Medical Malpractice in the Philippines

All you need to know about medical malpractice in the Philippines

The doctor (or the hospital or the clinic) I went to did not have a license. Is he (or it) liable?

Yes. The lack of license is negligence per se. (Garcia, Jr. v. Salvador, G.R. No. 168512, March 20, 2007. See also Añonuevo v. Court of Appeals, G.R. No. 130003, October 20, 2004; Asuncion v. Vda. de Golez, G.R. No. L-14160, June 30, 1960.)

Must I have been informed of the risks of the procedure before I went through?

Yes. (Sidaway v. Board of Governors of the Bethlem Royal Hospital, AC 871 (1985), UK Common Law.) The principle of Informed Consent requires that a patient be informed of the substantial risk of grave adverse consequences before he undergoes elective surgery.

What are the elements of medical malpractice?

1. There is a physician-patient relationship. A physician-patient relationship is formed when a patient engages the services of a physician. (Lucas v. Tuaño, G.R. No. 178763, 586 SCRA 173, 200, Apr. 21, 2009.)

2. There is a duty on the part of the physician to observe the same level of care that any reasonably competent doctor would use to treat the condition under the same circumstances. (Cayao-Lasam v. Ramolete, G.R. No. 159132, 574 SCRA 439, 454, Dec. 18, 2008, citing Reyes v. Sisters of Mercy Hospital, G.R. No. 130547, 396 Phil. 87, 107, Oct. 3, 2000.)

Parenthetically, medical literature may be used to establish the standard of care. (Shiffman, Melvin A., “Medicolegal Aspects of Liposuction”, Atlas of Liposuction, Jp Medical Ltd, 1st ed., 2013, p. 221.)

3. There is a breach of duty and injury. The injury contemplated by the law is a bodily injury to or death of the patient. (Cruz v. Court of Appeals, G.R. No. 122445, 346 Phil. 872, 876, Nov. 18, 1997.)

4. There is a causation between the breach and the injury. The act or omission complained of is the proximate cause of the injury suffered. The proximate cause of an injury is that cause that, in the natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury, and without which the result would not have occurred. (Vda. de Bataclan v. Medina, 102 Phil. 181, 186 [1957].)

It's obvious that the doctor was negligent.

You do not have to prove all the elements of medical malpractice then. The elements of duty and breach are presumed under the doctrine of res ipsa loquitur.

The breach of duty is presumed under the doctrine of res ipsa loquitur. Where the thing that caused the injury complained of is shown to be under the management of the defendant or his servants and the accident was such as in ordinary course of things does not happen if those who have its management or control used proper care, it affords reasonable evidence, in the absence of explanation by the defendant, that the accident arose from or was caused by the defendant’s want of care. This shifts the burden of proof to the defendant to establish that he has indeed observed due care and diligence. (Batiquin v. Court of Appeals, G.R. No. 118231, 327 Phil. 965, 968, July 5, 1996.)

The doctrine can be invoked only when under the circumstances, direct evidence is absent and not readily available. This is based in part upon the theory that the defendant in charge of the instrumentality which causes the injury either knows the cause of the accident or has the best opportunity of ascertaining it while the plaintiff has no such knowledge and is therefore compelled to allege negligence in general terms and rely upon the proof of the happening of the accident in order to establish negligence. The inference which the doctrine permits is grounded upon the fact that the chief evidence of the true cause, whether culpable or innocent, is practically accessible to the defendant but inaccessible to the injured person. (Macalinao v. Ong et al., G.R. NO. 146635, December 14, 2005. Citations omitted.)

In res ipsa loquitur, direct evidence is not necessary. (Jarcia, Jr. et al. v. People, G.R. No. 187926, February 15, 2012.)

Expert witnesses are dispensed with. (Solidum v. People, G.R. No. 192123, March 10, 2014.) A layman’s testimony is enough if he “would be able to say, as a matter of common knowledge and observation, that the consequences of professional treatment were not as such as would ordinarily have followed if due care had been exercised.” (Ramos v. Court of Appeals, G.R. No. 124354, April 11, 2002.)

What are the elements of res ipsa loquitur?

1. The accident is of a kind which ordinarily does not occur in the absence of someone’s negligence.

2. It is caused by an instrumentality within the exclusive control of the defendant or defendants.

3. The possibility of contributing conduct which would make the plaintiff responsible is eliminated. (Cantre v. Go, G.R. No. 160889, 522 SCRA 547, 556, Apr. 27, 2007.)

Give examples of the application of res ipsa loquitur.

Ending up in a comatose does not ordinarily arise from a simple operation unless someone is negligent. The administration of anaesthesia does not ordinarily result in decerebration, let alone death. (Ramos v. Court of Appeals, G.R. No. 124354, April 11, 2002. See also Voss vs. Bridwell, Kansas Supreme Court.)

What if someone else in the operating room was the one negligent, not the doctor?

The doctor is still liable under the Captain-of-the-Ship Doctrine and the Borrowed Servant Doctrine. The Captain-of-the-Ship Doctrine is “the doctrine imposing liability on a surgeon for the actions of assistants who are under the surgeon's control but who are employees of the hospital, not the surgeon.” ( BLACK’S LAW DICTIONARY [8th ed. 2004]; See Professional Services, Inc. v. Agana, G.R. No. 126927, 513 SCRA 478, Jan. 31, 2007.) The Borrowed Servant Doctrine imputes liability in a surgeon for the negligence committed by operating room personnel regardless of the identity of the employer of the latter. (Nogales v. Capitol Medical Center, CA-G.R. CV No. 45641, Feb. 6, 1998.)

Can I hold the clinic or the hospital liable?

Yes. The clinic is liable under the vicarious liability of an employer under art. 2180 of the Civil Code (respondeat superior).

The obligation imposed by article 2176 is demandable not only for one’s own acts or omissions, but also for those of persons for whom one is responsible x x x Employers shall be liable for the damages caused by their employees x x x acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry x x x The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage.

The clinic is also vicariously liable under the doctrine of Apparent Authority, also known as the Holding Out Theory, the doctrine of Ostensible Agency, and the doctrine of Agency by Estoppel. The elements are as follows:

1. The hospital, or its agent, acted in a manner that would lead a reasonable person to conclude that the individual who was alleged to be negligent was an employee or agent of the hospital;

2. Where the acts of the agent create the appearance of authority, the plaintiff must also prove that the hospital had knowledge of and acquiesced in them; and

3. The plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with ordinary care and prudence. (See Darwin P. Angeles, “A Framework of Philippine Medical Malpractice Law”, 85 PHIL. L.J. 926-927, [2011].)

For instance, the plaintiffs and the patient were not informed that the doctors were independent contractors. Rather, they were misled that there were staff privileges granted by the clinic to the doctors in the form of extending the use of its medical facilities and the services of its medical staff, and all communications were in the name of the clinic. All these taken collectively gave a clear impression that the hospital exercised supervision and control over its staff and physicians and thus placing their actions under its responsibility, giving an impression that the negligent physicians were members of the clinic’s medical staff in collaboration with its other employed specialists. (Nogales v. Capitol Medical Center, 511 SCRA 204, 230, December 19, 2006.)

Furthermore, the clinic is directly liable under the doctrine of Corporate Negligence. The hospital owes a direct duty to its patients to ensure their safety and well-being while at the hospital. (40A Am. Jur. 2d §26 citing Stroud v. Abington Memorial Hospital, 546 F. Supp. 2d 238 [E.D. Pa. 2008].) The clinic has the “duty to exercise reasonable care to protect from harm all patients admitted into its facility for medical treatment.” (Professional Services, Inc. v. Agana, G.R. No. 126927, 513 SCRA 478, Jan. 31, 2007.) The duties of the clinic include the following:

1. The use of reasonable care in the maintenance of safe and adequate facilities and equipment;

2. The selection and retention of competent physicians; the overseeing or supervision of all persons who practice medicine within its walls;

3. The formulation, adoption and enforcement of adequate rules and policies that ensure quality care for its patients; and

4. To make a reasonable effort to monitor and oversee the treatment prescribed and administered by the physicians practicing in its premises. (id.)

