Clear, concise, and effective English for law students, bar examinees, and legal writers in organizations, private companies, and government offices (01): Introduction

Law professors, bar examiners, and judges have been complaining of the poor grammar and woeful quality of writing among students and practitioners. If you are involved in legal writing in whatever capacity, I hope that this series will help improve the way you write. (Please read “A Message to Law Students: Effective Writing Takes a Lifelong Commitment” and “Seeking the Highest Level of Writing Competence” by Bryan A. Garner, editor-in-chief of Black’s Law Dictionary)

1. What is good legal writing? Is legal writing different from or superior to ordinary writing in English?

UCLA School of Law Prof. David Mellinkoff launched the Plain English revolution in legal writing when he published in 1963 his monumental work “The Language of the Law.” In his 1982 book “Legal Writing: Sense and Nonsense,” Mellinkoff said:

If it’s bad writing by the standards of ordinary English, it is bad legal writing. If it’s good legal writing by the standards of ordinary English, it is more likely to be good legal writing.

Richard C. Wydick is Professor Emeritus of Law at the University of California at Davis School of Law. He has also lectured at the International Legislative Drafting Institute presented in New Orleans by the Public Law Center, a joint venture of Tulane and Loyola law schools. In his book “Plain English for Lawyers,” Wydick says:

Good legal writing should not differ, without good reason, from ordinary well-written English.... In short, good legal writing is plain English.

(The National University of Singapore uses Wydick’s book as the main reference for its Legal Writing Programme.)

2. “Why lawyers can't write” by Bryan A. Garner, ABA Journal, March 2013 issue‎

Garner is editor-in-chief of Black’s Law Dictionary since 1977, and Distinguished Research Professor of Law at Southern Methodist University Law School. He is the president of LawProse Inc. through which he has trained thousands of American lawyers on modern legal drafting. He is the author of “Dictionary of Legal Usage”; “Modern American Usage”; and “Making Your Case: The Art of Persuading Judges” (with Justice Antonin Scalia).

In his ABA Journal article, Garner says that “lawyers on the whole don’t write well and have no clue that they don’t write well.” He explains:

The legal profession suffers from a pervasive Dunning-Kruger problem. This is puzzling but true. While lawyers are the most highly paid rhetoricians in the world, we’re among the most inept wielders of words. Stop and think about that. The blame goes primarily to the law schools. They inundate students with poorly written, legalese-riddled opinions that read like over-the-top Marx Brothers parodies of stiffness and hyperformality. And they offer law students little if any feedback (on substance, much less style) from professors on exams and writing assignments. But there’s plenty of blame that falls elsewhere. Writing standards have consistently fallen over the last century in secondary and higher education. (It would take a full-scale book to unpack that set of issues.) For law firm associates, their senior lawyers too often decry any emphasis on writing style (“I’m just concerned with the substance of it! I leave style to others!”). And in general society, serious readers are becoming an endangered species.

3. “Legal Writing Is Not What It Should Be” by Wayne Schiess, Senior lecturer, The University of Texas School of Law

Schiess says: “Most legal writing is average or below average – mediocre at best. Every lawyer has no doubt read lots of legal writing: judicial opinions, correspondence, statutes, agreements, memos, court documents, and more. I believe most lawyers would agree with me that most legal writing is mediocre at best.”

Schiess offers nine reasons why legal writing is not what it should be. Of these nine reasons, the following, I think, are the most compelling:

3. Law schools do not adequately train students in legal drafting.

4. Lawyers imbibe lots of poor writing from judicial opinions and other required reading.

8. Some lawyers have a misguided sense of professionalism, leading to a formal writing style that ignores audience needs.

9. Many lawyers are complacent, believing their writing is above average or better.

4. Resources by Judge Gerald Lebovits, adjunct professor at Columbia, Fordham, New York University law schools:

• Plain English: Eschew Legalese
• On Terra Firma with English
• Apostrophes and Plurals
• Fact vs Fiction Writing the Facts Part I
• Fact vs Fiction Writing the Facts Part II
• If I were A Lawyer: Tense in Legal Writing
• Legal Writing Don’ts Part I
• Legal Writing Don’ts Part II
• Legal Writing Do’s Part I
• Legal Writing Do’s Part II
• Legal Writing: Grammar Part I
• Legal Writing: Grammar Part II
• Legal Writing: Punctuation Part I
• Legal Writing: Punctuation Part II
• Legal Writing: Punctuation Part III
• Legal-Writing Ethics Part I
• Legal-Writing Ethics Part II
• Legal-Writing Myths
• Legal-Writing Myths Part II
• Pause that Refreshes Commas Part I
• Pause that Refreshes Commas Part 2
• Persuasive Writing for Lawyers Part I
• Persuasive Writing for Lawyers Part II
• Problem Words and Pairs in Legal Writing Part I
• Problem Words and Pairs in Legal Writing Part II
• Problem Words and Pairs in Legal Writing Part III
• Problem and Pairs in Legal Writing Part IV
• Powerful Writing Techniques to Help You Persuade Judges and Win Clients
• Usage Controversies Part I
• Usage Controversies Part II
• Write to Win

Free seminars: “English Proficiency Course” (4 hours; for college students, K-to-12 teachers, other groups) “Clear, concise English for effective legal writing” (3-5 hours; for Student Councils, academic organizations, fraternities, sororities, NGOs, LGUs, any interested group; test yourself with the interactive exercises) Seminars are for Metro Manila only. For more information or to schedule a seminar, please contact Atty. Gerry T. Galacio at 0927-798-3138. Be a better writer or editor through StyleWriter 4: this software checks 10,000 words in 12 seconds for hundreds of style and English usage issues like wordy and complex sentences, passive voice, nominalization, jargon, clichés, readability, spelling, etc. StyleWriter 4 graphs your style and sentence variety, and identifies your writing habits to give an instant view of your writing. You can learn to adjust your writing style to suit your audience and task. You can learn, for example, the writing style of Newsweek, Time, The Economist, and Scientific American. StyleWriter 4 is widely used in the US federal government (for example, the Environmental Protection Agency). It can be used by educators, students, and professionals in various fields - business, law, social or physical science, medicine, nursing, engineering, public relations, human resources, journalism, accounting, etc. Download your free 14-day trial copy now.

Notes:

1. I graduated with an AB English degree from the Philippine Christian University in 1979 and took my Education units from Philippine Normal College. I have been teaching English grammar and Composition, Literature, Argumentation and Debate since 1981. I created my website “Better English for everyone” in 2007, and it has been visited by over a million visitors from 150 countries since then. (It’s currently offline.) I am also a photographer; you might like my pictures of the 2006 bar operations in DLSU.

2. Since April 2011, I have been advocating the use of Plain Language/Plain English in public communications of government offices and private companies. I am a member of the Linkedin group “Plain Language Advocates.”  

3. The eagle-eyed among you may have noticed that in this article I always used a comma before the conjunction “and.” As Filipinos, we learned in school not to use a comma before the “and” in a list. I followed this rule until 2011 and then I started using what is called the “serial comma” or the “Oxford comma.” Among my reasons for using the Oxford comma are (a) Peterson vs. Midwest Security Insurance Company, Supreme Court of Wisconsin, 2001; and (b) Bryan A. Garner’s “Guidelines for Drafting and Editing Court Rules.” As Judge Mark Painter says: “Using the serial comma never creates ambiguity; leaving it out sometimes does.”

4. This blog focuses on family law and legal procedures. For my articles on freedom of religion, separation of church and State, etc. please surf to:

Are church clerks, ACE teachers, drivers, janitors, etc. considered “employees” under the Labor Code of the Philippines? (Landmark 2012 US Supreme Court ruling in “Hosanna-Tabor Lutheran vs. Equal Employment Opportunity Commission” and its implications for Philippine churches)

Estrada vs. Escritor case: Did the Supreme Court legitimize live-in relationships in the name of freedom of religion?

Secular courts do not have jurisdiction over expulsion or excommunication of church members (Philippine Supreme Court decision in Taruc et al vs. Bishop de la Cruz et al, 2005)

Instances when secular courts can intervene in church disputes (Supreme Court ruling in Fonacier vs. Court of Appeals and Isabelo De los Reyes, Jr., 1955)

Due process must be observed in terminating church membership Doctrine of Church Autonomy: secular courts and church disputes

Caution for pastors in solemnizing an “ecclesiastical marriage” or “marriage in the eyes of God and the church”

Life after life: medical criteria of “death,” its legal definition in the Philippines, related issues and Biblical perspectives

Registering a local Baptist church with the SEC as a religious society or aggregate; what is a corporation sole?

