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CASE NO. 2011-0021: PEOPLE OF THE PHILIPPINES VS. JAY LORENA Y LABAG (G.R. NO. 184954, 10 JANUARY 2011, VILLARAMA, JR., J.) SUBJECTS: PROSECUTION OF ILLEGAL SALE OF PROHIBITED DRUGS; CHAIN OF CUSTODY OF PROHIBITED DRUGS. (BRIEF TITLE: PEOPLE VS. LORENA)


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DOCTRINES:


WHAT ELEMENTS MUST BE PROVEN IN A PROSECUTION FOR ILLEGAL SALE OF PROHIBITED DRUG.


The following must be proven under Section 5 of R.A. No. 9165:


(1)   the identity of the buyer and the seller, the object, and the consideration;


(2)   the delivery of the thing sold and the payment therefor.


All these require evidence that the sale transaction transpired, coupled with the presentation in court of the corpus delicti, i.e., the body or substance of the crime that establishes that a crime has actually been committed, as shown by presenting the object of the illegal transaction.[1][13]


WHAT IS THE PROCEDURE FOR SEIZURE AND CUSTODY OF ILLEGAL DRUG?


Section 21, paragraph 1, Article II of R.A. No. 9165 provides such procedure:


(1)   The apprehending team having initial custody and control of the drugs shall, immediately after seizure and confiscation, physically inventory and photograph the same in the presence of the accused or the person/s from whom such items were confiscated and/or seized, or his/her representative or counsel, a representative from the media and the Department of Justice (DOJ), and any elected public official who shall be required to sign the copies of the inventory and be given a copy thereof[.] (Emphasis supplied.)


 


WHAT IS RATIONALE FOR STRICT OBSERVANCE OF THIS PROCEDURE:


The illegal drug’s unique characteristic rendering it indistinct, not readily identifiable and easily open to tampering, alteration or substitution either by accident or otherwise.


IS NON-COMPLIANCE BY THE AUTHORITIES OF AFORESAID SECTION 21 FATAL.


People v. Pringas[2][16] teaches that non-compliance by the apprehending/buy-bust team with Section 21 is not necessarily fatal.  Its non-compliance will not automatically render an accused’s arrest illegal or the items seized/confiscated from him inadmissible.


What is of utmost importance is the preservation of the integrity and the evidentiary value of the seized items, as the same would be utilized in the determination of the guilt or innocence of the accused.[3][17] 


As provided in Section 21, Article II of the Implementing Rules of R.A. No. 9165:


SECTION 21. Custody and Disposition of Confiscated, Seized and/or Surrendered Dangerous Drugs, Plant Sources of Dangerous Drugs, Controlled Precursors and Essential Chemicals, Instruments/Paraphernalia and/or Laboratory Equipment. – The PDEA shall take charge and have custody of all dangerous drugs, plant sources of dangerous drugs, controlled precursors and essential chemicals, as well as instruments/paraphernalia and/or laboratory equipment so confiscated, seized and/or surrendered, for proper disposition in the following manner:


 


          (a) The apprehending officer/team having initial custody and control of the drugs shall, immediately after seizure and confiscation, physically inventory and photograph the same in the presence of the accused or the person/s from whom such items were confiscated and/or seized, or his/her representative or counsel, a representative from the media and the Department of Justice (DOJ), and any elected public official who shall be required to sign the copies of the inventory and be given a copy thereof; Provided, that the physical inventory and photograph shall be conducted at the place where the search warrant is served; or at the nearest police station or at the nearest office of the apprehending officer/team, whichever is practicable, in case of warrantless seizures; Provided, further, that non-compliance with these requirements under justifiable grounds, as long as the integrity and evidentiary value of the seized items are properly preserved by the apprehending officer/team, shall not render void and invalid such seizures of and custody over said items[.] 


          x x x x  (Emphasis and underscoring supplied.) 


WHY IS THE RATIONALE FOR THE ABOVE?


Strict compliance with the requirements of Section 21 may not always be possible under field conditions; the police operates under varied conditions, and cannot at all times attend to all the niceties of the procedures in the handling of confiscated evidence.[4][18]


TO BE COVERED BY THE SAVING CLAUSE, WHAT MUST BE PROSECUTION DO?


Even so, for the saving clause to apply, it is important that the prosecution should explain the reasons behind the procedural lapses and that the integrity and evidentiary value of the evidence seized had been preserved.[5][19]


It must be shown that the illegal drug presented in court is the very same specimen seized from the accused. This function is performed by the “chain of custody” requirement to erase all doubts as to the identity of the seized drugs by establishing its movement from the accused, to the police, to the forensic chemist and finally to the court.[6][20]  Section 1(b) of Dangerous Drugs Board Regulation No. 1, Series of 2002 defines “chain of custody” as follows:


“Chain of Custody” means the duly recorded authorized movements and custody of seized drugs or controlled chemicals or plant sources of dangerous           drugs or laboratory equipment of each stage, from the time of seizure/confiscation to receipt in the forensic laboratory to safekeeping to presentation in court for destruction. Such record of movements and custody of seized item shall include the identity and signature  of the person who held temporary custody of the seized item, the date and time when such transfer of custody were made in the course of safekeeping and use in court as evidence, and the final disposition[.][7][21]


Every link must be accounted for.


 


 


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DECISION


VILLARAMA, JR., J.:


The instant appeal assails the Decision[8][1] dated November 22, 2007 of the Court of Appeals (CA) in CA-G.R. CR HC. No. 01620 which affirmed with modification the August 30, 2005 judgment[9][2] of the Regional Trial Court (RTC), Branch 25, of Naga City, finding appellant guilty beyond reasonable doubt of violating Section 5, Article II of Republic Act (R.A.) No. 9165, otherwise known as the “Comprehensive Dangerous Drugs Act of 2002.”


In an Information[10][3] dated July 10, 2003, appellant Jay Lorena y Labag was charged as follows:


          That on or about February 9, 2003, at about 7:30 o’clock (sic) in the evening, at Pier Site, Sta. Rosa, Pasacao, Camarines Sur, and within the jurisdiction of the Honorable Court, the above-named accused, did then and there, willfully, unlawfully, criminally and knowingly sell Methamphetamine Hydrocholoride, with a total weight of 0.21 gram[,] a dangerous drug, contained in a plastic sachet, to a poseur[-]buyer, without authority of law, and one (1) Five Hundred Peso bill with serial number MS [979614][11][4] was confiscated from the accused, to the damage and prejudice of the People of the Philippines.


 


            ACTS CONTRARY TO LAW.


