ADMINISTRATIVE LAW Atty. Ernesto C. Salao Case Digests: March 5, 2013 1 MAYNARD R. PERALTA, petitioner, vs.

CIVIL SERVICE COMMISSION, respondent. G.R. No. 95832 August 10, 1992 PADILLA, J.: Facts: 1. Petitioner was appointed Trade-Specialist II on 25 September 1989 in the Department of Trade and Industry (DTI). a. His appointment was classified as"Reinstatement/Permanent". 2. On 8 December 1989, petitioner received his initial salary, covering the period from 25 September to 31 October 1989. a. 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 3. 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. a. Amando T. Alvis answered petitioner's query in a memorandum: b. "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)." 4. Petitioner then sent a latter dated 20 February 1990 addressed to Civil Service Commission (CSC) Chairman Patricia A. Sto. Tomas a. 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? b. 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. 5. Commission promulgated Resolution No. 90-497: 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.
Jerika Everly Marquez San Sebastian College of Law

6. Petitioner filed a motion for reconsideration and in Resolution No. 90797, the respondent Commission denied said motion for lack of merit: a. 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 b. Petitioner's motion for reconsideration having been denied, petitioner filed the present petition. Issue: 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. Held: Resolutions No. 90-497 and 90-797 are declared NULL and VOID. 1. 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. a. 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." b. 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. 2. But the issue of whether or not the policy that had been adopted and in force since 1965 is valid or not, remains unresolved.

Page 1

3.

4.

5.

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. a. The Civil Service Act of 1959 (R.A. No. 2260) conferred upon the Commissioner of Civil Service the following powers and duties: b. 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; c. (k) To perform other functions that properly belong to a central personnel agency. The Commission promulgated the herein challenged policy. a. Said policy was embodied in a 2nd Indorsement dated 12 February 1965 of the respondent Commission involving the case of a Mrs. Rosalinda Gonzales. b. 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 nonworking days occur within the period of service actually rendered. The same policy is reiterated in the Handbook of Information on the Philippine Civil Service. 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. a. 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. b. 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.

6. 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 a. 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. b. 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 c. 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. d. 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. 7. 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 a. 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. b. The Court, in this connection, calls upon the respondent Commission and the Congress of the Philippines, if necessary,

Jerika Everly Marquez San Sebastian College of Law

Page 2

to handle this problem with justice and equity to all affected government employees. 2 EDWIN B. JAVELLANA, petitioner, vs. DEPARTMENT OF INTERIOR AND LOCAL GOVERNMENT AND LUIS T. SANTOS, SECRETARY, respondents. G.R. No. 102549 August 10, 1992 Facts: 1. This petition for review on certiorari involves the right of a public official to engage in the practice of his profession while employed in the Government. 2. Attorney Erwin B. Javellana was an elected City Councilor of Bago City, Negros Occidental. a. City Engineer Ernesto C. Divinagracia filed Administrative Case No. C-10-90 against Javellana for: (1) violation of Department of Local Government (DLG) Memorandum Circular No. 80-38 in relation to DLG Memorandum Circular No. 74-58 and of Section 7, paragraph b, No. 2 of Republic Act No. 6713, otherwise known as the "Code of Conduct and Ethical Standards for Public Officials and Employees," and (2) for oppression, misconduct and abuse of authority. b. Alleged that Javellana, an incumbent member of the City Council or Sanggunian Panglungsod of Bago City, and a lawyer by profession, has continuously engaged in the practice of law without securing authority for that purpose from the Regional Director, Department of Local Government, as required by DLG Memorandum Circular No. 80-38 in relation to DLG Memorandum Circular No. 74-58 of the same department 3. Javellana, as counsel for Antonio Javiero and Rolando Catapang, filed a case against City Engineer Ernesto C. Divinagracia of Bago City for "Illegal Dismissal and Reinstatement with Damages" putting him in public ridicule; that Javellana also appeared as counsel in several criminal and civil cases in the city, without prior authority of the DLG Regional Director, in violation of DLG Memorandum Circular No. 80-38 4. Secretary Luis T. Santos issued Memorandum Circular No. 90-81 setting forth guidelines for the practice of professions by local elective officials 5. Section 7 of Republic Act No. 6713 (Code of Conduct and Ethical Standards for Public Officials and Employees), states, in part, that "In addition to acts and omission of public officials . . . now prescribed in the Constitution and existing laws, the following shall constitute prohibited acts and transactions of any public officials . . . and are hereby declared to be unlawful: . . . (b) Public Officials . . . during their
Jerika Everly Marquez San Sebastian College of Law

