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G.R. No. 70451. March 24, 1993. HENRY H. GAW, petitioner, vs.

THE HONORABLE INTERMEDIATE APPELLATE COURT and UY DIET TAN, respondents. Ponce Enrile, Cayetano, Reyes&Manalastas for petitioner. Ireneo R. Clapano, Jr. collaborating counsel for petitioner. Ambrosio Padilla, Mempin& Reyes Law Office for private respondent. DECISION ROMERO, J p: This is a petition for review on certiorari of the decision 1 of the then Intermediate Appellate Court reversing the decision 2 of the then Court of First Instance of Rizal Instance at Quezon City, Branch IX which ordered therein dependantUy Diet Tan to pay plaintiff Henry Gaw the amount of One Hundred Twenty Thousand Pesos (P120,000.00) as reasonable actual damages and attorney's fees of Ten Thousand Pesos (P10,000.00), and ordering instead, Henry Gaw to pay Uy Diet Tan One Hundred Thousand Pesos (P100,000.00) also as reasonable actual damages plus Twenty Thousand Pesos (P20,000.00) as attorney's fees. Henry Gaw is a businessman engaged in the buy and sell of hardware and construction materials. Through a dealership agreement, on December 12, 1978, his trading firm, the K.H. Gaw Enterprises, was appointed as one of the four (4) exclusive dealers of white cement of Prime White Cement Corporation (PWCC for brevity). Among others, the agreement stipulated that for five (5) years, the dealer would take delivery from PWCC at least 2,600 bags of white cement a month; that in consideration of the execution of the contract, the dealer would deposit Two Hundred Thousand Pesos (P200, 000.00) "to be repaid or returned" to the dealer under a scheme set forth in the same contract, and that the dealer would increase its allocation to 6,5000 bags a month and "increase its loan" to PWCC to Five Hundred Thousand Pesos (P500,000.00) "in a contract akin, so as to abreast itself, or cope up with other dealers, within ninety (90) days" from the execution of the agreement. 3 To avail of the provision on the increased volume of monthly delivery of cement, on February 2, 1979, Gaw entered into a marketing agreement with Foundation Commercial, a single proprietorship, through Uy Diet Tan. Acknowledging that Gaw or the K.H. Gaw Enterprises was one of the four dealers of PWCC "as evidenced by a Contract hereto attached as Annex 'A' and made integral part of this Agreement," the parties agreed that: "1 That the PARTY OF THE SECOND PART (Tan) shall be entitled to get directly from Prime White Cement Corporation monthly at least 50% of the allocation of white cement of the PARTY OF THE FIRST PART (Gaw) equivalent to at least 3,250 bags a month and shall pay directly the value of the cement to Prime White Cement Corporation; 2. That the PARTY OF THE SECOND PART shall deposit to Prime White Cement Corporation the sum of TWO HUNDRED AND FIFTY THOUSAND PESOS (P250,000.00), Philippine Currency, by way of deposit and as required in its Contract herein marked as Annex 'A' in the name of the PARTY OF THE SECOND PART and repayment by Prime White Cement Corporation of the said amount shall likewise be directly made to the PARTY OF THE SECOND PART at P10,000.00 a month for 30 months,, beginning the month of March, 1979 as a marketing firm of the PARTY OF THE FIRST PART; 3. That the PARTY OF THE SECOND PART shall pay to the PARTY OF THE FIRST PART the sum of SEVENTY CENTAVOS (P0.70) per bag for every bag of white cement which the PART OF THE SECOND PART will withdraw from Prime White Cement Corporation, the said amount to be due and demandable every first (5) days of the next succeeding months; 4. That the PARTY OF THE SECOND PART shall pay in advance to the PARTY OF THE FIRST PART the sum of FIVE THOUSAND PESOS (P5,000.00), Philippine Currency, upon the signing of this Agreement and said amount shall be immediately deductable from the (o.70 per bag premium paid by the former to the latter until the said amount paid in advance shall have been fully paid;

5. That the PARTY OF THE SECOND PART shall invoice the sale in its own name and shall pay to Prime White Cement Corporation the value of the cement also in its own name; 6. All taxes due to the PARTY OF THE SECOND PART on all white cement withdrawn from Prime White Cement Corporation shall be the sole responsibility of the said Second Party; 7. This Contract shall take effect immediately upon signing hereof and co-terminus with the herein Contract of the PARTY OF THE FIRST PART with Prime White Cement Corporation. In the event that the said Contract will be extended for another five (5) years by Prime White Cement Corporation, the duration of this Contract shall Prime White Cement Corporation, the duration of this Contract shall also extended and co-terminus accordingly with the said extension." 4 Pursuant to the marketing agreement, on February 8, 1979, Tan issued China Banking Corporation Check No. 456993 in the amount of P250,000.00 payable to PWCC. The latter, however, refused to accept the deposit for the reason that accept the same in the name of Tan wound be tantamount to making him an exclusive dealer thereby violating the dealership agreement entered into between PWCC and Gaw. Thus, on March 5, 1979, counsel for Tan wrote the Executive Committee of PWCC confirming the intention of Tan to deposit the P250,000.00 "under the name of Mr. Gaw in compliance with his dealership agreement" with PWCC. 5 In reply to said letter, the Chairman of the Board and of the Executive Committee of PWCC, Constacio B. Maglana, informed Tan's counsel the he had written Tan himself; that "PWCC has already closed the dealership and/or disposition of its white cement product exclusively to four (4) distributors and/or dealers in Manila and Luzon"; that he was "not in a position to violate directly or indirectly any of the terms and conditions" of the existing dealership contracts and that, therefore, the intentions in the letter of Tan's counsel could not be given due course. 6 Meanwhile, in an apparent effort to save his option to increase his monthly allocation, Gaw entered into a contract with Mandee Commercial whereby the latter agreed to provide P250,000.00 which together with the P50,000.00 which would be produced by Gaw, would be added to the initial P200,000.00 which Gaw had given to PWCC, to reach the total amount of P500,000.00. The contract was executed on March 9, 1979 with the following terms and conditions: (a) direct sales by Gaw to Mandee Commercial of 3,250 bags of white cement a month; (b) the contract shall be for fifty-seven (57) months, specially from April 1, 1979 To December 31, 1983, and (c) Mandee shall pay Gaw a net mark-up or profit of P2.00 per bag. 7 Consequently, on March 5, 1979, Tan filed a complaint against Gaw for specific performance with damages and preliminary injunction in the then Court of First Instance of Rizal, Branch IV. Docketed as Civil Case No. Q-27097, the complaint alleged, among other things, that when Tan tried to deposit the P250,000.00 at the PWCC office in T.M. Kalaw St., Ermita, Manila, the auditor of PWCC told him that the amount should be directly deposited in the name of Gaw "to prevent the other dealers from complaining that plaintiff was made another dealer and not as a marketing arm of defendant Gaw" and that, even if Tan was willing to make said deposit in the name of Gaw, the latter "refused to accept the amount proffered and insisted that plaintiff should pay him one peso and fifty centavos (P1.50) instead of seventy centavos (P0.70) per bag as previously agreed upon" in the marketing agreement. Thus, Tan prayed that a preliminary injunction be issued "enjoining or restraining the defendant from negotiating with the other dealers for the assignment of dealership rights pending the hearing" of the case; that Gaw be ordered to accept the amount of P250,000.00 and to honor and respect his contract with Tan, and that Gaw be directed to pay P50,000.00 in moral damages, P50,000.00 as exemplary damages and actual or compensatory damages of P100,000.00 plus a total of P75,000.00 as attorney's fees and litigation expenses. 8 Thereafter, Tan filed an urgent ex-parte motion for the issuance of a restraining order to prevent Gaw disposing of 3,250 bags of white cement which allegedly belonged to Tan by virtue of the marketing agreement. On March 9, 1979, Judge Ricardo P. Tensuan issued the following Order: "Acting upon the 'urgent ex-parte motion for the issuance of a restraining order' filed the plaintiff, thru counsel, and finding the reasons alleged well-taken, the said motion is hereby grated. WHEREFORE, the parties are hereby ordered to maintain status quo, particularly the defendant to refrain from continuing the acts complained of. In the meantime, let the application for the issuance of a writ of preliminary injunction be set for hearing on March 16, 1979 at 8:3 A.M." 9

After having received copy of said Order on march 12, 1979, Gaw then filed a motion to dismiss the complaint on the grounds of lack of cause of action and that the demand had been extinguished as he had repudiated the marketing agreement. Forthwith, Tan filed an opposition Gaw filed a reply. On July 16, 1979, Tan filed a motion to withdraw his complaint on the ground that since he had been feeling pain in the chest that, "in the long run, (it) might affect his heart condition." 10 Thus, July 25, 1979, Judge Tensuan issued an Order dismissing the complaint. 11 Around four months later or on November 19, 1979, Gaw filed a complaint against Tan for damages in the then Court of First Instance of Rizal, Branch IX at Quezon City. Docketed as Civil Case No. Q-28799, the complaint alleged that the restraining order of March 9, 1979 caused him to lose P370,500.00 which he could have realized as profit out of the 57month contract with Mandee Commercial which had refused to honor said contract in view of the soaring cost building materials and the limited need for white cement. Pointing to the same restraining order as cause of his losses, Gaw prayed that Tan be ordered to pay the following: (a) P370,500.00 as unrealized profits with interest at the legal rate until fully paid; (b) P30,000.00 attorney's fees and P5,000.00 litigation and other expenses in Civil Case No. Q-27097; (c) P50,000.00 attorney's fees, and P5,000.00 litigation and miscellaneous expenses in the present case plus whatever amount for moral damages as the court would deem proper. 12 After trial, the lower court, through Judge Jose P. Castro, rendered a decision on February 15, 1982 in favor of Gaw. It is principally based on its finding that the Order issued on March 9, 1979 by Judge Tensuan was "was just a simple 'status quo' order, but one which restrained Henry Gaw, and because of such restraining order, the plaintiff herein (defendant in that case) had no alternative but to obey the Court's order and stopped the implementation of his then existing contract with Mandee Commercial to his damage and prejudice as it deprived him of a sure profit." 13 The decretal portion of the decision reads: "WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant, as follows: 1. Ordering the defendant Uy Diet Tan to pay Henry H. Gaw, the amount of P20,000.00 representing reasonable actual damages suffered by plaintiff in the form of unrealized profits,, with legal interest from the filling of the complaint until fully paid; 2. Ordering the defendant to pay the plaintiff the amount of P10,000.00 as and for attorney's fees and the cost of the suit. Insofar as moral damages is concerned, the Court holds that the plaintiff is not entitled. Accordingly, the counter claim of defendant is hereby dismissed. SO ORDERED." 14 Tan filed a motion for the reconsideration of the decision which was duly opposed by Gaw. After Tan had filed a reply to the opposition, the lower court, in an Order dated May 19, 1982, denied the motion for reconsideration on the basis of its finding that there was no "legitimate reason to disturb the decision." 15 Tan appealed to the then Intermediate Appellate Court, which, as earlier mentioned, reversed the decision of the lower court. After making its own findings of facts, the appellate court concluded that the claim for damages should have been ventilated in Civil Case No. Q-27097. Nonetheless, the appellate court opined, as the claim for damages was anchored on the issuance of the restraining order, under Aquino v. Socorro, 16 that such claim would not prosper in the absence of allegation or proof that the restraining order was maliciously procured and without probable cause. Finding the counter claim of Tan in the amount of P1,452,500.00 "to be high speculative," the appellate court disposed of the appeal as follows: "WHEREFORE, the judgment appealed from is hereby set aside and REVERSED and another decision is hereby entered dismissing the complaint and on the counterclaim: 1. Ordering plaintiff Henry Gaw to pay defendant Uy Diet Tan the amount of P100,000.00 representing the reasonable actual damages suffered in the form of unrealized profits, with legal interest thereon from the filing of the complaint until fully paid;

2. Ordering plaintiff to pay defendant the amount of P20,000.00 as attorney's fees and cost against the plaintiff-appellee. SO ORDERED." 17 Gaw moved for the reconsideration of said decision but in its Resolution of March 26, 1985, the Intermediate Appellate Court denied it. Hence, the instant petition for review on certiorari interposed by Gaw which not only errors of law but also errors of fact. 18 As a rule, the jurisdiction of this Court in cases brought to it from the Court of Appeals or the then Intermediate Appellate Court is limited to the review and revision of errors of law allegedly committed by the appellate court, as its findings of fact are deemed conclusive. 19 As such, this Court is not duty-bound to analyze and weigh all over again the evidence already considered in the proceedings below. 20 This rule, however, is not without exceptions. 21 One of these exceptions is when there is a conflict between the factual findings of the Court of Appeals and the trial court which necessitates a review of such factual findings. 22 This case falls within this exception. One of the points of disagreement between the appellate court and the lower court is whether or not the marketing agreement had in fact been implemented. The lower court found that Tan was unable to make the deposit of P250,000.00 because PWCC refused to accept it on the ground that it would have virtually made Tan a dealer, thus impelling, PWCC to violate its dealership agreement with Gaw. Moreover, the lower court in effect laid the blame for the non-implementation of the said agreement on Tan through his failure to deposit P5,000.00. 23 On the other hand, the appellate court ruled that Gaw himself, by breaching the marketing agreement was responsible for its non-implementation. It stated: "There was nothing wrong with defendant's deposit of P250,000.00 in his own name with Prime White Cement Corporation because that what was expressly stipulated in the Marketing Agreement (Exh. B) . . .Otherwise stated, defendant's deposit of P250,000.00 with Prime White Cement was made in defendant's name in compliance with the abovequoted stipulations of the Marketing Agreement (Exh. B) between plaintiff and defendant and was not the unilateral act of the latter. Nonetheless, if the manner of deposit as stipulated in the Marketing Agreement was not acceptable to Prime White Cement, defendant was willing to make the deposit in plaintiff's name as evidenced by defendant's letter to plaintiff dated February 28, 1979 (Exh. 9) and to Prime White Cement (Exh. 10). But plaintiff did not even choose to answer defendant's letter (Exh. 9). Instead, plaintiff negotiated and agreed with Mandee Commercial for the sale of 3,250 bags of white cement monthly under his dealership contract with a mark-up of P2.00 per bag as confirmed by plaintiff's letter to Mandee Commercial dated March 9, 1979 (Exh. L) without the benefit of even a formal contract. It is apparent that the Marketing Agreement (Exh. B) between plaintiff and defendant could have been implemented and/or enforced if plaintiff had intervened and agreed to the proposal of defendant to deposit the P250,000.00 in plaintiff's name (to comply with Prime White Cement's objection) and if plaintiff himself had increased his original deposit from P250,000.00 to P250,000.00 to make the deposit of P500,000.00 in all. If Prime White Cement Corporation does not object to the Agreement (Exh. 3) between plaintiff and A & A Trading and plaintiff's letter agreement (Exh. L) withMandee Commercial, why should it object to the Marketing Agreement of plaintiff and defendant (Exh. B) if the deposit is made in plaintiff's name and the latter had increased his own deposit to P50,000.00? As a party to the Dealership Agreement (Exh. A), it was plaintiff's duty to see to it that the Marketing Agreement (Exh. B) be approved by Prime White Cement and that it be enforced." 24 We find the appellate court's findings to be more in accord with the evidence on record. In paying directly to PWCC, Tan only observed paragraph two of the Marketing agreement aforequoted which specifically stated that he was to deposit with PWCC the amount of P250,000.00 in his name. Of course, Gaw capitalized on the testimony of the former president of PWCC to the effect that while Tan tendered the said amount, there was no actual deposit. 25 Such an assertion, however, is belied by the circumstances surrounding the tender of payment, as well as the agreement of the parties explicitly expressed in the marketing agreement. Thus, after PWCC had refused to accept Tan's deposit of P250,000.00 and PWCC's auditor had revised Tan to deposit it in the name of Gaw which Tan accepted, the least that Gaw could have done was to act conformably with such proposal to show his sincerity and good faith. It is plain from the facts of this case that the agreement was regarded by Gaw as nothing more that a scrap of paper which he could choose to ignore at his pleasure. One cannot help but conclude that he had intentions of abiding by its terms. But in an effort to conceal his real intention, he went to great lengths to prove to this court that the agreement was prepared by Trazo, the former president of PWCC, who "induced" him to sign the agreement which had practically the same terms as the marketing agreement of PWCC with Perpetual Commercial. 26 Furthermore, Gaw asserts that "the

