CASES ON CHAPTER 1 G.R. No. 1051 THE UNITED STATES, complainant-appellee, vs. FRED L. DORR, ET AL., defendants-appellants.

LADD, J.: The defendants have been convicted upon a complaint charging them with the offense of writing, publishing, and circulating a scurrilous libel against the Government of the United States and the Insular Government of the Philippine Islands. The complaint is based upon section 8 of Act No. 292 of the Commission, which is as follows: Every person who shall utter seditious words or speeches, write, publish, or circulate scurrilous libels against the Government of the United States or the Insular Government of the Philippine Islands, or which tend to disturb or obstruct any lawful officer in executing his office, or which tend to instigate others to cabal or meet together for unlawful purposes, or which suggest or incite rebellious conspiracies or riots, or which tend to stir up the people against the lawful authorities, or to disturb the peace of the community, the safety and order of the Government, or who shall knowingly conceal such evil practices, shall be punished by a fine not exceeding two thousand dollars or by imprisonment not exceeding two years, or both, in the discretion of the court. The alleged libel was published as an editorial in the issue of the "Manila Freedom" of April 6, 1902, under the caption of "A few hard facts." The Attorney-General in his brief indicates the following passages of the article as those upon which he relies to sustain the conviction: Sidney Adamson, in a late letter in "Leslie's Weekly," has the following to say of the action of the Civil Commission in appointing rascally natives to important Government positions: "It is a strong thing to say, but nevertheless true, that the Civil Commission, through its ex-insurgent office holders, and by its continual disregard for the records of natives obtained during the military rule of the Islands, has, in its distribution of offices, constituted a protectorate over a set of men who should be in jail or deported. . . . [Reference is then made to the appointment of one Tecson as justice of the peace.] This is the kind of foolish work that the Commission is doing all over the Islands, reinstating insurgents and rogues and turning down the men who have during the struggle, at the risk of their lives, aided the Americans." xxx xxx xxx There is no doubt but that the Filipino office holders of the Islands are in a good many instances rascals. xxx xxx xxx The commission has exalted to the highest positions in the Islands Filipinos who are alleged to be notoriously corrupt and rascally, and men of no personal character. xxx xxx xxx Editor Valdez, of "Miau," made serious charges against two of the native Commissioners charges against Trinidad H. Pardo de Tavera, which, if true, would brand the man as a coward and a rascal, and with what result? . . . [Reference is then made to the prosecution and conviction of Valdez for libel "under a law which specifies that the greater the truth the greater the libel."] Is it the desire of the people of the United States that the natives against whom these charges have been made (which, if true, absolutely vilify their personal characters) be permitted to retain their seats on the Civil Commission, the executive body of the Philippine Government, without an investigation? xxx xxx xxx

It is a notorious fact that many branches of the Government organized by the Civil Commission are rotten and corrupt. The fiscal system, upon which life, liberty, and justice depends, is admitted by the Attorney-General himself to be most unsatisfactory. It is a fact that the Philippine judiciary is far from being what it should. Neither fiscals nor judges can be persuaded to convict insurgents when they wish to protect them. xxx xxx xxx Now we hear all sorts of reports as to rottenness existing in the province [of Tayabas], and especially the northern end of it; it is said that it is impossible to secure the conviction of lawbreakers and outlaws by the native justices, or a prosecution by the native fiscals. xxx xxx xxx The long and short of it is that Americans will not stand for an arbitrary government, especially when evidences of carpetbagging and rumors of graft are too thick to be pleasant. We do not understand that it is claimed that the defendants succeeded in establishing at the trial the truth of any of the foregoing statements. The only question which we have considered is whether their publication constitutes an offense under section 8 ofAct No. 292, above cited. Several allied offenses or modes of committing the same offense are defined in that section, viz: (1) The uttering of seditious words or speeches; (2) the writing, publishing, or circulating of scurrilous libels against the Government of the United States or the Insular Government of the Philippine Islands; (3) the writing, publishing, or circulating of libels which tend to disturb or obstruct any lawful officer in executing his office; (4) or which tend to instigate others to cabal or meet together for unlawful purposes; (5) or which suggest or incite rebellious conspiracies or riots; (6) or which tend to stir up the people against the lawful authorities or to disturb the peace of the community, the safety and order of the Government; (7) knowingly concealing such evil practices. The complaint appears to be framed upon the theory that a writing, in order to be punishable as a libel under this section, must be of a scurrilous nature and directed against the Government of the United States or the Insular Government of the Philippine Islands, and must, in addition, tend to some one of the results enumerated in the section. The article in question is described in the complaint as "a scurrilous libel against the Government of the United States and the Insular Government of the Philippine Islands, which tends to obstruct the lawful officers of the United States and the Insular Government of the Philippine Islands in the execution of their offices, and which tends to instigate others to cabal and meet together for unlawful purposes, and which suggests and incites rebellious conspiracies, and which tends to stir up the people against the lawful authorities, and which disturbs the safety and order of the Government of the United States and the Insular Government of the Philippine Islands." But it is "a well-settled rule in considering indictments that where an offense may be committed in any of several different modes, and the offense, in any particular instance, is alleged to have been committed in two or more modes specified, it is sufficient to prove the offense committed in any one of them, provided that it be such as to constitute the substantive offense" (Com. vs. Kneeland, 20 Pick., Mass., 206, 215), and the defendants may, therefore, be convicted if any one of the substantive charges into which the complaint may be separated has been made out. We are all, however, agreed upon the proposition that the article in question has no appreciable tendency to "disturb or obstruct any lawful officer in executing his office," or to "instigate" any person or class of persons "to cabal or meet together for unlawful purposes," or to "suggest or incite rebellious conspiracies or riots," or to "stir up the people against the lawful authorities or to disturb the peace of the community, the safety and order of the Government." All these various tendencies, which are described in section 8 of Act No. 292, each one of which is made an element of a certain form of libel, may be characterized in general terms as seditious tendencies. This is recognized in the description of the offenses punished by this section, which is found in the title of the act, where they are defined as the crimes of the "seditious utterances, whether written or spoken." Excluding from consideration the offense of publishing "scurrilous libels against the Government of the United States or the Insular Government of the Philippine Islands," which may conceivably stand on a somewhat different footing, the offenses punished by this section all consist in inciting, orally or in writing, to acts of disloyalty or disobedience to the lawfully constituted authorities in these Islands. And

while the article in question, which is, in the main, a virulent attack against the policy of the Civil Commission in appointing natives to office, may have had the effect of exciting among certain classes dissatisfaction with the Commission and its measures, we are unable to discover anything in it which can be regarded as having a tendency to produce anything like what may be called disaffection, or, in other words, a state of feeling incompatible with a disposition to remain loyal to the Government and obedient to the laws. There can be no conviction, therefore, for any of the offenses described in the section on which the complaint is based, unless it is for the offense of publishing a scurrilous libel against the Government of the of the United States or the Insular Government of the Philippine Islands. Can the article be regarded as embraced within the description of "scurrilous libels against the Government of the United States or the Insular Government of the Philippine Islands?" In the determination of this question we have encountered great difficulty, by reason of the almost entire lack of American precedents which might serve as a guide in the construction of the law. There are, indeed, numerous English decisions, most of them of the eighteenth century, on the subject of libelous attacks upon the "Government, the constitution, or the law generally," attacks upon the Houses of Parliament, the Cabinet, the Established Church, and other governmental organisms, but these decisions are not now accessible to us, and, if they were, they were made under such different conditions from those which prevail at the present day, and are founded upon theories of government so foreign to those which have inspired the legislation of which the enactment in question forms a part, that they would probably afford but little light in the present inquiry. In England, in the latter part of the eighteenth century, any "written censure upon public men for their conduct as such," as well as any written censure "upon the laws or upon the institutions of the country," would probably have been regarded as a libel upon the Government. (2 Stephen, History of the Criminal Law of England, 348.) This has ceased to be the law in England, and it is doubtful whether it was ever the common law of any American State. "It is true that there are ancient dicta to the effect that any publication tending to "possess the people with an ill opinion of the Government" is a seditious libel ( per Holt, C. J., in R. vs. Tuchin, 1704, 5 St. Tr., 532, and Ellenborough, C. J., in R. vs. Cobbett, 1804, 29 How. St. Tr., 49), but no one would accept that doctrine now. Unless the words used directly tend to foment riot or rebellion or otherwise to disturb the peace and tranquility of the Kingdom, the utmost latitude is allowed in the discussion of all public affairs." (11 Enc. of the Laws of England, 450.) Judge Cooley says (Const. Lim., 528): "The English common law rule which made libels on the constitution or the government indictable, as it was administered by the courts, seems to us unsuited to the condition and circumstances of the people of America, and therefore never to have been adopted in the several States." We find no decisions construing the Tennessee statute (Code, sec. 6663), which is apparently the only existing American statute of a similar character to that in question, and from which much of the phraseology of then latter appears to have been taken, though with some essential modifications. The important question is to determine what is meant in section 8 of Act No. 292 by the expression "the Insular Government of the Philippine Islands." Does it mean in a general and abstract sense the existing laws and institutions of the Islands, or does it mean the aggregate of the individuals by whom the government of the Islands is, for the time being, administered? Either sense would doubtless be admissible. We understand, in modern political science, . . . by the term government, that institution or aggregate of institutions by which an independent society makes and carries out those rules of action which are unnecessary to enable men to live in a social state, or which are imposed upon the people forming that society by those who possess the power or authority of prescribing them. Government is the aggregate of authorities which rule a society. By "dministration, again, we understand in modern times, and especially in more or less free countries, the aggregate of those persons in whose hands the reins of government are for the time being (the chief ministers or heads of departments)." (Bouvier, Law Dictionary, 891.) But the writer adds that the terms "government" and "administration" are not always used in their strictness, and that "government" is often used for "administration." In the act of Congress of July 14, 1798, commonly known as the "Sedition Act," it is made an offense to "write, print, utter, or published," or to "knowingly and willingly assist or aid in writing, printing, uttering, or publishing any false, scandalous, and malicious writing or writings against the Government of the United States, or either House of the Congress of the United States, or the President of the United States, with intent to defame the said Government, or either House of the said Congress, or the said President, or to bring them, or either of them, into contempt or disrepute, or to excite against them or either or any of

them the hatred of the good people of the United States," etc. The term "government" would appear to be used here in the abstract sense of the existing political system, as distinguished from the concrete organisms of the Government the Houses of Congress and the Executive which are also specially mentioned. Upon the whole, we are of the opinion that this is the sense in which the term is used in the enactment under consideration. It may be said that there can be no such thing as a scurrilous libel, or any sort of a libel, upon an abstraction like the Government in the sense of the laws and institutions of a country, but we think an answer to this suggestion is that the expression "scurrilous libel" is not used in section 8 of Act No. 292 in the sense in which it is used in the general libel law (Act No. 277) that is, in the sense of written defamation of individuals but in the wider sense, in which it is applied in the common law to blasphemous, obscene, or seditious publications in which there may be no element of defamation whatever. "The word 'libel' as popularly used, seems to mean only defamatory words; but words written, if obscene, blasphemous, or seditious, are technically called libels, and the publication of them is, by the law of England, an indictable offense." (Bradlaugh vs. The Queen, 3 Q. B. D., 607, 627, per Bramwell L. J. See Com. vs. Kneeland, 20 Pick., 206, 211.) While libels upon forms of government, unconnected with defamation of individuals, must in the nature of things be of uncommon occurrence, the offense is by no means an imaginary one. An instance of a prosecution for an offense essentially of this nature is Republica vs. Dennie, 4 Yeates (Pa.), 267, where the defendant was indicted "as a factious and seditious person of a wicked mind and unquiet and turbulent disposition and conversation, seditiously, maliciously, and willfully intending, as much as in him lay, to bring into contempt and hatred the independence of the United States, the constitution of this Commonwealth and of the United States, to excite popular discontent and dissatisfaction against the scheme of polity instituted, and upon trial in the said United States and in the said Commonwealth, to molest, disturb, and destroy the peace and tranquility of the said United States and of the said Commonwealth, to condemn the principles of the Revolution, and revile, depreciate, and scandalize the characters of the Revolutionary patriots and statesmen, to endanger, subvert, and totally destroy the republican constitutions and free governments of the said United States and this Commonwealth, to involve the said United States and this Commonwealth in civil war, desolation, and anarchy, and to procure by art and force a radical change and alteration in the principles and forms of the said constitutions and governments, without the free will, wish, and concurrence of the people of the said United States and this Commonwealth, respectively," the charge being that "to fulfill, perfect, and bring to effect his wicked, seditious, and detestable intentions aforesaid he . . . falsely, maliciously, factiously, and seditiously did make, compose, write, and publish the following libel, to wit; 'A democracy is scarcely tolerable at any period of national history. Its omens are always sinister and its powers are unpropitious. With all the lights or experience blazing before our eyes, it is impossible not to discover the futility of this form of government. It was weak and wicked at Athens, it was bad in Sparta, and worse in Rome. It has been tried in France and terminated in despotism. it was tried in England and rejected with the utmost loathing and abhorrence. It is on its trial here and its issue will be civil war, desolation, and anarchy. No wise man but discerns its imperfections; no good man but shudders at its miseries; no honest man but proclaims its fraud, and no brave man but draws his sword against its force. The institution of a scheme of polity so radically contemptible and vicious is a memorable example of what the villainy of some men can devise, the folly of others receive, and both establish, in despite of reason, reflection, and sensation.'" An attack upon the lawfully established system of civil government in the Philippine Islands, like that which Dennie was accused of making upon the republican form of government lawfully established in the United States and in the State of Pennsylvania would, we think, if couched in scandalous language, constitute the precise offense described in section 8 of Act No. 292 as a scurrilous libel against the Insular Government of the Philippine Islands. Defamation of individuals, whether holding official positions or not, and whether directed to their public conduct or to their private life, may always be adequately punished under the general libel law. Defamation of the Civil Commission as an aggregation, it being "a body of persons definite and small enough for its individual members to be recognized as such" (Stephen, Digest of the Criminal Law, art. 277), as well as defamation of any of the individual members of the Commission or of the Civil Governor, either in his public capacity or as a private individual, may be so punished. The general libel law enacted by the Commission was in force when Act No. 292, was passed. There was no occasion for any further

legislation on the subject of libels against the individuals by whom the Insular Government is administered against the Insular Government in the sense of the aggregate of such individuals. There was occasion for stringent legislation against seditious words or libels, and that is the main if not the sole purpose of the section under consideration. It is not unreasonable to suppose that the Commission, in enacting this section, may have conceived of attacks of a malignant or scurrilous nature upon the existing political system of the United States, or the political system established in these Islands by the authority of the United States, as necessarily of a seditious tendency, but it is not so reasonable to suppose that they conceived of attacks upon the personnel of the government as necessarily tending to sedition. Had this been their view it seems probable that they would, like the framers of the Sedition Act of 1798, have expressly and specifically mentioned the various public officials and collegiate governmental bodies defamation of which they meant to punish as sedition. The article in question contains no attack upon the governmental system of the United States, and it is quite apparent that, though grossly abusive as respects both the Commission as a body and some of its individual members, it contains no attack upon the governmental system by which the authority of the United States is enforced in these Islands. The form of government by a Civil Commission and a Civil Governor is not assailed. It is the character of the men who are intrusted with the administration of the government that the writer is seeking to bring into disrepute by impugning the purity of their motives, their public integrity, and their private morals, and the wisdom of their policy. The publication of the article, therefore, no seditious tendency being apparent, constitutes no offense under Act No. 292, section 8. The judgment of conviction is reversed and the defendants are acquitted, with costs de oficio. EN BANC [G.R. No.L-9657. November 29, 1956.] LEOPOLDO T. BACANI and MATEO A. MATOTO, Plaintiffs-Appellees, vs. NATIONAL COCONUT CORPORATION, ET AL., Defendants, NATIONAL COCONUT CORPORATION and BOARD OF LIQUIDATORS, Defendants-Appellants.

within the purview of section 16, Rule 130 of the Rules of Court; chan roblesvirtualawlibrary(2) that the payments already made by said Defendant to Plaintiffs herein and received by the latter from the former in the total amount of P714, for copies of the stenographic transcripts in question, are valid, just and legal; chan roblesvirtualawlibraryand (3) that Plaintiffs are under no obligation whatsoever to make a refund of these payments already received by them. This is an appeal from said decision. Under section 16, Rule 130 of the Rules of Court, the Government of the Philippines is exempt from paying the legal fees provided for therein, and among these fees are those which stenographers may charge for the transcript of notes taken by them that may be requested by any interested person (section 8). The fees in question are for the transcript of notes taken during the hearing of a case in which the National Coconut Corporation is interested, and the transcript was requested by its assistant corporate counsel for the use of said corporation. On the other hand, section 2 of the Revised Administrative Code defines the scope of the term Government of the Republic of the Philippines as follows:chanroblesvirtuallawlibrary The Government of the Philippine Islands is a term which refers to the corporate governmental entity through which the functions of government are exercised throughout the Philippine Islands, including, save as the contrary appears from the context, the various arms through which political authority is made effective in said Islands, whether pertaining to the central Government or to the provincial or municipal branches or other form of local government. The question now to be determined is whether the National Coconut Corporation may be considered as included in the term Government of the Republic of the Philippines for the purposes of the exe mption of the legal fees provided for in Rule 130 of the Rules of Court. As may be noted, the term Government of the Republic of the Philippines refers to a government entity through which the functions of government are exercised, including the various arms through which political authority is made effective in the Philippines, whether pertaining to the central government or to the provincial or municipal branches or other form of local government. This requires a little digression on the nature and functions of our government as instituted in our Constitution. To begin with, we state that the term Government may be defined as that institution or aggregate of institutions by which an independent society makes and carries out those rules of action which are necessary to enable men to live in a social state, or which are imposed upon the people forming that society by those who possess the power or authority of prescribing them (U.S. vs. Dorr, 2 Phil., 332). This institution, when referring to the national government, has reference to what our Constitution has established composed of three great departments, the legislative, executive, and the judicial, through which the powers and functions of government are exercised. These functions are twofold:chanroblesvirtuallawlibrary constitute and ministrant. The former are those which constitute the very bonds of society and are compulsory in nature; chan roblesvirtualawlibrarythe latter are those that are undertaken only by way of advancing the general interests of society, and are merely optional. President Wilson enumerates the constituent functions as follows:chanroblesvirtuallawlibrary (1) The keeping of order and providing for the protection of persons and property from violence and robbery. (2) The fixing of the legal relations between man and wife and between parents and children. (3) The regulation of the holding, transmission, and interchange of property, and the determination of its liabilities for debt or for crime. (4) The determination of contract rights between individuals. (5) The definition and punishment of crime. (6) The administration of justice in civil cases. (7) The determination of the political duties, privileges, and relations of citizens. (8) Dealings of the state with foreign powers:chanroblesvirtuallawlibrary the preservation of the state from external danger or encroachment and the advancement of its international interests. (Malcolm, The Government of the Philippine Islands, p. 19.)

DECISION BAUTISTA ANGELO, J.: Plaintiffs herein are court stenographers assigned in Branch VI of the Court of First Instance of Manila. During the pendency of Civil Case No. 2293 of said court, entitled Francisco Sycip vs. National Coconut Corporation, Assistant Corporate Counsel Federico Alikpala, counsel forDefendant, requested said stenographers for copies of the transcript of the stenographic notes taken by them during the hearing. Plaintiffs complied with the request by delivering to Counsel Alikpala the needed transcript containing 714 pages and thereafter submitted to him their bills for the payment of their fees. The National Coconut Corporation paid the amount of P564 to Leopoldo T. Bacani and P150 to Mateo A. Matoto for said transcript at the rate of P1 per page. Upon inspecting the books of this corporation, the Auditor General disallowed the payment of these fees and sought the recovery of the amounts paid. On January 19, 1953, the Auditor General required the Plaintiffs to reimburse said amounts on the strength of a circular of the Department of Justice wherein the opinion was expressed that the National Coconut Corporation, being a government entity, was exempt from the payment of the fees in question. On February 6, 1954, the Auditor General issued an order directing the Cashier of the Department of Justice to deduct from the salary of Leopoldo T. Bacani the amount of P25 every payday and from the salary of Mateo A. Matoto the amount of P10 every payday beginning March 30, 1954. To prevent deduction of these fees from their salaries and secure a judicial ruling that the National Coconut Corporation is not a government entity within the purview of section 16, Rule 130 of the Rules of Court, this action was instituted in the Court of First Instance of Manila. Defendants set up as a defense that the National Coconut Corporation is a government entity within the purview of section 2 of the Revised Administrative Code of 1917 and, hence, it is exempt from paying the stenographers fees under Rule 130 of the Rules of Court. After trial, the court found for the Plaintiffs declaring (1) that Defendant National Coconut Corporation is not a government entity

The most important of the ministrant functions are:chanroblesvirtuallawlibrary public works, public education, public charity, health and safety regulations, and regulations of trade and industry. The principles deter mining whether or not a government shall exercise certain of these optional functions are:chanroblesvirtuallawlibrary (1) that a government should do for the public welfare those things which private capital would not naturally undertake and (2) that a government should do these things which by its very nature it is better equipped to administer for the public welfare than is any private individual or group of individuals. (Malcolm, The Government of the Philippine Islands, pp. 19-20.) From the above we may infer that, strictly speaking, there are functions which our government is required to exercise to promote its objectives as expressed in our Constitution and which are exercised by it as an attribute of sovereignty, and those which it may exercise to promote merely the welfare, progress and prosperity of the people. To this latter class belongs the organization of those corporations owned or controlled by the government to promote certain aspects of the economic life of our people such as the National Coconut Corporation. These are what we call government-owned or controlled corporations which may take on the form of a private enterprise or one organized with powers and formal characteristics of a private corporations under the Corporation Law. The question that now arises is:chanroblesvirtuallawlibrary Does the fact that these corporation perform certain functions of government make them a part of the Government of the Philippines? The answer is simple:chanroblesvirtuallawlibrary they do not acquire that status for the simple reason that they do not come under the classification of municipal or public corporation. Take for instance the National Coconut Corporation. While it was organized with the purpose of adjusting the coconut industry to a position independent of trade preferences in the United States and of providing F acilities for the better curing of copra products and the proper utilization of coconut by-products, a function which our government has chosen to exercise to promote the coconut industry, however, it was given a corporate power separate and distinct from our government, for it was made subject to the provisions of our Corporation Law in so far as its corporate existence and the powers that it may exercise are concerned (sections 2 and 4, Commonwealth Act No. 518). It may sue and be sued in the same manner as any other private corporations, and in this sense it is an entity different from our government. As this Court has aptly said, The mere fact that the Government happens to be a majority stockholder does not make it a public corporation (National Coal Co. vs. Collector of Internal Revenue, 46 Phil., 586-587). By becoming a stockholder in the National Coal Company, the Government divested itself of its sovereign character so far as respects the transactions of the corporation cralaw . Unlike the Government, the corporation may be sued without its consent, and is subject to taxation. Yet the National Coal Company remains an agency or instrumentality of government. (Government of the Philippine Islands vs. Springer, 50 Phil., 288.) To recapitulate, we may mention that the term Government of the Republic of the Philippines used in section 2 of the Revised Administrative Code refers only to that government entity through which the functions of the government are exercised as an attribute of sovereignty, and in this are included those arms through which political authority is made effective whether they be provincial, municipal or other form of local government. These are what we call municipal corporations. They do not include government entities which are given a corporate personality separate and distinct from the government and which are governed by the Corporation Law. Their powers, duties and liabilities have to be determined in the light of that law and of their corporate charters. They do not therefore come within the exemption clause prescribed in section 16, Rule 130 of our Rules of Court. Public corporations are those formed or organized for the government of a portion of the State. (Section 3, Republic Act No. 1459, Corporation Law). The generally accepted definition of a municipal corporation would only include organized cities and towns, and like organizations, with political and legislative powers for the local, civil government and police regulations of the inhabitants of the particular district included in the boundaries of the corporation. Heller vs. Stremmel, 52 Mo. 309, 312. In its more general sense the phrase municipal corporation may include both towns and counties, and other public corporations created by government for political purposes. In its more common and limited signification, it embraces only incorporated villages, towns and cities. Dunn vs. Court of County Revenues, 85 Ala. 144, 146, 4 So.661. (McQuillin, Municipal Corporations, 2nd ed., Vol. 1, p. 385.)

We may, therefore, define a municipal corporation in its historical and strict sense to be the incorporation, by the authority of the government, of the inhabitants of a particular place or district, and authorizing them in their corporate capacity to exercise subordinate specified powers of legislation and regulation with respect to their local and internal concerns. This power of local government is the distinctive purpose and the distinguishing feature of a municipal corporation proper. (Dillon, Municipal Corporations, 5th ed., Vol. I, p. 59.) It is true that under section 8, Rule 130, stenographers may only charge as fees P0.30 for each page of transcript of not less than 200 words before the appeal is taken and P0.15 for each page after the filing of the appeal, but in this case the National Coconut Corporation has agreed and in fact has paid P1.00 per page for the services rendered by the Plaintiffs and has not raised any objection to the amount paid until its propriety was disputed by the Auditor General. The payment of the fees in question became therefore contractual and as such is valid even if it goes beyond the limit prescribed in section 8, Rule 130 of the Rules of Court. As regards the question of procedure raised by Appellants, suffice it to say that the same is insubstantial, considering that this case refers not to a money claim disapproved by the Auditor General but to an action of prohibition the purpose of which is to restrain the officials concerned from deducting from Plaintiffs salaries the amount paid to them as stenographers fees. This case does not come under section 1, Rule 45 of the Rules of Court relative to appeals from a decision of the Auditor General. Wherefore, the decision appealed from is affirmed, without pronouncement as to costs SECOND DIVISION G.R. No. L-33022 April 22, 1975 CENTRAL BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and ABLAZA CONSTRUCTION & FINANCE CORPORATION, respondents. F.E. Evangelista for petitioner. Cruz, Villarin & Laureta for private respondent.

BARREDO, J.:+.wph!1 Petition of the Central Bank of the Philippines for review of the decision of the Court of Appeals in CAG.R. No. 43638-R affirming the judgment of the Court of First Instance of Rizal in Civil Case No. Q10919 sentenced petitioner to pay respondent Ablaza Construction and Finance Corporation damages for breach contract in that after having formally and officially awarded, pursuant to the results of the usual bidding to Ablaza in December 1965 the "contract" for the construction of its San Fernando, La Union branch building and allowed said contractor to commence the work up to about May, 1966, albeit without any written formal contract having been executed, the Bank failed and refused to proceed with the project, unless the plans were revised and a lower price were agreed to by Ablaza, the Bank claiming that its action was pursuant to the policy of fiscal restraint announced by the then new President of the Philippines on December 30, 1965 and the Memorandum Circular No. 1 dated December 31, 1965 of the same President. The factual background of this case is related in the following portions of the decision of the trial court, which the Court of Appeals affirmed without modification: t.hqw Sometime in 1965, defendant Central Bank of the Philippines issued Invitations to Bid and Instructions to Bidders for the purpose of receiving sealed proposals for the general construction of its various proposed regional offices, including the Central Bank regional office building in San Fernando, La Union. In response to the aforesaid Invitations to Bid, the plaintiff Ablaza Construction and Finance Corporation, which was one of the qualified bidders, submitted a bid proposal for the general construction of defendant's proposed regional office

building in San Fernando, La Union at the public bidding held on November 3, 1965. The said proposal was, as required by the defendant accompanied by a cash bidder's bond in the sum of P275,000.00. On December 7, 1965, the Monetary Board of the defendant Central Bank of the Philippines, after evaluating all the bid proposals submitted during the abovementioned bidding, unanimously voted and approved the award to the plaintiff of the contract for the general construction of defendant's proposed regional office building in San Fernando, La Union, for the sum of P3,749,000.00 under plaintiff's Proposal Item No. 2. Pursuant thereto, on December 10, 1965, Mr. Rizalino L. Mendoza, Assistant to the Governor and concurrently the Chairman of the Management Building Committee of the defendant Central Bank of the Philippines, set a telegram to the plaintiff, informing the latter that the contract for the general construction of defendant's proposed regional office building in San Fernando, La Union, had been awarded to the plaintiff. The said telegram was followed by a formal letter, also dated December 10, 1965, duly signed by said Mr. Rizalino L. Mendoza, confirming the approval of the award of the above-stated contract under plaintiff's Proposal Item No. 2 in the amount of P3,749,000.00. Upon receipt of the aforementioned letter, plaintiff immediately accepted the said award by means of a letter dated December 15, 1965, whereby plaintiff also requested permission for its workmen to enter the site of the project, build a temporary shelter and enclosure, and do some clearing job thereat. Accordingly, said permission was granted by the defendant as embodied in its letter dated January 4, 1966, addressed to the plaintiff.. Within five (5) days from receipt by the plaintiff of the said notice of award, and several times thereafter Mr. Nicomedes C. Ablaza, an officer of the plaintiff corporation, went personally to see Mr. Rizalino L. Mendoza at the latter's Central Bank office to follow up the signing of the corresponding contract. A performance bond in the total amount of P962,250.00 (P275,000.00 of which was in cash and P687,250.00 in the form of a surety bond) was subsequently posted by the plaintiff in compliance with the above-stated Instructions to Bidders, which bond was duly accepted by the defendant. Pursuant to the permission granted by the defendant, as aforesaid, plaintiff commenced actual construction work on the project about the middle of January, 1966. On February 8, 1966, by means of a formal letter, defendant requested the plaintiff to submit a schedule of deliveries of materials which, according to plaintiff's accepted proposal, shall be furnished by the defendant. In compliance therewith, on February 16, 1966, plaintiff submitted to the defendant the schedule of deliveries requested for. During the period when the actual construction work on the project was in progress, Mr. Nicomedes G. Ablaza had several meetings with Mr. Rizalino L. Mendoza at the latter's office in the Central Bank. During those meetings, they discussed the progress of the construction work being then undertaken by the plaintiff of the projects of the defendant in San Fernando, La Union, including the progress of the excavation work. Sometime during the early part of March, 1966, Mr. Rizalino L. Mendoza was at the construction site of the said project. While he was there, he admitted having seen pile of soil in the premises. At that time, the excavation work being undertaken by the plaintiff was about 20% complete. On March 22, 1966, defendant again wrote the plaintiff, requesting the latter to submit the name of its representative authorized to sign the building contract with the defendant. In compliance with the said request, plaintiff submitted to the defendant the name of its duly authorized representative by means of a letter dated March 24, 1966.

