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Admin 1a
Admin 1a
SYLLABUS
1. CRIMINAL LAW; SEDITION; GOVERNMENT DEFINED. — The term "government" as employed in Act No. 292 of the United States Philippine
Commission is used in the abstract sense of the existing political system as distinguished from the concrete organism of the Government.
2. CRIMINAL PROCEDURE; COMPLAINT OR INFORMATION. — When an offense may be committed in any of several different modes and the
complaint alleges the crime to have been committed in two or more modes, it is sufficient to prove the offense committed in any one of them.
3. ID.; SEDITION. — The publication of an article can not be punished under Act No. 292 of the United States Philippine Commission as having
seditious tendencies unless it has a tendency to produce disaffection or a feeling incompatible with a disposition to remain loyal to the Government and
obedient to its laws.
4. ID.; ID. The publication of an article abusive of the United States Philippine Commission and its members is not a libel upon the Government
and does not fall within said Act No. 292 of the United States Philippine Commission.
D E C I S I O N
LADD, J p:
The defendants have been convicted upon a complaint charging them with the offense of writing, publishing, and circulating a scurrilous libel
against the Government of the United States and the Insular Government of the Philippine Islands. The complaint is based upon section 8 of Act No.
292 of the Commission, which is as follows:
"Every person who shall utter seditious words or speeches, write, publish, or circulate scurrilous libels against the Government of the
United States or the Insular Government of the Philippine Islands, or which tend to disturb or obstruct any lawful officer in executing his
office, or which tend to instigate others to cabal or meet together for unlawful purposes, or which suggest or incite rebellious conspiracies
or riots, or which tend to stir up the people against the lawful authorities, or to disturb the peace of the community, the safety and order
of the Government, or who shall knowingly conceal such evil practices, shall be punished by a fine not exceeding two thousand dollars or
by imprisonment not exceeding two years, or both, in the discretion of the court."
The alleged libel was published as an editorial in the issue of the "Manila Freedom" of April 6, 1902, under the caption of " A few hard facts."
The Attorney-General in his brief indicates the following passages of the article as those upon which he relies to sustain the conviction:
"Sidney Adamson, in a late letter in 'Leslie's weekly,' has the following to say of the action of the Civil Commission in appointing
rascally natives to important Government positions:
"'It is a strong thing to say, but nevertheless true, that the Civil Commission, through its ex-insurgent office holders, and by its
continual disregard for the records of natives obtained during the military rule of the Islands, has, in its distribution of offices, constituted
a protectorate over a set of men who should be in jail or deported. . . . [Reference is then made to the appointment of one Tecson as justice
of the peace.] This is the kind of foolish work that the Commission is doing all over the Islands, reinstating insurgents and rogues and turning
down the men who have during the struggle, at the risk of their lives, aided the Americans.'
"There is no doubt but that the Filipino office holders of the Islands are in a good many instances rascals.
"The Commission has exalted to the highest positions in the Islands Filipinos who are alleged to be notoriously corrupt and rascally,
and men of no personal character.
"It is a notorious fact that many branches of the Government organized by the Civil Commission are rotten and corrupt. The fiscal
system, upon which life, liberty, and justice depends, is admitted by the Attorney-General himself to be most unsatisfactory. It is a fact
that the Philippine judiciary is far from being what it should. Neither fiscals nor judges can be persuaded to convict insurgents when they
wish to protect them.
"Now we hear all sorts of reports as to rottenness existing in the province [of Tayabas], and especially the northern end of it; it is
said that it is impossible to secure the conviction of lawbreakers and outlaws by the native justices, or a prosecution by the native fiscals.
"The long and short of it is that Americans will not stand for an arbitrary government, especially when evidences of carpet bagging
and rumors of graft are too thick to be pleasant."
We do not understand that it is claimed that the defendants succeeded in establishing at the trial the truth of any of the foregoing statements. The only
question which we have considered is whether their publication constitutes an offense under section 8 of Act No. 292, above cited.
Several allied offenses or modes of committing the same offense are defined in that section, viz: (1) The uttering of seditious words or speeches; (2) the
writing, publishing, or circulating of scurrilous libels against the Government of the United States or the Insular Government of the Philippine Islands; (3)
the writing, publishing, or circulating of libels which tend to disturb or obstruct any lawful officer in executing his office; (4) or which tend to instigate others
to cabal or meet together for unlawful purposes; (5) or which suggest or incite rebellions conspiracies or riots; (6) or which tend to stir up the people against
the lawful authorities or to disturb the peace of the community, the safety and order of the Government; (7) knowingly concealing such evil practices.
The complaint appears to be framed upon the theory that a writing, in order to be punishable as a libel under this section, must be of a scurrilous nature
and directed against the Government of the United States or the Insular Government of the Philippine Islands, and must, in addition, tend to some one
of the results enumerated in the section. The article in Question is described in the complaint as "a scurrilous libel against the Government of the United
States and the Insular Government of the Philippine Islands, which tends to obstruct the lawful officers of the United States and the Insular Government
of the Philippine Islands in the execution of their offices, and which tends to instigate others to cabal and meet together for unlawful purposes, and which
suggests and incites rebellious conspiracies, and which tends to stir up the people against the lawful authorities, and which disturbs the safety and order
of the Government of the United States and the Insular Government of the Philippine Islands." But it is "a well-settled rule in considering indictments that
where an offense may be committed in any of several different modes, and the offense, in any particular instance, is alleged to have been committed in
two or more modes specified, it is sufficient to prove the offense committed in any one of them, provided that it be such as to constitute the substantive
offense" (Com. vs. Kneeland, 20 Pick., Mass., 206, 215), and the defendants may, therefore, be convicted if any one of the substantive charges into which
the complaint may be separated has been made out.
We are all, however, agreed upon the proposition that the article in question has no appreciable tendency to "disturb or obstruct any lawful officer in
executing his office," or to "instigate'' any person or class of persons "to cabal or meet together for unlawful purposes," or to "suggest or incite rebellious
conspiracies or riots," or to "stir up the people against the lawful authorities or to disturb the peace of the community, the safety and order of the
Government." All these various tendencies, which are described in section 8 of Act No. 292, each one of which is made an element of a certain form of
libel, may be characterized in general terms as seditious tendencies. This is recognized in the description of the offenses punished by this section, which is
found in the title of the act, where they are defined as the crimes of "seditious utterances, whether written or spoken."
Excluding from consideration the offense of publishing "scurrilous libels against the Government of the United States or the Insular Government of the
Philippine Islands," which may conceivably stand on a somewhat different footing, the offenses punished by this section all consist in inciting, orally or in
writing, to acts of disloyalty or disobedience to the lawfully constituted authorities in these Islands. And while the article in question, which is, in the main,
a virulent attack against the policy of the Civil Commission in appointing natives to office, may have had the effect of exciting among certain classes
dissatisfaction with the Commission and its measures, we are unable to discover anything in it which can be regarded as having a tendency to produce
anything like what may be called disaffection, or, in other words, a state of feeling incompatible with a disposition to remain loyal to the Government and
obedient to the laws. There can be no conviction, therefore, for any of the offenses described in the section on which the complaint is based, unless it is for
the offense of publishing a scurrilous libel against the Government of the United States or the Insular Government of the Philippine Islands.
Can the article be regarded as embraced within the description of "scurrilous libels against the Government of the United States or the Insular Government
of the Philippine Islands?" In the determination of this question we have encountered great difficulty, by reason of the almost entire lack of American
precedents which might serve as a guide in the construction of the law. There are, indeed, numerous English decisions, most of them of the eighteenth
century, on the subject of libelous attacks upon the "Government, the constitution, or the law generally," attacks upon the Houses of Parliament, the Cabinet,
the Established Church, and other governmental organisms, but these decisions are not now accessible to us, and, if they were, they were made under such
different conditions from those which prevail at the present day, and are founded upon theories of government so foreign to those which have inspired the
legislation of which the enactment in question forms a part, that they would probably afford but little light in the present inquiry. In England, in the latter
part of the eighteenth century, any "written censure upon public men for their conduct as such," as well as any written censure "upon the laws or upon
the institutions of the country," would probably have been regarded as a libel upon the Government. (2 Stephen, History of the Criminal Law of England,
348.) This has ceased to be the law in England, and it is doubtful whether it was ever the common law of any American State. "It is true that there are
ancient dicta to the effect that any publication tending to possess the people with an ill opinion of the Government is a seditious libel (per Holt, C. J., in
R. vs. Tuchin, 1804, 5 St. Tr., 532, and Ellenborough, C. J., in R. vs. Cobbett, 1804, 29 How. St. Tr., 49), but no one would accept that doctrine now.
Unless the words used directly tend to foment riot or rebellion or otherwise to disturb the peace and tranquillity of the Kingdom, the utmost latitude is
allowed in the discussion of all public affairs." (11 Enc. of the Laws of England, 450.) Judge Cooley says (Const. Lim., 528): "The English common-law rule
which made libels on the constitution or the government indictable, as it was administered by the courts, seems to us unsuited to the condition and
circumstances of the people of America, and therefore never to have been adopted in the several States."
We find no decisions construing the Tennessee statute (Code, sec. 6663), which is apparently the only existing American statute of a similar character to
that in question, and from which much of the phraseology of the latter appears to have been taken, though with some essential modifications.
The important question is to determine what is meant in section 8 of Act No. "92 by the expression "the Insular Government of the Philippine Islands."
Does it mean in a general and abstract sense the existing laws and institutions of the Islands, or does it mean the aggregate of the individuals by whom
the Government of the Islands is, for the time being, administered? Either sense would doubtless be admissible.
"We understand, in modern political science . . . by the term "government", that institution or aggregate of institutions by which
an independent society makes and carries out those rules of action which are necessary to enable men to live in a social state, or which
are imposed upon the people forming that society by those who possess the power or authority of prescribing them. Government is the
aggregate of authorities which rule a society. By "administration" again, we understand in modern times, and especially in more or less
free countries, the aggregate of those persons in whose hands the reins of government are for the time being (the chief ministers or heads
of departments)." (Bouvier, Law Dictionary, 891.) But the writer adds that the terms "government and ''administration" are not always
used in their strictness, and that "government" is often used for ''administration.''
In the act of Congress of July 14, 1798, commonly known as the "Sedition Act," it is made an offense to "write, print, utter, or publish," or "cause to procure
to be written, printed, uttered, or published," or to "knowingly and willingly assist or aid in writing, printing, uttering, or publishing any false, scandalous,
and malicious writing or writings against the Government of the United States, or either house of the Congress of the United States, or the President of
the United States, with intent to defame the said Government, or either house of the said Congress or the said President, or to bring-them, or either of
them, into contempt or disrepute, or to excite against them or either or any of them the hatred of the good people of the United States," etc. The term
"government" would appeal to be used here in the abstract sense of the existing political system, as distinguished from the concrete organisms of the
Government — the houses of Congress and the Executive — which are also specially mentioned.
Upon the whole, we are of the opinion that this is the sense in which the term is used in the enactment under consideration.
It may be said that there can be no such thing as a scurrilous libel, or any sort of a libel, upon an abstraction like the Government in the sense of the laws
and institutions of a country, but we think an answer to this suggestion is that the expression "scurrilous libel" is not used in section 8 of Act No. 292 in
the sense in which it is used in the general libel law (Act No. 277) — that is, in the sense of written defamation of individuals — but in the wider sense,
in which it is applied in the common law to blasphemous, obscene, or seditious publications in which there may be no element of defamation whatever. "The
word 'libel' as popularly used, seems to mean only defamatory words; but words written, if obscene, blasphemous, or seditious, are technically called libels,
and the publication of them is, by the law of England, an indictable offense." (Bradlaugh vs. The Queen, 3 Q. B. D., 607, 627, per Bramwell, L. J. See Com. vs.
Kneeland, 20 Pick., 206, 211.)
While libels upon forms of government, unconnected with defamation of individuals, must in the nature of things be of uncommon occurrence, the offense
is by no means an imaginary one. An instance of a prosecution for an offense essentially of this nature is Respublica vs. Dennie, 4 Yeates (Pa.), 267, where
the defendant was indicted "as a factious and seditious person of a wicked mind and unquiet and turbulent disposition and conversation, seditiously,
maliciously, and willfully intending, as much as in him lay, to bring into contempt and hatred the independence of the United States, the constitution of
this Commonwealth and of the United States, to excite popular discontent and dissatisfaction against the scheme of polity instituted, and upon trial in
the said United States and in the said Commonwealth, to molest, disturb, and destroy the peace and tranquillity of the said United States and of the said
Commonwealth, to condemn the principles of the Revolution, and revile, depreciate, and scandalize the characters of the Revolutionary patriots and
statesmen, to endanger, subvert, and totally destroy the republican constitutions and free governments of the said United States and this Commonwealth,
to involve the said United States and this Commonwealth in civil war, desolation, and anarchy, and to procure by art and force a radical change and
alteration in the principles and forms of the said constitutions and governments, without the free will, wish, and concurrence of the people of the said United
States and this Commonwealth, respectively," the charge being that "to fulfill, perfect, and bring to effect his wicked, seditious, and detestable intentions
aforesaid he . . . falsely, maliciously, factiously, and seditiously did make, compose, write, and publish the following libel, to wit: 'A democracy is scarcely
tolerable at any period of national history. Its omens are always sinister and its powers are unpropitious. With all the lights of experience blazing before
our eves, it is impossible not to discover the futility of this form of government. It was weak and wicked at Athens, it was bad in Sparta, and worse in Rome.
It has been tried in France and terminated in despotism. It was tried in England and rejected with the utmost loathing and abhorrence. It is on its trial
here and its issue will be civil war, desolation, and anarchy. No wise man but discerns its imperfections; no good man but shudders at its miseries; no honest
man but proclaims its fraud, and no brave man but draws his sword against its force. The institution of a scheme of polity so radically contemptible and
vicious is a memorable example of what the villainy of some men can devise, the folly of others receive, and both establish, in despite of reason, reflection,
and sensation.'"
An attack upon the lawfully established system of civil government in the Philippine Islands, like that which Dennie was accused of making upon the
republican form of government lawfully established in the United States and in the State of Pennsylvania would, we think, if couched in scandalous language,
constitute the precise offense described in section 8 of Act No. 292 as a scurrilous libel against the Insular Government of the Philippine Islands.
Defamation of individuals, whether holding official positions or not, and whether directed to their public conduct or to their private life, may always be
adequately punished under the general libel law. Defamation of the Civil Commission as an aggregation, it being "a body of persons definite and small enough
for its individual members to be recognized as such" ( Stephen, Digest of the Criminal Law, art. 277), as well as defamation of and of the individual members
of the Commission or of the Civil Governor, either in his public capacity or as a private individual, may be so punished. The general libel law enacted by
the Commission was in force when Act No. 292 was passed. There was no occasion for any further legislation on the subject of libels against the individuals
by whom the Insular Government is administered — against the Insular Government in the sense of the aggregate of such individuals. There was occasion
for stringent legislation against seditious words or libels, and that is the main if not the sole purpose of the section under consideration. It is not unreasonable
to suppose that the Commission, in enacting this section, may have conceived of attacks of a malignant or scurrilous nature upon the existing political system
of the United States, or the political system established in these Islands by the authority of the United States, as necessarily of a seditious tendency, but
it is not so reasonable to suppose that they conceived of attacks upon the personnel of the government as necessarily tending to sedition. Had this been their
view it seems probable that they would, like the framers of the Sedition Act of 1798, have expressly and specifically mentioned the various public officials
and collegiate governmental bodies defamation of which they meant to punish as sedition.
The article in question contains no attack upon the governmental system of the United States, and it is quite apparent that, though grossly abusive as
respects both the Commission as a body and some of its individual members, it contains no attack upon the governmental system by which the authority
of the United States is enforced in these Islands. The form of government by a Civil Commission and a Civil Governor is not assailed. It is the character of
the men who are intrusted with the administration of the government that the writer is seeking to bring into disrepute by impugning the purity of their
motives, their public integrity, and their private morals, and the wisdom of their policy. The publication of the article, therefore, no seditious tendency being
apparent, constitutes no offense under Act No. 292, section 8.
||| (U.S. v. Dorr, G.R. No. 1051, [May 19, 1903], 2 PHIL 332-343)
First Corporate Counsel Simeon M. Gopengco and Lorenzo Mosqueda for appellants National Coconut Corporation and Board of Liquidators.
Solicitor General Ambrosio Padilla and Solicitor Jorge R. Coquia for appellants.
SYLLABUS
1. POLITICAL LAW; TERM "GOVERNMENT OF THE REPUBLIC OF THE PHILIPPINES" CONSTRUED. — The term "Government of the Republic
of the Philippines" used in section 2 of the Revised Administrative Code refers to that government entity through which functions of the government
are exercised as an attribute of sovereignty, and in this are included those arms through which political authority is made effective whether they be
provincial, municipal or other form of local government. These are what we call municipal corporations. They do not include government entities which
are given a corporate personality separate and distinct from the government and which are governed by the Corporation Law, such as the National
Coconut Corporation. Their powers, duties and liabilities have to determined in the light of that law and of their corporate charters. They do not
therefore come within the exemption clause prescribed in section 16, Rule 130 of ourRules of Court.
2. STENOGRAPHERS; TRANSCRIPT FEES; PAYMENT OF FEES BEYOND THE LIMIT PRESCRIBED BY THE RULES OF COURT, VALID. — It is
true that in section 8, Rule 130, stenographers may only charge as fees P0.30 for each page of transcript of not less than 200 words before the appeal
is taken and P0.15 for each page after filing of the appeal, but where, as in the case at bar, the party has agreed and in fact has paid P1 per page
for the services rendered by the stenographers and has not raised any objection to the amount paid until its propriety was disputed by the Auditor
General, the payment of the fees became contractual and as such is valid even if it goes beyond the limit prescribed by the Rules of Court.
D E C I S I O N
BAUTISTA ANGELO, J p:
Plaintiffs herein are court stenographers assigned in Branch VI of the Court of First Instance of Manila. During the pendency of Civil Case No.
2293 of said court, entitled Francisco Sycip vs. National Coconut Corporation, Assistant Corporate Counsel Federico Alikpala, counsel for defendant,
requested said stenographers for copies of the transcript of the stenographic notes taken by them during the hearing. Plaintiffs complied with the request
by delivering to Counsel Alikpala the needed transcript containing 714 pages and thereafter submitted to him their bills for the payment of their
fees. The National Coconut Corporation paid the amount of P564 to Leopoldo T. Bacani and P150 to Mateo A. Matoto for said transcript at the rate
of P1 per page.
Upon inspecting the books of this corporation, the Auditor General disallowed the payment of these fees and sought the recovery of the amounts
paid. On January 19, 1953, the Auditor General required the plaintiffs to reimburse said amounts on the strength of a circular of the Department
of Justice wherein the opinion was expressed that the National Coconut Corporation, being a government entity, was exempt from the payment of the
fees in question. On February 6, 1954, the Auditor General issued an order directing the Cashier of the Department of Justice to deduct from the salary
of Leopoldo T. Bacani the amount of P25 every payday and from the salary of Mateo A. Matoto the amount of P10 every payday beginning March
30, 1954. To prevent deduction of these fees from their salaries and secure a judicial ruling that the National Coconut Corporation is not a government
entity within the purview of section 16, Rule 130 of the Rules of Court, this action was instituted in the Court of First Instance of Manila.
Defendants set up as a defense that the National Coconut Corporation is a government entity within the purview of section 2 of the Revised
Administrative Code of 1917 and, hence, it is exempt from paying the stenographers' fees under Rule 130 of the Rules of Court. After trial, the court
found for the plaintiffs declaring (1) "that defendant National Coconut Corporation is not a government entity within the purview of section 16, Rule
130 of the Rules of Court; (2) that the payments already made by said defendant to plaintiffs herein and received by the latter from the former in
the total amount of P714, for copies of the stenographic transcripts in question, are valid, just and legal; and (3) that plaintiffs are under no obligation
whatsoever to make a refund of these payments already received by them." This is an appeal from said decision.
Under section 16, Rule 130 of the Rules of Court, the Government of the Philippines is exempt from paying the legal fees provided for therein,
and among these fees are those which stenographers may charge for the transcript of notes taken by them that may be requested by any interested
person (section 8). The fees in question are for the transcript of notes taken during the hearing of a case in which the National Coconut Corporation is
interested, and the transcript was requested by its assistant corporate counsel for the use of said corporation.
On the other hand, section 2 of the Revised Administrative Code defines the scope of the term "Government of the Republic of the Philippines"
as follows:
"'The Government of the Philippine Islands' is a term which refers to the corporate governmental entity through which the functions
of government are exercised throughout the Philippine Islands, including, save as the contrary appears from the context, the various arms
through which political authority is made effective in said Islands, whether pertaining to the central Government or to the provincial or
municipal branches or other form of local government."
The question now to be determined is whether the National Coconut Corporation may be considered as included in the term "Government of
the Republic of the Philippines" for the purposes of the exemption of the legal fees provided for in Rule 130 of the Rules of Court.
As may be noted, the term "Government of the Republic of the Philippines" refers to a government entity through which the functions of
government are exercised, including the various arms through which political authority is made effective in the Philippines, whether pertaining to the
central government or to the provincial or municipal branches or other form of local government. This requires a little digression on the nature and
functions of our government as instituted in our Constitution.
