G.R. No.

L-34526 August 9, 1988

HIJO PLANTATION INC., DAVAO FRUITS CORPORATION, TWIN RIVERS PLANTATION, INC.
and MARSMAN & CO., INC., for themselves and in behalf of other persons and entities
similarly situated, petitioners,
vs.
CENTRAL BANK OF THE PHILIPPINES, respondent.

PARAS, J.:

This is a petition for certiorari and prohibition which seeks: (1) to declare Monetary Board Resolution No. 1995, series of 1971, as null and
void; (2) to prohibit the Central Bank from collecting the stabilization tax on banana exports shipped during the period January 1, 1972 to
June 30, 1982; and (3) a refund of the amount collected as stabilization tax from the Central Bank.

The facts of this case as culled from the records are as follows:

Hijo Plantation, Inc., Davao Fruits Corporation, Twin Rivers Plantation, Inc. and Marsman Plantation
(Manifestation, Rollo, P. 18), collectively referred to herein as petitioners, are domestic corporations
duly organized and existing under the laws of the Philippines, all of which are engaged in the
production and exportation of bananas in and from Mindanao.

Owing to the difficulty of determining the exchange rate of the peso to the dollar because of the
floating rate and the promulgation of Central Bank Circular No. 289 which imposes an 80% retention
scheme on all dollar earners, Congress passed Republic Act No. 6125 entitled "an act imposing
STABILIZATION TAX ON CONSIGNMENTS ABROAD TO ACCELERATE THE ECONOMIC
DEVELOPMENT OF THE PHILIPPINES AND FOR OTHER PURPOSES," approved and made
effective on May 1, 1970 (Comment on Petition, Rollo, p, 32), to eliminate the necessity for said
circular and to stabilize the peso. Among others, it provides as follows:

SECTION 1. There shall be imposed, assessed and collected a stabilization tax on

the gross F.O.B. peso proceeds, based on the rate of exchange prevailing at the time
of receipt of such proceeds, whether partial or total, of any exportation of the
following products in accordance with the following schedule:

a. In the case of logs, copra, centrifugal sugar, and copper ore and
concentrates:

Ten per centum of the F.O.B. peso proceeds of

exports received on or after the date of effectivity of
this Act to June thirty, nineteen hundred seventy one;

Eight per centum of the F.O.B. peso proceeds of

exports received from July first, nineteen hundred
seventy-one to June thirty, nineteen hundred seventy-
two;

Six per centum of the F.O.B. peso proceeds of

exports received from July first, nineteen hundred
seventy two to June thirty, nineteen hundred seventy-
three; and
 Four per centum of the F.O.B. peso proceeds of
exports received from July first, nineteen hundred
seventy-three to June thirty, nineteen hundred
seventy-four.

b. In the case of molasses, coconut oil, dessicated coconut, iron ore

and concentrates, chromite ore and concentrates, copra meal or
cake, unmanufactured abaca, unmanufactured tobacco, veneer core
and sheets, plywood (including plywood panels faced with plastics),
lumber, canned pineapples, and bunker fuel oil;

Eight per centum of the F.O.B. peso proceeds of

exports shipped on or after the date of effectivity of
this Act to June thirty, nineteen hundred seventy-one;

Six per centum of the F.O.B. peso proceeds of

exports shipped from July first, nineteen hundred
seventy one to June thirty nineteen hundred seventy-
two;

Four per centum of the F.O.B. peso proceeds of

exports shipped from July first, nineteen hundred
seventy-two to June thirty nineteen hundred seventy-
three; and

Two per centum of the F.O.B. peso proceeds of

exports shipped from July first, nineteen hundred
seventy three to June thirty nineteen hundred
seventy-four.

Any export product the aggregate annual F.O.B. value of which shall exceed five
million United States dollars in any one calendar year during the effectivity of this Act
shall likewise be subject to the rates of tax in force during the fiscal years following its
reaching the said aggregate value. (Emphasis supplied).

During the first nine (9) months of calendar year 1971, the total banana export amounted to an
annual aggregate F.O.B. value of P8,949,000.00 (Answer, Rollo, p. 73) thus exceeding the
aggregate F.O.B. value of five million United States Dollar, bringing it within the ambit of Republic
Act No. 6125. Consequently, the banana industry was in a dilemma as to when the stabilization tax
was to become due and collectible from it and under what schedule of Section 1 (b) of Republic Act
6125 should said tax be collected. Accordingly, petitioners through their counsel, by letter dated
November 5, 1971, sought the authoritative pronouncement of the Central Bank (herein referred to
as respondent), therein advancing the opinion that the stabilization tax does not become due and
collectible from the petitioners until July 1, 1972 at the rate of 4% of the F.O.B. peso proceeds of the
exports shipped from July 1, 1972 to June 30,1973. Replying by letter dated December 17,1971
(Rollo, p. 11), the Central Bank called attention to Monetary Board Resolution No. 1995 dated
December 3, 1971 which clarified that:

1) For exports of bananas shipped during the period from January 1, 1972 to June
30, 1972; the stabilization tax shall be at the rate of 6%;
 2) For exports of bananas shipped during the period from July 1, 1972 to June 30,
1973, the stabilization tax shall be at the rate of 4%; and

3) For exports of bananas shipped during the period from July 1, 1973, to June 30,
1974, the stabilization tax shall be at the rate of 2%."

Contending that said Board Resolution No. 1995 was manifestly contrary to the legislative intent,
petitioners sought a reconsideration of said Board Resolution by letter dated December 27, 1971
(Rollo, p. 12) which request for reconsideration was denied by the respondent, also by letter dated
January 20, 1972 (Rollo, p. 24). With the denial of petitioners' request for reconsideration,
respondent thru its agent Bank, Rizal Commercial Banking Corporation has been collecting from the
petitioners who have been forced to pay under protest, such stabilization tax.

Petitioners view respondent's act as a clear violation of the provision of Republic Act No. 6125, and
as an act in excess of its jurisdiction, hence, this petition.

The sole issue in this case is whether or not respondent acted with grave abuse of discretion
amounting to lack of jurisdiction when it issued Monetary Board Resolution No. 1995, series of 1971
which in effect reaffirmed Central Bank Circular No. 309, enacted pursuant to Monetary Board
Resolution No. 1179.

There is here no dispute that the banana industry is liable to pay the stabilization tax prescribed
under Republic Act No. 1995, it being the admission of both parties, that the Industry has indeed
reached and for the first time in the calendar year 1971, a total banana export exceeding the
aggregate annual F.O.B. value of five million United States dollars. The crux of the controversy,
however, is the manner of implementation of Republic Act No. 6125.

Section 1 of R.A. 6125 clearly provides as follows:

An export product the aggregate annual F.O.B. value of which shall exceed five
million US dollars in any one calendar year during the effectivity of the act shall
likewise be subject to the rates of tax in force during the fiscal year following its
reaching the said aggregate value."

Petitioners contend that the stabilization tax to be collected from the banana industry does not
become due and collectible until July 1, 1972 at the rate of 4% of the F.O.B. peso proceeds of the
export shipped from July 1, 1972 to June 30,1973. They further contend that respondent gave
retroactive effect to the law (RA 6125) by ruling in Monetary Board Resolution No. 1995 dated
December 3, 1 971, that the export stabilization tax on banana industry would start to accrue on
January 1, 1972 at the rate of 6% of the F.O.B. peso proceeds of export shipped from July 1, 1971
to June 30, 1972 (Rollo, pp. 3-4).

Respondent, on the other hand, contends that the aforecited provision of RA 6125 merely prescribes
the rates that may be imposed but does not provide when the tax shall be collected and makes no
reference to any definite fixed period when the tax shall begin to be collected (Rollo, pp. 77-78).

There is merit in this petition.

In the very nature of things, in many cases it becomes impracticable for the legislative department of
the Government to provide general regulations for the various and varying details for the
management of a particular department of the Government. It therefore becomes convenient for the
legislative department of the government, by law, in a most general way, to provide for the conduct,
control, and management of the work of the particular department of the government; to authorize
certain persons, in charge of the management and control of such department (United States v.
Tupasi Molina, 29 Phil. 119 [19141).

Such is the case in RA 6125, which provided in its Section 6, as follows:

All rules and regulations for the purpose of carrying out the provisions of the act shall
be promulgated by the Central Bank of the Philippines and shall take effect fifteen
days after publication in three newspapers of general circulation throughout the
Philippines, one of which shall be in the national language.

Such regulations have uniformly been held to have the force of law, whenever they are found to be
in consonance and in harmony with the general purposes and objects of the law. Such regulations
once established and found to be in conformity with the general purposes of the law, are just as
binding upon all the parties, as if the regulation had been written in the original law itself (29 Phil.
119, Ibid). Upon the other hand, should the regulation conflict with the law, the validity of the
regulation cannot be sustained (Director of Forestry vs. Muroz 23 SCRA 1183).

Pursuant to the aforecited provision, the Monetary Board issued Resolution No. 1179 which
contained the rules and regulations for the implementation of said provision which Board resolution
was subsequently embodied in Central Bank Circular No. 309, dated August 10, 1970 (duly
published in the Official Gazette, Vol. 66, No. 34, August 24, 1940, p. 7855 and in three newspapers
of general circulation throughout the Philippines namely, the Manila Times, Manila Chronicle and
Manila Daily Bulletin). Section 3 of Central Bank Circular No. 309, "provides that the stabilization tax
shall begin to apply on January first following the calendar year during which such export products
shall have reached the aggregate annual F.O.B. value of more than $5 million and the applicable tax
rates shall be the rates prescribed in schedule (b) of Section 1 of RA No. 6125 for the fiscal year
following the reaching of the said aggregate value." Central Bank Circular No. 309 was subsequently
reaffirmed in Monetary Board Resolution No. 1995 herein assailed by petitioners for being null and
void (Rollo, pp. 97- 98).

In its comment (Rollo, p. 40), respondent argues that the request for authoritative pronouncement of
petitioners was made because there was no express provision in Section 1 of RA 6125 which
categorically states, when the stabilization tax shall begin to accrue on those aggregate annual
F.O.B. values exceeding five (5) million United States dollars in any one calendar year during the
effectivity of said act. For which reason, the law itself authorized it under Section 7 to promulgate
rules and regulations to carry out the provisions of said law.

In petitioner's reply (Rollo, p. 154) they argue that since the Banana Exports reached the aggregate
annual F.O.B. value of US $5 million in August 1971, the stabilization tax on banana should be
imposed only on July 1, 1972, the fiscal year following the calendar year during which the industry
attained the $5 million mark. Their argument finds support in the very language of the law and upon
congressional record where a clarification on the applicability of the law was categorically made by
the then Senator Aytona who stated that the tax shall be applicable only after the $5 million
aggregate value is reached, making such tax prospective in application and for a period of one year-
referring to the fiscal year (Annex 8, Comment of Respondent; Rollo, p. 60). Clearly such clarification
was indicative of the legislative intent. Further, they argue that respondent bank through the
Monetary Board clearly overstepped RA 6125 which empowered it to promulgate rules and
regulations for the purpose of carrying out the provisions of said act, because while Section 1 of the
law authorizes it to levy a stabilization tax on petitioners only in the fiscal year following their
reaching the aggregate annual F.O.B. value of US $5 million, that is, the fiscal year July 1, 1972 to
June 30, 1973, at a tax rate of 4% of the F.O.B. peso proceeds, respondent in gross violation of the
law, instead issued Resolution No. 1995 which impose a 6% stabilization tax for the calendar year
January 1, 1972 to June 30, 1972, which obviously is in excess of its jurisdiction. It was further
argued that in directing its agent bank to collect the stabilization tax in accordance with Monetary
Board Resolution No. 1995, it acted whimsically and capriciously. (Rollo, p. 155).

It will be observed that while Monetary Board Resolution No. 1995 cannot be said to be the product
of grave abuse of discretion but rather the result of respondent's overzealous desire to carry into
effect the provisions of RA 6125, it is evident that the Board acted beyond its authority under the law
and the Constitution. Hence, the petition for certiorari and prohibition in the case at bar, is proper.

Moreover, there is no dispute that in case of discrepancy between the basic law and a rule or
regulation issued to implement said law, the basic law prevails because said rule or regulation
cannot go beyond the terms and provisions of the basic law (People vs. Lim, 108 Phil. 1091). Rules
that subvert the statute cannot be sanctioned (University of Sto. Tomas v. Board of Tax Appeals, 93
Phil. 376; Del Mar v. Phil. Veterans Administration, 51 SCRA 340). Except for constitutional officials
who can trace their competence to act to the fundamental law itself, a public official must locate to
the statute relied upon a grant of power before he can exercise it. Department zeal may not be
permitted to outrun the authority conferred by statute (Radio Communications of the Philippines, Inc.
v. Santiago L-29236, August 21, 1974, 58 SCRA 493; cited in Tayug Rural Bank v. Central Bank, L-
46158, November 28,1986,146 SCRA 120,130).

PREMISES CONSIDERED, this petition is hereby GRANTED.

SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-46158 November 28, 1986

TAYUG RURAL BANK, plaintiff-appellee,

vs.
CENTRAL BANK OF THE PHILIPPINES, defendant-appellant.

Bengzon, Bengzon, Villaroman & De Vera Law Office for plaintiff-appellee.

Evangelista, Bautista & Valdehuesa Law Office for defendant-appellant.

PARAS, J.:p

Submitted on May 20, 1977 for decision by this Court is this appeal from the decision dated
January 6, 1971 rendered by the Court of First Instance of Manila, Branch III in Civil Case No.
76920, the decretal portion of which states as follows:
 WHEREFORE, judgment is rendered for the plaintiff on the complaint and the
defendant is ordered to further credit the plaintiff the amounts collected as
10% penalty in the sum of P19,335.88 or up to July 15, 1969 and to refrain from
collecting the said 10% penalty on the remaining past due loans of plaintiff
with the defendant.

With respect to defendant's counterclaim, judgment is hereby rendered against

the plaintiff and the defendant is ordered to pay the Central Bank of the
Philippines the outstanding balance of its past overdue accounts in the sum of
P444,809,45 plus accrued interest at the rate of 1/2 of 1 % per annum with
respect to the promissory notes (Annexes 1 to 1-E of defendant's Answer) and
2-1/2% per annum with respect to the promissory notes (Annexes 1-f to 1-i of
the Answer). From this amount shall be deducted the sum of P19,335.88
collected as 10% penalty.

The facts of the case based on the parties' stipulation of facts (Record on Appeal p. 67), are
as follows:

Plaintiff-Appellee, Tayug Rural Bank, Inc., is a banking corporation in Tayug, Pangasinan.

During the period from December 28, 1962 to July 30, 1963, it obtained thirteen (13) loans
from Defendant-Appellant, Central Bank of the Philippines, by way of rediscounting, at the
rate of 1/2 of 1% per annum from 1962 to March 28, 1963 and thereafter at the rate of 2-1/2%
per anum. The loans, amounting to P813,000.00 as of July 30, 1963, were all covered by
corresponding promissory notes prescribing the terms and conditions of the aforesaid loans
(Record on Appea, pp. 15-53). As of July 15, 1969, the outstanding balance was P 444,809.45
(Record on Appeal, p. 56).

On December 23, 1964, Appellant, thru the Director of the Department of Loans and Credit,
issued Memorandum Circular No. DLC-8, informing all rural banks that an additional penalty
interest rate of ten per cent (10%) per annum would be assessed on all past due loans
beginning January 4, 1965. Said Memorandum Circular was actually enforced on all rural
banks effective July 4, 1965.

On June 27, 1969, Appellee Rural Bank sued Appellant in the Court of First Instance of
Manila, Branch III, to recover the 10% penalty imposed by Appellant amounting to P16,874.97,
as of September 27, 1968 and to restrain Appellant from continuing the imposition of the
penalty. Appellant filed a counterclaim for the outstanding balance and overdue accounts of
Appellee in the total amount of P444,809.45 plus accrued interest and penalty at 10% per
annum on the outstanding balance until full payment. (Record on Appeal, p. 13). Appellant
justified the imposition of the penalty by way of affirmative and special defenses, stating that
it was legally imposed under the provisions of Section 147 and 148 of the Rules and
Regulations Governing Rural Banks promulgated by the Monetary Board on September 5,
1958, under authority of Section 3 of Republic Act No. 720, as amended (Record on Appeal, p.
8, Affirmative and Special Defenses Nos. 2 and 3).

In its answer to the counterclaim, Appellee prayed for the dismissal of the counterclaim,
denying Appellant's allegations stating that if Appellee has any unpaid obligations with
Appellant, it was due to the latter's fault on account of its flexible and double standard policy
in the granting of rediscounting privileges to Appellee and its subsequent arbitrary and illegal
imposition of the 10% penalty (Record on Appeal, p. 57). In its Memorandum filed on
November 11, 1970, Appellee also asserts that Appellant had no basis to impose the penalty
interest inasmuch as the promissory notes covering the loans executed by Appellee in favor
of Appellants do not provide for penalty interest rate of 10% per annum on just due loans
beginning January 4, 1965 (Record on Appeal p. 96).

The lower court, in its Order dated March 3, 1970, stated that "only a legal question has been
raised in the pleadings" and upholding the stand of plaintiff Rural Bank, decided the case in
its favor. (Rollo, p. 34).

Appellant appealed the decision of the trial court to the Court of Appeals, for determination of
questions of facts and of law. However, in its decision promulgated April 13, 1977, the Court
of Appeals, finding no controverted facts and taking note of the statement of the lower court
in its pre-trial Order dated March 3, 1970 that only a legal question has been raised in the
pleadings, (Record on Appeal, p. 61), ruled that the resolution of the appeal will solely depend
on the legal issue of whether or not the Monetary Board had authority to authorize Appellant
Central Bank to impose a penalty rate of 10% per annum on past due loans of rural banks
which had failed to pay their accounts on time and ordered the certification of this case to
this Court for proper determination (Rollo, pp. 34-35).

On April 20, 1977, the entire record of the case was forwarded to this Court (Rollo, p. 36). In
the resolution of May 20, 1977, the First Division of this Court, ordered the case docketed and
as already stated declared the same submitted for decision (Rollo, p. 38).

In its Brief, Appellant assigns the following errors:

I. THE LOWER COURT ERRED IN HOLDING THAT IT IS BEYOND

THE REACH OF THE MONETARY BOARD TO METE OUT
PENALTIES ON PAST DUE LOANS OF RURAL BANKS
ESPECIALLY SINCE NO PENAL CLAUSE HAS BEEN INCLUDED
IN THE PROMISSORY NOTES.

II. THE LOWER COURT ERRED IN HOLDING THAT THE

IMPOSITION OF THE PENALTY IS AN IMPAIRMENT OF THE
OBLIGATION OF CONTRACT WITHOUT DUE PROCESS.

III. THE LOWER COURT ERRED IN NOT FINDING JUDGMENT

AGAINST PLAINTIFF FOR 10% COST OF COLLECTION OF THE
PROMISSORY NOTE AS PROVIDED THEREIN.

It is undisputed that no penal clause has been included in the promissory notes. For this
reason, the trial court is of the view that Memorandum Circular DLC-8 issued on December
23, 1964 prescribing retroactive effect on all past due loans, impairs the obligation of contract
and deprives the plaintiff of its property without due process of law. (Record on Appel, p. 40).

On the other hand appellant without opposing appellee's right against impairment of
contracts, contends that when the promissory notes were signed by appellee, it was
chargeable with knowledge of Sections 147 and 148 of the rules and regulations authorizing
the Central Bank to impose additional reasonable penalties, which became part of the
agreement. (ibid).

Accordingly, the issue is reduced to the sole question as to whether or not the Central Bank
can validly impose the 10% penalty on Appellee's past overdue loans beginning July 4, 1965,
by virtue of Memorandum Circular No. DLC-8 dated December 23, 1964.
The answer is in the negative.

Memorandum Circular No. DLC-8 issued by the Director of Appellant's Department of Loans
and Credit on December 23, 1964, reads as follows:

Pursuant to Monetary Board Resolution No. 1813 dated December 18, 1964,
and in consonance with Section 147 and 148 of the Rules and Regulations
Governing Rural Banks concerning the responsibility of a rural bank to remit
immediately to the Central Bank payments received on papers rediscounted
with the latter including the loan value of rediscounted papers as they mature,
and to liquidate fully its maturing loan obligations with the Central Bank,
personal checks, for purposes of repayment, shall considered only after such
personal checks shall have been honored at clearing.

In addition, rural banks which shall default in their loan obligations, thus
incurring past due accounts with the Central Bank, shall be assessed an
additional penalty interest rate of ten per cent (10%) per annum on such past
due accounts with the Central Bank over and above the customary interest
rate(s) at which such loans were originally secured from the Central Bank.
(Record on Appeal, p. 135).

The above-quoted Memorandum Circular was issued on the basis of Sections 147 and 148 of
the Rules and Regulations Governing Rural Banks of the Philippines approved on September
5, 1958, which provide:

Section 147. Duty of Rural Bank to turn over payment received for papers
discounted or used for collateral. — A Rural Bank receiving any payment on
account of papers discounted or used for collateral must turn the same over to
the creditor bank before the close of the banking day next following the receipt
of payment, as long as the aggregate discounting on loan amount is not fully
paid, unless the Rural Bank substitutes the same with another eligible paper
with at least the same or earlier maturity and the same or greater value.

A Rural Bank failing to comply with the provisions of the preceding paragraph
shall ipso facto lose its right to the rediscounting or loan period, without
prejudice to the Central Bank imposing additional reasonable penalties,
including curtailment or withdrawal of financial assistance.

Sec. 148. Default and other violations of obligation by Rural Bank, effect. — A
Rural Bank becomes in default upon the expiration of the maturity period of its
note, or that of the papers discounted or used as collateral, without the
necessity of demand.

A Rural Bank incurring default, or in any other manner, violating any of the
stipulations in its note, shall suffer the consequences provided in the second
paragraph of the preceding section. (Record on Appeal, p. 136.)

The "Rules and Regulations Governing Rural Banks" was published in the Official Gazette, 55
O.G., on June 13, 1959, pp. 5186-5289. It is by virtue of these same Rules that Rural Banks re-
discount their loan papers with the Central Bank at 2-1/2% interest per annum and in turn
lend the money to the public at 12% interest per annum (Defendant's Reply to Plaintiff's
Memorandum, Record on Appeal, p. 130).
Appellant maintains that it is pursuant to Section 3 of R.A. No. 720, as amended, that the
Monetary Board has adopted the set of Rules and Regulations Governing Rural Banks. It
reads:

SEC. 3. In furtherance of this policy, the Monetary Board of the Central Bank of
the Philippines shall formulate the necessary rules and regulations governing
the establishment and operatives of Rural Banks for the purpose of providing
adequate credit facilities to small farmers and merchants, or to cooperatives of
such farmers or merchants and to supervise the operation of such banks.

The specific provision under the law claimed as basis for Sections 147 and 148 of the Rules
and Regulations Governing Rural Banks, that is, on Appellant's authority to extend loans to
Rural Banks by way of rediscounting is Section 13 of R.A. 720, as amended, which provides:

SEC. 13. In an emergency or when a financial crisis is imminent the Central

Bank may give a loan to any Rural Bank against assets of the Rural Bank
which may be considered acceptable by a concurrent vote of at least, five
members of the Monetary Board.

In normal times, the Central Bank may re-discount against papers evidencing a
loan granted by a Rural Bank to any of its customers which can be liquefied
within a period of two hundred and seventy days: PROVIDED, HOWEVER, That
for the purpose of implementing a nationwide program of agricultural and
industrial development, Rural Banks are hereby authorized under such terms
and conditions as the Central Bank shall prescribe to borrow on a medium or
long term basis, funds that the Central Bank or any other government
financing institutions shall borrow from the International Bank for
Reconstruction and Development or other international or foreign lending
institutions for the specific purpose of financing the above stated agricultural
and industrial program. Repayment of loans obtained by the Central Bank of
the Philippines or any other government financing institution from said foreign
lending institutions under this section shall be guaranteed by the Republic of
the Philippines.

As to the supervising authority of the Monetary Board of the Central Bank over Rural Banks,
the same is spelled-out under Section 10 of R.A. 720, as follows:

SEC. 10. The power to supervise the operation of any Rural Bank by the
Monetary Board of the Central Bank as herein indicated, shall consist in
placing limits to the maximum credit allowed any individual borrower; in
prescribing the interest rate; in determining the loan period and loan
procedure; in indicating the manner in which technical assistance shall be
extended to Rural Banks; in imposing a uniform accounting system and
manner of keeping the accounts and records of the Rural Banks; in
undertaking regular credit examination of the Rural Banks: in instituting
periodic surveys of loan and lending procedures, audits, test check of cash
and other transactions of the Rural Banks; in conducting training courses for
personnel of Rural Banks; and, in general in supervising the business
operation of the Rural Banks.

Nowhere in any of the above-quoted pertinent provisions of R.A. 720 nor in any other
provision of R.A. 720 for that matter, is the monetary Board authorized to mete out on rural
banks an additional penalty rate on their past due accounts with Appellant. As correctly
stated by the trial court, while the Monetary Board possesses broad supervisory powers,
nonetheless, the retroactive imposition of administrative penalties cannot be taken as a
measure supervisory in character. (Record on Appeal, p. 141).

Administrative rules and regulations have the force and effect of law (Valerio v. Hon.
Secretary of Agriculture and Natural Resources, 7 SCRA 719; Commissioner of Civil Service
v. Cruz, 15 SCRA 638; R.B. Industrial Development Company, Ltd. v. Enage, 24 SCRA 365;
Director of Forestry v. Munoz, 23 SCRA 1183; Gonzalo Sy v. Central Bank of the Philippines,
70 SCRA 570).

There are, however, limitations to the rule-making power of administrative agencies. A rule
shaped out by jurisprudence is that when Congress authorizes promulgation of
administrative rules and regulations to implement given legislation, all that is required is that
the regulation be not in contradiction with it, but conform to the standards that the law
prescribes (Director of Forestry v. Munoz, 23 SCRA 1183). The rule delineating the extent of
the binding force to be given to administrative rules and regulations was explained by the
Court in Teoxon v. Member of the Board of Administrators (33 SCRA 588), thus: "The
recognition of the power of administrative officials to promulgate rules in the implementation
of the statute, as necessarily limited to what is provided for in the legislative enactment, may
be found as early as 1908 in the case of United States v. Barrias (11 Phil. 327) in 1914 U.S. v.
Tupasi Molina (29 Phil. 119), in 1936 People v. Santos(63 Phil. 300), in 1951 Chinese Flour
Importers Ass. v. Price Stabilization Board (89 Phil. 439), and in 1962 Victorias Milling Co.,
Inc. v. Social Security Commission (4 SCRA 627). The Court held in the same case that "A
rule is binding on the courts so long as the procedure fixed for its promulgation is followed
and its scope is within the statute granted by the legislature, even if the courts are not in
agreement with the policy stated therein or its innate wisdom ...." On the other hand,
"administrative interpretation of the law is at best merely advisory, for it is the courts that
finally determine what the law means." Indeed, it cannot be otherwise as the Constitution
limits the authority of the President, in whom all executive power resides, to take care that
the laws be faithfully executed. No lesser administrative, executive office, or agency then can,
contrary to the express language of the Constitution, assert for itself a more extensive
prerogative. Necessarily, it is bound to observe the constitutional mandate. There must be
strict compliance with the legislative enactment. The rule has prevailed over the years, the
latest restatement of which was made by the Court in the case of Bautista v. Junio (L-50908,
January 31, 1984, 127 SCRA 342).

In case of discrepancy between the basic law and a rule or regulation issued to implement
said law, the basic law prevails because said rule or regulation cannot go beyond the terms
and provisions of the basic law (People v. Lim, 108 Phil. 1091). Rules that subvert the statute
cannot be sanctioned (University of St. Tomas v. Board of Tax Appeals, 93 Phil. 376; Del Mar
v. Phil. Veterans Administration, 51 SCRA 340). Except for constitutional officials who can
trace their competence to act to the fundamental law itself, a public official must locate in the
statute relied upon a grant of power before he can exercise it. Department zeal may not be
permitted to outrun the authority conferred by statute (Radio Communications of the
Philippines, Inc. v. Santiago, L-29236, August 21, 1974, 58 SCRA 493).

When promulgated in pursuance of the procedure or authority conferred upon the

administrative agency by law, the rules and regulations partake of the nature of a statute, and
compliance therewith may be enforced by a penal sanction provided in the law (Victorias
Milling Co., Inc. v. Social Security Commission, 114 Phil. 555; People v. Maceren, L-32166,
October 18, 1977, 79 SCRA 462; Daza v. Republic, L-43276, September 28, 1984, 132 SCRA
267). Conversely, the rule is likewise clear. Hence an administrative agency cannot impose a
penalty not so provided in the law authorizing the promulgation of the rules and regulations,
much less one that is applied retroactively.

The records show that DLC Form No. 11 (Folder of Exhibits, p. 16) was revised December 23,
1964 to include the penal clause, as follows:

In the event that this note becomes past due, the undersigned shall pay a
penalty at the rate of _____ per cent ( ) per annum on such past due account
over and above the interest rate at which such loan was originally secured
from the Central Bank.

Such clause was not a part of the promissory notes executed by Appellee to secure its loans.
Appellant inserted the clause in the revised DLC Form No. 11 to make it a part of the
contractual obligation of rural banks securing loans from the Central Bank, after December
23, 1964. Thus, while there is now a basis for the imposition of the 10% penalty rate on
overdue accounts of rural banks, there was none during the period that Appellee contracted
its loans from Appellant, the last of which loan was on July 30, 1963. Surely, the rule cannot
be given retroactive effect.

Finally, on March 31, 1970, the Monetary Board in its Resolution No. 475 effective April 1,
1970, revoked its Resolution No. 1813, dated December 18, 1964 imposing the questioned
10% per annum penalty rate on past due loans of rural banks and amended sub-paragraph
(a), Section 10 of the existing guidelines governing rural banks' applications for a loan or
rediscount, dated May 7, 1969 (Folder of Exhibits, p. 19). As stated by the trial court, this
move on the part of the Monetary Board clearly shows an admission that it has no power to
impose the 10% penalty interest through its rules and regulations but only through the terms
and conditions of the promissory notes executed by the borrowing rural banks. Appellant
evidently hoped that the defect could be adequately accomplished by the revision of DLC
Form No. 11.

The contention that Appellant is entitled to the 10% cost of collection in case of suit and
should therefore, have been awarded the same by the court below, is well taken. It is
provided in all the promissory notes signed by Appellee that in case of suit for the collection
of the amount of the note or any unpaid balance thereof, the Appellee Rural Bank shall pay
the Central Bank of the Philippines a sum equivalent to ten (10%) per cent of the amount
unpaid not in any case less than five hundred (P500.00) pesos as attorney's fees and costs of
suit and collection. Thus, Appellee cannot be allowed to come to Court seeking redress for
an wrong done against it and then be allowed to renege on its corresponding obligations.

PREMISES CONSIDERED, the decision of the trial court is hereby AFFIRMED with
modification that Appellee Rural Bank is ordered to pay a sum equivalent to 10% of the
outstanding balance of its past overdue accounts, but not in any case less than P500.00 as
attorney's fees and costs of suit and collection.

SO ORDERED.

G.R. No. L-23004 June 30, 1965

MAKATI STOCK EXCHANGE, INC., petitioner,
vs.
SECURITIES AND EXCHANGE COMMISSION and MANILA STOCK EXCHANGE, respondents.

Hermenegildo B. Reyes for petitioner.

Office of the Solicitor General for respondent Securities and Exchange Commission.
Norberto J. Quisumbing and Emma Quisumbing-Fernando for respondent Manila Stock Exchange.

BENGZON, C.J.:

This is a review of the resolution of the Securities and Exchange Commission which would deny the
Makati Stock Exchange, Inc., permission to operate a stock exchange unless it agreed not to list for
trading on its board, securities already listed in the Manila Stock Exchange.

Objecting to the requirement, Makati Stock Exchange, Inc. contends that the Commission has no
power to impose it and that, anyway, it is illegal, discriminatory and unjust.

Under the law, no stock exchange may do business in the Philippines unless it is previously
registered with the Commission by filing a statement containing the information described in Sec. 17
of the Securities Act (Commonwealth Act 83, as amended).

It is assumed that the Commission may permit registration if the section is complied with; if not, it
may refuse. And there is now no question that the section has been complied with, or would be
complied with, except that the Makati Stock Exchange, upon challenging this particular requirement
of the Commission (rule against double listing) may be deemed to have shown inability or refusal to
abide by its rules, and thereby to have given ground for denying registration. [Sec. 17 (a) (1) and
(d)].

Such rule provides: "... nor shall a security already listed in any securities exchange be listed anew
in any other securities exchange ... ."

The objection of Makati Stock Exchange, Inc., to this rule is understandable. There is actually only
one securities exchange — The Manila Stock Exchange — that has been operating alone for the
past 25 years; and all — or presumably all — available or worthwhile securities for trading in the
market are now listed there. In effect, the Commission permits the Makati Stock Exchange, Inc., to
deal only with other securities. Which is tantamount to permitting a store to open provided it sells
only those goods not sold in other stores. And if there's only one existing store, 1 the result is a
monopoly.

It is not farfetched to assert — as petitioner does 2 that for all practical purposes, the Commission's
order or resolution would make it impossible for the Makati Stock Exchange to operate. So, its
"permission" amounted to a "prohibition."

Apparently, the Commission acted "in the public interest." 3 Hence, it is pertinent to inquire whether
the Commission may "in the public interest" prohibit (or make impossible) the establishment of
another stock exchange (besides the Manila Stock Exchange), on the ground that the operation of
two or more exchanges adversely affects the public interest.

At first glance, the answer should be in the negative, because the law itself contemplated, and,
therefore, tacitly permitted or tolerated at least, the operation of two or more exchanges.
 Wherever two or more exchanges exist, the Commission, by order, shall require and enforce
uniformity of trading regulations in and/or between said exchanges. [Emphasis Ours] (Sec.
28b-13, Securities Act.)

In fact, as admitted by respondents, there were five stock exchanges in Manila, before the Pacific
War (p. 10, brief), when the Securities Act was approved or amended. (Respondent Commission
even admits that dual listing was practiced then.) So if the existence of more than one exchange
were contrary to public interest, it is strange that the Congress having from time to time enacted
legislation amending the Securities Act, 4 has not barred multiplicity of exchanges.

Forgetting for the moment the monopolistic aspect of the Commission's resolution, let us examine
the authority of the Commission to promulgate and implement the rule in question.

It is fundamental that an administrative officer has only such powers as are expressly granted to him
by the statute, and those necessarily implied in the exercise thereof.

In its brief and its resolution now subject to review, the Commission cites no provision expressly
supporting its rule. Nevertheless, it suggests that the power is "necessary for the execution of the
functions vested in it"; but it makes no explanation, perhaps relying on the reasons advanced in
support of its position that trading of the same securities in two or more stock exchanges, fails to
give protection to the investors, besides contravening public interest. (Of this, we shall treat later) .

On the legality of its rule, the Commission's argument is that: (a) it was approved by the Department
Head — before the War; and (b) it is not in conflict with the provisions of the Securities Act. In our
opinion, the approval of the Department, 5 by itself, adds no weight in a judicial litigation; and the test
is not whether the Act forbids the Commission from imposing a prohibition, but whether
it empowers the Commission to prohibit. No specific portion of the statute has been cited to uphold
this power. It is not found in sec. 28 (of the Securities Act), which is entitled "Powers (of the
Commission) with Respect to Exchanges and Securities." 6

According to many court precedents, the general power to "regulate" which the Commission has
(Sec. 33) does not imply authority to prohibit." 7

The Manila Stock Exchange, obviously the beneficiary of the disputed rule, contends that the power
may be inferred from the express power of the Commission to suspend trading in a security, under
said sec. 28 which reads partly:

And if in its opinion, the public interest so requires, summarily to suspend trading in any
registered security on any securities exchange ... . (Sec. 28[3], Securities Act.)

However, the Commission has not acted — nor claimed to have acted — in pursuance of such
authority, for the simple reason that suspension under it may only be for ten days. Indeed, this
section, if applicable, precisely argues against the position of the Commission because the
"suspension," if it is, and as applied to Makati Stock Exchange, continues for an indefinite period, if
not forever; whereas this Section 28 authorizes suspension for ten days only. Besides, the
suspension of trading in the security should not be on one exchange only, but on all exchanges;
bearing in mind that suspension should be ordered "for the protection of investors" (first par., sec.
28) in all exchanges, naturally, and if "the public interest so requires" [sec. 28(3)].

This brings up the Commission's principal conclusions underlying its determination viz.: (a) that the
establishment of another exchange in the environs of Manila would be inimical to the public interest;
and (b) that double or multiple listing of securities should be prohibited for the "protection of the
investors."

(a) Public Interest — Having already adverted to this aspect of the matter, and the emerging
monopoly of the Manila Stock Exchange, we may, at this juncture, emphasize that by restricting free
competition in the marketing of stocks, and depriving the public of the advantages thereof the
Commission all but permits what the law punishes as monopolies as "crimes against public
interest." 8

"A stock exchange is essentially monopolistic," the Commission states in its resolution (p. 14-a,
Appendix, Brief for Petitioner). This reveals the basic foundation of the Commission's process of
reasoning. And yet, a few pages afterwards, it recalls the benefits to be derived "from the existence
of two or more exchanges," and the desirability of "a healthy and fair competition in the securities
market," even as it expresses the belief that "a fair field of competition among stock exchanges
should be encouraged only to resolve, paradoxically enough, that Manila Stock Exchange shall, in
effect, continue to be the only stock exchange in Manila or in the Philippines.

"Double listing of a security," explains the Commission, "divides the sellers and the buyers, thus
destroying the essence of a stock exchange as a two-way auction market for the securities, where
all the buyers and sellers in one geographical area converge in one defined place, and the bidders
compete with each other to purchase the security at the lowest possible price and those seeking to
sell it compete with each other to get the highest price therefor. In this sense, a stock exchange is
essentially monopolistic."

Inconclusive premises, for sure. For it is debatable whether the buyer of stock may get the lowest
price where all the sellers assemble in only one place. The price there, in one sale, will tend to fix the
price for the succeeding, sales, and he has no chance to get a lower price except at another stock
exchange. Therefore, the arrangement desired by the Commission may, at most, be beneficial to
sellers of stock — not to buyers — although what applies to buyers should obtain equally as to
sellers (looking for higher prices). Besides, there is the brokerage fee which must be considered. Not
to mention the personality of the broker.

(b) Protection of investors. — At any rate, supposing the arrangement contemplated is beneficial to
investors (as the Commission says), it is to be doubted whether it is "necessary" for their "protection"
within the purview of the Securities Act. As the purpose of the Act is to give adequate and effective
protection to the investing public against fraudulent representations, or false promises and the
imposition of worthless ventures, 9 it is hard to see how the proposed concentration of the market has
a necessary bearing to the prevention of deceptive devices or unlawful practices. For it is not mere
semantics to declare that acts for the protection of investors are necessarily beneficial to them; but
not everything beneficial to them is necessary for their protection.

And yet, the Commission realizes that if there were two or more exchanges "the same security may
sell for more in one exchange and sell for less in the other. Variance in price of the same security
would be the rule ... ." Needless to add, the brokerage rates will also differ.

This, precisely, strengthens the objection to the Commission's ruling. Such difference in prices and
rates gives the buyer of shares alternative options, with the opportunity to invest at lower expense;
and the seller, to dispose at higher prices. Consequently, for the investors' benefit (protection is not
the word), quality of listing 10 should be permitted, nay, encouraged, and other exchanges allowed to
operate. The circumstance that some people "made a lot of money due to the difference in prices of
securities traded in the stock exchanges of Manila before the war" as the Commission noted,
furnishes no sufficient reason to let one exchange corner the market. If there was undue
manipulation or unfair advantage in exchange trading the Commission should have other means to
correct the specific abuses.

Granted that, as the Commission observes, "what the country needs is not another" market for
securities already listed on the Manila Stock Exchange, but "one that would focus its attention and
energies on the listing of new securities and thus effectively help in raising capital sorely needed by
our ... unlisted industries and enterprises."

Nonetheless, we discover no legal authority for it to shore up (and stifle) free enterprise and
individual liberty along channels leading to that economic desideratum. 11

The Legislature has specified the conditions under which a stock exchange may legally obtain a
permit (sec. 17, Securities Act); it is not for the Commission to impose others. If the existence of two
competing exchanges jeopardizes public interest — which is doubtful — let the Congress
speak. 12 Undoubtedly, the opinion and recommendation of the Commission will be given weight by
the Legislature, in judging whether or not to restrict individual enterprise and business opportunities.
But until otherwise directed by law, the operation of exchanges should not be so regulated as
practically to create a monopoly by preventing the establishment of other stock exchanges and
thereby contravening:

(a) the organizers' (Makati's) Constitutional right to equality before the law;

(b) their guaranteed civil liberty to pursue any lawful employment or trade; and

(c) the investor's right to choose where to buy or to sell, and his privilege to select the
brokers in his employment. 13

And no extended elucidation is needed to conclude that for a licensing officer to deny license solely
on the basis of what he believes is best for the economy of the country may amount to regimentation
or, in this instance, the exercise of undelegated legislative powers and discretion.

Thus, it has been held that where the licensing statute does not expressly or impliedly authorize the
officer in charge, he may not refuse to grant a license simply on the ground that a sufficient number
of licenses to serve the needs of the public have already been issued. (53 C.J.S. p. 636.)

Concerning res judicata. — Calling attention to the Commission's order of May 27, 1963, which
Makati Stock did not appeal, the Manila Stock Exchange pleads the doctrine of res judicata. 14 (The
order now reviewed is dated May 7, 1964.)

It appears that when Makati Stock Exchange, Inc. presented its articles of incorporation to the
Commission, the latter, after making some inquiries, issued on May 27, 1963, an order reading as
follows.

Let the certificate of incorporation of the MAKATI STOCK EXCHANGE be issued, and if the
organizers thereof are willing to abide by the foregoing conditions, they may file the proper
application for the registration and licensing of the said Exchange.

In that order, the Commission advanced the opinion that "it would permit the establishment and
operation of the proposed Makati Stock Exchange, provided ... it shall not list for trading on its board,
securities already listed in the Manila Stock Exchange ... ."
Admittedly, Makati Stock Exchange, Inc. has not appealed from that order of May 27, 1963. Now,
Manila Stock insists on res judicata.

Why should Makati have appealed? It got the certificate of incorporation which it wanted. The
condition or proviso mentioned would only apply if and when it subsequently filed the application for
registration as stock exchange. It had not yet applied. It was not the time to question the
condition; 15 Makati was still exploring the convenience of soliciting the permit to operate subject to
that condition. And it could have logically thought that, since the condition did not affect its articles of
incorporation, it should not appeal the order (of May 27, 1963) which after all, granted the certificate
of incorporation (corporate existence) it wanted at that time.

And when the Makati Stock Exchange finally found that it could not successfully operate with the
condition attached, it took the issue by the horns, and expressing its desire for registration and
license, it requested that the condition (against double listing) be dispensed with. The order of the
Commission denying, such request is dated May 7, 1964, and is now under, review.

Indeed, there can be no valid objection to the discussion of this issue of double listing
now, 16 because even if the Makati Stock Exchange, Inc. may be held to have accepted the
permission to operate with the condition against double listing (for having failed to appeal the order
of May 27, 1963), still it was not precluded from afterwards contesting 17 the validity of such condition
or rule:

(1) An agreement (which shall not be construed as a waiver of any constitutional right or any right to
contest the validity of any rule or regulation) to comply and to enforce so far as is within its powers,
compliance by its members, with the provisions of this Act, and any amendment thereto, and any
rule or regulation made or to be made thereunder. (See. 17-a-1, Securities Act [Emphasis Ours].)

Surely, this petition for review has suitably been coursed. And making reasonable allowances for the
presumption of regularity and validity of administrative action, we feel constrained to reach the
conclusion that the respondent Commission possesses no power to impose the condition of the rule,
which, additionally, results in discrimination and violation of constitutional rights.

ACCORDINGLY, the license of the petition to operate a stock exchange is approved without such
condition. Costs shall be paid by the Manila Stock Exchange. So ordered.

G.R. No. 90482 August 5, 1991

REPUBLIC OF THE PHILIPPINES, acting through the SUGAR REGULATORY

ADMINISTRATION, and REPUBLIC PLANTERS BANK, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, 15th Division, THE HONORABLE CORONA IBAY-
SOMERA, in her official capacity as Presiding Judge of the Regional Trial Court, National
Capital Region, Branch 26, Manila, JORGE C. VICTORINO and JAIME K. DEL ROSARIO, in
their official capacities as RTC Deputy Sheriffs of Manila, ROGER Z. REYES, ERNESTO L.
TREYES, JR., and EUTIQUIO M. FUDOLIN, respondents.

Enrique V. Olmedo for Independent Sugar Farmers, Inc.

Reyes, Treyes & Fudolin Law Firm for respondents.

DAVIDE, JR., J.:

This is an appeal by certiorari under Rule 45 of the Revised Rules of Court, with prayer for a
temporary restraining order or writ of preliminary injunction, filed on 25 October 1989 by the Office of
the Government Corporate Counsel (OGCC) in behalf of the Republic of the Philippines "acting
through the Sugar Regulatory Administration" (SRA) and the Republic Planters Bank (RPB) seeking
the review of the 13 October 1989 Decision of the Court of Appeals (15th Division) in CAGR No.
17188.

The assailed decision1 dismissed the petition for certiorari filed by Petitioners against herein public
respondents Judge and deputy sheriffs and private respondents for the nullification of the Orders of
respondent Judge of 13 March 1989, 21 March 1989 and 27 March 1989 in Civil Case No. 86-35880
of Branch 26 of the Regional Trial Court of Manila on the following grounds: (a) the funds upon
which the attorney's fees are sought to be executed now belong to the Republic of the Philippines
due to legal subrogation, (b) execution is not proper against the Republic which is not a party to the
case, (c) the issuance of a writ of execution would violate the Constitution since according to it no
money shall be paid out of the treasury except in pursuance to an appropriations made by law, and
(d) execution for attomey's fees is unwarranted.

Respondent Court of Appeals dismissed the petition for lack of merit principally because

(a) Under the compromise agreement petitioner (RPB) accepted the designation/appointment as
Trustee whose obligation is to pay; it received benefits by way of trustee's fees; it may not question
the right of private respondents to attorney's fees;

(b) Petitioner (SRA) may not lawfully bring an action on behalf of the Republic of the Philippines
since under Section 13 of Executive Order No. 18 dated 28 May 1986, which created it, it simply was
to take over the functions of the defunct PHILSUCOM; however, the latter was to remain a
judicial entity for three more years for the purpose of prosecuting and defending suits against it;
hence it is PHILSUCOM, being a party to the compromise agreement, which may properly contest
the right of private respondents to attomey's fees;

(c) The petition should have been filed through the Office of the Solicitor General OSG and not
through the (OGCC); neither the latter nor the (SRA) may lawfully represent the Government of the
Philippines in any suit or proceeding such as the present petition for administrative agencies may
only perform such powers and functions as may be authorized by the laws which created or gave
them existence; and

(d) The respondent judge did not commit any error of jurisdiction in issuing the questioned orders;
hence, the remedy should be appeal.

The facts which gave rise to said petition are summarized by the Court of Appeals as follows:

On May 16,1986, Republic Planters Bank (hereafter referred to as RPB), Zosimo Maravilla,
Rosendo de la Rama, Bibiano Sabino, Roberto Mascufiana and Ernesto Kramer "for
themselves and in representation of other sugar producers" filed a Complaint with the
respondent court, RTC Branch 26, docketed as C.C. 86-35880 "For Sum of Money and/or
Delivery of Personal Property with Restraining Order and/or Preliminary Injunction" against
the Philippine Sugar Commission (PHILSUCOM) and the National Sugar Trading
Corporation (NASUTRA) with the prayer:

WHEREFORE PREMISES CONSIDERED, it is respectfully prayed of this Honorable

Court that, after due hearing and trial, judgment be rendered in favor of Plaintiffs and
against Defendants ordering them to do the following:

1. To render a correct and faithful account of whatever amount of United States

dollar accounts/deposits in different banks, domestic and foreign, being held in
agents and/or representatives.

2. To render a correct and faithful inventory of all the physical sugar stocks for crop
year 1984-85 presently remaining in the warehouses of the different sugar mills all
over the country.

3. To deliver or remit to the Plaintiffs any and all United States dollar
accounts/deposits in various banks, domestic or foreign, held in the name of
Defendants, their subsidiaries, conducts (sic), agents and/or representatives.

4. To deliver the entire remaining physical sugar stocks corresponding to crop year
1984-85 presently remaining in the warehouses of the different sugar mills all over
the country in favor of Plaintiffs who were unlawfully deprived of their possession and
control by Defendants, to be applied and deducted from Defendant's liability to
Plaintiffs for the unaccounted sugar for crop year 1984-85.

5. To jointly and severally pay Plaintiffs-Producers all interests and penalties

imposed by Assignee-banks/creditors for accounts covered by unpaid sugar quedans
for crop year 1984-85.

6. To jointly and severally pay Plaintiffs claims for moral, compensatory and
exemplary damages in such accounts to be determined in the course of the trial.

7. To jointly and severally pay for the attorney's fees of twenty percent (20%) based
on the total amount that may be recovered.

8. To jointly and severally pay for the costs and litigation expenses incurred by the
Plaintiffs.

Plaintiffs likewise pray that, in order to prevent grave and irreparable injury, this Honorable
Court shall issue a writ of preliminary injunction enjoining and/or prohibiting the Defendants,
their officers and/or agents from transferring, releasing or in any manner disposing of all U.S.
dollar deposits/accounts held in the name of Defendants, its subsidiaries, conduits agents
and/or representatives in the different banks, domestic and foreign, including the physical
sugar corresponding to crop year 1984-85 presently remaining in the warehouses of the
different sugar mills all over the country after requiring the Plaintiffs to post a bond that may
be determined by the Honorable Court to answer for the damages in the event judgment will
be rendered in Defendant's favor. Furthermore, Plaintiffs pray that a Restraining Order be
immediately issued for the purpose of enjoining the Defendants from committing and/or
proceeding with the foregoing acts, pending hearing of the application for a writ of
preliminary injunction.
 Plaintiffs further pray for such other reliefs and remedies, just and equitable under the
premises.

Before PHILSUCOM and NASUTRA could answer, a Compromise Agreement dated May
23, 1986 was submitted by the parties which the lower court approved and based on it, the
Judgment dated June 2,1986 (Annex "B", Petition, Id., pp. 22-36) was issued. A motion for
the issuance of writ of execution was filed (Annex "C", Petition, Id., pp, 37-50). PHILSUCOM
and NASUTRA filed their "Comment and Opposition (To Motion for Issuance of Writ of
Execution)" (Annex D Petition, Id., pp. 51- 62). A Reply was filed by the plaintiffs (Annex
"E", Id., pp. 63- 72) and a Rejoinder was also filed by the defendants (Annex "E",
Petition, Id., pp. 73-78). The lower court issued the Order dated March 13, 1989 which
dismissed the separate petitions for relief from judgment filed by Franklin Fuentebella,
George Lacson, Fernando Ballesteros, and Antonio Lopez in one petition; Romeo Guanzon
as sugar producer and president of National Federation of Sugar Cane Planters; PASSI
(Iloilo) Sugar Central, Inc., represented by Romeo Villavicencio; the Independent Sugar
Planters represented by Corazon Sagimalet (In a Motion for Intervention which substituted
as a Petition for Relief from Judgment); and Zosimo Maravilla, Rosendo dela Rama and
Bibiano Sabino (Annex "G", Petition, Id., pp. 79-98). This Order dated March 13, 1989 (which
as aforesaid, dismissed the petitions for relief from judgment) is the first of the orders now
being assailed.

On March 21, 1989, the lower court issued the second of the assailed orders which granted
a second motion to resolve a pending motion for issuance of a writ of execution and allowed
the issuance of an alias writ of execution in words, thus:

Let an alias writ of execution be issued for the final implementation of the Judgment
on Compromise Agreement, dated June 2, 1986, the only remaining provision of said
judgment is the 10% attorney's fees of counsels for the plaintiffs (Paragraph 12 sub-
section Annex "H", Petition, Id., pp. 99-100).

Correspondingly, on that same date March 21, 1989, RTC Mala Deputy Sheriff Jaime K. del
Rosario issued a "Notice of Delivery of Money" asking the RPB to "pay in cash the 10% of
P45,293,552.60 to Attys. Roger Reyes, Ernesto Treyes, Jr. and Eutiquio Fudolin, Jr. ...
immediately upon receipt of this notice" (Annex "I", Petition, Id., p. 101).

And on March 27, 1989, the third of the questioned orders was issued by the lower court, in
response to the "Ex-Parte Motion to Require Officers of Trustee Republic Planters Bank to
Deliver Amount Subject of Alias Writ of Execution", requiring the officers of the RPB named
therein to "appear before the Court on March 29,1989 at 10:30 in the morning to explain why
they should not be cited for contempt of court for defying ... the alias writ of execution."
(Annex "J", Petition, Id. pp. 102-103).

The instant petition was filed in this court on March 29, 1989, ...

Parenthetically, it may also be added that, as stated in paragraph 15 of the instant petition, the
producers and producer organizations who filed various petitions for relief from the judgment based
on the compromise agreement have appealed to the Court of Appeals the Order of 13 March 1989
denying their petitions.2

In the instant petition petitioners limit their grounds to only two errors allegedly committed by
respondent Court of Appeals, namely: (a) it erred in holding that neither the OGCC nor the SRA can
represent the Government of the Philippines in the action before it and (b) it deviated from the
decision of the Ninth Division of said court in CAGR SP No. 11046 (Kramer, et al. vs. Hon. Doroteo,
Cañeba, et al. promulgated on 16 March 1987), which declared that there was no valid class suit
and the controversial compromise agreement did not extend to the 40,000 unnamed sugar
producers.3

In the resolution of 26 October 1989 We required respondents to comment on the petition and
issued a temporary restraining order directing respondent Judge to desist and refrain from further
proceeding in Civil Case No. 86-35880, entitled Republic Planters Bank, et al. vs. Philippine Sugar
Commission, et al.4

On 23 November 1989 petitioners filed a manifestation informing this Court that at 9:30 a.m. on 26
October 1989, private respondents, accompanied by respondents sheriff and a squad of police
Special Action Force, swooped upon RPB's Bacolod Branch and divested a teller of money from her
booth allegedly because the branch manager had instructed the bank personnel to close the bank
vault while the enforcement of the court order was being verified - with the head office in Manila; the
amount taken was P179,955.31; these acts were allegedly done by virtue of, among others, the
orders dated October 24 and 25, 1989 of respondent judge ordering the implementation of an alias
Writ of Execution dated 21 March 1989 and the Writ of Execution dated 21 March 1986; and
claiming that what was enforced was an expired writ.5

In Our resolution of 5 December 1989 respondents were required to comment on this manifestation.6

After motions for extension of time to file their Comments on the petition, separately filed by the
private respondents and the Solicitor General for the public respondents, were granted, the former
ultimately filed their Comment on 20 December 1989.7 The Solicitor General filed his Comment on 4
January 1990.8

In his Comment the Solicitor General maintains that the SRA has no legal personality to file the
instant petition in the name of the Republic of the Philippines for under its charter, Executive Order
No. 18, the SRA is not vested with legal capacity to sue. He further argues that the SRA was not a
party to the court-approved compromise agreement in Civil Case No. 8635880 which provided for
the questioned 10% attorney's fees; PHILSUCOM and NASUTRA, which were parties thereto, did
not file any action to annul the compromise agreement; that while Executive Order No. 18 abolished
the PHILSUCOM, the latter's juridical personality was to continue for three (3) years, during which
period it may prosecute and defend suits against it; and that, finally, even if SRA has the capacity to
sue, it cannot still bring any action on behalf of the Republic of the Philippines as this can be done
only by the Office of the Solicitor General per Section 1 of P.D. No. 478.

The Solicitor General likewise stresses that the interest of the national government in this case is
confined only to the amount remaining in RPB subject to legal subrogation; the judgment on the
compromise agreement had long become final and executory; and that no reversible error was
committed by respondent judge and respondent Court of Appeals.

Private respondents assert that the SRA and RPB do not have the legal authority to sue for and in
behalf of the Republic of the Philippines. In respect to the former, their conclusion is supported by
almost the same arguments as that asserted by the Solicitor General. As regards the RPB, they
maintain that it "is a government-controlled corporation engaged in the banking business with
corporate powers vested in a Board of Directors," hence, it is "legally untenable for such a banking
institution, even assuming that it is government-controlled, to initiate suits for and in behalf of the
Republic of the Philippines." p.171, Rollo). They further argued that petitioners have no legal
personality to initiate the instant petition for (a) SRA is not a party in the case before the trial court;
the only reason why it became involved was because of the contempt proceedings initiated by
private respondents against SRA's Arsenio Yulo, Carlos Ledesma and Bibiano Sabino for issuing
Sugar Orders No. 9 and 14; and that neither can it be presumed that SRA had substituted
defendants PHILSUCOM and the NASUTRA in the case as both continue to legally exist for the
purpose of prosecuting and defending suits in liquidation of its affairs; both did not file any petition for
relief from judgment questioning the validity of the judgment of the trial court approving the
compromise agreement; and that, moreover, RPB was a signatory to the Compromise Agreement as
a Trustee and, as such, it regarded itself as only a nominal party and in a series of pleadings it
recognized the final and executory nature of the decision approving the compromise agreement.

As to the second assigned error, private respondents pointed out that the Ninth Division of the Court
of Appeals did not rule in C.A.-G.R. No. 11046 that Civil Case No. 86-35880 before the trial court
was not a class suit, and whether or not it was a class suit was not an issue therein.

On 15 January 1990 petitioners filed a motion for leave to file consolidated reply, which We granted
in the resolution of 18 January 1990.9

On 18 January 1990 petitioners filed a Manifestation and Motion10 "wherein they informed the Court
that despite the temporary restraining order issued on 26 October 1989, respondent Judge, to whom
the Order was addressed, continued to hear the case, particularly on the whereabouts of 177,087.14
piculs of sugar for the crop year 1984-1985 allegedly stored in the different warehouses throughout
the country".

In the resolution of 30 January 199011 We required respondent judge to show cause why no
disciplinary action should be taken against her for failure to comply with the resolution of 26 October
1989 ordering her to refrain from further proceeding with Civil Case No. 86-35880 and to answer
why she should not be cited for contempt of court for such failure, within ten (10) days from notice.

On 8 March 1990 petitioners filed their Consolidated Reply to the Comment with Motion to Dismiss
filed by private respondents and the Comment of the Solicitor General.12

On 5 April 1990 private respondents filed a Rejoinder to the Consolidated Reply.13

On 16 April 1990 respondent judge, through the OSG, filed her Compliance as required by the
Resolution of 30 January 1990.14 She claims that she did not defy the temporary restraining order
issued by this Court on 26 October 1989 because the petitioners sought for the issuance of the
temporary restraining order to stop the enforcement of the decision of the respondent Court of
Appeals in CA GR No. 17188 dated October 13, 1989; hence, the temporary restraining order that
this Court issued "actually orders herein respondent judge to desist from enforcing the Decision of
the respondent Court of Appeals in CAGR No. 17188 which is the subject of the instant petition for
review". Consequently, she stresses, her 15 December 1989 order was not issued in defiance of the
restraining resolution; said order pertains exclusively to the whereabouts of the 177,087.14 piculs of
physical sugar for the crop year 1984-1985 and did not in any way attempt to enforce the questioned
decisions of the court a quo and the Court of Appeals to the prejudice of petitioner's right to appeal.

In Our resolution of 15 May 199015 We resolved to consider the comments of respondents as

Answers to the petition, give due course to the petition, require the parties to submit their respective
memoranda within thirty days from notice, and to note the compliance of respondent judge.

Petitioners filed their memorandum on 28 June 1990.16 Private respondents sent theirs by registered
mail on 22 August 1990 which this Court actually received on 8 September 1990.17 We shall now
take up the assigned errors.
 I.

The Court of Appeals correctly ruled that petitioner Sugar Regulatory Administration may not lawfully
bring an action on behalf of the Republic of the Philippines and that the Office of the Government
Corporate Counsel does not have the authority to represent said petitioner in this case.

Executive Order No. 18, enacted on 28 May 1986 and which took effect immediately, abolished the
Philippine Sugar Commission (PHILSUCOM) and created the Sugar Regulatory Administration
(SRA) which shall be under the Office of the President. However, under the third paragraph of
Section 13 thereof, the PHILSUCOM was allowed to continue as a juridical entity for three (3) years
for the purpose of prosecuting and defending suits by or against it and enabling it to settle and close
its affairs, to dispose of and convey its property and to distribute its assets, but not for the purpose of
continuing the functions for which it was established, under the supervision of the SRA.

Section 3 of said Executive Order enumerates the powers and functions of the SRA; but it does not
specifically include the power to represent the Republic of the Philippines in suits filed by or against
it, nor the power to sue and be sued although it has the power to "enter, make and execute routinary
contracts as may be necessary for or incidental to the attainment of its purposes between any
persons, firms, public or private, and the Government of the Philippines" and "[t]o do all such other
things, transact such other businesses and perform such functions directly or indirectly incidental or
conducive to the attainment of the purposes of the Sugar Regulatory Administration."18

Section 4 thereof provides for the governing board of the Administration, known as the Sugar Board,
which shall exercise "[a]ll the corporate powers" of the SRA. Its specific functions are enumerated in
Section 6; however, the enumeration does not include the power to represent the Republic of the
Philippines, although among such functions is "[t]o enter into contracts, transactions, or undertakings
of whatever nature which are necessary or incidental to its functions and objectives with any natural
or juridical persons and with any foreign government institutions, private corporations, partnership or
private individuals.19

It is apparent that its charter does not grant the SRA the power to represent the Republic of the
Philippines in suits filed by or against the latter.

It is a fundamental rule that an administrative agency has only such powers as are expressly granted
to it by law and those that are necessarily implied in the exercise thereof. (Guerzon vs Court of
Appeals, et al., 77707, August 8, 1988, 164 SCRA 182,189, citing Makati Stock Exchange, Inc. vs.
SEC, 14 SCRA 620, and Sy vs. Central Bank, 70 SCRA 570.)20

The SRA no doubt, is an administrative agency or body. An administrative agency is defined as "[a]
government body charged with administering and implementing particular legislation. Examples are
workers' compensation commissions ... and the like. ... The term 'agency' includes any department,
independent establishment, commission, administration, authority board or bureau ...21

The power to represent the Republic of the Philippines in any suit by or against it having been
withheld from SRA, it following that the latter cannot institute the instant petition and the petition in
C.A.-G.R. No. 17188 on behalf of the Republic of the Philippines.

This conclusion does not, however, mean that the SRA cannot sued and be sued. This power can
be implied from its powers to make and execute routinary contracts as may be necessary for or
incidental to the attainment of its purposes between any persons, firms public or private, and the
Government of the Philippines and to do all such other things, transact such other businesses and
perform such other functions directly or indirectly incidental or conducive to the attainment of the
purposes of the SRA and the powers of its governing board to enter into contracts, transactions, or
undertaking of whatever nature which are necessary or incidental to its functions and objectives with
any natural or juridical persons and with any foreign government institutions, private corporations,
partnership or private individuals.

The Court of Appeals also correctly ruled that the OGCC can represent neither the SRA nor the
Republic of the Philippines. We do not, however, share the view that only the Office of the Solicitor
General can represent the SRA.

The entry of appearance by the OGCC for the SRA was precipitated by the sudden turn-about of the
Office of the Solicitor General. Records show that the OSG eventually represented the
PHILSUCOM, NASUTRA and SRA in the trial court. However, on 29 January 1988 it filed a
Manifestation dated January 27, 1988 informing the court that its appearance in the case "is limited
to the issues relating only to the contempt proceedings against the public respondents and is not
concerned with the other issues raised by various parties in their petitions for relief".22 By reason
thereof, the Chairman/Administrator of SRA, Mr. Arsenio Yulo, Jr., sent a letter23 dated 6 April 1988
to the Solicitor General, informing him that since the appearance of the OSG is limited and that it has
taken a different position, SRA's only alternative is to seek another representative and that much to
its regret, it is constrained to terminate OSG's services. He further informed the Solicitor General that
the case is being indorsed to the Office of the Government Corporate Counsel for appropriate legal
action pursuant to P.D. No. 478. There is, however, no showing that the OSG withdrew its
appearance for PHILSUCOM, NASUTRA or the SRA in the trial court. On the contrary, per its
Manifestation dated 8 February 1990, and filed with this Court on 12 February 1990,24 it "has retained
its appearance" "on behalf of the Republic of the Philippines to recover whatever amount may be
owing to the National Treasury by virtue of legal subrogation."

Also on April 6,1988, SRA sent a letter25 to OGCC to engage its legal services to represent SRA as
successor agency of the PHILSUCOM in the case pending before the trial court.

The OGCC, availing of P.D. No. 1415, the law creating it, particularly Section 1 which, as quoted by
it on page 16 of the Petition,26 reads:

SECTION 1. The Office of the Government Corporate Counsel shall be the principal law
office of all government-owned and controlled corporations, including their
subsidiaries except as may otherwise be provided by their respective charters or authorized
by the President (Emphasis supplied).

sent a letter to the Office of the President, "in essence, requesting for authority for OGCC to
represent SRA in the case before the trial court," This was favorably acted by Executive Secretary
Catalino Macaraig, Jr.27

Indeed, under Section 35, Chapter 12, Title III of Book IV of the Administrative Code of 1987
(Executive Order No. 292) the Solicitor General is the lawyer of the government, its agencies and
instrumentalities, and its officials or agents. Said Section reads as follows:

SECTION 35. Functions and Organization. — The Office of the Solicitor General shall
represent the Government of the Philippines, its agencies and instrumentalities and its
officials and agents in any litigation, proceeding, investigation or matter requiring the services
of lawyers. When authorized by the President or head of the office concerned, it shall also
represent government-owned and controlled corporations. The Office of the Solicitor General
shall constitute the law office of the Government and, as such, shall discharge duties
requiring the services of lawyers. ... .
This is similar to subsection (1) of Section 1 of P.D. No. 478.

In Republic, et al. vs. Partisala et al. (G.R. No. 61997, 15 November 1982, 118 SCRA 370, 373), We
ruled that only the Solicitor General can bring or defend actions on behalf of the Republic of the
Philippines and that, henceforth, actions filed in the name of the Republic if not initiated by the
Solicitor General will be summarily dismissed.

However, in Secretary Oscar Orbos vs. Civil Service Commission, et al., G.R. No. 92561, 12
September 1990,28 We stated:

In the discharge of this task, the Solicitor General must see to it that the best interest of the
government is upheld within the limits set by law. When confronted with a situation where
one government office takes an adverse position against another government agency, as in
this case, the Solicitor General should not refrain from performing his duty as the lawyer of
the government. It is incumbent upon him to present to the court what he considers should
legally uphold the best interest of the government although it may run counter to a client's
position. In such an instance the government office adversely affected by the position taken
by the Solicitor General, if it still believes in the merit of its case, may appear in its own
behalf through its legal personnel or representative.

Consequently, the SRA need not be represented by the Office of the Solicitor General. It may
appear in its own behalf through its legal personnel or representative.

The question that logically crops up then is: May it be represented by the OGCC? Respondents hold
the negative view. Petitioners maintain otherwise, for the reason that pursuant to Section 1 of the
charter of the OGCC (P.D. No. 1415), as they quoted, the Office of the President, through the
Executive Secretary, has authorized it to represent the SRA. The specific basis for such authority is
the alleged portion of the exceptionary clause therein, reading "... or authorized by the President."

The words or authorized by the President are not found in the law. We are not aware of any law,
decree or executive order which amended Section 1 of P.D. No. 1415 by inserting therein said
words. Besides, even granting for the sake of argument that such words are written into the law,
such exception cannot confer upon the OGCC authority to represent the SRA. The exception simply
means that although the OGCC is the principal law office of all government-owned and controlled
corporations including their subsidiaries, the President may not allow it to act as lawyer for a
specified government-owned or controlled corporation or a subsidiary thereof. It will be noted that
under Section 1 of P.D. No. 478 the President may authorize the OSG to represent government-
owned or controlled corporations. In short, the exception limits, rather than expands, the authority of
the OGCC. Thus, the so-called approval by the Executive Secretary of the request of OGCC to
represent the SRA is based on an erroneous interpretation of the law.

In any case, even if we grant that there was such an exception, as well construed in the manner
urged by petitioners, it must be deemed, nevertheless, to have been repealed by the Administrative
Code of 1987. Section 10, Chapter 3, Title III, Book IV thereof on the Office of the Government
Corporate counsel does not contain the purported exception. It reads:

SECTION 10. Office of the Government Corporate Counsel. —The Office of the Government
Corporate Counsel (OGCC) shall act as the principal law office of all government-owned or
controlled corporations, their subsidiaries, other corporate offsprings and government
acquired asset corporations and shall exercise control and supervision over all legal
departments or divisions maintained separately and such powers and functions as are now
or may hereafter be provided by law. In the exercise of such control or suspension, the
 Government Corporate Counsel shall promulgate rules and regulations to effectively
implement the objectives of the Office. ...

Since the SRA is neither a government-owned or controlled corporation nor a subsidiary thereof,
OGCC does not have the authority to represent it. As to who may represent it,
the Orbos case29 provides the answer.

The case of the RPB is, however, different. It is admitted to be a government-owned corporation.
The OGCC can, therefore, legally represent RPB in actions filed by or against it. Unfortunately, this
issue was not categorically and expressly addressed by the Court of Appeals and has not been
raised in the petition. Anyway, even if We have to rule that OGCC's appearance for the RPB in the
petition before the Court of Appeals in CAGR No. 17188 was proper, the result would be the same
dismissal of the petition. As also correctly pointed out by the Court of Appeals, having received
benefits by way of trustee's fees, the RPB may not question the right of private respondents to
attorney's fees; its only obligation under the judgment based on compromise was to pay the
attorney's fees from out of the funds it held in trust.

II.

The second assigned error is without merit. Petitioners have misread the decision of the Court of
Appeals in CAGR SP No. 11046 (Ernesto Kramer, et al. vs. Hon. Doroteo Caneba et al. promulgated
on 16 March 1987).30 The case was a petition for certiorari and mandamus with a prayer for
preliminary injunction wherein petitioners principally prayed the Court to declare null and void the
order of respondent judge of 16 December 1986 and to order him to issue the writ of execution of
the judgment of 2 June 1986, require respondent NASUTRA to account and turn over to petitioners
any and all sales proceeds of 1984-1985 sugar from 2 June 1986 up to the present in favor of
respondent Trustee Bank RPB for proper distribution to petitioners, issue an order requiring
respondent Trustee Bank to distribute without delay all the sales proceeds of the 1984-1985 sugar in
its possession in accordance with the judgment of respondent court, and issue a restraining
order/preliminary injunction enjoining the SRA, its agents/representatives from implementing Sugar
Order No. 9 dated 25 September 1986. Although in the body of the opinion a discussion was made
on the matter of the sufficiency of representation to make Civil Case No. 86-35880 a class suit, the
resolution of the petition was not in any way based thereon or influenced by it. As a matter of fact,
the Court categorically stated that it was premature to rule on that issue because of the pendency of
the petition for relief from judgment and interventions. The full disquisition of the Court of Appeals on
this point reads:

xxx xxx xxx

At the outset, let it be stated that the incidents which arose from the class suit before the
respondent court are predominantly related to the ten percent (10%) attorney's fees
stipulated in the compromise agreement approved by the respondent court in its June 2,
1986 judgment in favor of petitioner's counsels Atty. Roger Z. Reyes, Ernesto L. Treyes, Jr.
and Eutiquio M. Fudolin, Jr.

In the said class suit, only the five original plaintiffs and producers Zosimo Maravilla, for
himself and in representation of Rosendo dela Rama, Roberto Mascurafia and Bibiano
Sabino per Special Power of Attorney, and Ernesto Kramer represented by Atty. Roger Z.
Reyes per Special Power of Attorney, have authorized said Attys. Reyes, Treyes, Jr. and
Fudolin, Jr. to represent them as counsel.
On page 18 of the instant petition, petitioners allege that there is no necessity to secure
Special Powers of Attorney from the unnamed parties in a class suit, and the failure of
petitioners' counsel to do so does not constitute fraud, the named parties having contest over
the class suit.' By such statement, petitioners and their counsels admit their lack of authority
from the rest of the alleged 40,000 sugar producers to file the class suit and enter into the
compromise agreement.

Section 12, Rule 3, Revised Rules of Court provides that in order that one or more may sue
for the benefit of others as a class suit, it is necessary that 'the court shall make sure that the
parties actually before it are sufficiently numerous and representative so that all interests are
fully protected. (Dimayuga, et al. vs. CIR, et al., G.R. No. L-1 0213, May 27, 1957).

For that matter, in the case below, therein plaintiffs Zosimo Maravilla, Rosendo dela Rama
and Bibiano Sabino filed with the respondent court a motion to partially annul decision and/or
petition for relief against the said ten (10%) percent attorney's fees on the allegation that they
were deceived into signing the compromise agreement believing, as was agreed upon during
the negotiations, that the ten (10%) percent of whatever would be collected would go to a
trust fund for the benefit of the sugar farmers and producers and not as attorney's fees. Also,
petition, for relief was filed by thirteen other alleged sugar producers principally on the
ground that the compromise agreement entered into was without their express authority by
way of Special Power of Attorney and that the class suit was unnecessary. Some of these
sugar producers are the Association de Agricultores de la Region Oesta de Batangas, Inc.
(AAROB) with 742 members; the Samahang Mag-aasukal sa Kanluran Batangas (SABA)
with 4,000 members and Independent Sugar Farmers, Inc. with 200 members.

Here is a situation, as pointed out by respondent NASUTRA and SRA, where petitioners in
filing the class suit claim to represent 40,000 sugar producers all over the country and yet
when some of these producers filed petition for relief and interventions, petitioners 'disowned'
them, stating that the other sugar producers have no personality to intervene, not having
been named parties to the class suit.

It should not be overlooked that the said sugar producers, although not named parties in the
class suit, are the very alleged persons represented in the class suit. They certainly have
interests in the subject matter of the controversy; in the contents of the compromise
agreement.

The filing of petitions for relief from judgment has not been prohibited by B.P. 129. The
remedy of petitions for relief from judgment is still available when a judgment is rendered by
an inferior court in a case, and a party thereto, by fraud, accident, mistake or excusable
negligence, has been unjustly deprived of a hearing therein, or has been prevented from
taking an appeal. Section 9, paragraph 2 of BP 129 placing the original exclusive jurisdiction
on the Court of Appeals to annul judgments of Regional Trial Courts has no relation to (sic)
all to the petition for relief provided for in Rule 38 because these two are completely different
remedies.

The petitions for relief from judgment and interventions are still pending action by respondent
court. In view thereof, it would be premature for this Court to resolve the issue of estoppel
1âw phi 1

on the part of the said sugar producers to question the pertinent portion of the judgment of
compromise, and fraud on the part of the counsels for petitioners therein. (Emphasis
supplied).

IV.
Having disposed of the main issues, We shall now consider the motion of petitioners of 16 January
1990 to hold in contempt respondent Judge Corona Ibay-Somera for violating/defying the Temporary
Restraining Order issued by Us on 26 October 1989. They allegedly "continued to hear the case
particularly on the whereabouts of 177,087.14 piculs of sugar for the crop year 1984-1985 allegedly
stored in different warehouses throughout the country," and that she even further reset the hearing
of the case on January 19, 1990 notwithstanding the cautionary manifestation filed by petitioners
during the 15 December 1989 hearing that said continued hearing would be a violation of the TRO.
In the resolution of 26 October 1989, this Court specifically ordered respondent Judge to desist and
refrain from further proceeding in Civil Case No. 86-35880, entitled Republic Planters Bank, et al. vs.
Philippine Sugar Commission, et al.

In her Compliance, respondent judge explained that the TRO in question actually ordered her to
desist from enforcing the Decision of the respondent Court of Appeals in CAGR No. 17188, which is
the subject of the instant petition, and that her "only honest motivation "in making the inquiry is to
see to it that while the instant petition is pending ... , whatever funds may be owing to the Republic of
the Philippines is duly preserved and protected."

We find the explanation to be satisfactory. No malice attended the commission of the challenged act.
We accord to respondent judge good faith in her claimed desire to preserve and protect public funds.
Moreover, petitioners failed to show that the act in question caused any injury or damage to their
rights or interest.

IN VIEW OF ALL THE FOREGOING, the Petition is DENIED for lack of merit. Costs against
petitioners.

SO ORDERED.

FRANCISCO I. CHAVEZ, G.R. No. 164527

Petitioner,
Present:

PUNO, CJ,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVAL-GUTIERREZ,
- versus - CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
CARPIO MORALES,
AZCUNA,
TINGA,
CHICO-NAZARIO,
GARCIA,
NATIONAL HOUSING VELASCO,
AUTHORITY, R-II BUILDERS, NACHURA, and
INC., R-II HOLDINGS, INC., REYES, JJ.
HARBOUR CENTRE PORT
TERMINAL, INC., and Promulgated:
MR. REGHIS ROMERO II,
Respondents. August 15, 2007
x-----------------------------------------------------------------------------------------x

DECISION
VELASCO, JR., J.:

In this Petition for Prohibition and Mandamus with Prayer for Temporary
Restraining Order and/or Writ of Preliminary Injunction under Rule 65, petitioner,
in his capacity as taxpayer, seeks:

to declare NULL AND VOID the Joint Venture Agreement (JVA) dated
March 9, 1993 between the National Housing Authority and R-II
Builders, Inc. and the Smokey Mountain Development and Reclamation
Project embodied therein; the subsequent amendments to the said JVA;
and all other agreements signed and executed in relation
thereto including, but not limited to the Smokey Mountain Asset Pool
Agreement dated 26 September 1994 and the separate agreements for
Phase I and Phase II of the Projectas well as all other transactions which
emanated therefrom, for
being UNCONSTITUTIONAL and INVALID;

to enjoin respondentsparticularly respondent NHAfrom further

implementing and/or enforcing the said project and other agreements
related thereto, and from further deriving and/or enjoying any rights,
privileges and interest therefrom x x x; and

to compel respondents to disclose all documents and information relating

to the projectincluding, but not limited to, any subsequent agreements
with respect to the different phases of the project, the revisions over the
original plan, the additional works incurred thereon, the current financial
condition of respondent R-II Builders, Inc., and the transactions made
respecting the project.[1]

The Facts
On March 1, 1988, then President Corazon C. Aquino issued Memorandum Order
No. (MO) 161[2] approving and directing the implementation of the Comprehensive
and Integrated Metropolitan Manila Waste Management Plan (the Plan). The
Metro Manila Commission, in coordination with various government agencies, was
tasked as the lead agency to implement the Plan as formulated by the Presidential
Task Force on Waste Management created by Memorandum Circular No. 39. A
day after, on March 2, 1988, MO 161-A[3] was issued, containing the guidelines
which prescribed the functions and responsibilities of fifteen (15) various
government departments and offices tasked to implement the Plan,
namely: Department of Public Works and Highway (DPWH), Department of
Health (DOH), Department of Environment and Natural Resources (DENR),
Department of Transportation and Communication, Department of Budget and
Management, National Economic and Development Authority (NEDA), Philippine
Constabulary Integrated National Police, Philippine Information Agency and the
Local Government Unit (referring to the City of Manila), Department of Social
Welfare and Development, Presidential Commission for Urban Poor, National
Housing Authority (NHA), Department of Labor and Employment, Department of
Education, Culture and Sports (now Department of Education), and Presidential
Management Staff.

Specifically, respondent NHA was ordered to conduct feasibility studies and

develop low-cost housing projects at the dumpsite and absorb scavengers in NHA
resettlement/low-cost housing projects.[4] On the other hand, the DENR was tasked
to review and evaluate proposed projects under the Plan with regard to their
environmental impact, conduct regular monitoring of activities of the Plan to
ensure compliance with environmental standards and assist DOH in the conduct of
the study on hospital waste management.[5]

At the time MO 161-A was issued by President Aquino, Smokey Mountain was a
wasteland in Balut, Tondo, Manila, where numerous Filipinos resided in subhuman
conditions, collecting items that may have some monetary value from the
garbage. The Smokey Mountain dumpsite is bounded on the north by the Estero
Marala, on the south by the property of the National Government, on the east by
the property of B and I Realty Co., and on the west by Radial Road 10 (R-10).
Pursuant to MO 161-A, NHA prepared the feasibility studies of the Smokey
Mountain low-cost housing project which resulted in the formulation of the
Smokey Mountain Development Plan and Reclamation of the Area Across R-10 or
the Smokey Mountain Development and Reclamation Project (SMDRP; the
Project). The Project aimed to convert the Smokey Mountain dumpsite into a
habitable housing project, inclusive of the reclamation of the area across R-10,
adjacent to the Smokey Mountain as the enabling component of the project.[6] Once
finalized, the Plan was submitted to President Aquino for her approval.

On July 9, 1990, the Build-Operate-and-Transfer (BOT) Law (Republic Act No.

[RA] 6957) was enacted.[7] Its declared policy under Section 1 is [t]o recognize the
indispensable role of the private sector as the main engine for national growth and
development and provide the most appropriate favorable incentives to mobilize
private resources for the purpose. Sec. 3 authorized and empowered [a]ll
government infrastructure agencies, including government-owned and controlled
corporations and local government units x x x to enter into contract with any duly
pre-qualified private contractor for the financing, construction, operation and
maintenance of any financially viable infrastructure facilities through the build-
operate-transfer or build and transfer scheme.

RA 6957 defined build-and-transfer scheme as [a] contractual arrangement

whereby the contractor undertakes the construction, including financing, of a given
infrastructure facility, and its turnover after the completion to the government
agency or local government unit concerned which shall pay the contractor its total
investment expended on the project, plus reasonable rate of return thereon. The last
paragraph of Sec. 6 of the BOT Law provides that the repayment scheme in the
case of land reclamation or the building of industrial estates may consist of [t]he
grant of a portion or percentage of the reclaimed land or industrial estate built,
subject to the constitutional requirements with respect to the ownership of lands.

On February 10, 1992, Joint Resolution No. 03[8] was passed by both houses
of Congress. Sec. 1 of this resolution provided, among other things, that:

Section 1. There is hereby approved the following national infrastructure

projects for implementation under the provisions of Republic Act No.
6957 and its implementing rules and regulations:
 xxxx

(d) Port infrastructure like piers, wharves, quays, storage handling, ferry
service and related facilities;

xxxx

(k) Land reclamation, dredging and other related development facilities;

(l) Industrial estates, regional industrial centers and export processing

zones including steel mills, iron-making and petrochemical complexes
and related infrastructure and utilities;

xxxx

(p) Environmental and solid waste management-related facilities such as

collection equipment, composting plants, incinerators, landfill and tidal
barriers, among others; and

(q) Development of new townsites and communities and related

facilities.

This resolution complied with and conformed to Sec. 4 of the BOT Law requiring
the approval of all national infrastructure projects by the Congress.

On January 17, 1992, President Aquino proclaimed MO 415[9] approving and

directing the implementation of the SMDRP. Secs. 3 and 4 of the Memorandum
Order stated:

Section 3. The National Housing Authority is hereby directed to

implement the Smokey Mountain Development Plan and Reclamation of
the Area Across R-10 through a private sector joint venture scheme
at the least cost to the government.

Section 4. The land area covered by the Smokey Mountain dumpsite is

hereby conveyed to the National Housing Authority as well as the area to
be reclaimed across R-10. (Emphasis supplied.)
In addition, the Public Estates Authority (PEA) was directed to assist in the
evaluation of proposals regarding the technical feasibility of reclamation, while the
DENR was directed to (1) facilitate titling of Smokey Mountain and of the area to
be reclaimed and (2) assist in the technical evaluation of proposals regarding
environmental impact statements.[10]

In the same MO 415, President Aquino created an Executive Committee

(EXECOM) to oversee the implementation of the Plan, chaired by the National
Capital Region-Cabinet Officer for Regional Development (NCR-CORD) with the
heads of the NHA, City of Manila, DPWH, PEA, Philippine Ports Authority
(PPA), DENR, and Development Bank of the Philippines (DBP) as
members.[11] The NEDA subsequently became a member of the
EXECOM. Notably, in a September 2, 1994 Letter,[12] PEA General Manager
Amado Lagdameo approved the plans for the reclamation project prepared by the
NHA.

In conformity with Sec. 5 of MO 415, an inter-agency technical committee

(TECHCOM) was created composed of the technical representatives of the
EXECOM [t]o assist the NHA in the evaluation of the project proposals, assist in
the resolution of all issues and problems in the project to ensure that all aspects of
the development from squatter relocation, waste management, reclamation,
environmental protection, land and house construction meet governing regulation
of the region and to facilitate the completion of the project.[13]

Subsequently, the TECHCOM put out the Public Notice and Notice to Pre-Qualify
and Bid for the right to become NHAs joint venture partner in the implementation
of the SMDRP. The notices were published in newspapers of general circulation on
January 23 and 26 and February 1, 14, 16, and 23, 1992, respectively. Out of the
thirteen (13) contractors who responded, only five (5) contractors fully complied
with the required pre-qualification documents. Based on the evaluation of the pre-
qualification documents, the EXECOM declared the New San Jose Builders, Inc.
and R-II Builders, Inc. (RBI) as the top two contractors.[14]
Thereafter, the TECHCOM evaluated the bids (which include the Pre-feasibility
Study and Financing Plan) of the top two (2) contractors in this manner:

(1) The DBP, as financial advisor to the Project, evaluated their Financial
Proposals;

(2) The DPWH, PPA, PEA and NHA evaluated the Technical Proposals for the
Housing Construction and Reclamation;

(3) The DENR evaluated Technical Proposals on Waste Management and Disposal
by conducting the Environmental Impact Analysis; and

(4) The NHA and the City of Manila evaluated the socio-economic benefits
presented by the proposals.

On June 30, 1992, Fidel V. Ramos assumed the Office of the President (OP) of
the Philippines.

On August 31, 1992, the TECHCOM submitted its recommendation to the

EXECOM to approve the R-II Builders, Inc. (RBI) proposal which garnered the
highest score of 88.475%.

Subsequently, the EXECOM made a Project briefing to President Ramos. As

a result, President Ramos issued Proclamation No. 39[15] on September 9, 1992,
which reads:

WHEREAS, the National Housing Authority has presented a viable

conceptual plan to convert the Smokey Mountain dumpsite into a
habitable housing project, inclusive of the reclamation of the area across
Road Radial 10 (R-10) adjacent to the Smokey Mountain as the enabling
component of the project;

xxxx
These parcels of land of public domain are hereby placed under the
administration and disposition of the National Housing Authority to
develop, subdivide and dispose to qualified beneficiaries, as well as
 its development for mix land use (commercial/industrial) to provide
employment opportunities to on-site families and additional areas
for port-related activities.

In order to facilitate the early development of the area for disposition,

the Department of Environment and Natural Resources, through the
Lands and Management Bureau, is hereby directed to approve the
boundary and subdivision survey and to issue a special patent and title in
the name of the National Housing Authority, subject to final survey and
private rights, if any there be.(Emphasis supplied.)

On October 7, 1992, President Ramos authorized NHA to enter into a Joint

Venture Agreement with RBI [s]ubject to final review and approval of the Joint
Venture Agreement by the Office of the President.[16]

On March 19, 1993, the NHA and RBI entered into a Joint Venture
Agreement[17] (JVA) for the development of the Smokey Mountain dumpsite and
the reclamation of the area across R-10 based on Presidential Decree No. (PD)
757[18] which mandated NHA [t]o undertake the physical and socio-economic
upgrading and development of lands of the public domain identified for housing,
MO 161-A which required NHA to conduct the feasibility studies and develop a
low-cost housing project at the Smokey Mountain, and MO 415 as amended by
MO 415-A which approved the Conceptual Plan for Smokey Mountain and
creation of the EXECOM and TECHCOM. Under the JVA, the Project involves
the clearing of Smokey Mountain for eventual development into a low cost
medium rise housing complex and industrial/commercial site with the reclamation
of the area directly across [R-10] to act as the enabling component of the
Project.[19] The JVA covered a lot in Tondo, Manila with an area of two hundred
twelve thousand two hundred thirty-four (212,234) square meters and another lot
to be reclaimed also in Tondo with an area of four hundred thousand (400,000)
square meters.

The Scope of Work of RBI under Article II of the JVA is as follows:

 a) To fully finance all aspects of development of Smokey Mountain and
reclamation of no more than 40 hectares of Manila Bay area across
Radial Road 10.

b) To immediately commence on the preparation of feasibility report and

detailed engineering with emphasis to the expedient acquisition of the
Environmental Clearance Certificate (ECC) from the DENR.

c) The construction activities will only commence after the acquisition of

the ECC, and

d) Final details of the contract, including construction, duration and

delivery timetables, shall be based on the approved feasibility report and
detailed engineering.

Other obligations of RBI are as follows:

2.02 The [RBI] shall develop the PROJECT based on the Final Report
and Detailed Engineering as approved by the Office of the President. All
costs and expenses for hiring technical personnel, date gathering,
permits, licenses, appraisals, clearances, testing and similar undertaking
shall be for the account of the [RBI].

2.03 The [RBI] shall undertake the construction of 3,500 temporary

housing units complete with basic amenities such as plumbing, electrical
and sewerage facilities within the temporary housing project as staging
area to temporarily house the squatter families from
the Smokey Mountain while development is being undertaken. These
temporary housing units shall be turned over to the [NHA] for
disposition.

2.04 The [RBI] shall construct 3,500 medium rise low cost permanent
housing units on the leveled Smokey Mountain complete with basic
utilities and amenities, in accordance with the plans and specifications
set forth in the Final Report approved by the [NHA]. Completed units
ready for mortgage take out shall be turned over by the [RBI] to NHA on
agreed schedule.

2.05 The [RBI] shall reclaim forty (40) hectares of Manila Bay area
directly across [R-10] as contained in Proclamation No. 39 as the
 enabling component of the project and payment to the [RBI] as its asset
share.

2.06 The [RBI] shall likewise furnish all labor materials and equipment
necessary to complete all herein development works to be undertaken on
a phase to phase basis in accordance with the work program stipulated
therein.

The profit sharing shall be based on the approved pre-feasibility report submitted
to the EXECOM, viz:

For the developer (RBI):

1. To own the forty (40) hectares of reclaimed land.

2. To own the commercial area at the Smokey Mountain area composed

of 1.3 hectares, and

3. To own all the constructed units of medium rise low cost permanent
housing units beyond the 3,500 units share of the [NHA].

For the NHA:

1. To own the temporary housing consisting of 3,500 units.

2. To own the cleared and fenced incinerator site consisting of 5 hectares

situated at the Smokey Mountain area.

3. To own the 3,500 units of permanent housing to be constructed by

[RBI] at the Smokey Mountain area to be awarded to qualified on site
residents.

4. To own the Industrial Area site consisting of 3.2 hectares, and

5. To own the open spaces, roads and facilities within

the Smokey Mountain area.
In the event of extraordinary increase in labor, materials, fuel and non-
recoverability of total project expenses,[20] the OP, upon recommendation of the
NHA, may approve a corresponding adjustment in the enabling component.

The functions and responsibilities of RBI and NHA are as follows:

For RBI:

4.01 Immediately commence on the preparation of the FINAL REPORT

with emphasis to the expedient acquisition, with the assistance of the
[NHA] of Environmental Compliance Certificate (ECC) from the
Environmental Management Bureau (EMB) of the
[DENR]. Construction shall only commence after the acquisition of the
ECC. The Environment Compliance Certificate (ECC) shall form part of
the FINAL REPORT.

The FINAL REPORT shall provide the necessary subdivision and

housing plans, detailed engineering and architectural drawings, technical
specifications and other related and required documents relative to
the Smokey Mountain area.

With respect to the 40-hectare reclamation area, the [RBI] shall have the
discretion to develop the same in a manner that it deems necessary to
recover the [RBIs] investment, subject to environmental and zoning
rules.

4.02 Finance the total project cost for land development, housing
construction and reclamation of the PROJECT.

4.03 Warrant that all developments shall be in compliance with the

requirements of the FINAL REPORT.

4.04 Provide all administrative resources for the submission of project

accomplishment reports to the [NHA] for proper evaluation and
supervision on the actual implementation.

4.05 Negotiate and secure, with the assistance of the [NHA] the grant of
rights of way to the PROJECT, from the owners of the adjacent lots for
access road, water, electrical power connections and drainage facilities.
 4.06 Provide temporary field office and transportation vehicles (2 units),
one (1) complete set of computer and one (1) unit electric typewriter for
the [NHAs] field personnel to be charged to the PROJECT.

For the NHA:

4.07 The [NHA] shall be responsible for the removal and relocation of
all squatters within Smokey Mountain to the Temporary Housing
Complex or to other areas prepared as relocation areas with the
assistance of the [RBI]. The [RBI] shall be responsible in releasing the
funds allocated and committed for relocation as detailed in the FINAL
REPORT.

4.08 Assist the [RBI] and shall endorse granting of exemption fees in the
acquisition of all necessary permits, licenses, appraisals, clearances and
accreditations for the PROJECT subject to existing laws, rules and
regulations.

4.09 The [NHA] shall inspect, evaluate and monitor all works at
the Smokey Mountain and Reclamation Area while the land
development and construction of housing units are in progress to
determine whether the development and construction works are
undertaken in accordance with the FINAL REPORT. If in its judgment,
the PROJECT is not pursued in accordance with the FINAL REPORT,
the [NHA] shall require the [RBI] to undertake necessary remedial
works. All expenses, charges and penalties incurred for such remedial, if
any, shall be for the account of the [RBI].

4.10 The [NHA] shall assist the [RBI] in the complete electrification of
the PROJECT. x x x

4.11 Handle the processing and documentation of all sales transactions

related to its assets shares from the venture such as the 3,500 units of
permanent housing and the allotted industrial area of 3.2 hectares.

4.12 All advances outside of project costs made by the [RBI] to the
[NHA] shall be deducted from the proceeds due to the [NHA].

4.13 The [NHA] shall be responsible for the acquisition of the Mother
Title for the Smokey Mountain and Reclamation Area within 90 days
 upon submission of Survey returns to the Land Management Sector. The
land titles to the 40-hectare reclaimed land, the 1.3 hectare commercial
area at the Smokey Mountain area and the constructed units of medium-
rise permanent housing units beyond the 3,500 units share of the [NHA]
shall be issued in the name of the [RBI] upon completion of the
project. However, the [RBI] shall have the authority to pre-sell its share
as indicated in this agreement.

The final details of the JVA, which will include the construction duration, costs,
extent of reclamation, and delivery timetables, shall be based on the FINAL
REPORT which will be contained in a Supplemental Agreement to be executed
later by the parties.

The JVA may be modified or revised by written agreement between the NHA and
RBI specifying the clauses to be revised or modified and the corresponding
amendments.

If the Project is revoked or terminated by the Government through no fault of RBI

or by mutual agreement, the Government shall compensate RBI for its actual
expenses incurred in the Project plus a reasonable rate of return not exceeding that
stated in the feasibility study and in the contract as of the date of such revocation,
cancellation, or termination on a schedule to be agreed upon by both parties.

As a preliminary step in the project implementation, consultations and dialogues

were conducted with the settlers of the Smokey Mountain Dumpsite Area. At the
same time, DENR started processing the application for the Environmental
Clearance Certificate (ECC) of the SMDRP. As a result however of the
consultative dialogues, public hearings, the report on the on-site field conditions,
the Environmental Impact Statement (EIS) published on April 29 and May 12,
1993 as required by the Environmental Management Bureau of DENR, the
evaluation of the DENR, and the recommendations from other government
agencies, it was discovered that design changes and additional work have to be
undertaken to successfully implement the Project.[21]
Thus, on February 21, 1994, the parties entered into another agreement
denominated as the Amended and Restated Joint Venture Agreement [22] (ARJVA)
which delineated the different phases of the Project. Phase I of the Project involves
the construction of temporary housing units for the current residents of
the Smokey Mountain dumpsite, the clearing and leveling-off of the dumpsite, and
the construction of medium-rise low-cost housing units at the cleared and leveled
dumpsite.[23] Phase II of the Project involves the construction of an incineration
area for the on-site disposal of the garbage at the dumpsite.[24] The enabling
component or consideration for Phase I of the Project was increased from 40
hectares of reclaimed lands across R-10 to 79 hectares.[25] The revision also
provided for the enabling component for Phase II of 119 hectares of reclaimed
lands contiguous to the 79 hectares of reclaimed lands for Phase I.[26] Furthermore,
the amended contract delineated the scope of works and the terms and conditions
of Phases I and II, thus:

The PROJECT shall consist of Phase I and Phase II.

Phase I shall involve the following:

a. the construction of 2,992 units of temporary housing for

the affected residents while clearing and development of
Smokey Mountain [are] being undertaken

b. the clearing of Smokey Mountain and the

subsequent construction of 3,520 units of medium rise housing and
the development of the industrial/commercial site within
the SmokeyMountain area

c. the reclamation and development of a 79 hectare area

directly across Radial Road 10 to serve as the enabling component
of Phase I

Phase II shall involve the following:

a. the construction and operation of an incinerator plant that

will conform to the emission standards of the DENR
 b. the reclamation and development of 119-hectare area contiguous to
that to be reclaimed under Phase I to serve as the enabling component of
Phase II.

Under the ARJVA, RBI shall construct 2,992 temporary housing units, a reduction
from 3,500 units under the JVA.[27] However, it was required to construct 3,520
medium-rise low-cost permanent housing units instead of 3,500 units under the
JVA. There was a substantial change in the design of the permanent housing units
such that a loft shall be incorporated in each unit so as to increase the living space
from 20 to 32 square meters. The additions and changes in the Original Project
Component are as follows:

ORIGINAL CHANGES/REVISIONS

1. TEMPORARY HOUSING

Wood/Plywood, ga. 31 G.I. Concrete/Steel Frame Structure

Sheet usable life of 3 years, gauge 26 G.I. roofing sheets future
12 SM floor area. use as permanent structures for factory and
warehouses mixed 17 sm & 12 sm floor area.

2. MEDIUM RISE MASS

HOUSING

Box type precast Shelter Conventional and precast component

20 square meter concrete structures, 32 square
floor area with 2.4 meter meter floor area with loft floor height;
bare type, 160 units/ (sleeping quarter) 3.6 m. floor
building. height, painted and improved
architectural faade, 80 units/
building.
3. MITIGATING MEASURES

3.1 For reclamation work Use of clean dredgefill material below

the MLLW and SM material
mixed with dredgefill above
MLLW.

a. 100% use of Smokey

Mountain material as
 dredgefill Use of Steel Sheet Piles needed
for longer depth of embedment.
b. Concrete Sheet Piles
short depth of
embedment

c. Silt removal approximately Need to remove more than 3.0

1.0 meter only meters of silt after sub-soil investigation.[28]
These material and substantial modifications served as justifications for the
increase in the share of RBI from 40 hectares to 79 hectares of reclaimed land.

Under the JVA, the specific costs of the Project were not stipulated but under the
ARJVA, the stipulated cost for Phase I was pegged at six billion six
hundred ninety-three million three hundred eighty-seven thousand
three hundred sixty-four pesos (PhP 6,693,387,364).

In his February 10, 1994 Memorandum, the Chairperson of the SMDRP

EXECOM submitted the ARJVA for approval by the OP. After review of said
agreement, the OP directed that certain terms and conditions of the ARJVA be
further clarified or amended preparatory to its approval. Pursuant to the Presidents
directive, the parties reached an agreement on the clarifications and amendments
required to be made on the ARJVA.

On August 11, 1994, the NHA and RBI executed an Amendment To the Amended
and Restated Joint Venture Agreement (AARJVA)[29] clarifying certain terms and
condition of the ARJVA, which was submitted to President Ramos for approval, to
wit:

Phase II shall involve the following:

a. the construction and operation of an incinerator plant that will

conform to the emission standards of the DENR

b. the reclamation and development of 119-hectare area contiguous to

that to be reclaimed under Phase I to serve as the enabling component
of Phase II, the exact size and configuration of which shall be
approved by the SMDRP Committee[30]
Other substantial amendments are the following:

4. Paragraph 2.05 of Article II of the ARJVA is hereby amended to read

as follows:

2.05. The DEVELOPER shall reclaim seventy nine (79) hectares

of the Manila Bay area directly across Radial Road 10 (R-10) to
serve as payment to the DEVELOPER as its asset share for Phase
I and to develop such land into commercial area with port
facilities; provided, that the port plan shall be integrated with the
Philippine Port Authoritys North Harbor plan for the Manila Bay
area and provided further, that the final reclamation and port plan
for said reclaimed area shall be submitted for approval by the
Public Estates Authority and the Philippine Ports Authority,
respectively: provided finally, that subject to par. 2.02 above,
actual reclamation work may commence upon approval of the
final reclamation plan by the Public Estates Authority.

xxxx

9. A new paragraph to be numbered 5.05 shall be added to Article V of

the ARJVA, and shall read as follows:

5.05. In the event this Agreement is revoked, cancelled or

terminated by the AUTHORITY through no fault of the
DEVELOPER, the AUTHORITY shall compensate the
DEVELOPER for the value of the completed portions of, and
actual expenditures on the PROJECT plus a reasonable rate of
return thereon, not exceeding that stated in the Cost Estimates of
Items of Work previously approved by the SMDRP Executive
Committee and the AUTHORITY and stated in this Agreement,
as of the date of such revocation, cancellation, or termination, on a
schedule to be agreed upon by the parties, provided that said
completed portions of Phase I are in accordance with the approved
FINAL REPORT.
 Afterwards, President Ramos issued Proclamation No. 465 dated August 31,
[31]
1994 increasing the proposed area for reclamation across R-10 from 40 hectares
to 79 hectares,[32] to wit:

NOW, THEREFORE, I, FIDEL V. RAMOS, President of the

Republic of the Philippines, by virtue of the powers vested in me by the
law, and as recommended by the SMDRP Executive Committee, do
hereby authorize the increase of the area of foreshore or submerged
lands of Manila Bay to be reclaimed, as previously authorized under
Proclamation No. 39 (s. 1992) and Memorandum Order No. 415 (s.
1992), from Four Hundred Thousand (400,000) square meters, more or
less, to Seven Hundred Ninety Thousand (790,000) square meters, more
or less.

On September 1, 1994, pursuant to Proclamation No. 39, the DENR issued

Special Patent No. 3591 conveying in favor of NHA an area of 211,975 square
meters covering the Smokey Mountain Dumpsite.

In its September 7, 1994 letter to the EXECOM, the OP through then

Executive Secretary Teofisto T. Guingona, Jr., approved the ARJVA as amended
by the AARJVA.

On September 8, 1994, the DENR issued Special Patent 3592 pursuant to

Proclamation No. 39, conveying in favor of NHA a 401,485-square meter area.

On September 26, 1994, the NHA, RBI, Home Insurance and Guaranty
Corporation (HIGC), now known as the Home Guaranty Corporation, and the
Philippine National Bank (PNB)[33] executed the Smokey Mountain Asset Pool
Formation Trust Agreement (Asset Pool Agreement).[34] Thereafter, a Guaranty
Contract was entered into by NHA, RBI, and HIGC.

On June 23, 1994, the Legislature passed the Clean Air Act.[35] The Act
made the establishment of an incinerator illegal and effectively barred the
implementation of the planned incinerator project under Phase II. Thus, the off-site
disposal of the garbage at the Smokey Mountain became necessary.[36]
The land reclamation was completed in August 1996.[37]

Sometime later in 1996, pursuant likewise to Proclamation No. 39, the

DENR issued Special Patent No. 3598 conveying in favor of NHA an additional
390,000 square meter area.

During the actual construction and implementation of Phase I of the

SMDRP, the Inter-Agency Technical Committee found and recommended to the
EXECOM on December 17, 1997 that additional works were necessary for the
completion and viability of the Project. The EXECOM approved the
recommendation and so, NHA instructed RBI to implement the change orders or
necessary works.[38]

Such necessary works comprised more than 25% of the original contract
price and as a result, the Asset Pool incurred direct and indirect costs. Based on C1
12 A of the Implementing Rules and Regulations of PD 1594, a supplemental
agreement is required for all change orders and extra work orders, the total
aggregate cost of which being more than twenty-five (25%) of the escalated
original contract price.

The EXECOM requested an opinion from the Department of Justice (DOJ)

to determine whether a bidding was required for the change orders and/or
necessary works. The DOJ, through DOJ Opinion Nos. 119 and 155 dated August
26, 1993 and November 12, 1993, opined that a rebidding, pursuant to the
aforequoted provisions of the implementing rules (referring to PD 1594) would not
be necessary where the change orders inseparable from the original scope of the
project, in which case, a negotiation with the incumbent contractor may be
allowed.

Thus, on February 19, 1998, the EXECOM issued a resolution directing

NHA to enter into a supplemental agreement covering said necessary works.

On March 20, 1998, the NHA and RBI entered into a Supplemental
Agreement covering the aforementioned necessary works and submitted it to the
President on March 24, 1998 for approval.
 Outgoing President Ramos decided to endorse the consideration of the
Supplemental Agreement to incoming President Joseph E. Estrada. On June 30,
1998, Estrada became the 13th Philippine President.

However, the approval of the Supplemental Agreement was unacted upon

for five months. As a result, the utilities and the road networks were constructed to
cover only the 79-hectare original enabling component granted under the
ARJVA. The 220-hectare extension of the 79-hectare area was no longer
technically feasible. Moreover, the financial crises and unreliable real estate
situation made it difficult to sell the remaining reclaimed lots. The devaluation of
the peso and the increase in interest cost led to the substantial increase in the cost
of reclamation.

On August 1, 1998, the NHA granted RBIs request to suspend work on the
SMDRP due to the delay in the approval of the Supplemental Agreement, the
consequent absence of an enabling component to cover the cost of the necessary
works for the project, and the resulting inability to replenish the Asset Pool funds
partially used for the completion of the necessary works.[39]

As of August 1, 1998 when the project was suspended, RBI had already
accomplished a portion of the necessary works and change orders which resulted in
[RBI] and the Asset Pool incurring advances for direct and indirect cost which
amount can no longer be covered by the 79-hectare enabling component under the
ARJVA.[40]

Repeated demands were made by RBI in its own capacity and on behalf of
the asset pool on NHA for payment for the advances for direct and indirect costs
subject to NHA validation.

In November 1998, President Estrada issued Memorandum Order No. 33

reconstituting the SMDRP EXECOM and further directed it to review the
Supplemental Agreement and submit its recommendation on the completion of the
SMDRP.

The reconstituted EXECOM conducted a review of the project and

recommended the amendment of the March 20, 1998 Supplemental Agreement to
make it more feasible and to identify and provide new sources of funds for the
project and provide for a new enabling component to cover the payment for the
necessary works that cannot be covered by the 79-hectare enabling component
under the ARJVA.[41]

The EXECOM passed Resolution Nos. 99-16-01 and 99-16-02[42] which

approved the modification of the Supplemental Agreement, to wit:

a) Approval of 150 hectares additional reclamation in order to make the

reclamation feasible as part of the enabling component.

b) The conveyance of the 15-hectare NHA Vitas property (actually 17

hectares based on surveys) to the SMDRP Asset Pool.

c) The inclusion in the total development cost of other

additional, necessary and indispensable infrastructure works and
the revision of the original cost stated in the Supplemental Agreement
dated March 20, 1998 from PhP 2,953,984,941.40 to PhP
2,969,134,053.13.

d) Revision in the sharing agreement between the parties.

In the March 23, 2000 OP Memorandum, the EXECOM was authorized to

proceed and complete the SMDRP subject to certain guidelines and directives.

After the parties in the case at bar had complied with the March 23, 2000
Memorandum, the NHA November 9, 2000 Resolution No. 4323 approved the
conveyance of the 17-hectare Vitas property in favor of the existing or a newly
created Asset Pool of the project to be developed into a mixed commercial-
industrial area, subject to certain conditions.

On January 20, 2001, then President Estrada was considered resigned. On

the same day, President Gloria M. Arroyo took her oath as the 14th President of
the Philippines.
 As of February 28, 2001, the estimated total project cost of the SMDRP has
reached P8.65 billion comprising of P4.78 billion in direct cost and P3.87 billion in
indirect cost,[43] subject to validation by the NHA.

On August 28, 2001, NHA issued Resolution No. 4436 to pay for the
various necessary works/change orders to SMDRP, to effect the corresponding
enabling component consisting of the conveyance of the NHAs Vitas Property and
an additional 150-hectare reclamation area and to authorize the release by NHA of
PhP 480 million as advance to the project to make the Permanent Housing
habitable, subject to reimbursement from the proceeds of the expanded enabling
component.[44]

On November 19, 2001, the Amended Supplemental Agreement (ASA) was

signed by the parties, and on February 28, 2002, the Housing and Urban
Development Coordinating Council (HUDCC) submitted the agreement to the OP
for approval.
In the July 20, 2002 Cabinet Meeting, HUDCC was directed to submit the
works covered by the PhP 480 million [advance to the Project] and the ASA to
public bidding.[45] On August 28, 2002, the HUDCC informed RBI of the decision
of the Cabinet.

In its September 2, 2002 letter to the HUDCC Chairman, RBI lamented the
decision of the government to bid out the remaining works under the ASA thereby
unilaterally terminating the Project with RBI and all the agreements related
thereto. RBI demanded the payment of just compensation for all accomplishments
and costs incurred in developing the SMDRP plus a reasonable rate of return
thereon pursuant to Section 5.05 of the ARJVA and Section 6.2 of the ASA.[46]

Consequently, the parties negotiated the terms of the termination of the JVA
and other subsequent agreements.

On August 27, 2003, the NHA and RBI executed a Memorandum of

Agreement (MOA) whereby both parties agreed to terminate the JVA and other
subsequent agreements, thus:
1. TERMINATION

1.1 In compliance with the Cabinet directive dated 30 July

2002 to submit the works covered by the P480 Million
and the ASA to public bidding, the following agreements
executed by and between the NHA and the
DEVELOPER are hereby terminated, to wit:

a. Joint Venture Agreement (JVA) dated 19 March 1993

b. Amended and Restated Joint Venture Agreement
(ARJVA) dated 21 February 1994
c. Amendment and Restated Joint Venture Agreement
dated 11 August 1994
d. Supplemental Agreement dated 24 March 1998
e. Amended Supplemental Agreement (ASA) dated 19
November 2001.
xxxx

5. SETTLEMENT OF CLAIMS

5.1 Subject to the validation of the DEVELOPERs claims, the

NHA hereby agrees to initially compensate the
Developer for the abovementioned costs as follows:

a. Direct payment to DEVELOPER of the amounts

herein listed in the following manner:
a.1 P250 Million in cash from the escrow account in
accordance with Section 2 herewith;

a.2 Conveyance of a 3 hectare portion of the Vitas

Industrial area immediately after joint
determination of the appraised value of the
said property in accordance with the procedure
herein set forth in the last paragraph of Section
5.3. For purposes of all payments to be made
through conveyance of real properties, the
parties shall secure from the NHA Board of
Directors all documents necessary and
sufficient to effect the transfer of title over the
properties to be conveyed to RBI, which
 documents shall be issued within a reasonable
period.

5.2 Any unpaid balance of the DEVELOPERS claims

determined after the validation process referred to in
Section 4 hereof, may be paid in cash, bonds or through
the conveyance of properties or any combination
thereof. The manner, terms and conditions of payment of
the balance shall be specified and agreed upon later
within a period of three months from the time a
substantial amount representing the unpaid balance has
been validated pursuant hereto including, but not limited
to the programming of quarterly cash payments to be
sourced by the NHA from its budget for debt servicing,
from its income or from any other sources.

5.3 In any case the unpaid balance is agreed to be paid, either

partially or totally through conveyance of properties, the
parties shall agree on which properties shall be subject to
conveyance. The NHA and DEVELOPER hereby agree
to determine the valuation of the properties to be
conveyed by getting the average of the appraisals to be
made by two (2) mutually acceptable independent
appraisers.

Meanwhile, respondent Harbour Centre Port Terminal, Inc. (HCPTI) entered into
an agreement with the asset pool for the development and operations of a port in
the Smokey Mountain Area which is a major component of SMDRP to provide a
source of livelihood and employment for Smokey Mountain residents and spur
economic growth. A Subscription Agreement was executed between the Asset Pool
and HCPTI whereby the asset pool subscribed to 607 million common shares and
1,143 million preferred shares of HCPTI. The HCPTI preferred shares had a
premium and penalty interest of 7.5% per annum and a mandatory redemption
feature. The asset pool paid the subscription by conveying to HCPTI a 10-hectare
land which it acquired from the NHA being a portion of the reclaimed land of the
SMDRP. Corresponding certificates of titles were issued to HCPTI, namely: TCT
Nos. 251355, 251356, 251357, and 251358.
Due to HCPTIs failure to obtain a license to handle foreign containerized cargo
from PPA, it suffered a net income loss of PhP 132,621,548 in 2002 and a net loss
of PhP 15,540,063 in 2003. The Project Governing Board of the Asset Pool later
conveyed by way of dacion en pago a number of HCPTI shares to RBI in lieu of
cash payment for the latters work in SMDRP.

On August 5, 2004, former Solicitor General Francisco I. Chavez, filed the instant
petition which impleaded as respondents the NHA, RBI, R-II Holdings, Inc. (RHI),
HCPTI, and Mr. Reghis Romero II, raising constitutional issues.

The NHA reported that thirty-four (34) temporary housing structures and twenty-
one (21) permanent housing structures had been turned over by respondent RBI. It
claimed that 2,510 beneficiary-families belonging to the poorest of the poor had
been transferred to their permanent homes and benefited from the Project.

The Issues

The grounds presented in the instant petition are:

I

NEITHER RESPONDENT NHA NOR RESPONDENT R-II

BUILDERS MAY VALIDLY RECLAIM FORESHORE AND
SUBMERGED LAND BECAUSE:

1. RESPONDENT NHA AND R-II BUILDERS WERE

NEVER GRANTED ANY POWER AND AUTHORITY TO
RECLAIM LANDS OF THE PUBLIC DOMAIN AS THIS POWER
IS VESTED EXCLUSIVELY WITH THE PEA.

2. EVEN ASSUMING THAT RESPONDENTS NHA AND R-

II BUILDERS WERE GIVEN THE POWER AND AUTHORITY TO
RECLAIM FORESHORE AND SUBMERGED LAND, THEY WERE
NEVER GIVEN THE AUTHORITY BY THE DENR TO DO SO.

II
RESPONDENT R-II BUILDERS CANNOT ACQUIRE THE
RECLAIMED FORESHORE AND SUBMERGED LAND AREAS
BECAUSE:

1. THE RECLAIMED FORESHORE AND SUBMERGED PARCELS

OF LAND ARE INALIENABLE PUBLIC LANDS WHICH ARE
BEYOND THE COMMERCE OF MAN.

2. ASSUMING ARGUENDO THAT THE SUBJECT RECLAIMED

FORESHORE AND SUBMERGED PARCELS OF LAND
WERE ALREADY DECLARED ALIENABLE LANDS OF THE
PUBLIC DOMAIN, RESPONDENT R-II BUILDERS STILL
COULD NOT ACQUIRE THE SAME BECAUSE THERE WAS
NEVER ANY DECLARATION THAT THE SAID LANDS
WERE NO LONGER NEEDED FOR PUBLIC USE.

3. EVEN ASSUMING THAT THE SUBJECT RECLAIMED LANDS

ARE ALIENABLE AND NO LONGER NEEDED FOR PUBLIC USE,
RESPONDENT R-II BUILDERS STILL CANNOT ACQUIRE THE
SAME BECAUSE THERE WAS NEVER ANY LAW AUTHORIZING
THE SALE THEREOF.

4. THERE WAS NEVER ANY PUBLIC BIDDING

AWARDING OWNERSHIP OF THE SUBJECT LAND TO
RESPONDENT R-II BUILDERS.

5. ASSUMING THAT ALL THE REQUIREMENTS FOR A VALID

TRANSFER OF ALIENABLE PUBLIC HAD BEEN
PERFORMED, RESPONDENT R-II BUILDERS, BEING
PRIVATE CORPORATION IS NONETHELESS
EXPRESSLYPROHIBITED BY THE PHILIPPINE
CONSTITUTION TO ACQUIRE LANDS OF THE PUBLIC
DOMAIN.

III

RESPONDENT HARBOUR, BEING A PRIVATE CORPORATION

WHOSE MAJORITY STOCKS ARE OWNED AND CONTROLLED
BY RESPONDENT ROMEROS CORPORATIONS R-II BUILDERS
AND R-II HOLDINGS IS DISQUALIFIED FROM BEING A
TRANSFEREE OF PUBLIC LAND.
 IV

RESPONDENTS MUST BE COMPELLED TO DISCLOSE ALL

INFORMATION RELATED TO THE SMOKEY MOUNTAIN
DEVELOPMENT AND RECLAMATION PROJECT.

The Courts Ruling

Before we delve into the substantive issues raised in this petition, we will first deal
with several procedural matters raised by respondents.

Whether petitioner has the requisite locus standi to file this case

Respondents argue that petitioner Chavez has no legal standing to file the petition.

Only a person who stands to be benefited or injured by the judgment in the

suit or entitled to the avails of the suit can file a complaint or
petition.[47] Respondents claim that petitioner is not a proper party-in-interest as he
was unable to show that he has sustained or is in immediate or imminent danger of
sustaining some direct and personal injury as a result of the execution and
enforcement of the assailed contracts or agreements.[48] Moreover, they assert that
not all government contracts can justify a taxpayers suit especially when no public
funds were utilized in contravention of the Constitution or a law.
We explicated in Chavez v. PCGG[49] that in cases where issues of
transcendental public importance are presented, there is no necessity to show that
petitioner has experienced or is in actual danger of suffering direct and personal
injury as the requisite injury is assumed. We find our ruling in Chavez v. PEA[50] as
conclusive authority on locus standi in the case at bar since the issues raised in this
petition are averred to be in breach of the fair diffusion of the countrys natural
resources and the constitutional right of a citizen to information which have been
declared to be matters of transcendental public importance. Moreover, the
pleadings especially those of respondents readily reveal that public funds have
been indirectly utilized in the Project by means of Smokey Mountain Project
Participation Certificates (SMPPCs) bought by some government agencies.
Hence, petitioner, as a taxpayer, is a proper party to the instant petition before the
court.

Whether petitioners direct recourse to this Court was proper

Respondents are one in asserting that petitioner circumvents the principle of

hierarchy of courts in his petition. Judicial hierarchy was made clear in the case
of People v. Cuaresma, thus:

There is after all a hierarchy of courts. That hierarchy is determinative of

the venue of appeals, and should also serve as a general determinant of
the appropriate forum for petitions for the extraordinary writs. A
becoming regard for that judicial hierarchy most certainly indicates that
petitions for the issuance of extraordinary writs against first level
(inferior) courts should be filed with the Regional Trial Court, and those
against the latter, with the Court of Appeals. A direct invocation of the
Supreme Courts original jurisdiction to issue these writs should be
allowed only when there are special and important reasons therefor,
clearly and specifically set out in the petition. This is established policy.
It is a policy that is necessary to prevent inordinate demands upon the
Courts time and attention which are better devoted to those matters
within its exclusive jurisdiction, and to prevent further over-crowding of
the Courts docket.[51] x x x

The OSG claims that the jurisdiction over petitions for prohibition and
mandamus is concurrent with other lower courts like the Regional Trial Courts and
the Court of Appeals. Respondent NHA argues that the instant petition is misfiled
because it does not introduce special and important reasons or exceptional and
compelling circumstances to warrant direct recourse to this Court and that the
lower courts are more equipped for factual issues since this Court is not a trier of
facts. Respondents RBI and RHI question the filing of the petition as this Court
should not be unduly burdened with repetitions, invocation of jurisdiction over
constitutional questions it had previously resolved and settled.

In the light of existing jurisprudence, we find paucity of merit in respondents

postulation.
While direct recourse to this Court is generally frowned upon and discouraged, we
have however ruled in Santiago v. Vasquez that such resort to us may be allowed in
certain situations, wherein this Court ruled that petitions for certiorari, prohibition,
or mandamus, though cognizable by other courts, may directly be filed with us if
the redress desired cannot be obtained in the appropriate courts or where
exceptional compelling circumstances justify availment of a remedy within and
calling for the exercise of [this Courts] primary jurisdiction.[52]

The instant petition challenges the constitutionality and legality of the SMDRP
involving several hectares of government land and hundreds of millions of funds of
several government agencies. Moreover, serious constitutional challenges are made
on the different aspects of the Project which allegedly affect the right of Filipinos
to the distribution of natural resources in the country and the right to information
of a citizenmatters which have been considered to be of extraordinary significance
and grave consequence to the public in general. These concerns in the instant
action compel us to turn a blind eye to the judicial structure meant to provide an
orderly dispensation of justice and consider the instant petition as a justified
deviation from an established precept.

Core factual matters undisputed

Respondents next challenge the projected review by this Court of the alleged
factual issues intertwined in the issues propounded by petitioner. They listed a
copious number of questions seemingly factual in nature which would make this
Court a trier of facts.[53]

We find the position of respondents bereft of merit.

For one, we already gave due course to the instant petition in our January 18,
2005 Resolution.[54] In said issuance, the parties were required to make clear and
concise statements of established facts upon which our decision will be based.

Secondly, we agree with petitioner that there is no necessity for us to make any
factual findings since the facts needed to decide the instant petition are well
established from the admissions of the parties in their pleadings [55] and those
derived from the documents appended to said submissions. Indeed, the core facts
which are the subject matter of the numerous issues raised in this petition are
undisputed.

Now we will tackle the issues that prop up the instant petition.

Since petitioner has cited our decision in PEA as basis for his postulations in
a number of issues, we first resolve the queryis PEA applicable to the case at bar?

A juxtaposition of the facts in the two cases constrains the Court to rule in the
negative.

The Court finds that PEA is not a binding precedent to the instant petition because
the facts in said case are substantially different from the facts and circumstances in
the case at bar, thus:

(1) The reclamation project in PEA was undertaken through a JVA entered into
between PEA and AMARI. The reclamation project in the instant NHA case was
undertaken by the NHA, a national government agency in consultation with PEA
and with the approval of two Philippine Presidents;

(2) In PEA, AMARI and PEA executed a JVA to develop the Freedom Islands and
reclaim submerged areas without public bidding on April 25, 1995. In the instant
NHA case, the NHA and RBI executed a JVA after RBI was declared the winning
bidder on August 31, 1992 as the JVA partner of the NHA in the SMDRP after
compliance with the requisite public bidding.

