POLITICAL LAW

2. National parties or organizations and regional

1. Atong Paglaum, Inc. vs Commission on

Elections

parties or organizations do not need to organize

along sectoral lines and do not need to represent any
marginalized and underrepresented sector.

694 SCRA 477 Political Law Constitutional Law

3. Political parties can participate in party-list

Legislative Department Party-List System

elections provided they register under the party-list

This case partially abandoned the rulings in Ang

system and do not field candidates in legislative

Bagong

district elections. A political party, whether major or

Bayani

vs

COMELEC andBANAT

vs

not, that fields candidates in legislative district

COMELEC.

elections can participate in party-list elections only

Atong Paglaum, Inc. and 51 other parties were

through its sectoral wing that can separately register

disqualified by the Commission on Elections in the

under the party-list system. The sectoral wing is by

May 2013 party-list elections for various reasons but

itself an independent sectoral party, and is linked to a

primarily for not being qualified as representatives

political party through a coalition.

for marginalized or underrepresented sectors.

4. Sectoral parties or organizations may either be
Atong Paglaum et al then filed a petition for

marginalized and underrepresented or lacking in

certiorari against COMELEC alleging grave abuse

well-defined political constituencies. It is enough

of discretion on the part of COMELEC in

that their principal advocacy pertains to the special

disqualifying them.

interest and concerns of their sector. The sectors that

are marginalized and underrepresented include

ISSUE: Whether or not the COMELEC committed

labor, peasant, fisherfolk, urban poor, indigenous

grave abuse of discretion in disqualifying the said

cultural communities, handicapped, veterans, and

party-lists.

overseas workers. The sectors that lack well-

HELD: No. The COMELEC merely followed the

guidelines

set

in

the cases

of Ang

Bagong

defined

political

constituencies

include

professionals, the elderly, women, and the youth.

Bayani and BANAT. However, the Supreme Court

5. A majority of the members of sectoral parties or

remanded the cases back to the COMELEC as the

organizations that represent the marginalized and

Supreme Court now provides for new guidelines

underrepresented must belong to the marginalized

which abandoned some principles established in the

and

two aforestated cases. The new guidelines are as

Similarly, a majority of the members of sectoral

follows:

parties or organizations that lack well-defined

I. Parameters.

In

qualifying

party-lists,

the

COMELEC must use the following parameters:

system:

(1) nationalparties

or

organizations, (2) regional parties or organizations,

and (3) sectoral parties or organizations.

sector

they

represent.

political constituencies must belong to the sector

they represent. The nominees of sectoral parties or
organizations that represent the marginalized and

1. Three different groups may participate in the

party-list

underrepresented

underrepresented, or that represent those who lack

well-defined political constituencies, either must
belong to their respective sectors, or must have a
track record of advocacy for their respective sectors.
The nominees of national and regional parties or

organizations must be bona-fide members of such

small ideology-based and cause-oriented parties who

parties or organizations.

lack well-defined political constituencies. The

common denominator however is that all of them

6. National,

regional,

and sectoral

parties

or

cannot, they do not have the machinery unlike

organizations shall not be disqualified if some of

major political parties, to field or sponsor candidates

their nominees are disqualified, provided that they

in the legislative districts but they can acquire the

have at least one nominee who remains qualified.

needed votes in a national election system like the

II. In the BANAT case, major political parties are

party-list system of elections.

disallowed, as has always been the practice, from

If the party-list system is only reserved for

participating in the party-list elections. But, since

marginalized representation, then the system itself

theres really no constitutional prohibition nor a

unduly excludes other cause-oriented groups from

statutory prohibition, major political parties can now

running for a seat in the lower house.

participate in the party-list system provided that they

do so through their bona fide sectoral wing (see

As explained by the Supreme Court, party-list

parameter 3 above).

representation should not be understood to include

only labor,

peasant,

fisherfolk,

Allowing major political parties to participate, albeit

indigenous

cultural

communities,

indirectly,

will

veterans, overseas workers, and other sectors that by

encourage them to work assiduously in extending

their nature are economically at the margins of

their constituencies to the marginalized and

society. It should be noted that Section 5

underrepresented and to those who lack well-

of Republic Act 7941 includes, among others, in its

defined political constituencies.

provision for sectoral representation groups of

in

the

party-list

elections

Ultimately, the Supreme Court gave weight to the

deliberations of the Constitutional Commission
when they were drafting the party-list system
provision of the Constitution. The Commissioners
deliberated that it was their intention to include all

urban

poor,

handicapped,

professionals, which are not per se economically

marginalized but are still qualified as marginalized,
underrepresented, and do not have well-defined
political constituencies as they are ideologically
marginalized.

parties into the party-list elections in order to

develop a political system which is pluralistic and
multiparty.