operative provisions of the marketing agreement actually made respondent tan a co-dealer of petitioner Gaw" because Tan's transactions with PWCC were "separate and independent." 27 Under Section 9, Rule 130 of the Rules of Court, once the terms of an agreement have been reduced to writing, it is deemed to contain all the terms agreed upon by the parties and no evidence of such terms other than the contents of the written agreement shall be admissible. 28 Whatever stipulations, clauses, terms and conditions are include in a contract, as long as they are not contrary to law, morals, goods customs, public policy or [public order, such contract is the law between the parties. 29 Thus, in the interpretation of the provisions of a written contract, the literal meaning of its stipulations must prevail. 30 It therefore, behooves the parties to examine the terms of a contract thoroughly before signing the same, particularly a businessman like Gaw who may not, by any stretch of the imagination, be considered to a tyro in these matter. Had he given even an iota's attention and care to scrutinize the subject contract, he would not have failed to detect that some provisions thereof contravene the terms and conditions of his exclusive dealership agreement with PWCC. While in a sense the marketing agreement between Gaw and Tan is related to the original dealership agreement between the former and PWCC, as the term of the former is co-terminous with that latter, we cannot subscribe to petitioner's contention that the marketing agreement was "an attempted novation" of the dealership agreement. 31 Arguing that "Tan intended to step into the shoes of petitioner Gaw as debtor of Prime White in respect to the additional deposit of P250,000.00," Gaw cites Article 1293 of the Civil Code which provides that '(n)ovation which consists in substituting a new debtor in the place of the original one may even without the knowledge or against the will of the latter, but not without the consent of the creditor." Yet Gaw fails to prove that PWCC, the creditor, knew all about the so-called substitution. It is axiomatic that novation is never presumed. It must be explicitly stated in the contract and there must be a manifest incompatibility between the old and the new obligation in every aspect. 32 The fact that the two agreements are coterminous with each other does not imply that a new obligation had arisen when the marketing agreement was signed, thus displacing the dealership contract. Not only was Gaw not released from complying with the terms and conditions of the dealership agreement but he was, in a sense, already implementing the latter. Gaw's claim for damages, therefore, had no basis in fact and in law. In the first place, as discussed above, he is partly to blame for the non implementation of the marketing agreement. Secondly, the claim for actual damages allegedly resulting from unrealized profits out of his agreement with Mandee Commercial appears to have been caused by factors other than the issuance of the restraining order in Civil Case No. Q-27079. The records disclose that he entered into an agreement with Mandee Commercial on March 9, 1979, three days before he received a copy of the restraining order on March 12, 1979. Paragraph 14 of the complaint itself in Civil Case No. Q-28799, reveals that Mandee Commercial refused to honor the agreement with Gaw because "the price of building materials have gone so high that there are now very much less constructions than before and the need for white cement is limited." 33 Granting arguendo that the failure of Gaw's agreement with Mandee Commercial was indeed the offshoot of the issuance of the restraining order in Civil Case No. Q-27079, Gaw may not successfully claim damages in the absence of proof that Tan maliciously filed Civil Case No. Q-27079 and that said case was without probable cause. As correctly enunciated by the appellate Court, the ruling in Aquino v. Socorro applies in this case. The appropriate remedy would have been for Gaw to hold Tan responsible on the bond that should have been required of him in Civil Case No. 27079. However, since he did not opt for said remedy, in filing the instant case, Gaw is duty-bound to prove malicious prosecution on the part of Tan and lack of probable cause in prosecuting his claim. Tan may not be penalized for resorting to court action in an attempt to implement the marketing agreement. He was within his rights in so doing, and if indeed damage was incurred by Gaw, it is simply damnumabsqueinjuria. 34 We disagree, however, with the appellate court's award of P100,000.00 representing the reasonable actual damages suffered by Tan in the form of unrealized profits. Art 2201 of the Civil code entitles a person to recover all damages which may be attributed to the non performance of an obligation, but the person claiming the same must prove his case. He must muster the best evidence he can and if so warranted, he might, with reasonable certainty, have been entitled to recover such damages. 35 Tan, in attempting to justify his claim to the alleged unearned profits, had trenched into the realm of what is speculative. He even failed to present evidence on the average actual profits earned by his business and other indicia of profitability.

WHEREFORE, the decision of the then Intermediate Appellate Court is hereby AFFIRMED, subject to the MODIFICATION that the award of P100,000.00 representing the actual damages suffered by private respondent Uy Diet Tan in the form of unrealized profits be DELETED. SO ORDERED. Feliciano, Davide, Jr. and Melo, JJ., concur. Gutierrez, Jr., J., On terminal leave. Bidin, J., No part. I was ponente of IAC decision under review. Footnotes 1. Penned by Associate Justice Abdulwahid A. Bidin and concurred in by Associate Justices Porfirio V. Sison and Marcelino R. Veloso. The petitioner is represented here by Atty. Ireneo R. Clapano, Jr. and Atty's. Eleazar B. Reyes, Sabino E. Acut, Jr., Loreto C. Ata and Louise Y. Gochan of the PECABAR Law Office while the private respondent is represented by Atty. Ambrosio Padilla of the Ambrosio Padilla, Mempin& Reyes Law Offices. 2. Penned by Judge Jose P. Castro. 3. Record on Appeal, pp. 8-14. 4. Record on Appeal, pp. 16-21. 5. Ibid, p. 22. 6. Record on Appeal, pp. 23-24. 7. Ibid, p. 96. 8. Record on Appeal, pp. 25-32. 9. Record on Appeal, p. 36. 10. Ibid, p. 52. 11. Ibid, p. 53. 12. Record on Appeal, pp. 2-7. 13. Ibid, p. 100. 14. Record on Appeal, p. 101. 15. Ibid, p. 143. 16. L-23868, October 22, 1970, 35 SCRA 373, 379. 17. Rollo, p. 48. 18. Petition, p. 12; Rollo,, p. 16.

19. Morales v. Court of Appeals, G.R. No. 91003, May 23, 1991, 197 SCRA 391, 401. 20. Navarra v. Court of Appeals, G.R. No. 86237, December 17, 1991, 204 SCRA 850, 855. 21. Morales v. Court of Appeals (supra at p. 401) enumerates these exceptions as: (a) when the conclusion is a finding grounded entirely on speculation, surmises or conjectures; (b) when the inference made is manifestly absurd, mistaken or impossible; (c) when there is grave abuse discretion in the appreciation of facts; (d) when the judgment is premised on a misapprehension of facts; (e) when the findings of fact are conflicting; and (f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee. 22. Co v. Court of Appeals, G.R. No. 86597 and Lio v. Court of Appeals, G.R. No. 86614, January 23, 1991, 193 SCRA 198, 206. 23. Record of Appeal, pp. 95-98. 24. IAC Decision, pp. 7-8; Rollo, pp. 44-45. 25. Memorandum for Petitioner, 33-34. 26. Petitioner's Memorandum, p. 22. 27. Ibid, pp. 18 & 30. 28. See: Policarpio v. Court of Appeals, G.R. No. 94563,, March 5, 1991, 194 SCRA 729. 29. Pe v. Court of Appeals, G.R. No. 74781, March 13, 1991, 195 SCRA 137. 30. Fermin v. Court of Appeals, G.R. 95146, May 6, 1991, 196 SCRA 723. 31. Petitioner's Memorandum, p. 20. 32. Young v. Court of Appeals, G.R. No. 83271, May 8, 1991, 196 SCRA 795. 33. Record on Appeal, p. 6. 34. Saba v. Court of Appeals,, G.R. No. 77950, August 24, 1990, 189 SCRA 50. 35. G.A. Machineries, Inc. v. Yaptinchay, L-30965, November 29, 1983, 126 SCRA 78 citing Cerrano v. Tan Chuco, 38 Phil. 392 [19] and Central Bank of the Philippines v. Court of Appeals, L-33022, April 22, 1975, 63 SCRA 431, 457.

G.R. No. 175769-70 January 19, 2009 ABS-CBN BROADCASTING CORPORATION, Petitioners, vs. PHILIPPINE MULTI-MEDIA SYSTEM, INC., CESAR G. REYES, FRANCIS CHUA (ANG BIAO), MANUEL F. ABELLADA, RAUL B. DE MESA, AND ALOYSIUS M. COLAYCO, Respondents. DECISION YNARES-SANTIAGO,J.: This petition for review on certiorari assails the July 12, 2006 Decision of the Court of Appeals in CA-G.R. SP Nos. 88092 and 90762, which affirmed the December 20, 2004 Decision of the Director-General of the Intellectual Property 3 Office (IPO) in Appeal No. 10-2004-0002. Also assailed is the December 11, 2006 Resolution denying the motion for reconsideration. Petitioner ABS-CBN Broadcasting Corporation (ABS-CBN) is licensed under the laws of the Republic of the Philippines to 4 engage in television and radio broadcasting. It broadcasts television programs by wireless means to Metro Manila and nearby provinces, and by satellite to provincial stations through Channel 2 on Very High Frequency (VHF) and Channel 23 on Ultra High Frequency (UHF). The programs aired over Channels 2 and 23 are either produced by ABS-CBN or purchased from or licensed by other producers. ABS-CBN also owns regional television stations which pattern their programming in accordance with perceived demands of the region. Thus, television programs shown in Metro Manila and nearby provinces are not necessarily shown in other provinces. Respondent Philippine Multi-Media System, Inc. (PMSI) is the operator of Dream Broadcasting System. It delivers digital direct-to-home (DTH) television via satellite to its subscribers all over the Philippines. Herein individual respondents, Cesar G. Reyes, Francis Chua, Manuel F. Abellada, Raul B. De Mesa, and Aloysius M. Colayco, are members of PMSIs Board of Directors. PMSI was granted a legislative franchise under Republic Act No. 8630 on May 7, 1998 and was given a Provisional Authority by the National Telecommunications Commission (NTC) on February 1, 2000 to install, operate and maintain a nationwide DTH satellite service. When it commenced operations, it offered as part of its program line-up ABS-CBN Channels 2 and 23, NBN, Channel 4, ABC Channel 5, GMA Channel 7, RPN Channel 9, and IBC Channel 13, together with other paid premium program channels. However, on April 25, 2001, ABS-CBN demanded for PMSI to cease and desist from rebroadcasting Channels 2 and 23. 7 On April 27, 2001, PMSI replied that the rebroadcasting was in accordance with the authority granted it by NTC and its 8 obligation under NTC Memorandum Circular No. 4-08-88, Section 6.2 of which requires all cable television system operators operating in a community within Grade A or B contours to carry the television signals of the authorized 9 television broadcast stations.
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Thereafter, negotiations ensued between the parties in an effort to reach a settlement; however, the negotiations were terminated on April 4, 2002 by ABS-CBN allegedly due to PMSIs inability to ensure the prevention of illegal retransmission and further rebroadcast of its signals, as well as the adverse effect of the rebroadcasts on the business 10 operations of its regional television stations. On May 13, 2002, ABS-CBN filed with the IPO a complaint for Violation of Laws Involving Property Rights, with Prayer for the Issuance of a Temporary Restraining Order and/or Writ of Preliminary Injunction, which was docketed as IPV No. 10 2002-0004. It alleged that PMSIs unauthorized rebroadcasting of Channels 2 and 23 infringed on its broadcasting rights and copyright. On July 2, 2002, the Bureau of Legal Affairs (BLA) of the IPO granted ABS-CBNs application for a temporary restraining order. On July 12, 2002, PMSI suspended its retransmission of Channels 2 and 23 and likewise filed a petition for certiorari with the Court of Appeals, which was docketed as CA-G.R. SP No. 71597. Subsequently, PMSI filed with the BLA a Manifestation reiterating that it is subject to the must-carry rule under Memorandum Circular No. 04-08-88. It also submitted a letter dated December 20, 2002 of then NTC Commissioner Armi Jane R. Borje to PMSI stating as follows: This refers to your letter dated December 16, 2002 requesting for regulatory guidance from this Commission in connection with the application and coverage of NTC Memorandum Circular No. 4-08-88, particularly Section 6 thereof, on mandatory carriage of television broadcast signals, to the direct-to-home (DTH) pay television services of Philippine Multi-Media System, Inc. (PMSI). Preliminarily, both DTH pay television and cable television services are broadcast services, the only difference being the medium of delivering such services (i.e. the former by satellite and the latter by cable). Both can carry broadcast signals to the remote areas, thus enriching the lives of the residents thereof through the dissemination of social, economic, educational information and cultural programs. The DTH pay television services of PMSI is equipped to provide nationwide DTH satellite services. Concededly, PMSIs DTH pay television services covers very much wider areas in terms of carriage of broadcast signals, including areas not reachable by cable television services thereby providing a better medium of dissemination of information to the public. In view of the foregoing and the spirit and intent of NTC memorandum Circular No. 4-08-88, particularly section 6 thereof, on mandatory carriage of television broadcast signals, DTH pay television services should be deemed covered by such NTC Memorandum Circular. For your guidance. (Emphasis added)
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On August 26, 2003, PMSI filed another Manifestation with the BLA that it received a letter dated July 24, 2003 from the NTC enjoining strict and immediate compliance with the must-carry rule under Memorandum Circular No. 04-08-88, to wit: Dear Mr. Abellada: Last July 22, 2003, the National Telecommunications Commission (NTC) received a letter dated July 17, 2003 from President/COO Rene Q. Bello of the International Broadcasting Corporation (IBC-Channel 13) complaining that your company, Dream Broadcasting System, Inc., has cut-off, without any notice or explanation whatsoever, to air the programs of IBC-13, a free-to-air television, to the detriment of the public. We were told that, until now, this has been going on. Please be advised that as a direct broadcast satellite operator, operating a direct-to-home (DTH) broadcasting system, with a provisional authority (PA) from the NTC, your company, along with cable television operators, are mandated to strictly comply with the existing policy of NTC on mandatory carriage of television broadcast signals as provided under Memorandum Circular No. 04-08-88, also known as the Revised Rules and Regulations Governing Cable Television System in the Philippines.

This mandatory coverage provision under Section 6.2 of said Memorandum Circular, requires all cable television system operators, operating in a community within the Grade A or B contours to must -carry the television signals of the authorized television broadcast stations, one of which is IBC-13. Said directive equally applies to your company as the circular was issued to give consumers and the public a wider access to more sources of news, information, entertainment and other programs/contents. This Commission, as the governing agency vested by laws with the jurisdiction, supervision and control over all public services, which includes direct broadcast satellite operators, and taking into consideration the paramount interest of the public in general, hereby directs you to immediately restore the signal of IBC-13 in your network programs, pursuant to existing circulars and regulations of the Commission. For strict compliance. (Emphasis added)
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Meanwhile, on October 10, 2003, the NTC issued Memorandum Circular No. 10-10-2003, entitled Implementing Rules and Regulations Governing Community Antenna/Cable Television (CATV) and Direct Broadcast Satellite (DBS) Services to Promote Competition in the Sector. Article 6, Section 8 thereof states: As a general rule, the reception, distribution and/or transmission by any CATV/DBS operator of any television signals without any agreement with or authorization from program/content providers are prohibited. On whether Memorandum Circular No. 10-10-2003 amended Memorandum Circular No. 04-08-88, the NTC explained to PMSI in a letter dated November 3, 2003 that: To address your query on whether or not the provisions of MC 10-10-2003 would have the effect of amending the provisions of MC 4-08-88 on mandatory carriage of television signals, the answer is in the negative. x xxx The Commission maintains that, MC 4-08-88 remains valid, subsisting and enforceable. Please be advised, therefore, that as duly licensed direct-to-home satellite television service provider authorized by this Commission, your company continues to be bound by the guidelines provided for under MC 04-08-88, specifically your obligation under its mandatory carriage provisions, in addition to your obligations under MC 1010-2003. (Emphasis added) Please be guided accordingly.
13

On December 22, 2003, the BLA rendered a decision finding that PMSI infringed the broadcasting rights and copyright of ABS-CBN and ordering it to permanently cease and desist from rebroadcasting Channels 2 and 23. On February 6, 2004, PMSI filed an appeal with the Office of the Director-General of the IPO which was docketed as Appeal No. 10-2004-0002. On December 23, 2004, it also filed with the Court of Appeals a Motion to Withdraw Petition; Alternatively, Memorandum of the Petition for Certiorari in CA-G.R. SP No. 71597, which was granted in a resolution dated February 17, 2005. On December 20, 2004, the Director-General of the IPO rendered a decision which states:
15

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in favor of PMSI, the dispositive portion of

WHEREFORE, premises considered, the instant appeal is hereby GRANTED. Accordingly, Decision No. 2003-01 dated 22 December 2003 of the Director of Bureau of Legal Affairs is hereby REVERSED and SET ASIDE. Let a copy of this Decision be furnished the Director of the Bureau of Legal Affairs for appropriate action, and the records be returned to her for proper disposition. The Documentation, Information and Technology Transfer Bureau is also given a copy for library and reference purposes. SO ORDERED.
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Thus, ABS-CBN filed a petition for review with prayer for issuance of a temporary restraining order and writ of preliminary injunction with the Court of Appeals, which was docketed as CA-G.R. SP No. 88092. On July 18, 2005, the Court of Appeals issued a temporary restraining order. Thereafter, ABS-CBN filed a petition for contempt against PMSI for continuing to rebroadcast Channels 2 and 23 despite the restraining order. The case was docketed as CA- G.R. SP No. 90762. On November 14, 2005, the Court of Appeals ordered the consolidation of CA-G.R. SP Nos. 88092 and 90762. In the assailed Decision dated July 12, 2006, the Court of Appeals sustained the findings of the Director-General of the 17 IPO and dismissed both petitions filed by ABS-CBN. ABS-CBNs motion for reconsideration was denied, hence, this petition. ABS-CBN contends that PMSIs unauthorized rebroadcasting of Channels 2 and 23 is an infringement of its broadcasting 18 rights and copyright under the Intellectual Property Code (IP Code); that Memorandum Circular No. 04-08-88 excludes DTH satellite television operators; that the Court of Appeals interpretation of the must -carry rule violates Section 9 of 19 Article III of the Constitution because it allows the taking of property for public use without payment of just compensation; that the Court of Appeals erred in dismissing the petition for contempt docketed as CA-G.R. SP No. 90762 without requiring respondents to file comment. Respondents, on the other hand, argue that PMSIs rebroadcasting of Channels 2 and 23 is sanctioned by Memorandum Circular No. 04-08-88; that the must-carry rule under the Memorandum Circular is a valid exercise of police power; and that the Court of Appeals correctly dismissed CA-G.R. SP No. 90762 since it found no need to exercise its power of contempt. After a careful review of the facts and records of this case, we affirm the findings of the Director-General of the IPO and the Court of Appeals. There is no merit in ABS-CBNs contention that PMSI violated its broadcasters rights under Section 211 of the IP Code which provides in part: Chapter XIV BROADCASTING ORGANIZATIONS Sec. 211.Scope of Right. - Subject to the provisions of Section 212, broadcasting organizations shall enjoy the exclusive right to carry out, authorize or prevent any of the following acts: 211.1. The rebroadcasting of their broadcasts; x xxx Neither is PMSI guilty of infringement of ABS-CBNs copyright under Section 177 of the IP Code which states that copyright or economic rights shall consist of the exclusive right to carry out, authorize or prevent the public performance of 20 the work (Section 177.6), and other communication to the public of the work (Section 177.7). Section 202.7 of the IP Code defines broadcasting as the transmission by wireless means for the public reception of sounds or of images or of representations thereof; such transmission by satellite is also broadcasting where the means for decrypting are provided to the public by the broadcasting organization or with its consent. On the other hand, rebroadcasting as defined in Article 3(g) of the International Convention for the Protection of Performers, Producers of Phonograms and Broadcasting Organizations, otherwise known as the 1961 Rome Convention, 21 of which the Republic of the Philippines is a signatory, is the simultaneous broadcasting by one broadcasting organization of the broadcast of another broadcasting organization.