(3) In PEA, there was no law or presidential proclamation classifying the lands to
be reclaimed as alienable and disposal lands of public domain. In this RBI case,
MO 415 of former President Aquino and Proclamation No. 39 of then President
Ramos, coupled with Special Patents Nos. 3591, 3592, and 3598, classified the
reclaimed lands as alienable and disposable;

(4) In PEA, the Chavez petition was filed before the amended JVA was executed
by PEA and AMARI. In this NHA case, the JVA and subsequent amendments
were already substantially implemented. Subsequently, the Project was terminated
through a MOA signed on August 27, 2003. Almost one year later on August 5,
2004, the Chavez petition was filed;

(5) In PEA, AMARI was considered to be in bad faith as it signed the amended
JVA after the Chavez petition was filed with the Court and after Senate Committee
Report No. 560 was issued finding that the subject lands are inalienable lands of
public domain. In the instant petition, RBI and other respondents are considered to
have signed the agreements in good faith as the Project was terminated even before
the Chavez petition was filed;

(6) The PEA-AMARI JVA was executed as a result of direct negotiation between
the parties and not in accordance with the BOT Law. The NHA-RBI JVA and
subsequent amendments constitute a BOT contract governed by the BOT Law; and

(7) In PEA, the lands to be reclaimed or already reclaimed were transferred to

PEA, a government entity tasked to dispose of public lands under Executive Order
No. (EO) 525.[56] In the NHA case, the reclaimed lands were transferred to NHA, a
government entity NOT tasked to dispose of public land and therefore said
alienable lands were converted to patrimonial lands upon their transfer to NHA. [57]
Thus the PEA Decision[58] cannot be considered an authority or precedent to
the instant case. The principle of stare decisis[59] has no application to the different
factual setting of the instant case.

We will now dwell on the substantive issues raised by petitioner. After a

perusal of the grounds raised in this petition, we find that most of these issues are
moored on our PEA Decision which, as earlier discussed, has no application to the
instant petition. For this reason alone, the petition can already be
rejected. Nevertheless, on the premise of the applicability of said decision to the
case at bar, we will proceed to resolve said issues.

First Issue: Whether respondents NHA and RBI have been granted
the power and authority to reclaim lands of the public domain as
this power is vested exclusively in PEA as claimed by petitioner
Petitioner contends that neither respondent NHA nor respondent RBI may validly
reclaim foreshore and submerged land because they were not given any power and
authority to reclaim lands of the public domain as this power was delegated by law
to PEA.

Asserting that existing laws did not empower the NHA and RBI to reclaim lands of
public domain, the Public Estates Authority (PEA), petitioner claims, is the
primary authority for the reclamation of all foreshore and submerged lands of
public domain, and relies on PEA where this Court held:

Moreover, Section 1 of Executive Order No. 525 provides that PEA shall
be primarily responsible for integrating, directing, and coordinating all
reclamation projects for and on behalf of the National Government. The
same section also states that [A]ll reclamation projects shall be approved
by the President upon recommendation of the PEA, and shall be
undertaken by the PEA or through a proper contract executed by it with
any person or entity; x x x. Thus, under EO No. 525, in relation to PD
No. 3-A and PD No. 1084, PEA became the primary implementing
agency of the National Government to reclaim foreshore and submerged
lands of the public domain. EO No. 525 recognized PEA as the
government entity to undertake the reclamation of lands and ensure their
maximum utilization in promoting public welfare and interests. Since
large portions of these reclaimed lands would obviously be needed for
public service, there must be a formal declaration segregating reclaimed
lands no longer needed for public service from those still needed for
public service.[60]

In the Smokey Mountain Project, petitioner clarifies that the reclamation was
not done by PEA or through a contract executed by PEA with another person or
entity but by the NHA through an agreement with respondent RBI. Therefore, he
concludes that the reclamation is null and void.

Petitioners contention has no merit.

EO 525 reads:
 Section 1. The Public Estates Authority (PEA) shall be primarily
responsible for integrating, directing, and coordinating all reclamation
projects for and on behalf of the National Government. All reclamation
projects shall be approved by the President upon recommendation of the
PEA, and shall be undertaken by the PEA or through a proper contract
executed by it with any person or entity; Provided, that, reclamation
projects of any national government agency or entity authorized
under its charter shall be undertaken in consultation with the PEA
upon approval of the President. (Emphasis supplied.)

The aforequoted provision points to three (3) requisites for a legal and valid
reclamation project, viz:

(1) approval by the President;

(2) favorable recommendation of PEA; and
(3) undertaken by any of the following:

a. by PEA
b. by any person or entity pursuant to a contract it executed with PEA
c. by the National Government agency or entity authorized under its charter to
reclaim lands subject to consultation with PEA

Without doubt, PEA under EO 525 was designated as the agency primarily
responsible for integrating, directing, and coordinating all reclamation projects.
Primarily means mainly, principally, mostly, generally. Thus, not all reclamation
projects fall under PEAs authority of supervision, integration, and
coordination. The very charter of PEA, PD 1084,[61] does not mention that PEA has
the exclusive and sole power and authority to reclaim lands of public domain. EO
525 even reveals the exceptionreclamation projects by a national government
agency or entity authorized by its charter to reclaim land. One example is EO 405
which authorized the Philippine Ports Authority (PPA) to reclaim and develop
submerged areas for port related purposes. Under its charter, PD 857, PPA has the
power to reclaim, excavate, enclose or raise any of the lands vested in it.
Thus, while PEA under PD 1084 has the power to reclaim land and under EO 525
is primarily responsible for integrating, directing and coordinating reclamation
projects, such authority is NOT exclusive and such power to reclaim may be
granted or delegated to another government agency or entity or may even be
undertaken by the National Government itself, PEA being only an agency and a
part of the National Government.

Let us apply the legal parameters of Sec. 1, EO 525 to the reclamation phase of
SMDRP. After a scrutiny of the facts culled from the records, we find that the
project met all the three (3) requirements, thus:

1. There was ample approval by the President of the Philippines; as a matter of

fact, two Philippine Presidents approved the same, namely: Presidents Aquino and
Ramos.President Aquino sanctioned the reclamation of both the SMDRP housing
and commercial-industrial sites through MO 415 (s. 1992) which approved the
SMDRP under Sec. 1 and directed NHA x x x to implement the Smokey Mountain
Development Plan and Reclamation of the Area across R-10 through a private
sector joint venture scheme at the least cost to government under Section 3.

For his part, then President Ramos issued Proclamation No. 39 (s. 1992) which
expressly reserved the Smokey Mountain Area and the Reclamation Area for a
housing project and related commercial/industrial development.

Moreover, President Ramos issued Proclamation No. 465 (s. 1994) which
authorized the increase of the Reclamation Area from 40 hectares of foreshore
and submerged land of the Manila Bay to 79 hectares. It speaks of the
reclamation of 400,000 square meters, more or less, of the foreshore and
submerged lands of Manila Bayadjoining R-10 as an enabling component of the
SMDRP.

As a result of Proclamations Nos. 39 and 465, Special Patent No. 3591 covering
211,975 square meters of Smokey Mountain, Special Patent No. 3592 covering
401,485 square meters of reclaimed land, and Special Patent No. 3598 covering
another 390,000 square meters of reclaimed land were issued by the DENR.
Thus, the first requirement of presidential imprimatur on the SMDRP has been
satisfied.

2. The requisite favorable endorsement of the reclamation phase was impliedly

granted by PEA. President Aquino saw to it that there was coordination of the
project with PEA by designating its general manager as member of the EXECOM
tasked to supervise the project implementation. The assignment was made in Sec. 2
of MO 415 which provides:

Section 2. An Executive Committee is hereby created to oversee the

implementation of the Plan, chaired by the NCR-CORD, with the heads
of the following agencies as members: The National Housing Authority,
the City of Manila, the Department of Public Works and Highways, the
Public Estates Authority, the Philippine Ports Authority, the
Department of Environment and Natural Resources and the
Development Bank of the Philippines. (Emphasis supplied.)

The favorable recommendation by PEA of the JVA and subsequent amendments

were incorporated as part of the recommendations of the EXECOM created under
MO 415. While there was no specific recommendation on the SMDRP emanating
solely from PEA, we find that the approbation of the Project and the land
reclamation as an essential component by the EXECOM of which PEA is a
member, and its submission of the SMDRP and the agreements on the Project to
the President for approval amply met the second requirement of EO 525.
3. The third element was also presentthe reclamation was undertaken either by
PEA or any person or entity under contract with PEA or by the National
Government agency or entity authorized under its charter to reclaim lands subject
to consultation with PEA. It cannot be disputed that the reclamation phase was not
done by PEA or any person or entity under contract with PEA. However, the
reclamation was implemented by the NHA, a national government agency whose
authority to reclaim lands under consultation with PEA is derived from its
charterPD 727 and other pertinent lawsRA 7279[62] and RA 6957 as amended by
RA 7718.

While the authority of NHA to reclaim lands is challenged by petitioner, we find

that the NHA had more than enough authority to do so under existing laws. While
PD 757, the charter of NHA, does not explicitly mention reclamation in any of the
listed powers of the agency, we rule that the NHA has an implied power to reclaim
land as this is vital or incidental to effectively, logically, and successfully
implement an urban land reform and housing program enunciated in Sec. 9 of
Article XIII of the 1987 Constitution.

Basic in administrative law is the doctrine that a government agency or office has
express and implied powers based on its charter and other pertinent
statutes. Express powers are those powers granted, allocated, and delegated to a
government agency or office by express provisions of law. On the other hand,
implied powers are those that can be inferred or are implicit in the wordings of the
law[63] or conferred by necessary or fair implication in the enabling
act.[64] In Angara v. Electoral Commission, the Court clarified and stressed that
when a general grant of power is conferred or duty enjoined, every particular
power necessary for the exercise of the one or the performance of the other is also
conferred by necessary implication.[65] It was also explicated that when the statute
does not specify the particular method to be followed or used by a government
agency in the exercise of the power vested in it by law, said agency has the
authority to adopt any reasonable method to carry out its functions.[66]

The power to reclaim on the part of the NHA is implicit from PD 757, RA 7279,
MO 415, RA 6957, and PD 3-A,[67] viz:

1. NHAs power to reclaim derived from PD 757 provisions:

a. Sec. 3 of PD 757 implies that reclamation may be resorted to in order to attain

the goals of NHA:

Section 3. Progress and Objectives. The Authority shall have the

following purposes and objectives:

xxxx

b) To undertake housing, development, resettlement or other

activities as would enhance the provision of housing to every
Filipino;
 c) To harness and promote private participation in housing ventures
in terms of capital expenditures, land, expertise, financing and
other facilities for the sustained growth of the housing
industry. (Emphasis supplied.)

Land reclamation is an integral part of the development of resources for some of

the housing requirements of the NHA. Private participation in housing projects
may also take the form of land reclamation.

b. Sec. 5 of PD 757 serves as proof that the NHA, as successor of the Tondo
Foreshore Development Authority (TFDA), has the power to reclaim, thus:
Section 5. Dissolution of Existing Housing Agencies. The People's
Homesite and Housing Corporation (PHHC), the Presidential Assistant
on Housing Resettlement Agency (PAHRA), the Tondo Foreshore
Development Authority (TFDA), the Central Institute for the Training
and Relocation of Urban Squatters (CITRUS), the Presidential
Committee for Housing and Urban Resettlement (PRECHUR), Sapang
Palay Development Committee, Inter-Agency Task Force to Undertake
the Relocation of Families in Barrio Nabacaan, Villanueva, Misamis
Oriental and all other existing government housing and resettlement
agencies, task forces and ad-hoc committees, are hereby
dissolved. Their powers and functions, balance of appropriations,
records, assets, rights, and choses in action, are transferred to,
vested in, and assumed by the Authority. x x x (Emphasis supplied.)
PD 570 dated October 30, 1974 created the TFDA, which defined its
objectives, powers, and functions. Sec. 2 provides:

Section 2. Objectives and Purposes. The Authority shall have the

following purposes and objectives:

a) To undertake all manner of activity, business or development projects

for the establishment of harmonious, comprehensive, integrated and
healthy living community in the Tondo Foreshoreland and its
resettlement site;
 b) To undertake and promote the physical and socio-economic
amelioration of the Tondo Foreshore residents in particular and the
nation in general (Emphasis supplied.)

The powers and functions are contained in Sec. 3, to wit:

a) To develop and implement comprehensive and integrated urban renewal

programs for the Tondo Foreshore and Dagat-dagatan lagoon and/or any other
additional/alternative resettlement site and to formulate and enforce general
and specific policies for its development which shall ensure reasonable degree of
compliance with environmental standards.

b) To prescribe guidelines and standards for the reservation,

conservation and utilization of public lands covering the Tondo
Foreshore land and its resettlement sites;

c) To construct, acquire, own, lease, operate and maintain infrastructure

facilities, housing complex, sites and services;

d) To determine, regulate and supervise the establishment and operation

of housing, sites, services and commercial and industrial complexes and
any other enterprises to be constructed or established within the Tondo
Foreshore and its resettlement sites;

e) To undertake and develop, by itself or through joint ventures with

other public or private entities, all or any of the different phases of
development of the Tondo Foreshore land and its resettlement sites;

f) To acquire and own property, property-rights and interests, and

encumber or otherwise dispose of the same as it may deem appropriate
(Emphasis supplied.)

From the foregoing provisions, it is readily apparent that the TFDA has the explicit
power to develop public lands covering the Tondo foreshore land and any other
additional and alternative resettlement sites under letter b, Sec. 3 of PD 570. Since
the additional and/or alternative sites adjacent to Tondo foreshore land cover
foreshore and submerged areas, the reclamation of said areas is necessary in order
to convert them into a comprehensive and integrated resettlement housing project
for the slum dwellers and squatters of Tondo.Since the powers of TFDA were
assumed by the NHA, then the NHA has the power to reclaim lands in the Tondo
foreshore area which covers the 79-hectare land subject of Proclamations Nos. 39
and 465 and Special Patents Nos. 3592 and 3598.

c. Sec. 6 of PD 757 delineates the functions and powers of the NHA which
embrace the authority to reclaim land, thus:

Sec. 6. Powers and functions of the Authority.The Authority shall have

the following powers and functions to be exercised by the Board in
accordance with its established national human settlements plan prepared
by the Human Settlements Commission:

(a) Develop and implement the comprehensive and integrated housing

program provided for in Section hereof;

xxxx

(c) Prescribe guidelines and standards for the reservation, conservation

and utilization of public lands identified for housing and resettlement;

xxxx

(e) Develop and undertake housing development and/or resettlement

projects through joint ventures or other arrangements with public and
private entities;
xxxx

(k) Enter into contracts whenever necessary under such terms and
conditions as it may deem proper and reasonable;

(l) Acquire property rights and interests and encumber or otherwise

dispose the same as it may deem appropriate;

xxxx

(s) Perform such other acts not inconsistent with this Decree, as may
be necessary to effect the policies and objectives herein
declared. (Emphasis supplied.)
 The NHAs authority to reclaim land can be inferred from the aforequoted
provisions. It can make use of public lands under letter (c) of Sec. 6 which includes
reclaimed land as site for its comprehensive and integrated housing projects under
letter (a) which can be undertaken through joint ventures with private entities
under letter (e). Taken together with letter (s) which authorizes NHA to perform
such other activities necessary to effect the policies and objectives of PD 757, it is
safe to conclude that the NHAs power to reclaim lands is a power that is implied
from the exercise of its explicit powers under Sec. 6 in order to effectively
accomplish its policies and objectives under Sec. 3 of its charter. Thus, the
reclamation of land is an indispensable component for the development and
construction of the SMDRP housing facilities.

2. NHAs implied power to reclaim land is enhanced by RA 7279.

PD 757 identifies NHAs mandate to [d]evelop and undertake housing development

and/or resettlement projects through joint ventures or other arrangements with
public and private entities.

The power of the NHA to undertake reclamation of land can be inferred from Secs.
12 and 29 of RA 7279, which provide:

Section 12. Disposition of Lands for Socialized Housing.The National

Housing Authority, with respect to lands belonging to the National
Government, and the local government units with respect to other lands
within their respective localities, shall coordinate with each other to
formulate and make available various alternative schemes for the
disposition of lands to the beneficiaries of the Program. These
schemes shall not be limited to those involving transfer of ownership in
fee simple but shall include lease, with option to purchase, usufruct or
such other variations as the local government units or the National
Housing Authority may deem most expedient in carrying out the
purposes of this Act.

xxxx

Section 29. Resettlement.With two (2) years from the effectivity of this
Act, the local government units, in coordination with the National
 Housing Authority, shall implement the relocation and resettlement of
persons living in danger areas such as esteros, railroad tracks, garbage
dumps, riverbanks, shorelines, waterways, and in other public places as
sidewalks, roads, parks, and playgrounds. The local government unit, in
coordination with the National Housing Authority, shall provide
relocation or resettlement sites with basic services and facilities and
access to employment and livelihood opportunities sufficient to meet the
basic needs of the affected families. (Emphasis supplied.)

Lands belonging to the National Government include foreshore and submerged

lands which can be reclaimed to undertake housing development and resettlement
projects.

3. MO 415 explains the undertaking of the NHA in SMDRP:

WHEREAS, Memorandum Order No. 161-A mandated the National

Housing Authority to conduct feasibility studies and develop low-cost
housing projects at the dumpsites of Metro Manila;

WHEREAS, the National Housing Authority has presented a viable

Conceptual Plan to convert the Smokey Mountain dumpsite into a
habitable housing project inclusive of the reclamation area across R-
10 as enabling component of the Project;

WHEREAS, the said Plan requires the coordinated and synchronized

efforts of the City of Manila and other government agencies and
instrumentalities to ensure effective and efficient implementation;

WHEREAS, the government encourages private sector initiative in the

implementation of its projects. (Emphasis supplied.)

Proceeding from these whereas clauses, it is unequivocal that reclamation of

land in the Smokey Mountain area is an essential and vital power of the NHA to
effectively implement its avowed goal of developing low-cost housing units at
the Smokey Mountain dumpsites. The interpretation made by no less than the
President of the Philippines as Chief of the Executive Branch, of which the NHA is
a part, must necessarily command respect and much weight and credit.

4. RA 6957 as amended by RA 7718the BOT Lawserves as an exception to PD

1084 and EO 525.
Based on the provisions of the BOT Law and Implementing Rules and
Regulations, it is unequivocal that all government infrastructure agencies like the
NHA can undertake infrastructure or development projects using the contractual
arrangements prescribed by the law, and land reclamation is one of the projects
that can be resorted to in the BOT project implementation under the February 10,
1992 Joint Resolution No. 3 of the 8th Congress.

From the foregoing considerations, we find that the NHA has ample implied
authority to undertake reclamation projects.

Even without an implied power to reclaim lands under NHAs charter, we rule that
the authority granted to NHA, a national government agency, by the President
under PD 3-A reinforced by EO 525 is more than sufficient statutory basis for the
reclamation of lands under the SMDRP.

PD 3-A is a law issued by then President Ferdinand E. Marcos under his martial
law powers on September 23, 1972. It provided that [t]he provisions of any law to
the contrary notwithstanding, the reclamation of areas, underwater, whether
foreshore or inland, shall be limited to the National Government or any person
authorized by it under the proper contract. It repealed, in effect, RA 1899 which
previously delegated the right to reclaim lands to municipalities and chartered
cities and revested it to the National Government.[68] Under PD 3-A, national
government can only mean the Executive Branch headed by the President. It
cannot refer to Congress as it was dissolved and abolished at the time of the
issuance of PD 3-A on September 23, 1972. Moreover, the Executive Branch is the
only implementing arm in the government with the equipment, manpower,
expertise, and capability by the very nature of its assigned powers and functions to
undertake reclamation projects. Thus, under PD 3-A, the Executive Branch through
the President can implement reclamation of lands through any of its departments,
agencies, or offices.
Subsequently, on February 4, 1977, President Marcos issued PD 1084 creating the
PEA, which was granted, among others, the power to reclaim land, including
foreshore and submerged areas by dredging, filling or other means or to acquire
reclaimed lands. The PEAs power to reclaim is not however exclusive as can be
gleaned from its charter, as the President retained his power under PD 3-A to
designate another agency to reclaim lands.

On February 14, 1979, EO 525 was issued. It granted PEA primary responsibility
for integrating, directing, and coordinating reclamation projects for and on behalf
of the National Government although other national government agencies can be
designated by the President to reclaim lands in coordination with the PEA. Despite
the issuance of EO 525, PD 3-A remained valid and subsisting. Thus, the National
Government through the President still retained the power and control over all
reclamation projects in the country.

The power of the National Government through the President over reclamation of
areas, that is, underwater whether foreshore or inland, was made clear in EO
543[69] which took effect on June 24, 2006. Under EO 543, PEA was renamed the
Philippine Reclamation Authority (PRA) and was granted the authority to approve
reclamation projects, a power previously reposed in the President under EO
525. EO 543 reads:

Section 1. The power of the President to approve reclamation

projects is hereby delegated to the Philippine Reclamation
Authority [formerly PEA], through its governing board, subject to
compliance with existing laws and rules and subject to the condition that
reclamation contracts to be executed with any person or entity go
through public bidding.

Section 2. Nothing in the Order shall be construed as diminishing the

Presidents authority to modify, amend or nullify PRAs action.

Section 3. All executive issuances inconsistent with this Executive Order

are hereby repealed or amended accordingly. (Emphasis supplied.)
 Sec. 2 of EO 543 strengthened the power of control and supervision of the
President over reclamation of lands as s/he can modify, amend, or nullify the
action of PEA (now PRA).

From the foregoing issuances, we conclude that the Presidents delegation to

NHA, a national government agency, to reclaim lands under the SMDRP, is legal
and valid, firmly anchored on PD 3-A buttressed by EO 525 notwithstanding the
absence of any specific grant of power under its charter, PD 757.

Second Issue: Whether respondents NHA and RBI were given the
power and authority by DENR to reclaim foreshore and submerged
lands

Petitioner Chavez puts forth the view that even if the NHA and RBI were granted
the authority to reclaim, they were not authorized to do so by the DENR.
Again, reliance is made on our ruling in PEA where it was held that the
DENRs authority is necessary in order for the government to validly reclaim
foreshore and submerged lands. In PEA, we expounded in this manner:

As manager, conservator and overseer of the natural resources of the

State, DENR exercises supervision and control over alienable and
disposable public lands. DENR also exercises exclusive jurisdiction on
the management and disposition of all lands of the public domain. Thus,
DENR decides whether areas under water, like foreshore or submerged
areas of Manila Bay, should be reclaimed or not. This means that PEA
needs authorization from DENR before PEA can undertake reclamation
projects in Manila Bay, or in any part of the country.

DENR also exercises exclusive jurisdiction over the disposition of all

lands of the public domain. Hence, DENR decides whether reclaimed
lands of PEA should be classified as alienable under Sections 6 and 7 of
CA No. 141. Once DENR decides that the reclaimed lands should be so
classified, it then recommends to the President the issuance of a
proclamation classifying the lands as alienable or disposable lands of the
public domain open to disposition. We note that then DENR Secretary
Fulgencio S. Factoran, Jr. countersigned Special Patent No. 3517 in
 compliance with the Revised Administrative Code and Sections 6 and 7
of CA No. 141.

In short, DENR is vested with the power to authorize the reclamation of

areas under water, while PEA is vested with the power to undertake the
physical reclamation of areas under water, whether directly or through
private contractors. DENR is also empowered to classify lands of the
public domain into alienable or disposable lands subject to the approval
of the President. On the other hand, PEA is tasked to develop, sell or
lease the reclaimed alienable lands of the public domain.[70]

Despite our finding that PEA is not a precedent to the case at bar, we find
after all that under existing laws, the NHA is still required to procure DENRs
authorization before a reclamation project in Manila Bay or in any part of
the Philippines can be undertaken. The requirement applies to PEA, NHA, or any
other government agency or office granted with such power under the law.

Notwithstanding the need for DENR permission, we nevertheless find

petitioners position bereft of merit.

The DENR is deemed to have granted the authority to reclaim in the Smokey
Mountain Project for the following reasons:

1. Sec. 17, Art. VII of the Constitution provides that the President shall have
control of all executive departments, bureaus and offices. The President is assigned
the task of seeing to it that all laws are faithfully executed. Control, in
administrative law, means the power of an officer to alter, modify, nullify or set
aside what a subordinate officer has done in the performance of his duties and to
substitute the judgment of the former for that of the latter.[71]

As such, the President can exercise executive power motu proprio and can supplant
the act or decision of a subordinate with the Presidents own. The DENR is a
department in the executive branch under the President, and it is only an alter ego
of the latter. Ordinarily the proposed action and the staff work are initially done by
a department like the DENR and then submitted to the President for
approval. However, there is nothing infirm or unconstitutional if the President
decides on the implementation of a certain project or activity and requires said
department to implement it. Such is a presidential prerogative as long as it involves
the department or office authorized by law to supervise or execute the
Project. Thus, as in this case, when the President approved and ordered the
development of a housing project with the corresponding reclamation work,
making DENR a member of the committee tasked to implement the project, the
required authorization from the DENR to reclaim land can be deemed satisfied. It
cannot be disputed that the ultimate power over alienable and disposable public
lands is reposed in the President of the Philippines and not the DENR
Secretary. To still require a DENR authorization on the Smokey Mountain when
the President has already authorized and ordered the implementation of the Project
would be a derogation of the powers of the President as the head of the executive
branch. Otherwise, any department head can defy or oppose the implementation of
a project approved by the head of the executive branch, which is patently illegal
and unconstitutional.

In Chavez v. Romulo, we stated that when a statute imposes a specific duty

on the executive department, the President may act directly or order the said
department to undertake an activity, thus:

[A]t the apex of the entire executive officialdom is the President. Section
17, Article VII of the Constitution specifies [her] power as Chief
executive departments, bureaus and offices. [She] shall ensure that the
laws be faithfully executed. As Chief Executive, President Arroyo holds
the steering wheel that controls the course of her government. She lays
down policies in the execution of her plans and programs. Whatever
policy she chooses, she has her subordinates to implement them. In
short, she has the power of control. Whenever a specific function is
entrusted by law or regulation to her subordinate, she may act
directly or merely direct the performance of a duty x x x. Such act is
well within the prerogative of her office (emphasis supplied).[72]

Moreover, the power to order the reclamation of lands of public domain is reposed
first in the Philippine President. The Revised Administrative Code of 1987 grants
authority to the President to reserve lands of public domain for settlement for any
specific purpose, thus:
 Section 14. Power to Reserve Lands of the Public and Private Domain of
the Government.(1) The President shall have the power to reserve for
settlement or public use, and for specific public purposes, any of the
lands of the public domain, the use of which is not otherwise directed
by law. The reserved land shall thereafter remain subject to the specific
public purpose indicated until otherwise provided by law or
proclamation. (Emphasis supplied.)

President Aquino reserved the area of the Smokey Mountain dumpsite for
settlement and issued MO 415 authorizing the implementation of the Smokey
Mountain Development Project plus the reclamation of the area across R-10. Then
President Ramos issued Proclamation No. 39 covering the 21-hectare dumpsite and
the 40-hectare commercial/industrial area, and Proclamation No. 465 and MO 415
increasing the area of foreshore and submerged lands of Manila Bay to be
reclaimed from 40 to 79 hectares.Having supervision and control over the DENR,
both Presidents directly assumed and exercised the power granted by the Revised
Administrative Code to the DENR Secretary to authorize the NHA to reclaim said
lands. What can be done indirectly by the DENR can be done directly by the
President. It would be absurd if the power of the President cannot be exercised
simply because the head of a department in the executive branch has not acted
favorably on a project already approved by the President. If such arrangement is
allowed then the department head will become more powerful than the President.

2. Under Sec. 2 of MO 415, the DENR is one of the members of the EXECOM
chaired by the NCR-CORD to oversee the implementation of the Project. The
EXECOM was the one which recommended approval of the project plan and the
joint venture agreements. Clearly, the DENR retained its power of supervision and
control over the laws affected by the Project since it was tasked to facilitate the
titling of the Smokey Mountain and of the area to be reclaimed, which shows that
it had tacitly given its authority to the NHA to undertake the reclamation.

3. Former DENR Secretary Angel C. Alcala issued Special Patents Nos. 3591 and
3592 while then Secretary Victor O. Ramos issued Special Patent No. 3598 that
embraced the areas covered by the reclamation. These patents conveyed the lands
to be reclaimed to the NHA and granted to said agency the administration and
disposition of said lands for subdivision and disposition to qualified beneficiaries
and for development for mix land use (commercial/industrial) to provide
employment opportunities to on-site families and additional areas for port related
activities. Such grant of authority to administer and dispose of lands of public
domain under the SMDRP is of course subject to the powers of the EXECOM of
SMDRP, of which the DENR is a member.

4. The issuance of ECCs by the DENR for SMDRP is but an exercise of its power
of supervision and control over the lands of public domain covered by the Project.

Based on these reasons, it is clear that the DENR, through its acts and issuances,
has ratified and confirmed the reclamation of the subject lands for the purposes laid
down in Proclamations Nos. 39 and 465.

Third Issue: Whether respondent RBI can acquire reclaimed

foreshore and submerged lands considered as inalienable and
outside the commerce of man

Petitioner postulates that respondent RBI cannot acquire the reclaimed foreshore
and submerged areas as these are inalienable public lands beyond the commerce of
man based on Art. 1409 of the Civil Code which provides:

Article 1409. The following contracts are inexistent and void from the
beginning:

(1) Those whose cause, object or purpose is contrary to law, morals,

good customs, public order or public policy;

xxxx

(7) Those expressly prohibited or declared void by law.

These contracts cannot be ratified. Neither can the right to set up the
defense of illegality be waived.
Secs. 2 and 3, Art. XII of the Constitution declare that all natural resources are
owned by the State and they cannot be alienated except for alienable agricultural
lands of the public domain. One of the States natural resources are lands of public
domain which include reclaimed lands.
Petitioner contends that for these reclaimed lands to be alienable, there must
be a law or presidential proclamation officially classifying these reclaimed lands as
alienable and disposable and open to disposition or concession. Absent such law or
proclamation, the reclaimed lands cannot be the enabling component or
consideration to be paid to RBI as these are beyond the commerce of man.

We are not convinced of petitioners postulation.

The reclaimed lands across R-10 were classified alienable and disposable lands of
public domain of the State for the following reasons, viz:

First, there were three (3) presidential proclamations classifying the reclaimed
lands across R-10 as alienable or disposable hence open to disposition or
concession, to wit:

(1) MO 415 issued by President Aquino, of which Sec. 4 states that [t]he land
covered by the Smokey Mountain Dumpsite is hereby conveyed to the National
Housing Authority as well as the area to be reclaimed across R-10.

The directive to transfer the lands once reclaimed to the NHA implicitly carries
with it the declaration that said lands are alienable and disposable. Otherwise, the
NHA cannot effectively use them in its housing and resettlement project.
(2) Proclamation No. 39 issued by then President Ramos by which the reclaimed
lands were conveyed to NHA for subdivision and disposition to qualified
beneficiaries and for development into a mixed land use (commercial/industrial) to
provide employment opportunities to on-site families and additional areas for port-
related activities. Said directive carries with it the pronouncement that said lands
have been transformed to alienable and disposable lands. Otherwise, there is no
legal way to convey it to the beneficiaries.
(3) Proclamation No. 465 likewise issued by President Ramos enlarged the
reclaimed area to 79 hectares to be developed and disposed of in the
implementation of the SMDRP.The authority put into the hands of the NHA to
dispose of the reclaimed lands tacitly sustains the conversion to alienable and
disposable lands.
Secondly, Special Patents Nos. 3591, 3592, and 3598 issued by the DENR
anchored on Proclamations Nos. 39 and 465 issued by President Ramos, without
doubt, classified the reclaimed areas as alienable and disposable.

Admittedly, it cannot be said that MO 415, Proclamations Nos. 39 and 465 are
explicit declarations that the lands to be reclaimed are classified as alienable and
disposable. We find however that such conclusion is derived and implicit from the
authority given to the NHA to transfer the reclaimed lands to qualified
beneficiaries.

The query is, when did the declaration take effect? It did so only after the special
patents covering the reclaimed areas were issued. It is only on such date that the
reclaimed lands became alienable and disposable lands of the public domain. This
is in line with the ruling in PEA where said issue was clarified and stressed:

PD No. 1085, coupled with President Aquinos actual issuance of a

special patent covering the Freedom Islands, is equivalent to an
official proclamation classifying the FreedomIslands as alienable or
disposable lands of the public domain. PD No. 1085 and President
Aquinos issuance of a land patent also constitute a declaration that
the Freedom Islands are no longer needed for public
service. The Freedom Islands are thus alienable or disposable lands of
the public domain, open to disposition or concession to qualified
parties.[73] (Emphasis supplied.)

Thus, MO 415 and Proclamations Nos. 39 and 465 cumulatively and jointly
taken together with Special Patent Nos. 3591, 3592, and 3598 more than satisfy the
requirement in PEA that [t]here must be a law or presidential
proclamation officially classifying these reclaimed lands as alienable or
disposable and open to disposition or concession (emphasis supplied).[74]
Apropos the requisite law categorizing reclaimed land as alienable or disposable,
we find that RA 6957 as amended by RA 7718 provides ample authority for the
classification of reclaimed land in the SMDRP for the repayment scheme of the
BOT project as alienable and disposable lands of public domain. Sec. 6 of RA
6957 as amended by RA 7718 provides:

For the financing, construction, operation and maintenance of any

infrastructure projects undertaken through the build-operate-and transfer
arrangement or any of its variations pursuant to the provisions of this
Act, the project proponent x x x may likewise be repaid in the form of a
share in the revenue of the project or other non-monetary payments, such
as, but not limited to, the grant of a portion or percentage of the
reclaimed land, subject to the constitutional requirements with respect
to the ownership of the land. (Emphasis supplied.)

While RA 6957 as modified by RA 7718 does not expressly declare that the
reclaimed lands that shall serve as payment to the project proponent have become
alienable and disposable lands and opened for disposition; nonetheless, this
conclusion is necessarily implied, for how else can the land be used as the enabling
component for the Project if such classification is not deemed made?

It may be argued that the grant of authority to sell public lands, pursuant to PEA,
does not convert alienable lands of public domain into private or patrimonial
lands. We ruled in PEA that alienable lands of public domain must be
transferred to qualified private parties, or to government entities not tasked
to dispose of public lands, before these lands can become private or
patrimonial lands (emphasis supplied).[75] To lands reclaimed by PEA or through
a contract with a private person or entity, such reclaimed lands still remain
alienable lands of public domain which can be transferred only to Filipino citizens
but not to a private corporation. This is because PEA under PD 1084 and EO 525 is
tasked to hold and dispose of alienable lands of public domain and it is only when
it is transferred to Filipino citizens that it becomes patrimonial property. On the
other hand, the NHA is a government agency not tasked to dispose of public lands
under its charterThe Revised Administrative Code of 1987. The NHA is an end-
user agency authorized by law to administer and dispose of reclaimed lands. The
moment titles over reclaimed lands based on the special patents are transferred to
the NHA by the Register of Deeds, they are automatically converted to patrimonial
properties of the State which can be sold to Filipino citizens and private
corporations, 60% of which are owned by Filipinos. The reason is obvious: if the
reclaimed land is not converted to patrimonial land once transferred to NHA, then
it would be useless to transfer it to the NHA since it cannot legally transfer or
alienate lands of public domain. More importantly, it cannot attain its avowed
purposes and goals since it can only transfer patrimonial lands to qualified
beneficiaries and prospective buyers to raise funds for the SMDRP.

From the foregoing considerations, we find that the 79-hectare reclaimed land has
been declared alienable and disposable land of the public domain; and in the hands
of NHA, it has been reclassified as patrimonial property.

Petitioner, however, contends that the reclaimed lands were inexistent prior to the
three (3) Presidential Acts (MO 415 and Proclamations Nos. 39 and 465) and
hence, the declaration that such areas are alienable and disposable land of the
public domain, citing PEA, has no legal basis.

Petitioners contention is not well-taken.

Petitioners sole reliance on Proclamations Nos. 39 and 465 without taking into
consideration the special patents issued by the DENR demonstrates the inherent
weakness of his proposition. As was ruled in PEA cited by petitioner himself, PD
No. 1085, coupled with President Aquinos actual issuance of a special patent
covering the Freedom Islands is equivalent to an official proclamation classifying
the Freedom islands as alienable or disposable lands of public domain. In a similar
vein, the combined and collective effect of Proclamations Nos. 39 and 465 with
Special Patents Nos. 3592 and 3598 is tantamount to and can be considered to be
an official declaration that the reclaimed lots are alienable or disposable lands of
the public domain.

The reclaimed lands covered by Special Patents Nos. 3591, 3592, and 3598,
which evidence transfer of ownership of reclaimed lands to the NHA, are official
acts of the DENR Secretary in the exercise of his power of supervision and control
over alienable and disposable public lands and his exclusive jurisdiction over the
management and disposition of all lands of public domain under the Revised
Administrative Code of 1987. Special Patent No. 3592 speaks of the transfer of
Lots 1 and 2, and RI-003901-000012-D with an area of 401,485 square meters
based on the survey and technical description approved by the Bureau of
Lands. Lastly, Special Patent No. 3598 was issued in favor of the NHA
transferring to said agency a tract of land described in Plan RL-00-000013 with an
area of 390,000 square meters based on the survey and technical descriptions
approved by the Bureau of Lands.

The conduct of the survey, the preparation of the survey plan, the computation of
the technical description, and the processing and preparation of the special patent
are matters within the technical area of expertise of administrative agencies like the
DENR and the Land Management Bureau and are generally accorded not only
respect but at times even finality.[76] Preparation of special patents calls for
technical examination and a specialized review of calculations and specific details
which the courts are ill-equipped to undertake; hence, the latter defer to the
administrative agency which is trained and knowledgeable on such matters.[77]

Subsequently, the special patents in the name of the NHA were submitted to the
Register of Deeds of the City of Manila for registration, and corresponding
certificates of titles over the reclaimed lots were issued based on said special
patents. The issuance of certificates of titles in NHAs name automatically converts
the reclaimed lands to patrimonial properties of the NHA. Otherwise, the lots
would not be of use to the NHAs housing projects or as payment to the BOT
contractor as the enabling component of the BOT contract. The laws of the land
have to be applied and interpreted depending on the changing conditions and
times. Tempora mutantur et legis mutantur in illis (time changes and laws change
with it). One such law that should be treated differently is the BOT Law (RA 6957)
which brought about a novel way of implementing government contracts by
allowing reclaimed land as part or full payment to the contractor of a government
project to satisfy the huge financial requirements of the undertaking. The NHA
holds the lands covered by Special Patents Nos. 3592 and 3598 solely for the
purpose of the SMDRP undertaken by authority of the BOT Law and for
disposition in accordance with said special law. The lands become alienable and
disposable lands of public domain upon issuance of the special patents and become
patrimonial properties of the Government from the time the titles are issued to the
NHA.
As early as 1999, this Court in Baguio v. Republic laid down the jurisprudence
that:

It is true that, once a patent is registered and the corresponding

certificate of title is issued, the land covered by them ceases to be part of
the public domain and becomes private property, and the Torrens Title
issued pursuant to the patent becomes indefeasible upon the expiration of
one year from the date of issuance of such patent.[78]

The doctrine was reiterated in Republic v. Heirs of Felipe Alijaga, Sr.,[79] Heirs of
Carlos Alcaraz v. Republic,[80] and the more recent case of Doris Chiongbian-Oliva
v. Republic of the Philippines.[81] Thus, the 79-hectare reclaimed land became
patrimonial property after the issuance of certificates of titles to the NHA based on
Special Patents Nos. 3592 and 3598.

One last point. The ruling in PEA cannot even be applied retroactively to the lots
covered by Special Patents Nos. 3592 (40 hectare reclaimed land) and 3598 (39-
hectare reclaimed land). The reclamation of the land under SMDRP was completed
in August 1996 while the PEA decision was rendered on July 9, 2002. In the
meantime, subdivided lots forming parts of the reclaimed land were already sold to
private corporations for value and separate titles issued to the buyers. The Project
was terminated through a Memorandum of Agreement signed on August 27,
2003. The PEA decision became final through the November 11,
2003 Resolution. It is a settled precept that decisions of the Supreme Court can
only be applied prospectively as they may prejudice vested rights if applied
retroactively.

In Benzonan v. Court of Appeals, the Court trenchantly elucidated the prospective

application of its decisions based on considerations of equity and fair play, thus:
At that time, the prevailing jurisprudence interpreting section 119
of R.A. 141 as amended was that enunciated in Monge and Tupas cited
above. The petitioners Benzonan and respondent Pe and the DBP are
bound by these decisions for pursuant to Article 8 of the Civil Code
judicial decisions applying or interpreting the laws of the Constitution
shall form a part of the legal system of the Philippines. But while our
decisions form part of the law of the land, they are also subject to Article
 4 of the Civil Code which provides that laws shall have no retroactive
effect unless the contrary is provided. This is expressed in the familiar
legal maxim lex prospicit, non respicit, the law looks forward not
backward. The rationale against retroactivity is easy to perceive. The
retroactive application of a law usually divests rights that have already
become vested or impairs the obligations of contract and hence, is
unconstitutional.

The same consideration underlies our rulings giving only prospective

effect to decisions enunciating new doctrines. Thus, we emphasized in
People v. Jabinal, 55 SCRA 607 [1974] x x x when a doctrine of this
Court is overruled and a different view is adopted, the new doctrine
should be applied prospectively and should not apply to parties who had
relied on the old doctrine and acted on the faith thereof.[82]

Fourth Issue: Whether respondent RBI can acquire reclaimed

lands when there was no declaration that said lands are no
longer needed for public use

Petitioner Chavez avers that despite the declaration that the reclaimed areas are
alienable lands of the public domain, still, the reclamation is flawed for there was
never any declaration that said lands are no longer needed for public use.

We are not moved by petitioners submission.

Even if it is conceded that there was no explicit declaration that the lands are no
longer needed for public use or public service, there was however an implicit
executive declaration that the reclaimed areas R-10 are not necessary anymore for
public use or public service when President Aquino through MO 415 conveyed the
same to the NHA partly for housing project and related commercial/industrial
development intended for disposition to and enjoyment of certain beneficiaries and
not the public in general and partly as enabling component to finance the project.

President Ramos, in issuing Proclamation No. 39, declared, though

indirectly, that the reclaimed lands of the Smokey Mountain project are no longer
required for public use or service, thus:
 These parcels of land of public domain are hereby placed under the
administration and disposition of the National Housing Authority to
develop, subdivide and dispose to qualified beneficiaries, as well as its
development for mix land use (commercial/industrial) to provide
employment opportunities to on-site families and additional areas for
port related activities.(Emphasis supplied.)

While numerical count of the persons to be benefited is not the determinant

whether the property is to be devoted to public use, the declaration in Proclamation
No. 39 undeniably identifies only particular individuals as beneficiaries to whom
the reclaimed lands can be sold, namelythe Smokey Mountain dwellers. The rest of
the Filipinos are not qualified; hence, said lands are no longer essential for the use
of the public in general.

In addition, President Ramos issued on August 31, 1994 Proclamation No.

465 increasing the area to be reclaimed from forty (40) hectares to seventy-nine
(79) hectares, elucidating that said lands are undoubtedly set aside for the
beneficiaries of SMDRP and not the publicdeclaring the power of NHA to dispose
of land to be reclaimed, thus: The authority to administer, develop, or dispose
lands identified and reserved by this Proclamation and Proclamation No. 39
(s.1992), in accordance with the SMDRP, as enhance, is vested with the NHA,
subject to the provisions of existing laws. (Emphasis supplied.)

MO 415 and Proclamations Nos. 39 and 465 are declarations that proclaimed the
non-use of the reclaimed areas for public use or service as the Project cannot be
successfully implemented without the withdrawal of said lands from public use or
service. Certainly, the devotion of the reclaimed land to public use or service
conflicts with the intended use of the Smokey Mountain areas for housing and
employment of the Smokey Mountain scavengers and for financing the Project
because the latter cannot be accomplished without abandoning the public use of the
subject land. Without doubt, the presidential proclamations on SMDRP together
with the issuance of the special patents had effectively removed the reclaimed
lands from public use.
More decisive and not in so many words is the ruling in PEA which we earlier
cited, that PD No. 1085 and President Aquinos issuance of a land patent also
constitute a declaration that the Freedom Islands are no longer needed for public
service. Consequently, we ruled in that case that the reclaimed lands are open to
disposition or concession to qualified parties.[83]

In a similar vein, presidential Proclamations Nos. 39 and 465 jointly with the
special patents have classified the reclaimed lands as alienable and disposable and
open to disposition or concession as they would be devoted to units
for Smokey Mountain beneficiaries. Hence, said lands are no longer intended for
public use or service and shall form part of the patrimonial properties of the State
under Art. 422 of the Civil Code.[84] As discussed a priori, the lands were classified
as patrimonial properties of the NHA ready for disposition when the titles were
registered in its name by the Register of Deeds.

Moreover, reclaimed lands that are made the enabling components of a BOT
infrastructure project are necessarily reclassified as alienable and disposable lands
under the BOT Law; otherwise, absurd and illogical consequences would naturally
result. Undoubtedly, the BOT contract will not be accepted by the BOT contractor
since there will be no consideration for its contractual obligations. Since reclaimed
land will be conveyed to the contractor pursuant to the BOT Law, then there is an
implied declaration that such land is no longer intended for public use or public
service and, hence, considered patrimonial property of the State.

Fifth Issue: Whether there is a law authorizing sale of

reclaimed lands

Petitioner next claims that RBI cannot acquire the reclaimed lands because there
was no law authorizing their sale. He argues that unlike PEA, no legislative
authority was granted to the NHA to sell reclaimed land.

This position is misplaced.

Petitioner relies on Sec. 60 of Commonwealth Act (CA) 141 to support his view
that the NHA is not empowered by any law to sell reclaimed land, thus:
 Section 60. Any tract of land comprised under this title may be leased or
sold, as the case may be, to any person, corporation or association
authorized to purchase or lease public lands for agricultural
purposes. The area of the land so leased or sold shall be such as shall, in
the judgment of the Secretary of Agriculture and Natural Resources, be
reasonably necessary for the purposes for which such sale or lease if
requested and shall in no case exceed one hundred and forty-four
hectares: Provided, however, That this limitation shall not apply to
grants, donations, transfers, made to a province, municipality or branch
or subdivision of the Government for the purposes deemed by said
entities conducive to the public interest; but the land so granted
donated or transferred to a province, municipality, or branch or
subdivision of the Government shall not be alienated, encumbered,
or otherwise disposed of in a manner affecting its title, except when
authorized by Congress; Provided, further, That any person,
corporation, association or partnership disqualified from purchasing
public land for agricultural purposes under the provisions of this Act,
may lease land included under this title suitable for industrial or
residential purposes, but the lease granted shall only be valid while such
land is used for the purposes referred to. (Emphasis supplied.)

Reliance on said provision is incorrect as the same applies only to a province,

municipality or branch or subdivision of the Government. The NHA is not a
government unit but a government corporation performing governmental and
proprietary functions.

In addition, PD 757 is clear that the NHA is empowered by law to transfer

properties acquired by it under the law to other parties, thus:

Section 6. Powers and functions of the Authority. The Authority shall

have the following powers and functions to be exercised by the Boards
in accordance with the established national human settlements plan
prepared by the Human Settlements Commission:

xxxx
 (k) Enter into contracts whenever necessary under such terms and
conditions as it may deem proper and reasonable;

(l) Acquire property rights and interests, and encumber or

otherwise dispose the same as it may deem appropriate (Emphasis
supplied.)

Letter (l) is emphatic that the NHA can acquire property rights and interests and
encumber or otherwise dispose of them as it may deem appropriate. The transfer of
the reclaimed lands by the National Government to the NHA for housing,
commercial, and industrial purposes transformed them into patrimonial lands
which are of course owned by the State in its private or proprietary
capacity. Perforce, the NHA can sell the reclaimed lands to any Filipino citizen or
qualified corporation.

Sixth Issue: Whether the transfer of reclaimed lands to RBI

was done by public bidding

Petitioner also contends that there was no public bidding but an awarding of
ownership of said reclaimed lands to RBI. Public bidding, he says, is required
under Secs. 63 and 67 of CA 141 which read:
Section 63. Whenever it is decided that lands covered by this
chapter are not needed for public purposes, the Director of Lands shall
ask the Secretary of Agriculture and Commerce for authority to dispose
of the same. Upon receipt of such authority, the Director of Lands shall
give notice by public advertisement in the same manner as in the case of
leases or sales of agricultural public land, that the Government will lease
or sell, as the case may be, the lots or blocks specified in the
advertisement, for the purpose stated in the notice and subject to the
conditions specified in this chapter.

xxxx
 Section 67. The lease or sale shall be made through oral bidding; and
adjudication shall be made to the highest bidder. However, where an
applicant has made improvements on the land by virtue of a permit
issued to him by competent authority, the sale or lease shall be made by
sealed bidding as prescribed in section twenty-six of this Act, the
provisions of which shall be applied whenever applicable. If all or part
of the lots remain unleased or unsold, the Director of Lands shall from
time to time announce in the Official Gazette or in any other newspapers
of general circulation, the lease of sale of those lots, if necessary.

He finds that the NHA and RBI violated Secs. 63 and 67 of CA 141, as the
reclaimed lands were conveyed to RBI by negotiated contract and not by public
bidding as required by law.

This stand is devoid of merit.

There is no doubt that respondent NHA conducted a public bidding of the right to
become its joint venture partner in the Smokey Mountain Project. Notices or
Invitations to Bid were published in the national dailies on January 23 and 26,
1992 and February 1, 14, 16, and 23, 1992. The bidding proper was done by the
Bids and Awards Committee (BAC) on May 18, 1992. On August 31, 1992, the
Inter-Agency Techcom made up of the NHA, PEA, DPWH, PPA, DBP, and
DENR opened the bids and evaluated them, resulting in the award of the contract
to respondent RBI on October 7, 1992.

On March 19, 1993, respondents NHA and RBI signed the JVA. On February 23,
1994, said JVA was amended and restated into the ARJVA. On August 11, 1994,
the ARJVA was again amended. On September 7, 1994, the OP approved the
ARJVA and the amendments to the ARJVA. From these factual settings, it cannot
be gainsaid that there was full compliance with the laws and regulations governing
public biddings involving a right, concession, or property of the government.

Petitioner concedes that he does not question the public bidding on the right to be a
joint venture partner of the NHA, but the absence of bidding in the sale of
alienable and disposable lands of public domain pursuant to CA 141 as amended.
Petitioners theory is incorrect.

Secs. 63 and 67 of CA 141, as amended, are in point as they refer to government

sale by the Director of Lands of alienable and disposable lands of public
domain. This is not present in the case at bar. The lands reclaimed by and
conveyed to the NHA are no longer lands of public domain. These lands became
proprietary lands or patrimonial properties of the State upon transfer of the titles
over the reclaimed lands to the NHA and hence outside the ambit of CA 141. The
NHA can therefore legally transfer patrimonial land to RBI or to any other
interested qualified buyer without any bidding conducted by the Director of Lands
because the NHA, unlike PEA, is a government agency not tasked to sell lands of
public domain. Hence, it can only hold patrimonial lands and can dispose of such
lands by sale without need of public bidding.
Petitioner likewise relies on Sec. 79 of PD 1445 which requires public
bidding when government property has become unserviceable for any cause or is
no longer needed.It appears from the Handbook on Property and Supply
Management System, Chapter 6, that reclaimed lands which have become
patrimonial properties of the State, whose titles are conveyed to government
agencies like the NHA, which it will use for its projects or programs, are not within
the ambit of Sec. 79. We quote the determining factors in the Disposal of
Unserviceable Property, thus:

Determining Factors in the Disposal of Unserviceable Property

Property, which can no longer be repaired or reconditioned;

Property whose maintenance costs of repair more than outweigh the

benefits and services that will be derived from its continued use;

Property that has become obsolete or outmoded because of changes in

technology;

Serviceable property that has been rendered unnecessary due to

change in the agencys function or mandate;

Unused supplies, materials and spare parts that were procured in

excess of requirements; and
 Unused supplies and materials that [have] become dangerous to use
because of long storage or use of which is determined to be
hazardous.[85]

Reclaimed lands cannot be considered unserviceable properties. The

reclaimed lands in question are very much needed by the NHA for the Smokey
Mountain Project because without it, then the projects will not be successfully
implemented. Since the reclaimed lands are not unserviceable properties and are
very much needed by NHA, then Sec. 79 of PD 1445 does not apply.

More importantly, Sec. 79 of PD 1445 cannot be applied to patrimonial properties

like reclaimed lands transferred to a government agency like the NHA which has
entered into a BOT contract with a private firm. The reason is obvious. If the
patrimonial property will be subject to public bidding as the only way of disposing
of said property, then Sec. 6 of RA 6957 on the repayment scheme is almost
impossible or extremely difficult to implement considering the uncertainty of a
winning bid during public auction. Moreover, the repayment scheme of a BOT
contract may be in the form of non-monetary payment like the grant of a portion or
percentage of reclaimed land. Even if the BOT partner participates in the public
bidding, there is no assurance that he will win the bid and therefore the payment in
kind as agreed to by the parties cannot be performed or the winning bid prize might
be below the estimated valuation of the land. The only way to harmonize Sec. 79
of PD 1445 with Sec. 6 of RA 6957 is to consider Sec. 79 of PD 1445 as
inapplicable to BOT contracts involving patrimonial lands. The law does not
intend anything impossible (lex non intendit aliquid impossibile).

Seventh Issue: Whether RBI, being a private corporation,

is barred by the Constitution to acquire lands of public domain

Petitioner maintains that RBI, being a private corporation, is expressly

prohibited by the 1987 Constitution from acquiring lands of public domain.

Petitioners proposition has no legal mooring for the following reasons:

1. RA 6957 as amended by RA 7718 explicitly states that a contractor can be paid
a portion as percentage of the reclaimed land subject to the constitutional
requirement that only Filipino citizens or corporations with at least 60% Filipino
equity can acquire the same. It cannot be denied that RBI is a private corporation,
where Filipino citizens own at least 60% of the stocks. Thus, the transfer to RBI is
valid and constitutional.
2. When Proclamations Nos. 39 and 465 were issued, inalienable lands
covered by said proclamations were converted to alienable and disposable lands of
public domain.When the titles to the reclaimed lands were transferred to the NHA,
said alienable and disposable lands of public domain were automatically classified
as lands of the private domain or patrimonial properties of the State because the
NHA is an agency NOT tasked to dispose of alienable or disposable lands of
public domain. The only way it can transfer the reclaimed land in conjunction with
its projects and to attain its goals is when it is automatically converted to
patrimonial properties of the State. Being patrimonial or private properties of the
State, then it has the power to sell the same to any qualified personunder the
Constitution, Filipino citizens as private corporations, 60% of which is owned by
Filipino citizens like RBI.

3. The NHA is an end-user entity such that when alienable lands of public domain
are transferred to said agency, they are automatically classified as patrimonial
properties. The NHA is similarly situated as BCDA which was granted the
authority to dispose of patrimonial lands of the government under RA 7227. The
nature of the property holdings conveyed to BCDA is elucidated and stressed in
the May 6, 2003 Resolution in Chavez v. PEA, thus:

BCDA is an entirely different government entity. BCDA is

authorized by law to sell specific government lands that have long
been declared by presidential proclamations as military reservations
for use by the different services of the armed forces under the
Department of National Defense. BCDAs mandate is specific and
limited in area, while PEAs mandate is general and national. BCDA
holds government lands that have been granted to end-user
government entitiesthe military services of the armed forces. In
contrast, under Executive Order No. 525, PEA holds the reclaimed
public lands, not as an end-user entity, but as the government
 agency primarily responsible for integrating, directing, and
coordinating all reclamation projects for and on behalf of the
National Government.

x x x Well-settled is the doctrine that public land granted to an end-user

government agency for a specific public use may subsequently be
withdrawn by Congress from public use and declared patrimonial
property to be sold to private parties. R.A. No. 7227 creating the
BCDA is a law that declares specific military reservations no longer
needed for defense or military purposes and reclassifies such lands
as patrimonial property for sale to private parties.

Government owned lands, as long as they are patrimonial property,

can be sold to private parties, whether Filipino citizens or qualified
private corporations. Thus, the so-called Friar Lands acquired by the
government under Act No. 1120 are patrimonial property which even
private corporations can acquire by purchase. Likewise, reclaimed
alienable lands of the public domain if sold or transferred to a public or
municipal corporation for a monetary consideration become patrimonial
property in the hands of the public or municipal corporation. Once
converted to patrimonial property, the land may be sold by the public or
municipal corporation to private parties, whether Filipino citizens or
qualified private corporations.[86] (Emphasis supplied.)

The foregoing Resolution makes it clear that the SMDRP was a program adopted
by the Government under Republic Act No. 6957 (An Act Authorizing the
Financing, Construction, Operation and Maintenance of Infrastructure Projects by
the Private Sector, and For Other Purposes), as amended by RA 7718, which is a
special law similar to RA 7227. Moreover, since the implementation was assigned
to the NHA, an end-user agency under PD 757 and RA 7279, the reclaimed lands
registered under the NHA are automatically classified as patrimonial lands ready
for disposition to qualified beneficiaries.

The foregoing reasons likewise apply to the contention of petitioner that HCPTI,
being a private corporation, is disqualified from being a transferee of public
land. What was transferred to HCPTI is a 10-hectare lot which is already classified
as patrimonial property in the hands of the NHA. HCPTI, being a qualified
corporation under the 1987 Constitution, the transfer of the subject lot to it is valid
and constitutional.

Eighth Issue: Whether respondents can be compelled to disclose

all information related to the SMDRP

Petitioner asserts his right to information on all documents such as contracts,

reports, memoranda, and the like relative to SMDRP.

Petitioner asserts that matters relative to the SMDRP have not been disclosed to the
public like the current stage of the Project, the present financial capacity of RBI,
the complete list of investors in the asset pool, the exact amount of investments in
the asset pool and other similar important information regarding the Project.

He prays that respondents be compelled to disclose all information regarding

the SMDRP and furnish him with originals or at least certified true copies of all
relevant documents relating to the said project including, but not limited to, the
original JVA, ARJVA, AARJVA, and the Asset Pool Agreement.

This relief must be granted.

The right of the Filipino people to information on matters of public concern

is enshrined in the 1987 Constitution, thus:

ARTICLE II

xxxx

SEC. 28. Subject to reasonable conditions prescribed by law, the State

adopts and implements a policy of full public disclosure of all its
transactions involving public interest.

ARTICLE III

SEC. 7. The right of the people to information on matters of public

concern shall be recognized. Access to official records, and to
 documents, and papers pertaining to official acts, transactions, or
decisions, as well as to government research data used as basis for policy
development, shall be afforded the citizen, subject to such limitations as
may be provided by law.

In Valmonte v. Belmonte, Jr., this Court explicated this way:

[A]n essential element of these freedoms is to keep open a continuing
dialogue or process of communication between the government and the
people. It is in the interest of the State that the channels for free political
discussion be maintained to the end that the government may perceive
and be responsive to the peoples will. Yet, this open dialogue can be
effective only to the extent that the citizenry is informed and thus able to
formulate its will intelligently. Only when the participants in the
discussion are aware of the issues and have access to information
relating thereto can such bear fruit.[87]

In PEA, this Court elucidated the rationale behind the right to information:

These twin provisions of the Constitution seek to promote transparency

in policy-making and in the operations of the government, as well as
provide the people sufficient information to exercise effectively other
constitutional rights. These twin provisions are essential to the exercise
of freedom of expression. If the government does not disclose its official
acts, transactions and decisions to citizens, whatever citizens say, even if
expressed without any restraint, will be speculative and amount to
nothing. These twin provisions are also essential to hold public officials
at all times x x x accountable to the people, for unless citizens have the
proper information, they cannot hold public officials accountable for
anything. Armed with the right information, citizens can participate in
public discussions leading to the formulation of government policies and
their effective implementation. An informed citizenry is essential to the
existence and proper functioning of any democracy.[88]

Sec. 28, Art. II compels the State and its agencies to fully disclose all of its
transactions involving public interest. Thus, the government agencies, without
need of demand from anyone, must bring into public view all the steps and
negotiations leading to the consummation of the transaction and the contents of the
perfected contract.[89] Such information must pertain to definite propositions of the
government, meaning official recommendations or final positions reached on the
different matters subject of negotiation.The government agency, however, need not
disclose intra-agency or inter-agency recommendations or communications during
the stage when common assertions are still in the process of being formulated or
are in the exploratory stage. The limitation also covers privileged communication
like information on military and diplomatic secrets; information affecting national
security; information on investigations of crimes by law enforcement agencies
before the prosecution of the accused; information on foreign relations,
intelligence, and other classified information.

It is unfortunate, however, that after almost twenty (20) years from birth of
the 1987 Constitution, there is still no enabling law that provides the mechanics for
the compulsory duty of government agencies to disclose information on
government transactions. Hopefully, the desired enabling law will finally see the
light of day if and when Congress decides to approve the proposed Freedom of
Access to Information Act. In the meantime, it would suffice that government
agencies post on their bulletin boards the documents incorporating the information
on the steps and negotiations that produced the agreements and the agreements
themselves, and if finances permit, to upload said information on their respective
websites for easy access by interested parties. Without any law or regulation
governing the right to disclose information, the NHA or any of the respondents
cannot be faulted if they were not able to disclose information relative to the
SMDRP to the public in general.

The other aspect of the peoples right to know apart from the duty to disclose
is the duty to allow access to information on matters of public concern under Sec.
7, Art. III of the Constitution. The gateway to information opens to the public the
following: (1) official records; (2) documents and papers pertaining to official acts,
transactions, or decisions; and (3) government research data used as a basis for
policy development.

Thus, the duty to disclose information should be differentiated from the duty to
permit access to information. There is no need to demand from the government
agency disclosure of information as this is mandatory under the Constitution;
failing that, legal remedies are available. On the other hand, the interested party
must first request or even demand that he be allowed access to documents and
papers in the particular agency. A request or demand is required; otherwise, the
government office or agency will not know of the desire of the interested party to
gain access to such papers and what papers are needed. The duty to disclose covers
only transactions involving public interest, while the duty to allow access has a
broader scope of information which embraces not only transactions involving
public interest, but any matter contained in official communications and public
documents of the government agency.

We find that although petitioner did not make any demand on the NHA to allow
access to information, we treat the petition as a written request or demand. We
order the NHA to allow petitioner access to its official records, documents, and
papers relating to official acts, transactions, and decisions that are relevant to the
said JVA and subsequent agreements relative to the SMDRP.

Ninth Issue: Whether the operative fact doctrine applies to the

instant petition

Petitioner postulates that the operative fact doctrine is inapplicable to the present
case because it is an equitable doctrine which could not be used to countenance an
inequitable result that is contrary to its proper office.

On the other hand, the petitioner Solicitor General argues that the existence of the
various agreements implementing the SMDRP is an operative fact that can no
longer be disturbed or simply ignored, citing Rieta v. People of the Philippines.[90]

The argument of the Solicitor General is meritorious.

The operative fact doctrine is embodied in De Agbayani v. Court of Appeals,

wherein it is stated that a legislative or executive act, prior to its being declared as
unconstitutional by the courts, is valid and must be complied with, thus:
 As the new Civil Code puts it: When the courts declare a law to be inconsistent
with the Constitution, the former shall be void and the latter shall govern.
Administrative or executive acts, orders and regulations shall be valid only when
they are not contrary to the laws of the Constitution. It is understandable why it
should be so, the Constitution being supreme and paramount. Any legislative or
executive act contrary to its terms cannot survive.

Such a view has support in logic and possesses the merit of simplicity. It
may not however be sufficiently realistic. It does not admit of doubt
that prior to the declaration of nullity such challenged legislative or
executive act must have been in force and had to be complied
with. This is so as until after the judiciary, in an appropriate case,
declares its invalidity, it is entitled to obedience and respect. Parties may
have acted under it and may have changed their positions. What could be
more fitting than that in a subsequent litigation regard be had to what has
been done while such legislative or executive act was in operation and
presumed to be valid in all respects. It is now accepted as a doctrine that
prior to its being nullified, its existence as a fact must be reckoned
with. This is merely to reflect awareness that precisely because the
judiciary is the governmental organ which has the final say on whether
or not a legislative or executive measure is valid, a period of time may
have elapsed before it can exercise the power of judicial review that may
lead to a declaration of nullity. It would be to deprive the law of its
quality of fairness and justice then, if there be no recognition of what had
transpired prior to such adjudication.

In the language of an American Supreme Court decision: The actual

existence of a statute, prior to such a determination [of
unconstitutionality], is an operative fact and may have consequences
which cannot justly be ignored. The past cannot always be erased by
a new judicial declaration. The effect of the subsequent ruling as to
invalidity may have to be considered in various aspects, with respect to
particular relations, individual and corporate, and particular conduct,
private and official. This language has been quoted with approval in a
resolution in Araneta v. Hill and the decision in Manila Motor Co., Inc.
v. Flores. An even more recent instance is the opinion of Justice Zaldivar
speaking for the Court in Fernandez v. Cuerva and Co.[91] (Emphasis
supplied.)

This doctrine was reiterated in the more recent case of City of Makati v. Civil
Service Commission, wherein we ruled that:
 Moreover, we certainly cannot nullify the City Governments order of
suspension, as we have no reason to do so, much less retroactively apply
such nullification to deprive private respondent of a compelling and
valid reason for not filing the leave application. For as we have held, a
void act though in law a mere scrap of paper nonetheless confers
legitimacy upon past acts or omissions done in reliance
thereof. Consequently, the existence of a statute or executive order
prior to its being adjudged void is an operative fact to which legal
consequences are attached. It would indeed be ghastly unfair to prevent
private respondent from relying upon the order of suspension in lieu of a
formal leave application.[92] (Emphasis supplied.)

The principle was further explicated in the case of Rieta v. People of

the Philippines, thus:

In similar situations in the past this Court had taken the pragmatic and realistic
course set forth in Chicot County Drainage District vs. Baxter Bank to wit:

The courts below have proceeded on the theory that the Act of Congress,
having been found to be unconstitutional, was not a law; that it was
inoperative, conferring no rights and imposing no duties, and hence
affording no basis for the challenged decree. x x x It is quite clear,
however, that such broad statements as to the effect of a determination of
unconstitutionality must be taken with qualifications. The actual existence
of a statute, prior to [the determination of its invalidity], is an operative
fact and may have consequences which cannot justly be ignored. The past
cannot always be erased by a new judicial declaration. The effect of the
subsequent ruling as to invalidity may have to be considered in various
aspects with respect to particular conduct, private and official. Questions
of rights claimed to have become vested, of status, of prior determinations
deemed to have finality and acted upon accordingly, of public policy in
the light of the nature both of the statute and of its previous application,
demand examination. These questions are among the most difficult of
those which have engaged the attention of courts, state and federal, and it
is manifest from numerous decisions that an all-inclusive statement of a
principle of absolute retroactive invalidity cannot be justified.
In the May 6, 2003 Resolution in Chavez v. PEA,[93] we ruled that De
Agbayani[94] is not applicable to the case considering that the prevailing law did not
authorize private corporations from owning land. The prevailing law at the time
was the 1935 Constitution as no statute dealt with the same issue.

In the instant case, RA 6957 was the prevailing law at the time that the joint
venture agreement was signed. RA 6957, entitled An Act Authorizing The
Financing, Construction, Operation And Maintenance Of Infrastructure Projects
By The Private Sector And For Other Purposes, which was passed by Congress
on July 24, 1989, allows repayment to the private contractor of reclaimed
lands.[95] Such law was relied upon by respondents, along with the above-
mentioned executive issuances in pushing through with the Project. The existence
of such law and issuances is an operative fact to which legal consequences have
attached. This Court is constrained to give legal effect to the acts done in
consonance with such executive and legislative acts; to do otherwise would work
patent injustice on respondents.

Further, in the May 6, 2003 Resolution in Chavez v. PEA, we ruled that in certain
cases, the transfer of land, although illegal or unconstitutional, will not be
invalidated on considerations of equity and social justice. However, in that case,
we did not apply the same considering that PEA, respondent in said case, was not
entitled to equity principles there being bad faith on its part, thus:

There are, moreover, special circumstances that disqualify Amari from

invoking equity principles. Amari cannot claim good faith because even
before Amari signed the Amended JVA on March 30, 1999, petitioner
had already filed the instant case on April 27, 1998 questioning precisely
the qualification of Amari to acquire the Freedom Islands. Even before
the filing of this petition, two Senate Committees had already approved
on September 16, 1997 Senate Committee Report No. 560. This Report
concluded, after a well-publicized investigation into PEAs sale of
the Freedom Islands to Amari, that the Freedom Islands are inalienable
lands of the public domain. Thus, Amari signed the Amended JVA
knowing and assuming all the attendant risks, including the annulment of
the Amended JVA.[96]
Such indicia of bad faith are not present in the instant case. When the ruling
in PEA was rendered by this Court on July 9, 2002, the JVAs were all
executed. Furthermore, when petitioner filed the instant case against respondents
on August 5, 2004, the JVAs were already terminated by virtue of the MOA
between the NHA and RBI. The respondents had no reason to think that their
agreements were unconstitutional or even questionable, as in fact, the concurrent
acts of the executive department lent validity to the implementation of the
Project. The SMDRP agreements have produced vested rights in favor of the slum
dwellers, the buyers of reclaimed land who were issued titles over said land, and
the agencies and investors who made investments in the project or who bought
SMPPCs. These properties and rights cannot be disturbed or questioned after the
passage of around ten (10) years from the start of the SMDRP implementation.
Evidently, the operative fact principle has set in. The titles to the lands in the hands
of the buyers can no longer be invalidated.
The Courts Dispositions

Based on the issues raised in this petition, we find that the March 19, 1993 JVA
between NHA and RBI and the SMDRP embodied in the JVA, the subsequent
amendments to the JVA and all other agreements signed and executed in relation to
it, including, but not limited to, the September 26, 1994 Smokey Mountain Asset
Pool Agreement and the agreement on Phase I of the Project as well as all other
transactions which emanated from the Project, have been shown to be valid, legal,
and constitutional. Phase II has been struck down by the Clean Air Act.

With regard to the prayer for prohibition, enjoining respondents particularly

respondent NHA from further implementing and/or enforcing the said Project and
other agreements related to it, and from further deriving and/or enjoying any rights,
privileges and interest from the Project, we find the same prayer meritless.

Sec. 2 of Rule 65 of the 1997 Rules of Civil Procedure provides:

Sec. 2. Petition for prohibition.When the proceedings of any tribunal,

corporation, board, officer or person, whether exercising judicial, quasi-
judicial or ministerial functions, are without or in excess of its or his
jurisdiction, or with grave abuse of discretion amounting to lack or
excess of jurisdiction, and there is no appeal or any other plain, speedy,
 and adequate remedy in the ordinary course of law, a person aggrieved
thereby may file a verified petition in the proper court, alleging the facts
with certainty and praying that judgment be rendered commanding the
respondent to desist from further proceedings in the action or matter
specified therein, or otherwise granting such incidental reliefs as law and
justice may require.

It has not been shown that the NHA exercised judicial or quasi-judicial
functions in relation to the SMDRP and the agreements relative to it. Likewise, it
has not been shown what ministerial functions the NHA has with regard to the
SMDRP.
A ministerial duty is one which is so clear and specific as to leave no room for the
exercise of discretion in its performance. It is a duty which an officer performs in a
given state of facts in a prescribed manner in obedience to the mandate of legal
authority, without regard to the exercise of his/her own judgment upon the
propriety of the act done.[97]
Whatever is left to be done in relation to the August 27, 2003 MOA, terminating
the JVA and other related agreements, certainly does not involve ministerial
functions of the NHA but instead requires exercise of judgment. In fact, Item No. 4
of the MOA terminating the JVAs provides for validation of the developers (RBIs)
claims arising from the termination of the SMDRP through the various government
agencies.[98] Such validation requires the exercise of discretion.

In addition, prohibition does not lie against the NHA in view of petitioners failure
to avail and exhaust all administrative remedies. Clear is the rule that prohibition is
only available when there is no adequate remedy in the ordinary course of law.

More importantly, prohibition does not lie to restrain an act which is already a fait
accompli. The operative fact doctrine protecting vested rights bars the grant of the
writ of prohibition to the case at bar. It should be remembered that petitioner was
the Solicitor General at the time SMDRP was formulated and implemented. He had
the opportunity to question the SMDRP and the agreements on it, but he did
not. The moment to challenge the Project had passed.

On the prayer for a writ of mandamus, petitioner asks the Court to compel
respondents to disclose all documents and information relating to the project,
including, but not limited to, any subsequent agreements with respect to the
different phases of the Project, the revisions of the original plan, the additional
works incurred on the Project, the current financial condition of respondent RBI,
and the transactions made with respect to the project. We earlier ruled that
petitioner will be allowed access to official records relative to the SMDRP. That
would be adequate relief to satisfy petitioners right to the information gateway.

WHEREFORE, the petition is PARTIALLY GRANTED.

The prayer for a writ of prohibition is DENIED for lack of merit.

The prayer for a writ of mandamus is GRANTED. Respondent NHA is ordered to

allow access to petitioner to all public documents and official records relative to
the SMDRPincluding, but not limited to, the March 19, 1993 JVA between the
NHA and RBI and subsequent agreements related to the JVA, the revisions over
the original plan, and the additional works incurred on and the transactions made
with respect to the Project.

No costs.

SO ORDERED.

G.R. No. 93237 November 6, 1992

RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), petitioner,

vs.
NATIONAL TELECOMMUNICATIONS COMMISSION (NTC) and JUAN A. ALEGRE, respondents.

PADILLA, J.:

Private respondent Juan A. Alegre's wife, Dr. Jimena Alegre, sent two (2) RUSH telegrams through
petitioner RCPI's facilities in Taft Ave., Manila at 9:00 in the morning of 17 March 1989 to his sister
and brother-in-law in Valencia, Bohol and another sister-in-law in Espiritu, Ilocos Norte, with the
following identical texts:

MANONG POLING DIED INTERMENT TUESDAY 1

Both telegrams did not reach their destinations on the expected dates. Private respondent filed a
letter-complaint against the RCPI with the National Telecommunications Commission (NTC) for poor
service, with a request for the imposition of the appropriate punitive sanction against the company.

Taking cognizance of the complaint, NTC directed RCPI to answer the complaint and set the initial
hearing of the case to 2 May 1989. After two (2) resettings, RCPI moved to dismiss the case on the
following grounds:

1. Juan Alegre is not the real party in interest;

2. NTC has no jurisdiction over the case;

3. the continued hearing of the case violates its constitutional right to due process of
law. 2

RCPI likewise moved for deferment of scheduled hearings until final determination of its motion to
dismiss.

On 15 June 1989, NTC proceeded with the hearing and received evidence for private respondent
Juan Alegre. On 3 October 1989, RCPI's motion to dismiss was denied, thus:

The herein complainant is the husband of the sender of the "rush" telegram that
respondent allegedly failed to deliver in a manner respondent bound itself to
undertake, so his legal interest in this administrative case cannot be seriously called
in question. As regards the issue of jurisdiction, the authority of the Commission to
hear and decide this case stems from its power of control and supervision over the
operation of public communication utilities as conferred upon it by law.

Besides, the filing of a motion to dismiss is not allowed by the rules (Section 1, Rule
12, Rules of Practice and Procedures). Following, however, the liberal construction of
the rules, respondent (sic) motion shall be treated as its answer or be passed upon
after the conclusion of the hearing on the merits. . . . 3

Hearings resumed in the absence of petitioner RCPI which was, however, duly notified thereof. On
27 November 1989, NTC disposed of the controversy in the following manner:

WHEREFORE, in view of all the foregoing, the Commission finds respondent

administratively liable for deficient and inadequate service defined under Section
19(a) of C.A. 146 and hereby imposes the penalty of FINE payable within thirty (30)
days from receipt hereof in the aggregate amount of ONE THOUSAND PESOS
(P1,000.00) for:

1. Rush Telegram sent to Valencia, Bohol on March 17, 1989 and received on March
21, 1989

3 days x P200.00 per day = P600.00

2. Rush Telegram sent to Espiritu, Ilocos Norte on March 17, 1989 and received on
March 20, 1989

2 days x P200.00 per day = P400.00

 Total = P1,000.00

ENTERED. November 27, 1989. 4

A motion for reconsideration by RCPI reiterating averments in its earlier motion to dismiss was
denied for lack of merit; 5 hence, this petition for review invoking C.A. 146 Sec. 19(a) which limits the
jurisdiction of the Public Service Commission (precursor of the NTC) to the fixing of rates. RCPI
submits that its position finds support in two (2) decided cases 6 identical with the present one. Then
Justice (later Chief Justice) Fernando writing for the Court stated:

. . . There can be no justification then for the Public Service Commission imposing
the fines for these two petitions. The law cannot be any clearer. The only power it
possessed over radio companies, as noted was the (sic ) fix rates. It could not take to
task a radio company for negligence or misfeasance. It was bereft of such
competence. It was not vested within such authority. . . .

The Public Service Commission having been abolished by virtue of a Presidential

Decree, as set forth at the outset, and a new Board of Communications having been
created to take its place, nothing said in its decision has reference to whatever
powers are now lodged in the latter body. . . . . . . (Footnotes omitted)

Two (2) later cases, 7 adhering to the above tenet ruled:

Even assuming that the respondent Board of Communications has the power of
jurisdiction over petitioner in the exercise of its supervision to insure adequate public
service, petitioner cannot be subjected to payment of fine under sec. 21 of the Public
Service Act, because this provision of the law subjects to a fine every public service
that violates or falls (sic) to comply with the terms and conditions of any certificate or
any orders, decisions and regulations of the Commission. . . . .

The Office of the Solicitor General now claims that the cited cases are no longer applicable, that the
power and authority of the NTC to impose fines is incidental to its power to regulate public service
utilities and to supervise telecommunications facilities, which are now clearly defined in Section 15,
Executive Order No. 546 dated 23 July 1979: thus:

Functions of the Commission. The Commission shall exercise the following functions:

xxx xxx xxx

b. Establish, prescribe and regulate the areas of operation of particular operators of

the public service communications;

xxx xxx xxx

h. Supervise and inspect the operation of radio stations and telecommunications

facilities.

Regulatory administrative agencies necessarily impose sanctions, adds the Office of the Solicitor
General. RCPI was fined based on the finding of the NTC that it failed to undertake adequate service
in delivering two (2) rush telegrams. NTC takes the view that its power of supervision was
broadened by E. O. No. 546, and that this development superseded the ruling in RCPI vs. Francisco
Santiago and companion cases.

The issues of due process and real parties in interest do not have to be discussed in this case. This
decision will dwell on the primary question of jurisdiction of the NTC to administratively impose fines
on a telegraph company which fails to render adequate service to a consumer.

E. O. 546, it will be observed, is couched in general terms. The NTC stepped "into the shoes" of the
Board of Communications which exercised powers pursuant to the Public Service Act. The power to
impose fines should therefore be read in the light of the Francisco Santiago case because
subsequent legislation did not grant additional powers to the Board of Communications. The Board
in other words, did not possess the power to impose administrative fines on public services
rendering deficient service to customers, ergo its successor cannot arrogate unto itself such power,
in the absence of legislation. It is true that the decision in RCPI vs. Board of Communications seems
to have modified the Santiago ruling in that the later case held that the Board of Communications
can impose fines if the public service entity violates or fails to comply with the terms and conditions
of any certificate or any order, decision or regulation of the Commission. But can private
respondent's complaint be similarly treated when the complaint seeks redress of a grievance against
the company? 8 NTC has no jurisdiction to impose a fine. Globe Wireless Ltd. vs.Public Service Commission (G. R. No. L-27250, 21
January 1987, 147 SCRA 269) says so categorically.

Verily, Section 13 of Commonwealth Act No. 146, as amended, otherwise known as

the Public Service Act, vested in the Public Service Commission jurisdiction,
supervision and control over all public services and their franchises, equipment and
other properties.

xxx xxx xxx

The act complained of consisted in petitioner having allegedly failed to deliver the
telegraphic message of private respondent to the addressee in Madrid, Spain.
Obviously, such imputed negligence has nothing whatsoever to do with the subject
matter of the very limited jurisdiction of the Commission over petitioner.

Moreover, under Section 21 of C. A. 146, as amended, the Commission was

empowered to impose an administrative fine in cases of violation of or failure by a
public service to comply with the terms and conditions of any certificate or any
orders, decisions or regulations of the Commission. Petitioner operated under a
legislative franchise, so there were no terms nor conditions of any certificate issued
by the Commission to violate. Neither was there any order, decision or regulation
from the Commission applicable to petitioner that the latter had allegedly violated,
disobeyed, defied or disregarded.

No substantial change has been brought about by Executive Order No. 546 invoked by the Solicitor
General's Office to bolster NTC's jurisdiction. The Executive Order is not an explicit grant of power to
impose administrative fines on public service utilities, including telegraphic agencies, which have
failed to render adequate service to consumers. Neither has it expanded the coverage of the
supervisory and regulatory power of the agency. There appears to be no alternative but to reiterate
the settled doctrine in administrative law that:

Too basic in administrative law to need citation of jurisprudence is the rule that
jurisdiction and powers of administrative agencies, like respondent Commission, are
limited to those expressly granted or necessarily implied from those granted in the
 legislation creating such body; and any order without or beyond such jurisdiction is
void and ineffective . . . (Globe Wireless case, supra).

WHEREFORE, the decision appealed from is REVERSED and SET ASIDE for lack of jurisdiction of
the NTC to render it. The temporary restraining order issued on 18 June 1990 is made
PERMANENT without prejudice, however, to the filing by the party aggrieved by the conduct of
RCPI, of the proper action in the proper forum. No costs.

SO ORDERED.

G.R. No. L-29236 August 21, 1974

RADIO COMMUNICATIONS OF THE PHILIPPINES, INC., petitioner,

vs.
FRANCISCO SANTIAGO and ENRIQUE MEDINA, as Commissioner, Public Service
Commission, respondents.

G.R. No. L-29247 August 21, 1974

RADIO COMMUNICATIONS OF THE PHILIPPINES, INC., petitioner,

vs.
CONSTANCIO JAUGAN and ENRIQUE MEDINA, Commissioner, Public Service
Commission, respondents.

Jose B. Trenas & Cecero L. Aligaen for petitioner.

Generoso Almario for respondents.

FERNANDO, J.:p

It is a legal question of significance that was raised in these two petitions for review, to be decided jointly. It is whether the Public Service
Commission, no longer in existence by virtue of the Presidential Decree reorganizing the executive branch of the national government1 had
the jurisdiction to act on complaints by dissatisfied customers of petitioner Radio Communications of the Phil., Inc. and thereafter to penalize
it with a fine. In Radio Communications of the Phil., Inc. v. Francisco Santiago & Enrique Medina, as Commissioner, Public Service
Commission2 the dispositive portion of the challenged order insofar as pertinent reads thus: "[Wherefore], under Section 21 of the Public
Service Act as amended, the respondent operator of Radio Communications of the Philippines, Inc. (RCPI) is hereby ordered to pay a fine of
[two hundred pesos](P200.00) within fifteen (15) days from receipt hereof, with the warning that failure to pay the said fine within the
aforecited period of time, will leave the Commission no other alternative but to suspend the rates authorized for the operation of respondent
herein."3 In Radio Communications of the Phil., Inc. v. Constancio Jaugan & Enrique Medina, Commissioner, Public Service
Commission,4 the dispositive portion insofar as pertinent is worded as follows: "[For all the foregoing considerations], under Section 21 of the
Public Service Act as amended, the respondent, operator of Radio Communications of the Philippines, Inc. (RCPI) is hereby ordered to pay a
fine of Two Hundred Pesos (P200.00) within fifteen (15) days from receipt hereof, with a warning that failure to pay the said fine within the
aforecited period of time, will leave the Commission no other alternative but to suspend and revoke the rates authorized, for the operation of
respondent herein."5 The allegation by petitioner that it was devoid of such competence is based on the express limitation found in the Public
Service Act6 expressly exempting radio companies from the jurisdiction, supervision and control of such body "except with respect to the
fixing of rates."7 In the face of the provision itself, it is rather apparent that the Public Service Commission lacked the required power to
proceed against petitioner. There is nothing in Section 21 thereof which impowers it to impose a fine that calls for a different conclusion.8 We
have to reverse.

There is no dispute as to the facts. The challenged order in Radio Communications of the Phil., Inc.
v. Santiago and Medina stated: "It is admitted by respondent [now petitioner] that on July 12, 1966, a
telegram was filed with respondent-company and the amount of P1.50 was paid for the transmission
of said telegram to Zamboanga City .... The telegram, however, was never transmitted until now.
The respondent not only did not give any valid explanation, but did not present any evidence to
explain why the said telegram was not forwarded to the addressee until now. This is, therefore, a
clear case where the respondent, taking advantage of the rates fixed by this Commission collected
the sum of P1.50 and promised to render a service to the complainant, i.e. the transmission of his
telegram filed on July 12, 1966; but, after receiving the sum of P1.50, respondent failed to render the
promised service,"9 in Radio Communications of the Phil., Inc. v. Jaugan and Medina, the order
sought to be reviewed had this to say: "The evidence presented shows that on August 1, 1967,
complainant Constancio Jaugan filed a telegram at the branch office of respondent in Dumaguete
City, ... addressed to Commissioner Enrique Medina, PSC, Manila. The telegram was received by an
employee of the respondent, Mrs. Jesusa A. Orge, as shown by the receipt ... dated August 1, 1967,
and the sum of P2.64 was collected in payment of said telegram. The telegram, ... in effect, advised
Commissioner Medina that the Land Registration Case where he was cited by subpoena to testify
before the CFI of Oriental Negros on August 14 and 15, 1967, was transferred and, therefore, there
was no necessity for the said Commissioner to proceed to Negros Oriental on those dates. It
appears that the said telegram received by Jesusa Orge at Dumaguete City on August 1, 1967, was
transmitted to Manila, on the same date, but was never delivered to the addressee, and on August
14 and 15, when Commissioner Medina appeared before the Dumaguete Court, he was advised that
the case was postponed since August 1 and that a telegram was sent to the said Commissioner.
Inquiries were made, why the telegram was not received by the Commissioner in Manila; the
Dumaguete Office communicated with the Manila Office, on the same date, August 14, 1967 and it
was only on August 15, 1967 that the telegram was relayed to the Public Service Commission and
was received by one of the employees of the Commission, in the absence of Commissioner Medina
who was then in Negros Oriental. ... ." 10 It was the manifest failure in both cases to render the
service expected of a responsible operator that led to the imposition of the penalty. The motions for
reconsideration in both cases having proved futile, the matter was elevated to this Court.

As noted at the outset, a reversal is called for.

1. Except for constitutional officials who can trace their competence to act to the fundamental law
itself, a public official must locate in the statute relied upon a grant of power before he can exercise
it. It need not be express. It may be implied from the wording of the law. Absent such a requisite,
however, no warrant exists for the assumption of authority. The act performed, if properly
challenged, cannot meet the test of validity. It must be set aside. So it must be in these two petitions.
That is to defer to a principle reiterated by this Court time and time again. 11 That doctrine goes back
to a 1916 decision, Bautista v. Angeles, 12 where Chief Justice Arellano stated the following: "It
devolves upon the judicial power to convince the private individual, the party governed, that he has
no right to do what he did in violating orders of the administrative authorities issued by them in the
exercise of their rights. Once he is convinced, the administrative authorities, by virtue of their own
powers, impose the weight of their authority upon him. If they, the administrative authorities of public
officials, exceed lawful limits in the exercise of their power of execution, the law provides what shall
be done before the judicial power can step in and repair the damage to the private interest, or apply
the law by declaring what was properly or improperly done in exercising public power." 13There is
likewise this relevant excerpt from Villegas v. Subido: 14 "Nothing is better settled in the law than that
a public official exercises power, not rights. The government itself is merely an agency through
which the will of the state is expressed and enforced. Its officers therefore are likewise agents
entrusted with the responsibility of discharging its functions. As such there is no presumption that
they are empowered to act. There must be a delegation of such authority, either express or implied.
In the absence of a valid grant, they are devoid of power. What they do suffers from a fatal infirmity.
That principle cannot be sufficiently stressed. In the appropriate language of Chief Justice Hughes:
'It must be conceded that departmental zeal may not be permitted to outrun the authority conferred
by statute.' Neither the high dignity of the office nor the righteousness of the motive then is an
acceptable substitute. Otherwise the rule of law becomes a myth. Such an eventuality, we must take
all pains to avoid." 15 Such a fundamental postulate applies to the Executive itself. So it has been
attested by a number of cases involving the President of the Philippines. 16

There can be no justification then for the Public Service Commission imposing the fines in these two
petitions. The law cannot be any clearer. The only power it possessed over radio companies, as
noted was the fix rates. 17 It could not take to task a radio company for any negligence or
misfeasance. It was bereft of such competence. It was not vested with such authority. What it did
then in these two petitions lacked the impress of validity.

2. The Public Service Commission having been abolished by virtue of a Presidential Decree, as set
forth at the outset, and a new Board of Communications having been created to take its place,
nothing said in this decision has reference to whatever powers are now lodged in the latter body. It is
to be understood, likewise, that insofar as the complainants are concerned, this decision goes no
further than to rule adversely on the exercise of authority by the Public Service Commission when it
took disciplinary action against petitioner.

WHEREFORE, in L-29236, Radio Communications of the Phil., Inc. v. Francisco Santiago and
Enrique Medina, the order of former Commissioner Enrique Medina of October 13, 1967 as affirmed
by the order of the Public Service Commission en banc of May 3, 1968, is reversed and set aside,
and in L-29247, Radio Communications of the Phil., Inc. v. Constancio Jaugan and Enrique Medina,
the order of former Commissioner Enrique Medina of October 10, 1967 as affirmed by the order of
the Public Service Commission en banc of April 4, 1968, is reversed and set aside. No costs.

G.R. No. L-43653 November 29, 1977

RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), petitioner,

vs.
BOARD OF COMMUNICATIONS and DIEGO MORALES, respondents.

G.R. No. L-45378 November 29, 1977

RADIO COMMUNICATIONS OF THE PHILIPPINES. INC. (RCPI), petitioner,

vs.

BOARD OF COMMUNICATIONS and PACIFICO INNOCENCIO, respondents.

Treñas & Aligaen for petitioner.

R. Mag. Bernardo for respondent Morales.

Silvestre T. de la Cruz for respondent Innocencio.

Primitivo C. Santos for respondent Board.

MARTIN, J.,

These two petitions (G.R. No. L-43653 and G.R. No. L-45378) for review by certiorari of the
decisions of the Board of Communications in BC Case No. 75-01-OC, entitled "Diego T Morales vs.
Radio Communications of the Philippines, Inc. (RCPI)" and BC Case No. 75-08-OC,
entitled "Pacifica Innocencio vs. Radio Communications of the Philippines, Inc. (RCPI)," have been
Consolidated as per resolution of this Court dated March 21, 1977, as they involve the same issue
as to whether the Board of Communications has jurisdiction over claims for damages allegedly
suffered by private respondents for failure to receive telegrams sent thru the petitioner Radio
Communications of the Philippines, Inc., RCPI for short.

In BC Case No. 75-01-OC (G.R. No. L-43653) complainant respondent Diego Morales claims that
while he was in Manila his daughter sent him a telegram on October 15, 1974 from Santiago,
Isabela, informing him of the death of his wife, Mrs. Diego T. Morales. The telegram sent thru the
petitioner RCPI however never reached him. He had to be informed personally about the death of
his wife and so to catch up with the burial of his wife, he had to take the trip by airplane to Isabela. In
its answer petitioner RCPI claims that the telegram sent by respondent was transmitted from
Santiago, lsabela to its Message Center at Cubao, Quezon City but when it was relayed from
Cubao, the radio signal became intermittent making the copy received at Sta. Cruz, Manila
unreadable and unintelligible. Because of the failure of the RCPI to transmit said telegram to him,
respondent allegedly suffered inconvenience and additional expenses and prays for damages.

In BC Case No. 75-08-OC (G.R. No. L-45378) complainant respondent Pacifico Innocencio claim
that on July 13, 1975 Lourdes Innocencio sent a telegram from Paniqui, Tarlac, thru the facilities of
the petitioner RCPI to him at Barrio Lomot, Cavinti, Laguna for the Purpose of informing him about
the death of their father. The telegram was never received by Pacifico Innocencio. Inspite of the non-
receipt and/or non-delivery of the message sent to said address, the sender (Lourdes Innocencio
has not been notified about its non-delivery, As a consequence Pacifica Innocencio was not able to
attend the internment of their father at Moncada, Tarlac. Because of the failure of RCPI to deliver to
him said telegram he allegedly was "shocked when he learned about the death of their father when
he visited his hometown Moncada Tarlac on August 14, 1975," and thus suffered mental anguish
and personal inconveniences. Likewise, he prays for damages.

After hearing. the respondent Board in both cases held that the service rendered by petitioner was
inadequate and unsatisfactory and imposed upon the petitioner in each case a disciplinary fine of
P200 pursuant to Section 21 of Commonwealth Act 146, as amended, by Presidential Decree No. I
and Letter of Implementation No. 1.

The main thrust of the argument of petitioner is that respondent Board has no jurisdiction to entertain
and take cognizance of complaints for injury caused by breach of contractual obligation arising from
negligence covered by Article 1170 of the Civil Code 1 and injury caused by quasi delict or tort liability
under Article 2176 of the Civil Code 2 which according to it should be ventilated in the proper courts of
justice and not in the Board of Communications.

We agree with petitioner RCPI. In one case We have ruled that the Public Service Commission and
its successor in interest, the Board of Communications, "being a creature of the legislature and not a
court, can exercise only such jurisdiction and powers as are expressly or by necessary implication,.
conferred upon it by statute".3 The functions of the Public Service Commission are limited and
administrative in nature and it has only jurisdiction and power as are expressly or by necessary
implication conferred upon it by statute. 4 As successor in interest of the Public Service Commission, the
Board of Communications exercises the same powers jurisdiction and functions as that provided for in the
Public Service Act for the Public Service Commission. One of these powers as provided under Section
129 of the Public Service Act governing the organization of the Specialized Regulatory Board, is to issue
certificate of public convenience. But this power to issue certificate of public convenience does not carry
with it the power of supervision and control over matters not related to the issuance of certificate of public
convenience or in the performance therewith in a manner suitable to promote public interest. But even
assuming that the respondent Board of Communications has the power or jurisdiction over petitioner in
the exercise of its supervision to insure adequate public service, petitioner cannot be subjected to
payment of fine under Section 21 of the Public Service Act, because this provision of the law subjects to a
fine every public service that violates or falls to comply with the terms and conditions of any certificate or
any orders, decisions or regulations of the Commission. In the two cases before us petitioner is not being
charged nor investigated for violation of the terms and conditions of its certificate of public convenience or
of any order, decision or regulations of the respondent Board of Communications. The complaint of
respondents in the two case was that they were allegedly inconvenienced or injured by the failure of the
petitioner to transmit to them telegrams informing them of the deaths of close relatives which according to
them constitute breach of contractual obligation through negligence under the Civil Code. The charges
however, do not necessarily involve petitioners failure to comply with its certificate of public convenience
or any order, decision or regulation of respondent Board of Communication. It is clear from the record that
petitioner has not been charge of any violation or failure to comply with the terms and condition of its
certificates of public convenience or of any order, decision or regulation of the respondent Board. The
charge does not relate to the management of the facilities and system of transmission of messages by
petitioner in accordance with its certificate of public convenience. If in the two cases before Us
complainants Diego Morales and Pacifica Innocencio allegedly suffered injury due to petitioner's breach
of contractual obligation arising from negligence, the proper forum for them to ventilate their grievances
for possible recovery of damages against petitioner should be in the courts and not in the respondent
Board of Communications. Much less can it impose the disciplinary fine of P200 upon the petitioner. In
Francisco Santiago vs. RCPI (G.R. No. L-29236) and Constancio Langan vs. RCPI (G.R. No. L-29247),
this Court speaking thru Justice Enrique Fernando, ruled:

There can be no justification then for the Public Service Commission (now the Board
of Communications as successor in interest) imposing the fines in these two
petitions. The law cannot be any clearer . The only power it possessed over radio
companies as noted was to fix rates It could not take to task a radio company for an
negligence or misfeasance. It was not vested with such authority. That it did then in
these two petitions lacked the impress of validity.

In the face of the provision itself, it is rather apparent that the Public Service
Commission lacked the required power to proceed against petitioner. There is
nothing in Section 21 thereof which empowers it to impose a fine that calls for a
different conclusion.

WHEREFORE. both decisions of respondent Board of Communications in BC Case No. 75-01 OC

and BC Case No. 75- 08-0C are hereby reversed, set aside, declared null and void for lack of
jurisdiction to take cognizance of both cases. Without costs.

SO ORDERED.

G.R. No. L-27520 January 21, 1987

GLOBE WIRELESS LTD., petitioner,

vs.
PUBLIC SERVICE COMMISSION and ANTONIO B. ARNAIZ, respondents.

RESOLUTION

G.R. No. 27520 [Globe Wireless Ltd., vs. Public Service Commission and Antonio B. Arnaiz]. —
Challenged in this petition for certiorari is the jurisdiction of the defunct Public Service Commission
[PSC] under Section 21 of Commonwealth Act No. 146, as amended, to discipline and impose a fine
upon petitioner, Globe Wireless, Ltd., a duly organized Philippines corporation engaged in
;international telecommunication business under a franchise granted by Public Acts Nos. 3495, 3692
and 4150 as amended by Republic Act No. 4630.

A message addressed to Maria Diaz, Monte Esquina 30, Madrid, Spain, filed by private respondent
Antonio B. Arnaiz with the telegraph office of the Bureau of Telecommunications in Dumaguete City
was transmitted to the Bureau of Telecommunications in Manila. It was forwarded to petitioner Globe
Wireless Ltd. for transmission to Madrid. Petitioner sent the message to the American Cable and
Radio Corporation in New York, which, in turn, transmitted the same to the Empresa Nacional de
Telecommunicaciones in Madrid. The latter, however, mislaid said message, resulting in its non-
delivery to the addressee.

After being informed of said fact, private respondent Arnaiz, sent to then Public Service
Commissioner Enrique Medina an unverified letter-complaint relating the incident. The complaint
was docketed as PSC Case No. 65-39-OC and petitioner was required to answer the same.
Petitioner, in its answer, questioned PSC's jurisdiction over the subject matter of the letter-complaint,
even as it denied liability for the non-delivery of the message to the addressee.

Hearing ensued, after which the PSC issued an order finding petitioner "responsible for the
inadequate and unsatisfactory service complained of, in violation of the Public Service Act" and
ordering it "to pay a fine of TWO HUNDRED [P200.00] PESOS under Sec. 21 of Com. Act 146, as
amended." petitioner was likewise required to refund the sum of P19.14 to the remitter of the
undelivered message. [Annex "C", petition, . 23, Rollo].

Its motion for reconsideration having been denied, petitioner instituted the instant petition.

We find for petitioner.

Verily, Section 13 of Commonwealth Act No. 146, as amended otherwise known as the Public
Service Act, vested in the Public Service Commission jurisdiction, supervision and control over all
Public services and their franchises, equipment and other properties. However, Section 5 of
Republic Act No. 4630, the legislative franchise under which petitioner was operating, limited
respondent Commission's jurisdiction over petitioner only to the rate which petitioner may charge the
Public. Thus,

Sec. 5. The Public Service Commission is hereby given jurisdiction over the
grantee only with respect to the rates which the grantee may charge the
public subject to international commitments made or adhered to by the Republic of
the Philippines. (Emphasis supplied.)

The act complained of consisted in petitioner having allegedly failed to deliver the telegraphic
message of private respondent to the addressee in Madrid, Spain. Obviously, such imputed
negligence had nothing whatsoever to do with the subject matter of the very limited jurisdiction of the
Commission over petitioner.

Moreover, under Section 21 of C.A. No. 146, as amended, the Commission was empowered to
impose an administrative fine in cases of violation of or failure by a Public service to comply with the
terms and conditions of any certificate or any orders, decisions or regulations of the Commission.
petitioner operated under a legislative franchise, so there were no terms nor conditions of any
certificate issued by the Commission to violate. Neither was there any order, decision or regulation
from the Commission applicable to petitioner that the latter had allegedly violated, disobeyed, defied
or disregarded.
Too basic in administrative law to need citation of jurisprudence is the rule that the jurisdiction and
powers of administrative agencies, like respondent Commission, are limited to those expressly
granted or necessarily implied from those granted in the legislation creating such body; and any
order without or beyond such jurisdiction is void and ineffective. The order under consideration
belonged to this category.

ACCORDINGLY, the instant petition is hereby granted and the order of respondent Public Service
Commission in PSC Case No. 65-39-OC is set aside for being null and void.

G.R. No. 84811 August 29, 1989

SOLID HOMES, INC., petitioner,

vs.
TERESITA PAYAWAL and COURT OF APPEALS, respondents.

CRUZ, J.:

We are asked to reverse a decision of the Court of Appeals sustaining the jurisdiction of the
Regional Trial Court of Quezon City over a complaint filed by a buyer, the herein private respondent,
against the petitioner, for delivery of title to a subdivision lot. The position of the petitioner, the
defendant in that action, is that the decision of the trial court is null and void ab initio because the
case should have been heard and decided by what is now called the Housing and Land Use
Regulatory Board.

The complaint was filed on August 31, 1982, by Teresita Payawal against Solid Homes, Inc. before
the Regional Trial Court of Quezon City and docketed as Civil Case No. Q-36119. The plaintiff
alleged that the defendant contracted to sell to her a subdivision lot in Marikina on June 9, 1975, for
the agreed price of P 28,080.00, and that by September 10, 1981, she had already paid the
defendant the total amount of P 38,949.87 in monthly installments and interests. Solid Homes
subsequently executed a deed of sale over the land but failed to deliver the corresponding certificate
of title despite her repeated demands because, as it appeared later, the defendant had mortgaged
the property in bad faith to a financing company. The plaintiff asked for delivery of the title to the lot
or, alternatively, the return of all the amounts paid by her plus interest. She also claimed moral and
exemplary damages, attorney's fees and the costs of the suit.

Solid Homes moved to dismiss the complaint on the ground that the court had no jurisdiction, this
being vested in the National Housing Authority under PD No. 957. The motion was denied. The
defendant repleaded the objection in its answer, citing Section 3 of the said decree providing that
"the National Housing Authority shall have exclusive jurisdiction to regulate the real estate trade and
business in accordance with the provisions of this Decree." After trial, judgment was rendered in
favor of the plaintiff and the defendant was ordered to deliver to her the title to the land or, failing
this, to refund to her the sum of P 38,949.87 plus interest from 1975 and until the full amount was
paid. She was also awarded P 5,000.00 moral damages, P 5,000.00 exemplary damages, P
10,000.00 attorney's fees, and the costs of the suit.1

Solid Homes appealed but the decision was affirmed by the respondent court, 2 which also berated
the appellant for its obvious efforts to evade a legitimate obligation, including its dilatory tactics
during the trial. The petitioner was also reproved for its "gall" in collecting the further amount of P
1,238.47 from the plaintiff purportedly for realty taxes and registration expenses despite its inability
to deliver the title to the land.
In holding that the trial court had jurisdiction, the respondent court referred to Section 41 of PD No.
957 itself providing that:

SEC. 41. Other remedies.-The rights and remedies provided in this Decree shall be
in addition to any and all other rights and remedies that may be available under
existing laws.

and declared that "its clear and unambiguous tenor undermine(d) the (petitioner's) pretension that
the court a quowas bereft of jurisdiction." The decision also dismissed the contrary opinion of the
Secretary of Justice as impinging on the authority of the courts of justice. While we are disturbed by
the findings of fact of the trial court and the respondent court on the dubious conduct of the
petitioner, we nevertheless must sustain it on the jurisdictional issue.

The applicable law is PD No. 957, as amended by PD No. 1344, entitled "Empowering the National
Housing Authority to Issue Writs of Execution in the Enforcement of Its Decisions Under Presidential
Decree No. 957." Section 1 of the latter decree provides as follows:

SECTION 1. In the exercise of its function to regulate the real estate trade and
business and in addition to its powers provided for in Presidential Decree No. 957,
the National Housing Authority shall haveexclusive jurisdiction to hear and decide
cases of the following nature:

A. Unsound real estate business practices;

B. Claims involving refund and any other claims filed by subdivision lot or
condominium unit buyer against the project owner, developer, dealer, broker or
salesman; and

C. Cases involving specific performance of contractuala statutory obligations filed by

buyers of subdivision lot or condominium unit against the owner, developer, dealer,
broker or salesman. (Emphasis supplied.)

The language of this section, especially the italicized portions, leaves no room for doubt that
"exclusive jurisdiction" over the case between the petitioner and the private respondent is vested not
in the Regional Trial Court but in the National Housing Authority. 3

The private respondent contends that the applicable law is BP No. 129, which confers on regional
trial courts jurisdiction to hear and decide cases mentioned in its Section 19, reading in part as
follows:

SEC. 19. Jurisdiction in civil cases.-Regional Trial Courts shall exercise exclusive
original jurisdiction:

(1) In all civil actions in which the subject of the litigation is incapable of pecuniary
estimation;

(2) In all civil actions which involve the title to, or possession of, real property, or any
interest therein, except actions for forcible entry into and unlawful detainer of lands or
buildings, original jurisdiction over which is conferred upon Metropolitan Trial Courts,
Municipal Trial Courts, and Municipal Circuit Trial Courts;
 xxx xxx xxx

(8) In all other cases in which the demand, exclusive of interest and cost or the value
of the property in controversy, amounts to more than twenty thousand pesos (P
20,000.00).

It stresses, additionally, that BP No. 129 should control as the later enactment, having been
promulgated in 1981, after PD No. 957 was issued in 1975 and PD No. 1344 in 1978.

This construction must yield to the familiar canon that in case of conflict between a general law and
a special law, the latter must prevail regardless of the dates of their enactment. Thus, it has been
held that-

The fact that one law is special and the other general creates a presumption that the
special act is to be considered as remaining an exception of the general act, one as
a general law of the land and the other as the law of the particular case. 4

xxx xxx xxx

The circumstance that the special law is passed before or after the general act does
not change the principle. Where the special law is later, it will be regarded as an
exception to, or a qualification of, the prior general act; and where the general act is
later, the special statute will be construed as remaining an exception to its terms,
unless repealed expressly or by necessary implication. 5

It is obvious that the general law in this case is BP No. 129 and PD No. 1344 the special law.

The argument that the trial court could also assume jurisdiction because of Section 41 of PD No.
957, earlier quoted, is also unacceptable. We do not read that provision as vesting concurrent
jurisdiction on the Regional Trial Court and the Board over the complaint mentioned in PD No. 1344
if only because grants of power are not to be lightly inferred or merely implied. The only purpose of
this section, as we see it, is to reserve. to the aggrieved party such other remedies as may be
provided by existing law, like a prosecution for the act complained of under the Revised Penal
Code. 6

On the competence of the Board to award damages, we find that this is part of the exclusive power
conferred upon it by PD No. 1344 to hear and decide "claims involving refund and any other
claims filed by subdivision lot or condominium unit buyers against the project owner, developer,
dealer, broker or salesman." It was therefore erroneous for the respondent to brush aside the well-
taken opinion of the Secretary of Justice that-

Such claim for damages which the subdivision/condominium buyer may have against
the owner, developer, dealer or salesman, being a necessary consequence of an
adjudication of liability for non-performance of contractual or statutory obligation, may
be deemed necessarily included in the phrase "claims involving refund and any other
claims" used in the aforequoted subparagraph C of Section 1 of PD No. 1344. The
phrase "any other claims" is, we believe, sufficiently broad to include any and all
claims which are incidental to or a necessary consequence of the claims/cases
 specifically included in the grant of jurisdiction to the National Housing Authority
under the subject provisions.

The same may be said with respect to claims for attorney's fees which are
recoverable either by agreement of the parties or pursuant to Art. 2208 of the Civil
Code (1) when exemplary damages are awarded and (2) where the defendant acted
in gross and evident bad faith in refusing to satisfy the plaintiff 's plainly valid, just
and demandable claim.

xxx xxx xxx

Besides, a strict construction of the subject provisions of PD No. 1344 which would
deny the HSRC the authority to adjudicate claims for damages and for damages and
for attorney's fees would result in multiplicity of suits in that the subdivision
condominium buyer who wins a case in the HSRC and who is thereby deemed
entitled to claim damages and attorney's fees would be forced to litigate in the
regular courts for the purpose, a situation which is obviously not in the contemplation
of the law. (Emphasis supplied.)7

As a result of the growing complexity of the modern society, it has become necessary to create more
and more administrative bodies to help in the regulation of its ramified activities. Specialized in the
particular fields assigned to them, they can deal with the problems thereof with more expertise and
dispatch than can be expected from the legislature or the courts of justice. This is the reason for the
increasing vesture of quasi-legislative and quasi-judicial powers in what is now not unreasonably
called the fourth department of the government.

Statutes conferring powers on their administrative agencies must be liberally construed to enable
them to discharge their assigned duties in accordance with the legislative purpose. 8 Following this
policy in Antipolo Realty Corporation v. National Housing Authority, 9 the Court sustained the
competence of the respondent administrative body, in the exercise of the exclusive jurisdiction
vested in it by PD No. 957 and PD No. 1344, to determine the rights of the parties under a contract
to sell a subdivision lot.

It remains to state that, contrary to the contention of the petitioner, the case of Tropical Homes v.
National Housing Authority 10 is not in point. We upheld in that case the constitutionality of the
procedure for appeal provided for in PD No. 1344, but we did not rule there that the National
Housing Authority and not the Regional Trial Court had exclusive jurisdiction over the cases
enumerated in Section I of the said decree. That is what we are doing now.

It is settled that any decision rendered without jurisdiction is a total nullity and may be struck down at
any time, even on appeal before this Court. 11 The only exception is where the party raising the issue
is barred by estoppel, 12 which does not appear in the case before us. On the contrary, the issue was
raised as early as in the motion to dismiss filed in the trial court by the petitioner, which continued to
plead it in its answer and, later, on appeal to the respondent court. We have no choice, therefore,
notwithstanding the delay this decision will entail, to nullify the proceedings in the trial court for lack
of jurisdiction.

WHEREFORE, the challenged decision of the respondent court is REVERSED and the decision of
the Regional Trial Court of Quezon City in Civil Case No. Q-36119 is SET ASIDE, without prejudice
to the filing of the appropriate complaint before the Housing and Land Use Regulatory Board. No
costs.
SO ORDERED.

G.R. No. L-50444 August 31, 1987

ANTIPOLO REALTY CORPORATION, petitioner,

vs.
THE NATIONAL HOUSING AUTHORITY, HON. G.V. TOBIAS, in his capacity as General
Manager of the National Housing Authority, THE HON. JACOBO C. CLAVE, in his capacity as
Presidential Executive Assistant and VIRGILIO A. YUSON, respondents.

FELICIANO, J.:

By virtue of a Contract to Sell dated 18 August 1970, Jose Hernando acquired prospective and
beneficial ownership over Lot. No. 15, Block IV of the Ponderosa Heights Subdivision in Antipolo,
Rizal, from the petitioner Antipolo Realty Corporation.

On 28 August 1974, Mr. Hernando transferred his rights over Lot No. 15 to private respondent
Virgilio Yuson. The transfer was embodied in a Deed of Assignment and Substitution of Obligor
(Delegacion), executed with the consent of Antipolo Realty, in which Mr. Yuson assumed the
performance of the vendee's obligations under the original contract, including payment of his
predecessor's installments in arrears. However, for failure of Antipolo Realty to develop the
subdivision project in accordance with its undertaking under Clause 17 of the Contract to Sell, Mr.
Yuson paid only the arrearages pertaining to the period up to, and including, the month of August
1972 and stopped all monthly installment payments falling due thereafter Clause 17 reads:

Clause 17. — SUBDIVISION BEAUTIFICATION. To insure the beauty of the

subdivision in line with the modern trend of urban development, the SELLER hereby
obligates itself to provide the subdivision with:

a) Concrete curbs and gutters

b) Underground drainage system

c) Asphalt paved roads

d) Independent water system

e) Electrical installation with concrete posts.

f) Landscaping and concrete sidewall

g) Developed park or amphi-theatre

h) 24-hour security guard service.

 These improvements shall be complete within a period of two (2) years from date of
this contract. Failure by the SELLER shall permit the BUYER to suspend his monthly
installments without any penalties or interest charges until such time that such
improvements shall have been completed. 1

On 14 October 1976, the president of Antipolo Realty sent a notice to private respondent Yuson advising that the required improvements in
the subdivision had already been completed, and requesting resumption of payment of the monthly installments on Lot No. 15. For his part,
Mr. Yuson replied that he would conform with the request as soon as he was able to verify the truth of the representation in the notice.

In a second letter dated 27 November 1976, Antipolo Realty reiterated its request that Mr. Yuson
resume payment of his monthly installments, citing the decision rendered by the National Housing
Authority (NHA) on 25 October 1976 in Case No. 252 (entitled "Jose B. Viado Jr., complainant vs.
Conrado S. Reyes, respondent") declaring Antipolo Realty to have "substantially complied with its
commitment to the lot buyers pursuant to the Contract to Sell executed by and between the lot
buyers and the respondent." In addition, a formal demand was made for full and immediate payment
of the amount of P16,994.73, representing installments which, Antipolo Realty alleged, had accrued
during the period while the improvements were being completed — i.e., between September 1972
and October 1976.

Mr. Yuson refused to pay the September 1972-October 1976 monthly installments but agreed to pay
the post October 1976 installments. Antipolo Realty responded by rescinding the Contract to Sell,
and claiming the forfeiture of all installment payments previously made by Mr. Yuson.

Aggrieved by the rescission of the Contract to Sell, Mr. Yuson brought his dispute with Antipolo
Realty before public respondent NHA through a letter-complaint dated 10 May 1977 which complaint
was docketed in NHA as Case No. 2123.

Antipolo Realty filed a Motion to Dismiss which was heard on 2 September 1977. Antipolo Realty,
without presenting any evidence, moved for the consolidation of Case No. 2123 with several other
cases filed against it by other subdivision lot buyers, then pending before the NHA. In an Order
issued on 7 February 1978, the NHA denied the motion to dismiss and scheduled Case No. 2123 for
hearing.

After hearing, the NHA rendered a decision on 9 March 1978 ordering the reinstatement of the
Contract to Sell under the following conditions:

l) Antipolo Realty Corporation shall sent [sic] to Virgilio Yuzon a statement of account
for the monthly amortizations from November 1976 to the present;

m) No penalty interest shall be charged for the period from November 1976 to the
date of the statement of account; and

n) Virgilio Yuzon shall be given sixty (60) days to pay the arrears shown in the
statement of account. 2

Antipolo Realty filed a Motion for Reconsideration asserting: (a) that it had been denied due process
of law since it had not been served with notice of the scheduled hearing; and (b) that the jurisdiction
to hear and decide Mr. Yuson's complaint was lodged in the regular courts, not in the NHA, since
that complaint involved the interpretation and application of the Contract to Sell.

The motion for reconsideration was denied on 28 June 1978 by respondent NHA General Manager
G.V. Tobias, who sustained the jurisdiction of the NHA to hear and decide the Yuson complaint. He
also found that Antipolo Realty had in fact been served with notice of the date of the hearing, but that
its counsel had failed to attend the hearing. 3 The case was submitted for decision, and eventually
decided, solely on the evidence presented by the complainant.

On 2 October 1978, Antipolo Realty came to this Court with a Petition for certiorari and Prohibition
with Writ of Preliminary Injunction, which was docketed as G.R. No. L-49051. Once more, the
jurisdiction of the NHA was assailed. Petitioner further asserted that, under Clause 7 of the Contract
to Sell, it could validly terminate its agreement with Mr. Yuson and, as a consequence thereof, retain
all the prior installment payments made by the latter. 4

This Court denied certiorari in a minute resolution issued on 11 December 1978, "without prejudice
to petitioner's pursuing the administrative remedy." 5 A motion for reconsideration was denied on 29
January 1979.

Thereafter, petitioner interposed an appeal from the NHA decision with the Office of the President
which, on 9 March 1979, dismissed the same through public respondent Presidential Executive
Assistant Jacobo C. Clave. 6

In the present petition, Antipolo Realty again asserts that, in hearing the complaint of private
respondent Yuson and in ordering the reinstatement of the Contract to Sell between the parties, the
NHA had not only acted on a matter beyond its competence, but had also, in effect, assumed the
performance of judicial or quasi-judicial functions which the NHA was not authorized to perform.

We find the petitioner's arguments lacking in merit.

It is by now commonplace learning that many administrative agencies exercise and perform
adjudicatory powers and functions, though to a limited extent only. Limited delegation of judicial or
quasi-judicial authority to administrative agencies (e.g., the Securities and Exchange Commission
and the National Labor Relations Commission) is well recognized in our jurisdiction,7 basically
because the need for special competence and experience has been recognized as essential in the
resolution of questions of complex or specialized character and because of a companion recognition
that the dockets of our regular courts have remained crowded and clogged. In Spouses Jose Abejo
and Aurora Abejo, et al. vs. Hon. Rafael dela Cruz, etc., et al., 8 the Court, through Mr. Chief Justice
Teehankee, said:

In the fifties, the Court taking cognizance of the move to vest jurisdiction in
administrative commissions and boards the power to resolve specialized disputes in
the field of labor (as in corporations, public transportation and public utilities) ruled
that Congress in requiring the Industrial Court's intervention in the resolution of labor
management controversies likely to cause strikes or lockouts meant such jurisdiction
to be exclusive, although it did not so expressly state in the law. The Court held that
under the "sense-making and expeditious doctrine of primary jurisdiction . . . the
courts cannot or will not determine a controversy involving a question which is within
the jurisdiction of an administrative tribunal where the question demands the exercise
of sound administrative discretion requiring the special knowledge, experience, and
services of the administrative tribunal to determine technical and intricate matters of
fact, and a uniformity of ruling is essential to comply with the purposes of the
regulatory statute administered" (Pambujan Sur United Mine Workers v. Samar
Mining Co., Inc., 94 Phil, 932, 941 [1954]).

In this era of clogged court dockets, the need for specialized administrative boards or
commissions with the special knowledge, experience and capability to hear and
 determine promptly disputes on technical matters or essentially factual matters,
subject to judicial review in case of grave abuse of discretion has become well nigh
indispensable. Thus, in 1984, the Court noted that 'between the power lodged in an
administrative body and a court, the unmistakeable trend has been to refer it to the
former, "Increasingly, this Court has been committed to the view that unless the law
speaks clearly and unequivocably, the choice should fall on fan administrative
agency]" ' (NFL v. Eisma, 127 SCRA 419, 428, citing precedents). The Court in the
earlier case of Ebon vs. De Guzman (113 SCRA 52, 56 [1982]), noted that the
lawmaking authority, in restoring to the labor arbiters and the NLRC their jurisdiction
to award all kinds of damages in labor cases, as against the previous P.D.
amendment splitting their jurisdiction with the regular courts, "evidently, . . . had
second thoughts about depriving the Labor Arbiters and the NLRC of the jurisdiction
to award damages in labor cases because that setup would mean duplicity of suits,
splitting the cause of action and possible conflicting findings and conclusions by two
tribunals on one and the same claim."

In an even more recent case, Tropical Homes, Inc. vs. National Housing Authority, et al., 9 Mr.
Justice Gutierrez, speaking for the Court, observed that:

There is no question that a statute may vest exclusive original jurisdiction in an

administrative agency over certain disputes and controversies falling within the
agency's special expertise. The very definition of an administrative agency includes
its being vested with quasi-judicial powers. The ever increasing variety of powers and
functions given to administrative agencies recognizes the need for the active
intervention of administrative agencies in matters calling for technical knowledge and
speed in countless controversies which cannot possibly be handled by regular
courts.

In general the quantum of judicial or quasi-judicial powers which an administrative agency may
exercise is defined in the enabling act of such agency. In other words, the extent to which an
administrative entity may exercise such powers depends largely, if not wholly, on the provisions of
the statute creating or empowering such agency. 10 In the exercise of such powers, the agency concerned must
commonly interpret and apply contracts and determine the rights of private parties under such contracts. One thrust of the multiplication of
administrative agencies is that the interpretation of contracts and the determination of private rights thereunder is no longer a uniquely
judicial function, exercisable only by our regular courts.

Thus, the extent to which the NHA has been vested with quasi-judicial authority must be determined
by referring to the terms of Presidential Decree No. 957, known as "The Subdivision and
Condominium Buyers' Decree." 11 Section 3 of this statute provides as follows:

National Housing Authority. — The National Housing Authority shall have exclusive
jurisdiction to regulate the real estate trade and business in accordance with the
provisions of this decree (emphasis supplied)

The need for and therefore the scope of the regulatory authority thus lodged in the NHA are
indicated in the second and third preambular paragraphs of the statute which provide:

WHEREAS, numerous reports reveal that many real estate subdivision owners,
developers, operators, and/or sellers have reneged on their representations and
obligations to provide and maintain properly subdivision roads, drainage, sewerage,
water systems lighting systems and other similar basic requirements, thus
endangering the health and safety of home and lot buyers;
 WHEREAS, reports of alarming magnitude also show cases of swindling and
fraudulent manipulations perpetrated by unscrupulous subdivision and condominium
sellers and operators, such as failure to deliver titles to the buyers or titles free from
liens and encumbrances, and to pay real estate taxes, and fraudulent sales of the
same subdivision lots to different innocent purchasers for value — . (emphasis
supplied)

Presidential Decree No. 1344 12 clarified and spelled out the quasi-judicial dimensions of the grant of regulatory authority to the
NHA in the following quite specific terms:

SECTION 1. In the exercise of its functions to regulate the real estate trade and
business and in addition to its powers provided for in Presidential Decree No. 957,
the National Housing Authority shall have exclusive jurisdiction to hear and decide
cases of the following nature:

A. Unsound real estate business practices:

B. Claims involving refund and any other claims filed by sub- division lot or
condominium unit buyer against the project owner, developer, dealer, broker or
salesman; and

C. Cases involving specific performance of contractual and statutory obligations filed

by buyers of subdivision lots or condominium units against the owner, developer,
dealer, broker or salesman.(emphasis supplied.)