Separation of church and State: Should Baptists be involved in politics, civil disobedience, the debate on reproductive health bill, etc?

Should Bible schools apply for recognition from the CHED? (2005 Texas Supreme Court ruling in “Tyndale Theological Seminary vs. Texas Higher Education Coordinating Board” and its implications for Bible schools in the Philippines)

Divorce obtained abroad by Filipino citizen against alien spouse now recognized in the Philippines

“SC recognizes divorce in marriage with foreigners” (Rappler) The Supreme Court (SC) en banc issued a landmark ruling on Tuesday, April 24, recognizing divorce in marriages with foreigners. Voting 10-3-1, the SC en banc ruled “that a foreign divorce secured by a Filipino against a foreign spouse is also considered valid in the Philippines, even if it is the Filipino spouse who files for divorce abroad.” “Republic of the Philippines v. Marelyn Tanedo Manalo” G.R. No. 221029, April 24, 2018 Based on a clear and plain reading of paragraph 2 of Article 26 (Family Code), the provision only requires that there be a divorce validly obtained abroad. The letter of the law does not demand that the alien spouse should be the one who initiated the proceedings wherein the divorce decree was granted. It does not distinguish whether the Filipino spouse is the petitioner or the respondent in the foreign divorce proceeding.” Summary: 1. Divorce obtained abroad by a Filipino citizen against his or her Filipino spouse is not recognized here in the Philippines because of Articles 15 and 17 of the New Civil Code of the Philippines. 2. Paragraph 2 of Article 26 of the Family Code is the primary law on the issue of divorce between a Filipino citizen and an alien spouse: “Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino spouse shall have capacity to remarry under Philippine law.” 3. Contrary to previous interpretations by lawyers and judges of paragraph 2 of Article 26 of the Family Code, the Supreme Court ruled in “Republic of the Philippines v. Marilyn Tanedo Manalo, April 24, 2018” that a divorce that is initiated and obtained abroad by a Filipino citizen against his or her alien spouse is valid and recognized in the Philippines. After obtaining the divorce decree, the Filipino spouse must file with the Family Court a petition for recognition of the divorce decree, either for record purposes or in case of a possible remarriage. Mere filing of the divorce decree with the Philippine embassy or consulate is not sufficient. If the divorced Filipino gets married again in the Philippines, he or she can be charged with bigamy. The petitioner must prove two things: (1) the existence of the divorce decree as a fact and (2) the foreign law that allows the alien spouse to remarry. 4. Related discussion: Divorce obtained abroad by a former Filipino citizen against his or her Filipino spouse is recognized in the Philippines. (Republic of the Philippines v. Cipriano Orbecido III) 5. Related discussion: “Is the Philippine embassy in Japan violating Article 26 of the Family Code and Supreme Court decisions?” 6. A petition for judicial recognition of a foreign divorce decree is a difficult and expensive legal process. Most Filipino lawyers, therefore, advise people to file instead a petition for declaration of nullity under Article 36 of the Family Code. 7. House Bill 7185, authored by Taguig City-Pateros Rep. Pia Cayetano, seeks to eliminate the need for judicial recognition of a foreign divorce decree.

Marriage between spouses who are both Filipino citizens

A marriage between two Filipinos cannot be dissolved by a divorce obtained abroad because of Articles 15 and 17 of the New Civil Code of the Philippines. (Garcia-Recio vs. Recio, G.R. No. 138322, October 2, 2001)

Mixed marriage (between a Filipino citizen and an alien spouse)

Paragraph 2 of Article 26 of the Family Code is the primary law on the issue of divorce between a Filipino citizen and an alien spouse:

“Where a marriage between a Filipino citizen and a foreigner is validly celebrated and a divorce is thereafter validly obtained abroad by the alien spouse capacitating him or her to remarry, the Filipino spouse shall have capacity to remarry under Philippine law.”

Contrary to previous interpretations by lawyers and judges of paragraph 2 of Article 26, the Supreme Court ruled in the case of Republic of the Philippines v. Marilyn Tanedo Manalo, (April 24, 2018) that a divorce initiated and obtained abroad by a Filipino citizen against his or her alien spouse is now recognized in the Philippines . The Court said:

Based on a clear and plain reading of the provision, it only requires that there be a divorce validly obtained abroad. The letter of the law does not demand that the alien spouse should be the one who initiated the proceedings wherein the divorce decree was granted. It does not distinguish whether the Filipino spouse is the petitioner or the respondent in the foreign divorce proceeding.

Pertinent sections of the Supreme Court ruling in “Republic of the Philippines v. Marilyn Tanedo Manalo”

Paragraph 2 of Article 26 confers jurisdiction on Philippine courts to extend the effect of a foreign divorce decree to a Filipino spouse without undergoing trial to determine the validity of the dissolution of the marriage. It authorizes our courts to adopt the effects of a foreign divorce decree precisely because the Philippines does not allow divorce. Philippine courts cannot try the case on the merits because it is tantamount to trying a divorce case. Under the principles of comity, our jurisdiction recognizes recognizes a valid divorce obtained by a spouse of foreign nationality, but the legal effects thereof, e.g., on custody, care and support of the children or property relations of the spouses, must still be determined by our courts.

In 2005, this Court concluded that Paragraph 2 of Article 26 applies to a case where, at the time of them marriage, the parties were Filipino citizens, but later on, one of them acquired foreign citizenship by naturalization, initiated a divorce proceeedings, and obtained a favorable decree. (Republic of the Phils. v. Orbecido III)

... a Flipino citizen has the capacity to remarry under Philippine law after initiating a divorce proceeding abroad and obtaining a favorable judgment against his or her alien spouse who is capacitated to remarry.

... a validly obtained foreign divorce decree initiated by the Filipino spouse can be recognized and given legal effects in the Philippines is implied from Our rulings in Fujiki v. Marinay. et al. and Medina v. Koike.

There is no compelling reason to deviate from the above-mentioned rulings. When this Court recognized a foreign divorce decree that was initiated and obtained by the Filipino spouse and extended its legal effects on the issues of child custody and property relations, it should not stop short in likewise acknowledging that one of the usual and necessary consequences of absolute divorce is the right to remarry. Indeed, there is no longer a mutual obligation to live together and observe fidelity. When the marriage tie is severed and ceased to exist, the civil status and the domestic relation of the former spouses change as both of them are freed from the marital bond.

Paragraph 2 of Article 26 speaks of “a divorce xxxx validly obtained abroad by the alien spouse capacitating him or her to remarry.” Based on a clear and plain reading of the provision, it only requires that there be a divorce validly obtained abroad. The letter of the law does not demand that the alien spouse should be the one who initiated the proceedings wherein the divorce decree was granted. It does not distinguish whether the Filipino spouse is the petitioner or the respondent in the foreign divorce proceeding.

Petition for judicial recognition of a divorce decree

After obtaining the divorce decree, the Filipino spouse must file with the Family Court a petition for recognition of the divorce decree, either for record purposes or in case of a possible remarriage. Mere filing of the divorce decree with the Philippine embassy or consulate is not sufficient; if the divorced Filipino gets married again in the Philippines, he or she can be charged with bigamy.

The recognition of a foreign divorce decree is a judicial process and not an administrative process. The petition is filed with the Family Court and not with the Local Civil Registrar or with the National Statistics Office. If officials of the LCR or the NSO by themselves annotate the divorce decree on the marriage certificate without any court order, they can be charged administratively.

In “Republic of the Philippines v. Marilyn Tanedo Manalo,” the petitioner (Manalo) submitted to the Family Court the following:

1. Decision of the Japanese Court allowing the divorce
   
   
2.  “Authentication/Certificate” issued by the Philippine Consulate General in Osaka, Japan of the “Decree of Divorce”
   
   
3. “Acceptance of Certificate of Divorce” by the Petitioner and the Japanese national

But the Supreme Court said that these requirements were not enough for the Family Court to grant the petition; it said that the petitioner (Manalo) must prove that Japanese law allows her alien spouse to remarry.

The Supreme Court in the Manalo ruling stated the requirements that the Family Court must follow:

Jurisprudence has set guidelines before Philippine courts recognize a foreign judgment relating to the status of a marriage where one of the parties is a citizen of a foreign country. Presentation solely of the divorce decree will not suffice. The fact of divorce must still first be proven. Before a foreign divorce decree can be recognized by our courts, the party pleading it must prove the divorce as a fact and demonstrate its conformity to the foreign law allowing it.

If the opposing party fails to properly object, as in this case, the divorce decree is rendered admissible as a written act of the foreign court. As it appears, the existence of the divorce decree was not denied by the OSG; neither was the jurisdiction of the divorce court impeached nor the validity of its proceedings challenged on the ground of collusion, fraud, or clear mistake of fact or law, albeit an opportunity to do so.