During pre-trial, the prosecution and defense stipulated on the following facts:


1.      Identity of the accused;


2.      That the arresting officers were organic members of the PNP Pasacao, Camarines Sur;


3.      That the accused was within the premises of [P]ier [S]ite, Sta. Rosa, Pasacao, Camarines Sur on February 9, 2003 at around 7:30 o’clock (sic) in the evening; and


4.      That the accused knew a certain Iris Mae Cleofe.[12][5]


When arraigned, appellant pleaded not guilty.[13][6]  In the ensuing trial, the prosecution presented seven witnesses: P/Insp. Mauro E. Solero, SPO1 Constantino Espiritu, SPO2 Ernesto Ayen, P/Insp. Josephine Macura Clemen, P/Insp. Ma. Cristina Nobleza, Police Chief Insp. Jerry Bearis, and P/Insp. Nelson del Socorro. Taken altogether, the evidence for the prosecution tried to establish the following facts:


On February 9, 2003, around 8:00 in the morning, Iris Mae Cleofe (Iris), a civilian informant, came to the Pasacao Police Station to report appellant’s alleged drug trafficking activities. Acting on said information, Pasacao Police Station Officer-in-Charge Police Chief Insp. Jerry Bearis (Bearis) directed P/Insp. Mauro E. Solero (Solero), SPO3 Tomas Llamado, SPO3 Oscar Angel, SPO2 Ernesto Ayen (Ayen) and SPO1 Constantino Espiritu (Espiritu), all members of Task Force Ubash, a unit charged with monitoring drug trafficking activities in the area, to go with Iris and conduct a surveillance upon appellant. Around 5:00 in the afternoon, after their surveillance yielded a positive result, Task Force Ubash coordinated by phone with the Philippine Drug Enforcement Agency (PDEA) Office in Naga City for the conduct of the buy-bust operation which will take place that same night at the house of one Edgar Saar (Saar) located in Pier Site, Pasacao.  Thereafter, Solero, Commander of Task Force Ubash, gave a briefing to the members of the buy-bust team. They were likewise instructed to synchronize their watches because at exactly 7:30 in the evening, they will enter the place immediately after Iris, the designated poseur-buyer, utters the words “Uya na ang bayad ko” (Here is my payment) as a signal that the transaction has been perfected.


Around 7:00 in the evening, when it was already dark, the buy-bust team arrived in the area and positioned themselves infront of the house of Saar. They were approximately five meters away hiding in the dark behind the plants but had a good view of the well-lit porch of Saar’s house. Moments later, Iris arrived and entered Saar’s house. She immediately proceeded with the transaction and handed over the marked P500-bill to appellant who was then sitting down. While handing over the money, Iris uttered the words “O, uya na an bayad ko kaiyan ha, baad kun wara-waraon mo iyan, uya na an bayad ko ha” (This is my payment, you might misplace it), her voice deliberately made louder for the buy-bust team to hear. Simultaneously, appellant handed over a plastic sachet containing white crystalline substance to Iris. At that point, Solero, Espiritu and Ayen rushed to the porch, arrested appellant and handcuffed him. Ayen recovered from appellant’s pocket the P500-bill while Iris turned over the sachet of shabu to Espiritu. Then they brought appellant to the police station where he was detained.  The sachet containing white crystalline substance was thereafter personally submitted by Bearis to the Camarines Sur Provincial Crime Laboratory, where it was tested by P/Insp. Ma. Cristina D. Nobleza.


The initial field test showed that the white crystalline substance contained in the sachet was Methamphetamine Hydrochloride or Shabu. Thus, it was submitted to the PNP Regional Crime Laboratory Office 5 for confirmatory testing by P/Insp. Josephine Macura Clemen, a forensic chemist.  There, the specimen likewise tested positive for Methamphetamine Hydrochloride.


The defense, for its part, presented an entirely different version.  Testifying as sole witness for the defense, appellant tried to establish the following facts:


During the first week of February 2003, appellant, a resident of San Felipe, Naga City, went to Pasacao to find a job. While in Pasacao, he stayed in the house of his friend Saar, in Pier Site.


On February 9, 2003, around 7:00 in the evening, while appellant was lying on a hammock near Saar’s residence, he saw Iris enter the yard and go into Saar’s house. A little later, she went out of the house so appellant asked her who she was looking for. Iris replied that she was looking for one Bongbong Ditsuso. Appellant told Iris to just wait for Bongbong inside the house. In the meantime, he went to the kitchen to cook rice. A little while later, he returned to the living room to talk to Iris. While they were talking, several men barged in and Iris suddenly gave him something which he later found out to be crumpled money when it fell on the floor. The men then handcuffed him after punching him and hitting him with a Caliber .45 in the nape. Afterwards, they boarded him on an owner-type jeep and brought him to the police station where he was detained.


          On August 30, 2005, the RTC promulgated its judgment finding appellant guilty beyond reasonable doubt of violating Section 5, Article II of R.A. No. 9165 and sentencing him to life imprisonment.  The fallo reads:


            WHEREFORE, in view of the foregoing disquisition, judgment is hereby rendered finding accused JAY LORENA y Labag, guilty beyond reasonable doubt for Violation of Sec. 5, … [Article] II of R.A. 9165. This court hereby sentences him to suffer the penalty of life imprisonment.


Since the accused has been undergoing preventive detention during the pendency of the trial of this case, let the same be credited in the service of his sentence.


SO ORDERED.[14][7]


The trial court found the prosecution evidence credible and sufficient to prove appellant’s culpability beyond reasonable doubt. It held that even if the prosecution failed to present the poseur-buyer by reason of her death, her failure to testify was not fatal to the prosecution’s evidence since prosecution witnesses Solero, Espiritu and Ayen were able to observe the transaction between Iris and appellant, and the shabu and buy-bust money recovered from him were presented as evidence to prove the sale. The trial court also ruled that the police officers are presumed to have performed their duties in a regular manner in the absence of evidence that they were motivated by spite, ill will, or other evil motive. The trial court did not give credence to appellant’s defense of denial, frame-up and maltreatment. It held that his claim cannot prevail over the positive identification made by credible prosecution witnesses and in light of the presumption of regularity in the performance of duties of law enforcers.


Appellant appealed to the CA.  In his brief, appellant alleged that:


THE TRIAL COURT GRAVELY ERRED IN FINDING THE ACCUSED-APPELLANT GUILTY [OF] VIOLATION OF SECTION 5, ARTICLE II OF R.A. 9165 [DESPITE] THE FAILURE OF THE PROSECUTION TO PROVE THE OFFENSE CHARGED BEYOND REASONABLE DOUBT.[15][8]


On November 22, 2007, the CA rendered a decision affirming with modification the RTC decision and disposing as follows:


            WHEREFORE, judgment is hereby rendered AFFIRMING WITH MODIFICATION the Judgment of the Regional Trial Court of Naga City, Branch 25. Appellant Jay Lorena y Labag is found GUILTY beyond reasonable doubt of violating Section 5, Article II of R.A. No. 9165 and sentencing him to suffer the penalty of life imprisonment and to pay a fine of P500,000.00.


 


Since the accused has been undergoing preventive detention during the pendency of the trial of this case, let the same be credited in the service of his sentence.


 


            SO ORDERED.[16][9]


          Aggrieved, appellant filed the instant appeal.


On December 15, 2008, the Court directed the parties to file their respective supplemental briefs if they so desire.[17][10]  The Office of the Solicitor General manifested[18][11] that it is dispensing with the filing of a supplemental brief as it finds no new issues to raise before this Court. Appellant, on the other hand, in addition to the lone assignment of errors he raised before the CA, raised the following errors in his Supplemental Brief:


I


THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT THE PROSECUTION FAILED TO PROVE THE BUY-BUST TEAM’S COMPLIANCE WITH THE PROVISIONS OF SECTION 21, R.A. NO. 9165.