To begin with, we state that the term "Government" may be defined as "that institution or aggregate of institutions by which an independent
society makes and carries out those rules of action which are necessary to enable men to live in a social state, or which are imposed upon the people
forming that society by those who possess the power or authority of prescribing them" (U.S. vs. Dorr, 2 Phil., 332). This institution, when referring to
the national government, has reference to what ourConstitution has established composed of three great departments, the legislative, executive, and
the judicial, through which the powers and functions of government are exercised. These functions are twofold: constitute and ministrant. The former
are those which constitute the very bonds of society and are compulsory in nature; the latter are those that are undertaken only by way of advancing
the general interests of society, and are merely optional. President Wilson enumerates the constituent functions as follows:
"'(1) The keeping of order and providing for the protection of persons and property from violence and robbery.
'(2) The fixing of the legal relations between man and wife and between parents and children.
'(3) The regulation of the holding, transmission, and interchange of property, and the determination of its liabilities for debt or for
crime.
'(7) The determination of the political duties, privileges, and relations of citizens.
'(8) Dealings of the state with foreign powers: the preservation of the state from external danger or encroachment and the
advancement of its international interests.'" (Malcolm, The Government of the Philippine Islands, p. 19.)
The most important of the ministrant functions are: public works, public education, public charity, health and safety regulations, and regulations
of trade and industry. The principles deter mining whether or not a government shall exercise certain of these optional functions are: (1) that a
government should do for the public welfare those things which private capital would not naturally undertake and (2) that a government should do
these things which by its very nature it is better equipped to administer for the public welfare than is any private individual or group of individuals.
(Malcolm, The Government of the Philippine Islands, pp. 19-20.)
From the above we may infer that, strictly speaking, there are functions which our government is required to exercise to promote its objectives
as expressed in our Constitution and which are exercised by it as an attribute of sovereignty, and those which it may exercise to promote merely the
welfare, progress and prosperity of the people. To this latter class belongs the organization of those corporations owned or controlled by the government
to promote certain aspects of the economic life of our people such as the National Coconut Corporation. These are what we call government-owned or
controlled corporations which may take on the form of a private enterprise or one organized with powers and formal characteristics of a private
corporations under the Corporation Law.
The question that now arises is: Does the fact that these corporation perform certain functions of government make them a part of the
Government of the Philippines?
The answer is simple: they do not acquire that status for the simple reason that they do not come under the classification of municipal or public
corporation. Take for instance the National Coconut Corporation. While it was organized with the purpose of "adjusting the coconut industry to a
position independent of trade preferences in the United States" and of providing "Facilities for the better curing of copra products and the proper
utilization of coconut by-products", a function which our government has chosen to exercise to promote the coconut industry, however, it was given
a corporate power separate and distinct from our government, for it was made subject to the provisions of our Corporation Law in so far as its corporate
existence and the powers that it may exercise are concerned (sections 2 and 4, Commonwealth Act No. 518). It may sue and be sued in the same manner
as any other private corporations, and in this sense it is an entity different from our government. As this Court has aptly said, "The mere fact that
the Government happens to be a majority stockholder does not make it a public corporation" (National Coal Co. vs. Collector of Internal Revenue, 46
Phil., 586-587). "By becoming a stockholder in the National Coal Company, the Government divested itself of its sovereign character so far as respects
the transactions of the corporation. . . . Unlike the Government, the corporation may be sued without its consent, and is subject to taxation. Yet the
National Coal Company remains an agency or instrumentality of government." (Government of the Philippine Islands vs. Springer, 50 Phil., 288.)
To recapitulate, we may mention that the term "Government of the Republic of the Philippines" used in section 2 of the Revised Administrative
Code refers only to that government entity through which the functions of the government are exercised as an attribute of sovereignty, and in this are
included those arms through which political authority is made effective whether they be provincial, municipal or other form of local government. These
are what we call municipal corporations. They do not include government entities which are given a corporate personality separate and distinct from
the government and which are governed by theCorporation Law. Their powers, duties and liabilities have to be determined in the light of that law and
of their corporate charters. They do not therefore come within the exemption clause prescribed in section 16, Rule 130 of our Rules of Court.
"Public corporations are those formed or organized for the government of a portion of the State." (Section 3, Act No.
1459 n, Corporation Law).
"'The generally accepted definition of a municipal corporation would only include organized cities and towns, and like organizations,
with political and legislative powers for the local, civil government and police regulations of the inhabitants of the particular district included
in the boundaries of the corporation.' Heller vs. Stremmel, 52 Mo. 309, 312."
"In its more general sense the phrase 'municipal corporation' may include both towns and counties, and other public corporations
created by government for political purposes. In its more common and limited signification, it embraces only incorporated villages, towns
and cities. Dunn vs. Court of County Revenues, 85 Ala. 144, 146, 4 So. 661." (McQuillin, Municipal Corporations, 2nd ed., Vol. 1, p. 385.)
"We may, therefore, define a municipal corporation in its historical and strict sense to be the incorporation, by the authority of the
government, of the inhabitants of a particular place or district, and authorizing them in their corporate capacity to exercise subordinate
specified powers of legislation and regulation with respect to their local and internal concerns. This power of local government is the
distinctive purpose and the distinguishing feature of a municipal corporation proper." (Dillon, Municipal Corporations, 5th ed., Vol. I, p. 59.)
It is true that under section 8, Rule 130, stenographers may only charge as fees P0.30 for each page of transcript of not less than 200 words
before the appeal is taken and P0.15 for each page after the filing of the appeal, but in this case the National Coconut Corporation has agreed and in
fact has paid P1.00 per page for the services rendered by the plaintiffs and has not raised any objection to the amount paid until its propriety was
disputed by the Auditor General. The payment of the fees in question became therefore contractual and as such is valid even if it goes beyond the limit
prescribed in section 8, Rule 130 of the Rules of Court.
As regards the question of procedure raised by appellants, suffice it to say that the same is insubstantial, considering that this case refers not
to a money claim disapproved by the Auditor General but to an action of prohibition the purpose of which is to restrain the officials concerned from
deducting from plaintiffs' salaries the amount paid to them as stenographers' fees. This case does not come under section 1, Rule 45 of the Rules of
Court relative to appeals from a decision of the Auditor General.
||| (Bacani v. National Coconut Corp., G.R. No. L-9657, [November 29, 1956], 100 PHIL 468-475)
SYNOPSIS
After being awarded the contract for the general construction of petitioner's regional office building in San Fernando, La Union, private respondent
commenced the actual construction work on the project. However, while the work was in progress, petitioner advised private respondent to stop its
construction work in view of the government's policy of economic restraint. Thereafter, negotiations for the settlement of private respondent's claims on
the contract were undertaken, but the same proved futile. Private respondent then sued petitioner in the trial court for damages for breach of contract.
The trial court rendered judgment in its favor and sentenced petitioner to pay damages. Petitioner appealed to the Court of Appeals, but the judgment
of the trial court was affirmed. Forthwith, it went to the Supreme Court on a petition for review of the decision of the Court of Appeals.
Decision affirmed with modification of award for attorney's fees to ten per centum (10%) of the total recovery. cdasia
SYLLABUS
1. APPEAL; DEFENSES NOT PLEADED IN THE ANSWER; MAY NOT BE RAISED FOR THE FIRST TIME ON APPEAL. — It is a familiar rule in procedure
that defenses not pleaded in the answer not be raised for the first time on appeal. Indeed, in the Court of Appeals, only such questions as are related to
the issues made by the parties in their pleadings may be brought up, particularly where factual matters may be involved, because to permit a party to change
his theory on appeal "would be unfair to the adverse party" (II, Moran, Rules of Court, p. 505, 1970 ed.). Furthermore, under Section 7 of Rule 51, the
appellate court cannot consider any error of the lower court "unless stated in the assignment of errors and property argued in the brief."
2. REVISED ADMINISTRATIVE CODE; GOVERNMENT CONTRACTS; CENTRAL BANK CONTRACTS NOT COVERED BY ADMINISTRATIVE CODE. —
Contracts entered into by the Central Bank are not within the contemplation of Sections 607 and 608 of the Administrative Code. Section 607 specifically
refers to "expenditure(s) of the National Government" and that the term "National Government" may not be deemed to include the Central Bank.
3. ID.; ID.; "NATIONAL GOVERNMENT" CONSTRUED. — Under the Administrative Code itself, the term "National Government" refers only to the central
government consisting of the legislative, executive and judicial departments of the government, as distinguished from local governments and other
governmental entities and is not synonymous, therefore, with the terms "The Government of the Republic of the Philippines" or "Philippine Government",
which are the expressions broad enough to include not only the central government but also the provincial and municipal governments, chartered cities
and other government-controlled corporations or agencies, like the Central Bank. (I, Martin, Administrative Code, p. 15.)
4. ID.; ID.; ID.; CENTRAL BANK IS AN AUTONOMOUS BODY. — The Central Bank is a government instrumentality, but it was created as an autonomous
body corporate to be governed by the provisions of its charter, Republic Act 265, "to administer the monetary and banking system of the Republic." (Sec.
1). It is not subject, like the Social Security Commission, to Section 1901 and related provisions of the Revised Administrative Code which require national
government constructions to be done by or under the supervision of the Bureau of Public Works. (Op. of the Sec. of Justice No. 92, Series of 1960).
5. ID.; ID.; ID.; SECTION 607 OF ADMINISTRATIVE CODE, RESTRICTIVELY CONSTRUED; CASE OF ZOBEL vs. CITY OF MANILA. — In Zobel vs. City of
Manila, 47 Phil. 69, Section 607 of the Administrative Code was construed to be inapplicable to contracts entered into by a chartered city. There is,
therefore, no valid reason why the same view should not be followed by conforming its application only to the officer comprised within the term National
Government, particularly insofar as government-owned or created corporations or entities having powers to make expenditures and to incur liabilities by
virtue of their own corporate authority independently of the national or local legislative bodies, as in the case of the Central Bank, are concerned.
6. ID.; ID.; NO CERTIFICATE OF AVAILABILITY OF FUNDS REQUIRED FOR CENTRAL BANK APPROPRIATIONS. — The Monetary Board, like any other
corporate board, makes all required appropriations directly from the funds of the Central Bank and does not need any official statement of availability
from its treasurer or auditor and without submitting any papers to, much less securing the approval of the Auditor General or any outside authority before
doing so. Indeed, this is readily to be inferred from the repeal of Administrative Code No. 290, s. 1959, by virtue of which the requirement that the Central
Bank should submit to the Auditor General for examination and review before contracts involving P10,000 or more to be entered into by it "before the
same are perfected and/or consummated" had already been eliminated at the time the transaction herein involved took place.
7. ID.; ID.; CENTRAL BANK CONTRACT IN CASE AT BAR WAS PERFECTED. — Petitioner Central Bank's posture that since the contract in question could
become effective and binding only upon the execution of the formal contract, and since no formal contract has yet been signed by the parties, there is yet
no perfected contract to speak of is untenable. According to Paragraph 1B 114.1 of its Instructions to Bidders, private respondent was "required to appear
in the office of the Owner (the Bank) in person; or, if a firm or corporations, a duly authorized representative (thereof), and to execute the contract within
(5) days after notice that the contract has been awarded to him. Failure or neglect to do so shall constitute a breach of agreement effected by the acceptance
of the Proposal." There can be no other meaning of this provision than that the Bank's acceptance of the bid of private respondent effected an actional
agreement between them.
8. ID.; ID.; ID.; BINDING EFFECT TO EVERY PARTY. — Every party to a contract who is sui juris and who has entered into it voluntarily and with full
knowledge of its unfavorable provisions may not subsequently complain about them when they are being enforced. In the absence of unavoidable just reasons,
a party could not simply refuse to execute the contract and thereby avoid it entirely. Even a government-owned corporation may not under the guise of
protecting the public interest unceremoniously disregard contractual commitments to the prejudice of the other party. Otherwise, the door would be wide
open to abuses and anomalies more detrimental to public interest.
9. ID.; ID.; PUBLIC BIDDING; AWARD OF CONTRACT CONSTITUTES ACCEPTANCE OF BIDDER'S PROPOSAL. — The award of a contract to a bidder
constitutes an acceptance of said bidder's proposal and that "the effect of said acceptance was to perfect a contract, upon notice of the award to (the
bidder)." (Valencia vs. RFC, 103 Phil. 444). Moreover, the bidder's "failure to (sign the corresponding contract) did not relieve him of the obligations arising
from the unqualified acceptance of his offer. Much less did it effect the existence of a contract between him and respondent." (Ibid).
10. ID.; ID.; PERFECTED CONTRACT; OBLIGATIONS THEREOF CANNOT BE IMPAIRED. — Inasmuch as the contract in question was perfected before the
issuance of Memorandum Circular No. 1, December 31, 1965, of the President of the Philippines, announcing the policy of fiscal restraint, the same may
not be enforced in such a manner as to result in the impairment of the obligations of the contract, for that is not constitutionally permissible. Not even
by means of a statute, which is much more weighty than a mere declaration of policy, may the government issue any regulation relieving itself or any person
from the binding effects of a contract. (Section 1(10), Article III, Philippine Constitution of 1935 and Section 11, Article IV, 1973 Constitution of the
Philippines).
11. APPEAL; FINDINGS OF FACT; GENERALLY NOT DISREGARDED. — The findings of the Court of Appeals that private respondent is entitled to the
damages claimed may not be disregarded, except as to the attorney's fees especially when they are not devoid of reasonable basis.
12. DAMAGES; "LUCRUM CESSANS"; A BASIS FOR INDEMNIFICATION. — Under Article 2200 of the Civil Code, Indemnification for damages
comprehends not only the value of the loss suffered but also that of the profits which the creditor fails to obtain. In other words, lucrum cessans is also a
basis for indemnification (General Enterprises, Inc. vs. Lianga Bay Logging Co., Inc., 11 SCRA 733).
D E C I S I O N
BARREDO, J p:
Petition of the Central Bank of the Philippines for review of the decision of the Court of Appeals in CA-G.R. No. 43638-R affirming the judgment of the
Court of First Instance of Rizal in Civil Case No. Q-10919 which sentenced petitioner to pay respondent Ablaza Construction and Finance Corporation
damages for breach of contract in that after having formally and officially awarded, pursuant to the results of the usual bidding, to Ablaza in December
1965 the "contract" for the construction of its San Fernando, La Union branch building and allowed said contractor to commence the work up to about
May, 1966, albeit without any written formal contract having been executed, the Bank failed and refused to proceed with the project, unless the plans
were revised and a lower price were agreed to by Ablaza, the Bank claiming that its action was pursuant to the policy of fiscal restraint announced by the
then new President of the Philippines on December 30, 1965 and Memorandum Circular No. 1 dated December 31, 1965 of the same President.
The factual background of this case is related in the following portions of the decision of the trial court, which the Court of Appeals affirmed without
modification:
"Sometime in 1965, defendant Central Bank of the Philippines issued Invitations to Bid and Instructions to Bidders for the purpose of
receiving sealed proposals for the general construction of its various proposed regional offices, including the Central Bank regional office
building in San Fernando, La Union.
In response to the aforesaid Invitations to Bid, the plaintiff Ablaza Construction and Finance Corporation, which was one of the qualified
bidders, submitted a bid proposal for the general construction of defendant's proposed regional office building in San Fernando, La Union
at the public bidding held on November 3, 1965. The said proposal was, as required by the defendant accompanied by a cash bidder's bond
in the sum of P275,000.00.
On December 7, 1965, the Monetary Board of the defendant Central Bank of the Philippines, after evaluating all the bid proposals
submitted during the above-mentioned bidding, unanimously voted and approved the award the plaintiff of the contract for the general
construction of defendant's proposed regional office building in San Fernando, La Union, for the sum of P3,749,000.00 under plaintiff's
Proposal Item No. 2.
Pursuant thereto, on December 10, 1965, Mr. Rizalino L. Mendoza, Assistant to the Governor and concurrently the Chairman of the
Management Building Committee of the defendant Central Bank of the Philippines, set a telegram to the plaintiff, informing the latter
that the contract for the general construction of defendant's proposed regional office building in San Fernando, La Union, had been awarded
to the plaintiff. The said telegram was followed by a formal letter, also dated December 10, 1965, duly signed by said Mr. Rizalino L.
Mendoza, confirming the approval of the award of the above-stated contract under plaintiff's Proposal Item No. 2 in the amount of
P3,749,000.00.
Upon receipt of the aforementioned letter, plaintiff immediately accepted the said award by means of a letter dated December 15, 1965,
whereby plaintiff also requested permission for its workmen to enter the site of the project, build a temporary shelter and enclosure, and
do some clearing job thereat. Accordingly, said permission was granted by the defendant as embodied in its letter dated January 4, 1966,
addressed to the plaintiff.
Within five (5) days from receipt by the plaintiff of the said notice of award, and several times thereafter, Mr. Nicomedes C. Ablaza, an
officer of the plaintiff corporation, went personally to see Mr. Rizalino L. Mendoza at the latter's Central Bank office to follow up the signing
of the corresponding contract. A performance bond in the total amount of P962,250.00 (P275,000.00 of which was in cash and
P687,250.00 in the form of a surety bond) was subsequently posted by the plaintiff in compliance with the above-stated Instructions to
Bidders, which bond was duly accepted by the defendant.
Pursuant to the permission granted by the defendant, as aforesaid, plaintiff commenced actual construction work on the project about the
middle of January, 1966. On February 8, 1966, by means of a formal letter, defendant requested the plaintiff to submit a schedule of
deliveries of materials which, according to plaintiff's accepted proposal, shall be furnished by the defendant. In compliance therewith, on
February 16, 1966, plaintiff submitted to the defendant the schedule of deliveries requested for.
During the period when the actual construction work on the project was in progress, Mr. Nicomedes G. Ablaza had several meetings with
Mr. Rizalino L. Mendoza at the latter's office in the Central Bank. During those meetings, they discussed the progress of the construction
work being then undertaken by the plaintiff of the projects of the defendant in San Fernando, La Union, including the progress of the
excavation work.
Sometime during the early part of March, 1966, Mr. Rizalino L. Mendoza was at the construction site of the said project. While he was
there, he admitted having seen pile of soil in the premises. At that time, the excavation work being undertaken by the plaintiff was about
20% complete. On March 22, 1966, defendant again wrote the plaintiff, requesting the latter to submit the name of its representative
authorized to sign the building contract with the defendant. In compliance with the said request, plaintiff submitted to the defendant the
name of its duly authorized representative by means of a letter dated March 24, 1966.
A meeting called by the defendant was held at the conference room of the Central Bank on May 20, 1966. At the said meeting, the
defendant, thru Finance Secretary Eduardo Romualdez, announced, among other things, the reduction of the appropriations for the
construction of the defendant's various proposed regional offices, including that of the proposed San Fernando, La Union regional office
building, the construction of which had already been started by the plaintiff. He also stated that the Central Bank Associated Architects
would be asked to prepare new plans and designs based on such reduced appropriations. The defendant, during that same meeting, also
advised the plaintiff, thru Messrs. Nicomedes G. Ablaza and Alfredo G. Ablaza (who represented the plaintiff corporation at the said
meeting), to stop its construction work on the Central Bank Regional office building in San Fernando, La Union. This was immediately
complied with by the plaintiff, although its various construction equipment remained in the jobsite. The defendant likewise presented
certain offer and proposals to the plaintiff, among which were: (a) the immediate return of plaintiff's cash bidder's bond of P275,000.00;
(b) the payment of interest on said bidder's bond at 12% per annum; (c) the reimbursement to the plaintiff of the value of all the work
accomplished at the site; (d) the entering into a negotiated contract with the plaintiff on the basis of the reduced appropriation for the
project in question; and (e) the reimbursement of the premium on plaintiff's performance bond. Not one of these offers and proposals of
the defendant, however, was accepted by the plaintiff during that meeting of May 20, 1966.
On June 3, 1966, plaintiff, thru counsel, wrote the defendant, demanding for the formal execution of the corresponding contract, without
prejudice to its claim for damages. The defendant, thru its Deputy Governor, Mr. Amado R. Briñas, on June 15, 1966, replied to the said
letter of the plaintiff, whereby the defendant claimed that an agreement was reached between the plaintiff and the defendant during the
meeting held on May 20, 1966. On the following day, however, in its letter dated June 16, 1966, the plaintiff, thru counsel, vehemently
denied that said parties concluded any agreement during the meeting in question.
On July 5, 1966, defendant again offered to return plaintiff's cash bidder's bond in the amount of P275,000.00. The plaintiff, thru counsel,
on July 6, 1966, agreed to accept the return of the said cash bond, without prejudice, however, to its claims as contained in its letters
to the defendant dated June 3, June 10, and June 16, 1966, and with further reservation regarding payment of the corresponding
interest thereon. On July 7, 1966, the said sum of P275,000.00 was returned by the defendant to the plaintiff.
On January 30, 1967, in accordance with the letter of the plaintiff, thru counsel, dated January 26, 1967, the construction equipment
of the plaintiff were pulled out from the construction site, for which the plaintiff incurred hauling expenses.
The negotiations of the parties for the settlement of plaintiff's claims out of court proved to be futile; hence, the present action was instituted
by plaintiff against the defendant." (Pp. 249-256, Rec. on Appeal).
It may be added that the Instructions to Bidders on the basis of which the bid and award in question were submitted and made contained, among others,
the following provisions:
"IB 113.4 The acceptance of the Proposal shall be communicated in writing by the Owner and no other act of the Owner shall constitute
the acceptance of the Proposal. The acceptance of a Proposal shall bind the successful bidder to execute the Contract and to be responsible
for liquidated damages as herein provided. The rights and obligations provided for in the Contract shall become effective and binding upon
the parties only with its formal execution.
xxx xxx xxx
"IB 114.1 The bidder whose proposal is accepted will be required to appear at the Office of the Owner in person, or, if a firm or corporation,
a duly authorized representative shall so appear, and to execute the contract within five (5) days after notice that the contract has been
awarded to him. Failure or neglect to do so shall constitute a breach of agreement effected by the acceptance of the Proposal.