Nonetheless, the Japanese law on divorce must still be proved.

Since the divorce was raised by Manalo, the burden of proving the pertinent Japanese law validating it, as well as her former husband’s capacity to remarry, falls squarely upon her. Japanese laws on persons and family relations are not among those matters that Filipino judges are supposed to know by reason of their judicial function.

 
Summing up, the Filipino citizen must prove (1) the existence of the divorce decree as a fact and (2) the Japanese law that allows the alien spouse to remarry.

Difference between petition for declaration of nullity and petition for judicial recognition of a foreign divorce decree

“Petition for authority to remarry” versus petition for declaratory relief In the case of Republic of the Philippines v. Cipriano Orbecido III which I discussed in “The right of a divorced Filipino to remarry under Article 26 of the Family Code,” Orbecido (a Filipino) was divorced by his wife (a former Filipino who became a naturalized US citizen). Orbecido, invoking Paragraph 2 of Article 26 of the Family Code, later on filed a “petition for authority to remarry” with the Regional Trial Court in Zamboanga del Sur. The Supreme Court clarified that instead of a “petition for authority to remarry” Orbecido should have filed a petition for declaratory relief under Rule 63 of the 1997 Rules of Civil Procedure. But the Court also expressly mentions “recognition of a foreign divorce decree” which is why most lawyers file this kind of petition instead of a petition for declaratory relief. Perhaps it is time for the Supreme Court to issue a clarificatory rule of procedure dealing with situations falling under the second paragraph of Article 26.

As I said above, before remarrying,the Filipino divorced by the foreign spouse must first file a petition in a Philippine court for the recognition of the foreign divorce decree.Only when the court has recognized the foreign divorce decree can the Filipino remarry.

The proper legal remedy is filing a petition for the recognition of the foreign divorce decree and not for declaration of nullity of the marriage. Legally speaking, “annulment ” refers to voidable marriages under Articles 45, 46 and 47 of the Family Code while “declaration of nullity” refers to void marriages under Articles 35, 36, 37, 38 and 41 of the Family Code. But Filipinos commonly use “annulment” as a generic term.

A petition for recognition of a divorce decree is not specifically provided for under the 1997 Rules of Civil Procedure or by a specific Supreme Court rule. But paragraph 2 of Article 26 (as clarified in the Manalo ruling) already provides that the Filipino spouse has the right to remarry. Thus, filing a petition for declaration of nullity is pointless. Moreover, the divorce decree cannot be used as the basis for declaration of nullity since this petition is governed by the articles of the Family Code that I cited above.

Petition for judicial recognition of a foreign divorce decree, however, is an expensive and difficult legal process

Most Filipino lawyers, however, advise their clients to file a petition for declaration of nullity under Article 36 of the Family Code rather than a petition for recognition of a foreign divorce decree. Why? In a petition for recognition, the court will require the presentation of expert witnesses who can

(1) translate the divorce decree if it is written in a language other than English, or

(2) testify on the law of the country where the divorce was granted to prove that the alien spouse is allowed to remarry. 

The translator must either come from the embassy concerned or from the Department of Foreign Affairs; getting their services can be costly or difficult. As to the expert witness on the law on marriage and divorce of the country that granted the decree, this is an even more difficult thing to do.

House Bill 7185 seeks to eliminate the need for judicial recognition of a foreign divorce decree

House Bill 7815, if it becomes law, will eliminate the need for judicial recognition of a foreign divorce decree. After the divorce decree is duly authenticated by the Philippine Embassy or Consular Office in the country where the decree was obtained, its registration with the Philippine civil registry (NSO) will be sufficient proof of the capacity to remarry.

Principal author of House Bill 7815 is Taguig City-Pateros 2nd District Rep. Pia Cayetano. The bill was approved 203-3 with no abstentions by the House of Representatives. The Senate must also have its equivalent bill, and the Bicameral Conference Committee will then iron out the final bill. Finally, it must be signed into law by President Duterte.

The Supreme Court ruling in Garcia-Recio vs. Recio (G.R. No. 138322, October 2, 2001) illustrates paragraph 2, Article 26 of the Family Code: “A divorce obtained abroad by an alien may be recognized in our jurisdiction, provided such decree is valid according to the national law of the foreigner. However, the divorce decree and the governing personal law of the alien spouse who obtained the divorce must be proven. Our courts do not take judicial notice of foreign laws and judgments; hence, like any other facts, both the divorce decree and the national law of the alien must be alleged and proven according to our law on evidence. “Philippine law does not provide for absolute divorce; hence, our courts cannot grant it. A marriage between two Filipinos cannot be dissolved even by a divorce obtained abroad, because of Articles 15 and 17 of the Civil Code. In mixed marriages involving a Filipino and a foreigner, Article 26 of the Family Code allows the former to contract a subsequent marriage in case the divorce is “validly obtained abroad by the alien spouse capacitating him or her to remarry.” A divorce obtained abroad by a couple, who are both aliens, may be recognized in the Philippines, provided it is consistent with their respective national laws. “A comparison between marriage and divorce, as far as pleading and proof are concerned, can be made. Van Dorn v. Romillo Jr. decrees that “aliens may obtain divorces abroad, which may be recognized in the Philippines, provided they are valid according to their national law.” Therefore, before a foreign divorce decree can be recognized by our courts, the party pleading it must prove the divorce as a fact and demonstrate its conformity to the foreign law allowing it. Presentation solely of the divorce decree is insufficient. “It is well-settled in our jurisdiction that our courts cannot take judicial notice of foreign laws. Like any other facts, they must be alleged and proved. Australian marital laws are not among those matters that judges are supposed to know by reason of their judicial function. The power of judicial notice must be exercised with caution, and every reasonable doubt upon the subject should be resolved in the negative. “Petitioner argues that the certificate of legal capacity required by Article 21 of the Family Code was not submitted together with the application for a marriage license. According to her, its absence is proof that respondent did not have legal capacity to remarry. “We clarify. To repeat, the legal capacity to contract marriage is determined by the national law of the party concerned. The certificate mentioned in Article 21 of the Family Code would have been sufficient to establish the legal capacity of respondent, had he duly presented it in court. A duly authenticated and admitted certificate is prima facie evidence of legal capacity to marry on the part of the alien applicant for a marriage license. “We agree with petitioner’s contention that the court a quo erred in finding that the divorce decree ipso facto clothed respondent with the legal capacity to remarry without requiring him to adduce sufficient evidence to show the Australian personal law governing his status; or at the very least, to prove his legal capacity to contract the second marriage. “Neither can we grant petitioner’s prayer to declare her marriage to respondent null and void on the ground of bigamy. After all, it may turn out that under Australian law, he was really capacitated to marry petitioner as a direct result of the divorce decree. Hence, we believe that the most judicious course is to remand this case to the trial court to receive evidence, if any, which show petitioner’s legal capacity to marry petitioner. Failing in that, then the court a quo may declare a nullity of the parties’ marriage on the ground of bigamy, there being already in evidence two existing marriage certificates, which were both obtained in the Philippines, one in Malabon, Metro Manila dated March 1, 1987 and the other, in Cabanatuan City dated January 12, 1994.”

Proposed legislation (02): Adverse claims on real property and certain practices of the Register of Deeds and the Land Registration Authority

Index of topics: 1. Background facts; 2. The relevant law on adverse claims - PD 1529 Property Registration Decree; 3. The Supreme Court ruling on adverse claims in Sajonas vs. Court of Appeals; 4. Proposed legislation: Amendments to Section 70 of PD 1529 so as to negate the Sajonas ruling

Background facts:

Elsie and her siblings inherited in 2004 a parcel of land in the province from their parents. Sometime in September 2011, Rose (the person living adjacent to that parcel of land) occupied a certain portion and claimed it as her own. Moreover, Rose filed with the Register of Deeds (RD) an application for annotation of an adverse claim (“application for adverse claim”).

The Register of Deeds did not inform Elsie and her siblings of the pending application for adverse claim.

Sometime in early 2012, when a buyer expressed interest in the land, Elsie and her siblings tried to get a certified copy of their Transfer Certificate of Title (TCT). The RD refused to issue the certified copy saying that there was a pending application for adverse claim. (Elsie and her siblings also found out later on that several persons interested in the land were told by the RD staff that there was a pending application for adverse claim.)

Sometime in April 2013 (two years after the application was filed), the RD approved and annotated the adverse claim on the TCT of the land inherited by Elsie and her siblings.

Again, the RD did not inform Elsie and her siblings that the adverse claim was approved and annotated on the TCT.

