J.A.B. Bulao & Associates

CASE 2011-0034: SILICON PHILIPPINES, INC., (FORMERLY INTEL PHILIPPINES MANUFACTURING, INC.) VS. COMMISSIONER OF INTERNAL  REVENUE (G.R. NO. 172378, 17 JANUARY 2011, DEL CASTILLO, J.) SUBJECT: CLAIM FOR CREDIT/REFUND OF INPUT VAT ON ZERO-RATED SALES. (BRIEF TITLE: SILICON PHILIPPINES VS. CIR).

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

D E C I S I O N

DEL CASTILLO, J.:

The burden of proving entitlement to a refund lies with the claimant.

This Petition for Review on Certiorari under Rule 45 of the Rules of Court seeks to set aside the September 30, 2005 Decision^[1][1] and the April 20, 2006 Resolution^[2][2] of the Court of Tax Appeals (CTA) En Banc.

Factual Antecedents

Petitioner Silicon Philippines, Inc., a corporation duly organized and existing under and by virtue of the laws of the Republic of the Philippines, is engaged in the business of designing, developing, manufacturing and exporting advance and large-scale integrated circuit components or “IC’s.”^[3][3]  Petitioner is registered with the Bureau of Internal Revenue (BIR) as a Value Added Tax (VAT) taxpayer ^[4][4] and with the Board of Investments (BOI) as a preferred pioneer enterprise.^[5][5]

On May 21, 1999, petitioner filed with the respondent Commissioner of Internal Revenue (CIR), through the One-Stop Shop Inter-Agency Tax Credit and Duty Drawback Center of the Department of Finance (DOF), an application for credit/refund of unutilized input VAT for the period October 1, 1998 to December 31, 1998 in the amount of P31,902,507.50, broken down as follows:

                                                                                     Amount

Proceedings before the CTA Division

On December 27, 2000, due to the inaction of the respondent, petitioner filed a Petition for Review with the CTA Division, docketed as CTA Case No. 6212.  Petitioner alleged that for the 4^th quarter of 1998, it generated and recorded zero-rated export sales in the amount of P3,027,880,818.42, paid to petitioner in acceptable foreign currency and accounted for in accordance with the rules and regulations of the Bangko Sentral ng Pilipinas;^[7][7] and that for the said period, petitioner paid input VAT in the total amount of P31,902,507.50,^[8][8] which have not been applied to any output VAT.^[9][9]

To this, respondent filed an Answer^[10][10] raising the following special and affirmative defenses, to wit:

8.         The petition states no cause of action as it does not allege the dates when the taxes sought to be refunded/credited were actually paid;

9.         It is incumbent upon herein petitioner to show that it complied with the provisions of Section 229 of the Tax Code as amended;

10.      Claims for refund are construed strictly against the claimant, the same being in the nature of exemption from taxes (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95; Manila Electric Co. vs. Commissioner of Internal Revenue, 67 SCRA 35);

11.      One who claims to be exempt from payment of a particular tax must do so under clear and unmistakable terms found in the statute (Asiatic Petroleum vs. Llanes, 49 Phil. 466; Union Garment Co. vs. Court of Tax Appeals, 4 SCRA 304);

12.      In an action for refund, the burden is upon the taxpayer to prove that he is entitled thereto, and failure to sustain the same is fatal to the action for refund.  Furthermore, as pointed out in the case of William Li Yao vs. Collector (L-11875, December 28, 1963), amounts sought to be recovered or credited should be shown to be taxes which are erroneously or illegally collected; that is to say, their payment was an independent single act of voluntary payment of a tax believed to be due and collectible and accepted by the government, which had therefor become part of the State moneys subject to expenditure and perhaps already spent or appropriated; and

13.      Taxes paid and collected are presumed to have been made in accordance with the law and regulations, hence not refundable.^[11][11]

On November 18, 2003, the CTA Division rendered a Decision^[12][12] partially granting petitioner’s claim for refund of unutilized input VAT on capital goods. Out of the amount of P15,170,082.00, only P9,898,867.00 was allowed to be refunded because training materials, office supplies, posters, banners, T-shirts, books, and other similar items purchased by petitioner were not considered capital goods under Section 4.106-1(b) of Revenue Regulations (RR) No. 7-95 (Consolidated Value-Added Tax Regulations).^[13][13] With regard to petitioner’s claim for credit/refund of input VAT attributable to its zero-rated export sales, the CTA Division denied the same because petitioner failed to present an Authority to Print (ATP) from the BIR;^[14][14] neither did it print on its export sales invoices the ATP and the word “zero-rated.”^[15][15] Thus, the CTA Division disposed of the case in this wise:

WHEREFORE, in view of the foregoing the instant petition for review is hereby PARTIALLY GRANTED. Respondent is ORDERED to ISSUE A TAX CREDIT CERTIFICATE in favor of petitioner in the reduced amount of P9,898,867.00 representing input VAT on importation of capital goods. However, the claim for refund of input VAT attributable to petitioner’s alleged zero-rated sales in the amount of P16,732,425.50 is hereby DENIED for lack of merit.

SO ORDERED.^[16][16]    

Not satisfied with the Decision, petitioner moved for reconsideration.^[17][17]  It claimed that it is not required to secure an ATP since it has a “Permit to Adopt Computerized Accounting Documents such as Sales Invoice and Official Receipts” from the BIR.^[18][18] Petitioner further argued that because all its finished products are exported to its mother company, Intel Corporation, a non-resident corporation and a non-VAT registered entity, the printing of the word “zero-rated” on its export sales invoices is not necessary.^[19][19]

On its part, respondent filed a Motion for Partial Reconsideration^[20][20] contending that petitioner is not entitled to a credit/refund of unutilized input VAT on capital goods because it failed to show that the goods imported/purchased are indeed capital goods as defined in Section 4.106-1 of RR No. 7-95.^[21][21]

The CTA Division denied both motions in a Resolution^[22][22] dated August 10, 2004. It noted that:

[P]etitioner’s request for Permit to Adopt Computerized Accounting Documents such as Sales Invoice and Official Receipt was approved on August 31, 2001 while the period involved in this case was October 31, 1998 to December 31, 1998 x x x.  While it appears that petitioner was previously issued a permit by the BIR Makati Branch, such permit was only limited to the use of computerized books of account x x x.  It was only on August 31, 2001 that petitioner was permitted to generate computerized sales invoices and official receipts [provided that the BIR Permit Number is printed] in the header of the document x x x.

                x x x x

Thus, petitioner’s contention that it is not required to show its BIR permit number on the sales invoices runs counter to the requirements under the said “Permit.” This court also wonders why petitioner was issuing computer generated sales invoices during the period involved (October 1998 to December 1998) when it did not have an authority or permit.  Therefore, we are convinced that such documents lack probative value and should be treated as inadmissible, incompetent and immaterial to prove petitioner’s export sales transaction.

x x x x

ACCORDINGLY, the Motion for Reconsideration and the Supplemental Motion for Reconsideration filed by petitioner as well as the Motion for Partial Reconsideration of respondent are hereby DENIED for lack of merit.  The pronouncement in the assailed decision is REITERATED.

SO ORDERED ^[23][23]

Ruling of the CTA En Banc

Undaunted, petitioner elevated the case to the CTA En Banc via a Petition for Review,^[24][24] docketed as EB Case No. 23.

On September 30, 2005, the CTA En Banc issued the assailed Decision^[25][25] denying the petition for lack of merit.  Pertinent portions of the Decision read:

This Court notes that petitioner raised the same issues which have already been thoroughly discussed in the assailed Decision, as well as, in the Resolution denying petitioner’s Motion for Partial Reconsideration.

With regard to the first assigned error, this Court reiterates that, the requirement of [printing] the BIR permit to print on the face of the sales invoices and official receipts is a control mechanism adopted by the Bureau of Internal Revenue to safeguard the interest of the government.

This requirement is clearly mandated under Section 238 of the 1997 National Internal Revenue Code, which provides that:

SEC. 238.  Printing of Receipts or Sales or Commercial Invoice. – All persons who are engaged in business shall secure from the Bureau of Internal Revenue an authority to print receipts or sales or commercial invoices before a printer can print the same.

The above mentioned provision seeks to eliminate the use of unregistered and double or multiple sets of receipts by striking at the very root of the problem — the printer (H. S. de Leon, The National Internal Revenue Code Annotated, 7th Ed., p. 901). And what better way to prove that the required permit to print was secured from the Bureau of Internal Revenue than to show or print the same on the face of the invoices. There can be no other valid proof of compliance with the above provision than to show the Authority to Print Permit number [printed] on the sales invoices and official receipts.

With regard to petitioner’s failure to print the word “zero-rated” on the face of its export sales invoices, it must be emphasized that Section 4.108-1 of Revenue Regulations No. 7-95 specifically requires that all value-added tax registered persons shall, for every sale or lease of goods or properties or services, issue duly registered invoices which must show the word “zero-rated” [printed] on the invoices covering zero-rated sales.

It is not enough that petitioner prove[s] that it is entitled to its claim for refund by way of substantial evidence. Well settled in our jurisprudence [is] that tax refunds are in the nature of tax exemptions and as such, they are regarded as in derogation of sovereign authority (Commissioner of Internal Revenue vs. Ledesma, 31 SCRA 95). Thus, tax refunds are construed in strictissimi juris against the person or entity claiming the same (Commissioner of Internal Revenue vs. Procter & Gamble Philippines Manufacturing Corporation, 204 SCRA 377; Commissioner of Internal Revenue vs. Tokyo Shipping Co., Ltd., 244 SCRA 332).