"IB 118.1 The Contractor shall commence the work within ten (10) calendar days from the date he receives a copy of the fully executed
Contract, and he shall complete the work within the time specified." (Pp. 18-19 & 58-59, Petitioner-Appellant's Brief.)
In the light of these facts, petitioner has made the following assignment of errors:
"I. THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS A PERFECTED CONTRACT BETWEEN PETITIONER CENTRAL BANK
OF THE PHILIPPINES AND RESPONDENT ABLAZA CONSTRUCTION & FINANCE CORPORATION FOR THE GENERAL CONSTRUCTION
WORK OF PETITIONER'S REGIONAL OFFICE BUILDING AT SAN FERNANDO, LA UNION.
II. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAS COMMITTED A BREACH OF CONTRACT.
III. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAD GIVEN ITS APPROVAL TO THE WORK DONE BY
RESPONDENT ABLAZA CONSTRUCTION & FINANCE CORPORATION.
IV. THE COURT OF APPEALS ERRED IN HOLDING THAT THE AWARD OF ACTUAL AND COMPENSATORY DAMAGES, ATTORNEY'S FEES
AND RETAINING FEE IS FAIR AND REASONABLE, AND IN HOLDING THAT PETITIONER IS LIABLE FOR COSTS." (Pp. A & B,
Petitioner-Appellant's Brief.)
Under the first assigned error, petitioner devotes the major part of its effort to the discussion of its proposition that there could be no perfected contract
in this case, (contrary to the conclusion of the courts below) because there is no showing of compliance, and in fact, there has been no compliance with the
requirement that there must be a certification of the availability of funds by the Auditor General pursuant to Section 607 of the Revised Administrative
Code which provides thus:
"Section 607. Certificate showing appropriation to meet contract. — Except in the case of a contract for personal service or for supplies
to be carried in stock, no contract involving an expenditure by the National Government of three thousand pesos or more shall be entered
into or authorized until the Auditor General shall have certified to the officer entering into such obligation that funds have been duly
appropriated for such purpose and that the amount necessary to cover the proposed contract is available for expenditure on account thereof.
When application is made to the Auditor General for the certificate herein required, a copy of the proposed contract or agreement shall
be submitted to him accompanied by a statement in writing from the officer making the application showing all obligations not yet
presented for audit which have been incurred against the appropriation to which the contract in question would be chargeable; and such
certificate, when signed by the Auditor, shall be attached to and become a part of the proposed contract, and the sum so certified shall
not thereafter be available for expenditure for any other purposes until the Government is discharged from the contract in question.
Except in the case of a contract for supplies to be carried in stock, no contract involving the expenditure by any province, municipality,
chartered city, or municipal district of two thousand pesos or more shall be entered into or authorized until the treasurer of the political
division concerned shall have certified to the officer entering into such contract that funds have been duly appropriated for such purpose
and that the amount necessary to cover the proposed contract is available for expenditure on account thereof. Such certificate, when signed
by the said treasurer, shall be attached to and become part of the proposed contract and the sum so certified shall not thereafter be available
for expenditure for any other purpose until the contract in question is lawfully abrogated or discharged.
For the purpose of making the certificate hereinabove required ninety per centum of the estimated revenues and receipts which should
accrue during the current fiscal year but which are yet uncollected, shall be deemed to be in the treasury of the particular branch of the
Government against which the obligation in question would create a charge." (Pp. 23-25, Petitioner-Appellant's Brief.)
It is contended that in view of such omission and considering the provisions of Section 608 of the same code to the effect that "a purported contract entered
into contrary to the requirements of the next preceding section hereof shall be wholly void", "no contract between the petitioner and respondent Ablaza
Construction and Finance Corporation for the general construction of the proposed regional office building of the Central Bank in San Fernando, La Union,
was ever perfected because only the first stage, that is, the award of the contract to the lowest responsible bidder, respondent Ablaza Construction and
Finance Corporation, was completed." (p. 29, Petitioner-Appellant's Brief.) And in support of this pose, petitioner relies heavily on Tan C. Tee & Co. vs.
Wright thus:
"The aforesaid requirements of the Revised Administrative Code for the perfection of government contracts have been upheld by this
Honorable Court in the case of Tan C. Tee & Co. vs. Wright, 53 Phil. 172, in which case it was held that the award of the contract to the
lowest bidder does not amount to entering into the contract because of the requirement of Section 607 of the Revised Administrative Code
that a copy of the proposed contract shall be submitted to the Auditor General together with a request for the availability of funds to cover
the proposed contract. Thus, this Honorable Court held:
'To award the contract to the lowest responsible bidder is not the equivalent of entering into the contract. Section 607 of the
Administrative Code requires that a copy of the proposed contract shall be submitted along with the request for the certificate of
availability of funds, but there could be no proposed contract to be submitted until after the award was made.'
And to guide government authorities in the letting of government contracts, this Honorable Court, in said case of Tan C. Tee vs. Wright,
supra, laid down the procedure which should be followed, as follows:
'PROCEDURE WHICH SHOULD BE FOLLOWED IN THE LETTING OF CONTRACTS FOR INSULAR WORKS. — The procedure which
should be followed in the letting of contracts for Insular works is the following: First, there is an award of the contract by the Director
of Public Works to the lowest responsible bidder. Second, there is a certificate of availability of funds to be obtained from the Insular
Auditor, and in some cases from the Insular Treasurer, to cover the proposed contract. And third, there is a contract to be executed
on behalf of the Government by the Director of Public Works with the approval of the department head.'" (Pp. 27-28,
Petitioner-Appellant's Brief.)
The contention is without merit. To start with, the record reveals that it is more of an afterthought. Respondent never raised this question whether in its
pleadings or at the hearings in the trial court. We have also read its brief in the appellate court and no mention is made therein of this point. Not even
in its memorandum submitted to that court in lieu of oral argument is there any discussion thereof, even as it appears that emphasis was given therein
to various portions of the Revised Manual of Instructions to Treasurers regarding the perfection and constitution of public contracts. In fact, reference was
made therein to Administrative Order No. 290 of the President of the Philippines, dated February 5, 1959, requiring "all contracts of whatever nature
involving P10,000 or more to be entered into by all bureaus and offices, . . . including the . . . Central Bank . . . shall be submitted to the Auditor General
for examination and review before the same are perfected and/or consummated, etc.", without mentioning, however, that said administrative order was
no longer in force, the same having been revoked on January 17, 1964 by President Macapagal underAdministrative Order No. 81, s. 1964.
Hence, if only for the reason that it is a familiar rule in procedure that defenses not pleaded in the answer may not be raised for the first time on appeal,
petitioner's position cannot be sustained. Indeed, in the Court of Appeals, petitioner could only bring up such questions as are related to the issues made
by the parties in their pleadings, particularly where factual matters may be involved, because to permit a party to change his theory on appeal "would be
unfair to the adverse party." (II, Moran, Rules of Court, p. 505, 1970 ed.) Furthermore, under Section 7 of Rule 51, the appellate court cannot consider
any error of the lower court "unless stated in the assignment of errors and properly argued in the brief."
Even prescinding from this consideration of belatedness, however, it is Our considered view that contracts entered into by petitioner Central Bank are not
within the contemplation of Sections 607 and 608 cited by it. Immediately to be noted, Section 607 specifically refers to "expenditure(s) of the National
Government" and that the term "National Government" may not be deemed to include the Central Bank. Under the Administrative Code itself, the term
"National Government" refers only to the central government, consisting of the legislative, executive and judicial departments of the government, as
distinguished from local governments and other governmental entities and is not synonymous, therefore, with the terms "The Government of the Republic
of the Philippines" or "Philippine Government", which are the expressions broad enough to include not only the central government but also the provincial
and municipal governments, chartered cities and other government-controlled corporations or agencies, like the Central Bank. (I, Martin, Administrative
Code, p. 15.)
To be sure the Central Bank is a government instrumentality. But it was created as an autonomous body corporate to be governed by the
provisions of its charter, Republic Act 265, "to administer the monetary and banking system of the Republic." (Sec. 1) As such, it is authorized "to adopt,
alter, and use a corporate seal which shall be judicially noticed; to make contracts; to lease or own real and personal property, and to sell or otherwise
dispose of the same; to sue and be sued, and otherwise to do and perform any and all things that may be necessary or proper to carry out the purposes
of this Act. The Central Bank may acquire and hold such assets and incur such liabilities as result directly from operations authorized by the provisions
of this Act, or as are essential to the proper conduct of such operations." (Sec. 4) It has capital of its own and operates under a budget prepared by
its own Monetary Board and otherwise appropriates money for its operations and other expenditures independently of the national budget. It does not
depend on the National Government for the financing of its operations; it is the National Government that occasionally resorts to it for needed budgetary
accommodations. Under Section 14 of the Bank's charter, the Monetary Board may authorize such expenditures by the Central Bank as are in the
interest of the effective administration and operation of the Bank." Its prerogative to incur such liabilities and expenditures is not subject to any
prerequisite found in any statute or regulation not expressly applicable to it. Relevantly to the issues in this case, it is not subject, like the Social Security
Commission, to Section 1901 and related provisions of the Revised Administrative Code which require national government constructions to be done
by or under the supervision of the Bureau of Public Works. (Op. of the Sec. of Justice No. 92, Series of 1960) For these reasons, the provisions of the
Revised Administrative Code invoked by the Bank do not apply to it. To Our knowledge, in no other instance has the Bank ever considered itself subject
thereto.
In Zobel vs. City of Manila, 47 Phil. 169, this Court adopted a restrictive construction of Section 607 of the Administrative Code thus:
"The second question to be considered has reference to the applicability of section 607 of the Administrative Code to contracts made by
the City of Manila. In the second paragraph of said section it is declared that no contract involving the expenditure by any province,
municipality, township, or settlement of two thousand pesos or more shall be entered into or authorized until the treasurer of the political
division concerned shall have certified to the officer entering into such contract that funds have been duly appropriated for such purpose
and that the amount necessary to cover the proposed contract is available for expenditure on account thereof. It is admitted that no such
certificate was made by the treasurer of Manila at the time the contract now in question was made. We are of the opinion that the provision
cited has no application to contracts of a chartered city, such as the City of Manila. Upon examining said provision (sec. 607) it will be found
that the term chartered city, or other similar expression, such as would include the City of Manila, is not used; and it is quite manifest from
the careful use of terms in said section that chartered cities were intended to be excluded. In this connection the definitions of 'province,'
'municipality,' and 'chartered city,' given in section 2 of the Administrative Code are instructive. The circumstance that for certain purposes
the City of Manila has the status both of a province and a municipality (as is true in the distribution of revenue) is not inconsistent with
this conclusion." 1
We perceive no valid reason why the Court should not follow the same view now in respect to the first paragraph of the section by confirming its
application only to the offices comprised within the term National Government as above defined, particularly insofar as government-owned or created
corporations or entities having powers to make expenditures and to incur liabilities by virtue of their own corporate authority independently of the
national or local legislative bodies, as in the case of the petitioner herein, are concerned. Whenever necessary, the Monetary Board, like any other
corporate board, makes all required appropriations directly from the funds of the Bank and does not need any official statement of availability from
its treasurer or auditor and without submitting any papers to, much less securing the approval of the Auditor General or any outside authority before
doing so. Indeed, this is readily to be inferred from the repeal already mentioned earlier ofAdministrative Order No. 290, s. 1959, which petitioner
tried to invoke, overlooking perhaps such repeal. In other words, by that repeal, the requirement that the Central Bank should submit to the Auditor
General for examination and review before contracts involving P10,000 or more to be entered into by it "before the same are perfected and/or
consummated" had already been eliminated at the time the transaction herein involved took place. Consequently, the point of invalidity pressed,
belatedly at that, by petitioner has no leg to stand on.
The other main contention of petitioner is that the purported or alleged contract being relied upon by respondent never reached the stage of perfection
which would make it binding upon the parties and entitle either of them to sue for specific performance in case of breach thereof. In this connection, since
the transaction herein involved arose from the award of a construction contract 2 by a government corporation and the attempt on its part to discontinue
with the construction several months after such award had been accepted by the contractor and after the latter had already commenced the work without
any objection on the part of the corporation, so much so that entry into the site for the purpose was upon express permission from it, but before any written
contract has been executed, it is preferable that certain pertinent points be clarified for the proper resolution of the issue between the parties here and
the general guidance of all who might be similarly situated.
Petitioner buttresses its position in regard to this issue on the provisions earlier quoted in this opinion of the Instruction to Bidders:
"IB 113.4 The acceptance of the Proposal shall be communicated in writing by the Owner and no other act of the Owner shall constitute
the acceptance of the Proposal. The acceptance of a Proposal shall bind the successful bidder to execute the Contract and to be responsible
for liquidated damages as herein provided. The rights and obligations provided for in the Contract shall become effective and binding upon
the parties only with its formal execution.
IB 118.1 The Contractor shall commence the work within ten (10) calendar days from the date he receives a copy of the fully executed
Contract, and he shall complete the work within the time specified." (Pp. 18-19, Petitioner-Appellant's Brief.)
Petitioner insists that under these provisions, the rights and obligations of the Bank and Ablaza could become effective and binding only upon the execution
of the formal contract, and since admittedly no formal contract has yet been signed by the parties herein, there is yet no perfected contract to speak of
and respondent has, therefore, no cause of action against the Bank. And in refutation of respondent's argument that it had already started the work with
some clearing job and foundation excavations, which has never been stopped by petitioner who had previously given express permission to respondent to
enter the jobsite, build a temporary shelter and enclosures thereon, petitioner counters that under the above instructions, respondent is supposed to
commence the work "within ten (10) calendar days from the date he receives a copy of the fully executed Contract," and for said respondent to have started
actual construction work before any contract has been signed was unauthorized and was consequently undertaken at his own risk, all the above
circumstances indicative of estoppel notwithstanding.
We are not persuaded that petitioner's posture conforms with law and equity. According to Paragraph IB 114.1 of the Instructions to Bidders, Ablaza was
"required to appear in the office of the Owner (the Bank) in person, or, if a firm or corporation, a duly authorized representative (thereof), and to execute
the contract within five (5) days after notice that the contract has been awarded to him. Failure or neglect to do so shall constitute a breach of agreement
effected by the acceptance of the Proposal." There can be no other meaning of this provision than that the Bank's acceptance of the bid of respondent Ablaza
effected an actionable agreement between them. We cannot read it in the unilateral sense suggested by petitioner that it bound only the contractor, without
any corresponding responsibility or obligation at all on the part of the Bank. An agreement presupposes a meeting of minds and when that point is reached
in the negotiations between two parties intending to enter into a contract, the purported contract is deemed perfected and none of them may thereafter
disengage himself therefrom without being liable to the other in an action for specific performance.
The rather ambiguous terms of Paragraph IB 113.4 of the Instructions to Bidders relied upon by petitioner have to be reconciled with the other paragraphs
thereof to avoid lack of mutuality in the relation between the parties. This invoked paragraph stipulates that "the acceptance of (respondent's) Proposal
shall bind said respondent) to execute the Contract and to be responsible for liquidated damages as herein provided." And yet, even if the contractor is ready
and willing to execute the formal contract within the five (5) day period given to him, petitioner now claims that under the invoked provision, it could
refuse to execute such contract and still be absolutely free from any liability to the contractor who, in the meantime, has to make necessary arrangements
and incur expenditures in order to be able to commence work "within ten (10) days from the date he receives a copy of the fully executed Contract," or
be responsible for damages for delay. The unfairness of such a view is too evident to be justified by the invocation of the principle that every party to a
contract who is sui juris and who has entered into it voluntarily and with full knowledge of its unfavorable provisions may not subsequently complain about
them when they are being enforced, if only because there are other portions of the Instruction to Bidders which indicate the contrary. Certainly, We cannot
sanction that in the absence of unavoidable just reasons, the Bank could simply refuse to execute the contract and thereby avoid it entirely. Even a
government owned corporation may not under the guise of protecting the public interest unceremoniously disregard contractual commitments to the
prejudice of the other party. Otherwise, the door would be wide open to abuses and anomalies more detrimental to public interest. If there could be instances
wherein a government corporation may justifiably withdraw from a commitment as a consequence of more paramount considerations, the case at bar is
not, for the reasons already given, one of them.
As We see it then, contrary to the contention of the Bank, the provision it is citing may not be considered as determinative of the perfection of the contract
here in question. Said provision only means that as regards the violation of any particular term or condition to be contained in the formal contract, the
corresponding action therefor cannot arise until after the writing has been fully executed. Thus, after the Proposal of respondent was accepted by the Bank
thru its telegram and letter both dated December 10, 1965 and respondent in turn accepted the award by its letter of December 15, 1965, both parties
became bound to proceed with the subsequent steps needed to formalize and consummate their agreement. Failure on the part of either of them to do so,
entitles the other to compensation for the resulting damages. To such effect was the ruling of this Court in Valencia vs. RFC 103 Phil. 444. We held therein
that the award of a contract to a bidder constitutes an acceptance of said bidder's proposal and that "the effect of said acceptance was to perfect a contract,
upon notice of the award to (the bidder)". (at p. 450) We further held therein that the bidder's "failure to (sign the corresponding contract) did not relieve
him of the obligation arising from the unqualified acceptance of his offer. Much less did it affect the existence of a contract between him and respondent".
(at p. 452)
It is neither just nor equitable that Valencia should be construed to have sanctioned a one-sided view of the perfection of contracts in the sense that the
acceptance of a bid by a duly authorized official of a government-owned corporation, financially and otherwise autonomous both from the National
Government and the Bureau of Public Works, insofar as its construction contracts are concerned, binds only the bidder and not the corporation until the
formal execution of the corresponding written contract.
Such unfairness and inequity would even be more evident in the case at bar, if We were to uphold petitioner's pose. Pertinently to the point under
consideration, the trial court found as follows:
"To determine the amount of damages recoverable from the defendant, plaintiff's claim for actual damages in the sum of P298,433.35,
as hereinabove stated, and the recommendation of Messrs. Ambrosio R. Flores and Ricardo Y. Mayuga, as contained in their separate reports
(Exhs. '13' and '15'), in the amounts of P154,075.00 and P147,500.00, respectively, should be taken into account.
"There is evidence on record showing that plaintiff incurred the sum of P48,770.30 for the preparation of the jobsite, construction of
bodegas, fences, field offices, working sheds, and workmen's quarters; that the value of the excavation work accomplished by the plaintiff
at the site was P113,800.00; that the rental of the various construction equipment of the plaintiff from the stoppage of work until the
removal thereof from the jobsite would amount to P78,540.00 (Exhs. 'K'-'K-1'); that the interest on the cash bond of P275,000.00 from
November 3, 1965 to July 7, 1966 at 12% per annum would be P22,000.00; that for removing said construction equipment from the
jobsite to Manila, plaintiff paid a hauling fee of P700.00 (Exhs. 'L' - 'L-1'); that for the performance bond that the plaintiff posted as
required under its contract with the defendant, the former was obliged to pay a premium of P2,216.55; and that the plaintiff was likewise
made to incur the sum of P32,406.50, representing the 3% contractor's tax (Exhs. 'AA' - 'A-1'). The itemized list of all these expenditures,
totalling P298,433.35 is attached to the records of this case (Annex 'B', Complaint) and forms part of the evidence of the plaintiff. Mr.
Nicomedes G. Ablaza, the witness for the plaintiff, properly identified said document and affirmed the contents thereof when he testified
during the hearing. The same witness likewise explained in detail the various figures contained therein, and identified the corresponding
supporting papers.
"It is noteworthy, in this connection, that there is nothing in the records that would show that the defendant assailed the accuracy and/or
reasonableness of the figures presented by the plaintiff; neither does it appear that the defendant offered any evidence to refute said figures.
"While it is claimed by the defendant that the plaintiff incurred a total expense of only P154,075.00 according to the report of Mr.
Ambrosio R. Flores, or P147,500.00, according to the report of Mr. Ricardo Y. Mayuga, the Court finds said estimates to be inaccurate.
To cite only an instance, in estimating the value of the excavation work, the defendant merely measured the depth, length and width of
the excavated area which was submerged in water, without ascertaining the volume of rock and the volume of earth actually excavated
as was done by the plaintiff who prepared a detailed plan showing the profile of the excavation work performed in the site (Exh. "B").
Likewise, the unit measure adopted by the defendant was in cubic meter while it should be in cubic yard. Also, the unit price used by the
defendant was only P8.75 for rock excavation while it should be P10.00 per cubic yard; and only P4.95 for earth excavation while it should
be P5.50 per cubic yard as clearly indicated in plaintiff's proposal (Annex 'A', Complaint; same as Annex '1', Answer). The Court, therefore,
can not give credence to defendant's aforementioned estimates in view of their evident inaccuracies.
"The Court finds from the evidence adduced that plaintiff's claim for actual damages in the sum of P298,433.35 is meritorious.
"The Bulk of plaintiff's claims consists of expected profit which it failed to realize due to the breach of the contract in question by the
defendant. As previously stated, the plaintiff seeks to recover the amount of P814,190.00 by way of unrealized expected profit. This figure
represents 18% of P4,523,275.00 which is the estimated direct cost of the subject project.
"As it has been established by the evidence that the defendant in fact was guilty of breach of contract and, therefore, liable for damages
(Art. 1170, New Civil Code), the Court finds that the plaintiff is entitled to recover from the defendant unrealized expected profit as part
of the actual or compensatory damages. Indemnification for damages shall comprehend not only the value of the loss suffered, but also that
of the profits which the obligee failed to obtain (Art. 2200, New Civil Code).