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The Director-General of the IPO correctly found that PMSI is not engaged in rebroadcasting and thus cannot be considered to have infringed ABS-CBNs broadcasting rights and copyright, thus: That the Appellants [herein respondent PMSI] subscribers are able to view Appellees [herein petitioner ABS -CBN] programs (Channels 2 and 23) at the same time that the latter is broadcasting the same is undisputed. The question however is, would the Appellant in doing so be considered engaged in broadcasting. Section 202.7 of the IP Code states that broadcasting means the transmission by wireless means for the public reception of sounds or of images or of representations thereof; such transmission by satellite is also broadcasting where the means for decrypting are provided to the public by the broadcasting organization or with its consent. Section 202.7 of the IP Code, thus, provides two instances wherein there is broadcasting, to wit: 1. The transmission by wireless means for the public reception of sounds or of images or of representations thereof; and 2. The transmission by satellite for the public reception of sounds or of images or of representations thereof where the means for decrypting are provided to the public by the broadcasting organization or with its consent. It is under the second category that Appellants DTH satellite television service must be examined since it is satellite based. The elements of such category are as follows: 1. There is transmission of sounds or images or of representations thereof; 2. The transmission is through satellite; 3. The transmission is for public reception; and 4. The means for decrypting are provided to the public by the broadcasting organization or with its consent. It is only the presence of all the above elements can a determination that the DTH is broadcasting and consequently, rebroadcasting Appellees signals in violation of Sections 211 and 177 of the IP Code, may be arrived at. Accordingly, this Office is of the view that the transmission contemplated under Section 202.7 of the IP Code presupposes that the origin of the signals is the broadcaster. Hence, a program that is broadcasted is attributed to the broadcaster. In the same manner, the rebroadcasted program is attributed to the rebroadcaster. In the case at hand, Appellant is not the origin nor does it claim to be the origin of the programs broadcasted by the Appellee. Appellant did not make and transmit on its own but merely carried the existing signals of the Appellee. When Appellants subscribers view Appellees programs in Channels 2 and 23, they know that the origin thereof was the Appellee. Aptly, it is imperative to discern the nature of broadcasting. When a broadcaster transmits, the signals are scattered or dispersed in the air. Anybody may pick-up these signals. There is no restriction as to its number, type or class of recipients. To receive the signals, one is not required to subscribe or to pay any fee. One only has to have a receiver, and in case of television signals, a television set, and to tune-in to the right channel/frequency. The definition of broadcasting, wherein it is required that the transmission is wireless, all the more supports this discussion. Apparently, the undiscriminating dispersal of signals in the air is possible only through wireless means. The use of wire in transmitting signals, such as cable television, limits the recipients to those who are connected. Unlike wireless transmissions, in wirebased transmissions, it is not enough that one wants to be connected and possesses the equipment. The service provider, such as cable television companies may choose its subscribers.

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The only limitation to such dispersal of signals in the air is the technical capacity of the transmitters and other equipment employed by the broadcaster. While the broadcaster may use a less powerful transmitter to limit its coverage, this is merely a business strategy or decision and not an inherent limitation when transmission is through cable. Accordingly, the nature of broadcasting is to scatter the signals in its widest area of coverage as possible. On this score, it may be said that making public means that accessibility is undiscriminating as long as it [is] within the range of the transmitter and equipment of the broadcaster. That the medium through which the Appellant carries the Appellees sig nal, that is via satellite, does not diminish the fact that it operates and functions as a cable television. It remains that the Appellants transmission of signals via its DTH satellite television service cannot be considered within the purview of broadcasting. x xx x xxx This Office also finds no evidence on record showing that the Appellant has provided decrypting means to the public indiscriminately. Considering the nature of this case, which is punitive in fact, the burden of proving the existence of the elements constituting the acts punishable rests on the shoulder of the complainant. Accordingly, this Office finds that there is no rebroadcasting on the part of the Appellant of the Appellees programs on 22 Channels 2 and 23, as defined under the Rome Convention. Under the Rome Convention, rebroadcasting is the simultaneous broadcasting by one broadcasting organization of the 23 broadcast of another broadcasting organization. The Working Paper prepared by the Secretariat of the Standing Committee on Copyright and Related Rights defines broadcasting organizations as entities that take the financial and 24 editorial responsibility for the selection and arrangement of, and investment in, the transmitted content. Evidently, PMSI would not qualify as a broadcasting organization because it does not have the aforementioned responsibilities imposed upon broadcasting organizations, such as ABS-CBN. ABS-CBN creates and transmits its own signals; PMSI merely carries such signals which the viewers receive in its unaltered form. PMSI does not produce, select, or determine the programs to be shown in Channels 2 and 23. Likewise, it does not pass itself off as the origin or author of such programs. Insofar as Channels 2 and 23 are concerned, PMSI merely retransmits the same in accordance with Memorandum Circular 04-08-88. With regard to its premium channels, it buys the channels from content providers and transmits on an as-is basis to its viewers. Clearly, PMSI does not perform the functions of a broadcasting organization; thus, it cannot be said that it is engaged in rebroadcasting Channels 2 and 23. The Director-General of the IPO and the Court of Appeals also correctly found that PMSIs services are similar to a cable television system because the services it renders fall under cable retransmission, as described in the Working Paper, to wit: (G) Cable Retransmission 47. When a radio or television program is being broadcast, it can be retransmitted to new audiences by means of cable or wire. In the early days of cable television, it was mainly used to improve signal reception, particularly in so-called shadow zones, or to distribute the signals in large buildings or building complexes. With improvements in technology, cable operators now often receive signals from satellites before retransmitting them in an unaltered form to their subscribers through cable. 48. In principle, cable retransmission can be either simultaneous with the broadcast over-the-air or delayed (deferred transmission) on the basis of a fixation or a reproduction of a fixation. Furthermore, they might be unaltered or altered, for example through replacement of commercials, etc. In general, however, the term retransmission seems to be reserved for such transmissions which are both simultaneous and unaltered. 49. The Rome Convention does not grant rights against unauthorized cable retransmission. Without such a right, cable operators can retransmit both domestic and foreign over the air broadcasts simultaneously to their subscribers without 25 permission from the broadcasting organizations or other rightholders and without obligation to pay remuneration. (Emphasis added)

13

Thus, while the Rome Convention gives broadcasting organizations the right to authorize or prohibit the rebroadcasting of its broadcast, however, this protection does not extend to cable retransmission. The retransmission of ABS-CBNs signals by PMSI which functions essentially as a cable television does not therefore constitute rebroadcasting in violation of the formers intellectual property rights under the IP Code. It must be emphasized that the law on copyright is not absolute. The IP Code provides that: Sec. 184.Limitations on Copyright. 184.1. Notwithstanding the provisions of Chapter V, the following acts shall not constitute infringement of copyright: x xxx (h) The use made of a work by or under the direction or control of the Government, by the National Library or by educational, scientific or professional institutions where such use is in the public interest and is compatible with fair use; The carriage of ABS-CBNs signals by virtue of the must-carry rule in Memorandum Circular No. 04-08-88 is under the direction and control of the government though the NTC which is vested with exclusive jurisdiction to supervise, regulate 26 and control telecommunications and broadcast services/facilities in the Philippines. The imposition of the must-carry rule is within the NTCs power to promulgate rules and regulations, as public safety and interest may require, to encourage a larger and more effective use of communications, radio and television broadcasting facilities, and to maintain effective 27 competition among private entities in these activities whenever the Commission finds it reasonably feasible. As correctly observed by the Director-General of the IPO: Accordingly, the Must-Carry Rule under NTC Circular No. 4-08-88 falls under the foregoing category of limitations on copyright. This Office agrees with the Appellant [herein respondent PMSI] that the Must-Carry Rule is in consonance 28 with the principles and objectives underlying Executive Order No. 436, to wit: The Filipino people must be given wider access to more sources of news, information, education, sports event and entertainment programs other than those provided for by mass media and afforded television programs to attain a well informed, well-versed and culturally refined citizenry and enhance their socio-economic growth: WHEREAS, cable television (CATV) systems could support or supplement the services provided by television broadcast 29 facilities, local and overseas, as the national information highway to the countryside. The Court of Appeals likewise correctly observed that: [T]he very intent and spirit of the NTC Circular will prevent a situation whereby station owners and a few networks would have unfettered power to make time available only to the highest bidders, to communicate only their own views on public issues, people, and to permit on the air only those with whom they agreed contrary to the state policy that the (franchise) grantee like the petitioner, private respondent and other TV station owners, shall provide at all times sound and balanced programming and assist in the functions of public information and education. This is for the first time that we have a structure that works to accomplish explicit state policy goals.
30

Indeed, intellectual property protection is merely a means towards the end of making society benefit from the creation of its men and women of talent and genius. This is the essence of intellectual property laws, and it explains why certain products of ingenuity that are concealed from the public are outside the pale of protection afforded by the law. It also 31 explains why the author or the creator enjoys no more rights than are consistent with public welfare. Further, as correctly observed by the Court of Appeals, the must-carry rule as well as the legislative franchises granted to 32 both ABS-CBN and PMSI are in consonance with state policies enshrined in the Constitution, specifically Sections 9, 33 34 35 17, and 24 of Article II on the Declaration of Principles and State Policies. ABS-CBN was granted a legislative franchise under Republic Act No. 7966, Section 1 of whic h authorizes it to construct, operate and maintain, for commercial purposes and in the public interest, television and radio broadcasting in and throughout the Philippines x xx. Section 4 thereof mandates that it shall provide adequate public service ti me to enable

14

the government, through the said broadcasting stations, to reach the population on important public issues; provide at all times sound and balanced programming; promote public participation such as in community programming; assist in the functions of public information and education x xx. PMSI was likewise granted a legislative franchise under Republic Act No. 8630, Section 4 of which similarly states that it shall provide adequate public service time to enable the government, through the sai d broadcasting stations, to reach the population on important public issues; provide at all times sound and balanced programming; promote public participation such as in community programming; assist in the functions of public information and education x x x. Section 5, paragraph 2 of the same law provides that the radio spectrum is a finite resource that is a part of the national patrimony and the use thereof is a privilege conferred upon the grantee by the State and may be withdrawn anytime, after due pr ocess. In Telecom.& Broadcast Attys. of the Phils., Inc. v. COMELEC, the Court held that a franchise is a mere privilege which may be reasonably burdened with some form of public service. Thus: All broadcasting, whether by radio or by television stations, is licensed by the government. Airwave frequencies have to be allocated as there are more individuals who want to broadcast than there are frequencies to assign. A franchise is thus a privilege subject, among other things, to amendment by Congress in accordance with the constitutional provision that any such franchise or right granted . . . shall be subject to amendment, alteration or repeal by the Congress w hen the common good so requires. x xxx Indeed, provisions for COMELEC Time have been made by amendment of the franchises of radio and television broadcast stations and, until the present case was brought, such provisions had not been thought of as taking property without just compensation. Art. XII, 11 of the Constitution authorizes the amendment of franchises for the common good. What better measure can be conceived for the common good than one for free air time for the benefit not only of candidates but even more of the public, particularly the voters, so that they will be fully informed of the issues in an election? [I]t is the right of the viewers and listeners, not the right of the broadcasters, which is paramount. Nor indeed can there be any constitutional objection to the requirement that broadcast stations give free air time. Even in the United States, there are responsible scholars who believe that government controls on broadcast media can constitutionally be instituted to ensure diversity of views and attention to public affairs to further the system of free expression. For this purpose, broadcast stations may be required to give free air time to candidates in an election. Thus, Professor Cass R. Sunstein of the University of Chicago Law School, in urging reforms in regulations affecting the broadcast industry, writes: x xxx In truth, radio and television broadcasting companies, which are given franchises, do not own the airwaves and frequencies through which they transmit broadcast signals and images. They are merely given the temporary privilege of using them. Since a franchise is a mere privilege, the exercise of the privilege may reasonably be burdened with the 37 performance by the grantee of some form of public service. x x x There is likewise no merit to ABS-CBNs claim that PMSIs carriage of its signals is for a commercial purpose; that its being the countrys top broadcasting company, the availability of its signals allegedly enhances PMSIs attractiveness to 38 potential customers; or that the unauthorized carriage of its signals by PMSI has created competition between its Metro Manila and regional stations. ABS-CBN presented no substantial evidence to prove that PMSI carried its signals for profit; or that such carriage adversely affected the business operations of its regional stations. Except for the testimonies of its witnesses,[39] no studies, statistical data or information have been submitted in evidence. Administrative charges cannot be based on mere speculation or conjecture. The complainant has the burden of proving 40 41 by substantial evidence the allegations in the complaint. Mere allegation is not evidence, and is not equivalent to proof. Anyone in the country who owns a television set and antenna can receive ABS-CBNs signals for free. Other broadcasting organizations with free-to-air signals such as GMA-7, RPN-9, ABC-5, and IBC-13 can likewise be accessed for free. No
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payment is required to view the said channels because these broadcasting networks do not generate revenue from subscription from their viewers but from airtime revenue from contracts with commercial advertisers and producers, as well as from direct sales. In contrast, cable and DTH television earn revenues from viewer subscription. In the case of PMSI, it offers its customers premium paid channels from content providers like Star Movies, Star World, Jack TV, and AXN, among others, thus 43 allowing its customers to go beyond the limits of Free TV and Cable TV. It does not advertise itself as a local channel carrier because these local channels can be viewed with or without DTH television. Relevantly, PMSIs carriage of Channels 2 and 23 is material in arriving at the ratings and audience share of AB S-CBN and its programs. These ratings help commercial advertisers and producers decide whether to buy airtime from the network. Thus, the must-carry rule is actually advantageous to the broadcasting networks because it provides them with increased viewership which attracts commercial advertisers and producers. On the other hand, the carriage of free-to-air signals imposes a burden to cable and DTH television providers such as PMSI. PMSI uses none of ABS-CBNs resources or equipment and carries the signals and shoulders the costs without 44 any recourse of charging. Moreover, such carriage of signals takes up channel space which can otherwise be utilized for other premium paid channels. There is no merit to ABS-CBNs argument that PMSIs carriage of Channels 2 and 23 resulted in competition between its Metro Manila and regional stations. ABS-CBN is free to decide to pattern its regional programming in accordance with perceived demands of the region; however, it cannot impose this kind of programming on the regional viewers who are also entitled to the free-to-air channels. It must be emphasized that, as a national broadcasting organization, one of ABSCBNs responsibilities is to scatter its signals to the widest area of coverage as possible. That it should limit its signal reach for the sole purpose of gaining profit for its regional stations undermines public interest and deprives the viewers of their right to access to information. Indeed, television is a business; however, the welfare of the people must not be sacrificed in the pursuit of profit. The right 45 of the viewers and listeners to the most diverse choice of programs available is paramount. The Director-General correctly observed, thus: The Must-Carry Rule favors both broadcasting organizations and the public. It prevents cable television companies from excluding broadcasting organization especially in those places not reached by signal. Also, the rule prevents cable television companies from depriving viewers in far-flung areas the enjoyment of programs available to city viewers. In fact, this Office finds the rule more burdensome on the part of the cable television companies. The latter carries the television signals and shoulders the costs without any recourse of charging. On the other hand, the signals that are carried by cable television companies are dispersed and scattered by the television stations and anybody with a television set is free to pick them up. With its enormous resources and vaunted technological capabilities, Appellees [herein petitioner ABS -CBN] broadcast signals can reach almost every corner of the archipelago. That in spite of such capacity, it chooses to maintain regional stations, is a business decision. That the Must-Carry Rule adversely affects the profitability of maintaining such regional stations since there will be competition between them and its Metro Manila station is speculative and an attempt to extrapolate the effects of the rule. As discussed above, Appellants DTH satellite television services is of limited subscription. There was not even a showing on part of the Appellee the number of Appellants subscribers in one region as compared to non-subscribing television owners. In any event, if this Office is to engage in conjecture, such competition between the regional stations and the Metro Manila station will benefit the public as such competition will most likely result 46 in the production of better television programs. All told, we find that the Court of Appeals correctly upheld the decision of the IPO Director-General that PMSI did not infringe on ABS-CBNs intellectual property rights under the IP Code. The findings of facts of administrative bodies charged with their specific field of expertise, are afforded great weight by the courts, and in the absence of substantial showing that such findings are made from an erroneous estimation of the evidence presented, they are conclusive, and in 47 the interest of stability of the governmental structure, should not be disturbed. Moreover, the factual findings of the Court of Appeals are conclusive on the parties and are not reviewable by the Supreme Court. They carry even more weight when the Court of Appeals affirms the factual findings of a lower fact-finding 48 body, as in the instant case.

