ADMINISTRATIVE AGENCIES activity or transaction.
Without responding to Garcia’s Memorandum, Dimagiba issued the following
GSIS v COA
Gr No. 162372, 2011
Facts:
This is a petition for review on certiorari under Rule 64 in relation to Rule 65 of the 1997 Rules of Court
to annul and set aside the COA Decisions for having been made without or in excess of jurisdiction, or
with grave abuse of discretion amounting to lack or excess of jurisdiction.
On May 30, 1997, Republic Act No. 8291, otherwise known as The Government Service Insurance
System Act of 1997 (the GSIS Act) was enacted and approved, amending Presidential Decree No.
1146, as amended, expanding and increasing the coverage and benefits of the GSIS, and instituting
reforms therein. Pursuant to the powers granted to it under the said law, the GSIS Board of Trustees,
upon the recommendation of the Management-Employee Relations Committee (MERCOM),
approved Board Resolution No. 326 wherein they adopted the GSIS Employees Loyalty Incentive
Plan (ELIP).
Dimagiba, the corporate auditor of GSIS, communicated to the President and General Manager of
GSIS that the GSIS RFP was contrary to law. However, the GSIS Legal Services Group opined that
the GSIS Board was legally authorized to adopt the plan.
Board Resolution No. 6 was approved, wherein ELIP was renamed GSIS Retirement/Financial
Plan (RFP) to conform strictly to the wordings of Section 41(n) of Republic Act No. 8291.
Upon Garcia’s assumption of office as President and General Manager, Dimagiba requested to again
review the GSIS RFP. This was denied by Garcia. Believing that the GSIS RFP was morally
indefensible, Dimagiba sought the assistance of COA in determining the legality and/or morality of the
said plan.
COAs General Counsel Santos M. Alquizalas (Alquizalas) issued a Memorandum to COA
Commissioner Raul C. Flores regarding the GSIS RFP. Alquizalas opined that the GSIS RFP is a
supplementary retirement plan, which is prohibited under Republic Act No. 4968, or the Teves
Retirement Law. Alquizalas pronounced that Board Resolution Nos. 360 and 6 are null and
void.
Commissioner Flores forwarded this Memorandum to Dimagiba, who in turn forwarded it to Garcia.
Dimagiba, in her letter attached to Alquizalass Memorandum, added that for lack of legal basis, her
office was disallowing in audit the portion of retirement benefits granted under the GSIS RFP, or
the excess of the benefits due the retirees.
Garcia responded to Dimagiba, taking exception to the notice of disallowance for being highly irregular
and precipitate as it was based on a mere opinion of COAs counsel who had no authority to declare
the resolution of the GSIS Board of Trustees as null and void. Moreover, Garcia asseverated that COA
had neither power nor authority to declare as null and void certain resolutions approved by the Board
of Government Corporations, as the power to do so was exclusively lodged before the courts. He also
argued that the notice of disallowance was premature, and was tantamount to a pre-audit activity, as it
should refer only to a particular or specific disbursement of public funds and not against a general
Notices of Disallowance.
GSIS, together with some of the petitioners herein, gave notice to the COA CAO I that it was appealing
the 21 Notices of Disallowance it had received from Dimagiba on various dates. It amended this Notice
of Appeal the following day, to include all GSIS officials and employees held liable and accountable
under the said disallowances.
In their Memorandum of Appeal, the petitioners mainly argued that GSIS had the power, under its
charter, to adopt and implement the GSIS RFP. They claimed that to then disallow their retirement plan
would be tantamount to a violation of their constitutional right to be equally protected by our laws. The
petitioners also argued that Republic Act No. 8291 had modified or repealed all provisions of the Teves
Retirement Law that were inconsistent with it and that GSISs officials could not be held liable or
accountable for implementing the GSIS RFP since this was done in the performance of their duties.
COA, through Escarda, affirmed the disallowances made by Dimagiba. Escarda sustained the
COA general counsels opinion and said that while the GSIS may have the power to adopt an early
retirement or a financial assistance plan under its charter, it cannot supplement a retirement plan
already existing under the law. Escarda held that the GSIS RFP was in reality a supplementary
retirement plan for these GSIS employees. Finally, Escarda disagreed with GSISs assertion that the
Teves Retirement Law had been modified or repealed. Undaunted, the petitioners filed before the COA
a Petition for Review of CAO Is decision.
COA said that the power of GSIS in applying the law must not be abused. COA averred that GSIS was
found to be deficient actually by Fifteen Billion Pesos, and for it to reward its employees, who were
already enjoying salaries higher than their counterparts in other government agencies, meant that it
would have to dip into its principal fund to the prejudice of its members, who were the very raison
detre for its establishment. Addressing petitioners claim of discrimination, COA said that each of the
government agencies that had adopted its own retirement plans did so pursuant to a valid law and
under factual circumstances that were not present in the case of GSIS. COA also affirmed the liability
of the petitioners who were held accountable under the disallowances as they had failed to exercise
the diligence of a good father of a family in the performance of their functions. The petitioners sought
reconsiderationof this decision and even asked to be heard in oral arguments, but COA denied both
motions and affirmed its decision with finality. Hence, this petition.
