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C. JUDICIAL LEGISLATION
Illustrative Cases
G.R. No. L-28463 May 31, 1971
REPUBLIC FLOUR MILLS INC., petitioner,
vs.
THE COMMISSIONER OF CUSTOMS and THE COURT OF TAX APPEALS, respondents.
Agrava & Agrava for petitioner.
Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Pacifico P. de Castro and Solicitor
Santiago M. Kapunan for respondents.
FERNANDO, J.:
It is a novel question that this petition for the review of a decision of respondent Court of Tax Appeals presents.
Petitioner Republic Flour Mills, Inc. would have this Court construe the words "products of the Philippines" found in
Section 2802 of the Tariff and Custom Code1
as excluding bran (ipa) and pollard (darak) on the ground that, coming
as they do from wheat grain which is imported in the Philippines, they are merely waste and not the products, which
is the flour produced.2
That way, it would not be liable at all for the wharfage dues assessed under such section by
respondent Commission of Customs. It elevated the matter to respondent Court, as the construction it would place
on the aforesaid section appears too strained and far remote from the ordinary meaning of the text, not to mention
the policy of the Act. We affirm.
In the decision of respondent Court now sought to be reviewed, after stating that what was before it was an appeal
from a decision of the Commissioner of Customs holding petitioner liable for the sum of P7,948.00 as wharfage due
the facts were set forth as follows: "Petitioner, Republic Flour Mills, Inc., is a domestic corporation, primarily
engaged in the manufacture of wheat flour, and produces pollard (darak) and bran (ipa) in the process of milling.
During the period from December, 1963 to July, 1964, inclusive, petitioner exported Pollard and/or bran which was
loaded from lighters alongside vessels engaged in foreign trade while anchored near the breakwater The
respondent assessed the petitioner by way of wharfage dues on the said exportations in the sum of P7,948.00,
which assessment was paid by petitioner under protest."3
The only issue, in the opinion of respondent Court, is
whether or not such collection of wharfage dues was in accordance with law. The main contention before
respondent Court of petitioner was "that inasmuch as no government or private wharves or government facilities
[were] utilized in exporting the pollard and/or bran, the collection of wharfage dues is contrary to law."4
On the other
hand, the stand of respondent Commissioner of Customs was that petitioner was liable for wharfage dues "upon
receipt or discharge of the exported goods by a vessel engaged in foreign trade regardless of the non-use of
government-owned or private wharves."5
Respondent Court of Tax Appeals sustained the action taken by the
Commissioner of Customs under the appropriate provision of the Tariff and Customs Code, relying on our decision
in Procter & Gamble Phil. Manufacturing Corp. v. Commissioner of Customs.6
It did not feel called upon to answer
the question now before us as, in its opinion, petitioner only called its attention to it for the first time in its
memorandum.
Hence, this petition for review. The sole error assigned by petitioner is that it should not, under its construction of the
Act, be liable for wharfage dues on its exportation of bran and pollard as they are not "products of the Philippines",
coming as they did from wheat grain which were imported from abroad, and being "merely parts of the wheat grain
milled by Petitioner to produce flour which had become waste."7
We find, to repeat, such contention unpersuasive
and affirm the decision of respondent Court of Tax Appeals.
1. The language of Section 2802 appears to be quite explicit: "There shall be levied, collected and paid on all
articles imported or brought into the Philippines, and on products of the Philippines ... exported from the Philippines,
a charge of two pesos per gross metric ton as a fee for wharfage ...." One category refers to what is imported. The
other mentions products of the Philippines that are exported. Even without undue scrutiny, it does appear quite
obvious that as long as the goods are produced in the country, they fall within the terms of the above section.
Petitioner appeared to have entertained such a nation. In its petition for review before respondent Court, it
categorically asserted: "Petitioner is primarily engaged in the manufacture of flour from wheat grain. In the process
of milling the wheat grain into flour, petitioner also produces 'bran' and 'pollard' which it exports abroad."8
It does
take a certain amount of hair-splitting to exclude from its operation what petitioner calls "waste" resulting from the
production of flour processed from the wheat grain in petitioner's flour mills in the Philippines. It is always timely to
remember that, as stressed by Justice Moreland: "The first and fundamental duty of courts, in our judgment, is to
apply the law. Construction and interpretation come only after it has been demonstrated that application is
impossible or inadequate without them."9
Petitioner ought to have been aware that deference to such a doctrine
precludes an affirmative response to its contention. The law is clear; it must be obeyed. It is as simple, as that. 10

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2. There is need of confining familiar language of a statute to its usual signification. While statutory construction
involves the exercise of choice, the temptation to roam at will and rely on one's predilections as to what policy
should prevail is to be resisted. The search must be for a reasonable interpretation. It is best to keep in mind the
reminder from Holmes that "there is no canon against using common sense in construing laws as saying what
obviously means." 11
To paraphrase Frankfurter, interpolation must be eschewed but evisceration avoided. Certainly,
the utmost effort should be exerted lest the interpretation arrived at does violence to the statutory language in its
total context. It would be then to ignore what has been stressed time and time again as to limits of judicial freedom
in the construction of statutes to accept their view advanced by petitioner.
3. Then, again, there is the fundamental postulate in statutory construction requiring fidelity to the legislative
purpose. What Congress intended is not to be frustrates. Its objective must be carried out. Even if there be doubt as
to the meaning of the language employed, the interpretation should not be at war with the end sought to be attained.
No undue reflection is needed to show that if through an ingenious argument, the scope of a statute may be
contracted, the probability that other exceptions may be thought of is not remote. If petitioner were to prevail,
subsequent pleas motivated by the same desire to be excluded from the operation of the Tariff and Customs Code
would likewise be entitled to sympathetic consideration. It is desirable then that the gates to such efforts at undue
restriction of the coverage of the Act be kept closed. Otherwise, the end result would be not respect for, but defiance
of, a clear legislative mandate. That kind of approach in statutory construction has never recommended itself. It
does not now. 12
WHEREFORE, the decision of respondent Court of Tax Appeals of November 27, 1967 is affirmed. With costs
against petitioner.
G.R. No. 74851 December 9, 1999
RIZAL COMMERCIAL BANKING CORPORATION, petitioner,
vs.
