J.A.B. Bulao & Associates

CASE 2012-0010: LAND BANK OF THE PHILIPPINES VS. ESTATE OF J. AMADO ARANETA (G.R. NO. 161796); DEPARTMENT OF AGRARIAN REFORM (PETITI0NER) AND NORBERTO RESULTA, EDITHA ABAD, LEDELIA ASIDOY, GIL PAGARAGAN, ROSALITO PAGHUBASAN, EDWIN FAUSTINO, FELOMINO JUSOL, EDELBERTO POBLARES, EFREN APON, NELSON VILLAREAL, JIMMY ZONIO, SERLISTO ZONIO, WILFREDO MARCELINO, ROGELIO RODERO, SERGIO ZONIO, NORBERTO FRANCISCO, AURORA VILLACORTE, JOVITO NINONUEVO, ELIZABETH ZAUSA, RUBEN VILLANUEVA, VICENTA RACCA, ROGELIO RACCA, MERCEDES VILLANUEVA, EDUARDO BIUTE, APOLINARIO TORRAL, BENJAMIN TANJER, JR., MINDA SOLIMAN, CIPRIANO REQUIOLA, GLORIA ROMERO, SILVERIO ZONIO, NESTOR ZONIO, NILO ZAUSA, ROMUALDO ZAUSA, REYNALDO ZAUSA, LUMILYN ZAUSA, GILBERT BAUTISTA, GILDA PACETES, ALUDIA CALUB, LOURDES CAGNO, ABELARDO CAGNO, BENJAMIN MARINAS, CRISPINA ARNAIZ, MARIA CABUS, RESTITUTA PRETENCIO, MA. LUZ ABALOS, ABELARDO DEL ROSARIO, CANDELARIA CEPEDA, HAYDEE MARQUILENCIA, LEONCIA ZATA, LUCIA LOPEZ, MARGARITA MANLANGIT, CRISTINA PACIS, LEONELDA FIDELA, MA. BLESS MASAGNAY, AGUSTIN CADAO, DOLORES FELICIANO, MA. JESSICA FELICIANO, MA. LOURDES FELICIANO, MA. JULITA FELICIANO, FEDERICO ZONIO, NENITA SINGSON, LIBRADA ZASPA, THELMA ELISERIO, SALVADOR VILLORENTE, SATURNINA TESORERO, ROGELIO PARACUELES, ANITA MENDOZA, AMADEO MASAGNAY, ELVIRA CAMPOS, LAURIANO CAMPOS, BENITO VILLAGANAS, VIRGILIO FERRER, SALVADOR RESULTA, NORLITO RESULTA, DIANA SEPTIMO, SALVADOR SEPTIMO, DIOSDADO LAGMAN, CLAUDIA MIRALLES, RICARDO FRANCISCO, RODOLFO FRANCISCO, ALEXANDER YURONG, ALFREDO BUENAVENTURA, ISIDRO DELA CRUZ, REMEDIOS CABUNDOC, ARTEMIO MIRASOL, MINDA COPINO, ANDRES IBARBIA, WILFREDO BALLOS, ELSA BANGCA, ARTURO CANTURIA, PABLITO SAGUIBO, CARLITO VILLONES, JOSEFINA TABANGCURA, NEDA MASAGNAY (PETITIONERS-INTERVENORS); ESTELA MARIE MALOLOS, LORETO DELA CRUZ, JOSE PAJARILLO, IMELDA ZAUSA, FEDERICO ZAUSA REPRESENTED BY ROSALINDA ZAUSA, LUDEVICO ZAUSA, GLORIA VILLANUEVA, ZENAIDA MASAGNAY, ELSIO ESTO, RODOLFO VILLONES, ALVINO NARCI REPRESENTED BY LILIA VILLONES, RUFINO ZONIO, ALBERTO ROSI, ZENAIDA VILLENA, ANTONIO ZAUSA, SALDITO ZONIO, ZACARIAS CORTEZ, LARRY MASAGNAY REPRESENTED BY LEONEL MASAGNAY, ERLINDA MORISON, JUAN CORTEZ, PRIMITIBO NICASIO, CARMELO CESAR, ANDRES ZONIO REPRESENTED BY RUFINO ZONIO, JUANITO ZONIO, JERENCIO ZONIO, ALEX CORTEZ, PEPITO VILLAREAL, (PETITIONERS-MOVANTS) VS. ESTATE OF J. AMADO ARANETA (G.R. NO. 161830); ERNESTO B. DURAN, LOPE P. ABALOS (DECEASED) REPRESENTED BY LOPE ABALOS, JR., ARTEMIO T. GONZALES (DECEASED) REPRESENTED BY PAUL GONZALES, AUGUSTO LIM, IMELDA MARCELINO, ERNESTO NAVARTE (DECEASED) REPRESENTED BY SURVIVING SPOUSE NELIA NAVARTE, FLORANTE M. QUIMZON, MANUEL R. QUIMZON (DECEASED) REPRESENTED BY FLORANTE M. QUIMZON, NELIA ZAUSA (PETITIONERS-INTERVENORS) VS. ESTATE OF J. AMADO ARANETA (G.R. NO. 190456) (08 FEBRUARY 2012, VELASCO, JR., J ) SUBJECT/S: DEFINITION OF AGRICULTURAL LANDS; PRIVATE RIGHTS; JUST COMPENSATION; POWER OF RECLASSIFICATION OF LANDS; JURISDICTION OF DARAB (BRIEF TITLE: J. AMADO ARANETA ESTATE CASE).

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DISPOSITIVE:

          WHEREFORE, the petitions are hereby partly DENIED. The CA Decision dated September 19, 2003, as effectively reiterated in its Resolution of January 22, 2004 and April 2, 2004, is AFFIRMED with the modification that the 75 CLTs issued prior to the effectivity of Presidential Proclamation No. 1283 on June 21, 1974 are declared legal and valid.  The other CLTs, EPs, CLOAs issued by DAR involving the subject property are hereby CANCELED and NULLIFIED.

          The Land Bank and DAR are hereby ordered to COMPUTE the just compensation of the land subject of the 75 CLTs and PAY the just compensation to the Estate of J. Amado Araneta.

          No pronouncement as to cost.

SO ORDERED.

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Republic of thePhilippines

SUPREME COURT

Manila

THIRD DIVISION

x—————————————————————————————–x

DECISION

VELASCO, JR., J.:

            In these three petitions for review under Rule 45, petitioners Land Bank of the Philippines (Land Bank), Department of Agrarian Reform (DAR), and Ernesto B. Duran, et al. (Duran, et al.) separately assail and seek to nullify the Decision^[2][2] of the Court of Appeals (CA) dated September 19, 2003 in CA-G.R. SP No. 65822 that set aside the February 7, 2001 Decision of the DAR Adjudication Board (DARAB) in DARAB Case No. 4176.  Likewise sought to be annulled is the Resolution of the CA dated January 22, 2004^[3][3] that denied separate motions for reconsideration of the September 19, 2003 Decision.

          The reversed DARAB decision upheld the agrarian reform coverage of 1,266 hectares of respondent estate’s 1,644.55-hectare property and its award to over a thousand farmer-beneficiaries. The CA’s reversing decision, on the other hand, is hinged on the illegality of the coverage and the consequent award. According to the CA, the property in question, having meanwhile ceased to be agricultural, is not amenable to land reform coverage and, hence, falls outside of DAR’s jurisdiction to implement agrarian enactments.

In G.R. No. 161796, petitioner Land Bank faults the CA insofar as it accorded retroactive exclusionary application to Presidential Proclamation No. (Proclamation) 1283,^[4][4] as amended by Proclamation 1637.^[5][5] In so doing, so Land Bank claims, the appellate court effectively but illegally extended exempt-coverage status to the subject land and in the process negated  the purpose behind Presidential Decree No. (PD) 27: to emancipate rice/corn land tenant-farmers from the bondage of the soil under their tillage.

Pursuing cognate arguments, petitioner DAR, in G.R. No. 161830, assails the CA’s holding, and the premises tying it together, on the department’s jurisdiction over the property subject of the case. 

          In G.R. No. 190456, petitioners Duran, et al. take issue at the CA’s pronouncement on the validity of service of the petition for review effected by respondent upon their long-deceased counsel of record, Atty. Eduardo Soliven Lara (Atty. Lara).^[6][6]  Like Land Bank and DAR, Duran, et al. impute reversible error on the CA for holding that the concerned farmer-beneficiaries never acquired ownership over their respective portions subject of the DAR award, owing to the prior conversion of the whole property to non-agricultural uses before the completion of the land reform process.

          Per its Resolution of June 28, 2004, the Court ordered the consolidation of G.R. Nos. 161796 and 161830 with G.R. No. 163174 (Nell-Armin Raralio v. Estate of J. Amado Araneta).   Another Resolution issued on November 17, 2010 directed that G.R. No. 190456 be consolidated with G.R. Nos. 161796, 161830 and 163174. 

          Due, however, to the denial, per Resolution of August 18, 2004, of the petition in G.R. No. 163174 and pursuant to entry of judgment dated December 9, 2004, the Court, by Resolution dated July 11, 2011, deconsolidated G.R. No. 163174 with the other three cases and considered it closed and terminated.^[7][7]

The Facts

          At the heart of the controversy is a large tract of land, denominated as Lot No. 23 of the Montalban Cadastre (Lot23), located in Brgy. Mascap, Montalban, Rizal with an area of 1,645 hectares, more or less. Lot23 was originally registered in the name of Alfonso Doronilla (Doronilla) under Original Certificate of Title (OCT) No. 7924 of the Rizal Registry.

          On June 21, 1974, then President Marcos issued Proclamation 1283, carving out a wide expanse from the Watershed Reservation in Antipolo, Rizal and reserving the segregated area for townsite purposes, “subject to private rights, if any there be.” In its pertinent parts, Proclamation 1283 reads:

 “Excluding from the Operation of Executive Order No. 33 dated July 26, 1904, as Amended by Executive Orders Nos. 14 and 16, Both Series of 1915, which Established the Watershed Reservation Situated in the Municipality of Antipolo, Province of Rizal, Island of Luzon, a Certain Portion of the Land Embraced therein and Reserving the Same, Together with the Adjacent Parcel of Land of the Public Domain, for Townsite Purposes Under the Provisions of Chapter XI of the Public Land Act”

            Upon recommendation of the Secretary of Agriculture and Natural Resources x x x, I, FERDINAND E. MARCOS, President of the Philippines, do hereby exclude from the operation of Executive Order No. 33 dated July 26, 1904, as amended x x x, which established the Watershed Reservation situated in the Municipality of Antipolo, Province of Rizal, Island of Luzon, certain portions of land embraced therein and reserve the same, together with the adjacent parcel of land of the public domain, for townsite purposes under the provisions of Chapter XI of the Public Land Act, subject to private rights, if any there be, and to future subdivision survey in accordance with the development plan to be prepared and approved by the Department of Local Government and Community Development, which parcels are more particularly described as follows:

            Lot A (Part of Watershed Reservation)

            A parcel of land (Lot A of Proposed Poor Man’sBaguio, being a portion of theMarikinaWatershed, IN-2), situated in themunicipalityofAntipolo,ProvinceofRizal, Island ofLuzonx x x;

[technical description omitted]

Containing an area of THREE THOUSAND SEVEN HUNDRED EIGHTY (3,780) Hectares, more or less.

            Lot B (Alienable and Disposable Land)

            A parcel of land (Lot B of Proposed Poor Man’sBaguio, being a portion of alienable and disposable portion of public domain) situated in themunicipalityofAntipolo,ProvinceofRizalx x x;

[technical description omitted]

Containing an area of ONE THOUSAND TWO HUNDRED TWENTY FIVE (1,225) Hectares, more or less. (Emphasis supplied.)

          Then came the amendatory issuance, Proclamation 1637 dated April 18, 1977, thereby increasing the size of the reservation, designated as “Lungsod Silangan Townsite” (LS Townsite), by 20.312 hectares and revising its technical description so as to include, within its coverage, other lands in the municipalities of San Mateo and Montalban, Rizal to absorb “the population overspill in Greater Manila Area,” but again “subject to private rights, if any there be,” thus:

               Upon recommendation of the Secretary of Natural Resources x x x, I, FERDINAND E. MARCOS, President of the Philippines, do hereby amend Proclamation No. 1283, dated June 21, 1974 which established the townsite reservation in the municipalities of Antipolo and San Mateo, Province of Rizal, Island of Luzon, by increasing the area and revising the technical descriptions of the land embraced therein, subject to private rights, if any there be, which parcel of land is more particularly described as follows:

            (Proposed Lungsod Silangan Townsite)

            A PARCEL OF LAND (Proposed Lungsod Silangan Townsite Reservation amending the area under SWO-41762 establishing the Bagong Silangan Townsite Reservation) situated in the Municipalities of Antipolo,San Mateo, and Montalban,ProvinceofRizal,IslandofLuzon.  Bounded on the E., along lines x x x.

Beginning at a point marked “1” on the Topographic Maps with the Scale of 1:50,000 which is the identical corner 38 IN-12, Marikina Watershed Reservation.

            [technical description omitted]

Containting an area of TWENTY THOUSAND THREE HUNDRED TWELVE (20,312) hectares, more or less.

            NOTE: all data are approximate and subject to change based on future survey. (Emphasis supplied.)

On November 9, 1977, Letter of Instructions No. (LOI) 625 addressed to several agencies was issued for the implementation of the aforementioned proclamations.  The Office of the Solicitor General (OSG), in particular, was directed to initiate condemnation proceedings for the acquisition of private lands within the new townsite, among which was Lot 23 (the Doronilla property).

          Prior to the issuance of the LS Townsite proclamations, the following events transpired:

(1) On October 21, 1972, PD 27 (Tenant’s Emancipation Decree) was issued. In accordance with PD 27 in relation to LOI 474 and related issuances, the DAR undertook to place under the Operation Land Transfer (OLT) program of the government all tenanted rice/corn lands with areas of seven hectares or less belonging to landowners who own other agricultural lands of more than seven (7) hectares.  In line with this program, the tenants of Doronilla tilling portions of his property, who claimed their primary crops to be rice and/or corn, organized themselves into farmers’ cooperatives or  Samahang Nayons and applied for certificates of land transfer (CLTs); and

(2) The DAR, to which the processed applications were forwarded, processed 106 CLTs involving 100 tenants-beneficiaries covering 73 hectares out of the total 1,645 hectares of Lot 23.  However, out of the 106 CLTs generated, only 75 CLTs had actually been distributed.

Upon the issuance of Proclamation 1637 on April 18, 1977, on-going parcellary mapping, survey and other processing activities related to the Doronilla property were stopped.^[8][8]

In 1978, the OSG, conformably with the directive embodied in LOI 625, filed with the then Court of First Instance (CFI) of Rizal an expropriation complaint against the Doronilla property.  Meanwhile, on June 6, 1979, Doronilla issued a Certification,^[9][9] copy furnished the Agrarian Reform Office, among other agencies, listing seventy-nine (79) “bona fide planters” he allegedly permitted to occupy a portion of his land.  On September 9, 1987 or nine (9) years after it commenced expropriation proceedings, the OSG moved^[10][10] for and secured, per the Rizal CFI Order^[11][11] dated September 18, 1987, the dismissal of the expropriation case.

Earlier, or on March 15, 1983, J. Amado Araneta, now deceased, acquired ownership of the subject Doronilla property by virtue of court litigation. A little over a week later, he had OCT No. 7924 canceled and secured the issuance of Transfer Certificate of Title (TCT) No. N-70860 in his name.

