THIRD DIVISION

area of 60 hectares more or less, now under Tax Dec. 29451 in the (sic) of said Vicente Villaflor, the
whole parcel of which this particular parcel is only a part, is assessed at P22,550.00 under the above
said Tax Dec. Number.

[G.R. No. 95694. October 9, 1997]

This deed states:

VICENTE VILLLAFLOR, substituted by his heirs, petitioner, vs. COURT OF APPEALS

and NASIPIT LUMBER CO., INC., respondents.

That the above described land was sold to the said VICENTE VILLAFLOR, xxx on June 22, 1937, but
no formal document was then executed, and since then until the present time, the said Vicente Villaflor
has been in possession and occupation of (the same); (and)
That the above described property was before the sale, of my exclusive property having inherited from
my long dead parents and my ownership to it and that of my [sic] lasted for more than fifty (50) years,
possessing and occupying same peacefully, publicly and continuously without interruption for that
length of time.

DECISION
PANGANIBAN ,J.:

In this rather factually complicated case, the Court reiterates the binding force and effect
of findings of specialized administrative agencies as well as those of trial courts when
affirmed by the Court of Appeals; rejects petitioners theory of simulation of contracts; and
passes upon the qualifications of private respondent corporation to acquire disposable public
agricultural lands prior to the effectivity of the 1973 Constitution.

Also on January 16, 1940, Claudio Otero, in a Deed of Absolute Sale (exh. C) sold to Villaflor a parcel
of agricultural land, containing an area of 24 hectares, more or less, and particularly described and
bounded as follows:

The Case

A certain land planted to corn with visible concrete measurements marking the boundaries and
bounded on the North by Public Land and Tungao Creek; on the East by Agusan River; on the South
by Serafin Villaflor and Cirilo Piencenaves; and on the West by land of Fermin Bacobo containing an
area of 24 hectares more or less, under Tax Declaration No. 29451 in the name already of Vicente
Villaflor, the whole parcel of which this particular land is only a part, is assessed at P22,550.00 under
the above said Tax Declaration No. 29451.

Before us is a petition for review on certiorari seeking the reversal of the Decision of the
Court of Appeals, dated September 27, 1990, in C.A. G.R. CV No. 09062, affirming the
dismissal by the trial court of Petitioner Vicente Villaflors complaint against Private
Respondent Nasipit Lumber Co., Inc. The disposition of both the trial and the appellate courts
are quoted in the statement of facts below.
[1]

The Facts

This deed states:

That the above described land was sold to the said VICENTE VILLAFLOR, xxx on June 22, 1937, but
no sound document was then executed, however since then and until the present time, the said Vicente
Villaflor has been in open and continuous possession and occupation of said land; (and)

The facts of this case, as narrated in detail by Respondent Court of Appeals, are as
follows:

That the above described land was before the sale, my own exclusive property, being inherited from
my deceased parents, and my ownership to it and that of my predecessors lasted more than fifty (50)
years, possessing and occupying the same, peacefully, openly and continuously without interruption
for that length of time.

The evidence, testimonial and documentary, presented during the trial show that on January 16, 1940, Cirilo
Piencenaves, in a Deed of Absolute Sale (exh. A), sold to [petitioner], a parcel of agricultural land containing an
area of 50 hectares, more or less, and particularly described and bounded as follows:

Likewise on January 16, 1940, Hermogenes Patete, in a Deed of Absolute Sale (exh. D), sold to
Villaflor, a parcel of agricultural land, containing an area of 20 hectares, more or less, and particularly
described and bounded as follows:

A certain parcel of agricultural land planted to abaca with visible concrete monuments marking the
boundaries and bounded on the NORTH by Public Land now Private Deeds on the East by Serafin
Villaflor, on the SOUTH by Public Land; and on the West by land claimed by H. Patete, containing an

A certain parcel of agricultural land planted to abaca and corn with visible concrete monuments
marking the boundaries and bounded on the North by Public Land area-private Road; on the East by
land claimed by Cirilo Piencenaves; on the South by Public Land containing an area of 20 hectares

[2]

[3]

more or less, now under Tax Declaration No. 29451 in the name of Vicente Villaflor the whole parcel
of which this particular parcel, is assessed at P22,550.00 for purposes of taxation under the above said
Tax Declaration No. 29451.
This deed states:
xxx (O)n June 22, 1937 but the formal document was then executed, and since then until the present
time, the said VICENTE VILLAFLOR has been in continuous and open possession and occupation of
the same; (and)
That the above described property was before the sale, my own and exclusive property, being inherited
from my deceased parents and my ownership to it and that of my predecessors lasted more than fifty
(50) years, possessing and occupying same, peacefully, openly and continuously without interruption
for that length of time.
On February 15, 1940, Fermin Bocobo, in a Deed of Absolute Sale (exh. B), sold to Villaflor, a parcel
of agricultural land, containing an area of 18 hectares, more or less, and particularly described and
bounded as follows:

empowered and authorized by the Lessor to sublot (sic) the premises hereby leased or assign the same
or any portion of the land hereby leased to any person, firm and corporation; (and)
4. The Lessee is hereby authorized to make any construction and/or improvement on the premises
hereby leased as he may deem necessary and proper thereon, provided however, that any and all such
improvements shall become the property of the Lessor upon the termination of this lease without
obligation on the part of the latter to reimburse the Lessee for expenses incurred in the construction of
the same.
Villaflor claimed having discovered that after the execution of the lease agreement, that Nasipit
Lumber in bad faith x x x surreptitiously grabbed and occupied a big portion of plaintiffs property x x
x; that after a confrontation with the corporates (sic) field manager, the latter, in a letter dated
December 3, 1973 (exh. R), stated recalling having made some sort of agreement for the occupancy
(of the property at Acacia, San Mateo), but I no longer recall the details and I had forgotten whether or
not we did occupy your land. But if, as you say, we did occupy it, then (he is ) sure that the company is
obligated to pay the rental.
[6]

On July 7, 1948, in an Agreement to Sell (exh. 2), Villaflor conveyed to Nasipit Lumber, two (2)
parcels of land xxx described as follows:
[7]

A certain parcel of agricultural land planted with abaca with visible part marking the corners and
bounded on the North by the corners and bounded on the North by Public Land; on the East by Cirilo
Piencenaves; on the South by Hermogenes Patete and West by Public Land, containing an area of 18
hectares more or less now under Tax Declaration No. 29451 in the name of Vicente Villaflor. The
whole parcel of which this particular parcel is only a part is assessed as P22,550.00 for purposes of
taxation under the above said Tax Declaration Number (Deed of Absolute Sale executed by Fermin
Bocobo date Feb. 15, 1940). This document was annotated in Registry of Deeds on February 16,
1940).
This deed states:
That the above described property was before the sale of my own exclusive property, being inherited
from my deceased parents, and my ownership to it and that of my predecessors lasted more than fifty
(50) years, possessing and occupying the same peacefully, openly and continuously without
interruption for that length of time.
On November 8, 1946, Villaflor, in a Lease Agreement (exh. Q), leased to Nasipit Lumber Co., Inc. a
parcel of land, containing an area of two (2) hectares, together with all the improvements existing
thereon, for a period of five (5) years from June 1, 1946 at a rental of P200.00 per annum to cover the
annual rental of house and building sites for thirty three (33) houses or buildings. This agreement also
provides:
[4]

PARCEL ONE
Bounded on the North by Public Land and Tungao Creek; on the East by Agusan River and Serafin
Villaflor; on the South by Public Land, on the West by Public Land. Improvements thereon consist of
abaca, fruit trees, coconuts and thirty houses of mixed materials belonging to the Nasipit Lumber
Company. Divided into Lot Nos. 5412, 5413, 5488, 5490, 5491, 5492, 5850, 5849, 5860, 5855, 5851,
5854, 5855, 5859, 5858, 5857, 5853, and 5852. Boundaries of this parcel of land are marked by
concrete monuments of the Bureau of Lands. Containing an area of 112,000 hectares. Assessed at
P17,160.00 according to Tax Declaration No. V-315 dated April 14, 1946.
PARCEL TWO
Bounded on the North by Pagudasan Creek; on the East by Agusan River; on the South by Tungao
Creek; on the West by Public Land. Containing an area of 48,000 hectares more or less. Divided into
Lot Nos. 5411, 5410, 5409, and 5399. Improvements 100 coconut trees, productive, and 300 cacao
trees. Boundaries of said land are marked by concrete monuments of the Bureau pf (sic)
Lands. Assessed value -- P6,290.00 according to Tax No. 317, April 14, 1946.
This Agreement to Sell provides:

[5]

3. During the term of this lease, the Lessee is authorized and empowered to build and construct
additional houses in addition to the 33 houses or buildings mentioned in the next preceding paragraph,
provided however, that for every additional house or building constructed the Lessee shall pay unto the
Lessor an amount of fifty centavos (50) per month for every house or building. The Lessee is

3. That beginning today, the Party of the Second Part shall continue to occupy the property not
anymore in concept of lessee but as prospective owners, it being the sense of the parties hereto that the
Party of the Second Part shall not in any manner be under any obligation to make any compensation to
the Party of the First Part, for the use, and occupation of the property herein before described in such
concept of prospective owner, and it likewise being the sense of the parties hereto to terminate as they

do hereby terminate, effective on the date of this present instrument, the Contract of Lease, otherwise
known as Doc. No. 420, Page No. 36, Book No. II, Series of 1946 of Notary Public Gabriel R. Banaag,
of the Province of Agusan.

5852, 5853, 5854, 5855, 5856, 5857, 5858, 5859 and 5860 and the second parcel of land is made of
Lots Nos. 5399, 5409, 5410 and 5411;

4. That the Party of the Second Part has bound as it does hereby bind itself, its executors and
administrators, to pay unto the party of the First Part the sum of Five Thousand Pesos (P5,000.00),
Philippine Currency, upon presentation by the latter to the former of satisfactory evidence that:

3. That on July 7, 1948, a contract of Agreement to Sell was executed between the contracting parties
herein, covering the said two parcels of land, copy of said Agreement to Sell is hereto attached marked
as Annex A and made an integral part of this document. The parties hereto agree that the said
Agreement to Sell be maintained in full force and effect with all its terms and conditions of this present
agreement and in no way be considered as modified.

(a) The Bureau of Lands will not have any objection to the obtainment by the Party of the First Part of
a Certificate of Torrens Title in his favor, either thru ordinary land registration proceedings or thru
administrative means procedure.

4. That paragraph 4 of the Contract of Agreement to Sell, marked as annex, A stipulates as follows:

(b) That there is no other private claimant to the properties hereinbefore described.
5. That the Party of the First Part has bound as he does hereby bind to undertake immediately after the
execution of these presents to secure and obtain, or cause to be secured and obtained, a Certificate of
Torrens Title in his favor over the properties described on Page (One) hereof, and after obtainment of
such Certificate of Torrens Title, the said Party of the First Part shall execute a (D)eed of Absolute Sale
unto and in favor of the Party of the Second Part, its executors, administrators and assigns, it being the
sense of the parties that the Party of the Second Part upon delivery to it of such deed of absolute sale,
shall pay unto the Party of the First Part in cash, the sum of Twelve Thousand (P12,000.00) Pesos in
Philippine Currency, provided, however, that the Party of the First Part, shall be reimbursed by the
Party of the Second Part with one half of the expenses incurred by the Party of the First Part for survey
and attorneys fees; and other incidental expenses not exceeding P300.00.
On December 2, 1948, Villaflor filed Sales Application No. V-807 (exh. 1) with the Bureau of Lands,
Manila, to purchase under the provisions of Chapter V, XI or IX of Commonwealth Act. No. 141 (The
Public Lands Act), as amended, the tract of public lands x x x and described as follows: North by
Public Land; East by Agusan River and Serafin Villaflor; South by Public Land and West by public
land (Lot Nos. 5379, 5489, 5412, 5490, 5491, 5492, 5849, 5850, 5851, 5413, 5488, 5489, 5852, 5853,
5854, 5855, 5856, 5857, 5858, 5859 and 5860 x x x containing an area of 140 hectares xxx. Paragraph
6 of the Application, states: I understand that this application conveys no right to occupy the land prior
to its approval, and I recognized (sic) that the land covered by the same is of public domain and any
and all rights I may have with respect thereto by virtue of continuous occupation and cultivation are
hereby relinquished to the Government. (exh. 1-D)
[8]

[9]

On December 7, 1948, Villaflor and Nasipit Lumber executed an Agreement (exh 3). This contract
provides:
[10]

1. That the First Party is the possessor since 1930 of two (2) parcels of land situated in sitio Tungao,
Barrio of San Mateo, Municipality of Butuan, Province of Agusan;
2. That the first parcel of land abovementioned and described in Plan PLS-97 filed in the office of the
Bureau of Lands is made up of Lots Nos. 5412, 5413, 5488, 5490, 5491, 5492, 5849, 5850, 5851,

Par. 4. That the Party of the Second Part has bound as it does hereby bind itself, its executors and
administrators, to pay unto the Party of the First Part of the sum of FIVE THOUSAND PESOS
(P5,000.00)Philippine Currency, upon presentation by the latter to the former of satisfactory evidence
that:
a) The Bureau of Lands will have any objection to the obtainment by Party of the First Part of a favor,
either thru ordinary land registration proceedings or thru administrative means and procedure.
b) That there is no other private claimant to the properties hereinabove described.
That the First Party has on December 2, 1948, submitted to the Bureau of Lands, a Sales Application
for the twenty-two (22) lots comprising the two abovementioned parcels of land, the said Sales
Application was registered in the said Bureau under No. V-807;
6. That in reply to the request made by the First Party to the Bureau of Lands, in connection with the
Sales Application No. V-807, the latter informed the former that action on his request will be
expedited, as per letter of the Chief, Public Land Division, dated December 2, 1948, copy of which is
hereto attached marked as annex B and made an integral part of this agreement:
7. That for and in consideration of the premises above stated and the amount of TWENTY FOUR
THOUSAND (P24,000.00) PESOS that the Second Party shall pay to the First Party, by these presents,
the First Party hereby sells, transfers and conveys unto the Second Party, its successors and assigns, his
right, interest and participation under an(d) by virtue of the Sales Application No. V-807, which he has
or may have in the lots mentioned in said Sales Application No. V-807;
8. That the amount of TWENTY FOUR THOUSAND (P24,000.00) PESOS, shall be paid by the
Second Party to the First Party, as follows:
a) The amount of SEVEN THOUSAND (P7,000.00) PESOS, has already been paid by the Second
Party to the First Party upon the execution of the Agreement to Sell, on July 7, 1948;
b) The amount of FIVE THOUSAND (P5,000.00) PESOS shall be paid upon the signing of this
present agreement; and

c) The balance of TWELVE THOUSAND (P12,000.00) PESOS, shall be paid upon the execution by
the First Party of the Absolute Deed of Sale of the two parcels of land in question in favor of the
Second Party, and upon delivery to the Second Party of the Certificate of Ownership of the said two
parcels of land.
9. It is specially understood that the mortgage constituted by the First Party in favor of the Second
Party, as stated in the said contract of Agreement to Sell dated July 7, 1948, shall cover not only the
amount of SEVEN THOUSAND (P7,000.00) PESOS as specified in said document, but shall also
cover the amount of FIVE THOUSAND (P5,000.00) PESOS to be paid as stipulated in paragraph 8,
sub-paragraph (b) of this present agreement, if the First Party should fail to comply with the
obligations as provided for in paragraphs 2, 4, and 5 of the Agreement to Sell;
10. It is further agreed that the First Party obligates himself to sign, execute and deliver to and in favor
of the Second Party, its successors and assigns, at anytime upon demand by the Second Party such
other instruments as may be necessary in order to give full effect to this present agreement;
In the Report dated December 31, 1949 by the public land inspector, District Land Office, Bureau of
Lands, in Butuan, the report contains an Indorsement of the aforesaid District Land Officer
recommending rejection of the Sales Application of Villaflor for having leased the property to another
even before he had acquired transmissible rights thereto.
In a letter of Villaflor dated January 23, 1950, addressed to the Bureau of Lands, he informed the
Bureau Director that he was already occupying the property when the Bureaus Agusan River Valley
Subdivision Project was inaugurated, that the property was formerly claimed as private properties (sic),
and that therefore, the property was segregated or excluded from disposition because of the claim of
private ownership. In a letter of Nasipit Lumber dated February 22, 1950 (exh. X) addressed to the
Director of Lands, the corporation informed the Bureau that it recognized Villaflor as the real owner,
claimant and occupant of the land; that since June 1946, Villaflor leased two (2) hectares inside the
land to the company; that it has no other interest on the land; and that the Sales Application of Villaflor
should be given favorable consideration.
[11]

xxx xxx xxx

On July 24, 1950, the scheduled date of auction of the property covered by the Sales Application,
Nasipit Lumber offered the highest bid of P41.00 per hectare, but since an applicant under CA 141, is
allowed to equal the bid of the highest bidder, Villaflor tendered an equal bid, deposited the equivalent
of 10% of the bid price and then paid the assessment in full.
xxx xxx xxx
On August 16, 1950, Villaflor executed a document, denominated as a Deed of Relinquishment of
Rights (exh. N), pertinent portion of which reads:
[12]

5. That in view of my present business in Manila, and my change in residence from Butuan, Agusan to
the City of Manila, I cannot, therefore, develope (sic) or cultivate the land applied for as projected
before;
6. That the Nasipit Lumber Company, Inc., a corporation duly organized xxx is very much interested in
acquiring the land covered by the aforecited application xxx;
7. That I believe the said company is qualified to acquire public land, and has the means to develop
(sic) the above-mentioned land;
xxx xxx xxx
WHEREFORE, and in consideration of the amount of FIVE THOUSAND PESOS (P5,000.00) to be
reimbursed to me by the aforementioned Nasipit Lumber Company, Inc., after its receipt of the order
of award, the said amount representing part of the purchase price of the land aforesaid, the value of the
improvements I introduced thereon, and the expenses incurred in the publication of the Notice of Sale,
I, the applicant, Vicente J. Villaflor, hereby voluntarily renounce and relinquish whatever rights to, and
interests I have in the land covered by my above-mentioned application in favor of the Nasipit Lumber
Company, Inc.
Also on August 16, 1950, Nasipit Lumber filed a Sales Application over the two (2) parcels of land,
covering an area of 140 hectares, more or less. This application was also numbered V-807 (exh. Y).
On August 17, 1950 the Director of Lands issued an Order of Award in favor of Nasipit Lumber
Company, Inc., pertinent portion of which reads:
[13]