INTERMEDIATE APPELLATE COURT AND BF HOMES, INC., respondents.
R E S O L U T I O N
MELO, J.:
On September 14, 1992, the Court passed upon the case at bar and rendered its decision, dismissing the petition of
Rizal Commercial Banking Corporation (RCBC), thereby affirming the decision of the Court of Appeals which
canceled the transfer certificate of title issued in favor of RCBC, and reinstating that of respondent BF Homes.
This will now resolve petitioner's motion for reconsideration which, although filed in 1992 was not deemed submitted
for resolution until in late 1998. The delay was occasioned by exchange of pleadings, the submission of
supplemental papers, withdrawal and change of lawyers, not to speak of the case having been passed from one
departing to another retiring justice. It was not until May 3, 1999, when the case was re-raffled to herein ponente,
but the record was given to him only sometime in the late October 1999.
By way of review, the pertinent facts as stated in our decision are reproduced herein, to wit:
On September 28, 1984, BF Homes filed a "Petition for Rehabilitation and for Declaration of
Suspension of Payments" (SEC Case No. 002693) with the Securities and Exchange Commission
(SEC).
One of the creditors listed in its inventory of creditors and liabilities was RCBC.
On October 26, 1984, RCBC requested the Provincial Sheriff of Rizal to extra-judicially foreclose its
real estate mortgage on some properties of BF Homes. A notice of extra-judicial foreclosure sale
was issued by the Sheriff on October 29, 1984, scheduled on November 29, 1984, copies furnished
both BF Homes (mortgagor) and RCBC (mortgagee).
On motion of BF Homes, the SEC issued on November 28, 1984 in SEC Case No. 002693 a
temporary restraining order (TRO), effective for 20 days, enjoining RCBC and the sheriff from
proceeding with the public auction sale. The sale was rescheduled to January 29, 1985.
On January 25, 1985, the SEC ordered the issuance of a writ of preliminary injunction upon
petitioner's filing of a bond. However, petitioner did not file a bond until January 29, 1985, the very

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day of the auction sale, so no writ of preliminary injunction was issued by the SEC. Presumably,
unaware of the filing of the bond, the sheriffs proceeded with the public auction sale on January 29,
1985, in which RCBC was the highest bidder for the properties auctioned.
On February 5, 1985, BF Homes filed in the SEC a consolidated motion to annul the auction sale
and to cite RCBC and the sheriff for contempt. RCBC opposed the motion
Because of the proceedings in the SEC, the sheriff withheld the delivery to RCBC of a certificate of
sale covering the auctioned properties.
On February 13, 1985, the SEC in Case No. 002693 belatedly issued a writ of preliminary injunction
stopping the auction sale which had been conducted by the sheriff two weeks earlier.
On March 13, 1985, despite SEC Case No. 002693, RCBC filed with the Regional Trial Court, Br.
140, Rizal (CC 10042) an action for mandamus against the provincial sheriff of Rizal and his deputy
to compel them to execute in its favor a certificate of sale of the auctioned properties.
In answer, the sheriffs alleged that they proceeded with the auction sale on January 29, 1985
because no writ of preliminary injunction had been issued by SEC as of that date, but they informed
the SEC that they would suspend the issuance of a certificate of sale to RCBC.
On March 18, 1985, the SEC appointed a Management Committee for BF Homes.
On RCBC's motion in the mandamus case, the trial court issued on May 8, 1985 a judgment on the
pleadings, the dispositive portion of which states:
WHEREFORE, petitioner's Motion for Judgment on the pleadings is granted and
judgment is hereby rendered ordering respondents to execute and deliver to
petitioner the Certificate of the Auction Sale of January 29, 1985, involving the
properties sold therein, more particularly those described in Annex "C" of their
Answer." (p. 87, Rollo.)
On June 4, 1985, B.F. Homes filed an original complaint with the IAC pursuant to Section 9 of B.P.
129 praying for the annulment of the judgment, premised on the following:
. . .: (1) even before RCBC asked the sheriff to extra-judicially foreclose its mortgage
on petitioner's properties, the SEC had already assumed exclusive jurisdiction over
those assets, and (2) that there was extrinsic fraud in procuring the judgment
because the petitioner was not impleaded as a party in the mandamus case,
respondent court did not acquire jurisdiction over it, and it was deprived of its right to
be heard. (CA Decision, p. 88, Rollo).
On April 8, 1986, the IAC rendered a decision, setting aside the decision of the trial court, dismissing
the mandamus case and suspending issuance to RCBC of new land titles, "until the resolution of
case by SEC in Case No. 002693," disposing as follows:
WHEREFORE, the judgment dated May 8, 1985 in Civil Case No. 10042 is hereby
annulled and set aside and the case is hereby dismissed. In view of the admission of
respondent Rizal Commercial Banking Corporation that the sheriff's certificate of sale
has been registered on BF Homes' TCT's . . . (here the TCTs were enumerated) the
Register of Deeds for Pasay City is hereby ordered to suspend the issuance to the
mortgagee-purchaser, Rizal Commercial Banking Corporation, of the owner's copies
of the new land titles replacing them until the matter shall have been resolved by the
Securities and Exchange Commission in SEC Case No. 002693.
(p. 257-260, Rollo;
also pp. 832-834, 213
SCRA 830 [1992];
Emphasis in the
original.)
On June 18, 1986, RCBC appealed the decision of the then Intermediate Appellate Court (now, back to its old
revered name, the Court of Appeals) to this Court, arguing that:
1. Petitioner did not commit extrinsic fraud in excluding private respondent as party
defendant in Special Civil Case No. 10042 as private respondent was not

4. 4 | P a g e
indispensable party thereto, its participation not being necessary for the full
resolution of the issues raised in said case.
2. SEC Case No. 2693 cannot be invoked to suspend Special Civil Case No. 10042,
and for that matter, the extra-judicial foreclosure of the real estate mortgage in
petitioner's favor, as these do not constitute actions against private respondent
contemplated under Section 6(c) of Presidential Decree No. 902-A.
3. Even assuming arguendo that the extra-judicial sale constitute an action that may
be suspended under Section 6(c) of Presidential Decree No. 902-A, the basis for the
suspension thereof did not exist so as to adversely affect the validity and regularity
thereof.