A meeting called by the defendant was held at the conference room of the Central Bank on May 20, 1966. At the said meeting, the defendant, thru Finance Secretary Eduardo Romualdez, announced, among other things, the reduction of the appropriations for the construction of the defendant's various proposed regional offices, including that of the proposed San Fernando, La Union regional office building, the construction of which had already been started by the plaintiff. He also stated that the Central Bank Associated Architects would be asked to prepare new plans and designs based on such reduced appropriations. The defendant, during that same meeting, also advised the plaintiff, thru Messrs. Nicomedes G. Ablaza and Alfredo G. Ablaza (who represented the plaintiff corporation at the said meeting), to stop its construction work on the Central Bank Regional office building in San Fernando, La Union. This was immediately complied with by the plaintiff, although its various construction equipment remained in the jobsite. The defendant likewise presented certain offer and proposals to the plaintiff, among which were: (a) the immediate return of plaintiff's cash bidder's bond of P275,000.00; (b) the payment of interest on said bidder's bond at 12% per annum; (c) the reimbursement to the plaintiff of the value of all the work accomplished at the site; (d) the entering into a negotiated contract with the plaintiff on the basis of the reduced appropriation for the project in question; and (e) the reimbursement of the premium on plaintiff's performance bond. Not one of these offers and proposals of the defendant, however, was accepted by the plaintiff during that meeting of May 20, 1966. On June 3, 1966, plaintiff, thru counsel, wrote the defendant, demanding for the formal execution of the corresponding contract, without prejudice to its claim for damages. The defendant, thru its Deputy Governor, Mr. Amado R. Brinas, on June 15, 1966, replied to the said letter of the plaintiff, whereby the defendant claimed that an agreement was reached between the plaintiff and the defendant during the meeting held on May 20, 1966. On the following day, however, in its letter dated June 16, 1966, the plaintiff, thru counsel, vehemently denied that said parties concluded any agreement during the meeting in question. On July 5, 1966, defendant again offered to return plaintiff's cash bidder's bond in the amount of P275,000.00. The plaintiff, thru counsel, on July 6, 1966, agreed to accept the return of the said cash bond, without prejudice, however, to its claims as contained in its letters to the defendant dated June 3, June 10, and June 16, 1966, and with further reservation regarding payment of the corresponding interest thereon. On July 7, 1966, the said sum of P275,000.00 was returned by the defendant to the plaintiff. On January 30, 1967, in accordance with the letter of the plaintiff, thru counsel, dated January 26, 1967, the construction equipment of the plaintiff were pulled out from the construction site, for which the plaintiff incurred hauling expenses. The negotiations of the parties for the settlement of plaintiff's claims out of court proved to be futile; hence, the present action was instituted by plaintiff against the defendant." (Pp. 249-256, Rec. on Appeal). It may be added that the Instructions to Bidders on the basis of which the bid and award in question were submitted and made contained, among others, the following provisions: t.hqw IB 113.4 The acceptance of the Proposal shall be communicated in writing by the Owner and no other act of the Owner shall constitute the acceptance of the Proposal. The acceptance of a Proposal shall bind the successful bidder to execute the Contract and to be responsible for liquidated damages as herein provided. The rights and obligations provided for in the Contract shall become effective and binding upon the parties only with its formal execution. xxx xxx xxx IB 114.1 The bidder whose proposal is accepted will be required to appear at the Office of the Owner in person, or, if a firm or corporation, a duly authorized

representative shall so appear, and to execute that contract within five (5) days after notice that the contract has been awarded to him. Failure or neglect to do so shall constitute a breach of agreement effected by the acceptance of the Proposal. xxx xxx xxx IB 118.1 The Contractor shall commence the work within ten (10) calendar days from the date he receives a copy of the fully executed Contract, and he shall complete the work within the time specified." (Pp. 18-19 & 58-59, PetitionerAppellant's Brief.) In the light of these facts, petitioner has made the following assignment of errors: t.hqw I. THE COURT OF APPEALS ERRED IN HOLDING THAT THERE WAS A PERFECTED CONTRACT BETWEEN PETITIONER CENTRAL BANK OF THE PHILIPPINES AND RESPONDENT ABLAZA CONSTRUCTION & FINANCE CORPORATION FOR THE GENERAL CONSTRUCTION WORK OF PETITIONER'S REGIONAL OFFICE BUILDING AT SAN FERNANDO, LA UNION. II. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAS COMMITTED A BREACH OF CONTRACT. III. THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER HAD GIVEN ITS APPROVAL TO THE WORK DONE BY RESPONDENT ABLAZA CONSTRUCTION & FINANCE CORPORATION. IV. THE COURT OF APPEALS ERRED IN HOLDING THAT THE AWARD OF ACTUAL AND COMPENSATORY DAMAGES, ATTORNEY'S FEES AND RETAINING FEE IS FAIR AND REASONABLE, AND IN HOLDING THAT PETITIONER IS LIABLE FOR COSTS." (Pp.A & B, Petitioner-Appellant's Brief.) Under the first assigned error, petitioner denotes the major part of its effort to the discussion of its proposition that there could be no perfected contract in this case, (contrary to the conclusion of the courts below) because there is no showing of compliance, and in fact, there has been no compliance with the requirement that there must be a certification of the availability of funds by the Auditor General pursuant to Section 607 of the Revised Administrative Code which provides thus: t.hqw Section 607.Certificate showing appropriation to meet contract. Except in the case of a contract for personal service or for supplies to be carried in stock, no contract involving an expenditure by the National Government of three thousand pesos or more shall be entered into or authorized until the Auditor General shall have certified to the officer entering into such obligation that funds have been duly appropriated for such purpose and that the amount necessary to cover the proposed contract is available for expenditure on account thereof. When application is made to the Auditor General for the certificate herein required, a copy of the proposed contract or agreement shall be submitted to him accompanied by a statement in writing from the officer making the application showing all obligations not yet presented for audit which have been incurred against the appropriation to which the contract in question would be chargeable; and such certificate, when signed by the Auditor, shall be attached to and become a part of the proposed contract, and the sum so certified shall not thereafter be available for expenditure for any other purposes until the Government is discharged from the contract in question. Except in the case of a contract for supplies to be carried in stock, no contract involving the expenditure by any province, municipality, chartered city, or municipal district of two thousand pesos or more shall be entered into or authorized until the treasurer of the political division concerned shall have certified to the officer entering into such contract that funds have been duly appropriated for such purpose and that the amount necessary to cover the proposed contract is available for expenditure on account thereof. Such certificate, when signed by the said treasurer, shall be attached to and become part of the proposed contract and the sum

so certified shall not thereafter be available for expenditure for any other purpose until the contract in question is lawfully abrogated or discharged. For the purpose of making the certificate hereinabove required ninety per centum of the estimated revenues and receipts which should accrue during the current fiscal year but which are yet uncollected, shall be deemed to be in the treasury of the particular branch of the Government against which the obligation in question would create a charge." (Pp. 23-25, Petitioner-Appellant's Brief.) It is contended that in view of such omission and considering the provisions of Section 608 of the same code to the effect that "a purported contract entered into contrary to the requirements of the next preceding section hereof shall be wholly void", "no contract between the petitioner and respondent Ablaza Construction and Finance Corporation for the general construction of the proposed regional office building of the Central Bank in San Fernando, La Union, was ever perfected because only the first stage, that is the award of the contract to the lowest responsible bidder, respondent Ablaza Construction and Finance Corporation, was completed." (p. 29, Petitioner-Appellant's Brief.) And in support of this pose, petitioner relies heavily on Tan C. Tee & Co. vs. Wrightthus: t.hqw The aforesaid requirements of the Revised Administrative Code for the perfection of government contracts have been upheld by this Honorable Court in the case of Tan C. Tee Co. vs. Wright, 53 Phil. 172, in which case it was held that the award of the contract to the lowest bidder does not amount to entering into the contract because of the requirement of Section 607 of the Revised Administrative Code that a copy of the proposed contract shall be submitted to the Auditor General together with a request for the availability of funds to cover the proposed contract. Thus, this Honorable Court held: t.hqw 'To award the contract to the lowest responsible bidder is not the equivalent of entering into the contract. Section 607 of the Administrative Code requires that a copy of the proposed contract shall be submitted along with the request for the certificate of availability of funds, but there could be no proposed contract to be submitted until after the award was made.' And to guide government authorities in the letting of government contracts, this Honorable Court, in said case of Tan C. Tee vs. Wright, supra, laid down the procedure which should be followed, as follows: t.hqw `PROCEDURE WHICH SHOULD BE FOLLOWED IN THE LETTING OF CONTRACTS FOR INSULAR WORKS. The procedure which should be followed in the letting of contracts for Insular works is the following: First, there is an award of the contract by the Director of Public Works to the lowest responsible bidder. Second, there is a certificate of availability of funds to be obtained from the Insular Auditor, and in some cases from the Insular Treasurer, to cover the proposed contract. And third, there is a contract to be executed on behalf of the Government by the Director of Public Works with the approval of the department head.'" (Pp. 27-28, Petitioner-Appellant's Brief.) The contention is without merit. To start with, the record reveals that it is more of an afterthought. Respondent never raised this question whether in its pleadings or at the hearings in the trial court. We have also read its brief in the appellate court and no mention is made therein of this point. Not even in its memorandum submitted to that court in lieu of oral argument is there any discussion thereof, even as it appears that emphasis was given therein to various portions of the Revised Manual of Instructions to Treasurers regarding the perfection and constitution of public contracts. In fact, reference was made therein to Administrative Order No. 290 of the President of the Philippines, dated February 5, 1959, requiring "all contracts of whatever nature involving P10,000 or more to be entered into by all bureaus and offices, ... including the ... Central Bank ... shall be submitted to the Auditor General for examination and

review before the same are perfected and/or consummated, etc.", without mentioning, however, that said administrative order was no longer in force, the same having been revoked on January 17, 1964 by President Macapagal under Administrative Order No. 81, s. 1964. Hence, if only for the reason that it is a familiar rule in procedure that defenses not pleaded in the answer may not be raised for the first time on appeal, petitioner's position cannot be sustained. Indeed, in the Court of Appeals, petitioner could only bring up such questions as are related to the issues made by the parties in their pleadings, particularly where factual matters may be involved, because to permit a party to change his theory on appeal "would be unfair to the adverse party." (II, Moran, Rules of Court, p. 505, 1970 ed.) Furthermore, under Section 7 of Rule 51, the appellate court cannot consider any error of the lower court "unless stated in the assignment of errors and properly argued in the brief." Even prescinding from this consideration of belatedness, however, it is Our considered view that contracts entered into by petitioner Central Bank are not within the contemplation of Sections 607 and 608 cited by it. Immediately to be noted, Section 607 specifically refers to "expenditure(s) of the National Government" and that the term "National Government" may not be deemed to include the Central Bank. Under the Administrative Code itself, the term "National Government" refers only to the central government, consisting of the legislative, executive and judicial departments of the government, as distinguished from local governments and other governmental entities and is not synonymous, therefore, with the terms "The Government of the Republic of the Philippines" or "Philippine Government", which are the expressions broad enough to include not only the central government but also the provincial and municipal governments, chartered cities and other government-controlled corporations or agencies, like the Central Bank. (I, Martin, Administrative Code, p. 15.) To be sure the Central Bank is a government instrumentality. But it was created as an autonomous body corporate to be governed by the provisions of its charter, Republic Act 265, "to administer the monetary and banking system of the Republic." (Sec. 1) As such, it is authorized "to adopt, alter and use a corporate seal which shall be judicially noticed; to make contracts; to lease or own real and personal property, and to sell or otherwise dispose of the same; to sue and be sued; and otherwise to do and perform any and all things that may be necessary or proper to carry out the purposes of this Act. The Central Bank may acquire and hold such assets and incur such liabilities as result directly from operations authorized by the provisions of this Act, or as are essential to the proper conduct of such operations." (Sec. 4) It has capital of its own and operates under a budget prepared by its own Monetary Board and otherwise appropriates money for its operations and other expenditures independently of the national budget. It does not depend on the National Government for the financing of its operations; it is the National Government that occasionally resorts to it for needed budgetary accommodations. Under Section 14 of the Bank's charter, the Monetary Board may authorize such expenditures by the Central Bank as are in the interest of the effective administration and operation of the Bank." Its prerogative to incur such liabilities and expenditures is not subject to any prerequisite found in any statute or regulation not expressly applicable to it. Relevantly to the issues in this case, it is not subject, like the Social Security Commission, to Section 1901 and related provisions of the Revised Administrative Code which require national government constructions to be done by or under the supervision of the Bureau of Public Works. (Op. of the Sec. of Justice No. 92, Series of 1960) For these reasons, the provisions of the Revised Administrative Code invoked by the Bank do not apply to it. To Our knowledge, in no other instance has the Bank ever considered itself subject thereto. In Zobel vs. City of Manila, 47 Phil. 169, this Court adopted a restrictive construction of Section 607 of the Administrative Code thus: The second question to be considered has reference to the applicability of section 607 of the Administrative Code to contracts made by the City of Manila. In the second paragraph of said section it is declared that no contract involving the expenditure by any province, municipality, township, or settlement of two thousand pesos or more shall be entered into or authorized until the treasurer of the political division concerned shall have certified to the officer entering into such contract that funds have been duly appropriated for such purpose and that the amount necessary to cover the proposed contract is available for expenditure on account thereof. It is admitted that no such certificate was made by the treasurer of Manila at the time the contract now in question was made. We are of the opinion that the provision cited has no application to contracts of a chartered city, such as the City of Manila. Upon examining said provision (sec. 607) it will be found that the term chartered city, or other similar expression, such as would include the City of Manila, is not used; and it is quite manifest from the careful use of terms in said

section that chartered cities were intended to be excluded. In this connection the definitions of "province," "municipality," and "chartered city," given in section 2 of the Administrative Code are instructive. The circumstance that for certain purposes the City of Manila has the status both of a province and a municipality (as is true in the distribution of revenue) is not inconsistent with this conclusion." 1 We perceive no valid reason why the Court should not follow the same view now in respect to the first paragraph of the section by confirming its application only to the offices comprised within the term National Government as above defined, particularly insofar as government-owned or created corporations or entities having powers to make expenditures and to incur liabilities by virtue of their own corporate authority independently of the national or local legislative bodies, as in the case of the petitioner herein, are concerned. Whenever necessary, the Monetary Board, like any other corporate board, makes all required appropriations directly from the funds of the Bank and does not need any official statement of availability from its treasurer or auditor and without submitting any papers to, much less securing the approval of the Auditor General or any outside authority before doing so. Indeed, this is readily to be inferred from the repeal already mentioned earlier of Administrative Order No. 290, s. 1959, which petitioner tried to invoke, overlooking perhaps such repeal. In other words, by that repeal, the requirement that the Central Bank should submit to the Auditor General for examination and review before contracts involving P10,000 or more to be entered into by it "before the same are perfected and/or consummated" had already been eliminated at the time the transaction herein involved took place. Consequently, the point of invalidity pressed, belatedly at that, by petitioner has no leg to stand on. The other main contention of petitioner is that the purported or alleged contract being relied upon by respondent never reached the stage of perfection which would make it binding upon the parties and entitle either of them to sue for specific performance in case of breach thereof. In this connection, since the transaction herein involved arose from the award of a construction contract 2 by a government corporation and the attempt on its part to discontinue with the construction several months after such award had been accepted by the contractor and after the latter had already commenced the work without any objection on the part of the corporation, so much so that entry into the site for the purpose was upon express permission from it, but before any written contract has been executed, it is preferable that certain pertinent points be clarified for the proper resolution of the issue between the parties here and the general guidance of all who might be similarly situated. Petitioner buttresses its position in regard to this issue on the provisions earlier quoted in this opinion of the Instruction to Bidders: t.hqw IB 113.4 The acceptance of the Proposal shall be communicated in writing by the Owner and no other act of the Owner shall constitute the acceptance of the Proposal. The acceptance of a Proposal shall bind the successful bidder to execute the Contract and to be responsible for liquidated damages as herein provided. The rights and obligations provided for in the Contract shall become effective and binding upon the parties only with its formal execution. xxx xxx xxx IB 118.1 The Contractor shall commence the work within ten (10) calendar days from the date he receives a copy of the fully executed Contract, and he shall complete the work within the time specified." (Pp. 18-19, Petitioner-Appellant's Brief.) Petitioner insists that under these provisions, the rights and obligations of the Bank and Ablaza could become effective and binding only upon the execution of the formal contract, and since admittedly no formal contract has yet been signed by the parties herein, there is yet no perfected contract to speak of and respondent has, therefore, no cause of action against the Bank. And in refutation of respondent's argument that it had already started the work with some clearing job and foundation excavations, which has never been stopped by petitioner who had previously given express permission to respondent to enter the jobsite, build a temporary shelter and enclosures thereon, petitioner counters that under the above instructions, respondent is supposed to commence the work "within ten (10) calendar days from the date he receives a copy of the fully executed Contract," and for said respondent to have started actual construction work before any contract has been signed was unauthorized and was consequently undertaken at his own risk, all the above circumstances indicative of estoppel notwithstanding.

We are not persuaded that petitioner's posture conforms with law and equity. According to Paragraph IB 114.1 of the Instructions to Bidders, Ablaza was "required to appear in the office of the Owner (the Bank) in person, or, if a firm or corporation, a duly authorized representative (thereof), and to execute the contract within five (5) days after notice that the contract has been awarded to him. Failure or neglect to do so shall constitute a breach of agreement effected by the acceptance of the Proposal ." There can be no other meaning of this provision than that the Bank's acceptance of the bid of respondent Ablaza effected an actionable agreement between them. We cannot read it in the unilateral sense suggested by petitioner that it bound only the contractor, without any corresponding responsibility or obligation at all on the part of the Bank. An agreement presupposes a meeting of minds and when that point is reached in the negotiations between two parties intending to enter into a contract, the purported contract is deemed perfected and none of them may thereafter disengage himself therefrom without being liable to the other in an action for specific performance. The rather ambiguous terms of Paragraph IB 113.4 of the Instructions to Bidders relied upon by petitioner have to be reconciled with the other paragraphs thereof to avoid lack of mutuality in the relation between the parties. This invoked paragraph stipulates that "the acceptance of (respondent's) Proposal shall bind said respondent to execute the Contract and to be responsible for liquidated damages as herein provided." And yet, even if the contractor is ready and willing to execute the formal contract within the five (5) day period given to him, petitioner now claims that under the invoked provision, it could refuse to execute such contract and still be absolutely free from any liability to the contractor who, in the meantime, has to make necessary arrangements and incur expenditures in order to be able to commence work "within ten (10) days from the date he receives a copy of the fully executed Contract," or be responsible for damages for delay. The unfairness of such a view is too evident to be justified by the invocation of the principle that every party to a contract who is sui juris and who has entered into it voluntarily and with full knowledge of its unfavorable provisions may not subsequently complain about them when they are being enforced, if only because there are other portions of the Instruction to Bidders which indicate the contrary. Certainly, We cannot sanction that in the absence of unavoidable just reasons, the Bank could simply refuse to execute the contract and thereby avoid it entirely. Even a government owned corporation may not under the guise of protecting the public interest unceremoniously disregard contractual commitments to the prejudice of the other party. Otherwise, the door would be wide open to abuses and anomalies more detrimental to public interest. If there could be instances wherein a government corporation may justifiably withdraw from a commitment as a consequence of more paramount considerations, the case at bar is not, for the reasons already given, one of them. As We see it then, contrary to the contention of the Bank, the provision it is citing may not be considered as determinative of the perfection of the contract here in question. Said provision only means that as regards the violation of any particular term or condition to be contained in the formal contract, the corresponding action therefor cannot arise until after the writing has been fully executed. Thus, after the Proposal of respondent was accepted by the Bank thru its telegram and letter both dated December 10, 1965 and respondent in turn accepted the award by its letter of December 15, 1965, both parties became bound to proceed with the subsequent steps needed to formalize and consummate their agreement. Failure on the part of either of them to do so, entities the other to compensation for the resulting damages. To such effect was the ruling of this Court in Valencia vs. RFC 103 Phil. 444. We held therein that the award of a contract to a bidder constitutes an acceptance of said bidder's proposal and that "the effect of said acceptance was to perfect a contract, upon notice of the award to (the bidder)". (at p. 450) We further held therein that the bidder's "failure to (sign the corresponding contract) do not relieve him of the obligation arising from the unqualified acceptance of his offer. Much less did it affect the existence of a contract between him and respondent". (at p. 452) It is neither just nor equitable that Valencia should be construed to have sanctioned a one-sided view of the perfection of contracts in the sense that the acceptance of a bid by a duly authorized official of a government-owned corporation, financially and otherwise autonomous both from the National Government and the Bureau of Public Works, insofar as its construction contracts are concerned, binds only the bidder and not the corporation until the formal execution of the corresponding written contract. Such unfairness and inequity would even be more evident in the case at bar, if We were to uphold petitioner's pose. Pertinently to the point under consideration, the trial court found as follows: To determine the amount of damages recoverable from the defendant, plaintiff's claim for actual damages in the sum of P298,433.35, as hereinabove stated, and the recommendation of Messrs. Ambrosio R. Flores

and Ricardo Y. Mayuga, as contained in their separate reports (Exhs. "13" and "15"), in the amounts of P154,075.00 and P147,500.00, respectively, should be taken into account. There is evidence on record showing that plaintiff incurred the sum of P48,770.30 for the preparation of the jobsite, construction of bodegas, fences field offices, working sheds, and workmen's quarters; that the value of the excavation work accomplished by the plaintiff at the site was P113,800.00; that the rental of the various construction equipment of the plaintiff from the stoppage of work until the removal thereof from the jobsite would amount to P78,540.00 (Exhs. "K" - "K-l"); that the interest on the cash bond of P275,000.00 from November 3, 1965 to July 7, 1966 at 12% per annum would be P22,000.00; that for removing said construction equipment from the jobsite to Manila, plaintiff paid a hauling fee of P700.00 (Exhs. "L" - "L-1" ); that for the performance bond that the plaintiff posted as required under its contract with the defendant, the former was obliged to pay a premium of P2,216.55; and that the plaintiff was likewise made to incur the sum of P32,406.50, representing the 3% contractor's tax (Exhs. "AA" - "A-l"). The itemized list of all these expenditures, totalling P298,433.35 is attached to the records of this case (Annex "B", Complaint) and forms part of the evidence of the plaintiff. Mr. Nicomedes G. Ablaza, the witness for the plaintiff, properly identified said document and affirmed the contents thereof when he testified during the hearing. The same witness likewise explained in detail the various figures contained therein, and identified the corresponding supporting papers. It is noteworthy, in this connection, that there is nothing in the records that would show that the defendant assailed the accuracy and/or reasonableness of the figures presented by the plaintiff; neither does it appear that the defendant offered any evidence to refute said figures. While it is claimed by the defendant that the plaintiff incurred a total expense of only P154,075.00 according to the report of Mr. Ambrosio R. Flores, or P147,500.00, according to the report of Mr. Ricardo Y. Mayuga, the Court finds said estimates to be inaccurate. To cite only an instance, in estimating, the value of the excavation work, the defendant merely measured the depth, length and width of the excavated, area which was submerged in water, without ascertaining the volume of rock and the volume of earth actually excavated as was done by the plaintiff who prepared a detailed plan showing the profile of the excavation work performed in the site (Exh. "B"). Likewise, the unit measure adopted by the defendant was in cubic meter while it should be in cubic yard. Also the unit price used by the defendant was only P8.75 for rock excavation while it should be P10.00 per cubic yard; and only P4.95 for earth excavation while it should be P5.50 per cubic yard as clearly indicated in plaintiff's proposal (Annex "A", Complaint; same as Annex "1", Answer). The Court, therefore, can not give credence to defendant's, aforementioned estimates in view of their evident inaccuracies. The Court finds from the evidence adduced that Plaintiff claim for actual damages in the sum of P298,433.35 is meritorious. The Bulk of plaintiffs claims consists of expected profit which it failed to realize due to the breach of the contract in question by the defendant. As previously stated, the plaintiff seeks to recover the amount of P814,190.00 by way of unrealized expected profit. This figure represents 18% of P4,523,275.00 which is the estimated direct cost of the subject project. As it has been established by the evidence that the defendant in fact was guilty of breach of contract and, therefore, liable for damages (Art. 1170, New Civil Code), the Court finds that the plaintiff is entitled to recover from the defendant unrealized expected profit as part of the actual or compensatory damages. Indemnification for damages shall comprehend not only the value of the loss suffered, but also that of the profits which the obligee failed to obtain (Art. 2200, New Civil Code). Where a party is guilty of breach of contract, the other party is entitled to recover the profit which the latter would have been able to make had the contract been performed ( Paz P. Arrieta, et al., plaintiffsappellees, vs. National Rice Corporation defendant-appellant, G.R. No. L-15645, promulgated on January 31, 1964; Vivencio Cerrano, plaintiff-appellee, vs. Tan Chuco, defendant-appellant, 38 Phil. 392). Regarding the expected profit, a number of questions will have to be answered: Is the 18% unrealized expected profit being claimed by the plaintiff reasonable? Would the plaintiff be entitled to the whole amount of said expected profit although there was only partial performance of the contract? Would the 18% expected profit be based on the estimated direct cost of the subject in the amount of P4,523,275.00, or on plaintiff's bid proposal of P3,749,000.00?

On the question of reasonableness of the 18% expected profit, the Court noted that according to defendant's own expert witness, Mr. Ambrosio R. Flores, 25% contractor's profit for a project similar in magnitude as the one involved in the present case would be ample and reasonable. Plaintiff's witness, Mr. Nicomedes G. Ablaza, an experienced civil engineer who has been actively engaged in the construction business, testified that 15% to 20% contractor's profit would be in accordance with the standard engineering practice. Considering the type of the project involved in this case, he stated, the contractor's profit was placed at 18%. Taking into consideration the fact that this percentage of profit is even lower than what defendant's witness considered to be ample and reasonable, the Court believes that the reasonable percentage should be 18% inasmuch as the actual work was not done completely and the plaintiff has not invested the whole amount of money called for by the project." (Pp. 263-268, Record on Appeal.) These findings have not been shown to Us to be erroneous. And additional and clarificatory details, which We find to be adequately supported by the record, are stated in Respondents' brief thus: t.hqw 23. In a letter dated January 4, 1966, petitioner Central Bank, through the same Mr. Mendoza, to this request of respondent Ablaza. (Annex "D-1" to the Partial Stipulation of Facts, R.A., p. 146). 24. Acting upon this written permission, respondent Ablaza immediately brought its men and equipment from Manila to the construction site in San Fernando, La Union, and promptly commenced construction work thereat. This work, consisted of the setting up of an enclosure around the site, the building of temporary shelter for its workmen, and the making of the necessary excavation works. (Commissioner's Report, R.A., p. 181). 25. Following the commencement of such construction work, petitioner Central Bank, through a letter dated February 8, 1966, formally requested respondent Ablaza to submit to petitioner the following:t.hqw (a) A schedule of deliveries of material which, under the terms of respondent Ablaza's approved proposal, were to be furnished by petitioner. (b) A time-table for the accomplishment of the construction work. In short, as early as February 8, 1966, or more than three months prior to petitioner's repudiation of the contract in question the latter (petitioner) already took the above positive steps it compliance with its own obligations under the contract. 26. Acting upon petitioner's above letter of February 8, 1966, on February 16, 1966, respondent Ablaza submitted the schedule of deliveries requested by petitioner. (Commissioner's Report, R.A., p. 182; Decision id., 252; also Exhs."D" to "D-7", inclusive.) 27. During the period of actual construction, respondent Ablaza, on several occasions, actually discussed the progress of the work with Mr. Mendoza. In addition, in March 1966, the latter (Mr. Mendoza) personally visited the construction site. There he saw the work which respondent had by that time already accomplished which consisted of the completion of approximately 20% of the necessary excavation works. (Commissioner's Report, R.A., p. 182; Decision, id., p. 252). 28. Following Mr. Mendoza's visit at the construction site, or more specifically on March 22, 1966, the latter (Mendoza) wrote to respondent Ablaza, instructing the latter to formally designate the person to represent the corporation at the signing of the formal construction contract. (Exh."H"; also t.s.n., pp. 119-121, December 18, 1967).

29. By a letter dated March 24, 1966, respondent Ablaza promptly complied with the above request. (Exh."I"; also t.s.n., pp 121-123, December 18, 1967). 30. Subsequently, respondent Ablaza posted the required performance guaranty bond in the total amount of P962,250.00, consisting of (a) a cash bond in the amount of P275,000.00, and (b) a surety bond, PSIC Bond No. B-252-ML, dated May 19, 1966, in the amount of P687,250.00. In this connection, it is important to note that the specific purpose of this bond was to guarantee "the faithful Performance of the Contract" by respondent Ablaza. (Partial Stipulation of Facts , par. 6, R.A., p. 141). This performance guaranty bond was duly accepted by petitioner.(Id.) 31. However, on May 20, 1966, petitioner Central Bank called for a meeting with representatives of respondent Ablaza and another contractor. This meeting was held at the Conference Room of the Central Bank Building. At this meeting, then Finance Secretary Eduardo Romualdez, who acted as the representative of petitioner, announced that the Monetary Board had decided to reduce the appropriations for the various proposed Central Bank regional office buildings, including the one for San Fernando, La Union. 32. In view of this decision, Secretary Romualdez informed respondent Ablaza that new plans and designs for the proposed regional office building in San Fernando would have to be drawn up to take account of the reduction in appropriation. Secretary Romualdez then advised respondent to suspendwork at the construction site in San Fernando in the meanwhile. (Decision, R.A., pp. 253-254). 33. After making the above announcements, Secretary Romualdez proposed that all existing contracts previously entered into between petitioner Central Bank and the several winning contractors (among them being respondent Ablaza) be considered set aside. 34. Obviously to induce acceptance of the above proposal, Secretary Romualdez offered the following concessions to respondent Ablaza: t.hqw (a) That its cash bond in the amount of P275,000.00 be released immediately, and that interest be paid thereon at the rate of 12% per annum. (b) That respondent Ablaza be reimbursed for expenses incurred for the premiums on the performance bond which it posted, and which petitioner had already accepted. (Decision, R.A., pp. 253-254). 35. In addition, Secretary Romualdez also proposed the conclusion of a new contract with respondent Ablaza for the construction of a more modest regional office building at San Fernando, La Union, on anegotiated basis. However, the sincerity and feasibility of this proposal was rendered dubious by a caveat attached to it, as follows: t.hqw '4. Where auditing regulations would permit, the Central Bank would enter into a negotiated contract with the said corporation (Ablaza) for the construction work on the building on the basis of the revised estimates.' (Annex "8" to Answer, R.A., p. 95). 36. The revised cost fixed for this proposed alternative regional office building was fixed at a maximum of P3,000,000.00 (compared to P3,749,000.00 under the contract originally awarded to respondent). (Annex "6-A" to Answer, R.A., p. 87). 37. Needless perhaps to state, respondent Ablaza rejected the above proposals (pars. 34 and 35, supra.), and on June 3, 1966, through counsel, wrote to petitioner demanding the formal execution of the contract previously awarded to it, or in the

alternative, to pay "all damages and expenses suffered by (it) in the total amount of P1,181,950.00 ... "(Annex "7" to Answer, R.A., pp. 89-91; Decision, id., p. 254). 38. In a letter dated June 15, 1966, petitioner Central Bank, through Deputy Governor Amado R. Brinas, replied to respondent Ablaza's demand denying any liability on the basis of the following claim:t.hqw `(That, allegedly) in line with the agreement ... reached between the Central Bank and Ablaza Construction and Finance Corporation at a meeting held ... on May 20, 1966,' "whatever agreements might have been previously agreed upon between (petitioner and respondent) would be considered set aside." (Decision, R.A., p. 255; Annex "8" to Answer, id., pp. 93-96.) 39. The above claim was, however, promptly and peremptorily denied by respondent Ablaza, through counsel, in a letter dated June 16, 1966. (Partial Stipulation of Facts, par. 9, R.A., p. 142, also Annex "G" thereof; Commissioner's Report, R.A., p. 185; Decision, id., p. 255.)" (Appellee's Brief, pars. 23 to 39, pp. 14-19.) None of these facts is seriously or in any event sufficiently denied in petitioner's reply brief. Considering all these facts, it is quite obvious that the Bank's insistence now regarding the need for the execution of the formal contract comes a little too late to be believable. Even assuming arguendo that the Revised Manual of Instructions to Treasurers were applicable to the Central Bank, which is doubtful, considering that under the provisions of its charter already referred to earlier, disbursements and expenditures of the Bank are supposed to be governed by rules and regulations promulgated by the Monetary Board, in this particular case, the attitude and actuations then of the Bank in relation to the work being done by Ablaza prior to May 20, 1966 clearly indicate that both parties assumed that the actual execution of the written contract is a mere formality which could not materially affect their respective contractual rights and obligations. In legal effect, therefore, the Bank must be considered as having waived such requirement. To be more concrete, from December 15, 1965, when Ablaza accepted the award of the contract in question, both parties were supposed to have seen to it that the formal contract were duly signed. Under the Instructions to Bidders, Ablaza was under obligation to sign the same within five (5) days from notice of the award, and so, he called on the Bank at various times for that purpose. The Bank never indicated until May, 1966 that it would not comply. On the contrary, on February 8, 1966, Ablaza was requested to submit a "schedule of deliveries of materials" which under the terms of the bid were to be furnished by the Bank. On March 22, 1966, Ablaza received a letter from the Bank inquiring as to who would be Ablaza's representative to sign the formal contract. In the meanwhile, no less than Mr. Rizalino Mendoza, the Chairman of the Management Building Committee of the Central Bank who had been signing for the Bank all the communications regarding the project at issue, had visited the construction site in March, 1966, just before he wrote the request abovementioned of the 22nd of that month for the nomination of the representative to sign the formal contract, and actually saw the progress of the work and that it was being continued, but he never protested or had it stopped. All these despite the fact that the Memorandum Circular being invoked by the Bank was issued way back on December 31, 1965 yet. And when finally on May 20, 1966 the Bank met with the representatives of Ablaza regarding the idea of changing the plans to more economical ones, there was no mention of the non-execution of the contract as entitling the Bank to back out of it unconditionally. Rather, the talk, according to the findings of the lower courts, was about the possibility of setting aside whatever agreement there was already. Under these circumstances, it appears that respondent has been made to believe up to the time the Bank decided definitely not to honor any agreement at all that its execution was not indispensable to a contract to be considered as already operating and respondent could therefore proceed with the work, while the contract could be formalized later. Petitioner contends next that its withdrawal from the contract is justified by the policy of economic restraint ordained by Memorandum Circular No. 1. We do not see it that way. Inasmuch as the contract here in question was perfected before the issuance of said Memorandum Circular, it is elementary that the same may not be enforced in such a manner as to result in the impairment of the obligations of the