On July 22, 1987, then President Corazon C. Aquino issued Proclamation No. 131 instituting the Comprehensive Agrarian Reform Program (CARP).  Thereafter, then DAR Undersecretary Jose C. Medina, in a memorandum of March 10, 1988, ordered the Regional Director of DAR Region IV to proceed with the OLT coverage and final survey of the Doronilla property.^[12][12]  Republic Act No. (RA) 6657, otherwise known as the Comprehensive Agrarian Reform Law (CARL)^[13][13] of 1988, was then enacted, and took effect on June 15, 1988.

On July 27, 1989, Jorge L. Araneta, as heir of J. Amado Araneta and administrator of his estate, wrote the DAR Secretary requesting approval, for reasons stated in the covering letter, of the conversion of Lot23 from agricultural to commercial, industrial and other non-agricultural uses.^[14][14]  Appended to the letter were maps, location clearance and other relevant documents. Through Jorge L. Araneta, respondent Estate of J. Amado Araneta (Araneta or Araneta Estate) would, however, reiterate the conversion request owing to what it viewed as DAR’s inaction on said request.

On December 12, 1989, DAR issued a “Notice of Acquisition” addressed to Doronilla, covering 7.53 hectares of the land now covered by TCT No. 216746 and offering compensation at a valuation stated in the notice.^[15][15]  Alarmed by the turn of events whereby DAR was having its property, or a portion of it, surveyed, incidental to effecting compulsory land acquisition, the Araneta Estate addressed a letter^[16][16] to DAR dated June 27, 1990, formally protesting the series of land surveys being conducted by the Bureau of Lands on what is now its property.  It claimed that the CARL does not cover the said property, being part of the LS Townsite reservation, apart from being mountainous, with a slope of more than 70 degrees and containing commercial quantities of marble deposit.  The Araneta Estate followed its protest letter with two (2) more letters dated June 20, 1990 and May 28, 1991, in which it reiterated its request for conversion, citing, for the purpose, Department of Justice (DOJ) Opinion No. 181, Series of 1990.^[17][17]

On November 29, 1991, the Office of the Provincial Adjudication Board of Rizal set a hearing to determine the just compensation for the subject property, docketed as P.A. Case No. IV-Ri-0024-91. Notwithstanding Araneta’s protest against the compulsory agrarian reform coverage and acquisition of the property in question, the Land Bank, nonetheless, proceeded to approve, on January 21, 1992, the land transfer claim (Claim No. EO-91-1266) covering 1,266 hectares.  On February 26, 1992, Land Bank notified Araneta of its entitlement, upon its compliance with certain requirements, of the amount of PhP 3,324,412.05, representing just compensation for its covered parcels of land.^[18][18]

By September 25, 1990, some 1,200 emancipation patents (EPs) had been generated in favor of 912 farmer-beneficiaries and TCTs derived from the EPs issued.^[19][19]

It is upon the foregoing backdrop of events that Araneta, sometime in April 1992, filed with the DARAB an action against the DAR and Land Bank for Cancellation of Compulsory Coverage under PD 27 and Exemption from CARL Coverage of the erstwhile Doronilla property, docketed as DARAB Case No. DCN-JC-RIV-R12-026-CO.^[20][20]  Thereafter, DARAB turned over the case folder to the Rizal Provincial Agrarian Reform Adjudicator (PARAD) where the matter was re-docketed as PARAD Case No. IV-Ri-0057-92.  Before the Rizal PARAD Office and with its leave, some 1,022 individuals affiliated with different farmer groups intervened and filed an answer-in- intervention,^[21][21] joining a group of earlier intervenors led by one Anastacia Ferrer claiming to be EP grantees.

Save for Land Bank, all the parties subsequently submitted their respective position papers.

Ruling of the Regional Adjudicator

          By Decision dated October 17, 1994,^[22][22] Regional Agrarian Reform Adjudicator (RARAD) Fe Arche-Manalang ruled against Araneta, denying its bid to have its property excluded from OLT coverage and/or the compulsory scheme under CARL.  The fallo of the RARAD’s Decision reads as follows:

            WHEREFORE, premises considered, judgment is hereby rendered:

1. Dismissing the petition for lack of merit;

1. Upholding the OLT coverage of the property described in Paragraph 1 of the Petition, pursuant to the provision of P.D. 27 as affirmed by E.O. 228 in relation to Section 7 of R.A. 6657;

1. Affirming the regularity of the OLT processing undertaken on the subject Property and sustaining the validity of the Transfer Certificates of Title emanating from the Emancipation Patents generated in favor of the Intervenors-awardees;

1. Directing the Respondent Land Bank of thePhilippinesto effect and release immediate payment to the Petitioner-Landowner under approved Land Transfer Claim No. EO-91-1266 dated February 3, 1992; and

1. Without pronouncement as to costs.

SO ORDERED.

          Therefrom, Araneta appealed to the DARAB proper. The appeal was docketed as DARAB Case No. 4176.  In due time, the DARAB, following the RARAD’s line that the intervenor-appellees were deemed owners of the land they tilled as of October 21, 1972, rendered a Decision dated February 7, 2001^[23][23] affirming in toto that of the RARAD’s,  disposing as follows:

            WHEREFORE, premises considered, this Board hereby AFFIRMS the appealed decision in toto without pronouncement as to costs.

            SO ORDERED.

Just like that of the RARAD, the DARAB ruling did not name individuals in whose favor the EPs were specifically generated, albeit, 86 were, per Our count, impleaded as “intervenor-appellees” in DARAB Case No. 4176.   

Subsequently, Araneta went to the CA via a petition for review under Rule 43 of the 1997 Rules of Civil Procedure on the stated principal issue of whether or not the DARAB in its appealed decision unduly expanded the scope of coverage of PD 27.

Ruling of the CA

          By Decision of September 19, 2003, the CA, as earlier stated, set aside the Decision of the DARAB, in effect nullifying all the individual farm lots awards thus made by the DARAB ostensibly in favor of the named  intervenor-appellees and necessarily all other unnamed awardees. The decretal portion of the CA decision reads as follows:

            WHEREFORE, premises considered, the present petition is hereby GIVEN DUE COURSE.  The challenged Decision of the DARAB in DARAB Case No. 4176 (Reg. Case No. IV-RI-0057-92) is hereby ANNULLED and SET ASIDE.  The DARAB is hereby ordered to reconvey to petitioner [Araneta] the subject portions of petitioner’s property embraced in TCT No. N-70860, earlier awarded to intervenors-appellees under their individual EPs now covered by their respective certificates of title, in accordance with pertinent administrative issuances of DARAB.

            No pronouncement as to costs.

            SO ORDERED.

In the main, the CA predicated its reversal action on the interplay of the ensuing premises, juxtaposed with the pertinent pronouncements in the cited cases of Natalia Realty, Inc. v. DAR^[24][24] and Paris v. Alfeche,^[25][25] among other landmark agrarian cases, thus:

(1) Agricultural lands found within the boundaries of declared townsite reservations are reclassified for residential use. They ceased to be agricultural lands upon approval of their inclusion in the reservation, as in the case of agricultural lands situated within the LS Townsite reservation upon its establishment pursuant to Proclamation 1637.

(2) The processing of the OLT coverage of the Doronilla property was not completed prior to the passage of CARL or RA 6657; hence, the governing law should be RA 6657, with PD 27 and Executive Order No. (EO) 228^[26][26] only having suppletory effect.

(3) Full payment of the cost of the land, inclusive of interest, is in every case considered a mandatory requirement prior to the transfer of the title to the farmer-beneficiary.  Before that time, the term “subject to private rights, if any” found in Proclamation 1637 refers to the landowner’s private rights.  At the time Proclamation 1637 was issued, the farmer-beneficiaries of the Doronilla property have no “vested rights” yet under PD 27 to their allotted lot, as erroneously ruled by the DARAB.

(4) The DARAB, as the adjudicating arm of DAR, was divested of jurisdiction over the Araneta property upon its inclusion in the LS Townsite reservation by virtue of Proclamation 1637, as can be gleaned from LOI 625 which directed the implementation of Proclamation 1637.

From the foregoing decision, Land Bank, DAR/DARAB and Araneta separately moved for but were denied reconsideration by the appellate court in its Resolution of January 22, 2004.

In due time, Land Bank and DARAB/DAR interposed before the Court separate petitions for review.

          On the other hand, in December 2009, or some six (6) years after the CA rendered its appealed judgment, Duran and eight others, as self-styled petitioners-intervenors, came to this Court on a petition for review under Rule 45.  In a bid to justify the six-year hiatus between the two events, Duran, et al. claimed that, through the machinations of Araneta’s counsel, they have been virtually kept in the dark about CA-G.R. SP No. 65822 and consequently were deprived of their right to appeal what turned out to be an adverse CA ruling. How the supposed deprivation came about, per Duran, et al.’s version, shall be explained shortly. Duran, et al. presently allege being EP holders over portions of the property in question, their rights to the patents having been decreed in the October 17, 1994 RARAD Decision, as affirmed by the DARAB.

The Issues

          Apart from what it considers the appellate court’s misapplication of the holdings in Natalia Realty, Inc. and Paris, Land Bank, in G.R. No. 161796,^[27][27] ascribes to the CA the commission of serious errors of law:

1)      When it gave retroactive effect or application  to Proclamation Nos. 1283 & 1637 resulting in the negation of “full land ownership to qualified farmer-beneficiaries covered by P.D. No. 27 x x x.”

2)      When it gave imprimatur to the virtual conversion through Proclamation Nos. 1283 & 1637 of erstwhile agricultural lands to residential use without the requisite expropriation/condemnation proceedings pursuant to LOI No. 625.

3)      When it upheld the nullification of the CLTs and EPs in the name of farmer-beneficiaries through a mere collateral attack which is not allowed by law.

4)     When it recognized respondent’s alleged private right which had been reduced into a mere claim for just compensation upon promulgation or effectivity of P.D. No. 27 on October 21, 1972.

In G.R. No. 161830,^[28][28] the DAR raises the following issues:

1)      Whether the subject agricultural landholding is exempt from CARP coverage, being non-agricultural, pursuant to Proclamation Nos. 1283, as amended, over and above the statutory emancipation of the tenants from the bondage of the soil under P.D. No. 27;

2)      Whether or not DAR was no longer possessed of jurisdiction over respondent Araneta’s landholding after the same was included in the LS Townsite; and

3)     Whether or not DAR should reconvey to Araneta the portion of its property that was subjected to OLT under P.D.  27.

Aside from the procedural concerns articulated in their petition, the main substantive issue raised by Duran, et al. in G.R. No. 190456,^[29][29] as outlined at the outset, revolves around the question, and its implication on their ownership rights over a portion of the subject estate, of whether or not the process of land reform was incomplete at the time of issuance of Proclamation 1637.

          The different but oftentimes overlapping issues tendered in this consolidated recourse boil down to this relatively simple but pregnant question: whether or not the Doronilla, now the Araneta, property, in light of the issuance of the land reclassifying Proclamation 1283, as amended, is, as held by the CA, entirely outside the ambit of PD 27 and RA 6657, and, thus, excluded from compulsory agrarian reform coverage, unfettered by the private claim of the farmer-beneficiaries.

The Court’s Ruling

          We find the petitions partly meritorious.

Classification of the Doronilla Property

          Several basic premises should be made clear at the outset.  Immediately prior to the promulgation of PD 27 in October 1972, the 1,645-hectare Doronilla property, or a large portion of it, was indisputably agricultural, some parts devoted to rice and/or corn production tilled by Doronilla’s tenants.  Doronilla, in fact, provided concerned government agencies with a list of seventy-nine (79)^[30][30] names he considered bona fide “planters” of his land. These planters, who may reasonably be considered tenant-farmers, had purposely, so it seems, organized themselves into Samahang Nayon(s) so that the DAR could start processing their applications under the PD 27 OLT program. CLTs were eventually generated covering 73 hectares, with about 75 CLTs actually distributed to the tenant-beneficiaries.  However, upon the issuance of Proclamation 1637, “all activities related to the OLT were stopped.”^[31][31]

          The discontinuance of the OLT processing was obviously DAR’s way of acknowledging the implication of the townsite proclamation on the agricultural classification of the Doronilla property. It ought to be emphasized, as a general proposition, however, that the former agricultural lands of Doronilla––situated as they were within areas duly set aside for townsite purposes, by virtue particularly of Proclamation 1637––were converted for residential use. By the terms of Natalia Realty, Inc., they would be exempt from land reform and, by necessarily corollary, beyond DAR’s or DARAB’s jurisdictional reach.   Excerpts from Natalia Realty, Inc.:

            We now determine whether such lands are covered by the CARL.  Section 4 of R.A. 6657 provides that the CARL shall “cover, regardless of tenurial arrangement and commodity produced, all public and private agricultural lands.”  As to what constitutes “agricultural land,” it is referred to as “land devoted to agricultural activity as defined in this Act and not classified as mineral, forest, residential, commercial or industrial land.”  The deliberations of the Constitutional Commission confirm this limitation.  “Agricultural lands” are only those lands which are “arable and suitable agricultural lands” and “do not include commercial, industrial and residential lands.”

            Based on the foregoing, it is clear that the undeveloped portions of the Antipolo Hills Subdivison cannot in any language be considered as ‘agricultural lands.’  These lots were intended for residential use.  They ceased to be agricultural lands upon approval of their inclusion in the Lungsod Silangan Reservation. x x x

            x x x x

            Since the NATALIA lands were converted prior to 15, June 1988, respondent DAR is bound by such conversion.  It was therefore error to include the undeveloped portions of the Antipolo Hills Subdivision within the coverage of CARL.^[32][32] (Emphasis added; italics in the original.)

          Guided by the foregoing doctrinal pronouncement, the key date to reckon, as a preliminary matter, is the precise time when Doronilla’s Lot23, now Araneta’s property, ceased to be agricultural. This is the same crucial cut-off date for considering the existence of “private rights” of farmers, if any, to the property in question.  This, in turn, means the date when Proclamation 1637 establishing LS Townsite was issued: April 18, 1977.  From then on, the entire Lot23 was, for all intents and purposes, considered residential, exempted ordinarily from land reform, albeit parts of the lot may still be actually suitable for agricultural purposes.  Both the Natalia lands, as determined in Natalia Realty, Inc., and the Doronilla property are situated within the same area covered by Proclamation 1637; thus, the principles regarding the classification of the land within the Townsite stated in Natalia Realty, Inc. apply mutatis mutandis to the instant case.

Applicability of PD 27, RA 6657

and Proclamation 1637 to the Doronilla Estate

          From the standpoint of agrarian reform, PD 27, being in context the earliest issuance, governed at the start the disposition of the rice-and-corn land portions of the Doronilla property.  And true enough, the DAR began processing land transfers through the OLT program under PD 27 and thereafter issued the corresponding CLTs.  However, when Proclamation 1637 went into effect, DAR discontinued with the OLT processing.  The tenants of Doronilla during that time desisted from questioning the halt in the issuance of the CLTs.  It is fairly evident that DAR noted the effect of the issuance of Proclamation 1637 on the subject land and decided not to pursue its original operation, recognizing the change of classification of the property from agricultural to residential.