"Where a party is guilty of breach of contract, the other party is entitled to recover the profit which the latter would have been able to
make bad the contract been performed (Paz P. Arrieta, et al., plaintiffs-appellees, vs. National Rice Corporation, defendant-appellant, G.R.
No. L-15645, promulgated on January 31, 1964; Vivencio Cerrano, plaintiff-appellee, vs. Tan Chuco, defendant-appellant, 38 Phil.
392).
"Regarding the expected profit, a number of questions will have to be answered: Is the 18% unrealized expected profit being claimed by
the plaintiff reasonable? Would the plaintiff be entitled to the whole amount of said expected profit although there was only partial
performance of the contract? Would the 18% expected profit be based on the estimated direct cost of the subject in the amount of
P4,523,215.00, or on plaintiff's bid proposal of P3,749,000.00?
"On the question of reasonableness of the 18% expected profit, the Court noted that according to defendant's own expert witness, Mr.
Ambrosio R. Flores, 25% contractor's profit for a project similar in magnitude as the one involved in the present case would be ample and
reasonable. Plaintiff's witness, Mr. Nicomedes G. Ablaza, an experienced civil engineer who has been actively engaged in the construction
business, testified that 15% to 20% contractor's profit would be in accordance with the standard engineering practice. Considering the type
of the project involved in this case, he stated, the contractor's profit was placed at 18%. Taking into consideration the fact that this
percentage of profit is even lower than what defendant's witness considered to be ample and reasonable, the Court believes that the
reasonable percentage should be 18% inasmuch as the actual work was not done completely and the plaintiff has not invested the whole
amount of money called for by the project." (Pp. 263-268, Record on Appeal.)
These findings have not been shown to Us to be erroneous. And additional and clarificatory details, which We find to be adequately supported by the record,
are stated in Respondents' brief thus:
"23. In a letter dated January 4, 1966, petitioner Central Bank, through the same Mr. Mendoza, acceded to this request of respondent
Ablaza. (Annex 'D-1' to thePartial Stipulation of Facts, R.A., p. 146).
"24. Acting upon this written permission, respondent Ablaza immediately brought its men and equipment from Manila to the construction
site in San Fernando, La Union, and promptly commenced construction work thereat. This work, consisted of the setting up of an enclosure
around the site, the building of temporary shelter for its workmen, and the making of the necessary excavation works. (Commissioner's
Report, R.A., p. 181).
"25. Following the commencement of such construction work, petitioner Central Bank, through a letter dated February 8, 1966, formally
requested respondent Ablaza to submit to petitioner the following:
(a) A schedule of deliveries of material which, under the terms of respondent Ablaza's approved proposal, were to be
furnished by petitioner.
In short, as early as February 8, 1966, or more than three months prior to petitioner's repudiation of the contract in question,
the latter (petitioner) already took the above positive steps in compliance with its own obligations under the contract.
"26. Acting upon petitioner's above letter of February 8, 1966, on February 16, 1966, respondent Ablaza submitted the schedule of
deliveries requested by petitioner. (Commissioner's Report, R.A., p. 182; Decision, id., 252; also Exhs. 'D' to 'D-7', inclusive.)
"27. During the period of actual construction, respondent Ablaza on several occasions, actually discussed the progress of the work with Mr.
Mendoza. In addition, in March 1966, the latter (Mr. Mendoza) personally visited the construction site. There he saw the work which
respondent had by that time already accomplished which consisted of the completion of approximately 20% of the necessary excavation
works. (Commissioner's Report, R.A., p. 182; Decision, id., p. 252)
"28. Following Mr. Mendoza's visit at the construction site, or more specifically on March 22, 1966, the latter (Mendoza) wrote to
respondent Ablaza, instructing the latter to formally designate the person to represent the corporation at the signing of the formal
construction contract. (Exh. "H"; also t.s.n., pp. 119-121, December 18, 1967)
"29. By a letter dated March 24, 1966, respondent Ablaza promptly complied with the above request. (Exh. "I"; also t.s.n., pp. 121-123,
December 18, 1967)
"30. Subsequently, respondent Ablaza posted the required performance guaranty bond in the total amount of P962,250.00, consisting
of (a) a cash bond in the amount of P275,000.00, and (b) a surety bond, PSIC Bond No. B-252-ML, dated May 19, 1966, in the amount
of P687,250.00. In this connection, it is important to note that the specific purpose of this bond was to guarantee 'the faithful performance
of the Contract' by respondent Ablaza. (Partial Stipulation of Facts, par. 6, R.A., p. 141).This performance guaranty bond was duly
accepted by petitioner. (Id.)
"31. However, on May 20, 1966, petitioner Central Bank called for a meeting with representatives of respondent Ablaza and another
contractor. This meeting was held at the Conference Room of the Central Bank Building. At this meeting, then Finance Secretary Eduardo
Romualdez, who acted as the representative of petitioner, announced that the Monetary Board had decided to reduce the appropriations
for the various proposed Central Bank regional office buildings, including the one for San Fernando, La Union.
"32. In view of this decision, Secretary Romualdez informed respondent Ablaza that new plans and designs for the proposed regional office
building in San Fernando would have to be drawn up to take account of the reduction in appropriation. Secretary Romualdez then advised
respondent to suspend work at the construction site in San Fernando in the meanwhile. (Decision, R.A., pp. 253-254)
"33. After making the above announcements, Secretary Romualdez proposed that all existing contracts previously entered into between
petitioner Central Bank and the several winning contractors (among them being respondent Ablaza) be considered set aside.
"34. Obviously to induce acceptance of the above proposal, Secretary Romualdez offered the following concessions to respondent Ablaza:.
(a) That its cash bond in the amount of P275,000.00 be released immediately, and that interest be paid thereon at the rate
of 12% per annum.
(b) That respondent Ablaza be reimbursed for expenses incurred for the premiums on the performance bond which it posted,
and which petitioner had already accepted. (Decision, R.A., pp. 253 254).
"35. In addition, Secretary Romualdez also proposed the conclusion of a new contract with respondent Ablaza for the construction of a
more modest regional office building at San Fernando, La Union, on a negotiated basis. However, the sincerity and feasibility of this proposal
was rendered dubious by a caveat attached to it, as follows:
'4. Where auditing regulations would permit, the Central Bank would enter into a negotiated contract with the said
corporation (Ablaza) for the construction work on the building on the basis of the revised estimates.' (Annex '8' to Answer, R.A.,
p. 95)
"36. The revised cost fixed for this proposed alternative regional office building was fixed at a maximum of P3,000,000.00 (compared to
P3,749,000.00 under the contract originally awarded to respondent). (Annex '6-A' to Answer, R.A., p. 87)
"37. Needless perhaps to state, respondent Ablaza rejected the above proposals (pars. 34 and 35, supra.), and on June 3, 1966, through
counsel, wrote to petitioner demanding the formal execution of the contract previously awarded to it, or in the alternative, to pay 'all
damages and expenses suffered by (it) in the total amount of P1,181,950.00 . . .' (Annex '7' to Answer, R.A., pp. 89-91; Decision, id.,
p. 254)
"38. In a letter dated June 15, 1966, petitioner Central Bank, through Deputy Governor Amado R. Briñas, replied to respondent Ablaza's
demand denying any liability on the basis of the following claim:
'(That, allegedly) in line with the agreement .. reached between the Central Bank and Ablaza Construction and Finance
Corporation at a meeting . . . held . . . on May 20, 1966,' 'whatever agreements might have been previously agreed upon between
(petitioner and respondent) would be considered set aside.' (Decision, R.A., p. 255; Annex '8' to Answer, id., pp. 93-96.)
"39. The above claim was, however, promptly and peremptorily denied by respondent Ablaza, through counsel, in a letter dated June 16,
1966. (Partial Stipulation of Facts, par. 9, R.A., p. 142, also Annex 'G' thereof; Commissioner's Report, R.A., p. 185, Decision, id., p. 255.)"
(Appellee's Brief, pars. 23 to 39, pp. 14-19.)
None of these facts is seriously or in any event sufficiently denied in petitioner's reply brief.
Considering all these facts, it is quite obvious that the Bank's insistence now regarding the need for the execution of the formal contract comes a little too
late to be believable. Even assuming arguendo that the Revised Manual of Instructions to Treasurers were applicable to the Central Bank, which is doubtful,
considering that under the provisions of its charter already referred to earlier, disbursements and expenditures of the Bank are supposed to be governed
by rules and regulations promulgated by the Monetary Board, in this particular case, the attitude and actuations then of the Bank in relation to the work
being done by Ablaza prior to May 20, 1966 clearly indicate that both parties assumed that the actual execution of the written contract is a mere formality
which could not materially affect their respective contractual rights and obligations. In legal effect, therefore, the Bank must be considered as having waived
such requirement.
To be more concrete, from December 15, 1965, when Ablaza accepted the award of the contract in question, both parties were supposed to have seen
to it that the formal contract were duly signed. Under the Instructions to Bidders, Ablaza was under obligation to sign the same within five (5) days from
notice of the award, and so, he called on the Bank at various times for that purpose. The Bank never indicated until May, 1966 that it would not comply.
On the contrary, on February 8, 1966, Ablaza was requested to submit a "schedule of deliveries of materials" which under the terms of the bid were to
be furnished by the Bank. On March 22, 1966, Ablaza received a letter from the Bank inquiring as to who would be Ablaza's representative to sign the
formal contract. In the meanwhile, no less than Mr. Rizalino Mendoza, the Chairman of the Management Building Committee of the Central Bank who had
been signing for the Bank all the communications regarding the project at issue, had visited the construction site in March, 1966, just before he wrote
the request abovementioned of the 22nd of that month for the nomination of the representative to sign the formal contract, and actually saw the progress
of the work and that it was being continued, but he never protested or had it stopped. All these despite the fact that the Memorandum Circular being
invoked by the Bank was issued was back on December 31, 1965 yet. And when finally on May 20, 1966 the Bank met with the representatives of Ablaza
regarding the idea of changing the plans to more economical ones, there was no mention of the non-execution of the contract as entitling the Bank to back
out of it unconditionally. Rather, the talk, according to the findings of the lower courts, was about the possibility of setting aside whatever agreement there
was already. Under these circumstances, it appears that respondent has been made to believe up to the time the Bank decided definitely not to honor any
agreement at all that its execution was not indispensable to a contract to be considered as already operating and respondent could therefore proceed with
the work, while the contract could be formalized later.
Petitioner contends next that its withdrawal from the contract is justified by the policy of economic restraint ordained by Memorandum Circular No. 1.
We do not see it that way. Inasmuch as the contract here in question was perfected before the issuance of said Memorandum Circular, it is elementary that
the same may not be enforced in such a manner as to result in the impairment of the obligations of the contract, for that is not constitutionally permissible.
Not even by means of a statute, which is much more weighty than a mere declaration of policy, may the government issue any regulation relieving itself
or any person from the binding effects of a contract. (Section 1 (10), Article III, Philippine Constitution of 1953 and Section 11, Article IV, 1973
Constitution of the Philippines.) Specially in the case of the Central Bank, perhaps, it might not have been really imperative that it should have revised its
plans, considering that it has its own resources independent of those of the national government and that the funds of the Central Bank are derived from
its own operations, not from taxes. In any event, if the memorandum circular had to be implemented, the corresponding action in that direction should
have been taken without loss of time and before the contract in question had taken deeper roots. It is thus clear that in unjustifiably failing to honor its
contract with respondent, petitioner has to suffer the consequences of its action.
The last issue submitted for Our resolution refers to the amount of damages awarded to Ablaza by the trial court and found by the Court of Appeals to
be "fair and reasonable." Again, after a review of the record, We do not find sufficient ground to disturb the appealed judgment even in this respect, except
as to attorney's fees.
There are three principal items of damages awarded by the courts below, namely: (1) compensation for actual work done in the amount of P298,433.35,
(2) unrealized profits equivalent to 18% of the contract price of P3,749,000 or P674,820.00 and (3) 15% of the total recovery as attorney's fees in
addition to the P5,000 already paid as retaining fee. All of these items were the subject of evidence presented by the parties. According to the Court of
Appeals:
"As regards the accuracy and reasonableness of the award for damages, both actual and compensatory, it is to be noted that the trial court
subjected the Commissioner's report and the evidence adduced therein to a careful scrutiny. Thus, when the appellant called the trial court's
attention to the fact that the P814,190.00 unrealized expected profit being claimed by appellee represented 18% of P4,523,275.00
which was the estimated cost of the project, while the contract awarded to appellee was only in the amount of P3,749,000.00 as per its
bid proposal, the Court made the necessary modification. It is further to be noted that the amount of 18% of the estimated cost considered
in the said award is much legs than that given by appellant's own expert witness, Ambrosio B. Flores. He testified that 26% as contractor's
profit 'would be fair, ample and reasonable.' (T.s.n. p. 557, Batalla.)" (P. 17 A, Appellant's brief.)
Basically, there are factual conclusions which We are not generally at liberty to disregard. And We have not been shown that they are devoid of reasonable
basis.
There can be no dispute as to the legal obligation of petitioner to pay respondent the actual expenses it has incurred in performing its part of the contract.
Upon the other hand, the legal question of whether or not the Bank is liable for unrealized profits presents no difficulty. In Arrieta vs. Naric, G.R. No.
L-15646, Jan. 31, 1964, 10 SCRA 79, this Court sustained as a matter of law the award of damages in the amount of U.S. $286,000, payable in
Philippine Currency, measured in the rate of exchange prevailing at the time the obligation was incurred (August, 1952), comprising of unrealized profits
of the plaintiff, Mrs. Paz Arrieta, in a case where a government-owned corporation, the Naric, failed to proceed with the purchase of imported rice after
having accepted and approved the bid of Arrieta and after she had already closed her contract with her foreign sellers.
Actually, the law on the matter is unequivocally expressed in Articles 2200 and 2201 of the Civil Code thus:
"ART. 2200. Indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits which the
obligee failed to obtain.
"ART. 2201. In contracts and quasicontracts, the damages for which the obligor who acted in good faith is liable shall be those that are
the natural and probable consequences of the breach of the obligation, and which the parties have foreseen or could have reasonably foreseen
at the time the obligation was constituted.
In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed
to the non-performance of the obligation."
Construing these provisions, the following is what this Court held in Cerrano vs. Tan Chuco, 38 Phil. 392:
". . . Article 1106 (now 2200) of the Civil Code establishes the rule that prospective profits may be recovered as damages, while article
1107 (now 2201) of the same Code provides that the damages recoverable for the breach of obligations not originating in fraud (dolo)
are those which were or might have been foreseen at the time the contract was entered into. Applying these principles to the facts in this
case, we think that it is unquestionable that defendant must be deemed to have foreseen at the time he made the contract that in the event
of his failure to perform it, the plaintiff would be damaged by the loss of the profit he might reasonably have expected to derive from its
use.
"When the existence of a loss is established, absolute certainty as to its amount is not required. The benefit to be derived from a contract
which one of the parties has absolutely failed to perform is of necessity to some extent, a matter of speculation, but the injured party is
not to be denied all remedy for that reason alone. He must produce the best evidence of which his case is susceptible and if that evidence
warrants the inference that he has been damaged by the loss of profits which he might with reasonable certainty have anticipated but for
the defendant's wrongful act, he is entitled to recover. As stated in Sedgwick on Damages (Ninth Ed., par. 177):
'The general rule is, then, that a plaintiff may recover compensation for any gain which he can make it appear with reasonable certainty
the defendant's wrongful act prevented him from acquiring, . . .' (See also Algarra vs. Sandejas, 27 Phil. Rep., 284, 289; Hicks vs. Manila
Hotel Co., 28 Phil. Rep., 325.)" (At pp. 398-399.)
Later, in General Enterprises, Inc. vs. Lianga Bay Logging Co. Inc., 11 SCRA 733, Article 2200 of the Civil Code was again applied as follows:
"Regarding the actual damages awarded to appellee, appellant contends that they are unwarranted inasmuch as appellee has failed to
adduce any evidence to substantiate them even assuming arguendo that appellant has failed to supply the additional monthly 2,000,000
board feet for the remainder of the period agreed upon in the contract Exhibit A. Appellant maintains that for appellee to be entitled to
demand payment of sales that were not effected it should have proved (1) that there are actual sales made of appellee's logs which were
not fulfilled, (2) that it had obtained the best price for such sales, (3) that there are buyers ready to buy at such price stating the volume
they are ready to buy, and (4) appellee could not cover the sales from the loss of other suppliers. Since these facts were not proven, appellee's
right to unearned commissions must fail.
This argument must be overruled in the light of the law and evidence on the matter. Under Article 2200 of the Civil Code, indemnification
for damages comprehends not only the value of the loss suffered but also that of the profits which the creditor fails to obtain. In other
words, lucrum cessans is also a basis for indemnification. The question then that arises is: Has appellee failed to make profits because of
appellant's breach of contract, and in the affirmative, is there here basis for determining with reasonable certainty such unearned profits?
Appellant's memorandum (p. 9) shows that appellee has sold to Korea under the contract in question the following board feet of logs,
Breareton Scale:
Months Board Feet
————
Total 7,405,861
The above figures tally with those of Exhibit N. In its brief (p. 141) appellant claims that in less than six months' time appellee received
by way of commission the amount of P117,859.54, while in its memorandum, appellant makes the following statement:
'11. The invoice F.O.B. price of the sale through plaintiff General is P767,798.82 but the agreed F.O.B. price was P799,319.00; the
commission at 13% (F.O.B.) is P117,859.54. But, as there were always two prices — Invoice F.O.B. price and F.O.B. price as per contract,
because of the sales difference amounting to P31,920.18, and the same was deducted from the commission, the commission, actually paid
to plaintiff General is only P79,580.82.'
"It appears, therefore, that during the period of June to December, 1959, in spite of the short delivery incurred by appellant, appellee had
been earning its commission whenever logs were delivered to it. But from January, 1960, appellee had ceased to earn any commission
because appellant failed to deliver any log in violation of their agreement. Had appellant continued to deliver the logs as it was bound to
pursuant to the agreement it is reasonable to expect that it would have continued earning its commission in much the same manner as
it need to in connection with the previous shipments of logs, which clearly indicates that it failed to earn the commissions it should earn
during this period of time. And this commission is not difficult to estimate. Thus, during the seventeen remaining months of the contract,
at the rate of at least 2,000,000 board feet, appellant should have delivered thirty-four million board feet. If we take the number of board
feet delivered during the months prior to the interruption, namely, 7,405,861 board feet, and the commission received by appellee
thereon, which amounts to P79,580.82, we would have that appellee received a commission of P.0107456 per board feet. Multiplying
34 million board feet by P.0107456, the product is P365,350.40, which represents the lucrum cessans that should accrue to appellee.
The award therefore, made by the court a quo of the amount of P400,000.00 as compensatory damages is not speculative, but based on
reasonable estimate."
In the light of these considerations, We cannot say that the Court of Appeals erred in making the aforementioned award of damages for unrealized profits
to respondent Ablaza.
With respect to the award for attorney's fees, We believe that in line with the amount fixed in Lianga, supra, an award of ten per centum (10%) of the
amount of the total recovery should be enough.
PREMISES CONSIDERED, the decision of the Court of Appeals in this case is affirmed, with the modification that the award for attorney's fees made therein
is hereby reduced to ten per centum (10%) of the total recovery of respondent Ablaza. Costs against petitioner.
||| (Central Bank of the Philippines v. Court of Appeals, G.R. No. L-33022, [April 22, 1975], 159-A PHIL 21-76)
SYLLABUS
1. STATUTES; STATUTORY CONSTRUCTION; REP. ACT 912; MEANING OF TERM "GOVERNMENT" THEREIN. — The term "government" without any
qualification as used in Republic Act 912, should be construed in its implied sense and not in the strict signification of the term "Government of the
Philippines" as the political entity through which political authority is exercised.
2. ID.; ID.; ID.; COM. ACT 138; GOVERNMENT OWNED OR CONTROLLED CORPORATIONS NOT EXEMPTED FROM REP. ACT 912. — The observation
thatCommonwealth Act 138 expressly includes purchases by Government-owned companies, while Republic Act 912 merely relates to construction or
repair work done by the Government, is no argument for the proposition that government-owned or controlled corporations have been excepted from the
operation of the latter law, for it is clear that Commonwealth Act 138 also ordains that the Purchase and Equipment Division of government-owned
companies authorized to purchase or contract for materials and supplies for public use, buildings, or public works, shall give preference to locally produced
materials or products. Being statutes in pari materia, they should be construed together to attain the purpose of an expressed national policy.
3. ID.; ID.; ID.; PURPOSE OF BOTH ACTS. — The main objective of the Government is to develop our domestic industries so that the country will be
economically self-sufficient. And both Commonwealth Act 138 and Republic Act 912 aim to contribute to the realization of the aforesaid nationalistic
policy by requiring the use of Philippine made products or materials, whenever available, practicable and usable in government construction work or repair
projects. The alleged conflict between the two laws is more apparent than real, and should not be allowed to defeat the purpose of these laws.
4. ID.; ID.; NAWASA IS EMBRACED IN TERM "GOVERNMENT" IN REP. ACT 912. — The NAWASA, like any other corporation exercising proprietary or
governmental functions should be deemed embraced within the term "Government" found in Republic Act 912, and in the repair or construction of their
works or projects or the purchase of materials therefor, local materials should be given preference whenever available, practicable and usable.