 


II


THE COURT OF APPEALS GRAVELY ERRED IN FINDING THE ACCUSED APPELLANT GUILTY OF THE CRIME CHARGED DESPITE THE PROSECUTION’S FAILURE TO PROVE HIS GUILT BEYOND REASONABLE DOUBT.[19][12]


Appellant questions the validity of his warrantless arrest, contending that none of the circumstances provided under Section 5, Rule 113 of the Revised Rules of Criminal Procedure, as amended, which justify a warrantless arrest is present.  He likewise points out that the non-presentation of the poseur-buyer coupled with the inconsistencies in the testimonies of the prosecution witnesses and their testimony to the effect that they did not see the sale itself, taint the credibility of the buy-bust operation. He adds that the lower court misapplied the presumption of regularity in the performance of official function, especially since the arresting officers failed to comply with the guidelines prescribed by the law regarding the custody and control of the seized drugs as mandated by Section 21, R.A. No. 9165.


          We reverse appellant’s conviction.


In a prosecution for illegal sale of a prohibited drug under Section 5 of R.A. No. 9165, the prosecution must prove the following elements: (1) the identity of the buyer and the seller, the object, and the consideration; and (2) the delivery of the thing sold and the payment therefor. All these require evidence that the sale transaction transpired, coupled with the presentation in court of the corpus delicti, i.e., the body or substance of the crime that establishes that a crime has actually been committed, as shown by presenting the object of the illegal transaction.[20][13]


Further, considering the illegal drug’s unique characteristic rendering it indistinct, not readily identifiable and easily open to tampering, alteration or substitution either by accident or otherwise, there is a need to comply strictly with procedure in its seizure and custody.[21][14] Section 21, paragraph 1, Article II of R.A. No. 9165 provides such procedure:


            (1) The apprehending team having initial custody and control of the drugs shall, immediately after seizure and confiscation, physically inventory and photograph the same in the presence of the accused or the person/s from whom such items were confiscated and/or seized, or his/her representative or counsel, a representative from the media and the Department of Justice (DOJ), and any elected public official who shall be required to sign the copies of the inventory and be given a copy thereof[.] (Emphasis supplied.)


Evident from the records of this case, however, is the fact that the members of the buy-bust team did not comply with the procedure laid down in Section 21 of R.A. No. 9165. Nothing in the testimony of Solero, Commander of Task Force Ubash, would show that the procedure was complied with. He even admitted that he has not seen the inventory of the confiscated drugs allegedly prepared by the police officers and that he only read a little of R.A. No. 9165:


Q         Now, Mr. Witness, did you prepare an inventory insofar as the apprehension of the shabu allegedly taken from the suspect?


A         That is the work of the Investigator, sir, we were just after the buy-bust operation.


 


Q         Was there any inventory prepared insofar as the operation is concerned?


A         Yes, sir.


 


Q         Where is that inventory?


A         At the Investigation Section, sir.


 


Q         Are you sure that there was indeed an inventory prepared?


A         Yes, sir.


 


Q         So, you are telling this court that the shabu that was allegedly taken from Jay Lorena was endorsed to the Investigation Section?


A         To the desk officer on duty first for the recording.


 


Q         Do you know what is investigation, Mr. Witness?


A         The details, the money involved including the suspect.


 


Q         This case was filed in the year 2003 and I suppose you are already aware of Rep. Act No. 9165 or the Comprehensive Dangerous Drugs Act?


A         Yes, sir.


 


Q         And the persons who prepare the inventory are the persons who apprehended, are you aware of that?


A         Yes sir, but the desk officer is also a member of the police station.


 


Q         So, you turned over the shabu to the desk officer?


A         Yes sir, including the suspect.


 


Q         And to your own knowledge, there was an inventory prepared by the desk officer?


A         The Investigation Section, sir.


 


Q         And in that inventory, Insp. Del Socorro signed?


A         No, sir.


 


Q         Or the local elected official signed that inventory?


A         I did not see the inventory, sir.


 


Q         So, you are talking about a particular document which you have not seen?


A         But I know it was inventoried.


Q         Now, during the supposed buy-bust operation, upon apprehending Jay Lorena and the shabu that your group allegedly taken from him, was there any photograph taken?


A         None, sir.


 


Q         Was there any police officer from the Pasacao Police Station or even the Chief of Police himself instructed your group about the requirements prescribed under Rep. Act No. 9165?


A         None, sir.


 


Q         But personally you are aware of Rep. Act No. 9165 otherwise known as the Comprehensive Dangerous Drugs Act?


A         Yes, sir.


 


Q         Have you read that?


A         A little.[22][15]


Nonetheless, People v. Pringas[23][16] teaches that non-compliance by the apprehending/buy-bust team with Section 21 is not necessarily fatal.  Its non-compliance will not automatically render an accused’s arrest illegal or the items seized/confiscated from him inadmissible. What is of utmost importance is the preservation of the integrity and the evidentiary value of the seized items, as the same would be utilized in the determination of the guilt or innocence of the accused.[24][17]  We recognize that the strict compliance with the requirements of Section 21 may not always be possible under field conditions; the police operates under varied conditions, and cannot at all times attend to all the niceties of the procedures in the handling of confiscated evidence.[25][18] As provided in Section 21, Article II of the Implementing Rules of R.A. No. 9165:


SECTION 21. Custody and Disposition of Confiscated, Seized and/or Surrendered Dangerous Drugs, Plant Sources of Dangerous Drugs, Controlled Precursors and Essential Chemicals, Instruments/Paraphernalia and/or Laboratory Equipment. – The PDEA shall take charge and have custody of all dangerous drugs, plant sources of dangerous drugs, controlled precursors and essential chemicals, as well as instruments/paraphernalia and/or laboratory equipment so confiscated, seized and/or surrendered, for proper disposition in the following manner:


 


            (a) The apprehending officer/team having initial custody and control of the drugs shall, immediately after seizure and confiscation, physically inventory and photograph the same in the presence of the accused or the person/s from whom such items were confiscated and/or seized, or his/her representative or counsel, a representative from the media and the Department of Justice (DOJ), and any elected public official who shall be required to sign the copies of the inventory and be given a copy thereof; Provided, that the physical inventory and photograph shall be conducted at the place where the search warrant is served; or at the nearest police station or at the nearest office of the apprehending officer/team, whichever is practicable, in case of warrantless seizures; Provided, further, that non-compliance with these requirements under justifiable grounds, as long as the integrity and evidentiary value of the seized items are properly preserved by the apprehending officer/team, shall not render void and invalid such seizures of and custody over said items[.] 


            x x x x  (Emphasis and underscoring supplied.)