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There is likewise no merit to ABS-CBNs contention that the Memorandum Circular excludes from its coverage DTH television services such as those provided by PMSI. Section 6.2 of the Memorandum Circular requires all cable television system operators operating in a community within Grade A or B contours to carry the television signals of the 49 authorized television broadcast stations. The rationale behind its issuance can be found in the whereas clauses which state: Whereas, Cable Television Systems or Community Antenna Television (CATV) have shown their ability to offer additional programming and to carry much improved broadcast signals in the remote areas, thereby enriching the lives of the rest of the population through the dissemination of social, economic, educational information and cultural programs; Whereas, the national government supports the promotes the orderly growth of the Cable Television industry within the framework of a regulated fee enterprise, which is a hallmark of a democratic society; Whereas, public interest so requires that monopolies in commercial mass media shall be regulated or prohibited, hence, to achieve the same, the cable TV industry is made part of the broadcast media; Whereas, pursuant to Act 3846 as amended and Executive Order 205 granting the National Telecommunications Commission the authority to set down rules and regulations in order to protect the public and promote the general welfare, the National Telecommunications Commission hereby promulgates the following rules and regulations on Cable Television Systems; The policy of the Memorandum Circular is to carry improved signals in remote areas for the good of the general public and to promote dissemination of information. In line with this policy, it is clear that DTH television should be deemed covered by the Memorandum Circular. Notwithstanding the different technologies employed, both DTH and cable television have the ability to carry improved signals and promote dissemination of information because they operate and function in the same way. In its December 20, 2002 letter, the NTC explained that both DTH and cable television services are of a similar nature, the only difference being the medium of delivering such services. They can carry broadcast signals to the remote areas and possess the capability to enrich the lives of the residents thereof through the dissemination of social, economic, educational information and cultural programs. Consequently, while the Memorandum Circular refers to cable television, it should be understood as to include DTH television which provides essentially the same services. In Eastern Telecommunications Philippines, Inc. v. International Communication Corporation,
51 50

we held:

The NTC, being the government agency entrusted with the regulation of activities coming under its special and technical forte, and possessing the necessary rule-making power to implement its objectives, is in the best position to interpret its own rules, regulations and guidelines. The Court has consistently yielded and accorded great respect to the interpretation by administrative agencies of their own rules unless there is an error of law, abuse of power, lack of jurisdiction or grave 52 abuse of discretion clearly conflicting with the letter and spirit of the law. With regard to the issue of the constitutionality of the must-carry rule, the Court finds that its resolution is not necessary in the disposition of the instant case. One of the essential requisites for a successful judicial inquiry into constitutional 53 questions is that the resolution of the constitutional question must be necessary in deciding the case. In Spouses 54 Mirasol v. Court of Appeals, we held: As a rule, the courts will not resolve the constitutionality of a law, if the controversy can be settled on other grounds. The policy of the courts is to avoid ruling on constitutional questions and to presume that the acts of the political departments are valid, absent a clear and unmistakable showing to the contrary. To doubt is to sustain. This presumption is based on the doctrine of separation of powers. This means that the measure had first been carefully studied by the legislative and 55 executive departments and found to be in accord with the Constitution before it was finally enacted and approved. The instant case was instituted for violation of the IP Code and infringement of ABS-CBNs broadcasting rights and copyright, which can be resolved without going into the constitutionality of Memorandum Circular No. 04-08-88. As held by the Court of Appeals, the only relevance of the circular in this case is whether or not compliance therewith should be considered manifestation of lack of intent to commit infringement, and if it is, whether such lack of intent is a valid defense 56 against the complaint of petitioner.

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The records show that petitioner assailed the constitutionality of Memorandum Circular No. 04-08-88 by way of a 57 collateral attack before the Court of Appeals. In Philippine National Bank v. Palma, we ruled that for reasons of public policy, the constitutionality of a law cannot be collaterally attacked. A law is deemed valid unless declared null and void by 58 a competent court; more so when the issue has not been duly pleaded in the trial court. As a general rule, the question of constitutionality must be raised at the earliest opportunity so that if not raised in the 59 pleadings, ordinarily it may not be raised in the trial, and if not raised in the trial court, it will not be considered on appeal. 60 In Philippine Veterans Bank v. Court of Appeals, we held: We decline to rule on the issue of constitutionality as all the requisites for the exercise of judicial review are not present herein. Specifically, the question of constitutionality will not be passed upon by the Court unless, at the first opportunity, it is properly raised and presented in an appropriate case, adequately argued, and is necessary to a 61 determination of the case, particularly where the issue of constitutionality is the very lismotapresented.x x x Finally, we find that the dismissal of the petition for contempt filed by ABS-CBN is in order. Indirect contempt may either be initiated (1) motuproprio by the court by issuing an order or any other formal charge requiring the respondent to show cause why he should not be punished for contempt or (2) by the filing of a verified 62 petition, complying with the requirements for filing initiatory pleadings. ABS-CBN filed a verified petition before the Court of Appeals, which was docketed CA G.R. SP No. 90762, for PMSIs alleged disobedience to the Resolution and Temporary Restraining Order, both dated July 18, 2005, issued in CA-G.R. SP No. 88092. However, after the cases were consolidated, the Court of Appeals did not require PMSI to comment on the petition for contempt. It ruled on the merits of CA-G.R. SP No. 88092 and ordered the dismissal of both petitions. ABS-CBN argues that the Court of Appeals erred in dismissing the petition for contempt without having ordered respondents to comment on the same. Consequently, it would have us reinstate CA-G.R. No. 90762 and order respondents to show cause why they should not be held in contempt. It bears stressing that the proceedings for punishment of indirect contempt are criminal in nature. The modes of procedure 63 and rules of evidence adopted in contempt proceedings are similar in nature to those used in criminal prosecutions. While it may be argued that the Court of Appeals should have ordered respondents to comment, the issue has been rendered moot in light of our ruling on the merits. To order respondents to comment and have the Court of Appeals conduct a hearing on the contempt charge when the main case has already been disposed of in favor of PMSI would be circuitous. Where the issues have become moot, there is no justiciable controversy, thereby rendering the resolution of 64 the same of no practical use or value. WHEREFORE, the petition is DENIED. The July 12, 2006 Decision of the Court of Appeals in CA-G.R. SP Nos. 88092 and 90762, sustaining the findings of the Director-General of the Intellectual Property Office and dismissing the petitions filed by ABS-CBN Broadcasting Corporation, and the December 11, 2006 Resolution denying the motion for reconsideration, are AFFIRMED. SO ORDERED. ACONSUELO YNARES-SANTIAGO Associate Justice

WE CONCUR: MA. ALICIA AUSTRIA-MARTINEZ Associate Justice MINITA V. CHICO-NAZARIO Associate Justice TERESITA J. LEONARDO-DE CASTRO Associate Justice A T T E STATION 18 ANTONIO EDUARDO B. NACHURA Associate Justice

I attest that the conclusions in the above decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. CONSUELO YNARES-SANTIAGO Associate Justice Chairperson, Third Division CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, it is hereby certified that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice Footnotes 1 Rollo, pp. 65-178. 2 Id. at 8-43. 3 Id. at 54-57. 4 ABS-CBN was granted a franchise under Republic Act No. 7966, entitled AN ACT GRANTING THE ABS-CBN BROADCASTING CORPORATION A FRANCHISE TO CONSTRUCT, INSTALL, OPERATE AND MAINTAIN TELEVISION AND RADIO BROADCASTING STATIONS IN THE PHILIPPINES, AND FOR OTHER PURPOSES. 5 AN ACT GRANTING THE PHILIPPINE MULTI-MEDIA SYSTEM, INC., A FRANCHISE TO CONSTRUCT, INSTALL, ESTABLISH, OPERATE AND MAINTAIN RADIO AND TELEVISION STATIONS IN THE PHILIPPINES. 6 Rollo, p. 316. 7 Id. at 317. 8 Revised Rules and Regulations Governing Cable Television Systems in the Philippines. 9 6.2. Mandatory Coverage 6.2.1. A cable TV system operating in a community which is within the Grade A or Grade B contours of an authorized TV broadcast station or stations must carry the TV signals of these stations. 10 Rollo, p. 322. 11 Id. at 852. 12 Id. at 853-854. 13 Id. at 857. 14 Id. at 567-590. Penned by Estrellita Beltran-Abelardo, Director, Bureau of Legal Affairs. 15 Idat 793-811. Penned by Director-General Emma C. Francisco. 16 Id. at 811. 17 Id. at 43. 18 Republic Act No. 8923, effective January 1, 1998. 19 Article III, Section 9 provides: Private property shall not be taken for public use without just compensation. 20 Sec. 177.Copy or Economic Rights. - Subject to the provisions of Chapter VIII, copyright or economic rights shall consist of the exclusive right to carry out, authorize or prevent the following acts: x xxx 177.6. Public performance of the work; and 177.7. Other communication to the public of the work (Sec. 5, P. D. No. 49a) 21 Entered into force on September 25, 1984. source: http://www.wipo.int/treaties/en/ShowResults.jsp?lang=en&treaty_id=17. 22 Rollo, pp. 805-809. 23 Eighth Session, Geneva, November 4-8, 2002. 24 Id.at paragraph 58, page 12. 25 Id. at paragraphs 47-49, page 10. 26 E.O. No. 546, Sec. 15.Functions of the Commission. The Commission shall exercise the following functions: a. Issue Certificate of Public Convenience for the operation of communications utilities and services, radio communications systems, wire or wireless telephone or telegraph systems, radio and television broadcasting system and other similar public utilities; b. Establish, prescribe and regulate areas of operation of particular operators of public service communications; and determine and prescribe charges or rates pertinent to the operation of such public utility facilities and services except in cases where charges or rates are established by international bodies or associations of which the Philippines is a participating member or by bodies recognized by the Philippine Government as the proper arbiter of such charges or rates; c. Grant permits for the use of radio frequencies for wireless telephone and telegraph systems and radio communication systems including amateur radio stations and radio and television broadcasting systems; d. Sub-allocate series of frequencies of bands allocated by the International Telecommunications Union to the specific services; e. Establish and prescribe rules, regulations, standards, specifications in all cases related to the issued Certificate of Public Convenience and administer and enforce the same; f. Coordinate and cooperate with government agencies and other entities concerned with any aspect involving communications with a view to continuously improve the communications service in the country; g. Promulgate such rules and regulations, as public safety and interest may require, to encourage a larger and more effective use of communications, radio and television broadcasting facilities, and to maintain effective competition among private entities in these activities whenever the Commission finds it reasonably feasible; h. Supervise and inspect the operation of radio stations and telecommunications facilities; i. Undertake the examination and licensing of radio operators; j. Undertake, whenever necessary, the registration of radio transmitters and transceivers; and k. Perform such other functions as may be prescribed by law. 27 Id. Section 15 (g). 28 PRESCRIBING POLICY GUIDELINES TO GOVERN THE OPERATIONS OF CABLE TELEVISION IN THE PHILIPPINES. 29 Rollo, p. 810. 30 Id. at 42. 31 Fr. RanhilloCallangan Aquino, Intellectual Property Law: Comments and Annotations, 2003, p. 5. 32 SEC. 9. The State shall promote a just and dynamic social order that will ensure the prosperity and independence of the nation and free the people from poverty through policies that provide adequate social services, promote full employment, a rising standard of living, and an improved quality of life for all.

19

33

SEC. 17. The State shall give priority to education, science and technology, arts, culture, and sports to foster patriotism and nationalism, accelerate social progress, and promote total human liberation and development. 34 SEC. 24. The State recognizes the vital role of communication and information in nation-building. 35 Rollo, p. 40. 36 352 Phil. 153 (1998). 37 Id. at 171-174. 38 Rollo, pp. 129-130. 39 Id. at 134. 40 Artuz v. Court of Appeals, 417 Phil. 588, 597 (2001). 41 Navarro v. Clerk of Court, A.M. No.P-05-1962, February 17, 2005, 451 SCRA 626, 629. 42 Rollo, Comment, p. 1249. 43 http://www.dreamsatellite.com/about.htm 44 Rollo, p. 810. 45 Telecom.& Broadcast Attys. of the Phils.,Inc v. COMELEC, 352 Phil. 153, 173 (1998). 46 Rollo, pp. 810-811. 47 Ocampo v. Salalila, 382 Phil. 522, 532 (2000). 48 Gala v. Ellice Agro-Industrial Corporation, G.R. No. 156819, December 11, 2003, 418 SCRA 431, 444. 49 Supra note 9. 50 Supra note 11. 51 G.R. No. 135992, January 31, 2006, 481 SCRA 163. 52 Id. at 166-167. 53 Meralco v. Secretary of Labor, 361 Phil. 845, 867 (1999). 54 403 Phil. 760 (2001). 55 Id. at 774. 56 Rollo, p. 41; citing the Decision of the Director-General of the IPO. 57 G.R. No. 157279, August 9, 2005, 466 SCRA 307. 58 Id. at 322-323. 59 Joaquin G. Bernas, The 1987 Constitution of the Republic of the Philippines: A Commentary, p. 858 (1996), citing People v. Vera, 65 Phil. 56 (1937). 60 G.R. No. 132561, June 30, 2005, 462 SCRA 336. 61 Id. at 349. 62 Montenegro v. Montenegro, G.R. No. 156829, June 8, 2004. 63 Soriano v. Court of Appeals, G.R. No. 128938, June 4, 2004, 431 SCRA 1, 7-8 64 Delgado v. Court of Appeals, G.R. No. 137881, August 19, 2005, 467 SCRA 418, 428.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 164774 April 12, 2006 STAR PAPER CORPORATION, JOSEPHINE ONGSITCO & SEBASTIAN CHUA, Petitioners, vs. RONALDO D. SIMBOL, WILFREDA N. COMIA & LORNA E. ESTRELLA, Respondents. DECISION PUNO, J.: We are called to decide an issue of first impression: whether the policy of the employer banning spouses from working in the same company violates the rights of the employee under the Constitution and the Labor Code or is a valid exercise of management prerogative. At bar is a Petition for Review on Certiorari of the Decision of the Court of Appeals dated August 3, 2004 in CA-G.R. SP No. 73477 reversing the decision of the National Labor Relations Commission (NLRC) which affirmed the ruling of the Labor Arbiter. Petitioner Star Paper Corporation (the company) is a corporation engaged in trading principally of paper products. Josephine Ongsitco is its Manager of the Personnel and Administration Department while Sebastian Chua is its Managing Director. The evidence for the petitioners show that respondents Ronaldo D. Simbol (Simbol), Wilfreda N. Comia (Comia) and 1 Lorna E. Estrella (Estrella) were all regular employees of the company.

20

Simbol was employed by the company on October 27, 1993. He met Alma Dayrit, also an employee of the company, whom he married on June 27, 1998. Prior to the marriage, Ongsitco advised the couple that should they decide to get 2 married, one of them should resign pursuant to a company policy promulgated in 1995, viz.: 1. New applicants will not be allowed to be hired if in case he/she has [a] relative, up to [the] 3rd degree of relationship, already employed by the company. 2. In case of two of our employees (both singles [sic], one male and another female) developed a friendly relationship during the course of their employment and then decided to get married, one of them should 3 resign to preserve the policy stated above. Simbol resigned on June 20, 1998 pursuant to the company policy.
4

Comia was hired by the company on February 5, 1997. She met Howard Comia, a co-employee, whom she married on June 1, 2000. Ongsitco likewise reminded them that pursuant to company policy, one must resign should they decide to 5 get married. Comia resigned on June 30, 2000. Estrella was hired on July 29, 1994. She met LuisitoZuiga (Zuiga), also a co-worker. Petitioners stated that Zuiga, a married man, got Estrella pregnant. The company allegedly could have terminated her services due to immorality but she 6 opted to resign on December 21, 1999. The respondents each signed a Release and Confirmation Agreement. They stated therein that they have no money and 7 property accountabilities in the company and that they release the latter of any claim or demand of whatever nature. Respondents offer a different version of their dismissal. Simbol and Comia allege that they did not resign voluntarily; they were compelled to resign in view of an illegal company policy. As to respondent Estrella, she alleges that she had a relationship with co-worker Zuiga who misrepresented himself as a married but separated man. After he got her pregnant, she discovered that he was not separated. Thus, she severed her relationship with him to avoid dismissal due to the company policy. On November 30, 1999, she met an accident and was advised by the doctor at the Orthopedic Hospital to recuperate for twenty-one (21) days. She returned to work on December 21, 1999 but she found out that her name was on-hold at the gate. She was denied entry. She was directed to proceed to the personnel office where one of the staff handed her a memorandum. The memorandum stated that she was being dismissed for immoral conduct. She refused to sign the memorandum because she was on leave for twenty-one (21) days and has not been given a chance to explain. The management asked her to write an explanation. However, after submission of the explanation, she was nonetheless dismissed by the company. Due to her urgent need for money, she later submitted a letter of resignation in 8 exchange for her thirteenth month pay. Respondents later filed a complaint for unfair labor practice, constructive dismissal, separation pay and attorneys fees. They averred that the aforementioned company policy is illegal and contravenes Article 136 of the Labor Code. They also contended that they were dismissed due to their union membership. On May 31, 2001, Labor Arbiter Melquiades Sol del Rosario dismissed the complaint for lack of merit, viz.: [T]his company policy was decreed pursuant to what the respondent corporation perceived as management prerogative. This management prerogative is quite broad and encompassing for it covers hiring, work assignment, working method, time, place and manner of work, tools to be used, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay-off of workers and the discipline, dismissal and recall of workers. Except as provided for or limited by special law, an employer is free to regulate, according to his own discretion and judgment all the 9 aspects of employment. (Citations omitted.) On appeal to the NLRC, the Commission affirmed the decision of the Labor Arbiter on January 11, 2002. Respondents filed a Motion for Reconsideration but was denied by the NLRC in a Resolution They appealed to respondent court via Petition for Certiorari.
11 10

dated August 8, 2002.

