G.R. No.

71813

July 20, 1987

ROSALINA PEREZ ABELLA/HDA. DANAO-RAMONA, petitioners,

vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION,
ROMEO QUITCO and RICARDO DIONELE, SR., respondents.
PARAS, J.:
This is a petition for review on certiorari of the April 8, 1985 Resolution
of the Ministry of Labor and Employment affirming the July 16, 1982
Decision of the Labor Arbiter, which ruled in favor of granting
separation pay to private respondents.
On June 27, 1960, herein petitioner Rosalina Perez Abella leased a
farm land in Monteverde, Negros Occidental, known as
Hacienda Danao-Ramona, for a period of ten (10) years,
renewable, at her option, for another ten (10) years (Rollo, pp. 1620).
On August 13, 1970, she opted to extend the lease contract for
another ten (10) years (Ibid, pp. 26-27).
During the existence of the lease, she employed the herein private
respondents. Private respondent Ricardo Dionele, Sr. has been a
regular farm worker since 1949 and he was promoted to Cabo
in 1963. On the other hand, private respondent Romeo Quitco
started as a regular employee in 1968 and was promoted to
Cabo in November of the same year.
Upon the expiration of her leasehold rights, petitioner
dismissed private respondents and turned over the hacienda
to the owners thereof on October 5, 1981, who continued the
management, cultivation and operation of the farm (Rollo, pp. 33; 89).
On November 20, 1981, private respondents filed a complaint against
the petitioner at the Ministry of Labor and Employment, Bacolod City
District Office, for overtime pay, illegal dismissal and
reinstatement with backwages. After the parties had presented
their respective evidence, Labor Arbiter Manuel M. Lucas, Jr., in a
Decision dated July 16, 1982 (Ibid, pp. 29-31), ruled that the dismissal
is warranted by the cessation of business, but granted the
private respondents separation pay. Pertinent portion of the
dispositive portion of the Decision reads:
In the instant case, the respondent closed its business operation
not by reason of business reverses or losses. Accordingly, the
award of termination pay in complainants' favor is warranted.
WHEREFORE, the respondent is hereby ordered to pay the
complainants separation pay at the rate of half-month salary for
every year of service, a fraction of six (6) months being
considered one (1) year. (Rollo pp. 29-30)
On appeal on August 11, 1982, the National Labor Relations
Commission, in a Resolution dated April 8, 1985 (Ibid, pp. 3940),
affirmed the decision and dismissed the appeal for lack of merit.
On May 22, 1985, petitioner filed a Motion for Reconsideration
(Ibid, pp. 41-45), but the same was denied in a Resolution dated June
10, 1985 (Ibid, p. 46). Hence, the present petition (Ibid, pp. 3-8).

The First Division of this Court, in a Resolution dated September 16,

1985, resolved to require the respondents to comment (Ibid, p. 58). In
compliance therewith, private respondents filed their Comment on
October 23, 1985 (Ibid, pp. 53-55); and the Solicitor General on
December 17, 1985 (Ibid, pp. 71-73-B).
On February 19, 1986, petitioner filed her Consolidated Reply to the
Comments of private and public respondents (Ibid, pp. 80-81).
The First Division of this Court, in a Resolution dated March 31, 1986,
resolved to give due course to the petition; and to require the parties
to submit simultaneous memoranda (Ibid., p. 83). In compliance
therewith, the Solicitor General filed his Memorandum on June 18,
1986 (Ibid, pp. 89-94); and petitioner on July 23, 1986 (Ibid, pp. 96194).
The petition is devoid of merit.
The sole issue in this case is
WHETHER OR NOT PRIVATE RESPONDENTS ARE ENTITLED TO
SEPARATION PAY.
Petitioner claims that since her lease agreement had already
expired, she is not liable for payment of separation pay. Neither
could she reinstate the complainants in the farm as this is a
complete cessation or closure of a business operation, a just
cause for employment termination under Article 272 of the Labor
Code.
On the other hand, the legal basis of the Labor Arbiter in granting
separation pay to the private respondents is Batas Pambansa Blg.
130, amending the Labor Code, Section 15 of which, specifically
provides:
Sec 15 Articles 285 and 284 of the Labor Code are hereby
amended to read as follows:
xxx

xxx

xxx

Art. 284. Closure of establishment and reduction of

personnel. The employer may also terminate the
employment of any employee due to the installation of laborsaving devices, redundancy, retrenchment to prevent losses or
the closing or cessation of operation of the establisment
or undertaking unless the closing is for the purpose of
circumventing the provisions of this title, by serving a written
notice on the workers and the Ministry of Labor and Employment
at least one (1) month before the intended date thereof. In case
of termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to a
separation pay equivalent to at least his one (1) month pay or to
at least one (1) month pay for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases
of closure or cessation of operations of establishment or
undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent
to one (1) month pay or at least one-half (1/2) month pay
for every year of service whichever is higher. A fraction of
at least six (6) months shall be considered one (1) whole
year.1avvphi1

There is no question that Article 284 of the Labor Code as amended by

BP 130 is the law applicable in this case.
Article 272 of the same Code invoked by the petitioner pertains to
the just causes of termination. The Labor Arbiter does not
argue the justification of the termination of employment but
applied Article 284 as amended, which provides for the rights
of the employees under the circumstances of termination.
Petitioner then contends that the aforequoted provision violates the
constitutional guarantee against impairment of obligations and
contracts, because when she leased Hacienda Danao-Ramona on June
27, 1960, neither she nor the lessor contemplated the creation
of the obligation to pay separation pay to workers at the end
of the lease.
Such contention is untenable.
This issue has been laid to rest in the case of Anucension v. National
Labor Union (80 SCRA 368-369 [1977]) where the Supreme Court ruled:
It should not be overlooked, however, that the prohibition to
impair the obligation of contracts is not absolute and unqualified.
The prohibition is general, affording a broad outline and requiring
construction to fill in the details. The prohibition is not to read
with literal exactness like a mathematical formula for it prohibits
unreasonable impairment only. In spite of the constitutional
prohibition the State continues to possess authority to safeguard
the vital interests of its people. Legislation appropriate to
safeguard said interest may modify or abrogate contracts already
in effect. For not only are existing laws read into contracts in
order to fix the obligations as between the parties but the
reservation of essential attributes of sovereign power is also read
into contracts as a postulate of the legal order. All contracts
made with reference to any matter that is subject to regulation
under the police power must be understood as made in reference
to the possible exercise of that power. Otherwise, important and
valuable reforms may be precluded by the simple device of
entering into contracts for the purpose of doing that which
otherwise maybe prohibited. ...
In order to determine whether legislation unconstitutionally
impairs contract of obligations, no unchanging yardstick,
applicable at all times and under all circumstances, by which the
validity of each statute may be measured or determined, has
been fashioned, but every case must be determined upon its
own circumstances. Legislation impairing the obligation of
contracts can be sustained when it is enacted for the promotion
of the general good of the people, and when the means adopted
must be legitimate, i.e. within the scope of the reserved power of
the state construed in harmony with the constitutional limitation
of that power. (Citing Basa vs. Federacion Obrera de la Industria
Tabaquera y Otros Trabajadores de Filipinas [FOITAF] [L-27113],
November 19, 1974; 61 SCRA 93,102-113]).
The purpose of Article 284 as amended is obvious-the
protection of the workers whose employment is terminated
because of the closure of establishment and reduction of
personnel. Without said law, employees like private
respondents in the case at bar will lose the benefits to which
they are entitled for the thirty three years of service in the

case of Dionele and fourteen years in the case of Quitco.

Although they were absorbed by the new management of the
hacienda, in the absence of any showing that the latter has
assumed the responsibilities of the former employer, they will be
considered as new employees and the years of service behind
them would amount to nothing.
Moreover, to come under the constitutional prohibition, the law
must effect a change in the rights of the parties with reference
to each other and not with reference to non-parties.
As correctly observed by the Solicitor General, Article 284 as amended
refers to employment benefits to farm hands who were not parties to
petitioner's lease contract with the owner of Hacienda Danao-Ramona.
That contract cannot have the effect of annulling subsequent
legislation designed to protect the interest of the working class.
In any event, it is well-settled that in the implementation and
interpretation of the provisions of the Labor Code and its implementing
regulations, the workingman's welfare should be the primordial and
paramount consideration. (Volshel Labor Union v. Bureau of Labor
Relations, 137 SCRA 43 [1985]). It is the kind of interpretation which
gives meaning and substance to the liberal and compassionate spirit of
the law as provided for in Article 4 of the New Labor Code which states
that "all doubts in the implementation and interpretation of the
provisions of this Code including its implementing rules and regulations
shall be resolved in favor of labor." The policy is to extend the
applicability of the decree to a greater number of employees who can
avail of the benefits under the law, which is in consonance with the
avowed policy of the State to give maximum aid and protection to
labor. (Sarmiento v. Employees Compensation Commission, 144 SCRA
422 [1986] citing Cristobal v. Employees Compensation Commission,
103 SCRA 329; Acosta v. Employees Compensation Commission, 109
SCRA 209).
PREMISES CONSIDERED, the instant petition is hereby DISMISSED and
the July 16, 1982 Decision of the Labor Arbiter and the April 8, 1985
Resolution of the Ministry of Labor and Employment are hereby
AFFIRMED.
SO ORDERED.
G.R. No. 75782 December 1, 1987
EURO-LINEA, PHILS., INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and JIMMY O.
PASTORAL, respondents.

PARAS, J.:
This is a petition for review on certiorari seeking to reverse and set
aside the resolution of public respondent, * NLRC, in Case No. RAB 1112-1589-84 entitled "Jimmy O. Pastoral v. Euro-Linea Phils., Inc."
affirming the decision of the Labor Arbiter ** which ordered the
reinstatement of complainant with six months backwages.
The facts as found by the Solicitor General are as follows:

On August 17, 1983, petitioner hired Pastoral as shipping

expediter on a probationary basis for a period of six months
ending February 18, 1984. However, prior to hiring by petitioner,
Pastoral had been employed by Fitscher Manufacturing
Corporation also as shipping expediter for more than one and a
half years. Pastoral was absorbed by petitioner but under a
probationary basis.
On February 4, 1984, Pastoral received a memorandum dated
January 31, 1984 terminating his probationary employment
effective also on February 4, 1984 in view of his failure ito meet the
performance standards set by the company." To contest his
dismissal, Pastoral filed a complaint for illegal dismissal against
petitioner on February 6, 1984 (Rollo, pp. 45-46). On July 19, 1985, the
Labor Arbiter found petitioner guilty of illegal dismissal, the
dispositive portion of the decision reading:
WHEREFORE all things considered the respondent or its
President and/or General Manager should be as it is
hereby ordered to reinstate complainant with six
months backwages.
SO ORDERED.
San Fernando, Pampanga, Philippines, July 19,1985.
(Rollo, p. 32).
Petitioner appealed the decision to the NLRC on August 5, 1985
(Rollo, pp. 33-39) but the appeal was dismissed on July 16, 1986
(Resolution; Rollo, p. 41).
Hence, this petition.
Petitioner raises the following errors of the NLRC (Rollo, p. 7):
a) The Labor Arbiter decided a question of law in a manner
contrary to the spirit and purpose of the law; and that
b) The Labor Arbiter gravely abused his discretion by
ignoring the material and significant facts in favor of
employer.
In the resolution of October 29, 1986, the Second Division of the Court
without giving due course to the petition required the respondents to
comment (Rollo, p. 42).
The Solicitor General submitted his comment on November 24, 1986
(Rollo, pp. 45-49), while petitioner through counsel filed its reply to
public respondent National Labor Relations Commission's comment in
compliance with the resolution of December 10, 1986 (Rollo, p. 50).
In the resolution of February 18, 1987 (Rollo, 58), the Court gave due
course to the petition and required the parties to file their respective
memoranda.
The only issue is whether or not the National Labor Relations
Commission acted with grave abuse of discretion amounting to
excess of jurisdiction in ruling against the dismissal of the
respondent, a temporary or probationary employee, by his
employer (Petitioner).

Although a probationary or temporary employee has a limited

tenure, he still enjoys the constitutional protection of security
of tenure. During his tenure of employment or before his
contract expires, he cannot be removed except for cause as
provided for by law (Manila Hotel Corp. v. NLRC, 141 SCRA 169
[1986]).
This brings us to the issue of whether or not private
respondent's dismissal was justifiable.
Petitioner claims that the dismissal is with cause, since respondent
during his period of employment failed to meet the
performance standards set by the company; that employers
should be given leeway in the application of his right to choose
efficient workers (Rollo, p. 6) and that the determination of
compliance with the standards is the prerogative of the
employer as long as it is not whimsical; that it had terminated
for cause the respondent before the expiration of the
probationary employment (Rollo, p. 70, Petitioner's Memorandum).
The records, however, reveal the contrary.
Petitioner not only failed to present sufficient evidence to
substantiate the cause of private respondent's dismissal, but
likewise failed to cite particular acts or instances to show the
latter's poor performance.
As correctly argued by the Solicitor General
There is no dispute that failure to qualify as a
regular employee in accordance with reasonable
standards prescribed by the employer is a ground to
terminate an employee engaged on a probationary
basis (Art. 282, Labor Code; Bk. VI, Rule 1, Section 6(c),
Implementing Rules, Labor Code). In this case, petitioner
alleged that Pastoral was dismissed because he failed
to meet its performance standard. However,
petitioner did not bother to cite particular acts or
instances in its position paper which show that
Pastoral was performing below par. ...
Petitioner's performance as shipping expediter can readily
be gauged from specific acts as may be gleaned from his
duties enumerated by petitioner to include processing of
export and import documents for dispatch or release and
talking to customs personnel regarding said documents. (p.
2, Annex "E " Petition).
Furthermore, what makes the dismissal highly suspicious is the
fact that while petitioner claims that respondent was
inefficient, it retained his services until the last remaining two
weeks of the six months probationary employment.
No less important is the fact that private respondent had been a
shipping expediter for more than one and a half years before he was
absorbed by petitioner. It therefore appears that the dismissal in
question is without sufficient justification.
It must be emphasized that the prerogative of management to dismiss
or lay- off an employee must be done without abuse of discretion, for
what is at stake is not only petitioner's position but also his means of

livelihood. (Remerco Garments Manufacturing vs. Minister of Labor,

135 SCRA 137 [1985]). The right of an employer to freely select
or discharge his employees is subject to regulation by the
State, basically in the exercise of its paramount police power
(PAL, Inc. vs. PALEA, 57 SCRA 489 [1974]). This is so because the
preservation of the lives of the citizens is a basic duty of the
State, more vital than the preservation of corporate profits
(Phil. Apparel Workers Union v. NLRC, 106 SCRA 444 [1981]; Manila
Hotel Corp. v. NLRC, supra).
Finally, it is significant to note that in the interpretation of the
protection to labor and social justice provisions of the
constitution and the labor laws and rules and regulations
implementing the constitutional mandate, the Supreme Court
has always adopted the liberal approach which favors the
exercise of labor rights. (Adamson & Adamson, Inc. v. CIR, 127 SCRA
268 [1984]).
In the instant case, it is evident that the NLRC correctly applied
Article 282 in the light of the foregoing and that its resolution is not
tainted with unfairness or arbitrariness that would amount to grave
abuse of discretion or lack of jurisdiction (Rosario Brothers Inc. v. Ople,
131 SCRA 73 [1984]).
PREMISES CONSIDERED, the petition is DISMISSED for lack of merit,
and the resolution of the NLRC is affirmed.
SO ORDERED.
G.R. No. L-48926 December 14, 1987
MANUEL SOSITO, petitioner,
vs.
AGUINALDO DEVELOPMENT CORPORATION, respondent.

CRUZ, J.:
We gave due course to this petition and required the parties to file
simultaneous memoranda on the sole question of whether or not the
petitioner is entitled to separation pay under the retrenchment
program of the private respondent.
The facts are as follows:
Petitioner Manuel Sosito was employed in 1964 by the private
respondent, a logging company, and was in charge of lo gging
importation, with a monthly salary of P675.00, 1 when he went
on indefinite leave with the consent of the company on January
16, 1976. 2 On July 20, 1976, the private respondent, through its
president, announced a retrenchment program and offered
separation pay to employees in the active service as of June 30,
1976, who would tender their resignations not later than July
31, 1976. The petitioner decided to accept this offer and so
submitted his resignation on July 29, 1976, "to avail himself of
the gratuity benefits" promised. 3 However, his resignation was not
acted upon and he was never given the separation pay he
expected. The petitioner complained to the Department of Labor,
where he was sustained by the labor arbiter. 4 The company was
ordered to pay Sosito the sum of P 4,387.50, representing his

salary for six and a half months. On appeal to the National Labor
Relations Commission, this decision was reversed and it was held
that the petitioner was not covered by the retrenchment
program. 5 The petitioner then came to us.
For a better understanding of this case, the memorandum of the
private respondent on its retrenchment program is reproduced in full
as follows:
July 20, 1976
Memorandum To: ALL EMPLOYEES
Re: RETRENCHMENT PROGRAM
As you are all aware, the operations of wood-based
industries in the Philippines for the last two (2) years were
adversely affected by the worldwide decline in the demand
for and prices of logs and wood products. Our company
was no exception to this general decline in the market, and
has suffered tremendous losses. In 1975 alone, such losses
amounted to nearly P20,000,000.00.
The company has made a general review of its operations
and has come to the unhappy decision of the need to make
adjustments in its manpower strength if it is to survive.
This is indeed an unfortunate and painful decision to make,
but it leaves the company no alternative but to reduce its
tremendous and excessive overhead expense in order to
prevent an ultimate closure.
Although the law allows the Company, in a situation such
as this, to drastically reduce it manpower strength without
any obligation to pay separation benefits, we recognize the
need to provide our employees some financial assistance
while they are looking for other jobs.
The Company therefore is adopting a retrenchment
program whereby employees who are in the active service
as of June 30, 1976 will be paid separation benefits in an
amount equivalent to the employee's one-half (1/2)
month's basic salary multiplied by his/her years of service
with the Company. Employees interested in availing of the
separation benefits offered by the Company must manifest
such intention by submitting written letters of resignation
to the Management not later than July 31, 1976. Those
whose resignations are accepted shall be informed
accordingly and shall be paid their separation benefits.
After July 31, 1976, this offer of payment of separation
benefits will no longer be available. Thereafter, the
Company shall apply for a clearance to terminate the
services of such number of employees as may be
necessary in order to reduce the manpower strength to
such desired level as to prevent further losses.
N.B.
For additional information
and/or resignation forms,

please see Mr. Vic Maceda

or Atty. Ben Aritao.