The substantive provisions being applied and enforced by the NHA in the instant case are found in
Section 23 of Presidential Decree No. 957 which reads:

Sec. 23. Non-Forfeiture of Payments. — No installment payment made by a buyer in

a subdivision or condominium project for the lot or unit he contracted to buy shall be
forfeited in favor of the owner or developer when the buyer, after due notice to the
owner or developer, desists from further payment due to the failure of the owner or
developer to develop the subdivision or condominium project according to the
approved plans and within the time limit for complying with the same. Such buyer
may, at his option, be reimbursed the total amount paid including amortization and
interests but excluding delinquency interests, with interest thereon at the legal rate.
(emphasis supplied.)

Having failed to comply with its contractual obligation to complete certain specified improvements in
the subdivision within the specified period of two years from the date of the execution of the Contract
to Sell, petitioner was not entitled to exercise its options under Clause 7 of the Contract. Hence,
petitioner could neither rescind the Contract to Sell nor treat the installment payments made by the
private respondent as forfeited in its favor. Indeed, under the general Civil Law, 13 in view of petitioner's
breach of its contract with private respondent, it is the latter who is vested with the option either to rescind the contract and receive
reimbursement of an installment payments (with legal interest) made for the purchase of the subdivision lot in question, or to suspend
payment of further purchase installments until such time as the petitioner had fulfilled its obligations to the buyer. The NHA was therefore
correct in holding that private respondent's prior installment payments could not be forfeited in favor of petitioner.

Neither did the NHA commit any abuse, let alone a grave abuse of discretion or act in excess of its
jurisdiction when it ordered the reinstatement of the Contract to Sell between the parties. Such
reinstatement is no more than a logical consequence of the NHA's correct ruling, just noted, that the
petitioner was not entitled to rescind the Contract to Sell. There is, in any case, no question that
under Presidential Decree No. 957, the NHA was legally empowered to determine and protect the
rights of contracting parties under the law administered by it and under the respective agreements,
as well as to ensure that their obligations thereunder are faithfully performed.

We turn to petitioner's assertion that it had been denied the right to due process. This assertion lacks
substance. The record shows that a copy of the order denying the Motion to Dismiss and scheduling
the hearing of the complaint for the morning of 6 March 1978, was duly served on counsel for
petitioner, as evidenced by the annotation appearing at the bottom of said copy indicating that such
service had been effected. 14 But even if it be assumed, arguendo, that such notice had not been served on the petitioner,
nevertheless the latter was not deprived of due process, for what the fundamental law abhors is not the absence of previous notice but rather
the absolute lack of opportunity to be heard. 15 In the instant case, petitioner was given ample opportunity to present its side and to be heard
on a motion for reconsideration as well, and not just on a motion to dismiss; the claim of denial of due process must hence sound even more
hollow. 16

We turn finally to the question of the amount of P16,994.73 which petitioner insists had accrued during the period from September 1972 to
October 1976, when private respondent had suspended payment of his monthly installments on his chosen subdivision lot. The NHA in its 9
March 1978 resolution ruled that the regular monthly installments under the Contract to Sell did not accrue during the September 1972 —
October 1976 period:

[R]espondent allowed the complainant to suspend payment of his monthly

installments until the improvements in the subdivision shall have been completed.
Respondent informed complainant on November 1976 that the improvements have
been completed. Monthly installments during the period of suspension of payment
did not become due and demandable Neither did they accrue Such must be the
case, otherwise, there is no sense in suspending payments. If the suspension is lifted
the debtor shall resume payments but never did he incur any arrears.

Such being the case, the demand of respondent for complainant to pay the arrears
due during the period of suspension of payment is null and void. Consequently, the
notice of cancellation based on the refusal to pay the s that were not due and
demandable is also null and void. 17

The NHA resolution is probably too terse and in need of certification and amplification. The NHA correctly held that no installment payments
should be considered as having accrued during the period of suspension of payments. Clearly, the critical issue is what happens to the
installment payments which would have accrued and fallen due during the period of suspension had no default on the part of the petitioner
intervened. To our mind, the NHA resolution is most appropriately read as directing that the original period of payment in the Contract to Sell
must be deemed extended by a period of time equal to the period of suspension (i.e., by four (4) years and two (2) months) during which
extended time (tacked on to the original contract period) private respondent buyer must continue to pay the monthly installment payments
until the entire original contract price shall have been paid. We think that such is the intent of the NHA resolution which directed that "[i]f the
suspension is lifted, the debtor shall resume payments" and that such is the most equitable and just reading that may be given to the NHA
resolution. To permit Antipolo Realty to collect the disputed amount in a lump sum after it had defaulted on its obligations to its lot buyers,
would tend to defeat the purpose of the authorization (under Sec. 23 of Presidential Decree No. 957, supra) to lot buyers to suspend
installment payments. As the NHA resolution pointed out, [s]uch must be the case, otherwise, there is no sense in suspending payments."
Upon the other hand, to condone the entire amount that would have become due would be an expressively harsh penalty upon the petitioner
and would result in the unjust enrichment of the private respondent at the expense of the petitioner. It should be recalled that the latter had
already fulfilled, albeit tardily, its obligations to its lot buyers under their Contracts to Sell. At the same time, the lot buyer should not be
regarded as delinquent and as such charged penalty interest. The suspension of installment payments was attributable to the petitioner, not
the private respondent. The tacking on of the period of suspension to the end of the original period precisely prevents default on the part of
the lot buyer. In the words of the NHA resolution, "never would [the buyer] incur any arrears."

WHEREFORE, the Petition for certiorari is DISMISSED. The NHA decision appealed from is hereby
AFFIRMED and clarified as providing for the lengthening of the original contract period for payment
of installments under the Contract to Sell by four (4) years and two (2) months, during which
extended time private respondent shall continue to pay the regular monthly installment payments
until the entire original contract price shall have been paid. No pronouncement as to costs.

SO ORDERED.
G.R. No. 110120 March 16, 1994

LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner,

vs.
COURT OF APPEALS, HON. MANUEL JN. SERAPIO, Presiding Judge RTC, Branch 127,
Caloocan City, HON. MACARIO A. ASISTIO, JR., City Mayor of Caloocan and/or THE CITY
GOVERNMENT OF CALOOCAN, respondents.

Alberto N. Hidalgo and Ma. Teresa T. Oledan for petitioner.

The City Legal Officer & Chief, Law Department for Mayor Macario A. Asistio, Jr. and the City
Government of Caloocan.

ROMERO, J.:

The clash between the responsibility of the City Government of Caloocan to dispose off the 350 tons
of garbage it collects daily and the growing concern and sensitivity to a pollution-free environment of
the residents of Barangay Camarin, Tala Estate, Caloocan City where these tons of garbage are
dumped everyday is the hub of this controversy elevated by the protagonists to the Laguna Lake
Development Authority (LLDA) for adjudication.

The instant case stemmed from an earlier petition filed with this Court by Laguna Lake Development
Authority (LLDA for short) docketed as G.R.
No. 107542 against the City Government of Caloocan, et al. In the Resolution of November 10,
1992, this Court referred G.R. No. 107542 to the Court of Appeals for appropriate disposition.
Docketed therein as CA-G.R. SP
No. 29449, the Court of Appeals, in a decision1 promulgated on January 29, 1993 ruled that the
LLDA has no power and authority to issue a cease and desist order enjoining the dumping of
garbage in Barangay Camarin, Tala Estate, Caloocan City. The LLDA now seeks, in this petition, a
review of the decision of the Court of Appeals.

The facts, as disclosed in the records, are undisputed.

On March 8, 1991, the Task Force Camarin Dumpsite of Our Lady of Lourdes Parish, Barangay
Camarin, Caloocan City, filed a letter-complaint2 with the Laguna Lake Development Authority
seeking to stop the operation of the 8.6-hectare open garbage dumpsite in Tala Estate, Barangay
Camarin, Caloocan City due to its harmful effects on the health of the residents and the possibility of
pollution of the water content of the surrounding area.

On November 15, 1991, the LLDA conducted an on-site investigation, monitoring and test sampling
of the leachate3that seeps from said dumpsite to the nearby creek which is a tributary of the Marilao
River. The LLDA Legal and Technical personnel found that the City Government of Caloocan was
maintaining an open dumpsite at the Camarin area without first securing an Environmental
Compliance Certificate (ECC) from the Environmental Management Bureau (EMB) of the
Department of Environment and Natural Resources, as required under Presidential Decree No.
1586,4 and clearance from LLDA as required under Republic Act No. 4850,5 as amended by
Presidential Decree No. 813 and Executive Order No. 927, series of 1983.6
After a public hearing conducted on December 4, 1991, the LLDA, acting on the complaint of Task
Force Camarin Dumpsite, found that the water collected from the leachate and the receiving streams
could considerably affect the quality, in turn, of the receiving waters since it indicates the presence of
bacteria, other than coliform, which may have contaminated the sample during collection or
handling.7 On December 5, 1991, the LLDA issued a Cease and Desist Order8 ordering the City
Government of Caloocan, Metropolitan Manila Authority, their contractors, and other entities, to
completely halt, stop and desist from dumping any form or kind of garbage and other waste matter at
the Camarin dumpsite.

The dumping operation was forthwith stopped by the City Government of Caloocan. However,
sometime in August 1992 the dumping operation was resumed after a meeting held in July 1992
among the City Government of Caloocan, the representatives of Task Force Camarin Dumpsite and
LLDA at the Office of Environmental Management Bureau Director Rodrigo U. Fuentes failed to
settle the problem.

After an investigation by its team of legal and technical personnel on August 14, 1992, the LLDA
issued another order reiterating the December 5, 1991, order and issued an Alias Cease and Desist
Order enjoining the City Government of Caloocan from continuing its dumping operations at the
Camarin area.

On September 25, 1992, the LLDA, with the assistance of the Philippine National Police, enforced its
Alias Cease and Desist Order by prohibiting the entry of all garbage dump trucks into the Tala
Estate, Camarin area being utilized as a dumpsite.

Pending resolution of its motion for reconsideration earlier filed on September 17, 1992 with the
LLDA, the City Government of Caloocan filed with the Regional Trial Court of Caloocan City an
action for the declaration of nullity of the cease and desist order with prayer for the issuance of writ
of injunction, docketed as Civil Case No. C-15598. In its complaint, the City Government of
Caloocan sought to be declared as the sole authority empowered to promote the health and safety
and enhance the right of the people in Caloocan City to a balanced ecology within its territorial
jurisdiction.9

On September 25, 1992, the Executive Judge of the Regional Trial Court of Caloocan City issued a
temporary restraining order enjoining the LLDA from enforcing its cease and desist order.
Subsequently, the case was raffled to the Regional Trial Court, Branch 126 of Caloocan which, at
the time, was presided over by Judge Manuel Jn. Serapio of the Regional Trial Court, Branch 127,
the pairing judge of the recently-retired presiding judge.

The LLDA, for its part, filed on October 2, 1992 a motion to dismiss on the ground, among others,
that under Republic Act No. 3931, as amended by Presidential Decree No. 984, otherwise known as
the Pollution Control Law, the cease and desist order issued by it which is the subject matter of the
complaint is reviewable both upon the law and the facts of the case by the Court of Appeals and not
by the Regional Trial Court. 10

On October 12, 1992 Judge Manuel Jn. Serapio issued an order consolidating Civil Case No. C-
15598 with Civil Case No. C-15580, an earlier case filed by the Task Force Camarin Dumpsite
entitled "Fr. John Moran, et al. vs. Hon. Macario Asistio." The LLDA, however, maintained during the
trial that the foregoing cases, being independent of each other, should have been treated separately.

On October 16, 1992, Judge Manuel Jn. Serapio, after hearing the motion to dismiss, issued in the
consolidated cases an order11 denying LLDA's motion to dismiss and granting the issuance of a writ
of preliminary injunction enjoining the LLDA, its agent and all persons acting for and on its behalf,
from enforcing or implementing its cease and desist order which prevents plaintiff City of Caloocan
from dumping garbage at the Camarin dumpsite during the pendency of this case and/or until further
orders of the court.

On November 5, 1992, the LLDA filed a petition for certiorari, prohibition and injunction with prayer
for restraining order with the Supreme Court, docketed as G.R. No. 107542, seeking to nullify the
aforesaid order dated October 16, 1992 issued by the Regional Trial Court, Branch 127 of Caloocan
City denying its motion to dismiss.

The Court, acting on the petition, issued a Resolution12 on November 10, 1992 referring the case to
the Court of Appeals for proper disposition and at the same time, without giving due course to the
petition, required the respondents to comment on the petition and file the same with the Court of
Appeals within ten (10) days from notice. In the meantime, the Court issued a temporary restraining
order, effective immediately and continuing until further orders from it, ordering the respondents: (1)
Judge Manuel Jn. Serapio, Presiding Judge, Regional Trial Court, Branch 127, Caloocan City to
cease and desist from exercising jurisdiction over the case for declaration of nullity of the cease and
desist order issued by the Laguna Lake Development Authority (LLDA); and (2) City Mayor of
Caloocan and/or the City Government of Caloocan to cease and desist from dumping its garbage at
the Tala Estate, Barangay Camarin, Caloocan City.

Respondents City Government of Caloocan and Mayor Macario A. Asistio, Jr. filed on November 12,
1992 a motion for reconsideration and/or to quash/recall the temporary restraining order and an
urgent motion for reconsideration alleging that ". . . in view of the calamitous situation that would
arise if the respondent city government fails to collect 350 tons of garbage daily for lack of dumpsite
(i)t is therefore, imperative that the issue be resolved with dispatch or with sufficient leeway to allow
the respondents to find alternative solutions to this garbage problem."

On November 17, 1992, the Court issued a Resolution13 directing the Court of Appeals to
immediately set the case for hearing for the purpose of determining whether or not the temporary
restraining order issued by the Court should be lifted and what conditions, if any, may be required if
it is to be so lifted or whether the restraining order should be maintained or converted into a
preliminary injunction.

The Court of Appeals set the case for hearing on November 27, 1992, at 10:00 in the morning at the
Hearing Room, 3rd Floor, New Building, Court of Appeals.14 After the oral argument, a conference
was set on December 8, 1992 at 10:00 o'clock in the morning where the Mayor of Caloocan City, the
General Manager of LLDA, the Secretary of DENR or his duly authorized representative and the
Secretary of DILG or his duly authorized representative were required to appear.

It was agreed at the conference that the LLDA had until December 15, 1992 to finish its study and
review of respondent's technical plan with respect to the dumping of its garbage and in the event of a
rejection of respondent's technical plan or a failure of settlement, the parties will submit within 10
days from notice their respective memoranda on the merits of the case, after which the petition shall
be deemed submitted for resolution.15Notwithstanding such efforts, the parties failed to settle the
dispute.

On April 30, 1993, the Court of Appeals promulgated its decision holding that: (1) the Regional Trial
Court has no jurisdiction on appeal to try, hear and decide the action for annulment of LLDA's cease
and desist order, including the issuance of a temporary restraining order and preliminary injunction in
relation thereto, since appeal therefrom is within the exclusive and appellate jurisdiction of the Court
of Appeals under Section 9, par. (3), of Batas Pambansa Blg. 129; and (2) the Laguna Lake
Development Authority has no power and authority to issue a cease and desist order under its
enabling law, Republic Act No. 4850, as amended by P.D. No. 813 and Executive Order
No. 927, series of 1983.

The Court of Appeals thus dismissed Civil Case No. 15598 and the preliminary injunction issued in
the said case was set aside; the cease and desist order of LLDA was likewise set aside and the
temporary restraining order enjoining the City Mayor of Caloocan and/or the City Government of
Caloocan to cease and desist from dumping its garbage at the Tala Estate, Barangay Camarin,
Caloocan City was lifted, subject, however, to the condition that any future dumping of garbage in
said area, shall be in conformity with the procedure and protective works contained in the proposal
attached to the records of this case and found on pages 152-160 of the Rollo, which was thereby
adopted by reference and made an integral part of the decision, until the corresponding restraining
and/or injunctive relief is granted by the proper Court upon LLDA's institution of the necessary legal
proceedings.

Hence, the Laguna Lake Development Authority filed the instant petition for review on certiorari, now
docketed as G.R. No. 110120, with prayer that the temporary restraining order lifted by the Court of
Appeals be re-issued until after final determination by this Court of the issue on the proper
interpretation of the powers and authority of the LLDA under its enabling law.

On July, 19, 1993, the Court issued a temporary restraining order16 enjoining the City Mayor of
Caloocan and/or the City Government of Caloocan to cease and desist from dumping its garbage at
the Tala Estate, Barangay Camarin, Caloocan City, effective as of this date and containing until
otherwise ordered by the Court.

It is significant to note that while both parties in this case agree on the need to protect the
environment and to maintain the ecological balance of the surrounding areas of the Camarin open
dumpsite, the question as to which agency can lawfully exercise jurisdiction over the matter remains
highly open to question.

The City Government of Caloocan claims that it is within its power, as a local government unit,
pursuant to the general welfare provision of the Local Government Code, 17 to determine the effects
of the operation of the dumpsite on the ecological balance and to see that such balance is
maintained. On the basis of said contention, it questioned, from the inception of the dispute before
the Regional Trial Court of Caloocan City, the power and authority of the LLDA to issue a cease and
desist order enjoining the dumping of garbage in the Barangay Camarin over which the City
Government of Caloocan has territorial jurisdiction.

The Court of Appeals sustained the position of the City of Caloocan on the theory that Section 7 of
Presidential Decree No. 984, otherwise known as the Pollution Control law, authorizing the defunct
National Pollution Control Commission to issue an ex-parte cease and desist order was not
incorporated in Presidential Decree No. 813 nor in Executive Order No. 927, series of
1983. The Court of Appeals ruled that under Section 4, par. (d), of Republic Act No. 4850, as
amended, the LLDA is instead required "to institute the necessary legal proceeding against any
person who shall commence to implement or continue implementation of any project, plan or
program within the Laguna de Bay region without previous clearance from the Authority."

The LLDA now assails, in this partition for review, the abovementioned ruling of the Court of
Appeals, contending that, as an administrative agency which was granted regulatory and
adjudicatory powers and functions by Republic Act No. 4850 and its amendatory laws, Presidential
Decree No. 813 and Executive Order No. 927, series of 1983, it is invested with the power and
authority to issue a cease and desist order pursuant to Section 4 par. (c), (d), (e), (f) and (g) of
Executive Order No. 927 series of 1983 which provides, thus:
 Sec. 4. Additional Powers and Functions. The authority shall have the following
powers and functions:

xxx xxx xxx

(c) Issue orders or decisions to compel compliance with the provisions of this
Executive Order and its implementing rules and regulations only after proper notice
and hearing.

(d) Make, alter or modify orders requiring the discontinuance of pollution specifying
the conditions and the time within which such discontinuance must be accomplished.

(e) Issue, renew, or deny permits, under such conditions as it may determine to be
reasonable, for the prevention and abatement of pollution, for the discharge of
sewage, industrial waste, or for the installation or operation of sewage works and
industrial disposal system or parts thereof.

(f) After due notice and hearing, the Authority may also revoke, suspend or modify
any permit issued under this Order whenever the same is necessary to prevent or
abate pollution.

(g) Deputize in writing or request assistance of appropriate government agencies or

instrumentalities for the purpose of enforcing this Executive Order and its
implementing rules and regulations and the orders and decisions of the Authority.

The LLDA claims that the appellate court deliberately suppressed and totally disregarded the above
provisions of Executive Order No. 927, series of 1983, which granted administrative quasi-judicial
functions to LLDA on pollution abatement cases.

In light of the relevant environmental protection laws cited which are applicable in this case, and the
corresponding overlapping jurisdiction of government agencies implementing these laws, the
resolution of the issue of whether or not the LLDA has the authority and power to issue an order
which, in its nature and effect was injunctive, necessarily requires a determination of the threshold
question: Does the Laguna Lake Development Authority, under its Charter and its amendatory laws,
have the authority to entertain the complaint against the dumping of garbage in the open dumpsite in
Barangay Camarin authorized by the City Government of Caloocan which is allegedly endangering
the health, safety, and welfare of the residents therein and the sanitation and quality of the water in
the area brought about by exposure to pollution caused by such open garbage dumpsite?

The matter of determining whether there is such pollution of the environment that requires control, if
not prohibition, of the operation of a business establishment is essentially addressed to the
Environmental Management Bureau (EMB) of the DENR which, by virtue of Section 16 of Executive
Order No. 192, series of 1987,18 has assumed the powers and functions of the defunct National
Pollution Control Commission created under Republic Act No. 3931. Under said Executive Order, a
Pollution Adjudication Board (PAB) under the Office of the DENR Secretary now assumes the
powers and functions of the National Pollution Control Commission with respect to adjudication of
pollution cases. 19

As a general rule, the adjudication of pollution cases generally pertains to the Pollution Adjudication
Board (PAB), except in cases where the special law provides for another forum. It must be
recognized in this regard that the LLDA, as a specialized administrative agency, is specifically
mandated under Republic Act No. 4850 and its amendatory laws to carry out and make effective the
declared national policy20 of promoting and accelerating the development and balanced growth of the
Laguna Lake area and the surrounding provinces of Rizal and Laguna and the cities of San Pablo,
Manila, Pasay, Quezon and Caloocan21 with due regard and adequate provisions for environmental
management and control, preservation of the quality of human life and ecological systems, and the
prevention of undue ecological disturbances, deterioration and pollution. Under such a broad grant
and power and authority, the LLDA, by virtue of its special charter, obviously has the responsibility to
protect the inhabitants of the Laguna Lake region from the deleterious effects of pollutants
emanating from the discharge of wastes from the surrounding areas. In carrying out the
aforementioned declared policy, the LLDA is mandated, among others, to pass upon and approve or
disapprove all plans, programs, and projects proposed by local government offices/agencies within
the region, public corporations, and private persons or enterprises where such plans, programs
and/or projects are related to those of the LLDA for the development of the region. 22

In the instant case, when the complainant Task Force Camarin Dumpsite of Our Lady of Lourdes
Parish, Barangay Camarin, Caloocan City, filed its letter-complaint before the LLDA, the latter's
jurisdiction under its charter was validly invoked by complainant on the basis of its allegation that the
open dumpsite project of the City Government of Caloocan in Barangay Camarin was undertaken
without a clearance from the LLDA, as required under Section 4, par. (d), of Republic Act. No. 4850,
as amended by P.D. No. 813 and Executive Order No. 927. While there is also an allegation that the
said project was without an Environmental Compliance Certificate from the Environmental
Management Bureau (EMB) of the DENR, the primary jurisdiction of the LLDA over this case was
recognized by the Environmental Management Bureau of the DENR when the latter acted as
intermediary at the meeting among the representatives of the City Government of Caloocan, Task
Force Camarin Dumpsite and LLDA sometime in July 1992 to discuss the possibility of
re-opening the open dumpsite.

Having thus resolved the threshold question, the inquiry then narrows down to the following issue:
Does the LLDA have the power and authority to issue a "cease and desist" order under Republic Act
No. 4850 and its amendatory laws, on the basis of the facts presented in this case, enjoining the
dumping of garbage in Tala Estate, Barangay Camarin, Caloocan City.

The irresistible answer is in the affirmative.

The cease and desist order issued by the LLDA requiring the City Government of Caloocan to stop
dumping its garbage in the Camarin open dumpsite found by the LLDA to have been done in
violation of Republic Act No. 4850, as amended, and other relevant environment laws,23 cannot be
stamped as an unauthorized exercise by the LLDA of injunctive powers. By its express terms,
Republic Act No. 4850, as amended by P.D. No. 813 and Executive Order No. 927, series of 1983,
authorizes the LLDA to "make, alter or modify order requiring the discontinuance or
pollution."24 (Emphasis supplied) Section 4, par. (d) explicitly authorizes the LLDA to make whatever
order may be necessary in the exercise of its jurisdiction.

To be sure, the LLDA was not expressly conferred the power "to issue and ex-parte cease and
desist order" in a language, as suggested by the City Government of Caloocan, similar to the
express grant to the defunct National Pollution Control Commission under Section 7 of P.D. No. 984
which, admittedly was not reproduced in P.D. No. 813 and E.O. No. 927, series of 1983. However, it
would be a mistake to draw therefrom the conclusion that there is a denial of the power to issue the
order in question when the power "to make, alter or modify orders requiring the discontinuance of
pollution" is expressly and clearly bestowed upon the LLDA by Executive Order No. 927, series of
1983.
Assuming arguendo that the authority to issue a "cease and desist order" were not expressly
conferred by law, there is jurisprudence enough to the effect that the rule granting such authority
need not necessarily be express.25 While it is a fundamental rule that an administrative agency has
only such powers as are expressly granted to it by law, it is likewise a settled rule that an
administrative agency has also such powers as are necessarily implied in the exercise of its express
powers.26 In the exercise, therefore, of its express powers under its charter as a regulatory and
quasi-judicial body with respect to pollution cases in the Laguna Lake region, the authority of the
LLDA to issue a "cease and desist order" is, perforce, implied. Otherwise, it may well be reduced to
a "toothless" paper agency.

In this connection, it must be noted that in Pollution Adjudication Board v. Court of Appeals, et
al.,27 the Court ruled that the Pollution Adjudication Board (PAB) has the power to issue an ex-
parte cease and desist order when there isprima facie evidence of an establishment exceeding the
allowable standards set by the anti-pollution laws of the country. The ponente, Associate Justice
Florentino P. Feliciano, declared:

Ex parte cease and desist orders are permitted by law and regulations in situations
like that here presented precisely because stopping the continuous discharge of
pollutive and untreated effluents into the rivers and other inland waters of the
Philippines cannot be made to wait until protracted litigation over the ultimate
correctness or propriety of such orders has run its full course, including multiple and
sequential appeals such as those which Solar has taken, which of course may take
several years. The relevant pollution control statute and implementing regulations
were enacted and promulgated in the exercise of that pervasive, sovereign power to
protect the safety, health, and general welfare and comfort of the public, as well as
the protection of plant and animal life, commonly designated as the police power. It is
a constitutional commonplace that the ordinary requirements of procedural due
process yield to the necessities of protecting vital public interests like those here
involved, through the exercise of police power. . . .

The immediate response to the demands of "the necessities of protecting vital public interests" gives
vitality to the statement on ecology embodied in the Declaration of Principles and State Policies or
the 1987 Constitution. Article II, Section 16 which provides:

The State shall protect and advance the right of the people to a balanced and
healthful ecology in accord with the rhythm and harmony of nature.

As a constitutionally guaranteed right of every person, it carries the correlative duty of non-
impairment. This is but in consonance with the declared policy of the state "to protect and promote
the right to health of the people and instill health consciousness among them."28 It is to be borne in
mind that the Philippines is party to the Universal Declaration of Human Rights and the Alma
Conference Declaration of 1978 which recognize health as a fundamental human right. 29

The issuance, therefore, of the cease and desist order by the LLDA, as a practical matter of
procedure under the circumstances of the case, is a proper exercise of its power and authority under
its charter and its amendatory laws. Had the cease and desist order issued by the LLDA been
complied with by the City Government of Caloocan as it did in the first instance, no further legal
steps would have been necessary.

The charter of LLDA, Republic Act No. 4850, as amended, instead of conferring upon the LLDA the
means of directly enforcing such orders, has provided under its Section 4 (d) the power to institute
"necessary legal proceeding against any person who shall commence to implement or continue
implementation of any project, plan or program within the Laguna de Bay region without previous
clearance from the LLDA."

Clearly, said provision was designed to invest the LLDA with sufficiently broad powers in the
regulation of all projects initiated in the Laguna Lake region, whether by the government or the
private sector, insofar as the implementation of these projects is concerned. It was meant to deal
with cases which might possibly arise where decisions or orders issued pursuant to the exercise of
such broad powers may not be obeyed, resulting in the thwarting of its laudabe objective. To meet
such contingencies, then the writs of mandamus and injunction which are beyond the power of the
LLDA to issue, may be sought from the proper courts.

Insofar as the implementation of relevant anti-pollution laws in the Laguna Lake region and its
surrounding provinces, cities and towns are concerned, the Court will not dwell further on the related
issues raised which are more appropriately addressed to an administrative agency with the special
knowledge and expertise of the LLDA.

WHEREFORE, the petition is GRANTED. The temporary restraining order issued by the Court on
July 19, 1993 enjoining the City Mayor of Caloocan and/or the City Government of Caloocan from
dumping their garbage at the Tala Estate, Barangay Camarin, Caloocan City is hereby made
permanent.

SO ORDERED.

G.R. No. 106719 September 21, 1993

DRA. BRIGIDA S. BUENASEDA, Lt. Col. ISABELO BANEZ, JR., ENGR. CONRADO REY
MATIAS, Ms. CORA S. SOLIS and Ms. ENYA N. LOPEZ, petitioners,
vs.
SECRETARY JUAN FLAVIER, Ombudsman CONRADO M. VASQUEZ, and NCMH NURSES
ASSOCIATION, represented by RAOULITO GAYUTIN, respondents.

Renato J. Dilag and Benjamin C. Santos for petitioners.

Danilo C. Cunanan for respondent Ombudsman.

Crispin T. Reyes and Florencio T. Domingo for private respondent.

QUIASON, J.:

This is a Petition for Certiorari, Prohibition and Mandamus, with Prayer for Preliminary Injunction or
Temporary Restraining Order, under Rule 65 of the Revised Rules of Court.

Principally, the petition seeks to nullify the Order of the Ombudsman dated January 7, 1992,
directing the preventive suspension of petitioners,
Dr. Brigida S. Buenaseda, Chief of Hospital III; Isabelo C. Banez, Jr., Administrative Officer III;
Conrado Rey Matias, Technical Assistant to the Chief of Hospital; Cora C. Solis, Accountant III; and
Enya N. Lopez, Supply Officer III, all of the National Center for Mental Health. The petition also asks
for an order directing the Ombudsman to disqualify Director Raul Arnaw and Investigator Amy de
Villa-Rosero, of the Office of the Ombudsman, from participation in the preliminary investigation of
the charges against petitioner (Rollo, pp. 2-17; Annexes to Petition, Rollo, pp. 19-21).

The questioned order was issued in connection with the administrative complaint filed with the
Ombudsman (OBM-ADM-0-91-0151) by the private respondents against the petitioners for violation
of the Anti-Graft and Corrupt Practices Act.

According to the petition, the said order was issued upon the recommendation of Director Raul
Arnaw and Investigator Amy de Villa-Rosero, without affording petitioners the opportunity to
controvert the charges filed against them. Petitioners had sought to disqualify Director Arnaw and
Investigator Villa-Rosero for manifest partiality and bias (Rollo, pp. 4-15).

On September 10, 1992, this Court required respondents' Comment on the petition.

On September 14 and September 22, 1992, petitioners filed a "Supplemental Petition (Rollo, pp.
124-130); Annexes to Supplemental Petition; Rollo pp. 140-163) and an "Urgent Supplemental
Manifestation" (Rollo,
pp. 164-172; Annexes to Urgent Supplemental Manifestation; Rollo, pp. 173-176), respectively,
averring developments that transpired after the filing of the petition and stressing the urgency for the
issuance of the writ of preliminary injunction or temporary restraining order.

On September 22, 1992, this Court ". . . Resolved to REQUIRE the respondents to MAINTAIN in the
meantime, the STATUS QUO pending filing of comments by said respondents on the original
supplemental manifestation" (Rollo, p. 177).

On September 29, 1992, petitioners filed a motion to direct respondent Secretary of Health to
comply with the Resolution dated September 22, 1992 (Rollo, pp. 182-192, Annexes, pp. 192-203).
In a Resolution dated October 1, 1992, this Court required respondent Secretary of Health to
comment on the said motion.

On September 29, 1992, in a pleading entitled "Omnibus Submission," respondent NCMH Nurses
Association submitted its Comment to the Petition, Supplemental Petition and Urgent Supplemental
Manifestation. Included in said pleadings were the motions to hold the lawyers of petitioners in
contempt and to disbar them (Rollo, pp. 210-267). Attached to the "Omnibus Submission" as
annexes were the orders and pleadings filed in Administrative Case No. OBM-ADM-0-91-1051
against petitioners (Rollo, pp. 268-480).

The Motion for Disbarment charges the lawyers of petitioners with:

(1) unlawfully advising or otherwise causing or inducing their clients — petitioners Buenaseda, et al.,
to openly defy, ignore, disregard, disobey or otherwise violate, maliciously evade their preventive
suspension by Order of July 7, 1992 of the Ombudsman . . ."; (2) "unlawfully interfering with and
obstructing the implementation of the said order (Omnibus Submission, pp. 50-52; Rollo, pp. 259-
260); and (3) violation of the Canons of the Code of Professional Responsibility and of
unprofessional and unethical conduct "by foisting blatant lies, malicious falsehood and outrageous
deception" and by committing subornation of perjury, falsification and fabrication in their pleadings
(Omnibus Submission, pp. 52-54; Rollo, pp. 261-263).

On November 11, 1992, petitioners filed a "Manifestation and Supplement to 'Motion to Direct
Respondent Secretary of Health to Comply with 22 September 1992 Resolution'" (Manifestation
attached to Rollo without pagination between pp. 613 and 614 thereof).
On November 13, 1992, the Solicitor General submitted its Comment dated November 10, 1992,
alleging that: (a) "despite the issuance of the September 22, 1992 Resolution directing respondents
to maintain the status quo, respondent Secretary refuses to hold in abeyance the implementation of
petitioners' preventive suspension; (b) the clear intent and spirit of the Resolution dated September
22, 1992 is to hold in abeyance the implementation of petitioners' preventive suspension, the status
quo obtaining the time of the filing of the instant petition; (c) respondent Secretary's acts in refusing
to hold in abeyance implementation of petitioners' preventive suspension and in tolerating and
approving the acts of Dr. Abueva, the OIC appointed to replace petitioner Buenaseda, are in
violation of the Resolution dated September 22, 1992; and
(d) therefore, respondent Secretary should be directed to comply with the Resolution dated
September 22, 1992 immediately, by restoring the status quo ante contemplated by the aforesaid
resolution" (Comment attached to Rollowithout paginations between pp. 613-614 thereof).

In the Resolution dated November 25, 1992, this Court required respondent Secretary to comply
with the aforestated status quo order, stating inter alia, that:

It appearing that the status quo ante litem motam, or the last peaceable uncontested
status which preceded the present controversy was the situation obtaining at the time
of the filing of the petition at bar on September 7, 1992 wherein petitioners were then
actually occupying their respective positions, the Court hereby ORDERS that
petitioners be allowed to perform the duties of their respective positions and to
receive such salaries and benefits as they may be lawfully entitled to, and that
respondents and/or any and all persons acting under their authority desist and refrain
from performing any act in violation of the aforementioned Resolution of September
22, 1992 until further orders from the Court (Attached to Rollo after p. 615 thereof).

On December 9, 1992, the Solicitor General, commenting on the Petition, Supplemental Petition and
Supplemental Manifestation, stated that (a) "The authority of the Ombudsman is only to recommend
suspension and he has no direct power to suspend;" and (b) "Assuming the Ombudsman has the
power to directly suspend a government official or employee, there are conditions required by law for
the exercise of such powers; [and] said conditions have not been met in the instant case" (Attached
to Rollo without pagination).

In the pleading filed on January 25, 1993, petitioners adopted the position of the Solicitor General
that the Ombudsman can only suspend government officials or employees connected with his office.
Petitioners also refuted private respondents' motion to disbar petitioners' counsel and to cite them for
contempt (Attached to Rollo without pagination).

The crucial issue to resolve is whether the Ombudsman has the power to suspend government
officials and employees working in offices other than the Office of the Ombudsman, pending the
investigation of the administrative complaints filed against said officials and employees.

In upholding the power of the Ombudsman to preventively suspend petitioners, respondents (Urgent
Motion to Lift Status Quo, etc, dated January 11, 1993, pp. 10-11), invoke Section 24 of R.A. No.
6770, which provides:

Sec. 24. Preventive Suspension. — The Ombudsman or his Deputy may preventively
suspend any officer or employee under his authority pending an investigation, if in his
judgment the evidence of guilt is strong, and (a) the charge against such officer or
employee involves dishonesty, oppression or grave misconduct or neglect in the
performance of duty; (b) the charge would warrant removal from the service; or (c)
the respondent's continued stay in office may prejudice the case filed against him.
 The preventive suspension shall continue until the case is terminated by the Office of
Ombudsman but not more than six months, without pay, except when the delay in
the disposition of the case by the Office of the Ombudsman is due to the fault,
negligence or petition of the respondent, in which case the period of such delay shall
not be counted in computing the period of suspension herein provided.

Respondents argue that the power of preventive suspension given the Ombudsman under Section
24 of R.A. No. 6770 was contemplated by Section 13 (8) of Article XI of the 1987 Constitution, which
provides that the Ombudsman shall exercise such other power or perform such functions or duties
as may be provided by law."

On the other hand, the Solicitor General and the petitioners claim that under the 1987 Constitution,
the Ombudsman can only recommend to the heads of the departments and other agencies the
preventive suspension of officials and employees facing administrative investigation conducted by
his office. Hence, he cannot order the preventive suspension himself.

They invoke Section 13(3) of the 1987 Constitution which provides that the Office of the
Ombudsman shall have inter alia the power, function, and duty to:

Direct the officer concerned to take appropriate action against a public official or
employee at fault, and recommend his removal, suspension, demotion, fine, censure
or prosecution, and ensure compliance therewith.

The Solicitor General argues that under said provision of the Constitutions, the Ombudsman has
three distinct powers, namely: (1) direct the officer concerned to take appropriate action against
public officials or employees at fault; (2) recommend their removal, suspension, demotion fine,
censure, or prosecution; and (3) compel compliance with the recommendation (Comment dated
December 3, 1992, pp. 9-10).

The line of argument of the Solicitor General is a siren call that can easily mislead, unless one bears
in mind that what the Ombudsman imposed on petitioners was not a punitive but only a preventive
suspension.

When the constitution vested on the Ombudsman the power "to recommend the suspension" of a
public official or employees (Sec. 13 [3]), it referred to "suspension," as a punitive measure. All the
words associated with the word "suspension" in said provision referred to penalties in administrative
cases, e.g. removal, demotion, fine, censure. Under the rule of Noscitor a sociis, the word
"suspension" should be given the same sense as the other words with which it is associated. Where
a particular word is equally susceptible of various meanings, its correct construction may be made
specific by considering the company of terms in which it is found or with which it is associated (Co
Kim Chan v. Valdez Tan Keh, 75 Phil. 371 [1945]; Caltex (Phils.) Inc. v. Palomar, 18 SCRA 247
[1966]).

Section 24 of R.A. No. 6770, which grants the Ombudsman the power to preventively suspend
public officials and employees facing administrative charges before him, is a procedural, not a penal
statute. The preventive suspension is imposed after compliance with the requisites therein set forth,
as an aid in the investigation of the administrative charges.

Under the Constitution, the Ombudsman is expressly authorized to recommend to the appropriate
official the discipline or prosecution of erring public officials or employees. In order to make an
intelligent determination whether to recommend such actions, the Ombudsman has to conduct an
investigation. In turn, in order for him to conduct such investigation in an expeditious and efficient
manner, he may need to suspend the respondent.

The need for the preventive suspension may arise from several causes, among them, the danger of
tampering or destruction of evidence in the possession of respondent; the intimidation of witnesses,
etc. The Ombudsman should be given the discretion to decide when the persons facing
administrative charges should be preventively suspended.

Penal statutes are strictly construed while procedural statutes are liberally construed (Crawford,
Statutory Construction, Interpretation of Laws, pp. 460-461; Lacson v. Romero, 92 Phil. 456 [1953]).
The test in determining if a statute is penal is whether a penalty is imposed for the punishment of a
wrong to the public or for the redress of an injury to an individual (59 Corpuz Juris, Sec. 658;
Crawford, Statutory Construction, pp. 496-497). A Code prescribing the procedure in criminal cases
is not a penal statute and is to be interpreted liberally (People v. Adler, 140 N.Y. 331; 35 N.E. 644).

The purpose of R.A. No. 6770 is to give the Ombudsman such powers as he may need to perform
efficiently the task committed to him by the Constitution. Such being the case, said statute,
particularly its provisions dealing with procedure, should be given such interpretation that will
effectuate the purposes and objectives of the Constitution. Any interpretation that will hamper the
work of the Ombudsman should be avoided.

A statute granting powers to an agency created by the Constitution should be liberally construed for
the advancement of the purposes and objectives for which it was created (Cf. Department of Public
Utilities v. Arkansas Louisiana Gas. Co., 200 Ark. 983, 142 S.W. (2d) 213 [1940]; Wallace v.
Feehan, 206 Ind. 522, 190 N.E., 438 [1934]).

In Nera v. Garcia, 106 Phil. 1031 [1960], this Court, holding that a preventive suspension is not a
penalty, said:

Suspension is a preliminary step in an administrative investigation. If after such

investigation, the charges are established and the person investigated is found guilty
of acts warranting his removal, then he is removed or dismissed. This is the penalty.

To support his theory that the Ombudsman can only preventively suspend respondents in
administrative cases who are employed in his office, the Solicitor General leans heavily on the
phrase "suspend any officer or employee under his authority" in Section 24 of R.A. No. 6770.

The origin of the phrase can be traced to Section 694 of the Revised Administrative Code, which
dealt with preventive suspension and which authorized the chief of a bureau or office to "suspend
any subordinate or employee in his bureau or under his authority pending an investigation . . . ."

Section 34 of the Civil Service Act of 1959 (R.A. No. 2266), which superseded Section 694 of the
Revised Administrative Code also authorized the chief of a bureau or office to "suspend any
subordinate officer or employees, in his bureau or under his authority."

However, when the power to discipline government officials and employees was extended to the
Civil Service Commission by the Civil Service Law of 1975 (P.D. No. 805), concurrently with the
President, the Department Secretaries and the heads of bureaus and offices, the phrase
"subordinate officer and employee in his bureau" was deleted, appropriately leaving the phrase
"under his authority." Therefore, Section 41 of said law only mentions that the proper disciplining
authority may preventively suspend "any subordinate officer or employee under his authority pending
an investigation . . ." (Sec. 41).
The Administrative Code of 1987 also empowered the proper disciplining authority to "preventively
suspend any subordinate officer or employee under his authority pending an investigation" (Sec. 51).

The Ombudsman Law advisedly deleted the words "subordinate" and "in his bureau," leaving the
phrase to read "suspend any officer or employee under his authority pending an investigation . . . ."
The conclusion that can be deduced from the deletion of the word "subordinate" before and the
words "in his bureau" after "officer or employee" is that the Congress intended to empower the
Ombudsman to preventively suspend all officials and employees under investigation by his office,
irrespective of whether they are employed "in his office" or in other offices of the government. The
moment a criminal or administrative complaint is filed with the Ombudsman, the respondent therein
is deemed to be "in his authority" and he can proceed to determine whether said respondent should
be placed under preventive suspension.

In their petition, petitioners also claim that the Ombudsman committed grave abuse of discretion
amounting to lack of jurisdiction when he issued the suspension order without affording petitioners
the opportunity to confront the charges against them during the preliminary conference and even
after petitioners had asked for the disqualification of Director Arnaw and Atty. Villa-Rosero (Rollo, pp.
6-13). Joining petitioners, the Solicitor General contends that assuming arguendo that the
Ombudsman has the power to preventively suspend erring public officials and employees who are
working in other departments and offices, the questioned order remains null and void for his failure
to comply with the requisites in Section 24 of the Ombudsman Law (Comment dated December 3,
1992, pp. 11-19).

Being a mere order for preventive suspension, the questioned order of the Ombudsman was validly
issued even without a full-blown hearing and the formal presentation of evidence by the parties.
In Nera, supra, petitioner therein also claimed that the Secretary of Health could not preventively
suspend him before he could file his answer to the administrative complaint. The contention of
petitioners herein can be dismissed perfunctorily by holding that the suspension meted out was
merely preventive and therefore, as held in Nera, there was "nothing improper in suspending an
officer pending his investigation and before tho charges against him are heard . . . (Nera v.
Garcia., supra).

There is no question that under Section 24 of R.A. No. 6770, the Ombudsman cannot order the
preventive suspension of a respondent unless the evidence of guilt is strong and (1) the charts
against such officer or employee involves dishonesty, oppression or grave misconduct or neglect in
the performance of duty; (2) the charge would warrant removal from the service; or (3) the
respondent's continued stay in office may prejudice the case filed against him.

The same conditions for the exercise of the power to preventively suspend officials or employees
under investigation were found in Section 34 of R.A. No. 2260.

The import of the Nera decision is that the disciplining authority is given the discretion to decide
when the evidence of guilt is strong. This fact is bolstered by Section 24 of R.A. No. 6770, which
expressly left such determination of guilt to the "judgment" of the Ombudsman on the basis of the
administrative complaint. In the case at bench, the Ombudsman issued the order of preventive
suspension only after: (a) petitioners had filed their answer to the administrative complaint and the
"Motion for the Preventive Suspension" of petitioners, which incorporated the charges in the criminal
complaint against them (Annex 3, Omnibus Submission, Rollo, pp. 288-289; Annex 4, Rollo,
pp. 290-296); (b) private respondent had filed a reply to the answer of petitioners, specifying 23
cases of harassment by petitioners of the members of the private respondent (Annex 6, Omnibus
Submission, Rollo, pp. 309-333); and (c) a preliminary conference wherein the complainant and the
respondents in the administrative case agreed to submit their list of witnesses and documentary
evidence.

Petitioners herein submitted on November 7, 1991 their list of exhibits (Annex 8 of Omnibus
Submission, Rollo, pp. 336-337) while private respondents submitted their list of exhibits (Annex 9 of
Omnibus Submission, Rollo, pp. 338-348).

Under these circumstances, it can not be said that Director Raul Arnaw and Investigator Amy de
Villa-Rosero acted with manifest partiality and bias in recommending the suspension of petitioners.
Neither can it be said that the Ombudsman had acted with grave abuse of discretion in acting
favorably on their recommendation.

The Motion for Contempt, which charges the lawyers of petitioners with unlawfully causing or
otherwise inducing their clients to openly defy and disobey the preventive suspension as ordered by
the Ombudsman and the Secretary of Health can not prosper (Rollo, pp. 259-261). The Motion
should be filed, as in fact such a motion was filed, with the Ombudsman. At any rate, we find that the
acts alleged to constitute indirect contempt were legitimate measures taken by said lawyers to
question the validity and propriety of the preventive suspension of their clients.

On the other hand, we take cognizance of the intemperate language used by counsel for private
respondents hurled against petitioners and their counsel (Consolidated: (1) Comment on Private
Respondent" "Urgent Motions, etc.;
(2) Adoption of OSG's Comment; and (3) Reply to Private Respondent's Comment and
Supplemental Comment, pp. 4-5).

A lawyer should not be carried away in espousing his client's cause. The language of a lawyer, both
oral or written, must be respectful and restrained in keeping with the dignity of the legal profession
and with his behavioral attitude toward his brethren in the profession (Lubiano v. Gordolla, 115
SCRA 459 [1982]). The use of abusive language by counsel against the opposing counsel
constitutes at the same time a disrespect to the dignity of the court of justice. Besides, the use of
impassioned language in pleadings, more often than not, creates more heat than light.

The Motion for Disbarment (Rollo, p. 261) has no place in the instant special civil action, which is
confined to questions of jurisdiction or abuse of discretion for the purpose of relieving persons from
the arbitrary acts of judges and quasi-judicial officers. There is a set of procedure for the discipline of
members of the bar separate and apart from the present special civil action.

WHEREFORE, the petition is DISMISSED and the Status quo ordered to be maintained in the
Resolution dated September 22, 1992 is LIFTED and SET ASIDE.

SO ORDERED.

G.R. No. L-13827 September 28, 1962

BENJAMIN MASANGCAY, petitioner,

vs.
THE COMMISSION ON ELECTIONS, respondent.

Godofredo A. Ramos and Ruby Salazar-Alberto for petitioner.

Office of the Solicitor General and Dominador D. Dayot for respondent.
BAUTISTA ANGELO, J.:

Benjamin Masangcay, with several others, was on October 14, 1957 charged before the
Commission on Election with contempt for having opened three boxes bearing serial numbers l-
8071, l-8072 and l-8073 containing official and sample ballots for the municipalities of the province of
Aklan, in violation of the instructions of said Commission embodied in its resolution promulgated
September 2, 1957, and its unnumbered resolution date March 5, 1957, inasmuch as he opened
said boxes not the presence of the division superintendent of schools of Aklan, the provincial auditor,
and the authorized representatives of the Nacionalista Party, the Liberal Party and the Citizens'
Party, as required in the aforesaid resolutions, which are punishable under Section 5 of the Revised
Election Code and Rule 64 of the Rules of Court. Masangcay was then the provincial treasurer of
Aklan designated by the Commission in its resolution in Case CE-No. 270, part II 2 (b) thereof, to
take charge of the receipt and custody of the official ballots, election forms and supplies, as well as
of their distribution, among the different municipalities of the province.

In compliance with the summons issued to Masangcay and his co-respondents to appear and show
cause why they should not be punished for contempt on the basis of the aforementioned charge,
they all appeared before the Commission on October 21, 1957 and entered a plea of not guilty.
Thereupon, evidence was presented by both the prosecution and the defense, and on December 16,
1957 the Commission rendered its decision finding Masangcay and his co-respondent Molo guilty as
charged and sentencing each of them to suffer three months imprisonment and pay a fine of P500,
with subsidiary imprisonment of two months in case of insolvency, to be served in the provincial jail
of Aklan. The other respondents were exonerated for lack of evidence.

Masangcay brought the present petition for review raising as main issue the constitutionality of
Section 5 of the Revised Election Code which grants the Commission on Elections as well as its
members the power to punish acts of contempt against said body under the same procedure and
with the same penalties provided for in Rule 64 of the Rules of Court in that the portion of said
section which grants to the Commission and members the power to punish for contempt is
unconstitutional for it infringes the principle underlying the separation of powers that exists among
the three departments of our constitutional form of government. In other words, it is contended that,
even if petitioner can be held guilty of the act of contempt charged, the decision is null and void for
lack of valid power on the part of the Commission to impose such disciplinary penalty under the
principle of separation of powers. There is merit in the contention that the Commission on Elections
lacks power to impose the disciplinary penalty meted out to petitioner in the decision subject of
review. We had occasion to stress in the case of Guevara v. The Commission on Elections 1 that
under the law and the constitution, the Commission on Elections has only the duty to enforce and
administer all laws to the conduct of elections, but also the power to try, hear and decide any
controversy that may be submitted to it in connection with the elections. In this sense, said, the
Commission, although it cannot be classified a court of justice within the meaning of the Constitution
(Section 30, Article VIII), for it is merely an administrative body, may however exercise quasi-judicial
functions insofar as controversies that by express provision law come under its jurisdiction. The
difficulty lies in drawing the demarcation line between the duty which inherently is administrative in
character and a function which calls for the exercise of the quasi-judicial function of the Commission.
In the same case, we also expressed the view that when the Commission exercises a ministerial
function it cannot exercise the power to punish contempt because such power is inherently judicial in
nature, as can be clearly gleaned from the following doctrine we laid down therein:
 . . . In proceeding on this matter, it only discharged a ministerial duty; it did not exercise any
judicial function. Such being the case, it could not exercise the power to punish for contempt
as postulated in the law, for such power is inherently judicial in nature. As this Court has
aptly said: 'The power to punish for contempt is inherent in all courts; its existence is
essential to the preservation of order in judicial proceedings, and to the enforcement of
judgments, orders and mandates courts, and, consequently, in the administration of justice
(Slade Perkins v. Director of Prisons, 58 Phil., 271; U.S. v. Lee Hoc, 36 Phil., 867; In
Re Sotto, 46 O.G., 2570; In Re Kelly, Phil., 944). The exercise of this power has always been
regarded as a necessary incident and attribute of courts (Slade Perkins v. Director of
Prisons, Ibid.). Its exercise by administrative bodies has been invariably limited to making
effective the power to elicit testimony (People v. Swena, 296 P., 271). And the exercise of
that power by an administrative body in furtherance of its administrative function has been
held invalid (Langenberg v. Lecker, 31 N.E., 190; In Re Sims, 37 P., 135; Roberts v. Hacney,
58 SW., 810). 1awphîl.nèt

In the instant case, the resolutions which the Commission tried to enforce and for whose violation
the charge for contempt was filed against petitioner Masangcay merely call for the exercise of an
administrative or ministerial function for they merely concern the procedure to be followed in the
distribution of ballots and other election paraphernalia among the different municipalities. In fact,
Masangcay, who as provincial treasurer of Aklan was the one designated to take charge of the
receipt, custody and distribution of election supplies in that province, was charged with having
opened three boxes containing official ballots for distribution among several municipalities in
violation of the instructions of the Commission which enjoin that the same cannot be opened except
in the presence of the division superintendent of schools, the provincial auditor, and the authorized
representatives of the Nacionalista Party, the Liberal Party, and the Citizens' Party, for he ordered
their opening and distribution not in accordance with the manner and procedure laid down in said
resolutions. And because of such violation he was dealt as for contempt of the Commission and was
sentenced accordingly. In this sense, the Commission has exceeded its jurisdiction in punishing him
for contempt, and so its decision is null and void.

Having reached the foregoing conclusion, we deem it unnecessary to pass on the question of
constitutionality raised by petitioner with regard to the portion of Section 5 of the Revised Election
Code which confers upon the Commission on Elections the power to punish for contempt for acts
provided for in Rule 64 of our rules of court.

WHEREFORE, the decision appealed from insofar as petitioner Benjamin Masangcay is concerned,
as well as the resolution denying petitioner's motion for reconsideration, insofar as it concerns him,
are hereby reversed, without pronouncement as to costs.

Bengzon, C. J., Padilla, Labrador, Concepcion, Barrera, Paredez, Dizon, Regala and Makalintal, JJ.,
concur.
Reyes, J. B. L., J., took no part.

G.R. No. 90336 August 12, 1991

RUPERTO TAULE, petitioner,

vs.
SECRETARY LUIS T. SANTOS and GOVERNOR LEANDRO VERCELES, respondents.

Balgos & Perez and Bugaring, Tugonon & Associates Law Offices for petitioner.
Juan G. Atencia for private respondent.
GANCAYCO, J.:

The extent of authority of the Secretary of Local Government over the katipunan ng mga
barangay or the barangay councils is brought to the fore in this case.

On June 18,1989, the Federation of Associations of Barangay Councils (FABC) of Catanduanes,

composed of eleven (11) members, in their capacities as Presidents of the Association of Barangay
Councils in their respective municipalities, convened in Virac, Catanduanes with six members in
attendance for the purpose of holding the election of its officers.

Present were petitioner Ruperto Taule of San Miguel, Allan Aquino of Viga, Vicente Avila of Virac,
Fidel Jacob of Panganiban, Leo Sales of Caramoran and Manuel Torres of Baras. The Board of
Election Supervisors/Consultants was composed of Provincial Government Operation Officer
(PGOO) Alberto P. Molina, Jr. as Chairman with Provincial Treasurer Luis A. Manlapaz, Jr. and
Provincial Election Supervisor Arnold Soquerata as members.

When the group decided to hold the election despite the absence of five (5) of its members, the
Provincial Treasurer and the Provincial Election Supervisor walked out.

The election nevertheless proceeded with PGOO Alberto P. Molina, Jr. as presiding officer. Chosen
as members of the Board of Directors were Taule, Aquino, Avila, Jacob and Sales.

Thereafter, the following were elected officers of the FABC:

President — Ruperto Taule

Vice-President — Allan Aquino

Secretary — Vicente Avila

Treasurer — Fidel Jacob

Auditor — Leo Sales1

On June 19, 1989, respondent Leandro I. Verceles, Governor of Catanduanes, sent a letter to
respondent Luis T. Santos, the Secretary of Local Government, * protesting the election of the
officers of the FABC and seeking its nullification in view of several flagrant irregularities in the
manner it was conducted.2

In compliance with the order of respondent Secretary, petitioner Ruperto Taule as President of the
FABC, filed his comment on the letter-protest of respondent Governor denying the alleged
irregularities and denouncing said respondent Governor for meddling or intervening in the election of
FABC officers which is a purely non-partisan affair and at the same time requesting for his
appointment as a member of the Sangguniang Panlalawigan of the province being the duly elected
President of the FABC in Catanduanes.3

On August 4, 1989, respondent Secretary issued a resolution nullifying the election of the officers of
the FABC in Catanduanes held on June 18, 1989 and ordering a new one to be conducted as early
as possible to be presided by the Regional Director of Region V of the Department of Local
Government.4

Petitioner filed a motion for reconsideration of the resolution of August 4, 1989 but it was denied by
respondent Secretary in his resolution of September 5, 1989.5

In the petition for certiorari before Us, petitioner seeks the reversal of the resolutions of respondent
Secretary dated August 4, 1989 and September 5, 1989 for being null and void.

Petitioner raises the following issues:

1) Whether or not the respondent Secretary has jurisdiction to entertain an election protest involving
the election of the officers of the Federation of Association of Barangay Councils;

2) Whether or not the respondent Governor has the legal personality to file an election protest;

3) Assuming that the respondent Secretary has jurisdiction over the election protest, whether or not
he committed grave abuse of discretion amounting to lack of jurisdiction in nullifying the election;

The Katipunan ng mga Barangay is the organization of all sangguniang barangays in the following
levels: in municipalities to be known as katipunang bayan; in cities, katipunang panlungsod; in
provinces, katipunang panlalawigan; in regions, katipunang pampook; and on the national
level, katipunan ng mga barangay.6

The Local Government Code provides for the manner in which the katipunan ng mga barangay at all
levels shall be organized:

Sec. 110. Organization. — (1) The katipunan at all levels shall be organized in the following
manner:

(a) The katipunan in each level shall elect a board of directors and a set of officers. The
president of each level shall represent the katipunan concerned in the next higher level of
organization.

(b) The katipunan ng mga barangay shall be composed of the katipunang pampook, which
shall in turn be composed of the presidents of the katipunang panlalawigan and the
katipunang panlungsod. The presidents of the katipunang bayan in each province shall
constitute the katipunang panlalawigan. The katipunang panlungsod and the katipunang
bayan shall be composed of the punong barangays of cities and municipalities, respectively.

xxx xxx xxx

The respondent Secretary, acting in accordance with the provision of the Local Government Code
empowering him to "promulgate in detail the implementing circulars and the rules and regulations to
carry out the various administrative actions required for the initial implementation of this Code in
such a manner as will ensure the least disruption of on-going programs and projects7 issued
Department of Local Government Circular No. 89-09 on April 7, 1989,8 to provide the guidelines for
the conduct of the elections of officers of the Katipunan ng mga Barangay at the municipal, city,
provincial, regional and national levels.
It is now the contention of petitioner that neither the constitution nor the law grants jurisdiction upon
the respondent Secretary over election contests involving the election of officers of the FABC,
the katipunan ng mga barangay at the provincial level. It is petitioner's theory that under Article IX, C,
Section 2 of the 1987 Constitution, it is the Commission on Elections which has jurisdiction over all
contests involving elective barangay officials.

On the other hand, it is the opinion of the respondent Secretary that any violation of the guidelines
as set forth in said circular would be a ground for filing a protest and would vest upon the
Department jurisdiction to resolve any protest that may be filed in relation thereto.

Under Article IX, C, Section 2(2) of the 1987 Constitution, the Commission on Elections shall
exercise "exclusive original jurisdiction over all contests relating to the elections, returns, and
qualifications of all elective regional, provincial, and city officials, and appellate jurisdiction over all
contests involving elective municipal officials decided by trial courts of general jurisdiction, or
involving elective barangay officials decided by trial courts of limited jurisdiction." The 1987
Constitution expanded the jurisdiction of the COMELEC by granting it appellate jurisdiction over all
contests involving elective municipal officials decided by trial courts of general jurisdiction or elective
barangay officials decided by trial courts of limited jurisdiction.9

The jurisdiction of the COMELEC over contests involving elective barangay officials is limited to
appellate jurisdiction from decisions of the trial courts. Under the law,10 the sworn petition contesting
the election of a barangay officer shall be filed with the proper Municipal or Metropolitan Trial Court
by any candidate who has duly filed a certificate of candidacy and has been voted for the same
office within 10 days after the proclamation of the results. A voter may also contest the election of
any barangay officer on the ground of ineligibility or of disloyalty to the Republic of the Philippines by
filing a sworn petition for quo warranto with the Metropolitan or Municipal Trial Court within 10 days
after the proclamation of the results of the election.11 Only appeals from decisions of inferior courts
on election matters as aforestated may be decided by the COMELEC.

The Court agrees with the Solicitor General that the jurisdiction of the COMELEC is over popular
elections, the elected officials of which are determined through the will of the electorate. An election
is the embodiment of the popular will, the expression of the sovereign power of the people.12 It
involves the choice or selection of candidates to public office by popular vote.13 Specifically, the term
"election," in the context of the Constitution, may refer to the conduct of the polls, including the listing
of voters, the holding of the electoral campaign, and the casting and counting of the votes14 which do
not characterize the election of officers in the Katipunan ng mga barangay. "Election contests" would
refer to adversary proceedings by which matters involving the title or claim of title to an elective
office, made before or after proclamation of the winner, is settled whether or not the contestant is
claiming the office in dispute15 and in the case of elections of barangay officials, it is restricted to
proceedings after the proclamation of the winners as no pre-proclamation controversies are
allowed.16

The jurisdiction of the COMELEC does not cover protests over the organizational set-up of the
katipunan ng mga barangay composed of popularly elected punong barangays as prescribed by law
whose officers are voted upon by their respective members. The COMELEC exercises only
appellate jurisdiction over election contests involving elective barangay officials decided by the
Metropolitan or Municipal Trial Courts which likewise have limited jurisdiction. The authority of the
COMELEC over the katipunan ng mga barangay is limited by law to supervision of the election of the
representative of the katipunan concerned to the sanggunian in a particular level conducted by their
own respective organization.17
However, the Secretary of Local Government is not vested with jurisdiction to entertain any protest
involving the election of officers of the FABC.

There is no question that he is vested with the power to promulgate rules and regulations as set forth
in Section 222 of the Local Government Code.

Likewise, under Book IV, Title XII, Chapter 1, See. 3(2) of the Administrative Code of 1987, ** the
respondent Secretary has the power to "establish and prescribe rules, regulations and other
issuances and implementing laws on the general supervision of local government units and on the
promotion of local autonomy and monitor compliance thereof by said units."

Also, the respondent Secretary's rule making power is provided in See. 7, Chapter II, Book IV of the
Administrative Code, to wit:

(3) Promulgate rules and regulations necessary to carry out department objectives, policies,
functions, plans, programs and projects;

Thus, DLG Circular No. 89-09 was issued by respondent Secretary in pursuance of his rule-making
power conferred by law and which now has the force and effect of law.18

Now the question that arises is whether or not a violation of said circular vests jurisdiction upon the
respondent Secretary, as claimed by him, to hear a protest filed in relation thereto and consequently
declare an election null and void.

It is a well-settled principle of administrative law that unless expressly empowered, administrative

agencies are bereft of quasi- judicial powers.19 The jurisdiction of administrative authorities is
dependent entirely upon the provisions of the statutes reposing power in them; they cannot confer it
upon themselves.20 Such jurisdiction is essential to give validity to their determinations.21

There is neither a statutory nor constitutional provision expressly or even by necessary implication
conferring upon the Secretary of Local Government the power to assume jurisdiction over an
election protect involving officers of the katipunan ng mga barangay. An understanding of the extent
of authority of the Secretary over local governments is therefore necessary if We are to resolve the
issue at hand.

Presidential power over local governments is limited by the Constitution to the exercise of general
supervision22 "to ensure that local affairs are administered according to law."23 The general
supervision is exercised by the President through the Secretary of Local Government.24

In administrative law, supervision means overseeing or the power or authority of an officer to see
that the subordinate officers perform their duties. If the latter fails or neglects to fulfill them the former
may take such action or step as prescribed by law to make them perform their duties. Control, on the
other hand, means the power of an officer to alter or modify or nullify or set aside what a subordinate
officer had done in the performance of his duties and to substitute the judgment of the former for that
of the latter. The fundamental law permits the Chief Executive to wield no more authority than that of
checking whether said local government or the officers thereof perform their duties as provided by
statutory enactments. Hence, the President cannot interfere with local governments so long as the
same or its officers act within the scope of their authority.25 Supervisory power, when contrasted with
control, is the power of mere oversight over an inferior body; it does not include any restraining
authority over such body.26
Construing the constitutional limitation on the power of general supervision of the President over
local governments, We hold that respondent Secretary has no authority to pass upon the validity or
regularity of the election of the officers of the katipunan. To allow respondent Secretary to do so will
give him more power than the law or the Constitution grants. It will in effect give him control over
local government officials for it will permit him to interfere in a purely democratic and non-partisan
activity aimed at strengthening the barangay as the basic component of local governments so that
the ultimate goal of fullest autonomy may be achieved. In fact, his order that the new elections to be
conducted be presided by the Regional Director is a clear and direct interference by the Department
with the political affairs of the barangays which is not permitted by the limitation of presidential power
to general supervision over local governments.27

Indeed, it is the policy of the state to ensure the autonomy of local governments.28 This state policy is
echoed in the Local Government Code wherein it is declared that "the State shall guarantee and
promote the autonomy of local government units to ensure their fullest development as self-reliant
communities and make them more effective partners in the pursuit of national development and
social progress."29 To deny the Secretary of Local Government the power to review the regularity of
the elections of officers of the katipunan would be to enhance the avowed state policy of promoting
the autonomy of local governments.

Moreover, although the Department is given the power to prescribe rules, regulations and other
issuances, the Administrative Code limits its authority to merely "monitoring compliance" by local
government units of such issuances.30 To monitor means "to watch, observe or check.31 This is
compatible with the power of supervision of the Secretary over local governments which as earlier
discussed is limited to checking whether the local government unit concerned or the officers thereof
perform their duties as provided by statutory enactments. Even the Local Government Code which
grants the Secretary power to issue implementing circulars, rules and regulations is silent as to how
these issuances should be enforced. Since the respondent Secretary exercises only supervision and
not control over local governments, it is truly doubtful if he could enforce compliance with the DLG
Circular.32 Any doubt therefore as to the power of the Secretary to interfere with local affairs should
be resolved in favor of the greater autonomy of the local government.

Thus, the Court holds that in assuming jurisdiction over the election protest filed by respondent
Governor and declaring the election of the officers of the FABC on June 18, 1989 as null and void,
the respondent Secretary acted in excess of his jurisdiction. The respondent Secretary not having
the jurisdiction to hear an election protest involving officers of the FABC, the recourse of the parties
is to the ordinary courts. The Regional Trial Courts have the exclusive original jurisdiction to hear the
protest.33

The provision in DLG Circular No. 89-15 amending DLG Circular No. 89-09 which states that
"whenever the guidelines are not substantially complied with, the election shall be declared null and
void by the Department of Local Government and an election shall conduct and being invoked by the
Solicitor General cannot be applied. DLG Circular No. 89-15 was issued on July 3, 1989 after the
June 18, 1989 elections of the FABC officers and it is the rule in statutory construction that laws,
including circulars and regulations34 cannot be applied retrospectively.35Moreover, such provision is
null and void for having been issued in excess of the respondent Secretary's jurisdiction, inasmuch
as an administrative authority cannot confer jurisdiction upon itself.

As regards the second issue raised by petitioner, the Court finds that respondent Governor has the
personality to file the protest. Under Section 205 of the Local Government Code, the membership of
the sangguniang panlalawiganconsists of the governor, the vice-governor, elective members of the
said sanggunian and the presidents of the katipunang panlalawigan and the kabataang
barangay provincial federation. The governor acts as the presiding officer of the sangguniang
panlalawigan.36

As presiding officer of the sagguniang panlalawigan, the respondent governor has an interest in the
election of the officers of the FABC since its elected president becomes a member of the assembly.
If the president of the FABC assumes his presidency under questionable circumstances and is
allowed to sit in the sangguniang panlalawiganthe official actions of the sanggunian may be
vulnerable to attacks as to their validity or legality. Hence, respondent governor is a proper party to
question the regularity of the elections of the officers of the FABC.

As to the third issue raised by petitioner, the Court has already ruled that the respondent Secretary
has no jurisdiction to hear the protest and nullify the elections.

Nevertheless, the Court holds that the issue of the validity of the elections should now be resolved in
order to prevent any unnecessary delay that may result from the commencement of an appropriate
action by the parties.

The elections were declared null and void primarily for failure to comply with Section 2.4 of DLG
Circular No. 89-09 which provides that "the incumbent FABC President or the Vice-
President shall preside over the reorganizational meeting, there being a quorum." The rule
specifically provides that it is the incumbent FABC President or Vice-President who shall preside
over the meeting. The word "shall" should be taken in its ordinary signification, i.e., it must be
imperative or mandatory and not merely
permissive,37 as the rule is explicit and requires no other interpretation. If it had been intended that
any other official should preside, the rules would have provided so, as it did in the elections at the
town and city levels38 as well as the regional level..39

It is admitted that neither the incumbent FABC President nor the Vice-President presided over the
meeting and elections but Alberto P. Molina, Jr., the Chairman of the Board of Election
Supervisors/Consultants. Thus, there was a clear violation of the aforesaid mandatory provision. On
this ground, the elections should be nullified.

Under Sec. 2.3.2.7 of the same circular it is provided that a Board of Election
Supervisors/Consultants shall be constituted to oversee and/or witness the canvassing of votes and
proclamation of winners. The rules confine the role of the Board of Election Supervisors/Consultants
to merely overseeing and witnessing the conduct of elections. This is consistent with the provision in
the Local Government Code limiting the authority of the COMELEC to the supervision of the
election.40

In case at bar, PGOO Molina, the Chairman of the Board, presided over the elections. There was
direct participation by the Chairman of the Board in the elections contrary to what is dictated by the
rules. Worse, there was no Board of Election Supervisors to oversee the elections in view of the
walk out staged by its two other members, the Provincial COMELEC Supervisor and the Provincial
Treasurer. The objective of keeping the election free and honest was therefore compromised.

The Court therefore finds that the election of officers of the FABC held on June 18, 1989 is null and
void for failure to comply with the provisions of DLG Circular No. 89-09.

Meanwhile, pending resolution of this petition, petitioner filed a supplemental petition alleging that
public respondent Local Government Secretary, in his memorandum dated June 7, 1990, designated
Augusto Antonio as temporary representative of the Federation to the sangguniang panlalawigan of
Catanduanes.41 By virtue of this memorandum, respondent governor swore into said office Augusto
Antonio on June 14, 1990.42

The Solicitor General filed his comment on the supplemental petition43 as required by the resolution
of the Court dated September 13,1990.

In his comment, the Solicitor General dismissed the supervening event alleged by petitioner as
something immaterial to the petition. He argues that Antonio's appointment was merely temporary
"until such time that the provincial FABC president in that province has been elected, appointed and
qualified."44 He stresses that Antonio's appointment was only a remedial measure designed to cope
with the problems brought about by the absence of a representative of the FABC to the "sanggunian
ang panlalawigan."

Sec. 205 (2) of the Local Government Code (B.P. Blg. 337) provides-

(2) The sangguniang panlalawigan shall be composed of the governor, the vice-governor,
elective members of the said sanggunian and the presidents of the katipunang
panlalawigan and the kabataang barangay provincial federation who shall be appointed by
the President of the Philippines. (Emphasis supplied.)

Batas Pambansa Blg. 51, under Sec. 2 likewise states:

xxx xxx xxx

The sangguniang panlalawigan of each province shall be composed of the governor as

chairman and presiding officer, the vice-governor as presiding officer pro tempore, the
elective sangguniang panlalawigan members, and the appointive members consisting of the
president of the provincial association of barangay councils, and the president of the
provincial federation of the kabataang barangay. (Emphasis supplied.)

In Ignacio vs. Banate Jr.45 the Court, interpreting similarly worded provisions of Batas Pambansa Blg.
337 and Batas Pambansa Blg. 51 on the composition of the sangguniang panlungsod,46 declared as
null and void the appointment of private respondent Leoncio Banate Jr. as member of
the Sangguniang Panlungsod of the City of Roxas representing the katipunang panlungsod ng mga
barangay for he lacked the elegibility and qualification required by law, not being a barangay captain
and for not having been elected president of the association of barangay councils. The Court held
that an unqualified person cannot be appointed a member of the sanggunian, even in an acting
capacity. In Reyes vs. Ferrer,47 the appointment of Nemesio L. Rasgo Jr. as representative of the
youth sector to the sangguniang panlungsod of Davao City was declared invalid since he was never
the president of the kabataang barangay city federation as required by Sec. 173, Batas Pambansa
Blg. 337.

In the present controversy involving the sangguniang panlalawigan, the law is likewise explicit. To be
appointed by the President of the Philippines to sit in the sangguniang panlalawigan is the president
of the katipunang panlalawigan. The appointee must meet the qualifications set by law.48 The
appointing power is bound by law to comply with the requirements as to the basic qualifications of
the appointee to the sangguniang panlalawigan. The President of the Philippines or his alter ego, the
Secretary of Local Government, has no authority to appoint anyone who does not meet the minimum
qualification to be the president of the federation of barangay councils.

Augusto Antonio is not the president of the federation. He is a member of the federation but he was
not even present during the elections despite notice. The argument that Antonio was appointed as a
remedial measure in the exigency of the service cannot be sustained. Since Antonio does not meet
the basic qualification of being president of the federation, his appointment to the sangguniang
panlalawigan is not justified notwithstanding that such appointment is merely in a temporary
capacity. If the intention of the respondent Secretary was to protect the interest of the federation in
the sanggunian, he should have appointed the incumbent FABC President in a hold-over capacity.
For even under the guidelines, the term of office of officers of the katipunan at all levels shall be from
the date of their election until their successors shall have been duly elected and qualified, without
prejudice to the terms of their appointments as members of the sanggunian to which they may be
correspondingly appointed.49 Since the election is still under protest such that no successor of the
incumbent has as yet qualified, the respondent Secretary has no choice but to have the incumbent
FABC President sit as member of the sanggunian. He could even have appointed petitioner since he
was elected the president of the federation but not Antonio. The appointment of Antonio, allegedly
the protege of respondent Governor, gives credence to petitioner's charge of political interference by
respondent Governor in the organization. This should not be allowed. The barangays should be
insulated from any partisan activity or political intervention if only to give true meaning to local
autonomy.

WHEREFORE, the petition is GRANTED in that the resolution of respondent Secretary dated August
4, 1989 is hereby SET ASIDE for having been issued in excess of jurisdiction.

The election of the officials of the ABC Federation held on June 18, 1989 is hereby annulled. A new 1âwphi1

election of officers of the federation is hereby ordered to be conducted immediately in accordance

with the governing rules and regulations.

The Supplemental petition is hereby GRANTED. The appointment of Augusto Antonio as

representative to the Sangguniang Panlalawigan in a temporary capacity is declared null and void.

No costs.

SO ORDERED.

G.R. No. 77707 August 8, 1988

PEDRO W. GUERZON, petitioner,

vs.
COURT OF APPEALS, BUREAU OF ENERGY UTILIZATION, F. C. CAASI JR., and PILIPINAS
SHELL PETROLEUM CORPORATION, respondents.

Llego, Llego & Collera for petitioner.

Florentino G. Dumlao, Jr. for respondent Pilipinas Shell Petroleum Corporation.

CORTES, J.:

Raised by petitioner to this Court is the issue of whether or not the Bureau of Energy Utilization, the agency charged with regulating the
operations and trade practices of the petroleum industry, has the power to order a service station operator-lessee to vacate the service
station and to turn over its possession to the oil company-lessor upon the expiration of the dealership and lease agreements.
The facts, as found by the Court of Appeals, are as follows:

Basic antecedent facts show that on January 9, 1981 petitioner Pedro Guerzon
executed with Basic Landoil Energy Corporation, which was later acquired by
respondent Pilipinas Shell Petroleum Corporation, a contract denominated as
"Service Station Lease" for the use and operation of respondent SHELL's properties,
facilities and equipment, which included four (4) pieces of fuel dispensing Pumps and
one (1) piece air compressor, for a period of five (5) years from January 15, 1981
and ending on January 14, 1986. On January 7, 1981 petitioner likewise executed
with the same Corporation a "Dealer's Sales Contract" for the sale by petitioner of
respondent SHELL's petroleum and other products in the leased service station
which contract expired April 12,1986. On April 13,1981, respondent Bureau of
Energy Utilization (BEU) approved the Dealer's Sales Contract pursuant to which
petitioner was appointed dealer of SHELL's gasoline and other petroleum products
which he was to sell at the gasoline station located at Cagayan de Oro City. On the
same day, respondent BEU issued a certificate of authority in petitioner's favor,
which had a 5-year period of validity, in line with the terms of the contract.

Paragraph 9 of the Service Station Lease Contract provides:

The cancellation or termination of the Dealer's Sales Contract

executed between the COMPANY and the LESSEE on January
7,1981 shall automatically cancel this Lease.

As early as January 2, 1986 respondent SHELL through its District Manager—

Reseller Mindanao wrote to petitioner informing him that the Company was not
renewing the Dealer's Sales Contract which was to expire on April 12, 1986 together
with the service station lease and reminding him to take appropriate steps to wind up
his business activities at the station and, on the appropriate date to hand over the
station with all its facilities and equipment to the representative of respondent. A copy
of this letter was furnished respondent BEU, through the latter's Mindanao Division
Office. On April 12, 1986, respondent SHELL wrote petitioner reiterating the decision
not to extend the Dealer's Sales Contract, demanding the surrender of the station
premises and all company owned equipment to the respondent's representative.

On April 15, 1986 respondent BEU, through respondent Caasi, Jr., officer- in-charge
of its Mindanao Division Office, issued the assailed order directing the petitioner as
follows:

(1) immediately vacate the service station abovementioned and turn it

over to Pilipinas Shell Petroleum Corporation; and

(2) show cause in writing, under oath within ten (10) days from receipt
hereof why no administrative and/or criminal proceedings shall be
instituted against you for the aforesaid violation.

The order directed that a copy of the same be furnished the PCINP Commander of
Cagayan de Oro City, requesting prompt and effective enforcement of the directive
and submitting to the BEU of the result of the action taken thereon.

On April 22, 1986, pursuant to the order of April 15, 1986, respondent SHELL,
accompanied by law enforcement officers, was able to secure possession of the
 gasoline station in question together with the requisite equipments and accessories,
and turned them over to the control of the personnel of respondent SHELL who
accompanied them.

On May 9, 1986, petitioner filed with the Regional Trial Court of Misamis Oriental a
complaint for certiorari, injunction and damages with preliminary mandatory
injunction (Civil Case No. 10619) to annul the disputed order dated April 15, 1986 of
respondent F.C. Caasi, Jr., but on September 18,1986 this complaint was dismissed
for lack of jurisdiction to annul the order of a quasi-judicial body of equivalent
category as the Regional Trial Court. [Rollo, pp. 37-39.]

Thus, petitioner filed in the Court of Appeals a petition for certiorari with a prayer for preliminary
mandatory injunction against Pilipinas Shell Petroleum Corporation, F.C. Caasi, Jr. and the Bureau
of Energy Utilization seeking the annulment of respondent Caasi, Jr.'s order dated April 15, 1986
and the restoration to petitioner of possession of the service station and the equipment removed
therefrom.

In a decision promulgated on February 10, 1987, the Court of Appeals denied due course and
dismissed the petition after holding the disputed order valid and the proceedings undertaken to
implement the same sanctioned by Presidential Decree No. 1206, as amended.

Hence, petitioner's recourse to this Court.

In his petition for review, petitioner ascribed the following errors to the Court of Appeals:

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT BUREAU

OF ENERGY UTILIZATION HAS JURISDICTION TO EJECT THE PETITIONER FROM THE
GASOLINE SERVICE STATION LEASED.

II

THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THERE IS NO NECESSITY

OF ANY NOTICE AND HEARING PRIOR TO THE ISSUANCE OF THE DISPUTED ORDER
ISSUED BY RESPONDENT BUREAU OF ENERGY UTILIZATION ORDERING THE PETITIONER
TO VACATE THE LEASED PREMISES. [Rollo, p. 13]

The controversy revolves around the assailed order issued by respondent F.C. Caasi, Jr., Officer-in-
Charge of the Mindanao Division Office of the Bureau of Energy Utilization, which reads:

15 April 1986

Mr. Pedro W. Guerzon

Corner Velez-Recto Streets

Cagayan de Oro City

Sir:
 We were officially informed by Pilipinas Shell Petroleum Corporation that you refused
to vacate its company-owned service station at the above address despite the fact
that you were advised by Shell in its letter of January 02, 1986 that it will not renew
the Dealer's Sales Contract between yourself and the company upon its expiration on
April 12,1986.

Your continued occupancy of the service station is not only considered a violation of
BEU laws, rules and regulations but is also detrimental to the interests of the parties
concerned and the public.

In view thereof, you are hereby directed to:

(1) immediately vacate the service station abovementioned and turn it over to
Pilipinas Shell Petroleum Corporation; and

(2) show cause in writing, under oath within ten (1O) days from receipt hereof why no
administrative and/or criminal proceedings shall be instituted against you for the
aforesaid violation.

Let a copy of this directive be furnished the PC-INP Commander of Cagayan de Oro
City, who is hereby requested to cause the prompt and effective enforcement hereof
and to submit to this Bureau the result/s of the action/s taken thereon.

Very truly yours,

(Sgd.) F.C. CAASI JR.

Officer-in-Charge

cc: PC/INP Commander

Cagayan de Oro City Pilipinas Shell Petroleum Corporation

Sasa, Davao City/Cagayan de Oro City

BEU-Manila

[Rollo, p. 122; Emphasis supplied.]

As stated at the outset, whether or not it is within the jurisdiction of the Bureau of Energy Utilization
to issue the above order is the primary issue to be resolved.

The Solicitor General contends that since petitioner's license to sell petroleum products expired on
April 12,1986, when his dealership and lease contracts expired, as of the following day, April 13,
1986 he was engaged in illegal trading in petroleum products in violation of Batas Pambansa Blg. 33
[Rollo, pp. 100-101.] The pertinent provisions of B.P. No. 33 state:

Sec. 2. Prohibited Acts.—The following acts are prohibited and penalized:

(a) Illegal trading in petroleum and/or petroleum products;

 xxx xxx xxx

Sec. 3. Definition of terms.—For the purposes of this Act, the si following terms shall
be understood to mean:

Illegal trading in petroleum and/or petroleum products-the sale or distribution of

petroleum products for profit without license or authority from the Government; non-
issuance of receipts by licensed traders; misrepresentation as to quality and/or
quantity; an sa oil companies, distributors and/or dealers violative of government
rules and regulations.

xxx xxx xxx

Thus, concludes the Solicitor General, the Bureau of Energy nation had the power to issue, and was
justified in issuing, the order to vacate pursuant to Presidential Decree No. 1206, as amended, the
pertinent portion of which provides:

Sec. 7. Bureau of Energy Utilization.—There is created in the Department a Bureau

of Energy Utilization, hereafter referred to in this Section as the Bureau, which shall
have the following powers and functions, among others:

xxx xxx xxx

e. After due notice and hearing, impose and collect a fine not exceeding One
Thousand Pesos, for every violation or non-compliance with any term or condition of
any certificate, license, or permit issued by the Bureau or of any of its orders,
decisions, rules and regulations.

The fine so imposed shall be paid to the Bureau, and failure to pay the fine within the
time specified in the order or decision of the Bureau or failure to cease and
discontinue the violation or noncompliance shall be deemed good and sufficient
reason for the suspension, closure or stoppage of operations of the establishment of
the person guilty of the violation or non-compliance. In case the violation or default is
committed by a corporation or association, the manager or person who has charge of
the management of the corporation or association and the officers or directors
thereof who have ordered or authorized the violation or default shall be solidarily
liable for the payment of the fine.

The Bureau shall have the power and authority to issue corresponding writs of
execution directing the City Sheriff or provincial Sheriff or other peace officers whom
it may appoint to enforce the fine or the order of closure, suspension or stoppage of
operations. Payment may also be enforced by appropriate action brought in a court
of competent jurisdiction. The remedy provided herein shall not be a bar to or affect
any other remedy under existing laws, but shall be cumulative and additional to such
remedies;

xxx xxx xxx

However, the Solicitor General's line of reasoning is fatally flawed by the failure of the facts to
support it. From a cursory reading of the assailed order, it is readily apparent that the order is
premised on petitioner's refusal to vacate the service station in spite of the expiration and non-
renewal of his dealership and lease agreements with respondent Shell. Nowhere in the order is it
stated that petitioner had engaged in illegal trading in petroleum products or had committed any
other violation of B.P. Blg. 33. The order merely makes a vague reference to a "violation of BEU
laws, rules and regulations," without stating the specific provision violated. That petitioner had
engaged in illegal trading in petroleum products cannot even be implied from the wording of the
assailed order.

But then, even if petitioner was indeed engaged in illegal trading in petroleum products, there was no
basis under B.P. Blg. 33 to order him to vacate the service station and to turn it over to respondent
Shell. Illegal trading in petroleum products is a criminal act wherein the injured party is the State.
Respondent Shell is not even alleged by the Solicitor General as a private party prejudiced and,
therefore, it can claim no relief if a criminal case is instituted. *

Even on the assumption that petitioner's continued occupancy and operation of the service station
constituted a violation of a law or regulation, still the Court has no recourse but to rule against the
legality of the order, the Bureau of Energy Utilization not being empowered to issue it. Section 7 of
P.D. No. 1206, as amended, is very clear as to the courses of action that the Bureau of Energy
Utilization may take in case of a violation or non- compliance with any term or condition of any
certificate, license or permit issued by the Bureau or any of its orders, decisions, rules or regulations.
The Bureau may: (1) impose a fine not exceeding P1,000.00; and (2) in case of failure to pay the
fine imposed or to cease and discontinue the violation or non-compliance, order the suspension,
closure or stoppage of operations of the establishment of the guilty party. Its authority is limited to
these two (2) options. It can do no more, as there is nothing in P.D. No. 1206, as amended, which
empowers the Bureau to issue an order to vacate in case of a violation.

As it is, jurisdiction to order a lessee to vacate the leased premises is vested in the civil courts in an
appropriate case for unlawful detainer or accion publiciana [Secs. 19(2) and 33(2), B.P. Blg. 129, as
amended.] There is nothing in P.D. No. 1206, as amended, that would suggest that the same or
similar jurisdiction has been granted to the Bureau of Energy Utilization. It is a fundamental rule that
an administrative agency has only such powers as are expressly granted to it by law and those that
are necessarily implied in the exercise thereof [Makati Stock Exchange, Inc. v. Securities and
Exchange Commission, G.R. No. L-23004, June 30,1965,14 SCRA 620; Sy v. Central Bank, G.R.
No. L-41480, April 30, 1976, 70 SCRA 570.] That issuing the order to vacate was the most effective
way of stopping any illegal trading in petroleum products is no excuse for a deviation from this rule.
Otherwise, adherence to the rule of law would be rendered meaningless.

Moreover, contrary to the Solicitor General's theory, the text of the assailed order leaves no room for
doubt that it was issued in connection with an adjudication of the contractual dispute between
respondent Shell and petitioner. But then the Bureau of Energy Utilization, like its predecessor, the
defunct Oil Industry Commission, has no power to decide contractual disputes between gasoline
dealers and oil companies, in the absence of an express provision of law granting to it such power
[see Pilipinas Shell Petroleum Corp. v. Oil Industry Commission, G.R. No. L-41315, November 13,
1986,145 SCRA 433.] As explicitly stated in the law, in connection with the exercise of quasi-judicial
powers, the Bureau's jurisdiction is limited to cases involving violation or non-compliance with any
term or condition of any certificate, license or permit issued by it or of any of its orders, decisions,
rules or regulations.

Viewed from any angle, respondent F.C. Caasi, Jr., in issuing the assailed order, acted beyond his
authority and overstepped the powers granted by P.D. No. 1206, as amended. The assailed order
was, therefore, null and void.
Even if the issuance of the order to vacate was within the authority of respondent Caasi, Jr., still its
nullity is apparent because of the failure to comply with the requirement of notice and hearing. That
P.D. No. 1206, as amended, requires notice and hearing before any administrative penalty provided
in Sec. (7)e may be imposed is patent. Sec. (7)e provides for a gradation of penalties of which the
imposition of a fine in an amount not exceeding P1,000.00 is the least severe, and requires that
even before a fine is imposed notice and an opportunity to be heard be given to the offender.

While the order dated April 15, 1986 is null and void, the Court, however, finds itself unable to issue
the writ of mandatory injunction prayed for ordering respondent Shell to restore possession of the
service station and the equipment and facilities therein to petitioner. Petitioner himself had admitted
in his petition that his dealership and lease agreements with respondent Shell had already expired.
Recognized the validity of the termination of the agreements, he requested for their renewal.
However, this request was denied. [Rollo, p. 9] Undeniably, after April 12, 1986, any right petitioner
had to possess the service station and the equipment and facilities therein had been extinguished.
No basis for an affirmative relief therefore exist.

WHEREFORE, in view of the foregoing, the Decision of the Court of Appeals dated February 10,
1987 is REVERSED and the Order dated April 15,1986 issued by respondent Caasi, Jr. of the
Bureau of Energy Utilization is ANNULLED and SET ASIDE.

However, the right of petitioner to the possession of the service station and the equipment and
facilities having been extinguished, the prayer for the issuance of a writ of mandatory injunction is
DENIED.

SO ORDERED.

G.R. No. 110265 July 7, 1994

FREEMAN, INC., FREEMAN MANAGEMENT & DEVELOPMENT CORP., CHIAO LIAN, LECHU S.
LIM, PERLITA S. DYOGI, OLIVIA S. SANTOS, CARMEN S. SAW and RUBEN CHUA, petitioners,
vs.
THE SECURITIES AND EXCHANGE COMMISSION, SAW MUI, RUBEN SAW, DIONISIO SAW,
LINA S. CHUA, LUCILA S. RUSTE and EVELYN SAW, respondents.

Abelardo G. Luzano for petitioner.

Benito O. Ching, Jr. for private respondents.

BELLOSILLO, J.:

This petition for certiorari filed under Rule 65 of the Rules of Court seeks to annul and set aside the
order of respondent Securities and Exchange Commission dated 7 January 1993 in SEC-EB No.
308 denying the action of petitioners to nullify the 7 January 1992 order of the Securities and
Exchange Commission in SEC Case No. 3577.

Sometime in 1986 and 1987, Freeman, Inc. (FREEMAN), was granted a loan by Equitable Banking
Corporation (EQUITABLE) as evidenced by two (2) promissory notes, P.N. No. 125957 dated 8
December 1986 for P1,700,000.00 payable 8 December 1987, and P.N. No. TL-369 dated 24 April
1987 for P6,000,000.00 payable 24 April 1988. Saw Chiao Lian, President of Freeman, Inc., signed
as co-maker in both promissory notes.

When FREEMAN failed to pay its obligations, EQUITABLE instituted collection suit against
FREEMAN and Saw Chiao Lian.1 EQUITABLE also prayed for preliminary attachment.

On 27 May 1988, private respondents Saw Mui, Ruben Saw, Dionisio Saw, Lina S. Chua, Lucila S.
Ruste and Evelyn Saw filed an answer in intervention claiming that they owned the minority interest
in FREEMAN.

On 12 October 1988, the trial court denied the intervention of private respondents. The denial was
affirmed by the Court of Appeals and thereafter by this Court.2

The collection case was terminated when the parties entered into a compromise agreement duly
approved by the court and a decision rendered thereon on 5 December 1988. However, Freeman,
Inc. (FREEMAN) and Saw Chiao Lian, defendants in the trial court, failed to comply with the
judgment.

On 30 January 1989, a writ of execution was issued. Two (2) parcels of land belonging to FREEMAN
covered by TCT Nos. 34219 and 34220 were levied upon and sold at public auction on 31 March
1989. The highest bidder was one of the petitioners, Freeman Management and Development
Corporation (FREEMAN MANAGEMENT), which thereafter registered its certificate of sale with the
Register of Deeds.

On 23 May 1989, before FREEMAN MANAGEMENT could consolidate its title over the properties
purchased at the auction sale, private respondents, representing the minority shareholdings of
FREEMAN, filed a petition with the Securities and Exchange Commission (SEC) seeking the
dissolution of FREEMAN, accounting and reconveyance of the properties covered by TCT Nos.
34219 and 34220.3

On 5 April 1990, private respondent filed a similar complaint against petitioners with the Regional
Trial Court of Kalookan City.4 The complaint sought to annul the compromise agreement between
EQUITABLE on one hand and defendants FREEMAN and Saw Chiao Lian on the other, as well as
the promissory notes executed by Saw Chiao Lian, the auction sale, and the sheriff's certificate of
sale of the lots covered by TCT Nos. 34219 and 34220.

Petitioners moved for the dismissal of the complaint on the ground that the same was a duplication
of the case pending in the SEC. But the motion was denied. Petitioners went up on certiorari to the
Court of Appeals which reversed the trial court and directed the dismissal of the complaint by reason
of the pendency of the case.5

On 7 January 1992, on motion on private respondents in SEC Case

No. 3577, and despite the opposition thereto by petitioners, SEC Hearing Officer Juanito B. Almosa,
Jr., issued a writ of preliminary injunction to prevent the consolidation of ownership of petitioner
FREEMAN MANAGEMENT over the properties it acquired in the auction sale of 31 March 1989, the
redemption period having expired on 7 April 1990.6

Petitioners assailed the order of the SEC Hearing Officer by filing a petition for certiorari with the
SEC en banc which on 7 January 1993 however denied the petition. 7 On 15 March 1993, petitioners'
motion for reconsideration was likewise denied.8
On 22 April 1993, petitioners filed with this Court a petition for certiorari questioning the 15 March
1993 order of the SEC.9 In a Resolution dated 10 May 1993, this Court dismissed the petition for its
failure to state the date when the questioned SEC Order was received as well as the date when the
order denying the Motion for Reconsideration was received.10

On 4 June 1993, petitioners filed the present petition containing the matters omitted in the petition
earlier dismissed. Petitioners allege that the SEC committed grave abuse of discretion and acted in
excess of jurisdiction in sustaining the order of its Hearing Officer granting the writ of injunction
enjoining consolidation of ownership in FREEMAN MANAGEMENT and that the SEC miscontrued
the decisions of the Court of Appeals in Equitable Banking Corp. v. Hon. Mangay11 and of this Court
in Saw v. Court
of Appeals, 12 which in effect ruled the SEC has jurisdiction to take cognizance of and determine the
rights of petitioners and private respondents as against each other. Petitioners also argue that the
assailed order of the SEC violated the basic principle that the SEC, being a coordinate body with the
Regional Trial Court, could not interfere in the proceedings held therein, and neither could it review
the issues passed upon by the said court. They likewise maintain that although SEC Case No. 3577
could still proceed as to the dissolution of FREEMAN, the two (2) properties of the latter which were
levied upon and sold to FREEMAN MANAGEMENT are already excluded from the corporate assets
of FREEMAN; and, that these properties could no longer be the subject of the action for
reconveyance in the SEC because they had been the subject of execution to enforce the decision of
the trial court in Civil Case No. 88-44404 which had already attained finality.

In their comment, private respondents contend that the present petition was filed beyond the
reglementary period of thirty (30) days within which to appeal to this Court, citing Sec. 1, Rule 17, of
the New Rules of Procedure of the SEC. Private respondents also allege that the jurisdiction of the
SEC has been resolved by this Court in Saw v. Court of Appeals 13 when it held that "even with the
denial of petitioners' motion to intervene, nothing is really lost to them. The denial did not necessarily
prejudice them as their rights are being litigated in the case (SEC Case No. 3577) now before the
Securities and Exchange Commission and may be fully asserted and protected in that separate
proceeding."

In its comment, the Office of the Solicitor General expresses conformity with the allegations in the
petition and prays that the petition be given due course. It also avers that since the present petition,
which is one under Rule 65 of the Rules of Court, was filed thirty-five (35) days after receipt of the
assailed resolution of the SEC, the instant petition was filed within a reasonable time. The Solicitor
General also agrees with petitioners' contention that the SEC, as a co-equal body with the Regional
Trial Court, cannot modify, reverse or pass upon the decision of said court. Moreover, private
respondents had the opportunity to submit a bid for the foreclosed properties during the public
auction and their failure to exercise their right should not prejudice petitioners.

We sustain petitioners. The present petition seeks to annul and set aside the order of the SEC for
want of jurisdiction to issue the writ of injunction, a provisional remedy to the principal action pending
in the SEC for the dissolution of petitioner FREEMAN. Hence, the petition is not an appeal from a
final order of the SEC but a special civil action questioning the legal competence of the latter to issue
such interlocutory order. It is covered by Sec. 1, Rule 65, of the Rules of Court which allow a person
aggrieved to file a verified petition in the proper court praying that judgment be rendered annulling or
modifying the proceedings, as the law requires, of the tribunal, board or officer when the latter,
exercising judicial functions, has acted without or in excess of its or his jurisdiction or with grave
abuse of discretion and there is no appeal, nor any plain, speedy and adequate remedy in the
ordinary course of law.
We have consistently ruled that petitions for certiorari must be filed within a reasonable time. In the
instant case, the records show that the petition at bench was filed on 4 June 1993, or two (2) months
and nineteen (19) days from 17 March 1993, which was the date when petitioners received copy of
the order of the SEC denying their motion for reconsideration. There is no doubt that this petition
was seasonably filed.

SEC Case No. 3577 arose from the action filed by private respondents as minority shareholders of
petitioner FREEMAN for the dissolution of the corporation and reconveyance of the properties
conveyed to another petitioner FREEMAN MANAGEMENT in a public auction. The SEC maintained
that it had jurisdiction to issue the writ of injunction preventing the consolidation of ownership in
FREEMAN MANAGEMENT on the basis of our ruling in Saw v. Court of Appeals. We denied the
intervention of private respondents in the trial court in Civil Case No. 88-44404 which had already
been terminated. As we stated therein, even with the denial of herein private respondents' motion to
intervene nothing could really be lost to them as their rights were being litigated before the SEC and
would be fully asserted and protected in that separate proceeding.

Our ruling in Saw v. Court of Appeals should be understood in the light of two(2) basic legal
principles. First, that administrative agencies like the SEC are tribunals of limited jurisdiction and as
such can exercise only those powers which are specifically granted to them by their enabling
statutes.14 Section 5 of P.D. No. 902-A, as amended, provides the cases over which the SEC has
original and exclusive jurisdiction to hear and decide. These include controversies arising out of
intra-corporate or partnership relations between and among stockholders, members or associates;
between any or all of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and, between such corporation, partnership or
association and the state insofar as it concerns their individual franchise or right to exist as such
entity. Section 6 of the same decree empowers the SEC to issue preliminary or permanent
injunction, whether prohibitory or mandatory, in all cases in which it has jurisdiction.

The action for dissolution of FREEMAN filed by its minority stockholders is well within the jurisdiction
of the SEC to resolve in accordance with P.D. No. 902-A. However, the inclusion in the SEC case of
FREEMAN MANAGEMENT of which private respondents are not stockholders for the purpose of
compelling it to reconvey to FREEMAN the properties originally owned by the latter but were levied
upon and sold to FREEMAN MANAGEMENT in a public auction is a matter outside of the limited
jurisdiction of the SEC. The petition for reconveyance of properties against FREEMAN
MANAGEMENT is not an intra-corporate controversy since private respondents have no shares or
interests whatsoever in FREEMAN MANAGEMENT, a corporation separate and distinct from
FREEMAN, which is undergoing dissolution proceedings in the SEC.

The second basic principle is the doctrine of non-interference which should be regarded as highly
important in judicial stability and in the administration of justice whereby the judgment of a court of
competent jurisdiction may not be opened, modified or vacated by any court or tribunal of concurrent
jurisdiction.15 The SEC is at the very least co-equal with the Regional Trial Court. As such, one would
have no power to control the other.16 Moreover, in the instant case, judgment was rendered by the
trial court in Civil Case No. 88-44404 approving the compromise agreement between EQUITABLE
on one hand, and FREEMAN and Saw Chiao Lian on the other. A writ of execution was issued
against the defendants to enforce the judgment and two (2) properties of FREEMAN were levied
upon and sold to FREEMAN MANAGEMENT as highest bidder in the public auction.

Finally, the judgment was fully satisfied and a certificate of sale was issued to FREEMAN
MANAGEMENT. It is axiomatic that after a judgment has been fully satisfied, the case is deemed
terminated once and for all.17 It cannot be modified or altered. Hence, the properties sold to
FREEMAN MANAGEMENT are now considered excluded from the corporate assets of FREEMAN
and can no longer be the subject of the proceedings in the SEC for the dissolution of the latter.
Therefore SEC exceeded its jurisdiction when it issued a writ of injunction enjoining FREEMAN
MANAGEMENT from consolidating its ownership over the two (2) parcels of land it acquired as
highest bidder in the execution sale.

WHEREFORE, the petition is GRANTED and the assailed orders of the Securities and Exchange
Commission dated 7 January 1993 and 15 March 1993 are REVERSED and SET ASIDE.

SO ORDERED.

G.R. No. 161811 April 12, 2006

THE CITY OF BAGUIO, MAURICIO DOMOGAN, and ORLANDO GENOVE, Petitioners,

vs.
FRANCISCO NIÑO, JOSEFINA NIÑO, EMMANUEL NIÑO, and EURLIE OCAMPO, Respondents.

DECISION

CARPIO MORALES, J.:

The Bureau of Lands awarded on May 13, 1966 to Narcisa A. Placino (Narcisa) a parcel of land
identified as Lot No. 10 (the lot) located at Saint Anthony Road, Dominican-Mirador Barangay,
Baguio City.

Francisco Niño (Niño), one of the herein respondents, who has been occupying the lot, contested
the award by filing a Petition Protest on December 23, 1975 before the Bureau of Lands.

The Director of Lands dismissed the Petition Protest by Order of November 11, 1976.

Niño appealed the dismissal all the way to the Supreme Court but he did not succeed.

The decision of the Director of Lands dated November 11, 1976 having become final and
executory,1 the then-Executive Director of the Department of Environment and Natural Resources-
Cordillera Autonomous Region (DENR-CAR), on petition of Narcisa, issued an Order of Execution
dated February 1, 1993 directing the Community Environment and Natural Resources Office
(CENRO) Officer to enforce the decision "by ordering Petitioner Niño and those acting in his behalf
to refrain from continuously occupying the area and remove whatever improvements they may have
introduced thereto."2

Attempts to enforce the Order of Execution failed, prompting Narcisa to file a complaint for ejectment
before the Baguio City Municipal Trial Court in Cities (MTCC). The MTCC dismissed Narcisa’s
complaint, however, by Order3of August 7, 1996.

Narcisa’s counsel, Atty. Edilberto Claravall (Atty. Claravall), later petitioned the DENR-CAR for the
issuance of a Special Order authorizing the City Sheriff of Baguio, the City Police Station, and the
Demolition Team of the City Government to demolish or remove the improvements on the lot
introduced by Niño. The DENR-CAR denied the petition, citing lack of jurisdiction over the City
Sheriff of Baguio, the City Police Station, and the Demolition Team of the City Government. The
DENR-CAR also invoked Section 14 (now Section 10 (d)) of Rule 39 of the Rules of Court.4
Atty. Claravall thereupon moved to have the Order of Execution previously issued by the DENR-
CAR amended, which was granted. As amended, the Order of Execution addressed to the CENRO
Officer read:

WHEREFORE, pursuant to the provisions of Section 1844 of the Revised Administrative Code as
amended by Act No. 3077, you are hereby enjoined to enforce the aforementioned order, with the
assistance upon request of the City Sheriff of Baguio City, the Demolition Team of Baguio City and
the Baguio City Police Station, by Ordering Petitioner Niño and those acting in his behalf to refrain
from continuously occupying the area and remove whatever improvements they may have
introduced thereto.

xxxx

SO ORDERED.5 (Emphasis and underscoring supplied)

The DENR-CENRO, together with the Demolition Team of Baguio City and the Baguio City police,
desisted, however, in their earlier attempt to enforce the Amended Order of Execution.6

On July 16, 1997, the Demolition Team of Baguio City headed by Engineer Orlando Genove and the
Baguio City Police, on orders of then Baguio City Police Officer-In-Charge (OIC) Donato Bacquian,
started demolishing the houses of Niño and his herein co-respondents.7

The demolition was, however, temporarily stopped upon the instructions of DENR-CENR Officer
Guillermo Fianza, who later advised Niño that the DENR-CENRO would implement the Amended
Order of Execution on August 4, 1997.8

Niño and his wife Josefina Niño thereupon filed a Petition9 for Certiorari and Prohibition with Prayer
for Temporary Restraining Order before the Regional Trial Court (RTC) of Baguio City against
Guillermo Fianza, Teofilo Olimpo of the DENR-CENRO, Mayor Mauricio Domogan (hereafter
petitioner), Atty. Claravall, Engr. Orlando Genove (hereafter petitioner), Rolando Angara, and Police
Officer Donato Bacquian challenging the Amended Order of Execution issued by the DENR-
CENRO. 1avv phil.net

The Niño spouses later filed an Amended Petition10 by impleading Emmanuel Niño and Eurlie
Ocampo as therein co-petitioners and the City of Baguio (hereafter petitioner) and Narcisa as therein
additional respondents, and further praying for damages.

Branch 6 of the Baguio RTC dismissed the petition of Niño et al. (hereafter respondents) for lack of
merit.11Respondents’ Motion for Reconsideration12 having been denied, they filed a Petition for
Review13 under Rule 42 of the Rules before the Court of Appeals.

By Decision14 of December 11, 2002, the Court of Appeals granted the Petition for Review, holding
that Sec. 10(d) of Rule 39 of the Rules reading:

SEC. 10. Execution of judgments for specific act.

xxxx

(d) Removal of improvements on property subject of execution. — When the property subject of the
execution contains improvements constructed or planted by the judgment obligor or his agent, the
officer shall not destroy, demolish or remove said improvements except upon special order of the
court, issued upon motion of the judgment obligee after due hearing and after the former has failed
to remove the same within a reasonable time fixed by the court. (Underscoring supplied)

applies.

Thus disposed the appellate court:

WHEREFORE, the instant appeal is hereby GRANTED and the Orders dated September 24, 1997
and November 23, 1998 are hereby SET ASIDE. Public respondent City Mayor Mauricio Domogan
thru the Demolition Team and City Engineer’s Office are hereby ordered to cease and desist from
enforcing the amended order of execution issued by Oscar N. Hamada, Regional Executive Director
of the Department of Environmental and Natural Resources, concerning the demolition or removal of
the structures made by petitioners until private respondent applied for a special order
abovementioned with the proper court. 1avvphil.net

SO ORDERED.15 (Underscoring supplied)

Respondents filed before the appellate court an Ex-Parte Motion for Reconsideration16 on January 9,
2003, alleging that some of the reliefs they prayed for in their petition were left unacted
upon.17 Petitioners too filed a Motion for Reconsideration18 on January 28, 2003, raising the following
grounds:

1. THE HONORABLE COURT FAILED TO CONSIDER THAT THE CITY MAYOR HAS THE
POWER TO ORDER THE DEMOLITION OF ILLEGALLY-BUILT STRUCTURES;

2. THE HONORABLE COURT GRAVELY ERRED IN GIVING DUE COURSE TO THE

PETITION FOR REVIEW;

3. THE HONORABLE COURT MISAPPLIED SEC. 10 (d), RULE 39 of the RULES OF

COURT.19(Underscoring supplied)

In support of the first ground, petitioners raised before the appellate court, in their Motion for
Reconsideration, for the first time, the power of the City Mayor to validly order the demolition of a
structure constructed without a building permit pursuant to Sec. 455(b) 3(vi) of the Local
Government Code of 1991 in relation to the National Building Code of the Philippines.

Alleging that respondents built their house without the required entry and building permits,
petitioners argued that the City Mayor may order the demolition of a house without a special court
order.20

The Court of Appeals denied both parties’ motions for reconsideration by Resolution21 of December
17, 2003.

Hence, the present petition of the City of Baguio, Mayor Domogan (now a Congressman), and
Orlando Genove, faulting the appellate court:

1. . . . IN RULING THAT A SPECIAL COURT ORDER IS NEEDED FOR THE DEMOLITION

OF RESPONDENTS’ STRUCTURES;

2. . . . IN APPLYING SEC. 10(d) RULE 39 OF THE RULES OF COURT IN THIS CASE;

 3. . . . IN ENTERTAINING RESPONDENTS’ PETITION FOR REVIEW.22

The petition fails.

While it is noted that respondent’s appeal to the Court of Appeals was erroneously brought under
Rule 42 of the Rules of Court, instead of under Rule 41, the RTC having rendered the questioned
decision in the exercise of its original, not appellate, jurisdiction, this Court overlooks the error in
view of the merits of respondents’ case.23

Petitioners’ contention that the enforcement of the Amended Order of Execution does not need a
hearing and court order which Sec. 10(d) of Rule 39 of the Rules of Court requires does not lie. That
an administrative agency which is clothed with quasi-judicial functions issued the Amended Order of
Execution is of no moment, since the requirement in Sec. 10 (d) of Rule 39 of the Rules of Court
echoes the constitutional provision that "no person shall be deprived of life, liberty or property
without due process of law, nor shall any person be denied the equal protection of the laws."24

Antipolo Realty Corporation v. National Housing Authority teaches:

In general, the quantum of judicial or quasi-judicial powers which an administrative agency may
exercise is defined in the enabling act of such agency. In other words, the extent to which an
administrative entity may exercise such powers depends largely, if not wholly, on the provisions of
the statute creating or empowering such agency.25(Underscoring supplied)

There is, however, no explicit provision granting the Bureau of Lands (now the Land Management
Bureau) or the DENR (which exercises control over the Land Management Bureau) the authority to
issue an order of demolition26— which the Amended Order of Execution, in substance, is.

Indeed,

[w]hile the jurisdiction of the Bureau of Lands is confined to the determination of the respective rights
of rival claimants to public lands or to cases which involve the disposition of public lands, the power
to determine who has the actual, physical possession or occupation or the better right of
possession over public lands remains with the courts.

The rationale is evident. The Bureau of Lands does not have the wherewithal to police public lands.
Neither does it have the means to prevent disorders or breaches of peace among the occupants. Its
power is clearly limited to disposition and alienation and while it may decide disputes over
possession, this is but in aid of making the proper awards. The ultimate power to resolve conflicts
of possession is recognized to be within the legal competence of the civil courts and its
purpose is to extend protection to the actual possessors and occupants with a view to quell
social unrest.27 (Emphasis added)

Consequently, this Court held:28

x x x the power to order the sheriff to remove improvements and turn over the possession of
the land to the party adjudged entitled thereto, belongs only to the courts of justice and not
to the Bureau of Lands.29(Emphasis and underscoring supplied)

In fine, it is the court sheriff which is empowered to remove improvements introduced by

respondents on, and turn over possession of, the lot to Narcisa.
Petitioners’ invocation of the City Mayor’s authority under Sec. 455(b) 3(vi) of the Local Government
Code to order the demolition or removal of an illegally constructed house, building, or structure
within the period prescribed by law or ordinance and their allegation that respondents’ structures
were constructed without building permits30 were not raised before the trial court. Petitioners having,
for the first time, invoked said section of the Local Government Code and respondents’ lack of
building entry permits in their Motion for Reconsideration of the Court of Appeals’ decision, it was
correctly denied of merit,31 it being settled that matters, theories or arguments not brought out in the
proceedings below will ordinarily not be considered by a reviewing court as they cannot be raised for
the first time on appeal.32

WHEREFORE, the petition is DISMISSED. The questioned Decision and Resolution of the Court of
Appeals are AFFIRMED.

No pronouncement as to costs.

SO ORDERED.

[G.R. No. 157684. April 27, 2005]

DEPARTMENT OF HEALTH, petitioner, vs. PRISCILLA G.

CAMPOSANO, ENRIQUE L. PEREZ, and IMELDA Q.
AGUSTIN, respondents.

DECISION
PANGANIBAN, J.:

Administrative due process requires that, prior to imposing disciplinary

sanctions, the disciplining authority must make an independent assessment of
the facts and the law. On its face, a decision imposing administrative
sanctions must show the bases for its conclusions. While the investigation of a
case may be delegated to and conducted by another body or group of
officials, the disciplining authority must nevertheless weigh the evidence
gathered and indicate the applicable law. In this manner, the respondents
would be informed of the bases for the sanctions and thus be able to prepare
their appeal intelligently. Such procedure is part of the sporting idea of fair
play in a democracy.

The Case
 Before us is a Petition for Review[1] under Rule 45 of the Rules of Court,
assailing the March 19, 2003 Decision[2] of the Court of Appeals (CA) in CA-
GR SP No. 67720. The challenged Decision disposed as follows:

WHEREFORE, based on the foregoing, the petition is GRANTED. The assailed

Resolutions of the CSC are hereby SET ASIDE.

The Department of Health is hereby ordered to:

1) Reinstate petitioners without loss of seniority rights but without prejudice to an

administrative investigation that may be undertaken against them by the
DOH should the evidence warrant; and
2) Pay petitioners their back salaries from the time their preventive suspension
expired. Mandatory leave credits shall not be charged against their leave
credits.[3]

The Facts

The facts are narrated by the CA as follows:

[Respondents] are former employees of the Department of HealthNational Capital

Region (hereinafter DOH-NCR). They held various positions as follows:
[Respondent] Priscilla B. Camposano (hereinafter Camposano) was the Finance and
Management Officer II, [Respondent] Imelda Q. Agusin (hereinafter Agustin) was an
Accountant I, and [Respondent] Enrique L. Perez (hereinafter Perez) was the Acting
Supply Officer III.

On May 15, 1996, some concerned [DOH-NCR] employees filed a complaint before
the DOH Resident Ombudsman Rogelio A. Ringpis (hereinafter the Resident
Ombudsman) against Dir. IV Rosalinda U. Majarais, Acting Administrative Officer
III Horacio Cabrera, and [respondents], arising out of an alleged anomalous purchase
by DOH-NCR of 1,500 bottles of Ferrous Sulfate 250 mg. with Vitamin B Complex
and Folic Acid capsules worth P330,000.00 from Lumar Pharmaceutical Laboratory
on May 13, 1996.

On August 6, 1996, the Resident Ombudsman submitted an investigation report to the

Secretary of Health recommending the filing of a formal administrative charge of
Dishonesty and Grave Misconduct against [respondents] and their co-respondents.

On August 8, 1996, the Secretary of Health filed a formal charge against the
[respondents] and their co-respondents for Grave Misconduct, Dishonesty, and
Violation of RA 3019. On October 25, 1996, then Executive Secretary Ruben D.
Torres issued Administrative Order No. 298 (hereafter AO 298) creating an ad-hoc
committee to investigate the administrative case filed against the DOH-NCR
employees. The said AO was indorsed to the Presidential Commission Against Graft
and Corruption (hereafter PCAGC) on October 26, 1996. The same reads:

I have the honor to transmit herewith, for your information and guidance, a certified
copy of Administrative Order No. 298 dated October 25, 1996 entitled CREATING
AN AD HOC COMMITTEE TO INVESTIGATE THE ADMINISTRATIVE CASES
FILED AGAINST NCR HEALTH DIRECTOR ROSALINDA U. MAJARAIS AND
OTHER OFFICERS AND EMPLOYEES OF THE DEPARTMENT OF HEALTH,
NATIONAL CAPITAL REGION.

On December 2, 1996, the PCAGC took over the investigation from the DOH. After
the investigation, it issued a resolution on January 23, 1998 disposing [respondents]
case as follows:

WHEREFORE, premises considered, this Commission finds Respondents Rosalinda

U. Majarais, Priscilla G. Camposano, Financial Management Chief II, Horacio D.
Cabrera, Acting Administrative Officer V, Imelda Q. Agustin, Accountant I and
Enrique L. Perez, Acting Supply Officer III, all of the Department of Health National
Capital Region (DOH-NCR) guilty as charged and so recommends to his Excellency
President Fidel V. Ramos that the penalty of dismissal from the government service
be imposed thereon.

SO ORDERED.

On April 20, 1998, President Ramos issued [Administrative Order No. 390
(hereinafter AO 390)] that reads:

WHEREFORE, premises considered, respondent Dr. Rosalinda U. Majarais is hereby

found guilty as charged and, as recommended by the Presidential Commission
Against Graft and Corruption, is meted the Penalty of dismissal from the service. The
records of the case with respect to the other respondents are remanded to Secretary
Carmencita N. Reodica, Department of Health for appropriate action.

Thereafter, on May 8, 1998, the Secretary of Health issued an Order disposing of the
case against [respondents] and [Horacio Cabrera]. The dispositive portion reads:

WHEREFORE, pursuant to the Resolution rendered by the Presidential Commission

Against Graft and Corruption (PCAGC) dated 23 January 1998 on the above-
captioned case, respondents Priscilla G. Camposano, Financial Management Chief II,
Horacio D. Cabrera, Acting Administrative Officer V, Imelda Q. Agustin, Accountant
I and Enrique L. Perez, Acting Supply Officer III, all of the Department of Health
NCR are hereby DISMISSED from the service.

SO ORDERED.

On May 28, 1998 [respondents] filed a motion for reconsideration of the said Order.
The Secretary of Health denied the same on June 5, 1998. Thus, [respondents] filed a
Notice of Appeal on June 29, 1998.

On July 17, 1998, [respondents] filed their appeal with the CSC. The appeal was
denied by the CSC on May 21, 1999. Horacio Cabrera filed a separate appeal with the
CSC which was denied on August 17, 1999. [Respondents] motion for reconsideration
was denied on September 30, 1999. While Cabreras motion for reconsideration was
denied on January 27, 2000. [Respondents], however, received the resolution denying
their motion for reconsideration on November 2001. Thus, Horacio Cabrera was able
to appeal to [the CA] the CSCs resolutions ahead of [respondents]. The petition of
Cabrera was granted [by the CA] in a decision dated October 15, 2001 with a
dispositive portion which reads:

WHEREFORE, the instant petition is GRANTED. The Assailed Resolutions of the

Civil Service Commission are hereby SET ASIDE.

Petitioner Horacio D. Cabrera is exonerated of the administrative charges against him.

The Civil Service Commission is hereby ORDERED[:]

(1) To reinstate petitioner immediately, without loss of seniority rights; and

(2) To pay petitioners back salaries from the time his preventive suspension expired.
Mandatory leave credits shall not be charged against his leave credits.

SO ORDERED.[4]

Not satisfied with the denial by the CSC (Civil Service Commission) of
their appeal, respondents brought the matter to the CA.

Ruling of the Court of Appeals

While the herein assailed Decision made no reference to the separate

appeal of Horacio Cabrera, the CA nonetheless used the same legal bases for
annulling the CSCs Resolution against respondents.[5]
 The appellate court held that the PCAGCs jurisdiction over administrative
complaints pertained only to presidential appointees. Thus, the Commission
had no power to investigate the charges against respondents.[6] Moreover, in
simply and completely relying on the PCAGCs findings, the secretary of health
failed to comply with administrative due process.[7]
Hence, this Petition.[8]

The Issues

Petitioner raises the following grounds for our consideration:

I

The Court of Appeals erred in finding that the Presidential Commission Against Graft
and Corruption (PCAGC) did not have jurisdiction to investigate the anomalous
transaction involving respondents.

II

The Court of Appeals erred in concluding that the authority to investigate and decide
was relinquished by the Secretary of Health and that the Secretary of Health merely
performed a mechanical act when she ordered the dismissal of respondents from
government service.

III

The Court of Appeals erred in ignoring the fact that an exhaustive investigation was
already conducted by the Presidential Commission Against Graft and Corruption
(PCAGC) which resulted in the finding that the anomalous contract for the purchase
of medicines without the required public bidding is patently illegal.[9]

The second and the third grounds will be discussed together, as they are
necessarily intertwined.

The Courts Ruling

The Petition is partly meritorious.

First Issue:
 Jurisdiction to Investigate

Executive Order (EO) No. 151[10] granted the PCAGC the jurisdiction to
investigate administrative complaints against presidential appointees allegedly
involved in graft and corruption. From a cursory reading of its provisions, it is
evident that EO 151 authorizes the PCAGC to investigate charges against
presidential, not non-presidential, appointees. In its Preamble, specifically in
its Whereas clauses, the EO specifically tasked [the PCAGC] to x x x
investigate presidential appointees charged with graft and corruption x x x.
More pointedly, Section 3 states that the Commission shall have jurisdiction
over all administrative complaints involving graft and corruption filed in any
form or manner against presidential appointees x x x. We quote the pertinent
provisions below:

Section 3. Jurisdiction. The Commission shall have jurisdiction over all

administrative complaints involving graft and corruption filed in any form or manner
against presidential appointees, including those in government-owned or controlled
corporations. (emphasis supplied)

Section 4. Powers, Functions and Duties. The Commission shall have the following
powers, functions and duties:

(a) Investigation The Commission shall have the power to investigate administrative
complaints against presidential appointees in the executive department of the
government, including those in government-owned or controlled corporations,
charged with graft and corruption. In the exercise thereof, the Commission is (1)
authorized to summon witnesses, administer oaths, or take testimony or evidence
relevant to the investigation by subpoena ad testificandum and subpoena duces tecum,
and do such other acts necessary and incidental to the discharge of its function and
duty to investigate the said administrative complaints; and (2) empowered to call upon
and secure the assistance of any department, bureau, office, agency, or instrumentality
of the government, including government-owned or controlled corporations.

The Commission shall confine itself to cases of graft and corruption involving one or
a combination of the following criteria:

1. Presidential appointees with the rank equivalent to or higher than an Assistant

Regional Director;

2. The amount involved is at least Ten Million Pesos (P10,000,000.00);

3. Those which threaten grievous harm or injury to the national interest; and
4. Those which may be assigned to it by the President.[11]

The Commission may refer to the Office of the Ombudsman, when warranted and
necessary, any case calling for the investigation and/or prosecution of the party or
parties concerned for violation of anti-graft and corruption laws.

Administrative investigation of complaints against presidential appointees currently

undertaken by various presidential committees or government agencies, including
government-owned or controlled corporations shall continue notwithstanding the
creation and organization of the Commission. This, however, shall be without
prejudice to the Commission, in its discretion, taking over the investigation if the
matter under investigation is within its jurisdiction.