contract, for that is not constitutionally permissible. Not even by means of a statute, which is much more weighty than a mere declaration of policy, may the government issue any regulation relieving itself or any person from the binding effects of a contract. (Section 1 (10), Article III, Philippine Constitution of 1953 and Section 11, Article IV, 1973 Constitution of the Philippines.)Specially in the case of the Central Bank, perhaps, it might not have been really imperative that it should have revised its plans, considering that it has its own resources independent of those of the national government and that the funds of the Central Bank are derived from its own operations, not from taxes. In any event, if the memorandum circular had to be implemented, the corresponding action in that direction should have been taken without loss of time and before the contract in question had taken deeper roots. It is thus clear that in unjustifiably failing to honor its contract with respondent, petitioner has to suffer the consequences of its action. The last issue submitted for Our resolution refers to the amount of damages awarded to Ablaza by the trial court and found by the Court of Appeals to be "fair and reasonable." Again, after a review of the record, We do not find sufficient ground to disturb the appealed judgment even in this respect, except as to attorney's fees. There are three principal items of damages awarded by the courts below, namely: (1) compensation for actual work done in the amount of P298,433.35, (2) unrealized profits equivalent to 18% of the contract price of P3,749,000 or P674,820.00 and (3) 15% of the total recovery as attorney's fees in addition to the P5,000 already paid as retaining fee. All of these items were the subject of evidence presented by the parties. According to the Court of Appeals: t.hqw As regard the accuracy and reasonableness of the award for damages, both actual and compensatory, it is to be noted that the trial court subjected the Commissioner's report and the evidence adduced therein to a careful scrutiny. Thus, when the appellant called the trial court's attention to the fact that the P814,190.00 unrealized expected profit being claimed by appellee represented 18% of P4,523,275.00 which was the estimated cost of the project, while the contract awarded to appellee was only in the amount of P3,749,000.00 as per its bid proposal, the Court made the necessary modification. It is further to be noted that the amount of 18% of the estimated cost considered in the said award is much less than that given by appellant's own expert witness, Ambrosio R. Flores. He testified that 25% as contractor's profit "would be fair, ample and reasonable." (T.s.n, p. 557, Batalla.)"(p. 17 A, Appellant's brief.) Basically, these are factual conclusions which We are not generally at liberty to disregard. And We have not been shown that they are devoid of reasonable basis. There can be no dispute as to the legal obligation of petitioner to pay respondent the actual expenses it has incurred in performing its part of the contract. Upon the other hand, the legal question of whether or not the Bank is liable for unrealized profits presents no difficulty. In Arrieta vs. Naric G.R. No. L-15645, Jan. 31, 1964, 10 SCRA 79, this Court sustained as a matter of law the award of damages n the amount of U.S. $286,000, payable in Philippine Currency, measured in the rate of exchange prevailing at the time the obligation was incurred (August, 1952), comprising of unrealized profits of the plaintiff, Mrs. Paz Arrieta, in a case where a government-owned corporation, the Naric failed to proceed with the purchase of imported rice after having accepted and approved the bid of Arrieta and after she had already closed her contract with her foreign sellers. Actually, the law on the matter is unequivocally expressed in Articles 2200 and 2201 of the Civil Code thus: t.hqw ART. 2200. Identification for damages shall comprehend not only the value of the loss suffered, but also that of the profits, which the obligee failed to obtain.. ART. 2201. In contracts and quasi-contracts, the damages for which the obligor who acted in good faith is liable shall be those that are the natural and probable consequences of the breach of the obligation, and which the parties have forseen or could have reasonably foreseen at the time the obligation was constituted.

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In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the nonperformance of the obligation. Construing these provisions, the following is what this Court held in Cerrano vs. Tan Chuco, 38 Phil. 392: t.hqw .... Article 1106 (now 2200) of the Civil Code establishes the rule that prospective profits may be recovered as damages, while article 1107 (now 2201) of the same Code provides that the damages recoverable for the breach of obligations not originating in fraud (dolo) are those which were or might have been foreseen at the time the contract was entered into. Applying these principles to the facts in this case, we think that it is unquestionable that defendant must be deemed to have foreseen at the time he made the contract that in the event of his failure to perform it, the plaintiff would be damaged by the loss of the profit he might reasonably have expected to derive from its use. When the existence of a loss is established, absolute certainty as to its amount is not required. The benefit to be derived from a contract which one of the parties has absolutely failed to perform is of necessity to some extent, a matter of speculation, but the injured party is not to be denied all remedy for that reason alone. He must produce the best evidence of which his case is susceptible and if that evidence warrants the inference that he has been damaged by the loss of profits which he might with reasonable certainty have anticipated but for the defendant's wrongful act, he is entitled to recover. As stated in Sedgwick on Damages (Ninth Ed., par. 177): The general rule is, then, that a plaintiff may recover compensation for any gain which he can make it appear with reasonable certainty the defendant's wrongful act prevented him from acquiring, ...'. (See also Algarra vs. Sandejas, 27 Phil. Rep., 284, 289; Hicks vs. Manila Hotel Co., 28 Phil. Rep., 325.)(At pp. 398-399.) Later, in General Enterprises, Inc. vs. Lianga Bay Logging Co. Inc., 11 SCRA 733, Article 2200 of the Civil Code was again applied as follows: t.hqw Regarding the actual damages awarded to appellee, appellant contends that they are unwarranted inasmuch as appellee has failed to adduce any evidence to substantiate them even assuming arguendo that appellant has failed to supply the additional monthly 2,000,000 board feet for the remainder of the period agreed upon in the contract Exhibit A. Appellant maintains that for appellee to be entitled to demand payment of sales that were not effected it should have proved (1) that there are actual sales made of appellee's logs which were not fulfilled, (2) that it had obtained the best price for such sales, (3) that there are buyers ready to buy at such price stating the volume they are ready to buy, and (4) appellee could not cover the sales from the logs of other suppliers. Since these facts were not proven, appellee's right to unearned commissions must fail. This argument must be overruled in the light of the law and evidence on the matter. Under Article 2200 of the Civil Code, indemnification for damages comprehends not only the value of the loss suffered but also that of the profits which the creditor fails to obtain. In other words, lucrum cessans is also a basis for indemnification. The question then that arises is: Has appellee failed to make profits because of appellant's breach of contract, and in the affirmative, is there here basis for determining with reasonable certainty such unearned profits? Appellant's memorandum (p. 9) shows that appellee has sold to Korea under the contract in question the following board feet of logs, Breareton Scale: t.hqw Months Board Feet From June to August 1959 3,007,435 September, 1959 none

October, 1959 2,299,805 November, 1959 801,021 December, 1959 1,297,510 Total 7,405,861 The above figures tally with those of Exhibit N. In its brief (p. 141) appellant claims that in less than six months' time appellee received by way of commission the amount of P117,859.54, while in its memorandum, appellant makes the following statement: `11. The invoice F.O.B. price of the sale through plaintiff General is P767,798.82 but the agreed F.O.B. price was P799,319.00, the commission at 13% (F.O.B.) is P117,859.54. But, as there were always two prices Invoice F.O.B price and F.O.B. price as per contract, because of the sales difference amounting to P31,920.18, and the same was deducted from the commission, actually paid to plaintiff General is only P79,580.82.' " It appears, therefore, that during the period of June to December, 1959, in spite of the short delivery incurred by appellant, appellee had been earning its commission whenever logs were delivered to it. But from January, 1960, appellee had ceased to earn any commission because appellant failed to deliver any log in violation of their agreement. Had appellant continued to deliver the logs as it was bound to pursuant to the agreement it is reasonable to expect that it would have continued earning its commission in much the same manner as it used to in connection with the previous shipments of logs, which clearly indicates that it failed to earn the commissions it should earn during this period of time. And this commission is not difficult to estimate. Thus, during the seventeen remaining months of the contract, at the rate of at least 2,000,000 board feet, appellant should have delivered thirty-four million board feet. If we take the number of board feet delivered during the months prior to the interruption, namely, 7,405,861 board feet, and the commission received by appellee thereon, which amounts to P79,580.82, we would have that appellee received a commission of P.0107456 per board feet. Multiplying 34 million board feet by P.0107456, the product is P365,350.40, which represents the lucrum cessans that should accrue to appellee. The award therefore, made by the court a quo of the amount of P400,000.00 as compensatory damages is not speculative, but based on reasonable estimate. In the light of these considerations, We cannot say that the Court of Appeals erred in making the aforementioned award of damages for unrealized profits to respondent Ablaza. With respect to the award for attorney's fees, We believe that in line with the amount fixed in Lianga, supra., an award of ten per centum (10%) of the amount of the total recovery should be enough. PREMISES CONSIDERED, the decision of the Court of Appeals in this case is affirmed, with the modification that the award for attorney's fees made therein is hereby reduced to ten per centum (10%) of the total recovery of respondent Ablaza. Costs against petitioner.

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G.R. No. L-27275

November 18, 1967

THE DAVAO METROPOLITAN WATERWORKS On 22 January 1965, the NAWASA called for bids for the furnishing of labor and the supply of materials for the construction of the proposed improvement of the Davao Metropolitan Waterworks System. In the call for bids, the bidders were required to submit proposals for the supply of 24-inch steel pipes, asbestos, cement pressure pipes, and cast iron pipes. The bidding was held on 23 February 1965. On 15 March 1965, the committee on award of the NAWASA recommended to the board of directors that the bid be awarded to the lowest bidder, Tirso del Rosario, under his proposal to supply steel pipes. On 10 August 1965, the plaintiff filed a (First) supplemental complaint seeking to restrain the NAWASA from proceeding with the award of the project in Davao, alleging that in specifying steel pipes for the project, which is admittedly imported material, without giving preference to locally produced asbestos cement pressure pipes manufactured by the plaintiff, violates the provisions of Republic Act 912. On 14 August 1965, the court admitted the supplemental complaint; and as prayed for therein on, 17 September 1965, the Court issued a writ of preliminary injunction. THE ILOILO WATERWORKS SYSTEM As early as on 26 November 1962, the NAWASA called for bids for the supply of 18-inch steel pipes for the improvement of the Iloilo Waterworks System. The bidding was conducted on 27 December 1962. C & C Commercial Co. participated in the bidding offering to supply the needed 18-inch steel pipes for the project, but lost in the bidding. The lowest bidder for the supply of the specified 18-inch steel pipes was the Regal Trading Corporation, and the bid was awarded to it. On 8 September 1965, almost three (3) years after the date of the bidding, the C & C Commercial Co. filed a (Second) supplemental complaint; seeking to restrain the NAWASA from formalizing or implementing the award on the aforesaid Iloilo project for the supply of 18-inch steel pipes, alleging that in specifying steel pipes for the particular project, the NAWASA has violated the provisions of Republic Act 912 which requires the purchase of Philippine made materials and products which are available, practicable and usable locally, like plaintiff's product asbestos cement pressure pipes in construction and repair undertaken by the government. On 24 September 1965, over the objection of the NAWASA, alleges second supplemental complaint was admitted by the court. The record is not clear when the restraining order under the second supplemental complaint was issued, although the NAWASA alleges that a restraining order was issued under date of 10 September 1965, which fact has not been traversed by the plaintiff. THE MANILA AND SUBURBS WATERWORKS SYSTEM On 13 September 1965, the NAWASA advertised for bids for the supply of 30 to 42-inch steel pipes for the use and improvement of the interim waterworks project in the City of Manila and suburbs, the bidding to take place on 14 December 1955. On 10 November 1965, the C & C Commercial Co. filed a (Third) Supplemental complaintseeking to restrain the NAWASA and its representatives from holding the balding under the aforementioned notice to bid, averring identical facts as those alleged in the previous supplemental complaints, that the call for bid for steel pipes for the Manila project and suburbs violates the provisions of Republic Act 912. Over the objection of the defendant NAWASA, the supplemental complaint was admitted; and as prayed for therein, on 20 November 1965, a writ of preliminary injunction was issued restraining the NAWASA from holding the bidding scheduled on 14 December 1965, or on any subsequent date, until further orders from the court. Pending the case in the court a quo, the NAWASA filed three separate motions praying for the dissolution of the preliminary injunctive writs issued in connection with the Davao, Iloilo and Manila projects, pleading to the court to consider the crying need for a more adequate supply of water in those cities, particularly in the City of Manila and its suburbs, where the lack of adequate supply of potable water has been a recurrent crisis which affected to a dangerous extent, the health and the life of the inhabitants, and that the continuation of the injunctive writs may bring about the cancellation of the $20,200,000.00 loan of the NAWASA from the World Bank, which would result from the failure of the NAWASA to comply with the formulated work schedule of the waterworks projects, which under the agreement with the World Bank, has to be completed in the month of October 1967; but the court failed to take any action on the motions. Parodying Shakespeare, "Set honor in one eye, and death in the other, and I will look on both indifferently."

C & C COMMERCIAL CORPORATION, plaintiff-appellee, vs. NATIONAL WATERWORKS AND SEWERAGE AUTHORITY, defendant-appellant. The Government Corporate Counsel for defendant-appellant. Cesar R. Canonizado and E. Ignacio for plaintiff-appellee. ANGELES, J.: The main issue in this appeal is, whether or not the call for bids for the supply of steel and centrifugal cast iron pipes for the waterworks projects in Manila and suburbs, and in the cities of Davao and Iloilo, the National Waterworks & Sewerage Authority (NAWASA) violated the provisions of Republic Act 912, section 1 of which provides as follows: Sec. 1. In construction or repair work undertaken by the Government, whether done directly or through contract awards, Philippine made materials and products, whenever available, practicable and usable, and will serve the purpose as equally well as foreign made products or materials, shall be used in said construction or repair work, upon the proper certification of the availability, practicability, usability and durability of said materials or products by the Director of the Bureau of Public Works and/or his assistants. In the decision appealed from the Court of First Instance of Manila has permanently enjoined the NAWASA from the procurement of the materials needed for the projects involved which, according to the appellant, are designed to alleviate the sufferings of the millions of inhabitants in said places where there is a crying need for more water an item so vital to human existence and the delay occasioned by the injunctions complained of, has in no little way, further aggravated the inconvenience of the consuming public in said metropolitan areas where acute water crises have recurred through the years. Nevertheless, it is vehemently contended by the appellee that the declaration of an economic national policy as envisioned in the aforequoted provision of the law which, like the original Flag Law1 is impressed with the clear nationalistic policy of giving preference to locally produced materials and products, has been violated; and if this is so, no amount of public clamor could justify the acts of the NAWASA complained of, for above all the supremacy of the law must be upheld. We have, therefore, examined the record of this case with these considerations foremost in Our minds. It appears that the case, originally commenced in the Court of First Instance of Manila, on July 7, 1965, as a petition for declaratory relief for the purpose of securing a judicial pronouncement on the interpretation of the word "practicable" as used in Republic Act No. 912, i.e., whether it means that the cheapest materials among the locally produced or manufactured products should be preferred and specified in construction and repair works undertaken by the Government, was later converted into, an action for prohibition with preliminary injunction through the process of supplemental pleadings. THE SAN PABLO WATERWORKS SYSTEM The corresponding complaint was filed on 19 July 1965, alleging that the NAWASA had started to negotiate: for direct purchase of centrifugally cast iron pipes (CCI) for the improvement of the San Pablo Waterworks System in violation of the provisions of Republic Act 912 and the law on public biddings, excluding the C & C Commercial Company, the plaintiff, which can supply instead asbestos cement pressure pipes which are available, practicableand usable, and will serve the purpose of the said project at a much lower cost. On 6 August 1965, the NAWASA filed its answer to the complaint. On 10 August 1965, the Filipino Pipe and Foundry Corporation, with leave of court, also filed its answer in intervention. On 16 August 1965, as prayed for in the complaint, the court issued a writ of preliminary injunction restraining the NAWASA from further negotiating the purchase of the CCI pipes from the intervenor. On 23 September 1965, the plaintiff and the NAWASA entered into a partial stipulation of facts, on the basis of which and the additional evidence adduced at the hearing, the court rendered a partial decision on 31 January 1966, dismissing the complaint insofar as the San Pablo Waterworks System was concerned and dissolving the preliminary injunction issued thereunder. This partial decision has become final.

12

After a trial of the case, on 15 August 1966, the court rendered a decision finding and concluding that the act of the NAWASA in specifying steel pipes for the project of the city of Manila and its suburbs, and in awarding the contracts for the supply of steel pipes in the cases of the Davao and Iloilo Waterworks System, constituted a violation of the provisions of Republic Act 912; the dispositive portion of the decision reads as follows: (a) On the supplemental complaint, making permanent the preliminary injunction dated September 2, 1965, enjoining the defendant or its representatives and agents from formalizing or implementing the award for the construction of the Davao Waterworks Project in respect of the award of pipes to be used therein; rescinding the award made in favor of Tirso del Rosario; and ordering the reappraisal of the bids with a view to complying with the provisions of Republic Act No 912; (b) On the second supplemental complaint ordering the issuance of a permanent injunction to enjoin the defendants or its agents and representatives from formalizing the award of the contract for the furnishing of 18" steel pipes for the Iloilo Waterworks System; ordering a new bidding for the said project so as to include in the call for bids for the supply and delivery of materials, asbestos cement pipes, as well as CCI pipes; and rescinding the award of the contract in favor of the Regal Trading Corporation; (c) On the third supplemental complaint, making permanent the preliminary injunction dated December 14, 1965, or any other subsequent date calling for imported steel pipes from 30" to 42" diameter for the interim Development of Waterworks System for Manila and suburbs; and ordering the defendant to specify asbestos cement pressure pipes for the said project; and (d) Ordering the defendants to pay the costs. From the decision, NAWASA appealed to this Court. Appellant contends that the provisions of Republic Act 912, are applicable only to construction or repair works undertaken by the Government. It argues, that since the NAWASA, though a public corporation, is not a municipal corporation or agency of the State empowered to regulate or administer the local affairs of a town or city,2 nor one of the various arms of the government through which political authority is made effective in the Islands, consequently, the NAWASA should not be included within the meaning of the term "Government" as used in the law.3 It is to be noted, however, that Section 2 of the Revised Administrative Code defining the term "Government" which is heavily relied upon by the appellant recognizes an exception: "when a different meaning for the word or phrase is given a particular statute or is plainly to be collected from the context or connection where the term is used." In this context of the law, the term "government" without any qualification as used in Republic Act 912, should be construed in its implied sense and not in the strict signification of the term "Government of the Philippines" as the political entity through which political authority is exercised. A comparative analysis of Republic Act 912 and Commonwealth Act 138, otherwise known as the "Flag Law" the latter "An Act to give Native Products and Domestic Entities the Preference in the Purchase of Articles for the Government", and the former "An Act to Require the Use, Under Certain Conditions, of Philippine Made Materials or Products in Government Projects or Public Works Construction, Whether Done Directly by the Government or Awarded thru Contracts", discloses that both relate to the same subject matter and have the same nationalistic purpose or object: to give preference to locally produced materials in purchases, works or projects of the Government. The oberservation that Commonwealth Act 138 expressly includes purchases by Government-owned companies, while Republic Act 912 merely relates to construction or repair work done by the Government, is no argument for the proposition that government-owned or controlled corporations have been excepted from the operation of the latter law, for it is clear that Commonwealth Act 138 also ordains that the Purchase and Equipment Division of government-owned companies authorized to purchase or contract for materials and supplies for public use, buildings, or public works, shall give preference to locally produced materials or products. Being statutes in pari materia they should be construed together to attain the purpose of an expressed national policy. Thus, it has been aptly stated: On the presumption that whenever the legislature enacts a provision it has in mind the previous statutes relating to the same subject matter, it is held that in the absence of any express repeal or amendment therein, the new provision was enacted in accord with the legislative policy embodied in those prior statutes, and they all should be construed together. Provisions in an act which are omitted in another act relating to the same subject matter will be applied in a

proceeding under the other act, when not inconsistent with its purpose. Prior statutes relating to the same subject matter are to be compared with the new provisions; and if possible by reasonable construction, both are to be construed that effect is given to every provision of each. Statutes in pari materia although in apparent conflict, are so far as reasonably possible construed to be in harmony with each other.4 The main objective of the Government is to develop our domestic industries so that the country will be economically self-sufficient. And both Commonwealth Act 138 and Republic Act 912 aim to contribute to the realization of the aforesaid nationalistic policy by requiring, the use of Philippine made products or materials, whenever available, practicable and usable in government construction work or repair projects. The alleged conflict between the two laws is more apparent than real, and should not be allowed to defeat the purpose of these laws. We have to declare, therefore, that the NAWASA, like any other corporation exercising proprietary or governmental functions should be deemed embraced within the term "Government" found in Republic Act 912, and in the repair or construction of their works or projects or the purchase of materials therefor, local materials should be given preference when available, practicable and usable. The next issue for consideration is: Did the NAWASA violate the provisions of Republic Act 912? Appellant vehemently denies the charge and decries the holding of the lower court appealed from that in specifying steel pipes in the call for bids for the supply of materials for the waterworks projects under consideration it had defied the mandate of the law. Appellant insists that at the time it called for bids for the Davao project, followed by the call for the supply of materials, for the Iloilo project, herein appellee's plant was only capable of producing asbestos cement pressure pipes up to 12 inches diameter; while at the time the call for bids for the supply of materials for the Interim Project of Manila and suburbs was advertised, the largest size of asbestos cement pipes available were of 24 inches being produced at the time by another local manufacturer, the Eternit Corporation, which never protested against the bids in question. We have reexamined the record of the case with painstaking solicitude and, instead, We find the facts indubitable and conclusive that the C & C Commercial Corporation had not therefore and even up to the present time ever produced pipes larger than 12 inches in diameter. Said appellee corporation has implicitly admitted this as a fact; and although it claims to have a complete plant that is equipped with the necessary machinery, technicians and skilled laborers capable of producing pipes in the sizes called for in those bids (18 to 42 inches in diameter) had the NAWASA specified them in asbestos cement, the weakness of the argument is at once exposed by a mere examination of the pertinent evidence adduced during the trial of the case on this particular point. The claim is belied by Leopoldo del Rosario, a staff civil an engineer of the NAWASA, who testified as follows: Q. Engineer Del Rosario, what is the limitation of the local asbestos cement pressure pipes that are locally manufactured in the Philippines? A. We based on NAWASA's experience, we have purchased only sizes up to 12 inches, but on certification of the Bureau of Public Works, a report has been submitted to us that asbestos cement pressure pipes (is) being manufactured by one local manufacturing company in the Philippines, the Eternit Corporation, which is a pipe manufacturer. and we have recently purchased pipes for the Manila interim project of sizes up to 24 inches non-pressure pipes. Q. Is there any other local manufacturer of asbestos cement pressure pipes besides C & C Commercial Corporation? A. None, sir, only the C & C Commercial Corporation.5

Q. Engineer del Rosario, as staff civil engineer and the specification engineer, member-secretary of the Pre-Qualifications Committee and the present chairman of all the bidding committees of the NAWASA, do you know if C & C Commercial Corporation, the plaintiff herein, is manufacturing asbestos cement pressure pipes from sizes thirty inches and up in diameter? A. The company does not manufacture size beyond twelve inches.

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Q. Why do you say that the C & C Commercial Corporation is not manufacturing asbestos cement pressure.pipes beyond twelve inches? A. Because we had bi-yearly inspection of all local plants here as a matter of policy of the committee to determine the capacity or capability of the local manufacturers to supply and even to bid. So every six months the pre-qualifications, committee in collaboration with the procurement inspect all the facilities of the chemical producing plant, this cast iron and asbestos plant, the galvanized iron pipe plant, these are regularly inspected every six months and so the pre-qualifications would know what is available.6 And the foregoing testimony relative to the "non-availability" of appellee's products in sizes above 12 inches in diameter was corroborated by Mrs. Clara Reyes Pastor, herein appellee corporation's President, who declared as follows: Q. Is it not a fact Mrs. Reyes, that the sizes of asbestos cement pressure pipes locally manufactured by you and which you furnish the NAWASA is only 12 inches in diameter? Yes or No ? A. Yes, sir, because that is the only pipe required at the time I delivered it.

certification, was found capable of producing. Hence, We cannot subscribe to the holding of the court below that locally produced asbestos cement pipes above 12 inches in diameter may be considered "'available" within the meaning of Republic Act 912 simply because the President of herein appellee corporation n had manifested or promised that it can procure bigger mandrels worth $25,000.00 fom abroad and will be able to produce pipes in the larger sizes called for in the questioned bids shortly after their installation, for that would be giving the term "available" a very strained meaning. It would really be unfair to require in order to be "available" within the meaning of the law that herein appellee should have in stock the sizes of pipes called for in the bids in the quantity needed by the appellant; but We cannot also believe, by any stretch of the imagination, that the Director of Public Works would certify to the availability, practicability, usability and durability of certain products even before the machinery, equipment or tools needed to produce said products are actually bought from abroad and installed in its plant by the manufacturer. Statutes granting advantages to private persons have in many instances created special privileges or monopolies for the grantees and thus have been viewed with suspicion and strictly construed. This is altogether appropriate in the majority of situations, for if public advantage is gained by the grant,it normally appears to be of secondary significance compared with the advantage gained by the grantee.8 And rights which exist only by virtue of such statutes come into being only after strict compliance with all the conditions found in those statutes.9 These rules should apply to the case at bar where the law invoked grants a preference to locally produced products or materials. Since Republic Act 912 grants preference only upon the certification of availability, practicability and usability of locally produced materials by the Director of Public Works, that certification must be existing and effective before any right arising therefrom may be claimed to have been violated. Notwithstanding the clear nationalistic policy of the law aforementioned, We cannot, by any mistaken sympathy towards herein appellee, recognize the existence of its right under the law alleged to have been violated, which C & C Commercial Corporation has miserably failed to prove in this case. With respect to the Interim Project for the City of Manila and its suburbs, it would seem that the decision appealed from had virtually become moot and academic by reason of the passage of Republic Act 4858 which authorizes the President to allow the procurement of supplies necessary for the rehabilitation of the project as an exception to the restrictions and preferences provided for in Republic Act 912, and the President appears to have authorized the General Manager of the NAWASA under the said statutory power to purchase all the pipes and materials necessary for the project by negotiated sales. For all the foregoing, We find it unnecessary to discuss further the other errors assigned by the appellant. WHEREFORE, the decision appealed from is hereby set aside, with costs against the appellee. The writs of preliminary injunctions issued by the lower court are set, aside, and declared null and void. Concepcion, C.J., Reyes J.B.L., Dizon, Bengzon, J.P., Zaldivar, Sanchez and Castro, JJ., concur. Fernando, J., took no part.

Q. And the asbestos cement pressure pipes from sizes 12 to 42 inches that you have supplied the NAWASA in the past, they were all imported by you? A. Yes, sir.

Q. I heard you testify Mrs. Reyes, that in case you win in this particular bidding, you intend to import equipments from abroad, is that correct? A. Q. A. Not equipments, only mandril. So that presently what is the biggest size of mandril that you have? I have a 16-inch mandril the biggest of them all.7

From the foregoing testimony of witnesses, and in the light of other evidence submitted by the parties, the following may be deduced: that it is the practice of the NAWASA which we find both practical and logical to send out its own men to the various local manufacturing plants for the purpose of knowing the availability of materials needed for its projects; that at the time it specified 18 and 24 inches diameter steel pipes for the Davao and Iloilo waterworks projects, there were no locally produced materials in said sizes; and that with respect to those sizes that were already available, the NAWASA has actually specified and used them in various other construction and repair works even without the certification of the Director of Public Works. We really do not see Our way clear how herein appellee could have charged that the NAWASA had discriminated against its products under the circumstances when its own president admits that it has supplied the NAWASA before locally produced asbestos cement pressure pipes up to 12 inches diameter only and all those with diameters above 12 inches were of foreign manufacture. The evidence, therefore, is conclusive that locally produced asbestos pipes above 12 inches in diameter were not available for purposes of claiming any preference under the provisions of Republic Act 912. And this conclusion becomes even more cogent if We are to consider the fact that C & C Commercial Corporation failed to produce the necessary certification from the Director of Public Works to show that its products were already certified as available, practicable and usable at the time that the call for bids for the supply of materials for the Davao, Iloilo and Manila Interim projects were made to give some semblance of the right it claims to have been violated. Of course, appellee points out the fact that it has subsequently secured the necessary certification from the Director of Public Works certifying to the availability, practicability and durability of the asbestos cement pressure pipes produced from its plant. We agree, and there should be no quarrel at all that with respect to pipes of 4 to 12 inches in diameter which it is actually producing now, the preference claimed under the law may be allowed. Be that as it may, however, the certification referred to did not in any way improve its position; for the stubborn fact still remains that at the time said certification was issued on July 6,1966, C & C Commercial Corporation was actually producing asbestos pipe up to 12 inches only, which its existing equipment or machinery, when inspected by a representative of the Office that issued the

14

.R. No. L-19337

September 30, 1969

The petitioner imputes three errors to the Court of Tax Appeals, namely: 1. In not declaring that force majeure and/or fortuitous event is a sufficient justification for the failure of the petitioner to export the jute bags in question within the time required by the bonds. 2. In not declaring that it is within the power of the Collector of Customs and/or the Commissioner of Customs to extend the period of one (1) year within which the jute bags should be exported. 3. In not declaring that the petitioner is entitled to a refund by way of a drawback under the provisions of section 106, par. (b), of the Tariff and Customs Code. 1. The basic issue tendered for resolution is whether the Commissioner of Customs is vested, under the Philippine Tariff Act of 1909, the then applicable law, with discretion to extend the period of one year provided for in section 23 of the Act. Section 23 reads: SEC. 23. That containers, such as casks, large metal, glass, or other receptacles which are, in the opinion of the collector of customs, of such a character as to be readily identifiable may be delivered to the importer thereof upon identification and the giving of a bond with sureties satisfactory to the collector of customs in an amount equal to double the estimated duties thereon, conditioned for the exportation thereof or payment of the corresponding duties thereon within one year from the date of importation, under such rules and regulations as the Insular Collector of Customs shall provide.1 To implement the said section 23, Customs Administrative Order 389 dated December 6, 1940 was promulgated, paragraph XXVIII of which provides that "bonds for the re-exportation of cylinders and other containers are good for 12 months without extension," and paragraph XXXI, that "bonds for customs brokers, commercial samples, repairs and those filed to guarantee the re-exportation of cylinders and other containers are not extendible." And insofar as jute bags as containers are concerned, Customs Administrative Order 66 dated August 25, 1948 was issued, prescribing rules and regulations governing the importation, exportation and identification thereof under section 23 of the Philippine Tariff Act of 1909. Said administrative order provides: That importation of jute bags intended for use as containers of Philippine products for exportation to foreign countries shall be declared in a regular import entry supported by a surety bond in an amount equal to double the estimated duties, conditioned for the exportation or payment of the corresponding duties thereon within one year from the date of importation. It will be noted that section 23 of the Philippine Tariff Act of 1909 and the superseding sec. 105(x) of the Tariff and Customs Code, while fixing at one year the period within which the containers therein mentioned must be exported, are silent as to whether the said period may be extended. It was surely by reason of this silence that the Bureau of Customs issued Administrative Orders 389 and 66, already adverted to, to eliminate confusion and provide a guide as to how it shall apply the law, 2 and, more specifically, to make officially known its policy to consider the one-year period mentioned in the law as non-extendible. Considering that the statutory provisions in question have not been the subject of previous judicial interpretation, then the application of the doctrine of "judicial respect for administrative construction," 3 would, initially, be in order. Only where the court of last resort has not previously interpreted the statute is the rule applicable that courts will give consideration to construction by administrative or executive departments of the state.41awphl.nt The formal or informal interpretation or practical construction of an ambiguous or uncertain statute or law by the executive department or other agency charged with its administration or enforcement is entitled to consideration and the highest respect from the courts, and must be accorded appropriate weight in determining the meaning of the law, especially when the construction or interpretation is long continued and uniform or is contemporaneous with the

ASTURIAS SUGAR CENTRAL, INC., petitioner, vs. COMMISSIONER OF CUSTOMS and COURT OF TAX APPEALS, respondents. Laurea, Laurea and Associates for petitioner. Office of the Solicitor General Arturo A. Alafriz, Assistant Solicitor General Esmeraldo Umali and Solicitor Sumilang V. Bernardo for respondents.