5. ID.; ID.; STATUTES GRANTING ADVANTAGES TO PRIVATE PERSONS, STRICTLY CONSTRUED. — Statutes granting advantages to private persons have
in many instances created special privileges or monopolies for the grantees and thus have been viewed with suspicion and strictly construed. This is altogether
appropriate in the majority of situations, for if public advantage is gained by the grant, it normally appears to be of secondary significance compared with
the advantage gained by the grantee (Sutherland Statutory Construction, Vol. II, sec. 3404, p. 240). These rules should apply to the case at bar where the
law invoked grants a preference to locally produced products or materials.
6. ID.; ID.; CERTIFICATION OF AVAILABILITY OF LOCALLY PRODUCED MATERIALS. — Since Republic Act 912 grants preference only upon the
certification of availability, practicability and usability of locally produced materials by the Director of Public Works, that certification must be existing and
effective before any right arising therefrom may be claimed to have been violated.
7. ID.; EFFECT OF PASSAGE OF REP. ACT 4858. — The decision appealed from had virtually become moot and academic by reason of the passage
of Republic Act 4858 which authorizes the President to allow the procurement of supplies necessary for the rehabilitation of the project as an exception
to the restrictions and preferences provided for in Republic Act 912.
D E C I S I O N
ANGELES, J p:
The main issue in this appeal is, whether or not the call for bids for the supply of steel and centrifugal cast iron pipes for the waterworks projects in Manila
and suburbs, and in the cities of Davao and Iloilo, the National Waterworks & Sewerage Authority (NAWASA) violated the provisions of Republic Act No.
912, section 1 of which provides as follows:
"Section 1. In construction or repair work undertaken by the Government, whether done directly or through contract awards, Philippine
made materials and products, whenever available, practicable and usable, and will serve the purpose as equally well as foreign made
products or materials, shall be used in said construction or repair work, upon the proper certification of the availability, practicability,
usability and durability of said materials or products by the Director of the Bureau of Public Works and/or his assistants."
In the decision appealed from the Court of First Instance of Manila has permanently enjoined the NAWASA from the procurement of the materials needed
for the projects involved which, according to the appellant, are designed to alleviate the sufferings of the millions of inhabitants in said places where there
is a crying need for more water — an item so vital to human existence — and the delay occasioned by the injunctions complained of, has in no little way,
further aggravated the inconvenience of the consuming public in said metropolitan areas where acute water crises have recurred through the years.
Nevertheless, it is vehemently contended by the appellee that the declaration of an economic national policy as envisioned in the aforequoted provision of
the law which, like the original "Flag Law 1 is impressed with the clear nationalistic policy of giving preference to locally produced materials and products,
has been violated; and if this is so, no amount of public clamor could justify the acts of the NAWASA complained of, for above all the supremacy of the law
must be upheld. We have, therefore, examined the record of this case with these considerations foremost in Our minds.
It appears that the case, originally commenced in the Court of First Instance of Manila, on July 7, 1965, as a petition for declaratory relief for the purpose
of securing a judicial pronouncement on the interpretation of the word "practicable" as used in Republic Act No. 912, i.e., whether it means that the
cheapest materials among the locally produced or manufactured products should be preferred and specified in construction and repair works undertaken
by the Government, was later converted into an action for prohibition with preliminary injunction through the process of supplemental pleadings.
The corresponding complaint was filed on 19 July 1965, alleging that the NAWASA had started to negotiate for direct purchase of centrifugally cast iron
pipes (CCI) for the improvement of the San Pablo Waterworks System in violation of the provisions of Republic Act 912 and the law on public biddings,
excluding the C & C Commercial Company, the plaintiff, which can supply instead asbestos cement pressure pipes which are available,
practicable and usable, and will serve the purpose of the said project at a much lower cost.
On 6 August 1965, the NAWASA filed its answer to the complaint. On 10 August 1965, the Filipino Pipe and Foundry Corporation, with leave of court,
also filed its answer in intervention.
On 16 August 1965, as prayed for in the complaint, the court issued a writ of preliminary injunction restraining the NAWASA from further negotiating
the purchase of the CCI pipes from the intervenor.
On 23 September 1965, the plaintiff and the NAWASA entered into a partial stipulation of facts, on the basis of which and the additional evidence adduced
at the hearing, the court rendered a partial decision on 31 January 1966, dismissing the complaint insofar as the San Pablo Waterworks System was
concerned and dissolving the preliminary injunction issued thereunder. This partial decision has become final.
On 22 January 1965, the NAWASA called for bids for the furnishing of labor and the supply of materials for the construction of the proposed improvement
of the Davao Metropolitan Waterworks System. In the call for bids, the bidders were required to submit proposals for the supply of 24-inch steel pipes,
asbestos cement pressure pipes, and cast iron pipes. The bidding was held on 23 February 1965. On 16 March 1965, the committee on award of the
NAWASA recommended to the board of directors that the bid be awarded to the lowest bidder, Tirso del Rosario, under his proposal to supply steel pipes.
On 10 August 1965, the plaintiff filed a (First) supplemental complaint seeking to restrain the NAWASA from proceeding with the award of the project
in Davao, alleging that in specifying steel pipes for the project, which is admittedly imported material, without giving preference to locally produced asbestos
cement pressure pipes manufactured by the plaintiff, violates the provisions of Republic Act 912. On 14 August 1965, the court admitted the supplemental
complaint; and as prayed for therein, on 17 September 1965, the Court issued a writ of preliminary injunction.
As early as on 26 November 1962, the NAWASA called for bids for the supply of 18-inch steel pipes for the improvement of the Iloilo Waterworks System.
The bidding was conducted on 27 December 1962, C & C Commercial Co. participated in the bidding offering to supply the needed 18-inch steel pipes
for the project, but lost in the bidding. The lowest bidder for the supply of the specific 18-inch steel pipes was the Regal Trading Corporation, and the bid
was awarded to it.
On 8 September 1965, almost three (3) years after the date of the bidding, the C & C Commercial Co. filed a (Second) supplemental complaint seeking
to restrain the NAWASA from formalizing or implementing the award on the aforesaid Iloilo project for the supply of 18-inch steel pipes, alleging that
in specifying steel pipes for the particular project, the NAWASA has violated the provisions of Republic Act 912 which requires the purchase of Philippine
made materials and products which areavailable, practicable and usable locally, like plaintiff's product — asbestos cement pressure pipes — in construction
and repair undertaken by the government. On 24 September 1965, over the objection of the NAWASA, the second supplemental complaint was admitted
by the court. The record is not clear when the restraining order under the second supplemental complaint was issued, although the NAWASA alleges that
a restraining order was issued under date of 10 September 1965, which fact has not been traversed by the plaintiff.
THE MANILA AND SUBURBS WATERWORKS SYSTEM —
On 13 September 1965, the NAWASA advertised for bids for the supply of 30 to 42-inch steel pipes for the use and improvement of the interim
waterworks project in the City of Manila and suburbs, the bidding to take place on 14 December 1965. On 10 November 1965, the C & C Commercial
Co. filed a (Third) supplemental complaintseeking to restrain the NAWASA and its representatives from holding the bidding under the aforementioned
notice to bid, averring identical facts as those alleged in the previous supplemental complaints, that the call for bid for steel pipes for the Manila project
and suburbs violates the provisions of Republic Act 912. Over the objection of the defendant NAWASA, the supplemental complaint was admitted; and
as prayed for therein, on 20 November 1965, a writ of preliminary injunction was issued restraining the NAWASA from holding the bidding scheduled
on 14 December 1965, or on any subsequent date, until further orders from the court.
Pending the case in the court a quo, the NAWASA filed three separate motions praying for the dissolution of the preliminary injunctive writs issued in
connection with the Davao, Iloilo and Manila projects, pleading to the court to consider the crying need for a more adequate supply of water in those cities,
particularly in the City of Manila and its suburbs, where the lack of adequate supply of potable water has been a recurrent crisis which affected to a
dangerous extent, the health and the life of the inhabitants, and that the continuation of the injunctive writs may bring about the cancellation of the
$20,200,000.00 loan of the NAWASA from the World Bank, which would result from the failure of the NAWASA to comply with the formulated work
schedule of the waterworks projects, which under the agreement with the World Bank, has to be completed in the month of October 1967; but the court
failed to take any action on the motions. Parodying Shakespeare, "Set honor in one eye, and death in the other, and I will look on both indifferently."
After a trial of the case, of 15 August 1966 the court rendered a decision finding and concluding that the act of the NAWASA in specifying steel pipes
for the project of the City of Manila and its suburbs, and in awarding the contracts for the supply of steel pipes in the cases of the Davao and Iloilo
Waterworks System, constituted a violation of the provisions of Republic Act 912; the dispositive portion of the decision reads as follows:
"(a) On the supplemental complaint, making permanent the preliminary injunction dated September 2, 1965 enjoining the defendant or
its representatives and agents from formalizing or implementing the award for the construction of the Davao Waterworks Project in respect
of the award of pipes to be used therein; rescinding the award made in favor of Tirso del Rosario; and ordering the reappraisal of the bids
with a view to complying with the provisions of Republic Act No. 912;
"(b) On the second supplemental complaint ordering the issuance of a permanent injunction to enjoin the defendants or its agents and
representatives from formalizing the award of the contract for the furnishing of 18" steel pipes for the Iloilo Waterworks System; ordering
a new bidding for the said project so as to include in the call for bids for the supply and delivery of materials, asbestos cement pipes, as
well as CCI pipes; and rescinding the award of the contract in favor of the Regal Trading Corporation;
"(c) On the third supplemental complaint making permanent the preliminary injunction dated December 14, 1965, or any other
subsequent date calling for imported steel pipes from 30" to 42" diameter for the interim Development of Waterworks System for Manila
and suburbs; and ordering the defendant to specify asbestos cement pressure pipes for the said project; and
Appellant contends that the provisions of Republic Act 912, are applicable only to construction or repair works undertaken by the Government. It argues,
that since the NAWASA, though a public corporation, is not a municipal corporation or agency of the State empowered to regulate or administer the local
affairs of a town or city, 2 nor one of the various arms of the government through which political authority is made effective in the Islands, consequently,
the NAWASA should not be included within the meaning of the term "Government" as used in the law. 3 It is to be noted, however, that Section 2 of the
Revised Administrative Code defining the term "Government" which is heavily relied upon by the appellant recognizes an exception: "when a different
meaning for the word or phrase is given a particular statute or is plainly to be collected from the context or connection where the term is used." In this
context of the law, the term "government" without any qualification as used inRepublic Act 912, should be construed in its implied sense and not in the
strict signification of the term "Government of the Philippines" as the political entity through which political authority is exercised. A comparative analysis
of Republic Act 912 and Commonwealth Act 138, otherwise known as the "Flag Law", the latter "An Act to Give Native Products and Domestic Entities
the Preference in the Purchase of Articles for the Government", and the former "An Act to Require the Use, Under Certain Conditions, of Philippine Made
Materials or Products in Government Projects or Public Works Construction, Whether Done Directly by the Government or Awarded thru Contracts",
discloses that both relate to the same subject matter and have the same nationalistic purpose or object: to give preference to locally produced materials
in purchases, works or projects of the Government. The observation that Commonwealth Act 138 expressly includes purchases by Government-owned
companies, whileRepublic Act 912 merely relates to construction or repair work done by the Government, is no argument for the proposition that
government-owned or controlled corporations have been excepted from the operation of the latter law, for it is clear that Commonwealth Act 138 also
ordains that the Purchase and Equipment Division of government-owned companies authorized to purchase or contract for materials and supplies for public
use, buildings, or public works, shall give preference to locally produced materials or products. Being statutes in pari materia, they should be construed
together to attain the purpose of an expressed national policy. Thus, it has been aptly stated:
"On the presumption that whenever the legislature enacts a provision it has in mind the previous statutes relating to the same subject
matter, it is held that in the absence of any express repeal or amendment therein, the new provision was enacted in accord with the
legislative policy embodied in those prior statutes, and they all should be construed together. Provisions in an act which are omitted in
another act relating to the same subject matter will be applied in a proceeding under the other act, when not inconsistent with its purpose.
Prior statutes relating to the same subject matter are to be compared with the new provisions; and if possible by reasonable construction,
both are to be construed that effect is given to every provision of each. Statutes in pari materia, although in apparent conflict, are so far
as reasonably possible construed to be in harmony with each other." 4
The main objective of the Government is to develop our domestic industries so that the country will be economically self-sufficient. And both Commonwealth
Act 138and Republic Act 912 aim to contribute to the realization of the aforesaid nationalistic policy by requiring the use of Philippine made products
or materials, wheneveravailable, practicable and usable in government construction work or repair projects. The alleged conflict between the two laws is
more apparent than real, and should not be allowed to defeat the purpose of these laws. We have to declare, therefore, that, the NAWASA, like any other
corporation exercising proprietary or governmental functions should be deemed embraced within the term "Government" found in Republic Act 912, and
in the repair or construction of their work or projects or the purchase of materials therefor, local materials should be given preference whenever available,
practicable and usable.
The next issue for consideration is: Did the NAWASA violate the provisions of Republic Act 912?
Appellant vehemently denies the charge and decries the holding of the lower court appealed from that in specifying steel pipes in the call for bids for the
supply of materials for the waterworks projects under consideration it had defied the mandate of the law. Appellant insists that at the time it called for
bids for the Davao project, followed by the call for the supply of materials for the Iloilo project, herein appellee's plant was only capable of producing asbestos
cement pressure pipes up to 12 inches diameter; while at the time the call for bids for the supply of materials for the Interim Project of Manila and suburbs
was advertised, the largest size of asbestos cement pipes available were of 24 inches being produced at the time by another local manufacturer, the Eternit
Corporation, which never protested against the bids in question.
We have reexamined the record of the case with painstaking solicitude and, indeed, We find the facts indubitable and conclusive that the C & C Commercial
Corporation had not theretofore and even up to the present time ever produced pipes larger than 12 inches in diameter. Said appellee corporation has
implicitly admitted this as a fact; and although it claims to have a complete plant that is equipped with the necessary machinery, technicians and skilled
laborers capable of producing pipes in the sizes called for in those bids (18 to 42 inches in diameter) had the NAWASA specified them in asbestos cement,
the weakness of the argument is at once exposed by a mere examination of the pertinent evidence adduced during the trial of the case on this particular
point. The claim is belied by Leopoldo del Rosario, a staff civil engineer of the NAWASA, who testified as follows:
"Q. Engineer Del Rosario, what is the limitation of the local asbestos cement pressure pipes that are locally manufactured in the Philippines?
A. We based on NAWASA's experience, we have purchased only sizes up to 12 inches, but on certification of the Bureau of Public Works,
a report has been submitted to us that asbestos cement pressure pipes (is) being manufactured by one local manufacturing company
in the Philippines, The Eternit Corporation, which is a pipe manufacturer, and we have recently purchased pipes for the Manila
interim project of sizes up to 24 inches non-pressure pipes.
Q. Is there any other local manufacturer of asbestos cement pressure pipes besides C & C Commercial Corporation?
Q. Engineer del Rosario, as staff civil engineer and the specification engineer, member-secretary of the Pre-Qualifications Committee and
the present chairman of all the bidding committees of the NAWASA, do you know if C & C Commercial Corporation, the plaintiff
herein, is manufacturing asbestos cement pressure pipes from sizes thirty inches and up in diameter?
Q. Why do you say that the C & C Commercial Corporation is not manufacturing asbestos cement pressure pipes beyond twelve inches?
A. Because we had bi-yearly inspection of all local plants here as a matter of policy of the committee to determine the capacity or capability
of the local manufactures to supply, and even to bid. So every six months the pre-qualifications committee in collaboration with the
procurement inspects all the facilities of the chemical producing plant, this cast iron and asbestos plant, the galvanized non pipe
plant, these are regularly inspected every six months and so the pre-qualifications would know what is available." 6
And the foregoing testimony relative to the "non-availability" of appellee's products in sizes above 12 inches in diameter was corroborated by Mrs. Clara
Reyes Pastor, herein appellee corporation's President, who declared as follows:
"Q. Is not a fact Mrs. Reyes, that the sizes of asbestos cement pressure pipes locally manufactured by you and which you furnish the NAWASA
is only 12 inches in diameter? Yes or No?
"A. Yes, sir, because that is the only pipe required at the time I delivered it.
Q. And the asbestos cement pressure pipes from sizes 12 to 42 inches that you have supplied the NAWASA in the past, they were all
imported by you?
A. Yes, sir.
Q. I heard you testify Mrs. Reyes, that in case you win in this particular bidding, you intend to import equipments from abroad, is that
correct?
Q. So that presently what is the biggest size of mandril that you have?
From the foregoing testimony of witnesses, and in the light of other evidence submitted by the parties, the following may be deduced: that it is the practice
of the NAWASA — which We find both practical and logical — to send out its own men to the various local manufacturing plants for the purpose of knowing
the availability of materials needed for its projects; that at the time it specified 18 and 24 inches diameter steel pipes for the Davao and Iloilo waterworks
projects, there were no locally produced materials in said sizes; and that with respect to those sizes that were already available, the NAWASA has actually
specified and used them in various other construction and repair works even without the certification of the Director of Public Works. We really do not see
Our way clear how herein appellee could have charged that the NAWASA had discriminated against its products under the circumstances when its own
president admits that it has supplied the NAWASA before locally produced asbestos cement pressure pipes up to 12 inches diameter only and all those with
diameters above 12 inches were of foreign manufacture. The evidence, therefore, is conclusive that locally produced asbestos pipes above 12 inches in
diameter were not available for purposes of claiming any preference under the provisions of Republic Act 912. And this conclusion becomes even more
cogent if We are to consider the fact that C & C Commercial Corporation failed to produce the necessary certification from the Director of Public Works
to show that its products were already certified as available, practicable and usable at the time that the call for bids for the supply of materials for the
Davao, Iloilo and Manila Interim projects were made to give some semblance of the right it claims to have been violated.
Of course, appellee points out the fact that it has subsequently secured the necessary certification from the Director of Public Works certifying to the
availability, practicability, usability and durability of the asbestos cement pressure pipes produced from its plant. We agree, and there should be no quarrel
at all that with respect to pipes of 4 to 12 inches in diameter which it is actually producing now, the preference claimed under the law may be allowed.
Be that as it may, however, the certification referred to did not in any way improve its position; for the stubborn fact still remains that at the time said
certification was issued on July 6, 1966, C & C Commercial Corporation was actually producing asbestos pipes up to 12 inches only, which its existing
equipment or machinery, when inspected by a representative of the Office that issued the certification, was found capable of producing. Hence, We cannot
subscribe to the holding of the court below that locally produced asbestos cement pipes above 12 inches in diameter may be considered "available" within
the meaning of Republic Act 912 simply because the President of herein appellee corporation had manifested or promised that it can procure bigger
mandrils worth $25,000.00 from abroad and will be able to produce pipes in the larger sizes called for in the questioned bids shortly after their installation,
for that would be giving the term "available" a very strained meaning. It would really be unfair to require in order to be "available" within the meaning
of the law that herein appellee should have in stock the sizes of pipes called for in the bids in the quantity needed by the appellant; but We cannot also believe,
by any stretch of the imagination, that the Director of Public Works would certify to the availability, practicability, usability and durability of certain
products even before the machinery, equipment or tools needed to produce said products are actually bought from abroad and installed in its plant by the
manufacturer.
Statutes granting advantages to private persons have in many instances created special privileges or monopolies for the grantees and thus have been viewed
with suspicion and strictly construed. This is altogether appropriate in the majority of situations, for if public advantage is gained by the grant, it normally
appears to be of secondary significance compared with the advantage gained by the grantee. 8 And rights which exist only by virtue of such statutes come
into being only after strict compliance with all the conditions found in those statutes. 9 These rules should apply to the case at bar where the law invoked
grants a preference to locally produced products or materials. Since Republic Act 912 grants preference only upon the certification of availability,
practicability and usability of locally produced materials by the Director of Public Works, that certification must be existing and effective before any right
arising therefrom may be claimed to have been violated. Notwithstanding the clear nationalistic policy of the law aforementioned, We cannot, by any
mistaken sympathy towards herein appellee, recognize the existence of its right under the law alleged to have been violated, which C & C Commercial
Corporation has miserably failed to prove in this case.
With respect to the Interim Project for the City of Manila and its suburbs. It would seem that the decision appealed from had virtually become moot and
academic by reason of the passage of Republic Act 4858 which authorizes the President to allow the procurement of supplies necessary for the rehabilitation
of the project as an exception to the restrictions and preferences provided for in Republic Act 912, and the President appears to have authorized the General
manager of the NAWASA under the said statutory power to purchase all the pipes and materials necessary for the project by negotiated sales.
For all the foregoing, We find it unnecessary to discuss further the other errors assigned by the appellant.
WHEREFORE, the decision appealed from is hereby set aside, with costs against the appellee. The writs of preliminary injunctions issued by the lower court
are set aside, and declared null and void.
||| (C & C Commercial Corp. v. National Waterworks and Sewerage Authority, G.R. No. L-27275, [November 18, 1967], 129 PHIL 227-242)
TOMATIC ARATUC, SERGIO TOCAO, CISCOLARIO DIAZ, FRED TAMULA, MANGONTAWAR GURO and BONIFACIO
LEGASPI, petitioners, vs. The COMMISSION ON ELECTIONS, REGIONAL BOARD OF CANVASSERS for Region XII (Central
Mindanao), ABDULLAH DIMAPORO, JESUS AMPARO, ANACLETO BADOY, et al., respondents.
[G.R. Nos. L-49717-21.]
LINANG MANDANGAN, petitioner, vs. THE COMMISSION ON ELECTIONS, The REGIONAL BOARD OF CANVASSERS for
Region XII, and ERNESTO ROLDAN, respondents.