4. The Regional Trial court had jurisdiction to take cognizable of Special Civil Case
No. 10042.
5. The Regional Trial court had jurisdiction over Special Civil Case No. 10042.
(p. 5, Rollo.)
On November 12, 1986, the Court gave due course to the petition. During the pendency of the case, RCBC brought
to the attention of the Court an order issued by the SEC on October 16, 1986 in Case No. 002693, denying the
consolidated Motion to Annul the Auction Sale and to cite RCBC and the Sheriff for Contempt, and ruling as follows:
WHEREFORE, the petitioner's "Consolidated Motion to Cite Sheriff and Rizal
Commercial Banking Corporation for Contempt and to Annul Proceedings and Sale,"
dated February 5, 1985, should be as is, hereby DENIED.
While we cannot direct the Register of Deeds to allow the consolidation of the titles
subject of the Omnibus Motion dated September 18, 1986 filed by the Rizal
Commercial Banking Corporation, and therefore, denies said Motion, neither can this
Commission restrain the said bank and the Register of Deeds from effecting the said
consolidation.
SO ORDERED.
(p.
143, R
ollo.)
By virtue of the aforesaid order, the Register of Deeds of Pasay City effected the transfer of title over subject pieces
of property to petitioner RCBC, and the issuance of new titles in its name. Thereafter, RCBC presented a motion for
the dismissal of the petition, theorizing that the issuance of said new transfer certificates of title in its name rendered
the petition moot and academic.
In the decision sought to be reconsidered, a greatly divided Court (Justices Gutierrez, Nocon, and Melo concurred
with the ponente, Justice Medialdea; Chief Justice Narvasa, Justices Bidin, Regalado, and Bellosillo concurred only
in the result; while Justice Feliciano dissented and was joined by Justice Padilla, then Justice, now Chief Justice
Davide, and Justice Romero; Justices Griño-Aquino and Campos took no part) denied petitioner's motion to dismiss,
finding basis for nullifying and setting aside the TCTs in the name of RCBC. Ruling on the merits, the Court upheld
the decision of the Intermediate Appellate Court which dismissed the mandamus case filed by RCBC and
suspended the issuance of new titles to RCBC. Setting aside RCBC's acquisition of title and nullifying the TCTs
issued to it, the Court held that:
. . . whenever a distressed corporation asks the SEC for rehabilitation and
suspension of payments, preferred creditors may no longer assert such preference,
but . . . stand on equal footing with other creditors. Foreclosure shall be disallowed
so as not to prejudice other creditors, or cause discrimination among them. If
foreclosure is undertaken despite the fact that a petition, for rehabilitation has been
filed, the certificate of sale shall not be delivered pending rehabilitation. Likewise, if
this has also been done, no transfer of title shall be effected also, within the period of
rehabilitation. The rationale behind PD 902-A, as amended to effect a feasible and
viable rehabilitation. This cannot be achieved if one creditor is preferred over the
others.

5. 5 | P a g e
In this connection, the prohibition against foreclosure attaches as soon as a petition
for rehabilitation is filed. Were it otherwise, what is to prevent the petitioner from
delaying the creation of a Management Committee and in the meantime dissipate all
its assets. The sooner the SEC takes over and imposes a freeze on all the assets,
the better for all concerned.
(pp. 265-266, Rollo;
also p. 838, 213 SCRA
830 [1992].)
Then Justice Feliciano (joined by three other Justices), dissented and voted to grant the petition. He opined that the
SEC acted prematurely and without jurisdiction or legal authority in enjoining RCBC and the sheriff from proceeding
with the public auction sale. The dissent maintain that Section 6 (c) of Presidential Decree 902-A is clear and
unequivocal that, claims against the corporations, partnerships, or associations shall be suspended only upon the
appointment of a management committee, rehabilitation receiver, board or body. Thus, in the case under
consideration, only upon the appointment of the Management Committee for BF Homes on March 18, 1985, should
the suspension of actions for claims against BF Homes have taken effect and not earlier.
In support of its motion for reconsideration, RCBC contends:
The restraining order and the writ of preliminary injunction issued by the Securities and Exchange
Commission enjoining the foreclosure sale of the properties of respondent BF Homes were issued
without or in excess of its jurisdiction because it was violative of the clear provision of Presidential
Decree No. 902-A, and are therefore null and void; and
Petitioner, being a mortgage creditor, is entitled to rely solely on its security and to refrain from
joining the unsecured creditors in SEC Case No. 002693, the petition for rehabilitation filed by
private respondent.
We find the motion for reconsideration meritorious.
The issue of whether or not preferred creditors of distressed corporations stand on equal footing with all other
creditors gains relevance and materiality only upon the appointment of a management committee, rehabilitation
receiver, board, or body. Insofar as petitioner RCBC is concerned, the provisions of Presidential Decree No. 902-A
are not yet applicable and it may still be allowed to assert its preferred status because it foreclosed on the mortgage
prior to the appointment of the management committee on March 18, 1985. The Court, therefore, grants the motion
for reconsideration on this score.
The law on the matter, Paragraph (c), Section 6 of Presidential Decree 902-A, provides:
Sec. 6. In order to effectively exercise such jurisdiction, the Commission shall posses the following
powers:
c) To appoint one or more receivers of the property, real and personal, which is the subject of the
action pending before the Commission in accordance with the pertinent provisions of the Rules of
Court in such other cases whenever necessary to preserve the rights of the parties litigants to and/or
protect the interest of the investing public and creditors; Provided, however, that the Commission
may, in appropriate cases, appoint a rehabilitation receiver of corporations, partnerships or other
associations not supervised or regulated by other government agencies who shall have, in addition
to the powers of a regular receiver under the provisions of the Rules of Court, such functions and
powers as are provided for in the succeeding paragraph (d) hereof: Provided, finally, That upon
appointment of a management committee rehabilitation receiver, board or body, pursuant to this
Decree, all actions for claims against corporations, partnerships or associations under management
or receivership, pending before any court, tribunal, board or body shall be suspended accordingly.
(As amended by PDs No. 1673, 1758 and by PD No. 1799. Emphasis supplied.)