incumbency shall not: (1) . . . accept employment as officer, employee, consultant, counsel, broker, agent, trustee or nominee in any private enterprise regulated, supervised or licensed by their office unless expressly allowed by law; (2) Engage in the private practice of their profession unless authorized by the Constitution or law, provided that such practice will not conflict or tend to conflict with their official functions: . . . 6. Under Memorandum Circular No. 17 of the Office of the President dated September 4, 1986, the authority to grant any permission, to accept private employment in any capacity and to exercise profession, to any government official shall be granted by the head of the Ministry (Department) or agency in accordance with Section 12, Rule XVIII of the Revised Civil Service Rules, 7. Javellana filed a Motion to Dismiss the administrative case against him on the ground mainly that DLG Memorandum Circulars Nos. 80-38 and 90-81 are unconstitutional because the Supreme Court has the sole and exclusive authority to regulate the practice of law. a. Javellana's motion to dismiss was denied by the public respondents. His motion for reconsideration was likewise denied 8. Five months later or on October 10, 1991, the Local Government Code of 1991 (RA 7160) was signed into law 9. Administrative Case No. C-10-90 was again set for hearing on November 26, 1991. a. Javellana thereupon filed this petition for certiorari praying that DLG Memorandum Circulars Nos. 80-38 and 90-81 and Section 90 of the new Local Government Code (RA 7160) be declared unconstitutional and null void Issue: WON DLG Memorandum Circulars Nos. 80-38 and 90-81 and Section 90 of the new Local Government Code (RA 7160) are constitutional They violate Article VIII, Section 5 of the 1987 Constitution o SC: Promulgate rules concerning the protection and enforcement of constitutional rights, pleading, practice, and procedure in all courts, the admission to the practice of law, the Integrated Bar, and legal assistance to the underprivileged They constitute class legislation, being discriminatory against the legal and medical professions for only sanggunian members who are lawyers and doctors are restricted in the exercise of their profession while dentists, engineers, architects, teachers, opticians, morticians and others are not so restricted

Page 3

Held: the Court resolved to dismiss the petition for lack of merit. 1. this Court accords great respect to the decisions and/or actions of administrative authorities not only because of the doctrine of separation of powers but also for their presumed knowledgeability and expertise in the enforcement of laws and regulations entrusted to their jurisdiction a. We find no grave abuse of discretion on the part of the respondent, Department of Interior and Local Government (DILG), in issuing the questioned DLG Circulars Nos. 80-30 and 90-81 and in denying petitioner's motion to dismiss the administrative charge against him. b. Complaints against public officers and employees relating or incidental to the performance of their duties are necessarily impressed with public interest for by express constitutional mandate, a public office is a public trust. The complaint for illegal dismissal filed by Javiero and Catapang against City Engineer Divinagracia is in effect a complaint against the City Government of Bago City, their real employer, of which petitioner Javellana is a councilman c. Hence, judgment against City Engineer Divinagracia would actually be a judgment against the City Government. By serving as counsel for the complaining employees and assisting them to prosecute their claims against City Engineer Divinagracia, the petitioner violated Memorandum Circular No. 74-58 (in relation to Section 7[b-2] of RA 6713) prohibiting a government official from engaging in the private practice of his profession, if such practice would represent interests adverse to the government. 2. Petitioner's contention that Section 90 of the Local Government Code of 1991 and DLG Memorandum Circular No. 90-81 violate Article VIII, Section 5 of the Constitution is completely off tangent. a. Neither the statute nor the circular trenches upon the Supreme Court's power and authority to prescribe rules on the practice of law b. The Local Government Code and DLG Memorandum Circular No. 90-81 simply prescribe rules of conduct for public officials to avoid conflicts of interest between the discharge of their public duties and the private practice of their profession, in those instances where the law allows it. c. Section 90 of the Local Government Code does not discriminate against lawyers and doctors. It applies to all provincial and