(b) Coordination The Commission shall coordinate with different government

agencies for the purpose of eradicating opportunities and the climate favorable to the
commission of graft and corruption. x x x.[12] (emphasis supplied)

On the basis of the foregoing verba legis approach, respondents claim that
the PCAGC did not have jurisdiction over them, because they were not
presidential appointees.
The Court notes, however, that respondents were not investigated
pursuant to EO 151. The investigation was authorized under Administrative
Order No. 298 dated October 25, 1996, which had created an Ad Hoc
Committee to look into the administrative charges filed against Director
Rosalinda U. Majarais, Priscilla G. Camposano, Horacio D. Cabrera, Imelda
Q. Agustin and Enrique L. Perez.
The Investigating Committee was composed of all the members of the
PCAGC: Chairman Eufemio C. Domingo, Commissioner Dario C. Rama and
Commissioner Jaime L. Guerrero. The Committee was directed by AO 298 to
follow the procedure prescribed under Section 38 to 40 of the Civil Service
Law (PD 807), as amended. It was tasked to forward to the Disciplining
Authority the entire records of the case, together with its findings and
recommendations, as well as the draft decision for the approval of the
President.
The Chief Executives power to create the Ad Hoc Investigating Committee
cannot be doubted. Having been constitutionally granted full control of the
Executive Department, to which respondents belong, the President has the
obligation to ensure that all executive officials and employees faithfully comply
with the law.[13] With AO 298 as mandate, the legality of the investigation is
sustained. Such validity is not affected by the fact that the investigating team and
the PCAGC had the same composition, or that the former used the offices and
facilities of the latter in conducting the inquiry.
Parenthetically, the perceived vacuum in EO 151 with regard to cases
involving non-presidential appointees was rectified in Executive Order No.
12,[14] which created the Presidential Anti-Graft Commission (PAGC). Non-
presidential appointees who may have acted in conspiracy, or who may have
been involved with a presidential appointee, may now be investigated by the
PAGC.[15]

Second and Third Issues:

Validity of Health Secretarys Decision

The Administrative Code of 1987 vests department secretaries with the

authority to investigate and decide matters involving disciplinary actions for
officers and employees under the formers jurisdiction.[16] Thus, the health
secretary had disciplinary authority over respondents.
Note that being a presidential appointee, Dr. Rosalinda Majarais was
under the jurisdiction of the President, in line with the principle that the power
to remove is inherent in the power to appoint.[17] While the Chief Executive
directly dismissed her from the service, he nonetheless recognized the health
secretarys disciplinary authority over respondents when he remanded the
PCAGCs findings against them for the secretarys appropriate action.[18]
As a matter of administrative procedure, a department secretary may
utilize other officials to investigate and report the facts from which a decision
may be based.[19] In the present case, the secretary effectively delegated the
power to investigate to the PCAGC.
Neither the PCAGC under EO 151 nor the Ad Hoc Investigating
Committee created under AO 298 had the power to impose any administrative
sanctions directly. Their authority was limited to conducting investigations and
preparing their findings and recommendations. The power to impose
sanctions belonged to the disciplining authority, who had to observe due
process prior to imposing penalties.
Due process in administrative proceedings requires compliance with the
following cardinal principles: (1) the respondents right to a hearing, which
includes the right to present ones case and submit supporting evidence, must
be observed; (2) the tribunal must consider the evidence presented; (3) the
decision must have some basis to support itself; (4) there must be substantial
evidence; (5) the decision must be rendered on the evidence presented at the
hearing, or at least contained in the record and disclosed to the parties
affected; (6) in arriving at a decision, the tribunal must have acted on its own
consideration of the law and the facts of the controversy and must not have
simply accepted the views of a subordinate; and (7) the decision must be
rendered in such manner that respondents would know the reasons for it and
the various issues involved.[20]
The CA correctly ruled that administrative due process had not been
observed in the present factual milieu. Noncompliance with the sixth requisite
is equally evident from the health secretarys Order dismissing the
respondents thus:

ORDER

This refers to the Resolution of the Presidential Commission Against Graft and
Corruption (PCAG[C]) on the above captioned case dated January 23, 1998, the
dispositive portion of which reads:

WHEREFORE, premises considered, this Commission finds Respondents Rosalinda

U. Majarais, Priscilla G. Camposano, Financial Management Chief II, [Horacio] D.
Cabrera, Acting Supply Officer III, all of the Department of HealthNational Capital
Region (DOH-NCR) guilty as charged and so recommends to his Excellency
President Fidel V. Ramos that the penalty of dismissal from the government be
imposed thereon.

Acting on the aforequoted resolution of the PCAGC[,] His Excellency President Fidel
V. Ramos issued Administrative Order No. 390 dated [A]pril 20, 1998, resolving thus:

WHEREFORE, premises considered, respondent Dr. Rosalinda U. Majarais is hereby

found guilty as charged and, as recommended by the Presidential Commission
Against Graft and Corruption, is meted the penalty of dismissal from the service. The
records of the case with respect to the other respondents are remanded to Secretary
Carmencita N. Reodica, Department of Health for appropriate action.

WHEREFORE, pursuant to the Resolution rendered by the Presidential Commission

Against Graft and Corruption (PCAGC) dated January 23, 1998 on the above
captioned case, respondents Priscilla G. Camposano, Financial Management Chief II;
Horacio D. Cabrera, Acting Administrative Officer V; Imelda Q. Agustin, Accountant
I; and Enrique G. Perez, Acting Supply Officer III; all of the Department of
HealthNCR, are hereby DISMISSED from the service.[21]
 Concededly, the health secretary has the competence and the authority to
decide what action should be taken against officials and employees who have
been administratively charged and investigated. However, the actual exercise
of the disciplining authoritys prerogative requires a
prior independent consideration of the law and the facts. Failure to comply
with this requirement results in an invalid decision. The disciplining authority
should not merely and solely rely on an investigators recommendation, but
must personally weigh and assess the evidence gathered. There can be no
shortcuts, because at stake are the honor, the reputation, and the livelihood of
the person administratively charged.
In the present case, the health secretarys two-page Order dismissing
respondents pales in comparison with the presidential action with regard to
Dr. Majarais. Prior to the issuance of his seven-page decision, President Fidel
V. Ramos conducted a restudy of the doctors case. He even noted a violation
that had not been considered by the PCAGC.[22] On the other hand, Health
Secretary Carmencita N. Reodica simply and blindly relied on the dispositive
portion of the Commissions Resolution. She even misquoted it by
inadvertently omitting the recommendation with regard to Respondents
Enrique L. Perez and Imelda Q. Agustin.
The Order of Secretary Reodica denying respondents Motion for
Reconsideration also failed to correct the deficiency in the initial Order.[23] She
improperly relied on the Presidents findings in AO 390 which, however,
pertained only to the administrative charge against Dr. Majarais, not against
respondents. To repeat, the Chief Executive recognized that the disciplinary
jurisdiction over respondents belonged to the health secretary,[24] who should
have followed the manner in which the President had rendered his action on
the recommendation.
The Presidents endorsement of the records of the case for the appropriate
action of the health secretary[25] did not constitute a directive for the immediate
dismissal of respondents. Like that of President Ramos, the decision of
Secretary Reodica should have contained a factual finding and a legal
assessment of the controversy to enable respondents to know the bases for
their dismissal and thereafter prepare their appeal intelligently, if they so
desired.
To support its position, petitioner cites American Tobacco Co. v. Director
of Patents.[26] However, this case merely authorized the delegation of the
power to investigate, but not the authority to impose sanctions. Verily, in
requiring the disciplining authority to exercise its own judgment and discretion
in deciding a case, American Tobacco supports the present respondents
cause. In that case, the petitioners objected to the appointment of hearing
officers and sought the personal hearing of their case by the disciplining
authority.[27] The Court, however, sustained the right to delegate the power to
investigate, as long as the adjudication would be made by the deciding
authority.
By the same token, the Constitution[28] grants the Supreme Court
disciplinary authority over all lower court justices and judges, as well as
judicial employees and lawyers. While the investigation of administrative
complaints is delegated usually to the Office of the Court Administrator (OCA)
or the Integrated Bar of the Philippines (IBP),[29] the Court nonetheless makes
its own judgments of the cases when sanctions are imposed. It does not
merely adopt or solely rely on the recommendations of the OCA or the IBP.
Inasmuch as the health secretarys twin Orders were patently void for want
of due process, the CA did not err in refusing to discuss the merit of the
PCAGCs (or the Ad Hoc Committees) recommendations. Such a discussion
should have been made by the health secretary before it could be passed
upon by the CA.
In representation of petitioner, the Office of the Solicitor General insists
that respondents are guilty of the charges and, like Dr. Majarais, deserve
dismissal from the service. Suffice it to stress that the issue in this case is not
the guilt of respondents, but solely due process.
In closing, the Court reiterates the oft-quoted aphorism that the end does
not justify the means. Guilt cannot be pronounced nor penalty imposed,
unless due process is first observed. This is the essence of fairness and the
rule of law in a democracy.
WHEREFORE, the Petition is PARTLY GRANTED. The assailed Decision
of the Court of Appeals is MODIFIED in the sense that the authority of the Ad
Hoc Investigating Committee created under Administrative Order 298
is SUSTAINED. Being violative of administrative due process, the May 8,
1998 and the June 5, 1998 Orders of the health secretary
are ANNULLED and SET ASIDE. Let the records of this case
be REMANDED to the Department of Health, so that proper steps can be
taken to correct the due-process errors pointed out in this Decision.
No pronouncement as to costs.
SO ORDERED.
G.R. No. 110265 July 7, 1994

FREEMAN, INC., FREEMAN MANAGEMENT & DEVELOPMENT CORP., CHIAO LIAN, LECHU S.
LIM, PERLITA S. DYOGI, OLIVIA S. SANTOS, CARMEN S. SAW and RUBEN CHUA, petitioners,
vs.
THE SECURITIES AND EXCHANGE COMMISSION, SAW MUI, RUBEN SAW, DIONISIO SAW,
LINA S. CHUA, LUCILA S. RUSTE and EVELYN SAW, respondents.

Abelardo G. Luzano for petitioner.

Benito O. Ching, Jr. for private respondents.

BELLOSILLO, J.:

This petition for certiorari filed under Rule 65 of the Rules of Court seeks to annul and set aside the
order of respondent Securities and Exchange Commission dated 7 January 1993 in SEC-EB No.
308 denying the action of petitioners to nullify the 7 January 1992 order of the Securities and
Exchange Commission in SEC Case No. 3577.

Sometime in 1986 and 1987, Freeman, Inc. (FREEMAN), was granted a loan by Equitable Banking
Corporation (EQUITABLE) as evidenced by two (2) promissory notes, P.N. No. 125957 dated 8
December 1986 for P1,700,000.00 payable 8 December 1987, and P.N. No. TL-369 dated 24 April
1987 for P6,000,000.00 payable 24 April 1988. Saw Chiao Lian, President of Freeman, Inc., signed
as co-maker in both promissory notes.

When FREEMAN failed to pay its obligations, EQUITABLE instituted collection suit against
FREEMAN and Saw Chiao Lian.1 EQUITABLE also prayed for preliminary attachment.

On 27 May 1988, private respondents Saw Mui, Ruben Saw, Dionisio Saw, Lina S. Chua, Lucila S.
Ruste and Evelyn Saw filed an answer in intervention claiming that they owned the minority interest
in FREEMAN.

On 12 October 1988, the trial court denied the intervention of private respondents. The denial was
affirmed by the Court of Appeals and thereafter by this Court.2

The collection case was terminated when the parties entered into a compromise agreement duly
approved by the court and a decision rendered thereon on 5 December 1988. However, Freeman,
Inc. (FREEMAN) and Saw Chiao Lian, defendants in the trial court, failed to comply with the
judgment.

On 30 January 1989, a writ of execution was issued. Two (2) parcels of land belonging to FREEMAN
covered by TCT Nos. 34219 and 34220 were levied upon and sold at public auction on 31 March
1989. The highest bidder was one of the petitioners, Freeman Management and Development
Corporation (FREEMAN MANAGEMENT), which thereafter registered its certificate of sale with the
Register of Deeds.

On 23 May 1989, before FREEMAN MANAGEMENT could consolidate its title over the properties
purchased at the auction sale, private respondents, representing the minority shareholdings of
FREEMAN, filed a petition with the Securities and Exchange Commission (SEC) seeking the
dissolution of FREEMAN, accounting and reconveyance of the properties covered by TCT Nos.
34219 and 34220.3

On 5 April 1990, private respondent filed a similar complaint against petitioners with the Regional
Trial Court of Kalookan City.4 The complaint sought to annul the compromise agreement between
EQUITABLE on one hand and defendants FREEMAN and Saw Chiao Lian on the other, as well as
the promissory notes executed by Saw Chiao Lian, the auction sale, and the sheriff's certificate of
sale of the lots covered by TCT Nos. 34219 and 34220.

Petitioners moved for the dismissal of the complaint on the ground that the same was a duplication
of the case pending in the SEC. But the motion was denied. Petitioners went up on certiorari to the
Court of Appeals which reversed the trial court and directed the dismissal of the complaint by reason
of the pendency of the case.5

On 7 January 1992, on motion on private respondents in SEC Case

No. 3577, and despite the opposition thereto by petitioners, SEC Hearing Officer Juanito B. Almosa,
Jr., issued a writ of preliminary injunction to prevent the consolidation of ownership of petitioner
FREEMAN MANAGEMENT over the properties it acquired in the auction sale of 31 March 1989, the
redemption period having expired on 7 April 1990.6

Petitioners assailed the order of the SEC Hearing Officer by filing a petition for certiorari with the
SEC en banc which on 7 January 1993 however denied the petition. 7 On 15 March 1993, petitioners'
motion for reconsideration was likewise denied.8

On 22 April 1993, petitioners filed with this Court a petition for certiorari questioning the 15 March
1993 order of the SEC.9 In a Resolution dated 10 May 1993, this Court dismissed the petition for its
failure to state the date when the questioned SEC Order was received as well as the date when the
order denying the Motion for Reconsideration was received.10

On 4 June 1993, petitioners filed the present petition containing the matters omitted in the petition
earlier dismissed. Petitioners allege that the SEC committed grave abuse of discretion and acted in
excess of jurisdiction in sustaining the order of its Hearing Officer granting the writ of injunction
enjoining consolidation of ownership in FREEMAN MANAGEMENT and that the SEC miscontrued
the decisions of the Court of Appeals in Equitable Banking Corp. v. Hon. Mangay11 and of this Court
in Saw v. Court
of Appeals, 12 which in effect ruled the SEC has jurisdiction to take cognizance of and determine the
rights of petitioners and private respondents as against each other. Petitioners also argue that the
assailed order of the SEC violated the basic principle that the SEC, being a coordinate body with the
Regional Trial Court, could not interfere in the proceedings held therein, and neither could it review
the issues passed upon by the said court. They likewise maintain that although SEC Case No. 3577
could still proceed as to the dissolution of FREEMAN, the two (2) properties of the latter which were
levied upon and sold to FREEMAN MANAGEMENT are already excluded from the corporate assets
of FREEMAN; and, that these properties could no longer be the subject of the action for
reconveyance in the SEC because they had been the subject of execution to enforce the decision of
the trial court in Civil Case No. 88-44404 which had already attained finality.

In their comment, private respondents contend that the present petition was filed beyond the
reglementary period of thirty (30) days within which to appeal to this Court, citing Sec. 1, Rule 17, of
the New Rules of Procedure of the SEC. Private respondents also allege that the jurisdiction of the
SEC has been resolved by this Court in Saw v. Court of Appeals 13 when it held that "even with the
denial of petitioners' motion to intervene, nothing is really lost to them. The denial did not necessarily
prejudice them as their rights are being litigated in the case (SEC Case No. 3577) now before the
Securities and Exchange Commission and may be fully asserted and protected in that separate
proceeding."

In its comment, the Office of the Solicitor General expresses conformity with the allegations in the
petition and prays that the petition be given due course. It also avers that since the present petition,
which is one under Rule 65 of the Rules of Court, was filed thirty-five (35) days after receipt of the
assailed resolution of the SEC, the instant petition was filed within a reasonable time. The Solicitor
General also agrees with petitioners' contention that the SEC, as a co-equal body with the Regional
Trial Court, cannot modify, reverse or pass upon the decision of said court. Moreover, private
respondents had the opportunity to submit a bid for the foreclosed properties during the public
auction and their failure to exercise their right should not prejudice petitioners.

We sustain petitioners. The present petition seeks to annul and set aside the order of the SEC for
want of jurisdiction to issue the writ of injunction, a provisional remedy to the principal action pending
in the SEC for the dissolution of petitioner FREEMAN. Hence, the petition is not an appeal from a
final order of the SEC but a special civil action questioning the legal competence of the latter to issue
such interlocutory order. It is covered by Sec. 1, Rule 65, of the Rules of Court which allow a person
aggrieved to file a verified petition in the proper court praying that judgment be rendered annulling or
modifying the proceedings, as the law requires, of the tribunal, board or officer when the latter,
exercising judicial functions, has acted without or in excess of its or his jurisdiction or with grave
abuse of discretion and there is no appeal, nor any plain, speedy and adequate remedy in the
ordinary course of law.

We have consistently ruled that petitions for certiorari must be filed within a reasonable time. In the
instant case, the records show that the petition at bench was filed on 4 June 1993, or two (2) months
and nineteen (19) days from 17 March 1993, which was the date when petitioners received copy of
the order of the SEC denying their motion for reconsideration. There is no doubt that this petition
was seasonably filed.

SEC Case No. 3577 arose from the action filed by private respondents as minority shareholders of
petitioner FREEMAN for the dissolution of the corporation and reconveyance of the properties
conveyed to another petitioner FREEMAN MANAGEMENT in a public auction. The SEC maintained
that it had jurisdiction to issue the writ of injunction preventing the consolidation of ownership in
FREEMAN MANAGEMENT on the basis of our ruling in Saw v. Court of Appeals. We denied the
intervention of private respondents in the trial court in Civil Case No. 88-44404 which had already
been terminated. As we stated therein, even with the denial of herein private respondents' motion to
intervene nothing could really be lost to them as their rights were being litigated before the SEC and
would be fully asserted and protected in that separate proceeding.

Our ruling in Saw v. Court of Appeals should be understood in the light of two(2) basic legal
principles. First, that administrative agencies like the SEC are tribunals of limited jurisdiction and as
such can exercise only those powers which are specifically granted to them by their enabling
statutes.14 Section 5 of P.D. No. 902-A, as amended, provides the cases over which the SEC has
original and exclusive jurisdiction to hear and decide. These include controversies arising out of
intra-corporate or partnership relations between and among stockholders, members or associates;
between any or all of them and the corporation, partnership or association of which they are
stockholders, members or associates, respectively; and, between such corporation, partnership or
association and the state insofar as it concerns their individual franchise or right to exist as such
entity. Section 6 of the same decree empowers the SEC to issue preliminary or permanent
injunction, whether prohibitory or mandatory, in all cases in which it has jurisdiction.
The action for dissolution of FREEMAN filed by its minority stockholders is well within the jurisdiction
of the SEC to resolve in accordance with P.D. No. 902-A. However, the inclusion in the SEC case of
FREEMAN MANAGEMENT of which private respondents are not stockholders for the purpose of
compelling it to reconvey to FREEMAN the properties originally owned by the latter but were levied
upon and sold to FREEMAN MANAGEMENT in a public auction is a matter outside of the limited
jurisdiction of the SEC. The petition for reconveyance of properties against FREEMAN
MANAGEMENT is not an intra-corporate controversy since private respondents have no shares or
interests whatsoever in FREEMAN MANAGEMENT, a corporation separate and distinct from
FREEMAN, which is undergoing dissolution proceedings in the SEC.

The second basic principle is the doctrine of non-interference which should be regarded as highly
important in judicial stability and in the administration of justice whereby the judgment of a court of
competent jurisdiction may not be opened, modified or vacated by any court or tribunal of concurrent
jurisdiction.15 The SEC is at the very least co-equal with the Regional Trial Court. As such, one would
have no power to control the other.16 Moreover, in the instant case, judgment was rendered by the
trial court in Civil Case No. 88-44404 approving the compromise agreement between EQUITABLE
on one hand, and FREEMAN and Saw Chiao Lian on the other. A writ of execution was issued
against the defendants to enforce the judgment and two (2) properties of FREEMAN were levied
upon and sold to FREEMAN MANAGEMENT as highest bidder in the public auction.

Finally, the judgment was fully satisfied and a certificate of sale was issued to FREEMAN
MANAGEMENT. It is axiomatic that after a judgment has been fully satisfied, the case is deemed
terminated once and for all.17 It cannot be modified or altered. Hence, the properties sold to
FREEMAN MANAGEMENT are now considered excluded from the corporate assets of FREEMAN
and can no longer be the subject of the proceedings in the SEC for the dissolution of the latter.
Therefore SEC exceeded its jurisdiction when it issued a writ of injunction enjoining FREEMAN
MANAGEMENT from consolidating its ownership over the two (2) parcels of land it acquired as
highest bidder in the execution sale.

WHEREFORE, the petition is GRANTED and the assailed orders of the Securities and Exchange
Commission dated 7 January 1993 and 15 March 1993 are REVERSED and SET ASIDE.

SO ORDERED.

[G.R. No. 137473. August 2, 2001]

ESTELITO V. REMOLONA, petitioner, vs. CIVIL SERVICE

COMMISSION, respondent.

DECISION
PUNO, J.:

The present petition seeks to review and set aside the Decision rendered by the Court of
Appeals dated July 31, 1998[1] upholding the decision of the Civil Service Commission which
ordered the dismissal of petitioner Estelito V. Remolona (Remolona) from the government
service for dishonesty, and the Resolution dated February 5, 1999[2] denying petitioner's motion
for reconsideration.
Records show that petitioner Estelito V. Remolona is the Postmaster at the Postal Office
Service in Infanta, Quezon, while his wife Nery Remolona is a teacher at the Kiborosa
Elementary School.
In a letter[3] dated January 3, 1991, Francisco R. America, District Supervisor of the
Department of Education, Culture & Sports at Infanta, Quezon, inquired from the Civil Service
Commission (CSC) as to the status of the civil service eligibility of Mrs. Remolona who
purportedly got a rating of 81.25% as per Report of Rating issued by the National Board for
Teachers.[4] Mr. America likewise disclosed that he received information that Mrs. Remolona was
campaigning for a fee of P8,000.00 per examinee for a passing mark in the teacher's board
examinations.
On February 11, 1991, then CSC Chairman Patricia A. Sto. Tomas issued an Order directing
CSC Region IV Director Bella Amilhasan to conduct an investigation on Mrs. Remolona's
eligibility, after verification from the Register of Eligibles in the Office for Central Personnel
Records revealed "that Remolona's name is not in the list of passing and failing examinees, and
that the list of examinees for December 10, 1989 does not include the name of
Remolona. Furthermore, Examination No. 061285 as indicated in her report of rating belongs to
a certain Marlou C. Madelo, who took the examination in Cagayan de Oro and got a rating of
65.00%."[5]
During the preliminary investigation conducted by Jaime G. Pasion, Director II, Civil
Service Field Office, Lucena City, Quezon, only petitioner Remolona appeared. He signed a
written statement of facts[6] regarding the issuance of the questioned Report of Rating of Mrs.
Remolona, which is summarized in the Memorandum[7] submitted by Director Pasion as follows:

"3.1 That sometime in the first week of September, 1990, while riding in a Kapalaran
Transit Bus from Sta. Cruz, Laguna on his way to San Pablo City, he met one Atty.
Hadji Salupadin (this is how it sounded) who happened to be sitting beside him;

3.2 That a conversation broke out between them until he was able to confide his
problem to Atty. Salupadin about his wife having difficulty in acquiring an eligibility;

3.3 That Atty. Salupadin who represented himself as working at the Batasan, offered
his help for a fee of P3,000.00;

3.4 That the following day they met at the Batasan where he gave the amount
of P2,000.00, requirements, application form and picture of his wife;

3.5 That the following week, Thursday, at around 1:00 P.M., they met again at the
Batasan where he handed to Atty. Salupadin the amount of P1,000.00 plus P500.00
bonus who in turn handed to him the Report of Rating of one Nery C. Remolona with
a passing grade, then they parted;
3.6 That sometime in the last week of September, he showed the Report of Rating to
the District Supervisor, Francisco America who informed her (sic) that there was no
vacancy;

3.7 That he went to Lucena City and complained to Dr. Magsino in writing x x x that
Mr. America is asking for money in exchange for the appointment of his wife but
failed to make good his promise. He attached the corroborating affidavits of
Mesdames Carmelinda Pradillada and Rosemarie P. Romantico and Nery C.
Remolona x x x;

3.8 That from 1986 to 1988, Mr. America was able to get six (6) checks at P2,600.00
each plus bonus of Nery C. Remolona;

3.9 That Mr. America got mad at them. And when he felt that Mr. America would
verify the authenticity of his wife's Report of Rating, he burned the original."

Furthermore, Remolona admitted that he was responsible in acquiring the alleged fake
eligibility, that his wife has no knowledge thereof, and that he did it because he wanted them to
be together. Based on the foregoing, Director Pasion recommended the filing of the appropriate
administrative action against Remolona but absolved Mrs. Nery Remolona from any liability
since it has not been shown that she willfully participated in the commission of the offense.
Consequently, a Formal Charge dated April 6, 1993 was filed against petitioner Remolona,
Nery C. Remolona, and Atty. Hadji Salupadin for possession of fake eligibility, falsification and
dishonesty.[8] A formal hearing ensued wherein the parties presented their respective
evidence. Thereafter, CSC Regional Director Bella A. Amilhasan issued a Memorandum dated
February 14, 1995[9] recommending that the spouses Estelito and Nery Remolona be found guilty
as charged and be meted the corresponding penalty.
Said recommendation was adopted by the CSC which issued Resolution No. 95-2908 on
April 20, 1995, finding the spouses Estelito and Nery Remolona guilty of dishonesty and
imposing the penalty of dismissal and all its accessory penalties. The case against Atty. Hadji
Salupadin was held in abeyance pending proof of his identity.[10] In its Resolution No.
965510[11] dated August 27, 1996, the CSC, acting on the motion for reconsideration filed by the
spouses Remolona, absolved Nery Remolona from liability and held that:

"Further, a review of the records and of the arguments presented fails to persuade this
Commission to reconsider its earlier resolution insofar as Estelito Remolona's
culpability is concerned. The evidence is substantial enough to effect his
conviction. His act of securing a fake eligibility for his wife is proved by substantial
evidence. However, in the case of Nery Remolona, the Commission finds her innocent
of the offense charged, for there is no evidence to show that she has used the fake
eligibility to support an appointment or promotion. In fact, Nery Remolona did not
indicate in her Personal Data Sheet that she possesses any eligibility. It must be
pointed out that it was her husband who unilaterally worked to secure a fake eligibility
for her.

WHEREFORE, the instant Motion for Reconsideration is hereby denied insofar as

respondent Estelito Remolona is concerned. However, Resolution No. 95-2908 is
modified in the sense that respondent Nery Remolona is exonerated of the
charges. Accordingly, Nery Remolona is automatically reinstated to her former
position as Teacher with back salaries and other benefits."

On appeal, the Court of Appeals rendered its questioned decision dismissing the petition for
review filed by herein petitioner Remolona. His motion for reconsideration and/or new trial was
likewise denied. Hence, this petition for review.

Petitioner submits that the Court of Appeals erred:

1. in denying petitioner's motion for new trial;

2. in holding that petitioner is liable for dishonesty; and

3. in sustaining the dismissal of the petitioner for an offense not work connected in
relation to his official position in the government service.

The main issue posed for resolution is whether a civil service employee can be dismissed
from the government service for an offense which is not work-related or which is not connected
with the performance of his official duty. Remolona likewise imputes a violation of his right to
due process during the preliminary investigation because he was not assisted by counsel. He
claims that the extra-judicial admission allegedly signed by him is inadmissible because he was
merely made to sign a blank form. He also avers that his motion for new trial should be granted
on the ground that the transcript of stenographic notes taken during the hearing of the case before
the Regional Office of the CSC was not forwarded to the Court of Appeals. Finally, he pleads
that the penalty of dismissal with forfeiture of all benefits is too harsh considering the nature of
the offense for which he was convicted, the length of his service in government, that this is his
first offense, and the fact that no damage was caused to the government.
The submission of Remolona that his alleged extrajudicial confession is inadmissible
because he was not assisted by counsel during the investigation as required under Section 12
paragraphs 1 and 3, Article III of the 1987 Constitution deserves scant consideration
The right to counsel under Section 12 of the Bill of Rights is meant to protect a suspect in a
criminal case under custodial investigation. Custodial investigation is the stage where the police
investigation is no longer a general inquiry into an unsolved crime but has begun to focus on a
particular suspect who had been taken into custody by the police to carry out a process of
interrogation that lends itself to elicit incriminating statements. It is when questions are initiated
by law enforcement officers after a person has been taken into custody or otherwise deprived of
his freedom of action in any significant way.The right to counsel attaches only upon the start of
such investigation. Therefore, the exclusionary rule under paragraph (2), Section 12 of the Bill of
Rights applies only to admissions made in a criminal investigation but not to those made in an
administrative investigation.[12]
While investigations conducted by an administrative body may at times be akin to a criminal
proceeding, the fact remains that under existing laws, a party in an administrative inquiry may or
may not be assisted by counsel, irrespective of the nature of the charges and of the respondent's
capacity to represent himself, and no duty rests on such body to furnish the person being
investigated with counsel. In an administrative proceeding, a respondent has the option of
engaging the services of counsel or not. This is clear from the provisions of Section 32, Article
VII of Republic Act No. 2260 (otherwise known as the Civil Service Act) and Section 39,
paragraph 2, Rule XIV (on discipline) of the Omnibus Rules Implementing Book V of Executive
Order No. 292 (otherwise known as the Administrative Code of 1987).Thus, the right to counsel
is not always imperative in administrative investigations because such inquiries are conducted
merely to determine whether there are facts that merit disciplinary measure against erring public
officers and employees, with the purpose of maintaining the dignity of government service. As
such, the hearing conducted by the investigating authority is not part of a criminal prosecution.[13]
In the case at bar, Remolona was not accused of any crime in the investigation conducted by
the CSC field office. The investigation was conducted for the purpose of ascertaining the facts
and whether there is a prima facie evidence sufficient to form a belief that an offense cognizable
by the CSC has been committed and that Remolona is probably guilty thereof and should be
administratively charged.Perforce, the admissions made by Remolona during such investigation
may be used as evidence to justify his dismissal.
The contention of Remolona that he never executed an extra-judicial admission and that he
merely signed a blank form cannot be given credence. Remolona occupies a high position in
government as Postmaster at Infanta, Quezon and, as such, he is expected to be circumspect in
his actions specially where he is being administratively charged with a grave offense which
carries the penalty of dismissal from service.
Remolona insists that his dismissal is a violation of his right to due process under Section
2(3), Article XI (B) of the Constitution which provides that no officer or employee in the Civil
Service shall be removed or suspended except for cause. Although the offense of dishonesty is
punishable under the Civil Service law, Remolona opines that such act must have been
committed in the performance of his function and duty as Postmaster. Considering that the
charge of dishonesty involves the falsification of the certificate of rating of his wife Nery
Remolona, the same has no bearing on his office and hence, he is deemed not to have been
dismissed for cause. This proposition is untenable.
It cannot be denied that dishonesty is considered a grave offense punishable by dismissal for
the first offense under Section 23, Rule XIV of the Rules Implementing Book V of Executive
Order No. 292.And the rule is that dishonesty, in order to warrant dismissal, need not be
committed in the course of the performance of duty by the person charged. The rationale for the
rule is that if a government officer or employee is dishonest or is guilty of oppression or grave
misconduct, even if said defects of character are not connected with his office, they affect his
right to continue in office. The Government cannot tolerate in its service a dishonest official,
even if he performs his duties correctly and well, because by reason of his government position,
he is given more and ample opportunity to commit acts of dishonesty against his fellow men,
even against offices and entities of the government other than the office where he is employed;
and by reason of his office, he enjoys and possesses a certain influence and power which renders
the victims of his grave misconduct, oppression and dishonesty less disposed and prepared to
resist and to counteract his evil acts and actuations. The private life of an employee cannot be
segregated from his public life. Dishonesty inevitably reflects on the fitness of the officer or
employee to continue in office and the discipline and morale of the service.[14]
The principle is that when an officer or employee is disciplined, the object sought is not the
punishment of such officer or employee but the improvement of the public service and the
preservation of the publics faith and confidence in the government.[15]
The general rule is that where the findings of the administrative body are amply supported
by substantial evidence, such findings are accorded not only respect but also finality, and are
binding on this Court.[16] It is not for the reviewing court to weigh the conflicting evidence,
determine the credibility of witnesses, or otherwise substitute its own judgment for that of the
administrative agency on the sufficiency of evidence.[17] Thus, when confronted with conflicting
versions of factual matters, it is for the administrative agency concerned in the exercise of
discretion to determine which party deserves credence on the basis of the evidence
received.[18] The rule, therefore, is that courts of justice will not generally interfere with purely
administrative matters which are addressed to the sound discretion of government agencies
unless there is a clear showing that the latter acted arbitrarily or with grave abuse of discretion or
when they have acted in a capricious and whimsical manner such that their action may amount to
an excess of jurisdiction.[19]
We have carefully scrutinized the records of the case below and we find no compelling
reason to deviate from the findings of the CSC and the Court of Appeals. The written admission
of Remolona is replete with details that could have been known only to him. No ill-motive or bad
faith was ever imputed to Director Pasion who conducted the investigation. The presumption that
official duty has been regularly performed remains unrebutted.
The transmittal of the transcript of stenographic notes taken during the formal hearing before
the CSC is entirely a matter of discretion on the part of the Court of Appeals. Revised
Administrative Circular No. 1-95 of this Court clearly states that in resolving appeals from quasi-
judicial agencies, it is within the discretion of the Court of Appeals to have the original records
of the proceedings under review transmitted to it.[20] Verily, the Court of Appeals decided the
merits of the case on the bases of the uncontroverted facts and admissions contained in the
pleadings filed by the parties.
We likewise find no merit in the contention of Remolona that the penalty of dismissal is too
harsh considering that there was no damage caused to the government since the certificate of
rating was never used to get an appointment for his wife, Nery Remolona. Although no
pecuniary damage was incurred by the government, there was still falsification of an official
document that constitutes gross dishonesty which cannot be countenanced, considering that he
was an accountable officer and occupied a sensitive position.[21] The Code of Conduct and Ethical
Standards for Public Officials and Employees enunciates the State policy of promoting a high
standard of ethics and utmost responsibility in the public service.[22]
WHEREFORE, the decision appealed from is hereby AFFIRMED in toto.
SO ORDERED.
 EN BANC

ABAKADA GURO PARTY G.R. No. 166715

LIST (formerly AASJS)

OFFICERS/MEMBERS

SAMSON S. ALCANTARA,

ED VINCENT S. ALBANO,

ROMEO R. ROBISO,

RENE B. GOROSPE and

EDWIN R. SANDOVAL,

Petitioners, Present:

PUNO, C.J.,
QUISUMBING,
YNARES-SANTIAGO,
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
- v e r s u s - CARPIO MORALES,
AZCUNA,
TINGA,
CHICO-NAZARIO,
VELASCO, JR.

NACHURA,

REYES,

LEONARDO-DE CASTRO and

BRION, JJ.
HON. CESAR V. PURISIMA, in

his capacity as Secretary of

Finance, HON. GUILLERMO L.

PARAYNO, JR., in his capacity

as Commissioner of the Bureau

of Internal Revenue, and

HON. ALBERTO D. LINA, in his

Capacity as Commissioner of

Bureau of Customs,

Respondents. Promulgated:

August 14, 2008

x---------------------------------------------------x

DECISION
CORONA, J.:

This petition for prohibition[1] seeks to prevent respondents from

implementing and enforcing Republic Act (RA) 9335[2] (Attrition Act of 2005).
 RA 9335 was enacted to optimize the revenue-generation capability and
collection of the Bureau of Internal Revenue (BIR) and the Bureau of Customs
(BOC). The law intends to encourage BIR and BOC officials and employees to
exceed their revenue targets by providing a system of rewards and sanctions
through the creation of a Rewards and Incentives Fund (Fund) and a Revenue
Performance Evaluation Board (Board).[3] It covers all officials and employees of
the BIR and the BOC with at least six months of service, regardless of employment
status.[4]

The Fund is sourced from the collection of the BIR and the BOC in excess of
their revenue targets for the year, as determined by the Development Budget and
Coordinating Committee (DBCC). Any incentive or reward is taken from the fund
and allocated to the BIR and the BOC in proportion to their contribution in the
excess collection of the targeted amount of tax revenue.[5]

The Boards in the BIR and the BOC are composed of the Secretary of the
Department of Finance (DOF) or his/her Undersecretary, the Secretary of the
Department of Budget and Management (DBM) or his/her Undersecretary, the
Director General of the National Economic Development Authority (NEDA) or
his/her Deputy Director General, the Commissioners of the BIR and the BOC or
their Deputy Commissioners, two representatives from the rank-and-file
employees and a representative from the officials nominated by their recognized
organization.[6]
 Each Board has the duty to (1) prescribe the rules and guidelines for the
allocation, distribution and release of the Fund; (2) set criteria and procedures for
removing from the service officials and employees whose revenue collection falls
short of the target; (3) terminate personnel in accordance with the criteria
adopted by the Board; (4) prescribe a system for performance evaluation; (5)
perform other functions, including the issuance of rules and regulations and (6)
submit an annual report to Congress.[7]

The DOF, DBM, NEDA, BIR, BOC and the Civil Service Commission (CSC)
were tasked to promulgate and issue the implementing rules and regulations of
RA 9335,[8]to be approved by a Joint Congressional Oversight Committee created
for such purpose.[9]

Petitioners, invoking their right as taxpayers filed this petition challenging

the constitutionality of RA 9335, a tax reform legislation. They contend that, by
establishing a system of rewards and incentives, the law transform[s] the officials
and employees of the BIR and the BOC into mercenaries and bounty hunters as
they will do their best only in consideration of such rewards. Thus, the system of
rewards and incentives invites corruption and undermines the constitutionally
mandated duty of these officials and employees to serve the people with utmost
responsibility, integrity, loyalty and efficiency.

Petitioners also claim that limiting the scope of the system of rewards and
incentives only to officials and employees of the BIR and the BOC violates the
constitutional guarantee of equal protection. There is no valid basis for
classification or distinction as to why such a system should not apply to officials
and employees of all other government agencies.

In addition, petitioners assert that the law unduly delegates the power to
fix revenue targets to the President as it lacks a sufficient standard on that
matter. While Section 7(b) and (c) of RA 9335 provides that BIR and BOC officials
may be dismissed from the service if their revenue collections fall short of the
target by at least 7.5%, the law does not, however, fix the revenue targets to be
achieved. Instead, the fixing of revenue targets has been delegated to the
President without sufficient standards. It will therefore be easy for the President
to fix an unrealistic and unattainable target in order to dismiss BIR or BOC
personnel.

Finally, petitioners assail the creation of a congressional oversight

committee on the ground that it violates the doctrine of separation of powers.
While the legislative function is deemed accomplished and completed upon the
enactment and approval of the law, the creation of the congressional oversight
committee permits legislative participation in the implementation and
enforcement of the law.

In their comment, respondents, through the Office of the Solicitor General,

question the petition for being premature as there is no actual case or
controversy yet. Petitioners have not asserted any right or claim that will
necessitate the exercise of this Courts jurisdiction. Nevertheless, respondents
acknowledge that public policy requires the resolution of the constitutional issues
involved in this case. They assert that the allegation that the reward system will
breed mercenaries is mere speculation and does not suffice to invalidate the law.
Seen in conjunction with the declared objective of RA 9335, the law validly
classifies the BIR and the BOC because the functions they perform are distinct
from those of the other government agencies and instrumentalities. Moreover,
the law provides a sufficient standard that will guide the executive in the
implementation of its provisions. Lastly, the creation of the congressional
oversight committee under the law enhances, rather than violates, separation of
powers. It ensures the fulfillment of the legislative policy and serves as a check to
any over-accumulation of power on the part of the executive and the
implementing agencies.

After a careful consideration of the conflicting contentions of the parties,

the Court finds that petitioners have failed to overcome the presumption of
constitutionality in favor of RA 9335, except as shall hereafter be discussed.

ACTUAL CASE AND RIPENESS

An actual case or controversy involves a conflict of legal rights, an assertion of

opposite legal claims susceptible of judicial adjudication.[10] A closely related
requirement is ripeness, that is, the question must be ripe for adjudication. And a
constitutional question is ripe for adjudication when the governmental act being
challenged has a direct adverse effect on the individual challenging it.[11] Thus, to
be ripe for judicial adjudication, the petitioner must show a personal stake in the
outcome of the case or an injury to himself that can be redressed by a favorable
decision of the Court.[12]

In this case, aside from the general claim that the dispute has ripened into a
judicial controversy by the mere enactment of the law even without any further
overt act,[13]petitioners fail either to assert any specific and concrete legal claim or
to demonstrate any direct adverse effect of the law on them. They are unable to
show a personal stake in the outcome of this case or an injury to themselves. On
this account, their petition is procedurally infirm.

This notwithstanding, public interest requires the resolution of the

constitutional issues raised by petitioners. The grave nature of their allegations
tends to cast a cloud on the presumption of constitutionality in favor of the law.
And where an action of the legislative branch is alleged to have infringed the
Constitution, it becomes not only the right but in fact the duty of the judiciary to
settle the dispute.[14]

ACCOUNTABILITY OF

PUBLIC OFFICERS

Section 1, Article 11 of the Constitution states:

 Sec. 1. Public office is a public trust. Public officers and employees must
at all times be accountable to the people, serve them with utmost
responsibility, integrity, loyalty, and efficiency, act with patriotism, and
justice, and lead modest lives.

Public office is a public trust. It must be discharged by its holder not for his
own personal gain but for the benefit of the public for whom he holds it in trust.
By demanding accountability and service with responsibility, integrity, loyalty,
efficiency, patriotism and justice, all government officials and employees have the
duty to be responsive to the needs of the people they are called upon to serve.

Public officers enjoy the presumption of regularity in the performance of

their duties. This presumption necessarily obtains in favor of BIR and BOC officials
and employees. RA 9335 operates on the basis thereof and reinforces it by
providing a system of rewards and sanctions for the purpose of encouraging the
officials and employees of the BIR and the BOC to exceed their revenue targets
and optimize their revenue-generation capability and collection.[15]

The presumption is disputable but proof to the contrary is required to rebut

it. It cannot be overturned by mere conjecture or denied in advance (as
petitioners would have the Court do) specially in this case where it is an
underlying principle to advance a declared public policy.

Petitioners claim that the implementation of RA 9335 will turn BIR and BOC
officials and employees into bounty hunters and mercenaries is not only without
any factual and legal basis; it is also purely speculative.
 A law enacted by Congress enjoys the strong presumption of
constitutionality. To justify its nullification, there must be a clear and unequivocal
breach of the Constitution, not a doubtful and equivocal one.[16] To invalidate RA
9335 based on petitioners baseless supposition is an affront to the wisdom not
only of the legislature that passed it but also of the executive which approved it.

Public service is its own reward. Nevertheless, public officers may by law be
rewarded for exemplary and exceptional performance. A system of incentives for
exceeding the set expectations of a public office is not anathema to the concept
of public accountability. In fact, it recognizes and reinforces dedication to duty,
industry, efficiency and loyalty to public service of deserving government
personnel.

In United States v. Matthews,[17] the U.S. Supreme Court validated a law

which awards to officers of the customs as well as other parties an amount not
exceeding one-half of the net proceeds of forfeitures in violation of the laws
against smuggling. Citing Dorsheimer v. United States,[18] the U.S. Supreme Court
said:

The offer of a portion of such penalties to the collectors is to

stimulate and reward their zeal and industry in detecting fraudulent
attempts to evade payment of duties and taxes.

In the same vein, employees of the BIR and the BOC may by law be entitled
to a reward when, as a consequence of their zeal in the enforcement of tax and
customs laws, they exceed their revenue targets. In addition, RA 9335 establishes
safeguards to ensure that the reward will not be claimed if it will be either the
fruit of bounty hunting or mercenary activity or the product of the irregular
performance of official duties. One of these precautionary measures is embodied
in Section 8 of the law:

SEC. 8. Liability of Officials, Examiners and Employees of the BIR and the
BOC. The officials, examiners, and employees of the [BIR] and the [BOC]
who violate this Act or who are guilty of negligence, abuses or acts of
malfeasance or misfeasance or fail to exercise extraordinary diligence in
the performance of their duties shall be held liable for any loss or injury
suffered by any business establishment or taxpayer as a result of such
violation, negligence, abuse, malfeasance, misfeasance or failure to
exercise extraordinary diligence.

EQUAL PROTECTION

Equality guaranteed under the equal protection clause is equality under the
same conditions and among persons similarly situated; it is equality among
equals, not similarity of treatment of persons who are classified based on
substantial differences in relation to the object to be accomplished.[19] When
things or persons are different in fact or circumstance, they may be treated in law
differently. In Victoriano v. Elizalde Rope Workers Union,[20] this Court declared:
 The guaranty of equal protection of the laws is not a guaranty of
equality in the application of the laws upon all citizens of the [S]tate. It
is not, therefore, a requirement, in order to avoid the constitutional
prohibition against inequality, that every man, woman and child should
be affected alike by a statute. Equality of operation of statutes does not
mean indiscriminate operation on persons merely as such, but on
persons according to the circumstances surrounding them. It
guarantees equality, not identity of rights. The Constitution does not
require that things which are different in fact be treated in law as
though they were the same. The equal protection clause does not
forbid discrimination as to things that are different. It does not
prohibit legislation which is limited either in the object to which it is
directed or by the territory within which it is to operate.

The equal protection of the laws clause of the Constitution allows

classification. Classification in law, as in the other departments of
knowledge or practice, is the grouping of things in speculation or
practice because they agree with one another in certain particulars. A
law is not invalid because of simple inequality. The very idea of
classification is that of inequality, so that it goes without saying that the
mere fact of inequality in no manner determines the matter of
constitutionality. All that is required of a valid classification is that it be
reasonable, which means that the classification should be based on
substantial distinctions which make for real differences, that it must
be germane to the purpose of the law; that it must not be limited to
existing conditions only; and that it must apply equally to each
member of the class. This Court has held that the standard is satisfied
if the classification or distinction is based on a reasonable foundation
or rational basis and is not palpably arbitrary.

In the exercise of its power to make classifications for the

purpose of enacting laws over matters within its jurisdiction, the state is
 recognized as enjoying a wide range of discretion. It is not necessary
that the classification be based on scientific or marked differences of
things or in their relation. Neither is it necessary that the classification
be made with mathematical nicety. Hence, legislative classification may
in many cases properly rest on narrow distinctions, for the equal
protection guaranty does not preclude the legislature from recognizing
degrees of evil or harm, and legislation is addressed to evils as they may
appear.[21] (emphasis supplied)

The equal protection clause recognizes a valid classification, that is, a

classification that has a reasonable foundation or rational basis and
not arbitrary.[22] With respect to RA 9335, its expressed public policy is the
optimization of the revenue-generation capability and collection of the BIR and
the BOC.[23] Since the subject of the law is the revenue- generation capability and
collection of the BIR and the BOC, the incentives and/or sanctions provided in the
law should logically pertain to the said agencies. Moreover, the law concerns only
the BIR and the BOC because they have the common distinct primary function of
generating revenues for the national government through the collection of taxes,
customs duties, fees and charges.

The BIR performs the following functions:

Sec. 18. The Bureau of Internal Revenue. The Bureau of Internal

Revenue, which shall be headed by and subject to the supervision and
control of the Commissioner of Internal Revenue, who shall be
appointed by the President upon the recommendation of the Secretary
[of the DOF], shall have the following functions:
(1) Assess and collect all taxes, fees and charges and account for
all revenues collected;

(2) Exercise duly delegated police powers for the proper

performance of its functions and duties;

(3) Prevent and prosecute tax evasions and all other illegal
economic activities;

(4) Exercise supervision and control over its constituent and

subordinate units; and

(5) Perform such other functions as may be provided by law.[24]

xxx xxx xxx (emphasis supplied)

On the other hand, the BOC has the following functions:

Sec. 23. The Bureau of Customs. The Bureau of Customs which shall be
headed and subject to the management and control of the
Commissioner of Customs, who shall be appointed by the President
upon the recommendation of the Secretary[of the DOF] and
hereinafter referred to as Commissioner, shall have the following
functions:

(1) Collect custom duties, taxes and the corresponding fees,

charges and penalties;

(2) Account for all customs revenues collected;

(3) Exercise police authority for the enforcement of tariff and

customs laws;
 (4) Prevent and suppress smuggling, pilferage and all other
economic frauds within all ports of entry;

(5) Supervise and control exports, imports, foreign mails and the
clearance of vessels and aircrafts in all ports of entry;

(6) Administer all legal requirements that are appropriate;

(7) Prevent and prosecute smuggling and other illegal activities in

all ports under its jurisdiction;

(8) Exercise supervision and control over its constituent units;

(9) Perform such other functions as may be provided by law.[25]

xxx xxx xxx (emphasis supplied)

Both the BIR and the BOC are bureaus under the DOF. They principally
perform the special function of being the instrumentalities through which the
State exercises one of its great inherent functions taxation. Indubitably, such
substantial distinction is germane and intimately related to the purpose of the
law. Hence, the classification and treatment accorded to the BIR and the BOC
under RA 9335 fully satisfy the demands of equal protection.

UNDUE DELEGATION

Two tests determine the validity of delegation of legislative power: (1) the
completeness test and (2) the sufficient standard test. A law is complete when
it sets forth therein the policy to be executed, carried out or implemented by the
delegate.[26] It lays down a sufficient standard when it provides adequate
guidelines or limitations in the law to map out the boundaries of the delegates
authority and prevent the delegation from running riot.[27] To be sufficient, the
standard must specify the limits of the delegates authority, announce the
legislative policy and identify the conditions under which it is to be
implemented.[28]

RA 9335 adequately states the policy and standards to guide the President
in fixing revenue targets and the implementing agencies in carrying out the
provisions of the law. Section 2 spells out the policy of the law:

SEC. 2. Declaration of Policy. It is the policy of the State to optimize the

revenue-generation capability and collection of the Bureau of Internal
Revenue (BIR) and the Bureau of Customs (BOC) by providing for a
system of rewards and sanctions through the creation of a Rewards and
Incentives Fund and a Revenue Performance Evaluation Board in the
above agencies for the purpose of encouraging their officials and
employees to exceed their revenue targets.

Section 4 canalized within banks that keep it from overflowing[29] the

delegated power to the President to fix revenue targets:
SEC. 4. Rewards and Incentives Fund. A Rewards and Incentives Fund,
hereinafter referred to as the Fund, is hereby created, to be sourced from
the collection of the BIR and the BOC in excess of their respective
revenue targets of the year, as determined by the Development
Budget and Coordinating Committee (DBCC), in the following
percentages:
Excess of Collection of the Percent (%) of the Excess
 Excess the Revenue Collection to Accrue to the
Targets Fund

30% or below 15%

More than 30% 15% of the first 30%

plus 20% of the

remaining excess

The Fund shall be deemed automatically appropriated the year

immediately following the year when the revenue collection target was
exceeded and shall be released on the same fiscal year.
Revenue targets shall refer to the original estimated revenue
collection expected of the BIR and the BOC for a given fiscal year as
stated in the Budget of Expenditures and Sources of Financing
(BESF) submitted by the President to Congress. The BIR and the
BOC shall submit to the DBCC the distribution of the agencies revenue
targets as allocated among its revenue districts in the case of the BIR,
and the collection districts in the case of the BOC.
xxx xxx xxx (emphasis supplied)

Revenue targets are based on the original estimated revenue collection

expected respectively of the BIR and the BOC for a given fiscal year as approved
by the DBCC and stated in the BESF submitted by the President to
Congress.[30] Thus, the determination of revenue targets does not rest solely on
the President as it also undergoes the scrutiny of the DBCC.

On the other hand, Section 7 specifies the limits of the Boards authority
and identifies the conditions under which officials and employees whose revenue
collection falls short of the target by at least 7.5% may be removed from the
service:
SEC. 7. Powers and Functions of the Board. The Board in the agency
shall have the following powers and functions:

xxx xxx xxx

(b) To set the criteria and procedures for removing from service
officials and employees whose revenue collection falls short of the
target by at least seven and a half percent (7.5%), with due
consideration of all relevant factors affecting the level of collection as
provided in the rules and regulations promulgated under this
Act, subject to civil service laws, rules and regulations and
compliance with substantive and procedural due process: Provided,
That the following exemptions shall apply:

1. Where the district or area of responsibility is newly-created, not

exceeding two years in operation, as has no historical record of
collection performance that can be used as basis for evaluation;
and

2. Where the revenue or customs official or employee is a recent

transferee in the middle of the period under consideration unless
the transfer was due to nonperformance of revenue targets or
potential nonperformance of revenue targets: Provided, however,
That when the district or area of responsibility covered by revenue
or customs officials or employees has suffered from economic
difficulties brought about by natural calamities or force
majeure or economic causes as may be determined by the Board,
termination shall be considered only after careful and proper
review by the Board.

(c) To terminate personnel in accordance with the criteria adopted in the

preceding paragraph: Provided, That such decision shall be immediately
executory: Provided, further, That the application of the criteria for
the separation of an official or employee from service under this Act
shall be without prejudice to the application of other relevant laws
on accountability of public officers and employees, such as the Code
of Conduct and Ethical Standards of Public Officers and Employees
and the Anti-Graft and Corrupt Practices Act;
 xxx xxx xxx (emphasis supplied)

Clearly, RA 9335 in no way violates the security of tenure of officials and

employees of the BIR and the BOC. The guarantee of security of tenure only
means that an employee cannot be dismissed from the service for causes other
than those provided by law and only after due process is accorded the
employee.[31] In the case of RA 9335, it lays down a reasonable yardstick for
removal (when the revenue collection falls short of the target by at least 7.5%)
with due consideration of all relevant factors affecting the level of collection. This
standard is analogous to inefficiency and incompetence in the performance of
official duties, a ground for disciplinary action under civil service laws.[32]The
action for removal is also subject to civil service laws, rules and regulations and
compliance with substantive and procedural due process.

At any rate, this Court has recognized the following as sufficient standards:
public interest, justice and equity, public convenience and welfare and simplicity,
economy and welfare.[33] In this case, the declared policy of optimization of the
revenue-generation capability and collection of the BIR and the BOC is infused
with public interest.

SEPARATION OF POWERS

Section 12 of RA 9335 provides:

 SEC. 12. Joint Congressional Oversight Committee. There is hereby
created a Joint Congressional Oversight Committee composed of seven
Members from the Senate and seven Members from the House of
Representatives. The Members from the Senate shall be appointed by
the Senate President, with at least two senators representing the
minority. The Members from the House of Representatives shall be
appointed by the Speaker with at least two members representing the
minority. After the Oversight Committee will have approved the
implementing rules and regulations (IRR) it shall thereafter
become functus officio and therefore cease to exist.

The Joint Congressional Oversight Committee in RA 9335 was created for

the purpose of approving the implementing rules and regulations (IRR)
formulated by the DOF, DBM, NEDA, BIR, BOC and CSC. On May 22, 2006, it
approved the said IRR. From then on, it became functus officio and ceased to
exist. Hence, the issue of its alleged encroachment on the executive function of
implementing and enforcing the law may be considered moot and academic.

This notwithstanding, this might be as good a time as any for the Court to
confront the issue of the constitutionality of the Joint Congressional Oversight
Committee created under RA 9335 (or other similar laws for that matter).
 The scholarly discourse of Mr. Justice (now Chief Justice) Puno on the
concept of congressional oversight in Macalintal v. Commission on Elections[34] is
illuminating:

Concept and bases of congressional oversight

Broadly defined, the power of oversight embraces all activities

undertaken by Congress to enhance its understanding of and
influence over the implementation of legislation it has enacted.
Clearly, oversight concerns post-enactment measures undertaken by
Congress: (a) to monitor bureaucratic compliance with program
objectives, (b) to determine whether agencies are properly
administered, (c) to eliminate executive waste and dishonesty, (d) to
prevent executive usurpation of legislative authority, and (d) to
assess executive conformity with the congressional perception of
public interest.

The power of oversight has been held to be intrinsic in the grant

of legislative power itself and integral to the checks and balances
inherent in a democratic system of government. x x x x x x x x x
Over the years, Congress has invoked its oversight power with
increased frequency to check the perceived exponential accumulation of
power by the executive branch. By the beginning of the 20 th century,
Congress has delegated an enormous amount of legislative authority to
the executive branch and the administrative agencies. Congress, thus,
uses its oversight power to make sure that the administrative agencies
perform their functions within the authority delegated to them. x x x x x
xxxx

Categories of congressional oversight functions

The acts done by Congress purportedly in the exercise of its

oversight powers may be divided into three categories,
namely: scrutiny, investigation and supervision.

a. Scrutiny
 Congressional scrutiny implies a lesser intensity and continuity of
attention to administrative operations. Its primary purpose is to
determine economy and efficiency of the operation of government
activities. In the exercise of legislative scrutiny, Congress may request
information and report from the other branches of government. It can
give recommendations or pass resolutions for consideration of the
agency involved.

xxx xxx xxx

b. Congressional investigation

While congressional scrutiny is regarded as a passive process of

looking at the facts that are readily available, congressional investigation
involves a more intense digging of facts. The power of Congress to
conduct investigation is recognized by the 1987 Constitution under
section 21, Article VI, xxx xxx xxx

c. Legislative supervision

The third and most encompassing form by which Congress

exercises its oversight power is thru legislative supervision. Supervision
connotes a continuing and informed awareness on the part of a
congressional committee regarding executive operations in a given
administrative area. While both congressional scrutiny and investigation
involve inquiry into past executive branch actions in order to influence
future executive branch performance, congressional supervision allows
Congress to scrutinize the exercise of delegated law-making authority,
and permits Congress to retain part of that delegated authority.

Congress exercises supervision over the executive agencies

through its veto power. It typically utilizes veto provisions when granting
the President or an executive agency the power to promulgate
regulations with the force of law. These provisions require the President
or an agency to present the proposed regulations to Congress, which
retains a right to approve or disapprove any regulation before it takes
effect. Such legislative veto provisions usually provide that a proposed
regulation will become a law after the expiration of a certain period of
time, only if Congress does not affirmatively disapprove of the
regulation in the meantime. Less frequently, the statute provides that a
proposed regulation will become law if Congress affirmatively approves
it.

Supporters of legislative veto stress that it is necessary to maintain

the balance of power between the legislative and the executive branches
of government as it offers lawmakers a way to delegate vast power to the
executive branch or to independent agencies while retaining the option to
cancel particular exercise of such power without having to pass new
legislation or to repeal existing law. They contend that this arrangement
promotes democratic accountability as it provides legislative check on
the activities of unelected administrative agencies. One proponent thus
explains:

It is too late to debate the merits of this delegation policy: the policy
is too deeply embedded in our law and practice. It suffices to say that the
complexities of modern government have often led Congress-whether by
actual or perceived necessity- to legislate by declaring broad policy goals and
general statutory standards, leaving the choice of policy options to the
discretion of an executive officer. Congress articulates legislative aims, but
leaves their implementation to the judgment of parties who may or may not
have participated in or agreed with the development of those aims.
Consequently, absent safeguards, in many instances the reverse of our
constitutional scheme could be effected: Congress proposes, the Executive
disposes. One safeguard, of course, is the legislative power to enact new
legislation or to change existing law. But without some means of overseeing
post enactment activities of the executive branch, Congress would be unable to
determine whether its policies have been implemented in accordance with
legislative intent and thus whether legislative intervention is appropriate.

Its opponents, however, criticize the legislative veto as undue

encroachment upon the executive prerogatives. They urge that any
post-enactment measures undertaken by the legislative branch
should be limited to scrutiny and investigation; any measure beyond
that would undermine the separation of powers guaranteed by the
Constitution. They contend that legislative veto constitutes an
impermissible evasion of the Presidents veto authority and intrusion into
the powers vested in the executive or judicial branches of government.
Proponents counter that legislative veto enhances separation of powers
as it prevents the executive branch and independent agencies from
accumulating too much power. They submit that reporting requirements
and congressional committee investigations allow Congress to scrutinize
only the exercise of delegated law-making authority. They do not allow
Congress to review executive proposals before they take effect and they
do not afford the opportunity for ongoing and binding expressions of
congressional intent. In contrast, legislative veto permits Congress to
participate prospectively in the approval or disapproval of subordinate
law or those enacted by the executive branch pursuant to a delegation of
authority by Congress. They further argue that legislative veto is a
necessary response by Congress to the accretion of policy control by
forces outside its chambers. In an era of delegated authority, they point
out that legislative veto is the most efficient means Congress has yet
devised to retain control over the evolution and implementation of its
policy as declared by statute.

In Immigration and Naturalization Service v. Chadha, the U.S.

Supreme Court resolved the validity of legislative veto provisions.
The case arose from the order of the immigration judge suspending the
deportation of Chadha pursuant to 244(c)(1) of the Immigration and
Nationality Act. The United States House of Representatives passed a
resolution vetoing the suspension pursuant to 244(c)(2) authorizing
either House of Congress, by resolution, to invalidate the decision of the
executive branch to allow a particular deportable alien to remain in the
United States. The immigration judge reopened the deportation
proceedings to implement the House order and the alien was ordered
deported. The Board of Immigration Appeals dismissed the aliens
appeal, holding that it had no power to declare unconstitutional an act of
Congress. The United States Court of Appeals for Ninth Circuit held that
the House was without constitutional authority to order the aliens
deportation and that 244(c)(2) violated the constitutional doctrine on
separation of powers.

On appeal, the U.S. Supreme Court declared 244(c)(2)

unconstitutional. But the Court shied away from the issue of
separation of powers and instead held that the provision violates the
presentment clause and bicameralism. It held that the one-house veto
was essentially legislative in purpose and effect. As such, it is subject to
the procedures set out in Article I of the Constitution requiring the
passage by a majority of both Houses and presentment to the President. x
xxxxxxxx

Two weeks after the Chadha decision, the Court upheld, in

memorandum decision, two lower court decisions invalidating the
legislative veto provisions in the Natural Gas Policy Act of 1978 and the
Federal Trade Commission Improvement Act of 1980. Following this
precedence, lower courts invalidated statutes containing legislative veto
provisions although some of these provisions required the approval of
 both Houses of Congress and thus met the bicameralism requirement of
Article I. Indeed, some of these veto provisions were not even
exercised.[35](emphasis supplied)

In Macalintal, given the concept and configuration of the power of

congressional oversight and considering the nature and powers of a constitutional
body like the Commission on Elections, the Court struck down the provision in RA
9189 (The Overseas Absentee Voting Act of 2003) creating a Joint Congressional
Committee. The committee was tasked not only to monitor and evaluate the
implementation of the said law but also to review, revise, amend and approve the
IRR promulgated by the Commission on Elections. The Court held that these
functions infringed on the constitutional independence of the Commission on
Elections.[36]

With this backdrop, it is clear that congressional oversight is not

unconstitutional per se, meaning, it neither necessarily constitutes an
encroachment on the executive power to implement laws nor undermines the
constitutional separation of powers. Rather, it is integral to the checks and
balances inherent in a democratic system of government. It may in fact even
enhance the separation of powers as it prevents the over-accumulation of power
in the executive branch.

However, to forestall the danger of congressional encroachment beyond

the legislative sphere, the Constitution imposes two basic and related constraints
on Congress.[37]It may not vest itself, any of its committees or its members with
either executive or judicial power.[38] And, when it exercises its legislative power,
it must follow the single, finely wrought and exhaustively considered, procedures
specified under the Constitution,[39] including the procedure for enactment of
laws and presentment.

Thus, any post-enactment congressional measure such as this should be

limited to scrutiny and investigation. In particular, congressional oversight must
be confined to the following:

(1) scrutiny based primarily on Congress power of appropriation and the

budget hearings conducted in connection with it, its power to ask
heads of departments to appear before and be heard by either of its
Houses on any matter pertaining to their departments and its power
of confirmation[40] and

(2) investigation and monitoring[41] of the implementation of laws pursuant

to the power of Congress to conduct inquiries in aid of legislation.[42]

Any action or step beyond that will undermine the separation of powers
guaranteed by the Constitution. Legislative vetoes fall in this class.

Legislative veto is a statutory provision requiring the President or an

administrative agency to present the proposed implementing rules and
regulations of a law to Congress which, by itself or through a committee formed
by it, retains a right or power to approve or disapprove such regulations before
they take effect. As such, a legislative veto in the form of a congressional
oversight committee is in the form of an inward-turning delegation designed to
attach a congressional leash (other than through scrutiny and investigation) to an
agency to which Congress has by law initially delegated broad powers. [43] It
radically changes the design or structure of the Constitutions diagram of power as
it entrusts to Congress a direct role in enforcing, applying or implementing its own
laws.[44]

Congress has two options when enacting legislation to define national

policy within the broad horizons of its legislative competence.[45] It can itself
formulate the details or it can assign to the executive branch the responsibility for
making necessary managerial decisions in conformity with those standards.[46] In
the latter case, the law must be complete in all its essential terms and conditions
when it leaves the hands of the legislature.[47] Thus, what is left for the executive
branch or the concerned administrative agency when it formulates rules and
regulations implementing the law is to fill up details (supplementary rule-making)
or ascertain facts necessary to bring the law into actual operation (contingent
rule-making).[48]

Administrative regulations enacted by administrative agencies to

implement and interpret the law which they are entrusted to enforce have the
force of law and are entitled to respect.[49] Such rules and regulations partake of
the nature of a statute[50] and are just as binding as if they have been written in
the statute itself. As such, they have the force and effect of law and enjoy the
presumption of constitutionality and legality until they are set aside with finality
in an appropriate case by a competent court.[51] Congress, in the guise of
assuming the role of an overseer, may not pass upon their legality by subjecting
them to its stamp of approval without disturbing the calculated balance of powers
established by the Constitution. In exercising discretion to approve or disapprove
the IRR based on a determination of whether or not they conformed with the
provisions of RA 9335, Congress arrogated judicial power unto itself, a power
exclusively vested in this Court by the Constitution.
CONSIDERED OPINION OF

MR. JUSTICE DANTE O. TINGA

Moreover, the requirement that the implementing rules of a law be

subjected to approval by Congress as a condition for their effectivity violates the
cardinal constitutional principles of bicameralism and the rule on presentment.[52]

Section 1, Article VI of the Constitution states:

Section 1. The legislative power shall be vested in the Congress of the

Philippines which shall consist of a Senate and a House of Representatives,
except to the extent reserved to the people by the provision on initiative and
referendum. (emphasis supplied)

Legislative power (or the power to propose, enact, amend and repeal

laws)[53] is vested in Congress which consists of two chambers, the Senate and the
House of Representatives. A valid exercise of legislative power requires the act of
both chambers. Corrollarily, it can be exercised neither solely by one of the two
chambers nor by a committee of either or both chambers. Thus, assuming the
validity of a legislative veto, both a single-chamber legislative veto and a

congressional committee legislative veto are invalid.

Additionally, Section 27(1), Article VI of the Constitution provides:

Section 27. (1) Every bill passed by the Congress shall, before it
becomes a law, be presented to the President. If he approves the same, he shall
sign it, otherwise, he shall veto it and return the same with his objections to the
House where it originated, which shall enter the objections at large in its Journal
and proceed to reconsider it. If, after such reconsideration, two-thirds of all the
Members of such House shall agree to pass the bill, it shall be sent, together with
the objections, to the other House by which it shall likewise be reconsidered, and
if approved by two-thirds of all the Members of that House, it shall become a law.
In all such cases, the votes of each House shall be determined by yeas or nays,
and the names of the members voting for or against shall be entered in its Journal.
The President shall communicate his veto of any bill to the House where it
originated within thirty days after the date of receipt thereof; otherwise, it shall
become a law as if he had signed it. (emphasis supplied)

Every bill passed by Congress must be presented to the President for

approval or veto. In the absence of presentment to the President, no bill passed by
Congress can become a law. In this sense, law-making under the Constitution is a

joint act of the Legislature and of the Executive. Assuming that legislative veto is a
valid legislative act with the force of law, it cannot take effect without such
presentment even if approved by both chambers of Congress.

In sum, two steps are required before a bill becomes a law. First, it must be
approved by both Houses of Congress.[54] Second, it must be presented to and
approved by the President.[55] As summarized by Justice Isagani Cruz[56] and Fr.
Joaquin G. Bernas, S.J.[57], the following is the procedure for the approval of bills:
 A bill is introduced by any member of the House of
Representatives or the Senate except for some measures that must
originate only in the former chamber.

The first reading involves only a reading of the number and title
of the measure and its referral by the Senate President or the Speaker
to the proper committee for study.

The bill may be killed in the committee or it may be

recommended for approval, with or without amendments, sometimes
after public hearings are first held thereon. If there are other bills of the
same nature or purpose, they may all be consolidated into one bill
under common authorship or as a committee bill.

Once reported out, the bill shall be calendared for second

reading. It is at this stage that the bill is read in its entirety, scrutinized,
debated upon and amended when desired. The second reading is the
most important stage in the passage of a bill.

The bill as approved on second reading is printed in its final form

and copies thereof are distributed at least three days before the third
reading. On the third reading, the members merely register their votes
and explain them if they are allowed by the rules. No further debate is
allowed.

Once the bill passes third reading, it is sent to the other chamber,
where it will also undergo the three readings. If there are differences
 between the versions approved by the two chambers, a conference
committee[58] representing both Houses will draft a compromise
measure that if ratified by the Senate and the House of Representatives
will then be submitted to the President for his consideration.

The bill is enrolled when printed as finally approved by the

Congress, thereafter authenticated with the signatures of the Senate
President, the Speaker, and the Secretaries of their respective
chambers[59]

The Presidents role in law-making.

The final step is submission to the President for approval. Once

approved, it takes effect as law after the required publication.[60]

Where Congress delegates the formulation of rules to implement the law it

has enacted pursuant to sufficient standards established in the said law, the law
must be complete in all its essential terms and conditions when it leaves the hands
of the legislature. And it may be deemed to have left the hands of the legislature
when it becomes effective because it is only upon effectivity of the statute that
legal rights and obligations become available to those entitled by the language of
the statute. Subject to the indispensable requisite of publication under the due

process clause,[61] the determination as to when a law takes effect is wholly the
prerogative of Congress.[62] As such, it is only upon its effectivity that a law may
be executed and the executive branch acquires the duties and powers to execute the
said law. Before that point, the role of the executive branch, particularly of the
President, is limited to approving or vetoing the law.[63]

From the moment the law becomes effective, any provision of law that
empowers Congress or any of its members to play any role in the implementation
or enforcement of the law violates the principle of separation of powers and is thus

unconstitutional. Under this principle, a provision that requires Congress or its

members to approve the implementing rules of a law after it has already taken
effect shall be unconstitutional, as is a provision that allows Congress or its
members to overturn any directive or ruling made by the members of the executive
branch charged with the implementation of the law.

Following this rationale, Section 12 of RA 9335 should be struck down as

unconstitutional. While there may be similar provisions of other laws that may be
invalidated for failure to pass this standard, the Court refrains from invalidating
them wholesale but will do so at the proper time when an appropriate case
assailing those provisions is brought before us.[64]

The next question to be resolved is: what is the effect of the

unconstitutionality of Section 12 of RA 9335 on the other provisions of the law?
Will it render the entire law unconstitutional? No.

Section 13 of RA 9335 provides:

 SEC. 13. Separability Clause. If any provision of this Act is declared
invalid by a competent court, the remainder of this Act or any provision
not affected by such declaration of invalidity shall remain in force and
effect.

In Tatad v. Secretary of the Department of Energy,[65] the Court laid down

the following rules:

The general rule is that where part of a statute is void as

repugnant to the Constitution, while another part is valid, the valid
portion, if separable from the invalid, may stand and be enforced. The
presence of a separability clause in a statute creates the presumption
that the legislature intended separability, rather than complete nullity
of the statute. To justify this result, the valid portion must be so far
independent of the invalid portion that it is fair to presume that the
legislature would have enacted it by itself if it had supposed that it
could not constitutionally enact the other. Enough must remain to
make a complete, intelligible and valid statute, which carries out the
legislative intent. x x x

The exception to the general rule is that when the parts of a

statute are so mutually dependent and connected, as conditions,
considerations, inducements, or compensations for each other, as to
warrant a belief that the legislature intended them as a whole, the
nullity of one part will vitiate the rest. In making the parts of the statute
dependent, conditional, or connected with one another, the legislature
intended the statute to be carried out as a whole and would not have
enacted it if one part is void, in which case if some parts are
 unconstitutional, all the other provisions thus dependent, conditional,
or connected must fall with them.

The separability clause of RA 9335 reveals the intention of the legislature to

isolate and detach any invalid provision from the other provisions so that the
latter may continue in force and effect. The valid portions can stand
independently of the invalid section. Without Section 12, the remaining
provisions still constitute a complete, intelligible and valid law which carries out
the legislative intent to optimize the revenue-generation capability and collection
of the BIR and the BOC by providing for a system of rewards and sanctions
through the Rewards and Incentives Fund and a Revenue Performance Evaluation
Board.

To be effective, administrative rules and regulations must be published in

full if their purpose is to enforce or implement existing law pursuant to a valid
delegation. The IRR of RA 9335 were published on May 30, 2006 in two
newspapers of general circulation[66] and became effective 15 days
thereafter.[67] Until and unless the contrary is shown, the IRR are presumed valid
and effective even without the approval of the Joint Congressional Oversight
Committee.

WHEREFORE, the petition is hereby PARTIALLY GRANTED. Section

12 of RA 9335 creating a Joint Congressional Oversight Committee to approve the
implementing rules and regulations of the law is
declared UNCONSTITUTIONAL and therefore NULL and VOID. The
constitutionality of the remaining provisions of RA 9335 is UPHELD. Pursuant to
Section 13 of RA 9335, the rest of the provisions remain in force and effect.
SO ORDERED.

EN BANC

VICTORIA C. GUTIERREZ, G.R. No. 153266

JOEL R. PEREZ, ARACELI L. YAMBOT,
CORAZON F. SORIANO, LORNA P. TAMOR,
ROMEO S. CONSIGNADO, DIVINA R. SULIT,
ESTRELITA F. IRESARE, ROSALINDA L.
ALPAY, AUREA L. ILAGAN AND ALL THE
OTHER CONCERNED EMPLOYEES OF THE
OFFICE OF THE SOLICITOR GENERAL,
Petitioners, Present:
Puno, C.J.,

Carpio,

Corona,

Carpio Morales,

Velasco, Jr.,

Nachura,

- versus - Leonardo-De Castro,

Brion,

Peralta,

Bersamin,
 Del Castillo,

Abad,

Villarama, Jr.,

Perez, and

Mendoza, JJ.

DEPARTMENT OF BUDGET AND

MANAGEMENT, HONORABLE SECRETARY
EMILIA T. BONCODIN AND DIRECTOR LUZ M.
CANTOR,

Respondents,

UNIVERSITY OF THE PHILIPPINES,

AMADO EUROPA, MERCEDITA REYES, CONCHITA

ABARCAR, LUCIO ABERIN, BIENVENIDO BIONG,
SOLOMON CELIZ, WILFREDO CORNEL, TOMAS
FORIO, ROGELIO JUNTERIAL, JAIME PERALTA,
PILAR RILLAS, WILFREDO SAGUN, JESUS
SUGUITAN, LUIS TORRES, JOSE VERSOZA AND ALL
THE OTHER CONCERNED INCUMBENT AND
RETIRED EMPLOYEES OF THE SOCIAL SECURITY
SYSTEM v. SOCIAL SECURITY SYSTEM***

CONSUELO A. TAGARO, REYNALDO S. CALLANO, AIDA A.

MARTINEZ, PRISCILLA P. COSTES, RICELI C. MENDOZA,
ARISTON CALVO, SAMSON L. MOLAO, MANUEL
SABUTAN, VILMA GONZALES, RUTH C. MAPANAO,
NELSON M. BELGIRA, JESUS ANTONIO G. DERIJE v.
UNIVERSITY OF SOUTHERN MINDANAO***

CONFEDERATION OF INDEPENDENT UNIONS IN THE

PUBLIC SECTOR (CIU)

ESTHER I. ABADIANO AND OTHER FORTY ONE

THOUSAND INDIVIDUAL TEACHERS INTERVENORS

ELPIDIO F. FERRER, MARIKINA CITY FEDERATION

OF PUBLIC SCHOOL TEACHERS, INC., REPRESENTED
BY ITS PRESIDENT ELPIDIO F. FERRER, AND ALL
OTHER INDIVIDUAL PUBLIC SCHOOL TEACHERS IN
CENTRAL LUZON, NORTHERN LUZON, SOUTHERN
TAGALOG, NATIONAL CENTRAL REGION, CARR AND
MINDANAO REPRESENTED BY THEIR RESPECTIVE
ATTORNEYS-IN-FACT, ATTORNEYS DANTE ILAYA
AND VIRGINIA SUAREZ-PINLAC AND ACTION AND
SOLIDARITY FOR THE EMPOWERMENT OF
TEACHERS (ASSERT), REPRESENTED BY ITS
PRESIDENT AMABLE TUIBEIO, ET AL.

HARRIS M. SINOLINDING, KALANTONGAN P. AKIL,

DAUNDI B. BAKONG, TERESITA C. DE GUZMAN, QUEENIE
A. HABIBUN, JOSE T. MAUN, VIVIENLE P. MARAGGUN,
SAAVEDRA M. MANTIKAYAN, GIJIT C. PARON, IRWIN R.
QUINAIN, DATUMANONG O. TAGITICAN AND HYDIE P.
WONG, AND ALL OTHER CONCERNED EMPLOYEES OF THE
COTABATO FOUNDATION COLLEGE OF SCIENCE AND
TECHNOLOGY (CFCST) v. COTABATO FOUNDATION
COLLEGE OF SCIENCE AND TECHNOLOGY AND
DEPARTMENT OF BUDGET AND MANAGEMENT***

FRANCISCA C. CASTRO, DARIO C. VARGAS, MA. DEBBIE M.

RESMA, RAMON P. CASIL, TERESITA C. BUSADRE,
CRISTINA V. MANALO, SAUL SAN RAMON, ALEXIS R.
REBURIANO, ROSALITO D. ROSA, DR. FERNANDO C.
JAVIER, DR. ROSEMARIE M. YAGUIE, DR. GIL T.
MAGBANUA, AND ALL OTHER CONCERNED PUBLIC
SCHOOL TEACHERS OF QUEZON CITY v. DEPARTMENT OF
BUDGET AND MANAGEMENT***

WILMA Q. NOBLEZA, ELEANOR M. CASTRO, JOSE B.

BUSTILLO, JR., ABELARDO E. DE GUZMAN, EDWIN F.
FABRIQUIER, ET AL. v. DBM SECRETARY ROMULO NERI
AND DEPARTMENT OF BUDGET AND MANAGEMENT***

EVA VALDEZ FERIA, WILHELMINA BALDO, ROSE MARIE L.

YCASA, GLORIA G. IGNACIO AND HJI. AKMAD A. ALSAD
AND OTHER TWELVE THOUSAND FIVE HUNDRED
INDIVIDUAL TEACHERS

BUREAU OF PLANT INDUSTRY EMPLOYEES ASSOCIATION,

MARY ANN GUERRERO, ET AL.

Intervenors.
x ------------------------------------------------------------ x

ESTRELLITA C. AMPONIN, JUDITH G.R. No. 159007

A. CUDAL, ROMEO A. PAGALAN, MARISSA F.
PARIAS, AND RAYMOND F. FLORES, ET AL.,

Petitioners,

- versus -

COMMISSION ON AUDIT, GUILERMO N.

CARAGUE, IN HIS CAPACITY AS CHAIRMAN, RAUL
C. FLORES, IN HIS CAPACITY AS COMMISSIONER,
COMMISSION ON AUDIT, AND EMMANUEL M.
DALMAN, IN HIS CAPACITY AS COMMISSIONER,
COMMISSION ON AUDIT,

Respondents.

x -------------------------------------------------- x

AUGUSTO R. NIEVES, BONIFACIO G.R. No. 159029

H. ATIVO, TARCELA P. DETERA, NILDA G. CIELO,
ANTHONY M. BRAVO, MARIA LOURDES G.
BARROZO, ANTONIO E. FUENTES, ALFREDO D.
DONOR, RICO B. NAVA, SR., DOLORES C. HUIDEM
AND ALL THE OTHER CONCERNED EMPLOYEES OF
THE SORSOGON STATE COLLEGE,
Petitioners,

- versus -

DEPARTMENT OF BUDGET AND MANAGEMENT

AND HONORABLE SECRETARY EMILIA T.
BONCODIN,

Respondents.

x ------------------------------------------------- x

KAPISANAN NG MGA MANGGAGAWA G.R. No. 170084

SA BUREAU OF AGRICULTURAL STATISTICS (KMB),
EVELYN C. TIDON, RIPOL O. ABALOS, BEATRIZ L.
HUBILLA, MA. CHERYL J. TAJONERA, LOLITA DE
HERNANDEZ, FLORA M. MABAMBA, DELILAH G.
BASSIG AND ALL CONCERNED INCUMBENT AND
RETIRED EMPLOYEES OF THE BUREAU OF
AGRICULTURAL STATISTICS, DEPARTMENT OF
AGRICULTURE,

Petitioners,

- versus -

DEPARTMENT OF BUDGET AND MANAGEMENT

AND HONORABLE SECRETARY ROMULO NERI***,

Respondents.
x ------------------------------------------------- x

NATIONAL HOUSING AUTHORITY, G.R. No. 172713

Petitioner,

- versus -

EPIFANIO P. RECANA, MERCEDES AMURAO,

ERASMO APOSTOL, FLORENDO ASUNCION,
FIORELLO JOSEFINA BALTAZAR, ET AL.,

Respondents.

x ------------------------------------------------- x

INSURANCE COMMISSION OFFICERS G.R. No. 173119

AND EMPLOYEES, REPRESENTED BY INSURANCE
COMMISSION EMPLOYEES WELFARE
ASSOCIATION (ICEWA), ET AL.,

Petitioners,

- versus -

DEPARTMENT OF BUDGET AND MANAGEMENT

AND/OR HONORABLE SECRETARY ROLANDO G.
ANDAYA, JR.,

Respondents.
x ------------------------------------------------- x

FIBER INDUSTRY DEVELOPMENT G.R. No. 176477

AUTHORITY EMPLOYEES ASSOCIATION (FIDAEA),
REMEDIOS V.J. ABGONA, CELERINA T. HILARIO,
QUIRINO U. SANTOS, GRACE AURORA F.
PASTORES, RHISA V. PEGENIA, ET AL.,

Petitioners,

- versus -

DEPARTMENT OF BUDGET AND MANAGEMENT

AND/OR HONORABLE SECRETARY ROLANDO G.
ANDAYA, JR.***,

Respondents.

x ------------------------------------------------- x
BUREAU OF ANIMAL INDUSTRY G.R. No. 177990
EMPLOYEES ASSOCIATION (BAIEA), LORY C.
BANGALISAN, EDGARDO VINCULADO, LORENZO J.
ABARCA, ROLANDO M. VASQUEZ, ALFREDO B.
DUCUSIN, ET AL.,

Petitioners,

- versus -

DEPARTMENT OF BUDGET AND MANAGEMENT

AND/OR HONORABLE SECRETARY ROLANDO G.
ANDAYA, JR.***,

Respondents.

x ------------------------------------------------- x

RE: REQUEST OF SANDIGANBAYAN A.M. No. 06-4-02-SB

FOR AUTHORITY TO USE THEIR SAVINGS TO PAY

THEIR COLA DIFFERENTIAL FROM JULY 1, 1989 TO
MARCH 16, 1999,

Promulgated:

March 18, 2010

x ---------------------------------------------------------------------------------------- x
 DECISION

ABAD, J.:

These consolidated cases question the inclusion of certain allowances and

fringe benefits into the standardized salary rates for offices in the national
government, state universities and colleges, and local government units as
required by the Compensation and Position Classification Act of 1989 and
implemented through the challenged National Compensation Circular 59 (NCC
59).

The Facts and the Case

Congress enacted in 1989 Republic Act (R.A.) 6758, called the

Compensation and Position Classification Act of 1989 to rationalize the
compensation of government employees. Its Section 12 directed the
consolidation of allowances and additional compensation already being enjoyed
by employees into their standardized salary rates. But it exempted certain
additional compensations that the employees may be receiving from such
consolidation. Thus:

Section 12. Consolidation of Allowances and Compensation. -- All allowances,

except for representation and transportation allowances; clothing and laundry
allowances; subsistence allowance of marine officers and crew on board government
vessels and hospital personnel; hazard pay; allowances of foreign service personnel
stationed abroad; and such other additional compensation not otherwise specified
herein as may be determined by the DBM, shall be deemed included in the
standardized salary rates herein prescribed. Such other additional compensation,
 whether in cash or in kind, being received by incumbents only as of July 1, 1989 not
integrated into the standardized salary rates shall continue to be authorized.

Pursuant to the above, the Department of Budget and Management (DBM)

issued NCC 59 dated September 30, 1989,[1] covering the offices of the national
government, state universities and colleges, and local government units. NCC 59
enumerated the specific allowances and additional compensations which were
deemed integrated in the basic salaries and these included the Cost of Living
Allowance (COLA) and Inflation Connected Allowance (ICA). The DBM re-issued
and published NCC 59 on May 3, 2004.[2]

The DBM also issued Corporate Compensation Circular (CCC) 10 dated

October 2, 1989,[3] covering all government-owned or controlled corporations and
government financial institutions. The DBM re-issued this circular on February 15,
1999[4] and published it on March 16, 1999. Accordingly, the Commission on Audit
(COA) disallowed the payments of honoraria and other allowances which were
deemed integrated into the standardized salary rates. Employees of government-
owned or controlled corporations questioned the validity of CCC 10 due to its
non-publication. In De Jesus v. Commission on Audit,[5] this Court declared CCC 10
ineffective because of such non-publication. Until then, it ordered the COA to
pass on audit the employees honoraria which they were receiving prior to
the effectivity of R.A. 6758.

Meanwhile, the DBM also issued Budget Circular 2001-03 dated November
12, 2001,[6] clarifying that only the exempt allowances under Section 12 of R.A.
6758 may continue to be granted the employees; all others were deemed
integrated in the standardized salary rates. Thus, the payment of allowances and
compensation such as COLA, amelioration allowance, and ICA, among others,
which were already deemed integrated in the basic salary were unauthorized. The
Courts ruling in subsequent cases involving government-owned or controlled
corporations followed the De Jesus ruling.
 On May 16, 2002 employees of the Office of the Solicitor General filed a
petition for certiorari and mandamus in G.R. 153266, questioning the propriety of
integrating their COLA into their standardized salary rates. Employees of other
offices of the national government followed suit. In addition, petitioners in G.R.
159007 questioned the disallowance of the allowances and fringe benefits that
the COA auditing personnel assigned to the Government Service Insurance
System (GSIS) used to get. Petitioners in G.R. 173119 questioned the disallowance
of the ICA that used to be paid to the officials and employees of the Insurance
Commission.

The Court caused the consolidation of the petitions and treated them as a
class suit for all government employees, excluding the employees of government-
owned or controlled corporations and government financial institutions.[7]

On October 26, 2005 the DBM issued National Budget Circular 2005-
[8]
502 which provided that all Supreme Court rulings on the integration of
allowances, including COLA, of government employees under R.A. 6758 applied
only to specific government-owned or controlled corporations since the
consolidated cases covering the national government employees are still pending
with this Court. Consequently, the payment of allowances and other benefits to
them, such as COLA and ICA, remained prohibited until otherwise provided by law
or ruled by this Court. The circular further said that all agency heads and other
responsible officials and employees found to have authorized the grant of COLA
and other allowances and benefits already integrated in the basic salary shall be
personally held liable for such payment.

The Issues Presented

The common issues presented in these consolidated cases are:

 1. Whether or not the COLA should be deemed integrated into the
standardized salary rates of the concerned government employees by virtue of
Section 12 of R.A. 6758;

2. Whether or not the ICA may still be paid to officials and employees of the
Insurance Commission;

3. Whether or not the GSIS may still pay the allowances and fringe benefits
to COA auditing personnel assigned to it;

4. Whether or not the non-publication of NCC 59 dated September 30, 1989

in the Official Gazette or newspaper of general circulation nullifies the integration
of the COLA into the standardized salary rates; and

5. Whether or not the grant of COLA to military and police personnel to the
exclusion of other government employees violates the equal protection clause.

The Courts Ruling

One. Petitioners espouse the common theory that the DBM needs to
promulgate rules and regulations before the COLA that they were getting prior to
the passage of R.A. 6758 can be deemed integrated in their standardized salary
rates. Respondent DBM counters that R.A. 6758 already specified the allowances
and benefits that were not to be integrated in the new salary rates. All other
allowances, DBM adds, such as COLA, are deemed integrated into those salary
rates.

At the heart of the present controversy is Section 12 of R.A. 6758 which is

quoted anew for clarity:
 Section 12. Consolidation of Allowances and Compensation. -- All allowances,
except for representation and transportation allowances; clothing and laundry
allowances; subsistence allowance of marine officers and crew on board government
vessels and hospital personnel; hazard pay; allowances of foreign service personnel
stationed abroad; and such other additional compensation not otherwise specified
herein as may be determined by the DBM, shall be deemed included in the
standardized salary rates herein prescribed. Such other additional compensation,
whether in cash or in kind, being received by incumbents only as of July 1, 1989 not
integrated into the standardized salary rates shall continue to be authorized.

As will be noted from the first sentence above, all allowances were
deemed integrated into the standardized salary rates except the following:

(1) representation and transportation allowances;

(2) clothing and laundry allowances;

(3) subsistence allowances of marine officers and crew on board

government vessels;

(4) subsistence allowances of hospital personnel;

(5) hazard pay;

(6) allowances of foreign service personnel stationed abroad; and

(7) such other additional compensation not otherwise specified in Section

12 as may be determined by the DBM.

But, while the provision enumerated certain exclusions, it also authorized

the DBM to identify such other additional compensation that may be granted
over and above the standardized salary rates. In Philippine Ports Authority
Employees Hired After July 1, 1989 v. Commission on Audit,[9] the Court has ruled
that while Section 12 could be considered self-executing in regard to items (1) to
(6), it was not so in regard to item (7). The DBM still needed to amplify item (7)
since one cannot simply assume what other allowances were excluded from the
standardized salary rates. It was only upon the issuance and effectivity of the
corresponding implementing rules and regulations that item (7) could be deemed
legally completed.

Delegated rule-making is a practical necessity in modern governance

because of the increasing complexity and variety of public functions. Congress has
endowed administrative agencies like respondent DBM with the power to make
rules and regulations to implement a given legislation and effectuate its
policies.[10] Such power is, however, necessarily limited to what the law
provides. Implementing rules and regulations cannot extend the law or expand its
coverage, as the power to amend or repeal a statute belongs to the
legislature. Administrative agencies implement the broad policies laid down in a
law by filling in only its details. The regulations must be germane to the objectives
and purposes of the law and must conform to the standards prescribed by law.[11]

In this case, the DBM promulgated NCC 59 [and CCC 10]. But, instead of
identifying some of the additional exclusions that Section 12 of R.A. 6758 permits
it to make, the DBM made a list of what allowances and benefits are deemed
integrated into the standardized salary rates. More specifically, NCC 59 identified
the following allowances/additional compensation that are deemed integrated:

(1) Cost of Living Allowance (COLA);

(2) Inflation connected allowance;

(3) Living Allowance;

(4) Emergency Allowance;

(5) Additional Compensation of Public Health Nurses assigned to public health

nursing;

(6) Additional Compensation of Rural Health Physicians;

(7) Additional Compensation of Nurses in Malacaang Clinic;

 (8) Nurses Allowance in the Air Transportation Office;

(9) Assignment Allowance of School Superintendents;

(10) Post allowance of Postal Service Office employees;

(11) Honoraria/allowances which are regularly given except the following:

a. those for teaching overload;

b. in lieu of overtime pay;

c. for employees on detail with task forces/special projects;

d. researchers, experts and specialists who are acknowledged authorities

in their field of specialization;

e. lecturers and resource persons;

f. Municipal Treasurers deputized by the Bureau of Internal Revenue to

collect and remit internal revenue collections; and

g. Executive positions in State Universities and Colleges filled by

designation from among their faculty members.

(12) Subsistence Allowance of employees except those authorized under EO

[Executive Order] 346 and uniformed personnel of the Armed Forces of
the Philippines and Integrated National Police;

(13) Laundry Allowance of employees except those hospital/sanitaria personnel

who attend directly to patients and who by the nature of their duties are
required to wear uniforms, prison guards and uniformed personnel of the
Armed Forces of the Philippines and Integrated National Police; and

(14) Incentive allowance/fee/pay except those authorized under the General

Appropriations Act and Section 33 of P.D. 807.

The drawing up of the above list is consistent with Section 12 above. R.A.
6758 did not prohibit the DBM from identifying for the purpose of
implementation what fell into the class of all allowances. With respect to what
employees benefits fell outside the term apart from those that the law specified,
the DBM, said this Court in a case,[12] needed to promulgate rules and regulations
identifying those excluded benefits. This leads to the inevitable conclusion that
until and unless the DBM issues such rules and regulations, the enumerated
exclusions in items (1) to (6) remain exclusive. Thus so, not being an enumerated
exclusion, COLA is deemed already incorporated in the standardized salary rates
of government employees under the general rule of integration.

In any event, the Court finds the inclusion of COLA in the standardized
salary rates proper. In National Tobacco Administration v. Commission on
Audit,[13] the Court ruled that the enumerated fringe benefits in items (1) to (6)
have one thing in commonthey belong to one category of privilege called
allowances which are usually granted to officials and employees of the
government to defray or reimburse the expenses incurred in the performance of
their official functions. Consequently, if these allowances are consolidated with
the standardized salary rates, then the government official or employee will be
compelled to spend his personal funds in attending to his duties. On the other
hand, item (7) is a catch-all proviso for benefits in the nature of allowances similar
to those enumerated.[14]

Clearly, COLA is not in the nature of an allowance intended to reimburse expenses

incurred by officials and employees of the government in the performance of
their official functions. It is not payment in consideration of the fulfillment of
official duty.[15] As defined, cost of living refers to the level of prices relating to a
range of everyday items[16]or the cost of purchasing those goods and services
which are included in an accepted standard level of consumption.[17] Based on this
premise, COLA is a benefit intended to cover increases in the cost of living. Thus,
it is and should be integrated into the standardized salary rates.

Two. Petitioning officials and employees of the Insurance

Commission question the disallowance of their ICA on the ground that it is a
benefit similar to the educational assistance granted by the Court in National
Tobacco Administration[18] based on the second sentence of Section 12 of R.A.
6758 that reads:
 Such other additional compensation, whether in cash or in kind, being received by
incumbents only as of July 1, 1989 not integrated into the standardized salary rates
shall continue to be authorized.

In National Tobacco Administration, the Court interpreted this provision as

referring to benefits in the nature of financial assistance, or a bonus or other
payment made to employees in addition to guaranteed hourly wages, as
contradistinguished from the allowance in the first sentence, which cannot,
strictly speaking, be treated as a bonus or additional income. In financial
assistance, reimbursement is not necessary, while in the case of allowance,
reimbursement is required.[19]

To be entitled to the financial assistance under this provision, the following

requisites must concur: (1) the recipients were incumbents when R.A. 6758 took
effect on July 1, 1989; (2) they were in fact, receiving the same, at the time; and
(3) such additional compensation is distinct and separate from the excepted
allowances under CCC 10, as it is not integrated into the standardized salary
rates.[20]

In this case, ICA, like COLA, falls under the general rule of integration. The
DBM specifically identified it as an allowance or additional compensation
integrated into the standardized salary rates. By its very nature, ICA is granted
due to inflation and upon determination that the current salary of officials and
employees of the Insurance Commission is insufficient to address the
problem. The DBM determines whether a need for ICA exists and the fund from
which it will be taken. The Insurance Commission cannot, on its own, determine
what allowances are necessary and then grant them to its officials and employees
without the approval of the DBM.

Moreover, ICA does not qualify under the second sentence of Section 12 of
R.A. 6758 since the employees failed to show that they were actually receiving it
as of June 30, 1989 or immediately prior to the implementation of R.A. 6758. The
Commissioner of the Insurance Commission requested for authority to
grant ICA from the DBM for the years 1981[21] and 1984[22] only. There is no
evidence that the ICA were paid in subsequent years. In the absence of a
subsequent authorization granting or restoring ICA to the officials and employees
of the Insurance Commission, there can be no valid legal basis for its continued
grant from July 1, 1986.

Three. Petitioners COA auditing personnel assigned to the GSIS question

the disallowance of their allowances and fringe benefits based on the allowances
given to GSIS personnel, namely:

5.6. Payment of other allowances/fringe benefits and all other forms of

compensation granted on top of basic salary, whether in cash or in kind, x x x shall be
discontinued effective November 1, 1989. Payment made for such allowances/fringe
benefits after said date shall be considered as illegal disbursement of public funds.

They alleged that since CCC 10 was declared ineffective, the disallowance should
be lifted until the issuance was published on March 16, 1999.

But, although petitioners alleged that the subject benefits were withheld
from them on the basis of CCC 10, it is clear that the benefits were actually
withheld from them on the basis of Section 18 of R.A. 6758, which reads:

Section 18. Additional Compensation of Commission on Audit Personnel and of

Other Agencies. - In order to preserve the independence and integrity of the
Commission on Audit (COA), its officials and employees are prohibited from receiving
salaries, honoraria, bonuses, allowances or other emoluments from any government
entity, local government unit, and government-owned and controlled corporations,
and government financial institution, except those compensation paid directly by the
COA out of its appropriations and contributions.

Government entities, including government-owned or controlled corporations

including financial institutions and local government units are hereby prohibited from
 assessing or billing other government entities, government-owned or controlled
corporations including financial institutions or local government units for services
rendered by its officials and employees as part of their regular functions for purposes
of paying additional compensation to said officials and employees.

As aptly pointed out by the COA, Section 18 of R.A. 6758 was complete
in itself and was operative without the aid of any supplementary or enabling
legislation.[23] The implementing rules and regulations were necessary only for
those provisions, such as item (7) of Section 12, which requires further
clarification and interpretation. Thus, notwithstanding the initial non-publication
of CCC 10, the disallowance of petitioners allowances and fringe benefits as
COA auditing personnel assigned to the GSIS was valid upon the effectivity of R.A.
6758.

In Tejada v. Domingo,[24] this Court explained that COA personnel assigned

to auditing units of government-owned or controlled corporations or government
financial institutions can receive only such salaries, allowances or fringe benefits
paid directly by the COA out of its appropriations and contributions. The
contributions referred to are the cost of audit services which did not include the
extra emoluments or benefits, such as bank equity pay, longevity pay,
amelioration allowance, and meal allowance, which petitioners claim. The COA is
further barred from assessing or billing government-owned or controlled
corporations and government financial institutions for services rendered by its
personnel as part of their regular audit functions for purposes of paying additional
compensation to such personnel.

In upholding the disallowance, the Court ruled in Villarea v. Commission on

[25]
Audit that valid reasons exist to treat COA officials differently from other
national government officials. The primary function of an auditor is to prevent
irregular, unnecessary, excessive or extravagant expenditures of government
funds. To be able to properly perform their constitutional mandate, COA officials
need to be insulated from unwarranted influences, so that they can act with
independence and integrity.
 Rightly so, the disallowance in this case is valid.

Four. Petitioners argue that since CCC 10 dated October 2, 1989 covering all
government-owned or controlled corporations and government financial
institutions was ineffective until its re-issuance and publication on March 16,
1999, its counterpart, NCC 59 dated September 30, 1989 covering the offices of
the national government, state universities and colleges, and local government
units should also be regarded as ineffective until its re-issuance and publication
on May 3, 2004. Thus, the COLA should not be deemed integrated into the
standardized salary rates from 1989 to 2004. Respondents counter that the fact
that NCC 59 was not published should not be considered as an obstacle to the
integration of COLA into the standardized salary rates. Accordingly, Budget
Circular 2001-03, insofar as it reiterates NCC 59, should not be treated as
ineffective since it merely reaffirms the fact of consolidation of COLA into the
employees salary as mandated by Section 12 of R.A. 6758.

It is a settled rule that publication is required as a condition precedent to

the effectivity of a law to inform the public of its contents before their rights and
interests are affected by the same.[26] Administrative rules and regulations must
also be published if their purpose is to enforce or implement existing law
pursuant also to a valid delegation.[27]

Nonetheless, as previously discussed, the integration of COLA into the

standardized salary rates is not dependent on the publication of CCC 10 and NCC
59. This benefit is deemed included in the standardized salary rates of
government employees since it falls under the general rule of integrationall
allowances.

More importantly, the integration was not by mere legal fiction since it was
factually integrated into the employees salaries. Records show that the
government employees were informed by their respective offices of their new
position titles and their corresponding salary grades when they were furnished
with the Notices of Position Allocation and Salary Adjustment (NPASA). The
NPASA provided the breakdown of the employees gross monthly salary as of June
30, 1989 and the composition of his standardized pay under R.A.
6758.[28] Notably, the COLA was considered part of the employees monthly
income.

In truth, petitioners never really suffered any diminution in pay as a

consequence of the consolidation of COLA into their standardized salary
rates. There is thus nothing in these cases which can be the subject of a back pay
since the amount corresponding to COLA was never withheld from petitioners in
the first place.[29]

Consequently, the non-publication of CCC 10 and NCC 59 in the Official

Gazette or newspaper of general circulation does not nullify the integration of
COLA into the standardized salary rates upon the effectivity of R.A. 6758. As the
Court has said in Philippine International Trading Corporation v. Commission on
Audit,[30] the validity of R.A. 6758 should not be made to depend on the validity of
its implementing rules.

Five. Petitioners contend that the continued grant of COLA to military and
police personnel under CCC 10 and NCC 59 to the exclusion of other government
employees violates the equal protection clause of the Constitution.

But as respondents pointed out, while it may appear that petitioners are
questioning the constitutionality of these issuances, they are in fact attacking the
very constitutionality of Section 11 of R.A. 6758. It is actually this provision which
allows the uniformed personnel to continue receiving their COLA over and above
their basic pay, thus:

Section 11. Military and Police Personnel. - The base pay of uniformed
personnel of the Armed Forces of the Philippines and the Integrated National Police
shall be as prescribed in the salary schedule for these personnel in R.A. 6638 and R.A.
6648. The longevity pay of these personnel shall be as prescribed under R.A. 6638, and
 R.A. 1134 as amended by R.A. 3725 and R.A. 6648: Provided, however, That the
longevity pay of uniformed personnel of the Integrated National Police shall include
those services rendered as uniformed members of the police, jail and fire departments
of the local government units prior to the police integration.

All existing types of allowances authorized for uniformed personnel of the

Armed Forces of the Philippines and Integrated National Police such as cost of living
allowance, longevity pay, quarters allowance, subsistence allowance, clothing
allowance, hazard pay and other allowances shall continue to be authorized.

Nothing is more settled than that the constitutionality of a statute cannot

be attacked collaterally because constitutionality issues must be pleaded directly
and not collaterally.[31]

In any event, the Court is not persuaded that the continued grant of COLA
to the uniformed personnel to the exclusion of other national government
officials run afoul the equal protection clause of the Constitution. The
fundamental right of equal protection of the laws is not absolute, but is subject to
reasonable classification. If the groupings are characterized by substantial
distinctions that make real differences, one class may be treated and regulated
differently from another. The classification must also be germane to the purpose
of the law and must apply to all those belonging to the same class.[32]

To be valid and reasonable, the classification must satisfy the following

requirements: (1) it must rest on substantial distinctions; (2) it must be germane
to the purpose of the law; (3) it must not be limited to existing conditions only;
and (4) it must apply equally to all members of the same class.[33]

It is clear from the first paragraph of Section 11 that Congress intended the
uniformed personnel to be continually governed by their respective
compensation laws. Thus, the military is governed by R.A. 6638,[34] as amended by
R.A. 9166[35] while the police is governed by R.A. 6648,[36] as amended by R.A.
6975.[37]
 Certainly, there are valid reasons to treat the
uniformed personnel differently from other national government officials. Being
in charged of the actual defense of the State and the maintenance of internal
peace and order, they are expected to be stationed virtually anywhere in the
country. They are likely to be assigned to a variety of low, moderate, and high-
cost areas. Since their basic pay does not vary based on location, the continued
grant of COLA is intended to help them offset the effects of living in higher cost
areas.[38]

WHEREFORE, the Court GRANTS the petition in G.R. No. 172713

and DENIES the petitions in G.R. 153266, 159007, 159029, 170084, 173119,
176477, 177990 and A.M. 06-4-02-SB.

SO ORDERED.

[G.R. No. 127624. November 18, 2003]

BPI LEASING CORPORATION, petitioner, vs. THE HONORABLE

COURT OF APPEALS, COURT OF TAX APPEAL AND
COMMISSIONER OF INTERNAL REVENUE, respondents.

DECISION
AZCUNA, J.:

The present petition for review on certiorari assails the decision of the
[1]

Court of Appeals in CA-G.R. SP No. 38223 and its subsequent

resolution denying the motion for reconsideration. The assailed decision and
[2]

resolution affirmed the decision of the Court of Tax Appeals (CTA) which
denied petitioner BPI Leasing Corporations (BLC) claim for tax refund in CTA
Case No. 4252.
The facts are not disputed.
BLC is a corporation engaged in the business of leasing properties. For [3]

the calendar year 1986, BLC paid the Commissioner of Internal Revenue
(CIR) a total of P1,139,041.49 representing 4% contractors percentage tax
then imposed by Section 205 of the National Internal Revenue Code (NIRC),
based on its gross rentals from equipment leasing for the said year amounting
to P27,783,725.42. [4]

On November 10, 1986, the CIR issued Revenue Regulation 19-86.

Section 6.2 thereof provided that finance and leasing companies registered
under Republic Act 5980 shall be subject to gross receipt tax of 5%-3%-1% on
actual income earned. This means that companies registered under Republic
Act 5980, such as BLC, are not liable for contractors percentage tax under
Section 205 but are, instead, subject to gross receipts tax under Section 260
(now Section 122) of the NIRC. Since BLC had earlier paid the
aforementioned contractors percentage tax, it re-computed its tax liabilities
under the gross receipts tax and arrived at the amount of P361,924.44.
On April 11, 1988, BLC filed a claim for a refund with the CIR for the
amount of P777,117.05, representing the difference between
the P1,139,041.49 it had paid as contractors percentage tax and P361,924.44
it should have paid for gross receipts tax. Four days later, to stop the running
[5]

of the prescriptive period for refunds, petitioner filed a petition for review with
the CTA. [6]

In a decision dated May 13, 1994, the CTA dismissed the petition and
[7]

denied BLCs claim of refund. The CTA held that Revenue Regulation 19-86,
as amended, may only be applied prospectively such that it only covers all
leases written on or after January 1, 1987, as stated under Section 7 of said
revenue regulation:

Section 7. Effectivity These regulations shall take effect on January 1, 1987 and shall
be applicable to all leases written on or after the said date.

The CTA ruled that, since BLCs rental income was all received prior to
1986, it follows that this was derived from lease transactions prior to January
1, 1987, and hence, not covered by the revenue regulation.
A motion for reconsideration of the CTAs decision was filed, but was
denied in a resolution dated July 26, 1995. BLC then appealed the case to
[8]
the Court of Appeals, which issued the aforementioned assailed decision and
resolution. Hence, the present petition.
[9]

In seeking to reverse the denial of its claim for tax refund, BLC submits
that the Court of Appeals and the CTA erred in not ruling that Revenue
Regulation 19-86 may be applied retroactively so as to allow BLCs claim for a
refund of P777,117.05.
Respondents, on the other hand, maintain that the provision on the date of
effectivity of Revenue Regulation 19-86 is clear and unequivocal, leaving no
room for interpretation on its prospective application. In addition, respondents
argue that the petition should be dismissed on the ground that the
Verification/Certification of Non-Forum Shopping was signed by the counsel of
record and not by BLC, through a duly authorized representative, in violation
of Supreme Court Circular 28-91.
In a resolution dated March 29, 2000, the petition was given due course
[10]

and the Court required the parties to file their respective Memoranda. Upon
submission of the Memoranda, the issues in this case were delineated, as
follows:
[11]

WHETHER THE INSTANT PETITION FOR REVIEW ON CERTIORARI

SUBSTANTIALLY COMPLIES WITH SUPREME COURT CIRCULAR 28-91.

WHETHER REVENUE REGULATION 19-86, AS AMENDED, IS LEGISLATIVE

OR INTERPRETATIVE IN NATURE.

WHETHER REVENUE REGULATION 19-86, AS AMENDED, IS PROSPECTIVE

OR RETROACTIVE IN ITS APPLICATION.

WHETHER PETITIONER, AS FOUND BY THE COURT OF APPEALS, FAILED

TO MEET THE QUANTUM OF EVIDENCE REQUIRED IN REFUND CASES.

WHETHER PETITIONER, AS FOUND BY THE COURT OF APPEALS, IS

ESTOPPED FROM CLAIMING ITS PRESENT REFUND.

As to the first issue, the Court agrees with respondents contention that the
petition should be dismissed outright for failure to comply with Supreme Court
Circular 28-91, now incorporated as Section 2 of Rule 42 of the Rules of
Court. The records plainly show, and this has not been denied by BLC, that
the certification was executed by counsel who has not been shown to have
specific authority to sign the same for BLC.
 In BA Savings Bank v. Sia, it was held that the certificate of non-forum
[12]

shopping may be signed, for and on behalf of a corporation, by a specifically

authorized lawyer who has personal knowledge of the facts required to be
disclosed in such document. This ruling, however, does not mean that any
lawyer, acting on behalf of the corporation he is representing, may routinely
sign a certification of non-forum shopping. The Court emphasizes that the
lawyer must be specifically authorized in order validly to sign the certification.
Corporations have no powers except those expressly conferred upon them
by the Corporation Code and those that are implied by or are incidental to its
existence. These powers are exercised through their board of directors and/or
duly authorized officers and agents. Hence, physical acts, like the signing of
documents, can be performed only by natural persons duly authorized for the
purpose by corporate bylaws or by specific act of the board of directors. [13]

The records are bereft of the authority of BLCs counsel to institute the
present petition and to sign the certification of non-forum shopping. While said
counsel may be the counsel of record for BLC, the representation does not
vest upon him the authority to execute the certification on behalf of his
client. There must be a resolution issued by the board of directors that
specifically authorizes him to institute the petition and execute the certification,
for it is only then that his actions can be legally binding upon BLC.
BLC however insists that there was substantial compliance with SC
Circular No. 28-91 because the verification/certification was issued by a
counsel who had full personal knowledge that no other petition or action has
been filed or is pending before any other tribunal. According to BLC, said
counsels law firm has handled this case from the very beginning and could
very well attest and/or certify to the absence of an instituted or pending case
involving the same or similar issues.
The argument of substantial compliance deserves no merit, given the
Courts ruling in Mendigorin v. Cabantog: [14]

The CA held that there was substantial compliance with the Rules of Court, citing
Dimagiba vs. Montalvo, Jr. [202 SCRA 641] to the effect that a lawyer who assumes
responsibility for a client's cause has the duty to know the entire history of the case,
especially if any litigation is commenced. This view, however, no longer holds
authoritative value in the light of Digital Microwave Corporation vs. CA [328 SCRA
286], where it was held that the reason the certification against forum shopping is
required to be accomplished by petitioner himself is that only the petitioner himself
has actual knowledge of whether or not he has initiated similar actions or proceedings
in other courts or tribunals. Even counsel of record may be unaware of such fact. To
our mind, this view is more in accord with the intent and purpose of Revised Circular
No. 28-91.

Clearly, therefore, the present petition lacks the proper certification as

strictly required by jurisprudence and the Rules of Court.
Even if the Court were to ignore the aforesaid procedural infirmity, a
perusal of the arguments raised in the petition indicates that a resolution on
the merits would nevertheless yield the same outcome.
BLC attempts to convince the Court that Revenue Regulation 19-86 is
legislative rather than interpretative in character and hence, should retroact to
the date of effectivity of the law it seeks to interpret.
Administrative issuances may be distinguished according to their nature
and substance: legislative and interpretative. A legislative rule is in the matter
of subordinate legislation, designed to implement a primary legislation by
providing the details thereof. An interpretative rule, on the other hand, is
designed to provide guidelines to the law which the administrative agency is in
charge of enforcing. [15]

The Court finds the questioned revenue regulation to be legislative in

nature. Section 1 of Revenue Regulation 19-86 plainly states that it was
promulgated pursuant to Section 277 of the NIRC. Section 277 (now Section
244) is an express grant of authority to the Secretary of Finance to promulgate
all needful rules and regulations for the effective enforcement of the provisions
of the NIRC. In Paper Industries Corporation of the Philippines v. Court of
Appeals, the Court recognized that the application of Section 277 calls for
[16]

none other than the exercise of quasi-legislative or rule-making

authority. Verily, it cannot be disputed that Revenue Regulation 19-86 was
issued pursuant to the rule-making power of the Secretary of Finance, thus
making it legislative, and not interpretative as alleged by BLC.
BLC further posits that, assuming the revenue regulation is legislative in
nature, it is invalid for want of due process as no prior notice, publication and
public hearing attended the issuance thereof. To support its view, BLC
cited CIR v. Fortune Tobacco, et al., wherein the Court nullified a revenue
[17]

memorandum circular which reclassified certain cigarettes and subjected

them to a higher tax rate, holding it invalid for lack of notice, publication and
public hearing.
The doctrine enunciated in Fortune Tobacco, and reiterated in CIR v.
Michel J. Lhuillier Pawnshop, Inc., is that when an administrative rule goes
[18]

beyond merely providing for the means that can facilitate or render less
cumbersome the implementation of the law and substantially increases the
burden of those governed, it behooves the agency to accord at least to
those directly affected a chance to be heard and, thereafter, to be duly
informed, before the issuance is given the force and effect of
law. In Lhuillier and Fortune Tobacco, the Court invalidated the revenue
memoranda concerned because the same increased the tax liabilities of the
affected taxpayers without affording them due process. In this case, Revenue
Regulation 19-86 would be beneficial to the taxpayers as they are subjected
to lesser taxes. Petitioner, in fact, is invoking Revenue Regulation 19-86 as
the very basis of its claim for refund.If it were invalid, then petitioner all the
more has no right to a refund.
After upholding the validity of Revenue Regulation 19-86, the Court now
resolves whether its application should be prospective or retroactive.
The principle is well entrenched that statutes, including administrative
rules and regulations, operate prospectively only, unless the legislative intent
to the contrary is manifest by express terms or by necessary implication. In [19]

the present case, there is no indication that the revenue regulation may
operate retroactively. Furthermore, there is an express provision stating that it
shall take effect on January 1, 1987, and that it shall be applicable to all
leases written on or after the said date. Being clear on its prospective
application, it must be given its literal meaning and applied without further
interpretation. Thus, BLC is not in a position to invoke the provisions of
[20]

Revenue Regulation 19-86 for lease rentals it received prior to January 1,

1987.
It is also apt to add that tax refunds are in the nature of tax exemptions. As
such, these are regarded as in derogation of sovereign authority and are to be
strictly construed against the person or entity claiming the exemption. The
burden of proof is upon him who claims the exemption and he must be able to
justify his claim by the clearest grant under Constitutional or statutory law, and
he cannot be permitted to rely upon vague implications. Nothing that BLC
[21]

has raised justifies a tax refund.

It is not necessary to rule on the remaining issues.
WHEREFORE, the petition for review is hereby DENIED, and the assailed
decision and resolution of the Court of Appeals are AFFIRMED. No
pronouncement as to costs.
SO ORDERED.
 SECOND DIVISION

THE BOARD OF G.R. No. 170463

TRUSTEES

OF THE GOVERNMENT
SERVICE INSURANCE Present:
SYSTEM and

WINSTON F. GARCIA, in
CARPIO, J., Chairperson,
his capacity
NACHURA,
as GSIS President and
General Manager,
PERALTA,
Petitioners,
ABAD, and

MENDOZA, JJ.
- versus -

Promulgated:
ALBERT M. VELASCO and
MARIO I. MOLINA,
February 2, 2011
Respondents.

x--------------------------------------------------x

DECISION

CARPIO, J.:
 The Case

This is a petition for review1 of the 24 September 2004 Decision2 and the 7 October
2005 Order3 of the Regional Trial Court of Manila, Branch 19 (trial court), in Civil
Case No. 03-108389. In its 24 September 2004 Decision, the trial court granted
respondents Albert M. Velasco4 and Mario I. Molinas5 (respondents) petition for
prohibition. In its 7 October 2005 Order, the trial court denied petitioners Board of
Trustees of the Government Service Insurance System (GSIS) and Winston F. Garcias
(petitioners) motion for reconsideration.

The Facts

On 23 May 2002, petitioners charged respondents administratively with grave

misconduct and placed them under preventive suspension for 90 days.6 Respondents
were charged for their alleged participation in the demonstration held by some GSIS
employees denouncing the alleged corruption in the GSIS and calling for the ouster of
its president and general manager, petitioner Winston F. Garcia.7

In a letter dated 4 April 2003, respondent Mario I. Molina (respondent Molina)

requested GSIS Senior Vice President Concepcion L. Madarang (SVP Madarang) for
the implementation of his step increment.8 On 22 April 2003, SVP Madarang denied
the request citing GSIS Board Resolution No. 372 (Resolution No. 372) 9 issued by
petitioner Board of Trustees of the GSIS (petitioner GSIS Board) which approved the
new GSIS salary structure, its implementing rules and regulations, and the adoption of
the supplemental guidelines on step increment and promotion.10 The pertinent
provision of Resolution No. 372 provides:

A. Step Increment

xxxx

III. Specific Rules:

 x x xx

3. The step increment adjustment of an employee who is on preventive

suspension shall be withheld until such time that a decision on the case has
been rendered. x x x x

Respondents also asked that they be allowed to avail of the employee privileges under
GSIS Board Resolution No. 306 (Resolution No. 306) approving Christmas raffle
benefits for all GSIS officials and employees effective year 2002.11 Respondents
request was again denied because of their pending administrative case.

On 27 August 2003, petitioner GSIS Board issued Board Resolution No. 197
(Resolution No. 197) approving the following policy recommendations:

B. On the disqualification from promotion of an employee with a pending

administrative case

To adopt the policy that an employee with pending administrative case shall be
disqualified from the following during the pendency of the case:

a) Promotion;

b) Step Increment;

c) Performance-Based Bonus; and

d) Other benefits and privileges.

On 14 November 2003, respondents filed before the trial court a petition for
prohibition with prayer for a writ of preliminary injunction.12 Respondents claimed
that they were denied the benefits which GSIS employees were entitled under
Resolution No. 306. Respondents also sought to restrain and prohibit petitioners from
implementing Resolution Nos. 197 and 372. Respondents claimed that the denial of
the employee benefits due them on the ground of their pending administrative cases
violates their right to be presumed innocent and that they are being punished without
hearing. Respondent Molina also added that he had already earned his right to the step
increment before Resolution No. 372 was enacted. Respondents also argued that the
three resolutions were ineffective because they were not registered with the University
of the Philippines (UP) Law Center pursuant to the Revised Administrative Code of
1987.13

On 24 November 2003, petitioners filed their comment with motion to dismiss and
opposition.14 On 2 December 2003, respondents filed their opposition to the motion to
dismiss.15 On 5 December 2003, petitioners filed their reply.16

On 16 January 2004, the trial court denied petitioners motion to dismiss and granted
respondents prayer for a writ of preliminary injunction.17

Petitioners filed a motion for reconsideration.18 In its 26 February 2004 Order, the
trial court denied petitioners motion.19

In its 24 September 2004 Decision, the trial court granted respondents petition for
prohibition. The dispositive portion of the 24 September 2004 Decision provides:

WHEREFORE, the petition is GRANTED and respondents Board Resolution

No. 197 of August 27, 2003 and No. 372 of November 21, 2000 are hereby
declared null and void. The writ of preliminary injunction issued by this Court
is hereby made permanent.

SO ORDERED.20

Petitioners filed a motion for reconsideration. In its 7 October 2005 Order, the trial
court denied petitioners motion.
Hence, this petition.

The Ruling of the Trial Court

On the issue of jurisdiction, the trial court said it can take cognizance of the petition
because the territorial area referred to in Section 4, Rule 65 of the Rules of Court does
not necessarily delimit to a particular locality but rather to the judicial region where
the office or agency is situated so that the prohibitive writ can be enforced.

On the merits of the case, the trial court ruled that respondents were entitled to all
employee benefits as provided under the law by reason of their employment.
According to the trial court, to deny respondents these employee benefits for the
reason alone that they have pending administrative cases is unjustified since it would
deprive them of what is legally due them without due process of law, inflict
punishment on them without hearing, and violate their right to be presumed innocent.

The trial court also found that the assailed resolutions were not registered with the UP
Law Center, per certification of the Office of the National Administrative Register
(ONAR).21Since they were not registered, the trial court declared that the assailed
resolutions have not become effective citing Sections 3 and 4, Chapter 2, Book 7 of
the Revised Administrative Code of 1987.22

The Issues

Petitioners raise the following issues:

 I

Whether the jurisdiction over the subject matter of Civil Case No. 03-108389
(Velasco, et al. vs. The Board of Trustees of GSIS, et al., RTC-Manila, Branch
19) lies with the Civil Service Commission (CSC) and not with the Regional
Trial Court of Manila, Branch 19.

II

Whether a Special Civil Action for Prohibition against the GSIS Board or its
President and General Manager exercising quasi-legislative and administrative
functions in Pasay City is outside the territorial jurisdiction of RTC-Manila,
Branch 19.

III

Whether internal rules and regulations need not require publication with the
Office of the National [Administrative] Register for their effectivity, contrary
to the conclusion of the RTC-Manila, Branch 19.

IV

Whether a regulation, which disqualifies government employees who have

pending administrative cases from the grant of step increment and Christmas
raffle benefits is unconstitutional.

Whether the nullification of GSIS Board Resolutions is beyond an action for

prohibition, and a writ of preliminary injunction cannot be made permanent
without a decision ordering the issuance of a writ of prohibition.23
 The Ruling of the Court

The petition is partly meritorious.