It is thus adequately clear that suspension of claims against a corporation under rehabilitation is counted or figured
up only upon the appointment of a management committee or a rehabilitation receiver. The holding that suspension
of actions for claims against a corporation under rehabilitation takes effect as soon as the application or a petition for
rehabilitation is filed with the SEC — may, to some, be more logical and wise but unfortunately, such is incongruent
with the clear language of the law. To insist on such ruling, no matter how practical and noble, would be to encroach
upon legislative prerogative to define the wisdom of the law — plainly judicial legislation.
It bears stressing that the first and fundamental duty of the Court is to apply the law. When the law is clear and free
from any doubt or ambiguity, there is no room for construction or interpretation. As has been our consistent ruling,
where the law speaks in clear and categorical language, there is no occasion for interpretation; there is only room
for application (Cebu Portland Cement Co. vs. Municipality of Naga, 24 SCRA-708 [1968]).

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Where the law is clear and unambiguous, it must be taken to mean exactly what it says and the
court has no choice but to see to it that its mandate is obeyed (Chartered Bank Employees
Association vs. Ople, 138 SCRA 273 [1985]; Luzon Surety Co., Inc. vs. De Garcia, 30 SCRA 111
[1969]; Quijano vs. Development Bank of the Philippines, 35 SCRA 270 [1970]).
Only when the law is ambiguous or of doubtful meaning may the court interpret or construe its true intent. Ambiguity
is a condition of admitting two or more meanings, of being understood in more than one way, or of referring to two or
more things at the same time. A statute is ambiguous if it is admissible of two or more possible meanings, in which
case, the Court is called upon to exercise one of its judicial functions, which is to interpret the law according to its
true intent.
Furthermore, as relevantly pointed out in the dissenting opinion, a petition for rehabilitation does nor always result in
the appointment of a receiver or the creation of a management committee. The SEC has to initially determine
whether such appointment is appropriate and necessary under the circumstances. Under Paragraph (d), Section 6
of Presidential Decree No. 902-A, certain situations must be shown to exist before a management committee may
be created or appointed, such as;
1. when there is imminent danger of dissipation, loss, wastage or destruction of
assets or other properties; or
2. when there is paralization of business operations of such corporations or entities
which may be prejudicial to the interest of minority stockholders, parties-litigants or to
the general public.
On the other hand, receivers may be appointed whenever:
1. necessary in order to preserve the rights of the parties-litigants; and/or
2. protect the interest of the investing public and creditors. (Section 6 (c), P.D. 902-
A.)
These situations are rather serious in nature, requiring the appointment of a management committee or a receiver to
preserve the existing assets and property of the corporation in order to protect the interests of its investors and
creditors. Thus, in such situations, suspension of actions for claims against a corporation as provided in Paragraph
(c) of Section 6, of Presidential Decree No. 902-A is necessary, and here we borrow the words of the late Justice
Medialdea, "so as not to render the SEC management Committee irrelevant and inutile and to give it unhampered
"rescue efforts" over the distressed firm" (Rollo, p. 265).
Otherwise, when such circumstances are not obtaining or when the SEC finds no such imminent danger of losing
the corporate assets, a management committee or rehabilitation receiver need not be appointed and suspension of
actions for claims may not be ordered by the SEC. When the SEC does not deem it necessary to appoint a receiver
or to create a management committee, it may be assumed, that there are sufficient assets to sustain the
rehabilitation plan and, that the creditors and investors are amply protected.
Petitioner additionally argues in its motion for reconsideration that, being a mortgage creditor, it is entitled to rely on
its security and that it need not join the unsecured creditors in filing their claims before the SEC appointed receiver.
To support its position, petitioner cites the Court's ruling in the case of Philippine Commercial International Bank vs.
Court of Appeals, (172 SCRA 436 [1989]) that an order of suspension of payments as well as actions for claims
applies only to claims of unsecured creditors and cannot extend to creditors holding a mortgage, pledge, or any lien
on the property.
Ordinarily, the Court would refrain from discussing additional matters such as that presented in RCBC's second
ground, and would rather limit itself only to the relevant issues by which the controversy may be settled with finality.
In view, however, of the significance of such issue, and the conflicting decisions of this Court on the matter, coupled
with the fact that our decision of September 14, 1992, if not clarified, might mislead the Bench and the Bar, the
Court resolved to discuss further.
It may be recalled that in the herein en banc majority opinion (pp. 256-275, Rollo, also published as RCBC vs. IAC,
213 SCRA 830 [1992]), we held that:
. . . whenever a distressed corporation asks the SEC for rehabilitation and suspension of payments,
preferred creditors may no longer assert such preference, but . . . stand on equal footing with other
creditors. Foreclosure shall be disallowed so as not to prejudice other creditors, or cause
discrimination among them. If foreclosure is undertaken despite the fact that a petition for
rehabilitation has been filed, the certificate of sale shall not be delivered pending rehabilitation.

7. 7 | P a g e
Likewise, if this has also, been done, no transfer of title shall be effected also, within the period of
rehabilitation. The rationale behind PD 902-A, as amended, is to effect a feasible and viable
rehabilitation. This cannot be achieved if one creditor is preferred over the others.
In this connection, the prohibition against foreclosure attaches as soon as a petition for rehabilitation
is filed. Were it otherwise, what is to prevent the petitioner from delaying the creation of a
Management Committee and in the meantime dissipate all its assets. The sooner the SEC takes
over and imposes a freeze on all the assets, the better for all concerned.
(pp. 265-
266, Rollo;
also p. 838,
213 SCRA 830
[1992]
Emphasis
supplied)
The foregoing majority opinion relied upon BF Homes, Inc. vs. Court of Appeals (190 SCRA 262 [1990] — per Cruz,
J.: First Division) where it held that "when a corporation threatened by bankruptcy is taken over by a receiver, all the
creditors should stand on an equal footing. Not anyone of them should be given preference by paying one or some
of them ahead of the others. This is precisely the reason for the suspension of all pending claims against the
corporation under receivership. Instead of creditors vexing the courts with suits against the distressed firm, they are
directed to file their claims with the receiver who is a duly appointed officer of the SEC (pp. 269-270; emphasis in
the original). This ruling is a reiteration of Alemar's Sibal & Sons, Inc. vs. Hon. Jesus M. Elbinias (pp. 99-100; 186
SCRA 94 [1991] — per Fernan, C.J.: Third Division).
