EN
BANC
THE
PEOPLE OF THE
PHILIPPINES,
Plaintiff-Appellee,
G.
R.
No. 47027
February
4, 1941
-versus-
BENITO R.
PADILLA
AND ALFRED VON AREND,
Defendants-Appellants.
D
E C I S I
O N
LAUREL,
J :
On October 27, 1938, in
Criminal Case No. 57235 of the Court of First Instance of Manila,
Benito
R. Padilla and Alfred Von Arend were charged with a violation of
Commonwealth
Act No. 108, in relation to Commonwealth Act No. 138. The information
filed
against them by the fiscal of Manila is of the following tenor:
"That on and during
the period between December, 1936 to August, 1938, both dates
inclusive,
in the City of Manila, Philippine Islands, Benito R. Padilla, a
Filipino
citizen, and Alfred Von Arend, a German citizen, voluntarily, illegally
and criminally, with intent to evade the provisions of Article 4 of
Commonwealth
Act No. 138, which require Philippine or United States citizenship
before
the exercise or enjoyment of the privilege established in said article,
acting jointly and conniving with each other, executed the following
acts, to wit: [a] the former permitting the latter and for the
latter's
corporation, known as the 'Insular Drug Co.,' an entity which is not
domestic
under the provisions of said Act, because 75% of its capital stock
belongs
to neither Filipino or American, and of which Alfred Von Arend is the
president
and general manager, to make use, as in effect made use of his name and
of his mercantile domestic firm, known as the 'Padilla Central
Distributors',
in the official auctions for the supply to the government and its
branches
of articles, materials and equipment for public use; and [b] the latter
making use, in said official auctions, of the name of the former and
that
of his commercial firm to the benefit of said corporation, both the
accused
having gained from the transactions which resulted from such illegal
practice,
in violation of Article 1 of Commonwealth Act No. 138."
Upon his request, Alfred
Von Arend was granted a separate trial, although by agreement of the
parties
all the evidence presented by the prosecution and the defense in the
trial
of Alfred Von Arend were offered and admitted in Padilla's. The trial
court,
on July 25, 1939, rendered judgment finding the two accused guilty of
the
offense charged, and sentenced each of them to an indeterminate penalty
of from two years to four years, to pay a fine of P2,000, with
subsidiary
imprisonment in case of insolvency, and to pay one-half of the costs.
Both
have appealed to this Court.
Counsel for Von Arend
makes the following assignment of errors:
"I. The Trial Court
erred in ruling that Commonwealth Act NO. 108 had any connection with
Commonwealth
Act NO. 138 or that it punished any deviation from the preferences
provided
by that law.
"II. The Trial Court
erred in not finding that Commonwealth Act No. 108 as interpreted by
the
trial court was enacted in violation of Article VI, sec. 12(1) of the
Constitution
of the Philippines.
"III. The Trial Court
erred in holding that Commonwealth Act No. 108 as applied to Alfred Von
Arend in this case did not deprive him of his liberty and property
without
due process of law contrary to Article III, section 1, subsections 15
and
17 of the Constitution of the Philippines.
"IV. The Trial Court
erred and acted contrary to Article III, sec. 1, subsections 15 and 17
of the Constitution of the Philippines in convicting Alfred Von Arend
on
the basis of evidence not offered at the trial.
"V. The Trial Court
erred in not properly complying with the provisions of section 33 of
the
Code of Criminal Procedure.
"VI. The Trial Court
erred in not holding that Commonwealth Act No. 138 was unconstitutional
and void as being contrary to an act of the Congress of the United
States.
"VII. The Trial Court
erred in not dismissing the information in this case on the ground that
more than one crime is charged therein.
"VIII. The Trial
Court
erred in not holding that section 4 of Commonwealth Act No. 138 was
enacted
contrary to the provisions of section 1, subsection 17, of the
Ordinance
Appended to the Constitution of the Philippines and is consequently
void
and ineffective.