Petitioners argue that the Civil Service Commission (CSC), not the trial court, has
jurisdiction over Civil Case No. 03-108389 because it involves claims of employee
benefits. Petitioners point out that the trial court should have dismissed the case for
lack of jurisdiction.

Sections 2 and 4, Rule 65 of the Rules of Court provide:

Sec. 2. Petition for Prohibition. - When the proceedings of any tribunal,

corporation, board, officer or person, whether exercising judicial, quasi-judicial
or ministerial functions, are without or in excess of its jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction, and there
is no appeal or any other plain, speedy, and adequate remedy in the ordinary
course of law, a person aggrieved thereby may file a verified petition in the
proper court, alleging the facts with certainty and praying that judgment be
rendered commanding the respondent to desist from further proceedings
in the action or matter specified therein, or otherwise granting such
incidental reliefs as law and justice may require.

Sec. 4. Where petition filed. - The petition may be filed not later than sixty (60)
days from notice of the judgment, order or resolution sought to be assailed in
the Supreme Court or, if it related to acts or omissions of a lower court or of
a corporation, board, officer or person in the Regional Trial Court
exercising jurisdiction over the territorial area as defined by the Supreme
Court. It may also be filed in the Court of Appeals whether or not the same is
in aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its
jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, and
unless otherwise provided by law or these Rules, the petition shall be filed in
and cognizable only by the Court of Appeals. (Emphasis supplied)
Civil Case No. 03-108389 is a petition for prohibition with prayer for the issuance of a
writ of preliminary injunction. Respondents prayed that the trial court declare all acts
emanating from Resolution Nos. 372, 197, and 306 void and to prohibit petitioners
from further enforcing the said resolutions.24 Therefore, the trial court, not the CSC,
has jurisdiction over respondents petition for prohibition.

Petitioners also claim that the petition for prohibition was filed in the wrong territorial
jurisdiction because the acts sought to be prohibited are the acts of petitioners who
hold their principal office in Pasay City, while the petition for prohibition was filed in
Manila.

Section 18 of Batas Pambansa Blg. 129 (BP 129)25 provides:

SEC. 18. Authority to define territory appurtenant to each branch. - The

Supreme Court shall define the territory over which a branch of the
Regional Trial Court shall exercise its authority. The territory thus
defined shall be deemed to be the territorial area of the branch concerned
for purposes of determining the venue of all suits, proceedings or actions,
whether civil or criminal, as well as determining the Metropolitan Trial
Courts, Municipal Trial Courts, and Municipal Circuit Trial Courts over which
the said branch may exercise appellate jurisdiction. The power herein granted
shall be exercised with a view to making the courts readily accessible to the
people of the different parts of the region and making attendance of litigants
and witnesses as inexpensive as possible. (Emphasis supplied)
In line with this, the Supreme Court issued Administrative Order No. 3 26 defining the
territorial jurisdiction of the regional trial courts in the National Capital Judicial
Region, as follows:

a. Branches I to LXXXII, inclusive, with seats at Manila over the City of

Manila only.

b. Branches LXXXIII to CVII, inclusive, with seats at Quezon City over

Quezon City only.

c. Branches CVIII to CXIX, inclusive, with seats at Pasay City over Pasay City
only.

xxxx

The petition for prohibition filed by respondents is a special civil action which may be
filed in the Supreme Court, the Court of Appeals, the Sandiganbayan or the regional
trial court, as the case may be.27 It is also a personal action because it does not affect
the title to, or possession of real property, or interest therein. Thus, it may be
commenced and tried where the plaintiff or any of the principal plaintiffs resides, or
where the defendant or any of the principal defendants resides, at the election of the
plaintiff.28 Since respondent Velasco, plaintiff before the trial court, is a resident of
the City of Manila,29 the petition could properly be filed in the City of Manila.30 The
choice of venue is sanctioned by Section 2, Rule 4 of the Rules of Court.

Moreover, Section 21(1) of BP 129 provides:

Sec. 21. Original jurisdiction in other cases. - Regional Trial Courts shall
exercise original jurisdiction:
 (1) In the issuance of writs
of certiorari, prohibition, mandamus, quo warranto, habeas
corpus and injunction, which may be enforced in any part of their
respective regions; x x x (Emphasis supplied)

Since the National Capital Judicial Region is comprised of the cities of Manila,
Quezon, Pasay, Caloocan, Malabon, Mandaluyong, Makati, Pasig,
Marikina, Paraaque, Las Pias, Muntinlupa, and Valenzuela and the municipalities
of Navotas, San Juan, Pateros, and Taguig, a writ of prohibition issued by the regional
trial court sitting in the City of Manila, is enforceable in Pasay City. Clearly, the RTC
did not err when it took cognizance of respondents petition for prohibition because it
had jurisdiction over the action and the venue was properly laid before it.

Petitioners also argue that Resolution Nos. 372, 197, and 306 need not be filed with
the UP Law Center ONAR since they are, at most, regulations which are merely
internal in nature regulating only the personnel of the GSIS and not the public.

Not all rules and regulations adopted by every government agency are to be filed with
the UP Law Center. Only those of general or of permanent character are to be filed.
According to the UP Law Centers guidelines for receiving and publication of rules
and regulations, interpretative regulations and those merely internal in nature, that is,
regulating only the personnel of the Administrative agency and not the public, need
not be filed with the UP Law Center.

Resolution No. 372 was about the new GSIS salary structure, Resolution No. 306 was
about the authority to pay the 2002 Christmas Package, and Resolution No. 197 was
about the GSIS merit selection and promotion plan. Clearly, the assailed resolutions
pertained only to internal rules meant to regulate the personnel of the GSIS. There
was no need for the publication or filing of these resolutions with the UP Law Center.

Petitioners insist that petitioner GSIS Board has the power to issue the assailed
resolutions. According to petitioners, it was within the power of petitioner GSIS
Board to disqualify respondents for step increment and from receiving GSIS benefits
from the time formal administrative charges were filed against them until the cases are
resolved.

The Court notes that the trial court only declared Resolution Nos. 197 and 372 void.
The trial court made no ruling on Resolution No. 306 and respondents did not appeal
this matter. Therefore, we will limit our discussion to Resolution Nos. 197 and 372,
particularly to the effects of preventive suspension on the grant of step increment
because this was what respondents raised before the trial court.

First, entitlement to step increment depends on the rules relative to the grant of such
benefit. In point are Section 1(b), Rule II and Section 2, Rule III of Joint Circular No.
1, series of 1990, which provide:

Rule II. Selection Criteria

Section 1. Step increments shall be granted to all deserving officials and

employees x x x

(b) Length of Service For those who have rendered continuous satisfactory
service in a particular position for at least three (3) years.

Rule III. Step Increments

xxxx

Section 2. Length of Service A one (1) step increment shall be granted officials
and employees for every three (3) years of continuous satisfactory service in
the position. Years of service in the position shall include the following:

(a) Those rendered before the position was reclassified to a position title with a
lower or the same salary grade allocation; and
 (b) Those rendered before the incumbent was transferred to another position
within the same agency or to another agency without a change in position title
and salary grade allocation.

In the initial implementation of step increments in 1990, an incumbent shall be

granted step increments equivalent to one (1) step for every three (3) years of
continuous satisfactory service in a given position occupied as of January 1,
1990.

A grant of step increment on the basis of length of service requires that an employee
must have rendered at least three years of continuous and satisfactory service in the
same position to which he is an incumbent.31 To determine whether service is
continuous, it is necessary to define what actual service is.32 Actual service refers to
the period of continuous service since the appointment of the official or employee
concerned, including the period or periods covered by any previously approved leave
with pay.33

Second, while there are no specific rules on the effects of preventive suspension on
step increment, we can refer to the CSC rules and rulings on the effects of the penalty
of suspension and approved vacation leaves without pay on the grant of step
increment for guidance.

Section 56(d), Rule IV of the Uniform Rules on Administrative Cases in the Civil
Service provides:

Section 56. Duration and effect of administrative penalties. - The following

rules shall govern in the imposition of administrative penalties: x x x

(d) The penalty of suspension shall result in the temporary cessation of work
for a period not exceeding one (1) year.
 Suspension of one day or more shall be considered a gap in the continuity of
service. During the period of suspension, respondent shall not be entitled to all
money benefits including leave credits.

If an employee is suspended as a penalty, it effectively interrupts the continuity of his

government service at the commencement of the service of the said suspension. This
is because a person under penalty of suspension is not rendering actual service. The
suspension will undoubtedly be considered a gap in the continuity of the service for
purposes of the computation of the three year period in the grant of step
increment.34 However, this does not mean that the employee will only be entitled to
the step increment after completing another three years of continuous satisfactory
service reckoned from the time the employee has fully served the penalty of
suspension.35 The CSC has taken this to mean that the computation of the three year
period requirement will only be extended by the number of days that the employee
was under suspension.36 In other words, the grant of step increment will only be
delayed by the same number of days that the employee was under suspension.

This is akin to the status of an employee who incurred vacation leave without pay for
purposes of the grant of step increment.37 Employees who were on approved vacation
leave without pay enjoy the liberal application of the rule on the grant of step
increment under Section 60 of CSC Memorandum Circular No. 41, series of 1998,
which provides:

Section 60. Effect of vacation leave without pay on the grant of length of
service step increment. - For purposes of computing the length of service for
the grant of step increment, approved vacation leave without pay for an
aggregate of fifteen (15) days shall not interrupt the continuity of the three-year
service requirement for the grant of step increment. However, if the total
number of authorized vacation leave without pay included within the three-year
period exceeds fifteen (15) days, the grant of one-step increment will only be
delayed for the same number of days that an official or employee was
absent without pay. (Emphasis supplied)
Third, on preventive suspension, Sections 51 and 52, Chapter 7, Subtitle A, Title I,
Book V of the Revised Administrative Code of 1987 provide:

SEC. 51. Preventive Suspension. - The proper disciplining authority may preventively suspend
any subordinate officer or employee under his authority pending an investigation, if the charge
against such officer or employee involves dishonesty, oppression or grave misconduct, or neglect
in the performance of duty, or if there are reasons to believe that the respondent is guilty of
charges which would warrant his removal from the service.

SEC. 52. Lifting of Preventive Suspension. Pending Administrative

Investigation. - When the administrative case against the officer or
employee under preventive suspension is not finally decided by the
disciplining authority within the period of ninety (90) days after the date of
suspension of the respondent who is not a presidential appointee, the
respondent shall be automatically reinstated in the service: Provided, That
when the delay in the disposition of the case is due to the fault, negligence or
petition of the respondent, the period of delay shall not be counted in
computing the period of suspension herein provided. (Emphasis supplied)

Preventive suspension pending investigation is not a penalty.38 It is a measure

intended to enable the disciplining authority to investigate charges against respondent
by preventing the latter from intimidating or in any way influencing witnesses against
him.39 If the investigation is not finished and a decision is not rendered within that
period, the suspension will be lifted and the respondent will automatically be
reinstated.

Therefore, on the matter of step increment, if an employee who was suspended as a

penalty will be treated like an employee on approved vacation leave without
pay,40 then it is only fair and reasonable to apply the same rules to an employee who
was preventively suspended, more so considering that preventive suspension is not a
penalty. If an employee is preventively suspended, the employee is not rendering
actual service and this will also effectively interrupt the continuity of his government
service. Consequently, an employee who was preventively suspended will still be
entitled to step increment after serving the time of his preventive suspension even if
the pending administrative case against him has not yet been resolved or dismissed.
The grant of step increment will only be delayed for the same number of days, which
must not exceed 90 days, that an official or employee was serving the preventive
suspension.

Fourth, the trial court was correct in declaring that respondents had the right to be
presumed innocent until proven guilty. This means that an employee who has a
pending administrative case filed against him is given the benefit of the doubt and is
considered innocent until the contrary is proven.41

In this case, respondents were placed under preventive suspension for 90 days
beginning on 23 May 2002. Their preventive suspension ended on 21 August 2002.
Therefore, after serving the period of their preventive suspension and without the
administrative case being finally resolved, respondents should have been reinstated
and, after serving the same number of days of their suspension, entitled to the grant of
step increment.

On a final note, social legislation like the circular on the grant of step increment,
being remedial in character, should be liberally construed and administered in favor of
the persons to be benefited. The liberal approach aims to achieve humanitarian
purposes of the law in order that the efficiency, security and well-being of government
employees may be enhanced.42

WHEREFORE, we DENY the petition. We AFFIRM with MODIFICATION the

24 September 2004 Decision and the 7 October 2005 Order of the Regional Trial
Court of Manila, Branch 19 in Civil Case No. 03-108389. We DECLARE the
assailed provisions on step increment in GSIS Board Resolution Nos. 197 and
372 VOID. We MODIFY the 24 September 2004 Decision of the Regional Trial
Court of Manila, Branch 19 and rule that GSIS Board Resolution Nos. 197, 306 and
372 need not be filed with the University of the Philippines Law Center.

SO ORDERED.
 EN BANC

[G.R. No. 152688. November 19, 2003]

PHILIPPINE INTERNATIONAL TRADING CORPORATION, petitioner,

vs. COMMISSION ON AUDIT, respondent.

DECISION
YNARES-SANTIAGO, J.:

Assailed in this petition for certiorari is the March 5, 2002 decision of the
[1]

respondent Commission on Audit (COA) in COA Decision No. 2002-

044, which disallowed the grant of Staple Food Incentive (SFI) in 1998 to the
[2]

officers and employees of petitioner Philippine International Trading

Corporation (PITC).
The undisputed facts show that in accordance with Department Order No.
79 (D.O. No. 79) of the Department of Trade and Industry (DTI), dated
December 1, 1998, then Secretary Jose Trinidad Pardo granted, subject to
the availability of savings of the respective bureaus/offices/GOCCs, a Staple
Food Incentive (SFI) in the maximum amount of P7,200.00 each to the
officials and employees of DTI bureaus, attached agencies and government
owned and controlled corporations (GOCCs). This was in accordance with
Rule X of the Omnibus Civil Service Rules. D.O. No. 79 further provided that
in case of disallowance, the employee shall refund the incentive through
salary deduction. [3]

Pursuant to D.O. No. 79, petitioner PITC, a government owned and

controlled corporation attached to the DTI, issued Resolution No. 98-12-07
dated December 9, 1998, approving the grant of SFI to its officers and
employees. Consequently, PITC released the total amount of P1,094,400.00
[4]

as SFI for the year 1998.

On April 29, 1999, the Resident Auditor of PITC issued a Notice of
Suspension disallowing the grant of the SFI and requiring the PITC to submit
[5]

the approval of such grant by the Department of Budget and Management

(DBM), in accordance with Section 12 of Republic Act No. 6758, or the Salary
Standardization Law. PITC appealed to the Director, Corporate Audit Office
[6]

II, who sustained the disallowance of the SFI. PITC elevated the matter to the
[7]

COA which, on March 5, 2002, affirmed the questioned disallowance. It ruled

that the grant of SFI by PITC was an illegal disbursement of public funds
under Section 12 of R.A. No. 6758. The dispositive portion of the COA
decision, reads

WHEREFORE, premises considered, the instant petition for reversal of CAO II

Decision dated November 9, 2000 cannot be given due course. Accordingly, the
disallowance in question amounting to P1,094,400.00 is hereby affirmed. The
Auditor, PITC, is hereby directed to enforce and monitor the settlement of the
disallowance and to advise the Commission of the proper implementation of this
decision.
[8]

Hence, PITC filed the instant petition for certiorari, contending that
I
RESPONDENT COA COMMITTED SERIOUS ERROR IN DECIDING A QUESTION
OF LAW IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR JURISPRUDENCE
WHEN IT AFFIRMED THE COA-CAO IIs 1st INDORSEMENT DISALLOWING THE
GRANT OF SFI FOR CY 1998 TO PITC OFFICERS AND EMPLOYEES DUE TO THE
ABSENCE OF SPECIFIC APPROVAL FROM THE DBM PURSUANT TO SEC. 12 OF
R.A. NO. 6758 (SALARY STANDARDIZATION LAW) DESPITE THE
INEFFECTIVENESS AND UNENFORCEABILITY OF DBM-CCC NO. 10 WHICH
COMPRISED THE IMPLEMENTING RULES AND REGULATIONS (IRR) OF R.A.
6758.
II
RESPONDENT COA COMMITTED SERIOUS ERROR IN DECIDING A QUESTION
OF LAW IN A WAY PROBABLY NOT IN ACCORD WITH LAW OR JURISPRUDENCE
WHEN IT AFFIRMED THE COA-CAO IIs 1st INDORSEMENT DISALLOWING THE
GRANT OF SFI FOR CY 1998 TO PITC OFFICERS AND EMPLOYEES WHILE
OTHER RESIDENT AUDITORS OF THE DTI AND OF ITS ATTACHED BUREAUS,
AGENCIES AND GOCCs ALLOWED THE SAME IN AUDIT, IN CLEAR VIOLATON OF
THE RIGHT TO EQUAL PROTECTION OF THE LAWS GUARANTEED UNDER THE
1987 CONSTITUTION.[9]

On August 29, 2002, the Office of the Solicitor General (OSG) manifested
that it cannot represent and maintain a stand consistent with COA because in
November 1998, the officials and employees of the OSG likewise received the
same Staple Food Incentive in the amount of P7,200.00 each. The OSG
prayed that it be excused from filing a comment and that the COA be given a
new period within which to file its comment. On September 17, 2002, the
[10]

Court issued a Resolution granting the prayer of the OSG. [11]

We first address the failure of the PITC to file a motion for reconsideration
of the assailed decision.
As a general rule, a petition for certiorari before a higher court will not
prosper unless the inferior court has been given, through a motion for
reconsideration, a chance to correct the errors imputed to it. This rule, though,
has certain exceptions: (1) when the issue raised is purely of law, (2) when
public interest is involved, or (3) in case of urgency. As a fourth exception, it
was also held that the filing of a motion for reconsideration before availment of
the remedy of certiorari is not a condition sine qua non, when the questions
raised are the same as those that have already been squarely argued and
exhaustively passed upon by the lower court. [12]

In the case at bar, a motion for reconsideration may be dispensed with not
only because the issue presented is purely of law, but also because the
question raised has already been extensively discussed in the decisions of the
Director, Corporate Audit Office II and the COA.
The resolution of the question of law in the case at bar hinges on the
interpretation of Section 12 of R.A. No. 6758, which was the basis of the COA
in denying the grant of SFI to the officers and employees of PITC. It provides

Sec. 12. Consolidation of Allowances and Compensation.- Allowances, except for

representation and transportation allowances; clothing and laundry allowances;
subsistence allowance of marine officers and crew on board government vessels and
hospital personnel; hazard pay; allowances of foreign services personnel stationed
abroad; and such other additional compensation not otherwise specified herein as may
be determined by the DBM, shall be deemed included in the standardized salary rates
herein prescribed. Such other additional compensation, whether in cash or in kind,
being received by incumbents as of July 1, 1989 not integrated into the standardized
salary rates shall continue to be authorized.

In construing the above provision, the Court in National Tobacco

Administration v. Commission on Audit, held that under the first sentence of
[13]

Section 12, the benefits excluded from the standardized salary rates are the
allowances or those which are usually granted to officials and employees of
the government to defray or reimburse the expenses incurred in the
performance of their official functions. It further ruled that the phrase and such
other additional compensation not otherwise specified [in Section 12] as may
be determined by the DBM, in the first sentence of Section 12, is a catch-all-
proviso for benefits in the nature of allowances similar to those
enumerated. Thus

Under the first sentence of Section 12, all allowances are integrated into the
prescribed salary rates, except:

(1) representation and transportation allowances (RATA);

 (2) clothing and laundry allowances;

(3) subsistence allowances of marine officers and crew on board government

vessels;

(4) subsistence allowance of hospital personnel;

(5) hazard pay;

(6) allowance of foreign service personnel stationed abroad; and

(7) such other additional compensation not otherwise specified in Section 12

as may be determined by the DBM.

Analyzing No. 7, which is the last clause of the first sentence of Section 12, in relation
to the other benefits therein enumerated, it can be gleaned unerringly that it is a catch-
all proviso. Further reflection on the nature of subject fringe benefits indicates that all
of them have one thing in common - they belong to one category of privilege called
allowances which are usually granted to officials and employees of the government to
defray or reimburse the expenses incurred in the performance of their official
functions. In Philippine Ports Authority vs. Commission on Audit, this Court
rationalized that if these allowances are consolidated with the standardized rate, then
the government official or employee will be compelled to spend his personal funds in
attending to his duties.

The conclusion [is] that the enumerated fringe benefits are in the nature of allowance [14]

Also in National Tobacco Administration, the second sentence of Section

12, which provides that

Such other additional compensation, whether in cash or in kind, being

received by incumbents as of July 1, 1989 not integrated into the standardized
salary rates shall continue to be authorized.

was interpreted as referring to benefits in the nature of financial assistance,

or a bonus or other payment made to employees in addition to guaranteed
hourly wages, as contradistinguished from the allowance in the first sentence,
which cannot, strictly speaking, be reckoned with as a bonus or additional
income. In financial assistance, reimbursement is not necessary, while in the
case of allowance, reimbursement is required. [15]

The foregoing interpretation is supported by the deliberations of the

representatives of the Senate and the House of Representatives on the
contradictory provisions of House Bill No. 10054 and Senate Bill No. 862,
which became R.A. No. 6758, also known as the Salary Standardization
Law. The House Bills sponsor, Representative Rolando Andaya, explained
that the second sentence of Section 12, R. A. No. 6758, refers to rice
allowance and dependents allowance. These benefits therefore comprise the
category of financial assistance, or a bonus or other payment made to
employees in addition to guaranteed hourly wages, and not the allowance
referred to in the first sentence of Section 12, R.A. No. 6758 which, to repeat,
are grantedto defray or reimburse the expenses incurred in the performance
of their official functions. Thus

MR. LAGMAN. I would like to refer to No. 26, page 3 of the report, where it says:

On page 15, line 13 after period (.) add the sentence Such other additional
compensation whether in cash or in kind, being received by incumbents as of July 1,
1989 not integrated into the standardized salary rates shall continue to be authorized.

Is this the particular provision which guarantees that these additional benefits being
paid by local government units shall henceforth be assumed by the national
government?

MR. ANDAYA. No, it is not. The provision applies to government corporations,

because government corporations now have rice allowance and dependents
allowance. The principle here is that nobody will suffer diminution in pay; these will
continue to be authorized whether what he is receiving is in kind or in cash. This
applies to government corporations. [16]

Entitlement to the financial assistance under the second sentence of

Section 12 is conditioned upon the following requisites (1) the recipients were
incumbents when R.A. No. 6758 took effect on July 1, 1989; (2) they were in
fact, receiving the same, at the time; and (3) such additional compensation is
distinct and separate from the specific allowances enumerated in the first
sentence of Section 12 of R.A. No. 6758. This is in relation to the non-
[17]

diminution of pay under Section 17 of R.A. No. 6758, which states:

SEC. 17. Salaries of Incumbents. Incumbents of positions presently receiving salaries

and additional compensation/fringe benefits including those absorbed from local
government units and other emoluments, the aggregate of which exceeds the
standardized salary rate as herein prescribed, shall continue to receive such excess
compensation, which shall be referred to as transition allowance. The transition
allowance shall be reduced by the amount of salary adjustment that the incumbent
shall receive in the future.
 Thus, in National Tobacco Administration (NTA) v. Commission on Audit,
the Court ruled that the social amelioration or educational assistance benefit
granted by the NTA is of a species belonging to the genus of financial
assistance under the second sentence of Section 12. Since the employees of
the NTA have been receiving said benefit before July 1, 1989, when R.A. No.
6758 took effect, it was held therein that the same benefit was not integrated
into their standardized salary rate, and should therefore be continued to be
authorized.[18]

In the instant case, the Staple Food Incentives was granted under D.O.
No. 79 to help the DTI employees cope with the present economic difficulties,
boost their morale and deepen their commitment and dedication to public
service. Clearly therefore, the SFI is a financial assistance or a bonus falling
under the second sentence of Section 12 and not a payment in consideration
of the performance of an official duty. It is not a benefit within the ambit of the
first sentence because it was not granted to defray or reimburse the expenses
incurred in the performance of their official functions, like representation and
transportation allowances, and other benefits of similar nature. Accordingly, in
order that the SFI may be allowed, the requisites for the entitlement of
benefits falling under the second sentence of Section 12 must be
established. Unfortunately, there is no evidence on record that the recipients
of the SFI were incumbents when R.A. No. 6758 took effect on July 1,
1989 and that they were in fact receiving the same at the time. Hence, no
abuse of discretion was committed by COA in disallowing the disbursement of
funds for the SFI of PITC.
There is no merit in the claim of PITC that R.A. No. 6758, particularly
Section 12 thereof is void because DBM-Corporate Compensation Circular
No. 10, its implementing rules, was nullified in the case of De Jesus v.
Commission on Audit, for lack of publication. The basis of COA in
[19] [20]

disallowing the grant of SFI was Section 12 of R.A. No. 6758 and not DBM-
CCC No. 10. Moreover, the nullity of DBM-CCC No. 10, will not affect the
validity of R.A. No. 6758. It is a cardinal rule in statutory construction that
statutory provisions control the rules and regulations which may be issued
pursuant thereto. Such rules and regulations must be consistent with and
must not defeat the purpose of the statute. The validity of R.A. No. 6758
[21]

should not be made to depend on the validity of its implementing rules.

Likewise, PITC failed to substantiate its allegation that it was singled out
by the COA, which act therefore violated the equal protection clause of the
Constitution. The alleged violation by the COA of PITCs right to equal
protection cannot bind the Court to an erroneous interpretation of R.A. No.
6758. No vested right can be acquired on a wrong construction of the law by
administrative officials and such erroneous interpretation does not place the
government in estoppel to correct or overrule the same. [22]

Notwithstanding the validity of the disallowance by the COA, however, the

officers and employees of PITC can not be obliged to refund the SFI received
by them in good faith. In the recent case of De Jesus v. Commission on
Audit, it was held that the Members of the Board of the Catbalogan Water
[23]

District cannot be ordered to refund the bonuses received by them because

they were of the honest belief that they were authorized to approve and
receive said payment. At the time they received the said benefits, the case
of Baybay Water District v.Commission on Audit, which categorically denied
[24]

the grant of additional compensation to the Members of the Board of water

districts, was not yet decided. It was held that the language of Section 13 of
P.D. No. 198, (the Provincial Water District Act of 1973, as amended) is clear
enough that it needs no interpretation. Local Water District Utilities
Administration Resolution No. 131, series of 1995, cannot justify the
disbursement of additional allowances because Section 13 of P.D. No. 198,
expressly prohibits the members of the board of water districts from receiving
compensation other than payment of per diem.
Accordingly, the officers and employees of PITC need not refund the
questioned SFI received by them in 1998. This is so because National
Tobacco Administration v. Commission on Audit which made a definitive
interpretation of Section 12 of R.A. No. 6758 was promulgated only on August
5, 1999. Prior thereto, PITC is presumed to be without knowledge that, absent
the requisites under the second sentence of R.A. No. 6758, the disbursement
of funds for the SFI is without legal basis.
WHEREFORE, in view of all the foregoing, the March 5, 2002 decision of
the Commission on Audit in COA Decision No. 2002-044, which disallowed
the grant of Staple Food Incentive in 1998 to the officers and employees of
the Philippine International Trading Corporation, is AFFIRMED with
MODIFICATIONS. The officers and employees of the Philippine International
Trading Corporation need not refund the Staple Food Incentive they received
per Resolution No. 98-12-07 dated December 9, 1998.
SO ORDERED.

G.R. No. L-45685 November 16, 1937

THE PEOPLE OF THE PHILIPPINE ISLANDS and HONGKONG & SHANGHAI BANKING
CORPORATION,petitioners,
vs.
JOSE O. VERA, Judge . of the Court of First Instance of Manila, and MARIANO CU
UNJIENG, respondents.

Office of the Solicitor General Tuason and City Fiscal Diaz for the Government.
De Witt, Perkins and Ponce Enrile for the Hongkong and Shanghai Banking Corporation.
Vicente J. Francisco, Feria and La O, Orense and Belmonte, and Gibbs and McDonough for
respondent Cu Unjieng.
No appearance for respondent Judge.

LAUREL, J.:

This is an original action instituted in this court on August 19, 1937, for the issuance of the writ
of certiorari and of prohibition to the Court of First Instance of Manila so that this court may review
the actuations of the aforesaid Court of First Instance in criminal case No. 42649 entitled "The
People of the Philippine Islands vs. Mariano Cu Unjieng, et al.", more particularly the application of
the defendant Mariano Cu Unjieng therein for probation under the provisions of Act No. 4221, and
thereafter prohibit the said Court of First Instance from taking any further action or entertaining
further the aforementioned application for probation, to the end that the defendant Mariano Cu
Unjieng may be forthwith committed to prison in accordance with the final judgment of conviction
rendered by this court in said case (G. R. No. 41200). 1

Petitioners herein, the People of the Philippine and the Hongkong and Shanghai Banking
Corporation, are respectively the plaintiff and the offended party, and the respondent herein Mariano
Cu Unjieng is one of the defendants, in the criminal case entitled "The People of the Philippine
Islands vs. Mariano Cu Unjieng, et al.", criminal case No. 42649 of the Court of First Instance of
Manila and G.R. No. 41200 of this court. Respondent herein, Hon. Jose O. Vera, is the Judge ad
interim of the seventh branch of the Court of First Instance of Manila, who heard the application of
the defendant Mariano Cu Unjieng for probation in the aforesaid criminal case.

The information in the aforesaid criminal case was filed with the Court of First Instance of Manila on
October 15, 1931, petitioner herein Hongkong and Shanghai Banking Corporation intervening in the
case as private prosecutor. After a protracted trial unparalleled in the annals of Philippine
jurisprudence both in the length of time spent by the court as well as in the volume in the testimony
and the bulk of the exhibits presented, the Court of First Instance of Manila, on January 8, 1934,
rendered a judgment of conviction sentencing the defendant Mariano Cu Unjieng to indeterminate
penalty ranging from four years and two months of prision correccional to eight years of prision
mayor, to pay the costs and with reservation of civil action to the offended party, the Hongkong and
Shanghai Banking Corporation. Upon appeal, the court, on March 26, 1935, modified the sentence
to an indeterminate penalty of from five years and six months of prision correccional to seven years,
six months and twenty-seven days of prision mayor, but affirmed the judgment in all other respects.
Mariano Cu Unjieng filed a motion for reconsideration and four successive motions for new trial
which were denied on December 17, 1935, and final judgment was accordingly entered on
December 18, 1935. The defendant thereupon sought to have the case elevated on certiorari to the
Supreme Court of the United States but the latter denied the petition
for certiorari in November, 1936. This court, on November 24, 1936, denied the
petition subsequently filed by the defendant for leave to file a second alternative motion for
reconsideration or new trial and thereafter remanded the case to the court of origin for execution of
the judgment.

The instant proceedings have to do with the application for probation filed by the herein respondent
Mariano Cu Unjieng on November 27, 1936, before the trial court, under the provisions of Act
No. 4221 of the defunct Philippine Legislature. Herein respondent Mariano Cu Unjieng states in his
petition, inter alia, that he is innocent of the crime of which he was convicted, that he has no criminal
record and that he would observe good conduct in the future. The Court of First Instance of Manila,
Judge Pedro Tuason presiding, referred the application for probation of the Insular Probation Office
which recommended denial of the same June 18, 1937. Thereafter, the Court of First Instance of
Manila, seventh branch, Judge Jose O. Vera presiding, set the petition for hearing on April 5, 1937.

On April 2, 1937, the Fiscal of the City of Manila filed an opposition to the granting of probation to the
herein respondent Mariano Cu Unjieng. The private prosecution also filed an opposition on April 5,
1937, alleging, among other things, that Act No. 4221, assuming that it has not been repealed by
section 2 of Article XV of the Constitution, is nevertheless violative of section 1, subsection (1),
Article III of the Constitution guaranteeing equal protection of the laws for the reason that its
applicability is not uniform throughout the Islands and because section 11 of the said Act endows the
provincial boards with the power to make said law effective or otherwise in their respective or
otherwise in their respective provinces. The private prosecution also filed a supplementary
opposition on April 19, 1937, elaborating on the alleged unconstitutionality on Act No. 4221, as an
undue delegation of legislative power to the provincial boards of several provinces (sec. 1, Art. VI,
Constitution). The City Fiscal concurred in the opposition of the private prosecution except with
respect to the questions raised concerning the constitutionality of Act No. 4221.

On June 28, 1937, herein respondent Judge Jose O. Vera promulgated a resolution with a finding
that "las pruebas no han establecido de unamanera concluyente la culpabilidad del peticionario y
que todos los hechos probados no son inconsistentes o incongrentes con su inocencia" and
concludes that the herein respondent Mariano Cu Unjieng "es inocente por duda racional" of the
crime of which he stands convicted by this court in G.R. No. 41200, but denying the latter's petition
for probation for the reason that:

. . . Si este Juzgado concediera la poblacion solicitada por las circunstancias y la historia

social que se han expuesto en el cuerpo de esta resolucion, que hacen al peticionario
acreedor de la misma, una parte de la opinion publica, atizada por los recelos y las
suspicacias, podria levantarse indignada contra un sistema de probacion que permite atisbar
en los procedimientos ordinarios de una causa criminal perturbando la quietud y la eficacia
de las decisiones ya recaidas al traer a la superficie conclusiones enteramente differentes,
en menoscabo del interes publico que demanda el respeto de las leyes y del veredicto
judicial.

On July 3, 1937, counsel for the herein respondent Mariano Cu Unjieng filed an exception to the
resolution denying probation and a notice of intention to file a motion for reconsideration. An
alternative motion for reconsideration or new trial was filed by counsel on July 13, 1937. This was
supplemented by an additional motion for reconsideration submitted on July 14, 1937. The aforesaid
motions were set for hearing on July 31, 1937, but said hearing was postponed at the petition of
counsel for the respondent Mariano Cu Unjieng because a motion for leave to intervene in the case
as amici curiae signed by thirty-three (thirty-four) attorneys had just been filed with the trial court.
Attorney Eulalio Chaves whose signature appears in the aforesaid motion subsequently filed a
petition for leave to withdraw his appearance as amicus curiae on the ground that the motion for
leave to intervene as amici curiae was circulated at a banquet given by counsel for Mariano Cu
Unjieng on the evening of July 30, 1937, and that he signed the same "without mature deliberation
and purely as a matter of courtesy to the person who invited me (him)."

On August 6, 1937, the Fiscal of the City of Manila filed a motion with the trial court for the issuance
of an order of execution of the judgment of this court in said case and forthwith to commit the herein
respondent Mariano Cu Unjieng to jail in obedience to said judgment.

On August 7, 1937, the private prosecution filed its opposition to the motion for leave to intervene
as amici curiae aforementioned, asking that a date be set for a hearing of the same and that, at all
events, said motion should be denied with respect to certain attorneys signing the same who were
members of the legal staff of the several counsel for Mariano Cu Unjieng. On August 10, 1937,
herein respondent Judge Jose O. Vera issued an order requiring all parties including the movants for
intervention as amici curiae to appear before the court on August 14, 1937. On the last-mentioned
date, the Fiscal of the City of Manila moved for the hearing of his motion for execution of judgment in
preference to the motion for leave to intervene as amici curiae but, upon objection of counsel for
Mariano Cu Unjieng, he moved for the postponement of the hearing of both motions. The
respondent judge thereupon set the hearing of the motion for execution on August 21, 1937, but
proceeded to consider the motion for leave to intervene as amici curiae as in order. Evidence as to
the circumstances under which said motion for leave to intervene as amici curiae was signed and
submitted to court was to have been heard on August 19, 1937. But at this juncture, herein
petitioners came to this court on extraordinary legal process to put an end to what they alleged was
an interminable proceeding in the Court of First Instance of Manila which fostered "the campaign of
the defendant Mariano Cu Unjieng for delay in the execution of the sentence imposed by this
Honorable Court on him, exposing the courts to criticism and ridicule because of the apparent
inability of the judicial machinery to make effective a final judgment of this court imposed on the
defendant Mariano Cu Unjieng."

The scheduled hearing before the trial court was accordingly suspended upon the issuance of a
temporary restraining order by this court on August 21, 1937.

To support their petition for the issuance of the extraordinary writs of certiorari and prohibition, herein
petitioners allege that the respondent judge has acted without jurisdiction or in excess of his
jurisdiction:

I. Because said respondent judge lacks the power to place respondent Mariano Cu Unjieng under
probation for the following reason:

(1) Under section 11 of Act No. 4221, the said of the Philippine Legislature is made
to apply only to the provinces of the Philippines; it nowhere states that it is to be
made applicable to chartered cities like the City of Manila.

(2) While section 37 of the Administrative Code contains a proviso to the effect that in
the absence of a special provision, the term "province" may be construed to include
the City of Manila for the purpose of giving effect to laws of general application, it is
also true that Act No. 4221 is not a law of general application because it is made to
apply only to those provinces in which the respective provincial boards shall have
provided for the salary of a probation officer.

(3) Even if the City of Manila were considered to be a province, still, Act No. 4221
would not be applicable to it because it has provided for the salary of a probation
officer as required by section 11 thereof; it being immaterial that there is an Insular
Probation Officer willing to act for the City of Manila, said Probation Officer provided
 for in section 10 of Act No. 4221 being different and distinct from the Probation
Officer provided for in section 11 of the same Act.

II. Because even if the respondent judge originally had jurisdiction to entertain the application for
probation of the respondent Mariano Cu Unjieng, he nevertheless acted without jurisdiction or in
excess thereof in continuing to entertain the motion for reconsideration and by failing to commit
Mariano Cu Unjieng to prison after he had promulgated his resolution of June 28, 1937, denying
Mariano Cu Unjieng's application for probation, for the reason that:

(1) His jurisdiction and power in probation proceedings is limited by Act No. 4221 to
the granting or denying of applications for probation.

(2) After he had issued the order denying Mariano Cu Unjieng's petition for probation
on June 28, 1937, it became final and executory at the moment of its rendition.

(3) No right on appeal exists in such cases.

(4) The respondent judge lacks the power to grant a rehearing of said order or to
modify or change the same.

III. Because the respondent judge made a finding that Mariano Cu Unjieng is innocent of the crime
for which he was convicted by final judgment of this court, which finding is not only presumptuous
but without foundation in fact and in law, and is furthermore in contempt of this court and a violation
of the respondent's oath of office as ad interim judge of first instance.

IV. Because the respondent judge has violated and continues to violate his duty, which became
imperative when he issued his order of June 28, 1937, denying the application for probation, to
commit his co-respondent to jail.

Petitioners also avers that they have no other plain, speedy and adequate remedy in the ordinary
course of law.

In a supplementary petition filed on September 9, 1937, the petitioner Hongkong and Shanghai
Banking Corporation further contends that Act No. 4221 of the Philippine Legislature providing for a
system of probation for persons eighteen years of age or over who are convicted of crime, is
unconstitutional because it is violative of section 1, subsection (1), Article III, of the Constitution of
the Philippines guaranteeing equal protection of the laws because it confers upon the provincial
board of its province the absolute discretion to make said law operative or otherwise in their
respective provinces, because it constitutes an unlawful and improper delegation to the provincial
boards of the several provinces of the legislative power lodged by the Jones Law (section 8) in the
Philippine Legislature and by the Constitution (section 1, Art. VI) in the National Assembly; and for
the further reason that it gives the provincial boards, in contravention of the Constitution (section 2,
Art. VIII) and the Jones Law (section 28), the authority to enlarge the powers of the Court of First
Instance of different provinces without uniformity. In another supplementary petition dated
September 14, 1937, the Fiscal of the City of Manila, in behalf of one of the petitioners, the People of
the Philippine Islands, concurs for the first time with the issues raised by other petitioner regarding
the constitutionality of Act No. 4221, and on the oral argument held on October 6, 1937, further
elaborated on the theory that probation is a form of reprieve and therefore Act. No. 4221 is an
encroachment on the exclusive power of the Chief Executive to grant pardons and reprieves. On
October 7, 1937, the City Fiscal filed two memorandums in which he contended that Act No. 4221
not only encroaches upon the pardoning power to the executive, but also constitute an unwarranted
delegation of legislative power and a denial of the equal protection of the laws. On October 9, 1937,
two memorandums, signed jointly by the City Fiscal and the Solicitor-General, acting in behalf of the
People of the Philippine Islands, and by counsel for the petitioner, the Hongkong and Shanghai
Banking Corporation, one sustaining the power of the state to impugn the validity of its own laws and
the other contending that Act No. 4221 constitutes an unwarranted delegation of legislative power,
were presented. Another joint memorandum was filed by the same persons on the same day,
October 9, 1937, alleging that Act No. 4221 is unconstitutional because it denies the equal protection
of the laws and constitutes an unlawful delegation of legislative power and, further, that the whole
Act is void: that the Commonwealth is not estopped from questioning the validity of its laws; that the
private prosecution may intervene in probation proceedings and may attack the probation law as
unconstitutional; and that this court may pass upon the constitutional question in prohibition
proceedings.

Respondents in their answer dated August 31, 1937, as well as in their oral argument and
memorandums, challenge each and every one of the foregoing proposition raised by the petitioners.

As special defenses, respondents allege:

(1) That the present petition does not state facts sufficient in law to warrant the
issuance of the writ of certiorari or of prohibition.

(2) That the aforesaid petition is premature because the remedy sought by the
petitioners is the very same remedy prayed for by them before the trial court and was
still pending resolution before the trial court when the present petition was filed with
this court.

(3) That the petitioners having themselves raised the question as to the execution of
judgment before the trial court, said trial court has acquired exclusive jurisdiction to
resolve the same under the theory that its resolution denying probation is
unappealable.

(4) That upon the hypothesis that this court has concurrent jurisdiction with the Court
of First Instance to decide the question as to whether or not the execution will lie, this
court nevertheless cannot exercise said jurisdiction while the Court of First Instance
has assumed jurisdiction over the same upon motion of herein petitioners
themselves.

(5) That upon the procedure followed by the herein petitioners in seeking to deprive
the trial court of its jurisdiction over the case and elevate the proceedings to this
court, should not be tolerated because it impairs the authority and dignity of the trial
court which court while sitting in the probation cases is "a court of limited jurisdiction
but of great dignity."

(6) That under the supposition that this court has jurisdiction to resolve the question
submitted to and pending resolution by the trial court, the present action would not lie
because the resolution of the trial court denying probation is appealable; for although
the Probation Law does not specifically provide that an applicant for probation may
appeal from a resolution of the Court of First Instance denying probation, still it is a
general rule in this jurisdiction that a final order, resolution or decision of an inferior
court is appealable to the superior court.

(7) That the resolution of the trial court denying probation of herein respondent
Mariano Cu Unjieng being appealable, the same had not become final and executory
 for the reason that the said respondent had filed an alternative motion for
reconsideration and new trial within the requisite period of fifteen days, which motion
the trial court was able to resolve in view of the restraining order improvidently and
erroneously issued by this court. lawphi1.net

(8) That the Fiscal of the City of Manila had by implication admitted that the
resolution of the trial court denying probation is not final and unappealable when he
presented his answer to the motion for reconsideration and agreed to the
postponement of the hearing of the said motion.

(9) That under the supposition that the order of the trial court denying probation is not
appealable, it is incumbent upon the accused to file an action for the issuance of the
writ of certiorari with mandamus, it appearing that the trial court, although it believed
that the accused was entitled to probation, nevertheless denied probation for fear of
criticism because the accused is a rich man; and that, before a petition
for certiorari grounded on an irregular exercise of jurisdiction by the trial court could
lie, it is incumbent upon the petitioner to file a motion for reconsideration specifying
the error committed so that the trial court could have an opportunity to correct or cure
the same.

(10) That on hypothesis that the resolution of this court is not appealable, the trial
court retains its jurisdiction within a reasonable time to correct or modify it in
accordance with law and justice; that this power to alter or modify an order or
resolution is inherent in the courts and may be exercise either motu proprio or upon
petition of the proper party, the petition in the latter case taking the form of a motion
for reconsideration.

(11) That on the hypothesis that the resolution of the trial court is appealable as
respondent allege, said court cannot order execution of the same while it is on
appeal, for then the appeal would not be availing because the doors of probation will
be closed from the moment the accused commences to serve his sentence (Act No.
4221, sec. 1; U.S. vs. Cook, 19 Fed. [2d], 827).

In their memorandums filed on October 23, 1937, counsel for the respondents maintain that Act No.
4221 is constitutional because, contrary to the allegations of the petitioners, it does not constitute an
undue delegation of legislative power, does not infringe the equal protection clause of the
Constitution, and does not encroach upon the pardoning power of the Executive. In an additional
memorandum filed on the same date, counsel for the respondents reiterate the view that section 11
of Act No. 4221 is free from constitutional objections and contend, in addition, that the private
prosecution may not intervene in probation proceedings, much less question the validity of Act No.
4221; that both the City Fiscal and the Solicitor-General are estopped from questioning the validity of
the Act; that the validity of Act cannot be attacked for the first time before this court; that probation in
unavailable; and that, in any event, section 11 of the Act No. 4221 is separable from the rest of the
Act. The last memorandum for the respondent Mariano Cu Unjieng was denied for having been filed
out of time but was admitted by resolution of this court and filed anew on November 5, 1937.
This memorandum elaborates on some of the points raised by the respondents and refutes those
brought up by the petitioners.

In the scrutiny of the pleadings and examination of the various aspects of the present case, we
noted that the court below, in passing upon the merits of the application of the respondent Mariano
Cu Unjieng and in denying said application assumed the task not only of considering the merits of
the application, but of passing upon the culpability of the applicant, notwithstanding the final
pronouncement of guilt by this court. (G.R. No. 41200.) Probation implies guilt be final judgment.
While a probation case may look into the circumstances attending the commission of the offense,
this does not authorize it to reverse the findings and conclusive of this court, either directly or
indirectly, especially wherefrom its own admission reliance was merely had on the printed briefs,
averments, and pleadings of the parties. As already observed by this court in Shioji vs.
Harvey ([1922], 43 Phil., 333, 337), and reiterated in subsequent cases, "if each and every Court of
First Instance could enjoy the privilege of overruling decisions of the Supreme Court, there would be
no end to litigation, and judicial chaos would result." A becoming modesty of inferior courts demands
conscious realization of the position that they occupy in the interrelation and operation of the
intergrated judicial system of the nation.

After threshing carefully the multifarious issues raised by both counsel for the petitioners and the
respondents, this court prefers to cut the Gordian knot and take up at once the two fundamental
questions presented, namely, (1) whether or not the constitutionality of Act No. 4221 has been
properly raised in these proceedings; and (2) in the affirmative, whether or not said Act is
constitutional. Considerations of these issues will involve a discussion of certain incidental questions
raised by the parties.

To arrive at a correct conclusion on the first question, resort to certain guiding principles is
necessary. It is a well-settled rule that the constitutionality of an act of the legislature will not be
determined by the courts unless that question is properly raised and presented inappropriate cases
and is necessary to a determination of the case; i.e., the issue of constitutionality must be the very lis
mota presented. (McGirr vs. Hamilton and Abreu [1915], 30 Phil., 563, 568; 6 R. C. L., pp. 76, 77; 12
C. J., pp. 780-782, 783.)

The question of the constitutionality of an act of the legislature is frequently raised in ordinary
actions. Nevertheless, resort may be made to extraordinary legal remedies, particularly where the
remedies in the ordinary course of law even if available, are not plain, speedy and adequate. Thus,
in Cu Unjieng vs. Patstone ([1922]), 42 Phil., 818), this court held that the question of the
constitutionality of a statute may be raised by the petitioner in mandamus proceedings (see, also, 12
C. J., p. 783); and in Government of the Philippine Islands vs. Springer ([1927], 50 Phil., 259
[affirmed in Springer vs. Government of the Philippine Islands (1928), 277 U. S., 189; 72 Law. ed.,
845]), this court declared an act of the legislature unconstitutional in an action of quo
warranto brought in the name of the Government of the Philippines. It has also been held that the
constitutionality of a statute may be questioned in habeas corpus proceedings (12 C. J., p. 783;
Bailey on Habeas Corpus, Vol. I, pp. 97, 117), although there are authorities to the contrary; on an
application for injunction to restrain action under the challenged statute (mandatory, see Cruz vs.
Youngberg [1931], 56 Phil., 234); and even on an application for preliminary injunction where the
determination of the constitutional question is necessary to a decision of the case. (12 C. J., p. 783.)
The same may be said as regards prohibition and certiorari.(Yu Cong Eng vs. Trinidad [1925], 47
Phil., 385; [1926], 271 U. S., 500; 70 Law. ed., 1059; Bell vs. First Judicial District Court [1905], 28
Nev., 280; 81 Pac., 875; 113 A. S. R., 854; 6 Ann. Cas., 982; 1 L. R. A. [N. S], 843, and cases cited).
The case of Yu Cong Eng vs. Trinidad, supra, decided by this court twelve years ago was, like the
present one, an original action for certiorari and prohibition. The constitutionality of Act No. 2972,
popularly known as the Chinese Bookkeeping Law, was there challenged by the petitioners, and the
constitutional issue was not met squarely by the respondent in a demurrer. A point was raised
"relating to the propriety of the constitutional question being decided in original proceedings in
prohibition." This court decided to take up the constitutional question and, with two justices
dissenting, held that Act No. 2972 was constitutional. The case was elevated on writ of certiorari to
the Supreme Court of the United States which reversed the judgment of this court and held that the
Act was invalid. (271 U. S., 500; 70 Law. ed., 1059.) On the question of jurisdiction, however, the
Federal Supreme Court, though its Chief Justice, said:
 By the Code of Civil Procedure of the Philippine Islands, section 516, the Philippine supreme
court is granted concurrent jurisdiction in prohibition with courts of first instance over inferior
tribunals or persons, and original jurisdiction over courts of first instance, when such courts
are exercising functions without or in excess of their jurisdiction. It has been held by that
court that the question of the validity of the criminal statute must usually be raised by a
defendant in the trial court and be carried regularly in review to the Supreme Court.
(Cadwallader-Gibson Lumber Co. vs. Del Rosario, 26 Phil., 192). But in this case where a
new act seriously affected numerous persons and extensive property rights, and was likely to
cause a multiplicity of actions, the Supreme Court exercised its discretion to bring the issue
to the act's validity promptly before it and decide in the interest of the orderly administration
of justice. The court relied by analogy upon the cases of Ex parte Young (209 U. S., 123;52
Law ed., 714; 13 L. R. A. [N. S.] 932; 28 Sup. Ct. Rep., 441; 14 Ann. Ca., 764; Traux vs.
Raich, 239 U. S., 33; 60 Law. ed., 131; L. R. A. 1916D, 545; 36 Sup. Ct. Rep., 7; Ann. Cas.,
1917B, 283; and Wilson vs. New, 243 U. S., 332; 61 Law. ed., 755; L. R. A. 1917E, 938; 37
Sup. Ct. Rep., 298; Ann. Cas. 1918A, 1024). Although objection to the jurisdiction was raise
by demurrer to the petition, this is now disclaimed on behalf of the respondents, and both
parties ask a decision on the merits. In view of the broad powers in prohibition granted to that
court under the Island Code, we acquiesce in the desire of the parties.

The writ of prohibition is an extraordinary judicial writ issuing out of a court of superior jurisdiction
and directed to an inferior court, for the purpose of preventing the inferior tribunal from usurping a
jurisdiction with which it is not legally vested. (High, Extraordinary Legal Remedies, p. 705.) The
general rule, although there is a conflict in the cases, is that the merit of prohibition will not lie
whether the inferior court has jurisdiction independent of the statute the constitutionality of which is
questioned, because in such cases the interior court having jurisdiction may itself determine the
constitutionality of the statute, and its decision may be subject to review, and consequently the
complainant in such cases ordinarily has adequate remedy by appeal without resort to the writ of
prohibition. But where the inferior court or tribunal derives its jurisdiction exclusively from an
unconstitutional statute, it may be prevented by the writ of prohibition from enforcing that statute. (50
C. J., 670; Ex parte Round tree [1874, 51 Ala., 42; In re Macfarland, 30 App. [D. C.], 365; Curtis vs.
Cornish [1912], 109 Me., 384; 84 A., 799; Pennington vs. Woolfolk [1880], 79 Ky., 13; State vs.
Godfrey [1903], 54 W. Va., 54; 46 S. E., 185; Arnold vs. Shields [1837], 5 Dana, 19; 30 Am. Dec.,
669.)

Courts of First Instance sitting in probation proceedings derived their jurisdiction solely from Act No.
4221 which prescribes in detailed manner the procedure for granting probation to accused persons
after their conviction has become final and before they have served their sentence. It is true that at
common law the authority of the courts to suspend temporarily the execution of the sentence is
recognized and, according to a number of state courts, including those of Massachusetts, Michigan,
New York, and Ohio, the power is inherent in the courts (Commonwealth vs. Dowdican's Bail [1874],
115 Mass., 133; People vs. Stickel [1909], 156 Mich., 557; 121 N. W., 497; People ex rel. Forsyth vs.
Court of Session [1894], 141 N. Y., 288; Weber vs. State [1898], 58 Ohio St., 616). But, in the
leading case of Ex parte United States ([1916], 242 U. S., 27; 61 Law. ed., 129; L. R. A., 1917E,
1178; 37 Sup. Ct. Rep., 72; Ann. Cas. 1917B, 355), the Supreme Court of the United States
expressed the opinion that under the common law the power of the court was limited to temporary
suspension, and brushed aside the contention as to inherent judicial power saying, through Chief
Justice White:

Indisputably under our constitutional system the right to try offenses against the criminal laws
and upon conviction to impose the punishment provided by law is judicial, and it is equally to
be conceded that, in exerting the powers vested in them on such subject, courts inherently
possess ample right to exercise reasonable, that is, judicial, discretion to enable them to
wisely exert their authority. But these concessions afford no ground for the contention as to
 power here made, since it must rest upon the proposition that the power to enforce begets
inherently a discretion to permanently refuse to do so. And the effect of the proposition urged
upon the distribution of powers made by the Constitution will become apparent when it is
observed that indisputable also is it that the authority to define and fix the punishment for
crime is legislative and includes the right in advance to bring within judicial discretion, for the
purpose of executing the statute, elements of consideration which would be otherwise
beyond the scope of judicial authority, and that the right to relieve from the punishment, fixed
by law and ascertained according to the methods by it provided belongs to the executive
department.

Justice Carson, in his illuminating concurring opinion in the case of Director of Prisons vs. Judge of
First Instance of Cavite (29 Phil., 265), decided by this court in 1915, also reached the conclusion
that the power to suspend the execution of sentences pronounced in criminal cases is not inherent in
the judicial function. "All are agreed", he said, "that in the absence of statutory authority, it does not
lie within the power of the courts to grant such suspensions." (at p. 278.) Both petitioner and
respondents are correct, therefore, when they argue that a Court of First Instance sitting in probation
proceedings is a court of limited jurisdiction. Its jurisdiction in such proceedings is conferred
exclusively by Act No. 4221 of the Philippine Legislature.

It is, of course, true that the constitutionality of a statute will not be considered on application for
prohibition where the question has not been properly brought to the attention of the court by
objection of some kind (Hill vs. Tarver [1901], 130 Ala., 592; 30 S., 499; State ex rel. Kelly vs. Kirby
[1914], 260 Mo., 120; 168 S. W., 746). In the case at bar, it is unquestionable that the constitutional
issue has been squarely presented not only before this court by the petitioners but also before the
trial court by the private prosecution. The respondent, Hon. Jose O Vera, however, acting as judge
of the court below, declined to pass upon the question on the ground that the private prosecutor, not
being a party whose rights are affected by the statute, may not raise said question. The respondent
judge cited Cooley on Constitutional Limitations (Vol. I, p. 339; 12 C. J., sec. 177, pp. 760 and 762),
and McGlue vs. Essex County ([1916], 225 Mass., 59; 113 N. E., 742, 743), as authority for the
proposition that a court will not consider any attack made on the constitutionality of a statute by one
who has no interest in defeating it because his rights are not affected by its operation. The
respondent judge further stated that it may not motu proprio take up the constitutional question and,
agreeing with Cooley that "the power to declare a legislative enactment void is one which the judge,
conscious of the fallibility of the human judgment, will shrink from exercising in any case where he
can conscientiously and with due regard to duty and official oath decline the responsibility"
(Constitutional Limitations, 8th ed., Vol. I, p. 332), proceeded on the assumption that Act No. 4221 is
constitutional. While therefore, the court a quo admits that the constitutional question was raised
before it, it refused to consider the question solely because it was not raised by a proper party.
Respondents herein reiterates this view. The argument is advanced that the private prosecution has
no personality to appear in the hearing of the application for probation of defendant Mariano Cu
Unjieng in criminal case No. 42648 of the Court of First Instance of Manila, and hence the issue of
constitutionality was not properly raised in the lower court. Although, as a general rule, only those
who are parties to a suit may question the constitutionality of a statute involved in a judicial decision,
it has been held that since the decree pronounced by a court without jurisdiction is void, where the
jurisdiction of the court depends on the validity of the statute in question, the issue of the
constitutionality will be considered on its being brought to the attention of the court by persons
interested in the effect to be given the statute.(12 C. J., sec. 184, p. 766.) And, even if we were to
concede that the issue was not properly raised in the court below by the proper party, it does not
follow that the issue may not be here raised in an original action of certiorari and prohibitions. It is
true that, as a general rule, the question of constitutionality must be raised at the earliest opportunity,
so that if not raised by the pleadings, ordinarily it may not be raised at the trial, and if not raised in
the trial court, it will not considered on appeal. (12 C. J., p. 786. See, also, Cadwallader-Gibson
Lumber Co. vs. Del Rosario, 26 Phil., 192, 193-195.) But we must state that the general rule admits
of exceptions. Courts, in the exercise of sounds discretion, may determine the time when a question
affecting the constitutionality of a statute should be presented. (In re Woolsey [1884], 95 N. Y., 135,
144.) Thus, in criminal cases, although there is a very sharp conflict of authorities, it is said that the
question may be raised for the first time at any stage of the proceedings, either in the trial court or on
appeal. (12 C. J., p. 786.) Even in civil cases, it has been held that it is the duty of a court to pass on
the constitutional question, though raised for the first time on appeal, if it appears that a
determination of the question is necessary to a decision of the case. (McCabe's Adm'x vs. Maysville
& B. S. R. Co., [1910], 136 ky., 674; 124 S. W., 892; Lohmeyer vs. St. Louis Cordage Co. [1908],
214 Mo., 685; 113 S. W. 1108; Carmody vs. St. Louis Transit Co., [1905], 188 Mo., 572; 87 S. W.,
913.) And it has been held that a constitutional question will be considered by an appellate court at
any time, where it involves the jurisdiction of the court below (State vs. Burke [1911], 175 Ala., 561;
57 S., 870.) As to the power of this court to consider the constitutional question raised for the first
time before this court in these proceedings, we turn again and point with emphasis to the case of Yu
Cong Eng vs. Trinidad, supra. And on the hypotheses that the Hongkong & Shanghai Banking
Corporation, represented by the private prosecution, is not the proper party to raise the constitutional
question here — a point we do not now have to decide — we are of the opinion that the People of
the Philippines, represented by the Solicitor-General and the Fiscal of the City of Manila, is such a
proper party in the present proceedings. The unchallenged rule is that the person who impugns the
validity of a statute must have a personal and substantial interest in the case such that he has
sustained, or will sustained, direct injury as a result of its enforcement. It goes without saying that if
Act No. 4221 really violates the constitution, the People of the Philippines, in whose name the
present action is brought, has a substantial interest in having it set aside. Of grater import than the
damage caused by the illegal expenditure of public funds is the mortal wound inflicted upon the
fundamental law by the enforcement of an invalid statute. Hence, the well-settled rule that the state
can challenge the validity of its own laws. In Government of the Philippine Islands vs. Springer
([1927]), 50 Phil., 259 (affirmed in Springer vs. Government of the Philippine Islands [1928], 277
U.S., 189; 72 Law. ed., 845), this court declared an act of the legislature unconstitutional in an action
instituted in behalf of the Government of the Philippines. In Attorney General vs. Perkins ([1889], 73
Mich., 303, 311, 312; 41 N. W. 426, 428, 429), the State of Michigan, through its Attorney General,
instituted quo warranto proceedings to test the right of the respondents to renew a mining
corporation, alleging that the statute under which the respondents base their right was
unconstitutional because it impaired the obligation of contracts. The capacity of the chief law officer
of the state to question the constitutionality of the statute was though, as a general rule, only those
who are parties to a suit may question the constitutionality of a statute involved in a judicial decision,
it has been held that since the decree pronounced by a court without jurisdiction in void, where the
jurisdiction of the court depends on the validity of the statute in question, the issue of constitutionality
will be considered on its being brought to the attention of the court by persons interested in the effect
to begin the statute. (12 C.J., sec. 184, p. 766.) And, even if we were to concede that the issue was
not properly raised in the court below by the proper party, it does not follow that the issue may not be
here raised in an original action of certiorari and prohibition. It is true that, as a general rule, the
question of constitutionality must be raised at the earliest opportunity, so that if not raised by the
pleadings, ordinarily it may not be raised a the trial, and if not raised in the trial court, it will not be
considered on appeal. (12 C.J., p. 786. See, also, Cadwallader-Gibson Lumber Co. vs. Del Rosario,
26 Phil., 192, 193-195.) But we must state that the general rule admits of exceptions. Courts, in the
exercise of sound discretion, may determine the time when a question affecting the constitutionality
of a statute should be presented. (In re Woolsey [19884], 95 N.Y., 135, 144.) Thus, in criminal
cases, although there is a very sharp conflict of authorities, it is said that the question may be raised
for the first time at any state of the proceedings, either in the trial court or on appeal. (12 C.J., p.
786.) Even in civil cases, it has been held that it is the duty of a court to pass on the constitutional
question, though raised for first time on appeal, if it appears that a determination of the question is
necessary to a decision of the case. (McCabe's Adm'x vs. Maysville & B. S. R. Co. [1910], 136 Ky.,
674; 124 S. W., 892; Lohmeyer vs. St. Louis, Cordage Co. [1908], 214 Mo. 685; 113 S. W., 1108;
Carmody vs. St. Louis Transit Co. [1905], 188 Mo., 572; 87 S. W., 913.) And it has been held that a
constitutional question will be considered by an appellate court at any time, where it involves the
jurisdiction of the court below (State vs. Burke [1911], 175 Ala., 561; 57 S., 870.) As to the power of
this court to consider the constitutional question raised for the first time before this court in these
proceedings, we turn again and point with emphasis to the case of Yu Cong Eng. vs. Trinidad,
supra. And on the hypothesis that the Hongkong & Shanghai Banking Corporation, represented by
the private prosecution, is not the proper party to raise the constitutional question here — a point we
do not now have to decide — we are of the opinion that the People of the Philippines, represented
by the Solicitor-General and the Fiscal of the City of Manila, is such a proper party in the present
proceedings. The unchallenged rule is that the person who impugns the validity of a statute must
have a personal and substantial interest in the case such that he has sustained, or will sustain, direct
injury as a result of its enforcement. It goes without saying that if Act No. 4221 really violates the
Constitution, the People of the Philippines, in whose name the present action is brought, has a
substantial interest in having it set aside. Of greater import than the damage caused by the illegal
expenditure of public funds is the mortal wound inflicted upon the fundamental law by the
enforcement of an invalid statute. Hence, the well-settled rule that the state can challenge the
validity of its own laws. In Government of the Philippine Islands vs. Springer ([1927]), 50 Phil., 259
(affirmed in Springer vs. Government of the Philippine Islands [1928], 277 U.S., 189; 72 Law. ed.,
845), this court declared an act of the legislature unconstitutional in an action instituted in behalf of
the Government of the Philippines. In Attorney General vs. Perkings([1889], 73 Mich., 303, 311, 312;
41 N.W., 426, 428, 429), the State of Michigan, through its Attorney General, instituted quo warranto
proceedings to test the right of the respondents to renew a mining corporation, alleging that the
statute under which the respondents base their right was unconstitutional because it impaired the
obligation of contracts. The capacity of the chief law officer of the state to question the
constitutionality of the statute was itself questioned. Said the Supreme Court of Michigan, through
Champlin, J.:

. . . The idea seems to be that the people are estopped from questioning the validity of a law
enacted by their representatives; that to an accusation by the people of Michigan of
usurpation their government, a statute enacted by the people of Michigan is an adequate
answer. The last proposition is true, but, if the statute relied on in justification is
unconstitutional, it is statute only in form, and lacks the force of law, and is of no more saving
effect to justify action under it than if it had never been enacted. The constitution is the
supreme law, and to its behests the courts, the legislature, and the people must bow . . . The
legislature and the respondents are not the only parties in interest upon such constitutional
questions. As was remarked by Mr. Justice Story, in speaking of an acquiescence by a party
affected by an unconstitutional act of the legislature: "The people have a deep and vested
interest in maintaining all the constitutional limitations upon the exercise of legislative
powers." (Allen vs. Mckeen, 1 Sum., 314.)

In State vs. Doane ([1916], 98 Kan., 435; 158 Pac., 38, 40), an original action (mandamus) was
brought by the Attorney-General of Kansas to test the constitutionality of a statute of the state. In
disposing of the question whether or not the state may bring the action, the Supreme Court of
Kansas said:

. . . the state is a proper party — indeed, the proper party — to bring this action. The state is
always interested where the integrity of its Constitution or statutes is involved.

"It has an interest in seeing that the will of the Legislature is not disregarded,
and need not, as an individual plaintiff must, show grounds of fearing more
specific injury. (State vs. Kansas City 60 Kan., 518 [57 Pac., 118])." (State vs.
Lawrence, 80 Kan., 707; 103 Pac., 839.)
 Where the constitutionality of a statute is in doubt the state's law officer, its Attorney-General,
or county attorney, may exercise his bet judgment as to what sort of action he will bring to
have the matter determined, either by quo warranto to challenge its validity (State vs.
Johnson, 61 Kan., 803; 60 Pac., 1068; 49 L.R.A., 662), by mandamus to compel obedience
to its terms (State vs. Dolley, 82 Kan., 533; 108 Pac., 846), or by injunction to restrain
proceedings under its questionable provisions (State ex rel. vs. City of Neodesha, 3 Kan.
App., 319; 45 Pac., 122).

Other courts have reached the same conclusion (See State vs. St. Louis S. W. Ry. Co. [1917], 197
S. W., 1006; State vs. S.H. Kress & Co. [1934], 155 S., 823; State vs. Walmsley [1935], 181 La.,
597; 160 S., 91; State vs. Board of County Comr's [1934], 39 Pac. [2d], 286; First Const. Co. of
Brooklyn vs. State [1917], 211 N.Y., 295; 116 N.E., 1020; Bush vs. State {1918], 187 Ind., 339; 119
N.E., 417; State vs. Watkins [1933], 176 La., 837; 147 S., 8, 10, 11). In the case last cited, the
Supreme Court of Luisiana said:

It is contended by counsel for Herbert Watkins that a district attorney, being charged with the
duty of enforcing the laws, has no right to plead that a law is unconstitutional. In support of
the argument three decisions are cited, viz.: State ex rel. Hall, District Attorney, vs. Judge of
Tenth Judicial District (33 La. Ann., 1222); State ex rel. Nicholls, Governor vs. Shakespeare,
Mayor of New Orleans (41 Ann., 156; 6 So., 592); and State ex rel., Banking Co., etc. vs.
Heard, Auditor (47 La. Ann., 1679; 18 So., 746; 47 L. R. A., 512). These decisions do not
forbid a district attorney to plead that a statute is unconstitutional if he finds if in conflict with
one which it is his duty to enforce. In State ex rel. Hall, District Attorney, vs. Judge, etc., the
ruling was the judge should not, merely because he believed a certain statute to be
unconstitutional forbid the district attorney to file a bill of information charging a person with a
violation of the statute. In other words, a judge should not judicially declare a statute
unconstitutional until the question of constitutionality is tendered for decision, and unless it
must be decided in order to determine the right of a party litigant. State ex rel. Nicholls,
Governor, etc., is authority for the proposition merely that an officer on whom a statute
imposes the duty of enforcing its provisions cannot avoid the duty upon the ground that he
considers the statute unconstitutional, and hence in enforcing the statute he is immune from
responsibility if the statute be unconstitutional. State ex rel. Banking Co., etc., is authority for
the proposition merely that executive officers, e.g., the state auditor and state treasurer,
should not decline to perform ministerial duties imposed upon them by a statute, on the
ground that they believe the statute is unconstitutional.

It is the duty of a district attorney to enforce the criminal laws of the state, and, above all, to
support the Constitution of the state. If, in the performance of his duty he finds two statutes in
conflict with each other, or one which repeals another, and if, in his judgment, one of the two
statutes is unconstitutional, it is his duty to enforce the other; and, in order to do so, he is
compelled to submit to the court, by way of a plea, that one of the statutes is
unconstitutional. If it were not so, the power of the Legislature would be free from
constitutional limitations in the enactment of criminal laws.

The respondents do not seem to doubt seriously the correctness of the general proposition that the
state may impugn the validity of its laws. They have not cited any authority running clearly in the
opposite direction. In fact, they appear to have proceeded on the assumption that the rule as stated
is sound but that it has no application in the present case, nor may it be invoked by the City Fiscal in
behalf of the People of the Philippines, one of the petitioners herein, the principal reasons being that
the validity before this court, that the City Fiscal is estopped from attacking the validity of the Act
and, not authorized challenge the validity of the Act in its application outside said city. (Additional
memorandum of respondents, October 23, 1937, pp. 8,. 10, 17 and 23.)
The mere fact that the Probation Act has been repeatedly relied upon the past and all that time has
not been attacked as unconstitutional by the Fiscal of Manila but, on the contrary, has been impliedly
regarded by him as constitutional, is no reason for considering the People of the Philippines
estopped from nor assailing its validity. For courts will pass upon a constitutional questions only
when presented before it in bona fide cases for determination, and the fact that the question has not
been raised before is not a valid reason for refusing to allow it to be raised later. The fiscal and all
others are justified in relying upon the statute and treating it as valid until it is held void by the courts
in proper cases.

It remains to consider whether the determination of the constitutionality of Act No. 4221 is necessary
to the resolution of the instant case. For, ". . . while the court will meet the question with firmness,
where its decision is indispensable, it is the part of wisdom, and just respect for the legislature,
renders it proper, to waive it, if the case in which it arises, can be decided on other points." (Ex
parte Randolph [1833], 20 F. Cas. No. 11, 558; 2 Brock., 447. Vide, also Hoover vs. wood [1857], 9
Ind., 286, 287.) It has been held that the determination of a constitutional question is necessary
whenever it is essential to the decision of the case (12 C. J., p. 782, citing Long Sault Dev. Co. vs.
Kennedy [1913], 158 App. Div., 398; 143 N. Y. Supp., 454 [aff. 212 N.Y., 1: 105 N. E., 849; Ann.
Cas. 1915D, 56; and app dism 242 U.S., 272]; Hesse vs. Ledesma, 7 Porto Rico Fed., 520; Cowan
vs. Doddridge, 22 Gratt [63 Va.], 458; Union Line Co., vs. Wisconsin R. Commn., 146 Wis., 523; 129
N. W., 605), as where the right of a party is founded solely on a statute the validity of which is
attacked. (12 C.J., p. 782, citing Central Glass Co. vs. Niagrara F. Ins. Co., 131 La., 513; 59 S., 972;
Cheney vs. Beverly, 188 Mass., 81; 74 N.E., 306). There is no doubt that the respondent Cu Unjieng
draws his privilege to probation solely from Act No. 4221 now being assailed.

Apart from the foregoing considerations, that court will also take cognizance of the fact that the
Probation Act is a new addition to our statute books and its validity has never before been passed
upon by the courts; that may persons accused and convicted of crime in the City of Manila have
applied for probation; that some of them are already on probation; that more people will likely take
advantage of the Probation Act in the future; and that the respondent Mariano Cu Unjieng has been
at large for a period of about four years since his first conviction. All wait the decision of this court on
the constitutional question. Considering, therefore, the importance which the instant case has
assumed and to prevent multiplicity of suits, strong reasons of public policy demand that the
constitutionality of Act No. 4221 be now resolved. (Yu Cong Eng vs. Trinidad [1925], 47 Phil., 385;
[1926], 271 U.S., 500; 70 Law. ed., 1059. See 6 R.C.L., pp. 77, 78; People vs. Kennedy [1913], 207
N.Y., 533; 101 N.E., 442, 444; Ann. Cas. 1914C, 616; Borginis vs. Falk Co. [1911], 147 Wis., 327;
133 N.W., 209, 211; 37 L.R.A. [N.S.] 489; Dimayuga and Fajardo vs. Fernandez [1922], 43 Phil.,
304.) In Yu Cong Eng vs. Trinidad, supra, an analogous situation confronted us. We said: "Inasmuch
as the property and personal rights of nearly twelve thousand merchants are affected by these
proceedings, and inasmuch as Act No. 2972 is a new law not yet interpreted by the courts, in the
interest of the public welfare and for the advancement of public policy, we have determined to
overrule the defense of want of jurisdiction in order that we may decide the main issue. We have
here an extraordinary situation which calls for a relaxation of the general rule." Our ruling on this
point was sustained by the Supreme Court of the United States. A more binding authority in support
of the view we have taken can not be found.

We have reached the conclusion that the question of the constitutionality of Act No. 4221 has been
properly raised. Now for the main inquiry: Is the Act unconstitutional?

Under a doctrine peculiarly American, it is the office and duty of the judiciary to enforce the
Constitution. This court, by clear implication from the provisions of section 2, subsection 1, and
section 10, of Article VIII of the Constitution, may declare an act of the national legislature invalid
because in conflict with the fundamental lay. It will not shirk from its sworn duty to enforce the
Constitution. And, in clear cases, it will not hesitate to give effect to the supreme law by setting aside
a statute in conflict therewith. This is of the essence of judicial duty.

This court is not unmindful of the fundamental criteria in cases of this nature that all reasonable
doubts should be resolved in favor of the constitutionality of a statute. An act of the legislature
approved by the executive, is presumed to be within constitutional limitations. The responsibility of
upholding the Constitution rests not on the courts alone but on the legislature as well. "The question
of the validity of every statute is first determined by the legislative department of the government
itself." (U.S. vs. Ten Yu [1912], 24 Phil., 1, 10; Case vs. Board of Health and Heiser [1913], 24 Phil.,
250, 276; U.S. vs. Joson [1913], 26 Phil., 1.) And a statute finally comes before the courts sustained
by the sanction of the executive. The members of the Legislature and the Chief Executive have
taken an oath to support the Constitution and it must be presumed that they have been true to this
oath and that in enacting and sanctioning a particular law they did not intend to violate the
Constitution. The courts cannot but cautiously exercise its power to overturn the solemn declarations
of two of the three grand departments of the governments. (6 R.C.L., p. 101.) Then, there is that
peculiar political philosophy which bids the judiciary to reflect the wisdom of the people as expressed
through an elective Legislature and an elective Chief Executive. It follows, therefore, that the courts
will not set aside a law as violative of the Constitution except in a clear case. This is a proposition
too plain to require a citation of authorities.

One of the counsel for respondents, in the course of his impassioned argument, called attention to
the fact that the President of the Philippines had already expressed his opinion against the
constitutionality of the Probation Act, adverting that as to the Executive the resolution of this question
was a foregone conclusion. Counsel, however, reiterated his confidence in the integrity and
independence of this court. We take notice of the fact that the President in his message dated
September 1, 1937, recommended to the National Assembly the immediate repeal of the Probation
Act (No. 4221); that this message resulted in the approval of Bill No. 2417 of the Nationality
Assembly repealing the probation Act, subject to certain conditions therein mentioned; but that said
bill was vetoed by the President on September 13, 1937, much against his wish, "to have stricken
out from the statute books of the Commonwealth a law . . . unfair and very likely unconstitutional." It
is sufficient to observe in this connection that, in vetoing the bill referred to, the President exercised
his constitutional prerogative. He may express the reasons which he may deem proper for taking
such a step, but his reasons are not binding upon us in the determination of actual controversies
submitted for our determination. Whether or not the Executive should express or in any manner
insinuate his opinion on a matter encompassed within his broad constitutional power of veto but
which happens to be at the same time pending determination in this court is a question of propriety
for him exclusively to decide or determine. Whatever opinion is expressed by him under these
circumstances, however, cannot sway our judgment on way or another and prevent us from taking
what in our opinion is the proper course of action to take in a given case. It if is ever necessary for us
to make any vehement affirmance during this formative period of our political history, it is that we are
independent of the Executive no less than of the Legislative department of our government —
independent in the performance of our functions, undeterred by any consideration, free from politics,
indifferent to popularity, and unafraid of criticism in the accomplishment of our sworn duty as we see
it and as we understand it.

The constitutionality of Act No. 4221 is challenged on three principal grounds: (1) That said Act
encroaches upon the pardoning power of the Executive; (2) that its constitutes an undue delegation
of legislative power and (3) that it denies the equal protection of the laws.

1. Section 21 of the Act of Congress of August 29, 1916, commonly known as the Jones Law, in
force at the time of the approval of Act No. 4221, otherwise known as the Probation Act, vests in the
Governor-General of the Philippines "the exclusive power to grant pardons and reprieves and remit
fines and forfeitures". This power is now vested in the President of the Philippines. (Art. VII, sec. 11,
subsec. 6.) The provisions of the Jones Law and the Constitution differ in some respects. The
adjective "exclusive" found in the Jones Law has been omitted from the Constitution. Under the
Jones Law, as at common law, pardon could be granted any time after the commission of the
offense, either before or after conviction (Vide Constitution of the United States, Art. II, sec. 2; In
re Lontok [1922], 43 Phil., 293). The Governor-General of the Philippines was thus empowered, like
the President of the United States, to pardon a person before the facts of the case were fully brought
to light. The framers of our Constitution thought this undesirable and, following most of the state
constitutions, provided that the pardoning power can only be exercised "after conviction". So, too,
under the new Constitution, the pardoning power does not extend to "cases of impeachment". This is
also the rule generally followed in the United States (Vide Constitution of the United States, Art. II,
sec. 2). The rule in England is different. There, a royal pardon can not be pleaded in bar of an
impeachment; "but," says Blackstone, "after the impeachment has been solemnly heard and
determined, it is not understood that the king's royal grace is further restrained or abridged." (Vide,
Ex parte Wells [1856], 18 How., 307; 15 Law. ed., 421; Com. vs. Lockwood [1872], 109 Mass., 323;
12 Am. Rep., 699; Sterling vs. Drake [1876], 29 Ohio St., 457; 23 am. Rep., 762.) The reason for the
distinction is obvious. In England, Judgment on impeachment is not confined to mere "removal from
office and disqualification to hold and enjoy any office of honor, trust, or profit under the
Government" (Art. IX, sec. 4, Constitution of the Philippines) but extends to the whole punishment
attached by law to the offense committed. The House of Lords, on a conviction may, by its sentence,
inflict capital punishment, perpetual banishment, perpetual banishment, fine or imprisonment,
depending upon the gravity of the offense committed, together with removal from office and
incapacity to hold office. (Com. vs. Lockwood, supra.) Our Constitution also makes specific mention
of "commutation" and of the power of the executive to impose, in the pardons he may grant, such
conditions, restrictions and limitations as he may deem proper. Amnesty may be granted by the
President under the Constitution but only with the concurrence of the National Assembly. We need
not dwell at length on the significance of these fundamental changes. It is sufficient for our purposes
to state that the pardoning power has remained essentially the same. The question is: Has the
pardoning power of the Chief Executive under the Jones Law been impaired by the Probation Act?

As already stated, the Jones Law vests the pardoning power exclusively in the Chief Executive. The
exercise of the power may not, therefore, be vested in anyone else.
". . . The benign prerogative of mercy reposed in the executive cannot be taken away nor fettered by
any legislative restrictions, nor can like power be given by the legislature to any other officer or
authority. The coordinate departments of government have nothing to do with the pardoning power,
since no person properly belonging to one of the departments can exercise any powers appertaining
to either of the others except in cases expressly provided for by the constitution." (20 R.C.L., pp., ,
and cases cited.) " . . . where the pardoning power is conferred on the executive without express or
implied limitations, the grant is exclusive, and the legislature can neither exercise such power itself
nor delegate it elsewhere, nor interfere with or control the proper exercise thereof, . . ." (12 C.J., pp.
838, 839, and cases cited.) If Act No. 4221, then, confers any pardoning power upon the courts it is
for that reason unconstitutional and void. But does it?

In the famous Killitts decision involving an embezzlement case, the Supreme Court of the United
States ruled in 1916 that an order indefinitely suspending sentenced was void. (Ex parte United
States [1916], 242 U.S., 27; 61 Law. ed., 129; L.R.A. 1917E, 1178; 37 Sup. Ct. Rep., 72; Ann. Cas.
1917B, 355.) Chief Justice White, after an exhaustive review of the authorities, expressed the
opinion of the court that under the common law the power of the court was limited to temporary
suspension and that the right to suspend sentenced absolutely and permanently was vested in the
executive branch of the government and not in the judiciary. But, the right of Congress to establish
probation by statute was conceded. Said the court through its Chief Justice: ". . . and so far as the
future is concerned, that is, the causing of the imposition of penalties as fixed to be subject, by
probation legislation or such other means as the legislative mind may devise, to such judicial
discretion as may be adequate to enable courts to meet by the exercise of an enlarged but wise
discretion the infinite variations which may be presented to them for judgment, recourse must be had
Congress whose legislative power on the subject is in the very nature of things adequately
complete." (Quoted in Riggs vs. United States [1926], 14 F. [2d], 5, 6.) This decision led the National
Probation Association and others to agitate for the enactment by Congress of a federal probation
law. Such action was finally taken on March 4, 1925 (chap. 521, 43 Stat. L. 159, U.S.C. title 18, sec.
724). This was followed by an appropriation to defray the salaries and expenses of a certain number
of probation officers chosen by civil service. (Johnson, Probation for Juveniles and Adults, p. 14.)

In United States vs. Murray ([1925], 275 U.S., 347; 48 Sup. Ct. Rep., 146; 72 Law. ed., 309), the
Supreme Court of the United States, through Chief Justice Taft, held that when a person sentenced
to imprisonment by a district court has begun to serve his sentence, that court has no power under
the Probation Act of March 4, 1925 to grant him probation even though the term at which sentence
was imposed had not yet expired. In this case of Murray, the constitutionality of the probation Act
was not considered but was assumed. The court traced the history of the Act and quoted from the
report of the Committee on the Judiciary of the United States House of Representatives (Report No.
1377, 68th Congress, 2 Session) the following statement:

Prior to the so-called Killitts case, rendered in December, 1916, the district courts exercised
a form of probation either, by suspending sentence or by placing the defendants under state
probation officers or volunteers. In this case, however (Ex parte United States, 242 U.S., 27;
61 L. Ed., 129; L.R.A., 1917E, 1178; 37 Sup. Ct. Rep., 72 Ann. Cas. 1917B, 355), the
Supreme Court denied the right of the district courts to suspend sentenced. In the same
opinion the court pointed out the necessity for action by Congress if the courts were to
exercise probation powers in the future . . .

Since this decision was rendered, two attempts have been made to enact probation
legislation. In 1917, a bill was favorably reported by the Judiciary Committee and passed the
House. In 1920, the judiciary Committee again favorably reported a probation bill to the
House, but it was never reached for definite action.

If this bill is enacted into law, it will bring the policy of the Federal government with reference
to its treatment of those convicted of violations of its criminal laws in harmony with that of the
states of the Union. At the present time every state has a probation law, and in all but twelve
states the law applies both to adult and juvenile offenders. (see, also, Johnson, Probation for
Juveniles and Adults [1928], Chap. I.)

The constitutionality of the federal probation law has been sustained by inferior federal courts. In
Riggs vs. United States supra, the Circuit Court of Appeals of the Fourth Circuit said:

Since the passage of the Probation Act of March 4, 1925, the questions under consideration
have been reviewed by the Circuit Court of Appeals of the Ninth Circuit (7 F. [2d], 590), and
the constitutionality of the act fully sustained, and the same held in no manner to encroach
upon the pardoning power of the President. This case will be found to contain an able and
comprehensive review of the law applicable here. It arose under the act we have to consider,
and to it and the authorities cited therein special reference is made (Nix vs. James, 7 F. [2d],
590, 594), as is also to a decision of the Circuit Court of Appeals of the Seventh Circuit
(Kriebel vs. U.S., 10 F. [2d], 762), likewise construing the Probation Act.

We have seen that in 1916 the Supreme Court of the United States; in plain and unequivocal
language, pointed to Congress as possessing the requisite power to enact probation laws, that a
federal probation law as actually enacted in 1925, and that the constitutionality of the Act has been
assumed by the Supreme Court of the United States in 1928 and consistently sustained by the
inferior federal courts in a number of earlier cases.

We are fully convinced that the Philippine Legislature, like the Congress of the United States, may
legally enact a probation law under its broad power to fix the punishment of any and all penal
offenses. This conclusion is supported by other authorities. In Ex parte Bates ([1915], 20 N. M., 542;
L.R.A. 1916A, 1285; 151 Pac., 698, the court said: "It is clearly within the province of the Legislature
to denominate and define all classes of crime, and to prescribe for each a minimum and maximum
punishment." And in State vs. Abbott ([1910], 87 S.C., 466; 33 L.R.A. [N. S.], 112; 70 S. E., 6; Ann.
Cas. 1912B, 1189), the court said: "The legislative power to set punishment for crime is very broad,
and in the exercise of this power the general assembly may confer on trial judges, if it sees fit, the
largest discretion as to the sentence to be imposed, as to the beginning and end of the punishment
and whether it should be certain or indeterminate or conditional." (Quoted in State vs. Teal [1918],
108 S. C., 455; 95 S. E., 69.) Indeed, the Philippine Legislature has defined all crimes and fixed the
penalties for their violation. Invariably, the legislature has demonstrated the desire to vest in the
courts — particularly the trial courts — large discretion in imposing the penalties which the law
prescribes in particular cases. It is believed that justice can best be served by vesting this power in
the courts, they being in a position to best determine the penalties which an individual convict,
peculiarly circumstanced, should suffer. Thus, while courts are not allowed to refrain from imposing a
sentence merely because, taking into consideration the degree of malice and the injury caused by
the offense, the penalty provided by law is clearly excessive, the courts being allowed in such case
to submit to the Chief Executive, through the Department of Justice, such statement as it may deem
proper (see art. 5, Revised Penal Code), in cases where both mitigating and aggravating
circumstances are attendant in the commission of a crime and the law provides for a penalty
composed of two indivisible penalties, the courts may allow such circumstances to offset one
another in consideration of their number and importance, and to apply the penalty according to the
result of such compensation. (Art. 63, rule 4, Revised Penal Code; U.S. vs. Reguera and Asuategui
[1921], 41 Phil., 506.) Again, article 64, paragraph 7, of the Revised Penal Code empowers the
courts to determine, within the limits of each periods, in case the penalty prescribed by law contains
three periods, the extent of the evil produced by the crime. In the imposition of fines, the courts are
allowed to fix any amount within the limits established by law, considering not only the mitigating and
aggravating circumstances, but more particularly the wealth or means of the culprit. (Art. 66, Revised
Penal Code.) Article 68, paragraph 1, of the same Code provides that "a discretionary penalty shall
be imposed" upon a person under fifteen but over nine years of age, who has not acted without
discernment, but always lower by two degrees at least than that prescribed by law for the crime
which he has committed. Article 69 of the same Code provides that in case of "incomplete self-
defense", i.e., when the crime committed is not wholly excusable by reason of the lack of some of
the conditions required to justify the same or to exempt from criminal liability in the several cases
mentioned in article 11 and 12 of the Code, "the courts shall impose the penalty in the period which
may be deemed proper, in view of the number and nature of the conditions of exemption present or
lacking." And, in case the commission of what are known as "impossible" crimes, "the court, having
in mind the social danger and the degree of criminality shown by the offender," shall impose upon
him either arresto mayor or a fine ranging from 200 to 500 pesos. (Art. 59, Revised Penal Code.)

Under our Revised Penal Code, also, one-half of the period of preventive imprisonment is deducted
form the entire term of imprisonment, except in certain cases expressly mentioned (art. 29); the
death penalty is not imposed when the guilty person is more than seventy years of age, or where
upon appeal or revision of the case by the Supreme Court, all the members thereof are not
unanimous in their voting as to the propriety of the imposition of the death penalty (art. 47, see also,
sec. 133, Revised Administrative Code, as amended by Commonwealth Act No. 3); the death
sentence is not to be inflicted upon a woman within the three years next following the date of the
sentence or while she is pregnant, or upon any person over seventy years of age (art. 83); and when
a convict shall become insane or an imbecile after final sentence has been pronounced, or while he
is serving his sentenced, the execution of said sentence shall be suspended with regard to the
personal penalty during the period of such insanity or imbecility (art. 79).

But the desire of the legislature to relax what might result in the undue harshness of the penal laws
is more clearly demonstrated in various other enactments, including the probation Act. There is the
Indeterminate Sentence Law enacted in 1933 as Act No. 4103 and subsequently amended by Act
No. 4225, establishing a system of parole (secs. 5 to 100 and granting the courts large discretion in
imposing the penalties of the law. Section 1 of the law as amended provides; "hereafter, in imposing
a prison sentence for an offenses punished by the Revised Penal Code, or its amendments, the
court shall sentence the accused to an indeterminate sentence the maximum term of which shall be
that which, in view of the attending circumstances, could be properly imposed under the rules of the
said Code, and to a minimum which shall be within the range of the penalty next lower to that
prescribed by the Code for the offense; and if the offense is punished by any other law, the court
shall sentence the accused to an indeterminate sentence, the maximum term of which shall not
exceed the maximum fixed by said law and the minimum shall not be less than the minimum term
prescribed by the same." Certain classes of convicts are, by section 2 of the law, excluded from the
operation thereof. The Legislature has also enacted the Juvenile Delinquency Law (Act No. 3203)
which was subsequently amended by Act No. 3559. Section 7 of the original Act and section 1 of the
amendatory Act have become article 80 of the Revised Penal Code, amended by Act No. 4117 of
the Philippine Legislature and recently reamended by Commonwealth Act No. 99 of the National
Assembly. In this Act is again manifested the intention of the legislature to "humanize" the penal
laws. It allows, in effect, the modification in particular cases of the penalties prescribed by law by
permitting the suspension of the execution of the judgment in the discretion of the trial court, after
due hearing and after investigation of the particular circumstances of the offenses, the criminal
record, if any, of the convict, and his social history. The Legislature has in reality decreed that in
certain cases no punishment at all shall be suffered by the convict as long as the conditions of
probation are faithfully observed. It this be so, then, it cannot be said that the Probation Act comes in
conflict with the power of the Chief Executive to grant pardons and reprieves, because, to use the
language of the Supreme Court of New Mexico, "the element of punishment or the penalty for the
commission of a wrong, while to be declared by the courts as a judicial function under and within the
limits of law as announced by legislative acts, concerns solely the procedure and conduct of criminal
causes, with which the executive can have nothing to do." (Ex parteBates, supra.) In Williams vs.
State ([1926], 162 Ga., 327; 133 S.E., 843), the court upheld the constitutionality of the Georgia
probation statute against the contention that it attempted to delegate to the courts the pardoning
power lodged by the constitution in the governor alone is vested with the power to pardon after final
sentence has been imposed by the courts, the power of the courts to imposed any penalty which
may be from time to time prescribed by law and in such manner as may be defined cannot be
questioned."

We realize, of course, the conflict which the American cases disclose. Some cases hold it unlawful
for the legislature to vest in the courts the power to suspend the operation of a sentenced, by
probation or otherwise, as to do so would encroach upon the pardoning power of the executive. (In
re Webb [1895], 89 Wis., 354; 27 L.R.A., 356; 46 Am. St. Rep., 846; 62 N.W., 177; 9 Am. Crim.,
Rep., 702; State ex rel. Summerfield vs. Moran [1919], 43 Nev., 150; 182 Pac., 927; Ex
parte Clendenning [1908], 22 Okla., 108; 1 Okla. Crim. Rep., 227; 19 L.R.A. [N.S.], 1041; 132 Am.
St. Rep., 628; 97 Pac., 650; People vs. Barrett [1903], 202 Ill, 287; 67 N.E., 23; 63 L.R.A., 82; 95
Am. St. Rep., 230; Snodgrass vs. State [1912], 67 Tex. Crim. Rep., 615; 41 L. R. A. [N. S.], 1144;
150 S. W., 162; Ex parte Shelor [1910], 33 Nev., 361;111 Pac., 291; Neal vs. State [1898], 104 Ga.,
509; 42 L. R. A., 190; 69 Am. St. Rep., 175; 30 S. E. 858; State ex rel. Payne vs. Anderson [1921],
43 S. D., 630; 181 N. W., 839; People vs. Brown, 54 Mich., 15; 19 N. W., 571; States vs. Dalton
[1903], 109 Tenn., 544; 72 S. W., 456.)
Other cases, however, hold contra. (Nix vs. James [1925; C. C. A., 9th], 7 F. [2d], 590; Archer vs.
Snook [1926; D. C.], 10 F. [2d], 567; Riggs. vs. United States [1926; C. C. A. 4th], 14]) [2d], 5;
Murphy vs. States [1926], 171 Ark., 620; 286 S. W., 871; 48 A. L. R., 1189; Re Giannini [1912], 18
Cal. App., 166; 122 Pac., 831; Re Nachnaber [1928], 89 Cal. App., 530; 265 Pac., 392; Ex parte De
Voe [1931], 114 Cal. App., 730; 300 Pac., 874; People vs. Patrick [1897], 118 Cal., 332; 50 Pac.,
425; Martin vs. People [1917], 69 Colo., 60; 168 Pac., 1171; Belden vs. Hugo [1914], 88 Conn., 50;
91 A., 369, 370, 371; Williams vs. State [1926], 162 Ga., 327; 133 S. E., 843; People vs. Heise
[1913], 257 Ill., 443; 100 N. E., 1000; Parker vs. State [1893], 135 Ind., 534; 35 N. E., 179; 23 L. R.
A., 859; St. Hillarie, Petitioner [1906], 101 Me., 522; 64 Atl., 882; People vs. Stickle [1909], 156
Mich., 557; 121 N. W., 497; State vs. Fjolander [1914], 125 Minn., 529; State ex rel. Bottomnly vs.
District Court [1925], 73 Mont., 541; 237 Pac., 525; State vs. Everitt [1913], 164 N. C., 399; 79 S. E.,
274; 47 L. R. A. [N. S.], 848; State ex rel. Buckley vs. Drew [1909], 75 N. H., 402; 74 Atl., 875; State
vs. Osborne [1911], 79 N. J. Eq., 430; 82 Atl. 424; Ex parte Bates [1915], 20 N. M., 542; L. R. A.,
1916 A. 1285; 151 Pac., 698; People vs. ex rel. Forsyth vs. Court of Session [1894], 141 N. Y., 288;
23 L. R. A., 856; 36 N. E., 386; 15 Am. Crim. Rep., 675; People ex rel. Sullivan vs. Flynn [1907], 55
Misc., 639; 106 N. Y. Supp., 928; People vs. Goodrich [1914], 149 N. Y. Supp., 406; Moore vs.
Thorn [1935], 245 App. Div., 180; 281 N. Y. Supp., 49; Re Hart [1914], 29 N. D., 38; L. R. A., 1915C,
1169; 149 N. W., 568; Ex parte Eaton [1925], 29 Okla., Crim. Rep., 275; 233 P., 781; State vs. Teal
[1918], 108 S. C., 455; 95 S. E., 69; State vs. Abbot [1910], 87 S. C., 466; 33 L.R.A., [N. S.], 112; 70
S. E., 6; Ann. Cas., 1912B, 1189; Fults vs. States [1854],34 Tenn., 232; Woods vs. State [1814], 130
Tenn., 100; 169 S. W., 558; Baker vs. State [1814], 130 Tenn., 100; 169 S. W., 558; Baker vs. State
[1913],70 Tex., Crim. Rep., 618; 158 S. W., 998; Cook vs. State [1914], 73 Tex. Crim. Rep., 548;
165 S. W., 573; King vs. State [1914], 72 Tex. Crim. Rep., 394; 162 S. W., 890; Clare vs. State
[1932], 122 Tex. Crim. Rep., 394; 162 S. W., 890; Clare vs. State [1932], 122 Tex. Crim. Rep., 211;
54 S. W. [2d], 127; Re Hall [1927], 100 Vt., 197; 136 A., 24; Richardson vs. Com. [1921], 131 Va.,
802; 109 S.E., 460; State vs. Mallahan [1911], 65 Wash., 287; 118 Pac., 42; State ex rel. Tingstand
vs. Starwich [1922], 119 Wash., 561; 206 Pac., 29; 26 A. L. R., 393; 396.) We elect to follow this
long catena of authorities holding that the courts may be legally authorized by the legislature to
suspend sentence by the establishment of a system of probation however characterized. State ex
rel. Tingstand vs. Starwich ([1922], 119 Wash., 561; 206 Pac., 29; 26 A. L. R., 393), deserved
particular mention. In that case, a statute enacted in 1921 which provided for the suspension of the
execution of a sentence until otherwise ordered by the court, and required that the convicted person
be placed under the charge of a parole or peace officer during the term of such suspension, on such
terms as the court may determine, was held constitutional and as not giving the court a power in
violation of the constitutional provision vesting the pardoning power in the chief executive of the
state. (Vide, also, Re Giannini [1912], 18 Cal App., 166; 122 Pac., 831.)

Probation and pardon are not coterminous; nor are they the same. They are actually district and
different from each other, both in origin and in nature. In People ex rel. Forsyth vs. Court of Sessions
([1894], 141 N. Y., 288, 294; 36 N. E., 386, 388; 23 L. R. A., 856; 15 Am. Crim. Rep., 675), the Court
of Appeals of New York said:

. . . The power to suspend sentence and the power to grant reprieves and pardons, as
understood when the constitution was adopted, are totally distinct and different in their
nature. The former was always a part of the judicial power; the latter was always a part of the
executive power. The suspension of the sentence simply postpones the judgment of the
court temporarily or indefinitely, but the conviction and liability following it, and the civil
disabilities, remain and become operative when judgment is rendered. A pardon reaches
both the punishment prescribed for the offense and the guilt of the offender. It releases the
punishment, and blots out of existence the guilt, so that in the eye of the law, the offender is
as innocent as if he had never committed the offense. It removes the penalties and
disabilities, and restores him to all his civil rights. It makes him, as it were, a new man, and
gives him a new credit and capacity. (Ex parte Garland, 71 U. S., 4 Wall., 333; 18 Law. ed.,
 366; U. S. vs. Klein, 80 U. S., 13 Wall., 128; 20 Law. ed., 519; Knote vs. U. S., 95 U. S., 149;
24 Law. ed., 442.)

The framers of the federal and the state constitutions were perfectly familiar with the
principles governing the power to grant pardons, and it was conferred by these instruments
upon the executive with full knowledge of the law upon the subject, and the words of the
constitution were used to express the authority formerly exercised by the English crown, or
by its representatives in the colonies. (Ex parte Wells, 59 U. S., 18 How., 307; 15 Law. ed.,
421.) As this power was understood, it did not comprehend any part of the judicial functions
to suspend sentence, and it was never intended that the authority to grant reprieves and
pardons should abrogate, or in any degree restrict, the exercise of that power in regard to its
own judgments, that criminal courts has so long maintained. The two powers, so distinct and
different in their nature and character, were still left separate and distinct, the one to be
exercised by the executive, and the other by the judicial department. We therefore conclude
that a statute which, in terms, authorizes courts of criminal jurisdiction to suspend sentence
in certain cases after conviction, — a power inherent in such courts at common law, which
was understood when the constitution was adopted to be an ordinary judicial function, and
which, ever since its adoption, has been exercised of legislative power under the
constitution. It does not encroach, in any just sense, upon the powers of the executive, as
they have been understood and practiced from the earliest times. (Quoted with approval in
Directors of Prisons vs. Judge of First Instance of Cavite [1915], 29 Phil., 265, Carson, J.,
concurring, at pp. 294, 295.)

In probation, the probationer is in no true sense, as in pardon, a free man. He is not finally and
completely exonerated. He is not exempt from the entire punishment which the law inflicts. Under
the Probation Act, the probationer's case is not terminated by the mere fact that he is placed on
probation. Section 4 of the Act provides that the probation may be definitely terminated and the
probationer finally discharged from supervision only after the period of probation shall have been
terminated and the probation officer shall have submitted a report, and the court shall have found
that the probationer has complied with the conditions of probation. The probationer, then, during the
period of probation, remains in legal custody — subject to the control of the probation officer and of
the court; and, he may be rearrested upon the non-fulfillment of the conditions of probation and,
when rearrested, may be committed to prison to serve the sentence originally imposed upon him.
(Secs. 2, 3, 5 and 6, Act No. 4221.)

The probation described in the act is not pardon. It is not complete liberty, and may be far
from it. It is really a new mode of punishment, to be applied by the judge in a proper case, in
substitution of the imprisonment and find prescribed by the criminal laws. For this reason its
application is as purely a judicial act as any other sentence carrying out the law deemed
applicable to the offense. The executive act of pardon, on the contrary, is against the criminal
law, which binds and directs the judges, or rather is outside of and above it. There is thus no
conflict with the pardoning power, and no possible unconstitutionality of the Probation Act for
this cause. (Archer vs. Snook [1926], 10 F. [2d], 567, 569.)

Probation should also be distinguished from reprieve and from commutation of the sentence.
Snodgrass vs. State ([1912], 67 Tex. Crim. Rep., 615;41 L. R. A. [N. S.], 1144; 150 S. W., 162), is
relied upon most strongly by the petitioners as authority in support of their contention that the power
to grant pardons and reprieves, having been vested exclusively upon the Chief Executive by the
Jones Law, may not be conferred by the legislature upon the courts by means of probation law
authorizing the indefinite judicial suspension of sentence. We have examined that case and found
that although the Court of Criminal Appeals of Texas held that the probation statute of the state in
terms conferred on the district courts the power to grant pardons to persons convicted of crime, it
also distinguished between suspensions sentence on the one hand, and reprieve and commutation
of sentence on the other. Said the court, through Harper, J.:

That the power to suspend the sentence does not conflict with the power of the Governor to
grant reprieves is settled by the decisions of the various courts; it being held that the
distinction between a "reprieve" and a suspension of sentence is that a reprieve postpones
the execution of the sentence to a day certain, whereas a suspension is for an indefinite
time. (Carnal vs. People, 1 Parker, Cr. R., 262; In re Buchanan, 146 N. Y., 264; 40 N. E.,
883), and cases cited in 7 Words & Phrases, pp. 6115, 6116. This law cannot be hold in
conflict with the power confiding in the Governor to grant commutations of punishment, for a
commutations is not but to change the punishment assessed to a less punishment.

In State ex rel. Bottomnly vs. District Court ([1925], 73 Mont., 541; 237 Pac., 525), the Supreme
Court of Montana had under consideration the validity of the adult probation law of the state enacted
in 1913, now found in sections 12078-12086, Revised Codes of 1921. The court held the law valid
as not impinging upon the pardoning power of the executive. In a unanimous decision penned by
Justice Holloway, the court said:

. . . . the term "pardon", "commutation", and "respite" each had a well understood meaning at
the time our Constitution was adopted, and no one of them was intended to comprehend the
suspension of the execution of the judgment as that phrase is employed in sections 12078-
12086. A "pardon" is an act of grace, proceeding from the power intrusted with the execution
of the laws which exempts the individual on whom it is bestowed from the punishment the
law inflicts for a crime he has committed (United States vs. Wilson, 7 Pet., 150; 8 Law. ed.,
640); It is a remission of guilt (State vs. Lewis, 111 La., 693; 35 So., 816), a forgiveness of
the offense (Cook vs. Middlesex County, 26 N. J. Law, 326; Ex parte Powell, 73 Ala., 517; 49
Am. Rep., 71). "Commutation" is a remission of a part of the punishment; a substitution of a
less penalty for the one originally imposed (Lee vs. Murphy, 22 Grat. [Va.] 789; 12 Am. Rep.,
563; Rich vs. Chamberlain, 107 Mich., 381; 65 N. W., 235). A "reprieve" or "respite" is the
withholding of the sentence for an interval of time (4 Blackstone's Commentaries, 394), a
postponement of execution (Carnal vs. People, 1 Parker, Cr. R. [N. Y.], 272), a temporary
suspension of execution (Butler vs. State, 97 Ind., 373).

Few adjudicated cases are to be found in which the validity of a statute similar to our section
12078 has been determined; but the same objections have been urged against parole
statutes which vest the power to parole in persons other than those to whom the power of
pardon is granted, and these statutes have been upheld quite uniformly, as a reference to
the numerous cases cited in the notes to Woods vs. State (130 Tenn., 100; 169 S. W.,558,
reported in L. R. A., 1915F, 531), will disclose. (See, also, 20 R. C. L., 524.)

We conclude that the Probation Act does not conflict with the pardoning power of the Executive. The
pardoning power, in respect to those serving their probationary sentences, remains as full and
complete as if the Probation Law had never been enacted. The President may yet pardon the
probationer and thus place it beyond the power of the court to order his rearrest and imprisonment.
(Riggs vs. United States [1926],
14 F. [2d], 5, 7.)

2. But while the Probation Law does not encroach upon the pardoning power of the executive and is
not for that reason void, does section 11 thereof constitute, as contended, an undue delegation of
legislative power?
Under the constitutional system, the powers of government are distributed among three coordinate
and substantially independent organs: the legislative, the executive and the judicial. Each of these
departments of the government derives its authority from the Constitution which, in turn, is the
highest expression of popular will. Each has exclusive cognizance of the matters within its
jurisdiction, and is supreme within its own sphere.

The power to make laws — the legislative power — is vested in a bicameral Legislature by the
Jones Law (sec. 12) and in a unicamiral National Assembly by the Constitution (Act. VI, sec. 1,
Constitution of the Philippines). The Philippine Legislature or the National Assembly may not escape
its duties and responsibilities by delegating that power to any other body or authority. Any attempt to
abdicate the power is unconstitutional and void, on the principle that potestas delegata non delegare
potest. This principle is said to have originated with the glossators, was introduced into English law
through a misreading of Bracton, there developed as a principle of agency, was established by Lord
Coke in the English public law in decisions forbidding the delegation of judicial power, and found its
way into America as an enlightened principle of free government. It has since become an accepted
corollary of the principle of separation of powers. (5 Encyc. of the Social Sciences, p. 66.) The
classic statement of the rule is that of Locke, namely: "The legislative neither must nor can transfer
the power of making laws to anybody else, or place it anywhere but where the people have." (Locke
on Civil Government, sec. 142.) Judge Cooley enunciates the doctrine in the following oft-quoted
language: "One of the settled maxims in constitutional law is, that the power conferred upon the
legislature to make laws cannot be delegated by that department to any other body or authority.
Where the sovereign power of the state has located the authority, there it must remain; and by the
constitutional agency alone the laws must be made until the Constitution itself is charged. The power
to whose judgment, wisdom, and patriotism this high prerogative has been intrusted cannot relieve
itself of the responsibilities by choosing other agencies upon which the power shall be devolved, nor
can it substitute the judgment, wisdom, and patriotism of any other body for those to which alone the
people have seen fit to confide this sovereign trust." (Cooley on Constitutional Limitations, 8th ed.,
Vol. I, p. 224. Quoted with approval in U. S. vs. Barrias [1908], 11 Phil., 327.) This court posits the
doctrine "on the ethical principle that such a delegated power constitutes not only a right but a duty
to be performed by the delegate by the instrumentality of his own judgment acting immediately upon
the matter of legislation and not through the intervening mind of another. (U. S. vs. Barrias, supra, at
p. 330.)

The rule, however, which forbids the delegation of legislative power is not absolute and inflexible. It
admits of exceptions. An exceptions sanctioned by immemorial practice permits the central
legislative body to delegate legislative powers to local authorities. (Rubi vs. Provincial Board of
Mindoro [1919], 39 Phil., 660; U. S. vs. Salaveria [1918], 39 Phil., 102; Stoutenburgh vs. Hennick
[1889], 129 U. S., 141; 32 Law. ed., 637; 9 Sup. Ct. Rep., 256; State vs. Noyes [1855], 30 N. H.,
279.) "It is a cardinal principle of our system of government, that local affairs shall be managed by
local authorities, and general affairs by the central authorities; and hence while the rule is also
fundamental that the power to make laws cannot be delegated, the creation of the municipalities
exercising local self government has never been held to trench upon that rule. Such legislation is not
regarded as a transfer of general legislative power, but rather as the grant of the authority to
prescribed local regulations, according to immemorial practice, subject of course to the interposition
of the superior in cases of necessity." (Stoutenburgh vs. Hennick, supra.) On quite the same
principle, Congress is powered to delegate legislative power to such agencies in the territories of the
United States as it may select. A territory stands in the same relation to Congress as a municipality
or city to the state government. (United States vs. Heinszen [1907], 206 U. S., 370; 27 Sup. Ct.
Rep., 742; 51 L. ed., 1098; 11 Ann. Cas., 688; Dorr vs. United States [1904], 195 U.S., 138; 24 Sup.
Ct. Rep., 808; 49 Law. ed., 128; 1 Ann. Cas., 697.) Courts have also sustained the delegation of
legislative power to the people at large. Some authorities maintain that this may not be done (12 C.
J., pp. 841, 842; 6 R. C. L., p. 164, citing People vs. Kennedy [1913], 207 N. Y., 533; 101 N. E., 442;
Ann. Cas., 1914C, 616). However, the question of whether or not a state has ceased to be
republican in form because of its adoption of the initiative and referendum has been held not to be a
judicial but a political question (Pacific States Tel. & Tel. Co. vs. Oregon [1912], 223 U. S., 118; 56
Law. ed., 377; 32 Sup. Cet. Rep., 224), and as the constitutionality of such laws has been looked
upon with favor by certain progressive courts, the sting of the decisions of the more conservative
courts has been pretty well drawn. (Opinions of the Justices [1894], 160 Mass., 586; 36 N. E., 488;
23 L. R. A., 113; Kiernan vs. Portland [1910], 57 Ore., 454; 111 Pac., 379; 1132 Pac., 402; 37 L. R.
A. [N. S.], 332; Pacific States Tel. & Tel. Co. vs. Oregon, supra.) Doubtless, also, legislative power
may be delegated by the Constitution itself. Section 14, paragraph 2, of article VI of the Constitution
of the Philippines provides that "The National Assembly may by law authorize the President, subject
to such limitations and restrictions as it may impose, to fix within specified limits, tariff rates, import or
export quotas, and tonnage and wharfage dues." And section 16 of the same article of the
Constitution provides that "In times of war or other national emergency, the National Assembly may
by law authorize the President, for a limited period and subject to such restrictions as it may
prescribed, to promulgate rules and regulations to carry out a declared national policy." It is beyond
the scope of this decision to determine whether or not, in the absence of the foregoing constitutional
provisions, the President could be authorized to exercise the powers thereby vested in him. Upon
the other hand, whatever doubt may have existed has been removed by the Constitution itself.

The case before us does not fall under any of the exceptions hereinabove mentioned.

The challenged section of Act No. 4221 in section 11 which reads as follows:

This Act shall apply only in those provinces in which the respective provincial boards have
provided for the salary of a probation officer at rates not lower than those now provided for
provincial fiscals. Said probation officer shall be appointed by the Secretary of Justice and
shall be subject to the direction of the Probation Office. (Emphasis ours.)

In testing whether a statute constitute an undue delegation of legislative power or not, it is usual to
inquire whether the statute was complete in all its terms and provisions when it left the hands of the
legislature so that nothing was left to the judgment of any other appointee or delegate of the
legislature. (6 R. C. L., p. 165.) In the United States vs. Ang Tang Ho ([1922], 43 Phil., 1), this court
adhered to the foregoing rule when it held an act of the legislature void in so far as it undertook to
authorize the Governor-General, in his discretion, to issue a proclamation fixing the price of rice and
to make the sale of it in violation of the proclamation a crime. (See and cf. Compañia General de
Tabacos vs. Board of Public Utility Commissioners [1916], 34 Phil., 136.) The general rule, however,
is limited by another rule that to a certain extent matters of detail may be left to be filled in by rules
and regulations to be adopted or promulgated by executive officers and administrative boards. (6 R.
C. L., pp. 177-179.)

For the purpose of Probation Act, the provincial boards may be regarded as administrative bodies
endowed with power to determine when the Act should take effect in their respective provinces.
They are the agents or delegates of the legislature in this respect. The rules governing delegation of
legislative power to administrative and executive officers are applicable or are at least indicative of
the rule which should be here adopted. An examination of a variety of cases on delegation of power
to administrative bodies will show that the ratio decidendi is at variance but, it can be broadly
asserted that the rationale revolves around the presence or absence of a standard or rule of action
— or the sufficiency thereof — in the statute, to aid the delegate in exercising the granted discretion.
In some cases, it is held that the standard is sufficient; in others that is insufficient; and in still others
that it is entirely lacking. As a rule, an act of the legislature is incomplete and hence invalid if it does
not lay down any rule or definite standard by which the administrative officer or board may be guided
in the exercise of the discretionary powers delegated to it. (See Schecter vs. United States [1925],
295 U. S., 495; 79 L. ed., 1570; 55 Sup. Ct. Rep., 837; 97 A.L.R., 947; People ex rel. Rice vs. Wilson
Oil Co. [1936], 364 Ill., 406; 4 N. E. [2d], 847; 107 A.L.R., 1500 and cases cited. See also R. C. L.,
title "Constitutional Law", sec 174.) In the case at bar, what rules are to guide the provincial boards
in the exercise of their discretionary power to determine whether or not the Probation Act shall apply
in their respective provinces? What standards are fixed by the Act? We do not find any and none
has been pointed to us by the respondents. The probation Act does not, by the force of any of its
provisions, fix and impose upon the provincial boards any standard or guide in the exercise of their
discretionary power. What is granted, if we may use the language of Justice Cardozo in the recent
case of Schecter, supra, is a "roving commission" which enables the provincial boards to exercise
arbitrary discretion. By section 11 if the Act, the legislature does not seemingly on its own authority
extend the benefits of the Probation Act to the provinces but in reality leaves the entire matter for the
various provincial boards to determine. In other words, the provincial boards of the various provinces
are to determine for themselves, whether the Probation Law shall apply to their provinces or not at
all. The applicability and application of the Probation Act are entirely placed in the hands of the
provincial boards. If the provincial board does not wish to have the Act applied in its province, all that
it has to do is to decline to appropriate the needed amount for the salary of a probation officer. The
plain language of the Act is not susceptible of any other interpretation. This, to our minds, is a virtual
surrender of legislative power to the provincial boards.

"The true distinction", says Judge Ranney, "is between the delegation of power to make the law,
which necessarily involves a discretion as to what it shall be, and conferring an authority or
discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be
done; to the latter no valid objection can be made." (Cincinnati, W. & Z. R. Co. vs. Clinton County
Comrs. [1852]; 1 Ohio St., 77, 88. See also, Sutherland on Statutory Construction, sec 68.) To the
same effect are the decision of this court in Municipality of Cardona vs. Municipality of
Binangonan ([1917], 36 Phil., 547); Rubi vs. Provincial Board of Mindoro ([1919],39 Phil., 660)
and Cruz vs. Youngberg ([1931], 56 Phil., 234). In the first of these cases, this court sustained the
validity of the law conferring upon the Governor-General authority to adjust provincial and municipal
boundaries. In the second case, this court held it lawful for the legislature to direct non-Christian
inhabitants to take up their habitation on unoccupied lands to be selected by the provincial governor
and approved by the provincial board. In the third case, it was held proper for the legislature to vest
in the Governor-General authority to suspend or not, at his discretion, the prohibition of the
importation of the foreign cattle, such prohibition to be raised "if the conditions of the country make
this advisable or if deceased among foreign cattle has ceased to be a menace to the agriculture and
livestock of the lands."

It should be observed that in the case at bar we are not concerned with the simple transference of
details of execution or the promulgation by executive or administrative officials of rules and
regulations to carry into effect the provisions of a law. If we were, recurrence to our own decisions
would be sufficient. (U. S. vs. Barrias [1908], 11 Phil., 327; U.S. vs. Molina [1914], 29 Phil., 119;
Alegre vs. Collector of Customs [1929], 53 Phil., 394; Cebu Autobus Co. vs. De Jesus [1931], 56
Phil., 446; U. S. vs. Gomez [1915], 31 Phil., 218; Rubi vs. Provincial Board of Mindoro [1919], 39
Phil., 660.)

It is connected, however, that a legislative act may be made to the effect as law after it leaves the
hands of the legislature. It is true that laws may be made effective on certain contingencies, as by
proclamation of the executive or the adoption by the people of a particular community (6 R. C. L.,
116, 170-172; Cooley, Constitutional Limitations, 8th ed., Vol. I, p. 227). In Wayman vs. Southard
([1825], 10 Wheat. 1; 6 Law. ed., 253), the Supreme Court of the United State ruled that the
legislature may delegate a power not legislative which it may itself rightfully exercise.(Vide, also,
Dowling vs. Lancashire Ins. Co. [1896], 92 Wis., 63; 65 N. W., 738; 31 L. R. A., 112.) The power to
ascertain facts is such a power which may be delegated. There is nothing essentially legislative in
ascertaining the existence of facts or conditions as the basis of the taking into effect of a law. That is
a mental process common to all branches of the government. (Dowling vs. Lancashire Ins.
Co., supra; In re Village of North Milwaukee [1896], 93 Wis., 616; 97 N.W., 1033; 33 L.R.A., 938;
Nash vs. Fries [1906], 129 Wis., 120; 108 N.W., 210; Field vs. Clark [1892], 143 U.S., 649; 12 Sup.
Ct., 495; 36 Law. ed., 294.) Notwithstanding the apparent tendency, however, to relax the rule
prohibiting delegation of legislative authority on account of the complexity arising from social and
economic forces at work in this modern industrial age (Pfiffner, Public Administration [1936] ch. XX;
Laski, "The Mother of Parliaments", foreign Affairs, July, 1931, Vol. IX, No. 4, pp. 569-579; Beard,
"Squirt-Gun Politics", in Harper's Monthly Magazine, July, 1930, Vol. CLXI, pp. 147, 152), the
orthodox pronouncement of Judge Cooley in his work on Constitutional Limitations finds restatement
in Prof. Willoughby's treatise on the Constitution of the United States in the following language —
speaking of declaration of legislative power to administrative agencies: "The principle which permits
the legislature to provide that the administrative agent may determine when the circumstances are
such as require the application of a law is defended upon the ground that at the time this authority is
granted, the rule of public policy, which is the essence of the legislative act, is determined by the
legislature. In other words, the legislature, as it its duty to do, determines that, under given
circumstances, certain executive or administrative action is to be taken, and that, under other
circumstances, different of no action at all is to be taken. What is thus left to the administrative
official is not the legislative determination of what public policy demands, but simply the
ascertainment of what the facts of the case require to be done according to the terms of the law by
which he is governed." (Willoughby on the Constitution of the United States, 2nd ed., Vol. II, p.
1637.) In Miller vs. Mayer, etc., of New York [1883], 109 U.S., 3 Sup. Ct. Rep., 228; 27 Law. ed.,
971, 974), it was said: "The efficiency of an Act as a declaration of legislative will must, of course,
come from Congress, but the ascertainment of the contingency upon which the Act shall take effect
may be left to such agencies as it may designate." (See, also, 12 C.J., p. 864; State vs. Parker
[1854], 26 Vt., 357; Blanding vs. Burr [1859], 13 Cal., 343, 258.) The legislature, then may provide
that a contingencies leaving to some other person or body the power to determine when the
specified contingencies has arisen. But, in the case at bar, the legislature has not made the
operation of the Prohibition Act contingent upon specified facts or conditions to be ascertained by
the provincial board. It leaves, as we have already said, the entire operation or non-operation of the
law upon the provincial board. the discretion vested is arbitrary because it is absolute and unlimited.
A provincial board need not investigate conditions or find any fact, or await the happening of any
specified contingency. It is bound by no rule, — limited by no principle of expendiency announced by
the legislature. It may take into consideration certain facts or conditions; and, again, it may not. It
may have any purpose or no purpose at all. It need not give any reason whatsoever for refusing or
failing to appropriate any funds for the salary of a probation officer. This is a matter which rest
entirely at its pleasure. The fact that at some future time — we cannot say when — the provincial
boards may appropriate funds for the salaries of probation officers and thus put the law into
operation in the various provinces will not save the statute. The time of its taking into effect, we
reiterate, would yet be based solely upon the will of the provincial boards and not upon the
happening of a certain specified contingency, or upon the ascertainment of certain facts or
conditions by a person or body other than legislature itself.

The various provincial boards are, in practical effect, endowed with the power of suspending the
operation of the Probation Law in their respective provinces. In some jurisdiction, constitutions
provided that laws may be suspended only by the legislature or by its authority. Thus, section 28,
article I of the Constitution of Texas provides that "No power of suspending laws in this state shall be
exercised except by the legislature"; and section 26, article I of the Constitution of Indiana provides
"That the operation of the laws shall never be suspended, except by authority of the General
Assembly." Yet, even provisions of this sort do not confer absolute power of suspension upon the
legislature. While it may be undoubted that the legislature may suspend a law, or the execution or
operation of a law, a law may not be suspended as to certain individuals only, leaving the law to be
enjoyed by others. The suspension must be general, and cannot be made for individual cases or for
particular localities. In Holden vs. James ([1814], 11 Mass., 396; 6 Am. Dec., 174, 177, 178), it was
said:
 By the twentieth article of the declaration of rights in the constitution of this commonwealth, it
is declared that the power of suspending the laws, or the execution of the laws, ought never
to be exercised but by the legislature, or by authority derived from it, to be exercised in such
particular cases only as the legislature shall expressly provide for. Many of the articles in that
declaration of rights were adopted from the Magna Charta of England, and from the bill of
rights passed in the reign of William and Mary. The bill of rights contains an enumeration of
the oppressive acts of James II, tending to subvert and extirpate the protestant religion, and
the laws and liberties of the kingdom; and the first of them is the assuming and exercising a
power of dispensing with and suspending the laws, and the execution of the laws without
consent of parliament. The first article in the claim or declaration of rights contained in the
statute is, that the exercise of such power, by legal authority without consent of parliament, is
illegal. In the tenth section of the same statute it is further declared and enacted, that "No
dispensation by non obstante of or to any statute, or part thereof, should be allowed; but the
same should be held void and of no effect, except a dispensation be allowed of in such
statute." There is an implied reservation of authority in the parliament to exercise the power
here mentioned; because, according to the theory of the English Constitution, "that absolute
despotic power, which must in all governments reside somewhere," is intrusted to the
parliament: 1 Bl. Com., 160.