It is clear from the memorandum that the offer of separation

pay was extended only to those who were in the active service
of the company as of June 30, 1976. It is equally clear that the
petitioner was not eligible for the promised gratuity as he was
not actually working with the company as of the said date.
Being on indefinite leave, he was not in the active service of
the private respondent although, if one were to be technical,
he was still in its employ. Even so, during the period of
indefinite leave, he was not entitled to receive any salary or to
enjoy any other benefits available to those in the active
service.
It seems to us that the petitioner wants to enjoy the best of two worlds
at the expense of the private respondent. He has insulated himself
from the insecurities of the floundering firm but at the same time
would demand the benefits it offers. Being on indefinite leave from the
company, he could seek and try other employment and remain there if
he should find it acceptable; but if not, he could go back to his former
work and argue that he still had the right to return as he was only on
leave.
There is no claim that the petitioner was temporarily laid off or
forced to go on leave; on the contrary, the record shows that
he voluntarily sought the indefinite leave which the private
respondent granted. It is strange that the company should agree to
such an open-ended arrangement, which is obviously one-sided. The
company would not be free to replace the petitioner but the petitioner
would have a right to resume his work as and when he saw fit.
We note that under the law then in force the private respondent
could have validly reduced its work force because of its
financial reverses without the obligation to grant separation
pay. This was permitted under the original Article 272(a), of the
Labor Code, 7 which was in force at the time. To its credit, however,
the company voluntarily offered gratuities to those who would agree to
be phased out pursuant to the terms and conditions of its
retrenchment program, in recognition of their loyalty and to tide them
over their own financial difficulties. The Court feels that such
compassionate measure deserves commendation and support but at
the same time rules that it should be available only to those who are
qualified therefore. We hold that the petitioner is not one of them.
While the Constitution is committed to the policy of social
justice and the protection of the working class, it should not be
supposed that every labor dispute will be automatically
decided in favor of labor. Management also has its own rights
which, as such, are entitled to respect and enforcement in the
interest of simple fair play. Out of its concern for those with less
privileges in life, this Court has inclined more often than not toward the
worker and upheld his cause in his conflicts with the employer. Such
favoritism, however, has not blinded us to the rule that justice is in
every case for the deserving, to be dispensed in the light of the
established facts and the applicable law and doctrine.
WHEREFORE, the petition is DISMISSED and the challenged decision
AFFIRMED, with costs against the petitioner.

SO ORDERED.
Teehankee, C.J., Narvasa, Paras and Gancayco, JJ., concur.
G.R. No. 73681 June 30, 1988
COLGATE PALMOLIVE PHILIPPINES, Inc., petitioners,
vs.
HON. BLAS F. OPLE, COLGATE PALMOLIVE SALES
UNION, respondents.

PARAS, J.:
Before Us is a Petition for certiorari seeking to set aside and annul the
Order of respondent Minister of Labor and Employment (MOLE) directly
certifying private respondent as the recognized and duly-authorized
collective bargaining agent for petitioner's sales force and ordering the
reinstatement of three employees of petitioner.
Acting on the petition for certiorari with prayer for temporary
restraining order, this Court issued a Temporary Restraining Order
enjoining respondents from enforcing and/or carrying out the assailed
order.
The antecedent facts are as follows:
On March 1, 1985, the respondent Union filed a Notice of Strike
with the Bureau of Labor Relations (BLR) on ground of unfair
labor practice consisting of alleged refusal to bargain, dismissal
of union officers/members; and coercing employees to retract
their membership with the union and restraining non-union
members from joining the union.
After efforts at amicable settlement proved unavailing, the Office of the
MOLE, upon petition of petitioner assumed jurisdiction over the dispute
pursuant to Article 264 (g) of the Labor Code, Thereafter the case was
captioned AJML-3-142-85, BLR-3-86-85 "In Re: Assumption of
Jurisdiction over the Labor Dispute at Colgate Palmolive Philippines,
Inc." In its position paper, petitioner pointed out that
(a) There is no legal basis for the charge that the company
refused to bargain collectively with the union considering
that the alleged union is not the certified agent of
the company salesmen;
(b) The union's status as a legitimate labor
organization is still under question because on 6
March 1985, a certain Monchito Rosales informed the BLR
that an overwhelming majority of the salesmen are not in
favor of the Notice of Strike allegedly filed by the Union
(Annex "C");
(c) Upon verification of the records of the Ministry of Labor
and Employment, it appeared that a petition for
cancellation of the registration of the alleged union was
filed by Monchito Rosales on behalf of certain salesmen of
the company who are obviously against the formation of

the Colgate Palmolive Sales Labor Union which is supposed

to represent them;
(d) The preventive suspensions of salesmen Peregrino
Sayson, Salvador Reynante and Cornelio Mejia, and their
eventual dismissal from the employ of the company
were carried out pursuant to the inherent right and
prerogative of management to discipline erring
employees; that based on the preliminary investigation
conducted by the company, there appeared substantial
grounds to believe that Sayson, Reynante and Mejia
violated company rules and regulations
necessitating their suspension pending further
investigation of their respective cases;
(e) It was also ascertained that the company sustained
damages resulting from the infractions committed by the
three salesmen, and that the final results of the
investigation fully convinced the company of the existence
of just causes for the dismissal of the three salesmen;
(f) The formation of the union and the membership
therein of Sayson, Reynante and Mejia were not in
any manner connected with the company's decision
to dismiss the three; that the fact that their dismissal
came at a time when the alleged union was being formed
was purely coincidental;
(g) The union's charge therefore, that the
membership in the union and refusal to retract
precipitated their dismissal was totally false and
amounted to a malicious imputation of union
busting;
(h) The company never coerced or attempted to coerce
employees, much less interferred in the exercise of their
right to self-organization; the company never thwarted nor
tried to defeat or frustrate the employees' right to form
their union in pursuit of their collective interest, as long as
that right is exercised within the limits prescribed by law; in
fact, there are at present two unions representing the rank
and file employees of the company-the factory workers
who are covered by a CBA which expired on 31 October
1985 (which was renewed on May 31, 1985) and are
represented by Colgate Palmolive Employees Union
(PAFLU); whereas, the salaried employees are covered by a
CBA which will expire on 31 May 1986 represented by
Philippine Association of Free Labor Union (PAFLU)-CPPI
Office Chapter. (pp. 4-6, Rollo)
The respondent Union, on the other hand, in its position paper,
reiterated the issue in its Notice to Strike, alleging that it was
duly registered with the Bureau of Labor Relations under
Registry No. 10312-LC with a total membership of 87 regular salesmen
(nationwide) out of 117 regular salesmen presently employed by the
company as of November 30, 1985 and that since the registration of
the Union up to the present, more than 2/3 of the total salesmen
employed are already members of the Union, leaving no doubt that the
true sentiment of the salesmen was to form and organize the ColgatePalmolive Salesmen Union. The Union further alleged that the
company is unreasonably delaying the recognition of the union

because when it was informed of the organization of the union,

and when presented with a set of proposals for a collective
bargaining agreement, the company took an adversarial stance
by secretly distributing a "survey sheet on union membership"
to newly hired salesmen from the Visayas, Mindanao and Metro
Manila areas, purposely avoiding regular salesmen who are now
members of the union; that in the accomplishment of the form, District
Sales Managers, and Sales Supervisors coerced salesmen from the
Visayas and Mindanao by requiring them to fill up and/or
accomplish said form by checking answers which were adverse
to the union; that with a handful of the survey sheets secured by
management through coercion, it now would like to claim that all
salesmen are not in favor of the organization of the union,
which acts are clear manifestations of unfair labor practices.
On August 9,1985, respondent Minister rendered a decision which:
(a) found no merit in the Union's Complaint for unfair
labor practice allegedly committed by petitioner as
regards the alleged refusal of petitioner to negotiate with
the Union, and the secret distribution of survey sheets
allegedly intended to discourage unionism,
(b) found the three salesmen, Peregrino Sayson, Salvador
Reynante & Cornelio Mejia "not without fault" and that
"the company 1 has grounds to dismiss above named
salesmen"
and at the same time respondent Minister directly certified the
respondent Union as the collective bargaining agent for the
sales force in petitioner company and ordered the
reinstatement of the three salesmen to the company on the
ground that the employees were first offenders.
Petitioner filed a Motion for Reconsideration which was denied by
respondent Minister in his assailed Order, dated December 27, 1985.
Petitioner now comes to Us with the following:
Assignment of Errors
I
Respondent Minister committed a grave abuse of
discretion when he directly certified the Union solely
on the basis of the latter's self-serving assertion
that it enjoys the support of the majority of the
sales force in petitioner's company.
II
Respondent Minister committed a grave abuse of discretion
when, notwithstanding his very own finding that there was
just cause for the dismissal of the three (3) salesmen, he
nevertheless ordered their reinstatement. (pp. 7-8,
Rollo)
Petitioner concedes that respondent Minister has the power to
decide a labor dispute in a case assumed by him under Art.
264 (g) of the Labor Code but this power was exceeded when
he certified respondent Union as the exclusive bargaining
agent of the company's salesmen since this is not a

representation proceeding as described under the Labor Code.

Moreover the Union did not pray for certification but merely for
a finding of unfair labor practice imputed to petitionercompany.
The petition merits our consideration. The procedure for a
representation case is outlined in Arts. 257-260 of the Labor
Code, in relation to the provisions on cancellation of a Union
registration under Arts. 239-240 thereof, the main purpose of
which is to aid in ascertaining majority representation. The
requirements under the law, specifically Secs. 2, 5, and 6 of Rule V,
Book V, of the Rules Implementing the Labor Code are all calculated to
ensure that the certified bargaining representative is the true
choice of the employees against all contenders. The
Constitutional mandate that the State shall "assure the rights of the
workers to self-organization, collective bargaining, security of tenure
and just and humane conditions of work," should be achieved under a
system of law such as the aforementioned provisions of the pertinent
statutes. When an overzealous official by-passes the law on the pretext
of retaining a laudable objective, the intendment or purpose of the law
will lose its meaning as the law itself is disregarded. When
respondent Minister directly certified the Union, he in fact
disregarded this procedure and its legal requirements. There
was therefore failure to determine with legal certainty whether the
Union indeed enjoyed majority representation. Contrary to the
respondent Minister's observation, the holding of a certification
election at the proper time is not necessarily a mere formality
as there was a compelling legal reason not to directly and
unilaterally certify a union whose legitimacy is precisely the
object of litigation in a pending cancellation case filed by
certain "concerned salesmen," who also claim majority status.
Even in a case where a union has filed a petition for
certification elections, the mere fact that no opposition is
made does not warrant a direct certification. More so as in the
case at bar, when the records of the suit show that the required proof
was not presented in an appropriate proceeding and that the basis of
the direct certification was the Union's mere allegation in its position
paper that it has 87 out of 117 regular salesmen. In other words,
respondent Minister merely relied on the self-serving assertion
of the respondent Union that it enjoyed the support of the
majority of the salesmen, without subjecting such assertion to
the test of competing claims. As pointed out by petitioner in its
petition, what the respondent Minister achieved in rendering the
assailed orders was to make a mockery of the procedure provided
under the law for representation cases because:
(a) He has created havoc by impliedly establishing a
procedural short-cut to obtaining a direct certification-by
merely filing a notice of strike.
(b) By creating such a short-cut, he has officially
encouraged disrespect for the law.
(c) By directly certifying a Union without sufficient proof of
majority representation, he has in effect arrogated unto
himself the right, vested naturally in the employees, to
choose their collective bargaining representative.
(d) He has in effect imposed upon the petitioner the
obligation to negotiate with a union whose majority
representation is under serious question. This is highly

irregular because while the Union enjoys the blessing of

the Minister, it does not enjoy the blessing of the
employees. Petitioner is therefore under threat of being
held liable for refusing to negotiate with a union whose
right to bargaining status has not been legally established.
(pp. 9-10, Rollo)
The order of the respondent Minister to reinstate the
employees despite a clear finding of guilt on their part is not in
conformity with law. Reinstatement is simply incompatible with
a finding of guilt. Where the totality of the evidence was
sufficient to warrant the dismissal of the employees the law
warrants their dismissal without making any distinction
between a first offender and a habitual delinquent. Under the
law, respondent Minister is duly mandated to equally protect and
respect not only the labor or workers' side but also the management
and/or employers' side. The law, in protecting the rights of the laborer,
authorizes neither oppression nor self-destruction of the employer. To
order the reinstatement of the erring employees namely,
Mejia, Sayson and Reynante would in effect encourage unequal
protection of the laws as a managerial employee of petitioner
company involved in the same incident was already dismissed
and was not ordered to be reinstated. As stated by Us in the case
of San Miguel Brewery vs. National Labor Union, 2 "an employer cannot
legally be compelled to continue with the employment of a person who
admittedly was guilty of misfeasance or malfeasance towards his
employer, and whose continuance in the service of the latter is
patently inimical to his interest."
In the subject order, respondent Minister cited a cases 3 implying that
"the proximity of the dismissal of the employees to the assumption
order created a doubt as to whether their dismissal was really for just
cause or due to their activities." 4
This is of no moment for the following reasons:
(a) Respondent Minister has still maintained in his assailed order that a
just cause existed to justify the dismissal of the employees.
(b) Respondent Minister has not made any finding substantiated by
evidence that the employees were dismissed because of their union
activities.
WHEREFORE, judgment is hereby rendered REVERSING and SETTING
ASIDE the Order of the respondent Minister, dated December 27, 1985
for grave abuse of discretion. However, in view of the fact that the
dismissed employees are first offenders, petitioner is hereby ordered to
give them separation pay. The temporary restraining order is hereby
made permanent.
SO ORDERED.
G.R. No. 85668 August 10, 1989
GELMART INDUSTRIES PHILS., INC., petitioner,
vs.
THE HON. NATIONAL LABOR RELATIONS COMMISSION AND
FELIX FRANCIS, respondents.
Bienvenido S. Hernandez & Associates for petitioner.

Koronado B. Apuzen for private respondent.

GANCAYCO, J.:
At issue in this petition is whether or not the National Labor Relations
Commission (hereinafter referred to as NLRC) committed a grave abuse
of discretion amounting to lack or excess of jurisdiction in ordering the
reinstatement of private respondent to his former position with
payment of backwages equivalent to six (6) months. 1
As revealed by the records, the background facts are as follows:
Private respondent Felix Francis started working as an automechanic for petitioner Gelmart Industries Phils., Inc.
(hereinafter referred to as GELMART) sometime in 1971. As such, his
work consisted of the repair of engines and underchassis, as
well as trouble shooting and overhauling of company vehicles.
He is likewise entrusted with some tools and spare parts in
furtherance of the work assigned to him.
On April 11, 1987, private respondent was caught by the security
guards taking out of GELMART's premises one (1) plastic
container filled with about 16 ounces of "used' motor oil,
without the necessary gate pass to cover the same as required
under GELMART's rules and regulations. By reason thereof,
petitioner, on April 13, 1987, was placed under preventive suspension
pending investigation for violation of company rules and
regulations. Under the said rules, theft and/or pilferage of
company property merits an outright termination from
employment.
After due investigation, or on May 20, 1987, private respondent was
found guilty of theft of company property. As a consequence, his
services were severed.
Thereafter, private respondent filed a complaint for illegal
dismissal before the NLRC. In a decision dated February 26, 1988,
Labor Arbiter Ceferina J. Diosana ruled that private respondent was
illegally dismissed and, accordingly, ordered the latter's
reinstatement with full backwages from April 13, 1987 up to the
time of actual reinstatement. 2
The ground relied upon by the labor arbiter in her decision is worth
quoting hereunder, to wit:
The most important aspect that should be considered in
interpreting this rule (referring to the company's rules on
theft and pilferages) is the deprivation of the company of
property belonging to it without any compensation.
Hence, the property that must be stolen or pilfered
must be property which has value.
x x x.
x x x.
In the respondent company, ... the used oil is thrown away
by the mechanics. ... In other words, the taking by
complainant of the subject 16 ounces of used oil did

not deprive the respondent company of anything. As

it appears, the said used oil for as part of the waste that
should be thrown away and the respondent company had
no use for the same, hence, the respondent company was
not deprived of any property ... and, therefore, and (sic) it
is the position of this Labor Arbiter that there was no
stealing or pilferage to speak of. 3 (Emphasis
supplied.)
From this decision, GELMART interposed an appeal with the NLRC. In its
decision dated October 21, 1988, the NLRC affirmed with
modification the ruling of Labor Arbiter Diosana, 4 the dispositive
portion of which reads as follows:
WHEREFORE, in view of the foregoing, the decision is
hereby MODIFIED. Respondent-appellant is hereby directed
to reinstate complainant-appellee to his former position
without loss of seniority rights and to pay him backwages
equivalent to six (6) months.
SO ORDERED.