          When it took effect on June 15, 1988, RA 6657 became the prevailing agrarian reform law.  This is not to say, however, that its coming into effect necessarily impeded the operation of PD 27, which, to repeat, covers only rice and corn land.   Far from it, for RA 6657, which identifies “rice and corn land” under PD 27 as among the properties the DAR shall acquire and distribute to the landless,^[33][33] no less provides that PD 27 shall be of suppletory application.  We stated in Land Bank of the Philippines v. Court of Appeals, “We cannot see why Sec. 18 of R.A. 6657 should not apply to rice and corn lands under P.D. 27. Section 75 of R.A. 6657 clearly states that the provisions of P.D. 27 and E.O. 228 shall only have a suppletory effect.”^[34][34]

          All told, the primary governing agrarian law with regard to agricultural lands, be they of private or public ownership and regardless of tenurial arrangement and crops produced, is now RA 6657.  Section 3(c) of RA 6657 defines “agricultural lands” as “lands devoted to agricultural activity as defined in the Act and not classified as mineral, forest, residential, commercial or industrial land.”  The DAR itself refers to “agricultural lands” as:

those devoted to agricultural activity as defined in RA 6657 and not classified as mineral or forest by the Department of Environment and Natural Resources (DENR) and its predecessor agencies, and not classified in town plans and zoning ordinances as approved by the Housing and Land Use Regulatory Board (HLURB) and its preceding competent authorities prior to 15 June 1988 for residential, commercial or industrial use.^[35][35]

          At the time of the effectivity of RA 6657 on June 15, 1998, the process of agrarian reform on the Doronilla property was, however, to reiterate, far from complete.  In fact, the DAR sent out a Notice of Acquisition to Araneta only on December 12, 1989, after the lapse of around 12 years following its discontinuance of all activities incident to the OLT.

          Proclamation 1637, a martial law and legislative-powers issuance, partakes the nature of a law.  In Natalia Realty, Inc., the Court in fact considered and categorically declared Proclamation 1637 a special law, since it referred specifically to the LS Townsite Reservation.^[36][36]  As such, Proclamation 1637 enjoys, so Natalia Realty, Inc. intones, applying basic tenets of statutory construction, primacy over general laws, like RA 6657.

          In light of the foregoing legal framework, the question that comes to the fore is whether or not the OLT coverage of the Doronilla property after June 15, 1988, ordered by DAR pursuant to the provisions of PD 27 and RA 6657, was still valid, given the classificatory effect of the townsite proclamation.

          To restate a basic postulate, the provisions of RA 6657 apply only to agricultural lands under which category the Doronilla property, during the period material, no longer falls, having been effectively classified as residential by force of Proclamation 1637.  It ceased, following Natalia Realty, Inc., to be agricultural land upon approval of its inclusion in the LS Townsite Reservation pursuant to the said reclassifying presidential issuance.  In this regard, the Court cites with approval the following excerpts from the appealed CA decision:

            The above [Natalia Realty, Inc.] ruling was reiterated in National Housing Authority vs. Allarde where the Supreme Court held that lands reserved for, converted to, non-agricultural uses by government agencies other than the [DAR], prior to the effectivity of [RA] 6657 x x x are not considered and treated as agricultural lands and therefore, outside the ambit of said law.  The High Court declared that since the Tala Estate as early as April 26, 1971 was reserved, inter alia, under Presidential Proclamation No. 843, for the housing program of the [NHA], the same has been categorized as not being devoted to agricultural activity contemplated by Section 3(c) of R.A. No. 6657, and therefore outside the coverage of CARL.^[37][37] (Emphasis supplied.)

“Private Rights” and Just Compensation as Payment

          Unlike in Natalia Realty, Inc., however, where pre-existing tenancy arrangement over the Natalia land, among other crucial considerations, was not part of the equation, this case involves farmers claiming before April 18, 1979 to be actual tenants of the rice and/or corn portion of the Doronilla property. The Court has, to be sure, taken stock of the fact that PD 27 ordains the emancipation of tenants and “deems” them owners of the rice and corn lands they till as of October 21, 1972.  The following provisions of the decree have concretized this emancipation and ownership policy:

            This [decree] shall apply to tenant farmers of private agricultural lands primarily devoted to rice and corn under a system of sharecrop or lease-tenancy, whether classified as landed estate or not;

            The tenant farmer x x x shall be deemed owner of a portion constituting a family-size farm of five (5) hectares if not irrigated and three (3) hectares if irrigated. (Emphasis added.)

            Complementing PD 27 is EO 228, Series of 1987, Sec. 1 of which states, “All qualified farmer beneficiaries are now deemed full owners as of October 21, 1972 of the land they acquired by virtue of Presidential Decree No. 27.” (Emphasis supplied.)

Petitioners DAR, Land Bank and Duran, et al. uniformly maintain that the PD 27 tenant-beneficiaries have acquired “vested rights” over the lands they tilled as of October 21, 1972 when the decree took effect.  Pursuing this point, they argue that, as of that date, the farmer-beneficiaries were “deemed owners” of what was to be Araneta’s property, and the issuance of Proclamation 1637 did not alter the legal situation. 

The CA, however, was of a different mind, predicating its stance on the following:

          Since actual title remained with the landowner Alfonso Doronilla at the time Presidential Proclamation No. 1637 was issued in 1977, it follows that it is the “private rights” of such owner which are contemplated by the exemption declared in said proclamation.  Definitely, the proviso “subject to private rights” could not refer to the farmer-tenants the process of land reform having just been commenced with the filing of their application with the DAR.  The conclusion finds support in a similar proclamation covering the Baguio Townsite Reservation.  Our Supreme Court in a case involving an application for registration of lots situated within the Baguio Townsite Reservation cited the decision dated November 13, 1922 of the Land Registration Court in Civil Reservation No. 1, GLRO Record No. 211, which held that all lands within the Baguio Townsite are public land with the exception of (1) lands reserved for specific public uses and (2) lands claimed and adjudicated as private property.  It is therefore in that sense that the term “private rights” under the subject proviso in Presidential Proclamation No. 1637 must be understood.^[38][38] x x x (Emphasis added.)

          In fine, the CA held that the “private rights” referred to in the proclamation pertained to the rights of the registered owner of the property in question, meaning Doronilla or Araneta, as the case may be.

The Court cannot lend full concurrence to the above holding of the appellate court and the consequent wholesale nullification of the awards made by the DARAB.

          The facts show that several farmer-beneficiaries received 75 CLTs prior to the issuance of Proclamation 1637 on June 21, 1974. The 75 CLTs seemingly represent the first batch of certificates of bona fide planting rice and corn. These certificates were processed pursuant to the OLT program under PD 27. It bears to stress, however, that the mere issuance of the CLT does not vest on the recipient-farmer-tenant ownership of the lot described in it. At best, the certificate, in the phraseology of Vinzons-Magana v. Estrella,^[39][39] “merely evidences the government’s recognition of the grantee as the party qualified to avail of the statutory mechanisms for the acquisition of ownership of the land [tilled] by him as provided under [PD] 27.”

The clause “now deemed full owners as of October 21, 1972” could not be pure rhetoric, without any beneficial effect whatsoever descending on the actual tillers of rice and/or corn lands, as the appealed decision seems to convey. To Us, the clause in context means that, with respect to the parcel of agricultural land covered by PD 27 and which is under his or her tillage, the farmer-beneficiary ipso facto acquires, by weight of that decree, ownership rights over it. That ownership right may perhaps not be irrevocable and permanent, nay vested, until the tenant-farmer shall have complied with the amortization payments on the cost of the land and other requirements exacted in the circular promulgated to implement PD 27. Vinzons-Magana holds:

This Court has therefore clarified that it is only compliance with the prescribed conditions which entitled the farmer/grantee to an emancipation patent by which he acquires the vested right of absolute ownership in the landholding––a right which has become fixed and established and is no longer open to doubt and controversy.^[40][40] x x x

Said ownership right is, nonetheless, a statutory right to be respected.

Plainly enough then, the farmer-beneficiaries vis-à-vis the PD 27 parcel they till, especially that brought within the coverage of OLT under PD 27, own in a sense the lot which they can validly set up against the original owners notwithstanding the fact that the latter have not yet been paid by Land Bank and/or even if the farmers have not yet fully paid their amortization obligation to the Land Bank, if that be the case.  After all, the former landowners, by force of PD 27, is already divested of their ownership of the covered lot, their right to payment of just compensation or of the un-amortized portion payable by Land Bank^[41][41] being assured under EO 228 and RA 6657.

          If only to stress, while the PD 27 tenant-farmers are considered the owners by virtue of that decree, they cannot yet exercise all the attributes inherent in ownership, such as selling the lot, because, with respect to the government represented by DAR and LBP, they have in the meantime only inchoate rights in the lot––the being “amortizing owners.”  This is because they must still pay all the amortizations over the lot to Land Bank before an EP is issued to them. Then and only then do they acquire, in the phraseology of Vinzons-Magana, “the vested right of absolute ownership in the landholding.”

          This brings us to the question, to whom does “private rights” referred to in Proclamation 1637 pertain? Absent any agrarian relationship involving the tract of lands covered by the proclamation, We can categorically state that the reference is to the private rights of the registered lot owner, in this case Doronilla and subsequently, Araneta.  But then the reality on the ground was that the Araneta property or at least a portion was placed under OLT pursuant to PD 27 and subject to compulsory acquisition by DAR prior to the issuance of Proclamation 1637 on June 21, 1974, and 75 CLTs were also issued to the farmer-beneficiaries. Stated a bit differently, before Proclamation 1637 came to be, there were already PD 27 tenant-farmers in said property.   In a very real sense, the “private rights” belong to these tenant-farmers.  Since the said farmer-beneficiaries were deemed owners of the agricultural land awarded to them as of October 21, 1972 under PD 27 and subsequently deemed full owners under EO 228, the logical conclusion is clear and simple: the township reservation established under Proclamation 1637 must yield and recognize the “deemed ownership rights” bestowed on the farmer-beneficiaries under PD 27. Another way of looking at the situation is that these farmer-beneficiaries are subrogated in the place of Doronilla and eventual transferee Araneta.

To Us, the private rights referred to in Proclamation 1637 means those of the farmer-beneficiaries who were issued the 75 CLTs.  As to them, farm lots are EXCLUDED from the coverage of Proclamation 1637 and are governed by PD 27 and subsequently RA 6657.

          With respect to the 912 farmer-beneficiaries who were issued around 1,200 EPs as a result of the DAR Notice of Acquisition dated December 12, 1989, We are constrained to affirm the CA ruling invalidating the individual lot awarded to them. Obviously, they are not rice/corn land tenant-farmers contemplated in PD 27. They do not possess the rights flowing from the phrase “deemed owner as of October 21, 1972.” In this regard, the Court notes only too distinctly that Doronilla no less only named some 79 individuals as coming close to being legitimate PD 27 tenant-farmers of Lot 23.  We reiterate the ensuing pronouncement in Natalia Realty, Inc., as cited by the CA, that agricultural lands reclassified as a residential land are outside the ambit of compulsory acquisition under RA 6657 ought to be brought to bear against the 912 farmer-beneficiaries adverted to:

The issue of whether such lands of the Lungsod Silangan Townsite are covered by the Comprehensive Agrarian Reform Law of 1988, the Supreme Court categorically declared, viz:

We now determine whether such lands are covered by the CARL. Section 4 of R.A. 6657 provides that CARL shall ‘cover, regardless of tenurial agreement and commodity produced, all public and private agricultural lands.’  As to what constitutes ‘agricultural land,’ it is referred to as ‘land devoted to agricultural activity as defined in this Act and not classified as mineral, forest, residential, commercial or industrial land.’  The deliberations of the Constitutional Commission confirm this limitation.  ‘Agricultural lands’ are only those lands which are ‘arable and suitable agricultural lands’ and do not include commercial, industrial and residential lands.’

      “Based on the foregoing, it is clear that the undeveloped portions of the Antipolo Hills Subdivision cannot in any language be considered as ‘agricultural lands.’  These lots were intended for residential use.  They ceased to be agricultural lands upon approval of their inclusion in the Lungsod Silangan Reservation.  Even today, the areas in question continued to be developed as a low-cost housing subdivision, albeit at a snail’s pace. x x x

      “Indeed, lands not devoted to agricultural activity are outside the coverage of CARL.  These include lands previously converted to non-agricultural uses prior to the effectivity of CARL by government agencies other than respondent DAR.  In its Revised Rules and Regulations Governing Conversion of Private Agricultural Lands to Non-Agricultural Uses, DAR itself defined ‘agricultural land; thus –

      ‘x x x Agricultural land refers to those devoted to agricultural activity as defined in R.A. 6657 and not classified as mineral or forest by the Department of Environment and Natural Resources (DENR) and its predecessor agencies, and not classified in town plans and zoning ordinances as approved by the Housing and Land Use Regulatory Board (HLURB) and its preceding competent authorities prior to June 15, 1988 for residential, commercial or industrial use..’

      “Since the NATALIA lands were converted prior to 15 June 1988, respondent DAR is bound by such conversion.  It was therefore error to include the undeveloped portions of the Antipolo Hills Subdivision within the coverage of CARL.

      “Be that as it may, the Secretary of Justice, responding to a query by the Secretary of Agrarian Reform noted in an Opinion that lands covered by Presidential Proclamation No. 1637, inter alia, of which the NATALIA lands are part, having been reserved for townsite purposes ‘to be developed as human settlements by the proper land and housing agency,’ are not deemed ‘agricultural lands’ within the meaning and intent of Section 3 (c) of R.A. No. 6657.’  Not being deemed ‘agricultural lands,’ they are outside the coverage of CARL.”^[42][42]

          Summarizing, the farmer-beneficiaries who were given the 75 CLTs prior to the issuance of Proclamation 1283, as amended by Proclamation 1637, are deemed full owners of the lots covered by 75 CLTs vis-à-vis the real registered owner.  The farmer-beneficiaries have private rights over said lots as they were deemed owners prior to the establishment of the LS Townsite reservation or at least are subrogated to the rights of the registered lot owner.  Those farmer-beneficiaries who were issued CLTs or EPs after June 21, 1974 when Proclamation 1283, as amended, became effective do not acquire rights over the lots they were claiming under PD 27 or RA 6657, because the lots have already been reclassified as residential and are beyond the compulsory coverage for agrarian reform under RA 6657.  Perforce, the said CLTs or EPs issued after June 21, 1974 have to be annulled and invalidated for want of legal basis, since the lots in question are no longer subject to agrarian reform due to the reclassification of the erstwhile Doronilla estate to non-agricultural purposes.

Power of Reclassification of Land

          Petitioners DAR and Land Bank ascribe error on the CA in giving Proclamation 1637, an administrative issuance, preference and weight over PD 27, a law.  As argued, it is basic that, in the hierarchy of issuances, a law has greater weight than and takes precedence over a mere administrative issuance.

          Petitioners’ contention may be accorded some measure of plausibility, except for the fact that it ignores a basic legal principle: that the power to classify or reclassify lands is essentially an executive prerogative,^[43][43] albeit local government units, thru zoning ordinances, may, subject to certain conditions, very well effect reclassification of land use within their respective territorial jurisdiction.^[44][44]  Reclassification decrees issued by the executive department, through its appropriate agencies, carry the same force and effect as any statute.  As it were, PD 27 and Proclamation 1637 are both presidential issuances, each forming, by virtue of Sec. 3(2), Article XVII of the 1973 Constitution, a part of the law of the land.  Sec. 3(2), Art. XVII of the 1973 Constitution provides that:

[A]ll proclamations, orders, decrees, instructions, and acts promulgated, issued or done by the incumbent President shall be part of the law of the land, and shall remain valid, legal, binding and effective even after the lifting of Martial Law or the ratification of this Constitution unless modified, revoked, or superseded by subsequent proclamations, orders, decrees, instructions or unless expressly or impliedly modified or repealed by the regular Batasang Pambansa. (Emphasis supplied.)

          While not determinative of the outcome of this dispute, the Court has, in Agrarian Reform Beneficiaries Association (ARBA) v. Nicolas,^[45][45] held that the principles enunciated in Natalia Realty, Inc. hold sway regardless of what non-agricultural use to which an agricultural land is converted. ARBA, in fine, declares that the Natalia Realty, Inc. ruling is not confined solely to agricultural lands located within the townsite reservations; it is also applicable to other agricultural lands converted to non-agricultural uses prior to the effectivity of the CARL.  The land classifying medium that ARBA teaches is not limited solely to a proclamation, but may also involve a city ordinance.