In its assailed Decision dated August 3, 2004, the Court of Appeals reversed the NLRC decision, viz.:

21

WHEREFORE, premises considered, the May 31, 2002 (sic) Decision of the National Labor Relations Commission is hereby REVERSED and SET ASIDE and a new one is entered as follows: (1) Declaring illegal, the petitioners dismissal from employment and ordering private respondents to reinstate petitioners to their former positions without loss of seniority rights with full backwages from the time of their dismissal until actual reinstatement; and (2) Ordering private respondents to pay petitioners attorneys fees amounting to 10% of the award and 13 the cost of this suit. On appeal to this Court, petitioners contend that the Court of Appeals erred in holding that: 1. x xx the subject 1995 policy/regulation is violative of the constitutional rights towards marriage and the family of employees and of Article 136 of the Labor Code; and 2. xxx respondents resignations were far from voluntary. We affirm. The 1987 Constitution
15 14

12

states our policy towards the protection of labor under the following provisions, viz.:

Article II, Section 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare. x xx Article XIII, Sec. 3. The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits as may be provided by law. The State shall promote the principle of shared responsibility between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and growth. The Civil Code likewise protects labor with the following provisions: Art. 1700. The relation between capital and labor are not merely contractual. They are so impressed with public interest that labor contracts must yield to the common good. Therefore, such contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor and similar subjects. Art. 1702. In case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer. The Labor Code is the most comprehensive piece of legislation protecting labor. The case at bar involves Article 136 of the Labor Code which provides: Art. 136. It shall be unlawful for an employer to require as a condition of employment or continuation of employment that a woman employee shall not get married, or to stipulate expressly or tacitly that upon getting married a woman employee shall be deemed resigned or separated, or to actually dismiss, discharge, discriminate or otherwise prejudice a woman employee merely by reason of her marriage.

22

Respondents submit that their dismissal violates the above provision. Petitioners allege that its policy "may appear to be contrary to Article 136 of the Labor Code" but it assumes a new meaning if read together with the first paragraph of the rule. The rule does not require the woman employee to resign. The employee spouses have the right to choose who between them should resign. Further, they are free to marry persons other than co-employees. Hence, it is not the marital status of the employee, per se, that is being discriminated. It is only intended to carry out its no-employment-for-relatives16 within-the-third-degree-policy which is within the ambit of the prerogatives of management. It is true that the policy of petitioners prohibiting close relatives from working in the same company takes the nature of an anti-nepotism employment policy. Companies adopt these policies to prevent the hiring of unqualified persons based on 17 their status as a relative, rather than upon their ability. These policies focus upon the potential employment problems arising from the perception of favoritism exhibited towards relatives. With more women entering the workforce, employers are also enacting employment policies specifically prohibiting spouses from working for the same company. We note that two types of employment policies involve spouses: policies banning only spouses from working in the same company (no-spouse employment policies), and those banning all immediate family members, including spouses, from working in the same company (anti-nepotism employment 18 policies). Unlike in our jurisdiction where there is no express prohibition on marital discrimination, there are twenty state statutes 21 in the United States prohibiting marital discrimination. Some state courts have been confronted with the issue of whether no-spouse policies violate their laws prohibiting both marital status and sex discrimination. In challenging the anti-nepotism employment policies in the United States, complainants utilize two theories of employment discrimination: the disparatetreatment and the disparate impact. Under the disparate treatment analysis, the plaintiff must prove that an employment policy is discriminatory on its face. No-spouse employment policies requiring an employee of a particular sex to either quit, transfer, or be fired are facially discriminatory. For example, an employment policy prohibiting the employer from hiring wives of male employees, but not husbands of female employees, 22 is discriminatory on its face. On the other hand, to establish disparate impact, the complainants must prove that a facially neutral policy has a disproportionate effect on a particular class. For example, although most employment policies do not expressly indicate 23 which spouse will be required to transfer or leave the company, the policy often disproportionately affects one sex. The state courts rulings on the issue depend on their interpretation of the scope of marital status discrimination within th e meaning of their respective civil rights acts. Though they agree that the term "marital status" encompasses discrimination based on a person's status as either married, single, divorced, or widowed, they are divided on whether the term has a 24 broader meaning. Thus, their decisions vary. The courts narrowly interpreting marital status to refer only to a person's status as married, single, divorced, or widowed reason that if the legislature intended a broader definition it would have either chosen different language or specified its intent. They hold that the relevant inquiry is if one is married rather than to whom one is married. They construe marital status discrimination to include only whether a person is single, married, divorced, or widowed and not the "identity, occupation, and place of employment of one's spouse." These courts have upheld the questioned policies and ruled that they did not violate the marital status discrimination provision of their respective state statutes. The courts that have broadly construed the term "marital status" rule that it encompassed the identity, occupation and employment of one's spouse. They strike down the no-spouse employment policies based on the broad legislative intent of the state statute. They reason that the no-spouse employment policy violate the marital status provision because it arbitrarily discriminates against all spouses of present employees without regard to the actual effect on the individual's 27 qualifications or work performance. These courts also find the no-spouse employment policy invalid for failure of the employer to present any evidence of business necessity other than the general perception that spouses in the same 28 workplace might adversely affect the business. They hold that the absence of such a bona fide occupational 29 qualification invalidates a rule denying employment to one spouse due to the current employment of the other spouse 30 in the same office. Thus, they rule that unless the employer can prove that the reasonable demands of the business require a distinction based on marital status and there is no better available or acceptable policy which would better accomplish the business purpose, an employer may not discriminate against an employee based on the identity of the 31 employees spouse. This is known as the bona fide occupational qualification exception.
26 25 19 20

23

We note that since the finding of a bona fide occupational qualification justifies an employers no -spouse rule, the exception is interpreted strictly and narrowly by these state courts. There must be a compelling business necessity for 32 which no alternative exists other than the discriminatory practice. To justify a bona fide occupational qualification, the employer must prove two factors: (1) that the employment qualification is reasonably related to the essential operation of the job involved; and, (2) that there is a factual basis for believing that all or substantially all persons meeting the 33 qualification would be unable to properly perform the duties of the job. The concept of a bona fide occupational qualification is not foreign in our jurisdiction. We employ the standard of reasonableness of the company policy which is parallel to the bona fide occupational qualification requirement. In the recent case of Duncan Association of Detailman-PTGWO and Pedro Tecson v. GlaxoWellcome Philippines, 34 Inc., we passed on the validity of the policy of a pharmaceutical company prohibiting its employees from marrying employees of any competitor company. We held that Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors. We considered the prohibition against personal or marital relationships with employees of competitor companies upon Glaxos employees reasonable under the circumstances because relationships of that nature might compromise the interests of Glaxo. In laying down the assailed company policy, we recognized that Glaxo only aims to protect its interests against the possibility that a 35 competitor company will gain access to its secrets and procedures. The requirement that a company policy must be reasonable under the circumstances to qualify as a valid exercise of management prerogative was also at issue in the 1997 case of Philippine Telegraph and Telephone Company v. 36 NLRC. In said case, the employee was dismissed in violation of petitioners policy of disqualifying from work any woman worker who contracts marriage. We held that the company policy violates the right against discrimination afforded all women workers under Article 136 of the Labor Code, but established a permissible exception, viz.: [A] requirement that a woman employee must remain unmarried could be justified as a "bona fide occupational qualification," or BFOQ, where the particular requirements of the job would justify the same, but not on the ground of a general principle, such as the desirability of spreading work in the workplace. A requirement of that nature would be valid 37 provided it reflects an inherent quality reasonably necessary for satisfactory job performance. (Emphases supplied.) The cases of Duncan and PT&T instruct us that the requirement of reasonableness must be clearly established to uphold the questioned employment policy. The employer has the burden to prove the existence of a reasonable business necessity. The burden was successfully discharged in Duncan but not in PT&T. We do not find a reasonable business necessity in the case at bar. Petitioners sole contention that "the company did not just want to have two (2) or more of its employees related between 38 the third degree by affinity and/or consanguinity" is lame. That the second paragraph was meant to give teeth to the first 39 paragraph of the questioned rule is evidently not the valid reasonable business necessity required by the law. It is significant to note that in the case at bar, respondents were hired after they were found fit for the job, but were asked to resign when they married a co-employee. Petitioners failed to show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an employee of the Repacking Section, could be detrimental to its business operations. Neither did petitioners explain how this detriment will happen in the case of WilfredaComia, then a Production Helper in the Selecting Department, who married Howard Comia, then a helper in the cutter-machine. The policy is premised on the mere fear that employees married to each other will be less efficient. If we uphold the questioned rule without valid justification, the employer can create policies based on an unproven presumption of a perceived danger at the expense of an employees right to security of tenure. Petitioners contend that their policy will apply only when one employee marries a co-employee, but they are free to marry persons other than co-employees. The questioned policy may not facially violate Article 136 of the Labor Code but it creates a disproportionate effect and under the disparate impact theory, the only way it could pass judicial scrutiny is a showing that it is reasonable despite the discriminatory, albeit disproportionate, effect. The failure of petitioners to prove a legitimate business concern in imposing the questioned policy cannot prejudice the employees right to be free from 40 arbitrary discrimination based upon stereotypes of married persons working together in one company. Lastly, the absence of a statute expressly prohibiting marital discrimination in our jurisdiction cannot benefit the petitioners. The protection given to labor in our jurisdiction is vast and extensive that we cannot prudently draw inferences 41 from the legislatures silence that married persons are not protected under our Constitution and declare valid a policy

24

based on a prejudice or stereotype. Thus, for failure of petitioners to present undisputed proof of a reasonable business necessity, we rule that the questioned policy is an invalid exercise of management prerogative. Corollarily, the issue as to whether respondents Simbol and Comia resigned voluntarily has become moot and academic. As to respondent Estrella, the Labor Arbiter and the NLRC based their ruling on the singular fact that her resignation letter was written in her own handwriting. Both ruled that her resignation was voluntary and thus valid. The respondent court failed to categorically rule whether Estrella voluntarily resigned but ordered that she be reinstated along with Simbol and Comia. Estrella claims that she was pressured to submit a resignation letter because she was in dire need of money. We examined the records of the case and find Estrellas contention to be more in accord with the evidence. While findings of fact by administrative tribunals like the NLRC are generally given not only respect but, at times, finality, this rule admits of 42 exceptions, as in the case at bar. Estrella avers that she went back to work on December 21, 1999 but was dismissed due to her alleged immoral conduct. At first, she did not want to sign the termination papers but she was forced to tender her resignation letter in exchange for her thirteenth month pay. The contention of petitioners that Estrella was pressured to resign because she got impregnated by a married man and 43 she could not stand being looked upon or talked about as immoral is incredulous. If she really wanted to avoid embarrassment and humiliation, she would not have gone back to work at all. Nor would she have filed a suit for illegal dismissal and pleaded for reinstatement. We have held that in voluntary resignation, the employee is compelled by personal reason(s) to dissociate himself from employment. It is done with the intention of relinquishing an office, 44 accompanied by the act of abandonment. Thus, it is illogical for Estrella to resign and then file a complaint for illegal dismissal. Given the lack of sufficient evidence on the part of petitioners that the resignation was voluntary, Estrellas dismissal is declared illegal. IN VIEW WHEREOF, the Decision of the Court of Appeals in CA-G.R. SP No. 73477 dated August 3, 2004 is AFFIRMED.1avvphil.net SO ORDERED. REYNATO S. PUNO Associate Justice WE CONCUR: ANGELINA SANDOVAL-GUTIERREZ Associate Justice RENATO C. CORONA Associate Justice CANCIO C. GARCIA
Associate Justice ATTESTATION I attest that the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Associate Justice Chairman CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairmans Attestation, it is hereby certified tha t the conclusions in the above Decision were reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. ARTEMIO V. PANGANIBAN Chief Justice Footnotes

ADOLFO S. AZCUNA Asscociate Justice

25

1 2

Petition for Review on Certiorari, 2; rollo, p. 9. The records do not state the exact date when the policy in question was promulgated. The date of reference is "sometime in 1995." 3 Petition for Review on Certiorari, p. 3; rollo, p. 10. 4 Id. at 4; Id. at 11. 5 Ibid. 6 Ibid. 7 Petition for Review on Certiorari, pp. 4-5; rollo, pp. 11-12. See CA rollo, pp. 40-49. 8 CA Decision, p. 4; rollo, p. 29. 9 Decision of Labor Arbiter Melquiades Sol del Rosario; CA rollo, pp. 40-49. 10 Resolution, p. 7; CA rollo, p. 36. 11 Resolution; Id. at 37. 12 Should be January 11, 2002. 13 CA Decision, p. 11; rollo, p. 36. 14 Petition, p. 7; rollo, p. 14. Lower case in the original. 15 The questioned Decision also invokes Article II, Section 12. The State recognizes the sanctity of family life and shall protect and strengthen the family as a basic autonomous social institution. It shall equally protect the life of the mother and the life of the unborn from conception. The natural and primary right and duty of parents in the rearing of the youth for civic efficiency and the development of moral character shall receive the support of the Government. 16 Memorandum [for Petitioners], p. 11; rollo, p. 73. 17 A. Giattina, Challenging No-Spouse Employment Policies As Marital Status Discrimination: A Balancing Approach, 33 Wayne L. Rev. 1111 (Spring, 1987). 18 Ibid. 19 See Note 23, Duncan Association of Detailman-PTGWO and Pedro Tecson v. GlaxoWellcome Philippines, Inc., G.R. No. 162994, September 17, 2004. 20 ALASKA STAT. 18.80.200 (1986); CAL. GOV'T CODE 12940 (West 1980 & Supp. 1987); CONN. GEN. STAT. 46a-60 (1986); DEL. CODE ANN. tit. 19, 711 (1985); D.C. CODE ANN. 1-2512 (1981); FLA.STAT. 760.01 (1986); HAWAII REV. STAT. 378-2 (1985); ILL.REV. STAT. ch. 68, 1- 103, 2-102 (Supp. 1986); MD.ANN. CODE art.49B, 16 (1986); MICH. COMP. LAWS ANN. 37.2202 (West 1985); MINN. STAT. ANN. 363.03 (West Supp. 1987); MONT.CODE ANN. 49-2-303 (1986); NEB. REV. STAT. 48-1104 (1984); N.H. REV. STAT. ANN. 354-A:2 (1984); N.J. REV. STAT. 10:5-12 (1981 & Supp. 1986); N.Y. EXEC. LAW 296 (McKinney 1982 & Supp. 1987); N.D. CENT. CODE 14-02.4-03 (1981 & Supp. 1985); OR. REV. STAT. 659.030 (1985); WASH. REV. CODE 49.60.180 (Supp. 1987); WIS.STAT. 111.321 (Supp. 1986). Cited in Note 34, A. Giattina, supra note 18. 21 State courts in Michigan, Minnesota, Montana, New York, and Washington have interpreted the marital status provision of their respective state statutes. See Note 10, A. Giattina, supra note 18. 22 Supra note 18. 23 Ibid. 24 Ibid. 25 Whirlpool Corp. v. Michigan Civil Rights Comm'n, 425 Mich. 527, 390 N.W.2d 625 (1986); Maryland Comm'n on Human Relations v. Greenbelt Homes, Inc., 300 Md. 75, 475 A.2d 1192 (1984); Manhattan Pizza Hut, Inc. v. New York State Human Rights Appeal Bd., 51 N.Y.2d 506, 434 N.Y.S.2d 961, 415 N.E.2d 950 (1980); Thompson v. Sanborn's Motor Express Inc., 154 N.J. Super. 555, 382 A.2d 53 (1977). 26 Ross v. Stouffer Hotel Co., 72 Haw. 350, 816 P.2d 302 (1991); Thompson v. Board of Trustees, 192 Mont. 266, 627 P.2d 1229 (1981); Kraft, Inc. v. State, 284 N.W.2d 386 (Minn.1979); Washington Water Power Co. v. Washington State Human Rights Comm'n, 91 Wash.2d 62, 586 P.2d 1149 (1978). 27 See note 55, A. Giattina, supra note 18. 28 See note 56, ibid. 29 Also referred to as BFOQ. 30 See note 67, A. Giattina, supra note 18. 31 See Muller v. BP Exploration (Alaska) Inc., 923 P.2d 783, 73 Fair Empl.Prac.Cas. (BNA) 579, 69. 32 See note 117, A. Giattina, supra note 18. 33 Richard G. Flood and Kelly A. Cahill, The River Bend Decision and How It Affects Municipalities Personnel Rule and Regulatio ns, Illinois Municipal Review, June 1993, p. 7. 34 G.R. No. 162994, September 17, 2004. 35 Ibid. 36 G.R. No. 118978, May 23, 1997. 37 Ibid. 38 Petition, p. 9; rollo, p. 16. 39 Ibid. 40 See A. Giattina, supra note 18. 41 See dissenting opinion of Chief Justice Compton in Muller v. BP Exploration (Alaska) Inc., 923 P.2d 783 (1996). 42 In Employees Association of the Philippine American Life Insurance Co. v. NLRC (G.R. No. 82976, July 26, 1991), the established exceptions are as follows: a) the conclusion is a finding of fact grounded on speculations, surmises and conjectures; b) the inferences made are manifestly mistaken, absurd or impossible; c) there is a grave abuse of discretion; d) there is misappreciation of facts; and e) the court, in arriving in its findings, went beyond the issues of the case and the same are contrary to the admission of the parties or the evidence presented. 43 Petition, p. 11; rollo, p. 18. 44 Great Southern Maritime Services Corporation v. Acua, et al., G.R. No. 140189, February 28, 2005.

