Cabinet remain in office only as long as they enjoy the confidence of the National Assembly. The moment this confidence is lost the Prime Minister and the Cabinet may be changed.87 The framers of the 1987 Constitution removed the mandatory nature of such appearance during the question hour in the present Constitution so as to conform more fully to a system of separation of powers.88 To that extent, the question hour, as it is presently understood in this jurisdiction, departs from the question period of the parliamentary system. That department heads may not be required to appear in a question hour does not, however, mean that the legislature is rendered powerless to elicit information from them in all circumstances. In fact, in light of the absence of a mandatory question period, the need to enforce Congress right to executive information in the performance of its legislative function becomes more imperative. As Schwartz observes: Indeed, if the separation of powers has anything to tell us on the subject under discussion, it is that the Congress has the right to obtain information from any source even from officials of departments and agencies in the executive branch. In the United States there is, unlike the situation which prevails in a parliamentary system such as that in Britain, a clear separation between the legislative and executive branches. It is this very separation that makes the congressional right to obtain information from the executive so essential, if the functions of the Congress as the elected representatives of the people are adequately to be carried out. The absence of close rapport between the legislative and executive branches in this country, comparable to those which
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exist under a parliamentary system, and the nonexistence in the Congress of an institution such as the British question period have perforce made reliance by the Congress upon its right to obtain information from the executive essential, if it is intelligently to perform its legislative tasks. Unless the Congress possesses the right to obtain executive information, its power of oversight of administration in a system such as ours becomes a power devoid of most of its practical content, since it depends for its effectiveness solely upon information parceled out ex gratia by the executive. 89 (Emphasis and underscoring supplied) Sections 21 and 22, therefore, while closely related and complementary to each other, should not be considered as pertaining to the same power of Congress. One specifically relates to the power to conduct inquiries in aid of legislation, the aim of which is to elicit information that may be used for legislation, while the other pertains to the power to conduct a question hour, the objective of which is to obtain information in pursuit of Congress oversight function. When Congress merely seeks to be informed on how department heads are implementing the statutes which it has issued, its right to such information is not as imperative as that of the President to whom, as Chief Executive, such department heads must give a report of their performance as a matter of duty. In such instances, Section 22, in keeping with the separation of powers, states that Congress may only request their appearance. Nonetheless, when the inquiry in which Congress requires their appearance is "in aid of legislation" under Section 21, the appearance is mandatory for the same reasons stated in Arnault. 90 In fine, the oversight function of Congress may be facilitated by compulsory process only to the extent that it is performed in pursuit of legislation. This is consistent with the intent discerned from the deliberations of the Constitutional Commission. Ultimately, the power of Congress to compel the appearance of executive officials under Section 21 and the lack of it under Section 22 find their basis in the principle of separation of powers. While the executive branch is a co-equal branch of the legislature, it cannot frustrate the power of Congress to legislate by refusing to comply with its demands for information. When Congress exercises its power of inquiry, the only way for department heads to exempt themselves therefrom is by a valid claim of privilege. They are not exempt by the mere fact that they are department heads. Only one executive official may be exempted from this power the President on whom executive power is vested, hence, beyond the reach of Congress except through the power of impeachment. It is based on her being the highest official of the executive branch, and the due respect accorded to a co-equal branch of government which is sanctioned by a long-standing custom. By the same token, members of the Supreme Court are also exempt from this power of inquiry. Unlike the Presidency, judicial power is vested in a collegial body; hence, each member thereof is exempt on the basis not only of separation of powers but also on the fiscal autonomy and the constitutional independence of the judiciary. This point is not in dispute, as even counsel for the Senate, Sen. Joker Arroyo, admitted it during the oral argument upon interpellation of the Chief Justice. Having established the proper interpretation of Section 22, Article VI of the Constitution, the Court now proceeds to pass on the constitutionality of Section 1 of E.O. 464. Section 1, in view of its specific reference to Section 22 of Article VI of the Constitution and the absence of any reference to inquiries in aid of legislation, must be construed as limited in its application to appearances of department heads in the question hour contemplated in the provision of said Section 22 of Article VI. The reading is dictated by the basic rule of construction that issuances must be interpreted, as much as possible, in a way that will render it constitutional. The requirement then to secure presidential consent under Section 1, limited as it is only to appearances in the question hour, is valid on its face. For under Section 22, Article VI of the Constitution, the appearance of department heads in the question hour is discretionary on their part. Section 1 cannot, however, be applied to appearances of department heads in inquiries in aid of legislation. Congress is not bound in such instances to respect the refusal of the department head to appear in such inquiry, unless a valid claim of privilege is subsequently made, either by the President herself or by the Executive Secretary. Validity of Sections 2 and 3 Section 3 of E.O. 464 requires all the public officials enumerated in Section 2(b) to secure the consent of the President prior to appearing before either house of Congress. The enumeration is broad. It covers all senior officials of executive departments, all officers of the AFP and the PNP, and all senior national security officials who, in the judgment of the heads of offices designated in the same section (i.e. department heads, Chief of Staff of the AFP, Chief of the PNP, and the National Security Adviser), are "covered by the executive privilege." The enumeration also includes such other officers as may be determined by the President. Given the title of Section 2 "Nature, Scope and Coverage of Executive Privilege" , it is evident that under the rule of ejusdem generis, the determination by the President under this provision is intended to be based on a similar finding of coverage under executive privilege. En passant, the Court notes that Section 2(b) of E.O. 464 virtually states that executive privilege actually covers persons. Such is a misuse of the doctrine. Executive privilege, as discussed above, is properly invoked in relation to specific categories of information and not to categories of persons. In light, however, of Sec 2(a) of E.O. 464 which deals with the nature, scope and coverage of executive privilege, the reference to persons being "covered by the executive privilege" may be read as an abbreviated way of saying that the person is in possession of information which is, in the judgment of the head of office concerned, privileged as defined in Section 2(a). The Court shall thus proceed on the assumption that this is the intention of the challenged order. Upon a determination by the designated head of office or by the President that an official is "covered by the executive privilege," such official is subjected to the requirement that he first secure the consent of the President prior to appearing before Congress. This requirement effectively bars the appearance of the official concerned unless the same is permitted by the President. The proviso allowing the President to give its consent means nothing more than that the President may reverse a prohibition which already exists by virtue of E.O. 464. Thus, underlying this requirement of prior consent is the determination by a head of office, authorized by the President under E.O. 464, or by the President herself, that such official is in possession of information that is covered by executive privilege. This determination then becomes the basis for the officials not showing up in the legislative investigation.

In view thereof, whenever an official invokes E.O. 464 to justify his failure to be present, such invocation must be construed as a declaration to Congress that the President, or a head of office authorized by the President, has determined that the requested information is privileged, and that the President has not reversed such determination. Such declaration, however, even without mentioning the term "executive privilege," amounts to an implied claim that the information is being withheld by the executive branch, by authority of the President, on the basis of executive privilege. Verily, there is an implied claim of privilege. The letter dated September 28, 2005 of respondent Executive Secretary Ermita to Senate President Drilon illustrates the implied nature of the claim of privilege authorized by E.O. 464. It reads: In connection with the inquiry to be conducted by the Committee of the Whole regarding the Northrail Project of the North Luzon Railways Corporation on 29 September 2005 at 10:00 a.m., please be informed that officials of the Executive Department invited to appear at the meeting will not be able to attend the same without the consent of the President, pursuant to Executive Order No. 464 (s. 2005), entitled "Ensuring Observance Of The Principle Of Separation Of Powers, Adherence To The Rule On Executive Privilege And Respect For The Rights Of Public Officials Appearing In Legislative Inquiries In Aid Of Legislation Under The Constitution, And For Other Purposes". Said officials have not secured the required consent from the President. (Underscoring supplied) The letter does not explicitly invoke executive privilege or that the matter on which these officials are being requested to be resource persons falls under the recognized grounds of the privilege to justify their absence. Nor does it expressly state that in view of the lack of consent from the President under E.O. 464, they cannot attend the hearing. Significant premises in this letter, however, are left unstated, deliberately or not. The letter assumes that the invited officials are covered by E.O. 464. As explained earlier, however, to be covered by the order means that a determination has been made, by the designated head of office or the President, that the invited official possesses information that is covered by executive privilege. Thus, although it is not stated in the letter that such determination has been made, the same must be deemed implied. Respecting the statement that the invited officials have not secured the consent of the President, it only means that the President has not reversed the standing prohibition against their appearance before Congress. Inevitably, Executive Secretary Ermitas letter leads to the conclusion that the executive branch, either through the Preside nt or the heads of offices authorized under E.O. 464, has made a determination that the information required by the Senate is privileged, and that, at the time of writing, there has been no contrary pronouncement from the President. In fine, an implied claim of privilege has been made by the executive. While there is no Philippine case that directly addresses the issue of whether executive privilege may be invoked against Congress, it is gathered from Chavez v. PEA that certain information in the possession of the executive may validly be claimed as privileged even against Congress. Thus, the case holds: There is no claim by PEA that the information demanded by petitioner is privileged information rooted in the separation of powers. The information does not cover Presidential conversations, correspondences, or discussions during closed-door Cabinet meetings which, like internal-deliberations of the Supreme Court and other collegiate courts, or executive sessions of either house of Congress, are recognized as confidential. This kind of information cannot be pried open by a co-equal branch of government. A frank exchange of exploratory ideas and assessments, free from the glare of publicity and pressure by interested parties, is essential to protect the independence of decision-making of those tasked to exercise Presidential, Legislative and Judicial power. This is not the situation in the instant case.91 (Emphasis and underscoring supplied) Section 3 of E.O. 464, therefore, cannot be dismissed outright as invalid by the mere fact that it sanctions claims of executive privilege. This Court must look further and assess the claim of privilege authorized by the Order to determine whether it is valid. While the validity of claims of privilege must be assessed on a case to case basis, examining the ground invoked therefor and the particular circumstances surrounding it, there is, in an implied claim of privilege, a defect that renders it invalid per se. By its very nature, and as demonstrated by the letter of respondent Executive Secretary quoted above, the implied claim authorized by Section 3 of E.O. 464 is not accompanied by any specific allegation of the basis thereof (e.g., whether the information demanded involves military or diplomatic secrets, closed-door Cabinet meetings, etc.). While Section 2(a) enumerates the types of information that are covered by the privilege under the challenged order, Congress is left to speculate as to which among them is being referred to by the executive. The enumeration is not even intended to be comprehensive, but a mere statement of what is included in the phrase "confidential or classified information between the President and the public officers covered by this executive order." Certainly, Congress has the right to know why the executive considers the requested information privileged. It does not suffice to merely declare that the President, or an authorized head of office, has determined that it is so, and that the President has not overturned that determination. Such declaration leaves Congress in the dark on how the requested information could be classified as privileged. That the message is couched in terms that, on first impression, do not seem like a claim of privilege only makes it more pernicious. It threatens to make Congress doubly blind to the question of why the executive branch is not providing it with the information that it has requested. A claim of privilege, being a claim of exemption from an obligation to disclose information, must, therefore, be clearly asserted. As U.S. v. Reynolds teaches: The privilege belongs to the government and must be asserted by it; it can neither be claimed nor waived by a private party. It is not to be lightly invoked. There must be a formal claim of privilege, lodged by the head of the department which has control over the matter, after actual personal consideration by that officer. The court itself must determine whether the circumstances are appropriate for the claim of privilege, and yet do so without forcing a disclosure of the very thing the privilege is designed to protect.92 (Underscoring supplied) Absent then a statement of the specific basis of a claim of executive privilege, there is no way of determining whether it falls under one of the traditional privileges, or whether, given the circumstances in which it is made, it should be respected. 93 These, in substance, were the same criteria in assessing the claim of privilege asserted against the Ombudsman in Almonte v.

Vasquez94 and, more in point, against a committee of the Senate in Senate Select Committee on Presidential Campaign Activities v. Nixon.95 A.O. Smith v. Federal Trade Commission is enlightening: [T]he lack of specificity renders an assessment of the potential harm resulting from disclosure impossible, thereby preventing the Court from balancing such harm against plaintiffs needs to determine whether to override any claims of privilege.96 (Underscoring supplied) And so is U.S. v. Article of Drug:97 On the present state of the record, this Court is not called upon to perform this balancing operation. In stating its objection to claimants interrogatories, government asserts, and nothing more, that the disclosures sought by claimant would inhibit the free expression of opinion that non-disclosure is designed to protect. The government has not shown nor even alleged that those who evaluated claimants product were involved in internal policymaking, generally, or in this particular instance. Privilege cannot be set up by an unsupported claim. The facts upon which the privilege is based must be established. To find these interrogatories objectionable, this Court would have to assume that the evaluation and classification of claimants products was a matter of internal policy formulation, an assumption in which this Court is unwilling to indulge sua sponte. 98 (Emphasis and underscoring supplied) Mobil Oil Corp. v. Department of Energy99 similarly emphasizes that "an agency must provide precise and certain reasons for preserving the confidentiality of requested information." Black v. Sheraton Corp. of America100 amplifies, thus: A formal and proper claim of executive privilege requires a specific designation and description of the documents within its scope as well as precise and certain reasons for preserving their confidentiality. Without this specificity, it is impossible for a court to analyze the claim short of disclosure of the very thing sought to be protected. As the affidavit now stands, the Court has little more than its sua sponte speculation with which to weigh the applicability of the claim. An improperly asserted claim of privilege is no claim of privilege. Therefore, despite the fact that a claim was made by the proper executive as Reynolds requires, the Court can not recognize the claim in the instant case because it is legally insufficient to allow the Court to make a just and reasonable determination as to its applicability. To recognize such a broad claim in which the Defendant has given no precise or compelling reasons to shield these documents from outside scrutiny, would make a farce of the whole procedure.101(Emphasis and underscoring supplied) Due respect for a co-equal branch of government, moreover, demands no less than a claim of privilege clearly stating the grounds therefor. Apropos is the following ruling in McPhaul v. U.S:102 We think the Courts decision in United States v. Bryan, 339 U.S. 323, 70 S. Ct. 724, is highly releva nt to these questions. For it is as true here as it was there, that if (petitioner) had legitimate reasons for failing to produce the records of the assoc iation, a decent respect for the House of Representatives, by whose authority the subpoenas issued, would have required that (he) state (his) reasons for noncompliance upon the return of the writ. Such a statement would have given the Subcommittee an opportunity to avoid the blocking of its inquiry by taking other appropriate steps to obtain the records. To deny the Committee the opportunity to consider the objection or remedy is in itself a contempt of its authority and an obstruction of its processes. His failure to make any such statement was "a patent evasion of the duty of one summoned to produce papers before a congressional committee[, and] cannot be condoned." (Emphasis and underscoring supplied; citations omitted) Upon the other hand, Congress must not require the executive to state the reasons for the claim with such particularity as to compel disclosure of the information which the privilege is meant to protect.103 A useful analogy in determining the requisite degree of particularity would be the privilege against self-incrimination. Thus, Hoffman v. U.S.104 declares: The witness is not exonerated from answering merely because he declares that in so doing he would incriminate himself his say-so does not of itself establish the hazard of incrimination. It is for the court to say whether his silence is justified, and to require him to answer if it clearly appears to the court that he is mistaken. However, if the witness, upon interposing his claim, were required to prove the hazard in the sense in which a claim is usually required to be established in court, he would be compelled to surrender the very protection which the privilege is designed to guarantee. To sustain the privilege, it need only be evident from the implications of the question, in the setting in which it is asked, that a responsive answer to the question or an explanation of why it cannot be answered might be dangerous because injurious disclosure could result." x x x (Emphasis and underscoring supplied) The claim of privilege under Section 3 of E.O. 464 in relation to Section 2(b) is thus invalid per se. It is not asserted. It is merely implied. Instead of providing precise and certain reasons for the claim, it merely invokes E.O. 464, coupled with an announcement that the President has not given her consent. It is woefully insufficient for Congress to determine whether the withholding of information is justified under the circumstances of each case. It severely frustrates the power of inquiry of Congress. In fine, Section 3 and Section 2(b) of E.O. 464 must be invalidated. No infirmity, however, can be imputed to Section 2(a) as it merely provides guidelines, binding only on the heads of office mentioned in Section 2(b), on what is covered by executive privilege. It does not purport to be conclusive on the other branches of government. It may thus be construed as a mere expression of opinion by the President regarding the nature and scope of executive privilege. Petitioners, however, assert as another ground for invalidating the challenged order the alleged unlawful delegation of authority to the heads of offices in Section 2(b). Petitioner Senate of the Philippines, in particular, cites the case of the United States where, so it claims, only the President can assert executive privilege to withhold information from Congress. Section 2(b) in relation to Section 3 virtually provides that, once the head of office determines that a certain information is privileged, such determination is presumed to bear the Presidents authority and has the effect of prohibiting the official f rom appearing before Congress, subject only to the express pronouncement of the President that it is allowing the appearance of such official. These provisions thus allow the President to authorize claims of privilege by mere silence.

Such presumptive authorization, however, is contrary to the exceptional nature of the privilege. Executive privilege, as already discussed, is recognized with respect to information the confidential nature of which is crucial to the fulfillment of the unique role and responsibilities of the executive branch,105 or in those instances where exemption from disclosure is necessary to the discharge of highly important executive responsibilities.106 The doctrine of executive privilege is thus premised on the fact that certain informations must, as a matter of necessity, be kept confidential in pursuit of the public interest. The privilege being, by definition, an exemption from the obligation to disclose information, in this case to Congress, the necessity must be of such high degree as to outweigh the public interest in enforcing that obligation in a particular case. In light of this highly exceptional nature of the privilege, the Court finds it essential to limit to the President the power to invoke the privilege. She may of course authorize the Executive Secretary to invoke the privilege on her behalf, in which case the Executive Secretary must state that the authority is "By order of the President," which means that he personally consulted with her. The privilege being an extraordinary power, it must be wielded only by the highest official in the executive hierarchy. In other words, the President may not authorize her subordinates to exercise such power. There is even less reason to uphold such authorization in the instant case where the authorization is not explicit but by mere silence. Section 3, in relation to Section 2(b), is further invalid on this score. It follows, therefore, that when an official is being summoned by Congress on a matter which, in his own judgment, might be covered by executive privilege, he must be afforded reasonable time to inform the President or the Executive Secretary of the possible need for invoking the privilege. This is necessary in order to provide the President or the Executive Secretary with fair opportunity to consider whether the matter indeed calls for a claim of executive privilege. If, after the lapse of that reasonable time, neither the President nor the Executive Secretary invokes the privilege, Congress is no longer bound to respect the failure of the official to appear before Congress and may then opt to avail of the necessary legal means to compel his appearance. The Court notes that one of the expressed purposes for requiring officials to secure the consent of the President under Section 3 of E.O. 464 is to ensure "respect for the rights of public officials appearing in inquiries in aid of legislation." That such rights must indeed be respected by Congress is an echo from Article VI Section 21 of the Constitution mandating that "[t]he rights of persons appearing in or affected by such inquiries shall be respected." In light of the above discussion of Section 3, it is clear that it is essentially an authorization for implied claims of executive privilege, for which reason it must be invalidated. That such authorization is partly motivated by the need to ensure respect for such officials does not change the infirm nature of the authorization itself. Right to Information E.O 464 is concerned only with the demands of Congress for the appearance of executive officials in the hearings conducted by it, and not with the demands of citizens for information pursuant to their right to information on matters of public concern. Petitioners are not amiss in claiming, however, that what is involved in the present controversy is not merely the legislative power of inquiry, but the right of the people to information. There are, it bears noting, clear distinctions between the right of Congress to information which underlies the power of inquiry and the right of the people to information on matters of public concern. For one, the demand of a citizen for the production of documents pursuant to his right to information does not have the same obligatory force as a subpoena duces tecum issued by Congress. Neither does the right to information grant a citizen the power to exact testimony from government officials. These powers belong only to Congress and not to an individual citizen. Thus, while Congress is composed of representatives elected by the people, it does not follow, except in a highly qualified sense, that in every exercise of its power of inquiry, the people are exercising their right to information. To the extent that investigations in aid of legislation are generally conducted in public, however, any executive issuance tending to unduly limit disclosures of information in such investigations necessarily deprives the people of information which, being presumed to be in aid of legislation, is presumed to be a matter of public concern. The citizens are thereby denied access to information which they can use in formulating their own opinions on the matter before Congress opinions which they can then communicate to their representatives and other government officials through the various legal means allowed by their freedom of expression. Thus holds Valmonte v. Belmonte: It is in the interest of the State that the channels for free political discussion be maintained to the end that the government may perceive and be responsive to the peoples will. Yet, this open dialogue can be effective only to the extent that the citizen ry is informed and thus able to formulate its will intelligently. Only when the participants in the discussion are aware of the issues and have access to information relating thereto can such bear fruit.107(Emphasis and underscoring supplied) The impairment of the right of the people to information as a consequence of E.O. 464 is, therefore, in the sense explained above, just as direct as its violation of the legislatures power of inquiry. Implementation of E.O. 464 prior to its publication While E.O. 464 applies only to officials of the executive branch, it does not follow that the same is exempt from the need for publication. On the need for publishing even those statutes that do not directly apply to people in general, Taada v. Tuvera states: The term "laws" should refer to all laws and not only to those of general application, for strictly speaking all laws relate to the people in general albeit there are some that do not apply to them directly. An example is a law granting citizenship to a particular individual, like a relative of President Marcos who was decreed instant naturalization. It surely cannot be said that such a law does not affect the public although it unquestionably does not apply directly to all the people. The subject of such law is a matter of public interest which any member of the body politic may question in the political forums or, if he is a proper party, even in courts of justice.108 (Emphasis and underscoring supplied) Although the above statement was made in reference to statutes, logic dictates that the challenged order must be covered by the publication requirement. As explained above, E.O. 464 has a direct effect on the right of the people to information on matters of public concern. It is, therefore, a matter of public interest which members of the body politic may question before this Court. Due process thus requires that the people should have been apprised of this issuance before it was implemented.

Conclusion Congress undoubtedly has a right to information from the executive branch whenever it is sought in aid of legislation. If the executive branch withholds such information on the ground that it is privileged, it must so assert it and state the reason therefor and why it must be respected. The infirm provisions of E.O. 464, however, allow the executive branch to evade congressional requests for information without need of clearly asserting a right to do so and/or proffering its reasons therefor. By the mere expedient of invoking said provisions, the power of Congress to conduct inquiries in aid of legislation is frustrated. That is impermissible. For [w]hat republican theory did accomplishwas to reverse the old presumption in favor of secrecy, base d on the divine right of kings and nobles, and replace it with a presumption in favor of publicity, based on the doctrine of popular sovereignty. (Underscoring supplied)109 Resort to any means then by which officials of the executive branch could refuse to divulge information cannot be presumed valid. Otherwise, we shall not have merely nullified the power of our legislature to inquire into the operations of government, but we shall have given up something of much greater value our right as a people to take part in government. WHEREFORE, the petitions are PARTLY GRANTED. Sections 2(b) and 3 of Executive Order No. 464 (series of 2005), "Ensuring Observance of the Principle of Separation of Powers, Adherence to the Rule on Executive Privilege and Respect for the Rights of Public Officials Appearing in Legislative Inquiries in Aid of Legislation Under the Constitution, and For Other Purposes," are declared VOID. Sections 1 and 2(a) are, however, VALID. SO ORDERED.

[G.R. No. 131636. March 5, 2003] PEOPLE OF THE PHILIPPINES, appellee, INVENCION y SORIANO, appellant. DECISION
DAVIDE, JR., C.J.:
[1] [2]

vs. ARTEMIO

Before us for automatic review is the Decision dated 22 September 1997 of the Regional Trial Court of Tarlac, Tarlac, Branch 65, in Criminal Case No. 9375, finding accused-appellant Artemio Invencion y Soriano guilty beyond reasonable doubt of the crime of rape committed against his 16-year-old daughter Cynthia P. Invencion, and sentencing him to suffer the penalty of death and to pay Cynthia the sum of P50,000 as moral damages and P25,000 as exemplary damages, as well as the costs of suit. Artemio was charged before the Regional Trial Court of Tarlac with thirteen counts of rape in separate complaints docketed as Criminal Cases Nos. 9363 to 9375, all dated 17 October 1996. The cases were consolidated and jointly tried. At his arraignment Artemio entered a plea of not guilty in each case. The witnesses presented by the prosecution in its evidence in chief were Elven Invencion, Eddie Sicat, Gloria Pagala, Dr. Rosario Fider, and Atty. Florencio Canlas. Presented as rebuttal witnesses were Gloria Pagala and Celestino Navarro. Elven Invencion, an 8-year-old grade two pupil of Sapang Tagalog Elementary School in Tarlac, Tarlac, testified that he is a half-brother of Cynthia and son of Artemio with his second common-law wife. Sometime before the end of the school year in 1996, while he was sleeping in one room with his father Artemio, Cynthia, and two other younger brothers, he was awakened by Cynthias loud cries. Looking towards her, he saw his father on top of Cynthia, doing a pumping motion. After about two minutes, his father put on his short pants. Elven further declared that Artemio was a very strict and cruel father and a drunkard. He angrily prohibited Cynthia from entertaining any of her suitors. Whenever he was drunk, he would maul Elven and quarrel with his stepfather, Celestino Navarro. Eddie Sicat, a 40-year-old farmer and neighbor of Artemio in Barangay Sapang Tagalog, Tarlac, Tarlac, testified that on the second week of March 1996, between 6:00 and 7:00 a.m., while he was passing by the house of Artemio on his way to the field to catch fish, he heard somebody crying. He then peeped through a small opening in the
[3] [4]

destroyed portion of the sawali wall of Artemios house. He saw Cynthia lying on her back and crying, while her father was on top of her, doing a pumping motion. Eddie observed them for about fifteen seconds, and then he left and proceeded to the field to catch fish. He reported what he had witnessed to Artemios stepfather, Celestino, later that morning. Gloria Pagala, the mother of Cynthia and former common-law wife of Artemio, testified that she and Artemio started living together in Guimba, Nueva Ecija, in February 1969. Out of their common-law relationship, they had six children, one of whom was Cynthia. In March 1982, she and Artemio parted ways permanently. Later, Gloria and her children lived in Pura, Tarlac. When Artemios mother died sometime in 1996, Cynthia lived with Artemio in a small one-room dwelling owned by Celestino and located in BarangaySapang Tagalog, Tarlac, Tarlac. On 30 August 1996, her son Novelito told her that Cynthia was pregnant. Gloria then went to the house of Artemio and asked Cynthia about her condition. The latter confessed that she had been sexually abused by her father. Gloria then went to the office of the National Bureau of Investigation (NBI) in Tarlac and reported what Artemio had done to their daughter Cynthia. Dr. Rosario Fider of Tarlac Provincial Hospital testified that she examined Cynthia on 16 September 1996. She found Cynthia to be five to six months pregnant and to have incomplete, healed hymenal lacerations at 3, 5, 8 oclock positions, which could have been caused by sexual intercourse or any foreign body inserted in her private part. Atty. Florencio Canlas, an NBI agent, testified that on 18 September 1996, Cynthia, accompanied by her mother, complained before him and NBI Supervising Agent Rolando Vergara that she was raped by her father Artemio. She then executed a written statement, which she subscribed and sworn to before Atty. Canlas. The defense did not present Artemio as a witness. Instead, his counsel de parte, Atty. Isabelo Salamida, took the witness stand and testified for the defense. He declared that on 24 June 1997 (the same day when he testified before the court), between 10:45 and 11:00 a.m., he and his secretary went to the house of Artemio in Barangay Sapang Tagalog. The hut was made of sawali. Its door was padlocked, and its windows were shut. When he went around the house and tried to peep through the old sawali walls on the front and left and right sides of the hut, he could not see anything inside the room where Artemio and his children used to sleep. Although it was then about noontime, it was dark inside. Atty. Salamida then concluded that prosecution witness Eddie Sicat was not telling the truth when he declared having seen what Artemio did to Cynthia when he peeped through a small opening in the sawali wall of the house in the early morning sometime on the second week of March 1996. On rebuttal, Gloria Pagala testified that the house where Artemio used to live was a small hut with some destroyed portions in its sawali walls. When she went there to visit her children sometime in December 1995, there was a hole in front and at the sidewall of the hut facing a vacant lot where people passed by to fish in a nearby brook. When she went to the place again sometime in September 1996 after she was informed of Cynthias pregnancy, she noticed that the destroyed portions of the huts sawali walls were not yet repaired. The second rebuttal witness Celestino Navarro, stepfather of Artemio, testified that he is the owner of the small house where Artemio and his children used to reside. At the time that Artemio and his children, including Cynthia, were living in that house, the huts
[5] [6] [7] [8] [9] [10] [11] [12] [13] [14]

old sawali walls had some small holes in them, thus confirming the testimony of Eddie Sicat. After Artemio was arrested on the basis of Cynthias complaint before the NBI, Celestino made some repairs in the hut by, among other things, placing galvanized iron sheets to cover the holes at the destroyed portions of the sawali walls. Thereafter, a person named Alvin occupied the house. In its Decision of 22 September 1997, the trial court convicted Artemio in Criminal Case No. 9375. It, however, acquitted him in all the other twelve cases for lack of evidence. In his Appellants Brief, Artemio contends that the trial court erred in
[15]

... BELIEVING THE TESTIMONIES OF THE PROSECUTION WITNESSES;

II

NOT DISMISSING THIS CASE FOR FAILURE OF THE PROSECUTION TO PROVE [HIS] GUILT BEYOND REASONABLE DOUBT. Artemio attacks the competency and credibility of Elven as a witness. He argues that Elven, as his son, should have been disqualified as a witness against him under Section 20(c), Rule 130 of the Rules of Court. Besides, Elvens testimony appears not to be his but what the prosecution wanted him to say, as the questions asked were mostly leading questions. Moreover, Elven had ill-motive in testifying against him, as he (Artemio) was cruel to him. In another attempt to cast doubt on the credibility of the prosecution witnesses, Artemio points to the following inconsistencies in their testimonies: (1) as to the time of the commission of the crime, Elven testified having seen Artemio on top of his sister one night in March 1996, while Eddie Sicat testified having seen them in the same positionbetween 6:00 and 7:00 a.m. in the second week of March 1996; (2) as to the residence of Cynthia in 1996, Gloria testified that the former was living with her in Guimba from November 1995 to September 1996, while Elven and Eddie declared that she was in Sapang Tagalog in March 1996; and (3) as to the residence of Artemio, Jr., Gloria stated that he was living with the appellant, but later she declared that he was living with her in Pura. Artemio also argues that since his house had no electricity and was dark even at daytime, it was impossible for Elven and Eddie to see him allegedly doing pumping motion on top of Cynthia. In his Reply Brief, he likewise urges us to disregard the testimonies of rebuttal witnesses Celestino and Gloria. According to him, Celestino had an ax to grind against him (Artemio) because he had been badgering Celestino for his share of the lot where the hut stands, which was owned by Artemios deceased mother. On the other hand, Gloria wanted to get rid of Artemio because she was already cohabiting with another man. In the Appellees Brief, the Office of the Solicitor General (OSG) prays for the affirmation of Artemios conviction and sentence, but recommends that a civil indemnity in the amount of P75,000 be awarded in addition to the awards of moral and exemplary damages. We find no cogent reason to overturn the findings of the trial court on the culpability of Artemio. It is doctrinally settled that the factual findings of the trial court, especially on the credibility of the witnesses, are accorded great weight and respect and will not be
[16]

disturbed on appeal. This is so because the trial court has the advantage of observing the witnesses through the different indicators of truthfulness or falsehood, such as the angry flush of an insisted assertion, the sudden pallor of a discovered lie, the tremulous mutter of a reluctant answer, the forthright tone of a ready reply, the furtive glance, the blush of conscious shame, the hesitation, the yawn, the sigh, the candor or lack of it, the scant or full realization of the solemnity of an oath, or the carriage and mien. This rule, however, admits of exceptions, as where there exists a fact or circumstance of weight and influence that has been ignored or misconstrued by the court, or where the trial court has acted arbitrarily in its appreciation of the facts. We do not find any of these exceptions in the case at bar. As to the competency of Elven to testify, we rule that such is not affected by Section 25, Rule 130 of the Rules of Court, otherwise known as the rule on filial privilege. This rule is not strictly a rule on disqualification because a descendant is not incompetent or disqualified to testify against an ascendant. The rule refers to a privilege not to testify, which can be invoked or waived like other privileges. As correctly observed by the lower court, Elven was not compelled to testify against his father; he chose to waive that filial privilege when he voluntarily testified against Artemio. Elven declared that he was testifying as a witness against his father of his own accord and only to tell the truth. Neither can Artemio challenge the prosecutions act of propounding leading questions on Elven. Section 10(c) of Rule 132 of the Rules of Court expressly allows leading questions when the witness is a child of tender years like Elven. The alleged ulterior motive of Elven in testifying against his father also deserves scant consideration. Such insinuation of ill-motive is too lame and flimsy. As observed by the OSG, Elven, who was of tender age, could not have subjected himself to the ordeal of a public trial had he not been compelled by a motive other than to bring to justice the despoiler of his sisters virtue. There is no indication that Elven testified because of anger or any ill-motive against his father, nor is there any showing that he was unduly pressured or influenced by his mother or by anyone to testify against his father. The rule is that where there is no evidence that the principal witness for the prosecution was actuated by improper motive, the presumption is that he was not so actuated and his testimony is entitled to full credence. We find as inconsequential the alleged variance or difference in the time that the rape was committed, i.e., during the night as testified to by Elven, or between 6:00 and 7:00 a.m. per the testimony of Eddie. The exact time or date of the commission of rape is not an element of the crime. What is decisive in a rape charge is that the commission of the rape by the accused has been sufficiently proved. Inconsistencies and discrepancies as to minor matters irrelevant to the elements of the crime cannot be considered grounds for acquittal. In this case, we believe that the crime of rape was, indeed, committed as testified to by Elven and Eddie. The alleged inconsistencies in the testimonies of both Elven and Gloria do not impair the credibility of these witnesses. We agree with the trial court that they are minor inconsistencies, which do not affect the credibility of the witnesses. We have held in a number of cases that inconsistencies in the testimonies of witnesses that refer to minor and insignificant details do not destroy the witnesses credibility. On the contrary, they may even be considered badges of veracity or manifestations of truthfulness on the
[17] [18] [19] [20] [21] [22] [23] [24] [25]

material points in the testimonies. What is important is that the testimonies agree on essential facts and substantially corroborate a consistent and coherent whole. Artemios allegation that it was impossible for both Elven and Eddie to have seen and witnessed the crime because the room was dark even at daytime was convincingly disputed by rebuttal witnesses Gloria Pagala and Celestino Navarro. Furthermore, as observed by the OSG, even if the hut was without electricity, Elven could not have been mistaken in his identification of Artemio because he had known the latter for a long time. Moreover, Elven was at the time only two meters away from Cynthia and Artemio. Even without sufficient illumination, Elven, who was jostled out of his sle ep by Cynthias loud cry, could observe the pumping motion made by his father. The alleged ill-motives on the part of Gloria and Celestino were not sufficiently proved. Nothing in the records suggests any reason that would motivate Gloria to testify falsely against Artemio, who is the father of her other children. Moreover, we have repeatedly held that no mother would subject her child to the humiliation, disgrace, and trauma attendant to the prosecution for rape if she were not motivated solely by the desire to have the person responsible for her childs defilement incarcerated. As for Celestino, he testified that the lot where the hut stands is owned by his daughter Erlinda, and not by Artemios mother. At any rate, even without Celestinos testimony, Artemios conviction would stand. The remaining issue for our resolution is the correctness of the penalty of death imposed by the trial court. The death penalty was imposed because of the trial courts appreciation of the special qualifying circumstances that Artemio is the father of the victim and the latter was less than 18 years old at the time the crime was committed. Article 335 of the Revised Penal Code, as amended by R.A. No. 7659, which is the governing law in this case, pertinently reads: Article 335. When and how rape is committed. The crime of rape shall be punished by reclusion perpetua. ... The death penalty shall also be imposed if the crime of rape is committed with any of the following circumstances: 1. when the victim is under eighteen (18) years of age and the offender is a parent, ascendant, step-parent, guardian, relative by consanguinity or affinity within the third civil degree, or the common-law spouse of the parent of the victim. To justify the imposition of the death penalty in a rape committed by a father on a daughter, the minority of the victim and her relationship with the offender, which are special qualifying circumstances, must be alleged in the complaint or information and proved by the prosecution during the trial by the quantum of proof required for conviction. The accusatory portion of the complaint in Criminal Case No. 9375 reads as follows: That on or about the month of March 1996 at Sapang Tagalog, Municipality of Tarlac, Province of Tarlac, Philippines, and within the jurisdiction of this Honorable Court, the said accused Artemio S. Invencion did then and there willfully, unlawfully and feloniously by using force and intimidation have carnal knowledge of his daughter Cynthia P. Invencion who was sixteen (16) years old, in their house. CONTRARY TO LAW.
[26] [27] [28] [29] [30]

Although the relationship of Cynthia with her father Artemio was alleged in the complaint and duly established by evidence during trial, the allegation in the complaint regarding her age was not clearly proved. In the very recent case of People v. Pruna, we set the guidelines in appreciating age either as an element of the crime or as a qualifying circumstance: 1. The best evidence to prove the age of the offended party is an original or certified true copy of the certificate of live birth of such party. 2. In the absence of a certificate of live birth, similar authentic documents such as baptismal certificate and school records which show the date of birth of the victim would suffice to prove age. 3. If the certificate of live birth or authentic document is shown to have been lost or destroyed or otherwise unavailable, the testimony, if clear and credible, of the victims mother or a member of the family either by affinity or consanguinity who is qualified to testify on matters respecting pedigree such as the exact age or date of birth of the offended party pursuant to Section 40, Rule 130 of the Rules on Evidence shall be sufficient under the following circumstances: a. If the victim is alleged to be below 3 years of age and what is sought to be proved is that she is less than 7 years old; b. If the victim is alleged to be below 7 years of age and what is sought to be proved is that she is less than 12 years old; c. If the victim is alleged to be below 12 years of age and what is sought to be proved is that she is less than 18 years old. 4. In the absence of a certificate of live birth, authentic document, or the testimony of the victims mother or relatives concerning the victims age, the complainants testimony will suffice provided that it is expressly and clearly admitted by the accused. 5. It is the prosecution that has the burden of proving the age of the offended party. The failure of the accused to object to the testimonial evidence regarding age shall not be taken against him. 6. The trial court should always make a categorical finding as to the age of the victim. In the present case, no birth certificate or any similar authentic document was presented and offered in evidence to prove Cynthias age. The statement in the medical certificate showing Cynthias age is not proof thereof, since a medical certificate does not authenticate the date of birth of the victim. Moreover, pursuant to Pruna, Glorias testimony regarding Cynthias age was insufficient, since Cynthia was alleged to be 16 years old already at the time of the rape and what is sought to be proved is that she was then 18 years old. Moreover, the trial court did not even make a categorical finding on Cynthias minority. Finally, the silence of Artemio or his failure to object to the testimonial evidence regarding Cynthias age could not be taken against him. It must be stressed that the severity of death penalty, especially its irreversible and final nature once carried out, makes the decision-making process in capital offenses aptly subject to the most exacting rules of procedure and evidence. Accordingly, in the absence of sufficient proof of Cynthias minority, Artemio cannot be convicted of qualified rape and sentenced to suffer the death penalty. He should only be convicted of simple rape and meted the penalty of reclusion perpetua. As regards the civil liability of Artemio, the awards of moral damages in the amount of P50,000 and exemplary damages in the amount of P25,000 are insufficient. Civil
[31] [32]

indemnity, which is mandatory upon the finding of the fact of rape, should also be awarded. In simple rape, the civil indemnity for the victim shall not be less than P50,000. WHEREFORE, the decision of the Regional Trial Court, Branch 65, Tarlac, Tarlac, in Criminal Case No. 9375 is hereby AFFIRMED with the modification that that accused Artemio Invencion y Soriano is held guilty beyond reasonable doubt as principal of the crime of simple rape, and is sentenced to suffer the penalty of reclusion perpetua and to pay the victim Cynthia Invencion the sums of P50,000 as indemnity; P50,000 as moral damages; and P25,000 as exemplary damages. Costs de oficio. SO ORDERED.
[33]

In Re Farber (State v. Jascalevich)

78 N.J. 259, 394 A.2d 330, cert. denied, 439 U.S. 997 (1978)

MOUNTAIN, J. In these consolidated appeals The New York Times Company and Myron Farber, a reporter employed by the newspaper, challenge judgments entered against them in two related matters--one a proceeding in aid of a litigant (civil contempt), the other for criminal contempt of court. The proceedings were instituted in an ongoing murder trial now in its seventh month, as a result of the appellants' failure to comply with two subpoenas duces tecum, directing them to produce certain documents and materials compiled by one or both of these appellants in the course of Farber's investigative reporting of certain allegedly criminal activities. Farber's investigations and reporting are said to have contributed largely to the indictment and prosecution of Dr. Mario E. Jascalevich for murder. Appellants moved unsuccessfully before Judge William J. Arnold, the trial judge in State v. Jascalevich, to quash the two subpoenas; an order was entered directing that the subpoenaed material be produced for in camera inspection by the court.... Impelled by appellants' persistent refusal to produce the subpoenaed materials for in camera inspection, Judge Arnold issued an order returnable before Judge Theodore W. Trautwein, directing appellants to show cause why they should not be deemed in contempt of court.... Judge Trautwein determined that both appellants had wilfully contemned Judge Arnold's order directing that materials be produced for in camera inspection and found them guilty as charged. A fine of $100,000 was imposed on The New York Times and Farber was ordered to serve six months in the Bergen County jail and to pay a fine of $1,000. Additionally, in order to compel production of the materials subpoenaed on behalf of Jascalevich, a fine of $5,000 per day for every day that elapsed until compliance with Judge Arnold's order was imposed upon The Times; Farber was fined $1,000 and sentenced to confinement in the county jail until he complied with the order.... I. THE FIRST AMENDMENT Appellants claim a privilege to refrain from revealing information sought by the subpoenas duces tecum essentially for the reason that were they to divulge this material, confidential sources of such information would be made public. Were this to occur, they argue, newsgathering and the dissemination of news would be seriously impaired, because much information would never be forthcoming to the news media unless the persons who were the sources of such information could be entirely certain that their identities would remain secret. The final result, appellants claim, would be a substantial lessening in the supply of available news on a variety of important and sensitive issues, all to the detriment of the public interest. They contend further that this privilege to remain silent with respect to confidential information and the sources of such information emanates from the "free speech" and "free press" clauses of the First Amendment. In our view the Supreme Court of the United States has clearly rejected this claim and has squarely held that no such First Amendment right exists. In Branzburg v. Hayes, 408 U.S. 665 (1972), three

news media representatives argued that, for the same reason here advanced, they should not be required to appear and testify before grand juries, and that this privilege to refrain from divulging information, asserted to have been received from confidential sources, derived from the First Amendment. Justice White, noting that there was no common law privilege, stated the issue and gave the Court's answer in the first paragraph of his opinion: "The issue in these cases is whether requiring newsmen to appear and testify before state or federal grand juries abridges the freedom of speech and press guaranteed by the First Amendment. We hold that it does not." Branzburg v. Hayes, supra, 408 U.S. at 667 (1972). In that case one reporter, from Frankfort, Kentucky, had witnessed individuals making hashish from marijuana and had made a rather comprehensive survey of the drug scene in Frankfort. He had written an article in the Louisville Courier-Journal describing this illegal activity. Another, a newsmanphotographer employed by a New Bedford, Massachusetts television station, had met with members of the Black Panther movement at the time that certain riots and disorders occurred in New Bedford. The material he assembled formed the basis for a television program that followed. The third investigative reporter had met with members of the Black Panthers in northern California and had written an article about the nature and activities of the movement. In each instance there had been a commitment on the part of the media representative that he would not divulge the source of his article or story. By a vote of 5 to 4 the Supreme Court held that newspaper reporters or other media representatives have no privilege deriving from the First Amendment to refrain from divulging confidential information and the sources of such information when properly subpoenaed to appear before a grand jury. The three media representatives were directed to appear and testify. The holding was later underscored and applied directly to this case by Justice White in a brief opinion filed in this cause upon the occasion of his denial of a stay sought by these appellants. He said, "There is no present authority in this Court either that newsmen are constitutionally privileged to withhold duly subpoenaed documents material to the prosecution or defense of a criminal case or that a defendant seeking the subpoena must show extraordinary circumstances before enforcement against newsmen will be had." New York Times and Farber v. Jascalevich, 439 U.S. 1317, 1322 (1978).... [A]mong the many First Amendment protections that may be invoked by the press, there is not to be found the privilege of refusing to reveal relevant confidential information and its sources to a grand jury which is engaged in the fundamental governmental function of "[f]air and effective law enforcement aimed at providing security for the person and property of the individual...." 408 U.S. at 690. The reason this is so is that a majority of the members of the United States Supreme Court have so determined.... Thus we do no weighing or balancing of societal interests in reaching our determination that the First Amendment does not afford appellants the privilege they claim. The weighing and balancing has been done by a higher court. Our conclusion that appellants cannot derive the protection they seek from the First Amendment rests upon the fact that the ruling in Branzburg is binding upon us and we interpret it as applicable to, and clearly including, the particular issue framed here. It follows that the obligation to appear at a criminal trial on behalf of a defendant who is enforcing his Sixth Amendment rights is at least as compelling as the duty to appear before a grand jury. II. THE SHIELD LAW(1)2 In Branzburg v. Hayes, supra, the Court dealt with a newsman's claim of privilege based solely upon the First Amendment. As we have seen, this claim of privilege failed. In Branzburg no shield law was involved. Here we have a shield law, said to be as strongly worded as any in the country. We read the legislative intent in adopting this statute in its present form as seeking to protect the confidential sources of the press as well as information so obtained by reporters and other news media representatives to the greatest extent permitted by the Constitution of the United States and that of the State of New Jersey. It is abundantly clear that appellants come fully within the literal language of the enactment....

III. THE SIXTH AMENDMENT AND ITS NEW JERSEY COUNTERPART Viewed on its face, considered solely as a reflection of legislative intent to bestow upon the press as broad a shield as possible to protect against forced revelation of confidential source materials, this legislation is entirely constitutional. Indeed, no one appears to have attacked its facial constitutionality. It is, however, argued, and argued very strenuously, that if enforced under the facts of this case, the Shield Law violates the Sixth Amendment of the Federal Constitution as well as Article 1, 10 of the New Jersey Constitution.... Essentially the argument is this: The Federal and State Constitutions each provide that in all criminal prosecutions the accused shall have the right "to have compulsory process for obtaining witnesses in his favor." Dr. Jascalevich seeks to obtain evidence to use in preparing and presenting his defense in the ongoing criminal trial in which he has been accused of multiple murders. He claims to come within the favor of these constitutional provisions--which he surely does. Finally, when faced with the Shield Law, he invokes the rather elementary but entirely sound proposition that where Constitution and statute collide, the latter must yield. Subject to what is said below, we find this argument unassailable. The compulsory process clause of the Sixth Amendment has never been elaborately explicated by the Supreme Court. Not until 1967, when it decided Washington v. Texas, 388 U.S. 14, had the clause been directly construed. Westen, Confrontation and Compulsory Process: A Unified Theory of Evidence for Criminal Cases, 91 Harv. L. Rev. 567, 586 (1978). In Washington the petitioner sought the reversal of his conviction for murder. A Texas statute at the time provided that persons charged or convicted as co-participants in the same crime could not testify for one another. One Fuller, who had already been convicted of the murder, was prevented from testifying by virtue of the statute. The record indicated that had he testified his testimony would have been favorable to petitioner. The Court reversed the conviction on the ground that petitioner's Sixth Amendment right to compulsory process had been denied. At the same time it determined that the compulsory process clause in the Sixth Amendment was binding on state courts by virtue of the due process clause of the Fourteenth Amendment. It will be seen that Washington is like the present case in a significant respect. The Texas statute and the Sixth Amendment could not both stand. The latter of course prevailed. So must it be here. Quite recently, in United States v. Nixon, 418 U.S. 683 (1974), the Court dealt with another compulsory process issue. There the Special Prosecutor, Leon Jaworski, subpoenaed various tape recordings and documents in the possession of President Nixon. The latter claimed an executive privilege and refused to deliver the tapes. The Supreme Court conceded that indeed there was an executive privilege and that although "[n]owhere in the Constitution ... is there any explicit reference to a privilege of confidentiality, yet to the extent this interest relates to the effective discharge of a President's powers, it is constitutionally based." 418 U.S. at 711. Despite this conclusion that at least to some extent a president's executive privilege derives from the Constitution, the Court nonetheless concluded that the demands of our criminal justice system required that the privilege must yield.... It is important to note that the Supreme Court in this case compelled the production of privileged material--the privilege acknowledged to rest in part upon the Constitution--even though there was no Sixth Amendment compulsion to do so. The Sixth Amendment affords rights to an accused but not to a prosecutor. The compulsion to require the production of the privileged material derived from the necessities of our system of administering criminal justice. Article I, 10 of the Constitution of the State of New Jersey contains, as we have seen, exactly the same language with respect to compulsory process as that found in the Sixth Amendment. There exists no authoritative explication of this constitutional provision. Indeed it has rarely been mentioned in our reported decisions. We interpret it as affording a defendant in a criminal prosecution the right to compel the attendance of witnesses and the production of documents and other material for which he may have, or may believe he has, a legitimate need in preparing or undertaking his defense. It also means that witnesses properly summoned will be required to testify and that material demanded by a properly phrased subpoena duces tecum will be forthcoming and available for appropriate

examination and use. Testimonial privileges, whether they derive from common law or from statute, which allow witnesses to withhold evidence seem to conflict with this provision. This conflict may arise in a variety of factual contexts with respect to different privileges. We confine our consideration here to the single privilege before us--that set forth in the Shield Law. We hold that Article 1, 10 of our Constitution prevails over this statute.... IV. PROCEDURAL MECHANISM Appellants insist that they are entitled to a full hearing on the issues of relevance, materiality and overbreadth of the subpoena. We agree. The trial court recognized its obligation to conduct such a hearing, but the appellants have aborted that hearing by refusing to submit the material subpoenaed for an in camera inspection by the court to assist it in determining the motion to quash. That inspection is no more than a procedural tool, a device to be used to ascertain the relevancy and materiality of that material. Such an in camera inspection is not in itself an invasion of the statutory privilege. Rather it is a preliminary step to determine whether, and if so to what extent, the statutory privilege must yield to the defendant's constitutional rights. Appellants' position is that there must be a full showing and definitive judicial determination of relevance, materiality, absence of less intrusive access, and need, prior to any in camera inspection. The obvious objection to such a rule, however, is that it would, in many cases, effectively stultify the judicial criminal process. It might well do so here. The defendant properly recognizes Myron Farber as a unique repository of pertinent information. But he does not know the extent of this information nor is it possible for him to specify all of it with particularity, nor to tailor his subpoena to precise materials of which he is ignorant. Well aware of this, Judge Arnold refused to give ultimate rulings with respect to relevance and other preliminary matters until he had examined the material. We think he had no other course. It is not rational to ask a judge to ponder the relevance of the unknown. The same objection applies with equal force to the contention that the subpoena is overbroad. Appellants do not assert that the subpoena is vague and uncertain, but that the data requested may not be relevant and material. To deal effectively with this assertion it is not only appropriate but absolutely necessary for the trial court to inspect in camera the subpoenaed items so that it can make its determinations on the basis of concrete materials rather than in a vacuum.... While we agree, then, that appellants should be afforded the hearing they are seeking, one procedural aspect of which calls for their compliance with the order for in camera inspection, we are also of the view that they, and those who in the future may be similarly situated, are entitled to a preliminary determination before being compelled to submit the subpoenaed materials to a trial judge for such inspection. Our decision in this regard is not, contrary to the suggestion in some of the briefs filed with us, mandated by the First Amendment; for in addition to ruling generally against the representatives of the press in Branzburg, the Court particularly and rather vigorously, rejected the claims there asserted that before going before the grand jury, each of the reporters, at the very least, was entitled to a preliminary hearing to establish a number of threshold issues. Branzburg v. Hayes, supra, 408 U.S. at 701-07. Rather, our insistence upon such a threshold determination springs from our obligation to give as much effect as possible, within ever-present constitutional limitations, to the very positively expressed legislative intent to protect the confidentiality and secrecy of sources from which the media derive information. To this end such a determination would seem a necessity. PASHMAN, J., dissenting.... This case is the first major test of New Jersey's new "Shield Law." There is no reason to accord this statute an unfriendly reception in any court of this State. There should be no eagerness to narrow or circumvent it. The Shield Law is not an irritation. It is an act of the Legislature. This law was passed in the aftermath of the Supreme Court's decision in Branzburg v. Hayes, 408 U.S. 665 (1972). In Branzburg, the Court held that the First Amendment will not always prevent forced disclosure of a reporter's confidential sources and information. More specifically, it ruled that the reporters there involved had no privilege under the First Amendment against being compelled, on pain of contempt, to reveal such confidential data to an investigating grand jury. In its view, the

resulting infringement upon the reporters' investigating abilities was outweighed by the grand jury's need to have everyman's evidence. The Court emphasized, however, that state legislatures were not powerless to alter the result reached in Branzburg. As Justice White stated: "At the federal level, Congress has freedom to determine whether a statutory newsman's privilege is necessary and desirable and to fashion standards and rules as narrow or broad as deemed necessary to deal with the evil discerned and, equally important, to refashion those rules as experience from time to time may dictate. There is also merit in leaving state legislatures free, within First Amendment limits, to fashion their own standards in light of the conditions and problems with respect to the relations between law enforcement officials and press in their own areas. It goes without saying, of course, that we are powerless to bar state courts from responding in their own way and construing their own constitutions so as to recognize a newsman's privilege, either qualified or absolute." [408 U.S. at 706, emphasis supplied]. The News Media Privilege Act was New Jersey's response to the Court's invitation. This Act reflects our Legislature's judgment that an uninhibited news media is more important to the proper functioning of our society than is the ability of either law enforcement agencies, the courts or criminal defendants to gain access to confidential news data.... A reporter's ability to obtain sensitive information depends on his reputation for keeping confidences. Once breached--that reputation is destroyed. Potential sources of information can no longer rest secure that their identities and confidences will remain free from disclosure. Realizing that strict confidentiality is essential to the workings of a free press, our Legislature, through the News Media Privilege Act, has granted reporters an immunity from disclosure which is both absolute and comprehensive. Any person connected with any news media for the purpose of gathering or disseminating news is granted the privilege of refusing to disclose, in any legal or quasilegal proceeding or before any investigative body, both the source of and any information acquired. Courts are thus given no discretion to determine on a case-by-case basis whether the societal importance of a free and robust press is "outweighed" by other assertedly compelling interests. The Legislature has done the weighing and balancing and has determined that in every case the right to non-disclosure is paramount. If a reporter falls within the ambit of the statute, he has a privilege of non-disclosure. This privilege exists not only with respect to public disclosures; it encompasses revelations to any legal or quasi-legal body, including "any court." Even forced in camera disclosures are thus prohibited. [A concurring opinion by Chief Judge Hughes and a dissenting opinion by Judge Handler are omitted.]

What arguments may be advanced in support of a reporter's privilege? Does a reporter's privilege satisfy Wigmore's four conditions? Can such a privilege be defended on purely utilitarian grounds or on the basis of other values extrinsic to the litigation process? What data would support a reporter's privilege on either basis? Is such data obtainable? If not, is a reporter's privilege justifiable? Do the majority and dissenting opinions in the Farber case reflect fundamentally different philosophical approaches to privileges in general or only different conceptions of the impact that such a privilege would have on the judicial process? What institutional issues do you see in the Farber case? What are the appropriate respective roles of the legislature and the judiciary in establishing privileges? Again, does this question depend upon the approach taken to the subject of privileges--the instrumentalist-utilitarian, the humanistic, or the perquisite of power? 1. 2. The term "shield law" is commonly and widely applied to statutes granting newsmen and other media representatives the privilege of declining to reveal confidential sources of information. The New Jersey shield law reads as follows:

"Subject to Rule 37, a person engaged on, engaged in, connected with, or employed by news media for the purpose of gathering, procuring, transmitting, compiling, editing or disseminating news for the general public or on whose behalf news is so gathered, procured, transmitted, compiled, edited or disseminated has a privilege to refuse to disclose, in any legal or quasi-legal proceeding or before any investigative body, including, but not limited to, any court, grand jury, petit jury, administrative agency, the Legislature or legislative committee, or elsewhere: "a. The source, author, means, agency or persons from or through whom any information was procured, obtained, supplied, furnished, gathered, transmitted, compiled, edited, disseminated, or delivered; and "b. Any news or information obtained in the course of pursuing his professional activities whether or not it is disseminated.... "Unless a different meaning clearly appears from the context of this act, as used in this act: "a. 'News media' means newspapers, magazines, press associations, news agencies, wire services, radio, television or other similar printed, photographic, mechanical or electronic means of disseminating news to the general public. "b. 'News' means any written, oral or pictorial information gathered, procured, transmitted, compiled, edited or disseminated by, or on behalf of any person engaged in, engaged on, connected with or employed by a news media and so procured or obtained while such required relationship is in effect. "c. 'Newspaper' means a paper that is printed and distributed ordinarily not less frequently than once a week and that contains news, articles of opinion, editorials, features, advertising, or other matter regarded as of current interest, has a paid circulation and has been entered at a United States post office as second class matter. "d. 'Magazine' means a publication containing news which is published and distributed periodically, has a paid circulation and has been entered at a United States post office as second class matter. "e. 'News agency' means a commercial organization that collects and supplies news to subscribing newspapers, magazines, periodicals, and news broadcasters. "f. 'Press association' means an association of newspapers or magazines formed to gather and distribute news to its members. "g. 'Wire service' means a news agency that sends out syndicated news copy by wire to subscribing newspapers, magazines, periodicals or news broadcasters. "h. 'In the course of pursuing his professional activities' means any situation, including a social gathering, in which a reporter obtains information for the purpose of disseminating it to the public, but does not include any situation in which a reporter intentionally conceals from the source the fact that he is a reporter, and does not include any situation in which a reporter is an eyewitness to, or participant in, any act involving physical violence or property damage." N.J.S.A. 2A:84A-21 and 21a.
FIRST DIVISION [G.R. No. 169895, March 23 : 2011] ISAGANI M. YAMBOT, LETTY JIMENEZ-MAGSANOC, JOSE MA. D. NOLASCO, ARTEMIO T. ENGRACIA, JR. AND VOLT CONTRERAS, PETITIONERS, VS. HON. ARTEMIO TUQUERO IN HIS CAPACITY AS SECRETARY OF JUSTICE, AND ESCOLASTICO U. CRUZ, JR., RESPONDENTS. DECISION LEONARDO-DE CASTRO, J.: This is a Petition for Review on Certiorari (under Rule 45 of the Rules of Court), assailing the Decision[1] of the Court of Appeals in CA-G.R. SP No. 62479 dated July 8, 2005 and its Resolution[2]dated September 29, 2005 in the same case. The antecedents of this case are as follows: On May 26, 1996, the Philippine Daily Inquirer (PDI) printed an article[3] headlined Judge mauled me, says court employee, carrying the byline of petitioner Volt Contreras (Contreras). The article reported an alleged mauling incident that took place between respondent Makati Regional Trial Court (RTC) Judge Escolastico U. Cruz, Jr. (Judge Cruz) and Robert Mendoza (Mendoza), an administrative officer assigned at the Office of the Clerk of Court of the Makati RTC.

Reckoning the article to be false and malicious, Judge Cruz initiated a Complaint[4] for libel with the City Prosecutor of Makati. In particular, Judge Cruz protested the following sentence in said article: According to Mendoza, Cruz still has a pending case of sexual harassment filed with the Supreme Court by Fiscal Maria Lourdes Garcia, also of the Makati RFC.[5] Rebutting the statement, Judge Cruz alleged that there was no suit for sexual harassment pending against him before this Court, and attached a certification dated July 16, 1996[6] of the Deputy Court Administrator attesting to the pendency of only two administrative cases against him, namely RTJ-96-1352 (Re: Mauling incident) and OCA IPI No. 96-185-RTJ (For gross ignorance of the law, Partiality and Rendering an unjust judgment). For his part, Contreras filed a counter-affidavit[7] with the JVIakati City Prosecutor's Office, explaining the supposed factual basis for his article. It appeared that Atty. Maria Lourdes Paredes-Garcia (Paredes-Garcia) had filed with this Court a Petition for Review to question a contempt order issued against her by Judge Cruz. In connection with said Petition for Review, which was docketed as G.R. No. 120654, Paredes-Garcia filed a Reply dated February 5, 1996 asking this Court to look deeply into allegations of one Enrina Talag-Pascual (TalagPascual) that Judge Cruz made sexual advances to her while she was a member of his staff at the Metropolitan Trial Court (MeTC) of Manila. Paredes-Garcia claimed that she suffered similar indignities from Judge Cruz, and prayed that her Petition be treated as an administrative case against said judge. Paredes-Garcia appended a January 29, 1996 affidavit executed by Talag-Pascual to purportedly show the proclivity of Judge Cruz for seducing women who became objects of his fancy. Contreras claimed that the statement in his news article constituted a fair and true report of a matter of grave public interest as it involved the conduct of a regional trial court judge. In the meantime, on September 11, 1996, this Court rendered its Decision[8] on the Petition of Paredes-Garcia, granting her prayer to set aside Judge Cruz's contempt order. The prayer in Paredes-Garcia's Reply that the Petition be treated as an administrative case against Judge Cruz was not passed upon by the Court. Subsequently, the City Prosecutor of Makati approved a Resolution[9] finding probable cause against Mendoza and six PDI officers and employees, namely: Contreras, Isagani Yambot, Letty Jimenez-Magsanoc, Jose Ma. Nolasco, Artemio Engracia, Jr. and Carlos Hidalgo (the PDI Staff). On February 21, 1997, the City Prosecutor filed an Information10 for libel against Mendoza and the PDI Staff. Thereafter, the PDI Staff filed a Motion with the trial court for the deferment of the arraignment to allow them to appeal to the Secretary of the Department of Justice. On March 3, 2000, then Secretary of Justice Artemio Tuquero (Secretary Tuquero) dismissed the PDI Staffs Petition for Review of the Resolution of the City Prosecutor.[11] Secretary Tuquero rejected the argument of therein petitioners that the complaint should be dismissed on the ground of lack of supporting affidavits from third persons. According to Secretary Tuquero, affidavits of third persons are not essential for a libel complaint to prosper, as it is enough that the person defamed can be identified.[12] As regards the factual basis presented by Contreras, Secretary Tuquero noted it cannot be said that Judge Cruz was indeed facing a sexual harassment suit in this Court.[13] The Motion for Reconsideration[14] was denied in a Resolution[15] dated October 12, 2000. The PDI Staff with the exception of Hidalgo (herein petitioners) filed a Petition for Certiorari with the Court of Appeals to challenge the aforementioned Resolutions q[ Secretary Tuquero. The Petition was docketed as CA-G.R. SP No. 62479. On July 8, 2005, the Court of Appeals rendered the assailed Decision dismissing the Petition forCertiorari. Applying our ruling in Advincula v. Court of Appeals,[16] the appellate court held that since the Information had already been filed with the trial court, the primary determination of probable cause is now with the latter.[17] The Court of Appeals denied the ensuing Motion for Reconsideration in the assailed Resolution dated September 29, 2005. Hence, petitioners filed this Petition for Review with this Court, raising the following issues:

(A) (B) (C)

WHETHER OR NOT A CRIMINAL COMPLAINT FOR LIBEL IS FATALLY DEFECTIVE OR DEFICIENT IF IT IS NOT SUPPORTED BY AFFIDAVITS OF THIRD PERSONS. WHETHER OR NOT A NEWS REPORT ON THE ACTUATIONS OF A PUBLIC OFFICIAL IS PRIVILEGED IN NATURE AND HENCE, THE PRESUMPTION OF MALICE IS DESTROYED. WHETHER OR NOT THE PRIVILEGED NATURE OF A PUBLICATION IS A GROUND FOR DISMISSAL AND THAT THE RESPONDENT NEED NOT WAIT UNTIL TRIAL TO RAISE THE ISSUE OF PRIVILEGE.

(D)div>WHETHER OR NOT THE PUBLISHER AND EDITORS ARE JOINTLY LIABLE WITH THE AUTHOR OF THE ALLEGEDLY OFFENDING NEWS REPORT EVEN IF THEY DID NOT PARTICIPATE IN THE WRITING AND EDITING OF SAID NEWS REPORT.[18]
In raising the above issues, petitioners essentially questioned the Makati City Prosecutors Office's finding of probable cause to charge them with libel, as affirmed by the Secretary of Justice. As stated above, the Court of Appeals dismissed the Petition for Certiorari by applying the procedural doctrine laid down in Advincula. Similar to the present case, in Advincula, respondents Amando and Isagani Ocampo filed a Petition forCertiorari and Prohibition with the Court of Appeals questioning the Resolution of the Secretary of Justice which had earlier led to the filing of Informations against them in court. The Court of Appeals granted the Petition and set aside the Resolution of the Secretary of Justice. In reversing the Decision of the Court of Appeals, we applied the rule that certiorari, being an extraordinary writ, cannot be resorted to when other remedies are available. The Court observed that respondents had other remedies available to them, such as the filing of a Motion to Quash the Information under Rule 117 of the Rules of Court, or allowing the trial to proceed where they could either file a demurrer to evidence or present their evidence to disprove the charges against them.[19]

At the outset, it should be made clear that the Court is not abandoning the foregoing ruling inAdvincula. However, Advincula cannot be read to completely disallow the institution of certiorariproceedings against the Secretary of Justice's determination of probable cause when the criminal information has already been filed in court. Under exceptional circumstances, a petition for certiorariassailing the resolution of the Secretary of Justice (involving an appeal of the prosecutor's ruling on probable cause) may be allowed, notwithstanding the filing of an information with the trial court. In Ching v. Secretary of Justice,[20] petitioner filed a Petition for Certiorari with the Court of Appeals assailing the Resolution of the Secretary of Justice finding probable cause for violation of Presidential Decree No. 115, otherwise known as the Trust Receipts Law. Conformably with said Resolution, the City Prosecutor filed 13 Informations against petitioner. Upon denial of the Motion for Reconsideration, petitioner filed a petition for certiorari, prohibition and mandamus with the Court of Appeals assailing the Resolution of the Secretary of Justice. While this Court ultimately affirmed the Court of Appeals' ruling denying the Petition for Certiorari, the discussion affirming the resort to said extraordinary writ is enlightening: In Mendoza-Arce v. Office of the Ombudsman (Visayas), this Court held that the acts of a quasi-judicial officer may be assailed by the aggrieved party via a petition forcertiorari and enjoined (a) when necessary to afford adequate protection to the constitutional rights of the accused; (b) when necessary for the orderly administration of justice; (c) when the acts of the officer are without or in excess of authority; (tl) where the charges are manifestly false and motivated by the lust for vengeance; and (e) when there is clearly no prima facie case against the accused. The Court also declared that, if the officer conducting a preliminary investigation (in that case, the Office of the Ombudsman) acts without or in excess of his authority and resolves to file an Information despite the absence of probable cause, such act may be nullified by a writ of certiorari. Indeed, under Section 4, Rule 112 of the 2000 Rules of Criminal Procedure, the Information shall be prepared by the Investigating Prosecutor against the respondent only if he or she finds probable cause to hold such respondent for trial. The Investigating Prosecutor acts without or in excess of his authority under the Rule if the Information is filed against the respondent despite absence of evidence showing probable cause therefor. If the Secretary of Justice reverses the Resolution of the Investigating Prosecutor who found no probable cause to hold the respondent for trial, and orders such prosecutor to file the Information despite the absence of probable cause, the Secretary of Justice acts contrary to law, without authority and/or in excess of authority. Such resolution may likewise be nullified in a petition for certiorari under Rule 65 of the Revised Rules of Civil Procedure.[21] In light of the particular factual context of the present controversy, we find that the need to uphold the constitutionally guaranteed freedom of the press and crystal clear absence of a prima facie case against the PDI staff justify the resort to the extraordinary writ of certiorari. Libel is defined as a public and malicious imputation of a crime, or of a vice or defect, real or imaginary, or any act, omission, condition, status or circumstance tending to discredit or cause the dishonor or contempt of a natural or juridical person, or to blacken the memory of one who is dead.[22] Consequently, the following elements constitute libel: (a) imputation of a discreditable act or condition to another; (b) publication of the imputation; (c) identity of the person defamed; and, (d) existence of malice.[23] The glaring absence of maliciousness in the assailed portion of the news article subject of this case negates the existence of probable cause that libel has been committed by the PDI staff. As previously stated, Judge Cruz initiated the complaint for libel, asserting the falsity and maliciousness of the statement in a news report that "(a)ccording to Mendoza, Cruz still has a pending case of sexual harassment filed with the Supreme Court by Fiscal Maria Lourdes Garcia, also of the Makati RTC."[24] It can be easily discerned that the article merely reported the statement of Mendoza that there was allegedly a pending case of sexual harassment against Judge Cruz and that said article did not report the existence of the alleged sexual harassment suit as a confirmed fact. Judge Cruz never alleged, much less proved, that Mendoza did not utter such statement. Nevertheless, Judge Cruz concludes that there was malice on the part of the PDI Staff by asserting that they did not check the facts. He claimed that the report got its facts wrong, pointing to a certification from the Deputy Court Administrator attesting to the pendency of only two administrative cases against him, both of which bear captions not mentioning sexual harassment. A newspaper should not be held to account to a point of suppression for honest mistakes, or imperfection in the choice of words.[25] While, indeed, the allegation of inappropriate sexual advances in an appeal of a contempt ruling does not turn such case into one for sexual harassment, we agree with petitioners' proposition that the subject news article's author, not having any legal training, cannot be expected,to make the fine distinction between a sexual harassment suit and a suit where there was an allegation of sexual harassment. In fact, three other newspapers reporting the same incident committed the same mistake: the Manila Times article was headlined "Judge in sex case now in physical injury rap";[26] the Philippine Star article described Judge Cruz as "(a) Makati judge who was previously charged with sexual harassment by a lady prosecutor";[27] and the Manila Standard Article referred to him as "(a) Makati judge who was reportedly charged with sexual harassment by a lady fiscal."[28] The questioned portion of the news article, while unfortunately not quite accurate, on its own, is insufficient to establish the element of malice in libel cases. We have held that malice connotes ill will or spite and speaks not in response to duty but merely to injure the reputation of the person defamed, and implies an intention to do ulterior and unjustifiable harm.[29] Malice is present when it is shown that the author of the libelous remarks made such remarks with knowledge that it was false or with reckless disregard as to the truth or falsity thereof.[30] The lack of malice on the part of the PDI Staff in the quoting of Mendoza's allegation of a sexual harassment suit is furthermore patent in the tenor of the article: it was a straightforward narration, without any comment from the reporter, of the alleged mauling incident involving Judge Cruz. The subject article was, in fact, replete with other allegations by Mendoza of puiported misconduct on the part of Judge Cruz. Except for the above-quoted statement, Judge Cruz did not find the other assertions by Mendoza as reported by the PDI article to be libelous: At around 2 p.m., Mendoza said, an employee at Cruz's court fetched him to the judge's chamber. He was walking along the corridor when Cruz looked out. saw him, and yelled, "Mendoza,halika nga rito (come here)." "He dragged me to his chamber and locked the door. Tatlo kami doom, kasama ang sheriff niya na si Nory Santos" Mendoza said. Inside, Mendoza said Cruz began taunting him, asking him, "Matigas ba ang dibdib mo, ha? (Do you have a strong chest?)" Mendoza said, (h)e was made to sit in a guest's chair in front of Cruz's desk. He recalled seeing placed on top of a side table a ,99mm and a .45 caliber pistol which he presumed to belong to the judge. While standing, Mendoza said the judge began punching him, at the same time subjecting him to verbal abuse. The first punch was at the left

side of his chest, the second at the right. The third was at his left knee, then last was at the right knee, Mendoza said. His right knee was still swollen as of yesterday. "Hinamon pa niya ako, square daw kami,'' he said. "At hindi daw niya ako titigilan at ipapatanggal pa daw niya ako (He even dared me to a fight. He threatened me that he would not stop until 1 am fired from my job)," Mendoza said. "Kung anak pa daw niya ang nakalaban ko, babarilin na lang daw niya ako sa sentido at babayaran na long ako (He said if it was his son with whom 1 quarreled, he would have simply put a bullet to my head and paid for my life)."[31] In Borjal v. Court of Appeals[32] we held that "[a] newspaper especially one national in reach and coverage, should be free to report on events and developments in which the public has a legitimate interest with minimum fear of being hauled to court by one group or another on criminal or civil charges for libel, so long as the newspaper respects and keeps within the standards of morality and civility prevailing within the general community."[33] Like fair commentaries on matters of public interest,[34] fair reports on the same should thus be included under the protective mantle of privileged communications, and should not be subjected to microscopic examination to discover grounds of malice or falsity.[35] The concept of privileged communication is implicit in the constitutionally protected freedom of the press,[36] which would be threatened when criminal suits are unscrupulously leveled by persons wishing to silence the media on account of unfounded claims of inaccuracies in news reports. WHEREFORE, the instant Petition for Review on Certiorari is GRANTED. The Decision of the Court of Appeals in CA-G.R. SP No. 62479 dated July 8, 2005 and its Resolution dated September 29, 2005 are hereby REVERSED and SET ASIDE. No pronouncement as to costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-34686 February 24, 1932 PHILIPPINE TRUST CO., plaintiff-appellant, vs. ANTIGUA BOTICA RAMIREZ, DANIEL BOQUER, and J. J. DUNBAR, defendants-appellees. ----------------------------G.R. No. 34687 February 24, 1932. PHILIPPINE TRUST CO., plaintiff-appellant, vs. ANTIGUA BOTICA RAMIREZ, DANIEL BOQUER, and J. J. DUNBAR, and EDUARDO GUTIERREZ REPIDE, defendantsappellees. ----------------------------G.R. No. 34688 February 24, 1932. PHILIPPINE TRUST CO., plaintiff-appellant, vs. J. J. DUNBAR, DANIEL BOQUER, EDUARDO GUTIERREZ REPIDE, and MANUELA REYES Y ALMEIDA, defendantsappellees. Ross, Lawrence & Selph and Antonio T. Carrascoso, Jr. for appellant. Jose Ma. Cavanna, J. W. Ferrier & Eduardo Gutierrez Repide for appellees. OSTRAND, J.: This is an appeal from the judgment of the Court of First Instance of Manila in the above-entitled three cases which have been tried together and decided by the court below as one case. In case G.R. No. 34686, plaintiff-appellant seeks to collect from defendants-appellees, Antigua Botica Ramirez, Daniel Boquer, and J. J. Dunbar, the amount of P7,531.28 which represents the balance of an overdraft account of the Antigua Botica Ramirez with the plaintiff as of December 17, 1928. J. J. Dunbar and Daniel Boquer were guarantors for the overdraft. In case G.R. No. 34687, plaintiff-appellant sees to collect from defendants, Daniel Boque, Antigua Botica Ramirez, J. J. Dunabar, and Eduardo Gutierrez Repide, the amount of P5,837.07, balance as of March 24, 1930, of a promissory note for P6,000 executed by the defendants on June 7, 1927, in favor of the plaintiff, whereby the defendant promised, jointly and severally, to pay the plaintiff 90 days after its execution. In case G.R. No. 34688, plaintiff-appellant seeks to collect from defendants J. J. Dunbar, Daniel Boquer, Eduardo Gutierrez Repide, and Manuela Reyes y Almeida, the sum of P17,702.52, balance of December 10, 1927, of a promissory note for P30,000 executed by Dunbar Boquer, and Gutierrez Rupide, P10,000 of which was guaranteed by Manuela Reyes y Almeida with a mortgage of a parcel of land situated in the City of Manila in favor of the plaintiff. For some time before the complaints were filed the Antigua Botica Ramirez was under the control and management of the plaintiff, and a few months after plaintiff's complaints were filed, and upon plaintiff's petition a receiver of the properties of the defendant Antigua Botica Ramirez was appointed.