A breach of any of these duties makes the clinic directly liable. (Darwin P. Angeles, “A Framework of Philippine Medical Malpractice Law”, 85 PHIL. L.J. 926-927, [2011].)

How much can I collect from the hospital and the doctor as compensation? 

It depends on your lawyer's negotiation and litigation skills. If the hospital or clinic is prominent and the doctor reputable, you may be able to collect more than from ones who are not.

How can I make the doctor responsible?

You can have him imprisoned, have his licensed cancelled, and collect monetary compensation.



What are considered practices of medicine?

Any person who shall, for compensation or reward or even without the same, diagnose, treat, operate, and prescribe remedies for any human disease, injury, deformity, physical or mental condition or any ailment, real or supposed, regardless of the nature of the remedy or treatment used or recommended, or who shall, by means of signs, cards, advertisements, or in any other way, either offer or undertake by any means or method, to diagnose, treat, manipulate, adjust, operate, or prescribe for any human disease, pain, injury, deformity, physical or mental condition. (Sec. 770, RA 1885)

What is Medical Malpractice?

Any person who shall practice medicine in the Philippines without having previously obtained the proper certificate of registration issued by the Board of Medical Examiners as herein constituted, or the lawful Board which was its predecessor shall be considered as guilty of medical malpractice. (Sec. 770, RA 1885)

What is a medical malpractice suit?

A medical malpractice suit is an action available to victims to redress a wrong committed by medical professionals who caused bodily harm to, or the death of, a patient. As the term is used, the suit is brought whenever a medical practitioner or health care provider fails to meet the standards demanded by his profession, or deviates from this standard, and causes injury to the patient. (Noel Campang v. Nelson Cortejo)

What are the elements of medical negligence?

The elements of medical negligence are (1) duty, (2) breach, (3) injury, and (4) proximate causation.

As discussed by the Court in the case of Noel Campang v. Nelson Cortejo, duty refers to the standard of behavior that imposes restrictions on one's conduct. It requires proof of a professional relationship between the physician and the patient. Without the professional relationship, a physician owes no duty to the patient, and cannot, therefore, incur any liability. A physician-patient relationship is created when a patient engages the services of a physician, and the latter accepts or agrees to provide care to the patient.

Breach of duty occurs when the doctor fails to comply with or improperly performs his duties under professional standards.

If the patient, as a result of the breach of duty, is injured in body or in health, actionable malpractice is committed, entitling the patient to damages.

The patient must, lastly, prove the causal relation between the negligence and the injury. This connection must be direct, natural, and should be unbroken by any intervening efficient causes. In other words, the negligence must be the proximate cause of the injury.

What is the standard of care required?

The standard of care required of doctors are characterised by these two: (1) factual and (2) legal. According to the case of Noel Campang v. Nelson Cortejo, it is factual as medical negligence cases are highly technical in nature, requiring the presentation of expert witnesses to provide guidance to the court on matters clearly falling within the domain of medical science, and legal, insofar as the Court, after evaluating the expert testimonies, and guided by medical literature, learned treatises, and its fund of common knowledge, ultimately determines whether breach of duty took place.

What are the guidelines in qualifying an expert witness?

To qualify a witness as a medical expert, it must be shown that the witness (1) has the required professional knowledge, learning and skill of the subject under inquiry sufficient to qualify him to speak with authority on the subject; and (2) is familiar with the standard required of a physician under similar circumstances; where a witness has disclosed sufficient knowledge of the subject to entitle his opinion to go to the jury, the question of the degree of his knowledge goes more to the weight of the evidence than to its admissibility. The Court further enunciated that it is not critical whether a medical expert is a general practitioner or a specialist so long as he exhibits knowledge of the subject. Where a duly licensed and practicing physician has gained knowledge of the standard of care applicable to a specialty in which he is not directly engaged but as to which he has an opinion based on education, experience, observation, or association with that specialty, his opinion is competent. (Evans v. Ohanesian)

What are the doctrines applicable to medical malpractice?

(1)Respondeat superior; (2) Res ipsa loquitor and (3) Good Samaritan Law/ Rescue Doctrine.

Respondeat superior is governed by the rule on vicarious liability under Art 2180, which provides:

Article 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or omissions but also for those of persons for whom one is responsible.

Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry.

Res ipsa loquitur or the thing speaks for itself. Under [this] doctrine . . . the happening of an injury permits an inference of negligence where plaintiff produces substantial evidence that [the] injury was caused by an agency or instrumentality under [the] exclusive control and management of defendant, and that the occurrence [sic] was such that in the ordinary course of things would not happen if reasonable care had been used. The doctrine of [r]es ipsa loquitur as a rule of evidence is peculiar to the law of negligence which recognizes that prima facie negligence may be established without direct proof and furnishes a substitute for specific proof of negligence. (Batiquin v. CA)

Good Samaritan is defined as an individual performing volunteer services who does not receive compensation to reasonably assist a person in an emergency. It further provides that no good Samaritan shall be liable for harm caused by an act or omission if:

(1) the good Samaritan was acting in an emergency at the time of the act or omission;
(2) if appropriate or required, the good Samaritan was properly licensed, certified, or authorized by the appropriate authorities for the activities undertaken in an emergency at the time of the act or omission; and
(3) the harm was not caused by willful or criminal misconduct, gross negligence, reckless misconduct, or a conscious, flagrant indifference to the rights or safety of the individual harmed by the good Samaritan.

What are the other doctrines found under Respondeat superior?

(1) Independent Contractor Doctrine; (2) Borrowed servant doctrine and the (3) Captain of the ship doctrine.

In general, a hospital is not liable for the negligence of an independent contractor-physician. There is, however, an exception to this principle. The hospital may be liable if the physician is the "ostensible" agent of the hospital. This exception is also known as the "doctrine of apparent authority."

In apparent authority, or what is sometimes referred to as the "holding out" theory, or doctrine of ostensible agency or agency by estoppel, it has its origin from the law of agency. It imposes liability, not as the result of the reality of a contractual relationship, but rather because of the actions of a principal or an employer in somehow misleading the public into believing that the relationship or the authority exists.

The case of Nogales v. Capitol Medical Center discussed the borrowed servant doctrine. This doctrine provides that once the surgeon enters the operating room and takes charge of the proceedings, the acts or omissions of operating room personnel, and any negligence associated with such acts or omissions, are imputable to the surgeon. While the assisting physicians and nurses may be employed by the hospital, or engaged by the patient, they normally become the temporary servants or agents of the surgeon in charge while the operation is in progress, and liability may be imposed upon the surgeon for their negligent acts under the doctrine of respondeat superior.

In the "Captain of the Ship" rule, the operating surgeon is the person in complete charge of the surgery room and all personnel connected with the operation. Their duty is to obey his orders. (Professional Services Inc v. Natividad and Enrique Agana)

What are the applicable doctrines for the liabilities of hospitals?

The applicable doctrines are: (1) Vicarious Liability; and (2) Apparent Authority/Ostensible Agency.

Vicarious liability is found under Art 2180 and 2176 of the Civil Code, which provides:

Article 2180. The obligation imposed by article 2176 is demandable not only for one's own acts or omissions but also for those of persons for whom one is responsible.

Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry.

Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter.

The Court held in Ramos v. Court of Appeals that for purposes of apportioning responsibility in medical negligence cases, an employer-employee relationship in effect exists between hospitals and their attending and visiting physicians. Private hospitals, hire, fire and exercise real control over their attending and visiting consultant staff. While consultants are not, technically employees, x x x, the control exercised, the hiring, and the right to terminate consultants all fulfill the important hallmarks of an employer-employee relationship, with the exception of the payment of wages. In assessing whether such a relationship in fact exists, the control test is determining. Accordingly, on the basis of the foregoing, we rule that for the purpose of allocating responsibility in medical negligence cases, an employer-employee relationship in effect exists between hospitals and their attending and visiting physicians.