Issue:
Whether COA committed a grave abuse of discretion amounting to lack or excess of jurisdiction.
Ruling:
No.
Republic Act No. 4968 or the Teves Retirement Law Is Still Good Law.
Commonwealth Act No. 186 as amended by the Teves Retirement Law:
While Republic Act No. 8291 speaks of an early retirement incentive plan or financial
assistance for the GSIS employees, Commonwealth Act No. 186 as amended by the Teves
Retirement Law talks about insurance or retirement plans other than our existing retirement
1
laws. In other words, what the Teves Retirement Law contemplates and prohibits
are separate retirement or insurance plans. In fact, the very same provision declared inoperative or
abolished all supplementary retirement or pension plans.
The GSIS Retirement/Financial Plan is Null and Void
In stark contrast, the GSIS RFP was not created because of a valid company reorganization. Its
purpose did not include the granting of benefits for early retirement. Neither did it provide benefits for
either voluntary or involuntary separation from GSIS. It was intended for employees who were already
eligible to retire under existing retirement laws. While the GSIS may have been clothed with authority
to adopt an early retirement or financial assistance plan, such authority was limited by the very law it
was seeking to implement.
COAs distaste for the huge retirement benefits of GSISs board members, officers, and employees,
who are already receiving significantly higher salaries than their counterparts in other government
agencies, COA illustrated the glaring discrepancy between what a GSIS employee would get under the
GSIS RFP, and what a mere GSIS member would get under applicable retirement laws.
The petitioners also question COAs authority to nullify the resolutions involved in this case. It
must be remembered that none of the COA decisions nullified the Board Resolutions adopted
by GSISs Board of Trustees. What the COA decisions affirmed were the disallowances made by
GSISs own Corporate Auditor, Dimagiba. It is irrelevant that COA, in its decisions, touched
upon issues not brought before it, or that it referred to its general counsels opinion on the GSIS
RFP, as these were done only to reinforce COAs position. They have no bearing upon the
weight of COAs decisions, which are based upon our existing laws and jurisprudence.
As for Dimagiba, while she may have relied on the opinion of COAs legal counsel to support the
disallowances she had made, it is worthy to note that she had already informed Garcia of the GSIS
RFPs illegality even before she sought COAs opinion on the matter. Moreover, neither Dimagibas nor
COAs confidence in the opinion of COAs general counsel could be faulted, as under Presidential
Decree No. 1445, or the Government Auditing Code of the Philippines, one of the responsibilities of
COAs legal office is to interpret pertinent laws and auditing rules and regulations.
In view of the above, we can hardly impute grave abuse of discretion amounting to lack or
excess of jurisdiction on the part of respondents COA, Escarda, and Dimagiba, for disallowing
in audit the portion of retirement benefits in excess of what is allowed under our existing
retirement laws. On the contrary, they acted with caution, diligence, and vigilance in the
exercise of their duties, especially since what was involved were huge amounts of money
imbued with public interest, since GSISs funds come from the contributions of its
members. Thus, GSISs business is to keep in trust the money belonging to its members, who
are not limited to its own employees.
The Payees are Liable for the Return of the Disallowed Benefits Under the GSIS RFP
This Court agrees that only the payees should be held liable for the return of the disallowed amounts
under the GSIS RFP.
Although it is true that as early as December 2000, Dimagiba already questioned the legality of the
GSIS RFP, it was only in August 2001 when GSIS received COAs opinion on the matter. Moreover,
COA first decided the issue only in 2002.
While the Board of Trustees believed they had the authority and power to adopt the GSIS RFP, the
officers on the other hand believed that they were implementing a valid resolution. On account of the
GSIS RFPs doubtful validity, the petitioners should have exercised prudence and held in abeyance the
disbursement of the portion of retirement benefits under the GSIS RFP until the issue of its legality had
been resolved.
However, the Board of Trustees and the officers held accountable under the Notices of Disallowance
should not be held liable as they are entitled to the presumption of having exercised their functions with
regularity and in good faith.
MMDA vs.DANTE O. GARIN
GR. No. 130230. April 15, 2005
Facts:
At issue in this case is the validity of Section 5(f) of Republic Act No. 7924 creating the Metropolitan
Manila Development Authority (MMDA), which authorizes it to confiscate and suspend or revoke
drivers licenses in the enforcement of traffic laws and regulations.