In this case, not only should petitioner establish that it is entitled to the claim but it must most importantly show proof of compliance with the substantiation requirements as mandated by law or regulations.

The rest of the assigned errors pertain to the alleged errors of the First Division: in finding that the petitioner failed to comply with the substantiation requirements provided by law in proving its claim for refund; in reducing the amount of petitioner’s tax credit for input vat on importation of capital goods; and in denying petitioner’s claim for refund of input vat attributable to petitioner’s zero-rated sales.

It is petitioner’s contention that it has clearly established its right to the tax credit or refund by way of substantial evidence in the form of material and documentary evidence and it would be improper to set aside with haste the claimed input VAT on capital goods expended for training materials, office supplies, posters, banners, t-shirts, books and the like because Revenue Regulations No. 7-95 defines capital goods as to include even those goods which are indirectly used in the production or sale of taxable goods or services.

Capital goods or properties, as defined under Section 4.106-1(b) of Revenue Regulations No. 7-95, refer “to goods or properties with estimated useful life greater than one year and which are treated as depreciable assets under Section 29 (f), used directly or indirectly in the production or sale of taxable goods or services.”

Considering that the items (training materials, office supplies, posters, banners, t-shirts, books and the like) purchased by petitioner as reflected in the summary were not duly proven to have been used, directly or indirectly[,] in the production or sale of taxable goods or services, the same cannot be considered as capital goods as defined above[.  Consequently,] the same may not x x x then [be] claimed as such.

WHEREFORE, in view of the foregoing, this instant Petition for Review is hereby DENIED DUE COURSE and hereby DISMISSED for lack of merit. This Court’s Decision of November 18, 2003 and Resolution of August 10, 2004 are hereby AFFIRMED in all respects.

SO ORDERED.^[26][26]

Petitioner sought reconsideration of the assailed Decision but the CTA En Banc denied the Motion^[27][27] in a Resolution^[28][28] dated April 20, 2006. 

Issues

Hence, the instant Petition raising the following issues for resolution:

(1)       whether the CTA En Banc erred in denying petitioner’s claim for credit/ refund of input VAT attributable to its zero-rated sales in the amount of P16,732,425.00 due to its failure:

(a)       to show that it secured an ATP from the BIR and to indicate the same in its export sales invoices; and

(b)       to print the word “zero-rated” in its export sales invoices.^[29][29]

(2)       whether the CTA En Banc erred in ruling that only the amount of P9,898,867.00 can be classified as input VAT paid on capital goods.^[30][30]

Petitioner’s Arguments

Petitioner posits that the denial by the CTA En Banc of its claim for refund of input VAT attributable to its zero-rated sales has no legal basis because the printing of the ATP and the word “zero-rated” on the export sales invoices are not required under Sections 113 and 237 of the National Internal Revenue Code (NIRC).^[31][31]  And since there is no law requiring the ATP and the word “zero-rated” to be indicated on the sales invoices,^[32][32] the absence of such information in the sales invoices should not invalidate the petition^[33][33] nor result in the outright denial of a claim for tax credit/refund.^[34][34] To support its position, petitioner cites Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue,^[35][35] where Intel’s failure to print the ATP on the sales invoices or receipts did not result in the outright denial of its claim for tax credit/refund.^[36][36] Although the cited case only dealt with the printing of the ATP, petitioner submits that the reasoning in that case should also apply to the printing of the word “zero-rated.”^[37][37] Hence, failure to print of the word “zero-rated” on the sales invoices should not result in the denial of a claim.

            As to the claim for refund of input VAT on capital goods, petitioner insists that it has sufficiently proven through testimonial and documentary evidence that all the goods purchased were used in the production and manufacture of its finished products which were sold and exported.^[38][38] 

Respondent’s Arguments

           To refute petitioner’s arguments, respondent asserts that the printing of the ATP on the export sales invoices, which serves as a control mechanism for the BIR, is mandated by Section 238 of the NIRC;^[39][39] while the printing of the word “zero-rated” on the export sales invoices, which seeks to prevent purchasers of zero-rated sales or services from claiming non-existent input VAT credit/refund,^[40][40] is required under RR No. 7-95, promulgated pursuant to Section 244 of the NIRC.^[41][41]  With regard to the unutilized input VAT on capital goods, respondent counters that petitioner failed to show that the goods it purchased/imported are capital goods as defined in Section 4.106-1 of RR No. 7-95. ^[42][42]

Our Ruling

The petition is bereft of merit.

Before us are two types of input VAT credits.  One is a credit/refund of input VAT attributable to zero-rated sales under Section 112 (A) of the NIRC, and the other is a credit/refund of input VAT on capital goods pursuant to Section 112 (B) of the same Code. 

Credit/refund of input VAT on  zero-rated sales

            In a claim for credit/refund of input VAT attributable to zero-rated sales, Section 112 (A)^[43][43] of the NIRC lays down four requisites, to wit:

1)    the taxpayer must be VAT-registered; 

2)    the taxpayer must be engaged in sales which are zero-rated or effectively zero-rated; 

3)    the claim must be filed within two years after the close of the taxable quarter when such sales were made;  and

4)    the creditable input tax due or paid must be attributable to such sales, except the transitional input tax,  to the extent that such input tax has not been applied against the output tax. 

To prove that it is engaged in zero-rated sales, petitioner presented export sales invoices, certifications of inward remittance, export declarations, and airway bills of lading for the fourth quarter of 1998.  The CTA Division, however, found the export sales invoices of no probative value in establishing petitioner’s zero-rated sales for the purpose of claiming credit/refund of input VAT because petitioner failed to show that it has an ATP from the BIR and to indicate the ATP and the word “zero-rated” in its export sales invoices.^[44][44] The CTA Division cited as basis Sections 113,^[45][45] 237^[46][46] and 238^[47][47] of the NIRC, in relation to Section 4.108-1 of RR No. 7-95.^[48][48]

We partly agree with the CTA.

Printing the ATP on the invoices or receipts is not required

It has been settled in Intel Technology Philippines, Inc. v. Commissioner of Internal Revenue^[49][49] that the ATP need not be reflected or indicated in the invoices or receipts because there is no law or regulation requiring it.^[50][50]  Thus, in the absence of such law or regulation, failure to print the ATP on the invoices or receipts should not result in the outright denial of a claim or the invalidation of the invoices or receipts for purposes of claiming a refund.^[51][51]

ATP must be secured from the BIR

But while there is no law requiring the ATP to be printed on the invoices or receipts, Section 238 of the NIRC expressly requires persons engaged in business to secure an ATP from the BIR prior to printing invoices or receipts.  Failure to do so makes the person liable under Section 264^[52][52] of the NIRC. 

This brings us to the question of whether a claimant for unutilized input VAT on zero-rated sales is required to present proof that it has secured an ATP from the BIR prior to the printing of its invoices or receipts.

We rule in the affirmative.

Under Section 112 (A) of the NIRC, a claimant must be engaged in sales which are zero-rated or effectively zero-rated.  To prove this, duly registered invoices or receipts evidencing zero-rated sales must be presented.  However, since the ATP is not indicated in the invoices or receipts, the only way to verify whether the invoices or receipts are duly registered is by requiring the claimant to present its ATP from the BIR.  Without this proof, the invoices or receipts would have no probative value for the purpose of refund.  In the case of Intel, we emphasized that:

                It bears reiterating that while the pertinent provisions of the Tax Code and the rules and regulations implementing them require entities engaged in business to secure a BIR authority to print invoices or receipts and to issue duly registered invoices or receipts, it is not specifically required that the BIR authority to print be reflected or indicated therein. Indeed, what is important with respect to the BIR authority to print is that it has been secured or obtained by the taxpayer, and that invoices or receipts are duly registered.^[53][53]  (Emphasis supplied)

Failure to print the word “zero-rated” on the sales invoices is fatal to a claim for refund of input VAT

            Similarly, failure to print the word “zero-rated” on the sales invoices or receipts is fatal to a claim for credit/refund of input VAT on zero-rated sales.

In Panasonic Communications Imaging Corporation of the Philippines (formerly Matsushita Business Machine Corporation of the Philippines) v. Commissioner of Internal Revenue,^[54][54] we upheld the denial of Panasonic’s claim for tax credit/refund due to the absence of the word “zero-rated” in its invoices.  We explained that compliance with Section 4.108-1 of RR 7-95, requiring the printing of the word “zero rated” on the invoice covering zero-rated sales, is essential as this regulation proceeds from the rule-making authority of the Secretary of Finance under Section 244^[55][55] of the NIRC. 

All told, the non-presentation of the ATP and the failure to indicate the word “zero-rated” in the invoices or receipts are fatal to a claim for credit/refund of input VAT on zero-rated sales. The failure to indicate the ATP in the sales invoices or receipts, on the other hand, is not.  In this case, petitioner failed to present its ATP and to print the word “zero-rated” on its export sales invoices.  Thus, we find no error on the part of the CTA in denying outright petitioner’s claim for credit/refund of input VAT attributable to its zero-rated sales.

Credit/refund of input VAT on capital goods

Capital goods are defined under Section 4.106-1(b) of RR No. 7-95

            To claim a refund of input VAT on capital goods, Section 112 (B)^[56][56] of the NIRC requires that:

1.     the claimant must be a VAT registered person;

2.     the input taxes claimed must have been paid on capital goods;

3.     the input taxes must not have been applied against any output tax liability; and

4.     the administrative claim for refund must have been filed within two (2) years after the close of the taxable quarter when the importation or purchase was made.