(In

the BANAT case,

Justice

Puno

emphasized that the will of the people should defeat

the intent of the framers; and that the intent of the
people, in ratifying the 1987 Constitution, is that the
party-list system should be reserved for the

2. Maria Carolina Araullo vs Benigno Aquino III

Political Law Constitutional Law Separation of
Powers Fund Realignment Constitutionality of
the Disbursement Acceleration Program

marginalized sectors.)

Power of the Purse Executive Impoundment

III. The Supreme Court also emphasized that the

When President Benigno Aquino III took office, his

party-list system is NOT RESERVED for the

administration noticed the sluggish growth of the

marginalized and underrepresented or for parties

economy. The World Bank advised that the economy

who lack well-defined political constituencies. It

needed a stimulus plan. Budget Secretary Florencio

is also for national or regional parties. It is also for

Butch Abad then came up with a program called

This prompted Maria Carolina Araullo, Chairperson

the Disbursement Acceleration Program (DAP).

of the Bagong Alyansang Makabayan, and several

other concerned citizens to file various petitions with

The DAP was seen as a remedy to speed up the

the Supreme Court questioning the validity of the

funding of government projects. DAP enables the

DAP. Among their contentions was:

Executive to realign funds from slow moving

projects to priority projects instead of waiting for

DAP is unconstitutional because it violates the

next years appropriation. So what happens under

constitutional rule which provides that no money

the DAP was that if a certain government project is

shall be paid out of the Treasury except in

being undertaken slowly by a certain executive

pursuance of an appropriation made by law.

agency, the funds allotted therefor will be withdrawn

by the Executive. Once withdrawn, these funds are

Secretary Abad argued that the DAP is based on

declared as savings by the Executive and said

certain laws particularly the GAA (savings and

funds will then be reallotted to other priority

augmentation provisions thereof), Sec. 25(5), Art. VI

projects. The DAP program did work to stimulate

of the Constitution (power of the President to

the economy as economic growth was in fact

augment), Secs. 38 and 49 of Executive Order 292

reported and portion of such growth was attributed

(power of the President to suspend expenditures and

to the DAP (as noted by the Supreme Court).

authority to use savings, respectively).

Other

sources

unprogrammed

of
funds

the

DAP
from

include
the

the

General

Appropriations Act (GAA). Unprogrammed funds

are standby appropriations made by Congress in the
GAA.
Meanwhile, in September 2013, Senator Jinggoy
Estrada made an expos claiming that he, and other
Senators, received Php50M from the President as an
incentive for voting in favor of the impeachment of
then Chief Justice Renato Corona. Secretary Abad
claimed that the money was taken from the DAP but
was disbursed upon the request of the Senators.
This apparently opened a can of worms as it turns
out that the DAP does not only realign funds within
the Executive. It turns out that some non-Executive
projects were also funded; to name a few: Php1.5B
for the CPLA (Cordillera Peoples Liberation Army),

Issues:
I. Whether or not the DAP violates the principle no
money shall be paid out of the Treasury except in
pursuance of an appropriation made by law (Sec.
29(1), Art. VI, Constitution).
II. Whether or not the DAP realignments can be
considered as impoundments by the executive.
III. Whether or not the DAP realignments/transfers
are constitutional.
IV. Whether or not the sourcing of unprogrammed
funds to the DAP is constitutional.
V. Whether or not the Doctrine of Operative Fact is
applicable.
HELD:

Php1.8B for the MNLF (Moro National Liberation

Front), P700M for the Quezon Province, P50-

I. No, the DAP did not violate Section 29(1), Art. VI

P100M for certain Senators each, P10B for

of the Constitution. DAP was merely a program by

Relocation Projects, etc.

the Executive and is not a fund nor is it an

appropriation. It is a program for prioritizing

government spending. As such, it did not violate the

GAA. As such, transfer to such projects is

Constitutional provision cited in Section 29(1), Art.

unconstitutional and is without legal basis.

VI of the Constitution. In DAP no additional funds

were withdrawn from the Treasury otherwise, an
appropriation made by law would have been
required. Funds, which were already appropriated
for by the GAA, were merely being realigned via the

On the issue of what are savings

These DAP transfers are not savings contrary to
what was being declared by the Executive. Under

DAP.

the definition of savings in the GAA, savings only

II. No, there is no executive impoundment in the

excess in the funding of a certain project once it is

DAP. Impoundment of funds refers to the Presidents

completed,

power to refuse to spend appropriations or to retain

abandoned. The GAA does not refer to savings as

or deduct appropriations for whatever reason.