The "Schloendorff doctrine" regards a physician, even if employed by a hospital, as an independent contractor because of the skill he exercises and the lack of control exerted over his work. Under this doctrine, hospitals are exempt from the application of the respondeat superior principle for fault or negligence committed by physicians in the discharge of their profession. However, in Bing v. Thunig, the New York Court of Appeals deviated from the Schloendorff doctrine, noting that modern hospitals actually do far more than provide facilities for treatment. Rather, they regularly employ, on a salaried basis, a large staff of physicians, interns, nurses, administrative and manual workers. They charge patients for medical care and treatment, even collecting for such services through legal action, if necessary. The court then concluded that there is no reason to exempt hospitals from the universal rule of respondeat superior. (Schloendorff v. Society of New York Hospital)

The doctrine of apparent authority is discussed in the case of Gilbert v. Sycamore Municipal Hospital wherein the Court held:

[U]nder the doctrine of apparent authority a hospital can be held vicariously liable for the negligent acts of a physician providing care at the hospital, regardless of whether the physician is an independent contractor, unless the patient knows, or should have known, that the physician is an independent contractor. The elements of the action have been set out as follows:

For a hospital to be liable under the doctrine of apparent authority, a plaintiff must show that: (1) the hospital, or its agent, acted in a manner that would lead a reasonable person to conclude that the individual who was alleged to be negligent was an employee or agent of the hospital; (2) where the acts of the agent create the appearance of authority, the plaintiff must also prove that the hospital had knowledge of and acquiesced in them; and (3) the plaintiff acted in reliance upon the conduct of the hospital or its agent, consistent with ordinary care and prudence.

The element of holding out on the part of the hospital does not require an express representation by the hospital that the person alleged to be negligent is an employee. Rather, the element is satisfied if the hospital holds itself out as a provider of emergency room care without informing the patient that the care is provided by independent contractors. The element of justifiable reliance on the part of the plaintiff is satisfied if the plaintiff relies upon the hospital to provide complete emergency room care, rather than upon a specific physician.

Respicio & Co. represents victims, doctors and other medical professionals, and hospitals and other medical organisations in medical malpractice suits.

The 2017 Investment Priorities Plan

Concurrent with the theme of “Scaling Up and Dispersing Opportunities”, the Board of Investments, with the approval of President Duterte, has released the 2017 Investment Priorities Plan, which details all preferred activities and other priority areas for investment where citizens and foreigners alike may seek to invest or set up businesses.

I. Preferred Investment Activities

  1. Qualified Manufacturing Activities, including Agro-Processing

  2. Agriculture, Fishery and Forestry

  3. Strategic Services

    • Integrated Circuit (IC) Design

    • Creative Industries/Knowledge-Based Services

    • Maintenance, Repair, and Overhaul (MRO) of aircraft

    • Charging/Refueling Stations for Alternative Energy Vehicles (except LPG-run vehicles)

    • Industrial Waste Treatment

    • Telecommunications

    • State- of-the-art Engineering, Procurement, and Construction

  4. Healthcare Services including Drug Rehabilitation Centers

  5. Mass Housing (only projects outside Metro Manila may qualify for incentives)

  6. Infrastructure and Logistics, including Public-Private Partnerships with Local Government Units

  7. Innovation Drivers, including, but not limited to

    • R&D Activities

    • Clinical Trials

    • Establishment of Centers of Excellence

    • Business Incubation Hubs

    • Fabrication Laboratories

    • Commercialization of New and Emerging Technilogies

    • Products of the Department of Science and Technology or Government-funded R&D

  8. Inclusive Business Models (covers medium and large enterprises in the agribusiness and tourism sectors providing opportunities to MSMEs)

  9. Environment or Climate Change-Related Projects

  10. Energy

II. Export Activities

  1. Production and Manufacturing of products to be exported

  2. Service Exports

  3. Activities in Support of Exporters, such as Warehousing and Logistics

III. Activities under Special Laws

All activities where inclusion in the IPP is mandated by statute, for purposes of incentives, fiscal or otherwise:

  1. Industrial Tree Plantation (P.D. 705)

  2. Mining (R.A. 7942)

  3. Publication or Printing of Books/Textbooks (R.A. 8047)

  4. Refining, Storage, Marketing and Distribution of Petroleum Products (R.A. 8479)

  5. Rehabilitation, Self-Development and Self-Reliance of Persons with Disability (R.A. 7277)

  6. Renewable Energy (R.A. 9513)

  7. Tourism (R.A. 9593)

IV. Priority Investment Areas for the Autonomous Region in Muslim Mindanao (ARMM)

  1. Export Activities

    • Export Trader and Service Exporters

    • Suppor t Activities for Exporters

  2. Agriculture and Agribusiness

  3. Aquaculture and Fishery

  4. Basic Industries

  5. Industrial Service Facilities

  6. Engineering Industries

  7. Logistics

  8. Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP – EAGA) Related Investment Enterprises

  9. Tourism

  10. Health and Education Services and Facilities

  11. Halal Industry

  12. Banking, Non-Bank Financial Institutions and Facilities

  13. Energy

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Respicio & Co. Law Firm can help you set up your business in these areas and fully maximize all investment incentives available.

Corporate Dissolution and Alternatives to Closing Up Shop

The Corporation Code of the Philippines provides various methods for corporations to close up shop if they feel the need to start anew.

  1. Voluntary Dissolution

    • Where no creditors will be affected – The ideal option for shutting down operations, provided that the corporation’s dissolution will not prejudice any creditors who may have claims against it

    • Where creditors will be affected – The standard option for dissolution, where the corporation still has to settle its outstanding debts, and any other liabilities it may have incurred

  2. Involuntary Dissolution – Where the corporation is insolvent, its creditors may file a petition before the Securities and Exchange Commission for dissolution and liquidation of the corporation, in accordance with the Financial Rehabilitation and Insolvency Act. There are, however, methods for the corporation to protect its assets and/or continue its existence

  3. Quietly Going Away

  4. Dissolution via Shortening the Term of Existence

Respicio & Co. Law Firm can help you settle your affairs, and determine the best method for you to dissolve and liquidate your corporation, or, if insolvency proceedings have been initiated against you, we can also help you protect and rehabilitate your corporation.

If you are a creditor with outstanding and demandable claims against an insolvent corporation, Respicio & Co. Law Firm can help you pursue and protect your claims.
 

Foreigners Doing Business in the Philippines: Part Two

Aside from doing business as a licensed foreign corporate entity, foreigners may establish their businesses in the Philippines under different organizational structures, as may suit their needs:

Organised under Philippine Laws

Sole Proprietorship

Owned by an individual who exercises full control and direction over the business, owns all of its assets and exclusively enjoys profits, while personally answers for all of the business’ liabilities.

Partnership

Either a general professional partnership or a limited liability partnership, depending on the agreement between the partners as to contributions of assets and answering of the partnership’s liabilities. Treated as a separate juridical person from the partners themselves.
 
Stock and Non-Stock Corporation (may be established as a subsidiary of a foreign parent corporation)

Stock corporations own capital stock divided into shares of stock held by its shareholders. They are authorized to declare and distribute dividends when the corporation has unrestricted retained earnings. Different classes of shares may grant the shareholder different rights as to ownership and control of the corporation, or preference in distribution of dividends or liquidation of the corporation. 

Non-Stock corporations are organized for public welfare, such as for charity, education, culture, science, sports, civic service, religion, or other similar purposes. In lieu of shareholders and shares, they have members and membership dues, and are not authorized to distribute income as dividends to such members.

Organized under Foreign Laws

Branch Office

Foreign corporations may establish branch offices in the Philippines. The branch office carries out business activities of the head office and derives income within the Philippines. Profits made are remitted to the head office.
 
Representative Office

Unlike a branch office, a representative office does not derive income within the Philippines. It is fully financed by the head office, and its sole purpose is to directly deal with the clients of the foreign corporation, such as customer service, information dissemination, setting up communication enters, and marketing company products.

Regional or Area Headquarters (RHQs)

An RHQ is limited to purely administrative functions, such as supervisory, communication, and coordination activities for the subsidiaries, affiliates, branches, and customers of the foreign corporation in the Asia Pacific Region. Since it does not directly manage the subsidiary/branch offices in the Philippines, it does not derive income therein.
 
Regional Operating Headquarters (ROHQs)

ROHQs have a wider scope of services, beyond acting as the administrative arm of the foreign corporation in the region. It may engage other businesses and corporations to source raw materials, conduct research and development, marketing control, and sales promotion.