            Corollarily, Section 4.106-1 (b) of RR No. 7-95 defines capital goods as follows:

                “Capital goods or properties” refer to goods or properties with estimated useful life greater that one year and which are treated as depreciable assets under Section 29 (f),^[57][57] used directly or indirectly in the production or sale of taxable goods or services.

            Based on the foregoing definition, we find no reason to deviate from the findings of the CTA that training materials, office supplies, posters, banners, T-shirts, books, and the other similar items reflected in petitioner’s Summary of Importation of Goods are not capital goods.  A reduction in the refundable input VAT on capital goods from P15,170,082.00 to P9,898,867.00 is therefore in order.

WHEREFORE, the Petition is hereby DENIED.  The assailed Decision dated September 30, 2005 and the Resolution dated April 20, 2006 of the Court of Tax Appeals En Banc are hereby AFFIRMED.

            SO ORDERED.

                                    MARIANO C. DEL CASTILLO

                                    Associate Justice

WE CONCUR:

RENATO C. CORONA

Chief Justice

Chairperson

JOSE PORTUGAL PEREZ

Associate Justice

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

            Pursuant to Section 13, Article VIII of the Constitution, it is hereby certified 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 2011-0033: ANTONIO M. CARANDANG VS. HONORABLE ANIANO A. DESIERTO, OFFICE OF THE OMBUDSMAN (G.R. NO. 148076); ANTONIO M. CARANDANG VS. SANDIGANBAYAN (FIFTH DIVISION) SUBJECTS: DEFINITION OF OGCC; RADIO PHILIPPINE NETWORK. (BRIEF TITLE: CARANDANG VS. DESIERTO ET AL.)

(G.R. NO. 153161) (12 JANUARY 2011, BERSAMIN, J.)

X ————————————————————————————————- X

DOCTRINES:

DO THE  OMBUDSMAN AND SANDIGANBAYAN HAVE  JURISDICTION OVER ADMIN CASES INVOLVING GRAVE MISCONDUCT COMMITTED BY EMPLOYEES OF GOVERNMENT-OWNED OR CONTROLLED CORPORATION?

YES.

It is not disputed that the Ombudsman has jurisdiction over administrative cases involving grave misconduct committed by the officials and employees of government-owned or -controlled corporations; and that the Sandiganbayan has jurisdiction to try and decide criminal actions involving violations of R.A. 3019 committed by public officials and employees, including presidents, directors and managers of government-owned or -controlled corporations. The respective jurisdictions of the respondents are expressly defined and delineated by the law.^[1][25]

WHAT ARE GOVERNMENT-OWNED AND CONTROLLED CORPORATION?

Similarly, the law defines what are government-owned or -controlled corporations. For one, Section 2 of Presidential Decree No. 2029 (Defining Government Owned or Controlled Corporations and Identifying Their Role in National Development) states:  

Section 2. A government-owned or controlled corporation is a stock or a non-stock corporation, whether performing governmental or proprietary functions, which is directly chartered by a special law or if organized under the general corporation law is owned or controlled by the government directly, or indirectly through a parent corporation or subsidiary corporation, to the extent of at least a majority of its outstanding capital stock or of its outstanding voting capital stock.

Section 2 (13) of Executive Order No. 292 (Administrative Code of 1987)^[2][26] renders a similar definition of government-owned or -controlled corporations:

Section 2. General Terms Defined. – Unless the specific words of the text or the context as a whole or a particular statute, shall require a different meaning:

x x x

(13) government-owned or controlled corporations refer to any agency organized as a stock or non-stock corporation vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the government directly or indirectly through its instrumentalities either wholly, or where applicable as in the case of stock corporations to the extent of at least 51% of its capital stock.

It is clear, therefore, that a corporation is considered a government-owned or -controlled corporation only when the Government directly or indirectly owns or controls at least a majority or 51% share of the capital stock. Applying this statutory criterion, the Court ruled in Leyson, Jr. v. Office of the Ombudsman:^[3][27]

But these jurisprudential rules invoked by petitioner in support of his claim that the CIIF companies are government owned and/or controlled corporations are incomplete without resorting to the definition of “government owned or controlled corporation” contained in par. (13), Sec.2, Introductory Provisions of the Administrative Code of 1987, i.e., any agency organized as a stock or non-stock corporation vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the government directly or indirectly through its instrumentalities either wholly, or where applicable as in the case of stock corporations to the extent of at least fifty-one (51) percent of its capital stock. The definition mentions three (3) requisites, namely, first, any agency organized as a stock or non-stock corporation; second, vested with functions relating to public needs whether governmental or proprietary in nature; and, third, owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) of its capital stock.

In the present case, all three (3) corporations comprising the CIIF companies were organized as stock corporations. The UCPB-CIIF owns 44.10% of the shares of LEGASPI OIL, xxx. Obviously, the below 51% shares of stock in LEGASPI OIL removes this firm from the definition of a government owned or controlled corporation. x x x The Court thus concludes that the CIIF are, as found by public respondent, private corporations not within the scope of its jurisdiction.^[4][28]

IS RADIO PHILIPPINE NETWORK A GOVERNMENT OWNED AND CONTROLLED CORPORATION?

NO.

Consequently, RPN was neither a government-owned nor a controlled corporation because of the Government’s total share in RPN’s capital stock being only 32.4%.

SANDIGANBAYAN ORDERED BENEDICTO TO TRANSFER HIS 72.4%  IN RPN TO RPN. DOES THIS MAKE RPN NOW A GOVERNMENT-OWNED AND CONTROLLED CORP?

NO. BECAUSE BENEDICTO FILED A MOTION FOR RECONSIDERATION WHERE HE CLARIFIED THAT THE SHARES CEDED TO RPN WAS ONLY 32.4%. SUCH MOTION IS NOT YET RESOLVED WITH FINALITY.

Parenthetically, although it is true that the Sandiganbayan (Second Division) ordered the transfer to the PCGG of Benedicto’s shares that represented 72.4% of the total issued and outstanding capital stock of RPN, such quantification of Benedicto’s shareholding cannot be controlling in view of Benedicto’s timely filing of a motion for reconsideration whereby he  clarified and insisted that the shares ceded to the PCGG had accounted for only 32.4%, not 72.4%, of RPN’s outstanding capital stock. With the extent of Benedicto’s holdings in RPN remaining unresolved with finality, concluding that the Government held the majority of RPN’s capital stock as to make RPN a government-owned or -controlled corporation would be bereft of any factual and legal basis.  

WHAT OTHER PROOF EXISTS  THAT RPN IS NOT AN OGCC?

EVEN OFFICE OF THE PRESIDENT AND PCGG RECOGNIZED RPN’S STATUS AS BEING NEITHER A GOVERNMENT-OWNED NOR CONTROLLED CORP. CONSTRUCTION OF A STATUTE BY GOVT AGENCIES DESERVE RESPECT.

Even the PCGG and the Office of the President (OP) have recognized RPN’s status as being neither a government-owned nor -controlled corporation.

In its Opinion/Clarification dated August 18, 1999, the PCGG communicated to San Luis as the president and general manager of RPN regarding a case involving RPN and Carandang:^[5][29]

MR. EDGAR S. SAN LUIS

President & General Manager

Radio Philippines Network, Inc.

Broadcast City, Capitol Hills

Diliman, Quezon City

Sir:

This refers to your letter dated August 4, 1999, seeking “PCGG’s position on the following:

“1. Whether RPN-9 is a GOCC x x x or a private corporation outside the scope of OGCC and COA’s control given 32% Government ownership x x x.

x x x

It appears that under the RP-Benedicto Compromise Agreement dated November 3, 1990 – validity of which has been sustained by the Supreme Court in G.R. No. 96087, March 31, 1992, (Guingona, Jr. vs. PCGG, 207 SCRA 659) – Benedicto ceded all his rights, interest and/or participation, if he has any, in RPN-9, among others, to the government which rights, interest and/or participation per PCGG’s understanding, include 9,494,327.50 shares of stock, i.e, about 72.4% of the total issued and outstanding capital stock of RPN-9.

Accordingly, the Sandiganbayan (Second Division), on motion of the government through PCGG, ordered the president and corporate secretary of the RPN-9 to “effect the immediate cancellation and transfer of the 9,494,327.50 shares corresponding to Benedicto’s proprietary interest in RPN-9 to the Republic of the Philippines c/o PCGG” (Sandiganbayan’s Resolution of February 3, 1998 in Civil Case No. 0034, RP vs. Roberto Benedicto, et. al.) Benedicto, however, filed a motion for reconsideration of said Resolution, contending that the number of RPN-9 shares ceded by him embraces only his personal holdings and those of his immediate family and nominees totaling 4,161,207.5 shares but excluding the RPN-9 shares in the name of Far East Managers and Investors, Inc. (“FEMIE”), which is about 40%, as they are corporate properties/assets of FEMIE and not his personal holdings. Said motion for reconsideration is still pending resolution by the Sandiganbayan.

x x x

We agree with your x x x view that RPN-9 is not a government owned or controlled corporation within the contemplation of the Administrative Code of 1987, for admittedly, RPN-9 was organized for private needs and profits, and not for public needs and was not specifically vested with functions relating to public needs.