On December 12, 1988, GELMART filed before this Court a special civil
action for certiorari with a prayer for the issuance of a temporary
restraining order.
On January 18, 1989, this Court, without necessarily giving due course
to the petition, issued a temporary restraining order enjoining
respondents from enforcing the assailed decision. On the same date,
this Court required respondents to comment on the petition.
Aside from the substantive issues raised in their comment which will be
discussed later on in this decision, public respondent pointed to a
procedural error allegedly committed by petitioner. 6 The
Solicitor General contends that petitioner failed to exhaust "[t]he
administrative remedies afforded by law ... before resort can be had to
the courts ... 7 More specifically, our attention is called to the fact
that no motion for reconsideration of the NLRC decision was
filed by petitioner. The Solicitor General then concludes that "[s]ince
petitioners failed to avail of the plain, speedy and adequate remedy
accorded to them in the ordinary course of law ..., the instant petition
for certiorari ran is prematurely filed, and hence, does not state a
cause of action. 8
The legal provision pertinent to this issue is found in Article 223 of
the Labor Code which provides, in part:
ART. 223. Appeal. ... .
x x x.
The decision of the Commission shall be immediately
executory even pending appeal ... (Emphasis
supplied.)
From this provision, it can be gleaned that the filing of a motion for
reconsideration may not prove to be an adequate remedy. For one,
assuming that a motion for reconsideration is filed, nowhere does it
state that the filing thereof would automatically suspend the execution
of the decision. Second, although a motion for reconsideration has
often been considered a condition precedent for granting the writ

of certiorari, this rule, however, finds exception in cases where

execution had been ordered and the need for relief is
extremely urgent. 9
This Court is not unaware of Section 2, Rule XI of the Revised
Rules of the National Labor Relations Commission which
provides in paragraphs (a) and (b) thereof:
See. 2. Finality of Decisions of the Commission
(a) The decisions, resolutions or orders of the Commission
shall become executory after ten (10) calendar days from
receipt of the same.
(b) Should there be a motion for reconsideration in
accordance with Sec. 9, Rule X of these Rules, the decision
shall be executory after 10 days from receipt of the
resolution on such motion.
x x x.
However, this Court has already ruled against the validity of the
abovecited rule, particularly Section 2, Rule XI, paragraph (a) in Juan
vs. Musngi. 10 Interpreting the word "immediately" in Article 223 of the
Labor Code to mean "without interval of time" or "without delay," this
Court declared that the NLRC rules which provide that
decisions, resolutions or orders of the Commission shall
become executory after ten (10) calendar days from receipt
thereof cannot prevail over Article 223 of the Labor Code.
Further amplifying on this ruling, this Court stated that administrative
regulations under legislative authority by a particular department must
be in harmony with the provision of the law for the sole purpose of
carrying into effect its general provisions. 11 Otherwise stated, no
period of time need elapse before the decision of the NLRC becomes
executory.
From the foregoing, it will be seen that a motion for reconsideration
may not be a plain, speedy and adequate remedy. Hence, a petition for
certiorari with this Court with a prayer for the issuance of a temporary
restraining order is but a proper remedy to forestall the immediate
execution of the assailed decision.
The Court will now look into the substance of this petition. In their
petition, GELMART ascribes grave abuse of discretion on the part of the
NLRC for rendering a decision that is contrary to law and existing
jurisprudence.
We find no merit in this petition.
Consistent with the policy of the State to bridge the gap between the
underprivileged workingmen and the more affluent employers, the
NLRC rightfully tilted the balance in favor of the workingmen and
this was done without being blind to the concomitant right of the
employer to the protection of his property. The NLRC went on to say as
follows:
We do not fully concur with the findings of the Labor
Arbiter. Complainant-appellee's suspension prior to
termination had sufficient basis. We disagree with the
conclusion that complainant-appellee did not violate
respondent-appellant's rule requiring a gate pass for taking

out company property as the used motor oil was not really
in a sense ' property' considering that it was plain waste
and had no commercial value. ... Used motor oil is not
plain waste because it had its use to respondentappellant's motor pool. ... Besides, it is not for
complainant-appellee to interpret the rule according
to his own understanding. Respondent appellant
had the right to interpret the rule and ... to exact
discipline ... in the light of its policy to instill
discipline on its 6,000 workforce.
We find however, complainant-appellee's dismissal
unwarranted. ... The penalty of preventive
suspension was sufficient punishment for the violation
under the circumstances. ... 12 (Emphasis supplied)
Thus, without being too harsh to the employer, on the one hand, and
naively liberal to labor, on the other, the NLRC correctly pointed out
that private respondent cannot totally escape liability for what is
patently a violation of company rules and regulations.
To reiterate, be it of big or small commercial value, intended to
be re-used or altogether disposed of or wasted, the "used"
motor oil still remains, in legal contemplation, the property of
GELMART. As such, to take the same out of GELMART's
premises without the corresponding gate pass is a violation of
the company rule on theft and/or pilferage of company
property. However, as this Court ruled in Meracap vs. International
Ceramics Mfg. Co., Inc., "[w]here a penalty less punitive would suffice,
whatever missteps may be committed by labor ought not to be visited
with a consequence so severe. 13 On this score, it is very difficult for
this Court to discern grave abuse of discretion on the part of the NLRC
in modifying the appealed decision. The suspension imposed upon
private respondent is a sufficient penalty for the misdemeanor
committed.
As stated earlier, petitioner assails the NLRC decision on the ground
that the same is contrary to existing jurisprudence, particularly citing
in support thereof Firestone Tire and Rubber Co. of the Phil. vs.
Lariosa 14 Petitioner contends that by virtue of this ruling they
have the right to dismiss private respondent from employment
on the ground of breach of trust or loss of confidence resulting
from theft of company property.
We believe otherwise.
There is nothing in Firestone which categorically gives management an
unhampered right in terminating an employee's services. The,
decision in Firestone specifically focuses only on the legality of
a dismissal by reason of acts of dishonesty in the handling of
company property for what was involved in that case is theft of
sixteen (16) flannel swabs which were supposed to be used to
clean certain machineries in the company. 15 In fact, a careful
review of the cases cited in Firestone 16 will readily reveal that the
underlying reason behind sustaining the personam. of
dismissal or outright termination is that, under the
circumstances obtaining in those cases, there exists ample
reason to distrust the employees concerned.
Thus, in upholding the dismissal of a cashier found guilty of
misappropriating corporate funds, this Court, in Metro Drug,"

17

made,

a distinction between managerial personnel and-in other

employees occupying positions of trust and-in confidence from
ordinary employees. On the other hand, in Dole Philippines, 18 this
Court spoke of the "nature of participation" which renders one
absolutely unworthy of the trust and-in confidence demanded
by the position in upholding the dismissal of employee found
guilty of illegally selling for their philosophy benefit two (2)
drums of crude oil belonging to the company.
Additionally, in Firestone, it clearly appears that to retain the employee
would "[i]n the long run, endanger the company's viability. 19
The, Court rules that these circumstances are not present in this
instant case.
Contrary to the assertion of petitioner, the ruling in Firestone does not
preclude the NLRC from looking into the particular facts of the case to
determine if there is ample reason to dismiss an employee charged
and subsequently found guilty of theft of company property. The, said
decision cannot be deemed as a limitation on the right of the
State in the exercise of its paramount police power to regulate
or temper the prerogative of management to dismiss an erring
employee. 20 Consequently, even when there exists some rules
agreed upon between the employer and-in the employee, it
cannot preclude the State from inquiring on whether or not its
rigid application would work too harshly on the employee.
Considering that private respondent herein has no previous derogatory
record in his fifteen (15) years of service with petitioner GELMART the
value of the property pilfered (16 ounces of used motor oil) is
very minimal, plus the fact that petitioner failed to reasonably
establish that non-dismissal of private respondent would work
undue prejudice to the viability of their operation or is
patently inimical to the company's interest, it is more in
consonance with the policy of the State, as embodied in the
Constitution, to resolve all doubts in favor of labor. This is our ruling
inPhilippine Air Lines, Inc. vs. Philippine Air Lines Employees
Association 21 involving as it does essentially the same facts and in
circumstances. At this point, this Court does not see any reason to
deviate from the said ruling.
WHEREFORE, in view of the foregoing, the petition is DISMISSED for
lack of merit. The, restraining order issued by this Court on January 18,
1989 enjoining the enforcement of the questioned decision of the
National Labor Relations Commission is hereby lifted. No
pronouncement as to costs.
SO ORDERED.
Narvasa, Cruz, Gri;o-Aquino and-in Medialdea, JJ., concur.
CHINA BANKING CORPORATION, G.R. No. 156515
Petitioner,
Present:
PUNO, J., Chairman,
AUSTRIA-MARTINEZ,
- versus - CALLEJO, SR.,
TINGA, and
CHICO-NAZARIO, JJ.*
Promulgated:

MARIANO M. BORROMEO,
Respondent. October 19, 2004
x--------------------------------------------------x
DECISION
CALLEJO, SR., J.:

Before the Court is the petition for review on certiorari filed by China
Banking Corporation seeking the reversal of the Decision [1] dated July
19, 2002 of the Court of Appeals in CA-G.R. SP No. 57365, remanding
to the Labor Arbiter for further hearings the complaint for payment of
separation pay, mid-year bonus, profit share and damages filed by
respondent Mariano M. Borromeo against the petitioner Bank. Likewise,
sought to be reversed is the appellate courts Resolution dated January
6, 2003, denying the petitioner Banks motion for reconsideration.
The factual antecedents of the case are as follows:
Respondent Mariano M. Borromeo joined the petitioner Bank
on June 1, 1989 as Manager assigned at the latters Regional
Office in Cebu City. He then had the rank of Manager Level
I. Subsequently, the respondent was laterally transferred to
Cagayan de Oro City as Branch Manager of the petitioner
Banks branch thereat.
For the years 1989 and 1990, the respondent received a highly
satisfactory

performance

rating

and

was

given

the

corresponding profit sharing/performance bonus. From 1991 up

to 1995, he consistently received a very good performance rating for
each of the said years and again received the corresponding profit
sharing/performance bonus. Moreover, in 1992, he was promoted from
Manager Level I to Manager Level II. In 1994, he was promoted to
Senior Manager Level I. Then again, in 1995, he was promoted to
Senior Manager Level II. Finally, in 1996, with a highly satisfactory
performance rating, the respondent was promoted to the position of
Assistant

Vice-President,

Branch

Banking

Group

for

the

Mindanao area effective October 16, 1996. Each promotion had

the corresponding increase in the respondents salary as well as in the
benefits he received from the petitioner Bank.
However, prior to his last promotion and then unknown to the
petitioner Bank, the respondent, without authority from the
Executive Committee or Board of Directors, approved several
DAUD/BP accommodations amounting to P2,441,375 in favor of
Joel Maniwan, with Edmundo Ramos as surety. DAUD/BP is the

acronym

for

checks

Drawn

Against

Uncollected

Deposits/Bills

Purchased. Such checks, which are not sufficiently funded by cash, are
generally not honored by banks. Further, a DAUD/BP accommodation is
a credit accommodation granted to a few and select bank clients
through the withdrawal of uncollected or uncleared check deposits
from their current account. Under the petitioner Banks standard
operating

procedures,

DAUD/BP

accommodations

may

be

granted only by a bank officer upon express authority from its

Executive Committee or Board of Directors.
As a result of the DAUD/BP accommodations in favor of
Maniwan, a total of ten out-of-town checks (7 PCIB checks and 3
UCPB checks) of various dates amounting to P2,441,375 were
returned unpaid from September 20, 1996 to October 17, 1996. Each
of the returned checks was stamped with the notation Payment
Stopped/Account Closed.
On October 8, 1996, the respondent wrote a Memorandum to the
petitioner Banks senior management requesting for the grant of a P2.4
million loan to Maniwan.The memorandum stated that the loan was to
regularize/liquidate

subjects

(referring

to

Maniwan)

DAUD

availments. It was only then that the petitioner Bank came to know of
the DAUD/BP accommodations in favor of Maniwan. The petitioner
Bank further learned that these DAUD/BP accommodations exceeded
the limit granted to clients, were granted without proper prior approval
and already past due. Acting on this information, Samuel L. Chiong, the
petitioner Banks First Vice- President and Head-Visayas Mindanao
Division, in his Memorandum dated November 19, 1996 for the
respondent, sought clarification from the latter on the following
matters:
1)

When
DAUD/BP
accommodations
were
allowed, what efforts, if any, were made to establish
the identity and/or legitimacy of the alleged broker or
drawers of the checks accommodated?

2)

Did the branch follow and comply with

operating procedure which require that all checks
accommodated for DAUD/BP should be previously
verified with the drawee bank and history if not
outright balances determined if enough to cover the
checks?

3)

How
did
the
accommodations
reach P2,441,375.00 when our records indicate that
the borrowers B/P-DAUD line is only for P500,000.00?
When did the accommodations start exceeding the
limit of P500,000.00 and under whose authority?

4)

When did the accommodated checks start

bouncing?

5)

What is the status of these checks now and

what has the branch done so far to protect/ensure
collectibility of the returned checks?

6)

What about client Joel Maniwan and surety

Edmund Ramos, what steps have they done to pay
the checks returned?[2]

In reply thereto, the respondent, in his Letter dated December 5,

1996, answered the foregoing queries in seriatim and explained, thus:
1.

None

2.

No

3.

The accommodations reach P2.4 million upon

the request of Mr. Edmund Ramos, surety, and this
request
was
subsequently
approved
by
undersigned. The excess accommodations started in
July 96 without higher management approval.

4.

Checks started bouncing on September 20,

1996.

5.

Checks have remained unpaid. The branch

sent demand letters to Messrs. Maniwan and Ramos
and referred the matter to our Legal Dept. for filing of
appropriate legal action.

6.

Mr. Maniwan, thru his lawyer, Atty. Oscar

Musni has signified their intention to settle by Feb.
1997.

Justification for lapses committed (Item nos. 1 to 3).

The account was personally endorsed and referred to us by
Mr. Edmund Ramos, Branch Manager of Metrobank,
Divisoria Br., Cagayan de Oro City. In fact, the CASA
account was opened jointly as &/or (Maniwan &/or
Ramos). Mr. Ramos gave us his full assurance that the
checks that we intend to purchase are the same drawee
that Metrobank has been purchasing for the past one (1)
year already. He even disclosed that these checks were
verified by his own branch accountant and that Mr.
Maniwans loan account was being co-maked by Mr. Elbert
Tan Yao Tin, son of Jose Tan Yao Tin of CIFC. To show his
sincerity, Mr. Ramos signed as surety for Mr. Maniwan
for P2.5MM. Corollary to this, Mr. Ramos applied for a loan
with us mortgaging his house, lot and duplex with an
estimated market value of P4.508MM. The branch,
therefore, is not totally negligent as officer to officer bank
checking was done. In fact, it is also for the very same
reason that other banks granted DAUD to subject account
and, likewise, the checks returned unpaid, namely:

Solidbank P1.8 Million

Allied Bank .8
Far East Bank 2.0
MBTC 5.0
The attached letter of Mr. Ramos dated 19 Nov. 1996 will
speak for itself. Further to this, undersigned conferred with
the acting BOH VSYap if these checks are legitimate
3rd party checks.
On the other hand, Atty. Musni continues to insist that Mr.
Maniwan was gypped by a broker in the total amount
of P10.00 Million.
Undersigned accepts full responsibility for committing an
error in judgment, lapses in control and abuse of discretion
by relying solely on the word, assurance, surety and REM of
Mr. Edmund Ramos, a friend and a co-bank officer. I am
now ready to face the consequence of my action.[3]

In another Letter dated April 8, 1997, the respondent notified

Chiong of his intention to resign from the petitioner Bank and
apologized for all the trouble I have caused because of the
Maniwan case.[4] The respondent, however, vehemently denied
benefiting therefrom. In his Letter dated April 30, 1997, the
respondent

formally

tendered

his

irrevocable

resignation

effective May 31, 1997.[5]

In the Memorandum dated May 23, 1997 addressed to the
respondent, Nancy D. Yang, the petitioner Banks Senior Vice-President
and Head-Branch Banking Group, informed the former that his approval
of the DAUD/BP accommodations in favor of Maniwan without authority
and/or approval of higher management violated the petitioner Banks
Code of Ethics. As such, he was directed to restitute the amount
of P1,507,736.79

representing

90%

of

the

total

loss

of P1,675,263.10 incurred by the petitioner Bank. However, in view

of his resignation and considering the years of service in the
petitioner Bank, the management earmarked only P836,637.08 from
the respondents total separation benefits or pay. The memorandum
addressed to the respondent stated:

After a careful review and evaluation of the facts

surrounding the above case, the following have been
conclusively established:
1.

The branch granted various BP/DAUD

accommodations
to
clients
Joel
Maniwan/Edmundo Ramos in excess of
approved lines through the following out-oftown checks which were returned for the
reason Payment Stopped/Account Closed:
1. PCIB Cebu Check No. 86256 P251,816.00
2. PCIB Cebu Check No. 86261 235,880.00
3. PCIB Cebu Check No. 8215 241,443.00
4. UCPB Tagbilaran Check No. 277,630.00
5. PCIB Bogo, Cebu Check No. 6117 267,418.00
6. UCPB
Tagbilaran
Check
No.
216070 197,467.00
7. UCPB
Tagbilaran
Check
No.
216073 263,920.00
8. PCIB Bogo, Cebu Check No. 6129 253,528.00
9. PCIB Bogo, Cebu Check No. 6122 198,615.00
10. PCIB Bogo, Cebu Check No. 6134 253,658.00

2.

The
foregoing
checks
were
accommodated through your approval which
was in excess of your authority.

3.

The branch failed to follow the

fundamental and basic procedures in handling
BP/DAUD accommodations which made the
accommodations basically flawed.

4.

The accommodations were attended by

lapses in control consisting of failure to report
the exception and failure to cover the account
of Joel Maniwan with the required Credit Line
Agreement.

Since the foregoing were established by your own

admissions in your letter explanation dated 5 December
1996, and the Audit Report and findings of the Region
Head, Management finds your actions in violation of
the Banks Code of Ethics:
Table 6.2., no. 1: Compliance with Standard
Operating Procedures
- Infraction of Bank procedures in handling any
bank transactions or work assignment which
results in a loss or probable loss.
Table 6.3., no. 6: Proper Conduct and Behavior Willful misconduct in the performance of duty
whether or not the bank suffers a loss, and/or
Table 6.5., no. 1: Work Responsibilities Dereliction of duty whether or not the Bank
suffers a loss, and/or
Table 6.6., no. 2: Authority and Subordination Failure to carry out lawful orders or instructions
of superiors.