Jurisdiction of DAR and its Adjudicating Arm

          The DARAB has been created and designed to exercise the DAR’s adjudicating functions.^[46][46]  And just like any quasi-judicial body, DARAB derives its jurisdiction from law, specifically RA 6657, which invested it with adjudicatory powers over agrarian reform disputes^[47][47] and matters related to the implementation of CARL.  We need not belabor that DARAB’s jurisdiction over the subject matter, the Doronilla property, cannot be conferred by the main parties, let alone the intervening farmer-beneficiaries claiming to have “vested rights” under PD 27.  As earlier discussed, the process of land reform covering the 1,266 hectares of the Araneta estate was not completed prior to the issuance of Proclamation 1637. So the intervenors, with the exception of the 79 tenant-beneficiaries who were granted CLTs, failed to acquire private rights of ownership under PD 27 before the effective conversion of the Doronilla property to non-agricultural uses.  Hence, the Doronilla property, being outside of CARP coverage, is also beyond DARAB’s jurisdiction.

          The OSG’s withdrawal of the expropriation suit on September 9, 1987 did not, as Land Bank posits, automatically restore the Doronilla property to its original classification nor did it grant DAR or DARAB the power or jurisdiction to order the compulsory acquisition of the property and to place it under CARP.  And, as the CA aptly noted, the DOJ Secretary, through Opinion No. 181,^[48][48] even advised the DAR Secretary that lands covered by Proclamation 1637, having been reserved for townsite purposes, are not deemed “agricultural lands” within the meaning and intent of Sec. 3(c) of RA 6657 and, hence, outside the coverage of CARL.^[49][49]  The Secretary of Justice further stated that RA 6657 did not supersede or repeal Proclamations 1283 and 1637 and they remain operative until now; their being townsite reservations still remain valid and subsisting.  To clarify, a DOJ opinion carries only a persuasive weight upon the courts.  However since this Court, in Natalia Realty, Inc., cited with approval DOJ Opinion No. 181, such citation carries weight and importance as jurisprudence.  Be that as it may, We recognize and apply the principles found in Natalia Realty, Inc. regarding the character of the Doronilla property being converted to a townsite and, thus, non-agricultural in character.

          Worth mentioning at this juncture is the fact that DAR itself issued administrative circulars governing lands exempted from CARP.  For instance, Administrative No. (AO) 3, Series of 1996, declares in its policy statement what categories of lands are outside CARP coverage and unequivocally states that properties not covered by CARP shall be reconveyed to the original transferors or owners.  Significantly, AO 3 defines lands not so covered as “property determined to be exempted from CARP coverage pursuant to [DOJ] Opinion Nos. 44 and 181” and “where Presidential Proclamation has been issued declaring the subject property for certain uses other than agricultural.”  Said policy of the DAR, as explained in the CA Decision,^[50][50] should be “applied and upheld in cases where the DAR had erroneously ordered the compulsory acquisition of the lands found outside CARP coverage.”  This is true with the case at bar due to the fact that Proclamation 1283, as amended by Proclamation 1637, had effectively reclassified respondent’s land as “residential.”

          To address erroneous compulsory coverage or acquisition of non-agricultural lands or agricultural lands subject of retention, especially where Certificates of Land Ownership Award (CLOAs) or EPs have been generated, the said AO itself provides the mechanism/remedy for the reconveyance of lots thus covered or acquired, viz:

1. The Emancipation Patents (EPs) or Certificate of Land Ownership Awards (CLOAs) already generated for landholdings to be reconveyed shall have to be cancelled first pursuant to Administrative Order No. 02, Series of 1994 prior to the actual reconveyance. The cancellation shall either be through administrative proceedings in cases where the EP/CLOA has not yet been registered with the ROD or through quasi-judicial proceedings in cases where the said EP/CLOA has already been registered.^[51][51]

Given the foregoing perspective, private petitioners’ lament about the injustice done to them due to the cancellation of their EPs or CLOAs, as the case may be, is specious at best, for those EPs or CLOAs were generated or granted based on the invalid order by DAR for the inclusion of the bulk of the Doronilla property under PD 27 and CARP.

With Respect to Petitioners-Intervenors Duran, et al.

In their petition for intervention filed before Us on December 17, 2009, Duran, et al. claim that Atty. Lara, the counsel who won their case before the DARAB, passed away on March 6, 1995.^[52][52]   They bemoan the fact that due to his death, which was unbeknownst to them at that time, they were not able to receive a copy of, thus are not bound by, the CA Decision dated September 19, 2003.  They blame Araneta for this unfortunate incident, alleging, “[S]ix years after Atty. Lara died, the Estate of J. Amado Araneta x x x filed a Petition for Review [of the DARAB’s decision] before the Court of Appeals. x x x The Araneta estate faked and feigned the service of its Petition upon Atty. Lara and the farmers by registered mail with the  Explanation ‘unavailability of messenger.’ ”^[53][53]  On the basis of the foregoing premises, Duran, et al. pray to be allowed to intervene in the instant case and admit their petition for review. 

In its Comment (with motion to exclude) on intervenors’ petition for review, Araneta stated the observation that if a handling lawyer dies, it is the that lawyer’s client who is in the better position to know about the former’s death, not his adversary or the court. Assuming that court notices and pleadings continued to be sent and delivered to Atty. Lara even after his death, at his given address, the comment added, it was intervenors’ fault.^[54][54]  And in support of the motion to exclude, Araneta draws attention to the rule governing how intervention is done, i.e., via a motion with a pleading-in- intervention attached to it. Exclusion is also sought on the ground that the petition includes individuals who are long dead and parties who are not parties below.

We resolve to deny due course to the plea for intervention of Duran, et al.

As the records would show, the DARAB promulgated its Decision on February 7, 2001 or six (6) years after Atty. Lara died.  Yet, intervening petitioners opted to make an issue only with respect about their inability, due to Atty. Lara’s death, to receive the adverse CA Decision, but curiously not about the DARAB judgment favorable to them. Noticeably, in the instant petition, they only focused on questioning what they termed as the “malicious” failure of the Estate of Araneta to individually inform them of the filing of its petition for review with the CA.  Nowhere can it be gleaned that they are questioning the failure of the CA and the DARAB to send copies of their respective decisions to them.  Thus, the Court is at a loss to understand how Duran, et al. can insinuate malice on the part of the Estate of Araneta’s for its alleged failure to provide them with a copy of the CA decision and yet not have any problem with respect to the DARAB decision which they also failed to personally receive due to their counsel’s demise.  

While the fault clearly lies with Duran, et al. themselves, they found it convenient to point fingers.  To be sure, they were remiss in their duty of coordinating with their counsel on the progress of their pending case.  The constant communication link needed to be established between diligent clients and their attorney did not obtain in this case.  It is not surprising, therefore, that Duran and his group only filed their instant petition 14 years after the death of their counsel, Atty. Lara.  Parties cannot blame their counsel for negligence when they themselves were guilty of neglect.^[55][55]  Relief cannot be granted to parties who seek to be relieved from the effects of a judgment when the loss of the remedy was due to their own negligence.^[56][56]  Equity serves the vigilant and not those who slumber on their rights.^[57][57] Duran, et al., as are expected of prudent men concerned with their ordinary affairs, should have had periodically touched base at least to be apprised with the status of their case.  Judiciousness in this regard would have alerted them about their counsel’s death, thus enabling them to take the necessary steps to protect their claimed right and interest in the case.

As Araneta aptly suggested in its Comment on the petition for review-in-intervention, it is Duran, et al., as clients, not the court or their adversary, who are in a better position or at least expected to know about their lawyer’s death due to the nature of a client-lawyer relationship.  And knowing, fair play demands that the client accordingly advises the court and the adverse party about the fact of death.  It is not for the appellate court or respondent Araneta to inquire why service of court processes or pleadings seemingly remained unacted by Atty. De Lara and/or his clients.

The long inaction of Duran, et al. to assert their rights over the subject case should be brought to bear against them.  Thus, We held in Esmaquel v. Coprada:^[58][58]

Laches is the failure or neglect, for an unreasonable and unexplained length of time, to do that which, by exercising due diligence, could or should have been done earlier; it is negligence or omission to assert a right within a reasonable time, warranting the presumption that the party entitled to assert it either has abandoned or declined to assert it.  There is no absolute rule as to what constitutes laches or staleness of demand; each case is to be determined according to its particular circumstances, with the question of laches addressed to the sound discretion of the court. Because laches is an equitable doctrine, its application is controlled by equitable considerations and should not be used to defeat justice or to perpetuate fraud or injustice.

          There can be little quibble about Duran, et al. being guilty of laches.  They failed and neglected to keep track of their case with their lawyer for 14 long years. As discussed above, Atty. Lara died even prior to the promulgation of the DARAB Decision.  Even then, they failed to notify the DARAB and the other parties of the case regarding the demise of Atty. Lara and even a change of counsel.  It certainly strains credulity to think that literally no one, among those constituting the petitioning-intervenors, had the characteristic good sense of following up the case with their legal counsel.    Only now, 14 years after, did some think of fighting for the right they slept on.  Thus, as to them, the CA Decision is deemed final and executory based on the principle of laches.   

Agrarian reform finds context in social justice in tandem with the police power of the State. But social justice itself is not merely granted to the marginalized and  the underprivileged.  But while the concept of social justice is intended to favor those who have less in life, it should never be taken as a toll to justify let alone commit an injustice.  To borrow from Justice Isagani A. Cruz:

[S]ocial justice––or any justice for that matter––is for the deserving whether he be a millionaire in his mansion or a pauper in his hovel.  It is true that, in a case of reasonable doubt, we are called upon to tilt the balance in favor of the poor simply because they are poor, to whom the Constitution fittingly extends its sympathy and compassion.  But never is it justified to prefer the poor simply because they are poor, or to eject the rich simply because they are rich, for justice must always be served, for poor and rich alike, according to the mandate of the law.^[59][59]

          At any rate, all is not lost on the part of Duran and the other petitioners-intervenors.  In the event that they belong to the group of 75 PD 27 tenant-farmers who, as earlier adverted, were awarded individual CLT covering parcels of lands described in the CLT, then it is just but fair and in keeping with the imperatives of social justice that their rights to the covered lots should be recognized and respected.

To the 912 holders of EPs, this decision might be a big let down. But then the facts and applicable laws and jurisprudence call for this disposition.

          WHEREFORE, the petitions are hereby partly DENIED. The CA Decision dated September 19, 2003, as effectively reiterated in its Resolution of January 22, 2004 and April 2, 2004, is AFFIRMED with the modification that the 75 CLTs issued prior to the effectivity of Presidential Proclamation No. 1283 on June 21, 1974 are declared legal and valid.  The other CLTs, EPs, CLOAs issued by DAR involving the subject property are hereby CANCELED and NULLIFIED.

          The Land Bank and DAR are hereby ordered to COMPUTE the just compensation of the land subject of the 75 CLTs and PAY the just compensation to the Estate of J. Amado Araneta.

          No pronouncement as to cost.

SO ORDERED.

                                                             PRESBITERO J. VELASCO, JR.

                                                                         Associate Justice

WE CONCUR:

DIOSDADO M. PERALTA

Associate Justice

ROBERTO A. ABAD                                JOSE CATRAL MENDOZA

     Associate Justice                                                  Associate Justice

ESTELA M. PERLAS-BERNABE

Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

PRESBITERO J. VELASCO, JR.

       Associate Justice

          Chairperson

C E R T I F I C A T I O N

               Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                                   RENATO C. CORONA

                                                                            Chief Justice

CASE 2012-0009:   PEOPLE OF THE PHILIPPINES VS. HON. SANDIGANBAYAN (FOURTH DIVISION), IMELDA R. MARCOS, JOSE CONRADO BENITEZ AND GILBERT C. DULAY (G.R. NOS. 153304-05, 08 FEBRUARY 2011, BRION, J.) SUBJECT/S: WHEN DOUBLE JEOPARDY DOES NOT APPLY; MISTAKE OF COUNSEL BINDS CLIENT; SANDIGAN NEED NOT REQUIRE PRESENTATION OF EVIDENCE WHEN DEMURRER TO EVIDENCE IS FILED EVEN IF EVIDENCE APPEARS WEAK. (BRIEF TITLE: PEOPLE VS. SANDIGAN AND IMELDA MARCOS).

======================

DISPOSITIVE:

1. I.                  Conclusion

In dismissing this petition, we observe that the criminal cases might have been prompted by reasons other than injury to government interest as the primary concern.^[1][90] These other reasons might have triggered the hastiness that attended the conduct of audit examinations which resulted in evidentiary gaps in the prosecution’s case to hold the respondents liable for the crime of malversation.^[2][91] As matters now stand, no sufficient evidence exists to support the charges of malversation against the respondents.  Hence, the Sandiganbayan did not commit any grave abuse of discretion amounting to lack or excess of jurisdiction when it granted the demurrers to evidence and, consequently, dismissed the criminal cases against the respondents.

We take this opportunity to remind the prosecution that this Court is as much a judge in behalf of an accused-defendant whose liberty is in jeopardy, as it is the judge in behalf of the State, for the purpose of safeguarding the interests of society.^[3][92] Therefore, unless the petitioner demonstrates, through evidence and records, that its case falls within the narrow exceptions from the criminal protection of double jeopardy, the Court has no recourse but to apply the finality-of-acquittal rule.   

WHEREFORE, premises considered, we hereby DENY the petition.

SO ORDERED.

======================

Republic of thePhilippines

Supreme Court

Manila

EN BANC

x—————————————————————————————–x

D E C I S I O N

BRION, J.:

            Before us is a petition for certiorari filed by the People of the Philippines (petitioner) assailing the decision dated March 22, 2002 of the Sandiganbayan^[4][1] in Criminal Case Nos. 20345 and 20346 which granted the demurrers to evidence filed by Imelda R. Marcos, Jose Conrado Benitez (respondents) and Rafael Zagala.

The Facts

          The petition stemmed from two criminal informations filed before the Sandiganbayan, charging the respondents with the crime of malversation of public funds, defined and penalized under Article 217, paragraph 4 of the Revised Penal Code, as amended. The charges arose from the transactions that the respondents participated in, in their official capacities as Minister and Deputy Minister of the Ministry of Human Settlements (MHS) under the MHS’ Kabisig Program.

In Criminal Case No. 20345, respondents, together with Gilbert C. Dulay, were charged with malversation of public funds, committed as follows:

            That on or about April 6, 1984 or sometime and/or [subsequent] thereto, in Pasig, Metro Manila, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, all public officers charged with the administration of public funds and as such, accountable officers, Imelda R. Marcos being then the Minister of Human Settlements, Jose Conrado Benitez being then the Deputy Minister of Human Settlements and Gilbert C. Dulay being then [the] Assistant Manager for Finance, Ministry of Human Settlements, while in the performance of their official functions, taking advantage of their positions, acting in concert and mutually helping one another thru manifest partiality and evident bad faith did then and there, willfully, unlawfully and criminally, in a series of anomalous transactions, abstract the total amount of P57.954 Million Pesos (sic), Philippine Currency from the funds of the Ministry of Human Settlements in the following manner: accused Conrado Benitez approved the series of cash advances made and received by Gilbert C. Dulay, and made it appear that the funds were transferred to the University of Life, a private foundation represented likewise by Gilbert C. Dulay when in truth and in fact no such funds were transferred while Imelda R. Marcos concurred in the series of such cash advances approved by Jose Conrado Benitez and received by Gilbert C. Dulay and in furtherance of the conspiracy, in order to camouflage the aforesaid anomalous and irregular cash advances and withdrawals, Imelda R. Marcos requested that the funds of the KSS Program be treated as “Confidential Funds”; and as such be considered as “Classified Information”; and that the above-named accused, once in possession of the said aggregate amount of P57.954 Million Pesos (sic), misappropriated and converted the same to their own use and benefit to the damage and prejudice of the government in the said amount.