THIRD DIVISION SPO2 GERONIMO MANALO, G.R. No. 178920 SPO2 LEO MORCILLA, PO3 RICO M. LANDICHO, PO2 ROMEO MEDALLA, JR., SPO2 WILLIAM Present: 26

RELOS, JR., P/INSP. ROBERTO N. MARINDA, YNARES-SANTIAGO, J., Petitioners, Chairperson, AUSTRIA-MARTINEZ, CHICO-NAZARIO, - versus - NACHURA, and REYES, JJ. HON. PNP CHIEF OSCAR CALDERON, HON. P/DIR. GEARY BARIAS, Directorate for Investigation and Detective Management, Camp Crame, HON. REGIONAL DIRECTOR, POLICE CHIEF SUPT. NICASIO J. RADOVAN, HON. POLICE SR. SUPT. AARON DEOCARES FIDEL, HON. POLICE SR. SUPT. LUISITO Promulgated: DE LEON, Respondents. October 15, 2007
x--------------------------------------------------x DECISION REYES, J.: ANG isangpetisyonparasahabeas corpus ay bibigyandaanlamang kung ito ay nagpapakitanaangnagpepetisyon ay ipinipiit o pinipigilanangkalayaannanglabagsabatas. Angmahigpitnapangangalaga at angpag-monitor nggalaw o kinaroroonanngmgapulisnasumasailalimsaimbestigasyonngkanilangpamunuan ay hindiisanguringipinagbabawalnapagpiit o pagpigilsakanilangkalayaan. A petition for habeas corpus will be given due course only if it shows that petitioner is being detained or restrained of his liberty unlawfully. A restrictive custody and monitoring of movements or whereabouts of police officers under investigation by their superiors is not a form of illegal detention or restraint of liberty. Filed on August 7, 2007, this petition for the issuance of a writ of habeas corpus assails the restrictive custody and monitored movements of petitioners SPO2 Geronimo Manalo, PO3 Leo Morcilla, PO3 Rico M. Landicho, PO2 Romeo Medalla, Jr., SPO2 William Relos, Jr., PInsp. Roberto D. Marinda, by the Philippine National Police (PNP), Region 4-A, after they were implicated in the burning of an elementary school in Taysan, Batangas at the height of the May 2007 national and local elections. Petitioners were formerly police operatives assigned at the Regional Special Operations Group, PNP Region 4-A, Camp Vicente Lim, Calamba City, Laguna. When their petition was filed, they were detailed at the Regional Headquarters Support Group at the same Camp under a restrictive custody status. Respondents Oscar Calderon, Geary Barias, Nicasio Radovan, Aaron Deocares Fidel, and Luisito De Leon were, at the time of filing of the petition, the Chief of the PNP, the Directorate for Investigation and Detective Management, the Regional Director and Police Sr. Superintendents, respectively. The Facts The facts, as reflected in the petition and its annexes, are as follows: On May 15, 2007, at around 3:00 a.m., five unidentified malefactors bearing high-powered firearms suddenly appeared at the BarangayPinagbayanan Elementary School in the Municipality of Taysan, Province of Batangas. Earlier, the entire

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school grounds were converted into a polling area for the 2007 national and local elections. The five armed men forcibly entered Polling Precinct 76-A, and poured gasoline over a ballot box. Then they fired several rounds of ammunitions at 1 the premises, setting it ablaze. The conflagration caused the death of a school teacher, Ritchel (Nellie) Banaag, who was then acting as an election supervisor. A poll watcher in the person of Leticia (Letty) Ramos also perished while nine others were reportedly injured 2 as a result of the fire. In the investigation that ensued, several eye-witnesses identified some of petitioners as the perpetrators of the school 3 burning. The investigation also yielded that all six petitioners, who are all members of the PNP Regional Special 4 Operations Group (PNP-RSOG), failed to timely respond to the incident at the Pinagbayanan Elementary School. Acting on the report, the PNP hierarchy issued three successive memoranda dated May 18, May 22 and June 28, 2007, to wit: A. MEMORANDUM FOR : TDPRM FROM : TDIDM SUBJECT: Order for Restrictive Custody of PCINSP ELPIDIO RAMIREZ, et al. DATE :May 18, 2007 ------------------------------------------------------------1. Reference: Memo from TDIDM with subject: Special Report re Alleged Arson in Pinagbayanan Elementary School, Taysan, Batangas which was approved by the C, PNP. 2. This pertains to the investigation being conducted regarding the reported involvement of personnel from PRO 4ARSOG in the fire incident in Pinagbayanan Elementary School, Taysan, Batangas on May 15, 2007 resulting in the death of two (2) teachers and wounding of several others. 3. In this connection, request issue orders putting in restrictive custody the following PNP personnel: PCINSP ELPIDIO A RAMIREZ PINSP RUEL C DELA CRUZ PINSP ROBERTO N MARINDA SPO2 William Relos, Jr. (SGD.) GEARY L. BARIAS Police Director
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B. MEMORANDUM To : GD, RHSG

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From : Regional Director Subject: Monitoring of PCOs and PNCOs Date :May 22, 2007 -------------------------------------------------------1. References: a. Verbal instruction of RD, PRO, CALABARZON, dated May 22, 2007; and b. S.O. No. 274 dated May 17, 2007, PRO, CALABARZON. 2. Above references pertains to the relief of PINSP ROBERTO D. MARINDA, SPO2 William D. Relos, SPO2 Leo V. Morcilla, SPO2 Geronimo R. Manalo, PO3 Rico M. Landicho and PO2 Romeo E. Medalla, Jr, from their respective unit assignment and subsequent reassignment to that office. 3. In connection thereof, subject PCO and PNCOs should be properly accounted from time to time taking into consideration the following: a. All their movements within camp should be monitored; b. When situation warrants their movement outside camp, they should be properly escorted on one-on-one basis; and c. A logbook should be maintained to record the accounting of said PCO and PNCOs, their place of destination, name of escort, Estimated Time of Departure (ETD) and Estimated Time of Return to Station (ETRS). 4. Further inform the Regional Director and the Command Group thru Chief, Regional Directorial Staff of any unusual incident or movement involving subject PCOs and PNCOs. 5. This Order takes effect immediately. BY AUTHORITY OF PCSUPT RADOVAN, JR.: (SGD.) AARON DEOCARES FIDEL, CSEE Police Senior Superintendent (DSC) Chief, Regional Directorial Staff C. MEMORANDUM FOR : GD, RHSG 4A FROM : Chief, RPHRDD SUBJECT: Order for Restrictive Custody of PINSP ROBERTO NAZ MARINDA and SPO2 William DizonRelos, Jr.
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DATE :June 28, 2007 -----------------------------------------------------1. References a. Memorandum from TDPRM dated May 23, 2007; b. Memorandum from Chief, RLS 4A June 19, 2007 noted by RD, PRO 4A 2. This is in connection with the reported involvement of PRO 4A-RSOG personnel to the fire incident on May 15, 2007 at Pinagbayanan Elementary School, Taysan, Batangas 3. Please be informed that pursuant to reference 1.a., orders are being issued by this Office placing following named PNP personnel under Restrictive Custody (in view of the investigation being conducted against them) effective this date, namely: PINSP ROBERTO NAZ MARINDA SPO2 William DizonRelos, Jr. 4. In this regard, inform concerned personnel and adjust your records accordingly. 5. For information and be guided accordingly. (SGD.) IRENEO DIZON BORDAS Police Senior Superintendent DSG Chief, RPHRDD
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Petitioners contend that the May 22, 2007 Memorandum "defines and circumscribes the scope of petitioners restrictive 8 custody" status; that "although technically speaking, petitioners as PNP officer are not detained or imprisoned, their physical movements are, however, limited only within Camp Vicente Lim, Calamba City, Laguna; they cannot go home to 9 their respective families and if they would leave Camp Vicente Lim they need to be escorted;" "that petitioners restrictive 10 custody status is illegal" and "not sanctioned by any existing provision of our constitution and laws;" that "it is degrading," "summarily and arbitrarily imposed on the basis of mere suspicion and it actually makes PNP members enjoy 11 lesser rights than what are actually enjoyed by ordinary citizens." Petitioners further posit that what is only sanctioned is preventive suspension under which they can enjoy liberty and go home to their families pending administrative investigation. Hence, they urge, this practice by the PNP organization should be put to a stop. In support of their petition, petitioners principally rely on the case of Moncupa v. Enrile, et al., where it was essentially held that the writ of habeas corpus applies to all cases of illegal confinement or detention by which any person is deprived of his liberty. The ruling holds true even if petitioners are released but continue to be denied one or more of his constitutional freedoms, where there is present a denial of due process, where the restraints are not merely involuntary but appear to be unnecessary, and where a deprivation of freedom, originally valid has, in the light of subsequent developments, become arbitrary. They also cite Villavicencio v. Lukban, where certain women were illegally transported against their will from Manila to Davao. There they were forced to change their domicile and some of them returned to Manila. Yet, this Court condemned
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the involuntary restraints on petitioners, fined the City Mayor of Manila and hoped the decision would serve to bulwark the fortifications of an orderly government of laws and to protect individual liberty from illegal encroachment. Petitioners thus pray that a writ of habeas corpus be issued, commanding the respondents to produce the bodies of petitioners before the Court, to explain the lawful cause of their detention and deprivation of physical liberties and, thereafter, for this Court to adjudge their restrictive custody status as illegal and to set them free. Without necessarily giving due course to the petition, the Court required respondents to comment. In lieu of a comment, the Office of the Solicitor General (OSG) manifested that by Memorandum Order of August 30, 14 2007, respondent Radovan, Director of PNP Regional Office 4-A, has recalled, effective immediately, the assailed restrictive custody order embodied in the two Memoranda dated May 22 and June 28, 2007. In view of the recall, it is prayed that the petition be dismissed on ground of mootness. Issues Two critical issues are thus posed for our determination. One, by petitioners, on whether or not they are unlawfully detained or restrained of their liberty under their restrictive custody status.Two, by respondents, on whether the Court should dismiss the petition on the sole ground of mootness, the assailed orders having been recalled, or proceed to decide the petition on the merits. We shall resolve them in the reverse order, dealing with the procedural ahead of the substantive question. Our Ruling I. This Court, By Way Of Exceptions, Decides Moot Issues Notwithstanding the mootness of the issues on restrictive custody and monitoring of movements of petitioners, We opt to resolve them given (a) the paramount public interest involved, (b) their susceptibility of recurring yet evading review and (c) the imperative need to educate the police community on the matter. Sa kabilangpagigingakademikonalamangngmgaisyutungkolsamahigpitnapangangalaga (restrictive custody) at pagmonitornggalaw (monitoring of movements) ngnagpepetisyon, dedesisyunannaminito (a) dahilsanangingibabawnainteresngmadlananakapaloobdito, (b) dahilsaposibilidadnamaaaringmaulitangpangyayari at (c) dahilkailangangmaturuanangkapulisantungkoldito. The release of petitioners by respondents in a petition for habeas corpus does not automatically abate a decision on the case. Similarly, a recall of the custody order challenged by petitioners will not necessarily call for a dismissal on the ground of mootness alone. Although the general rule is mootness of the issue warrants a dismissal, there are well-defined exceptions. In the habeas corpus case of Aquino, Jr. v. Enrile, twenty-six (26) petitioners were released from custody and one withdrew during the pendency of the petition. The fact that the petition was rendered moot and academic did not prevent this Court in the exercise of its symbolic function from promulgating one of the most voluminous decisions ever. Even petitioners cite Tibo v. The Provincial Commander and Toyoto, et al. v. Ramos, et al., where respondents filed a motion to dismiss the petition for habeas corpus on the ground that petitioners had been temporarily released and their case had, therefore, become moot and academic. This Court, as in Moncupa, chose to decide the said cases. The Court sustained petitioners plea that their case be considered moot and academic only "if their release would be permanent." In Acop, et al. v. Guingona, Jr., petitioning PNP officers questioned, via petition for injunction, the legality of the admission of SPO2 delos Reyes and SPO2 dela Cruz into the Witness Protection Program. Petitioners contended that under Section 3(d) of R.A. No. 6981, law enforcement officers like the said SPO2 are disqualified from being admitted into the program, though they may be testifying against other law enforcement officers.
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In its comment, the OSG claimed that the petition lacked merit and that the same was rendered moot and academic because the coverage of SPO2 delos Reyes and SPO2 dela Cruz under the program was already terminated on December 3, 1997 and August 23, 1998, respectively, as evidenced by the letter of the Director of the Program addressed to the OSG, dated February 10, 1999. In their comment, private respondents SPO2 delos Reyes and SPO2 dela Cruz agreed with the OSG. Denying the OSG motion, this Court held: Indeed, prayers a) and b) above had been rendered moot and academic by reason of the release of SPO2 delos Reyes and SPO2 dela Cruz from the coverage of the Program. However, we find it necessary to resolve the merits of the principal issue raised for a proper disposition of prayer c) and for future guidance of both bench and bar as to the application of Sections 3(d) and 4 of R. A. No. 6981. As we have ruled in Alunan III vs. Mirasol, and Viola vs. Alunan III, courts will decide a question otherwise moot and academic if it is capable of repetition, yet evading review. (Emphasis supplied) This Court then sustained the RTC observation that law enforcement officers may be admitted into the Witness Protection Program in cases where they are witnesses in legislative investigations. In the recent landmark cases of David, et al. v. Arroyo, et al., involving seven petitions for certiorari and prohibition, the President lifted the declaration of a state of national emergency during the pendency of the suits. In effect, Presidential Proclamation No. 1017 and General Order No. 5 were withdrawn. The OSG thus moved and prayed for the dismissal of the petitions, arguing there is no more justiciable controversy as the issue has been mooted. This Court denied the motion and proceeded to declare the constitutional infirmity of the Presidential issuances. On the issue of mootness, the Court summed up the four exceptions to the rule, thus: The moot and academic principle is not a magical formula that can automatically dissuade the courts in resolving a case. Courts will decidecases, otherwise moot and academic, if: first, there is a grave violation of the Constitution; second, the exceptional character of the situation and the paramount public interest is involved; third, when constitutional issue raised requires formulation of controlling principles to guide the bench, the bar, and the public; and fourth,the case is capable of repetition yet evading review. All the foregoing exceptions are present here and justify this Cou rts assumption of jurisdiction over the instant petitions. Petitioners alleged that the issuance of PP 1017 and G.O. No. 5 violates the Constitution. There is no question that the issues being raised affect the public interest, involving as they do the pe oples basic rights to freedom of expression, of assembly and of the press. Moreover, the Court has the duty to formulate guiding and controlling constitutional precepts, doctrines or rules. It has the symbolic function of educating the bench and the bar, and in the present petitions,the military andthe police, on the extent of the protection given by constitutional guarantees. And lastly, respondents contested actions are capable of repetition. Certainly, the petitions are subject to judicial review. (Emphasis supplied). Evidently, the triple reasons We advanced at the start of Our ruling are justified under the foregoing exceptions. Every bad, unusual incident where police officers figure in generates public interest and people watch what will be done or not done to them. Lack of disciplinary steps taken against them erode public confidence in the police institution. As petitioners themselves assert, the restrictive custody of policemen under investigation is an existing practice, hence, the issue is bound to crop up every now and then. The matter is capable of repetition or susceptible of recurrence. It better be resolved now for the education and guidance of all concerned. II. There Is No Illegal Restraint In The Restrictive Custody and Monitored Movements Of Police Officers Under Investigation The high prerogative writ of habeas corpus, whose origin is traced to antiquity, was devised and exists as a speedy and 20 effectual remedy to relieve persons from unlawful restraint and as the best and efficient defense of personal freedom. Angmataasnapinapahalagahang writ of habeas corpus, naangpinagmulan ay nuon pa mangmatandangpanahon, ay ginawa at umiiralbilangkagyat at mabisanglunasupangpaalpasinangtaosalabagsabatasnapagkakapigil at bilangpinakamaigi at mahusaynasanggalangngsarilingkalayaan.
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The main thrust of the special proceeding of habeas corpus is to inquire into the legality of one's detention. More specifically, its vital purpose is to obtain immediate relief from illegal confinement, to liberate those who may be 21 imprisoned without sufficient cause and to deliver them from unlawful custody. Only if the Court is satisfied that a person is unlawfully restrained of his liberty will a petition for habeas corpus be granted 22 and the person detained released from confinement. If respondents are not detaining nor restraining the applicants or 23 the person in whose behalf the petition for habeas corpus is filed, the petition should perforce be dismissed. Angkahilinganparasahabeas corpus ay maarilamangpagbigyan at angtaongpinipigilan ay pawawalansapagkapiit kung masisiyahanangHukumannalabagsabatasangpagkakaitsakanyangkalayaan. Kung hindiipinipiit o pinipigilanangmgataongnaghainngkahilinganparasahabeas corpus o angmgakinakatawannila, angpetisyon ay dapatpawalangsaysay. Measured by the foregoing yardstick, the petition, on its face, fails to convince us that petitioners are actually and 24 unlawfully detained and restrained of their liberty. Sombong v. Court of Appeals, et al. teaches us that for the writ of habeas corpus to issue, the restraint of liberty must be in the nature of an illegal and involuntary deprivation of freedom of action. More importantly, the prime specification of an application for a writ of habeas corpus is an actual and effective, 25 and not merely nominal or moral, illegal restraint of liberty. To the mind of the Court, petitioners are not illegally and involuntarily deprived of their freedom of action. Walang illegal napagpipigil o pagkakaitngkalayaansanagpepetisyon. Firstly, the assailed memoranda dated May 22, 2007, June 28, 2007 and May 18, 2007, decreeing the monitoring of their movements cannot, by any stretch of the imagination, be considered as a form of curtailment of their freedom guaranteed under our Constitution. Angipag-utosnasubaybayanangkanilangmga kilos ay hindimaituturingnapagbabawasngkanilangkalayaannaginagarantiyahansailalimngatingKonstitusyon. Perusing the assailed memoranda, it is evident that petitioners are not actually detained or restrained of their liberties. What was ordered by the PNP is that their movements, inside and outside camp be monitored in the following manner, to wit: a. All their movements within camp should be monitored; b. When situation warrants their movement outside camp, they should be properly escorted on one-on-one basis; and c. A logbook should be maintained to record the accounting of said PCO and PNCOs, their place of destination, name of 29 escort, Estimated Time of Departure (ETD) and Estimated Time of Return to Station (ETRS). It is crystal-clear that petitioners are free to go in and out of Camp Vicente Lim as they please. The only limitation imposed upon them is that their movements within the premises of the camp shall be monitored; that they have to be escorted whenever the circumstances warrant that they leave the camp; and that their estimated time of departure and arrival shall 30 be entered in a logbook. Even petitioners themselves admit they are not actually detained or imprisoned. Secondly, the "restrictive custody" complained of by petitioners is, at best, nominal restraint which is beyond the ambit of habeas corpus. It is neither actual nor effective restraint that would call for the grant of the remedy prayed for. It is a permissible precautionary measure to assure the PNP authorities that the police officers concerned are always accounted for. Ang restrictive custody o mahigpitnapangangalaga, nainirereklamongmganagpetisyon, ay bahagyangpaghihigpitlamangnalabassasaklawng habeas corpus. Itoyhindiaktuwal o mabisangpagpigilparamangailanganngremedyonghinihiling. Itoyisangpinapayaganghakbangngpag iingatupangmakatiyakangpamunuanng PNP naangmganaturangpulis ay maaringiprisintaanumangsandali. If said custodial procedure were not taken, respondent police superiors themselves would have been exposed to charges of conspiracy, negligence or laxity in the enforcement of internal discipline. If petitioners get lost or are able to go abroad or figure in another untoward incident, respondents would have to explain why they did not observe the needed precaution, else they would also be administratively liable.
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Thirdly, petitioners reliance on Moncupa is misplaced. In said case, petitioner was ordered released by respondent but his release was saddled with restrictions. There, petitioner was required to secure prior approval for: (a) any travel outside Metro Manila; and (b) a change in residence. His freedom of speech was likewise muffled by a prohibition on 32 granting interviews to local or foreign media. He was likewise ordered to report regularly to respondent. In the case at bench, no restrictions in the nature of those imposed in Moncupaexist. To reiterate, petitioners are merely held to account for their movements inside and outside the camps premises. They are not required to secure prior approval before they can move out of the camp, only that each of them be accompanied by an escort and their time of departure and arrival noted. Angmganagpepetisyon ay pinipigillamangupangmasubaybayanangkanilangikinikilossaloob at labasngkampo. Hindi nilakailanganangpermisobagomakalabasngkampo, kailanganlangna may kasamangbantay at angkanilangpagalis at pagbalik ay nakatala. Fourthly, Republic Act (R.A.) No. 6975 (DILG Act of 1990), as amended by R.A. No. 8551 (PNP Reform and Reorganization Act of 1998), clearly provides that members of the police force are subject to the administrative disciplinary machinery of the PNP. Section 41(b) of the said law enumerates the disciplinary actions, including restrictivecustody that may be imposed by duly designated supervisors and equivalent officers of the PNP as a matter of internal discipline, to wit: (b) Internal Discipline. On dealing with minor offenses involving internal discipline found to have been committed by any regular member of their respective commands, the duly designated supervisors and equivalent officers of the PNP shall, after due notice and summary hearing, exercise disciplinary powers as follows: (1) Chiefs of police or equivalent supervisors may summarily impose the administrative punishment of admonition or reprimand; restriction to specified limits; withholding of privileges; forfeiture of salary or suspension; or any of the combination of the foregoing: Provided, That, in all cases, the total period shall not exceed fifteen (15) days; (2) Provincial directors or equivalent supervisors may summarily impose administrative punishment of admonition or reprimand; restrictive custody; withholding of privileges; forfeiture of salary or suspension, or any combination of the foregoing: Provided, That, in all cases, the total period shall not exceed thirty (30) days; (3) Police regional directors or equivalent supervisors shall have the power to impose upon any member the disciplinary punishment of dismissal from the service. He may also impose the administrative punishment of admonition or reprimand; restrictive custody; withholding of privileges; suspension or forfeiture of salary; demotion; or any combination of the foregoing: Provided, That, in all cases, the total period shall not exceed sixty (60) days; (4) The Chief of the PNP shall have the power to impose the disciplinary punishment of dismissal from the service; suspension or forfeiture of salary; or any combination thereof for a period not exceeding one hundred eighty (180) days: Provided, further, That the chief of the PNP shall have the authority to place police personnel under restrictive custody during the pendency of a grave administrative case filed against him or even after the filing of a criminal 33 complaint, grave in nature, against such police personnel. (Emphasis supplied) It can be gleaned from the memoranda issued by the PNP hierarchy that an investigation is being conducted on the reported involvement of police personnel from PRO 4A-RSOG in the fire that gutted the Pinagbayanan Elementary School, Taysan, Batangas during the wee hours of May 15, 2007. The initial investigation report appended to the petition discloses that all petitioners are members of the Region 4 Special Operations Group who failed to timely respond to the incident. Some are even tagged by key eyewitnesses as the primary suspects in the burning of the school. As a result of the blaze, two persons, including a school teacher performing election duties, were killed. The incident sparked a national uproar, and rightly so, considering that it was a direct attack on the countrys already much -maligned electoral process. Evidently, the PNP is well within its authority to relieve petitioners from their former positions and place them under tight watch, at least until the termination of the said investigation. Clearly, placing police officers facing a grave administrative case under restrictive custody is a disciplinary measure authorized under the PNP law. Malinawnaangpaglalagaysamahigpitnapangangalagasamgapulisnanahaharapsaisanggrabengkasongadministratibo ay isangpandisiplinanghakbangnapinahihintulutanngbatasng PNP. T hus, petitioners claim that their restrictive custody is an illegal practice "not sanctioned by any existing provision of our constitution and laws" is not true. It must necessarily fail.