Your approval of the accommodations in excess of your

authority without prior authority and/or approval from
higher management is a violation of the above cited Rules.
In view of these, you are directed to restitute the
amount of P1,507,736.79 representing 90% of the
total loss of P1,675,263.10 incurred by the Bank as
your proportionate share.However, in light of your
voluntary separation from the Bank effective May
31, 1997, in view of the years of service you have
given to the Bank, management shall earmark and
segregate only the amount of P836,637.08 from
your total separation benefits/pay. The Bank further
directs you to fully assist in the effort to collect from Joel
Maniwan and Edmundo Ramos the sums due to the Bank.[6]

In the Letter dated May 26, 1997 addressed to the respondent,

Remedios

Cruz,

petitioner

Banks

Vice-President

of

the

Human

Resources Division, again informed him that the management would

withhold the sum of P836,637.08 from his separation pay, mid-year
bonus and profit sharing. The amount withheld represented his
proportionate share in the accountability vis--vis the DAUD/BP
accommodations in favor of Maniwan. The said amount would be
released upon recovery of the sums demanded from Maniwan in Civil
Case No. 97174 filed against him by the petitioner Bank with the
Regional Trial Court in Cagayan de Oro City.
Consequently, the respondent, through counsel, made a demand on
the petitioner Bank for the payment of his separation pay and
other benefits. The petitioner Bank maintained its position to
withhold the sum of P836,637.08. Thus, the respondent filed with
the National Labor Relations Commission (NLRC), Regional Arbitration
Branch No. 10, in Cagayan de Oro City, the complaint for payment
of separation pay, mid-year bonus, profit share and damages
against the petitioner Bank.
The parties submitted their respective position papers to the Labor
Arbiter. Thereafter, the respondent filed a motion to set case for trial or

hearing. Acting thereon, the Labor Arbiter, in the Order dated January
29, 1999, denied the same stating that:
... This Branch views that if complainant finds the
necessity to controvert the allegations in the respondents
pleadings, then he may file a supplemental position paper
and adduce thereto evidence and additional supporting
documents, the soonest possible time. All the evidence will
be evaluated by the Branch to determine whether or not a
clarificatory hearing shall be conducted.[7]

On February 26, 1999, the Labor Arbiter issued another Order

submitting the case for resolution upon finding that he could
judiciously pass on the merits without the necessity of further hearing.
On

even

date,

the

Labor

Arbiter

promulgated

the

Decision[8] dismissing the respondents complaint. According to the

Labor Arbiter, the respondent, an officer of the petitioner Bank,
had committed a serious infraction when, in blatant violation
of the banks standard operating procedures and policies, he
approved the DAUD/BP accommodations in favor of Maniwan
without

authorization

by

senior

management. Even

the

respondent himself had admitted this breach in the letters that he

wrote to the senior officers of the petitioner Bank.
The

Labor

Arbiter,

likewise,

made

the

finding

that

the

respondent offered to assign or convey a property that he

owned

to

the

petitioner

Bank

as

well

as

proposed

the

withholding of the benefits due him to answer for the losses

that the petitioner Bank incurred on account of unauthorized DAUD/BP
accommodations. But even if the respondent had not given his
consent, the Labor Arbiter held that the petitioner Banks act of
withholding the benefits due the respondent was justified
under its Code of Ethics. The respondent, as an officer of the
petitioner Bank, was bound by the provisions of the said Code.

Aggrieved, the respondent appealed to the National Labor Relations

Commission. After the parties had filed their respective memoranda,
the NLRC, in the Decision dated October 20, 1999, dismissed the
appeal as it affirmed in toto the findings and conclusions of the Labor
Arbiter. The NLRC preliminarily ruled that the Labor Arbiter committed
no grave abuse of discretion when he decided the case on the basis of
the position papers submitted by the parties. On the merits, the NLRC,
like the Labor Arbiter, gave credence to the petitioner Banks
allegation that the respondent offered to pledge his property
to the bank and proposed the withholding of his benefits in
acknowledgment of the serious infraction he committed against the
bank. Further, the NLRC concurred with the Labor Arbiter that the
petitioner Bank was justified in withholding the benefits due
the respondent. Being a responsible bank officer, the respondent
ought to know that, based on the petitioner Banks Code of
Ethics, restitution may be imposed on erring employees apart
from any other penalty for acts resulting in loss or damage to the
bank. The decretal portion of the NLRC decision reads:
WHEREFORE, the decision of the Labor Arbiter is
Affirmed. The appeal is Dismissed for lack of merit.
SO ORDERED.[9]

The respondent moved for a reconsideration of the said decision

but the NLRC, in the Resolution of December 20, 1999, denied his
motion.
The respondent then filed a petition for certiorari with the Court
of Appeals alleging that the NLRC committed grave abuse of discretion
when it affirmed the findings and conclusions of the Labor Arbiter. He
vehemently denied having offered to pledge his property to
the bank or proposed the withholding of his separation pay

and other benefits. Further, he argued that the petitioner Bank

deprived him of his right to due process because it unilaterally
imposed

the

penalty

of

restitution

on

him.The

DAUD/BP

accommodations in favor of Maniwan allegedly could not be considered

as a loss to the bank as the amounts may still be recovered. The
respondent, likewise, maintained that the Labor Arbiter should not
have decided the case on the basis of the parties position papers but
should have conducted a full-blown hearing thereon.
On July 19, 2002, the CA rendered the Decision[10] now being
assailed by the petitioner Bank. The CA found merit in the
respondents contention that he was deprived of his right to
due process by the petitioner Bank as no administrative
investigation
withholding

was
the

conducted
respondents

by

it

prior

separation

to
pay

its

act

and

of

other

benefits. The respondent was not informed of any charge

against

him

in

connection

with

the

Maniwan

DAUD/BP

accommodations nor afforded the right to a hearing or to defend

himself before the penalty of restitution was imposed on
him. This, according to the appellate court, was contrary not only to
the fundamental principle of due process but to the petitioner Banks
Code of Ethics as well.
The CA further held that the Labor Arbiter, likewise, failed to
afford the respondent due process when it denied his motion to set
case for trial or hearing. While the authority of the Labor Arbiter to
decide a case based on the parties position papers and documents is
indubitable, the CA opined that factual issues attendant to the
case, including whether or not the respondent proposed the
withholding of his benefits or pledged the same to the
petitioner Bank, necessitated the conduct of a full-blown
trial. The appellate court explained that:

Procedural due process, as must be remembered,

has two main concerns, the prevention of unjustified or
mistaken deprivation and the promotion of participation
and dialogue by affected individuals in the decision-making
process. Truly, the magnitude of the case and the
withholding of Borromeos property as well as the
willingness of the parties to conciliate, make a hearing
imperative. As manifested by the bank, it did not contest
Borromeos motion for hearing or trial inasmuch as the
bank itself wanted to fully ventilate its side.[11]
Accordingly, the CA set aside the decision of the NLRC and
ordered that the records of the case be remanded to the Labor Arbiter
for further hearings on the factual issues involved.
The petitioner Bank filed a motion for reconsideration of the said
decision but the CA, in the assailed Resolution of January 6, 2003,
denied the same as it found no compelling ground to warrant
reconsideration.[12] Hence, its recourse to this Court alleging that the
assailed CA decision is contrary to law and jurisprudence in that:
I.
THE FACTUAL FINDINGS OF THE LABOR ARBITER AS
AFFIRMED
BY
THE
NATIONAL
LABOR
RELATIONS
COMMISSION ARE SUPPORTED BY SUBSTANTIAL EVIDENCE
AND SHOULD HAVE BEEN ACCORDED RESPECT AND
FINALITY BY THE COURT OF APPEALS IN ACCORDANCE
WITH GOVERNING JURISPRUDENCE.
II.
AT ALL TIMES, THE LABOR ARBITER ACTED IN
ACCORDANCE WITH THE REQUIREMENTS OF DUE PROCESS
IN THE PROCEEDINGS A QUO.
III.
THERE WAS NO VIOLATION BY PETITIONER BANK OF
RESPONDENTS RIGHT TO DUE PROCESS AS NO
ADMINISTRATIVE INVESTIGATION WAS NEEDED TO BE
CONDUCTED ON HIS ADMITTED MISCONDUCT.[13]

The petitioner Bank posits that the sole factual issue that remained in
dispute was whether the respondent pledged his benefits as
guarantee for the losses the bank incurred resulting from the
unauthorized

DAUD/BP

accommodations

in

favor

of

Maniwan. On this issue, both the Labor Arbiter and the NLRC found
that

the

respondent

had

indeed

pledged

his

benefits

to

the bank. According to the petitioner Bank, this factual finding should
have been accorded respect by the CA as the same is supported by the
evidence on record. By ordering the remand of the case to the Labor
Arbiter, the CA allegedly unjustifiably analyzed and weighed all over
again the evidence presented.
The petitioner Bank insists that the Labor Arbiter acted within his
authority when he denied the respondents motion to set case for
hearing or trial and instead decided the case on the basis of the
position papers and evidence submitted by the parties. Due
process simply demands an opportunity to be heard and the
respondent was not denied of this as he was even given the
opportunity to file a supplemental position paper and other
supporting documents, but he did not do so.
The petitioner Bank takes exception to the findings of the
appellate court that the respondent was not afforded the right
to a hearing or to defend himself by the petitioner Bank as it
did not conduct an administrative investigation. The petitioner
Bank points out that it was poised to conduct one but was
preempted

by

the

respondents

resignation. In

any

case,

respondent himself in his Letter dated December 5, 1996, in reply to

the clarificatory queries of Chiong, admitted that the DAUD/BP
accommodations were granted without higher management approval
and that he (the respondent) accepts full responsibility for committing
an

error

of

judgment,

lapses

in

control

and

abuse

of

discretion ... Given the respondents admission, the holding of a

formal investigation was no longer necessary.
For his part, the respondent, in his Comment, maintains that the
DAUD/BP accommodations in favor of Maniwan were approved, albeit
not expressly, by the senior management of the petitioner Bank. He

cites the regular reports he made to Chiong, his superior, regarding the
DAUD/BP transactions made by the branch, including that of Maniwan,
and Chiong never called his attention thereto nor stopped or
reprimanded him therefor. These reports further showed that he did
not conceal these transactions to the management.
The

respondent

vehemently

denies

having

offered

the

withholding of his benefits or pledged the same to the petitioner

Bank. The findings of the Labor Arbiter and the NLRC that what he did
are allegedly not supported by the evidence on record.
The respondent is of the view that restitution is not
proper because the petitioner Bank has not, as yet, incurred
any actual loss as the amount owed by Maniwan may still be
recovered from him. In fact, the petitioner Bank had already
instituted a civil case against Maniwan for the recovery of the sum and
the RTC rendered judgment in the petitioner Banks favor. The case is
still pending appeal. In any case, the respondent argues that the
petitioner Bank could not properly impose the accessory
penalty of restitution on him without imposing the principal
penalty of Written Reprimand/Suspension as provided under
its

Code

of

Ethics. He,

likewise,

vigorously

avers

that,

in

contravention of its own Code of Ethics, he was denied due process

by the petitioner Bank as it did not conduct any administrative
investigation

relative

to

the

unauthorized

DAUD/BP

accommodations. He was not informed in writing of any charge

against him nor was he given the opportunity to defend
himself.
The petition is meritorious.

The Court shall first resolve the procedural issue raised in the
petition, i.e., whether the CA erred in remanding the case to the Labor
Arbiter. The

Court

rules

in

the

affirmative. It

is

settled

that

administrative bodies like the NLRC, including the Labor

Arbiter, are not bound by the technical niceties of the law and
procedure and the rules obtaining in courts of law.[14] Rules of
evidence are not strictly observed in proceedings before
administrative bodies like the NLRC, where decisions may be
reached on the basis of position papers.[15] The holding of a
formal hearing or trial is discretionary with the Labor Arbiter
and is something that the parties cannot demand as a matter
of right.[16] As a corollary, trial-type hearings are not even required as
the cases may be decided based on verified position papers, with
supporting documents and their affidavits.[17]
Hence, the Labor Arbiter acted well within his authority when he
issued the Order dated February 26, 1999 submitting the case for
resolution upon finding that he could judiciously pass on the merits
without the necessity of further hearing. On the other hand, the
assailed CA decisions directive requiring him to conduct further
hearings constitutes undue interference with the Labor Arbiters
discretion. Moreover, to require the conduct of hearings would be to
negate the rationale and purpose of the summary nature of the
proceedings mandated by the Rules and to make mandatory the
application of the technical rules of evidence. [18] The appellate court,
therefore, committed reversible error in ordering the remand of the
case to the Labor Arbiter for further hearings.
Before delving on the merits of the case, it is well to remember that
factual findings of the NLRC affirming those of the Labor
Arbiter, both bodies being deemed to have acquired expertise
in matters within their jurisdiction, when sufficiently supported

by evidence on record, are accorded respect, if not finality, and

are considered binding on this Court. [19] As long as their decisions
are devoid of any arbitrariness in the process of their deduction
from the evidence proffered by the parties, all that is left is for the
Court to stamp its affirmation.[20]
In this case, the factual findings of the Labor Arbiter and those of the
NLRC concur on the following material points: the respondent was a
responsible officer of the petitioner Bank; by his own admission, he
granted DAUD/BP accommodations in excess of the authority given to
him and in violation of the banks standard operating procedures; the
petitioner Banks Code of Ethics provides that restitution/forfeiture of
benefits may be imposed on the employees for, inter alia, infraction of
the banks standard operating procedures; and, the respondent
resigned from the petitioner Bank on May 31, 1998. These factual
findings are amply supported by the evidence on record.
Indeed, it had been indubitably shown that the respondent
admitted that he violated the petitioner Banks standard operating
procedures in granting the DAUD/BP accommodations in favor of
Maniwan without higher management approval. The respondents
replies to the clarificatory questions propounded to him by way of the
Memorandum

dated

November

19,

1996

were

particularly

significant. When the respondent was asked whether efforts were

made to establish the identity and/or legitimacy of the drawers of the
checks before the DAUD/BP accommodations were allowed, [21] he
replied in the negative.[22] To the query did the branch follow and
comply with operating procedure which require that all checks
accommodated for DAUD/BP should be previously verified with the
drawee bank and history, if not outright balances, determined if
enough to cover the checks?[23] again, the respondent answered no.

[24]

When

asked

under

whose

authority

the

excess

DAUD/BP

accommodations were granted,[25] the respondent expressly stated that

they were approved by undersigned (referring to himself) and that the
excess accommodation was granted without higher management
approval.[26] More telling, however, is the respondents statement
that he accepts full responsibility for committing an error in
judgment, lapses in control and abuse of discretion by relying
solely on the word, assurance, surety and REM of Mr. Edmundo
Ramos.[27] The respondent added that he was ready to face the
consequence of [his] action.[28]
The foregoing sufficiently establish that the respondent,
by his own admissions, had violated the petitioner Banks
standard

operating

procedures. Among others, the petitioner

Banks Code of Ethics provides:

Table 6.2 COMPLIANCE WITH STANDARD OPERATING PROCEDURES
VIOLATIONS

PENALTIES
1
2
3RD
Written
Suspensio Dismissal
Repriman n/
*
d/
Dismissal
Suspensio *
n*
ST

1. Infraction of Bank
procedures in
handling any Bank
transaction or work
assignment which
results in a loss or
probable loss

ND

4TH

* With restitution, if warranted.

Further, the said Code states that:

7.2.5. Restitution/Forfeiture of Benefits
Restitution may be imposed independently or
together with any other penalty in case of loss or
damage to the property of the Bank, its employees,
clients or other parties doing business with the Bank. The
Bank may recover the amount involved by means of
salary deduction or whatever legal means that will
prompt offenders to pay the amount involved.But
restitution shall in no way mitigate the penalties
attached to the violation or infraction.

Forfeiture of benefits/privileges may also be effected in

cases where infractions or violations were incurred in
connection with or arising from the application/availment
thereof.

It

is

well

recognized

that

company

policies

and

regulations are, unless shown to be grossly oppressive or

contrary

to

law,

generally

binding

and

valid on the parties and must be complied with until finally

revised

or

amended

unilaterally

or

preferably

through

negotiation or by competent authority.[29] Moreover, management

has the prerogative to discipline its employees and to impose
appropriate penalties on erring workers pursuant to company rules and
regulations.[30] With more reason should these truisms apply to the
respondent, who, by reason of his position, was required to act
judiciously and to exercise his authority in harmony with company
policies.[31]
Contrary to the respondents contention that the petitioner Bank
could not properly impose the accessory penalty of restitution on him
without

imposing

the

principal

penalty

of

Written

Reprimand/Suspension, the latters Code of Ethics expressly sanctions

the imposition of restitution/forfeiture of benefits apart from or
independent of the other penalties. Obviously, in view of his
voluntary separation from the petitioner Bank, the imposition
of the penalty of reprimand or suspension would be futile. The
petitioner Bank was left with no other recourse but to impose
the ancillary penalty of restitution. It was certainly within the
petitioner Banks prerogative to impose on the respondent
what

it

considered

the

appropriate

penalty

under

the

circumstances pursuant to its company rules and regulations.

Anent the issue that the respondents right to due process was
violated by the petitioner Bank since no administrative investigation
was conducted prior to the withholding of his separation benefits, the
Court rules that, under the circumstances obtaining in this
case,

no

formal

administrative

investigation

was

necessary. Due process simply demands an opportunity to be

heard and this opportunity was not denied the respondent.[32]
Prior to the respondents resignation, he was furnished with
the Memorandum[33] dated November 19, 1996 in which several
clarificatory questions were propounded to him regarding the DAUD/BP
accommodations in favor of Maniwan. Among others, the respondent
was asked whether the banks standard operating procedures were
complied with and under whose authority the accommodations were
granted. From the tenor thereof, it could be reasonably gleaned
that the said memorandum constituted notice of the charge
against the respondent.
Replying to the queries, the respondent, in his Letter [34] dated
December 5, 1996, admitted, inter alia, that he approved the
DAUD/BP accommodations in favor of Maniwan and the amount
in excess of the credit limit of P500,000 was approved by him
without

higher

management

approval. The

respondent,

likewise,

admitted non-compliance with the banks standard operating

procedures,

specifically,

that

which

required

that

all

checks

accommodated for DAUD/BP be previously verified with the drawee

bank and history, if not outright balances determined if enough to
cover the checks. In the same letter, the respondent expressed that
he
accepts full responsibility for committing an error in judgment,

lapses in control and abuse of discretion and that he is ready

to face the consequence of his action.
Contrary to his protestations, the respondent was given the
opportunity to be heard and considering his admissions, it
became unnecessary to hold any formal investigation.[35] More
particularly, it became unnecessary for the petitioner Bank to conduct
an investigation on whether the respondent had committed an
[I]nfraction of Bank procedures in handling any Bank transaction or
work assignment which results in a loss or probable loss because the
respondent already admitted the same. All that was needed was to
inform him of the findings of the management [36] and this was done by
way of the Memorandum[37] dated May 23, 1997 addressed to the
respondent. His claim of denial of due process must perforce fail.
Significantly, the respondent is not wholly deprived of his
separation benefits. As the Labor Arbiter stressed in his decision, the
separation benefits due the complainant (the respondent herein) were
merely withheld.[38] The NLRC made the same conclusion and was even
more explicit as it opined that the respondent is entitled to the
benefits he claimed in pursuance to the Collective Bargaining
Agreement but, in the meantime, such benefits shall be
deposited

with

the

bank

by

way

of

pledge.[39] Even

the petitioner Bank itself gives the assurance that as soon as

the Bank has satisfied a judgment in Civil Case No. 97174, the
earmarked portion of his benefits will be released without
delay.[40]
It bears stressing that the respondent was not just a rank and file
employee. At the time of his resignation, he was the Assistant VicePresident, Branch Banking Group for the Mindanao area of the
petitioner Bank. His position carried authority for the exercise of

independent judgment and discretion, characteristic of sensitive posts

in corporate hierarchy.[41] As such, he was, as earlier intimated,
required to act judiciously and to exercise his authority in harmony
with company policies.[42]
On the other hand, the petitioner

Banks

business

is

essentially imbued with public interest and owes great fidelity

to the public it deals withb.[43] It is expected to exercise the highest
degree of diligence in the selection and supervision of their employees.
[44]

As a corollary, and like all other business enterprises,

prerogative

to

discipline

its

employees

and

to

its

impose

appropriate penalties on erring workers pursuant to company

rules and regulations must be respected.[45] The law, in protecting
the rights of labor, authorized neither oppression nor self-destruction of
an employer company which itself is possessed of rights that must be
entitled to recognition and respect.[46]

WHEREFORE, the petition is GRANTED. The Decision dated July

19, 2002 of the Court of Appeals and its Resolution dated January 6,
2003 in CA-G.R. SP No. 57365 are REVERSED AND SET ASIDE. The
Resolution dated October 20, 1999 of the NLRC, affirming the Decision
dated February 26, 1999 of the Labor Arbiter, is REINSTATED.
SO ORDERED.
G.R. No. 78517 February 27, 1989
GABINO ALITA, JESUS JULIAN, JR., JESUS JULIAN, SR., PEDRO
RICALDE, VICENTE RICALDE and ROLANDO
SALAMAR, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, ENRIQUE M. REYES, PAZ
M. REYES and FE M. REYES,respondents.
Bureau of Agrarian Legal Assistance for petitioners.
Leonardo N. Zulueta for Enrique Reyes, et al. Adolfo S. Azcuna for
private respondents.