CASTRO, J.: This is a petition for review of the decision of the Court of Tax Appeals of November 20, 1961, which denied recovery of the sum of P28,629.42, paid by the petitioner, under protest, in the concept of customs duties and special import tax, as well as the petitioner's alternative remedy to recover the said amount minus one per cent thereof by way of a drawback under sec. 106 (b) of the Tariff and Customs Code. The petitioner Asturias Sugar Central, Inc. is engaged in the production and milling of centrifugal sugar for exert, the sugar so produced being placed in containers known as jute bags. In 1957 it made two importations of jute bags. The first shipment consisting of 44,800 jute bags and declared under entry 48 on January 8, 1967, entered free of customs duties and special import tax upon the petitioner's filing of Reexportation and Special Import Tax Bond no. 1 in the amounts of P25,088 and P2,464.50, conditioned upon the exportation of the jute bags within one year from the date of importation. The second shipment consisting of 75,200 jute bags and declared under entry 243 on February 8, 1957, likewise entered free of customs duties and special import tax upon the petitioner's filing of Re-exportation and Special Import Tax Bond no. 6 in the amounts of P42,112 and P7,984.44, with the same conditions as stated in bond no. 1. Of the 44,800 jute bags declared under entry 48, only 8,647 were exported within one year from the date of importation as containers of centrifugal sugar. Of the 75,200 jute bags declared under entry 243, only 25,000 were exported within the said period of one year. In other words, of the total number of imported jute bags only 33,647 bags were exported within one year after their importation. The remaining 86,353 bags were exported after the expiration of the one-year period but within three years from their importation. On February 6, 1958 the petitioner, thru its agent Theo. H. Davies & Co., Far East, Ltd., requested the Commissioner of Customs for a week's extension of Re-exportation and Special Import Tax Bond no. 6 which was to expire the following day, giving the following as the reasons for its failure to export the remaining jute bags within the period of one year: (a) typhoons and severe floods; (b) picketing of the Central railroad line from November 6 to December 21, 1957 by certain union elements in the employ of the Philippine Railway Company, which hampered normal operations; and (c) delay in the arrival of the vessel aboard which the petitioner was to ship its sugar which was then ready for loading. This request was denied by the Commissioner per his letter of April 15, 1958. Due to the petitioner's failure to show proof of the exportation of the balance of 86,353 jute bags within one year from their importation, the Collector of Customs of Iloilo, on March 17, 1958, required it to pay the amount of P28,629.42 representing the customs duties and special import tax due thereon, which amount the petitioner paid under protest. In its letter of April 10, 1958, supplemented by its letter of May 12, 1958, the petitioner demanded the refund of the amount it had paid, on the ground that its request for extension of the period of one year was filed on time, and that its failure to export the jute bags within the required one-year period was due to delay in the arrival of the vessel on which they were to be loaded and to the picketing of the Central railroad line. Alternatively, the petitioner asked for refund of the same amount in the form of a drawback under section 106(b) in relation to section 105(x) of the Tariff and Customs Code. After hearing, the Collector of Customs of Iloilo rendered judgment on January 21, 1960 denying the claim for refund. From his action, appeal was taken to the Commissioner of Customs who upheld the decision of the Collector. Upon a petition for review the Court of Tax Appeals affirmed the decision of the Commissioner of Customs.

15

first workings of the statute, or when the enactment of the statute was suggested by such agency.5 The administrative orders in question appear to be in consonance with the intention of the legislature to limit the period within which to export imported containers to one year, without extension, from the date of importation. Otherwise, in enacting the Tariff and Customs Code to supersede the Philippine Tariff Act of 1909, Congress would have amended section 23 of the latter law so as to overrule the long-standing view of the Commissioner of Customs that the one-year period therein mentioned is not extendible. Implied legislative approval by failure to change a long-standing administrative construction is not essential to judicial respect for the construction but is an element which greatly increases the weight given such construction.6 The correctness of the interpretation given a statute by the agency charged with administering its provision is indicated where it appears that Congress, with full knowledge of the agency's interpretation, has made significant additions to the statute without amending it to depart from the agency's view.7 Considering that the Bureau of Customs is the office charged with implementing and enforcing the provisions of our Tariff and Customs Code, the construction placed by it thereon should be given controlling weight.1awphl.nt In applying the doctrine or principle of respect for administrative or practical construction, the courts often refer to several factors which may be regarded as bases of the principle, as factors leading the courts to give the principle controlling weight in particular instances, or as independent rules in themselves. These factors are the respect due the governmental agencies charged with administration, their competence, expertness, experience, and informed judgment and the fact that they frequently are the drafters of the law they interpret; that the agency is the one on which the legislature must rely to advise it as to the practical working out of the statute, and practical application of the statute presents the agency with unique opportunity and experiences for discovering deficiencies, inaccuracies, or improvements in the statute; ... 8 If it is further considered that exemptions from taxation are not favored, 9 and that tax statutes are to be construed in strictissimi juris against the taxpayer and liberally in favor of the taxing authority, 10 then we are hard put to sustain the petitioner's stand that it was entitled to an extension of time within which to export the jute bags and, consequently, to a refund of the amount it had paid as customs duties. In the light of the foregoing, it is our considered view that the one-year period prescribed in section 23 of the Philippine Tariff Act of 1909 is non-extendible and compliance therewith is mandatory. The petitioner's argument that force majeure and/or fortuitous events prevented it from exporting the jute bags within the one-year period cannot be accorded credit, for several reasons. In the first place, in its decision of November 20, 1961, the Court of Tax Appeals made absolutely no mention of or reference to this argument of the petitioner, which can only be interpreted to mean that the court did not believe that the "typhoons, floods and picketing" adverted to by the petitioner in its brief were of such magnitude or nature as to effectively prevent the exportation of the jute bags within the required one-year period. In point of fact nowhere in the record does the petitioner convincingly show that the so-called fortuitous events or force majeure referred to by it precluded the timely exportation of the jute bags. In the second place, assuming, arguendo, that the one-year period is extendible, the jute bags were not actually exported within the one-week extension the petitioner sought. The record shows that although of the remaining 86,353 jute bags 21,944 were exported within the period of one week after the request for extension was filed, the rest of the bags, amounting to a total of 64,409, were actually exported only during the period from February 16 to May 24, 1958, long after the expiration of the one-week extension sought by the petitioner. Finally, it is clear from the record that the typhoons and floods which, according to the petitioner, helped render impossible the fulfillment of its obligation to export within the one-year period, assuming that they may be placed in the category of fortuitous events or force majeure, all occurred prior to the execution of the bonds in question, or prior to the commencement of the one-year period within which the petitioner was in law required to export the jute bags. 2. The next argument of the petitioner is that granting that Customs Administrative Order 389 is valid and binding, yet "jute bags" cannot be included in the phrase "cylinders and other containers" mentioned therein. It will be noted, however, that the Philippine Tariff Act of 1909 and the Tariff and Customs Code,

which Administrative Order 389 seeks to implement, speak of "containers" in general. The enumeration following the word "containers" in the said statutes serves merely to give examples of containers and not to specify the particular kinds thereof. Thus, sec. 23 of the Philippine Tariff Act states, "containers such as casks large metals, glass or other receptacles," and sec. 105 (x) of the Tariff and Customs Code mentions "large containers," giving as examples "demijohn cylinders, drums, casks and other similar receptacles of metal, glass or other materials." (emphasis supplied) There is, therefore, no reason to suppose that the customs authorities had intended, in Customs Administrative Order 389 to circumscribe the scope of the word "container," any more than the statures sought to be implemented actually intended to do. 3. Finally, the petitioner claims entitlement to a drawback of the duties it had paid, by virtue of section 106 (b) of the Tariff and Customs Code, 11 which reads: SEC. 106. Drawbacks: ... b. On Articles Made from Imported Materials or Similar Domestic Materials and Wastes Thereof. Upon the exportation of articles manufactured or produced in the Philippines, including the packing, covering, putting up, marking or labeling thereof, either in whole or in part of imported materials, or from similar domestic materials of equal quantity and productive manufacturing quality and value, such question to be determined by the Collector of Customs, there shall be allowed a drawback equal in amount to the duties paid on the imported materials so used, or where similar domestic materials are used, to the duties paid on the equivalent imported similar materials, less one per cent thereof: Provided, That the exportation shall be made within three years after the importation of the foreign material used or constituting the basis for drawback ... . The petitioner argues that not having availed itself of the full exemption granted by sec. 105(x) of the Tariff and Customs Code due to its failure to export the jute bags within one year, it is nevertheless, by authority of the above-quoted provision, entitled to a 99% drawback of the duties it had paid, averring further that sec. 106(b) does not presuppose immediate payment of duties and taxes at the time of importation. The contention is palpably devoid of merit. The provisions invoked by the petitioner (to sustain his claim for refund) offer two options to an importer. The first, under sec. 105 (x), gives him the privilege of importing, free from import duties, the containers mentioned therein as long as he exports them within one year from the date of acceptance of the import entry, which period as shown above, is not extendible. The second, presented by sec. 106 (b), contemplates a case where import duties are first paid, subject to refund to the extent of 99% of the amount paid, provided the articles mentioned therein are exported within three years from importation. It would seem then that the Government would forego collecting duties on the articles mentioned in section 105(x) of Tariff and Customs Code as long as it is assured, by the filing of a bond, that the same shall be exported within the relatively short period of one year from the date of acceptance of the import entry. Where an importer cannot provide such assurance, then the Government, under sec. 106(b) of said Code, would require payment of the corresponding duties first. The basic purpose of the two provisions is the same, which is, to enable a local manufacturer to compete in foreign markets, by relieving him of the disadvantages resulting from having to pay duties on imported merchandise, thereby building up export trade and encouraging manufacture in the country. 12But there is a difference, and it is this: under section 105(x) full exemption is granted to an importer who justifies the grant of exemption by exporting within one-year. The petitioner, having opted to take advantage of the provisions of section 105(x), may not, after having failed to comply with the conditions imposed thereby, avoid the consequences of such failure by being allowed a drawback under section 106(b) of the same Act without having complied with the conditions of the latter section. For it is not to be supposed that the legislature had intended to defeat compliance with the terms of section 105(x) thru a refuge under the provisions of section 106(b). A construction should be avoided which affords an opportunity to defeat compliance with the terms of a statute. 13 Rather courts should proceed on the theory that parts of a statute may be harmonized and reconciled with each other.

16

A construction of a statute which creates an inconsistency should be avoided when a reasonable interpretation can be adopted which will not do violence to the plain words of the act and will carry out the intention of Congress. In the construction of statutes, the courts start with the assumption that the legislature intended to enact an effective law, and the legislature is not to be presumed to have done a vain thing in the enactment of a statute. Hence, it is a general principle, embodied in the maxim, "ut res magis valeat quam pereat," that the courts should, if reasonably possible to do so without violence to the spirit and language of an act, so interpret the statute to give it efficient operation and effect as a whole. An interpretation should, if possible, be avoided under which a statute or provision being construed is defeated, or as otherwise expressed, nullified, destroyed, emasculated, repealed, explained away, or rendered insignificant, meaningless, inoperative, or nugatory. 14 ACCORDINGLY, the judgment of the Court of Tax Appeals of November 20, 1961 is affirmed, at petitioner's cost. Concepcion, C.J., Dizon, Zaldivar, Fernando, Capistrano, Teehankee and Barredo, JJ., concur. Makalintal and Sanchez, JJ., took no part. Reyes, J.B.L., J., is on leave.

Kudarat, Sulu, Tawi-Tawi, Zamboanga del Norte, and Zamboanga del Sur, and the cities of Cotabato, Dapitan, Dipolog, General Santos, Iligan, Marawi, Pagadian, Puerto Princesa and Zamboanga. In the ensuing plebiscite held on November 16, 1989, four provinces voted in favor of creating an autonomous region. These are the provinces of Lanao del Sur, Maguindanao, Sulu and Tawi-Tawi. In accordance with the constitutional provision, these provinces became the Autonomous Region in Muslim Mindanao. On the other hand, with respect to provinces and cities not voting in favor of the Autonomous Region, Art. XIX, 13 of R.A. No. 6734 provides, That only the provinces and cities voting favorably in such plebiscites shall be included in the Autonomous Region in Muslim Mindanao. The provinces and cities which in the plebiscite do not vote for inclusion in the Autonomous Region shall remain in the existing administrative regions. Provided, however, that the President may, by administrative determination, merge the existing regions. Pursuant to the authority granted by this provision, then President Corazon C. Aquino issued on October 12, 1990 Executive Order No. 429, "providing for the Reorganization of the Administrative Regions in Mindanao." Under this Order, as amended by E.O. No. 439 (1) Misamis Occidental, at present part of Region X, will become part of Region IX. (2) Oroquieta City, Tangub City and Ozamiz City, at present parts of Region X will become parts of Region IX.

G.R. No. 96754 June 22, 1995 CONGRESSMAN JAMES L. CHIONGBIAN (Third District, South Cotobato) ADELBERT W. ANTONINO (First District, South Cotobato), WILFREDO G. CAINGLET (Third District, Zamboanga del Norte), HILARION RAMIRO, JR. (Second Division, Misamis Occidental), ERNESTO S. AMATONG (Second District, Zamboanga del Norte), ALVIN G. DANS (Lone District, Basilan), ABDULLAH M. DIMAPORO (Second District, Lanao del Norte), and CONGRESSWOMAN MARIA CLARA A. LOBREGAT (Lone District, Zamboanga City) petitioners, vs. HON. OSCAR M. ORBOS, Executive Secretary; COMMITTEE CHAIRMAN SEC. FIDEL V. RAMOS, CABINET OFFICERS FOR REGIONAL DEVELOPMENT FOR REGIONS X AND XII, CHAIRMAN OF THE REGIONAL DEVELOPMENT COUNCIL FOR REGION X, CHAIRMAN JESUS V. AYALA, CABINET OFFICERS FOR REGIONAL DEVELOPMENT FOR REGIONS XI and XII, DEPARTMENT OF LOCAL GOVERNMENT, NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY SECRETARIAT, PRESIDENTIAL MANAGEMENT STAFF, HON. GUILLERMO CARAGUE, Secretary of the DEPARTMENT OF BUDGET and MANAGEMENT; and HON. ROSALINA S. CAJUCUM, OIC National Treasurer, respondents.

(3) South Cotobato, at present a part of Region XI, will become part of Region XII. (4) General Santos City, at present part of Region XI, will become part of Region XII. (5) Lanao del Norte, at present part of Region XII, will become part of Region IX. (6) Iligan City and Marawi City, at present part of Region XII, will become part of Region IX. Petitioners in G.R. No. 96754 are, or at least at the time of the filing of their petition, members of Congress representing various legislative districts in South Cotobato, Zamboanga del Norte, Basilan, Lanao del Norte and Zamboanga City. On November 12, 1990, they wrote then President Aquino protesting E.O. No. 429. They contended that There is no law which authorizes the President to pick certain provinces and cities within the existing regions some of which did not even take part in the plebiscite as in the case of the province of Misamis Occidental and the cities of Oroquieta, Tangub and Ozamiz and restructure them to new administrative regions. On the other hand, the law (Sec. 13, Art. XIX, R.A. 6734) is specific to the point, that is, that "the provinces and cities which in the plebiscite do not vote for inclusion in the Autonomous Region shall remain in the existing administrative regions." The transfer of the provinces of Misamis Occidental from Region X to Region IX; Lanao del Norte from Region XII to Region IX, and South Cotobato from Region XI to Region XII are alterations of the existing structures of governmental units, in other words, reorganization. This can be gleaned from Executive Order No. 429, thus Whereas, there is an urgent need to reorganize the administrative regions in Mindanao to guarantee the effective delivery of field services of government agencies taking into consideration the formation of the Autonomous Region in Muslim Mindanao. With due respect to Her Excellency, we submit that while the authority necessarily includes the authority to merge, the authority to merge does not include the authority to reorganize. Therefore, the President's authority under RA 6734 to

MENDOZA, J.: These suits challenge the validity of a provision of the Organic Act for the Autonomous Region in Muslim Mindanao (R.A. No. 6734), authorizing the President of the Philippines to "merge" by administrative determination the regions remaining after the establishment of the Autonomous Region, and the Executive Order issued by the President pursuant to such authority, "Providing for the Reorganization of Administrative Regions in Mindanao." A temporary restraining order prayed for by the petitioners was issued by this Court on January 29, 1991, enjoining the respondents from enforcing the Executive Order and statute in question. The facts are as follows: Pursuant to Art. X, 18 of the 1987 Constitution, Congress passed R.A. No. 6734, the Organic Act for the Autonomous Region in Muslim Mindanao, calling for a plebiscite to be held in the provinces of Basilan, Cotobato, Davao del Sur, Lanao del Norte, Lanao del Sur, Maguindanao, Palawan, South Cotabato, Sultan

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"merge existing regions" cannot be construed to include the authority to reorganize them. To do so will violate the rules of statutory construction. The transfer of regional centers under Executive Order 429 is actually a restructuring (reorganization) of administrative regions. While this reorganization, as in Executive Order 429, does not affect the apportionment of congressional representatives, the same is not valid under the penultimate paragraph of Sec. 13, Art. XIX of R.A. 6734 and Ordinance appended to the 1986 Constitution apportioning the seats of the House of Representatives of Congress of the Philippines to the different legislative districts in provinces and cities. 1 As their protest went unheeded, while Inauguration Ceremonies of the New Administrative Region IX were scheduled on January 26, 1991, petitioners brought this suit for certiorari and prohibition. On the other hand, the petitioner in G.R. No. 96673, Immanuel Jaldon, is a resident of Zamboanga City, who is suing in the capacity of taxpayer and citizen of the Republic of the Philippines. Petitioners in both cases contend that Art. XIX, 13 of R.A. No. 6734 is unconstitutional because (1) it unduly delegates legislative power to the President by authorizing him to "merge [by administrative determination] the existing regions" or at any rate provides no standard for the exercise of the power delegated and (2) the power granted is not expressed in the title of the law. In addition, petitioner in G.R. No. 96673 challenges the validity of E.O. No. 429 on the ground that the power granted by Art. XIX, 13 to the President is only to "merge regions IX and XII" but not to reorganize the entire administrative regions in Mindanao and certainly not to transfer the regional center of Region IX from Zamboanga City to Pagadian City. The Solicitor General defends the reorganization of regions in Mindanao by E.O. No. 429 as merely the exercise of a power "traditionally lodged in the President," as held in Abbas v. Comelec, 2 and as a mere incident of his power of general supervision over local governments and control of executive departments, bureaus and offices under Art. X, 16 and Art. VII, 17, respectively, of the Constitution. He contends that there is no undue delegation of legislative power but only a grant of the power to "fill up" or provide the details of legislation because Congress did not have the facility to provide for them. He cites by analogy the case of Municipality of Cardona v. Municipality of Binangonan, 3 in which the power of the Governor-General to fix municipal boundaries was sustained on the ground that [such power] is simply a transference of certain details with respect to provinces, municipalities, and townships, many of them newly created, and all of them subject to a more or less rapid change both in development and centers of population, the proper regulation of which might require not only prompt action but action of such a detailed character as not to permit the legislative body, as such, to take it efficiently. The Solicitor General justifies the grant to the President of the power "to merge the existing regions" as something fairly embraced in the title of R.A. No. 6734, to wit, "An Act Providing for an Organic Act for the Autonomous Region in Muslim Mindanao," because it is germane to it. He argues that the power is not limited to the merger of those regions in which the provinces and cities which took part in the plebiscite are located but that it extends to all regions in Mindanao as necessitated by the establishment of the autonomous region. Finally, he invokes P.D. No. 1416, as amended by P.D. No. 1772 which provides: 1. The President of the Philippines shall have the continuing authority to reorganize the National Government. In exercising this authority, the President shall be guided by generally acceptable principles of good government and responsive national government, including but not limited to the following guidelines for a more efficient, effective, economical and development-oriented governmental framework: (a) More effective planning implementation, and review functions;

(b) Greater decentralization and responsiveness in decisionmaking process; (c) Further minimization, if not, elimination, of duplication or overlapping of purposes, functions, activities, and programs; (d) Further development of as standardized as possible ministerial, sub-ministerial and corporate organizational structures; (e) Further development of the regionalization process; and (f) Further rationalization of the functions of and administrative relationships among government entities. For purposes of this Decree, the coverage of the continuing authority of the President to reorganize shall be interpreted to encompass all agencies, entities, instrumentalities, and units of the National Government, including all government owned or controlled corporations as well as the entire range of the powers, functions, authorities, administrative relationships, acid related aspects pertaining to these agencies, entities, instrumentalities, and units. 2. [T]he President may, at his discretion, take the following actions: xxx xxx xxx f. Create, abolish, group, consolidate, merge, or integrate entities, agencies, instrumentalities, and units of the National Government, as well as expand, amend, change, or otherwise modify their powers, functions and authorities, including, with respect to government-owned or controlled corporations, their corporate life, capitalization, and other relevant aspects of their charters. g. Take such other related actions as may be necessary to carry out the purposes and objectives of this Decree. Considering the arguments of the parties, the issues are: (1) whether the power to "merge" administrative regions is legislative in character, as petitioners contend, or whether it is executive in character, as respondents claim it is, and, in any event, whether Art. XIX, 13 is invalid because it contains no standard to guide the President's discretion; (2) whether the power given is fairly expressed in the title of the statute; and (3) whether the power granted authorizes the reorganization even of regions the provinces and cities in which either did not take part in the plebiscite on the creation of the Autonomous Region or did not vote in favor of it; and (4) whether the power granted to the President includes the power to transfer the regional center of Region IX from Zamboanga City to Pagadian City. It will be useful to recall first the nature of administrative regions and the basis and purpose for their creation. On September 9, 1968, R.A. No. 5435 was passed "authorizing the President of the Philippines, with the help of a Commission on Reorganization, to reorganize the different executive departments, bureaus, offices, agencies and instrumentalities of the government, including banking or financial institutions and corporations owned or controlled by it." The purpose was to promote "simplicity, economy and efficiency in the government." 4 The Commission on Reorganization created under the law was required to submit an integrated reorganization plan not later than December 31, 1969 to the President who was in turn required to submit the plan to Congress within forty days after the opening of its next

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regular session. The law provided that any reorganization plan submitted would become effective only upon the approval of Congress. 5 Accordingly, the Reorganization Commission prepared an Integrated Reorganization Plan which divided the country into eleven administrative regions. 6 By P.D. No. 1, the Plan was approved and made part of the law of the land on September 24, 1972. P.D. No. 1 was twice amended in 1975, first by P.D. No. 742 which "restructur[ed] the regional organization of Mindanao, Basilan, Sulu and Tawi-Tawi" and later by P.D. No. 773 which further "restructur[ed] the regional organization of Mindanao and divid[ed] Region IX into two sub-regions." In 1978, P.D. No. 1555 transferred the regional center of Region IX from Jolo to Zamboanga City. Thus the creation and subsequent reorganization of administrative regions have been by the President pursuant to authority granted to him by law. In conferring on the President the power "to merge [by administrative determination] the existing regions" following the establishment of the Autonomous Region in Muslim Mindanao, Congress merely followed the pattern set in previous legislation dating back to the initial organization of administrative regions in 1972. The choice of the President as delegate is logical because the division of the country into regions is intended to facilitate not only the administration of local governments but also the direction of executive departments which the law requires should have regional offices. As this Court observed in Abbas, "while the power to merge administrative regions is not expressly provided for in the Constitution, it is a power which has traditionally been lodged with the President to facilitate the exercise of the power of general supervision over local governments [ see Art. X, 4 of the Constitution]." The regions themselves are not territorial and political divisions like provinces, cities, municipalities and barangays but are "mere groupings of contiguous provinces for administrative purposes." 7 The power conferred on the President is similar to the power to adjust municipal boundaries 8which has been described in Pelaez v. Auditor General 9 or as "administrative in nature." There is, therefore, no abdication by Congress of its legislative power in conferring on the President the power to merge administrative regions. The question is whether Congress has provided a sufficient standard by which the President is to be guided in the exercise of the power granted and whether in any event the grant of power to him is included in the subject expressed in the title of the law. First, the question of standard. A legislative standard need not be expressed. It may simply be gathered or implied.10 Nor need it be found in the law challenged because it may be embodied in other statutes on the same subject as that of the challenged legislation. 11 With respect to the power to merge existing administrative regions, the standard is to be found in the same policy underlying the grant to the President in R.A. No. 5435 of the power to reorganize the Executive Department, to wit: "to promote simplicity, economy and efficiency in the government to enable it to pursue programs consistent with national goals for accelerated social and economic development and to improve the service in the transaction of the public business." 12 Indeed, as the original eleven administrative regions were established in accordance with this policy, it is logical to suppose that in authorizing the President to "merge [by administrative determination] the existing regions" in view of the withdrawal from some of those regions of the provinces now constituting the Autonomous Region, the purpose of Congress was to reconstitute the original basis for the organization of administrative regions. Nor is Art.XIX, 13 susceptible to charge that its subject is not embraced in the title of R.A. No. 6734. The constitutional requirement that "every bill passed by the Congress shall embrace only one subject which shall be expressed in the title thereof" 13 has always been given a practical rather than a technical construction. The title is not required to be an index of the content of the bill. It is a sufficient compliance with the constitutional requirement if the title expresses the general subject and all provisions of the statute are germane to that subject. 14 Certainly the reorganization of the remaining administrative regions is germane to the general subject of R.A. No. 6734, which is the establishment of the Autonomous Region in Muslim Mindanao. Finally, it is contended that the power granted to the President is limited to the reorganization of administrative regions in which some of the provinces and cities which voted in favor of regional autonomy are found, because Art. XIX, 13 provides that those which did not vote for autonomy "shall remain in the existing administrative regions." More specifically, petitioner in G.R. No. 96673 claims: The questioned Executive Order No. 429 distorted and, in fact, contravened the clear intent of this provision by moving out or transferring certain political

subdivisions (provinces/cities) out of their legally designated regions. Aggravating this unacceptable or untenable situation is EO No. 429's effecting certain movements on areas which did not even participate in the November 19, 1989 plebiscite. The unauthorized action of the President, as effected by and under the questioned EO No. 429, is shown by the following dispositions: (1) Misamis Occidental, formerly of Region X and which did not even participate in the plebiscite, was moved from said Region X to Region IX; (2) the cities of Ozamis, Oroquieta, and Tangub, all formerly belonging to Region X, which likewise did not participate in the said plebiscite, were transferred to Region IX; (3) South Cotobato, from Region XI to Region XII; (4) General Santos City: from Region XI to Region XII; (5) Lanao del Norte, from Region XII to Region IX; and (6) the cities of Marawi and Iligan from Region XII to Region IX. All of the said provinces and cities voted "NO", and thereby rejected their entry into the Autonomous Region in Muslim Mindanao, as provided under RA No. 6734. 15 The contention has no merit. While Art. XIX, 13 provides that "The provinces and cities which do not vote for inclusion in the Autonomous Region shall remain in the existing administrative regions," this provision is subject to the qualification that "the President may by administrative determination merge the existing regions." This means that while non-assenting provinces and cities are to remain in the regions as designated upon the creation of the Autonomous Region, they may nevertheless be regrouped with contiguous provinces forming other regions as the exigency of administration may require. The regrouping is done only on paper. It involves no more than are definition or redrawing of the lines separating administrative regions for the purpose of facilitating the administrative supervision of local government units by the President and insuring the efficient delivery of essential services. There will be no "transfer" of local governments from one region to another except as they may thus be regrouped so that a province like Lanao del Norte, which is at present part of Region XII, will become part of Region IX. The regrouping of contiguous provinces is not even analogous to a redistricting or to the division or merger of local governments, which all have political consequences on the right of people residing in those political units to vote and to be voted for. It cannot be overemphasized that administrative regions are mere groupings of contiguous provinces for administrative purposes, not for political representation. Petitioners nonetheless insist that only those regions, in which the provinces and cities which voted for inclusion in the Autonomous Region are located, can be "merged" by the President. To be fundamental reason Art. XIX, 13 is not so limited. But the more fundamental reason is that the President's power cannot be so limited without neglecting the necessities of administration. It is noteworthy that the petitioners do not claim that the reorganization of the regions in E.O. No. 429 is irrational. The fact is that, as they themselves admit, the reorganization of administrative regions in E.O. No. 429 is based on relevant criteria, to wit: (1) contiguity and geographical features; (2) transportation and communication facilities; (3) cultural and language groupings; (4) land area and population; (5) existing regional centers adopted by several agencies; (6) socio-economic development programs in the regions and (7) number of provinces and cities. What has been said above applies to the change of the regional center from Zamboanga City to Pagadian City. Petitioners contend that the determination of provincial capitals has always been by act of Congress. But as, this Court said in Abbas, 16 administrative regions are mere "groupings of contiguous provinces for administrative purposes, . . . [They] are not territorial and political subdivisions like provinces, cities, municipalities and barangays." There is, therefore, no basis for contending that only Congress can change or determine regional centers. To the contrary, the examples of P.D. Nos. 1, 742, 773 and 1555 suggest that the power to reorganize administrative regions carries with it the power to determine the regional center. It may be that the transfer of the regional center in Region IX from Zamboanga City to Pagadian City may entail the expenditure of large sums of money for the construction of buildings and other infrastructure to house regional offices. That contention is addressed to the wisdom of the transfer rather than to its legality and it is settled that courts are not the arbiters of the wisdom or expediency of legislation. In any event this is a question that we will consider only if fully briefed and upon a more adequate record than that presented by petitioners.

