For article 4 retroactive:

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-34586 April 2, 1984
HOSPICIO NILO, petitioner,
vs.
HONORABLE COURT OF APPEALS and ALMARIO GATCHALIAN, respondents.
G.R. No. L-36625 April 2, 1984
FORTUNATO CASTRO, petitioner,
vs.
JUAN CASTRO, respondent.
Lavides Law Office for petitioner.
The Solicitor General for respondents.

GUTIERREZ, JR., J.:

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Under Section 36 (1) of Republic Act No. 3844, the Agricultural Land Reform Code, a landowner
may eject an agricultural lessee or tenant on the ground that the owner shall personally cultivate the
land himself. On September 10, 1971, Republic Act No. 6389, in amending Republic Act No. 3844,
eliminated personal cultivation as a ground for the ejectment of the tenant or leaseholder. The issue
in these cases is whether or not the amendment in R.A. 6389 should be given retroactive effect to
cover cases that were filed during the effectivity of the repealed provision.
G.R. NO. L-34586 This is a petition for review on certiorari of the Court of Appeals' decision ruling
that Republic Act No. 6389 has no retroactive effect.
Respondent Almario Gatchalian is the owner of a parcel of riceland at Barrio San Roque, San
Rafael, Bulacan with an area of two (2) hectares covered by Transfer Certificate of Title No. T-76791
of the Registry of Deeds of Bulacan. Petitioner Hospicio Nilo has been the agricultural share-tenant
of Gatchalian since agricultural year 1964-65.
On February 22, 1967, petitioner filed a petition in C.A.R. Case No. 1676 with the Court of Agrarian
Relations electing the leasehold system. On March 7, 1968, Gatchalian flied an ejectment suit

against petitioner on the ground of personal cultivation under Sec. 36 (1) of Republic Act No. 3844
which provides:
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SEC. 36. Possession of Landholding, Exceptions. Notwithstanding any agreement

as to the period or future surrender of the land, an agricultural lessee shall continue
in the enjoyment and possession of his landholding except when his dispossession
has been authorized by the Court in a judgment that is final and executory if after due
hearing it is shown that:
(1) The agricultural lessor-owner or a member of the immediate family will personally
cultivate the landholding or will convert the landholding, if suitably located, into
residential factory, hospital or school site or other useful non-agricultural purposes ...
Nilo alleged by way of affirmative defense that the ejectment suit was but an act of reprisal and
retaliation because he elected the leasehold system,
The two cases were heard jointly since they involved Identical landholding and parties. The Court of
Agrarian Relations found that there was a bona fide intention to cultivate the land personally. The
petitioner appealed to the respondent Court of Appeals which affirmed the decision of the Court of
Agrarian Relations. The Court found no justification to unduly interfere with the desire of Gatchalian
to personally cultivate his own land.
The petitioner filed a motion for reconsideration contending that "personal cultivation as a ground for
ejectment of an agricultural lessee has been eliminated under Republic Act No. 6389". The latter law
which took effect on September 10, 1971 now provides:
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(1) The landholding is declared by the department head upon recommendation of the
National Planning Commission to be suited for residential commercial, industrial or
some other urban purposes ....
The respondent Court of Appeals denied the motion resolving that Republic Act No. 6389 has no
retroactive application.
G.R. NO. L-36625 This is an appeal raised by petitioner Fortunato Castro to the Court of Appeals
from the decision of the Court of Agrarian Relations dismissing his complaint for the ejectment of his
tenant, respondent Juan Castro, on the ground of personal cultivation. The landowner wants to
personally cultivate the land owned by him located in Pulilan, Bulacan with an area of 6,941 square
meters. Petitioner Fortunato Castro questioned the constitutionality of Section 7 of Republic Act No.
6389 which amended Section 36(l) of Republic Act No. 3844. The Court of Appeals certified the
appeal to this Court on the ground that the issue of the constitutionality of Republic Act No. 6389
fails squarely within the exclusive jurisdiction of the Supreme Court.
The complaint in this case was filed by the petitioner with the Court of Agrarian Relations. The
petitioner asked for the ejectment of his tenant Juan Castro. The latter in his answer alleged that the
petitioner was not the owner of the landholding in question and that assuming the petitioner was the
owner, he is nevertheless not qualified and fit to personally cultivate said landholding as he spends
most of his time in mahjong sessions and in cockpits.
After the enactment of Republic Act No. 6389 on September 10, 1971, the respondent moved for the
dismissal of petitioner's complaint on the ground that the new law eliminated personal cultivation by
the landowmer as a ground for the ejectment of an agricultural tenant. The Court of Agrarian
Relations dismissed the complaint. A motion for reconsideration was denied. The petitioner

appealed to the Court of Appeals alleging that: (1) the trial court erred in considering that Sec. 7 of
Republic Act No. 6389 which amended Sec. 36 (1) of Republic Act No. 3844 has a retroactive effect
on an cases for ejectment of an agricultural lessee 'from his landholding on the ground of personal
cultivation even if the said cases were filed long before the approval of the said Act; and (2) the trial
court erred in not considering that Sec. 7 of Republic Act No. 6389 is unconstitutional which point
was raised by appellant in his opposition to appellee's motion to dismiss the complaint and his
motion for reconsideration of the order dated December 17, 1971.
Since both cases involve the same issue of retroactivity, we shall resolve them together.
The issue of whether or not Section 7 of Republic Act No. 6389 which amended Section 36 (1) of
Republic Act No. 3844, repealing as a consequence "personal cultivation" as a cause for
dispossession, should be given retroactive effect has spawned controversy. In Arambulo v.
Conicon (CA-G.R. No. 46727-R, January 6, 1972) andPalpalatoc v. Pescador (CA-G.R. No. SP00089-R, February 22, 1972), the Court of Appeals held that the deletion of personal cultivation as a
cause for ejectment has retroactive application affecting even those cases pending in courts. The
Arambulo case was elevated to the Supreme Court on certiorari but was denied in a minute
resolution "for lack of merit" (G.R. No. L-34816, March 14, 1972).
In other cases, however, the Court of Appeals held that Republic Act No. 6389 has no retroactive
effect. InLorenzo v. Lorenzo (CA-G.R. No. 46842-R, September 4, 1971), the Court made a
categorical statement that Republic Act No. 6389 has no retroactive effect. There are other cases
where the appellate court split into two camps.
In resolving the controversy, we first apply established rules of statutory construction.
Article 3 of the old Civil Code (now Article 4 of the New Civil Code) provides that: "Laws shall not
have a retroactive effect unless therein otherwise provided." According to this provision of law, in
order that a law may have retroactive effect it is necessary that an express provision to this effect be
made in the law, otherwise nothing should be understood which is not embodied in the law.
Furthermore, it must be borne in mind that a law is a rule established to guide our actions with no
binding effect until it is enacted, wherefore, it has no application to past times but only to future time,
and that is why it is said that the law looks to the future only and has no retroactive effect unless the
legislator may have formally given that effect to some legal provisions (Lopez and Lopez v. Crow, 40
Phil. 997).
As early as 1913, this Court with Justice Moreland as ponente announced:

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The Act contains, as is seen, no express words giving it a retrospective or retroactive

effect, nor is there anything found therein which indicates an intention to give it such
an effect. Its effect is, rather, by clear intendment, prospective.
It is a rule of statutory construction that all statutes are to be construed as having
only a prospective operation unless the purpose and intention of the Legislature to
give them a retrospective effect is expressly declared or is necessarily implied from
the language used. In every case of doubt, the doubt must be solved against the
retrospective effect. The cases supporting this rule are almost without number.
In the case of Reynold v. M'Arthur (2 Pet., 416, 434), it was said that
It is a principle which has always been held sacred in the United States, that laws by
which human action is to be regulated, look forward not backward; and are never to

be construed retrospectively, unless the language of the Act shall render such
construction indispensable.
In the case of Leate v. St. Louis State Bank (115 Mo., 184), it was held that
In construing statutes in regard to whether their action is to be prospective or
retrospective, all the adjudicated cases and all the text-writers with unbroken
uniformity unite in declaring 'that they are to operate prospectively and not otherwise
unless the intent that they are to operate in such an unusual way, to wit,
retrospectively, is manifested on the face of the statute in a manner altogether free
from ambiguity.
The case of Berdan v. Van Riper (16 N.J.L., 7) holds that where a statute is
susceptible of construction as both prospective and retrospective, the former
construction will be adopted, but especially if the retrospective operation will work
injustice to anyone. ... (de Montilla v. La Corporacion de PP. Agustinos; Ancajas v.
Jakosalem, 24 Phil. 220).
The doctrine of non-retroactivity was reiterated in the case of Segovia v. Noel (47 Phil. 543). Thus
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A sound canon of statutory construction is that a statute operates prospectively only

and never retroactively, unless the legislative intent to the contrary is made manifest
either by the express terms of the statute or by necessary implication. Following the
lead of the United States Supreme Court and putting the rule more strongly, a statute
ought not to receive a construction making it act retroactively, unless the words used
are so clear, strong, and imperative that no other meaning can be annexed to them,
or unless the intention of the legislature cannot be otherwise satisfied. No court will
hold a statute to be retroactive when the legislature has not said so. ... (Farrel v.
Pingree (1888), 5 Utah, 443; 16 Pac., 843; Greer v. City of Asheville [1894], 114 N.
C., 495; United States Fidelity & Guaranty Co. v. Struthers Wells Co. [1907], 209
U.S., 306;)
An earlier opinion to the same effect is In re Will of Riosa (39 Phil. 23). This is still the rule and it has
stood the test of time (Asiatic Petroleum Co. v. Llanes, 49 Phil. 466; De Mesa v. Collector of Internal
Revenue, 53 Phil. 342; Hosana v. Diomano, 56 Phil. 741; China Insurance & Surety Co. v. Judge of
lst Inst. of Manila, 63 Phil. 320; La Paz Ice Plant & Cold Storage Co., Inc. v. Bordman and Iloilo
Commercial & Ice Co., 65 Phil. 401; The Manila Trading & Supply Co. v. Santos, 66 Phil. 237; La
Previsora Filipina v. Ledda, 66 Phil. 573; Tolentino v. Alzate, 98 Phil. 781; Tolentino v. Angeles, 99
Phil. 309; Tamayo v. Manila Hotel Co., 101 Phil. 810; Valencia v. Hon. Jose T. Surtida, 2 SCRA 622;
Buyco v. PNB, 2 SCRA 682; Billiones v. Court of Industrial Relations and Villardo v. Court of
Industrial Relations, 14 SCRA 676; Lazaro v. Commissioner of Customs, 17 SCRA 36; Universal
Corn Products, Inc. v. Rice and Corn Board, 20 SCRA 1048; Cebu Portland Cement Co. v. Collector
of Internal Revenue, 25 SCRA 789).
A restatement of the doctrine was made in the case of Espiritu v. Cipriano (55 SCRA 533.) Thus
xxx xxx xxx
... Well-settled is the principle that while the Legislature has the power to pass
retroactive laws which do not impair the obligation of contracts, or affect injuriously
vested rights, it is equally true that statutes are not to be construed as intended to