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Each organisational structure has varying requirements before and after setting up, and differ based on income, startup costs/initial investments, ownership, and tax treatments under Philippine Law.

Respicio & Co. Law Firm can help you determine which structure best suits your needs, assist you in procuring all the necessary requirements, and process your registration in the Philippines.

PEZA Guidelines of Registration – Part 3 of PEZA Series: Perks of Being a PEZA-Registered Business

All persons, firms, associations, partnerships, corporations, or any other business organization, regardless of nationality, control and/or ownership of the working capital, may apply for registration as an Export or Free Trade Enterprise upon compliance with the following procedure.

Documents required:

  1. Three duly accomplished application forms

  2. Project brief – the completion of the project brief entails the submission of additional documents relating to the statements made therein

  3. Anti-graft certificate

  4. Board Resolution authorizing the filing and designation of a representative

  5. SEC Certificate of Registration, Articles of Incorporation and By-Laws (if not yet available, submit draft of Articles of Incorporation)

  6. Project Feasibility Study – information and documents necessary in the preparation of the project feasibility study

  7. Supporting Technical Data and Documents such as equipment inventory, organizational chart, and others

  8. Financial Data and Documents such as number of employees, employee positions and salary rates, audited financial statements, and others

  9. Other documents specifically required according to the enterprise to be registered

  10. PEZA Reports (pre-registration, post-registration)

Respicio & Co. Law Firm can help you process all your documentary requirements, and register your business with PEZA.

Previous: PEZA Economic Incentives – Part 2 of PEZA Series: Perks of Being a PEZA-Registered Business

PEZA Economic Incentives – Part 2 of PEZA Series: Perks of Being a PEZA-Registered Business

All PEZA-registered Economic Enterprises are granted the following Non-Fiscal Incentives:

  1. Simplified Import-Export Procedures via Electronic Import Permit System and Automated Export Documentation System;

  2. Non-resident foreign nationals may be employed in supervisory, technical, or advisory positions;

  3. Special Non-Immigrant Visa with Multiple Entry Privileges for the following non-resident foreign nationals in a PEZA-registered Economic Zone Enterprise:

    • Investor/s

    • Officers and Employees in supervisory, technical, or advisory position

    • And their spouses and unmarried children under 21 years of age

The following are the Tax and other Fiscal Incentives provided to PEZA-registered businesses:

  1. Economic Zone Export Manufacturing Enterprise

    • Income Tax Holiday (ITH) – 100% exemption from Corporate Income Tax up to a period of:

      • 4 years for Non-pioneer Project

      • 6 years for Pioneer Project
        (ITH Extensions may be granted, subject to compliance with certain criteria, and not in excess of 8 years)

      • 3 years for Expansion Project

    • 5% Special Tax on Gross Income, and exemption from all national and local taxes, upon expiration of the ITH period;

    • Tax and duty-free importation of raw materials, capital equipment, machineries and spare parts;

    • Exemption from wharfage dues and export tax, impost or fees;

    • VAT zero-rating of local purchases, subject to compliance with BIR and PEZA requirements;

    • Exemption from all local government imposts, fees, licenses or taxes, except real estate tax while still under ITH;

    • Machineries installed and operated within the zone for manufacturing, processing or for industrial purposes are exempt from real estate taxes for the first (3) years of operation of such machineries. Production equipment not attached to real estate are exempt from real property taxes;

    • Exemption from expanded withholding tax.

  2. Information Technology Enterprise

    • Income Tax Holiday (ITH) – 100% exemption from Corporate Income Tax up to a period of:

      • 4 years for Non-pioneer Project

      • 6 years for Pioneer Project
        (ITH Extensions may be granted, subject to compliance with certain criteria, and not in excess of 8 years)

      • 3 years for Expansion Project

    • 5% Special Tax on Gross Income, and exemption from all national and local taxes, upon expiration of the ITH period;

    • Tax and duty-free importation of equipment and parts;

    • Exemption from wharfage dues and export tax, impost or fees;

    • VAT zero-rating of local purchases, including land-based telecommunications, electrical power, water bills, and lease on the building, subject to compliance with BIR and PEZA requirements;

    • Exemption from all local government imposts, fees, licenses or taxes, except real estate tax while still under ITH;

    • Machineries installed and operated within the zone for manufacturing, processing or for industrial purposes are exempt from real estate taxes for the first (3) years of operation of such machineries. Production equipment not attached to real estate are exempt from real property taxes;

    • Exemption from expanded withholding tax.

  3. Tourism Economic Zone Locator Enterprise

    • 4 years of Income Tax Holiday (ITH);

    • 5% Special Tax on Gross Income, and exemption from all national and local taxes, upon expiration of the ITH period;

    • Tax and duty-free importation of capital equipment;

    • VAT zero-rating on local purchases of goods and services, including land-based telecommunications, electric power, and water bills;

    • E xemption from expanded withholding tax.

  4. Medical tourism Enterprise

    • 4 years of Income Tax Holiday (ITH);

    • 5% Special Tax on Gross Income, and exemption from all national and local taxes, upon expiration of the ITH period;

    • Tax and duty-free importation of medical equipment, including spare parts and equipment supplies, required for the technical viability and operation of the registered activities of the enterprise;

    • VAT zero-rating on local purchases of goods and services, including land-based telecommunications, electric power, and water bills;

    • Exemption from expanded withholding tax.

  5. Agro-Industrial Economic Zone Enterprise

    • 4 years of Income Tax Holiday (ITH);

    • 5% Special Tax on Gross Income, and exemption from all national and local taxes, upon expiration of the ITH period;

    • Tax and duty-free importation of production equipment and machineries, breeding stocks, farm implements including spare parts and supplies of the equipment and machineries;

    • Exempti on from export taxes, wharfage dues, impost and fees;

    • VAT zero-rating on local purchases of goods and services, including land-based telecommunications, electric power, and water bills;

    • Exemption from payment of local government fees such as Mayor’s Permit, Business Permit, Permit on the Exercise of Profession/Occupation/Calling, Health Certificate Fee, Sanitary Inspection Fee, and Garbage Fee.

  6. Economic Zone Logistics Enterprise

    • Exemption from duties and taxes on raw materials, semi-finished goods for re-sale to, or for packing/covering, cutting, altering for subsequent sale to PEZA-registered Export Manufacturing Enterprises, for direct export or for consignment to PEZA-registered export enterprise;

    • VAT zero-rating on raw materials for checking, packing, visual inspection, storage, and shipping to be sourced locally.

  7. Economic Zone Developer/Operator

    • 5% Special Tax on Gross Income and exemption from all national and local taxes, except real property tax on land owned by the Economic Zone Developer;

    • VAT zero-rating of local purchases;

    • Exemption from expanded withholding tax.

  8. Facilities Enterprises

    • 5% Special Tax on Gross Income and exemption from all national and local taxes, except real property tax on land owned by developers;

    • VAT zero-rating of local purchases;

    • Exemption from expanded withholding tax.

  9. Economic Zone Utilities Enterprise

    • 5% Special Tax on Gross Income and exemption from all national and local taxes, except real property tax on land owned by developers;

    • VAT zero-rating of local purchases;

    • Exemption from expanded withholding tax.

Respicio & Co. Law Firm can help you evaluate your investment, locate your operation in an ideal zone, building or park, and fully maximise your PEZA incentives.

Previous: PEZA Areas of Investment – Part 1 of PEZA Series: Perks of Being a PEZA-Registered Business

Next: PEZA Guidelines of Registration – Part 3 of PEZA Series: Perks of Being a PEZA-Registered Business

PEZA Areas of Investment – Part 1 of PEZA Series: Perks of Being a PEZA-Registered Business

The Philippine Economic Zone Authority, created by R.A. 7915, “The Special Economic Zone Act of 1995”, is the government agency tasked with the promotion and regulation of foreign investments on Philippine soil, in Special Economic Zones.

These zones provide tax incentives and other economic benefits to foreign investors setting up certain types of businesses within these areas:

  1. Export Manufacturing – Economic Zone Export Manufacturing Enterprise engaged in processing, assembly, and manufacturing of goods where 70% of the production is to be exported.