After trial, the court below rendered judgment, dismissing the three complaints, ordering the cancellation of the mortgage of Manuela Reyes' land, discharging the receiver and ordering him to turn over the properties of the defendant Antigua Botica Ramirez to plaintiff. From this judgment the plaintiff appealed to this court and made the following assignments of error: 1. The trial court erred in permitting the defendant Eduardo Gutierrez Repide testify, over the objection and exception of counsel for the plaintiff, that he signed the promissory notes marked Exhibits J and M in cases Nos. 34687-88, as a mere surety, and for no consideration. 2. The trial court erred in not striking from the record defendant Eduardo Gutierrez Repide's testimony that his codefendant Daniel Boquer told him that the plaintiff gave him several extentions for the payment of the promissory notes marked Exhibits J and M in cases Nos. 34687-88, and in finding that such extensions were in fact given by plaintiff. 3. The trial court erred in permitting the defendants Eduardo Gutierrez Repide, Daniel Boquer and J. J. Dunbar and the witness Rosario Boquer testify, over the objection and exception of counsel for the plaintiff, that the shares which they owned of the stock of the defendant corporation Antigua Botica Ramirez were assigned by them to plaintiff in payment of their obligations and in finding that such assignment, as claimed by the defendant, was in fact made. 4. The trial court erred in holding that the plaintiff administered the business of the defendant corporation Antigua Botica Ramirez, without any intervention on the latter's part, and in not permitting plaintiff's witness J. M. Araullo testify as to the condition of the corporation in the month of April, 1929. 5. The trial court erred in finding that plaintiff sold certain furniture and other properties of the defendant Antigua Botica Ramirez at very reduced prices. 6. The trial court erred in admitting in evidence the documents marked defendant's Exhibit CC, DD and EE, and in not permitting plaintiff's witnesses E.B. Ford and E.B. Velasquez testify on them. 7. The trial court erred in finding that the preponderance of evidence was in favor of the defendant and against the plaintiff. 8. The trial court erred in rendering judgment in favor of the defendants, and not in favor of the plaintiff, as prayed for in its complaints. 9. The trial court erred in denying plaintiff's motions for a new trial. Under the first assignment of error, counsel for the plaintiff contend that the defendant Eduardo Gutierrez Repide should not have been permitted by the lower court to testify that he signed the promissory notes marked plaintiff's Exhibits J and M as a mere surety, and for no consideration. We think that this point is well taken. It is admitted by the defendant Eduardo Gutierrez Repide that he signed the promissory notes as a surety, and it was immaterial, so far as the plaintiff was concerned, whether or not the said Gutierrez Repide received anything in payment for the use of his signature. (Clark vs. Sellner, 42 Phil., 384.) The second assignment of error has reference to the action of the lower court in not striking from the record the testimony of the defendant Eduardo Gutierrez Repide that he was told by the defendant Daniel Boquer that the plaintiff bank gave him (Boquer) several extensions for the payment of the promissory notes Exhibits J and M, and in finding that plaintiff gave such extensions. We have not found anything in the record to justify defendant's contention. The only witness for the defendants who testified on the alleged extensions given by plaintiff was the defendant Gutierrez Repide himself, and his testimony consisted only of hearsay evidence and general statements against the direct and positive evidence introduced by plaintiff that no extension was ever given for the payment of the promissory notes. But what convinces the court that plaintiff did not extend the time for the payment of the promissory notes in question, is the fact that the testimony of the defendant Eduardo Gutierrez Repide, was not corroborated by either the defendant Daniel Boquer, who imparted the information to Gutierrez, Repide, or by the defendant J. J. Dunbar. The latter, in fact, admitted that no extension was given him for the payment of the promissory notes. Dunbar testified as follows: Q. Mr. Dunbar, have you ever obtained an extension for the payment of the indebtedness or obligations of the Antigua Botica Ramirez to the Philippine Trust Company and Fidelity & Surety Company covered by some of the documents here presented in evidence? A. No, sir. Plaintiff might not have been prompt in proceeding against the principal debtor, but mere delay is no defense at all for the surety. We rule that the lower court erred in not striking from the record the testimony of the defendant Eduardo Gutierrez Repide on the alleged extensions given by plaintiff to the defendant Daniel Boquer for the payment of the promissory notes marked plaintiff's Exhibits J and M, and in finding that such extensions were given by plaintiff. The third assignment of error is directed toward the action of the lower court in permitting the defendants Eduardo Gutierrez Repide, Daniel Boquer, and J. J. Dunbar, and the witness Rosario Boquer to testify that the shares which they owned of the stock of the corporation Antigua Botica Ramirez were assigned by them to plaintiff that such assignment was, in fact, made. The defendants claim that they assigned to plaintiff the shares which they owned of the stock of the corporation Antigua Botica Ramirez in payment of their obligations. Plaintiff denies that such assignment was ever made, and claims that the shares in question were assigned for the purpose of enabling plaintiff to reorganize the corporation Antigua Botica Ramirez and sell its business at a fair and reasonable price. We have carefully examined the evidence, and are of the opinion that plaintiff's contention should be sustained. The defendants Eduardo Gutierrez Repide and Daniel Boquer testified, in direct examination, that a deed of assignment to plaintiff of the shares in question in payment of the obligations of the defendants was to be executed, and the record shows that no such document was ever executed. It is claimed by the defendants that the assignment of their shares of the stock of the corporation Antigua Botica Ramirez to the plaintiff bank was made in payment of their obligations. Examining, however, the notice for the special stockholders' meeting on April 26, 1929, which notice was prepared by the defendant Eduardo Gutierrez Repide himself, no mention is made therein of any assignment of the shares in question in payment of the obligations of the defendants to plaintiff. The notice simply says that

the meeting was being called "for the purpose of electing the new members of the Board of Directors and determining the manner of liquidating with the Philippine Trust Company and Fidelity & Surety Company of the Philippine Islands the obligations of the corporation (Antiga Botica Ramirez) pending payment, and at the same time resolve the indorsement of all the shares of the corporations to the creditor corporations in order that the latter might reorganize the Antigua Botica Ramirez (antes Zobel), Inc. in the manner most convenient to their interest." Had such an assignment as claimed by the defendants been made, it is but natural to except that the defendant Gutierrez Repide would have made some mention thereof in the notice for the meeting prepared by him. The fourth and fifth assignments of error relate to the action of the lower court in holding that plaintiff administered the business of the defendant corporation Antigua Botica Ramirez without any intervention on the latter's part; in not permitting the witness J. M. Araullo to testify as to the condition of the corporation in the month of April, 1929; and in finding that plaintiff sold certain properties of the defendant Antigua Botica Ramirez at very reduced prices. We think these points are well taken. The defendants contend that plaintiff should not have sold for P5,000 a credit of P18,539.25 which the defendant corporation Antigua Botica Ramirez had against the Palma Rosa Manufacturing Company. The record, however, shows that the debtor, the said Palma Rosa Manufacturing Company, was insolvent and that before the new board of directors of the corporation Antigua Botica Ramirez made the sale, the defendants Daniel Boquer and Jose V. Ramirez were asked by plaintiff to make their comments and recommendations and that no attention was paid to plaintiff's request. The defendants should not be heard now to complain. The defendant Daniel Boquer testified, in direct examination, that he delivered to plaintiff's witness J. M. Araullo all the assets of the defendant coporation Antigua Botica Ramirez. On rebuttal, Araullo was not permitted to controvert Boquer's testimony. The defendant Daniel Boquer was the manager of the business of the Antigua Botica Ramirez before the plaintiff took possession thereof, and the defendants claimed that the business was properly managed by Boquer. On rebuttal, Araullo was not permitted to testify as to the condition of the business at the time plaintiff took it over for the purpose of reorganization. The rulings of the lower court were erroneous. The witness Araullo should have been permitted to testify, on rebuttal, on the points covered by the defendant Boquer in direct examination. With reference to the sale of a motorcycle and certain shelves of the corporation Antigua Botica Ramirez, we have examined the record and found nothing therein to show that they were not sold for a reasonable price. It appears that the party who once offered P500 for the motorcycle and later on P150, had no money and claimed that the motorcycle was in bad condition, and there is total lack of evidence as to the condition in which the shelves were at the time of the sale. The sixth and seventh assignments of error are concerned with certain evidence offered by the defendant and admitted by the lower court over the objection of counsel for the plaintiff, and with certain evidence offered by the plaintiff and rejected by the lower court. In view of the decision to be rendered by the court, we shall only discuss the assignment of error in connection with the document marked Exhibit EE offered by plaintiff in evidence and rejected by the lower court. Plaintiff's Exhibit EE is a copy of the minutes of a special meeting of the stockholders of the corporation Antigua Botica Ramirez held on April 26, 1929, wherein a transcript of the stenographic notes taken at the stockholders' meeting of the same corporation held on April 19, 1929, was incorporated. At the said meeting of April 19, 1929, the defendants Eduardo Gutierrez Repide, J. J. Dunbar and Daniel Boquer admitted their obligations to the plaintiff bank and such admissions were inserted, without any objection on the part of the said defendants, in the minutes of the special stockholders' meeting of April 26, 1929. Counsel for the defendants objected to the introduction of said Exhibit EE on the ground that it contained certain statements made by the said defendants Eduardo Gutierrez Repide, J. J. Dunbar, and Daniel Boquer; that the latter were not given an opportunity to explain their statements before plaintiff offered the document in evidence; and that this contention is without merit. Had plaintiff intended to impeach statements made by the defendants Eduardo Gutierrez Repide, J. J. Dunbar, and Daniel Boquer on another occasion, plaintiff, as claimed by counsel for the defendant, should have laid a foundation for the introduction in evidence of said Exhibit EE by calling the attention of the said defendants Eduardo Gutierrez Repide, J. J. Dunbar, and Daniel Boquer to their former statements, but apparently plaintiff had no such purpose. Plaintiff's purpose in introducing the said Exhibit EE was probably to show certain admissions against interest made by the defendants, and said EE might then be admissible without the necessity of plaintiff's first making the defendant Eduardo Gutierrez Repide, J. J. Dunbar, and Daniel Boquer explain their statements. . . . In offering in evidence the testimony given by Mr. Hemady and the Hashims in the earlier case, the defendantappellant did not claim that said testimony contained admissions against interest by the parties to the action of their agents; if such had been the case, the testimony would have been admissible without the laying of a foundation and without the witness having testified in the case at bar. . . . (Juan Ysmael & Co. vs. Hashim and Gorayeb, 50 Phil., 132, 138.) For all the foregoing considerations, the judgment of the lower court is hereby reversed, and judgment is hereby rendered In case No. 34686, in favor of the plaintiff Philippine Trust Company and against the defendants Antigua Botica Ramirez, Daniel Boquer, and J. J. Dunbar, jointly, for the sum of seven thousand five hundred thirty-one pesos and twenty-eight centavos(P7,531.28), with interest at the rate of nine per cent (9%) per annum from December 17, 1928, until paid. In case No. 34687, in favor of the plaintiff Philippine Trust Company and against the defendants Antigua Botica Ramirez, Daniel Boquer, J. J. Dunbar, and Eduardo Gutierrez Repide, jointly and severally, for the sum of five thousand eight hundred thirtyseven pesos and seven centavos (P5,837.07), with interest at the rate of ten per cent (10%) per annum, from March 24, 1930, until paid; and additional sum of five hundred eighty-three pesos and seventy centavos (P583.70) for and as attorney's fee and costs of collection. In case No. 34688 in favor of the plaintiff Philippine Trust Company and against the defendant J. J. Dunbar, Daniel Boquer, Eduardo Gutierrez Repide and Manuela Reyes y Almeida, jointly and severally, for the sum of seventeen thousand seven

hundred and two pesos and fifty-two centavos (P17,702.52), with interest at the rate of ten per cent (10%) per annum from December 10, 1927, until paid, the liability of the defendant Manuela Reyes y Almeida being limited, however, to the sum of ten thousand pesos (10,000), which is the amount of the obligation secured by her mortgage of February 13, 1926. The defendants J. J. Dunbar, Daniel Boquer, and Eduardo Gutierrez Repide are further sentenced to pay plaintiff, jointly and severally, the additional sum of one centavos (P1,702.25) for and as attorneys' fees and costs of collection. The defendant Manuela Reyes y Almeida is further sentenced to pay plaintiff the additional sum of one thousand pesos (P1,000) for and as attorney's fees and costs of collection. The costs will be limited to the attorney's fees and costs of collection as hereinbefore stated. So ordered. Avancea, C.J., Johnson, Street, Malcolm, Villa-Real and Imperial, JJ., concur. Romualdez, J., I vote to affirm. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-44060 July 20, 1978 THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. BIENVENIDO PARAGSA, alias "BENBEN", defendant-appellant. MAKASIAR, J.: Bienvenido Paragsa, alias "Benben", appealed to the Court of Appeals the decision of the Court of First Instance of Cebu (Judge Agapito Hontanosas, presiding), the dispositive portion of which reads as follows: WHEREFORE, judgment is hereby rendered convicting the accused Bienvenido Paragsa of the crime of Rape as charged in the Information beyond reasonable doubt and applying the Indeterminate Sentence Law, hereby sentences him to suffer the indeterminate penalty of twelve (12) years of prision mayor as minimum to seventeen (17) years, four (4) months and one (1) day of reclusion temporal as the maximum and to indemnify the complaining witness in the amount of P8,000.00 (People vs. Rogato Rivera, 58, O.G. and People vs. Chan et al., CA No. 03545-GR, August 11, 1967) with all legal accessories and to pay the costs. Being a detention prisoner, he is entitled to the full credit of his preventive imprisonment from the time of his confinement up to the date of the promulgation of this judgment. xxx xxx xxx (pp. 10-19, rollo). Because the penalty of reclusion perpetua was imposed by the Court of Appeals on the accused, this case is now before US for review pursuant to Section 34, Republic Act No. 296, as amended, otherwise known as the Judiciary Act of 1948. The evidence for the prosecution consists of the testimony of Mirasol Magallanes, the alleged rape victim, her aunt-in-law, Mrs. Lita Parochel, and Dr. Luis L. Gandiongco of the Bantayan Emergency Hospital, Bantayan, Cebu, who examined the offended party and submitted Exhibit A embodying his findings thereon, Substantially, the records show that in the afternoon of July 13, 1971, Mirasol, who was then a little over twelve and a half (12) years old (Exhibit B, p. 7, rec.), was alone in her parents' house in Sitio Tabagac of Barrio Bunacan, Municipality of Madridejos, Cebu, cooking hog feed. Her parents were away at the time her father was in Cadiz, while her mother was in Sagay, both in Negros Occidental (p. 16, t.s.n., Jan. 5, 1972) while the rest of the family were with Mirasol's grandmother in Barrio Codia; also in Madridejos, Cebu. Mirasol was a 6th grade student of the Bunacan Elementary School (p. 6, t.s.n., Dec. 3, 1971). Upon instruction of her mother, she did not go to school that afternoon so that she could look after the pigs and cook their feed. Thus, she was alone in the ground floor of their house cooking hog feed when the accused, Bienvenido Paragsa, armed with a hunting knife, entered the house and closed the door after him. Approaching from behind, he placed his left arm around Mirasol's neck, encircled her abdomen with his right arm, at the same time pointing the hunting knife with s right hand at her breast, and threatened her not to shout otherwise she would be killed. Thereafter, the accused pushed her to a bamboo bed nearby, rolled up her dress and, with his two hands, removed her panties. The accused then placed his hunting knife on the bed by Mirasol's side, opened the zipper of his pants while kneeling on the bed, opened Mirasol's thighs, picked up the hunting knife again, placed himself on top of Mirasol, inserted his erect penis into her sexual organ and then made four push and pull movement until he ejaculated (pp. 7, 10-11, 12, 13, 14, t.s.n., Ibid). In the process, Mirasol's dress and panties were not torn, since, because of fear, she allowed the accused to roll up her dress and pull her panties without any resistance whatsoever. During the intercourse, the accused was not holding the hunting knife. After the accused had discharged, he ran to the storeroom of the house upstairs because he heard Mrs. Lita Parochel, wife of the younger brother of Mirasol's father, calling from outside the gate of the house, asking Mirasol to open the gate. Mirasol did not answer because she was then in the act of putting on her panties (p. 14, t.s.n., Ibid; p. 10, t.s.n., Jan. 5, 1972). After she had put on her panties, she opened the gate and saw her aunt Lita, who asked her what the accused did to her, but she did not answer because she was afraid as the accused was still inside the house. She also did not tell her aunt Lita that the accused had sexual intercourse with her under threats and against her will. Her aunt Lita then walked away. Thereafter, the accused reappeared in the room and told Mirasol that if she would tell her aunt Lita what he did, he would kill her (pp. 13-14, t.s.n., Dec. 3, 1971). After the incident, Mirasol went to Barrio Codia later in the afternoon of the same day and joined her brother and sister and grandmother. She did not reveal to any of them what transpired between her and the accused in Tabagac.

Mirasol's father returned from Cadiz, Negros Occidental that same day; but Mirasol did not also reveal the incident to him because she was afraid her father might punish her. Her mother returned home on July 16, 1971 from Sagay, Negros Occidental; but Mirasol did not also tell her mother about what happened to her on July 13 in Tabagac It was her aunt Lita who revealed the matter to Mirasol's mother, who thereupon confronted her daughter. Mirasol had to reveal the incident of July 13 to her mother only when her mother asked her about it; because, according to her, she wanted to take revenge on the accused (p. 15, Dec. 3, 1971). Three days after her return from Sagay, Negros Occidental on July 19, 1971 Mirasol's mother brought her to the Bantayan Emergency Hospital in Bantayan, Cebu, where she was examined by Dr. Luis L. Gandiongco, who submitted his findings as follows: Abrasion of inguinal region Abrasion, left thigh, medial side INTERNAL FINDINGS: 1. Discharges sticky, milky in color, found at the anterior fornix but negative for spermatozoa (Exh. A, p. 8, rec.; p. 2, t.s.n., Nov. 16, 1971). Mrs. Lita Parochel, the aunt-in-law of Mirasol, testified that she is the wife of the younger brother of Mirasol's father. Her house is fifty (50) meters away from the house of her brother-in-law, Ruperto Magallanes. In the afternoon of July 13, 1971, she went to the house of her brother-in-law in Tabagac Arriving there, she saw, through the gate which was made of split bamboos, the accused running away when she shouted to Mirasol, who was then in the act of putting on her panties, to open the gate (p. 10, t.s.n., Jan. 15, 1972). Mirasol opened the gate after she had put on her panties. Entering the house, Mrs. Parochel asked Mirasol what the accused did to her, but Mirasol did not answer. So, she hid and from her hiding place she saw the accused emerge from his hiding place and run away, passing through the gate of the fence. Thereupon, she told Mirasol to go home to barrio Codia because she was also going there (p. 15, t.s.n., Ibid). Mrs. Parochel met Mirasol's father at about 4:00 o'clock the same afternoon but she did not talk to him about what she saw earlier in Tabagak However, she revealed the incident to her husband (p. 17, t.s.n., Ibid). When Mirasol's mother returned from Sagay, Negros Occidental, Mrs. Parochel had a conversation with her regarding the person of the accused and thereafter Mirasol's mother filed the corresponding complaint against the accused (p. 18, t.s.n., Ibid). Incidentally, in support of the complaint of Bernandina Magallanes, mother of Mirasol, Mrs. Parochel executed an affidavit which she subscribed and swore to before the municipal judge of Madridejos, Cebu, on July 30, 1971, wherein she stated, among other things: 1. That at about 3:00 o'clock in the afternoon of July 13, 1971, I went to the house of Ruperto Magallanes, my neighbor; 2. That when I entered their fence, I found out that one Benben Paragsa ran from the bed where Mirasol Magallanes was sitting on while putting on her panties; 3. That she, Mirasol Magallanes, upon my arrival, did not say anything to me about the happening; and that I was only thinking that something had happened (Exh. 1, p. 5, rec.). In his typewritten brief, the appellant enumerated and discussed five errors as having been committed by the trial court. These errors may, however, be boiled down to the issue of credibility. Appellant admits having sexual intercourse with Mirasol, the complaining witness, but he stoutly denied that he did so by employing force or intimidation against Mirasol. He claims he and Mirasol were sweethearts; that on the day of the incident, it was Mirasol who invited him to the latter's house where they had sexual intercourse after kissing each other; and that the intercourse they had that afternoon was, as a matter of fact, their third sexual intercourse (pp. 2, 3, 5, 6, 8-9, t.s.n., March 21, 1972). The foregoing testimony of the accused was substantially corroborated by two witnesses for the defense, Mercado Batosbatosan and Eduardo Ducay (pp. 5, 6-7, 12, 15-16, 17, 18, 19, 20, 25, t.s.n., Feb. 1, 1972). A careful scrutiny of the record reveals that the prosecution's evidence is weak, unsatisfactory and inconclusive to justify a conviction. Certain circumstances negate the commission by the appellant of the crime charged and point to the conclusion that the sexual intercourse between the appellant and the complaining witness was voluntary. Force and intimidation were not proven. Mirasol did not offer any resistance or vocal protestation against the alleged sexual assault. She could have easily made an outcry or resisted the appellant's advances without endangering her life. But she did not. She was allegedly raped in her own home, not far from her neighbors and during the daytime. If, indeed, she was raped under the circumstances narrated by her, she could have revealed the same the very moment she was confronted by her aunt Lita who asked her what the accused did to her upon entering the house immediately after the intercourse took place and when the accused ran from the bed to a storeroom of the house to hide upon seeing and/or hearing the voice of her aunt Lita. or, she could have grabbed the hunting knife by her side when the copulation was going on, and with it she could have possibly prevented the accused from consummating the sexual act. But she did not. Another circumstance is that Mirasol did not reveal immediately to her parents that she was raped. It was only after her mother arrived from Sagay, Negros Occidental, three (3) days after the incident, and confronted her about the rape incident that her mother learned through her aunt Lita that she eventually revealed to her mother what the accused did to her in the afternoon of July 13, 1971. Still another circumstance is the fact that Mirasol did not bother at all to rebut the testimony of the appellant and his witnesses to the effect that the accused and Mirasol were actually sweethearts; and that they had had two previous sexual communications before July 13, 1971, one of which happened on June 29, 1971 in the house of the accused, where Mirasol and the accused slept together in the evening of the same day after the mother of the accused and Mirasol had returned from the town fiesta of Bantayan, Cebu (p. 10, t.s.n., March 21, 1972).

The rule allowing silence of a person to be taken as an implied admission of the truth of the statements uttered in his presence is applicable in criminal cases. But before the silence of a party can be taken as an admission of what is said, it must appear: (1) that he heard and understood the statement; (2) that he was at liberty to interpose a denial; (3) that the statement was in respect to some matter affecting his rights or in which he was then interested, and calling, naturally, for an answer; (4) that the facts were within his knowledge; and (5) that the fact admitted or the inference to be drawn from his silence would be material to the issue (IV Francisco, The Revised Rules of Court in the Philippines, 1973 ed., p. 316). These requisites of admission by silence all obtain in the present case. Hence, the silence of Mirasol on the facts asserted by the accused and his witnesses may be safely construed as an admission of the truth of such assertion. One more circumstance which engenders serious doubt on the truthfulness of Mirasol is the testimony of Dr. Gandiongco that he did not notice any laceration in the walls of Mirasol's vagina, thus Q Doctor, you testified that according to your findings a foreign body might have inserted the internal organ of the offended party? A Yes, sir. Q And as a matter of fact, in your examination there was no laceration? A There was no laceration (p 5, t.s.n., November 16, 1971; Emphasis supplied). Considering Mirasol's tender age, if she had no previous sexual experience, she must have been a virgin when she was allegedly raped by the accused. Yet she did not state that she felt some pain as the accused tried to insert his organ into her private part. Neither did she state that she was bleeding during and after the alleged forced coition. Instead, she matter-of-factly narrated that the accused made four push and pull movements after which the latter ejaculated indicating that he had an easy time doing it. If WE are to believe her story, certainly the doctor who examined her could have noticed the lacerations even after the lapse of three (3) days from the coition, if the intercourse on July 13, 1971 was in fact her first experience. WE believe the absence of lacerations in the walls of Mirasol's vagina, as testified to by Dr. Gandiongco, supra, eloquently confirms the truth of the accused's assertion that before the incident in question, he and Mirasol had two prior copulations. And still another circumstance which casts serious doubt on the credibility of the complaining witness and her aunt Lita is the matter of the hunting knife. While it is true that on the witness stand these two witnesses practically corroborated each other on this particular point, the matter of the accused having a hunting knife with him on the day of the incident was not, however, mentioned by Mrs. Parochel in her affidavit, Exhibit 1, which she executed on July 30, 1971 five months before she testified in court. Besides, at the trial, the prosecution did not bother to present such "hunting knife". A last circumstance which also engenders serious doubt on the veracity of Mrs. Parochel, whose testimony the trial court summarized, runs thus: ... The victim did not answer the call of her aunt nor did she open the barred door. ... She returned to the opened door and asked Mirasol what had happened. Mirasol was very pale, trembling and in a state of shock, did not answer her inquiries ...(p. 3, Decision; p. 64, rec.; emphasis added). The Solicitor General adopted the above factual summary made by the trial court by stating that Mirasol's aunt, Lita Parochel ... found her niece in a state of shock (p. 4, Brief for the Plaintiff-Appellee; p. 49, rec.; Emphasis supplied). A painstaking scrutiny of the record, particularly the transcript of stenographic notes, shows that contrary to the finding of the trial court, Mirasol answered the call of her aunt and opened the gate of the house after she had put on her panties (p. 14, t.s.n., Dec. 3, 1971); and that Mirasol only seemed to be afraid, besides trembling (p. 23, t.s.n., 1972); nowhere in the record is any evidence of Mirasol having been in a state of shock. If Mirasol was in fact in a state of shock 1. How come she was able to put on her panties and thereafter open the gate of the house when she heard her aunt Lita calling from the outside? 2. Her aunt Lita would feel so alarmed and so concerned that she would not lose any time to bring her to a doctor or to a hospital for medical treatment or assistance; 3. Her aunt Lita would have confronted the accused who was still hiding in the closet in a corner of the ground floor, or she would have gone to the nearest police authority or barrio captain, who could have easily apprehended the accused: 4. Her aunt could have sought the assistance of their barriomates or neighbors; or 5. She could have brought Mirasol to her own house which was on about 50 meters away (pp. 7, 20, t.s.n., Jan. 5, 1972). But what did she do? She abandoned Mirasol "because" she Mirasol had to feed her hogs (p. 24, Idem). That Mirasol was pale, afraid and trembling can only be attributed to the fact that her aunt discovered her having sexual intercourse at so young an age and that she feared that her aunt would report the same to her parents. And if Mrs. Parochel really believed that her niece Mirasol was raped by appellant about 3 o'clock that afternoon of July 13, 1971, why did she not report the outrage to Mirasol's father her husband's brother whom she met about 4 o'clock that same afternoon, just one hour after the alleged rape? Mrs. Parochel's close relationship to her niece-daughter of her brother-in-law vitiates her credibility. Appellant cannot be legally convicted of simple seduction under Article 338 of the Revised Penal Code, for the same is not warranted by the wording of the information, which does not alleged deceit, although appellant testified that he promised to marry Mirasol if "something happens to her body." Much less can simple seduction include rape. WHEREFORE, APPELLANT BIENVENIDO PARAGSA, ALIAS "BENBEN", IS HEREBY ACQUITTED, WITH COSTS de oficio AND HIS IMMEDIATE RELEASE IS HEREBY ORDERED UNLESS HE IS BEING DETAINED ON OTHER CHARGES. SO ORDERED. Fernando, Concepcion, Jr., Santos, Fernandez, and Guerrero, JJ., concur. Muoz-Palma, J., vote for the affirmance of the judgment.

Separate Opinions TEEHANKEE, J., concurring: I concur in the acquittal of the accused-appellant in the light of the salient facts and circumstances discussed in the decision penned by Mr. Justice Makasiar 1 which justly cast serious doubts on the guilt of the accused and entitle him to a verdict of acquittal founded on the constitutional presumption of innocence. The ratio decidendi in the analogous case of People vs. Ramirez 2 (where the 15-year old daughter of the accused's commonlaw wife charged him with double rape and his defense was "that there was consent on her part, as indeed there had been previous instances where he had access to her is fully applicable to the case at bar, thus: "The pronouncement in People vs. Damayo 3 as to the extent of the protection accorded by the Constitution to a person indicted for a criminal offense once again possesses relevance. Thus: 'Accusation is not, according to the fundamental law, synonymous with guilt. It is incumbent on the prosecution to d demonstrate that culpability lies. Appellants were not even called upon then to offer evidence on their behalf. Their freedom is forfeit only if the requisite quantum of proof necessary for conviction be in existence. Their guilt must be shown beyond reasonable doubt. To such a standard, this Court has always been committed. There is need, therefore, for the most careful scrutiny of the testimony of the state, both oral and documentary, independently of whatever defense is offered by the accused. Only if the judge below and the appellate tribunal could arrive at a conclusion that the crime had been committed precisely by the person on trial under such an exacting test should the sentence be one of conviction. It is thus required that every circumstance favoring his innocence be duly taken into account. The proof against him must survive the text of reason; the strongest suspicion must not be permitted to sway judgment. The conscience must be satisfied that on the defendant could be laid the responsibility for the offense charged; that not only did he perpetrate the act but that it amounted to a crime. What is required then is moral certain. 4 There as in tills case, we held that the accused could not be convicted of seduction under the rape charge, citing the case of People vs. Castro 5 because "the rape charge did not place [the accused] in jeopardy of being convicted for qualified seduction. He is entitled to be informed of the nature and cause of the accusation against him." I have written this brief concurrence, principally, because I noted from the decision 6 that this is a case where as against the prevailing view and practice under section 34 of Republic Act 296, as amended (the Judiciary Act of 1948) and incorporated in Rule 124, section 12 of the Rules of Court (whereby in any criminal case submitted to a division of the Court of Appeals whenever said court should be of the opinion that the higher penalty of death or life imprisonment should be imposed than the lesser penalty imposed by the trial court in the decision subject of the appeal before it, said court "shall refrain from entering judgment thereon and shall forthwith certify the case to the Supreme Court for final determination, as if the case had been brought before it on appeal") the Court of Appeals rendered judgment imposing the penalty of reclusion perpetua instead of forthwith certifying by resolutionthe case to this Court as falling with this Court's exclusive appellate jurisdiction under section 17 of the Judiciary Act. Some members of the Court have asked for re-examination of the prevailing view and practice and to set down as the proper procedure that followed by the Court of Appeals in the case at bar. But since the Court's verdict is one of acquittal, there was no need to take up the question in this case. I make this of record so that the present decision may not be taken as impliedly sanctioning such procedure, or as an indication of approval thereof on the part of any member of the Court taking part herein. The question will be definitively resolved in several cases pending before the Court where such reexamination has been squarely raised, e.g. in Case L-40330, entitledPeople of the Philippines vs. Amado Danie alias "Amado Ato". submitted for decision of August 5, 1975. AQUINO, J., dissenting: The evidence for the prosecution was summarized by the Solicitor General in this wise: Mirasol Magallanes, aged twelve-and-a-half, was alone in her parent's house in Sitio Tabagak of Barrio Bunacan, in Madridejos Cebu in the early afternoon of July 13, 197 1, cooking hog feed. Both of her parents were then away, in Negros Occidental, and the rest of the family were with Mirasol's grandmother in Barrio Codia also in Madridejos, Cebu, Mirasol, although a six-grader in the Bunacan Elementary School, was at home on this date, on instructions of her mother to look after their pigs, and cook hog feed in the afternoon. While thus alone on the ground floor of their house in Tabagak innocently cooking food for the family's pigs, the a accused Bienvenido Paragsa, with a hunting knife in hand, stealthily entered the house, barring the door as he entered, And approaching Mirasol from behind, he hooked his left arm around the young girl's neck and simultaneously thrust his knife at Mirasol's tender breast, barking at the same moment for the girl not to shout, under threat of instant death. His left arm still hooked around the poor girl's neck, and the knife he held perilously poised upon the girl's vulnerable breast, the accused pushed the girl to the bamboo bed nearby, and there laid her down. He then removed her panties, and opened the fly of his own pants. Forcibly, he opened the girl's thighs, and himself in between, he then penetrated young Mirasol's private part with his erect private part, and hastily consummated his guilt-ridden forcible, physical intrusion into the young girl's body. Mirasol's aunt, Lita Parochel, arriving later, too late to prevent the dastardly abuse of her niece, nevertheless, saw the accused as he surreptitiously fled the scene and found her niece in a state of shock. Subsequently, report of the crime was made to the girl's parents, and a complaint lodged against the accused for the crime of rape. (pp. 6-8, tsn Dec. 3, 1971; pp. 7-18, tsn Jan. 5, 1972; pp 1-3, tsn Nov. 16, 1971; Exh. A). The accused admitted that he had sexual intercourse with the complaint girl. His defense is that the copulation was voluntary. The doctor, who examined the complainant, found that she sustained an "abrasion, left thigh, medial side" in addition to an

"abrasion of inguinal region" (Exh. A). He testified that there was laceration of the hymen. The pertinent portion of his testimony is quoted below: Q Can you tell us your external findings? A My external findings is that there was an abrasion of inguinal region and abrasion, left thigh, medial side. Q How about your internal examination? A I was able to get some of the secretion found at the anterior fornix of the cervic. xxx xxx xxx Q From your findings, Doctor, there was something foreign which got inside the vaginal tract of the complainant. A There might be foreign body which got inside the vaginal tract not so deep that caused laceration of the hymen. Q In your study of medicine, when a foreign object is penetrated but not so deep, will that produce laceration of the viginal tract or the hymem of the woman, is that possible? Q When there is a penetration but not deep, will it produce laceration of the vaginal tract of a woman? A Yes, sir. xxx xxx xxx Fiscal: Can you tell us what could have possibly caused the on your external examination of the woman Mirasol Magallanes? xxx xxx xxx A Maybe the assailant used force. (3tsn). The trial court and the Court of Appeals (Justice Lorenzo Relova, ponente) both held that rape was committed. That conclusion is supported by the following testimony of the complainant: Q You said that in the afternoon of July 13, 1971, you saw Bienvenido Paragsa entered under your house where you were cooking the hog feeds, can you tell this Honorable Court what was he doing when he entered your premises? A Yes, sir. Q What did he do? A When he entered under the house he immediately held my neck and then embraced my abdomen and he was carrying a hunting knife. Q When he grabbed your neck and hugged you, did he say anything to you? A Yes, sir, he told me, 'Do not shout, if you will shout, I will kill you. Q After hugging you and telling you not to shout, what did Paragsa do next? A He pushed me to bed and he let me lie on the bed and he immediately pulled out my panty, Q After removing your panty, what next did Paragsa do. A He tried to open my thigh but I insisted closing them because I was ashamed. Q In effect, was he able to open your thigh A Yes, sir, because he threatened me with his hunting knife: You not open. if you will not open, I will stab you. xxx xxx xxx Q After he succeeded in inserting his penis into your sexual organ, what did he do next? ATTY. FLORES: I want to make of record that witness is spontaneous in answering the question, considering that she is minor and this is her first time. WITNESS: He made a push and pull movement. ATTY. SALGADO: Q After he finished picking you, what was or where did Paragsa go? A He ran to one of the room of the house to hide. xxx xxx xxx Q Did you have a conversation with your Tia Lita after you opened the door? A Tia Lita asked me what Benben did to me but I did not answer because I was afraid. Q That was the only question that was being asked on you by your Tia Lita? A Yes, sir. Q You did not make any answer? A I did not. Q Did you tell anybody of what had happened to you as what you had testified? A I did not. Q Why? A I did not tell because I was warned by the accused that if I would tell he would be coming back to kill me. xxx xxx xxx Q And after that while he was holding your neck and embracing your abdomen you were then sitting near the place where you were cooking your hog's feeds? A When he entered under our house when he was nearing I immediately stood up; I was no longer sitting.

Q So. you recognized him before he took hold of your neck? A Yes, sir. Q And when he took hold of your neck and embraced your abdomen, what did he do next? A He told me: 'Do not shout, if you will shout I will kill you. Q He was uttering those words when he was holding your neck and embracing your abdomen? A Yes, sir. Q And after that he immediately carried you to the bed inside your house? A He did not carry me but he pushed me to the bed. Q How far was the bed to the place where you were pushed by accused Paragsa? A One and one-half meters. xxx xxx xxx ATTY. FLORES: Q And how long did your Tia Lita went home after the conversation? A Tia Lita walked away passing thru our 'banguera and Ka Benben appeared and he told me that if I will tell Tia Lita he will kill me and I was afraid because he was still holding the hunting knife. xxx xxx xxx Q You did not tell your father about the incident that evening? A No, I did not tell because I was afraid, he might punish me and he might kill me. xxx xxx xxx Q When your mother arrived home, did she inquire from you about the incident? A Yes, she asked me because Tia Lita related to her the incident. ATTY. FLORES: Q You want to tell the Court that if your mother had not inquired from you about the incident you have not told Your mother about the incident. A No, I will not tell. Q How would you reconcile your testimony when a moment ago you said that you told the incident to your mother because you took revenge of what Ka Benben had done to you'? A Because before she asked one of the incident I had in mind not to tell her of the incident but after she asked me I (told) her of the incident because I want to take revenge on Ka Benben. TSN, hearing on December 3, 197 1, pp. 6 to 15). The trial court's vivid summary of the prosecution's evidence, which reveals how the rape was committed and why the complainant did not disclose the outrage right away to her aunt and parents and which mentions the flight of the accused, and the trial court's reasons for convicting the accused are as follows: The prosecution thru the testimonies of the complaining witness', and the other State witnesses has established the following facts: That at about 1:30 o'clock in the afternoon of July 13, 1971. the offended party, Mirasol Magallanes, aged 12 years, 6 months and 4 days as shown in Exhibit "B", was in the house of her parents at Sitio Tabagak Barrio Bunacan, Municipality of Madridejos, Province of Cebu. She was alone and under the house cooking hog feeds. The house, the lower portion of which, is fenced with bamboo strips, while the surrounding lawn is likewise enclosed with fence. Her father at the time was in Cadiz, Negros Occidental, where he was employed in one of the Fishing Outfits. Her mother was in Sagay, Negros Occidental, while all her younger sisters and brother were in the house of her grandmother at Barrio Codia Madridejos, Cebu, where all of the children were left for care when their mother left for Sagay on July 10, 1971. The girl Mirasol Magallanes was a grade six pupil in tile Bunacan Elementary School, and she did not attend her classes on that day upon instruction of her mother not to attend her classes during the period of her (mother's) absence. She was instructed to go to Bunacan in order to feed their pig in the morning, cook its foods and the afternoon and after feeding return to the house of her grandmother at Codia While Mirasol was cooking the hog feeds, at about 1:30 in the afternoon of July 13, 1971, the accused Bienvenido Paragsa, armed with a hunting knife, surreptitiously entered the fenced ground floor of the house, then barred the door after him. The accused approached Mirasol from behind, hook his left forearm around her neck, at the same time thrust the knife which was held by his right hand at the breast of Mirasol Magallanes, and told her not to shout for help under the threat of instant death. With his left forearm still around the neck of Mirasol and the knife's point at her breast, the accused pushed the victim to a nearby bamboo bed and laid her. He then placed the knife beside Mirasol, removed her panty, and opened his pants. He forced the victim to open or spread her legs by placing his hands on the inside portion of both thighs according to the testimony of Mirasol and corroborated by Medical Certificate, Exhibit "A", indicating confusion. Placing himself between the legs, directly in front of the sexual organ of Mirasol, the accused inserted his erected penis into her vagina and hurriedly proceeded with the act of copulation by up and down movement. After completing the act, the accused was about to leave when, unexpectedly, Lita Parochel, aunt of Mirasol (wife of the younger brother of victim's father), arrived outside the barred door. She called for Mirasol, who was already sitting at the edge of the bamboo bed, putting on her panty, to open the door, On hearing the call, the accused ran away and hid himself in a closet located at the corner of the ground floor.

The victim did not answer the call of her aunt nor did she open the barred door. Lita Parochel, suspecting that something unusual had happened to her niece, walked away from the door, making it appear t at she was going out and hid herself behind an outside projection of the ground floor where she could see and observe the door. No sooner had she hidden herself when she saw the accused came out of the door, holding a hunting knife in his right hand, and ran towards the general direction of the seashore. She returned to the opened door and asked Mirasol what had happened. Mirasol was very pale, trembling and in a state of shock did not answer her inquiries. Without pressing further, the aunt instructed her niece to return immediately to her grandmother's home at Barrio Codia after feeding the pig, then she (Lita) returned to her house which is about 50 fathoms away. At about 4:00 o'clock that same afternoon, before Mirasol Magallanes could return to her grandmother's house, her father arrived from Cadiz, Negros Occidental. Lita Parochel, having only her suspicion as she did not actually see the accused abuse her niece, did not report the incident to her brother-in-law. But she reported the incident to her husband at 7:00 o'clock that evening on his return home. On July 15, 1971, upon the return of Mirasol's mother from Sagay, Negros Occidental, Lita Parochel personally reported the matter to the mother. Acting upon the report, the mother immediately investigated her daughter who, having been given the assurance that she would not be subjected to physical punishment, and who had already recovered from her fears and shock, readily told her mother that she was raped by Bienvenido Paragsa. She was brought to the Bantayan Emergency Hospital and subjected to an internal examination by Dr. Luis L. Gandiongco, M.D. Medico- Legal-Incharge, who found her positive of having sexual intercourse. A complaint for rape was filed against Bienvenido Paragsa by the Chief of Police of Madridejos, Cebu, at the instance of Bernardina R. Magallanes, mother of the victim, who at the time she was raped was a little more than 12 years old as stated above (Exhibit "B"). In the meantime the accused had left Madridejos, Cebu and was finally arrested at Danao City on the strength of a Warrant of Arrest issued by the Municipal Judge of Madridejos, Cebu, before whom the Complain, for rape was filed. xxx xxx xxx After a careful consideration of the evidence of the parties in its totality, the Court is of the view that the prosecution has been able to establish beyond reasonable doubt that the accused committed the crime of RAPE as charged in the Information. It is true that the offended party did not exert strong and effective efforts to thwart the attack of the accused in disgracing or dishonoring her womanhood but considering that the accused was carrying with him a knife which he used in threatening her to death, it is not unusual that the young and innocent girl of over 12 years of age would just meekly submit for fear of her life. xxx xxx xxx In the instant case, the accused admitted having sexual intercourse with the complaining minor of a little over 12 years of age and his testimony regarding their being sweetheart and especially as to the first intercourse he allegedly had with the victim in their house in the first week of July 1971 and the second in the first week of June 1971 is so unnatural, unbelievable and contrary to common sense that this Court is of the opinion and so holds that his story is fabricated and self-serving and untrustworthy for it if it were true that the victim was his own sweetheart and he was her boyfriend then there could have been no reason for this young innocent girl of a little above 12 years to tell her mother about the criminal attack by the accused upon her womanhood and virginity. Her story regarding her being threatened to death by the accused who carried with him a hunting knife is being corroborated by witness Lita Parochel who had no motive whatsoever to declare falsely against the accused. xxx xxx xxx The Court had observed that Mirasol Magallanes is an intelligent, honest and reliable witness notwithstanding the fact that she was of a very tender age and the Court cannot accept the theory of the defense that the intercourse that took place on July 13, 1971 was voluntary on her part. It would be very hard to believe that the complainant would easily submit to such an intercourse if her will to resist had not been overpowered or overcome by threat, intimidation and force on the part of the accused who was armed with a knife. The accused was twenty-one (21) years old while the victim was twelve years and six months old. The fact of the accused in taking advantage of the victim's immaturity is a form of unpardonable sexual perversion which is worse than the offense committed by Roman Polanski the Hollywood director who was convicted of cohabiting with thirteen-year old girl. To acquit the accused would be a miscarriage of justice. The lower court's judgment of conviction should be affirmed and the accused should be sentenced to reclusion perpetua.

Separate Opinions TEEHANKEE, J., concurring: I concur in the acquittal of the accused-appellant in the light of the salient facts and circumstances discussed in the decision penned by Mr. Justice Makasiar 1 which justly cast serious doubts on the guilt of the accused and entitle him to a verdict of acquittal founded on the constitutional presumption of innocence. The ratio decidendi in the analogous case of People vs. Ramirez 2 (where the 15-year old daughter of the accused's commonlaw wife charged him with double rape and his defense was "that there was consent on her part, as indeed there had been previous instances where he had access to her is fully applicable to the case at bar, thus: "The pronouncement in People vs. Damayo 3 as to the extent of the protection accorded by the Constitution to a person indicted for a criminal offense once again possesses relevance. Thus: 'Accusation is not, according to the fundamental law, synonymous with guilt. It is incumbent on the

prosecution to d demonstrate that culpability lies. Appellants were not even called upon then to offer evidence on their behalf. Their freedom is forfeit only if the requisite quantum of proof necessary for conviction be in existence. Their guilt must be shown beyond reasonable doubt. To such a standard, this Court has always been committed. There is need, therefore, for the most careful scrutiny of the testimony of the state, both oral and documentary, independently of whatever defense is offered by the accused. Only if the judge below and the appellate tribunal could arrive at a conclusion that the crime had been committed precisely by the person on trial under such an exacting test should the sentence be one of conviction. It is thus required that every circumstance favoring his innocence be duly taken into account. The proof against him must survive the text of reason; the strongest suspicion must not be permitted to sway judgment. The conscience must be satisfied that on the defendant could be laid the responsibility for the offense charged; that not only did he perpetrate the act but that it amounted to a crime. What is required then is moral certain. 4 There as in tills case, we held that the accused could not be convicted of seduction under the rape charge, citing the case of People vs. Castro 5 because "the rape charge did not place [the accused] in jeopardy of being convicted for qualified seduction. He is entitled to be informed of the nature and cause of the accusation against him." I have written this brief concurrence, principally, because I noted from the decision 6 that this is a case where as against the prevailing view and practice under section 34 of Republic Act 296, as amended (the Judiciary Act of 1948) and incorporated in Rule 124, section 12 of the Rules of Court (whereby in any criminal case submitted to a division of the Court of Appeals whenever said court should be of the opinion that the higher penalty of death or life imprisonment should be imposed than the lesser penalty imposed by the trial court in the decision subject of the appeal before it, said court "shall refrain from entering judgment thereon and shall forthwith certify the case to the Supreme Court for final determination, as if the case had been brought before it on appeal") the Court of Appeals rendered judgment imposing the penalty of reclusion perpetua instead of forthwith certifying by resolutionthe case to this Court as falling with this Court's exclusive appellate jurisdiction under section 17 of the Judiciary Act. Some members of the Court have asked for re-examination of the prevailing view and practice and to set down as the proper procedure that followed by the Court of Appeals in the case at bar. But since the Court's verdict is one of acquittal, there was no need to take up the question in this case. I make this of record so that the present decision may not be taken as impliedly sanctioning such procedure, or as an indication of approval thereof on the part of any member of the Court taking part herein. The question will be definitively resolved in several cases pending before the Court where such reexamination has been squarely raised, e.g. in Case L-40330, entitledPeople of the Philippines vs. Amado Danie alias "Amado Ato". submitted for decision of August 5, 1975. AQUINO, J., dissenting: The evidence for the prosecution was summarized by the Solicitor General in this wise: Mirasol Magallanes, aged twelve-and-a-half, was alone in her parent's house in Sitio Tabagak of Barrio Bunacan, in Madridejos Cebu in the early afternoon of July 13, 197 1, cooking hog feed. Both of her parents were then away, in Negros Occidental, and the rest of the family were with Mirasol's grandmother in Barrio Codia also in Madridejos, Cebu, Mirasol, although a six-grader in the Bunacan Elementary School, was at home on this date, on instructions of her mother to look after their pigs, and cook hog feed in the afternoon. While thus alone on the ground floor of their house in Tabagak innocently cooking food for the family's pigs, the a accused Bienvenido Paragsa, with a hunting knife in hand, stealthily entered the house, barring the door as he entered, And approaching Mirasol from behind, he hooked his left arm around the young girl's neck and simultaneously thrust his knife at Mirasol's tender breast, barking at the same moment for the girl not to shout, under threat of instant death. His left arm still hooked around the poor girl's neck, and the knife he held perilously poised upon the girl's vulnerable breast, the accused pushed the girl to the bamboo bed nearby, and there laid her down. He then removed her panties, and opened the fly of his own pants. Forcibly, he opened the girl's thighs, and himself in between, he then penetrated young Mirasol's private part with his erect private part, and hastily consummated his guilt-ridden forcible, physical intrusion into the young girl's body. Mirasol's aunt, Lita Parochel, arriving later, too late to prevent the dastardly abuse of her niece, nevertheless, saw the accused as he surreptitiously fled the scene and found her niece in a state of shock. Subsequently, report of the crime was made to the girl's parents, and a complaint lodged against the accused for the crime of rape. (pp. 6-8, tsn Dec. 3, 1971; pp. 7-18, tsn Jan. 5, 1972; pp 1-3, tsn Nov. 16, 1971; Exh. A). The accused admitted that he had sexual intercourse with the complaint girl. His defense is that the copulation was voluntary. The doctor, who examined the complainant, found that she sustained an "abrasion, left thigh, medial side" in addition to an "abrasion of inguinal region" (Exh. A). He testified that there was laceration of the hymen. The pertinent portion of his testimony is quoted below: Q Can you tell us your external findings? A My external findings is that there was an abrasion of inguinal region and abrasion, left thigh, medial side. Q How about your internal examination? A I was able to get some of the secretion found at the anterior fornix of the cervic. xxx xxx xxx Q From your findings, Doctor, there was something foreign which got inside the vaginal tract of the complainant. A There might be foreign body which got inside the vaginal tract not so deep that caused laceration of the hymen. Q In your study of medicine, when a foreign object is penetrated but not so deep, will that produce laceration of the viginal tract or the hymem of the woman, is that possible?

Q When there is a penetration but not deep, will it produce laceration of the vaginal tract of a woman? A Yes, sir. xxx xxx xxx Fiscal: Can you tell us what could have possibly caused the on your external examination of the woman Mirasol Magallanes? xxx xxx xxx A Maybe the assailant used force. (3tsn). The trial court and the Court of Appeals (Justice Lorenzo Relova, ponente) both held that rape was committed. That conclusion is supported by the following testimony of the complainant: Q You said that in the afternoon of July 13, 1971, you saw Bienvenido Paragsa entered under your house where you were cooking the hog feeds, can you tell this Honorable Court what was he doing when he entered your premises? A Yes, sir. Q What did he do? A When he entered under the house he immediately held my neck and then embraced my abdomen and he was carrying a hunting knife. Q When he grabbed your neck and hugged you, did he say anything to you? A Yes, sir, he told me, 'Do not shout, if you will shout, I will kill you. Q After hugging you and telling you not to shout, what did Paragsa do next? A He pushed me to bed and he let me lie on the bed and he immediately pulled out my panty, Q After removing your panty, what next did Paragsa do. A He tried to open my thigh but I insisted closing them because I was ashamed. Q In effect, was he able to open your thigh A Yes, sir, because he threatened me with his hunting knife: You not open. if you will not open, I will stab you. xxx xxx xxx Q After he succeeded in inserting his penis into your sexual organ, what did he do next? ATTY. FLORES: I want to make of record that witness is spontaneous in answering the question, considering that she is minor and this is her first time. WITNESS: He made a push and pull movement. ATTY. SALGADO: Q After he finished picking you, what was or where did Paragsa go? A He ran to one of the room of the house to hide. xxx xxx xxx Q Did you have a conversation with your Tia Lita after you opened the door? A Tia Lita asked me what Benben did to me but I did not answer because I was afraid. Q That was the only question that was being asked on you by your Tia Lita? A Yes, sir. Q You did not make any answer? A I did not. Q Did you tell anybody of what had happened to you as what you had testified? A I did not. Q Why? A I did not tell because I was warned by the accused that if I would tell he would be coming back to kill me. xxx xxx xxx Q And after that while he was holding your neck and embracing your abdomen you were then sitting near the place where you were cooking your hog's feeds? A When he entered under our house when he was nearing I immediately stood up; I was no longer sitting. Q So. you recognized him before he took hold of your neck? A Yes, sir. Q And when he took hold of your neck and embraced your abdomen, what did he do next? A He told me: 'Do not shout, if you will shout I will kill you. Q He was uttering those words when he was holding your neck and embracing your abdomen? A Yes, sir. Q And after that he immediately carried you to the bed inside your house? A He did not carry me but he pushed me to the bed. Q How far was the bed to the place where you were pushed by accused Paragsa? A One and one-half meters. xxx xxx xxx ATTY. FLORES: Q And how long did your Tia Lita went home after the conversation?

A Tia Lita walked away passing thru our 'banguera and Ka Benben appeared and he told me that if I will tell Tia Lita he will kill me and I was afraid because he was still holding the hunting knife. xxx xxx xxx Q You did not tell your father about the incident that evening? A No, I did not tell because I was afraid, he might punish me and he might kill me. xxx xxx xxx Q When your mother arrived home, did she inquire from you about the incident? A Yes, she asked me because Tia Lita related to her the incident. ATTY. FLORES: Q You want to tell the Court that if your mother had not inquired from you about the incident you have not told Your mother about the incident. A No, I will not tell. Q How would you reconcile your testimony when a moment ago you said that you told the incident to your mother because you took revenge of what Ka Benben had done to you'? A Because before she asked one of the incident I had in mind not to tell her of the incident but after she asked me I (told) her of the incident because I want to take revenge on Ka Benben. TSN, hearing on December 3, 197 1, pp. 6 to 15). The trial court's vivid summary of the prosecution's evidence, which reveals how the rape was committed and why the complainant did not disclose the outrage right away to her aunt and parents and which mentions the flight of the accused, and the trial court's reasons for convicting the accused are as follows: The prosecution thru the testimonies of the complaining witness', and the other State witnesses has established the following facts: That at about 1:30 o'clock in the afternoon of July 13, 1971. the offended party, Mirasol Magallanes, aged 12 years, 6 months and 4 days as shown in Exhibit "B", was in the house of her parents at Sitio Tabagak Barrio Bunacan, Municipality of Madridejos, Province of Cebu. She was alone and under the house cooking hog feeds. The house, the lower portion of which, is fenced with bamboo strips, while the surrounding lawn is likewise enclosed with fence. Her father at the time was in Cadiz, Negros Occidental, where he was employed in one of the Fishing Outfits. Her mother was in Sagay, Negros Occidental, while all her younger sisters and brother were in the house of her grandmother at Barrio Codia Madridejos, Cebu, where all of the children were left for care when their mother left for Sagay on July 10, 1971. The girl Mirasol Magallanes was a grade six pupil in tile Bunacan Elementary School, and she did not attend her classes on that day upon instruction of her mother not to attend her classes during the period of her (mother's) absence. She was instructed to go to Bunacan in order to feed their pig in the morning, cook its foods and the afternoon and after feeding return to the house of her grandmother at Codia While Mirasol was cooking the hog feeds, at about 1:30 in the afternoon of July 13, 1971, the accused Bienvenido Paragsa, armed with a hunting knife, surreptitiously entered the fenced ground floor of the house, then barred the door after him. The accused approached Mirasol from behind, hook his left forearm around her neck, at the same time thrust the knife which was held by his right hand at the breast of Mirasol Magallanes, and told her not to shout for help under the threat of instant death. With his left forearm still around the neck of Mirasol and the knife's point at her breast, the accused pushed the victim to a nearby bamboo bed and laid her. He then placed the knife beside Mirasol, removed her panty, and opened his pants. He forced the victim to open or spread her legs by placing his hands on the inside portion of both thighs according to the testimony of Mirasol and corroborated by Medical Certificate, Exhibit "A", indicating confusion. Placing himself between the legs, directly in front of the sexual organ of Mirasol, the accused inserted his erected penis into her vagina and hurriedly proceeded with the act of copulation by up and down movement. After completing the act, the accused was about to leave when, unexpectedly, Lita Parochel, aunt of Mirasol (wife of the younger brother of victim's father), arrived outside the barred door. She called for Mirasol, who was already sitting at the edge of the bamboo bed, putting on her panty, to open the door, On hearing the call, the accused ran away and hid himself in a closet located at the corner of the ground floor. The victim did not answer the call of her aunt nor did she open the barred door. Lita Parochel, suspecting that something unusual had happened to her niece, walked away from the door, making it appear t at she was going out and hid herself behind an outside projection of the ground floor where she could see and observe the door. No sooner had she hidden herself when she saw the accused came out of the door, holding a hunting knife in his right hand, and ran towards the general direction of the seashore. She returned to the opened door and asked Mirasol what had happened. Mirasol was very pale, trembling and in a state of shock did not answer her inquiries. Without pressing further, the aunt instructed her niece to return immediately to her grandmother's home at Barrio Codia after feeding the pig, then she (Lita) returned to her house which is about 50 fathoms away. At about 4:00 o'clock that same afternoon, before Mirasol Magallanes could return to her grandmother's house, her father arrived from Cadiz, Negros Occidental. Lita Parochel, having only her suspicion as she did not actually see the accused abuse her niece, did not report the incident to her brother-in-law. But she reported the incident to her husband at 7:00 o'clock that evening on his return home. On July 15, 1971, upon the return of Mirasol's mother from Sagay, Negros Occidental, Lita Parochel personally reported the matter to the mother. Acting upon the report, the mother immediately investigated her daughter

who, having been given the assurance that she would not be subjected to physical punishment, and who had already recovered from her fears and shock, readily told her mother that she was raped by Bienvenido Paragsa. She was brought to the Bantayan Emergency Hospital and subjected to an internal examination by Dr. Luis L. Gandiongco, M.D. Medico- Legal-Incharge, who found her positive of having sexual intercourse. A complaint for rape was filed against Bienvenido Paragsa by the Chief of Police of Madridejos, Cebu, at the instance of Bernardina R. Magallanes, mother of the victim, who at the time she was raped was a little more than 12 years old as stated above (Exhibit "B"). In the meantime the accused had left Madridejos, Cebu and was finally arrested at Danao City on the strength of a Warrant of Arrest issued by the Municipal Judge of Madridejos, Cebu, before whom the Complain, for rape was filed. xxx xxx xxx After a careful consideration of the evidence of the parties in its totality, the Court is of the view that the prosecution has been able to establish beyond reasonable doubt that the accused committed the crime of RAPE as charged in the Information. It is true that the offended party did not exert strong and effective efforts to thwart the attack of the accused in disgracing or dishonoring her womanhood but considering that the accused was carrying with him a knife which he used in threatening her to death, it is not unusual that the young and innocent girl of over 12 years of age would just meekly submit for fear of her life. xxx xxx xxx In the instant case, the accused admitted having sexual intercourse with the complaining minor of a little over 12 years of age and his testimony regarding their being sweetheart and especially as to the first intercourse he allegedly had with the victim in their house in the first week of July 1971 and the second in the first week of June 1971 is so unnatural, unbelievable and contrary to common sense that this Court is of the opinion and so holds that his story is fabricated and self-serving and untrustworthy for it if it were true that the victim was his own sweetheart and he was her boyfriend then there could have been no reason for this young innocent girl of a little above 12 years to tell her mother about the criminal attack by the accused upon her womanhood and virginity. Her story regarding her being threatened to death by the accused who carried with him a hunting knife is being corroborated by witness Lita Parochel who had no motive whatsoever to declare falsely against the accused. xxx xxx xxx The Court had observed that Mirasol Magallanes is an intelligent, honest and reliable witness notwithstanding the fact that she was of a very tender age and the Court cannot accept the theory of the defense that the intercourse that took place on July 13, 1971 was voluntary on her part. It would be very hard to believe that the complainant would easily submit to such an intercourse if her will to resist had not been overpowered or overcome by threat, intimidation and force on the part of the accused who was armed with a knife. The accused was twenty-one (21) years old while the victim was twelve years and six months old. The fact of the accused in taking advantage of the victim's immaturity is a form of unpardonable sexual perversion which is worse than the offense committed by Roman Polanski the Hollywood director who was convicted of cohabiting with thirteen-year old girl. To acquit the accused would be a miscarriage of justice. The lower court's judgment of conviction should be affirmed and the accused should be sentenced to reclusion perpetua.

[G. R. No. 146202. July 14, 2004] RUFINA PATIS FACTORY, and JESUS LUCAS, SR. petitioners, vs. JUAN ALUSITAIN, respondent. DECISION
CARPIO MORALES, J.:

From the June 23, 2000 Decision of the Court of Appeals in CA-G.R. SP No. 54722 affirming that of the National Labor Relations Commission (NLRC) awarding retirement benefits in the amount of P88,595.00 to respondent Juan Alusitain (Alusitain), petitioners Rufina Patis Factory and Jesus Lucas, Sr. (Lucas) come to this Court on a petition for review on certiorari. The antecedent facts are as follows: In March 1948, Alusitain was hired as a laborer at the Rufina Patis Factory owned and operated by petitioner Lucas. After close to forty three years or on February 19, 1991, Alusitain admittedly tendered his letter of resignation which is quoted verbatim: February 19, 1991 TO: MR. JESUS LUCAS, JR. ASSISTANT MANAGER RUFINA PATIS FACTORY
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Gentlemen: I would like to tender my separation letter as a laborer, from your good company effective this 20th of February 1991. May I take this opportunity to extent my heartfelt thanks to you for having given me the chance to commit myself to work in your factory from which I owe varied experiences that has made a part of me and be what I am today. Anticipating your outmost consideration on this matter. I remain. VERY TRULY YOURS, (Signed) JUAN A. ALUSITAIN RECEIVED THE ABOVE SEPARATION LETTER ON THIS DAY, FEBRUARY 20, 1991. (Signed) BY: JESUS R. LUCAS, JR. Assistant Manager On May 22, 1991, Alusitain executed a duly notarized affidavit of separation from employment and submitted the same on even date to the Pensions Department of the Social Security System (SSS). The affidavit reads: Republic of the Philippines )SSS Quezon City ) AFFIDAVIT OF SEPARATION FROM EMPLOYMENT I, JUAN ASERAS ALUSITAIN of legal age, 63, Filipino and residing at Int. 18 Flores St., Mal. Mla, after having [been] sworn to in accordance with law hereby depose and state; 1. That I am [a] bonafide member of the Social Security System with SSS Number 030107252-0 2. That I was separated from my last employer RUFINA PATIS FACTORY with address at 290 C. Arellano St., Malabon, Metro Manila on 2-20-91 and thereafter, I was never again re-employed. 3. That I cannot secure a certification of separation from my last employer because I have not reached the company applicable age of retirement. 4. That I am executing this affidavit to attest to the truth of the foregoing facts and to support my retirement paper. FURTHER AFFIANT SAYETH NAUGHT. (Signed) Affiant On January 7, 1993, Republic Act No. 7641 (R.A. 7641), AN ACT AMENDING ARTICLE 287 OF PRESIDENTIAL DECREE NO. 442, AS AMENDED OTHERWISE KNOWN AS THE LABOR CODE OF THE PHILIPPINES, BY PROVIDING FOR RETIREMENT PAY TO QUALIFIED PRIVATE SECTOR EMPLOYEES IN THE ABSENCE OF ANY RETIRMENT PLAN IN THE ESTABLISHMENT, took effect providing, among other things, thusly: Art. 287. Retirement. Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract. xxx In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire and shall be entitled to retirement pay
[2] [4] [5]

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equivalent to at least one half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year. Unless the parties provide for broader inclusions, the term one half ( 1/2) month salary shall mean fifteen (15) days plus one twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive leaves. xxx Violation of this provision is hereby declared unlawful and subject to the penal provisions under Article 288 of this Code. Sometime in 1995, Alusitain, claiming that he retired from the company on January 31, 1995, having reached the age of 65 and due to poor health, verbally demanded from petitioner Lucas for the payment of his retirement benefits. By his computation, he claimed that he was entitled to P86,710.00 broken down as follows: Retirement Benefits = month salary for every year of service One-half month salary = P1,885.00 Years of Service = 47 years Retirement Benefits = P86,710.00 Petitioner Lucas, however, refused to pay the retirement benefits of Alusitain, prompting the latter to make a written demand on September 20, 1995. Lucas, however, remained adamant in his refusal to give in to Alusitains demands. Having failed to arrive at an amicable settlement, Alusitain filed on November 17, 1995 a complaint before the NLRC against petitioners Rufina Patis Factory and Lucas for nonpayment of retirement benefits. The complaint was docketed as NLRC Case No. 00-1107474-95. Petitioners maintained that Alusitain had resigned from the company on February 19, 1991 per his letter of resignation and the Affidavit of Separation dated May 22, 1991. On the other hand, while respondent admitted having tendered his letter of resignation on February 19, 1991 and executed the Affidavit of Separation on May 22, 1991, he nevertheless maintained that he continued working for petitioners until January 1995, the date of actual retirement, due to illness and old age, and that he merely accomplished the foregoing documents in compliance with the requirements of the SSS in order to avail of his retirement benefits. By Decision of February 6, 1997, Executive Labor Arbiter Valentin C. Guanio upheld Alusitains position in this wise: After carefully considering the respective submissions of the parties and the evidence they adduced in support of their opposing claims, this Office rules in favor of the complainant. To substantiate his allegation that he had continued working for the respondents even after his supposed resignation on February 19, 1991, the complainant submitted in evidence his sworn statement and that of his eldest daughter, Gloria Alusitain. In his affidavit, the complainant swore that: Bagamat ako ay pensionado ng SSS, ako ay patuloy na naglilingkod/nagtratrabaho sa kompanya ng Rufina Patis Factory hanggang noong buwan ng Enero 1995. By way of corroboration, his daughter on the other hand, stated under oath that since elementary school (sic), she was the one who brought food to her father at work in the Rufina Patis Factory; and that the last time she brought him food at the said factory was in the month of January 1995. While the foregoing statements may appear to be self-serving, still they have the ring of truth. From experience, it is quite common that the eldest daughter would be tasked with the duty of taking lunch to her father at work. Besides, the respondents failed to controvert these sworn
[6] [7] [8] [9] [10] [11] [12] [13]

declarations by submitting their counter-affidavits. If it is true that the complainant had in fact stopped working on February 1991, the respondents could have produced a number of witnesses who could have attested to this. Hence, their failure to submit even a single affidavit does not speak well of their credibility in this regard. Thus, this Office finds that the complainant had executed the letter of resignation and affidavit of separation from employment in 1991 only for the purpose of securing a pension from the SSS, but that despite this he remained in the employ of the respondents until his actual retirement on January 31, 1995, two years after the effectivity of Republic Act 7641 on January 7, 1993. At the time of his retirement, the complainant was already sixty-five (65) years of age and had served the respondent company for forty-seven (47) years and therefore, he is legally entitled to the retirement benefits granted by R.A. 7641 which is one-half (1/2) month salary for every year of service which as computed will amount to a total of P88,595.00 (P1,885.00 x 47 years). WHEREFORE, in view of the foregoing, judgment is hereby rendered ordering the respondents Rufina Patis Factory and Jesus Lucas, Sr., jointly and severally to pay complainant Juan Alusitain his retirement benefits in the amount of P88,595.00. SO ORDERED. On appeal, the NLRC, by Resolution of May 17, 1999, affirmed the Labor Arbiters decision. Aggrieved by the NLRC resolution, petitioners brought the case on certiorari to the Court of Appeals which, by the assailed decision, dismissed it, holding that the NLRC committed no error much less any grave abuse of discretion as Alusitain was able to sufficiently establish that his letter of resignation and Affidavit of Separation were executed only for the purpose of securing a pension from the SSS and that he remained in the employ of petitioners. Their motion for reconsideration having been denied by the Court of Appeals by Resolution of December 6, 2000, petitioners lodged the present petition. Petitioners argue that the appellate court erred when it did not give weight and probative value to Alusitains letter of resignation and Affidavit of Separation, choosing instead to give credence to his self-serving sworn statement and that of his daughter that he remained in the employ of petitioners until January 31, 1995. Petitioners assert that the Affidavit of Separation, being a public document, is entitled to full faith and credit upon its face, and proof is required to assail and controvert the same, citing Cacho v. Court of Appeals and Arrieta v. Llosa. Petitioners further assert that the appellate court erred in applying retroactively R.A. 7641 as said law does not expressly provide for such retroactive application and to do so would defeat the clear intent of Congress. Furthermore, petitioners insist that the case of Oro Enterprises, Inc. v. NLRC is inapplicable and submit that what is controlling is the case of J.V. Angeles Construction Corp. v. NLRC where this Court held that before R.A. 7641 could be given retroactive effect, the claimant should still be an employee of the employer at the time the said law took effect,. The petition is impressed with merit. This Court held in Oro that R.A. 7641 should be given retroactive effect, viz: R.A. 7641 is undoubtedly a social legislation. The law has been enacted as a labor protection measure and as a curative statute that absent a retirement plan devised by, an agreement with, or a voluntary grant from, an employer can respond, in part at least, to the financial well-being of workers during their twilight years soon following their life of labor. There should be little doubt
[14] [15] [16] [17] [18] [19] [20] [21] [22] [23] [24] [25]

about the fact that the law can apply to labor contracts still existing at the time the statute has taken effect, and that its benefits can be reckoned not only from the date of the laws enactment but retroactively to the time said employment contracts have started. . . (Underscoring supplied) The doctrine enunciated in Oro has been clarified in several cases. In CJC Trading, Inc. v. NLRC, this Court, speaking through Justice Florentino Feliciano, held that R.A. 7641 may be given retroactive effect where (1) the claimant for retirement benefits was still the employee of the employer at the time the statute took effect; and (2) the claimant had complied with the requirements for eligibility under the statute for such retirement benefits. These twin requirements for the retroactive application of R.A. 7641 have been reiterated in Philippine Scout Veterans Security and Investigation Agency v. NLRC, Cabcaban v. NLRC, J.V. Angeles Construction Corporation v. NLRC, and Manuel L. Quezon University v. NLRC. It is thus clear that in order for respondent to claim retirement benefits from petitioner Rufina Patis Factory, he has to prove that he was its employee at the time R.A. 7641 took effect. As a general rule, the factual findings and conclusions of quasi-judicial agencies such as the NLRC are, on appeal, accorded great weight and even finality, unless petitioners are able to show that the NLRC arbitrarily disregarded the evidence before it or misapprehended evidence of such nature as to compel a contrary conclusion if properly appreciated. In affirming the decision of the NLRC and the Labor Arbiter, the Court of Appeals disregarded Alusitains letter of resignation and Affidavit of Separation and gave weight to his and his daughters sworn statements that he remained in the employ of petitioners until January 31, 1995. It is a basic rule in evidence, however, that the burden of proof is on the part of the party who makes the allegations ei incumbit probatio, qui dicit, non qui negat. If he claims a right granted by law, he must prove his claim by competent evidence, relying on the strength of his own evidence and not upon the weakness of that of his opponent. In the case at bar, it was incumbent on Alusitain to prove that he retired on January 31, 1995 and not on February 20, 1991 as indicated on his letter of resignation. As the following discussion will show, he utterly failed to discharge the onus. Respondents letter of resignation and May 22, 1991 Affidavit of Separation which he admittedly voluntarily executed constitute admissions against his own interest. The said documents belie his claim that he retired on January 31, 1995. Being an admission against interest, the documents are the best evidence which affords the greatest certainty of the facts in dispute. The rationale for the rule is based on the presumption that no man would declare anything against himself unless such declaration was true. Thus, it is fair to presume that the declaration corresponds with the truth, and it is his fault if it does not. While these two documents may have facilitated the release of Alusitains retirement benefits from the SSS, hence, beneficial to him at that time, they may still be considered admissions against interest since the disserving quality of the admission is judged as of the time it is used or offered in evidence and not when such admission is made. Thus, it matters not that the admission is self-serving when it was made, so long as it is against respondents present claim.
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No doubt, admissions against interest may be refuted by the declarant. It bears stressing, however, that Alusitains Affidavit of Separation filed with the SSS is a notarial document, hence, prima facie evidence of the facts expressed therein. Since notarial documents have in their favor the presumption of regularity, to contradict the facts stated therein, there must be evidence that is clear, convincing and more than merely preponderant. Alusitain explains through his subsequent sworn statement that he only executed these two documents in order to obtain his retirement benefits from the SSS. His daughter, also by sworn statement, corroborates his explanation. His position does not persuade. In order for a declarant to impugn a notarial document which he himself executed, it is not enough for him to merely execute a subsequent notarial document. What the law requires in order to contradict the facts stated in a notarial document is clear and convincing evidence. The subsequent notarial documents executed by respondent and his daughter fall short of this standard. The case of Reyes v. Zaballero is instructive. In said case, the creditor executed on December 1, 1944 a notarial document stating that he was releasing a real estate mortgage as the debtor had already paid his debt. On even date, the creditor subsequently executed an affidavit without the debtors knowledge stating that he had accepted the payment under protest and obligado por las circunstancias actuales. This Court held that the creditors statement in his affidavit that he received the money obligado por las circunstancias actuales is self-serving evidence. A contrary rule would undermine the confidence of the public in the integrity of notarial documents. In Dequito v. Llamas, this Court held: After executing the affidavit voluntarily wherein he made admissions and declarations against his own interest under the solemnity of an oath, he cannot be allowed to spurn them and undo what he has done. He cannot, even with great repentance, retrieve the body he forsook and now wishes to live. Neither is the sworn statement of Alusitains daughter sufficient to prove that he indeed retired on January 31, 1995. The February 6, 1997 Decision of Labor Arbiter Guanio relates the material portion of the sworn statement of Alusitains daughter as follows: . . . By way of corroboration, his daughter on the other hand, stated under oath that since elementary school (sic), she was the one who brought food to her father at work in the Rufina Patis Factory;and that the last time she brought him food at the said factory was in the month of January 1995. (Emphasis and underscoring supplied) Alusitains daughter did not state, however, that her father worked for petitioner Rufina Patis Factory until his alleged retirement on January 31, 1995. All she said was that the last time she brought him food at the factory was in January 1995. To conclude that Alusitain was still employed on January 1995 from the mere fact that his daughter brought him food at the Rufina Patis Factory is non sequitur. Lastly, while it is evident that Alusitains subsequent sworn statement is in the nature of a retraction of his May 22, 1991 Affidavit of Separation, such retraction does not necessarily negate the affidavit. For retractions are generally unreliable and looked upon with considerable disfavor by the courts as they can easily be fabricated. Thus, before accepting a retraction, it is necessary to examine the circumstances surrounding it and possible motives for reversing the previous declaration, as these motives may not
[42] [43] [44] [45] [46] [47] [48] [49] [50] [51]

necessarily be in consonance with the truth. To automatically adopt them hook, line and sinker would allow unscrupulous individuals to throw wide open the doors to fraud. In the case at bar, Alusitains retraction is highly suspect. Other than his bare and selfserving allegations and the sworn statement of his daughter which, as reflected above, cannot be relied upon, he has not shown any scintilla of evidence that he was employed with petitioner Rufina Patis Factory at the time R.A. 7641 took effect. He did not produce any documentary evidence such as pay slips, income tax return, his identification card, or any other independent evidence to substantiate his claim. While the NLRC and its Labor Arbiters are not bound by technical rules of procedure and evidence in the adjudication of cases, this should not be construed as a license to disregard fundamental rules on evidence in proving ones allegations. In fine, Alusitain having failed to prove that he was an employee of petitioner at the time R.A. 7641 took effect, his claim for retirement benefits thereunder must be disallowed. WHEREFORE, the petition is GRANTED. The Court of Appeals June 23, 2000 Decision and December 6, 2000 Resolution in CA-G.R. SP No. 54722 are REVERSED andSET ASIDE. SO ORDERED. Vitug, (Chairman), Sandoval-Gutierrez, and Corona, JJ., concur.
[52] [53]

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 168661 October 26, 2007 ESTATE OF THE LATE JESUS S. YUJUICO, represented by ADMINISTRATORS BENEDICTO V. YUJUICO and EDILBERTO V. YUJUICO; and AUGUSTO Y. CARPIO, Petitioners, vs. REPUBLIC OF THE PHILIPPINES and the COURT OF APPEALS, Respondents. DECISION VELASCO, JR., J.: In 1973, Fermina Castro filed an application for the registration and confirmation of her title over a parcel of land with an area of 17,343 square meters covered by plan (LRC) Psu-964 located in the Municipality of Paraaque, Province of Rizal (now Paraaque City), in the Pasig-Rizal Court of First Instance (CFI), Branch 22. The application was docketed LRC Case No. N8239. The application was opposed by the Office of the Solicitor General (OSG) on behalf of the Director of Lands, and by Mercedes Dizon, a private party. Both oppositions were stricken from the records since the opposition of Dizon was filed after the expiration of the period given by the court, and the opposition of the Director of Lands was filed after the entry of the order of general default. After considering the evidence, the trial court rendered its April 26, 1974 Decision. The dispositive portion reads: ____________________________ * As per September 3, 2007 raffle. WHEREFORE, the Court hereby declares the applicant, Fermina Castro, of legal age, single, Filipino and a resident of 1515 F. Agoncillo St., Corner J. Escoda St., Ermita, Manila, the true and absolute owner of the land applied for situated in the Municipality of Paraaque, Province of Rizal, with an area of 17,343 square meters and covered by plan (LRC) Psu-964 and orders the registration of said parcel of land in her name with her aforementioned personal circumstances. Once this decision becomes final and executory, let the corresponding order for the issuance of the decree be issued. SO ORDERED.1 The Director of Lands and Mercedes Dizon did not appeal from the adverse decision of the Pasig-Rizal CFI. Thus, the order for the issuance of a decree of registration became final, and Decree No. N-150912 was issued by the Land Registration Commission (LRC).2 Original Certificate of Title (OCT) No. 10215 was issued in the name of Fermina Castro by the Register of Deeds for the Province of Rizal on May 29, 1974.3 The land was then sold to Jesus S. Yujuico, and OCT No. 10215 was cancelled. On May 31, 1974, 4 Transfer Certificate of Title (TCT) No. 445863 was issued in Yujuicos name, who subdivided the land into two lots. TCT No. 446386 5 over Lot 1 was issued in his name, while TCT No. S-293616 over Lot 2 was issued in the name of petitioner Augusto Y. Carpio. Annotations at the back of TCT No. 446386 show that Yujuico had, at one time or another, mortgaged the lot to the Philippine Investments System Organization (PISO) and Citibank, N.A. Annotations in the title of petitioner Carpio reveal the lot was mortgaged in favor of Private Development Corporation (PDC), Rizal Commercial Banking Corporation (RCBC) and then Philippine Commercial and Industrial Bank (PCIB) and the Development Bank of the Philippines (DBP) to secure various loans.

Sometime in 1977, Presidential Decree No. (PD) 1085 entitled Conveying the Land Reclaimed in the Foreshore and Offshore of the Manila Bay (The Manila-Cavite Coastal Road Project) as Property of the Public Estates Authority as well as Rights and Interests with Assumptions of Obligations in the Reclamation Contract Covering Areas of the Manila Bay between the Republic of the Philippines and the Construction and Development Corporation of the Philippines (1977) was issued. Land reclaimed in the foreshore and offshore areas of Manila Bay became the properties of the Public Estates Authority (PEA), a government corporation that undertook the reclamation of lands or the acquisition of reclaimed lands. On January 13, 1989, OCT No. SP 02 was issued in favor of PEA. The PEA also acquired ownership of other parcels of land along the Manila Bay coast, some of which were subsequently sold to the Manila Bay Development Corporation (MBDC), which in turn leased portions to Uniwide Holdings, Inc.7 The PEA undertook the construction of the Manila Coastal Road. As this was being planned, Yujuico and Carpio discovered that a verification survey they commissioned showed that the road directly overlapped their property, and that they owned a portion of the land sold by the PEA to the MBDC. On July 24, 1996, Yujuico and Carpio filed before the Paraaque City Regional Trial Court (RTC), a complaint for the Removal of Cloud and Annulment of Title with Damages docketed as Civil Case No. 96-0317 against the PEA. On May 15, 1998 the parties entered into a compromise agreement approved by the trial court in a Resolution dated May 18, 1998. On June 17, 1998, the parties executed a Deed of Exchange of Real Property, pursuant to the compromise agreement, where the PEA property with an area of 1.4007 hectares would be conveyed to Jesus Yujuico and petitioner Carpio in exchange for their property with a combined area of 1.7343 hectares. On July 31, 1998, the incumbent PEA General Manager, Carlos P. Doble, informed the OSG that the new PEA board and management had reviewed the compromise agreement and had decided to defer its implementation and hold it in abeyance following the view of the former PEA General Manager, Atty. Arsenio Yulo, Jr., that the compromise agreement did not reflect a condition of the previous PEA Board, requiring the approval of the Office of the President. The new PEA management then filed a petition for relief from the resolution approving the compromise agreement on the ground of mistake and excusable negligence. The petition was dismissed by the trial court on the ground that it was filed out of time and that the allegation of mistake and excusable negligence lacked basis. The PEA fared no better in the Court of Appeals (CA), as the petition was dismissed for failure to pay the required docket fees and for lack of merit. The matter was raised to the Supreme Court in Public Estates Authority v. Yujuico8 but PEAs petition was denied, upholding the trial courts dismissal of the petition for relief for having been filed out of time. The allegation of fraud in the titling of the subject property in the name of Fermina Castro was not taken up by the Court. On June 8, 2001, in a Complaint for Annulment and Cancellation of Decree No. N-150912 and its Derivative Titles, entitled Republic of the Philippines v. Fermina Castro, Jesus S. Yujuico, August Y. Carpio and the Registry of Deeds of Paraaque City docketed as Civil Case No. 01-0222, filed with the Paraaque City RTC, respondent Republic of the Philippines, through the OSG, alleged that when the land registered to Castro was surveyed by Engr. H. Obreto on August 3, 1972 and subsequently approved by the LRC on April 23, 1973, the land was still a portion of Manila Bay as evidenced by Namria Hydrographic Map No. 4243, Surveys to 1980; 1st Ed/. January 9/61: Revised 80-11-2; that Roman Mataverde, the then OIC of the Surveys Division, Bureau of Lands, informed the OIC of the Legal Division that "[w]hen projected on Cadastral Maps CM 14 deg. 13 N-120 deg, 59E, Sec.2-A of Paraaque Cadastre (Cad. 299), (LRC) Psu-964 falls inside Manila Bay, outside Cad. 299"; that then Acting Regional Lands Director Narciso V. Villapando issued a Report dated November 15, 1973 stating that plan (LRC) Psu-964 is a portion of Manila Bay; that then Officer-in-Charge, Assistant Director of Lands, Ernesto C. Mendiola, submitted his Comment and Recommendation re: Application for Registration of Title of FERMINA CASTRO, LRC Case No. N8239, dated Dec. 1, 1977, praying that the instant registration case be dismissed; and that Fermina Castro had no registrable rights over the property. More significantly, respondent Republic argued that, first, since the subject land was still underwater, it could not be registered in the name of Fermina Castro. Second, the land registration court did not have jurisdiction to adjudicate inalienable lands, thus the decision adjudicating the subject parcel of land to Fermina Castro was void. And third, the titles of Yujuico and Carpio, being derived from a void title, were likewise void.9 On September 13, 2001, Yujuico and Carpio filed a Motion to Dismiss (With Cancellation of Notice of Lis Pendens),10 on the grounds that: (1) the cause of action was barred by prior judgment; (2) the claim had been waived, abandoned, or otherwise extinguished; (3) a condition precedent for the filing of the complaint was not complied with; and (4) the complaint was not verified and the certification against forum shopping was not duly executed by the plaintiff or principal party. On November 27, 2001, respondent Republic filed an Opposition11 to the motion to dismiss to which defendants filed a Reply12 on January 14, 2002, reiterating the grounds for the motion to dismiss. In the August 7, 2002 Order of the RTC,13 Civil Case No. 01-0222 was dismissed. The trial court stated that the matter had already been decided in LRC Case No. N-8239, and that after 28 years without being contested, the case had already become final and executory. The trial court also found that the OSG had participated in the LRC case, and could have questioned the validity of the decision but did not. Civil Case No. 01-0222 was thus found barred by prior judgment. On appeal to the CA, in CA-G.R. CV No. 76212, respondent Republic alleged that the trial court erred in disregarding that appellant had evidence to prove that the subject parcel of land used to be foreshore land of the Manila Bay and that the trial court erred in dismissing Civil Case No. 01-0222 on the ground of res judicata.14 The CA observed that shores are properties of the public domain intended for public use and, therefore, not registrable and their inclusion in a certificate of title does not convert the same into properties of private ownership or confer title upon the registrant. Further, according to the appellate court res judicata does not apply to lands of public domain, nor does possession of the land automatically divest the land of its public character.
1w phi 1

The appellate court explained that rulings of the Supreme Court have made exceptions in cases where the findings of the Director of Lands and the Department of Environment and Natural Resources (DENR) were conflicting as to the true nature of the land in as much as reversion efforts pertaining foreshore lands are embued with public interest. The dispositive portion of the CA decision reads, WHEREFORE, premises considered, the present appeal is hereby GRANTED. The appealed Order dated August 7, 2002 of the trial court in Civil Case No. 01-0222 is hereby REVERSED and SET ASIDE. The case is hereby REMANDED to said court for further proceedings and a full-blown trial on the merits with utmost dispatch.15 Hence, this petition. The Issues Petitioners now raise the following issues before this Court: THE COURT OF APPEALS COMMITTED REVERSIBLE ERROR AND DECIDED A QUESTION OF SUBSTANCE IN A WAY NOT IN ACCORDANCE WITH LAW AND THE APPLICABLE DECISIONS OF THE HONORABLE COURT AND HAS DEPARTED FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL PROCEEDINGS NECESSITATING THE HONORABLE COURTS EXERCISE OF ITS POWER OF SUPERVISION CONSIDERING THAT: I. THE REVERSAL BY THE COURT OF APPEALS OF THE TRIAL COURTS APPLICATION OF THE PRINCIPLE OF RES JUDICATA IN THE INSTANT CASE IS BASED ON ITS ERRONEOUS ASSUMPTION THAT THE SUBJECT LAND IS OF PUBLIC DOMAIN, ALLEGEDLY PART OF MANILA BAY. A. IN THE FIRESTONE CASE, THE HONORABLE COURT APPLIED THE PRINCIPLE OF RES JUDICATA NOTWITHSTANDING ALLEGATIONS OF LACK OF JURISDICTION OF A LAND REGISTRATION COURT, FORECLOSING ANY FURTHER ATTEMPT BY RESPONDENT THEREIN, AS IN THE INSTANT CASE, TO RESURRECT A LONG-SETTLED JUDICIAL DETERMINATION OF REGISTRABILITY OF A PARCEL OF LAND BASED ON THE SHEER ALLEGATION THAT THE SAME IS PART OF THE PUBLIC DOMAIN. B. THE LAND REGISTRATION COURT HAD JURISDICTION TO DETERMINE WHETHER THE SUBJECT LAND WAS PART OF THE PUBLIC DOMAIN. C. RESPONDENTS REVERSION CASE SEEKS TO RETRY THE VERY SAME FACTUAL ISSUES THAT HAVE ALREADY BEEN JUDICIALLY DETERMINED OVER THIRTY (30) YEARS AGO. D. THE JURISPRUDENTIAL BASES APPLIED BY THE COURT OF APPEALS IN ITS QUESTIONED DECISION ARE MISPLACED, CONSIDERING THAT THEY ARE ALL PREDICATED ON THE ERRONEOUS PREMISE THAT IT IS UNDISPUTED THAT THE SUBJECT LAND IS PART OF THE PUBLIC DOMAIN. II. RESPONDENT IS BARRED BY JURISDICTIONAL ESTOPPEL AND LACHES FROM QUESTIONING THE JURISDICTION OF THE LAND REGISTRATION COURT. III. RELIANCE BY THE COURT OF APPEALS ON THE ISOLATED PRONOUNCEMENT OF THE HONORABLE COURT IN THE PEA CASE IS UNWARRANTED AND MISLEADING CONSIDERING THAT THE MATTER OF WHETHER RES JUDICATA APPLIES WITH RESPECT TO THE LAND REGISTRATION COURTS DECISION IN 1974 WAS NOT IN ISSUE IN SAID CASE. A. THE INSTANT REVERSION CASE IS NOT THE PROPER RECOURSE. B. THE VALIDITY OF THE COURT-APPROVED COMPROMISE AGREEMENT 15 MAY 1998 HAS ALREADY BEEN AFFIRMED BY THE HONORABLE COURT IN THE PEA CASE. IV. EQUITABLE CONSIDERATIONS MANDATE THE APPLICATION OF THE RULE ON ORDINARY ESTOPPEL AND LACHES IN THE INSTANT CASE AGAINST RESPONDENT. V. RESPONDENT CANNOT BE GIVEN SPECIAL CONSIDERATION AND EXCUSED FOR TRANSGRESSING RULES OF PROCEDURE.16 Essentially, the issues boil down to three: (1) Is a reversion suit proper in this case? (2) Is the present petition estopped by laches? (3) Did the CA erroneously apply the principle of res judicata? An action for reversion seeks to restore public land fraudulently awarded and disposed of to private individuals or corporations to the mass of public domain.17 This remedy is provided under Commonwealth Act (CA) No. 141 (Public Land Act) which became effective on December 1, 1936. Said law recognized the power of the state to recover lands of public domain. Section 124 of CA No. 141 reads: SEC. 124. Any acquisition, conveyance, alienation, transfer, or other contract made or executed in violation of any of the provisions of Sections one hundred and eighteen, one hundred and twenty, one hundred and twenty one, one hundred and twenty-two, and one hundred twenty-three of this Act shall be unlawful and null and void from its execution and shall produce the effect of annulling and cancelling the grant, title, patent, or permit originally issued, recognized or confirmed, actually or presumptively, and cause the reversion of the property and its improvements to the State. (Emphasis supplied.) Pursuant to Section 124 of the Public Land Act, reversion suits are proper in the following instances, to wit: 1. Alienations of land acquired under free patent or homestead provisions in violation of Section 118, CA No. 141; 2. Conveyances made by non-Christians in violation of Section 120, CA No. 141; and 3. Alienations of lands acquired under CA No. 141 in favor of persons not qualified under Sections 121, 122, and 123 of CA No. 141. From the foregoing, an action for reversion to cancel titles derived from homestead patents or free patents based on transfers and conveyances in violation of CA No. 141 is filed by the OSG pursuant to its authority under the Administrative Code with the RTC. It is clear therefore that reversion suits were originally utilized to annul titles or patents administratively issued by the Director of the Land Management Bureau or the Secretary of the DENR. While CA No. 141 did not specify whether judicial confirmation of titles by a land registration court can be subject of a reversion suit, the government availed of such remedy by filing actions with the RTC to cancel titles and decrees granted in land registration applications.