PARAS, J.:
Before us is a petition seeking the reversal of the decision rendered by
the respondent Court of Appeals**on March 3, 1987 affirming the
judgment of the court a quo dated April 29, 1986, the dispositive
portion of the trial court's decision reading as follows;
WHEREFORE, the decision rendered by this Court on
November 5, 1982 is hereby reconsidered and a new
judgment is hereby rendered:
1. Declaring that Presidential Decree No. 27 is inapplicable
to lands obtained thru the homestead law,
2. Declaring that the four registered co-owners will
cultivate and operate the farmholding themselves as
owners thereof; and
3. Ejecting from the land the so-called tenants, namely;
Gabino Alita, Jesus Julian, Sr., Jesus Julian, Jr., Pedro Ricalde,
Vicente Ricalde and Rolando Salamar, as the owners would
want to cultivate the farmholding themselves.
No pronouncement as to costs.
SO ORDERED. (p. 31, Rollo)
The facts are undisputed. The subject matter of the case consists of
two (2) parcels of land, acquired by private respondents'
predecessors-in-interest through homestead patent under the
provisions of Commonwealth Act No. 141. Said lands are situated
at Guilinan, Tungawan, Zamboanga del Sur.
Private respondents herein are desirous of personally cultivating
these lands, but petitioners refuse to vacate, relying on the
provisions of P.D. 27 and P.D. 316 and appurtenant regulations
issued by the then Ministry of Agrarian Reform (DAR for short),
now Department of Agrarian Reform (MAR for short).
On June 18, 1981, private respondents (then plaintiffs),
instituted a complaint against Hon. Conrado Estrella as then
Minister of Agrarian Reform, P.D. Macarambon as Regional Director
of MAR Region IX, and herein petitioners (then defendants) for the
declaration of P.D. 27 and all other Decrees, Letters of
Instructions and General Orders issued in connection therewith
as inapplicable to homestead lands.
Defendants filed their answer with special and affirmative defenses of
July 8, 1981.
Subsequently, on July 19, 1982, plaintiffs filed an urgent motion to
enjoin the defendants from declaring the lands in litigation
under Operation Land Transfer and from being issued land transfer
certificates to which the defendants filed their opposition dated August
4, 1982.
On November 5, 1982, the then Court of Agrarian Relations 16th
Regional District, Branch IV, Pagadian City (now Regional Trial Court,
9th Judicial Region, Branch XVIII) rendered its decision dismissing the

said complaint and the motion to enjoin the defendants was

denied.
On January 4, 1983, plaintiffs moved to reconsider the Order of
dismissal, to which defendants filed their opposition on January 10,
1983.
Thus, on April 29, 1986, the Regional Trial Court issued the aforequoted
decision prompting defendants to move for a reconsideration but the
same was denied in its Order dated June 6, 1986.
On appeal to the respondent Court of Appeals, the same was sustained
in its judgment rendered on March 3, 1987, thus:
WHEREFORE, finding no reversible error thereof, the
decision appealed from is hereby AFFIRMED.
SO ORDERED. (p. 34, Rollo)
Hence, the present petition for review on certiorari.
The pivotal issue is whether or not lands obtained through
homestead patent are covered by the Agrarian Reform under
P.D. 27.
The question certainly calls for a negative answer.
We agree with the petitioners in saying that P.D. 27 decreeing the
emancipation of tenants from the bondage of the soil and transferring
to them ownership of the land they till is a sweeping social legislation,
a remedial measure promulgated pursuant to the social justice
precepts of the Constitution. However, such contention cannot be
invoked to defeat the very purpose of the enactment of the
Public Land Act or Commonwealth Act No. 141. Thus,
The Homestead Act has been enacted for the welfare and
protection of the poor. The law gives a needy citizen a
piece of land where he may build a modest house for
himself and family and plant what is necessary for
subsistence and for the satisfaction of life's other needs.
The right of the citizens to their homes and to the things
necessary for their subsistence is as vital as the right to life
itself. They have a right to live with a certain degree of
comfort as become human beings, and the State which
looks after the welfare of the people's happiness is under a
duty to safeguard the satisfaction of this vital right.
(Patricio v. Bayog, 112 SCRA 45)
In this regard, the Philippine Constitution likewise respects the
superiority of the homesteaders' rights over the rights of the
tenants guaranteed by the Agrarian Reform statute. In point is
Section 6 of Article XIII of the 1987 Philippine Constitution
which provides:
Section 6. The State shall apply the principles of agrarian
reform or stewardship, whenever applicable in accordance
with law, in the disposition or utilization of other natural
resources, including lands of public domain under lease or
concession suitable to agriculture, subject to prior rights,
homestead rights of small settlers, and the rights of
indigenous communities to their ancestral lands.

Additionally, it is worthy of note that the newly promulgated

Comprehensive Agrarian Reform Law of 1988 or Republic Act
No. 6657 likewise contains a proviso supporting the
inapplicability of P.D. 27 to lands covered by homestead
patents like those of the property in question, reading,
Section 6. Retention Limits. ...
... Provided further, That original homestead grantees or
their direct compulsory heirs who still own the original
homestead at the time of the approval of this Act shall
retain the same areas as long as they continue to cultivate
said homestead.'
WHEREFORE, premises considered, the decision of the respondent
Court of Appeals sustaining the decision of the Regional Trial Court is
hereby AFFIRMED.
SO ORDERED.
G.R. No. 78742 July 14, 1989
ASSOCIATION OF SMALL LANDOWNERS IN THE PHILIPPINES,
INC., JUANITO D. GOMEZ, GERARDO B. ALARCIO, FELIPE A.
GUICO, JR., BERNARDO M. ALMONTE, CANUTO RAMIR B.
CABRITO, ISIDRO T. GUICO, FELISA I. LLAMIDO, FAUSTO J.
SALVA, REYNALDO G. ESTRADA, FELISA C. BAUTISTA, ESMENIA
J. CABE, TEODORO B. MADRIAGA, AUREA J. PRESTOSA,
EMERENCIANA J. ISLA, FELICISIMA C. ARRESTO, CONSUELO M.
MORALES, BENJAMIN R. SEGISMUNDO, CIRILA A. JOSE &
NAPOLEON S. FERRER, petitioners,
vs.
HONORABLE SECRETARY OF AGRARIAN REFORM, respondent.
G.R. No. 79310 July 14, 1989
ARSENIO AL. ACUNA, NEWTON JISON, VICTORINO FERRARIS,
DENNIS JEREZA, HERMINIGILDO GUSTILO, PAULINO D.
TOLENTINO and PLANTERS' COMMITTEE, INC., Victorias Mill
District, Victorias, Negros Occidental, petitioners,
vs.
JOKER ARROYO, PHILIP E. JUICO and PRESIDENTIAL AGRARIAN
REFORM COUNCIL, respondents.
G.R. No. 79744 July 14, 1989
INOCENTES PABICO, petitioner,
vs.
HON. PHILIP E. JUICO, SECRETARY OF THE DEPARTMENT OF
AGRARIAN REFORM, HON. JOKER ARROYO, EXECUTIVE
SECRETARY OF THE OFFICE OF THE PRESIDENT, and Messrs.
SALVADOR TALENTO, JAIME ABOGADO, CONRADO AVANCENA
and ROBERTO TAAY, respondents.
G.R. No. 79777 July 14, 1989
NICOLAS S. MANAAY and AGUSTIN HERMANO, JR., petitioners,
vs.
HON. PHILIP ELLA JUICO, as Secretary of Agrarian Reform, and
LAND BANK OF THE PHILIPPINES,respondents.

CRUZ, J.:
In ancient mythology, Antaeus was a terrible giant who blocked and
challenged Hercules for his life on his way to Mycenae after performing
his eleventh labor. The two wrestled mightily and Hercules flung his
adversary to the ground thinking him dead, but Antaeus rose even
stronger to resume their struggle. This happened several times to
Hercules' increasing amazement. Finally, as they continued grappling,
it dawned on Hercules that Antaeus was the son of Gaea and could
never die as long as any part of his body was touching his Mother
Earth. Thus forewarned, Hercules then held Antaeus up in the air,
beyond the reach of the sustaining soil, and crushed him to death.
Mother Earth. The sustaining soil. The giver of life, without whose
invigorating touch even the powerful Antaeus weakened and died.
The cases before us are not as fanciful as the foregoing tale. But they
also tell of the elemental forces of life and death, of men and women
who, like Antaeus need the sustaining strength of the precious earth to
stay alive.
"Land for the Landless" is a slogan that underscores the acute
imbalance in the distribution of this precious resource among our
people. But it is more than a slogan. Through the brooding centuries, it
has become a battle-cry dramatizing the increasingly urgent demand
of the dispossessed among us for a plot of earth as their place in the
sun.
Recognizing this need, the Constitution in 1935 mandated the policy of
social justice to "insure the well-being and economic security of all the
people," 1 especially the less privileged. In 1973, the new Constitution
affirmed this goal adding specifically that "the State shall regulate the
acquisition, ownership, use, enjoyment and disposition of private
property and equitably diffuse property ownership and
profits." 2 Significantly, there was also the specific injunction to
"formulate and implement an agrarian reform program aimed at
emancipating the tenant from the bondage of the soil." 3
The Constitution of 1987 was not to be outdone. Besides echoing these
sentiments, it also adopted one whole and separate Article XIII on
Social Justice and Human Rights, containing grandiose but undoubtedly
sincere provisions for the uplift of the common people. These include a
call in the following words for the adoption by the State of an agrarian
reform program:
SEC. 4. The State shall, by law, undertake an agrarian
reform program founded on the right of farmers and
regular farmworkers, who are landless, to own directly
or collectively the lands they till or, in the case of
other farmworkers, to receive a just share of the
fruits thereof. To this end, the State shall encourage and
undertake the just distribution of all agricultural lands,
subject to such priorities and reasonable retention limits as
the Congress may prescribe, taking into account
ecological, developmental, or equity considerations and
subject to the payment of just compensation. In
determining retention limits, the State shall respect
the right of small landowners. The State shall further
provide incentives for voluntary land-sharing.

Earlier, in fact, R.A. No. 3844, otherwise known as the

Agricultural Land Reform Code, had already been enacted by the
Congress of the Philippines on August 8, 1963, in line with the abovestated principles. This was substantially superseded almost a decade
later by P.D. No. 27, which was promulgated on October 21, 1972,
along with martial law, to provide for the compulsory acquisition of
private lands for distribution among tenant-farmers and to
specify maximum retention limits for landowners.
The people power revolution of 1986 did not change and indeed even
energized the thrust for agrarian reform. Thus, on July 17, 1987,
President Corazon C. Aquino issued E.O. No. 228, declaring full land
ownership in favor of the beneficiaries of P.D. No. 27 and providing for
the valuation of still unvalued lands covered by the decree as well as
the manner of their payment. This was followed on July 22, 1987 by
Presidential Proclamation No. 131, instituting a comprehensive
agrarian reform program (CARP), and E.O. No. 229, providing the
mechanics for its implementation.
Subsequently, with its formal organization, the revived Congress of the
Philippines took over legislative power from the President and started
its own deliberations, including extensive public hearings, on the
improvement of the interests of farmers. The result, after almost a year
of spirited debate, was the enactment of R.A. No. 6657, otherwise
known as the Comprehensive Agrarian Reform Law of 1988,
which President Aquino signed on June 10, 1988. This law, while
considerably changing the earlier mentioned enactments, nevertheless
gives them suppletory effect insofar as they are not inconsistent with
its provisions. 4
The above-captioned cases have been consolidated because they
involve common legal questions, including serious challenges to the
constitutionality of the several measures mentioned above. They will
be the subject of one common discussion and resolution, The different
antecedents of each case will require separate treatment, however,
and will first be explained hereunder.
G.R. No. 79777
Squarely raised in this petition is the constitutionality of P.D. No. 27,
E.O. Nos. 228 and 229, and R.A. No. 6657.
The subjects of this petition are a 9-hectare riceland worked by four
tenants and owned by petitioner Nicolas Manaay and his wife and a 5hectare riceland worked by four tenants and owned by petitioner
Augustin Hermano, Jr. The tenants were declared full owners of these
lands by E.O. No. 228 as qualified farmers under P.D. No. 27.
The petitioners are questioning P.D. No. 27 and E.O. Nos. 228 and 229
on grounds inter alia of separation of powers, due process, equal
protection and the constitutional limitation that no private property
shall be taken for public use without just compensation.
They contend that President Aquino usurped legislative power when
she promulgated E.O. No. 228. The said measure is invalid also for
violation of Article XIII, Section 4, of the Constitution, for failure to
provide for retention limits for small landowners. Moreover, it does not
conform to Article VI, Section 25(4) and the other requisites of a valid
appropriation.

In connection with the determination of just compensation, the

petitioners argue that the same may be made only by a court of justice
and not by the President of the Philippines. They invoke the recent
cases of EPZA v. Dulay 5 andManotok v. National Food
Authority. 6 Moreover, the just compensation contemplated by the Bill
of Rights is payable in money or in cash and not in the form of bonds
or other things of value.
In considering the rentals as advance payment on the land, the
executive order also deprives the petitioners of their property rights as
protected by due process. The equal protection clause is also violated
because the order places the burden of solving the agrarian problems
on the owners only of agricultural lands. No similar obligation is
imposed on the owners of other properties.
The petitioners also maintain that in declaring the beneficiaries under
P.D. No. 27 to be the owners of the lands occupied by them, E.O. No.
228 ignored judicial prerogatives and so violated due process. Worse,
the measure would not solve the agrarian problem because even the
small farmers are deprived of their lands and the retention rights
guaranteed by the Constitution.
In his Comment, the Solicitor General stresses that P.D. No. 27 has
already been upheld in the earlier cases ofChavez v. Zobel, 7 Gonzales
v. Estrella, 8 and Association of Rice and Corn Producers of the
Philippines, Inc. v. The National Land Reform Council. 9 The
determination of just compensation by the executive authorities
conformably to the formula prescribed under the questioned order is at
best initial or preliminary only. It does not foreclose judicial intervention
whenever sought or warranted. At any rate, the challenge to the order
is premature because no valuation of their property has as yet been
made by the Department of Agrarian Reform. The petitioners are also
not proper parties because the lands owned by them do not exceed the
maximum retention limit of 7 hectares.
Replying, the petitioners insist they are proper parties because P.D. No.
27 does not provide for retention limits on tenanted lands and that in
any event their petition is a class suit brought in behalf of landowners
with landholdings below 24 hectares. They maintain that the
determination of just compensation by the administrative authorities is
a final ascertainment. As for the cases invoked by the public
respondent, the constitutionality of P.D. No. 27 was merely assumed
in Chavez, while what was decided in Gonzales was the validity of the
imposition of martial law.
In the amended petition dated November 22, 1588, it is contended that
P.D. No. 27, E.O. Nos. 228 and 229 (except Sections 20 and 21) have
been impliedly repealed by R.A. No. 6657. Nevertheless, this statute
should itself also be declared unconstitutional because it suffers from
substantially the same infirmities as the earlier measures.
A petition for intervention was filed with leave of court on June 1, 1988
by Vicente Cruz, owner of a 1. 83- hectare land, who complained that
the DAR was insisting on the implementation of P.D. No. 27 and E.O.
No. 228 despite a compromise agreement he had reached with his
tenant on the payment of rentals. In a subsequent motion dated April
10, 1989, he adopted the allegations in the basic amended petition
that the above- mentioned enactments have been impliedly repealed
by R.A. No. 6657.
G.R. No. 79310

The petitioners herein are landowners and sugar planters in the

Victorias Mill District, Victorias, Negros Occidental. Co-petitioner
Planters' Committee, Inc. is an organization composed of 1,400 plantermembers. This petition seeks to prohibit the implementation of Proc.
No. 131 and E.O. No. 229.
The petitioners claim that the power to provide for a Comprehensive
Agrarian Reform Program as decreed by the Constitution belongs to
Congress and not the President. Although they agree that the President
could exercise legislative power until the Congress was convened, she
could do so only to enact emergency measures during the transition
period. At that, even assuming that the interim legislative power of the
President was properly exercised, Proc. No. 131 and E.O. No. 229 would
still have to be annulled for violating the constitutional provisions on
just compensation, due process, and equal protection.
They also argue that under Section 2 of Proc. No. 131 which provides:
Agrarian Reform Fund.-There is hereby created a special fund, to be
known as the Agrarian Reform Fund, an initial amount of FIFTY BILLION
PESOS (P50,000,000,000.00) to cover the estimated cost of the
Comprehensive Agrarian Reform Program from 1987 to 1992 which
shall be sourced from the receipts of the sale of the assets of the Asset
Privatization Trust and Receipts of sale of ill-gotten wealth received
through the Presidential Commission on Good Government and such
other sources as government may deem appropriate. The amounts
collected and accruing to this special fund shall be considered
automatically appropriated for the purpose authorized in this
Proclamation the amount appropriated is in futuro, not in esse. The
money needed to cover the cost of the contemplated expropriation has
yet to be raised and cannot be appropriated at this time.
Furthermore, they contend that taking must be simultaneous with
payment of just compensation as it is traditionally understood, i.e.,
with money and in full, but no such payment is contemplated in
Section 5 of the E.O. No. 229. On the contrary, Section 6, thereof
provides that the Land Bank of the Philippines "shall compensate the
landowner in an amount to be established by the government, which
shall be based on the owner's declaration of current fair market value
as provided in Section 4 hereof, but subject to certain controls to be
defined and promulgated by the Presidential Agrarian Reform Council."
This compensation may not be paid fully in money but in any of several
modes that may consist of part cash and part bond, with interest,
maturing periodically, or direct payment in cash or bond as may be
mutually agreed upon by the beneficiary and the landowner or as may
be prescribed or approved by the PARC.
The petitioners also argue that in the issuance of the two measures, no
effort was made to make a careful study of the sugar planters'
situation. There is no tenancy problem in the sugar areas that can
justify the application of the CARP to them. To the extent that the sugar
planters have been lumped in the same legislation with other farmers,
although they are a separate group with problems exclusively their
own, their right to equal protection has been violated.
A motion for intervention was filed on August 27,1987 by the National
Federation of Sugarcane Planters (NASP) which claims a membership of
at least 20,000 individual sugar planters all over the country. On
September 10, 1987, another motion for intervention was filed, this
time by Manuel Barcelona, et al., representing coconut and riceland
owners. Both motions were granted by the Court.