The issue arose from an incident involving the respondent Dante O. Garin, a lawyer, who was issued a
traffic violation receipt (TVR) and his drivers license confiscated for parking illegally along Gandara
Street, Binondo, Manila. Shortly before the expiration of the TVRs validity, the respondent addressed a
letter to then MMDA Chairman Prospero Oreta requesting the return of his drivers license, and
expressing his preference for his case to be filed in court. Receiving no immediate reply, Garin filed the
original complaint with application for preliminary injunction in the Regional Trial Court (RTC) of
Paranaque, contending that, in the absence of any implementing rules and regulations, Sec. 5(f) of
Rep. Act No. 7924 grants the MMDA unbridled discretion to deprive erring motorists of their licenses,
pre-empting a judicial determination of the validity of the deprivation, thereby violating the due process
clause of the Constitution. The respondent further contended that the provision violates the
constitutional prohibition against undue delegation of legislative authority, allowing as it does the
MMDA to fix and impose unspecified and therefore unlimited - fines and other penalties on erring
motorists.
In support of his application for a writ of preliminary injunction, Garin alleged that he suffered and
continues to suffer great and irreparable damage because of the deprivation of his license and that,
absent any implementing rules from the Metro Manila Council, the TVR and the confiscation of his
license have no legal basis.
For its part, the MMDA, represented by the Office of the Solicitor General, pointed out that the powers
granted to it by Sec. 5(f) of Rep. Act No. 7924 are limited to the fixing, collection and imposition of fines
and penalties for traffic violations, which powers are legislative and executive in nature; the judiciary
retains the right to determine the validity of the penalty imposed.
2
The MMDA also refuted Garins allegation that the Metro Manila Council, the governing board and
policy making body of the petitioner, has as yet to formulate the implementing rules for Sec. 5(f) of Rep.
Act No. 7924 and directed the courts attention to MMDA Memorandum Circular No. TT-95-001 dated
15 April 1995. Respondent Garin, however, questioned the validity of MMDA Memorandum Circular
No. TT-95-001, as he claims that it was passed by the Metro Manila Council in the absence of a
quorum.
Judge Helen Bautista-Ricafort issued a temporary restraining order, extending the validity of the
TVR as a temporary drivers license for twenty more days. A preliminary mandatory injunction was
granted and the MMDA was directed to return the respondents drivers license. The trial court rendered
the assailed decision in favor of the herein respondent.
In filing this petition, the MMDA reiterates and reinforces its argument in the court below and
contends that a license to operate a motor vehicle is neither a contract nor a property right, but is a
privilege subject to reasonable regulation under the police power in the interest of the public safety and
welfare. The petitioner further argues that revocation or suspension of this privilege does not constitute
a taking without due process as long as the licensee is given the right to appeal the revocation.
The MMDA argues that Memorandum Circular No. TT-95-001 was validly passed in the
presence of a quorum, and it asserts that though the circular is the basis for the issuance of TVRs, the
basis for the summary confiscation of licenses is Sec. 5(f) of Rep. Act No. 7924 itself, and that such
power is self-executory and does not require the issuance of any implementing regulation or circular.
MMDA, through its Chairman Bayani Fernando, implemented Memorandum Circular No. 04,
Series of 2004, outlining the procedures for the use of the Metropolitan Traffic Ticket (MTT)
scheme.Traffic enforcers may no longer confiscate drivers licenses as a matter of course in cases of
traffic violations. All motorists with unredeemed TVRs were given seven days from the date of
implementation of the new system to pay their fines and redeem their license or vehicle plates.
It would seem, therefore, recent events have overtaken the Courts need to decide this case,
which has been rendered moot and academic by the implementation of Memorandum Circular No. 04,
Series of 2004.
Issue:
Whether the MMDA needs to enact IRRs in order to exercise its functions.
The petitioner, however, is not precluded from re-implementing Memorandum Circular No.
TT-95-001, or any other scheme, for that matter, that would entail confiscating drivers licenses. For the
proper implementation, therefore, of the petitioners future programs, this Court deems it appropriate to
make the following observations:
1. A license to operate a motor vehicle is a privilege that the state may withhold in the exercise of its
police power.
The petitioner correctly points out that a license to operate a motor vehicle is not a property right,
but a privilege granted by the state, which may be suspended or revoked by the state in the exercise of
its police power, in the interest of the public safety and welfare, subject to the procedural due process
requirements.
The common thread running through the cited cases is that it is the legislature, in the exercise of
police power, which has the power and responsibility to regulate how and by whom motor vehicles may
be operated on the state highways.
2. The MMDA is not vested with police power.
In Metro Manila Development Authority v. Bel-Air Village Association, Inc.,[14] we categorically
stated that Rep. Act No. 7924 does not grant the MMDA with police power, let alone legislative power,
and that all its functions are administrative in nature.
We restate here the doctrine in the said decision as it applies to the case at bar: police power, as
an inherent attribute of sovereignty, is the power vested by the Constitution in the legislature to make,
ordain, and establish all manner of wholesome and reasonable laws, statutes and ordinances, either
with penalties or without, not repugnant to the Constitution, as they shall judge to be for the good and
welfare of the commonwealth, and for the subjects of the same.