4. That at the auction sale of the land held on July 24, 1950 the highest bid received was that of Nasipit
Lumber Company, Inc. which offered P41.00 per hectare or P5,740.00 for the whole tract, which bid
was equaled by applicant Vicente J. Villaflor, who deposited the amount of P574.00 under Official
Receipt No. B-1373826 dated July 24, 1950 which is equivalent to 10% of the bid. Subsequently, the
said xxx Villaflor paid the amount of P5,160.00 in full payment of the purchase price of the abovementioned land and for some reasons stated in an instrument of relinquishment dated August 16, 1950,
he (Vicente J. Villaflor) relinquished his rights to and interest in the said land in favor of the Nasipit
Lumber Company, Inc. who filed the corresponding application therefore.
In view of the foregoing, and it appearing that the proceedings had xxx were in accordance with law
and in [sic] existing regulations, the land covered thereby is hereby awarded to Nasipit Lumber
Company, Inc. at P41.00 per hectare or P5,740.00 for the whole tract.
This application should be entered in the record of this Office as Sales Entry No. V-407.
It is Villaflors claim that he only learned of the Order of Award on January 16, 1974, or after his arrival
to the Philippines, coming from Indonesia, where he stayed for more than ten (10) years; that he went
to Butuan City in the latter part of 1973 upon the call of his brother Serafin Villaflor, who was then

sick and learned that Nasipit Lumber (had) failed and refused to pay the agreed rentals, although his
brother was able to collect during the early years; and that Serafin died three days after his (Vicentes)
arrival, and so no accounting of the rentals could be made; that on November 27, 1973, Villaflor wrote
a letter to Mr. G.E.C. Mears of Nasipit Lumber, reminding him of their verbal agreement in 1955 xxx
that Mr. Mears in a Reply dated December 3, 1973, appears to have referred the matter to Mr. Noriega,
the corporate general manager, but the new set of corporate officers refused to recognize (Villaflors)
claim, for Mr. Florencio Tamesis, the general manager of Nasipit Lumber, in a letter dated February 19,
1974, denied Villaflors itemized claim dated January 5, 1974 (exh. V) to be without valid and legal
basis. In that 5th January, 1974 letter, Villaflor claimed the total amount of P427,000.00 x x x.
In a formal protest dated January 31, 1974 which Villaflor filed with the Bureau of Lands, he
protested the Sales Application of Nasipit Lumber, claiming that the company has not paid
him P5,000.00 as provided in the Deed of Relinquishment of Rights dated August 16, 1950.
[14]

xxx xxx xxx

x x x (T)hat in a Decision dated August 8, 1977 (exh. 8), the Director of Lands found that the payment
of the amount of P5,000.00 in the Deed xxx and the consideration in the Agreement to Sell were duly
proven, and ordered the dismissal of Villaflors protest and gave due course to the Sales Application of
Nasipit Lumber. Pertinent portion of the Decision penned by Director of Lands, Ramon Casanova, in
the Matter of SP No. V-807 (C-V-407) xxx reads:

x x x The records clearly show, however, that since the execution of the deed of relinquishment xxx
Villaflor has always considered and recognized NASIPIT as having the juridical personality to acquire
public lands for agricultural purposes. xxxx.
xxx xxx xxx
Even this Office had not failed to recognize the juridical personality of NASIPIT to apply for the
purchase of public lands xxx when it awarded to it the land so relinquished by Villaflor (Order of
Award dated August 17, 1950) and accepted its application therefor. At any rate, the question whether
an applicant is qualified to apply for the acquisition of public lands is a matter between the applicant
and this Office to decide and which a third party like Villaflor has no personality to question beyond
merely calling the attention of this Office thereto.
xxx xxx xxx
Villaflor offered no evidence to support his claim of non-payment beyond his own self-serving
assertions and expressions that he had not been paid said amount. As protestant in this case, he has the
affirmative of the issue. He is obliged to prove his allegations, otherwise his action will fail. For, it is a
well settled principle () that if plaintiff upon whom rests the burden of proving his cause of action fails
to show in a satisfactory manner the facts upon which he bases his claim, the defendant is under no
obligation to prove his exceptions or special defenses (Belen vs. Belen, 13 Phil. 202; Mendoza vs.
Fulgencio, 8 Phil. 243).

xxx xxx xxx

xxx xxx xxx
During the proceedings, Villaflor presented another claim entirely different from his previous claim -this time, for recovery of rentals in arrears arising from a supposed contract of lease by Villaflor as
lessor in favor of Nasipit as lessee, and indemnity for damages supposedly caused improvements on
his other property xxx in the staggering amount of Seventeen Million (P17,000,000.00) Pesos. Earlier,
he had also demanded from NASIPIT xxx (P427,000.00) xxx also as indemnity for damages to
improvements supposedly caused by NASIPIT on his other real property as well as for reimbursement
of realty taxes allegedly paid by him thereon.
xxx xxx xxx
It would seem that xxx Villaflor has sought to inject so many collaterals, if not extraneous claims, into
this case. It is the considered opinion of this Office that any claim not within the sphere or scope of its
adjudicatory authority as an administrative as well as quasi-judicial body or any issue which seeks to
delve into the merits of incidents clearly outside of the administrative competence of this Office to
decide may not be entertained.
There is no merit in the contention of Villaflor that owing to Nasipits failure to pay the amount of xxx
(P5,000.00) xxx (assuming that Nasipit had failed) the deed of relinquishment became null and void
for lack of consideration. xxxx.
xxx xxx xxx

Consequently, Villaflors claim that he had not been paid must perforce fail.
On the other hand, there are strong and compelling reasons to presume that Villaflor had already been
paid the amount of Five Thousand (P5,000.00) Pesos.
First, xxx What is surprising, however, is not so much his claims consisting of gigantic amounts as his
having forgotten to adduce evidence to prove his claim of non-payment of the Five Thousand
(P5,000.00) Pesos during the investigation proceedings when he had all the time and opportunity to do
so. xxx The fact that he did not adduce or even attempt to adduce evidence in support thereof shows
either that he had no evidence to offer xxx that NASIPIT had already paid him in fact. What is worse is
that Villaflor did not even bother to command payment, orally or in writing, of the Five Thousand
(P5,000.00) Pesos which was supposed to be due him since August 17, 1950, the date when the order
of award was issued to Nasipit, and when his cause of action to recover payment had accrued. The fact
that he only made a command (sic) for payment on January 31, 1974, when he filed his protest or
twenty-four (24) years later is immediately nugatory of his claim for non-payment.
But Villaflor maintains that he had no knowledge or notice that the order of award had already been
issued to NASIPIT as he had gone to Indonesia and he had been absent from the Philippines during all
those twenty-four (24) years. This of course taxes credulity. xxx.

Second, it should be understood that the condition that NASIPIT should reimburse Villaflor the amount
of Five Thousand (P5,000.00) Pesos upon its receipt of the order of award was fulfilled as said award
was issued to NASIPIT on August 17, 1950. The said deed of relinquishment was prepared and
notarized in Manila with Villaflor and NASIPIT signing the instrument also in Manila on August 16,
1950 (p.77, (sic)). The following day or barely a day after that, or on August 17, 1950, the order of
award was issued by this Office to NASIPIT also in Manila. Now, considering that Villaflor is
presumed to be more assiduous in following up with the Bureau of Lands the expeditious issuance of
the order of award as the payment of the Five Thousand (P5,000.00) Pesos (consideration) would
depend on the issuance of said order to award NASIPIT, would it not be reasonable to believe that
Villaflor was at hand when the award was issued to NASIPIT on August 17, 1950, or barely a day
which (sic) he executed the deed of relinquishment on August 16, 1950, in Manila? xxx.
Third, on the other hand, NASIPIT has in his possession a sort of order upon itself -- (the deed of
relinquishment wherein he (sic) obligated itself to reimburse or pay Villaflor the xxx consideration of
the relinquishment upon its receipt of the order of award) for the payment of the aforesaid amount the
moment the order of award is issued to it. It is reasonable to presume that NASIPIT has paid the Five
Thousand (P5,000.00) Pesos to Villaflor.
A person in possession of an order on himself for the payment of money, or the delivery of anything,
has paid the money or delivered the thing accordingly. (Section 5(k) B-131-Revised Rules of Court.
It should be noted that NASIPIT did not produce direct evidence as proof of its payment of the Five
Thousand (P5,000.00) Pesos to Villaflor. Nasipits explanation on this point is found satisfactory.
x x x (I)t was virtually impossible for NASIPIT, after the lapse of the intervening 24 years, to be able
to cope up with all the records necessary to show that the consideration for the deed of relinquishment
had been fully paid. To expect NASIPIT to keep intact all records pertinent to the transaction for the
whole quarter of a century would be to require what even the law does not. Indeed, even the applicable
law itself (Sec. 337, National Internal Revenue Code) requires that all records of corporations be
preserved for only a maximum of five years.
NASIPIT may well have added that at any rate while there are transactions where the proper evidence
is impossible or extremely difficult to produce after the lapse of time xxx the law creates presumptions
of regularity in favor of such transactions (20 Am. Jur. 232) so that when the basic fact is established in
an action the existence of the presumed fact must be assumed by force of law. (Rule 13, Uniform Rules
of Evidence; 9 Wigmore, Sec. 2491).
Anent Villaflors claim that the 140-hectare land relinquished and awarded to NASIPIT is his private
property, little (need) be said. xxxx The tracks of land referred to therein are not identical to the lands
awarded to NASIPIT. Even in the assumption that the lands mentioned in the deeds of transfer are the
same as the 140-hectare area awarded to NASIPIT, their purchase by Villaflor (or) the latters
occupation of the same did not change the character of the land from that of public land to a private
property. The provision of the law is specific that public lands can only be acquired in the manner
provided for therein and not otherwise (Sec. 11, C.A. No. 141, as amended). The records show that
Villaflor had applied for the purchase of the lands in question with this Office (Sales Application No.

V-807) on December 2, 1948. xxxx There is a condition in the sales application signed by Villaflor to
the effect that he recognizes that the land covered by the same is of public domain and any and all
rights he may have with respect thereto by virtue of continuous occupation and cultivation are
relinquished to the Government (paragraph 6, Sales Application No. V-807 xxx) of which Villaflor is
very much aware. It also appears that Villaflor had paid for the publication fees appurtenant to the sale
of the land. He participated in the public auction where he was declared the successful bidder. He had
fully paid the purchase prive (sic) thereof (sic). It would be a (sic) height of absurdity for Villaflor to
be buying that which is owned by him if his claim of private ownership thereof is to be believed. The
most that can be said is that his possession was merely that of a sales applicant to when it had not been
awarded because he relinquished his interest therein in favor of NASIPIT who (sic) filed a sales
application therefor.
xxx xxx xxx
x x x During the investigation proceedings, Villaflor presented as his Exhibit (sic) (which NASIPIT
adopted as its own exhibit and had it marked in evidence as Exhibit 1) a duly notarized agreement to
Sell dated July 7, 1948, by virtue of which Villaflor undertook to sell to Nasipit the tracts of land
mentioned therein, for a consideration of Twenty-Four Thousand (P24,000.00) Pesos. Said tracts of
land have been verified to be identical to the parcels of land formerly applied for by Villaflor and
which the latter had relinquished in favor of NASIPIT under a deed of relinquishment executed by him
on August 16, 1950.In another document executed on December 7, 1948 xxx Villaflor as FIRST
PARTY and NASIPIT as SECOND PARTY confirmed the Agreement to Sell of July 7, 1948, which
was maintained in full force and effect with all its terms and conditions x x x (Exh. 38-A); and that for
and in consideration of xxx TWENTY FOUR THOUSAND (P24,000.00) PESOS that the Second
Party shall pay to the First Party xxx the First Party hereby sells, transfers and conveys unto the
Second Party xxx his right interest and participation under and by virtue of the Sales Application No.
V-807 and, in its paragraph 8, it made stipulations as to when part of the said consideration xxx was
paid and when the balance was to be paid, to wit:
a) the amount of SEVEN THOUSAND xxx PESOS has already been paid by the Second Party to the
First Party upon the execution of the Agreement to Sell, on July 17, 1948;
b) the amount of FIVE THOUSAND xxx PESOS shall be paid upon the signing of this present
agreement; and
c) the amount of TWELVE THOUSAND xxx PESOS, shall be paid upon the execution by the First
Party of the Absolute Sale of the Two parcels of land in question in favor of the Second Party of the
Certificate of Ownership of the said two parcels of land. (Exh. 38-B). (Emphasis ours)
It is thus clear from this subsequent document marked Exhibit 38 ANALCO that of the consideration
of the Agreement to Sell dated July7, 1948, involving the 140-hectare area relinquished by Villaflor in
favor of NASIPIT, in the amount of Twenty-Four Thousand (P24,000.00) Pesos:

(1) the amount of Seven Thousand (P7,000.00) Pesos was already paid upon the execution of the
Agreement to Sell on July 7, 1948, receipt of which incidentally was admitted by Villaflor in the
document of December 7, 1948;

xxx xxx xxx

(2) the amount of Five Thousand (P5,000.00) Pesos was paid when said document was signed by
Vicente J. Villaflor as the First Party and Nasipit thru its President, as the Second Party, on December
7, 1948; and

Having found that both the Five Thousand xxx consideration of the deed of Relinquishment xxx and
that the remaining balance of xxx (P12,000.00) to complete the Twenty-Four Thousand (P24,000.00)
Pesos consideration of both the Agreement to Sell dated July 7, 1948, and the document, dated
December 7, 1948, executed by the former in favor of the latter, have been paid Villaflor the issue on
prescription and laches becomes academic and needs no further discussion.

(3) the balance of Twelve Thousand (P12,000.00) Pesos to be paid upon the execution by the First
Party of the Absolute Deed of Sale of the two parcels of land in favor of the Second Party, and upon
delivery to the Second Party of the Certificate of Ownership of the said two parcels of land.

But more than all the questions thus far raised and resolved is the question whether a sales patent can
be issued to NASIPIT for the 140-hectare area awarded to it in the light of Section 11, Article XIV of
the new Constitution which provides in its pertinent portion to wit:

Villaflor contends that NASIPIT could not have paid Villaflor the balance of Twelve Thousand
(P12,000.00) Pesos x x x consideration in the Agreement to Sell will only be paid to applicant-assignor
(referring to Villaflor) upon obtaining a Torrens Title in his favor over the 140-hectare of land applied
for and upon execution by him of a Deed of Absolute Sale in favor of Nasipit Lumber Company, Inc. x
x x. Inasmuch as applicant-assignor was not able to obtain a Torrens Title over the land in question he
could not execute an absolute Deed of (sic) Nasipit Lumber Co., Inc. Hence, the Agreement to Sell was
not carried out and no Twelve Thousand (P12,000.00) Pesos was overpaid either to the applicantassignor, much less to Howard J. Nell Company. (See MEMORANDUM FOR THE APPLICANTASSIGNOR, dated January 5, 1977). xxx.

x x x No private corporation or association may hold alienable land of the public domain except by
lease not to exceed one thousand hectares in area xxx.

xxx Villaflor did not adduce evidence in support of his claim that he had not been paid the xxx
(P12,000.00) xxx consideration of the Agreement to Sell dated July 7, 1948 (Exh. 38 NALCO) beyond
his mere uncorroborated assertions. On the other hand, there is strong evidence to show that said
Twelve Thousand (P12,000.00) Pesos had been paid by (private respondent) to Edward J. Nell
Company by virtue of the Deed of Assignment of Credit executed by Villaflor (Exh. 41 NALCO) for
the credit of the latter.
Atty. Gabriel Banaag, resident counsel of NASIPIT who is in a position to know the facts, testified for
NASIPIT. He described that it was he who notarized the Agreement to Sell (Exh. F); that he knew
about the execution of the document of December 7, 1948 (Exh. 38) confirming the said Agreement to
Sell having been previously consulted thereon by Jose Fernandez, who signed said document on behalf
of NASIPIT xxx that subsequently, in January 1949, Villaflor executed a Deed of Assignment of credit
in favor of Edward J. Nell Company (Exh. 41 NALCO) whereby Villaflor ceded to the latter his
receivable for NASIPIT corresponding to the remaining balance in the amount of Twelve Thousand
xxx Pesos of the total consideration xxx stipulated in both the Agreement to Sell (Exh. F) and the
document dated December 7, 1948 (Exh. 39); xxx. He further testified that the said assignment of
credit was communicated to (private respondent) under cover letter dated January 24, 1949 (Exh. 41A) and not long thereafter, by virtue of the said assignment of credit, (private respondent) paid the
balance of Twelve Thousand xxx due to Villaflor to Edward J. Nell Company xxx. Atty. Banaags
aforesaid testimony stand unrebutted; hence, must be given full weight and credit. xxx Villaflor and his
counsel were present when Atty. Banaags foregoing testimony was given. Yet, Villaflor did not demur,
nor did he rebut the same, despite having been accorded full opportunity to do so.