The situation changed on August 14, 1981 upon effectivity of Batas Pambansa (BP) Blg. 129 which gave the Intermediate Appellate Court the exclusive original jurisdiction over actions for annulment of judgments of RTCs. When the 1997 Rules of Civil Procedure became effective on July 1, 1997, it incorporated Rule 47 on annulment of judgments or final orders and resolutions of the RTCs. The two grounds for annulment under Sec. 2, Rule 47 are extrinsic fraud and lack of jurisdiction. If based on extrinsic fraud, the action must be filed within four (4) years from its discovery, and if based on lack of jurisdiction, before it is barred by laches or estoppel as provided by Section 3, Rule 47. Thus, effective July 1, 1997, any action for reversion of public land instituted by the Government was already covered by Rule 47. The instant Civil Case No. 01-0222 for annulment and cancellation of Decree No. N-150912 and its derivative titles was filed on June 8, 2001 with the Paraaque City RTC. It is clear therefore that the reversion suit was erroneously instituted in the Paraaque RTC and should have been dismissed for lack of jurisdiction. The proper court is the CA which is the body mandated by BP Blg. 129 and prescribed by Rule 47 to handle annulment of judgments of RTCs. In Collado v. Court of Appeals,18 the government, represented by the Solicitor General pursuant to Section 9(2) of BP Blg. 129, filed a petition for annulment of judgment with the CA. Similarly in the case of Republic v. Court of Appeals, 19 the Solicitor General correctly filed the annulment of judgment with the said appellate court. This was not done in this case. The Republic misfiled the reversion suit with the Paraaque RTC. It should have been filed with the CA as required by Rule 47. Evidently, the Paraaque RTC had no jurisdiction over the instant reversion case. Assuming that the Paraaque RTC has jurisdiction over the reversion case, still the lapse of almost three decades in filing the instant case, the inexplicable lack of action of the Republic and the injury this would cause constrain us to rule for petitioners. While it may be true that estoppel does not operate against the state or its agents, 20deviations have been allowed. In Manila Lodge No. 761 v. Court of Appeals, we said: Estoppels against the public are little favored. They should not be invoked except in rare and unusual circumstances, and may not be invoked where they would operate to defeat the effective operation of a policy adopted to protect the public. They must be applied with circumspection and should be applied only in those special cases where the interests of justice clearly require it. Nevertheless, the government must not be allowed to deal dishonorably or capriciously with its citizens, and must not play an ignoble part or do a shabby thing; and subject to limitations x x x, the doctrine of equitable estoppel may be invoked against public authorities as well as against private individuals.21 (Emphasis supplied.) Equitable estoppel may be invoked against public authorities when as in this case, the lot was already alienated to innocent buyers for value and the government did not undertake any act to contest the title for an unreasonable length of time. In Republic v. Court of Appeals, where the title of an innocent purchaser for value who relied on the clean certificates of the title was sought to be cancelled and the excess land to be reverted to the Government, we ruled that "[i]t is only fair and reasonable to apply the equitable principle of estoppel by laches against the government to avoid an injustice to innocent purchasers for value (emphasis supplied)."22 We explained: Likewise time-settled is the doctrine that where innocent third persons, relying on the correctness of the certificate of title, acquire rights over the property, courts cannot disregard such rights and order the cancellation of the certificate. Such cancellation would impair public confidence in the certificate of title, for everyone dealing with property registered under the Torrens system would have to inquire in every instance whether the title has been regularly issued or not. This would be contrary to the very purpose of the law, which is to stabilize land titles. Verily, all persons dealing with registered land may safely rely on the correctness of the certificate of title issued therefore, and the law or the courts do not oblige them to go behind the certificate in order to investigate again the true condition of the property. They are only charged with notice of the liens and encumbrances on the property that are noted on the certificate.23 xxxx But in the interest of justice and equity, neither may the titleholder be made to bear the unfavorable effect of the mistake or negligence of the States agents, in the absence of proof of his complicity in a fraud or of manifest damage to third persons . First, the real purpose of the Torrens system is to quiet title to land to put a stop forever to any question as to the legality of the title, except claims that were noted in the certificate at the time of the registration or that may arise subsequent thereto. Second, as we discussed earlier, estoppel by laches now bars petiti oner from questioning private respondents titles to the subdivision lots. Third, it was never proven that Private Respondent St. Jude was a party to the fraud that led to the increase in the area of the property after its subdivision. Finally, because petitioner even failed to give sufficient proof of any error that might have been committed by its agents who had surveyed the property, the presumption of regularity in the performance of their functions must be respected. Otherwise, the integrity of the Torrens system, which petitioner purportedly aims to protect by filing this case, shall forever be sullied by the ineptitude and inefficiency of land registration officials, who are ordinarily presumed to have regularly performed their duties.24 Republic v. Court of Appeals is reinforced by our ruling in Republic v. Umali,25 where, in a reversion case, we held that even if the original grantee of a patent and title has obtained the same through fraud, reversion will no longer prosper as the land had become private land and the fraudulent acquisition cannot affect the titles of innocent purchasers for value. Considering that innocent purchaser for value Yujuico bought the lot in 1974, and more than 27 years had elapsed before the action for reversion was filed, then said action is now barred by laches. While the general rule is that an action to recover lands of public domain is imprescriptible, said right can be barred by laches or estoppel. Section 32 of PD 1592 recognized the rights of an innocent purchaser for value over and above the interests of the government. Section 32 provides: SEC. 32. Review of decree of registration; Innocent purchaser for value.The decree of registration shall not be reopened or revised by reason of absence, minority, or other disability of any person adversely affected thereby, nor by any proceeding in any court for reversing judgments, subject, however, to the right of any person, including the government and the branches thereof, deprived of land or of any estate or interest therein by such adjudication or confirmation of title obtained by actual fraud, to file in the proper Court of First Instance a petition for reopening and review of the decree of registration not later than one year

from and after the date of the entry of such decree of registration, but in no case shall such petition be entertained by the court where an innocent purchaser for value has acquired the land or an interest therein, whose rights may be prejudiced. Whenever the phrase "innocent purchaser for value" or an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrances for value. (Emphasis supplied.) In this petition, the LRC (now LRA), on May 30, 1974, issued Decree No. N-150912 in favor of Fermina Castro and OCT No. 10215 was issued by the Rizal Registrar of Deeds on May 29, 1974. OCT No. 10215 does not show any annotation, lien, or encumbrance on its face. Relying on the clean title, Yujuico bought the same in good faith and for value from her. He was issued TCT No. 445863 on May 31, 1974. There is no allegation that Yujuico was a buyer in bad faith, nor did he acquire the land fraudulently. He thus had the protection of the Torrens System that every subsequent purchaser of registered land taking a certificate of title for value and in good faith shall hold the same free from all encumbrances except those noted on the certificate and any of the x x x encumbrances which may be subsisting.26 The same legal shield redounds to his successors-in-interest, the Yujuicos and Carpio, more particularly the latter since Carpio bought the lot from Jesus Y. Yujuico for value and in good faith. Likewise protected are the rights of innocent mortgagees for value, the PISO, Citibank, N.A., PDC, RCBC, PCIB, and DBP. Even if the mortgagors title was proved fraudulent and the title declared null and void, such declaration cannot nullify the mortgage rights of a mortgagee in good faith.27 All told, a reversion suit will no longer be allowed at this stage. More on the issue of laches. Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which by exercising due diligence could or should have been done earlier. It is negligence or omission to assert a right within a reasonable time, warranting a presumption that the party entitled thereto has either abandoned or declined to assert it. 28 When respondent government filed the reversion case in 2001, 27 years had already elapsed from the time the late Jesus Yujuico purchased the land from the original owner Castro. After the issuance of OCT No. 10215 to Castro, no further action was taken by the government to question the issuance of the title to Castro until the case of Public Estates Authority, brought up in the oral argument before this Court on September 6, 2000.29 We then held that allegation of fraud in the issuance of the title was not proper for consideration and determination at that stage of the case. From the undisputed facts of the case, it is easily revealed that respondent Republic took its sweet time to nullify Castros title, notwithstanding the easy access to ample remedies which were readily available after OCT No. 10215 was registered in the name of Castro. First, it could have appealed to the CA when the Pasig-Rizal CFI rendered a decision ordering the registration of title in the name of applicant Castro on April 26, 1974. Had it done so, it could have elevated the matter to this Court if the appellate court affirms the decision of the land registration court. Second, when the entry of Decree No. N-150912 was made on May 29, 1974 by the Rizal Register of Deeds, the Republic had one (1) year from said date or up to May 28, 1975 to file a petition for the reopening and review of Decree No. N-150912 with the Rizal CFI (now RTC) on the ground of actual fraud under section 32 of PD 1592. Again, respondent Republic did not avail of such remedy. Third, when Jesus Yujuico filed a complaint for Removal of Cloud and Annulment of Title with Damages against PEA before the Paraaque RTC in Civil Case No. 96-0317, respondent could have persevered to question and nullify Castros title. Instead, PEA undertook a compromise agreement on which the May 18, 1998 Resolution30 was issued. PEA in effect admitted that the disputed land was owned by the predecessorsin-interest of petitioners and their title legal and valid; and impliedly waived its right to contest the validity of said title; respondent Republic even filed the petition for relief from judgment beyond the time frames allowed by the rules, a fact even acknowledged by this Court in Public Estates Authority. Lastly, respondent only filed the reversion suit on June 8, 2001 after the passage of 27 years from the date the decree of registration was issued to Fermina Castro. Such a Rip Van Winkle, coupled with the signing of the settlement with PEA, understandably misled petitioners to believe that the government no longer had any right or interest in the disputed lot to the extent that the two lots were even mortgaged to several banks including a government financing institution. Any nullification of title at this stage would unsettle and prejudice the rights and obligations of innocent parties. All told, we are constrained to conclude that laches had set in. Even granting arguendo that respondent Republic is not precluded by laches from challenging the title of petitioners in the case at bar, still we find that the instant action for reversion is already barred by res judicata. Petitioners relying on Firestone Ceramics, Inc. v. Court of Appeals31 as a precedent to the case at bar contend that the instant reversion suit is now barred by res judicata. We agree with petitioners. The doctrine on precedents is expressed in the latin maximStare decisis et non quieta movere. Follow past precedents and do not disturb what has been settled.32 In order however that a case can be considered as a precedent to another case which is pending consideration, the facts of the first case should be similar or analogous to the second case. A perusal of the facts of the Firestone case and those of the case at bar reveals that the facts in the two (2) cases are parallel. First, in Firestone and in this case, the claimants filed land registration applications with the CFI; both claimants obtained decrees for registration of lots applied for and were issued OCTs. Second, in Firestone, the Republic filed a reversion case alleging that the land covered by the OCT was still inalienable forest land at the time of the application and hence the Land Registration Court did not acquire jurisdiction to adjudicate the property to the claimant. In the instant case, respondent Republic contend that the land applied for by Yujuico was within Manila Bay at the time of application and therefore the CFI had no jurisdiction over the subject matter of the complaint. Third, in Firestone, the validity of the title of the claimant was favorably ruled upon by this Court in G.R. No. 109490 entitled Patrocinio E. Margolles v. CA. In the case at bar, the validity of the compromise agreement involving the disputed lot was in effect upheld when this Court in Public Estates Authority v. Yujuico dismissed the petition of PEA seeking to reinstate the petition for relief from the May 18, 1998 Resolution approving said compromise agreement. With the dismissal of the petition, the May 18, 1998 Resolution became final and executory and herein respondent Republic through PEA was deemed to have recognized C astros title over the disputed land as legal and valid. In Romero v. Tan,33 we ruled that "a judicial compromise has the effect of res judicata." We also made clear that a judgment based on a compromise agreement is a judgment on the merits, wherein the parties have validly entered into stipulations and the evidence

was duly considered by the trial court that approved the agreement. In the instant case, the May 18, 1998 Resolution approving the compromise agreement confirmed the favorable decision directing the registration of the lot to Castros name in LRC Case No. N-8239. Similarly, in Firestone, the Margolles case confirmed the decision rendered in favor of Gana in Land Registration Case No. 672 ordering the issuance of the decree to said applicant. Fourth, in Firestone, the Supreme Court relied on the letter of then Solicitor General Francisco Chavez that the evidence of the Bureau of Lands and the LRC was not sufficient to support an action for cancellation of OCT No. 4216. In the instant case, both the Solicitor General and the Government Corporate Counsel opined that the Yujuico land was not under water and that "there appears to be no sufficient basis for the Government to institute the action for annulment."Fifth, in Firestone, we ruled that "the Margolles case had long become final, thus the validity of OCT No. 4216 should no longer be disturbed and should be applied in the instant case (reversion suit) based on the principle of res judicata or, otherwise, the rule on conclusiveness of judgment."34 Clearly from the above, Firestone is a precedent case. The Public Estates Authority had become final and thus the validity of OCT No. 10215 issued to Castro could no longer be questioned. While we said in Public Estates Authority that the court does not foreclose the right of the Republic from pursuing the proper recourse in a separate proceedings as it may deem warranted, the statement was obiter dictum since the inquiry on whether or not the disputed land was still under water at the time of its registration was a non-issue in the said case. Even granting for the sake of argument that Firestone is not squarely applicable, still we find the reversion suit already barred by res judicata. For res judicata to serve as an absolute bar to a subsequent action, the following requisites must concur: (1) there must be a final judgment or order; (2) the court rendering it must have jurisdiction over the subject matter and the parties; (3) it must be a judgment or order on the merits; and (4) there must be between the two cases, identity of parties, subject matter and causes of action.35 There is no question as to the first, third and last requisites. The threshold question pertains to the second requisite, whether or not the then Pasig-Rizal CFI, Branch 22 had jurisdiction over the subject matter in LRC Case No. N-8239. In Civil Case No. 010222, the Paraaque City RTC, Branch 257 held that the CFI had jurisdiction. The CA reversed the decision of the Paraaque City RTC based on the assertion of respondent Republic that the Pasig-Rizal CFI had no jurisdiction over the subject matter, and that there was a need to determine the character of the land in question. The Paraaque City RTC Order dismissing the case for res judicata must be upheld. The CA, in rejecting the dismissal of the reversion case by the Paraaque RTC, relied on two cases, namely: Municipality of Antipolo v. Zapanta36 and Republic v. Vda. De Castillo.37 In Municipality of Antipolo, we held that the land registration court had no jurisdiction to entertain any land registration application if the land was public property, thus: Since the Land Registration Court had no jurisdiction to entertain the application for registration of public property of ANTIPOLO, its Decision adjudicating the DISPUTED PROPERTY as of private ownership is null and void. It never attained finality, and can be attacked at any time. It was not a bar to the action brought by ANTIPOLO for its annulment by reason of res judicata. "[x x x] the want of jurisdiction by a court over the subject matter renders the judgment void and a mere nullity, and considering that a void judgment is in legal effect no judgment, by which no rights are divested, from which no rights can be obtained, which neither binds nor bars any one, and under which all acts performed and all claims flowing out of are void, and considering, further, that the decision, for want of jurisdiction of the court, is not a decision in contemplation of law, and hence, can never become executory, it follows that such a void judgment cannot constitute a bar to another case by reason of res judicata." xxxx "It follows that if a person obtains a title under the Public Land Act which includes, by oversight, lands which cannot be registered under the Torrens System, or when the Director of Lands did not have jurisdiction over the same because it is a public forest, the grantee does not, by virtue of the said certificate of title alone, become the owner of the land illegally included (Republic vs. Animas, 56 SCRA 499, 503; Ledesma vs. Municipality of Iloilo, 49 Phil. 769)." [x x x x] "Under these circumstances, the certificate of title may be ordered cancelled (Republic vs. Animas, et al., supra), and the cancellation maybe pursued through an ordinary action therefore. This action cannot be barred by the prior judgment of the land registration court, since the said court had no jurisdiction over the subject matter. And if there was no such jurisdiction, then the principle of res judicata does not apply. [x x x] Certainly, one of the essential requisites, i.e., jurisdiction over the subject matter, is absent in this case." (Italics supplied).38 The plain import of Municipality of Antipolo is that a land registration court, the RTC at present, has no jurisdiction over the subject matter of the application which respondent Republic claims is public land. This ruling needs elucidation. Firmly entrenched is the principle that jurisdiction over the subject matter is conferred by law. 39 Consequently, the proper CFI (now the RTC) under Section 14 of PD 152940 (Property Registration Decree) has jurisdiction over applications for registration of title to land. Section 14 of PD 1592 provides: SEC. 14. Who may apply.The following persons may file in the proper Court of First Instance an application for registration of title to land, whether personally or through their duly authorized representatives: (1) Those who by themselves or through their predecessors-in-interest have been in open, continuous, exclusive and notorious possession and occupation of alienable and disposable lands of the public domain under a bona fide claim of ownership since June 12, 1945, or earlier. (Emphasis supplied.) Conformably, the Pasig-Rizal CFI, Branch XXII has jurisdiction over the subject matter of the land registration case filed by Fermina Castro, petitioners predecessor-in-interest, since jurisdiction over the subject matter is determined by the allegations of the initiatory pleadingthe application.41 Settled is the rule that "the authority to decide a case and not the decision rendered

therein is what makes up jurisdiction. When there is jurisdiction, the decision of all questions arising in the case is but an exercise of jurisdiction."42 In our view, it was imprecise to state in Municipality of Antipolo that the "Land Registration Court [has] no jurisdiction to entertain the application for registration of public property x x x" for such court precisely has the jurisdiction to entertain land registration applications since that is conferred by PD 1529. The applicant in a land registration case usually claims the land subject matter of the application as his/her private property, as in the case of the application of Castro. Thus, the conclusion of the CA that the Pasig-Rizal CFI has no jurisdiction over the subject matter of the application of Castro has no legal mooring. The land registration court initially has jurisdiction over the land applied for at the time of the filing of the application. After trial, the court, in the exercise of its jurisdiction, can determine whether the title to the land applied for is registrable and can be confirmed. In the event that the subject matter of the application turns out to be inalienable public land, then it has no jurisdiction to order the registration of the land and perforce must dismiss the application. Based on our ruling in Antipolo, the threshold question is whether the land covered by the titles of petitioners is under water and forms part of Manila Bay at the time of the land registration application in 1974. If the land was within Manila Bay, then res judicata does not apply. Otherwise, the decision of the land registration court is a bar to the instant reversion suit. After a scrutiny of the case records and pleadings of the parties in LRC Case No. N-8239 and in the instant petition, we rule that the land of Fermina Castro is registrable and not part of Manila Bay at the time of the filing of the land registration application. The trial courts Decision in 1974 easily reveals the basis for its conclusion that the subject matter was a dry land, thus: On February 1, 1974, the applicant presented her evidence before the Deputy Clerk of this Court and among the evidence presented by her were certain documents which were marked as Exhibits D to J, inclusive. The applicant testified in her behalf and substantially declared that: she was 62 years old, single, housekeeper and residing at 1550 J. Escoda, Ermita, Manila; that she was born on June 3, 1911; that she first came to know of the land applied for which is situated in the Municipality of Paraaque, province of Rizal, with an area of 17,343 square meters and covered by plan (LRC) Psu-964 while she was still ten (10) years old or sometime in 1921; that when she first came to know of the land applied for, the person who was in possession and owner of said land was her father, Catalino Castro; that during that time her father used to plant on said land various crops like pechay, mustard, eggplant, etc.; that during that time, her father built a house on said land which was used by her father and the other members of the family, including the applicant, as their residential house; that the land applied for was inherited by her father from her grandfather Sergio Castro; that Catalino Castro continuously possessed and owned the land in question from 1921 up to the time of his death in 1952; and that during that period of time nobody ever disturbed the possession and ownership of her father over the said parcel of land; that after the death of her father in 1952 she left the place and transferred her place of residence but she had also occasions to visit said land twice or thrice a week and sometimes once a week; that after she left the land in question in 1952, she still continued possessing said land, through her caretaker Eliseo Salonga; that her possession over the land in question from the time she inherited it up to the time of the filing of the application has been continuous, public, adverse against the whole world and in the concept of an owner; that it was never encumbered, mortgaged, or disposed of by her father during his lifetime and neither did she ever encumber or sell the same; that it was declared for taxation purposes by her father when he was still alive and her father also paid the real estate taxes due to the government although the receipt evidencing the payment of said real estate taxes for the property applied for have been lost and could no longer be found inspite of diligent effort exerted to locate the same. The other witness presented by the applicant was Emiliano de Leon, who declared that he was 70 years old, married, farmer and residing at San Jose, Baliwag, Bulacan; that he knew Catalino Castro, the father of the applicant because said Catalino Castro was his neighbor in Tambo, Paraaque, Rizal, he had a house erected on the land of Catalino Castro; that he was born in 1903 and he first came to know of the land in question when in 1918 when he was about 18 years old; that the area of the land owned and possessed by Catalino Castro where he constructed a residential house has an area of more than one and onehalf (1 ) hectares; that the possession of Catalino Castro over the land in question was peaceful, continuous, notorious, adverse against the whole world and in the concept of an owner; that during the time that Catalino Castro was in possession of the land applied for he planted on said parcel of land mango, coconut and banana, etc.; that Catalino Castro continuously possessed and owned said parcel of land up to the year 1952 when he died; that during the time that Catalino Castro was in possession of said land, nobody ever laid claim over the said property; that said land is not within any military or naval reservation; that upon the death of Catalino Castro, the applicant took possession of the land applied for and that up to the present the applicant is in possession of said land; that he resided in the land in question from 1918 up to the time he transferred his place of residence in Baliwag, Bulacan in the year 1958. On February 11, 1974, the Court, pursuant to the provision of Presidential Decree No. 230 issued by his Excellency, Ferdinand E. Marcos dated July 9, 1973 held in abeyance the rendition of a decision in this case and directed the applicant to submit a white print copy of plan (LRC) Psu-964 to the Director of lands who was directed by the Court to submit his comment and recommendation thereon. The property in question is declared for taxation purposes under Tax Declaration No. 51842 (Exhibit G) and real estate taxes due thereon have been paid up to the year 1973 (Exhibit H). In compliance with the Order of this Court February 11, 1974, the Director of Lands, thru Special Attorney Saturnino A. Pacubas, submitted a report to this Court dated April 25, 1974, stating among other things, that upon ocular inspection conducted by Land Inspector Adelino G. Gorospe and the subsequent joint ocular inspection conducted by Geodetic Engineer Manuel A. Cervantes and Administrative Assistant Lazaro G. Berania, it was established that the parcel of land covered by plan (LRC) Psu-964 no longer forms part of the Manila Bay but is definitely solid and dry land. In this connection, it should be noted that Administrative Assistant Lazaro G. Berania and Geodetic Engineer Manuel A. Cervantes, in their report dated March 22, 1974 have also stated that the land applied for cannot be reached by water even in the highest tide and that the said land is occupied by squatter families who have erected makeshift shanties and a basketball court which only prove that the same is dry and solid land away from the shores of Manila Bay.

Furthermore, Land Inspector Adelino G. Gorospe in his letter-report dated November 28, 1973 has also stated that there is a house of pre-war vintage owned by the applicant on the land in question which in effect corroborates the testimony of the applicant and her witness that they have lived on the land in question even prior to the outbreak of the second world war and that the applicant has been in possession of the land in question long time ago.43 To counter the evidence of applicant Castro, and bolster its claim that she has no valid title, respondent Republic relies on the July 18, 1973 Office Memorandum44 of Roman Mataverde, OIC, Surveys Division, to the OIC, Legal Division, of the Bureau of Lands, stating that "when projected on cadastral maps CM 14 13N - 120 59 E., Sec. 3-D and CM 14 30N - 120 59E., Sec. 2-A of Paranaque [sic] Cadastre (Cad-299), (LRC) Psu-964 falls inside Manila Bay, outside Cad-299."45 The same conclusion was adopted in a November 15, 1973 letter of Narciso Villapando, Acting Regional Lands Director to the Chief, Legal Division, Bureau of Lands and in the Comment and Recommendation of Ernesto C. Mendiola, Assistant Director, also of the Bureau of Lands. Respondent likewise cites Namria Hydrographic Map No. 4243 Revised 80-11-2 to support its position that Castros lot is a portion of Manila Bay. The burden of proving these averments falls to the shoulders of respondent Republic. The difficulty is locating the witnesses of the government. Roman Mataverde, then OIC of the Surveys Division retired from the government service in 1982. He should by this time be in his 90s. Moreover, Asst. Regional Director Narciso Villapando and Asst. Director Ernesto C. Mendiola are no longer connected with the Bureau of Lands since 1986. Assuming that OIC Roman Mataverde, Asst. Regional Director Narciso Villapando and Assistant Director Ernesto C. Mendiola are still available as witnesses, the projections made on the cadastral maps of the then Bureau of Lands cannot prevail over the results of the two ocular inspections by several Bureau of Lands officials that the disputed lot is definitely "dry and solid land" and not part of Manila Bay. Special Attorney Saturnino A. Pacubas, Land Inspector Adelino G. Gorospe, Geodetic Engineer Manuel A. Cervantes and Administrative Asst. Lazaro A. Berana, all officials of the Bureau of Lands, were positive that the disputed land is solid and dry land and no longer forms part of Manila Bay. Evidence gathered from the ocular inspection is considered direct and firsthand information entitled to great weight and credit while the Mataverde and Villapando reports are evidence weak in probative value, being merely based on theoretical projections "in the cadastral map or table surveys." 46 Said projections must be confirmed by the actual inspection and verification survey by the land inspectors and geodetic engineers of the Bureau of Lands. Unfortunately for respondent Republic, the bureau land inspectors attested and affirmed that the disputed land is already dry land and not within Manila Bay. On the other hand, the Namria Hydrographic Map No. 4243 does not reveal what portion of Manila Bay was Castros lot loca ted in 1974. Moreover, a hydrographic map is not the best evidence to show the nature and location of the lot subject of a land registration application. It is derived from a hydrographic survey which is mainly used for navigation purposes, thus: Surveys whose principal purpose is the determination of data relating to bodies of water. A hydrographic survey may consist of the determination of one or several of the following classes of data: depth water; configuration and nature of the bottom; directions and force of currents; heights and times of tides and water stages; and location of fixed objects for survey and navigation purposes.47 Juxtaposed with finding of the ocular inspection by Bureau of Lands Special Attorney Pacubas and others that Castros lot is dry land in 1974, Namria Hydrographic Map No. 4243 is therefore inferior evidence and lacking in probative force. Moreover, the reliability and veracity of the July 18, 1973 report of Roman Mataverde based on the alleged projection on cadastral maps and the Villapando report dated November 15, 1973 are put to serious doubt in the face of the opinion dated October 13, 1997 of the Government Corporate Counsel, the lawyer of the PEA, which upheld the validity of the titles of petitioners, thus: We maintain to agree with the findings of the court that the property of Fermina Castro was registrable land, as based on the two (2) ocular inspections conducted on March 22, 1974 by Lands Administrative Assistant Lazaro G. Berania and Lands Geodetic Engr. Manuel Cervantes, finding the same no longer forms part of Manila Bay but is definitely solid land which cannot be reached by water even in the highest of tides. This Berania-Cervantes report based on ocular inspections literally overturned the findings and recommendations of Land Director Narciso V. Villapando dated November 15, 1973, and that of Director Ernesto C. Mendiola dated December 1, 1977, and the fact that the Villapando-Mendiola reports were merely based on projections in the cadastral map or table surveys. xxxx A. The Legal prognosis of the case is not promising in favor of PEA. 4.1 LRC Case No. N-8239 has already become final and executory and OCT No. 10215 was already issued in favor of Fermina Castro. Any and all attempts to question its validity can only be entertained in a quo warranto proceedings (sic), assuming that there are legal grounds (not factual grounds) to support its nullification. Subjecting it to a collateral attack is not allowed under the Torrens Title System. In Calalang vs. Register of Deeds of Quezon City, 208 SCRA 215, the Supreme Court held that the present petition is not the proper remedy in challenging the validity of certificates of titles since the judicial action required is a direct and not a collateral attack (refer also to: Toyota Motor Philippine Corporation vs. CA, 216 SCRA 236). 4.2 OCT No. 10215 in favor of Fermina Castro was issued pursuant to a cadastral proceeding, hence is arem proceedings which is translated as a constructive notice to the whole world, as held in Adez Realty Incorporated vs. CA, 212 SCRA 623. 4.3 From the cursory and intent reading of the decision of Judge Sison in LRC Case No. N-8239, we cannot find any iota of fraud having been committed by the court and the parties. In fact, due process was observed when the Office of the Solicitor General represented ably the Bureau of Lands. In Balangcad vs. Justices of the Court of Appeals, 206 SCRA 169, the Supreme Court held that title to registered property becomes indefeasible after one-year from date of registration except where there is actual fraud in which case it may be challenged in a direct proceeding within that

period. This is also the ruling in Bishop vs. CA, 208 SCRA 636, that to sustain an action for annulment of a torrens certificate for being void ab initio, it must be shown that the registration court had not acquired jurisdiction over the case and there was actual fraud in securing the title. 4.4 As to priority of torrens title, PEA has no defense, assuming that both PEA and Yujuico titles are valid, as held in Metropolitan Waterworks and Sewerage System vs. CA, 215 SCRA 783, where two (2) certificates purport to include the same land, the earlier in date prevails. 4.5 The documents so far submitted by the parties to the court indicate that the mother title of the Yujuico land when registered in 1974 was not underwater. This was shown in the two (2) ocular inspections conducted by the officials of the Land Bureau. 4.6 The provision of P.D. 239 that no decree of registration may be issued by the court unless upon approval and recommendation of the Bureau of Lands was substantially complied with in the Report of Lands Special Attorney Saturnino Pacubas, submitted to the court.48 Even the counsel of respondent Republic, the OSG, arrived at the conclusion that there is no sufficient legal basis for said respondent to institute action to annul the titles of petitioners, thus: It may be stated at the outset that a petition for annulment of certificate of title or reconveyance of land may be based on fraud which attended the issuance of the decree of registration and the corresponding certificate of title. Based on the decision in the LRC Case No. N-8239 involving the petition for registration and confirmation of title filed by Fermina Castro, there is no showing that fraud attended the issuance of OCT No. 10215. it appears that the evidence presented by Fermina Castro was sufficient for the trial court to grant her petition. The testimony of Fermina Castro, which was corroborated by Emiliano de Leon, that she and her predecessors-in-interest had been in possession of the land for more than thirty (30) years sufficiently established her vested right over the property initially covered by OCT No. 10215. The report dated April 25, 1974 which was submitted to the trial court by the Director of Lands through Special Attorney Saturnino Pacubas showed that the parcel of land was solid and dry land when Fermina Castros application for registration of title was filed. It was based on the ocular inspection conducted by Land Inspector Adelino Gorospe and the joint circular inspection conducted by Geodetic Engineer Manuel A. Cervantes and Administrative Assistant Lazaro Berania on November 28, 1973 and March 22, 1974 respectively. The aforesaid report must be requested unless there is a concrete proof that there was an irregularity in the issuance thereof. In the absence of evidence to the contrary, the ocular inspection of the parcel of land, which was made the basis of said report, is presumed to be in order. Based on the available records, there appears to be no sufficient basis for the Government to institute an action for the annulment of OCT No. 10215 and its derivative titles. It is opined that a petition for cancellation/annulment of Decree No. N150912 and OCT No. 10215 and all its derivative titles will not prosper unless there is convincing evidence to negate the report of the then Land Management Bureau through Special Attorney Pacubas. Should the Government pursue the filing of such an action, the possibility of winning the case is remote.49 More so, respondent Government, through its counsel, admits that the land applied by Fermina Castro in 1973 was solid and dry land, negating the nebulous allegation that said land is underwater. The only conclusion that can be derived from the admissions of the Solicitor General and Government Corporate Counsel is that the land subject of the titles of petitioners is alienable land beyond the reach of the reversion suit of the state. Notably, the land in question has been the subject of a compromise agreement upheld by this Court in Public Estates Authority.50 In that compromise agreement, among other provisions, it was held that the property covered by TCT Nos. 446386 and S-29361, the land subject of the instant case, would be exchanged for PEA property. The fact that PEA signed the May 15, 1998 Compromise Agreement is already a clear admission that it recognized petitioners as true and legal owners of the land subject of this controversy. Moreover, PEA has waived its right to contest the legality and validity of Castros title. Such waiver is clearly within the powers of PEA since it was created by PD 1084 as a body corporate "which shall have the attribute of perpetual succession and possessed of the powers of the corporations, to be exercised in conformity with the provisions of this Charter [PD 1084]." 51 It has the power "to enter into, make, perform and carry out contracts of every class and description, including loan agreements, mortgages and other types of security arrangements, necessary or incidental to the realization of its purposes with any person, firm or corporation, private or public, and with any foreign government or entity."52 It also has the power to sue and be sued in its corporate name.53Thus, the Compromise Agreement and the Deed of Exchange of Real Property signed by PEA with the petitioners are legal, valid and binding on PEA. In the Compromise Agreement, it is provided that it "settles in full all the claims/counterclaims of the parties against each other."54 The waiver by PEA of its right to question petitioners title is fortified by the manifestation by PEA in the Joint Motion for Judgment based on Compromise Agreement that 4. The parties herein hereto waive and abandon any and all other claims and counterclaims which they may have against each other arising from this case or related thereto.55 Thus, there was a valid waiver of the right of respondent Republic through PEA to challenge petitioners titles. The recognition of petitioners legal ownership of the land is further bolstered by the categorical and unequivocal acknowledgment made by PEA in its September 30, 2003 letter where it stated that: "Your ownership thereof was acknowledged by PEA when it did not object to your membership in the CBP-IA Association, in which an owner of a piece of land in CBP-IA automatically becomes a member thereof."56 Section 26, Rule 130 provides that "the act, declaration or omission of a party as to a relevant fact may be given in evidence against him." The admissions of PEA which is the real party-in-interest in this case on the nature of the land of Fermina Castro are valid and binding on respondent Republic. Respondents claim that the disputed land is underwater falls flat in the face of the admissions of PEA against its interests. Hence, res judicata now effectively precludes the relitigation of the issue of registrability of petitioners lot.

In sum, the Court finds that the reversion case should be dismissed for lack of jurisdiction on the part of the Paraaque RTC. Even if we treat said case as a petition for annulment of judgment under Rule 47 of the 1997 Rules of Civil Procedure, the dismissal of the case nevertheless has to be upheld because it is already barred by laches. Even if laches is disregarded, still the suit is already precluded by res judicata in view of the peculiar facts and circumstances obtaining therein. WHEREFORE, premises considered, the petition is GRANTED. The Decision of the Court of Appeals in CA-G.R. CV No. 76212 is REVERSED and SET ASIDE, and the August 7, 2002 Order of the Paraaque City RTC, Branch 257 in Civil Case No. 010222 entitled Republic of the Philippines v. Fermina Castro, et al. dismissing the complaint is AFFIRMED. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 21911 September 15, 1924 EL VARADERO DE MANILA, plaintiff-appellant, vs. INSULAR LUMBER COMPANY, defendant-appellee. Ernesto Zaragoza for appellant. Ross, Lawrence & Selph and Antonio T. Carrascoso, Jr., for appellee. MALCOLM, J.: El Varadero de Manila completed satisfactorily certain repairs on the lighter Tatlo, the property of the Insular Lumber Company. The work was performed pursuant to no express agreement, but with the implicit understanding that the price would be as low as, or lower than, could be secured from any other company. The Insular Lumber Company being of the opinion that the bill as presented by El Varadero de Manila was grossly exorbitant and a proposed compromise having failed of realization, the matter was taken to court with the result that in the Court of First Instance of Manila, El Varadero de Manila, the plaintiff, secured judgment against the Insular Lumber Company, the defendant, in the amount of P5,310.70, with legal interest from the presentation of the complaint, and costs. Still dissatisfied, the plaintiff has appealed to this court and here as asked us to increase the amount of the judgment to P12,412.62. To arrive at as correct a judgment as is possible, it will first be necessary to set down a number of figures and thereafter to seize upon a few salient facts as having influence. The itemized bill presented by the plaintiff, the amount which it still claims, totals P12,412.62. At one time during the course of the negotiations, the plaintiff was willing to accept P10,241.37. (Exhibit I.) The witnesses for the plaintiff naturally took the view that the bill was correct. But the trial judge was of the opinion that it was excessive. The defendant, on the other hand, says that a reasonable figure for the work would be P5,310.70. Witnesses were offered to substantiate this contention. Their testimony so impressed the trial judge that he adopted their statements as his own. During the course of the abortive negotiations, however, the defendant expressed a willingness to pay the plaintiff P8,070.12. (Exhibit G.) Now to emphasize three points which will materially assist us in rendering judgment. The first point relates to the offer of compromise which naturally, under the general rules of evidence, must be excluded, except that as the amounts named in the offers to accept certain sums in settlement appear to have been arrived at as a fair estimate of value, they are relevant. (City of Springfield vs. Schmook [1878], 68 Mo., 394; Daniels vs. Town of Woonsocket [1874], 11 R. I., 4; Teasley vs. Bradley [1900], 110 Ga., 497.) Here, there was no denial of liability and the only question discussed was the amount to be paid which the plaintiff insisted should not be more than P8,070.12. The second point of interest relates to the testimony of Mariano Yengko, inspector of vessels, admittedly a disinterested witness, who in one synopsis of a fair value of the repairs, arrived at P5,134.20, but which, on cross-examination, he raised to between seven and eight thousand pesos. And the third point is that the tacit understanding between the parties was that the cost of the repairs should be approximately the same as what other companies would charge. The defendant admits that El Varadero de Navotas would have done the work for about P8,000. Basing our findings, therefore, on the foregoing considerations, we are of the opinion that the reasonable value of the repairs performed by El Varadero de Manila on the Tatlo owned by the Insular Lumber Company, was something less than P8,000. We fix the sum definitely at P7,700. Judgment is modified, and in lieu of the judgment rendered in the lower court, another shall issue in favor of the plaintiff and against the defendant for the recovery of P7,700, with legal interest to begin to run from the date when this judgment shall become final and to continue until payment, without express finding as to costs in either instance. So ordered. Street, Avancea, Villamor, Ostrand and Romualdez, JJ., concur. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. Nos. 115908-09 December 6, 1995 PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. DANNY GODOY, * accused-appellant. REGALADO, J.:

Often glossed over in the emotional arguments against capital punishment is the amplitude of legal protection accorded to the offender. Ignored by the polemicist are the safeguards designed to minimally reduce, if not altogether eliminate, the grain of human fault. Indeed, there is no critique on the plethora of rights enjoyed by the accused regardless of how ruthlessly he committed the crime. Any margin of judicial error is further addressed by the grace of executive clemency. But, even before that, all convictions imposing the penalty of death are automatically reviewed by this Court. The cases at bar, involving two death sentences, apostrophize for the condemned the role of this ultimate judicial intervention. Accused-appellant Danny Godoy was charged in two separate informations filed before the Regional Trial Court, for Palawan and Puerto Princesa City, Branch 47, with rape and kidnapping with serious illegal detention, respectively punished under Articles 335 and 267 of the Revised Penal Code, to wit: In Criminal Case No. 11640 for Rape:

That on or about the evening of the 21st day of January, 1994, at Barangay Pulot Center, Municipality of Brooke's Point, Province of Palawan, Philippines, and within the jurisdiction of this Honorable Court, the said accused by means of force, threat and intimidation, by using a knife and by means of deceit, did then and there wilfully, unlawfully and feloniously have carnal knowledge with one Mia Taha to her damage and prejudice. 1 In Criminal Case No. 11641 for Kidnapping with Serious Illegal Detention: That on or about the 22nd day of January, 1994, at Barangay Ipilan, Municipality of Brooke's Point, Province of Palawan, Philippines, and within the jurisdiction of this Honorable Court, the said accused, a private individual, and being a teacher of the victim, Mia Taha, and by means of deceit did then and there wilfully, unlawfully and feloniously kidnap or detained ( sic) said Mia Taha, a girl of 17 years old (sic), for a period of five (5) days thus thereby depriving said Mia Taha of her liberty against her will and consent and without legal justification, to the damage and prejudice of said Mia Taha. 2 During the arraignment on both indictments, appellant pleaded not guilty to said charges and, after the pre-trial was terminated, a joint trial of the two cases was conducted by the trial court. 3 According to complainant Mia Taha, at around 7:00 P.M. of January 21, 1994, she went to the boarding house of her cousin, Merlylyn Casantosan, at Pulot Center, Brooke's Point which is near the Palawan National School (PNS), Pulot Branch, where she was studying. When she saw that the house was dark, she decided to pass through the kitchen door at the back because she knew that there was nobody inside. As soon as she opened the door, somebody suddenly grabbed her, poked a knife on her neck, dragged her by the hand and told her not to shout. She was then forced to lie down on the floor. Although it was dark, complainant was able to recognize her assailant, by the light coming from the moon and through his voice, as accused-appellant Danny Godoy who was her Physics teacher at PNS. When she was already on the floor, appellant removed her panty with one hand while holding the knife with the other hand, opened the zipper of his pants, and then inserted his private organ inside her private parts against her will. She felt pain because it was her first experience and she cried. Throughout her ordeal, she could not utter a word. She was very frightened because a knife was continually pointed at her. She also could not fight back nor plead with appellant not to rape her because he was her teacher and she was afraid of him. She was threatened not to report the incident to anyone or else she and her family would be killed. Thereafter, while she was putting on her panty, she noticed that her skirt was stained with blood. Appellant walked with her to the gate of the house and she then proceeded alone to the boarding house where she lived. She did not see where appellant went after she left him at the gate. When she arrived at her boarding house, she saw her landlady but she did not mention anything about the incident. The following morning, January 22, 1994, complainant went home to her parents' house at Ipilan, Brooke's Point. She likewise did not tell her parents about the incident for fear that appellant might make good his threat. At around 3:00 P.M. of that same day, appellant arrived at the house of her parents and asked permission from the latter if complainant could accompany him to solicit funds because she was a candidate for "Miss PNS Pulot." When her parents agreed, she was constrained to go with appellant because she did not want her parents to get into trouble. Appellant and complainant then left the house and they walked in silence, with Mia following behind appellant, towards the highway where appellant hailed a passenger jeep which was empty except for the driver and the conductor. She was forced to ride the jeep because appellant threatened to kill her if she would not board the vehicle. The jeep proceeded to the Sunset Garden at the poblacion, Brooke's Point where they alighted. At the Sunset Garden, appellant checked in and brought her to a room where they staye d for three days. During the entire duration of their stay at the Sunset Garden, complainant was not allowed to leave the room which was always kept locked. She was continuously guarded and constantly raped by appellant. She was, however, never drunk or unconscious. Nonetheless, she was forced to have sex with appellant because the latter was always carrying a knife with him. In the early morning of January 25, 1994, appellant brought her to the house of his friend at Edward's Subdivision where she was raped by him three times. She was likewise detained and locked inside the room and tightly guarded by appellant. After two days, or on January 27, 1994, they left the place because appellant came to know that complainant had been reported and indicated as a missing person in the police blotter. They went to see a certain Naem ** from whom appellant sought help. On that same day, she was released but only after her parents agreed to settle the case with appellant. Immediately thereafter, Mia's parents brought her to the District Hospital at Brooke's Point where she was examined by Dr. Rogelio Divinagracia who made the following medical findings: GENERAL: Well developed, nourished, cooperative, walking, conscious, coherent Filipina. BREAST: Slightly globular with brown colored areola and nipple. EXTERNAL EXAM.: Numerous pubic hair, fairly developed labia majora and minora, hymenal opening stellate in shape, presence of laceration superficial, longitudinal at the fossa navicularis, approximately 1/2 cm. length.

INTERNAL EXAM.: Hymenal opening, stellate in shape, laceration noted, hymenal opening admits 2 fingers with slight resistance, prominent vaginal rugae, cervix closed.

CONCLUSION: Hymenal opening admits easily 2 fingers with slight resistance, presence of laceration, longitudinal at the fossa navicularis approximately 1/2 cm. length. Hymenal opening can admit an average size penis in erection with laceration. 4 Dr. Divinagracia further testified that the hymenal opening was in stellate shape and that there was a laceration, which shows that complainant had participated in sexual intercourse. On the basis of the inflicted laceration which was downward at 6 o'clock position, he could not say that there was force applied because there were no scratches or bruises, but only a week-old laceration. He also examined the patient bodily but found no sign of bruises or injuries. The patient told him that she was raped. During the cross-examination, complainant denied that she wrote the letters marked as Exhibits "1" and "2"; that she never loved appellant but, on the contrary, she hated him because of what he did to her; and that she did not notice if there were people near the boarding house of her cousin. She narrated that when appellant started to remove her panty, she was already lying down, and that even as appellant was doing this she could not shout because she was afraid. She could not remember with which hand appellant held the knife. She was completely silent from the time she was made to lie down, while her panty was being removed, and even until appellant was able to rape her. When appellant went to their house the following day, she did not know if he was armed but there was no threat made on her or her parents. On the contrary, appellant even courteously asked permission from them in her behalf and so they left the house with appellant walking ahead of her. When she was brought to the Sunset Garden, she could not refuse because she was afraid. However, she admitted that at that time, appellant was not pointing a knife at her. She only saw the cashier of the Sunset Garden but she did not notice if there were other people inside. She likewise did not ask the appellant why he brought her there. Complainant described the lock in their room as an ordinary doorknob, similar to that on the door of the courtroom which, even if locked, could still be opened from the inside, and she added that there was a sliding lock inside the room. According to her, they stayed at Sunset Garden for three days and three nights but she never noticed if appellant ever slept because everytime she woke up, appellant was always beside her. She never saw him close his eyes. Helen Taha, the mother of complainant, testified that when the latter arrived at their house in the morning of January 22, 1994, she noticed that Mia appeared weak and her eyes were swollen. When she asked her daughter if there was anything wrong, the latter merely kept silent. That afternoon, she allowed Mia to go with appellant because she knew he was her teacher. However, when Mia and appellant failed to come home at the expected time, she and her husband, Adjeril, went to look for them at Ipilan. When they could not find them there, she went to the house of appellant because she was already suspecting that something was wrong, but appellant's wife told her that he did not come home. Early the next morning, she and her husband went to the Philippine National Police (PNP) station at Pulot, Brooke's Point and had the incident recorded in the police blotter. The following day, they went to the office of the National Bureau of Investigation (NBI) at Puerto Princess City, then to the police station near the NBI, and finally to the radio station airing the Radyo ng Bayan program where she made an appeal to appellant to return her daughter. When she returned home, a certain Naem was waiting there and he informed her that Mia was at Brooke's Point. He further conveyed appellant's willingness to become a Muslim so he could marry Mia and thus settle the case. Helen Taha readily acceded because she wanted to see her daughter. In the morning of January 27, 1994, she went to the house of Naem who sent somebody to fetch complainant. She testified that when Mia arrived, she was crying as she reported that she was raped by appellant, and that the latter threatened to kill her if she did not return within an hour. Because of this, she immediately brought Mia to the hospital where the latter was examined and then they proceeded to the municipal hall to file a complaint for rape and kidnapping. Both Mia and Helen Taha executed separate sworn statements before the PNP at Brooke's Point. Later, Fruit Godoy, the wife of appellant, went to their house and offered P50,000.00 for the settlement of the case. On their part, her husband insisted that they just settle, hence all three of them, Adjeril, Helen and Mia Taha, went to the Office of the Provincial Prosecutor where they met with the mother of appellant who gave them P30,000.00. Adjeril and Helen Taha subsequently executed an affidavit of desistance in Criminal Case No. 7687 for kidnapping pending in the prosecutor's office, which was sworn to before Prosecutor II Chito S. Meregillano. Helen Taha testified that she agreed to the settlement because that was what her husband wanted. Mia Taha was dropped from the school and was not allowed to graduate. Her father died two months later, supposedly because of what happened. The defense presented a different version of what actually transpired. According to appellant, he first met Mia Taha sometime in August, 1993 at the Palawan National School (PNS). Although he did not court her, he fell in love with her because she often told him "Sir, I love you." What started as a joke later developed into a serious relationship which was kept a secret from everybody else. It was on December 20, 1993 when they first had sexual intercourse as lovers. Appellant was then assigned at the Narra Pilot Elementary School at the poblacion because he was the coach of the Palawan delegation for chess. At around 5:00 P.M. of that day, complainant arrived at his quarters allegedly because she missed him, and she then decided to spend the night there with him. Exactly a month thereafter, specifically in the evening of January 20, 1994, Erna Baradero, a teacher at the PNS, was looking inside the school building for her husband, who was a security guard of PNS, when she heard voices apparently coming from the Orchids Room. She went closer to listen and she heard a girl's voice saying "Mahal na mahal kita, Sir, iwanan mo ang iyong asawa at tatakas tayo." Upon hearing this, she immediately opened the door and was startled to see Mia Taha and Danny Godoy holding hands. She asked them what they were doing there at such an unholy hour but the two, who were obviously caught by surprise, could not answer. She then hurriedly closed the door and left. According to this witness, complainant admitted to her that she was having an affair with appellant. Desirous that such illicit relationship must be stopped, Erna Baradero informed appellant's wife about it when the latter arrived from Manila around the first week of February, 1994. Upon the request of appellant's wife, Erna Baradero executed an affidavit in connection with the present case, but the same was not filed then because of the affidavit of desistance which was executed and submitted by the parents of complainant. In her

sworn statement, later marked in evidence as Exhibit "7", Erna Baradero alleged that on January 21, 1994, she confronted Mia Taha about the latter's indiscretion and reminded her that appellant is a married man, but complainant retorted, "Ano ang pakialam mo," adding that she loves appellant very much. Appellant testified that on January 21, 1994, at around 7:00 P.M., Mia Taha went to his office asking for help with the monologue that she would be presenting for the Miss PNS contest. He agreed to meet her at the house of her cousin, Merlylyn Casantosan. However, when he reached the place, the house was dark and he saw Mia waiting for him outside. Accordingly, they just sat on a bench near the road where there was a lighted electric post and they talked about the matter she had earlier asked him about. They stayed there for fifteen minutes, after which complainant returned to her boarding house just across the street while appellant headed for home some fifteen meters away. It appears that while complainant was then waiting for appellant, Filomena Pielago, a former teacher of Mia at PNS and who was then on her way to a nearby store, saw her sitting on a bench and asked what she was doing there at such a late hour. Complainant merely replied that she was waiting for somebody. Filomena proceeded to the store and, along the way, she saw Inday Zapanta watering the plants outside the porch of her house. When Filomena Pielago returned, she saw complainant talking with appellant and she noticed that they were quite intimate because they were holding hands. This made her suspect that the two could be having a relationship. She, therefore, told appellant that his wife had finished her aerobics class and was already waiting for him. She also advised Mia to go home. Prior to this incident, Filomena Pielago already used to see them seated on the same bench. Filomena further testified that she had tried to talk appellant out of the relationship because his wife had a heart ailment. She also warned Mia Taha, but to no avail. She had likewise told complainant's grandmother about her activities. At the trial, she identified the handwriting of complainant appearing on the letters marked as Exhibits "1" and "2", claiming that she is familiar with the same because Mia was her former student. On cross-examination, Filomena clarified that when she saw the couple on the night of January 21, 1994, the two were talking naturally, she did not see Mia crying, nor did it appear as if appellant was pleading with her. In the afternoon of the following day, January 22, 1994, appellant met Mia's mother on the road near their house and she invited him to come up and eat "buko," which invitation he accepted. Thirty minutes thereafter, complainant told him to ask permission from her mother for them to go and solicit funds at the poblacion, and he did so. Before they left, he noticed that Mia was carrying a plastic bag and when he asked her about it, she said that it contained her things which she was bringing to her cousin's house. Appellant and Mia went to the poblacion where they solicited funds until 6:30 P.M. and then had snacks at the Vic Tan Store. Thereafter, complainant told appellant that it was already late and there was no more available transportation, so she suggested that they just stay at Sunset Garden. Convinced that there was nothing wrong in that because they already had intimate relations, aside from the fact that Mia had repeatedly told him she would commit suicide should he leave her, appellant was prevailed upon to stay at the hotel. Parenthetically, it was complainant who arranged their registration and subsequently paid P400.00 for their bill from the funds they had solicited. That evening, however, appellant told complainant at around 9:00 P.M. that he was going out to see a certain Bert Dalojo at the latter's residence. In truth, he borrowed a motorcycle from Fernando Rubio and went home to Pulot. He did not bring complainant along because she had refused to go home. The following morning, January 23, 1994, appellant went to the house of complainant's parents and informed them that Mia spent the night at the Sunset Garden. Mia's parents said that they would just fetch her there, so he went back to Sunset Garden and waited for them outside the hotel until 5:00 P.M. When they did not arrive, he decided to go with one Isagani Virey, whom he saw while waiting near the road, and they had a drinking session with Virey's friends. Thereafter, Virey accompanied him back to Sunset Garden where they proceeded to Mia's room. Since the room was locked from the inside, Virey had to knock on the door until it was opened by her. Once inside, he talked to complainant and asked her what they were doing, but she merely answered that what she was doing was of her own free will and that at that moment her father was not supposed to know about it for, otherwise, he would kill her. What complainant did not know, however, was that appellant had already reported the matter to her parents, although he opted not to tell her because he did not want to add to her apprehensions. Isagani Virey further testified that when he saw appellant and complainant on January 23 and 24, 1994, the couple looked very happy. Appellant denied that they had sexual intercourse during their entire stay at Sunset Garden, that is, from January 22 to 24, 1994, because he did not have any idea as to what she really wanted to prove to him. Appellant knew that what they were doing was wrong but he allegedly could not avoid Mia because of her threat that she would commit suicide if he left her. Thus, according to appellant, on January 24, 1994 he asked Isagani Virey to accompany him to the house of Romy Vallan, a policeman, to report the matter. Additionally, Virey testified that appellant and Mia went to see him at his aunt's house to ask for assistance in procuring transportation because, according to appellant, the relatives of Mia were already looking for them and so they intend to go to Puerto Princesa City. Virey accompanied them to the house of Romy Vallan, whose wife was a co-teacher of appellant's wife, but the latter refused to help because of the complicated situation appellant was in. Nevertheless, Vallan verified from the police station whether a complaint had been filed against appellant and after finding out that there was none, he told appellant to just consult a certain Naem who is an "imam." Appellant was able to talk to Naem at Vallan's house that same day and bared everything about him and Mia. Naem suggested that appellant marry complainant in Muslim rites but appellant refused because he was already married. It was eventually agreed that Naem would just mediate in behalf of appellant and make arrangements for a settlement with Mia's parents. Later that day, Naem went to see the parents of complainant at the latter's house. The following day, January 25, 1994, allegedly because complainant could no longer afford to pay their hotel bills, the couple were constrained to transfer to the house of appellant's friend, Fernando Rubio, at Edward's Subdivision where they stayed for two days. They just walked along the national highway from Sunset Garden to Edward's Subdivision which was only five hundred to seven hundred meters away. The owner of the house, Fernando Rubio, as well as his brother Benedicto Rubio,

testified that the couple were very happy, they were intimate and sweet to each other, they always ate together, and it was very obvious that they were having a relationship. In fact, Fernando Rubio recalled that complainant even called appellant "Papa." While they were there, she would buy food at the market, help in the cooking, wash clothes, and sometimes watch television. When Fernando Rubio once asked her why she chose to go with appellant despite the fact the he was a married man, Mia told him that she really loved appellant. She never told him, and Fernando Rubio never had the slightest suspicion, that she was supposed to have been kidnapped as it was later claimed. He also testified that several police officers lived within their neighborhood and if complainant had really been kidnapped and detained, she could have easily reported that fact to them. Mia was free to come and go as she pleased, and the room where they stayed was never locked because the lock had been destroyed. On cross-examination, Fernando Rubio declared that appellant was merely an acquaintance of his; that it was Naem who went to the lodging house to arrange for Mia to go home; that complainant's mother never went to his house; and that it was Chief of Police Eliseo Crespo who fetched appellant from the lodging house and brought him to the municipal hall. Shortly before noon of January 26, 1994, Naem again met with appellant at Edward's Subdivision and informed him that complainant's parents were willing to talk to him at Naem's house the next day. The following morning, or on January 27, 1994, appellant was not able to talk to complainant's parents because they merely sent a child to fetch Mia at Edward's Subdivision and to tell her that her mother, who was at Naem's house, wanted to see her. Appellant permitted complainant to go but he told her that within one hour he was be going to the police station at the municipal hall so that they could settle everything there. After an hour, while appellant was already on his way out of Edward's Subdivision, he was met by Chief of Police Eliseo Crespo who invited him to the police station. Appellant waited at the police station the whole afternoon but when complainant, her parents and relatives arrived at around 5:00 P.M., he was not given the chance to talk to any one of them. That afternoon of January 27, 1994, appellant was no longer allowed to leave and he was detained at the police station after Mia and her parents lodged a complaint for rape and kidnapping against him. During his detention, Mia's cousin, Lorna Casantosan, delivered to appellant on different occasions two letters from complainant dated February 27, 1994 and March 1, 1994, respectively. As Mia's teacher, appellant is familiar with and was, therefore, able to identify the handwriting in said letters as that of Mia Taha. After a time, he came to know, through his mother, that an affidavit of desistance was reportedly executed by complainants. However, he claims that he never knew and it was never mentioned to him, not until the day he testified in court, that his mother paid P30,000.00 to Mia's father because, although he did not dissuade them, neither did he request his mother to talk to complainants in order to settle the case. Under cross-examination, appellant denied that he poked a knife at and raped Mia Taha on January 21, 1994. However, he admitted that he had sex with Mia at the Sunset Garden but that was already on January 24, 1994. While they were at Edward's Subdivision, they never had sexual relations. Appellant was told, when complainant visited him in jail, that her father would kill her if she refused to testify against him, although by the time she testified in court, her father had already died. Appellant further testified that complainant has had several illicit relations in the boarding house of her cousin, Merlylyn Casantosan, which was a well-known fact in Pulot. However, he decided to have a relationship with her because he wanted to change her and that was what they had agreed upon. Appellant denied that, during the time when they were staying together, Mia had allegedly asked permission to leave several times but that he refused. On the contrary, he claimed that on January 27, 1994 when she told him that her parents wanted to see her, he readily gave her permission to go. He also identified the clothes that Mia brought with her when they left her parents' house on January 22, 1994, but which she left behind at the Rubios' lodging house after she failed to return on January 27, 1994. The bag of clothes was brought to him at the provincial jail by Benedicto Rubio. Appellant likewise declared that he had been detained at the provincial jail since January 27, 1994 but the warrant for his arrest was issued only on January 28, 1994; and that he did not submit a counter-affidavit because according to his former counsel, Atty. Paredes, it was no longer necessary since the complainants had already executed an affidavit of desistance. He admits having signed a "Waiver of Right to Preliminary Investigation" in connection with these cases. On rebuttal, Lorna Casantosan, the cousin of Mia Taha, denied that she delivered any letter to appellant when the latter was still detained at the provincial jail. She admitted, on cross-examination, that she was requested by Mia Taha to testify for her, although she clarified that she does not have any quarrel or misunderstanding with appellant. Mia Taha was again presented on rebuttal and she denied the testimony of Erna Baradero regarding the incident at the Orchids Room because, according to her, the truth was that she was at the boarding house of Toto Zapanta on that date and time. She likewise negated the claim that Erna Baradero confronted her on January 21, 1994 about her alleged relationship with appellant contending that she did not see her former teacher on that day. Similarly, she disclaimed having seen and talked to Filemona Pielago on the night of January 21, 1994. She vehemently disavowed that she and appellant were lovers, much less with intimate relations, since there never was a time that they became sweethearts. She sought to rebut, likewise through bare denials, the following testimonies of the defense witnesses: that she told appellant "iwanan mo ang iyong asawa at tatakas tayo;" that she answered "wala kang pakialam" when Erna Baradero confronted her about her relationship with appellant; that she was the one who registered them at Sunset Garden and paid for their bill; that appellant left her at Sunset Garden to go to Ipil on January 22, 1994; that Isagani Virey came to their room and stayed there for five minutes, because the only other person who went there was the room boy who served their food; that they went to the house of Virey's aunt requesting help for transportation; and that she was free to roam around or to go out of the lodging house at Edward's Subdivision. Mia Taha also rejected as false the testimony of appellant that she went to see him at Narra, Palawan to have sex with him and claims that the last time she went to Narra was when she was still in Grade VI; that she ever told him "I love you, sabik no sabik ako sa iyo" when she allegedly went to Narra; that she wrote to him, since the letters marked as Exhibits "1" and "2" are not hers; that she threatened to commit suicide if appellant would leave her since she never brought a blade with her; and that at Sunset Garden and at Edward's Subdivison, she was not being guarded by appellant.

However, on cross-examination, complainant identified her signature on her test paper marked as Exhibit "4" and admitted that the signature thereon is exactly the same as that appearing on Exhibits "1" and "2". Then, contradicting her previous disclaimers, she also admitted that the handwriting on Exhibits "1" and "2" all belong to her. On sur-rebuttal, Armando Pasion, a provincial guard of the Provincial Jail, Palawan who volunteered to testify in these cases, identified Lorna Casantosan as the person who visited appellant in jail on February 27, 1994 at around 4:00 P.M. Since he was on duty at that time, he asked her what she wanted and she said she would just visit appellant. Pasion then called appellant and told him he had a visitor. Lorna Casantosan and appellant talked at the visiting area which is around ten meters away from his post, and then he saw her hand over to appellant a letter which the latter immediately read. This witness declared that appellant never requested him to testify. Another sur-rebuttal witness, Desmond Selga, a jeepney driver, testified that in the afternoon of January 22, 1994, he was plying his regular route in going to Brooke's Point and, when he passed by Ipilan, he picked up appellant and Mia Taha. At that time, there were already several passengers inside his jeepney. The two got off at the poblacion market. He denied that he brought them to the Sunset Garden. On May 20, 1994, the court a quo rendered judgment 5 finding appellant guilty beyond reasonable doubt of the crimes of rape and kidnapping with serious illegal detention, and sentencing him to the maximum penalty of death in both cases. 6 By reason of the nature of the penalty imposed, these cases were elevated to this Court on automatic review. The records show that, on the basis of the complaints for rape 7 and kidnapping with serious illegal detention 8filed by Mia Taha and Helen Taha, respectively, the Municipal Trial Court of Brooke's Point issued a resolution 9on February 4, 1994 finding the existence of a prima facie case against appellant. On February 10, 1994, the spouses Adjeril Taha and Helen Taha executed an affidavit of desistance withdrawing the charge of kidnapping with serious illegal detention. 10 However, pursuant to a joint resolution 11 issued on March 11, 1994 by Prosecutor II Reynaldo R. Guayco of the Office of the Provincial Prosecutor, two separate informations for rape and for kidnapping with serious illegal detention were nevertheless filed against appellant Danny Godoy with no bail recommended in both charges. Appellant is now before us seeking the reversal of the judgment of the court below, on the following assignment of errors: I. The trial court erred in convicting the accused-appellant (of) the crime of rape despite the fact that the prosecution failed to prove his guilt beyond reasonable doubt. II. The trial court erred by failing to adhere to the doctrine/principle in reviewing the evidence adduced in a prosecution for the crime of rape as cited in its decision reiterating the case of People vs. Calixto (193 SCRA 303). III. The trial court erred in concluding that the accused-appellant had consummated the crime of rape against private complainant. IV. The trial court erred by its failure to give any credence to Exhibits "1" and "2" as evidence of the defense. V. The trial court erred in convicting the accused-appellant of the crime of kidnapping with serious illegal detention as the prosecution failed to prove his guilt beyond reasonable doubt. VI. The trial court erred in giving full faith and credence to the testimonies of prosecution witnesses and completely ignoring the testimonies of the defense witnesses. VII. The trial court erred in concluding that there was implied admission of guilt on the part of the accusedappellant in view of the offer to compromise. VIII. The trial court erred in ordering that the complainant be indemnified in the sum of one hundred thousand pesos (P100,000.00) for each of the alleged crimes committed.

IX. The trial court gravely erred by imposing the death penalty for each of the crimes charged on the accused-appellant despite the fact that the crimes were allegedly committed prior to the effectivity of Republic Act No. 7659. 12 A. The Rape Case A rape charge is a serious matter with pernicious consequences. It exposes both the accused and the accuser to humiliation, fear and anxieties, not to mention the stigma of shame that both have to bear for the rest of their lives. 13 By the very nature of the crime of rape, conviction or acquittal depends almost entirely on the credibility of the complainant's testimony because of the fact that usually only the participants can testify as to its occurrence. 14 This notwithstanding, the basic rule remains that in all criminal prosecutions without regard to the nature of the defense which the accused may raise, the burden of proof remains at all times upon the prosecution to establish his guilt beyond a reasonable doubt. If the accused raises a sufficient doubt as to any material element, and the prosecution is then unable to overcome this evidence, the prosecution has failed to carry its burden of proof of the guilt of the accused beyond a reasonable doubt and the accused must be acquitted. 15 The rationale for the rule is that, confronted by the full panoply of State authority, the accused is accorded the presumption of innocence to lighten and even reverse the heavy odds against him. Mere accusation is not enough to convict him, and neither is the weakness of his defense. The evidence for the prosecution must be strong per se, strong enough to establish the guilt of the accused beyond reasonable doubt. 16 In other words, the accused may be convicted on the basis of the lone uncorroborated testimony of the offended woman, provided such testimony is clear, positive, convincing and otherwise consistent with human nature and the normal course of things. There are three well-known principles that guide an appellate court in reviewing the evidence presented in a prosecution for the crime of rape. These are: (1) while rape is a most detestable crime, and ought to be severely and impartially punished, it must be borne in mind that it is an accusation easy to be made, hard to be proved, but harder to be defended by the party accused, though innocent; 17 (2) that in view of the intrinsic nature of the crime of rape where only two persons are usually involved, the testimony of the complainant must be scrutinized with extreme caution; 18 and (3) that the evidence for the prosecution must stand or fall on its own merits and cannot be allowed to draw strength from the weakness of the evidence for the defense. 19

In the case at bar, several circumstances exist which amply demonstrate and ineluctably convince this Court that there was no rape committed on the alleged date and place, and that the charge of rape was the contrivance of an afterthought, rather than a truthful plaint for redress of an actual wrong. I. Two principal facts indispensably to be proven beyond reasonable doubt for conviction of the crime of rape under paragraph (1), Article 335 of the Revised Penal Code are, first, that the accused had carnal knowledge of the complainant; and, second, that the same was accomplished through force or intimidation. 1. The prosecution has palpably failed to prove beyond peradventure of doubt that appellant had sexual congress with complainant against her will. Complainant avers that on the night of January 21, 1994, she was sexually assaulted by appellant in the boarding house of her cousin, Merlelyn Casantosan. Appellant, on the other hand, denied such a serious imputation and contends that on said date and time, he merely talked with complainant outside that house. We find appellant's version more credible and sustained by the evidence presented and of record. According to complainant, when she entered the kitchen of the boarding house, appellant was already inside apparently waiting for her. If so, it is quite perplexing how appellant could have known that she was going there on that particular day and at that time, considering that she does not even live there, unless of course it was appellant's intention to satisfy his lustful desires on anybody who happened to come along. But then this would be stretching the imagination too far, aside from the fact that such a generic intent with an indeterminate victim was never established nor even intimated by the prosecution. Moreover, any accord of credit to the complainant's story is precluded by the implausibility that plagues it as regards the setting of the supposed sexual assault. 20 It will be noted that the place where the alleged crime was committed is not an ordinary residence but a boarding house where several persons live and where people are expected to come and go. The prosecution did not even bother to elucidate on whether it was the semestral break or that the boarding house had remained closed for some time, in order that it could be safely assumed that nobody was expected to arrive at any given time. Appellant, on the other hand, testified that on that fateful day, he went to the boarding house upon the invitation of complainant because the latter requested him to help her with her monologue for the Miss PNS contest. However, they were not able to go inside the house because it was locked and there was no light, so they just sat on a bench outside the house and talked. This testimony of appellant was substantially corroborated by defense witness Filomena Pielago. She affirmed that in the evening of January 21, 1994, she saw both appellant and complainant seated on a bench outside the boarding house, and that she even advised them to go home because it was already late and appellant's wife, who was the head teacher of witness Pielago, was waiting for him at the school building. On rebuttal, complainant could only deny that she saw Pielago that night. Doctrinally, where the inculpatory facts and circumstances are capable of two or more explanations one of which is consistent with the innocence of the accused and the other consistent with his guilt, then the evidence does not fulfill the test of moral certainty and is not sufficient to support a conviction. 21 It was further alleged by complainant that after her alleged ravishment, she put on her panty and then appellant openly accompanied her all the way to the gate of the house where they eventually parted ways. This is inconceivable. It is not the natural tendency of a man to remain for long by the side of the woman he had raped,22 and in public in a highly populated area at that. Given the stealth that accompanies it and the anxiety to end further exposure at the scene, the logical post-incident impulse of the felon is to distance himself from his victim as far and as soon as practicable, to avoid discovery and apprehension. It is to be expected that one who is guilty of a crime would want to dissociate himself from the person of his victim, the scene of the crime, and from all other things and circumstances related to the offense which could possibly implicate him or give rise to even the slightest suspicion as to his guilt. Verily, the guilty flee where no man pursueth. It is of common knowledge that facts which prove or tend to prove that the accused was at the scene of the crime are admissible as relevant, on the theory that such presence can be appreciated as a circumstance tending to identify the appellant. 23 Consequently, it is not in accord with human experience for appellant to have let himself be seen with the complainant immediately after he had allegedly raped her. 24 It thus behooves this Court to reject the notion that appellant would be so foolhardy as to accompany complainant up to the gate of the house, considering its strategic location vis-avis complainant's boarding house which is just across the street, 25 and the PNS schoolbuilding which is only around thirty meters away. 26 Complainant mentioned in her narration that right after the incident she went directly to her boarding house where she saw her landlady. Yet, the landlady was never presented as a witness to corroborate the story of complainant, despite the fact that the former was the very first person she came in contact with from the time appellant allegedly left her at the gate of the Casantosan boarding house after her alleged traumatic ordeal. Even though they supposedly did not talk, the landlady could at least have testified on complainant's physical appearance and to attest to the theorized fact that indeed she saw complainant on said date and hour, possibly with dishevelled hair, bloody skirt and all. We are, therefore, justifiedly inclined to believe appellant's version that it was Mia Taha who invited him to the boarding house to help her with the monologue she was preparing for the school contest. This is even consonant with her testimony that appellant fetched her the following day in order to solicit funds for her candidacy in that same school affair. In contrast, complainant's professed reason for going to the boarding house is vague and tenuous. At first, she asserted that she was at the boarding house talking with a friend and then, later, she said it was her cousin. Subsequently, she again wavered and said that she was not able to talk to her cousin. Furthermore, she initially stated that on January 21, 1994 at around 7:00 P.M., she was at the boarding house conversing with her cousin. Then in the course of her narration, she gave another version and said that when she reached the boarding house it was dark and there was nobody inside. The apparent ease with which she changed or adjusted her answers in order to cover up or realign the same with her prior inconsistent statements is readily apparent from her testimony even on this single episode, thus: Q Sometime on January 21, 1994, at about 7:00 o'clock in the evening, do you remember where you were? A Yes, sir.

Q Where were you? A I was in the boarding house of Merlylyn Casantosan, Sir. xxx xxx xxx Q Why were you there? A I was conversing with my friend there, Sir. COURT: Q Conversing with whom? A With my cousin, Your Honor. Q Your cousin's name? A Merlylyn Casantosan, Your Honor. xxx xxx xxx PROSECUTOR GUAYCO: Q You said that this Dane or Danny Godoy raped you, will you please relate to this Honorable Court how that rape happened? A On Friday and it was 7:00 o'clock in the evening. COURT: Q Of what date? A January 21, 1994, Your Honor. xxx xxx xxx PROSECUTOR GUAYCO: Q Then what happened? A I went to the boarding house of my cousin Merlylyn Casantosan. I passed (through) the kitchen and then when I opened the door somebody grabbed me suddenly. xxx xxx xxx Q During that time were there other people present in that boarding house where you said Danny Godoy raped you? A None, Sir. COURT: Q So, the house was empty? A Yes, Your Honor. Q I thought your cousin was there and you were conversing?

A When I went there she was not there, Your Honor. 27 (Corrections and emphasis supplied.) 2. Complainant testified that appellant raped her through the use of force and intimidation, specifically by holding a knife to her neck. However, the element of force was not sufficiently established. The physical facts adverted to by the lower court as corroborative of the prosecution's theory on the use of force are undoubtedly the medico-legal findings of Dr. Rogelio Divinagracia. Upon closer scrutiny, however, we find that said findings neither support nor confirm the charge that rape was so committed through forcible means by appellant against complainant on January 21, 1994. The reported hymenal laceration which, according to Dr. Divinagracia, was a week old and already healed, and the conclusion therefrom that complainant had sexual intercourse with a man on the date which she alleged, do not establish the supposed rape since the same findings and conclusion are likewise consistent with appellant's admission that coitus took place with the consent of complainant at Sunset Garden on January 24, 1994. 28Further, rather than substantiating the prosecution's aforesaid theory and the supposed date of commission of rape, the finding that there were no evident signs of extra-genital injuries tends, instead, to lend more credence to appellant's claim of voluntary coition on a later date and the absence of a struggle or the lack of employment of physical force. 29 In rape of the nature alleged in this case, we repeat, the testimony of the complainant must be corroborated by physical evidence showing use of force. 30 Thus, on the basis of the laceration inflicted, which is superficial at 6 o'clock position, the aforesaid medico-legal expert opined that it could not be categorically stated that there was force involved. On further questioning, he gave a straightforward answer that force was not applied. 31 He also added that when he examined the patient bodily, he did not see any sign of bruises. 32 The absence of any sign of physical violence on the complainant's body is an indication of complainant's consent to the act. 33 While the absence in the medical certificate of external signs of physical injuries on the victim does not necessarily negate the commission of rape, 34 the instant case is clearly an exception to this rule since appellant has successfully cast doubt on the veracity of that charge against him. Even granting ex gratia argumenti that the medical report and the laceration corroborated complainant's assertion that there was sexual intercourse, of course the same cannot be said as to the alleged use of force. It has been held that such corroborative evidence is not considered sufficient, since proof of facts constituting one principal element of the crime is not corroborative proof of facts necessary to constitute another equally important element of the crime. 35 Complainant testified that she struggled a little but it was not really strong because she was afraid of appellant. Again assuming that a sexual assault did take place as she claims, we nevertheless strongly believe that her supposed fear is more imaginary than real. It is evident that complainant did not use the manifest resistance expected of a woman defending her honor and chastity. 36 She failed to make any outcry when appellant allegedly grabbed her and dragged her inside the house. There is likewise no evidence on record that she put up a struggle when appellant forced her to lie on the floor, removed her panty, opened the zipper of his trousers, and inserted his organ inside her genitals. Neither did she demonstrate that appellant, in committing the heinous act, subjected her to any force of whatever nature or form.

Complainant's explanation for her failure to shout or struggle is too conveniently general and ruefully unconvincing to make this Court believe that she tenaciously resisted the alleged sexual attack on her by appellant. And, if ever she did put up any struggle or objected at all to the involuntary intercourse, such was not enough to show the kind of resistance expected of a woman defending her virtue and honor. 37 Her failure to do anything while allegedly being raped renders doubtful her charge of rape, 38 especially when we consider the actual mise-en-scene in the context of her asseverations. There is a rule that the rape victim's panty and blood-stained dress are not essential, and need not be presented, as they are not indispensable evidence to prove rape. 39 We incline to the view, however, that this general rule holds true only if there exist other corroborative evidence sufficiently and convincingly proving the rape charge beyond reasonable doubt. The rule should go the other way where, as in the present case, the testimony of complainant is inherently weak and no other physical evidence has been presented to bolster the charge of sexual abuse except for the medical report which, as earlier discussed, even negated the existence of one of the essential elements of the crime. We cannot, therefore, escape the irresistible conclusion that the deliberate non-presentation of complainant's blood-stained skirt, if it did exist, should vigorously militate against the prosecution's cause. II. The conduct of the outraged woman immediately following the alleged assault is of the utmost importance as tending to establish the truth or falsity of the charge. It may well be doubted whether a conviction for the offense of rape should even be sustained from the uncorroborated testimony of the woman unless the court is satisfied beyond doubt that her conduct at the time when the alleged rape was committed and immediately thereafter was such as might be reasonably expected from her under all the circumstances of the case. 40 Complainant said that on the day following the supposed rape, appellant went to her parents' house and asked permission from them to allow her to go with him to solicit funds for her candidacy. Nowhere throughout her entire testimony did she aver or imply that appellant was armed and that by reason thereof she was forced to leave with him. In brief, she was neither threatened nor intimidated by appellant. Her pretense that she was afraid of the supposed threat previously made by appellant does not inspire belief since appellant was alone and unarmed on that occasion and there was no showing of any opportunity for him to make good his threat, even assuming that he had really voiced any. On the contrary, complainant even admitted that appellant respectfully asked permission from her parents for her to accompany him. Complainant's enigmatic behavior after her alleged ravishment can only be described as paradoxical: it was so strangely normal as to be abnormal. 41 It seems odd, if not incredible, that upon seeing the person who had allegedly raped her only the day before, she did not accuse, revile or denounce him, or show rage, revulsion, and disgust. 42 Instead, she meekly went with appellant despite the presence of her parents and the proximity of neighbors which, if only for such facts, would naturally have deterred appellant from pursuing any evil design. From her deportment, it does not appear that the alleged threat made by appellant had instilled any fear in the mind of complainant. Such a nonchalant, unconcerned attitude is totally at odds with the demeanor that would naturally be expected of a person who had just suffered the ultimate invasion of her womanhood. 43 III. Rape is a very emotional word, and the natural human reactions to it are categorical: admiration and sympathy for the courageous female publicly seeking retribution for her outrageous violation, and condemnation of the rapist. However, being interpreters of the law and dispensers of justice, judges must look at a rape charge without those proclivities, and deal with it with extreme caution and circumspection. Judges must free themselves of the natural tendency to be overprotective of every woman decrying her having been sexually abused, and demanding punishment for the abuser. While they ought to be cognizant of the anguish and humiliation the rape victim goes through as she demands justice, judges should equally bear in mind that their responsibility is to render justice based on the law. 44 The rule, therefore, that this Court generally desists from disturbing the conclusions of the trial court on the credibility of witnesses 45 will not apply where the evidence of record fails to support or substantiate the lower court's findings of fact and conclusions; or where the lower court overlooked certain facts of substance and value that, if considered, would affect the outcome of the case; or where the disputed decision is based on a misapprehension of facts. 46 The trial court here unfortunately relied solely on the lone testimony of complainant regarding the January 21, 1994 incident. Indeed, it is easy to allege that one was raped by a man. All that the victim had to testify to was that appellant poked a knife at her, threatened to kill her if she shouted and under these threats, undressed her and had sexual intercourse with her. The question then that confronts the trial court is whether or not complainant's testimony is credible. 47 The technique in deciphering testimony is not to solely concentrate on isolated parts of that testimony. The correct meaning of the testimony can often be ascertained only upon a perusal of the entire testimony. Everything stated by the witness has to be considered in relation to what else has been stated. 48 In the case at bar, the challenged decision definitely leaves much to be desired. The court below made no serious effort to dispassionately or impartially consider the totality of the evidence for the prosecution in spite of the teaching in various rulings that in rape cases, the testimony of the offended party must not be accepted with precipitate credulity. 49 In finding that the crime of rape was committed, the lower court took into account only that portion of the testimony of complainant regarding the January 21, 1994 incident and conveniently deleted the rest. Taken singly, there would be reason to believe that she was indeed raped. But if we are to consider the other portions of her testimony concerning the events which transpired thereafter, which unfortunately the court a quo wittingly or unwittingly failed or declined to appreciate, the actual truth could have been readily exposed. There are easily perceived or discernible defects in complainant's testimony which inveigh against its being accorded the full credit it was given by the trial court. Considered independently of any other, the defects might not suffice to overturn the trial court's judgment of conviction; but assessed and weighed conjointly, as logic and fairness dictate, they exert a powerful compulsion towards reversal of said judgment. 50 Thus: 1. Complainant said that she was continuously raped by herein appellant at the Sunset Garden and around three times at Edward's Subdivision. In her sworn statement she made the same allegations. If this were true, it is inconceivable how the

investigating prosecutor could have overlooked these facts with their obvious legal implications and, instead, filed an information charging appellant with only one count of rape. The incredibility of complainant's representations is further magnified by the fact that even the trial court did not believe it, as may be inferred from its failure to consider this aspect of her testimony, unless we were to uncharitably assume that it was similarly befuddled. 2. She claims that appellant always carried a knife, but it was never explained how she was threatened with the same in such a manner that she was allegedly always cowed into giving in to his innumerable sexual demands. We are not unaware that in rape cases, this claim that complainant now advances appears to be a common testimonial expedient and face-saving subterfuge. 3. According to her, they stayed at Sunset Garden for three days and three nights and that she never noticed if appellant slept because she never saw him close his eyes. Yet, when asked if she slept side by side with appellant, complainant admitted that everytime she woke up, appellant was invariably in bed beside her. 51 4. She alleged that she could never go out of the room because it was always locked and it could not be opened from the inside. But, this was refuted by complainant's own testimony, as follows: Q And yet the door could be opened by you from the inside? A No, Sir, it was locked. Q Can you describe the lock of that room? A It's like that of the door where there is a doorknob. ATTY. EBOL: Let it be recorded that the lock is a doorknob and may I ask that the door be locked and opened from the inside. COURT: Alright (sic) you go down the witness stand and find out for yourself if you can open that door from the inside. CLERK OF COURT: Witness holding the doorknob. COURT: The key is made to open if you are outside, but as you're were (sic) inside you can open it? A Yes, sir. Q Is there no other lock aside from that doorknob that you held? A There was, Your Honor. Q What is that? A The one that slides, Your Honor. Q And that is used when you are already inside?