The RD also dated the annotation as of September 2011 (the date of the filing of the application), not as of April 2013 (date when the application was approved and actually annotated).

Elsie and her siblings filed a “consulta” with the Land Registration Authority (LRA) with the following questions:

1. Why didn’t the RD notify them that an application for annotation of adverse claim was filed against their land?

2. Why did it take the RD two years to decide whether to deny or grant the application for annotation of the adverse claim?

3. Why did the RD date the annotation as of September 2011 (the date of the filing of the application) and not as of April 2013 (date when the application was approved and actually annotated)?

The relevant law on adverse claims: PD 1529 Property Registration Decree

Section 70 of PD 1529 states:

Adverse claim. Whoever claims any part or interest in registered land adverse to the registered owner, arising subsequent to the date of the original registration, may, if no other provision is made in this Decree for registering the same, make a statement in writing setting forth fully his alleged right or interest, and how or under whom acquired, a reference to the number of the certificate of title of the registered owner, the name of the registered owner, and a description of the land in which the right or interest is claimed.

The statement shall be signed and sworn to, and shall state the adverse claimant's residence, and a place at which all notices may be served upon him. This statement shall be entitled to registration as an adverse claim on the certificate of title. The adverse claim shall be effective for a period of thirty days from the date of registration. After the lapse of said period, the annotation of adverse claim may be canceled upon filing of a verified petition therefor by the party in interest: Provided, however, that after cancellation, no second adverse claim based on the same ground shall be registered by the same claimant.

Before the lapse of thirty days aforesaid, any party in interest may file a petition in the Court of First Instance where the land is situated for the cancellation of the adverse claim, and the court shall grant a speedy hearing upon the question of the validity of such adverse claim, and shall render judgment as may be just and equitable. If the adverse claim is adjudged to be invalid, the registration thereof shall be ordered canceled. If, in any case, the court, after notice and hearing, shall find that the adverse claim thus registered was frivolous, it may fine the claimant in an amount not less than one thousand pesos nor more than five thousand pesos, in its discretion. Before the lapse of thirty days, the claimant may withdraw his adverse claim by filing with the Register of Deeds a sworn petition to that effect.

Lawyers who graduated from law school or were admitted into the bar before 1996 understood this section to mean:

1. The adverse claim is effective only for 30 days from the date of annotation.

2. Within 30 days after the adverse claim is annotated, the claimant must file with the Regional Trial Court (RTC) the proper petition to enforce the claim. (The reason for filing the adverse claim with the RD is to prevent the landowner from disposing of the property while the lawyer is preparing the petition with the RTC.)

3. Although the adverse claim automatically loses its effectivity after the 30-day period, the affected landowner needs to file a petition with the RTC to have the annotation cancelled. (The landowner can include in the petition a claim for damages against the party who filed the adverse claim.)

The Supreme Court ruling on adverse claims in Sajonas vs. Court of Appeals

The Supreme Court in Sajonas vs. CA (G. R. No. 102377, July 5, 1996) ruled that the adverse claim is effective even beyond the 30-day period, for as long as there’s no decision from the RTC declaring that the adverse claim has been cancelled. The Supreme Court said: “The cancellation of the adverse claim is still necessary to render it ineffective, otherwise, the inscription will remain annotated and shall continue as a lien upon the property.” It also clarified the reason for the required court hearing:

[t]he annotation of an adverse claim is a measure designed to protect the interest of a person over a piece of real property where the registration of such interest or right is not otherwise provided for by the Land Registration Act or Act 496 (now P.D. 1529 or the Property Registration Decree), and serves as a warning to third parties dealing with said property that someone is claiming an interest or the same or a better right than the registered owner thereof.

The reason why the law provides for a hearing where the validity of the adverse claim is to be threshed out is to afford the adverse claimant an opportunity to be heard, providing a venue where the propriety of his claimed interest can be established or revoked, all for the purpose of determining at last the existence of any encumbrance on the title arising from such adverse claim.

The Supreme Court upheld its Sajonas ruling in these subsequent cases: Diaz-Duarte vs. Ong and CA, G.R. No. 130352 November 3, 1998; Equatorial Realty Development vs. Frogozo and CA, G.R. No. 128563, March 25, 2004.

Proposed legislation: Amendments to Section 70 of PD 1529 so as to negate the Sajonas ruling

According to the LRA staff whom I have talked to, numerous landowners have complained to them of the negative effects of the Sajonas ruling, specifically about frivolous claims that are meant to harass landowners. One staff member told me that the LRA has approached some members of Congress asking them to amend the law on adverse claims.

1. Proposed legislation: Increase the penalty imposed on frivolous adverse claims from “not less than one thousand pesos nor more than five thousand pesos” to, for example, from fifty thousand pesos to one hundred thousand pesos.

Section 70, PD 1529 states:

If the adverse claim is adjudged to be invalid, the registration thereof shall be ordered canceled. If, in any case, the court, after notice and hearing, shall find that the adverse claim thus registered was frivolous, it may fine the claimant in an amount not less than one thousand pesos nor more than five thousand pesos, in its discretion.

Landowners whose property have been subjected to adverse claims are reluctant to go to court to have the annotation cancelled because of the high costs of litigation. The penalty of “not less than one thousand pesos nor more than five thousand pesos” does not even cover the cost of a lawyer’s single appearance fee. The increase in the penalty can (a) discourage the frivolous filing of adverse claims and (b) answer for the landowner’s legal expenses.

2. With the Sajonas ruling that an adverse claim is valid beyond the 30-day period, the claimant doesn’t have to do anything else once the adverse claim has been annotated. The landowner is now forced to incur legal expenses by retaining the services of a lawyer to have the annotation canceled.

Moreover, Section 70, PD 1529 seemingly violates the doctrine that a Torrens title cannot be subjected to a collateral attack. For example: The landowner files a petition to have the annotation of adverse claim cancelled. What if the adverse claimant, in the Answer, raises grounds that question the authenticity of the title? Normally, such an Answer is not allowed because it’s a collateral attack, but Section 70, PD 1529 (as clarified in the Sajonas ruling) states:

The reason why the law provides for a hearing where the validity of the adverse claim is to be threshed out is to afford the adverse claimant an opportunity to be heard, providing a venue where the propriety of his claimed interest can be established or revoked, all for the purpose of determining at last the existence of any encumbrance on the title arising from such adverse claim.

Proposed legislation: Amend Section 70, PD 1529 so that the adverse claimant must proactively pursue the claim in court. (“He who alleges must prove.”) The claimant must file, within 30 days from the annotation, the proper petition in court to prove the adverse claim. If the claimant fails to do so, then the adverse claim should no longer be effective.

This proposed amendment will prevent the filing of frivolous adverse claims.

3. Proposed legislation: To prevent the filing of frivolous adverse claims, an adverse claim must be effective only for 30 days and will be automatically canceled by the mere lapse of the period, without the need for a court order or an annotation by the RD.

In the alternative, the RD can annotate the cancellation upon the application by the landowner. To prevent the RD from sitting on the application for cancellation, the action on the application must be made within the 5-day period for simple transactions provided by RA 9485 Anti-Red Tape Act of 2007.

Another alternative: The effectivity of an adverse claim can be increased from 30 days to 45 days, so as to give the adverse claimant enough time to enforce the claim in the Regional Trial Court.

Benefits of this proposed legislation:

(a) Frivolous adverse claims will be minimized.

(b) Landowners will not incur legal expenses in going to court to have the adverse claim canceled.

4. As stated in the “Background facts” above, the RD did not inform Elsie and her siblings of the pending application for adverse claim.

The third paragraph of Section 70 of PD 1529 provides that the landowner (who is a “party in interest”) has the remedy of going to court for the cancellation of the adverse claim within 30 days from the registration of the claim. This section thus implies that the RD must immediately notify the landowner so that the legal remedy can be availed of.

Proposed legislation:

(a) Make explicit the duty of the RD to immediately notify the landowner of the registration of the adverse claim, and

(b) Provide penalties if the RD fails to notify the landowner.

The legislation could require the RD to notify the landowner twice: first notice that an application for adverse claim has been filed, and second notice that the application has either been denied or approved.

5. As stated in the “Background facts” above, it took the RD two years to act on the application for adverse claim.

Proposed legislation:

(a) Set a time limit of 30 days from the time the application for an adverse claim was filed within which the RD must either deny or approve the application, with the corresponding penalty if the RD fails to comply with this period;

(b) Provide that if the RD denies the application for adverse claim, the denial cannot be subject of a motion for reconsideration or an appeal to the Land Registration Authority. The remedy of the applicant should be to file a court action to pursue the claim.