"IX. The Trial Court
erred in finding that Padilla Central Distributors and Benito R.
Padilla
were mere figure-heads or dummies.
"X. The Trial Court
erred in disregarding the testimony establishing the Government's
practice
of awarding contracts to the lowest bidder regardless of whether such
bidder
was a domestic or a foreign entity.
"XI. The Trial Court
erred in making findings of facts contrary to the clear weight of
evidence."
Counsel for Padilla
assigns the following errors:
"I. In not holding
that the facts charged in the Information do not constitute a public
offense
and that Act No. 138 is unconstitutional.
"II. In holding
that
the 'Padilla Central Distributors' was organized by the accused Benito
R. Padilla as a mere nominal entity or name in which the 'Insular Drug
Co., Inc.,' made sales to the Government to evade the provisions of
Commonwealth
Act No. 138.
"III. In holding
that
the 'Padilla Central Distributors' was managed and administered by the
'Insular Drug Co., Inc.,
"IV. In holding
that
the accused Benito R. Padilla had in bad faith willfully withheld from
the Pharmaceutical Board or the person in charge of issuing permits
certain
pertinent information when exhibits '12' and '13' were issued.
"V. In finding the
accused Benito R. Padilla guilty of the crime charged in the
information."
The principal question
to be determined is whether or not a violation of Commonwealth Act No.
138, commonly known as the "Flag Law", may be prosecuted under
Commonwealth
Act No. 108, entitled "An Act to punish acts of evasion of the laws on
the nationalization of certain rights, franchises or privileges." Other
points raised in the briefs will be taken up in the course of this
opinion.
It appears that shortly
after the approval of Commonwealth Act No. 138, or on December 16,
1936,
Benito R. Padilla resigned from the Insular Drug Company, where he had
been employed as a selling agent for seven years, and organized the
"Padilla
Central Distributors" capitalized at P1,000 [Exhibit A] for the
distribution
and sale of medicine, chemical products, and clinical, surgical and
laboratory
equipment. At the same time, he opened with his old employer a credit
account
in the amount of P6,000, secured by his own and his wife's savings
deposit,
to enable him to purchase drugs and other chemicals and facilitate his
business transactions. In addition, he was allowed a small space in the
offices of the Insular Drug Company, and also the use of the latter's
telephone,
warehouse and delivery cars. To assist him in the venture, he appointed
Serafin Enriquez, secretary treasurer of the Insular Drug Company, and
Bartolome Salapong, cashier of the same firm, as his attorney-in-fact
and
bookkeeper, respectively. Serafin Enriquez, as attorney-in-fact,
prepared
and submitted all the bids of the Padilla Central Distributors for
pharmaceutical
supplies needed by the Government, and was successful in winning for it
most of the contracts as the lowest domestic bidder. The open-account
agreement
stipulated the amount of P5,000 as the limit of Padilla's credit, but
the
finding of the lower court is that this limit had always been exceeded,
the lowest instance being in January, 1938, when Benito R. Padilla's
account
totalled P6,692.88. As most of the government contracts were awarded to
the Padilla Central Distributors as the lowest domestic bidder under
the
provisions of Commonwealth Act No. 138, and as all the requisitioned
supplies
were taken from the Insular Drug Company, the sales of the latter
increased
in volume, and its president and general manager, defendant Alfred Von
Arend, for a period comprised between January, 1937 and June, 1938,
received
dividends amounting to P16,186, besides P1,000 as monthly salary and
P200
as monthly expenses. Benito R. Padilla, for the same period, due to the
2-5 per cent discount granted by the Insular Drug Company, made a gross
profit of P5,003.31 and a net profit of P2,662.26. [Exhibit 25, Resume
of Capitulation Statement].