funds withdrawn from a slow moving project. Thus,

Impoundment is actually prohibited by the GAA

since the statutory definition of savings was not

unless there will be an unmanageable national

complied with under the DAP, there is no basis at all

government budget deficit (which did not happen).

for the transfers. Further, savings should only be

Nevertheless, theres no impoundment in the case at

declared at the end of the fiscal year. But under the

bar because whats involved in the DAP was the

DAP, funds are already being withdrawn from

transfer of funds.

certain projects in the middle of the year and then

occur, among other instances, when there is an

finally discontinued,

or

finally

being declared as savings by the Executive

III. No, the transfers made through the DAP were

particularly by the DBM.

unconstitutional. It is true that the President (and

even the heads of the other branches of the

IV. No. Unprogrammed funds from the GAA cannot

government) are allowed by the Constitution to

be used as money source for the DAP because under

make realignment of funds, however, such transfer

the law, such funds may only be used if there is a

or realignment should only be made within their

certification from the National Treasurer to the effect

respective

cross-border

that the revenue collections have exceeded the

transfers/augmentations may be allowed. But under

revenue targets. In this case, no such certification

the

was secured before unprogrammed funds were used.

offices.

DAP, this

was

Thus,
violated

no

because

funds

appropriated by the GAA for the Executive were

being transferred to the Legislative and other non-

V. Yes. The Doctrine of Operative Fact, which

Executive agencies.

recognizes the legal effects of an act prior to it being

Further, transfers within their respective offices

is applicable. The DAP has definitely helped

also contemplate realignment of funds to an existing

stimulate the economy. It has funded numerous

project in the GAA. Under the DAP, even though

projects. If the Executive is ordered to reverse all

some projects were within the Executive, these

actions under the DAP, then it may cause more harm

projects are non-existent insofar as the GAA is

than good. The DAP effects can no longer be

concerned because no funds were appropriated to

undone. The beneficiaries of the DAP cannot be

them in the GAA. Although some of these projects

asked to return what they received especially so that

may be legitimate, they are still non-existent under

they relied on the validity of the DAP. However, the

the GAA because they were not provided for by the

Doctrine of Operative Fact may not be applicable to

declared as unconstitutional by the Supreme Court,

the authors, implementers, and proponents of the

DAP if it is so found in the appropriate tribunals

The PDAF articles in the GAA do provide

(civil, criminal, or administrative) that they have not

for realignment of funds whereby certain cabinet

acted in good faith.

members may request for the realignment of funds

into their department provided that the request for
realignment is approved or concurred by the

3. Greco Belgica vs Executive Secretary Paquito

Ochoa

legislator concerned.
Presidential Pork Barrel

710 SCRA 1 Political Law Constitutional Law

The president does have his own source of fund

Local Government Invalid Delegation

albeit not included in the GAA. The so-called

Legislative Department Invalid Delegation of

presidential pork barrel comes from two sources: (a)

Legislative Power

the Malampaya Funds, from the Malampaya Gas

Project this has been around since 1976, and (b)

This case is consolidated with G.R. No. 208493

the Presidential Social Fund which is derived from

and G.R. No. 209251.

theearnings of PAGCOR this has been around

since about 1983.

The so-called pork barrel system has been around in

the Philippines since about 1922. Pork Barrel is

Pork Barrel Scam Controversy

commonly known as the lump-sum, discretionary

funds of the members of the Congress. It underwent

Ever since, the pork barrel system has been besieged

several legal designations from Congressional Pork

by allegations of corruption. In July 2013, six

Barrel

Development

whistle blowers, headed by Benhur Luy, exposed

Assistance Fund orPDAF. The allocation for the

that for the last decade, the corruption in the pork

pork barrel is integrated in the annual General

barrel system had been facilitated by Janet Lim

Appropriations Act (GAA).

Napoles. Napoles had been helping lawmakers in

to

the

latest

Priority

funneling their pork barrel funds into about 20 bogus

Since 2011, the allocation of the PDAF has been

NGOs

done in the following manner:

which would make it appear that government funds

(non-government

organizations)

are being used in legit existing projects but are in

a. P70 million: for each member of the lower house;

fact going to ghost projects. An audit was then

broken down to P40 million for hard projects

conducted by the Commission on Audit and the

(infrastructure

results thereof concurred with the exposes of Luy et

projects

like

roads,

buildings,

schools, etc.), and P30 million for soft projects

al.

(scholarship grants, medical assistance, livelihood

programs, IT development, etc.);

Motivated by the foregoing, Greco Belgica and

several others, filed various petitions before the

b. P200 million: for each senator; broken down to

Supreme Court questioning the constitutionality of

P100 million for hard projects, P100 million for soft

the pork barrel system.

projects;
ISSUES:
c. P200 million: for the Vice-President; broken down
to P100 million for hard projects, P100 million for
soft projects.