municipal officials in the professions or engaged in any occupation. Section 90 explicitly provides that sanggunian members "may practice their professions, engage in any occupation, or teach in schools expect during session hours." If there are some prohibitions that apply particularly to lawyers, it is because of all the professions, the practice of law is more likely than others to relate to, or affect, the area of public service. 3 COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. HON. COURT OF APPEALS, HON. COURT OF TAX APPEALS and FORTUNE TOBACCO CORPORATION,respondents. G.R. No. 119761 August 29, 1996 VITUG, J.: Facts: 1. Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of different brands of cigarettes a. Philippine Patent Office issued to the corporation separate certificates of trademark registration over "Champion," "Hope," and "More" cigarettes b. 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." c. Ad Valorem taxes were imposed on these brands 2. 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. a. 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." b. 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.

Jerika Everly Marquez San Sebastian College of Law

Page 4

3.

4. 5.

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. a. On 15 July 1993, Fortune Tobacco received, by ordinary mail, a certified xerox copy of RMC 37-93. b. Fortune Tobacco requested for a review, reconsideration and recall of RMC 37-93. The request was denied on 29 July 1993. The CIR assessed Fortune Tobacco for ad valorem tax deficiency amounting to P9,598,334.00. a. Fortune Tobacco filed a petition for review with the CTA CTA upheld the position of Fortune Tobacco and adjudged a. "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 b. The CIR forthwith filed a petition for review with the Court of Appeals, questioning the CTA's

6.

Issue: WON RMC 37-93 is a legislative or interpretative ruling. o 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. 7.

Held: The Court must sustain both the appellate court and the tax court. 1. Let us first distinguish between two kinds of administrative issuances a legislative rule and aninterpretative rule. a. 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

interpretative rules are designed to provide guidelines to the law which the administrative agency is in charge of enforcing. c. 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 d. 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. 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, a. 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. b. 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 not bearing foreign brand subject to 45% ad valorem tax. a. Hence, without RMC 37-93, the enactment of RA 7654, would have had no new tax rate consequence on private respondent's products. b. 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. c. In so doing, the BIR not simply intrepreted the law; verily, it legislated under its quasi-legislative authority. d. The due observance of the requirements of notice, of hearing, and of publication should not have been then ignored.

b.

Jerika Everly Marquez San Sebastian College of Law

Page 5

8.

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. a. 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 consideredadjudicatory in nature and thus violative of due process following the Ang Tibay 16 doctrine, the measure suffers from lack of uniformity of taxation.

4 COMMISSIONER OF CUSTOMS and the DISTRICT COLLECTOR OF THE PORT OF SUBIC, Petitioners, versus HYPERMIX FEEDS CORPORATION, G.R. No. 179579 February 1, 2012 SERENO, J.: Facts: 1. Petitioner Commissioner of Customs issued CMO 27-2003. a. Includes the following: (1) importer or consignee; (2) country of origin; and (3) port of discharge b. The regulation provided an exclusive list of corporations, ports of discharge, commodity descriptions and countries of origin. Depending on these factors, wheat would be classified either as food grade or feed grade. c. The corresponding tariff for food grade wheat was 3%, for feed grade, 7%. d. CMO 27-2003 further provided for the proper procedure for protest or Valuation and Classification Review Committee (VCRC) cases e. Under this procedure, the release of the articles that were the subject of protest required the importer to post a cash bond to cover the tariff differential Respondent filed a Petition for Declaratory Relief with the Regional Trial Court (RTC) of Las Pias City.