Taking the lead from Alemar's Sibal & Sons, the Court also applied this same ruling in Araneta vs. Court of
Appeals (211 SCRA 390 [1992] — per Nocon, J.: Second Division).
All the foregoing cases departed from the ruling of the Court in the much earlier case of PCIB vs. Court of
Appeals (172 SCRA 436 [1989] — per Medialdea, J.: First Division) where the Court categorically ruled that:
SEC's order for suspension of payments of Philfinance as well as for all actions of claims against
Philfinance could only be applied to claims of unsecured creditors. Such order can not extend to
creditors holding a mortgage, pledge or any lien on the property unless they give up the property,
security or lien in favor of all the creditors of Philfinance . . .
(p. 440. Emphasis supplied)
Thus, in BPI vs. Court of Appeals (229 SCRA 223 [1994] — per Bellosilio, J.: First Division) the Court explicitly
stared that ". . . the doctrine in the PCIB Case has since been abrogated. In Alemar's Sibal & Sons v. Elbinias, BF
Homes, Inc. v. Court of Appeals, Araneta v. Court of Appeals and RCBC v. Court of Appeals, we already ruled that
whenever a distressed corporation asks SEC for rehabilitation and suspension of payments, preferred creditors may
no longer assert such preference, but shall stand on equal footing with other creditors . . ." (pp. 227-228).
It may be stressed, however, that of all the cases cited by Justice Bellosillo in BPI, which abandoned the Court's
ruling in PCIB, only the present case satisfies the constitutional requirement that "no doctrine or principle of law laid
down by the court in a decision rendered en banc or in division may be modified or reversed except by the court
sitting en banc" (Sec 4, Article VIII, 1987 Constitution). The rest were division decisions.
It behooves the Court, therefore, to settle the issue in this present resolution once and for all, and for the guidance
of the Bench and the Bar, the following rules of thumb shall are laid down:
1. All claims against corporations, partnerships, or associations that are pending before any court, tribunal, or board,
without distinction as to whether or not a creditor is secured or unsecured, shall be suspended effective upon the
appointment of a management committee, rehabilitation receiver, board, or body in accordance which the provisions
of Presidential Decree No. 902-A.
2. Secured creditors retain their preference over unsecured creditors, but enforcement of such preference is equally
suspended upon the appointment of a management committee, rehabilitation receiver, board, or body. In the event
that the assets of the corporation, partnership, or association are finally liquidated, however, secured and preferred
credits under the applicable provisions of the Civil Code will definitely have preference over unsecured ones.
In other words, once a management committee, rehabilitation receiver, board or body is appointed pursuant to P.D.
902-A, all actions for claims against a distressed corporation pending before any court, tribunal, board or body shall
be suspended accordingly.

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This suspension shall not prejudice or render ineffective the status of a secured creditor as compared totally
unsecured creditor P.D. 902-A does not state anything to this effect. What it merely provides is that all actions for
claims against the corporation, partnership or association shall be suspended. This should give the receiver a
chance to rehabilitate the corporation if there should still be a possibility of doing so. (This will be in consonance with
Alemar's BF Homes, Araneta, and RCBC insofar as enforcing liens by preferred creditors are concerned.)
However, in the event that rehabilitation is no longer feasible and claims against the distressed corporation would
eventually have to be settled, the secured creditors shall enjoy preference over the unsecured creditors (still
maintaining PCIB ruling), subject only to the provisions of the Civil Code on Concurrence and Preferences of Credit
(our ruling in State Investment House, Inc. vs. Court of Appeals, 277 SCRA 209 [1997]).
The Majority ruling in our 1992 decision that preferred creditors of distressed corporations shall, in a way, stand an
equal footing with all other creditors, must be read and understood in the light of the foregoing rulings. All claims of
both a secured or unsecured creditors, without distinction on this score, are suspended once a management
committee is appointed. Secured creditors, in the meantime, shall not be allowed to assert such preference before
the Securities and Exchange Commission. It may be stressed, however, that this shall only take effect upon the
appointment of a management committee, rehabilitation receiver, board, or body, as opined in the dissent.
In fine, the Court grants the motion for reconsideration for the cogent reason that suspension of actions for claims
commences only from the time a management committee or receiver is appointed by the SEC. Petitioner RCBC,
therefore, could have rightfully, as it did, move for the extrajudicial foreclosure of its mortgage on October 26, 1984
because a management committee was not appointed by the SEC until March 18, 1985.
WHEREFORE, petitioner's motion for reconsideration is hereby GRANTED. The decision, dated September 14,
1992 is vacated, the decision of Intermediate Appellate Court in AC-G.R. No. SP-06313 REVERSED and SET
ASIDE, and the judgment of the Regional Trial Court National Capital Judicial Region, Branch 140, in Civil Case No.
10042 REINSTATED.
SO ORDERED.
G.R. No. L-42935 February 15, 1935
FELIPE REGALADO, petitioner,
vs.
JOSE YULO, Secretary of Justice,
JUAN G. LESACA, Judge of First Instance of Albay,
and ESTEBAN T. VILLAR, respondents.
L.R. Peña for petitioner.
Office of the Solicitor-General Hilado for respondents.
Respondent Villar in his own behalf.
MALCOLM, J.:
This is an action of quo warranto originally brought in this court to determine the respective rights of the petitioner
Felipe Regalado and one of the respondents, Esteban T. Villar, to the office of justice of the peace of Malinao,
Albay. The issue in the case is whether or not under the provisions of section 203 of the Administrative Code, as
amended by Act No. 3899, the justices of the peace and auxiliary justices of the peace appointed prior to the
approval of the last mentioned Act who reached the age of sixty-five years after said Act took effect shall cease to
hold office upon reaching the age of sixty-five years.
The facts as stipulated are principally the following: Felipe Regalado qualified for the office of justice of the peace of
Malinao, Albay, on April 12, 1906. On September 13, 1934, Regalado became sixty-five years of age. As a
consequence, shortly thereafter, the judge of first instance of Albay, acting in accordance with instructions from the
Secretary of Justice, designated Esteban T. Villar, justice of the peace of Tabaco, Albay, to act as justice of the
peace of Malinao, Albay. Regalado surrendered the office to Villar under protest. On December 17, 1934, Villar
qualified as justice of the peace of Malinao, Albay, and entered upon the discharge of the duties of the office.