The Secretary of Justice had previous occasion to rule on this point in his opinion No. 140, s.
1974. Said the Honorable Justice Secretary:
On the second question, (referring to the questions when may a public land be considered to have been
acquired by purchase before the effectivity of the new Constitution posed by the Director of Lands in
his query on the effect on pending applications for the issuance of sales patent in the light of Section
11, Art. XIV of the New Constitution aforecited), you refer to this Offices Opinion No. 64 series of
1973 in which I stated:
On the other hand, with respect to sales applications ready for issuance of sales patent, it is my opinion
that where the applicant had, before the Constitution took effect, fully complied with all this
obligations under the Public Land Act in order to entitle him to a Sales patent, there would be no legal
or equitable justification for refusing to issue or release the sales patent.
With respect to the point as to when the Sales applicant has complied with all the terms and conditions
which would entitle him to a sales patent, the herein above Secretary of Justice went on:
That as to when the applicant has complied with all the terms and conditions which would entitle him
to a patent is a questioned (sic) fact which your office would be in the best position to
determine.However, relating this to the procedure for the processing of applications mentioned above, I
think that as the applicant has fulfilled the construction/cultivation requirements and has fully paid the
purchase price, he should be deemed to have acquired by purchase the particular tract of land and (sic)
the area (sic) in the provision in question of the new constitution would not apply.
From the decision of the Director of Lands, Villaflor filed a Motion for Reconsideration which was
considered as an Appeal M.N.R. Case 4341, to the Ministry of Natural Resources.
On June 6, 1979, the Minister of Natural Resources rendered a Decision (exh. 9), dismissing the
appeal and affirming the decision of the Director of Lands, pertinent portions of which reads:
[15]

After a careful study of the records and the arguments of the parties, we believe that the appeal is not
well taken.
Firstly, the area in dispute is not the private property of appellant.
The evidence adduced by appellant to establish his claim of ownership over the subject area consists of
deeds of absolute sale executed in his favor on January 16, and February 15, 1940, by four (4) different
persons, namely, Cirilo Piencenaves, Fermin Balobo, Claudio Otero and Hermogenes Patete.
However, an examination of the technical descriptions of the tracts of land subject of the deeds of sale
will disclose that said parcels are not identical to, and do not tally with, the area in controversy.
It is a basic assumption of our policy that lands of whatever classification belong to the state. Unless
alienated in accordance with law, it retains its rights over the same as dominus, (Santiago vs. de los
Santos, L-20241, November 22, 1974, 61 SCRA 152).
For, it is well-settled that no public land can be acquired by private persons without any grant, express
or implied from the government. It is indispensable then that there be showing of title from the state or
any other mode of acquisition recognized by law. (Lee Hong Hok, et al. vs. David, et al., L-30389,
December 27, 1972, 48 SCRA 379.)
It is well-settled that all lands remain part of the public domain unless severed therefrom by state grant
or unless alienated in accordance with law.
We, therefore, believe that the aforesaid deeds of sale do not constitute clear and convincing evidence
to establish that the contested area is of private ownership. Hence, the property must be held to be
public domain.
There being no evidence whatever that the property in question was ever acquired by the applicants or
their ancestors either by composition title from the Spanish Government or by possessory information
title or by any other means for the acquisition of public lands, the property must be held to be public
domain. (Lee Hong Hok, et al., vs. David , et al., L-30389 December 27, 1972, 48 SCRA 378-379
citing Heirs of Datu Pendatun vs. Director of Lands; see also Director of Lands vs. Reyes, L-27594,
November 28, 1975, 68 SCRA 177).
Be that as it may, appellant, by filing a sales application over the controverted land, acknowledged
unequivocably [sic] that the same is not his private property.
As such sales applicant, appellant manifestly acknowledged that he does not own the land and that the
same is a public land under the administration of the Bureau of Lands, to which the application was
submitted, xxx All of its acts prior thereof, including its real estate tax declarations, characterized its
possessions of the land as that of a sales applicant and consequently, as one who expects to buy it, but
has not as yet done so, and is not, therefore, its owner. (Palawan Agricultural and Industrial Co., Inc.
vs. Director of Lands, L-25914, March 21, 1972, 44 SCRA 20, 21).

Secondly, appellants alleged failure to pay the consideration stipulated in the deed of relinquishment
neither converts said deed into one without a cause or consideration nor ipso facto rescinds the
same.Appellant, though, has the right to demand payment with legal interest for the delay or to demand
rescission.
xxx xxx xxx
However, appellants cause of action, either for specific performance or rescission of contract, with
damages, lies within the jurisdiction of civil courts, not with administrative bodies.
xxx xxx xxx
Lastly, appellee has acquired a vested right to the subject area and, therefore, is deemed not affected by
the new constitutional provision that no private corporation may hold alienable land of the public
domain except by lease.
xxx xxx xxx
Implementing the aforesaid Opinion No. 64 of the Secretary of Justice, the then Secretary of
Agriculture and Natural Resources issued a memorandum, dated February 18, 1974, which pertinently
reads as follows:
In the implementation of the foregoing opinion, sales application of private individuals covering areas
in excess of 24 hectares and those of corporations, associations, or partnership which fall under any of
the following categories shall be given due course and issued patents, to wit:
1. Sales application for fishponds and for agricultural purposes (SFA, SA and IGPSA) wherein prior to
January 17, 1973;
a. the land covered thereby was awarded;
b. cultivation requirements of law were complied with as shown by investigation reports submitted
prior to January 17, 1973;
c. land was surveyed and survey returns already submitted to the Director of Lands for verification and
approval; and
d. purchase price was fully paid.
From the records, it is evident that the aforestated requisites have been complied with by appellee long
before January 17, 1973, the effectivity of the New Constitution. To restate, the disputed area was
awarded to appellee on August 17, 1950, the purchase price was fully paid on July 26, 1951, the
cultivation requirements were complied with as per investigation report dated December 31, 1949, and
the land was surveyed under Pls-97.

On July 6, 1978, petitioner filed a complaint in the trial court for Declaration of Nullity of
Contract (Deed of Relinquishment of Rights), Recovery of Possession (of two parcels of land
subject of the contract), and Damages at about the same time that he appealed the decision
of the Minister of Natural Resources to the Office of the President.

The Issues

[16]

On January 28, 1983, petitioner died. The trial court ordered his widow, Lourdes D.
Villaflor, to be substituted as petitioner. After trial in due course, the then Court of First
Instance of Agusan del Norte and Butuan City, Branch III, dismissed the complaint on the
grounds that: (1) petitioner admitted the due execution and genuineness of the contract and
was estopped from proving its nullity, (2) the verbal lease agreements were unenforceable
under Article 1403 (2)(e) of the Civil Code, and (3) his causes of action were barred by
extinctive prescription and/or laches. It ruled that there was prescription and/or laches
because the alleged verbal lease ended in 1966, but the action was filed only on January 6,
1978. The six-year period within which to file an action on an oral contract per Article 1145 (1)
of the Civil Code expired in 1972. The decretal portion of the trial courts decision reads:

Petitioner, through his heirs, attributes the following errors to the Court of Appeals:
I. Are the findings of the Court of Appeals conclusive and binding upon the Supreme Court?

[17]

[18]

WHEREFORE, the foregoing premises duly considered, judgment is hereby rendered in favor of the
defendant and against the plaintiff. Consequently, this case is hereby ordered DISMISSED. The
defendant is hereby declared the lawful actual physical possessor-occupant and having a better right of
possession over the two (2) parcels of land in litigation described in par. 1.2 of the complaint as Parcel
I and Parcel II, containing a total area of One Hundred Sixty (160) hectares, and was then the subject
of the Sales Application No. V-807 of the plaintiff (Exhibits 1, 1-A, 1-B, pp. 421 to 421-A, Record),
and now of the Sales Application No. 807, Entry No. V-407 of the defendant Nasipit Lumber Company
(Exhibit Y, pp. 357-358, Record). The Agreements to Sell Real Rights, Exhibits 2 to 2-C, 3 to 3-B, and
the Deed of Relinquishment of Rights, Exhibits N to N-1, over the two parcels of land in litigation are
hereby declared binding between the plaintiff and the defendant, their successors and assigns.
Double the costs against the plaintiff.
The heirs of petitioner appealed to Respondent Court of Appeals which, however,
rendered judgment against petitioner via the assailed Decision dated September 27, 1990
finding petitioners prayers -- (1) for the declaration of nullity of the deed of relinquishment, (2)
for the eviction of private respondent from the property and (3) for the declaration
of petitioners heirs as owners to be without basis. The decretal portion of the assailed 49page, single-spaced Decision curtly reads:
[19]

[20]

WHEREFORE, the Decision appealed from, is hereby AFFIRMED, with costs against plaintiffappellants.
Not satisfied, petitioners heirs filed the instant 57-page petition for review dated
December 7, 1990. In a Resolution dated June 23, 1991, the Court denied this petition for
being late. On reconsideration -- upon plea of counsel that petitioners were poor and that a
full decision on the merits should be rendered -- the Court reinstated the petition and required
comment from private respondent. Eventually, the petition was granted due course and the
parties thus filed their respective memoranda.

II. Are the findings of the Court of Appeals fortified by the similar findings made by the Director of
Lands and the Minister of Natural Resources (as well as by the Office of the President)?
III. Was there forum shopping?
IV. Are the findings of facts of the Court of Appeals and the trial court supported by the evidence and
the law?
V. Are the findings of the Court of Appeals supported by the very terms of the contracts which were
under consideration by the said court?
VI. Did the Court of Appeals, in construing the subject contracts, consider the contemporaneous and
subsequent act of the parties pursuant to article 1371 of the Civil Code?
VII. Did the Court of Appeals consider the fact and the unrefuted claim of Villaflor that he never knew
of the award in favor of Nasipit?
VIII. Did the Court of Appeals correctly apply the rules on evidence in its findings that Villaflor was
paid the P5,000.00 consideration because Villaflor did not adduce any proof that he was not paid?
IX. Is the Court of Appeals conclusion that the contract is not simulated or fictitious simply because it
is genuine and duly executed by the parties, supported by logic or the law?
X. May the prestations in a contract agreeing to transfer certain rights constitute estoppel when this
very contract is the subject of an action for annulment on the ground that it is fictitious?
XI. Is the Court of Appeals conclusion that the lease agreement between Villaflor is verbal and
therefore, unenforceable supported by the evidence and the law?
After a review of the various submissions of the parties, particularly those of petitioner,
this Court believes and holds that the issues can be condensed into three as follows:
(1) Did the Court of Appeals err in adopting or relying on the factual findings of the Bureau of Lands,
especially those affirmed by the Minister (now Secretary) of Natural Resources and the trial court?

(2) Did the Court of Appeals err in upholding the validity of the contracts to sell and the deed of
relinquishment? Otherwise stated, did the Court of Appeals err in finding the deed of relinquishment of
rights and the contracts to sell valid, and not simulated or fictitious?
(3) Is the private respondent qualified to acquire title over the disputed property?

The Courts Ruling

Vasquez, the Court recognized that the MWSS was in the best position to evaluate and to
decide which bid for a waterworks project was compatible with its development plan.
[25]

The rationale underlying the doctrine of primary jurisdiction finds application in this case,
since the questions on the identity of the land in dispute and the factual qualification of private
respondent as an awardee of a sales application require a technical determination by the
Bureau of Lands as the administrative agency with the expertise to determine such
matters.Because these issues preclude prior judicial determination, it behooves the courts to
stand aside even when they apparently have statutory power to proceed, in recognition of the
primary jurisdiction of the administrative agency.
[26]

The petition is bereft of merit. It basically questions the sufficiency of the evidence relied
upon by the Court of Appeals, alleging that public respondents factual findings were based on
speculations, surmises and conjectures. Petitioner insists that a review of those findings is in
order because they were allegedly (1) rooted, not on specific evidence, but on conclusions
and inferences of the Director of Lands which were, in turn, based on misapprehension of the
applicable law on simulated contracts; (2) arrived at whimsically -- totally ignoring the
substantial and admitted fact that petitioner was not notified of the award in favor of private
respondent; and (3) grounded on errors and misapprehensions, particularly those relating to
the identity of the disputed area.

First Issue: Primary Jurisdiction of the Director of Lands and Finality of Factual
Findings of the Court of Appeals
Underlying the rulings of the trial and appellate courts is the doctrine of primary
jurisdiction; i.e., courts cannot and will not resolve a controversy involving a question which is
within the jurisdiction of an administrative tribunal, especially where the question demands
the exercise of sound administrative discretion requiring the special knowledge, experience
and services of the administrative tribunal to determine technical and intricate matters of fact.
[21]

In recent years, it has been the jurisprudential trend to apply this doctrine to cases
involving matters that demand the special competence of administrative agencies even if the
question involved is also judicial in character. It applies where a claim is originally cognizable
in the courts, and comes into play whenever enforcement of the claim requires the resolution
of issues which, under a regulatory scheme, have been placed within the special competence
of an administrative body; in such case, the judicial process is suspended pending referral of
such issues to the administrative body for its view.
[22]

In cases where the doctrine of primary jurisdiction is clearly applicable, the court cannot
arrogate unto itself the authority to resolve a controversy, the jurisdiction over which is initially
lodged with an administrative body of special competence. In Machete vs. Court of Appeals,
the Court upheld the primary jurisdiction of the Department of Agrarian Reform Adjudicatory
Board (DARAB) in an agrarian dispute over the payment of back rentals under a leasehold
contract. In Concerned Officials of the Metropolitan Waterworks and Sewerage System vs.

One thrust of the multiplication of administrative agencies is that the interpretation of contracts and the
determination of private rights thereunder is no longer a uniquely judicial function, exercisable only by
our regular courts
[27]

Petitioner initiated his action with a protest before the Bureau of Lands and followed it
through in the Ministry of Natural Resources and thereafter in the Office of the
President.Consistent with the doctrine of primary jurisdiction, the trial and the appellate courts
had reason to rely on the findings of these specialized administrative bodies.
The primary jurisdiction of the director of lands and the minister of natural resources over
the issues regarding the identity of the disputed land and the qualification of an awardee of a
sales patent is established by Sections 3 and 4 of Commonwealth Act No. 141, also known
as the Public Land Act:
Section 3. The Secretary of Agriculture and Commerce (now Secretary of Natural Resources) shall be
the executive officer charged with carrying out the provisions of this Act through the Director of
Lands, who shall act under his immediate control.
Section 4. Subject to said control, the Director of Lands shall have direct executive control of the
survey, classification, lease, sale or any other form of concession or disposition and management of the
lands of the public domain, and his decision as to questions of fact shall be conclusive when approved
by the Secretary of Agriculture and Commerce.
Thus, the Director of Lands, in his decision, said:

[28]

x x x It is merely whether or not Villaflor has been paid the Five Thousand (P5,000.00) Pesos
stipulated consideration of the deed of relinquishment made by him without touching on the nature of
the deed of relinquishment. The administration and disposition of public lands is primarily vested in
the Director of Lands and ultimately with the Secretary of Agriculture and Natural Resources (now
Secretary of Natural Resources), and to this end--

[23]

[24]

Our Supreme Court has recognized that the Director of Lands is a quasi-judicial officer who passes on
issues of mixed facts and law (Ortua vs. Bingson Encarnacion, 59 Phil 440). Sections 3 and 4 of the
Public Land Law thus mean that the Secretary of Agriculture and Natural Resources shall be the final

arbiter on questions of fact in public land conflicts (Heirs of Varela vs. Aquino, 71 Phil 69; Julian vs.
Apostol, 52 Phil 442).
The ruling of this Office in its order dated September 10, 1975, is worth reiterating, thus:
x x x it is our opinion that in the exercise of his power of executive control, administrative disposition
and allegation of public land, the Director of Lands should entertain the protest of Villaflor and
conduct formal investigation xxx to determine the following points: (a) whether or not the Nasipit
Lumber Company, Inc. paid or reimbursed to Villaflor the consideration of the rights in the amount
of P5,000.00 and what evidence the company has to prove payment, the relinquishment of rights being
part of the administrative process in the disposition of the land in question xxx.
xxxx Besides, the authority of the Director of Lands to pass upon and determine questions considered
inherent in or essential to the efficient exercise of his powers like the incident at issue, i.e. , whether
Villaflor had been paid or not, is conceded by law.
Reliance by the trial and the appellate courts on the factual findings of the Director of
Lands and the Minister of Natural Resources is not misplaced. By reason of the special
knowledge and expertise of said administrative agencies over matters falling under their
jurisdiction, they are in a better position to pass judgment thereon; thus, their findings of fact
in that regard are generally accorded great respect, if not finality, by the courts. The
findings of fact of an administrative agency must be respected as long as they are supported
by substantial evidence, even if such evidence might not be overwhelming or even
preponderant. It is not the task of an appellate court to weigh once more the evidence
submitted before the administrative body and to substitute its own judgment for that of the
administrative agency in respect of sufficiency of evidence.
[29]

[30]

[31]

However, the rule that factual findings of an administrative agency are accorded respect
and even finality by courts admits of exceptions. This is true also in assessing factual findings
of lower courts. It is incumbent on the petitioner to show that the resolution of the factual
issues by the administrative agency and/or by the trial court falls under any of the
exceptions.Otherwise, this Court will not disturb such findings.
[32]

[33]

We mention and quote extensively from the rulings of the Bureau of Lands and the
Minister of Natural Resources because the points, questions and issues raised by petitioner
before the trial court, the appellate court and now before this Court are basically the same as
those brought up before the aforesaid specialized administrative agencies. As held by the
Court of Appeals:
[34]

We find that the contentious points raised by appellant in this action, are substantially the same matters
he raised in BL Claim No. 873 (N). In both actions, he claimed private ownership over the land in
question, assailed the validity and effectiveness of the Deed of Relinquishment of Rights he executed
in August 16, 1950, that he had not been paid the P5,000.00 consideration, the value of the
improvements he introduced on the land and other expenses incurred by him.

In this instance, both the principle of primary jurisdiction of administrative agencies and
the doctrine of finality of factual findings of the trial courts, particularly when affirmed by the
Court of Appeals as in this case, militate against petitioners cause. Indeed, petitioner has not
given us sufficient reason to deviate from them.

Land in Dispute Is Public Land

Petitioner argues that even if the technical description in the deeds of sale and those in
the sales application were not identical, the area in dispute remains his private property. He
alleges that the deeds did not contain any technical description, as they were executed prior
to the survey conducted by the Bureau of Lands; thus, the properties sold were merely
described by reference to natural boundaries. His private ownership thereof was also
allegedly attested to by private respondents former field manager in the latters February 22,
1950 letter, which contained an admission that the land leased by private respondent was
covered by the sales application.
This contention is specious. The lack of technical description did not prove that the
finding of the Director of Lands lacked substantial evidence. Here, the issue is not so much
whether the subject land is identical with the property purchased by petitioner. The issue,
rather, is whether the land covered by the sales application is private or public land. In his
sales application, petitioner expressly admitted that said property was public land. This is
formidable evidence as it amounts to an admission against interest.
In the exercise of his primary jurisdiction over the issue, Director of Lands Casanova
ruled that the land was public:
[35]

x x x Even (o)n the assumption that the lands mentioned in the deeds of transfer are the same as the
140-hectare area awarded to Nasipit, their purchase by Villaflor (or) the latters occupation of the same
did not change the character of the land from that of public land to a private property. The provision of
the law is specific that public lands can only be acquired in the manner provided for therein and not
otherwise (Sec. 11, C.A. No. 141, as amended). The records show that Villaflor had applied for the
purchase of lands in question with this Office (Sales Application No. V-807) on December 2, 1948. xxx
There is a condition in the sales application xxx to the effect that he recognizes that the land covered
by the same is of public domain and any and all rights he may have with respect thereto by virtue of
continuous occupation and cultivation are relinquished to the Government (paragraph 6, Sales
Application No. V-807 of Vicente J. Villaflor, p. 21, carpeta) of which Villaflor is very much aware. It
also appears that Villaflor had paid for the publication fees appurtenant to the sale of the land. He
participated in the public auction where he was declared the successful bidder. He had fully paid the
purchase prive (sic) thereor (sic). It would be a (sic) height of absurdity for Villaflor to be buying that
which is owned by him if his claim of private ownership thereof is to be believed. xxx.
This finding was affirmed by the Minister of Natural Resources:

[36]

Firstly, the area in dispute is not the private property of appellant (herein petitioner).