The principles of our government are widely different in this particular. Here the sovereign
and absolute power resides in the people; and the legislature can only exercise what is
delegated to them according to the constitution. It is obvious that the exercise of the power in
question would be equally oppressive to the subject, and subversive of his right to protection,
"according to standing laws," whether exercised by one man or by a number of men. It
cannot be supposed that the people when adopting this general principle from the English bill
of rights and inserting it in our constitution, intended to bestow by implication on the general
court one of the most odious and oppressive prerogatives of the ancient kings of England. It
is manifestly contrary to the first principles of civil liberty and natural justice, and to the spirit
of our constitution and laws, that any one citizen should enjoy privileges and advantages
which are denied to all others under like circumstances; or that ant one should be subject to
losses, damages, suits, or actions from which all others under like circumstances are
exempted.

To illustrate the principle: A section of a statute relative to dogs made the owner of any dog liable to
the owner of domestic animals wounded by it for the damages without proving a knowledge of it
vicious disposition. By a provision of the act, power was given to the board of supervisors to
determine whether or not during the current year their county should be governed by the provisions
of the act of which that section constituted a part. It was held that the legislature could not confer that
power. The court observed that it could no more confer such a power than to authorize the board of
supervisors of a county to abolish in such county the days of grace on commercial paper, or to
suspend the statute of limitations. (Slinger vs. Henneman [1875], 38 Wis., 504.) A similar statute in
Missouri was held void for the same reason in State vs. Field ([1853, 17 Mo., 529;59 Am. Dec., 275.)
In that case a general statute formulating a road system contained a provision that "if the county
court of any county should be of opinion that the provisions of the act should not be enforced, they
might, in their discretion, suspend the operation of the same for any specified length of time, and
thereupon the act should become inoperative in such county for the period specified in such order;
and thereupon order the roads to be opened and kept in good repair, under the laws theretofore in
force." Said the court: ". . . this act, by its own provisions, repeals the inconsistent provisions of a
former act, and yet it is left to the county court to say which act shall be enforce in their county. The
act does not submit the question to the county court as an original question, to be decided by that
tribunal, whether the act shall commence its operation within the county; but it became by its own
terms a law in every county not excepted by name in the act. It did not, then, require the county court
to do any act in order to give it effect. But being the law in the county, and having by its provisions
superseded and abrogated the inconsistent provisions of previous laws, the county court is . . .
empowered, to suspend this act and revive the repealed provisions of the former act. When the
question is before the county court for that tribunal to determine which law shall be in force, it is urge
before us that the power then to be exercised by the court is strictly legislative power, which under
our constitution, cannot be delegated to that tribunal or to any other body of men in the state. In the
present case, the question is not presented in the abstract; for the county court of Saline county,
after the act had been for several months in force in that county, did by order suspend its operation;
and during that suspension the offense was committed which is the subject of the present indictment
. . . ." (See Mitchell vs. State [1901], 134 Ala., 392; 32 S., 687.)

True, the legislature may enact laws for a particular locality different from those applicable to other
localities and, while recognizing the force of the principle hereinabove expressed, courts in may
jurisdiction have sustained the constitutionality of the submission of option laws to the vote of the
people. (6 R.C.L., p. 171.) But option laws thus sustained treat of subjects purely local in character
which should receive different treatment in different localities placed under different circumstances.
"They relate to subjects which, like the retailing of intoxicating drinks, or the running at large of cattle
in the highways, may be differently regarded in different localities, and they are sustained on what
seems to us the impregnable ground, that the subject, though not embraced within the ordinary
powers of municipalities to make by-laws and ordinances, is nevertheless within the class of public
regulations, in respect to which it is proper that the local judgment should control." (Cooley on
Constitutional Limitations, 5th ed., p. 148.) So that, while we do not deny the right of local self-
government and the propriety of leaving matters of purely local concern in the hands of local
authorities or for the people of small communities to pass upon, we believe that in matters of general
of general legislation like that which treats of criminals in general, and as regards the general subject
of probation, discretion may not be vested in a manner so unqualified and absolute as provided in
Act No. 4221. True, the statute does not expressly state that the provincial boards may suspend the
operation of the Probation Act in particular provinces but, considering that, in being vested with the
authority to appropriate or not the necessary funds for the salaries of probation officers, they thereby
are given absolute discretion to determine whether or not the law should take effect or operate in
their respective provinces, the provincial boards are in reality empowered by the legislature to
suspend the operation of the Probation Act in particular provinces, the Act to be held in abeyance
until the provincial boards should decide otherwise by appropriating the necessary funds. The
validity of a law is not tested by what has been done but by what may be done under its provisions.
(Walter E. Olsen & Co. vs. Aldanese and Trinidad [1922], 43 Phil., 259; 12 C. J., p. 786.)

It in conceded that a great deal of latitude should be granted to the legislature not only in the
expression of what may be termed legislative policy but in the elaboration and execution thereof.
"Without this power, legislation would become oppressive and yet imbecile." (People vs. Reynolds, 5
Gilman, 1.) It has been said that popular government lives because of the inexhaustible reservoir of
power behind it. It is unquestionable that the mass of powers of government is vested in the
representatives of the people and that these representatives are no further restrained under our
system than by the express language of the instrument imposing the restraint, or by particular
provisions which by clear intendment, have that effect. (Angara vs. Electoral Commission [1936], 35
Off. Ga., 23; Schneckenburger vs. Moran [1936], 35 Off. Gaz., 1317.) But, it should be borne in mind
that a constitution is both a grant and a limitation of power and one of these time-honored limitations
is that, subject to certain exceptions, legislative power shall not be delegated.

We conclude that section 11 of Act No. 4221 constitutes an improper and unlawful delegation of
legislative authority to the provincial boards and is, for this reason, unconstitutional and void.

3. It is also contended that the Probation Act violates the provisions of our Bill of Rights which
prohibits the denial to any person of the equal protection of the laws (Act. III, sec. 1 subsec. 1.
Constitution of the Philippines.)
This basic individual right sheltered by the Constitution is a restraint on all the tree grand
departments of our government and on the subordinate instrumentalities and subdivision thereof,
and on many constitutional power, like the police power, taxation and eminent domain. The equal
protection of laws, sententiously observes the Supreme Court of the United States, "is a pledge of
the protection of equal laws." (Yick Wo vs. Hopkins [1886], 118 U. S., 356; 30 Law. ed., 220; 6 Sup.
Ct. Rep., 10464; Perley vs. North Carolina, 249 U. S., 510; 39 Sup. Ct. Rep., 357; 63 Law. ed., 735.)
Of course, what may be regarded as a denial of the equal protection of the laws in a question not
always easily determined. No rule that will cover every case can be formulated. (Connolly vs. Union
Sewer Pipe Co. [1902], 184, U. S., 540; 22 Sup. Ct., Rep., 431; 46 Law. ed., 679.) Class legislation
discriminating against some and favoring others in prohibited. But classification on a reasonable
basis, and nor made arbitrarily or capriciously, is permitted. (Finely vs. California [1911], 222 U. S.,
28; 56 Law. ed., 75; 32 Sup. Ct. Rep., 13; Gulf. C. & S. F. Ry Co. vs. Ellis [1897], 165 U. S., 150; 41
Law. ed., 666; 17 Sup. Ct. Rep., 255; Smith, Bell & Co. vs. Natividad [1919], 40 Phil., 136.) The
classification, however, to be reasonable must be based on substantial distinctions which make real
differences; it must be germane to the purposes of the law; it must not be limited to existing
conditions only, and must apply equally to each member of the class. (Borgnis vs. Falk. Co. [1911],
147 Wis., 327, 353; 133 N. W., 209; 3 N. C. C. A., 649; 37 L. R. A. [N. S.], 489; State vs. Cooley, 56
Minn., 540; 530-552; 58 N. W., 150; Lindsley vs. Natural Carbonic Gas Co.[1911], 220 U. S., 61, 79,
55 Law. ed., 369, 377; 31 Sup. Ct. Rep., 337; Ann. Cas., 1912C, 160; Lake Shore & M. S. R. Co. vs.
Clough [1917], 242 U.S., 375; 37 Sup. Ct. Rep., 144; 61 Law. ed., 374; Southern Ry. Co. vs. Greene
[1910], 216 U. S., 400; 30 Sup. Ct. Rep., 287; 54 Law. ed., 536; 17 Ann. Cas., 1247; Truax vs.
Corrigan [1921], 257 U. S., 312; 12 C. J., pp. 1148, 1149.)

In the case at bar, however, the resultant inequality may be said to flow from the unwarranted
delegation of legislative power, although perhaps this is not necessarily the result in every case.
Adopting the example given by one of the counsel for the petitioners in the course of his oral
argument, one province may appropriate the necessary fund to defray the salary of a probation
officer, while another province may refuse or fail to do so. In such a case, the Probation Act would
be in operation in the former province but not in the latter. This means that a person otherwise
coming within the purview of the law would be liable to enjoy the benefits of probation in one
province while another person similarly situated in another province would be denied those same
benefits. This is obnoxious discrimination. Contrariwise, it is also possible for all the provincial
boards to appropriate the necessary funds for the salaries of the probation officers in their respective
provinces, in which case no inequality would result for the obvious reason that probation would be in
operation in each and every province by the affirmative action of appropriation by all the provincial
boards. On that hypothesis, every person coming within the purview of the Probation Act would be
entitled to avail of the benefits of the Act. Neither will there be any resulting inequality if no province,
through its provincial board, should appropriate any amount for the salary of the probation officer —
which is the situation now — and, also, if we accept the contention that, for the purpose of the
Probation Act, the City of Manila should be considered as a province and that the municipal board of
said city has not made any appropriation for the salary of the probation officer. These different
situations suggested show, indeed, that while inequality may result in the application of the law and
in the conferment of the benefits therein provided, inequality is not in all cases the necessary result.
But whatever may be the case, it is clear that in section 11 of the Probation Act creates a situation in
which discrimination and inequality are permitted or allowed. There are, to be sure, abundant
authorities requiring actual denial of the equal protection of the law before court should assume the
task of setting aside a law vulnerable on that score, but premises and circumstances considered, we
are of the opinion that section 11 of Act No. 4221 permits of the denial of the equal protection of the
law and is on that account bad. We see no difference between a law which permits of such denial. A
law may appear to be fair on its face and impartial in appearance, yet, if it permits of unjust and
illegal discrimination, it is within the constitutional prohibitions. (By analogy, Chy Lung vs. Freeman
[1876], 292 U. S., 275; 23 Law. ed., 550; Henderson vs. Mayor [1876], 92 U. S., 259; 23 Law. ed.,
543; Ex parte Virginia [1880], 100 U. S., 339; 25 Law. ed., 676; Neal vs. Delaware [1881], 103 U. S.,
370; 26 Law. ed., 567; Soon Hing vs. Crowley [1885], 113 U. S., 703; 28 Law. ed., 1145, Yick Wo
vs. Hopkins [1886],118 U. S., 356; 30 Law. ed., 220; Williams vs. Mississippi [1897], 170 U. S., 218;
18 Sup. Ct. Rep., 583; 42 Law. ed., 1012; Bailey vs. Alabama [1911], 219 U. S., 219; 31 Sup. Ct.
Rep. 145; 55 Law. ed., Sunday Lake Iron Co. vs. Wakefield [1918], 247 U. S., 450; 38 Sup. Ct. Rep.,
495; 62 Law. ed., 1154.) In other words, statutes may be adjudged unconstitutional because of their
effect in operation (General Oil Co. vs. Clain [1907], 209 U. S., 211; 28 Sup. Ct. Rep., 475; 52 Law.
ed., 754; State vs. Clement Nat. Bank [1911], 84 Vt., 167; 78 Atl., 944; Ann. Cas., 1912D, 22). If the
law has the effect of denying the equal protection of the law it is unconstitutional. (6 R. C. L. p. 372;
Civil Rights Cases, 109 U. S., 3; 3 Sup. Ct. Rep., 18; 27 Law. ed., 835; Yick Wo vs. Hopkins, supra;
State vs. Montgomery, 94 Me., 192; 47 Atl., 165; 80 A. S. R., 386; State vs. Dering, 84 Wis., 585; 54
N. W., 1104; 36 A. S. R., 948; 19 L. R. A., 858.) Under section 11 of the Probation Act, not only may
said Act be in force in one or several provinces and not be in force in other provinces, but one
province may appropriate for the salary of the probation officer of a given year — and have probation
during that year — and thereafter decline to make further appropriation, and have no probation is
subsequent years. While this situation goes rather to the abuse of discretion which delegation
implies, it is here indicated to show that the Probation Act sanctions a situation which is intolerable in
a government of laws, and to prove how easy it is, under the Act, to make the guaranty of the
equality clause but "a rope of sand". (Brewer, J. Gulf C. & S. F. Ry. Co. vs. Ellis [1897], 165 U. S.,
150 154; 41 Law. ed., 666; 17 Sup. Ct. Rep., 255.) lawph!1.net

Great reliance is placed by counsel for the respondents on the case of Ocampo vs. United States
([1914], 234 U. S., 91; 58 Law. ed., 1231). In that case, the Supreme Court of the United States
affirmed the decision of this court (18 Phil., 1) by declining to uphold the contention that there was a
denial of the equal protection of the laws because, as held in Missouri vs. Lewis (Bowman vs. Lewis)
decided in 1880 (101 U. S., 220; 25 Law. ed., 991), the guaranty of the equality clause does not
require territorial uniformity. It should be observed, however, that this case concerns the right to
preliminary investigations in criminal cases originally granted by General Orders No. 58. No question
of legislative authority was involved and the alleged denial of the equal protection of the laws was
the result of the subsequent enactment of Act No. 612, amending the charter of the City of Manila
(Act No. 813) and providing in section 2 thereof that "in cases triable only in the court of first instance
of the City of Manila, the defendant . . . shall not be entitled as of right to a preliminary examination
in any case where the prosecuting attorney, after a due investigation of the facts . . . shall have
presented an information against him in proper form . . . ." Upon the other hand, an analysis of the
arguments and the decision indicates that the investigation by the prosecuting attorney — although
not in the form had in the provinces — was considered a reasonable substitute for the City of Manila,
considering the peculiar conditions of the city as found and taken into account by the legislature
itself.

Reliance is also placed on the case of Missouri vs. Lewis, supra. That case has reference to a
situation where the constitution of Missouri permits appeals to the Supreme Court of the state from
final judgments of any circuit court, except those in certain counties for which counties the
constitution establishes a separate court of appeals called St. Louis Court of Appeals. The provision
complained of, then, is found in the constitution itself and it is the constitution that makes the
apportionment of territorial jurisdiction.

We are of the opinion that section 11 of the Probation Act is unconstitutional and void because it is
also repugnant to equal-protection clause of our Constitution.

Section 11 of the Probation Act being unconstitutional and void for the reasons already stated, the
next inquiry is whether or not the entire Act should be avoided.
 In seeking the legislative intent, the presumption is against any mutilation of a statute, and
the courts will resort to elimination only where an unconstitutional provision is interjected into
a statute otherwise valid, and is so independent and separable that its removal will leave the
constitutional features and purposes of the act substantially unaffected by the process.
(Riccio vs. Hoboken, 69 N. J. Law., 649, 662; 63 L. R. A., 485; 55 Atl., 1109, quoted in
Williams vs. Standard Oil Co. [1929], 278 U.S., 235, 240; 73 Law. ed., 287, 309; 49 Sup. Ct.
Rep., 115; 60 A. L. R., 596.) In Barrameda vs. Moir ([1913], 25 Phil., 44, 47), this court stated
the well-established rule concerning partial invalidity of statutes in the following language:

. . . where part of the a statute is void, as repugnant to the Organic Law, while another part is
valid, the valid portion, if separable from the valid, may stand and be enforced. But in order
to do this, the valid portion must be in so far independent of the invalid portion that it is fair to
presume that the Legislative would have enacted it by itself if they had supposed that they
could not constitutionally enact the other. (Mutual Loan Co. vs. Martell, 200 Mass., 482; 86
N. E., 916; 128 A. S. R., 446; Supervisors of Holmes Co. vs. Black Creek Drainage District,
99 Miss., 739; 55 Sou., 963.) Enough must remain to make a complete, intelligible, and valid
statute, which carries out the legislative intent. (Pearson vs. Bass. 132 Ga., 117; 63 S. E.,
798.) The void provisions must be eliminated without causing results affecting the main
purpose of the Act, in a manner contrary to the intention of the Legislature. (State vs. A. C. L.
R., Co., 56 Fla., 617, 642; 47 Sou., 969; Harper vs. Galloway, 58 Fla., 255; 51 Sou., 226; 26
L. R. A., N. S., 794; Connolly vs. Union Sewer Pipe Co., 184 U. S., 540, 565; People vs.
Strassheim, 240 Ill., 279, 300; 88 N. E., 821; 22 L. R. A., N. S., 1135; State vs. Cognevich,
124 La., 414; 50 Sou., 439.) The language used in the invalid part of a statute can have no
legal force or efficacy for any purpose whatever, and what remains must express the
legislative will, independently of the void part, since the court has no power to legislate.
(State vs. Junkin, 85 Neb., 1; 122 N. W., 473; 23 L. R. A., N. S., 839; Vide, also,. U. S., vs.
Rodriguez [1918], 38 Phil., 759; Pollock vs. Farmers' Loan and Trust Co. [1895], 158 U. S.,
601, 635; 39 Law. ed., 1108, 1125; 15 Sup. Ct. Rep., 912; 6 R.C.L., 121.)

It is contended that even if section 11, which makes the Probation Act applicable only in those
provinces in which the respective provincial boards provided for the salaries of probation officers
were inoperative on constitutional grounds, the remainder of the Act would still be valid and may be
enforced. We should be inclined to accept the suggestions but for the fact that said section is, in our
opinion, is inseparably linked with the other portions of the Act that with the elimination of the section
what would be left is the bare idealism of the system, devoid of any practical benefit to a large
number of people who may be deserving of the intended beneficial result of that system. The clear
policy of the law, as may be gleaned from a careful examination of the whole context, is to make the
application of the system dependent entirely upon the affirmative action of the different provincial
boards through appropriation of the salaries for probation officers at rates not lower than those
provided for provincial fiscals. Without such action on the part of the various boards, no probation
officers would be appointed by the Secretary of Justice to act in the provinces. The Philippines is
divided or subdivided into provinces and it needs no argument to show that if not one of the
provinces — and this is the actual situation now — appropriate the necessary fund for the salary of a
probation officer, probation under Act No. 4221 would be illusory. There can be no probation without
a probation officer. Neither can there be a probation officer without the probation system.

Section 2 of the Acts provides that the probation officer shall supervise and visit the probationer.
Every probation officer is given, as to the person placed in probation under his care, the powers of
the police officer. It is the duty of the probation officer to see that the conditions which are imposed
by the court upon the probationer under his care are complied with. Among those conditions, the
following are enumerated in section 3 of the Act:

That the probationer (a) shall indulge in no injurious or vicious habits;

 (b) Shall avoid places or persons of disreputable or harmful character;

(c) Shall report to the probation officer as directed by the court or probation officers;

(d) Shall permit the probation officer to visit him at reasonable times at his place of abode or
elsewhere;

(e) Shall truthfully answer any reasonable inquiries on the part of the probation officer
concerning his conduct or condition; "(f) Shall endeavor to be employed regularly; "(g) Shall
remain or reside within a specified place or locality;

(f) Shall make reparation or restitution to the aggrieved parties for actual damages or losses
caused by his offense;

(g) Shall comply with such orders as the court may from time to time make; and

(h) Shall refrain from violating any law, statute, ordinance, or any by-law or regulation,
promulgated in accordance with law.

The court is required to notify the probation officer in writing of the period and terms of probation.
Under section 4, it is only after the period of probation, the submission of a report of the probation
officer and appropriate finding of the court that the probationer has complied with the conditions of
probation that probation may be definitely terminated and the probationer finally discharged from
supervision. Under section 5, if the court finds that there is non-compliance with said conditions, as
reported by the probation officer, it may issue a warrant for the arrest of the probationer and said
probationer may be committed with or without bail. Upon arraignment and after an opportunity to be
heard, the court may revoke, continue or modify the probation, and if revoked, the court shall order
the execution of the sentence originally imposed. Section 6 prescribes the duties of probation
officers: "It shall be the duty of every probation officer to furnish to all persons placed on probation
under his supervision a statement of the period and conditions of their probation, and to instruct
them concerning the same; to keep informed concerning their conduct and condition; to aid and
encourage them by friendly advice and admonition, and by such other measures, not inconsistent
with the conditions imposed by court as may seem most suitable, to bring about improvement in their
conduct and condition; to report in writing to the court having jurisdiction over said probationers at
least once every two months concerning their conduct and condition; to keep records of their work;
make such report as are necessary for the information of the Secretary of Justice and as the latter
may require; and to perform such other duties as are consistent with the functions of the probation
officer and as the court or judge may direct. The probation officers provided for in this Act may act as
parole officers for any penal or reformatory institution for adults when so requested by the authorities
thereof, and, when designated by the Secretary of Justice shall act as parole officer of persons
released on parole under Act Number Forty-one Hundred and Three, without additional
compensation."

It is argued, however, that even without section 11 probation officers maybe appointed in the
provinces under section 10 of Act which provides as follows:

There is hereby created in the Department of Justice and subject to its supervision and
control, a Probation Office under the direction of a Chief Probation Officer to be appointed by
the Governor-General with the advise and consent of the Senate who shall receive a salary
of four eight hundred pesos per annum. To carry out this Act there is hereby appropriated out
of any funds in the Insular Treasury not otherwise appropriated, the sum of fifty thousand
pesos to be disbursed by the Secretary of Justice, who is hereby authorized to appoint
 probation officers and the administrative personnel of the probation officer under civil service
regulations from among those who possess the qualifications, training and experience
prescribed by the Bureau of Civil Service, and shall fix the compensation of such probation
officers and administrative personnel until such positions shall have been included in the
Appropriation Act.

But the probation officers and the administrative personnel referred to in the foregoing section are
clearly not those probation officers required to be appointed for the provinces under section 11. It
may be said, reddendo singula singulis, that the probation officers referred to in section 10 above-
quoted are to act as such, not in the various provinces, but in the central office known as the
Probation Office established in the Department of Justice, under the supervision of the Chief
Probation Officer. When the law provides that "the probation officer" shall investigate and make
reports to the court (secs. 1 and 4); that "the probation officer" shall supervise and visit the
probationer (sec. 2; sec. 6, par. d); that the probationer shall report to the "probationer officer" (sec.
3, par. c.), shall allow "the probationer officer" to visit him (sec. 3, par. d), shall truthfully answer any
reasonable inquiries on the part of "the probation officer" concerning his conduct or condition (sec. 3,
par. 4); that the court shall notify "the probation officer" in writing of the period and terms of probation
(sec. 3, last par.), it means the probation officer who is in charge of a particular probationer in a
particular province. It never could have been intention of the legislature, for instance, to require the
probationer in Batanes, to report to a probationer officer in the City of Manila, or to require a
probation officer in Manila to visit the probationer in the said province of Batanes, to place him under
his care, to supervise his conduct, to instruct him concerning the conditions of his probation or to
perform such other functions as are assigned to him by law.

That under section 10 the Secretary of Justice may appoint as many probation officers as there are
provinces or groups of provinces is, of course possible. But this would be arguing on what the law
may be or should be and not on what the law is. Between is and ought there is a far cry. The wisdom
and propriety of legislation is not for us to pass upon. We may think a law better otherwise than it is.
But much as has been said regarding progressive interpretation and judicial legislation we decline to
amend the law. We are not permitted to read into the law matters and provisions which are not there.
Not for any purpose — not even to save a statute from the doom of invalidity.

Upon the other hand, the clear intention and policy of the law is not to make the Insular Government
defray the salaries of probation officers in the provinces but to make the provinces defray them
should they desire to have the Probation Act apply thereto. The sum of P50,000, appropriated "to
carry out the purposes of this Act", is to be applied, among other things, for the salaries of probation
officers in the central office at Manila. These probation officers are to receive such compensations
as the Secretary of Justice may fix "until such positions shall have been included in the Appropriation
Act". It was the intention of the legislature to empower the Secretary of Justice to fix the salaries of
the probation officers in the provinces or later on to include said salaries in an appropriation act.
Considering, further, that the sum of P50,000 appropriated in section 10 is to cover, among other
things, the salaries of the administrative personnel of the Probation Office, what would be left of the
amount can hardly be said to be sufficient to pay even nominal salaries to probation officers in the
provinces. We take judicial notice of the fact that there are 48 provinces in the Philippines and we do
not think it is seriously contended that, with the fifty thousand pesos appropriated for the central
office, there can be in each province, as intended, a probation officer with a salary not lower than
that of a provincial fiscal. If this a correct, the contention that without section 11 of Act No. 4221 said
act is complete is an impracticable thing under the remainder of the Act, unless it is conceded that in
our case there can be a system of probation in the provinces without probation officers.

Probation as a development of a modern penology is a commendable system. Probation laws have

been enacted, here and in other countries, to permit what modern criminologist call the
"individualization of the punishment", the adjustment of the penalty to the character of the criminal
and the circumstances of his particular case. It provides a period of grace in order to aid in the
rehabilitation of a penitent offender. It is believed that, in any cases, convicts may be reformed and
their development into hardened criminals aborted. It, therefore, takes advantage of an opportunity
for reformation and avoids imprisonment so long as the convicts gives promise of reform. (United
States vs. Murray [1925], 275 U. S., 347 357, 358; 72 Law. ed., 309; 312, 313; 48 Sup. Ct. Rep.,
146; Kaplan vs. Hecht, 24 F. [2d], 664, 665.) The Welfare of society is its chief end and aim. The
benefit to the individual convict is merely incidental. But while we believe that probation is
commendable as a system and its implantation into the Philippines should be welcomed, we are
forced by our inescapable duty to set the law aside because of the repugnancy to our fundamental
law.

In arriving at this conclusion, we have endeavored to consider the different aspects presented by
able counsel for both parties, as well in their memorandums as in their oral argument. We have
examined the cases brought to our attention, and others we have been able to reach in the short
time at our command for the study and deliberation of this case. In the examination of the cases and
in then analysis of the legal principles involved we have inclined to adopt the line of action which in
our opinion, is supported better reasoned authorities and is more conducive to the general welfare.
(Smith, Bell & Co. vs. Natividad [1919], 40 Phil., 136.) Realizing the conflict of authorities, we have
declined to be bound by certain adjudicated cases brought to our attention, except where the point
or principle is settled directly or by clear implication by the more authoritative pronouncements of the
Supreme Court of the United States. This line of approach is justified because:

(a) The constitutional relations between the Federal and the State governments of the United
States and the dual character of the American Government is a situation which does not
obtain in the Philippines;

(b) The situation of s state of the American Union of the District of Columbia with reference to
the Federal Government of the United States is not the situation of the province with respect
to the Insular Government (Art. I, sec. 8 cl. 17 and 10th Amendment, Constitution of the
United States; Sims vs. Rives, 84 Fed. [2d], 871),

(c) The distinct federal and the state judicial organizations of the United States do not
embrace the integrated judicial system of the Philippines (Schneckenburger vs. Moran
[1936], 35 Off. Gaz., p. 1317);

(d) "General propositions do not decide concrete cases" (Justice Holmes in Lochner vs. New
York [1904], 198 U. S., 45, 76; 49 Law. ed., 937, 949) and, "to keep pace with . . . new
developments of times and circumstances" (Chief Justice Waite in Pensacola Tel. Co. vs.
Western Union Tel. Co. [1899], 96 U. S., 1, 9; 24 Law. ed., 708; Yale Law Journal, Vol. XXIX,
No. 2, Dec. 1919, 141, 142), fundamental principles should be interpreted having in view
existing local conditions and environment.

Act No. 4221 is hereby declared unconstitutional and void and the writ of prohibition is, accordingly,
granted. Without any pronouncement regarding costs. So ordered.

G.R. No. L-34674 October 26, 1931

MAURICIO CRUZ, petitioner-appellant,
vs.
STANTON YOUNGBERG, Director of the Bureau of Animal Industry, respondent-appellee.

Jose Yulo for appellant.

Office of the Solicitor-General Reyes for appellee.

OSTRAND, J.:

This is a petition brought originally before the Court of First Instance of Manila for the issuance of a
writ of mandatory injunction against the respondent, Stanton Youngberg, as Director of the Bureau
of Animal Industry, requiring him to issue a permit for the landing of ten large cattle imported by the
petitioner and for the slaughter thereof. The petitioner attacked the constitutionality of Act No. 3155,
which at present prohibits the importation of cattle from foreign countries into the Philippine Islands.

Among other things in the allegation of the petition, it is asserted that "Act No. 3155 of the Philippine
Legislature was enacted for the sole purpose of preventing the introduction of cattle diseases into
the Philippine Islands from foreign countries, as shown by an explanatory note and text of Senate
Bill No. 328 as introduced in the Philippine Legislature, ... ." The Act in question reads as follows:

SECTION 1. After March thirty-first, nineteen hundred and twenty-five existing contracts for
the importation of cattle into this country to the contrary notwithstanding, it shall be strictly
prohibited to import, bring or introduce into the Philippine Islands any cattle from foreign
countries: Provided, however, That at any time after said date, the Governor-General, with
the concurrence of the presiding officers of both Houses, may raise such prohibition entirely
or in part if the conditions of the country make this advisable or if decease among foreign
cattle has ceased to be a menace to the agriculture and live stock of the lands.

SEC. 2. All acts or parts of acts inconsistent with this Act are hereby repealed.

SEC. 3. This Act shall take effect on its approval.

Approved, March 8, 1924.

The respondent demurred to the petition on the ground that it did not state facts sufficient to
constitute a cause of action. The demurrer was based on two reasons, namely, (1) that if Act No.
3155 were declared unconstitutional and void, the petitioner would not be entitled to the relief
demanded because Act No. 3052 would automatically become effective and would prohibit the
respondent from giving the permit prayed for; and (2) that Act No. 3155 was constitutional and,
therefore, valid.

The court sustained the demurrer and the complaint was dismissed by reason of the failure of the
petitioner to file another complaint. From that order of dismissal, the petitioner appealed to this court.

The appellee contends that even if Act No. 3155 be declared unconstitutional by the fact alleged by
the petitioner in his complaint, still the petitioner can not be allowed to import cattle from Australia for
the reason that, while Act No. 3155 were declared unconstitutional, Act No. 3052 would
automatically become effective. Act No. 3052 reads as follows:
 SECTION 1. Section seventeen hundred and sixty-two of Act Numbered Twenty-seven
hundred and eleven, known as the Administrative Code, is hereby amended to read as
follows:

"SEC. 1762. Bringing of animals imported from foreign countries into the Philippine
Islands. — It shall be unlawful for any person or corporation to import, bring or
introduce live cattle into the Philippine Islands from any foreign country. The Director
of Agriculture may, with the approval of the head of the department first had,
authorize the importation, bringing or introduction of various classes of thoroughbred
cattle from foreign countries for breeding the same to the native cattle of these
Islands, and such as may be necessary for the improvement of the breed, not to
exceed five hundred head per annum: Provided, however, That the Director of
Agriculture shall in all cases permit the importation, bringing or introduction of draft
cattle and bovine cattle for the manufacture of serum: Provided, further, That all live
cattle from foreign countries the importation, bringing or introduction of which into the
Islands is authorized by this Act, shall be submitted to regulations issued by the
Director of Agriculture, with the approval of the head of the department, prior to
authorizing its transfer to other provinces.

"At the time of the approval of this Act, the Governor-General shall issue regulations
and others to provide against a raising of the price of both fresh and refrigerated
meat. The Governor-General also may, by executive order, suspend, this prohibition
for a fixed period in case local conditions require it."

SEC. 2. This Act shall take effect six months after approval.

Approved, March 14, 1922.

The petitioner does not present any allegations in regard to Act No. 3052 to show its nullity or
unconstitutionality though it appears clearly that in the absence of Act No. 3155 the former act would
make it impossible for the Director of the Bureau of Animal Industry to grant the petitioner a permit
for the importation of the cattle without the approval of the head of the corresponding department.

An unconstitutional statute can have no effect to repeal former laws or parts of laws by
implication, since, being void, it is not inconsistent with such former laws. (I Lewis
Sutherland, Statutory Construction 2nd ed., p. 458, citing McAllister vs. Hamlin, 83 Cal., 361;
23 Pac., 357; Orange Country vs. Harris, 97 Cal., 600; 32 Pac., 594; Carr vs. State, 127 Ind.,
204; 11 L.R.A., 370, etc.)

This court has several times declared that it will not pass upon the constitutionality of statutes unless
it is necessary to do so (McGirr vs. Hamilton and Abreu, 30 Phil., 563, 568; Walter E. Olsen &
Co. vs. Aldanese and Trinidad, 43 Phil., 259) but in this case it is not necessary to pass upon the
validity of the statute attacked by the petitioner because even if it were declared unconstitutional, the
petitioner would not be entitled to relief inasmuch as Act No. 3052 is not in issue.

But aside from the provisions of Act No. 3052, we are of the opinion that Act No. 3155 is entirely
valid. As shown in paragraph 8 of the amended petition, the Legislature passed Act No. 3155 to
protect the cattle industry of the country and to prevent the introduction of cattle diseases through
importation of foreign cattle. It is now generally recognized that the promotion of industries affecting
the public welfare and the development of the resources of the country are objects within the scope
of the police power (12 C.J., 927; 6 R.C.L., 203-206 and decisions cited therein; Reid vs. Colorado,
187 U.S., 137, 147, 152; Yeazel vs. Alexander, 58 Ill., 254). In this connection it is said in the case of
Punzalan vs. Ferriols and Provincial Board of Batangas (19 Phil., 214), that the provisions of the Act
of Congress of July 1, 1902, did not have the effect of denying to the Government of the Philippine
Islands the right to the exercise of the sovereign police power in the promotion of the general welfare
and the public interest. The facts recited in paragraph 8 of the amended petition shows that at the
time the Act No. 3155 was promulgated there was reasonable necessity therefor and it cannot be
said that the Legislature exceeded its power in passing the Act. That being so, it is not for this court
to avoid or vacate the Act upon constitutional grounds nor will it assume to determine whether the
measures are wise or the best that might have been adopted. (6 R.C.L., 243 and decisions cited
therein.)
1awphil.net

In his third assignment of error the petitioner claims that "The lower court erred in not holding that
the power given by Act No. 3155 to the Governor-General to suspend or not, at his discretion, the
prohibition provided in the act constitutes an unlawful delegation of the legislative powers." We do
not think that such is the case; as Judge Ranney of the Ohio Supreme Court in Cincinnati,
Wilmington and Zanesville Railroad Co. vs. Commissioners of Clinton County (1 Ohio St., 77, 88)
said in such case:

The true distinction, therefore, is between the delegation of power to make the law, which
necessarily involves a discretion as to what it shall be, and conferring an authority or
discretion as to its execution, to be exercised under and in pursuance of the law. The first
cannot be done; to the latter no valid objection can be made.

Under his fourth assignment of error the appellant argues that Act No. 3155 amends section 3 of the
Tariff Law, but it will be noted that Act No. 3155 is not an absolute prohibition of the importation of
cattle and it does not add any provision to section 3 of the Tariff Law. As stated in the brief of the
Attorney-General: "It is a complete statute in itself. It does not make any reference to the Tariff Law.
It does not permit the importation of articles, whose importation is prohibited by the Tariff Law. It is
not a tariff measure but a quarantine measure, a statute adopted under the police power of the
Philippine Government. It is at most a `supplement' or an `addition' to the Tariff Law. (See
MacLeary vs. Babcock, 82 N.E., 453, 455; 169 Ind., 228 for distinction between `supplemental' and
`amendatory' and O'Pry vs. U.S., 249 U.S., 323; 63 Law. ed., 626, for distinction between `addition'
and `amendment.')"

The decision appealed from is affirmed with the costs against the appellant. So ordered.

EN BANC
WILLIAM C. DAGAN, CARLOS G.R. No. 175220
H. REYES, NARCISO MORALES,
BONIFACIO MANTILLA, Present:
CESAR AZURIN, WEITONG LIM,
MA. TERESA TRINIDAD, MA. PUNO, C.J.,
CARMELITA FLORENTINO, QUISUMBING,
Petitioners, YNARES-SANTIAGO,
CARPIO,
AUSTRIA-MARTINEZ,
CORONA,
- versus - CARPIO MORALES,
AZCUNA,
TINGA,
CHICO-NAZARIO,
VELASCO, JR.,
PHILIPPINE RACING COMMISSION, NACHURA,
MANILA JOCKEY CLUB, INC., and LEONARDO DE CASTRO,
PHILIPPINE RACING CLUB, INC., BRION, and
Respondents PERALTA, JJ.

Promulgated:

February 12, 2009

x ----------------------------------------------------------------------------------- x

DECISION

TINGA, J.:

The subject of this petition for certiorari is the decision[1] of the Court of
Appeals in CA-G.R. SP No. 95212, affirming in toto the judgment[2] of the
Regional Trial Court of Makati in Civil Case No. 04-1228.

The controversy stemmed from the 11 August 2004 directive[3] issued by the
Philippine Racing Commission (Philracom) directing the Manila Jockey Club, Inc.
(MJCI) and Philippine Racing Club, Inc. (PRCI) to immediately come up with
their respective Clubs House Rule to address Equine Infectious Anemia
(EIA)[4] problem and to rid their facilities of horses infected with EIA. Said
directive was issued pursuant to Administrative Order No. 5[5] dated 28 March
1994 by the Department of Agriculture declaring it unlawful for any person, firm
or corporation to ship, drive, or transport horses from any locality or place except
when accompanied by a certificate issued by the authority of the Director of the
Bureau of Animal Industry (BAI).[6]
 In compliance with the directive, MJCI and PRCI ordered the owners of
racehorses stable in their establishments to submit the horses to blood sampling
and administration of the Coggins Test to determine whether they are afflicted with
the EIA virus. Subsequently, on 17 September 2004, Philracom issued copies of
the guidelines for the monitoring and eradication of EIA.[7]

Petitioners and racehorse owners William Dagan (Dagan), Carlos Reyes,

Narciso Morales, Bonifacio Montilla, Cezar Azurin, Weitong Lim, Ma. Teresa
Trinidad and Ma. Carmelita Florentino refused to comply with the directive. First,
they alleged that there had been no prior consultation with horse owners. Second,
they claimed that neither official guidelines nor regulations had been issued
relative to the taking of blood samples. And third, they asserted that no
documented case of EIA had been presented to justify the undertaking.[8]

Despite resistance from petitioners, the blood testing proceeded. The horses,
whose owners refused to comply were banned from the races, were removed from
the actual day of race, prohibited from renewing their licenses or evicted from their
stables.

When their complaint went unheeded, the racehorse owners lodged a complaint
before the Office of the President (OP) which in turn issued a directive instructing
Philracom to investigate the matter.
For failure of Philracom to act upon the directive of the OP, petitioners filed a
petition for injunction with application for the issuance of a temporary restraining
order (TRO). In an order[9] dated 11 November 2004, the trial court issued a TRO.

Dagan refused to comply with the directives because, according to him, the same
are unfair as there are no implementing rules on the banning of sick horses from
races.Consequently, his horses were evicted from the stables and transferred to an
isolation area. He also admitted that three of his horses had been found positive for
EIA.[10]

Confronted with two issues, namely: whether there were valid grounds for the
issuance of a writ of injunction and whether respondents had acted with whim and
caprice in the implementation of the contested guideline, the trial court resolved
both queries in the negative.

The trial court found that most racehorse owners, except for Dagan, had already
subjected their racehorses to EIA testing. Their act constituted demonstrated
compliance with the contested guidelines, according to the trial court. Hence, the
acts sought to be enjoined had been rendered moot and academic.

With respect to the subject guidelines, the trial court upheld their validity as an
exercise of police power, thus:
The Petitioners submission that the subject guidelines are
oppressive and hence confiscatory of proprietary rights is likewise
viewed by this Court to be barren of factual and legal support. The
horseracing industry, needless to state, is imbued with public interest
deserving of utmost concern if not constant vigilance. The Petitioners do
not dispute this. It is because of this basic fact that respondents are
expected to police the concerned individuals and adopt measures that
will promote and protect the interests of all the stakeholders starting
from the moneyed horse-owners, gawking bettors down to the lowly
maintainers of the stables. This is a clear and valid exercise of police
power with the respondents acting for the State. Participation in the
business of horseracing is but a privilege; it is not a right. And no clear
acquiescence to this postulation can there be than the Petitioners' own
undertaking to abide by the rules and conditions issued and imposed by
the respondents as specifically shown by their contracts of lease with
MCJI.[11]

Petitioners appealed to the Court of Appeals. In its Decision dated 27

October 2006, the appellate court affirmed in toto the decision of the trial court.

The appellate court upheld the authority of Philracom to formulate

guidelines since it is vested with exclusive jurisdiction over and control of the
horse-racing industry per Section 8 of Presidential Decree (P.D.) No. 8. The
appellate court further pointed out that P.D. No. 420 also endows Philracom with
the power to prescribe additional rules and regulations not otherwise inconsistent
with the said presidential decree[12] and to perform such duties and exercise all
powers incidental or necessary to the accomplishment of its aims and
objectives.[13] It similarly concluded that the petition for prohibition should be
dismissed on the ground of mootness in light of evidence indicating that petitioners
had already reconsidered their refusal to have their horses tested and had, in fact,
subsequently requested the administration of the test to the horses.[14]

Aggrieved by the appellate courts decision, petitioners filed the instant

certiorari petition[15] imputing grave abuse of discretion on the part of respondents
in compelling petitioners to subject their racehorses to blood testing.
In their amended petition,[16] petitioners allege that Philracoms unsigned and
undated implementing guidelines suffer from several infirmities. They maintain
that the assailed guidelines do not comply with due process
requirements. Petitioners insist that racehorses already in the MJCI stables were
allowed to be so quartered because the individual horse owners had already
complied with the Philracom regulation that horses should not bear any disease.
There was neither a directive nor a rule that racehorses already lodged in the
stables of the racing clubs should again be subjected to the collection of blood
samples preparatory to the conduct of the EIA tests,[17] petitioners note.Thus, it
came as a surprise to horse owners when told about the administration of a
new Coggins Tests on old horses since the matter had not been taken up with
them.[18] No investigation or at least a summary proceeding was conducted
affording petitioners an opportunity to be heard.[19] Petitioners also aver that the
assailed guidelines are ultra vires in that the sanctions imposed for refusing to
submit to medical examination are summary eviction from the stables or arbitrary
banning of participation in the races, notwithstanding the penalties prescribed in
the contract of lease.[20]

In its Comment,[21] the PRCI emphasizes that it merely obeyed the terms of
its franchise and abided by the rules enacted by Philracom. [22] For its part,
Philracom, through the Office of the Solicitor-General (OSG), stresses that the case
has become moot and academic since most of petitioners had complied with the
guidelines by subjecting their race horses to EIA testing. The horses found
unafflicted with the disease were eventually allowed to join the races.[23] Philracom
also justified its right under the law to regulate horse racing.[24] MJCI adds that
Philracom need
not delegate its rule-making power to the former since MJCIs right to formulate its
internal rules is subsumed under the franchise granted to it by Congress.[25]

In their Reply,[26] petitioners raise for the first time the issue that Philracom had
unconstitutionally delegated its rule-making power to PRCI and MJCI in
issuing the directive for them to come up with club rules. In response to the claim
that respondents had merely complied with their duties under their franchises,
petitioners counter that the power granted to PRCI and MJCI under their respective
franchises is limited to: (1) the construction, operation and maintenance of
racetracks; (2) the establishment of branches for booking purposes; and (3) the
conduct of horse races.

It appears on record that only Dagan had refused to comply with the orders
of respondents. Therefore, the case subsists as regards Dagan.

Petitioners essentially assail two issuances of Philracom; namely: the

Philracom directive[27] and the subsequent guidelines addressed to MJCI and PRCI.

The validity of an administrative issuance, such as the assailed guidelines,

hinges on compliance with the following requisites:

1. Its promulgation must be authorized by the legislature;

2. It must be promulgated in accordance with the prescribed procedure;
3. It must be within the scope of the authority given by the legislature;
4. It must be reasonable.[28]

All the prescribed requisites are met as regards the questioned issuances.
Philracoms authority is drawn from P.D. No. 420. The delegation made in the
presidential decree is valid. Philracom did not exceed its authority. And the
issuances are fair and reasonable.

The rule is that what has been delegated cannot be delegated, or as expressed
in the Latin maxim: potestas delegate non delegare potest. This rule is based upon
the ethical principle that such delegated power constitutes not only a right but a
duty to be performed by the delegate by the instrumentality of his own judgment
acting immediately upon the matter of legislation and not through the intervening
mind of another.[29] This rule however admits of recognized exceptions[30] such as
the grant of rule-making power to administrative agencies. They have been granted
by Congress with the authority to issue rules to regulate the implementation of a
law entrusted to them. Delegated rule-making has become a practical necessity in
modern governance due to the increasing complexity and variety of public
functions.[31]

However, in every case of permissible delegation, there must be a showing

that the delegation itself is valid. It is valid only if the law (a) is complete in itself,
setting forth therein the policy to be executed, carried out, or implemented by the
delegate; and (b) fixes a standardthe limits of which are sufficiently determinate
and determinableto which the delegate must conform in the performance of his
functions. A sufficient standard is one which defines legislative policy, marks its
limits, maps out its boundaries and specifies the public agency to apply it. It
indicates the circumstances under which the legislative command is to be
effected.[32]

P.D. No. 420 hurdles the tests of completeness and standards sufficiency.

Philracom was created for the purpose of carrying out the declared policy in
Section 1 which is to promote and direct the accelerated development and
continued growth of horse racing not only in pursuance of the sports development
program but also in order to insure the full exploitation of the sport as a source of
revenue and employment. Furthermore, Philracom was granted exclusive
jurisdiction and control over every aspect of the conduct of horse racing, including
the framing and scheduling of races, the construction and safety of race tracks,
and the security of racing. P.D. No. 420 is already complete in itself.

Section 9 of the law fixes the standards and limitations to which Philracom
must conform in the performance of its functions, to wit:

Section 9. Specific Powers. Specifically, the Commission shall have

the power:

a. To enforce all laws, decrees and executive orders relating to

horse-racing that are not expressly or implied repealed or
modified by this Decree, including all such existing rules and
regulations until otherwise modified or amended by the
Commission;
b. To prescribe additional rules and regulations not otherwise
inconsistent with this Decree;
c. To register race horses, horse owners or associations or
federations thereof, and to regulate the construction of race
tracks and to grant permit for the holding of races;
d. To issue, suspend or revoke permits and licenses and to
impose or collect fees for the issuance of such licenses and
permits to persons required to obtain the same;
e. To review, modify, approve or disapprove the rules and
regulations issued by any person or entity concerning the
conduct of horse races held by them;
f. To supervise all such race meeting to assure integrity at all
times. It can order the suspension of any racing event in case
of violation of any law, ordinance or rules and regulations;
g. To prohibit the use of improper devices, drugs, stimulants
or other means to enhance or diminish the speed of horse or
materially harm their condition;
h. To approve the annual budget of the omission and such
supplemental budgets as may be necessary;
i. To appoint all personnel, including an Executive Director of the
Commission, as it may be deem necessary in the exercise and
performance of its powers and duties; and
j. To enter into contracts involving obligations chargeable to or
against the funds of the Commission. (Emphasis supplied)
 Clearly, there is a proper legislative delegation of rule-making power to
Philracom. Clearly too, for its part Philracom has exercised its rule-making power
in a proper and reasonable manner. More specifically, its discretion to rid the
facilities of MJCI and PRCI of horses afflicted with EIA is aimed at preserving the
security and integrity of horse races.

Petitioners also question the supposed delegation by Philracom of its rule-

making powers to MJCI and PRCI.

There is no delegation of power to speak of between Philracom, as the

delegator and MJCI and PRCI as delegates. The Philracom directive is merely
instructive in character. Philracom had instructed PRCI and MJCI to immediately
come up with Clubs House Rule to address the problem and rid their facilities of
horses infected with EIA.PRCI and MJCI followed-up when they ordered the
racehorse owners to submit blood samples and subject their race horses to blood
testing. Compliance with the Philracoms directive is part of the mandate of PRCI
and MJCI under Sections 1[33] of R.A. No. 7953[34] and Sections 1[35] and 2[36] of
8407.[37]

As correctly proferred by MJCI, its duty is not derived from the delegated
authority of Philracom but arises from the franchise granted to them by Congress
allowing MJCI to do and carry out all such acts, deeds and things as may be
necessary to give effect to the foregoing.[38] As justified by PRCI, obeying the
terms of the franchise and abiding by whatever rules enacted by Philracom is its
duty.[39]

More on the second, third and fourth requisites.

As to the second requisite, petitioners raise some infirmities relating to

Philracoms guidelines. They question the supposed belated issuance of the
guidelines, that is, only after the collection of blood samples for the Coggins
Test was ordered. While it is conceded that the guidelines were issued a month
after Philracoms directive, this circumstance does not render the directive nor the
guidelines void. The directives validity and effectivity are not dependent on any
supplemental guidelines. Philracom has every right to issue directives to MJCI and
PRCI with respect to the conduct of horse racing, with or without implementing
guidelines.

Petitioners also argue that Philracoms guidelines have no force and effect for
lack of publication and failure to file copies with the University of the Philippines
(UP) LawCenter as required by law.

As a rule, the issuance of rules and regulations in the exercise of an

administrative agency of its quasi-legislative power does not require notice 7and
hearing.[40] In Abella, Jr. v. Civil Service Commission,[41] this Court had the
occasion to rule that prior notice and hearing are not essential to the validity of
rules or regulations issued in the exercise of quasi-legislative powers since there is
no determination of past events or facts that have to be established or
ascertained.[42]

The third requisite for the validity of an administrative issuance is that it

must be within the limits of the powers granted to it. The administrative body may
not make rules and regulations which are inconsistent with the provisions of the
Constitution or a statute, particularly the statute it is administering or which created
it, or which are in derogation of, or defeat, the purpose of a statute.[43]

The assailed guidelines prescribe the procedure for monitoring and

eradicating EIA. These guidelines are in accord with Philracoms mandate under
the law to regulate the conduct of horse racing in the country.

Anent the fourth requisite, the assailed guidelines do not appear to be

unreasonable or discriminatory. In fact, all horses stabled at the MJCI and PRCIs
premises underwent the same procedure. The guidelines implemented were
undoubtedly reasonable as they bear a reasonable relation to the purpose sought to
be accomplished, i.e., the complete riddance of horses infected with EIA.

It also appears from the records that MJCI properly notified the racehorse
owners before the test was conducted.[44] Those who failed to comply were
repeatedly warned of certain consequences and sanctions.
 Furthermore, extant from the records are circumstances which allow
respondents to determine from time to time the eligibility of horses as race entries.
The lease contract executed between petitioner and MJC contains a proviso
reserving the right of the lessor, MJCI in this case, the right to determine whether a
particular horse is a qualified horse.In addition, Philracoms rules and regulations
on horse racing provide that horses must be free from any contagious disease or
illness in order to be eligible as race entries.

All told, we find no grave abuse of discretion on the part of Philracom in

issuing the contested guidelines and on the part MJCI and PRCI in complying with
Philracoms directive.

WHEREFORE, the petition is DISMISSED. Costs against petitioner

William Dagan.

SO ORDERED.

[G.R. No. 151908. August 12, 2003]

SMART COMMUNICATIONS, INC. (SMART) and PILIPINO TELEPHONE

CORPORATION (PILTEL), petitioners, vs. NATIONAL
TELECOMMUNICATIONS COMMISSION (NTC), respondent.

[G.R. No. 152063. August 12, 2003]

GLOBE TELECOM, INC. (GLOBE) and ISLA COMMUNICATIONS CO.,

INC. (ISLACOM), petitioners, vs. COURT OF APPEALS (The
Former 6th Division) and the NATIONAL
TELECOMMUNICATIONS COMMISSION, respondents.

DECISION
YNARES-SANTIAGO, J.:

Pursuant to its rule-making and regulatory powers, the National

Telecommunications Commission (NTC) issued on June 16, 2000
Memorandum Circular No. 13-6-2000, promulgating rules and regulations on
the billing of telecommunications services. Among its pertinent provisions are
the following:

(1) The billing statements shall be received by the subscriber of the telephone service
not later than 30 days from the end of each billing cycle. In case the statement is
received beyond this period, the subscriber shall have a specified grace period within
which to pay the bill and the public telecommunications entity (PTEs) shall not be
allowed to disconnect the service within the grace period.

(2) There shall be no charge for calls that are diverted to a voice mailbox, voice
prompt, recorded message or similar facility excluding the customers own equipment.

(3) PTEs shall verify the identification and address of each purchaser of prepaid SIM
cards. Prepaid call cards and SIM cards shall be valid for at least 2 years from the date
of first use. Holders of prepaid SIM cards shall be given 45 days from the date the
prepaid SIM card is fully consumed but not beyond 2 years and 45 days from date of
first use to replenish the SIM card, otherwise the SIM card shall be rendered
invalid. The validity of an invalid SIM card, however, shall be installed upon request
of the customer at no additional charge except the presentation of a valid prepaid call
card.

(4) Subscribers shall be updated of the remaining value of their cards before the start
of every call using the cards.

(5) The unit of billing for the cellular mobile telephone service whether postpaid or
prepaid shall be reduced from 1 minute per pulse to 6 seconds per pulse. The
authorized rates per minute shall thus be divided by 10. [1]

The Memorandum Circular provided that it shall take effect 15 days after
its publication in a newspaper of general circulation and three certified true
copies thereof furnished the UP Law Center. It was published in the
newspaper, The Philippine Star, on June 22, 2000. Meanwhile, the provisions
[2]

of the Memorandum Circular pertaining to the sale and use of prepaid cards
and the unit of billing for cellular mobile telephone service took effect 90 days
from the effectivity of the Memorandum Circular.
On August 30, 2000, the NTC issued a Memorandum to all cellular mobile
telephone service (CMTS) operators which contained measures to minimize if
not totally eliminate the incidence of stealing of cellular phone units. The
Memorandum directed CMTS operators to:
a. strictly comply with Section B(1) of MC 13-6-2000 requiring the presentation and
verification of the identity and addresses of prepaid SIM card customers;
b. require all your respective prepaid SIM cards dealers to comply with Section B(1) of
MC 13-6-2000;
c. deny acceptance to your respective networks prepaid and/or postpaid customers
using stolen cellphone units or cellphone units registered to somebody other than
the applicant when properly informed of all information relative to the stolen
cellphone units;
d. share all necessary information of stolen cellphone units to all other CMTS operators
in order to prevent the use of stolen cellphone units; and
e. require all your existing prepaid SIM card customers to register and present valid
identification cards.[3]

This was followed by another Memorandum dated October 6, 2000

addressed to all public telecommunications entities, which reads:

This is to remind you that the validity of all prepaid cards sold on 07 October
2000 and beyond shall be valid for at least two (2) years from date of first use
pursuant to MC 13-6-2000.

In addition, all CMTS operators are reminded that all SIM packs used by
subscribers of prepaid cards sold on 07 October 2000 and beyond shall be valid
for at least two (2) years from date of first use.Also, the billing unit shall be on a
six (6) seconds pulse effective 07 October 2000.

For strict compliance. [4]

On October 20, 2000, petitioners Isla Communications Co., Inc. and

Pilipino Telephone Corporation filed against the National Telecommunications
Commission, Commissioner Joseph A. Santiago, Deputy Commissioner
Aurelio M. Umali and Deputy Commissioner Nestor C. Dacanay, an action for
declaration of nullity of NTC Memorandum Circular No. 13-6-2000 (the Billing
Circular) and the NTC Memorandum dated October 6, 2000, with prayer for
the issuance of a writ of preliminary injunction and temporary restraining
order. The complaint was docketed as Civil Case No. Q-00-42221 at the
Regional Trial Court of Quezon City, Branch 77. [5]

Petitioners Islacom and Piltel alleged, inter alia, that the NTC has no
jurisdiction to regulate the sale of consumer goods such as the prepaid call
cards since such jurisdiction belongs to the Department of Trade and Industry
under the Consumer Act of the Philippines; that the Billing Circular is
oppressive, confiscatory and violative of the constitutional prohibition against
deprivation of property without due process of law; that the Circular will result
in the impairment of the viability of the prepaid cellular service by unduly
prolonging the validity and expiration of the prepaid SIM and call cards; and
that the requirements of identification of prepaid card buyers and call balance
announcement are unreasonable. Hence, they prayed that the Billing Circular
be declared null and void ab initio.
Soon thereafter, petitioners Globe Telecom, Inc and Smart
Communications, Inc. filed a joint Motion for Leave to Intervene and to Admit
Complaint-in-Intervention. This was granted by the trial court.
[6]

On October 27, 2000, the trial court issued a temporary restraining order
enjoining the NTC from implementing Memorandum Circular No. 13-6-2000
and the Memorandum dated October 6, 2000. [7]

In the meantime, respondent NTC and its co-defendants filed a motion to

dismiss the case on the ground of petitioners failure to exhaust administrative
remedies.
Subsequently, after hearing petitioners application for preliminary
injunction as well as respondents motion to dismiss, the trial court issued on
November 20, 2000 an Order, the dispositive portion of which reads:

WHEREFORE, premises considered, the defendants motion to dismiss is hereby

denied for lack of merit. The plaintiffs application for the issuance of a writ of
preliminary injunction is hereby granted.Accordingly, the defendants are hereby
enjoined from implementing NTC Memorandum Circular 13-6-2000 and the NTC
Memorandum, dated October 6, 2000, pending the issuance and finality of the
decision in this case. The plaintiffs and intervenors are, however, required to file a
bond in the sum of FIVE HUNDRED THOUSAND PESOS (P500,000.00),
Philippine currency.

SO ORDERED. [8]

Defendants filed a motion for reconsideration, which was denied in an

Order dated February 1, 2001. [9]

Respondent NTC thus filed a special civil action for certiorari and
prohibition with the Court of Appeals, which was docketed as CA-G.R. SP.
No. 64274. On October 9, 2001, a decision was rendered, the decretal portion
of which reads:
WHEREFORE, premises considered, the instant petition for certiorari and prohibition
is GRANTED, in that, the order of the court a quo denying the petitioners motion to
dismiss as well as the order of the court a quo granting the private respondents prayer
for a writ of preliminary injunction, and the writ of preliminary injunction issued
thereby, are hereby ANNULLED and SET ASIDE. The private respondents complaint
and complaint-in-intervention below are hereby DISMISSED, without prejudice to the
referral of the private respondents grievances and disputes on the assailed issuances of
the NTC with the said agency.

SO ORDERED. [10]

Petitioners motions for reconsideration were denied in a Resolution dated

January 10, 2002 for lack of merit. [11]

Hence, the instant petition for review filed by Smart and Piltel, which was
docketed as G.R. No. 151908, anchored on the following grounds:
A.
THE HONORABLE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT
THE NATIONAL TELECOMMUNICATIONS COMMISSION (NTC) AND NOT THE
REGULAR COURTS HAS JURISDICTION OVER THE CASE.
B.
THE HONORABLE COURT OF APPEALS ALSO GRAVELY ERRED IN HOLDING
THAT THE PRIVATE RESPONDENTS FAILED TO EXHAUST AN AVAILABLE
ADMINISTRATIVE REMEDY.
C.
THE HONORABLE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
BILLING CIRCULAR ISSUED BY THE RESPONDENT NTC IS UNCONSTITUTIONAL
AND CONTRARY TO LAW AND PUBLIC POLICY.
D.
THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PRIVATE
RESPONDENTS FAILED TO SHOW THEIR CLEAR POSITIVE RIGHT TO WARRANT
THE ISSUANCE OF A WRIT OF PRELIMINARY INJUNCTION.[12]

Likewise, Globe and Islacom filed a petition for review, docketed as G.R.
No. 152063, assigning the following errors:
1. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE
DOCTRINES OF PRIMARY JURISDICTION AND EXHAUSTION OF
ADMINISTRATIVE REMEDIES DO NOT APPLY SINCE THE INSTANT CASE IS
FOR LEGAL NULLIFICATION (BECAUSE OF LEGAL INFIRMITIES AND
VIOLATIONS OF LAW) OF A PURELY ADMINISTRATIVE REGULATION
PROMULGATED BY AN AGENCY IN THE EXERCISE OF ITS RULE MAKING
POWERS AND INVOLVES ONLY QUESTIONS OF LAW.
 2. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE
DOCTRINE ON EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES NOT
APPLY WHEN THE QUESTIONS RAISED ARE PURELY LEGAL QUESTIONS.
3. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE THE
DOCTRINE OF EXHAUSTION OF ADMINISTRATIVE REMEDIES DOES NOT
APPLY WHERE THE ADMINISTRATIVE ACTION IS COMPLETE AND
EFFECTIVE, WHEN THERE IS NO OTHER REMEDY, AND THE PETITIONER
STANDS TO SUFFER GRAVE AND IRREPARABLE INJURY.
4. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED BECAUSE
PETITIONERS IN FACT EXHAUSTED ALL ADMINISTRATIVE REMEDIES
AVAILABLE TO THEM.
5. THE HONORABLE COURT OF APPEALS SO GRAVELY ERRED IN ISSUING ITS
QUESTIONED RULINGS IN THIS CASE BECAUSE GLOBE AND ISLA HAVE A
CLEAR RIGHT TO AN INJUNCTION.[13]

The two petitions were consolidated in a Resolution dated February 17,

2003.[14]

On March 24, 2003, the petitions were given due course and the parties
were required to submit their respective memoranda. [15]

We find merit in the petitions.

Administrative agencies possess quasi-legislative or rule-making powers
and quasi-judicial or administrative adjudicatory powers. Quasi-legislative or
rule-making power is the power to make rules and regulations which results in
delegated legislation that is within the confines of the granting statute and the
doctrine of non-delegability and separability of powers. [16]

The rules and regulations that administrative agencies promulgate, which

are the product of a delegated legislative power to create new and additional
legal provisions that have the effect of law, should be within the scope of the
statutory authority granted by the legislature to the administrative agency. It is
required that the regulation be germane to the objects and purposes of the
law, and be not in contradiction to, but in conformity with, the standards
prescribed by law. They must conform to and be consistent with the
[17]

provisions of the enabling statute in order for such rule or regulation to be

valid. Constitutional and statutory provisions control with respect to what rules
and regulations may be promulgated by an administrative body, as well as
with respect to what fields are subject to regulation by it. It may not make rules
and regulations which are inconsistent with the provisions of the Constitution
or a statute, particularly the statute it is administering or which created it, or
which are in derogation of, or defeat, the purpose of a statute. In case of
conflict between a statute and an administrative order, the former must
prevail. [18]
 Not to be confused with the quasi-legislative or rule-making power of an
administrative agency is its quasi-judicial or administrative adjudicatory
power. This is the power to hear and determine questions of fact to which the
legislative policy is to apply and to decide in accordance with the standards
laid down by the law itself in enforcing and administering the same law.The
administrative body exercises its quasi-judicial power when it performs in a
judicial manner an act which is essentially of an executive or administrative
nature, where the power to act in such manner is incidental to or reasonably
necessary for the performance of the executive or administrative duty
entrusted to it. In carrying out their quasi-judicial functions, the administrative
officers or bodies are required to investigate facts or ascertain the existence of
facts, hold hearings, weigh evidence, and draw conclusions from them as
basis for their official action and exercise of discretion in a judicial nature. [19]

In questioning the validity or constitutionality of a rule or regulation issued

by an administrative agency, a party need not exhaust administrative
remedies before going to court. This principle applies only where the act of the
administrative agency concerned was performed pursuant to its quasi-judicial
function, and not when the assailed act pertained to its rule-making or quasi-
legislative power. In Association of Philippine Coconut Dessicators v.
Philippine Coconut Authority, it was held:
[20]

The rule of requiring exhaustion of administrative remedies before a party may seek
judicial review, so strenuously urged by the Solicitor General on behalf of respondent,
has obviously no application here.The resolution in question was issued by the PCA in
the exercise of its rule- making or legislative power. However, only judicial review of
decisions of administrative agencies made in the exercise of their quasi-judicial
function is subject to the exhaustion doctrine.

Even assuming arguendo that the principle of exhaustion of administrative

remedies apply in this case, the records reveal that petitioners sufficiently
complied with this requirement.Even during the drafting and deliberation
stages leading to the issuance of Memorandum Circular No. 13-6-2000,
petitioners were able to register their protests to the proposed billing
guidelines. They submitted their respective position papers setting forth their
objections and submitting proposed schemes for the billing circular. After the
[21]

same was issued, petitioners wrote successive letters dated July 3,

2000 and July 5, 2000, asking for the suspension and reconsideration of
[22] [23]

the so-called Billing Circular. These letters were not acted upon until October
6, 2000, when respondent NTC issued the second assailed Memorandum
implementing certain provisions of the Billing Circular. This was taken by
petitioners as a clear denial of the requests contained in their previous letters,
thus prompting them to seek judicial relief.
In like manner, the doctrine of primary jurisdiction applies only where the
administrative agency exercises its quasi-judicial or adjudicatory
function. Thus, in cases involving specialized disputes, the practice has been
to refer the same to an administrative agency of special competence pursuant
to the doctrine of primary jurisdiction. The courts will not determine a
controversy involving a question which is within the jurisdiction of the
administrative tribunal prior to the resolution of that question by the
administrative tribunal, where the question demands the exercise of sound
administrative discretion requiring the special knowledge, experience and
services of the administrative tribunal to determine technical and intricate
matters of fact, and a uniformity of ruling is essential to comply with the
premises of the regulatory statute administered. The objective of the doctrine
of primary jurisdiction is to guide a court in determining whether it should
refrain from exercising its jurisdiction until after an administrative agency has
determined some question or some aspect of some question arising in the
proceeding before the court. It applies where the claim is originally cognizable
in the courts and comes into play whenever enforcement of the claim requires
the resolution of issues which, under a regulatory scheme, has been placed
within the special competence of an administrative body; in such case, the
judicial process is suspended pending referral of such issues to the
administrative body for its view.[24]

However, where what is assailed is the validity or constitutionality of a rule

or regulation issued by the administrative agency in the performance of its
quasi-legislative function, the regular courts have jurisdiction to pass upon the
same. The determination of whether a specific rule or set of rules issued by an
administrative agency contravenes the law or the constitution is within the
jurisdiction of the regular courts. Indeed, the Constitution vests the power of
judicial review or the power to declare a law, treaty, international or executive
agreement, presidential decree, order, instruction, ordinance, or regulation in
the courts, including the regional trial courts. This is within the scope of
[25]

judicial power, which includes the authority of the courts to determine in an

appropriate action the validity of the acts of the political departments. Judicial
[26]

power includes the duty of the courts of justice to settle actual controversies
involving rights which are legally demandable and enforceable, and to
determine whether or not there has been a grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of any branch or
instrumentality of the Government. [27]
 In the case at bar, the issuance by the NTC of Memorandum Circular No.
13-6-2000 and its Memorandum dated October 6, 2000 was pursuant to its
quasi-legislative or rule-making power. As such, petitioners were justified in
invoking the judicial power of the Regional Trial Court to assail the
constitutionality and validity of the said issuances. In Drilon v. Lim, it was [28]

held:

We stress at the outset that the lower court had jurisdiction to consider the
constitutionality of Section 187, this authority being embraced in the general
definition of the judicial power to determine what are the valid and binding laws by
the criterion of their conformity to the fundamental law. Specifically, B.P. 129 vests
in the regional trial courts jurisdiction over all civil cases in which the subject of the
litigation is incapable of pecuniary estimation, even as the accused in a criminal action
has the right to question in his defense the constitutionality of a law he is charged with
violating and of the proceedings taken against him, particularly as they contravene the
Bill of Rights. Moreover, Article X, Section 5(2), of the Constitution vests in the
Supreme Court appellate jurisdiction over final judgments and orders of lower courts
in all cases in which the constitutionality or validity of any treaty, international or
executive agreement, law, presidential decree, proclamation, order, instruction,
ordinance, or regulation is in question.[29]

In their complaint before the Regional Trial Court, petitioners averred that
the Circular contravened Civil Code provisions on sales and violated the
constitutional prohibition against the deprivation of property without due
process of law. These are within the competence of the trial judge. Contrary to
the finding of the Court of Appeals, the issues raised in the complaint do not
entail highly technical matters. Rather, what is required of the judge who will
resolve this issue is a basic familiarity with the workings of the cellular
telephone service, including prepaid SIM and call cards and this is judicially
known to be within the knowledge of a good percentage of our population and
expertise in fundamental principles of civil law and the Constitution.
Hence, the Regional Trial Court has jurisdiction to hear and decide Civil
Case No. Q-00-42221. The Court of Appeals erred in setting aside the orders
of the trial court and in dismissing the case.
WHEREFORE, in view of the foregoing, the consolidated petitions
are GRANTED. The decision of the Court of Appeals in CA-G.R. SP No.
64274 dated October 9, 2001 and its Resolution dated January 10, 2002 are
REVERSED and SET ASIDE. The Order dated November 20, 2000 of the
Regional Trial Court of Quezon City, Branch 77, in Civil Case No. Q-00-42221
is REINSTATED. This case is REMANDED to the court a quo for continuation
of the proceedings.
 SO ORDERED.

[G.R. No. 116422. November 4, 1996]

AVELINA B. CONTE and LETICIA BOISER-PALMA, petitioners, vs.

COMMISSION ON AUDIT (COA), respondent.

DECISION
PANGANIBAN, J.:

Are the benefits provided for under Social Security System Resolution No.
56 to be considered simply as financial assistance for retiring employees, or
does such scheme constitute a supplementary retirement plan proscribed by
Republic Act No. 4968?
The foregoing question is addressed by this Court in resolving the instant
petition for certiorari which seeks to reverse and set aside Decision No. 94-
126 dated March 15, 1994 of respondent Commission on Audit, which denied
[1]

petitioners request for reconsideration of its adverse ruling disapproving

claims for financial assistance under SSS Resolution No. 56.

The Facts

Petitioners Avelina B. Conte and Leticia Boiser-Palma were former

employees of the Social Security System (SSS) who retired from government
service on May 9, 1990 and September 13, 1992, respectively. They availed
of compulsory retirement benefits under Republic Act No. 660. [2]

In addition to retirement benefits provided under R.A. 660, petitioners also

claimed SSS financial assistance benefits granted under SSS Resolution No.
56, series of 1971.
A brief historical backgrounder is in order. SSS Resolution No.
56, approved on January 21, 1971, provides financial incentive and
[3]

inducement to SSS employees qualified to retire to avail of retirement benefits

under RA 660 as amended, rather than the retirement benefits under RA 1616
as amended, by giving them financial assistance equivalent in amount to the
difference between what a retiree would have received under RA 1616, less
what he was entitled to under RA 660. The said SSS Resolution No. 56
states:

RESOLUTION NO. 56

WHEREAS, the retirement benefits of SSS employees are provided for under
Republic Acts 660 and 1616 as amended;

WHEREAS, SSS employees who are qualified for compulsory retirement at age 65 or
for optional retirement at a lower age are entitled to either the life annuity under R.A.
660, as amended, or the gratuity under R.A. 1616, as amended;

WHEREAS, a retirement benefit to be effective must be a periodic income as close as

possible to the monthly income that would have been due to the retiree during the
remaining years of his life were he still employed;

WHEREAS, the life annuity under R.A. 660, as amended, being closer to the monthly
income that was lost on account of old age than the gratuity under R.A. 1616, as
amended, would best serve the interest of the retiree;

WHEREAS, it is the policy of the Social Security Commission to promote and to

protect the interest of all SSS employees, with a view to providing for their well-being
during both their working and retirement years;

WHEREAS, the availment of life annuities built up by premiums paid on behalf of

SSS employees during their working years would mean more savings to the SSS;

WHEREAS, it is a duty of the Social Security Commission to effect savings in every

possible way for economical and efficient operations;

WHEREAS, it is the right of every SSS employee to choose freely and voluntarily the
benefit he is entitled to solely for his own benefit and for the benefit of his family;

NOW, THEREFORE, BE IT RESOLVED, That all the SSS employees who are
simultaneously qualified for compulsory retirement at age 65 or for optional
retirement at a lower age be encouraged to avail for themselves the life annuity under
R.A. 660, as amended;

RESOLVED, FURTHER, That SSS employees who availed themselves of the said
life annuity, in appreciation and recognition of their long and faithful service, be
granted financial assistance equivalent to the gratuity plus return of contributions
under R.A. 1616, as amended, less the five year guaranteed annuity under R.A. 660,
as amended;

RESOLVED, FINALLY, That the Administrator be authorized to act on all

applications for retirement submitted by SSS employees and subject to availability of
funds, pay the corresponding benefits in addition to the money value of all
accumulated leaves. (underscoring supplied)

Long after the promulgation of SSS Resolution No. 56, respondent

Commission on Audit (COA) issued a ruling, captioned as 3rd Indorsement
dated July 10, 1989, disallowing in audit all such claims for financial
[4]

assistance under SSS Resolution No. 56, for the reason that: --

x x x the scheme of financial assistance authorized by the SSS is similar to those

separate retirement plan or incentive/separation pay plans adopted by other
government corporate agencies which results in the increase of benefits beyond what
is allowed under existing retirement laws. In this regard, attention x x x is invited to
the view expressed by the Secretary of Budget and Management dated February 17,
1988 to the COA General Counsel against the proliferation of retirement plans which,
in COA Decision No. 591 dated August 31, 1988, was concurred in by this
Commission. x x x.

Accordingly, all such claims for financial assistance under SSS Resolution No. 56
dated January 21, 1971 should be disallowed in audit. (underscoring supplied)

Despite the aforequoted ruling of respondent COA, then SSS

Administrator Jose L. Cuisia, Jr. nevertheless wrote on February 12, 1990
[5]

then Executive Secretary Catalino Macaraig, Jr., seeking presidential authority

for SSS to continue implementing its Resolution No. 56 dated January 21,
1971 granting financial assistance to its qualified retiring employees.
However, in a letter-reply dated May 28, 1990, then Executive Secretary
[6]

Macaraig advised Administrator Cuisia that the Office of the President is not
inclined to favorably act on the herein request, let alone overrule the
disallowance by COA of such claims, because, aside from the fact that
decisions, order or actions of the COA in the exercise of its audit functions are
appealable to the Supreme Court pursuant to Sec. 50 of PD 1445, the
[7]

benefits under said Res. 56, though referred to as financial assistance,

constituted additional retirement benefits, and the scheme partook of the
nature of a supplementary pension/retirement plan proscribed by law.
The law referred to above is RA 4968 (The Teves Retirement Law), which
took effect June 17, 1967 and amended CA 186 (otherwise known as the
Government Service Insurance Act, or the GSIS Charter), making Sec. 28 (b)
of the latter act read as follows:

(b) Hereafter, no insurance or retirement plan for officers or employees shall be

created by employer. All supplementary retirement or pension plans heretofore in
force in any government office, agency or instrumentality or corporation owned or
controlled by the government, are hereby declared inoperative or abolished; Provided,
That the rights of those who are already eligible to retire thereunder shall not be
affected. (underscoring supplied)

On January 12, 1993, herein petitioners filed with respondent COA their
letter-appeal/protest seeking reconsideration of COAs ruling of July 10,
[8]

1989 disallowing claims for financial assistance under Res. 56.

On November 15, 1993, petitioner Conte sought payment from SSS of the
benefits under Res. 56. On December 9, 1993, SSS Administrator Renato C.
Valencia denied the request in consonance with the previous disallowance by
[9]

respondent COA, but assured petitioner that should the COA change its
position, the SSS will resume the grant of benefits under said Res. 56.
On March 15, 1994, respondent COA rendered its COA Decision No. 94-
126 denying petitioners request for reconsideration.
Thus this petition for certiorari under Rule 65 of the Rules of Court.

The Issues

The issues submitted by petitioners may be simplified and re-stated thus:

[10]

Did public respondent abuse its discretion when it disallowed in audit

petitioners claims for benefits under SSS Res. 56?
Petitioners argue that the financial assistance under Res. 56 is not a
retirement plan prohibited by RA 4968, and that Res. 56 provides benefits
different from and aside from what a retiring SSS employee would be entitled
to under RA 660. Petitioners contend that it is a social amelioration and
economic upliftment measure undertaken not only for the benefit of the SSS
but more so for the welfare of its qualified retiring employees. As such, it
should be interpreted in a manner that would give the x x x most advantage to
the recipient -- the retiring employees whose dedicated, loyal, lengthy and
faithful service to the agency of government is recognized and amply
rewarded -- the rationale for the financial assistance plan. Petitioners reiterate
the argument in their letter dated January 12, 1993 to COA that:
Motivation can be in the form of financial assistance, during their stay in the service
or upon retirement, as in the SSS Financial Assistance Plan. This is so, because
Government has to have some attractive remuneration programs to encourage well-
qualified personnel to pursue a career in the government service, rather than in the
private sector or in foreign countries ...

A more developmental view of the financial institutions grant of certain forms of

financial assistance to its personnel, we believe, would enable government
administrators to see these financial forms of remuneration as contributory to the
national developmental efforts for effective and efficient administration of the
personnel programs in different institutions.[11]

The Courts Ruling

Petitioners contentions are not supported by law. We hold that Res. 56

constitutes a supplementary retirement plan.
A cursory examination of the preambular clauses and provisions of Res.
56 provides a number of clear indications that its financial assistance plan
constitutes a supplemental retirement/pension benefits plan. In particular, the
fifth preambular clause which provides that it is the policy of the Social
Security Commission to promote and to protect the interest of all SSS
employees, with a view to providing for their well-being during both their
working and retirement years, and the wording of the resolution itself which
states Resolved, further, that SSS employees who availed themselves of the
said life annuity (under RA 660), in appreciation and recognition of their long
and faithful service, be granted financial assistance x x x can only be
interpreted to mean that the benefit being granted is none other than a kind of
amelioration to enable the retiring employee to enjoy (or survive) his
retirement years and a reward for his loyalty and service. Moreover, it is plain
to see that the grant of said financial assistance is inextricably linked with and
inseparable from the application for and approval of retirement benefits under
RA 660, i.e., that availment of said financial assistance under Res. 56 may not
be done independently of but only in conjunction with the availment of
retirement benefits under RA 660, and that the former is in augmentation or
supplementation of the latter benefits.
Likewise, then SSS Administrator Cuisias historical overview of the origins
and purpose of Res. 56 is very instructive and sheds much light on the
controversy: [12]
Resolution No. 56, x x x, applies where a retiring SSS employee is qualified to claim
under either RA 660 (pension benefit, that is, 5 year lump sum pension and after 5
years, life time pension), or RA 1616 (gratuity benefit plus return of contribution), at
his option. The benefits under RA 660 are entirely payable by GSIS while those under
RA 1616 are entirely shouldered by SSS except the return of contribution by GSIS.

Resolution No. 56 came about upon observation that qualified SSS employees have
invariably opted to retire under RA 1616 instead of RA 660 because the total benefit
under the former is much greater than the 5-year lump sum under the latter. As a
consequence, the SSS usually ended up virtually paying the entire retirement benefit,
instead of GSIS which is the main insurance carrier for government employees.
Hence, the situation has become so expensive for SSS that a study of the problem
became inevitable.

As a result of the study and upon the recommendation of its Actuary, the SSS
Management recommended to the Social Security Commission that retiring
employees who are qualified to claim under either RA 660 or 1616 should be
encouraged to avail for themselves the life annuity under RA 660, as amended, with
the SSS providing a financial assistance equivalent to the difference between the
benefit under RA 1616 (gratuity plus return of contribution) and the 5-year lump sum
pension under RA 660.

The Social Security Commission, as the policy-making body of the SSS approved the
recommendation in line with its mandate to insure the efficient, honest
and economical administration of the provisions and purposes of this Act. (Section 3
(c) of the Social Security Law).

Necessarily, the situation was reversed with qualified SSS employees opting to retire
under RA No. 660 or RA 1146 instead of RA 1616, resulting in substantial savings for
the SSS despite its having to pay financial assistance.

Until Resolution No. 56 was questioned by COA. (underscoring part of original text;
italics ours)

Although such financial assistance package may have been instituted for
noble, altruistic purposes as well as from self-interest and a desire to cut costs
on the part of the SSS, nevertheless, it is beyond any dispute that such
package effectively constitutes a supplementary retirement plan. The fact that
it was designed to equalize the benefits receivable from RA 1616 with those
payable under RA 660 and make the latter program more attractive, merely
confirms the foregoing finding.
 That the Res. 56 package is labelled financial assistance does not change
its essential nature. Retirement benefits are, after all, a form of reward for an
employees loyalty and service to the employer, and are intended to help the
employee enjoy the remaining years of his life, lessening the burden of
worrying about his financial support or upkeep. On the other hand, a pension
[13]

partakes of the nature of retained wages of the retiree for a dual purpose: to
entice competent people to enter the government service, and to permit them
to retire from the service with relative security, not only for those who have
retained their vigor, but more so for those who have been incapacitated by
illness or accident.
[14]

Is SSS Resolution No. 56 then within the ambit of and thus proscribed by
Sec. 28 (b) of CA 186 as amended by RA 4968?
We answer in the affirmative. Said Sec. 28 (b) as amended by RA 4968 in
no uncertain terms bars the creation of any insurance or retirement plan --
other than the GSIS -- for government officers and employees, in order to
prevent the undue and inequitous proliferation of such plans. It is beyond cavil
that Res. 56 contravenes the said provision of law and is therefore invalid,
void and of no effect. To ignore this and rule otherwise would be tantamount
to permitting every other government office or agency to put up its own
supplementary retirement benefit plan under the guise of such financial
assistance.
We are not unmindful of the laudable purposes for promulgating Res. 56,
and the positive results it must have had, not only in reducing costs and
expenses on the part of the SSS in connection with the pay-out of retirement
benefits and gratuities, but also in improving the quality of life for scores of
retirees. But it is simply beyond dispute that the SSS had no authority to
maintain and implement such retirement plan, particularly in the face of the
statutory prohibition. The SSS cannot, in the guise of rule-making, legislate or
amend laws or worse, render them nugatory.
It is doctrinal that in case of conflict between a statute and an
administrative order, the former must prevail. A rule or regulation must
[15]

conform to and be consistent with the provisions of the enabling statute in

order for such rule or regulation to be valid. The rule-making power of a
[16]

public administrative body is a delegated legislative power, which it may not

use either to abridge the authority given it by the Congress or the Constitution
or to enlarge its power beyond the scope intended. Constitutional and
statutory provisions control with respect to what rules and regulations may be
promulgated by such a body, as well as with respect to what fields are subject
to regulation by it. It may not make rules and regulations which are
inconsistent with the provisions of the Constitution or a statute, particularly the
statute it is administering or which created it, or which are in derogation of, or
defeat, the purpose of a statute. Though well-settled is the rule that
[17]

retirement laws are liberally interpreted in favor of the retiree, nevertheless,

[18]

there is really nothing to interpret in either RA 4968 or Res. 56, and

correspondingly, the absence of any doubt as to the ultra-vires nature and
illegality of the disputed resolution constrains us to rule against petitioners.
As a necessary consequence of the invalidity of Res. 56, we can hardly
impute abuse of discretion of any sort to respondent Commission for denying
petitioners request for reconsideration of the 3rd Indorsement of July 10,
1989. On the contrary, we hold that public respondent in its assailed Decision
acted with circumspection in denying petitioners claim. It reasoned thus:

After a careful evaluation of the facts herein obtaining, this Commission finds the
instant request to be devoid of merit. It bears stress that the financial assistance
contemplated under SSS Resolution No. 56 is granted to SSS employees who opt to
retire under R.A. No. 660. In fact, by the aggrieved parties own admission (page 2 of
the request for reconsideration dated January 12, 1993), it is a financial assistance
granted by the SSS management to its employees, in addition to the retirement
benefits under Republic Act No. 660. (underscoring supplied for emphasis) There is
therefore no question, that the said financial assistance partakes of the nature of a
retirement benefit that has the effect of modifying existing retirement laws
particularly R.A. No. 660.

Petitioners also asseverate that the scheme of financial assistance under

Res. 56 may be likened to the monetary benefits of government officials and
employees who are paid, over and above their salaries and allowances as
provided by statute, an additional honorarium in varying amounts. We find this
comparison baseless and misplaced. As clarified by the Solicitor General: [19]

Petitioners comparison of SSS Resolution No. 56 with the honoraria given to

government officials and employees of the National Prosecution Service of the
Department of Justice, Office of the Government Corporate Counsel and even in the
Office of the Solicitor General is devoid of any basis. The monetary benefits or
honoraria given to these officials or employees are categorized as travelling and/or
representation expenses which are incurred by them in the course of handling cases,
attending court/administrative hearings, or performing other field work. These
monetary benefits are given upon rendition of service while the financial benefits
under SSS Resolution No. 56 are given upon retirement from service.
 In a last-ditch attempt to convince this Court that their position is tenable,
petitioners invoke equity. They believe that they are deserving of justice and
equity in their quest for financial assistance under SSS Resolution No. 56, not
so much because the SSS is one of the very few stable agencies of
government where no doubt this recognition and reputation is earned x x x but
more so due to the miserable scale of compensation granted to employees in
various agencies to include those obtaining in the SSS. [20]

We must admit we sympathize with petitioners in their financial

predicament as a result of their misplaced decision to avail of retirement
benefits under RA 660, with the false expectation that financial assistance
under the disputed Res. 56 will also materialize. Nevertheless, this Court has
always held that equity, which has been aptly described as justice outside
legality, is applied only in the absence of, and never against, statutory law or
judicial rules of procedure. In this case, equity cannot be applied to give
[21]

validity and effect to Res. 56, which directly contravenes the clear mandate of
the provisions of RA 4968.
Likewise, we cannot but be aware that the clear imbalance between the
benefits available under RA 660 and those under RA 1616 has created an
unfair situation for it has shifted the burden of paying such benefits from the
GSIS (the main insurance carrier of government employees) to the
SSS. Without the corrective effects of Res. 56, all retiring SSS employees
without exception will be impelled to avail of benefits under RA 1616. The
cumulative effect of such availments on the financial standing and stability of
the SSS is better left to actuarians.But the solution or remedy for such
situation can be provided only by Congress. Judicial hands cannot, on the
pretext of showing concern for the welfare of government employees, bestow
equity contrary to the clear provisions of law.
Nevertheless, insofar as herein petitioners are concerned, this Court
cannot just sit back and watch as these two erstwhile government employees,
who after spending the best parts of their lives in public service have retired
hoping to enjoy their remaining years, face a financially dismal if not
distressed future, deprived of what should have been due them by way of
additional retirement benefits, on account of a bureaucratic boo-boo
improvidently hatched by their higher-ups. It is clear to our mind that
petitioners applied for benefits under RA 660 only because of the incentives
offered by Res. 56, and that absent such incentives, they would have without
fail availed of RA 1616 instead. We likewise have no doubt that petitioners are
simply innocent bystanders in this whole bureaucratic rule-making/financial
scheme-making drama, and that therefore, to the extent possible, petitioners
ought not be penalized or made to suffer as a result of the subsequently
determined invalidity of Res. 56, the promulgation and implementation of
which they had nothing to do with.
And here is where equity may properly be invoked: since SSS employees
who are qualified for compulsory retirement at age 65 or for optional
retirement at a lower age are entitled to either the life annuity under R.A. 660,
as amended, or the gratuity under R.A. 1616, as amended, it appears that [22]

petitioners, being qualified to avail of benefits under RA 660, may also readily
qualify under RA 1616. It would therefore not be misplaced to enjoin the SSS
to render all possible assistance to petitioners for the prompt processing and
approval of their applications under RA 1616, and in the meantime, unless
barred by existing regulations, to advance to petitioners the difference
between the amounts due under RA 1616, and the amounts they already
obtained, if any, under RA 660.
WHEREFORE, the petition is hereby DISMISSED for lack of merit, there
having been no grave abuse of discretion on the part of respondent
Commission. The assailed Decision of public respondent is AFFIRMED, and
SSS Resolution No. 56 is hereby declared ILLEGAL, VOID AND OF NO
EFFECT. The SSS is hereby urged to assist petitioners and facilitate their
applications under RA 1616, and to advance to them, unless barred by
existing regulations, the corresponding amounts representing the difference
between the two benefits programs. No costs.
SO ORDERED.

G.R. No. 77372 April 29, 1988

LUPO L. LUPANGCO, RAYMOND S. MANGKAL, NORMAN A. MESINA, ALEXANDER R.

REGUYAL, JOCELYN P. CATAPANG, ENRICO V. REGALADO, JEROME O. ARCEGA,
ERNESTOC. BLAS, JR., ELPEDIO M. ALMAZAN, KARL CAESAR R. RIMANDO, petitioner,
vs.
COURT OF APPEALS and PROFESSIONAL REGULATION COMMISSION, respondent.

Balgos & Perez Law Offices for petitioners.

The Solicitor General for respondents.

GANCAYCO, J.:

Is the Regional Trial Court of the same category as the Professional Regulation Commission so that it cannot pass upon the validity of the
administrative acts of the latter? Can this Commission lawfully prohibit the examiness from attending review classes, receiving handout
materials, tips, or the like three (3) days before the date of the examination? Theses are the issues presented to the court by this petition for
certiorari to review the decision of the Court of Appeals promulagated on January 13, 1987, in CA-G.R. SP No. 10598, * declaring null and
void the other dated Ocober 21, 1986 issued by the Regional Trial Court of Manila, Branch 32 in Civil Case No. 86-37950 entitled " Lupo L.
Lupangco, et al. vs. Professional Regulation Commission."

The records shows the following undisputed facts:

On or about October 6, 1986, herein respondent Professional Regulation Commission (PRC) issued
Resolution No. 105 as parts of its "Additional Instructions to Examiness," to all those applying for
admission to take the licensure examinations in accountancy. The resolution embodied the following
pertinent provisions:

No examinee shall attend any review class, briefing, conference or the like
conducted by, or shall receive any hand-out, review material, or any tip from any
school, college or university, or any review center or the like or any reviewer,
lecturer, instructor official or employee of any of the aforementioned or similars
institutions during the three days immediately proceeding every examination day
including examination day.

Any examinee violating this instruction shall be subject to the sanctions prescribed by
Sec. 8, Art. III of the Rules and Regulations of the Commission. 1

On October 16, 1986, herein petitioners, all reviewees preparing to take the licensure examinations
in accountancy schedule on October 25 and November 2 of the same year, filed on their own behalf
of all others similarly situated like them, with the Regional Trial Court of Manila, Branch XXXII, a
complaint for injuction with a prayer with the issuance of a writ of a preliminary injunction against
respondent PRC to restrain the latter from enforcing the above-mentioned resolution and to declare
the same unconstitution.

Respondent PRC filed a motion to dismiss on October 21, 1987 on the ground that the lower court
had no jurisdiction to review and to enjoin the enforcement of its resolution. In an Order of October
21, 1987, the lower court declared that it had jurisdiction to try the case and enjoined the respondent
commission from enforcing and giving effect to Resolution No. 105 which it found to be
unconstitutional.

Not satisfied therewith, respondent PRC, on November 10, 1986, filed with the Court of Appeals a
petition for the nullification of the above Order of the lower court. Said petiton was granted in the
Decision of the Court of Appeals promulagated on January 13, 1987, to wit:

WHEREFORE, finding the petition meritorious the same is hereby GRANTED and
the other dated October 21, 1986 issued by respondent court is declared null and
void. The respondent court is further directed to dismiss with prejudice Civil Case No.
86-37950 for want of jurisdiction over the subject matter thereof. No cost in this
instance.

SO ORDERED. 2

Hence, this petition.

The Court of Appeals, in deciding that the Regional Trial Court of Manila had no jurisdiction to
entertain the case and to enjoin the enforcement of the Resolution No. 105, stated as its basis its
conclusion that the Professional Regulation Commission and the Regional Trial Court are co-equal
bodies. Thus it held —
 That the petitioner Professional Regulatory Commission is at least a co-equal body
with the Regional Trial Court is beyond question, and co-equal bodies have no power
to control each other or interfere with each other's acts. 3

To strenghten its position, the Court of Appeals relied heavily on National Electrification
Administration vs. Mendoza, 4 which cites Pineda vs. Lantin 5 and Philippine Pacific Fishing, Inc. vs.
Luna, 6 where this Court held that a Court of First Instance cannot interfere with the orders of the
Securities and Exchange Commission, the two being co-equal bodies.

After a close scrutiny of the facts and the record of this case,

We rule in favor of the petitioner.

The cases cited by respondent court are not in point. It is glaringly apparent that the reason why this
Court ruled that the Court of First Instance could not interfere with the orders of the Securities and
Exchange Commission was that this was so provided for by the law. In Pineda vs. Lantin, We
explained that whenever a party is aggrieved by or disagree with an order or ruling of the Securities
and Exchange Commission, he cannot seek relief from courts of general jurisdiction since under the
Rules of Court and Commonwealth Act No. 83, as amended by Republic Act No. 635, creating and
setting forth the powers and functions of the old Securities and Exchange Commission, his remedy
is to go the Supreme Court on a petition for review. Likewise, in Philippine Pacific Fishing Co., Inc.
vs. Luna,it was stressed that if an order of the Securities and Exchange Commission is erroneous,
the appropriate remedy take is first, within the Commission itself, then, to the Supreme Court as
mandated in Presidential Decree No. 902-A, the law creating the new Securities and Exchange
Commission. Nowhere in the said cases was it held that a Court of First Instance has no jurisdiction
over all other government agencies. On the contrary, the ruling was specifically limited to the
Securities and Exchange Commission.

The respondent court erred when it place the Securities and Exchange Commission and the
Professional Regulation Commsision in the same category. As alraedy mentioned, with respect to
the Securities and Exchange Commission, the laws cited explicitly provide with the procedure that
need be taken when one is aggrieved by its order or ruling. Upon the other hand, there is no law
providing for the next course of action for a party who wants to question a ruling or order of the
Professional Regulation Commission. Unlike Commonwealth Act No. 83 and Presidential Decree
No. 902-A, there is no provision in Presidential Decree No. 223, creating the Professional Regulation
Commission, that orders or resolutions of the Commission are appealable either to the Court of
Appeals or to theSupreme Court. Consequently, Civil Case No. 86-37950, which was filed in order to
enjoin the enforcement of a resolution of the respondent Professional Regulation Commission
alleged to be unconstitutional, should fall within the general jurisdiction of the Court of First Instance,
now the Regional Trial Court. 7

What is clear from Presidential Decree No. 223 is that the Professional Regulation Commission is
attached to the Office of the President for general direction and coordination. 8 Well settled in our
jurisprudence is the view that even acts of the Office of the President may be reviewed by the Court
of First Instance (now the Regional Trial Court). In Medalla vs. Sayo, 9 this rule was thoroughly
propounded on, to wit:

In so far as jurisdiction of the Court below to review by certiorari decisions and/or

resolutions of the Civil Service Commission and of the residential Executive
Asssistant is concerned, there should be no question but that the power of judicial
review should be upheld. The following rulings buttress this conclusion:
 The objection to a judicial review of a Presidential act arises from a
failure to recognize the most important principle in our system of
government, i.e., the separation of powers into three co-equal
departments, the executives, the legislative and the judicial, each
supreme within its own assigned powers and duties. When a
presidential act is challenged before the courts of justice, it is not to
be implied therefrom that the Executive is being made subject and
subordinate to the courts. The legality of his acts are under judicial
review, not because the Executive is inferior to the courts, but
because the law is above the Chief Executive himself, and the courts
seek only to interpret, apply or implement it (the law). A judicial
review of the President's decision on a case of an employee decided
by the Civil Service Board of Appeals should be viewed in this light
and the bringing of the case to the Courts should be governed by the
same principles as govern the jucucial review of all administrative
acts of all administrative officers. 10

Republic vs. Presiding Judge, CFI of Lanao del Norte, Br. II, 11 is another case in point. Here, "the
Executive Office"' of the Department of Education and Culture issued Memorandum Order No. 93
under the authority of then Secretary of Education Juan Manuel. As in this case, a complaint for
injunction was filed with the Court of First Instance of Lanao del Norte because, allegedly, the
enforcement of the circular would impair some contracts already entered into by public school
teachers. It was the contention of petitioner therein that "the Court of First Instance is not
empowered to amend, reverse and modify what is otherwise the clear and explicit provision of the
memorandum circular issued by the Executive Office which has the force and effect of law." In
resolving the issue, We held:

... We definitely state that respondent Court lawfully acquired jurisdiction in Civil
Case No. II-240 (8) because the plaintiff therein asked the lower court for relief, in the
form of injunction, in defense of a legal right (freedom to enter into contracts) . . . . .

Hence there is a clear infringement of private respondent's constitutional right to

enter into agreements not contrary to law, which might run the risk of being violated
by the threatened implementation of Executive Office Memorandum Circular No. 93,
dated February 5, 1968, which prohibits, with certain exceptions, cashiers and
disbursing officers from honoring special powers of attorney executed by the payee
employees. The respondent Court is not only right but duty bound to take cognizance
of cases of this nature wherein a constitutional and statutory right is allegedly
infringed by the administrative action of a government office. Courts of first Instance
have original jurisdiction over all civil actions in which the subject of the litigation is
not capable of pecuniary estimation (Sec. 44, Republic Act 296, as
amended). 12 (Emphasis supplied.)

In San Miguel Corporation vs. Avelino, 13 We ruled that a judge of the Court of First Instance has the
authority to decide on the validity of a city tax ordinance even after its validity had been contested
before the Secretary of Justice and an opinion thereon had been rendered.

In view of the foregoing, We find no cogent reason why Resolution No. 105, issued by the
respondent Professional Regulation Commission, should be exempted from the general jurisdiction
of the Regional Trial Court.
Respondent PRC, on the other hand, contends that under Section 9, paragraph 3 of B.P. Blg. 129, it
is the Court of Appeals which has jurisdiction over the case. The said law provides:

SEC. 9. Jurisdiction. — The Intermediate Appellate Court shall exercise:

xxx xxx xxx

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions,
orders, or awards of Regional Trial Courts and quasi-judicial agencies,
instrumentalities, boards or commissions, except those falling within the appellate
jurisdiction of the Supreme Court in accordance with the Constitution, the provisions
of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of
the fourth paragraph of Section 17 of the Judiciary Act of 1948.

The contention is devoid of merit.

In order to invoke the exclusive appellate jurisdiction of the Court of Appeals as provided for in
Section 9, paragraph 3 of B.P. Blg. 129, there has to be a final order or ruling which resulted from
proceedings wherein the administrative body involved exercised its quasi-judicial functions. In
Black's Law Dictionary, quasi-judicial is defined as a term applied to the action, discretion, etc., of
public administrative officers or bodies required to investigate facts, or ascertain the existence of
facts, hold hearings, and draw conclusions from them, as a basis for their official action, and to
exercise discretion of a judicial nature. To expound thereon, quasi-judicial adjudication would mean
a determination of rights, privileges and duties resulting in a decision or order which applies to a
specific situation . 14This does not cover rules and regulations of general applicability issued by the
administrative body to implement its purely administrative policies and functions like Resolution No.
105 which was adopted by the respondent PRC as a measure to preserve the integrity of licensure
examinations.

The above rule was adhered to in Filipinas Engineering and Machine Shop vs. Ferrer. 15 In this case,
the issue presented was whether or not the Court of First Instance had jurisdiction over a case
involving an order of the Commission on Elections awarding a contract to a private party which
originated from an invitation to bid. The said issue came about because under the laws then in force,
final awards, judgments, decisions or orders of the Commission on Elections fall within the exclusive
jurisdiction of the Supreme Court by way of certiorari. Hence, it has been consistently held that "it is
the Supreme Court, not the Court of First Instance, which has exclusive jurisdiction to review on
certiorari final decisions, orders, or rulings of the Commission on Elections relative to the conduct of
elections and the enforcement of election laws." 16

As to whether or not the Court of First Instance had jurisdiction in saidcase, We said:

We are however, far from convinced that an order of the COMELEC awarding a
contract to a private party, as a result of its choice among various proposals
submitted in response to its invitation to bid comes within the purview of a "final
order" which is exclusively and directly appealable to this court on certiorari. What is
contemplated by the term "final orders, rulings and decisions, of the COMELEC
reviewable by certiorari by the Supreme Court as provided by law are those rendered
in actions or proceedings before the COMELEC and taken cognizance of by the said
body in the exercise of its adjudicatory or quasi-judicial powers. (Emphasis supplied.)

xxx xxx xxx

 We agree with petitioner's contention that the order of the Commission granting the
award to a bidder is not an order rendered in a legal controversy before it wherein
the parties filed their respective pleadings and presented evidence after which the
questioned order was issued; and that this order of the commission was issued
pursuant to its authority to enter into contracts in relation to election purposes. In
short, the COMELEC resolution awarding the contract in favor of Acme was not
issued pursuant to its quasi-judicial functions but merely as an incident of its inherent
administrative functions over the conduct of elections, and hence, the said resolution
may not be deemed as a "final order reviewable by certiorari by the Supreme
Court. Being non-judicial in character, no contempt order may be imposed by the
COMELEC from said order, and no direct and exclusive appeal by certiorari to this
Tribunal lie from such order. Any question arising from said order may be well taken
in an ordinary civil action before the trial courts. (Emphasis supplied.) 17

One other case that should be mentioned in this regard is Salud vs. Central Bank of the
Philippines. 18 Here, petitioner Central Bank, like respondent in this case, argued that under Section
9, paragraph 3 of B.P. Blg. 129, orders of the Monetary Board are appealable only to the
Intermediate Appellate Court. Thus:

The Central Bank and its Liquidator also postulate, for the very first time, that the
Monetary Board is among the "quasi-judicial ... boards" whose judgments are within
the exclusive appellate jurisdiction of the IAC; hence, it is only said Court, "to the
exclusion of the Regional Trial Courts," that may review the Monetary Board's
resolutions. 19

Anent the posture of the Central Bank, We made the following pronouncement:

The contention is utterly devoid of merit. The IAC has no appellate jurisdiction over
resolution or orders of the Monetary Board. No law prescribes any mode of appeal
from the Monetary Board to the IAC. 20

In view of the foregoing, We hold that the Regional Trial Court has jurisdiction to entertain Civil Case
No. 86-37950 and enjoin the respondent PRC from enforcing its resolution.

Although We have finally settled the issue of jurisdiction, We find it imperative to decide once and for
all the validity of Resolution No. 105 so as to provide the much awaited relief to those who are and
will be affected by it.

Of course, We realize that the questioned resolution was adopted for a commendable purpose which
is "to preserve the integrity and purity of the licensure examinations." However, its good aim cannot
be a cloak to conceal its constitutional infirmities. On its face, it can be readily seen that it is
unreasonable in that an examinee cannot even attend any review class, briefing, conference or the
like, or receive any hand-out, review material, or any tip from any school, collge or university, or any
review center or the like or any reviewer, lecturer, instructor, official or employee of any of the
aforementioned or similar institutions . ... 21

The unreasonableness is more obvious in that one who is caught committing the prohibited acts
even without any ill motives will be barred from taking future examinations conducted by the
respondent PRC. Furthermore, it is inconceivable how the Commission can manage to have a
watchful eye on each and every examinee during the three days before the examination period.
It is an aixiom in administrative law that administrative authorities should not act arbitrarily and
capriciously in the issuance of rules and regulations. To be valid, such rules and regulations must be
reasonable and fairly adapted to the end in view. If shown to bear no reasonable relation to the
purposes for which they are authorized to be issued, then they must be held to be invalid. 22

Resolution No. 105 is not only unreasonable and arbitrary, it also infringes on the examinees' right to
liberty guaranteed by the Constitution. Respondent PRC has no authority to dictate on the reviewees
as to how they should prepare themselves for the licensure examinations. They cannot be restrained
from taking all the lawful steps needed to assure the fulfillment of their ambition to become public
accountants. They have every right to make use of their faculties in attaining success in their
endeavors. They should be allowed to enjoy their freedom to acquire useful knowledge that will
promote their personal growth. As defined in a decision of the United States Supreme Court:

The term "liberty" means more than mere freedom from physical restraint or the
bounds of a prison. It means freedom to go where one may choose and to act in
such a manner not inconsistent with the equal rights of others, as his judgment may
dictate for the promotion of his happiness, to pursue such callings and vocations as
may be most suitable to develop his capacities, and giv to them their highest
enjoyment. 23

Another evident objection to Resolution No. 105 is that it violates the academic freedom of the
schools concerned. Respondent PRC cannot interfere with the conduct of review that review schools
and centers believe would best enable their enrolees to meet the standards required before
becoming a full fledged public accountant. Unless the means or methods of instruction are clearly
found to be inefficient, impractical, or riddled with corruption, review schools and centers may not be
stopped from helping out their students. At this juncture, We call attention to Our pronouncement
in Garcia vs. The Faculty Admission Committee, Loyola School of Theology, 24 regarding academic
freedom to wit:

... It would follow then that the school or college itself is possessed of such a right. It
decides for itself its aims and objectives and how best to attain them. It is free from
outside coercion or interference save possibly when the overriding public welfare
calls for some restraint. It has a wide sphere of autonomy certainly extending to the
choice of students. This constitutional provision is not to be construed in a niggardly
manner or in a grudging fashion.

Needless to say, the enforcement of Resolution No. 105 is not a guarantee that the alleged leakages
in the licensure examinations will be eradicated or at least minimized. Making the examinees suffer
by depriving them of legitimate means of review or preparation on those last three precious days-
when they should be refreshing themselves with all that they have learned in the review classes and
preparing their mental and psychological make-up for the examination day itself-would be like
uprooting the tree to get ride of a rotten branch. What is needed to be done by the respondent is to
find out the source of such leakages and stop it right there. If corrupt officials or personnel should be
terminated from their loss, then so be it. Fixers or swindlers should be flushed out. Strict guidelines
to be observed by examiners should be set up and if violations are committed, then licenses should
be suspended or revoked. These are all within the powers of the respondent commission as
provided for in Presidential Decree No. 223. But by all means the right and freedom of the
examinees to avail of all legitimate means to prepare for the examinations should not be curtailed.

In the light of the above, We hereby REVERSE and SET ASIDE, the decision of the Court of
Appeals in CA-G.R. SP No. 10591 and another judgment is hereby rendered declaring Resolution
No. 105 null and void and of no force and effect for being unconstitutional. This decision is
immediately executory. No costs.

SO ORDERED.

G.R. No. L-32166 October 18, 1977

THE PEOPLE OF THE PHILIPPINES, plaintiff-appellant,

vs.
HON. MAXIMO A. MACEREN CFI, Sta. Cruz, Laguna, JOSE BUENAVENTURA, GODOFREDO
REYES, BENJAMIN REYES, NAZARIO AQUINO and CARLO DEL ROSARIO, accused-appellees.

Office of the Solicitor General for appellant.

Rustics F. de los Reyes, Jr. for appellees.

AQUINO, J.: têñ .£îhqwâ£

This is a case involving the validity of a 1967 regulation, penalizing electro fishing in fresh water
fisheries, promulgated by the Secretary of Agriculture and Natural Resources and the Commissioner
of Fisheries under the old Fisheries Law and the law creating the Fisheries Commission.

On March 7, 1969 Jose Buenaventura, Godofredo Reyes, Benjamin Reyes, Nazario Aquino and
Carlito del Rosario were charged by a Constabulary investigator in the municipal court of Sta. Cruz,
Laguna with having violated Fisheries Administrative Order No. 84-1.

It was alleged in the complaint that the five accused in the morning of March 1, 1969 resorted to
electro fishing in the waters of Barrio San Pablo Norte, Sta. Cruz by "using their own motor banca,
equipped with motor; with a generator colored green with attached dynamo colored gray or
somewhat white; and electrocuting device locally known as sensored with a somewhat webbed
copper wire on the tip or other end of a bamboo pole with electric wire attachment which was
attached to the dynamo direct and with the use of these devices or equipments catches fish thru
electric current, which destroy any aquatic animals within its cuffed reach, to the detriment and
prejudice of the populace" (Criminal Case No. 5429).

Upon motion of the accused, the municipal court quashed the complaint. The prosecution appealed.
The Court of First Instance of Laguna affirmed the order of dismissal (Civil Case No. SC-36). The
case is now before this Court on appeal by the prosecution under Republic Act No. 5440.

The lower court held that electro fishing cannot be penalize because electric current is not an
obnoxious or poisonous substance as contemplated in section I I of the Fisheries Law and that it is
not a substance at all but a form of energy conducted or transmitted by substances. The lower court
further held that, since the law does not clearly prohibit electro fishing, the executive and judicial
departments cannot consider it unlawful.

As legal background, it should be stated that section 11 of the Fisheries Law prohibits "the use of
any obnoxious or poisonous substance" in fishing.
Section 76 of the same law punishes any person who uses an obnoxious or poisonous substance in
fishing with a fine of not more than five hundred pesos nor more than five thousand, and by
imprisonment for not less than six months nor more than five years.

It is noteworthy that the Fisheries Law does not expressly punish .electro fishing." Notwithstanding
the silence of the law, the Secretary of Agriculture and Natural Resources, upon the
recommendation of the Commissioner of Fisheries, promulgated Fisheries Administrative Order No.
84 (62 O.G. 1224), prohibiting electro fishing in all Philippine waters. The order is quoted below: ñé+ .£ªw ph!1

SUBJECT: PROHIBITING ELECTRO FISHING IN ALL WATERS ñé+.£ªw ph!1

OF THE PHILIPPINES.

Pursuant to Section 4 of Act No. 4003, as amended, and Section 4 of R.A. No. 3512, the following
rules and regulations regarding the prohibition of electro fishing in all waters of the Philippines are
promulgated for the information and guidance of all concerned. ñé+.£ªw ph!1

SECTION 1. — Definition. — Words and terms used in this Order 11 construed as

follows:

(a) Philippine waters or territorial waters of the Philippines' includes all waters of the
Philippine Archipelago, as defined in the t between the United States and Spain,
dated respectively the tenth of December, eighteen hundred ninety eight and the
seventh of November, nineteen hundred. For the purpose of this order, rivers, lakes
and other bodies of fresh waters are included.

(b) Electro Fishing. — Electro fishing is the catching of fish with the use of electric
current. The equipment used are of many electrical devices which may be battery or
generator-operated and from and available source of electric current.

(c) 'Persons' includes firm, corporation, association, agent or employee.

(d) 'Fish' includes other aquatic products.

SEC. 2. — Prohibition. — It shall be unlawful for any person to engage in electro

fishing or to catch fish by the use of electric current in any portion of the Philippine
waters except for research, educational and scientific purposes which must be
covered by a permit issued by the Secretary of Agriculture and Natural Resources
which shall be carried at all times.

SEC. 3. — Penalty. — Any violation of the provisions of this Administrative Order

shall subject the offender to a fine of not exceeding five hundred pesos (P500.00) or
imprisonment of not extending six (6) months or both at the discretion of the Court.

SEC. 4. — Repealing Provisions. — All administrative orders or parts thereof

inconsistent with the provisions of this Administrative Order are hereby revoked.

SEC. 5. — Effectivity. — This Administrative Order shall take effect six (60) days
after its publication in the Office Gazette.
On June 28, 1967 the Secretary of Agriculture and Natural Resources, upon the recommendation of
the Fisheries Commission, issued Fisheries Administrative Order No. 84-1, amending section 2 of
Administrative Order No. 84, by restricting the ban against electro fishing to fresh water fisheries (63
O.G. 9963).

Thus, the phrase "in any portion of the Philippine waters" found in section 2, was changed by the
amendatory order to read as follows: "in fresh water fisheries in the Philippines, such as rivers,
lakes, swamps, dams, irrigation canals and other bodies of fresh water."

The Court of First Instance and the prosecution (p. 11 of brief) assumed that electro fishing is
punishable under section 83 of the Fisheries Law (not under section 76 thereof), which provides that
any other violation of that law "or of any rules and regulations promulgated thereunder shall subject
the offender to a fine of not more than two hundred pesos (P200), or in t for not more than six
months, or both, in the discretion of the court."

That assumption is incorrect because 3 of the aforequoted Administrative Order No. 84 imposes a
fm of not exceeding P500 on a person engaged in electro fishing, which amount the 83. It seems
that the Department of Fisheries prescribed their own penalty for swift fishing which penalty is less
than the severe penalty imposed in section 76 and which is not Identified to the at penalty imposed
in section 83.

Had Administrative Order No. 84 adopted the fighter penalty prescribed in on 83, then the crime of
electro fishing would be within the exclusive original jurisdiction of the inferior court (Sec. 44 [f],
Judiciary Law; People vs. Ragasi, L-28663, September 22,

We have discussed this pre point, not raised in the briefs, because it is obvious that the crime of
electro fishing which is punishable with a sum up to P500, falls within the concurrent original
jurisdiction of the inferior courts and the Court of First instance (People vs. Nazareno, L-40037, April
30, 1976, 70 SCRA 531 and the cases cited therein).

And since the instant case was filed in the municipal court of Sta. Cruz, Laguna, a provincial capital,
the order of d rendered by that municipal court was directly appealable to the Court, not to the Court
of First Instance of Laguna (Sec. 45 and last par. of section 87 of the Judiciary Law; Esperat vs.
Avila, L-25992, June 30, 1967, 20 SCRA 596).

It results that the Court of First Instance of Laguna had no appellate jurisdiction over the case. Its
order affirming the municipal court's order of dismissal is void for lack of motion. This appeal shall be
treated as a direct appeal from the municipal court to this Court. (See People vs. Del Rosario, 97
Phil. 67).

In this appeal, the prosecution argues that Administrative Orders Nos. 84 and 84-1 were not issued
under section 11 of the Fisheries Law which, as indicated above, punishes fishing by means of an
obnoxious or poisonous substance. This contention is not well-taken because, as already stated, the
Penal provision of Administrative Order No. 84 implies that electro fishing is penalized as a form of
fishing by means of an obnoxious or poisonous substance under section 11.

The prosecution cites as the legal sanctions for the prohibition against electro fishing in fresh water
fisheries (1) the rule-making power of the Department Secretary under section 4 of the Fisheries
Law; (2) the function of the Commissioner of Fisheries to enforce the provisions of the Fisheries Law
and the regulations Promulgated thereunder and to execute the rules and regulations consistent with
the purpose for the creation of the Fisheries Commission and for the development of fisheries (Sec.
4[c] and [h] Republic Act No. 3512; (3) the declared national policy to encourage, Promote and
conserve our fishing resources (Sec. 1, Republic Act No. 3512), and (4) section 83 of the Fisheries
Law which provides that "any other violation of" the Fisheries Law or of any rules and regulations
promulgated thereunder "shall subject the offender to a fine of not more than two hundred pesos, or
imprisonment for not more than six months, or both, in the discretion of the court."

As already pointed out above, the prosecution's reference to section 83 is out of place because the
penalty for electro fishing under Administrative order No. 84 is not the same as the penalty fixed in
section 83.

We are of the opinion that the Secretary of Agriculture and Natural Resources and the
Commissioner of Fisheries exceeded their authority in issuing Fisheries Administrative Orders Nos.
84 and 84-1 and that those orders are not warranted under the Fisheries Commission, Republic Act
No. 3512.

The reason is that the Fisheries Law does not expressly prohibit electro fishing. As electro fishing is
not banned under that law, the Secretary of Agriculture and Natural Resources and the
Commissioner of Fisheries are powerless to penalize it. In other words, Administrative Orders Nos.
84 and 84-1, in penalizing electro fishing, are devoid of any legal basis.

Had the lawmaking body intended to punish electro fishing, a penal provision to that effect could
have been easily embodied in the old Fisheries Law.

That law punishes (1) the use of obnoxious or poisonous substance, or explosive in fishing; (2)
unlawful fishing in deepsea fisheries; (3) unlawful taking of marine molusca, (4) illegal taking of
sponges; (5) failure of licensed fishermen to report the kind and quantity of fish caught, and (6) other
violations.

Nowhere in that law is electro fishing specifically punished. Administrative Order No. 84, in punishing
electro fishing, does not contemplate that such an offense fails within the category of "other
violations" because, as already shown, the penalty for electro fishing is the penalty next lower to the
penalty for fishing with the use of obnoxious or poisonous substances, fixed in section 76, and is not
the same as the penalty for "other violations" of the law and regulations fixed in section 83 of the
Fisheries Law.

The lawmaking body cannot delegate to an executive official the power to declare what acts should
constitute an offense. It can authorize the issuance of regulations and the imposition of the penalty
provided for in the law itself. (People vs. Exconde 101 Phil. 11 25, citing 11 Am. Jur. 965 on p. 11
32).

Originally, Administrative Order No. 84 punished electro fishing in all waters. Later, the ban against
electro fishing was confined to fresh water fisheries. The amendment created the impression that
electro fishing is not condemnable per se. It could be tolerated in marine waters. That circumstances
strengthens the view that the old law does not eschew all forms of electro fishing.

However, at present, there is no more doubt that electro fishing is punishable under the Fisheries
Law and that it cannot be penalized merely by executive revolution because Presidential Decree No.
704, which is a revision and consolidation of all laws and decrees affecting fishing and fisheries and
which was promulgated on May 16, 1975 (71 O.G. 4269), expressly punishes electro fishing in fresh
water and salt water areas.

That decree provides: ñé+.£ªwph!1

 SEC. 33. — Illegal fishing, dealing in illegally caught fish or fishery/aquatic products.
— It shall he unlawful for any person to catch, take or gather or cause to be caught,
taken or gathered fish or fishery/aquatic products in Philippine waters with the use of
explosives, obnoxious or poisonous substance, or by the use of electricity as defined
in paragraphs (1), (m) and (d), respectively, of Section 3 hereof: ...

The decree Act No. 4003, as amended, Republic Acts Nos. 428, 3048, 3512 and 3586, Presidential
Decrees Nos. 43, 534 and 553, and all , Acts, Executive Orders, rules and regulations or parts
thereof inconsistent with it (Sec. 49, P. D. No. 704).

The inclusion in that decree of provisions defining and penalizing electro fishing is a clear recognition
of the deficiency or silence on that point of the old Fisheries Law. It is an admission that a mere
executive regulation is not legally adequate to penalize electro fishing.

Note that the definition of electro fishing, which is found in section 1 (c) of Fisheries Administrative
Order No. 84 and which is not provided for the old Fisheries Law, is now found in section 3(d) of the
decree. Note further that the decree penalty electro fishing by "imprisonment from two (2) to four (4)
years", a punishment which is more severe than the penalty of a time of not excluding P500 or
imprisonment of not more than six months or both fixed in section 3 of Fisheries Administrative
Order No. 84.

An examination of the rule-making power of executive officials and administrative agencies and, in
particular, of the Secretary of Agriculture and Natural Resources (now Secretary of Natural
Resources) under the Fisheries Law sustains the view that he ex his authority in penalizing electro
fishing by means of an administrative order.

Administrative agent are clothed with rule-making powers because the lawmaking body finds it
impracticable, if not impossible, to anticipate and provide for the multifarious and complex situations
that may be encountered in enforcing the law. All that is required is that the regulation should be
germane to the defects and purposes of the law and that it should conform to the standards that the
law prescribes (People vs. Exconde 101 Phil. 1125; Director of Forestry vs. Muñ;oz, L-24796, June
28, 1968, 23 SCRA 1183, 1198; Geukeko vs. Araneta, 102 Phil. 706, 712).

The lawmaking body cannot possibly provide for all the details in the enforcement of a particular
statute (U.S. vs. Tupasi Molina, 29 Phil. 119, 125, citing U.S. vs. Grimaud 220 U.S. 506;
Interprovincial Autobus Co., Inc. vs. Coll. of Internal Revenue, 98 Phil. 290, 295-6).

The grant of the rule-making power to administrative agencies is a relaxation of the principle of
separation of powers and is an exception to the nondeleption of legislative, powers. Administrative
regulations or "subordinate legislation calculated to promote the public interest are necessary
because of "the growing complexity of modem life, the multiplication of the subjects of governmental
regulations, and the increased difficulty of administering the law" Calalang vs. Williams, 70 Phil. 726;
People vs. Rosenthal and Osmeñ;a, 68 Phil. 328).

Administrative regulations adopted under legislative authority by a particular department must be in

harmony with the provisions of the law, and should be for the sole purpose of carrying into effect its
general provisions. By such regulations, of course, the law itself cannot be extended. (U.S. vs.
Tupasi Molina, supra). An administrative agency cannot amend an act of Congress (Santos vs.
Estenzo, 109 Phil. 419, 422; Teoxon vs. Members of the d of Administrators, L-25619, June 30,
1970, 33 SCRA 585; Manuel vs. General Auditing Office, L-28952, December 29, 1971, 42 SCRA
660; Deluao vs. Casteel, L-21906, August 29, 1969, 29 SCRA 350).
The rule-making power must be confined to details for regulating the mode or proceeding to carry
into effect the law as it his been enacted. The power cannot be extended to amending or expanding
the statutory requirements or to embrace matters not covered by the statute. Rules that subvert the
statute cannot be sanctioned. (University of Santo Tomas vs. Board of Tax A 93 Phil. 376, 382,
citing 12 C.J. 845-46. As to invalid regulations, see of Internal Revenue vs. Villaflor 69 Phil. 319,
Wise & Co. vs. Meer, 78 Phil. 655, 676; Del March vs. Phil. Veterans Administrative, L-27299, June
27, 1973, 51 SCRA 340, 349).

There is no question that the Secretary of Agriculture and Natural Resources has rule-making
powers. Section 4 of the Fisheries law provides that the Secretary "shall from time to time issue
instructions, orders, and regulations consistent" with that law, "as may be and proper to carry into
effect the provisions thereof." That power is now vested in the Secretary of Natural Resources by on
7 of the Revised Fisheries law, Presidential December No. 704.

Section 4(h) of Republic Act No. 3512 empower the Co of Fisheries "to prepare and execute upon
the approval of the Secretary of Agriculture and Natural Resources, forms instructions, rules and
regulations consistent with the purpose" of that enactment "and for the development of fisheries."

Section 79(B) of the Revised Administrative Code provides that "the Department Head shall have
the power to promulgate, whenever he may see fit do so, all rules, regulates, orders, memorandums,
and other instructions, not contrary to law, to regulate the proper working and harmonious and
efficient administration of each and all of the offices and dependencies of his Department, and for
the strict enforcement and proper execution of the laws relative to matters under the jurisdiction of
said Department; but none of said rules or orders shall prescribe penalties for the violation thereof,
except as expressly authorized by law."