Neither could RPN-9 be considered a “government-owned or controlled corporation” under Presidential Decree (PD) No. 2029 dated February 4, 1986, which defines said terms as follows:

“Sec.2. Definition. – A government owned- or controlled corporation is a stock or non-stock corporation, whether performing governmental or proprietary functions which is directly chartered by special law or organized under the general corporation law is owned or controlled by the government directly, or indirectly through a parent corporation or subsidiary corporation, to the extent of at least a majority of its outstanding capital stock or of its outstanding voting capital stock;

Provided, that a corporation organized under the general corporation law under private ownership at least a majority of the shares of stock of which were conveyed to a government corporation in satisfaction of debts incurred with a government financial institution, whether by foreclosure or otherwise, or a subsidiary corporation of a government corporation organized exclusively to own and manage, or lease, or operate specific physical assets acquired by a government financial institution in satisfaction of debts incurred therewith, and which in any case by enunciated policy of the government is required to be disposed of to private ownership within a specified period of time, shall not be considered a government-owned or controlled corporation before such disposition and even if the ownership or control thereof is subsequently transferred to another government-owned or controlled corporation.”

A government-owned or controlled corporation is either “parent” corporation, i.e., one “created by special law” (Sec. 3 (a), PD 2029) or a “subsidiary” corporation, i.e, one created pursuant to law where at least a majority of the outstanding voting capital stock of which is owned by parent government corporation and/or other government-owned subsidiaries. (Sec. 3 (b), PD 2029).

RPN-9 may not likewise be considered as an “acquired asset corporation” which is one organized under the general corporation law (1) under private ownership at least a majority of the shares of stock of which were conveyed to a government corporation in satisfaction of debts incurred with a government financial institution, whether by foreclosure or otherwise, or (2) as a subsidiary corporation of a government corporation organized exclusively to own and manage, or lease, or operate specific physical assets acquired by a government financial institution in satisfaction of debts incurred therewith, and which in any case by enunciated policy of the government is required to be disposed of to private ownership within a specified period of time” (Sec 3 c, PD 2029), for the following reasons:

1.   as noted above, the uncontested (not litigated) RPN-9 shares of the government is only 32.4% (not a majority) of its capital stock;

2.   said 32.4% shares of stock, together with the contested/litigated 40%, were not conveyed to a government corporation or the government “in satisfaction of debts incurred with government financial institution, whether by foreclosure or otherwise;

3.   RPN-9 was not organized as a subsidiary corporation of a government corporation organized exclusively to own and manage, or lease, or operate specific physical assets acquired by a government financial institution in satisfaction of debts incurred therewith.

It should be parenthetically noted that the 32.4% or 72.4% shares of stocks were turned over to the government by virtue of a compromise agreement between the government and Benedicto in Civil Case No. 0034 which is “a civil action against Defendants Roberto S. Benedicto, Ferdinand E. Marcos, Imelda R. Marcos” and others, to recover from them ill-gotten wealth” (Amended Complaint, Aug. 12, 1987, Civil Case No. 0034, p. 2.) As the case between the government and Benedicto, his family and nominees was compromised, no judicial pronouncement was made as to the character or nature of the assets and properties turned over by Benedicto to the government – whether they are ill-gotten wealth or not.^[6][30]    

The PCGG’s Opinion/Clarification was affirmed by the OP itself on February 10, 2000: ^[7][31]                     

                                                               February 10, 2000

Mr. Edgar S. San Luis

President and General Manager

Radio Philippines Network Inc.

Broadcasting City, Capitol Hills, Diliman

Quezon City

Dear President San Luis,

x x x

Relative thereto, please be informed that we affirm the PCGG’s opinion that RPNI is not a government-owned and/or controlled corporation (GOCC). Section 2 (13), Introductory Provisions of the Administrative Code of 1987 defines a GOCC as an agency organized as a stock or non-stock corporation vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the government directly or indirectly through its instrumentalities either wholly, or where applicable as in the case of stock corporations to the extent of at least 51% of its capital stock. As government ownership over RPNI is only 32.4% of its capital stock, pending the final judicial determination of the true and legal ownership of RPNI, the corporation is deemed private.^[8][32] 

Even earlier, a similar construction impelled the Ombudsman to dismiss a criminal  complaint  for violation of R.A. 3019 filed against certain RPN officials, as the Ombudsman’s resolution dated December 15, 1997 indicates,^[9][33] a pertinent portion of which is quoted thus:

This is not to mention the fact that the other respondents, the RPN officials, are outside the jurisdiction of this Office (Office of the Ombudsman); they are employed by a private corporation registered with the Securities and Exchange Commission, the RPN, which is not a government owned or controlled corporation x x x^[10][34]

Considering that the construction of a statute given by administrative agencies deserves respect,^[11][35] the uniform administrative constructions of the relevant aforequoted laws defining what are government-owned or -controlled corporations as applied to RPN is highly persuasive.

BUT PRESIDENT ESTRADA ALLEGEDLY APPOINTED CARANDANG AS GENERAL MANAGER OF RPN. DOES THIS APPOINTMENT NOT MAKE HIM A GOVERNMENT OFFICIAL?

NO.

Lastly, the conclusion that Carandang was a public official by virtue of his having been appointed as general manager and chief operating officer of RPN by President Estrada deserves no consideration. President Estrada’s intervention was merely to recommend Carandang’s designation as general manager and chief operating officer of RPN to the PCGG, which then cast the vote in his favor vis-à-vis said positions.^[12][36] Under the circumstances, it was RPN’s Board of Directors that appointed Carandang to his positions pursuant to RPN’s By-Laws.^[13][37]

In fine, Carandang was correct in insisting that being a private individual he was not subject to the administrative authority of the Ombudsman and to the criminal jurisdiction of the Sandiganbayan.^[14][38]

x————————————————————————————–x

D E C I S I O N

BERSAMIN, J.:

Petitioner Antonio M. Carandang (Carandang) challenges the jurisdiction over him of the Ombudsman and of the Sandiganbayan on the ground that he was being held to account for acts committed while he was serving as general manager and chief operating officer of Radio Philippines Network, Inc. (RPN), which was not a government-owned or -controlled corporation; hence, he was not a public official or employee.

In G.R. No. 148076, Carandang seeks the reversal of the decision^[15][1] and resolution^[16][2] promulgated by the Court of Appeals (CA) affirming the decision^[17][3] of the Ombudsman dismissing him from the service for grave misconduct.

In G.R. No. 153161, Carandang assails on certiorari the resolutions dated October 17, 2001^[18][4] and March 14, 2002^[19][5] of the Sandiganbayan (Fifth Division) that sustained the Sandiganbayan’s jurisdiction over the criminal complaint charging him with violation of Republic Act No. 3019 (Anti-Graft and Corrupt Practices Act).

                                      Antecedents

Roberto S. Benedicto (Benedicto) was a stockholder of RPN, a private corporation duly registered with the Securities and Exchange Commission (SEC).^[20][6]  In March 1986, the Government ordered the sequestration of RPN’s properties, assets, and business. On November 3, 1990, the Presidential Commission on Good Government (PCGG) entered into a compromise agreement with Benedicto, whereby he ceded to the Government, through the PCGG, all his shares of stock in RPN. Consequently, upon motion of the PCGG, the Sandiganbayan (Second Division) directed the president and corporate secretary of RPN to transfer to the PCGG Benedicto’s shares representing 72.4% of the total issued and outstanding capital stock of RPN.

However, Benedicto moved for a reconsideration, contending that his RPN shares ceded to the Government, through the PCGG, represented only 32.4% of RPN’s outstanding capital stock, not 72.4%. Benedicto’s motion for reconsideration has remained unresolved to this date.^[21][7]

Administrative Complaint for Grave Misconduct

On July 28, 1998, Carandang assumed office as general manager and chief operating officer of RPN.^[22][8]

On April 19, 1999, Carandang and other RPN officials were charged with grave misconduct before the Ombudsman. The charge alleged that Carandang, in his capacity as the general manager of RPN, had entered into a contract with AF Broadcasting Incorporated despite his being an incorporator, director, and stockholder of that corporation; that he had thus held financial and material interest in a contract that had required the approval of his office; and that the transaction was prohibited under Section 7 (a) and Section 9 of Republic Act No. 6713 (Code of Conduct and Ethical Standards for Public Officials and Employees), thereby rendering him administratively liable for grave misconduct.

Carandang sought the dismissal of the administrative charge on the ground that the Ombudsman had no jurisdiction over him because RPN was not a government-owned or -controlled corporation.^[23][9]

On May 7, 1999, the Ombudsman suspended Carandang from his positions in RPN.

On September 8, 1999, Carandang manifested that he was no longer interested and had no further claim to his positions in RPN. He was subsequently replaced by Edgar San Luis.^[24][10]

In its decision dated January 26, 2000,^[25][11] the Ombudsman found Carandang guilty of grave misconduct and ordered his dismissal from the service. 

Carandang moved for reconsideration on two grounds: (a) that the Ombudsman had no jurisdiction over him because RPN was not a government-owned or -controlled corporation; and (b) that he had no financial and material interest in the contract that required the approval of his office.^[26][12]

The Ombudsman denied Carandang’s motion for reconsideration on March 15, 2000.^[27][13]

On appeal (CA G.R. SP No. 58204),^[28][14] the CA affirmed the decision of the Ombudsman on February 12, 2001, stating:

The threshold question to be resolved in the present case is whether or not the Office of the Ombudsman has jurisdiction over the herein petitioner.

It is therefore of paramount importance to consider the definitions of the following basic terms, to wit: A public office “is the right, authority and duty, created and conferred by law, by which for a given period, either fixed by law or enduring at the pleasure of the creating power, an individual is invested with some portion of the sovereign functions of the state to be exercised by him for the benefit of the public.” (San Andres, Catanduanes vs. Court of Appeals, 284 SCRA 276: Chapter I, Section 1, Mechem, A Treatise on Law of Public Offices and Officers). The individual so invested is called the public officer which “includes elective and appointive officials and employees, permanent or temporary, whether in the classified or unclassified or exemption service receiving compensation, even nominal, from the government as defined in xxx [Sec. 2 (a) of Republic Act No. 3019 as amended].” (Sec. 2 (b) of Republic Act No. 3019 as amended. Unless the powers conferred are of this nature, the individual is not a public officer.