NASP alleges that President Aquino had no authority to fund the

Agrarian Reform Program and that, in any event, the appropriation is
invalid because of uncertainty in the amount appropriated. Section 2 of
Proc. No. 131 and Sections 20 and 21 of E.O. No. 229 provide for an
initial appropriation of fifty billion pesos and thus specifies the
minimum rather than the maximum authorized amount. This is not
allowed. Furthermore, the stated initial amount has not been certified
to by the National Treasurer as actually available.
Two additional arguments are made by Barcelona, to wit, the failure to
establish by clear and convincing evidence the necessity for the
exercise of the powers of eminent domain, and the violation of the
fundamental right to own property.
The petitioners also decry the penalty for non-registration of the lands,
which is the expropriation of the said land for an amount equal to the
government assessor's valuation of the land for tax purposes. On the
other hand, if the landowner declares his own valuation he is unjustly
required to immediately pay the corresponding taxes on the land, in
violation of the uniformity rule.
In his consolidated Comment, the Solicitor General first invokes the
presumption of constitutionality in favor of Proc. No. 131 and E.O. No.
229. He also justifies the necessity for the expropriation as explained in
the "whereas" clauses of the Proclamation and submits that, contrary
to the petitioner's contention, a pilot project to determine the
feasibility of CARP and a general survey on the people's opinion
thereon are not indispensable prerequisites to its promulgation.
On the alleged violation of the equal protection clause, the sugar
planters have failed to show that they belong to a different class and
should be differently treated. The Comment also suggests the
possibility of Congress first distributing public agricultural lands and
scheduling the expropriation of private agricultural lands later. From
this viewpoint, the petition for prohibition would be premature.
The public respondent also points out that the constitutional
prohibition is against the payment of public money without the
corresponding appropriation. There is no rule that only money already
in existence can be the subject of an appropriation law. Finally, the
earmarking of fifty billion pesos as Agrarian Reform Fund, although
denominated as an initial amount, is actually the maximum sum
appropriated. The word "initial" simply means that additional amounts
may be appropriated later when necessary.
On April 11, 1988, Prudencio Serrano, a coconut planter, filed a petition
on his own behalf, assailing the constitutionality of E.O. No. 229. In
addition to the arguments already raised, Serrano contends that the
measure is unconstitutional because:
(1) Only public lands should be included in the CARP;
(2) E.O. No. 229 embraces more than one subject which is
not expressed in the title;
(3) The power of the President to legislate was terminated
on July 2, 1987; and
(4) The appropriation of a P50 billion special fund from the
National Treasury did not originate from the House of
Representatives.

G.R. No. 79744

The petitioner alleges that the then Secretary of Department of
Agrarian Reform, in violation of due process and the requirement for
just compensation, placed his landholding under the coverage of
Operation Land Transfer. Certificates of Land Transfer were
subsequently issued to the private respondents, who then refused
payment of lease rentals to him.
On September 3, 1986, the petitioner protested the erroneous
inclusion of his small landholding under Operation Land transfer and
asked for the recall and cancellation of the Certificates of Land Transfer
in the name of the private respondents. He claims that on December
24, 1986, his petition was denied without hearing. On February 17,
1987, he filed a motion for reconsideration, which had not been acted
upon when E.O. Nos. 228 and 229 were issued. These orders rendered
his motion moot and academic because they directly effected the
transfer of his land to the private respondents.
The petitioner now argues that:
(1) E.O. Nos. 228 and 229 were invalidly issued by the
President of the Philippines.
(2) The said executive orders are violative of the
constitutional provision that no private property shall be
taken without due process or just compensation.
(3) The petitioner is denied the right of maximum retention
provided for under the 1987 Constitution.
The petitioner contends that the issuance of E.0. Nos. 228 and 229
shortly before Congress convened is anomalous and arbitrary, besides
violating the doctrine of separation of powers. The legislative power
granted to the President under the Transitory Provisions refers only to
emergency measures that may be promulgated in the proper exercise
of the police power.
The petitioner also invokes his rights not to be deprived of his property
without due process of law and to the retention of his small parcels of
riceholding as guaranteed under Article XIII, Section 4 of the
Constitution. He likewise argues that, besides denying him just
compensation for his land, the provisions of E.O. No. 228 declaring
that:
Lease rentals paid to the landowner by the farmerbeneficiary after October 21, 1972 shall be considered as
advance payment for the land.
is an unconstitutional taking of a vested property right. It is also his
contention that the inclusion of even small landowners in the program
along with other landowners with lands consisting of seven hectares or
more is undemocratic.
In his Comment, the Solicitor General submits that the petition is
premature because the motion for reconsideration filed with the
Minister of Agrarian Reform is still unresolved. As for the validity of the
issuance of E.O. Nos. 228 and 229, he argues that they were enacted
pursuant to Section 6, Article XVIII of the Transitory Provisions of the
1987 Constitution which reads:

The incumbent president shall continue to exercise legislative powers

until the first Congress is convened.
On the issue of just compensation, his position is that when P.D. No. 27
was promulgated on October 21. 1972, the tenant-farmer of
agricultural land was deemed the owner of the land he was tilling. The
leasehold rentals paid after that date should therefore be considered
amortization payments.
In his Reply to the public respondents, the petitioner maintains that the
motion he filed was resolved on December 14, 1987. An appeal to the
Office of the President would be useless with the promulgation of E.O.
Nos. 228 and 229, which in effect sanctioned the validity of the public
respondent's acts.
G.R. No. 78742
The petitioners in this case invoke the right of retention granted
by P.D. No. 27 to owners of rice and corn lands not exceeding
seven hectares as long as they are cultivating or intend to
cultivate the same. Their respective lands do not exceed the
statutory limit but are occupied by tenants who are actually
cultivating such lands.
According to P.D. No. 316, which was promulgated in implementation
of P.D. No. 27:
No tenant-farmer in agricultural lands primarily
devoted to rice and corn shall be ejected or removed
from his farmholding until such time as the
respective rights of the tenant- farmers and the
landowner shall have been determined in
accordance with the rules and regulations
implementing P.D. No. 27.
The petitioners claim they cannot eject their tenants and so
are unable to enjoy their right of retention because the
Department of Agrarian Reform has so far not issued the
implementing rules required under the above-quoted decree.
They therefore ask the Court for a writ of mandamus to compel the
respondent to issue the said rules.
In his Comment, the public respondent argues that P.D. No. 27 has
been amended by LOI 474 removing any right of retention from
persons who own other agricultural lands of more than 7
hectares in aggregate area or lands used for residential,
commercial, industrial or other purposes from which they
derive adequate income for their family. And even assuming that
the petitioners do not fall under its terms, the regulations
implementing P.D. No. 27 have already been issued, to wit, the
Memorandum dated July 10, 1975 (Interim Guidelines on Retention by
Small Landowners, with an accompanying Retention Guide Table),
Memorandum Circular No. 11 dated April 21, 1978, (Implementation
Guidelines of LOI No. 474), Memorandum Circular No. 18-81 dated
December 29,1981 (Clarificatory Guidelines on Coverage of P.D. No. 27
and Retention by Small Landowners), and DAR Administrative Order
No. 1, series of 1985 (Providing for a Cut-off Date for Landowners
to Apply for Retention and/or to Protest the Coverage of their
Landholdings under Operation Land Transfer pursuant to P.D. No. 27).
For failure to file the corresponding applications for retention

under these measures, the petitioners are now barred from

invoking this right.
The public respondent also stresses that the petitioners have
prematurely initiated this case notwithstanding the pendency of their
appeal to the President of the Philippines. Moreover, the issuance of
the implementing rules, assuming this has not yet been done, involves
the exercise of discretion which cannot be controlled through the writ
of mandamus. This is especially true if this function is entrusted, as in
this case, to a separate department of the government.
In their Reply, the petitioners insist that the above-cited measures
are not applicable to them because they do not own more than
seven hectares of agricultural land. Moreover, assuming arguendo
that the rules were intended to cover them also, the said measures are
nevertheless not in force because they have not been
published as required by law and the ruling of this Court in Tanada
v. Tuvera. 10 As for LOI 474, the same is ineffective for the additional
reason that a mere letter of instruction could not have repealed
the presidential decree.
I
Although holding neither purse nor sword and so regarded as the
weakest of the three departments of the government, the judiciary is
nonetheless vested with the power to annul the acts of either the
legislative or the executive or of both when not conformable to the
fundamental law. This is the reason for what some quarters call the
doctrine of judicial supremacy. Even so, this power is not lightly
assumed or readily exercised. The doctrine of separation of powers
imposes upon the courts a proper restraint, born of the nature of their
functions and of their respect for the other departments, in striking
down the acts of the legislative and the executive as unconstitutional.
The policy, indeed, is a blend of courtesy and caution. To doubt is to
sustain. The theory is that before the act was done or the law was
enacted, earnest studies were made by Congress or the President, or
both, to insure that the Constitution would not be breached.
In addition, the Constitution itself lays down stringent conditions for a
declaration of unconstitutionality, requiring therefor the concurrence of
a majority of the members of the Supreme Court who took part in the
deliberations and voted on the issue during their session en
banc. 11 And as established by judge made doctrine, the Court will
assume jurisdiction over a constitutional question only if it is shown
that the essential requisites of a judicial inquiry into such a question
are first satisfied. Thus, there must be an actual case or controversy
involving a conflict of legal rights susceptible of judicial determination,
the constitutional question must have been opportunely raised by the
proper party, and the resolution of the question is unavoidably
necessary to the decision of the case itself. 12
With particular regard to the requirement of proper party as applied in
the cases before us, we hold that the same is satisfied by the
petitioners and intervenors because each of them has sustained or is in
danger of sustaining an immediate injury as a result of the acts or
measures complained of. 13 And even if, strictly speaking, they are not
covered by the definition, it is still within the wide discretion of the
Court to waive the requirement and so remove the impediment to its
addressing and resolving the serious constitutional questions raised.

In the first Emergency Powers Cases, 14 ordinary citizens and taxpayers

were allowed to question the constitutionality of several executive
orders issued by President Quirino although they were invoking only an
indirect and general interest shared in common with the public. The
Court dismissed the objection that they were not proper parties and
ruled that "the transcendental importance to the public of these cases
demands that they be settled promptly and definitely, brushing aside,
if we must, technicalities of procedure." We have since then applied
this exception in many other cases. 15
The other above-mentioned requisites have also been met in the
present petitions.
In must be stressed that despite the inhibitions pressing upon the
Court when confronted with constitutional issues like the ones now
before it, it will not hesitate to declare a law or act invalid when it is
convinced that this must be done. In arriving at this conclusion, its only
criterion will be the Constitution as God and its conscience give it the
light to probe its meaning and discover its purpose. Personal motives
and political considerations are irrelevancies that cannot influence its
decision. Blandishment is as ineffectual as intimidation.
For all the awesome power of the Congress and the Executive, the
Court will not hesitate to "make the hammer fall, and heavily," to use
Justice Laurel's pithy language, where the acts of these departments,
or of any public official, betray the people's will as expressed in the
Constitution.
It need only be added, to borrow again the words of Justice Laurel, that

... when the judiciary mediates to allocate constitutional

boundaries, it does not assert any superiority over the
other departments; it does not in reality nullify or
invalidate an act of the Legislature, but only asserts the
solemn and sacred obligation assigned to it by the
Constitution to determine conflicting claims of authority
under the Constitution and to establish for the parties in an
actual controversy the rights which that instrument
secures and guarantees to them. This is in truth all that is
involved in what is termed "judicial supremacy" which
properly is the power of judicial review under the
Constitution. 16
The cases before us categorically raise constitutional questions that
this Court must categorically resolve. And so we shall.
II
We proceed first to the examination of the preliminary issues before
resolving the more serious challenges to the constitutionality of the
several measures involved in these petitions.
The promulgation of P.D. No. 27 by President Marcos in the exercise of
his powers under martial law has already been sustained in Gonzales v.
Estrella and we find no reason to modify or reverse it on that issue. As
for the power of President Aquino to promulgate Proc. No. 131 and E.O.
Nos. 228 and 229, the same was authorized under Section 6 of the
Transitory Provisions of the 1987 Constitution, quoted above.

The said measures were issued by President Aquino before July 27,
1987, when the Congress of the Philippines was formally convened and
took over legislative power from her. They are not "midnight"
enactments intended to pre-empt the legislature because E.O. No. 228
was issued on July 17, 1987, and the other measures, i.e., Proc. No.
131 and E.O. No. 229, were both issued on July 22, 1987. Neither is it
correct to say that these measures ceased to be valid when she lost
her legislative power for, like any statute, they continue to be in force
unless modified or repealed by subsequent law or declared invalid by
the courts. A statute does not ipso facto become inoperative simply
because of the dissolution of the legislature that enacted it. By the
same token, President Aquino's loss of legislative power did not have
the effect of invalidating all the measures enacted by her when and as
long as she possessed it.
Significantly, the Congress she is alleged to have undercut has not
rejected but in fact substantially affirmed the challenged measures and
has specifically provided that they shall be suppletory to R.A. No. 6657
whenever not inconsistent with its provisions. 17 Indeed, some portions
of the said measures, like the creation of the P50 billion fund in Section
2 of Proc. No. 131, and Sections 20 and 21 of E.O. No. 229, have been
incorporated by reference in the CARP Law.18
That fund, as earlier noted, is itself being questioned on the ground
that it does not conform to the requirements of a valid appropriation as
specified in the Constitution. Clearly, however, Proc. No. 131 is not an
appropriation measure even if it does provide for the creation of said
fund, for that is not its principal purpose. An appropriation law is one
the primary and specific purpose of which is to authorize the release of
public funds from the treasury. 19 The creation of the fund is only
incidental to the main objective of the proclamation, which is agrarian
reform.
It should follow that the specific constitutional provisions invoked, to
wit, Section 24 and Section 25(4) of Article VI, are not applicable. With
particular reference to Section 24, this obviously could not have been
complied with for the simple reason that the House of Representatives,
which now has the exclusive power to initiate appropriation measures,
had not yet been convened when the proclamation was issued. The
legislative power was then solely vested in the President of the
Philippines, who embodied, as it were, both houses of Congress.
The argument of some of the petitioners that Proc. No. 131 and E.O.
No. 229 should be invalidated because they do not provide for
retention limits as required by Article XIII, Section 4 of the Constitution
is no longer tenable. R.A. No. 6657 does provide for such limits now in
Section 6 of the law, which in fact is one of its most controversial
provisions. This section declares:
Retention Limits. Except as otherwise provided in this
Act, no person may own or retain, directly or indirectly, any
public or private agricultural land, the size of which shall
vary according to factors governing a viable family-sized
farm, such as commodity produced, terrain, infrastructure,
and soil fertility as determined by the Presidential Agrarian
Reform Council (PARC) created hereunder, but in no case
shall retention by the landowner exceed five (5) hectares.
Three (3) hectares may be awarded to each child of the
landowner, subject to the following qualifications: (1) that
he is at least fifteen (15) years of age; and (2) that he is
actually tilling the land or directly managing the farm;