I. Whether or not the congressional pork barrel

Exceptions to the rule are:

system is constitutional.
(i) delegated legislative power to local government
II. Whether or not presidential pork barrel system is

units but this shall involve purely local matters;

constitutional.
(ii) authority of the President to, by law, exercise
HELD:

powers necessary and proper to carry out a declared

national policy in times of war or other national

I. No, the congressional pork barrel system is

emergency, or fix within specified limits, and subject

unconstitutional. It is unconstitutional because it

to such limitations and restrictions as Congress may

violates the following principles:

impose, tariff rates, import and export quotas,

tonnage and wharfage dues, and other duties or

a. Separation of Powers

imposts within the framework of the national

As a rule, the budgeting power lies in Congress. It

regulates the release of funds (power of the purse).
The executive, on the other hand, implements the
laws this includes the GAA to which the PDAF is
a part of. Only the executive may implement the law
but under the pork barrel system, whats happening
was that, after the GAA, itself a law, was enacted,
the legislators themselves dictate as to which
projects their PDAF funds should be allocated to a
clear act of implementing the law they enacted a
violation of the principle of separation of powers.
(Note in the older case of PHILCONSA vs Enriquez,
it was ruled that pork barrel, then called as CDF or
the

Countrywide

constitutional

Development

insofar

as

the

Fund,

was

legislators

only

recommend where their pork barrel funds go).

development program of the Government.

In this case, the PDAF articles which allow the
individual legislator to identify the projects to which
his PDAF money should go to is a violation of the
rule on non-delegability of legislative power. The
power to appropriate funds is solely lodged in
Congress (in the two houses comprising it)
collectively and not lodged in the individual
members. Further, nowhere in the exceptions does it
state that the Congress can delegate the power to the
individual member of Congress.
c. Principle of Checks and Balances
One feature in the principle of checks and balances
is the power of the president to veto items in the
GAA which he may deem to be inappropriate. But

This is also highlighted by the fact that in realigning

this power is already being undermined because of

the PDAF, the executive will still have to get the

the fact that once the GAA is approved, the

concurrence of the legislator concerned.

legislator can now identify the project to which he

will appropriate his PDAF. Under such system, how

b. Non-delegability of Legislative Power

can the president veto the appropriation made by the

As a rule, the Constitution vests legislative power in

Congress alone. (The Constitution does grant the
people legislative power but only insofar as the
processes

of

referendum

and

initiative

are

concerned). That being, legislative power cannot be

delegated by Congress for it cannot delegate further
that which was delegated to it by the Constitution.

legislator if the appropriation is made after the

approval of the GAA again, Congress cannot
choose a mode of budgeting which effectively
renders the constitutionally-given power of the
President useless.
d. Local Autonomy

As a rule, the local governments have the power to

finance energy resource development and for other

manage their local affairs. Through their Local

purposes which the President may direct;

Development Councils (LDCs), the LGUs can

develop their own programs and policies concerning

(ii) PD 1869, as amended: Section 12 thereof

their localities. But with the PDAF, particularly on

provides that a part of PAGCORs earnings shall be

the part of the members of the house of

allocated to a General Fund (the Presidential Social

representatives,

Fund)

whats

happening

is

that

congressman can either bypass or duplicate a project

by the LDC and later on claim it as his own. This is
an instance where the national government (note, a
congressman is a national officer) meddles with the
affairs of the local government and this is contrary
to the State policy embodied in the Constitution on
local autonomy. Its good if thats all that is

which

shall

be

used

in

government

infrastructure projects.
These are sufficient laws which met the requirement
of Section 29, Article VI of the Constitution. The
appropriation contemplated therein does not have to
be a particular appropriation as it can be a general
appropriation as in the case of PD 910 and PD 1869.

happening under the pork barrel system but worse,

the PDAF becomes more of a personal fund on the
part of legislators.
II. Yes, the presidential pork barrel is valid.
The main issue raised by Belgica et al against the
presidential pork barrel is that it is unconstitutional
because it violates Section 29 (1), Article VI of the
Constitution which provides:
No money shall be paid out of the Treasury except in
pursuance of an appropriation made by law.
Belgica et al emphasized that the presidential pork
comes from the earnings of the Malampaya and
PAGCOR and not from any appropriation from a
particular legislation.
The Supreme Court disagrees as it ruled that PD
910, which created the Malampaya Fund, as well as
PD 1869 (as amended by PD 1993), which
amended PAGCORs charter, provided for the