With these time-honored definitions and the substantial findings of the Ombudsman, We are constrained to conclude that, indeed, the herein petitioner (Antonio M. Carandang) is a public officer. Precisely, since he (Antonio M. Carandang) was appointed by then President Joseph Ejercito Estrada as general manager and chief operating officer of RPN-9 (page 127 of the Rollo). As a presidential appointee, the petitioner derives his authority from the Philippine Government. It is luce clarius that the function of the herein petitioner (as a presidential appointee), relates to public duty, i.e., to represent the interest of the Philippine Government in RPN-9 and not purely personal matter, thus, the matter transcends the petitioner’s personal pique or pride.

x x x

Having declared earlier that the herein petitioner is a public officer, it follows therefore that, that jurisdiction over him is lodged in the Office of the Ombudsman.

It is worth remembering that as protector of the people, the Ombudsman has the power, function and duty to act promptly on complaints filed in any form or manner against officers or employees of the Government, or of any, subdivision, agency or instrumentality thereof, including government-owned or controlled corporations, and enforce their administrative, civil and criminal liability in every case where the evidence warrants in order to promote efficient service by the Government to the people. (Section 13 of Republic Act No. 6770).

x x x

Accordingly, the Office of the Ombudsman is, therefore, clothed with the proper armor when it assumed jurisdiction over the case filed against the herein petitioner. x x x

x x x

It appears that RPN-9 is a private corporation established to install, operate and manage radio broadcasting and/or television stations in the Philippines (pages 59-79 of the Rollo). On March 2, 1986, when RPN-9 was sequestered by the Government on ground that the same was considered as an illegally obtained property (page 3 of the Petition for Review; page 2 of the Respondent’s Comment; pages 10 and 302 of the Rollo), RPN-9 has shed-off its private status. In other words, there can be no gainsaying that as of the date of its sequestration by the Government, RPN-9, while retaining its own corporate existence, became a government-owned or controlled corporation within the Constitutional precept.

Be it noted that a government-owned or controlled corporation “refers to any agency organized as a stock or non-stock corporation, vested with functions relating to public needs whether government or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock; Provided, That government-owned or controlled corporations may be further categorized by the department of Budget, the Civil Service, and the Commission on Audit for purposes of the exercise and discharge of their respective powers, functions and responsibilities with respect to such corporations.” (Section 2 [13], Executive Order No. 292).  

Contrary to the claim of the petitioner, this Court is of the view and so holds that RPN-9 perfectly falls under the foregoing definition. For one, “the government’s interest to RPN-9 amounts to 72.4% of RPN’s capital stock with an uncontested portion of 32.4% and a contested or litigated portion of 40%.” (page 3 of the Petition for Review; pages 8-9 of the Respondent’s Comment). On this score, it ought to be pointed out that while the forty percent (40%) of the seventy two point four percent (72.4%) is still contested and litigated, until the matter becomes formally settled, the government, for all interests and purposes still has the right over said portion, for the law is on its side. Hence, We can safely say that for the moment, RPN-9 is a government owned and controlled corporation. Another thing, RPN 9, though predominantly tackles proprietary functions—those intended for private advantage and benefit, still, it is irrefutable that RPN-9 also performs governmental roles in the interest of health, safety and for the advancement of public good and welfare, affecting the public in general.

x x x

Coming now to the last assignment of error- While it may be considered in substance that the “latest GIS clearly shows that petitioner was no longer a stockholder of record of AF Broadcasting Corporation at the time of his assumption of Office in RPN 9 x x x” (Petitioner’s Reply [to Comment]; page 317 of the Rollo), still severing ties from AF Broadcasting Corporation does not convince this Court fully well to reverse the finding of the Ombudsman that Antonio Carandang “appears to be liable for Grave Misconduct” (page 10 of the Assailed Decision; page 36 of the Rollo). Note that, as a former stockholder of AF Broadcasting Corporation, it is improbable that the herein petitioner was completely oblivious of the developments therein and unaware of the contracts it (AF Broadcasting Corporation) entered into. By reason of his past (Antonio Carandang) association with the officers of the AF Broadcasting Corporation, it is unbelievable that herein petitioner could simply have ignored the contract entered into between RPN-9 and AF Broadcasting Corporation and not at all felt to reap the benefits thereof. Technically, it is true that herein petitioner did not directly act on behalf of AF Broadcasting Corporation, however, We doubt that he (herein petitioner) had no financial and/or material interest in that particular transaction requiring the approval of his office—a fact that could not have eluded Our attention.    

x x x

WHEREFORE, premises considered and pursuant to applicable laws and jurisprudence on the matter, the present Petition for Review is hereby DENIED for lack of merit. The assailed decision (dated January 26, 2000) of the Office of the Ombudsman in OMB-ADM-0-99-0349 is hereby AFFIRMED in toto. No pronouncement as to costs.

SO ORDERED.^[29][15]

After the denial of his motion for reconsideration,^[30][16] Carandang commenced G.R. No. 148076.

Violation of Section 3 (g), Republic Act No. 3019

On January 17, 2000, the Ombudsman formally charged Carandang in the Sandiganbayan with a violation of Section 3 (g) of RA 3019 by alleging in the following information, ^[31][17] viz:

That sometime on September 8, 1998 or thereabouts, in Quezon City, Philippines and within the jurisdiction of this Honorable Court, accused ANTONIO M. CARANDANG, a high ranking officer (HRO) being then the General Manager of Radio Philippines Network, Inc. (RPN-9), then a government owned and controlled corporation, did then and there willfully, unlawfully and criminally give unwarranted benefits to On Target Media Concept, Inc. (OTMCI) through manifest partiality and gross inexcusable negligence and caused the government undue injury, by pre-terminating the existing block time contract between RPN 9 and OTMCI for the telecast of “Isumbong Mo Kay Tulfo” which assured the government an income of Sixty Four Thousand and Nine Pesos (P 64,009.00) per telecast and substituting the same with a more onerous co-production agreement without any prior study as to the profitability thereof, by which agreement RPN-9 assumed the additional obligation of taking part in the promotions, sales and proper marketing of the program, with the end result in that in a period of five (5) months RPN-9 was able to realize an income of only Seventy One Thousand One Hundred Eighty Five Pesos (P 71,185.00), and further, by waiving RPN-9’s collectible from OTMCI for August 1-30, 1998 in the amount of Three Hundred Twenty Thousand and Forty Five Pesos (P 320,045.00).  

Carandang moved to quash the information,^[32][18] arguing that Sandiganbayan had no jurisdiction because he was not a public official due to RPN not being a government-owned or -controlled corporation.

The Sandiganbayan denied Carandang’s motion to quash on October 17, 2001.^[33][19]

After the denial by the Sandiganbayan of his motion for reconsideration,^[34][20] Carandang initiated G.R. No. 153161.^[35][21]

On May 27, 2002, Carandang moved to defer his arraignment and pre-trial, citing the pendency of G.R. No. 153161.^[36][22]

On July 29, 2002, the Court directed the parties in G.R. No. 153161 to maintain the status quo until further orders.^[37][23]

On November 20, 2006, G.R. No. 148076 was consolidated with G.R. No. 153161.^[38][24]

Issue

Carandang insists that he was not a public official considering that RPN was not a government-owned or -controlled corporation; and that, consequently, the Ombudsman and the Sandiganbayan had no jurisdiction over him. He prays that the administrative and criminal complaints filed against him should be dismissed. Accordingly, decisive is whether or not RPN was a government-owned or -controlled corporation.

Ruling

We find the petitions to be meritorious.

It is not disputed that the Ombudsman has jurisdiction over administrative cases involving grave misconduct committed by the officials and employees of government-owned or -controlled corporations; and that the Sandiganbayan has jurisdiction to try and decide criminal actions involving violations of R.A. 3019 committed by public officials and employees, including presidents, directors and managers of government-owned or -controlled corporations. The respective jurisdictions of the respondents are expressly defined and delineated by the law.^[39][25]

Similarly, the law defines what are government-owned or -controlled corporations. For one, Section 2 of Presidential Decree No. 2029 (Defining Government Owned or Controlled Corporations and Identifying Their Role in National Development) states:  

Section 2. A government-owned or controlled corporation is a stock or a non-stock corporation, whether performing governmental or proprietary functions, which is directly chartered by a special law or if organized under the general corporation law is owned or controlled by the government directly, or indirectly through a parent corporation or subsidiary corporation, to the extent of at least a majority of its outstanding capital stock or of its outstanding voting capital stock.

Section 2 (13) of Executive Order No. 292 (Administrative Code of 1987)^[40][26] renders a similar definition of government-owned or -controlled corporations:

Section 2. General Terms Defined. – Unless the specific words of the text or the context as a whole or a particular statute, shall require a different meaning:

x x x

(13) government-owned or controlled corporations refer to any agency organized as a stock or non-stock corporation vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the government directly or indirectly through its instrumentalities either wholly, or where applicable as in the case of stock corporations to the extent of at least 51% of its capital stock.