Even so, for the saving clause to apply, it is important that the prosecution should explain the reasons behind the procedural lapses and that the integrity and evidentiary value of the evidence seized had been preserved.[26][19] It must be shown that the illegal drug presented in court is the very same specimen seized from the accused. This function is performed by the “chain of custody” requirement to erase all doubts as to the identity of the seized drugs by establishing its movement from the accused, to the police, to the forensic chemist and finally to the court.[27][20]  Section 1(b) of Dangerous Drugs Board Regulation No. 1, Series of 2002 defines “chain of custody” as follows:


“Chain of Custody” means the duly recorded authorized movements and custody of seized drugs or controlled chemicals or plant sources of dangerous        drugs or laboratory equipment of each stage, from the time of seizure/confiscation to receipt in the forensic laboratory to safekeeping to presentation in court for destruction. Such record of movements and custody of seized item shall include the identity and signature  of the person who held temporary custody of the seized item, the date and time when such transfer of custody were made in the course of safekeeping and use in court as evidence, and the final disposition[.][28][21]


          In this case, there was no compliance with the inventory and photographing of the seized dangerous drug and marked money immediately after the buy-bust operation.  We have held that such non-compliance does not necessarily render void and invalid the seizure of the dangerous drugs.  There must, however, be justifiable grounds to warrant exception therefrom, and provided that the integrity and evidentiary value of the seized items are properly preserved by the apprehending officer/s.[29][22]  While a perfect chain of custody is almost always impossible to achieve, an unbroken chain becomes indispensable and essential in the prosecution of drug cases owing to its susceptibility to alteration, tampering, contamination and even substitution and exchange.  Hence, every link must be accounted for.[30][23]


          Prosecution witnesses Solero, Ayen and Espiritu were united in testifying that after the consummation of the transaction and immediately upon appellant’s apprehension, Iris turned over the plastic sachet to Espiritu.  It was likewise clear that Espiritu turned over to Solero the specimen allegedly seized from appellant at the police station.


          However, as to the subsequent handling of said specimen at the police station until it was presented in court, the prosecution failed to clearly account for each link in the chain due to the vagueness and patent inconsistencies in the testimonies of the prosecution witnesses.


Solero testified that after he got hold of the specimen, the same was turned over to the desk officer whose name he cannot remember.[31][24] During his direct examination, he promised that he will find out who the desk officer was during that particular day.[32][25]  He however failed to name the said desk officer when he came back on another hearing date for his cross examination and still referred to him or her as “the desk officer on duty.”[33][26]  And when asked what their office did to the specimen, he declared that what he knows is that it was brought to the provincial crime laboratory for testing but cannot remember who brought it to the provincial crime laboratory.[34][27]


Bearis, on the other hand, testified that it was he who brought the specimen to the provincial crime laboratory and when asked from whom he got the specimen, he stated that it was Solero who handed it over to him (Bearis).[35][28]  He identified in court that it was the same specimen he brought to the provincial crime laboratory since it had the marking “MES,” presumably corresponding to the initials of Solero, and claimed that it was marked in his presence.[36][29]  There was no evidence to show, however, if Solero indeed made said marking in the presence of Bearis since there was no mention of this when Solero testified.  We find Solero’s failure to mention the supposed marking as consistent with his claim that he turned over the specimen to the unidentified desk officer and not to Bearis. It is thus unclear whether after Solero, the next person who came into possession of the specimen was the unidentified desk officer OR Bearis, given the latter’s testimony that he directly got the same from Solero.


Also unaccounted for is the transfer of the specimen from the provincial crime laboratory to the regional crime laboratory. Nobleza, who received the specimen from Bearis and conducted the initial field test on it, testified that after the examination and preparing the result, she turned over the same to the evidence custodian, SPO3 Augusto Basagre.[37][30] Clemen, the chemist who conducted the confirmatory test at the regional crime laboratory, testified that she received the specimen from one P/Insp. Alfredo Lopez,[38][31] Deputy Provincial Officer of the Provincial Crime Laboratory, the signatory of the memorandum for request for laboratory examination.[39][32] The prosecution failed to present evidence to show how the specimen was transferred from Basagre to Lopez.


Given the foregoing lapses committed by the apprehending officers, the saving clause cannot apply to the case at bar. Not only did the prosecution fail to offer any justifiable ground why the procedure required by law was not complied with, it was also unable to establish the chain of custody of the shabu allegedly taken from appellant. The obvious gaps in the chain of custody created a reasonable doubt as to whether the specimen seized from appellant was the same specimen brought to the crime laboratories and eventually offered in court as evidence.  Without adequate proof of the corpus delicti, appellant’s conviction cannot stand.


As a result of the irregularities and lapses in the chain of custody requirement which unfortunately the trial and appellate courts overlooked, the presumption of regularity in the performance of official duties cannot be used against appellant. It needs no elucidation that the presumption of regularity in the performance of official duty must be seen in the context of an existing rule of law or statute authorizing the performance of an act or duty or prescribing a procedure in the performance thereof. The presumption, in other words, obtains only where nothing in the records is suggestive of the fact that the law enforcers involved deviated from the standard conduct of official duty as provided for in the law. Otherwise, where the official act in question is irregular on its face, an adverse presumption arises as a matter of course.[40][33]


WHEREFORE, we hereby REVERSE and SET ASIDE the November 22, 2007 Decision of the Court of Appeals in CA-G.R. CR HC. No. 01620. Appellant JAY LORENA y LABAG is ACQUITTED of the crime charged and ordered immediately RELEASED from detention, unless he is confined for any other lawful cause/s.


          The Director of the Bureau of Corrections is DIRECTED to IMPLEMENT this Decision with deliberate dispatch and to report to this Court the action taken hereon within five (5) days from receipt hereof.


          With costs de oficio.


SO ORDERED.













 


 


MARTIN S. VILLARAMA, JR.


                                                                               Associate Justice


WE CONCUR:


CONCHITA CARPIO MORALES


Associate Justice


Chairperson


ARTURO D. BRION


Associate Justice


LUCAS P. BERSAMIN


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, Third Division


 


 


          C E R T I F I C A T I O N


 


          Pursuant to Section 13, Article VIII of the 1987 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


 


 






 






[1][13] People v. Pagaduan, G.R. No. 179029, August 9, 2010, p. 7, citing People v. Garcia, G.R. No. 173480, February 25, 2009, 580 SCRA 259, 266.



[2][16] G.R. No. 175928, August 31, 2007, 531 SCRA 828.



[3][17] Id. at 842-843.



[4][18] People v. Pagaduan, supra note 13 at 10-11.



[5][19] People v. Almorfe, G.R. No. 181831, March 29, 2010, 617 SCRA 52, 60, citing People v. Sanchez, G.R. No. 175832, October 15, 2008, 569 SCRA 194, 212.



[6][20] People v. Almorfe, id. at 60-61, citing Malillin v. People, G.R. No. 172953, April 30, 2008, 553 SCRA 619.



[7][21] See People v. Denoman, G.R. No. 171732, August 14, 2000, 596 SCRA 257, 271.



[8][1]   Rollo, pp. 2-9. Penned by Associate Justice Marlene Gonzales-Sison with Associate Justices Juan Q. Enriquez, Jr. and Vicente S.E. Veloso concurring.



[9][2]   Records, pp. 236-241. Penned by Judge Jaime E. Contreras.



[10][3] Id. at 1.



[11][4]  Id. at 180.



[12][5] Id. at 43.



[13][6] Id. at 29.



[14][7] Id. at 241.



[15][8] CA rollo, p. 65.



[16][9] Rollo, p. 8.



[17][10]         Id. at 15.



[18][11]         Id. at 17-18.



[19][12]         Id. at 24.