As stated in the “Background facts,” the RD refused to issue a certified copy of the TCT to Elsie and her siblings while the application for adverse claim was pending. Under the LRA guidelines, if the RD denies the application for adverse claim, the claimant can file a “consulta” with the LRA questioning the denial. This guideline should be repealed because it means that, while the “consulta” is pending, the RD can continue to refuse issuing a certified copy of the affected TCT (or continue to tell interested buyers of the pending appeal), to the detriment of the landowner who may wish to sell the property.

(The LRA usually takes years to resolve a “consulta” because it goes through numerous stages or departments — investigation by an RD designated as the hearing officer or by the Investigation and Inspection Division; preliminary review of the hearing officer’s draft resolution by the LRA Administrator; consulta conference; drafting and signing of the final resolution by the LRA Deputy Administrator; final review by the LRA Administrator; and promulgation by the Clerks of Court Division.)

6. As stated in the “Background facts” above, Elsie and her siblings questioned why the RD dated the annotation as of September 2011 (the date of the filing of the application) and not as of April 2013 (date when the application was approved and actually annotated)?

In reply to this question, the RD invoked the Implementing Guidelines of the Philippine Land Registration and Information System (PHILARIS), specifically Section 5, sub-paragraph k), which states:

k) Electronic Primary Entry Book for Registered Land (EPEB-RL) – refers to the electronic book wherein registered lands,including all transactions and/or instruments registered related thereto, are recorded and assigned sequential entry numbers in the order of presentation indicating therein the date, hour, and minute when the same was received.

But Section 5, sub-paragraph k) of the PHILARIS guidelines is contrary to the provisions of the third paragraph of Section 70 of PD 1529. As stated above,  this section of PD 1529 provides that the landowner (“party in interest”) has the remedy of going to court for the cancellation of the adverse claim within 30 days from the registration of the claim. But how can Elsie and her siblings have availed of this remedy when the approval of the application for adverse claim made in 2013 was retroactively dated to 2011?

In effect, this provision of the PHILARIS guidelines on retroactive dating negates the legal remedy provided by PD 1529.

Proposed legislation: Require the RD to annotate any adverse claim using the date of actual registration rather than the date of the filing of the claim. (The implementing guidelines of PHILARIS must therefore also be amended by the LRA.)

Escalation of interest rates in loan contracts void without written notice to and written consent of the borrower

Plain Language summary: Case title: “Spouses Ignacio F. Juico and Alice P. Juico, Petitioners, -versus- China Banking Corporation, Respondent,” G.R. No. 187678, April 10, 2013 Ruling: The escalation clause is void because it granted China Banking the power to impose an increased rate of interest without a written notice to the Juico couple and their written consent.   Definition: “Escalation clauses refer to stipulations allowing an increase in the interest rate agreed upon by the contracting parties.   Doctrine: “There is nothing inherently wrong with escalation clauses which are valid stipulations in commercial contracts to maintain fiscal stability and to retain the value of money in long term contracts.” “But an escalation clause is void where the creditor unilaterally determines and imposes an increase in the stipulated rate of interest without the express conformity of the debtor.” New Sampaguita Builders Construction, Inc. v. Philippine National Bank (July 30, 2004) Note: The Supreme Court rulings on escalation clauses also apply to credit card agreements. Polotan, Sr. v. CA (Eleventh Div.), 357 Phil. 250 (1998)

Background facts

Spouses Ignacio and Alice Juico got a loan from China Banking Corporation as evidenced by 2 promissory notes. The loan was secured by a Real Estate Mortgage over the Juico couple’s property located at White Plains, Quezon City. The notes contained the following escalation clause stating that the interest rate would change every month based on the prevailing market rate:

“I/We hereby authorize the CHINA BANKING CORPORATION to increase or decrease as the case may be, the interest rate/service charge presently stipulated in this note without any advance notice to me/us in the event a law or Central Bank regulation is passed or promulgated by the Central Bank of the Philippines or appropriate government entities, increasing or decreasing such interest rate or service charge.”

The Juicos failed to pay the monthly amortizations due. As of February 23, 2001, the amount due on the two promissory notes totaled P19,201,776.63 representing the principal, interests, penalties and attorney’s fees. The mortgaged property was sold at public auction, with China Bank as the highest bidder for the amount of Php 10,300,000.

After the auction, China Bank filed a collection case with the Regional Trial Court (RTC) of Makati City for Php 8,901,776.63, the amount of deficiency after applying the proceeds of the foreclosure sale to the mortgage debt.

In their Answer, the Juicos admitted their debt but claimed that the principal of the loan was already paid when the mortgaged property was extrajudicially foreclosed and sold for Php 10,300,000. They contended that should they be held liable for any deficiency, it should be only for Php 55,000 representing the difference between the total outstanding obligation of Php 10,355,000 and the bid price of Php 10,300,000.

At the trial, China Bank presented Ms. Annabelle Cokai Yu, its Senior Loans Assistant, as witness. She testified that she handled the account of the Juicos and assisted them in processing their loan application. She called them monthly to inform them of the prevailing rates to be used in computing interest due on their loan.

On cross-examination, Ms. Yu reiterated that the interest rate changes every month based on the prevailing market rate and she notified the Juicos of the prevailing rate by calling them monthly before their account becomes past due. When asked if there was any written authority from the Juicos to increase the interest rate unilaterally, Ms. Yu answered that they signed a promissory note indicating that they agreed to pay interest at the prevailing rate.

In defense, Ignacio Juico testified that before the loan’s release, he was required to sign a blank promissory note and was informed that the interest rate on the loan will be based on prevailing market rates. On cross-examination, Ignacio testified that he is a Doctor of Medicine and also engaged in the business of distributing medical supplies. Ignacio admitted having read the promissory notes and that he is aware of his obligation under them before he signed them.

The RTC rules against the Juicos 

The trial court held that:

(1) Ignacio’s claim that he signed the promissory notes in blank cannot negate or mitigate his liability since he admitted reading the Promissory Notes before signing them.

(2) Considering the substantial amount involved, it is unbelievable that the Juicos threw all caution to the wind and simply signed the documents without reading and understanding the contents.

The Court of Appeals affirms RTC ruling 

The CA recognized China Bank’s right to claim the deficiency because the proceeds of the foreclosure sale were insufficient to cover the amount of the debt.

Also, the CA found as valid the stipulation in the promissory notes that interest will be based on the prevailing rate. It noted that the parties agreed on the interest rate which was not unilaterally imposed by the bank but was the rate offered daily by all commercial banks as approved by the Monetary Board. Having signed the promissory notes, the Juicos are bound by the stipulations.

Supreme Court rules partly for the Juicos and partly for China Bank 

The Juico couple appealed to the Supreme Court. According to the Juicos, the issues are:

(1) The interest rates imposed by China Bank are not valid as they were not by virtue of any law or Bangko Sentral ng Pilipinas regulation or any regulation that was passed by an appropriate government entity. They insist that the interest rates were unilaterally imposed by the bank and thus violate the principle of mutuality of contracts.

(2) The escalation clause in the promissory notes does not give China Bank the unbridled authority to increase the interest rate unilaterally. Any change must be mutually agreed upon.

The Court’s ruling in favor of the Juicos: 

(1) Escalation clauses are not necessarily void. These clauses are valid stipulations in commercial contracts to maintain fiscal stability and to retain the value of money in long term contracts.

(2) The Juicos were not coerced into signing the promissory notes and they did not protest the new rates imposed on their loan. Nevertheless, an escalation clause “granting the creditor an unbridled right to adjust the interest independently and upwardly, completely depriving the debtor of the right to assent to an important modification in the agreement” is void. A stipulation of this nature violates the principle of mutuality of contracts under Article 1308 of the New Civil Code.

(3) An escalation clause is void where the creditor unilaterally determines and imposes an increase in the stipulated rate of interest without the express conformity of the debtor.

(4) Changes in the rate of interest for loans under an escalation clause must be the result of an agreement between the parties.

(5) China Bank should have given a detailed billing statement based on the new imposed interest with corresponding computation of the total debt. The statement would have enabled the Juicos to make an informed decision. China Bank should also have provided an appropriate form to be signed by the Juicos to indicate their conformity to the new rates.

The Court’s ruling in favor of China Bank: 

The Court ordered the Juicos to pay China Bank Php 4,761 ,865. 79 (instead of Php 8,901,776.63, the amount originally claimed) representing the amount of deficiency inclusive of interest, penalty charge and attorney’s fees.