Having been lodged primarily in the National Legislature, it cannot be exercised by any group or
body of individuals not possessing legislative power. The National Legislature, however, may delegate
this power to the president and administrative boards as well as the lawmaking bodies of municipal
corporations or local government units (LGUs). Once delegated, the agents can exercise only such
legislative powers as are conferred on them by the national lawmaking body.
Clearly, the MMDA is not a political unit of government. The power delegated to the MMDA is
that given to the Metro Manila Council to promulgate administrative rules and regulations in the
implementation of the MMDAs functions. There is no grant of authority to enact ordinances and
regulations for the general welfare of the inhabitants of the metropolis.
Therefore, insofar as Sec. 5(f) of Rep. Act No. 7924 is understood by the lower court and by the
petitioner to grant the MMDA the power to confiscate and suspend or revoke drivers licenses without
need of any other legislative enactment, such is an unauthorized exercise of police power.
3. Sec. 5(f) grants the MMDA with the duty to enforce existing traffic rules and regulations.
Section 5 of Rep. Act No. 7924 enumerates the Functions and Powers of the Metro Manila
Development Authority. The contested clause in Sec. 5(f) states that the petitioner shall install and
administer a single ticketing system, fix, impose and collect fines and penalties for all kinds of
violations of traffic rules and regulations, whether moving or nonmoving in nature, and confiscate and
suspend or revoke drivers licenses in the enforcement of such traffic laws and regulations, the
provisions of Rep. Act No. 4136 and P.D. No. 1605 to the contrary notwithstanding, and that (f)or this
purpose, the Authority shall enforce all traffic laws and regulations in Metro Manila, through its traffic
operation center, and may deputize members of the PNP, traffic enforcers of local government units,
duly licensed security guards, or members of non-governmental organizations to whom may be
delegated certain authority, subject to such conditions and requirements as the Authority may impose.
Thus, where there is a traffic law or regulation validly enacted by the legislature or those
agencies to whom legislative powers have been delegated (the City of Manila in this case), the
petitioner is not precluded and in fact is duty-bound to confiscate and suspend or revoke drivers
licenses in the exercise of its mandate of transport and traffic management, as well as the
3
administration and implementation of all traffic enforcement operations, traffic engineering services
and traffic education programs.
Soriano v MTRCB
GR No. 164785
Facts:
In these two petitions for certiorari and prohibition under Rule 65, petitioner Eliseo F. Soriano seeks to
nullify and set aside an order and a decision of the Movie and Television Review and Classification
Board (MTRCB) in connection with certain utterances he made in his television show, Ang Dating
Daan.
On August 10, 2004, at around 10:00 p.m., petitioner, as host of the program Ang Dating Daan, aired on
UNTV 37, made the following remarks:
Lehitimong anak ng demonyo; sinungaling;
Gago ka talaga Michael, masahol ka pa sa putang babae o di ba. Yung putang
babae ang gumagana lang doon yung ibaba, [dito] kay Michael ang gumagana
ang itaas, o di ba! O, masahol pa sa putang babae yan. Sabi ng lola ko masahol
pa sa putang babae yan. Sobra ang kasinungalingan ng mga demonyong ito. x x
x this authority stems naturally from, and is necessary for the exercise of, its power of regulation and
Two days after, before the MTRCB, separate but almost identical affidavit-complaints were lodged by
Jessie L. Galapon and seven other private respondents, all members of the Iglesia ni Cristo (INC),
against petitioner in connection with the above broadcast. Respondent Michael M. Sandoval, who felt
directly alluded to in petitioners remark, was then a minister of INC and a regular host of the TV
program Ang Tamang Daan. Forthwith, the MTRCB sent petitioner a notice of the hearing in relation to
the alleged use of some cuss words in the episode of Ang Dating Daan. After a preliminary conference
in which petitioner appeared, the MTRCB, preventively suspended the showing of Ang Dating
Daan program for 20 days. The same order also set the case for preliminary investigation.
The following day, petitioner sought reconsideration of the preventive suspension order. Two days
after, however, petitioner sought to withdraw his motion for reconsideration, followed by the filing with
this Court of a petition for certiorari and prohibition, to nullify the preventive suspension order thus
issued.
In Adm. Case No. 01-04, the MTRCB issued a decision finding respondent Soriano liable for his
utterances and thereby imposing on him a penalty of three (3) months suspension from his program,
Ang Dating Daan. Hence, this petition.
Issues:
In G.R. No. 164785:
THE ORDER OF PREVENTIVE SUSPENSION PROMULGATED BY
RESPONDENT [MTRCB] AGAINST THE TELEVISION PROGRAM ANG
DATING DAAN x x x IS NULL AND VOID FOR BEING ISSUED WITH GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF
JURISDICTION as PD 1986 does not expressly authorize MTRCB to issue
preventive suspension.
In G.R. No. 165636:
Whether the decision suspending his show for 3 months is invalid as it curtails his
right of freedom of speech and expression and of religion.
Ruling:
G.R. No. 164785 - NO.