3.

4.

2.

5.

It anticipated the implementation of the regulation on its imported and perishable Chinese milling wheat in transit from China b. Respondent contended that CMO 27-2003 was issued without following the mandate of the Revised Administrative Code on public participation, prior notice, and publication or registration with the University of the Philippines Law Center. c. The regulation summarily adjudged it to be a feed grade supplier without the benefit of prior assessment and examination; thus, despite having imported food grade wheat, it would be subjected to the 7% tariff upon the arrival of the shipment, forcing them to pay 133% more than was proper. Petitioners thereafter filed a Motion to Dismiss. a. They alleged that: (1) the RTC did not have jurisdiction over the subject matter of the case, because respondent was asking for a judicial determination of the classification of wheat; (2) an action for declaratory relief was improper; (3) CMO 272003 was an internal administrative rule and not legislative in nature; and (4) the claims of respondent were speculative and premature, because the Bureau of Customs (BOC) had yet to examine respondents products. Trial court ruled in favor of respondent a. Petition is GRANTED and the subject Customs Memorandum Order 27-2003 is declared INVALID and OF NO FORCE AND EFFECT b. trial court found that petitioners had not followed the basic requirements of hearing and publication in the issuance of CMO 27-2003. It likewise held that petitioners had substituted the quasi-judicial determination of the commodity by a quasilegislative predetermination. c. The lower court pointed out that a classification based on importers and ports of discharge were violative of the due process rights of respondent. The appellate court, however, dismissed the appeal.

a.

Jerika Everly Marquez San Sebastian College of Law

Page 6

a.

It held that, since the regulation affected substantial rights of petitioners and other importers, petitioners should have observed the requirements of notice, hearing and publication.

2.

Issue: Constitutionality of CMO 27-2003 issued by petitioner Commissioner of Customs Held: Petitioners violated respondents right to due process in the issuance of CMO 27-2003 when they failed to observe the requirements under the Revised Administrative Code. Petitioners likewise violated respondents right to equal protection of laws when they provided for an unreasonable classification in the application of the regulation. Finally, petitioner Commissioner of Customs went beyond his powers of delegated authority when the regulation limited the powers of the customs officer to examine and assess imported articles. 1. Legislative rule is in the nature of subordinate legislation, designed to implement a primary legislation by providing the details thereof. xxx a. In addition such rule must be published. b. On the other hand, interpretative rules are designed to provide guidelines to the law which the administrative agency is in charge of enforcing. c. 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. d. 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, on 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 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.

3.

4.

5.

The clear object of the above-quoted provision is to give the general public adequate notice of the various laws which are to regulate their actions and conduct as citizens. a. Without such notice and publication, there would be no basis for the application of the maxim ignorantia legis non excusat. b. It would be the height of injustice to punish or otherwise burden a citizen for the transgression of a law of which he had no notice whatsoever, not even a constructive one. c. Because petitioners failed to follow the requirements enumerated by the Revised Administrative Code, the assailed regulation must be struck down. The equal protection clause means that no person or class of persons shall be deprived of the same protection of laws enjoyed by other persons or other classes in the same place in like circumstances. Thus, the guarantee of the equal protection of laws is not violated if there is a reasonable classification. a. For a classification to be reasonable, it must be shown that (1) it rests on substantial distinctions; (2) it is germane to the purpose of the law; (3) it is not limited to existing conditions only; and (4) it applies equally to all members of the same class b. Unfortunately, CMO 27-2003 does not meet these requirements. We do not see how the quality of wheat is affected by who imports it, where it is discharged, or which country it came from. The provision mandates that the customs officer must first assess and determine the classification of the imported article before tariff may be imposed. Unfortunately, CMO 23-2007 has already classified the article even before the customs officer had the chance to examine it. In effect, petitioner Commissioner of Customs diminished the powers granted by the Tariff and Customs Code with regard to wheat importation when it no longer required the customs officers prior examination and assessment of the proper classification of the wheat. It is well-settled that rules and regulations, which are the product of a delegated 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.