Lino M. Patajo for petitioners in G.R. No. L-49705-09 and for private respondent in G.R. No. L-49717-21.
Estanislao A. Fernandez for private respondents in G.R. No. L-49705-09 and for petitioner in G.R. No. L-49717-21.
SYNOPSIS
Over the objection of the Konsensiya ng Bayan (KB) candidates, the Regional Board of Canvassers of Region XII issued a resolution declaring
all the eight Kilusan ng Bagong Lipunan (KBL) candidates elected representatives to the Batasang Pambansa. The KB candidates appealed
the resolution to the Comelec which consequently issued the now assailed resolution declaring seven KBL candidates and one KB candidates
as having obtain the first eight places, and ordering the Regional Board of Canvassers to proclaim the winning candidates. The Aratuc petition
alleged that the Comelec in arriving at its conclusion committed grave abuse of discretion amounting to lack of jurisdiction. The Mandangan
petition, on the other hand, claims that it was error of law for Comelec to consider spurious and manufactured the returns in voting centers
showing that the votes of the candidates obtaining the highest number of votes exceeded the highest possible number of valid votes, because
the excess was not more than 40% as was the rule followed in Bashier/Basman (L-33758, February 24, 1972), and that the Comelec
exceeded its jurisdiction and denied due process to petitioner in extending its inquiry beyond the election records of "the 878 voting centers
examined by the KB experts and passed upon by the Regional Board of Canvassers" and in excluding from the canvass the returns form voting
centers showing 90% to 100% voting in places where military operations were certified by the army to be going on, the same being
unsupported by evidence.
The Supreme Court found no grave abuse of discretion in the actuations of the Comelec and in Mandangan held (1) that considering the
historical antecedents relative to the highly questionable manner in which elections have been held in the past in the provinces involved, the
Comelec may deem spurious and manufactured the returns in voting centers showing that the votes of the candidates obtaining the highest
number of valid votes exceeded the highest possible number of votes cast therein even if the excess number of votes were not more than 40%;
and (2) that the Comelec could extend its inquiry beyond that undertaken by the Board of Canvassers and take cognizance of the fact that
voting centers affected by military operations have been transferred to the poblaciones, because as a superior body having supervision and
control over the Board of Canvassers, it may do directly what the latter was supposed or ought to have done. In Aratuc et al., the Supreme
Court found that the Comelec did consider the high percentage of voting coupled with mass substitute voting as proof that the pertinent
returns had been manufactured, and that apart from presuming regularity in the performance of its duties, the Comelec had adhered to
the Supreme Court's guidelines in examining and passing on the returns from the voting centers and in denying petitioner's motion for the
opening of ballot boxes concerned. Further, the High Court stated, it might disagree with the Comelec as to which voting center should be
excluded or included, but still a case of grave abuse of discretion would not come out considering that Comelec, which concededly is in a better
position to appreciate and assess the vital circumstances clearly and accurately, cannot be said to have acted whimsically or capriciously, or
without basis.
Petition dismissed.
SYLLABUS
1. CONSTITUTIONAL LAW; NATURE AND EXTENT OF SUPREME COURT'S POWER OF CERTIORARI OVER DECISIONS, ORDERS, AND
RULINGS OF THE COMELEC UNDER THE 1978 CONSTITUTION. — While under the constitution of 1935 "the decisions, orders, and rulings
of the Commissions shall be subject to review by the Supreme Court" (Section 2, first par., Article X), the 1973 Constitution provides
somewhat differently thus: "Any decision, order or ruling of the Commission may be brought to the Supreme Court on certiorari by the
aggrieved party within 30 days from his receipt of a copy thereof" (Section II, Article XII), even as it ordains that the Commission shall "be
the sole judge of all contests relating to the election returns and qualifications of all members of the National Assembly and elective provincial
and city officials" (Section 2(2), Article XII). Correspondingly, the Election Code of 1978, which is the first legislative construction of these
pertinent constitutional provisions, makes the Commission also the "sole judge of all pre-proclamation controversies" and further provides
that "any of its decisions, orders or rulings (in such controversies) shall be final and executory", just as in election contests, "the decisions of
the Commission shall be final and appealable" (Section 192). The framers of the new Constitutionmust be presumed to have definite
knowledge of what its means to make the decisions, orders and rulings of the Commission "subject to review by the Supreme Court". And
since instead of maintaining that provision intact, it ordained that the Commission's actuations be instead brought to the Supreme Court
on certiorari", the Supreme Court cannot insist that there was no intent to change the nature of the remedy, considering that the limited
scope of certiorari, compared to a review, is well known in remedial law. A review includes digging into the merits or unearthing errors of
judgment, while certiorari deals exclusively with grave abuse of discretion, which may not exist even when the decision is otherwise erroneous.
Certiorari implies indifferent disregard of the law, arbitrariness and caprice, an omission to weigh pertinent considerations, a decision arrived
at without rational deliberation. While the effects of an error of judgment may not differ from that of an indiscretion, as a matter of policy,
there are matters that by their nature ought to be left for final determination to the sound discretion of certain officers or entities, reserving
it to the Supreme Court to insure the faithful observance of due process only in cases of patent arbitrariness.
2. CERTIORARI; GRAVE ABUSE OF DISCRETION; CONSIDERING AS SPURIOUS VOTES EXCEEDING THE HIGHEST POSSIBLE NUMBER OF
VALID VOTES THAT CAN BE CAST IN A VOTING CENTER, NOT A CASE OF. — It is not grave abuse of discretion for the Comelec to deem
as spurious and manufactured votes exceeding the highest possible number of valid votes that can be cast in a voting center even if the total
number of excess votes in the voting center is not more than 40%, considering the historical antecedents relative to the highly questionable
manner in which elections have been held in the past in the provinces involved in this case, of which the Supreme Court has judicial notice.
3. ID.; ID.; NOT A CASE OF; COMELEC MAY DO DIRECTLY WHAT THE BOARD OF CANVASSERS IS SUPPOSED TO DO OR OUGHT TO HAVE
DONE. — Under Section 168 of the Revised Election Code of 1978, the Comelec shall have direct control and supervision of the board of
canvassers, and that relatedly Section 175 of the same Code provides that it "shall be the sole judge of all pre-proclamation controversies."
The authority of the Commission in reviewing actuations of the board of canvassers does not spring from any appellate jurisdiction conferred
by any specific provision of law, for there is none such provision any where in the Election Code, but from the plenary prerogative of direct
control and supervision endowed by Section 168 of the Code. And in administrative law, it is a too well settled postulate to need any
supporting citation, that a superior body or office having supervision and control over another may do directly what the latter is supposed
to do or ought to have done.
4. ID.; ID.; ERRORS OF JUDGMENT NOT REVIEWABLE BY THE SUPREME COURT. — Where it appears from the records that the Comelec
has taken pains to consider as meticulously as the nature of the evidence presented by both parties would permit all the contentions of
petitioners relative to the weight that should be given to such evidence, the Supreme Court will not hold that the Comelec acted wantonly
and arbitrarily in drawing its conclusions. If errors there are in any of those conclusions, they are errors of judgment which are not reviewable
in certiorari, so long as they are founded on substantial evidence.
5. ID.; ID.; NOT A CASE OF; WHERE COMELEC PASSED UPON RETURNS USING COMMON SENSE AND PERCEPTION ONLY;
PRESUMPTION OF REGULARITY IN THE PERFORMANCE OF DUTIES. — Where the Comelec did not examine the questioned election returns
with the aid of experts but "using common sense and perception only", apart from presuming regularity in the performance of its duties, a
case of grave abuse of discretion would not come out, considering that Comelec cannot be said to have acted whimsically or capriciously or
without any rational basis, particularity if it is considered that in many respects and from the very nature of the Supreme Court's and the
Commission's respective functions, the Commission is in a better position to appreciate and assess the vital circumstances closely and
accurately.
6. ID.; NON-IDENTIFICATION OF BALLOT BOXES IN DEFECTIVE CONDITIONS DOES NOT CONSTITUTE GRAVE ABUSE OF DISCRETION
WHERE COMELEC HAS EXAMINED, STUDIED AND PASSED UPON THE RECORDS RELATED THERETO. — Non-identification of defective
ballot boxes by the Comelec does not constitute grave abuse of discretion where it has examined, studied and passed upon the records related
thereto. If at all, deeper inquiry into this point would be of real value in an electoral protest.
DECI SION
BARREDO, J p:
Petition in G.R. Nos. L-49705-09 for certiorari with restraining order and preliminary injunction filed by six (6) independent candidates
for representatives to the Interim Batasang Pambansa who had joined together under the banner of the Kunsensiya ng Bayan which, however,
was not registered as a political party or group under the 197& Election Code, P.D. No. 1296, namely Tomatic Aratuc, Sergio Tocao,
Ciscolario Diaz, Fred Tamula, Mangontawar Guro and Bonifacio Legaspi, hereinafter referred to as petitioners, to review the decision of the
respondent Commission on Elections (Comelec) resolving their appeal from the rulings of the respondent Regional Board of Canvassers for
Region XII regarding the canvass of the results of the election in said region for representatives to the I.B.P. held on April 7, 1978. Similar
petition in G.R. Nos. L-49717-21, for certiorari with restraining order and preliminary injunction filed by Linang Mandangan, also a
candidate for representative in the same election in that region, to review the decision of the Comelec declaring respondent Ernesto Roldan
as entitled to be proclaimed as one of the eight winners in said election. prcd
The instant proceedings are sequels of Our decision in G.R. No. L-48097, wherein Tomatic Aratuc, et al. sought the suspension of the canvass
then being undertaken by respondent Board in Cotabato City and in which canvass, the returns in 1,966 out of a total of 4,107 voting centers
in the whole region had already been canvassed showing partial results as follows:
(Votes of the independent candidates who actually were not in contention omitted.)" (Page 6, Record, L-49705-09.).
A supervening panel headed by Commissioner of Elections, Hon. Venancio S. Duque, had conducted hearings of the complaints of the
petitioners therein of alleged irregularities in the election records in all the voting centers in the whole province of Lanao del Sur, the whole
City of Marawi, eight (8) towns of Lanao del Norte, namely, Baloi, Karomatan, Matungao, Munai, Nunungan, Pantao Ragat, Tagoloan
and Tangcal, seven (7) towns in Maguindanao, namely, Barrira, Datu Piang, Dinaig, Matanog, Parang, South Upi and Upi, ten (10) towns
in North Cotabato, namely, Carmen, Kabacan, Kidapawan, Magpet, Matalam, Midsayap, Pigcawayan, Pikit, Pres. Roxas and Tulonan, ana
eleven (11) towns in Sultan Kudarat, namely, Bagumbayan, Columbio, Don Mariano Marcos, Esperanza, Isulan, Kalamansig, Lebak,
Lutayan, Palimbang, President Quirino and Tacurong, by reason for which, petitioners had asked that the returns from said voting centers
be excluded from the canvass. Before the start of the hearings, the canvass was suspended, but after the supervisory panel presented its
report, on May 15, 1978, the Comelec lifted its order of suspension and directed the resumption of the canvass to be done in Manila.
This order was the one assailed in this Court. We issued a restraining order.
After hearing the parties, the Court allowed the resumption of the canvass but issued the following guidelines to be observed thereat:
"1. That the resumption of said canvass shall be held in the Comelec main office in Manila starting not later than June 1, 1978;
"2. That in preparation therefor, respondent Commission on Elections shall see to it that all the material election paraphernalia
corresponding to all the voting centers involved in Election Cases Nos. 78-8, 78-9, 78-10, 78-11 and 78-12 are taken to
its main office in Manila, more particularly, the ballot boxes, with their contents, used during the said elections, the books of
voters or records of voting and the Listing or records of registered voters, on or before May 31, 1978;
"3. That as soon as the corresponding records are available, petitioners and their counsel shall be allowed to examine the same
under such security measures as the respondent Board may determine, except the contents of the ballot boxes which shall be
opened only upon orders of either the respondent Board or respondent Commission, after the need therefor has become
evident, the purpose of such examination being to enable petitioners and their counsel to expeditiously determine which of them
they would wish to be scrutinized and passed upon by the Board as supporting their charges of election frauds and anomalies,
petitioners and their counsel being admonished, in this connection, that no dilatory tactics should be indulged in by them and
that only such records as would support substantial objections should be offered by them for the scrutiny by Board:
"4. That none of the election returns referred to in the petition herein shall be canvassed without first giving the herein
petitioners ample opportunity to make their specific objections thereto, if they have any, and to show sufficient basis for the
rejection of any of the returns, and, this connection, the respondent Regional Board of Canvassers should gave due
consideration to the points raised in the memorandum filed by said petitioners with the Commission on Elections in the above
cases dated April 26, 1978;
"5. That should it appear to the Board upon summary scrutiny of the records to be offered by petitioners that there is sufficient
indication that in the voting centers concerned, no election was actually held and/or that election returns were prepared either
before the day of the election or at any other time, without counting the ballots or without regard thereto or that there has
been massive substitution of voters, or that ballots and/or returns were prepared by the same groups of persons or individuals
or outside of the voting centers, the Board should exclude the corresponding returns from the canvass;
"6. That appeals to the Commission on Elections from rulings of the Board may be made only after all the returns in question
in all the above five cases shall have been passed upon by the Board and, accordingly, no proclamation shall be made until after
the Commission shall have finally resolved the appeal without prejudice to recourse to this Court, if warranted as provided by
the Code and the Constitution, giving the parties reasonable time thereof;
"7. That the copies of the election returns found in the corresponding ballot boxes shall be the one used in the canvass;
"8. That the canvass shall be conducted with utmost dispatch, to the end that a proclamation, if feasible, may be made not
later than June 10, 1978; thus, the canvass may be terminated as soon as it is evident that the possible number of votes in
the still uncanvassed returns will no longer affect the general results of the elections here in controversy;
"9. That respondent Commission shall promulgate such other directive not inconsistent with this resolution as it may deem
necessary to expedite the proceedings herein contemplated and to accomplish the purposes herein intended." (Pp. 8-9, Record.
". . . in the sense that the ballot boxes for the voting centers just referred to need not be taken to Manila, EXCEPT those of
the particular voting centers as to which the petitioners have the right to demand that the corresponding ballot boxes be
opened in order that the votes therein may be counted because said ballots unlike the election returns, have not been tampered
with or substituted, in which instances the result of the counting shall be the basis of the canvass, provided that the voting
centers concerned shall be specified and made known by petitioners to the Regional Board of Canvassers not later than June
3, 1978; it being understood, that for the purposes of the canvass, the petitioners shall not be allowed to invoke any objection
not already alleged in or comprehend within the allegations in their complaint in the election cases above-mentioned." (Page
8, Id.).
Thus, respondent Board proceeded with the canvass, with the herein petitioners presenting objections, most of them supported by the report
of handwriting and finger-print experts who had examined the voting records and lists of voters in 878 voting centers, out of 2,700 which
they specified in their complaints or petitions in Election Cases 78-8, 78-9, 78-10, 78- 11 and 78-12 in the Comelec. In regard to 501
voting centers, the records of which, consisting of the voters lists and voting records were not available and could not be brought to Manila,
petitioners asked that the results therein be completely excluded from the canvass. On July 11, 1978, respondent Board terminated its
canvass and declared the result of the voting to be as follows:
Without loss of time, the petitioner brought the resolution of respondent Board to the Comelec. Hearing was held on April 26, 1978, after
which hearing, the case was declared submitted for decision. However, on August 30, 1978, the Comelec issued a resolution stating inter
alia that: LexLib
"b. To interview and get statements under oath of impartial and disinterested persons from the area to determine whether
actual voting took place on April 7, 1978, as well as those of the military authorities in the areas affected." (Page 12), Record,
L-49705-09.).
On December 11, 1978, the Comelec required the parties "to file their respective written comments on the reports they shall periodically
receive from the NBI Comelec team of finger-print and signature experts within the inextendible period of seven (7) days from their receipt
thereof". According to counsel for Aratuc, et al., "petitioners submitted their various comments on the report the principal gist of which was
that it would appear uniformly in all the reports submitted by the Comelec NBI experts that the registered voters were not the ones who
voted as shown by the fact that the thumb prints appearing in Form 1 were different from the thumbprints of the voters in Form 5." But
the Comelec deemed a motion of petitioners asking that the ballot boxes corresponding to the voting centers the records of which are not
available be opened and that a date be set when the statements of witnesses referred to in the August 30, 1978 resolution would be taken,
on the ground that in its opinion, it was no longer necessary to proceed with such opening of ballot boxes and taking of statements.
For his part, counsel for petitioner Mandangan in G.R. No. L-49717-21 filed with Comelec on December 19, 1978 a Preliminary
Memorandum. To quote from the petition:
"On December 19, 1978, the KBL, through counsel, filed a 'Preliminary Memorandum for the Kilusang Bagong Lipunan (KBL)
Candidates on the Comelec's Resolution of December 11, 1978,' a xerox copy of which is attached hereto and made a part
hereof as Annex 2, wherein they discussed the following topics: (I) Brief History of the President Case; (II) Summary of Our
Position and Submission Before the Honorable Commission; and (III) KBL's Appeal Ad Cautelam. And the fourth topic, because
of its relevance to the case now before this Honorable Court, we hereby quote for ready reference:
"IV
"OUR POSITION WITH RESPECT TO
THE RESOLUTION OF THE HONORABLE
COMMISSION OF DECEMBER 11, 1978
"We respectfully submit that the Resolution of this case by this Honorable Commission should be limited to the precincts and
municipalities involved in the KB's Petitions in Cases Nos. 78-8 to 78-12, on which evidence had been submitted by the parties,
and on which the KB submitted the reports of their handwriting/finger-print experts. Furthermore, it should be limited by
the appeal of the KB. For under the Supreme Court Resolution of May 23, 1978, original jurisdiction was given to the Board,
with appeal to this Honorable Commission. Considerations of other matters beyond these would be, in our humble opinion,
without jurisdiction.
"For the present, we beg to inform this Honorable Commission that we stand by the reports and findings of the COMELEC/NBI
experts us submitted by them to the Regional Board of Canvassers and as confirmed by the said Regional Board of Canvassers
in its Resolution of July 11, 1978, giving the 8 KBL candidates the majorities we have already above mentioned. The Board
did more than make a summary scrutiny of the records' required by the Supreme Court Resolution, Guideline No. 5, of May
23, 1978. Hence, if for lack of material time we cannot file any Memorandum within the non-extendible period of seven (7)
days, we would just stand by said COMELEC/NBI experts' reports to the Regional Board, as confirmed by the Board (subject
to our appeal ad cautelam)."
"The COMELEC sent to the parties copies of the reports of the NBI-COMELEC experts. For lack of material time due to the
voluminous reports and number of voting centers involved, the Christmas holidays, and our impression that the COMELEC will
exercise only its appellate jurisdiction, specifically as per resolution of this Honorable Court of May 23, 1978 (in G.R. No.
L-48097), we, the KBL, did not comment any more on said reports." (Pp. 5-6, Record, L-49717-21.)
On January 13, 1979, the Comelec rendered its resolution being assailed in these cases, declaring the final result of the canvass to be as
follows:
"CANDIDATES VOTES
"2. In including in the canvass returns from the voting centers whose book of voters and voting records could not be recovered
be the Commission in spite of its repeated efforts to retrieve said records;
"3. In not excluding from the canvass returns from voting centers showing a very high percentage of voting and coupled with
massive substitution of voters is proof of manufacturing of election returns;
"4. In denying petitioners' petition for the opening of the ballot boxes from voting centers whose records are not available for
examination to determine whether or not there had been voting in said voting centers;
"5. In not identifying the ballot boxes that had no padlocks and Especially those that were found to be empty while they were
shipped to Mania pursuant to the directive of the Commission in compliance with the guidelines of this Honorable Court;
"6. In not excluding from the canvass returns where the results of examination of the voting records and registration records
show that the thumbprints of the voters in CE Form 5 did not correspond to those of the registered voters as shown in CE
Form 1;
"7. In giving more credence to the affidavits of chairmen and members of the voting centers, municipal treasurers and other
election officials in the voting centers where irregularities had been committed and not giving credence to the affidavits of
watchers of petitioners;
"8. In not including among those questioned before the Board by petitioners those include among the returns questioned by
them in their Memorandum filed with the Commission on April 26, 1978 filed which Memorandum was attached as Annex
'I' to their petition filed with this Honorable Court said in its Guidelines should be considered by the Board in the course of the
canvass (Guidelines No. 4)." (Pp. 15-16, Record, Id.).
On the other hand, the Mandangan petition submits that the Comelec committed the following errors: LLpr
"1. In erroneously applying the earlier case of Diaz vs. Commission on Elections (November 29, 1971; 42 SCRA 426), and
particularly the highly restrictive criterion that when the when obtained by the candidates with the highest number of votes
exceed the total number of highest possible valid votes, the COMELEC ruled to exclude from the canvass the election returns
reflecting such results, under which the COMELEC excluded 1,004 election returns, involving around 100,000 votes, 95% of
which are for KBL candidate, particularly the petitioner Linang Mandangan, and which rule is so patently unfair, unjust and
oppressive.
"2. In not holding that the real doctrine in the Diaz-Case is not the total exclusion of election returns simple because the total
number of votes exceed to total number of highest possible valid votes, but 'even if all to votes cast by persons identified as
registered voters were added to the votes cast by persons who can not be definitely ascertained as registered or not, and
granting, ad arguendo, that all of them voted for respondent Daoas, still the resulting total is much below the number of votes
credited to the latter in returns for Sagada, 'and that 'of the 2,188 ballots cast in Sagada, nearly one half (1,012) were cast
by persons definitely identified as not registered therein,' or still more than 40% of substitute voting which was the rule
followed in the later case of Bashier/Basman (Diaz Case, November 19, 1971, 42 SCRA 426,432).