The evidence adduced by (petitioner) to establish his claim of ownership over the subject area consists
of deeds of absolute sale executed in his favor xxx.

Second Issue: No Simulation of Contracts Proven

However, an examination of the technical descriptions of the tracts of land subject of the deeds of sale
will disclose that said parcels are not identical to, and do not tally with, the area in controversy.

Petitioner insists that contrary to Article 1371 of the Civil Code, Respondent Court
erroneously ignored the contemporaneous and subsequent acts of the parties; hence, it failed
toascertain their true intentions. However, the rule on the interpretation of contracts that was
alluded to by petitioner is used in affirming, not negating, their validity. Thus, Article 1373,
which is a conjunct of Article 1371, provides that, if the instrument is susceptible of two or
more interpretations, the interpretation which will make it valid and effectual should be
adopted. In this light, it is not difficult to understand that the legal basis urged by petitioner
does not support his allegation that the contracts to sell and the deed of relinquishment are
simulated and fictitious. Properly understood, such rules on interpretation even negate
petitioners thesis.

It is a basic assumption of our policy that lands of whatever classification belong to the state. Unless
alienated in accordance with law, it retains its rights over the same as dominus. (Santiago vs. de los
Santos, L-20241, November 22, 1974, 61 SCRA 152).
For it is well-settled that no public land can be acquired by private persons without any grant, express
or implied from the government. It is indispensable then that there be showing of title from the state or
any other mode of acquisition recognized by law. (Lee Hong Hok, et al. vs. David, et al., L-30389,
December 27, 1972, 48 SCRA 379).
xxx xxx xxx xxx
We, therefore, believe that the aforesaid deeds of sale do not constitute clear and convincing evidence
to establish that the contested area is of private ownership. Hence, the property must be held to be
public domain.
There being no evidence whatever that the property in question was ever acquired by the applicants or
their ancestors either by composition title from the Spanish Government or by possessory information
title or by any other means for the acquisition of public lands, the property must be held to be public
domain.
Be that as it may, [petitioner], by filing a sales application over the controverted land, acknowledged
unequivocably [sic] that the same is not his private property.
As such sales applicant manifestly acknowledged that he does not own the land and that the same is a
public land under the administration of the Bureau of Lands, to which the application was submitted,
xxx All of its acts prior thereof, including its real estate tax declarations, characterized its possessions
of the land as that of a sales applicant. And consequently, as one who expects to buy it, but has not as
yet done so, and is not, therefore, its owner.(Palawan Agricultural and Industrial Co., Inc. vs. Director
of Lands, L-25914, March 21, 1972, 44 SCRA 15).
Clearly, this issue falls under the primary jurisdiction of the Director of Lands because its
resolution requires survey, classification, xxx disposition and management of the lands of the
public domain. It follows that his rulings deserve great respect. As petitioner failed to show
that this factual finding of the Director of Lands was unsupported by substantial evidence, it
assumes finality. Thus, both the trial and the appellate courts correctly relied on such finding.
We can do no less.
[37]

[38]

[39]

But let us indulge the petitioner awhile and determine whether the cited
contemporaneous and subsequent acts
of the parties
support
his
allegation
of
simulation. Petitioner asserts that the relinquishment of rights and the agreements to sell
were simulated because, first, the language and terms of said contracts negated private
respondents acquisition of ownership of the land in issue; and second, contemporaneous and
subsequent communications between him and private respondent allegedly showed that the
latter admitted that petitioner owned and occupied the two parcels; i.e., that private
respondent was not applying for said parcels but was interested only in the two hectares it
had leased, and that private respondent supported petitioners application for a patent.
Petitioner explains that the Agreement to Sell dated December 7, 1948 did not and could
not transfer ownership because paragraph 8 (c) thereof stipulates that the balance of twelve
thousand pesos (P12,000.00) shall be paid upon the execution by the First Party [petitioner]
of the Absolute Deed of Sale of the two parcels of land in question in favor of the Second
Party, and upon delivery to the Second Party [private respondent] of the Certificate of
Ownership of the said two parcels of land. The mortgage provisions in paragraphs 6 and 7 of
the agreement state that the P7,000.00 and P5,000.00 were earnest money or a loan with
antichresis by the free occupancy and use given to Nasipit of the 140 hectares of land not
anymore as a lessee.If the agreement to sell transferred ownership to Nasipit, then why was
it necessary to require petitioner, in a second agreement, to mortgage his property in the
event of nonfulfillment of the prestations in the first agreement?
True, the agreement to sell did not absolutely transfer ownership of the land to private
respondent. This fact, however, does not show that the agreement was simulated. Petitioners
delivery of the Certificate of Ownership and execution of the deed of absolute sale were
suspensive conditions, which gave rise to a corresponding obligation on the part of the
private respondent, i.e., the payment of the last installment of the consideration mentioned in
the December 7, 1948 Agreement. Such conditions did not affect the perfection of the
contract or prove simulation. Neither did the mortgage.
Simulation occurs when an apparent contract is a declaration of a fictitious will,
deliberately made by agreement of the parties, in order to produce, for the purpose of
deception, the appearance of a juridical act which does not exist or is different from that

which was really executed. Such an intention is not apparent in the agreements. The intent
to sell, on the other hand, is as clear as daylight.
[40]

Petitioner alleges further that the deed of relinquishment of right did not give full effect to
the two agreements to sell, because the preliminary clauses of the deed allegedly served only
to give private respondent an interest in the property as a future owner thereof and to enable
respondent to follow up petitioners sales application.
We disagree. Such an intention is not indicated in the deed. On the contrary, a real and
factual sale is evident in paragraph 6 thereof, which states: That the Nasipit Lumber Co., Inc.,
xxx is very much interested in acquiring the land covered by the aforecited application to be
used for purposes of mechanized farming and the penultimate paragraph stating: xxx
VICENTE J. VILLAFLOR, hereby voluntarily renounce and relinquish whatever rights to, and
interests I have in the land covered by my above-mentioned application in favor of the Nasipit
Lumber Co., Inc.
We also hold that no simulation is shown either in the letter, dated December 3, 1973, of
the former field manager of private respondent, George Mear. A pertinent portion of the letter
reads:
(a)s regards your property at Acacia, San Mateo, I recall that we made some sort of agreement for the
occupancy, but I no longer recall the details and I had forgotten whether or not we actually did occupy
your land. But if, as you say, we did occupy it, then I am sure that the Company is obligated to pay a
rental.
The letter did not contain any express admission that private respondent was still leasing
the land from petitioner as of that date. According to Mear, he could no longer recall the
details of his agreement with petitioner. This cannot be read as evidence of the simulation of
either the deed of relinquishment or the agreements to sell. It is evidence merely of an honest
lack of recollection.
Petitioner also alleges that he continued to pay realty taxes on the land even after the
execution of said contracts. This is immaterial because payment of realty taxes does not
necessarily prove ownership, much less simulation of said contracts.
[41]

Nonpayment of the Consideration

Did Not Prove Simulation
Petitioner insists that nonpayment of the consideration in the contracts proves their
simulation. We disagree. Nonpayment, at most, gives him only the right to sue for
collection.Generally, in a contract of sale, payment of the price is a resolutory condition and
the remedy of the seller is to exact fulfillment or, in case of a substantial breach, to rescind
the contract under Article 1191 of the Civil Code. However, failure to pay is not even a
breach, but merely an event which prevents the vendors obligation to convey title from
acquiring binding force.
[42]

[43]

Petitioner also argues that Respondent Court violated evidentiary rules in upholding the
ruling of the Director of Lands that petitioner did not present evidence to show private
respondents failure to pay him. We disagree. Prior to the amendment of the rules on
evidence on March 14, 1989, Section 1, Rule 131, states that each party must prove his or
her own affirmative allegations. Thus, the burden of proof in any cause rested upon the party
who, as determined by the pleadings or the nature of the case, asserts the affirmative of an
issue and remains there until the termination of the action. Although nonpayment is a
negative fact which need not be proved, the party seeking payment is still required to prove
the existence of the debt and the fact that it is already due.
[44]

[45]

[46]

Petitioner showed the existence of the obligation with the presentation of the contracts,
but did not present any evidence that he demanded payment from private respondent. The
demand letters dated January 2 and 5, 1974 (Exhs. J and U), adduced in evidence by
petitioner, were for the payment of back rentals, damages to improvements and
reimbursement of acquisition costs and realty taxes, not payment arising from the contract to
sell.
Thus, we cannot fault Respondent Court for adopting the finding of the Director of Lands
that petitioner offered no evidence to support his claim of nonpayment beyond his own selfserving assertions, as he did not even demand payment, orally or in writing, of the five
thousand (P5,000.00) pesos which was supposed to be due him since August 17, 1950, the
date when the order of award was issued to Nasipit, and when his cause of action to recover
payment had accrued. Nonpayment of the consideration in the contracts to sell or the deed of
relinquishment was raised for the first time in the protest filed with the Bureau of Lands on
January 31, 1974. But this protest letter was not the demand letter required by law.
Petitioner alleges that the assignment of credit and the letter of the former field manager
of private respondent are contemporaneous and subsequent acts revealing the nonpayment
of the consideration. He maintains that the P12,000.00 credit assigned pertains to
the P5,000.00 and P7,000.00 initial payments in the December 7, 1948 Agreement, because
the balance of P12,000.00 was not yet due and accruing. This is consistent, he argues, with
the representation that private respondent was not interested in filing a sales application over
the land in issue and that Nasipit was instead supporting petitioners application thereto
in Mears letter to the Director of Lands dated February 22, 1950 (Exh. X).
[47]

This argument is too strained to be acceptable. The assignment of credit did not
establish the nondelivery of these initial payments of the total consideration. First, the
assignment of credit happened on January 19, 1949, or a month after the signing of the
December 7, 1948 Agreement and almost six months after the July 7, 1948 Agreement to
Sell. Second, it does not overcome the recitation in the Agreement of December 7, 1948: xxx
a) The amount of SEVEN THOUSAND (P7,000.00) PESOS has already been paid by the
Second Party to the First Party upon the execution of the Agreement to Sell, on July 7, 1948;
b) The amount of FIVE THOUSAND (P5,000.00) PESOS shall be paid upon the signing of
this present agreement; xxx.
Aside from these facts, the Director of Lands found evidence of greater weight showing
that payment was actually made:
[48]

x x x (T)here is strong evidence to show that said xxx (P12,000.00) had been paid by NASIPIT to
Edward J. Nell Company by virtue of the Deed of Assignment of Credit executed by Villaflor (Exh. 41
NALCO) for the credit of the latter.
Atty. Gabriel Banaag, resident counsel of NASIPIT xxx declared that it was he who notarized the
Agreement to Sell (Exh. F); xxxx that subsequently, in January 1949, Villaflor executed a Deed of
Assignment of credit in favor of Edward J. Nell Company (Exh. 41 NALCO) whereby Villaflor ceded
to the latter his receivable for NASIPIT corresponding to the remaining balance in the amount of xxx
(P12,000.00) xxx of the total consideration xxxx; He further testified that the said assignment xxx was
communicated to NASIPIT under cover letter dated January 24, 1949 (Exh. 41-A) and not long
thereafter, by virtue of the said assignment of credit, NASIPIT paid the balance xxx to Edward J. Nell
Company (p. 58, bid). Atty. Banaags aforesaid testimony stand unrebutted; hence, must be given full
weight and credit.
xxx xxx xxx.
The Director of Lands also found that there had been payment of the consideration in
the relinquishment of rights:
[49]

On the other hand, there are strong and compelling reasons to presume that Villaflor had already been
paid the amount of Five Thousand (P5,000.00) Pesos.
First, x x x What is surprising, however, is not so much his claims consisting of gigantic amounts as his
having forgotten to adduce evidence to prove his claim of non-payment of the Five Thousand
(P5,000.00) Pesos during the investigation proceedings when he had all the time and opportunity to do
so. xxxx The fact that he did not adduce or even attempt to adduce evidence in support thereof shows
either that he had no evidence to offer of that NASIPIT had already paid him in fact. What is worse is
that Villaflor did not even bother to command payment, orally or in writing, of the Five Thousand
(P5,000.00) Pesos which was supposed to be due him since August 17, 1950, the date when the order
of award was issued to Nasipit, and when his cause of action to recover payment had accrued. The fact
that he only made a command for payment on January 31, 1974, when he filed his protest or twentyfour (24) years later is immediately nugatory of his claim for non-payment.
But Villaflor maintains that he had no knowledge or notice that the order of award had already been
issued to NASIPIT as he had gone to Indonesia and he had been absent from the Philippines during all
those twenty-four (24) years. This of course taxes credulity.xxxx
x x x It is more in keeping with the ordinary course of things that he should have acquired information
as to what was transpiring in his affairs in Manila x x x.
Second, it should be understood that the condition that NASIPIT should reimburse Villaflor the amount
of Five Thousand (P5,000.00) Pesos upon its receipt of the order of award was fulfilled as said award
was issued to NASIPIT on August 17, 1950. The said deed of relinquishment was prepared and
notarized in Manila with Villaflor and NASIPIT signing the instrument also in Manila. Now,
considering that Villaflor is presumed to be more assiduous in following up with the Bureau of Lands

the expeditious issuance of the order of award as the (consideration) would depend on the issuance of
said order to award NASIPIT, would it not be reasonable to believe that Villaflor was at hand when the
award was issued to NASIPIT on August 17, 1950, or barely a day which he executed the deed of
relinquishment on August 16, 1950, in Manila? xxxx.
Third, on the other hand, NASIPIT has in his possession a sort of order upon itself -- (the deed of
relinquishment wherein he(sic) obligated itself to reimburse or pay Villaflor the xxx consideration of
the relinquishment upon its receipt of the order of award) for the payment of the aforesaid amount the
moment the order of award is issued to it. It is reasonable to presume that NASIPIT has paid the
(consideration) to Villaflor.
xxx xxx xxx
x x x (I)t was virtually impossible for NASIPIT, after the lapse of the intervening 24 years, to be able
to cope up with all the records necessary to show that the consideration for the deed of relinquishment
had been fully paid. To expect NASIPIT to keep intact all records pertinent to the transaction for the
whole quarter of a century would be to require what even the law does not. Indeed, even the applicable
law itself (Sec. 337, National Internal Revenue Code) requires that all records of corporations be
preserved for only a maximum of five years.
NASIPIT may well have added that at any rate while there are transactions where the proper evidence
is impossible or extremely difficult to produce after the lapse of time xxx the law creates presumptions
of regularity in favor of such transactions (20 Am. Jur. 232) so that when the basic fact is established in
an action the existence of the presumed fact must be assumed by force of law. (Rule 13, Uniform Rules
of Evidence; 9 Wigmore, Sec. 2491).
The Court also notes that Mears letter of February 22, 1950 was sent six months prior to
the execution of the deed of relinquishment of right. At the time of its writing, private
respondent had not perfected its ownership of the land to be able to qualify as a sales
applicant. Besides, although he was a party to the July 7, 1948 Agreement to Sell, Mear was
not a signatory to the Deed of Relinquishment or to the December 7, 1948 Agreement to
Sell. Thus, he cannot be expected to know the existence of and the amendments to the later
contracts. These
circumstances
explain
the
mistaken
representations,
not
misrepresentations, in said letter.

Lack of Notice of the Award

Petitioner insists that private respondent suppressed evidence, pointing to his not having
been notified of the Order of Award dated August 17, 1950. At the bottom of page 2 of the
order, petitioner was not listed as one of the parties who were to be furnished a copy by
Director of Lands Jose P. Dans. Petitioner also posits that Public Land Inspector Sulpicio A.
Taeza irregularly received the copies for both private respondent and the city treasurer of
Butuan City. The lack of notice for petitioner can be easily explained. Plainly, petitioner was
[50]

not entitled to said notice of award from the Director of Lands, because by then, he had
already relinquished his rights to the disputed land in favor of private respondent. In the
heading of the order, he was referred to as sales applicant-assignor. In paragraph number 4,
the order stated that, on August 16, 1950, he relinquished his rights to the land subject of the
award to private respondent. From such date, the sales application was considered to be a
matter between the Bureau of Lands and private respondent only. Considering these facts,
the failure to give petitioner a copy of the notice of the award cannot be considered as
suppression of evidence. Furthermore, this order was in fact available to petitioner and had
been referred to by him since January 31, 1974 when he filed his protest with the Bureau of
Lands.
[51]

All told, the only disqualification that can be imputed to private respondent is the
prohibition in the 1973 Constitution against the holding of alienable lands of the public domain
by corporations. However, this Court earlier settled the matter, ruling that said constitutional
prohibition had no retroactive effect and could not prevail over a vested right to the
land. In Ayog vs. Cusi, Jr., this Court declared:
[54]

[55]

We hold that the said constitutional prohibition has no retroactive application to the sales application of
Bian Development Co., Inc. because it had already acquired a vested right to the land applied for at the
time the 1973 Constitution took effect.

[52]

Third Issue: Private Respondent Qualified

for an Award of Public Land
Petitioner asserts that private respondent was legally disqualified from acquiring the
parcels of land in question because it was not authorized by its charter to acquire disposable
public agricultural lands under Sections 121, 122 and 123 of the Public Land Act, prior to its
amendment by P.D. No. 763. We disagree. The requirements for a sales application under
the Public Land Act are: (1) the possession of the qualifications required by said Act (under
Section 29) and (2) the lack of the disqualifications mentioned therein (under Sections 121,
122, and 123).However, the transfer of ownership via the two agreements dated July 7 and
December 7, 1948 and the relinquishment of rights, being private contracts, were binding only
between petitioner and private respondent. The Public Land Act finds no relevance because
the disputed land was covered by said Act only after the issuance of the order of award in
favor of private respondent. Thus, the possession of any disqualification by private
respondent under said Act is immaterial to the private contracts between the parties
thereto. (We are not, however, suggesting a departure from the rule that laws are deemed
written in contracts.) Consideration of said provisions of the Act will further show their
inapplicability to these contracts. Section 121 of the Act pertains to acquisitions of public land
by a corporation from a grantee, but petitioner never became a grantee of the disputed
land. On the other hand, private respondent itself was the direct grantee. Sections 122 and
123 disqualify corporations, which are not authorized by their charter, from acquiring public
land; the records do not show that private respondent was not so authorized under its charter.
Also, the determination by the Director of Lands and the Minister of Natural Resources
of the qualification of private respondent to become an awardee or grantee under the Act is
persuasive on Respondent Court. In Espinosa vs. Makalintal, the Court ruled that, by law,
the powers of the Secretary of Agriculture and Natural Resources regarding the disposition of
public lands -- including the approval, rejection, and reinstatement of applications are of
executive and administrative nature. (Such powers, however, do not include the judicial
power to decide controversies arising from disagreements in civil or contractual relations
between the litigants.) Consequently, the determination of whether private respondent is
qualified to become an awardee of public land under C.A. 141 by sales application is included
therein.