The text of section 203 of the Administrative Code, as amended by Act No. 3899, reads in Spanish, the language in
which this Act was enacted by the Philippine Legislature, as follows:
ART. 203. Nombramiento y distribucion de jueces de paz. — El Gobernador General nombrara, con el
consejo y consentimiento del Senado de Filipinas, un juez de paz y un juez de paz auxilizr para la Ciudad
de Baguio y para cada municipio, township, y distrito municipal da las Islas Filipinas y si el interes publico

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asi lo exigiere para cualquier otra division politica de menos importancia y territorio no organizado en dichas
Islas: Entendiendose, Que los jueces de paz y jueces de paz auxiliares seran nombrados para servir
cumplir sesenta y cinco años de edad: Entendiendose, ademas, Que los actuales jueces de paz y jueces de
paz auxiliares que al tiempo de la vigencia de esta Ley hayan cumplido sesenta y cinco años de edad,
cesaran el primero de enero de mil novecientos treinta y tres en sus cargos; y el Gobernador General, con
el consejo y consentimiento del Senado de Filipinas, hara nuevos nombramientos para cubrir las vacantes
que habran de ocurir por ministerio de esta Ley.
The English version of the same codal section, as amended, reads as follows:
SEC. 203. Appointment and distribution of justices of the peace. — One justice of the peace and one
auxiliary justice of the peace shall be appointed by the Governor-General, with the advise and consent of the
Philippine Senate, for the City of Baguio, and for each municipality, township, and municipal district in the
Philippine Islands, and if the public interests shall so require, for any other minor political division or
unorganized territory in said Islands: Provided, That justices and auxiliary justices of the peace shall be
appointed to serve until they have reached the age of sixty-five years: Provided, further, That the present
justices and auxiliary justices of the peace who shall, at the time this Act takes effect, have completed sixty-
five years of age, shall automatically cease to hold office on January first, nineteen hundred and thirty-three;
and the Governor-General, with the advise and consent of the Philippine Senate, shall make new
appointments to cover the vacancies occurring by operation of this Act.
Petitioner Regalado insists that the law is clear and accordingly needs no interpretation. The meaning of the law
according to him is that only those justice of the peace and auxiliary justices of the peace ceased to hold office who
had completed sixty-five years of age on or before November 16, 1931, when Act No. 3899 took effect. On the other
hand, the Solicitor-General, as attorney for the respondents, admits that the provisions of the second proviso added
to section 203 of the Administrative Code by Act No. 3899, are not very specific, but that according to the real
intention of the law the only sensible and proper construction that could be place on the proviso in question in that
under its provisions all justices of the peace and auxiliary justices of the peace, whether appointed prior to the
approval of the Act or subsequent thereto, who had completed the age of sixty-five years of age at the time of the
approval of the Act, and those who shall complete that age thereafter, shall cease to hold office, the former on
January 1, 1933, and the latter at the time they complete that age.
All are agreed that the language which should prevail in the interpretation of Act No. 3899 is Spanish, but that the
English text may be consulted to explain the Spanish. The English text is deficient in that it includes the word
"automatically", the equivalent of which does not appear in the Spanish. Also, in the Administrative Code containing
a compilation of section 203, as amended, the word "office" was omitted after the word "hold". Finally, the spanish
uses the term "al teimpo de la vigencia de esta ley", translated into English as "at the time this Act takes effect". But
the Solicitor-General insists that the equivalent of the term "al" is "at" and that "at" can be construed as equivalent to
"during".
The Solicitor-General properly invites attention to the history of the law and from that history would deduce the
legislative intention to be effectuated. Let us briefly notice this point. Originally judges of first instance and justices of
the peace had no age limits on their tenures of office. Eventually, however, the Philippine Legislature enacted Act
No. 2347. That law not only provided that judges of first instance shall serve until they have reached the age of
sixty-five years, but it further provided that "... the present judges of Courts of First Instance ... vacate their positions
on the taking effect of this Act: and the Governor-General, with the advice and consent of the Philippine
Commission, shall make new appointments of judges of the Courts of First Instance ... ." This law was held valid.
(Chanco vs. Imperial [1916], 34 Phil., 329.) Subsequently section 203 of the Administrative Code, relating to justices
of the peace, was amended by section 1 of Act No. 3107 by adding at the end thereof the following proviso:
"... Provided, That justices and auxiliary justices of the peace shall be appointed to serve until they have reached the
age of sixty-five years." It was held that the law should be given prospective effect only and was not applicable to
justices and auxiliary justices of the peace appointed before it went into effect. (Segovia vs. Noel [1925], 47 Phil.,
543.) Thereafter the matter again came before the Philippine Legislature and apparently it was in the mind of certain
members of the Legislature to make the law fixing the age limit for justices of the peace retroactive in nature. At
least the bill as introduced in the Senate, and providing: "Entendiendose, ademas, Que los actuales jueces de paz y
jueces de paz auxiliares que al tiempo de la vigencia de esta Ley hayan cumplido sesenta y cinco años de edad,
cesaran automaticamente en sus cargos; y el Gobernador General, con el consejo y consentimiento del Senado de
Filipinas, hara nuevos nombramientos para cubrir las vacantes que habran de ocurrir por ministerio de esta ley," —
appears to have had this purpose both because of the langage used and because of what can be gleaned from the
debates on the bill while it was under consideration in the Senate. But when the bill left the Philippine Legislature it
was in a different form, for the word "automaticamente" had been omitted and instead there was to be found the
words "el primero de enero de mil novecientos treinta y tres".
The Solicitor-General finally points out that the Secretary of Justice has consistently interpreted the proviso in
question as meaning, that all justices of the peace and auxiliary justices of the peace no matter when appointed who
had completed the age of sixty-five years prior to the approval of the law and those who shall complete that age
thereafter, shall cease to hold office upon their attaining that age. It is of course a cardinal rule that the practical
construction of a statute by the department whose duty it is to carry it into execution is entitled to great weight.