It is admitted that
Commonwealth Act No. 108 does not provide for any penalty for the
violation
of any of its provisions. Section 1 of Commonwealth Act No. 108,
however,
provides that "in all cases in which any constitutional or legal
provision
requires Philippine or United States citizenship as a requisite for the
exercise of enjoyment of a right, franchise or privilege, any citizen
of
the Philippines or the United States who allows his name or citizenship
to be used for the purpose of evading such provision, and any alien or
foreigner profiting thereby, shall be punished by imprisonment for not
less than two nor more than ten years, and a fine of not less than two
thousand nor more than ten thousand pesos." In Commonwealth Act No.
138,
a domestic entity is defined as "any citizen of the Philippines or of
the
United States habitually established in business and engaged in the
manufacture
or sale of the merchandise covered by his bid, or any corporate body or
commercial company duly organized and registered under the laws of the
Philippines of whose capital 75 percentum is owned by citizens of the
Philippines
or of the United States, or both." Section 4 of the same Act emphasizes
that "whenever several bidders shall participate in the bidding for
supplying
articles, materials and equipment for any of the dependencies mentioned
in section one of this Act for public use, public buildings, or public
works, the award shall be made to the domestic entity making the lowest
bid, provided that it is not more than fifteen per centum in excess of
the lowest bid made by a bidder other than a domestic entity." We are
of
the opinion that any citizen of the Philippines or of the United States
who knowingly allows his name or citizenship to be used so that a
person
not 80 qualified may enjoy the privilege granted to domestic entities
by
Commonwealth Act No. 138, as well as any alien or foreigner profiting
thereby,
is guilty of violation of Commonwealth Act. No. 108.
The Insular Drug
Company
of which the appellant, Alfred Von Arend, is president and general
manager,
is a foreign entity because 75 per centum of its capital is not owned
by
Filipino or American citizens. On the other hand, the Padilla Central
Distributors,
as organized by the appellant, Benito R. Padilla, which is a domestic
entity,
enjoys the privilege afforded by Commonwealth Act No. 138. The lower
court
found that the organization by the Padilla Central Distributors was but
an ingenious scheme to evade the requirements of Commonwealth Act No.
138
for the following reasons: [1] Benito R. Padilla did not invest a
single
centavo in the Padilla Central Distributors for the reason that the
Insular
Drug company, through Alfred Von Arend, furnished him all the articles
ordered by the Government. Von Arend accounted for his operating
capital
on paper, and eventually they shared in the profits realized with the
award
of government contracts to the Padilla Central Distributors. [2] The
pledge
agreement [Exhibit I] between Benito R. Padilla and the Insular Drug
Company
was but a device to dispel the suspicion of business competitors and
the
authorities. The pledge contract was not naturalized, it was never
honored
considering the monthly excess of Padilla's account over the quota
therein
specified. Although Benito R. Padilla and his wife had assigned their
bank
passbooks to Von Arend to answer for their credit, Padilla always
indorsed
the government warrants to the Insular Drug Company which collected the
face value of said warrants. [3] Benito R. Padilla opened his office in
the Insular Drug Company, and was allowed to use the latter's
telephone,
warehouse and delivery truck. This disproves the pretended independence
of the Padilla Central Distributors from the Insular Drug Company. [4]
Padilla's employees, Serafin Enriquez and Bartolome Salapong, are
salaried
men of the Insular Drug Company, and Padilla's claim that they were
paid
by him was not accepted by the lower court. [5] Benito R. Padilla had
no
tangible investment in the Padilla Central Distributors, and it was
Serafin
Enriquez, his attorney-in-fact, and the secretary-treasurer of the
Insular
Drug Company, who supervised all the business transactions, from the
formal
submission of the bids to the endorsement of the government warrants to
the Insular Drug Company. These are conclusions of facts which We are
not
inclined to disturb.