[20][13]         People v. Pagaduan, G.R. No. 179029, August 9, 2010, p. 7, citing People v. Garcia, G.R. No. 173480, February 25, 2009, 580 SCRA 259, 266.



[21][14]         People v. Kamad, G.R. No.174198, January 19, 2010, 610 SCRA 295, 304-305.



[22][15]         TSN, January 12, 2004, pp. 17-19.



[23][16]         G.R. No. 175928, August 31, 2007, 531 SCRA 828.



[24][17]         Id. at 842-843.



[25][18]         People v. Pagaduan, supra note 13 at 10-11.



[26][19]         People v. Almorfe, G.R. No. 181831, March 29, 2010, 617 SCRA 52, 60, citing People v. Sanchez, G.R. No. 175832, October 15, 2008, 569 SCRA 194, 212.



[27][20]         People v. Almorfe, id. at 60-61, citing Malillin v. People, G.R. No. 172953, April 30, 2008, 553 SCRA 619.



[28][21]         See People v. Denoman, G.R. No. 171732, August 14, 2000, 596 SCRA 257, 271.



[29][22]         People v. Almorfe, supra note 19 at 59, citing Sec. 21(a), Art. II of the Implementing Rules and Regulations of R.A. No. 9165.



[30][23]         Id. at 61-62, citing Malillin v. People, supra note 20 at 633.



[31][24]         TSN, January 9, 2004, pp. 14-15.



[32][25]         Id. at 15.



[33][26]         TSN, January 12, 2004, p. 17.



[34][27]         TSN, January 9, 2004, p. 15.



[35][28]         TSN, June 8, 2004, pp. 14-15.



[36][29]         Id. at 13.



[37][30]         Id. at 5.



[38][31]         Lauta in the TSN.



[39][32]         TSN, May 6, 2004, p. 5. 



[40][33]         People v. Obmiranis, G.R. No. 181492, December 16, 2008, 574 SCRA 140,156.

 (DENIAL OF MOTION FOR RECONSIDERATION) ANTONIO LEJANO VS.  PEOPLE OF THE PHILIPPINES (G.R. NO. 176389); PEOPLE OF THE PHILIPPINES VS. HUBERT JEFFREY P. WEBB, ANTONIO LEJANO, MICHAEL A. GATCHALIAN, HOSPICIO FERNANDEZ, MIGUEL RODRIGUEZ, PETER ESTRADA and GERARDO BIONG (18 JANUARY 2011, ABAD, J.)

 

x ———————————————————- x

 

 

DOCTRINES:

 

AS A GENERAL RULE CAN JUDGMENT OF ACQUITTAL BE RECONSIDERED? NO, BECAUSE IT IS PROHIBITED BY THE CONSTITUTION.

          But, as a rule, a judgment of acquittal cannot be reconsidered because it places the accused under double jeopardy.  The Constitution provides in Section 21, Article III, that:

            Section 21.  No person shall be twice put in jeopardy of punishment for the same offense.  x x x

 

WHAT IS THE EFFECT IF A JUDGMENT OF ACQUITTAL BE RECONSIDERED? IT WILL PUT HIM TWICE IN JEOPARDY OF BEING PUNISHED FOR THE SAME CRIME. THIS SCHEME IF ALLOWED CAN MAKE THE GOVT AN INSTRUMENT OF OPPRESSION.

To reconsider a judgment of acquittal places the accused twice in jeopardy of being punished for the crime of which he has already been absolved.  There is reason for this provision of the Constitution.  In criminal cases, the full power of the State is ranged against the accused.  If there is no limit to attempts to prosecute the accused for the same offense after he has been acquitted, the infinite power and capacity of the State for a sustained and repeated litigation would eventually overwhelm the accused in terms of resources, stamina, and the will to fight.  

As the Court said in People of the Philippines v. Sandiganbayan:[1][2]

[A]t the heart of this policy is the concern that permitting the sovereign freely to subject the citizen to a second judgment for the same offense would arm the government with a potent instrument of oppression.  The provision therefore guarantees that the State shall not be permitted to make repeated attempts to convict an individual for an alleged offense, thereby subjecting him to embarrassment, expense, and ordeal and compelling him to live in a continuing state of anxiety and insecurity, as well as enhancing the possibility that even though innocent he may be found guilty.  Society’s awareness of the heavy personal strain which a criminal trial represents for the individual defendant is manifested in the willingness to limit the government to a single criminal proceeding to vindicate its very vital interest in the enforcement of criminal laws.[2][3] 

 

BUT IS THERE AN EXCEPTION TO THE RULE THAT  JUDGMENT OF ACQUITTAL WILL NOT BE RECONSIDERED? YES, IF THERE IS GRAVE ABUSE OF DISCRETION.

Of course, on occasions, a motion for reconsideration after an acquittal is possible.  But the grounds are exceptional and narrow as when the court that absolved the accused gravely abused its discretion, resulting in loss of jurisdiction, or when a mistrial has occurred. In any of such cases, the State may assail the decision by special civil action of certiorari under Rule 65.[3][4]

 

DID VIZCONDE PROVE GRAVE ABUSE OF DISCRETION? NO. HE DID NOT SPECIFY THE ACTS CONSTITUTING GRAVE ABUSE OF DISCRETION. HIS CLAIM IS MERE CONCLUSION DRAWN FROM PERSONAL PERCEPTION.

Here, although complainant Vizconde invoked the exceptions, he has been unable to bring his pleas for reconsideration under such exceptions.  For instance, he avers that the Court “must ensure that due process is afforded to all parties and there is no grave abuse of discretion in the treatment of witnesses and the evidence.”[4][5]  But he has not specified the violations of due process or acts constituting grave abuse of discretion that the Court supposedly committed.  His claim that “the highly questionable and suspicious evidence for the defense taints with serious doubts the validity of the decision”[5][6] is, without more, a mere conclusion drawn from personal perception. 

Complainant Vizconde cites the decision in Galman v. Sandiganbayan[6][7] as authority that the Court can set aside the acquittal of the accused in the present case.  But the government proved in Galman that the prosecution was deprived of due process since the judgment of acquittal in that case was “dictated, coerced and scripted.”[7][8]  It was a sham trial.  Here, however, Vizconde does not allege that the Court held a sham review of the decision of the CA.  He has made out no case that the Court held a phony deliberation in this case such that the seven Justices who voted to acquit the accused, the four who dissented, and the four who inhibited themselves did not really go through the process. 

 

WHAT WAS THE SUBSTANCE OF VIZCONDE’S MOTION FOR RECON? IT QUESTIONS THE COURT’S APPRECIATION OF THE EVIDENCE. IT WANTS THE COURT TO RE-EVALUATE THE EVIDENCE. IT IS A REPEATED ATTEMPT TO SECURE THE CONVICTION OF WEBB ET AL. IT IS PROHIBITED.

          Ultimately, what the complainant actually questions is the Court’s appreciation of the evidence and assessment of the prosecution witnesses’ credibility.  He ascribes grave error on the Court’s finding that Alfaro was not a credible witness and assails the value assigned by the Court to the evidence of the defense. In other words, private complainant wants the Court to review the evidence anew and render another judgment based on such a re-evaluation.  This is not constitutionally allowed as it is merely a repeated attempt to secure Webb, et al’s conviction.  The judgment acquitting Webb, et al is final and can no longer be disturbed.