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WHEREFORE, the petitions for certiorari and prohibition are DISMISSED for lack of merit. SO ORDERED. Narvasa, C.J., Feliciano, Padilla, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Puno, Vitug, Kapunan and Francisco, JJ., concur. G.R. No. 96266 July 18, 1991 ERNESTO M. MACEDA, petitioner, vs. ENERGY REGULATORY BOARD, CALTEX (Philippines), INC., PILIPINAS SHELL PETROLEUM CORPORATION AND PETRON CORPORATION, respondents. RESOLUTION

On November 5, 1990, the three oil companies filed their respective motions for leave to file or admit amended/supplemental applications to further increase the prices of petroleum products. The ERB admitted the respective supplemental/amended petitions on November 6, 1990 at the same time requiring applicants to publish the corresponding Notices of Public Hearing in two newspapers of general circulation (p. 4, Rollo and Annexes "F" and "G," pp. 60 and 62, Rollo). Hearing for the presentation of the evidence-in-chief commenced on November 21, 1990 with ERB ruling that testimonies of witnesses were to be in the form of Affidavits (p. 6, Rollo). ERB subsequently outlined the procedure to be observed in the reception of evidence, as follows: CHAIRMAN FERNANDO: Well, at the last hearing, applicant Caltex presented its evidence-in-chief and there is an understanding or it is the Board's wish that for purposes of good order in the presentation of the evidence considering that these are being heard together, we will defer the cross-examination of applicant Caltex's witness and ask the other applicants to present their evidence-in-chief so that the oppositors win have a better Idea of what an of these will lead to because as I mentioned earlier, it has been traditional and it is the intention of the Board to act on these applications on an industry-wide basis, whether to accept, reject, modify or whatever, the Board win do it on an industry wide basis, so, the best way to have (sic) the oppositors and the Board a clear picture of what the applicants are asking for is to have all the evidence-in-chief to be placed on record first and then the examination will come later, the cross-examination will come later. . . . (pp. 5-6, tsn., November 23, 1990, ERB Cases Nos. 90-106, 90382 and 90-384). (p. 162, Rollo) Petitioner Maceda maintains that this order of proof deprived him of his right to finish his cross-examination of Petron's witnesses and denied him his right to cross-examine each of the witnesses of Caltex and Shell. He points out that this relaxed procedure resulted in the denial of due process. We disagree. The Solicitor General has pointed out: . . . The order of testimony both with respect to the examination of the particular witness and to the general course of the trial is within the discretion of the court and the exercise of this discretion in permitting to be introduced out of the order prescribed by the rules is not improper (88 C.J.S. 206-207). Such a relaxed procedure is especially true in administrative bodies, such as the ERB which in matters of rate or price fixing is considered as exercising a quasilegislative, not quasi-judicial, function As such administrative agency, it is not bound by the strict or technical rules of evidence governing court proceedings (Sec. 29, Public Service Act; Dickenson v. United States, 346, U.S. 389, 98 L. ed. 132, 74 S. St. 152). (Emphasis supplied) In fact, Section 2, Rule I of the Rules of Practice and Procedure Governing Hearings Before the ERB provides that These Rules shall govern pleadings, practice and procedure before the Energy Regulatory Board in all matters of inquiry, study, hearing, investigation and/or any other proceedings within the jurisdiction of the Board. However, in the broader interest of justice, the Board may, in any particular matter, except itself from these rules and apply such suitable procedure as shall promote the objectives of the Order. (pp. 163-164, Rollo) Petitioner Maceda also claims that there is no substantial evidence on record to support the provisional relief. We have, in G.R. Nos. 95203-05, previously taken judicial notice of matters and events related to the oil industry, as follows:

MEDIALDEA, J.:p In G.R. No. 96266, petitioner Maceda seeks nullification of the Energy Regulatory Board (ERB) Orders dated December 5 and 6, 1990 on the ground that the hearings conducted on the second provisional increase in oil prices did not allow him substantial cross-examination, in effect, allegedly, a denial of due process. The facts of the case are as follows: Upon the outbreak of the Persian Gulf conflict on August 2, 1990, private respondents oil companies filed with the ERB their respective applications on oil price increases (docketed as ERB Case Nos. 90-106, 90382 and 90-384, respectively). On September 21, 1990, the ERB issued an order granting a provisional increase of P1.42 per liter. Petitioner Maceda filed a petition for Prohibition on September 26, 1990 (E. Maceda v. ERB, et al., G.R. No. 95203), seeking to nullify the provisional increase. We dismissed the petition on December 18, 1990, reaffirming ERB's authority to grant provisional increase even without prior hearing, pursuant to Sec. 8 of E.O. No. 172, clarifying as follows: What must be stressed is that while under Executive Order No. 172, a hearing is indispensable, it does not preclude the Board from ordering, ex-parte, a provisional increase, as it did here, subject to its final disposition of whether or not: (1) to make it permanent; (2) to reduce or increase it further; or (3) to deny the application. Section 3, paragraph (e) is akin to a temporary restraining order or a writ of preliminary attachment issued by the courts, which are given ex-parte and which are subject to the resolution of the main case. Section 3, paragraph (e) and Section 8 do not negate each other, or otherwise, operate exclusively of the other, in that the Board may resort to one but not to both at the same time. Section 3(e) outlines the jurisdiction of the Board and the grounds for which it may decree a price adjustment, subject to the requirements of notice and hearing. Pending that, however, it may order, under Section 8, an authority to increase provisionally, without need of a hearing, subject to the final outcome of the proceeding. The Board, of course, is not prevented from conducting a hearing on the grant of provisional authority-which is of course, the better procedure however, it cannot be stigmatized later if it failed to conduct one. (pp. 129130, Rollo) (Emphasis supplied) In the same order of September 21, 1990, authorizing provisional increase, the ERB set the applications for hearing with due notice to all interested parties on October 16, 1990. Petitioner Maceda failed to appear at said hearing as well as on the second hearing on October 17, 1990. To afford registered oppositors the opportunity to cross-examine the witnesses, the ERB set the continuation of the hearing to October 24, 1990. This was postponed to November 5, 1990, on written notice of petitioner Maceda.

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. . . (1) as of June 30, 1990, the OPSF has incurred a deficit of P6.1 Billion; (2) the exchange rate has fallen to P28.00 to $1.00; (3) the country's balance of payments is expected to reach $1 Billion; (4) our trade deficit is at P2.855 Billion as of the first nine months of the year. . . . (p. 150, Rollo) The Solicitor General likewise commented: Among the pieces of evidence considered by ERB in the grant of the contested provisional relief were: (1) certified copies of bins of lading issued by crude oil suppliers to the private respondents; (2) reports of the Bankers Association of the Philippines on the peso-dollar exchange rate at the BAP oil pit; and (3) OPSF status reports of the Office of Energy Affairs. The ERB was likewise guided in the determination of international crude oil prices by traditional authoritative sources of information on crude oil and petroleum products, such as Platt's Oilgram and Petroleum Intelligence Weekly. (p. 158,Rollo) Thus, We concede ERB's authority to grant the provisional increase in oil price, as We note that the Order of December 5, 1990 explicitly stated: in the light, therefore, of the rise in crude oil importation costs, which as earlier mentioned, reached an average of $30.3318 per barrel at $25.551/US $ in September-October 1990; the huge OPSF deficit which, as reported by the Office of Energy Affairs, has amounted to P5.7 Billion (based on filed claims only and net of the P5 Billion OPSF) as of September 30, 1990, and is estimated to further increase to over P10 Billion by end December 1990; the decision of the government to discontinue subsidizing oil prices in view of inflationary pressures; the apparent inadequacy of the proposed additional P5.1 Billion government appropriation for the OPSF and the sharp drop in the value of the peso in relation to the US dollar to P28/US $, this Board is left with no other recourse but to grant applicants oil companies further relief by increasing the prices of petroleum products sold by them. (p. 161, Rollo) Petitioner Maceda together with petitioner Original (G.R. No. 96349) also claim that the provisional increase involved amounts over and above that sought by the petitioning oil companies. The Solicitor General has pointed out that aside from the increase in crude oil prices, all the applications of the respondent oil companies filed with the ERB covered claims from the OPSF. We shall thus respect the ERB's Order of December 5, 1990 granting a provisional price increase on petroleum products premised on the oil companies' OPSF claims, crude cost peso differentials, forex risk for a subsidy on sale to NPC (p. 167, Rollo), since the oil companies are "entitled to as much relief as the fact alleged constituting the course of action may warrant," (Javellana v. D.O. Plaza Enterprises, Inc., G.R. No. L-28297, March 30, 1970, 32 SCRA 261 citing Rosales v. Reyes, 25 Phil. 495; Aguilar v. Rubiato, 40 Phil. 470) as follows: Per Liter Weighted Petron Shell Caltex Average Crude Cost P3.11 P3.6047 P2.9248 P3.1523 Peso Cost Diffn'l 2.1747 1.5203 1.5669 1.8123 Forex Risk Fee -0.1089 -0,0719 -0.0790 -0.0896 Subsidy on

Sales to NPC 0.1955 0.0685 0.0590 0.1203 Total Price Increase Applied for P59.3713 P5.1216 P4.4717 P4.9954 Less: September 21 Price Relief Actual Price Increase P1.42 Actual Tax Reduction: Ad Valorem Tax (per Sept. 1, 1990 price build-up) P1.3333 Specific Tax (per Oct. 5, 1990 price build-up) .6264 .7069 2.1269 Net Price Increase Applied for 2.8685 Nonetheless, it is relevant to point out that on December 10, 1990, the ERB, in response to the President's appeal, brought back the increases in Premium and Regular gasoline to the levels mandated by the December 5, 1990 Order (P6.9600 and P6.3900, respectively), as follows: Product In Pesos Per Liter OPSF Premium Gasoline 6.9600 Regular Gasoline 6.3900 Avturbo 4.9950 Kerosene 1.4100 Diesel Oil 1.4100 Fuel Oil/Feedstock 0.2405 LPG 1.2200 Asphalt 2.5000 Thinner 2.5000 In G.R. No. 96349, petitioner Original additionally claims that if the price increase will be used to augment the OPSF this will constitute illegal taxation. In the Maceda case, (G.R. Nos. 95203-05, supra) this Court has already ruled that "the Board Order authorizing the proceeds generated by the increase to be deposited to the OPSF is not an act of taxation but is authorized by Presidential Decree No. 1956, as amended by Executive Order No. 137. The petitions of E.O. Original et al. (G.R. No. 96349) and C.S. Povedas, Jr. (G.R. No. 96284), insofar as they question the ERB's authority under Sec. 8 of E.O. 172, have become moot and academic. We lament Our helplessness over this second provisional increase in oil price. We have stated that this "is a question best judged by the political leadership" (G.R. Nos. 95203-05, G.R. Nos. 95119-21, supra). We

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wish to reiterate Our previous pronouncements therein that while the government is able to justify a provisional increase, these findings "are not final, and it is up to petitioners to demonstrate that the present economic picture does not warrant a permanent increase." In this regard, We also note the Solicitor General's comments that "the ERB is not averse to the idea of a presidential review of its decision," except that there is no law at present authorizing the same. Perhaps, as pointed out by Justice Padilla, our lawmakers may see the wisdom of allowing presidential review of the decisions of the ERB since, despite its being a quasi-judicial body, it is still "an administrative body under the Office of the President whose decisions should be appealed to the President under the established principle of exhaustion of administrative remedies," especially on a matter as transcendental as oil price increases which affect the lives of almost an Filipinos. ACCORDINGLY, the petitions are hereby DISMISSED. SO ORDERED. Narvasa, Melencio-Herrera, Feliciano, Gancayco, Bidin, Grio-Aquino and Regalado, JJ., concur. Davide, J., concurs in the result. Fernan, C.J., took no part.

view that unlike the preliminary investigation of criminal cases by fiscals which are under the supervision and control of the Secretary of Justice, 1 the peculiar procedure prescribed by law in unfair labor practices partakes of the nature of judicial investigations, since they are conducted, to quote the language of the law, by "the Court or any agency or agent designated by the Court", (Section 5 (b), Rep. Act 875) similarly to the preliminary investigations undertaken by courts of first instance in election cases 2 and charges of violation of the Anti-Subversion Act. 3 Surely, no one can pretend that in such preliminary investigations, the courts of first instance are performing administrative or non-judicial functions. In such cases, the courts act in the same judicial capacity as they do in trying the cases on the merits and cannot, in any respect or measure, be controlled by the Secretary of Justice. The fact that the law authorizes the CIR to delegate the investigation to "any agency or agent designated by the Court" does not alter the nature of the court's function in the premises, just as the appointment of commissioners by the courts under Rule 34 does not make the procedure administrative or less judicial. Indeed, under the provision aforementioned, the investigation could very well be assigned to one of the judges of the CIR, and in that event, how can it be maintained that the function is administrative? Withal, it is implicit in this procedure that the work of the "agency or agent designated by Court" is as much the responsibility of the court as if it were the court itself that were acting directly. The contention of respondent Judge that the function of overseering the Prosecution Division of the CIR in its work of filing and dismissing charges of unfair labor practice is purely administrative in nature and falls within his exclusive competence is without merit. It is true that reference to the court in the law must be construed to mean the Presiding Judge and not the court en banc when the action contemplated is purely administrative in character, but, precisely, the point missed is that, as already explained, the Industrial Peace Act does not consider the investigation by the CIR, either by itself or thru an agent, as an administrative matter but a judicial one like the preliminary investigations in election and anti-subversion cases. Maybe the development in the United States recounted by respondent Judge whereby the Taft-Hartley Law transferred from the National Labor Relations Board to its General Counsel the exclusive function and power to determine with finality whether or not an unfair labor practice charge should be filed with the Board is good, in the sense of avoiding that the Board be the accuser, investigator and judge all rolled into one, but there is nothing in either Commonwealth Act 103 or the Industrial Peace Act indicating that the American experience has influenced the enactment and phraseology of the pertinent provisions of our laws. Quite on the contrary, as already pointed out, Section 5(b) of RA 875 very explicitly confers the function of investigating unfair labor charges upon the CIR itself, albeit it allows the court to designate any other agency or agent for the purpose. As regards the other impugned order of July 30, 1969, the result of the foregoing discussion and ruling is that the same should first be submitted to the CIR en banc for appropriate action. Much as the writer of this opinion feels that the objections thereto raised by petitioners are rather strained and are not very consistent with the interests of justice, which would not permit the throwing out of an unfair labor practice charge merely because of non-jurisdictional defects which can anyway be corrected, the Court would not pre-empt the power of the CIR en bancto make the corresponding ruling relative thereto in the first instance. Before closing, it might be stated that, to be sure, the creation of the National Labor Relations Commission, may have altered the procedure in cases involving alleged unfair labor practices, but that point is not and cannot be raised anymore in this proceeding and We do not consider it necessary to pass on it now. WHEREFORE, the petition for certiorari and prohibition insofar as the assailed order of July 30, 1969 is concerned is denied, without prejudice to the appropriate action on petitioners' motion for reconsideration thereof by the CIRen banc, but the petition for certiorari and mandamus relative to the impugned order of respondent Presiding Judge of October 6, 1969 is granted, the said order is hereby declared null and void and set aside, as in excess of jurisdiction, and respondent Presiding Judge or whoever is acting in his stead is ordered to refer the motion for reconsideration of petitioners dated August 16, 1969 to the CIR en banc for appropriate action. The writ of preliminary injunction issued by the Court on November 24, 1969 is made permanent, without prejudice to the resolution by the CIR of petitioners' motion for reconsideration just referred to. The manifestation of Acting Presiding Judge Ansberto Paredes to the effect that he has desisted and continues to desist from following the practice of former Presiding Judge Martinez declared illegal in this decision is noted. Costs against private respondents.

G.R. No. L-31152 March 27, 1974 UNIVERSITY OF NUEVA CACERES, JAIME HERNANDEZ, SR., and JAIME HERNANDEZ, JR., petitioners, vs. HON. ARSENIO I. MARTINEZ, as Presiding Judge of the Court of Industrial Relations, and the UNIVERSITY OF NUEVA CACERES GUARDIANS UNION, respondents. BARREDO, J.:p Petition for certiorari, prohibition and mandamus, with preliminary injunction, relative to the orders of respondent Presiding Judge of the Court of Industrial Relations dated July 30, 1969 and October 6, 1969, which in effect held that the determination of whether or not a charge of unfair labor practice, investigated by the Prosecution Division of said court, should be dismissed outright because of any fatal defect of form or substance is the exclusive prerogative of said Presiding Judge, to the exclusion of the court en banc, on the theory that the function involved in such determination is not judicial but purely administrative and hence entrusted to his exclusive administrative authority as head of said court. On June 17, 1969, respondent University of Nueva Caceres Guardians Union filed with the Bicol branch of respondent Court of Industrial Relations (CIR) an unfair labor practice charge against petitioners accompanied by the joint affidavit of Benito de la Paz and George Offemaria. At the hearing of said charge before the prosecutor of the CIR, petitioners moved to dismiss the same on the grounds: (1) it is not verified; (2) it does not specify the particular provisions of Section 4 (a) of the Industrial Peace Act, RA 875, as amended, supposed to have been violated, and (3) the supporting joint affidavit contains "falsities, misstatements and improbabilities on points otherwise material to the charge." Instead of dismissing the charge, the prosecutor, although finding the grounds of the dismissal motion to be more or less plausible, granted respondent Union five (5) days "to file an amended charge and amended affidavit," which said Union did on July 8, 1969. On July 14, 1969, petitioners moved to reconsider the ruling of the prosecutor, but on July 30, 1969, respondent Presiding Judge denied the same, admitted the amended charge and directed the Court Prosecutor to set the said amended charge for preliminary investigation. On August 16, 1969, petitioners moved again for reconsideration of the order of July 30, 1969. Apparently, petitioners assumed their motion for reconsideration would be acted upon by the court en banc, for when on October 6, 1969, respondent Judge issued an order, signed by him alone, denying it, the present petition was filed charging said respondent with having acted in excess of jurisdiction in acting on a matter addressed to and within the jurisdiction of the CIR en banc and of grave abuse of discretion in not ordering the dismissal of the charge upon the grounds invoked by them. The assertion by respondent Judge, implicit in his order of October 6, 1969, of jurisdiction, to the exclusion of the court en banc, over the matter herein involved cannot be sustained. It is Our considered

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FIRST DIVISION [G.R. NO. 166062 : September 26, 2006] SALVADOR M. PEREZ and JUANITA A. APOSTOL, Petitioners, v. HON. SANDIGANBAYAN (2nd Division) and PEOPLE OF THE PHILIPPINES represented by the Special Prosecutor of the Office of the Ombudsman, Respondents. DECISION CHICO-NAZARIO, J.: This is a Petition for Certiorari under Rule 65 of the Rules of Court, questioning the twin Resolutions1 of the Sandiganbayan dated 7 May 2004 (promulgated 18 May 2004), 2 and 27 September 2004 (promulgated 1 October 2004).3 The following facts were culled from the records of the case: In a resolution dated 24 April 2001, the Office of the Deputy Ombudsman for Luzon resolved to file charges of violation of Section 3(e)4 of Republic Act No. 30195 against petitioners, San Manuel, Pangasinan Mayor Salvador M. Perez, and Municipal Treasurer Juanita Apostol. The Information alleges a crime committed as follows: That on or about September of 1998, or sometime prior or subsequent thereto, in the Municipality of San Manuel, Pangasinan, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, SALVADOR PEREZ, being then the Municipal Mayor and JUANITA APOSTOL, ZAPANTA, Municipal Treasurer of said municipality, conspiring and confederating with one another, committing the crime herein charged in relation to and taking advantage of their official functions, and through manifest partiality, evident bad faith or gross inexcusable negligence, did then and there, wilfully, unlawfully and criminally cause the purchase of one (1) computer unit costing P120,000.00 acquisition by personal canvass which is in violation of Secs. 362 and 367 of R.A. 7160, thereby causing undue injury to the Municipality of San Manuel, Pangasinan.6 On 16 January 2002, prior to the scheduled arraignment, petitioners filed with the Sandiganbayan a Motion for Leave of Court to File Motion for Reconsideration/Reinvestigation alleging the discovery of new evidence which will change the outcome of the case if presented and appreciated. The alleged newly discovered evidence consists in the reassessment by the auditors of the Commission on Audit (COA) that, though the prices between the subject computer and that canvassed by the COA are different, such difference is "not really that material."7 The Sandiganbayan denied the Motion for Leave of Court to File Motion for Reconsideration/Reinvestigation in an Order dated 4 April 2002. On a subsequent Motion for Reconsideration, however, the Sandiganbayan reconsidered the 4 April 2002 Order, and granted petitioners ten days from receipt of the current 6 September 2002 Resolution within which to formalize their Motion for Reconsideration in the Office of the Ombudsman. Complying with the 6 September 2002 Resolution, petitioners formalized their Motion for Reconsideration in the Office of the Ombudsman. Accordingly, the Office of the Special Prosecutor conducted a reinvestigation. Assistant Special Prosecutor Warlito F. Galisanao prepared a Memorandum dated 23 October 2003, recommending the withdrawal of the Information.8 However, in the portion of the Memorandum earmarked for the Special Prosecutor's action, Special Prosecutor Dennis M. Villa-Ignacio chose the action "DO NOT CONCUR" by drawing two lines on the action "I CONCUR," and wrote the following marginal note: I am, instead adopting the enclosed memorandum of Pros. Chua dated Jan. 22, 2004 recommending that in the meantime, further fact-finding be conducted, and an administrative case be filed against accused Apostol, after withdrawing the Information for viol. of Sec. 3(e) R.A. 3019. 9 On the other hand, new Ombudsman Simeon V. Marcelo crossed out both actions (APPROVED/DISAPPROVED), and wrote the following marginal note dated 16 February 2004:

The resolution of this case is deferred. There are two modes of violating Section 3(e) of RA 3019, to wit: a) causing undue injury or b) giving unwarranted benefits, advantage or preference. OSP should study whether the accused, assuming arguendo that there was no overprice, gave unwarranted benefits, advantage or preference to the seller of the subject computer. Kindly submit your recommendation soonest.10 In an 8 March 2004 Supplemental Memorandum, Assistant Special Prosecutor III Warlito F. Galisanao recommended an amendment of the Information, instead of a withdrawal thereof, to wit: This is a Supplemental Memorandum to an earlier Memorandum dated October 23, 2003 to the Honorable Tanodbayan, Simeon V. Marcelo who directed the deferment of action on undersigned's recommendation for the withdrawal of the Information. As earlier found, the acquisition of the unbranded computer set was questionable on the following grounds: 1. There was no public bidding and the mode of procurement was by canvass. 2. Under Sec. 367 of the Local Government Code, procurement through Personal Canvass requires approval of the Committee on Awards. There was no committee approval to speak of in this case because none has been constituted. This committee is supposed to be composed of: A. Local General Services Officer or the Municipal Treasurer; b. Local Accountant; c. The head of office of department for whose use the supplies are being procured. 3. Purchases under this section allows municipalities outside Metro Manila with the following limits: Second and Third Class - Forty Thousand Pesos (P40,000.00) Fourth Class and Below - Twenty Thousand Pesos (P20,000.00) These limits are applicable for all items procured by any one (1) month period only. The local government of San Manuel, Pangasinan, incidentally, is a fourth class municipality. It must be noted that the canvass made on all the stores/suppliers were done by accused Treasurer Juanita Apostol and attested by Mayor, Salvador Perez. To attest means to affirm to be correct, true or genuine (Blacks Law Dictionary, Fifth Edition)[.] In the earlier memorandum, there is no unanimity of conclusion as far as the reasonableness of the purchase price of the computer set is concern[ed]. However, the circumstances of its acquisition clearly indicate that the public officials involved gave the supplier, Mobil Link Enterprises/Starlet Sales Center, a private party, unwarranted benefits, advantage or preference through manifest partiality, evident bad faith or gross inexcusable negligence by paying much more than the prevailing price for a comparable computer set in the market. This conclusion is derived from accused's deliberate disregard of the rules on procurement discussed above. The Information must, therefore, be amended to reflect the manner of the commission of the offense. In regard to Prosecutor Elvira Chua's recommendation which is endorsed by the Special Prosecutor, the issue of overpricing must be referred to the appropriate office for further fact-finding and probable administrative investigation for violation of COA rules and RA 7160 otherwise, known as the Local Government Code of 1991. In light of the foregoing, it is recommended that the Information be amended instead of withdrawing the same. Further, the case of overpricing be referred for fact-finding and possible administrative investigation for violation of Secs. 362 and 367 of RA 7160, otherwise known as the Local Government Code of 1991.11

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This time around, Special Prosecutor Villa-Ignacio approved the Supplemental Memorandum and, pursuant thereto, Assistant Special Prosecutor Galisanao filed a Motion for Leave to File Amended Information dated 12 March 2004. The Amended Information, which again charges petitioners Perez and Apostol for violation of Sec. 3(e) of Republic Act No. 3019, provides: That on or about January 21, 1998, or sometime prior or subsequent thereto, in the Municipality of San Manuel, Pangasinan, Philippines, and within the jurisdiction of this Honorable Court, the above-named accused, SALVADOR PEREZ, being then the Municipal Mayor and JUANITA A. APOSTOL, Municipal Treasurer of said municipality, conspiring and confederating with one another, committing the crime herein charged in relation to and taking advantage of their official functions, through manifest partiality, evident bad faith or gross inexcusable negligence, did then and there, willfully, unlawfully and criminally, give unwarranted benefits, advantage or preference in the discharge of official functions to Mobil Link Enterprises/Starlet Sales Center causing the purchase of one (1) computer unit costing P120,000.00, an acquisition by personal canvass which is in violation of Sections 362 and 367 of RA 7160, thereby causing damage and prejudice to the Municipality of San Manuel, Pangasinan. 12 The Sandiganbayan granted the motion in the first assailed resolution, thus: There having been no arraignment yet and the pre-maturity of the amendment is of the prosecution's risk, the motion to Amend the Information is GRANTED. Accordingly, the Amended Information submitted by the prosecution is admitted. 13 Petitioners filed a motion for reconsideration, but the same was denied in the second assailed resolution: The Court resolves to deny the Motion for Reconsideration filed by the accused. Indeed, the power of a prosecuting prosecutor to amend or cause the amendment of the information does not need the approving authority of the Ombudsman. The Information was maintained only with some amendments made which the Court feels do not violate any law since there was no arraignment yet. Accordingly, accused Motion for Reconsideration dated June 4, 2004 is denied for lack of merit.
14

A judicial examination of the prosecutorial powers of these two Constitutional positions came barely a year after the effectivity of the 1987 Constitution, when then Special Prosecutor Raul Gonzalez filed criminal cases against Antique Governor Enrique Zaldivar. Zaldivar claimed that said cases were filed without legal and constitutional authority since, under the 1987 Constitution, it is only the Ombudsman (not the incumbent Tanodbayan who should now be called the Special Prosecutor) who has the authority to file the cases with the Sandiganbayan. In granting the petitions and nullifying the criminal informations filed against Zaldivar, this Court held: Under the 1987 Constitution, the Ombudsman (as distinguished from the incumbent Tanodbayan) is charged with the duty to: "Investigate on its own, or on complaint by any person, any act or omission of any public official, employee, office or agency, when such act or omission appears to be illegal, unjust, improper or inefficient." (Sec. 13, par. 1) The Constitution likewise provides that: "The existing Tanodbayan shall hereafter be known as the Office of the Special Prosecutor. It shall continue to function and exercise its powers as now or hereafter may be provided by law, except those conferred on the Office of the Ombudsman created under this Constitution." (Art. XI, Section 7) (Italics ours). Now then, inasmuch as the aforementioned duty is given to the Ombudsman, the incumbent Tanodbayan (called Special Prosecutor under the 1987 constitution and who is supposed to retain powers and duties NOT GIVEN to the Ombudsman) is clearly without authority to conduct preliminary investigations and to direct the filing of criminal cases with the Sandiganbayan, except upon orders of the Ombudsman. This right to do so was lost effective February 2, 1987. From that time, he has been divested of such authority. Under the present constitution, the Special Prosecutor (Raul Gonzalez) is a mere subordinate of the Tanodbayan (Ombudsman) and can investigate and prosecute cases only upon the latter's authority or orders. The Special Prosecutor cannot initiate the prosecution of cases but can only conduct the same if instructed to do so by the Ombudsman. Even his original power to issue subpoena, which he still claims under Section 10(d) of PD 1630, is now deemed transferred to the Ombudsman, who may, however, retain it in the Special Prosecutor in connection with the cases he is ordered to investigate.16 (Emphasis supplied.) The following year, Republic Act No. 6770,17 otherwise known as The Ombudsman Act of 1989, was passed into law. Among other things, said law: 1) expressly included the Special Prosecutor under the Office of the Ombudsman;18 2) gave the Special Prosecutor the power, under the supervision and control and upon the authority of the Ombudsman, to conduct preliminary investigation and prosecute criminal cases within the jurisdiction of the Sandiganbayan, and to perform such other duties assigned to it by the Ombudsman; 19 and, most importantly, 3) granted the Ombudsman the powers to: Investigate and prosecute on its own or on complaint by any person, any act or omission of any public officer or employee, office or agency, when such act or omission appears to be illegal, unjust, improper or inefficient. It has primary jurisdiction over cases cognizable by the Sandiganbayan and, in the exercise of its primary jurisdiction, it may take over, at any stage, from any investigatory agency of the Government, the investigation of such cases.20 A few years later, several persons charged in a complaint filed with the Office of the Ombudsman (in connection with the alleged summary execution of Kuratong Baleleng gang members) instituted petitions for certiorari with this Court, claiming that it is the Special Prosecutor which has jurisdiction to conduct the preliminary investigation and file the proper information against them. In the oral arguments, the parties agreed to limit the issues, with petitioners praying for the re-examination of the Zaldivar ruling on the argument that the Constitution did not give the Ombudsman prosecutorial functions, and contending that the inclusion of the Office of the Special Prosecutor as among the offices under the Office of the Ombudsman in Section 3 of Republic Act No. 6770 is unconstitutional.

Petitioners assail the foregoing Resolutions before this Court, presenting the following issues for resolution: 1. Whether or not there is a denial of procedural due process on the part of the petitioners when the Special Prosecutor filed the Amended Information without authority from or the approval of the Honorable Ombudsman, and against the latter's specific instruction; 2. Whether or not the Amended Information is valid in the absence of such authority or approval of the Ombudsman under the circumstances; andcralawlibrary 3. Whether or not respondent Sandiganbayan acted with grave abuse of discretion amounting to lack or excess of jurisdiction, when it admitted the Amended Information which bears no approval of the Honorable Ombudsman, and against the latter's written instruction to submit to him for approval the result of the re-study before the filing of said Amended Information.15 This is not the first time the respective powers of the Ombudsman and the Special Prosecutor were pitted at loggerheads against each other since these positions were reinvented in the 1987 Constitution. The Offices of the Ombudsman (now also called the Tanodbayan) and the Special Prosecutor (then called the Tanodbayan) were reintroduced, with modified powers and designation, in the following provisions of Article XI of the Constitution: Sec. 5. There is hereby created the independent Office of the Ombudsman, composed of the Ombudsman to be known as Tanodbayan, one overall Deputy, and at least one Deputy each for Luzon, Visayas and Mindanao. A separate Deputy for the military establishment may likewise be appointed. xxx Sec. 7. The existing Tanodbayan shall hereafter be known as the Office of the Special Prosecutor. It shall continue to function and exercise its powers as now or hereafter may be provided by law, except those conferred on the Office of the Ombudsman created under this Constitution.