  2. Information Technology Service Export – Economic Zone IT Enterprise or IT Parks and Buildings of which 70% of IT service activities are rendered to clients abroad, such as: BPOs, call centers, data encoding, software development and application, content development for multi-media or internet purposes; and others.

  3. Tourism – Tourism Economic Zone Developers or Operators and Locators establishing and operating sports and recreation centers, accommodation, convention, and cultural facilities and their special interest attraction activities/establishments, with foreign tourists as primary clientele.

  4. Medical Tourism – Medical Tourism Enterprise providing medical health services, duly endorsed by the Department of Health, primarily rendering services to foreign patients.

  5. Agro-industrial Export Manufacturing – Agro-industrial Economic Zone Developers or Operators and Locators, engaged in the processing and/or manufacturing of agricultural products resulting in the exportation of its production.

  6. Agro-industrial Bio-Fuel Manufacturing – Enterprise engaged in specialized manufacturing of agricultural crops and eventual commercial processing which shall result in the production of clean energy such as bio-fuels and the like.

  7. Logistics and Warehousing Services – Enterprise engaged in:

    • Warehousing for storage, deposit, and safekeeping of goods for PEZA-registered Economic Zone Export Manufacturing Enterprises; and/or

    • Importation or local sourcing of raw materials, semi-finished goods for resale to, or for packing, covering (marking/labeling), cutting, or altering to customer specification, mounting and/or packaging into kits or marketable lots for subsequent sale to PEZA-registered Export Manufacturing Enterprises for use in their export activities, or for direct export, or for consignment to PEZA-registered Export Manufacturing Enterprises and eventual export.

  8. Economic Zone Development and Operation – Enterprise engaged in the development, operation and maintenance of:

    • Manufacturing Economic Zone Development/Operation – infrastructure, facilities and utilites as light and power system, water supply and distribution system, sewerage and drainage system, pollution control devices, communication facilities, paved road network, administration building.

    • IT Park Development/Operation – infrastructures and other support facilities required by IT Enterprises, as well as amenities or easy access thereto, required by IT professionals and workers.

    • Tourism Economic Zone Development/Operation – integrated resort complex, with prescribed carrying capacities of tourist facilities and activities.

    • Medical Tourism Economic Zone Development/Operation – Medical Tourism Park or Medical Tourism Center, planned and designed in accordance with the standards of the Department of Health and the Department of Tourism to have support facilities and services required for health and wellness, and provided with required infrastructure facilities and utilities.

    • Agro-industrial Economic Zone Development/Operation – Agro-industrial economic zone planned and designed to have support facilities and services required for processing and agro-based manufacturing facilities, and provided with the required infrastructure facilities and utilities.

    • Retirement Economic Zone Development/Operation – Retirement Economic Zone Park or Center, planned and designed in accor dance with the accreditation standards of the Philippine Retirement Authority, and provided with the required infrastructure facilities and utilities.

  9. Facilities Providers – Enterprise engaged in:

    • Facilities for Manufacturing Enterprises – construction as owner/operator of factory buildings inside special economic zone, for lease to PEZA-registered Export Manufacturing Enterprises.

    • Facilities for IT Enterprises – construction as owner/operator of buildings and other facilities inside IT Parks which are leased to PEZA-registered IT Enterprises.

    • Retirement Facilities – establishment, operation and management of retirement facilities and other related activities, with foreign retirees as primary clientele, duly endorsed by the Philippine Retirement Authority, and located in a Retirement Economic Zone.

  10. Utilities – Enterprise engaged in the establishment, operation and maintenance of light and power systems, water supply and distribution systems inside Special Economic Zones.

Respicio & Co. Law Firm can help you determine your eligibility for PEZA-registration, and process the registration.

Next: PEZA Economic Incentives – Part 2 of PEZA Series: Perks of Being a PEZA-Registered Business

Public-Private Partnership in the Philippines

Public-Private Partnership (PPP) in the Philippines was institutionalized through R.A. No. 6957, entitled “An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and for the Other Purposes”. It was meant to recognize the indispensable role of the private sector as the main engine for national growth and development. In 1994, R.A. No. No. 7718 amended R.A. 6957 in to expand the modalities of partnership between the government and the private sector.

In 2010, the Office of the President issued Executive Order No. 8, entitled “Reorganizing and Renaming the Build-Operate and Transfer Center to the Public-Private Partnership Center of the Philippines and Transferring its Attachment from the Department of Trade and Industry to the National Economic and Development Authority and for Other Purposes”, which designates the PPP Center as the central coordinating body for all PPP projects.

It must be noted that despite the creation of the PPP Center, National Government Agencies (NGA), Government-Owned and -Controlled Corporations (GOCC), and Local Government Units (LGU) with infrastructure and development projects remain to be the owners and implementing agencies of the PPP projects.

Example of awarded projects under the PPP include the DaangHari – SLEX Link Road, PPP for School Infrastructure Project (Phase I), NAIA Expressway Project, PPP for School Infrastructure Project (Phase II), Modernization of the Philippine Orthopedic Center (MPOC), Automatic Fare Collection System (AFCS), and Mactan-Cebu International Airport Passenger Terminal Building.

The following projects are currently in the pipeline:

  1. Manila Heritage and Urban Renewal Project

  2. Clark Green City Food Processing Terminal

  3. Central Spine Roll-on/Roll-off (RoRo)

  4. Manila-East Rail Transit System Project

  5. R1-R10 Link Mass Transport System Development Project

  6. LRT Line 4 Project

  7. Central Luzon Link Expressway (CLLEX) Phase II, Cabanatuan-San Jose Section and Operation and Maintenance of Phases I (Tarlac- Cabanatuan, Nueva Ecija) and II Project

  8. Improvement and Operation & Maintenance of Kennon Road and Marcos Highway

  9. Rehabilitation of National Center for Mental Health

  10. NLEX East Expressway

  11. Camarines Sur Expressway Project

  12. PPP for School Infrastructure Project (PSIP) Phase III

  13. Sucat Gas Power Plant

  14. Duty Free Retail Development Project

  15. Motor Vehicle Inspection System

  16. Laguna Lakeshore Expressway-Dike Project

  17. Clark International Airport Project

  18. San Ramon Newport Project

Respicio & Co. can help interested investors participate in the bidding of these projects.

Foreign Equity Limitations

Foreign equity limitations provide the maximum percentage shareholding by foreign stockholders in corporations engaged in partially nationalized economic activities, such as public utilities. Section 2 of SEC Memorandum Circular No. 8 series of 2013 states that “the required percentage of Filipino ownership shall be applied to BOTH (a) the total outstanding shares of stock entitled to vote in the election of directors; AND (b) the total number of outstanding shares of stock, whether or not entitled to vote in the election of directors.”

To illustrate, a telecommunications company is allowed to have a maximum of 40% of its capital owned by foreign stockholders. However, capital can be in the form of voting or common shares and non-voting or preferred shares. To comply with the foreign equity limitation, the 40% maximum must be observed not only on the basis of total outstanding shares—i.e., both voting and non-voting shares—but also on the basis of voting or common shares.

Hence, a company with 35% foreign equity on the basis of total outstanding shares, but with 41% foreign equity on the basis of voting shares, violates the 1987 Constitution on the 60-40 maximum equity allocation between Filipino and foreign stockholders in public utility corporations.

The Supreme Court in Gamboa vs. Teves articulated the rationale for this rule, as follows:

The Constitution expressly declares as State policy the development of an economy “effectively controlled” by Filipinos. […] [T]he right to vote in the election of directors, coupled with full beneficial ownership of stocks, translates to effective control of a corporation.

Any other construction of the term "capital" in Section 11, Article XII of the Constitution contravenes the letter and intent of the Constitution. Any other meaning of the term “capital” openly invites alien domination of economic activities reserved exclusively to Philippine nationals

Respicio & Co. Law Firm can help you establish your business in the Philippines.

Foreigners Doing Business in the Philippines

A foreign corporation must be licensed by the Securities and Exchange Commission (SEC) to do business in the Philippines. Section 133 of the Corporation Code of the Philippines (B.P. No. 68) provides the adverse legal effect of doing business without license, as follows:

No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.