The lower court also
found that the appellant, Alfred Von Arend, had profited by the scheme,
for the reason that under section 4 of the Flag Law, the Insular Drug
Company
being a foreign entity would have had to bid 15 percent lower to
successfully
outbid a domestic entity or a domestic bidder. With the establishment
of
the Padilla Central Distributors which submitted bids as a domestic
entity,
the Insular Drug Company stood to lose only 2-5 percent as a discount
to
Padilla. The advantage afforded by this arrangement is proved by the
fact
that, as hereinabove stated, between the period comprised between
September,
1937, and June, 1938 alone, Alfred Von Arend, as president, general
manager,
and controlling stockholder of the Insular Drug Company, received as
dividends
the sum of P16,186, in addition to his monthly salary and expenses of
P1,000
and P200, respectively; and Benito R. Padilla, for the same period,
realized
a gross profit of P5,003.31.
It is contended,
however,
that notwithstanding the infringement of Section 4 of Act No. 138, the
defendants cannot be punished therefor since the said Act No. 138
imposes
no penal sanction whatsoever, and the penalty provided by Act No. 108
cannot
be correctly extended to and applied in this case. This argument is, in
our opinion, without merit. The very title of Act No. 108 gives
unmistakable
notice of the legislative intent and purpose of punishing all "acts
evasion
of the laws of the nationalization of certain rights, franchises or
privileges,"
and Section 1 of the same Act applies the punishment provided therein
to
"all cases in which any constitutional or legal provision requires
Philippine
or United States citizenship as a requisite for the exercise or
enjoyment
of a right, franchise or privilege." Under Act No. 108 any legal
provision,
whether existing at the time of the passage of said Act No. 108 or
promulgated
thereafter, would fall within its scope, so long as said legal
provision
requires Philippine or United States citizenship as a requisite for the
enjoyment of a right, franchise or privilege. One of such legal
provisions
is section 4 of Commonwealth Act No. 138. While "statutes prescribing
punishments
or penalties should not be extended further than their terms reasonably
justify" [Snowden v. Brown, 60 Fla. 212, 53 So. 648, 649], this rule of
strict construction is subordinate to the rule of reasonable, sensible
construction having in view the legislative purpose and intent, and
giving
effect to the same. It is not to be so unreasonably applied as to
defeat
the true intent and meaning of the enactment found in the language
actually
used. [Chapman v. Lake, 161 So. 399, 402-403]. Although not so
expressly
stated, Act No. 138 is cumulative of Act No. 108; and it is no
objection
that one statute creates an offense and another Act provides for its
punishment.
It is also urged that
Acts Nos. 108 and 138 are unconstitutional: as to the former, because
its
provisions are vague and uncertain, covered more than one subject, and
deprived Alfred Von Arend of his liberty and property without due
process
of law; and as to the latter, because it is contrary to Act No. 428 of
the 72nd Congress of the United States. We have examined these
Commonwealth
Acts and are of the opinion that they are constitutional. Commonwealth
Act No. 108 is sufficiently clear, and prescribes with reasonable
certainty
the elements of the offense that it punishes. It embraces only one
general
subject, to wit, the punishment of acts of evasion of the laws on the
nationalization
of certain rights, franchises or privileges, which subject is fairly
suggestive
of, and not foreign to, its intent and purpose. It does not deprive
Alfred
Von Arend, or any person for that matter, of liberty and property
without
due process of law. As to Commonwealth Act No. 138, this cannot be said
to be antagonistic to Act No. 428 of the 72nd Congress of the United
States.
Fundamentally, it is in harmony with the congressional enactment.
The judgment of the
lower court as to Alfred Von Arend is affirmed in all respects. As to
Benito
R. Padilla, the Court feels that as a Filipino citizen he has proved
himself
lacking in civic consciousness and responsibility as to require censure
and punishment at once prompt and severe, in order to enliven the
confidence
of the people in their Government and their institutions. The penalty,
in his case, is accordingly increased to a minimum imprisonment of four
[4] years to a maximum imprisonment of six [6] years and a fine of
P4,000,
with subsidiary imprisonment in case of insolvency, both appellants to
pay the costs. So ordered.
Avanceña, C.J.,
Imperial, Diaz and Horrilleno, JJ., concur.
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