Overview of Supreme Court rulings on escalation cases 

The controlling case and ruling on escalation clauses is New Sampaguita Builders Construction, Inc. v. Philippine National Bank. The Court ruled that “an escalation clause is void where the creditor unilaterally determines and imposes an increase in the stipulated rate of interest without the express conformity of the debtor.” The Court explained:

Courts have the authority to strike down or to modify provisions in promissory notes that grant the lenders unrestrained power to increase interest rates, penalties and other charges at the latter’s sole discretion and without giving prior notice to and securing the consent of the borrowers. This unilateral authority is anathema to the mutuality of contracts and enable lenders to take undue advantage of borrowers. Although the Usury Law has been effectively repealed, courts may still reduce iniquitous or unconscionable rates charged for the use of money. Furthermore, excessive interests, penalties and other charges not revealed in disclosure statements issued by banks, even if stipulated in the promissory notes, cannot be given effect under the Truth in Lending Act.

Posted below are some other cases on escalation clauses.

Banco Filipino Savings & Mortgage Bank v. Navarro, No. L-46591, July 28, 1987, 152 SCRA 346, 353 “I/We hereby authorize Banco Filipino to correspondingly increase the interest rate stipulated in this contract without advance notice to me/us in the event a law should be enacted increasing the lawful rates of interest that may be charged on this particular kind of loan.”	Ruling: Escalation clause void because: Circular No. 494 issued by the Monetary Board on January 2,1976, because said circular is not a law although it has the force and effect of law Escalation clause has no provision for reducing the stipulated interest “in the event that the applicable maximum rate of interest is reduced by law or by the Monetary Board” (de-escalation clause).
Philippine National Bank v. Court of Appeals, G.R. No. 107569, November 8, 1994, 238 SCRA 20 The promissory notes authorized PNB to increase the stipulated interest per annum “within the limits allowed by law at any time depending on whatever policy [PNB] may adopt in the future; Provided, that, the interest rate on this note shall be correspondingly decreased in the event that the applicable maximum interest rate is reduced by law or by the Monetary Board.” Philippine National Bank v. Court of Appeals, 273 Phil. 789 (1991)	Ruling: Although the contract included a de-escalation clause, increases unilaterally imposed by PNB violated the principle of mutuality essential in contracts.
Philippine National Bank v. Court of Appeals, 328 Phil. 54, 61-62 (1996) Escalation clause authorized PNB to raise the stipulated interest rate at any time without notice, within the limits allowed by law.	Ruling: PNB did not secure the conformity of the borrower to the successive increases in the interest rate. The borrower’s assent to the increases cannot be implied from lack of response to the letters sent by PNB, informing them of the increases.
Philippine Savings Bank v. Castillo, G.R. No. 193178, May 30, 2011, 649 SCRA 527 “The rate of interest and/or bank charges herein stipulated, during the terms of this promissory note, its extensions, renewals or other modifications, may be increased, decreased or otherwise changed from time to time within the rate of interest and charges allowed under present or future law(s) and/or government regulation(s) as the [PSBank] may prescribe for its debtors.”	Ruling: Escalation clause void despite provision for de-escalation. “The increase or decrease of interest rates under such clause hinges solely on the discretion of petitioner as it does not require the conformity of the maker before a new interest rate could be enforced. We also said that respondents’ assent to the modifications in the interest rates cannot be implied from their lack of response to the memos sent by petitioner, informing them of the amendments, nor from the letters requesting for reduction of the rates.”

Some observations:

[1] The Juicos should have asked for the reduction of the attorney’s fees demanded by China Bank amounting to 10% or about Php 1.36 million. In New Sampaguita Builders Construction, Inc. v. Philippine National Bank, the Supreme Court equitably reduced the attorney’s fees to just 1%.

[2] The Supreme Court rulings on escalation clauses also apply to credit card agreements. See Polotan, Sr. v. CA (Eleventh Div.), 357 Phil. 250 (1998).

Rights of employees and obligations of employers in business closure, asset sale, or stock sale

(Note: For counseling on labor problems, please contact the Public Assistance and Complaints Unit (PACU) of the Department of Labor and Employment, Muralla St. cor. Gen. Luna St., Intramuros, 1002 Manila, between Pamantasan ng Lungsod ng Maynila and the Bulletin. You may call DOLE Hotline: 1349 from your fixed-line phones. You can also inquire through an online form.)

Business closure	The law permits an employer to dismiss its employees if the business is being closed down.	Obligations of employer: (1) serve written notices on the employees and the Department of Labor at least one month before the intended date of closure; (2) pay the dismissed employees separation pay, except if the closure is due to serious business losses or financial reverses. Exemption from giving separation pay: . a. the closure was due to serious business losses or financial reverses; . b. the employer must show convincing evidence that it actually suffered serious financial reverses.
Asset sale	The business owner sells all or substantially all of the assets to another party.	The business owner who sells in good faith is authorized to dismiss the affected employees. But the owner must give separation pay to the employees. The buyer in good faith, on the other hand, is: (1) not obliged to absorb the employees affected by the sale. (2) not liable for paying their claims.
Stock sale	The individual or corporate shareholders sell a controlling block of stock to new or existing shareholders.	The employees cannot be dismissed simply because new majority stockholders and new management have taken over the business.

Sari-sari Group of Companies, Inc. v. Piglas Kamao, G.R. No. 164624, 11 August 2008, 561 SCRA 569

Facts: The employees agreed with the corporation’s act of considering them as terminated. They accepted their separation pay.

Ruling: Despite having accepted the separation pay, the employees can contest the legality of their dismissal.

SME Bank vs. De Guzman, G.R. No. 184517, October 8, 2013

Background facts:

The original principal shareholders and corporate directors of Small and Medium Enterprise Bank, Incorporated (SME Bank) were Eduardo M. Agustin, Jr. (Agustin) and Peregrin de Guzman, Jr. (De Guzman). Some of SME Bank’s employees were Elicerio Gaspar (Elicerio), Ricardo Gaspar, Jr.(Ricardo), Eufemia Rosete (Eufemia), Fidel Espiritu (Fidel), Simeon Espiritu, Jr. (Simeon, Jr.), and Liberato Mangoba (Liberato).

SME Bank experienced financial difficulties in June 2001. To remedy the situation, Agustin and De Guzman sold 86.365% of the shares of stock of SME Bank to spouses Abelardo and Olga Samson. The Samson couple then became the principal shareholders of SME Bank, while Aurelio Villaflor, Jr. was appointed bank president.

Before the sale, Simeon Espiritu (Espiritu), then the general manager of SME Bank, met with all the employees of the head office and of the Talavera and Muñoz branches of SME Bank. He persuaded them to tender their resignations, with the promise that they would be rehired when they reapplied.

Relying on this representation, Elicerio, Ricardo, Fidel, Simeon, Jr., and Liberato tendered their resignations dated August 27, 2001. As for Eufemia, she first tendered a resignation letter and then a retirement letter dated September 2001. But as it turned out, the employees, except for Simeon, Jr., were not rehired.

The employees demanded the payment of their respective separation pays but their requests were denied. They then filed a Complaint with the National Labor Relations Commission (NLRC) – Regional Arbitration Branch No. III against SME Bank, the Samson couple, and Villaflor for unfair labor practice; illegal dismissal; illegal deductions; underpayment; and nonpayment of allowances, separation pay and 13th month pay. The employees later on amended their Complaint to include Agustin and De Guzman as respondents.

In defense, the Samson Group (the Samson couple, and Villaflor) contended that Elicerio, Ricardo, Fidel, and Liberato voluntarily resigned from their posts while Eufemia retired from her position. As their resignations and retirements were voluntary, they were not dismissed from their employment. In support of this argument, the Samson Group presented copies of their resignation and retirement letters, which were couched in terms of gratitude.

Labor Arbiter dismisses case against the Samson Group but rules against Agustin and De Guzman

(1) The buyer of an enterprise is not bound to absorb its employees, unless there is an express stipulation to the contrary.

(2) The employees were illegally dismissed, because they had involuntarily executed their resignation letters after relying on representations that they would be given their separation benefits and rehired by the new management. The arbiter ordered Agustin and De Guzman to pay the complainants’ separation pay.

NLRC ruling: mere change in management not a valid ground to terminate the employees

Dissatisfied with the judgment, Elicerio and the other employees appealed to the NLRC. Agustin and De Guzman also appealed. The employees questioned the labor arbiter’s failure to award backwages. Agustin and De Guzman, on the other hand, contended that they should not be held liable for the payment of the employees’ claims.

The NLRC found that there was only a mere transfer of shares – and therefore, a mere change of management – from Agustin and De Guzman to the Samson Group. As the change of management was not a valid ground to terminate respondent bank employees,

(1) Elicerio and the other employees were illegally dismissed;

(2) Agustin, De Guzman, and the Samson Group should be held jointly and severally liable for the employees’ separation pay and backwages.