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Lastly, petitioners contend that by placing them under restrictive custody, they are made to suffer lesser rights than those 34 enjoyed by private citizens. On this score, the Courts pronouncement in Canson,et al. v. Hidalgo, et al. is categorical. It was held there that although the PNP is civilian in character, its members are subject to the disciplinary authority of the Chief, Philippine National Police, under the National Police Commission. Courts cannot, by injunction, review, overrule or otherwise interfere with valid acts of police officials. The police organization must observe 35 self-discipline and obey a chain of command under civilian officials. Elsewise stated, police officers are not similarly situated with ordinary civil service employees. The PNP has its own administrative disciplinary mechanism different from those of other government employees. Saibangsalita, angkapulisan ay hindikatuladngkaraniwangkawaningpamahalaan. Ang PNP ay may sarilingmekanismongpagdisiplinanakaibasaipinatutupadsaibangempleyadonggobyerno. In Fianza v. The Peoples Law Enforcement Board, et al.,
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we ruled:

x xx although respondent policemen continue to be citizens, as public respondents contend, they are not the "private citizens" referred to in the laws cited above. Clearly, the term "private citizens" does not ordinarily include men in uniform, such as the respondent PNP men. This is particularly evident in the PNP law which uses the term "members of the PNP" as well as "private citizens" to refer to different groups of persons and not interchangeably. The "plain meaning rule" or verbalegisin statutory construction is applicable in this situation. When the words of a statute are clear, plain and free from ambiguity, it must be given its interpretation. The term "private citizen" in the PNP Law and PLEB Rules is used in its common signification and was not meant to refer to the members of the PNP, such as respondent policemen. In sum, petitioners are unable to discharge their burden of showing that they are entitled to the issuance of the writ prayed for. The petition fails to show on its face that they are unlawfully deprived of their liberties guaranteed and enshrined in the Constitution. No unlawful restraint is foisted on them by the PNP authorities under the questioned memoranda. The ultimate purpose of the writ of habeas corpus is to relieve a person from unlawful restraint. The writ cannot and will not issue absent a showing that petitioners are deprived of their liberty. Neither can it relieve petitioners, who are police officers, from the valid exercise of prescribed discipline over them by the PNP leadership. Angpangunahinglayuninng writ o utosng habeas corpus ay angpagsaklolosaisangtaomulasapagkapiit o pagkapigilnanglisyasabatas. Ang writ ay hindimakakamit kung walangpagkakaitngkalayaan. Hindi rinitomapanghahawakanngmganagpepetisyongkapulisanupangmakaiwassatakdangparaanngpagdisiplinasakanilangmgap inunong PNP. WHEREFORE, the petition is DENIED DUE COURSE and DISMISSED. SO ORDERED. RUBEN T. REYES Associate Justice WE CONCUR: CONSUELO YNARES-SANTIAGO Associate Justice Chairperson MA. ALICIA AUSTRIA-MARTINEZ MINITA V. CHICO-NAZARIO Associate Justice Associate Justice ANTONIO EDUARDO B. NACHURA Associate Justice

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A TTESTATION
I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. CONSUELO YNARES-SANTIAGO Associate Justice Chairperson CERTIFICATION Pursuant to Section 13, Article VIII of the Constitution and the Division Chairpersons Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Courts Division. REYNATO S. PUNO Chief Justice Footnotes 1 Rollo, pp. 47-49. 2 Id. 3 Id. at 15-16, 63-64. 4 Id. at 47-49. 5 Id. at 16. 6 Id. at 14. 7 Id. at 15. 8 Id. at 4. 9 Id. 10 Id. at 5. 11 Id. at 5-6. 12 G.R. No.L-63345, January 30, 1986, 141 SCRA 233. 13 39 Phil. 778 (1919). 14 Annex "1." 15 G.R. No.L-35546, September 17, 1974, 59 SCRA 183. 16 G.R. No.L-44825, October 20, 1978, 85 SCRA 561. 17 G.R. No.L-69270, October 15, 1985, 139 SCRA 316. 18 G.R. No. 134855, July 2, 2002, 383 SCRA 577. 19 G.R. Nos. 171396, 171409, 171485, 171483, 171400, 171489 & 171424, May 3, 2006, 489 SCRA 160. 20 Feria v. Court of Appeals, et al., G.R. No. 122954, February 15, 2000, 325 SCRA 525, 533; Sombongv. Court of Appeals, et al., G.R. No. 111876, January 31, 1996, 252 SCRA 663, 673; Castriciones v.Chief of Staff Armed Forces of the Philippines, G.R. No. 65731, September 28, 1989; MizuakiTakenouchi v. Cristi, et al., G.R. No. 82232, July 25, 1988. 21 Velasco, et al. v. Court of Appeals, et al., G.R. No. 118644, July 7, 1995, 245 SCRA 677, 679; Quintos v. Director of Prisons, 55 Phil. 304. 22 Gonzales v. Viola, 61 Phil. 824. 23 In the matter of the Petition for Habeas Corpus of Ferdinand E. Marcos, etc. v. Executive SecretaryCatalinoMacaraig, G.R. No. 88079, May 18, 1989; In Re: Daniel Ngaya-an, et al. v. ConradoBalweg, G.R. No. 80591, August 6, 1991. 24 G.R. No. 111876, January 31, 1996, 252 SCRA 663. 25 Moncupa v. Enrile, et al., see note 12, citing Villavicenciov. Lukban, 539 Phil. 778, 790. 26 Annex "A." 27 Annex "B." 28 Annex "C." 29 Rollo, p. 14. 30 Id. at 4. 31 See note 12. 32 Id. 33 Id. 34 G.R. No. 121889, August 4, 2000, 337 SCRA 293. 35 Id.at 296. 36 G.R. Nos. 109638-39, March 31, 1995, 243 SCRA 165, 178. Unchecked Article -oct2007

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 162994 September 17, 2004 DUNCAN ASSOCIATION OF DETAILMAN-PTGWO and PEDRO A. TECSON, petitioners, vs. GLAXO WELLCOME PHILIPPINES, INC., Respondent. RESOLUTION

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TINGA, J.: Confronting the Court in this petition is a novel question, with constitutional overtones, involving the validity of the policy of a pharmaceutical company prohibiting its employees from marrying employees of any competitor company. This is a Petition for Review on Certiorari assailing the Decision dated May 19, 2003 and the Resolution dated March 26, 2 2004 of the Court of Appeals in CA-G.R. SP No. 62434. Petitioner Pedro A. Tecson (Tecson) was hired by respondent GlaxoWellcome Philippines, Inc. (Glaxo) as medical representative on October 24, 1995, after Tecson had undergone training and orientation. Thereafter, Tecson signed a contract of employment which stipulates, among others, that he agrees to study and abide by existing company rules; to disclose to management any existing or future relationship by consanguinity or affinity with coemployees or employees of competing drug companies and should management find that such relationship poses a possible conflict of interest, to resign from the company. The Employee Code of Conduct of Glaxo similarly provides that an employee is expected to inform management of any existing or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies. If management perceives a conflict of interest or a potential conflict between such relationship and the employees employment with the company, the management and the employee will explore the possibility of a "transfer to another department in a non-counterchecking position" or preparation for employment outside the company after six months. Tecson was initially assigned to market Glaxos products in the Camarines Sur -Camarines Norte sales area. Subsequently, Tecson entered into a romantic relationship with Bettsy, an employee of Astra Pharmaceuticals (Astra), a competitor of Glaxo. Bettsy was Astras Branch Coordinator in Albay. She supervised the district managers and medical representatives of her company and prepared marketing strategies for Astra in that area. Even before they got married, Tecson received several reminders from his District Manager regarding the conflict of interest which his relationship with Bettsy might engender. Still, love prevailed, and Tecson married Bettsy in September 1998. In January 1999, Tecsons superiors informed him that his marriage to Bettsy gave rise to a conflict of interest. Tecsons superiors reminded him that he and Bettsy should decide which one of them would resign from their jobs, although they told him that they wanted to retain him as much as possible because he was performing his job well. Tecson requested for time to comply with the company policy against entering into a relationship with an employee of a competitor company. He explained that Astra, Bettsys employer, was planning to merge with Zeneca, another drug company; and Bettsy was planning to avail of the redundancy package to be offered by Astra. With Bettsys separation from her company, the potential conflict of interest would be eliminated. At the same time, they would be able to avail of the attractive redundancy package from Astra. In August 1999, Tecson again requested for more time resolve the problem. In September 1999, Tecson applied for a transfer in Glaxos milk division, thinking that since Astra did not have a milk division, the potential conflict of interest would be eliminated. His application was denied in view of Glaxos "least -movement-possible" policy. In November 1999, Glaxo transferred Tecson to the Butuan City-Surigao City-Agusan del Sur sales area. Tecson asked Glaxo to reconsider its decision, but his request was denied. Tecson sought Glaxos reconsideration regarding his transfer and brought the matter to Glaxos Grievance Committee. Glaxo, however, remained firm in its decision and gave Tescon until February 7, 2000 to comply with the transfer order. Tecson defied the transfer order and continued acting as medical representative in the Camarines Sur-Camarines Norte sales area. During the pendency of the grievance proceedings, Tecson was paid his salary, but was not issued samples of products which were competing with similar products manufactured by Astra. He was also not included in product conferences regarding such products.
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Because the parties failed to resolve the issue at the grievance machinery level, they submitted the matter for voluntary arbitration. Glaxo offered Tecson a separation pay of one-half () month pay for every year of service, or a total of P50,000.00 but he declined the offer. On November 15, 2000, the National Conciliation and Mediation Board (NCMB) rendered its Decision declaring as valid Glaxos policy on relationships between its employees and persons employed with competitor companies, and affirming Glaxos right to transfer Tecson to another sale s territory. Aggrieved, Tecson filed a Petition for Review with the Court of Appeals assailing the NCMB Decision. On May 19, 2003, the Court of Appeals promulgated its Decision denying the Petition for Review on the ground that the NCMB did not err in rendering its Decision. The appellate court held that Glaxos policy prohibiting its employees from having personal relationships with employees of competitor companies is a valid exercise of its management 4 prerogatives. Tecson filed a Motion for Reconsideration of the appellate courts Decision, but the motion was denied by the appellate 5 court in its Resolution dated March 26, 2004. Petitioners filed the instant petition, arguing therein that (i) the Court of Ap peals erred in affirming the NCMBs finding that the Glaxos policy prohibiting its employees from marrying an employee of a competitor company is valid; and (ii) the Court of Appeals also erred in not finding that Tecson was constructively dismissed when he was transferred to a new 6 sales territory, and deprived of the opportunity to attend products seminars and training sessions. Petitioners contend that Glaxos policy against employees marrying employees of competitor companies violates the equal protection clause of the Constitution because it creates invalid distinctions among employees on account only of 7 marriage. They claim that the policy restricts the employees right to marry. They also argue that Tecson was constructively dismissed as shown by the following circumstances: (1) he was transferred from the Camarines Sur-Camarines Norte sales area to the Butuan-Surigao-Agusan sales area, (2) he suffered a diminution in pay, (3) he was excluded from attending seminars and training sessions for medical representatives, and (4) he was prohibited from promoting respondents products which were competing with Astras 8 products. In its Comment on the petition, Glaxo argues that the company policy prohibiting its employees from having a relationship with and/or marrying an employee of a competitor company is a valid exercise of its management prerogatives and does not violate the equal protection clause; and that Tecsons reassignment from the Camarines Norte -Camarines Sur sales 9 area to the Butuan City-Surigao City and Agusan del Sur sales area does not amount to constructive dismissal. Glaxo insists that as a company engaged in the promotion and sale of pharmaceutical products, it has a genuine interest in ensuring that its employees avoid any activity, relationship or interest that may conflict with their responsibilities to the company. Thus, it expects its employees to avoid having personal or family interests in any competitor company which may influence their actions and decisions and consequently deprive Glaxo of legitimate profits. The policy is also aimed at 10 preventing a competitor company from gaining access to its secrets, procedures and policies. It likewise asserts that the policy does not prohibit marriage per se but only proscribes existing or future relationships with employees of competitor companies, and is therefore not violative of the equal protection clause. It maintains that 11 considering the nature of its business, the prohibition is based on valid grounds. According to Glaxo, Tecsons m arriage to Bettsy, an employee of Astra, posed a real and potential conflict of interest. Astras products were in direct competition with 67% of the products sold by Glaxo. Hence, Glaxos enforcement of the 12 foregoing policy in Tecsons case was a valid exercise of its management prerogatives. In any case, Tecson was given several months to remedy the situation, and was even encouraged not to resign but to ask his wife to resign form Astra 13 instead. Glaxo also points out that Tecson can no longer question the assailed company policy because when he signed his contract of employment, he was aware that such policy was stipulated therein. In said contract, he also agreed to resign from respondent if the management finds that his relationship with an employee of a competitor company would be 14 detrimental to the interests of Glaxo.