            CONTRARY TO LAW. [Emphasis ours]^[5][2]

          In Criminal Case No. 20346, respondents together with Zagala were charged with malversation of public funds under these allegations:

          That on or about April 6 to April 16, 1984^[6][3] and/or sometime or subsequent thereto, in Pasig, Metro Manila, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, all public officers charged with the administration of public funds and as such, accountable officers, Imelda R. Marcos being then the Minister of Human Settlements, Jose Conrado Benitez being then the Deputy Minister of Human Settlements[,] and Rafael Zagala being then [the] Assistant Manager for Regional Operations and at the same time Presidential Action Officer, while in the performance of their official functions, taking advantage of their positions, acting in concert and mutually helping one another thru manifest partiality and evident bad faith[,] did then and there, willfully, unlawfully and criminally, in a series of anomalous transactions, abstract from the funds of the Ministry of Human Settlements the total amount of P40 Million Pesos (sic), Philippine Currency, in the following manner: Jose Conrado Benitez approved the cash advances made by Rafael Zagala and Imelda R. Marcos concurred in the series of cash advances approved by Jose Conrado Benitez in favor of Rafael G. Zagala; and in furtherance of the conspiracy, Imelda R. Marcos in order to camouflage the aforesaid anomalous and irregular cash advances, requested that funds of the KSS Program be treated as “Confidential Funds”; and as such be considered as “Classified Information”; and the above-named accused, once in possession of the total amount of P40 Million Pesos (sic), misappropriated and converted the same to their own use and benefit to the damage and prejudice of the government in the said amount.

            CONTRARY TO LAW. [Emphasis ours]^[7][4]

          Only the respondents and Zagala were arraigned for the above charges to which they pleaded not guilty; Dulay was not arraigned and remains at large. On March 15, 2000, Zagala died, leaving the respondents to answer the charges in the criminal cases.

 After the pre-trial conference, a joint trial of the criminal cases ensued. The prosecution’s chief evidence was based on the lone testimony of Commission of Audit (COA) Auditor Iluminada Cortez and the documentary evidence used in the audit examination of the subject funds.^[8][5]

The gist of COA Auditor Cortez’ direct testimony was summarized by the Sandiganbaya, as follows:

In Criminal Case No. 20345 –

[s]he was appointed on March 31, 1986 by then COA Chairman Teofisto Guingona, Jr. to head a team of COA auditors. Upon examination of the documents, she declared that an amount of P100 Million Pesos (sic) from the Office of Budget and Management was released for the KSS Project of the Ministry of Human Settlements (MHS) by virtue of an Advice of Allotment for Calendar Year 1984. Also, an amount of P42.4 Million Pesos (sic) was separately disbursed for the Kabisig Program of the Ministry of Human Settlements. With regard to the amount of P100 Million Pesos (sic) received by the MHS, P60 Million Pesos (sic) [was] disbursed through cash advances. Of the P60 Million Pesos (sic) in cash advances, accused Zagala received P40 Million Pesos (sic) in four (4) disbursements while accused Dulay received the remaining P20 Million Pesos (sic) in two disbursements.

With respect to accused Rafael Zagala, the cash advances consist of four (4) disbursement vouchers in the amount of P5 Million Pesos (sic), P10 Million Pesos (sic), P10 Million Pesos (sic) and P15 Million Pesos (sic).  All of these vouchers are in the name of accused Zagala as claimant and accused Benitez as approving officer and are accompanied by their corresponding Treasury Warrants that were countersigned by accused Benitez and approved by accused Dulay.

In contrast, x  x  x  a disbursement voucher in the amount of P10 Million Pesos (sic) was drawn in favor of accused Gilbert Dulay and approved by accused Benitez. Pursuant to this, a Treasury Warrant was issued to the order of accused Dulay, countersigned by accused Benitez and approved by accused Zagala. Another voucher was drawn in favor of accused Dulay in the amount of P10 Million Pesos (sic) and approved by accused Benitez. Again, a Treasury Warrant was issued to the order of accused Dulay in the amount of P10 Million Pesos (sic), which was countersigned by accused Benitez and approved by accused Zagala.

x  x  x  [A]ccused Marcos sent a letter to then President Ferdinand E. Marcos requesting that the fund intended for the KSS Project in the amount of P100 Million Pesos (sic) be deemed as “Confidential Fund”.

x  x  x  [T]he liquidation of accused Zagala’s account, which was contained in a Journal Voucher dated November 27, 1984, was without any supporting documents. Upon this discovery, witness requested and secured a certification from the Manager of the National Government Audit Office to the effect that the COA did not receive any document coming from the MHS. However, this liquidation voucher which contained figures in the total amount of P50 Million Pesos (sic), comprised the entire cash advances of accused Zagala in the amount of P40 Million Pesos (sic) and the P10 Million Pesos (sic) cash advance made by accused Dulay. Since the amount of P10 Million Pesos (sic) was already contained in Zagala’s Journal Voucher, the witness and her team of auditors tried to locate the remaining P10 Million Pesos (sic) and found out that accused Dulay had liquidated the same amount.^[9][6] (footnotes omitted)

          According to COA Auditor Cortez, Zagala’s cash advances were supported by a liquidation report and supporting documents submitted to the resident auditor even before the P100 Million Kilusang Sariling Sikap (KSS) fund was made confidential.^[10][7] The witness also testified that the COA resident auditor found no irregularity in this liquidation report.^[11][8]

COA Auditor Cortez stated that since the P100 Million KSS fund was classified as confidential, the liquidation report should have been submitted to the COA Chairman who should have then issued a credit memo. No credit memo was ever found during the audit examination of the MHS accounts.^[12][9]  COA Auditor Cortez admitted that she did not verify whether the supporting documents of Zagala’s cash advances were sent to the COA Chairman.^[13][10]

          Respondent Marcos was prosecuted because of her participation as Minister of the MHS, in requesting that the P100 Million KSS fund be declared confidential. Respondent Benitez was prosecuted because he was the approving officer in these disputed transactions.

 In Criminal Case No. 20346 –

            Regarding the Kabisig Program of the MHS, the COA team of auditors examined the vouchers of the MHS, which upon inspection revealed that there were at least three (3) memoranda of agreements entered into between the MHS and University of Life (UL).  With reference to the first Memorandum of Agreement dated July 2, 1985, an amount of P21.6 Million Pesos (sic) was transferred by the MHS to the UL to pay for the operations of the Community Mobilization Program and the Kabisig Program of the MHS. Accused Benitez as the Deputy Minister of the MHS and accused Dulay as Vice President of the UL were the signatories of this agreement. Although there is no disbursement voucher in the records, it is admitted that a Treasury Warrant was drawn in the sum of P21.6 Million Pesos (sic). The second Memorandum of Agreement dated July 10, 1985 provided for a fund transfer in the amount of P3.8 Million Pesos (sic) for the Human Resources Development Plan of the MHS. Accordingly, a Disbursement Voucher certified by accused Dulay and approved by accused Benitez was drawn in the sum of P3.8 Million Pesos (sic). The third Memorandum of Agreement in the sum of P17 Million Pesos (sic) was granted for the acquisition of motor vehicles and other equipment to support the Kabisig Program of the MHS. For that reason, a Disbursement Voucher pertaining thereto accompanied by a Treasury Warrant was drafted.

            Similarly, the witness declared that although they did not examine any of the records of the UL, the abovementioned sums were not received by the UL based on the affidavit of the UL Comptroller named Pablo Cueto. In the same way, an affidavit was executed by the UL Chief Accountant named Ernesto Jiao attesting that there is no financial transaction on record covering the purchase of motor vehicles. Again, witness Cortez admitted that they did not examine the books of the UL on this matter but only inquired about it from Mr. Jiao. The affidavit of Mr. Jiao with respect to the nonexistence of the purchases of motor vehicles was further corroborated by the affidavit of one Romeo Sison, who was the Administrative Assistant of the Property Section of the UL.

            The respective treasury warrants representing the various sums of P21.6 Million Pesos (sic), P17 Million Pesos (sic) and P3.8 Million Pesos (sic) were subsequently deposited with the United Coconut Planters’ Bank (UCPB), Shaw Blvd. Branch, Mandaluyong, under various accounts. Soon after, several checks were drawn out of these funds as evidenced by the Photostat copies recovered by the COA auditors. In the course of the testimony of the witness, she revealed that her team of auditors classified said several checks into different groups in accordance with the account numbers of the said deposits.

            x  x  x  [T]he amount of P3.8 Million Pesos (sic), the same was intended for the Human Resource Development Plan of the UL.  x  x  x [T]he aforesaid amount is not a cash advance but rather paid as an expense account, which is charged directly as if services have already been rendered. Hence, UL is not mandated to render liquidation for the disbursement of P3.8 Million Pesos (sic).

The sums of P21.6 Million Pesos (sic) and P17 Million Pesos (sic) were deposited under x  x  x  the name of the UL Special Account. Out of these deposits, the following first sequence of withdrawals of checks^[14][11]  payable either to its order or to cash  x  x  x  reached a total sum of P5,690,750.93 Million Pesos (sic).

The second list of checks^[15][12] [which] consists of numerous [Manager’s] Checks  x  x  x  reached the amount of P18,416,062.15.

A third set of checks allegedly consists of nine (9) ordinary checks and two (2) manager’s checks in the sum of P1,971,568.00 and P4,566,712.18[,] respectively.  x  x  x

Moreover, [a] witness confirmed that as regards the amount of P17 Million Pesos (sic) intended for the acquisition of motor vehicles, P10.4 Million Pesos (sic) was spent for the purchase of some five hundred (500) units of motorcycles while P2.1 Million Pesos (sic) was used to procure eight (8) brand new cars. The balance of P4.5 Million Pesos (sic) was later refunded to the MHS. As regards the five hundred (500) units of motorcycle, the Presidential Task Force furnished the witness documents attesting to the transfers of some two hundred seventy-one (271) units of motorcycles from the UL to the MHS by virtue of Deed of Assignments allegedly executed on February 17, 1986. However, of the two hundred seventy-one (271) units of motorcycle, only one hundred ninety (190) units were covered with complete documents. With respect to the eight (8) brand new cars, the team of auditors did not see any registration papers. (footnotes omitted; underscorings ours)^[16][13]

COA Auditor Cortez admitted that the audit team did not conduct a physical inventory of these motor vehicles; it based its report on the information given by the Presidential Task Force.^[17][14]  She emphasized that the audit team found it highly irregular that the motor vehicles were registered in the name of University of Life (UL) and not in the name of MHS; and for this reason, she believed that no proper liquidation was made of these vehicles by MHS.^[18][15]

          After COA Auditor Cortez’ testimony, the prosecution submitted its formal offer of evidence and rested its case.

          Subsequently, separate motions to dismiss the criminal cases, by way of demurrers to evidence, were filed by Zagala and the respondents on November 15, 1997, January 5, 1998 and January 28, 1998; on January 27, 1998, the prosecution filed a Manifestation stating that it was not opposing the demurrers to evidence.^[19][16] 

The Sandiganbayan’s Ruling

The Sandiganbayan granted the demurrers to evidence and acquitted the respondents in its assailed decision dated March 22, 2002.  The dispositive portion of this decision reads:

          Wherefore, the Demurrers to Evidence are hereby granted. Accused Imelda R. Marcos, Jose Conrado Benitez and Gilbert C. Dulay are hereby acquitted of the crime of Malversation in Criminal Case No. 20435 for insufficiency of evidence to prove their guilt beyond reasonable doubt. Accused Imelda R. Marcos, Jose Conrado Benitez and Rafael G. Zagala are likewise acquitted of the offense of Malversation in Criminal Case No. 20346 for insufficiency of evidence in proving their guilt beyond reasonable doubt.^[20][17]

In dismissing these criminal cases, the Sandiganbayan found no evidence of misappropriation of the subject funds in the two criminal cases considering the unreliability and incompleteness of the audit report.^[21][18]

The Issues

          The issues for our consideration are:

1. Whether the prosecutor’s actions and/or omissions in these cases effectively deprived the State of its right to due process; and

1. Whether the Sandiganbayan gravely abused its discretion in granting the demurrers to evidence of the respondents.

The petitioner claims that the State was denied due process because of the nonfeasance committed by the special prosecutor in failing to present sufficient evidence to prove its case. It claims that the prosecutor failed to protect the State’s interest in the proceedings before the Sandiganbayan. To support its position, petitioner cites the case of Merciales v. Court of Appeals^[22][19] where the Court nullified the dismissal of the criminal cases due to the serious nonfeasance committed by the public prosecutor.

The petitioner argues that the Sandiganbayan committed grave abuse of discretion amounting to lack or excess of jurisdiction that resulted in a miscarriage of justice prejudicial to the State’s interest when it took the demurrers to evidence at face value instead of requiring the presentation of additional evidence, taking into consideration the huge amounts of public funds involved and the special prosecutor’s failure to oppose the demurrers to evidence.  

The Court’s Ruling

           We do not find the petition meritorious.

We are called to overturn a judgment of acquittal in favor of the respondents brought about by the dismissal, for insufficiency of evidence, of the malversation charged in the two criminal cases.  As a rule, once the court grants the demurrer, the grant amounts to an acquittal; any further prosecution of the accused would violate the constitutional proscription on double jeopardy.^[23][20]  Notably, the proscription against double jeopardy only envisages appeals based on errors of judgment, but not errors of jurisdiction.  Jurisprudence recognizes two grounds where double jeopardy will not attach, these are: (i) on the ground of grave abuse of discretion amounting to lack or excess of jurisdiction;^[24][21] and/or (ii) where there is a denial of a party’s due process rights.^[25][22]

A judgment of acquittal sought to be reviewed on the basis of grave abuse of discretion amounting to lack or excess of jurisdiction or on the ground of denial of due process implies an invalid or otherwise void judgment. If either or both grounds are established, the judgment of acquittal is considered void; as a void judgment, it is legally inexistent and does not have the effect of an acquittal.^[26][23] Thus, the defense of double jeopardy will not lie in such a case.^[27][24]

Accordingly, a review of a dismissal order of the Sandiganbayan granting an accused’s demurrer to evidence may be done via the special civil action of certiorari under Rule 65, based on the narrow ground of grave abuse of discretion amounting to lack or excess of jurisdiction.^[28][25]  Mere allegations of grave abuse of discretion, however, are not enough to establish this ground; so also, mere abuse of discretion is not sufficient.^[29][26] On the petitioner lies the burden of demonstrating, plainly and distinctly, all facts essential to establish its right to a writ of certiorari.^[30][27]

In the present case, the petitioner particularly imputes grave abuse of discretion on the Sandiganbayan for its grant of the demurrer to evidence, without requiring the presentation of additional evidence and despite the lack of basis for the grant traceable to the special prosecutor’s conduct. The special prosecutor’s conduct allegedly also violated the State’s due process rights.

There is grave abuse of discretion when the public respondent acts in a capricious, whimsical, arbitrary or despotic manner, amounting to lack of jurisdiction, in the exercise of its judgment.^[31][28] An act is done without jurisdiction if the public respondent does not have the legal power to act or where the respondent, being clothed with the power to act, oversteps its authority as determined by law,^[32][29] or acts outside the contemplation of law. For the grant of the present petition, the petitioner must prove, based on the existing records, action in the above manner by the Sandiganbayan. 