"3. In not applying the rule and formula in the later case of Bashier and Basman vs. Commission on Elections (February 24,
1972, 43 SCRA 238) which was the one followed by the Regional Board of Canvassers, to wit:
'In Basman vs. Comelec (L-33728, Feb. 24, 1972) the Supreme Court upheld the ruling of the Comelec in setting
the standard of 40% excess votes to justify the exclusion of election returns. In line with the above ruling, the Board of
Canvassers may likewise set aside election returns with 40% substitute votes. Likewise, where excess voting occurred and
the excess was such as to destroy the presumption of innocent mistake, the returns was excluded.
(COMELEC'S Resolution, Annex 1 hereof, p. 22), which this Honorable Court must have meant when its Resolution of May 23,
1978 (G.R. No. L-48097), it referred to 'massive substitution of voters.'
"4. In examining, through the NBI/COMELEC experts, the records in more than 878 voting centers examined by the KB
experts and passed upon by the Regional Board of Canvassers which was all that was within its appellate jurisdiction; is
examination of more election records to make a total of 1,085 voting centers (COMELEC's Resolution, Annex 1 hereof, p. 100),
being beyond its jurisdiction and a denial of due process as far as the KBL, particularly the petitioner Mandangan, were
concerned because they were informed of it only in December, 1978, long after the case has been submitted for decision in
September, 1978; and the statement that the KBL acquiesced to the same is absolutely without foundation.
"5. In excluding election returns from areas where the conditions of peace and order were allegedly unsettled or where there
was a military operation going on immediately before and during elections and where the voter turn out was high (90% to
100%), and where the people had been asked to evacuate, as a ruling without jurisdiction and in violation of due process because
no evidence was at all submitted by the parties before the Regional Board of Canvassers." (Pp. 23-25, Record, L-47917-21.).
Now before discussing the merits of the foregoing contentions, it is necessary to clarify first the nature and extent of the Supreme Court's
power of review in the premises. The Aratuc petition is expressly predicated on the ground that respondent Comelec "committed grave abuse
of discretion, amounting to lack of jurisdiction" in eight specifications. On the other hand, the Mandangan petition raises pure questions of
law and jurisdiction. In other words, both petitions invoked the Court's certiorari jurisdiction, not its appellate authority of review. cdphil
This is as it should be. While under the Constitution of 1935, "the decisions, orders and rulings of the Commission shall be subject to review
by the Supreme Court" (Sec. 2, first paragraph, Article X) and pursuant to the Rules of Court the petition for "certiorari or review" shall be
on the ground that the Commission "has decided a question of substance not theretofore determined by the Supreme Court, or has decided
it in a way not in accord with law or the applicable decisions of the Supreme Court" (Sec. 3, Rule 43), and such provisions refer not only to
election contests but even to pre-proclamation proceedings, the 1973 Constitution provides somewhat differently thus: "Any decision, order
or ruling of the Commission may be brought to the Supreme Court" on certiorari by the aggrieved party within thirty days from this receipt
of a copy thereof" (Section 11, Article XII c), even as it ordains that the Commission shall "be the sole judge of all contests relating to the
elections, returns and qualifications of all members of the National Assembly and elective provincial and city officials" (Section 2 (2).)
Correspondingly, the Election Code of 1978, which is the first legislative construction of the pertinent constitutional provisions, makes the
Commission also the "sole judge of all pre-proclamation controversies" and further provides that "any of its decisions, orders or rulings (in
such controversies) shall be final and executory", just as in election contests, "the decision of the Commission shall be final, and executory and
inappealable." (Section 193)
It is at once evident from these constitutional and statutory modifications that there is a definite tendency to enhance and invigorate the
role of the Commission on Elections as the independent constitutional body charged with the safeguarding of free, peaceful and honest
elections. The framers of the new Constitution must be presumed to have definite knowledge of what it means to make the decisions, orders
and rulings of the Commission "subject to review by the Supreme Court". And since instead of maintaining that provision intact, it ordained
that the Commission's actuations be instead "brought to the Supreme Court on certiorari", We cannot insist that there was no intent to
change the nature of the remedy, considering that the limited scope of certiorari, compared to a review, is well known in remedial law.
Withal, as already stated, the legislative construction of the modified pertinent constitutional provision is to the effect that the actuations
of the Commission are final, executory and even inappealable. While such construction does not exclude the general certiorari jurisdiction of
the Supreme Court which inheres in it as the final guardian of the Constitution, particularly, of its imperious due process mandate, it
correspondingly narrows down the scope and extent of the inquiry the Court is supposed to undertake to what is strictly, the office of
certiorari as distinguished from review. We are of the considered opinion that the statutory modifications are consistent with the apparent
new constitutional intent. Indeed, it is obvious that to say that actuations of the Commission may be brought to the Supreme Court
oncertiorari technically connotes something less than saying that the same "shall be subject to review by the Supreme Court", when it comes
to the measure the Court's reviewing authority or prerogative in the premises.
A review includes digging into the merits and unearthing errors of judgment, while certiorari deals exclusively with grave abuse of discretion,
which may not exist even when the decision is otherwise erroneous. Certiorari implies an indifferent disregard of the law, arbitrariness and
caprice, an omission to weigh pertinent considerations, a decision arrived at without rational deliberation. While the effects of an error of
judgment may not differ from that of an indiscretion, as a matter of policy, there are matters that by their nature ought to be left for final
determination to the sound discretion of certain officers or entities, reserving it to the Supreme Court to insure the faithful observance of
due process only in cases of patent arbitrariness. cdrep
Such, to Our mind, is the constitutional scheme relative to the Commission on Elections. Conceived by the charter as the effective instrument
to preserve the sanctity of popular suffrage, endowed with independence and all the needed con-comittant powers, it is but proper that the
Court should accord the greatest measure of presumption of regularity to its course of action and choice of means in performing its duties,
to the end that it may achieve its designed place in the democratic fabric of our government. Ideally, its members should be free from all
suspicions of partisan inclinations, but the fact that actually some of them have had stints in the arena of politics should not, unless the
contrary is shown, serve as basis for denying to its actuations the respect and consideration that the Constitution contemplates should be
accorded to it, in the same manner that the Supreme Court itself which from time to time may have members drawn from the political ranks
or even from the military is at all times deemed insulated from every degree or form of external pressure and influence as well as improper
internal motivations that could arise from such background or orientation.
We hold, therefore, that under the existing constitutional and statutory provisions, the certiorari jurisdiction of the Court over orders, rulings
and decisions of the Comelec is not as abroad as it used to be and should be confined to instances of grave abuse of discretion amounting to
patent and substantial denial of due process. Accordingly, it is in this light that We shall proceed to examine the opposing contentions of the
parties in these cases.
Being more simple in Our view, We shall deal with the petition in G.R. No. L-49717-21 first.
The errors assigned in this petition boil down to two main propositions, namely, (1) that it was an error of law on the part of respondent
Comelec to have applied to the extant circumstances hereof the ruling of this Court in Diaz vs. Comelec, 42 SCRA 426 instead of that of
Bashier vs. Comelec, 43 SCRA 238; and (2) that respondent Comelec exceeded its jurisdiction and denied due process to petitioner
Mandangan in extending its inquiry beyond the election records of "the 878 voting centers examined by the KB experts and passed upon by
the Regional Board of Canvassers" and in excluding from the canvass the returns, showing 90 to 100% voting, from voting centers where
military operations were certified by the Army to be going on, to the extent that said voting centers had to be transferred to the poblaciones,
the same being unsupported by evidence.
Anent the first proposition, it must be made clear that the Diaz and Bashier rulings are not mutually exclusive of each other, each being an
outgrowth of the basic rationale of statistical improbability laid down in Lagumbay vs. Comelec and Climaco, 16 SCRA 176. Whether they
should be applied together or separately-or which of them should be applied depends on the situation on hand. In the factual milieu of the
instant case as found by the Comelec, We see no cogent reason, and petitioner has not shown any, why returns in voting centers showing
that the votes of the candidate obtaining the highest possible number of valid votes cast therein should not be deemed as spurious and
manufactured just because the total number of excess votes in said voting centers were not more than 40%. Surely, this is not the occasion,
considering the historical antecedents relative to the highly questionable manner in which elections have been held in the past in the provinces
herein involved, of which the Court has judicial notice as attested by its numerous decisions in cases involving practically every such election,
of the Court to move a whit back from the standards it has enunciated in those decisions.
In regard to the jurisdictional and due process points raised by herein petitioner, it is of decisive importance to bear in mind that under Section
168 of the RevisedElection Code of 1978, "the Commission (on Elections) shall have direct control and supervision over the board of
canvassers" and that relatedly, Section 176 of the same Code provides that it "shall be the sole judge of all pre-proclamation controversies."
While nominally, the procedure of bringing to the Commission objections to the actuations of boards of canvassers has been quite loosely
referred to in certain quarters, even by the Commission and by this Court, such as in the guidelines of May 23, 1978 quoted earlier in this
opinion, as an appeal, the fact of the matter is that the authority of the Commission in reviewing such actuations does not spring from any
appellate jurisdiction conferred by any specific provision of law, for there is none such provision anywhere in the Election Code, but from the
plenary prerogative of direct control and supervision endowed to it by the above-quoted provisions of Section 168. And in administrative
law, it is a too well settled postulate to need any supporting citation here, that a superior body or office having supervision and control over
another may do directly what the latter is supposed to do or ought to have done. llcd
Consequently, anything said in Lucman vs. Dimaporo, 33 SCRA 387, cited by petitioner, to the contrary notwithstanding, We cannot fault
respondent Comelec for its having extended its inquiry beyond that undertaken by the Board of Canvassers. On the contrary, it must be stated
that Comelec correctly and commendably asserted its statutory authority born of its envisaged constitutional duties vis-a-vis the preservation
of the purity of elections and electoral processes and procedures in doing what petitioner claims it should not have done. Incidentally, it cannot
be said that Comelec went further than even what Aratuc, et al. have asked, since said complainants had impugned from the outset not only
the returns from the 878 voting centers examined by their experts but all those mentioned in their complaints in the election cases filed
originally with the Comelec enumerated in the opening statements hereof, hence respondent Comelec had that much field to work on.
The same principle should apply in respect to the ruling of the Commission regarding the voting centers affected by military operations. It
took cognizance of the fact, not considered by the board of canvassers, that said voting centers had been transferred to the poblaciones. And,
if only for purposes of pre-proclamation proceedings, We are persuaded it did not constitute a denial of due process for the Commission to
have taken into account, without the need or presentation of evidence by the parties, a matter so publicly notorious as the unsettled situation
of peace and order in some localities in the provinces herein involved that they may perhaps be taken judicial notice of, the same being capable
of unquestionable demonstration. (See 1, Rule 129).
In this connection, We may as well, perhaps, say here as later that regrettably We cannot, however, go along with the view, expressed in the
dissent of our respected Chief Justice, that from the fact that some of the voting centers had been transferred to the poblaciones there is
already sufficient basis for Us to rule that the Commission should have also subjected all the returns from the other voting centers of the same
municipalities, if not provinces, to the same degree of scrutiny as in the former. The majority of the Court feels that had the Commission done
so, it would have fallen into the error precisely alleged by petitioner Mandangan about denial of due process, for it is relatively unsafe to draw
adverse conclusions us to the exact conditions of peace and order in those other voting centers without at least someprima facie evidence to
rely on considering that there is no allegation, much less any showing at all that the voting centers in question are so close to those excluded
by the Commission as to warrant the inescapable conclusion that the relevant circumstances found by the Comelec as obtaining in the latter
were identical to those in the former.
Premises considered, the petition in G.R. Nos. L-49717-21 is hereby dismissed, for lack of merit.
Of the eight errors assigned by herein petitioners earlier adverted to, the seventh and the eight do not require any extended disquisition. As
to the issue of whether the elections in the voting centers concerned were held on April 7, 1978, the date designated by law, or earlier, to
which the seventh alleged error is addressed, We note that apparently petitioners are not seriously pressing on it anymore, as evidenced by
the complete absence of any reference thereto during the oral argument of their counsel and the practically cavalier discussion thereof in the
petition. In any event, We are satisfied from a careful review of the analysis by the Comelec in its resolution now before Us that it took pains
to consider as meticulously as the nature of the evidence presented by both parties would permit all the contentions of petitioners relative
to the weight that should be given to such evidence. The detailed discussion of said evidence is contained in not less than nineteen pages (pp.
70-89) of the resolution. In these premises, We are not prepared to hold that Comelec acted wantonly and arbitrarily in drawing its
conclusions adverse to petitioners' position. If errors there are in any of those conclusions, they are errors of judgment which are not reviewable
in certiorari, so long as they are founded on substantial evidence.
As to eighth assigned error. the thrust of respondents' comment is that the results in the voting centers mentioned in this assignment of error
had already been canvassed at the regional canvassing center in Cotabato City. Again, We cannot say that in sustaining the board of canvassers
in this regard, Comelec gravely abused its discretion, if only because in the guidelines set by this Court, what appears to have been referred
to is, rightly or wrongly, the resumption only of the canvass, which does not necessarily include the setting aside and repetition of the canvass
already made in Cotabato City.
The second and fourth assignments of error concern the voting centers the corresponding voter's record (C.E. Form 1) and record of voting,
(C.E. Form 6) of which have never been brought to Manila because they were not available. The record is not clear as to how many are these
voting centers. According to petitioners they are 501, but in the Comelec resolution in question, the number mentioned is only 408, and
this number is directly challenged in the petition. Under the second assignment, it is contended that the Comelec gravely abused its discretion
in including in the canvass the election returns from these voting centers and, somewhat alternatively, it is alleged as fourth assignment that
petitioners' motion for the opening of the ballot boxes pertaining to said voting centers was arbitrarily denied by respondent Comelec. prcd
The resolution under scrutiny explains the situation that confronted the Commission in regard to the 408 voting centers referred to as follows:
"The Commission had the option of excluding from the canvass the election returns under this category. By deciding to exclude,
the Commission would be summarily disenfranchising the voters registered in the voting centers affected without any basis.
The Commission could also order the inclusion in the canvass of these election returns under the injunction of the Supreme
Court that extreme caution must be exercised in rejecting returns unless these are palpably irregular. The Commission chose
to give prima facie validity to the election returns mentioned and uphold the votes cast by the voters in those areas. The
Commission held the view that the failure of some election officials to comply with Commission orders (to submit the records)
should not prejudice the right of suffrage of the citizens who were not parties to such official disobedience. In the case of Lino
Luna vs. Rodriguez, 39 Phil. 208, the Supreme Court ruled that when voters have honestly cast their ballots, the same should
not be nullified because the officers appointed under the law to direct the election and guard the purity of the ballot have not
complied with their duty. (cited in Laurel on Elections, p. 24)" (Pp. 139-140, Record).
"At all events, the returns corresponding to these voting centers were examined by the Comelec and 141 of such returns were
excluded, as follows:
'SUMMARY
PROVINCE TOTAL EXCLUDED INCLUDED
Maguindanao 21 1 20
North Cotabato 7 1 6
Sultan Kudurat 12 2 10
—— —— ——
Thus, it appears that precisely because of the absence or unavailability of the CE Forms 1 and 5 corresponding to the more than 400 voting
centers concerned in our present discussion, the Comelec examined the returns from said voting centers to determine their trustworthiness
by scrutinizing the purported relevant data appearing on their faces, believing that such was the next best thing that could be done to avoid
total disenfranchisement of the voters in all of them. On the other hand, petitioners' insist that the right thing to do was to order the opening
of the ballot boxes involved.
In connection with such opposing contentions, Comelec's explanation in its resolution is:
". . . The commission had it seen fit to so order, could have directed the opening of the ballot boxes. But the Commission did
not see the necessity of going to such length in a proceeding that was summary in nature and decided that there was sufficient
bases for the resolution of the appeal. That the Commission has discretion to determine when the ballot boxes should be opened
is implicit in the guidelines set by the Supreme Court which states that '. . . the ballot boxes [which] shall be opened only upon
orders of either the respondent Board or respondent Commission, after the need therefor has become evident . . .' (guideline
No. 3; italics supplied). Furthermore, the Court on June 1, 1978, amended the guidelines by providing that the "ballot boxes
for the voting centers . . . need not be taken to Manila, EXCEPT those of the particular centers as to which the petitioners have
the right to demand that the corresponding ballot boxes he opened . . . provided that the voting centers concerned shall be
specified and made known by petitioners to the Regional Board of Canvassers not later than June 3, 1978 . . .' (emphasis
supplied). The KB, candidates did not take advantage of the option granted them under these guidelines.' (Pp. 106-107,
Record.)
Considering that Comelec, if it had wished to do so, had the facilities to identify on its own the voting centers without CE Form, 1 and 5,
thereby precluding the need for the petitioners having to specify them, and under the circumstances the need for opening the ballot boxes
in question should have appeared to it to be quite apparent, it may be contended that Comelec would have done greater service to the public
interest had it proceeded to order such opening, as it had announced it had thoughts of doing in its resolution of August 30, 1978. On the
other hand, We cannot really blame the Commission too much, since the exacting tenor of the guidelines issued by Us left it with very little
elbow room, so to speak, to use its own discretion independently of what We had ordered. What could have saved matters altogether would
have been a timely move on the part of petitioners on or before June 3, 1978, as contemplated in Our resolution. After all, come to think
of it, that the possible outcome of the opening of the ballot boxes would favor the petitioners was not a certainty — the contents thereof could
conceivably boomerang against them, such as, for example, if the ballots therein had been found to be regular and preponderantly for their
opponents. Having in mind that significantly, petitioners filed their motion for opening only on January 9, 1979, practically on the eve of
the promulgation of the resolution, We hold that by having adhered to Our guidelines of June 1, 1978, Comelec certainly cannot be held
to be guilty of having gravely abused its discretion, whether in examining and passing on the returns from the voting centers referred to in
the second and fourth assignments of error in the canvass or in denying petitioners' motion for the opening of the ballot boxes concerned.
The first, third and sixth assignment of errors involve related matters and maybe discussed together. They all deal with the inclusion in or
exclusion from the canvass of certain returns on the basis of the percentage of voting in specified voting centers and the corresponding findings
of the Comelec on the extent of substitute voting therein as indicated by the result of either the technical examination by experts of the
signatures and thumb-prints of the voters thereat.
To begin with, petitioners' complaint that the Comelec did not examine and study 1,694 of the records in all the 2,775 voting centers
questioned by them is hardly accurate. To be more exact, the Commission excluded a total of 1,267 returns coming under four categories
namely: 1,001 under the Diaz, supra, ruling, 79 because of 90-100% turnout of voters despite military operations, 105 palpably
manufactured ones and 82 returns excluded by the board of canvassers on other grounds. Thus, 45.45% of the claims of the petitioners were
sustained by the Comelec. In contrast, in the board of canvassers, only 453 returns were excluded. The board was reversed as to 6 of these,
and 821 returns were excluded by Comelec over and above those excluded by the board. In other words, the Comelec almost doubled the
exclusions by the board. llcd
Petitioners would give the impression by their third assignment of error that Comelec refused to consider high percentage of voting, coupled
with mass substitute voting as proof that the pertinent returns had been manufactured. That such was not the case is already shown in the
above specifications. To add more, it can be gleaned from the resolution that in respect to the 1,065 voting centers in Lanao del Sur and
Marawi City where a high percentage of voting appeared, the returns from the 867 voting centers were excluded by the Comelec and only
198 were included a ratio of roughly 78% to 22%. The following tabulation drawn from the figures in the resolution shows hour the Comelec
went over those returns center by center and acted on them individually:
NO. OF V/C THAT V/C WITH 90% to 100% MUNICIPALITIES FUNCTIONED VOTING No. of V/C Excluded Included
Bacolod Grande 28 28 27 1
Balabagan 53 53 49 4
Balindong 22 22 15 7
Bayang 29 20 13 7
Binidayan 37 33 29 4
Buadiposo Buntoug 41 10 10 0
Bubong 24 23 21 2
Butig 35 33 32 1
Calanogas 23 21 21 0
Ditsaan-Ramain 42 39 38 1
Ganassi 39 38 23 15
Lumba Bayabao 64 63 47 16
Lumbatan 30 28 17 11
Lumbayanague 37 33 28 5
Madalum 14 13 6 7
Madamba 20 20 5 15
Maguing 57 55 53 2
Malabang 59 47 5 42
Marantao 79 63 41 22
Marugong 37 35 32 3
Masiu 27 26 24 2
Pagayawan 15 13 9 4
Piagapo 39 39 36 3
Poona-Bayabao 44 44 42 2
Pualas 23 20 20 0
Saguiaran 36 32 21 11
Sultan Gumander 35 31 31 0
Tamparan 24 21 15 6
Taraka 31 31 31 0
Tubaran 23 19 19 0
————
We are convinced, apart from presuming regularity in the performance of its duties, that there is enough showing in the record that it did
examine and study the returns and pertinent records corresponding to all the 2775 voting centers subject of petitioners' complaints below.
In one part of its resolution the Comelec states:
"The Commission as earlier stated examined on its own the Books of Voters (Comelec Form No. 1) and the Voters Records
Comelec Form No. 5) to determine for itself which of these election forms needed further examination by the COMELEC-NBI
experts. The Commission, aware of the summary nature of this pre-proclamation controversy, believes that it can decide, using
common sense and perception, whether the election forms in controversy needed further examination by the experts based
on the presence or absence of patent signs of irregularity." (Pp. 137-138, Record.)