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Nevertheless the court is not bound by such construction and the rule does not apply in cases where the
construction is not doubtful.
The fundamental purpose in enacting Act No. 3899, it is argued, was to correct the phraseology of the first proviso
to section 203 of the Administrative Code added thereto by Act No. 3107, and to place justices of the peace and
auxiliary justices of the peace on the same footing as regards their cessation from office by reason of age. We are
asked for effectuate this legislative purpose. We would accede if that result was obtainable by any logical
construction of the law whether strict or liberal. But we cannot reach that result when to do so compels us to rewrite
a law and to insert words or phrases not found in it. If the court should do that it would pass beyond the bounds of
judicial power to usurp legislative power.
The intent of the Legislature to be ascertained and enforced is the intent expressed in the words of the statute. If
legislative intent is not expressed in some appropriate manner, the courts cannot by interpretation speculate as to
an intent and supply a meaning not found in the phraseology of the law. In other words, the courts cannot assume
some purpose in no way expressed and then construe the statute to accomplish this supposed intention.
Delving a little more deeply into the meaning of the law as applied to the case of the petitioner, at the time Act No.
3899 took effect he was one of the "actuales jueces de paz" (present justices of the peace). Giving the term "al
tiempo de la vigencia de la ley" the ordinary meaning of "at the time this Act takes effect," which was on November
16, 1931, on that date the petitioner was not sixty-five years of age. Proceeding further, the phrase "hayan cumplido
se senta cinco años de edad", appearing in English as "have completed sixty-five years of age", is of the past tense
and could not regularly be taken to contemplate the future. Finally the phrase "el primero de enero de mil
novecientos treinta y tres", in English "on January first nineteen hundred and thirty-three", is also a date in the past,
for on that date the petitioner had not yet reached the age of sixty-five.
Before we conclude, let us again return to the consideration of the law and see if it would be possible under any
logical interpretation, to give the law the meaning which the Government insists it should have. Supposing we give
to the phrase "al tiempo de la vigencia de esta ley" the unusual meaning of "within the time this Act is effective", but
having done so, we then reach the barrier that the petitioner within the time this Act is effective must have
completed sixty-five years of age and cease to hold office on January 1, 1933. The petitioner having become sixty-
five years of age on September 13, 1934, could not be included under a law which required justices of the peace
sixty-five years of age to cease to hold office on January 1, 1933.
For the reasons given, we are of the opinion that the natural and reasonable meaning of the language used in Act
No. 3899 leaves room for no other deduction than that a justice of the peace appointed prior to the approval of the
Act and who completed sixty-five years of age on September 13, 1934, subsequent to the approval of the Act, which
was on November 16, 1931, and who by the law was required to cease to hold office on January 1, 1933, is not
affected by the said Act. Accordingly it is our judgment that the respondent Esteban T. Villar be ousted from the
office of justice of the peace of Malinao, Albay, and that the petitioner Felipe Regalado be placed in possession of
the same. So ordered, without special pronouncement as to the costs.
G.R. No. 88202 December 14, 1998
REPUBLIC OF THE PHILIPPINES, petitioner,
vs.
COURT OF APPEALS and CYNTHIA VICENCIO, respondents.
QUISUMBING, J.:
This is an interposed by the Republic of the Philippines as represented by the Office of the Solicitor General (OSG),
assailing the decision 1 of the Court of Appeals promulgated on April 28, 1989, which affirmed the decision2 of
the Regional Trial Court of Manila, Branch 52, dated August 31, 1987. The appealed decision granted private
respondent Cynthia Vicencio's petition for change of surname, from "Vicencio" to "Yu".
As found by the trial court, hereunder are the facts and circumstances of the case:
Petitioner's evidence is to the effect that she was born on 19 January 1971 at the Capitol
Medical Center, Quezon City, to the spouses Pablo Castro Vicencio and Fe Esperanza de
Vega Leabres (Exh. C, also marked Annex A of Petition); that on 10 January 1972, after a
marital spat, Pablo Vicencio left their conjugal abode then situated at Meycauayan, Bulacan;
that since then Pablo Vicencio never reappeared nor sent support to his family and it was
Ernesto Yu who had come to the aid of Fe Esperanza Labres (sic) and her children; that on 29
June 1976, Fe Esperanza Leabres filed a petition in the then Juvenile and Domestic Relations
Court of Manila for dissolution of their conjugal partnership, Civil Case No. E-02009, which
was granted in a decision rendered by the Hon. Regina C. Ordoñez Benitez on 11 July 1977

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(Exhs. D, D-1 to D-3); that sometime in 1983, petitioner's mother filed another petition for
change of name, Sp. Proc No. 83-16346, that is to drop the surname of her husband
therefrom, and after hearing a decision was rendered on 5 July 1983 by the Hon. Emeterio C.
Cui of Branch XXV of this Court approving the petition (Exh. E); that in 1984, petitioner's
mother again filed another petition with this Court, Sp. Proc. No. 84-22605, for the declaration
of Pablo Vicencio as an absentee, and which petition was granted on 26 April 1984 in a
decision rendered by the Hon. Corona Ibay-Somera (Exh. F & F-1); that on 15 April 1986,
petitioner's mother and Ernesto Yu were joined in matrimony in a ceremony solemnized by
Mayor Benjamin S. Abalos of Mandaluyong, Metro Manila (Exh. G.).
It was also established that even (sic) since her childhood, petitioner had not known mush
less remembered her real father Pablo Vicencio, and her known father had been and still is
Ernesto Yu; that despite of which she had been using the family name "Vicencio" in her
school and other related activities therein; that in view of such situation, confusion arose as
to her parentage and she had been subjected to inquiries why she is using Vicencio as her
family name, both by her classmates and their neighbors, causing her extreme
embarrassment; that on two (2) occassions when she ran as a beauty contestant in a Lions
Club affair and in Manila Red Cross pageant, her name was entered as Cynthia L. Yu; that her
step-father had been priorly consulted about this petition and had given his consent thereto;
that in fact Ernesto Yu testified for petitioner and confirmed his consent to the petition as he
had always treated petitioner as his own daughter ever since. 3
At the hearing of the petition for change of name by the trial court, the OSG manifested that it was opposing
the petition. It participated in the proceedings by cross-examining the private respondent Cynthia Vicencio,
(petitioner a quo) and her witnesses.