That vested right has to be respected. It could not be abrogated by the new Constitution. Section 2,
Article XIII of the 1935 Constitution allows private corporations to purchase public agricultural lands
not exceeding one thousand and twenty-four hectares. Petitioners prohibition action is barred by the
doctrine of vested rights in constitutional law.
A right is vested when the right to enjoyment has become the property of some particular person or
persons as a present interest. (16 C.J.S. 1173). It is the privilege to enjoy property legally vested, to
enforce contracts, and enjoy the rights of property conferred by existing law (12 C.J. 955, Note 46, No.
6) or some right or interest in property which has become fixed and established and is no longer open
to doubt or controversy (Downs vs. Blount, 170 Fed. 15, 20, cited in Balboa vs. Farrales, 51 Phil. 498,
502).
The due process clause prohibits the annihilation of vested rights. A state may not impair vested rights
by legislative enactment, by the enactment or by the subsequent repeal of a municipal ordinance, or by
a change in the constitution of the State, except in a legitimate exercise of the police power (16 C.J.S.
1177-78).
It has been observed that, generally, the term vested right expresses the concept of present fixed
interest, which in right reason and natural justice should be protected against arbitrary State action, or
an innately just an imperative right which an enlightened free society, sensitive to inherent and
irrefragable individual rights, cannot deny (16 C.J.S. 1174, Note 71, No. 5, citing Pennsylvania
Greyhound Lines, Inc. vs. Rosenthal, 192 Atl. 2 587).
nd

Secretary of Justice Abad Santos in his 1973 opinion ruled that where the applicant, before the
Constitution took effect, had fully complied with all his obligations under the Public Land Act in order
to entitle him to a sales patent, there would seem to be no legal or equitable justification for refusing to
issue or release the sales patent (p. 254, Rollo).

[53]

In Opinion No. 140, series of 1974, he held that as soon as the applicant had fulfilled the construction
or cultivation requirements and has fully paid the purchase price, he should be deemed to have
acquired by purchase the particular tract of land and to him the area limitation in the new Constitution
would not apply.

In Opinion No. 185, series of 1976, Secretary Abad Santos held that where the cultivation requirements
were fulfilled before the new Constitution took effect but the full payment of the price was completed
after January 17, 1973, the applicant was, nevertheless, entitled to a sales patent (p. 256, Rollo).
Such a contemporaneous construction of the constitutional prohibition by a high executive official
carries great weight and should be accorded much respect. It is a correct interpretation of section 11 of
Article XIV.
In the instant case, it is incontestable that prior to the effectivity of the 1973 Constitution the right of
the corporation to purchase the land in question had become fixed and established and was no longer
open to doubt or controversy.
Its compliance with the requirements of the Public Land Law for the issuance of a patent had the effect
of segregating the said land from the public domain. The corporations right to obtain a patent for that
land is protected by law. It cannot be deprived of that right without due process (Director of Lands vs.
CA, 123 Phil. 919).
The Minister of Natural Resources ruled, and we agree, that private respondent was
similarly qualified to become an awardee of the disputed land because its rights to it vested
prior to the effectivity of the 1973 Constitution:
[56]

Lastly, appellee has acquired a vested right to the subject area and, therefore, is deemed not affected by
the new constitutional provision that no private corporation may hold alienable land of the public
domain except by lease.
It may be recalled that the Secretary of Justice in his Opinion No. 64, series of 1973, had declared, to
wit:
On the other hand, with respect to sales application ready for issuance of sales patent, it is my opinion
that where the applicant had, before, the constitution took effect, fully complied with all his obligations
under the Public Land act in order to entitle him to sales patent, there would seem to be not legal or
equitable justification for refusing to issue or release the sales patent.
Implementing the aforesaid Opinion No. 64 xxx, the then Secretary of Agriculture and Natural
Resources issued a memorandum, dated February 18, 1974, which pertinently reads as follows:

b. cultivation requirements of law were complied with as shown by investigation reports submitted
prior to January 17, 1973;
c. land was surveyed and survey returns already submitted to the Director of Lands for verification and
approval; and
d. purchase price was fully paid.
From the records, it is evident that the aforestated requisites have been complied with by appellee long
before January 17, 1973, the effectivity of the New Constitution. To restate, the disputed area was
awarded to appellee on August 17, 1950, the purchase price was fully paid on July 26, 1951, the
cultivation requirements were complied with as per investigation report dated December 31, 1949, and
the land was surveyed under Pls-97.
The same finding was earlier made by the Director of Lands:

[57]

It is further contended by Villaflor that Nasipit has no juridical personality to apply for the purchase of
public lands for agricultural purposes. The records clearly show, however, that since the execution of
the deed of relinquishment of August 16, 1950, in favor of Nasipit, Villaflor has always considered and
recognized Nasipit as having the juridical personality to acquire public lands for agricultural
purposes. In the deed of relinquishment xxx, it is stated:
6. That the Nasipit Lumber Co., Inc., a corporation duly organized in accordance with the laws of the
Philippines, x x x.
Even this Office had not failed to recognize the juridical personality of Nasipit to apply for the
purchase of public lands xxx when it awarded to it the land so relinquished by Villaflor (Order of
Award dated August 17, 1950) and accepted its application therefor. At any rate, the question whether
an applicant is qualified to apply for the acquisition of public lands is a matter between the applicant
and this Office to decide and which a third party like Villaflor has no personality to question beyond
merely calling the attention of this Office thereto.
Needless to say, we also agree that the November 8, 1946 Lease Agreement between
petitioner and private respondent had been terminated by the agreements to sell and the
relinquishment of rights. By the time the verbal leases were allegedly made in 1951 and
1955, the disputed land had already been acquired and awarded to private respondent. In
any event, petitioners cause of action on these alleged lease agreements prescribed long
before he filed Civil Case No. 2072-III, as correctly found by the trial and appellate courts.
Thus, it is no longer important, in this case, to pass upon the issue of whether or not
amendments to a lease contract can be proven by parol evidence. The same holds true as
regards the issue of forum-shopping.
[58]

In the implementation of the foregoing opinion, sales application of private individuals covering areas
in excess of 24 hectares and those of corporations, associations, or partnership which fall under any of
the following categories shall be given due course and issued patents, to wit:
Sales application for fishponds and for agricultural purposes (SFA, SA and IGPSA) wherein prior to
January 17, 1973,
a. the land covered thereby was awarded;

[59]

All in all, petitioner has not provided us sufficient reason to disturb the cogent findings of
the Director of Lands, the Minister of Natural Resources, the trial court and the Court of
Appeals.

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.
Narvasa, C.J., (Chairman), Romero, and Francisco, JJ., concur.
Melo, J., no part.

FIRST DIVISION
[G.R. No. 127249. February 27, 1998]

CAMARINES NORTE ELECTRIC COOPERATIVE, INC. (CANORE-CO); RUBEN N.

BARRAMEDA; ELVIS L. ESPIRITU; MERARDO G. ENERO, JR.; MARCELITO B.
ABAS; and REYNALDO V. ABUNDO, petitioners, vs. HON. RUBEN D. TORRES,
in his capacity as Executive Secretary; REX TANTIONGCO; HONESTO DE
JESUS;
ANDRES
IBASCO;
TEODULO
M.
MEA;
and
VICENTE
LUKBAN, respondent.
DECISION
DAVIDE, JR., J.:

May the Office of the President validly constitute an ad hoc committee to take over and manage
the affairs of an electric cooperative?
This is the key issue in this original action for certiorari and prohibition under Rule 65 of the Rules
of Court wherein the petitioners seek to (a) annul and set aside Memorandum Order No. 409 of the
Office of the President dated 3 December 1996 constituting an Ad Hoc Committee to take over and
manage the affairs of the Camarines Norte Electric Cooperative, Inc., (hereafter CANORECO) until
such time as a general membership meeting can be called to decide the serious issues affecting the
said cooperative and normalcy in operations is restored"; and (b) prohibit the respondents from
performing acts or continuing proceedings pursuant to the Memorandum Order.
The factual backdrop of this case is not complicated.
Petitioner CANORECO is an electric cooperative organized under the provisions of P.D. No. 269,
otherwise known as the National Electrification Administration Decree, as amended by P.D. No. 1645.
On 10 March 1990, then President Corazon C. Aquino signed into law R.A. No. 6938 and R.A. No.
6939. The former is the Cooperative Code of the Philippines, while the latter created the Cooperative
Development Authority (CDA) and vested solely upon the CDA the power to register cooperatives.

Section 10. Enforcement Powers and Remedies. -- In the exercise of its power of supervision
and control over electric cooperatives and other borrower, supervised or controlled entities,
the NEA is empowered to issue orders, rules and regulations and motu proprio or upon
petition of third parties, to conduct investigations, referenda and other similar actions in all
matters affecting said electric cooperatives and other borrower, or supervised or controlled
entities.
...
Finally, the repealing clause (Article 127) of the Cooperative Code provides:

Provided, however, That nothing in this Code shall be interpreted to mean the amendment or
repeal of any provision of Presidential Decree No. 269: Provided, further, That the electric
cooperatives which qualify as such under this Code shall fall under the coverage thereof.
CANORECO registered with the CDA pursuant to R.A. No. 6938 and R.A. No. 6939. On 8 March
1993, the CDA issued a Certificate of Provisional Registration (T-003-93) to CANORECO effective for
two years. On 1 March 1995, the CDA extended this provisional registration until 4 May 1997.
However, on 10 July 1996, CANORECO filed with the CDA its approved amendments to its Articles of
Cooperation converting itself from a non-stock to a stock cooperative pursuant to the provisions of R.A.
No. 6938 and the Omnibus Implementing Rules and Regulations on Electric Cooperatives. On the same
date the CDA issued a Certificate of Registration of the amendments to CANORECO Articles of
Cooperation certifying that CANORECO is registered as a full-[f]ledged cooperative under and by virtue
of R.A. 6938.
[1]

[2]

Article 122 of the Cooperative Code expressly provides that electric cooperatives shall be covered
by the Code. Article 128 of the said Code and Section 17 of R.A. No. 6939 similarly provide that
cooperatives created under P.D. No. 269, as amended by P.D. No. 1645, shall have three years within
which to qualify and register with the CDA and that after they shall have so qualified and registered, the
provisions of Sections 3 and 5 of P.D. No. 1645 shall no longer be applicable to them. These Sections 3
and 5 read as follows:

[3]

Previously, on 11 March 1995, the Board of Directors of CANORECO approved Resolution No. 22
appointing petitioner Reynaldo V. Abundo as permanent General Manager. The Board was composed
of
[4]

SEC. 3. Section 5(a), Chapter II of Presidential Decree No. 269 is hereby amended by adding
sub-paragraph (6) to read as follows:
(6) To authorize the NEA Administrator to designate, subject to the confirmation of the Board
Administrators, an Acting General Manager and/or Project Supervisor for a Cooperative
where vacancies in the said positions occur and/or when the interest of the Cooperative and
the program so requires, and to prescribe the functions of said Acting General Manager
and/or Project Supervisor, which powers shall not be nullified, altered or diminished by any
policy or resolution of the Board of Directors of the Cooperative concerned.
...
SEC. 5. Section 10, Chapter II of Presidential Decree No. 269 is hereby amended to read as
follows:

Ruben N. Barrameda -- President

Elvis L. Espiritu -- Vice president
Merardo G. Enero, Jr. -- Secretary
Marcelito B. Abas -- Treasurer
Antonio R. Obias -- Director
Luis A. Pascua -- Director

Norberto Z. Ochoa -- Director

4) Resolution No. 30, c.s. -- hiring the services of Atty. Juanito Subia as retainer-lawyer
for CANORECO.
[6]

Leonida Z. Manalo -- OIC GM/Ex-Officio

On 28 May 1995, Antonio Obias, Norberto Ochoa, Luis Pascua, and Felicito Ilan held a special
meeting of the Board of Directors of CANORECO. The minutes of the meeting showed that President
Ruben Barrameda, Vice-President Elvis Espiritu, and Treasurer Marcelito Abas were absent; that Obias
acted as temporary chairman; that the latter informed those present that it was the responsibility of the
Board after the annual meeting to meet and elect the new set of officers, but that despite the fact that he
had called the attention of President Barrameda and Directors Abas and Espiritu for the holding thereof,
the three chose not to appear; and that those present in the special meeting declared all positions in the
board vacant and thereafter proceeded to hold elections by secret balloting with all the directors present
considered candidates for the positions. The following won and were declared as the newly elected
officers of the CANORECO:
[5]

President . . . . . . . . Norberto Ochoa

Vice President . . . . Antonio Obias
Secretary . . . . . . . . Felicito Ilan
Treasurer. . . . . . . . Luis Pascua
Thereupon, these newly elected officers approved the following resolutions:

1) Resolution No. 27, c.s. -- confirming the election of the new set of officers of the
Board of Directors of CANORECO
2) Resolution No. 28, c.s. -- recalling Resolution No. 22, c.s. appointing Mr. Reynaldo V.
Abundo as permanent General Manager in view of the fact that such appointment
was in violation of the provisions of R.A. 6713; declaring the position of General
Manager as vacant; and designating Mr. Oscar Acobera as Officer-in-Charge
3) Resolution No. 29, c.s. -- authorizing the Board President, or in his absence, the VicePresident, countersigned by the Treasurer, or in his absence, the Secretary, to be the
only officers who can transfer funds from savings to current accounts; and
authorizing the Officer-in-Charge, Mr. Acobera, to issue checks without
countersignature in an amount not to exceed P3,000.00 and in excess thereof, to be
countersigned by the President and/or the Treasurer

The petitioners challenged the above resolutions and the election of officers by filing with the CDA
a Petition for Declaration of Nullity of Board Resolutions and Election of Officers with Prayer for
Issuance of Injunction/Temporary Restraining Order, which the CDA docketed as CDA-CO Case No. 95010.
In its Resolution of 15 February 1996, the CDA resolved the petition in favor of the petitioners and
decreed as follows:
[7]

WHEREFORE, premises considered, the Board Meeting of May 28, 1995, participated by the
respondents, and all the Resolutions issued on such occasion, are hereby declared NULL
AND VOID AB INITIO.
Likewise, the election of respondents Norberto Ochoa, Antonio Obias, Felicito Ilan, and Luis
Pascua, as President, Vice-President, Secretary, and Treasurer, respectively, of CANORECO
is hereby declared NULL AND VOID AB INITIO.
Hence, respondents Norberto Ochoa, Antonio Obias, Felicito Ilan, and Luis Pascua are
hereby ordered to refrain from representing themselves as President, Vice-President,
Secretary, and Treasurer, respectively, of CANORECO. The same respondents are further
ordered to refrain from acting as authorized signatories to the bank accounts of CANORECO.
Further respondent Felicito Ilan is hereby ordered to refrain from exercising the duties and
functions of a member of the Board of CANORECO until the election protest is resolved with
finality by the proper forum. In the meantime, the incumbency of petitioner Merardo Enero, Jr.
as Director of the CANORECO Board is hereby recognized.
A status quo is hereby ordered as regards the position of General Manager, being held by Mr.
Reynaldo Abundo, considering that the recall of his appointment was done under a void
Resolution, and that the designation of Mr. Oscar Acodera as Officer-in-Charge, under the
same void Resolution, has no force and effect.
Finally, respondents Antonio Obias, Norberto Ochoa, Luisito Pascua, and petitioners Ruben
Barrameda, Elvis Espiritu, Marcelito Abas and Merardo Enero, Jr. are hereby ordered to work
together, as Board of Directors, for the common good of CANORECO and its consumermembers, and to maintain an atmosphere of sincere cooperation among the officers and
members of CANORECO.

On 28 June 1996, in defiance of the abovementioned Resolution of the CDA and with the active
participation of some officials of the National Electrification Administration (NEA), the group of Norberto
Ochoa, Antonio Obias, Felicito Ilan, and Luis Pascua forcibly took possession of the offices of
CANORECO and assumed the duties as officers thereof.

VICENTE LUKBAN -- Member

National Electrification Administration Nominee

[8]

On 26 September 1996, pursuant to the writ of execution and order to vacate issued by the CDA,
the petitioners were able to reassume control of the CANORECO and to perform their respective
functions.
[9]

On 3 December 1996, the President of the Philippines issued Memorandum Order No.
409 onstituting an Ad Hoc Committee to temporarily take over and manage the affairs of
CANORECO. It reads as follows:
[10]

To efficiently and effectively address the worsening problem of the Camarines Norte Electric
Cooperative, Inc. (CANORECO) and in order not to prejudice and endanger the interest of
the people who rely on the said cooperative for their supply of electricity, an AD HOC
Committee is hereby constituted to take over and manage the affairs of CANORECO until
such time as a general membership meeting can be called to decide the serious issues
affecting the said cooperative and normalcy in operations is restored. Further, if and when
warranted, the present Board of Directors may be called upon by the Committee for advisory
services without prejudice to the receipt of their per diems as may be authorized by existing
rules and regulations.

The said Committee shall have the following functions:

1. Designate the following upon the recommendation of the Chairman:
1.1 an Acting General Manager who shall handle the day-to-day operations of
the Cooperative. In the meantime, the General Manager shall be deemed
to be on leave without prejudice to the payment of his salaries legally due
him; and
1.2 a Comptroller who shall handle the financial affairs of the Cooperative.
2. Ensure that:
The AD HOC Committee shall submit a written report to the President, through the Office of
the Executive Secretary, every two (2) weeks from the effectivity of this Order.

Presidential Assistant on Energy Affairs

A General Membership Meeting shall be called by the AD HOC Committee to determine

whether or not there is a need to change the composition of the membership of the
Cooperatives Board of Directors. If the need exists, the AD HOC Committee shall call for
elections. Once the composition of the Board of Directors is finally settled, it shall decide on
the appointment of a General Manager in accordance with prescribed laws, rules and
regulations. Upon the appointment of a General Manager, the Committee shall
become functus officio.

HONESTO DE JESUS -- Member

This Memorandum Order shall take effect immediately.