[1][2]  G.R. Nos. 168188-89, June 16, 2006, 491 SCRA 185.

[2][3]  Id. at 207. 

[3][4]  Castro v. People, G.R. No. 180832, July 23, 2008, 559 SCRA 676, 683-684.

[4][5]  Supra note 1, at 7.

[5][6]  Id. at 12.

[6][7]  228 Phil. 42 (1986).

[7][8]  Id. at 89.

X———————————————————X

RESOLUTION

 

ABAD, J.:

 

On December 14, 2010 the Court reversed the judgment of the Court of Appeals (CA) and acquitted the accused in this case, Hubert Jeffrey P. Webb, Antonio Lejano, Michael A. Gatchalian, Hospicio Fernandez, Miguel Rodriguez, Peter Estrada, and Gerardo Biong of the charges against them on the ground of lack of proof of their guilt beyond reasonable doubt.

On December 28, 2010 complainant Lauro G. Vizconde, an immediate relative of the victims, asked the Court to reconsider its decision, claiming that it “denied the prosecution due process of law; seriously misappreciated the facts; unreasonably regarded Alfaro as lacking credibility; issued a tainted and erroneous decision; decided the case in a manner that resulted in the miscarriage of justice; or committed grave abuse in its treatment of the evidence and prosecution witnesses.”[1][1] 

          But, as a rule, a judgment of acquittal cannot be reconsidered because it places the accused under double jeopardy.  The Constitution provides in Section 21, Article III, that:

            Section 21.  No person shall be twice put in jeopardy of punishment for the same offense.  x x x

To reconsider a judgment of acquittal places the accused twice in jeopardy of being punished for the crime of which he has already been absolved.  There is reason for this provision of the Constitution.  In criminal cases, the full power of the State is ranged against the accused.  If there is no limit to attempts to prosecute the accused for the same offense after he has been acquitted, the infinite power and capacity of the State for a sustained and repeated litigation would eventually overwhelm the accused in terms of resources, stamina, and the will to fight.  

As the Court said in People of the Philippines v. Sandiganbayan:[2][2]

[A]t the heart of this policy is the concern that permitting the sovereign freely to subject the citizen to a second judgment for the same offense would arm the government with a potent instrument of oppression.  The provision therefore guarantees that the State shall not be permitted to make repeated attempts to convict an individual for an alleged offense, thereby subjecting him to embarrassment, expense, and ordeal and compelling him to live in a continuing state of anxiety and insecurity, as well as enhancing the possibility that even though innocent he may be found guilty.  Society’s awareness of the heavy personal strain which a criminal trial represents for the individual defendant is manifested in the willingness to limit the government to a single criminal proceeding to vindicate its very vital interest in the enforcement of criminal laws.[3][3] 

Of course, on occasions, a motion for reconsideration after an acquittal is possible.  But the grounds are exceptional and narrow as when the court that absolved the accused gravely abused its discretion, resulting in loss of jurisdiction, or when a mistrial has occurred. In any of such cases, the State may assail the decision by special civil action of certiorari under Rule 65.[4][4]

          Here, although complainant Vizconde invoked the exceptions, he has been unable to bring his pleas for reconsideration under such exceptions.  For instance, he avers that the Court “must ensure that due process is afforded to all parties and there is no grave abuse of discretion in the treatment of witnesses and the evidence.”[5][5]  But he has not specified the violations of due process or acts constituting grave abuse of discretion that the Court supposedly committed.  His claim that “the highly questionable and suspicious evidence for the defense taints with serious doubts the validity of the decision”[6][6] is, without more, a mere conclusion drawn from personal perception. 

Complainant Vizconde cites the decision in Galman v. Sandiganbayan[7][7] as authority that the Court can set aside the acquittal of the accused in the present case.  But the government proved in Galman that the prosecution was deprived of due process since the judgment of acquittal in that case was “dictated, coerced and scripted.”[8][8]  It was a sham trial.  Here, however, Vizconde does not allege that the Court held a sham review of the decision of the CA.  He has made out no case that the Court held a phony deliberation in this case such that the seven Justices who voted to acquit the accused, the four who dissented, and the four who inhibited themselves did not really go through the process. 

          Ultimately, what the complainant actually questions is the Court’s appreciation of the evidence and assessment of the prosecution witnesses’ credibility.  He ascribes grave error on the Court’s finding that Alfaro was not a credible witness and assails the value assigned by the Court to the evidence of the defense. In other words, private complainant wants the Court to review the evidence anew and render another judgment based on such a re-evaluation.  This is not constitutionally allowed as it is merely a repeated attempt to secure Webb, et al’s conviction.  The judgment acquitting Webb, et al is final and can no longer be disturbed.

WHEREFORE, the Court DENIES for lack of merit complainant Lauro G. Vizconde’s motion for reconsideration dated December 28, 2010.

For essentially the same reason, the Court DENIES the motions for leave to intervene of Fr. Robert P. Reyes, Sister Mary John R. Mananzan, Bishop Evangelio L. Mercado, and Dante L.A. Jimenez, representing the Volunteers Against Crime and Corruption and of former Vice President Teofisto Guingona, Jr.

No further pleadings shall be entertained in this case.

SO ORDERED.  

 

ROBERTO A. ABAD

                                                              Associate Justice

 

 

WE CONCUR:

 

 

                                                                                                                                                                       I vote to grant the M.R.

RENATO C. CORONA

Chief Justice

 

 

 

No part, prior inhibition

      ANTONIO T. CARPIO              CONCHITA CARPIO MORALES    

  Associate Justice                                               Associate Justice

 

 

No part due to relastionship to a party           No part; filed pleading as Sol Gen

PRESBITERO J. VELASCO, JR.     ANTONIO EDUARDO B. NACHURA

               Associate Justice                                     Associate Justice

 

 

 

I vote to grant the motion for reconsideration                   Same vote as J. Villarama

TERESITA J. LEONARDO-DE CASTRO       ARTURO D. BRION

                     Associate Justice                                 Associate Justice

 

 

                      

       DIOSDADO M. PERALTA                     LUCAS P. BERSAMIN

                 Associate Justice                                      Associate Justice        

No part                                     I vote to grant the motion for reconsideration

 MARIANO C. DEL CASTILLO             MARTIN S. VILLARAMA, JR.

              Associate Justice                                     Associate Justice

  JOSE PORTUGAL PEREZ                           JOSE CATRAL MENDOZA

            Associate Justice                                       Associate Justice

See concurring Opinion

MARIA LOURDES P. A. SERENO

Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, 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.

RENATO C. CORONA

          Chief Justice

 


 


[1][1]  Private Complainant’s Motion for Reconsideration, p. 8.

[2][2]  G.R. Nos. 168188-89, June 16, 2006, 491 SCRA 185.

[3][3]  Id. at 207. 

[4][4]  Castro v. People, G.R. No. 180832, July 23, 2008, 559 SCRA 676, 683-684.

[5][5]  Supra note 1, at 7.

[6][6]  Id. at 12.

[7][7]  228 Phil. 42 (1986).

[8][8]  Id. at 89.