1. II.               State’s right to due process

In People v. Leviste,^[33][30] we stressed that the State, like any other litigant, is entitled to its day in court; in criminal proceedings, the public prosecutor acts for and represents the State, and carries the burden of diligently pursuing the criminal prosecution in a manner consistent with public interest.^[34][31] The State’s right to be heard in court rests to a large extent on whether the public prosecutor properly undertook his duties in pursuing the criminal action for the punishment of the guilty.^[35][32]

The prosecutor’s role in the administration of justice is to lay before the court, fairly and fully, every fact and circumstance known to him or her to exist, without regard to whether such fact tends to establish the guilt or innocence of the accused and without regard to any personal conviction or presumption on what the judge may or is disposed to do.^[36][33]  The prosecutor owes the State, the court and the accused the duty to lay before the court the pertinent facts at his disposal with methodical and meticulous attention, clarifying contradictions and filling up gaps and loopholes in his evidence to the end that the court’s mind may not be tortured by doubts; that the innocent may not suffer; and that the guilty may not escape unpunished.^[37][34] In the conduct of the criminal proceedings, the prosecutor has ample discretionary power to control the conduct of the presentation of the prosecution evidence, part of which is the option to choose what evidence to present or who to call as witness.^[38][35]

The petitioner claims that the special prosecutor failed in her duty to give effective legal representation to enable the State to fully present its case against the respondents, citing Merciales v. Court of Appeals^[39][36] where we considered the following factual circumstances – (1) the public prosecutor rested the case knowing fully well that the evidence adduced was insufficient; (2) the refusal of the public prosecutor to present other witnesses available to take the stand; (3) the knowledge of the trial court of the insufficiency of the prosecution’s evidence when the demurrer to evidence was filed before it; and (4) the trial court’s failure to require the presentation of additional evidence before it acted on the demurrer to evidence.  All these circumstances effectively resulted in the denial of the State’s right to due process, attributable to the inaction of the public prosecutor and/or the trial court.

Merciales was followed by Valencia v. Sandiganbayan,^[40][37] where we recognized the violation of the State’s right to due process in criminal proceedings because of sufficient showing that the special prosecutor haphazardly handled the prosecution. In upholding the prosecution’s right to present additional evidence under the circumstances, Valencia took into account the fact that the former special prosecutor rested his case solely on the basis of a Joint Stipulation of Facts that was not even signed by the accused.

These two cases, to our mind, not only show the existing factual considerations^[41][38] that led to the conclusion that the public prosecutor willfully and deliberately failed to perform his mandated duty to represent the State’s interest, but stress as well that there must be sufficient facts on record supporting this conclusion. In the absence of these supporting facts, no conclusion similar to the Merciales and Valencia outcomes can be reached.

The requirement for supporting factual premises finds complement in the general rule founded on public policy^[42][39] that the negligence or mistake of a counsel binds the client. While this rule admits of exceptions^[43][40] (as when the gross negligence of a counsel resulted in depriving the client of due process), the application of the exception likewise depends on a showing of facts on record demonstrating a clear violation of the client’s due process rights.   

1. III.           The factual premises cited in the petition and the issue of due process

In the present case, we find that the State was not denied due process in the proceedings before the Sandiganbayan.  There was no indication that the special prosecutor deliberately and willfully failed to present available evidence or that other evidence could be secured.  For purposes of clarity, we shall address the instances cited in the petition as alleged proof of the denial of the State’s due process rights, and our reasons in finding them inadequate.

First. The petitioner bewails the alleged lack of efforts by the special prosecutor to ascertain the last known addresses and whereabouts, and to compel the attendance of Pablo C. Cueto, Ernesto M. Jiao and Romeo F. Sison, UL officers who executed affidavits in connection with the alleged anomalous fund transfers from MHS to UL.

The special prosecutor likewise allegedly did not present the records of the UL to show that the sums under the Memoranda of Agreement were not received by UL (based on the affidavit of UL Comptroller Cueto) and that no financial transactions really took place for the purchase of the motor vehicles (based on the affidavit of UL Chief Accountant Jiao, as corroborated by the affidavit of UL Administrative Assistant Sison).

We note that, other than making a claim that these instances demonstrate the serious nonfeasance by the special prosecutor, the petitioner failed to offer any explanation showing how these instances deprived the State of due process. An examination of the records shows that the affidavits of Cueto,^[44][41] Jiao and Sison surfaced early on to prove the alleged anomalous fund transfers from MHS to UL. The records further show that during the hearing of December 5, 1995 – when the special prosecutor was  asked by the presiding judge what she intended to do with these affidavits – the special prosecutor replied that she planned to present Jiao and Cueto who were the chief accountant and the designated comptroller, respectively, of UL.^[45][42]  The same records, however, show that, indeed, an attempt had been made to bring these prospective witnesses to court;as early as April 20, 1994, ^subpoenas had been issued to these three individuals and these were all returned unserved because the subjects had RESIGNED from the service sometime in 1992, and their present whereabouts were unknown.^[46][43]

We consider at this point that these individuals executed their respective affidavits on the alleged anomalous transactions between MHS and UL sometime in 1986; from that period on, and until the actual criminal prosecution started in 1994, a considerable time had elapsed bringing undesirable changes – one of which was the disappearance of these prospective witnesses. 

Significantly, no evidence exists or has been submitted showing that the special prosecutor willfully and deliberately opted not to present these individuals. The petitioner also failed to show that the whereabouts of these individuals could have been located by the exercise of reasonable diligence in order to prove that the special prosecutor had been remiss in performing her duties.  We can in fact deduce from the allegations in the petition that even at present, the petitioner has not and cannot ascertain the whereabouts of these prospective witnesses. 

Further, the records show that the affidavits of these individuals (who denied the transfer of the funds in the amounts of P21.6 Million, P3.8 Million and P17 Million from MHS to UL) were refuted by contrary evidence of the prosecution itself.  The records indicate that the special prosecutor presented treasury warrants and disbursement vouchers issued in the name of UL, bearing the respective amounts for transactions between MHS and UL.^[47][44]

The special prosecutor admitted that the audit team failed to examine the records of UL to support the prosecution’s allegation of an anomalous fund transfer. COA Auditor Cortez admitted, too, that the amounts (P21.6 Million and P3.8 Million) were transferred^[48][45] to UL^[49][46] and that a portion of the amount of P17 Million, i.e., P12.5 Million, was used to purchase 500 motorcycles and eight cars, while the remaining amount of P4.5 Million was refunded by UL to MHS.^[50][47]

Under these facts, and in the absence of indicators too that other persons could have testified, we cannot give weight to the petitioner’s allegation that no efforts were exerted by the special prosecutor. On the contrary, we find under the circumstances that the special prosecutor exerted reasonable efforts to present these individuals in court, but failed to do so for reasons beyond her control. One of these reasons appears to be the simple lack of concrete evidence of irregularities in the respondents’ handling of the MHS funds. 

Second. The petitioner alleged that the special prosecutor failed to present the resident auditor to testify on the physical inventory of the vehicles, or to produce documents showing that an inspection was conducted on the vehicles.

The prosecution’s theory, as the records would show, was to prove that there had been misappropriation of funds since the motor vehicles were registered in UL’s name instead of the MHS.^[51][48] In this regard, the special prosecutor presented COA Auditor Cortez who testified that the audit team did not assail the existence of the motor vehicles and she also did not dispute that the amount of P12.5 Million (out of P17 Million) was used to purchase 500 motorcycles and eight cars. The witness stated that the audit team was more concerned with the documentation of the disbursements made rather than the physical liquidation (inventory) of the funds.^[52][49]  The witness further explained that it was the Presidential Task Force which had the duty to keep track of the existence of the motor vehicles.^[53][50] She reiterated that the audit team was only questioning the registration of the vehicles; it never doubted that the vehicles were purchased.^[54][51]

More importantly, COA Auditor Cortez stated that at the time the team made the audit examination in April 1986, 500 registration papers supported the purchase of these motorcycles;^[55][52] none of the audit team at that time found this documentation inadequate or anomalous.^[56][53] The witness also stated that the Presidential Task Force gave the audit team a folder showing that P10.4 Million was used to purchase the motorcycles and P2.1 Million was used to purchase the cars.^[57][54] Checks were presented indicating the dates when the purchase of some of the motor vehicles was made.^[58][55]  COA Auditor Cortez also testified that 270 of these motorcycles had already been transferred by UL in the name of MHS.^[59][56]  She stated that all the documents are in order except for the registration of the motor vehicles in the name of UL.^[60][57]

Given these admissions regarding the existence of the motor vehicles, the presentation of the resident auditor who would simply testify on the physical inventory of the motor vehicles, or that an inspection had been conducted thereon, was unnecessary.  Her presentation in court would not materially reinforce the prosecution’s case; thus, the omission to present her did not deprive the State of due process.  To repeat, the prosecution’s theory of misappropriation was not based on the fact that the funds were not used to purchase motor vehicles, in which case, the testimony of the resident auditor would have had material implications.  Rather, the prosecution’s theory, as established by the records, shows that the imputed misappropriation stemmed from the registration of the motor vehicles in UL’s name – an administrative lapse in light of the relationship of UL to MHS simply as an implementing agency.^[61][58]

Third. Despite the Sandiganbayan’s warning on June 7, 1996 that the various checks covering the cash advances for P40 Million were “photostatic” copies, the special prosecutor still failed to present the certified copies from the legal custodian of these commercial documents.

The petitioner faults the special prosecutor for failing to present the original copies of the checks drawn out of the P21.6 Million and P17 Million combination account from the United Coconut Planters Bank (UCPB), as well as the P3.8 Million expense account with the same bank.  The presentation would have allegedly proven the misappropriation of these amounts.^[62][59]

Records show that instead of presenting the original copies of these checks, the special prosecutor tried to establish, through the testimony of COA Auditor Cortez, that these checks were photocopied from the original checks in the possession of UCPB, which were obtained through the assistance of the UL management.^[63][60]  Thus, while the originals of these checks were not presented, COA Auditor Cortez testified that the photostatic copies were furnished by the UCPB which had custody of the original checks.^[64][61] Further, the witness also testified that at the time she made the examination of these documents, the entries thereon were legible.^[65][62] She also presented a summary schedule of the various micro film prints of the UCPB checks that she examined.^[66][63]

At any rate, we observe that the defense never objected^[67][64]  to the submission of the photostatic copies of the UCPB checks as evidence, thus making the production of the originals dispensable. This was our view in Estrada v. Hon. Desierto^[68][65] where we ruled that the production of the original may be dispensed with if the opponent does not dispute the contents of the document and no other useful purpose would be served by requiring its production.  In such case, we ruled that secondary evidence of the content of the writing would be received in evidence if no objection was made to its reception.^[69][66]  We note, too, that in addition to the defense’s failure to object to the presentation of photostatic copies of the checks, the petitioner failed to show that the presentation of the originals would serve a useful purpose, pursuant to our ruling in Estrada.

We reiterate in this regard our earlier observation that other than enumerating instances in the petition where the State was allegedly deprived of due process in the principal case, no explanation was ever offered by the petitioner on how each instance resulted in the deprivation of the State’s right to due process warranting the annulment of the presently assailed Sandiganbayan ruling.

Fourth. The petitioner faults the special prosecutor for making no effort to produce the “final audit report” dated June 6, 1986, referred to in the last paragraph of the Affidavit^[70][67] dated June 10, 1987 of COA Auditor Cortez.

The records show that although this final audit report dated June 6, 1986 was not presented in court, the prosecution questioned her on the contents of this audit report since she had a hand in its preparation. COA Auditor Cortez directly testified on the audit team’s findings and examination, which took three hearings to complete; the cross-examination of COA Auditor Cortez took two hearings to complete; and subsequently, the Sandiganbayan ordered that a clarificatory hearing be held with respect to COA Auditor Cortez’ testimony.  In addition to her testimony, the special prosecutor did present, too, other pieces of documentary evidence (from which the final audit report was based) before the Sandiganbayan.

Under these circumstances, we are reluctant to consider the special prosecutor’s omission as significant in the petitioner’s allegation of serious nonfeasance or misfeasance.

Fifth. The petitioner presents the special prosecutor’s failure to oppose the demurrer to evidence as its last point and as basis for the applicability of the Merciales ruling.

The failure to oppose per se cannot be a ground for grave abuse of discretion.  The real issue, to our mind, is whether the special prosecutor had basis to act as she did. As the point-by-point presentation above shows, the dismissal of the criminal cases cannot be attributed to any grossly negligent handling by the special prosecutor. To begin with, the prosecution’s case suffered from lack of witnesses because, among others, of the time that elapsed between the act charged and the start of the actual prosecution in 1994; and from lack of sufficient preparatory investigation conducted, resulting in insufficiency of its evidence as a whole. In sum, in the absence of circumstances approximating the facts of Merciales and Valencia, which circumstances the petitioner failed to show, no basis exists to conclude that the special prosecutor grossly erred in failing to oppose the demurrer to evidence.

Neither are we persuaded by the petitioner’s position that the special prosecutor’s Manifestation of non-opposition to the demurrer needed to be submitted to, and approved by, her superiors.^[71][68]  The petitioner’s argument assumes that the special prosecutor lacked the necessary authority from her superiors when she filed her non-opposition to the demurrers to evidence.  This starting assumption, in our view, is incorrect.  The correct premise and presumption, since the special prosecutor is a State delegate, is that she had all incidental and necessary powers to prosecute the case in the State’s behalf so that her actions as a State delegate bound the State.  We do not believe that the State can have an unbridled discretion to disown the acts of its delegates at will unless it can clearly establish that its agent had been grossly negligent^[72][69] or was guilty of collusion with the accused or other interested party,^[73][70] resulting in the State’s deprivation of its due process rights as client-principal. 

Gross negligence exists where there is want, or absence of or failure to exercise slight care or diligence, or the entire absence of care.  It involves a thoughtless disregard of consequences without exerting any effort to avoid them.^[74][71] As the above discussions show, the State failed to clearly establish the gross negligence on the part of the special prosecutor (or to show or even allege that there was collusion in the principal case between the special prosecutor and the respondents) that resulted in depriving the petitioner of its due process rights; and, consequently prevent the application of the rule on double jeopardy. If at all, what the records emphasized, as previously discussed, is the weakness of the prosecution’s evidence as a whole rather than the gross negligence of the special prosecutor.  In these lights, we must reject the petitioner’s position.

1. IV.            Grave abuse of discretion

Under the Rules on Criminal Procedure, the Sandiganbayan is under no obligation to require the parties to present additional evidence when a demurrer to evidence is filed.  In a criminal proceeding, the burden lies with the prosecution to prove that the accused committed the crime charged beyond reasonable doubt, as the constitutional presumption of innocence ordinarily stands in favor of the accused. Whether the Sandiganbayan will intervene in the course of the prosecution of the case is within its exclusive jurisdiction, competence and discretion, provided that its actions do not result in the impairment of the substantial rights of the accused, or of the right of the State and of the offended party to due process of law.^[75][72]

A discussion of the violation of the State’s right to due process in the present case, however, is intimately linked with the gross negligence or the fraudulent action of the State’s agent. The absence of this circumstance in the present case cannot but have a negative impact on how the petitioner would want the Court to view the Sandiganbayan’s actuation and exercise of discretion.