Jerika Everly Marquez San Sebastian College of Law

Page 7

6.

It is required that the regulation be germane to the objects and purposes of the law; and that it be not in contradiction to, but in conformity with, the standards prescribed by law.

1.

5 VICTORIAS MILLING COMPANY, INC., petitioner-appellant, vs. SOCIAL SECURITY COMMISSION, respondent-appellee. G.R. No. L-16704 March 17, 1962 BARRERA, J Facts: 1. Social Security Commission issued its Circular No. 22 a. Effective November 1, 1958, all Employers in computing the premiums due the System, will take into consideration and include in the Employee's remuneration all bonuses and overtime pay, as well as the cash value of other media of remuneration. All these will comprise the Employee's remuneration or earnings, upon which the 3-1/2% and 2-1/2% contributions will be based, up to a maximum of P500 for any one month 2. Petitioner Victorias Milling Company, Inc., through counsel, wrote the Social Security Commission in effect protesting against the circular as contradictory to a previous Circular No. 7, dated October 7, 1957 expressly excluding overtime pay and bonus in the computation of the employers' and employees' respective monthly premium contributions a. Counsel further questioned the validity of the circular for lack of authority on the part of the Social Security Commission to promulgate it without the approval of the President and for lack of publication in the Official Gazette. 3. Social Security Commission ruled that Circular No. 22 is not a rule or regulation that needed the approval of the President and publication in the Official Gazette to be effective, but a mere administrative interpretation of the statute, a mere statement of general policy or opinion as to how the law should be construed. Issue: whether or not Circular No. 22 is a rule or regulation, as contemplated in Section 4(a) of Republic Act 1161 empowering the Social Security Commission "to adopt, amend and repeal subject to the approval of the President such rules and regulations as may be necessary to carry out the provisions and purposes of this Act." Held:
Jerika Everly Marquez San Sebastian College of Law

2.

When an administrative agency promulgates rules and regulations, it "makes" a new law with the force and effect of a valid law, while when it renders an opinion or gives a statement of policy, it merely interprets a pre-existing law a. 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 often times 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. b. A rule is binding on the courts so long as the procedure fixed for its promulgation is followed and its scope is within the statutory authority granted by the legislature, even if the courts are not in agreement with the policy stated therein or its innate wisdom c. 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. Circular No. 22 in question was issued by the Social Security Commission, in view of the amendment of the provisions of the Social Security Law defining the term "compensation" a. It will thus be seen that whereas prior to the amendment, bonuses, allowances, and overtime pay given in addition to the regular or base pay were expressly excluded, or exempted from the definition of the term "compensation", such exemption or exclusion was deleted by the amendatory law b. Circular No. 22 was, therefore, issued to apprise those concerned of the interpretation or understanding of the Commission, of the law as amended, which it was its duty to enforce. It did not add any duty or detail that was not already in the law as amended. It merely stated and circularized the opinion of the Commission as to how the law should be construed. c. People v. Jolliffe (G.R. No. L-9553, promulgated on May 30, 1959) cited by appellant, does not support its contention that the circular in question is a rule or regulation. What was there said was merely that a regulation may be incorporated in the form of a circular. Such statement simply meant that the substance and not the form of a regulation is decisive in determining its nature. It does not lay down a general