1

IMPLEMENTING RULES AND REGULATIONS OF

LENDING COMPANY REGULATION ACT OF 2007

(REPUBLIC ACT NO. 9474)

 

 

RULE 1. Title

These Rules shall be known as the Implementing Rules and

Regulations of Republic Act No. 9474, otherwise known as the

“Lending Company Regulation Act of 2007” promulgated pursuant to

Section 10 thereof.

RULE 2. Definition of Terms

As used in these Implementing Rules, the following definitions shall

apply:

(a) Act shall refer to Lending Company Regulation Act of 2007.

(b) Affilliate shall refer to a corporation, the voting stock of which,

to the extent of fifty percent (50%) or less, is owned by a bank or

quasi-bank which is related or linked to such institution

through common stockholders or such other factors as may be

determined by the Monetary Board of the BSP.

2

(c) Subsidiary shall refer to a corporation more than fifty percent

(50%) of the voting stock of which is owned by a bank or quasibank.

(d) Branch Office – shall include an extension office, unit, satellite

office, etc. of a lending company with a Certificate of Authority

to operate as such.

(e) BSP shall refer to the Bangko Sentral ng Pilipinas.

(f) Certificate of Authority (CA) shall refer to a certificate issued by

the SEC in favor of a lending company to engage in the business

of lending regulated by R.A. No. 9474 and its Implementing

Rules and Regulations.

(g) Charges on loan shall refer to agreed upon interest rate, service

charge, penalty, discount, and such other charges incidental to

lending activity.

(h) Debtor shall refer to a borrower or person granted a loan by a

lending company.

(i) Monetary Assets shall refer to total assets inclusive of valuation

reserves and deferred income but shall not include investments

3

in real estate, in shares of stock of real estate development

corporations or in real estate based projects, leasehold rights

and improvements, fixed assets, foreclosed properties and

prepayments.

(j) Lending company shall refer to a corporation engaged in

granting loans from its own capital funds or from funds sourced

from not more than nineteen (19) persons. It shall not be

deemed to include banking institutions, investment houses,

savings and loan associations, financing companies,

pawnshops, insurance companies, cooperatives and other credit

institutions already regulated by law. The term lending company

shall be synonymous with lending investor.

(k) Networth shall refer to the excess of assets over liabilities, net

of appraisal surplus, unbooked valuation reserves, capital

adjustments, overstatement of assets and unrecorded liabilities.

(l) Quasi-Bank shall refer to a non-bank financial institution

authorized by the BSP to engage in quasi-banking functions and

to borrow funds from more than nineteen (19) lenders through

the issuance, endorsement or assignment with recourse or

acceptance of deposit substitutes as defined in Section 95 of

4

Republic Act No.7653 (the “New Central Bank Act”) for purposes

of relending or purchasing of receivables and other obligations.

(m) SEC or Commission shall refer to the Securities and

Exchange Commission

RULE 3. Requirements for Organization

(a) Form of Organization

A lending company shall be established as a stock corporation.

i. Existing Lending Companies organized as single

proprietorships or partnerships shall, within a period of

one (1) year from the effectivity of the Act, organize

themselves as a stock corporation with the minimum

capitalization prescribed under the Act and secure a

Certificate of Authority to operate a lending company.

Otherwise, they shall be disallowed from engaging in the

business of granting loans to the public.

ii. The words “Lending Company” or “Lending Investor” or

any other word descriptive of its primary activity of

5

granting loans to the public except words commonly used

to identify financing companies shall always be included

in the corporate and trade name.

(b) Requirements for Securing an Authority – A lending company

shall file with SEC four (4) copies of a duly accomplished

application form to operate as a lending company, signed under

oath by the President, together with the following documents in

the prescribed form:

i. Information Sheet;

ii. NBI clearance of each director/officer;

iii. Foreign directors/officers, in addition to the NBI

Clearance, shall submit a clearance from the Bureau of

Immigration (BI), a photocopy of his passport showing a

valid visa or stay in the Philippines, ACR i-card, and a

work permit issued by the Department of Labor and

Employment;

iv. President’s Sworn Statement and Undertaking that the

corporation will not accept or solicit investments, other

6

than loans, from more than 19 persons without SEC

approval, and upon presentation of valid claims, it shall

immediately indemnify or return the investments of

persons from said unauthorized public solicitation of

funds; Moreover, the sworn statement shall likewise

contain an undertaking that the country or state of the

foreign applicant allows Filipino citizens and corporations

to do lending business therein.

v. For an existing lending investor applying for a Certificate

of Authority, it shall submit an external auditor’s sworn

statement and undertaking that based on his/her

examination of the corporate books of accounts and other

related records of the corporation, it has not accepted or

solicited investments, other than loans, from more than 19

persons without prior compliance with Sections 8 and 12

of the Securities Regulation Code and its Amended

Implementing Rules and Regulations.

vi. Business plan including method of marketing its product

and sources of the funds and maturities of credit; and

7

vii. Statement of its compliance with Rule 17.1(2)(A)(i) and (ii)

of the Amended Implementing Rules and Regulations of

the Securities Regulation Code.

(c) Branches, Extension or Satellites Offices or Units.

i. Loan transactions shall be booked in the authorized offices of

the lending company;

ii. No lending company shall establish or operate a branch,

extension office or unit or satellite office without prior

approval by the SEC. The following documents shall be

submitted for the opening of a branch office:

1) Information Sheet on the proposed branch;

2) NBI clearance of the manager, cashier and

administrative officer of the proposed branch;

iii. The Certificate of Authority to operate a branch, extension

office, unit or satellite office shall be coterminous with that of

the Head Office.

8

(d) Licensing Fees:

i.Initial Application Fees shall be paid to SEC at the time of

filing of application

1) Head Office –

A fee of 1/10 of 1% of the paid-up capital of the

lending company shall be paid for the issuance of

a Certificate of Authority to Operate as a Lending

Company.

2) Branch, extension office, unit or satellite office

A fee of 1/10 of 1% of the assigned capital of the

branch, extension office, unit or satellite office

shall likewise be paid for the issuance of an

original Certificate of Authority.

ii. Annual fee –

An annual fee shall be paid not later than forty five (45) days

before the anniversary date of the CA.

9

1) Head Office – 1/8 of 1% of the required paid-up

capital

2) Branch Office – 1/8 of 1% of the required paid-up

capital

(e) Commencement of Operations

A corporation/company that has been duly registered and

granted a Certificate of Authority to Operate as a Lending

Company shall commence operations within one hundred

twenty (120) days from date of grant of such authority.

Failure to commence operations within said period shall be a

ground for the suspension of its CA.

(f) Lending Companies shall use at least 51% of their funds for

direct lending purposes.

(g) The total investment of a lending company in real estate and in

shares of stock in a real estate development corporation and

other real estate based projects shall not at any time exceed

twenty-five (25%) percent of its networth.