In other words, an unlicensed foreign corporation shall have no recourse in the courts to enforce its rights against other persons and corporations in the country. Section 3(d) of the Foreign Investments Act of 1991 (R.A. No. 7042) provides examples constituting the act of “doing business”, as follows:

  1. Soliciting orders, service contracts, opening offices, whether called "liaison" offices or branches;

  2. Appointing representatives or distributors domiciled in the Philippines or who in any calendar year stay in the country for a period or periods totalling one hundred eighty (180) days or more;

  3. Participating in the management, supervision or control of any domestic business, firm, entity or corporation in the Philippines; and

  4. Any other act or acts that imply a continuity of commercial dealings or arrangements, and contemplate to that extent the performance of acts or works, or the exercise of some of the functions normally incident to, and in progressive prosecution of, commercial gain or of the purpose and object of the business organization.

The same Section also defines what shall not be deemed as “doing business”, as follows:

  1. Mere investment as a shareholder by a foreign entity in domestic corporations duly registered to do business, and/or the exercise of rights as such investor; nor

  2. Having a nominee director or officer to represent its interests in such corporation; and

  3. Appointing a representative or distributor domiciled in the Philippines which transacts business in its own name and for its own account.

Respicio & Co. Law Firm can help you establish your business in the Philippines.

Overview of Foreign Investment Laws

In order to successfully establish a sound and legal business in the Philippines, the foreign investor must comply with several foreign investment laws. The following provides an overview of the most important legislation on the subject.

The Omnibus Investments Code of 1987 (Executive Order No. 226) provides the general rules and regulations for foreign investments in the Philippines, with provision on grant of incentives in particular industries and sectors. The Foreign Investments Act of 1991 (Republic Act No. 7042, as amended by Republic Act No. 8179) provides the regulatory framework of foreign investments without incentives. Those providing incentives to foreign investments are: Bases Conversion and Development Act of 1992 (Republic Act No. 7227), which provides incentives to enterprises with plants and offices located within the Subic Bay Freeport Zone; Special Economic Zone Act of 1995 (Republic Act No. 7916), which provides incentives to enterprises which are located in the Special Economic Zones; and Export Development Act of 1994 (Republic Act No. 7844), which provides incentives to export industries.

Republic Act No. 7721 is a law liberalizing the entry and operations of foreign banks and financial institutions. The Investor's Lease Act (Republic Act No. 7652) allows foreign investors to lease private lands for a period of 50 years, which may be renewed for another 25 years. The Build-Operate-Transfer Act (Republic Act No. 7718 as amended) established various Public-Private Partnership schemes.

The following are agencies enforcing relevant to foreign investments regulation: (i) Board of Investments, for the enforcement of the Omnibus Investments Code, (ii) Securities and Exchange Commission, for the registration of corporations and partnerships, as well as the enforcement of securities regulation and the Foreign Investments Act, (iii) the Philippine Economic Zone Authority, for the enforcement of the Philippine Economic Zone Authority Law, (iv) the Subic Bay Metropolitan Authority, for the enforcement of the Bases Conversion and Development Act, (v) the Bases Conversion Development Authority, also for the enforcement of the Bases Conversion and Development Act, and (vi) Bureau of Internal Revenue, for the enforcement of the National Internal Revenue Code of 1997.

Respicio & Co. Law Firm can help you establish your business in the Philippines.

Forms of Business Organizations for Foreign Investors

Foreign companies may do business in the Philippines by establishing any of the following forms of business organizations: (i) regional headquarter, (ii) regional operating headquarter, (iii) representative office, or (iv) branch.

A regional head quarter or RHQ must be endorsed by the Board of Investments to the Securities and Exchange Commission (SEC). It also needs to be registered with the SEC for its legitimate existence. It must have an annual minimum inward remittance of at least USD 50,000. One condition for approval relates to its functions, which must be relevant to (i) supervisory role, (ii), communication, or (iii) coordination. Another condition is that it does not earn income in the Philippines.

A regional operating headquarter or ROHQ, like the RHQ, must also be endorsed by the Board of Investments to the SEC. Also like the RHQ, it must be approved and registered with the SEC. It must have a minimum inward remittance of at least USD 200,000. The condition for approval and registration in terms of function is that it must perform qualifying services to its affiliates, subsidiaries, and branches. The second condition is that it earns income from such qualifying services. The income earned is subject to 10% tax.

A representative office needs SEC registration as a representative office. It is an extension of the personality of its mother company. Its activities are limited only to liaison work between mother company and its clients. It does not derive income. A representative office must have an initial minimum inward remittance of USD 30,000 to cover its operating expenses.

A branch is a foreign corporation organized and existing under foreign laws that carries out business activities of the head office and derives income from the host country. A branch needs SEC registration as a branch. It carries out the business activities of the parent company. It must have an assigned capital from the head office of at least USD 200,000, which can be reduced to USD 100,000 subject to conditions. These conditions are: (i) the activity involves advanced technology, or (ii) the company employs at least 50 direct employees.

The Foreign Investments Act provides an exception to the USD 100,00 and USD 200,000 capital requirement. This exception is applicable for businesses that are classified as export enterprises. An export enterprise is one which has 60% export sales. It is immaterial whether these are sales of goods or sales of services. These enterprises include foreign-owned branches in the Philippines that function as an outsourcing operation.

Respicio & Co. Law Firm can help foreign companies do business in the Philippines.

Irregularity in Entrapment Operations in Drug Cases

An entrapment operation is a valid way of apprehending perpetrators of sale of illegal drugs. Upon the consummation of the sale, the entrapment team is authorized to immediately arrest the seller of illegal drugs. The case would fall under the category of “in flagrante delicto” arrests, which do not require the issuance of a warrant of arrest. An “in flagrante delicto” arrest is one where the law enforcement officer witnesses that a crime has taken place or is about to take place, based on his own personal knowledge.

However, notwithstanding the fact that the police officers have personally witnessed that a sale of illegal drugs has taken place, a person apprehended through an entrapment operation can still be acquitted. This is possible if he objects to the admissibility of evidence during trial, and the most important evidence in illegal drugs cases is the confiscated drugs themselves. The Comprehensive Dangerous Drugs Law imposes a very strict procedure in handling confiscated drugs as evidence.

The case of People v. Casabuena (G.R. No. 186455, November 19, 2014) is instructive. Sometime in 2004, a group of police officers formed an entrapment team and assigned one agent as a poseur-buyer. The poseur-buyer went to the target area, with the rest of the team positioned 15 meters from the place of sale of illegal drugs. The poseur-buyer entered the seller’s house, and there conducted the sale. The accused was apprehended, and the drugs were confiscated.

However, the Supreme Court acquitted the accused because of an irregularity in the entrapment operation. Specifically, the police officers failed to undertake an inventory and to photograph the seize sachets of shabu at the place where they were seized or at the police station. Furthermore, the police officers did not even attempt to offer any justification why it failed to inventory and to photograph the seized items. The Supreme Court states, “In prosecutions involving narcotics, the narcotic substance itself constitutes the corpus delicti of the offense and its existence is vital to sustain a judgment of conviction beyond reasonable doubt. Proof beyond reasonable doubt demands that unwavering exactitude be observed in establishing the corpus delicti.”

The Comprehensive Dangerous Drugs Law itself provides that the apprehending officer/team having initial custody and control of the drugs shall, immediately after seizure and confiscation, physically inventory and photograph the same in the presence of the accused or the person/s from whom such items were confiscated and/or seized.

The effect of non-compliance with the requirement to conduct an inventory and to photograph the evidence is the non-admissibility of the confiscated drugs as evidence. The judge therefore cannot consider said evidence in writing his decision. The net effect is the failure of sufficient evidence to convict. 

Respicio & Co. specializes in criminal law and defense of persons accused of drug-related offenses.

Chain of Custody Rule in Drug Cases

One of the most common defenses in the criminal prosecution of drug cases under the Comprehensive Dangerous Drugs Act of 2002 (R.A. No. 9165) is the failure of the prosecution to establish the “chain of custody”. The law prescribes a strict procedure for handling object evidence, particularly the custody of confiscated dangerous drugs by law enforcement agencies and by the courts. Non-compliance with the said procedure renders the evidence non-admissible, resulting in the eventual acquittal of the accused if there is no other sufficient evidence to convict him.