Disregarding the OSG's contention, the trial court ruled that there is no valid cause for denying the petition.
Further, the trial court stated that it could not compel private respondent's step-father to adopt her, as
adoption is a voluntary act; but failure to resort to adoption should not be a cause for disallowing private
respondent to legally change her name.4 Hence, it granted the change of surname of private respondent
from Vicencio to Yu.
The decision of the trial court was affirmed by the appellate court, which held that it is for the best interest
of petitioner that her surname be changed. The appellate court took into account the testimonies of private
respondent and her witnesses that allowing the change of surname would "give her an opportunity to
improve her personality and welfare." 5 It likewise noted that the discrepancy between her original surname,
taken from her biological father; and the surname of her step-father, who has been socially recognized as
her father, caused her embarrassment and inferiority complex.6
The main issue before us is whether the appellate court erred in affirming the trial court's decision allowing
the change of private respondent's surname to that of her step-father's surname.
In Republic vs. Hernandez 7, we have recognized inter alia, the following as sufficient grounds to warrant a
change name: (a) when the name is ridiculous, dishonorable or extremely difficult to write or pronounce, (b)
when the change is a legal consequence of legitimation or adoption; (c) when the change will avoid
confusion; (d) when one has continuously used and been known since childhood by a Filipino name and
was unaware of alien parentage; (e) when the change is based on a sincere desire to adopt a Filipino name
to erase signs of former alienage, all in good faith and without prejudice to anybody; and (f) when the
surname causes embarrassment and there is no showing that the desired change of name was far a
fraudulent purpose, or that the change of name would prejudice public interest.
Private respondent asserts that her case falls under one of the justifiable grounds aforecited. She says that
confusion has arisen as to her parentage because ever since childhood, Ernesto Yu has acted as her father,
assuming duties of rearing, caring and supporting her. Since she is known in society as the daughter of
Ernesto Yu, she claims that she been subjected to inquiries regarding her use of a different surname,
causing her much humiliation and embarrassment. However, it is not denied that private respondent has
used Vicencio as her surname in her school records and related documents. But she had used the surname
of her step-father, Yu, when she participated in public functions, such as entering beauty contests, namely,
with the Lion's Club and the Manila Red Cross, and when she celebrated her debut at the Manila Hotel. 8
The Solicitor General however argues that there is no proper and reasonable cause to warrant private
respondent's change of surname. Such change might even cause confusion and give rise to legal
complications due to the fact that private respondent's step-father has two (2) children with her mother. In
the event of her step-father's death, it is possible that private respondent may even claim inheritance rights
as a "legitimate" daughter. In his memorandum, the Solicitor General opines that "Ernesto Yu has no
intention of making Cynthia as an heir because despite the suggestion made before the petition for change

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of name was heard by the trial court that the change of family name to Yu could very easily be achieved by
adoption, he has not opted for such a remedy." 9
We find merit in the Solicitor General's contention.
"The touchstone for the grant of a change of name is that there be "proper and reasonable cause" for which
the change is sought." 10 The assailed decision as affirmed by the appellate court does not persuade us to
depart from the applicability of the general rule on the use of surnames 11, specifically the law which
requires that legitimate children shall principally use the surname of their father 12.
Private respondent Cynthia Vicencio is the legitimate offspring of Fe Leabres and Pablo Vicencio. As
previously stated, a legitimate child generally bears the surname of his or her father. It must be stressed
that a change of name is a privilege, not a matter of right, addressed to the sound discretion of the court,
which has the duty to consider carefully the consequences of a change of name and to deny the same
unless weighty reasons are shown. 13
Confusion indeed might arise with regard to private respondent's parentage because of her surname. But
even, more confusion with grave legal consequences could arise if we allow private respondent to bear her
step-father's surname, even if she is not legally adopted by him. While previous decisions have allowed
children to bear the surname of their respective step-fathers even without the benefit of adoption, these
instances should be distinguished from the present case. In Calderon vs. Republic, 14 and Llaneta vs.
Agrava, 15 this Court allowed the concerned child to adopt the surname of the step-father, but unlike the
situation in the present case where private respondent is a legitimate child, in those cases the children were
not of legitimate parentage. In Moore vs.
Republic, 16 where the circumstances appears to be similar to the present case before us, the Court upheld
the Republic's position:
We find tenable this observation of government's counsel. Indeed, if a child born out of a
lawful wedlock be allowed to bear the surname of the second husband of the mother, should
the first husband die or be separated by a decree of divorce, there may result a confusion as
to his real paternity. In the long run the change may redound to the prejudice of the child in
the community.
While the purpose which may have animated petitioner is plausible and may run along the
feeling of cordiality and spiritual relationship that pervades among the members of the Moore
family, our hand is deferred by a legal barrier which we cannot at present overlook or brush
aside. 17
Similarly in Padilla vs. Republic, 18 the Court ruled that:
To allow said minors to adopt the surname of their mother's second husband, who is not
their father, could result in confusion in their paternity It could also create the suspicion that
said minors, who were born during the coverture of their mother with her first husband, were
in fact sired by Edward Padilla, thus bringing their legitimate status into discredit. 19
Private respondent might sincerely wish to be in a position similar to that of her step-father's legitimate
children, a plausible reason the petition for change of name was filed in the first place. Moreover, it is
laudable that Ernesto Yu has treated Cynthia as his very own daughter, providing for all her needs as a
father would his own flesh and blood. However, legal constraints lead us to reject private respondent's
desire to use her stepfather's surname. Further, there is no assurance the end result would not be even
more detrimental to her person, for instead of bringing a stop to questions, the very change of name, if
granted, could trigger much deeper inquiries regarding her parentage.
Lastly, when this case was decided by the appellate court, private respondent was already 18 years old but
still considered a minor because Republic Act 6809, 20 lowering the age of majority, was then in effect.
However, regardless of private respondent's age, our conclusion remains considering the circumstances
before us and the lack of any legally justifiable cause for allowing the change of her surname.
WHEREFORE, the appealed decision is hereby REVERSED and SET ASIDE; and the instant petition is
hereby GRANTED.
SO ORDERED.