Page 8

proposition of law that any circular, regardless of its substance and even if it is only interpretative, constitutes a rule or regulation which must be published in the Official Gazette before it could take effect. d. People v. Que Po Lay (50 O.G. 2850) also cited by appellant is not applicable to the present case, because the penalty that may be incurred by employers and employees if they refuse to pay the corresponding premiums on bonus, overtime pay, etc. which the employer pays to his employees, is not by reason of non-compliance with Circular No. 22, but for violation of the specific legal provisions contained in Section 27(c) and (f) of Republic Act No. 1161. 3. Circular No. 22 purports merely to advise employers-members of the System of what, in the light of the amendment of the law, they should include in determining the monthly compensation of their employees upon which the social security contributions should be based, and that such circular did not require presidential approval and publication in the Official Gazette for its effectivity. a. The express elimination among the exemptions excluded in the old law, of all bonuses, allowances and overtime pay in the determination of the "compensation" paid to employees makes it imperative that such bonuses and overtime pay must now be included in the employee's remuneration in pursuance of the amendatory law. b. Republic Act 1161 specifically defined what "compensation" should mean "For the purposes of this Act". Republic Act 1792 amended such definition by deleting same exemptions authorized in the original Act. By virtue of this express substantial change in the phraseology of the law, whatever prior executive or judicial construction may have been given to the phrase in question should give way to the clear mandate of the new law. 6 NATIONAL FOOD AUTHORITY (NFA), and JUANITO M. DAVID, in his capacity as Regional Director, NFA Regional Office No. 1, San Juan, La Union, petitioners, vs. MASADA SECURITY AGENCY, INC., represented by its Acting President & General Manager, COL. EDWIN S. ESPEJO (RET.), respondents. YNARES-SANTIAGO, J.: Facts:

1.

Respondent MASADA Security Agency, Inc., entered into a one year[2] contract[3] to provide security services to the various offices, warehouses and installations of NFA within the scope of the NFA Region I, comprised of the provinces of Pangasinan, La Union, Abra, Ilocos Sur and Ilocos Norte. a. Upon the expiration of said contract, the parties extended the effectivity thereof on a monthly basis under same terms and condition. 2. Regional Tripartite Wages and Productivity Board issued several wage orders mandating increases in the daily wage rate a. Respondent requested NFA for a corresponding upward adjustment in the monthly contract rate consisting of the increases in the daily minimum wage of the security guards as well as the corresponding raise in their overtime pay, holiday pay, 13th month pay, holiday and rest day pay. b. also claimed increases in Social Security System (SSS) and Pag-ibig premiums as well as in the administrative costs and margin. c. NFA, however, granted the request only with respect to the increase in the daily wage by multiplying the amount of the mandated increase by 30 days and denied the same with respect to the adjustments in the other benefits and remunerations computed on the basis of the daily wage. 3. Respondent sought the intervention of the Office of the Regional Director, Regional Office No. I, La Union, as Chairman of the Regional Tripartite Wages and Productivity Board and the DOLE Secretary through the Executive Director of the National Wages and Productivity Commission. Despite the advisory a. Claim of respondent that the increase mandated by Republic Act No. 6727 (RA 6727) and the wage orders issued by the RTWPB is not limited to the daily pay, NFA maintained its stance that it is not liable to pay the corresponding adjustments in the wage related benefits of respondents security guards. b. Respondent filed with the Regional Trial Court of Quezon a case for recovery of sum of money against NFA.