Related news:
SC strikes down certain provisions of DAP as
unconstitutional
(Updated 4:29 p.m.) The Supreme Court has voted
unanimously to strike down as unconstitutional
specific acts under the controversial Disbursement
Acceleration Program (DAP) of the Aquino
government.
In a press briefing in Manila on Tuesday, SC
spokesman Theodore Te said the high court sitting
en banc declared the following "acts and practices"
under the DAP, National Budget Circular No. 541,
and
related
issuances as
unconstitutional:
- the withdrawal of unobligated allotments from the
implementing agencies, and the declaration of the
withdrawn unobligated allotments and unreleased
appropriations as savings prior to the end of the
fiscal year and without complying with the statutory
definition of savings contained in the General
Appropriations
Act;

appropriation, to wit:
(i) PD 910: Section 8 thereof provides that all fees,
among others, collected from certain energy-related
ventures shall form part of a special fund (the
Malampaya Fund) which shall be used to further

- the cross-border transfers of the savings of the

executive to augment the appropriations of other
offices
outside
the
executive;
and
- the funding of projects, activities and programs that
were not covered by any appropriation in the GAA.

Te said these acts violated Section 25 (5) Article VI

of the 1987 Constitution and the doctrines of
separation
of
powers.

level of obligations as of June 30, 2012 both for

continuing and current allotment" that President
Benigno Aquino III ordered withdrawn on June 27,
2012.

The National Budget Circular No. 541, which

sanctions the DAP, allows the DBM to withdraw
unobligated allotments of agencies with low levels
of obligations as of June 30, 2012, both for
continuing
and
current
allotments.

The withdrawn funds were deemed as savings by

Aquino and Budget Sec. Florencio "Butch" Abad,
and realigned to augment existing programs and
projects of other agencies and fund priority
programs and projects not considered in the 2012
budget but expected to be started or implemented
within the current year.

The court also ruled as void the portion of the DAP

that allows the use of unprogrammed funds even
without a certification from the National Treasurer
saying that revenue collections exceeded the revenue
targets due to non-compliance with the conditions
provided in the relevant GAA.
Te said the high court en banc voted 13-0-1, with
Associate Justice Teresita Leonardo-De Castro
recusing.
A court insider said the petitioners were "partially
granted" because "other prayers of the petitioners,
like the disclosure of documents, were not granted
because they were moot."
Nine petitions have been filed with the high court
contesting the legality of the DAP, a discretionary
fund that hit the headlines after Sen. Jinggoy Estrada
revealed that several senators received P50 million
to P100 million after the conviction of Chief Justice
Renato Corona by the Senate impeachment court.
Te said the dispositive portion of the ruling did not
mention anything about liabilities of the government
officials involved in the DAP.

But the petitioners have argued the DAP funds could

not be artificially deemed as savings as defined by
the Department of Budget and Management and the
General Appropriations Act of 2012 since there
couldn't be savings in the middle of a fiscal year,
especially if the projects or programs for which
these funds were allocated by law, haven't been
completed, discontinued or abandoned.
They said the funds accumulated through the DAP
were part of the presidential pork barrel, where only
the sitting President, or in this case, Aquino, can
determine where the funds will go. They said this
could be used for patronage politics.
During oral arguments last January, the government
had insisted that the SC debate on the issue was
already moot since the Aquino administration has
already stopped the implementation of the DAP.
Abad, during the Jan. 28 debates, said the countrys
economic managers have already recommended to
Aquino to stop the implementation of the DAP.

Asked to comment on the SC ruling, presidential

spokesperson Edwin Lacierda said in a text message
sent to GMA News Online that they will wait first
for the full decision to come out.

Malacaang had reiterated the President's statement

that DAP was essential in boosting economic
growth.

"We are not in a position to make a comment until

we
see
the
full
decision,"
he
said.

"The decision itself will be promulgated as soon as

editing is done and separate opinions are submitted,"
he
said.

Te said copies of the resolution would be available

"within
the
next
few
days."

Savings or presidential pork barrel?

The Aquino government said the fund came from
"unobligated allotments of all agencies with low

The SC spokesman said separate opinions will be

submitted by Senior Associate Justice Antonio
Carpio, and Associate Justices Arturo Brion,

Mariano del Castillo, Estela Perlas-Bernabe and

Marvic Leonen.

The Zarates sued PNR and the Pereas (Alfaro

LABOR LAW

was based on quasi-delict. Their cause of action

became at-large). Their cause of action against PNR

against the Pereas was based on breach of contract
of common carriage.