Administrative regulations issued by a Department Head in conformity with law have the force of law
(Valerie vs. Secretary of culture and Natural Resources, 117 Phil. 729, 733; Antique Sawmills, Inc.
vs. Zayco, L- 20051, May 30, 1966, 17 SCRA 316). As he exercises the rule-making power by
delegation of the lawmaking body, it is a requisite that he should not transcend the bound
demarcated by the statute for the exercise of that power; otherwise, he would be improperly
exercising legislative power in his own right and not as a surrogate of the lawmaking body.

Article 7 of the Civil Code embodies the basic principle that administrative or executive acts, orders
and regulations shall be valid only when they are not contrary to the laws or the Constitution."

As noted by Justice Fernando, "except for constitutional officials who can trace their competence to
act to the fundamental law itself, a public office must be in the statute relied upon a grant of power
before he can exercise it." "department zeal may not be permitted to outrun the authority conferred
by statute." (Radio Communications of the Philippines, Inc. vs. Santiago, L-29236, August 21, 1974,
58 SCRA 493, 496-8).

"Rules and regulations when promulgated in pursuance of the procedure or authority conferred upon
the administrative agency by law, partake of the nature of a statute, and compliance therewith may
be enforced by a penal sanction provided in the law. This is so because statutes are usually
couched in general terms, after expressing the policy, purposes, objectives, remedies and sanctions
intended by the legislature. The details and the manner of carrying out the law are oftentimes left to
the administrative agency entrusted with its enforcement. In this sense, it has been said that rules
and regulations are the product of a delegated power to create new or additional legal provisions
that have the effect of law." The rule or regulation should be within the scope of the statutory
authority granted by the legislature to the administrative agency. (Davis, Administrative Law, p. 194,
197, cited in Victories Milling Co., Inc. vs. Social Security Commission, 114 Phil. 555, 558).
In case of discrepancy between the basic law and a rule or regulation issued to implement said law,
the basic law prevails because said rule or regulation cannot go beyond the terms and provisions of
the basic law (People vs. Lim, 108 Phil. 1091).

This Court in its decision in the Lim case, supra, promulgated on July 26, 1960, called the attention
of technical men in the executive departments, who draft rules and regulations, to the importance
and necessity of closely following the legal provisions which they intend to implement so as to avoid
any possible misunderstanding or confusion.

The rule is that the violation of a regulation prescribed by an executive officer of the government in
conformity with and based upon a statute authorizing such regulation constitutes an offense and
renders the offender liable to punishment in accordance with the provisions of the law (U.S. vs.
Tupasi Molina, 29 Phil. 119, 124).

In other words, a violation or infringement of a rule or regulation validly issued can constitute a crime
punishable as provided in the authorizing statute and by virtue of the latter (People vs. Exconde 101
Phil. 1125, 1132).

It has been held that "to declare what shall constitute a crime and how it shall be punished is a
power vested exclusively in the legislature, and it may not be delegated to any other body or agency"
(1 Am. Jur. 2nd, sec. 127, p. 938; Texas Co. vs. Montgomery, 73 F. Supp. 527).

In the instant case the regulation penalizing electro fishing is not strictly in accordance with the
Fisheries Law, under which the regulation was issued, because the law itself does not expressly
punish electro fishing.

The instant case is similar to People vs. Santos, 63 Phil. 300. The Santos case involves section 28
of Fish and Game Administrative Order No. 2 issued by the Secretary of Agriculture and Natural
Resources pursuant to the aforementioned section 4 of the Fisheries Law.

Section 28 contains the proviso that a fishing boat not licensed under the Fisheries Law and under
the said administrative order may fish within three kilometers of the shoreline of islands and
reservations over which jurisdiction is exercised by naval and military reservations authorities of the
United States only upon receiving written permission therefor, which permission may be granted by
the Secretary upon recommendation of the military or naval authorities concerned. A violation of the
proviso may be proceeded against under section 45 of the Federal Penal Code.

Augusto A. Santos was prosecuted under that provision in the Court of First Instance of Cavite for
having caused his two fishing boats to fish, loiter and anchor without permission from the Secretary
within three kilometers from the shoreline of Corrigidor Island.

This Court held that the Fisheries Law does not prohibit boats not subject to license from fishing
within three kilometers of the shoreline of islands and reservations over which jurisdiction is
exercised by naval and military authorities of the United States, without permission from the
Secretary of Agriculture and Natural Resources upon recommendation of the military and naval
authorities concerned.

As the said law does not penalize the act mentioned in section 28 of the administrative order, the
promulgation of that provision by the Secretary "is equivalent to legislating on the matter, a power
which has not been and cannot be delegated to him, it being expressly reserved" to the lawmaking
body. "Such an act constitutes not only an excess of the regulatory power conferred upon the
Secretary but also an exercise of a legislative power which he does not have, and therefore" the said
provision "is null and void and without effect". Hence, the charge against Santos was dismiss.

A penal statute is strictly construed. While an administrative agency has the right to make ranks and
regulations to carry into effect a law already enacted, that power should not be confused with the
power to enact a criminal statute. An administrative agency can have only the administrative or
policing powers expressly or by necessary implication conferred upon it. (Glustrom vs. State, 206
Ga. 734, 58 Second 2d 534; See 2 Am. Jr. 2nd 129-130).

Where the legislature has delegated to executive or administrative officers and boards authority to
promulgate rules to carry out an express legislative purpose, the rules of administrative officers and
boards, which have the effect of extending, or which conflict with the authority granting statute, do
not represent a valid precise of the rule-making power but constitute an attempt by an administrative
body to legislate (State vs. Miles, Wash. 2nd 322, 105 Pac. 2nd 51).

In a prosecution for a violation of an administrative order, it must clearly appear that the order is one
which falls within the scope of the authority conferred upon the administrative body, and the order
will be scrutinized with special care. (State vs. Miles supra).

The Miles case involved a statute which authorized the State Game Commission "to adopt,
promulgate, amend and/or repeal, and enforce reasonable rules and regulations governing and/or
prohibiting the taking of the various classes of game.

Under that statute, the Game Commission promulgated a rule that "it shall be unlawful to offer, pay
or receive any reward, prize or compensation for the hunting, pursuing, taking, killing or displaying of
any game animal, game bird or game fish or any part thereof."

Beryl S. Miles, the owner of a sporting goods store, regularly offered a ten-down cash prize to the
person displaying the largest deer in his store during the open for hunting such game animals. For
that act, he was charged with a violation of the rule Promulgated by the State Game Commission.

It was held that there was no statute penalizing the display of game. What the statute penalized was
the taking of game. If the lawmaking body desired to prohibit the display of game, it could have
readily said so. It was not lawful for the administrative board to extend or modify the statute. Hence,
the indictment against Miles was quashed. The Miles case is similar to this case.

WHEREFORE, the lower court's decision of June 9, 1970 is set aside for lack of appellate
jurisdiction and the order of dismissal rendered by the municipal court of Sta. Cruz, Laguna in
Criminal Case No. 5429 is affirmed. Costs de oficio.

SO ORDERED.

THIRD DIVISION

The HONORABLE SECRETARY G.R. No. 159149

VINCENT S. PEREZ, in his capacity as
the Secretary of the Department of Present:
Energy,

Petitioner,
QUISUMBING, J., Chairperson,

CARPIO,

- versus -

CARPIO MORALES,
TINGA, and
VELASCO, JR., JJ.

LPG REFILLERS ASSOCIATIONOF THE Promulgated:

PHILIPPINES, INC.,

Respondent.
June 26, 2006

x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

QUISUMBING, J.:

Before us is a petition for review on certiorari under Rule 45, assailing the
Decision[1] and Order[2] of the Regional Trial Court of Pasig City, Branch 161, in SCA
Case No. 2318, which nullified Circular No. 2000-06-010 of the Department of
Energy (DOE).

The facts are undisputed.

Batas Pambansa Blg. 33, as amended, penalizes illegal trading, hoarding,

overpricing, adulteration, underdelivery, and underfilling of petroleum products,
as well as possession for trade of adulterated petroleum products and of
underfilled liquefied petroleum gas (LPG) cylinders.[3] The said law sets the
monetary penalty for violators to a minimum of P20,000 and a maximum
of P50,000.[4]

On June 9, 2000, Circular No. 2000-06-010 was issued by the DOE to

implement B.P. Blg. 33, thus:

SECTION 4. NO PRICE DISPLAY BOARD

LPG Marketer/LPG Dealer/LPG Retail Outlet

1st Offense - Reprimand/warning letter

2nd Offense - Recommend suspension of business operation to

the proper local government unit

3rd Offense - Recommend business closure to the proper local

government unit and initiate criminal proceedings

SECTION 5. NO WEIGHING SCALE

A. LPG Refiller/Marketer

1st Offense - Fine of P5,000

2nd Offense - Fine of P10,000

 3rd Offense - Recommend business closure to the proper local
government unit

B. Dealer

1st Offense - Fine of P3,000

2nd Offense - Fine of P7,000

3rd Offense - Recommend business closure to the proper local

government unit

C. LPG Retail Outlet

1st Offense - Reprimand

2nd Offense - Fine of P500.00

3rd Offense - Fine of P1,000.00

SECTION 6. NO TARE WEIGHT OR INCORRECT TARE WEIGHT

MARKINGS. (REQUIREMENT ON ENGRAVED TARE WEIGHT SHALL TAKE
EFFECT TWO (2) YEARS AFTER EFFECTIVITY OF THIS CIRCULAR)

A. LPG Refiller/Marketer

1st Offense - Fine of P3,000 for each cylinder

2nd Offense - Fine of P5,000 for each cylinder

3rd Offense - Recommend business closure to the proper local

government unit

B. Dealer

1st Offense - Fine of P2,000 for each cylinder

2nd Offense - Fine of P4,000 for each cylinder

3rd Offense - Recommend business closure to the proper local

government unit
 C. LPG Retail Outlet

1st Offense - Fine of P1,000 for each cylinder

2nd Offense - Fine of P2,000 for each cylinder

3rd Offense - Recommend business closure to the proper local

government unit

SECTION 7. NO APPROPRIATE OR AUTHORIZED LPG SEAL

A. LPG Refiller/Marketer

1st Offense - Fine of P3,000 for each cylinder

2nd Offense - Fine of P5,000 for each cylinder

3rd Offense - Recommend business closure to the proper local

government unit

B. Dealer

1st Offense - Fine of P2,000 for each cylinder

2nd Offense - Fine of P4,000 for each cylinder

3rd Offense - Recommend business closure to the proper local

government unit

C. LPG Retail Outlet

1st Offense - Fine of P1,000 for each cylinder

2nd Offense - Fine of P2,000 for each cylinder

3rd Offense - Recommend business closure to the proper local

government unit

SECTION 8. NO TRADE NAME, UNBRANDED LPG CYLINDERS, NO

SERIAL NUMBER, NO DISTINGUISHING COLOR, NO EMBOSSED
IDENTIFYING MARKINGS ON CYLINDER OR DISTINCTIVE COLLAR OR
DESIGN (REQUIREMENT ON SERIAL NUMBER AND DISTINCTIVE
 COLLAR OR DESIGN SHALL TAKE EFFECT TWO (2) YEARS AFTER
EFFECTIVITY OF THIS CIRCULAR)

A. LPG Refiller/Marketer

1st Offense - Fine of P4,000 for each cylinder

2nd Offense - Fine of P5,000 for each cylinder

3rd Offense - Recommend business closure to the proper local

government unit

B. Dealer

1st Offense - Fine of P3,000 for each cylinder

2nd Offense - Fine of P4,000 for each cylinder

3rd Offense - Recommend business closure to the proper local

government unit

C. LPG Retail Outlet

1st Offense - Fine of P1,000 for each cylinder

2nd Offense - Fine of P2,000 for each cylinder

3rd Offense - Recommend business closure to the proper local

government unit

SECTION 9. UNDERFILLED LPG CYLINDERS

A. LPG REFILLER/MARKETER

1st Offense - Fine of P4,000 for each cylinder

2nd Offense - Fine of P6,000 for each cylinder

3rd Offense - Recommend business closure to the proper local

government unit

B. DEALER
 1st Offense - Fine of P3,000 for each cylinder

2nd Offense - Fine of P4,000 for each cylinder

3rd Offense - Recommend business closure to the proper local

government unit

C. LPG RETAIL OUTLET

1st Offense - Fine of P1,000 for each cylinder

2nd Offense - Fine of P2,000 for each cylinder

3rd Offense - Recommend business closure to the proper local

government unit

SECTION 10. TAMPERING, ALTERING, OR MODIFYING OF LPG

CYLINDER THRU ANY MEANS SUCH AS BUT NOT LIMITED TO
CHANGING THE VALVE, REPAINTING, AND RELABELLING BY ANY
PERSON OR ENTITY OTHER THAN THE LEGITIMATE AND
REGISTERED OWNER OF THE SAME. FOR THIS PURPOSE, LPG
REFILLER, MARKETER, DEALER, OR RETAIL OUTLET, AS THE CASE
MAY BE, WHO HAS POSSESSION OF SUCH ILLEGALLY
TAMPERED, ALTERED, OR OTHERWISE MODIFIED LPG CYLINDER
SHALL BE HELD LIABLE FOR THIS OFFENSE

A. LPG Refiller/Marketer

1st Offense - Fine of P5,000 for each cylinder

2nd Offense - Fine of P10,000 for each cylinder

3rd Offense - Recommend business closure to the proper local government

unit

B. Dealer

1st Offense - Fine of P3,000 for each cylinder

2nd Offense - Fine of P5,000 for each cylinder

 3rd Offense - Recommend business closure to the proper local
government unit

C. LPG Retail Outlet

1st Offense - Fine of P1,500 for each cylinder

2nd Offense - Fine of P3,000 for each cylinder

3rd Offense - Recommend business closure to the proper local

government unit

SECTION 11. UNAUTHORIZED DECANTING OR REFILLING OF LPG

CYLINDERS

1st Offense - Fine of P5,000 for each cylinder

2nd Offense - Fine of P10,000 for each cylinder

3rd Offense - Recommend business closure to the proper local

government unit

SECTION 12. HOARDING OF PETROLEUM PRODUCTS INCLUDING

LIQUEFIED PETROLEUM GAS

1st Offense - Fine of P10,000 per cylinder

2nd Offense - Recommend business closure to the proper local

government unit plus the filing of appropriate criminal action

SECTION 13. REFUSAL TO ALLOW OR COOPERATE WITH DULY

AUTHORIZED INSPECTORS OF THE ENERGY INDUSTRY
ADMINISTRATION BUREAU (EIAB) OF THE DEPARTMENT OF
ENERGY IN THE CONDUCT OF THEIR
INSPECTION/INVESTIGATION, WHETHER REGULAR AND
ROUTINARY OR COMPLAINT-INITIATED

1st Offense - Fine of P10,000

2nd Offense - Recommend business closure to the

 proper local government unit

SECTION 14. REFUSAL OR FAILURE TO PAY FINE The Department of

Energy shall recommend to the proper local government unit the closure
of business of a respondent who refuses or fails to pay any
administrative fine without prejudice to the filing of an appropriate
criminal action if warranted.[5]

Respondent LPG Refillers Association of the Philippines, Inc. asked the DOE
to set aside the Circular for being contrary to law. The DOE, however, denied the
request for lack of merit.

Respondent then filed a petition for prohibition and annulment with prayer
for temporary restraining order and/or writ of preliminary injunction before the
trial court.
After trial on the merits, the trial court nullified the Circular on the ground that it
introduced new offenses not included in the law.[6] The court intimated that the
Circular, in providing penalties on a per cylinder basis for each violation, might
exceed the maximum penalty under the law. The decretal part of its Decision
reads:

IN VIEW OF THE FOREGOING, this Court renders judgment declaring

DOE Circular No. 2000-06-010 null and void and prohibits the
respondent from implementing the same.

SO ORDERED.[7]

The trial court denied for lack of merit petitioners motion for reconsideration.
Hence this petition, raising the following issues:
I

WHETHER OR NOT THE COURT A QUO GRAVELY ERRED IN HOLDING

THAT A CLOSE SCRUTINY OF BP 33, PD 1865 AND R.A. NO. 8479 SHOWS
THAT OFFENSES LIKE NO PRICE DISPLAY [BOARD], NO WEIGHING SCALE,
ETC. SET FORTH IN THE CIRCULAR ARE NOT PROVIDED FOR IN ANY OF
THE THREE (3) LAWS.

II

WHETHER OR NOT THE COURT A QUO GRAVELY ERRED IN HOLDING

THAT A SCRUTINY OF THE NEW SET OF PENALTIES PROVIDED BY THE
CIRCULAR SHOWS THAT THE PENALTIES THIS TIME ARE BASED ON PER
CYLINDER BASIS; THAT BEING SUCH, NO CEILING WAS PROVIDED FOR
AS TO THE ADMINISTRATIVE FINES; THAT AS ILLUSTRATED BY THE
PETITIONER, FOR JUST ONE LPG CYLINDER FOUND VIOLATING AT LEAST
SEC[TIONS] 6, 7, 8, 9, 10 AND 11 OF THE [CIRCULAR], A FINE
OF P24,000.00 IS IMPOSED; AND THAT THIS WILL CLEARLY BE BEYOND
THE P10,000.00 PROVIDED BY THE LAWS.

III

WHETHER OR NOT THE COURT A QUO GRAVELY ERRED IN HOLDING

THAT SECTION 16 OF PETITIONERS CIRCULAR WHICH AUTHORIZES THE
IMPOSITION OF PECUNIARY PENALTIES WITH THE TOTAL FINE NOT
EXCEEDING P20,000.00 FOR RETAIL OUTLETS VIOLATES THE PENALTY
CEILING OF P10,000.00 SET UNDER BP BLG. 33, AS AMENDED.

IV

WHETHER OR NOT THE COURT A QUO GRAVELY ERRED IN HOLDING

THAT SINCE SECTION 5(g) OF R.A. 7638 FINDS NO REFERENCE IN DOE
CIRCULAR NO. 2000-06-010, THE SAME SHOULD BE DISREGARDED.

WHETHER OR NOT THE COURT A QUO GRAVELY ERRED IN HOLDING

THAT ON THE NEW OFFENSES INTRODUCED IN THE CIRCULAR SUCH AS
SECTIONS 4, 5, 10, 13 AND 14 AND THE IMPOSITION OF THE
GRADUATED PENALTIES ON A PER CYLINDER BASIS, THIS COURT FINDS
[NO] REASON TO DISTURB ITS FINDINGS THAT RESPONDENT-MOVANT
EXCEEDED ITS AUTHORITY. X X X IT SHOULD BE REMEMBERED THAT BP
 BLG. 33 AS AMENDED AND P.D. 1865 ARE CRIMINAL STATUTES AND
MUST BE CONSTRUED WITH SUCH STRICTNESS AS TO CAREFULLY
SAFEGUARD THE RIGHTS OF THE DEFENDANT.

VI

WHETHER OR NOT THE COURT A QUO ERRED IN HOLDING THAT THE

ASSAILED CIRCULAR SETS NO MAXIMUM LIMIT AS TO THE FINE THAT
MAY BE IMPOSED ON AN ERRING PERSON OR ENTITY TO WHICH FACT
MOVANT CONCEDES. FOR ONE (1) CYLINDER ALONE, NOT ONLY DOES
THE CIRCULAR MAKE THE FINE EXCESSIVE TO THE EXTENT OF BEING
CONFISCATORY, BUT IT EVEN IMPOSES A PENALTY WHICH MAY EVEN
GO BEYOND THAT MAXIMUM IMPOSABLE FINE OF P50,000.00 SET BY
P.D. 1865 IN ITS SEC. 4 AFTER A CRIMINAL PROCEEDING.[8]

To our mind, the issue raised by petitioner may be reduced to the sole issue of
whether the Regional Trial Court of Pasig erred in declaring the provisions of the
Circular null and void, and prohibiting the Circulars implementation.

Petitioner argues that the penalties for the acts and omissions enumerated
in the Circular are sanctioned by Sections 1[9] and 3-A[10] of B.P. Blg. 33 and
Section 23[11] of Republic Act No. 8479.[12] Petitioner adds that Sections
5(g)[13] and 21[14] of Republic Act No. 7638[15] also authorize the DOE to impose the
penalties provided in the Circular.
Respondent counters that the enabling laws, B.P. Blg. 33 and R.A. No. 8479, do
not expressly penalize the acts and omissions enumerated in the Circular. Neither
is the Circular supported by R.A. No. 7638, respondent claims, since the said law
does not pertain to LPG traders. Respondent maintains that the Circular is not in
conformity with the law it seeks to implement.

We resolve to grant the petition.

For an administrative regulation, such as the Circular in this case, to have the
force of penal law, (1) the violation of the administrative regulation must be made
a crime by the delegating statute itself; and (2) the penalty for such violation must
be provided by the statute itself.[16]

The Circular satisfies the first requirement. B.P. Blg. 33, as amended, criminalizes
illegal trading, adulteration, underfilling, hoarding, and overpricing of petroleum
products. Under this general description of what constitutes criminal acts
involving petroleum products, the Circular merely lists the various modes by
which the said criminal acts may be perpetrated, namely: no price display board,
no weighing scale, no tare weight or incorrect tare weight markings, no
authorized LPG seal, no trade name, unbranded LPG cylinders, no serial number,
no distinguishing color, no embossed identifying markings on cylinder, underfilling
LPG cylinders, tampering LPG cylinders, and unauthorized decanting of LPG
cylinders. These specific acts and omissions are obviously within the
contemplation of the law, which seeks to curb the pernicious practices of some
petroleum merchants.

As for the second requirement, we find that the Circular is in accord with the law.
Under B.P. Blg. 33, as amended, the monetary penalty for any person who commits
any of the acts aforestated is limited to a minimum of P20,000 and a maximum
of P50,000. Under the Circular, the maximum pecuniary penalty for retail
outlets is P20,000,[17] an amount within the range allowed by law. However, for
the refillers, marketers, and dealers, the Circular is silent as to any maximum
monetary penalty. This mere silence, nonetheless, does not amount to violation of
the aforesaid statutory maximum limit. Further, the mere fact that the Circular
provides penalties on a per cylinder basis does not in itself run counter to the law
since all that B.P. Blg. 33 prescribes are the minimum and the maximum limits of
penalties.

Clearly, it is B.P. Blg. 33, as amended, which defines what constitute punishable
acts involving petroleum products and which set the minimum and maximum
limits for the corresponding penalties. The Circular merely implements the said
law, albeit it is silent on the maximum pecuniary penalty for refillers, marketers,
and dealers. Nothing in the Circular contravenes the law.

Noteworthy, the enabling laws on which the Circular is based were specifically
intended to provide the DOE with increased administrative and penal measures
with which to effectively curtail rampant adulteration and shortselling, as well as
other acts involving petroleum products, which are inimical to public interest. To
nullify the Circular in this case would be to render inutile government efforts to
protect the general consuming public against the nefarious practices of some
unscrupulous LPG traders.

WHEREFORE, the petition is GRANTED. The assailed Circular No. 2000-06-010 of

DOE is declared valid. The Decision and Order of the Regional Trial Court of Pasig
City, Branch 161, in SCA Case No. 2318, nullifying said Circular and prohibiting its
implementation are hereby REVERSED and SET ASIDE.

No pronouncement as to costs.

SO ORDERED.

G.R. No. L-34526 August 9, 1988

HIJO PLANTATION INC., DAVAO FRUITS CORPORATION, TWIN RIVERS PLANTATION, INC.
and MARSMAN & CO., INC., for themselves and in behalf of other persons and entities
similarly situated, petitioners,
vs.
CENTRAL BANK OF THE PHILIPPINES, respondent.

PARAS, J.:

This is a petition for certiorari and prohibition which seeks: (1) to declare Monetary Board Resolution No. 1995, series of 1971, as null and
void; (2) to prohibit the Central Bank from collecting the stabilization tax on banana exports shipped during the period January 1, 1972 to
June 30, 1982; and (3) a refund of the amount collected as stabilization tax from the Central Bank.

The facts of this case as culled from the records are as follows:
Hijo Plantation, Inc., Davao Fruits Corporation, Twin Rivers Plantation, Inc. and Marsman Plantation
(Manifestation, Rollo, P. 18), collectively referred to herein as petitioners, are domestic corporations
duly organized and existing under the laws of the Philippines, all of which are engaged in the
production and exportation of bananas in and from Mindanao.

Owing to the difficulty of determining the exchange rate of the peso to the dollar because of the
floating rate and the promulgation of Central Bank Circular No. 289 which imposes an 80% retention
scheme on all dollar earners, Congress passed Republic Act No. 6125 entitled "an act imposing
STABILIZATION TAX ON CONSIGNMENTS ABROAD TO ACCELERATE THE ECONOMIC
DEVELOPMENT OF THE PHILIPPINES AND FOR OTHER PURPOSES," approved and made
effective on May 1, 1970 (Comment on Petition, Rollo, p, 32), to eliminate the necessity for said
circular and to stabilize the peso. Among others, it provides as follows:

SECTION 1. There shall be imposed, assessed and collected a stabilization tax on

the gross F.O.B. peso proceeds, based on the rate of exchange prevailing at the time
of receipt of such proceeds, whether partial or total, of any exportation of the
following products in accordance with the following schedule:

a. In the case of logs, copra, centrifugal sugar, and copper ore and
concentrates:

Ten per centum of the F.O.B. peso proceeds of

exports received on or after the date of effectivity of
this Act to June thirty, nineteen hundred seventy one;

Eight per centum of the F.O.B. peso proceeds of

exports received from July first, nineteen hundred
seventy-one to June thirty, nineteen hundred seventy-
two;

Six per centum of the F.O.B. peso proceeds of

exports received from July first, nineteen hundred
seventy two to June thirty, nineteen hundred seventy-
three; and

Four per centum of the F.O.B. peso proceeds of

exports received from July first, nineteen hundred
seventy-three to June thirty, nineteen hundred
seventy-four.

b. In the case of molasses, coconut oil, dessicated coconut, iron ore

and concentrates, chromite ore and concentrates, copra meal or
cake, unmanufactured abaca, unmanufactured tobacco, veneer core
and sheets, plywood (including plywood panels faced with plastics),
lumber, canned pineapples, and bunker fuel oil;

Eight per centum of the F.O.B. peso proceeds of

exports shipped on or after the date of effectivity of
this Act to June thirty, nineteen hundred seventy-one;

Six per centum of the F.O.B. peso proceeds of

exports shipped from July first, nineteen hundred
 seventy one to June thirty nineteen hundred seventy-
two;

Four per centum of the F.O.B. peso proceeds of

exports shipped from July first, nineteen hundred
seventy-two to June thirty nineteen hundred seventy-
three; and

Two per centum of the F.O.B. peso proceeds of

exports shipped from July first, nineteen hundred
seventy three to June thirty nineteen hundred
seventy-four.

Any export product the aggregate annual F.O.B. value of which shall exceed five
million United States dollars in any one calendar year during the effectivity of this Act
shall likewise be subject to the rates of tax in force during the fiscal years following its
reaching the said aggregate value. (Emphasis supplied).

During the first nine (9) months of calendar year 1971, the total banana export amounted to an
annual aggregate F.O.B. value of P8,949,000.00 (Answer, Rollo, p. 73) thus exceeding the
aggregate F.O.B. value of five million United States Dollar, bringing it within the ambit of Republic
Act No. 6125. Consequently, the banana industry was in a dilemma as to when the stabilization tax
was to become due and collectible from it and under what schedule of Section 1 (b) of Republic Act
6125 should said tax be collected. Accordingly, petitioners through their counsel, by letter dated
November 5, 1971, sought the authoritative pronouncement of the Central Bank (herein referred to
as respondent), therein advancing the opinion that the stabilization tax does not become due and
collectible from the petitioners until July 1, 1972 at the rate of 4% of the F.O.B. peso proceeds of the
exports shipped from July 1, 1972 to June 30,1973. Replying by letter dated December 17,1971
(Rollo, p. 11), the Central Bank called attention to Monetary Board Resolution No. 1995 dated
December 3, 1971 which clarified that:

1) For exports of bananas shipped during the period from January 1, 1972 to June
30, 1972; the stabilization tax shall be at the rate of 6%;

2) For exports of bananas shipped during the period from July 1, 1972 to June 30,
1973, the stabilization tax shall be at the rate of 4%; and

3) For exports of bananas shipped during the period from July 1, 1973, to June 30,
1974, the stabilization tax shall be at the rate of 2%."

Contending that said Board Resolution No. 1995 was manifestly contrary to the legislative intent,
petitioners sought a reconsideration of said Board Resolution by letter dated December 27, 1971
(Rollo, p. 12) which request for reconsideration was denied by the respondent, also by letter dated
January 20, 1972 (Rollo, p. 24). With the denial of petitioners' request for reconsideration,
respondent thru its agent Bank, Rizal Commercial Banking Corporation has been collecting from the
petitioners who have been forced to pay under protest, such stabilization tax.

Petitioners view respondent's act as a clear violation of the provision of Republic Act No. 6125, and
as an act in excess of its jurisdiction, hence, this petition.

The sole issue in this case is whether or not respondent acted with grave abuse of discretion
amounting to lack of jurisdiction when it issued Monetary Board Resolution No. 1995, series of 1971
which in effect reaffirmed Central Bank Circular No. 309, enacted pursuant to Monetary Board
Resolution No. 1179.

There is here no dispute that the banana industry is liable to pay the stabilization tax prescribed
under Republic Act No. 1995, it being the admission of both parties, that the Industry has indeed
reached and for the first time in the calendar year 1971, a total banana export exceeding the
aggregate annual F.O.B. value of five million United States dollars. The crux of the controversy,
however, is the manner of implementation of Republic Act No. 6125.

Section 1 of R.A. 6125 clearly provides as follows:

An export product the aggregate annual F.O.B. value of which shall exceed five
million US dollars in any one calendar year during the effectivity of the act shall
likewise be subject to the rates of tax in force during the fiscal year following its
reaching the said aggregate value."

Petitioners contend that the stabilization tax to be collected from the banana industry does not
become due and collectible until July 1, 1972 at the rate of 4% of the F.O.B. peso proceeds of the
export shipped from July 1, 1972 to June 30,1973. They further contend that respondent gave
retroactive effect to the law (RA 6125) by ruling in Monetary Board Resolution No. 1995 dated
December 3, 1 971, that the export stabilization tax on banana industry would start to accrue on
January 1, 1972 at the rate of 6% of the F.O.B. peso proceeds of export shipped from July 1, 1971
to June 30, 1972 (Rollo, pp. 3-4).

Respondent, on the other hand, contends that the aforecited provision of RA 6125 merely prescribes
the rates that may be imposed but does not provide when the tax shall be collected and makes no
reference to any definite fixed period when the tax shall begin to be collected (Rollo, pp. 77-78).

There is merit in this petition.

In the very nature of things, in many cases it becomes impracticable for the legislative department of
the Government to provide general regulations for the various and varying details for the
management of a particular department of the Government. It therefore becomes convenient for the
legislative department of the government, by law, in a most general way, to provide for the conduct,
control, and management of the work of the particular department of the government; to authorize
certain persons, in charge of the management and control of such department (United States v.
Tupasi Molina, 29 Phil. 119 [19141).

Such is the case in RA 6125, which provided in its Section 6, as follows:

All rules and regulations for the purpose of carrying out the provisions of the act shall
be promulgated by the Central Bank of the Philippines and shall take effect fifteen
days after publication in three newspapers of general circulation throughout the
Philippines, one of which shall be in the national language.

Such regulations have uniformly been held to have the force of law, whenever they are found to be
in consonance and in harmony with the general purposes and objects of the law. Such regulations
once established and found to be in conformity with the general purposes of the law, are just as
binding upon all the parties, as if the regulation had been written in the original law itself (29 Phil.
119, Ibid). Upon the other hand, should the regulation conflict with the law, the validity of the
regulation cannot be sustained (Director of Forestry vs. Muroz 23 SCRA 1183).
Pursuant to the aforecited provision, the Monetary Board issued Resolution No. 1179 which
contained the rules and regulations for the implementation of said provision which Board resolution
was subsequently embodied in Central Bank Circular No. 309, dated August 10, 1970 (duly
published in the Official Gazette, Vol. 66, No. 34, August 24, 1940, p. 7855 and in three newspapers
of general circulation throughout the Philippines namely, the Manila Times, Manila Chronicle and
Manila Daily Bulletin). Section 3 of Central Bank Circular No. 309, "provides that the stabilization tax
shall begin to apply on January first following the calendar year during which such export products
shall have reached the aggregate annual F.O.B. value of more than $5 million and the applicable tax
rates shall be the rates prescribed in schedule (b) of Section 1 of RA No. 6125 for the fiscal year
following the reaching of the said aggregate value." Central Bank Circular No. 309 was subsequently
reaffirmed in Monetary Board Resolution No. 1995 herein assailed by petitioners for being null and
void (Rollo, pp. 97- 98).

In its comment (Rollo, p. 40), respondent argues that the request for authoritative pronouncement of
petitioners was made because there was no express provision in Section 1 of RA 6125 which
categorically states, when the stabilization tax shall begin to accrue on those aggregate annual
F.O.B. values exceeding five (5) million United States dollars in any one calendar year during the
effectivity of said act. For which reason, the law itself authorized it under Section 7 to promulgate
rules and regulations to carry out the provisions of said law.

In petitioner's reply (Rollo, p. 154) they argue that since the Banana Exports reached the aggregate
annual F.O.B. value of US $5 million in August 1971, the stabilization tax on banana should be
imposed only on July 1, 1972, the fiscal year following the calendar year during which the industry
attained the $5 million mark. Their argument finds support in the very language of the law and upon
congressional record where a clarification on the applicability of the law was categorically made by
the then Senator Aytona who stated that the tax shall be applicable only after the $5 million
aggregate value is reached, making such tax prospective in application and for a period of one year-
referring to the fiscal year (Annex 8, Comment of Respondent; Rollo, p. 60). Clearly such clarification
was indicative of the legislative intent. Further, they argue that respondent bank through the
Monetary Board clearly overstepped RA 6125 which empowered it to promulgate rules and
regulations for the purpose of carrying out the provisions of said act, because while Section 1 of the
law authorizes it to levy a stabilization tax on petitioners only in the fiscal year following their
reaching the aggregate annual F.O.B. value of US $5 million, that is, the fiscal year July 1, 1972 to
June 30, 1973, at a tax rate of 4% of the F.O.B. peso proceeds, respondent in gross violation of the
law, instead issued Resolution No. 1995 which impose a 6% stabilization tax for the calendar year
January 1, 1972 to June 30, 1972, which obviously is in excess of its jurisdiction. It was further
argued that in directing its agent bank to collect the stabilization tax in accordance with Monetary
Board Resolution No. 1995, it acted whimsically and capriciously. (Rollo, p. 155).

It will be observed that while Monetary Board Resolution No. 1995 cannot be said to be the product
of grave abuse of discretion but rather the result of respondent's overzealous desire to carry into
effect the provisions of RA 6125, it is evident that the Board acted beyond its authority under the law
and the Constitution. Hence, the petition for certiorari and prohibition in the case at bar, is proper.

Moreover, there is no dispute that in case of discrepancy between the basic law and a rule or
regulation issued to implement said law, the basic law prevails because said rule or regulation
cannot go beyond the terms and provisions of the basic law (People vs. Lim, 108 Phil. 1091). Rules
that subvert the statute cannot be sanctioned (University of Sto. Tomas v. Board of Tax Appeals, 93
Phil. 376; Del Mar v. Phil. Veterans Administration, 51 SCRA 340). Except for constitutional officials
who can trace their competence to act to the fundamental law itself, a public official must locate to
the statute relied upon a grant of power before he can exercise it. Department zeal may not be
permitted to outrun the authority conferred by statute (Radio Communications of the Philippines, Inc.
v. Santiago L-29236, August 21, 1974, 58 SCRA 493; cited in Tayug Rural Bank v. Central Bank, L-
46158, November 28,1986,146 SCRA 120,130).

PREMISES CONSIDERED, this petition is hereby GRANTED.

SO ORDERED.

G.R. No. 108524 November 10, 1994

MISAMIS ORIENTAL ASSOCIATION OF COCO TRADERS, INC., petitioner,

vs.
DEPARTMENT OF FINANCE SECRETARY, COMMISSIONER OF THE BUREAU OF INTERNAL
REVENUE (BIR), AND REVENUE DISTRICT OFFICER, BIR MISAMIS ORIENTAL, respondents.

Damasing Law Office for petitioner.

MENDOZA, J.:

This is a petition for prohibition and injunction seeking to nullify Revenue Memorandum Circular No.
47-91 and enjoin the collection by respondent revenue officials of the Value Added Tax (VAT) on the
sale of copra by members of petitioner organization. 1

Petitioner Misamis Oriental Association of Coco Traders, Inc. is a domestic corporation whose
members, individually or collectively, are engaged in the buying and selling of copra in Misamis
Oriental. The petitioner alleges that prior to the issuance of Revenue Memorandum Circular 47-91
on June 11, 1991, which implemented VAT Ruling 190-90, copra was classified as agricultural food
product under $ 103(b) of the National Internal Revenue Code and, therefore, exempt from VAT at
all stages of production or distribution.

Respondents represent departments of the executive branch of government charged with the
generation of funds and the assessment, levy and collection of taxes and other imposts.

The pertinent provision of the NIRC states:

Sec. 103. Exempt Transactions. — The following shall be exempt from the value-
added tax:

(a) Sale of nonfood agricultural, marine and forest products in their original state by
the primary producer or the owner of the land where the same are produced;

(b) Sale or importation in their original state of agricultural and marine food products,
livestock and poultry of a kind generally used as, or yielding or producing foods for
human consumption, and breeding stock and genetic material therefor;

Under §103(a), as above quoted, the sale of agricultural non-food products in their original state is
exempt from VAT only if the sale is made by the primary producer or owner of the land from which
the same are produced. The sale made by any other person or entity, like a trader or dealer, is not
exempt from the tax. On the other hand, under §103(b) the sale of agricultural food products in their
original state is exempt from VAT at all stages of production or distribution regardless of who the
seller is.

The question is whether copra is an agricultural food or non-food product for purposes of this
provision of the NIRC. On June 11, 1991, respondent Commissioner of Internal Revenue issued the
circular in question, classifying copra as an agricultural non-food product and declaring it "exempt
from VAT only if the sale is made by the primary producer pursuant to Section 103(a) of the Tax
Code, as amended." 2

The reclassification had the effect of denying to the petitioner the exemption it previously enjoyed
when copra was classified as an agricultural food product under §103(b) of the NIRC. Petitioner
challenges RMC No. 47-91 on various grounds, which will be presently discussed although not in the
order raised in the petition for prohibition.

First. Petitioner contends that the Bureau of Food and Drug of the Department of Health and not the
BIR is the competent government agency to determine the proper classification of food products.
Petitioner cites the opinion of Dr. Quintin Kintanar of the Bureau of Food and Drug to the effect that
copra should be considered "food" because it is produced from coconut which is food and 80% of
coconut products are edible.

On the other hand, the respondents argue that the opinion of the BIR, as the government agency
charged with the implementation and interpretation of the tax laws, is entitled to great respect.

We agree with respondents. In interpreting §103(a) and (b) of the NIRC, the Commissioner of
Internal Revenue gave it a strict construction consistent with the rule that tax exemptions must be
strictly construed against the taxpayer and liberally in favor of the state. Indeed, even Dr. Kintanar
said that his classification of copra as food was based on "the broader definition of food which
includes agricultural commodities and other components used in the manufacture/processing of
food." The full text of his letter reads:

10 April 1991

Mr. VICTOR A. DEOFERIO, JR.

Chairman VAT Review Committee
Bureau of Internal Revenue
Diliman, Quezon City

Dear Mr. Deoferio:

This is to clarify a previous communication made by this Office about copra in a letter
dated 05 December 1990 stating that copra is not classified as food. The statement
was made in the context of BFAD's regulatory responsibilities which focus mainly on
foods that are processed and packaged, and thereby copra is not covered.

However, in the broader definition of food which include agricultural commodities and
other components used in the manufacture/ processing of food, it is our opinion that
copra should be classified as an agricultural food product since copra is produced
from coconut meat which is food and based on available information, more than 80%
of products derived from copra are edible products.
 Very
truly
yours,

QUINTI
N L.
KINTA
NAR,
M.D.,
Ph.D.
Directo
r
Assista
nt
Secret
ary of
Health
for
Standa
rds and
Regula
tions

Moreover, as the government agency charged with the enforcement of the law, the opinion of the
Commissioner of Internal Revenue, in the absence of any showing that it is plainly wrong, is entitled
to great weight. Indeed, the ruling was made by the Commissioner of Internal Revenue in the
exercise of his power under § 245 of the NIRC to "make rulings or opinions in connection with the
implementation of the provisions of internal revenue laws, including rulings on the classification of
articles for sales tax and similar purposes."

Second. Petitioner complains that it was denied due process because it was not heard before the
ruling was made. There is a distinction in administrative law between legislative rules and
interpretative rules. 3 There would be force in petitioner's argument if the circular in question were in
the nature of a legislative rule. But it is not. It is a mere interpretative rule.

The reason for this distinction is that a legislative rule is in the nature of subordinate legislation,
designed to implement a primary legislation by providing the details thereof. In the same way that
laws must have the benefit of public hearing, it is generally required that before a legislative rule is
adopted there must be hearing. In this connection, the Administrative Code of 1987 provides:

Public Participation. — If not otherwise required by law, an agency shall, as far as

practicable, publish or circulate notices of proposed rules and afford interested
parties the opportunity to submit their views prior to the adoption of any rule.

(2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates
shall have been published in a newspaper of general circulation at least two (2)
weeks before the first hearing thereon.

(3) In case of opposition, the rules on contested cases shall be observed. 4

In addition such rule must be published.5 On the other hand, interpretative rules are designed to
provide guidelines to the law which the administrative agency is in charge of enforcing.
Accordingly, in considering a legislative rule a court is free to make three inquiries: (i) whether the
rule is within the delegated authority of the administrative agency; (ii) whether it is reasonable; and
(iii) whether it was issued pursuant to proper procedure. But the court is not free to substitute its
judgment as to the desirability or wisdom of the rule for the legislative body, by its delegation of
administrative judgment, has committed those questions to administrative judgments and not to
judicial judgments. In the case of an interpretative rule, the inquiry is not into the validity but into the
correctness or propriety of the rule. As a matter of power a court, when confronted with an
interpretative rule, is free to (i) give the force of law to the rule; (ii) go to the opposite extreme and
substitute its judgment; or (iii) give some intermediate degree of authoritative weight to the
interpretative rule. 6

In the case at bar, we find no reason for holding that respondent Commissioner erred in not
considering copra as an "agricultural food product" within the meaning of § 103(b) of the NIRC. As
the Solicitor General contends, "copra per se is not food, that is, it is not intended for human
consumption. Simply stated, nobody eats copra for food." That previous Commissioners considered
it so, is not reason for holding that the present interpretation is wrong. The Commissioner of Internal
Revenue is not bound by the ruling of his predecessors. 7 To the contrary, the overruling of decisions
is inherent in the interpretation of laws.

Third. Petitioner likewise claims that RMC No. 47-91 is discriminatory and violative of the equal
protection clause of the Constitution because while coconut farmers and copra producers are
exempt, traders and dealers are not, although both sell copra in its original state. Petitioners add that
oil millers do not enjoy tax credit out of the VAT payment of traders and dealers.

The argument has no merit. There is a material or substantial difference between coconut farmers
and copra producers, on the one hand, and copra traders and dealers, on the other. The
former produce and sell copra, the latter merely sell copra. The Constitution does not forbid the
differential treatment of persons so long as there is a reasonable basis for classifying them
differently. 8

It is not true that oil millers are exempt from VAT. Pursuant to § 102 of the NIRC, they are subject to
10% VAT on the sale of services. Under § 104 of the Tax Code, they are allowed to credit the input
tax on the sale of copra by traders and dealers, but there is no tax credit if the sale is made directly
by the copra producer as the sale is VAT exempt. In the same manner, copra traders and dealers
are allowed to credit the input tax on the sale of copra by other traders and dealers, but there is no
tax credit if the sale is made by the producer.

Fourth. It is finally argued that RMC No. 47-91 is counterproductive because traders and dealers
would be forced to buy copra from coconut farmers who are exempt from the VAT and that to the
extent that prices are reduced the government would lose revenues as the 10% tax base is
correspondingly diminished.

This is not so. The sale of agricultural non-food products is exempt from VAT only when made by the
primary producer or owner of the land from which the same is produced, but in the case of
agricultural food products their sale in their original state is exempt at all stages of production or
distribution. At any rate, the argument that the classification of copra as agricultural non-food product
is counterproductive is a question of wisdom or policy which should be addressed to respondent
officials and to Congress.

WHEREFORE, the petition is DISMISSED.

SO ORDERED.
G.R. No. 95832 August 10, 1992

MAYNARD R. PERALTA, petitioner,

vs.
CIVIL SERVICE COMMISSION, respondent.

Tranquilino F. Meris Law Office for petitioner.

PADILLA, J.:

Petitioner was appointed Trade-Specialist II on 25 September 1989 in the Department of Trade and
Industry (DTI). His appointment was classified as "Reinstatement/Permanent". Before said
appointment, he was working at the Philippine Cotton Corporation, a government-owned and
controlled corporation under the Department of Agriculture.

On 8 December 1989, petitioner received his initial salary, covering the period from 25 September to
31 October 1989. Since he had no accumulated leave credits, DTI deducted from his salary the
amount corresponding to his absences during the covered period, namely, 29 September 1989 and
20 October 1989, inclusive of Saturdays and Sundays. More specifically, the dates of said absences
for which salary deductions were made, are as follows:

1. 29 September 1989 — Friday

2. 30 September 1989 — Saturday

3. 01 October 1989 — Sunday

4. 20 October 1989 — Friday

5. 21 October 1989 — Saturday

6. 22 October 1989 — Sunday

Petitioner sent a memorandum to Amando T. Alvis (Chief, General Administrative Service) on 15

December 1989 inquiring as to the law on salary deductions, if the employee has no leave credits.

Amando T. Alvis answered petitioner's query in a memorandum dated 30 January 1990 citing
Chapter 5.49 of the Handbook of Information on the Philippine Civil Service which states that "when
an employee is on leave without pay on a day before or on a day immediately preceding a Saturday,
Sunday or Holiday, such Saturday, Sunday, or Holiday shall also be without pay (CSC, 2nd Ind.,
February 12, 1965)."

Petitioner then sent a latter dated 20 February 1990 addressed to Civil Service Commission (CSC)
Chairman Patricia A. Sto. Tomas raising the following question:

Is an employee who was on leave of absence without pay on a day before or on a

day time immediately preceding a Saturday, Sunday or Holiday, also considered on
leave of absence without pay on such Saturday, Sunday or Holiday?1
Petitioner in his said letter to the CSC Chairman argued that a reading of the General Leave Law as
contained in the Revised Administrative Code, as well as the old Civil Service Law (Republic Act No.
2260), the Civil Service Decree (Presidential Decree No. 807), and the Civil Service Rules and
Regulation fails to disclose a specific provision which supports the CSC rule at issue. That being the
case, the petitioner contented that he cannot be deprived of his pay or salary corresponding to the
intervening Saturdays, Sundays or Holidays (in the factual situation posed), and that the withholding
(or deduction) of the same is tantamount to a deprivation of property without due process of law.

On 25 May 1990, respondent Commission promulgated Resolution No. 90-497, ruling that the action
of the DTI in deducting from the salary of petitioner, a part thereof corresponding to six (6) days
(September 29, 30, October 1, 20, 21, 22, 1989) is in order. 2 The CSC stated that:

In a 2nd Indorsement dated February 12, 1965 of this Commission, which embodies
the policy on leave of absence without pay incurred on a Friday and Monday, reads:

Mrs. Rosalinda Gonzales is not entitled to payment of salary

corresponding to January 23 and 24, 1965, Saturday and Sunday,
respectively, it appearing that she was present on Friday, January 22,
1965 but was on leave without pay beginning January 25, the
succeeding Monday. It is the view of this Office that an employee who
has no more leave credit in his favor is not entitled to the payment of
salary on Saturdays, Sundays or holidays unless such non-working
days occur within the period of service actually rendered. (Emphasis
supplied)

The rationale for the above ruling which applies only to those employees who are
being paid on monthly basis, rests on the assumption that having been absent on
either Monday or Friday, one who has no leave credits, could not be favorably
credited with intervening days had the same been working days. Hence, the above
policy that for an employee on leave without pay to be entitled to salary on
Saturdays, Sundays or holidays, the same must occur between the dates where the
said employee actually renders service. To rule otherwise would allow an employee
who is on leave of absent (sic) without pay for a long period of time to be entitled to
payment of his salary corresponding to Saturdays, Sundays or holidays. It also
discourages the employees who have exhausted their leave credits from absenting
themselves on a Friday or Monday in order to have a prolonged weekend, resulting
in the prejudice of the government and the public in general. 3

Petitioner filed a motion for reconsideration and in Resolution No. 90-797, the respondent
Commission denied said motion for lack of merit. The respondent Commission in explaining its
action held:

The Primer on the Civil Service dated February 21, 1978, embodies the Civil Service
Commission rulings to be observed whenever an employee of the government who
has no more leave credits, is absent on a Friday and/or a Monday is enough basis
for the deduction of his salaries corresponding to the intervening Saturdays and
Sundays. What the Commission perceived to be without basis is the demand of
Peralta for the payment of his salaries corresponding to Saturdays and Sundays
when he was in fact on leave of absence without pay on a Friday prior to the said
days. A reading of Republic Act No. 2260 (sic) does not show that a government
employee who is on leave of absence without pay on a day before or immediately
preceding Saturdays, Sunday or legal holiday is entitled to payment of his salary for
 said days. Further, a reading of Senate Journal No. 67 dated May 4, 1960 of House
Bill No. 41 (Republic Act No. 2625) reveals that while the law excludes Saturdays,
Sundays and holidays in the computation of leave credits, it does not, however,
include a case where the leave of absence is without pay. Hence, applying the
principle of inclusio unius est exclusio alterius, the claim of Peralta has no merit.
Moreover, to take a different posture would be in effect giving more premium to
employees who are frequently on leave of absence without pay, instead of
discouraging them from incurring further absence without
pay. 4

Petitioner's motion for reconsideration having been denied, petitioner filed the present petition.

What is primarily questioned by the petitioner is the validity of the respondent Commission's policy
mandating salary deductions corresponding to the intervening Saturdays, Sundays or Holidays
where an employee without leave credits was absent on the immediately preceding working day.

During the pendency of this petition, the respondent Commission promulgated Resolution No. 91-
540 dated 23 April 1991 amending the questioned policy, considering that employees paid on a
monthly basis are not required to work on Saturdays, Sunday or Holidays. In said amendatory
Resolution, the respondent Commission resolved "to adopt the policy that when an employee,
regardless of whether he has leave credits or not, is absent without pay on day immediately
preceding or succeeding Saturday, Sunday or holiday, he shall not be considered absent on those
days." Memorandum Circular No. 16 Series of 1991 dated 26 April 1991, was also issued by CSC
Chairman Sto. Tomas adopting and promulgating the new policy and directing the Heads of
Departments, Bureaus and Agencies in the national and local governments, including government-
owned or controlled corporations with original charters, to oversee the strict implementation of the
circular.

Because of these developments, it would seem at first blush that this petition has become moot and
academic since the very CSC policy being questioned has already been amended and, in effect,
Resolutions No. 90-497 and 90-797, subject of this petition for certiorari, have already been set
aside and superseded. But the issue of whether or not the policy that had been adopted and in force
since 1965 is valid or not, remains unresolved. Thus, for reasons of public interest and public policy,
it is the duty of the Court to make a formal ruling on the validity or invalidity of such questioned
policy.

The Civil Service Act of 1959 (R.A. No. 2260) conferred upon the Commissioner of Civil Service the
following powers and duties:

Sec. 16 (e) with the approval by the President to prescribe, amend and enforce
suitable rules and regulations for carrying into effect the provisions of this Civil
Service Law, and the rules prescribed pursuant to the provisions of this law shall
become effective thirty days after publication in the Official Gazette;

xxx xxx xxx

(k) To perform other functions that properly belong to a central personnel agency. 5

Pursuant to the foregoing provisions, the Commission promulgated the herein challenged policy.
Said policy was embodied in a 2nd Indorsement dated 12 February 1965 of the respondent
Commission involving the case of a Mrs. Rosalinda Gonzales. The respondent Commission ruled
that an employee who has no leave credits in his favor is not entitled to the payment of salary on
Saturdays, Sundays or Holidays unless such non-working days occur within the period of service
actually rendered. The same policy is reiterated in the Handbook of Information on the Philippine
Civil Service. 6 Chapter Five on leave of absence provides that:

5.51. When intervening Saturday, Sunday or holiday considered as leave without pay
— when an employee is on leave without pay on a day before or on a day
immediately preceding a Saturday, Sunday or holiday, such Saturday, Sunday or
holiday shall also be without pay. (CSC, 2nd Ind., Feb. 12, 1965).

It is likewise illustrated in the Primer on the Civil Service 7 in the section referring to Questions and
Answers on Leave of Absences, which states the following:

27. How is leave of an employee who has no more leave credits computed if:

(1) he is absent on a Friday and the

following Monday?

(2) if he is absent on Friday but

reports to work the following Monday?

(3) if he is absent on a Monday but

present the preceding Friday?

- (1) He is considered on leave without

pay for 4 days covering Friday to
Monday;

- (2) He is considered on leave without

pay for 3 days from Friday to Sunday;

- (3) He is considered on leave without

pay for 3 days from Saturday to
Monday.

When an administrative or executive agency renders an opinion or issues a statement of policy, it

merely interprets a pre-existing law; and the administrative interpretation of the law is at best
advisory, for it is the courts that finally determine what the law means. 8 It has also been held that interpretative
regulations need not be published. 9

In promulgating as early as 12 February 1965 the questioned policy, the Civil Service Commission
interpreted the provisions of Republic Act No. 2625 (which took effect on 17 June 1960) amending
the Revised Administrative Code, and which stated as follows:

Sec. 1. Sections two hundred eighty-four and two hundred eighty-five-A of the
Administrative Code, as amended, are further amended to read as follows:

Sec. 284. After at least six months' continues (sic) faithful, and
satisfactory service, the President or proper head of department, or
the chief of office in the case of municipal employees may, in his
discretion, grant to an employee or laborer, whether permanent or
temporary, of the national government, the provincial government, the
 government of a chartered city, of a municipality, of a municipal
district or of government-owned or controlled corporations other than
those mentioned in Section two hundred sixty-eight, two hundred
seventy-one and two hundred seventy-four hereof, fifteen days
vacation leave of absence with full pay, exclusive of Saturdays,
Sundays and holidays, for each calendar year of service.

Sec. 285-A. In addition to the vacation leave provided in the two

preceding sections each employee or laborer, whether permanent or
temporary, of the national government, the provincial government, the
government of a chartered city, of a municipality or municipal district
in any regularly and specially organized province, other than those
mentioned in Section two hundred sixty-eight, two hundred seventy-
one and two hundred seventy-four hereof, shall be entitled to fifteen
days of sick leave for each year of service with full pay, exclusive of
Saturdays, Sundays and holidays: Provided, That such sick leave will
be granted by the President, Head of Department or independent
office concerned, or the chief of office in case of municipal
employees, only on account of sickness on the part of the employee
or laborer concerned or of any member of his immediate family.

The Civil Service Commission in its here questioned Resolution No. 90-797 construed R.A. 2625 as
referring only to government employees who have earned leave credits against which their
absences may be charged with pay, as its letters speak only of leaves of absence with full pay. The
respondent Commission ruled that a reading of R.A. 2625 does not show that a government
employee who is on leave of absence without pay on a day before or immediately preceding a
Saturday, Sunday or legal holiday is entitled to payment of his salary for said days.

Administrative construction, if we may repeat, is not necessarily binding upon the courts. Action of
an administrative agency may be disturbed or set aside by the judicial department if there is an error
of law, or abuse of power or lack of jurisdiction or grave abuse of discretion clearly conflicting with
either the letter or the spirit of a legislative enactment. 10

We find this petition to be impressed with merit.

As held in Hidalgo vs. Hidalgo: 11

. . . . where the true intent of the law is clear that calls for the application of the
cardinal rule of statutory construction that such intent or spirit must prevail over the
letter thereof, for whatever is within the spirit of a statute is within the statute, since
adherence to the letter would result in absurdity, injustice and contradictions and
would defeat the plain and vital purpose of the statute.

The intention of the legislature in the enactment of R.A. 2625 may be gleaned from, among others,
the sponsorship speech of Senator Arturo M. Tolentino during the second reading of House Bill No.
41 (which became R.A. 2625). He said:

The law actually provides for sick leave and vacation leave of 15 days each year of
service to be with full pay. But under the present law, in computing these periods of
leaves, Saturday, Sunday and holidays are included in the computation so that if an
employee should become sick and absent himself on a Friday and then he reports
for work on a Tuesday, in the computation of the leave the Saturday and Sunday will
 be included, so that he will be considered as having had a leave of Friday, Saturday,
Sunday and Monday, or four days.

The purpose of the present bill is to exclude from the computation of the leave those
days, Saturdays and Sundays, as well as holidays, because actually the employee is
entitled not to go to office during those days. And it is unfair and unjust to him that
those days should be counted in the computation of leaves. 12

With this in mind, the construction by the respondent Commission of R.A. 2625 is not in accordance
with the legislative intent. R.A. 2625 specifically provides that government employees are entitled to
fifteen (15) days vacation leave of absence with full pay and fifteen (15) days sick leave with full
pay, exclusive of Saturdays, Sundays and Holidays in both cases. Thus, the law speaks of the
granting of a right and the law does not provide for a distinction between those who have
accumulated leave credits and those who have exhausted their leave credits in order to enjoy such
right. Ubi lex non distinguit nec nos distinguere debemus. The fact remains that government
employees, whether or not they have accumulated leave credits, are not required by law to work on
Saturdays, Sundays and Holidays and thus they can not be declared absent on such non-working
days. They cannot be or are not considered absent on non-working days; they cannot and should
not be deprived of their salary corresponding to said non-working days just because they were
absent without pay on the day immediately prior to, or after said non-working days. A different rule
would constitute a deprivation of property without due process.

Furthermore, before their amendment by R.A. 2625, Sections 284 and 285-A of the Revised
Administrative Code applied to all government employee without any distinction. It follows that the
effect of the amendment similarly applies to all employees enumerated in Sections 284 and 285-A,
whether or not they have accumulated leave credits.

As the questioned CSC policy is here declared invalid, we are next confronted with the question of
what effect such invalidity will have. Will all government employees on a monthly salary basis,
deprived of their salaries corresponding to Saturdays, Sundays or legal holidays (as herein petitioner
was so deprived) since 12 February 1965, be entitled to recover the amounts corresponding to such
non-working days?

The general rule vis-a-vis legislation is that an unconstitutional act is not a law; it confers no rights; it
imposes no duties; it affords no protection; it creates no office; it is in legal contemplation as
inoperative as though it had never been passed. 13

But, as held in Chicot County Drainage District vs. Baxter State

Bank:14

. . . . It is quite clear, however, that such broad statements as to the effect of a

determination of unconstitutionality must be taken with qualifications. The actual
existence of a statute, prior to such determination is an operative fact and may have
consequences which cannot always be ignored. The past cannot always be erased
by a new judicial declaration. The effect of the subsequent ruling as to invalidity may
have to be considered in various aspects — with respect to particular relations,
individual and corporate; and particular conduct, private and official.

To allow all the affected government employees, similarly situated as petitioner herein, to claim their
deducted salaries resulting from the past enforcement of the herein invalidated CSC policy, would
cause quite a heavy financial burden on the national and local governments considering the length
of time that such policy has been effective. Also, administrative and practical considerations must be
taken into account if this ruling will have a strict restrospective application. The Court, in this
connection, calls upon the respondent Commission and the Congress of the Philippines, if
necessary, to handle this problem with justice and equity to all affected government employees.

It must be pointed out, however, that after CSC Memorandum Circular No. 16 Series of 1991 —
amending the herein invalidated policy — was promulgated on 26 April 1991, deductions from
salaries made after said date in contravention of the new CSC policy must be restored to the
government employees concerned.

WHEREFORE, the petition is GRANTED, CSC Resolutions No. 90-497 and 90-797 are declared
NULL and VOID. The respondent Commission is directed to take the appropriate action so that
petitioner shall be paid the amounts previously but unlawfully deducted from his monthly salary as
above indicated. No costs.

SO ORDERED.

FIRST DIVISION

COMMISSIONER OF G.R. No. 159694

INTERNAL REVENUE,
Petitioner, Present:
Panganiban, CJ,
- versus - Chairman,
Ynares-Santiago,
Austria-Martinez,
AZUCENA T. REYES, Callejo, Sr., and
Respondent. Chico-Nazario, JJ
x -- -- -- -- -- -- -- -- -- -- -- -- -- x
AZUCENA T. REYES, G.R. No. 163581
Petitioner,
- versus -
COMMISSIONER OF Promulgated:
INTERNAL REVENUE,
Respondent. January 27, 2006
x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x

DECISION

PANGANIBAN, CJ.:

U
nder the present provisions of the Tax Code and pursuant to
elementary due process, taxpayers must be informed in writing of
the law and the facts upon which a tax assessment is based;
otherwise, the assessment is void. Being invalid, the assessment
cannot in turn be used as a basis for the perfection of a tax compromise.

The Case
Before us are two consolidated[1] Petitions for Review[2] filed under Rule 45
of the Rules of Court, assailing the August 8, 2003 Decision[3] of the Court
of Appeals (CA) in CA-GR SP No. 71392. The dispositive portion of the
assailed Decision reads as follows:

WHEREFORE, the petition is GRANTED. The assailed

decision of the Court of Tax Appeals is ANNULLED and SET
ASIDE without prejudice to the action of the National Evaluation
Board on the proposed compromise settlement of the Maria
C. Tancinco estates tax liability.[4]

The Facts

The CA narrated the facts as follows:

On July 8, 1993, Maria C. Tancinco (or decedent) died, leaving a

1,292 square-meter residential lot and an old house thereon (or
subject property) located
at 4931 Pasay Road, Dasmarias Village, Makati City.

On the basis of a sworn information-for-reward filed on February 17,

1997 by a certain Raymond Abad (or Abad), Revenue District Office
No. 50 (South Makati) conducted an investigation on the decedents
estate (or estate). Subsequently, it issued a Return Verification
Order. But without the required preliminary findings being submitted,
it issued Letter of Authority No. 132963 for the regular investigation
of the estate tax case. Azucena T. Reyes (or [Reyes]), one of the
decedents heirs, received the Letter of Authority on March 14, 1997.

On February 12, 1998, the Chief, Assessment Division, Bureau of

Internal Revenue (or BIR), issued a preliminary assessment notice
against the estate in the amount of P14,580,618.67. On May 10,
1998, the heirs of the decedent (or heirs) received a final estate tax
assessment notice and a demand letter, both dated April 22, 1998,
for the amount of P14,912,205.47, inclusive of surcharge and
interest.

On June 1, 1998, a certain Felix M. Sumbillo (or Sumbillo) protested

the assessment [o]n behalf of the heirs on the ground that the
subject property had already been sold by the decedent sometime in
1990.

On November 12, 1998, the Commissioner of Internal Revenue (or

[CIR]) issued a preliminary collection letter to [Reyes], followed by a
Final Notice Before Seizure dated December 4, 1998.

On January 5, 1999, a Warrant of Distraint and/or Levy was served

upon the estate, followed on February 11, 1999 by Notices of Levy
on Real Property and Tax Lien against it.

On March 2, 1999, [Reyes] protested the notice of levy. However,

on March 11, 1999, the heirs proposed a compromise settlement
of P1,000,000.00.
In a letter to [the CIR] dated January 27, 2000, [Reyes] proposed to
pay 50% of the basic tax due, citing the heirs inability to pay the tax
assessment. On March 20, 2000, [the CIR] rejected [Reyess] offer,
pointing out that since the estate tax is a charge on the estate and
not on the heirs, the latters financial incapacity is immaterial as, in
fact, the gross value of the estate amounting to P32,420,360.00 is
more than sufficient to settle the tax liability. Thus, [the CIR]
demanded payment of the amount of P18,034,382.13 on or
before April 15, 2000[;] otherwise, the notice of sale of the subject
property would be published.

On April 11, 2000, [Reyes] again wrote to [the CIR], this time
proposing to pay 100% of the basic tax due in the amount
of P5,313,891.00. She reiterated the proposal in a letter dated May
18, 2000.

As the estate failed to pay its tax liability within the April 15, 2000
deadline, the Chief, Collection Enforcement Division, BIR, notified
[Reyes] on June 6, 2000 that the subject property would be sold at
public auction on August 8, 2000.

On June 13, 2000, [Reyes] filed a protest with the BIR Appellate
Division. Assailing the scheduled auction sale, she asserted that
x x x the assessment, letter of demand[,] and the whole tax
proceedings against the estate are void ab initio. She offered to file
the corresponding estate tax return and pay the correct amount of
tax without surcharge [or] interest.

Without acting on [Reyess] protest and offer, [the CIR] instructed the
Collection Enforcement Division to proceed with the August 8,
2000 auction sale.Consequently, on June 28, 2000, [Reyes] filed a
[P]etition for [R]eview with the Court of Tax Appeals (or CTA),
docketed as CTA Case No. 6124.
On July 17, 2000, [Reyes] filed a Motion for the Issuance of a Writ of
Preliminary Injunction or Status Quo Order, which was granted by
the CTA on July 26, 2000.Upon [Reyess] filing of a surety bond in
the amount of P27,000,000.00, the CTA issued a [R]esolution dated
August 16, 2000 ordering [the CIR] to desist and refrain from
proceeding with the auction sale of the subject property or from
issuing a [W]arrant of [D]istraint or [G]arnishment of
[B]ank [A]ccount[,] pending determination of the case and/or unless
a contrary order is issued.

[The CIR] filed a [M]otion to [D]ismiss the petition on the grounds (i)
that the CTA no longer has jurisdiction over the case[,] because the
assessment against the estate is already final and executory; and (ii)
that the petition was filed out of time. In a
[R]esolution dated November 23, 2000, the CTA denied [the CIRs]
motion.

During the pendency of the [P]etition for [R]eview with the CTA,
however, the BIR issued Revenue Regulation (or RR) No. 6-2000
and Revenue Memorandum Order (or RMO) No. 42-2000 offering
certain taxpayers with delinquent accounts and disputed
assessments an opportunity to compromise their tax liability.

On November 25, 2000, [Reyes] filed an application with the BIR for
the compromise settlement (or compromise) of the assessment
against the estate pursuant to Sec. 204(A) of the Tax Code, as
implemented by RR No. 6-2000 and RMO No. 42-2000.

On December 26, 2000, [Reyes] filed an Ex-Parte Motion for

Postponement of the hearing before the CTA scheduled on January
9, 2001, citing her pending application for compromise with the
BIR. The motion was granted and the hearing was reset to February
6, 2001.

On January 29, 2001, [Reyes] moved for postponement of the

hearing set on February 6, 2001, this time on the ground that she
had already paid the compromise amount of P1,062,778.20 but was
still awaiting approval of the National Evaluation Board (or
NEB). The CTA granted the motion and reset the hearing
to February 27, 2001.

On February 19, 2001, [Reyes] filed a Motion to Declare Application

for the Settlement of Disputed Assessment as a Perfected
Compromise. In said motion, she alleged that [the CIR] had not yet
signed the compromise[,] because of procedural red tape requiring
the initials of four Deputy Commissioners on relevant documents
before the compromise is signed by the [CIR]. [Reyes] posited that
the absence of the requisite initials and signature[s] on said
documents does not vitiate the perfected compromise.

Commenting on the motion, [the CIR] countered that[,] without the

approval of the NEB, [Reyess] application for compromise with the
BIR cannot be considered a perfected or consummated
compromise.

On March 9, 2001, the CTA denied [Reyess] motion, prompting her

to file a Motion for Reconsideration Ad Cautelam. In a
[R]esolution dated April 10, 2001, the CTA denied the [M]otion for
[R]econsideration with the suggestion that[,] for an orderly
presentation of her case and to prevent piecemeal resolutions of
different issues, [Reyes] should file a [S]upplemental [P]etition for
[R]eview[,] setting forth the new issue of whether there was already
a perfected compromise.
On May 2, 2001, [Reyes] filed a Supplemental Petition for Review
with the CTA, followed on June 4, 2001 by its Amplificatory
Arguments (for the Supplemental Petition for Review), raising the
following issues:

1. Whether or not an offer to compromise by the [CIR], with the

acquiescence by the Secretary of Finance, of a tax liability
pending in court, that was accepted and paid by the taxpayer, is a
perfected and consummated compromise.

2. Whether this compromise is covered by the provisions of

Section 204 of the Tax Code (CTRP) that requires approval by the
BIR [NEB].

Answering the Supplemental Petition, [the CIR] averred that

an application for compromise of a tax liability under RR No. 6-2000
and RMO No. 42-2000 requires the evaluation and approval of either
the NEB or the Regional Evaluation Board (or REB), as the case
may be.

On June 14, 2001, [Reyes] filed a Motion for Judgment on the

Pleadings; the motion was granted on July 11, 2001. After
submission of memoranda, the case was submitted for [D]ecision.

On June 19, 2002, the CTA rendered a [D]ecision,

the decretal portion of which pertinently reads:

WHEREFORE, in view of all the foregoing, the instant

[P]etition for [R]eview is hereby DENIED. Accordingly, [Reyes] is
hereby ORDERED to PAY deficiency estate tax in the amount of
 Nineteen Million Five Hundred Twenty Four Thousand Nine
Hundred Nine and 78/100 (P19,524,909.78), computed as follows:

xxxxxxxxx

[Reyes] is likewise ORDERED to PAY 20% delinquency

interest on deficiency estate tax due of P17,934,382.13 from
January 11, 2001 until full payment thereof pursuant to Section
249(c) of the Tax Code, as amended.

In arriving at its decision, the CTA ratiocinated that there can only be
a perfected and consummated compromise of the estates tax
liability[,] if the NEB has approved [Reyess]
application for compromise in accordance with RR No. 6-2000, as
implemented by RMO No. 42-2000.

Anent the validity of the assessment notice and letter of demand

against the estate, the CTA stated that at the time the questioned
assessment notice and letter of demand were issued, the heirs knew
very well the law and the facts on which the same were based. It
also observed that the petition was not filed within the 30-
day reglementary period provided under Sec. 11 of Rep. Act No.
1125 and Sec. 228 of the Tax Code.[5]

Ruling of the Court of Appeals

In partly granting the Petition, the CA said that Section 228 of the Tax
Code and RR 12-99 were mandatory and unequivocal in their
requirement. The assessment notice and the demand letter should have
stated the facts and the law on which they were based; otherwise, they were
deemed void.[6] The appellate court held that while administrative agencies,
like the BIR, were not bound by procedural requirements, they were still
required by law and equity to observe substantive due process. The reason
behind this requirement, said the CA, was to ensure that taxpayers would
be duly apprised of -- and could effectively protest -- the basis of tax
assessments against them.[7] Since the assessment and the demand were
void, the proceedings emanating from them were likewise void, and any
order emanating from them could never attain finality.

The appellate court added, however, that it was premature to declare as

perfected and consummated the compromise of the estates tax liability. It
explained that, where the basic tax assessed exceeded P1 million, or where
the settlement offer was less than the prescribed minimum rates, the
National Evaluation Boards (NEB) prior evaluation and approval were
the conditio sine qua non to the perfection and consummation of any
compromise.[8] Besides, the CA pointed out, Section 204(A) of the Tax
Code applied to all compromises, whether government-initiated or
not.[9] Where the law did not distinguish, courts too should not distinguish.
Hence, this Petition.[10]

The Issues

In GR No. 159694, petitioner raises the following issues for the Courts
consideration:

I.

Whether petitioners assessment against the estate is valid.

II.

Whether respondent can validly argue that she, as well as the other
heirs, was not aware of the facts and the law on which the
assessment in question is based, after she had opted to propose
several compromises on the estate tax due, and even prematurely
acting on such proposal by paying 20% of the basic estate tax
due.[11]
The foregoing issues can be simplified as follows: first, whether the
assessment against the estate is valid; and, second, whether the
compromise entered into is also valid.

The Courts Ruling

The Petition is unmeritorious.

First Issue:
Validity of the Assessment Against the Estate

The second paragraph of Section 228 of the Tax Code[12] is clear and
mandatory. It provides as follows:

Sec. 228. Protesting of Assessment. --

xxxxxxxxx
 The taxpayers shall be informed in writing of the law and the facts on
which the assessment is made: otherwise, the assessment shall be
void.

In the present case, Reyes was not informed in writing of the law and the
facts on which the assessment of estate taxes had been made. She was
merely notified of the findings by the CIR, who had simply relied upon the
provisions of former Section 229[13] prior to its amendment by Republic
Act (RA) No. 8424, otherwise known as the Tax Reform Act of 1997.

First, RA 8424 has already amended the provision of Section 229 on

protesting an assessment. The old requirement of merely notifying the
taxpayer of the CIRsfindings was changed in 1998 to informing the taxpayer
of not only the law, but also of the facts on which an assessment would be
made; otherwise, the assessment itself would be invalid.

It was on February 12, 1998, that a preliminary assessment notice was

issued against the estate. On April 22, 1998, the final estate tax assessment
notice, as well as demand letter, was also issued. During those dates, RA
8424 was already in effect. The notice required under the old law was no
longer sufficient under the newlaw.
To be simply informed in writing of the investigation being conducted and
of the recommendation for the assessment of the estate taxes due is
nothing but a perfunctory discharge of the tax function of correctly
assessing a taxpayer. The act cannot be taken to mean that Reyes already
knew the law and the facts on which the assessment was based. It does not
at all conform to the compulsory requirement under Section
228. Moreover, the Letter of Authority received by respondent on March
14, 1997 was for the sheer purpose of investigation and was not even the
requisite notice under the law.

The procedure for protesting an assessment under the Tax Code is found
in Chapter III of Title VIII, which deals with remedies. Being procedural in
nature, can its provision then be applied retroactively? The answer is yes.

The general rule is that statutes are prospective. However, statutes that are
remedial, or that do not create new or take away vested rights, do not fall
under the general rule against the retroactive operation of
statutes.[14] Clearly, Section 228 provides for the procedure in case an
assessment is protested. The provision does not create new or take away
vested rights. In both instances, it can surely be applied
retroactively. Moreover, RA 8424 does not state, either expressly or by
necessary implication, that pending actions are excepted from the
operation of Section 228, or that applying it to pending proceedings would
impair vested rights.

Second, the non-retroactive application of Revenue Regulation (RR) No. 12-

99 is of no moment, considering that it merely implements the law.

A tax regulation is promulgated by the finance secretary to implement the

provisions of the Tax Code.[15] While it is desirable for the government
authority or administrative agency to have one immediately issued after a
law is passed, the absence of the regulation does not automatically mean
that the law itself would become inoperative.

At the time the pre-assessment notice was issued to Reyes, RA 8424

already stated that the taxpayer must be informed of both the law and facts
on which the assessment was based. Thus, the CIR should have required
the assessment officers of the Bureau of Internal Revenue (BIR) to follow
the clear mandate of the new law. The old regulation governing the
issuance of estate tax assessment notices ran afoul of the rule that tax
regulations -- old as they were -- should be in harmony with, and not
supplant or modify, the law.[16]
It may be argued that the Tax Code provisions are not self-executory. It
would be too wide a stretch of the imagination, though, to still issue a
regulation that would simply require tax officials to inform the taxpayer, in
any manner, of the law and the facts on which an assessment was
based. That requirement is neither difficult to make nor its desired results
hard to achieve.

Moreover, an administrative rule interpretive of a statute, and not

declarative of certain rights and corresponding obligations, is given
retroactive effect as of the date of the effectivity of the statute.[17] RR 12-99
is one such rule. Being interpretive of the provisions of the Tax Code, even
if it was issued only on September 6, 1999, this regulation was to retroact
to January 1, 1998 -- a date prior to the issuance of the preliminary
assessment notice and demand letter.

Third, neither Section 229 nor RR 12-85 can prevail over Section 228 of the
Tax Code.

No doubt, Section 228 has replaced Section 229. The provision on

protesting an assessment has been amended. Furthermore, in case of
discrepancy between the law as amended and its implementing but old
regulation, the former necessarily prevails.[18] Thus, between Section 228 of
the Tax Code and the pertinent provisions of RR 12-85, the latter cannot
stand because it cannot go beyond the provision of the law. The law must
still be followed, even though the existing tax regulation at that time
provided for a different procedure. The regulation then simply provided
that notice be sent to the respondent in the form prescribed, and that no
consequence would ensue for failure to comply with that form.

Fourth, petitioner violated the cardinal rule in administrative law that the
taxpayer be accorded due process. Not only was the law here disregarded,
but no valid notice was sent, either. A void assessment bears no valid fruit.

The law imposes a substantive, not merely a formal, requirement. To

proceed heedlessly with tax collection without first establishing a valid
assessment is evidently violative of the cardinal principle in administrative
investigations: that taxpayers should be able to present their case and
adduce supporting evidence.[19] In the instant case, respondent has not been
informed of the basis of the estate tax liability. Without complying with the
unequivocal mandate of first informing the taxpayer of the governments
claim, there can be no deprivation of property, because no effective protest
can be made.[20] The haphazard shot at slapping an assessment, supposedly
based on estate taxations general provisions that are expected to be known
by the taxpayer, is utter chicanery.
Even a cursory review of the preliminary assessment notice, as well as the
demand letter sent, reveals the lack of basis for -- not to mention the
insufficiency of -- the gross figures and details of the itemized deductions
indicated in the notice and the letter. This Court cannot countenance an
assessment based on estimates that appear to have been arbitrarily or
capriciously arrived at. Although taxes are
the lifeblood of the government, their assessment and collection should be
made in accordance with law as any arbitrariness will negate the very reason
for government itself.[21]

Fifth, the rule against estoppel does not apply. Although the government
cannot be estopped by the negligence or omission of its agents, the
obligatory provision on protesting a tax assessment cannot be rendered
nugatory by a mere act of the CIR .

Tax laws are civil in nature.[22] Under our Civil Code, acts executed against
the mandatory provisions of law are void, except when the law itself
authorizes the validity of those acts.[23] Failure to comply with Section 228
does not only render the assessment void, but also finds no validation in
any provision in the Tax Code. We cannot condone errant or enterprising
tax officials, as they are expected to be vigilant and law-abiding.
 Second Issue:
Validity of Compromise

It would be premature for this Court to declare that the compromise on

the estate tax liability has been perfected and consummated, considering
the earlier determination that the assessment against the estate was
void. Nothing has been settled or finalized. Under Section 204(A) of the
Tax Code, where the basic tax involved exceeds one million pesos or the
settlement offered is less than the prescribed minimum rates, the
compromise shall be subject to the approval of the NEB composed of the
petitioner and four deputy commissioners.

Finally, as correctly held by the appellate court, this provision applies to all
compromises, whether government-initiated or
not. Ubi lex non distinguit, nec nosdistinguere debemos. Where the law does not
distinguish, we should not distinguish.

WHEREFORE, the Petition is hereby DENIED and the assailed

Decision AFFIRMED. No pronouncement as to costs.
SO ORDERED.

G.R. Nos. 94878-94881 May 15, 1991

NORBERTO A. ROMUALDEZ III, petitioner,

vs.
CIVIL SERVICE COMMISSION* and THE PHILIPPINE COCONUT AUTHORITY, respondents.

Fernando T. Collantes for petitioner.

GANCAYCO, J.:

By this petition the intervention of public respondent Civil Service Commission (SCS) is sought to
compel public respondent Philippine Coconut Authority (PCA) to reinstate and extend a permanent
appointment to petitioner as Deputy Administrator for Industrial Research and Market Development.

Petitioner was appointed and served as a Commercial Attache of the Department of Trade
continuously for twelve years from September, 1975 to August 30, 1987. His civil service eligibilities
are: Patrolman of the City of Manila (1963 CS Exam) and a Commercial Attache (1973 CS Exam).

On September 1, 1987, he was transferred to the respondent PCA whereby he was extended an
appointment as Deputy Administrator for Industrial Research and Market Development.1 The nature
of his appointment was "reinstatement" and his employment status was "temporary," for the period
covering September 1, 1987 to August 30, 1988. His appointment was renewed for another six
months from September 1, 1988 to February 28, 1989 also on a "temporary" status and subject to
certain conditions to which petitioner agreed.

When his appointment expired on February 28, 1989, the Governing Board did not renew the same
so he was promptly informed thereof by the Acting Chairman of the Board of the PCA, Apolonio V.
Bautista.2

On February 6, 1990, petitioner appealed to respondent CSC He requested reinstatement to his

previous position in PCA and in support of the request, he invoked the provisions of (CSC)
Memorandum Circular No. 29 dated July 19, 1989.3

Respondent CSC denied petitioner's request for reinstatement on May 2, 1990 by way of its
Resolution No. 90-407, holding that CSC Memorandum Circular No. 29 was not applicable to
petitioner's case because it took effect on July 19, 1989 when petitioner had long been out of the
government service since February 28, 1989 and that his reappointment was essentially
discretionary on the part of the proper appointing authority.

On May 11, 1990, respondent PCA appointed Mr. Roman Santos to the contested position.

Petitioner moved for a reconsideration of Resolution No. 90-407 but it was denied by respondent
CSC in Resolution No. 90-693 dated July 31, 1990.4

Hence, petitioner filed this petition for certiorari, prohibition and mandamus with a prayer for the
issuance of a writ of preliminary injunction and/or temporary restraining order, raising the following
issues—

l. Public Respondent Civil Service Commission committed grave abuse of discretion

amounting to capricious, whimsical, and despotic refusal to perform a legal/constitutional
duty to enforce the Civil Service Law and/or constituting non-feasance/mis-feasance in office
in issuing Resolution Nos. 90-407 and 90-693;

2. The legal issue of the applicability of Civil Service Commission Circular No. 29, Series
1989 on the appointment of petitioner as PCA Deputy Administrator for Industrial Research
and Market Development;

3. The legal issue as to whether it is mandatory for an appointing authority to extend

permanent appointments to selected appointees with corresponding civil service eligibilities;

4. Public respondent Civil Service Commission committed grave abuse of discretion

amounting to lack of jurisdiction and/or non-feasance/misfeasance of official functions in not
exercising its authority to enforce/implement the Civil Service Law and in not affording
petitioner who belongs to the career service in the government the protective security of
tenure and due process clause of the Philippine 1987 Constitution as well as the Civil
Service Law under P.D. 807;

5. Public respondent Philippine Coconut Authority unlawfully and maliciously deliberately

failed/refused to strictly comply with the provision of par. a, Section 25 of P.D. 807 in the
matter of extending permanent appointment to petitioner constituting likewise grave abuse of
discretion on the part of public respondent Civil Service Commission amounting to gross
ignorance of the law in not correcting/rectifying such malicious and deliberate non-
compliance, in view of the mandatory directive of Section 8, Rule III of the Civil Service Rules
on Personnel Actions and Policies.5

The petition is devoid of merit.

No doubt the appointment extended to petitioner by respondent PCA as PCA Deputy Administrator
for Industrial Research and Market Development was temporary. Although petitioner was formerly
holding a permanent appointment as a commercial attache, he sought and accepted this temporary
appointment to respondent PCA.

His temporary appointment was for a definite period and when it lapsed and was not renewed on
February 28, 1987, he complains that there was a denial of due process. This is not a case of
removal from office. Indeed, when he accepted this temporary appointment he was thereby
effectively divested of security of tenure.6 A temporary appointment does not give the appointee any
definite tenure of office but makes it dependent upon the pleasure of the appointing power.7 Thus,
the matter of converting such a temporary appointment to a permanent one is addressed to the
sound discretion of the appointing authority. Respondent CSC cannot direct the appointing authority
to make such an appointment if it is not so disposed.8

The duty of respondent CSC is to approve or disapprove an appointment. Its attestation is limited to
1âw phi 1

the determination whether the appointee possesses the required qualifications for the position as the
appropriate civil service eligibility.9

Petitioner invokes CSC Memorandum Circular No, 29, S. 1989, dated July 19, 1989 which
provides—

(a) A permanent appointment shall be issued to a person who meets all the requirements for
the position to which he is being appointed, including the appropriate eligibility prescribed, in
accordance with the provisions of law, rules and standards promulgated in pursuance
thereof. (Section 25 (a), P.D. 807).

(b) While the appointing authority is given a wide latitude of discretion in the selection of
personnel for his department or agency, in the exercise of this discretion he shall be guided
by and subject to the Civil Service Law and Rules.10

As aptly observed by respondent CSC said circular cannot be given retrospective effect as to apply
to the case of petitioner who was separated from the service on February 28, 1989. And even if the
said circular may apply to petitioner's situation, under said circular it is recognized that "the
appointing authority is given a wide latitude of discretion in the selection of personnel of his
department or agency." Respondent PCA exercised its discretion and opted not to extend the
appointment of petitioner. It cannot be compelled to extend petitioner's appointment, much less can
it be directed to extend a permanent appointment to petitioner. A discretionary duty cannot be
compelled by mandamus.11 More so when as in this case petitioner has not shown a lawful right to
the position. If the legal rights of the petitioner are not well-defined, clear and certain, the petition
must be dismissed.12

WHEREFORE, the petition is DISMISSED for lack of merit.

SO ORDERED.

[G.R. No. 119761. August 29, 1996]

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. HON.

COURT OF APPEALS, HON. COURT OF TAX APPEALS and
FORTUNE TOBACCO CORPORATION, respondents.

DECISION
VITUG, J.:

The Commissioner of Internal Revenue ("CIR") disputes the decision,

dated 31 March 1995, of respondent Court of Appeals affirming the 10th
[1]

August 1994 decision and the 11th October 1994 resolution of the Court of
Tax Appeals ("CTA") in C.T.A. Case No. 5015, entitled "Fortune Tobacco
[2]

Corporation vs. Liwayway Vinzons-Chato in her capacity as Commissioner of

Internal Revenue."
The facts, by and large, are not in dispute.
Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the
manufacture of different brands of cigarettes.
On various dates, the Philippine Patent Office issued to the corporation
separate certificates of trademark registration over "Champion," "Hope," and
"More" cigarettes. In a letter, dated 06 January 1987, of then Commissioner of
Internal Revenue Bienvenido A. Tan, Jr., to Deputy Minister Ramon Diaz of
the Presidential Commission on Good Government, "the initial position of the
Commission was to classify 'Champion,' 'Hope,' and 'More' as foreign brands
since they were listed in the World Tobacco Directory as belonging to foreign
companies.However, Fortune Tobacco changed the names of 'Hope' to
Hope Luxury' and 'More' to 'Premium More,' thereby removing the said brands
from the foreign brand category. Proof was also submitted to the Bureau (of
Internal Revenue ['BIR']) that 'Champion' was an original Fortune Tobacco
Corporation register and therefore a local brand." Ad Valorem taxes were
[3]

imposed on these brands, at the following rates:

[4]

"BRAND AD VALOREM TAX RATE

E.O. 22
06-23-86
07-01-86 and E.O. 273
07-25-87
01-01-88 RA 6956
06-18-90
07-05-90

Hope Luxury M. 100's

 Sec. 142, (c), (2) 40% 45%
Hope Luxury M. King
Sec. 142, (c), (2) 40% 45%
More Premium M. 100's
Sec. 142, (c), (2) 40% 45%
More Premium International
Sec. 142, (c), (2) 40% 45%
Champion Int'l. M. 100's
Sec. 142, (c), (2) 40% 45%
Champion M. 100's
Sec. 142, (c), (2) 40% 45%
Champion M. King
Sec. 142, (c), last par. 15% 20%
Champion Lights
Sec. 142, (c), last par. 15% 20%" [5]

A bill, which later became Republic Act ("RA") No. 7654, was enacted, on
[6]

10 June 1993, by the legislature and signed into law, on 14 June 1993, by the
President of the Philippines.The new law became effective on 03 July 1993. It
amended Section 142(c)(1) of the National Internal Revenue Code ("NIRC") to
read; as follows:

"SEC. 142. Cigars and Cigarettes. -

"x x x x x x x x x.

"(c) Cigarettes packed by machine. - There shall be levied, assessed and collected on
cigarettes packed by machine a tax at the rates prescribed below based on the
constructive manufacturer's wholesale price or the actual manufacturer's wholesale
price, whichever is higher:

"(1) On locally manufactured cigarettes which are currently classified and taxed at
fifty-five percent (55%) or the exportation of which is not authorized by contract or
otherwise, fifty-five (55%) provided that the minimum tax shall not be less than Five
Pesos (P5.00) per pack.
"(2). On other locally manufactured cigarettes, forty-five percent (45%) provided that
the minimum tax shall not be less than Three Pesos (P3.00) per pack.

"x x x x x x x x x.

"When the registered manufacturer's wholesale price or the actual manufacturer's

wholesale price whichever is higher of existing brands of cigarettes, including the
amounts intended to cover the taxes, of cigarettes packed in twenties does not exceed
Four Pesos and eighty centavos (P4.80) per pack, the rate shall be twenty percent
(20%)." (Italics supplied.)
[7]

About a month after the enactment and two (2) days before the effectivity
of RA 7654, Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was
issued by the BIR the full text of which expressed:

"REPUBLIKA NG PILIPINAS
KAGAWARAN NG PANANALAPI
KAWANIHAN NG RENTAS INTERNAS

July 1, 1993

REVENUE MEMORANDUM CIRCULAR NO. 37-93

SUBJECT : Reclassification of Cigarettes Subject to Excise Tax

TO : All Internal Revenue Officers and Others Concerned.

"In view of the issues raised on whether 'HOPE,' 'MORE' and 'CHAMPION'
cigarettes which are locally manufactured are appropriately considered as locally
manufactured cigarettes bearing a foreign brand, this Office is compelled to review
the previous rulings on the matter.

"Section 142(c)(1) National Internal Revenue Code, as amended by R.A. No. 6956,
provides:

"'On locally manufactured cigarettes bearing a foreign brand, fifty-five percent (55%)
Provided, That this rate shall apply regardless of whether or not the right to use or title
to the foreign brand was sold or transferred by its owner to the local
manufacturer. Whenever it has to be determined whether or not a cigarette bears a
foreign brand, the listing of brands manufactured in foreign countries appearing in the
current World Tobacco Directory shall govern."
"Under the foregoing, the test for imposition of the 55% ad valorem tax on cigarettes
is that the locally manufactured cigarettes bear a foreign brand regardless of whether
or not the right to use or title to the foreign brand was sold or transferred by its owner
to the local manufacturer. The brand must be originally owned by a foreign
manufacturer or producer. If ownership of the cigarette brand is, however, not
definitely determinable, 'x x x the listing of brands manufactured in foreign countries
appearing in the current World Tobacco Directory shall govern. x x x'

"'HOPE' is listed in the World Tobacco Directory as being manufactured by (a) Japan
Tobacco, Japan and (b) Fortune Tobacco, Philippines. 'MORE' is listed in the said
directory as being manufactured by: (a) Fills de Julia Reig, Andorra; (b) Rothmans,
Australia; (c) RJR-Macdonald, Canada; (d) Rettig-Strenberg, Finland; (e) Karellas,
Greece; (f) R.J. Reynolds, Malaysia; (g) Rothmans, New Zealand; (h) Fortune
Tobacco, Philippines; (i) R.J. Reynolds, Puerto Rico; (j) R.J. Reynolds, Spain; (k)
Tabacalera, Spain; (l) R.J. Reynolds, Switzerland; and (m) R.J. Reynolds,
USA. 'Champion' is registered in the said directory as being manufactured by (a)
Commonwealth Bangladesh; (b) Sudan, Brazil; (c) Japan Tobacco, Japan; (d) Fortune
Tobacco, Philippines; (e) Haggar, Sudan; and (f) Tabac Reunies, Switzerland.

"Since there is no showing who among the above-listed manufacturers of the

cigarettes bearing the said brands are the real owner/s thereof, then it follows that the
same shall be considered foreign brand for purposes of determining the ad
valorem tax pursuant to Section 142 of the National Internal Revenue Code. As held
in BIR Ruling No. 410-88, dated August 24, 1988, 'in cases where it cannot be
established or there is dearth of evidence as to whether a brand is foreign or not, resort
to the World Tobacco Directory should be made.'

"In view of the foregoing, the aforesaid brands of cigarettes, viz: 'HOPE,' 'MORE' and
'CHAMPION' being manufactured by Fortune Tobacco Corporation are hereby
considered locally manufactured cigarettes bearing a foreign brand subject to the
55% ad valorem tax on cigarettes.

"Any ruling inconsistent herewith is revoked or modified accordingly.

(SGD) LIWAYWAY
VINZONS-CHATO
Commissioner"
On 02 July 1993, at about 17:50 hours, BIR Deputy Commissioner Victor
A. Deoferio, Jr., sent via telefax a copy of RMC 37-93 to Fortune Tobacco but
it was addressed to no one in particular. On 15 July 1993, Fortune Tobacco
received, by ordinary mail, a certified xerox copy of RMC 37-93.
 In a letter, dated 19 July 1993, addressed to the appellate division of the
BIR, Fortune Tobacco, requested for a review, reconsideration and recall of
RMC 37-93. The request was denied on 29 July 1993. The following day, or
on 30 July 1993, the CIR assessed Fortune Tobacco for ad valorem tax
deficiency amounting to P9,598,334.00.
On 03 August 1993, Fortune Tobacco filed a petition for review with the
CTA. [8]

On 10 August 1994, the CTA upheld the position of Fortune Tobacco and
adjudged:

"WHEREFORE, Revenue Memorandum Circular No. 37-93 reclassifying the brands

of cigarettes, viz: `HOPE,' `MORE' and `CHAMPION' being manufactured by
Fortune Tobacco Corporation as locally manufactured cigarettes bearing a foreign
brand subject to the 55% ad valorem tax on cigarettes is found to be defective, invalid
and unenforceable, such that when R.A. No. 7654 took effect on July 3, 1993, the
brands in question were not CURRENTLY CLASSIFIED AND TAXED at 55%
pursuant to Section 1142(c)(1) of the Tax Code, as amended by R.A. No. 7654 and
were therefore still classified as other locally manufactured cigarettes and taxed at
45% or 20% as the case may be.

"Accordingly, the deficiency ad valorem tax assessment issued on petitioner Fortune

Tobacco Corporation in the amount of P9,598,334.00, exclusive of surcharge and
interest, is hereby canceled for lack of legal basis.

"Respondent Commissioner of Internal Revenue is hereby enjoined from collecting

the deficiency tax assessment made and issued on petitioner in relation to the
implementation of RMC No. 37-93.

"SO ORDERED." [9]

In its resolution, dated 11 October 1994, the CTA dismissed for lack of merit
the motion for reconsideration.
The CIR forthwith filed a petition for review with the Court of Appeals,
questioning the CTA's 10th August 1994 decision and 11th October 1994
resolution. On 31 March 1993, the appellate court's Special Thirteenth
Division affirmed in all respects the assailed decision and resolution.
In the instant petition, the Solicitor General argues: That -
"I. RMC 37-93 IS A RULING OR OPINION OF THE COMMISSIONER OF
INTERNAL REVENUE INTERPRETING THE PROVISIONS OF THE TAX
CODE.

"II. BEING AN INTERPRETATIVE RULING OR OPINION, THE PUBLICATION

OF RMC 37-93, FILING OF COPIES THEREOF WITH THE UP LAW CENTER
AND PRIOR HEARING ARE NOT NECESSARY TO ITS VALIDITY,
EFFECTIVITY AND ENFORCEABILITY.

"III. PRIVATE RESPONDENT IS DEEMED TO HAVE BEEN NOTIFIED OR

RMC 37-93 ON JULY 2, 1993.

IV. RMC 37-93 IS NOT DISCRIMINATORY SINCE IT APPLIES TO ALL

LOCALLY MANUFACTURED CIGARETTES SIMILARLY SITUATED AS
'HOPE,' 'MORE' AND 'CHAMPION' CIGARETTES.

"V. PETITIONER WAS NOT LEGALLY PROSCRIBED FROM RECLASSIFYING

HOPE, MORE AND CHAMPION CIGARETTES BEFORE THE EFFECTIVITY
OF R.A. NO. 7654.

VI. SINCE RMC 37-93 IS AN INTERPRETATIVE RULE, THE INQUIRY IS NOT

INTO ITS VALIDITY, EFFECTIVITY OR ENFORCEABILITY BUT INTO ITS
CORRECTNESS OR PROPRIETY; RMC 37-93 IS CORRECT." [10]

In fine, petitioner opines that RMC 37-93 is merely an interpretative ruling

of the BIR which can thus become effective without any prior need for notice
and hearing, nor publication, and that its issuance is not discriminatory since it
would apply under similar circumstances to all locally manufactured
cigarettes.
The Court must sustain both the appellate court and the tax court.
Petitioner stresses on the wide and ample authority of the BIR in the
issuance of rulings for the effective implementation of the provisions of the
National Internal Revenue Code. Let it be made clear that such authority of
the Commissioner is not here doubted. Like any other government agency,
however, the CIR may not disregard legal requirements or applicable
principles in the exercise of its quasi-legislative powers.
Let us first distinguish between two kinds of administrative issuances -
a legislative rule and an interpretative rule.
In Misamis Oriental Association of Coco Traders, Inc., vs. Department of
Finance Secretary, the Court expressed:
[11]
"x x x a legislative rule is in the nature of subordinate legislation, designed to
implement a primary legislation by providing the details thereof. In the same way that
laws must have the benefit of public hearing, it is generally required that before a
legislative rule is adopted there must be hearing. In this connection, the
Administrative Code of 1987 provides:

"Public Participation. - If not otherwise required by law, an agency shall, as far as

practicable, publish or circulate notices of proposed rules and afford interested parties
the opportunity to submit their views prior to the adoption of any rule.

"(2) In the fixing of rates, no rule or final order shall be valid unless the proposed
rates shall have been published in a newspaper of general circulation at least two (2)
weeks before the first hearing thereon.

"(3) In case of opposition, the rules on contested cases shall be observed.

"In addition such rule must be published. On the other hand, interpretative rules are
designed to provide guidelines to the law which the administrative agency is in charge
of enforcing."[12]

It should be understandable that when an administrative rule is merely

interpretative in nature, its applicability needs nothing further than its bare
issuance for it gives no real consequence more than what the law itself has
already prescribed. When, upon the other hand, the administrative rule goes
beyond merely providing for the means that can facilitate or render least
cumbersome the implementation of the law but substantially adds to or
increases the burden of those governed, it behooves the agency to accord at
least to those directly affected a chance to be heard, and thereafter to be duly
informed, before that new issuance is given the force and effect of law.
A reading of RMC 37-93, particularly considering the circumstances under
which it has been issued, convinces us that the circular cannot be viewed
simply as a corrective measure (revoking in the process the previous holdings
of past Commissioners) or merely as construing Section 142(c)(1) of the
NIRC, as amended, but has, in fact and most importantly, been made in order
to place "Hope Luxury," "Premium More" and "Champion" within the
classification of locally manufactured cigarettes bearing foreign brands and to
thereby have them covered by RA 7654. Specifically, the new law would have
its amendatory provisions applied to locally manufactured cigarettes which at
the time of its effectivity were not so classified as bearing foreign brands. Prior
to the issuance of the questioned circular, "Hope Luxury," "Premium More,"
and "Champion" cigarettes were in the category of locally manufactured
cigarettes notbearing foreign brand subject to 45% ad valorem tax. Hence,
without RMC 37-93, the enactment of RA 7654, would have had no new tax
rate consequence on private respondent's products. Evidently, in order to
place "Hope Luxury," "Premium More," and "Champion" cigarettes within the
scope of the amendatory law and subject them to an increased tax rate, the
now disputed RMC 37-93 had to be issued. In so doing, the BIR not simply
interpreted the law; verily, it legislated under its quasi-legislative authority. The
due observance of the requirements of notice, of hearing, and of publication
should not have been then ignored.
Indeed, the BIR itself, in its RMC 10-86, has observed and provided:

"RMC NO. 10-86

Effectivity of Internal Revenue Rules and Regulations

"It has been observed that one of the problem areas bearing on compliance with
Internal Revenue Tax rules and regulations is lack or insufficiency of due notice to the
tax paying public. Unless there is due notice, due compliance therewith may not be
reasonably expected. And most importantly, their strict enforcement could possibly
suffer from legal infirmity in the light of the constitutional provision on `due process
of law' and the essence of the Civil Code provision concerning effectivity of laws,
whereby due notice is a basic requirement (Sec. 1, Art. IV, Constitution; Art. 2, New
Civil Code).

"In order that there shall be a just enforcement of rules and regulations, in conformity
with the basic element of due process, the following procedures are hereby prescribed
for the drafting, issuance and implementation of the said Revenue Tax Issuances:

"(1). This Circular shall apply only to (a) Revenue Regulations; (b) Revenue Audit
Memorandum Orders; and (c) Revenue Memorandum Circulars and Revenue
Memorandum Orders bearing on internal revenue tax rules and regulations.

"(2). Except when the law otherwise expressly provides, the aforesaid internal revenue
tax issuances shall not begin to be operative until after due notice thereof may be
fairly presumed.

"Due notice of the said issuances may be fairly presumed only after the following
procedures have been taken:

"xxx xxx xxx

"(5). Strict compliance with the foregoing procedures is enjoined." [13]

Nothing on record could tell us that it was either impossible or impracticable
for the BIR to observe and comply with the above requirements before giving
effect to its questioned circular.
Not insignificantly, RMC 37-93 might have likewise infringed on uniformity
of taxation.
Article VI, Section 28, paragraph 1, of the 1987 Constitution mandates
taxation to be uniform and equitable. Uniformity requires that all subjects or
objects of taxation, similarly situated, are to be treated alike or put on equal
footing both in privileges and liabilities. Thus, all taxable articles or kinds of
[14]

property of the same class must be taxed at the same rate and the tax must
[15]

operate with the same force and effect in every place where the subject may
be found.
Apparently, RMC 37-93 would only apply to "Hope Luxury," Premium
More" and "Champion" cigarettes and, unless petitioner would be willing to
concede to the submission of private respondent that the circular should, as in
fact my esteemed colleague Mr. Justice Bellosillo so expresses in his
separate opinion, be considered adjudicatory in nature and thus violative of
due process following the Ang Tibay doctrine, the measure suffers from lack
[16]

of uniformity of taxation. In its decision, the CTA has keenly noted that other
cigarettes bearing foreign brands have not been similarly included within the
scope of the circular, such as -

"1. Locally manufactured by ALHAMBRA INDUSTRIES, INC.

(a) `PALM TREE' is listed as manufactured by office of Monopoly, Korea (Exhibit

`R')

"2. Locally manufactured by LA SUERTE CIGAR and CIGARETTE COMPANY

(a) `GOLDEN KEY' is listed being manufactured by United Tobacco, Pakistan

(Exhibit `S')

(b) `CANNON' is listed as being manufactured by Alpha Tobacco, Bangladesh

(Exhibit `T')

"3. Locally manufactured by LA PERLA INDUSTRIES, INC.

(a) `WHITE HORSE' is listed as being manufactured by Rothman's, Malaysia

(Exhibit `U')
(b) `RIGHT' is listed as being manufactured by SVENSKA, Tobaks, Sweden (Exhibit
`V-1')

"4. Locally manufactured by MIGHTY CORPORATION

(a) 'WHITE HORSE' is listed as being manufactured by Rothman's, Malaysia (Exhibit

'U-1')

"5. Locally manufactured by STERLING TOBACCO CORPORATION

(a) UNION' is listed as being manufactured by Sumatra Tobacco, Indonesia and

Brown and Williamson, USA (Exhibit 'U-3')

(b) WINNER' is listed as being manufactured by Alpha Tobacco, Bangladesh;

Nanyang, Hongkong; Joo Lan, Malaysia; Pakistan Tobacco Co., Pakistan; Premier
Tobacco, Pakistan and Haggar, Sudan (Exhibit 'U-4')." [17]

The court quoted at length from the transcript of the hearing conducted on 10
August 1993 by the Committee on Ways and Means of the House of
Representatives; viz:

"THE CHAIRMAN. So you have specific information on Fortune Tobacco

alone. You don't have specific information on other tobacco manufacturers. Now,
there are other brands which are similarly situated.They are locally manufactured
bearing foreign brands. And may I enumerate to you all these brands, which are also
listed in the World Tobacco Directory x x x. Why were these brands not reclassified at
55 if your want to give a level playing field to foreign manufacturers?

"MS. CHATO. Mr. Chairman, in fact, we have already prepared a Revenue

Memorandum Circular that was supposed to come after RMC No. 37-93 which have
really named specifically the list of locally manufactured cigarettes bearing a foreign
brand for excise tax purposes and includes all these brands that you mentioned at 55
percent except that at that time, when we had to come up with this, we were forced to
study the brands of Hope, More and Champion because we were given documents that
would indicate the that these brands were actually being claimed or patented in other
countries because we went by Revenue Memorandum Circular 1488 and we wanted to
give some rationality to how it came about but we couldn't find the rationale
there. And we really found based on our own interpretation that the only test that is
given by that existing law would be registration in the World Tobacco Directory. So
we came out with this proposed revenue memorandum circular which we forwarded
to the Secretary of Finance except that at that point in time, we went by the Republic
Act 7654 in Section 1 which amended Section 142, C-1, it said, that on locally
manufactured cigarettes which are currently classified and taxed at 55 percent. So we
were saying that when this law took effect in July 3 and if we are going to come up
with this revenue circular thereafter, then I think our action would really be subject to
questionbut we feel that . . . Memorandum Circular Number 37-93 would really cover
even similarly situated brands. And in fact, it was really because of the study, the short
time that we were given to study the matter that we could not include all the rest of the
other brands that would have been really classified as foreign brand if we went by the
law itself. I am sure that by the reading of the law, you would without that ruling by
Commissioner Tan they would really have been included in the definition or in the
classification of foregoing brands. These brands that you referred to or just read to us
and in fact just for your information, we really came out with a proposed revenue
memorandum circular for those brands. (Italics supplied)

"Exhibit 'FF-2-C', pp. V-5 TO V-6, VI-1 to VI-3).

"x x x x x x x x x.

"MS. CHATO. x x x But I do agree with you now that it cannot and in fact that is why
I felt that we . . . I wanted to come up with a more extensive coverage and precisely
why I asked that revenue memorandum circular that would cover all those similarly
situated would be prepared but because of the lack of time and I came out with a
study of RA 7654, it would not have been possible to really come up with the
reclassification or the proper classification of all brands that are listed there. x x
x' (italics supplied) (Exhibit 'FF-2d', page IX-1)

"x x x x x x x x x.

"HON. DIAZ. But did you not consider that there are similarly situated?

"MS. CHATO. That is precisely why, Sir, after we have come up with this Revenue
Memorandum Circular No. 37-93, the other brands came about the would have also
clarified RMC 37-93 by I was saying really because of the fact that I was just recently
appointed and the lack of time, the period that was allotted to us to come up with the
right actions on the matter, we were really caught by the July 3 deadline.But in fact,
We have already prepared a revenue memorandum circular clarifying with the other .
. . does not yet, would have been a list of locally manufactured cigarettes bearing a
foreign brand for excise tax purposes which would include all the other brands that
were mentioned by the Honorable Chairman. (Italics supplied) (Exhibit 'FF-2-d,' par.
IX-4)."18

All taken, the Court is convinced that the hastily promulgated RMC 37-93
has fallen short of a valid and effective administrative issuance.
 WHEREFORE, the decision of the Court of Appeals, sustaining that of the
Court of Tax Appeals, is AFFIRMED. No costs.
SO ORDERED.



EN BANC

[G.R. No.133842. January 26, 2000]

FEDERICO S. SANDOVAL, petitioner, vs. COMMISSION ON ELECTIONS

and CANUTO SENEN A. ORETA, respondents.

DECISION

PUNO, J.:

The petition at bar assails the order of the Commission on Elections , (COMELEC) en
banc dated June 2, 1998 nullifying and setting aside the proclamation of petitioner
Federico S. Sandoval as congressman-elect for the Malabon-Navotas legislative
district.

The facts are as follows:

Petitioner Federico S. Sandoval and private respondent Canuto Senen Greta, together
with Pedro Domingo, Mariano Santiago, Symaco Benito and Warren Serna, vied for
the congressional seat for the Malabon-Navotas legislative district during the election
held on May 11, 1998.

On election day, after the votes have been cast and counted in the various precincts in
the two municipalities, their respective board of canvassers convened to canvass the
election returns forwarded by the board of election inspectors.

In Malabon, a reception group and several canvassing committees were formed to

expedite the canvass. The reception group received, examined and recorded the sealed
envelopes containing the election returns, as well as the ballot boxes coming from the
precincts. The reception group then distributed the election returns among the
canvassing committees. The committees simultaneously canvassed the election
returns assigned to them in the presence of the lawyers and watchers of the
candidates.

On May 16, 1998, counsels for private respondent made a written request upon
Malabon Election Officer Armando Mallorca to furnish them with a complete list of
the statement of votes so that they could verify whether all statements of votes have
been tabulated. They likewise requested for a complete list of precincts in the
[1]

municipality together with the number of canvassed votes for petitioner and private
respondent as of May 16, 1998. They also sought permission to conduct an audit of
the tabulation reports made by the municipal board of canvassers. These requests,
[2]

however, were denied by the municipal ,board of canvassers on the following

grounds: (1) that any counsel for a candidate has neither personality nor right to
conduct an audit of the tabulation report as the proceedings of the board are presumed
to be regular, and (2) that the granting of the requests would delay the proceedings of
the board to the prejudice of the will of the people of Malabon. 
[3]

On May 17, 1998, the Malabon municipal board of canvassers concluded its
proceedings. The board issued a certificate of canvass of votes stating that it
canvassed 804 out of 805 precincts in the municipality. The certificate of canvass
showed that private respondent obtained the highest number of votes in Malabon with
57,760 votes, with petitioner coming in second with 42,892 votes. [4]

On the same day, after obtaining copies of the statements of votes, Ma. Rosario O.
Lapuz, authorized representative of private respondent wrote then COMELEC
Chairman Bernardo Pardo and informed him that several election returns were not
[5]

included in the canvass conducted by the Malabon municipal board of canvassers. She
moved that the certificate of canvass issued by said board be declared "not final."[6]

On May 19, 1998, Ms. Lapuz again wrote Chairman Pardo. The letter reiterated the
allegations in her letter dated May 17, 1998 and requested that the Malabon municipal
board of canvassers be ordered to canvass the election returns which it allegedly failed
to include in its canvass.
[7]

On May 23, 1998, private respondent filed with the COMELEC an Urgent Petition
entitled "In re: Petition to Correct Manifest Error in Tabulation of Election Returns by
the Municipal Board of Canvassers of Malabon, NCR. Canuto Tito Oreta vs.
Municipal Board of Canvassers of Malabon." The petition was docketed as SPC
No.98-143. It alleged that while the certificate of canvass showed that 804 election
returns were canvassed and tabulated, only 790 election returns were actually
canvassed. Private respondent contended that there was a manifest error in the non-
recording or copying of the results in 14 election returns from 14 precincts into the
statement of votes. It prayed: (1) that the municipal, board of canvassers of Malabon
be reconvened to correct said manifest error by entering the results of the elections in
the 14 election returns into the statement of , votes and that the certificate of canvass
be corrected to reflect the complete results in 804 precincts; and (2) that the canvass
of the results for the congressional election by the district board of canvassers for
Malabon and Navotas be suspended until the alleged manifest error is
corrected. 
[8]

Meanwhile, the proceedings of the municipal board of canvassers of Navotas were

disrupted by the riotous exchange of accusations by the supporters of the opposing
mayoralty candidates. The COMELEC had to move the venue to the Philippine
International Convention Center in Manila to finish the canvass. On May 27, 1998,
Chairman Pardo issued a memorandum to Atty. Ma. Anne V. G. Lacuesta, Chairman,
District Board of Canvassers for Malabon-Navotas, authorizing her to immediately
reconvene the district board of canvassers, complete the canvassing of the municipal
certificate of canvass and supporting statement of votes per municipality , and
proclaim the winning candidate for the congressional seat of the Malabon-Navotas
legislative district.[9]

On May 28, 1998, private respondent filed with the COMELEC an Urgent
Manifestation/Motion in connection with SPC No.98-143. It prayed that the canvass
of the, results of the congressional election by the district board of canvassers be
suspended until the alleged manifest error in SPC No.98-143 is corrected. [10]

At 4:15 in the afternoon on May 28, 1998, the district board of canvassers convened at
the Philippine International Convention Center. It took up private respondent's
petition to correct the manifest error arising from the non-inclusion of 19 election
returns in the canvass. After examining the statement of votes by precinct and the
certificate of canvass signed and thumbmarked by three watchers from different
parties, the district board of canvassers found that a total of 804 election returns were
canvassed by the Malabon municipal board of canvassers. [11]

The district board of canvassers then proceeded to canvass the certificates of canvass
from the two municipalities. Counsel for private respondent requested that the
canvassing be suspended until the Commission has resolved their petition for
correction of manifest error in the certificate of canvass of Malabon. The district
board of canvassers, however, denied the request for the following reasons:

"1. absence of restraining order from the Commission;

"2. order of the Chairman dated May 27, 1998 directing the district
board to proceed with the canvass and proclamation of winning
candidates for the district of Malabon-Navotas;
 "3. there is no irregularity in the submitted certificate of canvass from
both municipalities and there were no objections raised for both
certificates of canvass of the counsels present;

"4. no report coming from the municipal board of canvassers from

Malabon that there were uncanvassed election return except for one;

"5. the municipal board of canvassers of Malabon submitted to the

district board of canvassers certificate of canvass which indicated that
the number of canvassed returns for District I is 397 and 407 for District
II for a total of 804 out of 805 election returns;

"6. the board has only the ministerial duty to tally the votes as reflected
on the certificate of canvass supplemented by the statement of votes and
has no authority to verify allegations of irregularities in the preparation
thereof; and

"7. there is no pre-proclamation contest for the position of

congressman." [12]

Private respondent's counsel sought reconsideration of the decision of the district

board' of canvassers but it was likewise denied by the board.

After canvassing the municipal certificates of canvass, the district board of canvassers
proclaimed petitioner the duly elected congressman of the legislative district of
Malabon-Navotas. The board declared that petitioner obtained a total vote of 82,339
over private respondent's 80,319 votes. Petitioner took his oath of office on the same
[13]

day. 
[14]

The following day, on May 29, 1998, private respondent filed with the COMELEC in
connection with SPC No.98-143 an "Urgent Appeal from the Decision of the
Legislative District Board of Canvassers for Malabon and Navotas with Prayer for the
Nullification of the Proclamation of Federico S. Sandoval as Congressman." It alleged
that there was a verbal order from the COMELEC Chairman to suspend the canvass
and proclamation of the winning candidate for congressman of the Malabon-Navotas
legislative district; that the district board of canvassers proceeded with the canvass
and proclamation despite the verbal order; and that the non-inclusion of the 19
election returns in the canvass would result in an incomplete canvass of the election
returns. It prayed that the decision of the district board of canvassers be reversed and
that the municipal board of canvassers of Malabon be reconvened to complete its
canvass. It also prayed that the proclamation of petitioner as congressman be
annulled. [15]
On May 30, 1998, private respondent filed with the COMELEC an Urgent Petition
docketed as SPC No.98-206. The petition sought the annulment of , petitioner's
proclamation as congressman. It alleged that at about 4:00 in the afternoon on May
28, 1998, the COMELEC Chairman directed the district board of canvassers to
suspend the canvass and proclamation pending the resolution of the petition for
correction of manifest error in the municipal certificate of canvass of Malabon; that
the district board of canvassers still proceeded with the canvass in spite of the order;
that the proclamation was made despite the non-inclusion of election returns from 19
precincts in Malabon; and that the non-inclusion of these election returns will
materially affect the result of the election. Private respondent prayed that the
proclamation of petitioner as congressman be annulled and that the municipal board of
canvassers of Malabon be ordered to reconvene to include the 19 election returns in
the canvass.[16]

On June 2, 1998, the COMELEC en banc issued an order setting aside the
proclamation of petitioner. The COMELEC ruled that the proclamation by the district
board of canvassers was void because: (1) it was made in defiance of the verbal order
by the COMELEC Chairman relayed through Executive Director Resurrection Z.
Borra to suspend the proclamation of the winner in the congressional election until the
Commission has resolved private respondent's petition for correction of manifest error
in the certificate of canvass; and (2) it was based on an incomplete canvass. The
dispositive portion of the order reads:

"WHEREFORE, the proclamation made by the District Board of

Canvassers of Malabon and Navotas for the position of Congressman
being void ab initio is no proclamation at all. Meantime, it is hereby set
aside.

"Atty .Ma. Anne Lacuesta is hereby relieved as Chairman, District Board

of Canvassers of Malabon-Navotas, and Atty. Consuelo B. Diola is
named Chairman of said Board. Atty. Diola is directed to maintain
the status quo prior to the Board's unauthorized proclamation, until
further orders.

"Meantime, let these cases be set for hearing en banc on 09 June 1998
at 10:00 in the morning.

"SO ORDERED." [17]

On June 8, 1998, petitioner filed this petition for certiorari seeking the annulment and
reversal of said order. Petitioner contended:
 "1. Respondent COMELEC's annulment of petitioner Sandoval's
proclamation as winner in the election for congressman of Malabon-
Navotas, without the benefit of prior hearing, is grossly indecent and
violates his right to due process of law.

"2. Respondent COMELEC's action on respondent Oreta's petitions

violates Republic Act 7166 which bars pre-proclamation cases in the
elections of members of the House of Representative.

"3. Respondent Oreta's remedy for seeking correction of alleged

manifest errors in the certificate of canvass for members of Congress
does not lie with respondent COMELEC but, initially with the municipal
board of canvassers.

"4. At any rate, respondent Oreta's right to raise questions concerning

alleged manifest errors in the Malabon certificate of canvass is barred by
his failure to raise such questions before petitioner Sandoval's
proclamation.

"5. Respondent Oreta's recourse lies with the House of Representatives

Electoral Tribunal which is not precluded from passing upon the
allegedly uncanvassed election returns in Malabon." [18]

On June 9, 1998, we required the respondents to comment on the petition. We also

issued a temporary restraining order mandating the COMELEC to cease and desist
from implementing and enforcing the questioned order. [19]

The COMELEC nonetheless conducted a hearing on June 9, 1998 , concerning SPC

No.98-143 and SPC No.98-206.

Private respondent filed his comment on June 22, 1998. He argued:

[20]

"1. Respondent COMELEC committed no jurisdictional error in

declaring void ab initio the proclamation of petitioner Sandoval as
Congressman-elect for the Malabon-Navotas legislative
district.

a. The premature and hasty proclamation of respondent Sandoval

made by the District Board on the basis of an incomplete canvass
is illegal, hence, null and void.
 b. Respondent COMELEC substantially complied with the
requirements of due process in declaring the proclamation of
respondent Sandoval an absolute nullity.

"2. Respondent COMELEC properly took cognizance of respondent

Oreta's petition to correct manifest error in the certificate of canvass
issued by the Malabon board.

a. While technically a pre-proclamation case, correction of

manifest errors for purposes of the congressional elections is
within the power and authority of the COMELEC to order, in the
exercise of its appellate and original jurisdiction over such subject
matter.

b. The failure of the Malabon board to tabulate the results of

seventeen ( 17) election returns and to record the votes supporting
the certificate of canvass resulted in a manifest error in the
certificate of canvass which should be summarily corrected by
ordering the Malabon board to reconvene, canvass the 17 election
returns, record the votes in the statement of votes and prepare a
new certificate of canvass."

On June 29, 1998, then Solicitor General Silvestre Bello III filed a Manifestation and
Motion in Lieu of Comment. He found the assailed order of the COMELEC null and
[21]

void for the following reasons:

"1. Respondent COMELEC's motu proprio and ex parte annulment of

petitioner's proclamation as winner in the election for congressman of
Malabon-Navotas is tainted with grave abuse of discretion amounting to
lack or excess of jurisdiction and violated petitioner's right to due
process; and

"2. Respondent COMELEC had no jurisdiction over the petitions filed

by respondent Oreta, hence its order dated June 2, 1998 annulling
petitioner's proclamation is null and void."

In view of. the Solicitor General's manifestation and motion, we required the
COMELEC to file its own comment.

The COMELEC filed its comment on August 11, 1998. It invoked its power of direct
control and supervision over the board of canvassers, allowing it to review, revise and
reverse the board's actions. It said that it rendered the questioned order upon finding
that petitioner's proclamation was illegal and therefore void ab initio. It cited two
reasons to support its findings: first, it was made in disregard of the Chairman's verbal
order to suspend the canvass and proclamation, and second, it was based on an
incomplete canvass. 
[22]

On August 27, 1998, the new Solicitor General, Ricardo P. Galvez, filed a
Manifestation and Motion withdrawing the Manifestation and Motion filed ,by former
Solicitor General Bello. The Solicitor General, this time, upheld the validity of the
assailed order. In essence, he argued that the Malabon municipal board of canvassers
failed to include 17 election returns in its canvass; that such omission constitutes
manifest error in the certificate of canvass which must be corrected by the district
board of canvassers; and that the proclamation of petitioner was void ab initio because
it was based on an incomplete canvass. [23]

Petitioner and private respondent subsequently filed their respective reply, rejoinder
and sur-rejoinder.

Considering the arguments raised by the parties, the issues that need to be resolved in
this case are:

1. whether the COMELEC has the power to take cognizance of SPC No.
98-143 and SPC No. 98-206, both alleging the existence 'of manifest
error in the certificate of canvass issued by the Malabon municipal board
of canvassers and seeking to reconvene said board of canvassers to allow
it to correct the alleged error; and

2. whether the COMELEC's order to set aside petitioner's proclamation

was valid.