Jerika Everly Marquez San Sebastian College of Law

Page 9

NFA denied that respondent paid the security guards their wage related benefits and that it shouldered the additional costs and margin arising from the implementation of the wage orders. d. NFA argued that respondent cannot demand an adjustment on said salary related benefits because it is bound by their contract expressly limiting NFAs obligation to pay only the increment in the daily wage. 4. Trial court rendered a decision[13] in favor of respondent holding that NFA is liable to pay the security guards wage related benefits pursuant to RA 6727, because the basis of the computation of said benefits, like overtime pay, holiday pay, SSS and Pag-ibig premium, is the increased minimum wage. It also found NFA liable for the consequential adjustments in administrative costs and margin. a. NFA appealed to the Court of Appeals but the same was dismissed b. Court of Appeals denied NFAs motion for reconsideration Issue: Whether or not the liability of principals in service contracts under Section 6 of RA 6727 and the wage orders issued by the Regional Tripartite Wages and Productivity Board is limited only to the increment in the minimum wage. o NFA claims that its additional liability under the aforecited provision is limited only to the payment of the increment in the statutory minimum wage rate, i.e., the rate for a regular eight (8) hour work day Held: Yes. The contention is meritorious. 1. RA 6727[18] (Wage Rationalization Act) declared it a policy of the State to rationalize the fixing of minimum wages and to promote productivity-improvement and gain-sharing measures to ensure a decent standard of living for the workers and their families; to guarantee the rights of labor to its just share in the fruits of production; to enhance employment generation in the countryside through

c.

2.

3.

4.

industrial dispersal; and to allow business and industry reasonable returns on investment, expansion and growth a. created the National Wages and Productivity Commission (NWPC),[21] vested, inter alia, with the power to prescribe rules and guidelines for the determination of appropriate minimum wage and productivity measures at the regional, provincial or industry levels Regional Tripartite Wages and Productivity Boards (RTWPB) which, among others, determine and fix the minimum wage rates applicable in their respective region, provinces, or industries therein and issue the corresponding wage orders, subject to the guidelines issued by the NWPC.[23] Pursuant to its wage fixing authority, the RTWPB issue wage orders which set the daily minimum wage rates The term wage as used in Section 6 of RA 6727 pertains to no other than the statutory minimum wage which is defined under the Rules Implementing RA 6727 as the lowest wage rate fixed by law that an employer can pay his worker.[26] a. The basis thereof under Section 7 of the same Rules is the normal working hours, which shall not exceed eight hours a day. Hence, the prescribed increases or the additional liability to be borne by the principal under Section 6 of RA 6727 is the increment or amount added to the remuneration of an employee for an 8-hour work. b. The presumption therefore is that lawmakers are well aware that the word wage as used in Section 6 means the statutory minimum wage. If their intention was to extend the obligation of principals in service contracts to the payment of the increment in the other benefits and remuneration of workers, it would have so expressly specified. In not so doing, the only logical conclusion is that the legislature intended to limit the additional obligation imposed on principals in service contracts to the payment of the increment in the statutory minimum wage. The general rule is that construction of a statute by an administrative agency charged with the task of interpreting or applying the same is entitled to great weight and respect.

Jerika Everly Marquez San Sebastian College of Law

Page 10

The Court, however, is not bound to apply said rule where such executive interpretation, is clearly erroneous, or when there is no ambiguity in the law interpreted, or when the language of the words used is clear and plain, as in the case at bar. Besides, administrative interpretations are at best advisory for it is the Court that finally determines what the law means.[29] Hence, the interpretation given by the labor agencies in the instant case which went as far as supplementing what is otherwise not stated in the law cannot bind this Court b. Based on the foregoing interpretation of Section 6 of RA 6727, the parties may enter into stipulations increasing the liability of the principal. So long as the minimum obligation of the principal, i.e., payment of the increased statutory minimum wage is complied with, the Wage Rationalization Act is not violated. 5. The parties therefore acknowledged the application to their contract of the wage orders issued by the RTWPB pursuant to RA 6727. There being no assumption by NFA of a greater liability than that mandated by Section 6 of the Act, its obligation is limited to the payment of the increased statutory minimum wage rates which, as admitted by respondent, had already been satisfied by NFA.[33] a. Under Article 1231 of the Civil Code, one of the modes of extinguishing an obligation is by payment. Having discharged its obligation to respondent, NFA no longer have a duty that will give rise to a correlative legal right of respondent. The latters complaint for collection of remuneration and benefits other than the increased minimum wage rate, should therefore be dismissed for lack of cause of action.

a.

Jerika Everly Marquez San Sebastian College of Law

Page 11