The AD HOC Committee shall be composed of the following:

REX TANTIONGCO -- Chairman

Cooperative Development Authority Nominee

On 11 December 1996, the petitioners filed this petition wherein they claim that

ANDRES IBASCO -- Member

I. THE PRESIDENT HAS NO POWER TO TAKE OVER AND MANAGE OR TO ORDER THE TAKEOVER OR MANAGEMENT OF CANORECO.

Cooperative Development Authority Nominee

TEODULO M. MEA -- Member
National Electrification Administration Nominee

II. [THE] TAKE-OVER OF CANORECO BY THE AD HOC COMMITTEE IS UNLAWFUL DESPITE

DESIGNATION OF CANORECO CONSUMERS AS MEMBERS OF AD HOC COMMITTEE.
III. [THE] RELEGATION OF PETITIONERS AS MERE ADVISERS TO THE AD HOC COMMITTEE
AMOUNTS TO REMOVAL FROM OFFICE WHICH THE PRESIDENT HAS NO POWER TO

DO. MOREOVER, PETITIONERS REMOVAL VIOLATES PETITIONERS RIGHT TO DUE

PROCESS OF LAW.
IV. THE PRESIDENT IS LIKEWISE WITHOUT POWER TO DESIGNATE OR ORDER THE
DESIGNATION OF AN ACTING GENERAL MANAGER FOR CANORECO AND TO CONSIDER
THE INCUMBENT REYNALDO V. ABUNDO TO BE ON LEAVE.

The petitioners assert that there is no provision in the Constitution or in a statute expressly, or
even impliedly, authorizing the President or his representatives to take over or order the take-over of
electric cooperatives. Although conceding that while the State, through its police power, has the right to
interfere with private business or commerce, they maintain that the exercise thereof is generally limited
to the regulation of the business or commerce and that the power to regulate does not include the
power to take over, control, manage, or direct the operation of the business. Accordingly, the creation of
the Ad Hoc Committee for the purpose of take-over was illegal and void.
The petitioners further claim that Memorandum Order No. 409 removed them from their positions
as members of the Board of Directors of CANORECO. The President does not have the authority to
appoint, much less to remove, members of the board of directors of a private enterprise including
electric cooperatives. He cannot rely on his power of supervision over the NEA to justify the designation
of an acting general manager for CANORECO under P.D. No. 269 as amended by P.D. No. 1645, for
CANORECO had already registered with the CDA pursuant to R.A. No. 6938 and R.A. No. 6939; hence,
the latter laws now govern the internal affairs of CANORECO.
On 3 January 1997, the petitioners filed an Urgent Motion for Issuance of a Temporary Restraining
Order.
On 9 January 1997, the petitioners filed a Manifestation and Motion informing the Court that on 8
January 1997 respondent Rex Tantiongco notified the petitioners that the Ad HocCommittee was taking
over the affairs and management of CANORECO effective as of that date. They reiterated their plea
for the issuance of a temporary restraining order because the Ad Hoc Committee has taken control of
CANORECO and usurped the functions of the individual petitioners.
[11]

In the Resolution dated 13 January 1997, we required respondents to comment on the petition.
Despite four extensions granted it, the Office of the Solicitor General (OSG) failed to file its
Comment. Hence, in the resolution of 16 July 1997 we deemed the OSG to have waived the filing of its
Comment and declared this case submitted for decision. The OSGs motion to admit its Comment, as
well as the attached Comment, belatedly filed on 24 July 1997 was merely noted without action in the
resolution of 13 August 1997. We also subsequently denied for lack of merit its motion for
reconsideration.
We find the instant petition impressed with merit.

Having registered itself with the CDA pursuant to Section 128 of R.A. No. 6938 and Section 17 of
R.A. No. 6939, CANORECO was brought under the coverage of said laws. Article 38 of R.A. No. 6938
vests upon the board of directors the conduct and management of the affairs of cooperatives, and
Article 39 provides for the powers of the board of directors. These sections read:

Article 38. Composition of the Board of Directors. -- The conduct and management of the
affairs of a cooperative shall be vested in a board of directors which shall be composed of not
less than five (5) nor more than fifteen (15) members elected by the general assembly for a
term fixed in the by-laws but not exceeding a term of two (2) years and shall hold office until
their successors are duly elected and qualified, or until duly removed. However, no director
shall serve for more than three (3) consecutive terms.
Article 39. Powers of the Board of Directors. -- The board of directors shall direct and
supervise the business, manage the property of the cooperative and may, by resolution,
exercise all such powers of the cooperative as are not reserved for the general assembly
under this Code and the by-laws.
As to the officers of cooperatives, Article 43 of the Code provides:

ART. 43. Officers of the Cooperatives. The board of directors shall elect from among
themselves only the chairman and vice-chairman, and elect or appoint other officers of the
cooperative from outside of the board in accordance with their by-laws. All officers shall serve
during good behavior and shall not be removed except for cause and after due hearing. Loss
of confidence shall not be a valid ground for removal unless evidenced by acts or omissions
causing loss of confidence in the honesty and integrity of such officer. No two (2) or more
persons with relationship up to the third degree of consanguinity or affinity shall serve as
elective or appointive officers in the same board.
[12]

Under Article 34 of the Code, the general assembly of cooperatives has the exclusive power, which
cannot be delegated, to elect or appoint the members of the board of directors and to remove them for
cause. Article 51 thereof provides for removal of directors and officers as follows:

ART. 51. Removal. -- An elective officer, director, or committee member may be removed by a
vote of two-thirds (2/3) of the voting members present and constituting a quorum, in a regular
or special general assembly meeting called for the purpose. The person involved shall be
given an opportunity to be heard at said assembly.
Memorandum Order No. 409 clearly removed from the Board of Directors of CANORECO the
power to manage the affairs of CANORECO and transferred such power to the Ad HocCommittee,
albeit temporarily. Considering that (1) the take-over will be until such time that a general membership
meeting can be called to decide the serious issues affecting the said cooperative and normalcy in

operations is restored, and (2) the date such meeting shall be called and the determination of whether
there is a need to change the composition of the membership of CANORECOs Board of Directors are
exclusively left to the Ad Hoc Committee, it necessarily follows that the incumbent directors were, for all
intents and purposes, suspended at the least, and removed, at the most, from their office. The said
Memorandum did no less to the lawfully appointed General Manager by directing that upon the
settlement of the issue concerning the composition of the board of directors the Committee shall decide
on the appointment of a general manager. In the meantime, it authorized the Committee to designate
upon the recommendation of the Chairman an Acting Manager, with the lawfully appointed Manager
considered on leave, but who is, however, entitled to the payment of his salaries.
Nothing in law supported the take-over of the management of the affairs of CANORECO, and the
suspension, if not removal, of the Board of Directors and the officers thereof.
It must be pointed out that the controversy which resulted in the issuance of the Memorandum
Order stemmed from a struggle between two groups vying for control of the management of
CANORECO. One faction was led by the group of Norberto Ochoa, while the other was petitioners
group whose members were, at that time, the incumbent directors and officers. It was the action of
Ochoa and his cohorts in holding a special meeting on 28 May 1995 and then declaring vacant the
positions of cooperative officers and thereafter electing themselves to the positions of president, vicepresident, treasurer, and secretary of CANORECO which compelled the petitioners to file a petition with
the CDA. The CDA thereafter came out with a decision favorable to the petitioners.
Obviously there was a clear case of intra-cooperative dispute. Article 121 of the Cooperative Code
is explicit on how the dispute should be resolved; thus:

ART. 121. Settlement of Disputes. -- Disputes among members, officers, directors, and
committee members, and intra-cooperative disputes shall, as far as practicable, be settled
amicably in accordance with the conciliation or mediation mechanisms embodied in the bylaws of the cooperative, and in applicable laws.

Even granting for the sake of argument that the party aggrieved by a decision of the CDA could
pursue an administrative appeal to the Office of the President on the theory that the CDA is an agency
under its direct supervision and control, still the Office of the President could not in this case, motu
proprio or upon request of a party, supplant or overturn the decision of the CDA. The record does not
disclose that the group of Norberto Ochoa appealed from the decision of the CDA in CDA-CO Case No.
95-010 to the Office of the President as the head of the Executive Department exercising supervision
and control over said agency. In fact the CDA had already issued a Cease and Desist Order dated 14
August 1996 ordering Antonio Obias, Norberto Ochoa, Luis Pascua, Felicito Ilan and their followers to
cease and desist from acting as the Board of Directors and Officers of Camarines Norte Electric
Cooperative (CANORECO) and to refrain from implementing their Resolution calling for the District V
Election on August 17 and 24, 1996. Consequently, the said decision of the CDA had long become
final and executory when Memorandum Order No. 409 was issued on 3 December 1996. That
Memorandum cannot then be considered as one reversing the decision of the CDA which had attained
finality.
[13]

Under Section 15, Chapter III of Book VII of the Administrative Code of 1987 (Executive Order No.
292), decisions of administrative agencies become final and executory fifteen days after receipt of a
copy thereof by the party adversely affected unless within that period an administrative appeal or
judicial review, if proper, has been perfected. One motion for reconsideration is allowed. A final
resolution or decision of an administrative agency also binds the Office of the President even if such
agency is under the administrative supervision and control of the latter.
We have stated before, and reiterate it now, that administrative decisions must end sometime, as
fully as public policy demands that finality be written on judicial controversies. Public interest requires
that proceedings already terminated should not be altered at every step, for the rule of non quieta
movere prescribes that what had already been terminated should not be disturbed. A disregard of this
principle does not commend itself to sound public policy.
[14]

Neither can police power be invoked to clothe with validity the assailed Memorandum Order No.
409. Police power is the power inherent in a government to enact laws, within constitutional limits, to
promote the order, safety, health, morals, and general welfare of society. It is lodged primarily in the
legislature. By virtue of a valid delegation of legislative power, it may also be exercised by the President
and administrative boards, as well as the lawmaking bodies on all municipal levels, including
the barangay. Delegation of legislative powers to the President is permitted in Sections 23(2) and
28(2) of Article VI of the Constitution. The pertinent laws on cooperatives, namely, R.A. No. 6938, R.A.
No. 6939, and P.D. No. 269 as amended by P.D. No. 1645 do not provide for the President or any other
administrative body to take over the internal management of a cooperative. Article 98 of R.A. 6938
instead provides:
[15]

Should such a conciliation/mediation proceeding fail, the matter shall be settled in a court of
competent jurisdiction.

[16]

Complementing this Article is Section 8 of R.A. No. 6939, which provides:

SEC. 8. Mediation and Conciliation. Upon request of either or both or both parties, the [CDA]
shall mediate and conciliate disputes with the cooperative or between cooperatives: Provided,
That if no mediation or conciliation succeeds within three (3) months from request thereof, a
certificate of non-resolution shall be issued by the commission prior to the filing of appropriate
action before the proper courts.

[17]

ART. 98. Regulation of Public Service Cooperatives. -- (1) The internal affairs of public
service cooperatives such as the rights and privileges of members, the rules and procedures
for meetings of the general assembly, board of directors and committees; for the election and
qualification of officers, directors, and committee members; allocation and distribution of

surpluses, and all other matters relating to their internal affairs shall be governed by this
Code.
We do not then hesitate to rule that Memorandum Order No. 409 has no constitutional and
statutory basis. It violates the basic underlying principle enshrined in Article 4(2) of R.A. No. 6938 that
cooperatives are democratic organizations and that their affairs shall be administered by persons
elected or appointed in a manner agreed upon by the members. Likewise, it runs counter to the policy
set forth in Section 1 of R.A. No. 6939 that the State shall, except as provided in said Act, maintain a
policy of non-interference in the management and operation of cooperatives.
WHEREFORE, the instant petition is GRANTED and Memorandum Order No. 409 of the
President is hereby declared INVALID.
SO ORDERED.
Narvasa, Regalado, Romero,
Panganiban,and Martinez, JJ., concur.

SECOND DIVISION
Bellosillo,

Melo,

Quisumbing, No part. Involve in O.P. matter.

Purisima, No part. Did not take in the deliberation.

Puno,

Vitug,

Kapunan,

Mendoza,

[G.R. No. 93540. December 13, 1999]

FULGENCIO S. FACTORAN, JR., Secretary, Department of Environment and Natural
Resources, VICENTE A. ROBLES and NESTOR GAPUZAN, petitioners,
vs.COURT OF APPEALS (Third Division), Hon. BENIGNO T. DAYAW,as,
Judge, Regional Trial Court of Quezon City, Branch 80, JESUS SY and LILY
FRANCISCO UY, respondents.
DECISION
DE LEON, JR., J.:

Before us is a petition for review on certiorari of the Decision and Resolution of the
Court of Appeals dated March 30, 1990 and May 18, 1990, respectively, dismissing
petitioners charge that Honorable Benigno T. Dayaw, Presiding Judge of Branch 80 of the
Regional Trial Court (RTC) of Quezon City, committed grave abuse of discretion in ordering
them to deliver to private respondents the six-wheeler truck and its cargo, some 4,000 board
feet of narra lumber which were confiscated by the Department of Environment and Natural
Resources (DENR) and forfeited in favor of the government. [1]
The antecedent facts:
On August 9, 1988, two (2) police officers of the Marikina Police Station, Sub-Station
III, intercepted a six-wheeler truck, with Plate No. NJT-881, carrying 4,000 board feet of

narra lumber as it was cruising along the Marcos Highway. They apprehended the truck
driver, private respondent Jesus Sy, and brought the truck and its cargo to the Personnel
Investigation Committee/Special Actions and Investigation Division (PIC/SAID) of the
DENR Office in Quezon City. There, petitioner Atty. Vicente Robles of the PIC/SAID
investigated them, and discovered the following discrepancies in the documentation of the
narra lumber:[2]

Private respondents neither asked for reconsideration of nor appealed, the said order to
the Office of the President. Consequently, the confiscated narra lumber and six-wheeler truck
were forfeited in favor of the government. They were subsequently advertised to be sold at
public auction on March 20, 1989.[8]

a. What were declared in the documents (Certificate of Timber Origin, Auxiliary Invoices and
various Certifications) were narra flitches, while the cargo of the truck consisted of narra
lumber;

On March 17, 1989, private respondents filed a complaint with prayer for the issuance of
writs of replevin and preliminary injunction and/or temporary restraining order for the
recovery of the confiscated lumber and six-wheeler truck, and to enjoin the planned auction
sale of the subject narra lumber, respectively.[9] Said complaint was docketed as Civil Case
No. Q-89-2045 and raffled to Branch 80 of the RTC of Quezon City.

b. As appearing in the documents, the Plate Numbers of the truck supposed to carry the forest
products bear the numbers BAX-404, PEC-492 or NSN-267, while the Plate Number of the
truck apprehended is NVT-881;

On the same day, the trial court issued an Order directing petitioners to desist from
proceeding with the planned auction sale and setting the hearing for the issuance of the writ
of preliminary injunction on March 27, 1989.[10]

c. Considering that the cargo is lumber, the transport should have been accompanied by a
Certificate of Lumber Origin, scale sheet of said lumber and not by a Certificate of Timber
Origin, which merely covers only transport of logs and flitches;

On March 20, 1989, the scheduled date of the auction sale, private respondents filed an
Ex-Parte Motion for Release and Return of Goods and Documents (Replevin) supported by
an Affidavit for Issuance of Writ of Replevin and Preliminary Injunction and a Replevin
Bond in the amount of P180,000.00.[11] The trial court granted the writ of replevin on the same
day and directed the petitioners to deliver the xxx [n]arra lumber, original documents and
truck with plate no. NJT 881 to the custody of the plaintiffs and/or their representative x x x.

d. The Log Sale Purchase Agreement presented is between DSM Golden Cup International as
the seller and Bonamy Enterprises as the buyer/consignee and not with Lily Francisco
Lumber and Hardware,[3]
which are in violation of Bureau of Forestry Development (BFD) Circular No. 10. The said
BFD Circular requires possession or transportation of lumber to be supported by the
following documents: (1) Certificate of Lumber Origin (CLO) which shall be issued only by
the District Forester, or in his absence, the Assistant District Forester; (2) Sales Invoice; (3)
Delivery Receipt; and (4) Tally Sheets. [4] Such omission is punishable under Sec. 68 of
Presidential Decree (P.D.) No. 705 otherwise known as the Revised Forestry Code. [5] Thus,
petitioner Atty. Robles issued a temporary seizure order and seizure receipt for the narra
lumber and the six-wheeler truck.[6]
On January 20, 1989, petitioner Fulgencio S. Factoran, then Secretary of Environment
and Natural Resources (hereinafter referred to as petitioner Secretary) issued an order for the
confiscation of the narra lumber and the six-wheeler truck. [7]

[12]

On March 22, 1989, the trial court issued a writ of seizure. However, petitioners refused
to comply therewith.[13] David G. Brodett, Sheriff of Branch 80 of the RTC of Quezon City
(hereinafter referred to as the Sheriff) reported that petitioners prevented him from removing
the subject properties from the DENR Compound and transferring them to the Mobil Unit
Compound of the Quezon City Police Force.To avoid any unwarranted confrontation between
them, he just agreed to a constructive possession of the properties in question. [14] In the
afternoon of the same day, petitioners filed a Manifestation stating their intention to file a
counterbond under Rule 60 of the Rules of Court to stay the execution of the writ of seizure
and to post a cash bond in the amount of P180,000.00. But the trial court did not oblige
petitioners for they failed to serve a copy of the Manifestation on private
respondents. Petitioners then immediately made the required service and tendered the cash
counterbond in the amount of P180,000.00, but it was refused, petitioners Manifestation
having already been set for hearing on March 30, 1989. [15]

On March 27, 1989, petitioners made another attempt to post a counterbond which was,
however, denied for the same reason. [16]
On the same day, private respondents filed a motion to declare petitioners in contempt
for disobeying the writ of seizure.[17] The trial court gave petitioners twenty-four (24) hours to
answer the motion. Hearing thereon was scheduled on March 30, 1989.
However, on March 29, 1989, petitioners filed with the Court of Appeals a Petition for
Certiorari, Prohibition and/or Mandamus to annul the Orders of the trial court dated March
20, 1989 and March 27, 1989.[18]
On March 30, 1989, the Court of Appeals granted petitioners temporary relief in the
form of a temporary restraining order (TRO).
On September 11, 1989, the Court of Appeals converted the TRO into a writ of
preliminary injunction upon filing by petitioners of a bond in the amount of P180,000.00. [19]
However, on March 30, 1990, the Court of Appeals lifted the writ of preliminary
injunction and dismissed the petition. It declared that as the complaint for replevin filed by
private respondents complied with the requirements of an affidavit and bond under Secs. 1
and 2 of Rule 60 of the Revised Rules of court, issuance of the writ of replevin was
mandatory.[20]
As for the contempt charges against petitioners, the Court of Appeals believed the same
were sufficiently based on a written charge by private respondents and the report submitted
by the Sheriff.[21]
On April 25, 1990, petitioners filed a motion for reconsideration of the foregoing
decision. However, that motion was denied by the Court of Appeals in its Resolution dated
May 18, 1990.[22]
Hence this petition.
On the one hand, petitioners contend, thus:
(1) Confiscated lumber cannot be subject of replevin. [23]