CIVIL LAW
1. Spouses Teodoro and Nanette Perea vs
Spouses Nicolas and Teresita Zarate
Civil Law Common Carrier Private School
Transport are Common Carriers
Torts and Damages Heirs of a high school student
may be awarded damages for loss income
In June 1996, Nicolas and Teresita Zarate contracted
Teodoro and Nanette Perea to transport their
(Zarates) son, Aaron Zarate, to and from school.
The Pereas were owners of a van being used for
private school transport.
At about 6:45am of August 22, 1996, the driver of
the said private van, Clemente Alfaro, while the
children were on board including Aaron, decided to
take a short cut in order to avoid traffic. The usual
short cut was a railroad crossing of the Philippine
National Railway (PNR).
Alfaro saw that the barandilla (the pole used to
block vehicles crossing the railway) was up which
means it was okay to cross. He then tried to overtake
a bus. However, there was in fact an oncoming train
but Alfaro no longer saw the train as his view was
already blocked by the bus he was trying to
overtake. The bus was able to cross unscathed but
the vans rear end was hit. During the collision,
Aaron, was thrown off the van. His body hit the
railroad tracks and his head was severed. He was

In their defense, the Pereas invoked that as private

carriers they were not negligent in selecting Alfaro
as their driver as they made sure that he had a
drivers license and that he was not involved in any
accident prior to his being hired. In short, they
observed the diligence of a good father in selecting
their employee.
PNR also disclaimed liability as they insist that the
railroad crossing they placed there was not meant for
railroad crossing (really, thats their defense!).
The RTC ruled in favor of the Zarates. The Court of
Appeals affirmed the RTC. In the decision of the
RTC and the CA, they awarded damages in favor of
the Zarates for the loss of earning capacity of their
dead son.
The Pereas appealed. They argued that the award
was improper as Aaron was merely a high school
student, hence, the award of such damages was
merely speculative. They cited the case of People vs
Teehankee where the Supreme Court did not award
damages for the loss of earning capacity despite the
fact that the victim there was enrolled in a pilot
school.
ISSUES: Whether or not the defense of due
diligence of a good father by the Pereas is
untenable. Whether or not the award of damages for
loss of income is proper.

only 15 years old.

HELD: Yes, in both issues.

It turns out that Alfaro was not able to hear the train

Defense of Due Diligence of a Good Father

honking from 50 meters away before the collision

because the vans stereo was playing loudly.

This defense is not tenable in this case. The Pereas

are common carriers. They are not merely private

carriers. (Prior to this case, the status of private

he would at least be a minimum wage earner by the

transport for school services or school buses is not

time he starts working. This is not being speculative

well settled as to whether or not they are private or

at all.

common carriers but they were generally regarded

as private carriers). Private transport for schools are

The Teehankee case was different because in that

common carriers. The Pereas, as the operators of a

case, the reason why no damages were awarded for

school bus service were: (a) engaged in transporting

loss of earning capacity was that the defendants

passengers generally as a business, not just as a

there were already assuming that the victim would

casual

carry

indeed become a pilot hence, that made the

passengers over established roads by the method by

assumption speculative. But in the case of Aaron,

which the business was conducted; and (c)

there was no speculation as to what he might be

transporting students for a fee. Despite catering to a

but whatever hell become, it is certain that he will

limited clientle, the Pereas operated as a common

at the least be earning minimum wage.

occupation;

(b)

undertaking

to

carrier because they held themselves out as a ready

transportation indiscriminately to the students of a
particular school living within or near where they

is specifically required from them by law is

2. DARIO NACAR VS. GALLERY FRAMES

703 SCRA 439 Civil Law Torts and
Damages Actual and Compensatory Damages
Legal Rate of Interest is now 6%
Labor Law Labor Relations Illegal
Dismissal Computation of Monetary Benefits

extraordinary diligence a fact which they failed to

Facts:

operated the service and for a fee.

Being a common carrier, what is required of the
Pereas is not mere diligence of a good father. What

prove in court. Verily, their obligation as common

carriers did not cease upon their exercise of
diligently choosing Alfaro as their employee.
(It is recommended that you read the full text, the
Supreme Court made an elaborate and extensive
definition of common and private carriers as well as
their distinctions.)
Award of Damages for Aarons loss of earning
capacity despite he being a high school student at
the time of his death
The award is proper. Aaron was enrolled in a
reputable school (Don Bosco). He was of normal
health and was an able-bodied person. Further, the
basis of the computation of his earning capacity was
not on what he would have become. It was based on
the current minimum wage. The minimum wage was
validly used because with his circumstances at the
time of his death, it is most certain that had he lived,

Dario Nacar filed a labor case against Gallery

Frames and its owner Felipe Bordey, Jr. Nacar
alleged that he was dismissed without cause by
Gallery Frames on January 24, 1997. On October 15,
1998, the Labor Arbiter (LA) found Gallery Frames
guilty of illegal dismissal hence the Arbiter awarded
Nacar P158,919.92 in damages consisting of
backwages and separation pay.
Gallery Frames appealed all the way to the Supreme
Court (SC). The Supreme Court affirmed the
decision of the Labor Arbiter and the decision
became final on May 27, 2002.
After the finality of the SC decision, Nacar filed a
motion before the LA for recomputation as he
alleged that his backwages should be computed from
the time of his illegal dismissal (January 24, 1997)
until the finality of the SC decision (May 27, 2002)
with interest. The LA denied the motion as he ruled
that the reckoning point of the computation should
only be from the time Nacar was illegally dismissed
(January 24, 1997) until the decision of the LA