10

RULE 4. Capital

(a) A Lending Company shall have a minimum paid-up capital of

One Million Pesos (PhP1,000,000.00), unless the SEC prescribes

a higher minimum capitalization, if warranted by the

circumstances.

i. Lending companies established and in operation with a

lower paid-up capital prior to the effectivity of the Act shall

comply with the capital requirement within three (3) years

from the date of effectivity of the Act. For this purpose,

said lending companies shall, within sixty (60) days from

effectivity of these Rules, provide the SEC a sworn

statement by the President, indicating the schedule of their

capital build-up within the three (3) year period.

ii. Should a branch, extension, satellite office or unit be

established, the excess of the required minimum paid-up

capital may be applied to the additional capital requirement

for the proposed branch, extension, satellite office or unit,

as follows:

PhP300,000.00 : Metro Manila and other first

class cities;

11

PhP150,000.00 : Second class and other cities;

and

PhP 75,000.00 : Municipalities

(b) In case of failure to comply with the aforementioned capital

requirement, the authority of a lending company to operate as

such shall be suspended, after due notice and hearing, for a

period of thirty (30) days.

RULE 5. Citizenship Requirements

(a) A majority of the voting stock of the lending company shall be

owned by citizens of the Philippines.

(b) The percentage of foreign-owned voting stocks in any lending

company shall be determined by the citizenship of the

individual stockholders. In the case of corporations owning

shares in a lending company, the citizenship of the individual

owners of voting stock in such corporations shall be the basis

in the computation of the percentage.

(c) If the percentage of foreign owned voting stock in any Lending

Company existing prior to the effectivity of the Act is in excess

12

of forty-nine (49%), it shall not be increased but may be

reduced and once reduced, shall not be increased thereafter

beyond 49% of the voting stock.

(d) No foreign national may be allowed to own stock unless the

country of which he is a national accords reciprocal rights to

Filipinos.

RULE 6. Amount and Charges on Loans

(a) A lending company may grant loans in such amounts and

interest rates and charges as may be agreed upon between the

lending company and the debtor:

(b) In accordance with the Truth in Lending Act and prior to the

consummation of the transaction, a lending company shall

furnish each debtor a disclosure statement, setting forth, to

the extent applicable, the following information:

i. The principal amount of loan;

ii. Rate of interest of the loan;

iii. Service or processing fee, if any;

iv. Amortization schedule;

v. Any penalty charge for late amortization payment;

13

vi. Collection fee, if any;

vii. Notarial fee;

viii. All other fees in connection with the loan transaction;

ix. Description of the collection and lien enforcement

procedures; and

x. Method of calculating the total amount of obligation in case

of default.

RULE 7. Maintenance of Books of Accounts and Records

(a) Every lending company shall maintain books of accounts and

records as may be required by the SEC and prescribed by the

Bureau of Internal Revenue and other government agencies. In

case a lending company engages in other businesses, it shall

maintain separate books of accounts for these businesses.

(b) The Manual of Accounts prescribed by the BSP for lending

investors shall continue to be adopted by lending companies

for uniform recording and reporting of their operations, until a

new Manual of Accounts shall have been prescribed by the

SEC.

14

RULE 8. Authority of the SEC

Lending Companies shall be under the supervision and regulation of the

SEC.

(a) Reports – Lending companies shall file with the SEC the

following reports / manuals in accordance with the following

schedules:

Kind of report / manual Due Date

General Information Sheet (GIS)

Within thirty (30)

days from annual

meeting, as stated in

its SEC approved bylaws

Audited Financial Statements

prepared by an external auditor

accredited by the SEC

Within One Hundred

Twenty (120) days

from end of fiscal

year, as stated in its

SEC approved bylaws

Special Forms for Financial

Statements in Electronic Format

Within thirty (30)

days from the last day

of submission of the

15

annual Audited

Financial Statements

Interim semi-annual financial

statements (using Special Form)

including the following:

  • • Balance Sheet;
  • • Income and Expense

statement;

  • • Cash flow
  • • Statement of Changes in

Equity

  • • Schedule of Liabilities
  • • List of Directors and Officers
  • • Aging of Receivables

Every July 15 and

January 15

(b) The SEC may examine the Books of Accounts and other

records of the lending company.

(c) Administrative Sanctions – The SEC shall, at its discretion,

impose upon any lending company a basic fine of P10,000.00

16

and P100.00 for each day of continuing violation but such

daily fine shall not exceed P50,000.00 for the following:

i. Violation of the Act and its Implementing Rules and

Regulations;

ii. Violation of the terms and conditions of the Certificate of

Authority;

iii. Violation of any lawful order, decision, or ruling of the

Commission;

iv. Unjustified refusal to have its bank of accounts audited;

and

v. Continuous failure to comply with SEC requirements.

The penalty of suspension shall be imposed in case of three

(3) violations and revocation in case of four (4) violations.

RULE 9. Delineation of Authority between SEC and the BSP

Lending companies shall be under the supervision and regulation of

the SEC, Provided, those lending companies which are subsidiaries

and affiliates of banks and quasi-banks shall be subject to BSP

supervision and examination in accordance with Republic Act

No.7653.

17

RULE 10. Acts Punishable and Persons Liable

A fine of not less than Ten Thousand Pesos (PhP10,000.00) and not

more than Fifty Thousand Pesos (PhP50,000.00) or imprisonment of

not less than six months but not more than ten (10) years or both, at

the discretion of the court, shall be imposed upon:

(a) Any person who shall engage in the business of a lending

company without a validly subsisting authority to operate from

the SEC;

(b) The president, treasurer and other officers of a corporation,

including the managing officer thereof, who shall knowingly

and willingly

i. Engage in the business of a lending company without a

validly subsisting authority from the SEC;

ii. Hold themselves out to be a lending company, either

through advertisement on whatever form, whether in its

stationery, commercial paper, or other document, or

through other representations;

iii. Make use of a trade or firm name containing the words

lending company or “lending investor” or any other

18

designation that would give the public the impression that

it is engaged in the business of a lending company as

defined in the Act without the appropriate SEC authority;

and

(c) Violators or violations of the provisions of the Act;

(d) Any officer, employee or agent of a lending company who shall:

i. Knowingly and willingly make any statement in any

application, report, or document required to be filled under

the Act, which statement is false or misleading with respect

to any material fact;

ii. Overvalue or aid in overvaluing any security for the purpose

of influencing in any way the action of the company in any

loan;

(e) Any officer, employee or examiner of the SEC directly charged

with the implementation of the Act or of other government

agencies who shall commit, connive, aid, or assist in the

commission of acts enumerated under Subsection 1 and 2 of

this Rule.

19

RULE 11. Applicability of Other Laws

The provisions of Republic Act No. 3765, otherwise known as the

“Truth in Lending Act of the Philippines,” Republic Act No. 7394 or the

“Consumer Act of the Philippines” and other existing laws, insofar as

they are not in conflict with any provisions of this Act, shall have a

suppletory applicability to Lending Companies.

RULE 12. Effectivity of Implementing Rules and Regulations

These Implementing Rules and Regulations shall take effect fifteen

(15) days from publication in two (2) newspapers of general

circulation.

Adopted by the Commission En Banc on August 23, 2007.

Mandaluyong City, Philippines.

FE B. BARIN

Chairperson

MA. JUANITA E. CUETO

Commissioner

JESUS ENRIQUE G. MARTINEZ

Commissioner

RAUL J. PALABRICA

Commissioner

THADDEUS E. VENTURANZA

Commissioner