(2) Petitioners not compelled to criminally prosecute private respondents but may opt only to
confiscate lumber".[24]
(3) Private respondent charged criminally in court. [25] and
(4) Writ of Replevin issued in contravention of PD #605.[26]

On the other hand, private respondents argue that:

(1) The respondent
Judge
had jurisdiction to take cognizance of the
complaint for recovery of personal property and, therefore, had
jurisdiction to issue the necessary orders in connection therewith.[27]
(2)

The issuance of the order for the delivery of personal property

upon application, affidavit and filing of replevin bond by the plaintiff is mandatory and not
discretionary, hence, no abuse of discretion can be committed by the trial court in the issuance
thereof.[28]

(3) The Order of March 20, 1989 was in accordance with Section 4, Rule 60 of the Rules of Court and
is, therefore, valid.[29]
(4) The private respondents have not been proven to have violated Section 68 of the Revised Forestry
Code.[30]
(5) The petitioners do not have the authority to keep private respondents property for an indefinite
period, more so, to dispose of the same without notice and hearing or without due process. [31]
(6) Contrary to the allegation of petitioners, no formal investigation was conducted by the PIC with
respect to the subject lumber in this case. [32]
(7) The alleged Order dated January 20, 1989 of the petitioner Secretary Fulgencio Factoran, Jr. of the
DENR is not valid and does not make the issuance of the order of replevin illegal. [33] and
(8) The subject properties were not in custody of the law and may be replevied. [34]

At the outset we observe that herein respondents never appealed the confiscation order
of petitioner Secretary to the Office of the President as provided for in Sec. 8 of P.D. No. 705
which reads:
All actions and decisions of the Director are subject to review, motu propio or upon appeal of
any person aggrieved thereby, by the Department Head whose decision shall be final and

executory after the lapse of thirty (30) days from receipt by the aggrieved party of said
decision unless appealed to the President x x x. The decision of the Department Head may not
be reviewed by the courts except through a special civil action for certiorari and prohibition.

an affidavit, sans allegations therein that satisfy the requirements of Sec. 2, Rule 60 of the
Revised Rules of Court, cannot justify the issuance of a writ of replevin. Said provision
reads:

The doctrine of exhaustion of administrative remedies is basic. Courts, for reasons of law,
comity and convenience, should not entertain suits unless the available administrative
remedies have first been resorted to and the proper authorities have been given an appropriate
opportunity to act and correct their alleged errors, if any, committed in the administrative
forum.[35] As to the application of this doctrine in cases involving violations of P.D. No. 705,
our ruling in Paat v. Court of Appeals, is apropos:

Affidavit and bond. - Upon applying for such order the plaintiff must show by his own
affidavit or that of some other person who personally knows the facts:

Moreover, it is important to point out that the enforcement of forestry laws, rules and
regulations and the protection, development and management of forest lands fall within the
primary and special responsibilities of the Department of Environment and Natural
Resources. By the very nature of its function, the DENR should be given a free hand
unperturbed by judicial intrusion to determine a controversy which is well within its
jurisdiction. The assumption by the trial court, therefore, of the replevin suit filed by private
respondents constitutes an encroachment into the domain of the administrative agencys
prerogative. The doctrine of primary jurisdiction does not warrant a court to arrogate unto
itself the authority to resolve a controversy the jurisdiction over which is initially lodged with
an administrative body of special competence. In Felipe Ismael, Jr. and Co. vs. Deputy
Executive Secretary, which was reiterated in the recent case of Concerned Officials of MWSS
vs. Vasquez, this Court held:
Thus, while the administration grapples with the complex and multifarious problems caused
by unbridled exploitation of these resources, the judiciary will stand clear. A long line of
cases establish the basic rule that the courts will not interfere in matters which are addressed
to the sound discretion of government agencies entrusted with the regulation of activities
coming under the special technical knowledge and training of such agencies. [36]
However, petitioners did not file a motion to dismiss based on the ground of nonexhaustion of administrative remedies. Thus, it is deemed waived.[37]
Nonetheless, the petition is impressed with merit.
First. A writ of replevin does not just issue as a matter of course upon the applicants
filing of a bond and affidavit, as the Court of Appeals has wrongly put it. The mere filing of

(a) That the plaintiff is the owner of the property claimed, particularly describing it, or
entitled to the possession thereof;
(b) That the property is wrongfully detained by the defendant, alleging the cause of detention
thereof to his best knowledge, information, and belief;
(c) That it has not been taken for a tax assessment or fine pursuant to law, or seized under an
execution, or an attachment against the property of the plaintiff, or, if so seized, that it is
exempt from such seizure; and
(d) The actual value of the property.
xxxxxxxxx.
Wrongful detention by the defendant of the properties sought in an action for replevin
must be satisfactorily established. If only a mechanistic averment thereof is offered, the writ
should not be issued.
In the case at bar, the subject narra lumber and six-wheeler truck were confiscated by
petitioner Secretary pursuant to Section 68-A of P.D. No. 705, as amended by Executive
Order (E.O.) No. 277, to wit:
SEC. 68-A. Administrative Authority of the Department Head or His Duly Authorized
Representative to Order Confiscation. - In all cases of violations of this Code or other forest
laws, rules and regulations, the Department Head or his duly authorized representative, may
order the confiscation of any forest products illegally cut, gathered, removed, or possessed or
abandoned, and all conveyances used either by land, water, or air in the commission of the
offense and to dispose of the same in accordance with pertinent laws, regulations or policies
on the matter.[38]

As the petitioner Secretarys administrative authority to confiscate is clearly provided by law,

the taking of the subject properties is not wrongful and does not warrant the issuance of a writ
of replevin prayed for by private respondents.
Second. Issuance of the confiscation order by petitioner Secretary was a valid exercise of
his power under Sec. 68-A of P.D. No. 705. By virtue of said order, the narra lumber and sixwheeler truck of private respondents were held in custodia legis and hence, beyond the reach
of replevin.
Property lawfully taken by virtue of legal process is deemed to be in custodia legis.
When a thing is in official custody of a judicial or executive officer in pursuance of his
execution of a legal writ, replevin will not lie to recover it.[40] Otherwise, there would be
interference with the possession before the function of law had been performed as to the
process under which the property was taken.[41] So basic is this doctrine that it found inclusion
in the 1997 amendments introduced to the Rules of Civil Procedure. Thus, Sec. 2(c), Rule 60
of the 1997 Rules of Civil Procedure provides that:
[39]

Affidavit and bond. - Upon applying for such order the plaintiff must show by his own
affidavit or that of some other person who personally knows the facts:

WHEREAS, there is an urgency to conserve the remaining forest resources of the country for
the benefit and welfare of the present and future generations of Filipinos;
WHEREAS, our forest resources may be effectively conserved and protected through the
vigilant enforcement and implementation of our forestry laws, rules and regulations;
WHEREAS, the implementation of our forestry laws suffers from technical difficulties, due
to certain inadequacies in the Penal provisions of the Revised Forestry Code of the
Philippines; and
WHEREAS, to overcome this [sic] difficulties, there is a need to penalize certain acts more
responsive to present situations and realities;
It is interesting to note that Section 68-A is a new provision authorizing the DENR to
confiscate, not only conveyances but forest products as well. On the other hand, confiscation
of forest products by the court in a criminal action has long been provided for in Section 68.
If as private respondents insist, the power of confiscation cannot be exercised except only
through the court under Section 68, then Section 68-A would have no purpose at all. Simply
put, Section 68-A would not have provided any solution to the problem perceived in EO 277,
x x x.[43]

x x x x x x x x x;
(c) That the property has not been distrained or taken for a tax assessment or fine pursuant to
law, or seized under a writ of execution, or preliminary attachment or otherwise placed under
custodia legis, or if so seized, that it is exempt from such seizure or custody; x x x
x x x x x x x x x.[42]
Third. Petitioner Secretarys authority to confiscate forest products under Sec. 68-A of
P.D. No. 705 is distinct from and independent of the confiscation of forest products in a
criminal action provided for in Section 68 of P.D. No. 705. Thus, in Paat, we held that:
x x x precisely because of the need to make forestry laws more responsive to present
situations and realities and in view of the urgency to conserve the remaining resources of the
country, that the government opted to add Section 68-A. This amendatory provision is an
administrative remedy totally separate and distinct from criminal proceedings. x x x. The
preamble of EO 277 that added Section 68-A to PD 705- is most revealing:

Sec. 68-A was added precisely to supplant the inadequacies and supplement criminal
enforcement of forestry laws.
Fourth. Sec. 80 of P. D. No. 705 which requires delivery of the seized forest products
within six (6) hours from the time of the seizure to the appropriate official designated by law
to conduct preliminary investigations applies only to criminal prosecutions provided for in
Sec. 68, and not to administrative confiscation provided for in Section 68-A.
Sec. 80 of P.D. No. 705 provides:
SEC. 80. Arrest; Institution of criminal actions. - A forest officer or employee of the Bureau
shall arrest even without a warrant any person who has committed or is committing in his
presence any of the offenses defined in this Chapter. He shall also seize and confiscate, in
favor of the Government, the tools and equipment used in committing the offense, and the
forest products cut, gathered or taken by the offender in the process of committing the
offense. The arresting officer or employee shall thereafter deliver within six (6) hours from

the time of arrest and seizure, the offender and the confiscated forest products, tools and
equipment to, and file the proper complaint with, the appropriate official designated by law to
conduct preliminary investigations and file informations in court.
x x x x x x x x x.
The title of Sec. 80 - Arrest; Institution of Criminal Actions - bespeaks this intendment of the
law. The fact, too, that Secs. 68 and 80 were co-existing prior to the introduction of Sec. 68A, proves that Sec. 80 applies to the criminal prosecutions subject of Sec. 68 and not to the
administrative confiscation subject of Sec. 68-A. Sec. 68-A, therefore, should not be
interpreted in relation to Sec. 80 as to require that criminal charges be filed with and seized
forest products be immediately delivered to, the fiscal in case of administrative confiscation,
for this renders nugatory the purpose sought to be achieved thereby. Statutes should always
be construed in the light of the object to be achieved and the evil or mischief to be
suppressed, and they should be given such interpretation as will advance the object, suppress
the mischief, and secure the benefits intended. [44]
Fifth. Nothing in the records supports private respondents allegation that their right to
due process was violated as no investigation was conducted prior to the confiscation of their
properties.
On the contrary, by private respondents own admission, private respondent Sy who
drove the six-wheeler truck was properly investigated by petitioner Atty. Robles at the
PIC/SAID Office of the DENR.Thereafter, private respondent Sy and his witnesses were
given full opportunity to explain the deficiencies in the documents. [45] Private respondents
categorically stated that they made a continuous and almost daily follow-up and plea x x x
with the PIC for the return of the truck and lumber x x x. [46] Finally in a letter dated December
30, 1989, private respondent Lily Francisco Uy requested petitioner Secretary for immediate
resolution and release of the impounded narra sawn lumber.[47]
Undoubtedly, private respondents were afforded an opportunity to be heard before the
order of confiscation was issued. There was no formal or trial type hearing but the same is
not, in all instances, essential in administrative proceedings. It is settled that due process is
satisfied when the parties are afforded fair and reasonable opportunity to explain their side of
the controversy or an opportunity to move for a reconsideration of the action or ruling
complained of.[48]

Moreover, respondents claim that the order of confiscation was antedated and not the
product of the investigation supposedly conducted by the PIC of the DENR. However, they
proffer no proof to support that allegation. On the other hand, there is the legal presumption
that official duty has been regularly performed. The presumption of regularity in the
performance of official duties is even particularly strong with respect to administrative
agencies like the DENR which are vested with quasi-judicial powers in enforcing the laws
affecting their respective fields of activity, the proper regulation of which requires of them
such technical mastery of all relevant conditions obtaining in the nation. [49]
Finally. The writ of seizure and the writ of replevin were issued by the trial court in
grave abuse of its discretion. Thus, disobedience thereto cannot constitute indirect contempt
of court which presupposes that the court order thereby violated was valid and legal. Without
a lawful order having been issued, no contempt of court could be committed. [50]
WHEREFORE, the instant petition is hereby GRANTED. The Decision of the Court of
Appeals dated March 30, 1990 and its Resolution dated May 18, 1990 in CA-G.R. SP No.
17194 are hereby SET ASIDE and REVERSED. Respondent Presiding Judge Benigno T.
Dayaw, of the Regional Trial Court of Quezon City, is PERMANENTLY ENJOINED from
enforcing the Orders dated March 20, 1989 and March 22, 1989 in Civil Case No. Q-892045, or if said orders have already been enforced, the said respondent Judge is directed to
render judgment of forfeiture on the replevin bond filed by private respondents. Finally, the
said respondent Judge is PERMANENTLY ENJOINED from further acting on the Motion for
Contempt filed by private respondents against the petitioners.
Costs against private respondents.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing and Buena, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-13744

November 29, 1918

JOSE LINO LUNA, petitioner-appellant,

vs.
EULOGIO RODRIGUEZ, respondent-appellant;
SERVANDO DE LOS ANGELES, respondent.
Ramon Diokno and Agapito Ygnacio for petitioner.
Sumulong & Estrada for respondent.

JOHNSON, J.:
It appears from the record that an election for the office of governor of the Province of Rizal was held on
the 6th day of June, 1916. At said election Jose Lino Luna, Eulogio Rodriguez and Servando de los
Angeles were candidates for said office. The election was closed, the votes cast in the various
municipalities were counted, and a return was made by the inspectors of said municipalities to the
provincial board of canvassers, who, after a canvass of said returns, proclaimed the following result:
(a) That Eulogio Rodriguez received 4,321 votes; (b) Jose Lino Luna 4,157; (c) Servando de los
Angeles 3,576 votes; and (d) that Eulogio Rodriguez, having received a plurality of said votes, was duly
elected governor of said province.
Against said proclamation Jose Lino Luna presented a protest in the Court of First Instance. Upon said
protest issue was joined, hearing was had and a decision was rendered which was, on appeal, set
aside and a new trial ordered. (Lino Luna vs. Rodriguez and De los Angeles, 37 Phil. Rep., 186.)
Complying with said order, a new trial was had at which the Honorable William E. McMahon, judge,
presided. Additional evidence was adduced. After a consideration of all of the facts and the evidence
adduced at both trials, Judge McMahon reached the conclusion that the ballots cast for the various
candidates were as indicated in the returns of the inspectors of the various municipalities except those
in the municipality of Taytay and Binangonan. In the municipality of Taytay, Judge McMahon found from
the evidence that 50 ballots cast for Eulogio Rodriguez should not have been counted for him, and
ordered that number of votes deducted from his total. In the municipality of Binangonan, Judge
McMahon found that the inspectors did not close the polls at 6 o'clock p.m., and that a large number of
persons voted after that time, and directed that the total vote of Eulogio Rodriguez should be reduced
by the number of such votes, without ascertaining how many had been cast for Rodriguez and how

many for Luna. By deducting the said votes in the municipality of Taytay and those cast after six o'clock
p.m. in the municipality of Binangonan, Judge McMahon concluded that Jose Lino Luna had received a
plurality of the legal votes cast at said election and ordered the provincial board of canvassers to correct
its canvass accordingly. From that conclusion both parties to the contest appealed to this court and
made several assignments of error.
Considering all of said assignments of error, we find that they present, in fact, but three questions:
(1) What is the effect of holding the polls open after the hour fixed for closing the election?
(2) What is the effect of assistance rendered by the inspectors of the election to incapacitated persons,
without first requiring of such persons an oath to the effect that they are incapacitated to prepare their
own ballots?
(3) What is the effect of a failure on the part of the authorities to provide proper voting booths?
With reference to the first question, the law provides that "at all the elections held under the provisions
of this Act the polls shall be open from seven o'clock in the morning until six o'clock in the afternoon,
during which period not more than one member of the board of inspectors shall be absent at one time,
and then for not to exceed twenty minutes at one time." (Sec. 21 of Act No. 1582; sec. 11 of Act No.
2045; sec. 543 of Act No. 2657, and sec. 445 of Act No. 2711.) Are the provisions with reference to the
time of opening and closing the polls mandatory? It is admitted in the present case that the polls were
not closed at 6 p.m. The record shows that at 6 p.m. a large number of voters had not yet been able to
vote and that, for that reason, an agreement was made between some of the candidates for office who
were present and the board of inspectors, to the effect that the polls should be kept open in order that
such electors might vote. No objection whatever to that agreement was made by any person at that
time.
One of the reasons why all of the voters of the municipality had not voted before 6 p.m. was that the
board of inspectors failed to have the list of voters properly prepared at 7 a.m., and therefore but few of
the voters were able to vote before eleven or eleven-thirty in the morning. That failure, on the part of the
board of inspectors, made it impossible for many of the voters of the municipality of Binangonan to vote
before the regular time for the closing of the polls.
Shall the ballot of an innocent voter, who is prevented, through no fault of his, from casting the same
before 6 p.m. be annulled for the simple reason that the polls were kept open, after the hour designated
by the law, for the purpose of giving such voter an opportunity to vote?
Experience and observation has taught legislatures and courts that, at the time of a hotly contested
election, the partisan spirit of ingenious and unscrupulous politicians will lead them beyond the limits of
honesty and decency and by the use of bribery, fraud and intimidation, despoil the purity of the ballot
and defeat the will of the people at the polls. Such experience has led the legislatures to adopt very
stringent rules for the purpose of protecting the voter in the manner of preparing and casting his ballot to
guard the purity of elections. (Paulino vs. Cailles, 37 Phil. Rep., 825.)