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In upholding Zaldivar, we held that while there was indeed an intention to withhold prosecutorial functions from the Ombudsman, the legislature nevertheless recommended that the Legislature could, through statute, prescribe such other powers, functions and duties to the Ombudsman. 21 Thus, paragraph 8, Section 13, Article XI of the Constitution, provides that the Ombudsman may exercise other functions and duties as may be provided by law.22 Pursuant to this authority, the Legislature enacted Republic Act No. 6770, which granted prosecutorial powers to the Ombudsman. On the claim that the inclusion of the Office of the Special Prosecutor as among the offices under the Office of the Ombudsman in Section 3 of Republic Act No. 6770 is unconstitutional, we ratiocinated that: The contention is not impressed with merit. Firstly, the petitioners misconstrue Commissioner Romulo's statement as authority to advocate that the intent of the framers of the 1987 Constitution was to place the Office of the Special Prosecutor under the Office of the President. The said statement obviously referred to the Tanodbayan under P.D. No. 1630 - note how specific the erstwhile Commissioner was in stating; ". . . as the decree now reads . . ." Further, in complete contrast to the petitioner's stand, one of the principal reasons for the proposal to withhold prosecutorial powers from the Ombudsman was precisely to remove the office from presidential control. x x x xxx In the second place, Section 7 of Article XI expressly provides that the then existing Tanodbayan, to be henceforth known as the Office of the Special Prosecutor, "shall continue to function and exercise its powers as now or hereafter may be provided by law, except those conferred on the Office of the Ombudsman created under this Constitution." The underscored phrase evidently refers to the Tanodbayan's powers under P.D. No. 1630 or subsequent amendatory legislation. It follows then that Congress may remove any of the Tanodbayan's/Special Prosecutor's powers under P.D. No. 1630 or grant it other powers, except those powers conferred by the Constitution on the Office of the Ombudsman. Pursuing the present line of reasoning, when one considers that by express mandate of paragraph 8, Section 13, Article XI of the Constitution, the Ombudsman may "exercise such other powers or perform functions or duties as may be provided by law," it is indubitable then that Congress has the power to place the Office of the Special Prosecutor under the Office of the Ombudsman. In the same vein, Congress may remove some of the powers granted to the Tanodbayan by P.D. No. 1630 and transfer them to the Ombudsman; or grant the Office of the Special Prosecutor such other powers and functions and duties as Congress may deem fit and wise. This Congress did through the passage of R.A No. 6770. 23 While it is clear that Acop v. Office of the Ombudsman upheld Zaldivar v. Sandiganbayan insofar as the power of the Ombudsman to prosecute cases is concerned, there has been a shift in its ratio decidendi. Hence, it was pronounced that the authority of the Ombudsman to prosecute was based on Republic Act No. 6770, as authorized by paragraph 8, Section 13, Article XI of the Constitution. This being the case, and considering that Republic Act No. 6770 also gives the Special Prosecutor the power to prosecute criminal cases (albeit under the supervision and control and under the authority of the Ombudsman), was there likewise a modification of our ruling in Zaldivar prohibiting the then Special Prosecutor to initiate criminal cases unless authorized by the Ombudsman? Or should there now be a presumed authority, pursuant to Republic Act No. 6770, to prosecute cases unless prohibited by the Ombudsman?cralaw library The determination of this question is necessary in the case at bar, where it is the petitioners' central contention that the Sandiganbayan committed grave abuse of discretion amounting to lack or excess in jurisdiction when it admitted the Amended Information which, according to petitioners, bears no approval of the Ombudsman, thus, constituting denial of procedural due process.24 Particularly, petitioners allege that the amendment of the Information and the admission of the Amended Information is premature, since the Ombudsman has not yet acted with finality on the 23 October 2003 Memorandum.25 The Ombudsman, by stating in the marginal notes of the 23 October 2003 Memorandum that "(t)he resolution of this case is deferred," and "(k)indly submit your recommendation soonest," allegedly decreed that the reinvestigation stage would not be completed until his final determination.26 Respondent People's defense is that compliance with the specific instructions of the Ombudsman is merely an internal matter and the alleged failure to heed the specific instructions of the Ombudsman is speculative.27

The marginal notes of Ombudsmen to the recommendations of investigating prosecutors are hardly internal matters. In Cruz, Jr. v. People,28 Olivarez v. Sandiganbayan,29 and Gallardo v. People,30 the marginal notes, even one-liners as in the case of Gallardo, were judicially considered sufficient dispositions by the Ombudsmen and Special Prosecutors concerned. We held in Olivarez that: The mere fact that the order to file the information against petitioner was contained in a marginal note is not sufficient to impute arbitrariness or caprice on the part of respondent special prosecutors, absent a clear showing that they gravely abused their discretion in disapproving the recommendation of the investigating prosecutors to dismiss or withdraw the case against petitioner. x x x.31 Was there, as petitioners assert, a violation of the orders of the Ombudsman as stated in his marginal note?cralaw library For reference, we reiterate the marginal note of Ombudsman Marcelo dated 16 February 2004: The resolution of this case is deferred. There are two modes of violating Section 3(e) of RA 3019, to wit: a) causing undue injury or b) giving unwarranted benefits, advantage or preference. OSP should study whether the accused, assuming arguendo that there was no overprice, gave unwarranted benefits, advantage or preference to the seller of the subject computer. Kindly submit your recommendation soonest.32 Assistant Special Prosecutor Galisanao's Special Memorandum, quoted in full in the narration of facts, show complete compliance with Ombudsman Marcelo's order to "study whether the accused, assuming arguendo that there was no overprice, gave unwarranted benefits, advantage or preference to the seller of the subject computer." Assistant Special Prosecutor Galisanao answered the query in the affirmative, stating that unwarranted benefits, advantage or preference were given to Mobil Link Enterprises/Starlet Sales Center through the "deliberate disregard of the rules on procurement discussed above." Ombudsman Marcelo's order, however, to "(k)indly submit your recommendation soonest," is another matter. The marginal note did not indicate to whom the recommendation should be submitted. As the recommendation was prepared by a subordinate in the Office of the Special Prosecutor, would a submission to the Special Prosecutor be sufficient compliance with the order of the Ombudsman? What is imperative is that the recommendation be submitted to someone who has the authority to implement such recommendation, by authorizing the filing of the proper information. Republic Act No. 6770, by conferring upon the Ombudsman the power to prosecute, likewise grants to the Ombudsman the power to authorize the filing of informations. As to the Special Prosecutor, respondent People invokes the aforesaid authority of the Ombudsman in Section 15(10) to delegate his powers, and claim that there was a general delegation of the authority to approve the filing of informations in Office Order No. 03-97, series of 2003 (dated 15 September 2003), and Office Order No. 40-05, series of 2005 (dated 4 April 2005). Office Order No. 40-05 is a consolidation of several office orders, including the aforementioned Office Order No. 03-97, which is thus superceded by the former.33 Office Order No. 40-05 provides: In the exigency of the service, except when otherwise ordered by the Ombudsman, the disposition of administrative and criminal cases involving any of the following, viz: 1) City and Municipal mayors; xxx as the highest ranking respondent, where the offense charged involves injury or damage amounting to, or valued at Two Million Pesos (P2,000,000.00) or less, or where the maximum imposable penalty for any of the offense charged does not exceed twenty (20) years imprisonment, shall be subject to the final approval of the Deputy Ombudsman concerned; provided, that, where the offense charged involves injury or damage amounting to, or valued at, more than Two Million Pesos (P2,000,000.00), or where the maximum imposable penalty for any of the offense charged is more than twenty (20) years imprisonment, the disposition shall be subject to the final approval of the Ombudsman. In the foregoing dispositions that are subject to the final approval of the Deputy Ombudsman concerned, the undersigned hereby delegates to the latter further authority to approve and sign any corresponding criminal information, whether to be filed with the regular courts or the Sandiganbayan; provided,

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however, that, preparatory to the filing of the information with the Sandiganbayan, the Office of the Special Prosecutor may review and modify the same, subject to the approval of the Special Prosecutor, without departing from, or varying in any way, the contents of the basic Resolution, Order or Decision.34 Contrary to the contention of respondent People, the delegation of the power to authorize the filing of informations under Office Order No. 40-05 was only made to Deputy Ombudsmen, and not to the Special Prosecutor. All that was delegated to the Special Prosecutor was the discretional35 authority to review and modify the Deputy Ombudsmen-authorized information, but even this is subject to the condition that such modification must be "without departing from, or varying in any way, the contents of the basic Resolution, Order or Decision." Even the title of Office Order No. 40-05 betray the contention of delegation to the Special Prosecutor: "DELEGATION OF FINAL APPROVING AUTHORITY TO THE DEPUTY OMBUDSMAN FOR LUZON, DEPUTY OMBUDSMAN FOR VISAYAS AND DEPUTY OMBUDSMAN FOR MINDANAO." Neither does it help that, under Section 11(4) of Republic Act No. 6770, the Special Prosecutor was given the rank and salary of Deputy Ombudsman. In Office of the Ombudsman v. Valera, 36 this Court held: The petitioner's contention that since the Special Prosecutor is of the same rank as that of a Deputy Ombudsman, then the former can rightfully perform all the functions of the latter, including the power to preventively suspend, is not persuasive. Under civil service laws, rank classification determines the salary and status of government officials and employees. Although there is substantial equality in the level of their respective functions, those occupying the same rank do not necessarily have the same powers nor perform the same functions.37 There being no express delegation of the power to prosecute, we are constrained to go back to our main query: Is there an implied delegation of the power to prosecute under Republic Act No. 6770, such that Special Prosecutors are presumed to have been delegated such power, in the absence of a prohibition from the Ombudsman?cralaw library Republic Act No. 6770 provides: (4) The Office of the Special Prosecutor shall, under the supervision and control and upon the authority of the Ombudsman, have the following powers: (a) To conduct preliminary investigation and prosecute criminal cases within the jurisdiction of the Sandiganbayan; (b) To enter into plea-bargaining agreements; andcralawlibrary (c) To perform such other duties assigned to it by the Ombudsman. 38 This Court has defined the power of control as "the power of an officer to alter or modify or nullify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for that of the latter."39 The power of supervision, on the other hand, means "overseeing, or the power or authority of an officer to see that subordinate officers perform their duties." 40 Under the Administrative Code of 198741 : Supervision and control shall include authority to act directly whenever a specific function is entrusted by law or regulation to a subordinate; direct the performance of duty; restrain the commission of acts; review, approve, reverse or modify acts and decisions of subordinate officials or units; determine priorities in the execution of plans and programs; and prescribe standards, guidelines, plans and programs. x x x Springing from the power of control is the doctrine of qualified political agency, wherein the acts of a subordinate bears the implied approval of his superior, unless actually disapproved by the latter. 42 Thus, taken with the powers of control and supervision, the acts of Department Secretaries in the performance of their duties are presumed to be the act of the President, unless and until the President alters, modifies, or nullifies the same. By arguing that "[w]hat is important is that the amended Information has not been withdrawn, and or recalled by the Honorable Ombudsman, [a] clear showing that the latter acknowledged/upheld the act of the Special Prosecutor in signing the Amended Information,"43 respondent People claims that the doctrine of qualified political agency should be applied as well to the relationship between the Ombudsman and the Special Prosecutor.

Petitioners counter that the doctrine of qualified political agency does not apply to the Office of the Ombudsman, since the latter is an apolitical agency, and is far different from the bureaucracy to which said doctrine applies.44 Petitioners are correct. The doctrine of qualified political agency was adopted in our system of government on the following pronouncement of this Court in Villena v. The Secretary of the Interior45 : After serious reflection, we have decided to sustain the contention of the government in this case on the broad proposition, albeit not suggested, that under the presidential type of government which we have adopted and considering the departmental organization established and continued in force by paragraph 1, section 12, Article VII, of our Constitution, all executive and administrative organizations are adjuncts of the Executive Department, the heads of the various executive departments are assistants and agents of the Chief Executive, and, except in cases where the Chief Executive is required by the Constitution or the law to act in person or the exigencies of the situation demand that he act personally, the multifarious executive and administrative functions of the Chief Executive are performed by and through the executive departments, and the acts of the secretaries of such departments, performed and promulgated in the regular course of business, are, unless disapproved or reprobated by the Chief Executive, presumptively the acts of the Chief Executive. (Runkle v. United States [1887]. 122 U.S., 543; 30 Law. ed., 1167; 7 Sup.Ct. Rep., 1141; see also U. S. v. Eliason [1839], 16 Pet., 291; 10 Law.ed., 968; Jones v. U. S. [1890], 137 U.S., 202; 34 Law.ed., 691; 11 Sup.Ct., Rep., 80; Wolsey v. Chapman [1880], 101 U.S., 755; 25 Law.ed., 915; Wilcox v. Jackson [1836], 13 Pet., 498; 10 Law.ed., 264.) 46 While we do not underestimate the quantity of work in the hands of the Office of the Ombudsman, the same simply does not measure up to the workload of the Office of the President as to necessitate having the Special Prosecutor as an alter ego of the Ombudsman. In any case, the Office of the Ombudsman could very well make a general delegation of powers to the Special Prosecutor, if it is so desired. An examination of the office orders issued by the Ombudsman, however, reveal that there had been no such intention to make a general delegation. Indeed, a statute granting powers to an agency created by the Constitution should be liberally construed for the advancement of the purposes and objectives for which it was created. 47 Yet, the Ombudsman would be severely hampered from exercising his power of control if we are to allow the Special Prosecutor to authorize the filing of informations in the first instance. This is because while the Ombudsman has full discretion to determine whether or not a criminal case should be filed in the Sandiganbayan, once the case has been filed with said court, it is the Sandiganbayan, and no longer the Ombudsman, which has full control of the case so much so that the informations may not be dismissed, without the approval of the said court.48 We, therefore, resolve to grant the Petition. We realize that, once transmitted to the new Ombudsman, she can so easily approve the 8 March 2004 Supplemental Memorandum of Assistant Special Prosecutor Galisanao, and the same Amended Information can be filed in no time. However, when the law entails a specific procedure to be followed, unwarranted shortcuts lead to the violation of the sacred right to due process, which we cannot countenance. Finally, as regards other informations authorized by the Special Prosecutor to be filed without the approval of the Ombudsman, we also recognize that the former prevailing interpretation of the law may shield these informations from illegality. Such reliance upon the operative fact, however, would cease upon the finality of this Decision. WHEREFORE, the instant Petition for Certiorari is GRANTED. The assailed Resolutions of the Sandiganbayan admitting the Amended Information is SET ASIDE. Let the 8 March 2004 Supplemental Memorandum of Assistant Special Prosecutor III Warlito F. Galisanao be TRANSMITTED to the Office of the Ombudsman for approval or disapproval. SO ORDERED.

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G.R. No. 141309

June 19, 2007

LIWAYWAY VINZONS-CHATO, petitioner, vs. FORTUNE TOBACCO CORPORATION, respondent. DECISION YNARES-SANTIAGO, J.: Petitioner assails the May 7, 1999 Decision1 of the Court of Appeals in CA-G.R. SP No. 47167, which affirmed the September 29, 1997 Order2 of the Regional Trial Court (RTC) of Marikina, Branch 272, in Civil Case No. 97-341-MK, denying petitioners motion to dismiss. The complaint filed by respondent sought to recover damages for the alleged violation of its constitutional rights arising from petitioners issuance of Revenue Memorandum Circular No. 37-93 (RMC 37-93), which the Court declared invalid in Commissioner of Internal Revenue v. Court of Appeals.3 Petitioner Liwayway Vinzons-Chato was then the Commissioner of Internal Revenue while respondent Fortune Tobacco Corporation is an entity engaged in the manufacture of different brands of cigarettes, among which are "Champion," "Hope," and "More" cigarettes. On June 10, 1993, the legislature enacted Republic Act No. 7654 (RA 7654), which took effect on July 3, 1993. Prior to its effectivity, cigarette brands Champion," "Hope," and "More" were considered local brands subjected to an ad valorem tax at the rate of 20-45%. However, on July 1, 1993, or two days before RA 7654 took effect, petitioner issued RMC 37-93 reclassifying "Champion," "Hope," and "More" as locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax.4 RMC 37-93 in effect subjected "Hope," "More," and"Champion" cigarettes to the provisions of RA 7654, specifically, to Sec. 142,5 (c)(1) on locally manufactured cigarettes which are currently classified and taxed at 55%, and which imposes an ad valorem tax of "55% provided that the minimum tax shall not be less than Five Pesos (P5.00) per pack."6 On July 2, 1993, at about 5:50 p.m., BIR Deputy Commissioner Victor A. Deoferio, Jr. sent via telefax a copy of RMC 37-93 to Fortune Tobacco but it was addressed to no one in particular. On July 15, 1993, Fortune Tobacco received, by ordinary mail, a certified xerox copy of RMC 37-93. On July 20, 1993, respondent filed a motion for reconsideration requesting the recall of RMC 37-93, but was denied in a letter dated July 30, 1993.7 The same letter assessed respondent for ad valorem tax deficiency amounting to P9,598,334.00 (computed on the basis of RMC 37-93) and demanded payment within 10 days from receipt thereof.8 On August 3, 1993, respondent filed a petition for review with the Court of Tax Appeals (CTA), which on September 30, 1993, issued an injunction enjoining the implementation of RMC 3793.9 In its decision dated August 10, 1994, the CTA ruled that RMC 37-93 is defective, invalid, and unenforceable and further enjoined petitioner from collecting the deficiency tax assessment issued pursuant to RMC No. 37-93. This ruling was affirmed by the Court of Appeals, and finally by this Court in Commissioner of Internal Revenue v. Court of Appeals.10 It was held, among others, that RMC 37-93, has fallen short of the requirements for a valid administrative issuance. On April 10, 1997, respondent filed before the RTC a complaint 11 for damages against petitioner in her private capacity. Respondent contended that the latter should be held liable for damages under Article 32 of the Civil Code considering that the issuance of RMC 37-93 violated its constitutional right against deprivation of property without due process of law and the right to equal protection of the laws. Petitioner filed a motion to dismiss12 contending that: (1) respondent has no cause of action against her because she issued RMC 37-93 in the performance of her official function and within the scope of her authority. She claimed that she acted merely as an agent of the Republic and therefore the latter is the one responsible for her acts; (2) the complaint states no cause of action for lack of allegation of malice or bad faith; and (3) the certification against forum shopping was signed by respondents counsel in violation of the rule that it is the plaintiff or the principal party who should sign the same. On September 29, 1997, the RTC denied petitioners motion to dismiss holding that to rule on the allegations of petitioner would be to prematurely decide the merits of the case without allowing the parties to present evidence. It further held that the defect in the certification against forum shopping was cured by respondents submission of the corporate secretarys certificate authorizing its counsel to execute the certification against forum shopping. The dispositive portion thereof, states:

WHEREFORE, foregoing premises considered, the motion to dismiss filed by the defendant Liwayway Vinzons-Chato and the motion to strike out and expunge from the record the said motion to dismiss filed by plaintiff Fortune Tobacco Corporation are both denied on the grounds aforecited. The defendant is ordered to file her answer to the complaint within ten (10) days from receipt of this Order. SO ORDERED.13 The case was elevated to the Court of Appeals via a petition for certiorari under Rule 65. However, same was dismissed on the ground that under Article 32 of the Civil Code, liability may arise even if the defendant did not act with malice or bad faith. The appellate court ratiocinated that Section 38, Book I of the Administrative Code is the general law on the civil liability of public officers while Article 32 of the Civil Code is the special law that governs the instant case. Consequently, malice or bad faith need not be alleged in the complaint for damages. It also sustained the ruling of the RTC that the defect of the certification against forum shopping was cured by the submission of the corporate secretarys certificate giving authority to its counsel to execute the same. Undaunted, petitioner filed the instant recourse contending that the suit is grounded on her acts done in the performance of her functions as a public officer, hence, it is Section 38, Book I of the Administrative Code which should be applied. Under this provision, liability will attach only when there is a clear showing of bad faith, malice, or gross negligence. She further averred that the Civil Code, specifically, Article 32 which allows recovery of damages for violation of constitutional rights, is a general law on the liability of public officers; while Section 38, Book I of the Administrative Code is a special law on the superior public officers liability, such that, if the complaint, as in the instant case, does not allege bad faith, malice, or gross negligence, the same is dismissible for failure to state a cause of action. As to the defect of the certification against forum shopping, she urged the Court to strictly construe the rules and to dismiss the complaint. Conversely, respondent argued that Section 38 which treats in general the public officers "acts" from which civil liability may arise, is a general law; while Article 32 which deals specifically with the public officers violation of constitutional rights, is a special provision which should determine whether the complaint states a cause of action or not. Citing the case of Lim v. Ponce de Leon,14 respondent alleged that under Article 32 of the Civil Code, it is enough that there was a violation of the constitutional rights of the plaintiff and it is not required that said public officer should have acted with malice or in bad faith. Hence, it concluded that even granting that the complaint failed to allege bad faith or malice, the motion to dismiss for failure to state a cause of action should be denied inasmuch as bad faith or malice are not necessary to hold petitioner liable. The issues for resolution are as follows: (1) May a public officer be validly sued in his/her private capacity for acts done in connection with the discharge of the functions of his/her office? (2) Which as between Article 32 of the Civil Code and Section 38, Book I of the Administrative Code should govern in determining whether the instant complaint states a cause of action? (3) Should the complaint be dismissed for failure to comply with the rule on certification against forum shopping? (4) May petitioner be held liable for damages? On the first issue, the general rule is that a public officer is not liable for damages which a person may suffer arising from the just performance of his official duties and within the scope of his assigned tasks.15 An officer who acts within his authority to administer the affairs of the office which he/she heads is not liable for damages that may have been caused to another, as it would virtually be a charge against the Republic, which is not amenable to judgment for monetary claims without its consent. 16 However, a public officer is by law not immune from damages in his/her personal capacity for acts done in bad faith which, being outside the scope of his authority, are no longer protected by the mantle of immunity for official actions.17

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Specifically, under Section 38, Book I of the Administrative Code, civil liability may arise where there is bad faith, malice, or gross negligence on the part of a superior public officer. And, under Section 39 of the same Book, civil liability may arise where the subordinate public officers act is characterized by willfulness or negligence. Thus Sec. 38.Liability of Superior Officers. (1) A public officer shall not be civilly liable for acts done in the performance of his official duties, unless there is a clear showing of bad faith, malice or gross negligence. xxxx Section 39.Liability of Subordinate Officers. No subordinate officer or employee shall be civilly liable for acts done by him in good faith in the performance of his duties. However, he shall be liable for willful or negligent acts done by him which are contrary to law, morals, public policy and good customs even if he acts under orders or instructions of his superior. In addition, the Court held in Cojuangco, Jr. v. Court of Appeals,18 that a public officer who directly or indirectly violates the constitutional rights of another, may be validly sued for damages under Article 32 of the Civil Code even if his acts were not so tainted with malice or bad faith. Thus, the rule in this jurisdiction is that a public officer may be validly sued in his/her private capacity for acts done in the course of the performance of the functions of the office, where said public officer: (1) acted with malice, bad faith, or negligence; or (2) where the public officer violated a constitutional right of the plaintiff. Anent the second issue, we hold that the complaint filed by respondent stated a cause of action and that the decisive provision thereon is Article 32 of the Civil Code. A general statute is one which embraces a class of subjects or places and does not omit any subject or place naturally belonging to such class. A special statute, as the term is generally understood, is one which relates to particular persons or things of a class or to a particular portion or section of the state only. 19 A general law and a special law on the same subject are statutes in pari materia and should, accordingly, be read together and harmonized, if possible, with a view to giving effect to both. The rule is that where there are two acts, one of which is special and particular and the other general which, if standing alone, would include the same matter and thus conflict with the special act, the special law must prevail since it evinces the legislative intent more clearly than that of a general statute and must not be taken as intended to affect the more particular and specific provisions of the earlier act, unless it is absolutely necessary so to construe it in order to give its words any meaning at all.20 The circumstance that the special law is passed before or after the general act does not change the principle. Where the special law is later, it will be regarded as an exception to, or a qualification of, the prior general act; and where the general act is later, the special statute will be construed as remaining an exception to its terms, unless repealed expressly or by necessary implication. 21 Thus, in City of Manila v. Teotico,22 the Court held that Article 2189 of the Civil Code which holds provinces, cities, and municipalities civilly liable for death or injuries by reason of defective conditions of roads and other public works, is a special provision and should prevail over Section 4 of Republic Act No. 409, the Charter of Manila, in determining the liability for defective street conditions. Under said Charter, the city shall not be held for damages or injuries arising from the failure of the local officials to enforce the provision of the charter, law, or ordinance, or from negligence while enforcing or attempting to enforce the same. As explained by the Court: Manila maintains that the former provision should prevail over the latter, because Republic Act 409 is a special law, intended exclusively for the City of Manila, whereas the Civil Code is a general law, applicable to the entire Philippines. The Court of Appeals, however, applied the Civil Code, and, we think, correctly. It is true that, insofar as its territorial application is concerned, Republic Act No. 409 is a special law and the Civil Code a general legislation; but, as regards the subject matter of the provisions above quoted, Section 4 of Republic Act 409 establishes a general rule regulating the liability of the City of Manila for "damages or injury to persons or property arising from the failure of" city

officers "to enforce the provisions of" said Act "or any other law or ordinance, or from negligence" of the city "Mayor, Municipal Board, or other officers while enforcing or attempting to enforce said provisions." Upon the other hand, Article 2189 of the Civil Code constitutes a particular prescription making "provinces, cities and municipalities . . . liable for damages for the death of, or injury suffered by, any person by reason" specifically "of the defective condition of roads, streets, bridges, public buildings, and other public works under their control or supervision." In other words, said section 4 refers to liability arising from negligence, in general, regardless of the object thereof, whereas Article 2189 governs liability due to "defective streets," in particular. Since the present action is based upon the alleged defective condition of a road, said Article 2189 is decisive thereon .23 In the case of Bagatsing v. Ramirez,24 the issue was which law should govern the publication of a tax ordinance, the City Charter of Manila, a special act which treats ordinances in general and which requires their publication before enactment and after approval, or the Tax Code, a general law, which deals in particular with "ordinances levying or imposing taxes, fees or other charges," and which demands publication only after approval. In holding that it is the Tax Code which should prevail, the Court elucidated that: There is no question that the Revised Charter of the City of Manila is a special act since it relates only to the City of Manila, whereas the Local Tax Code is a general law because it applies universally to all local governments. Blackstone defines general law as a universal rule affecting the entire community and special law as one relating to particular persons or things of a class. And the rule commonly said is that a prior special law is not ordinarily repealed by a subsequent general law. The fact that one is special and the other general creates a presumption that the special is to be considered as remaining an exception of the general, one as a general law of the land, the other as the law of a particular case. However, the rule readily yields to a situation where the special statute refers to a subject in general, which the general statute treats in particular. Th[is] exactly is the circumstance obtaining in the case at bar. Section 17 of the Revised Charter of the City of Manila speaks of "ordinance" in general, i.e., irrespective of the nature and scope thereof, whereas, Section 43 of the Local Tax Code relates to "ordinances levying or imposing taxes, fees or other charges" in particular. In regard, therefore, to ordinances in general, the Revised Charter of the City of Manila is doubtless dominant, but, that dominant force loses its continuity when it approaches the realm of "ordinances levying or imposing taxes, fees or other charges" in particular. There, the Local Tax Code controls. Here, as always, a general provision must give way to a particular provision. Special provision governs. Let us examine the provisions involved in the case at bar. Article 32 of the Civil Code provides: ART. 32. Any public officer or employee, or any private individual, who directly or indirectly obstructs, defeats, violates, or in any manner impedes or impairs any of the following rights and liberties of another person shall be liable to the latter for damages: xxxx (6) The right against deprivation of property without due process of law; xxxx (8) The right to the equal protection of the laws; xxxx The rationale for its enactment was explained by Dean Bocobo of the Code Commission, as follows: "DEAN BOCOBO. Article 32, regarding individual rights, Attorney Cirilo Paredes proposes that Article 32 be so amended as to make a public official liable for violation of another persons constitutional rights only if the public official acted maliciously or in bad faith. The Code Commission opposes this suggestion for these reasons: "The very nature of Article 32 is that the wrong may be civil or criminal. It is not necessary therefore that there should be malice or bad faith. To make such a requisite would defeat the

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main purpose of Article 32 which is the effective protection of individual rights. Public officials in the past have abused their powers on the pretext of justifiable motives or good faith in the performance of their duties. Precisely, the object of the Article is to put an end to official abuse by the plea of good faith. In the United States this remedy is in the nature of a tort. "Mr. Chairman, this article is firmly one of the fundamental articles introduced in the New Civil Code to implement democracy. There is no real democracy if a public official is abusing and we made the article so strong and so comprehensive that it concludes an abuse of individual rights even if done in good faith, that official is liable. As a matter of fact, we know that there are very few public officials who openly and definitely abuse the individual rights of the citizens. In most cases, the abuse is justified on a plea of desire to enforce the law to comply with ones duty. And so, if we should limit the scope of this article, that would practically nullify the object of the article. Precisely, the opening object of the article is to put an end to abuses which are justified by a plea of good faith, which is in most cases the plea of officials abusing individual rights."25 The Code Commission deemed it necessary to hold not only public officers but also private individuals civilly liable for violation of the rights enumerated in Article 32 of the Civil Code. It is not necessary that the defendant under this Article should have acted with malice or bad faith, otherwise, it would defeat its main purpose, which is the effective protection of individual rights. It suffices that there is a violation of the constitutional right of the plaintiff.26 Article 32 was patterned after the "tort" in American law. 27 A tort is a wrong, a tortious act which has been defined as the commission or omission of an act by one, without right, whereby another receives some injury, directly or indirectly, in person, property, or reputation.28 There are cases in which it has been stated that civil liability in tort is determined by the conduct and not by the mental state of the tortfeasor, and there are circumstances under which the motive of the defendant has been rendered immaterial. The reason sometimes given for the rule is that otherwise, the mental attitude of the alleged wrongdoer, and not the act itself, would determine whether the act was wrongful.29 Presence of good motive, or rather, the absence of an evil motive, does not render lawful an act which is otherwise an invasion of anothers legal right; that is, liability in tort is not precluded by the fact that defendant acted without evil intent. 30 The clear intention therefore of the legislature was to create a distinct cause of action in the nature of tort for violation of constitutional rights, irrespective of the motive or intent of the defendant. 31 This is a fundamental innovation in the Civil Code, and in enacting the Administrative Code pursuant to the exercise of legislative powers, then President Corazon C. Aquino, could not have intended to obliterate this constitutional protection on civil liberties. In Aberca v. Ver,32 it was held that with the enactment of Article 32, the principle of accountability of public officials under the Constitution acquires added meaning and assumes a larger dimension. No longer may a superior official relax his vigilance or abdicate his duty to supervise his subordinates, secure in the thought that he does not have to answer for the transgressions committed by the latter against the constitutionally protected rights and liberties of the citizen. Part of the factors that propelled people power in February 1986 was the widely held perception that the government was callous or indifferent to, if not actually responsible for, the rampant violations of human rights. While it would certainly be too naive to expect that violators of human rights would easily be deterred by the prospect of facing damage suits, it should nonetheless be made clear in no uncertain terms that Article 32 of the Civil Code makes the persons who are directly, as well as indirectly, responsible for the transgression, joint tortfeasors. On the other hand, Sections 38 and 39, Book I of the Administrative Code, laid down the rule on the civil liability of superior and subordinate public officers for acts done in the performance of their duties. For both superior and subordinate public officers, the presence of bad faith, malice, and negligence are vital elements that will make them liable for damages. Note that while said provisions deal in particular with the liability of government officials, the subject thereof is general, i.e., "acts" done in the performance of official duties, without specifying the action or omission that may give rise to a civil suit against the official concerned. Contrarily, Article 32 of the Civil Code specifies in clear and unequivocal terms a particular specie of an "act" that may give rise to an action for damages against a public officer, and that is, a tort for impairment of rights and liberties. Indeed, Article 32 is the special provision that deals specifically with violation of constitutional rights by public officers. All other actionable acts of public officers are governed by