It is clear, therefore, that a corporation is considered a government-owned or -controlled corporation only when the Government directly or indirectly owns or controls at least a majority or 51% share of the capital stock. Applying this statutory criterion, the Court ruled in Leyson, Jr. v. Office of the Ombudsman:^[41][27]

But these jurisprudential rules invoked by petitioner in support of his claim that the CIIF companies are government owned and/or controlled corporations are incomplete without resorting to the definition of “government owned or controlled corporation” contained in par. (13), Sec.2, Introductory Provisions of the Administrative Code of 1987, i.e., any agency organized as a stock or non-stock corporation vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the government directly or indirectly through its instrumentalities either wholly, or where applicable as in the case of stock corporations to the extent of at least fifty-one (51) percent of its capital stock. The definition mentions three (3) requisites, namely, first, any agency organized as a stock or non-stock corporation; second, vested with functions relating to public needs whether governmental or proprietary in nature; and, third, owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) of its capital stock.

In the present case, all three (3) corporations comprising the CIIF companies were organized as stock corporations. The UCPB-CIIF owns 44.10% of the shares of LEGASPI OIL, xxx. Obviously, the below 51% shares of stock in LEGASPI OIL removes this firm from the definition of a government owned or controlled corporation. x x x The Court thus concludes that the CIIF are, as found by public respondent, private corporations not within the scope of its jurisdiction.^[42][28]

Consequently, RPN was neither a government-owned nor a controlled corporation because of the Government’s total share in RPN’s capital stock being only 32.4%.

Parenthetically, although it is true that the Sandiganbayan (Second Division) ordered the transfer to the PCGG of Benedicto’s shares that represented 72.4% of the total issued and outstanding capital stock of RPN, such quantification of Benedicto’s shareholding cannot be controlling in view of Benedicto’s timely filing of a motion for reconsideration whereby he  clarified and insisted that the shares ceded to the PCGG had accounted for only 32.4%, not 72.4%, of RPN’s outstanding capital stock. With the extent of Benedicto’s holdings in RPN remaining unresolved with finality, concluding that the Government held the majority of RPN’s capital stock as to make RPN a government-owned or -controlled corporation would be bereft of any factual and legal basis.  

Even the PCGG and the Office of the President (OP) have recognized RPN’s status as being neither a government-owned nor -controlled corporation.

In its Opinion/Clarification dated August 18, 1999, the PCGG communicated to San Luis as the president and general manager of RPN regarding a case involving RPN and Carandang:^[43][29]

MR. EDGAR S. SAN LUIS

President & General Manager

Radio Philippines Network, Inc.

Broadcast City, Capitol Hills

Diliman, Quezon City

Sir:

This refers to your letter dated August 4, 1999, seeking “PCGG’s position on the following:

“1. Whether RPN-9 is a GOCC x x x or a private corporation outside the scope of OGCC and COA’s control given 32% Government ownership x x x.

x x x

It appears that under the RP-Benedicto Compromise Agreement dated November 3, 1990 – validity of which has been sustained by the Supreme Court in G.R. No. 96087, March 31, 1992, (Guingona, Jr. vs. PCGG, 207 SCRA 659) – Benedicto ceded all his rights, interest and/or participation, if he has any, in RPN-9, among others, to the government which rights, interest and/or participation per PCGG’s understanding, include 9,494,327.50 shares of stock, i.e, about 72.4% of the total issued and outstanding capital stock of RPN-9.

Accordingly, the Sandiganbayan (Second Division), on motion of the government through PCGG, ordered the president and corporate secretary of the RPN-9 to “effect the immediate cancellation and transfer of the 9,494,327.50 shares corresponding to Benedicto’s proprietary interest in RPN-9 to the Republic of the Philippines c/o PCGG” (Sandiganbayan’s Resolution of February 3, 1998 in Civil Case No. 0034, RP vs. Roberto Benedicto, et. al.) Benedicto, however, filed a motion for reconsideration of said Resolution, contending that the number of RPN-9 shares ceded by him embraces only his personal holdings and those of his immediate family and nominees totaling 4,161,207.5 shares but excluding the RPN-9 shares in the name of Far East Managers and Investors, Inc. (“FEMIE”), which is about 40%, as they are corporate properties/assets of FEMIE and not his personal holdings. Said motion for reconsideration is still pending resolution by the Sandiganbayan.

x x x

We agree with your x x x view that RPN-9 is not a government owned or controlled corporation within the contemplation of the Administrative Code of 1987, for admittedly, RPN-9 was organized for private needs and profits, and not for public needs and was not specifically vested with functions relating to public needs.

Neither could RPN-9 be considered a “government-owned or controlled corporation” under Presidential Decree (PD) No. 2029 dated February 4, 1986, which defines said terms as follows:

“Sec.2. Definition. – A government owned- or controlled corporation is a stock or non-stock corporation, whether performing governmental or proprietary functions which is directly chartered by special law or organized under the general corporation law is owned or controlled by the government directly, or indirectly through a parent corporation or subsidiary corporation, to the extent of at least a majority of its outstanding capital stock or of its outstanding voting capital stock;

Provided, that a corporation organized under the general corporation law under private ownership at least a majority of the shares of stock of which were conveyed to a government corporation in satisfaction of debts incurred with a government financial institution, whether by foreclosure or otherwise, or a subsidiary corporation of a government corporation organized exclusively to own and manage, or lease, or operate specific physical assets acquired by a government financial institution in satisfaction of debts incurred therewith, and which in any case by enunciated policy of the government is required to be disposed of to private ownership within a specified period of time, shall not be considered a government-owned or controlled corporation before such disposition and even if the ownership or control thereof is subsequently transferred to another government-owned or controlled corporation.”

A government-owned or controlled corporation is either “parent” corporation, i.e., one “created by special law” (Sec. 3 (a), PD 2029) or a “subsidiary” corporation, i.e, one created pursuant to law where at least a majority of the outstanding voting capital stock of which is owned by parent government corporation and/or other government-owned subsidiaries. (Sec. 3 (b), PD 2029).

RPN-9 may not likewise be considered as an “acquired asset corporation” which is one organized under the general corporation law (1) under private ownership at least a majority of the shares of stock of which were conveyed to a government corporation in satisfaction of debts incurred with a government financial institution, whether by foreclosure or otherwise, or (2) as a subsidiary corporation of a government corporation organized exclusively to own and manage, or lease, or operate specific physical assets acquired by a government financial institution in satisfaction of debts incurred therewith, and which in any case by enunciated policy of the government is required to be disposed of to private ownership within a specified period of time” (Sec 3 c, PD 2029), for the following reasons:

1.   as noted above, the uncontested (not litigated) RPN-9 shares of the government is only 32.4% (not a majority) of its capital stock;

2.   said 32.4% shares of stock, together with the contested/litigated 40%, were not conveyed to a government corporation or the government “in satisfaction of debts incurred with government financial institution, whether by foreclosure or otherwise;

3.   RPN-9 was not organized as a subsidiary corporation of a government corporation organized exclusively to own and manage, or lease, or operate specific physical assets acquired by a government financial institution in satisfaction of debts incurred therewith.

It should be parenthetically noted that the 32.4% or 72.4% shares of stocks were turned over to the government by virtue of a compromise agreement between the government and Benedicto in Civil Case No. 0034 which is “a civil action against Defendants Roberto S. Benedicto, Ferdinand E. Marcos, Imelda R. Marcos” and others, to recover from them ill-gotten wealth” (Amended Complaint, Aug. 12, 1987, Civil Case No. 0034, p. 2.) As the case between the government and Benedicto, his family and nominees was compromised, no judicial pronouncement was made as to the character or nature of the assets and properties turned over by Benedicto to the government – whether they are ill-gotten wealth or not.^[44][30]    

The PCGG’s Opinion/Clarification was affirmed by the OP itself on February 10, 2000: ^[45][31]                     

                                                               February 10, 2000

Mr. Edgar S. San Luis

President and General Manager

Radio Philippines Network Inc.

Broadcasting City, Capitol Hills, Diliman

Quezon City

Dear President San Luis,

x x x

Relative thereto, please be informed that we affirm the PCGG’s opinion that RPNI is not a government-owned and/or controlled corporation (GOCC). Section 2 (13), Introductory Provisions of the Administrative Code of 1987 defines a GOCC as an agency organized as a stock or non-stock corporation vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the government directly or indirectly through its instrumentalities either wholly, or where applicable as in the case of stock corporations to the extent of at least 51% of its capital stock. As government ownership over RPNI is only 32.4% of its capital stock, pending the final judicial determination of the true and legal ownership of RPNI, the corporation is deemed private.^[46][32]

Even earlier, a similar construction impelled the Ombudsman to dismiss a criminal  complaint  for violation of R.A. 3019 filed against certain

RPN officials, as the Ombudsman’s resolution dated December 15, 1997 indicates,^[47][33] a pertinent portion of which is quoted thus:

This is not to mention the fact that the other respondents, the RPN officials, are outside the jurisdiction of this Office (Office of the Ombudsman); they are employed by a private corporation registered with the Securities and Exchange Commission, the RPN, which is not a government owned or controlled corporation x x x^[48][34]

Considering that the construction of a statute given by administrative agencies deserves respect,^[49][35] the uniform administrative constructions of the relevant aforequoted laws defining what are government-owned or -controlled corporations as applied to RPN is highly persuasive.

Lastly, the conclusion that Carandang was a public official by virtue of his having been appointed as general manager and chief operating officer of RPN by President Estrada deserves no consideration. President Estrada’s intervention was merely to recommend Carandang’s designation as general manager and chief operating officer of RPN to the PCGG, which then cast the vote in his favor vis-à-vis said positions.^[50][36] Under the circumstances, it was RPN’s Board of Directors that appointed Carandang to his positions pursuant to RPN’s By-Laws.^[51][37]

In fine, Carandang was correct in insisting that being a private individual he was not subject to the administrative authority of the Ombudsman and to the criminal jurisdiction of the Sandiganbayan.^[52][38]

WHEREFORE, we grant the petitions in G.R. No. 148076 and G.R. No. 153161.