The infinite ingenuity of violent partisan spirit in evading the rules and regulation of elections and the
use of bribery, fraud and intimidation has made necessary the establishment of elaborate and rigid rules
and regulations for the conduct of elections. The very elaborateness of these rules has resulted in their
frequent violation and the reports of the courts are replete with cases in which the result of an election
has been attacked on the ground that some provision of the law has not been complied with.
Presumably, all the provisions of the election laws have a purpose and should therefore be observed.
(Detroit vs. Rush, 82 Mich., 532; 10 L. R. A., 171; 9 R. C. L., 1091; Patton vs. Watkins, 131 Ala., 387; 90
Am. State Rep., 43, 72.)
It has been announced in many decisions that the rules and regulations, for the conduct of
elections, are mandatory before the election, but when it is sought to enforce them after the election
they are held to be directory only, if that is possible, especially where, if they are held to be
mandatory, innocent voters will be deprived of their votes without any fault on their part.
(Patton vs. Watkins, 131 Ala., 387; 90 Am. State Rep., 43, 72; Jones vs. State, 153 Ind., 440.)
In the case of Gardiner vs. Romulo (26 Phil. Rep., 521), we held that when the Election Law
does not provide that a departure from a prescribed form will be fatal and such departure has been due
to an honest mistake or misrepresentation of the Election Law, and such departure has not been used
as a means for fraudulent practices and it is clear that there has been a free and honest expression of
the popular will, the law will be held to be directory and such departure will be considered a harmless
irregularity. However, the irregularities may be so numerous as not to be attributed to ignorance or
honest mistake, but to a design to defeat the will of the voters or to such careless disregard of the law
as to amount not only to laches but to fraudulent intent. In such cases, the election officers should be
punished, the election should be declared null and a new election held.
It has been held, therefore, very generally, that the provisions of a statute as to the manner of
conducting the details of an election are not mandatory, but directory merely, and irregularities, in
conducting an election and counting the votes, not proceeding from any wrongful intent and which
deprives no legal voter of his vote, will not vitiate an election or justify the rejection of the entire votes of
a precinct. (Behrensmeyer vs. Kreitz, 135 Ill., 591; Hankey vs. Bowman, 82 Minn., 328;
Sprague vs. Norway, 31 Cal., 173; Webre vs. Wilton, 29 La. Ann., 610.)
The purpose of an election is to give the voters a direct participation in the affairs of their government,
either in determining who shall be their public officials or in deciding some question of public interest;
and for that purpose all of the legal voters should be permitted, unhampered and unmolested, to cast
their ballot. When that is done and no frauds have been committed, the ballots should be counted and
the election should not be declared null. Innocent voters should not be deprived of their participation in
the affairs of their government for mere irregularities on the part of the election officers, for which they
are in no way responsible. A different rule would make the manner and method of performing a public
duty of greater importance than the duty itself. (Loomis vs.Jackson, 6 W. Va., 613.)
The errors and irregularities which warrant the rejection of ballots and the annulment of an election and
thus deprive lawful voters of their legal right to vote, should be such as to fully justify that result. (The
People vs. Cook, 8 N. Y., 67; 59 Am. Dec., 451.) It has been held that even great irregularities on the

part of election officers will not of necessity vitiate an election, where no fraud is committed or
attempted, or no illegal vote was polled was no legal voter was deprived of his vote.
(Morris vs. Vanlaningham, 11 Kan., 269.)
No complaint is made that any fraud was committed nor that any person voted who had no right to vote,
by reason of the fact that the polls were kept open after the hour fixed by the law. It is admitted that the
polls were kept open after the hour, by the consent of all parties concerned, for the reasons and
purposes above indicated. In view of such facts, should the vote of the innocent voter be annulled and
he thereby deprived of his participation in the affairs of the government when he was guilty of no illegal
act? If the inspectors may, for one reason or another, prevent the opening of the polls or delay the
commencement of the voting until 11 o'clock in the morning and then close the polls in the evening so
as to prevent all those who desire to vote from voting, without incurring criminal liability for a violation of
the election laws, the same motives will induce them to delay the opening of the polls until later and
thus prevent any to vote except those whom they desire.
The polls should be opened and closed in strict accord with the provisions of the law. Voters who do not
appear and offer to vote within the hours designated by the law should not be permitted to vote after the
time for closing the polls has arrived. Upon the other hand, if the voter is prevented, during the voting
hours, from voting, and is not permitted to vote by reason of the failure of the inspectors to do their duty,
then, certainly, in the absence of some fraud, neither such votes nor the entire vote of the precinct
should be annulled simply because some votes were cast after the regular hour. (People vs. Prewett,
124 Cal., 7; Packwood vs. Brownell, 121 Cal., 478; Pickett vs. Russell, 42 Fla., 116.)
The decisions in the various States of the United States are not uniform upon the effect of a failure to
open and close polls at the time specified by the law. In some States such a provision has been held to
be mandatory, in others directory. The decisions seem to be based upon the language of the particular
statutes discussed.
We are not inclined to the belief that the legislature intended that a failure to comply with the law in this
jurisdiction should render the entire election void, nor nullify the votes cast after the period mentioned in
the law, unless the polls were kept open after the hour for the purpose of permitting some fraud to be
committed, or for the purpose of permitting some person to vote who had not appeared during the
regular voting hours.
The section of the law which we are discussing provides that 'not more than one member of the board
of inspectors shall be absent at one time and then for not to exceed twenty minutes at one time."
Suppose that the evidence showed that two of the inspectors were absent at one time and for a period
longer than twenty minutes, would the courts be justified in holding that the entire election was void, in
the absence of fraud, for the reason? There is little justification for holding that one provision of said
section is mandatory and the other directory.
Our conclusion upon the first question, in view of the foregoing, is that in the present case there seems
to be no justification, under the facts, there being no fraud committed, for annulling the votes of innocent
voters who were permitted by the election inspectors to cast their votes in a legal manner after the

regular hour for closing the polls. In this conclusion, however, we do not desire to be understood to
have decided that in no case should the courts not annul and set aside an election, where fraud is
clearly proved, for a violation of the section under discussion. When the polls are kept open after the
hour prescribed by the law for the purpose of defeating the will of the people, such a violation of the law
should result in annulling and setting aside the election of that precinct. No such facts exist in the
present case. It is true, perhaps, that a number of the votes cast after the hour for closing the polls were
sufficient to change the result of the election, but the result would have been the same had those same
voters been permitted to vote, except for the negligence of the inspectors, during the regular hours for
voting. There seems to be no more reason for annulling the votes cast, after the hour for closing the
election, than for annulling the election for the reason that the inspectors failed to provide the means for
voting at the time fixed for opening the polls in the morning.
We are firmly of the opinion that instead of depriving the innocent voters of their right to participate in
the affairs of their government for irregularities committed by the election inspectors, the latter should be
proceeded against in a criminal action for failure, on their part, to comply with the law and be punished
in accordance with section 29 of Act No. 1592; section 2632 of Act No. 2657 and section 2639 of Act
No. 2711.
The various and numerous provisions of the Election Law are adopted to assist the voters in their
participation in the affairs of the government, and not to defeat that object. When the voters have
honestly cast their ballots, the same should not be nullified simply because the officers appointed, under
the law to direct the election and guard the purity of elections, have not done their duty. The law
provides a remedy, by criminal action, against them. They should be prosecuted, and the will of the
honest voter, as expressed through his ballot, should be protected and upheld.
lawphi1.net

It may be noted in this relation that, under the law, the polls are kept open from 7 a.m. until 6 p.m. or, for
a period of eleven hours only. In the municipality of Binangonan the record shows that there were
375 analfabetos(illiterate persons) and 164 other voters. The law requires an analfabeto to take an oath
and that the oath shall be filed. Naturally the inspectors require some time in (a) ascertaining whether or
not the voter is in fact an analfabeto; (b) in administering, preparing, signing and filing the oath.
Suppose one minute only is allowed for that work. Then two inspectors must accompany such a voter to
the booth, there assist him in preparing his ballot and then return to their position occupied by them as
inspectors. We do not think that work could be accomplished in less than another minute and it would
more than likely occupy nearer two minutes. But admitting that it could be accomplished in one minute,
we have, at least, two minutes occupied by two inspectors for each analfabeto. There being
375 analfabetos, it would require 750 minutes to vote, or 12 hours. If the inspectors had strictly
complied with the law, not all of the analfabetos of said municipality could have voted in the eleven
hours provided by the law, not to say anything of the time necessarily occupied with the 164 other
voters of the municipality who would, at least, occupy one minute each of the time of the inspectors, or
nearly 2 1/2 hours more. With reference to this particular question of the time necessary for
each analfabeto to vote, some of the judges have estimated that it would take, at least, five minutes of
the time of the inspectors for each analfabeto. (Hontiveros vs. Mobo, R. G. No. 13959, p. 230, post.)

From the foregoing, it was practically an impossibility for all of the voters of said municipality to have
voted in the eleven hours prescribed by the law even though the polls had been opened promptly at 7
a.m. instead of at nearly 11 a.m. The above time is computed upon the theory that no time whatever is
lost, that the voters arrive one immediately after another and that no time is lost waiting for the arrival of
the voters.
With reference to the second question above presented, the law provides that:
A voter otherwise qualified who declares that he can not write, or that from blindness or other
physical disability he is unable to prepare his ballot, may make an oath to the effect that he is
so disabled and the nature of his disability and that he desires the inspectors to assist him in
the preparation of such ballot. The board shall keep a record of all such oaths taken and file
the same with the municipal secretary with the other records of the board after the election.
Two of the inspectors, each of whom shall belong to a different political party, shall ascertain
the wishes of the voter, and one of them shall prepare the ballot of the voter in proper form
according to his wishes, in the presence of the other inspector, and out of view of any other
person. The information this obtained shall be regarded as a privileged communication.
(Section 12, Act No. 2045; section 550, Act No. 2657; section 453, Act No. 2711.)
Said quoted section provides the method by which a person who cannot prepare his ballot may be
assisted. The conditions are:
(a) That he must make an oath to the effect that he is disabled and the nature of his disability
together with the fact that he desires the inspectors to assist him in the preparation of his
ballot;
(b) That a record of said oath shall be filed with the municipal secretary with the other records
of the board of inspectors after the election; and
(c) When said oath is taken, then two of the inspectors, each of whom shall belong to different
political party, may assist him in the preparation of his ballot.
In view of said conditions, what shall be the effect of a failure to comply therewith? Suppose, for
example, that the voter is incapacitated; that the board of inspectors are fully aware of that fact; that
they failed to require of him the oath; that they failed to keep on file the oath taken, or that one inspector
only assisted said voter in the preparation of his ballot, or that two assisted him which belonged to the
same party, shall the ballot of such an incapacitated person be rejected? Shall all of the votes of the
precinct be nullified because of the failure of the inspectors to comply strictly with the letter of the law?
We held in the case of Paulino vs. Cailles (R. G. No. 12753, 37 Phil. Rep., 825) that the ballots of
incapacitated persons who voted without taking the oath or were assisted by one inspector alone, or by
two belonging to the same party, should not be counted if such ballots could be identified. We further
held that, in the absence of fraud, all of the ballots of the precinct should not be invalidated by the mere
fact that the inspectors did not comply with their duty. Innocent voters should not be deprived of their

participation in an election for a violation of the law for which they were in no way responsible and which
they could not prevent.
lawphil.net

The incapacitated persons mentioned in said section above noted are usually persons who are unable
to acquaint themselves with the provisions of the law. They are, therefore, absolutely dependent upon
the advice and counsel of others. Generally, they have no idea whatever as to the form and
requirements in casting their ballots. Their ignorance, however, does not relieve them from their
responsibility under the law, nor from the effect of their failure to comply therewith. (Manalo vs. Sevilla,
24 Phil. Rep., 609; Gardiner vs. De Leon, R. G. No. 12382 decided March 15, 1917, not published;
Paulino vs. Cailles, R. G. No. 12763, 37 Phil. Rep., 825.)
The law intended that those votes only who are incapacitated in some way should be assisted. To
insure a compliance with the law an oath of incapacity is required. To prove that only such persons have
received assistance, the election board is required to keep a record of such oath. To guarantee that
such voters should not be imposed upon, the law wisely provided that two inspectors of different
political faith should assist them. Upon the other hand, if the inspectors have failed or declined to
perform a duty or obligation imposed upon them by the Election Law, they may be punished.
The record shows that in many of the municipalities of the Province of Rizal, during the election in
question, a great many incapacitated persons voted without taking the oath required and were assisted
by one inspector only in the preparation of their ballots. But, in view of the fact that such ballots have not
been identified they cannot be rejected. The voter cannot be punished. The remedy is by a criminal
action against the inspectors for a failure to comply with the law. (Section 29, Act No. 1582; section
2632, Act No. 2657; section 2639, Act No. 2711.)
Said section (2632) provides, among other things, that any member of a board of registration, or board
of inspectors, or board of canvassers who willfully declines or fails to perform any duty or obligation
imposed by the Election Law, shall be punished by imprisonment for not less than one month nor more
than one year, or by a fine of not less than P200 nor more than P500 or both.
With reference to the third question above indicated, relating to what is the effect of a failure on the part
of the authorities to provide proper voting booths, it may be said that we have held in the case of
Gardiner vs. Romulo (26 Phil. Rep., 521) that the requirements of the Election Law providing for the
location of polling stations and the construction of booths and guard rails for the latter may be departed
from in some particulars and yet preserve, in substantial form, the secrecy which the law requires. But
the failure to provide doors and guard rails for the booths and the placing of the writing shelf so that it
faces the side instead of the rear of the booths are, combined, a fatal disregard of the law, inasmuch as
such an arrangement does not offer, even in substantial form, the secrecy and seclusion which,
according to the purpose and spirit of the Election Law, is its most mandatory requirement.
Section 9 of Act No. 1582, as amended by section 512 of Act No. 2657 and section 415 of Act 2711,
provides that there shall be in each polling place, during each election, a sufficient number of voting
booths, not less than one for every fifty voters, in the election precinct. Said section further provides
how such voting booths, not less than one every fifty voters, in the election precinct. Said section further

provides how such voting booths shall be constructed. The purpose of said provisions is to furnish each
voter an opportunity to prepare his ballot in secrecy. Suppose the board of inspectors does not prepare
the voting booth in exactly the form prescribed by law, what shall be the effect? Support, the example,
that they construct a booth less than one meter square as is provided by the law but yet sufficiently
large to enable the voter to enter and to prepare his ballot in secrecy; or suppose that the door swinging
outward to the booth shall extend to the floor instead of within fifty centimeters of the floor; or suppose
that the shelf upon which the voter shall prepare his ballot shall be less than thirty centimeters wide,
shall the entire election be declared null and void for such failures when it is admitted and proved,
beyond question, that even with such defects in the fulfillment of the requirements of the election law
they were in fact constructed in a manner which provided the voter a complete opportunity to prepare
his ballot in absolute secrecy? While there is no provision in the law, relating to the construction of
booths, they shall be constructed in such manner as to afford the voter an opportunity to prepare his
ballot in secret, that must be the primary and ultimate object of having the booths constructed in the
manner indicated.
When we held that the law requiring the preparation of the booths in a particular manner was
mandatory, we did not mean to hold that unless they were prepared in exact conformity with the law,
that the election would be nullified. We simply held that if they were not constructed in a manner which
afforded the voters an opportunity to prepare their ballots in secret, the election would be declared null
and void on that account. If, however, upon the other hand, the booths were so constructed, even
though not in strict accord with the provisions of the law, as to afford each voter an opportunity to
prepare his ballot in secret, the election should not be declared null and void. Secrecy is the object of
the booth. An opportunity to prepare his ballot in private is the purpose of the provision. When the booth
affords that protection, the purpose of the law is fulfilled. To hold otherwise to establish a different
rule would make the manner of performing a public duty more important than the performance of the
duty itself.
In the present case, while there is some conflict in the evidence, and while the proof clearly shows that
the booths were not constructed in strict accordance with the provisions of the law, we are of the opinion
that a large preponderance of the evidence shows that the booths were constructed (defectively
perhaps) in a manner which afforded each voter an opportunity to prepare his ballot in absolute secrecy.
That being true, we find no reason for changing or modifying the conclusion of the lower court.
The defendant-appellant alleges, and attempts to establish the fact, that in the municipality of San
Felipe Nery many irregularities were committed which should invalidate the election. For example, he
alleges the different columns of the polling list were not properly filled. Even granting that fact, the voter
was in no way responsible. The voter not being responsible, his ballot should not be nullified on that
account. Filling the different columns of the polling list is a duty imposed upon the election officers. If
they fail to perform their duty they are responsible; and as we have frequently said, the ballots of
innocent voters should not be nullified for a failure on the part of election officers to perform their duty in
accordance with the provisions of the law. The remedy is a criminal action against the inspectors if they
have violated the law and not to nullify the votes of innocent voters.

The defendant-appellant further alleges that in the municipality of San Felipe Nery, a number of voters
voted who were not residents of said municipality. That question was presented to the court below, and
upon a full consideration he refused to nullify the election in said municipality upon the grounds alleged.
While it is true that the proof shows that some grave irregularities were committed by the board of
inspectors, we are not persuaded that the evidence is sufficient to justify this court in nullifying the entire
vote of said municipality. In view of that conclusion, we deem it unnecessary to discuss the other
allegations of the defendant-appellant with reference to the striking out of certain allegations in his
answer.
The lower court, after hearing the evidence and after examining the ballots cast in the municipality of
Taytay, found that 50 ballots which had been counted for the defendant-appellant should not be counted
for him and ordered that the total vote of the defendant-appellant should be reduced by that number.
The defendant-appellant in fact admits that the said 50 votes should be deducted from his total vote. In
view of that admission of the defendant-appellant, we deem it unnecessary to discuss the reasons
therefor.
Upon the various errors assigned, our conclusions are:
(1) That the total votes cast in the municipality of Binangonan should be counted for the
respective candidates; that for the special reason given, the board of inspectors was justified in
keeping the polls open after the hour for closing. But this conclusion must not be interpreted to
mean that under other circumstances and other conditions, where the polls are kept open after
the hour for fraudulent purposes, that such act on the part of the inspectors might not nullify
the entire election (Gardiner vs. Romulo, 26 Phil. Rep., 521);
(2) That while it is irregular for the board of inspectors to permit incapacitated voters to vote
without taking the oath and for one inspector only to assist such voters, yet the ballots of the
innocent voters should not be nullified on that account; that the ballots of such persons only
should be annulled when identified;
(3) That inasmuch as the voting booths in the municipality of Antipolo were prepared in a
manner and form which permitted the voter to prepare his ballot in absolute secrecy, the vote
of that municipality should not be nullified; and
(4) That the judgment of the lower court reducing the total vote of the defendant-appellant by
fifty identified fraudulent ballots counted for him, in the municipality of Taytay, should be
affirmed.
As a result of the count of the ballots, cast in the various municipalities by the provincial board of
inspectors, Eulogio Rodriguez received 4,321 votes, Jose Lino Luna received 4,157 votes and
Servando de los Angeles received 3,576 votes. Servando de los Angeles did not protest the election.
From all of the foregoing, the total votes of Eulogio Rodriguez must be reduced by 50 votes, leaving him
a total of 4,271 only, or a clear majority of 114 votes.

Therefore, with the modification herein indicated, the judgment of the lower court is affirmed as
modified, and it is hereby ordered and decreed that the record be immediately returned to the lower
court with direction that a judgment be entered directing and ordering the provincial board of inspectors
to amend its count accordingly.

It is so ordered, without any finding as to costs.

Arellano, C.J., Torres, Street, Malcolm and Avancea, JJ., concur.