A Yes, Your Honor. 52 (Emphases ours.) 5. During their entire stay at the Sunset Garden or even at Edward's Subdivision, beyond supposedly offering token or futile resistance to the latter's sexual advances, she made no outcry, no attempt to flee or attract attention to her plight. 53 In her own declaration, complainant mentioned that when they checked in at Sunset Garden, she saw the cashier at the information counter where appellant registered. She did not do anything, despite the fact that appellant at that time was admittedly not armed. She likewise stated that a room boy usually went to their room and brought them food. If indeed she was bent on fleeing from appellant, she could have grabbed every possible opportunity to escape. Inexplicably, she did not. What likewise appears puzzling is the prosecution's failure to present these two people she mentioned and whose testimonies could have bolstered or corroborated complainant's story. 6. When appellant fetched complainant in the afternoon of January 22, 1994, they left the house together and walked in going to the highway. In her own testimony, complainant stated that appellant went ahead of her. It is highly improbable, if appellant really had evil motives, that he would be that careless. It is likewise beyond comprehension that appellant was capable of instilling such fear in complainant that she could not dare take advantage of the situation, in spite of the laxity of appellant, and run as far away from him as possible despite all the chances therefor. 7. Helen Taha, the mother of Mia, testified that as a result of the filing of the rape case, complainant was dropped from school and was not allowed to graduate. This is absurd. Rather than support and commiserate with the ill-fated victim of rape, it would appear that the school authorities were heartless people who turned their backs on her and considered her an outcast. That would be adding insult to injury. But what is more abstruse yet significant is that Mia and her parents were never heard to complain about this apparent injustice. Such complacency cannot but make one think and conclude that there must necessarily have been a valid justification for the drastic action taken by the school and the docile submission thereto by the Taha family. On the other hand, in evaluating appellant's testimony, the trial court's decision was replete with sweeping statements and generalizations. It chose to focus on certain portions of appellant's testimony, declared them to be preposterous and abnormal, and then hastened to conclude that appellant is indeed guilty. The court in effect rendered a judgment of conviction based, not on the strength of the prosecution's evidence, but on the weakness of that of the defense, which is totally repugnant to the elementary and time-honored rule that conviction should be made on the basis of strong, clear and compelling evidence of the prosecution. 54 IV. The main defense proffered by appellant is that he and complainant were sweethearts. While the "sweetheart theory" does not often gain favor with this Court, such is not always the case if the hard fact is that the accused and the supposed victim are, in truth, intimately related except that, as is usual in most cases, either the relationship is illicit or the victim's parents are against it. It is not improbable that in some instances, when the relationship is uncovered, the alleged victim or her parents for that matter would rather take the risk of instituting a criminal action in the hope that the court would take the cudgels for them than for the woman to admit to her own acts of indiscretion. And this, as the records reveal, is precisely what happened to appellant.

Appellant's claim that he and complainant were lovers is fortified by the highly credible testimonies of several witnesses for the defense, viz.: 1. Filomena Pielago testified that on the night of January 21, 1994, she saw appellant and complainant sitting on a bench in front of the house where the sexual attack allegedly took place, and the couple were talking intimately. She had warned Mia about the latter's illicit affair with appellant. 2. Fernando Rubio, an acquaintance of appellant and owner of the house at Edward's Subdivision, testified that he asked Mia why she decided to have an affair with appellant who is a married man. Mia answered that she really loves him. 55 He heard her call appellant "Papa". 56 The couple looked happy and were sweet to each other. 57 3. Benedicto Rubio, the younger brother of Fernando, testified on redirect examination that he asked Mia if she knew what she getting into and she answered, "Yes;" then he asked her if she really loved Sir Godoy, and she again answered in the affirmative. When he was trying to give counsel to appellant, complainant announced that if appellant left her, she would commit suicide. 58 He could see that the couple were happy together. 59 4. Isagani Virey, who knew appellant because the Municipal Engineering Office where he worked was located within the premises of PNS, attested that he was able to talk to the couple and that when he was advising appellant that what he was doing is wrong because he is married and Mia is his student, complainant reacted by saying that no matter what happened she would not leave Godoy, and that if she went home her father would kill her. 60 He also observed that they were happy. 61 5. Erna Baradero, a co-teacher of appellant, saw the couple the day before the alleged rape incident, inside one of the classrooms and they were holding hands, and she heard Mia tell appellant, "Mahal na mahal kita Sir, iwanan mo ang iyong asawa at tatakas tayo." 62 She tried to dissuade complainant from continuing with her relationship with appellant. 63 The positive allegations of appellant that he was having an intimate relationship with complainant, which were substantially corroborated by several witnesses, were never successfully confuted. The rebuttal testimony of complainant merely consisted of bare, unexplained denials of the positive, definite, consistent and detailed assertions of appellant. 64 Mere denials are self-serving negative evidence. They cannot obtain evidentiary weight greater than the declarations of credible disinterested witnesses. 65 Besides, appellant recounted certain facts that only he could have supplied. They were replete with details which could have been known only to him, thereby lending credence and reliability thereto. 66 His assertions are more logical, probable and bear the earmarks of truth. This is not to say that the testimony of appellant should be accorded full credence. His self-interest must have colored his account, even on the assumption that he could be trusted to stick to the literal truth. Nonetheless, there is much in his version that does not strain the limits of credulity. More to the point, there is enough to raise doubts that do appear to have some basis in reality. 67 Thus, the trial court's hasty pontification that appellant's testimony is improbable, ridiculous, nonsensical and incredible is highly uncalled for. The rule of falsus in uno, falsus in omnibus is not mandatory. It is not a positive rule of law and is not an inflexible one. 68 It does not apply where there is sufficient corroboration on many grounds of the testimony and the supposed inconsistencies arise merely from a desire of the witness to exculpate himself although not completely. 69 Complainant's denial that she and appellant were lovers is belied by the evidence presented by the defense, the most telling of which are her two handwritten letters, Exhibits "1" and "2", which she sent to the latter while he was detained at the provincial jail. For analysis and emphasis, said letters are herein quoted in full: 27 Feb. 94 Dane, Kumusta kana? Kong ako hito hindi na makatiis sa sakit. Sir, sumulat ako sa inyo dahil gusto kong malaman mo ang situation ko. Sir, kong mahal mo ako gagawa kang paraan na mailayo ako dito sa bahay. nalaman ng nanay at tatay ko na delayed ang mens ko ng one week. pinapainom nila ako ng pampalaglag pero ayaw ko. pagnalaman nila na hindi ko ininom ang gamot sinasaktan nila ako. Sir, kong maari ay huwag ng maabutan ng Martes. dahil naabutan nila akong maglayas sana ako. kaya ngayon hindi ako makalabas ng bahay kong wala akong kasama, kong gaano sila kahigpit noon doble pa ngayon. ang mga gamit ko ngayon ay wala sa lalagyan ko. tinago nila hindi ko makita, ang narito lang ay ang bihisan kong luma. Sir kong manghiram ka kaya ng motor na gagamitin sa pagkuha sa akin. Sa lunes ng gabi manonood kami Ng Veta eksakto alas 9:00 ay dapat dito ka sa lugar na may Veta. tanungin mo lang kay Lorna kong saan ang Veta nila Navoor Lozot. Mag busina ka lang ng tatlo bilang senyas na lalabas na ako at huwag kang tatapat ng bahay dahil nandoon ang kuya ko. kong ano ang disisyon mo maari bang magsulat ka at ipahatid kay Lorna. alang-alang sa bata. Baka makainon ako ng gamot dahil baka pagkain ko hahaluan nila. Please sir . . . (Sgd.) Mia Taha 70 3/1/94 Dane, I'm sorry kong problem ang ipinadala o sinulat sa iyo sa halip sa kasiyahan. oo nag usap na tayo nagawa ko lang naman ang sumulat sa iyo dahil naiinis na ako sa pagmumukha ng mga magulang kong suwapang. Ang paglayas ko sana ay dahil sa narinig ko. Sir narinig ko na magreklamo si nanay kay Arquero yong superentende sa Palawan high tapos ang sabi ay magreklamo itong si Arquero sa DECS para matanggal ka sa pagtuturo yan ang dahilan kong bakit naisipan kong lumayas ng wala sa oras at wala akong tensyon na masama laban so iyo. hindi ko sinabi sa kanila na delayed ako ay sinabi sa iyo ni Eden na sa harap niya mismo binigyan ako ng gamot samantalang noong Sabado ng gabi lang nalaman dahil gusto kong masuka. Oo aaminin ko nagkasala ako sa iyo, pinabilanggo kita dahil nagpanig ako sa mga magulang ko nadala nila ako sa sulsul nila. hindi ko naipaglaban ang dapat kong ipaglaban ngunit kong iniisip mong minahal lang kita dahil sa

may kailangan lang ako sa iyo nagkakamali ka. alam ng Diyos na hindi ganon ang hangarin ko sa iyo. higit pa sa binilanggo ang kalagayan ko kong alam mo. kinukunsinsiya, nagtitiis na saktan at pagsasakripisyo ng damdamin ko na gusto kang makita at yakapin ka pero ano ang magagawa ko kong ang paglabas ko ng bahay ay hindi ako makalabas ng mag isa may guardiya pa. tanungin mo si Lorna kong ano ginagawa nilang pagbantay sa akin para akong puganti. hindi ito ayon sa kagustuhan ng mga magulang ko sarili kong plano ito. Magtitiis pa ba akong hindi makakain maghapon tubig lang ang laman ng tiyan, kong may masama akong hangarin sa iyo. Oo, magtiis ako para maipakita kong mahal rin kita. March 2 darating ako sa bahay na sinasabi mo. hindi ko matiyak kong anong oras dahil kukuha pa ako ng tiyempo na wala rito ang tatay ko. Alam mo bang pati ang kapatid kong si Rowena ay inuutusan akong lumayas dahil naawa no siya sa situation ko. siya lang ang kakampi ko rito sa bahay malaki ang pag-asa kong makalabas ako ng bahay sa tulong niya. Love you (Sgd.) Mia Taha 71 There is absolutely nothing left to the imagination. The letters eloquently speak for themselves. It was complainant's handwriting which spilled the beans, so to speak. Aside from appellant, two other defense witnesses identified the handwriting on the letters as belonging to Mia Taha. They are Filomena Pielago and Erna Baradero who were admittedly the former teachers of complainant and highly familiar with her handwriting. The greatest blunder committed by the trial court was in ignoring the testimonies of these qualified witnesses and refusing to give any probative value to these two vital pieces of evidence, on the dubious and lame pretext that no handwriting expert was presented to analyze and evaluate the same. Well-entrenched by now is the rule that resort to questioned document examiners, more familiarly called handwriting experts, is not mandatory. Handwriting experts, while probably useful, are not indispensable in examining or comparing handwriting. 72 This is so since under Section 22, Rule 132 of the Rules of Court, the handwriting of a person may be proved by any witness who believes it to be the handwriting of such person, because he has seen the person write, or has seen writing purporting to be his upon which the witness has acted or been charged, and has thus acquired knowledge of the handwriting of such person. The said section further provides that evidence respecting the handwriting may also be given by a comparison, made by the witness or the court, with writings admitted or treated as genuine by the party against whom the evidence is offered or proved to be genuine to the satisfaction of the judge. 73 The defense witnesses were able to identify complainant's handwriting on the basis of the examination papers submitted to them by her in their respective subjects. This Court has likewise carefully examined and compared the handwriting on the letters with the standard writing appearing on the test papers as specimens for comparison and, contrary to the observations and conclusions of the lower court, we are convinced beyond doubt that they were written by one and the same person. More importantly, complainant herself categorically admitted that the handwriting on the questioned letters belongs to her. It is, therefore, extremely disconcerting, to say the least, why the trial court again chose to turn a deaf ear to this conclusive portion of complainant's testimony: ATTY. EBOL: Q Did I get you right on rebuttal that Mrs. Erna Baradero and Filomena Pielago were your teachers? A Yes, sir. Q And they have been your teachers for several months before this incident of January 21, 1994, am I not correct? A That is true, sir. Q And you have (sic) during these past months that they have been your teachers you took examinations in their classes in their particular subject(s)? A Yes, sir. Q And some of those test papers are in the possession of your teachers, am I correct? A Yes, sir. Q I will show you Exhibit "4" previously marked as Exhibit "4", it appears to be your test paper and with your signature and the alphabet appears in this exhibit appears to be that of Mia Taha, please examine this and tell the Honorable Court if that is your test paper? A Yes, sir. Q That signature Mia Taha I understand is also your signature? A Yes, sir. Q I will show you Exhibit "4-A", will you please examine this Exhibit "4-A" and tell this Honorable Court if you are familiar with that. A What subject is that? Q I am just asking you whether you are familiar with that. A I cannot remember if I have this kind of subject, sir. Q How about this signature Mia Taha, are you not familiar with that signature? A That is min(e), sir. Q I will show you Exhibit "4-C" which appears to be that in Math, are you familiar with that signature? A Yes, sir.

Q That is your signature? A Yes, sir. Q In fact, these letters in alphabet here are in your own handwriting? A Yes, sir. xxx xxx xxx Q You will deny this Exhibit "1" your signature? xxx xxx xxx Q You will deny that this is your handwriting? A That is my handwriting, sir. Q Also Exhibit "2"?

A Yes, sir. 74 While rebuttal witness Lorna Casantosan insisted that she never delivered any letter of complainant to herein appellant, the witness presented by the defense on sur-rebuttal, Armando Pasion, who was the guard on duty at the provincial jail at that time, testified of his own accord because he knew that what Casantosan said was a blatant lie. Appellant never talked to Amando Pasion nor requested him to testify for the defense, as related by the witness himself. Hence, there exists no reason whatsoever to disbelieve the testimony of witness Pasion to the effect that Lorna Casantosan actually went to visit appellant in jail and in truth handed to him what turned out to be the letters marked as Exhibits "1" and "2" for the defense. V. The prosecution insists that the offer of compromise made by appellant is deemed to be an admission of guilt. This inference does not arise in the instant case. In criminal cases, an offer of compromise is generally admissible as evidence against the party making it. It is a legal maxim, which assuredly constitutes one of the bases of the right to penalize, that in the matter of public crimes which directly affect the public interest, no compromise whatever may be entered into as regards the penal action. It has long been held, however, that in such cases the accused is permitted to show that the offer was not made under a consciousness of guilt, but merely to avoid the inconvenience of imprisonment or for some other reason which would justify a claim by the accused that the offer to compromise was not in truth an admission of his guilt or an attempt to avoid the legal consequences which would ordinarily ensue therefrom. 75 A primary consideration here is that the evidence for the defense overwhelmingly proves appellant's innocence of the offense charged. Further, the supposed offer of marriage did not come from appellant but was actually suggested by a certain Naem, who is an imam or Muslim leader and who likewise informed appellant that he could be converted into a Muslim so he could marry complainant. As a matter of fact, when said offer was first made to appellant, he declined because of the fact that he was already married. On top of these, appellant did not know, not until the trial proper, that his mother actually paid P30,000.00 for the settlement of these cases. Complainant's own mother, Helen Taha, testified that present during the negotiations were herself, her husband, Mia, and appellant's mother. Appellant himself was never present in any of said meetings. 76 It has been held that where the accused was not present at the time the offer for monetary consideration was made, such offer of compromise would not save the day for the prosecution. 77 In another case, this Court ruled that no implied admission can be drawn from the efforts to arrive at a settlement outside the court, where the accused did not take part in any of the negotiations and the effort to settle the case was in accordance with the established tribal customs, that is, Muslim practices and traditions, in an effort to prevent further deterioration of the relations between the parties. 78 VI. Generally, an affidavit of desistance by the complainant is not looked upon with favor. It may, however, create serious doubts as to the liability of appellant, especially if it corroborates appellant's explanation about the filing of criminal charges. 79 In the cases at bar, the letters written by complainant to appellant are very revealing. Most probably written out of desperation and exasperation with the way she was being treated by her parents, complainant threw all caution to the winds when she wrote: "Oo, aaminin ko nagkasala ako sa iyo, pinabilanggo kita dahil nagpanig ako sa mga magulang ko nadala nila ako sa sulsul nila, hindi ko naipaglaban ang dapat kong ipaglaban," obviously referring to her ineptitude and impotence in helping appellant out of his predicament. It could, therefore, be safely presumed that the rape charge was merely an offshoot of the discovery by her parents of the intimate relationship between her and appellant. In order to avoid retribution from her parents, together with the moral pressure exerted upon her by her mother, she was forced to concoct her account of the alleged rape. The Court takes judicial cognizance of the fact that in rural areas in the Philippines, young ladies are strictly required to act with circumspection and prudence. Great caution is observed so that their reputations shall remain untainted. Any breath of scandal which brings dishonor to their character humiliates their entire families. 80 It could precisely be that complainant's mother wanted to save face in the community where everybody knows everybody else, and in an effort to conceal her daughter's indiscretion and escape the wagging tongues of their small rural community, she had to weave the scenario of this rape drama. Although the trial court did observe that a mother would not sacrifice her daughter to tell a story of defloration, that is not always the case as this Court has noted a long time ago. The books disclose too many instances of false charges of rape. 81 While this Court has, in numerous cases, affirmed the judgments of conviction rendered by trial courts in rape charges, especially where the offended parties were very young and presumptively had no ill motives to concoct a story just to secure indictments for a crime as grave as rape, the Court has likewise reversed judgments of conviction and acquitted the accused when there are strong indications pointing to the possibility that the rape charges were merely motivated by some factors except the truth as to their commission.82 This is a case in point. The Court, therefore, cannot abdicate its duty to declare that the prosecution has failed to meet the exacting test of moral certainty and proof of guilt of appellant beyond reasonable doubt. This is not to say that the Court approves of the conduct of appellant. Indisputably, he took advantage of complainant's feelings for him and breached his vow of fidelity to his wife. As her teacher, he should have acted as adviser and counselor to complainant and helped her develop in manners and virtue instead of corrupting her.83 Hence, even as he is freed from physical detention in a prison as an instrument of human justice, he remains in the spiritual confinement of his conscience as a measure of divine retribution. Additionally, these ruminations do not rule out such other legal options against him as may be available in the arsenal of statutory law.

VII. The trial court, in holding for conviction, relied on the presumptio hominis that a young Filipina will not charge a person with rape if it is not true. In the process, however, it totally disregarded the more paramount constitutional presumption that an accused is deemed innocent until proven otherwise. It frequently happens that in a particular case two or more presumptions are involved. Sometimes the presumptions conflict, one tending to demonstrate the guilt of the accused and the other his innocence. In such case, it is necessary to examine the basis for each presumption and determine what logical or social basis exists for each presumption, and then determine which should be regarded as the more important and entitled to prevail over the other. It must, however, be remembered that the existence of a presumption indicating guilt does not in itself destroy the presumption against innocence unless the inculpating presumption, together with all of the evidence, or the lack of any evidence or explanation, is sufficient to overcome the presumption of innocence by proving the defendant's guilt beyond a reasonable doubt. Until the defendant's guilt is shown in this manner, the presumption of innocence continues. 84 The rationale for the presumption of guilt in rape cases has been explained in this wise:

In rape cases especially, much credence is accorded the testimony of the complaining witness, on the theory that she will not choose to accuse her attacker at all and subject herself to the stigma and indignities her accusation will entail unless she is telling the truth. The rape victim who decides to speak up exposes herself as a woman whose virtue has been not only violated but also irreparably sullied. In the eyes of a narrow-minded society, she becomes a cheapened woman, never mind that she did not submit to her humiliation and has in fact denounced her assailant. At the trial, she will be the object of lascivious curiosity. People will want to be titillated by the intimate details of her violation. She will squirm through her testimony as she describes how her honor was defiled, relating every embarrassing movement of the intrusion upon the most private parts of her body. Most frequently, the defense will argue that she was not forced to submit but freely conjoined in the sexual act. Her motives will be impugned. Her chastity will be challenged and maligned. Whatever the outcome of the case, she will remain a tainted woman, a pariah because her purity has been lost, albeit through no fault of hers. This is why many a rape victim chooses instead to keep quiet, suppressing her helpless indignation rather than denouncing her attacker. This is also the reason why, if a woman decides instead to come out openly and point to her assailant, courts are prone to believe that she is telling the truth regardless of its consequences. . . . 85 The presumption of innocence, on the other hand, is founded upon the first principles of justice, and is not a mere form but a substantial part of the law. It is not overcome by mere suspicion or conjecture; a probability that the defendant committed the crime; nor by the fact that he had the opportunity to do so. 86 Its purpose is to balance the scales in what would otherwise be an uneven contest between the lone individual pitted against the People and all the resources at their command. Its inexorable mandate is that, for all the authority and influence of the prosecution, the accused must be acquitted and set free if his guilt cannot be proved beyond the whisper of a doubt. 87 This is in consonance with the rule that conflicts in evidence must be resolved upon the theory of innocence rather than upon a theory of guilt when it is possible to do so. 88 On the basis of the foregoing doctrinal tenets and principles, and in conjunction with the overwhelming evidence in favor of herein appellant, we do not encounter any difficulty in concluding that the constitutional presumption on the innocence of an accused must prevail in this particular indictment. B. The Kidnapping/Illegal Detention Case It is basic that for kidnapping to exist, there must be indubitable proof that the actual intent of the malefactor was to deprive the offended party of her liberty. 89 In the present charge for that crime, such intent has not at all been established by the prosecution. Prescinding from the fact that the Taha spouses desisted from pursuing this charge which they themselves instituted, several grave and irreconcilable inconsistencies bedevil the prosecution's evidence thereon and cast serious doubts on the guilt of appellant, as hereunder explained: To recall, complainant testified that appellant by himself went to fetch her at her parents' house the day after the alleged rape incident. In her own words, appellant courteously asked her parents to permit her to help him solicit contributions for her candidacy. When they left the house, appellant walked ahead of her, obviously with her parents and their neighbors witnessing their departure. It is difficult to comprehend how one could deduce from these normal and innocuous arrangement any felonious intent of appellant to deprive complainant of her liberty. One will look in vain for a case where a kidnapping was committed under such inauspicious circumstances as described by complainant. Appellant declared that when they left the house of the Taha family, complainant was bringing with her a plastic bag which later turned out to contain her clothes. This bag was left behind by Mia at Edward's Subdivision, as hereinbefore noted, and was later delivered to appellant by Benedicto Rubio. Again, we cannot conceive of a ridiculous situation where the kidnap victim was first allowed to prepare and pack her clothes, as if she was merely leaving for a pleasant sojourn with the criminal, all these with the knowledge and consent of her parents who passively looked on without comment. Complainant alleged that appellant always kept her locked inside the room which they occupied, whether at Sunset Garden or at Edward's Subdivision, and that she could not unlock the door from the inside. We must, however, recall that when she was asked on cross-examination about the kind of lock that was used, she pointed to the doorknob of the courtroom. The court then ordered that the door of the courtroom be locked and then asked complainant to open it from the inside. She was easily able to do so and, in fact, she admitted that the two locks in the room at Sunset Garden could also be opened from the inside in the same manner. This demonstrably undeniable fact was never assailed by the prosecution. It also failed to rebut the testimony of Fernando Rubio that the room which was occupied by the couple at Edward's Subdivision could not even be locked because the lock thereof was broken.

When the couple transferred to Edward's Subdivision, they walked along the national highway in broad daylight. Complainant, therefore, had more than ample opportunity to seek the help of other people and free herself from appellant if it were true that she was forcibly kidnapped and abused by the latter. 90 In fact, several opportunities to do so had presented themselves from the time they left complainant's home and during their extended stay in the hotel and in the lodging house. According to appellant, he went to see the parents of complainant the day after they went to Sunset Garden to inform them that Mia spent the night in said place. This was neither denied nor impugned by Helen Taha, her husband, or any other person. On the other hand, the allegation of Helen Taha that she made a report to the police about her missing daughter was not supported by any corroborative evidence, such as the police blotter, nor was the police officer to whom she allegedly reported the incident ever identified or presented in court. We agree with appellant's contention that the prosecution failed to prove any motive on his part for the commission of the crime charged. In one case, this Court rejected the kidnapping charge where there was not the slightest hint of a motive for the crime. 91 It is true that, as a rule, the motive of the accused in a criminal case is immaterial and, not being an element of a crime, it does not have to be proved. 92 Where, however, the evidence is weak, without any motive being disclosed by the evidence, the guilt of the accused becomes open to a reasonable doubt and, hence, an acquittal is in order. 93 Nowhere in the testimony of either the complainant or her mother can any ill motive of a criminal nature be reasonably drawn. What actually transpired was an elopement or a lovers' tryst, immoral though it may be. As a closing note, we are bewildered by the trial court's refusal to admit in evidence the bag of clothes belonging to complainant which was presented and duly identified by the defense, on its announced supposition that the clothes could have easily been bought from a department store. Such preposterous reasoning founded on a mere surmise or speculation, aside from the fact that on rebuttal the prosecution did not even seek to elicit an explanation or clarification from complainant about said clothes, strengthens and reinforces our impression of an apparently whimsical exercise of discretion by the court below. Matters which could have been easily verified were thus cavalierly dismissed and supplanted by a conjecture, and on such inferential basis a conclusion was then drawn by said court. We accordingly deem it necessary to reiterate an early and highly regarded disquisition of this Court against the practice of excluding evidence in the erroneous manner adopted by the trial court:

It has been observed that justice is most effectively and expeditiously administered where trivial objections to the admission of proof are received with least favor. The practice of excluding evidence on doubtful objections to its materiality or technical objections to the form of the questions should be avoided. In a case of any intricacy it is impossible for a judge of first instance, in the early stages of the development of the proof, to know with any certainty whether the testimony is relevant or not; and where there is no indication of bad faith on the part of the attorney offering the evidence, the court may as a rule safely accept the testimony upon the statement of the attorney that the proof offered will be connected later. Moreover, it must be remembered that in the heat of the battle over which he presides, a judge of first instance may possibly fall into error in judging the relevancy of proof where a fair and logical connection is in fact shown. When such a mistake is made and the proof is erroneously ruled out, the Supreme Court, upon appeal, often finds itself embarrassed and possibly unable to correct the effects of the error without returning the case for a new trial, a step which this court is always very loath to take. On the other hand, the admission of proof in a court of first instance, even if the question as to its form, materiality, or relevancy is doubtful, can never result in much harm to either litigant, because the trial judge is supposed to know the law and it is its duty, upon final consideration of the case, to distinguish the relevant and material from the irrelevant and immaterial. If this course is followed and the cause is prosecuted to the Supreme Court upon appeal, this court then has all the materials before it necessary to make a correct judgment. 94 At any rate, despite that procedural lapse, we find in the records of these cases sufficient and substantial evidence which warrant and demand the acquittal of appellant. Apropos thereto, we take this opportunity to repeat this age-old observation and experience of mankind on the penological and societal effect of capital punishment: If it is justified, it serves as a deterrent; if injudiciously imposed, it generates resentment. Finally, we are constrained to reiterate here that Republic Act No. 7659 which reimposed the death penalty on certain heinous crimes took effect on December 31, 1993, that is, fifteen days after its publication in the December 16, 1993 issues of the Manila Bulletin, Philippine Star, Malaya and Philippine Times Journal, 95 and not on January 1, 1994 as is sometimes misinterpreted. WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE, and accused-appellant Danny Godoy is hereby ACQUITTED of the crimes of rape and kidnapping with serious illegal detention charged in Criminal Cases Nos. 11640 and 11641 of the Regional Trial Court for Palawan and Puerto Princesa City, Branch 49. It is hereby ORDERED that he be released forthwith, unless he is otherwise detained for any other valid cause. SO ORDERED. Narvasa, C.J., Feliciano, Padilla, Davide, Jr., Romero, Bellosillo, Melo, Vitug, Kapunan, Mendoza, Francisco, Hermosisima, Jr. and Panganiban, JJ., concur. Puno, J., took no part.

[G.R. Nos. 133066-67. October 1, 2003] PEOPLE OF THE PHILIPPINES, appellee, vs. ROMEO H. LAMBID, appellant. DECISION
AUSTRIA-MARTINEZ, J.:

On automatic review is the joint decision of the Regional Trial Court of Cebu City, Branch 18, in Criminal Cases Nos. CBU-45672 and CBU-45673 finding Romeo H. Lambid guilty beyond reasonable doubt of two counts of qualified rape and sentencing him to suffer the penalty of death for each count. In her two separate Complaints dated November 4, 1997 and November 5, 1997, complainant Lyzel S. Lambid, accuses Romeo H. Lambid of raping her, as follows: In Criminal Case No. CBU-45672: The undersigned complainant, LYZEL S. LAMBID, after having been duly sworn to in accordance with law, hereby accuses ROMEO H. LAMBID of the crime of Rape, committed as follows: That on or about the 31st day of October, 1997, at about 5:00 A.M., and for sometime subsequent thereto, in the City of Cebu, Philippines, and within the jurisdiction of this Honorable Court, the said accused, by means of force and intimidation upon undersigned complainant to wit, by forcibly placing himself on top of the victim, and at the same time threat her with death if she would shout, then removed her panty, did then and there have carnal knowledge of the undersigned against her will. CONTRARY TO LAW. In Criminal Case No. CBU-45673: The undersigned complainant, LYZEL S. LAMBID, after having been duly sworn to in accordance with law, hereby accuses ROMEO H. LAMBID of the crime of Rape, committed as follows: That on or about the 1st day of November, 1997, at about 5:00 A.M., in the City of Cebu, Philippines, and within the jurisdiction of this Honorable Court, the said accused, by means of force and intimidation upon undersigned complainant to wit, by forcibly placing himself on top of the victim, and at the same time threat her with death if she would shout, then removed her panty, did then and there have carnal knowledge of the undersigned against her will. CONTRARY TO LAW. Upon his arraignment, appellant pleaded not guilty to both charges. The cases were consolidated and tried jointly. The prosecution presented three witnesses: Lyzel Lambid, the complainant; Mary Ann Lambid, a sister of Lyzel; and Dr. Aster Khosravibabadi, the physician who conducted a physical examination on the complainant. The facts established by the prosecution are as follows: On October 31, 1997, 14-year old Lyzel was sleeping in their house located at Inayawan, Cebu City together with her father, herein appellant, and two sisters. Around 5:00 in the morning, she woke up and noticed her father lying beside her. Then, her father started removing her panty at the same time warning her not to tell her mother what he was doing. After her father succeeded in removing her panty, he went on top of her and started inserting his penis into her vagina. She initially tried to resist the sexual advances of her father by kicking him and by moving her body from left to right and vice versa. She stopped resisting when her father stared hard at her and threatened to kill her (Lyzel). Her father succeeded in inserting his penis into her vagina. The following day, November 1, 1997, she was again roused from her sleep and noticed her father lying beside her. Repeating what he did the previous day, her father removed her panty. Thereafter, he successfully inserted his penis into her vagina. Lyzel did nothing out of fear. She did not tell anybody about these two incidents. However, her sister, Mary Ann, aged 13, witnessed both incidents. She was awakened around 5:00 in the morning of October 31, 1997 when she heard their father say to her
[1] [2] [3] [4]

sister Lyzel: Dont tell this to your mother or else I will kill you. Their father was then lying beside Lyzel. Afterwards, she saw him stand up and go to urinate. About 5:00 in the morning of the succeeding day, November 1, 1997, she was sleeping beside her sister Lyzel. She was awakened while their father was pulling her blanket. Suspicious of their fathers actuation, she kicked him. After kicking him, she laid near the foot of her sister Lyzel. Their father then covered her with a blanket but she peeped through the blanket. She saw their father who was only wearing an underwear place himself on top of Lyzel. Her father covered himself and Lyzel with a blanket, after which Mary Ann saw their fathers whole body shake and heard him breathing hard. She again heard their father warn Lyzel not to relate the incident to their mother, otherwise he will kill her (Lyzel). On November 2, 1997, Mary Ann informed three of their neighbors about the incidents she witnessed. Their neighbors brought her to the president of their local association for assistance and on that same day their father was arrested. Dr. Aster Khosravibabadi conducted a physical examination of Lyzel on November 3, 1997 and found that Lyzels vagina had new hymenal lacerations with raw edges at 5 oclock position. The doctor asserted that Lyzel might have sustained the lacerations within six days prior to her examination. The test for the presence of spermatozoa yielded negative results. The defense presented appellant as its lone witness. On the witness stand, when asked about the truth of her daughters complaint, appellant simply stated that if he had committed the crimes of rape against his daughter, he asks for forgiveness because during that time he was drunk. He asked the court to impose upon him a lesser penalty considering that his children are still under his care. The trial court rendered judgment, the dispositive portion of which reads as follows: WHEREFORE, premises considered, the Court finds the accused Romeo H. Lambid guilty beyond reasonable doubt of the crime of rape, defined and penalized by Article 335 of the Revised Penal Code and Republic Act No. 7659 known as the Death Penalty Law and sentences him to suffer two supreme penalties of Death for the two (2) crimes of rape committed against her own daughter Lyzel Lambid, with inherent accessory penalties provided by law; to indemnify the victim the sum of P100,000.00 as moral damages and to pay the costs. SO ORDERED. Hence, the present automatic review pursuant to Article 47 of the Revised Penal Code, as amended. Appellant raises the following Assignment of Errors:
[5] [6] [7] [8]

THE TRIAL COURT GRAVELY ERRED IN FINDING ACCUSED-APPELLANT GUILTY OF THE CRIME CHARGED BASED ON REASONABLE DOUBT.
II

THE TRIAL COURT GRAVELY ERRED IN IMPOSING THE SUPREME PENALTY OF DEATH NOTWITHSTANDING THE FAILURE OF THE PROSECUTION TO ALLEGE THE AGE AND RELATIONSHIP OF THE VICTIM AND THE ACCUSED-APPELLANT. At the outset, it is noted that since the crimes were committed on October 31, 1997 and November 1, 1997, the applicable law is R.A. 8353, otherwise known as The AntiRape Law of 1997 which took effect on October 22, 1997. Under this law, rape has been reclassified from a private crime or crime against chastity into a crime against
[9] [10] [11]

persons. Consequently, the prosecution for the crime of rape was removed from the ambit of Chapter Five, Title Eleven of the Revised Penal Code and Section 5, Rule 110 of the 1985 Rules on Criminal Procedure which required that in crimes against chastity, the complaint must be filed by the offended party, or her parents, godparents or guardian, as the case may be under the law. Thus, effective October 22, 1997, R.A. No. 8353, it is required that prosecution for the crime of rape, as in any other public crimes, is commenced in court by the filing of an information by the public prosecutor and no longer by a mere complaint filed by the offended party, parents, godparents or guardian. In the present cases, the indictments charging appellant with the crimes of rape were each captioned as a Complaint signed by Lyzel herself; but, there is a Certification on the second page of each of the complaints by the investigating prosecutor treating the complaint as an information, to wit: In Criminal Case No. CBU-45672: CERTIFICATION I hereby certify that the foregoing information is filed pursuant to Sec. 7, Rule 112 of the 1985 Rules on Criminal Procedure, as amended, the accused not having opted to avail of his right to a preliminary investigation and not having executed a waiver pursuant to Art. 125 of the Revised Penal Code. I further certify that this information is being filed with the prior authority of the City Prosecutor. Cebu City, Philippines, November 4, 1997. (signed) JOSE R. PEDROSA Prosecutor II, Cebu City (Emphasis supplied) In Criminal Case No. CBU-45673: CERTIFICATION I hereby certify that the foregoing information is filed pursuant to Sec. 7, Rule 112 of the 1985 Rules on Criminal Procedure, as amended, the accused having opted to avail of his right to a preliminary investigation and having executed a waiver pursuant to Art. 125 of the Revised Penal Code. I further certify that this information is being filed with the prior authority of the City Prosecutor. Cebu City, Philippines, November 5, 1997. (signed) JOSE R. PEDROSA Prosecutor II, Cebu City The apparent defect in the form of indictment, that is by way of a complaint by the offended party, is merely one of form which does not invalidate the proceedings had in the trial court. The certification converted the complaints into informations filed by the prosecutor. Moreover, under Section 8, Rule 117 of the 1985 Rules of Criminal Procedure, the governing law at the time of the filing of the indictments, for his failure to move to quash the same prior to his arraignment, appellant was deemed to have waived his right to question the complaints filed by Lyzel on the ground that it is defective in form per Section 3(d), Rule 117 of the Rules of Court. Coming to the merits of the case, appellant, in support of the first assigned error, attacks the credibility of the complainant. He harps upon the fact that although Lyzel was
[12] [13] [14] [15]

sure of the dates when appellant raped her, she failed to recall the days of the week upon which these dates fell. Appellant also points out the apparent inconsistency as to the date Lyzels mother arrived from Leyte and the date she accompanied Lyzel to report the incident to the police authorities. We agree with the contention of the Office of the Solicitor General (OSG) that the failure of complainant to correctly pinpoint the day of the week when she was raped and to recall the exact date of her mothers arrival from Leyte are inconsequential matters. It is a settled rule that discrepancies in details which are irrelevant to the elements of the crime, such as the exact time of the commission of the crime, are not grounds for acquittal. To be material, discrepancies in the testimony of the victim should refer to significant facts which are determinative of the guilt or innocence of the accused. In the present case, the mental lapse on the part of Lyzel in failing to accurately recall the exact days of the week when she was raped and the date of her mothers arrival from Leyte does not detract from her credibility. It only indicates that her account is spontaneous, neither rehearsed nor contrived. What is important is that she was able to clearly recall how she was raped and testify on this matter in a categorical and straightforward manner. Moreover, Lyzels testimony is strongly corroborated by her sister Mary Ann and buttressed by physical evidence. The physicians findings on her physical examination conducted on November 3, 1997 indicated the presence of fresh lacerations on her hymen. Laceration of the hymen, whether fresh or healed, is the best physical evidence of defloration. In the present case, the doctor estimated that the lacerations could have been sustained by Lyzel within six days prior to the date of her examination. This estimate is consistent with Lyzels claim that she was raped on October 31, 1997 and November 1, 1997. Under Article 266-A, paragraph 1(a) of the Revised Penal Code, as amended by R.A. No. 8353, rape is committed by a man who shall have carnal knowledge of a woman through fear, threat or intimidation. Appellant would have us to believe that if he had carnal knowledge with her daughter Lyzel, it was done without force and intimidation, citing her testimony that she did nothing while she was supposedly being sexually abused by him. We are not convinced in the light of Lyzels testimony, pertinent portions of which we quote verbatim, as follows:
[16] [17] [18] [19] [20] [21]

Q A Q A Q A Q A Q A Q A Q A ...

At about 5:00 oclock in the morning of October 31, 1997 can you recall of any unusual incident that transpired inside the house where you were residing? Yes there was sir. Please tell the Court Lyzel what was the unusual indicent? While I was still asleep I was awaken when my father sleep beside me. If your father was laying beside you did he do anything? There was sir. What did your father do to you? He remove my panty. And after your father remove your panty what did he do? He lift out his penis and let it enter into my vagina. And did your father succeeded in inserting his penis into your vagina? Yes, sir. What did you do when your father was still removing your panty and before he placed himself on top of you and inserted his penis into your vagina? He told me not to reveal to my mother what he did

COURT: Q What did you do when your father was doing all these things that you have told to us? A Nothing. FISCAL LABORTE: Q Why? A I was entertaining fear considering that he stared his eyes towards me. Q Aside from staring at you what else if any did your father do to in staring on you? A He said as follows: Dont tell anybody, if you still somebody I would kill you. COURT: Q Did you not move your body away from him so that he would not succeed in doing such thing to you? A I moved my body but he kept on holding me. FISCAL LABORTE: Q On the following day Lyzel November 1, 1997 where did you sleep? A At our house sir. Q The same house where you sleep the day before? A Yes, sir. COURT: Q Why did you still sleep in that house after that experienced you had with your father the preceding night. Why did you not run away from that house. A Because he will be looking for me, Your Honor. FISCAL LABORTE: Q And again Lyzel who were your companions if any on November 1, 1997 at your house when you were sleeping? A My two younger sister sir. Q Who else if any? A My father. Q At about the same time on November 1, 1997 at about 5:00 oclock in the morning was there anything unusual that happened inside your house? A There was. Q Now. Please tell this Honorable Court what unusual incident happened on that particular date and time. A While I was still asleep there was somebody lying beside me I thought it was my sister but when I was awaken it was my father. Q And while your father was lying beside you did he do anything? A Yes. Q Please tell the Court Lyzel what did your father do to you? A He removed my panty sir. Q And after your father removed your panty what did he do next? A He lift out his penis and inserted into my vagina. ... FISCAL LABORTE: Q Did your father succeed in inserting his penis into your vagina? A Yes. Q Now what did you do when your father inserted his penis into your vagina? A Nothing. Q Why? A Because I was entertaining fear. COURT: Q Why were you afraid of your father? A Because his eyes were starring at me. Q Was his bolo was still there? A Yes, Your Honor. FISCAL LABORTE: Q Did you tell somebody Lyzel on what your father did to you on October 31, 1997 as well as on November 1, 1997?

A Q A

No, sir. Why did you not tell anybody about what your father did to you? Because I was entertaining fear all the time.[22] (Emphasis supplied)

On cross-examination, Lyzel further testified:

ATTY. GUBALANE: Q How long did it take by your father in removing your panty on October 31, 1997? A About one minute sir. Q Do your remember what were your wearing on October 31, 1997? A Yes I remember sir. Q What were you wearing then? A Short pants sir. Q When you noticed your father on October 31, 1997 sleep beside you and before he remove your panty why did you not shour for help? A Because I was entertaining fear sir. COURT: Q Fear of what? A Entertaining fear to my father, Your Honor. ATTY. GUBALANE: Q Is it not true then that Mary Ann is sleeping beside you at your foot? A Thats correct sir. Q Did you not kick you father? A I kicked him sir. Q How many times did you kick your father? A Two times. Q But you did not shout? A No, sir. Q Because of fear? A Thats right sir. Q Inspite your fear you managed to kick your father two times? A Thats right sir. COURT: Q You kick for two times, did you do this on the first rape or on the second rape? A The first rape, Your Honor. Q Why did you not kick him any more in the second time? A Because he stared his eyes towards me (gisigahan ko sa iyang mata).[23] (Emphasis supplied)

Lyzel very clearly testified that in the first incident, she tried to resist the sexual advances of appellant by kicking him and by trying to move her body but when appellant threatened to kill her, she, who was only fourteen years old, was easily cowed into submitting herself to appellants carnal desire. When appellant raped her the following day, her fear of her father and of the previous threat that he would kill her still pervaded causing her to do nothing the second time. Her harrowing experience the day before in the hands of her father coupled with a threat on her life was sufficient to envelop her with fear and paralyze her into submission even if appellant merely stared at her when he raped her again the following morning. Lyzels failure to shout or offer tenacious resistance during the second incident does not demolish her claim that she was raped. As we have held in People vs. Rodriguez: The defense argument that the accused has not employed force upon his daughter in order to have sex with him does not at all persuade. The force or violence necessary in rape is a relative term that depends not only on the age, size, and strength of the persons involved but also on their relationship to each other. In a rape committed by a father against his own daughter, the formers parental authority and moral ascendancy over the latter substitutes for violence or intimidation who, expectedly, would just cower in fear and resign to the fathers w icked deeds. It would be plain

fallacy to say that the failure to shout or to offer tenacious resistance makes voluntary the victims submission to the criminal act of the offender. and in People vs. Flores, to wit: Intimidation must be viewed in the light of the perception of the victim at the time of the commission of the crime, not by any hard and fast rule; it is therefore enough that it produced fear fear that if she did not yield to the bestial demands of her revisher, some evil could happen to her at that moment or even thereafter. The fact that complainant bore no physical evidence of any force used against her person is of no moment. The absence of any external sign of injury does not necessarily negate the occurrence of rape, proof of injury not being an essential element of the crime. What is important is that because of force and intimidation, the victim was made to submit to the will of appellant. As stated in People vs. Maglente, the test is whether the treat or intimidation produces fear in the mind of a reasonable person that if one resists or does not yield to the desires of the accused, the threat would be carried out. Besides, no less than Lyzels younger sister Mary Ann positively testified that she heard her father threaten Lyzels life on both occasions. Appellants threat on the life of his 14-year old child and the fear it instilled in her clearly repudiate his claim that there was no force or intimidation employed against her in both occasions. Appellant further questions the credibility of Lyzel in enabling him to rape her in two successive days. He contends that after Lyzel was raped for the first time on October 31, 1997, her logical reaction should have been to immediately seek the help of other people; that despite her opportunity to do so, she did not. We are not persuaded. It is a settled rule that the workings of the human mind under emotional stress are unpredictable and there is no standard form of behavior when one is confronted by a shocking incident. Verily, under emotional stress, the human mind is not expected to follow a predictable path. Indeed, Lyzel must have been shocked and utterly confused by the fact that her own father, committed such an act of bestiality against her. More importantly, it is established by competent evidence that appellant threatened to kill Lyzel if she told anybody about the rape. That alone is sufficient explanation why she did not make known to other people the first time that she was raped by her father. Appellant raised no defense whatsoever. He virtually admitted his guilt. A review of the transcript of stenographic notes taken during his direct and cross examinations shows that he never disowned the acts imputed against him. Appellant merely claimed that he was drunk and he asked for forgiveness from Lyzel, if he had really raped her and for compassion from the trial court. In People vs. Alvero, we held that a plea for forgiveness may be considered as analogous to an attempt to compromise and an offer of compromise by the accused may be received in evidence as an implied admission of guilt. Thus, by asking for forgiveness, appellant has admitted his guilt. As to the second assigned error, the OSG agrees with appellant. We sustain the arguments of both appellant and the OSG. The trial court erred in imposing the death penalty. Articles 266-A and 267 of the Revised Penal Code, as amended by R.A. No. 8353, provide: Art. 266-A. Rape; When and How Committed.- Rape is committed: 1) By a man who shall have carnal knowledge of a woman under any of the following circumstances:
[24] [25] [26] [27] [28] [29]

a) b) c) d)

Through force, threat or intimidation; When the offended party is deprived of reason or otherwise unconscious; By means of fraudulent machination or grave abuse of authority; and When the offended party is under twelve (12) years of age or is demented, even though none of the circumstances mentioned above are present.

... Article 266-B. Penalties. Rape under paragraph 1 of the next preceding article shall be punished by reclusion perpetua. ... The death penalty shall also be imposed if the crime of rape is committed with any of the following aggravating/qualifying circumstances: 1) When the victim is under eighteen (18) years of age and the offender is a parent , ascendant, step-parent, guardian, relative by consanguinity or affinity within the third civil degree, or the common law spouse of the parent of the victim; ... 3) When the rape is committed in full view of the spouse, parent, any of the children or other relatives within the third civil degree of consanguinity; (Emphasis supplied) ... In both cases, the prosecution has established by competent evidence that Lyzel was fourteen years old and appellant is her father. In Criminal Case No. CBU-45673, it is likewise established that appellant raped his daughter Lyzel in full view of his other minor daughter Mary Ann, thus:
FISCAL LABORTE: Q The following day November 1, 1997 at about the same time 5:00 a.m., can you recall where were you? A Yes, I can. Q Where were you on that particular date and time? A At our house. Q Again, can you tell the Court if there was any unusual incident that transpired? A Yes, sir. Q What was that unusual incident? A While I was sleeping beside my sister my father pulled that blanket and then I kicked him. That is why I transferred lying at the foot sir of my sister. Q You said that when your father pulled the blanket you kicked him why did you kick you father? A Because I was suspicious on his actuations sir considering that because I noticed what he said to my sister by saying dont tell to your mother. If you tell your mother I would kill you. Q What was that something which your father dont want to let your sister do, if you know? A When he abused my sister. Q Now, after you kicked your father and transferred sleeping at the foot of your sister what happened next? A While I was lying at that time and when he covered me with a blanket I saw my father rose placed himself on top of my sister. Q While your father was already on top of your sister what did you do? A He made a sexual intercourse with my sister. COURT: Q Were you not dreaming? A No, Your Honor. Q Are your sure you were wide awake at that time? A Yes, I am sure. COURT: Proceed.

FISCAL LABORTE: Q According to you Mary Ann you covered yourself you covered yourself with a blanket how were you able to witness, to see what all your father did to your sister when you were inside the blanket? A Because I peeped sir. Q Why did you peep when there was no partition or room inside that house? A The breathing of my father. As a matter of fact, he kicked me. Q You said you saw what your father did to your sister because you peeped from where did your peep? A I peeped through the blanket. Q Whose blanket? A My blanket. COURT: Q Are you made to understand you have covered yourself with a blanket and removed a part so you can peeped? A That is right Your Honor. COURT: Proceed. FISCAL LABORTE: Q Now, after your father, according to you, sexually abused your sister Lyzel did your father say anything to your sister? A Yes, there was. He threatened my sister. Q What was this threat? A He told my sister as follows: dont tell your mother and if you tell your mother I will kill you. Q And after that what happened? A He keep on sexually abusing my sister. Q For how long? A For quite a time. Q Did you notice, if your sister, ever resisted to the sexual intercourse done by your father to her? A My sister moaned. Q How about you Mary Ann considering that you actually saw your father abusing your sister what did you do? A I cried. Q Did you not try to stop your father from abusing your sister? A No, sir because he placed a bolo beside him when he sleep. Q On October 31, 1997 did your father place a bolo beside him when he sleep? A Yes, sir. Q How about on November 1, 1997 did he also place the bolo beside him when your father sleep? A Yes, he place the bolo beside him every night.[30]

However, the complaints/informations in those two cases fail to allege Lyzels minority or appellants relationship to her. Section 9, Rule 110 of the Revised Rules of Criminal Procedure, requires that both qualifying and aggravating circumstances must be stated in the complaint or information. Existing jurisprudence instructs that the death penalty may be imposed only if the complaint or information has alleged and the evidence has proven both the minority of the victim and her relationship to the offender by the quantum of proof required for conviction. In the present case, not only were the minority of the complainant and her relationship with appellant not alleged in the two complaints/informations filed against appellant, but, also, the aggravating/qualifying circumstance that the second rape was committed in full view of appellants daughter. Consequently, appellant may be convicted only of simple rape; hence, the trial court erred in imposing death penalty in both cases. The appropriate penalty which could be imposed on the appellant is reclusion perpetua in each count. Let us now consider the civil aspect of the criminal cases.
[31]

It is a settled rule that an appeal in a criminal proceeding throws the whole case open for review and it becomes the duty of the appellate court to correct an error as may be found in the appealed judgment, whether or not it is made the subject of assignment of errors. While the trial court correctly awarded moral damages in the amount of P50,000.00, it failed to award civil indemnity. Civil indemnity is distinct from moral damages as it is based on different jural foundations and assessed by the court in the exercise of its sound discretion. The award of civil indemnity is mandatory upon the finding of fact of rape. Based on existing jurisprudence, the civil indemnity for the victim in simple rape shall not be less than P50,000.00. It is settled that the presence of an aggravating circumstance justifies an award for exemplary damages under Article 2230 of the Civil Code even in the absence of an allegation of the aggravating circumstance in the Information. The award of exemplary damages should serve to deter other fathers with perverse tendencies and aberrant sexual behavior from preying upon and sexually abusing their daughters. Thus, exemplary damages in the amount of P25,000.00 for each count of rape should be awarded to the victim in view of the presence of the aggravating circumstances of relationship and dwelling. WHEREFORE, the Decision of the Regional Trial Court of Cebu City, Branch 18, dated December 22, 1997 in Criminal Cases Nos. CBU-45672 and CBU-45673 finding appellant Romeo H. Lambid guilty beyond reasonable doubt of two (2) counts of rape is AFFIRMED with MODIFICATIONS to the effect that in each case, he is sentenced to suffer the penalty of reclusion perpetua and ordered to pay complainant Lyzel S. Lambid the amounts of Fifty Thousand Pesos (P50,000.00) as civil indemnity, Twenty Five Thousand Pesos (P25,000.00) as exemplary damages in addition to the amount of Fifty Thousand Pesos (P50,000.00) awarded by the trial court as moral damages or a total of Two Hundred Fifty Thousand Pesos (P250,000.00). SO ORDERED. Davide, Jr., C.J., Bellosillo, Puno, Vitug, Panganiban, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Corona, Carpio-Morales, Callejo, Sr., and Tinga, JJ. ,concur. Azcuna, J., on leave.
[32] [33] [34] [35] [36] [37] [38]

[G.R. Nos. 98494-98692. July 17, 2003] ROGELIO ALVIZO, FLORITO MONTECILLO, POMPEYO ALMAGRO and CATALINO MAGNO, JR., petitioners, vs. THE HONORABLE SANDIGANBAYAN and PEOPLE OF THE PHILIPPINES, respondents. [G.R. Nos. 99006-20. July 17, 2003] JOSELITO J. GENSON, petitioner, vs. THE HONORABLE SANDIGANBAYAN and PEOPLE OF THE PHILIPPINES, respondents. [G.R. Nos. 99059-99259. July 17, 2003] EFREN COYOCA, petitioner, vs. THE HONORABLE SANDIGANBAYAN and PEOPLE OF THE PHILIPPINES, respondents. [G.R. Nos. 99309-18. July 17, 2003] OSCAR BELCINA, petitioner, vs. THE HONORABLE SANDIGANBAYAN and PEOPLE OF THE PHILIPPINES, respondents.

[G.R. Nos. 99412-16 & 99436-99636. July 17, 2003] HARVEY RUIZ, EDGAR OSMEA, GUILBERTO HERMOSA and ANICETO ARRIOLA, petitioners, vs. THE HONORABLE SANDIGANBAYAN and PEOPLE OF THE PHILIPPINES, respondents. [G.R.Nos. 99417-21 & 99637-99837. July 17, 2003] SANTOS CABUSAS and SOFRONIO MAG-UYON, petitioners, vs. THE HONORABLE SANDIGANBAYAN and PEOPLE OF THE PHILIPPINES, respondents. [G.R. Nos. 99887-100084. July 17, 2003] RAFAEL RABAYA, JR. and NESTOR RABAYA, petitioners, vs. THE HONORABLE SANDIGANBAYAN and PEOPLE OF THE PHILIPPINES,respondents. DECISION
AUSTRIA-MARTINEZ, J.:

Before us are the consolidated petitions for review on certiorari under Rule 45 of the Rules of Court filed by accused Rogelio Alvizo, Florito Montecillo, Pompeyo Almagro, Catalino Magno, Jr., Efren Coyoca, Oscar Belcina, Harvey Ruiz, Edgar Osmea, Guilberto Hermosa, Aniceto Arriola, Santos Cabusas, Sofronio Mag-uyon, Rafael Rabaya, Jr., Nestor Rabaya and Joselito Genson which seek to annul the Decision dated October 24, 1990 of the Sandiganbayan in Criminal Cases Nos. 1143-1341 finding them guilty on different counts of violation of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act, and the Resolution dated April 15, 1991 denying their respective motions for reconsideration. The factual background of the consolidated petitions are as follows: Sometime in 1978, a team from the Commission on Audit (COA) was organized by Sofronio Flores, Jr., the COA Region VII Director, to verify the alleged issuances of fake Letters of Advice of Allotments (LAAs) and Sub-Advices of Cash Disbursement Ceilings (SACDCs) during the period of 1976-1978 in various Highway Engineering Districts (HEDs) of Region VII. The special audit team was composed of auditors Victoria C. Quejada and Ruth Paredes. Then President Marcos also created a Special Cabinet Committee composed of the heads of the COA, Ministry of Justice, Office of the Budget and Management, Bureau of Treasury and the National Bureau of Investigation to investigate the fund anomalies in Region VII. This Special Cabinet Committee created a Special Task Force made up of various teams, among others, Team II, headed by Supervising Agent Amado de Coco to cover the Cebu 2nd HED. The task force worked with the Audit team and retrieved documents and records from the Regional Office and the Cebu 2nd HED. The Audit team found out that fake LAAs and SACDCs were issued in the year 1977 leading to irregular disbursements of public funds for the payment of ghost projects. The investigations resulted in the filing of 397 criminal cases with the Sandiganbayan charging certain officials and employees of the government as well as private contractors with violation of the Anti-Graft and Corrupt Practices Act. In the 198 cases docketed as Criminal Cases Nos. 5585-5782, the accused were officials and employees of Central Office of the then Ministry of Public Highways, Manila (MPH for brevity), now Department of Public Works and Highways. They were all acquitted by the Sandiganbayan for failure of the prosecution to prove their guilt beyond reasonable doubt.
[1] [2] [3]

In the 199 cases docketed as Criminal Cases Nos. 1143-1341, subject-matter of herein petitions, the following officials and employees of the Cebu 2 nd HED were charged: Manuel de Veyra (Regional Director), Rolando Mangubat (Regional Accountant), Delia Preagido (Regional Accountant III), Santos Cabusas (District Property Custodian), Sofronio Mag-uyon (District Accountant), Adventor Fernandez (Highway District Engineer), Jose Genson (Highway District Engineer), Domingo Rayos (Highway District Engineer), Rafael Rabaya, Jr. (Assistant Highway District Engineer), Godofredo Lagura (Assistant Highway District Engineer), Nestor Rabaya (Material Testing Engineer), Oscar Belcina, Sr. (Civil Engineer), Rogelio Alvizo, (Civil Engineer), Florito Montecillo (Supervising Civil Engineer I), Catalino Magno, Jr. (Supervising Civil Engineer), Perseverando Licen (Civil Engineer), Pompeo Almagro, (Civil Engineer), Efren Coyoca (Auditor), Harvey Ruiz (Auditor), Edgar Osmea (Auditor), Fe delos Reyes (Auditing Examiner), Guilberto Hermosa, Aniceto Arriola and Graciano Navales, Jr. (COA Auditing Aides); together with private contractors/suppliers Rufino Nuez, Antolin Jariol, Erasmo Gabison, Feliciano Echavez, Joselito Genson and Pablo Guinocor. The 199 Informations are identically worded, except as to names of the persons charged, dates of the commission, amounts defrauded, and supplies/materials involved. We adopt the same format used by the Sandiganbayan in its decision by reproducing only the Information filed in Criminal Case No. 1143, leaving blank and unfilled the proper spaces corresponding to the above-mentioned particulars, thus: That in, about and during the period from [period specified] in the City and Province of Cebu, within the jurisdiction of this Honorable SANDIGANBAYAN, the accused [name] all public officers and employees in the Ministry of Public Highways and Commission on Audit, Republic of the Philippines, conspiring, confederating, conniving and cooperating with each other, and conspiracy, confederation, connivance and cooperation with [name] a private contractor for the supply of materials, with manifest partiality, evident bad faith and/or inexcusable negligence in the discharge and performance of their official and administrative functions, did then and there unlawfully and feloniously cause undue injury, loss and prejudice to the Government of the Philippines by causing, allowing, approving and receiving the illegal and unauthorized disbursement and expenditure of public funds, out of the National Treasury, in the amount of x x x x x Philippine Currency, thru General Voucher No. x x x x x and charged against spurious and fake Letter of Advice of Allotment (LAA) and fake Advice of Cash Disbursement Ceiling (ACDC); supported by simulated and falsified public bidding proposals, abstract of sealed quotations, Requisitions, Purchase Order, Delivery Receipts, Inspection of Reports and Tally Sheets thus making it appear (1) that said expenditures and disbursements were legally funded out of authorized budgetary appropriations of the Ministry of Public Highways; (2) that the accounting and auditing rules and requirements on public biddings in relation to government purchases of equipment supplies and materials were complied with; (3) that a valid purchase order was prepared and approved; and (4) that worth were needed, ordered, delivered, receipted, inspected and consequently, paid for - when in truth and in fact, as all the aforementioned accused very well knew, that such were all false and falsified as same were prepared to merely give semblances of regularity of the transactions and as designed means to pursue and cover-up the fraud; and finally, upon receipt of the aforesaid amount the accused misappropriated, converted and misapplied the same for their own personal benefit, uses and gain thus, causing injury to the government in the aforesaid amount of CONTRARY TO LAW.
[4] [5] [6]

The following tabulation specifies the data corresponding to the particulars alleged in each of the Information under which the petitioners are charged:
Crim. Case No. 1143 1144 1145 1146 1147 1148 1149 1150 1151 1152 1153 1154 1155 1156 1157 1158 1159 1160 Date of Amount GV[7]. Treasury Material commission No. Check No. Dec. 197625,220.00 288 2400749 Aggregate Feb. 23, base 1977 course Dec.-Feb. 38,446.92 145 959604 -do28, 1977 -do47,530.00 261 240072 -do-do27,645.00 139 959598 -doNov. 1976 25,220.00 134 959592 -doFeb. 1977 Dec. 197640,123.08 138 959597 -doFeb. 28, 1977 Nov. 197647,530.00 133 959591 -doFeb. 1977 Nov. - Feb. 38,446.92 105 959563 -do28, 1977 Nov. 1976 40,123.00 77 959535 -do- Jan. 1977 Nov. 1976 27,645.00 76 959534 -do-Feb. 1977 Feb. 28, 1977 37,927.81 71 959529 -doDec. Jan. 43,527.00 38 959495 -do1977 Nov. - Feb. 26,645.00 35 959492 -do28, 1977 Nov. - Feb. 37,870.74 30 959487 -do10, 1977 Nov. - Jan. 26,675.00 18 959475 -do30, 1977 Nov. - Feb. 46,075.00 15 959472 -do28, 1977 Nov. - Feb. 40,699.26 08 959465 -do1977 Sept. 197740,740.00 1773 4217072 Bituminous Jan. 1978 concrete Surface Course Oct. 1976 38,800.00 1769 4217068 Bituminous - Jan. 1977 concrete surface course Sept. Nov. 38,800.00 1682 4216981 -do30, 1977 Aug. - Nov. 38,800.00 1556 4216480 -do1977 Aug.-Nov. 38,800.00 1497 4216421 -do15, 1977 Aug.-Oct. 38,800.00 1397 2887321 -do30, 1977 July-Oct. 38,800.00 1384 2887278 -do15, 1977 July - Sept. 38,800.00 1286 2887208 -do30, 1977 July - Sept. 38,800.00 1266 2887188 -do30, 1977 Aug. - Nov. 33,465.00 1481 4216405 Aggregate 1977 base course

1161

1162 1163 1164 1165 1166 1167 1168 1169

1170 1977 1171 1172 1173

July - Oct. July - Sept. 30, 1977 Aug. Nov. 1977 Aug.- Oct. 30, 1977 Aug.Nov. 1977

30,555.00 29,100.00 48,015.00 39,900.37

1362 1241 1462 1402

2887286 2887163 4216386 2887326

-do-do-do-

1174 1175 1176 1177 1178 1179 1180 1181 1182 1183

48,132.18

1401

Bituminous concrete surface course 2887325 -do-

1184 1185

1186 1187 1188 1189 1190 1191 1192 1193 1194 1195 1196 1197 1198 1199 1200

Aug.-Oct. 48,158.56 1400 2887324 -do30, 1977 -do48,301.34 1399 2887323 -doAug-Sept. 48,253.23 1398 2887322 -do1977 July - Oct. 47,118.19 1380 2887304 -do1977 -do48,364.59 1361 2887285 -doJulyOct. 43,650.00 1360 2887284 Aggregate 1977 base course -do32,010.00 1358 2887282 -doSept.-Nov. 29,100.00 1357 2887281 -do15, 1977 July-Oct. 48,283.40 1355 2887279 Bituminous 1977 concrete surface course JulyOct. 43,650.00 1353 2887277 Aggregate 1977 base course -do48,384.13 1343 2887267 Bituminous concrete surface course -do48,409.69 1342 2887266 -do-do13,849.66 1288 2887210 Aggregate base course June - Nov. 43,768.34 1287 2887209 -do30, 1977 July - Sept. 32,010.00 1242 2887164 -do1977 -do48,257.50 1237 2887159 -doAug. - Sept. 24,492.50 1236 2887158 -do1977 June Aug. 29,100.00 1233 2887155 -do15, 1977 June - Sept. 180.00 1110 2886407 -do30, 1977 May - Aug. 29,100.00 1070 2886267 -do15, 1977 -do29,100.00 997 2886294 -doApril June 29,100.00 756 2886051 -do1977 Jan.-April 29,100.00 462 2400925 -do1977 -do27,465.43 398 2400860 -do-do24,390.77 386 2400847 -do-do29,100.00 345 2400806 -do-

1201 1977 1202 1203 1204 1205 1206 1207 1208 1209 1210

Jan.-Mar.

28,247.97

309

2400770

-do-

1211 1212 1213 1214 1215

1216 1217 1218 1219 1220 1221 1222 1223 1224 1225 1226

1227 1228 1229 1230 1231 1232 1233

Sept.-Dec. 47,294.29 1607 4216906 -do30, 1977 Aug.-Nov. 48,257.50 1461 4216385 -do30, 1977 July-Oct. 30,433.75 1379 2887303 -do30, 1977 -do42,316.25 1352 2887276 -do-do39,285.00 1268 2887190 -do-do48,015.00 1239 2887161 -doOct. 197744,232.00 1756 4217055 -doJan. 1978 Oct. 197743,068.00 1761 4217060 -doJan. 1978 Sept.-Dec. 48,290.29 1618 4216917 Bituminous 15, 1977 concrete surface course Oct.-Dec. 33,465.00 1617 4216916 Aggregate 15, 1977 base course Sept. - Nov. 30,355.00 1615 4216914 -do30, 1977 -do47,025.60 1613 4216912 -doSept.-Dec. 46,094.40 1605 4216904 -do1977 Sept.-Nov. 6,945.59 1562 4216486 Bituminous 30, 1977 concrete surface course Aug.-Nov. 47,840.79 1560 4216484 -do1977 -do48,343.73 1559 4216483 -do-do48,340.43 1557 4216481 -doAug.-Oct. 47,863.87 1524 4216448 -do1977 -do48,015.58 1520 4216444 -doAug.-Nov. 39,285.00 1494 4216418 Aggregate 1977 base course -do29,100.00 1488 4216412 -do-do8,962.80 1473 4216397 -do-do30,555.00 1472 4216396 -do-do43,999.20 1470 4216394 -doSept.-Dec. 48,229.47 1625 4216924 Bituminous 15, 1977 concrete surface course Sept.-Nov. 46,696.19 1624 4216923 -do30, 1977 -do48,133.44 1622 4216921 -do-do29,100.00 1619 4216918 Aggregate base course Aug.-Nov. 24,492.00 1469 4216393 -do1977 Sept.-Nov. 48,015.00 1606 4216905 -do1977 Oct. 1977 32,010.00 1760 4217059 -doJan. 1978 -do33,465.00 1759 4217058 -do-

1234

1235

1236 1237 1238

1239 1240 1241 1242 1243 1244 1245 1246 1247 1248 1249 1250 1251 1252 1253 1254 1255 1256 1257 1258 1259 1260 1261 1262

Bituminous concrete surface course JuneSept. 38,800.00 1202 2886499 Bituminous 1977 concrete surface course -do38,800.00 1112 2886409 -do-do240.00 1111 2886408 Hollow blocks April - Aug. 38,800.00 1079 2886376 Bituminous 28, 1977 concrete surface course May-Aug. 38,800.00 1048 2886345 -do1977 April-July 38,800.00 996 2886293 -do15, 1977 April-June 36,860.00 773 2886069 -do30, 1977 Jan.-April 41,111.12 327 2400788 -do1977 Dec.-Mar. 44,693.62 282 2400742 -do30, 1977 Jan.-Mar. 46,616.65 259 2400719 -do1977 Dec. 197644,118.61 215 999675 -doMar. 30, 1977 Nov. 197634,920.00 146 959605 -doFeb. 28, 1977 -do34, 920.00 131 959589 -do-do33,950.00 37 959494 -do-do33,950.00 05 959462 -doJuneAug. 43,650.00 1081 2880378 Aggregate 30, 1977 base course May-Aug. 43,650.00 1065 2886362 -do1977 May-Aug. 39,721.50 961 2886258 -do15, 1977 Oct. 197741,147.40 1762 4717061 -doJan. 1978 May-Aug 47,578.50 959 2886256 -do15, 1977 Mar.-June 43,795.50 753 2886048 -do30, 1977 Mar.-June 43,504.50 751 2886046 -do15, 1977 Oct. 197640,332.60 1757 4217056 Aggregate Jan. 15, 1977 base Course Sept.-Nov. 48,015.00 1672 4216911 Aggregate 1977 base course Sept.-Dec. 18,180.71 1614 4216913 -do1977 Oct. 197729,100.00 1768 4217067 -doJan. 15, 1978 Dec.-Mar. 23,608.23 298 2400759 -do31, 1977 Nov. 1976 6,790.00 227 2400687 -do-

June-Sept. 1977

38,800.00

1203

2886500

1263 1264 1265 1266 1267 1268 1269 1270 1271 1272 1273 1274 1275 1276 1277 1278 1279 1280 1281 1282 1283

Mar. 1977 Nov. 197629,100.00 Feb. 28, 1977 Nov. 197647,142.00 Feb. 28, 1977 -do29,100.00 69 Nov. 197629,100.00 Feb. 1977 May-Aug. 33,465.00 1977 May-Aug. 33,465.00 15, 1977 April-June 29,100.00 3, 1977 Jan.-April 33,465.00 1977 -do26,190.00 464 -do32,010.00 402 Jan.-Mar. 26,190.00 1977 -do33,465.00 350 Dec. 197626,190.00 Mar. 1977 Dec. 197626,190.00 Feb. 28, 1977 -do33,465.00 140 Nov. 197633,465.00 Feb. 1977 -do26,190.00 70 -do33,465.00 36 Nov. 197626,190.00 Jan. 30, 1977 May-Aug. 30, 1977 May-July 30, 1977 April-July 1977 Jan.-Mar. 30, 1977 Jan.-Mar. 9, 1977 Nov. 1976Jan. 3, 1977 Nov. 1976Jan. 30, 1977 Nov. 1976Jan. 1977 Jan.-April 1977 Dec.1976Mar. 31, 1977 Nov. 1976Mar. 1977 Dec.-Mar. 31, 1977 -do29,100.00 29,100.00 32,010.00 32,010.00 32,010.00 32,010.00 32,010.00 32,010.00 42,427.80 48,476.53

142 132

959601 959590

-do-do-

959527 -do31 959488 -do1067 998 766 466 2886364 2886295 2886062 2400929 -do-do-do-do-

2400927 -do2400864 -do355 2400816 -do2400811 -do252 2400712 -do143 959602 do-

959599 -do90 959548 -do959528 -do959493 -do33 959490 Aggregate base Course 1066 2886363 Aggregate base course 993 2886290 -do767 465 351 141 89 32 337 299 2886063 2400928 2400812 959600 959547 959489 2400798 2400760 -do-do-do-do-do-do-

1284 1285 1286 1287 1288 1289 1290 1291

1292 1293 1294

48,392.33 34,744.16 294

296 295

Bituminous concrete Surface Course 2400757 -doAggregate base

2400756

46,735.84

2400755

course -do-

1295

-do-

48,422.21

291

1296 1297 1298 1299 1300 1301 -do-do-do-do-

Jan.-April 1977

41,104.33 39,285.00 27,645.00 46,195.67 36,142.00 44,083.40 348 347 346 344

-do-

1302 1303 1304 1305 1306 1307 1977 1308 1977 1309 -do-do-

-do-

35,036.40

10,289.76 400 48,443.60 399 Dec. 197646,280.64 Apr. 30, 1977 Jan - Mar. 33,465.00 354 30, 1977 Apr.-June Mar.-June Feb.-May 1977 33,683.25 39,066.75 20,802.13 754 752 504

Bituminous concrete surface course 352 2400813 Aggregate base course 2400809 -do2400808 -do2400807 -do2400805 -do326 2400787 Bituminous concrete surface course 401 2400863 Aggregate base course 2400862 -do2400861 -do387 2400848 -do2400815 course 2886049 2886047 2400968 Aggregate base -do-do-

2400752

1310 1311 1312 1313 1314 1315 1316 1317

1318 1319 1320 1321 1322 1323 1324 1325

Bituminous concrete surface course -do31,187.73 503 2400967 -doJan.-Apr. 41,132.70 497 2400961 -do1977 -do48,361.10 484 2400947 -do-do48,370.94 483 2400946 -do-do48,188.10 482 2400945 -do-do47,160.33 468 2400931 -do-do27,645.00 463 2400926 Aggregate base course -do46,711.17 461 2400924 Bituminous concrete surface course -do48,352.79 460 2400932 -doApr.-June 33,465.00 757 2886052 Aggregate 1977 base course Oct. 197629,100.00 1770 4217069 -doJan. 30, 1977 Sept.-Dec. 29,100.00 1621 4216920 -do1977 Aug.-Nov. 29,100.00 1487 4216411 -do30, 1977 July-Oct. 29,100.00 1359 2887283 -do1977 July-Sept. 29,100.00 1238 2887160 -do30, 1977 Oct. 197730,555.00 1758 4217057 -do-

1326 1327 1328 1329 1330

Jan. 1978 Sept.-Dec. 1977 Aug.-Nov. 1977 July-Oct. 1977 July-Sept. 30, 1977 May-Aug. 30, 1977 June-Aug. 1977 June-Sept. 30, 1977 June-Aug. 1977

32,010.00 32,010.00 33,465.00 33,465.00 46,349.80

1616 1471 1356 1240 1151

4216915 4216395 2887280 2887162 2886448

-do-do-do-do-

1331 1332 1333

46,792.85 47, 496.10 29,318.25

1150 1149 1082

Bituminous concrete surface course 2886447 -do2886446 2886379 -doAggregate base course -do-do-do-do-do-do-do-do-

1334 1335 1336 1337 1338 1339 1340 1341

May-Aug. 29,100.00 1069 2886366 1977 -do32,010.00 1068 2886365 -do43, 431.75 1064 2886361 -do29,100.00 1008 2886305 -do32,010.00 994 2886291 April-July 35,211.00 962 2886259

31, 1977
April-June 30, 1977 April-July 31, 1977 29,100.00 37,539.00 771 960 2886067 2886257

Accused Domingo Rayos, Graciano Navales, Jr., Basilisa Galvan, Edgardo Cruz and Agripino Pagdanganan are at large. After the judgment was rendered in these cases, accused Pablo Guinocor surrendered and was charged in Criminal Cases Nos. 1267-1281, 1325-1329. He pleaded guilty and was convicted by the Sandiganbayan in a decision dated April 20, 1994. Accused Rufino Nuez, Adventor Fernandez and Heracleo Faelnar are already deceased. Accused Fe delos Reyes (District Auditing Examiner) and Delia Preagido (Region VII Accountant III) were discharged and utilized as state witnesses. Upon being duly arraigned under each of the separate Informations wherein they were charged, all the rest of the accused pleaded not guilty. All these cases were tried jointly by agreement of the parties except as to accused private contractor Joselito Genson who, upon his motion, was granted a separate trial when it was his turn to present evidence. During the trial, accused Rolando Mangubat (Region VII Accountant) who signed all the fake LAAs and SACDCs, and co-accused contractors/ suppliers Erasmo Gabison and Feliciano Echavez who delivered the materials and prosecuted the ghost projects,
[8] [9] [10] [11] [12] [13]

changed their previous pleas of not guilty to guilty to the crimes charged against them. The evidence of the prosecution, through the testimony of the then Supervising COA Auditor Ruth Paredes, established the standard operating procedure in the releases of allotments to fund the highway projects or the maintenance and repair of the existing ones in the different regions of the MPH, as follows: Based on the appropriation law and upon the request made by the head of the MPH, the Ministry of Budget releases funds to the MPH by means of an Advice of Allotment (AA) which is the authority to obligate funds, and the Cash Disbursement Ceiling (CDC) which is the authority to disburse the funds so obligated. In turn, the MPH issues a Sub-Advice of Allotment (SAA) and the corresponding Advice of Cash Disbursement Ceiling (ACDC) addressed to the Regional Director concerned which are duly recorded in the appropriate book of account of the Central Office of the MPH. These SAAs and ACDCs serve as the authority for the Regional Offices to obligate and disburse funds which become the sources of funds of the various Engineering Districts apportioned throughout each region. The Engineering District then submits a Program of Work to the Regional Director for the release of these funds. Upon approval of said request by the Regional Director, the Regional Finance Officer issues a Letter of Advice of Allotment (LAA) and the corresponding Sub-Advice of Cash Disbursement Ceiling (SACDC), as authority to incur obligation and to disburse the funds so obligated, to the District Engineer. The LAA and the SACDC are then duly recorded in the logbook of the Regional Office and are sent to the district engineers office. The testimony of Auditor Paredes as to the implementation of the project in the district level is summarized by the Sandiganbayan as follows: Implementation of the districts programs of work now go into the requisition stage, wherein the proper Requisition for Supplies and Equipment (RSE), needed for the prosecution of its projects and embodied in the approved program of work, is prepared by the requisitioning officer, certified as to the availability of funds by the District Accountant, and approved by the District Engineer. The Project Engineer also prepares a Request for Obligation of Allotment (ROA) which the Accountant certifies as to availability of funds. The RSE, together with a copy of the program of work, is then transmitted to the Regional Office for the approval of the Regional Director and thereafter returned to the district concerned for prosecution of the project after compliance with bidding and award procedures. Based on the approved RSE, the districts Property Custodian or Purchasing/Supply Officer, with the approval of the District Engineer, sends out Request for Sealed Quotations to various contractors or suppliers requesting them to submit, on or before a date fixed therein, their quotations for the materials or supplies. Notices thereof are likewise publicized through either newspaper publications or postings in public places. Within the reglementary period, the sealed bid forms are opened by the Committee on Bidding and Award in the presence of representatives of the District Engineer and the District/City Auditor. The lowest price quotation or bid is determined and the corresponding Abstract of Bids is prepared and signed by the members of the committee, as well as the auditors and district engineers representatives, after wh ich the corresponding award is made to the said lowest bidder, duly approved by the District Engineer. A Purchase Order (PO) is thereafter prepared by the Property Custodian, addressed to the winning bidder, certified as to availability of funds by the Accountant and approved by the District Engineer.
[14]

Delivery is then effected by the winning bidder, in accordance with the terms and conditions of the PO, which may include the time required to start and terminate said deliveries and the places of delivery. Inspection of deliveries are made at the delivery or project sites by a representative of the Auditors office upon receipt of a verbal or written request for such inspection prepared by the Property Custodian to the Auditor. The Auditors representative inspects the deliveries, signs the Delivery Receipts (DRs) and, finally, the Report of Inspection (ROI), duly concurred in by the Property Custodian. During said deliveries, samples of the materials are also tested for their conformity with specifications and the results of such tests are submitted to the District Engineer to be attached to the payment vouchers, together with all other supporting documents. After completion of deliveries, the corresponding General Voucher (GV) for the payment of the supplies or materials delivered is prepared, usually by someone at the district office. Said GV contains on the face thereof five (5) certifications to be signed by the proper officials, namely, the Property Custodian, the Project Engineer, the District or City Engineer, the Accountant and the District or City Auditor attesting and certifying to the correctness, legality and propriety of the transactions covered by said GV. Attached to said GV and required to be examined and verified by the proper district officials and their subordinates are the requisite supporting documents, such as, the RSE, ROA, Program of Work, Detailed Estimates, Request for Sealed Quotations, Abstract of Bids, PO, DRs, Request for Inspection, Test Reports and Tax Clearance Certificate of the suppliercontractor. After the GV is processed, pre-audited and approved, the papers are brought to the Cashier for the preparation of the check or treasury warrant or TCAA check, which is also preaudited. The check is then released to the supplier-contractor or his duly authorized representative who issues the corresponding official receipt. At the end of each calendar month, the District Accountant prepares several reports, including the Report of Obligations Incurred (ROI) and the Report of Checks Issued (RCI), which are submitted to the Regional Office. At the Regional Budget and Finance Division, these reports, together with those coming from other districts, are entered in the proper journals and, in the course of ordinary accounting procedures, are entered in the General Ledger. In turn, the entries in the General Ledger become the basis for monthly Trial Balances (TBs) which are prepared cumulatively by the Regional Accountant, recommended for approval by the Regional Finance officer and approved by the Regional Director, which TBs are also submitted every month to the Central Office of the MPH. At the end of the fiscal calendar year, the final Trial Balance is prepared by the Regional Office and likewise submitted to the MPH. Paredes further testified: Her team prepared a working paper containing the summary of Sub-Advice of Allotments (SAAs) received by Region VII from the MPH, Central Office in 1977. The summary was based on the (1) certifications from the Regional officials (2) the copies of the SAAs themselves and (3) the logbook of the Regional Offices. They prepared another working paper to match the SAAs and the Letters of Advice of Allotments (LAAs) released by the Region to Cebu 2nd HED for 1977. While they found some LAAs that matched with the SAAs and these LAAs were entered in the logbook of the Regional Office, they also found another set of LAAs which were fake or irregular as they were (1) not stamped released by the accounting section of the region at the topmost portion of the sheet, (2) undated and not numbered consecutively, (3) not recorded in the Regional Office logbook, (4) not covered by any appropriation law and (5) not supported by SAA number coming from the MPH which must be reflected in the LAA. It was possible to release several LAAs but not exceeding the amount of the SAA and she found no fake SAAs released by the MPH, Central Office. They found out that the Regional
[15] [16] [17] [18] [19] [20] [21] [22]

Office manipulated the amount in such a way that they deleted certain amounts which they charged against the fake allotments and thus the trial balance sent to the Central Office did not reflect the true and correct expenditures of the district. They also prepared a summary of the Advice of Cash Disbursements Ceilings (ACDCs) released by the Central Office to the Regional Office in 1977 and they had found some Sub-Advice of Cash Disbursement Ceilings (SACDCs) released by the Region to the district which could not be traced from these ACDCs. They identified the general vouchers charged against the fake allotments based on the general vouchers themselves, cost ledger sheets maintained by Cebu 2nd HED and the Report of Checks Issued by the Deputized Disbursing Officer (RCIDDO). All the general vouchers charged against the fake LAAs were all for amounts below P50,000.00 in order to avoid review of said vouchers in the COA Regional Office since under existing auditing rules and regulations, all disbursements exceedingP50,000.00 would have to be countersigned by the officials in the COA Regional Office. Prosecution witness Felicitas Ona, then Auditor V, was assigned as a member of the team formed by the Performance Audit Office to investigate the extent of the anomaly in the MPH Central and the Regional Offices. Her testimony is as follows: She assisted in the interpretation and analysis of the regions trial balance, journal of checks issued and books of accounts submitted to the Central Office. Her team analyzed the trial balance per month based on the journal where all the checks issued for the month were recorded. They discovered discrepancies because the trial balance did not match the amounts recorded in the journal. The region made adjusting entry in the journal voucher so as to take out the checks issued from the fake LAAs, enclosed them in parenthesis and transferred them to another account so as not to show that the actual disbursements made were much higher than the accounts payable. Negative entries were made so that the regional trial balance will no longer show such manipulation when forwarded to MPH Central Office for consolidation. Prosecution witness Manuel Dionisio, a Senior Agent of the NBI and member of the Special Task Force of the Cabinet Committee, testified that he concentrated on the angle of splitting of the general vouchers into amounts less than P50,000.00 and that most of these vouchers were supported by the same RIVs. Accused-turned-state witness, Delia Preagido testified as follows: She was employed in the MPH, Region VII, holding the position of Accountant III. Her duties consisted in the handling of books of accounts like journal of collections and disbursements, general journals, preparation of the trial balance for the entire region and other related works. Sometime in the last week of January 1977, accused Rolando Mangubat, Chief Accountant of Region VII, asked her to stay after office hours and they proceeded to the Town and Country Restaurant Club. While they were there, Mangubat told her that they could get a big money out of the simulated LAAs by selling them to the Contractors, District Accountant, District Engineer and the Assistant District Engineer. Mangubat told her that some officers and employees in the Region and the Central Office would be part of the arrangement. They also discussed the percentages to be given to the participants, i.e., 26 percent to the Regional Office, 20 percent to the Central Office, 6 percent to the signatories of the fake LAA, while the balance will go to the contractors and District Engineers. She agreed to be a part of the fraudulent scheme after she was assured that the conspiracy was not only in the Regional Office but included the Central
[23] [24] [25] [26] [27] [28] [29] [30] [31] [32] [33] [34] [35] [36] [37]