The court, in the exercise of its sound discretion, may require or allow the prosecution to present additional evidence (at its own initiative or upon a motion) after a demurrer to evidence is filed. This exercise, however, must be for good reasons and in the paramount interest of justice.^[76][73]  As mentioned, the court may require the presentation of further evidence if its action on the demurrer to evidence would patently result in the denial of due process; it may also allow the presentation of additional evidence if it is newly discovered, if it was omitted through inadvertence or mistake, or if it is intended to correct the evidence previously offered.^[77][74]

In this case, we cannot attribute grave abuse of discretion to the Sandiganbayan when it exercised restraint and did not require the presentation of additional evidence, given the clear weakness of the case at that point.  We note that under the obtaining circumstances, the petitioner failed to show what and how additional available evidence could have helped and the paramount interest of justice sought to be achieved.  It does not appear that pieces of evidence had been omitted through inadvertence or mistake, or that these pieces of evidence are intended to correct evidence previously offered. More importantly, it does not appear that these contemplated additional pieces of evidence (which the special prosecutor allegedly should have presented) were ever present and available. For instance, at no point in the records did the petitioner unequivocally state that it could present the three UL officers, Cueto, Jiao and Sison.  The petitioner also failed to demonstrate its possession of or access to these documents (such as the final audit report) to support the prosecution’s charges – the proof that the State had been deprived of due process due to the special prosecutor’s alleged inaction.

IIIa. Grave abuse of discretion and the demurrers to evidence

 In Criminal Case No. 20345 that charged conspiracy for abstracting P57.59 Million out of the P100 Million KSS fund, the prosecution’s evidence showed that P60 Million of this fund was disbursed by respondent Benitez, as approving officer, in the nature of cash advances to Zagala (who received a total amount of P40 Million) and Dulay (who received P20 Million). 

          To prove the misappropriation, the prosecution tried to establish that there was an irregularity in the procedure of liquidating these amounts on the basis of COA Auditor Cortez’ testimony that the liquidation should have been made before the COA Chairman (not to the resident auditor of the MHS) because these funds were confidential.^[78][75]

Quite evident from the prosecution’s position is that it did not dispute whether a liquidation had been made of the whole amount of P60 Million; rather, what it disputed was the identity of the person before whom the liquidation should have been made. Before the directive of former President Marcos was made which declared the KSS funds (of which the P60 Million formed part) to be confidential, the liquidation of this amount must be made before the resident auditor of the MHS.  With the issuance of the directive, liquidation should have been made to the COA Chairman who should have then issued a credit memo to prove proper liquidation.^[79][76]

To justify conviction for malversation of public funds, the prosecution has to prove that the accused received public funds or property that they could not account for, or was not in their possession and which they could not give a reasonable excuse for the disappearance of such public funds or property.^[80][77] The prosecution failed in this task as the subject funds were liquidated and were not shown to have been converted for personal use by the respondents.

The records reveal that the amounts of P50 Million and P10 Million were liquidated by Zagala and Dulay, respectively.^[81][78] On Zagala’s part, the liquidation of P50 Million (P10 Million of which was the cash advance given to Dulay) was made to resident auditor Flerida V. Creencia on September 25, 1984 or before the directive of former President Marcos (declaring the said funds confidential) was issued on November 7, 1984.^[82][79] Hence, at the time the liquidation of the amount was made, the liquidation report submitted to the resident auditor was the proper procedure of liquidation.  Respondent Benitez, for his part, submitted Journal Voucher No. 4350208 dated November 27, 1984 stating, among others, that as early as June 22, 1984, the supporting papers for the liquidation of the P50 Million had already been submitted to the COA.^[83][80]

Moreover, even if the liquidation should have been made in compliance with the former President’s directive, the prosecution’s evidence did not sufficiently establish the non-existence of a credit memo. As admitted by COA Auditor Cortez, certain documents they were looking for during the audit examination (including the credit memo) could no longer be located after the (EDSA) revolution.^[84][81]  She further declared that she did not know if COA Chairman Alfredo Tantingco complied with the required audit examination of the liquidated P60 Million.^[85][82]       

In Criminal Case No. 20346, respondents are sought to be held liable under the criminal information for converting P40 Million (subdivided to P21.6 Million,  P3.8 Million and P17 Million or a total of P42.4 Million) to their own use given that these funds were never allegedly transferred to UL, the intended beneficiary.

Records show that the disputed amount allegedly malversed was actually P37,757,364.57 Million because of evidence that an amount of P4.5 Million was returned by respondent Benitez.^[86][83]  As previously mentioned, the documentary evidence adduced reveals the existence of treasury warrants and disbursement vouchers issued in the name of UL bearing the amounts of P21.6 Million,  P3.8 Million and P17 Million.^[87][84]  Documentary evidence also exists showing that these amounts were deposited in the UCPB and drawn afterwards by means of checks issued for purchases intended for the Kabisig Program of the MHS.

Except for the appropriated P17 Million, the petitioner’s evidence does not sufficiently show how the amounts of P21.6 Million and P3.8 Million were converted to the personal use by the respondents. The testimony of COA Auditor Cortez revealed that documents showing the disbursements of the subject funds were in possession of one Flordeliz Gomez as the Records Custodian and Secretary of UL.  For undisclosed reasons, however, COA Auditor Cortez failed to communicate with Gomez but merely relied on the documents and checks, which the audit team already had in its possession.^[88][85]

This omission, in our view, raises doubts on the completeness and accuracy of the audit examination pertaining to the P21.6 Million and P3.8 Million funds. Such doubt was further strengthened by COA Auditor Cortez’ testimony showing that P3.8 Million was listed in the books of the MHS as a direct expense account to which UL is not required to render an accounting or liquidation.^[89][86]  Also, she admitted that the amount of P21.6 Million was contained in a liquidation voucher submitted by Dulay, which was included in the transmittal letter signed by the respondents to the COA and accompanied by a performance report on the Kabisig Program. This performance report showed that the total amount of P21.6 Million was exhausted in the Kabisig Program.^[90][87]

With respect to the P17 Million, evidence adduced showed that 270 units of the motorcycles have already been transferred in the name of MHS by UL.^[91][88] There is also evidence that the audit team initially found nothing irregular in the documentation of the 500 motorcycles during the audit examination conducted in April 1986; the same goes for the eight cars purchased.

Under the circumstances, we agree with the Sandiganbayan that registration of these vehicles in UL’s name alone did not constitute malversation in the absence of proof, based on the available evidence, to establish that the respondents benefited from the registration of these motor vehicles in UL’s name, or that these motor vehicles were converted by the respondents to their own personal use.^[92][89]  In the end, the prosecution’s evidence tended to prove that the subject funds were actually used for their intended purpose.

1. V.               Conclusion

In dismissing this petition, we observe that the criminal cases might have been prompted by reasons other than injury to government interest as the primary concern.^[93][90] These other reasons might have triggered the hastiness that attended the conduct of audit examinations which resulted in evidentiary gaps in the prosecution’s case to hold the respondents liable for the crime of malversation.^[94][91] As matters now stand, no sufficient evidence exists to support the charges of malversation against the respondents.  Hence, the Sandiganbayan did not commit any grave abuse of discretion amounting to lack or excess of jurisdiction when it granted the demurrers to evidence and, consequently, dismissed the criminal cases against the respondents.

We take this opportunity to remind the prosecution that this Court is as much a judge in behalf of an accused-defendant whose liberty is in jeopardy, as it is the judge in behalf of the State, for the purpose of safeguarding the interests of society.^[95][92] Therefore, unless the petitioner demonstrates, through evidence and records, that its case falls within the narrow exceptions from the criminal protection of double jeopardy, the Court has no recourse but to apply the finality-of-acquittal rule.   

WHEREFORE, premises considered, we hereby DENY the petition.

SO ORDERED.

                                                ARTURO D. BRION

                                                Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

ESTELA M. PERLAS-BERNABE

Associate Justice

C E R T I F I C A T I O N

          Pursuant to Section 13, Article VIII of the Constitution, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court.

                                                 RENATO C. CORONA

                                                Chief Justice

CASE 2012-0008: LYNVIL FISHING ENTERPRISES, INC. AND/OR ROSENDO S. DE BORJA VS. ANDRES G. ARIOLA, JESSIE D. ALCOVENDAS,  JIMMY B. CALINAO AND LEOPOLDO G. SEBULLEN (G.R. NO. 181974, 01 FEBRUARY 2012, PEREZ, J.) SUBJECT/S: TERMINATION FOR BREACH OF TRUST; CONDITIONS FOR THE VALIDITY OF A FIXED-CONTRACT AGREEMENT; RULING OF PROSECUTOR NOT DETERMINATIVE; PENALTY IN CASE THE TWO NOTICE RULE IS NOT FOLLOWED; (BRIEF TITLE: LYNVIL FISHING VS. ARIOLA)

========================

DISPOSITIVE:

WHEREFORE, the petition is partially GRANTED.  The 10 September 2007 Decision of the Court of Appeals in CA-G.R. SP No. 95094 reversing the Resolution dated 31 March 2004 of the National Labor Relations Commission is hereby MODIFIED.  The Court hereby rules that the employees were dismissed for just cause by Lynvil Fishing Enterprises, Inc. and Rosendo S. De Borja, hence, the reversal of the award for backwages and separation pay.  However, we affirm the award for 13^th month pay, salary differential and grant an additional P50,000.00 in favor of the employees representing nominal damages for petitioners’ non-compliance with statutory due process. No cost.

SO ORDERED.

========================

SECOND DIVISION

x – – – – – – – – – – – – – – – – – – – – – –  – – – – – – – – – – – – – – – – – – – – – – – – – – x

D E C I S I O N

PEREZ, J.:

Before the Court is a Petition for Review on Certiorari^[1][1] of the Decision^[2][2] of the Fourteenth Division of the Court of Appeals in CA-G.R. SP No. 95094 dated 10 September 2007, granting the Writ of Certiorari prayed for under Rule 65 of the 1997 Revised Rules of Civil Procedure by herein respondents Andres G. Ariola, Jessie D. Alcovendas, Jimmy B. Calinao and Leopoldo Sebullen thereby reversing the Resolution of the National Labor Relations Commission (NLRC).  The dispositive portion of the assailed decision reads:

WHEREFORE, premises considered, the Decision dated March 31, 2004 rendered by the National Labor Relations Commission is hereby REVERSED and SET ASIDE.  In lieu thereof, the Decision of the Labor Arbiter is hereby REINSTATED, except as to the award of attorney’s fees, which is ordered DELETED.^[3][3]

The version of the petitioners follows:

1.   Lynvil Fishing Enterprises, Inc. (Lynvil) is a company engaged in deep-sea fishing, operating along the shores of Palawan and other outlying islands of the Philippines.^[4][4]  It is operated and managed by Rosendo S. de Borja.

2.  On 1 August 1998, Lynvil received a report from Romanito Clarido, one of its employees, that on 31 July 1998, he witnessed that while on board the company vessel Analyn VIII,  Lynvil employees, namely: Andres G. Ariola (Ariola), the captain; Jessie D. Alcovendas (Alcovendas), Chief Mate; Jimmy B. Calinao (Calinao), Chief Engineer; Ismael G. Nubla (Nubla), cook; Elorde Bañez (Bañez), oiler; and Leopoldo D. Sebullen (Sebullen), bodegero, conspired with one another and stole eight (8) tubs of “pampano” and “tangigue” fish and delivered them to another vessel, to the prejudice of Lynvil.^[5][5]

3.   The said employees were engaged on a per trip basis or “por viaje” which terminates at the end of each trip.  Ariola, Alcovendas and Calinao were managerial field personnel while the rest of the crew were field personnel.^[6][6]

4.  By reason of the report and after initial investigation, Lynvil’s General Manager Rosendo S. De Borja (De Borja) summoned respondents to explain within five (5) days why they should not be dismissed from service.  However, except for Alcovendas and Bañez,^[7][7] the respondents refused to sign the receipt of the notice.

5.  Failing to explain as required, respondents’ employment was terminated. 

6.   Lynvil, through De Borja, filed a criminal complaint against the dismissed employees for violation of P.D. 532, or the Anti-Piracy and Anti-Highway Robbery Law of 1974 before the Office of the City Prosecutor of Malabon City.^[8][8]

7.   On 12 November 1998, First Assistant City Prosecutor Rosauro Silverio found probable cause for the indictment of the dismissed employees for the crime of qualified theft^[9][9] under the Revised Penal Code.

On the other hand, the story of the defense is:

1.   The private respondents were crew members of Lynvil’s vessel named Analyn VIII.^[10][10] 

2.    On 31 July 1998, they arrived at the Navotas Fishport on board Analyn VIII loaded with 1,241 bañeras of different kinds of fishes.  These bañeras were delivered to a consignee named SAS and Royale.^[11][11] 

The following day, the private respondents reported back to Lynvil office to inquire about their new job assignment but were told to wait for further advice.  They were not allowed to board any vessel.^[12][12]

3.  On 5 August 1998, only Alcovendas and Bañez received a memorandum from De Borja ordering them to explain the incident that happened on 31 July 1998.  Upon being informed about this, Ariola, Calinao, Nubla and Sebullen went to the Lynvil office.  However, they were told that their employments were already terminated.^[13][13]

Aggrieved, the employees filed with the Arbitration Branch of the National Labor Relations Commission-National Capital Region on 25 August 1998 a complaint for illegal dismissal with claims for backwages, salary differential reinstatement, service incentive leave, holiday pay and its premium and 13^th month pay from 1996 to1998.  They also claimed for moral, exemplary damages and attorney’s fees for their dismissal with bad faith.^[14][14] 

They added that the unwarranted accusation of theft stemmed from their oral demand of increase of salaries three months earlier and their request that they should not be required to sign a blank payroll and vouchers.^[15][15]

On 5 June 2002, Labor Arbiter Ramon Valentin C. Reyes found merit in complainants’ charge of illegal dismissal.^[16][16]  The dispositive portion reads:

WHEREFORE, premises considered, judgment is hereby rendered finding that complainants were illegally dismissed, ordering respondents to jointly and severally pay complainants (a) separation pay at one half month pay for every year of service; (b) backwages; (c) salary differential; (d) 13^th month pay; and (e) attorney’s fees, as follows:

“1) Andres Ariola

                        Backwages                                           P234,000.00

                        (P6,500.00 x 36 = P234,000.00)

                        Separation Pay – P74,650.00

                        13^th Month Pay – P6,500.00               

                                                                                    P325,250.00

“2) Jessie Alcovendas

                        Backwages                                           P195,328.00

                        (P5,148.00 x 36 = P195,328.00)

                        Separation Pay – P44,304.00

                        13^th Month Pay – 5,538.00

                        Salary Differential – 1,547.52  

                                                                                    P246,717.52

“3) Jimmy Calinao

                        Backwages                                           P234,000.00

                        (P6,500.00 x 36 = P234,000.00)

                        Separation Pay – 55,250.00

                        13^th Month Pay – P6,500.00                                                                                                                                                    P295,700.00

“4) Leopoldo Sebullen

                        Backwages                                           P154,440.00

                        (P4, 290.00 x 36 = P154,440.00)

                        Separation Pay – P44,073.00

                        13^th Month Pay – 2,473.12

                        Salary Differential – 4,472.00

                                                                                    P208,455.12

“5) Ismael Nubla

                        Backwages                                           P199,640.12

                        Separation Pay – P58,149.00

                        13^th Month Pay – 2,473.12

                        Salary Differential – P5,538.00

                                                                                    P265, 28.12

                                                                                    ___________

                                                            TOTAL           P 1, 341, 650.76

                        All other claims are dismissed for lack of merit.”^[17][17]

            The Labor Arbiter found that there was no evidence showing that the private respondents received the 41 bañeras of “pampano” as alleged by De Borja in his reply-affidavit; and that no proof was presented that the 8 bañeras of pampano [and tangigue] were missing at the place of destination.^[18][18]

          The Labor Arbiter disregarded the Resolution of Assistant City Prosecutor Rosauro Silverio on the theft case.  He reasoned out that the Labor Office is governed by different rules for the determination of the validity of the dismissal of employees.^[19][19]

          The Labor Arbiter also ruled that the contractual provision that the employment terminates upon the end of each trip does not make the respondents’ dismissal legal.   He pointed out that respondents and Lynvil did not negotiate on equal terms because of the moral dominance of the employer.^[20][20]

          The Labor Arbiter found that the procedural due process was not complied with and that the mere notice given to the private respondents fell short of the requirement of “ample opportunity” to present the employees’ side.^[21][21]

          On appeal before the National Labor Relations Commission, petitioners asserted that private respondents were only contractual employees; that they were not illegally dismissed but were accorded procedural due process and that De Borja did not commit bad faith in dismissing the employees so as to warrant his joint liability with Lynvil.^[22][22]

On 31 March 2004, the NLRC reversed and set aside the Decision of the Labor Arbiter.  The dispositive portion reads:

WHEREFORE, judgment is hereby rendered REVERSING AND SETTING ASIDE the Decision of the Labor Arbiter a quo and a new one entered DISMISSING the present complaints for utter lack of merit;

However as above discussed, an administrative fine of PhP5,000.00 for each complainant, Andres Ariola, Jessie Alcovendas, Jimmy Canilao, Leopoldo Sebullen and Ismael Nobla or a total of PhP25,000.00 is hereby awarded.^[23][23]

          The private respondents except Elorde Bañez filed a Petition for Certiorari^[24][24] before the Court of Appeals alleging grave abuse of discretion on the part of NLRC.