Suppose a person is arrested pursuant to an entrapment operation effected by the police for the apprehension of drug traffickers. In the course of the arrest, it is a standard operating procedure for the law enforcement officer to confiscate the illegal drugs obtained in the crime scene.

Section 21 of R.A. No. 9165 directs the apprehending team having initial custody and control of the drugs to immediately undertake a physical inventory of the confiscated drugs, and to take photographs of the same, in the presence of the accused or the person/s from whom such items were confiscated and/or seized, or his/her representative or counsel. The law also requires a representative from the media and the Department of Justice (DOJ), and any elected public official who shall be required to sign the copies of the inventory.

Within 24 hours upon confiscation of dangerous drugs, these must be submitted to the PDEA Forensic Laboratory for a qualitative and quantitative examination. The forensic laboratory examiner must then make a certification of the forensic laboratory examination results. The said certification must be issued within 24 hours after the receipt of the subject item/s.

What if the confiscated drugs are so numerous as to render it impossible to conduct an examination within 24 hours from confiscation? In this case, a partial laboratory examination report shall be provisionally issued stating the quantities of dangerous drugs still to be examined by the forensic laboratory. However, a final certification must be issued on the completed forensic laboratory examination within the next 24 hours. In other words, the law only allows an extension period of 24 hours.

While the PDEA has custody of the confiscated drugs, the police agents file the complaint with the prosecutor, who in turn files the criminal Information in court. Seventy-two (72) hours after filing, the court must conduct an ocular inspection of the confiscated, seized and/or surrendered dangerous drugs. Within 24 hours thereafter, the PDEA shall then proceed with the destruction or burning of the confiscated drugs, in the presence of the accused or the person/s from whom such items were confiscated and/or seized, or his/her representative or counsel, a representative from the media and the DOJ, civil society groups and any elected public official.

The PDEA Board afterward issues a sworn certification as to the fact of destruction or burning of the subject item/s which, together with the representative sample/s in the custody of the PDEA. The sworn certification must be submitted to the court having jurisdiction over the case. In all instances, the representative sample/s shall be kept to a minimum quantity as determined by the Board.

During trial, the prosecution has the burden of proving the chain of custody — i.e., the prosecutor must prove that the sample of drugs being presented into evidence forms part of the inventory of drugs at the time and place of confiscation. Moreover, the prosecutor must prove that the said drugs which are being presented into evidence are the same substances taken from the possession of the accused.

If there are substantial gaps in the testimony of witnesses on the chain of custody of the seized dangerous drugs, these raise doubts about the authenticity of the evidence presented in court, and therefore the accused cannot be convicted beyond reasonable doubt.

Respicio & Co. specializes in criminal law and defense of persons accused of drug-related offenses.

Buy-Bust Operations

One of the most common ways in which law enforcement agencies apprehend persons accused of illegal sale of drugs is through buy-bust operations. A buy-bust operation is a form of entrapment, whereby a police agent disguised as a buyer of illegal drugs undertakes a sales transaction with a seller. Suppose, however, that there is an irregularity in the buy-bust operation, and illegal drugs are confiscated from an alleged seller, what are the remedies and defenses of the accused seller?

To convict a person for the sale of illegal drugs under the Comprehensive Dangerous Drugs Law, the prosecutor must prove the following: (a) the identities of the buyer and seller, object, and consideration; and (b) the delivery of the thing sold and the payment for it. In short, the prosecutor must prove that the sale took place, and that the accused was the seller.

There is one important requirement to convict the accused under this law: the prosecution must establish and present the “corpus delicti” or “body of the crime”, which in this case is the confiscated drugs. Concomitant to this requirement is the duty of the prosecution to establish the integrity and evidentiary value of such seized items. Absent this requirement, there is no sufficiency of evidence to convict the accused beyond reasonable doubt.

The case of People v. Sorin (G.R. No. 212635, March 25, 2015) is instructive. Here, the accused was acquitted because of an irregularity in the buy-bust operations. Specifically, the apprehending officer who seized the sachets from the accused Sorin during the buy-bust operation failed to mark the sachets and, instead, turned them over unmarked to another police officer. The latter officer was the person who marked the sachets of shabu, and who eventually took custody of the confiscated drugs and delivery to the PDEA.

According to the Supreme Court, the fact that the sachets of drugs were not marked for inventory in the presence of the apprehending officer who confiscated the drugs is fatal to the cause of the prosecution. “The Court cannot over-emphasize the significance of marking in illegal drugs cases. The marking of the evidence serves to separate the marked evidence from the corpus of all other similar or related evidence from the time they are seized from the accused until they are disposed of at the end of the criminal proceedings, thus, preventing switching, planting, or contamination of evidence.”

The same case occurred in People v. Sabdula (G.R. No. 184758, April 21, 2014), where the accused was also acquitted because of failure of the apprehending officer to mark the confiscated drugs in the buy-bust operations. The Supreme Court noted that due to the procedural lapse in the first link of the chain of custody, serious uncertainty hangs over the identification of the shabu that the prosecution introduced into evidence.

It is well-settled that in criminal prosecutions involving illegal drugs, the presentation of the drugs which constitute the corpus delicti of the crime calls for the necessity of proving with moral certainty that they are the same seized items. The lack of conclusive identification of the illegal drugs allegedly seized from the accused strongly militates against a finding of guilt, as in this case. As reasonable doubt persists on the identity of the drugs allegedly seized from the accused, the latter's acquittal should come as a matter of course.

Respicio & Co. specializes in criminal law and defense of persons accused of drug-related offenses.

Unreasonable Search and Seizure in Drug Cases

A person apprehended due to possession or use of illegal drugs under the Comprehensive Dangerous Drugs Law can raise the defense that he was subjected to unreasonable search by a law enforcement officer. Persons have an inviolable constitutional right under Section 2 of the Bill of Rights to be secure in their persons, houses, papers, and effects against unreasonable searches and seizures of whatever nature. In short, even if the person is actually in possession of illegal drugs, the said confiscated items can still be held inadmissible in court.

The general rule is that a search warrant is required for a police officer to compel a person to allow entry in his house for the purpose of confirming the existence of illegal drugs and confiscating the same. There are several exceptions to this general rule.

One of these exceptions is warrantless search as an incident to an arrest. A person lawfully arrested may be searched for dangerous weapons or anything which may have been used or constitute proof in the commission of an offense without a search warrant. Other exceptions include (a) search of evidence in “plain view”; (b) search of a moving vehicle; (c) consented warrantless search; (d) customs search; (e) stop and frisk; and (f) exigent and emergency circumstances.

The absence of a search warrant, when the case does not fall in any of these exceptions, is fatal to the case of the prosecution. In People v. Collado (G.R. No. 185719, June 17, 2013), the apprehending officers entered the house of the accused, where they found open plastic sachets (containing shabu residue), pieces of rolled used aluminum foil, and pieces of used aluminum foil.

Despite this very obvious discovery of the commission of a crime (i.e. possession of illegal drugs and paraphernalia), the Supreme Court still acquitted the accused on the ground of lack of a search warrant. “The arresting officers had no personal knowledge that at the time of the arrest, accused had just committed, were committing, or were about to commit a crime, as they had no probable cause to enter the house of accused Rafael Gonzales in order to arrest them.”

A person arrested for possession of illegal drugs has the right to object to the introduction of evidence obtained from a warrantless search. The prosecution then has the burden to prove that the warrantless search falls under an exception to the general rule that a warrant is required for the search.

Respicio & Co. specializes in criminal law and defense of persons accused of drug-related offenses.

Support Pendente Lite

Support may be demanded from an erring spouse pending litigation, specifically during the following proceedings: (i) legal separation, (ii) declaration of nullity of marriage, and (iii) annulment. The support of the innocent spouse and common children shall be obtained from the properties of the absolute community or conjugal partnership.

According to the Supreme Court in Reyes vs. Ines-Luciano (G.R. No. L-48219), support pendente lite may be awarded without determining the full merits of the pending action. “Mere affidavits may satisfy the court to pass upon the application for support pendente lite. It is enough that the facts be established by affidavits or other documentary evidence appearing in the record.”