We reverse and set aside the decision promulgated on February 12, 2001 by the Court of Appeals in C.A.-G.R. SP No. 58204, and dismiss the administrative charge for grave misconduct against the petitioner.

We annul and set aside the resolutions dated October 17, 2001 and March 14, 2002, as well as the order dated March 15, 2002, all issued by the Sandiganbayan (Fifth Division) in Criminal Case No. 25802, and dismiss Criminal Case No. 25802 as against the petitioner.

SO  ORDERED.

                                                                    LUCAS P. BERSAMIN

                                                                          Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES

Associate Justice

 Chairperson

      ARTURO D. BRION                         MARTIN S. VILLARAMA, JR.      

          Associate Justice                                         Associate Justice

 MARIA LOURDES P.A. SERENO

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.

                                                    CONCHITA CARPIO MORALES

                                                                     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 2011-0032: LETICIA TAN, MYRNA MEDINA, MARILOU SPOONER, ROSALINDA TAN, AND MARY JANE TAN, MARY LYN TAN, CELEDONIO CHAIRPERSON,TAN, JR., MARY  JOY TAN,   AND MARK ALLAN  TAN, REPRESENTED HEREIN BY THEIR MOTHER, LETICIA TAN, VS. OMC CARRIERS, INC. AND BONIFACIO ARAMBALA,  (G.R. NO. 190521, 12 JANUARY 2011, BRION, J.) SUBJECTS: ACTUAL DAMAGES, HOW PROVEN; TEMPERATE DAMAGES; EXEMPLARY DAMAGES; ATTORNEY’S FEES IN WRECKLESS IMPRUDENCE CASE. (BRIEF TITLE: TAN ET AL VS. OMC CARRIERS ET AL)

x——————————————————————x

R E S O L U T I O N

BRION, J.:

We resolve the motion for reconsideration^[1][1] – filed by Leticia Tan, Myrna Medina, Marilou Spooner, Rosalinda Tan, Mary Jane Tan, Mary Lyn Tan, Celedonio Tan, Jr., Mary Joy Tan, and Mark Allan Tan (petitioners), all heirs of the late Celedonio Tan – asking us to reverse and set aside our Resolution of February 17, 2010.^[2][2]  We denied in this Resolution their petition for review on certiorari for failing to show any reversible error in the assailed Court of Appeals (CA) decision of June 22, 2009^[3][3] sufficient to warrant the exercise of our discretionary appellate jurisdiction.

The CA decision, in turn, affirmed with modification the decision of the Regional Trial Court (RTC) of Muntinlupa City in Civil Case No. 96-186, finding the respondents – OMC Carriers, Inc. (OMC) and Bonifacio Arambala – guilty of gross negligence and awarding damages to the petitioners.

THE FACTS

On September 27, 1996, the petitioners filed a complaint for damages with the RTC against OMC and Bonifacio Arambala.^[4][4]  The complaint states that on November 24, 1995, at around 6:15 a.m., Arambala was driving a truck^[5][5] with a trailer^[6][6] owned by OMC, along Meralco Road, Sucat, Muntinlupa City.  When Arambala noticed that the truck had suddenly lost its brakes, he told his companion to jump out.  Soon thereafter, he also jumped out and abandoned the truck.  Driverless, the truck rammed into the house and tailoring shop owned by petitioner Leticia Tan and her husband Celedonio Tan, instantly killing Celedonio who was standing at the doorway of the house at the time.^[7][7] 

          The petitioners alleged that the collision occurred due to OMC’s gross negligence in not properly maintaining the truck, and to Arambala’s recklessness when he abandoned the moving truck. Thus, they claimed that the respondents should be held jointly and severally liable for the actual damages that they suffered, which include the damage to their properties, the funeral expenses they incurred for Celedonio Tan’s burial, as well as the loss of his earning capacity. The petitioners also asked for moral and exemplary damages, and attorney’s fees.^[8][8]  

          The respondents denied any liability for the collision, essentially claiming that the damage to the petitioners was caused by a fortuitous event, since the truck skidded due to the slippery condition of the road caused by spilled motor oil.^[9][9]

THE RTC DECISION

          After trial, the RTC found OMC and Arambala jointly and severally liable to the petitioners for damages.^[10][10]  Relying on the doctrine of res ipsa loquitur, the RTC held that it was unusual for a truck to suddenly lose its brakes; the fact that the truck rammed into the petitioners’ house raised the presumption of negligence on the part of the respondents. These, the respondents failed to refute.^[11][11]

The RTC did not agree with the respondents’ claim of a fortuitous event, pointing out that even with oil on the road, Arambala did not slow down or take any precautionary measure to prevent the truck from skidding off the road. The alleged oil on the road did not also explain why the truck lost its brakes. Had OMC done a more rigid inspection of the truck before its use, the defective brake could have been discovered. The RTC, thus, held OMC jointly and severally liable with Arambala for the damage caused to the petitioners, based on the principle of vicarious liability embodied in Article 2180^[12][12] of the Civil Code.^[13][13]

The dispositive portion of the decision stated:

            WHEREFORE, in view of the foregoing, judgment is hereby rendered in favor of the plaintiffs and against the defendants ordering:

1.      The defendants to pay the plaintiffs jointly and severally the amount of P50,000.00 for the death of Celedonio Tan;

2.      The defendants to pay the plaintiffs jointly and severally the amount of P500,000.00 for the loss of earning capacity of Celedonio Tan, plus interest thereon from the date of death of Celedonio Tan;

3.      The defendants to pay the plaintiff Leticia Tan jointly and severally the amount of P355,895.00 as actual damages;

4.      The defendants to pay the plaintiffs jointly and severally the amount of P500,000.00 as moral damages;

5.      The defendants to pay the plaintiffs jointly and severally the amount of P500,000.00 as exemplary damages; and

6.      The defendants to pay the plaintiffs jointly and solidarily the amount of P500,000.00 as attorney’s fees.

Costs against the defendants.

SO ORDERED.^[14][14]

THE COURT OF APPEALS DECISION

          On appeal, the CA affirmed the RTC’s findings on the issues of the respondents’ negligence and liability for damages. However, the CA modified the damages awarded to the petitioners by reducing the actual damages award from P355,895.00 to P72,295.00. The CA observed that only the latter amount was duly supported by official receipts.^[15][15]

The CA also deleted the RTC’s award for loss of earning capacity. The CA explained that the petitioners failed to substantiate Celedonio Tan’s claimed earning capacity with reasonable certainty; no documentary evidence was ever presented on this point. Instead, the RTC merely relied on Leticia Tan’s testimony regarding Celedonio Tan’s income. The CA characterized this testimony as self-serving.^[16][16]  

The CA further reduced the exemplary damages from P500,000.00 to P200,000.00, and deleted the award of attorney’s fees because the RTC merely included the award in the dispositive portion of the decision without discussing its legal basis.^[17][17]

THE PETITION

          In the petition for review on certiorari before us,^[18][18] the petitioners assert that the CA erred when it modified the RTC’s awarded damages.  The petitioners submit the reasons outlined below.

          First, the CA erred when it reduced the RTC’s award of actual damages from P355,895.00 to P72,295.00. The petitioners claim that they sought compensation for the damage done to petitioner Leticia Tan’s house, tailoring shop, sewing machines, as well as other household appliances. Since the damages primarily refer to the value of their destroyed property, and not the cost of repairing or replacing them, the value cannot be evidenced by receipts. Accordingly, the RTC correctly relied on petitioner Leticia Tan’s testimony and the documentary evidence presented, consisting of pictures of the damaged property, to prove their right to recover actual damages for the destroyed property.

Second, the petitioners are entitled to actual damages for the loss of Celedonio Tan’s earning capacity.  While they admit that they did not submit any documentary evidence to substantiate this claim, the petitioners point out that Celedonio Tan was undisputably a self-employed tailor who owned a small tailor shop; in his line of work, no documentary evidence is available.

Third, the petitioners maintain that they are entitled to exemplary damages in the amount of P500,000.00 because the RTC and the CA  consistently found that the collision was caused by the respondents’ gross negligence. Moreover, the respondents acted with bad faith when they fabricated the “oil slick on the road” story to avoid paying damages to the petitioners.  As observed by the CA, the Traffic Accident Investigation Report did not mention any motor oil on the road at the time of the accident. SPO4 Armando Alambro, the Investigation Officer, likewise testified that there was no oil on the road at the time of the accident. For the public good and to serve as an example, the respondents should be made to pay P500,000.00 as exemplary damages.

          Lastly, the petitioners are entitled to attorney’s fees based on  Article 2208 of the Civil Code which provides, among others, that attorney’s fees can be recovered when exemplary damages are awarded, and when the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim.

          We initially denied the petition in our Resolution of February 17, 2010, for the petitioners’ failure to show any reversible error in the CA decision sufficient to warrant the exercise of our discretionary appellate jurisdiction.  In our Resolution of August 11, 2010, we reinstated the petition on the basis of the petitioners’ motion for reconsideration.

OUR RULING

          Finding merit in the petitioners’ arguments, we partly grant the petition.

Procedural Issue

As both the RTC and the CA found that the respondents’ gross negligence led to the death of Celedonio Tan, as well as to the destruction of the petitioners’ home and tailoring shop, we see no reason to disturb this factual finding.  We, thus, concentrate on the sole issue of what damages the petitioners are entitled to.