Office. After a while, accused Jose Sayson (Budget Examiner II) and Edgardo Cruz (Accountant I) of Region VII, arrived and joined them in their discussion. Sayson and Cruz also typed the fake LAAs and were in charge in the negotiation and selling of the fake LAAs. After they had typed the simulated LAAs and SACDCs and released them to the district concerned, she received her share from the fake LAAs. For around one year, Mangubat gave her amounts varying from P500.00 to P700.00 every week totaling to around P70,000.00. She also distributed money to the other Regional officials and employees based on the handwritten lists prepared by Mangubat and she together with Mangubat brought the amounts intended for the Central Office people. The amounts covered by the fake LAAs were all reflected in the journals of checks issued, general journals and lists of checks issued and cancelled but the amounts were no longer reflected in the trial balance submitted to the Central Office because of the manipulation of the journal voucher through negation of entries. She identified Exhibits K, K-1 to K-18 as fake LAAs and Exhibits Q, Q-1 to Q-18 as fake SACDCs issued to Cebu 2nd HED in 1977. Fe delos Reyes, then Auditing Examiner II at the Cebu 2nd HED, likewise an accusedturned-state witness, testified as follows: Among her duties was to conduct the inspection of the deliveries of supplies and materials made by the contractors/suppliers in the job sites. Sometime in the first quarter of 1977, she was instructed by petitioner Auditor Efren Coyoca to inspect the delivery of supplies and materials at the project site of the Argao Dalaguete project but she found no deliveries therein. She then reported the nondelivery to petitioner Coyoca who told her that he had to confer the matter with petitioner Engr. Rafael Rabaya, Jr.. After a day later, she was called by petitioner Coyoca to his office and told her, in the presence of petitioner Rabaya, to just sign all the prepared tally sheets and inspection reports as Coyoca would assume the responsibility if anything went wrong. Upon such assurance, she signed the tally sheets and inspection reports. Thereafter, she just signed tally sheets and reports without actually going to the jobsites to inspect the deliveries of supplies and materials because she knew that there would be no deliveries to be made. The contractors who participated in the alleged deliveries of materials were accused Rufino Nuez, Antolin Jariol, Pablo Guinocor, Feliciano Echavez and Erasmo Gabison and herein petitioner Joselito Genson. The practice of signing the tally sheets and inspection reports without actual inspections of deliveries of materials at the job sites was done during the time of petitioner Auditor Efren Coyoca and was continued even after he was replaced by petitioner Auditor Harvey Ruiz and the latter by petitioner Edgar Osmea. On separate occasions, she called the attention of all the petitioners Auditors on the non-deliveries of materials but after these Auditors conferred with petitioner Engr. Rabaya, Jr., she was just told to continue with the practice. The signed tally sheets and inspection reports were used by the contractors to claim for the payments of the alleged deliveries of materials. She saw Marcia Maruda, an employee in the Engineering District Office, distributing several mailing envelopes containing money to petitioners Aniceto Arriola, Guilberto Hermosa, Sofronio Mag-uyon, Santos Cabusas, Florito Montecillo, Rogelio Alvizo, Oscar Belcina, Pompeyo Almagro, Sr., Nestor Rabaya and accused Graciano Navales, Perseverando Licen and Patalinghog. She also received envelopes with money inside from Maruda who told her that they were given by petitioner Engr. Rabaya, Jr. for her signature in the tally sheets and inspection reports.
[38] [39] [40] [41] [42] [43] [44] [45] [46] [47] [48] [49] [50] [51] [52] [53] [54] [55] [56] [57] [58]

Eduardo Selma, operations manager of the Selma Mananga Rocks, owned by his deceased father, Moises Selma, testified: Sometime in 1979, he and his late father were summoned by the NBI for investigation as to whether they had participated in any government projects. He and his father had issued separate certifications stating that they had never participated in any bidding conducted by the Cebu 2nd HED. They were not shown any abstract of bids prior to the signing of the certifications. The signatures on the quotations were not his signatures and neither had he authorized anybody to sign for him. It was possible that said abstracts of bids were prepared for the company without his knowledge but they are not licensed contractors and never participated in any government contract. On the other hand, all the accused from the District Office denied that they had anything to do with the preparation and simulation of the LAAs and SACDCs which originated from the Regional Office. The project engineers maintained that the projects were implemented in accordance with the programs of work. The auditing examiners declared that they inspected the materials delivered in the project sites. The auditors, accountant and property custodian asserted that the documents submitted in support of the general vouchers were complete. All the district officials asserted that there were no splitting of payments but only partial payments which was allowed. The private contractors declared that they delivered the materials to the project sites as shown by the delivery receipts and the tally sheets. After a long tedious trial, a joint decision was rendered by the Sandiganbayan on October 24, 1990. It made the following findings: (1) Region VII had released the regular maintenance allocation of Cebu nd 2 HED for the year 1977 through 33 regular LAAs and 19 SACDCs which amounted toP5,735,197.97 and P6,529,063.29, respectively. There was no basis for the additional disbursements of P7,005,477.22 made by the district through the 199 general vouchers covered by 18 LAAs and 8 SACDCs to co-accused contractors/suppliers for the supposed deliveries of aggregate base course, bituminous concrete surface course, hollow blocks and cover coat materials from January to December 1977. Although the defense claim that the regular allocations for 1977 were insufficient, they failed to prove that proper written requests had been made by the district officials to the Regional and Central Offices for approval and implementation; (2) The issuances of 18 LAAs and 8 SACDCs from which the 199 general vouchers were based were clearly established to be fake or spurious. Badges of fraud were patently shown on the faces of the LAAs, to wit: (a) six LAAs were undated while one was only dated October 1977; (b) five LAAs were improperly charged to alleged prior years obligations (1973-76); (c) fake LAAs have a letter A after the number 8; (d) the improper charging of the illegal disbursements to savings on equipment rentals and for salaries when there were no programs of work; (e) fake LAAs were not numbered in sequence; (f) no references were made to the mother SAA numbers which were always cited in the regular LAAs; (g) fake LAAs could not be traced in the logbook maintained by the Regional Office;
[59] [60] [61] [62]

the rubber stamps for the certification of availability of funds in the fake LAAs were all signed by convicted accused Rolando Mangubat as Chief Accountant I, while in the regular LAAs, it was his assistant Delia Preagido who signed such certifications; (3) The SACDCs were found to be fake since they could not be matched up against the ACDCs released by the MPH Central Office to the Regional office; they could not be found in the subsidiary ledger maintained by the Regional office; (4) There were splitting of Requisitions for Supplies and Equipments (RSEs), Purchase Orders (POs) and General Vouchers (GVs) so that the checks in payment of the items purportedly delivered were split into amounts less than P50,000.00 in order that the general vouchers would only be pre-audited by the Cebu Second HED Resident Auditor and would not be subject to action, review and approval by the COA Regional Auditor as required in COA Circular No. 76-41 dated July 30, 1976 in relation to COA Circular No. 16-16-A dated March 23, 1976 clarifying COA Circular No. 76-A dated February 10, 1976; (5) There were illegal charging to fund 81-400 (prior year obligation); (6) No programs of works were attached to the general vouchers; (7) There were no deliveries made by the accused contractors/ suppliers, thus: (a) the execution and preparation of the supposed delivery receipts(DRs), summaries of deliveries (tally sheets), reports of inspections and the reports of analysis of the materials, were all manufactured en-masse and ante-dated to give some semblance of justification for the questioned transactions, (b) the projects undertaken in 1977 involving the 199 GVs were in connection with the regular maintenance projects and not part of the rehabilitation or improvement as claimed by the defense, (c) the seven accused contractors/suppliers could not have made the deliveries on the limited period appearing in the delivery receipts and tally sheets, (d) there were inordinate haste in the alleged inspections and payments, (e) two of the seven contractors/suppliers had admitted non-delivery of materials when they pleaded guilty of the charges against them; (8) No foremen or maintenance engineers of Cebu 2nd HED supervised and inspected the alleged projects. There were no laborers who did the spreading and steam rolling of the materials. No record of the proper travel orders and cash advances or reimbursable expense receipts (RERs) in the travels of personnel from the district office to the project sites and no daily time records (DTRs) were presented to show that the employees who performed the works in the project sites were absent from the district office on the dates reflected in the supporting documents. There was no payroll for the payment of laborers who worked on the project. There were no proper travel orders or lease documents from the Engineering depot concerned which showed that heavy equipments were utilized in these projects; (9) The GVs and their supporting documents were produced en masse and processed hastily by the Cebu 2nd HED officials and contractors since all the 199 transactions were paid within 3-4 weeks from dates of requisition; (10) The case of the prosecution was strengthened by the pleas of guilty of accused Rolando Mangubat and co-accused contractors Erasmo Gabison and Feliciano Echavez thus constituting judicial admissions which clearly and positively confirmed not only the issuances of fake or simulated LAAs and SACDCs as well as the irregular, illegal preparation, execution and processing of the GVs and their supporting

(h)

documents as a consequence of the receipt by the Cebu 2 nd HED but also the nondelivery of materials and the non-prosecution of the ghost projects; (11) The amount of P7,005,477.22 was received by the contractors/ suppliers as follows: Rufino Nuez - P3,470,428.58; Antolin Jariol - P935,320.40; Joselito Genson P731,685.09; Pablo Guinocor - P889,963.75; Feliciano Echavez - P540,124.40; Erasmo Gabison - P94,575.00 and Jose Abatayo - P343,380.00; (12) There was conspiracy among the accused as shown by the following: Accused Sofronio Mag-uyons liability, as District Accountant, emanates from his signing GVs, ROAs, RIVs, and Abstract of Proposals for Furnishing Supplies, Materials and Equipments which were all irregular and which cover ghost projects. He also cannot feign ignorance of the fake and/or fictitious nature of the LAAs and SACDCs which were received by him as chief financial officer of the district and on the basis of which he certified as to the availability of unauthorized funds or allotments in said GV, ROAs and RSEs. Accused Santos Cabusas liability, as Property Custodian, in all the 199 cases wherein he stands charged can readily be seen, as he signed all the GVs and many RIVs, POs, Reports of Inspection and Abstract of Proposals for Furnishing Supplies, Materials and Equipments which were all irregular and covered ghost projects. As Property Custodian, he is not supposed to sign Reports of Inspection and Abstracts. Accused Rafael Rabaya, Jr., Godofredo Lagura, Catalino Magno, Jr. Pompeyo Almagro, Florito Montecillo, Rogelio Alvizo, Oscar Belcia, Perseverando Licen, and Nestor Rabaya; their liabilities as Asst. Highway District Engrs., Supervising Civil Engr. I, Sr. Civil Engr., Supervising Civil Engr. I, Senior Civil Engrs., Civil Engr., and Material Testing Engr., arise and/or emanate from their individual and collective preparation, execution and approval of irregularly-processed and simulated public documents which purported to be in pursuance of regular and authorized allotments for actual projects within the district but which were really based on fake, irregular and unauthorized LAAs and SACDCs and the projects were fictitious and non-existent, thus enabling their co-accused contractors to receive public funds to which they are not entitled. Accused Efren Coyoca, Edgar Osmea, Harvey Ruiz, Aniceto Arriola, and Guilberto Hermosa; their liabilities as District Auditor, District Auditor, District Auditor, Auditing Aide and Auditing Aide, respectively, arise and/or emanate from their individual and collective execution, processing and approval of GVs, ROIs, Delivery Receipts and Daily Tally Sheets which were irregular and/or fictitious and covered ghost projects and, because of the deliberate and/or grossly negligent performance of their auditing duties and functions, their co-accused contractors were able to collect payments of public funds to which they are not entitled. Contractors Joselito Genson and Antolin Jariol, Jr. liabilities arise and/or emanate from their individual and collective participation in the preparation of fake or simulated bid quotations, POs, ROIs, Delivery Receipts, Daily Tally Sheets, ORs and GVs for fictitious or non-existent deliveries of aggregate base course and asphalt on ghost projects and for which they illegally collected public funds to the damage and prejudice of the Government. Based on the foregoing, the Sandiganbayan convicted the accused under Section 3, paragraph (e) of RA 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act which provides: Sec. 3. Corrupt Practices of Public Officers. In addition to acts or omissions of public officers already penalized by existing law, the following shall constitute corrupt practices of any public officer and are hereby declared to be unlawful:
[63] [64]

(e) Causing any undue injury to any party, including the government, or giving any private party any unwarranted benefits, advantage or preference in the discharge of his official, administrative or judicial functions through manifest partiality, evident bad faith or gross inexcusable negligence. This provision shall apply to officers or government corporations charged with the grant of licenses or permits or other concessions. Under paragraph (e), the requisite elements to constitute corrupt practices are (1) the accused are public officers or private persons charged in conspiracy with them; (2) said public officers commit the prohibited acts during the performance of their official duties or in relation to their public position; (3) they caused undue injury to any party, whether the Government or a private party; (4) such injury is caused by giving unwarranted benefits, advantage or preference to such parties; and (5) the public officers have acted with manifest partiality, evident bad faith or gross inexcusable negligence. As aptly found by the Sandiganbayan, all these elements are present, thus: In the cases at bar, all the above-cited requisites elements are present. When accused Fernandez, Faelnar and Mangubat, as Asst. Regional Directors and Regional Accountant, respectively, issued the fake LAAs and corresponding SACDCs to the Cebu 2nd HED knowing fully well that the allotments and/or allocation thereunder were not properly authorized by the Ministries of the Budget and the Public Highways and neither have they been programmed for release in accordance with standard operating procedure, they thus acted with evident bad faith. Accused District Engineer Jose Genson, Assistant District Engineers Rafael Rabaya, Jr. and Godofredo Lagura and District Accountant Sofronio Mag-uyon likewise acted with evident bad faith, gross inexcusable negligence and manifest partiality in receiving and implementing the fake LAAs and SACDCs since they should have known and noticed that all the allotments released thereunder were not for regular maintenance, especially so when the district had been receiving its regular maintenance allocations for 1977; that they had not requested formally for such extra allocations; that the LAAs and SACDCs were fake or spurious on their faces and signed by unauthorized officials, and that they had not prepared any program of work to justify such extra allocations. All the other accused officials from the Cebu 2nd HED, namely, Santos Cabusas, Nestor Rabaya, Almagro, Montecillo, Alvizo, Magno, Jr., Belcia and Licen who are all engineers, together with those involved in auditing functions, namely, District Auditors Harvey Ruiz, Edgar Osmea and Efren Coyoca, and Auditing Aides Aniceto Arriola and Guilberto Hermosa, likewise acted with evident bad faith and manifest partiality in participating in the preparation, processing and approval of the GVs and supporting documents, such as RSEs, Requests for Obligation of Allotment (ROAs), Abstracts of Bids, POs, Delivery Receipts (DRs), Summary of Deliveries, Reports of Inspection (ROIs) and Checks in payment of ghost projects to fake or spurious contractors-suppliers, among whom are Jariol and Joselito Genson. They not only connived and confederated in the hasty and mass production of such ante-dated documents, excluding programs of work, but also allowed their names, positions and signatures to be used in completing the cycle which would lend a semblance of legality or regularity to the questioned transactions and illegal disbursements and which caused undue injury to the Government in the total amount of P7,005,477.22. Even assuming, for the sake of argument, that their claims and pretensions as to their lack of expertise or means to determine the validity or nullity of the LAAs and SACDCs in questions have any bases, however, they are still liable for having acted with gross inexcusable negligence in the performance of their respective duties.
[65] [66] [67] [68]

Except for Manuel de Veyra, who was acquitted, all the other accused in Criminal Cases Nos. 1143-1341, which include herein petitioners, were convicted in all the criminal cases they were respectively charged. They were sentenced in each of the 199 cases to an indeterminate penalty ranging from Four (4) Years and One (1) Day as the minimum, to Eight (8) Years and One (1) Day as the maximum and to indemnify the Government of the amounts defrauded in each case. Petitioners filed their respective motions for reconsideration which were all denied by the Sandiganbayan in a Resolution dated April 15, 1991. Hence, the herein consolidated petitions for review. Auditor Harvey Ruiz is one of the petitioners together with Edgar Osmea, Guilberto Hermosa and Aniceto Arriola in G.R. Nos. 99412-99416 and 99436-99636. However, Ruiz had filed a separate petition, entitled Harvey Ruiz vs. Sandiganbayan and People of the Philippines, docketed as G.R. Nos. 98715-98913 which we dismissed in a Resolution dated June 20, 1991 pursuant to paragraph 3 of Circular 1-88 which took effect on January 1, 1989. Ruiz filed a motion for reconsideration but was denied in a Resolution dated August 6, 1991. The corresponding entry of judgment was made on September 9, 1991. Considering that the decision of the Sandiganbayan is already final and executory as to Ruiz, his inclusion as one of the petitioners in G.R. Nos. 99412-99416 and 9943699636 could no longer be entertained and his name should be deleted from the petitions. Also, in our Resolution dated September 29, 1994, we dismissed the petition filed by Oscar Belcina in G.R. Nos. 99309-99318 pursuant to paragraph 3 of Circular No. 188. No motion for reconsideration having been filed, the decision appealed from had already attained finality. In a Resolution, dated November 16, 1999, the cases against Florito Montecillo (a co-petitioner of Rogelio Alvizo, Pompeyo Almagro and Catalino Magno, Jr.) in G.R. Nos. 9849498692 were dismissed by reason of his death on April 17, 1998. The corresponding partial entry of judgment was made insofar as Florito Montecillo is concerned on March 27, 2000. The following are the respective contentions of herein petitioners: In G.R. Nos. 98494-98692 (Criminal Cases Nos. 1153-1159, 1161-1163, 1165, 1170-1171, 1173-1177, 1182, 11871188, 1192, 1194-1197, 1200, 1201, 1203-1205, 1215-1218, 1222, 1227, 1230, 1231-1233, 1236, 1238, 1241-1246, 1249, 1253, 1255, 1257, 1258, 1261, 1263-1266, 1272, 1280, 1281, 1284, 1288, 1291-1295, 1301-1302, 1304, 1307, 1319-1324, 1330-1332, 1334 and 1337) Engineers Rogelio Alvizo, Pompeyo Almagro and Catalino Magno, Jr. assail the decision of the Sandiganbayan, as follows: THE RESPONDENT SANDIGANBAYAN PALPABLY DISREGARDED THE FUNDAMENTAL RIGHT OF THE PETITIONERS TO BE PRESUMED INNOCENT AND, INSTEAD, REVERSED THE PRESUMPTION AND CONVICTED THE PETITIONERS OF VIOLATION OF THE ANTI-GRAFT LAW IN SPITE OF THE CONCEDED FACT THAT PETITIONER-ENGINEERS ACTUALLY PROSECUTED THE ENGINEERING PROJECTS ASSIGNED TO THEM, THE CONVICTION RESTING NOT ON THE BASIS OF CONCRETE INCULPATORY EVIDENCE BUT ON RATIOCINATION THRU LOGIC AND COMMON SENSE THAT, WITHOUT THE SUSPICION THAT OBVIOUSLY SWAYED THE JUDGMENT, SHOULD HAVE INEVITABLY, AS SHOWN BY UNDEBATABLE PREMISES,
[69] [70] [71] [72] [73] [74]

RESULTED IN A FINDING THAT THE PETITIONERS COULD NOT HAVE BEEN COAUTHORS OF THE CRIMES IMPUTED TO THEM BUT THEY WERE MADE THE UNWITTING TOOLS OF THE CRIMINAL MINDS THAT PLANNED AND EXECUTED THE DEFRAUDATION OF THE GOVERNMENT. In G.R. Nos. 99006-99020 (Criminal Cases Nos. 1202-1207, 1230, 1231, 1250-1259) Joselito Genson, private contractor/supplier of materials, raises the following errors:
[75]

I II

III

IV

VI

THE RESPONDENT COURT COMMITTED GRAVE AND REVERSIBLE ERROR IN CONSIDERING EXTRANEOUS EVIDENCE IN CONVICTING ACCUSED JOSELITO GENSON. THE RESPONDENT COURT COMMITTED GRAVE AND REVERSIBLE ERROR IN FINDING CONSPIRACY BETWEEN AND AMONG THE CONVICTED ACCUSED DESPITE FAILURE OF PROSECUTION TO ESTABLISH CONSPIRACY BEYOND REASONABLE DOUBT. THE RESPONDENT COURT COMMITTED GRAVE AND REVERSIBLE ERROR IN UTTERLY FAILING TO ANALYZE AND EVALUATE THE EVIDENCE OF THE PROSECUTION WHICH DO NOT CONTAIN ANY INCULPATORY EVIDENCE WHATSOEVER AGAINST PETITIONER. THE RESPONDENT COURT COMMITTED GRAVE AND REVERSIBLE ERROR IN OVERLOOKING RELEVANT AND UNREBUTTED FACTS TESTIFIED TO BY ACCUSED/PETITIONER WHICH JUSTIFIES HIS ACQUITTAL. THE RESPONDENT COURT COMMITTED GRAVE AND REVERSIBLE ERROR IN CONVICTING THE PETITIONER BASED UPON THE PROSECUTION EVIDENCE NOT SUFFICIENT TO CONVICT AND OVERCOME PETITIONERS PRESUMPTIO N OF INNOCENCE (SEC. 14, SUB-PAR. [2], ART. III, BILL OF RIGHTS, 1987 CONSTITUTION). THE RESPONDENT COURT COMMITTED GRAVE AND REVERSIBLE ERROR IN FAILING TO APPLY THE MANDATORY REQUIREMENT OF PROOF BEYOND REASONABLE DOUBT IN ORDER TO ESTABLISH GUILT OF PETITIONER (SEC. 2, RULE 133, THE REVISED RULES OF COURT)[76]

In G.R. Nos. 99059-99259 (Criminal Cases Nos. 1143-1153, 1155-1159, 1197-1201, 1242-1249, 1261-1266, 12701281, 1285-1288, 1290-1306 and 1309-1318) District Auditor Efren Coyoca alleges the following errors:
I

THE SANDIGANBAYAN GRAVELY ERRED IN ENTERTAINING THE CASES.

II

THE SANDIGANBAYAN ERRED IN FINDING THE PETITIONER TO HAVE CONSPIRED WITH HIS CO-ACCUSED.
III

THE SANDIGANBAYAN ERRED IN FINDING THAT THE FUND RELEASES, EXPENDITURES AND DISBURSEMENTS WERE WITHOUT BUDGETARY ALLOCATION.
IV

THE SANDIGANBAYAN ERRED IN FAULTING THE PETITIONER FOR THE EXCLUSIVE ACT OF THE REGIONAL ACCOUNTANT IN CHARGING OF EXPENDITURES AND DISBURSEMENTS TO PRIOR YEAR OBLIGATION WITH ACCOUNT SYMBOL 81-400.
V

THE SANDIGANBAYAN ERRED IN FINDING THE EXISTENCE OF SPLITTING OF VOUCHERS, ETC., IN THESE CASES AND IN CONSIDERING THE SAME TO BE ILLEGAL.
VI

THE SANDIGANBAYAN ERRED IN FINDING THE PETITIONER GUILTY OF THE CRIME CHARGED. In G.R. Nos. 99412-99416 and 99436-99636
[77]

(Criminal Cases Nos.

1143-1163, 1165-1167, 1169-1177, 1180-1181, 1184, 1190-1191, 1193-1194, 1196, 1198-1200, 1208-1214, 1217, 1221-1224, 1226-1229, 1233, 1236-1237, 1239-1240, 1245, 1253, 1255-1260, 1262-1263, 12651272, 1277, 1281-1285, 1288-1289, 1291-1299, 1301, 1306, 1311, 1315, 1317-1323, 1325-1336, 1338, 1339-1341) District Auditor Edgar Osmea, and Auditing Aides Guilberto Hermosa and Aniceto Arriola raise the following issues:
I

WHETHER OR NOT THESE CASES WERE VALIDLY FILED.

II

WHETHER OR NOT THE PETITIONERS ARE PARTIES TO THE ALLEGED CONSPIRACY.

III

WHETHER OR NOT THE DECISION OF THE RESPONDENT COURT IN SO FAR AS THE PETITIONERS ARE CONCERNED WAS SUPPORTED BY ESTABLISHED FACTS AND LAW OF THE CASES.
IV

WHETHER OR NOT RESPONDENT SANDIGANBAYAN COMMITTED GRAVE ABUSE OF DISCRETION IN RENDERING ITS SUBJECT DECISION. In G.R. Nos. 99417-99421 (Criminal Cases Nos. 1143-1341) Property Custodian Santos Cabusas and District Accountant Sofronio Mag-uyon anchor their petition on the following grounds: 1. THEIR RIGHT TO DUE PROCESS MAY HAVE BEEN IMPAIRED. 2. THE DECISION OF THE SANDIGANBAYAN CONVICTING HEREIN PETITIONERS IS NOT SUPPORTED BY THE EVIDENCE ADDUCED DURING THE TRIAL. THUS, THE SANDIGANBAYAN DISREGARDED THE FUNDAMENTAL CONSTITUTIONAL RIGHTS OF THE ACCUSED TO BE PRESUMED INNOCENT UNTIL PROVEN GUILTY BEYOND REASONABLE DOUBT. In G.R. Nos. 99887-100084 (Criminal Cases Nos. 1143-1341 except 1289) Assistant District Engineer Rafael B. Rabaya, Jr., and Material Testing Supervisor Nestor Rabaya assign the following errors: I. THE CONCLUSION OF THE HONORABLE SANDIGANBAYAN IN DENYING CREDENCE TO THE EVIDENCE OF THE PETITIONERS IS A FINDING GROUNDED ENTIRELY ON SPECULATIONS, SURMISES OR CONJECTURES AND THE INFERENCES MADE BY IT ARE MANIFESTLY MISTAKEN, ABSURD OR IMPOSSIBLE. II. THERE WAS GRAVE ABUSE OF DISCRETION ON THE PART OF THE HONORABLE SANDIGANBAYAN IN GIVING WEIGHT TO THE EVIDENCE OF THE PROSECUTION DESPITE THE CLEAR AND CONVINCING EXPLANATION BY THE PETITIONERS THAT THERE WERE IN FACT DELIVERIES OF ROAD CONSTRUCTION MATERIALS AND THE PROJECTS PAID FOR AS REFLECTED IN THE GENERAL VOUCHERS IN EACH OF THE 199 CASES WERE IN TRUTH AND IN FACT UNDERTAKEN AND WERE IN EXISTENCE AT THE TIME AN OCULAR INSPECTION WAS MADE BY MEMBERS OF THE NBI INVESTIGATING TEAM AND THAT THE LAAs FUNDING THEM WERE VALID.
[78] [79]

III. THE JUDGMENT OF CONVICTION RENDERED BY THE HONORABLE SANDIGANBAYAN IS BASED ON GRAVE MISAPPREHENSION OF FACTS. IV. THE SANDIGANBAYAN COMMITTED A GRAVE ERROR OF LAW WHEN IT GAVE WEIGHT TO THE PLEAS OF GUILTY OF SOME OF THE CO-ACCUSED IN THE AFOREMENTIONED CASES AND CONSIDERED SAID PLEAS OF GUILTY AS COMPETENT AND ADMISSIBLE AGAINST THE ABOVE-NAMED PETITIONERS. The common issues raised by petitioners may be summarized as follows: (a) Whether the evidence of the prosecution has sufficiently proven that the offense charged was committed. (b) Whether the prosecution has duly established conspiracy among the petitioners in the commission of the crimes charged. Before delving into the merits of these cases, we shall first discuss the preliminary matters put in issue. Petitioners Cabusas and Mag-uyon argue that their right to due process had been impaired due to the following: (a) adverse publicity about the Central Visayas highway anomalies in the tri-media; (b) they were not able to fully exercise their basic right to confront witnesses against them by reason of poverty because attendance in hearing which were held in Manila entailed a lot of expenses for transportation and lodging and they were not represented by counsel of their choice; (c) the respondent court had probably made a pre-judgment of their cases since it also previously heard the other criminal cases filed against officials and employees of the other districts. Said arguments deserve scant consideration. These cases were filed in 1978 while the hearing started only in June 1984. Hence any alleged adverse publicity in 1978 had already waned or ceased by 1984. Petitioners Mag-uyon and Cabusas have no basis in claiming that they have been denied due process since the records show that they were given ample opportunity to present their cases and to cross-examine the witnesses. The Sandiganbayan has, in fact, decided these cases on the basis of the documentary and the testimonial evidence presented by the prosecution in these cases. Aware of the possible concern of the accused, respondent court declared: Considering that there are other similar cases pending trial before the First and Third Divisions of this Court, resolution of the instant charges shall be confined only to such evidence which have been presented in the cases at bar, despite the similarity of the legal and factual issues involved in all of these cases. Petitioners Auditors, Efren Coyoca and Edgar Osmena; and Auditing Aides, Aniceto Arriola and Guilberto Hermosa, complain that the Informations against them were filed without the preliminary investigations conducted by the Tanodbayan as mandated by PD 1630; and that the Informations were filed by Atty. Meliton R. Reyes who had no authority because he was not from the Tanodbayan but the Chief of the Administrative Services of the Bureau of Treasury. Said claim is without merit. Under Section 17 of PD 1630, while it is the Office of the Tanodbayan which has the exclusive authority to conduct preliminary investigations of all cases and to file the corresponding Informations, cognizable by the Sandiganbayan, the Tanodbayan, with the approval of the President, may utilize, designate or deputize any lawyer in the government to act as special prosecutor to assist him in the investigation of said cases. As stated by
[80] [81]

petitioners in their respective petitions, the conduct of the investigation was made by the composite team whose finding and resolution to file Information was approved by the Tanodbayan. Hence, the designation of Atty. Meliton Reyes as Investigating Prosecutor of the Tanodbayan was valid. Moreover, the absence of a preliminary investigation does not impair the validity of the criminal information or render it defective. The question of whether or not a preliminary investigation has been properly conducted should be raised prior to arraignment. It can not be invoked for the first time at the appellate level. Besides, the posting of bail made by petitioners expressly waived any irregularity in the preliminary investigation. The Sandiganbayan had rendered, after trial on the merits, a judgment of conviction. It is too late in the day for petitioners to make an issue of their right to a preliminary investigation. We now proceed to resolve the issue whether the evidence of the prosecution has proven beyond reasonable doubt that the crime charged was committed by petitioners. The petitioners question the conclusions of the Sandiganbayan insofar as its appreciation of the facts is concerned. Generally, the factual findings of the Sandiganbayan are binding upon the Court. However, this general rule is subject to some exceptions, among them: 1) when the conclusion is a finding grounded entirely on speculation, surmise and conjectures; 2) the inference made is manifestly mistaken; 3) there is a grave abuse of discretion; 4) the judgment is based on misapprehension of facts; 5) said findings of facts are conclusions without citation of specific evidence on which they are based and 6) the findings of fact of the Sandiganayan are premised on the absence of evidence on record. Petitioners claim that these cases are exceptions to the general rule because the findings of Sandiganbayan are contrary to the established facts and based on speculations, surmises or conjectures and the inferences made by it are manifestly mistaken, absurd or impossible. We are not persuaded. The scheme to defraud the government started with the issuance of 18 fake LAAs and 8 SACDCs to Cebu 2nd HED which were admittedly signed by Regional Accountant Rolando Mangubat. The evidence for the prosecution had clearly established the existence of these fake LAAs and SACDCs which became the bases of the subject 199 general vouchers and checks issued to contractors/suppliers in payment for the alleged deliveries of materials in the different project sites. Prosecution witnesses Ruth Paredes and Felicitas Ona, both COA Auditors who were tasked to investigate the issuances of these fake LAAs and SACDCs, had clearly identified the badges of fraud in the issuances of these fake LAAs which were released to Cebu 2nd HED. It was established among others that while the regular LAAs were recorded in the logbook maintained by the Regional Office, the fake LAAs and SACDCs following their issuances were not entered in the logbook. The entry in the logbook is an important safeguard against fraud; thus, the failure to enter the LAAs and SACDCs in the logbook necessarily indicates irregularity and fraud. The COA findings were corroborated by no less than prosecution witness Delia Preagido, an accused-turned-state witness, who had a first hand knowledge of how such falsification was done, testifying as follows:
[82] [83] [84] [85] [86]

Q - What were the other occasions wherein Mr. Rolando Mangubat requested you to remain after office hours?

A - In the first week of February 1977, he told me to remain after office hours and to discuss important matters. PROS. GUERRERO Q - Where were you? WITNESS A - In the office. Q - What time was it? A - About 4:30. Q - And did you comply with the request of Mr. Rolando Mangubat? A - Yes sir. Q - Now, what happened when you remained after office hours? A - He told me to pack up my things and that we will go to the Town and Country Restaurant. PROS. GUERRERO Q - And did you go to the Town and Country Restaurant? WITNESS A - Yes sir. Q - Now, what time did you go to the Town and Country Restaurant? A - After office hours. Q - Could you recall the exact time? A - After 5:00 oclock. Q - Now, at the Town and Country Restaurant, will you kindly tell us what happened? A - He discussed about the letter of advice of allotment and he told me that we can get big money out of simulated letter of advice of allotment. PRESIDING JUSTICE (To the witness) Q - How many were you then? WITNESS A - Only two, Your Honor. Q - You and Mangubat only? A - Yes, Your Honor. PROS. GUERRERO Q - Aside from your being superior officer, is there any other relationship that you have with Rolando Mangubat at that time? A - I am next in rank, and we are close friends. Q - In what way are you close friends with each other? A - He tells me his personal and office problems; his No. 2, he told me. Q - Now, what was your reaction to the things that were told to you by Rolando Mangubat regarding these allotments? A - I told him, how can we get money out of fake letters of advice of allotments? PROS. GUERRERO Q - And what did Rolando Mangubat tell you? WITNESS A - Mr. Mangubat told me that by selling the fake LAAs we can get big money. PROS. GUERRERO Q - And to whom will these fake LAAs be sold? WITNESS A - To the different contractors, the District Accountant, the District Engineer and the Assistant District Engineer. Q - Now, on these occasions, did Mangubat tell you how the fake LAAs would be affected (sic)? ATTY. DE SANTOS Objection. Asking for hearsay evidence. PRESIDING JUSTICE May answer. WITNESS A - Yes sir. PROS. GUERRERO

Q - How. WITNESS A - If we will sell the LAAs to the contractors or to the district engineers, we can get big amount of money and we can receive the proceeds of the fake LAAs. ATTY. DE SANTOS I move to strike out the answer for being hearsay and hypothetical. PRESIDING JUSTICE May remain. PROS. GUERRERO Q - Now, were you informed on that occasion who will be the persons involved in this scheme that was mentioned to you by Rolando Mangubat? WITNESS A - In the regional office, I told him that there is difficulty to sell fake LAAs because it can be easily discovered by Mrs. Angelina Escao. But he told me that Mrs. Angelina Escao is a part of the arrangement. ATTY. DE SANTOS I move to strike out the answer for being hearsay. PRESIDING JUSTICE May remain. PROS. GUERRERO Q - What else? WITNESS A - And the big boos(sic) already knows about it. Q - Now, who is this big boss that you mentioned? ATTY. DE SANTOS Asking for strictly hearsay evidence. PRESIDING JUSTICE May answer. WITNESS A - He told me the regional director, the assistant regional director and other high ranking officers in the central office.[87] ... Q - Now, what else was discussed inside the Town and Country Restaurant between you and Rolando Mangubat? WITNESS A - Mr. Rolando Mangubat and I discussed about the percentage of the selling of the LAAs. PROS. GUERRERO Q - Percentage of whom? WITNESS A - From the contractors and from the district engineers. We discussed about the LAAs and I told him that even if the arrangement is between the regional office only it is easily discovered by the central office people because of our report of checks issued and cancelled, and he told me not to worry because the officers or the people in the central office are part of the conspiracy. ATTY. JIMENEZ Central office? Hearsay. ATTY. DE SANTOS We joined the objection of counsel. PRESIDING JUSTICE Part of her testimony. PROS. GUERRERO Q - What did you discuss about? WITNESS A - About the percentage of the LAAs 26 per cent of the fake LAA. Q - What is this 26 per cent?

A - The contractors or the district engineers concerned will give us 26 percent like for example P5,000.00, 26% of the P5,000.00 is our percentage, and 20% goes to the central office and 6% to the signatories of the fake LAA; the 20% we divide, of the 20% goes to the regional office and goes to the central office people. Q - Now, Mrs. Preagido, will you kindly tell us why your superior officer, Rolando Mangubat, discussed to you these things that you have mentioned about the fake LAAs and the selling of these fake LAAs to contractors? ATTY. DE SANTOS We object to her previous answer for being hearsay. ATTY. BAUTISTA Objection to the question. Calling for opinion. PRESIDING JUSTICE May answer. WITNESS A - Being an intimate friend of Mr. Rolando Mangubat and I am the one who makes the trial balance for the entire region and for the posting of the journal entries to the journal voucher. PROS. GUERRERO Q - And what would be the significance of this duty that you mentioned to the fake LAAs and the selling thereof? ATTY. DE SANTOS Asking for an opinion. PRESIDING JUSTICE May answer. WITNESS A - For the journal voucher, there is a regulation in the journal to be posted in the general journal and from the general journal to the general ledger, then the preparation of the trial balance. PROS. GUERRERO Q - The discussion that you had with Rolando Mangubat at the Town and Country Restaurant, was that the first time that Rolando Mangubat ever discussed out this fake LAA and the selling of the same to the contractors? WITNESS A - Yes sir. JUSTICE BUENAVENTURA J. GUERRERO (To the witness) Q - Were the people in the central office allegedly involved, were the names mentioned to you? WITNESS A - Mr. Rolando Mangubat mentioned their names during our conversation, Your Honor. Q - And who are they? A - Mrs. Leonila del Rosario; Mrs. Engracia Escobar, our chief accountant; and Mr. Abelardo Cardona, our assistant chief accountant; Mr. Leonardo Tordecilla, our supervising accountant; and Mr. Pagdanganan, our budget officer. Q - All of the central office? A - Yes sir. Yes, Your Honor. PROS. GUERRERO Q - What did you tell Mr. Rolando Mangubat when you were told about this scheme of faking LAAs and selling these to the contractors? WITNESS A - I said, how can that be possible when there are some officers who can easily discover. Q - And what was his reply? A - He answered not to worry because they are part of the conspiracy. Q - Why did you tell Rolando Mangubat the possibility that these fake LAAs will be detected? A - Because of our reports. It can be easily detected in our reports especially in the list of checks issued and cancelled. All checks issued in the district will be signed, all checks issued and cancelled. Q - Now, on that occasion, did Rolando Mangubat tell you to join them in the fraudulent scheme? ATTY. DE SANTOS -

Leading. PRESIDING JUSTICE May answer. WITNESS A - Yes sir. PROS. GUERRERO Q - And what did you tell Rolando Mangubat when you were invited to join them? ATTY. DE SANTOS Objection. Asking for hearsay evidence. PRESIDING JUSTICE May answer. WITNESS A - I told Mr. Rolando Mangubat, if the conspiracy is not only for the regional office by including the central office, I will consent to be part of the conspiracy. ... PROS. GUERRERO Q - Now, you mentioned also of Jose Sayson, an employee of Region 7, as being involved in this conspiracy that you discussed with Rolando Mangubat. Now, my question is, on that occasion when Rolando Mangubat discussed with you these fake LAAs and the selling thereof to contractors, do you recall having met Jose Sayson? WITNESS A - Yes sir. Q - Where did you meet him, Jose Sayson? A - In the Town and Country Restaurant. Q - How many days after that meeting with Rolando Mangubat? A - After a few minutes on that day. Q - How did you meet him? A - Mr. Rolando Mangubat called by phone. After two minutes, he joined our table with Edgardo Cruz, Accountant I of Region 7. Q - With your office? A - Yes sir. Q - In the accounting division? A - Yes sir. Q - What is the position of Jose Sayson? A - Budget Examiner II, Ministry of Public Highways, under Angelina Escao. Q - What happened when these Jose Sayson and Edgardo Cruz joined your table inside the Town and Country Restaurant? ATTY. DE SANTOS Objection. Nothing was said by this witness regarding Edgardo Cruz. PROS. GUERRERO Q - Who arrived after making that phone call? WITNESS A - Mr. Edgardo Cruz and Mr. Jose Sayson. Q - What happened? A - They joined our table. Q - And what was discussed? A - At that time, I knew that Mr. Edgardo Cruz and Mr. Jose Sayson will be ones to do the selling of fake LAAs. Q - Who brought up the proposition when the two arrived? A - Mr. Rolando Mangubat. Q - What did he say? A - He told to us, Mr. Jose Sayson and Mr. Edgardo Cruz will be the ones to take charge of negotiating and selling the fake LAAs. Q - What was the reply of Cruz? A - They answered, yes. Q - I am only asking you about Cruz.

AQAQA-

Mr. Cruz answered yes. How about Sayson? He said also, yes. And then? Mr. Mangubat told us that Mr. Sayson and Mr. Cruz are the ones who typed the fake LAAs, or sometimes by me. Q - You said, are the ones. Why, was there anything typewritten already? A - The amount of fake LAAs because we have only the forms. Q - Now, what else what discussed in that meeting? What was the reply of how about you, what was your reply? A - I told Mr. Mangubat that if I have no work, I will type. Q - How about Jose Sayson? A - He said, yes. Q - How about Edgardo Cruz? A - Yes. Q - What happened after you agreed? A - We started to make the LAAs. Q - About that meeting, nothing more? A - Nothing more. Q - You separated already? A - But Edgardo Cruz, Jose Sayson and Mr. Mangubat stayed in the Town and Country Restaurant and I went home. Q - After that meeting, what happened? A - We started typing the fake LAAs. Q - You said, we. Who were your companions? A - Mr. Jose Sayson and Edgardo Cruz. Q - Now, how many documents did you prepare in connection with these allotments that were discussed between you and Mr. Rolando Mangubat? ATTY. DE SANTOS Objection. Leading. PRESIDING JUSTICE May answer. WITNESS A - I cannot remember because we typed in bunch, not individually.[88] ... Q - But aside from you, just to be clear, aside from you, Edgardo Cruz and Jose Sayson, nobody else typed the fake LAAs. A - Nobody else, Your Honor. Q - How can you be sure about that? A - Our agreement with Mr. Mangubat was that we will be the ones who will type the fake LAAs, the three of us, Your Honor. Q - You do not know if Mangubat also made arrangements with others? A - He told me that only three of us, Your Honor.[89] ... JUSTICE B. GUERRERO (To the witness) Q - What happened to these fake LAAs and fake CDCs after Mangubat signed them? WITNESS A - The Regional Director, or the Assistant Regional Director, or the District Highways Engineer countersigned them for approval. Q - Who were these people that you mentioned? What are their names? A - Mr. Rolando Mangubat, Adventor Fernandez and Jose Bagasao, Your Honor. Q - Why do you know that they signed these documents? A - I am familiar with their signatures. Besides, I saw Mr. Bagasao signed (sic) in his office. PROS. GUERRERO -

Q - Now, you mentioned that these fake LAAs and fake CDCs were released to the district. After they were duly signed, what happened to the fake LAAs and fake SACDCs? WITNESS A - Mr. Edgardo Cruz and Mr. Jose Sayson started selling them to the different contractors.[90]

The plea of guilty entered by accused Regional Accountant Rolando Mangubat as the author of such fraud and the signatory of all the fake LAAs and SACDCs, in effect, confirms the testimony of Delia Preagido on the falsity of the LAAs. We find it significant to mention that we have already affirmed the conviction of Mangubat by the Sandiganbayan in the other ghost project anomalies involving the same scheme as in this case, which was committed in the other engineering districts of the MPH-Region VII in 1977 and 1978, to wit: the Danao City Highway Engineering District and the Tagbilaran City Engineering Office. Pursuant to the 18 LAAs and 8 SACDCs addressed to Cebu 2 nd HED, purportedly issued by Region VII, it appears that the Cebu 2nd HED had prepared the necessary papers for the procurements of supplies and materials. Evidence shows that initially, the Requisition and Issue Vouchers (RIVs) and the Requests for Allotments (ROAs) were both prepared by petitioner Property Custodian Santos Cabusas upon instructions of the project engineer. These RIVs and ROAs show that they were signed by the requisitioning officer, herein petitioner Assistant District Engineer Rafael Rabaya Jr., or by any one of his co-petitioners Project Engineers, namely: Rogelio Alvizo, Pompeyo Almagro, Catalino Magno, Jr., and co-accused Florito Montecillo. After having been certified as to the availability of funds by petitioner District Accountant Sofronio Maguyon, the RIVs and the ROAs were approved by the District Engineer Jose Genson or Domingo Rayos. Evidence clearly show that during approximately the same period of time, separate RIVs and ROAs were prepared for the same project involving the same materials and requested by the same requistioner. Thus, as correctly found by the Sandiganbayan, there was indeed a splitting of requisition which is not allowed under COA Circular No. 7641, dated July 30, 1976. Based on the abstracts of proposals, various contractors/suppliers whose names appeared therein purportedly submitted their bids which were opened on the specified date by the Committee on Bidding, witnessed and signed by petitioner Aniceto Arriola or petitioner Guilberto Hermosa or co-accused Graciano Navales or co-accused-turned-state witness Fe delos Reyes as COA representative and by petitioner Property Custodian Cabusas. In the same abstract, the award was given to the lowest bidder signed by three members of the Committee on Award, composed of Administrative Officer Vicente C. Licen, petitioner Assistant District Engineer Rafael Rabaya, Jr. and petitioner District Engineer Jose Genson or District Engineer Domingo Rayos. Purchase orders for the materials needed addressed to the winning contractor/supplier were either signed by the requisitioning officer, petitioner Assistant District Engineer Rafael Rabaya, Jr. or the other petitioners Project Engineers, Property Custodian Cabusas and the District Engineer. The tally sheets based on the delivery receipts of materials were signed by a Property Inspector from COA, herein petitioners Arriola, Hermosa, Navales or delos Reyes or one of the Project Engineers, petitioners Alvizo, Magno, Jr. or Almagro. The reports of inspection were signed by a COA inspector, petitioners Arriola, Hermosa, Navales or delos Reyes, with the concurrence of petitioner Property Custodian Cabusas and approved by the Auditor concerned, petitioners Efren
[91] [92] [93] [94] [95] [96] [97] [98] [99] [100] [101] [102] [103] [104]

Coyoca or Edgar Osmea. The worksheets for mechanical analysis that samples of materials delivered were tested for conformity with the specifications were signed by the Material Testing Supervisor petitioner Nestor Rabaya or Rogelio Alvizo. It is established by prosecution witness COA Examiner Fe delos Reyes, an accusedturned-state witness, who was one of the inspectors assigned to inspect deliveries on the project sites, that no actual deliveries were made when she made the inspections on the specified date. She testified that on the two separate days that she went to the job sites where the deliveries were to have been made, she found none; that she called the attention of the Auditor, petitioner Efren Coyoca regarding the non-delivery but he told her to sign the tally sheets and inspection reports even without actual deliveries and assured her that he will be responsible if something went wrong. She did not go to the jobsite after her first and second inspections because petitioner Auditor Coyoca told her to just sign the tally sheets and there was no need to go to the site since there would be no delivery at all. Petitioner Auditor Coyoca was replaced by petitioner Auditor Edgar Osmea and later by petitioner Auditor Harvey Ruiz. Delos Reyes brought the matter of non-delivery to the attention of these replacement Auditors who just told her to continue with what had been the practice. The Sandiganbayan found no actual deliveries of materials and aptly made the following disquisition: With respect to the issue as to whether there was actual compliance and deliveries made by the accused-contractors herein, the Court must necessarily adjudge that there was no such compliance or deliveries and that the execution and preparation of the supposed DRs, Summaries of Deliveries (Tally Sheets), and Reports of Inspection, together with the Reports of Analysis of the materials, were all manufactured en masse and ante-dated to give some semblance of justification for the questioned transactions. Even if it will be admitted, for the sake of argument, that there were projects during 1977 within the Cebu 2nd HED involving re-gravelling and asphalting and that there were deliveries made on such projects, the Court concludes that these were in connection with the regular maintenance projects and not, as claimed by the defense, part of routine, periodic, or progressive maintenance or for rehabilitation, betterment or improvement. Considering the allotments released to the Cebu 2nd HED for regular maintenance in 1977, and there being no showing at all that dire calamities, such as typhoons and earthquakes, had occurred over Cebu province during said year which would have necessitated or required additional allotments, then the defense theory to that effect must be rejected. Such a theory appears to be a desperate and last minute concoction by the accused which they seek to impose on the Court in the total absence of any meritorious or valid defense. This Courts credulity and powers of imagination would have to be stretched ten-fold to conceive that the seven (7) accused-contractors could make the deliveries alleged by them within the limited periods appearing in the supporting papers to the GVs in question, notably, the DRs and the Tally Sheets. The convergence of the dates when some of these deliveries were alleged to have been made and the monumental, if not stupendous, efforts required to perform such tasks, together with the inordinate haste with which the alleged inspections were made, resulting in similarly hasty payments, all these circumstances indicate that no such deliveries were actually made. In fact, the defense theories put up by the accused who are officials of the Cebu 2nd HED suffer from an intrinsic flaw or defect, which is, that two of the seven (7) contractors suppliers had admitted non deliveries by pleading guilty in the cases wherein they were charged. As reflected in the record, accused Gabison and Echavez had withdrawn their previous pleas of not guilty in all of cases
[105] [106]

wherein they were charged and, upon re-arraignment, pleaded guilty, thus, admitting that they had participated in the conspiracy by submitting simulated bids, making fictitious deliveries and receiving payments for them. Accused Pablo Guinocor, on the other hand, has remained at- large up to this date while Rufino Nunez had died after having been convicted by final judgment in the Danao 78 and Lapu Lapu 78 cases wherein he was also similarly charged. Furthermore, even assuming, arguendo, that actual projects were being prosecuted by the Cebu 2nd HED during the period from January to December, 1977 and that there were actual deliveries of Items 200 and asphalt made on such projects, the Court logically assumes that these were in connection with regular maintenance and not for periodic maintenance, or for rehabilitation, betterment or improvement (RBI) as claimed by the defense. Considering that, as previously stated, the Cebu 2nd HED had already been issued regular LAAs and SACDCs in the amounts of P5,737,197.97 and P6,529,063.39 respectively, for the entire year 1977, and there is no showing whatsoever, that, firstly, such allocations were insufficient; secondly, that extreme emergencies, calamities or force majeure had actually occurred during said year to justify additional allocations and, thirdly, that the proper request or requests had been made to the Central Office, MPH, through the Regional Office, then the inevitable conclusions which arise are that the alleged periodic maintenance or RBI were not actually done but had been prosecuted as part and parcel of regular maintenance and that such theory had been concocted by the defense to justify the illegal disbursements made through the 199 GVs. For it defies logic and reason to accept the defense posture that illegally-disbursed and misappropriated public funds would be actually spent for any project at all. Instead, the co-conspirators would naturally divide the spoils among themselves rather than look for ways and means to disburse them pursuant to the generallyaccepted accounting and auditing procedures. Such a situation we find to be completely in accord with the facts and circumstances appearing on the record. Moreover, attempts by the defense to discredit the testimony of discharged state witness Fe delos Reyes to the effect that, as Auditing Aide or Examiner, she signed Daily Tally Sheets and Reports of Inspections for supplies and materials supposedly delivered at the project sites by accusedcontractors when there were actually no deliveries or inspection, do not gain our acceptance or approval. Aside from the fact that delos Reyes testimony appears to be convincing and credible, the facts testified to by her have been substantiated and/or corroborated by the pleas of guilty of accused-contractors Gabison and Echavez. If such modus operandi was resorted to with respect to these two contractors, then there is no reason for its non-application or non-compliance as regards accused-contractors Joselito Genson and Jariol, Jr. and also Nunez, Guinocor and Abatayo. Again, logic and common sense dictates that the disbursement of public funds emanating from the fake or irregular LAAs and SACDCs and the utilization of simulated RSEs, POs, Tests Reports, DRs, DTSs, ROIs and GVs would not include or cover the actual deliveries of supplies and materials since the co-conspirators would not be able to profit therefrom. Thus, if We are to believe and accept the accused-contractors theories, more particularly those of accused Jariol and Joselito Genson, with respect to their alleged prosecution of projects in 1977 within the Cebu 2nd HED, involving P7,005,477.22, We can just imagine the monstrous traffic jams and problems which would have occurred within the district throughout the year, considering that, at the same time and during the same months, projects involving regular maintenance worth P5,735,197.97 were on-going. Considering further, that during the same year, contractors Rufino Nunez, Juliana delos Angeles, Antolin Jariol and Erasmo Gabison were involved in
[107] [108]

allegedly similar projects in the Cebu 1st HED, Mandaue City HED, Davao City HED and LapuLapu City HED, then it could be logically and reasonably concluded that they would have run short of supplies and equipment, such as trucks, payloaders, bulldozers and rollers, as well as manpower. Furthermore, no attempt whatsoever had been made by the accused district officials and the accused-contractors to show or prove that there was no overlapping or regular maintenance projects with the projects in question, there being no showing that the districts records for 1977 are not available or complete. The general vouchers were prepared for payment to the contractors/ suppliers concerned, one of whom was petitioner Joselito Genson. The documents submitted by the contractor to ask for payment and to support the general vouchers were the RIV, ROA, abstract of bids, PO, delivery receipts, tally sheets, inspection report and the test report which were all signed by herein petitioners. The general vouchers contain on the face thereof five certifications signed by the proper officials, to wit: (1) a certification of receipt of supplies accomplished by the Property Custodian; (2) a certification of correctness, that is, that the expenses are necessary and lawful and that the prices are just and reasonable and not in excess of current rates in the locality accomplished by the Project Engineeer; (3) approval by the District Engineer; (4) a certification accomplished by the Accountant, that the GV had been properly approved, its account codes proper, and that it is supported by the proper documents; (5) a certification that the GV has undergone pre-audit accomplished by the Auditor. The general vouchers and the supporting documents attached thereto were processed, pre-audited and approved for payment by the District Auditor, petitioners Efren Coyoca or Edgar Osmea. The Sandiganbayan found that there were patent splitting of payments in the general vouchers as shown by the supporting documents which was in violation of COA Circular No.76-41. One glaring fact which cannot be overlooked is that all the 199 general vouchers were for amounts less than P50,000.00 even if most of these vouchers were supported by the same set of documents worth much higher than the said amount. Under COA Circular No. 76-41, the District Auditor can approve vouchers in amounts not exceedingP50,000.00. All the general vouchers more than P50,000.00 must have to be pre-audited and approved for payment by the Regional Auditor instead of the herein petitioner District Auditors. In fact, COA Examiner Ruth Paredes testified that during their investigation, they found out that the Regional Auditor who routinely receives copy of the LAAs and SACDCs from the Regional Office, was not furnished copies of the fake LAAs. Paredes explained that this was due to the fact that the Regional Auditor who received copies of the SAA released by the Central Office to the Regional Office would disapprove the voucher since he could easily see that the fake LAAs were beyond the SAA issued. With the approval of the general vouchers, checks were prepared by the Cashier and released to the supplier/contractor or his representative who then issued the corresponding official receipts. Petitioner contractor Joselito Genson issued company receipts acknowledging that he had received the checks pursuant to the subject general vouchers from the Cebu 2nd district. Fe delos Reyes testified that she had received envelopes containing money for her signatures in the tally sheets and reports of inspection certifying that deliveries were made but in reality there were none. The first envelope she received was personally given to her by Engr. Rafael Rabaya, Jr. while the subsequent envelopes were given by Marcia
[109] [110] [111]

Maruda, a Clerk from the Cebu 2nd HED. The tally sheets and reports of inspections which she signed were some of the documents which supported the general vouchers based on the fake LAAs. It is positively demonstrated by the prosecution evidence that the amounts covered by the subject 199 general vouchers and checks based on the fake LAAs were not reflected in the trial balances submitted by Region VII to the Central Office since they were negated through the journal vouchers to cover up the fraud. As established in Mangubat vs. Sandiganbayan, the ghost projects anomalies that beset the different engineering districts of the MPH-Region VII in 1977 and 1978 was masterminded by a core group of officers and employees of the Regional Office headed by the Chief Accountant, Rolando Mangubat. The scheme made use of fake LAAs, SACDCs and supporting documents such as RSEs or RIVs, ROAs, abstracts of bids, purchase orders, delivery receipts, tally sheets, reports of inspections which had to be accomplished before a check could be issued and released to the supplier or contractor in payment of the materials purportedly purchased from and delivered by him. The Sandiganbayan found petitioners, who were officers and employees of the Cebu nd 2 HED and the COA, to have perpetuated the crime by signing the general vouchers and the supporting documents. Their convictions were based upon a finding of conspiracy. The evidence on record shows that such conspiracy existed considering the issuances of fake LAAs, followed by the irregular preparation, processing and approval of the 199 GVs supported by simulated supporting documents and the payment to the contractors for ghost projects. All the foregoing documents were prepared and processed by petitioners Regional and District officials in connection with the performance of their official functions without which collusion the anomalies charged could not have been committed. Direct proof is not essential to show conspiracy. It need not be shown that the parties actually came together and agreed in express terms to enter into and pursue a common design. The existence of the assent of minds which is involved in a conspiracy may be, and from the secrecy of the crime, usually must be, inferred by the court from proof of facts and circumstances which, taken together, apparently indicate that they are merely parts of some complete whole. If it is proved that two or more persons aimed by their acts towards the accomplishment of the same unlawful object, each doing a part so that their acts, though apparently independent, were in fact connected and cooperative, indicating a closeness of personal association and a concurrence of sentiments, then a conspiracy may be inferred though no actual meeting among them to concert means is proved. Thus, the proof of conspiracy, which is essentially hatched under cover and out of view of others than those directly concerned, is perhaps most frequently made by evidence of a chain of circumstances only. All the herein petitioners contend that they had nothing to do with the preparations and issuances of the LAAs and SACDCs, which turned out to be fake or irregular. While it is true that the fake LAAs and SACDCs originated from the regional office, the falsity of such allotments would be useless if the district officials and employees did not consent to its implementation by making it appear that there were valid requisitions, deliveries, inspections, processing, pre-auditing and approval of the general vouchers and the checks paid to the contractor/supplier. The individual acts of the petitioners including petitioner contractor Genson pointed to a single criminal intent, one performing one part of
[112] [113] [114] [115] [116] [117]

the transaction and the others another part of the same transaction, so as to complete it with a view to attaining the object which they were pursuing, i.e., to defraud the government. We will now discuss the respective liabilities of the petitioners. Petitioners Assistant District Engineer Rafael Rabaya, Jr., Engineer Nestor Rabaya, Material Testing Supervisor, Project Engineers Rogelio Alvizo, Pompeyo Almagro and Catalino Magno, Jr. were convicted for signing the RIVs, worksheet for mechanical analysis and tally sheets. The documents they signed were used as the supporting papers of the general vouchers and the corresponding checks issued for payment to the contractors/suppliers. The general vouchers were traced to the fake LAAs. Petitioners made it appear that there were valid requisitions and deliveries of materials, that projects were indeed undertaken. However, the Sandiganbayan found that although there were deliveries in 1977 in Cebu 2nd HED, these deliveries were in connection with the regular maintenance projects covered by the regular LAAs and SACDCs and not part of the routine, periodic or progressive maintenance as claimed by the petitioners which were based on the fake LAAs and SACDCs; and that no deliveries were made under the fake LAAs and SACDCs since payments to the vouchers went to the pockets of the co-conspirators. Liability of Asst. District Engineer Rafael Rabaya, Jr.: Rafael was the then Assistant District Engineer of the Cebu 2 nd HED. He was second in command in the over-all supervision of the district office which includes the proper implementation of the maintenance, construction and improvement of the districts national roads and bridges. It was established and unrebutted that the district had received 33 regular LAAs in 1977 for the regular maintenance of the districts national roads and bridges. It was also shown that when the district would ask for supplementary allocations outside of the regular allocations given, a written communication must be made by the District Engineer to the Regional Director who would refer the request and the copy of the program of work attached thereto to the Central Office for approval. Petitioner Rafael, in his petition, insists that requests for additional allotments which covered the alleged ghost projects were indeed made but these requests and the programs of work were all taken by the NBI agents when the latter retrieved documents from the district office. If these documents really existed, petitioner Rafael could have easily secured a certification from the Regional Office where the requests were made or from the Central Office where the alleged written requests and programs of work were supposed to have been forwarded to prove his claim. It is an essential part of standard operating procedure that these documents have copies for each office where they customarily pass through. Without such written request accompanied by a program of work, the district had no basis for additional releases of funds. Petitioner Rafael had signed so many RIVs as the requisitioning officer and a painstaking review of these RIVs showed that even if the projects undertaken refer to the same road for the same materials and for almost the same period of time, there were splitting of RIVs which resulted in separate biddings for each RIV and separate purchase orders. We find no compelling reason to disregard the finding of the Sandiganbayan that such splitting had been deliberately resorted to in order to avoid said transactions to be sent to the higher authorities for approval.
[118]

Petitioner Rafael was also held liable for affixing his signature in the general vouchers certifying that the expenses are necessary, lawful and incurred for. His signature signified that the expenses are necessary in the prosecution of the project and in accordance with the program of work. As admitted in his petition, there is one RIV for every program of work; but despite the fact that so many RIVs had been issued, petitioner failed to present a single program of work which would have justified the additional allotments. Moreover, his defense of denial does not relieve him from the fact that had he exercised due diligence, he would have known the badges of fraud enumerated by the Sandiganbayan in its decision and refused to be a part of the conspiracy. We therefore sustain the conviction of petitioner Rafael Rabaya, Jr. in 184 counts. Rafael was not charged in Criminal Case No. 1232 but the Sandiganbayan convicted him in said case. Thus, his conviction in said case must be set aside. Further, Rafael was charged and tried in Criminal Cases Nos. 1180 1283 and 1289 but he was neither convicted nor acquitted in the assailed decision of Sandiganbayan. Records of said cases should be remanded for proper disposition by the Sandiganbayan. Liability of petitioner Project Engineer Nestor Rabaya: Petitioner Nestor affixed his signature as material testing supervisor in the laboratory test reports certifying that he had checked the samples taken from the alleged materials delivered and they passed the required tests. Notably, the laboratory test reports indicated that samples were taken by a certain Soledad F. Pansacala and Honorio A. Capa, laboratory technicians, but they were not presented to corroborate his claim that samples were presented to him and he had checked them. The evidence of the prosecution clearly show that no deliveries were actually made, thus, Nestor is guilty of affixing his signature in the worksheets for mechanical analysis when in fact there were no deliveries and no analysis were made by him. He allowed his name and position to complete the process of defrauding the Government. Nestor as well as Rafael tried to cast doubt on the testimony of prosecution witness Ruth Paredes, COA Supervising Auditor, regarding her findings that the subject LAAs and SACDCs were fake or irregular as they could not be traced from the mother SAA. Petitioners Rabayas argue that why should Paredes insist on tracing the subject LAAs to the mother SAA when they could be traced to the obligation numbers reflected in the ROA which, they claim, were taken by the NBI. We are not convinced. COA Auditor Ruth Paredes had satisfactorily explained the irregularity of indicating the obligation number in the fake LAAs, thus:
[119] [120]

Q. In these LAAs that you have examined, the obligation number is indicated in the LAAs, these alleged LAAs. A. In the LAAs marked Exhs. K-1 to K-18 there are obligation numbers, the obligation numbers are indicated. CHAIRMAN ESCAREAL: Q. Were they correct obligation numbers? A. No, sir, obligation number should not be indicated because the LAA is the authority to incur obligationthat means funds are still available for obligation, not that part that it has already been obligated. Q. What is wrong in putting the obligation number in these? A. Because it would appear that funds were already obligated in the past. Q. So there is no necessity for an LAA? A. But the CDC if the obligations have been already obligated in the past. [121]

We find no basis for petitioners Rabayas insistence on the regularity of the LAAs. The prosecution had sufficiently established the falsity of the same. All the LAAs which were regularly issued by the Regional Office were recorded in their logbook. The fact that the fake LAAs were not recorded conclusively established their falsity. Petitioners Rabayas further contend that although the total amount released to Cebu nd 2 HED for 1977 through the 33 LAAs was P5,735,197.97, only the amount ofP1,919,385.71 was actually released for the regular maintenance of the national roads and bridges which amount was inadequate to meet the total effective maintenance kilometrage (EMK) of 294.54 a year. We find the argument devoid of merit. The 33 regular LAAs issued to Cebu 2nd HED provided also for calamity funds for the repair of the national and barangay roads hit by typhoons. There were also funds released for the construction, rehabilitation, betterment and improvement of the other national and barangay roads. These funds were released together with the amount ofP1,919,385.71 for the regular maintenance of the national roads and bridges; thus, the claim of petitioners Rabayas is misleading. Assuming arguendo that the funds released were inadequate to maintain the national roads, such deficiency, in the absence of a written request for additional allotment did not give authority to petitioners to obtain the release of these funds in violation of the standard operating procedure. To reiterate, the LAAs are issued by the Regional Office based on the SAA from the MPH. The fake LAAs did not have the SAA No. from which the allotment was based and were not recorded in the logbook of the Regional Office. The contention of petitioners Rabayas that the court erred in giving evidentiary value to the pleas of guilty of accused Mangubat, Gabison and Echavez as it violated the hearsay and res inter alios acta rule, is devoid of merit. The Solicitor General, in the Brief for respondent State, aptly refuted the argument of petitioners, as follows: In their fourth and last argument, petitioners maintain that the Sandiganbayan erred in giving evidentiary value to the pleas of guilty of Mangubat, Gabison and Echavez, petitioners co accused. According to petitioners, the admission or confession of a party may be presented as evidence only against himself pursuant to Sec. 33 of Rule 130 of the Rules of Court and under Sec. 26 of the same Rule; that, therefore, admission of the pleas of guilty of Mangubat, Gabison and Echavez against petitioners violated the hearsay and res inter alios acta rules. Sections 26 and 33 of the Rule 130 of the Rules of Court, cited by petitioners, provide as follows: Section 26. Admissions of a party. The act, declaration or omission of a party as to relevant fact may be given in evidence against him. Section 33. Confession. The declaration of an accused [expressly] acknowledging his guilt of the offense charged, OR OF ANY OFFENSE NECESSARILY INCLUDED THEREIN, may be given in evidence against him. On the other hand, the rule of res inter alios acta, mentioned by petitioners, is embodied in Section 28 of Rule 130, Rules of Court states: Section 28. Admission by third party. The rights of a party cannot be prejudiced by an act, declaration, or omission of another and proceedings against one cannot affect another, except as hereinafter provided. However, this aforecited rule allow exceptions one of these being Section 30 on admissions by a co-conspirator, to wit:

Section 30. Admission by conspirator. The act or declaration of a conspirator relating to the conspiracy and during its existence, may be given in evidence against the co-conspirator after the conspiracy is shown by evidence other than such act or declaration. Petitioners contend that the Sandiganbayan violated the rule of res inter alios acta when said Court made reference to the pleas of guilty of Mangubat, Gabison and Echavez. It is submitted that this contention is untenable. Gabison, Mangubat and Echavez were charged together with petitioners for having acted in conspiracy with one another to commit the offenses. The pleas of guilty of some of the accused are admissions of the truth of the accusations that they committed acts of falsifications done during the existence of the conspiracy. The Sandiganbayan merely declared that the pleas of guilty confirmed the issuance and release of fake or simulated LAAs and SACDCs, the irregular, improper and illegal preparation, execution and processing of the general vouchers and their supporting documents, and the non-delivery of materials and non-prosecution of ghost projects. In short, the pleas of guilty were merely confirmatory: they confirmed the facts already established by other evidence of the prosecution. Said pleas were not used by the Sandiganbayan to convict petitioners for, as already mentioned, even if the pleas were completely disregarded, the prosecution had already succeeded in proving petitioners guilt beyond reasonable doubt. It could be conceded, as petitioners assert, that the confession, i.e., the pleas of guilty, were not made during the existence of the conspiracy (Rules of Court, Rule 130, Sec. 30). However, it is submitted that said pleas are nonetheless admissible against petitioners as co-conspirators because the pleas were made in open court. In other words, they are judicial confessions. The rule embodied in Sec. 30 that the declaration of a conspirator made after the termination of the conspiracy is inadmissible against his co-conspirator applies only to an extra-judicial confession, and not to a plea of guilty, which is a judicial confession. In this very specific instance, the rule of res inter alios acta does not apply because the confessions embodied in the pleas of guilty are judicial confessions, not extra-judicial ones. ... The hearsay rule being put up by petitioners apply only if Gabison, Mangubat and Echavez admission of guilt was testified to by another person or by means of affidavit. In this case the three co-accused personally confessed their guilt during arraignment where petitioners were likewise present. If petitioners wanted to dispute the circumstances surrounding the confession of guilt of Gabison, Mangubat and Echavez, petitioners had the right to present the three as hostile witnesses during the trial or petitioners could even have presented the three as their own witnesses. And this fault should not be translated in terms of absence of opportunity to cross-examine the three. Petitioners invoke the rule on res inter alios acta alleging that the pleas of guilty of the three should have not been given weight because they were made after the conspiracy had terminated (Petition, p. 29). This is erroneous because the Sandiganbayan did not convict petitioners on the basis of the pleas of guilty. The Sandiganbayan merely said that the prosecutions case had been amply supported and strengthened by the pleas of guilty entered by the three. The pleas of guilty are in themselves evidence that the pleaders committed the acts mentioned in the Informations. The pleas certainly have corroborative effect on the evidence-in-chief of the prosecution. There is no rule violated by the Sandiganbayan when it considered the pleas of guilty. The motive of the three in pleading not guilty is both speculative and insignificant. Petitioners could imagine the motives of the three for pleading guilty, but the fact remains that the

consequence of their pleas is that they admitted the commission of the crimes charged. Petitioners cannot escape the effects of this admission. Nevertheless, it should be stressed that the portion of the Decision referring to the pleas of guilty of Gabison, Mangubat and Echavez is not the basis for the conviction of petitioners. Even if said portion is disregarded, the decision is still supported by evidence which proved petitioners guilt beyond reasonable doubt. In other words, even if there were no pleas of guilty by Mangubat, Gabison and Echavez, the prosecution was able to prove petitioners guilt beyond reasonable doubt. Assuming that it was error for the Sandiganbayan to consider and refer to the pleas of guilty, this is not reversible error because after disregarding the pleas of guilty there remains sufficient evidence to establish the guilt of petitioners beyond reasonable doubt, and the substantial rights of petitioners were not, therefore, prejudice by its admission (See U.S. vs. Empeinado, 9 Phil. 613, 616 [1908]. (Emphasis supplied). We uphold the conviction of petitioner Nestor Rabaya in 184 counts. Liabilities of Project Engineers Rogelio Alvizo, Catalino Magno, Jr. and Pompeyo Almagro: Project Engineers Alvizo, Almagro and Magno, Jr. claim that they received the materials delivered in their respective projects; that they signed the tally sheets certifying receipt of materials after they had checked and verified the deliveries; that all projects assigned to them were prosecuted in accordance with the program of work. However, the Sandiganbayan rejected such claim of completion of projects, which we uphold, thus: And since it goes without saying that the projects in question involved re-gravelling and asphalting wherein the presence of the maintenance engineers or foremen would be required, as well as laborers to do the spreading and steam rolling, accused district officials should have presented evidence that the officials and employees concerned were issued the proper travel orders and either cash advances or reimbursable expense receipts (RERs) in traveling from the district office to the project sites and in supervising and inspecting the project sites on the dates concerned; that their Daily Time Records would show their absence from the district office on the dates reflected in the GVs supporting documents and that the proper payrolls had been prepared for payment of the laborers who worked on the project. If heavy equipments were utilized in these projects, then the proper travel orders or lease documents from the Engineering depot concerned would show that such equipment had, indeed, been used in the prosecution of said projects. None of these have been submitted by the accused concerned. Petitioner Alvizo testified during his cross-examination that road graders and rollers of the government were used to spread the base course materials and to compact the same; that the laborers required were the operator of the road graders, the assistant of the road grade operator and an assistant laborer; and that reports were made for the use of such equipments but he could no longer recall where the operators submitted their reports. Taking note of his testimony, Justice Escareal asked petitioner Alvizo, thus:
[122] [123] [124] [125]

Q. Mr. Alvizo in 1977 do you still remember how many road rollers and graders were being used by Cebu Second Engineering District? A. The project, on road grader and road roller. Q. In your district, do you remember? A. We have wide area. I could not count how many were there. Q. But there will be more than two? A. I am not very sure. Q. But at least two are assigned to you. A. In my project, one.

Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q. A. Q.

A. Q. A. Q.

A.

So there are more than two? Maybe sir. If there are other projects they will also be entitled to two? If there are And since you were assigned to several projects then in those projects at least two or more road rollers and graders were assigned in those projects where you are the project engineer? Sometimes the equipment will be utilized first in the first project and transfer (sic) to the second project. In other words the road rollers will be used by other project engineers and after you can use them in your project? Yes, your honor. Following your testimony that Cebu Second Engineering District is quite wide you are referring to the area south of Cebu City from Talisay up to the tip, Southern tip of Cebu? Yes, that is the area. On both course of Cebu Island and inland going south? Yes, your honor. If there is a project down south in Cebu down south of Cebu City such as Alcoy, the road roller and grader will have to travel? In connection with the grader, is it not? Yes, sir. Then the operator will have to get trip ticket because they could not travel without the trip ticket, is it not. Yes your honor. You all project engineers should know that? Not only that but the operator has to file daily time record? Yes, your honor. If it exceeds the number of hours, it requires over time? We are not allowed overtime, your honor. If you work only during the regular hours? Sometimes we go home late at night but we do not claim overtime. But the workers stay there until completed? If you make projects in Argao the road rollers, the graders will not be able to come back in the afternoon? They will stay in the project site. So there will be a record of the Engineering office of the length of time a road roller and road grader is stationed in a project. I could no longer recall, your honor. We are talking about procedure. If a road roller is assigned in Argao will there be a record of the Engineering Office at the time it left and was issued a trip ticket, the amount of gasoline used in going there in completing the project and in coming back to Cebu City? Yes your honor. So unless assigned and the same thing will follow the number of hours it is used in completing the project, correct? Yes your honor So if this project was really projected (sic) these cases which are now being tried were really prosecuted, you just look into the record of the Cebu Engineering District and it supports there the completing of the project. Is it not? Yes, Your honor.[126]

Yet, Alvizo did not present any record of machine utilization reports nor evidence of workers who performed the work of spreading the materials to corroborate that work had actually been done. If indeed there were reports, they should have been readily available. Bare allegations which are not supported by any other evidence, document or otherwise, fall short to satisfy the degree of proof needed. Likewise, petitioner Magno asserted during his cross-examination that the use of the road graders and rollers for a certain project and a certain date was reflected in the record of the district and that even their office had a record of the trip tickets of these

machines. However, like Alvizo, he also failed to present the records and the trip tickets to corroborate his defense. Aside from his bare allegation, no competent evidence was adduced to substantiate his claim. The failure to request for the record gives rise to a presumption that the evidence willfully suppressed would be adverse if produced. Petitioner Almagro testified on cross-examination that he was the requisitioning officer in all the projects he prosecuted which, however, was belied by the RIVs which were all signed by Assistant District Engineer Rafael Rabaya, Jr.. If he were not part of the conspiracy he should have easily noticed that something was unusual with the RIVs considering that they were split even if the projects undertaken refer to the same road and for the same kind of materials and called the attention of Rabaya. Such conspiracy was shown when he affixed his signatures in the tally sheets as project engineer certifying receipt of non-existent materials and projects. There would have been no need to resort to splitting of requisitions and the use of fake LAAs and SACDCs if materials were really delivered and projects were prosecuted. The claim of petitioners Engineers Alvizo, Magno, Jr. and Almagro that the supporting documents on which their signatures appeared were only re-used to validate or give semblance of validity to the fake LAAs and SACDCs deserves scant consideration. The records disclose that petitioners raised this issue for the first time on appeal. It is settled jurisprudence that an issue which was neither averred in the complaint nor raised during the trial in the court below cannot be raised for the first time on appeal as it would be offensive to the basic rules of fair play, justice and due process. We uphold the conviction of petitioner Alvizo only in 25 counts instead of 31 counts; of petitioner Magno, Jr. in 22 counts instead of 28 counts; and of petitioner Almagro in 24 counts instead of 26 counts. The conviction of petitioners Alvizo in Criminal Cases Nos. 1203, 1204, 1205, 1230, 1281 and 1288; Magno, Jr. in Criminal Cases Nos. 1162, 1163, 1215, 1217, 1236 and 1238; Almagro in Criminal Case No. 1227, cannot be sustained for the reason that their signatures do not appear in the general vouchers and its supporting documents. Moreover, records disclose the following: In Criminal Case No. 1241, petitioner Magno, Jr. was neither convicted nor acquitted by the Sandiganbayan in its assailed decision although he was charged in the Information and duly tried therefor. Records of said case should be remanded to the Sandiganbayan for proper disposition thereof insofar as petitioner Magno, Jr. is concerned. In Criminal Case No. 1232, petitioner Almagro was convicted by the respondent court although Almagro was not charged in the Information. Thus, the conviction of Almagro in said case should be set aside. Liability of petitioner District Accountant Sofronio Mag-uyon: Petitioner Mag-uyon was held liable by the respondent Sandiganbayan in this wise: Accused Sofronio Mag-uyons liability, as District Accountant, emanates from his signing GVs, ROAs, RIVs, and Abstract of Proposals for Furnishing of Supplies, Materials and Equipments which were all irregular and which cover ghost projects. He also cannot feign ignorance of the fake and/or fictitious nature of the LAAs and SACDCs which were received by him as chief financial officer of the district and on the basis of which he certified as to availability of unauthorized funds of allotments in said GVs, ROAs and RSEs.
[127] [128] [129] [130] [131] [132] [133] [134] [135]

He was the District Accountant of Cebu 2nd HED since 1973 up to 1981 and he had received copies of the LAAs for the quarterly allotments of the district which made him familiar with the LAAs. In the regular LAAs for 1977 which petitioner Mag-uyon received, the SAA number from which the LAA was taken and the date it was issued are indicated in typewritten words. To show where they were derived from, the SAA number is specified in the regular LAAs. On the other hand, the fake LAAs, although signed by Regional Accountant Rolando Mangubat who was also authorized to sign the LAAs and SACDCs in the absence of the finance officer, have no SAA Number. Instead, the fake LAAs were charged to account 81-400 (prior years obligations) which was not a normal procedure and should have put Mag-uyon on guard. These fake LAAs were supposed to be issued for current allotments so that they should not refer to prior obligation numbers. Supervising COA Auditor Felicitas Ona, a member of the Performance Audit team, who investigated the anomaly, testified, during her cross-examination, on such anomalous practice:
[136]

QAQAQ-

Now, lets go to Exhibit K-3. This is a letter of advice of allotment for a total sum of P350,000.00[137] Yes, Sir. Again, will you please enlighten this Honorable Court what these entries mean, this 101-7? 101 is the fund, 7 is the month, 292 is the number of ROA issued for the year 1975. Again, these were requested for obligation of funds made in 75 but as per letter of advice of allotment, they were being done for the year 1977 as per Exhibit K-3, is it not?