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have a retroactive effect so as to affect pending proceedings, unless such intent is

expressly declared or clearly and necessary implied from the language of the
enactment. ... (Jones v. Summers, 105 Cal. App. 51, 286 Pac. 1093; U.S. v. Whyel
28 F (2d) 30.)
The general rule therefore, is that statutes have no retroactive effect unless otherwise provided
therein (Philippine Virginia Tobacco Administration v. Gonzales, 92 SCRA 172). To exemplify this
doctrine, in Salcedo v. Court of Appeals (81 SCRA 408), we held that Republic Act No. 2260 or the
Civil Service Act of 1959 has no retroactive effect. In Padasas v. Court of Appeals (82 SCRA 250),
we held that the Agricultural Land Reform Code or Republic Act No. 3844 must be enforced
prospectively and not retroactively and therefore, the rights created, granted, or recognized therein
such as the right of redemption accrued upon the enactment of said legislation and may be
exercised thereafter in appropriate cases. In Jacinto v. Court of Appeals (87 SCRA 263) reiterated
in Castro v. Court of Appeals (99 SCRA 722) and in Baltazar v. Court of Appeals (104 SCRA 619),
we held that Presidential Decrees Nos. 27, 316, and 946 cannot be applied retroactively.
More important than resort to statutory construction in determining the issue of retroactivity is the
ascertainment of the objectives sought to be realized by the Code of Agrarian Reforms.
In the declaration of policy in Republic Act No. 6389, the applicable objectives are:

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(2) To achieve a dignified existence for the sman farmers free from pernicious
institutional restraints and practices;
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(6) To make the small farmers more independent, self-reliant and responsible
citizens and a source of genuine strength in our democratic society.
It is the legislature which determines the policy objectives of reform legislation.
This Court would be thwarting and not promoting the objectives of Congress if we rule against the
small landowners in this case. The national goal of having independent and self reliant farmers tilling
their own small landholdings would not be achieved if persons who own only two hectares or 6,941
square meters of land as in the instant cases cannot be allowed to work their land themselves but
must be compelled to perpetuate a lessor-lessee relationship. The desire of Congress to achieve a
"dignified existence for the small farmers" is not served if two families one landowner and one
tenant must share the measly produce from 6,941 square meters of land. Land reform and
agrarian reform were intended to equalize opportunities for land ownership, to enable a diffusion and
sharing of wealth and not a sharing of poverty or a fragmentation of tenanted farms into noneconomic sizes.
We are aware of the deliberations and debates in Congress on Republic Act No. 6389. We stated
in Aisporna v. Court of Appeals (108 SCRA 481).
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That it was the intention of the legislature in amending paragraph (1), sec. 36 of R.A.
3844 to deprive the landowner of the right to eject his tenant on the ground that the
former would personally cultivate the land and also to abate cases brought by the
landowner to eject the tenant on the same grounds which were still pending at the

time of the passage of the amendatory act, is clear and evident from the
deliberations and debate of Congress when Republic Act 6389 was being
deliberated, as published in the Senate Journal ....
This Aisporna case is, however, notably distinct from the two cases now before us. In Aisporna, the
court ordered the petitioner tenant ejected on the ground of personal cultivation by the landowner.
The court order became final and executory. One year after his ejectment, Aisporna availed himself
of his remedies under the law and filed a case for reinstatement with damages alleging that the
owner failed to cultivate the land himself. The trial court ruled in favor of Aisporna. However, on
appeal, the Court of Appeals reversed the decision stating that during the pendency of the action for
reinstatement, the law was amended and personal cultivation as a ground to eject a tenant was
removed. The appellate court opined that with the abolition of personal cultivation as a basis for
ejectment, the corollary proviso on reinstatement:
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... Provided, further, That should the landholder not cultivate the land himself for
three years or fail to substantially carry out such conversion within one year after the
dispossession of the tenant, it shall be presumed that he acted in bad faith and the
tenant shall have the right to demand possession of the land and recover damages
for any loss incurred by him because of said dispossession.
was also eliminated.
The issue in Aisporna was the right of the tenant to recover his status vis-a-vis the landholding from
whence he was ejected. To sustain the appellate decision would have resulted in a plain case of
injustice to the tenant and a condonation of bad faith. Our pronouncements on retroactivity dealt with
this issue alone and to the extent that theAisporna decision may be interpreted as covering factual
situations similar to the two cases now before us, to that extent we make it clear that it does not do
so.
It is true that during the debates on the bill which was later enacted into Republic Act No. 3844, there
were statements on the floor that "the owner will lose the right to eject after the enactment of this
measure" even in cases where the owner has not really succeeded yet in ejecting the tenants
(Senate Journal, Nos. 43 and 44, March 30 and 31, 1971, 2nd Regular Session 7th Congress).
Nonetheless and inspite of these remarks, Congress failed to express an intention to make Republic
Act No. 6389 retroactive and to cover ejectment cases on the ground of personal cultivation then
pending adjudication by the courts.
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... In the interpretation of a legal document, especially a statute, unlike in the

interpretation of an ordinary written document, it is not enough to obtain information
as to the intention or meaning of the author or authors, but also to see whether the
intention or meaning has been expressed in such a way as to give it legal effect and
validity. In short, the purpose of the inquiry, is not only to know what the author
meant by the language he used, but also to see that the language used sufficiently
expresses that meaning. The legal act, so to speak, is made up of two elements-an
internal and an external one; it originates in intention and is perfected by expression.
Failure of the latter may defeat the former. (59 C.J.S. 1017; Manila Jockey Club, Inc.
v. Games and Amusement Board, 107 Phil. 151).
In the case of Manila Jockey Club, Inc. v. Games and Amusements Board, supra, we held that
legislative debates are expressive of the views and motives of individual members and are not
always safe guides and, hence, may not be resorted to, in ascertaining the meaning and purpose of
the lawmaking body. It is impossible to determine with certainty what construction was put upon an

act by the members of the legislative body that passed the bill, by resorting to the speeches of the
members thereof. Those who did not speak, may not have agreed with those who did; and those
who spoke, might differ from each other (Sutherland on Statutory Construction, 499-501; Ramos vs.
Alverez, 97 Phil. 844).
There have been cases in the past where we adhered to this doctrine. Thus, we held that individual
statements made by Senators on the floor of the Senate do not necessarily reflect the view of the
Senate. Much less do they indicate the intent of the House of Representatives (Casco Phil. Chem.
Co., Inc. v. Gimenez, 7 SCRA 347; Resins, Inc. v. Auditor General, 25 SCRA 754). Accordingly, they
are not controlling in the interpretation of the law in question (Phil. Assn. of Government Retirees,
Inc. v. GSIS, 14 SCRA 610). Some statements may be deemed to be a mere personal opinion of the
legislator (Mayon Motors, Inc. vs. Acting Com. of Internal Revenue, 1 SCRA 918).
The interpretation of statutes is for the courts. And the courts are not necessarily bound by one
legislator's opinion, expressed in Congressional debates, concerning the apPlication of existing laws
(Song Kiat Chocolate Factory vs. Central Bank of the Phils., 102 Phil. 477).
The petitioner-tenant in G.R. No. L-34586 contends that since Republic Act No. 6389 is a social
legislation and passed under the police power of the State, it should be liberally interpreted in favor
of the tenants.
We agree with the petitioner-tenant that the law in question is social legislation. But social justice is
not for tenants alone. The disputed land in L-36625 is only 6,941 square meters. The area of the
land in L-34586 is slightly bigger, about two (2) hectares. A person with only one or two hectares of
land to his name is equally deserving of social justice.
A majority of the landowners affected by the appeal of personal cultivation" as a ground for the
ejectment of a tenant own small landholdings. The records of Senate Bill No. 478 which eventually
became Republic Act No. 6389 reveal that the repeal has affected an estimated 75% of landowners
in the country who own tenanted lands of less than 3 hectares, 40% of those who own 5 hectares or
less and 96% of landowners who own an area of less than 10 hectares each.
Many of these landowners who filed actions for ejectment on this ground are retirees who have
opted to leave the stresses and strains of city life and to return to their home towns to personally
cultivate their small landholdings. They are teachers, clerks, nurses, and other hardworking and
frugal people who in a lifetime of sacrifice gathered their pitiful little savings and purchased small
farms to supplement the inadequate pensions from the Government Service Insurance System or
the Social Security System. The owners of the lots in these cases had the bona fideintention to
personally cultivate their lands as proven and found by the trial courts. To hold that they can no
longer eject their tenants because of Republic Act No. 6389 would deprive them of their right to
enjoy their property which they had already asserted before the statute was passed. Precisely, the
legislators, in providing "personal cultivation" as a ground to eject tenants intended to encourage and
attract the landowners to go to their respective provinces and till their own lands. Unfortunately, the
ground of "personal cultivation" was abused and used as a pretext to eject the tenant and this led to
the amendatory law.
This unfortunate consequence should not work an injustice upon those small landowners proven to
have the bona fide intention to personally cultivate their lands. In Gonzales v. GSIS (107 SCRA
492), we held that:
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It should also be borne in mind that Republic Act No. 3844, then known as the
Agricultural land Reform Code, is a social legislation whose implementation has been

made more imperative by Section 6, Article 11 of the 1973 Constitution. It is

designed to promote economic and social Stability. It must be interpreted liberally to
give full force and effect to its clear intent. This liberality in interpretation, however,
should not accrue solely in favor of actual tillers of the land, the tenant-farmers, but
should extend to landowners as well, especially those owning ,"small landholdings",
by which is meant landholdings of 24 hectares and less than 24 hectares. These
landowners constitute part of the economic Middle class which the Government is
trying to build. They deserve as much consideration as the tenants themselves in
order not to create an economic dislocation, were tenants solely favored but this
particular group of landowners impoverished. (See "Whereas", clauses of LOI No.
143).
In Cabatan v. Court of Appeals (95 SCRA 323), we similarly held that:

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... the reliance by the tenants-lessees on"social justice"as a reason to support the
continuance of an unjust and inequitable rental rate is not only improper but would
countenance and perpetuate an injustice against the landholder-lessor. This, the
constitutional precept of "social justice" was never meant to do.
xxx xxx xxx
Social justice as thus defined and in its true meaning is not meant to countenance,
much less perpetuate, an injustice against any group-not even as against
landholders. For the landholders as a component unit or element in our agroindustrial society are entitled to 'equal justice under law' which our courts are, above
everything else, under mandate of the Constitution to dispense fairly, without fear nor
favor.
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... A cursory study of the long line of decisions on social justice will readily reveal,
however, that the concept has been fleshed out-the principle, conceptualized as
Justice Laurel enjoined in the celebrated case of Calalang vs. Williams not thru
mistaken sympathy for or misplaced antipathy against any group whether labor or
capital, landlord or tenant but evenhandedly and fairly, thru the observance of the
principle of "equal justice under law," for all and each and every element of the body
politic." (Eg. Calalang vs. Williams, 70 Phil. 726 (1940) cited, supra; Guido vs. Rural
Progress Administration, 47 O.G. 1848, (1949) 84 Phil. 847, a reconciliation between
conflicting claims of social justice and protection to property and rights; Militona
Estate Inc. vs. De Guzman, et al., No. L-11912 (1959), 105 Phil. 1296 (unreported).
In Dequito v. Llamas, (66 SCRA 504) we ruled that the petitioner-tenant ought to know that if he has
rights to protection as a tenant, the landowner has also rights under the law. The protective mantle
of social justice cannot be utilized as an instrument to hoodwink courts of justice and undermine the
rights of landowners on the plea of helplessness and heartless exploitation of the tenant by the
landowner.
Our decision to deny retroactive effect to the amendatory provision gains added strength from later
developments.
Under the 1973 Constitution, it is even more emphasized that property ownership is impressed with
a social function. This means that the owner has the obligation to use his property not only to benefit

himself but society as well. Hence, the Constitution provides under Section 6 of Article II that in the
promotion of social justice, the State "shall regulate the acquisition, ownership, use, enjoyment, and
disposition of private property, and equitably diffuse property ownership and profits." The
Constitution also ensures that the worker shall have a just and living wage which should assure for
himself and his family an existence worthy of human dignity and give him opportunities for a better
life (Sections 7 and 9, Article II) (Alfanta vs, Noe, 53 SCRA 76; Almeda vs. Court of Appeals, 78
SCRA 194).
In line with the above mandates, this Court upheld the constitutionality of Presidential Decree No.
27, which decrees the emancipation of tenants from the bondage of the soil and transferred to them
the ownership of the land they till, in Gonzales v. Estrella (91 SCRA 294). We noted the imperative
need for such a decree in Chavez v. Zobel (55 SCRA 26). We held in the latter case that "on this
vital policy question, one of the utmost concern, the need for what for some is a radical solution in its
pristine sense, one that goes at the root, was apparent. Presidential Decree No. 27 was thus
conceived. ... There is no doubt then, as set forth expressly therein, that the goal is emancipation.
What is more, the decree is now part and parcel of the law of the land according to the present
Constitution."
Significantly, P.D. No. 27, which decrees the emancipation of the tenant from the bondage of the
soil, transfers to him the ownership of the land he tills, and provides instruments and mechanisms
therefor, has recognized personal cultivation as a ground for retention and, therefore, exemption
from the land transfer decree. Personal cultivation cannot be effected unless the tenant gives up the
land to the owner.
Presidential Decree No. 27 provides:

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In all cases, the landowner may retain an area of not more than seven (7) hectares if
such landowner is cultivating such area or will now cultivate it.
The redistribution of land, restructuring of property ownership, democratization of political power,
and implementation of social justice do not require that a landowner should be deprived of
everything he owns and that even small parcels as in these two cases now before us may not be
worked by the owner himself. The evil sought to be remedied by agrarian reform is the ancient
anachronism where one person owns the land while another works on it. The evil is not present in
cases of personal cultivation by the owner.
Taking over by the landowner is subject to strict requirements. In addition to proof of ownership and
the required notices to the tenant, the bona-fide intention to cultivate must be proved to the
satisfaction of the court. And as earlier stated, the tenant is Protected in case the owner fails to
cultivate the land within one year or to work the land himself for three years.
The seven hectares retention under P.D. No. 27 is applicable only to landowners who do not own
other agricultural lands containing an aggregate of more than seven hectares or lands used for
residential commercial industry or other urban purposes where they derive adequate income to
support themselves and their families. (Letter of Instruction No. 472 dated October 21, 1976).
To Support his petition, Fortunate Castro in L-36625 asserts that Section 7 of Republic Act No. 6389
is unconstitutional
The amended provision reads:
xxx xxx xxx

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(1) The landholding is declared by the department head upon rommendation of the
National Planning Commission to be suited for residential commercial industrial or
some other urban purposes: Provided, That the agricultural lessee shag be entitled
to disturbance compensation equivalent to five times the average of the gross
harvests on his landholding during the last five preceding calendar years.
. There appears to be nothing unconstitutional in the above provision. If Mr. Castro is challenging
agrarian reform itself, then his challenge is puerile if not hopeless. We ruled in Vda, de Genuino v.
Court of Agrarian Relations (22 SCRA 792) that the Agricultural Land Reform Code is valid and
justified. In Paulo v. Court of Appeals (54 SCRA 253) we ruled:
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... Land Reform which is now transforming the rural existence of the farmers, has
become more imperative in view of the provisions of the New Constitution. Thus
Section 6, Article II thereof directs that 'the State shag promote social justice to
insure the dignity, welfare and security of all the people,' and for the attainment of
this end, directs that 'the State shall regulate the acquisition, ownership, use,
enjoyment, and diffuse of private property, and equitably diffuse ownership and
profits.' Section 6, Article XVII of the Transitory Provisions provides that the
implementation of declared agrarian reforms' shall be given priority. There is no
question that the massive overhaul of the system of land ownership by the transfer to
the tenants of the ownership of the land they till and the grant to them of the
instruments and mechanisms to increase their land's productivity will decisively
improve the people's livelihood and promote political and social stability.
And, of course, Section 12 of Article XIV specifically mandates that "the State shad formulate and
implement an agrarian reform program aimed at emancipating the tenant from the bondage of the
soil and achieving the goals enunciated in this Constitution." At any rate, there is no need to pass
upon the constitutional issue for the purpose of resolving the narrow question of retroactivity of the
questioned provision.
WHEREFORE, the petition in G.R. No. L-34586 is denied for lack of merit and the questioned
decision of the Court of Appeals is aimed. In G.R. No. L-36625, the questioned order of the lower
court is set aside and the case is remanded to the Regional Trial Court of Bulacan for trial on the
merits.
SO ORDERED.

1w ph1.t

Makasiar, Actg. C.J., Concepcion, Jr., Guerrero, De Castro, Melencio-Herrera, Plana, Escolin,
Relova and De la Fuente, JJ., concur.
Abad Santos, J., concur in the result.
Aquino, J., took no part.
Fernando, C.J. , and Teehankee, J., are on leave.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-22512 & G.R. No. L-22514

December 22, 1967

ANDRES E. LAZARO, petitioner,

vs.
THE COMMISSIONER OF CUSTOMS, respondent.
----------------------------------------------G.R. No. L-22514

December 22, 1967

ANDRES E. LAZARO, petitioner,

vs.
THE COMMISSIONER OF CUSTOMS, respondent.
G.R. No. L-22512
De Leon and De Leon and N. V. Benedicto for petitioner.
Office of the Solicitor General for respondent.
G.R. No. L-22514
Juan T. David for petitioner.
Office of the Solicitor General for respondent.
CONCEPCION, C.J.:
This is a petition for review of a decision of the Court of Tax Appeals.
On August 31, 1954, the SS "Templar" arrived at the port of Manila with a shipment, among others,
of candies, dried shrimps, and celluloid combs, consigned to petitioner, Andres E. Lazaro, under
customs entry No. 69463. For lack of the Central Bank release certificate required in Central Bank
Circulars Nos. 44 and 45, in relation to Section 1363 (f) of the Revised Administrative Code, the
goods were subjected to seizure proceedings; but, on September 4, 1954, they were released to the
petitioner upon a surety bond of the Pioneer Insurance and Surety Corporation filed by him in
the sum of P4,822.00, based on the value of the goods, as appraised by the Bureau of Customs,
including an estimated profit of 30% of the landed cost.
After appropriate proceedings, the Collector of Customs rendered a decision decreeing the forfeiture
of the goods, and, as the same had already been released to the petitioner, ordering him to pay in
cash the sum of P4,820.00 as the value thereof. This decision was, on appeal taken by petitioner,
affirmed by the Commissioner of Customs, who directed the confiscation of said bond and ordered
petitioner and his surety to pay, jointly and severally, in cash, said sum of P4,822.00, within thirty
(30) days from notice. A reconsideration of the decision of the Commissioner of Customs having
been denied, petitioner filed a second motion for reconsideration, with the same result. Petitioner
appealed to the Court of Tax Appeals, which affirmed the decision of the Commissioner of Customs.
itc-alf

Said Court having subsequently refused to reconsider its decision, two (2) petitions for review
thereof by the Supreme Court have been filed for petitioner herein, one (L-22512) by Attys. De Leon
and De Leon and Nicolas V. Benedicto, Jr., and another (L-22514) by Atty. Juan T. David.
Although petitioner's counsel in these two (2) cases have filed separate briefs, with their respective
assignments of error, the issues raised in both are substantially the same. Petitioner maintains that
Section 1363 (f) of the Revised Administrative Code, which was applied by the Court of Tax
Appeals, to sustain the decision of the Commissioner of Customs, is inapplicable to this case
because said section refers to articles of "prohibited importation," to which category the goods in
question do not, he claims, belong; that Circulars Nos. 44 and 451 do not authorize the forfeiture of
goods imported in violation thereof; that said circulars have been repealed by Circular No. 133,
issued by the Central Bank on January 21, 1962, and abolishing control over foreign exchange and
dispensing with the requirement, under Circular No. 44, of import licenses, and by Republic Act No.
1410, approved on September 10, 1955; that said repeals had abated any and all liabilities incurred
in consequence of the violation of Circulars Nos. 44 and 45; and that, in any event, such liability
should be limited to the value of the imported goods at the place of origin, as provided in Section
13(a) of the Philippine Tariff Act of 1909, as amended, in relation to Section 1280 of the Revised
Administrative Code, and should not include estimated profits.
These questions have already been decided by this Court adversely to petitioner's pretense. Indeed,
in Lazaro vs. Commissioner of Customs2 involving the same petitioner we held that:
1. Despite the issuance of Central Bank Circular. No. 133, importations made without the
corresponding Central Bank release certificate violated said Circular Nos. 44 and 45, in relation to
Section 1363(f) of the Revised administrative Code, for
Central Bank Circular 133 did not repeal Circular 44 and 45 with respect to the necessity of a
release certificate. As matter of fact, paragraph 6 of Circular 133 required imports to be
released only upon presentation of a release certificate issued by the Central Bank. Not only
that, section 14 which states:
"14. No item of import shall be released by the Bureau of Customs without the
presentation of a release certificate issued by the Central Bank or any authorized
Agent Bank in a form prescribed by the Monetary Board."
was deemed incorporated to Circular 133 by virtue of paragraph 8 thereof which we quote
hereunder:
"8. All existing circulars, rules and regulations and, conditions governing transactions
in foreign exchange not inconsistent with the provision a of this Circular, are deemed
incorporated hereto and made integral parts hereof by reference."
2. The passage of Republic Act No. 1410 did not abate any liability incurred for violation of Central
Bank Circular No. 45, because Section 3 of said Act provides:
. . . That goods and commodities in transit or previously imported on a no-dollar
remittance basis at the time of the approval of this Act shall not be affected by the operation
of this Act.
3. For purposes of seizure proceedings, the appraised value of the imported merchandise should not
be the market value in the country of origin, as provided in Section 13 (a) of the Philippine Tariff Act
of 1909, as amended, in relation to Section 1280 of the Revised Administrative Code, because:

Rule 13(a) of the Philippine Tariff Act of 1909, as amended, relates to the appraisal of
importations for purposes of determining the customs duties. (See Lim Quim v. collector of
Customs, 23 Phil. 509). For appraisal of importations in connection with seizure proceedings,
the value of the importation in the localmarket should prevail, following section 1377 of the
Revised Administrative Code which provides:
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"Sec. 1377. Description and appraisement of seized property. The collector shall
also cause a list and particular description of the property seized to be prepared and
appraisement of the same at itsvalue in the local market to be made by at least two
appraising officers under the revenue laws, if there are such officers at or near the
place of seizure, but if there are not, then by two competent and disinterested
citizens of the Philippines, to be selected by him for the purpose residing at or near
the place of seizure which list and appraisement shall be properly attested by such
collector and the persons making the appraisal," and
4. As regards the inclusion of the 30% estimated profit, as part of the appraised value of the goods
involved in the present case,
. . . the inclusion of the 30% estimated profits as part of the value of the importations in
question was made, with the acquiescence and approval of the appellant. As a matter of fact,
the amount of bonds posted by him upon release of the goods carried the 30% estimated
profits. The payment of such estimated profits as part of the value of the importations in the
surety bonds therefore constitutes his contractual obligation in case of forfeiture.
In fact, the applicability of the aforementioned Circulars Nos. 44 and 45 to importations involving nodollar remittances is well settled and the foregoing views have been upheld in a long line of
decisions.3
Lastly petitioner had submitted the issues herein for decision, by the Court of Tax Appeals, "on the
basis of the final ruling of the Supreme Court in the aforementioned cases" of Andres Lazaro v.
Commissioner of Customs, L-21790 and L-21794, which accordingly, are controlling in the present
appeals.
WHEREFORE, the decision appealed from should be, as it is hereby, affirmed, with cost against the
petitioner. It is so ordered.
Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and Fernando,
JJ., concur.

Footnotes
1

Pursuant to par. 14 of Circular No. 44:

".....No item of import shall be released by the Bureau of Customs without the presentation of
a release certificate issued by the Central Bank or any Authorized Agent Bank in a form
prescribed by the Monetary Board."
Circular No. 45 provides, inter alia, that: .

"WHEREAS, practically all imports represent an immediate demand for foreign exchange or
a potential demand for foreign exchange;
xxx

xxx

xxx

".....The Monetary Board, in pursuance of Central Bank Circular No. 20 and other circulars
and notifications issued in pursuance thereto, hereby requires any person or entity who
intends to import or receive goods from any foreign country for which no foreign exchange is
required or will be required of the banks to apply for a license from the Monetary Board to
authorize such import."
2

G.R. Nos. L-21790 and L-21794, December 24, 1965. .

Pascual v. Comm. of Customs, L-10979, June 30, 1961; Actg. Comm. of Customs v.
Leuterio, L-19142, Oct. 17, 1951; Tong Teck v. Comm. of Customs, L-11947, June 30, 1959;
Comm. of Customs v. Eastern Sea Trading, L-14279, Oct. 31, 1961; Comm. of Customs v.
Santos, L-11911, Mar. 30, 1962; Comm. of Customs v. Nepomuceno, L-11126, Mar. 31,
1962; Seree Investment Co. v. Comm. of Customs, L-19564, Nov. 28, 1964; Seree
Investment Co. v. Comm. of Customs, L-20847-49, June 22, 1965; Bombay Department
Store v. Comm. of Customs, L-20460, Sept. 30, 1965; Seree Investment Co. v. Comm. of
Customs, L-21217, Nov. 29 1965; Yupangco & Sons, Inc. v. Comm. of Customs, L-22259,
Jan. 19, 1966; Chan Kian v. Collector of Customs, L-20803, Jan. 31, 1966 and Phil.
International Surety v. Comm. of Customs, L-22209, December 17, 1966.

G.R. No. L-21013, Universal Corn

Products Inc. et al. v. Rice and Corn
Board et al., 20 SCRA 1048
Republic of the Philippines
SUPREME COURT
Manila
EN BANC
August 17, 1967
G.R. No. L-21013
UNIVERSAL CORN PRODUCTS, INC., ET AL., petitioners-appellants,

vs.
RICE AND CORN BOARD, ET AL., respondents appellees.
Paredes, Poblador, Cruz, Nazareno and Associates for petitioners-appellants.
Office of the Solicitor General for respondents-appellees.
FERNANDO, J.:
Appeal from a judgment of Judge Guillermo Torres of Pasig, Rizal dated August 6,
1962, dismissing an amended petition for declaratory relief seeking a judicial
declaration of illegality of the construction placed by respondent Rice and Corn Board
of its Resolution No.10 in connection with Section 2-A of Commonwealth Act No.
108. What was sought, without success, was a ruling that petitioner Universal Corn
Products, Inc. could retain its co-petitioners, all aliens, in its employ, contending that a
dismissal from employment on the strength of the aforesaid construction by
respondents would be to give it a retroactive, and under the circumstances, an
unconstitutional effect.
The amended petition of February 8, 1961 after the averments as to the petitioners and
respondents alleged that pursuant to the power vested in respondent Rice and Corn
Board by Section 6 of Republic Act No. 3018, Resolution No.10 was promulgated
dated November 21, 1960, a particular regulation of which specifically provides: "No
person who is not a citizen of the Philippines shall be employed in any capacity in any
Filipino-owned establishment engaged in any of the lines of activity in the rice and/or
corn industry except technical personnel whose employment may be authorized by the
President of the Philippines upon recommendation of the Rice and Corn
Board." 1 Then came a paragraph that petitioner Universal Corn Products, Inc. "is a
corporation the capital stock of which is wholly owned by citizens of the Philippines
and is engaged in certain lines of activity covered by Republic Act No. 3018 and
Resolution No.10 of the Rice and Corn Board." 2 It was then stated that all its
employees numbering over 200 are Filipinos, with the exception of co-petitioners,
then holding the positions of executive vice-president, comptroller, sales manager,
chief warehouseman, assistant plant superintendent, cashier, and sales
supervisor, 3 and that such alien employees "have been with the Universal Corn
Products, Inc. long before the enactment into law of Republic Act No. 3018 and the
promulgation of Resolution No.10 of the Rice and Corn Board." 4 The next two
paragraphs would impugn the construction placed on Resolution No.10 for its
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retroactivity insofar as it would be made to apply to the alien petitioners with the
result that their dismissal would be called for and for its unconstitutionality insofar as
such individuals and other persons similarly situated would be deprived of their means
of livelihood without due process of law and would be denied the equal protection of
the law. The amended petition next stressed the propriety of a judicial declaration as
to the interpretation that must be placed on the aforesaid Resolution No.10 and
Section 2-A of Commonwealth Act No. 108 to avoid the taint of retroactivity and
unconstitutionality. 5
Respondents, the National Rice and Corn Board and its chairman as well as members,
in their answer of March 9, 1961, in effect admitted the allegations of the petition but
denied the legal conclusion asserted by petitioners to flow therefrom. 6 More
specifically, they disputed the alleged retroactive character of the construction, the
truth according to them being that regardless of the date of employment, "upon the
passage of Republic Act No. 3018 and the regulation in question," which is a mere
reproduction of Section 2-A of Commonwealth Act No. 108 as amended by Republic
Act No. 134 "employment of aliens in the regulated industry has become unlawful
and contracts of employment entered prior to the passage of Republic Act No.
3018 have become legally impossible of performance . . . "Respondents likewise
denied the allegation of unconstitutionality on due process and equal protection
grounds, the statute being a valid measure under the police power of the state . .
. 7 There were likewise allegations as to the impropriety of the action for declaratory
relief and the absence of a cause of action. 8 After invoking special defenses centered
mainly on the validity under American constitutional law doctrines of the action taken
by respondents, respondents prayed for the dismissal of the petition, with costs,
which, as above pointed out, was granted by the lower court in the decision, now the
subject of this appeal.
The decision must be affirmed. There is no valid ground for reversal. The contention
that the interpretation by respondents of Resolution No.10 and Section 2-A
ofCommonwealth Act No. 108 suffers from the vice of retroactivity or afflicted with
the taint of unconstitutionality is far from persuasive.
On the question of the retroactivity of the construction placed by respondent Rice and
Corn Board on its Resolution No. 10 in connection with Section 2-A
of Commonwealth Act No. 108, it is undeniable of course that if such be the case
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petitioners could successfully impugn the appealed decision. For as early as 1913, this
Court with Justice Moreland as ponente announced: "It is a rule of statutory
construction that all statutes are to be construed as having only a prospective
operation unless the purpose and intention of the Legislature to give them a
retrospective effect is expressly declared or is necessarily implied from the language
used. In every case of doubt, the doubt must be resolved against the retrospective
effect. The cases supporting this rule are almost without number." 9 Subsequently in
1925, this Court through Justice Malcolm reiterated the doctrine. Thus: "A sound
canon of statutory construction is that a statute operates prospectively only and never
retroactively, unless the legislative intent to the contrary is made manifest either by
the express terms of the statute or by necessary implication. Following the lead of the
United States Supreme Court and putting the rule more strongly, a statute ought not to
receive a construction making it act retroactively, unless the words are so clear,
strong, and imperative that no other meaning can be annexed to them, or unless the
intention of the legislature cannot be otherwise satisfied. No court will hold a statute
to be retroactive when the legislature has not said so." 10 That is still the rule; it has
stood the test of time. 11
It suffices to refer to the pertinent provision of Republic Act No. 3018 to show that
the imputation of retroactivity lacks support in law. The act was approved on August
2, 1960 and made to take effect on January 1, 1961, except as to certain provisions
specifically designated. More precisely, with reference to rules and regulations, it is
provided that they could be issued by the Rice and Corn Board within thirty (30) days
from the date of approval, namely, August 2, 1960; such rules and regulations which
may be necessary to carry out its provision shall take effect fifteen (15) days after
their publication in a newspaper of general circulation printed in Manila. 12 Barely
two months ago, where it was shown that the collection of interest on a deficiency
income tax assessment dated only from the effectivity of the applicable Republic Act,
such deficiency income taxes in question having been assessed and unpaid before
such a date, this Court, speaking through Justice J.B.L. Reyes, sustained the Court of
Tax Appeals in its holding "that said Section 51 (d), as amended, is not being applied
retroactively as contended by petitioner herein." 13 To the same effect is this citation
from Salcedo and Ignacio v. Carpio: 14 "We are sorry to say that this contention is
not correct. To apply the provision of Republic Act No. 546 to the petitioners is not to
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apply it retrospectively, because to do so is to make said Act merely effective, not