On the first issue, we uphold the jurisdiction of the COMELEC over the petitions filed
by private respondent. As a general rule, candidates and registered political parties
involved in an election are allowed to file pre-proclamation cases before the
COMELEC. Pre-proclamation cases refer to any question pertaining to or affecting
the proceedings of the board of canvassers which may be raised by, any candidate or
by any registered political party or coalition of political parties before the board or
directly with the Commission, or any matter raised under Sections 233, 234, 235 and
236 in relation to the preparation, transmission, receipt, custody and appreciation of
election returns. The COMELEC has exclusive jurisdiction over all pre-
[24]

proclamation controversies. As an exception, however, to the general rule, Section

[25]

15 of Republic Act (RA) 7166 . prohibits candidates in the presidential, vice-

[26]

presidential, senatorial and congressional elections from filing pre-proclamation

cases. It states:
[27]
 "Sec. 15. Pre-proclamation Cases Not Allowed in Elections for
President, Vice-President, Senator, and Members of the House of
Representatives.-- For purposes of the elections for President, Vice-
President, Senator and Member of the House of Representatives, no pre-
proclamation cases shall be allowed on matters relating to the
preparation, transmission, receipt, custody and appreciation of election
returns or the certificates of canvass, as the case may be. However, this
does not preclude the authority of the appropriate canvassing
body motu propio or upon written complaint of an interested person
to correct manifest errors in the certificate of canvass or election
returns before it."

The prohibition aims to avoid delay in the proclamation of the winner in the election,
which delay might result in a vacuum in these sensitive posts. The law, nonetheless,
[28]

provides an exception to the exception. The second sentence of Section 15 allows the
filing of petitions for correction of manifest errors in the certificate of canvass or
election returns even in elections for president, vice- president and members of the
House of Representatives for the simple reason that the correction of manifest error
will not prolong the process of canvassing nor delay the proclamation of the winner in
the election. This rule is consistent with and complements the authority of the
COMELEC under the Constitution to, "enforce and administer all laws and
regulations relative to the conduct of an, election, plebiscite, initiative, referendum
and recall" and its power to "decide, except those involving the right to vote, all
[29]

questions affecting elections." [30]

Applying the foregoing rule, we hold that the Commission has jurisdiction over SPC
No. 98- 143 and SPC No.98-206, both filed by private respondent seeking to correct
the alleged manifest error in the certificate of canvass issued by the Malabon
municipal board of canvassers. These petitions essentially allege that there exists a
manifest error in said certificate of canvass as the board failed to include several
election returns in the canvassing. Private respondent prays that the board be
reconvened to correct said error. Section 15 of RA 7166 vests the COMELEC with
jurisdiction over cases of this nature. We reiterate the long-standing rule that
jurisdiction is conferred by law and is determined by the allegations in the
petition regardless of whether or not the petitioner is entitled to the relief
sought.[31]

The authority to rule on petitions for correction of manifest error is vested in

the COMELEC en banc. Section 7 of Rule 27 of the 1993 COMELEC Rules of
Procedure provides that if the error is discovered before proclamation, the board of
[32]

canvassers may motu proprio, or upon verified petition by any candidate, political
party, organization or coalition of political parties, after due notice and hearing,
correct the errors committed. The aggrieved party may appeal the decision of the
board to the Commission and said appeal shall be heard and decided by the
Commission en banc. Section 5, however of the same rule states that a petition for
correction of manifest error may be filed directly with the Commission en
banc provided that such errors could not have been discovered during the canvassing
despite the exercise of due diligence and proclamation of , the winning candidate had
already been made. Thus, we held in Ramirez vs. COMELEC:  [33]

"Although in Ong, Jr. v. COMELEC it was said that 'By now it is settled
that election cases which include pre-proclamation controversies must
first be heard and decided by a division of the Commission' -- and a
petition for correction of manifest error in the Statement of Votes, like
SPC 95-198 is a pre-proclamation ; controversy -- in none of the cases
cited to support this proposition was the issue the correction of a
manifest error in the Statement of Votes under Sec. 231 of the Omnibus
Election Code (BP. Blg. 881) or Sec. 15 of R.A. No.7166. On the other
hand, Rule 27, Sec. 5 of the 1993 Rules of the COMELEC expressly
provides that pre - proclamation controversies involving, inter alia,
manifest errors in the tabulation or tallying of the results may be filed
directly with the COMELEC en banc x x x." [34]

Petitioner nonetheless contends that SPC No. 98-143 and SPC No. 98-206 must be
dismissed because private respondent failed to raise the issue of manifest error before
the appropriate board of canvassers in accordance with the second sentence of Section
15 of RA 7166.

We disagree.

The issue of manifest error in the certificate of canvass for Malabon has been raised
before the district board of canvassers before petitioner could be proclaimed and said
board has in fact ruled on the issue. We find this as sufficient compliance with the
[35]

law. The facts show that it was impossible for private respondent to raise the issue
before the Malabon municipal board of canvassers as it still did not have a copy of the
statement of votes and the precinct list at the time of the canvassing in the municipal
level. At that time, private respondent still had no knowledge of the alleged manifest
error. He, however, lost no time in notifying the COMELEC Chairman and the district
board of the alleged error upon discovery thereof. We find petitioner's argument,
therefore, to be devoid of merit.

We now go to the second issue. Although the COMELEC is clothed with jurisdiction
over the subject matter and issue of SPC No.98-143 and SPC No. 98-206, we find
the exercise of its jurisdiction tainted with illegality. We hold that its order to set
aside the proclamation of petitioner is invalid for having been rendered without due
process of law. Procedural due process demands prior notice and hearing. Then after
the hearing, it is also necessary that the tribunal show substantial evidence to support
its ruling. In other words, due process requires that a party be given an opportunity
[36]

to adduce his evidence to support his side of the case and that the evidence should be
considered in the adjudication of the case. The facts show that COMELEC set aside
[37]

the proclamation of petitioner , without the benefit of prior notice and hearing and it
rendered the questioned order based solely on private respondent's allegations. We
held in Bince, Jr. vs. COMELEC: 
[38]

"Petitioner cannot be deprived of his office without due process of law.

Although public office is not property under Section 1 of the Bill of
Rights of the Constitution, and one cannot acquire a vested right to
public office, it is, nevertheless, a protected right. Due process in
proceedings before the COMELEC, exercising its quasi-judicial
functions, requires due notice and hearing, among others. Thus, although
the COMELEC possesses, in appropriate cases, the power to annul or
suspend the proclamation of any candidate, We had ruled in Farinas vs.
Commission on Elections, Reyes vs. Commission on Elections and
Gallardo vs. Commission on Elections that the COMELEC is without
power to partially or totally annul a proclamation or suspend the effects
of a proclamation without notice and hearing."[39]

Citing Section 242 of the Omnibus Election Code, private respondent argues that the
COMELEC is authorized to annul an illegal proclamation even without notice and
hearing because the law states that it may motu proprio order a partial or total
suspension of the proclamation of any candidate-elect or annul partially or totally any
proclamation, if one has been made. We reject the argument. Section 242 of the
Omnibus Election Code reads:

"Sec. 242. Commission's exclusive jurisdiction of all pre-proclamation

controversies.-- The Commission shall have exclusive jurisdiction of all
pre-proclamation controversies. It may motu proprio or upon written
petition, and after due notice and hearing, order the partial or total
suspension of the proclamation of any candidate-elect or annul partially
or totally any proclamation, if one has been made, as the evidence shall
warrant in accordance with the succeeding sections."

The phrase "motu proprio" does not refer to the annulment of proclamation but to the
manner of initiating the proceedings to annul a proclamation made by the board of
canvassers. The law provides two ways by which annulment proceedings may be
initiated. It may be at the own initiative of the COMELEC (motu proprio) or by
written petition. In either case, notice and hearing is required. This is clear from the
language of the law.

We likewise reject private respondent's assertion that the hearing held on June 9, 1998
substantially satisfies the due process requirement. The law requires that the hearing
be held before the COMELEC rules on the petition. Here, the public respondent first
issued an order annulling the proclamation of petitioner and then set the date of the
hearing. We explained in Farinas vs. COMELEC the pernicious effect of such
[40]

procedure:

"As aptly pointed out by the Solicitor General, 'to sanction the
immediate annulment or even the suspension of the effects of a
proclamation before the petition seeking such annulment or suspension
of its effects shall have been heard would open the floodgates of
unsubstantiated petitions after the results are known, considering the
propensity of the losing candidates to put up all sorts of obstacles in an
open display of unwillingness to accept defeat, or would encourage the
filing of baseless petitions not only to the damage and prejudice of
winning candidates but also to the frustration of the sovereign will of the
electorate.'" (citations omitted)

Public respondent submits that procedural due process need not be observed in this
case because it was merely exercising its administrative power to review, revise and
reverse the actions of the board of canvassers. It set aside the proclamation made by
the district board of canvassers for the position of congressman upon finding that it
was tainted with illegality.

We cannot accept public respondent's argument.

Taking cognizance of private respondent's petitions for annulment of petitioner's

proclamation, COMELEC was not merely performing an administrative function. The
administrative powers of the COMELEC include the power to determine the number
and location of polling places, appoint election officials and inspectors, conduct
registration of voters, deputize law enforcement agencies and government
instrumentalities to ensure free, orderly, honest, peaceful and credible elections,
register political parties, organizations or coalitions, accredit citizens' arms of the
Commission, prosecute election offenses, and recommend to the President the
removal of or imposition of any other disciplinary action upon any officer or
employee it has deputized for violation or disregard of its directive, order or decision.
In addition, the Commission also has direct control and supervision over all personnel
involved in the conduct of election. However , the resolution of the adverse claims
of private respondent and petitioner as regards the existence of a manifest error
in the questioned certificate of canvass requires the COMELEC to act as an
arbiter. It behooves the Commission to hear both parties to determine the
veracity of their allegations and to decide whether the alleged error is a manifest
error. Hence, the resolution of this issue calls for the exercise by the COMELEC
of its quasi- judicial power. It has been said that where a power rests in judgment or
discretion, so that it is of judicial nature or character, but does not involve the exercise
of functions of a judge, or is conferred upon an officer other than a judicial officer, it
is deemed quasi-judicial. The COMELEC therefore, acting as quasi-judicial tribunal,
[41]

cannot ignore the requirements of procedural due process in resolving the petitions
filed by private respondent.

IN VIEW WHEREOF, the COMELEC order dated June 2, 1998 in SPC No. 98-143
and SPC No. 98-206 is ANNULLED. This case is REMANDED to the COMELEC
and the Commission is hereby ordered to hold a hearing on the issues presented in
SPC No. 98-143 and SPC No. 98-206, and thereafter render a decision based on the
evidence adduced and the applicable laws. The incident of whether or not petitioner
may continue discharging the functions of the office of congressman pending
resolution of the case on its merit shall be addressed by the COMELEC in the exercise
of its reasonable discretion.

SO ORDERED.

G.R. No. 73123 September 2, 1991

IN RE: PETITION FOR DECLARATION OF INSOLVENCY OF [A] FILAND MANUFACTURING

AND ESTATE DEVELOPMENT COMPANY; [B] TOP CONSTRUCTION ENTERPRISES, INC.
AND [C] SPOUSES EMILIO CHING AND INAI TEH; EMILIO CHING, petitioner, LAND BANK OF
THE PHILIPPINES, oppositor. LAND BANK OF THE PHILIPPINES, petitioner,
vs.
HON. DIONISIO N. CAPISTRANO, JUDGE OF THE REGIONAL TRIAL COURT OF PASAY CITY,
EMILIO CHING AND FILAND MANUFACTURING AND ESTATE DEVELOPMENT CO.,
INC., respondents.

Lily K. Gruba and Florencio S. Jimenez for Land Bank of the Philippines.

FERNAN, C.J.:

Assailed in this petition for review on certiorari is the jurisdiction of the Regional Trial Court (RTC) of
Pasay City over a petition for declaration of insolvency of two (2) private corporations.

The antecedent facts are undisputed:

On September 19, 1980, private respondents Filand Manufacturing and Estate Development Co.,
Inc. (hereafter, Filand Manufacturing) and Emilio Ching obtained from petitioner Land Bank of the
Philippines a loan in the amount of Ten Million Pesos (P10,000,000.00). Private respondents having
failed to pay the loan on its due date, petitioner instituted before the RTC of Manila a complaint for
recovery thereof, docketed as Civil Case No. 0184-P.

During the pendency of the collection suit on December 29, 1984, private respondents Filand
Manufacturing, Emilio Ching and his spouse Inai Teh and Top Construction Enterprises, Inc., thru
Emilio Ching, filed before the respondent RTC of Pasay City a petition docketed as Special
Proceedings No. 3232P for declaration of insolvency. Cited as ground therefor was their inability to
pay the various debts and liabilities incurred by them, either jointly or solidarily or guaranteed by one
for the other, in the course of their businesses, such inability being due to business reserves brought
about by the fire on January 2, 1984 which gutted the old Holiday Plaza Building then owned and
operated by Filand Manufacturing, as well as the economic crisis which gripped the country following
the assassination of former Senator Benigno S. Aquino in 1983.1

Acting on said petition, respondent court on January 29, 1985 issued an Order of Adjudication
declaring private respondents insolvent pursuant to Section 18 of the Insolvency Law (Act No. 1956).
The Sheriff of Pasay City was "directed to take possession of, and safely keep, until the appointment
of a receiver or assignee, all the deeds, vouchers, books of account, papers, notes, bonds, bills and
securities of (therein) petitioners, and all the real and personal properties, estates and effects of the
same petitioners, except such as may, by law, be exempt from execution." Respondent court set
"March 25, 1985 at 9:00 A.M. in its premises ... as the date of the meeting of the creditors of the
petitioners for them to choose an assignee/assignees of the estates of the petitioners."2

Petitioner bank moved for a reconsideration of the Order of Adjudication on two (2) grounds, namely:
(1) that the court has no jurisdiction over the subject matter of the petition insofar as petitioning
corporations are concerned; and (2) the petition is defective in form and substance.3 After an
exchange of pleadings between petitioner and private respondents, respondent court issued on July
19, 1985 an Order upholding its jurisdiction over the petition and appointing petitioner bank as the
assignee for and in behalf of all the creditors without bond, thus:

WHEREFORE, all motions seeking to have this Court make a declaration that it has no
jurisdiction over the above-entitled proceeding are hereby DENIED, and the Land Bank of
the Philippines is appointed as the assignee for and in behalf of all the creditors of the
petitioners, without bond, to which assignee the Clerk of Court, thru the Branch Sheriff, shall
deliver any and all real and personal properties, estates and effects, as well as the pertinent
papers and all deeds, vouchers, books of accounts, papers, notes, bonds, bills and securities
taken by him pursuant to the order of this Court of January 29, 1985.

The assignee is hereby ordered to comply with the time limit provided for in Sec. 43 of Act
1956, and for this purpose, hereby sets his report for hearing on October 29, 1985, at 9:00
A.M.

SO ORDERED.4

Petitioner bank declined the appointment and the City Treasurer of Pasay City, being the second
biggest creditor of private respondents, was appointed in its stead Petitioner bank then filed a Notice
of Appeal and a Record on Appeal on August 19, 1985, on the basis of which the respondent court
forwarded the records of the case directly to this Court.
By resolution dated September 23, 1985, the Court resolved to "REQUIRE the Branch Clerk of Court
of the (respondent court) to EXPLAIN why he forwarded to this Court the aforesaid records when the
mode of seeking review by this Court of a lower court's judgment under R.A. 5440 is by petition for
review on certiorari; and the Presiding Judge of said trial court is also directed to EXPLAIN why he
accepted and approved the forwarding to this Court of the aforesaid records, both within ten (10)
days from notice hereof." Petitioner bank and/or counsel were also "REQUIRED to EXPLAIN within
ten (10) days from notice ..., since they failed to pay timely the docket and legal research fund fees
and to file timely a petition for review on certiorari under R.A. 5440 why the judgment sought to be
reviewed should not be now deemed final and executory and the records returned for execution of
judgment".5 Upon submission of the required explanations, the Court on December 4, 1985 resolved
to require the petitioner bank to file a petition for review on certiorari and to pay the docket and legal
research fund fees, both within a non-extendible period of ten (10) days from notice.6 This Order was
seasonably complied with.

After the private respondents had submitted their comment on the petition, petitioner bank filed on
March 24, 1986 a "Manifestation with motion for issuance of writ of preliminary injunction" informing
the Court that on March 3, 1986, the respondent court rendered a decision in Special Proceedings
No. 3232-P, providing in its dispositive portion as follows:

WHEREFORE, judgment is hereby rendered, as follows:

1. Petitioners Filand Manufacturing & Estate Development Co., Inc., and Top Construction
Enterprises, Inc., are declared by this Court as insolvent and, pursuant to Sec. 52 of Act
1956, as amended, their properties and assets shall be distributed to the creditors in the
proceeding with respect to the appointment of the City Treasurer of Pasay City as receiver of
their estates and effects. However, they are not discharged from their liabilities in
accordance with Sec. 52 of Act 1956, as amended.

2. Petitioners spouses Emilio Ching and Inai Teh are likewise declared insolvent and their
application for discharge is hereby approved, and they are hereby ordered discharged and
released from all claims, debts, liabilities and demands, whether actual or contingent, and
whether personally or as guarantors or in a joint and solidary capacity, with respect to the
obligations set forth in the schedule and inventory of accounts due and payable, Annex 'A' of
the petition, as well as with respect to the obligations and creditors listed in the manifestation
of April 29, 1985, and the supplemental manifestation dated May 22, 1985, in the above-
entitled proceedings.

The other aspect of the above-entitled proceedings as regards the receiver and all incidents
and matters in connection with his functions and duties are hereby considered as mere
interlocutory matters in the process of winding up this proceeding.

SO ORDERED.7

Acting on said manifestation and motion, the Court on April 14, 1986 issued a temporary restraining
order enjoining the respondent court from enforcing its decision of March 3, 1986.8 The temporary
restraining order was however lifted insofar as private respondents spouses Emilio Ching and Inai
Teh were concerned, the latter being natural persons over whom the jurisdiction of the respondent
court is not being questioned.9

In its petition, given due course by the Court per resolution dated January 28, 1987, petitioner bank
advances the argument that it is the Securities and Exchange Commission (SEC), rather than the
Regional Trial Court (RTC) which has jurisdiction over the petition for declaration of insolvency filed
by private respondent corporations. This theory is allegedly anchored on specific provisions of
Presidential Decree No. 902-A, as amended, namely: Sections 3, 5(d) and 6(c) and (d), which
petitioner bank construes as having repealed the Insolvency Law (Act 1956), which confers
jurisdiction over insolvency proceedings on the regular courts. Private respondents maintain the
opposite view, contending simply that a petition for declaration of insolvency is not one of those
cases enumerated under Section 5, P.D. No. 902-A, as amended, over which the SEC has original
and exclusive jurisdiction.

In view of the far reaching importance of the issue presented before the Court, both from a legal and
economic standpoint, we resolved to implead the SEC as a party to this case and to require it to
inform the Court of its practice regarding insolvency proceedings.10 The SEC thru the Solicitor
General, filed its memorandum on December 13, 1989.

After deliberating on the SEC's memorandum, the Court resolved to set the case for hearing on May
14, 1990 at 10:00 o'clock in the morning. A senior and knowledgeable officer of the SEC was
requested to "appear and inform the Court of the law and practice actually applied and followed by
the SEC in respect of suspension of payments by, and voluntary and involuntary insolvencies of
Philippine corporations . ..." Former SEC Chairman Julito Sulit, Jr. was appointed amicus curiae and
was requested to appear at the hearing in that capacity.11

Before addressing the principal issue in the instant petition, the Court notes with dismay that the
petitioner and the lower court appear to be still in the dark as to the proper mode of appeal to this
Court. Hence, for their elucidation as well as the others similarly misinformed, we deem it proper to
quote the following resolution dated March 1, 1990 of the Court en banc in UDK 9748, "Murillo v.
Consul":

R.A. No. 5440 changed the mode of appeal from courts of first instance (now Regional Trial
Courts) to the Supreme Court in cases involving only questions of law, or the constitutionality
or validity of any treaty, law, ordinance, etc. or the legality of any tax, impost, assessment or
toll, etc., or the jurisdiction of any inferior court, from ordinary appeal — i.e., by notice of
appeal, record on appeal and appeal bond, under Rule 41— to appeal by certiorari, under
Rule 45.

xxx xxx xxx

At present then, except in criminal cases where the penalty imposed is life imprisonment
or reclusion perpetua, there is no way by which judgments of regional trial courts may be
appealed to this Court except by petition for review on certiorari in accordance with Rule 45
of the Rules of Court, in relation to Section 17 of the Judiciary Act of 1948, as amended. The
proposition is clearly stated in the Interim Rules: 'Appeals to the Supreme Court shall be
taken by petition for certiorari which shall be governed by Rule 45 of the Rules of Court.

xxx xxx xxx

... To repeat, appeals to this Court cannot now be made by petition for review or by notice of
appeal (and, in certain instances, by record on appeal), but only by petition for review on
certiorari under Rule 45. As was stressed by this Court as early as 1980 in Buenbrazo v.
Marave, 101 SCRA 848, all the members of the bench and bar are charged with knowledge,
not only that since the enactment of Republic Act No. 6031 in 1969,' 'the review of the
decision of the Court of First Instance in a case exclusively cognizable by the inferior court ...
cannot be made in an ordinary appeal or by record on appeal but also that 'appeal by record
on appeal to the Supreme Court under Rule 42 of the Rules of Court was abolished by
 Republic Act No. 5440 which, as already stated, took effect on September 9, 1968.' Similarly,
in Santos, Jr. v. C.A., 152 SCRA 378, this Court declared that 'Republic Act No. 5440 had
long superseded Rule 41 and Section 1, Rule 122 of the Rules of Court on direct appeals
from the court of first instance to the Supreme Court in civil and criminal cases,' ... and that
'direct appeals to this Court from the trial court on questions of law had to be through the
filing of a petition for review on certiorari, wherein this Court could either give due course to
the proposed appeal or deny it outright to prevent the clogging of its docket with
unmeritorious and dilatory appeals.

Going now to the issue of jurisdiction raised in this petition and considering the arguments proferred
by the parties' respective counsel, the view spoused by the amicus curiae as well as the
submissions of the SEC thru the Office of the Solicitor General and its Assistant Executive Director,
we find for private respondents.

Under Act 1956, otherwise known as the Insolvency Law, jurisdiction over proceedings for
suspension of payments, voluntary and involuntary insolvency is exclusively vested in the regular
courts. However, P.D. No. 1758 issued in 1981 added to the exclusive and original jurisdiction of the
SEC defined and delineated in Section 5 of P.D. 902-A,12the following:

d) Petitions of corporations, partnerships or associations to be declared in the state of

suspension of payments in cases where the corporation, partnership or association
possesses sufficient property to cover all its debts but foresees the impossibility of meeting
them when they respectively fall due or in cases where the corporation, partnership or
association has no sufficient assets to cover its liabilities, but is under the management of a
Rehabilitation Receiver or Management Committee created pursuant to this Decree.

It is petitioner's contention that said additional par. (d) effectively repealed the Insolvency Law so as
to transfer and confer upon the SEC jurisdiction theretofore enjoyed by the regular courts over
proceedings for suspension of payments and voluntary and involuntary insolvency. We do not share
such interpretation.

The SEC like any other administrative body, is a tribunal of limited jurisdiction and as such, could
wield only such powers as are specifically granted to it by its enabling statute.13 Its jurisdiction should
be interpreted in strictissimi juris.14

Section 5, par. (d) should be construed as vesting upon the SEC original and exclusive jurisdiction
only over petitions to be declared in a state of suspension of payments, which may either be: (a) a
simple petition for suspension of payments based on the provisions of the Insolvency Law, or (b) a
similar petition accompanied by a prayer for the creation/appointment of a management committee
and/or rehabilitation receiver based on the provisions of P.D. No. 902-A. Said provision cannot be
stretched to include petitions for insolvency. The reason is that under said Section 5, par. (d) above-
quoted, the jurisdiction of the SEC over cases where the corporation, partnership or association has
no sufficient assets to cover its liabilities, (and therefore insolvent) is qualified by the conjunctive
phrase "but is under the management of a Rehabilitation Receiver or Management Committee
created pursuant to this Decree." This qualification effectively circumscribes the jurisdiction of the
SEC over insolvent corporations, partnerships and associations, and consequently, over
proceedings for the declaration of insolvency. It demonstrates beyond doubt that jurisdiction over
insolvency proceedings pertains neither in the first instance nor exclusively to the SEC but only in
continuation of or as an incident to the exercise of its jurisdiction over petitions to be declared in a
state of suspension of payments wherein the petitioning corporation, partnership or association had
previously been placed under a rehabilitation receiver or management committee by the SEC itself.
Viewed differently, where the petition filed is one for declaration of a state of suspension of
payments due to a recognition of the inability to pay one's debts and liabilities, and where the
petitioning corporation either: (a) has sufficient property to cover all its debts but foresees the
impossibility of meeting them when they fall due (solvent but illiquid or (b) has no sufficient property
(insolvent) but is under the management of a rehabilitation receiver or a management committee,
the applicable law is P.D. No. 902-A pursuant to Sec. 5 par. (d) thereof. However, if the petitioning
corporation has no sufficient assets to cover its liabilities and is not under a rehabilitation receiver or
a management committee created under P.D. No. 902-A and does not seek merely to have the
payments of its debts suspended, but seeks a declaration of insolvency, as in this case, the
applicable law is Act 1956 on voluntary insolvency, specifically section 14 thereof, which provides:

Sec. 14. — An insolvent debtor, owing debts exceeding in amount the sum of one thousand
pesos, may apply to be discharged from his debts and liabilities by petition to the Court of
First Instance of the province or city in which he has resided for six month next preceding the
filing of such petition. In his petition, he shall set forth his place of residence, the period of his
residence therein immediately prior to filing said petition, his inability to pay all his debts in
full, his willingness to surrender all his property, estate, and effects not exempt from
execution for the benefit of his creditors, and an application to be adjudged an insolvent. He
shall annex to his petition a schedule and inventory in the form hereinafter provided. The
filing of such petition shall be an act of insolvency.

Neither could the grant of additional powers to SEC under Section 6(c) and (d) of P.D. No. 902- A,
as amended, be construed as vesting upon it exclusive and original jurisdiction over insolvency
proceedings. The pertinent provisions read:

SEC. 6. In order to effectively exercise such jurisdiction, the Commission shall possess the
following powers:

xxx xxx xxx

c) To appoint one or more receivers of the property, real and personal, which is the subject
of the action pending before the Commission in accordance with the pertinent provisions of
the Rules of Court in such other cases whenever necessary to preserve the rights of the
parties-litigants to and/or protect the interest of the investing public and creditors; Provided,
however, that the Commission may, in appropriate cases, appoint a rehabilitation receiver of
corporations, partnerships or other associations not supervised or regulated by other
government agencies who shall have, in addition to the powers of a regular receiver under
the provisions of the Rules of Court, such functions and powers as are provided for in the
succeeding paragraph (d) hereof; Provided, further that the Commission may appoint a
rehabilitation receiver of corporations, partnerships or other nations supervised or regulated
by other government agencies, such as banks and insurance companies, upon request of
the government agency concerned; Provided, finally that upon appointment of a
management committee, rehabilitation receiver, board or body pursuant to this Decree, all
actions for claims against corporations, partnerships or nations under management or
receivership pending before any court, tribunal, board or body shall be suspended
accordingly.

d) To create and appoint a management committee, board, or body upon petition or motu
proprio to undertake the management of corporations, partnerships or other associations not
supervised or regulated by other government agencies in appropriate cases when there is
imminent danger of dissipation, loss, wastage or destruction of assets or other properties or
paralization of business operations of such corporations or entities which may be prejudicial
 to the interest of minority stockholders, parties-litigants or the general public; Provided,
further, that the Commission may create or appoint a management committee, board or body
to undertake the management of corporations, partnerships or other associations supervised
or regulated by other government agencies, such as banks and insurance companies, upon
request of the government agency concerned.

The management committee or rehabilitation receiver, board or body shall have the power to
take custody of, and control over, all the existing assets and property of such entities under
management; to evaluate the existing assets and liabilities, earnings and operations of such
corporations, partnerships or other associations, to determine the best way to wage and
protect the interest of the investors and creditors; to study, review and evaluate the feasibility
of continuing operations and restructure and rehabilitate such entities if determined to be
feasible by the Commission. It shall report and be responsible to the Commission until
dissolved by order of the Commission: Provided, however, that the Commission may, on the
basis of the findings and recommendation of the management committee, or rehabilitation
receiver, board or body, or on its own findings, determine that the continuance in business of
such corporation or entity would not be feasible or profitable nor work to the best interest of
the stockholders, parties-litigants, creditors, or the general public, order the dissolution of
such corporation entity and its remaining assets liquidated accordingly.

The management committee or rehabilitation receiver, board or body may overrule or revoke
the actions of the previous management and board of directors of the entity or entities under
management notwithstanding any provision of law, articles of incorporation or by-laws to the
contrary.

The management committee, or rehabilitation receiver, board or body shall not be subject to
any action, claim or demand for, or in connection with any act done or omitted to be done by
it in good faith in the exercise of its functions, or in connection with the exercise of its powers
herein conferred.

As declared by the law itself, these are merely ancillary powers to enable the SEC to effectively
exercise its jurisdiction. These additional ancillary powers can be exercised only in connection with
an action pending before the SEC and therefore had to be viewed in relation to Section 5 which
defines the SEC's original and exclusive jurisdiction. Section 6 does not enlarge or add to the
exclusive and original jurisdiction of the SEC as particularly enumerated under Section 5 of said
Presidential Decree, as amended.

A well-recognized rule in statutory construction is that repeals by implication are not favored and will
not be so declared unless it be manifest that the legislature so intended.15 When statutes are in pari
material they should be construed together. In construing them the old statutes relating to the same
subject matter should be compared with the new provisions and if possible by reasonable
construction, both should be so construed that effect may be given to every provision of each.16

Construing P.D. 902-A, as amended, in relation to Act 1956, we rule that insofar as petitions for
declaration of insolvency of private corporations are concerned, it is the regular court that has
exclusive and original jurisdiction thereon. The SEC may entertain such petitions only as an incident
of and in continuation of its already acquired jurisdiction over petitions to be declared in the state of
suspension of payments in the two (2) cases provided in Section 5 (d) of P.D. 902-A, as amended.

WHEREFORE, the instant petition for review on certiorari is DENIED. The temporary restraining
order issued on April 14, 1986 is LIFTED. No pronouncement as to costs.
SO ORDERED.

[G.R. No. 159145. April 29, 2005]

DEPARTMENT OF AGRARIAN REFORM ADJUDICATION BOARD

(DARAB) of the DEPARTMENT OF AGRARIAN REFORM (DAR),
REPRESENTED by DAR SECRETARY ROBERTO M.
PAGDANGANAN, petitioner, vs. JOSEFINA S. LUBRICA, in her
capacity as Assignee of the rights and interest of FEDERICO
SUNTAY, respondent.

DECISION
TINGA, J.:

Before this Court is an appeal by certiorari under Rule 45 of the 1997

Rules of Civil Procedure, seeking the reversal of the Decision of the Court of
[1]

Appeals in CA-G.R. SP No. 66710 granting herein respondents petition for

prohibition and its Resolution denying herein petitioners motion for
[2]

reconsideration.
This Court adopts the appellate courts narration of facts.
On August 4, 2000, Federico Suntay, now deceased, filed a petition for
fixing and payment of just compensation under Presidential Decree No. 27
against the Department of Agrarian Reform (DAR), the DAR Regional Director
for Region IV and the Land Bank of the Philippines (Land Bank). Docketed as
[3]

DARAB Case No. V-0405-0001-00, the case was filed before the Office of the
Regional Agrarian Reform Adjudicator (RARAD) and raffled to Adjudicator
Conchita Mias. Subject of the case was Suntays landholdings covering a total
area of 948.1911 hectares situated in Sablayan, Occidental Mindoro and
embraced under Transfer Certificate of Title T-31. The DAR and Land Bank
determined its value at Four Million Two Hundred Fifty-One Thousand One
Hundred Forty-One Pesos and 68/100 (P4,251,141.68) or Four Thousand
Four Hundred Ninety-Seven Pesos and 50/100 (P4,497.50) per hectare,
which valuation according to Suntay, was unconscionably low and tantamount
to taking of property without due process of law.[4]
 After summary administrative proceedings, the RARAD rendered
a Decision on January 24, 2001 in favor of Suntay, ordering Land Bank to
[5]

pay the former the amount of One Hundred Fifty-Seven Million Five Hundred
Forty-One Thousand Nine Hundred Fifty-One Pesos & 30/100
(P157,541,951.30) as just compensation for the taking of a total of 948.1911
hectares of Suntays properties. Land Bank sought reconsideration of the
RARAD decision for not being supported by clear and convincing evidence
and for its conclusions which are contrary to law. However, in an Order dated [6]

March 14, 2001, the RARAD denied Land Banks motion. Land Bank received
a copy of the order of denial on March 26, 2001. [7]

On April 20, 2001, Land Bank filed a petition for just compensation with [8]

the Regional Trial Court (RTC) of San Jose, Occidental Mindoro against
Suntay, DAR, and RARAD. The petition, docketed as Agrarian Case No. R-
1241, prayed that just compensation for the taking of Suntays landholdings be
declared in the amount of Four Million Two Hundred Fifty One Thousand, One
Hundred Forty-One Pesos (P4,251,141.00). Suntay moved to dismiss the
petition on the grounds of lack of capacity to sue, lack of cause of action,
and res judicata. After Land Bank filed its comment on Suntays motion to
dismiss, the RTC, sitting as a special agrarian court, dismissed on August 6,
2001 Land Banks petition for failure to pay the docket fees within the
reglementary period. The special agrarian court also denied Land
[9]

Banks Motion for Reconsideration for being pro-forma. Thereafter, Land

[10]

Bank appealed the order of dismissal to the Court of Appeals by filing a Notice
of Appeal with the special agrarian court.
[11]

While the petition for just compensation was pending with the special
agrarian court, upon motion of Suntay, the RARAD issued an Order on May [12]

22, 2001, declaring its January 24, 2001 Decision as final and executory after
noting that Land Banks petition for just compensation with the special agrarian
court was filed beyond the fifteen-day reglementary period in violation of
Section 11, Rule XIII of the DARAB Rules of Procedure. In its July 10,
[13]

2001 Order, the RARAD denied LBPs motion for reconsideration of the order
[14]

of finality. On July 18, 2001, the RARAD issued a Writ of Execution, directing
[15]

the Regional Sheriff of DARAB-Region IV to implement its January 24,

2001 Decision.
Thus, Land Bank filed a Petition for Certiorari with Prayer for the Issuance
of Temporary Restraining Order/Preliminary Injunction before the DARAB on
[16]

September 12, 2001 against Suntay and RARAD. The petition, docketed as
DSCA No. 0252, prayed for the nullification of the following issuances of the
RARAD: [1] the January 24, 2001 Decision directing Land Bank to pay Suntay
just compensation in the amount of P157,541,951.30; [2] the Order dated May
22, 2001 declaring the finality of the aforesaid Decision; [3] the July 10,
2001 Order denying Land Banks motion for reconsideration; and [4] the Writ
of Execution dated July 18, 2001. On September 12, 2001, the DARAB issued
an Order enjoining the RARAD from momentarily implementing its January
[17]

24, 2001 Decision and directing the parties to attend the hearing for the
purpose of determining the propriety of issuing a preliminary/permanent
injunction.
On September 20, 2001, Josefina Lubrica, the successor-in-interest of
Suntay, filed with the Court of Appeals a Petition for Prohibition, docketed as
[18]

CA-G.R. SP No. 66710. The petition, impleading DARAB and Land Bank as
respondents, sought to enjoin DARAB from further proceeding with DSCA No.
0252, mainly on the theory that Republic Act (R.A.) No. 6657, which confers
adjudicatory functions upon the DAR, does not grant DAR jurisdiction over
special civil actions for certiorari. On the same day, the Court of Appeals
granted Lubricas prayer for a temporary restraining order. This [19]

notwithstanding, DARAB issued a Writ of Preliminary Injunction on October

[20]

3, 2001, directing RARAD not to implement its January 24, 2001 Decision and
the other orders in relation thereto, including the Writ of Execution.
On October 8, 2001, DARAB filed a Comment in CA-G.R. SP No. 66710,
[21]

arguing that the writ of certiorari/injunction was issued under its power of
supervision over its subordinates/delegates like the PARADs and RARADs to
restrain the execution of a decision which had not yet attained finality. In an
omnibus motion filed on October 10, 2001, Lubrica sought to nullify the Writ of
Preliminary Injunction issued by DARAB in DSCA No. 0252 and to cite the
DARAB for contempt. Land Bank also filed its Comment on October 15,
[22] [23]

2001, raising the prematurity of Lubricas petition for prohibition. It contended

that the issue of whether or not DARAB can take cognizance of Land Banks
petition for certiorari may be elevated to the Office of the DAR Secretary, in
accordance with the doctrine of exhaustion of administrative remedies. Land
Bank also questioned Lubricas personality to file the petition for prohibition
considering that she never intervened in the proceedings before the RARAD.
The Court of Appeals rendered the assailed Decision on August 22,
[24]

2002. The appellate court ruled that petitioner DARAB had no personality to
file a comment on Lubricas petition for prohibition filed with the Court of
Appeals because DARAB was a mere formal party and could file a comment
only when specifically and expressly directed to do so. The appellate court
also ruled that DARABs exercise of jurisdiction over the petition for certiorari
had no constitutional or statutory basis. It rejected DARABs contention that
the issuance of the writ of certiorari arose from its power of direct and
functional supervision over the RARAD. In sum, the Court of Appeals declared
that DARAB was without jurisdiction to take cognizance of DSCA No. 0252
and issued a Writ of Prohibition, perpetually enjoining DARAB from
proceeding with DSCA No. 0252 and ordering its dismissal.
Hence, the instant petition, in which DARAB assigns the following errors to
the Court of Appeals:

The Honorable Court of Appeals erred when it ruled:

1. THAT THE PETITIONER (DARAB), BEING A FORMAL PARTY, SHOULD

NOT HAVE FILED COMMENT TO THE PETITION AND INSTEAD, IT
SHOULD HAVE BEEN CO-RESPONDENT LAND BANK, THE FINANCIAL
INTERMEDIARY OF CARP;

2. THAT PETITIONER HAS NO JURISDICTION OVER DSCA 0252 WHICH IS A

PETITION FOR CERTIORARI; AND

3. THAT WRIT OF PRELIMINARY INJUNCTION ISSUED BY DARAB IN DSCA

0252 WAS NULL AND VOID FOR HAVING BEEN ISSUED IN VIOLATION OF
THE TEMPORARY RESTRAINING ORDER IT ISSUED. [25]

This Court affirms the ruling of the Court of Appeals that the DARAB does
not have jurisdiction over Land Banks petition for certiorari.
Jurisdiction, or the legal power to hear and determine a cause or causes
of action, must exist as a matter of law. It is settled that the authority to issue
[26]

writs of certiorari, prohibition, and mandamus involves the exercise of original

jurisdiction which must be expressly conferred by the Constitution or by
law. It is never derived by implication. Indeed, while the power to issue the
[27]

writ of certiorari is in some instance conferred on all courts by constitutional or

statutory provisions, ordinarily, the particular courts which have such power
are expressly designated. [28]

Pursuant to Section 17 of Executive Order (E.O.) No. 229 and Section 13

of E.O. No. 129-A, the DARAB was created to act as the quasi-judicial arm of
the DAR. With the passage of R.A. No. 6657, the adjudicatory powers and
functions of the DAR were further delineated when, under Section 50 thereof,
it was vested with the primary jurisdiction to determine and adjudicate
agrarian reform matters and exclusive original jurisdiction over all matters
involving the implementation of agrarian reform except those falling under the
exclusive jurisdiction of the Department of Agriculture, Department of
Environment and Natural Resources and the Special Agrarian Courts. The
same provision granted the DAR the power to summon witnesses, administer
oaths, take testimony, require submission of reports, compel the production of
books and documents and answers to interrogatories and issue subpoena
and subpoena duces tecum, and enforce its writs through sheriffs or other
duly deputized officers, and the broad power to adopt a uniform rule of
procedure to achieve a just, expeditious and inexpensive determination of
cases before it. Section 13 of E.O. No. 129-A also authorized the DAR to
[29]

delegate its adjudicatory powers and functions to its regional offices.

To this end, the DARAB adopted its Rules of Procedure, where it
delegated to the RARADs and PARADs the authority to hear, determine and
adjudicate all agrarian cases and disputes, and incidents in connection
therewith, arising within their assigned territorial jurisdiction. In the absence
[30]

of a specific statutory grant of jurisdiction to issue the said extraordinary writ of

certiorari, the DARAB, as a quasi-judicial body with only limited jurisdiction,
cannot exercise jurisdiction over Land Banks petition for certiorari. Neither the
quasi-judicial authority of the DARAB nor its rule-making power justifies such
self-conferment of authority.
In general, the quantum of judicial or quasi-judicial powers which an
administrative agency may exercise is defined in the enabling act of such
agency. In other words, the extent to which an administrative entity may
exercise such powers depends largely, if not wholly, on the provisions of the
statute creating or empowering such agency. The grant of original
[31]

jurisdiction on a quasi-judicial agency is not implied. There is no question that

the legislative grant of adjudicatory powers upon the DAR, as in all other
quasi-judicial agencies, bodies and tribunals, is in the nature of a limited and
special jurisdiction, that is, the authority to hear and determine a class of
cases within the DARs competence and field of expertise. In conferring
adjudicatory powers and functions on the DAR, the legislature could not have
intended to create a regular court of justice out of the DARAB, equipped with
all the vast powers inherent in the exercise of its jurisdiction. The DARAB is
only a quasi-judicial body, whose limited jurisdiction does not include authority
over petitions for certiorari, in the absence of an express grant in R.A. No.
6657, E.O. No. 229 and E.O. No. 129-A.
In addition, Rule XIII, 11 of the DARAB Rules of Procedure allows a party
who does not agree with the RARADs preliminary valuation in land
compensation cases fifteen (15) days from receipt of notice to bring the matter
to the proper special agrarian court, thus:

SECTION 11. Land Valuation and Preliminary Determination and Payment of Just
Compensation. The decision of the Adjudicator on land valuation and preliminary
determination and payment of just compensation shall not be appealable to the Board
but shall be brought directly to the Regional Trial Courts designated as Special
Agrarian Courts within fifteen (15) days from receipt of the notice thereof. Any party
shall be entitled to only one motion for reconsideration.

In Philippine Veterans Bank vs. Court of Appeals, this Court affirmed the
[32]

dismissal of a landowners petition for judicial determination of just

compensation for its failure to file the petition within the fifteen-day
reglementary period provided under Rule XIII, 11 of the DARAB Rules of
Procedure.
In the instant case, Land Bank received a copy of the RARAD order
denying its motion for reconsideration on March 26, 2001. Land Bank filed the
petition for just compensation with the special agrarian court only on April 20,
2001, which is doubtlessly beyond the fifteen-day reglementary period. Thus,
the RARAD Decision had already attained finality in accordance with the
afore-quoted rule, notwithstanding Land Banks recourse to the special
agrarian court.
DARAB takes exception to the general rule that jurisdiction over special
civil actions must be expressly conferred by law before a court or tribunal can
take cognizance thereof. It believes that this principle is applicable only in
cases where the officials/entities contemplated to be subject thereof are not
within the administrative power/competence, or in any manner under the
control or supervision, of the issuing authority.
This Court is not persuaded. The function of a writ of certiorari is to keep
an inferior court within the bounds of its jurisdiction or to prevent it from
committing such a grave abuse of discretion amounting to excess of
jurisdiction. In the instant case, the RARAD issued the order of finality and
[33]

the writ of execution upon the belief that its decision had become final and
executory, as authorized under Section 1, Rule XII of the DARAB Rules of
Procedure. It is worth noting that in its petition, DARAB maintains that in
preventing the RARAD from implementing its decision, it merely exercised its
residual power of supervision, to insure that the RARAD acted within the
bounds of delegated authority and/or prevent/avoid her from committing grave
and serious disservice to the Program. DARABs action, therefore, is a
[34]

rectification of what it perceived as an abuse of the RARADs jurisdiction. By

its own admission, DARAB took upon itself the power to correct errors of
jurisdiction which is ordinarily lodged with the regular courts by virtue of
express constitutional grant or legislative enactments.
This Court recognizes the supervisory authority of the DARAB over its
delegates, namely, the RARADs and PARADs, but the same should be
exercised within the context of administrative supervision and/or control. In the
event that the RARADs or PARADs act beyond its adjudicatory functions,
nothing prevents the aggrieved party from availing of the extraordinary
remedy of certiorari, which is ordinarily within the jurisdiction of the regular
courts.
That the statutes allowed the DARAB to adopt its own rules of procedure
does not permit it with unbridled discretion to grant itself jurisdiction ordinarily
conferred only by the Constitution or by law. Procedure, as distinguished from
jurisdiction, is the means by which the power or authority of a court to hear
and decide a class of cases is put into action. Rules of procedure are remedial
in nature and not substantive. They cover only rules on pleadings and
practice.[35]

While the Court of Appeals held that the DARAB should not have
participated in the proceedings before said court by filing a comment in CA-
G.R. SP No. 66710, this Court considers satisfactory the explanation of the
DARAB that it has a peculiar interest in the final outcome of this case. As
DARAB pointed out, while it is only an adjunct of, it is at the same time not
totally independent from it. The DARAB is composed of the senior officials of
the DAR, who are guided by the States main policy in agrarian reform when
resolving disputes before the DARAB. The DARABs interest in the case is not
purely legal but also a matter of governance; thus, it cannot be strictly
considered as a nominal party which must refrain from taking an active part in
the proceedings.
WHEREFORE, the instant petition is DENIED. No costs.
SO ORDERED.

[G.R. No. 78163. December 10, 1990.]

ANGELINA P. SANTIAGO, Petitioner, v. The Honorable DEPUTY EXECUTIVE SECRETARY and HI-
CEMENT CORPORATION, Respondents.

Justiniano P. Cortez & Associates for Petitioner.

Juan J. Diaz & Nicolas J. Lim for Respondents.

DECISION

PARAS, J.:
This is a special civil action for certiorari and prohibition, with preliminary injunction, to review and annul the
decision of the respondent Deputy Executive Secretary ** dated September 1, 1986 in O.P. Case No. 3274
(MNR Case No. 6376), entitled "Hi-Cement Corporation v. Angelina P. Santiago and Philippine Development
and Industrial Corporation" setting aside the decision of the Ministry of Natural Resources *** (now
Department of Environment and Natural Resources) dated March 26, 1986 and reinstating the decision of
the Bureau of Mines and Geo-Sciences, **** dated May 17, which cancelled Quarry License No. 37 of
petitioner and ordered her and/or her operator to immediately vacate and turn over the possession of the
mining area to the respondent Hi-Cement Corporation.

As gathered from the records, the antecedent facts are as follows: chan rob1es v irt ual 1aw l ibra ry

Hi-Cement Corporation (Hi-Cement, for short) is a manufacturer of cement with plant located at Bo.
Matiktik, Norzagaray, Bulacan. For its operation, Hi-Cement leased and acquired several placer mining
claims from the Bureau of Mines and Geo-Sciences (BMGS), namely Mining Lease Contract (MLC) Nos. V-78,
85, 90, 150, 261, and 269. MLC V-90 covers mining claim Red Star VIII, Red Star IX and Hunter I in the
name of Red Star Association. Said mining claims were transferred to Hi-Cement by virtue of a deed of
assignment dated December 13, 1965 duly approved by the Director of BMGS.

On February 24, 1984, BMGS issued Quarry License (QL) No. 37 in the name of Angelina P. Santiago,
petitioner herein, covering 19.5 hectares which are entirely within the mining claims of respondent Hi-
Cement despite the fact that its lease contract has not been declared abandoned or cancelled by the BMGS
(Rollo, p. 55). On April 10, 1984, Santiago entered into an Operating Agreement with the Philippine
Development and Industrial Corporation (PDIC).

Meanwhile, the Director of BMGS, in a letter dated April 3, 1984, informed Nicolas Katigbak, Senior V-
president of Hi-Cement, that per field verification conducted, Hi-Cement has complied with the annual work
obligation requirements vis-a-vis MLC V-90 and that the BMGS recognizes the validity of Hi-Cement mining
lease contracts. Nevertheless, the Director recognized as valid the intervening rights prior to the field
verification, although the same would no longer be subject to renewal (Rollo, p. 89). chanrob lesvi rtua lawlib rary

On October 20, 1984, Hi-Cement filed a petition with the BMGS, amended on January 28, 1985, praying for
the revocation of QL No. 37 on the following grounds: cha nro b1es vi rtua l 1aw li brary

1. Hi-Cement is the lessee and surface titled owner of the area covered by QL No. 37 of Santiago (Rollo, p.
27);

2. Hi-Cement’s mining claims covered under MLC V-90 has never been declared abandoned nor cancelled
(Rollo, p. 29);

3. That under Sec. 63, PD 463 and its implementing rules and regulations, areas covered by valid and
existing mining lease shall not be subject to any quarry permit or license (Ibid., p. 28);

4. That Santiago has misled the BMGS into issuing a quarry license by misrepresenting the area to be public
land (Rollo, p. 30).

In her answer to the above petition, Santiago alleged, among others, that the failure of Hi-Cement to file
Affidavits of Annual Work Obligations (AAWO) for more than two (2) consecutive years constituted
automatic abandonment of the mining claims under Sec. 27 of PD 463, as amended (Rollo, p. 36) and that
Hi-Cement’s title over the disputed area is void as it covers mineral lands (Ibid., p. 53).

On May 17, 1985, the Officer-In-Charge (OIC) of the BMGS, Benjamin Gonzales, issued a decision, the
dispositive portion of which is as follows:jgc:chan robles .com.p h

"VIEWED IN THE LIGHT OF THE FOREGOING, this office, finding the instant petition of HI-CEMENT
Corporation to be well-founded, the same is hereby granted. Accordingly, Quarry License No. 37 of
Respondent Angelina Santiago is hereby declared cancelled and she and/or her operator is ordered to
immediately vacate and turn over the possession of the mining area subject of this case to the petitioner."
(Rollo, p. 63).

On July 1, 1985, Santiago filed an appeal with the then Ministry of Natural Resources, alleging that: chanrob1es vi rt ual 1aw li bra ry
1. The OIC erred in rendering and signing the aforesaid decision considering that he has no legal authority
to do so (Rollo, p. 66).

2. The OIC erred in not holding that Red Star VIII under MLC-90 was not automatically abandoned for
failure of Hi-Cement to comply with the filing of the AAWP for more than two consecutive years (Rollo, p.
72).

3. The OIC erred in stating that Santiago committed misrepresentation or deception fatal enough to cause
the cancellation of her QL No. 37 (Rollo, p. 81).

On March 26, 1986, the Minister of Natural Resources issued a decision, the dispositive portion of which
reads:jgc:chan roble s.com.p h

"IN THE LIGHT OF ALL THE FOREGOING CONSIDERATIONS, the decision dated May 17, 1985 of the OIC of
the Bureau of Mines and Geo-Sciences should be, as hereby it is, SET ASIDE. Quarry License No. 37 of
Angelina P. Santiago is hereby ordered REINSTATED and be entered in the records as Q.P. or quarry permit
subject to renewal upon compliance with the requirements of law, and the area covered thereby excluded
from the coverage of MLC No. V-90 of HI-CEMENT Corporation.

SO ORDERED. (Rollo, P. 102)

From said decision, Hi-Cement filed an appeal with the Office of the President, dated May 19, 1986,
assigning the following errors, to wit: chanro b1es vi rtua l 1aw lib ra ry

1. The Hon. Minister of Natural Resources erred in declaring as null and void the Decision of the OIC of the
BMGS; chanrobles vi rtua l lawlib ra ry

2. The Hon. Minister of Natural Resources erred in declaring as automatically abandoned the Placer Lease
Contract of Hi-Cement Corporation for failure to file proof of annual work obligation despite lessee having
performed the work obligation required, and despite the fact that no previous hearing was even conducted
in accordance with Section 44 of the Consolidated Mines Administrative Order, implementing PD 463; and

3. The Hon. Minister of Natural Resources erred in not taking into consideration the Transfer Certificate of
Title of Hi-Cement Corporation, as well as the Supreme Court and Court of Appeals decisions as proof of the
misrepresentation of Santiago. (Rollo, p. 190).

On September 1, 1986, the then Deputy Executive Secretary rendered a decision, holding thus: jgc:cha nrob les.co m.ph

"IN VIEW OF ALL THE FOREGOING, the decision of the Ministry of Natural Resources, dated March 26, 1986
is hereby SET ASIDE, and this office hereby REINSTATES the decision of the Bureau of Mines and Geo-
Sciences dated May 17, 1985.

SO ORDERED." (Rollo, p. 106)

On November 8, 1986, Santiago filed a motion for reconsideration of the aforesaid decision (Rollo, p. 111)
but was denied by the Deputy Executive Secretary not only because it was filed late but her motion
contained mere reiterations of the matters already considered and found to be without merit (Rollo, p. 117).

Hence, the instant petition.

The issues to be resolved in this case are as follows: chanrob 1es vi rtual 1aw lib rary

1. Whether or not private respondent automatically abandoned its mining claim on MLC V-90 by reason of
its failure to file affidavit of annual work obligations for two years, as required by Section 27 of PD 463, as
amended.

2. Whether or not QL No. 37 of Santiago is a valid intervening right that prevails over the mining claim of
private Respondent.

3. Whether or not the decision issued by the OIC of BMGS dated May 17, 1985 is valid.
The petition is devoid of merit.

Petitioner contends that Hi-Cement abandoned its mining claim over MLC V-90 when it failed to file affidavit
of annual work obligations (AAWO) as required by Sec. 27, PD 463, as amended, which states: jgc:chanrob les.com .ph

"Sec. 27. Annual Work Obligations. — The claim-owner shall submit proof of compliance with the annual
work obligations by filing an affidavit therefor and the statement of expenditures and technical report in the
prescribed form in support thereof with the Mines Regional Officer concerned within one hundred twenty
days from the end of the year in which the work obligation is required: Provided, That failure of the claim-
owner to comply therewith for two (2) consecutive years shall constitute automatic abandonment of the
mining claim: Provided, further, That, if it is found upon field verification that no such work was actually
done on the mining claim, the claim owner/lessee shall automatically lose all his right thereto
notwithstanding submission of the aforesaid documents: Provided, finally, That the Director, in cases of
unstable peace and order conditions and/or involvement in mining conflicts may grant further extensions."
libra ry
cralaw virtua 1aw

The argument is untenable. chanrobl es.com : virtual law l ibra ry

Contrary to petitioner’s claim, there is no rule of automatic abandonment with respect to mining claims for
failure to file AAWO. Under the Consolidated Mines Administrative Order (CMAO), implementing PD 463, as
amended, the rule that has been consistently applied is that it is the failure to perform the required
assessment work, not the failure to file the AAWO that gives rise to abandonment. Interpreted within the
context of PD 1902, the last amending decree of PD 463, it is intended, among others, to accelerate the
development of our natural resources and to accelerate mineral productions, abandonment under the
aforequoted Sec. 27 refers to the failure to perform work obligations which in turn is one of the grounds for
the cancellation of the lease contract (Sec. 43 (a), Consolidated Mines Administrative Order, implementing
PD 463).

The question of whether or not the failure to submit AAWO for more than two (2) consecutive years
constitutes abandonment as ground for cancellation of a mining lease contract has been the subject matter
of many cases in the Ministry of Natural Resources (now Department of Environment and Natural
Resources). Public respondent had made the following significant findings, to quote: jgc:cha nroble s.com.p h

"In a number of cases, the MNR answered the question in the negative. (Sec. 1, Malayan Integrated
industries Corporation v. Apo Cement Corporation; 2. "In the matter of the denial by the Director of Mines
Temporary Permit Application No. V-2780 of the Republic Glass Corporation" and 3. "In Re: Denial of Mines
Temporary Permit Application No. V-2340, Bonanza Consolidated Mines, Inc., Appellant", docketed as MNR
Case Nos. 5036, 4386, 4459, respectively). As there explained, it is the continued failure to perform the
annual work obligations, NOT the failure to file AAWO, that gives rise to abandonment as ground for
cancellation of a mining lease contract; that compliance with AAWO requirements, not being related to the
essence of the acts to be performed, is a matter of convenience rather than substance; and that non-
submission of AAWO does not preclude the lessee from proving performance of such working obligation in
some other way." (Rollo, p. 106; Decision, O.P., p. 6)

Moreover, before any mining lease contract is cancelled, Consolidated Mines Administrative Order, Section
44 thereof, requires notice and healing. Said BMGS OIC Director Gonzales: jgc:cha nro bles.c om.ph

"The provision of Sec. 44 of Consolidated Mines Administrative Order (CMAO) specifically provides for the
necessity of the cancellation of the Mining Lease Contract before the same can be considered open to
relocation. And in cases of non-compliance with the filing of AAWO, it has been a long consistent policy of
this office to first require field verification before any recommendation for cancellation be endorsed to the
Ministry of Natural Resources (MNR). But the field verification reveals that cancellation is not in order and
neither can it be said that the verification conducted was improperly made." (Rollo, p. 107)

It is significant to note that the then Minister of Natural Resources Ernesto Maceda reiterated the Ministry’s
previous ruling in his decision dated April 10, 1986, in MNR Case No. 6300, entitled "RE PLACER LEASE
APPLICATION NO. V-3895 OF CONTINENTAL MARBLE CORPORATION." To quote: jgc:chanrob les.com. ph

"This office has been consistent on its ruling that it is the continued failure to undertake the work obligation
that causes a mining claim to lapse. The affidavit (of annual work obligation) is merely a prima facie proof of
performance of said work obligations, and the omission to submit said affidavit raised only a disputable
presumption that no work had been done and shift upon the claim owner the burden of proof to show
otherwise. The claim-owner is not precluded from making proof of performance in some other way.
(Malayan Integrated Industries v. Apo Cement Corporation, Et. Al. MNR Case No. 5036, July 6, 1982,
Republic Glass Corporation, MNR Case 4336 and Sto. Rosario Fertilizer Corporation, MNR Case No. 4369).
These decided cases fall squarely with the facts of the instant case." (Rollo, p. 195)

The aforesaid decision was penned after the then Minister Ernesto Maceda overturned the decision of the
BMGS in the case of Hi-Cement v. Angelina Santiago. As can be seen therefore, it has always been an
administrative policy that the requirement to file AAWO is a matter of convenience rather than substance as
it is not related to the essence of the acts performed. These administrative policies enacted by
administrative bodies to interpret the law have the force and effect of law and entitled to great respect
(Tayug v. Central Bank, G.R. 46158, Nov. 28, 1986; Warren Manufacturing Workers Union v. Bureau of
Labor Relations, 159 SCRA 387 [1988]). It is the general policy of this Court to sustain the decision of
administrative authorities not only on the basis of the doctrine of separation of powers but also for their
presumed knowledge ability and even expertise in the laws they are entrusted to enforce (Cuerdo v. COA,
166 SCRA 657 [1988]). chanro bles. com.ph : vi rtua l law lib rary

Consequently, Hi-Cement has never abandoned its mining claim. It may not have filed the AAWO but it has
actually performed the annual work obligations as found by the BMGS. Administrative findings of facts are
sufficient if supported by substantial evidence on record and as a general rule, actions of administrative
agencies need not be disturbed by the judicial department (Manahan v. People, G.R. 37010, Nov. 7, 1988;
Gordon v. Veridiano, 167 SCRA 51[1938]; Mapa v. Arroyo G.R. 78585, July 5, 1989; Neddle Queen
Corporation v. Nicolas, Et. Al. G.R. 60741-45, Dec. 22, 1989). This court finds no reason to disturb such
findings.

II

Petitioner insists that her Quarry License No. 37 is a valid intervening right that prevails over the mining
claims of Hi-Cement as its claims were automatically abandoned without need for any proceeding or
declaration for cancellation.

Given the fact that Hi-Cement Mining Lease Contract has never been cancelled not its mining claim
abandoned, this Court rules that Santiago can not have any valid intervening right over the mining claims of
the respondent for the following reasons: First, the license of the respondent covers an area which is closed
to mining location under Sec. 13, PD 463, as amended.

"Sec. 13. Areas Closed to Mining Location. — No prospecting and exploration shall be allowed: cha nrob 1es vi rtua l 1aw lib ra ry

x x x

"C. In lands covered by valid and subsisting mining claims located, and leases acquired, under previous
mining laws and in accordance with the provisions of this Decree." cralaw virt ua1aw li bra ry

Second, Sec. 63 of the Consolidated Mines Administrative Order categorically states that: jgc:chanrob les.com. ph

". . . Areas covered by valid and subsisting mining claims and mining leases shall not be the subject of a
quarry permit or license." cralaw vi rtua1aw l ib rary

Hence, it is only when the mining lease contract has been cancelled or terminated in the manner provided
by law that a leased mining area may be open to location and lease by other qualified persons. Since the
mining lease contract of Hi-Cement over the area covered by the quarry license of petitioner is still valid and
existing at the time the license was obtained by the petitioner, her license is null and void and, therefore,
cannot be considered as a valid intervening right that prevails over the mining claim of Hi-Cement.

Third, both the BMGS and the public respondent found the petitioner guilty of misrepresentation. Said the
public respondent: chan rob1e s virtual 1aw l ibrary

. . . Santiago misrepresented in her application for a quarry license that the area applied for was a public
land when, in reality, it is covered by TCT No. T-62628 in the name of Hi-Cement. In this regard, the
provisions of PD 512 require the locator or prospector before entering a private land to give prior notification
to the landowner who is thereby entitled to compensation and royalty." (Rollo, p. 110).

Such finding is binding on this Court. Findings of the administrative agency on matters falling within its
competence will not be disturbed by the courts, especially with respect to factual findings, they are accorded
respect if not finality, because of the special knowledge and expertise gained by the tribunals from handling
specific matters falling under their jurisdiction (Mapa v. Arroyo, G.R. 78585, July 5, 1989; Needle Queen
Corp. v. Nicolas, Et Al., supra). chanroble s law li bra ry

Section 43 of the Consolidated Mines Administrative Order has provided a ground for cancellation of a Mining
Lease Contract, among others, as follows: jgc:chan robles .com.p h

"1.) Any falsehood in the statements in the application or support thereof, which may alter, change or affect
substantially the facts set in said statements." cralaw virt ua1aw lib ra ry

Petitioner’s QL No. 37, therefore, cannot be a valid intervening right over the mining claims of Hi-Cement.

III

Petitioner assails the decision rendered by OIC Benjamin A. Gonzales of the BGMS. She claims that under
Special Order No. 86 dated March 19, 1985 which states: jgc:chan roble s.com.p h

"Except appointments and matters involving policy, the Assistant director or the Officer-in-charge of his
office shall sign on official papers; . . ." (p. 18, Rollo).

the jurisdiction to exercise quasi-judicial authority to resolve mining controversies lies solely with the
Director of BGMS. Hence, she alleges that the decision of May 17, 1985 is null and void for want of authority
(Rollo, pp. 228-230).

The argument is untenable.

What is actually excluded in the aforesaid order is the formulation of new policies of the BGMS. OIC
Gonzales did not formulate new policies. He merely upheld and reiterated the long and consistent policy of
the Bureau in similar disputes previously passed upon not only by the Director of Mines but also by the
Secretary of Environment and Natural Resources based on the applicable law. Besides, as the public
respondent said, "the more important consideration is that the decision correctly disposes of the
controversy" (Rollo, p. 110).chanrobles vi rt ual lawli bra ry

Hence, the decision issued by the OIC is valid.

PREMISES CONSIDERED, the instant petition is hereby DISMISSED for lack of merit and the decision of the
Deputy Executive Secretary, dated September 1, 1986, is hereby AFFIRMED. With costs against the
petitioner.

SO ORDERED.

FIRST DIVISION

G.R. No. 77372 April 29, 1988

LUPO L. LUPANGCO, RAYMOND S. MANGKAL, NORMAN A. MESINA, ALEXANDER R.

REGUYAL, JOCELYN P. CATAPANG, ENRICO V. REGALADO, JEROME O. ARCEGA,
ERNESTOC. BLAS, JR., ELPEDIO M. ALMAZAN, KARL CAESAR R. RIMANDO, petitioner,
vs.
COURT OF APPEALS and PROFESSIONAL REGULATION COMMISSION, respondent.

Balgos & Perez Law Offices for petitioners.

The Solicitor General for respondents.

GANCAYCO, J.:

Is the Regional Trial Court of the same category as the Professional Regulation Commission so that it cannot pass upon the validity of the
administrative acts of the latter? Can this Commission lawfully prohibit the examiness from attending review classes, receiving handout
materials, tips, or the like three (3) days before the date of the examination? Theses are the issues presented to the court by this petition for
certiorari to review the decision of the Court of Appeals promulagated on January 13, 1987, in CA-G.R. SP No. 10598, * declaring null and
void the other dated Ocober 21, 1986 issued by the Regional Trial Court of Manila, Branch 32 in Civil Case No. 86-37950 entitled " Lupo L.
Lupangco, et al. vs. Professional Regulation Commission."

The records shows the following undisputed facts:

On or about October 6, 1986, herein respondent Professional Regulation Commission (PRC) issued
Resolution No. 105 as parts of its "Additional Instructions to Examiness," to all those applying for
admission to take the licensure examinations in accountancy. The resolution embodied the following
pertinent provisions:

No examinee shall attend any review class, briefing, conference or the like
conducted by, or shall receive any hand-out, review material, or any tip from any
school, college or university, or any review center or the like or any reviewer,
lecturer, instructor official or employee of any of the aforementioned or similars
institutions during the three days immediately proceeding every examination day
including examination day.

Any examinee violating this instruction shall be subject to the sanctions prescribed by
Sec. 8, Art. III of the Rules and Regulations of the Commission. 1

On October 16, 1986, herein petitioners, all reviewees preparing to take the licensure examinations
in accountancy schedule on October 25 and November 2 of the same year, filed on their own behalf
of all others similarly situated like them, with the Regional Trial Court of Manila, Branch XXXII, a
complaint for injuction with a prayer with the issuance of a writ of a preliminary injunction against
respondent PRC to restrain the latter from enforcing the above-mentioned resolution and to declare
the same unconstitution.

Respondent PRC filed a motion to dismiss on October 21, 1987 on the ground that the lower court
had no jurisdiction to review and to enjoin the enforcement of its resolution. In an Order of October
21, 1987, the lower court declared that it had jurisdiction to try the case and enjoined the respondent
commission from enforcing and giving effect to Resolution No. 105 which it found to be
unconstitutional.

Not satisfied therewith, respondent PRC, on November 10, 1986, filed with the Court of Appeals a
petition for the nullification of the above Order of the lower court. Said petiton was granted in the
Decision of the Court of Appeals promulagated on January 13, 1987, to wit:
 WHEREFORE, finding the petition meritorious the same is hereby GRANTED and
the other dated October 21, 1986 issued by respondent court is declared null and
void. The respondent court is further directed to dismiss with prejudice Civil Case No.
86-37950 for want of jurisdiction over the subject matter thereof. No cost in this
instance.

SO ORDERED. 2

Hence, this petition.

The Court of Appeals, in deciding that the Regional Trial Court of Manila had no jurisdiction to
entertain the case and to enjoin the enforcement of the Resolution No. 105, stated as its basis its
conclusion that the Professional Regulation Commission and the Regional Trial Court are co-equal
bodies. Thus it held —

That the petitioner Professional Regulatory Commission is at least a co-equal body

with the Regional Trial Court is beyond question, and co-equal bodies have no power
to control each other or interfere with each other's acts. 3

To strenghten its position, the Court of Appeals relied heavily on National Electrification
Administration vs. Mendoza, 4 which cites Pineda vs. Lantin 5 and Philippine Pacific Fishing, Inc. vs.
Luna, 6 where this Court held that a Court of First Instance cannot interfere with the orders of the
Securities and Exchange Commission, the two being co-equal bodies.

After a close scrutiny of the facts and the record of this case,

We rule in favor of the petitioner.

The cases cited by respondent court are not in point. It is glaringly apparent that the reason why this
Court ruled that the Court of First Instance could not interfere with the orders of the Securities and
Exchange Commission was that this was so provided for by the law. In Pineda vs. Lantin, We
explained that whenever a party is aggrieved by or disagree with an order or ruling of the Securities
and Exchange Commission, he cannot seek relief from courts of general jurisdiction since under the
Rules of Court and Commonwealth Act No. 83, as amended by Republic Act No. 635, creating and
setting forth the powers and functions of the old Securities and Exchange Commission, his remedy
is to go the Supreme Court on a petition for review. Likewise, in Philippine Pacific Fishing Co., Inc.
vs. Luna,it was stressed that if an order of the Securities and Exchange Commission is erroneous,
the appropriate remedy take is first, within the Commission itself, then, to the Supreme Court as
mandated in Presidential Decree No. 902-A, the law creating the new Securities and Exchange
Commission. Nowhere in the said cases was it held that a Court of First Instance has no jurisdiction
over all other government agencies. On the contrary, the ruling was specifically limited to the
Securities and Exchange Commission.

The respondent court erred when it place the Securities and Exchange Commission and the
Professional Regulation Commsision in the same category. As alraedy mentioned, with respect to
the Securities and Exchange Commission, the laws cited explicitly provide with the procedure that
need be taken when one is aggrieved by its order or ruling. Upon the other hand, there is no law
providing for the next course of action for a party who wants to question a ruling or order of the
Professional Regulation Commission. Unlike Commonwealth Act No. 83 and Presidential Decree
No. 902-A, there is no provision in Presidential Decree No. 223, creating the Professional Regulation
Commission, that orders or resolutions of the Commission are appealable either to the Court of
Appeals or to theSupreme Court. Consequently, Civil Case No. 86-37950, which was filed in order to
enjoin the enforcement of a resolution of the respondent Professional Regulation Commission
alleged to be unconstitutional, should fall within the general jurisdiction of the Court of First Instance,
now the Regional Trial Court. 7

What is clear from Presidential Decree No. 223 is that the Professional Regulation Commission is
attached to the Office of the President for general direction and coordination. 8 Well settled in our
jurisprudence is the view that even acts of the Office of the President may be reviewed by the Court
of First Instance (now the Regional Trial Court). In Medalla vs. Sayo, 9 this rule was thoroughly
propounded on, to wit:

In so far as jurisdiction of the Court below to review by certiorari decisions and/or

resolutions of the Civil Service Commission and of the residential Executive
Asssistant is concerned, there should be no question but that the power of judicial
review should be upheld. The following rulings buttress this conclusion:

The objection to a judicial review of a Presidential act arises from a

failure to recognize the most important principle in our system of
government, i.e., the separation of powers into three co-equal
departments, the executives, the legislative and the judicial, each
supreme within its own assigned powers and duties. When a
presidential act is challenged before the courts of justice, it is not to
be implied therefrom that the Executive is being made subject and
subordinate to the courts. The legality of his acts are under judicial
review, not because the Executive is inferior to the courts, but
because the law is above the Chief Executive himself, and the courts
seek only to interpret, apply or implement it (the law). A judicial
review of the President's decision on a case of an employee decided
by the Civil Service Board of Appeals should be viewed in this light
and the bringing of the case to the Courts should be governed by the
same principles as govern the jucucial review of all administrative
acts of all administrative officers. 10

Republic vs. Presiding Judge, CFI of Lanao del Norte, Br. II, 11 is another case in point. Here, "the
Executive Office"' of the Department of Education and Culture issued Memorandum Order No. 93
under the authority of then Secretary of Education Juan Manuel. As in this case, a complaint for
injunction was filed with the Court of First Instance of Lanao del Norte because, allegedly, the
enforcement of the circular would impair some contracts already entered into by public school
teachers. It was the contention of petitioner therein that "the Court of First Instance is not
empowered to amend, reverse and modify what is otherwise the clear and explicit provision of the
memorandum circular issued by the Executive Office which has the force and effect of law." In
resolving the issue, We held:

... We definitely state that respondent Court lawfully acquired jurisdiction in Civil
Case No. II-240 (8) because the plaintiff therein asked the lower court for relief, in the
form of injunction, in defense of a legal right (freedom to enter into contracts) . . . . .

Hence there is a clear infringement of private respondent's constitutional right to

enter into agreements not contrary to law, which might run the risk of being violated
by the threatened implementation of Executive Office Memorandum Circular No. 93,
dated February 5, 1968, which prohibits, with certain exceptions, cashiers and
disbursing officers from honoring special powers of attorney executed by the payee
employees. The respondent Court is not only right but duty bound to take cognizance
 of cases of this nature wherein a constitutional and statutory right is allegedly
infringed by the administrative action of a government office. Courts of first Instance
have original jurisdiction over all civil actions in which the subject of the litigation is
not capable of pecuniary estimation (Sec. 44, Republic Act 296, as
amended). 12 (Emphasis supplied.)

In San Miguel Corporation vs. Avelino, 13 We ruled that a judge of the Court of First Instance has the
authority to decide on the validity of a city tax ordinance even after its validity had been contested
before the Secretary of Justice and an opinion thereon had been rendered.

In view of the foregoing, We find no cogent reason why Resolution No. 105, issued by the
respondent Professional Regulation Commission, should be exempted from the general jurisdiction
of the Regional Trial Court.

Respondent PRC, on the other hand, contends that under Section 9, paragraph 3 of B.P. Blg. 129, it
is the Court of Appeals which has jurisdiction over the case. The said law provides:

SEC. 9. Jurisdiction. — The Intermediate Appellate Court shall exercise:

xxx xxx xxx

(3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions,
orders, or awards of Regional Trial Courts and quasi-judicial agencies,
instrumentalities, boards or commissions, except those falling within the appellate
jurisdiction of the Supreme Court in accordance with the Constitution, the provisions
of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of
the fourth paragraph of Section 17 of the Judiciary Act of 1948.

The contention is devoid of merit.

In order to invoke the exclusive appellate jurisdiction of the Court of Appeals as provided for in
Section 9, paragraph 3 of B.P. Blg. 129, there has to be a final order or ruling which resulted from
proceedings wherein the administrative body involved exercised its quasi-judicial functions. In
Black's Law Dictionary, quasi-judicial is defined as a term applied to the action, discretion, etc., of
public administrative officers or bodies required to investigate facts, or ascertain the existence of
facts, hold hearings, and draw conclusions from them, as a basis for their official action, and to
exercise discretion of a judicial nature. To expound thereon, quasi-judicial adjudication would mean
a determination of rights, privileges and duties resulting in a decision or order which applies to a
specific situation . 14This does not cover rules and regulations of general applicability issued by the
administrative body to implement its purely administrative policies and functions like Resolution No.
105 which was adopted by the respondent PRC as a measure to preserve the integrity of licensure
examinations.

The above rule was adhered to in Filipinas Engineering and Machine Shop vs. Ferrer. 15 In this case,
the issue presented was whether or not the Court of First Instance had jurisdiction over a case
involving an order of the Commission on Elections awarding a contract to a private party which
originated from an invitation to bid. The said issue came about because under the laws then in force,
final awards, judgments, decisions or orders of the Commission on Elections fall within the exclusive
jurisdiction of the Supreme Court by way of certiorari. Hence, it has been consistently held that "it is
the Supreme Court, not the Court of First Instance, which has exclusive jurisdiction to review on
certiorari final decisions, orders, or rulings of the Commission on Elections relative to the conduct of
elections and the enforcement of election laws." 16
As to whether or not the Court of First Instance had jurisdiction in saidcase, We said:

We are however, far from convinced that an order of the COMELEC awarding a
contract to a private party, as a result of its choice among various proposals
submitted in response to its invitation to bid comes within the purview of a "final
order" which is exclusively and directly appealable to this court on certiorari. What is
contemplated by the term "final orders, rulings and decisions, of the COMELEC
reviewable by certiorari by the Supreme Court as provided by law are those rendered
in actions or proceedings before the COMELEC and taken cognizance of by the said
body in the exercise of its adjudicatory or quasi-judicial powers. (Emphasis supplied.)

xxx xxx xxx

We agree with petitioner's contention that the order of the Commission granting the
award to a bidder is not an order rendered in a legal controversy before it wherein
the parties filed their respective pleadings and presented evidence after which the
questioned order was issued; and that this order of the commission was issued
pursuant to its authority to enter into contracts in relation to election purposes. In
short, the COMELEC resolution awarding the contract in favor of Acme was not
issued pursuant to its quasi-judicial functions but merely as an incident of its inherent
administrative functions over the conduct of elections, and hence, the said resolution
may not be deemed as a "final order reviewable by certiorari by the Supreme
Court. Being non-judicial in character, no contempt order may be imposed by the
COMELEC from said order, and no direct and exclusive appeal by certiorari to this
Tribunal lie from such order. Any question arising from said order may be well taken
in an ordinary civil action before the trial courts. (Emphasis supplied.) 17

One other case that should be mentioned in this regard is Salud vs. Central Bank of the
Philippines. 18 Here, petitioner Central Bank, like respondent in this case, argued that under Section
9, paragraph 3 of B.P. Blg. 129, orders of the Monetary Board are appealable only to the
Intermediate Appellate Court. Thus:

The Central Bank and its Liquidator also postulate, for the very first time, that the
Monetary Board is among the "quasi-judicial ... boards" whose judgments are within
the exclusive appellate jurisdiction of the IAC; hence, it is only said Court, "to the
exclusion of the Regional Trial Courts," that may review the Monetary Board's
resolutions. 19

Anent the posture of the Central Bank, We made the following pronouncement:

The contention is utterly devoid of merit. The IAC has no appellate jurisdiction over
resolution or orders of the Monetary Board. No law prescribes any mode of appeal
from the Monetary Board to the IAC. 20

In view of the foregoing, We hold that the Regional Trial Court has jurisdiction to entertain Civil Case
No. 86-37950 and enjoin the respondent PRC from enforcing its resolution.

Although We have finally settled the issue of jurisdiction, We find it imperative to decide once and for
all the validity of Resolution No. 105 so as to provide the much awaited relief to those who are and
will be affected by it.
Of course, We realize that the questioned resolution was adopted for a commendable purpose which
is "to preserve the integrity and purity of the licensure examinations." However, its good aim cannot
be a cloak to conceal its constitutional infirmities. On its face, it can be readily seen that it is
unreasonable in that an examinee cannot even attend any review class, briefing, conference or the
like, or receive any hand-out, review material, or any tip from any school, collge or university, or any
review center or the like or any reviewer, lecturer, instructor, official or employee of any of the
aforementioned or similar institutions . ... 21

The unreasonableness is more obvious in that one who is caught committing the prohibited acts
even without any ill motives will be barred from taking future examinations conducted by the
respondent PRC. Furthermore, it is inconceivable how the Commission can manage to have a
watchful eye on each and every examinee during the three days before the examination period.

It is an aixiom in administrative law that administrative authorities should not act arbitrarily and
capriciously in the issuance of rules and regulations. To be valid, such rules and regulations must be
reasonable and fairly adapted to the end in view. If shown to bear no reasonable relation to the
purposes for which they are authorized to be issued, then they must be held to be invalid. 22

Resolution No. 105 is not only unreasonable and arbitrary, it also infringes on the examinees' right to
liberty guaranteed by the Constitution. Respondent PRC has no authority to dictate on the reviewees
as to how they should prepare themselves for the licensure examinations. They cannot be restrained
from taking all the lawful steps needed to assure the fulfillment of their ambition to become public
accountants. They have every right to make use of their faculties in attaining success in their
endeavors. They should be allowed to enjoy their freedom to acquire useful knowledge that will
promote their personal growth. As defined in a decision of the United States Supreme Court:

The term "liberty" means more than mere freedom from physical restraint or the
bounds of a prison. It means freedom to go where one may choose and to act in
such a manner not inconsistent with the equal rights of others, as his judgment may
dictate for the promotion of his happiness, to pursue such callings and vocations as
may be most suitable to develop his capacities, and giv to them their highest
enjoyment. 23

Another evident objection to Resolution No. 105 is that it violates the academic freedom of the
schools concerned. Respondent PRC cannot interfere with the conduct of review that review schools
and centers believe would best enable their enrolees to meet the standards required before
becoming a full fledged public accountant. Unless the means or methods of instruction are clearly
found to be inefficient, impractical, or riddled with corruption, review schools and centers may not be
stopped from helping out their students. At this juncture, We call attention to Our pronouncement
in Garcia vs. The Faculty Admission Committee, Loyola School of Theology, 24 regarding academic
freedom to wit:

... It would follow then that the school or college itself is possessed of such a right. It
decides for itself its aims and objectives and how best to attain them. It is free from
outside coercion or interference save possibly when the overriding public welfare
calls for some restraint. It has a wide sphere of autonomy certainly extending to the
choice of students. This constitutional provision is not to be construed in a niggardly
manner or in a grudging fashion.

Needless to say, the enforcement of Resolution No. 105 is not a guarantee that the alleged leakages
in the licensure examinations will be eradicated or at least minimized. Making the examinees suffer
by depriving them of legitimate means of review or preparation on those last three precious days-
when they should be refreshing themselves with all that they have learned in the review classes and
preparing their mental and psychological make-up for the examination day itself-would be like
uprooting the tree to get ride of a rotten branch. What is needed to be done by the respondent is to
find out the source of such leakages and stop it right there. If corrupt officials or personnel should be
terminated from their loss, then so be it. Fixers or swindlers should be flushed out. Strict guidelines
to be observed by examiners should be set up and if violations are committed, then licenses should
be suspended or revoked. These are all within the powers of the respondent commission as
provided for in Presidential Decree No. 223. But by all means the right and freedom of the
examinees to avail of all legitimate means to prepare for the examinations should not be curtailed.

In the light of the above, We hereby REVERSE and SET ASIDE, the decision of the Court of
Appeals in CA-G.R. SP No. 10591 and another judgment is hereby rendered declaring Resolution
No. 105 null and void and of no force and effect for being unconstitutional. This decision is
immediately executory. No costs.

SO ORDERED.

G.R. No. 96681 December 2, 1991

HON. ISIDRO CARIÑO, in his capacity as Secretary of the Department of Education, Culture &
Sports, DR. ERLINDA LOLARGA, in her capacity as Superintendent of City Schools of
Manila, petitioners,
vs.
THE COMMISSION ON HUMAN RIGHTS, GRACIANO BUDOY, JULIETA BABARAN, ELSA
IBABAO, HELEN LUPO, AMPARO GONZALES, LUZ DEL CASTILLO, ELSA REYES and
APOLINARIO ESBER, respondents.

NARVASA, J.:

The issue raised in the special civil action of certiorari and prohibition at bar, instituted by the
Solicitor General, may be formulated as follows: where the relief sought from the Commission on
Human Rights by a party in a case consists of the review and reversal or modification of a decision
or order issued by a court of justice or government agency or official exercising quasi-judicial
functions, may the Commission take cognizance of the case and grant that relief? Stated otherwise,
where a particular subject-matter is placed by law within the jurisdiction of a court or other
government agency or official for purposes of trial and adjudgment, may the Commission on Human
Rights take cognizance of the same subject-matter for the same purposes of hearing and
adjudication?

The facts narrated in the petition are not denied by the respondents and are hence taken as
substantially correct for purposes of ruling on the legal questions posed in the present action. These
facts, 1 together with others involved in related cases recently resolved by this Court 2 or otherwise
undisputed on the record, are hereunder set forth.
1. On September 17, 1990, a Monday and a class day, some 800 public school teachers, among
them members of the Manila Public School Teachers Association (MPSTA) and Alliance of
Concerned Teachers (ACT) undertook what they described as "mass concerted actions" to
"dramatize and highlight" their plight resulting from the alleged failure of the public authorities to act
upon grievances that had time and again been brought to the latter's attention. According to them
they had decided to undertake said "mass concerted actions" after the protest rally staged at the
DECS premises on September 14, 1990 without disrupting classes as a last call for the government
to negotiate the granting of demands had elicited no response from the Secretary of Education. The
"mass actions" consisted in staying away from their classes, converging at the Liwasang Bonifacio,
gathering in peaceable assemblies, etc. Through their representatives, the teachers participating in
the mass actions were served with an order of the Secretary of Education to return to work in 24
hours or face dismissal, and a memorandum directing the DECS officials concerned to initiate
dismissal proceedings against those who did not comply and to hire their replacements. Those
directives notwithstanding, the mass actions continued into the week, with more teachers joining in
the days that followed. 3
Among those who took part in the "concerted mass actions" were the eight (8) private respondents herein, teachers at the Ramon Magsaysay High School, Manila, who had agreed to support the non-political demands of the MPSTA. 4

2. For failure to heed the return-to-work order, the CHR complainants (private respondents) were administratively charged on the basis of the principal's report and given five (5) days to answer the charges. They were also preventively
suspended for ninety (90) days "pursuant to Section 41 of P.D. 807" and temporarily replaced (unmarked CHR Exhibits, Annexes F, G, H). An investigation committee was consequently formed to hear the charges in accordance with
P.D. 807. 5

the latter
3. In the administrative case docketed as Case No. DECS 90-082 in which CHR complainants Graciano Budoy, Jr., Julieta Babaran, Luz del Castillo, Apolinario Esber were, among others, named respondents, 6

filed separate answers, opted for a formal investigation, and also moved "for suspension of the
administrative proceedings pending resolution by . . (the Supreme) Court of their application for
issuance of an injunctive writ/temporary restraining order." But when their motion for suspension was
denied by Order dated November 8, 1990 of the Investigating Committee, which later also denied
their motion for reconsideration orally made at the hearing of November 14, 1990, "the respondents
led by their counsel staged a walkout signifying their intent to boycott the entire proceedings." 7 The
case eventually resulted in a Decision of Secretary Cariño dated December 17, 1990, rendered after
evaluation of the evidence as well as the answers, affidavits and documents submitted by the
respondents, decreeing dismissal from the service of Apolinario Esber and the suspension for nine
(9) months of Babaran, Budoy and del Castillo. 8
4. In the meantime, the "MPSTA filed a petition for certiorari before the Regional Trial Court of Manila against petitioner (Cariño), which was dismissed (unmarked CHR Exhibit, Annex I). Later, the MPSTA went to the Supreme Court
(on certiorari, in an attempt to nullify said dismissal, grounded on the) alleged violation of the striking teachers" right to due process and peaceable assembly docketed as G.R. No. 95445, supra. The ACT also filed a similar petition

Both petitions in this Court were filed in behalf of the teacher

before the Supreme Court . . . docketed as G.R. No. 95590." 9

associations, a few named individuals, and "other teacher-members so numerous similarly situated"
or "other similarly situated public school teachers too numerous to be impleaded."

5. In the meantime, too, the respondent teachers submitted sworn statements dated September 27,
1990 to the Commission on Human Rights to complain that while they were participating in peaceful
mass actions, they suddenly learned of their replacements as teachers, allegedly without notice and
consequently for reasons completely unknown to them. 10
6. Their complaints — and those of other teachers also "ordered suspended by the . . . (DECS)," all numbering forty-two (42) — were docketed as "Striking Teachers CHR Case No. 90775." In connection therewith the Commission
scheduled a "dialogue" on October 11, 1990, and sent a subpoena to Secretary Cariño requiring his attendance therein. 11

On the day of the "dialogue," although it said that it was "not certain whether he (Sec. Cariño) received the subpoena which was served at his office, . . . (the) Commission, with the Chairman presiding, and Commissioners Hesiquio R.
Mallilin and Narciso C. Monteiro, proceeded to hear the case;" it heard the complainants' counsel (a) explain that his clients had been "denied due process and suspended without formal notice, and unjustly, since they did not join the

The Commission
mass leave," and (b) expatiate on the grievances which were "the cause of the mass leave of MPSTA teachers, (and) with which causes they (CHR complainants) sympathize." 12

thereafter issued an Order 13reciting these facts and making the following disposition:

To be properly apprised of the real facts of the case and be accordingly guided in its
investigation and resolution of the matter, considering that these forty two teachers are now
 suspended and deprived of their wages, which they need very badly, Secretary Isidro Cariño,
of the Department of Education, Culture and Sports, Dr. Erlinda Lolarga, school
superintendent of Manila and the Principal of Ramon Magsaysay High School, Manila, are
hereby enjoined to appear and enlighten the Commission en banc on October 19, 1990 at
11:00 A.M. and to bring with them any and all documents relevant to the allegations
aforestated herein to assist the Commission in this matter. Otherwise, the Commission will
resolve the complaint on the basis of complainants' evidence.

xxx xxx xxx

7. Through the Office of the Solicitor General, Secretary Cariño sought and was granted leave to file
a motion to dismiss the case. His motion to dismiss was submitted on November 14, 1990 alleging
as grounds therefor, "that the complaint states no cause of action and that the CHR has no
jurisdiction over the case." 14

8. Pending determination by the Commission of the motion to dismiss, judgments affecting the "striking teachers" were promulgated in two (2) cases,
as aforestated, viz.:

a) The Decision dated December l7, 1990 of Education Secretary Cariño in Case No. DECS 90-082, decreeing dismissal from the service of Apolinario Esber and the suspension for nine (9) months of Babaran, Budoy
and del Castillo; 15 and

b) The joint Resolution of this Court dated August 6, 1991 in G.R. Nos. 95445 and 95590 dismissing the petitions "without prejudice to any appeals, if still timely, that the individual petitioners may take to the Civil
Service Commission on the matters complained of," 16 and inter alia "ruling that it was prima facie lawful for petitioner Cariño to issue return-to-work orders, file administrative charges against recalcitrants, preventively
suspend them, and issue decision on those charges." 17

9. In an Order dated December 28, 1990, respondent Commission denied Sec. Cariño's motion to dismiss and required him and Superintendent Lolarga "to submit their counter-affidavits within ten (10) days . . . (after which) the

It held that the "striking teachers" "were denied

Commission shall proceed to hear and resolve the case on the merits with or without respondents counter affidavit." 18

due process of law; . . . they should not have been replaced without a chance to reply to the
administrative charges;" there had been a violation of their civil and political rights which the
Commission was empowered to investigate; and while expressing its "utmost respect to the
Supreme Court . . . the facts before . . . (it) are different from those in the case decided by the
Supreme Court" (the reference being unmistakably to this Court's joint Resolution of August 6, 1991
in G.R. Nos. 95445 and 95590, supra).

It is to invalidate and set aside this Order of December 28, 1990 that the Solicitor General, in behalf
of petitioner Cariño, has commenced the present action of certiorari and prohibition.

The Commission on Human Rights has made clear its position that it does not feel bound by this
Court's joint Resolution in G.R. Nos. 95445 and 95590, supra. It has also made plain its intention "to
hear and resolve the case (i.e., Striking Teachers HRC Case No. 90-775) on the merits." It intends,
in other words, to try and decide or hear and determine, i.e., exercise jurisdiction over the following
general issues:

1) whether or not the striking teachers were denied due process, and just cause exists for the
imposition of administrative disciplinary sanctions on them by their superiors; and

2) whether or not the grievances which were "the cause of the mass leave of MPSTA teachers, (and)
with which causes they (CHR complainants) sympathize," justify their mass action or strike.
The Commission evidently intends to itself adjudicate, that is to say, determine with character of
finality and definiteness, the same issues which have been passed upon and decided by the
Secretary of Education, Culture & Sports, subject to appeal to the Civil Service Commission, this
Court having in fact, as aforementioned, declared that the teachers affected may take appeals to the
Civil Service Commission on said matters, if still timely.

The threshold question is whether or not the Commission on Human Rights has the power under the
Constitution to do so; whether or not, like a court of justice, 19 or even a quasi-judicial agency, 20 it has
jurisdiction or adjudicatory powers over, or the power to try and decide, or hear and determine,
certain specific type of cases, like alleged human rights violations involving civil or political rights.

The Court declares the Commission on Human Rights to have no such power; and that it was not
meant by the fundamental law to be another court or quasi-judicial agency in this country, or
duplicate much less take over the functions of the latter.

The most that may be conceded to the Commission in the way of adjudicative power is that it
may investigate, i.e., receive evidence and make findings of fact as regards claimed human rights
violations involving civil and political rights. But fact finding is not adjudication, and cannot be likened
to the judicial function of a court of justice, or even a quasi-judicial agency or official. The function of
receiving evidence and ascertaining therefrom the facts of a controversy is not a judicial function,
properly speaking. To be considered such, the faculty of receiving evidence and making factual
conclusions in a controversy must be accompanied by the authority of applying the law to those
factual conclusions to the end that the controversy may be decided or determined authoritatively,
finally and definitively, subject to such appeals or modes of review as may be provided by law. 21 This
function, to repeat, the Commission does not have. 22

The proposition is made clear by the constitutional provisions specifying the powers of the Commission on Human Rights.

Upon its constitution, it succeeded and superseded the

The Commission was created by the 1987 Constitution as an independent office. 23

Presidential Committee on Human Rights existing at the time of the effectivity of the
Constitution. 24 Its powers and functions are the following 25

(1) Investigate, on its own or on complaint by any party, all forms of human rights violations involving civil and political rights;

(2) Adopt its operational guidelines and rules of procedure, and cite for contempt for violations thereof in accordance with the Rules of
Court;

(3) Provide appropriate legal measures for the protection of human rights of all persons within the Philippines, as well as Filipinos residing
abroad, and provide for preventive measures and legal aid services to the underprivileged whose human rights have been violated or need
protection;

(4) Exercise visitorial powers over jails, prisons, or detention facilities;

(5) Establish a continuing program of research, education, and information to enhance respect for the primacy of human rights;
 (6) Recommend to the Congress effective measures to promote human rights and to provide for compensation to victims of violations of
human rights, or their families;

(7) Monitor the Philippine Government's compliance with international treaty obligations on human rights;

(8) Grant immunity from prosecution to any person whose testimony or whose possession of documents or other evidence is necessary or
convenient to determine the truth in any investigation conducted by it or under its authority;

(9) Request the assistance of any department, bureau, office, or agency in the performance of its functions;

(10) Appoint its officers and employees in accordance with law; and

(11) Perform such other duties and functions as may be provided by law.

As should at once be observed, only the first of the enumerated powers and functions bears any resemblance to adjudication or adjudgment. The Constitution clearly and categorically grants to the Commission the power to investigate
all forms of human rights violations involving civil and political rights. It can exercise that power on its own initiative or on complaint of any person. It may exercise that power pursuant to such rules of procedure as it may adopt and, in
cases of violations of said rules, cite for contempt in accordance with the Rules of Court. In the course of any investigation conducted by it or under its authority, it may grant immunity from prosecution to any person whose testimony or
whose possession of documents or other evidence is necessary or convenient to determine the truth. It may also request the assistance of any department, bureau, office, or agency in the performance of its functions, in the conduct of
its investigation or in extending such remedy as may be required by its findings. 26

But it cannot try and decide cases (or hear and determine causes) as courts of justice, or even quasi-judicial bodies do. To investigate is not to
adjudicate or adjudge. Whether in the popular or the technical sense, these terms have well understood and quite distinct meanings.

"Investigate," commonly understood, means to examine, explore, inquire or delve or probe into, research on, study. The dictionary definition of "investigate" is "to observe or study closely: inquire into systematically. "to search or inquire

The purpose of investigation, of course, is to discover, to find out, to

into: . . . to subject to an official probe . . .: to conduct an official inquiry." 27

learn, obtain information. Nowhere included or intimated is the notion of settling, deciding or
resolving a controversy involved in the facts inquired into by application of the law to the facts
established by the inquiry.

The legal meaning of "investigate" is essentially the same: "(t)o follow up step by step by patient
inquiry or observation. To trace or track; to search into; to examine and inquire into with care and
accuracy; to find out by careful inquisition; examination; the taking of evidence; a legal inquiry;" 28 "to
inquire; to make an investigation," "investigation" being in turn describe as "(a)n administrative
function, the exercise of which ordinarily does not require a hearing. 2 Am J2d Adm L Sec. 257; . . .
an inquiry, judicial or otherwise, for the discovery and collection of facts concerning a certain matter
or matters." 29
"Adjudicate," commonly or popularly understood, means to adjudge, arbitrate, judge, decide, determine, resolve, rule on, settle. The dictionary defines the term as "to settle finally (the rights and duties of the parties to a court case) on

And "adjudge" means "to decide or rule upon as a judge or

the merits of issues raised: . . . to pass judgment on: settle judicially: . . . act as judge." 30

with judicial or quasi-judicial powers: . . . to award or grant judicially in a case of controversy . . . ." 31
In the legal sense, "adjudicate" means: "To settle in the exercise of judicial authority. To determine finally. Synonymous with adjudge in its strictest sense;" and "adjudge" means: "To pass on judicially, to decide, settle or decree, or to
sentence or condemn. . . . Implies a judicial determination of a fact, and the entry of a judgment." 32

Hence it is that the Commission on Human Rights, having merely the power "to investigate," cannot and should not "try and resolve on the merits"
(adjudicate) the matters involved in Striking Teachers HRC Case No. 90-775, as it has announced it means to do; and it cannot do so even if there be
a claim that in the administrative disciplinary proceedings against the teachers in question, initiated and conducted by the DECS, their human rights, or
civil or political rights had been transgressed. More particularly, the Commission has no power to "resolve on the merits" the question of (a) whether or
not the mass concerted actions engaged in by the teachers constitute and are prohibited or otherwise restricted by law; (b) whether or not the act of
carrying on and taking part in those actions, and the failure of the teachers to discontinue those actions, and return to their classes despite the order to
this effect by the Secretary of Education, constitute infractions of relevant rules and regulations warranting administrative disciplinary sanctions, or are
justified by the grievances complained of by them; and (c) what where the particular acts done by each individual teacher and what sanctions, if any,
may properly be imposed for said acts or omissions.

These are matters undoubtedly and clearly within the original jurisdiction of the Secretary of Education, being within the scope of the disciplinary
powers granted to him under the Civil Service Law, and also, within the appellate jurisdiction of the Civil Service Commission.

and it appears that appeals have been

Indeed, the Secretary of Education has, as above narrated, already taken cognizance of the issues and resolved them, 33

seasonably taken by the aggrieved parties to the Civil Service Commission; and even this Court
itself has had occasion to pass upon said issues. 34

Now, it is quite obvious that whether or not the conclusions reached by the Secretary of Education in disciplinary cases are correct and are adequately
based on substantial evidence; whether or not the proceedings themselves are void or defective in not having accorded the respondents due process;
and whether or not the Secretary of Education had in truth committed "human rights violations involving civil and political rights," are matters which may
be passed upon and determined through a motion for reconsideration addressed to the Secretary Education himself, and in the event of an adverse
verdict, may be reviewed by the Civil Service Commission and eventually the Supreme Court.

The Commission on Human Rights simply has no place in this scheme of things. It has no business intruding into the jurisdiction and functions of the
Education Secretary or the Civil Service Commission. It has no business going over the same ground traversed by the latter and making its own
judgment on the questions involved. This would accord success to what may well have been the complaining teachers' strategy to abort, frustrate or
negate the judgment of the Education Secretary in the administrative cases against them which they anticipated would be adverse to them.

This cannot be done. It will not be permitted to be done.

In any event, the investigation by the Commission on Human Rights would serve no useful purpose. If its investigation should result in conclusions contrary to those reached by Secretary Cariño, it would have no power anyway to
reverse the Secretary's conclusions. Reversal thereof can only by done by the Civil Service Commission and lastly by this Court. The only thing the Commission can do, if it concludes that Secretary Cariño was in error, is to refer the

matter to the appropriate Government agency or tribunal for assistance; that would be the Civil Service Commission. 35
It cannot arrogate unto itself the appellate
jurisdiction of the Civil Service Commission.

WHEREFORE, the petition is granted; the Order of December 29, 1990 is ANNULLED and SET
ASIDE, and the respondent Commission on Human Rights and the Chairman and Members thereof
are prohibited "to hear and resolve the case (i.e., Striking Teachers HRC Case No. 90-775) on the
merits."

SO ORDERED.

G.R. No. 188056 January 8, 2013

SPOUSES AUGUSTO G. DACUDAO AND OFELIA R. DACUDAO, Petitioners,
vs.
SECRETARY OF JUSTICE RAUL M. GONZALES OF THE DEPARTMENT OF
JUSTICE, Respondent.

DECISION

BERSAMIN, J.:

Petitioners - residents of Bacaca Road, Davao City - were among the investors whom Celso G.
Delos Angeles, Jr. and his associates in the Legacy Group of Companies (Legacy Group) allegedly
defrauded through the Legacy Group's "buy back agreement" that earned them check payments that
were dishonored. After their written demands for the return of their investments went unheeded, they
initiated a number of charges for syndicated estafa against Delos Angeles, Jr., et al. in the Office of
the City Prosecutor of Davao City on February 6, 2009. Three of the cases were docketed as NPS
Docket No. XI-02-INV.-09-A-00356, Docket No. XI-02-INV.-09-C-00752, and Docket No. XI-02-INV.-
09-C-00753.1

On March 18, 2009, the Secretary of Justice issued Department of Justice (DOJ) Order No. 182 (DO
No. 182), directing all Regional State Prosecutors, Provincial Prosecutors, and City Prosecutors to
forward all cases already filed against Delos Angeles, Jr., et al. to the Secretariat of the DOJ Special
Panel in Manila for appropriate action.

DO No. 182 reads:2

All cases against Celso G. delos Angeles, Jr., et al. under Legacy Group of Companies, may be filed
with the docket section of the National Prosecution Service, Department of Justice, Padre Faura,
Manila and shall be forwarded to the Secretariat of the Special Panel for assignment and distribution
to panel members, per Department Order No. 84 dated February 13, 2009.

However, cases already filed against Celso G. delos Angeles, Jr. et al. of Legacy group of
Companies in your respective offices with the exemption of the cases filed in Cagayan de Oro City
which is covered by Memorandum dated March 2, 2009, should be forwarded to the Secretariat of
the Special Panel at Room 149, Department of Justice, Padre Faura, Manila, for proper disposition.

For information and guidance.

Pursuant to DO No. 182, the complaints of petitioners were forwarded by the Office of the City
Prosecutor of Davao City to the Secretariat of the Special Panel of the DOJ.3

Aggrieved by such turn of events, petitioners have directly come to the Court via petition for
certiorari, prohibition and mandamus, ascribing to respondent Secretary of Justice grave abuse of
discretion in issuing DO No. 182. They claim that DO No. 182 violated their right to due process,
their right to the equal protection of the laws, and their right to the speedy disposition of cases. They
insist that DO No. 182 was an obstruction of justice and a violation of the rule against enactment of
laws with retroactive effect.

Petitioners also challenge as unconstitutional the issuance of DOJ Memorandum dated March 2,
2009 exempting from the coverage of DO No. No. 182 all the cases for syndicated estafa already
filed and pending in the Office of the City Prosecutor of Cagayan de Oro City. They aver that DOJ
Memorandum dated March 2, 2009 violated their right to equal protection under the Constitution.
The Office of the Solicitor General (OSG), representing respondent Secretary of Justice, maintains
the validity of DO No. 182 and DOJ Memorandum dated March 2, 2009, and prays that the petition
be dismissed for its utter lack of merit.

Issues

The following issues are now to be resolved, to wit:

1. Did petitioners properly bring their petition for certiorari, prohibition and mandamus directly
to the Court?

2. Did respondent Secretary of Justice commit grave abuse of discretion in issuing DO No.
182?

3. Did DO No. 182 and DOJ Memorandum dated March 2, 2009 violate petitioners’
constitutionally guaranteed rights?

Ruling

The petition for certiorari, prohibition and mandamus, being bereft of substance and merit, is
dismissed.

Firstly, petitioners have unduly disregarded the hierarchy of courts by coming directly to the Court
with their petition for certiorari, prohibition and mandamus without tendering therein any special,
important or compelling reason to justify the direct filing of the petition.

We emphasize that the concurrence of jurisdiction among the Supreme Court, Court of Appeals and
the Regional Trial Courts to issue the writs of certiorari, prohibition, mandamus, quo warranto,
habeas corpus and injunction did not give petitioners the unrestricted freedom of choice of court
forum.4 An undue disregard of this policy against direct resort to the Court will cause the dismissal of
the recourse. In Bañez, Jr. v. Concepcion,5 we explained why, to wit:

The Court must enjoin the observance of the policy on the hierarchy of courts, and now affirms that
the policy is not to be ignored without serious consequences. The strictness of the policy is designed
to shield the Court from having to deal with causes that are also well within the competence of the
lower courts, and thus leave time to the Court to deal with the more fundamental and more essential
tasks that the Constitution has assigned to it. The Court may act on petitions for the extraordinary
writs of certiorari, prohibition and mandamus only when absolutely necessary or when serious and
important reasons exist to justify an exception to the policy. This was why the Court stressed in
Vergara, Sr. v. Suelto:

x x x. The Supreme Court is a court of last resort, and must so remain if it is to satisfactorily perform
the functions assigned to it by the fundamental charter and immemorial tradition. It cannot and
should not be burdened with the task of dealing with causes in the first instance. Its original
jurisdiction to issue the so-called extraordinary writs should be exercised only where absolutely
necessary or where serious and important reasons exist therefor. Hence, that jurisdiction should
generally be exercised relative to actions or proceedings before the Court of Appeals, or before
constitutional or other tribunals, bodies or agencies whose acts for some reason or another are not
controllable by the Court of Appeals. Where the issuance of an extraordinary writ is also within the
competence of the Court of Appeals or a Regional Trial Court, it is in either of these courts that the
specific action for the writ’s procurement must be presented. This is and should continue to be the
policy in this regard, a policy that courts and lawyers must strictly observe. (Emphasis supplied)

In People v. Cuaresma, the Court has also amplified the need for strict adherence to the policy of
hierarchy of courts. There, noting "a growing tendency on the part of litigants and lawyers to have
their applications for the so-called extraordinary writs, and sometimes even their appeals, passed
upon and adjudicated directly and immediately by the highest tribunal of the land," the Court has
cautioned lawyers and litigants against taking a direct resort to the highest tribunal, viz:

x x x. This Court’s original jurisdiction to issue writs of certiorari (as well as prohibition, mandamus,
quo warranto, habeas corpus and injunction) is not exclusive. It is shared by this Court with Regional
Trial Courts x x x, which may issue the writ, enforceable in any part of their respective regions. It is
also shared by this Court, and by the Regional Trial Court, with the Court of Appeals x x x, although
prior to the effectivity of Batas Pambansa Bilang 129 on August 14, 1981, the latter's competence to
issue the extraordinary writs was restricted to those "in aid of its appellate jurisdiction." This
concurrence of jurisdiction is not, however, to be taken as according to parties seeking any of the
writs an absolute, unrestrained freedom of choice of the court to which application therefor will be
directed. There is after all a hierarchy of courts. That hierarchy is determinative of the venue of
appeals, and should also serve as a general determinant of the appropriate forum for petitions for
the extraordinary writs. A becoming regard for that judicial hierarchy most certainly indicates that
petitions for the issuance of extraordinary writs against first level ("inferior") courts should be filed
with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct
invocation of the Supreme Court's original jurisdiction to issue these writs should be allowed only
when there are special and important reasons therefor, clearly and specifically set out in the petition.
This is established policy. It is a policy that is necessary to prevent inordinate demands upon the
Court’s time and attention which are better devoted to those matters within its exclusive jurisdiction,
and to prevent further over-crowding of the Court's docket. Indeed, the removal of the restriction on
the jurisdiction of the Court of Appeals in this regard, supra— resulting from the deletion of the
qualifying phrase, "in aid of its appellate jurisdiction" — was evidently intended precisely to relieve
this Court pro tanto of the burden of dealing with applications for the extraordinary writs which, but
for the expansion of the Appellate Court corresponding jurisdiction, would have had to be filed with
it.
1âw phi1

xxxx

The Court therefore closes this decision with the declaration for the information and evidence of all
concerned, that it will not only continue to enforce the policy, but will require a more strict
observance thereof. (Emphasis supplied)

Accordingly, every litigant must remember that the Court is not the only judicial forum from which to
seek and obtain effective redress of their grievances. As a rule, the Court is a court of last resort, not
a court of the first instance. Hence, every litigant who brings the petitions for the extraordinary writs
of certiorari, prohibition and mandamus should ever be mindful of the policy on the hierarchy of
courts, the observance of which is explicitly defined and enjoined in Section 4 of Rule 65, Rules of
Court, viz:

Section 4. When and where petition filed. - The petition shall be filed not later than sixty (60) days
from notice of the judgment, order or resolution. In case a motion for reconsideration or new trial is
timely filed, whether such motion is required or not, the sixty (60) day period shall be counted from
notice of the denial of the said motion.
The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower
court or of a corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction
over the territorial area as defined by the Supreme Court. It may also be filed in the Court of Appeals
whether or not the same is in the aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid
of its appellate jurisdiction. If it involves the acts or omissions of a quasi-judicial agency, unless
otherwise provided by law or these rules, the petition shall be filed in and cognizable only by the
Court of Appeals.

In election cases involving an act or an omission of a municipal or a regional trial court, the petition
shall be filed exclusively with the Commission on Elections, in aid of its appellate jurisdiction.6

Secondly, even assuming arguendo that petitioners’ direct resort to the Court was permissible, the
petition must still be dismissed.

The writ of certiorari is available only when any tribunal, board or officer exercising judicial or quasi-
judicial functions has acted without or in excess of its or his jurisdiction, or with grave abuse of
discretion amounting to lack or excess of jurisdiction, and there is no appeal, nor any plain, speedy,
and adequate remedy in the ordinary course of law.7"The sole office of the writ of certiorari,"
according to Delos Santos v. Metropolitan Bank and Trust Company:8

x x x is the correction of errors of jurisdiction, which includes the commission of grave abuse of
discretion amounting to lack of jurisdiction. In this regard, mere abuse of discretion is not enough to
warrant the issuance of the writ. The abuse of discretion must be grave, which means either that the
judicial or quasi-judicial power was exercised in an arbitrary or despotic manner by reason of
passion or personal hostility, or that the respondent judge, tribunal or board evaded a positive duty,
or virtually refused to perform the duty enjoined or to act in contemplation of law, such as when such
judge, tribunal or board exercising judicial or quasi-judicial powers acted in a capricious or whimsical
manner as to be equivalent to lack of jurisdiction.

For a special civil action for certiorari to prosper, therefore, the following requisites must concur,
namely: (a) it must be directed against a tribunal, board or officer exercising judicial or quasi-judicial
functions; (b) the tribunal, board, or officer must have acted without or in excess of jurisdiction or
with grave abuse of discretion amounting to lack or excess of jurisdiction; and (c) there is no appeal
nor any plain, speedy, and adequate remedy in the ordinary course of law.9 The burden of proof lies
on petitioners to demonstrate that the assailed order was issued without or in excess of jurisdiction
or with grave abuse of discretion amounting to lack or excess of jurisdiction.

Yet, petitioners have not shown a compliance with the requisites. To start with, they merely alleged
that the Secretary of Justice had acted without or in excess of his jurisdiction. Also, the petition did
not show that the Secretary of Justice was an officer exercising judicial or quasi-judicial functions.
Instead, the Secretary of Justice would appear to be not exercising any judicial or quasi-judicial
functions because his questioned issuances were ostensibly intended to ensure his subordinates’
efficiency and economy in the conduct of the preliminary investigation of all the cases involving the
Legacy Group. The function involved was purely executive or administrative.

The fact that the DOJ is the primary prosecution arm of the Government does not make it a quasi-
judicial office or agency. Its preliminary investigation of cases is not a quasi-judicial proceeding. Nor
does the DOJ exercise a quasi-judicial function when it reviews the findings of a public prosecutor on
the finding of probable cause in any case. Indeed, in Bautista v. Court of Appeals,10 the Supreme
Court has held that a preliminary investigation is not a quasi-judicial proceeding, stating:
x x x the prosecutor in a preliminary investigation does not determine the guilt or innocence of the
accused. He does not exercise adjudication nor rule-making functions. Preliminary investigation is
merely inquisitorial, and is often the only means of discovering the persons who may be reasonably
charged with a crime and to enable the fiscal to prepare his complaint or information. It is not a trial
of the case on the merits and has no purpose except that of determining whether a crime has been
committed and whether there is probable cause to believe that the accused is guilty thereof. While
the fiscal makes that determination, he cannot be said to be acting as a quasi-court, for it is the
courts, ultimately, that pass judgment on the accused, not the fiscal.11

There may be some decisions of the Court that have characterized the public prosecutor’s power to
conduct a preliminary investigation as quasi-judicial in nature. Still, this characterization is true only
to the extent that the public prosecutor, like a quasi-judicial body, is an officer of the executive
department exercising powers akin to those of a court of law.

But the limited similarity between the public prosecutor and a quasi-judicial body quickly endsthere.
For sure, a quasi-judicial body is an organ of government other than a court of law or a legislative
office that affects the rights of private parties through either adjudication or rule-making; it performs
adjudicatory functions, and its awards and adjudications determine the rights of the parties coming
before it; its decisions have the same effect as the judgments of a court of law. In contrast, that is not
the effect whenever a public prosecutor conducts a preliminary investigation to determine probable
cause in order to file a criminal information against a person properly charged with the offense, or
whenever the Secretary of Justice reviews the public prosecutor’s orders or resolutions.

Petitioners have self-styled their petition to be also for prohibition. However, we do not see how that
can be. They have not shown in their petition in what manner and at what point the Secretary of
Justice, in handing out the assailed issuances, acted without or in excess of his jurisdiction, or with
grave abuse of discretion amounting to lack or excess of jurisdiction. On the other hand, we already
indicated why the issuances were not infirmed by any defect of jurisdiction. Hence, the blatant
omissions of the petition transgressed Section 2, Rule 65 of the Rules of Court, to wit:

Section 2. Petition for prohibition. — When the proceedings of any tribunal, corporation, board,
officer or person, whether exercising judicial, quasi-judicial or ministerial functions, are without or in
excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal or any other plain, speedy, and adequate remedy in the ordinary
course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the
facts with certainty and praying that judgment be rendered commanding the respondent to desist
from further proceedings in the action or matter specified therein, or otherwise granting such
incidental reliefs as law and justice may require.

The petition shall likewise be accompanied by a certified true copy of the judgment, order or
resolution subject thereof, copies of all pleadings and documents relevant and pertinent thereto, and
a sworn certification of non-forum shopping as provided in the third paragraph of section 3, Rule 46.
(2a) Similarly, the petition could not be one for mandamus, which is a remedy available only when
"any tribunal, corporation, board, officer or person unlawfully neglects the performance of an act
which the law specifically enjoins as a duty resulting from an office, trust, or station, or unlawfully
excludes another from the use and enjoyment of a right or office to which such other is entitled, and
there is no other plain, speedy and adequate remedy in the ordinary course of law, the person
aggrieved thereby may file a verified petition in the proper court."12 The main objective of mandamus
is to compel the performance of a ministerial duty on the part of the respondent. Plainly enough, the
writ of mandamus does not issue to control or review the exercise of discretion or to compel a
course of conduct,13 which, it quickly seems to us, was what petitioners would have the Secretary of
Justice do in their favor. Consequently, their petition has not indicated how and where the Secretary
of Justice’s assailed issuances excluded them from the use and enjoyment of a right or office to
which they were unquestionably entitled.

Thirdly, there is no question that DO No. 182 enjoyed a strong presumption of its validity. In
ABAKADA Guro Party List v. Purisima,14 the Court has extended the presumption of validity to
legislative issuances as well as to rules and regulations issued by administrative agencies, saying:

Administrative regulations enacted by administrative agencies to implement and interpret the law
which they are entrusted to enforce have the force of law and are entitled to respect. Such rules and
regulations partake of the nature of a statute and are just as binding as if they have been written in
the statute itself. As such, they have the force and effect of law and enjoy the presumption of
constitutionality and legality until they are set aside with finality in an appropriate case by a
competent court.15

DO No. 182 was issued pursuant to Department Order No. 84 that the Secretary of Justice had
promulgated to govern the performance of the mandate of the DOJ to "administer the criminal justice
system in accordance with the accepted processes thereof"16 as expressed in Republic Act No.
10071 (Prosecution Service Act of 2010) and Section 3, Chapter I, Title III and Section 1, Chapter I,
Title III of Book IV of Executive Order 292 (Administrative Code of 1987).

To overcome this strong presumption of validity of the questioned issuances, it became incumbent
upon petitioners to prove their unconstitutionality and invalidity, either by showing that the
Administrative Code of 1987 did not authorize the Secretary of Justice to issue DO No. 182, or by
demonstrating that DO No. 182 exceeded the bounds of the Administrative Code of 1987 and other
pertinent laws. They did not do so. They must further show that the performance of the DOJ’s
functions under the Administrative Code of 1987 and other pertinent laws did not call for the
impositions laid down by the assailed issuances. That was not true here, for DO No 182 did not
deprive petitioners in any degree of their right to seek redress for the alleged wrong done against
them by the Legacy Group. Instead, the issuances were designed to assist petitioners and others
like them expedite the prosecution, if warranted under the law, of all those responsible for the wrong
through the creation of the special panel of state prosecutors and prosecution attorneys in order to
conduct a nationwide and comprehensive preliminary investigation and prosecution of the cases.
Thereby, the Secretary of Justice did not act arbitrarily or oppressively against petitioners.

Fourthly, petitioners attack the exemption from the consolidation decreed in DO No. 182 of the cases
filed or pending in the Office of the City Prosecutor of Cagayan de Oro City, claiming that the
exemption traversed the constitutional guaranty in their favor of the equal protection of law.17

The exemption is covered by the assailed DOJ Memorandum dated March 2, 2009, to wit:

It has come to the attention of the undersigned that cases for syndicated estafa were filed with your
office against officers of the Legacy Group of Companies. Considering the distance of the place of
complainants therein to Manila, your Office is hereby exempted from the directive previously issued
by the undersigned requiring prosecution offices to forward the records of all cases involving Legacy
Group of Companies to the Task Force.

Anent the foregoing, you are hereby directed to conduct preliminary investigation of all cases
involving the Legacy Group of Companies filed in your office with dispatch and to file the
corresponding informations if evidence warrants and to prosecute the same in court.

Petitioners’ attack deserves no consideration. The equal protection clause of the Constitution does
not require the universal application of the laws to all persons or things without distinction; what it
requires is simply equality among equals as determined according to a valid classification.18 Hence,
the Court has affirmed that if a law neither burdens a fundamental right nor targets a suspect class,
the classification stands as long as it bears a rational relationship to some legitimate government
end.19

That is the situation here. In issuing the assailed DOJ Memorandum dated March 2, 2009, the
Secretary of Justice took into account the relative distance between Cagayan de Oro, where many
complainants against the Legacy Group resided, and Manila, where the preliminary investigations
would be conducted by the special panel. He also took into account that the cases had already been
filed in the City Prosecutor’s Office of Cagayan de Oro at the time he issued DO No. 182. Given the
considerable number of complainants residing in Cagayan de Oro City, the Secretary of Justice was
fully justified in excluding the cases commenced in Cagayan de Oro from the ambit of DO No. 182.
The classification taken into consideration by the Secretary of Justice was really valid. Resultantly,
petitioners could not inquire into the wisdom behind the exemption upon the ground that the non-
application of the exemption to them would cause them some inconvenience.

Fifthly, petitioners contend that DO No. 182 violated their right to the speedy disposition of cases
guaranteed by the Constitution. They posit that there would be considerable delay in the resolution
of their cases that would definitely be "a flagrant transgression of petitioners’ constitutional rights to
speedy disposition of their cases."20

We cannot favor their contention.

In The Ombudsman v. Jurado,21 the Court has clarified that although the Constitution guarantees the
right to the speedy disposition of cases, such speedy disposition is a flexible concept. To properly
define that concept, the facts and circumstances surrounding each case must be evaluated and
taken into account. There occurs a violation of the right to a speedy disposition of a case only when
the proceedings are attended by vexatious, capricious, and oppressive delays, or when unjustified
postponements of the trial are sought and secured, or when, without cause or justifiable motive, a
long period of time is allowed to elapse without the party having his case tried.22 It is cogent to
mention that a mere mathematical reckoning of the time involved is not determinant of the concept.23

The consolidation of the cases against Delos Angeles, Jr., et al. was ordered obviously to obtain
expeditious justice for the parties with the least cost and vexation to them. Inasmuch as the cases
filed involved similar or related questions to be dealt with during the preliminary investigation, the
Secretary of Justice rightly found the consolidation of the cases to be the most feasible means of
promoting the efficient use of public resources and of having a comprehensive investigation of the
cases.

On the other hand, we do not ignore the possibility that there would be more cases reaching the
DOJ in addition to those already brought by petitioners and other parties. Yet, any delays in
petitioners’ cases occasioned by such other and subsequent cases should not warrant the
invalidation of DO No. 182. The Constitution prohibits only the delays that are unreasonable,
arbitrary and oppressive, and tend to render rights nugatory.24 In fine, we see neither undue delays,
nor any violation of the right of petitioners to the speedy disposition of their cases.

Sixthly, petitioners assert that the assailed issuances should cover only future cases against Delos
Angeles, Jr., et al., not those already being investigated. They maintain that DO No. 182 was issued
in violation of the prohibition against passing laws with retroactive effect.

Petitioners’ assertion is baseless.

As a general rule, laws shall have no retroactive effect. However, exceptions exist, and one such
exception concerns a law that is procedural in nature. The reason is that a remedial statute or a
statute relating to remedies or modes of procedure does not create new rights or take away vested
rights but only operates in furtherance of the remedy or the confirmation of already existing
rights.25 A statute or rule regulating the procedure of the courts will be construed as applicable to
actions pending and undetermined at the time of its passage. All procedural laws are retroactive in
that sense and to that extent. The retroactive application is not violative of any right of a person who
may feel adversely affected, for, verily, no vested right generally attaches to or arises from
procedural laws.

Finally, petitioners have averred but failed to establish that DO No. 182 constituted obstruction of
justice. This ground of the petition, being unsubstantiated, was unfounded.

Nonetheless, it is not amiss to reiterate that the authority of the Secretary of Justice to assume
jurisdiction over matters involving the investigation of crimes and the prosecution of offenders is fully
sanctioned by law. Towards that end, the Secretary of Justice exercises control and supervision over
all the regional, provincial, and city prosecutors of the country; has broad discretion in the discharge
of the DOJ’s functions; and administers the DOJ and its adjunct offices and agencies by
promulgating rules and regulations to carry out their objectives, policies and functions.

Consequently, unless and until the Secretary of Justice acts beyond the bounds of his authority, or
arbitrarily, or whimsically, or oppressively, any person or entity who may feel to be thereby aggrieved
or adversely affected should have no right to call for the invalidation or nullification of the rules and
regulations issued by, as well as other actions taken by the Secretary of Justice.

WHEREFORE, the Court DISMISSES the omnibus petition for certiorari, prohibition, and mandamus
for lack of merit.

Petitioners shall pay the costs of suit.

SO ORDERED.