In the face of this categorical assertion of fact of the Commission, the bare charge of petitioners that the records pertaining to the 1,694
voting centers assailed by them should not create any ripple of serious doubt. As We view this point under discussion, what is more factually
accurate is that those records complained of were not examined with the aid of experts and that Comelec passed upon the returns
concerned "using common sense and perception only." And there is nothing basically objectionable in this. The defunct Presidential, Senate
and House Electoral Tribunals examined, passed upon and voided millions of votes in several national elections without the assistance of
experts and "using" only "common sense and perception". No one ever raised any eyebrows about such procedure. Withal, what we discern
from the resolution is that Comelec preliminary screened the records and whatever it could not properly pass upon by "using common
sense and perception" it left to the experts to work on. We might disagree with he Comelec as to which voting center should be excluded
or included, were We to go over the same records Ourselves, but still a case of grave abuse of discretion would not come out, considering
that Comelec cannot be said to have acted whimsically or capriciously or without any rational basis, particularly if it is considered that
in many respects and from the very nature of our respective functions, becoming candor would dictate to Us to concede that the
Commission is in a better position to appreciate and assess the vital circumstances closely and accurately. By and large, therefore, the first,
third and sixth assignments of error of the petitioners are not well taken. cdll
The fifth assignment of error is in Our view moot and academic. The identification of the ballot boxes in defective condition, in some instances
open and allegedly empty, is at best of secondary import because, as already discussed, the records related thereto were after all examined,
studied and passed upon. If at all, deeper inquiry into this point would be of real value in an electoral protest.
CONCLUSION
Before closing, it may not be amiss to state here that the Court had initially agreed to dispose of the cases in a minute resolution, without
prejudice to an extended or reasoned out opinion later, so that the Court's decision may be known earlier. Considering, however, that no less
than the Honorable Chief Justice has expressed misgivings as to the propriety of yielding to the conclusions of respondent Commission because
in his view there are strong considerations warranting further meticulous inquiry of what he deems to be earmarks of seemingly traditional
faults in the manner elections are held in the municipalities and provinces herein involved, and he is joined in this pose by two other
distinguished colleagues of Ours, the majority opted to ask for more time to put down at least some of the important considerations that
impelled Us to see the matters in dispute the other way, just as the minority bidded for the opportunity to record their points of view. In
this manner, all concerned will perhaps have ample basis to place their respective reactions in proper perspective.
In this connection, the majority feels it is but meet to advert to the following portion of the ratiocination of respondent Board of Canvassers
adopted by respondent Commission with approval in its resolution under question:
"First of all this Board was guided by the legal doctrine that canvassing boards must exercise "extreme caution" in rejecting
returns and they may do so only when the returns are palpably irregular. A conclusion that an election return is obviously
manufactured or false and consequently should be disregarded in the canvass must be approached with extreme caution, and
only upon the most convincing proof. Any plausible explanation, one which is acceptable to a reasonable man in the light of
experience and of the probabilities of the situation, should suffice to avoid outright nullification, with the resulting
disenfranchisement of those who exercised their right of suffrage. (Anni vs. Isquierdo et al, L-35918, June 28, 1974; Villalon
v. Comelec, L-32008, August 31, 1970: Tagoranao v. Comelec, 22 SCRA 978). In the absence of strong evidence establishing
the spuriousness of the return, the basis rule of their being accorded prima facie status as bona fide reports of the results of
the count of the votes for canvassing and proclamation purposes must be applied, without prejudice to the question being tried
on the merits with the presentation of evidence, testimonial and real, in the corresponding electoral protest. (Bashier vs.
Comelec, L-33692, 33699, 33728, 43 SCRA 236, February 24, 1972). The decisive factor is that where it has been duly
determined after investigation and examination of the voting and registration records that actual voting and election by the
registered voters had taken place in the questioned voting centers, the election returns cannot be disregarded and excluded
with the resulting disenfranchisement of the voters, but must be accorded prima facie status as bona fide reports of the results
of the voting for canvassing and proclamation purposes. Where the grievances relied upon is the commission of irregularities
and violation of the Election Law the proper remedy is election protest. (Anni vs. Isquierdo et al, Supra)." (P. 59, Record,
L-49706-09).
The writer of this opinion has taken care to personally check on the citations to be doubly sure they were not taken out of context, considering
that most, if not all of them, arose from similar situations in the very venues of the actual milieu of the instant cases, and We are satisfied
they do fit our chosen posture. More importantly, they actually came from the pens of different members of the Court, already retired or
still with Us, distinguished by their perspicacity and their perceptive prowess. In the context of the constitutional and legislative intent
expounded at the outset of this opinion and evident in the modifications of the duties and responsibilities of the Commission on Elections
vis-a-vis the matters that have concerned Us herein, particularly the elevation of the Commission as the "sole judge of pre-proclamation
controversies" as well as of all electoral contests, We find the aforequoted doctrines compelling as they reveal through the clouds of existing
jurisprudence the polestar by which the future should be guided in delineating and circumscribing separate spheres of action of the Commission
as it functions in its equally important dual role just indicated bearing as they do on the purity and sanctity of elections in this country. cdrep
In conclusion, the Court finds insufficient merit in the petition to warrant its being given due course. Petition dismissed, without
pronouncement as to costs. Justices Fernando, Antonio and Guerrero who are presently on official missions abroad voted for such dismissal.
Fernando, Antonio, Concepcion, Jr., Santos, Fernandez and Guerrero, JJ., concur.
||| (Aratuc v. Commission on Elections, G.R. Nos. L-49705-09, [February 8, 1979], 177 PHIL 205-246)
ASTURIAS SUGAR CENTRAL, INC., petitioner, vs. COMMISSIONER OF CUSTOMS and COURT OF TAX
APPEALS, respondents.
Solicitor General Arturo A. Alafriz, Assistant Solicitor General Esmeraldo Umali and Solicitor Sumilang V . Bernardo for respondents.
SYLLABUS
1. POLITICAL LAW; TARIFF AND CUSTOMS LAWS; ADMINISTRATIVE CONSTRUCTION, WEIGHT OF. — Considering that the Bureau of
Customs is the office charged with implementing and enforcing the provisions of our Tariff and Customs Code, the construction placed by
It should be given controlling weight.
2. ID.; ID.; PERIOD PRESCRIBED TO EXPORT, NON-EXTENDIBLE AND MANDATORY. — In the light of the well established rule that
exemptions from taxation are not favored, and that tax statutes are to be construed in strictissimi juris against the taxpayer and liberally
in favor of the taxing authority, the court is of the opinion that the one-year period with which to export imported containers prescribed
in Section 23 of the Philippine Tariff Act of 1909 is non-extendible; compliance therewith is mandatory.
3. ID.; ID.; JUTE BAGS WITHIN THE MEANING OF THE WORD "CONTAINERS." — The words "jute bags" are included in the phrase "cylinders
and other containers" mentioned in Administrative Order No. 389, for the reason that the Philippine Tariff Act of 1909 and the Tariff and
Customs Code, speak of "containers" in general, and the enumeration following said word merely serves to give example of containers and
do not specify the particular kinds thereof.
DECI SION
CASTRO, J p:
This is a petition for review of the decision of the Court of Tax Appeals of November 20, 1961, which denied recovery of the sum
of P28,629.42, paid by the petitioner, under protest, in the concept of customs duties and special import tax, as well as the petitioner's
alternative remedy to recover the said amount minus one per cent thereof by way of a drawback under sec. 106(b) of the Tariff and
Customs Code.
The petitioner Asturias Sugar Central, Inc. is engaged in the production and milling of centrifugal sugar for export, the sugar so produced
being placed in containers known as jute bags. In 1957 it made two importations of jute bags. The first shipment consisting of 44,800 jute
bags and declared under entry 48 on January 8, 1957, entered free of customs duties and special import tax upon the petitioner's filing
of Re-exportation and Special Import Tax Bond no. 1 in the amounts of P25,088 and P2,464.50. conditioned upon the exportation of the
jute bags within one year from the date of importation. The second shipment consisting of 75,200 jute bags and declared under entry 243
on February 8, 1957, likewise entered free of customs duties and special import tax upon the petitioner's filing of Re-exportation and Special
Import Tax Bond no. 6 in the amounts of P42,112 and P7,984.44, with the same conditions as stated in bond no. 1.
Of the 44,800 jute bags declared under entry 48, only 8,647 were exported within one year from the date of importation as containers
of centrifugal sugar. Of the 75,200 jute bags declared under entry 243, only 25,000 were exported within the said period of one year. In
other words, of the total number of imported jute bags only 33,647 bags were exported within one year after their importation. The
remaining 86,353 bags were exported after the expiration of the one-year period but within three years from their importation.
On February 6, 1958 the petitioner, thru its agent Theo. H. Davies & Co., Far East, Ltd., requested the Commissioner of Customs for a week's
extension of Re-exportation and Special Import Tax Bond no. 6 which was to expire the following day, giving the following as the reasons
for its failure to export the remaining jute bags within the period of one year: (a) typhoons and severe floods; (b) picketing of the Central
railroad line from November 6 to December 21, 1957 by certain union elements in the employ of the Philippine Railway Company, which
hampered normal operations; and (c) delay in the arrival of the vessel aboard which the petitioner was to ship its sugar which was then ready
for loading. This request was denied by the Commissioner per his letter of April 15, 1958.
Due to the petitioner's failure to show proof of the exportation of the balance of 86,353 jute bags within one year from their importation,
the Collector of Customs of Iloilo, on March 17, 1958, required it to pay the amount of P28,629.42 representing the customs duties and
special import tax due thereon, which amount the petitioner paid under protest.
In its letter of April 10, 1958, supplemented by its letter of May 12, 1958, the petitioner demanded the refund of the amount it had paid,
on the ground that its request for extension of the period of one year was filed on time, and that its failure to export the jute bags within
the required one-year period was due to delay in the arrival of the vessel on which they were to be loaded and to the picketing of the Central
railroad line. Alternatively, the petitioner asked for refund of the same amount in the form of a drawback under section 106(b) in relation
to section 105(x) of the Tariff and Customs Code.
After hearing, the Collector of Customs of Iloilo rendered judgment on January 21, 1960 denying the claim for refund. From his action,
appeal was taken to the Commissioner of Customs who upheld the decision of the Collector. Upon a petition for review the Court of Tax Appeals
affirmed the decision of the Commissioner of Customs.
The petitioner imputes three errors to the Court of Tax Appeals, namely:
"1. In not declaring that force majeure and/or fortuitous event is a sufficient justification for the failure of the petitioner to
export the jute bags in question within the time required by the bonds.
"2. In not declaring that it is within the power of the Collector of Customs and/or the Commissioner of Customs to extend the
period of one (1) year within which the jute bags should be exported.
"3. In not declaring that the petitioner is entitled to a refund by way of a drawback under the provisions of section 106, par.
(b), of the Tariff and Customs Code."
1. The basic issue tendered for resolution is whether the Commissioner of Customs is vested, under the Philippine Tariff Act of 1909, the then
applicable law, with discretion to extend the period of one year provided for in section 23 of the Act. Section 23 reads:
"SEC. 23. That containers, such as casks, large metal, glass, or other receptacles which are, in the opinion of the collector of
customs, of such a character as to be readily identifiable may be delivered to the importer thereof upon identification and the
giving of a bond with sureties satisfactory to the collector of customs in an amount equal to double the estimated duties thereon,
conditioned for the exportation thereof or payment of the corresponding duties thereon within one year from the date of
importation, under such rules and regulations as the Insular Collector of Customs shall provide." 1
To implement the said section 23, Customs Administrative Order 389 dated December 6, 1940 was promulgated, paragraph XXVIII of
which provides that "bonds for the re-exportation of cylinders and other containers are good for 12 months without extension," and
paragraph XXXI, that "bonds for customs brokers, commercial samples, repairs and those filed to guarantee the re-exportation of cylinders
and other containers are not extendible."
And insofar as jute bags as containers are concerned, Customs Administrative Order 66 dated August 25, 1948 was issued, prescribing rules
and regulations governing the importation, exportation and identification thereof under section 23 of the Philippine Tariff Act of 1909. Said
administrative order provides:
"That importation of jute bags intended for use as containers of Philippine products for exportation to foreign countries shall
be declared in a regular import entry supported by a surety bond in an amount equal to double the estimated duties,
conditioned for the exportation or payment of the corresponding duties thereon within one year from the date of importation."
It will be noted that section 23 of the Philippine Tariff Act of 1909 and the superseding sec. 105(x) of the Tariff and Customs Code, while
fixing at one year the period within which the containers therein mentioned must be exported, are silent as to whether the said period may
be extended. It was surely by reason of this silence that the Bureau of Customs issued Administrative Orders 389 and 66, already adverted
to, to eliminate confusion and provide a guide as to how it shall apply the law, 2 and, more specifically, to make officially known its policy
to consider the one-year period mentioned in the law as non-extendible.
Considering that the statutory provisions in question have not been the subject of previous judicial interpretation, then the application of the
doctrine of "judicial respect for administrative construction," 3 would, initially, be in order.
"Only where the court of last resort has not previously interpreted the statute is the rule applicable that courts will give
consideration to construction by administrative or executive departments of the state." 4
"The formal or informal interpretation or practical construction of an ambiguous or uncertain statute or law by the executive
department or other agency charged with its administration or enforcement is entitled to consideration and the highest
respect from the courts, and must be accorded appropriate weight in determining the meaning of the law, especially when
the construction or interpretation is long continued and uniform or is contemporaneous with the first workings of the statute,
or when the enactment of the statute was suggested by such agency." 5
The administrative orders in question appear to be in consonance with the intention of the legislature to limit the period within which to
export imported containers to one year, without extension, from the date of importation. Otherwise, in enacting the Tariff and Customs Code
to supersede the Philippine Tariff Act of 1909, Congress would have amended section 23 of the latter law so as to overrule the long- standing
view of the Commissioner of Customs that the one-year period therein mentioned is not extendible.
"Implied legislative approval by failure to change a long- standing administrative construction is not essential to judicial respect
for the construction but is an element which greatly increases the weight given such construction." 6
"The correctness of the interpretation given a statute by the agency charged with administering its provision is indicated where
it appears that Congress, with full knowledge of the agency's interpretation, has made significant additions to the statute
without amending it to depart from the agency's view." 7
Considering that the Bureau of Customs is the office charged with implementing and enforcing the provisions of our Tariff and Customs Code,
the construction placed by it thereon should be given controlling weight.
"In applying the doctrine or principle of respect for administrative or practical construction, the courts often refer to several
factors which may be regarded as bases of the principle, as factors leading the courts to give the principle controlling weight
in particular instances, or as independent rules in themselves. These factors are the respect due the governmental agencies
charged with administration, their competence, expertness, experience, and informed judgment and the fact that they
frequently are the drafters of the law they interpret; that the agency is the one on which the legislature must rely to advise
it as to the practical working out of the statute, and practical application of the statute presents the agency with unique
opportunity and experiences for discovering deficiencies, inaccuracies, or improvements in the statute; . . ." 8
If it is further considered that exemptions from taxation are not favored, 9 and that tax statutes are to be construed in strictissimi
juris against the taxpayer and liberally in favor of the taxing authority, 10 then we are hard put to sustain the petitioner's stand that it was
entitled to an extension of time within which to export the jute bags and, consequently, to a refund of the amount it had paid as customs
duties.
In the light of the foregoing, it is our considered view that the one-year period prescribed in section 23 of the Philippine Tariff Act of 1909
is non-extendible and compliance therewith is mandatory.
The petitioner's argument that force majeure and/or fortuitous events prevented it from exporting the jute bags within the one-year period
cannot be accorded credit, for several reasons. In the first place, in its decision of November 20, 1961, the Court of Tax Appeals made
absolutely no mention of or reference to this argument of the petitioner, which can only be interpreted to mean that the court did not believe
that the "typhoons, floods and picketing" adverted to by the petitioner in its brief were of such magnitude or nature as to effectively prevent
the exportation of the jute bags within the required one-year period. In point of fact nowhere in the record does the petitioner convincingly
show that the so-called fortuitous events or force majeure referred to by it precluded the timely exportation of the jute bags. In the second
place, assuming, arguendo, that the one- year period is extendible, the jute bags were not actually exported within the one-week extension
the petitioner sought. The record shows that although of the remaining 86,353 jute bags 21,944 were exported within the period of one
week after the request for extension was filed, the rest of the bags, amounting to a total of 64,409, were actually exported only during the
period from February 16 to May 24, 1958, long after the expiration of the one week extension sought by the petitioner. Finally, it is clear
from the record that the typhoons and floods which, according to the petitioner, helped render impossible the fulfillment of its obligation
to export within the one- year period, assuming that they may be placed in the category of fortuitous events or force majeure, all occurred
prior to the execution of the bonds in question, or prior to the commencement of the one-year period within which the petitioner was in
law required to export the jute bags.
2. The next argument of the petitioner is that granting that Customs Administrative Order 389 is valid and binding, yet "jute bags" cannot
be included in the phrase "cylinders and other containers" mentioned therein. It will be noted, however, that the Philippine Tariff Act of 1909
and the Tariff and Customs Code, which Administrative Order 389 seeks to implement, speak of "containers" in general. The enumeration
following the word "containers" in the said statutes serves merely to give examples of containers and not to specify the particular kinds thereof.
Thus, sec. 23 of the Philippine Tariff Act states, "containers such as casks, large metals, glass or other receptacles," and sec. 105(x) of the
Tariff and Customs Code mentions "large containers," giving as examples "demijohn, cylinders, drums, casks and other similar receptacles of
metal, glass or other materials." (emphasis supplied) There is, therefore, no reason to suppose that the customs authorities had intended, in
Customs Administrative Order 389 to circumscribe the scope of the word "container," any more than the statutes sought to be implemented
actually intended to do.
3. Finally, the petitioner claims entitlement to a drawback of the duties it had paid, by virtue of section 106 (b) of the Tariff and Customs
Code, 11 which reads:
"b. On Articles Made from Imported Materials or Similar Domestic Materials and Wastes Thereof. — Upon the exportation of
articles manufactured or produced in the Philippines, including the packing, covering, putting up, marking or labeling thereof,
either in whole or in part of imported materials, or from similar domestic materials of equal quantity and productive
manufacturing quality and value, such question to be determined by the Collector of Customs, there shall be allowed a drawback
equal in amount to the duties paid on the imported materials so used or where similar domestic materials are used, to the
duties paid on the equivalent imported similar materials, less one per cent thereof: Provided That the exportation shall be
made within three years after the importation of the foreign material used or constituting the basis for drawback . . ."
The petitioner argues that not having availed itself of the full exemption granted by sec. 105 (x) of the Tariff and Customs Code due to
its failure to export the jute bags within one year, it is nevertheless, by authority of the above-quoted provision, entitled to a 99% drawback
of the duties it had paid, averring further that sec. 106 (b) does not presuppose immediate payment of duties and taxes at the time of
importation.
The provision invoked by the petitioner (to sustain his claim for refund) offer two options to an importer. The first under sec. 105 (x), gives
him the privilege of importing, free from import duties, the containers mentioned therein as long as he exports them within one year from
the date of acceptance of the import entry, which period, as shown above, is not extendible. The second, presented by sec. 106(b),
contemplates a case where import duties are first paid. subject to refund to the extent of 99% of the amount paid, provided the articles
mentioned therein are exported within three years from importation.
It would seem then that the Government would forego collecting duties on the article mentioned in section 105 (x) of Tariff and Customs
Code as long as it is assured, by the filing of a bond, that the same shall be exported within the relatively short period of one year from the
date of acceptance of the import entry. Where an importer cannot provide such assurance, then the Government, under sec. 106(b) of said
Code, would require payment of the corresponding duties first. The basic purpose of the two provisions is the same which is, to enable a local
manufacturer to compete in foreign markets, by relieving him of the disadvantages resulting from having to pay duties on imported
merchandise, thereby building up export trade and encouraging manufacture in the country. 12 But there is a difference, and it is this: under
section 105(x) full exemption is granted to an importer who justifies the grant of exemption by exporting within one year. The petitioner,
having opted to take advantage of the provisions of section 105(x), may not, after having failed to comply with the conditions imposed
thereby, avoid the consequences of such failure by being allowed a drawback under section 106 (b) of the same Act without having complied
with the conditions of the latter section.
For it is not to be supposed that the legislature had intended to defeat compliance with the terms of section 105 (x) thru a refuge under the
provisions of section 106(b). A construction should be avoided which affords an opportunity to defeat compliance with the terms of a
statute. 13 Rather courts should proceed on the theory that parts of a statute may be harmonized and reconciled with each other.
"A construction of a Statute which creates an inconsistency should be avoided when a reasonable interpretation can be adopted
which will not do violence to the plain words of the act and will carry out the intention of Congress.
"In the construction of statutes, the courts start with the assumption that the legislature intended to enact an effective law,
and the legislature is not to be presumed to have done a vain thing in the enactment of a statute. Hence, it is a general principle,
embodied in the maxim, 'ut res magis valeat quam pereat,' that the courts should, if reasonably possible to do so without
violence to the spirit and language of an act, so interpret the statute to give it efficient operation and effect as a whole. An
interpretation should, if possible, be avoided, under which a statute or provision being construed is defeated, or as otherwise
expressed, nullified, destroyed, emasculated, repealed, explained away, or rendered insignificant, meaningless, inoperative, or
nugatory." 14
ACCORDINGLY, the judgment of the Court of Tax Appeals of November 20, 1961 is affirmed, at petitioner's cost.
||| (Asturias Sugar Central, Inc. v. Commissioner of Customs, G.R. No. L-19337, [September 30, 1969], 140 PHIL 20-31)