Q - I am driving at this. These were the funds that were appropriated in 75 but these funds were obligated and actually spent for 1977? A - Yes, Sir. Q - Is that allowable? A - No, Sir. Q - Why? A - In fact, this is really questionable because, Sir, an allotment is an authority to obligate. So much so now that if the region had already obligated this in 1975, they dont need an allotment to be issued to the district because all that they need is the CDC to pay this obligation. Because, they are an authority to obligate. Q - Now, if an LAA such as K-3 which was received by the district and which you claim cannot be done or should not be done A - Not regularly done. Q - Because it is irregular, what should the district do upon receipt of such LAA? A - I will question If I am the district, I will question the region why are you giving me this fund when it is obligated, how will I spend the money. You have already obligated, so I cannot spend it. [138]

All the regular LAAs bore the rubber stamps of the Accounting Division of Region VII indicating the date when they were released and the signature of the person who released the same which the fake LAAs did not have. The appropriation law which authorized such expenditure was indicated in the regular LAAs but it was not so indicated in the fake LAAs. All regular LAAs were dated while five fake LAAs were undated. COA Auditor Paredes explained during her cross-examination that the LAA must be dated because under budgetary regulations, the funds intended for a particular quarter becomes selfexecutory only at the beginning of that quarter; and that the LAA has to be dated to indicate when it is supposed to take effect because obligation which may not be incurred in the particular quarter is chargeable against the allotments of subsequent

quarters. Thus, in the absence of the date in the fake LAA, Mag-uyon would not know when it is to take effect and to what period of obligation it should be applied. These were patent irregularities on the faces of the LAAs which Mag-uyon could not have failed to see but still, he affixed his signature on the RIV and ROA certifying to the availability of funds. Notably, petitioner Mag-uyon had approved 199 general vouchers which were all for amounts less than P50,000.00. Looking at the RIVs where Mag-uyons signatures appeared certifying Ok as to funds, and the POs supporting the general vouchers, he should have easily noticed that the items requisitioned were actually worth more thanP50,000.00, thus unmistakably signifying that Mag-uyon had knowingly and deliberately participated in the splitting of the accounts. The splitting of accounts is very glaring to be ignored. The number of transactions in which petitioner is involved prevent a reasonable mind from accepting the proposition that petitioner was merely careless or negligent in the performance of his functions. His signatures on the general vouchers, as the District Accountant, certifying to the availability of funds, were an indispensable link to the accomplishment of the fraud. We entertain no doubt that Mag-uyons participation in the conspiracy was proven beyond reasonable doubt. Moreover, the fact that several of these vouchers were made in payment for the same kind of materials to be delivered to the same project and payable to the same suppliers could not have escaped his attention and alerted him of the anomalies in said transactions. Mag-uyon contends that he could not be considered a conspirator because he entered all the funds received by the district from the Regional Office as well as all the disbursements of the district in the cost ledger sheet which he submitted to the Region. We are not convinced. It has been established that there was conspiracy among the district and regional officials and employees thus, Mag-uyon had to record all the transactions done in the district to enable his co-conspirators in the region, who received the cost ledger sheet, to manipulate the books of accounts. Such manipulation was done by taking out the transactions covered by the fake LAAs through negation of entries in the journal voucher, thus, the checks issued and paid, based on the fake LAAs would no longer be reflected in the trial balance submitted by the Regional Office to the Central Office. Liability of petitioner Property Custodian Santos Cabusas: Property Custodian Cabusas was held liable for affixing his signatures in the 199 GVs and in the Reports of Inspection certifying receipt of materials requisitioned and in the Abstracts of Proposals for furnishing supplies, materials and equipments which were all irregular and covered ghost projects. He was the one who prepared all the RIVs and the purchase orders to the winning suppliers of the materials needed for the alleged projects. Prosecution evidence showed that there were many RIVs issued for the same project with the same materials and for almost the same period of time and made by the same requisitioner. It boggles our mind why as property custodian, Cabusas had not been suspicious of the fact that he was asked by Assistant District Engineer Rabaya, Jr. or by the project engineers to prepare separate RIVs and separate notices of public biddings and purchase orders for the same projects and materials. He was also the one who prepared the general vouchers, where a number of these general vouchers were
[139] [140]

supported by the same RIV, PO and other documents. In fact, the Sandiganbayan took notice of the circumstances and propounded questions to Cabusas as follows:
JUSTICE DEL ROSARIO: Q - You said that before you signed vouchers you scrutinize the delivery receipts and tally sheets and other documents that are necessary and since you find out that there is nothing wrong you approve and sign the voucher? A - Yes, your honor Q - What bothers the Court, if there were only one or a few vouchers it will be all right but did it not ever arouse your suspicion that there might be something wrong due to the unusual volume of materials purchased and number of vouchers being prepared a number, the similar identities of suppliers and contractors, did it never occur to you to suggest that instead of so many vouchers and purchase orders you prepare why not lump sum them all in one voucher? A - No sir. Q - Why? A - Because I am only the Property Custodian. I only do what I am told to do. JUSTICE DEL ROSARIO: Q - But you are the one in charge of preparing purchase order? A - Yes sir. Q - And since that involved a lot of repeated work for you for the purchase of materials for the same project involving the same suppliers, it is unusual that you would not even think of suggesting to put only all in one voucher or one specific purchase order? A - Mine is not to question them because I only perform my duty. Q - All right, you said you merely depend on delivery receipts and tally sheet. Since you are the property custodian would you ever try to verify on your own in these delivery receipts or tally sheets were being correct or accurate say by making an inspection on you own? A - I make inspections but very seldom because of the very nature of my duty as property custodian requires that I stay more in office because I have also to take the needs of the project, project engineers. I have to take care of the issuance of gasoline and equipments so I am tied mostly. Q - Did it not occur to you that just to make sure that these vouchers that what you are signing is regular and proper to go out on your own and find out? It did not even occur to you? A - I go out but not often. Very seldom so that I have to rely on them because I do not have reason to doubt the honesty and integrity of the project engineers and the COA representatives. JUSTICE DEL ROSARIO: Q - Despite the numerous vouchers and orders? A - They certify to the inspection and receipts. Q - In going over the delivery receipts did you ever notice that problem the same trucks made several trips a day which may not have been physically possible? A - My checking is the mathematical computation. I am not concerned with the quantity, the total number of cubic meter that is being delivered and recommended for payments. Q - So you did not go deep enough? A - No, I did not, Your Honor.[141]

Petitioner Cabusas could not simply say that he signed the documents as mandated by the nature of his functions pursuant to the standard operating procedure. His signature in the 199 general vouchers certifying that he received the supplies and materials served as a vital link to perpetuate such anomaly. As Property Custodian, he discharges a very sensitive function in the work of the Ministry of Public Highways, even in such areas that may be said to be routine. It is of no defense therefore to say that since there were engineers to inspect and supervise the projects as well as the materials requisitioned therefore, he need not have intervened therein. Otherwise, he would have allowed unbridled fraud in the office itself, an eventuality against which he, as property custodian, had been precisely designated to install safeguards. As such Property Custodian, the petitioner is the first person to determine whether or not supplies (not only for specific programs but for perfunctory projects as well) are properly delivered based on the
[142]

specifications. The fact that the orders therefore had previously passed through the higher-ups and had merited their sanction does not deprive him of the right, nay his bounden duty, to ascertain the correctness of such orders, that is to say, whether or not they conform to the said specifications. Indeed, had he performed this duty he would have discovered the anomaly then going on and prevented it had he desired. Liabilities of petitioners Guilberto Hermosa and Aniceto Arriola: Petitioners Hermosa and Arriola, both COA Auditing Aides of the same district, were convicted of 26 and 100 counts, respectively, for signing abstract of proposal, reports of inspections and tally sheets of materials delivered, covered by fake LAAs and SACDCs. Both were convicted for signing the abstracts of proposals, tally sheets and reports of inspections, certifying to the receipts of certain deliveries in the jobsites which deliveries, however, were found to be non-existent. As Auditing Aides, they were charged with the duty to make sure that materials conformed to the specifications in the purchase order. However, they allowed the irregularities to be committed by making it appear in the inspection reports they prepared and signed that materials had been delivered in the project sites. The tally sheets and the inspection reports were attached as supporting documents to the general vouchers, which allowed the co-accused contractors and suppliers to collect payments for ghost projects. Their signatures facilitated the consummation of the crime. Petitioner Hermosa was not charged in Criminal Case No. 1163 but he was convicted and therefore the decision of the Sandiganbayan must be set aside against him insofar as said case is concerned. Petitioner Arriola was charged in Criminal Cases Nos. 1163 and 1232 but the Sandiganbayan neither convicted nor acquitted him and therefore the records of said cases must be remanded for proper disposition by the Sandiganbayan. Liabilities of petitioners District Auditors Efren Coyoca and Edgar Osmea: Petitioner Coyoca was convicted of 78 counts. Petitioner Osmea was convicted of 24 counts. The Sandiganbayan convicted petitioners Coyoca and Osmea for pre-auditing and approving the general vouchers, and the reports of inspections which were irregular and/or fictitious covering ghost projects. They were found to have conspired with the other petitioners to defraud the government when they allowed splitting of RIVs, POs and GVs into amounts less than P50,000.00 so that their approval of the vouchers would suffice. A higher amount of the vouchers would have required the vouchers to be forwarded to the Regional Auditor for action and review. The Sandiganbayan described the details of splitting, thus: V. Another significant circumstance patent on the record which supports the perpetration of irregularities in the preparation and processing of the GVs and supporting papers and the corollary aspect of conspiracy between and among the accused coming from the Regional Office and the Cebu 2nd HED is the splitting of the RSEs (RIVs), POs and the GVs into amounts less than P50,000.00. Noteworthy is the fact that sixteen (16) of the eighteen (18) fake LAAs were for amounts over P350,000.00, while the eight (8) fake SACDCs were for amounts over P500,000.00. Therefrom, 199 GVs were prepared for the payments of separate transactions below P50,000.00. Under the COA Circular No. 76-41, dated July 30, 1976, in relation to COA Circular No. 16-16A, dated March 23, 1976, clarifying COA Circular No. 76-4, dated February 10, 1976, of which the Court can take judicial notice, it is provided that Resident Auditors of bureaus, offices and
[143] [144] [145] [146] [147] [148] [149] [150]

agencies of the National Government in Metropolitan Manila, as well as other Auditors for District/City Highway, Public Work/School, State Colleges and Universities, Military Areas and Zones outside Metropolitan Manila, are authorized to countersign checks and warrants in amounts not exceedingP50,000.00 in each case (Underlining supplied). Consequently, all GVs in amounts exceeding P50,000.00 must have to be processed, pre-audited and approved for payment by the Regional Auditor of the COA, instead of the Cebu 2nd HED resident auditors, accused Harvey Ruiz, Edgar Osmea and Efren Coyoca. Thus, in the very wording of COA Circular No. 76-41, to avoid action, review or approval by higher authorities, the district officials herein resorted to the splitting of the RSEs, POs, and the GVs involved in the fake LAAs with 199 GVs evolving into separate transactions involving the amounts of less then P50,000.00. Otherwise, if such transactions were to be reviewed and preaudited by the Regional COA Auditor, who might be adverse to joining the conspiracy then the GVs and supporting papers may be found to be the result of (1) inexistent or ante-dated programs of work, (2) illegal funding, (3) irregular bidding, (4) fictitious or simulated deliveries and inspection, and other anomalies. Consequently, the Court considers such splitting as an integral and/or essential element or link in the conspiracy to defraud the Government inasmuch as such practice was consciously and deliberately resorted to in order to hide the massive misappropriation being undertaken by some of the accused herein. The participation of petitioners Coyoca and Osmea in the conspiracy were established by the testimony of prosecution witness Fe delos Reyes who positively identified them, to wit:
[151]

Q - Now in the early part of 1977 would you recall if the Cebu 2nd Highway Engineering District have ever undertaken projects concerning the maintenance or repair of the highway under its jurisdiction? A - Yes, sir. Q - Now, why do you know this fact? A - Because, I was assigned as one of the property inspectors during that time. Q - As property inspector, what do you usually perform with respect to these projects being undertaken or prosecuted by the district? A - I usually perform the inspection. Q - Inspection of? A - Of deliveries of supplies and materials. Q - And where do you usually make the inspection of these materials that would be delivered? A - At the job site. Q - When you said at the job site, to what place are you particularly referring to? A - It depends upon my office memorandum issued by the auditor. Q - Now, usually who assigns you to inspect deliveries of materials for projects being undertaken by the district? A - It is the auditor. Q - And how are you assigned verbally or in writing? A - I am covered by an office memorandum. Q - Issued by whom? A - Issued by the auditor. Q - Now, in the early part of 1977 would you recall if you received any instructions from your immediate superior, Auditor Coyoca, concerning the inspection of materials? A - Yes, sir. Q - Now, would you recall the specific month of 1977 when you were directed to perform inspection? A - As I recall, it was sometime in the first quarter. Q - Of 1977 A - Yes, sir. Q - Can you not recall the month? A - I cannot.

QAQAQ-

Now, were you able to comply with that directive of your auditor, Efren Coyoca? Yes, sir. And what did you do when you went to inspect the materials? When I went to inspect the first time at the job site, I found out that there was no delivery made. So, what did you do when you discovered that there were no deliveries of materials made by the contractor? A - I told that matter immediately to Auditor Coyoca. Q - And what did Auditor Coyoca say? A - He told me I will just confer that matter first to Engineer Rafael Rabaya, Jr. Q - Now, this Rafael Rabaya, Jr., what is his position at the district in the early part of 1977? A - He was the Assistant District Engineer. Q - And would you know if Auditor Coyoca has some conversation with Engineer Rabaya concerning your report? A - Yes, sir. Q - Why? Why do you know that he was able to talk with Engineer Rabaya? A - Because after the day later, Coyoca called me up in his office. Q - And were you able to talk with Auditor Coyoca? A - Yes, sir. Q - Now, when you talked with Auditor Coyoca were there other persons present? A - There was. Q - Who? A - It was Engineer Rafael Rabaya, Jr. Q - What did Engineer . . . Auditor Coyoca tell you, if any? A - That you just sign all those prepared tally sheets and inspection reports. CHAIRMAN Q - Who said that? A - That inspection reports and that if anything goes wrong, I will assume the full responsibility being your chief. (sic) PROS. GUERRERO Q - Now, when Auditor Coyoca told you that, what did you do? A - Then, because of that assurance, I was compelled to sign all those prepared tally sheets and reports of Inspection. Q - Now, lets go back to that inspection which you made on the job site. Would you recall who was the contractor involved in that project wherein you were required to make an inspection of deliveries? A - I think it was Rufino Nuez. Q - Now, in connection with that inspection that you made on Rufino Nuez, would you recall if you ever signed inspection reports and tally sheets concerning deliveries of materials? A - Yes, sir. Q - Now, you said from this first inspection that you conducted were you also assigned to conduct other inspections in the succeeding quarters of 1977? A - Yes, sir. Q - And what would be the procedure that you would adopt in connection with this inspection that you would conduct? A - It was just the same procedure. Q - In this inspection that you subsequently conducted what were your findings? Were there deliveries of materials or not? A - The second order that they gave me, I did not go to the job site anymore because I know that there were no deliveries. PROS. GUERRERO Q - For how long did Auditor Coyoca act as your immediate superior in the year 1977? A - That was the first quarter, sir. Q - Up to the first quarter? A - Up to the first quarter.

Q - During Auditor Coyocas incumbency would you recall how many inspections or yes, inspections were you required to conduct in the district? A - I cannot recall it anymore, sir. Q - But would you recall the contractors involved, in this alleged delivery of materials that you are supposed to inspect? A - Yes, sir. Q - And aside from Rufino Nuez who are the other contractors? A - Antolin Jariol, Pablo Guinocor, Feliciano Echavez, Gabison. I think that is all. Q - After Auditor Coyoca ceased to be your immediate superior who replaced him? A - He was replaced by Atty. Harvey Ruiz. PROS. GUERRERO Q - Now, would you recall the specific date when Atty. Harvey Ruiz assumed the position of resident auditor of the engineering district? A - It was sometime in April, 1977. Q - And upon the assumption of Auditor Ruiz what happened to your practice of inspecting? A - Upon assumption, the first day he assumed office I told him of the anomalies regarding the delivery of materials and supplies in the contract. Q - And what did Auditor Ruiz do or say to your report? A - He also told me to, we will just refer it to Engineer Rabaya. Q - Did Auditor Ruiz confer with Engineer Rabaya? A - Yes, sir. Q - When did Auditor Ruiz confer with Engineer Rabaya? A - After I told him about the anomalies. Q - Why do you know that Auditor Ruiz was able to talk with Engineer Rabaya concerning your report to him? A - Because Engineer Rabaya came also to the office of Auditor Harvey Ruiz. PROS. GUERRERO Q - Why? Were you able to talk with Engineer Rabaya when he came to you? A - The first time he came he talked with Auditor Ruiz and Auditor Ruiz called me up in the office and in the presence also of Engineer Rabaya. Q - And what did he tell you during that occasion? A - To just continue what has been done during the time of Coyoca. Q - Now, during the time of Auditor Ruiz how many inspection reports were signed by you in your capacity as Auditing Examiner II of the district? A - I cannot recall it anymore, sir. Q - Would you recall the contractors involved in this inspection report that you signed? A - Yes, sir. Q - Who are these contractors involved? A - They are Jariol, Nuez, Gabison, Echavez, Guinocor. Q - Mrs. delos Reyes, do you know a person by the name of Joselito Genson. A - Yes, sir. Q - In the year 1977 when you were made to sign inspection reports and tally sheets did you have the occasion of meeting this Joselito Genson? A - Yes, sir. Q - Under what circumstance did you come to know Joselito Genson? A - Because, as I recall now, he is one also of the contractors. Q - Contractors of what district? A - Of Cebu 2nd. Q - In what year did he contract with Cebu 2nd Highway Engineering District? A - In 1977. Q - Of course you know the accused, Jose Genson? A - Yes, sir. Q - Would you know if there is a relation between Jose Genson and Joselito Genson? A - Yes, sir. Q - What is the relationship between the two? A - Contractor Joselito Genson is the son of the district engineer, Genson.

Q - Now, in the year 1977 would you know if Jose Genson was ever employed with the Cebu 2nd Engineering District? A - No, he is not. Q - For how long did Auditor Ruiz act as the resident auditor of Cebu 2nd Highway Engineering District? A - It was from April up to October. Q - Why, what happened to him in October, 1977? A - He was then replaced by Auditor Edgar Osmea. Q - Now, when Auditor Edgar Osmea took over what was the practice that you adopted in connection with the deliveries of materials to be inspected by you? A - It was just the same practice. Q - When Auditor Osmea assumed his office did you have occasion to talk to him? A - Yes, sir. Q - And what did you tell him? A - I told him about the practice that there is no delivery of supplies and materials and that if possible I would like to be assigned to another (sic) activities other than inspection of materials and supplies.[152]

The positive declaration of prosecution witness Fe de Los Reyes was corroborated by the voluminous documentary evidence consisting of the 199 general vouchers and checks as well as the supporting documents attached thereto which were submitted by the prosecution establishing the complicity of petitioners in the illegality of the subject transactions. A careful review of the 199 general vouchers and the supporting documents revealed that there were splitting of requisitions, purchase orders and general vouchers which were all in violation of COA Circular No. 76-41, dated 30 July 1976. As defined by the Circular, splitting in its literal sense, means dividing or breaking up into separate parts or portions, or an act resulting in a fissure, rupture, breach. Within the sphere of government procurement, splitting is associated with requisitions, purchase orders, deliveries and payments. Splitting may be in the form of (1) Splitting of Requisitions which consists in the nonconsolidation of requisitions for one or more items needed at or about the same time by the requisitioner; (2) Splitting of Purchase Orders which consists in the issuance of two or more purchase orders based on two or more requisitions for the same or at about the same time by the different requisitioners; and (3) Splitting of payments which consists in making two or more payments for one or more items involving one purchase order. These forms of splitting are resorted to in order to avoid (a) inspection of deliveries, (b) action, review of approval by higher authorities; (or) public bidding. We find that all these forms of splitting were used in all the transactions brought to the attention of the auditors. Thus, even if the projects undertaken refer to the same road and for the same materials and for almost the same period of time, separate requisitions were prepared and separate purchase orders were made corresponding to each requisition. Also, payments were split into amounts less than P50,000.00 although the general vouchers were supported by the same RIVs and POs. All, to avoid action or review by the higher authorities. The petitioners District Auditors were tasked to safeguard expenditures and uses of government funds hence they had to be on the look-out for cases of splitting in varied forms. The job of an auditor is to pre-audit the general voucher and review the documents attached thereto before a check is to be issued. Petitioners auditors could not have failed to notice that the 199 general vouchers were all for amounts less than P50,000.00 despite the fact that most of these vouchers were supported by the same set of documents, i.e.,
[153]

RIVs and POs, which were worth higher than such amount. To reiterate, several of the general vouchers were made in payment for the same kind of materials to be delivered to the same project for almost the same period of time and payable to the same contractor. Notably, some of the checks issued pursuant to these general vouchers bore the same date or were dated very close to each other. All the herein petitioners insist that there were no splitting of payments but only partial payments in accordance with the progress of work. They claim that partial payments are allowed under existing rules of the MPH particularly Art. 9.06 of the Standard Specification for Highways and Bridges which reads: Art. 9.06. PARTIAL PAYMENTS. Once each month, or oftener if warranted, as the work progresses, the Engineer and the representative of the Contractor will make an estimate of the value of the work performed and materials complete in place in accordance with the contract. Materials on hand but not complete in place shall not be included for payment. Each consecutive estimate shall be filed by the Contractor as a claim against the government and certified to by the Engineer. Ten per cent of each estimate shall be deducted and retained until final acceptance of the entire contract as guarantee for good performance. The monthly payments shall be considered as approximate only and shall not be evidence of acceptance of unsatisfactory work or material. The retention of ten per cent on every partial payment shall be made regardless of whether or not claims for labor and materials have been paid, and shall not be released or authorized to be paid to the contractor until after sixty calendar days have elapsed, counting from the date the final payment on the contract is made. We are not convinced. Petitioners reliance on Art. 9.06 is misplaced for the following reasons: Firstly, the RIVs pertained to the procurement of supplies and materials and the purchase orders covering these procurements did not indicate therein any partial payment that may be allowed to the contractor. Hence, the suppliers were obligated to deliver the materials within the period agreed upon and to be paid only after completion of the delivery. Secondly, based on the delivery receipts and checks paid to the suppliers, the alleged deliveries of materials were completed within 10-15 days from the start of the deliveries and paid within 3-4 weeks from the issuance of the RIVs. A reading of Art. 9.06 would show that the allowed partial payments refer to long term project which is precisely why the frequency of the said payments is generally on a monthly basis. Thirdly, the almost one hundred checks issued to the suppliers which were based on the general vouchers supported by the same RIVs and purchase orders were dated on the same date or were dated very close to each other; therefore, partial payments did not serve its alleged purpose of helping the suppliers to defray their expenses. It bears stressing that when these contractors/ suppliers participated and were awarded the whole quantity of what they bidded, they were expected that they had their own resources to comply in order to attain uniformity of the materials delivered. Finally, it is incredibly astonishing that all the alleged partial payments were uniformly pegged at amounts below P50,000.00 when this circumstance only shows that the scheme was deliberately employed by petitioners to make sure that said payments would no longer be made subject to the approval of the Regional Auditor. Thus, we agree with the Sandiganbayan that the prosecution has amply established the guilt of petitioners Auditors Coyoca and Osmea, as well as the Auditing Aides Hermosa and Arriola.
[154] [155] [156]

Records disclose that although petitioner Osmea was convicted in Criminal Case No. 1163, he was not charged in said case; and in Criminal Case No. 1232, he was neither convicted nor acquitted by the Sandiganbayan although he had been duly charged and tried in said case. The assailed decision must be set aside insofar as Osmea is concerned in Criminal Case No. 1163 and the records should be remanded to Sandiganbayan for proper disposition of Criminal Case No. 1232. Petitioner Coyoca was charged in Criminal Case No. 1289 and tried but was neither convicted nor acquitted by the Sandiganbayan. Consequently, records of said case must be remanded to respondent court for proper disposition. While there are cases where heads of offices, whose actions involved the very function he had to discharge, cannot be swept into a conspiracy conviction, we find the same to be inapplicable in the present cases before the Court. Herein petitioners, Engineer Rafael Rabaya, Jr., District Accountant Mag-uyon, Property Custodian Cabusas and the District Auditors who were heads of their respective divisions in the Cebu 2nd HED were knowing participants in the conspiracy considering that despite the patent irregularities in the documents presented to them, they still affixed their signatures thereto. In fine, all the individual acts of petitioners were so synchronized and concerted leaving no room for any doubt that there was conspiracy and connivance among them. Liability of petitioner contractor Joselito Genson: Petitioner Genson was one of the private contractors who was convicted of 19 counts of violation of section 3(e), RA 3019 for having conspired, cooperated and confederated with the other petitioners in a fraudulent scheme that defrauded the government. Genson was not charged in Criminal Case No. 1232 but he was convicted. The Solicitor General, in his Comment, points out that Genson was not charged in Criminal Case No. 1251 as the name of contractor Rufino Nuez appeared in the body of the Information. A reading of the Information would show that Gensons name appeared in the title as well as in the first paragraph of the Information but not in the body of the Information. However, Genson never raised any objection thereto when he entered his plea of not guilty to the Information nor did he raise the same before, during, after trial, in his memorandum or in his petition. In fact, he included Criminal Case No. 1251 as one of the appealed cases. Thus, unlike the other petitioners heretofore mentioned, Genson is considered as having been validly charged and tried in Criminal Case No. 1251. Petitioner Genson basically raises the issue of sufficiency of the prosecution evidence to sustain his conviction on the basis of conspiracy. He claims that Sandiganbayans statement that a meticulous examination and analysis of the mass of testimonial and documentary evidence presented by the prosecution tends to show the existence of a conspiracy was not the kind of proof required to establish conspiracy. We are not persuaded. Although the findings of the Sandiganbayan started with such a statement, the entirety of the decision discussed how the crime was committed by means of conspiracy between petitioner Genson and his co-accused. The Sandiganbayan had discussed lengthily how such conspiracy was carried out by the individual collective actions of the regional and district employees which began with the issuances of the fake LAAs and SACDCs, followed by the irregular processing of the supporting documents and the approval of the
[157] [158]

general vouchers which ended with the payment of the checks to the accused supplier or contractor. We agree with the findings of the Sandiganbayan that petitioner Joselito Genson conspired with the other petitioners to commit the crime. Such agreement was manifested in the general vouchers and the checks paid to petitioner Joselito Genson, to wit: CC RIV GV No. Date of Amount Project No. Check 1255 345 B-751 5-31-77 P 43,795.50 Pinamungahan Aloguinsan Rd. 1256 - do - 753 - do 43,504.50 - do 1250 451 1081 7-28-77 43,650.00 - do 1251 - do - 1065 8-1-77 43,650.00 - do 1252 421 961 7-13-77 39,721.50 - do 1254 - do - 959 - do 47,578.50 - do 1207 - do - 1239 9-1-77 48,015.00 - do 1204 607 1379 9-20-77 30,433.75 CebuToledo Rd 1205 - do - 1352 9-29-77 42,316.25 - do 1203 632 1461 10-17-77 48,257.50 - do 1230 - do - 1469 - do 24,492.00 - do 1253 755 1762 12-21-77 41,147.40 - do 1257 - do - 1757 - do 40,332.60 - do 1231 685 1606 11-9-77 48,015.00 MantalongonDalaguite Rd. 1258 - do - 1612 11-30-77 - do - do 1202 691 1607 11-9-77 47,294.29 Argao 1259 - do - 1614 11-14-77 18,180.71 - do Notably, there were two general vouchers corresponding to each RIV, thus a clear case of splitting of payments by the issuances of two checks below P50,000.00 each for only one RIV. Such fact supports the findings of respondent court that there was splitting of payments to avoid review by the Regional COA Auditor. Petitioner Genson admits the receipt of said payments but claims that he had asked for partial payments to answer for the fuel and oil used and as a down payment for the rented dump trucks and other equipments. However, the summary shows that some checks supported by the same RIV bore the same date or were dated very close to each other. How could such partial payments serve their purported purpose when the checks were received by petitioner supposedly after the alleged deliveries were completed as shown by the tally sheets attached to the general vouchers. Petitioner Genson further contends that his conviction was merely based on the pleas of guilty of the two co-accused contractors/suppliers, namely, Erasmo Gabison and
[159] [160] [161] [162] [163] [164] [165] [166] [167] [168] [169] [170] [171] [172] [173] [174] [175] [176]

Feliciano Echavez; that said pleas are not admissible against him considering that he was granted a separate trial by the court. We are not convinced. It is settled that if a separate trial is allowed to one of two or more defendants, his testimony therein imputing guilt to any of the co-accused is not admissible against the latter who was not able to cross-examine him. We have carefully studied the decision of the Sandiganbayan and we find that petitioner Genson, like the petitioners Engineers, was not convicted on the basis solely of the pleas of guilty of his co-accused private contractors/suppliers. The evidence of the prosecution had fully established the conspiracy among the accused and the pleas of guilty of the two contractors were merely considered as confirmatory. Thus, even without such pleas, petitioner Gensons participation in the scheme to defraud the government was proven beyond reasonable doubt. Petitioner Genson claims that the respondent court did not consider the testimonies of his witnesses proving that he prosecuted the questioned projects. We have gone over the testimonies of Gensons witnesses and we find no error committed by the respondent court in not giving them probative value. Defense witness Mariano Castro testified that petitioner Genson requested him to utilize his house as resting place for his men while hauling gravel and sand; that their place was not a boarding house nor was he engaged in the business of accepting transients; that he did not know Genson personally; that Gensons men stayed in his house for 2-3 weeks which began on the 9th of November; that he did not accept any rental fees from Genson since the road construction was just in front of his house thus, will be beneficial to him; Based on the prosecutions evidence, however, the alleged deliveries of the materials in the Argao section were supposed to have started on November 5 up to 10, 1977, or a total of 6 days only contrary to Castros testimony that Gensons men stayed in his house for 14 to 21 days. Moreover, it is quite unusual that witness Castro would allow the workers of Genson to stay in his house and for free at that when Castro admitted that he did not even know Genson personally, much more the workers. Defense witness Perpetua Mercado, barangay captain of Ubo and owner of the quarry where petitioner allegedly hauled limestone, testified that she met Genson for the first time when he asked her permission to allow his men to stay in her sister-in laws house; that she agreed on condition that Genson will fill up the barangay road with grinded materials. There was nothing, however, in Perpetuas testimony explaining why it was her permission that was sought and not of her sister-in-law who lives in the house where Gensons men were supposed to stay. The name of Perpetuas sister-in law was not even made known nor was she presented in court to confirm that Gensons men indeed stayed in her place. Perpetua further stated that it took petitioner a month or more to deliver the piles of limestone used in leveling the 12 kms. Montalongon road, however, the delivery receipts show that it purportedly took petitioner only 5 days, i.e., November 7 to 12, 1977, to deliver the materials to the project site. Moreover, Perpetuas testimony on cross-examination that she was not requested by Genson to testify for him is quite unbelievable. She testified that the last time she saw Genson was in 1977 when the project was still undergoing; that since then she had no
[177] [178] [179] [180] [181] [182] [183] [184] [185]

communication with him until twelve years later, she received a note at 7:00 a.m. of April 11, 1989 signed by Genson telling her to meet him on the same day at the Capitol building without specifying the subject matter of the meeting; that she had traveled ninety kilometers from Barangay Ubo, Dalaguete to Cebu City in order to meet Genson and on the same day was presented as Gensons witness; that she only came to know that there were cases filed against Genson involving non-deliveries of materials when she was already being questioned in court; that she was not able to talk to Genson or his lawyer before she was presented as a witness. The behavior shown by Perpetua is contrary to ordinary human experience since a note from somebody whom she was not in close association with and without even a slightest hint on what the meeting would be about, would not prompt her to act on it specially when it was made on such a short notice and such meeting would not only entail expenses on her part but also the inconvenience of traveling a ninety kilometer road just to reach the meeting place. Felicidad Obejero testified that she met Genson when he came to haul materials at the river bank of Mananga, Campo 2, in Talisay, Cebu; that after hauling the materials, she collected P1 for every truck that passed by their private road; that she did not know where those gravel and sand taken from the river were unloaded. Obviously, this testimony has no probative value as it is too general and does not specifically refer to the projects in question. We find that the testimonies of petitioner Gensons witnesses do not outweigh the evidence presented by the prosecution that no deliveries were actually made in 1977 in the Cebu 2nd HED and that the Sandiganbayan did not commit any error in convicting him. WHEREFORE, the convictions of petitioners Rogelio Alvizo in Criminal Cases Nos. 1153-1159, 1196-1197, 1200, 1242-1245, 1249, 1263-1266, 1272, 1280, 1293-1294, 1302 and 1304, Pompeyo Almagro in Criminal Cases Nos. 1170-1171, 1182, 1192, 1194-1195, 1201, 1222, 1231, 1233, 1258, 1261, 1291-1292, 1295, 1301, 1319-1324, 1334 and 1337, Catalino Magno, Jr. in Criminal Cases Nos. 1161, 1165, 1173-1177, 1187-1188, 1196, 1216, 1218, 1246, 1253, 1255, 1257, 1284, 1307, 1319, 13301332, Efren Coyoca in Criminal Cases Nos. 1143-1153, 1155-1159, 1197-1201, 12421249, 1261-1266, 1270-1281, 1285-1288, 1290-1306 and 1309-1318, Edgar Osmea in Criminal Cases Nos. 1160-1162, 1208-1213, 1226-1229, 1233, 1253, 1257-1260, 13201321 and 1325-1326, Guilberto Hermosa in Criminal Cases Nos. 1160, 1162, 1165, 1172, 1180-1181, 1184, 1190-1191, 1193, 1213-1214, 1221, 1223, 1237, 1240, 1253, 1255-1257, 1262, 1333, 1336, 1339 and 1341, Aniceto Arriola in Criminal Cases Nos. 1143-1159, 1166-1167, 1169-1171, 1173-1177, 1181, 1189-1190, 1194, 1196, 11981200, 1210, 1217, 1221-1222, 1224, 1226-1229, 1233, 1236-1237, 1239-1240, 1245, 1256, 1263, 1265-1272, 1277, 1281-1285, 1288-1289, 1291-1299, 1301, 1306, 1311, 1315, 1317-1319, 1321-1323, 1325, 1327-1332, 1334-1336, 1338, 1340 and 1341, Sofronio Mag-uyon in Criminal Cases Nos. 1143-1341, Santos Cabusas in Criminal Cases Nos. 1143-1341, Rafael Rabaya, Jr., in Criminal Cases Nos. 1143-1159, 1162-1179, 1181-1195, 1197-1207, 1210-1231, 1234-1252, 1254-1256, 1258-1259, 12611282, 1284-1288, 1290-1319, 1321-1324 and 1326-1341, Nestor Rabaya in Criminal Cases Nos. 1143-1152, 1155, 1157-1158, 1160-1172, 1174-1192, 1194-1206, 1208-1236, 1238-1247, 1250-1261, 1263-1265, 1267-1276, 1278-1279, 1281-1288 and 1290-1341, and Joselito Genson in Criminal Cases Nos. 1202-1207, 1230-1231, 1250-1259 of violation of Section 3(e) of RA 3019 are hereby AFFIRMED.
[186] [187] [188]

The convictions of Rogelio Alvizo in Criminal Cases Nos. 1203, 1204, 1205, 1230, 1281, and 1288; Catalino Magno, Jr. in Criminal Cases Nos. 1162, 1163, 1215, 1217, 1236 and 1238; Pompeyo Almagro in Criminal Case No. 1227 are hereby SET ASIDE and they are ACQUITTED for lack of evidence. The convictions of Pompeyo Almagro in Criminal Case No. 1232, Edgar Osmea in Criminal Case No. 1163, Guilberto Hermosa in Criminal Case No. 1163, Rafael Rabaya in Criminal Case No. 1232 and Joselito Genson in Criminal Case No. 1232 are hereby SET ASIDE considering that they were not charged in the Informations. Considering that the Sandiganbayan did not acquit or convict Rafael Rabaya, Jr., in Criminal Cases Nos. 1180, 1283 and 1289; Efren Coyoca in Criminal Case No. 1289; Edgar Osmea in Criminal Case No. 1232, Aniceto Arriola in Criminal Cases Nos. 1163 and 1232; and Catalino Magno in Criminal Case No. 1241, let the original records of the said cases be remanded to the Sandiganbayan for rendition of the proper verdict on the said petitioners. The petition filed by Oscar Belcina in G.R.Nos. 99309-18 had already been DISMISSED in our Resolution dated September 29, 1994 which had already attained finality. The name of petitioner Harvey Ruiz in G.R. Nos. 99412-16 and G.R. Nos. 9943699636 is DELETED for the reason that his previous petitions in G.R. Nos. 98715-98913 assailing the same decision of the Sandiganbayan were dismissed in our Resolution promulgated on June 10, 1991 which had become final and executory. SO ORDERED. Bellosillo, Puno, Vitug, Panganiban, Ynares-Santiago, Carpio, Corona, CarpioMorales, Callejo, Sr., Azcuna, and Tinga, JJ., concur. Davide, Jr., C.J., no part. I was a former counsel of a party. Quisumbing, and Sandoval-Gutierrez, JJ., on official leave. [G.R. No. 146111. February 23, 2004] PEOPLE OF THE PHILIPPINES, appellee, vs. ROLENDO GAUDIA @ LENDOY or DODO, appellant. DECISION
PUNO, J.:

There can be no greater violation of a persons right to feel safe and secure than the crime of rape. When one commits such a horrible act on another, he degrades not only that persons body; more importantly, he defiles that persons mind. When the victim is a little child, the act and the perpetrator himself assume a bestiality beyond the comprehension of normal human beings. Yet, the law must apply equally upon saints and sinners alike, even to the most salacious ruffian. Before us is the Decision dated 10 July 2000 of Branch 19 of the Regional Trial Court of Digos, Davao del Sur, finding appellant Rolendo Gaudia guilty of the crime of rape, meting upon him the penalty of death, and ordering him to pay to private complainant Remelyn Loyola the amounts of fifty thousand pesos (P50,000.00) as moral damages, thirty thousand pesos (P30,000.00) as exemplary damages, and costs of suit. The Information filed against the accused-appellant reads as follows: That on or about March 24, 1997 at about 6:30 oclock in the evening, in the Municipality of Hagonoy, Province of Davao del Sur, Philippines, and within the jurisdiction of this Honorable
[1] [2]

Court, the above-named accused, by means of force and intimidation, did, then and there willfully, unlawfully and feloniously have carnal knowledge with Remelyn Loyola, a minor, against her will to her damage and prejudice. The prosecution presented Remelyns mother, Amalia Loyola, as its primary witness. Amalia testified that on 24 March 1997, she left her two children Remelyn (3 1/2 years old) and Kimberly (1 year old) at their house in Clib, Hagonoy, Davao del Sur to gather pigs food at Bulatukan. At the time, her husband was working in Tulunan, South Cotabato. At about 4:00 in the afternoon, Amalia returned home and could not find Remelyn. She went to fetch water and proceeded to a neighbor to ask about the whereabouts of Remelyn. Nobody could provide her any information. On her way home, she shouted and called out Remelyns name. At about 6:00 p.m., Amalia heard Remelyn calling out to her, Ma, I am here, from a grove of ipil-ipil trees. Amalia rushed toward the place, but was met by Remelyn at the mango trees, some thirty (30) meters from their house. She found Remelyn crying, naked, nagbakaang (walking with her legs spread apart) and with fresh and dried blood on her body. Ipil-ipil leaves clung to her forehead. Blood was oozing from her private organ. Amalia brought Remelyn home and washed her. Upon closer inspection, she found a whitish mucus-like substance coming from Remelyns private organ. The following day, 2 March 1997, Amalia brought Remelyn to the house of a certain Tiya Coring, a quack doctor, for treatment. Among the people present in the premises were the relatives and parents of the appellant. The quack doctor found both dried blood and fresh blood oozing in Remelyns vagina, and told Amalia, Hoy! Amalia, your daughter was being (sic) raped. At about 10:00 a.m., Tulon Mik, a neighbor, came and informed Amalia that he had seen the appellant pass by her house and take Remelyn. At this point, the parents of appellant told Amalia, Mal, let us talk about this matter, we will just settle this, we are willing to pay the amount of P15,000.00, for the crime that my son committed. Police officers came and brought Amalia, Remelyn and two barangay officials (kagawads) to the police precinct of Hagonoy for investigation. Amalias statement was taken. On 25 March 1997, Amalia brought Remelyn to the Hagonoy Health Center in Davao del Sur. Dr. Patricio Hernane, the municipal health officer, conducted a genital examination of Remelyn, and made the following findings: GENITAL EXAMINATION: Absence of Pubic Hair (Tanner Stage I). No contusions are noted on the external genitalia. Dried blood are (sic) noted on the labia minora. Fresh hymenal lacerations are noted at 12, 3, 6, 10 oclock(sic) are noted with fresh vaginal laceration noted at the posterior commissure but not extending to the perineum. No lacerations were noted at the anal opening. Speculum examination is not done because even exposure of the labia minora make the child cry. (sic) CONCLUSION: Physical virginity lost. The doctor opined that the lacerations could have been caused by the insertion of a foreign object, such as the penis of a man. On 26 March 1997, Amalia executed her affidavit complaint. Amalia stated therein that Remelyn had told her Buang Lendoy iya kong lugos. (Meaning crazy lendoy he forced me in the Visayan dialect.) Amalia confirmed in her testimony that two weeks after
[3] [4] [5] [6] [7] [8] [9] [10] [11] [12] [13] [14] [15] [16] [17]

the incident, Remelyn told her, Ma, Lendoy is crazy, she (sic) brought me to the ipilipiltrees. The prosecution also presented Tulon Mik, Remelyns neighbor and a barangay kagawad in their area. Mik testified that on 24 March 1997, at about 4:00 p.m., he and his wife were on their way home after registering at the COMELEC office. They were in a hurry as their child was running a fever. Mik saw appellant carrying a small girl in his arms. He identified the little girl as Remelyn Loyola, daughter of Amalia Loyola. Appellant and Remelyn were on their way toward the ipil-ipil trees. The next morning, 25 March 1997, at about 7:00 a.m., a neighbor informed Mik that Remelyn had been raped. He proceeded to the house of the quack doctor where Amalia brought Remelyn for examination. Amalia confirmed to Mik that Remelyn had been raped. Mik told Amalia that appellant committed the crime. Mik then informed Barangay Official Rodrigo Malud and the other tanods of the incident. They were instructed to locate the appellant. They passed to the police the information that appellant was in Barangay Mahayahay. The policemen came and took appellant for investigation. The appellant, ROLENDO GAUDIA, interposed the defense of alibi. He averred that on 24 March 1997, at about 4:00 p.m., he went to the Barangay Center to register at the COMELEC for the National Elections. With him was Totong Loyola, the brother-in-law of Amalia Loyola. They finished at 5:00 p.m., left and repaired to the house of Catalina Cabano, appellants aunt, to ask for vinegar for their kinilaw (a dish composed of raw fish steeped in vinegar). They found Daylen Cabano, the small grandchild of Catalina, alone at her house. Daylen was crying, hence, they brought her with them as they proceeded to the place where Catalina was collecting tuba (fermented coconut wine). It was appellant who carried Daylen. They reached Catalinas place after 5:00 p.m. Thereafter, they went to the house of appellant. Dodo Malon and appellants parents were in the house. At around 9:00 p.m., Totong and Dodo Malon left, after partaking of the kinilaw. Appellant stayed home. The following morning (25 March 1997), appellant and Dodo Malon went to the river to fish. At about 12:00 noon, appellant repaired to the house of his aunt, Victoria Gayod, in Mahayahay to drink tuba. He was located by the police and investigated. He claimed that it was Daylen and not the victim Remelyn whom he was carrying. As corroborative witness, appellant presented Alex Totong Loyola. Totong testified that on 24 March 1997, at about 4:00 p.m., they registered as voters in the barangay. After registering, they went home to appellants house, but again left to get vinegar from his aunt Catalina Cabano, for their kinilaw. In Catalinas house, they found her drunk husband, her 10-year old daughter, and her 3-year old grandchild Daylen. Catalinas daughter directed them to the place where she was gathering tuba. As Daylen was crying, appellant carried her on their way to Catalina. It was then about 4:00 p.m. After Catalina finished gathering tuba, the four of them appellant, Totong, Catalina and Daylen, left together and repaired to Catalinas house for the vinegar. Appellant and Totong returned to appellants house where they spent the night. Totong woke up at 6:00 a.m. the following day, and left appellants house. Totong came to know of appellants arrest the following day. Catalina Cabano also corroborated appellants story. She relates that on 24 March 1997, she was gathering tuba, at a place around 2 kilometers from her house. She left Maritess, her youngest child and Daylen, her grandchild, at her house. At about 5:30 p.m., appellant and Totong arrived. Appellant was carrying Daylen. They waited for
[18] [19] [20] [21] [22] [23] [24] [25] [26] [27] [28]

Catalina to finish gathering tuba until 6:00 p.m. Appellant and Totong went to the formers house, had a drinking spree, and then parted ways at about 6:30 p.m. That night, according to Catalina, she talked to Tulon Mik at the premises near the house. Mik was looking for Remelyn. At that time, appellant was already at the house of Catalinas younger sister, which is located across the river, about 4 kilometers away. After trial, the trial court found that there was sufficient circumstantial evidence to convict appellant for the crime of rape with the qualifying circumstance that the victim was below seven years of age. Appellant was sentenced to death and ordered to indemnify the victim the sums of fifty thousand pesos (P50,000.00) as moral damages, thirty thousand pesos (P30,000.00) as exemplary damages, and to pay the costs of suit. In his Brief to the Court, appellant assigned the following errors in the judgment of the trial court:
[29] [30]

I.

THE TRIAL COURT ERRED IN CONVICTING THE ACCUSED-APPELLANT, ROLANDO (sic) GAUDIA DESPITE THE FACT THAT HIS GUILT WAS NOT PROVEN BEYOND REASONABLE DOUBT.
II.

EVEN GRANTING WITHOUT ADMITTING THAT ACCUSED-APPELLANT IS GUILTY OF THE CRIME CHARGED, THE TRIAL COURT STILL ERRED IN IMPOSING THE SUPREME PENALTY OF DEATH DESPITE THE FAILURE OF THE PROSECUTION TO STATE WITH CERTAINTY THE QUALIFYING CIRCUMSTANCE OF AGE IN THE INFORMATION. We convict appellant for simple rape, and not for qualified rape. Under Rule 133, Section 4 of the Revised Rules of Court, conviction may be based on circumstantial evidence provided three requisites concur: (a) there is more than one circumstance; (b) the facts from which the inferences are derived are proven; and (c) the combination of all the circumstances is such as to produce a conviction beyond reasonable doubt. The ruling case law is that for circumstantial evidence to be sufficient to support a conviction, all circumstances must be consistent with each other, consistent with the hypothesis that the accused is guilty, and at the same time inconsistent with the hypothesis that he is innocent and with every other rational hypothesis except that of guilt. The first circumstantial evidence against the appellant is the testimony of prosecution witness Tulon Mik that at 4:00 p.m. on 24 March 1997, he saw him carrying Remelyn toward the direction of the ipil-ipil grove, some 130 meters from her house. As a neighbor and relative of Remelyns stepfather, Mik had sufficient familiarity with the child Remelyn. The possibility that he could have been mistaken in identifying the victim is nil. The second circumstantial evidence against the appellant is Amalias testimony that Remelyn emerged naked from the same ipil-ipil grove, with ipil-ipil leaves clinging to her forehead. Remelyn was crying and walking with her legs spread far apart. Remelyns private organ was bleeding and excreting a white mucus-like substance. The third circumstantial evidence against appellant is Remelyns statement to her mother that it was appellant who had brought her to the ipil-ipil grove and forced her to do something against her will. There is no question that Remelyn was violated. After examining Remelyn, Dr. Patricio Hernane, the Municipal Health Officer of Hagonoy, found her to have a broken hymen, as well as fresh vaginal lacerations.
[31] [32] [33] [34] [35]

From these, the culpability of the appellant can be inferred with moral certainty. All the aforementioned circumstances have been indubitably proven, both by the testimonial and documentary evidence presented by the prosecution, and by the inability of the appellant to discredit their veracity. The attempt of appellant to discredit the circumstantial evidence against him is futile. Appellant contends, first, that Tulon Miks testimony is weak, on the ground that Mik is a relative of the husband of Amalia. He also questions the credibility of Mik because of his failure to confront appellant when he saw him carrying Remelyn. Neither did Mik inform Amalia about what he saw when Amalia was looking for Remelyn. Appellant insists that it was Daylen whom he carried and not Remelyn. Second, he stresses the fact that Remelyn did not make any categorical statement that he sexually molested her. Third, he maintains that the accusation of flight against him is false. Fourth, he avers that the offer of compromise by his parents as tendered to Amalia Loyola should not be taken against him, while the offer of compromise he allegedly made to Amalias husband, as relayed by Amalia in her testimony, should be excluded as evidence for being hearsay. Finally, he submits that inconsistencies in the testimony of Alex Loyola and Cabano should not be counted against him on the ground that any finding of guilt must rest on the strength of the prosecutions evidence. We reject appellants arguments. First, appellants attempt to discredit the testimony of Mik cannot succeed. It is true that Mik is a relative by affinity of Amalia Loyola. It is hoary jurisprudence, however, that mere relationship to one of the parties, without a showing of any other improper motive, is not sufficient basis to impair the credibility of the witness. In the case at bar, appellant cannot impute any ill motive for Mik to testify adversely against him. Appellant questions the failure of Mik to challenge him why he was carrying Remelyn. Also, he assails Mik for failing to inform Amalia Loyola of such a sight. Mik had an explanation for the inadvertence. He said his own child was down with a fever, and he and his wife were hurrying home. For this same reason, he revealed the fact that he saw appellant carrying Remelyn toward the ipil-ipil grove only when he learned of Remelyns fate. But thereafter, he lost no time in reporting the matter to the barangay chairman. As a barangay kagawad, he also assisted in the pursuit and arrest of appellant at Barangay Mahayahay. These subsequent actions strengthen Miks credibility. The trial court accorded more credence to Miks narration of the events over the testimonies of Cabano and Loyola. It is a cornerstone of our jurisprudence that the trial judge's evaluation of the testimony of a witness and its factual findings are accorded not only the highest respect, but also finality, unless some weighty circumstance has been ignored or misunderstood which could alter the result of the judgment rendered. In the case at bar, there is no irregularity in the assessment of evidence by the lower court. It granted utmost credibility to Miks testimony. Given the direct opportunity to observe the witness on the stand, the trial judge was in a vantage position to assess his demeanor and determine if he was telling the truth or not. The trial court found Miks testimony more worthy of credence over those of Catalina and Loyola. We have no reason to reverse its findings. Next, appellant tried to capitalize on the fact that Remelyn never made any statement that he sexually molested her. This is a specious argument. Remelyn had told her mother, Crazy Lendoy forced me. Remelyn was 3 1/2 years old at the time. At such an
[36] [37] [38] [39] [40] [41] [42] [43] [44]

infantile age, she could not be expected to have a comprehension of the concept of rape. Studies show that children, particularly very young children, make the perfect victims. They naturally follow the authority of adults as the socialization process teaches children that adults are to be respected. The childs age and developmental level will govern how much she comprehends about the abuse and therefore how much it affects her. If the child is too young to understand what has happened to her, the effects will be minimized because she has no comprehension of the consequences. Certainly, children have more problems in providing accounts of events because they do not understand everything they experience. They do not have enough life experiences from which to draw upon in making sense of what they see, hear, taste, smell and feel. Moreover, they have a limited vocabulary. The fact that Remelyn called appellant Buang or crazy shows that he did something which she knew was not right or proper. By saying iya kong lugos, Remelyn clearly conveyed that he forced her to do something bad. With her limited comprehension, the child could not have a perfect way of relating that she had been sexually abused. Finally, it must also be considered that there is no actual counterpart for the word rape in Visayan parlance. Appellants charge that the trial court erred when it ruled that he fled arrest, even if correct, is not pivotal to his guilt. There are enough pieces of circumstantial evidence to convict him. Neither will it affect the penalty or the award of damages rendered against him. Similarly, appellants charge that the offers of compromise allegedly made by the parents of the appellant to Amalia, and by the appellant himself to Amalias husband should not have been taken against him by the trial court, even if sustained, will not exculpate him. To be sure, the offer of compromise allegedly made by appellant to Amalia Loyolas husband is hearsay evidence, and of no probative value. It was only Amalia who testified as to the alleged offer, and she was not a party to the conversation which allegedly transpired at the Hagonoy Municipal Jail. A witness can only testify on facts which are based on his personal knowledge or perception. The offer of compromise allegedly made by the appellants parents to Amalia may have been the subject of testimony of Amalia. However, following the principle of res inter alios acta alteri nocere non debet, the actions of his parents cannot prejudice the appellant, since he was not a party to the said conversation, nor was it shown that he was privy to the offer of compromise made by them to the mother of the victim. They cannot be considered as evidence against appellant but we reiterate that these errors are not enough to reverse the conviction of the appellant. Appellants defense hardly impresses. It is interesting to note that appellant and his witnesses claim that it was at around 5:00 p.m. when appellant carried the child Daylen toward her grandmother Catalina at the place where she was gathering tuba. Mik testified that it was around 4:00 p.m. when he saw appellant carrying Remelyn toward the ipilipilgrove. Given the 130-meter distance between the ipil-ipil grove and the houses of appellant and of Amalia Loyola, appellant could have easily taken Remelyn from her house, raped her at the ipil-ipil grove, and left her there, all in a matter of a few minutes. Sometime past 4:00 p.m., he could then have returned to his house, and together with Alex Loyola, proceeded to the COMELEC office to register, and did all the subsequent acts he claims to have done.
[45] [46] [47] [48] [49]

The Court also notes the inconsistencies in the testimonies of Catalina and Loyola. The discrepancies in the witnesses narration as to the time of arrival of appellant at the place where Catalina was gathering tuba, his time of arrival at his own house, and the time when Loyola and appellant actually parted ways, are not mere trivial details which could be forgotten by witnesses because of the passage of time. To make matters worse, the appellants testimony was, at times, contradicted by his own witnesses. Particularly telling was the conflict between appellants statement that Totong had already left his house on the night of 24 March 1997 and Totong and Catalinas own averments that Totong had stayed the night at appellants house. These contradictory testimonies only made more incredulous appellants tale. We now review the penalty of death imposed upon appellant. In the case at bar, the Information states that appellant, by means of force and intimidationwillfully, unlawfully and feloniously (had) carnal knowledge with Remelyn Loyola, a minor, against her will to her damage and prejudice. (emphasis ours) The Information did not allege that Remelyn was below seven years old when she was violated. Appellant was therefore charged with simple rape, under Section 335 of the Revised Penal Code, as amended by Republic Act No. 7659 (the Death Penalty Law). Upon its passage, R.A. No. 7659 introduced seven new attendant circumstances, which when present, will transform the crime to qualified rape, punishable by death. We again stress that these new attendant circumstances must be properly pleaded in the information to justify the imposition of the death penalty. The facts stated in the body of the information determine the crime for which the accused stands charged and for which he must be tried. The main purpose of requiring all the elements of a crime to be set out in the information is to enable the accused to suitably prepare his defense. It would be a denial of the right of the accused to be informed of the charges against him and, consequently, a denial of due process, if he is charged with simple rape and be convicted of its qualified form punishable with death, although the attendant circumstance qualifying the offense and resulting in capital punishment was not alleged in the indictment on which he was arraigned. We now review the damages awarded by the trial court. Time and again, we have ruled that when there is a finding that rape had been committed, the award of civil indemnityex delicto is mandatory. If the death penalty has been imposed, the indemnity should be P75,000.00; otherwise the victim is entitled to P50,000.00 for each count of rape. Thus, the appellant is ordered to pay the amount of P50,000.00 as civil indemnity to Remelyn Loyola. We affirm the award of moral damages. This is automatically awarded in rape cases without need of further proof other than the commission of the crime, as it is assumed that a rape victim has suffered moral injuries entitling her to such an award. We also find the award of exemplary damages made by the lower court in favor of complainant as proper because complainant has been correctly granted moral damages and the offense against her was committed with the aggravating circumstance of age. However, the amount awarded must be reduced to P25,000.00 in line with prevailing jurisprudence. WHEREFORE, the judgment of conviction of the Regional Trial Court, Branch 19, of Digos, Davao del Sur in Criminal Case No. 213(97) is hereby MODIFIED. Appellant is found guilty of the crime of simple rape, and is sentenced to suffer the penalty of reclusion perpetua. He is ordered to pay to complainant Remelyn Loyola the amounts
[50] [51] [52] [53] [54] [55] [56] [57] [58]

ofP50,000.00 as civil indemnity ex delicto, P50,000.00 as moral damages, and P25,000.00 as exemplary damages. Costs against the appellant. SO ORDERED. Davide, Jr., C.J., Vitug, Panganiban, Quisumbing, Ynares-Santiago, SandovalGutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, and Tinga, JJ., concur.
Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-17011 August 30, 1963 EMMA S. ACENAS and ALBERTO E. ACENAS, spouses, plaintiffs-appellees, vs. ANGELA SISON and TEOFILO SISON, spouses, defendants-appellants. Gil R. Carlos & Associates for plaintiffs-appellees. Sevilla and Aquino for defendants-appellants. REGALA, J.: This is an appeal from the order dated March 7, 1960 of the Court of First Instance of Rizal, Quezon City Branch, holding husband and wife solidarily liable on a note made by the wife. But although this appeal was brought on behalf of husband and wife, the decision of the trial court is being questioned only insofar as it holds the husband liable on the note of his wife. The wife's liability is admitted. The records show that in September, 1956, Angela Sison executed a promissory note, promising to pay Emma S. Acenas the sum of P8,160 in 26 installments, the first falling due on November 30, 1956 and the last on November 30, 1960. The note provided that failure to pay two consecutive installments would make the balance due and demandable. Mrs. Sison was able to pay up to August 31, 1957 only. Upon her failure to pay the balance of the note, alleged to be in the sum of P8,391.60, she was sued. Her husband, Teofilo Sison, was joined as a defendant pursuant to Article 113 of the Civil Code. In their answer, Mr. Sison denied liability on the ground that he had not signed the promissory note. The case was set for hearing on March 7, 1960. What happened on that day is set forth in the following decision of the court of First Instance, dated March 7, 1960. When this case was called for hearing today, counsel for the defendants moved for the postponement of the hearing hereof in view of the absence of his clients and that he needs time within which to confer with them for the purpose of amicably settling this case. To this motion for postponement, however, counsel for the plaintiffs objected on the ground that the defendants have been given sufficient time within which to settle this case but failed to do so. On the other hand, when the court indicated to the defendant's counsel that there seems to be no defense on the part of the defendants in this case, and that it would be for the best interest of the latter if the case is terminated by way of judgment on the pleadings or confession of judgment, counsel for defendants offered no objection and asked that confession of judgment by the defendants may be entered in this case provided that the corresponding writ of execution thereof should not be issued until June 30, 1960, to which counsel for the plaintiffs agreed. In view thereof, and upon motion of counsel for defendants with the conformity of counsel for the plaintiffs, the motion for confession of judgment under the terms and conditions set forth above are hereby granted. WHEREFORE, judgment is rendered, one in favor of the plaintiffs and against the defendants, by ordering the defendants, jointly and severally, to pay to plaintiffs the sum of P8,391.60, with interest at the rate of 1% per month from November 1, 1959 until fully paid for: by ordering the same defendants, jointly and severally, to pay to plaintiffs the additional sum of P500.00 by way of attorney's fees; and for the defendants to pay the costs. This decision, however, is subject to the condition that the corresponding writ of execution should not be issued until June 30, 1960, as agreed upon by the parties herein. (Emphasis supplied). Their motion for reconsideration and new trial having been denied, defendants appealed directly to this Court. Appellant Teofilo Sison contends that his lawyer agreed to a judgment on the pleadings but not to a confession of judgment; that he never authorized his lawyer to confess judgment for him and that at any rate he was not liable on the note of his wife. For purposes of this appeal, We take it as a fact, as the trial court found, that Atty. Nicanor S. Sison, counsel for Teofilo and Angela Sison, agreed to a judgment on confession against his clients, provided no writ of execution was issued until June 30, 1960. But, the records do not show that Atty. Sison had authority to confess judgment. On the contrary, the decision of March 7, 1960 states that Atty. Sison "moved for the postponement of the hearing hereof in view of the absence of his clients and that he needs time within which to confer with them for the purpose of amicably settling this case." This indicates that Atty. Sison lacked authority to confess judgment, otherwise, there would have been no need for him to confer with his clients. This circumstance should have put the trial court on an inquiry as to counsel's authority. In Natividad v. Natividad, 51 Phil. 613, and Anduiza v. Quirona, G.R. No. L-5073, May 20, 1953, We held that the compromise of causes and confession of judgments appear to stand upon the same footing and that since the compromise may not be effected by counsel without special authority,1 so may not an agreement to permit judgment to be entered against his client be authorized except with the knowledge and at the instance of the client. Such judgment may be set aside or reopened.

Appellees cite decisions of the courts of Georgia which hold that where a settlement of a suit is made by an attorney accepting less than the full amount of the claim in cash, the agreement binds the client if the settlement is carried out by a consent verdict and judgment and the settlement was made without fraud on the part of the attorney or any instruction of the client to the contrary. (Coweta Fertilizer Co. v. Johnson, 26 Ga. App. 528, 106 S.E. 610; Brannan v. Mobley, 169 Ga. 243, 150 S.E. 76). As this Court noted in the Natividad case, these cases do not apply here because the Georgia statute is different from our law. Thus, in the Coweta Fertilizer case, supra, the Court of Appeals of Georgia held: We do not think that section 4956 of the Civil Code of 1910 is applicable to the facts of the present case. That section provides as follows: "Without special authority, attorneys cannot receive anything in discharge of a client's claim but the full amount in cash." In the present case the attorney of the defendant was not endeavoring to collect or enforce his client's claim, but was resisting a suit or claim against his client and consented to the credit in favor of his client. . . . In contrast, Section 21 of Rule 127 expressly requires that attorneys have special authority not only to receive anything in discharge of a client's claim but the full amount in cash but also to compromise their client's litigation. Appellees also rely on Holker and others v. Parker, 7 Cranch 436, 6 Law Ed. 433. But that case does not support appellees' position, for it was held there that Although an attorney at law, merely as such has strictly speaking no right to make a compromise, yet a court would be disinclined to disturb one which was not so unreasonable in itself as to be exclaimed against by all, and to create an impression that the judgment of the attorney has been imposed on, or not fairly exercised in the case. But where the sacrifice is such as to leave it scarcely possible that, with a full knowledge of every circumstance, such a compromise could be fairly made, there can be no hesitation in saying that the compromise, being unauthorized and being therefore itself void, ought not to bind the injured party. Though it may assume the form of an award or of a judgment at law, the injured party, if his own conduct has been perfectly blameless, ought to be relieved against it. . . . We hold therefore that it was error for the trial court to accept the confession made by counsel without ascertaining his authority to do so, at least with respect to Teofilo Sison. With respect to Angela Sison, however, the judgment will be maintained, there being no claim in this appeal that the confession of judgment made in her behalf was unauthorized. In fact her liability is admitted here. This brings us to the next point. Does Article 113 of the Civil Code, which requires the joinder of the husband in actions against the wife, make the husband solidarily liable? Appellees maintain that it does, since the order is not assailed as far as Mrs. Sison is concerned "otherwise, his (the husband's) joinder would be an empty formality." We do not share this view. The law requires the joinder of the husband not because he is thereby bound with his wife but because he is the administrator of the conjugal partnership which might be held liable in the action. To make the husband solidarily liable with his wife simply because his joinder is required would be to subvert the basic rule that the wife cannot bind the conjugal partnership without the husband's consent. (Art. 172, Civil Code.) The only exceptions are when the husband consents; when the wife spends for the usual daily needs of the family (Art. 115); or when she is given the management of the partnership (Arts. 157, 168, 178 and 196). There is no allegation in the complaint that Mrs. Sison incurred her obligation to Mrs. Acenas under any of these exceptions so as to bind the conjugal partnership. WHEREFORE, the decision dated March 7, 1960 of the lower court is modified in the sense that defendant Teofilo Sison is not liable and that defendant Angela Sison alone is liable to the plaintiffs for the amount adjudged in the decision. No costs. Bengzon, C.J., Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon and Makalintal, JJ., concur.
1w ph1.t

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 166421 September 5, 2006 PHILIPPINE JOURNALISTS, INC., BOBBY DELA CRUZ, ARNOLD BANARES and ATTY. RUBY RUIZ BRUNO, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, HON. COMMS. LOURDES JAVIER, TITO GENILO and ERNESTO VERCELES, JOURNAL EMPLOYEES UNION, and THE COURT OF APPEALS, respondents. DECISION CALLEJO, SR., J.: This is a Petition for Certiorari under Rule 651 of the Rules of Court of the Decision2 of the Court of Appeals (CA) in CA-G.R. SP No. 81544, as well as the Resolution3 dated November 23, 2004 denying the motion for reconsideration thereof. The Antecedents The Philippine Journalists, Inc. (PJI) is a domestic corporation engaged in the publication and sale of newspapers and magazines. The exclusive bargaining agent of all the rank-and-file employees in the company is the Journal Employees Union (Union for brevity). Sometime in April 2005, the Union filed a notice of strike before the National Conciliation and Mediation Board (NCMB), claiming that PJI was guilty of unfair labor practice. PJI was then going to implement a retrenchment program due to "over-staffing or bloated work force and continuing actual losses sustained by the company for the past three years resulting in negative stockholders equity of P127.0 million." The Secretary of the Department of Labor and Employment (DOLE) certified 4 the labor dispute to the National Labor Relations Commission (NLRC) for compulsory arbitration pursuant to Article 263 (g) of the Labor Code. The case was docketed as NCMB-NCR-NS-03-087-00.

The parties were required to submit their respective position papers. PJI filed a motion to dismiss, contending that the Secretary of Labor had no jurisdiction to assume over the case and thus erred in certifying it to the Commission. The NLRC denied the motion. PJI, thereafter, filed a Motion to Defer Further Proceedings, alleging, among others, that the filing of its position paper might jeopardize attempts to settle the matter extrajudicially, which the NLRC also denied. The case was, thereafter, submitted for decision.5 In its Resolution6 dated May 31, 2001, the NLRC declared that the 31 complainants were illegally dismissed and that there was no basis for the implementation of petitioner's retrenchment program. The NLRC noted that the following circumstances belied PJI's claim that it had incurred losses: (1) office renovations were made as evidenced by numerous purchase orders; (2) certain employees were granted merit increases; and (3) a Christmas party for employees was held at a plush hotel. It also observed that PJI's executives refused to forego their quarterly bonuses if the Union members refused to forego theirs. Thus, the NLRC declared that the retrenchment of 31 employees was illegal and ordered their reinstatement "to their former position without loss of seniority rights and other benefits, with payment of unpaid salaries, bonuses and backwages from the date of dismissal up to the actual date of reinstatement plus 10% of the total monetary award as attorney's fees." PJI was adjudged liable in the total amount of P6,447,008.57.7 Thereafter, the parties executed a Compromise Agreement8 dated July 9, 2001, where PJI undertook to reinstate the 31 complainant-employees effective July 1, 2001 without loss of seniority rights and benefits; 17 of them who were previously retrenched were agreed to be given full and complete payment of their respective monetary claims, while 14 others would be paid their monetary claims minus what they received by way of separation pay. The agreement stated that the parties entered the agreement "[i]n a sincere effort at peace and reconciliation as well as to jointly establish a new era in labor management relations marked by mutual trust, cooperation and assistance, enhanced by open, constant and sincere communication with a view of advancing the interest of both the company and its employees." The compromise agreement was submitted to the NLRC for approval. All the employees mentioned in the agreement and in the NLRC Resolution affixed their signatures thereon. They likewise signed the Joint Manifesto and Declaration of Mutual Support and Cooperation9 which had also been submitted for the consideration of the labor tribunal. The NLRC forthwith issued another Resolution10 on July 25, 2002, declaring that the Clarificatory Motion of complainants Floro Andrin, Jr. and Jazen M. Jilhani had been mooted by the compromise agreement as they appeared to be included in paragraph 2.c and paragraph 2.d, respectively thereof. As to the seven others who had filed a motion for clarification, the NLRC held that they should have filed individual affidavits to establish their claims or moved to consolidate their cases with the certified case. Thus, the NLRC granted the computation of their benefits as shown in the individual affidavits of the complainants. However, as to the prayer to declare the Union guilty of unfair labor practice, to continue with the CBA negotiation and to pay moral and exemplary damages, the NLRC ruled that there was no sufficient factual and legal basis to modify its resolution. Thus, the compromise agreement was approved and NCMB-NCR-NS-03-087-00 was deemed closed and terminated.11 In the meantime, however, the Union filed another Notice of Strike on July 1, 2002, premised on the following claims: 1. OUTRIGHT DISMISSAL OF 29 EMPLOYEES 2. VIOLATION OF CBA BENEFITS 3. NON-PAYMENT OF ALLOWANCES, MEAL, RICE, TRANSPORTATION, QUARTERLY BONUS, X-MAS BONUS, ANNIVERSARY BONUS, HEALTH INSURANCE, DENTAL TO 29 EMPLOYEES 4. NON-PAYMENT OF BACKWAGES OF 38 REINSTATED EMPLOYEES [JUNE 2001 SALARY AND ALLOWANCES, DIFFERENCE (sic) OF ALLOWANCES AND BONUSES AWARDED BY NLRC] 5. TRANSPORTATION ALLOWANCE OF 5 UNION MEMBERS 6. NON-PAYMENT OF P1000 INCREASE PER CBA 7. DIMINUTION OF SALARY OF 200 EMPLOYEES TO 50%12 In an Order13 dated September 16, 2002, the DOLE Secretary certified the case to the Commission for compulsory arbitration. The case was docketed as NCMB-NCR-NS-07-251-02. The Union claimed that 29 employees were illegally dismissed from employment, and that the salaries and benefits 14 of 50 others had been illegally reduced.15 After the retrenchment program was implemented, 200 Union members-employees who continued working for petitioner had been made to sign five-month contracts. The Union also alleged that the company, through its legal officer, threatened to dismiss some 200 union members from employment if they refused to conform to a 40% to 50% salary reduction; indeed, the 29 employees who refused to accede to these demands were dismissed on June 28, 2002. The Union prayed that the dismissed employees be reinstated with payment of full backwages and all other benefits or their monetary equivalent from the date of their dismissal on July 3, 2002 up to the actual date of reinstatement; and that the CBA benefits (as of November 2002) of the 29 employees and 50 others be restored. In its Resolution16 dated July 31, 2003, the NLRC ruled that the complainants were not illegally dismissed. The May 31, 2001 Resolution declaring the retrenchment program illegal did not attain finality as "it had been academically mooted by the compromise agreement entered into between both parties on July 9, 2001." According to the Commission, it was on the basis of this agreement that the July 25, 2002 Resolution which declared the case closed and terminated was issued. Pursuant to Article 223 of the Labor Code, this later resolution attained finality upon the expiration of ten days from both parties' receipt thereof. Thus, the May 31, 2001 Resolution could not be made the basis to justify the alleged continued employment regularity of the 29 complainants subsequent to their retrenchment. The NLRC further declared that the two cases involved different sets of facts, hence, the inapplicability of the doctrine of stare decisis. In the first action, the issue was whether the complainants as regular employees were illegally retrenched; in this case, whether the 29 complainants, contractual employees, were illegally dismissed on separate dates long after their retrenchment. The NLRC also declared that by their separate acts of entering into fixed-term employment contracts with petitioner after their separation from employment by virtue of retrenchment, they are deemed to have admitted the validity of their separation from employment and are thus estopped from questioning it. Moreover, there was no showing that the complainants were forced or

pressured into signing the fixed-term employment contracts which they entered into. Consequently, their claims for CBA benefits and increases from January to November 2002 should be dismissed. The NLRC pointed out that since they were mere contractual employees, the complainants were necessarily excluded from the collective bargaining unit. The NLRC stressed that the complainants had refused to be regularized and ceased to be employees of petitioner upon the expiration of their last fixedterm employment contracts. Thus, the NLRC dismissed the case for lack of merit, but directed the company to "give preference to the separated 29 complainants should they apply for re-employment." On the other issues raised by the complainants, the NLRC held: We, furthermore find that JEU has no personality to represent the 29 Complainants for, as prudently discussed above, they were contractual employees, not regular employees, from the time they entered into fixed-term employment contracts after being retrenched up to the time they ceased being employees of PJI due to the non-renewal of their last fixed-term employment contracts. As contractual employees, they were excluded from the Collective Bargaining Unit (Section 2, CBA) and hence, not union members. Complainants contend that PJI admitted that the 29 Complainants were union members because PJI deducted union dues from their monthly wages. We, however, do not subscribe to this view. Firstly, although PJI deducted union dues from the monthly wages of the 29 employees, it erroneously did so due to the distracting misrepresentation of JEU that they were union members. Thus, if there is any legal effect of these acts of misrepresentation and erroneous deduction, it is certainly the liability of JEU for restitution of the erroneously deducted amounts to PJI. Secondly, the union membership admission due to erroneous union dues deduction is incompatible with the fixed-term employment contracts Complainants entered into with PJI. We finally rule that JEU is not guilty of unfair labor practice. Although it admitted the 29 contractual employees as its members and represented them in the instant case and circulated derogatory letters and made accusations against Respondents, it is, nevertheless, deemed to have acted in good faith, there being no substantial evidence on record showing that they did so in bad faith and with malice. Much as we empathize with Complainants in their period of depressing economic plight and hence, sincerely yearn to extricate them from them such a situation, [w]e cannot do anything, for our hands are shackled by the hard but true merits of the instant case. As an exception to this incapacity, however, [w]e can request Respondents to give preference to the 29 Complainants should they apply for re-employment.17 The Union assailed the ruling of the NLRC before the CA via petition for certiorari under Rule 65. In its Decision dated August 17, 2004, the appellate court held that the NLRC gravely abused its discretion in ruling for PJI. The compromise agreement referred only to the award given by the NLRC to the complainants in the said case, that is, the obligation of the employer to the complainants. The CA pointed out that the NLRC Resolution nevertheless declared that respondent failed to prove the validity of its retrenchment program, which according to it, stands even after the compromise agreement was executed; it was the reason why the agreement was reached in the first place. The CA further held that the act of respondent in hiring the retrenched employees as contractual workers was a ploy to circumvent the latter's security of tenure. This is evidenced by the admission of PJI, that it hired contractual employees (majority of whom were those retrenched) because of increased, albeit uncertain, demand for its publications. The CA pointed out that this was done almost immediately after implementing the retrenchment program. Another "telling feature" is the fact that the said employees were re-hired for five-month contracts only, and were later offered regular employment with salaries lower than what they were previously receiving. The CA also ruled that the dismissed employees were not barred from pursuing their monetary claims despite the fact that they had accepted their separation pay and signed their quitclaims. The dispositive portion of the decision reads: WHEREFORE, the petition is GRANTED. Respondent is ordered to reinstate the 29 dismissed employees to their previous positions without loss of seniority rights and payment of their full backwages from the time of their dismissal up to their actual reinstatement. Respondent is likewise ordered to pay the 29 and 50 employees, respectively, their rightful benefits under the CBA, less whatever amount they have already received. The records of this case are remanded to the NLRC for the computation of the monetary awards. SO ORDERED.18 The Present Petition PJI, its President Bobby Dela Cruz, its Executive Vice-President Arnold Banares, and its Chief Legal Officer Ruby Ruiz Bruno, the petitioners, now come before this Court and submit that the CA erred as follows: I THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT ADOPTED THE RESOLUTION DATED 31 MAY 2001 IN CERT. CASE NO. 000181-00 AND APPLIED THE SAME TO THE INSTANT CASE DOCKETED AS CERT. CASE NO. 000229-02, DESPITE THE SAID RESOLUTION BEING ABANDONED AND ACADEMICALLY MOOTED BY THE RESOLUTION DATED 25 JULY 2001, WHICH APPROVED THE COMPROMISE AGREEMENT BETWEEN THE PARTIES IN CERT. CASE NO. 000181-00. IN FINE; THE HONORABLE COURT OF APPEALS APPLIED TO THE INSTANT CASE THE LOGIC AND LAW OF AN ABANDONED RESOLUTION WHICH NEVER ATTAINED FINALITY. II THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT TRIED FACTS AND EVIDENCES WHICH WERE NOT PRESENTED AND CONSIDERED BY THE COURT A QUO. IN FINE, THE

HONORABLE COURT OF APPEALS WENT BEYOND ITS MANDATE AND AUTHORITY WHEN IT BECAME A TRIER OF FACTS. III THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT GRANTED TO AWARD 50 OTHER PERSONS WHO ARE NOT PARTIES OR PRIVIES TO THE INSTANT CASE. IN FINE, THE HONORABLE COURT OF APPEALS GRANTED AWARDS TO THOSE WITH WHOM IT NEVER HAD JURISDICTION.19 At the outset, we note that this case was brought before us via petition for certiorari under Rule 65 of the Revised Rules of Civil Procedure. The proper remedy, however, was to file a petition under Rule 45. It must be stressed that certiorari under Rule 65 is "a remedy narrow in scope and inflexible in character. It is not a general utility tool in the legal workshop." 20 Moreover, the special civil action for certiorari will lie only when a court has acted without or in excess of jurisdiction or with grave abuse of discretion.21 Be that as it may, a petition for certiorari may be treated as a petition for review under Rule 45. Such move is in accordance with the liberal spirit pervading the Rules of Court and in the interest of substantial justice.22 As the instant petition was filed within the prescribed fifteen-day period, and in view of the substantial issues raised, the Court resolves to give due course to the petition and treat the same as a petition for review on certiorari.23 The primary issue before the Court is whether an NLRC Resolution, which includes a pronouncement that the members of a union had been illegally dismissed, is abandoned or rendered "moot and academic" by a compromise agreement subsequently entered into between the dismissed employees and the employer; this, in turn, raises the question of whether such a compromise agreement constitutes res judicata to a new complaint later filed by other union members-employees, not parties to the agreement, who likewise claim to have been illegally dismissed. Petitioners point out that a compromise agreement is the product of free will and consent of the parties and that such agreement can be entered into during any stage of the case. They insist that its terms are not dictated or dependent on the court's findings of facts; it is valid as long as not contrary to law, public order, public policy, morals or good customs. According to petitioners, the execution of the compromise agreement embodied and approved by the NLRC Resolution dated July 25, 2001 effectively closed and terminated Certified Case No. 000181-00. Citing Golden Donuts, Inc., v. National Labor Relations Commission.24 Thus, a judgment on a compromise agreement has the force and effect of any other judgment. Petitioners also point out that as correctly observed by the NLRC, the resolution declaring respondents' retrenchment was promulgated on May 31, 2001. Petitioners' side was never presented in Certified Case No. 000181-00, and if it were not for the filing of the compromise agreement, they would have moved to reconsider or at least filed the appropriate pleadings to rectify the findings adverse to them. They insist that the compromise agreement effectively abandoned all findings of facts and its necessary consequences in favor of the amicable settlement. The compromise agreement was thereafter approved on July 25, 2001 by the NLRC. As clearly stated in Article 223 of the Labor Code, it is the Resolution dated July 25, 2001 that attained finality after the expiration of the ten-day period, and not the abandoned and mooted Resolution dated May 31, 2001. Petitioners claim that the letter of Atty. Adolfo Romero dated March 20, 2000 was never presented as evidence. Moreover, since the CA is not a trier of facts, it was error on its part to "admit material evidence that was never presented in the instant case (or to lift findings of facts from the abandoned and mooted resolution dated 31 May 2001)." Thus, the NLRC did not act with grave abuse of discretion when it found that the retrenchment was legal as stated in the appealed decision dated July 31, 2003. Such use of the admissions contained in the said letter dated March 20, 2000 denied them due process as they were not given the opportunity to contest or deny its validity or existence. Petitioners further point out that while the instant petition was filed only by 29 complainants, the dispositive portion of the assailed decision was extended to cover 50 other persons. They insist that the said letter, as well as the findings of a "mooted decision," were used as evidence to support the erroneous decision of the CA; in so doing, the appellate court acted with grave abuse of discretion amounting to lack or excess of jurisdiction. For their part, private respondents claim that the appellate court did not commit any reversible error, and that the assailed decision is borne out by the evidence on record. Since the dismissal of the retrenched employees has been declared illegal, the 29 dismissed employees enjoy the status of regular and permanent employees who cannot be dismissed except for cause; hence, the CA correctly ordered their reinstatement. They further point out that the fixing of five-month contracts of employment entered into by the individual union members was intentionally employed by petitioners to circumvent the provisions of the Labor Code on security of tenure, hence, illegal. They also allege that petitioners did not comply with the 30-day notice rule required by law to render any dismissal from employment valid. The letter of dismissal was dated June 27, 2002, and took effect a week after, or on July 3, 2002, a violation of the 30-day notice rule. The Union members' salaries and benefits were obtained through CBA negotiations and were included in the existing CBA. Thus, petitioners' act of unilaterally removing such benefits and wage increases constitutes gross violations of its economic provisions, and unfair labor practice as defined by the Labor Code. Private respondents cite Philippine Carpet Employees Association v. Philippine Carpet Manufacturing Corporation 25 to support their arguments. They insist that the illegally retrenched employees were made to believe that their retrenchment was valid, and thus, through mistake or fraud accepted their separation pay, which, however, does not militate against their claims. The Ruling of the Court The petition is denied. The nature of a compromise is spelled out in Article 2028 of the New Civil Code: it is "a contract whereby the parties, by making reciprocal concessions, avoid litigation or put an end to one already commenced." Parties to a compromise are motivated by "the hope of gaining, balanced by the dangers of losing."26 It contemplates mutual concessions and mutual gains to avoid the expenses of litigation, or, when litigation has already begun, to end it because of the uncertainty of the result. 27 Article 227 of the Labor Code of the Philippines authorizes compromise agreements voluntarily agreed upon by the parties, in conformity with the

basic policy of the State "to promote and emphasize the primacy of free collective bargaining and negotiations, including voluntary arbitration, mediation and conciliation, as modes of settling labor or industrial disputes." 28 As the Court held in Reformist Union of R.B. Liner, Inc. v. NLRC,29 the provision "bestows finality to unvitiated compromise agreements," particularly if there is no allegation that either party did not comply with what was incumbent upon them under the agreement. The provision reads: ART. 227 Compromise Agreements. Any compromise settlement, including those involving labor standard laws, voluntarily agreed upon by the parties with the assistance of the Bureau or the regional office of the Department of Labor, shall be final and binding upon the parties. The National Labor Relations Commission or any court shall not assume jurisdiction over issues involved therein except in case of noncompliance thereof or if there is prima facie evidence that the settlement was obtained through fraud, misrepresentation, or coercion. Thus, a judgment rendered in accordance with a compromise agreement is not appealable, and is immediately executory unless a motion is filed to set aside the agreement on the ground of fraud, mistake, or duress, in which case an appeal may be taken against the order denying the motion.30 Under Article 2037 of the Civil Code, "a compromise has upon the parties the effect and authority of res judicata," even when effected without judicial approval; and under the principle of res judicata, an issue which had already been laid to rest by the parties themselves can no longer be relitigated. 31 In AFP Mutual Benefit Association, Inc. v. Court of Appeals,32 the Court spelled out the distinguishing features of a compromise agreement that is basically intended to resolve a matter already in litigation, or what is normally termed as a judicial compromise. The Court held that once approved, the agreement becomes more than a mere contract binding upon the parties, considering that it has been entered as the court's determination of the controversy and has the force and effect of any other judgment. The Court went on to state: Adjective law governing judicial compromises annunciate that once approved by the court, a judicial compromise is not appealable and it thereby becomes immediately executory but this rule must be understood to refer and apply only to those who are bound by the compromise and, on the assumption that they are the only parties to the case, the litigation comes to an end except only as regards to its compliance and the fulfillment by the parties of their respective obligations thereunder. The reason for the rule, said the Court in Domingo v. Court of Appeals [325 Phil. 469], is that when both parties so enter into the agreement to put a close to a pending litigation between them and ask that a decision be rendered in conformity therewith, it would only be "natural to presume that such action constitutes an implicit waiver of the right to appeal" against that decision. The order approving the compromise agreement thus becomes a final act, and it forms part and parcel of the judgment that can be enforced by a writ of execution unless otherwise enjoined by a restraining order.33 Thus, contrary to the allegation of petitioners, the execution and subsequent approval by the NLRC of the agreement forged between it and the respondent Union did not render the NLRC resolution ineffectual, nor rendered it "moot and academic." The agreement becomes part of the judgment of the court or tribunal, and as a logical consequence, there is an implicit waiver of the right to appeal. In any event, the compromise agreement cannot bind a party who did not voluntarily take part in the settlement itself and gave specific individual consent.34 It must be remembered that a compromise agreement is also a contract; it requires the consent of the parties, and it is only then that the agreement may be considered as voluntarily entered into. The case of Golden Donuts, Inc. v. National Labor Relations Commission,35 which petitioners erroneously rely upon, is instructive on this point. The Court therein was confronted with the following questions: x x x (1) whether or not a union may compromise or waive the rights to security of tenure and money claims of its minority members, without the latter's consent, and (2) whether or not the compromise agreement entered into by the union with petitioner company, which has not been consented to nor ratified by respondents minority members has the effect of res judicata upon them."36 Speaking through Justice Reynato C. Puno, the Court held that pursuant to Section 23, Rule 138 37 of the then 1964 Revised Rules of Court, a special authority is required before a lawyer may compromise his client's litigation; thus, the union has no authority to compromise the individual claims of members who did not consent to the settlement.38 The Court also stated that "the authority to compromise cannot lightly be presumed and should be duly established by evidence," 39 and that "a compromise agreement is not valid when a party in the case has not signed the same or when someone signs for and in behalf of such party without authority to do so;" consequently, the affected employees may still pursue their individual claims against their employer.40 The Court went on to state that a judgment approving a compromise agreement cannot have the effect of res judicata upon non-signatories since the requirement of identity of parties is not satisfied. A judgment upon a compromise agreement has all the force and effect of any other judgment, and, conclusive only upon parties thereto and their privies, hence, not binding on third persons who are not parties to it.41 A careful perusal of the wordings of the compromise agreement will show that the parties agreed that the only issue to be resolved was the question of the monetary claim of several employees. The prayer of the parties in the compromise agreement which was submitted to the NLRC reads: WHEREFORE, premises considered, it is respectfully prayed that the Compromise Settlement be noted and considered; that the instant case [be] deemed close[d] and terminated and that the Decision dated May 31, 2001 rendered herein by this Honorable Commission be deemed to be fully implemented insofar as concerns the thirty-one (31) employees mentioned in paragraphs 2c and 2d hereof; and, that the only issue remaining to be resolved be limited to the question of the monetary claim raised in the motion for clarification by the seven employees mentioned in paragraph 2e hereof.42 The agreement was later approved by the NLRC. The case was considered closed and terminated and the Resolution dated May 31, 2001 fully implemented insofar as the employees "mentioned in paragraphs 2c and 2d of the compromise agreement" were concerned. Hence, the CA was correct in holding that the compromise agreement pertained only to the "monetary

obligation" of the employer to the dismissed employees, and in no way affected the Resolution in NCMB-NCR-NS-03-087-00 dated May 31, 2001 where the NLRC made the pronouncement that there was no basis for the implementation of petitioners' retrenchment program. To reiterate, the rule is that when judgment is rendered based on a compromise agreement, the judgment becomes immediately executory, there being an implied waiver of the parties' right to appeal from the decision.43The judgment having become final, the Court can no longer reverse, much less modify it. Petitioners' argument that the CA is not a trier of facts is likewise erroneous. In the exercise of its power to review decisions by the NLRC, the CA can review the factual findings or legal conclusions of the labor tribunal. 44 Thus, the CA is not proscribed from "examining evidence anew to determine whether the factual findings of the NLRC are supported by the evidence presented and the conclusions derived therefrom accurately ascertained."45 The findings of the appellate court are in accord with the evidence on record, and we note with approval the following pronouncement: Respondents alleged that it hired contractual employees majority of whom were those retrenched because of the increased but uncertain demand for its publications. Respondent did this almost immediately after its alleged retrenchment program. Another telling feature in the scheme of respondent is the fact that these contractual employees were given contracts of five (5) month durations and thereafter, were offered regular employment with salaries lower than their previous salaries. The Labor Code explicitly prohibits the diminution of employee's benefits. Clearly, the situation in the case at bar is one of the things the provision on security of tenure seeks to prevent. Lastly, it could not be said that the employees in this case are barred from pursuing their claims because of their acceptance of separation pay and their signing of quitclaims. It is settled that "quitclaims, waivers and/or complete releases executed by employees do not stop them from pursuing their claims if there is a showing of undue pressure or duress. The basic reason for this is that such quitclaims, waivers and/or complete releases being figuratively exacted through the barrel of a gun, are against public policy and therefore null and void ab initio (ACD Investigation Security Agency, Inc. v. Pablo D. Daquera, G.R. No. 147473, March 30, 2004)." In the case at bar, the employees were faced with impending termination. As such, it was but natural for them to accept whatever monetary benefits that they could get.46 CONSIDERING THE FOREGOING, the petition is DENIED and the assailed Decision and Resolution AFFIRMED. Costs against the petitioners. SO ORDERED. Panganiban, C.J., Chairperson, Ynares-Santiago, Austria-Martinez, Chico-Nazario, J.J., concur. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-37398 June 28, 1974 THE PEOPLE OF THE PHILIPPINES, plaintiff-appellee, vs. ROSARIO CABRERA and CONRADO VILLANUEVA, defendants, CONRADO VILLANUEVA, defendant-appellant. Office of the Solicitor General Estelito P. Mendoza, Assistant Solicitor General Conrado T. Limcaoco and Solicitor Pio C. Guerrero for plaintiff-appellee. Jesus E. Mendoza & Raul M. Aviso for defendant-appellant. BARREDO, J.:p Appeal from the judgment of conviction of Robbery-Hold-up with Homicide of the Court of First Instance of Bulacan, Branch III, in its Criminal Case No. O423-V, the dispositive portion of which reads thus: WHEREFORE, the Court finds the accused Rosario Cabrera y Martin alias Charing and Conrado Villanueva y Santos alias Cadoc guilty, beyond reasonable doubt, of the crime as charged in the information and hereby sentence each of them to life imprisonment; to indemnify jointly and severally the heirs of the offended party the amount of P12,000.00; and also jointly and severally to pay the amount of P8,000.00, the cost of the jeep stolen; and the further amount of P30,000.00 representing actual, moral and exemplary damages; to suffer all the accessory penalties prescribed by law and to pay the costs. Accused shall be entitled to full credit for the preventive imprisonment they have already undergone in accordance with Rep. Act 6127. SO ORDERED. Accused Rosario Cabrera did not appeal. Only defendant Conrado Villanueva's appeal is before Us. Accused Rosario Cabrera and appellant Conrado Villanueva were charged in an information reading: The undersigned Provincial Fiscal accuses Rosario Cabrera y Martin alias Charing and Conrado Villanueva y Santos alias Cadoc of the crime of robbery holdup with homicide, penalized under the provisions of Art. 294, paragraph 1 of the Revised Penal Code, committed as follows: That on or about the 17th day of January, 1972, in the municipality of Valenzuela, province of Bulacan, Philippines, and within the jurisdiction of this Honorable Court, the said accused Rosario Cabrera y Martin alias Charing and Conrado Villanueva y Santos alias Cadoc, with John Doe alias Ben and Peter Doe alias Abay, who are still at large, armed with knives or ice picks, conspiring and confederating together and helping one

another, did then and there willfully, unlawfully and feloniously, with intent of gain and by means of force, violence and intimidation, holdup, take, rob and carry away with them a jeep with plate number 84-26 S'71, Bulacan, being driven by Luis dela Cruz y de Jesus and owned by one Reynaldo Santos, Jr., with a value of P8,000.00, to the damage and prejudice of the said owner in the said amount of P8,000.00; that during the commission of this crime, and on the occasion thereof, the said accused in furtherance of their conspiracy, did then and there willfully, unlawfully and feloniously tie and stab several times with the said knives or ice picks the said Luis dela Cruz y de Jesus and thereafter was abandoned, thereby inflicting upon the said Luis dela Cruz y de Jesus stabbed wounds which caused his death after a few days of confinement in the hospital. Contrary to law. The facts pertinent to this appeal are briefly stated in the brief of Solicitor General Estelito P. Mendoza assisted by Assistant Solicitor General Conrado T. Limcaoco and Solicitor Pio C. Guerrero as follows: At about 11:00 in the evening of January 17, 1972 Police Sgt. Mario Tanfelix of Valenzuela, Bulacan, while on a patrol duty received an instruction from his superior Lt. Carlos Palomares to proceed immediately to Jose Reyes Memorial Hospital at Manila to investigate an abandoned person who was found at the North Diversion Road suffering from stab wounds (pp. 12-13, tsn., May 11, 1972). This abandoned and wounded person was identified as Luis de la Cruz (pp. 6-7, tsn., May 11, 1972). He gave an ante mortem statement (Exhibit A; p. 11, tsn., May 11, 1972). In the ante-mortem statement the deceased named defendant Rosario Cabrera as the person who hired his jeep (Exhibit A) but did not know the names of the three men who stabbed him and took his money and jeep (pp. 11-72, tsn., May 11, 1972; Exhibit A). In the morning of January 18, 1972, defendant Rosario Cabrera was arrested by the police (p. 18, tsn., May 18, 1972). On January 20, 1972 she executed an extra-judicial confession (Exhibit B, to B-3, inclusive). In the said extra-judicial confession she pointed to appellant Conrado Villanueva as the mastermind of the robbery. She merely hired the jeep upon instruction of appellant but the robbery and the killing of the deceased were done by appellant and his two unidentified companions (Ibid). Lt. Carlos Palomares of the Valenzuela Police Department who took the extra-judicial confession of defendant Rosario Cabrera testified to identify and to read the contents of the said extra-judicial confession (pp. 3-37, tsn., May 18, 1972). Dr. Ernesto G, Brion of the National Bureau of Investigation (NBI) testified regarding the postmortem examination conducted on the body of the deceased (pp. 310, tsn., September 7, 1972). Reynaldo Santos Jr. testified on the ownership and value of the jeep stolen (pp. 4-14, tsn., June 9, 1972). Alejandro de la Cruz testified on the expenses and damages suffered by the family of the deceased (pp. 15-27, tsn., June 9, 1972) on account of the deceased's untimely death. Dante Marcelo testified that in the early evening before the robbery took place he saw defendant Rosario Cabrera riding on the jeep of the deceased (pp. 29-41, tsn., June 9, 1972) but did not notice whether there were other passengers (p. 33, tsn., June 9, 1972). Defendant Rosario Cabrera and appellant Conrado Villanueva did not take the witness stand. Neither did they present any evidence. On the basis of the evidence adduced by the prosecution together with their respective cross-examination and objections to some of the exhibits, particularly appellants objection to the admission of Exhibits B to B-3 (defendant Cabrera's extra-judicial confession) insofar as he was concerned, the case was considered submitted for decision." (Pp. 2-4, Brief for the Appellee) xxx xxx xxx The only evidence that would support the judgment of conviction of appellant Villanueva was the extra-judicial confession of his co-accused Rosario Cabrera which was read into the record over the continuing objection of appellant's counsel (p. 10, tsn., May 18, 1972). Appellant reiterated his objection when the said extra-judicial confession was being offered in evidence (p. 12, tsn., September 7, 1972)." (Id.) In their prayer, counsel for the People, joining appellant's counsel, ask for the reversal of appellant's conviction and his acquittal. After carefully going over the record and minutely reviewing the evidence, We are fully convinced that the prayer for acquittal is in order. The extrajudicial statement of accused Cabrera does point to appellant as the mastermind and perpetrator, together with two persons whose identities are still unknown, of the killing of the deceased Luis dela Cruz and the taking of the jeep he was driving. But said statement is obviously inadmissible against appellant, who made timely objection thereto. There is no question that Cabrera's inculpatory statements were made by her during the investigation conducted by the Valenzuela police on January 20, 1972, two days after the date of the incident in question. For this reason alone, that is, that said statement was not made during the existence of the alleged conspiracy between her and appellant, but after said supposed conspiracy had already ceased and when she was already in the hands of the authorities, Section 27 of Rule 130 cannot be availed of. Said provision reads: Admission by conspirator. The act or declaration of a conspirator relating to the conspiracy and during its existence, may be given in evidence against the co-conspirator after the conspiracy is shown by evidence other than such act or declaration. There being no other evidence against appellant, We have no alternative but to reverse the judgment appealed from and to acquit him, as prayed for by his counsel as well as counsel for the People. PREMISES CONSIDERED, the judgment of the lower court is reversed, appellant Conrado Villanueva is acquitted, and his immediate release from confinement is ordered, unless he is lawfully held for another case, with costs de oficio. Zaldivar (Chairman), Fernando, Antonio, Fernandez and Aquino, JJ., concur.