Provided, That landowners whose lands have been covered

by Presidential Decree No. 27 shall be allowed to keep the
area originally retained by them thereunder, further, That
original homestead grantees or direct compulsory heirs
who still own the original homestead at the time of the
approval of this Act shall retain the same areas as long as
they continue to cultivate said homestead.
The argument that E.O. No. 229 violates the constitutional requirement
that a bill shall have only one subject, to be expressed in its title,
deserves only short attention. It is settled that the title of the bill does
not have to be a catalogue of its contents and will suffice if the matters
embodied in the text are relevant to each other and may be inferred
from the title. 20
The Court wryly observes that during the past dictatorship, every
presidential issuance, by whatever name it was called, had the force
and effect of law because it came from President Marcos. Such are the
ways of despots. Hence, it is futile to argue, as the petitioners do in
G.R. No. 79744, that LOI 474 could not have repealed P.D. No. 27
because the former was only a letter of instruction. The important
thing is that it was issued by President Marcos, whose word was law
during that time.
But for all their peremptoriness, these issuances from the President
Marcos still had to comply with the requirement for publication as this
Court held in Tanada v. Tuvera. 21 Hence, unless published in the
Official Gazette in accordance with Article 2 of the Civil Code, they
could not have any force and effect if they were among those
enactments successfully challenged in that case. LOI 474 was
published, though, in the Official Gazette dated November 29,1976.)
Finally, there is the contention of the public respondent in G.R. No.
78742 that the writ of mandamus cannot issue to compel the
performance of a discretionary act, especially by a specific department
of the government. That is true as a general proposition but is subject
to one important qualification. Correctly and categorically stated, the
rule is that mandamus will lie to compel the discharge of the
discretionary duty itself but not to control the discretion to be
exercised. In other words, mandamus can issue to require kaction only
but not specific action.
Whenever a duty is imposed upon a public official and an
unnecessary and unreasonable delay in the exercise of
such duty occurs, if it is a clear duty imposed by law, the
courts will intervene by the extraordinary legal remedy of
mandamus to compel action. If the duty is purely
ministerial, the courts will require specific action. If the
duty is purely discretionary, the courts by mandamus will
require action only. For example, if an inferior court, public
official, or board should, for an unreasonable length of
time, fail to decide a particular question to the great
detriment of all parties concerned, or a court should refuse
to take jurisdiction of a cause when the law clearly gave it
jurisdiction mandamus will issue, in the first case to require
a decision, and in the second to require that jurisdiction be
taken of the cause. 22
And while it is true that as a rule the writ will not be proper as long as
there is still a plain, speedy and adequate remedy available from the

administrative authorities, resort to the courts may still be permitted if

the issue raised is a question of law. 23
III
There are traditional distinctions between the police power and the
power of eminent domain that logically preclude the application of
both powers at the same time on the same subject. In the case of City
of Baguio v. NAWASA, 24for example, where a law required the transfer
of all municipal waterworks systems to the NAWASA in exchange for its
assets of equivalent value, the Court held that the power being
exercised was eminent domain because the property involved was
wholesome and intended for a public use. Property condemned under
the police power is noxious or intended for a noxious purpose, such as
a building on the verge of collapse, which should be demolished for the
public safety, or obscene materials, which should be destroyed in the
interest of public morals. The confiscation of such property is not
compensable, unlike the taking of property under the power of
expropriation, which requires the payment of just compensation to the
owner.
In the case of Pennsylvania Coal Co. v. Mahon, 25 Justice Holmes laid
down the limits of the police power in a famous aphorism: "The general
rule at least is that while property may be regulated to a certain
extent, if regulation goes too far it will be recognized as a taking." The
regulation that went "too far" was a law prohibiting mining which might
cause the subsidence of structures for human habitation constructed
on the land surface. This was resisted by a coal company which had
earlier granted a deed to the land over its mine but reserved all mining
rights thereunder, with the grantee assuming all risks and waiving any
damage claim. The Court held the law could not be sustained without
compensating the grantor. Justice Brandeis filed a lone dissent in which
he argued that there was a valid exercise of the police power. He said:
Every restriction upon the use of property imposed in the
exercise of the police power deprives the owner of some
right theretofore enjoyed, and is, in that sense, an
abridgment by the State of rights in property without
making compensation. But restriction imposed to protect
the public health, safety or morals from dangers
threatened is not a taking. The restriction here in question
is merely the prohibition of a noxious use. The property so
restricted remains in the possession of its owner. The state
does not appropriate it or make any use of it. The state
merely prevents the owner from making a use which
interferes with paramount rights of the public. Whenever
the use prohibited ceases to be noxious as it may
because of further changes in local or social conditions
the restriction will have to be removed and the owner will
again be free to enjoy his property as heretofore.
Recent trends, however, would indicate not a polarization but a
mingling of the police power and the power of eminent domain, with
the latter being used as an implement of the former like the power of
taxation. The employment of the taxing power to achieve a police
purpose has long been accepted. 26 As for the power of expropriation,
Prof. John J. Costonis of the University of Illinois College of Law
(referring to the earlier case of Euclid v. Ambler Realty Co., 272 US 365,
which sustained a zoning law under the police power) makes the
following significant remarks:

Euclid, moreover, was decided in an era when judges

located the Police and eminent domain powers on different
planets. Generally speaking, they viewed eminent domain
as encompassing public acquisition of private property for
improvements that would be available for public use,"
literally construed. To the police power, on the other hand,
they assigned the less intrusive task of preventing harmful
externalities a point reflected in the Euclid opinion's
reliance on an analogy to nuisance law to bolster its
support of zoning. So long as suppression of a privately
authored harm bore a plausible relation to some legitimate
"public purpose," the pertinent measure need have
afforded no compensation whatever. With the progressive
growth of government's involvement in land use, the
distance between the two powers has contracted
considerably. Today government often employs eminent
domain interchangeably with or as a useful complement to
the police power-- a trend expressly approved in the
Supreme Court's 1954 decision in Berman v. Parker, which
broadened the reach of eminent domain's "public use" test
to match that of the police power's standard of "public
purpose." 27
The Berman case sustained a redevelopment project and the
improvement of blighted areas in the District of Columbia as a proper
exercise of the police power. On the role of eminent domain in the
attainment of this purpose, Justice Douglas declared:
If those who govern the District of Columbia decide that
the Nation's Capital should be beautiful as well as sanitary,
there is nothing in the Fifth Amendment that stands in the
way.
Once the object is within the authority of Congress, the
right to realize it through the exercise of eminent domain is
clear.
For the power of eminent domain is merely the means to
the end. 28
In Penn Central Transportation Co. v. New York City, 29 decided by a 6-3
vote in 1978, the U.S Supreme Court sustained the respondent's
Landmarks Preservation Law under which the owners of the Grand
Central Terminal had not been allowed to construct a multi-story office
building over the Terminal, which had been designated a historic
landmark. Preservation of the landmark was held to be a valid
objective of the police power. The problem, however, was that the
owners of the Terminal would be deprived of the right to use the
airspace above it although other landowners in the area could do so
over their respective properties. While insisting that there was here no
taking, the Court nonetheless recognized certain compensatory rights
accruing to Grand Central Terminal which it said would "undoubtedly
mitigate" the loss caused by the regulation. This "fair compensation,"
as he called it, was explained by Prof. Costonis in this wise:
In return for retaining the Terminal site in its pristine landmark status,
Penn Central was authorized to transfer to neighboring properties the
authorized but unused rights accruing to the site prior to the Terminal's
designation as a landmark the rights which would have been
exhausted by the 59-story building that the city refused to
countenance atop the Terminal. Prevailing bulk restrictions on

neighboring sites were proportionately relaxed, theoretically enabling

Penn Central to recoup its losses at the Terminal site by constructing or
selling to others the right to construct larger, hence more profitable
buildings on the transferee sites. 30
The cases before us present no knotty complication insofar as the
question of compensable taking is concerned. To the extent that the
measures under challenge merely prescribe retention limits for
landowners, there is an exercise of the police power for the regulation
of private property in accordance with the Constitution. But where, to
carry out such regulation, it becomes necessary to deprive such
owners of whatever lands they may own in excess of the maximum
area allowed, there is definitely a taking under the power of eminent
domain for which payment of just compensation is imperative. The
taking contemplated is not a mere limitation of the use of the land.
What is required is the surrender of the title to and the physical
possession of the said excess and all beneficial rights accruing to the
owner in favor of the farmer-beneficiary. This is definitely an exercise
not of the police power but of the power of eminent domain.
Whether as an exercise of the police power or of the power of eminent
domain, the several measures before us are challenged as violative of
the due process and equal protection clauses.
The challenge to Proc. No. 131 and E.O. Nos. 228 and 299 on the
ground that no retention limits are prescribed has already been
discussed and dismissed. It is noted that although they excited many
bitter exchanges during the deliberation of the CARP Law in Congress,
the retention limits finally agreed upon are, curiously enough, not
being questioned in these petitions. We therefore do not discuss them
here. The Court will come to the other claimed violations of due
process in connection with our examination of the adequacy of just
compensation as required under the power of expropriation.
The argument of the small farmers that they have been denied equal
protection because of the absence of retention limits has also become
academic under Section 6 of R.A. No. 6657. Significantly, they too have
not questioned the area of such limits. There is also the complaint that
they should not be made to share the burden of agrarian reform, an
objection also made by the sugar planters on the ground that they
belong to a particular class with particular interests of their own.
However, no evidence has been submitted to the Court that the
requisites of a valid classification have been violated.
Classification has been defined as the grouping of persons or things
similar to each other in certain particulars and different from each
other in these same particulars. 31 To be valid, it must conform to the
following requirements: (1) it must be based on substantial
distinctions; (2) it must be germane to the purposes of the law; (3) it
must not be limited to existing conditions only; and (4) it must apply
equally to all the members of the class. 32 The Court finds that all these
requisites have been met by the measures here challenged as arbitrary
and discriminatory.
Equal protection simply means that all persons or things similarly
situated must be treated alike both as to the rights conferred and the
liabilities imposed. 33 The petitioners have not shown that they belong
to a different class and entitled to a different treatment. The argument
that not only landowners but also owners of other properties must be
made to share the burden of implementing land reform must be
rejected. There is a substantial distinction between these two classes

of owners that is clearly visible except to those who will not see. There
is no need to elaborate on this matter. In any event, the Congress is
allowed a wide leeway in providing for a valid classification. Its decision
is accorded recognition and respect by the courts of justice except only
where its discretion is abused to the detriment of the Bill of Rights.
It is worth remarking at this juncture that a statute may be sustained
under the police power only if there is a concurrence of the lawful
subject and the lawful method. Put otherwise, the interests of the
public generally as distinguished from those of a particular class
require the interference of the State and, no less important, the means
employed are reasonably necessary for the attainment of the purpose
sought to be achieved and not unduly oppressive upon
individuals. 34 As the subject and purpose of agrarian reform have been
laid down by the Constitution itself, we may say that the first
requirement has been satisfied. What remains to be examined is the
validity of the method employed to achieve the constitutional goal.
One of the basic principles of the democratic system is that where the
rights of the individual are concerned, the end does not justify the
means. It is not enough that there be a valid objective; it is also
necessary that the means employed to pursue it be in keeping with the
Constitution. Mere expediency will not excuse constitutional shortcuts.
There is no question that not even the strongest moral conviction or
the most urgent public need, subject only to a few notable exceptions,
will excuse the bypassing of an individual's rights. It is no exaggeration
to say that a, person invoking a right guaranteed under Article III of the
Constitution is a majority of one even as against the rest of the nation
who would deny him that right.
That right covers the person's life, his liberty and his property under
Section 1 of Article III of the Constitution. With regard to his property,
the owner enjoys the added protection of Section 9, which reaffirms
the familiar rule that private property shall not be taken for public use
without just compensation.
This brings us now to the power of eminent domain.
IV
Eminent domain is an inherent power of the State that
enables it to forcibly acquire private lands intended for
public use upon payment of just compensation to the
owner. Obviously, there is no need to expropriate where
the owner is willing to sell under terms also acceptable to
the purchaser, in which case an ordinary deed of sale may
be agreed upon by the parties. 35 It is only where the owner
is unwilling to sell, or cannot accept the price or other
conditions offered by the vendee, that the power of
eminent domain will come into play to assert the
paramount authority of the State over the interests of the
property owner. Private rights must then yield to the
irresistible demands of the public interest on the timehonored justification, as in the case of the police power,
that the welfare of the people is the supreme law.
But for all its primacy and urgency, the power of expropriation is by no
means absolute (as indeed no power is absolute). The limitation is
found in the constitutional injunction that "private property shall not be
taken for public use without just compensation" and in the abundant
jurisprudence that has evolved from the interpretation of this principle.

Basically, the requirements for a proper exercise of the power are: (1)
public use and (2) just compensation.
Let us dispose first of the argument raised by the petitioners in G.R.
No. 79310 that the State should first distribute public agricultural lands
in the pursuit of agrarian reform instead of immediately disturbing
property rights by forcibly acquiring private agricultural lands.
Parenthetically, it is not correct to say that only public agricultural
lands may be covered by the CARP as the Constitution calls for "the
just distribution of all agricultural lands." In any event, the decision to
redistribute private agricultural lands in the manner prescribed by the
CARP was made by the legislative and executive departments in the
exercise of their discretion. We are not justified in reviewing that
discretion in the absence of a clear showing that it has been abused.
A becoming courtesy admonishes us to respect the decisions of the
political departments when they decide what is known as the political
question. As explained by Chief Justice Concepcion in the case
of Taada v. Cuenco: 36
The term "political question" connotes what it means in
ordinary parlance, namely, a question of policy. It refers to
"those questions which, under the Constitution, are to be
decided by the people in their sovereign capacity; or in
regard to which full discretionary authority has been
delegated to the legislative or executive branch of the
government." It is concerned with issues dependent upon
the wisdom, not legality, of a particular measure.
It is true that the concept of the political question has been constricted
with the enlargement of judicial power, which now includes the
authority of the courts "to determine whether or not there has been a
grave abuse of discretion amounting to lack or excess of jurisdiction on
the part of any branch or instrumentality of the Government." 37 Even
so, this should not be construed as a license for us to reverse the other
departments simply because their views may not coincide with ours.
The legislature and the executive have been seen fit, in their wisdom,
to include in the CARP the redistribution of private landholdings (even
as the distribution of public agricultural lands is first provided for, while
also continuing apace under the Public Land Act and other cognate
laws). The Court sees no justification to interpose its authority, which
we may assert only if we believe that the political decision is not
unwise, but illegal. We do not find it to be so.
In U.S. v. Chandler-Dunbar Water Power Company, 38 it was held:
Congress having determined, as it did by the Act of March
3,1909 that the entire St. Mary's river between the
American bank and the international line, as well as all of
the upland north of the present ship canal, throughout its
entire length, was "necessary for the purpose of navigation
of said waters, and the waters connected therewith," that
determination is conclusive in condemnation proceedings
instituted by the United States under that Act, and there is
no room for judicial review of the judgment of Congress ... .
As earlier observed, the requirement for public use has already been
settled for us by the Constitution itself No less than the 1987 Charter
calls for agrarian reform, which is the reason why private agricultural
lands are to be taken from their owners, subject to the prescribed

maximum retention limits. The purposes specified in P.D. No. 27, Proc.
No. 131 and R.A. No. 6657 are only an elaboration of the constitutional
injunction that the State adopt the necessary measures "to encourage
and undertake the just distribution of all agricultural lands to enable
farmers who are landless to own directly or collectively the lands they
till." That public use, as pronounced by the fundamental law itself,
must be binding on us.
The second requirement, i.e., the payment of just compensation, needs
a longer and more thoughtful examination.
Just compensation is defined as the full and fair equivalent of the
property taken from its owner by the expropriator.39 It has been
repeatedly stressed by this Court that the measure is not the taker's
gain but the owner's loss. 40 The word "just" is used to intensify the
meaning of the word "compensation" to convey the idea that the
equivalent to be rendered for the property to be taken shall be real,
substantial, full, ample. 41
It bears repeating that the measures challenged in these petitions
contemplate more than a mere regulation of the use of private lands
under the police power. We deal here with an actual taking of private
agricultural lands that has dispossessed the owners of their property
and deprived them of all its beneficial use and enjoyment, to entitle
them to the just compensation mandated by the Constitution.
As held in Republic of the Philippines v. Castellvi, 42 there is
compensable taking when the following conditions concur: (1) the
expropriator must enter a private property; (2) the entry must be for
more than a momentary period; (3) the entry must be under warrant or
color of legal authority; (4) the property must be devoted to public use
or otherwise informally appropriated or injuriously affected; and (5) the
utilization of the property for public use must be in such a way as to
oust the owner and deprive him of beneficial enjoyment of the
property. All these requisites are envisioned in the measures before us.
Where the State itself is the expropriator, it is not necessary for it to
make a deposit upon its taking possession of the condemned property,
as "the compensation is a public charge, the good faith of the public is
pledged for its payment, and all the resources of taxation may be
employed in raising the amount." 43 Nevertheless, Section 16(e) of the
CARP Law provides that:
Upon receipt by the landowner of the corresponding
payment or, in case of rejection or no response from the
landowner, upon the deposit with an accessible bank
designated by the DAR of the compensation in cash or in
LBP bonds in accordance with this Act, the DAR shall take
immediate possession of the land and shall request the
proper Register of Deeds to issue a Transfer Certificate of
Title (TCT) in the name of the Republic of the Philippines.
The DAR shall thereafter proceed with the redistribution of
the land to the qualified beneficiaries.
Objection is raised, however, to the manner of fixing the just
compensation, which it is claimed is entrusted to the administrative
authorities in violation of judicial prerogatives. Specific reference is
made to Section 16(d), which provides that in case of the rejection or
disregard by the owner of the offer of the government to buy his land-

... the DAR shall conduct summary administrative

proceedings to determine the compensation for the land by
requiring the landowner, the LBP and other interested
parties to submit evidence as to the just compensation for
the land, within fifteen (15) days from the receipt of the
notice. After the expiration of the above period, the matter
is deemed submitted for decision. The DAR shall decide the
case within thirty (30) days after it is submitted for
decision.
To be sure, the determination of just compensation is a function
addressed to the courts of justice and may not be usurped by any
other branch or official of the government. EPZA v. Dulay 44 resolved a
challenge to several decrees promulgated by President Marcos
providing that the just compensation for property under expropriation
should be either the assessment of the property by the government or
the sworn valuation thereof by the owner, whichever was lower. In
declaring these decrees unconstitutional, the Court held through Mr.
Justice Hugo E. Gutierrez, Jr.:
The method of ascertaining just compensation under the
aforecited decrees constitutes impermissible
encroachment on judicial prerogatives. It tends to render
this Court inutile in a matter which under this Constitution
is reserved to it for final determination.
Thus, although in an expropriation proceeding the court
technically would still have the power to determine the just
compensation for the property, following the applicable
decrees, its task would be relegated to simply stating the
lower value of the property as declared either by the owner
or the assessor. As a necessary consequence, it would be
useless for the court to appoint commissioners under Rule
67 of the Rules of Court. Moreover, the need to satisfy the
due process clause in the taking of private property is
seemingly fulfilled since it cannot be said that a judicial
proceeding was not had before the actual taking. However,
the strict application of the decrees during the proceedings
would be nothing short of a mere formality or charade as
the court has only to choose between the valuation of the
owner and that of the assessor, and its choice is always
limited to the lower of the two. The court cannot exercise
its discretion or independence in determining what is just
or fair. Even a grade school pupil could substitute for the
judge insofar as the determination of constitutional just
compensation is concerned.
xxx
In the present petition, we are once again confronted with
the same question of whether the courts under P.D. No.
1533, which contains the same provision on just
compensation as its predecessor decrees, still have the
power and authority to determine just compensation,
independent of what is stated by the decree and to this
effect, to appoint commissioners for such purpose.
This time, we answer in the affirmative.
xxx