We are generally precluded from resolving a Rule 45 petition that solely raises the issue of damages, an essentially factual question, because Section 1, Rule 45 of the Rules of Court, expressly states that –

Section 1. Filing of petition with Supreme Court. – A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth.

In light, however of the RTC’s and the CA’s conflicting findings on the kind and amount of damages suffered which must be compensated, we are compelled to consider the case as one of the recognized exceptions.^[19][19]  We look into the parties’ presented evidence to resolve this appeal.

Temperate damages in lieu

of actual damages

We begin by discussing the petitioners’ claim for actual damages arising from the damage inflicted on petitioner Leticia Tan’s house and tailoring shop, taking into account the sewing machines and various household appliances affected. Our basic law tells us that to recover damages there must be pleading and proof of actual damages suffered.^[20][20] As we explained in Viron Transportation Co., Inc. v. Delos Santos:^[21][21]

Actual damages, to be recoverable, must not only be capable of proof, but must actually be proved with a reasonable degree of certainty. Courts cannot simply rely on speculation, conjecture or guesswork in determining the fact and amount of damages. To justify an award of actual damages, there must be competent proof of the actual amount of loss, credence can be given only to claims which are duly supported by receipts.^[22][22]

The petitioners do not deny that they did not submit any receipt to support their claim for actual damages to prove the monetary value of the damage caused to the house and tailoring shop when the truck rammed into them.  Thus, no actual damages for the destruction to petitioner Leticia Tan’s house and tailoring shop can be awarded.

Nonetheless, absent competent proof on the actual damages suffered, a party still has the option of claiming temperate damages, which may be allowed in cases where, from the nature of the case, definite proof of pecuniary loss cannot be adduced although the court is convinced that the aggrieved party suffered some pecuniary loss.^[23][23] As defined in Article 2224 of the Civil Code:

Article 2224. Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount can not, from the nature of the case, be proved with certainty.

In Canada v. All Commodities Marketing Corporation,^[24][24] we disallowed the award of actual damages arising from breach of contract, where the respondent merely alleged that it was entitled to actual damages and failed to adduce proof to support its plea. In its place, we awarded temperate damages, in recognition of the pecuniary loss suffered.

The photographs the petitioners presented as evidence show the extent of the damage done to the house, the tailoring shop and the petitioners’ appliances and equipment.^[25][25]  Irrefutably, this damage was directly attributable to Arambala’s gross negligence in handling OMC’s truck. Unfortunately, these photographs are not enough to establish the amount of the loss with certainty.  From the attendant circumstances and given the property destroyed,^[26][26] we find the amount of P200,000.00 as a fair and sufficient award by way of temperate damages. 

Temperate damages in lieu of

loss of earning capacity

Similarly, the CA was correct in disallowing the award of actual damages for loss of earning capacity. Damages for loss of earning capacity are awarded pursuant to Article 2206 of the Civil Code, which states that:

Article 2206. The amount of damages for death caused by a crime or quasi-delict shall be at least three thousand pesos, even though there may have been mitigating circumstances. In addition:

(1) The defendant shall be liable for the loss of the earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every case be assessed and awarded by the court, unless the deceased on account of permanent physical disability not caused by the defendant, had no earning capacity at the time of his death[.]

As a rule, documentary evidence should be presented to substantiate the claim for loss of earning capacity.^[27][27] By way of exception, damages for loss of earning capacity may be awarded despite the absence of documentary evidence when: (1) the deceased is self-employed and earning less than the minimum wage under current labor laws, in which case, judicial notice may be taken of the fact that in the deceased’s line of work, no documentary evidence is available; or (2) the deceased is employed as a daily wage worker earning less than the minimum wage under current labor laws.^[28][28]

According to the petitioners, prior to his death, Celedonio was a self-employed tailor who earned approximately P156,000.00 a year, or P13,000.00 a month. At the time of his death in 1995, the prevailing daily minimum wage was P145.00,^[29][29] or P3,770.00 per month, provided the wage earner had only one rest day per week.  Even if we take judicial notice of the fact that a small tailoring shop normally does not issue receipts to its customers, and would probably not have any documentary evidence of the income it earns, Celedonio’s alleged monthly income of P13,000.00 greatly exceeded the prevailing monthly minimum wage; thus, the exception set forth above does not apply.

In the past, we awarded temperate damages in lieu of actual damages for loss of earning capacity where earning capacity is plainly established but no evidence was presented to support the allegation of the injured party’s actual income.

In Pleno v. Court of Appeals,^[30][30] we sustained the award of temperate damages in the amount of P200,000.00 instead of actual damages for loss of earning capacity because the plaintiff’s income was not sufficiently proven.

We did the same in People v. Singh,^[31][31] and People v. Almedilla,^[32][32] granting temperate damages in place of actual damages for the failure of the prosecution to present sufficient evidence of the deceased’s income.

Similarly, in Victory Liner, Inc. v. Gammad,^[33][33] we deleted the award of damages for loss of earning capacity for lack of evidentiary basis of the actual extent of the loss. Nevertheless, because the income-earning capacity lost was clearly established, we awarded the heirs P500,000.00 as temperate damages.

In the present case, the income-earning capacity of the deceased was never disputed.  Petitioners Mary Jane Tan, Mary Lyn Tan, Celedonio Tan, Jr., Mary Joy Tan and Mark Allan Tan were all minors at the time the petition was filed on February 4, 2010,^[34][34] and they all relied mainly on the income earned by their father from his tailoring activities for their sustenance and support.  Under these facts and taking into account the unrebutted annual earnings of the deceased, we hold that the petitioners are entitled to temperate damages in the amount of P300,000.00 [or roughly, the gross income for two (2) years] to compensate for damages for loss of the earning capacity of the deceased.

Reduction of exemplary damages proper

Exemplary or corrective damages are imposed by way of example or correction for the public good, in addition to moral, temperate, liquidated or compensatory damages.^[35][35] In quasi-delicts, exemplary damages may be granted if the defendant acted with gross negligence.^[36][36]

Celedonio Tan’s death and the destruction of the petitioners’ home and tailoring shop were unquestionably caused by the respondents’ gross negligence. The law allows the grant of exemplary damages in cases such as this to serve as a warning to the pubic and as a deterrent against the repetition of this kind of deleterious actions.^[37][37]  The grant, however, should be tempered, as it is not intended to enrich one party or to impoverish another. From this perspective, we find the CA’s reduction of the exemplary damages awarded to the petitioners from P500,000.00 to P200,000.00 to be proper.

Attorney’s fees in order

In view of the award of exemplary damages, we find it also proper to award the petitioners attorney’s fees, in consonance with Article 2208(1) of the Civil Code.^[38][38]  We find the award of attorney’s fees, equivalent to 10% of the total amount adjudged the petitioners, to be just and reasonable under the circumstances.

Interests due

          Finally, we impose legal interest on the amounts awarded, in keeping with our ruling in Eastern Shipping Lines, Inc. v. Court of Appeals,^[39][39] which held that:

I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII on “Damages” of the Civil Code govern in determining the measure of recoverable damages.

II. With regard particularly to an award of interest in the concept of actual and compensatory damages, the rate of interest, as well as the accrual thereof, is imposed, as follows:

1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance of money, the interest due should be that which may have been stipulated in writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil Code.

2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest, however, shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty. Accordingly, where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at the time the demand is made, the interest shall begin to run only from the date the judgment of the court is made (at which time the quantification of damages may be deemed to have been reasonably ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount finally adjudged.

3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

Accordingly, legal interest at the rate of 6% per annum on the amounts awarded starts to run from May 14, 2003, when the trial court rendered judgment. From the time this judgment becomes final and executory, the interest rate shall be 12% per annum on the judgment amount and the interest earned up to that date, until the judgment is wholly satisfied.

WHEREFORE, premises considered, we PARTIALLY GRANT the petition. The June 22, 2009 decision of the Court of Appeals in CA-G.R. CV. No. 84733, which modified the decision of the Regional Trial Court of Muntinlupa City, Branch 256, in Civil Case No. 96-186, is AFFIRMED with MODIFICATION. As modified, respondents OMC Carriers, Inc. and Bonifacio Arambala are ordered to jointly and severally pay the petitioners the following:

(1) P50,000.00 as indemnity for the death of Celedonio Tan;

(2) P72,295.00 as actual damages for funeral expenses;

(3)  P200,000.00 as temperate damages for the damage done to petitioner Leticia’s house, tailoring shop, household appliances and shop equipment;

(4) P300,000.00 as damages for the loss of Celedonio Tan’s earning capacity;

(5) P500,000.00 as moral damages;

(6) P200,000.00 as exemplary damages; and

(7) 10% of the total amount as attorney’s fees; and costs of suit.

In addition, the total amount adjudged shall earn interest at the rate of 6% per annum from May 14, 2003, and at the rate of 12% per annum, from the finality of this Resolution on the balance and interest due, until fully paid.

SO ORDERED.

                                                                   ARTURO D. BRION

                                                                       Associate Justice

WE CONCUR:

CONCHITA CARPIO MORALES

Associate Justice

    LUCAS P. BERSAMIN                         MARTIN S. VILLARAMA, JR.

        Associate Justice                                           Associate Justice

MARIA LOURDES P.A. SERENO

Associate Justice

ATTESTATION

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

                                                          CONCHITA CARPIO MORALES

                                                                             Associate Justice

                                                                                 Chairperson

 CERTIFICATION

          Pursuant to Section 13, Article VIII of the Constitution, and the Division Chairperson’s Attestation, it is hereby certified that the conclusions in the above Resolution 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