(October 15, 1998). The LA reasoned that the said

date should be the reckoning point because Nacar
did not appeal hence as to him, that decision became
final and executory.

b.1. shall run from date of default (either failure to

pay upon extra-judicial demand or upon judicial
demand whichever is appropriate and subject to the
provisions of Article 1169 of the Civil Code)

ISSUE: Whether or not the Labor Arbiter is correct.

b.2. rate of interest shall be 6% per annum

HELD: No. There are two parts of a decision when it

comes to illegal dismissal cases (referring to cases
where the dismissed employee wins, or loses but
wins on appeal). The first part is the ruling that the
employee was illegally dismissed. This is
immediately final even if the employer appeals but
will be reversed if employer wins on appeal. The
second part is the ruling on the award of backwages
and/or separation pay. For backwages, it will be
computed from the date of illegal dismissal until the
date of the decision of the Labor Arbiter. But if the
employer appeals, then the end date shall be
extended until the day when the appellate courts
decision shall become final. Hence, as a
consequence, the liability of the employer, if he
loses on appeal, will increase this is just but a risk
that the employer cannot avoid when it continued to
seek recourses against the Labor Arbiters decision.
This is also in accordance with Article 279 of the
Labor Code.

2. Non-Monetary Obligations (such as the case at

bar)

Anent the issue of award of interest in the form of

actual or compensatory damages, the Supreme Court
ruled that the old case of Eastern Shipping Lines vs
CAis already modified by the promulgation of the
Bangko Sentral ng Pilipinas Monetary Board
Resolution No. 796 which lowered the legal rate of
interest from 12% to 6%. Specifically, the rules on
interest are now as follows:
1. Monetary Obligations ex. Loans:
a. If stipulated in writing:
a.1. shall run from date of judicial demand (filing of
the case)
a.2. rate of interest shall be that amount stipulated

a. If already liquidated, rate of interest shall be 6%

per annum, demandable from date of judicial or
extra-judicial
demand (Art. 1169, Civil Code)
b. If unliquidated, no interest
Except: When later on established with certainty.
Interest shall still be 6% per annum demandable
from the date of judgment because such on such
date, it is already deemed that the amount of
damages is already ascertained.
3. Compounded Interest
- This is applicable to both monetary and nonmonetary obligations
- 6% per annum computed against award of damages
(interest) granted by the court. To be computed from
the date when the courts decision becomes final and
executory until the award is fully satisfied by the
losing party.
4. The 6% per annum rate of legal interest shall be
applied prospectively:
- Final and executory judgments awarding damages
prior to July 1, 2013 shall apply the 12% rate;
- Final and executory judgments awarding damages
on or after July 1, 2013 shall apply the 12% rate for
unpaid obligations until June 30, 2013; unpaid
obligations with respect to said judgments on or
after July 1, 2013 shall still incur the 6% rate.
Michael Pealosa vs Candido Villanueva

b. If not stipulated in writing

TAXATION LAW

MERCANTILE LAW

1. Wilson Gamboa vs Secretary Margarito

Teves

Mercantile Law Corporation Code Capital

What Capital means
In 1928, the Philippine Long Distance Telephone
Company (PLDT) was granted a franchise to
engage in the business of telecommunications.
Telecommunications is a nationalized area of
activity where a corporation engaged therein must
have 60% of its capital be owned by Filipinos as
provided for by Section 11, Article XII (National
Economy and Patrimony) of the 1987
Constitution, to wit:
Section 11. No franchise, certificate, or any other
form of authorization for the operation of a public
utility shall be granted except to citizens of the
Philippines
or
to
corporations
or associations organized under the laws of the
Philippines, at least sixty per centum of
whose capital is owned by such citizens; xxx
In 1999, First Pacific, a foreign corporation,
acquired 37% of PLDT common shares. Wilson
Gamboa opposed said acquisition because at that
time, 44.47% of PLDT common shares already
belong to various other foreign corporations.
Hence, if First Pacifics share is added, foreign
shares will amount to 81.47% or more than the
40% threshold prescribed by the Constitution.
Margarito Teves, as Secretary of Finance, and the
other respondents argued that this is okay because
in totality, most of the capital stocks of PLDT is
Filipino owned. It was explained that all PLDT
subscribers, pursuant to a law passed by Marcos,
are considered shareholders (they hold serial
preferred shares). Broken down, preferred shares
consist of 77.85% while common shares consist of
22.15%.