It is violative of due process to deny the owner the

opportunity to prove that the valuation in the tax
documents is unfair or wrong. And it is repulsive to the
basic concepts of justice and fairness to allow the
haphazard work of a minor bureaucrat or clerk to
absolutely prevail over the judgment of a court
promulgated only after expert commissioners have actually
viewed the property, after evidence and arguments pro
and con have been presented, and after all factors and
considerations essential to a fair and just determination
have been judiciously evaluated.
A reading of the aforecited Section 16(d) will readily show that it does
not suffer from the arbitrariness that rendered the challenged decrees
constitutionally objectionable. Although the proceedings are described
as summary, the landowner and other interested parties are
nevertheless allowed an opportunity to submit evidence on the real
value of the property. But more importantly, the determination of the
just compensation by the DAR is not by any means final and conclusive
upon the landowner or any other interested party, for Section 16(f)
clearly provides:
Any party who disagrees with the decision may bring the
matter to the court of proper jurisdiction for final
determination of just compensation.
The determination made by the DAR is only preliminary unless
accepted by all parties concerned. Otherwise, the courts of justice will
still have the right to review with finality the said determination in the
exercise of what is admittedly a judicial function.
The second and more serious objection to the provisions on just
compensation is not as easily resolved.
This refers to Section 18 of the CARP Law providing in full as follows:
SEC. 18. Valuation and Mode of Compensation. The LBP
shall compensate the landowner in such amount as may be
agreed upon by the landowner and the DAR and the LBP, in
accordance with the criteria provided for in Sections 16
and 17, and other pertinent provisions hereof, or as may be
finally determined by the court, as the just compensation
for the land.
The compensation shall be paid in one of the following
modes, at the option of the landowner:
(1) Cash payment, under the following terms and
conditions:
(a) For lands above fifty (50)
hectares, insofar as the excess
hectarage is concerned Twentyfive percent (25%) cash, the
balance to be paid in government
financial instruments negotiable at
any time.
(b) For lands above twenty-four
(24) hectares and up to fifty (50)
hectares Thirty percent (30%)

cash, the balance to be paid in

government financial instruments
negotiable at any time.
(c) For lands twenty-four (24)
hectares and below Thirty-five
percent (35%) cash, the balance to
be paid in government financial
instruments negotiable at any
time.
(2) Shares of stock in government-owned or controlled
corporations, LBP preferred shares, physical assets or other
qualified investments in accordance with guidelines set by
the PARC;
(3) Tax credits which can be used against any tax liability;
(4) LBP bonds, which shall have the following features:
(a) Market interest rates aligned
with 91-day treasury bill rates. Ten
percent (10%) of the face value of
the bonds shall mature every year
from the date of issuance until the
tenth (10th) year: Provided, That
should the landowner choose to
forego the cash portion, whether in
full or in part, he shall be paid
correspondingly in LBP bonds;
(b) Transferability and negotiability.
Such LBP bonds may be used by
the landowner, his successors-ininterest or his assigns, up to the
amount of their face value, for any
of the following:
(i) Acquisition of land or other real
properties of the government,
including assets under the Asset
Privatization Program and other
assets foreclosed by government
financial institutions in the same
province or region where the lands
for which the bonds were paid are
situated;
(ii) Acquisition of shares of stock of
government-owned or controlled
corporations or shares of stock
owned by the government in
private corporations;
(iii) Substitution for surety or bail
bonds for the provisional release of
accused persons, or for
performance bonds;
(iv) Security for loans with any
government financial institution,

provided the proceeds of the loans

shall be invested in an economic
enterprise, preferably in a small
and medium- scale industry, in the
same province or region as the
land for which the bonds are paid;
(v) Payment for various taxes and
fees to government: Provided, That
the use of these bonds for these
purposes will be limited to a certain
percentage of the outstanding
balance of the financial
instruments; Provided, further, That
the PARC shall determine the
percentages mentioned above;
(vi) Payment for tuition fees of the
immediate family of the original
bondholder in government
universities, colleges, trade
schools, and other institutions;
(vii) Payment for fees of the
immediate family of the original
bondholder in government
hospitals; and
(viii) Such other uses as the PARC
may from time to time allow.
The contention of the petitioners in G.R. No. 79777 is that the above
provision is unconstitutional insofar as it requires the owners of the
expropriated properties to accept just compensation therefor in less
than money, which is the only medium of payment allowed. In support
of this contention, they cite jurisprudence holding that:
The fundamental rule in expropriation matters is that the
owner of the property expropriated is entitled to a just
compensation, which should be neither more nor less,
whenever it is possible to make the assessment, than the
money equivalent of said property. Just compensation has
always been understood to be the just and complete
equivalent of the loss which the owner of the thing
expropriated has to suffer by reason of the
expropriation . 45 (Emphasis supplied.)
In J.M. Tuazon Co. v. Land Tenure Administration,

46

this Court held:

It is well-settled that just compensation means the

equivalent for the value of the property at the time of its
taking. Anything beyond that is more, and anything short
of that is less, than just compensation. It means a fair and
full equivalent for the loss sustained, which is the measure
of the indemnity, not whatever gain would accrue to the
expropriating entity. The market value of the land taken is
the just compensation to which the owner of condemned
property is entitled, the market value being that sum of
money which a person desirous, but not compelled to buy,
and an owner, willing, but not compelled to sell, would

agree on as a price to be given and received for such

property. (Emphasis supplied.)
In the United States, where much of our jurisprudence on the subject
has been derived, the weight of authority is also to the effect that just
compensation for property expropriated is payable only in money and
not otherwise. Thus
The medium of payment of compensation is ready money
or cash. The condemnor cannot compel the owner to
accept anything but money, nor can the owner compel or
require the condemnor to pay him on any other basis than
the value of the property in money at the time and in the
manner prescribed by the Constitution and the statutes.
When the power of eminent domain is resorted to, there
must be a standard medium of payment, binding upon
both parties, and the law has fixed that standard as money
in cash. 47 (Emphasis supplied.)
Part cash and deferred payments are not and cannot, in
the nature of things, be regarded as a reliable and constant
standard of compensation. 48
"Just compensation" for property taken by condemnation
means a fair equivalent in money, which must be paid at
least within a reasonable time after the taking, and it is not
within the power of the Legislature to substitute for such
payment future obligations, bonds, or other valuable
advantage. 49 (Emphasis supplied.)
It cannot be denied from these cases that the traditional medium for
the payment of just compensation is money and no other. And so,
conformably, has just compensation been paid in the past solely in that
medium. However, we do not deal here with the traditional excercise of
the power of eminent domain. This is not an ordinary expropriation
where only a specific property of relatively limited area is sought to be
taken by the State from its owner for a specific and perhaps local
purpose.
What we deal with here is a revolutionary kind of expropriation.
The expropriation before us affects all private agricultural lands
whenever found and of whatever kind as long as they are in excess of
the maximum retention limits allowed their owners. This kind of
expropriation is intended for the benefit not only of a particular
community or of a small segment of the population but of the entire
Filipino nation, from all levels of our society, from the impoverished
farmer to the land-glutted owner. Its purpose does not cover only the
whole territory of this country but goes beyond in time to the
foreseeable future, which it hopes to secure and edify with the vision
and the sacrifice of the present generation of Filipinos. Generations yet
to come are as involved in this program as we are today, although
hopefully only as beneficiaries of a richer and more fulfilling life we will
guarantee to them tomorrow through our thoughtfulness today. And,
finally, let it not be forgotten that it is no less than the Constitution
itself that has ordained this revolution in the farms, calling for "a just
distribution" among the farmers of lands that have heretofore been the
prison of their dreams but can now become the key at least to their
deliverance.

Such a program will involve not mere millions of pesos. The cost will be
tremendous. Considering the vast areas of land subject to
expropriation under the laws before us, we estimate that hundreds of
billions of pesos will be needed, far more indeed than the amount of
P50 billion initially appropriated, which is already staggering as it is by
our present standards. Such amount is in fact not even fully available
at this time.
We assume that the framers of the Constitution were aware of this
difficulty when they called for agrarian reform as a top priority project
of the government. It is a part of this assumption that when they
envisioned the expropriation that would be needed, they also intended
that the just compensation would have to be paid not in the orthodox
way but a less conventional if more practical method. There can be no
doubt that they were aware of the financial limitations of the
government and had no illusions that there would be enough money to
pay in cash and in full for the lands they wanted to be distributed
among the farmers. We may therefore assume that their intention was
to allow such manner of payment as is now provided for by the CARP
Law, particularly the payment of the balance (if the owner cannot be
paid fully with money), or indeed of the entire amount of the just
compensation, with other things of value. We may also suppose that
what they had in mind was a similar scheme of payment as that
prescribed in P.D. No. 27, which was the law in force at the time they
deliberated on the new Charter and with which they presumably
agreed in principle.
The Court has not found in the records of the Constitutional
Commission any categorical agreement among the members regarding
the meaning to be given the concept of just compensation as applied
to the comprehensive agrarian reform program being contemplated.
There was the suggestion to "fine tune" the requirement to suit the
demands of the project even as it was also felt that they should "leave
it to Congress" to determine how payment should be made to the
landowner and reimbursement required from the farmer-beneficiaries.
Such innovations as "progressive compensation" and "State-subsidized
compensation" were also proposed. In the end, however, no special
definition of the just compensation for the lands to be expropriated
was reached by the Commission. 50
On the other hand, there is nothing in the records either that militates
against the assumptions we are making of the general sentiments and
intention of the members on the content and manner of the payment
to be made to the landowner in the light of the magnitude of the
expenditure and the limitations of the expropriator.
With these assumptions, the Court hereby declares that the content
and manner of the just compensation provided for in the afore- quoted
Section 18 of the CARP Law is not violative of the Constitution. We do
not mind admitting that a certain degree of pragmatism has influenced
our decision on this issue, but after all this Court is not a cloistered
institution removed from the realities and demands of society or
oblivious to the need for its enhancement. The Court is as acutely
anxious as the rest of our people to see the goal of agrarian reform
achieved at last after the frustrations and deprivations of our peasant
masses during all these disappointing decades. We are aware that
invalidation of the said section will result in the nullification of the
entire program, killing the farmer's hopes even as they approach
realization and resurrecting the spectre of discontent and dissent in the
restless countryside. That is not in our view the intention of the
Constitution, and that is not what we shall decree today.

Accepting the theory that payment of the just compensation is not

always required to be made fully in money, we find further that the
proportion of cash payment to the other things of value constituting
the total payment, as determined on the basis of the areas of the lands
expropriated, is not unduly oppressive upon the landowner. It is noted
that the smaller the land, the bigger the payment in money, primarily
because the small landowner will be needing it more than the big
landowners, who can afford a bigger balance in bonds and other things
of value. No less importantly, the government financial instruments
making up the balance of the payment are "negotiable at any time."
The other modes, which are likewise available to the landowner at his
option, are also not unreasonable because payment is made in shares
of stock, LBP bonds, other properties or assets, tax credits, and other
things of value equivalent to the amount of just compensation.
Admittedly, the compensation contemplated in the law will cause the
landowners, big and small, not a little inconvenience. As already
remarked, this cannot be avoided. Nevertheless, it is devoutly hoped
that these countrymen of ours, conscious as we know they are of the
need for their forebearance and even sacrifice, will not begrudge us
their indispensable share in the attainment of the ideal of agrarian
reform. Otherwise, our pursuit of this elusive goal will be like the quest
for the Holy Grail.
The complaint against the effects of non-registration of the land under
E.O. No. 229 does not seem to be viable any more as it appears that
Section 4 of the said Order has been superseded by Section 14 of the
CARP Law. This repeats the requisites of registration as embodied in
the earlier measure but does not provide, as the latter did, that in case
of failure or refusal to register the land, the valuation thereof shall be
that given by the provincial or city assessor for tax purposes. On the
contrary, the CARP Law says that the just compensation shall be
ascertained on the basis of the factors mentioned in its Section 17 and
in the manner provided for in Section 16.
The last major challenge to CARP is that the landowner is divested of
his property even before actual payment to him in full of just
compensation, in contravention of a well- accepted principle of
eminent domain.
The recognized rule, indeed, is that title to the property expropriated
shall pass from the owner to the expropriator only upon full payment of
the just compensation. Jurisprudence on this settled principle is
consistent both here and in other democratic jurisdictions. Thus:
Title to property which is the subject of condemnation proceedings
does not vest the condemnor until the judgment fixing just
compensation is entered and paid, but the condemnor's title relates
back to the date on which the petition under the Eminent Domain Act,
or the commissioner's report under the Local Improvement Act, is
filed. 51
... although the right to appropriate and use land taken for a canal is
complete at the time of entry, title to the property taken remains in the
owner until payment is actually made. 52 (Emphasis supplied.)
In Kennedy v. Indianapolis, 53 the US Supreme Court cited several cases
holding that title to property does not pass to the condemnor until just
compensation had actually been made. In fact, the decisions appear to
be uniformly to this effect. As early as 1838, in Rubottom v.
McLure, 54 it was held that "actual payment to the owner of the

condemned property was a condition precedent to the investment of

the title to the property in the State" albeit "not to the appropriation of
it to public use." In Rexford v. Knight, 55 the Court of Appeals of New
York said that the construction upon the statutes was that the fee did
not vest in the State until the payment of the compensation although
the authority to enter upon and appropriate the land was complete
prior to the payment. Kennedy further said that "both on principle and
authority the rule is ... that the right to enter on and use the property is
complete, as soon as the property is actually appropriated under the
authority of law for a public use, but that the title does not pass from
the owner without his consent, until just compensation has been made
to him."
Our own Supreme Court has held in Visayan Refining Co. v. Camus and
Paredes, 56 that:
If the laws which we have exhibited or cited in the
preceding discussion are attentively examined it will be
apparent that the method of expropriation adopted in this
jurisdiction is such as to afford absolute reassurance
that no piece of land can be finally and irrevocably taken
from an unwilling owner until compensation is
paid ... . (Emphasis supplied.)
It is true that P.D. No. 27 expressly ordered the emancipation of tenantfarmer as October 21, 1972 and declared that he shall "be deemed the
owner" of a portion of land consisting of a family-sized farm except that
"no title to the land owned by him was to be actually issued to him
unless and until he had become a full-fledged member of a duly
recognized farmers' cooperative." It was understood, however, that full
payment of the just compensation also had to be made first,
conformably to the constitutional requirement.
When E.O. No. 228, categorically stated in its Section 1 that:
All qualified farmer-beneficiaries are now deemed full
owners as of October 21, 1972 of the land they acquired by
virtue of Presidential Decree No. 27. (Emphasis supplied.)
it was obviously referring to lands already validly acquired under the
said decree, after proof of full-fledged membership in the farmers'
cooperatives and full payment of just compensation. Hence, it was also
perfectly proper for the Order to also provide in its Section 2 that the
"lease rentals paid to the landowner by the farmer- beneficiary after
October 21, 1972 (pending transfer of ownership after full payment of
just compensation), shall be considered as advance payment for the
land."
The CARP Law, for its part, conditions the transfer of possession and
ownership of the land to the government on receipt by the landowner
of the corresponding payment or the deposit by the DAR of the
compensation in cash or LBP bonds with an accessible bank. Until then,
title also remains with the landowner. 57 No outright change of
ownership is contemplated either.
Hence, the argument that the assailed measures violate due process
by arbitrarily transferring title before the land is fully paid for must also
be rejected.
It is worth stressing at this point that all rights acquired by the tenantfarmer under P.D. No. 27, as recognized under E.O. No. 228, are

retained by him even now under R.A. No. 6657. This should counterbalance the express provision in Section 6 of the said law that "the
landowners whose lands have been covered by Presidential Decree No.
27 shall be allowed to keep the area originally retained by them
thereunder, further, That original homestead grantees or direct
compulsory heirs who still own the original homestead at the time of
the approval of this Act shall retain the same areas as long as they
continue to cultivate said homestead."
In connection with these retained rights, it does not appear in G.R. No.
78742 that the appeal filed by the petitioners with the Office of the
President has already been resolved. Although we have said that the
doctrine of exhaustion of administrative remedies need not preclude
immediate resort to judicial action, there are factual issues that have
yet to be examined on the administrative level, especially the claim
that the petitioners are not covered by LOI 474 because they do not
own other agricultural lands than the subjects of their petition.
Obviously, the Court cannot resolve these issues. In any event,
assuming that the petitioners have not yet exercised their retention
rights, if any, under P.D. No. 27, the Court holds that they are entitled
to the new retention rights provided for by R.A. No. 6657, which in fact
are on the whole more liberal than those granted by the decree.
V
The CARP Law and the other enactments also involved in these cases
have been the subject of bitter attack from those who point to the
shortcomings of these measures and ask that they be scrapped
entirely. To be sure, these enactments are less than perfect; indeed,
they should be continuously re-examined and rehoned, that they may
be sharper instruments for the better protection of the farmer's rights.
But we have to start somewhere. In the pursuit of agrarian reform, we
do not tread on familiar ground but grope on terrain fraught with
pitfalls and expected difficulties. This is inevitable. The CARP Law is not
a tried and tested project. On the contrary, to use Justice Holmes's
words, "it is an experiment, as all life is an experiment," and so we
learn as we venture forward, and, if necessary, by our own mistakes.
We cannot expect perfection although we should strive for it by all
means. Meantime, we struggle as best we can in freeing the farmer
from the iron shackles that have unconscionably, and for so long,
fettered his soul to the soil.
By the decision we reach today, all major legal obstacles to the
comprehensive agrarian reform program are removed, to clear the way
for the true freedom of the farmer. We may now glimpse the day he
will be released not only from want but also from the exploitation and
disdain of the past and from his own feelings of inadequacy and
helplessness. At last his servitude will be ended forever. At last the
farm on which he toils will be his farm. It will be his portion of the
Mother Earth that will give him not only the staff of life but also the joy
of living. And where once it bred for him only deep despair, now can he
see in it the fruition of his hopes for a more fulfilling future. Now at last
can he banish from his small plot of earth his insecurities and dark
resentments and "rebuild in it the music and the dream."
WHEREFORE, the Court holds as follows:
1. R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos.
228 and 229 are SUSTAINED against all the constitutional
objections raised in the herein petitions.

2. Title to all expropriated properties shall be transferred to

the State only upon full payment of compensation to their
respective owners.
3. All rights previously acquired by the tenant- farmers
under P.D. No. 27 are retained and recognized.
4. Landowners who were unable to exercise their rights of
retention under P.D. No. 27 shall enjoy the retention rights
granted by R.A. No. 6657 under the conditions therein
prescribed.
5. Subject to the above-mentioned rulings all the petitions
are DISMISSED, without pronouncement as to costs.
SO ORDERED.