Administrative agencies have powers and functions which may be administrative,
investigatory, regulatory, quasi-legislative, or quasi-judicial, or a mix of the five, as may be conferred by
the Constitution or by statute. They have in fine only such powers or authority as are granted or
delegated, expressly or impliedly, by law.And in determining whether an agency has certain powers,
the inquiry should be from the law itself. But once ascertained as existing, the authority given should
be liberally construed.
A perusal of the MTRCBs basic mandate under PD 1986 reveals the possession by the
agency of the authority, albeit impliedly, to issue the challenged order of preventive suspension. And
supervision.
The issuance of a preventive suspension comes well within the scope of the MTRCBs
authority and functions expressly set forth in PD 1986, more particularly under its Sec. 3(d), which
empowers the MTRCB to supervise, regulate, and grant, deny or cancel, permits for the x x x exhibition,
and/or television broadcast of all motion pictures, television programs and publicity materials, to the
end that no such pictures, programs and materials as are determined by the BOARD to be
objectionable in accordance with paragraph (c) hereof shall be x x x exhibited and/or broadcast by
television.
Surely, the power to issue preventive suspension forms part of the MTRCBs express
regulatory and supervisory statutory mandate and its investigatory and disciplinary authority subsumed
in or implied from such mandate.
Just as untenable is petitioners argument on the nullity of the preventive suspension order
on the ground of lack of hearing. As it were, the MTRCB handed out the assailed order after petitioner,
in response to a written notice, appeared before that Board for a hearing on private respondents
complaint. No less than petitioner admitted that the order was issued after the adjournment of the
hearing, proving that he had already appeared before the MTRCB. Under Sec. 3, Chapter XIII of the
IRR of PD 1986, preventive suspension shall issue [a]ny time during the pendency of the case. In this
particular case, it was done after MTRCB duly apprised petitioner of his having possibly violated PD
1986 and of administrative complaints that had been filed against him for such violation. At any event,
that preventive suspension can validly be meted out even without a hearing.
G.R. No. 165636- NO.
4
Petitioner asserts that his utterance in question is a protected form of speech.
The Court rules otherwise. It has been established in this jurisdiction that unprotected speech or
low-value expression refers to libelous statements, obscenity or pornography, false or misleading
advertisement, insulting or fighting words, i.e., those which by their very utterance inflict injury or tend
to incite an immediate breach of peace and expression endangering national security. The Court finds
that petitioners statement can be treated as obscene, at least with respect to the average child.
A cursory examination of the utterances complained of and the circumstances of the case reveal that
to an average adult, the utterances may not constitute obscene but merely indecent utterances. They
can be viewed as figures of speech or merely a play on words. In the context they were used, they may
not appeal to the prurient interests of an adult. The problem with the challenged statements is that they
were uttered in a TV program that is rated G or for general viewership, and in a time slot that would
likely reach even the eyes and ears of children.
Even if we concede that petitioners remarks are not obscene but merely indecent speech, still the
Court rules that petitioner cannot avail himself of the constitutional protection of free speech. Said
statements were made in a medium easily accessible to children. With respect to the young minds,
said utterances are to be treated as unprotected speech.
After a review of the facts, the Court finds that what MTRCB imposed on petitioner is an administrative
sanction or subsequent punishment for his offensive and obscene language in Ang Dating Daan.
To clarify, statutes imposing prior restraints on speech are generally illegal and presumed
unconstitutional breaches of the freedom of speech. The exceptions to prior restraint are movies,
television, and radio broadcast censorship in view of its access to numerous people, including the
young who must be insulated from the prejudicial effects of unprotected speech. PD 1986 was passed
creating the Board of Review for Motion Pictures and Television (now MTRCB) and which requires
prior permit or license before showing a motion picture or broadcasting a TV program. The Board can
classify movies and television programs and can cancel permits for exhibition of films or television
broadcast.
POWER OF ADMINISTRATIVE AGENCIES
GMA NETWORK, INC. V MTRCB
GR. No. 148579 February 5, 2007
Subject of this petition for review under Rule 45 of the Rules of Court is the decision of the Court of
Appeals (CA) affirming the order of respondent MTRCB, suspending from airing/broadcasting any
program on EMC Channel 27 for a period of seven (7) days which period shall commence immediately
upon receipt of this Order.
Facts:
Petitioner GMA Network, Inc. operates and manages the UHF television station, EMC Channel 27. On
January 7, 2000, respondent MTRCB issued an order of suspension against petitioner for airing "Muro
Ami: The Making" without first securing a permit from it as provided in Section 7 of PD 1986. The
penalty of suspension was based on Memorandum Circular 98-17 which provided for the penalties for
exhibiting a program without a valid permit from the MTRCB.
Petitioner moved for reconsideration of the suspension order and, at the same time, informed MTRCB
that Channel 27 had complied with the suspension order by going off the air since midnight of January
11, 2000. It also filed a letter-protest which was merely "noted" by the MTRCB thereby, in effect,
denying both the motion for reconsideration and letter-protest. Petitioner then filed with the CA a
petition for certiorari which was dismissed. Hence, this recourse.