Sections 38 and 39 of the Administrative Code. While the Civil Code, specifically, the Chapter on Human Relations is a general law, Article 32 of the same Chapter is a special and specific provision that holds a public officer liable for and allows redress from a particular class of wrongful acts that may be committed by public officers. Compared thus with Section 38 of the Administrative Code, which broadly deals with civil liability arising from errors in the performance of duties, Article 32 of the Civil Code is the specific provision which must be applied in the instant case precisely filed to seek damages for violation of constitutional rights. The complaint in the instant case was brought under Article 32 of the Civil Code. Considering that bad faith and malice are not necessary in an action based on Article 32 of the Civil Code, the failure to specifically allege the same will not amount to failure to state a cause of action. The courts below therefore correctly denied the motion to dismiss on the ground of failure to state a cause of action, since it is enough that the complaint avers a violation of a constitutional right of the plaintiff. Anent the issue on non-compliance with the rule against forum shopping, the subsequent submission of the secretarys certificate authorizing the counsel to sign and execute the certification against forum shopping cured the defect of respondents complaint. Besides, the merits of the instant case justify the liberal application of the rules.33 WHEREFORE, in view of the foregoing, the petition is DENIED. The Decision of the Court of Appeals dated May 7, 1999 which affirmed the Order of the Regional Trial Court of Marikina, Branch 272, denying petitioners motion to dismiss, is AFFIRMED. The Presiding Judge, Regional Trial Court of Marikina, Branch 272, is hereby DIRECTEDto continue with the proceedings in Civil Case No. 97-341MK with dispatch. With costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 158253 March 2, 2007

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF PUBLIC WORKS AND HIGHWAYS, COMMISSION ON AUDIT and THE NATIONAL TREASURER, Petitioner, vs. CARLITO LACAP, doing business under the name and style CARWIN CONSTRUCTION AND CONSTRUCTION SUPPLY, Respondent. DECISION AUSTRIA-MARTINEZ, J.: Before the Court is a Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court assailing the Decision1 dated April 28, 2003 of the Court of Appeals (CA) in CA-G.R. CV No. 56345 which affirmed with modification the Decision2 of the Regional Trial Court, Branch 41, San Fernando, Pampanga (RTC) in Civil Case No. 10538, granting the complaint for Specific Performance and Damages filed by Carlito Lacap (respondent) against the Republic of the Philippines (petitioner). The factual background of the case is as follows: The District Engineer of Pampanga issued and duly published an "Invitation To Bid" dated January 27, 1992. Respondent, doing business under the name and style Carwin Construction and Construction Supply (Carwin Construction), was pre-qualified together with two other contractors. Since respondent submitted

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the lowest bid, he was awarded the contract for the concreting of Sitio 5 Bahay Pare.3 On November 4, 1992, a Contract Agreement was executed by respondent and petitioner. 4 On September 25, 1992, District Engineer Rafael S. Ponio issued a Notice to Proceed with the concreting of Sitio 5 Bahay Pare.5 Accordingly, respondent undertook the works, made advances for the purchase of the materials and payment for labor costs.6 On October 29, 1992, personnel of the Office of the District Engineer of San Fernando, Pampanga conducted a final inspection of the project and found it 100% completed in accordance with the approved plans and specifications. Accordingly, the Office of the District Engineer issued Certificates of Final Inspection and Final Acceptance.7 Thereafter, respondent sought to collect payment for the completed project.8 The DPWH prepared the Disbursement Voucher in favor of petitioner.9 However, the DPWH withheld payment from respondent after the District Auditor of the Commission on Audit (COA) disapproved the final release of funds on the ground that the contractors license of respondent had expired at the time of the execution of the contract. The District Engineer sought the opinion of the DPWH Legal Department on whether the contracts of Carwin Construction for various Mount Pinatubo rehabilitation projects were valid and effective although its contractors license had already expired when the projects were contracted. 10 In a Letter-Reply dated September 1, 1993, Cesar D. Mejia, Director III of the DPWH Legal Department opined that since Republic Act No. 4566 (R.A. No. 4566), otherwise known as the Contractors License Law, does not provide that a contract entered into after the license has expired is void and there is no law which expressly prohibits or declares void such contract, the contract is enforceable and payment may be paid, without prejudice to any appropriate administrative liability action that may be imposed on the contractor and the government officials or employees concerned.11 In a Letter dated July 4, 1994, the District Engineer requested clarification from the DPWH Legal Department on whether Carwin Construction should be paid for works accomplished despite an expired contractors license at the time the contracts were executed. 12 In a First Indorsement dated July 20, 1994, Cesar D. Mejia, Director III of the Legal Department, recommended that payment should be made to Carwin Construction, reiterating his earlier legal opinion.13 Despite such recommendation for payment, no payment was made to respondent. Thus, on July 3, 1995, respondent filed the complaint for Specific Performance and Damages against petitioner before the RTC.14 On September 14, 1995, petitioner, through the Office of the Solicitor General (OSG), filed a Motion to Dismiss the complaint on the grounds that the complaint states no cause of action and that the RTC had no jurisdiction over the nature of the action since respondent did not appeal to the COA the decision of the District Auditor to disapprove the claim.15 Following the submission of respondents Opposition to Motion to Dismiss,16 the RTC issued an Order dated March 11, 1996 denying the Motion to Dismiss.17 The OSG filed a Motion for Reconsideration18 but it was likewise denied by the RTC in its Order dated May 23, 1996. 19 On August 5, 1996, the OSG filed its Answer invoking the defenses of non-exhaustion of administrative remedies and the doctrine of non-suability of the State.20 Following trial, the RTC rendered on February 19, 1997 its Decision, the dispositive portion of which reads as follows: WHEREFORE, in view of all the foregoing consideration, judgment is hereby rendered in favor of the plaintiff and against the defendant, ordering the latter, thru its District Engineer at Sindalan, San Fernando, Pampanga, to pay the following: a) P457,000.00 representing the contract for the concreting project of Sitio 5 road, Bahay Pare, Candaba, Pampanga plus interest at 12% from demand until fully paid; and b) The costs of suit. SO ORDERED.21

The RTC held that petitioner must be required to pay the contract price since it has accepted the completed project and enjoyed the benefits thereof; to hold otherwise would be to overrun the long standing and consistent pronouncement against enriching oneself at the expense of another.22 Dissatisfied, petitioner filed an appeal with the CA.23 On April 28, 2003, the CA rendered its Decision sustaining the Decision of the RTC. It held that since the case involves the application of the principle of estoppel against the government which is a purely legal question, then the principle of exhaustion of administrative remedies does not apply; that by its actions the government is estopped from questioning the validity and binding effect of the Contract Agreement with the respondent; that denial of payment to respondent on purely technical grounds after successful completion of the project is not countenanced either by justice or equity. The CA rendered herein the assailed Decision dated April 28, 2003, the dispositive portion of which reads: WHEREFORE, the decision of the lower court is hereby AFFIRMED with modification in that the interest shall be six percent (6%) per annum computed from June 21, 1995. SO ORDERED.24 Hence, the present petition on the following ground: THE COURT OF APPEALS ERRED IN NOT FINDING THAT RESPONDENT HAS NO CAUSE OF ACTION AGAINST PETITIONER, CONSIDERING THAT: (a) RESPONDENT FAILED TO EXHAUST ADMINISTRATIVE REMEDIES; AND (b) IT IS THE COMMISSION ON AUDIT WHICH HAS THE PRIMARY JURISDICTION TO RESOLVE RESPONDENTS MONEY CLAIM AGAINST THE GOVERNMENT.25 Petitioner contends that respondents recourse to judicial action was premature since the proper remedy was to appeal the District Auditors disapproval of payment to the COA, pursuant to Section 48, Presidential Decree No. 1445 (P.D. No. 1445), otherwise known as the Government Auditing Code of the Philippines; that the COA has primary jurisdiction to resolve respondents money claim against the government under Section 2(1),26 Article IX of the 1987 Constitution and Section 2627 of P.D. No. 1445; that non-observance of the doctrine of exhaustion of administrative remedies and the principle of primary jurisdiction results in a lack of cause of action. Respondent, on the other hand, in his Memorandum28 limited his discussion to Civil Code provisions relating to human relations. He submits that equity demands that he be paid for the work performed; otherwise, the mandate of the Civil Code provisions relating to human relations would be rendered nugatory if the State itself is allowed to ignore and circumvent the standard of behavior it sets for its inhabitants. The present petition is bereft of merit. The general rule is that before a party may seek the intervention of the court, he should first avail of all the means afforded him by administrative processes.29 The issues which administrative agencies are authorized to decide should not be summarily taken from them and submitted to a court without first giving such administrative agency the opportunity to dispose of the same after due deliberation.30 Corollary to the doctrine of exhaustion of administrative remedies is the doctrine of primary jurisdiction; that is, courts cannot or will not determine a controversy involving a question which is within the jurisdiction of the administrative tribunal prior to the resolution of that question by the administrative tribunal, where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience and services of the administrative tribunal to determine technical and intricate matters of fact.31 Nonetheless, the doctrine of exhaustion of administrative remedies and the corollary doctrine of primary jurisdiction, which are based on sound public policy and practical considerations, are not inflexible rules. There are many accepted exceptions, such as: (a) where there is estoppel on the part of the party invoking the doctrine; (b) where the challenged administrative act is patently illegal, amounting to lack of jurisdiction; (c) where there is unreasonable delay or official inaction that will irretrievably prejudice the

30

complainant; (d) where the amount involved is relatively small so as to make the rule impractical and oppressive; (e) where the question involved is purely legal and will ultimately have to be decided by the courts of justice;32 (f) where judicial intervention is urgent; (g) when its application may cause great and irreparable damage; (h) where the controverted acts violate due process; (i) when the issue of nonexhaustion of administrative remedies has been rendered moot; 33 (j) when there is no other plain, speedy and adequate remedy; (k) when strong public interest is involved; and, (l) in quo warranto proceedings.34 Exceptions (c) and (e) are applicable to the present case. Notwithstanding the legal opinions of the DPWH Legal Department rendered in 1993 and 1994 that payment to a contractor with an expired contractors license is proper, respondent remained unpaid for the completed work despite repeated demands. Clearly, there was unreasonable delay and official inaction to the great prejudice of respondent. Furthermore, whether a contractor with an expired license at the time of the execution of its contract is entitled to be paid for completed projects, clearly is a pure question of law. It does not involve an examination of the probative value of the evidence presented by the parties. There is a question of law when the doubt or difference arises as to what the law is on a certain state of facts, and not as to the truth or the falsehood of alleged facts.35Said question at best could be resolved only tentatively by the administrative authorities. The final decision on the matter rests not with them but with the courts of justice. Exhaustion of administrative remedies does not apply, because nothing of an administrative nature is to be or can be done.36 The issue does not require technical knowledge and experience but one that would involve the interpretation and application of law. Thus, while it is undisputed that the District Auditor of the COA disapproved respondents claim against the Government, and, under Section 4837 of P.D. No. 1445, the administrative remedy available to respondent is an appeal of the denial of his claim by the District Auditor to the COA itself, the Court holds that, in view of exceptions (c) and (e) narrated above, the complaint for specific performance and damages was not prematurely filed and within the jurisdiction of the RTC to resolve, despite the failure to exhaust administrative remedies. As the Court aptly stated in Rocamora v. RTC-Cebu (Branch VIII):38 The plaintiffs were not supposed to hold their breath and wait until the Commission on Audit and the Ministry of Public Highways had acted on the claims for compensation for the lands appropriated by the government. The road had been completed; the Pope had come and gone; but the plaintiffs had yet to be paid for the properties taken from them. Given this official indifference, which apparently would continue indefinitely, the private respondents had to act to assert and protect their interests. 39 On the question of whether a contractor with an expired license is entitled to be paid for completed projects, Section 35 of R.A. No. 4566 explicitly provides: SEC. 35.Penalties. Any contractor who, for a price, commission, fee or wage, submits or attempts to submit a bid to construct, or contracts to or undertakes to construct, or assumes charge in a supervisory capacity of a construction work within the purview of this Act, without first securing a license to engage in the business of contracting in this country; or who shall present or file the license certificate of another, give false evidence of any kind to the Board, or any member thereof in obtaining a certificate or license, impersonate another, or use an expired or revoked certificate or license, shall be deemed guilty of misdemeanor, and shall, upon conviction, be sentenced to pay a fine of not less than five hundred pesos but not more than five thousand pesos. (Emphasis supplied) The "plain meaning rule" or verba legis in statutory construction is that if the statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without interpretation. 40 This rule derived from the maxim Index animi sermo est (speech is the index of intention) rests on the valid presumption that the words employed by the legislature in a statute correctly express its intention or will and preclude the court from construing it differently. The legislature is presumed to know the meaning of the words, to have used words advisedly, and to have expressed its intent by use of such words as are found in the statute.41 Verba legis non est recedendum, or from the words of a statute there should be no departure.42 The wordings of R.A. No. 4566 are clear. It does not declare, expressly or impliedly, as void contracts entered into by a contractor whose license had already expired. Nonetheless, such contractor is liable for payment of the fine prescribed therein. Thus, respondent should be paid for the projects he completed. Such payment, however, is without prejudice to the payment of the fine prescribed under the law.

Besides, Article 22 of the Civil Code which embodies the maxim Nemo ex alterius incommode debet lecupletari (no man ought to be made rich out of anothers injury) states: Art. 22. Every person who through an act of performance by another, or any other means, acquires or comes into possession of something at the expense of the latter without just or legal ground, shall return the same to him. This article is part of the chapter of the Civil Code on Human Relations, the provisions of which were formulated as "basic principles to be observed for the rightful relationship between human beings and for the stability of the social order, x x x designed to indicate certain norms that spring from the fountain of good conscience, x x x guides human conduct [that] should run as golden threads through society to the end that law may approach its supreme ideal which is the sway and dominance of justice." 43 The rules thereon apply equally well to the Government.44Since respondent had rendered services to the full satisfaction and acceptance by petitioner, then the former should be compensated for them. To allow petitioner to acquire the finished project at no cost would undoubtedly constitute unjust enrichment for the petitioner to the prejudice of respondent. Such unjust enrichment is not allowed by law. WHEREFORE, the present petition is DENIED for lack of merit. The assailed Decision of the Court of Appeals dated April 28, 2003 in CA-G.R. CV No. 56345 is AFFIRMED. No pronouncement as to costs.

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G.R. No. 176478 LORNA A. MEDINA Petitioner, VS. , COMMISSION ON AUDIT (COA), represented by the Audit Team of EUFROCINIA

in reversing the8 November 2004 decision. The motion was treated as a motion for reconsideration of the said decision.

MAWAK, SUSAN PALLERNA, and MA. DOLORES TEPORA, R espondents. TINGA, J.: While highlighting the interplay between the powers of two constitutional offices, one mandated as the government monitor of public fund expenditures and the other as the sentinel against graft and corruption in government, this case resolves some questions about the extent of their powers. This is a petition for review on certiorari [1] under Rule 45 of the 1997 Rules of Civil Procedure seeking the reversal of the Decision[2] and Resolution[3] of the Court of Appeals in CA-G.R. SP No. 89539. The Court of Appeals decision affirmed the two joint orders issued by the Office of the Deputy Ombudsman for Luzon finding herein petitioner Lorna A. Medina guilty of grave misconduct and dishonesty. The Resolution of the same court denied petitioners motion for reconsideration of the said decision. The instant petition originated from the audit conducted by respondent Commission on Audit (COA) on the cash and accounts handled by petitioner inher official capacity as Municipal Treasurer of General Mariano Alvarez, Cavite. In the Joint Affidavit[4] executed by herein respondents Eufrocinia M. Mawak, head of the audit team, and Susana L. Pallerna, Ma. Dolores C. Tepora and a certain Nelson T. Alvarez, who were all state auditors of the Provincial Auditors Office of Cavite, they all stated that they had examined petitioners financial records covering 19 August 1999 to 26 September 2000 and discovered a total cash shortage in the aggregate amount of P4,080,631.36. They thus directed petitioner to immediately restitute the shortage within 72 hours from receipt of the demand letter but petitioner allegedly failed to comply. The state auditors submitted a report to the Provincial Auditors Office and recommended the relief of petitioner from her post as municipal treasurer and the filing of criminal charges against her. COA, represented by the aforementioned state auditors, filed an administrative case docketed as OMB-L-A-04-0361-F before the Office of the Deputy Ombudsman for Luzon, charging petitioner with grave misconduct and dishonesty. As directed, petitioner filed a Counter-Affidavit[5] and a Position Paper[6] mainly raising the following defenses: (1) the audit team was not independent and competent; (2) the computation of her accountabilities was overstated and erroneous; (3) the audit team failed to verify documents such as bank reconciliation statements, general ledgers and cashbooks presented during the cash count; (4) the documents in support of the audit report were not signed, hence, were self-serving; (5) the cash shortage in the amount of P379,646.51 under the SEF and Trust Fund as well as the disallowed amount of P585,803.37 had no basis as the same pertained to a previous audit and, thus, should have been excluded from the computation of the total shortage; (6) the cash items amounting to P883,952.91 in the form of reimbursement expense receipts should not have been disallowed because they were actually received by individual payees; (7) petitioners cash on hand accountability was overstated because a collection was not immediately recorded; and (8) the audit team erroneously credited petitioners accounts to another cashier.

On 31 January 2005, Deputy Ombudsman Fernandez issued the first assailed Joint Order[9] denying petitioners urgent motion. Although the order acknowledged the erroneous statement in the 8 November 2004Decision stating that petitioner failed to submit a counter-affidavit, nevertheless, it affirmed the Resolution and Decision both dated 8 November 2004. Deputy Ombudsman Fernandez ruled that petitioners Counter-Affidavit and Position Paper did not present exculpatory arguments that would negate the allegation of discrepancy on petitioners accounts. He also held that petitioners concerns relating to the conduct of the audit should have been raised at the time of the audit or immediately thereafter, and that petitioners failure to produce t he amount of cash shortage despite demand created a presumption that she appropriated public funds under her custody for her own personal use.[10] Petitioner sought reconsideration[11] on grounds of newly discovered and material evidence and grave errors of fact and/or law prejudicial to her own interest. The purported newly discovered evidence consisted of petitioners request for reconsideration of the audit report filed and still pending before the office of the audit team head, herein respondent Mawak, and letters sent by petitioners counsel to the provincial auditor of Cavite questioning the audit and requesting a re-audit of petitioners accounts. In the second assailed Joint Order dated 22 March 2005,[12] Deputy Ombudsman Fernandez denied petitioners motion for reconsideration. He reiterated that petitioners allegations as regards the incompetence of the audit team and the errors in the audit report were matters which may be properly ventilated during trial. He explained that petitioner failed to produce the missing funds despite notice thereof creating a presumption that the same were appropriated for personal use and for the purpose of preliminary investigation, such findings warranted the filing of criminal charges against petitioner. The deputy ombudsman held that petitioners belated request for re-audit could not be considered newly discovered evidence and denied the request for a formal investigation on the ground that petitioner was afforded due process when she filed her counter-affidavit and position paper.[13] Petitioner elevated the matter to the Court of Appeals via a Petition for Review[14] questioning the denial of her request for a formal investigation, the penalty of dismissal, and the sufficiency of the evidence against her. The Court of Appeals dismissed the petition in the assailed Decision dated 23 October 2006.[15] It held that petitioner was not entitled to a formal investigation and it affirmed the deputy ombudsmans factual finding that petitioner was guilty of grave misconduct and dishonesty. The appellate court also denied petitioners motion for reconsideration in a Resolution dated 30 January 2007. Hence, the instant petition[16] seeking the reversal of the Court of Appeals decision on the following grounds: (1) the Court of Appeals failed to order a formal reinvestigation, to reopen and review the records of the administrative case, to consider newly discovered evidence attached to petitioners motion for reconsideration of the deputy ombudsmans Decision and to consider material allegations in the motion for reconsideration of the assailed decision; (2) petitioner was able to overcome the presumption that she appropriated the missing funds for personal use; (3) the filing of the administrative case was baseless; and (4) the penalty of dismissal was unwarranted. The instant petition reiterates the issues brought up before the Court of Appeals, namely: whether petitioner was deprived of her right to due process, whether the penalty of dismissal is proper and whether petitioners guilt for grave misconduct and dishonesty is supported by substantial evidence. Invoking her right to due process, petitioner, on one hand, insists that she is entitled to a formal investigation, citing the Administrative Code of 1987, Book V, Title I, Subtitle A, Section 48 (2) [17] and (3).[18] On the other hand, in support of its argument that the propriety of conducting a formal investigation rests on the sound discretion of the hearing officer, respondent COA, through the Office of the Solicitor General (OSG), relies on Administrative Order No. 07, as amended by Administrative Order No. 17, Rule III, Section 5,[19] governing the procedure in administrative cases filed before the Office of the Ombudsman.

In a Decision[7] dated 8 November 2004, Deputy Ombudsman Victor C. Fernandez approved the recommendation of the Graft Investigation and Prosecution Officer to dismiss petitioner from service based on the existence of substantial evidence of a discrepancy in petitioners account totaling P4,080,631.36. The said decision noted petitioners supposed failure to file a counter -affidavit and position paper despite due notice.

On 29 November 2004, petitioner filed an urgent motion [8] stating that she complied with the directive to file a counter-affidavit and position paper and praying that the defenses therein be considered

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The validity of Administrative Order No. 07, Rule III, Section 5 is not in dispute. However, petitioner argues that said provision is inferior to the provision in the Administrative Code which entitles the respondent to a formal investigation if he so desires. Petitioners theory is erroneous. Administrative Order No. 07, as amended by Administrative Order No. 17, particularly governs the procedure in administrative proceedings before the Office of the Ombudsman. The Rules of Procedure of the Office of the Ombudsman was issued pursuant to the authority vested in the Office of the Ombudsman under Republic Act No. 6770, otherwise known as The Ombudsman Act of 1989. When an administrative agency promulgates rules and regulations, it makes a new law with the force and effect of a valid law. Rules and regulations when promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law, partake of the nature of a statute. [20] On the other hand, the provisions in the Administrative Code cited by petitioner in support of her theory that she is entitled to a formal investigation apply only to administrative cases filed before the Civil Service Commission (CSC). In particular, Section 48(2) and Section 48(3) are subsumed under Subtitle A of Title I, which pertains to the CSC and to the procedure of administrative cases filed before the CSC. The administrative complaint against petitioner was filed before the Office of the Ombudsman, suggesting that a different set of procedural rules govern. And rightly so, the Deputy Ombudsman applied the provisions of Rules of Procedure of the Office of the Ombudsman in ruling that the prerogative to elect a formal investigation pertains to the hearing officer and not to petitioner. On various occasions,[21] the Court has ruled on the primacy of special laws and of their implementing regulations over the Administrative Code of 1987 in settling controversies specifically subject of these special laws. For instance, in Hon. Joson v. Exec. Sec. Torres,[22] the Court held that the Local Government Code of 1991, the Rules and Regulations Implementing the Local Government Code of 1991, and Administrative Order No. 23 (A.O. No. 23)[23] govern administrative disciplinary proceedings against elective local officials, whereas the Rules of Court and the Administrative Code of 1987 apply in a suppletory character to all matters not provided in A.O. No. 23. [24] The aforesaid ruling is based on the principle of statutory construction that where there are two statutes applicable to a particular case, that which is specially intended for the said case must prevail.[25]

Thus, as between the Administrative Code of 1987 and Administrative Order No. 07, as amended, issued by the Office of the Ombudsman, the latter governs in this case which involves an administrative complaint filed with the Office of the Ombudsman and which raises the question of whether petitioner is entitled to a formal investigation as a matter of right. Even assuming the Administrative Code is applicable, still there is a formidable hindrance to petitioners prayer for a formal investigation. The r ecords show that petitioner sought a reinvestigation only as an afterthought, that is, after the deputy ombudsman had already rendered a decision on the administrative complaint. The reinvestigation should have been requested at the first opportunity but definitely before the rendition of a decision. As correctly pointed out by the OSG, the denial of petitioners request for a formal investigation is not tantamount to a denial of her right to due process. Petitioner was required to file a counter-affidavit and position paper and later on, was given a chance to file two motions for reconsideration of the decision of the deputy ombudsman. The essence of due process in administrative proceedings is the opportunity to explain ones side or seek a reconsideratio n of the action or ruling complained of. As long as the parties are given the opportunity to be heard before judgment is rendered, the demands of due process are sufficiently met.[28] Petitioners assertion that the Court of Appeals refused to reopen and review the case and ignored material issues and arguments in her motion for reconsideration of the 23 October 2006 Decision in violation of her right to due process, is quite hollow. The appellate court disposed of petitioners contention that she was able to controvert the accusations against her in this wise: Regarding the second, third and fourth assigned errors, We judiciously believe that the issues raised therein are essentially factual in nature. The rule is that the findings of fact in administrative decisions must be respected as long as they are supported by substantial evidence, even if not overwhelming or preponderant. It is not for the reviewing court to weight the conflicting evidence, determine the credibility of the witnesses or otherwise substitute its own judgment for that of the administrative agency on the sufficiency of evidence. It has been consistently held that substantial evidence is all that is needed to support an administrative finding of fact which means such relevant evidence as a reasonable mind might accept to support a conclusion.[29] Nothing prevents the Court of Appeals from adopting the factual findings and conclusion of the deputy ombudsman on the ground that the findings and conclusions were based on substantial evidence. Well-settled is the rule that the findings of fact of administrative bodies, if based on substantial evidence, are controlling on the reviewing authority. It is settled that it is not for the appellate court to substitute its own judgment for that of the administrative agency on the sufficiency of the evidence and the credibility of the witnesses. Administrative decisions on matters within their jurisdiction are entitled to respect and can only be set aside on proof of grave abuse of discretion, fraud or error of law. [30] Guided by this principle, the appellate court correctly affirmed the finding of guilt for grave misconduct and dishonesty. Unfazed, petitioner now asks this Court to once again review the factual findings and conclusions of the Deputy Ombudsman which had already been affirmed by the Court of Appeals. Whether the finding of petitioners guilt for grave misconduct and dishonesty is supported by substantial evidence, suffice it to say these are factual issues calling for a review of the records of the case. Clear and unmistakable is the rule that the Supreme Court is not a trier of facts. Just as well entrenched is the doctrine that pure issues of fact may not be the proper subject of appeal by certiorari under Rule 45 of the Revised Rules of Court as this mode of appeal is generally confined to questions of law. Only questions of law, not questions of fact, may be raised before the Supreme Court in a petition for review under Rule 45. This Court cannot be tasked to go over the proofs presented by the petitioners in the lower courts and analyze, assess and weigh them to ascertain if the court a quo and the appellate court were correct in their appreciation of the evidence.[31] Anyhow, the Court adopts the following findings of the Court of Appeals which are borne out by the records of the case:

More significantly, in Lapid v. Court of Appeals,[26] the Court expressly upheld the applicability of The Ombudsman Act of 1989 and the implementing rules and regulations thereof to the exclusion of the Local Government Code and the Administrative Code of 1989 on the issue of the execution of the Ombudsmans decision pending appeal. The Court noted that petitioner therein was charged before the Office of the Ombudsman and accordingly, The Ombudsman Act of 1989 should apply exclusively. The Court explained, thus: There is no basis in law for the proposition that the provisions of the Administrative Code of 1987 and the Local Government Code on execution pending review should be applied suppletorily to the provisions of the Ombudsman Act as there is nothing in the Ombudsman Act which provides for such suppletory application. xxx xxx xxx

And while in one respect, the Ombudsman Law, the Administrative Code of 1987 and the Local Government Code are in pari materia insofar as the three laws relate or deal with public officers, the similarity ends there. It is a principle in statutory construction that where there are two statutes that apply to a particular case, that which was specially designed for the said case must prevail over the other. In the instant case, the acts attributed to petitioner could have been the subject of administrative disciplinary proceedings before the Office of the President under the Local Government Code or before the Office of the Ombudsman under the Ombudsman Act. Considering however, that petitioner was charged under the Ombudsman Act, it is this law alone which should govern his case.[27]

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x x x It is a fact that an examination was conducted on the cash and accounts of respondent and that a shortage was found. While the latter argues that the auditors did not observe the proper procedure in conducting an examination and as a consequence of which, she was not able to justify the alleged shortage, we take note that the latter was given the opportunity to make such explanation when the auditors sent her a demand letter.[32]

DECISION PANGANIBAN, J.: There is grave abuse of discretion (1) when an act is done contrary to the Constitution, the law or jurisprudence;[1] or (2) when it is executed whimsically, capriciously or arbitrarily out of malice, ill will or personal bias.[2] In the present case, the Commission on Elections approved the assailed Resolution and awarded the subject Contract not only in clear violation of law and jurisprudence, but also in reckless disregard of its own bidding rules and procedure. For the automation of the counting and canvassing of the ballots in the 2004 elections, Comelec awarded the Contract to Mega Pacific Consortium an entity that had not participated in the bidding. Despite this grant, the poll body signed the actual automation Contract with Mega Pacific eSolutions, Inc., a company that joined the bidding but had not met the eligibility requirements. Comelec awarded this billion-peso undertaking with inexplicable haste, without adequately checking and observing mandatory financial, technical and legal requirements. It also accepted the proferred computer hardware and software even if, at the time of the award, they had undeniably failed to pass eight critical requirements designed to safeguard the integrity of elections, especially the following three items: They failed to achieve the accuracy rating criteria of 99.9995 percent set-up by the Comelec itself They were not able to detect previously downloaded results at various canvassing or consolidation levels and to prevent these from being inputted again They were unable to print the statutorily required audit trails of the count/canvass at different levels without any loss of data Because of the foregoing violations of law and the glaring grave abuse of discretion committed by Comelec, the Court has no choice but to exercise its solemn constitutional duty [3] to void the assailed Resolution and the subject Contract. The illegal, imprudent and hasty actions of the Commission have not only desecrated legal and jurisprudential norms, but have also cast serious doubts upon the poll bodys ability and capacity to conduct automated elections. Truly, the pith and soul of democracy -- credible, orderly, and peaceful elections -- has been put in jeopardy by the illegal and gravely abusive acts of Comelec. The Case

On the penalty of dismissal which petitioner claims is too harsh, petitioner argues that the mitigating circumstances of this being her first offense and of the unreasonable length of time in filing the administrative case should be considered in her favor. Jurisprudence is replete with cases declaring that a grave offense cannot be mitigated by the fact that the accused is a first time offender or by the length of service of the accused. In Civil Service Commission v. Cortez,[33] the Court held as follows:

The gravity of the offense committed is also the reason why we cannot consider the first offense circumstance invoked by respondent. In several cases, we imposed the heavier penalty of dismissal or a fine of more than P20,000.00, considering the gravity of the offense committed, even if the offense charged was respondents first offense. Thus, in the present case, even though the offense respondent was found guilty of was her first offense, the gravity thereof outweighs the fact that it was her first offense.[34] Also, in Concerned Employees v. Nuestro,[35] a court employee charged with and found guilty of dishonesty for falsification was meted the penalty of dismissal notwithstanding the length of her service in view of the gravity of the offense charged.

To end, it must be stressed that dishonesty and grave misconduct have always been and should remain anathema in the civil service. They inevitably reflect on the fitness of a civil servant to continue in office. When an officer or employee is disciplined, the object sought is not the punishment of such officer or employee but the improvement of the public service and the preservation of the publics faith and confidence in the government.[36]

WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 89539 are hereby AFFIRMED. Costs against petitioner.

Before us is a Petition under Rule 65 of the Rules of Court, seeking (1) to declare null and void Resolution No. 6074 of the Commission on Elections (Comelec), which awarded Phase II of the Modernization Project of the Commission to Mega Pacific Consortium (MPC); (2) to enjoin the implementation of any further contract that may have been entered into by Comelec either with Mega Pacific Consortium and/or Mega Pacific eSolutions, Inc. (MPEI); and (3) to compel Comelec to conduct a re-bidding of the project. The Facts The following facts are not disputed. They were culled from official documents, the parties pleadings, as well as from admissions during the Oral Argument on October 7, 2003.

[4]

SO ORDERED.