EN BANC
DELIA PREAGIDO and ULRICO BOLOTAULO, Petitioners, G.R. No. 52341-46 Present: DAVIDE, JR., C.J., PUNO, PANGANIBAN, QUISUMBING, YNARES-SANTIAGO, SANDOVAL-GUTIERREZ, CARPIO, AUSTRIA-MARTINEZ, CORONA, CARPIO-MORALES, CALLEJO, SR., AZCUNA, TINGA, CHICO-NAZARIO, and GARCIA, JJ. Promulgated: November 25, 2005

- versus -

THE SANDIGANBAYAN and THE PEOPLE OF THE PHILIPPINES, Respondents.

x----------------------------------------------------------- x

DECISION
AUSTRIA-MARTINEZ, J.:

Before us is a petition for review on certiorari under Rule 45 of the Rules of Court filed by petitioners Delia Preagido and Ulrico Bolotaulo seeking annulment of the Decision[1] dated December 28, 1979 of the Sandiganbayan rendered in Criminal Case Nos. 195, 196, 197, 198, 199 and 200 finding them guilty of 6 and 3 counts, respectively, of estafa thru falsification of official and commercial documents.

In a Resolution dated July 4, 1991, the instant petition was consolidated with another group of cases which were all petitions for review on certiorari from the joint decision of the Sandiganbayan dated October 24, 1990 in Criminal Case Nos. 1143-1341 and 5585-5782 finding accused-petitioners therein guilty on different counts of violation of Republic Act No. 3019, as amended, otherwise known as the Anti-Graft and Corrupt Practices Act.

However, the records of Criminal Case Nos. 195-200 were not included in the voluminous records of the consolidated cases. We learned from our Judicial Records Office that the original records of Criminal Case Nos. 195-200 were with the First Division of the Sandiganbayan. Thus, in a Resolution dated May 6, 2003,[2] we directed the Clerk of Court of the First Division of the Sandiganbayan to elevate the records of the instant petition. In the same Resolution, we also effected the separation of the herein petition of Preagido and Bolotaulo from the other consolidated cases so as not to delay the disposition of the latter and considering that the instant petition involves the alleged anomalous transactions in the Tagbilaran City Engineering Office (CEO) committed in 1978 which are entirely different from the other consolidated cases which involved anomalous transactions in the Cebu Second Highway Engineering District in 1977 wherein neither of herein petitioners were accused. Later, the Executive Clerk of Court III of the Sandiganbayan, Atty. Estela Teresita C. Rosete, submitted the original records and the transcripts of stenographic notes. She also filed a Manifestation wherein she informed us that despite her earnest efforts to locate some documentary exhibits, the same could no longer be found. Thus, in a Resolution dated March 23, 2004,[3] we asked the Solictor General to furnish us copies of the other unlocated exhibits listed in said Resolution as well as the counsel of herein petitioners to furnish us copies of their exhibits offered and marked for petitioners. We also directed them to manifest whether they are willing to dispense with the other unlocated exhibits and to submit the case for resolution on the basis of the evidence already with us.

The Office of the Solicitor General (OSG) filed a Manifestation dated July 13, 2004 submitting the case for decision. Atty. Epifanio Bolando, petitioner Bolotaulos new counsel, entered his appearance on December 19, 2004. Atty. Bolando filed his Compliance dated April 15, 2005 dispensing with the other exhibits and for submission of the case for resolution. He also informed us that petitioner Preagido had died on December 16, 2003.

On June 21, 2005, the Solicitor General, pursuant to our Resolution dated March 8, 2005 requiring him to verify and report the alleged death of petitioner Preagido, submitted a certified true copy of petitioner Preagidos death certificate issued by the Office of the City Civil Registrar, Cebu City. Petitioner Preagidos death during the pendency of he r appeal extinguishes her criminal and civil liabilities. Thus, we will only resolve the appeal of petitioner Senior Civil Engineer Bolotaulo.

It is noteworthy to mention that when the instant petition was filed in 1980, the other coaccused of petitioner Bolotaulo in Criminal Case Nos. 195, 198 and 199 had separately filed their respective appeals which had been decided by us, to wit:

(1) Valentino G. Castillo vs. Sandiganbayan and the People of the Philippines, G.R.Nos. L-52352-57,[4] (2) Jose C. Bagasao vs. Sandiganbayan and the People of the Philippines, G.R. Nos. L-53813-53818,[5] (3) Isidoro Recamadas vs. Sandiganbayan and the People of the Philippines, G.R. Nos. L-53694-99,[6] (4) Rolando R. Mangubat vs. Sandiganbayan and the People of the Philippines, G.R.Nos. L-53724-29[7]

where we affirmed the decision of the Sandiganbayan.

We adopt our factual findings in those cases which we now incorporate as an integral part of herein decision, to wit:
In the regional level, the requisition of funds for public works purposes, especially in the matter of road and bridge repairs, involves a graduated series of steps. As found by the respondent Sandiganbayan, it begins with the SubAllotment Advices (SAAs), as well as the Advices of Cash Disbursement Ceilings (ACDCs), issued by the Ministry of Public Highways in favor of its Highways Regional Offices. These serve as the Regional Offices' authority to obligate and disburse funds. In turn, these become the sources of funds of the various Engineering Districts apportioned throughout each region. The Engineering District then requests for the release of these funds from the Regional Director through a Program of Work. The Regional Finance Officer issues a Letter of Advice of Allotment (LAA), certified as to availability of funds by the Regional Accountant countersigned by the Regional Director, and addressed to the District (or City, as the case may be) Engineer. At the same time, he (the Regional Finance Officer) prepares a Sub-Advice of Cash Disbursement Ceiling (SACDC) for the Regional Director. The LAA and SACDC are subsequently entered in a logbook. The funds requested are then released. On the strength of such LAA and SACDC, the District then prepares a Requisition for Supplies or Equipment (RSE) as well as a Request for Obligation of Allotment (ROA), pursuant to the Program of Work. Both are likewise certified

as to availability of funds by the Regional Accountant and approved by the Regional Director. Thereafter, the Property Custodian or the Purchasing Officer, as the case may be, addresses Requests for Sealed Quotations to various suppliers, usually through newspaper advertisements or notices posted in conspicuous places in the District concerned. After ten days, the Sealed Quotations are submitted to the Price Verification Committee which determines the lowest bid in the presence of representatives of the District Engineer and the Auditor. An Abstract of Sealed Quotations is then signed by the members of the Committee as well as the said local representatives. Thereafter, and subject to the approval of the District Engineer, the proper award is made in favor of the lowest bidder. On the basis thereof, the Property Custodian issues a Purchase Order (PO) in favor of the winning bidder, again subject to the approval of the District Engineer and certified as to availability of funds by the Regional Accountant. The supplies thus to be delivered are thereafter inspected (through Request for Inspection) by the Property Custodian. The deliveries themselves are recorded in a Tally Sheet after which a Record of Inspection, certified by the Property Custodian, is prepared by the representative of the Auditor and the Property Custodian. Payment to the supplier is evidenced by a General Voucher (GV). Among others, the GV contains five parts; (1) a certification of receipt of supplies to be accomplished by the Property Custodian; (2) a certification of correctness, that is, that the expenses are necessary and lawful, and that the prices are not in excess of the current rates in the locality, to be accomplished by the Project Engineer; (3) approval by the District Engineer; (4) a certification, to be accomplished by the Auditor, that the GV has been properly approved, its account codes proper, and that it is supported by the proper documents; and (5) a certification that the GV has undergone pre-audit, to be accomplished by the Auditor. The GV itself must carry with it the following: the RSE, ROA, Program of Work, Detailed Estimates, Request for Sealed Quotations, Abstract of Sealed Quotations, PO, Delivery Receipts, Request for Inspection, Record of Inspection, Test Reports, and Tax Clearance of the supplier. The process winds up with the issuance of the check by the Cashier in the name of the supplier. Like the GV, the check is pre-audited and then released. The District Accountant thereafter prepares a Report of Obligation Incurred (ROI) and a Report of Checks Issued (RCI) to be submitted to the Regional Office and entered in the journals and the General Ledger thereof. On the basis thereof, the Regional Accountant prepares a trial balance to be recommended by the Finance Officer and approved by the Regional Director. The same is then submitted to the Ministry of Public Highways. It appears that from May through June, 1978, the Tagbilaran City Engineering Office (CEO) embarked on certain projects involving the restoration of various roads and bridges in Tagbilaran City. Pursuant to five LAAs addressed to the Ministry of Public Highways

purportedly issued by the Seventh Regional Highways Office on behalf of the Tagbilaran CEO, more specifically described as follows: LAA No. 107-780-05-78 107-0780-07-78 107-780-012-78 107-780-014-78 107-780-011-78 TOTAL Date April 29, 1978 No date April 24, 1978 April 24, 1978 No date Amount 150,000.00 26,000.00 48,100.00 150,000.00 100,000.00 474,100.00

as well as six SACDCs, as follows: SACDC No. Amount 022-78 P 26,000.00 167-78 48,100.00 180-78 48,100.00 193-78 150,000.00 222-78 150,000.00 086-78 225,830.00 TOTAL P 699,930.00 the Tagbilaran CEO prepared RSEs and ROAs for the procurement of materials and supplies, specifically, anapog binder, for the projects aforementioned. All five LAAs were certified as to availability of funds by Rolando Mangubat, allegedly on behalf of Angelina Escao, Finance Officer of the Seventh Regional Highways Office (Mangubat signed over her typewritten name) and countersigned by Jose Bagasao. The six SACDs were likewise signed by Mangubat for the Regional Director. The materials requisitioned were supplied by JV Sand & Gravel & Construction Supply, a private contractorship owned by James Tiu. Six GVs were prepared therefor, as follows: GV No. 01-780601 Program of Work Restoration of Shoulders, Tagbiliaran North Road (TNR), Junction TNRAirport Road, Junction TNR-Wharf Road and TCSR Restoration of Shoulders, Tagbilaran North Road (TNR), Junction TNRWharf Road Restoration of Shourders, Tagbilaran Corella-Sikatuna Road Restoration, Totulan-Ubos-Dauis Bridge Approaches Restoration, Totulan, Bridge Approaches Ubos-Dauis Amount P 49,980.00

01-780606

49,980.00

01-780641

49,980.00

01-780682

49,980.00

01-780684

49,980.00

01-780694

Restoration, Junction, Tagbilaran East Road-Dauis Paulao Central Road Shoulders and Bridge Approaches

49,980.00

TOTAL

299,880.00 ========

representing partial payments in favor of JV Sand & Gravel & Construction Supply, which has been named as a creditor therein. The GVs themselves were accompanied by various supporting papers, among them, the RSEs and ROAs earlier referred to.[8] Eventually, the matter reached the Commission on Audit which constituted two teams to mount an inquiry. The investigation disclosed that the above mentioned LAAs as well as SACDCs were spurious documents, and that the six GVs were in fact based on only two LAAs, Nos. 107-78005-78 and 107-780-014-78. It was further established that the total sum requested under the said LAAs P474,100.00 supposedly to cover the Tagbilaran CEO's unliquidated obligations were not in fact supported by its statement of accounts, under which its total obligations totalled but P160,639.55. Moreover, the payee, JV Sand & Gravel & Construction Supply, was not listed in the City's books as a creditor, for which it could have been entitled to the sums released. The Audit Commission likewise observed certain discrepancies in the GVs in question, notably, that the Programs of Work had been "split"; that they were dated after the dates of the RSEs; that while the POs called for 9,369 to 9,375 cubic meters of anapog binder, the GVs specified but 3,123 to 3,125 cubic meters thereof apiece; that the Delivery Receipts had been issued "in lump quantities," did not bear acknowledgment signatures or were not initialled by the auditor or dated after the dates of the pre-audit; that the biddings were irregular; and that anapog had been short-delivered. The Commission on Audit moreover found that the Highways Regional Office, as of this period, had in fact released "doubtful" allotments to ten districts, the Tagbilaran CEO among them, in the total sum of P24,052,750.00 supposedly to cover unliquidated obligations, although the statements of account thereof showed a total of only P2,735,181.98 as and for unliquidated obligations. The very books of the Regional Office appeared furthermore to have been doctored. For while the total unliquidated obligations totalled only P2,586,306.78, the entry in the Regional Office's general ledger was P35,509,002.99. And in payment of such doubtful obligations, the checks issued exceeded the cash disbursement ceiling by P6,837,971.35. Apparently, it was Rolando Mangubat who recorded these entries by way of seven Journal Vouchers (JVs). It likewise turned out that James Tiu subsequently opened certain savings accounts at the Allied Bank in favor of Nio Pilayre, Praxedes Lopena, and Miguel Bulac, although Lopena insists that as far as she was concerned, she knew nothing about it.[9]

The Tanodbayan filed six Informations for estafa through falsification of public and commercial documents against nine public officials[10] and two private individuals[11] on the basis of conspiracy. Later, additional public officials[12] were included in some of these Informations. It is only in Criminal Case Nos. 195, 198 and 199 that petitioner Bolotaulo is a

co-accused. Except for the amounts involved, the quantities of anapog binder allegedly requisitioned and delivered, the six Informations were uniformly worded as follows:

That, in or about and during the period from the months of April to June, 1978, in the City of Tagbilaran, Philippines, and within the jurisdiction of this Honorable Court, the public officials, who by reason of the duties of their office, are accountable officers, and conspiring and conniving among themselves, as well as with their private party co-accused, after having falsified or caused to have falsified Letters of Advice of Allotment No. 107-780-05-78 and No. 107-780-014-78, both dated April 24, 1978 and Sub-Advices of Cash Disbursement Ceiling No. 193-78 dated April 28, 1978 and No. 222-78 dated May 2, 1978, which are all public documents, whereby said accused made it appear that an amount of Three Hundred Thousand (P300,000.00) had been lawfully allocated for the City of Tagbilaran from the MPH Regional Highway Office No. VII, Cebu City, and made available For the maintenance of existing and unabandoned roads and bridges in the City of Tagbilaran, which falsifications had been committed in connection with the functions of their respective offices, then taking advantage of their official positions and committing in relation to the functions of their respective offices, did then and there willfully, unlawfully and feloniously falsify or cause to have falsified General Voucher,[13] covering the sum of Forty-Nine Thousand Nine Hundred Eighty Pesos (P49,980.00) for the payment of road shouldering materials (anapog binder), with the use of the aforesaid falsified Letters of Advice of Allotment and Sub-advices of Cash Disbursement Ceiling to support thereof and other documents, such as the Program of Work/Budget Cost for Roads and Bridges dated May 8, 1978, Request for Obligation of Allotment dated May 16, 1978, Abstract of Sealed Quotations, Purchase Orders dated June 9, 1978, Record of Inspection dated June 9, 1978, and other papers in support thereof, by making it appear that the request for obligation of allotment was regularly prepared and approved, that the bidding of materials was properly conducted, that the corresponding purchase order was prepared in favor of the lowest bidder, and that the materials purchased were duly and fully delivered in accordance with specifications and duly inspected, when in truth and in fact, as the accused fully knew well, the foregoing transactions were false and simulated, except that, with the amount of 3,123 cubic meters of anapog binder having been purchased for the sum of P49,980.00 at the rate of P16.00 per cubic meter, accused Jimmy Tiu and his representative accused Engracio Quiroz, by previous understanding with the accused officials, had caused the delivery only of (quantity) cubic meters of anapog binders, hence causing the Government to lose (quantity) cubic meters and worth (amount) at the rate of P16.00 per cubic meter; thus, the said accused having in said manner in a narration of facts; and that, by means of the aforesaid falsifications, the said accused were able to demand, collect and receive from the government thru the Tagbilaran City Engineers Office, MPH Regional office No. VII, the value of the vouchers in question although the amount due should have been only the value of the actual quantities delivered, and that, after the accused after having demanded, collected and received, did then and there willfully, unlawfully and feloniously misapply, misappropriate and convert to their own personal use and benefit, and/or consent or, through negligence, permit other persons to take, misapply, misappropriate, and convert to their own personal use and benefit, to the damage and prejudice of the Government.

All the accused pleaded not guilty to the charges against them. Joint trial thereafter ensued. In a decision dated December 28, 1979, the Sandiganbayan acquitted accused Sayson, Budget Examiner II and Quiroz, the employee of accused contractor Tiu; and convicted the rest of the accused, including Bolotaulo, of estafa thru falsification of official and commercial documents to six years of prision correccional to ten years, eight months and one day of prision

mayor each case with the accessories provided by law, pay the fine of P3,500.00 for each count and ordered them to pay certain amounts.[14]

The Sandiganbayan convicted petitioners and the other accused on the basis of conspiracy. It found that they were guilty of conspiring in the falsification of the following documents, to wit: (1) Letters of Advice of Allotment (LAAs); (2) Sub-Advice of Cash Disbursement Ceiling (SACDCs); (3) Programs of Work (PWs); (4) General Vouchers (GVs); (5) Requests for Obligation of Allotment (ROAs); (6) Abstract of Sealed Quotations; (7) Purchase Orders (POs); (8) Delivery Receipts and (9) Records of Inspections (ROIs); that such falsification facilitated the unauthorized release of funds; and, the supplies allegedly requisitioned under them were short delivered or not delivered at all. As we have stated earlier, the separate appeals of petitioner Bolotaulos co-accused Castillo (City Engineer), Bagasao (Assistant Regional Director), Recamadas (Property Custodian), and Mangubat (Regional Chief Accountant), were denied and the decision of the Sandiganbayan was affirmed in Castillo vs. Sandiganbayan,[15] Bagasao vs. [16] [17] [18] Sandiganbayan, Recamadas vs. Sandiganbayan, and Mangubat vs. Sandiganbayan. We found in those cases that the projects turned out to be ghost projects since they did not carry the imprimatur of the then Public Highways Ministry, the various requisition papers having been falsified to enable the accused to acquire the necessary funding. Furthermore, the supplies ordered were either short delivered or not delivered at all. As a result, the government suffered losses in the total sum of P240,058.00[19]

We now resolve the appeal of petitioner Ulrico Bolotaulo, Senior Civil Engineer, Tagbilaran CEO, Ministry of Public Highways, who was convicted in Criminal Case Nos. 195, 198 and 199.

Petitioner comes to us raising both questions of law and of fact. The OSG filed its Answer praying for the denial of the instant petition for review.[20]

The questions of law are as follows: (1) whether Presidential Decree No. 1486 as amended by P.D. No. 1606 creating the Sandiganbayan is an ex post factolaw and violates the rights of the accused to due process and equal protection of law; (2) whether the Sandiganbayan was validly created and constituted. The first legal issue had already been settled in Nuez vs. Sandiganbayan,[21] the very first case which upheld the constitutionality of the P.D. No. 1486 as amended, creating the Sandiganbayan. We declared that P.D. No. 1486 as amended was not an ex post facto law and

does not violate the due process and equal protection clauses of the Constitution. Such ruling was reiterated in many subsequent cases.[22]

As to the second legal issue, petitioner claims that the Sandiganbayan was not validly constituted since at the time it rendered the judgment, it was only composed of one Presiding Justice and two Associate Justices, thus how could it possibly act in division when it was never constituted as a whole? This issue had already been put to rest in De Guzman vs. People,[23] where we held:
Although the Sandiganbayan is composed of a Presiding Justice and eight Associate Justices, it does not mean that it cannot validly function without all of the Divisions constituted. Section 3 of PD 1606 provides that the Sandiganbayan shall sit in three divisions of three justices each. While Section 5 thereof provides that the unanimous vote of the three justices in a division shall be necessary for the pronouncement of a judgment. Thus, the Sandiganbayan functions in Divisions of three Justices each and each Division functions independently of the other. As long as a Division has been duly constituted it is a judicial body whose pronouncements are binding as judgments of the Sandiganbayan. The judgment convicting petitioner was a unanimous Decision of the First Division duly constituted. It thus met the requirement for the pronouncement of a judgment as required by Section 5 PD 1606 supra.[24]

Petitioner next raises the issue of the sufficiency of evidence upon which his conviction was predicated. He argues that estafa cannot be committed in the absence of any statement from the government of fund loss; that the checks covering the questioned transactions in the Tagbilaran CEO were not dishonored by the drawee bank; and that there was no concrete evidence shown by the prosecution to establish underdeliveries.

We are not impressed.

The prosecution had clearly established that because of the fake LAAs, SACDCs and the general vouchers with all its supporting documents, the government through the Tagbilaran CEO had disbursed funds for projects which were short delivered. Since there were short deliveries of anapog binder to the alleged projects sites, it resulted to the government suffering losses. We quote with approval the findings of the Sandiganbayan on this matter, thus:
It is only logical that, if funds are disbursed without any appropriation, there is actually a payment of money out of the Treasury without any sanction in

law. In such case, the Government suffers a loss of so much as is disbursed. Of course, in the cases at bar, the People adopted a more realistic approach to the situation. It opted to hold the perpetrators of the fraudulent transactions liable only up to the amount of the actual loss sustained, evidently because it concedes that there had been some deliveries, albeit minimal. And, there can be no question that, if a contract is entered into with the Government for a given quantity of materials and the entire contract price is paid but only a quantity less than that contracted for is actually delivered, the Government would naturally be prejudiced to the extent of the value of the materials not delivered. This is precisely what happened here. Therefore, it is altogether off-tangent for the accused to contend that, because no statement of loss consequent to the transactions here involved had been presented from the National Treasury or from the Philippine National Bank, no justifiable finding of damage to the Government can be made. This would be closing ones eyes to reality. For, the stark reality is that certain amounts have in fact been paid by the Government for materials that were short-delivered. Accordingly, we hold that damage to the extent of the value of said short-delivery was sustained. Considering that it is undeniable that the damage came about thru the deceitful medium of the multiple falsifications here found to have been perpetrated, it is ineluctably clear that said falsifications were the means to the perpetration of a crime of estafa. As correctly formulated in the Informations herein, the crime committed in each of the cases at bar is estafa thru falsification of public documents. This ushers the Court to the determination of the extent of the damage caused to the Government. On this score, the evidence bears looking into. Restituto Castro, testifying for the People, detailed the volume of deliveries made to various sections of the roads and bridge approaches covered by the projects here involved based on his counting of truckloads of anapog extracted from the Belderol Co and Picmao quarries and brought to the restoration sites. On the other hand, Assistant Provincial Engineer Sarmiento also made documented estimates of the volume of anapog delivered and significantly, enough, even after reckoning with pertinent factors bearing on the matter-including the time lapse between the date of spreading and the date of inspection, the effect of erosion, and a shrinkage factor of 20% and 30% as the case may be- came up with figures higher than those arrived at by Castro. So much so that, giving the defense the benefit of the doubt, the Court elects to go by the figures furnished by Engineer Sarmiento as bases for reckoning the damage caused. For this purpose, the amount to be considered as starting point should be the face value of the respective checks actually paid to accused Tiu, that is to say, deducting the amount paid to the City Treasurer for Mining Fees. And, the value of anapog delivered should be taken at the price it was supposed to have been sold to the Government, that is P16.00 per cubic meter. On this (sic) bases, the damage may be computed as follows Case Amount No. Paid 195- P 47,637.75 196- 47,636.25 197- 47,636.25 198- 47,637.75 199- 47,637.75 Delivery Volume 56612624none1,496Value of Delivery DAMAGE

P9,056.00- P 38,581.75 192.0047,444.25 9,984.00- 37,652.25 none47,637.75 23,936.00- 23,701.75

200-

47,636.25

106-

1,696.00-

45,940.25 P 240,958.00[25]

It bears stressing that the fraudulent issuances of the LAAs, SACDCs, GVs and its supporting documents and the journal vouchers and short deliveries are now settled issues. As we have earlier stated, we upheld the findings of the Sandiganbayan in four petitions brought to us by the four co-accused of herein petitioners which involved the same decision of the Sandiganbayan in Criminal Case Nos. 195 to 200 covering the same transactions.[26]

Thus, the only issue now is whether the Sandiganbayan is correct in finding petitioner Bolotaulo guilty of conspiracy in committing the crime charged.

Petitioner Bolotaulo was convicted for his signature in the RSEs, in the abstract of sealed quotations and for signing the general voucher certifying that the expenses are necessary, lawful and incurred under his direct supervision, and that the price is just and reasonable and not in excess of the current rates in the locality. He, however, contends that he merely performed his duties and responsibilities in affixing his signatures on those documents.

We are not persuaded.

Petitioner, as the Senior Civil Engineer of the Tagbilaran CEO, was the one who prepared the three Request for Supplies or Equipment (RSEs)[27] which were all dated April 11, 1978 allegedly on the basis of three programs of work he recommended for approval which were all dated May 8, 1978. Notably, however, the RSEs antedated the programs of work which is an anomalous circumstance since the RSEs needed for the prosecution of the projects are only based on the programs of work. In fact, petitioner, in his cross-examination, admitted that he cannot prepare a RSE without an approved program of work[28] and that it is the normal and regular procedure;[29] that if the program of work is prepared later than the RSE, there must be something irregular about it.[30] No satisfactory explanation was advanced by petitioner on why the RSEs antedated the programs of work as all he could say was that it was not his concern which of these two came ahead as long as that at the time he was signing the general voucher, the program of work was there.[31] As the Sandiganbayan found, it unmasks the RSEs and/or Programs of Work as falsificiations since the former cannot be said to be O.K. as to program of work, as therein stated since at the time of their preparation, no program of work was yet in existence and that the latter can only be said to have been subsequently prepared to plug a veritable loophole.[32]

In fact, the RSEs are not even in accord with the program of work. While petitioner recommended the approval of the three programs of work each calling for the use of 3,123

cubic meters of selected borrow (Item 108) as well as the detailed estimates which also called for the use of selected borrow, the three RSEs which petitioner prepared called for the use of anapog binder. No explanation was offered as to why there was such a discrepancy.

Notably, petitioner Bolotaulo recommended for approval three programs of work which all cost not more than P50,000.00 each. As established by the testimony of prosecution witness, Miguel V. Bulac, this was so since petitioner Bolotaulos co -accused City Engineer Castillo could not approve program of work exceeding P50,000.00 because in excess of that amount, the program of work has to be approved by the Regional Director. [33] In fact, Engr. Castillo admitted that program of work in excess of P50,000.00 needs the approval of the region.[34] As we earlier stated, we affirmed the conviction of City Engineer Castillo.[35]

Petitioner Bolotaulo signed three GVs certifying that the expenses are necessary, lawful and incurred under his direct supervision, and that the price is just and reasonable and not in excess of the current rates in the locality. Attached to these GVs as supporting documents are the programs of work, the RSEs, the requests for sealed quotations and the purchase orders among others. He signed the GVs despite the fact that the RSEs antedated the programs of work. He could not have failed to notice that there was only one set of request for sealed quotation for the total of 9,369 cubic meters of anapog binders and one purchase order which supported the three GVs all for amounts less than P50,000.00 each to the same contractor/ supplier James Tiu. The issuance of three GVs for amounts less thanP50,000.00 each was resorted to since a higher amount would have required the vouchers to be forwarded to the Regional Auditor for action and review. The RSEs and the GVs had been split into uniform amounts of not more than P50,000.00 each which is a clear case of splitting of requisitions and general vouchers prohibited by the Commission on Audit Circular No. 76- 41 dated July 30, 1976. As defined by the Circular, splitting in its literal sense means dividing or breaking up into separate parts or portions, or an act resulting in a fissure, rupture, breach. Within the sphere of government procurement, splitting is associated with requisitions, purchase orders, deliveries and payments.

Splitting may be in the form of (1) Splitting of Requisi3tions which consists in the nonconsolidation of requisitions for one or more items needed at about the same time by the requisitioner; (2) Splitting of Purchase orders which consists in the issuance of two or more purchase orders based on two or more requisitions for the same or at about the same time by the different requisitioners; and (3) Splitting of payments which consists in making two or more payments for one or more items involving one purchase order. These forms of splitting are resorted to in order to avoid (a) inspection of deliveries, (b) action, review or approval by higher authorities; or (c) public bidding.

There is also no truth to petitioner Bolotaulos certification in the general voucher that the price of the materials requisitioned is just and reasonable and not in excess of the current rates in the locality considering that it was established that there was irregularity in the bidding held on May 24, 1978.[36] As the Sandiganbayan found:
In the same vein, the record is clear that, prior to the pre-audit of all GVs here involved, defects and irregularties respecting the bidding conducted in connection with the procurement of the materials purchased were brought home to the knowledge of all concerned, particularly the District Auditor. A letter was actually written by accused Lopea to accused Castillo officially bringing to his attention the defects and irregularities aforesaid (Exhibit G-22). Another letter was also written by accused Lopea to accused Castillo returning the GVs (Exhibits D, E and H) because of defects like splitting, lack of ROA, and others. And yet, without anything being done to correct the defects and/or supply the deficiencies except the mere explanation of accused Castillo that the defects are mere clerical errors or that the objections are tardy, the GVs involved herein were nevertheless eventually passed on pre-audit. Since the bidding is defective, necessarily, the certification as to the justness and reasonableness of the price and that it is not in excess of the current price in the locality becomes a falsehood.

We likewise find no merit in petitioners claim that the Sandiganbayan erred in finding the existence of conspiracy in the alleged commission of the crime. We are indeed convinced that conspiracy has been clearly established by the evidence presented by the prosecution. The whole scheme started with the issuances of fake LAAs, which give the authority to obligate, and the SACDCs, the authority to disburse funds, to the Tagbilaran CEO for the alleged purpose of prosecuting certain projects. The Tagbilaran Office which was fully aware of the fake LAAs and SACDCs, made it appear that there were valid requisitions, public bidding and purchase order which all turned out to be also falsified. General vouchers were prepared and checks pursuant thereto were issued in payment to the supplier/contractor for materials which turned out to be short delivered or not delivered at all. As correctly held by the Sandiganbayan:
It will readily be discerned from the facts in the case at bar that the defraudation perpetrated upon the Government was launched with the issuance of the fake LAAs in the Regional office, gained momentum as it wound its way thru the intricate paces of the procurement and payment processes in the District Office, and was put to rest with the execution of the fake JVs also in the Regional office. A veritable umbilical cord that ties the accused in the Regional office with those in the District Office is thus unmistakable. Such that even if the acts imputed to each accused may, at first blush, appear disconnected and separate from those of the others, there is nevertheless that common thread of sentiment, intent and purpose to attain the same end that runs thru the entire gamut of acts separately perpetrated by them. After all, conspiracy implies concert of design more than participation in every act of execution. Like links in a chain, the role played by each accused is so indispensable to the success of the fraud that,

without any of them, the scheme would have failed. In this posture, a conspiracy is made out that as a result, the act of one is the act of all.[37]

Finally, petitioner argues that assuming that there were admissions from the other coaccused, the alleged conspiracy must first be proven by evidence other than the declaration of a co-conspirator citing Section 27 of Rule 130, Rules of Court, to wit:
Sec. 27. Admission by conspirator- The act or declaration of a conspirator relating to the conspiracy and during its existence, may be given in evidence against the co-conspirator after the conspiracy is shown by evidence other than such act or declaration.

The argument is devoid of merit.

Section 27 of Rule 130 of the Rules of Court applies only to extrajudicial acts or declarations but not to testimony given on the witness stand at the trial where the defendant has the opportunity to cross-examine the declarant.[38]

All told, we are convinced that the prosecution has successfully established beyond doubt that petitioner Bolotaulo is guilty of the crimes charged.

WHEREFORE, the petition is DENIED for lack of merit. The Decision of the Sandiganbayan dated December 28, 1979 insofar as petitioner Ulrico Bolotaulo is concerned is AFFIRMED. The cases against petitioner Delia Preagido are DISMISSED in view of her demise on December 16, 2003. SO ORDERED.
Republic of the Philippines SUPREME COURT Manila EN BANC DECISION August 25, 1928 G.R. No. L-29842 THE FISCAL OF THE CITY OF MANILA, petitioner, vs. SIMPLICIO DEL ROSARIO, Judge of First Instance of Manila, CATALINA ORQUETA, ET AL., respondents. The City Fiscal in his own behalf. The respondent judge in his own behalf.

, J.: In certiorari proceedings, the Fiscal of the City of Manila challenges as illegal and null the resolution approved by the trial judge on June 2, 1928, in the case of The People vs. Fortunato Galang et al., case No. 36396, of the Court of First Instance of Manila , setting aside the sentence promulgated in the case, authorizing the accused to retire their plea of guilty and to substitute therefor a plea of not guilty, and transferring the hearing of the case to another branch of the court. The resolution is defended by the trial judge in his own behalf and by counsel for the accused in their behalf as authorized by law and as made pursuant to an absolute judicial discretion before the judgment in the case had become final. On May 4, 1928, twelve persons were informed against in the Court of First Instance of Manila for a violation of the Opium Law. On May 24, 1928, ten of the accused were arraigned, and with the permission of the court, were permitted to change their previous plea of not guilty to that of guilty. In view of the spontaneous declaration of guilt, to use the language of the trial judge, the court deems it wise to accede to the petition of the same that the minimum penalty be imposed, and accordingly, on the same day, handed down a decision, sentencing each of the accused to three months and a half imprisonment, to pay a fine of P300 or suffer the corresponding subsidiary imprisonment in case of insolvency, and to pay the costs. The following day, the accused, through a newly contracted attorney, asked leave to withdraw their plea of guilty and to substitute for it the plea of not guilty. It was alleged that the declaration of guilty by the accused was due without doubt to ignorance or misunderstanding, and that counsel has a good de fense to present on behalf of his clients. This application was not verified and was not supported by affidavits. On June 2, 1928, the trial judge, thinking it proper to give the accused every opportunity to amply and freely defend themselves, if in reality they ha ve the means, made the order acceding to the petition as hereinbefore indicated. The application to withdraw the plea was made under section 25 of the Code of Criminal Procedure, which provides that A plea of guilty can be put in only by defendant himself in open court. The court may at any time before judgment upon a plea of guilty, permit it to be withdrawn and a plea of not guilty substituted. As the language of the statute implies and as has often been expressly held, applications of this kind are addressed to the sound discretion of the trial court. One may even go further and say that before judgment is pronounced upon the prisoner he has a right to withdraw his plea of guilty. But the same situation does not obtain after judgment for the law restricts the power of the court by a negative pregnant. The purpose of the law is not difficult to understand. It is intended to permit a plea of guilty only to be made by the defendant himself in open court so as fully to protect his rights. Even then, before the trial judge has gotten round to pronounce judgment, the defendant may ask for a chance to plead not guilty and to go to trial. Undoubtedly, every trial judge would exercise his discretion in the matter in favor of life and liberty. If the judge did not, it would constitute an abuse of discretion which could be corrected. At the same time, the defendant, cannot be allowed to gamble on judicial results. He may say to himself, Should I plead guilty, I may gain favor in the court and so receive light punishment. But on pronouncement of the sentence, the defendant may find himself rec eiving a severe sentence. He has taken his chance and must abide by it even if, as has happened, the death penalty be imposed. So the law is wisely circumscribed by the insertion of the phrase before judgment. It has been said to be the rule that whether a plea of guilty can be withdrawn after judgment has been rendered thereon seems to be a controverted question. In some jurisdictions, it is well settled that, in the absence of a statutory provision to the contrary, it is in the discretion of the court to allow the plea to be withdrawn after sentence is pronounced. On the other hand, it has been held that no withdrawal and substitution may be allowed after sentence has been pronounced. The Philippine jurisdiction would appear to fall into the latter category. When the law says before judgment, it does not mean after judgment. The time of the judgment has importance. Yet a harsh and uncompromising rule not be announced. Even following judgment, a plea of guilty could be changed to a plea of not guilty in the discretion of the court, as we will now proceed to explain. The trial judge has control over judgment rendered by him until they become final. He may set aside a judgment or revise it as he deems best in the interest of justice. But the trial judge may not act so as to nullify the explicit provisions of section 25 of the Code of Criminal Procedure, or any other provisions of law. After judgment, the showing made must be more than a mere request, a mere motion, a mere petition, and must assume the characteristics of a motion for the reopening of the case. Such reasons must exist as would justify the granting of a new trial. The motion must be verified and supported by affidavits. It is said here on the one hand by the respondents that until the judgment becomes final, the judge has unlimited power over it, and on the other hand by the City Fiscal that the judgment has become final because the accused have begun to serve their sentences.

We feel that neither proposition is exactly correct. It is true that courts in this jurisdiction have control over their judgments until they become final, and may set them aside and modify them as law and justice may require, but it is likewise true that such action must be taken in conformity with proper proceedings and law. In this instance, for example, within the fifteen-day period the trial judge could have lowered the sentence from three months and fifteen days imprisonment to three months imprisonment, or could have raised it even to deportation of those accused who were aliens. But no proper basis was laid on an unverified and unsupported motion of an attorney newly employed, who admits that he had never spoken a word to the defendants, for a change of a plea of guilty after judgment to a plea of not guilty As to the contention of the City Fiscal, we think that he is overstating the matter when he claims that the accused assented to the sentence imposed on them. Although the Director of Prisons states that on May 24, 1928, the prisoners were received and began to serve their imprisonment, the record fails to show if any order of commitment was issued. It must not be forgotten that the accused were not admitted to bail so that after conviction, even if they had desired to appeal, they had no other place to go except to prison. To explain and at the same time consolidate our point of view, we desire to reiterate ? To attain the status of a matter of right, an application to change a plea of guilty to not guilty must be made before judgment. The court retains control over its judgments in criminal cases until they either become final through the elapsing of fifteen days, or through compliance with the terms of the sentence. For a motion to set aside to gain judicial attention after judgment, it must be verified and supported and there must exist such reason as would be sufficient to warrant a reopening of the case. In the case at bar, as the plea of guilty was put in by the defendants in open court, as a judgment was rendered by the court upon that plea, and as the application for permission to substitute a plea of not guilty for a plea of guilty came in after judgment unverified and unsupported, there was not a showing which would justify the granting of the application. If the defendants even now desire either to appeal or to present the proper kind of a motion, they have it within their power, and the trial judge has it within his power to grant or to deny the same as he deems wise. But as the record stands, it would be sanctioning a dangerous practice to permit defendants to speculate on sentence and to play with the courts in defiance of clear provisions of law. Writ granted, without cost. Street, Ostrand, Romualdez and Villa-Real, JJ., concur. Johnson, J., concurs in the result. Separate Opinions AVANCE?A, C.J., dissenting: This being a certiorari proceeding instituted in this court, the whole question to be decided is whether or not the respondent judge acted without or in excess of his jurisdiction. As grounds for this petition, it is alleged that when the respondent judge set aside his judgment and allowed the defendants to change their plea of guilty for that of not guilty, said judgment was already final, and, that, in any case, the respondent judge violated section 25 of General Orders No. 58. In regards to the first ground alleged, I concur with the majority in holding that the judgment rendered by the respondent judge had not yet become final when it was set aside. But I cannot agree with the majority in granting the remedy sought, on the strength of the alleged violation of section 25 of General Orders No. 58. It is a well-established rule that before a judgment of the court becomes final, it is within its jurisdiction, and may be modified or set aside by it. This rule is applicable to the case in which judgment has been rendered upon the evidence, as well as when judgment has been rendered only upon defendants plea of guilty. There is no reason for discriminating between the two. The purpose of the rule is to provide the court with an opportunity to correct any mistake it may have in the judgment rendered before the latter becomes final and the right to its execution has not yet arisen ? and this purpose is present in one case as well as in the other. It was so held in the case of United States vs. Vayson (27 Phil. 447). In that case, the defendant having pleaded guilty, judgment was rendered on September 29th, sentencing him to one months imprisonment and on the following October 31st, the court set aside this judgment and rendered another, sentencing defendant to six months imprisonment. It may be noted that judgment was amended in that case for the purpose of increasing the penalty. In accordance with this precedent, there can be no doubt that in the present case the respondent judge could set aside his judgment in order to correct an error which he thought he had committed,

and, having set it aside, there was no longer any judgment. Then, when the defendants were allowed to withdraw their plea of guilty, such withdrawal was not barred by section 25 of General Orders No. 58, since there was no longer any judgment. But even regarding the matter from the viewpoint taken in the majority decision, that is, whether a court may set aside its judgment rendered upon a plea of guilty in order to permit the defendants to withdraw said plea and substitute one of not guilty, the question is the same. When a defendant pleads guilty, it is the duty of the court to ascertain whether such plea is made with an exact knowledge of the nature of the facts charged and their effects, and when such knowledge is lacking, the judgment rendered upon the plea of guilty is erroneous and illegal. So that if after judgment has been rendered, the judge believes that the plea of guilty was entered on account of the ignorance of the defendants, without their being correctly informed of the acts charged and the liability these acts entail, there is no reason why he cannot set aside his judgment and permit them to withdraw their plea of guilty substituting one of not guilty therefor, just as he can set aside a judgment rendered upon the evidence introduced, and acquit the defendants, if he afterwards believes that he committed an error in his first judgment. There is no difference between the two cases. If, in for the purpose of increasing the penalty imposed, I do not see why the same cannot be done in this case ? with greater reason, because this judgment is favorable to the defendants. In both cases the object is the same: to make the judgment conform to justice and law. In the majority opinion it is admitted that if the respondent judge had set aside his judgment by virtue of a motion meeting the conditions required for obtaining a new trial, he should then have acted lawfully. Now, then, one of the cases wherein a judge may order a new trial, even motu propio, is when, as in the present case, he believes his judgment contrary to law. At any rate, the question then would be, not one of jurisdiction, which is taken for granted, but one upon the merits, in which case, a writ of certiorari would not lie. In fact this court laid down such a ruling in the case of United States vs. Neri (8 Phil. 669). In that case the defendant pleaded guilty and judgment was rendered against him. Immediately after said judgment had been rendered, the defendant moved the court to permit him to withdraw his plea of guilty. Considering that motion, the court denied it for the following reason: It was entirely within the discretion of the lower court to permit the defendant to change his plea after sentence. The lower court having denied the defendant this right, we refuse to interfere with such discretion. The court was justified under the circumstances, in denying said motion. This citation recognizes that the lower court has jurisdiction, since it admits that it rests with its own discretion to act either in one way or in the other. In my opinion the writ should be denied. Villamor, J., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 152154 July 15, 2003 REPUBLIC OF THE PHILIPPINES, petitioner, vs. HONORABLE SANDIGANBAYAN (SPECIAL FIRST DIVISION), FERDINAND E. MARCOS (REPRESENTED BY HIS ESTATE/HEIRS: IMELDA R. MARCOS, MARIA IMELDA [IMEE] MARCOS-MANOTOC, FERDINAND R. MARCOS, JR. AND IRENE MARCOS-ARANETA) AND IMELDA ROMUALDEZ MARCOS, respondents. CORONA, J.: This is a petition for certiorari under Rule 65 of the Rules of Court seeking to (1) set aside the Resolution dated January 31, 2002 issued by the Special First Division of the Sandiganbayan in Civil Case No. 0141 entitled Republic of the Philippines vs. Ferdinand E. Marcos, et. al., and (2) reinstate its earlier decision dated September 19, 2000 which forfeited in favor of petitioner Republic of the Philippines (Republic) the amount held in escrow in the Philippine National Bank (PNB) in the aggregate amount of US$658,175,373.60 as of January 31, 2002. BACKGROUND OF THE CASE On December 17, 1991, petitioner Republic, through the Presidential Commission on Good Government (PCGG), represented by the Office of the Solicitor General (OSG), filed a petition for forfeiture before the Sandiganbayan, docketed as Civil Case No. 0141 entitled Republic of the Philippines vs. Ferdinand E. Marcos, represented by his Estate/Heirs and Imelda R. Marcos , pursuant to RA 13791 in relation to Executive Order Nos. 1,2 2,3 144 and 14-A.5

In said case, petitioner sought the declaration of the aggregate amount of US$356 million (now estimated to be more than US$658 million inclusive of interest) deposited in escrow in the PNB, as ill-gotten wealth. The funds were previously held by the following five account groups, using various foreign foundations in certain Swiss banks: (1) Azio-Verso-Vibur Foundation accounts; (2) Xandy-Wintrop: Charis-Scolari-Valamo-Spinus- Avertina Foundation accounts; (3) Trinidad-Rayby-Palmy Foundation accounts; (4) Rosalys-Aguamina Foundation accounts and (5) Maler Foundation accounts. In addition, the petition sought the forfeiture of US$25 million and US$5 million in treasury notes which exceeded the Marcos couple's salaries, other lawful income as well as income from legitimately acquired property. The treasury notes are frozen at the Central Bank of the Philippines, now Bangko Sentral ng Pilipinas, by virtue of the freeze order issued by the PCGG. On October 18, 1993, respondents Imelda R. Marcos, Maria Imelda M. Manotoc, Irene M. Araneta and Ferdinand R. Marcos, Jr. filed their answer. Before the case was set for pre-trial, a General Agreement and the Supplemental Agreements6 dated December 28, 1993 were executed by the Marcos children and then PCGG Chairman Magtanggol Gunigundo for a global settlement of the assets of the Marcos family. Subsequently, respondent Marcos children filed a motion dated December 7, 1995 for the approval of said agreements and for the enforcement thereof. The General Agreement/Supplemental Agreements sought to identify, collate, cause the inventory of and distribute all assets presumed to be owned by the Marcos family under the conditions contained therein. The aforementioned General Agreement specified in one of its premises or "whereas clauses" the fact that petitioner "obtained a judgment from the Swiss Federal Tribunal on December 21, 1990, that the Three Hundred Fifty-six Million U.S. dollars (US$356 million) belongs in principle to the Republic of the Philippines provided certain conditionalities are met x x x." The said decision of the Swiss Federal Supreme Court affirmed the decision of Zurich District Attorney Peter Consandey, granting petitioner's request for legal assistance.7 Consandey declared the various deposits in the name of the enumerated foundations to be of illegal provenance and ordered that they be frozen to await the final verdict in favor of the parties entitled to restitution. Hearings were conducted by the Sandiganbayan on the motion to approve the General/Supplemental Agreements. Respondent Ferdinand, Jr. was presented as witness for the purpose of establishing the partial implementation of said agreements. On October 18, 1996, petitioner filed a motion for summary judgment and/or judgment on the pleadings. Respondent Mrs. Marcos filed her opposition thereto which was later adopted by respondents Mrs. Manotoc, Mrs. Araneta and Ferdinand, Jr. In its resolution dated November 20, 1997, the Sandiganbayan denied petitioner's motion for summary judgment and/or judgment on the pleadings on the ground that the motion to approve the compromise agreement "(took) precedence over the motion for summary judgment." Respondent Mrs. Marcos filed a manifestation on May 26, 1998 claiming she was not a party to the motion for approval of the Compromise Agreement and that she owned 90% of the funds with the remaining 10% belonging to the Marcos estate. Meanwhile, on August 10, 1995, petitioner filed with the District Attorney in Zurich, Switzerland, an additional request for the immediate transfer of the deposits to an escrow account in the PNB. The request was granted. On appeal by the Marcoses, the Swiss Federal Supreme Court, in a decision dated December 10, 1997, upheld the ruling of the District Attorney of Zurich granting the request for the transfer of the funds. In 1998, the funds were remitted to the Philippines in escrow. Subsequently, respondent Marcos children moved that the funds be placed in custodia legis because the deposit in escrow in the PNB was allegedly in danger of dissipation by petitioner. The Sandiganbayan, in its resolution dated September 8, 1998, granted the motion. After the pre-trial and the issuance of the pre-trial order and supplemental pre-trial order dated October 28, 1999 and January 21, 2000, respectively, the case was set for trial. After several resettings, petitioner, on March 10, 2000, filed another motion for summary judgment pertaining to the forfeiture of the US$356 million, based on the following grounds: I THE ESSENTIAL FACTS WHICH WARRANT THE FORFEITURE OF THE FUNDS SUBJECT OF THE PETITION UNDER R.A. NO. 1379 ARE ADMITTED BY RESPONDENTS IN THEIR PLEADINGS AND OTHER SUBMISSIONS MADE IN THE COURSE OF THE PROCEEDING. II RESPONDENTS' ADMISSION MADE DURING THE PRE-TRIAL THAT THEY DO NOT HAVE ANY INTEREST OR OWNERSHIP OVER THE FUNDS SUBJECT OF THE ACTION FOR FORFEITURE TENDERS NO GENUINE ISSUE OR CONTROVERSY AS TO ANY MATERIAL FACT IN THE PRESENT ACTION, THUS WARRANTING THE RENDITION OF SUMMARY JUDGMENT.8 Petitioner contended that, after the pre-trial conference, certain facts were established, warranting a summary judgment on the funds sought to be forfeited. Respondent Mrs. Marcos filed her opposition to the petitioner's motion for summary judgment, which opposition was later adopted by her co-respondents Mrs. Manotoc, Mrs. Araneta and Ferdinand, Jr. On March 24, 2000, a hearing on the motion for summary judgment was conducted. In a decision9 dated September 19, 2000, the Sandiganbayan granted petitioner's motion for summary judgment: CONCLUSION There is no issue of fact which calls for the presentation of evidence. The Motion for Summary Judgment is hereby granted. The Swiss deposits which were transmitted to and now held in escrow at the PNB are deemed unlawfully acquired as ill-gotten wealth. DISPOSITION

WHEREFORE, judgment is hereby rendered in favor of the Republic of the Philippines and against the respondents, declaring the Swiss deposits which were transferred to and now deposited in escrow at the Philippine National Bank in the total aggregate value equivalent to US$627,608,544.95 as of August 31, 2000 together with the increments thereof forfeited in favor of the State.10 Respondent Mrs. Marcos filed a motion for reconsideration dated September 26, 2000. Likewise, Mrs. Manotoc and Ferdinand, Jr. filed their own motion for reconsideration dated October 5, 2000. Mrs. Araneta filed a manifestation dated October 4, 2000 adopting the motion for reconsideration of Mrs. Marcos, Mrs. Manotoc and Ferdinand, Jr. Subsequently, petitioner filed its opposition thereto. In a resolution11 dated January 31, 2002, the Sandiganbayan reversed its September 19, 2000 decision, thus denying petitioner's motion for summary judgment: CONCLUSION In sum, the evidence offered for summary judgment of the case did not prove that the money in the Swiss Banks belonged to the Marcos spouses because no legal proof exists in the record as to the ownership by the Marcoses of the funds in escrow from the Swiss Banks. The basis for the forfeiture in favor of the government cannot be deemed to have been established and our judgment thereon, perforce, must also have been without basis. WHEREFORE, the decision of this Court dated September 19, 2000 is reconsidered and set aside, and this case is now being set for further proceedings.12 Hence, the instant petition. In filing the same, petitioner argues that the Sandiganbayan, in reversing its September 19, 2000 decision, committed grave abuse of discretion amounting to lack or excess of jurisdiction considering that -I PETITIONER WAS ABLE TO PROVE ITS CASE IN ACCORDANCE WITH THE REQUISITES OF SECTIONS 2 AND 3 OF R.A. NO. 1379: A. PRIVATE RESPONDENTS CATEGORICALLY ADMITTED NOT ONLY THE PERSONAL CIRCUMSTANCES OF FERDINAND E. MARCOS AND IMELDA R. MARCOS AS PUBLIC OFFICIALS BUT ALSO THE EXTENT OF THEIR SALARIES AS SUCH PUBLIC OFFICIALS, WHO UNDER THE CONSTITUTION, WERE PROHIBITED FROM ENGAGING IN THE MANAGEMENT OF FOUNDATIONS. B. PRIVATE RESPONDENTS ALSO ADMITTED THE EXISTENCE OF THE SWISS DEPOSITS AND THEIR OWNERSHIP THEREOF: 1. ADMISSIONS IN PRIVATE RESPONDENTS' ANSWER; 2. ADMISSION IN THE GENERAL / SUPPLEMENTAL AGREEMENTS THEY SIGNED AND SOUGHT TO IMPLEMENT; 3. ADMISSION IN A MANIFESTATION OF PRIVATE RESPONDENT IMELDA R. MARCOS AND IN THE MOTION TO PLACE THE RES IN CUSTODIA LEGIS; AND 4. ADMISSION IN THE UNDERTAKING TO PAY THE HUMAN RIGHTS VICTIMS. C. PETITIONER HAS PROVED THE EXTENT OF THE LEGITIMATE INCOME OF FERDINAND E. MARCOS AND IMELDA R. MARCOS AS PUBLIC OFFICIALS. D. PETITIONER HAS ESTABLISHED A PRIMA FACIE PRESUMPTION OF UNLAWFULLY ACQUIRED WEALTH. II SUMMARY JUDGMENT IS PROPER SINCE PRIVATE RESPONDENTS HAVE NOT RAISED ANY GENUINE ISSUE OF FACT CONSIDERING THAT: A. PRIVATE RESPONDENTS' DEFENSE THAT SWISS DEPOSITS WERE LAWFULLY ACQUIRED DOES NOT ONLY FAIL TO TENDER AN ISSUE BUT IS CLEARLY A SHAM; AND B. IN SUBSEQUENTLY DISCLAIMING OWNERSHIP OF THE SWISS DEPOSITS, PRIVATE RESPONDENTS ABANDONED THEIR SHAM DEFENSE OF LEGITIMATE ACQUISITION, AND THIS FURTHER JUSTIFIED THE RENDITION OF A SUMMARY JUDGMENT. III THE FOREIGN FOUNDATIONS NEED NOT BE IMPLEADED. IV THE HONORABLE PRESIDING JUSTICE COMMITTED GRAVE ABUSE OF DISCRETION IN REVERSING HIMSELF ON THE GROUND THAT ORIGINAL COPIES OF THE AUTHENTICATED SWISS DECISIONS AND THEIR "AUTHENTICATED TRANSLATIONS" HAVE NOT BEEN SUBMITTED TO THE COURT, WHEN EARLIER THE SANDIGANBAYAN HAS QUOTED EXTENSIVELY A PORTION OF THE TRANSLATION OF ONE OF THESE SWISS DECISIONS IN HIS "PONENCIA" DATED JULY 29, 1999 WHEN IT DENIED THE MOTION TO RELEASE ONE HUNDRED FIFTY MILLION US DOLLARS ($150,000,000.00) TO THE HUMAN RIGHTS VICTIMS. V PRIVATE RESPONDENTS ARE DEEMED TO HAVE WAIVED THEIR OBJECTION TO THE AUTHENTICITY OF THE SWISS FEDERAL SUPREME COURT DECISIONS.13 Petitioner, in the main, asserts that nowhere in the respondents' motions for reconsideration and supplemental motion for reconsideration were the authenticity, accuracy and admissibility of the Swiss decisions ever challenged. Otherwise stated, it was incorrect for the Sandiganbayan to use the issue of lack of authenticated translations of the decisions of the Swiss Federal Supreme Court as the basis for reversing itself because respondents themselves never raised this issue in their motions for reconsideration and supplemental motion for reconsideration. Furthermore, this particular issue relating to the translation of the

Swiss court decisions could not be resurrected anymore because said decisions had been previously utilized by the Sandiganbayan itself in resolving a "decisive issue" before it. Petitioner faults the Sandiganbayan for questioning the non-production of the authenticated translations of the Swiss Federal Supreme Court decisions as this was a marginal and technical matter that did not diminish by any measure the conclusiveness and strength of what had been proven and admitted before the Sandiganbayan, that is, that the funds deposited by the Marcoses constituted ill-gotten wealth and thus belonged to the Filipino people. In compliance with the order of this Court, Mrs. Marcos filed her comment to the petition on May 22, 2002. After several motions for extension which were all granted, the comment of Mrs. Manotoc and Ferdinand, Jr. and the separate comment of Mrs. Araneta were filed on May 27, 2002. Mrs. Marcos asserts that the petition should be denied on the following grounds: A. PETITIONER HAS A PLAIN, SPEEDY, AND ADEQUATE REMEDY AT THE SANDIGANBAYAN. B. THE SANDIGANBAYAN DID NOT ABUSE ITS DISCRETION IN SETTING THE CASE FOR FURTHER PROCEEDINGS.14 Mrs. Marcos contends that petitioner has a plain, speedy and adequate remedy in the ordinary course of law in view of the resolution of the Sandiganbayan dated January 31, 2000 directing petitioner to submit the authenticated translations of the Swiss decisions. Instead of availing of said remedy, petitioner now elevates the matter to this Court. According to Mrs. Marcos, a petition for certiorari which does not comply with the requirements of the rules may be dismissed. Since petitioner has a plain, speedy and adequate remedy, that is, to proceed to trial and submit authenticated translations of the Swiss decisions, its petition before this Court must be dismissed. Corollarily, the Sandiganbayan's ruling to set the case for further proceedings cannot and should not be considered a capricious and whimsical exercise of judgment. Likewise, Mrs. Manotoc and Ferdinand, Jr., in their comment, prayed for the dismissal of the petition on the grounds that: (A) BY THE TIME PETITIONER FILED ITS MOTION FOR SUMMARY JUDGMENT ON 10 MARCH 2000, IT WAS ALREADY BARRED FROM DOING SO. (1) The Motion for Summary Judgment was based on private respondents' Answer and other documents that had long been in the records of the case. Thus, by the time the Motion was filed on 10 March 2000, estoppel by laches had already set in against petitioner. (2) By its positive acts and express admissions prior to filing the Motion for Summary Judgment on 10 March 1990, petitioner had legally bound itself to go to trial on the basis of existing issues. Thus, it clearly waived whatever right it had to move for summary judgment. (B) EVEN ASSUMING THAT PETITIONER WAS NOT LEGALLY BARRED FROM FILING THE MOTION FOR SUMMARY JUDGMENT, THE SANDIGANBAYAN IS CORRECT IN RULING THAT PETITIONER HAS NOT YET ESTABLISHED A PRIMA FACIE CASE FOR THE FORFEITURE OF THE SWISS FUNDS. (1) Republic Act No. 1379, the applicable law, is a penal statute. As such, its provisions, particularly the essential elements stated in section 3 thereof, are mandatory in nature. These should be strictly construed against petitioner and liberally in favor of private respondents. (2) Petitioner has failed to establish the third and fourth essential elements in Section 3 of R.A. 1379 with respect to the identification, ownership, and approximate amount of the property which the Marcos couple allegedly "acquired during their incumbency". (a) Petitioner has failed to prove that the Marcos couple "acquired" or own the Swiss funds. (b) Even assuming, for the sake of argument, that the fact of acquisition has been proven, petitioner has categorically admitted that it has no evidence showing how much of the Swiss funds was acquired "during the incumbency" of the Marcos couple from 31 December 1965 to 25 February 1986. (3) In contravention of the essential element stated in Section 3 (e) of R.A. 1379, petitioner has failed to establish the other proper earnings and income from legitimately acquired property of the Marcos couple over and above their government salaries. (4) Since petitioner failed to prove the three essential elements provided in paragraphs (c) 15 (d),16 and (e)17 of Section 3, R.A. 1379, the inescapable conclusion is that the prima facie presumption of unlawful acquisition of the Swiss funds has not yet attached. There can, therefore, be no premature forfeiture of the funds. (C) IT WAS ONLY BY ARBITRARILY ISOLATING AND THEN TAKING CERTAIN STATEMENTS MADE BY PRIVATE RESPONDENTS OUT OF CONTEXT THAT PETITIONER WAS ABLE TO TREAT THESE AS "JUDICIAL ADMISSIONS" SUFFICIENT TO ESTABLISH A PRIMA FACIE AND THEREAFTER A CONCLUSIVE CASE TO JUSTIFY THE FORFEITURE OF THE SWISS FUNDS. (1) Under Section 27, Rule 130 of the Rules of Court, the General and Supplemental Agreements, as well as the other written and testimonial statements submitted in relation thereto, are expressly barred from being admissible in evidence against private respondents. (2) Had petitioner bothered to weigh the alleged admissions together with the other statements on record, there would be a demonstrable showing that no such "judicial admissions" were made by private respondents. (D) SINCE PETITIONER HAS NOT (YET) PROVEN ALL THE ESSENTIAL ELEMENTS TO ESTABLISH A PRIMA FACIE CASE FOR FORFEITURE, AND PRIVATE RESPONDENTS HAVE NOT MADE ANY JUDICIAL ADMISSION THAT

WOULD HAVE FREED IT FROM ITS BURDEN OF PROOF, THE SANDIGANBAYAN DID NOT COMMIT GRAVE ABUSE OF DISCRETION IN DENYING THE MOTION FOR SUMMARY JUDGMENT. CERTIORARI, THEREFORE, DOES NOT LIE, ESPECIALLY AS THIS COURT IS NOT A TRIER OF FACTS.18 For her part, Mrs. Araneta, in her comment to the petition, claims that obviously petitioner is unable to comply with a very plain requirement of respondent Sandiganbayan. The instant petition is allegedly an attempt to elevate to this Court matters, issues and incidents which should be properly threshed out at the Sandiganbayan. To respondent Mrs. Araneta, all other matters, save that pertaining to the authentication of the translated Swiss Court decisions, are irrelevant and impertinent as far as this Court is concerned. Respondent Mrs. Araneta manifests that she is as eager as respondent Sandiganbayan or any interested person to have the Swiss Court decisions officially translated in our known language. She says the authenticated official English version of the Swiss Court decisions should be presented. This should stop all speculations on what indeed is contained therein. Thus, respondent Mrs. Araneta prays that the petition be denied for lack of merit and for raising matters which, in elaborated fashion, are impertinent and improper before this Court. PROPRIETY OF PETITIONER'S ACTION FOR CERTIORARI But before this Court discusses the more relevant issues, the question regarding the propriety of petitioner Republic's action for certiorari under Rule 6519 of the 1997 Rules of Civil Procedure assailing the Sandiganbayan Resolution dated January 21, 2002 should be threshed out. At the outset, we would like to stress that we are treating this case as an exception to the general rule governing petitions for certiorari. Normally, decisions of the Sandiganbayan are brought before this Court under Rule 45, not Rule 65. 20 But where the case is undeniably ingrained with immense public interest, public policy and deep historical repercussions, certiorari is allowed notwithstanding the existence and availability of the remedy of appeal.21 One of the foremost concerns of the Aquino Government in February 1986 was the recovery of the unexplained or ill-gotten wealth reputedly amassed by former President and Mrs. Ferdinand E. Marcos, their relatives, friends and business associates. Thus, the very first Executive Order (EO) issued by then President Corazon Aquino upon her assumption to office after the ouster of the Marcoses was EO No. 1, issued on February 28, 1986. It created the Presidential Commission on Good Government (PCGG) and charged it with the task of assisting the President in the "recovery of all ill-gotten wealth accumulated by former President Ferdinand E. Marcos, his immediate family, relatives, subordinates and close associates, whether located in the Philippines or abroad, including the takeover or sequestration of all business enterprises and entities owned or controlled by them during his administration, directly or through nominees, by taking undue advantage of their public office and/or using their powers, authority, influence, connections or relationship." The urgency of this undertaking was tersely described by this Court in Republic vs. Lobregat22: surely x x x an enterprise "of great pith and moment"; it was attended by "great expectations"; it was initiated not only out of considerations of simple justice but also out of sheer necessity - the national coffers were empty, or nearly so. In all the alleged ill-gotten wealth cases filed by the PCGG, this Court has seen fit to set aside technicalities and formalities that merely serve to delay or impede judicious resolution. This Court prefers to have such cases resolved on the merits at the Sandiganbayan. But substantial justice to the Filipino people and to all parties concerned, not mere legalisms or perfection of form, should now be relentlessly and firmly pursued. Almost two decades have passed since the government initiated its search for and reversion of such ill-gotten wealth. The definitive resolution of such cases on the merits is thus long overdue. If there is proof of illegal acquisition, accumulation, misappropriation, fraud or illicit conduct, let it be brought out now. Let the ownership of these funds and other assets be finally determined and resolved with dispatch, free from all the delaying technicalities and annoying procedural sidetracks. 23 We thus take cognizance of this case and settle with finality all the issues therein. ISSUES BEFORE THIS COURT The crucial issues which this Court must resolve are: (1) whether or not respondents raised any genuine issue of fact which would either justify or negate summary judgment; and (2) whether or not petitioner Republic was able to prove its case for forfeiture in accordance with Sections 2 and 3 of RA 1379. (1) THE PROPRIETY OF SUMMARY JUDGMENT We hold that respondent Marcoses failed to raise any genuine issue of fact in their pleadings. Thus, on motion of petitioner Republic, summary judgment should take place as a matter of right. In the early case of Auman vs. Estenzo24, summary judgment was described as a judgment which a court may render before trial but after both parties have pleaded. It is ordered by the court upon application by one party, supported by affidavits, depositions or other documents, with notice upon the adverse party who may in turn file an opposition supported also by affidavits, depositions or other documents. This is after the court summarily hears both parties with their respective proofs and finds that there is no genuine issue between them. Summary judgment is sanctioned in this jurisdiction by Section 1, Rule 35 of the 1997 Rules of Civil Procedure: SECTION 1. Summary judgment for claimant.- A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the pleading in answer thereto has been served, move with supporting affidavits, depositions or admissions for a summary judgment in his favor upon all or any part thereof.25 Summary judgment is proper when there is clearly no genuine issue as to any material fact in the action. 26 The theory of summary judgment is that, although an answer may on its face appear to tender issues requiring trial, if it is demonstrated by affidavits, depositions or admissions that those issues are not genuine but sham or fictitious, the Court is justified in dispensing with the trial and rendering summary judgment for petitioner Republic. The Solicitor General made a very thorough presentation of its case for forfeiture: xxx 4. Respondent Ferdinand E. Marcos (now deceased and represented by his Estate/Heirs) was a public officer for several decades continuously and without interruption as Congressman, Senator, Senate President and President of

the Republic of the Philippines from December 31, 1965 up to his ouster by direct action of the people of EDSA on February 22-25, 1986. 5. Respondent Imelda Romualdez Marcos (Imelda, for short) the former First Lady who ruled with FM during the 14year martial law regime, occupied the position of Minister of Human Settlements from June 1976 up to the peaceful revolution in February 22-25, 1986. She likewise served once as a member of the Interim Batasang Pambansa during the early years of martial law from 1978 to 1984 and as Metro Manila Governor in concurrent capacity as Minister of Human Settlements. x x x xxx xxx xxx 11. At the outset, however, it must be pointed out that based on the Official Report of the Minister of Budget, the total salaries of former President Marcos as President form 1966 to 1976 was P60,000 a year and from 1977 to 1985, P100,000 a year; while that of the former First Lady, Imelda R. Marcos, as Minister of Human Settlements from June 1976 to February 22-25, 1986 was P75,000 a year xxx. ANALYSIS OF RESPONDENTS LEGITIMATE INCOME xxx 12. Based on available documents, the ITRs of the Marcoses for the years 1965-1975 were filed under Tax Identification No. 1365-055-1. For the years 1976 until 1984, the returns were filed under Tax Identification No. M 6221J 1117-A-9. 13. The data contained in the ITRs and Balance Sheet filed by the "Marcoses are summarized and attached to the reports in the following schedules: Schedule A: Schedule of Income (Annex "T" hereof); Schedule B: Schedule of Income Tax Paid (Annex "T-1" hereof); Schedule C: Schedule of Net Disposable Income (Annex "T-2" hereof); Schedule D: Schedule of Networth Analysis (Annex "T-3" hereof). 14. As summarized in Schedule A (Annex "T" hereof), the Marcoses reported P16,408,442.00 or US$2,414,484.91 in total income over a period of 20 years from 1965 to 1984. The sources of income are as follows: Official Salaries P 2,627,581.00 16.01% Legal Practice Farm Income Others 11,109,836.00 149,700.00 2,521,325.00 67.71% .91% 15.37%

Total P16,408,442.00 100.00% 15. FM's official salary pertains to his compensation as Senate President in 1965 in the amount of P15,935.00 and P1,420,000.00 as President of the Philippines during the period 1966 until 1984. On the other hand, Imelda reported salaries and allowances only for the years 1979 to 1984 in the amount of P1,191,646.00. The records indicate that the reported income came from her salary from the Ministry of Human Settlements and allowances from Food Terminal, Inc., National Home Mortgage Finance Corporation, National Food Authority Council, Light Rail Transit Authority and Home Development Mutual Fund. 16. Of the P11,109,836.00 in reported income from legal practice, the amount of P10,649,836.00 or 96% represents "receivables from prior years" during the period 1967 up to 1984. 17. In the guise of reporting income using the cash method under Section 38 of the National Internal Revenue Code, FM made it appear that he had an extremely profitable legal practice before he became a President (FM being barred by law from practicing his law profession during his entire presidency) and that, incredibly, he was still receiving payments almost 20 years after. The only problem is that in his Balance Sheet attached to his 1965 ITR immediately preceeding his ascendancy to the presidency he did not show any Receivables from client at all, much less the P10,65M that he decided to later recognize as income. There are no documents showing any withholding tax certificates. Likewise, there is nothing on record that will show any known Marcos client as he has no known law office. As previously stated, his networth was a mere P120,000.00 in December, 1965. The joint income tax returns of FM and Imelda cannot, therefore, conceal the skeletons of their kleptocracy. 18. FM reported a total of P2,521,325.00 as Other Income for the years 1972 up to 1976 which he referred to in his return as "Miscellaneous Items" and "Various Corporations." There is no indication of any payor of the dividends or earnings. 19. Spouses Ferdinand and Imelda did not declare any income from any deposits and placements which are subject to a 5% withholding tax. The Bureau of Internal Revenue attested that after a diligent search of pertinent records on file with the Records Division, they did not find any records involving the tax transactions of spouses Ferdinand and Imelda in Revenue Region No. 1, Baguio City, Revenue Region No.4A, Manila, Revenue Region No. 4B1, Quezon City and Revenue No. 8, Tacloban, Leyte. Likewise, the Office of the Revenue Collector of Batac. Further, BIR attested that no records were found on any filing of capital gains tax return involving spouses FM and Imelda covering the years 1960 to 1965.