Issues:
(1) whether the MTRCB has the power or authority to review the show "Muro Ami: The Making" prior to
its broadcast by television and
(2) whether Memorandum Circular No. 98-17 was enforceable and binding on petitioner.
Ruling:
1. Yes. Section 3 of PD 1986 empowers the MTRCB to screen, review and examine all motion pictures,
television programs including publicity materials. This power of prior review is highlighted in its Rules
and Regulations, particularly Section 7 thereof.
The only exemptions from the MTRCB’s power of review are those expressly mentioned in Section
7, such as (1) television programs imprinted or exhibited by the Philippine Government and/or
departments and agencies, and (2) newsreels. According to the CA, the subject program was a
publicity for the movie, "Muro Ami." In adopting this finding, we hold that "Muro Ami: The Making," did
not fall under any of the exemptions and was therefore within the power of review of MTRCB.
2. No. However, while MTRCB had jurisdiction over the subject program, Memorandum Circular 98-17,
which was the basis of the suspension order, was not binding on petitioner. The Administrative Code of
1987, particularly Section 3 thereof, expressly requires each agency to file with the Office of the
National Administrative Register (ONAR) of the University of the Philippines Law Center three certified
copies of every rule adopted by it. Administrative issuances which are not published or filed with the
ONAR are ineffective and may not be enforced.
5
Memorandum Circular No. 98-17, which provides for the penalties for the first, second and third
offenses for exhibiting programs without valid permit to exhibit, has not been registered with the ONAR
as of January 27, 2000. Hence, the same is yet to be effective. It is thus unenforceable since it has not
been filed in the ONAR. Consequently, petitioner was not bound by said circular and should not have
been meted the sanction provided thereunder.
Board of Trustees of the GSIS v Velasco
GR No. 170463
This is a petition for review of the Regional Trial Court of Manila, in Civil Case No. 03-108389. In its 24
September 2004 Decision, the trial court granted respondents Albert M. Velasco and Mario I.
Molinas (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.
Facts:
Petitioners charged respondents administratively with grave misconduct and placed them under
preventive suspension for 90 days. 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.
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. SVP Madarang denied the request citing GSIS Board Resolution No. 372 issued by
petitioner Board of Trustees of the GSIS which approved the new GSIS salary structure, its
implementing rules and regulations, and the adoption of the supplemental guidelines on step
increment and promotion.
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. Respondents request was again denied because of their pending
administrative case. 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.
Respondents filed before the trial court a petition for prohibition with prayer for a writ of preliminary
injunction. Respondents claimed that they were denied the benefits which GSIS employees were
entitled under Resolution No. 306. 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. Petitioners
filed their comment with motion to dismiss and opposition. Respondents filed their opposition to the
motion to dismiss. The trial court denied petitioners motion to dismiss and granted respondents prayer
for a writ of preliminary injunction. Petitioners filed a motion for reconsideration but such was denied.
The trial court granted respondents petition for prohibition. Petitioners filed a motion for
reconsideration but was denied. Petitioner now assails the jurisdiction of the RTC. It argues that it is
the CSC who has the jurisdiction of the said case because it involves claims of employment benefits.
Hence, this petition.
The Ruling of the Trial Court
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). Since they were not
registered, the trial court declared that the assailed resolutions have not become effective.
Issue:
Whether the jurisdiction over the subject matter lies with the Civil Service Commission (CSC) and not
with the Regional Trial Court of Manila, Branch 19.
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Ruling:
No. 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. 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.
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. 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. Since respondent Velasco, plaintiff before the trial court, is a resident of the City of Manila,
the petition could properly be filed in the City of Manila. The choice of venue is sanctioned by Section 2,
Rule 4 of the Rules of Court.
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.
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.
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. To determine whether service is continuous, it is necessary to define what actual
service is. 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.
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.
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. 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.The grant of step increment will only be delayed by the same number of days that the
employee was under suspension.
Third, on preventive suspension, preventive suspension pending investigation is not a penalty. 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. 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, 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. 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.
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Fourth, the trial court was correct in declaring that respondents had the right to be presumed innocent the Auditor General Informed him on June 19, 1950, of his refusal to modify his decision. Hence this
until proven guilty. This means that an employee who has a pending administrative case filed against petition for review.
him is given the benefit of the doubt and is considered innocent until the contrary is proven.

Issue:
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 Whether the Control Committee has the power to deny such resolution.
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.