Supreme Court ruling: corporate officers who act in bad faith or with malice liable for illegal dismissal

(1) Elicerio and the other employees are entitled to separation pay, full backwages, moral damages, exemplary damages and attorney’s fees. They tendered resignation letters only because they were led to believe that, upon reapplication, they would be reemployed by the new management. They had no real intention of leaving their posts.

While resignation letters containing words of gratitude may indicate that the employees were not coerced into resignation, this fact alone is not conclusive proof that they intelligently, freely and voluntarily resigned. To rule that resignation letters couched in terms of gratitude are, by themselves, conclusive proof that the employees intended to relinquish their posts would open the floodgates to possible abuse.

In order to withstand the test of validity, resignations must be made voluntarily and with the intention of relinquishing the office, coupled with an act of relinquishment. Therefore, in order to determine whether the employees truly intended to resign from their respective posts, the Court cannot merely rely on the tenor of the resignation letters, but must consider the totality of circumstances.

(2) Contrary to SME Bank’s argument, there was no transfer of the business establishment but merely a change in the new majority shareholders and new management of the corporation. This change is not a just or authorized cause for termination of employment under the Labor Code.

SME Bank continued to be the employer of respondent employees notwithstanding the equity change in the corporation. A corporation has a personality separate and distinct from that of its individual shareholders or members. Thus, a change in the composition of its shareholders or members would not affect its corporate liabilities.

As the employer of the illegally dismissed employees before and after the equity transfer, SME Bank is liable for the satisfaction of their claims.

(3) Liability of corporate directors and officers in illegal dismissal cases

Rule Corporate officers are not personally liable for their official acts. A corporation, by legal fiction, has a personality separate and distinct from its officers, stockholders, and members.

Exception Corporate directors and officers are solidarily liable with the corporation if they acted with malice or in bad faith in terminating the employees.

Agustin and De Guzman are corporate directors who acted in bad faith. They may be held solidarily liable with SME Bank for the satisfaction of the employees’ lawful claims.

The dismissal of Elicerio and the other employees was done in bad faith. Motivated by their desire to sell their shares of stock to the Samson couple, Agustin and De Guzman agreed to and later implemented the precondition in the Letter Agreements as to the termination or retirement of SME Bank’s employees. But instead of going through the proper procedure, the bank manager induced the employees to resign or retire from their respective employments, while promising that they would be rehired by the new management. Fully relying on that promise, they tendered courtesy resignations or retirements and eventually found themselves jobless. Clearly, this sequence of events constituted a gross circumvention of labor laws and a violation of the employees’ constitutionally guaranteed right to security of tenure.

Differences between regular employees and project employees, between project employment and fixed term employment

Plain Language summary: Case title: “GMA Network, Inc., Petitioner, vs.Carlos P. Pabriga, Geoffrey F. Arias, Kirby N. Campo, Arnold L. Lagahit, And Armando A. Catubig, Respondents” G.R. No. 176419, November 27, 2013 Ruling: Pabriga and his co-workers were GMA7’s regular employees, not project employees, and they were illegally dismissed. Definitions: “Regular employees perform activities that are usually necessary or desirable in the employer’s usual business or trade.” “Project employees perform activities that may be usually necessary or desirable in the usual business or trade of the employer.” (For example, a construction company engages in various projects like a twenty-five-storey hotel in Makati; a residential condominium building in Baguio City; and a domestic air terminal in Iloilo City. Employees who are hired for the carrying out of one of these separate projects, the scope and duration of which has been determined and made known to the employees at the time of employment, are properly treated as “project employees,” and their services may be lawfully terminated at completion of the project.) “Project employees perform activities that may not be usually necessary or desirable in the usual business or trade of the employer.” (For example, a steel company engages in  fish production or cultivation of vegetables.) A project employee or a member of a work pool may acquire the status of a regular employee. Related case: “Universal Robina Sugar Milling Corporation, et. al., vs. Acibo, et. al” G.R. No. 186439, 15 January 2014 (differences between regular, project/seasonal, and casual employees)

(Note: For counseling on labor problems, please contact the Public Assistance and Complaints Unit (PACU) of the Department of Labor and Employment, Muralla St. cor. Gen. Luna St., Intramuros, 1002 Manila, between Pamantasan ng Lungsod ng Maynila and the Manila Bulletin office. You may call DOLE Hotline: 1349 from your fixed-line phones. You can also inquire through an online form.)

Background facts

Carlos Pabriga, Geoffrey Arias, Kirby Campo, Arnold Lagahit, and Armando Catubig worked as television technicians for GMA7 in the late 1990s. Their work included manning of technical operations center and acting as transmitter/VTR men, maintenance staff, and cameramen. They were repeatedly rehired in several fixed term contracts from 1996 to 1999.

Pabriga and his co-workers originally filed in July 1999 a complaint for non-payment of benefits with the National Labor Relations Commission (NLRC). Later on, they amended their complaint by raising the issues of unfair labor practice, illegal dismissal, damages, and attorney’s fees.

Pabriga and his co-workers claimed that they were GMA7's regular employees. On the other hand, GMA7 claimed that they were merely hired as “pinch-hitters” on fixed term contracts.

Labor Arbiter rules against Pabriga and his co-workers

The Labor Arbiter dismissed the complaint for illegal dismissal and unfair labor practice, but held GMA 7 liable for 13th month pay.

NLRC reverses Labor Arbiter’s decision; Court of Appeals affirms NLRC ruling

The NLRC ruled that Pabriga and his co-workers were regular employees with respect to the particular activity to which they were assigned, until it ceased to exist. As such, they were entitled to payment of separation pay computed at one month salary for every year of service.

The NLRC also ruled that Pabriga and his co-workers were entitled to 13th month pay, night shift differential, and service incentive leave pay.

GMA7 elevated the case to the Court of Appeals through a petition for certiorari. On September 8, 2006, the CA denied the petition for lack of merit.

Supreme Court ruling: Pabriga and his co-workers were regular employees, not project employees, and they were illegally dismissed

The Supreme Court affirmed the findings of the NLRC and the CA that Pabriga and his co-workers were GMA7’s regular employees and that they were illegally dismissed.The Court ruled:

(1) Pabriga and his co-workers were not project employees because the manning of the operations center to air commercials, acting as transmitter/VTR men, maintaining the equipment, and acting as cameramen were not undertakings separate or distinct from the business of a broadcasting company.

(2) Even if Pabriga and his co-workers are to be considered as project employees, they attained regular employment status because GMA7 continuously rehired them.

(3) GMA7 did not report the completion of its projects and the dismissal of Pabriga and his co-workers in its finished projects to the nearest Public Employment Office as required by Policy Instruction No. 20 of the Department of Labor and Employment. Based on jurisprudence, the failure of an employer to report to the nearest Public Employment Office the termination of its workers’ services every time a project or a phase is completed indicates that the workers are not project employees.

(4) GMA7’s practice of hiring and rehiring of workers on fixed terms, without end, is unjustifiable.

Difference between regular employee and project employee

A regular employee performs activities that are usually necessary or desirable in the employer’s usual business or trade.

A project employee performs activities that may or may not be usually necessary or desirable in the usual business or trade of the employer. The services of the project employees are legally and automatically terminated when the project ends or is completed.

The principal test for determining whether employees are “project employees” is two-fold:

(1) Is the employee assigned to carry out a specific project or undertaking?

(2) Is the completion or termination of the project specified or determined at the time the employee was engaged for that project?

Definition of “project”

The term “project” must be properly defined in order to safeguard the rights of workers against the arbitrary use of the word “project” by employers to prevent them from attaining the status of regular employees.

(1) The “project” would ordinarily have some relationship to the usual business of the employer.

For example, a construction company ordinarily carries out two or more [distinct] identifiable construction projects: a twenty-five-storey hotel in Makati; a residential condominium building in Baguio City; and a domestic air terminal in Iloilo City. Employees who are hired for the carrying out of one of these separate projects (the scope and duration of which has been determined and made known to the employees at the time of employment), are properly treated as “project employees,” and their services may be lawfully terminated at completion of the project.

(2) Exceptionally, the “project” job or undertaking is not within the regular business of the employer. The job or undertaking is identifiably separate and distinct from the ordinary or regular business operations of the employer. The job or undertaking also begins and ends at determined or determinable times. For example, a steel-making company, for one reason or another, undertakes the breeding and production of fish or the cultivation of vegetables.