20. In Schedule B, the taxable reported income over the twenty-year period was P14,463,595.00 which represents 88% of the gross income. The Marcoses paid income taxes totaling P8,233,296.00 or US$1,220,667.59. The business expenses in the amount of P861,748.00 represent expenses incurred for subscription, postage, stationeries and contributions while the other deductions in the amount of P567,097.00 represents interest charges, medicare fees, taxes and licenses. The total deductions in the amount of P1,994,845.00 represents 12% of the total gross income. 21. In Schedule C, the net cumulative disposable income amounts to P6,756,301.00 or US$980,709.77. This is the amount that represents that portion of the Marcoses income that is free for consumption, savings and investments. The amount is arrived at by adding back to the net income after tax the personal and additional exemptions for the years 1965-1984, as well as the tax-exempt salary of the President for the years 1966 until 1972. 22. Finally, the networth analysis in Schedule D, represents the total accumulated networth of spouses, Ferdinand and Imelda. Respondent's Balance Sheet attached to their 1965 ITR, covering the year immediately preceding their ascendancy to the presidency, indicates an ending networth of P120,000.00 which FM declared as Library and Miscellaneous assets. In computing for the networth, the income approach was utilized. Under this approach, the beginning capital is increased or decreased, as the case may be, depending upon the income earned or loss incurred. Computations establish the total networth of spouses Ferdinand and Imelda, for the years 1965 until 1984 in the total amount of US$957,487.75, assuming the income from legal practice is real and valid x x x. G. THE SECRET MARCOS DEPOSITS IN SWISS BANKS 23. The following presentation very clearly and overwhelmingly show in detail how both respondents clandestinely stashed away the country's wealth to Switzerland and hid the same under layers upon layers of foundations and other corporate entities to prevent its detection. Through their dummies/nominees, fronts or agents who formed those foundations or corporate entities, they opened and maintained numerous bank accounts. But due to the difficulty if not the impossibility of detecting and documenting all those secret accounts as well as the enormity of the deposits therein hidden, the following presentation is confined to five identified accounts groups, with balances amounting to about $356-M with a reservation for the filing of a supplemental or separate forfeiture complaint should the need arise. H. THE AZIO-VERSO-VIBUR FOUNDATION ACCOUNTS 24. On June 11, 1971, Ferdinand Marcos issued a written order to Dr. Theo Bertheau, legal counsel of Schweizeresche Kreditanstalt or SKA, also known as Swiss Credit Bank, for him to establish the AZIO Foundation. On the same date, Marcos executed a power of attorney in favor of Roberto S. Benedicto empowering him to transact business in behalf of the said foundation. Pursuant to the said Marcos mandate, AZIO Foundation was formed on June 21, 1971 in Vaduz. Walter Fessler and Ernst Scheller, also of SKA Legal Service, and Dr. Helmuth Merling from Schaan were designated as members of the Board of Trustees of the said foundation. Ferdinand Marcos was named first beneficiary and the Marcos Foundation, Inc. was second beneficiary. On November 12, 1971, FM again issued another written order naming Austrahil PTY Ltd. In Sydney, Australia, as the foundation's first and sole beneficiary. This was recorded on December 14, 1971. 25. In an undated instrument, Marcos changed the first and sole beneficiary to CHARIS FOUNDATION. This change was recorded on December 4, 1972. 26. On August 29, 1978, the AZIO FOUNDATION was renamed to VERSO FOUNDATION. The Board of Trustees remained the same. On March 11, 1981, Marcos issued a written directive to liquidated VERSO FOUNDATION and to transfer all its assets to account of FIDES TRUST COMPANY at Bank Hofman in Zurich under the account "Reference OSER." The Board of Trustees decided to dissolve the foundation on June 25, 1981. 27. In an apparent maneuver to bury further the secret deposits beneath the thick layers of corporate entities, FM effected the establishment of VIBUR FOUNDATION on May 13, 1981 in Vaduz. Atty. Ivo Beck and Limag Management, a wholly-owned subsidiary of Fides Trust, were designated as members of the Board of Trustees. The account was officially opened with SKA on September 10, 1981. The beneficial owner was not made known to the bank since Fides Trust Company acted as fiduciary. However, comparison of the listing of the securities in the safe deposit register of the VERSO FOUNDATION as of February 27, 1981 with that of VIBUR FOUNDATION as of December 31, 1981 readily reveals that exactly the same securities were listed. 28. Under the foregoing circumstances, it is certain that the VIBUR FOUNDATION is the beneficial successor of VERSO FOUNDATION. 29. On March 18, 1986, the Marcos-designated Board of Trustees decided to liquidate VIBUR FOUNDATION. A notice of such liquidation was sent to the Office of the Public Register on March 21, 1986. However, the bank accounts and respective balances of the said VIBUR FOUNDATION remained with SKA. Apparently, the liquidation was an attempt by the Marcoses to transfer the foundation's funds to another account or bank but this was prevented by the timely freeze order issued by the Swiss authorities. One of the latest documents obtained by the PCGG from the Swiss authorities is a declaration signed by Dr. Ivo Beck (the trustee) stating that the beneficial owner of VIBUR FOUNDATION is Ferdinand E. Marcos. Another document signed by G. Raber of SKA shows that VIBUR FOUNDATION is owned by the "Marcos Familie" 30. As of December 31, 1989, the balance of the bank accounts of VIBUR FOUNDATION with SKA, Zurich, under the General Account No. 469857 totaled $3,597,544.00 I. XANDY-WINTROP: CHARIS-SCOLARIVALAMO-SPINUS-AVERTINA FOUNDATION ACCOUNTS 31. This is the most intricate and complicated account group. As the Flow Chart hereof shows, two (2) groups under the foundation organized by Marcos dummies/nominees for FM's benefit, eventually joined together and became one (1) account group under the AVERTINA FOUNDATION for the benefit of both FM and Imelda. This is the biggest group

from where the $50-M investment fund of the Marcoses was drawn when they bought the Central Bank's dollardenominated treasury notes with high-yielding interests. 32. On March 20, 1968, after his second year in the presidency, Marcos opened bank accounts with SKA using an alias or pseudonym WILLIAM SAUNDERS, apparently to hide his true identity. The next day, March 21, 1968, his First Lady, Mrs. Imelda Marcos also opened her own bank accounts with the same bank using an American-sounding alias, JANE RYAN. Found among the voluminous documents in Malacaang shortly after they fled to Hawaii in haste that fateful night of February 25, 1986, were accomplished forms for "Declaration/Specimen Signatures" submitted by the Marcos couple. Under the caption "signature(s)" Ferdinand and Imelda signed their real names as well as their respective aliases underneath. These accounts were actively operated and maintained by the Marcoses for about two (2) years until their closure sometime in February, 1970 and the balances transferred to XANDY FOUNDATION. 33. The XANDY FOUNDATION was established on March 3, 1970 in Vaduz. C.W. Fessler, C. Souviron and E. Scheller were named as members of the Board of Trustees. 34. FM and Imelda issued the written mandate to establish the foundation to Markus Geel of SKA on March 3, 1970. In the handwritten Regulations signed by the Marcos couple as well as in the type-written Regulations signed by Markus Geel both dated February 13, 1970, the Marcos spouses were named the first beneficiaries, the surviving spouse as the second beneficiary and the Marcos children Imee, Ferdinand, Jr. (Bongbong) and Irene as equal third beneficiaries. 35. The XANDY FOUNDATION was renamed WINTROP FOUNDATION on August 29, 1978. The Board of Trustees remained the same at the outset. However, on March 27, 1980, Souviron was replaced by Dr. Peter Ritter. On March 10. 1981, Ferdinand and Imelda Marcos issued a written order to the Board of Wintrop to liquidate the foundation and transfer all its assets to Bank Hofmann in Zurich in favor of FIDES TRUST COMPANY. Later, WINTROP FOUNDATION was dissolved. 36. The AVERTINA FOUNDATION was established on May 13, 1981 in Vaduz with Atty. Ivo Beck and Limag Management, a wholly-owned subsidiary of FIDES TRUST CO., as members of the Board of Trustees. Two (2) account categories, namely: CAR and NES, were opened on September 10, 1981. The beneficial owner of AVERTINA was not made known to the bank since the FIDES TRUST CO. acted as fiduciary. However, the securities listed in the safe deposit register of WINTROP FOUNDATION Category R as of December 31, 1980 were the same as those listed in the register of AVERTINA FOUNDATION Category CAR as of December 31, 1981. Likewise, the securities listed in the safe deposit register of WINTROP FOUNDATION Category S as of December 31, 1980 were the same as those listed in the register of Avertina Category NES as of December 31, 1981.Under the circumstances, it is certain that the beneficial successor of WINTROP FOUNDATION is AVERTINA FOUNDATION. The balance of Category CAR as of December 31, 1989 amounted to US$231,366,894.00 while that of Category NES as of 12-31-83 was US$8,647,190.00. Latest documents received from Swiss authorities included a declaration signed by IVO Beck stating that the beneficial owners of AVERTINA FOUNDATION are FM and Imelda. Another document signed by G. Raber of SKA indicates that Avertina Foundation is owned by the "Marcos Families." 37. The other groups of foundations that eventually joined AVERTINA were also established by FM through his dummies, which started with the CHARIS FOUNDATION. 38. The CHARIS FOUNDATION was established in VADUZ on December 27, 1971. Walter Fessler and Ernst Scheller of SKA and Dr. Peter Ritter were named as directors. Dr. Theo Bertheau, SKA legal counsel, acted as founding director in behalf of FM by virtue of the mandate and agreement dated November 12, 1971. FM himself was named the first beneficiary and Xandy Foundation as second beneficiary in accordance with the handwritten instructions of FM on November 12, 1971 and the Regulations. FM gave a power of attorney to Roberto S. Benedicto on February 15, 1972 to act in his behalf with regard to Charis Foundation. 39. On December 13, 1974, Charis Foundation was renamed Scolari Foundation but the directors remained the same. On March 11, 1981 FM ordered in writing that the Valamo Foundation be liquidated and all its assets be transferred to Bank Hofmann, AG in favor of Fides Trust Company under the account "Reference OMAL". The Board of Directors decided on the immediate dissolution of Valamo Foundation on June 25, 1981. 40 The SPINUS FOUNDATION was established on May 13, 1981 in Vaduz with Atty. Ivo Beck and Limag Management, a wholly-owned subsidiary of Fides Trust Co., as members of the Foundation's Board of Directors. The account was officially opened with SKA on September 10, 1981. The beneficial owner of the foundation was not made known to the bank since Fides Trust Co. acted as fiduciary. However, the list of securities in the safe deposit register of Valamo Foundation as of December 31, 1980 are practically the same with those listed in the safe deposit register of Spinus Foundation as of December 31, 1981. Under the circumstances, it is certain that the Spinus Foundation is the beneficial successor of the Valamo Foundation. 41. On September 6, 1982, there was a written instruction from Spinus Foundation to SKA to close its Swiss Franc account and transfer the balance to Avertina Foundation. In July/August, 1982, several transfers from the foundation's German marks and US dollar accounts were made to Avertina Category CAR totaling DM 29.5-M and $58-M, respectively. Moreover, a comparison of the list of securities of the Spinus Foundation as of February 3, 1982 with the safe deposit slips of the Avertina Foundation Category CAR as of August 19, 1982 shows that all the securities of Spinus were transferred to Avertina. J. TRINIDAD-RAYBY-PALMY FOUNDATION ACCOUNTS 42. The Trinidad Foundation was organized on August 26, 1970 in Vaduz with C.W. Fessler and E. Scheller of SKA and Dr. Otto Tondury as the foundation's directors. Imelda issued a written mandate to establish the foundation to Markus Geel on August 26, 1970. The regulations as well as the agreement, both dated August 28, 1970 were likewise signed by Imelda. Imelda was named the first beneficiary and her children Imelda (Imee), Ferdinand, Jr. (Bongbong) and, Irene were named as equal second beneficiaries.

43. Rayby Foundation was established on June 22, 1973 in Vaduz with Fessler, Scheller and Ritter as members of the board of directors. Imelda issued a written mandate to Dr. Theo Bertheau to establish the foundation with a note that the foundation's capitalization as well as the cost of establishing it be debited against the account of Trinidad Foundation. Imelda was named the first and only beneficiary of Rayby foundation. According to written information from SKA dated November 28, 1988, Imelda apparently had the intention in 1973 to transfer part of the assets of Trinidad Foundation to another foundation, thus the establishment of Rayby Foundation. However, transfer of assets never took place. On March 10, 1981, Imelda issued a written order to transfer all the assets of Rayby Foundation to Trinidad Foundation and to subsequently liquidate Rayby. On the same date, she issued a written order to the board of Trinidad to dissolve the foundation and transfer all its assets to Bank Hofmann in favor of Fides Trust Co. Under the account "Reference Dido," Rayby was dissolved on April 6, 1981 and Trinidad was liquidated on August 3, 1981. 44. The PALMY FOUNDATION was established on May 13, 1981 in Vaduz with Dr. Ivo Beck and Limag Management, a wholly-owned subsidiary of Fides Trust Co, as members of the Foundation's Board of Directors. The account was officially opened with the SKA on September 10, 1981. The beneficial owner was not made known to the bank since Fides Trust Co. acted as fiduciary. However, when one compares the listing of securities in the safe deposit register of Trinidad Foundation as of December 31,1980 with that of the Palmy Foundation as of December 31, 1980, one can clearly see that practically the same securities were listed. Under the circumstances, it is certain that the Palmy Foundation is the beneficial successor of the Trinidad Foundation. 45. As of December 31, 1989, the ending balance of the bank accounts of Palmy Foundation under General Account No. 391528 is $17,214,432.00. 46. Latest documents received from Swiss Authorities included a declaration signed by Dr. Ivo Beck stating that the beneficial owner of Palmy Foundation is Imelda. Another document signed by Raber shows that the said Palmy Foundation is owned by "Marcos Familie". K. ROSALYS-AGUAMINA FOUNDATION ACCOUNTS 47. Rosalys Foundation was established in 1971 with FM as the beneficiary. Its Articles of Incorporation was executed on September 24, 1971 and its By-Laws on October 3, 1971. This foundation maintained several accounts with Swiss Bank Corporation (SBC) under the general account 51960 where most of the bribe monies from Japanese suppliers were hidden. 48. On December 19, 1985, Rosalys Foundation was liquidated and all its assets were transferred to Aguamina Corporation's (Panama) Account No. 53300 with SBC. The ownership by Aguamina Corporation of Account No. 53300 is evidenced by an opening account documents from the bank. J. Christinaz and R.L. Rossier, First Vice-President and Senior Vice President, respectively, of SBC, Geneva issued a declaration dated September 3, 1991 stating that the bylaws dated October 3, 1971 governing Rosalys Foundation was the same by-law applied to Aguamina Corporation Account No. 53300. They further confirmed that no change of beneficial owner was involved while transferring the assets of Rosalys to Aguamina. Hence, FM remains the beneficiary of Aguamina Corporation Account No. 53300. As of August 30, 1991, the ending balance of Account No. 53300 amounted to $80,566,483.00. L. MALER FOUNDATION ACCOUNTS 49. Maler was first created as an establishment. A statement of its rules and regulations was found among Malacaang documents. It stated, among others, that 50% of the Company's assets will be for sole and full right disposal of FM and Imelda during their lifetime, which the remaining 50% will be divided in equal parts among their children. Another Malacaang document dated October 19,1968 and signed by Ferdinand and Imelda pertains to the appointment of Dr. Andre Barbey and Jean Louis Sunier as attorneys of the company and as administrator and manager of all assets held by the company. The Marcos couple, also mentioned in the said document that they bought the Maler Establishment from SBC, Geneva. On the same date, FM and Imelda issued a letter addressed to Maler Establishment, stating that all instructions to be transmitted with regard to Maler will be signed with the word "JOHN LEWIS". This word will have the same value as the couple's own personal signature. The letter was signed by FM and Imelda in their signatures and as John Lewis. 50. Maler Establishment opened and maintained bank accounts with SBC, Geneva. The opening bank documents were signed by Dr. Barbey and Mr. Sunnier as authorized signatories. 51. On November 17, 1981, it became necessary to transform Maler Establishment into a foundation. Likewise, the attorneys were changed to Michael Amaudruz, et. al. However, administration of the assets was left to SBC. The articles of incorporation of Maler Foundation registered on November 17, 1981 appear to be the same articles applied to Maler Establishment. On February 28, 1984, Maler Foundation cancelled the power of attorney for the management of its assets in favor of SBC and transferred such power to Sustrust Investment Co., S.A. 52. As of June 6, 1991, the ending balance of Maler Foundation's Account Nos. 254,508 BT and 98,929 NY amount SF 9,083,567 and SG 16,195,258, respectively, for a total of SF 25,278,825.00. GM only until December 31, 1980. This account was opened by Maler when it was still an establishment which was subsequently transformed into a foundation. 53. All the five (5) group accounts in the over-all flow chart have a total balance of about Three Hundred Fifty Six Million Dollars ($356,000,000.00) as shown by Annex "R-5" hereto attached as integral part hereof. xxx x x x.27 Respondents Imelda R. Marcos, Maria Imelda M. Manotoc, Irene M. Araneta and Ferdinand Marcos, Jr., in their answer, stated the following: xxx xxx xxx 4. Respondents ADMIT paragraphs 3 and 4 of the Petition. 5. Respondents specifically deny paragraph 5 of the Petition in so far as it states that summons and other court processes may be served on Respondent Imelda R. Marcos at the stated address the truth of the matter being that

Respondent Imelda R. Marcos may be served with summons and other processes at No. 10-B Bel Air Condominium 5022 P. Burgos Street, Makati, Metro Manila, and ADMIT the rest. xxx xxx xxx 10. Respondents ADMIT paragraph 11 of the Petition. 11. Respondents specifically DENY paragraph 12 of the Petition for lack of knowledge sufficient to form a belief as to the truth of the allegation since Respondents were not privy to the transactions and that they cannot remember exactly the truth as to the matters alleged. 12. Respondents specifically DENY paragraph 13 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs and Balance Sheet. 13. Respondents specifically DENY paragraph 14 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs. 14. Respondents specifically DENY paragraph 15 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs. 15. Respondents specifically DENY paragraph 16 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs. 16. Respondents specifically DENY paragraph 17 of the Petition insofar as it attributes willful duplicity on the part of the late President Marcos, for being false, the same being pure conclusions based on pure assumption and not allegations of fact; and specifically DENY the rest for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs or the attachments thereto. 17. Respondents specifically DENY paragraph 18 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs. 18. Respondents specifically DENY paragraph 19 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs and that they are not privy to the activities of the BIR. 19. Respondents specifically DENY paragraph 20 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs. 20. Respondents specifically DENY paragraph 21 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs. 21. Respondents specifically DENY paragraph 22 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents cannot remember with exactitude the contents of the alleged ITRs. 22. Respondents specifically DENY paragraph 23 insofar as it alleges that Respondents clandestinely stashed the country's wealth in Switzerland and hid the same under layers and layers of foundation and corporate entities for being false, the truth being that Respondents aforesaid properties were lawfully acquired. 23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28, 29 and 30 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since Respondents were not privy to the transactions regarding the alleged Azio-Verso-Vibur Foundation accounts, except that as to Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfully acquired. 24. Respondents specifically DENY paragraphs 31, 32, 33, 34, 35, 36,37, 38, 39, 40, and 41 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegations since Respondents are not privy to the transactions and as to such transaction they were privy to they cannot remember with exactitude the same having occurred a long time ago, except that as to Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfully acquired. 25. Respondents specifically DENY paragraphs 42, 43, 44, 45, and 46, of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegations since Respondents were not privy to the transactions and as to such transaction they were privy to they cannot remember with exactitude the same having occurred a long time ago, except that as to Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfully acquired. 26. Respondents specifically DENY paragraphs 49, 50, 51 and 52, of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegations since Respondents were not privy to the transactions and as to such transaction they were privy to they cannot remember with exactitude the same having occurred a long time ago, except that as to Respondent Imelda R. Marcos she specifically remembers that the funds involved were lawfully acquired. Upon careful perusal of the foregoing, the Court finds that respondent Mrs. Marcos and the Marcos children indubitably failed to tender genuine issues in their answer to the petition for forfeiture. A genuine issue is an issue of fact which calls for the presentation of evidence as distinguished from an issue which is fictitious and contrived, set up in bad faith or patently lacking in substance so as not to constitute a genuine issue for trial. Respondents' defenses of "lack of knowledge for lack of privity" or

"(inability to) recall because it happened a long time ago" or, on the part of Mrs. Marcos, that "the funds were lawfully acquired" are fully insufficient to tender genuine issues. Respondent Marcoses' defenses were a sham and evidently calibrated to compound and confuse the issues. The following pleadings filed by respondent Marcoses are replete with indications of a spurious defense: (a) Respondents' Answer dated October 18, 1993; (b) Pre-trial Brief dated October 4, 1999 of Mrs. Marcos, Supplemental Pre-trial Brief dated October 19, 1999 of Ferdinand, Jr. and Mrs. Imee Marcos-Manotoc adopting the pre-trial brief of Mrs. Marcos, and Manifestation dated October 19, 1999 of Irene Marcos-Araneta adopting the pre-trial briefs of her co- respondents; (c) Opposition to Motion for Summary Judgment dated March 21, 2000, filed by Mrs. Marcos which the other respondents (Marcos children) adopted; (d) Demurrer to Evidence dated May 2, 2000 filed by Mrs. Marcos and adopted by the Marcos children; (e) Motion for Reconsideration dated September 26, 2000 filed by Mrs. Marcos; Motion for Reconsideration dated October 5, 2000 jointly filed by Mrs. Manotoc and Ferdinand, Jr., and Supplemental Motion for Reconsideration dated October 9, 2000 likewise jointly filed by Mrs. Manotoc and Ferdinand, Jr.; (f) Memorandum dated December 12, 2000 of Mrs. Marcos and Memorandum dated December 17, 2000 of the Marcos children; (g) Manifestation dated May 26, 1998; and (h) General/Supplemental Agreement dated December 23, 1993. An examination of the foregoing pleadings is in order. Respondents' Answer dated October 18, 1993. In their answer, respondents failed to specifically deny each and every allegation contained in the petition for forfeiture in the manner required by the rules. All they gave were stock answers like "they have no sufficient knowledge" or "they could not recall because it happened a long time ago," and, as to Mrs. Marcos, "the funds were lawfully acquired," without stating the basis of such assertions. Section 10, Rule 8 of the 1997 Rules of Civil Procedure, provides: A defendant must specify each material allegation of fact the truth of which he does not admit and, whenever practicable, shall set forth the substance of the matters upon which he relies to support his denial. Where a defendant desires to deny only a part of an averment, he shall specify so much of it as is true and material and shall deny the remainder. Where a defendant is without knowledge or information sufficient to form a belief as to the truth of a material averment made in the complaint, he shall so state, and this shall have the effect of a denial.28 The purpose of requiring respondents to make a specific denial is to make them disclose facts which will disprove the allegations of petitioner at the trial, together with the matters they rely upon in support of such denial. Our jurisdiction adheres to this rule to avoid and prevent unnecessary expenses and waste of time by compelling both parties to lay their cards on the table, thus reducing the controversy to its true terms. As explained in Alonso vs. Villamor,29 A litigation is not a game of technicalities in which one, more deeply schooled and skilled in the subtle art of movement and position, entraps and destroys the other. It is rather a contest in which each contending party fully and fairly lays before the court the facts in issue and then, brushing aside as wholly trivial and indecisive all imperfections of form and technicalities of procedure, asks that justice be done upon the merits. Lawsuits, unlike duels, are not to be won by a rapier's thrust. On the part of Mrs. Marcos, she claimed that the funds were lawfully acquired. However, she failed to particularly state the ultimate facts surrounding the lawful manner or mode of acquisition of the subject funds. Simply put, she merely stated in her answer with the other respondents that the funds were "lawfully acquired" without detailing how exactly these funds were supposedly acquired legally by them. Even in this case before us, her assertion that the funds were lawfully acquired remains bare and unaccompanied by any factual support which can prove, by the presentation of evidence at a hearing, that indeed the funds were acquired legitimately by the Marcos family. Respondents' denials in their answer at the Sandiganbayan were based on their alleged lack of knowledge or information sufficient to form a belief as to the truth of the allegations of the petition. It is true that one of the modes of specific denial under the rules is a denial through a statement that the defendant is without knowledge or information sufficient to form a belief as to the truth of the material averment in the complaint. The question, however, is whether the kind of denial in respondents' answer qualifies as the specific denial called for by the rules. We do not think so. In Morales vs. Court of Appeals,30 this Court ruled that if an allegation directly and specifically charges a party with having done, performed or committed a particular act which the latter did not in fact do, perform or commit, a categorical and express denial must be made. Here, despite the serious and specific allegations against them, the Marcoses responded by simply saying that they had no knowledge or information sufficient to form a belief as to the truth of such allegations. Such a general, self-serving claim of ignorance of the facts alleged in the petition for forfeiture was insufficient to raise an issue. Respondent Marcoses should have positively stated how it was that they were supposedly ignorant of the facts alleged.31 To elucidate, the allegation of petitioner Republic in paragraph 23 of the petition for forfeiture stated: 23. The following presentation very clearly and overwhelmingly show in detail how both respondents clandestinely stashed away the country's wealth to Switzerland and hid the same under layers upon layers of foundations and other corporate entities to prevent its detection. Through their dummies/nominees, fronts or agents who formed those foundations or corporate entities, they opened and maintained numerous bank accounts. But due to the difficulty if not the impossibility of detecting and documenting all those secret accounts as well as the enormity of the deposits therein hidden, the following presentation is confined to five identified accounts groups, with balances amounting to about $356-M with a reservation for the filing of a supplemental or separate forfeiture complaint should the need arise. 32

Respondents' lame denial of the aforesaid allegation was: 22. Respondents specifically DENY paragraph 23 insofar as it alleges that Respondents clandestinely stashed the country's wealth in Switzerland and hid the same under layers and layers of foundations and corporate entities for being false, the truth being that Respondents' aforesaid properties were lawfully acquired.33 Evidently, this particular denial had the earmark of what is called in the law on pleadings as a negative pregnant, that is, a denial pregnant with the admission of the substantial facts in the pleading responded to which are not squarely denied. It was in effect an admission of the averments it was directed at.34 Stated otherwise, a negative pregnant is a form of negative expression which carries with it an affirmation or at least an implication of some kind favorable to the adverse party. It is a denial pregnant with an admission of the substantial facts alleged in the pleading. Where a fact is alleged with qualifying or modifying language and the words of the allegation as so qualified or modified are literally denied, has been held that the qualifying circumstances alone are denied while the fact itself is admitted.35 In the instant case, the material allegations in paragraph 23 of the said petition were not specifically denied by respondents in paragraph 22 of their answer. The denial contained in paragraph 22 of the answer was focused on the averment in paragraph 23 of the petition for forfeiture that "Respondents clandestinely stashed the country's wealth in Switzerland and hid the same under layers and layers of foundations and corporate entities." Paragraph 22 of the respondents' answer was thus a denial pregnant with admissions of the following substantial facts: (1) the Swiss bank deposits existed and (2) that the estimated sum thereof was US$356 million as of December, 1990. Therefore, the allegations in the petition for forfeiture on the existence of the Swiss bank deposits in the sum of about US$356 million, not having been specifically denied by respondents in their answer, were deemed admitted by them pursuant to Section 11, Rule 8 of the 1997 Revised Rules on Civil Procedure: Material averment in the complaint, xxx shall be deemed admitted when not specifically denied. xxx. 36 By the same token, the following unsupported denials of respondents in their answer were pregnant with admissions of the substantial facts alleged in the Republic's petition for forfeiture: 23. Respondents specifically DENY paragraphs 24, 25, 26, 27, 28, 29 and 30 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegation since respondents were not privy to the transactions regarding the alleged Azio-Verso-Vibur Foundation accounts, except that, as to respondent Imelda R. Marcos, she specifically remembers that the funds involved were lawfully acquired. 24. Respondents specifically DENY paragraphs 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41 of the Petition for lack of knowledge or information sufficient to form a belief as to the truth of the allegations since respondents were not privy to the transactions and as to such transactions they were privy to, they cannot remember with exactitude the same having occurred a long time ago, except as to respondent Imelda R. Marcos, she specifically remembers that the funds involved were lawfully acquired. 25. Respondents specifically DENY paragraphs 42, 43, 45, and 46 of the petition for lack of knowledge or information sufficient to from a belief as to the truth of the allegations since respondents were not privy to the transactions and as to such transaction they were privy to, they cannot remember with exactitude, the same having occurred a long time ago, except that as to respondent Imelda R. Marcos, she specifically remembers that the funds involved were lawfully acquired. 26. Respondents specifically DENY paragraphs 49, 50, 51 and 52 of the petition for lack of knowledge and information sufficient to form a belief as to the truth of the allegations since respondents were not privy to the transactions and as to such transaction they were privy to they cannot remember with exactitude the same having occurred a long time ago, except that as to respondent Imelda R. Marcos, she specifically remembers that the funds involved were lawfully acquired. The matters referred to in paragraphs 23 to 26 of the respondents' answer pertained to the creation of five groups of accounts as well as their respective ending balances and attached documents alleged in paragraphs 24 to 52 of the Republic's petition for forfeiture. Respondent Imelda R. Marcos never specifically denied the existence of the Swiss funds. Her claim that "the funds involved were lawfully acquired" was an acknowledgment on her part of the existence of said deposits. This only reinforced her earlier admission of the allegation in paragraph 23 of the petition for forfeiture regarding the existence of the US$356 million Swiss bank deposits. The allegations in paragraphs 4737 and 4838 of the petition for forfeiture referring to the creation and amount of the deposits of the Rosalys-Aguamina Foundation as well as the averment in paragraph 52-a39 of the said petition with respect to the sum of the Swiss bank deposits estimated to be US$356 million were again not specifically denied by respondents in their answer. The respondents did not at all respond to the issues raised in these paragraphs and the existence, nature and amount of the Swiss funds were therefore deemed admitted by them. As held in Galofa vs. Nee Bon Sing,40 if a defendant's denial is a negative pregnant, it is equivalent to an admission. Moreover, respondents' denial of the allegations in the petition for forfeiture "for lack of knowledge or information sufficient to form a belief as to the truth of the allegations since respondents were not privy to the transactions" was just a pretense. Mrs. Marcos' privity to the transactions was in fact evident from her signatures on some of the vital documents41 attached to the petition for forfeiture which Mrs. Marcos failed to specifically deny as required by the rules. 42 It is worthy to note that the pertinent documents attached to the petition for forfeiture were even signed personally by respondent Mrs. Marcos and her late husband, Ferdinand E. Marcos, indicating that said documents were within their knowledge. As correctly pointed out by Sandiganbayan Justice Francisco Villaruz, Jr. in his dissenting opinion: The pattern of: 1) creating foundations, 2) use of pseudonyms and dummies, 3) approving regulations of the Foundations for the distribution of capital and income of the Foundations to the First and Second beneficiary (who are no other than FM and his family), 4) opening of bank accounts for the Foundations, 5) changing the names of the

Foundations, 6) transferring funds and assets of the Foundations to other Foundations or Fides Trust, 7) liquidation of the Foundations as substantiated by the Annexes U to U-168, Petition [for forfeiture] strongly indicate that FM and/or Imelda were the real owners of the assets deposited in the Swiss banks, using the Foundations as dummies. 43 How could respondents therefore claim lack of sufficient knowledge or information regarding the existence of the Swiss bank deposits and the creation of five groups of accounts when Mrs. Marcos and her late husband personally masterminded and participated in the formation and control of said foundations? This is a fact respondent Marcoses were never able to explain. Not only that. Respondents' answer also technically admitted the genuineness and due execution of the Income Tax Returns (ITRs) and the balance sheets of the late Ferdinand E. Marcos and Imelda R. Marcos attached to the petition for forfeiture, as well as the veracity of the contents thereof. The answer again premised its denials of said ITRs and balance sheets on the ground of lack of knowledge or information sufficient to form a belief as to the truth of the contents thereof. Petitioner correctly points out that respondents' denial was not really grounded on lack of knowledge or information sufficient to form a belief but was based on lack of recollection. By reviewing their own records, respondent Marcoses could have easily determined the genuineness and due execution of the ITRs and the balance sheets. They also had the means and opportunity of verifying the same from the records of the BIR and the Office of the President. They did not. When matters regarding which respondents claim to have no knowledge or information sufficient to form a belief are plainly and necessarily within their knowledge, their alleged ignorance or lack of information will not be considered a specific denial. 44 An unexplained denial of information within the control of the pleader, or is readily accessible to him, is evasive and is insufficient to constitute an effective denial.45 The form of denial adopted by respondents must be availed of with sincerity and in good faith, and certainly not for the purpose of confusing the adverse party as to what allegations of the petition are really being challenged; nor should it be made for the purpose of delay.46 In the instant case, the Marcoses did not only present unsubstantiated assertions but in truth attempted to mislead and deceive this Court by presenting an obviously contrived defense. Simply put, a profession of ignorance about a fact which is patently and necessarily within the pleader's knowledge or means of knowing is as ineffective as no denial at all.47 Respondents' ineffective denial thus failed to properly tender an issue and the averments contained in the petition for forfeiture were deemed judicially admitted by them. As held in J.P. Juan & Sons, Inc. vs. Lianga Industries, Inc.: Its "specific denial" of the material allegation of the petition without setting forth the substance of the matters relied upon to support its general denial, when such matters were plainly within its knowledge and it could not logically pretend ignorance as to the same, therefore, failed to properly tender on issue.48 Thus, the general denial of the Marcos children of the allegations in the petition for forfeiture "for lack of knowledge or information sufficient to form a belief as to the truth of the allegations since they were not privy to the transactions" cannot rightfully be accepted as a defense because they are the legal heirs and successors-in-interest of Ferdinand E. Marcos and are therefore bound by the acts of their father vis-a-vis the Swiss funds. PRE-TRIAL BRIEF DATED OCTOBER 18, 1993 The pre-trial brief of Mrs. Marcos was adopted by the three Marcos children. In said brief, Mrs. Marcos stressed that the funds involved were lawfully acquired. But, as in their answer, they failed to state and substantiate how these funds were acquired lawfully. They failed to present and attach even a single document that would show and prove the truth of their allegations. Section 6, Rule 18 of the 1997 Rules of Civil Procedure provides: The parties shall file with the court and serve on the adverse party, x x x their respective pre-trial briefs which shall contain, among others: xxx (d) the documents or exhibits to be presented, stating the purpose thereof; xxx (f) the number and names of the witnesses, and the substance of their respective testimonies.49 It is unquestionably within the court's power to require the parties to submit their pre-trial briefs and to state the number of witnesses intended to be called to the stand, and a brief summary of the evidence each of them is expected to give as well as to disclose the number of documents to be submitted with a description of the nature of each. The tenor and character of the testimony of the witnesses and of the documents to be deduced at the trial thus made known, in addition to the particular issues of fact and law, it becomes apparent if genuine issues are being put forward necessitating the holding of a trial. Likewise, the parties are obliged not only to make a formal identification and specification of the issues and their proofs, and to put these matters in writing and submit them to the court within the specified period for the prompt disposition of the action. 50 The pre-trial brief of Mrs. Marcos, as subsequently adopted by respondent Marcos children, merely stated: xxx WITNESSES 4.1 Respondent Imelda will present herself as a witness and reserves the right to present additional witnesses as may be necessary in the course of the trial. xxx DOCUMENTARY EVIDENCE 5.1 Respondent Imelda reserves the right to present and introduce in evidence documents as may be necessary in the course of the trial. Mrs. Marcos did not enumerate and describe the documents constituting her evidence. Neither the names of witnesses nor the nature of their testimony was stated. What alone appeared certain was the testimony of Mrs. Marcos only who in fact had previously claimed ignorance and lack of knowledge. And even then, the substance of her testimony, as required by the rules,

was not made known either. Such cunning tactics of respondents are totally unacceptable to this Court. We hold that, since no genuine issue was raised, the case became ripe for summary judgment. OPPOSITION TO MOTION FOR SUMMARY JUDGMENT DATED MARCH 21, 2000 The opposition filed by Mrs. Marcos to the motion for summary judgment dated March 21, 2000 of petitioner Republic was merely adopted by the Marcos children as their own opposition to the said motion. However, it was again not accompanied by affidavits, depositions or admissions as required by Section 3, Rule 35 of the 1997 Rules on Civil Procedure: x x x The adverse party may serve opposing affidavits, depositions, or admissions at least three (3) days before hearing. After hearing, the judgment sought shall be rendered forthwith if the pleadings, supporting affidavits, depositions, and admissions on file, show that, except as to the amount of damages, there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.51 The absence of opposing affidavits, depositions and admissions to contradict the sworn declarations in the Republic's motion only demonstrated that the averments of such opposition were not genuine and therefore unworthy of belief. Demurrer to Evidence dated May 2, 2000;52 Motions for Reconsideration;53 and Memoranda of Mrs. Marcos and the Marcos children54 All these pleadings again contained no allegations of facts showing their lawful acquisition of the funds. Once more, respondents merely made general denials without alleging facts which would have been admissible in evidence at the hearing, thereby failing to raise genuine issues of fact. Mrs. Marcos insists in her memorandum dated October 21, 2002 that, during the pre-trial, her counsel stated that his client was just a beneficiary of the funds, contrary to petitioner Republic's allegation that Mrs. Marcos disclaimed ownership of or interest in the funds. This is yet another indication that respondents presented a fictitious defense because, during the pre-trial, Mrs. Marcos and the Marcos children denied ownership of or interest in the Swiss funds: PJ Garchitorena: Make of record that as far as Imelda Marcos is concerned through the statement of Atty. Armando M. Marcelo that the US$360 million more or less subject matter of the instant lawsuit as allegedly obtained from the various Swiss Foundations do not belong to the estate of Marcos or to Imelda Marcos herself. That's your statement of facts? Atty. MARCELO: Yes, Your Honor. PJ Garchitorena: That's it. Okay. Counsel for Manotoc and Manotoc, Jr. What is your point here? Does the estate of Marcos own anything of the $360 million subject of this case. Atty. TECSON: We joined the Manifestation of Counsel. PJ Garchitorena: You do not own anything? Atty. TECSON: Yes, Your Honor. PJ Garchitorena: Counsel for Irene Araneta? Atty. SISON: I join the position taken by my other compaeros here, Your Honor. xxx Atty. SISON: Irene Araneta as heir do (sic) not own any of the amount, Your Honor.55 We are convinced that the strategy of respondent Marcoses was to confuse petitioner Republic as to what facts they would prove or what issues they intended to pose for the court's resolution. There is no doubt in our mind that they were leading petitioner Republic, and now this Court, to perplexity, if not trying to drag this forfeiture case to eternity. Manifestation dated May 26, 1998 filed by MRS. Marcos; General/Supplemental Compromise Agreement dated December 28, 1993 These pleadings of respondent Marcoses presented nothing but feigned defenses. In their earlier pleadings, respondents alleged either that they had no knowledge of the existence of the Swiss deposits or that they could no longer remember anything as it happened a long time ago. As to Mrs. Marcos, she remembered that it was lawfully acquired. In her Manifestation dated May 26, 1998, Mrs. Marcos stated that: COMES NOW undersigned counsel for respondent Imelda R. Marcos, and before this Honorable Court, most respectfully manifests: That respondent Imelda R, Marcos owns 90% of the subject matter of the above-entitled case, being the sole beneficiary of the dollar deposits in the name of the various foundations alleged in the case; That in fact only 10% of the subject matter in the above-entitled case belongs to the estate of the late President Ferdinand E. Marcos.

In the Compromise/Supplemental Agreements, respondent Marcoses sought to implement the agreed distribution of the Marcos assets, including the Swiss deposits. This was, to us, an unequivocal admission of ownership by the Marcoses of the said deposits. But, as already pointed out, during the pre-trial conference, respondent Marcoses denied knowledge as well as ownership of the Swiss funds. Anyway we look at it, respondent Marcoses have put forth no real defense. The "facts" pleaded by respondents, while ostensibly raising important questions or issues of fact, in reality comprised mere verbiage that was evidently wanting in substance and constituted no genuine issues for trial. We therefore rule that, under the circumstances, summary judgment is proper. In fact, it is the law itself which determines when summary judgment is called for. Under the rules, summary judgment is appropriate when there are no genuine issues of fact requiring the presentation of evidence in a full-blown trial. Even if on their face the pleadings appear to raise issue, if the affidavits, depositions and admissions show that such issues are not genuine, then summary judgment as prescribed by the rules must ensue as a matter of law. 56 In sum, mere denials, if unaccompanied by any fact which will be admissible in evidence at a hearing, are not sufficient to raise genuine issues of fact and will not defeat a motion for summary judgment.57 A summary judgment is one granted upon motion of a party for an expeditious settlement of the case, it appearing from the pleadings, depositions, admissions and affidavits that there are no important questions or issues of fact posed and, therefore, the movant is entitled to a judgment as a matter of law. A motion for summary judgment is premised on the assumption that the issues presented need not be tried either because these are patently devoid of substance or that there is no genuine issue as to any pertinent fact. It is a method sanctioned by the Rules of Court for the prompt disposition of a civil action where there exists no serious controversy. 58 Summary judgment is a procedural device for the prompt disposition of actions in which the pleadings raise only a legal issue, not a genuine issue as to any material fact. The theory of summary judgment is that, although an answer may on its face appear to tender issues requiring trial, if it is established by affidavits, depositions or admissions that those issues are not genuine but fictitious, the Court is justified in dispensing with the trial and rendering summary judgment for petitioner.59 In the various annexes to the petition for forfeiture, petitioner Republic attached sworn statements of witnesses who had personal knowledge of the Marcoses' participation in the illegal acquisition of funds deposited in the Swiss accounts under the names of five groups or foundations. These sworn statements substantiated the ill-gotten nature of the Swiss bank deposits. In their answer and other subsequent pleadings, however, the Marcoses merely made general denials of the allegations against them without stating facts admissible in evidence at the hearing, thereby failing to raise any genuine issues of fact. Under these circumstances, a trial would have served no purpose at all and would have been totally unnecessary, thus justifying a summary judgment on the petition for forfeiture. There were no opposing affidavits to contradict the sworn declarations of the witnesses of petitioner Republic, leading to the inescapable conclusion that the matters raised in the Marcoses' answer were false. Time and again, this Court has encountered cases like this which are either only half-heartedly defended or, if the semblance of a defense is interposed at all, it is only to delay disposition and gain time. It is certainly not in the interest of justice to allow respondent Marcoses to avail of the appellate remedies accorded by the Rules of Court to litigants in good faith, to the prejudice of the Republic and ultimately of the Filipino people. From the beginning, a candid demonstration of respondents' good faith should have been made to the court below. Without the deceptive reasoning and argumentation, this protracted litigation could have ended a long time ago. Since 1991, when the petition for forfeiture was first filed, up to the present, all respondents have offered are foxy responses like "lack of sufficient knowledge or lack of privity" or "they cannot recall because it happened a long time ago" or, as to Mrs. Marcos, "the funds were lawfully acquired." But, whenever it suits them, they also claim ownership of 90% of the funds and allege that only 10% belongs to the Marcos estate. It has been an incredible charade from beginning to end. In the hope of convincing this Court to rule otherwise, respondents Maria Imelda Marcos-Manotoc and Ferdinand R. Marcos Jr. contend that "by its positive acts and express admissions prior to filing the motion for summary judgment on March 10, 2000, petitioner Republic had bound itself to go to trial on the basis of existing issues. Thus, it had legally waived whatever right it had to move for summary judgment."60 We do not think so. The alleged positive acts and express admissions of the petitioner did not preclude it from filing a motion for summary judgment. Rule 35 of the 1997 Rules of Civil Procedure provides: Rule 35 Summary Judgment Section 1. Summary judgment for claimant. - A party seeking to recover upon a claim, counterclaim, or cross-claim or to obtain a declaratory relief may, at any time after the pleading in answer thereto has been served, move with supporting affidavits, depositions or admissions for a summary judgment in his favor upon all or any part thereof. Section 2. Summary judgment for defending party. - A party against whom a claim, counterclaim, or cross-claim is asserted or a declaratory relief is sought may, at any time, move with supporting affidavits, depositions or admissions for a summary judgment in his favor as to all or any part thereof. (Emphasis ours)61 Under the rule, the plaintiff can move for summary judgment "at any time after the pleading in answer thereto (i.e., in answer to the claim, counterclaim or cross-claim) has been served." No fixed reglementary period is provided by the Rules. How else does one construe the phrase "any time after the answer has been served?" This issue is actually one of first impression. No local jurisprudence or authoritative work has touched upon this matter. This being so, an examination of foreign laws and jurisprudence, particularly those of the United States where many of our laws and rules were copied, is in order.

Rule 56 of the Federal Rules of Civil Procedure provides that a party seeking to recover upon a claim, counterclaim or crossclaim may move for summary judgment at any time after the expiration of 20 days from the commencement of the action or after service of a motion for summary judgment by the adverse party, and that a party against whom a claim, counterclaim or crossclaim is asserted may move for summary judgment at any time. However, some rules, particularly Rule 113 of the Rules of Civil Practice of New York, specifically provide that a motion for summary judgment may not be made until issues have been joined, that is, only after an answer has been served.62 Under said rule, after issues have been joined, the motion for summary judgment may be madeat any stage of the litigation.63 No fixed prescriptive period is provided. Like Rule 113 of the Rules of Civil Practice of New York, our rules also provide that a motion for summary judgment may not be made until issues have been joined, meaning, the plaintiff has to wait for the answer before he can move for summary judgment.64 And like the New York rules, ours do not provide for a fixed reglementary period within which to move for summary judgment. This being so, the New York Supreme Court's interpretation of Rule 113 of the Rules of Civil Practice can be applied by analogy to the interpretation of Section 1, Rule 35, of our 1997 Rules of Civil Procedure. Under the New York rule, after the issues have been joined, the motion for summary judgment may be made at any stage of the litigation. And what exactly does the phrase "at any stage of the litigation" mean? In Ecker vs. Muzysh,65 the New York Supreme Court ruled: "PER CURIAM. Plaintiff introduced her evidence and the defendants rested on the case made by the plaintiff. The case was submitted. Owing to the serious illness of the trial justice, a decision was not rendered within sixty days after the final adjournment of the term at which the case was tried. With the approval of the trial justice, the plaintiff moved for a new trial under Section 442 of the Civil Practice Act. The plaintiff also moved for summary judgment under Rule 113 of the Rules of Civil Practice. The motion was opposed mainly on the ground that, by proceeding to trial, the plaintiff had waived her right to summary judgment and that the answer and the opposing affidavits raised triable issues. The amount due and unpaid under the contract is not in dispute. The Special Term granted both motions and the defendants have appealed. The Special Term properly held that the answer and the opposing affidavits raised no triable issue. Rule 113 of the Rules of Civil Practice and the Civil Practice Act prescribe no limitation as to the time when a motion for summary judgment must be made. The object of Rule 113 is to empower the court to summarily determine whether or not a bona fide issue exists between the parties, and there is no limitation on the power of the court to make such a determination at any stage of the litigation." (emphasis ours) On the basis of the aforequoted disquisition, "any stage of the litigation" means that "even if the plaintiff has proceeded to trial, this does not preclude him from thereafter moving for summary judgment."66 In the case at bar, petitioner moved for summary judgment after pre-trial and before its scheduled date for presentation of evidence. Respondent Marcoses argue that, by agreeing to proceed to trial during the pre-trial conference, petitioner "waived" its right to summary judgment. This argument must fail in the light of the New York Supreme Court ruling which we apply by analogy to this case. In Ecker,67 the defendant opposed the motion for summary judgment on a ground similar to that raised by the Marcoses, that is, "that plaintiff had waived her right to summary judgment" by her act of proceeding to trial. If, as correctly ruled by the New York court, plaintiff was allowed to move for summary judgment even after trial and submission of the case for resolution, more so should we permit it in the present case where petitioner moved for summary judgment before trial. Therefore, the phrase "anytime after the pleading in answer thereto has been served" in Section 1, Rule 35 of our Rules of Civil Procedure means "at any stage of the litigation." Whenever it becomes evident at any stage of the litigation that no triable issue exists, or that the defenses raised by the defendant(s) are sham or frivolous, plaintiff may move for summary judgment. A contrary interpretation would go against the very objective of the Rule on Summary Judgment which is to "weed out sham claims or defenses thereby avoiding the expense and loss of time involved in a trial."68 In cases with political undertones like the one at bar, adverse parties will often do almost anything to delay the proceedings in the hope that a future administration sympathetic to them might be able to influence the outcome of the case in their favor. This is rank injustice we cannot tolerate. The law looks with disfavor on long, protracted and expensive litigation and encourages the speedy and prompt disposition of cases. That is why the law and the rules provide for a number of devices to ensure the speedy disposition of cases. Summary judgment is one of them. Faithful therefore to the spirit of the law on summary judgment which seeks to avoid unnecessary expense and loss of time in a trial, we hereby rule that petitioner Republic could validly move for summary judgment any time after the respondents' answer was filed or, for that matter, at any subsequent stage of the litigation. The fact that petitioner agreed to proceed to trial did not in any way prevent it from moving for summary judgment, as indeed no genuine issue of fact was ever validly raised by respondent Marcoses. This interpretation conforms with the guiding principle enshrined in Section 6, Rule 1 of the 1997 Rules of Civil Procedure that the "[r]ules should be liberally construed in order to promote their objective of securing a just, speedy and inexpensive disposition of every action and proceeding."69 Respondents further allege that the motion for summary judgment was based on respondents' answer and other documents that had long been in the records of the case. Thus, by the time the motion was filed on March 10, 2000, estoppel by laches had already set in against petitioner. We disagree. Estoppel by laches is the failure or neglect for an unreasonable or unexplained length of time to do that which, by exercising due diligence, could or should have been done earlier, warranting a presumption that the person has abandoned his

right or declined to assert it.70 In effect, therefore, the principle of laches is one of estoppel because "it prevents people who have slept on their rights from prejudicing the rights of third parties who have placed reliance on the inaction of the original parties and their successors-in-interest".71 A careful examination of the records, however, reveals that petitioner was in fact never remiss in pursuing its case against respondent Marcoses through every remedy available to it, including the motion for summary judgment. Petitioner Republic initially filed its motion for summary judgment on October 18, 1996. The motion was denied because of the pending compromise agreement between the Marcoses and petitioner. But during the pre-trial conference, the Marcoses denied ownership of the Swiss funds, prompting petitioner to file another motion for summary judgment now under consideration by this Court. It was the subsequent events that transpired after the answer was filed, therefore, which prevented petitioner from filing the questioned motion. It was definitely not because of neglect or inaction that petitioner filed the (second) motion for summary judgment years after respondents' answer to the petition for forfeiture. In invoking the doctrine of estoppel by laches, respondents must show not only unjustified inaction but also that some unfair injury to them might result unless the action is barred.72 This, respondents failed to bear out. In fact, during the pre-trial conference, the Marcoses disclaimed ownership of the Swiss deposits. Not being the owners, as they claimed, respondents did not have any vested right or interest which could be adversely affected by petitioner's alleged inaction. But even assuming for the sake of argument that laches had already set in, the doctrine of estoppel or laches does not apply when the government sues as a sovereign or asserts governmental rights.73 Nor can estoppel validate an act that contravenes law or public policy.74 As a final point, it must be emphasized that laches is not a mere question of time but is principally a question of the inequity or unfairness of permitting a right or claim to be enforced or asserted.75 Equity demands that petitioner Republic should not be barred from pursuing the people's case against the Marcoses. (2) The Propriety of Forfeiture The matter of summary judgment having been thus settled, the issue of whether or not petitioner Republic was able to prove its case for forfeiture in accordance with the requisites of Sections 2 and 3 of RA 1379 now takes center stage. The law raises the prima facie presumption that a property is unlawfully acquired, hence subject to forfeiture, if its amount or value is manifestly disproportionate to the official salary and other lawful income of the public officer who owns it. Hence, Sections 2 and 6 of RA 137976 provide: xxx xxx Section 2. Filing of petition. Whenever any public officer or employee has acquired during his incumbency an amount or property which is manifestly out of proportion to his salary as such public officer or employee and to his other lawful income and the income from legitimately acquired property, said property shall be presumed prima facie to have been unlawfully acquired. xxx xxx Sec. 6. Judgment If the respondent is unable to show to the satisfaction of the court that he has lawfully acquired the property in question, then the court shall declare such property in question, forfeited in favor of the State, and by virtue of such judgment the property aforesaid shall become the property of the State.Provided, That no judgment shall be rendered within six months before any general election or within three months before any special election. The Court may, in addition, refer this case to the corresponding Executive Department for administrative or criminal action, or both. From the above-quoted provisions of the law, the following facts must be established in order that forfeiture or seizure of the Swiss deposits may be effected: (1) ownership by the public officer of money or property acquired during his incumbency, whether it be in his name or otherwise, and (2) the extent to which the amount of that money or property exceeds, i. e., is grossly disproportionate to, the legitimate income of the public officer. That spouses Ferdinand and Imelda Marcos were public officials during the time material to the instant case was never in dispute. Paragraph 4 of respondent Marcoses' answer categorically admitted the allegations in paragraph 4 of the petition for forfeiture as to the personal circumstances of Ferdinand E. Marcos as a public official who served without interruption as Congressman, Senator, Senate President and President of the Republic of the Philippines from December 1, 1965 to February 25, 1986.77 Likewise, respondents admitted in their answer the contents of paragraph 5 of the petition as to the personal circumstances of Imelda R. Marcos who once served as a member of the Interim Batasang Pambansa from 1978 to 1984 and as Metro Manila Governor, concurrently Minister of Human Settlements, from June 1976 to February 1986. 78 Respondent Mrs. Marcos also admitted in paragraph 10 of her answer the allegations of paragraph 11 of the petition for forfeiture which referred to the accumulated salaries of respondents Ferdinand E. Marcos and Imelda R. Marcos. 79 The combined accumulated salaries of the Marcos couple were reflected in the Certification dated May 27, 1986 issued by then Minister of Budget and Management Alberto Romulo.80 The Certification showed that, from 1966 to 1985, Ferdinand E. Marcos and Imelda R. Marcos had accumulated salaries in the amount of P1,570,000 and P718,750, respectively, or a total of P2,288,750: Ferdinand E. Marcos, as President 1966-1976 at P60,000/year P660,000 1977-1984 1985 at P100,000/year at P110,000/year 800,000 110,000 P1,570,00

Imelda R. Marcos, as Minister June 1976-1985 at P75,000/year P718,000 In addition to their accumulated salaries from 1966 to 1985 are the Marcos couple's combined salaries from January to February 1986 in the amount of P30,833.33. Hence, their total accumulated salaries amounted to P2,319,583.33. Converted to U.S. dollars on the basis of the corresponding peso-dollar exchange rates prevailing during the applicable period when said salaries were received, the total amount had an equivalent value of $304,372.43. The dollar equivalent was arrived at by using the official annual rates of exchange of the Philippine peso and the US dollar from 1965 to 1985 as well as the official monthly rates of exchange in January and February 1986 issued by the Center for Statistical Information of the Bangko Sentral ng Pilipinas. Prescinding from the aforesaid admissions, Section 4, Rule 129 of the Rules of Court provides that: Section 4. Judicial admissions An admission, verbal or written, made by a party in the course of the proceedings in the same case does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made.81 It is settled that judicial admissions may be made: (a) in the pleadings filed by the parties; (b) in the course of the trial either by verbal or written manifestations or stipulations; or (c) in other stages of judicial proceedings, as in the pre-trial of the case.82 Thus, facts pleaded in the petition and answer, as in the case at bar, are deemed admissions of petitioner and respondents, respectively, who are not permitted to contradict them or subsequently take a position contrary to or inconsistent with such admissions.83 The sum of $304,372.43 should be held as the only known lawful income of respondents since they did not file any Statement of Assets and Liabilities (SAL), as required by law, from which their net worth could be determined. Besides, under the 1935 Constitution, Ferdinand E. Marcos as President could not receive "any other emolument from the Government or any of its subdivisions and instrumentalities".84 Likewise, under the 1973 Constitution, Ferdinand E. Marcos as President could "not receive during his tenure any other emolument from the Government or any other source."85 In fact, his management of businesses, like the administration of foundations to accumulate funds, was expressly prohibited under the 1973 Constitution: Article VII, Sec. 4(2) The President and the Vice-President shall not, during their tenure, hold any other office except when otherwise provided in this Constitution, nor may they practice any profession, participate directly or indirectly in the management of any business, or be financially interested directly or indirectly in any contract with, or in any franchise or special privilege granted by the Government or any other subdivision, agency, or instrumentality thereof, including any government owned or controlled corporation. Article VII, Sec. 11 No Member of the National Assembly shall appear as counsel before any court inferior to a court with appellate jurisdiction, x x x. Neither shall he, directly or indirectly, be interested financially in any contract with, or in any franchise or special privilege granted by the Government, or any subdivision, agency, or instrumentality thereof including any government owned or controlled corporation during his term of office. He shall not intervene in any matter before any office of the government for his pecuniary benefit. Article IX, Sec. 7 The Prime Minister and Members of the Cabinet shall be subject to the provision of Section 11, Article VIII hereof and may not appear as counsel before any court or administrative body, or manage any business, or practice any profession, and shall also be subject to such other disqualification as may be provided by law. Their only known lawful income of $304,372.43 can therefore legally and fairly serve as basis for determining the existence of a prima facie case of forfeiture of the Swiss funds. Respondents argue that petitioner was not able to establish a prima facie case for the forfeiture of the Swiss funds since it failed to prove the essential elements under Section 3, paragraphs (c), (d) and (e) of RA 1379. As the Act is a penal statute, its provisions are mandatory and should thus be construed strictly against the petitioner and liberally in favor of respondent Marcoses. We hold that it was not for petitioner to establish the Marcoses' other lawful income or income from legitimately acquired property for the presumption to apply because, as between petitioner and respondents, the latter were in a better position to know if there were such other sources of lawful income. And if indeed there was such other lawful income, respondents should have specifically stated the same in their answer. Insofar as petitioner Republic was concerned, it was enough to specify the known lawful income of respondents. Section 9 of the PCGG Rules and Regulations provides that, in determining prima facie evidence of ill-gotten wealth, the value of the accumulated assets, properties and other material possessions of those covered by Executive Order Nos. 1 and 2 must be out of proportion to the known lawful income of such persons. The respondent Marcos couple did not file any Statement of Assets and Liabilities (SAL) from which their net worth could be determined. Their failure to file their SAL was in itself a violation of law and to allow them to successfully assail the Republic for not presenting their SAL would reward them for their violation of the law. Further, contrary to the claim of respondents, the admissions made by them in their various pleadings and documents were valid. It is of record that respondents judicially admitted that the money deposited with the Swiss banks belonged to them. We agree with petitioner that respondent Marcoses made judicial admissions of their ownership of the subject Swiss bank deposits in their answer, the General/Supplemental Agreements, Mrs. Marcos' Manifestation and Constancia dated May 5, 1999, and the Undertaking dated February 10, 1999. We take note of the fact that the Associate Justices of the Sandiganbayan were unanimous in holding that respondents had made judicial admissions of their ownership of the Swiss funds. In their answer, aside from admitting the existence of the subject funds, respondents likewise admitted ownershipthereof. Paragraph 22 of respondents' answer stated: 22. Respondents specifically DENY PARAGRAPH 23 insofar as it alleges that respondents clandestinely stashed the country's wealth in Switzerland and hid the same under layers and layers of foundations and corporate entities for being false, the truth being that respondents' aforesaid properties were lawfully acquired. (emphasis supplied)

By qualifying their acquisition of the Swiss bank deposits as lawful, respondents unwittingly admitted their ownership thereof. Respondent Mrs. Marcos also admitted ownership of the Swiss bank deposits by failing to deny under oath the genuineness and due execution of certain actionable documents bearing her signature attached to the petition. As discussed earlier, Section 11, Rule 886 of the 1997 Rules of Civil Procedure provides that material averments in the complaint shall be deemed admitted when not specifically denied. The General87 and Supplemental88 Agreements executed by petitioner and respondents on December 28, 1993 further bolstered the claim of petitioner Republic that its case for forfeiture was proven in accordance with the requisites of Sections 2 and 3 of RA 1379. The whereas clause in the General Agreement declared that: WHEREAS, the FIRST PARTY has obtained a judgment from the Swiss Federal Tribunal on December 21, 1990, that the $356 million belongs in principle to the Republic of the Philippines provided certain conditionalities are met, but even after 7 years, the FIRST PARTY has not been able to procure a final judgment of conviction against the PRIVATE PARTY. While the Supplemental Agreement warranted, inter alia, that: In consideration of the foregoing, the parties hereby agree that the PRIVATE PARTY shall be entitled to the equivalent of 25% of the amount that may be eventually withdrawn from said $356 million Swiss deposits. The stipulations set forth in the General and Supplemental Agreements undeniably indicated the manifest intent of respondents to enter into a compromise with petitioner. Corollarily, respondents' willingness to agree to an amicable settlement with the Republic only affirmed their ownership of the Swiss deposits for the simple reason that no person would acquiesce to any concession over such huge dollar deposits if he did not in fact own them. Respondents make much capital of the pronouncement by this Court that the General and Supplemental Agreements were null and void.89 They insist that nothing in those agreements could thus be admitted in evidence against them because they stood on the same ground as an accepted offer which, under Section 27, Rule 13090 of the 1997 Rules of Civil Procedure, provides that "in civil cases, an offer of compromise is not an admission of any liability and is not admissible in evidence against the offeror." We find no merit in this contention. The declaration of nullity of said agreements was premised on the following constitutional and statutory infirmities: (1) the grant of criminal immunity to the Marcos heirs was against the law; (2) the PCGG's commitment to exempt from all forms of taxes the properties to be retained by the Marcos heirs was against the Constitution; and (3) the government's undertaking to cause the dismissal of all cases filed against the Marcoses pending before the Sandiganbayan and other courts encroached on the powers of the judiciary. The reasons relied upon by the Court never in the least bit even touched on the veracity and truthfulness of respondents' admission with respect to their ownership of the Swiss funds . Besides, having made certain admissions in those agreements, respondents cannot now deny that they voluntarily admitted owning the subject Swiss funds, notwithstanding the fact that the agreements themselves were later declared null and void. The following observation of Sandiganbayan Justice Catalino Castaeda, Jr. in the decision dated September 19, 2000 could not have been better said: x x x The declaration of nullity of the two agreements rendered the same without legal effects but it did not detract from the admissions of the respondents contained therein. Otherwise stated, the admissions made in said agreements, as quoted above, remain binding on the respondents.91 A written statement is nonetheless competent as an admission even if it is contained in a document which is not itself effective for the purpose for which it is made, either by reason of illegality, or incompetency of a party thereto, or by reason of not being signed, executed or delivered. Accordingly, contracts have been held as competent evidence of admissions, although they may be unenforceable.92 The testimony of respondent Ferdinand Marcos, Jr. during the hearing on the motion for the approval of the Compromise Agreement on April 29, 1998 also lent credence to the allegations of petitioner Republic that respondents admitted ownership of the Swiss bank accounts. We quote the salient portions of Ferdinand Jr.'s formal declarations in open court: ATTY. FERNANDO: Mr. Marcos, did you ever have any meetings with PCGG Chairman Magtanggol C. Gunigundo? F. MARCOS, JR.: Yes. I have had very many meetings in fact with Chairman. ATTY. FERNANDO: Would you recall when the first meeting occurred? PJ GARCHITORENA: In connection with what? ATTY. FERNANDO: In connection with the ongoing talks to compromise the various cases initiated by PCGG against your family? F. MARCOS, JR.: The nature of our meetings was solely concerned with negotiations towards achieving some kind of agreement between the Philippine government and the Marcos family. The discussions that led up to the compromise agreement were initiated by our then counsel Atty. Simeon Mesina x x x.93 xxx xxx xxx ATTY. FERNANDO: What was your reaction when Atty. Mesina informed you of this possibility? F. MARCOS, JR.: My reaction to all of these approaches is that I am always open, we are always open, we are very much always in search of resolution to the problem of the family and any approach that has been made us, we have entertained. And so my reaction was the same as what I have always why not? Maybe this is the one that will finally put an end to this problem.94

xxx xxx xxx ATTY. FERNANDO: Basically, what were the true amounts of the assets in the bank? PJ GARCHITORENA: So, we are talking about liquid assets here? Just Cash? F. MARCOS, JR.: Well, basically, any assets. Anything that was under the Marcos name in any of the banks in Switzerland which may necessarily be not cash.95 xxx xxx xxx PJ GARCHITORENA: x x x What did you do in other words, after being apprised of this contract in connection herewith? F. MARCOS, JR.: I assumed that we are beginning to implement the agreement because this was forwarded through the Philippine government lawyers through our lawyers and then, subsequently, to me. I was a little surprised because we hadn't really discussed the details of the transfer of the funds, what the bank accounts, what the mechanism would be. But nevertheless, I was happy to see that as far as the PCGG is concerned, that the agreement was perfected and that we were beginning to implement it and that was a source of satisfaction to me because I thought that finally it will be the end.96 Ferdinand Jr.'s pronouncements, taken in context and in their entirety, were a confirmation of respondents' recognition of their ownership of the Swiss bank deposits. Admissions of a party in his testimony are receivable against him. If a party, as a witness, deliberately concedes a fact, such concession has the force of a judicial admission. 97 It is apparent from Ferdinand Jr.'s testimony that the Marcos family agreed to negotiate with the Philippine government in the hope of finally putting an end to the problems besetting the Marcos family regarding the Swiss accounts. This was doubtlessly an acknowledgment of ownership on their part. The rule is that the testimony on the witness stand partakes of the nature of a formal judicial admission when a party testifies clearly and unequivocally to a fact which is peculiarly within his own knowledge.98 In her Manifestation99 dated May 26, 1998, respondent Imelda Marcos furthermore revealed the following: That respondent Imelda R. Marcos owns 90% of the subject matter of the above-entitled case, being the sole beneficiary of the dollar deposits in the name of the various foundations alleged in the case; That in fact only 10% of the subject matter in the above-entitled case belongs to the estate of the late President Ferdinand E. Marcos; xxx xxx xxx Respondents' ownership of the Swiss bank accounts as borne out by Mrs. Marcos' manifestation is as bright as sunlight. And her claim that she is merely a beneficiary of the Swiss deposits is belied by her own signatures on the appended copies of the documents substantiating her ownership of the funds in the name of the foundations. As already mentioned, she failed to specifically deny under oath the authenticity of such documents, especially those involving "William Saunders" and "Jane Ryan" which actually referred to Ferdinand Marcos and Imelda Marcos, respectively. That failure of Imelda Marcos to specifically deny the existence, much less the genuineness and due execution, of the instruments bearing her signature, was tantamount to a judicial admission of the genuineness and due execution of said instruments, in accordance with Section 8, Rule 8 100 of the 1997 Rules of Civil Procedure. Likewise, in her Constancia101 dated May 6, 1999, Imelda Marcos prayed for the approval of the Compromise Agreement and the subsequent release and transfer of the $150 million to the rightful owner. She further made the following manifestations: xxx xxx xxx 2. The Republic's cause of action over the full amount is its forfeiture in favor of the government if found to be ill-gotten. On the other hand, the Marcoses defend that it is a legitimate asset. Therefore, both parties have an inchoate right of ownership over the account. If it turns out that the account is of lawful origin, the Republic may yield to the Marcoses. Conversely, the Marcoses must yield to the Republic. (underscoring supplied) xxx xxx xxx 3. Consistent with the foregoing, and the Marcoses having committed themselves to helping the less fortunate, in the interest of peace, reconciliation and unity, defendant MADAM IMELDA ROMUALDEZ MARCOS, in firm abidance thereby, hereby affirms her agreement with the Republic for the release and transfer of the US Dollar 150 million for proper disposition, without prejudice to the final outcome of the litigation respecting the ownership of the remainder. Again, the above statements were indicative of Imelda's admission of the Marcoses' ownership of the Swiss deposits as in fact "the Marcoses defend that it (Swiss deposits) is a legitimate (Marcos) asset." On the other hand, respondents Maria Imelda Marcos-Manotoc, Ferdinand Marcos, Jr. and Maria Irene Marcos-Araneta filed a motion102 on May 4, 1998 asking the Sandiganbayan to place the res (Swiss deposits) in custodia legis: 7. Indeed, the prevailing situation is fraught with danger! Unless the aforesaid Swiss deposits are placed in custodia legis or within the Court's protective mantle, its dissipation or misappropriation by the petitioner looms as a distinct possibility. Such display of deep, personal interest can only come from someone who believes that he has a marked and intimate right over the considerable dollar deposits. Truly, by filing said motion, the Marcos children revealed their ownership of the said deposits. Lastly, the Undertaking103 entered into by the PCGG, the PNB and the Marcos foundations on February 10, 1999, confirmed the Marcoses' ownership of the Swiss bank deposits. The subject Undertaking brought to light their readiness to pay the human rights victims out of the funds held in escrow in the PNB. It stated: WHEREAS, the Republic of the Philippines sympathizes with the plight of the human rights victims-plaintiffs in the aforementioned litigation through the Second Party, desires to assist in the satisfaction of the judgment awards of said

human rights victims-plaintiffs, by releasing, assigning and or waiving US$150 million of the funds held in escrow under the Escrow Agreements dated August 14, 1995, although the Republic is not obligated to do so under final judgments of the Swiss courts dated December 10 and 19, 1997, and January 8, 1998; WHEREAS, the Third Party is likewise willing to release, assign and/or waive all its rights and interests over said US$150 million to the aforementioned human rights victims-plaintiffs. All told, the foregoing disquisition negates the claim of respondents that "petitioner failed to prove that they acquired or own the Swiss funds" and that "it was only by arbitrarily isolating and taking certain statements made by private respondents out of context that petitioner was able to treat these as judicial admissions." The Court is fully aware of the relevance, materiality and implications of every pleading and document submitted in this case. This Court carefully scrutinized the proofs presented by the parties. We analyzed, assessed and weighed them to ascertain if each piece of evidence rightfully qualified as an admission. Owing to the far-reaching historical and political implications of this case, we considered and examined, individually and totally, the evidence of the parties, even if it might have bordered on factual adjudication which, by authority of the rules and jurisprudence, is not usually done by this Court. There is no doubt in our mind that respondent Marcoses admitted ownership of the Swiss bank deposits. We have always adhered to the familiar doctrine that an admission made in the pleadings cannot be controverted by the party making such admission and becomes conclusive on him, and that all proofs submitted by him contrary thereto or inconsistent therewith should be ignored, whether an objection is interposed by the adverse party or not. 104 This doctrine is embodied in Section 4, Rule 129 of the Rules of Court: SEC. 4. Judicial admissions. An admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made.105 In the absence of a compelling reason to the contrary, respondents' judicial admission of ownership of the Swiss deposits is definitely binding on them. The individual and separate admissions of each respondent bind all of them pursuant to Sections 29 and 31, Rule 130 of the Rules of Court: SEC. 29. Admission by co-partner or agent. The act or declaration of a partner or agent of the party within the scope of his authority and during the existence of the partnership or agency, may be given in evidence against such party after the partnership or agency is shown by evidence other than such act or declaration. The same rule applies to the act or declaration of a joint owner, joint debtor, or other person jointly interested with the party.106 SEC. 31. Admission by privies. Where one derives title to property from another, the act, declaration, or omission of the latter, while holding the title, in relation to the property, is evidence against the former. 107 The declarations of a person are admissible against a party whenever a "privity of estate" exists between the declarant and the party, the term "privity of estate" generally denoting a succession in rights.108 Consequently, an admission of one in privity with a party to the record is competent.109 Without doubt, privity exists among the respondents in this case. And where several coparties to the record are jointly interested in the subject matter of the controversy, the admission of one is competent against all.110 Respondents insist that the Sandiganbayan is correct in ruling that petitioner Republic has failed to establish a prima facie case for the forfeiture of the Swiss deposits. We disagree. The sudden turn-around of the Sandiganbayan was really strange, to say the least, as its findings and conclusions were not borne out by the voluminous records of this case. Section 2 of RA 1379 explicitly states that "whenever any public officer or employee has acquired during his incumbency an amount of property which is manifestly out of proportion to his salary as such public officer or employee and to his other lawful income and the income from legitimately acquired property, said property shall be presumed prima facie to have been unlawfully acquired. x x x" The elements which must concur for this prima facie presumption to apply are: (1) the offender is a public officer or employee; (2) he must have acquired a considerable amount of money or property during his incumbency; and (3) said amount is manifestly out of proportion to his salary as such public officer or employee and to his other lawful income and the income from legitimately acquired property. It is undisputed that spouses Ferdinand and Imelda Marcos were former public officers. Hence, the first element is clearly extant. The second element deals with the amount of money or property acquired by the public officer during his incumbency. The Marcos couple indubitably acquired and owned properties during their term of office. In fact, the five groups of Swiss accounts were admittedly owned by them. There is proof of the existence and ownership of these assets and properties and it suffices to comply with the second element. The third requirement is met if it can be shown that such assets, money or property is manifestly out of proportion to the public officer's salary and his other lawful income. It is the proof of this third element that is crucial in determining whether a prima facie presumption has been established in this case. Petitioner Republic presented not only a schedule indicating the lawful income of the Marcos spouses during their incumbency but also evidence that they had huge deposits beyond such lawful income in Swiss banks under the names of five different foundations. We believe petitioner was able to establish the prima facie presumption that the assets and properties acquired by the Marcoses were manifestly and patently disproportionate to their aggregate salaries as public officials. Otherwise stated, petitioner presented enough evidence to convince us that the Marcoses had dollar deposits amounting to US $356 million representing the balance of the Swiss accounts of the five foundations, an amount way, way beyond their aggregate legitimate income of only US$304,372.43 during their incumbency as government officials.

Considering, therefore, that the total amount of the Swiss deposits was considerably out of proportion to the known lawful income of the Marcoses, the presumption that said dollar deposits were unlawfully acquired was duly established. It was sufficient for the petition for forfeiture to state the approximate amount of money and property acquired by the respondents, and their total government salaries. Section 9 of the PCGG Rules and Regulations states: Prima Facie Evidence. Any accumulation of assets, properties, and other material possessions of those persons covered by Executive Orders No. 1 and No. 2, whose value is out of proportion to their known lawful income is prima facie deemed ill-gotten wealth. Indeed, the burden of proof was on the respondents to dispute this presumption and show by clear and convincing evidence that the Swiss deposits were lawfully acquired and that they had other legitimate sources of income. A presumption is prima facie proof of the fact presumed and, unless the fact thus prima facie established by legal presumption is disproved, it must stand as proved.111 Respondent Mrs. Marcos argues that the foreign foundations should have been impleaded as they were indispensable parties without whom no complete determination of the issues could be made. She asserts that the failure of petitioner Republic to implead the foundations rendered the judgment void as the joinder of indispensable parties was a sine qua non exercise of judicial power. Furthermore, the non-inclusion of the foreign foundations violated the conditions prescribed by the Swiss government regarding the deposit of the funds in escrow, deprived them of their day in court and denied them their rights under the Swiss constitution and international law.112 The Court finds that petitioner Republic did not err in not impleading the foreign foundations. Section 7, Rule 3 of the 1997 Rules of Civil Procedure,113 taken from Rule 19b of the American Federal Rules of Civil Procedure, provides for the compulsory joinder of indispensable parties. Generally, an indispensable party must be impleaded for the complete determination of the suit. However, failure to join an indispensable party does not divest the court of jurisdiction since the rule regarding indispensable parties is founded on equitable considerations and is not jurisdictional. Thus, the court is not divested of its power to render a decision even in the absence of indispensable parties, though such judgment is not binding on the non-joined party.114 An indispensable party115 has been defined as one: [who] must have a direct interest in the litigation; and if this interest is such that it cannot be separated from that of the parties to the suit, if the court cannot render justice between the parties in his absence, if the decree will have an injurious effect upon his interest, or if the final determination of the controversy in his absence will be inconsistent with equity and good conscience. There are two essential tests of an indispensable party: (1) can relief be afforded the plaintiff without the presence of the other party? and (2) can the case be decided on its merits without prejudicing the rights of the other party? 116 There is, however, no fixed formula for determining who is an indispensable party; this can only be determined in the context and by the facts of the particular suit or litigation. In the present case, there was an admission by respondent Imelda Marcos in her May 26, 1998 Manifestation before the Sandiganbayan that she was the sole beneficiary of 90% of the subject matter in controversy with the remaining 10% belonging to the estate of Ferdinand Marcos.117 Viewed against this admission, the foreign foundations were not indispensable parties. Their non-participation in the proceedings did not prevent the court from deciding the case on its merits and according full relief to petitioner Republic. The judgment ordering the return of the $356 million was neither inimical to the foundations' interests nor inconsistent with equity and good conscience. The admission of respondent Imelda Marcos only confirmed what was already generally known: that the foundations were established precisely to hide the money stolen by the Marcos spouses from petitioner Republic. It negated whatever illusion there was, if any, that the foreign foundations owned even a nominal part of the assets in question. The rulings of the Swiss court that the foundations, as formal owners, must be given an opportunity to participate in the proceedings hinged on the assumption that they owned a nominal share of the assets.118 But this was already refuted by no less than Mrs. Marcos herself. Thus, she cannot now argue that the ruling of the Sandiganbayan violated the conditions set by the Swiss court. The directive given by the Swiss court for the foundations to participate in the proceedings was for the purpose of protecting whatever nominal interest they might have had in the assets as formal owners. But inasmuch as their ownership was subsequently repudiated by Imelda Marcos, they could no longer be considered as indispensable parties and their participation in the proceedings became unnecessary. In Republic vs. Sandiganbayan,119 this Court ruled that impleading the firms which are the res of the action was unnecessary: "And as to corporations organized with ill-gotten wealth, but are not themselves guilty of misappropriation, fraud or other illicit conduct in other words, the companies themselves are not the object or thing involved in the action, the res thereof there is no need to implead them either. Indeed, their impleading is not proper on the strength alone of their having been formed with ill-gotten funds, absent any other particular wrongdoing on their part Such showing of having been formed with, or having received ill-gotten funds, however strong or convincing, does not, without more, warrant identifying the corporations in question with the person who formed or made use of them to give the color or appearance of lawful, innocent acquisition to illegally amassed wealth at the least, not so as place on the Government the onus of impleading the former with the latter in actions to recover such wealth. Distinguished in terms of juridical personality and legal culpability from their erring members or stockholders, said corporations are not themselves guilty of the sins of the latter, of the embezzlement, asportation, etc., that gave rise to the Government's cause of action for recovery; their creation or organization was merely the result of their members' (or stockholders') manipulations and maneuvers to conceal the illegal origins of the assets or monies invested therein. In this light, they are simply the res in the actions for the recovery of illegally acquired wealth, and there is, in principle, no cause of action against them and no ground to implead them as defendants in said actions."

Just like the corporations in the aforementioned case, the foreign foundations here were set up to conceal the illegally acquired funds of the Marcos spouses. Thus, they were simply the res in the action for recovery of ill-gotten wealth and did not have to be impleaded for lack of cause of action or ground to implead them. Assuming arguendo, however, that the foundations were indispensable parties, the failure of petitioner to implead them was a curable error, as held in the previously cited case of Republic vs. Sandiganbayan:120 "Even in those cases where it might reasonably be argued that the failure of the Government to implead the sequestered corporations as defendants is indeed a procedural abberation, as where said firms were allegedly used, and actively cooperated with the defendants, as instruments or conduits for conversion of public funds and property or illicit or fraudulent obtention of favored government contracts, etc., slight reflection would nevertheless lead to the conclusion that the defect is not fatal, but one correctible under applicable adjective rules e.g., Section 10, Rule 5 of the Rules of Court [specifying the remedy of amendment during trial to authorize or to conform to the evidence]; Section 1, Rule 20 [governing amendments before trial], in relation to the rule respecting omission of so-called necessary or indispensable parties, set out in Section 11, Rule 3 of the Rules of Court. It is relevant in this context to advert to the old familiar doctrines that the omission to implead such parties "is a mere technical defect which can be cured at any stage of the proceedings even after judgment"; and that, particularly in the case of indispensable parties, since their presence and participation is essential to the very life of the action, for without them no judgment may be rendered, amendments of the complaint in order to implead them should be freely allowed, even on appeal, in fact even after rendition of judgment by this Court, where it appears that the complaint otherwise indicates their identity and character as such indispensable parties."121 Although there are decided cases wherein the non-joinder of indispensable parties in fact led to the dismissal of the suit or the annulment of judgment, such cases do not jibe with the matter at hand. The better view is that non-joinder is not a ground to dismiss the suit or annul the judgment. The rule on joinder of indispensable parties is founded on equity. And the spirit of the law is reflected in Section 11, Rule 3122 of the 1997 Rules of Civil Procedure. It prohibits the dismissal of a suit on the ground of nonjoinder or misjoinder of parties and allows the amendment of the complaint at any stage of the proceedings, through motion or on order of the court on its own initiative.123 Likewise, jurisprudence on the Federal Rules of Procedure, from which our Section 7, Rule 3 124 on indispensable parties was copied, allows the joinder of indispensable parties even after judgment has been entered if such is needed to afford the moving party full relief.125 Mere delay in filing the joinder motion does not necessarily result in the waiver of the right as long as the delay is excusable.126 Thus, respondent Mrs. Marcos cannot correctly argue that the judgment rendered by the Sandiganbayan was void due to the non-joinder of the foreign foundations. The court had jurisdiction to render judgment which, even in the absence of indispensable parties, was binding on all the parties before it though not on the absent party.127 If she really felt that she could not be granted full relief due to the absence of the foreign foundations, she should have moved for their inclusion, which was allowable at any stage of the proceedings. She never did. Instead she assailed the judgment rendered. In the face of undeniable circumstances and the avalanche of documentary evidence against them, respondent Marcoses failed to justify the lawful nature of their acquisition of the said assets. Hence, the Swiss deposits should be considered ill-gotten wealth and forfeited in favor of the State in accordance with Section 6 of RA 1379: SEC. 6. Judgment. If the respondent is unable to show to the satisfaction of the court that he has lawfully acquired the property in question, then the court shall declare such property forfeited in favor of the State, and by virtue of such judgment the property aforesaid shall become property of the State x x x. THE FAILURE TO PRESENT AUTHENTICATED TRANSLATIONS OF THE SWISS DECISIONS Finally, petitioner Republic contends that the Honorable Sandiganbayan Presiding Justice Francis Garchitorena committed grave abuse of discretion in reversing himself on the ground that the original copies of the authenticated Swiss decisions and their authenticated translations were not submitted to the court a quo. Earlier PJ Garchitorena had quoted extensively from the unofficial translation of one of these Swiss decisions in his ponencia dated July 29, 1999 when he denied the motion to release US$150 Million to the human rights victims. While we are in reality perplexed by such an incomprehensible change of heart, there might nevertheless not be any real need to belabor the issue. The presentation of the authenticated translations of the original copies of the Swiss decision was not de rigueur for the public respondent to make findings of fact and reach its conclusions. In short, the Sandiganbayan's decision was not dependent on the determination of the Swiss courts. For that matter, neither is this Court's. The release of the Swiss funds held in escrow in the PNB is dependent solely on the decision of this jurisdiction that said funds belong to the petitioner Republic. What is important is our own assessment of the sufficiency of the evidence to rule in favor of either petitioner Republic or respondent Marcoses. In this instance, despite the absence of the authenticated translations of the Swiss decisions, the evidence on hand tilts convincingly in favor of petitioner Republic. WHEREFORE, the petition is hereby GRANTED. The assailed Resolution of the Sandiganbayan dated January 31, 2002 is SET ASIDE. The Swiss deposits which were transferred to and are now deposited in escrow at the Philippine National Bank in the estimated aggregate amount of US$658,175,373.60 as of January 31, 2002, plus interest, are hereby forfeited in favor of petitioner Republic of the Philippines. SO ORDERED. Davide, Jr., C.J., Bellosillo, Panganiban, Ynares-Santiago, Austria-Martinez, Carpio-Morales, Callejo, Sr., Azcuna, and Tinga, JJ., concur. Puno, and Vitug, JJ., in the result Quisumbing, Sandoval-Gutierrez, J., on official leave. Carpio, J., no part.