Ruling:

Yes. Republic Act No. 51 was approved authorizing the President of the Philippines, among other
CENON S. CERVANTES vs. THE AUDITOR GENERAL things, to effect such reforms and changes in government owned and controlled corporations for the
G.R. No. L-4043 May 26, 1952 purpose of promoting simplicity, economy and efficiency in their operation Pursuant to this authority,
the President on October 4, 1947, promulgated Executive Order No. 93 creating the Government
Enterprises Council. The council was to advise the President in the exercise of his power of
supervision and control over these corporations and to formulate and adopt such policy and measures
This is a petition to review a decision of the Auditor General denying petitioner's claim for quarters as might be necessary to coordinate their functions and activities. The Executive Order also provided
allowance as manager of the National Abaca and Other Fibers Corporation, otherwise known as the that the council was to have a Control Committee, and with the power, among others —
NAFCO.

(1) To supervise, for and under the direction of the President, all the corporations owned or controlled
Facts: by the Government for the purpose of insuring efficiency and economy in their operations;

It appears that petitioner was in 1949 the manager of the NAFCO with a salary of P15,000 a year. By a
resolution of the Board of Directors of this corporation approved on January 19 of that year, he was
granted quarters allowance of not exceeding P400 a month effective the first of that month. Submitted (2) To pass upon the program of activities and the yearly budget of expenditures approved by the
the Control Committee of the Government Enterprises Council for approval, the said resolution was respective Boards of Directors of the said corporations; and
disapproved by the said Committee on strength of the recommendation of the NAFCO auditor,
concurred in by the Auditor General, (1) that quarters allowance constituted additional compensation
prohibited by the charter of the NAFCO, which fixes the salary of the general manager thereof at the
sum not to exceed P15,000 a year, and (2) that the precarious financial condition of the corporation did (3) To carry out the policies and measures formulated by the Government Enterprises Council with the
not warrant the granting of such allowance. approval of the President. (Sec. 3, Executive Order No. 93.)

Petitioner asked the Control Committee to reconsider its action and approve his claim for allowance. With its controlling stock owned by the Government and the power of appointing its directors vested in
The claim was again referred by the Control Committee to the auditor General for comment. The latter, the President of the Philippines, there can be no question that the NAFCO is Government controlled
in turn referred it to the NAFCO auditor, who reaffirmed his previous recommendation and emphasized corporation subject to the provisions of Republic Act No. 51 and the executive order (No. 93)
that the fact that the corporation's finances had not improve but as the petitioner insisted on his claim

8
promulgated in accordance therewith. Consequently, it was also subject to the powers of the Control
Committee created in said executive order, among which is the power of supervision for the purpose of
insuring efficiency and economy in the operations of the corporation and also the power to pass upon
the program of activities and the yearly budget of expenditures approved by the board of directors. It
can hardly be questioned that under these powers the Control Committee had the right to pass upon,
and consequently to approve or disapprove, the resolution of the NAFCO board of directors granting
quarters allowance to the petitioners as such allowance necessarily constitute an item of expenditure
in the corporation's budget. That the Control Committee had good grounds for disapproving the
resolution is also clear, for, as pointed out by the Auditor General and the NAFCO auditor, the granting
of the allowance amounted to an illegal increase of petitioner's salary beyond the limit fixed in the
corporate charter and was furthermore not justified by the precarious financial condition of the
corporation.
It is argued, however, that Executive Order No. 93 is null and void, not only because it is based on a
law that is unconstitutional as an illegal delegation of legislature power to executive, but also because
it was promulgated beyond the period of one year limited in said law.
The rule is that so long as the Legislature "lays down a policy and a standard is established by the
statute" there is no undue delegation. (11 Am. Jur. 957). Republic Act No. 51 in authorizing the
President of the Philippines, among others, to make reforms and changes in government-controlled
corporations, lays down a standard and policy that the purpose shall be to meet the exigencies
attendant upon the establishment of the free and independent government of the Philippines and to
promote simplicity, economy and efficiency in their operations. The standard was set and the policy
fixed. The President had to carry the mandate. This he did by promulgating the executive order in
question which, tested by the rule above cited, does not constitute an undue delegation of legislative
power.
Regardless of whether quarters allowance should be considered as compensation or not, the
resolution of the board of the directors authorizing payment thereof to the petitioner cannot be given
effect since it was disapproved by the Control Committee in the exercise of powers granted to it by
Executive Order No. 93.
PNR v Kanlaon
GR No. 182967
This is a petition for review of the Decision and Resolution of the Court of Appeals in CA-G.R. CV No.
70205. In its Decision, the Court of Appeals affirmed the Decision of the Regional Trial Court of
Quezon City, Branch 221 (trial court), directing petitioner Philippine National Railways (PNR) to pay
respondent Kanlaon Construction Enterprises Co., Inc. (Kanlaon) the remaining balance of the
contracts and to release the retention money. Court of Appeals denied PNRs motion for
reconsideration.
Facts:
PNR and Kanlaon entered into contracts for the repair of three PNR station buildings and passenger
shelters, namely: 1) College Station, 2) Bian Station and 3) Buendia Station for P1,820,534.40. The
total cost of the three projects was P6,685,081.44. By November 1990, Kanlaon alleged that it had
already completed the three projects.