Examples of regular employee and a project employee

Philippine Long Distance Telephone Company v. Ylagan, 537 Phil. 840 (2006) Although essentially a telephone company, PLDT maintains its own accounting department to which Ylagan was assigned. PLDT was not able to prove that accounting duties were distinct, separate and identifiable from its usual undertakings. Ylagan is therefore a regular employee, not a project employee.

San Miguel Corporation v. National Labor Relations Commission, 357 Phil. 954 (1998) The private respondent was hired to repair furnaces, which are needed by San Miguel Corporation to manufacture glass, an integral component of its packaging and manufacturing business. San Miguel Corporation is not engaged in the business of repairing furnaces. Although the activity was necessary to enable it to continue manufacturing glass, the necessity for the repairs arose only when a furnace reached the end of its life or operating cycle. Private respondent is therefore a project employee.

A project employee or a member of a work pool may acquire the status of a regular employee when the following concur:

(1) The project employee is continuously rehired even after a project has ended; and

(2) The alleged project employee performs tasks are vital, necessary, and indispensable to the usual business or trade of the employer.

Difference between project employment and fixed period/fixed term employment

GMA7 interchangeably characterized Pabriga and his co-workers’s service as project employment and fixed term employment. But these types of employment are not the same.

Project employment The employee’s services are coterminous with the project. The employment may, in fact, last for more than a year, depending on the needs or circumstances of the project.

Fixed period/fixed term employment Duration of employment is agreed upon by the parties.

The decisive determinant in fixed-term employment is not the activity that the employee is called upon to perform but the day certain agreed upon by the parties for the employment relationship to commence and terminate.

The use of fixed-term employment is subject to abuse by employers who want to deprive workers of their security of tenure. In this situation, the fixed term or period should be struck down as contrary to public policy or morals.

Indications or criteria under which “term employment” does not circumvent the law on security of tenure:

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

(2) The employer and the employee dealt with each other on more or less equal terms with no moral dominance exercised by the former or the latter.

To prove the fixed term contracts, GMA7 presented cash disbursement vouchers signed by Pabriga and his co-workers, stating that they were merely hired as “pinch-hitters.” The Court observed that Pabriga and his co-workers were in no position to refuse to sign these vouchers, as refusal would entail not getting paid for their services. Plainly, Pabriga and his co-workers as “pinch-hitters” cannot be considered to be on equal footing as GMA7 in the negotiation of their employment contract.

Illegal drugs: if chain of custody is broken, accused must be acquitted

Plain Language summary: Case title: “People of the Philippines vs. Nicolas Gutierrez” G.R. No. 179213, September 3, 2009 Ruling: The prosecution failed to prove under the “chain of custody” rule that the shabu allegedly seized from the accused by the police officers was the same shabu presented in court. The accused must therefore be acquitted. Definitions: (1) “Corpus delicti”: substance of the crime that proves a crime has actually been committed. In cases involving illegal drugs, the illegal drug itself is the corpus delicti. Its existence is vital for the court to find the accused beyond reasonable doubt. (2) “Chain of custody” rule: there must be testimony about every link in the chain, from the moment the object seized was picked up to the time it is offered in evidence. Every person who touched the object must describe how and from whom it was received, where it was, and what happened to it while in the witness's possession, the condition in which it was received, and the condition in which it was delivered to the next link in the chain. References, links, relevant laws: “Mallillin v. People” G.R. No. 172953, April 30, 2008 (Supreme Court requirements in proving chain of custody) Section 1 (b) of the Dangerous Drugs Board Regulation No. 1, Series of 2002 which implements R.A. No. 9165 (definition of "chain of custody")

Background facts:

[1] A police team arrested Nicolas Gutierrez during a buy-bust operation on June 16, 2003 in Pasig City. The team allegedly seized from Gutierrez five centigrams of methylamphetamine hydrochloride (“shabu”) and drug paraphernalia.

Gutierrez was charged under R.A. 9165 with illegal sale of shabu and illegal possession of paraphernalia.

[2] Gutierrez pleaded “not guilty” during his arraignment. He claimed that he was merely having dinner with his family when four unidentified armed men barged into his house and arrested him.

[3] During the pre-trial, Gutierrez’s lawyer stipulated that:

a. the specimen (alleged shabu) exists,
b. the arresting officers requested for its examination,
c. a forensic chemist examined the specimen, and
d. it tested positive for methyl amphetamine hydrochloride.

[4] During the hearing, the fiscal presented some of the police officers who arrested Gutierrez. The officers identified the buy-bust money paid to Gutierrez and the shabu bought from him. PO1 Espares testified on the marking and eventual turnover of the seized sachet of alleged shabu to the investigator.

[5] The Pasig City Regional Trial Court found Gutierrez guilty of the illegal sale of shabu. But the RTC acquitted him of the charge of illegal possession of paraphernalia.

Gutierrez questioned the RTC’s ruling before the Court of Appeals. The CA affirmed the RTC’s decision. Gutierrez then brought his case up to the Supreme Court.

Issue:

The prosecution failed to show what happened to the shabu from the time the arresting officers gave it to the investigator up to its turnover for laboratory examination. The case records also do not show what happened to the shabu between its turnover by the chemist to the investigator and its presentation in court. Since the prosecution failed to prove that the shabu allegedly seized from Gutierrez was the same shabu presented in court, should Gutierrez be acquitted?

Supreme Court ruling:

Gutierrez should be acquitted because the prosecution failed to show an unbroken chain of custody of the alleged shabu.

Under Section 5, Article II of R.A. No. 9165, the elements necessary in a prosecution for the illegal sale of shabu are:

• the identity of the buyer and the seller;
• the object and the consideration; and
• the delivery of the thing sold and the payment for it.

The prosecution must prove that the sale of shabu took place. The corpus delicti— the body or substance of the crime which establishes the fact that acrime has actually been committed—must also be presented in court. In cases involving narcotics, the illegal drug itself constitutes the corpus delicti of the offense. The existence of the illegal drug is vital for the court to find the accused guilty beyond reasonable doubt. The “chain of custody” rule ensures that unnecessary doubts on the identity of the evidence are removed.

In “Malillin v. People,” the Supreme Court explained how it expects the chain of custody or “movement” of the seized evidence to be maintained. There must be testimony about every link in the chain, from the moment the object seized was picked up to the time it is offered in evidence. Every person who touched the object must describe

• how and from whom it was received, where it was, and what happened to it
  while in the witness’s possession,
• the condition in which it was received, and
• the condition in which it was delivered to the next link in the chain.
  

These witnesses must describe the precautions taken to ensure that there had been

1. no change in the condition of the object and
2. no opportunity for someone not in the chain to possess the object.

PO1 Espares, one of the arresting officers, testified on the marking and eventual turnover of the allegedly seized sachet of shabu to the investigator. But no explanation was given on its custody in the interim – from the time it was turned over to the investigator to its turnover for laboratory examination. The case records also do not show what happened to the allegedly seized shabu between the turnover by the chemist to the investigator and its presentation in court.

Highlights of the Supreme Court’s decision / clarifications:

[1] The Supreme Court also ruled that Gutierrez should be acquitted because the arresting officers failed to comply with the rule on the custody and disposition of confiscated drugs (Section 21, Paragraph 1 of Article II of R.A. No. 9165). The officers did not physically inventory and take pictures of the shabu allegedly confiscated from Gutierrez. The officers also did not explain why they did not follow the rule.

[2] “Because of the built-in danger of abuse that a buy-bust operation carries, it is governed by specific procedures on the seizure and custody of drugs.”

“By the very nature of anti-narcotics operations, the need for entrapment procedures, the use of shady characters as informants, the ease with which sticks of marijuana or grams of heroin can be planted in the pockets or hands of unsuspecting provincial hicks, and the secrecy that inevitably shrouds all drug deals, the possibility of abuse is great.”

“Courts must be extra vigilant in trying drug cases lest an innocent person is made to suffer the unusually severe penalties for drug offenses.”

[3] What about the stipulations made by Gutierrez’s lawyer during the pre-trial?

These stipulations have no bearing on the question of chain of custody. The Court said:

These stipulations, which merely affirm the existence of the specimen, and the request for laboratory examination and the results thereof, were entered into during pre-trial only in order to dispense with the testimony of the forensic chemist and abbreviate the proceedings. That such is the intention of the parties is clear from the additional stipulations that the forensic chemist had no personal knowledge as to the source of the alleged specimen; and that the defense was reserving its right to object to the pieces of evidence marked by the prosecution. Clearly, the stipulations do not cover the manner the specimen was handled before it came to the possession of the forensic chemist and after it left her possession.

To interpret the stipulations as an admission that appellant was the source of the specimen would be to bind him to an unceremonious withdrawal of his plea of not guilty – a reading not supported by the records which creates a dangerous precedent.