The Court of Appeals found merit in the petition and reinstated the Decision of the Labor Arbiter except as to the award of attorney’s fees.  The appellate court held that the allegation of theft did not warrant the dismissal of the employees since there was no evidence to prove the actual quantities of the missing kinds of fish loaded to Analyn VIII.^[25][25]  It also reversed the finding of the NLRC that the dismissed employees were merely contractual employees and added that they were regular ones performing activities which are usually necessary or desirable in the business and trade of Lynvil.  Finally, it ruled that the two-notice rule provided by law and jurisprudence is mandatory and non-compliance therewith rendered the dismissal of the employees illegal.

The following are the assignment of errors presented before this Court by Lynvil:

I

THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO CONSIDER THE ESTABLISHED DOCTRINE LAID DOWN IN NASIPIT LUMBER COMPANY V. NLRC HOLDING THAT THE FILING OF A CRIMINAL CASE BEFORE THE PROSECUTOR’S OFFICE CONSTITUTES SUFFICIENT BASIS FOR A VALID TERMINATION OF EMPLOYMENT ON THE GROUNDS OF SERIOUS MISCONDUCT AND/OR LOSS OF TRUST AND CONFIDENCE.

II

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE TERMINATION OF RESPONDENTS’ EMPLOYMENT WAS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE.

III

THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO CONSIDER THAT THE RESPONDENTS’ EMPLOYMENT, IN ANY EVENT, WERE CONTRACTUAL IN NATURE BEING ON A PER VOYAGE BASIS. THUS, THEIR RESPECTIVE EMPLOYMENT TERMINATED AFTER THE END OF EACH VOYAGE

IV

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE RESPONDENTS WERE NOT ACCORDED PROCEDURAL DUE PROCESS.

V

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE RESPONDENTS ARE ENTITLED TO THE PAYMENT OF THEIR MONEY CLAIMS.

VI

THE HONORABLE COURT OF APPEALS ERRED IN FAILING TO CONSIDER THAT PETITIONER ROSENDO S. DE BORJA IS NOT JOINTLY AND SEVERALLY LIABLE FOR THE JUDGMENT WHEN THERE WAS NO FINDING OF BAD FAITH.^[26][26]

The Court’s Ruling

The Supreme Court is not a trier of facts. Under Rule 45,^[27][27] parties may raise only questions of law. We are not duty-bound to analyze again and weigh the evidence introduced in and considered by the tribunals below. Generally when supported by substantial evidence, the findings of fact of the CA are conclusive and binding on the parties and are not reviewable by this Court, unless the case falls under any of the following recognized exceptions:

(1) When the conclusion is a finding grounded entirely on speculation, surmises and conjectures;

(2) When the inference made is manifestly mistaken, absurd or impossible;

(3) Where there is a grave abuse of discretion;

(4) When the judgment is based on a misapprehension of facts;

(5) When the findings of fact are conflicting;

(6) When the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee;

(7) When the findings are contrary to those of the trial court;

(8) When the findings of fact are conclusions without citation of specific evidence on which they are based;

(9) When the facts set forth in the petition as well as in the petitioners’ main and reply briefs are not disputed by the respondents; and

(10) When the findings of fact of the Court of Appeals are premised on the supposed absence of evidence and contradicted by the evidence on record. (Emphasis supplied)^[28][28]

The contrariety of the findings of the Labor Arbiter and the NLRC prevents reliance on the principle of special administrative expertise and provides the reason for judicial review, at first instance by the appellate court, and on final study through the present petition.

In the first assignment of error, Lynvil contends that the filing of a criminal case before the Office of the Prosecutor is sufficient basis for a valid termination of employment based on serious misconduct and/or loss of trust and confidence relying on Nasipit Lumber Company v. NLRC.^[29][29] 

Nasipit is about a security guard who was charged with qualified theft which charge was dismissed by the Office of the Prosecutor.  However, despite the dismissal of the complaint, he was still terminated from his employment on the ground of loss of confidence.  We ruled that proof beyond reasonable doubt of an employee’s misconduct is not required when loss of confidence is the ground for dismissal.  It is sufficient if the employer has “some basis” to lose confidence or that the employer has reasonable ground to believe or to entertain the moral conviction that the employee concerned is responsible for the misconduct and that the nature of his participation therein rendered him absolutely unworthy of the trust and confidence demanded by his position.^[30][30] It added that the dropping of the qualified theft charges against the respondent is not binding upon a labor tribunal.^[31][31] 

In Nicolas v. National Labor Relations Commission,^[32][32] we held that a criminal conviction is not necessary to find just cause for employment termination. Otherwise stated, an employee’s acquittal in a criminal case, especially one that is grounded on the existence of reasonable doubt, will not preclude a determination in a labor case that he is guilty of acts inimical to the employer’s interests.^[33][33]  In the reverse, the finding of probable cause is not followed by automatic adoption of such finding by the labor tribunals.

In other words, whichever way the public prosecutor disposes of a complaint, the finding does not bind the labor tribunal.

Thus, Lynvil cannot argue that since the Office of the Prosecutor found probable cause for theft the Labor Arbiter must follow the finding as a valid reason for the termination of respondents’ employment.  The proof required for purposes that differ from one and the other are likewise different.

Nonetheless, even without reliance on the prosecutor’s finding, we find that there was valid cause for respondents’ dismissal.

In illegal dismissal cases, the employer bears the burden of proving that the termination was for a valid or authorized cause.^[34][34] 

Just cause is required for a valid dismissal.  The Labor Code^[35][35] provides that an employer may terminate an employment based on fraud or willful breach of the trust reposed on the employee.  Such breach is considered willful if it is done intentionally, knowingly, and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. It must also be based on substantial evidence and not on the employer’s whims or caprices or suspicions otherwise, the employee would eternally remain at the mercy of the employer. Loss of confidence must not be indiscriminately used as a shield by the employer against a claim that the dismissal of an employee was arbitrary. And, in order to constitute a just cause for dismissal, the act complained of must be work-related and shows that the employee concerned is unfit to continue working for the employer. In addition, loss of confidence as a just cause for termination of employment is premised on the fact that the employee concerned holds a position of responsibility, trust and confidence or that the employee concerned is entrusted with confidence with respect to delicate matters, such as the handling or care and protection of the property and assets of the employer. The betrayal of this trust is the essence of the offense for which an employee is penalized.^[36][36]

Breach of trust is present in this case. 

We agree with the ruling of the Labor Arbiter and Court of Appeals that the quantity of tubs expected to be received was the same as that which was loaded.  However, what is material is the kind of fish loaded and then unloaded.  Sameness is likewise needed.

We cannot close our eyes to the positive and clear narration of facts of the three witnesses to the commission of qualified theft.  Jonathan Distajo, a crew member of the Analyn VIII, stated in his letter addressed to De Borja^[37][37] dated 8 August 1998, that while the vessel was traversing San Nicolas, Cavite, he saw a small boat approach them.  When the boat was next to their vessel, Alcovendas went inside the stockroom while Sebullen pushed an estimated four tubs of fish away from it.  Ariola, on the other hand, served as the lookout and negotiator of the transaction.  Finally, Bañez and Calinao helped in putting the tubs in the small boat.  He further added that he received P800.00 as his share for the transaction.  Romanito Clarido, who was also on board the vessel, corroborated the narration of Distajo on all accounts in his 25 August 1998 affidavit.^[38][38]  He added that Alcovendas told him to keep silent about what happened on that day.  Sealing tight the credibility of the narration of theft is the affidavit^[39][39] executed by Elorde Bañez dated 3 May 1999.  Bañez was one of the dismissed employees who actively participated in the taking of the tubs.  He clarified in the affidavit that the four tubs taken out of the stockroom in fact contained fish taken from the eight tubs.  He further stated that Ariola told everyone in the vessel not to say anything and instead file a labor case against the management.  Clearly, we cannot fault Lynvil and De Borja when it dismissed the employees.

          The second to the fifth assignment of errors interconnect.

The nature of employment is defined in the Labor Code, thus:

Art. 280. Regular and casual employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season.

An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.

Lynvil contends that it cannot be guilty of illegal dismissal because the private respondents were employed under a fixed-term contract which expired at the end of the voyage.  The pertinent provisions of the contract are:

xxxx

1.       NA ako ay sumasang-ayon na maglingkod at gumawa ng mga gawain sang-ayon sa patakarang “por viaje” na magmumula sa pagalis sa Navotas papunta sa pangisdaan at pagbabalik sa pondohan ng lantsa sa Navotas, Metro Manila;

xxxx

1.       NA ako ay nakipagkasundo na babayaran ang aking paglilingkod sa paraang “por viaje” sa halagang P__________ isang biyahe ng kabuuang araw xxxx.^[40][40]

Lynvil insists on the applicability of the case of Brent School,^[41][41] to wit:

Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee’s right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences.

Contrarily, the private respondents contend that they became regular employees by reason of their continuous hiring and performance of tasks necessary and desirable in the usual trade and business of Lynvil.

Jurisprudence,^[42][42] laid two conditions for the validity of a fixed-contract agreement between the employer and employee:

First, the fixed period of employment was knowingly and voluntarily agreed upon by the parties without any force, duress, or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent; or

Second, it satisfactorily appears that the employer and the employee dealt with each other on more or less equal terms with no moral dominance exercised by the former or the latter.^[43][43]

          Textually, the provision that: “NA ako ay sumasang-ayon na maglingkod at gumawa ng mga gawain sang-ayon sa patakarang “por viaje” na magmumula sa pagalis sa Navotas papunta sa pangisdaan at pagbabalik sa pondohan ng lantsa sa Navotas, Metro Manila” is for a fixed period of employment.  In the context, however, of the facts that:  (1) the respondents were doing tasks necessarily to Lynvil’s fishing business with positions ranging from captain of the vessel to bodegero; (2) after the end of a trip, they will again be hired for another trip with new contracts; and (3) this arrangement continued for more than ten years, the clear intention is to go around the security of tenure of the respondents as regular employees.  And respondents are so by the express provisions of the second paragraph of Article 280, thus:

xxx Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exists.

          The same set of circumstances indicate clearly enough that it was the need for a continued source of income that forced the employees’ acceptance of the “por viaje” provision.

Having found that respondents are regular employees who may be, however, dismissed for cause as we have so found in this case, there is a need to look into the procedural requirement of due process in Section 2, Rule XXIII, Book V of the Rules Implementing the Labor Code.  It is required that the employer furnish the employee with two written notices:  (1) a written notice served on the employee specifying the ground or grounds for termination, and giving to said employee reasonable opportunity within which to explain his side; and (2) a written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination.

From the records, there was only one written notice which required respondents to explain within five (5) days why they should not be dismissed from the service.   Alcovendas was the only one who signed the receipt of the notice.  The others, as claimed by Lynvil, refused to sign.  The other employees argue that no notice was given to them.   Despite the inconsistencies, what is clear is that no final written notice or notices of termination were sent to the employees.

The twin requirements of notice and hearing constitute the elements of [due] process in cases of employee’s dismissal.  The requirement of notice is intended to inform the employee concerned of the employer’s intent to dismiss and the reason for the proposed dismissal. Upon the other hand, the requirement of hearing affords the employee an opportunity to answer his employer’s charges against him and accordingly, to defend himself therefrom before dismissal is effected.^[44][44]  Obviously, the second written notice, as indispensable as the first, is intended to ensure the observance of due process.

          Applying the rule to the facts at hand, we grant a monetary award of P50,000.00 as nominal damages, this, pursuant to the fresh ruling of this Court in Culili v. Eastern Communication Philippines, Inc.^[45][45]   Due to the failure of Lynvil to follow the procedural requirement of two-notice rule, nominal damages are due to respondents despite their dismissal for just cause. 

Given the fact that their dismissal was for just cause, we cannot grant backwages and separation pay to respondents.  However, following the findings of the Labor Arbiter who with the expertise presided over the proceedings below, which findings were affirmed by the Court of Appeals, we grant the 13^th month pay and salary differential of the dismissed employees.

Whether De Borja is jointly and severally liable with Lynvil 

As to the last issue, this Court has ruled that in labor cases, the corporate directors and officers are solidarily liable with the corporation for the termination of employment of employees done with malice or in bad faith.^[46][46] Indeed, moral damages are recoverable when the dismissal of an employee is attended by bad faith or fraud or constitutes an act oppressive to labor, or is done in a manner contrary to good morals, good customs or public policy. 

It has also been discussed in MAM Realty Development Corporation v. NLRC^[47][47] that:

x x x A corporation being a juridical entity, may act only through its directors, officers and employees. Obligations incurred by them, acting as such corporate agents, are not theirs but the direct accountabilities of the corporation they represent. True, solidary liabilities may at times be incurred but only when exceptional circumstances warrant such as, generally, in the following cases:

1. When directors and trustees or, in appropriate cases, the officers of a corporation:

xxx

(b) act in bad faith or with gross negligence in directing the corporate affairs;

x x x ^[48][48]

          The term “bad faith” contemplates a “state of mind affirmatively operating with furtive design or with some motive of self-interest or will or for ulterior purpose.”^[49][49]

          We agree with the ruling of both the NLRC and the Court of Appeals when they pronounced that there was no evidence on record that indicates commission of bad faith on the part of De Borja.    He is the general manager of Lynvil, the one tasked with the supervision by the employees and the operation of the business.  However, there is no proof that he imposed on the respondents the “por viaje” provision for purpose of effecting their summary dismissal.

WHEREFORE, the petition is partially GRANTED.  The 10 September 2007 Decision of the Court of Appeals in CA-G.R. SP No. 95094 reversing the Resolution dated 31 March 2004 of the National Labor Relations Commission is hereby MODIFIED.  The Court hereby rules that the employees were dismissed for just cause by Lynvil Fishing Enterprises, Inc. and Rosendo S. De Borja, hence, the reversal of the award for backwages and separation pay.  However, we affirm the award for 13^th month pay, salary differential and grant an additional P50,000.00 in favor of the employees representing nominal damages for petitioners’ non-compliance with statutory due process. No cost.

SO ORDERED.

A T T E S T A T I O N

          I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                                 ANTONIO T. CARPIO

                                                                       Associate Justice

                                                     Chairperson

C E R T I F I C A T I O N

          Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

                                                                    RENATO C. CORONA

Chief Justice