On 30 June 1994, Kanlaon sent a demand letter to PNR requesting for the release of the retention
money in the amount of P333,894.07. In a letter PNR denied Kanlaon’s demand because of the 24
January 1994 Notices of Suspension issued by the Commission on Audit (COA).
Kanlaon filed a complaint for collection of sum of money plus damages against PNR. Kanlaon sought
to recover from PNR a total of P865,906.79 consisting of the remaining balance of the three projects in
the amount of P531,652.72 and the retention money in the amount of P334,254.07. In its amended
complaint, Kanlaon impleaded the COA.
In its answer, PNR admitted the existence of the three contracts but alleged that Kanlaon did not
comply with the conditions of the contract. PNR also alleged that Kanlaon did not complete the
projects and that PNR did not have any unpaid balance. PNR added that it had a valid ground to refuse
the release of the retention money because of the COA orders suspending the release of payment
to Kanlaon. In its Decision, the trial court ruled in favor of Kanlaon. COA appealed and PNR filed a
motion for reconsideration.
The trial court modified its Decision and fixed the interest rate from twelve percent to six percent per
annum from the date of the first written demand. PNR and COA appealed to the Court of Appeals. The
CA affirmed the trial court’s decision. PNR filed a motion for reconsideration but was denied. Hence,
this petition.
Issue:
Whether the notices of suspension issued by COA were valid.
Ruling:
Yes. The Court notes that one of the reasons the COA issued the Notices of Suspension was because
the contracts did not contain a Certificate of Availability of Funds as required under Sections 85 and 86
of Presidential Decree No. 1445. Kanlaon does not dispute the absence of a Certificate of Availability
of Funds.
The Administrative Code of 1987, a more recent law, also contains the same provisions. Sections 46,
47, and 48, Chapter 8, Subtitle B, Title I, Book V of the Administrative Code of 1987 provide:
SECTION 46. Appropriation Before Entering into Contract.
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 1. No contract involving the expenditure of public funds shall be entered into unless The three contracts between PNR and Kanlaon do not comply with the requirement of a certification of
there is an appropriation therefor, the unexpended balance of which, free of appropriation and fund availability. Even if a certification of appropriation is not applicable to PNR if the
other obligations, is sufficient to cover the proposed expenditure; and funds used are internally generated, still a certificate of fund availability is required. Thus, the three
contracts between PNR and Kanlaon are void for violation of Sections 46, 47, and 48, Chapter 8,
Subtitle B, Title I, Book V of the Administrative Code of 1987, as well as Sections 85, 86, and 87 of the
2. Notwithstanding this provision, contracts for the procurement of supplies and Government Auditing Code of the Philippines.
materials to be carried in stock may be entered into under regulations of the
Commission provided that when issued, the supplies and materials shall be However, Kanlaon is not left without recourse. The law itself affords it the remedy. Section 48 of the
charged to the proper appropriations account. Administrative Code of 1987 provides that the officer or officers entering into the contract shall be liable
to the Government or other contracting party for any consequent damage to the same extent as if the
transaction had been wholly between private parties. Kanlaon could go after the officers who signed
SECTION 47. Certificate Showing Appropriation to Meet Contract. Except in the the contract and hold them personally liable.
case of a contract for personal service, for supplies for current consumption or to
be carried in stock not exceeding the estimated consumption for three (3) months,
or banking transactions of government-owned or controlled banks, no contract
involving the expenditure of public funds by any government agency shall
be entered into or authorized unless the proper accounting official of the
agency concerned shall have certified to the officer entering into the
obligation that funds have been duly appropriated for the purpose and that
the amount necessary to cover the proposed contract for the current
calendar year is available for expenditure on account thereof, subject to
verification by the auditor concerned. The certificate signed by the proper
accounting official and the auditor who verified it, shall be attached to and
become an integral part of the proposed contract, and the sum so certified shall
not thereafter be available for expenditure for any other purpose until the
obligation of the government agency concerned under the contract is fully
extinguished.

SECTION 48. Void Contract and Liability of Officer. Any contract entered into
contrary to the requirements of the two (2) immediately preceding sections
shall be void, and the officer or officers entering into the contract shall be liable
to the Government or other contracting party for any consequent damage to the
same extent as if the transaction had been wholly between private parties.
(Emphasis supplied)

Thus, the Administrative Code of 1987 expressly prohibits the entering into contracts involving the
expenditure of public funds unless two prior requirements are satisfied. First, there must be an
appropriation law authorizing the expenditure required in the contract. Second, there must be attached
to the contract a certification by the proper accounting official and auditor that funds have been
appropriated by law and such funds are available. Failure to comply with any of these two
requirements renders the contract void.
The law expressly declares void a contract that fails to comply with the two requirements, namely, an
appropriation law funding the contract and a certification of appropriation and fund availability. The
clear purpose of these requirements is to insure that government contracts are never signed unless
supported by the corresponding appropriation law and fund availability.

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