before, but after the date it was approved or became effective, and it will affect their
continuance in office, not before, but after the approval of Republic Act No. 546. The
fact that they have been appointed prior thereto does not make said Act of retroactive
effect."
Two recent decisions speak similarly, People v. Yu Bao 15 and People v. Ong
Tin. 16 According to the former: "Lastly, appellant would have us declare the penal
provisions of Republic Act No. 1180 in the nature of an ex post facto law and,
therefore, unconstitutional, if applied to his case, upon the argument that although he
was not yet engaged in the retail business on May 15, 1954, he was issued a license to
engage therein and had entered the retail business on May 22, 1954, prior to the
approval of the Act on June 19, 1954; and yet his having so engaged, although legal at
its inception has been penalized and made criminal by the law. We also find this
argument unattainable. An ex post facto law is one that "makes an act done before the
passage of a law, innocent when done, criminal and punish(es) such act . . . " (Mekin
v. Wolfe, 2 Phil. 74). Applied to appellant's case, Republic Act No. 1180 does not
penalize this alien appellant for having engaged in the retail business prior to its
approval; what the law penalizes is his having done so thereafter." According to the
latter: "The next issue raised by defense counsel refers to the proposition that even
assuming that Republic Act No. 1180 is constitutional, yet the same does not apply to
the accused inasmuch as he has obtained his permit and license to engage in the retail
trade before said law was approved and before it became effective. We find no merit
in this contention because the acts constituting the crime for which appellant has been
convicted in the case at bar were all executed after the effectivity of Republic Act No.
1180, and by no means can We consider appellant's conviction as the result of the
application to him of an ex post facto law."
Petitioners are vocal in their fears that to construe Resolution No.10 in connection
with Section 2-A of Commonwealth Act No. 108 as to require the dismissal of alien
personnel would be to run the risk of an unconstitutional interpretation. Such doubts
and misgivings are unjustified. A recent decision of this Court, King v. Hernaez, 17 of
far-reaching significance, ought to have stilled such misplaced apprehension. Thus: "It
is hard to see how the nationalization of employment in the Philippines can run
counter to any provision of our Constitution considering that its aim is not exactly to
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deprive a citizen of a right that he may exercise under it but rather to promote,
enhance and protect those that are expressly accorded to a citizen such as the right to
life, liberty and pursuit of happiness. The nationalization of an economic measure
when founded on grounds of public policy cannot be branded as unjust, arbitrary or
oppressive or contrary to the Constitution because its aim is merely to further the
material progress and welfare of the citizens of the country. This is what we expressed
in no uncertain terms in the Ichong case when we declared constitutional the
nationalization of the retail trade. Indeed, we said there that it is a law 'clearly in the
interest of the public, nay of the national security itself, and indisputably falls within
the scope of police power, through which and by which the State insures its existence
and security and the supreme welfare of its citizens.' True, this fundamental policy
was expressed in a decision the subject of which concerns the constitutionality of the
Retail Trade Act, but since the Anti-Dummy Law is but a mere complement of the
former in the sense that it is designed to make effective its aims and purposes and both
tend to accomplish the same objective either by excluding aliens from owning any
retail trade or by banning their employment if the trade is owned by Filipinos, and the
target of both is 'the removal and eradication of the shackles of foreign economic
control and domination' thru the nationalization of the retail trade both in ownership
and employment, the pronouncement made in one regarding its constitutionality
applies equally if not with greater reason to the other both being complementary one
to the other. Indeed, in nationalizing employment in retail trade the right of choice of
an employer is not impaired but its sphere is merely limited to the citizens to the
exclusion of those of other nationalities."
Wherefore, the judgment appealed from is affirmed. With costs against petitioners.
Reyes, J.B.L., Makalintal, Bengzon, J.P., Zaldivar, Sanchez and Angeles, JJ., concur.
Castro, J., concurs in the result.
Concepcion, C.J. and Dizon, J., are on leave.
Footnotes
1 Paragraph 3, Petition.
2 Paragraph 4, Petition.
3 Paragraph 5, Petition.
4 Paragraph 6, Petition.
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Paragraph 13, Petition.

6 Paragraph 4, Answer.
7 Paragraphs 5 & 7, Answer.
8 Paragraphs 6 & 9, Answer.
9 Montilla vs. Augustinian Corp. (1913) 24 Phil. 220, 222.
10 Segovia vs. Noel (1925) 47 Phil. 543, 546. An earlier opinion to the same effect
is In reWill of Riosa (1918), 39 Phil. 23.
11 Thus Justices Street (Asiatic Petroleum Co. vs. Llanes [1926] 49 Phil. 466, 469470; De Mesa vs. Collector of Internal Revenue [1929] 53 Phil. 342, 345), Imperial
(La Paz Ice Plant & Cold Storage Co., Inc. vs. Bordman & Iloilo Commercial & lee
Co. [1938] 65 Phil. 401, 406-407; La Previsora Filipina vs. Ledda [1938] 66 Phil. 573,
577; The Manila Trading & Supply Co. vs. Santos [1938] 66 Phil. 237, 239-240),
Recto (China Ins. & Sty Co. vs. Judge [1936] 63 Phil. 320, 327), Villa-Real (Hosana
vs. Diomano [1927] 56 Phil. 742, 746), Padilla (Tolentino vs. Angeles [1956] 99 Phil.
309, 316), Reyes, A. (Tamayo vs. Manila Hotel Co. [1951] 101 Phil. 810, 813)
Paredes (Buyco vs. PNB, L-14406, June 30, 1961; Billones vs. Court, L-17566 &
Villardo vs. Court, L-17567, July 30, 1965) and Chief Justice Concepcion (Valencia
vs. Hon. Jose T. Surtida, L-17277, May 31, 1961).
12 Section 6, Republic Act No. 3018.
13 Central Azucarera de Don Pedro vs. Court, L-2236 & L-23254, May 31, 1967.
14 89 Phil. 254, 258 (1951).
15 103 Phil. 271, 276 (1958).
16 103 Phil. 476, 480 (1958).
17 L-14859, March 31, 1962.
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Following enstances on art 4

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-14542

October 31, 1962

MANUEL A. CORDERO, Trial Attorney of the Tenancy Unit, Mediation Division, Agricultural
Tenancy Commission Department of Justice and VICENTE SALAZAR, petitioners,
vs.
HON. JOSE R. CABATUANDO, Associate Judge of the Court of Agrarian Relations, and
LEONARDO STA. ROMANA, respondents.
Office of the Solicitor General for petitioners.
Manuel A. Cordero for and in his own behalf as petitioner.
Fausto F. Allado and Ludivico M. Ipac for respondent Associate Judge of the Court of Agrarian
Relations.
Policarpio O. Sta. Romana for respondent Leonardo Sta. Romana.
REGALA, J.:
This is a petition for certiorari and mandamus "to declare null and void the disputed order dated
September 22, 1958 and the resolution dated October 1, 1958" of the Court of Agrarian Relations,
disqualifying petitioner Manuel A. Cordero, Trial Attorney, Tenancy Counsel Unit, Mediation Division,
Agricultural Tenancy Commission, Department of Justice "from appearing as counsel for petitioner
tenant in this case, or for any tenant in any other cases before this Court," and "to compel
respondent Judge to allow petitioner trial attorney and all trial attorneys of the Mediation Division of
the Department of Justice to appear as counsel for indigent tenants in cases pending in his sala."
The record discloses that on July 21, 1958, the Tenancy Counsel Unit of the Agricultural Tenancy
Commission of the Department of Justice, thru its Trial Attorney the herein petitioner Manuel A.
Cordero as counsel for indigent petitioner tenant Vicente Salazar, filed with the Second Regional
District of the Court of Agrarian Relations, CAR Case No. 1379-NE-58 against respondent landlord
Leonardo Sta. Romana and others "for reinstatement and reliquidation of past harvests"; that on
September 1958, respondent landlord Leonardo Sta. Romana file "Motion to Disqualify Counsel and
To Set Hearing at Cabanatuan City, praying among others for the disqualification of petitioner
Manuel A. Cordero to act as counsel tenant Vicente Salazar; that on September 22, 1958,
respondent Judge, acting on the aforesaid motion to qualify, issued the order in question
disqualifying petitioner Manuel A. Cordero and/or any other attorney from the Mediation Division of
the Department of Justice from appearing as counsel for petitioner tenant Vicente Salazar or for
other tenants represented by the said division the said court; that on September 29, 1958, an
"Urgent Motion for Reconsideration" was filed before the court, praying for the setting aside of the
order of September 22, 1958 but the same was denied on October 1958.
In its order dated September 22, 1958, the Court Agrarian Relations (Second Regional District)
upheld respondents' claim and held, among others:

(1) That representation by counsel of tenants who cannot afford to pay should be done by the public
defendant of the Department of Labor as provided for in section 54 of Republic Act No. 1199;
(2) That Circular No. 5, dated June 28, 1957, of Agricultural Tenancy Commission, as approved by
Secretary of Justice, creating a Tenancy Unit Counsel in the Mediation Division, is ultra vires and
has no legal force; and
(3) That even the Mediation Division of the Agricultural Tenancy Commission, which has been
performing many functions, has been in existence without the sanction of any statute.
As a result of this order, the plaintiff filed the present petition before this Court. As prayed for, this
Court on August 21, 1958 issued a writ of preliminary injunction restraining the respondent judge
from enforcing his order complained of until further orders from this Court.
Meanwhile, Congress passed Republic Act No. 2263, amending the Agricultural Tenancy Act of the
Philippines (Republic Act No. 1199) providing among others that
In all cases wherein a tenant cannot afford to be represented by counsel, it shall be the duty
of the trial attorney of the tenancy mediation commission to represent him, upon proper
notification by the party concerned, or the court of competent jurisdiction shall assign or
appoint counsel de oficio for the indigent tenant. (Section 54, Republic Act No. 1199, as
amended by Section 20 of Republic Act No. 2263).
After the enactment of the aforementioned Republic Act No. 2263, on August 11, 1959, petitioner
filed a MANIFESTATION contending "that the issue in the case at bar is now moot and academic."
As required by this Court, respondent judge, thru counsel, filed on October 3, 1959 his COMMENT
to the aforementioned manifestation of petitioner alleging that, before the enactment of Republic Act
No. 2263, there was no Tenancy Mediation Division in existence nor was there any law creating the
same and defining its functions, and that its only basis for existence, therefore, are sections 19 and
20 of Republic Act No. 2263 which are null and void because the Constitution provides that "no bill
which may be enacted into law shall embrace more than one subject which shall be expressed in the
title of the bill." He contended further that nowhere in the titles of Republic Act No. 1199 and
Republic Act No. 2263 is the creation of the Tenancy Mediation Division ever mentioned, thereby
indicating that section 19, Republic Act No. 2263 falls under the first class of prohibited bills.
The decisive issue in this case is the constitutionality of sections 19 and 20 of Republic Act No.
2263, amending sections 53 and 54 of Republic Act No. 1199. The fundamental objection of
respondent to the presumed constitutionality of these sections is that section 19 of Republic Act No.
226 authorizing the Secretary of Justice acting through a tenancy mediation division, to carry out a
national enforcement program including the mediation of tenancy disputes, is not expressed in the
title of the bill as required by section 21, paragraph 1, of Article VI of the Philippine Constitution
which reads:
No bill which may be enacted into law shall embrace more than one subject which shall be
expressed in the title of the bill.
It is to be noted that the basic law, Republic Act 1199, is called "The Agricultural Tenancy Act of the
Philippines."
The constitutional requirement in question is satisfied if all parts of the law are related, and are
germane to subject matter expressed in the title of the bill. The title of Republic Act No. 2263 reads
as follows: "AN ACT AMENDING CERTAIN SECTIONS OF REPUBLIC ACT NUMBERED ONE

THOUSAND ONE HUNDRED NINETY-NINE, OTHERWISE KNOWN AS THE AGRICULTURAL

TENANCY ACT OF THE PHILIPPINE." The constitutional requirement is complied with as long the
law, as in the instant case, has a single general subject which is the Agricultural Tenancy Act and
the amendatory provisions no matter how diverse they may be, so long as they are not inconsistent
with or foreign to the general subject, will be regarded as valid (Sinco, Philippine Political Law, 11th
Ed., p. 225; Cooley, Constitutional Limitations, 6th Ed., p. 172; See also Public Service Commission
v. Recteweald, 290 Ill. 314, 8 A.L.R. 466.)
The provisions of sections 19 and 20 of Republic Act No. 2263 are certainly germane to, and are
reasonably necessary for the accomplishment of the one general subject, agricultural tenancy.
In the case of Government v. Hongkong & Shanghai Banking Corporation, 66 Phil. 483, We laid
down the rule that
Constitutional provisions relating to the subject matter and titles of statutes should not be so
narrowly construed as to cripple or impede the power of legislation. The requirement that the
subject of an act shall be expressed in its title should receive a reasonable and not a
technical construction. It is sufficient if the title be comprehensive enough reasonably to
include the general object which a statute seeks to effect, without expressing each and every
end and means necessary or convenient for the accomplishing of the object. Mere details
need not be set forth. The title need not be an abstract or index of the Act. (syllabus)
In the case of Sumulong v. Commission on Elections, 73 Phil. 288, the following doctrine was
enunciated:
The Constitutional requirement that the subject of an act shall be expressed in its title should
be reasonably construed so as not to interfere unduly with the enactment of necessary
legislation. It should be given a practical rather than technical construction. It should be a
sufficient compliance with such requirement if the title expresses the general subject and all
the provisions of the statute are germane to that general subject. In the light of the relevant
provisions of the Constitution, the challenged provision of section 5 of Commonwealth Act
657 has a necessary and proper connection with the reorganization of the Commission on
Elections, which is the subject expressed in the title of the Act. . . . (syllabus)
And in the later case of People v. Carlos, 78 Phil. 535, We again said:
The People's Court was intended to be a full and complete scheme with its own machinery
for the indictment, trial and judgment of treason cases. The various provisos mentioned in
appellants brief are allied and germane to the subject matter and purposes of the People's
Court Act; they are subordinate to its end. The multitude of matters which the legislation, by
its nature, has to embrace would make mention of all of them in the title of the act
cumbersome. It is not necessary, and the Congress is not expected, to make the title of an
enactment a complete index of its contents. (Government of the Philippine Islands v.
Municipality of Binalonan, 32 Phil. 634.) The constitutional rule is satisfied if all parts of a law
relate to the subject expressed in its title.
The only amendment brought about by Republic Act No. 2263 is the transfer of the function of
representing these indigent tenants to the Department of Justice, apparently to consolidate in the
latter Department the functions relative to the enforcement of tenancy laws. In essence, therefore,
there is no change in the set-up established by Republic Act No. 1199 and that provided for by
Republic Act No. 2263. There is only a transfer of functions from one department of the government
to another.

One salient aspect of this case We should not lose sight of is the fact that, shortly after the
enactment of Republic Act No. 2263 in 1959, the function of representing these indigents before the
Agrarian Court by public defenders of the Department of Labor had been actually transferred to the
Tenancy Mediation Division of the Department of Justice by virtue of a Memorandum Circular of the
department of Labor, dated July 15, 1959, addressed to Regional Labor Administrators, Officers-inCharge Local Offices, Legal Advisers and Labor Attorneys of the Department. The concluding
paragraph of this circular reads:
In view hereof, all legal personnel of this department shall henceforth desist from performing
legal aid functions in tenancy cases in any manner in their respective jurisdiction, and all
such cases which they are handling and still pending adjudication settlement, as well as
those which may be addressed to them in the future, should be referred and turned over to
the Commissioner of the Tenancy Mediation Commission at 758 Padilla St., San Miguel,
Manila.
To declare sections 19 and 20 of Republic Act No. 2 null and void would in effect upset the transfer
of duty of representing indigent tenants from the public defenders of the Department of Labor to the
trial attorney in the Mediation Division of the Agricultural Tenancy Commission of the Department of
Justice. In other words, a declaration of nullity of these provisions of Republic Act No. 2263 would do
harm to, and would be nugatory of, intention of Congress to consolidate the function of enforcing our
tenancy laws in the Department of Justice.
For these reasons, We hereby declare sections 19 and 20 of Republic Act No. 2263 valid and
constitutional.
WHEREFORE, the petition is hereby granted and writ of preliminary injunction heretofore issued,
made permanent.
Bengzon, C.J., Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Barrera, Paredes, Dizon and
Makalintal,concur.
Padilla, J., took no part.

Art 5

SECOND DIVISION

[G.R. No. 128448. February 1, 2001]

SPOUSES ALEJANDRO MIRASOL and LILIA E. MIRASOL, petitioners,

vs. THE COURT OF APPEALS, PHILIPPINE NATIONAL BANK,
and PHILIPPINE EXCHANGE CO., INC., respondents.
DECISION
QUISUMBING, J.:

This is a petition for review on certiorari of the decision of the Court of Appeals dated July
22, 1996, in CA-G.R. CV No. 38607, as well as of its resolution of January 23, 1997, denying
petitioners motion for reconsideration. The challenged decision reversed the judgment of the
Regional Trial Court of Bacolod City, Branch 42 in Civil Case No. 14725.
The factual background of this case, as gleaned from the records, is as follows:
The Mirasols are sugarland owners and planters. In 1973-1974, they produced 70,501.08
piculs[1] of sugar, 25,662.36 of which were assigned for export. The following crop year, their
acreage planted to the same crop was lower, yielding 65,100 piculs of sugar, with 23,696.40
piculs marked for export.
Private respondent Philippine National Bank (PNB) financed the Mirasols sugar production
venture for crop years, 1973-1974 and 1974-1975 under a crop loan financing scheme. Under
said scheme, the Mirasols signed Credit Agreements, a Chattel Mortgage on Standing Crops, and
a Real Estate Mortgage in favor of PNB. The Chattel Mortgage empowered PNB as the
petitioners attorney-in-fact to negotiate and to sell the latters sugar in both domestic and export
markets and to apply the proceeds to the payment of their obligations to it.
Exercising his law-making powers under Martial Law, then President Ferdinand Marcos
issued Presidential Decree (P.D.) No. 579[2] in November, 1974. The decree authorized private
respondent Philippine Exchange Co., Inc. (PHILEX) to purchase sugar allocated for export to the
United States and to other foreign markets. The price and quantity was determined by the Sugar
Quota Administration, PNB, the Department of Trade and Industry, and finally, by the Office of
the President. The decree further authorized PNB to finance PHILEXs purchases. Finally, the
decree directed that whatever profit PHILEX might realize from sales of sugar abroad was to be
remitted to a special fund of the national government, after commissions, overhead expenses and
liabilities had been deducted. The government offices and entities tasked by existing laws and

administrative regulations to oversee the sugar export pegged the purchase price of export sugar
in crop years 1973-1974 and 1974-1975 at P180.00 per picul.
PNB continued to finance the sugar production of the Mirasols for crop years 1975-1976
and 1976-1977. These crop loans and similar obligations were secured by real estate mortgages
over several properties of the Mirasols and chattel mortgages over standing crops. Believing that
the proceeds of their sugar sales to PNB, if properly accounted for, were more than enough to
pay their obligations, petitioners asked PNB for an accounting of the proceeds of the sale of their
export sugar. PNB ignored the request. Meanwhile, petitioners continued to avail of other loans
from PNB and to make unfunded withdrawals from their current accounts with said bank. PNB
then asked petitioners to settle their due and demandable accounts. As a result of these demands
for payment, petitioners on August 4, 1977, conveyed to PNB real properties valued
at P1,410,466.00 by way of dacion en pago, leaving an unpaid overdrawn account
of P1,513,347.78.
On August 10, 1982, the balance of outstanding sugar crop and other loans owed by
petitioners to PNB stood at P15,964,252.93. Despite demands, the Mirasols failed to settle said
due and demandable accounts. PNB then proceeded to extrajudicially foreclose the mortgaged
properties. After applying the proceeds of the auction sale of the mortgaged realties, PNB still
had a deficiency claim of P12,551,252.93.
Petitioners continued to ask PNB to account for the proceeds of the sale of their export sugar
for crop years 1973-1974 and 1974-1975, insisting that said proceeds, if properly liquidated,
could offset their outstanding obligations with the bank. PNB remained adamant in its stance that
under P.D. No. 579, there was nothing to account since under said law, all earnings from the
export sales of sugar pertained to the National Government and were subject to the disposition of
the President of the Philippines for public purposes.
On August 9, 1979, the Mirasols filed a suit for accounting, specific performance, and
damages against PNB with the Regional Trial Court of Bacolod City, docketed as Civil Case No.
14725.
On June 16, 1987, the complaint was amended to implead PHILEX as party-defendant.
The parties agreed at pre-trial to limit the issues to the following:

1. The constitutionality and/or legality of Presidential Decrees numbered 338, 579,

and 1192;
2. The determination of the total amount allegedly due the plaintiffs from the
defendants corresponding to the allege(d) unliquidated cost price of export sugar
during crop years 1973-1974 and 1974-1975.[3]
After trial on the merits, the trial court decided as follows:

WHEREFORE, the foregoing premises considered, judgment is hereby rendered in

favor of the plaintiffs and against the defendants Philippine National Bank (PNB) and
Philippine Exchange Co., Inc. (PHILEX):

(1)Declaring Presidential Decree 579 enacted on November 12, 1974 and all circulars, as well
as policies, orders and other issuances issued in furtherance thereof, unconstitutional and
therefore, NULL and VOID being in gross violation of the Bill of Rights;
(2) Ordering defendants PNB and PHILEX to pay, jointly and severally, plaintiffs the whole
amount corresponding to the residue of the unliquidated actual cost price of 25,662 piculs in
export sugar for crop year 1973-1974 at an average price of P300.00 per picul, deducting
therefrom however, the amount of P180.00 already paid in advance plus the allowable
deductions in service fees and other charges;
(3) And also, for the same defendants to pay, jointly and severally, same plaintiffs the whole
amount corresponding to the unpaid actual price of 14,596 piculs of export sugar for crop
year 1974-1975 at an average rate of P214.14 per picul minus however, the sum of P180.00
per picul already paid by the defendants in advance and the allowable deducting (sic) in
service fees and other charges.

The unliquidated amount of money due the plaintiffs but withheld by the defendants,
shall earn the legal rate of interest at 12% per annum computed from the date this
action was instituted until fully paid; and, finally
(4) Directing the defendants PNB and PHILEX to pay, jointly and severally, plaintiffs the sum
of P50,000.00 in moral damages and the amount of P50,000.00 as attorneys fees, plus the
costs of this litigation.

SO ORDERED.[4]
The same was, however, modified by a Resolution of the trial court dated May 14, 1992,
which added the following paragraph:

This decision should however, be interpreted without prejudice to whatever benefits

that may have accrued in favor of the plaintiffs with the passage and approval of
Republic Act 7202 otherwise known as the Sugar Restitution Law, authorizing the
restitution of losses suffered by the plaintiffs from Crop year 1974-1975 to Crop year
1984-1985 occasioned by the actuations of government-owned and controlled
agencies. (Underscoring in the original).
SO ORDERED.[5]
The Mirasols then filed an appeal with the respondent court, docketed as CA-G.R. CV No.
38607, faulting the trial court for not nullifying the dacion en pago and the mortgage contracts,
as well as the foreclosure of their mortgaged properties. Also faulted was the trial courts failure
to award them the full money claims and damages sought from both PNB and PHILEX.
On July 22, 1996, the Court of Appeals reversed the trial court as follows:

WHEREFORE, this Court renders judgment REVERSING the appealed Decision

and entering the following verdict:

1. Declaring the dacion en pago and the foreclosure of the mortgaged properties
valid;
2. Ordering the PNB to render an accounting of the sugar account of the Mirasol[s]
specifically stating the indebtedness of the latter to the former and the proceeds of
Mirasols 1973-1974 and 1974-1975 sugar production sold pursuant to and in
accordance with P.D. 579 and the issuances therefrom;
3. Ordering the PNB to recompute in accordance with RA 7202 Mirasols
indebtedness to it crediting to the latter payments already made as well as the auction
price of their foreclosed real estate and stipulated value of their properties ceded to
PNB in the dacon (sic) en pago;
4. Whatever the result of the recomputation of Mirasols account, the outstanding
balance or the excess payment shall be governed by the pertinent provisions of RA
7202.
SO ORDERED.[6]
On August 28, 1996, petitioners moved for reconsideration, which the appellate court denied
on January 23, 1997.
Hence, the instant petition, with petitioners submitting the following issues for our
resolution:

1. Whether the Trial Court has jurisdiction to declare a statute unconstitutional

without notice to the Solicitor General where the parties have agreed to submit such
issue for the resolution of the Trial Court.
2. Whether PD 579 and subsequent issuances[7] thereof are unconstitutional.
3. Whether the Honorable Court of Appeals committed manifest error in not
applying the doctrine of piercing the corporate veil between respondents PNB and
PHILEX.
4. Whether the Honorable Court of Appeals committed manifest error in upholding
the validity of the foreclosure on petitioners property and in upholding the validity of
the dacion en pago in this case.
5. Whether the Honorable Court of Appeals committed manifest error in not
awarding damages to petitioners grounds relied upon the allowance of the petition.
(Underscored in the original)[8]

On the first issue. It is settled that Regional Trial Courts have the authority and jurisdiction
to consider the constitutionality of a statute, presidential decree, or executive order. [9] The
Constitution vests the power of judicial review or the power to declare a law, treaty, international
or executive agreement, presidential decree, order, instruction, ordinance, or regulation not only
in this Court, but in all Regional Trial Courts.[10] In J.M. Tuason and Co. v. Court of Appeals, 3
SCRA 696 (1961) we held:

Plainly, the Constitution contemplates that the inferior courts should have
jurisdiction in cases involving constitutionality of any treaty or law, for it speaks of
appellate review of final judgments of inferior courts in cases where such
constitutionality happens to be in issue.[11]
Furthermore, B.P. Blg. 129 grants Regional Trial Courts the authority to rule on the
conformity of laws or treaties with the Constitution, thus:

SECTION 19. Jurisdiction in civil cases. Regional Trial Courts shall exercise
exclusive original jurisdiction:
(1) In all civil actions in which the subject of the litigations is incapable of pecuniary
estimation;
The pivotal issue, which we must address, is whether it was proper for the trial court to have
exercised judicial review.
Petitioners argue that the Court of Appeals erred in finding that it was improper for the trial
court to have declared P.D. No. 579[12] unconstitutional, since petitioners had not complied with
Rule 64, Section 3, of the Rules of Court. Petitioners contend that said Rule specifically refers
only to actions for declaratory relief and not to an ordinary action for accounting, specific
performance, and damages.
Petitioners contentions are bereft of merit. Rule 64, Section 3 of the Rules of Court
provides:

SEC. 3. Notice to Solicitor General. In any action which involves the validity of a
statute, or executive order or regulation, the Solicitor General shall be notified by the
party attacking the statute, executive order, or regulation, and shall be entitled to be
heard upon such question.
This should be read in relation to Section 1 [c] of P.D. No. 478,[13] which states in part:

SECTION 1. Functions and Organizations (1) The Office of the Solicitor General
shallhave the following specific powers and functions:
xxx

[c] Appear in any court in any action involving the validity of any treaty, law,
executive order or proclamation, rule or regulation when in his judgment his
intervention is necessary or when requested by the court.
It is basic legal construction that where words of command such as shall, must, or
ought are employed, they are generally and ordinarily regarded as mandatory.[14] Thus, where,
as in Rule 64, Section 3 of the Rules of Court, the word shall is used, a mandatory duty is
imposed, which the courts ought to enforce.
The purpose of the mandatory notice in Rule 64, Section 3 is to enable the Solicitor General
to decide whether or not his intervention in the action assailing the validity of a law or treaty is
necessary. To deny the Solicitor General such notice would be tantamount to depriving him of
his day in court. We must stress that, contrary to petitioners stand, the mandatory notice
requirement is not limited to actions involving declaratory relief and similar remedies. The rule
itself provides that such notice is required in any action and not just actions involving
declaratory relief. Where there is no ambiguity in the words used in the rule, there is no room for
construction.[15] In all actions assailing the validity of a statute, treaty, presidential decree, order,
or proclamation, notice to the Solicitor General is mandatory.
In this case, the Solicitor General was never notified about Civil Case No. 14725. Nor did
the trial court ever require him to appear in person or by a representative or to file any pleading
or memorandum on the constitutionality of the assailed decree. Hence, the Court of Appeals did
not err in holding that lack of the required notice made it improper for the trial court to pass upon
the constitutional validity of the questioned presidential decrees.
As regards the second issue, petitioners contend that P.D. No. 579 and its implementing
issuances are void for violating the due process clause and the prohibition against the taking of
private property without just compensation. Petitioners now ask this Court to exercise its power
of judicial review.
Jurisprudence has laid down the following requisites for the exercise of this power: First,
there must be before the Court an actual case calling for the exercise of judicial review. Second,
the question before the Court must be ripe for adjudication. Third, the person challenging the
validity of the act must have standing to challenge. Fourth, the question of constitutionality must
have been raised at the earliest opportunity, and lastly, the issue of constitutionality must be the
very lis mota of the case. [16]
As a rule, the courts will not resolve the constitutionality of a law, if the controversy can be
settled on other grounds.[17] 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 executive departments and found to be in accord with the Constitution before
it was finally enacted and approved.[18]
The present case was instituted primarily for accounting and specific performance. The
Court of Appeals correctly ruled that PNBs obligation to render an accounting is an issue, which
can be determined, without having to rule on the constitutionality of P.D. No. 579. In fact there is
nothing in P.D. No. 579, which is applicable to PNBs intransigence in refusing to give an

accounting. The governing law should be the law on agency, it being undisputed that PNB acted
as petitioners agent. In other words, the requisite that the constitutionality of the law in question
be the very lis mota of the case is absent. Thus we cannot rule on the constitutionality of P.D.
No. 579.
Petitioners further contend that the passage of R.A. No. 7202[19] rendered P.D. No. 579
unconstitutional, since R.A. No. 7202 affirms that under P.D. 579, the due process clause of the
Constitution and the right of the sugar planters not to be deprived of their property without just
compensation were violated.
A perusal of the text of R.A. No. 7202 shows that the repealing clause of said law merely
reads:

SEC. 10. All laws, acts, executive orders and circulars in conflict herewith are
hereby repealed or modified accordingly.
The settled rule of statutory construction is that repeals by implication are not
favored.[20] R.A. No. 7202 cannot be deemed to have repealed P.D. No. 579. In addition, the
power to declare a law unconstitutional does not lie with the legislature, but with the
courts.[21] Assuming arguendo that R.A. No. 7202 did indeed repeal P.D. No. 579, said repeal is
not a legislative declaration finding the earlier law unconstitutional.
To resolve the third issue, petitioners ask us to apply the doctrine of piercing the veil of
corporate fiction with respect to PNB and PHILEX. Petitioners submit that PHILEX was a
wholly-owned subsidiary of PNB prior to the latters privatization.
We note, however, that the appellate court made the following finding of fact:

1. PNB and PHILEX are separate juridical persons and there is no reason to pierce
the veil of corporate personality. Both existed by virtue of separate organic acts. They
had separate operations and different purposes and powers.[22]
Findings of fact by the Court of Appeals are conclusive and binding upon this Court unless
said findings are not supported by the evidence.[23] Our jurisdiction in a petition for review under
Rule 45 of the Rules of Court is limited only to reviewing questions of law and factual issues are
not within its province.[24] In view of the aforequoted finding of fact, no manifest error is
chargeable to the respondent court for refusing to pierce the veil of corporate fiction.
On the fourth issue, the appellate court found that there were two sets of accounts between
petitioners and PNB, namely:

1. The accounts relative to the loan financing scheme entered into by the Mirasols
with PNB (PNBs Brief, p. 16) On the question of how much the PNB lent the
Mirasols for crop years 1973-1974 and 1974-1975, the evidence recited by the lower
court in its decision was deficient. We are offered (sic) PNB the amount of FIFTEEN
MILLION NINE HUNDRED SIXTY FOUR THOUSAND TWO HUNDRED FIFTY

TWO PESOS and NINETY THREE Centavos (Ps15,964,252.93) but this is the
alleged balance the Mirasols owe PNB covering the years 1975 to 1982.
2. The account relative to the Mirasols current account Numbers 5186 and 5177
involving the amount of THREE MILLION FOUR HUNDRED THOUSAND Pesos
(P3,400,000.00) PNB claims against the Mirasols. (PNBs Brief, p. 17)
In regard to the first set of accounts, besides the proceeds from PNBs sale of sugar
(involving the defendant PHILEX in relation to the export portion of the stock), the
PNB foreclosed the Mirasols mortgaged properties realizing therefrom in 1982
THREE MILLION FOUR HUNDRED THIRTEEN THOUSAND Pesos
(P3,413,000.00), the PNB itself having acquired the properties as the highest bidder.
As to the second set of accounts, PNB proposed, and the Mirasols accepted,
a dacion en pago scheme by which the Mirasols conveyed to PNB pieces of property
valued at ONE MILLION FOUR HUNDRED TEN THOUSAND FOUR HUNDRED
SIXTY-SIX Pesos (Ps1,410,466.00) (PNBs Brief, pp. 16-17).[25]
Petitioners now claim that the dacion en pago and the foreclosure of their mortgaged
properties were void for want of consideration. Petitioners insist that the loans granted them by
PNB from 1975 to 1982 had been fully paid by virtue of legal compensation. Hence, the
foreclosure was invalid and of no effect, since the mortgages were already fully discharged. It is
also averred that they agreed to the dacion only by virtue of a martial law Arrest, Search, and
Seizure Order (ASSO).
We find petitioners arguments unpersuasive. Both the lower court and the appellate court
found that the Mirasols admitted that they were indebted to PNB in the sum stated in the latters
counterclaim.[26] Petitioners nonetheless insist that the same can be offset by the unliquidated
amounts owed them by PNB for crop years 1973-74 and 1974-75. Petitioners argument has no
basis in law. For legal compensation to take place, the requirements set forth in Articles 1278
and 1279 of the Civil Code must be present. Said articles read as follows:

Art. 1278. Compensation shall take place when two persons, in their own right, are
creditors and debtors of each other.
Art. 1279. In order that compensation may be proper, it is necessary:
(1) That each one of the obligors be bound principally, and that he be at the same
time a principal creditor of the other;
(2) That both debts consist in a sum of money, or if the things due are
consumable, they be of the same kind, and also of the same quality if the latter has
been stated;

(3) That the two debts are due;

(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced
by third persons and communicated in due time to the debtor.
In the present case, set-off or compensation cannot take place between the parties because:
First, neither of the parties are mutually creditors and debtors of each other. Under P.D. No.
579, neither PNB nor PHILEX could retain any difference claimed by the Mirasols in the price
of sugar sold by the two firms. P.D. No. 579 prescribed where the profits from the sales are to be
paid, to wit:

SECTION 7. x x x After deducting its commission of two and one-half (2-1/2%)

percent of gross sales, the balance of the proceeds of sugar trading operations for
every crop year shall be set aside by the Philippine Exchange Company, Inc,. as
profits which shall be paid to a special fund of the National Government subject to the
disposition of the President for public purposes.
Thus, as correctly found by the Court of Appeals, there was nothing with which PNB was
supposed to have off-set Mirasols admitted indebtedness.[27]
Second, compensation cannot take place where one claim, as in the instant case, is still the
subject of litigation, as the same cannot be deemed liquidated.[28]
With respect to the duress allegedly employed by PNB, which impugned petitioners
consent to the dacion en pago, both the trial court and the Court of Appeals found that there was
no evidence to support said claim. Factual findings of the trial court, affirmed by the appellate
court, are conclusive upon this Court.[29]
On the fifth issue, the trial court awarded petitioners P50,000.00 in moral damages
and P50,000.00 in attorneys fees. Petitioners now theorize that it was error for the Court of
Appeals to have deleted these awards, considering that the appellate court found PNB breached
its duty as an agent to render an accounting to petitioners.
An agents failure to render an accounting to his principal is contrary to Article 1891 of the
Civil Code.[30] The erring agent is liable for damages under Article 1170 of the Civil Code, which
states:

Those who in the performance of their obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof, are liable for
damages.
Article 1170 of the Civil Code, however, must be construed in relation to Article 2217 of
said Code which reads:

Moral damages include physical suffering, mental anguish, fright, serious anxiety,
besmirched reputation, wounded feelings, moral shock, social humiliation, and similar
injury. Though incapable of pecuniary computation, moral damages may be recovered
if they are the proximate result of the defendants wrongful act or omission.
Moral damages are explicitly authorized in breaches of contract where the defendant acted
fraudulently or in bad faith.[31] Good faith, however, is always presumed and any person who
seeks to be awarded damages due to the acts of another has the burden of proving that the latter
acted in bad faith, with malice, or with ill motive. In the instant case, petitioners have failed to
show malice or bad faith[32] on the part of PNB in failing to render an accounting. Absent such
showing, moral damages cannot be awarded.
Nor can we restore the award of attorneys fees and costs of suit in favor of petitioners.
Under Article 2208 (5) of the Civil Code, attorneys fees are allowed in the absence of
stipulation only if the defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiffs plainly valid, just, and demandable claim. As earlier stated, petitioners have not
proven bad faith on the part of PNB and PHILEX.
WHEREFORE, the instant petition is DENIED and the assailed decision of the respondent
court in CA-G.R. CV 38607 AFFIRMED. Costs against petitioners.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Buena, and De Leon, Jr., JJ., concur.

[1]

One picul is equivalent to 63.25 kilograms.

[2]

The decree was entitled Rationalizing and Stabilizing The Export of Sugar And For Other Purposes.

[3]

Rollo, p. 78.

[4]

Id. at 104-105.

[5]

Id. at 110.

[6]

Id. at 88-89.

[7]

These include Circular Letter No. 24 dated October 25, 1974 which designates PHILEX to undertake the
liquidation, buying and disposition of B sugar quedans; Circular Letter No. 13 s. 1974-1975 issued on May 5,
1975 which outlines the revision of the pricing policy for sugar for crop year 1974-1975; and Circular Letter No. 24
s. 1974-1975 which outlines the fixing of the price of sugar covering production starting May 5, 1975.
[8]

Supra Note 6, at 32-33.

[9]

Drilon v. Lim, 235 SCRA 135, 139 (1994).

[10]

Const, Art. VIII, Sec. 5 (2).

[11]

3 SCRA 696, 703-704 (1961).

[12]

Rationalizing and stabilizing the export of sugar and for other purposes.

[13]

Defining the powers and functions of the Office of the Solicitor General.

[14]

Brehm v. Republic, 9 SCRA 172, 176 (1963).

[15]

Republic v. Court of Appeals, 299 SCRA 199, 227 (1998).

[16]

Board of Optometry v. Colet, 260 SCRA 88, 103 (1996) citing Garcia vs. Executive Secretary, 204 SCRA 516,
522 (1991); Santos vs. Northwest Orient Airlines, 210 SCRA 256, 261 (1992).
[17]

Ty v. Trampe, 250 SCRA 500, 520 (1995).

[18]

Drilon v. Lim, supra.

[19]

An Act Authorizing the Restitution of Losses Suffered by Sugar Producers from Crop Year 1974-1975 to Crop
Year 1984-1985 Due to the Actions of Government-Owned and Controlled Agencies.
[20]

Manzano v. Valera, 292 SCRA 66, 76 (1998); Garcia v. Burgos, 291 SCRA 547, 575 (1998) citing Frivaldo vs.
Commission on Elections, 257 SCRA 727, 743-744 (1996).
[21]

Angara v. Electoral Commission, 63 Phil. 139, 175 (1936).

[22]

Rollo, p. 78.

[23]

Guerrero v. Court of Appeals, 285 SCRA 670, 678 (1998).

[24]

Congregation of the Religious of the Virgin Mary v. Court of Appeals, 291 SCRA 385, 391-392 (1998).

[25]

Rollo, p. 85.

[26]

Id. at 86.

[27]

Id. at 87.

[28]

Silahis Marketing Corp. v. Intermediate Appellate Court, 180 SCRA 21, 25 (1989); Compania Maritima v. Court
of Appeals, 135 SCRA 593 (1985).
[29]

Salao v. Court of Appeals, 284 SCRA 493, 498 (1998) citing Catapusan v. Court of Appeals, 264 SCRA 534
(1996); People vs. Flores, 243 SCRA 374 (1995); Lufthansa German Airlines v. Court of Appeals, 243 SCRA 600
(1995).
[30]

Article 1891 of the Civil Code reads:

Every agent is bound to render an account of his transactions and to deliver to the principal whatever he
may have received by virtue of the agency, even though it may not be owing to the principal.
Every stipulation exempting the agent from the obligation to render an account shall be void.
[31]
[32]

Del Rosario v. Court of Appeals, 267 SCRA 158, 172 (1997) citing Civil code, Art. 2220.

BPI Express Card Corp. v. Court of Appeals, 296 SCRA 260, 272 (1998) citing Barons Marketing Corp. vs.
Court of Appeals, 286 SCRA 96 (1998).