Under the Family Code of the Philippines, the amount of the support should be in proportion to the resources or means of the giver and to the necessities of the recipient. The support may be increased or reduced proportionately, according to the increases or reduction of necessities of the recipient and the resources or means of the person obliged. The obligation to give support is demandable from the time the person who has a right to receive the same needs it for maintenance, but it shall not be paid except from the date of judicial or extrajudicial demand.

Support must be demanded and the right to it established before it becomes payable. For the right to support does not arise from the mere fact of relationship, even from relationship of parents and children, but from ‘imperative necessity’ without which it cannot be demanded, and the law presumes that such necessity does not exist unless support is demanded. As to how the obligation to support can be performed, Article 204 of the Family Code provides that the person obliged to give support shall have the option to fulfill the obligation either by paying the allowance fixed, or by receiving and maintaining in the family dwelling the person who has the right to receive support. The latter alternative cannot be availed of in case there is a moral or legal obstacle thereto, such as the strained relationship between the parties.

The right to receive support as well as money or property obtained as such support shall not be levied upon on attachment or execution. However, in case of contractual support or that given by will, the excess in amount beyond that required for legal support shall be subject to levy on attachment or execution.

Respicio & Co. can help in disputes concerning family relations.

Child Custody

The right of custody accorded to parents springs from the exercise of parental authority. According to Santos vs. CA (G.R. No. 113054, March 16, 1995), parental authority or patria potestas in Roman Law is the juridical institution whereby parents rightfully assume control and protection of their unemancipated children to the extent required by the latter's needs. The Court in Reyes vs. Alvarez (8 Phil. 732) also states that custody is a mass of rights and obligations which the law grants to parents for the purpose of the children's physical preservation and development, as well as the cultivation of their intellect and the education of their heart and senses.

Based on Articles 222-224 of the Family Code, the right of parental authority (to which the right of custody over a child attaches) is purely personal; therefore, the law allows a waiver of parental authority only in cases of adoption, guardianship and surrender to a children's home or an orphan institution. The Supreme Court in Celis v. Cafuir (86 Phil. 555) states that when a parent entrusts the custody of a minor to another, such as a friend or godfather, even in a document, what is given is merely temporary custody and it does not constitute a renunciation of parental authority. Even if a definite renunciation is manifest, the law still disallows the same. The father and mother, being the natural guardians of unemancipated children, are duty-bound and entitled to keep them in their custody and company.

Under Article 8, Presidential Decree No. 603 or the Child and Youth Welfare Code, the child's welfare is always the paramount consideration in all questions concerning his care and custody. The law vests on the father and mother joint parental authority over the persons of their common children. In case of absence or death of either parent, the parent present shall continue exercising parental authority. Only in case of the parents' death, absence or unsuitability may substitute parental authority be exercised by the surviving grandparent.

The Writ of Habeas Corpus may be resorted to in cases where the rightful custody of any person is withheld from the person entitled thereto. Although the Writ of Habeas Corpus ought not to be issued if the restraint is voluntary, the Supreme Court held in Salvana v. Gaela (55 Phil. 680) that the said writ is the proper legal remedy to enable parents to regain the custody of a minor child even if the latter be in the custody of a third person of her own free will. It may even be said that in custody cases involving minors, the question of illegal and involuntary restraint of liberty is not the underlying rationale for the availability of the writ as a remedy; rather, the writ of habeas corpus is prosecuted for the purpose of determining the right of custody over a child.

In a Writ of Habeas Corpus involving child custody, the controversy does not involve the question of personal freedom, because an infant is presumed to be in the custody of someone until he attains majority age. In passing on the writ in a child custody case, the court deals with a matter of an equitable nature. Not bound by any mere legal right of parent or guardian, the court gives his or her claim to the custody of the child due weight as a claim founded on human nature and considered generally equitable and just. Therefore, these cases are decided, not on the legal right of the petitioner to be relieved from unlawful imprisonment or detention, as in the case of adults, but on the court’s view of the best interests of those whose welfare requires that they be in custody of one person or another. Hence, the court is not bound to deliver a child into the custody of any claimant or of any person, but should, in the consideration of the facts, leave it in such custody as its welfare at the time appears to require. In short, the child’s welfare is the supreme consideration.

The foregoing principles considered in the issuance of Writ of Habeas Corpus for child custody are: (1) that the petitioner has the right of custody over the minor; (2) that the rightful custody of the minor is being withheld from the petitioner by the respondent; and (3) that it is to the best interest of the minor concerned to be in the custody of petitioner and not that of the respondent.

Respicio & Co. can help you in child custody cases and family law.

Divorce and Recognition of Foreign Judgments

The general rule of divorce in the Philippines is that the law does not provide for absolute divorce. Hence, Philippine courts cannot grant a divorce decree. This is the ruling in Garcia vs. Recio (G.R. No. 138322, October 2, 2001). A marriage between two Filipinos cannot be dissolved even by a divorce obtained abroad due to the following provisions of the New Civil Code:

Art. 15. Laws relating to family rights and duties, or to the status, condition and legal capacity of persons are binding upon citizens of the Philippines, even though living abroad.

Art. 17. The forms and solemnities of contracts, wills, and other public instruments shall be governed by the laws of the country in which they are executed.

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Prohibitive laws concerning persons, their acts or property, and those which have for their object public order, public policy and good customs shall not be rendered ineffective by laws or judgments promulgated, or by determinations or conventions agreed upon in a foreign country.

In mixed marriages involving a Filipino and a foreigner, 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. Article 26 of the Family states:

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.

The case of Van Dorn v. Romillo Jr. (139 SCRA 139, October 8, 1985) and Pilapil v. Ibay-Somera (174 SCRA 653, June 30, 1989) have authoritatively applied this provision in mixed marriages between a Filipino and a foreigner. 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.

However, 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. A divorce obtained abroad is proven by the divorce decree itself. The best evidence of a judgment is the judgment itself. Rule 130 of the Rules on Evidence provides that when the subject of inquiry is the contents of a document, no evidence shall be admissible other than the original document itself. The decree purports to be a written act or record of an act of an official body or tribunal of a foreign country. 

Under Sections 24 and 25 of Rule 132 of the Rules on Evidence, a writing or document may be proven as a public or official record of a foreign country by either (1) an official publication or (2) a copy thereof attested by the officer having legal custody of the document. If the record is not kept in the Philippines, such copy must be (a) accompanied by a certificate issued by the proper diplomatic or consular officer in the Philippine foreign service stationed in the foreign country in which the record is kept and (b) authenticated by the seal of his office.

Philippine courts cannot take judicial notice of foreign laws. Like any other facts, they must be alleged and proved. Foreign 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.

Respicio & Co. can help parties in the recognition of foreign divorce decrees.

Customs Procedure for Importation by Overseas Filipino Workers

Customs Memorandum Order No. 27-2015 dated 27 August 2015 governs the importation of balik-bayan boxes from Overseas Filipino Workers (OFWs). It was issued to simplify customs procedures and contribute to the enforcement efforts in suppressing unscrupulous individuals in abusing the balikbayan boxes privilege.

The order applies to all non-commercial inbound consolidated shipments of OFWs and for returning OFWs bringing in personal and household effects as provided under Section 105(f) of the Tariff and Customs Code of the Philippines (TCCP), as amended.

With the new regulation, balikbayan boxes of OFWs are not subject to random or arbitrary physical inspection. Instead, they are required only to undergo mandatory X-ray scanning. For containers, mandatory container X-ray scanning are conducted at the X-ray Inspection Project (XIP) Designated Examination Area (DEA) for preliminary examination of non-commercial inbound consolidated shipment.

In cases of non-commercial inbound consolidated shipment tagged “suspect” after X-ray scanning, the XIP image analysis inspector shall identify the Balikbayan boxes with possible violation and recommend the issuance of an Alert Order. For Balikbayan boxes without violation, it shall be segregated and provisionally released to allow its continuous processing.

Balikbayan boxes which are alerted shall be subjected to 100% physical examination at the authorized examination area to be conducted by a Customs Examiner in the presence of the apprehending officers, freight forwarder consolidator, representatives of the Overseas Workers Welfare Administration (OWWA) and/or a designated office of an OFW Association be present.

Respicio & Co. can help in customs procedures for importation.