Gamboa argued that the term capital should

only pertain to the common shares because that is
the share which is entitled to vote and thus have
effective control over the corporation.
ISSUE: What does the term capital pertain to?
Does the term capital in Section 11, Article XII
of the Constitution refer to common shares or to
the total outstanding capital stock (combined total
of common and non-voting preferred shares)?
HELD: Gamboa is correct. Capital only pertains
to common shares. It will be absurd for capital to
pertain as inclusive of non-voting shares. This is
because a corporation consisting of 1,000,000
capital stocks, 100 of which are common shares
which are foreign owned and the rest (999,900
shares) are preferred shares which are non-voting
shares and are Filipino owned, would seem
compliant to the constitutional requirement here
99.999% is Filipino owned. But if scrutinized, the
controlling stock the voting stock or that
miniscule .001% is foreign owned. That is absurd.
In this case, it is true that at least 77.85% of the
capital is owned by Filipinos (the PLDT
subscribers). But these subscribers, who hold nonvoting preferred shares, have no control over the
corporation. Hence, capital should only pertain to
common shares.
Thus, to be compliant with the constitution, 60%
of the common shares of PLDT should be Filipino
owned. That is not so in this case as it appears that
81.47% of the common shares are already foreign
owned (split between First Pacific (37%) and a
Japanese corporation).
When may preferred shares be considered part of
the capital share?
If the preferred shares are allowed to vote like
common shares.

RELATED NEWS:
Son continues fathers fight vs. giant firm, July
30, 2013 (MANILA TIMES)
This son is carrying on a just fight waged by his
father.
A pool of lawyers led by Wilson Gamboa Jr., son of
the late Bacolod lawmaker Wilson Gamboa Sr.
earlier favored twice by the Supreme Court as
petitioner, has joined the legal battle over the
questionable status of Philippine Long Distance
Telephone Co. (PLDT)s ownership of voting of
shares including alleged violation of constitutional
provisions.
Gamboa Jr. and lawyers Daniel Cartagena, John
Warren Gabinete, Antonio Pesina Jr., Modesto
Martin Mamon and Gerardo Erebaren, filed a
motion for intervention on Tuesday before the
Supreme Court supporting a petition against the
Securities and Exchange Commission (SEC) and the
PLDT.

in nominating trustees. They added that all the

trustees are PLDT nominees.
Gamboa Jr. substituted as petitioner after his father
passed away in 2011 to continue the quest. The elder
Gamboa was the petitioner in the case of Gamboa
vs. Teves, in which the Supreme Court decided that
PLDT breached the 40-percent foreign ownership
limit for utilities on June 2011 and rejected the
motion for reconsideration filed by PLDT on
October 2012.
In their motion for intervention, Gamboas group
fully agrees with Roy that Section 2 of MC8 is not in
accord with the previous ruling of the Supreme
Court because it fails to differentiate the varying
classes of shares and does not require the application
of the foreign equity limits to each class of shares
issued by a corporation.
To continue the legacy of his father, Gamboa Jr. and
his group challenged what they refer to as SECs
patently erroneous interpretation of the Constitution
as well as the erroneous implementation of the
Supreme Court decision in the Gamboa case.

The group seeks to join the petition filed by lawyer

Jose Roy 3rd former dean and president of
Pamantasan ng Lungsod ng Maynila, that aims to
nullify Memorandum Circular 8 (MC8) Series of
2013 of the SEC.

We cannot just stay on the sidelines doing nothing

while such violations are allowed to go on, said
Gamboa Jr.

Roys petition claims that the said memorandum

circular seems to have been tailor-made to
accommodate the alleged scheme of PLDT to
conform with the Constitution which includes
amending its Articles of Incorporation to be able to
issue preferred voting shares, which are sold to a
non-complying entity called BTF Holdings Inc., to
skirt the cap on foreign ownership in public utilities.

Trust Fund is not a Philippine entity and that more

than 60 percent of its outstanding capital stock
should also be declared as a foreign capital.

BTF Holdings Inc. was formed from the Beneficial

Trust Fund or the fund allotted for the pensions of
retiring PLDT employees.
PLDT employees had earlier filed a complaint over
the BTF issue because of their lack of participation

The group joined Roy in asking the High Tribunal to

declare that the PLDT Beneficial

The group added that SEC should also be

correspondingly ordered to issue new guidelines
regarding the determination of compliance with
Section 11, Article XII of the Constitution in
accordance with the Gamboa cases, with a warning
that any deviation from the said decision will be
tantamount to contempt of court.
2.