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Glaxo likewise insists that Tecsons reassignment to another sales area and his exclusion from seminars regarding respondents new products did not amount to constructive dismissal. It claims that in view of Tecsons refusal to resign, he was relocated from the Camarines Sur -Camarines Norte sales area to the Butuan City-Surigao City and Agusandel Sur sales area. Glaxo asserts that in effecting the reassignment, it also considered the welfare of Tecsons family. Since Tecsons hometown was in Agusandel Sur and his wife traces her roots to Butuan City, Glaxo assumed that his transfer from the Bicol region to the Butuan City sales area would be favorable to 15 him and his family as he would be relocating to a familiar territory and minimizing his travel expenses. In addition, Glaxo avers that Tecsons exclusion from the seminar concerning the new anti -asthma drug was due to the fact that said product was in direct competition with a drug which was soon to be sold by Astra, and hence, would pose a potential conflict of interest for him. Lastly, the delay in Tecsons receipt of his sales paraphernalia was due to the mix -up created by his refusal to transfer to the Butuan City sales area (his paraphernalia was delivered to his new sales area 16 instead of Naga City because the supplier thought he already transferred to Butuan). The Court is tasked to resolve the following issues: (1) Whether the Court of Appeals erred in ruling that Glaxos pol icy against its employees marrying employees from competitor companies is valid, and in not holding that said policy violates the equal protection clause of the Constitution; (2) Whether Tecson was constructively dismissed. The Court finds no merit in the petition. The stipulation in Tecsons contract of employment with Glaxo being questioned by petitioners provides: 10. You agree to disclose to management any existing or future relationship you may have, either by consanguinity or affinity with co-employees or employees of competing drug companies. Should it pose a possible conflict of interest in management discretion, you agree to resign voluntarily from the Company as a matter of Company policy.
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The same contract also stipulates that Tescon agrees to abide by the existing company rules of Glaxo, and to study and 18 become acquainted with such policies. In this regard, the Employee Handbook of Glaxo expressly informs its employees of its rules regarding conflict of interest: 1. Conflict of Interest Employees should avoid any activity, investment relationship, or interest that may run counter to the responsibilities which they owe GlaxoWellcome. Specifically, this means that employees are expected: a. To avoid having personal or family interest, financial or otherwise, in any competitor supplier or other businesses which may consciously or unconsciously influence their actions or decisions and thus deprive GlaxoWellcome of legitimate profit. b. To refrain from using their position in GlaxoWellcome or knowledge of Company plans to advance their outside personal interests, that of their relatives, friends and other businesses. c. To avoid outside employment or other interests for income which would impair their effective job performance. d. To consult with Management on such activities or relationships that may lead to conflict of interest.

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1.1. Employee Relationships Employees with existing or future relationships either by consanguinity or affinity with co-employees of competing drug companies are expected to disclose such relationship to the Management. If management perceives a conflict or potential conflict of interest, every effort shall be made, together by management and the employee, to arrive at a solution within six (6) months, either by transfer to another department in a non-counter checking position, or by career preparation toward outside employment after GlaxoWellcome. Employees must be prepared for possible resignation within six (6) months, if no other 19 solution is feasible. No reversible error can be ascribed to the Court of Appeals when it ruled that Glaxos policy prohibiting an employee from having a relationship with an employee of a competitor company is a valid exercise of management prerogative. Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors, especially so that it and Astra are rival companies in the highly competitive pharmaceutical industry. The prohibition against personal or marital relationships with employees of competitor companies upon Glaxos employees is reasonable under the circumstances because relationships of that nature might compromise the interests of the company. In laying down the assailed company policy, Glaxo only aims to protect its interests against the possibility that a competitor company will gain access to its secrets and procedures. That Glaxo possesses the right to protect its economic interests cannot be denied. No less than the Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its right to reasonable returns on 20 investments and to expansion and growth. Indeed, while our laws endeavor to give life to the constitutional policy on social justice and the protection of labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also recognizes that management has rights which are also entitled to respect and enforcement in the interest of 21 fair play. As held in a Georgia, U.S.Acase, it is a legitimate business practice to guard business confidentiality and protect a competitive position by even-handedly disqualifying from jobs male and female applicants or employees who are married to a competitor. Consequently, the court ruled than an employer that discharged an employee who was married to an 23 employee of an active competitor did not violate Title VII of the Civil Rights Act of 1964. The Court pointed out that the policy was applied to men and women equally, and noted that the employers business was highly competitive and that gaining inside information would constitute a competitive advantage. The challenged company policy does not violate the equal protection clause of the Constitution as petitioners erroneously suggest. It is a settled principle that the commands of the equal protection clause are addressed only to the state or those 24 acting under color of its authority. Corollarily, it has been held in a long array of U.S. Supreme Court decisions that the 25 equal protection clause erects no shield against merely private conduct, however, discriminatory or wrongful. The only 29 exception occurs when the state in any of its manifestations or actions has been found to have become entwined or 27 involved in the wrongful private conduct. Obviously, however, the exception is not present in this case. Significantly, the company actually enforced the policy after repeated requests to the employee to comply with the policy. Indeed, the application of the policy was made in an impartial and even-handed manner, with due regard for the lot of the employee. In any event, from the wordings of the contractual provision and the policy in its employee handbook, it is clear that Glaxo does not impose an absolute prohibition against relationships between its employees and those of competitor companies. Its employees are free to cultivate relationships with and marry persons of their own choosing. What the company merely seeks to avoid is a conflict of interest between the employee and the company that may arise out of such relationships. As succinctly explained by the appellate court, thus: The policy being questioned is not a policy against marriage. An employee of the company remains free to marry anyone of his or her choosing. The policy is not aimed at restricting a personal prerogative that belongs only to the individual. However, an employees personal decision does not detract the employer 28 from exercising management prerogatives to ensure maximum profit and business success. . . The Court of Appeals also correctly noted that the assailed company policy which forms part of respondents Employee Code of Conduct and of its contracts with its employees, such as that signed by Tescon, was made known to him prior to
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his employment. Tecson, therefore, was aware of that restriction when he signed his employment contract and when he entered into a relationship with Bettsy. Since Tecson knowingly and voluntarily entered into a contract of employment with 29 Glaxo, the stipulations therein have the force of law between them and, thus, should be complied with in good faith." He is therefore estopped from questioning said policy. The Court finds no merit in petitioners contention that Tescon was constructively dismissed when he was tra nsferred from the Camarines Norte-Camarines Sur sales area to the Butuan City-Surigao City-Agusan del Sur sales area, and when he was excluded from attending the companys seminar on new products which were directly competing with similar products manufactured by Astra. Constructive dismissal is defined as a quitting, an involuntary resignation resorted to when continued employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in 30 pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee. None of these conditions are present in the instant case. The record does not show that Tescon was demoted or unduly discriminated upon by reason of such transfer. As found by the appellate court, Glaxo properly exercised its management prerogative in reassigning Tecson to the Butuan City sales area: . . . In this case, petitioners transfer to another place of assignment was merely in keeping with the policy of the company in avoidance of conflict of interest, and thus validNote that [Tecsons] wife holds a sensitive supervisory position as Branch Coordinator in her employer-company which requires her to work in close coordination with District Managers and Medical Representatives. Her duties include monitoring sales of Astra products, conducting sales drives, establishing and furthering relationship with customers, collection, monitoring and managing Astras inventoryshe therefore takes an active participation in the market war characterized as it is by stiff competition among pharmaceutical companies. Moreover, and this is significant, petitioners sales territory covers Camarines Sur and Camarines Norte while his wife is supervising a branch of her employer in Albay. The proximity of their areas of responsibility, all in the same Bicol Region, renders the conflict of interest not only possible, but actual, as learning by one spouse of the others market strategies in the region would be inevitable. [Managements] appreciat ion of 31 a conflict of interest is therefore not merely illusory and wanting in factual basis In Abbott Laboratories (Phils.), Inc. v. National Labor Relations Commission, which involved a complaint filed by a medical representative against his employer drug company for illegal dismissal for allegedly terminating his employment when he refused to accept his reassignment to a new area, the Court upheld the right of the drug company to transfer or reassign its employee in accordance with its operational demands and requirements. The ruling of the Court therein, quoted hereunder, also finds application in the instant case: By the very nature of his employment, a drug salesman or medical representative is expected to travel. He should anticipate reassignment according to the demands of their business. It would be a poor drug corporation which cannot even assign its representatives or detail men to new markets calling for opening or expansion or to areas where the need for pushing its products is great. More so if such reassignments 33 are part of the employment contract. As noted earlier, the challenged policy has been implemented by Glaxo impartially and disinterestedly for a long period of time. In the case at bar, the record shows that Glaxo gave Tecson several chances to eliminate the conflict of interest brought about by his relationship with Bettsy. When their relationship was still in its initial stage, Tecsons supervisors a t Glaxo constantly reminded him about its effects on his employment with the company and on the companys interests. After Tecson married Bettsy, Glaxo gave him time to resolve the conflict by either resigning from the company or asking his wife to resign from Astra. Glaxo even expressed its desire to retain Tecson in its employ because of his satisfactory performance and suggested that he ask Bettsy to resign from her company instead. Glaxo likewise acceded to his repeated requests for more time to resolve the conflict of interest. When the problem could not be resolved after several years of waiting, Glaxo was constrained to reassign Tecson to a sales area different from that handled by his wife for Astra. Notably, the Court did not terminate Tecson from employment but only reassigned him to another area where his home province, Agusandel Sur, was included. In effecting Tecsons transfer, Glaxo even considered the welfare of 34 Tecsons family. Clearly, the foregoing dispels any suspicion of unfairness and bad faith on the part of Glaxo. WHEREFORE, the Petition is DENIED for lack of merit. Costs against petitioners. SO ORDERED.
Puno, Austria-Martinez, Callejo, Sr., and Chico-Nazario*, JJ., concur.
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Footnotes 1 Penned by Associate Justice Rosmari D. Carandang and concurred in by Justices Conrado M. Vasquez, Jr. and Mercedes Gozo-Dadole. Rollo,pp. 2232. 2 Duncan Association of Detailman-PTGWO and Pedro A. Tecson, petitioners, v. GlaxoWellcome Philippines, Inc., respondent. 3 Now Astra Zeneca Pharmaceuticals, Inc. 4 Rollo, pp. 28-32. 5 Id. at 55. 6 Id. at 9. 7 Id. at 9-11. 8 Id. at 14-17. 9 Id. at 96-112. 10 Id. at 99-100. 11 Id. at 101-102. 12 Id. at 102-103. 13 Id. at 102-104. 14 Id. at 104-105. 15 Id. at 64. 16 Id. at 106-110. 17 See Decision of the Court of Appeals; Rollo, pp. 23-24. 18 Item No. 6 of Tecsons employment contract cited by the Court of Appeals in its Decision, Id. 19 Excerpt of Glaxos Employee Handbook, Annex "A" of respondents Comment, Id. at 114. 20 Section 3, Article XIII of the Constitution provides: The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and growth. 21 Sta. Catalina College v. National Labor Relations Commission, G.R. No. 144483, November 19, 2003. 22 Emory v. Georgia Hospital Service Association (1971), DC Ga., 4 CCH EPD 7785, 4 BNA FEP Cas 891, affd (CA5) 446 F2d 897, 4 CCH EPD 7786; Cited 45 Am Jr 2d Sec. 469. 23 42 USCS 2000e2002e17. Title VII prohibits certain employers, employment agencies, labor organizations, and joint labor-management training committees from discriminating against applicants and employees on the basis of race or color, religion, sex, national origin, or opposition to discriminatory practices. There is no similar legislation in the Philippines. 24 Avery v. Midland County, 390 US 474, 20 L. Ed 2d 45, 88 S Ct 1114, on remand (Tex) 430 SW2d 487; Cooper v. Aaron, 358 US 1, 3 L Ed 2d 5, 78 S Ct 1401. 25 District of Columbia v. Carter, 409 US 418, 34 L.Ed.2d 613, 93 S. Ct. 602, 35 L.Ed.2d 694, 93 S. Ct. 1411; Moose Lodge No. 107 v. Irvis, 407 US 163, 32 L.Ed.2d 627, 92 S. Ct. 1965; United States v. Price, 383 US 787, 16 L.Ed. 2d 267, 86 S. Ct. 1152; Burton v. Wilmington Parking Authority, 365 US 715, 6 L.Ed.2d 45, 81 S. Ct. 856; Shelley v. Kraemer, 334 US 1, 92 L.Ed.1161, 68 S. Ct. 836, 3 ALR2d 441; United States v. Classic, 313 US 299, 85 L.Ed 1368, 61 S. Ct. 1031, 86 L.Ed 565, 62 S. Ct. 51; Nixon v. Condon, 286 US 73, 76 L.Ed. 984, 52 S. Ct. 484, 88 ALR 458; Iowa-Des Moines Nat. Bank v. Bennet, 284 US 239, 76 L.Ed 265, 52 S. Ct. 133; Corrigan v. Buckley, 271 US 323, 70 L.Ed.969, 46 S. Ct. 521; U.S. Adickes v. S. H. Kress & Co., N.Y., 90 S. Ct. 1598, 398 U.S. 144, 26 L. Ed. 2d 142. 26 The equal protection clause contained in the Fourteenth Amendment of the U.S. Constitution is a restriction on the state governments and operates exclusively upon them. It does not extend to authority exercised by the Government of the United States. 16 A Am Jur 2d 742. 27 Gilmore v. Montgomery, 417 US 556, 41 L Ed 2d 304, 94 S Ct 2416; Evans v. Newton, 382 US 296, 15 L Ed 2d 373, 86 S Ct 486; Anderson v. Martin, 375 US 399, 11 L Ed 2d 430, 84 S Ct 454; Peterson v. Greenville, 373 US 244, 10 L Ed 2d 323, 83 S Ct 1119; Burton v. Wilmington Parking Authority, supra note 25. 28 Decision of the Court of Appeals, Rollo, p. 28. 29 Article 1159, Civil Code. See National Sugar Trading and/or the Sugar Regulatory Administration v. Philippine National Bank, G.R. No. 151218, January 18, 2003, 396 SCRA 528; Pilipinas Hino, Inc. v. Court of Appeals, G.R. No. 126570, August 18, 2000, 338 SCRA 355. 30 Leonardo v. National Labor Relations Commission, et al., G.R. Nos. 125303, and 126937, June 16, 2000, 333 SCRA 589. 31 Rollo, pp. 30-31. 32 G.R. No.L-76959, October 12, 1987, 154 SCRA 713. 33 Id. at 719. 34 Decision of the Court of Appeals, Rollo, pp. 24-27.

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