EN BANC [G.R. No. 159139. January 13, 2004] INFORMATION TECHNOLOGY FOUNDATION OF THE PHILIPPINES, MA. CORAZON M. AKOL, MIGUEL UY, EDUARDO H. LOPEZ, AUGUSTO C. LAGMAN, REX C. DRILON, MIGUEL HILADO, LEY SALCEDO, and MANUEL ALCUAZ JR., petitioners, vs. COMMISSION ON ELECTIONS; COMELEC CHAIRMAN BENJAMIN ABALOS SR.; COMELEC BIDDING and AWARD COMMITTEE CHAIRMAN EDUARDO D. MEJOS and MEMBERS GIDEON DE GUZMAN, JOSE F. BALBUENA, LAMBERTO P. LLAMAS, and BARTOLOME SINOCRUZ JR.; MEGA PACIFIC eSOLUTIONS, INC.; and MEGA PACIFIC CONSORTIUM, respondents.

On June 7, 1995, Congress passed Republic Act 8046,[5] which authorized Comelec to conduct a nationwide demonstration of a computerized election system and allowed the poll body to pilot-test the system in the March 1996 elections in the Autonomous Region in Muslim Mindanao (ARMM). On December 22, 1997, Congress enacted Republic Act 8436 [6] authorizing Comelec to use an automated election system (AES) for the process of voting, counting votes and canvassing/consolidating the results of the national and local elections. It also mandated the poll body to acquire automated counting machines (ACMs), computer equipment, devices and materials; and to adopt new electoral forms and printing materials. Initially intending to implement the automation during the May 11, 1998 presidential elections, Comelec -- in its Resolution No. 2985 dated February 9, 1998[7] -- eventually decided against full national

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implementation and limited the automation to the Autonomous Region in Muslim Mindanao (ARMM). However, due to the failure of the machines to read correctly some automated ballots in one town, the poll body later ordered their manual count for the entire Province of Sulu. [8] In the May 2001 elections, the counting and canvassing of votes for both national and local positions were also done manually, as no additional ACMs had been acquired for that electoral exercise allegedly because of time constraints. On October 29, 2002, Comelec adopted in its Resolution 02-0170 a modernization program for the 2004 elections. It resolved to conduct biddings for the three (3) phases of its Automated Election System; namely, Phase I - Voter Registration and Validation System; Phase II - Automated Counting and Canvassing System; and Phase III - Electronic Transmission. On January 24, 2003, President Gloria Macapagal-Arroyo issued Executive Order No. 172, which allocated the sum of P2.5 billion to fund the AES for the May 10, 2004 elections. Upon the request of Comelec, she authorized the release of an additional P500 million. On January 28, 2003, the Commission issued an Invitation to Apply for Eligibility and to Bid, which we quote as follows: INVITATION TO APPLY FOR ELIGIBILITY AND TO BID The Commission on Elections (COMELEC), pursuant to the mandate of Republic Act Nos. 8189 and 8436, invites interested offerors, vendors, suppliers or lessors to apply for eligibility and to bid for the procurement by purchase, lease, lease with option to purchase, or otherwise, supplies, equipment, materials and services needed for a comprehensive Automated Election System, consisting of three (3) phases: (a) registration/verification of voters, (b) automated counting and consolidation of votes, and (c) electronic transmission of election results, with an approved budget of TWO BILLION FIVE HUNDRED MILLION (Php2,500,000,000) Pesos. Only bids from the following entities shall be entertained: a. b. c. Duly licensed Filipino citizens/proprietorships; Partnerships duly organized under the laws of the Philippines and of which at least sixty percent (60%) of the interest belongs to citizens of the Philippines; Corporations duly organized under the laws of the Philippines, and of which at least sixty percent (60%) of the outstanding capital stock belongs to citizens of the Philippines; Manufacturers, suppliers and/or distributors forming themselves into a joint venture, i.e., a group of two (2) or more manufacturers, suppliers and/or distributors that intend to be jointly and severally responsible or liable for a particular contract, provided that Filipino ownership thereof shall be at least sixty percent (60%); and Cooperatives duly registered with the Cooperatives Development Authority.

Deadline for submission to the BAC of applications for eligibility and bid envelopes for the supply of the comprehensive Automated Election System shall be at the Session Hall, Commission on Elections, Postigo Street, Intramuros, Manila on 28 February 2003 at 9:00 a.m. The COMELEC reserves the right to review the qualifications of the bidders after the bidding and before the contract is executed. Should such review uncover any misrepresentation made in the eligibility statements, or any changes in the situation of the bidder to materially downgrade the substance of such statements, the COMELEC shall disqualify the bidder upon due notice without any obligation whatsoever for any expenses or losses that may be incurred by it in the preparation of its bid. [9] On February 11, 2003, Comelec issued Resolution No. 5929 clarifying certain eligibility criteria for bidders and the schedule of activities for the project bidding, as follows: 1.) Open to Filipino and foreign corporation duly registered and licensed to do business and is actually doing business in the Philippines, subject to Sec. 43 of RA 9184 (An Act providing In the Modernization Standardization and Regulation of the Procurement Activities of the Government and for other purposes etc.)

2.)

Track Record: a) b) For counting machines should have been used in at least one (1) political exercise with no less than Twenty Million Voters; For verification of voters the reference site of an existing data base installation using Automated Fingerprint Identification System (AFIS) with at least Twenty Million.

3.) 4.)

Ten percent (10%) equity requirement shall be based on the total project cost; and Performance bond shall be twenty percent (20%) of the bid offer.

RESOLVED moreover, that: 1) A. Due to the decision that the eligibility requirements and the rest of the Bid documents shall be released at the same time, and the memorandum of Comm. Resurreccion Z. Borra dated February 7, 2003, the documents to be released on Friday, February 14, 2003 at 2:00 oclock p.m. shall be the eligibility criteria, Terms of Reference (TOR) and other pertinent documents; B. Pre-Bid conference shall be on February 18, 2003; and C. Deadline for the submission and receipt of the Bids shall be on March 5, 2003. 2) The aforementioned documents will be available at the following offices: a) Voters Validation: Office of Comm. Javier b) Automated Counting Machines: Office of Comm. Borra c) Electronic Transmission: Office of Comm. Tancangco[10] On February 17, 2003, the poll body released the Request for Proposal (RFP) to procure the election automation machines. The Bids and Awards Committee (BAC) of Comelec convened a pre-bid conference on February 18, 2003 and gave prospective bidders until March 10, 2003 to submit their respective bids. Among others, the RFP provided that bids from manufacturers, suppliers and/or distributors forming themselves into a joint venture may be entertained, provided that the Philippine ownership thereof shall be at least 60 percent. Joint venture is defined in the RFP as a group of two or more manufacturers, suppliers and/or distributors that intend to be jointly and severally responsible or liable for a particular contract.[11] Basically, the public bidding was to be conducted under a two-envelope/two stage system. The bidders first envelope or the Eligibility Envelope should establish the bidders eligibility to bid and its

d.

e.

Bid documents for the three (3) phases may be obtained starting 10 February 2003, during office hours from the Bids and Awards Committee (BAC) Secretariat/Office of Commissioner Resurreccion Z. Borra, 7th Floor, Palacio del Governador, Intramuros, Manila, upon payment at the Cash Division, Commission on Elections, in cash or cashiers check, payable to the Commission on Elections, of a non -refundable amount of FIFTEEN THOUSAND PESOS (Php15,000.00) for each phase. For this purpose, interested offerors, vendors, suppliers or lessors have the option to participate in any or all of the three (3) phases of the comprehensive Automated Election System. A Pre-Bid Conference is scheduled on 13 February 2003, at 9:00 a.m. at the Session Hall, Commission on Elections, Postigo Street, Intramuros, Manila. Should there be questions on the bid documents, bidders are required to submit their queries in writing to the BAC Secretariat prior to the scheduled Pre-Bid Conference.

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qualifications to perform the acts if accepted. On the other hand, the second envelope would be the Bid Envelope itself. The RFP outlines the bidding procedures as follows: 25. Determination of Eligibility of Prospective Bidders

29.2 The determination will take into account the Bidders financial, technical and production capabilities/resources. It will be based upon an examination of the documentary evidence of the Bidders qualification submitted by the Bidder as well as such other information as the BAC deems necessary and appropriate. 29.3 A bid determined as not substantially responsive will be rejected by the BAC and may not subsequently be made responsive by the Bidder by correction of the non-conformity. 29.4 The BAC may waive any informality or non-conformity or irregularity in a bid which does not constitute a material deviation, provided such waiver does not prejudice or affect the relative ranking of any Bidder. 29.5 Should the BAC find that the Bidder complies with the legal, financial and technical requirements, it shall make an affirmative determination which shall be a prerequisite for award of the Contract to the Bidder. Otherwise, it will make a negative determination which will result in rejection of the Bidders bid, in which event the B AC will proceed to the next lowest calculated bid to make a similar determination of that Bidders capabilities to perform satisfactorily.[12] Out of the 57 bidders,[13] the BAC found MPC and the Total Information Management Corporation (TIMC) eligible. For technical evaluation, they were referred to the BACs Technical Wo rking Group (TWG) and the Department of Science and Technology (DOST). In its Report on the Evaluation of the Technical Proposals on Phase II, DOST said that both MPC and TIMC had obtained a number of failed marks in the technical evaluation. Notwithstanding these failures, Comelec en banc, on April 15, 2003, promulgated Resolution No. 6074 awarding the project to MPC. The Commission publicized this Resolution and the award of the project to MPC on May 16, 2003. On May 29, 2003, five individuals and entities (including the herein Petitioners Information Technology Foundation of the Philippines, represented by its president, Alfredo M. Torres; and Ma. Corazon Akol) wrote a letter[14] to Comelec Chairman Benjamin Abalos Sr. They protested the award of the Contract to Respondent MPC due to glaring irregularities in the manner in which the bidding process had been conducted. Citing therein the noncompliance with eligibility as well as technical and procedural requirements (many of which have been discussed at length in the Petition), they sought a rebidding. In a letter-reply dated June 6, 2003,[15] the Comelec chairman -- speaking through Atty. Jaime Paz, his head executive assistant -- rejected the protest and declared that the award would stand up to the strictest scrutiny. Hence, the present Petition.[16] The Issues In their Memorandum, petitioners raise the following issues for our consideration: 1. 2. The COMELEC awarded and contracted with a non-eligible entity; x x x Private respondents failed to pass the Technical Test as required in the RFP. Notwithstanding, such failure was ignored. In effect, the COMELEC changed the rules after the bidding in effect changing the nature of the contract bidded upon. Petitioners have locus standi. Instant Petition is not premature. Direct resort to the Supreme Court is justified. [17]

25.1 The eligibility envelopes of prospective Bidders shall be opened first to determine their eligibility. In case any of the requirements specified in Clause 20 is missing from the first bid envelope, the BAC shall declare said prospective Bidder as ineligible to bid. Bid envelopes of ineligible Bidders shall be immediately returned unopened. 25.2 The eligibility of prospective Bidders shall be determined using simple pass/fail criteria and shall be determined as either eligible or ineligible. If the prospective Bidder is rated passed for all the legal, technical and financial requirements, he shall be considered eligible. If the prospective Bidder is rated failed in any of the requirements, he shall be considered ineligible. 26. Bid Examination/Evaluation

26.1 The BAC will examine the Bids to determine whether they are complete, whether any computational errors have been made, whether required securities have been furnished, whether the documents have been properly signed, and whether the Bids are generally in order. 26.2 The BAC shall check the submitted documents of each Bidder against the required documents enumerated under Clause 20, to ascertain if they are all present in the Second bid envelope (Technical Envelope). In case one (1) or more of the required documents is missing, the BAC shall rate the Bid concerned as failed and immediately return to the Bidder its Third bid envelope (Financial Envelope) unopened. Otherwise, the BAC shall rate the first bid envelope as passed. 26.3 The BAC shall immediately open the Financial Envelopes of the Bidders whose Technical Envelopes were passed or rated on or above the passing score. Only Bids that are determined to contain all the bid requirements for both components shall be rated passed and shall immediately be considered for evaluation and comparison. 26.4 In the opening and examination of the Financial Envelope, the BAC shall announce and tabulate the Total Bid Price as calculated. Arithmetical errors will be rectified on the following basis: If there is a discrepancy between words and figures, the amount in words will prevail. If there is a discrepancy between the unit price and the total price that is obtained by multiplying the unit price and the quantity, the unit price shall prevail and the total price shall be corrected accordingly. If there is a discrepancy between the Total Bid Price and the sum of the total prices, the sum of the total prices prevail and the Total Bid Price shall be corrected accordingly. 26.5 Financial Proposals which do not clearly state the Total Bid Price shall be rejected. Also, Total Bid Price as calculated that exceeds the approved budget for the contract shall also be rejected. 27. Comparison of Bids

27.1 The bid price shall be deemed to embrace all costs, charges and fees associated with carrying out all the elements of the proposed Contract, including but not limited to, license fees, freight charges and taxes. 27.2 The BAC shall establish the calculated prices of all Bids rated passed and rank the same in ascending order. xxx 29. Postqualification 29.1 The BAC will determine to its satisfaction whether the Bidder selected as having submitted the lowest calculated bid is qualified to satisfactorily perform the Contract. xxx xxx

3. 4.

In the main, the substantive issue is whether the Commission on Elections, the agency vested with the exclusive constitutional mandate to oversee elections, gravely abused its discretion when, in the exercise of its administrative functions, it awarded to MPC the contract for the second phase of the comprehensive Automated Election System. Before discussing the validity of the award to MPC, however, we deem it proper to first pass upon the procedural issues: the legal standing of petitioners and the alleged prematurity of the Petition.

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This Courts Ruling The Petition is meritorious. First Procedural Issue: Locus Standi of Petitioners Respondents chorus that petitioners do not possess locus standi, inasmuch as they are not challenging the validity or constitutionality of RA 8436. Moreover, petitioners supposedly admitted during the Oral Argument that no law had been violated by the award of the Contract. Furthermore, they allegedly have no actual and material interest in the Contract and, hence, do not stand to be injured or prejudiced on account of the award. On the other hand, petitioners -- suing in their capacities as taxpayers, registered voters and concerned citizens -- respond that the issues central to this case are of transcendental importance and of national interest. Allegedly, Comelecs flawed bidding and questionable award of the Contract to an unqualified entity would impact directly on the success or the failure of the electoral process. Thus, any taint on the sanctity of the ballot as the expression of the will of the people would inevitably affect their faith in the democratic system of government. Petitioners further argue that the award of any contract for automation involves disbursement of public funds in gargantuan amounts; therefore, public interest requires that the laws governing the transaction must be followed strictly. We agree with petitioners. Our nations political and economic future virtually hangs in the balance, pending the outcome of the 2004 elections. Hence, there can be no serious doubt that the subject matter of this case is a matter of public concern and imbued with public interest; [18] in other words, it is of paramount public interest[19] and transcendental importance.[20] This fact alone would justify relaxing the rule on legal standing, following the liberal policy of this Court whenever a case involves an issue of overarching significance to our society.[21] Petitioners legal standing should therefore be recognized and upheld. Moreover, this Court has held that taxpayers are allowed to sue when there is a claim of illegal disbursement of public funds,[22] or if public money is being deflected to any improper purpose; [23] or when petitioners seek to restrain respondent from wasting public funds through the enforcement of an invalid or unconstitutional law.[24] In the instant case, individual petitioners, suing as taxpayers, assert a material interest in seeing to it that public funds are properly and lawfully used. In the Petition, they claim that the bidding was defective, the winning bidder not a qualified entity, and the award of the Contract contrary to law and regulation. Accordingly, they seek to restrain respondents from implementing the Contract and, necessarily, from making any unwarranted expenditure of public funds pursuant thereto. Thus, we hold that petitioners possess locus standi. Second Procedural Issue: Alleged Prematurity Due to Non-Exhaustion of Administrative Remedies Respondents claim that petitioners acted prematurely, since they had not first utilized the protest mechanism available to them under RA 9184, the Government Procurement Reform Act, for the settlement of disputes pertaining to procurement contracts. Section 55 of RA 9184 states that protests against decisions of the Bidding and Awards Committee in all stages of procurement may be lodged with the head of the procuring entity by filing a verified position paper and paying a protest fee. Section 57 of the same law mandates that in no case shall any such protest stay or delay the bidding process, but it must first be resolved before any award is made. On the other hand, Section 58 provides that court action may be resorted to only after the protests contemplated by the statute shall have been completed. Cases filed in violation of this process are to be dismissed for lack of jurisdiction. Regional trial courts shall have jurisdiction over final decisions of the head of the procuring entity, and court actions shall be instituted pursuant to Rule 65 of the 1997 Rules of Civil Procedure.

Respondents assert that throughout the bidding process, petitioners never questioned the BAC Report finding MPC eligible to bid and recommending the award of the Contract to it (MPC). According to respondents, the Report should have been appealed to the Comelec en banc, pursuant to the aforementioned sections of RA 9184. In the absence of such appeal, the determination and recommendation of the BAC had become final. The Court is not persuaded. Respondent Comelec came out with its en banc Resolution No. 6074 dated April 15, 2003, awarding the project to Respondent MPC even before the BAC managed to issue its written report and recommendation on April 21, 2003. Thus, how could petitioners have appealed the BACs recommendation or report to the head of the procuring entity (the chairman of Comelec), when the Comelec en banc had already approved the award of the contract to MPC even before petitioners learned of the BAC recommendation? It is claimed[25] by Comelec that during its April 15, 2003 session, it received and approved the verbal report and recommendation of the BAC for the award of the Contract to MPC, and that the BAC subsequently re-affirmed its verbal report and recommendation by submitting it in writing on April 21, 2003. Respondents insist that the law does not require that the BAC Report be in writing before Comelec can act thereon; therefore, there is allegedly nothing irregular about the Report as well as the en banc Resolution. However, it is obvious that petitioners could have appealed the BACs report and rec ommendation to the head of the procuring entity (the Comelec chair) only upon their discovery thereof, which at the very earliest would have been on April 21, 2003, when the BAC actually put its report in writing and finally released it. Even then, what would have been the use of protesting/appealing the report to the Comelec chair, when by that time the Commission en banc (including the chairman himself) had already approved the BAC Report and awarded the Contract to MPC? And even assuming arguendo that petitioners had somehow gotten wind of the verbal BAC report on April 15, 2003 (immediately after the en banc session), at that point the Commission en banc had already given its approval to the BAC Report along with the award to MPC. To put it bluntly, the Comelec en banc itself made it legally impossible for petitioners to avail themselves of the administrative remedy that the Commission is so impiously harping on. There is no doubt that they had not been accorded the opportunity to avail themselves of the process provided under Section 55 of RA 9184, according to which a protest against a decision of the BAC may be filed with the head of the procuring entity. Nemo tenetur ad impossible,[26] to borrow private respondents favorite Latin excuse.[27] Some Observations on the BAC Report to the Comelec We shall return to this issue of alleged prematurity shortly, but at this interstice, we would just want to put forward a few observations regarding the BAC Report and the Comelec en bancs approval thereof. First, Comelec contends that there was nothing unusual about the fact that the Report submitted by the BAC came only after the former had already awarded the Contract, because the latter had been asked to render its report and recommendation orally during the Commissions en banc session on April 15, 2003. Accordingly, Comelec supposedly acted upon such oral recommendation and approved the award to MPC on the same day, following which the recommendation was subsequently reduced into writing on April 21, 2003. While not entirely outside the realm of the possible, this interesting and unique spiel does not speak well of the process that Comelec supposedly went through in making a critical decision with respect to a multi-billion-peso contract. We can imagine that anyone else standing in the shoes of the Honorable Commissioners would have been extremely conscious of the overarching need for utter transparency. They would have scrupulously avoided the slightest hint of impropriety, preferring to maintain an exacting regularity in the performance of their duties, instead of trying to break a speed record in the award of multi-billion-peso contracts. After all, between April 15 and April 21 were a mere six (6) days. Could Comelec not have waited out six more days for the written report of the BAC, instead of rushing pell-mell into the arms of MPC? Certainly, respondents never cared to explain the nature of the Commissions dire need to act immediately without awaiting the formal, written BAC Report.

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In short, the Court finds it difficult to reconcile the uncommon dispatch with which Comelec acted to approve the multi-billion-peso deal, with its claim of having been impelled by only the purest and most noble of motives. At any rate, as will be discussed later on, several other factors combine to lend negative credence to Comelecs tale. Second, without necessarily ascribing any premature malice or premeditation on the part of the Comelec officials involved, it should nevertheless be conceded that this cart-before-the-horse maneuver (awarding of the Contract ahead of the BACs written report) would definitely serve as a clever and effective way of averting and frustrating any impending protest under Section 55. Having made the foregoing observations, we now go back to the question of exhausting administrative remedies. Respondents may not have realized it, but the letter addressed to Chairman Benjamin Abalos Sr. dated May 29, 2003 [28] serves to eliminate the prematurity issue as it was an actual written protest against the decision of the poll body to award the Contract. The letter was signed by/for, inter alia, two of herein petitioners: the Information Technology Foundation of the Philippines, represented by its president, Alfredo M. Torres; and Ma. Corazon Akol. Such letter-protest is sufficient compliance with the requirement to exhaust administrative remedies particularly because it hews closely to the procedure outlined in Section 55 of RA 9184. And even without that May 29, 2003 letter-protest, the Court still holds that petitioners need not exhaust administrative remedies in the light of Paat v. Court of Appeals.[29] Paat enumerates the instances when the rule on exhaustion of administrative remedies may be disregarded, as follows: (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) when there is a violation of due process, when the issue involved is purely a legal question, when the administrative action is patently illegal amounting to lack or excess of jurisdiction, when there is estoppel on the part of the administrative agency concerned, when there is irreparable injury, when the respondent is a department secretary whose acts as an alter ego of the President bears the implied and assumed approval of the latter, when to require exhaustion of administrative remedies would be unreasonable, when it would amount to a nullification of a claim, when the subject matter is a private land in land case proceedings, when the rule does not provide a plain, speedy and adequate remedy, and when there are circumstances indicating the urgency of judicial intervention. [30]

We come now to the meat of the controversy. Petitioners contend that the award is invalid, since Comelec gravely abused its discretion when it did the following: 1. Awarded the Contract to MPC though it did not even participate in the bidding 2. Allowed MPEI to participate in the bidding despite its failure to meet the mandatory eligibility requirements 3. Issued its Resolution of April 15, 2003 awarding the Contract to MPC despite the issuance by the BAC of its Report, which formed the basis of the assailed Resolution, only on April 21, 2003 [31] 4. Awarded the Contract, notwithstanding the fact that during the bidding process, there were violations of the mandatory requirements of RA 8436 as well as those set forth in Comelecs own Request for Proposal on the automated election system 5. Refused to declare a failed bidding and to conduct a re-bidding despite the failure of the bidders to pass the technical tests conducted by the Department of Science and Technology 6. Failed to follow strictly the provisions of RA 8436 in the conduct of the bidding for the automated counting machines After reviewing the slew of pleadings as well as the matters raised during the Oral Argument, the Court deems it sufficient to focus discussion on the following major areas of concern that impinge on the issue of grave abuse of discretion: A. B. Matters pertaining to the identity, existence and eligibility of MPC as a bidder Failure of the automated counting machines (ACMs) to pass the DOST technical tests

C. Remedial measures and re-testings undertaken by Comelec and DOST after the award, and their effect on the present controversy A. Failure to Establish the Identity, Existence and Eligibility of the Alleged Consortium as a Bidder On the question of the identity and the existence of the real bidder, respondents insist that, contrary to petitioners allegations, the bidder was not Mega Pacific eSolutions, Inc. (MPEI), which was incorporated only on February 27, 2003, or 11 days prior to the bidding itself. Rather, the bidder was Mega Pacific Consortium (MPC), of which MPEI was but a part. As proof thereof, they point to the March 7, 2003 letter of intent to bid, signed by the president of MPEI allegedly for and on behalf of MPC. They also call attention to the official receipt issued to MPC, acknowledging payment for the bidding documents, as proof that it was the consortium that participated in the bidding process. We do not agree. The March 7, 2003 letter, signed by only one signatory -- Willy U. Yu, President, Mega Pacific eSolutions, Inc., (Lead Company/ Proponent) For: Mega Pacific Consortium -and without any further proof, does not by itself prove the existence of the consortium. It does not show that MPEI or its president have been duly pre-authorized by the other members of the putative consortium to represent them, to bid on their collective behalf and, more important, to commit them jointly and severally to the bid undertakings. The letter is purely self-serving and uncorroborated. Neither does an official receipt issued to MPC, acknowledging payment for the bidding documents, constitute proof that it was the purported consortium that participated in the bidding. Such receipts are issued by cashiers without any legally sufficient inquiry as to the real identity or existence of the supposed payor. To assure itself properly of the due existence (as well as eligibility and qualification) of the putative consortium, Comelecs BAC should have examined the bidding documents submitted on behalf of MPC. They would have easily discovered the following fatal flaws. Two-Envelope,

The present controversy precisely falls within the exceptions listed as Nos. 7, 10 and 11: (7) when to require exhaustion of administrative remedies would be unreasonable; (10) when the rule does not provide a plain, speedy and adequate remedy, and (11) when there are circumstances indicating the urgency of judicial intervention. As already stated, Comelec itself made the exhaustion of administrative remedies legally impossible or, at the very least, unreasonable. In any event, the peculiar circumstances surrounding the unconventional rendition of the BAC Report and the precipitate awarding of the Contract by the Comelec en banc -- plus the fact that it was racing to have its Contract with MPC implemented in time for the elections in May 2004 (barely four months away) -- have combined to bring about the urgent need for judicial intervention, thus prompting this Court to dispense with the procedural exhaustion of administrative remedies in this case. Main Substantive Issue: Validity of the Award to MPC

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Two-Stage System As stated earlier in our factual presentation, the public bidding system designed by Comelec under its RFP (Request for Proposal for the Automation of the 2004 Election) mandated the use of a twoenvelope, two-stage system. A bidders first envelope (Eligibility Envelope) was meant to establish its eligibility to bid and its qualifications and capacity to perform the contract if its bid was accepted, while the second envelope would be the Bid Envelope itself. The Eligibility Envelope was to contain legal documents such as articles of incorporation, business registrations, licenses and permits, mayors permit, VAT certification, and so forth; technical documents containing documentary evidence to establish the track record of the bidder and its technical and production capabilities to perform the contract; and financial documents, including audited financial statements for the last three years, to establish the bidders financial capacity. In the case of a consortium or joint venture desirous of participating in the bidding, it goes without saying that the Eligibility Envelope would necessarily have to include a copy of the joint venture agreement, the consortium agreement or memorandum of agreement -- or a business plan or some other instrument of similar import -- establishing the due existence, composition and scope of such aggrupation. Otherwise, how would Comelec know who it was dealing with, and whether these parties are qualified and capable of delivering the products and services being offered for bidding ?[32] In the instant case, no such instrument was submitted to Comelec during the bidding process. This fact can be conclusively ascertained by scrutinizing the two-inch thick Eligibility Requirements file submitted by Comelec last October 9, 2003, in partial compliance with this Courts instructions given during the Oral Argument. This file purports to replicate the eligibility documents originally submitted to Comelec by MPEI allegedly on behalf of MPC, in connection with the bidding conducted in March 2003. Included in the file are the incorporation papers and financial statements of the members of the supposed consortium and certain certificates, licenses and permits issued to them. However, there is no sign whatsoever of any joint venture agreement, consortium agreement, memorandum of agreement, or business plan executed among the members of the purported consortium. The only logical conclusion is that no such agreement was ever submitted to the Comelec for its consideration, as part of the bidding process. It thus follows that, prior the award of the Contract, there was no documentary or other basis for Comelec to conclude that a consortium had actually been formed amongst MPEI, SK C&C and WeSolv, along with Election.com and ePLDT.[33] Neither was there anything to indicate the exact relationships between and among these firms; their diverse roles, undertakings and prestations, if any, relative to the prosecution of the project, the extent of their respective investments (if any) in the supposed consortium or in the project; and the precise nature and extent of their respective liabilities with respect to the contract being offered for bidding. And apart from the self-serving letter of March 7, 2003, there was not even any indication that MPEI was the lead company duly authorized to act on behalf of the others. So, it necessarily follows that, during the bidding process, Comelec had no basis at all for determining that the alleged consortium really existed and was eligible and qualified; and that the arrangements among the members were satisfactory and sufficient to ensure delivery on the Contract and to protect the governments interest. Notwithstanding such deficiencies, Comelec still deemed the consortium eligible to participate in the bidding, proceeded to open its Second Envelope, and eventually awarded the bid to it, even though -per the Comelecs own RFP -- the BAC should have declared the MPC ineligible to bid and returned the Second (Bid) Envelope unopened. Inasmuch as Comelec should not have considered MPEI et al. as comprising a consortium or joint venture, it should not have allowed them to avail themselves of the provision in Section 5.4 (b) (i) of the IRR for RA 6957 (the Build-Operate-Transfer Law), as amended by RA 7718. This provision states in part that a joint venture/consortium proponent shall be evaluated based on the individual or collective experience of the member-firms of the joint venture or consortium and of the contractor(s) that it has engaged for the project. Parenthetically, respondents have uniformly argued that the said IRR of RA 6957, as amended, have suppletory application to the instant case.

Hence, had the proponent MPEI been evaluated based solely on its own experience, financial and operational track record or lack thereof, it would surely not have qualified and would have been immediately considered ineligible to bid, as respondents readily admit. At any rate, it is clear that Comelec gravely abused its discretion in arbitrarily failing to observe its own rules, policies and guidelines with respect to the bidding process, thereby negating a fair, honest and competitive bidding. Commissioners Not Aware of Consortium In this regard, the Court is beguiled by the statements of Commissioner Florentino Tuason Jr., given in open court during the Oral Argument last October 7, 2003. The good commissioner affirmed that he was aware, of his own personal knowledge, that there had indeed been a written agreement among the consortium members,[34] although it was an internal matter among them,[35] and of the fact that it would be presented by counsel for private respondent.[36] However, under questioning by Chief Justice Hilario G. Davide Jr. and Justice Jose C. Vitug, Commissioner Tuason in effect admitted that, while he was the commissioner-in-charge of Comelecs Legal Department, he had never seen, even up to that late date, the agreement he spoke of .[37] Under further questioning, he was likewise unable to provide any information regarding the amounts invested into the project by several members of the claimed consortium.[38] A short while later, he admitted that the Commission had not taken a look at the agreement (if any).[39] He tried to justify his position by claiming that he was not a member of the BAC. Neither was he the commissioner-in-charge of the Phase II Modernization project (the automated election system); but that, in any case, the BAC and the Phase II Modernization Project Team did look into the aspect of the composition of the consortium. It seems to the Court, though, that even if the BAC or the Phase II Team had taken charge of evaluating the eligibility, qualifications and credentials of the consortium-bidder, still, in all probability, the former would have referred the task t o Commissioner Tuason, head of Comelecs Legal Department. That task was the appreciation and evaluation of the legal effects and consequences of the terms, conditions, stipulations and covenants contained in any joint venture agreement, consortium agreement or a similar document -- assuming of course that any of these was available at the time. The fact that Commissioner Tuason was barely aware of the situation bespeaks the complete absence of such document, or the utter failure or neglect of the Comelec to examine it -- assuming it was available at all -at the time the award was made on April 15, 2003. In any event, the Court notes for the record that Commissioner Tuason basically contradicted his statements in open court about there being one written agreement among all the consortium members, when he subsequently referred[40] to the four (4) Memoranda of Agreement (MOAs) executed by them. [41] At this juncture, one might ask: What, then, if there are four MOAs instead of one or none at all? Isnt it enough that there are these corporations coming together to carry out the automation project? Isnt it true, as respondent aver, that nowhere in the RFP issued by Comelec is it required that the members of the joint venture execute a single written agreement to prove the existence of a joint venture. Indeed, the intention to be jointly and severally liable may be evidenced not only by a single joint venture agreement, but also by supplementary documents executed by the parties signifying such intention. What then is the big deal? The problem is not that there are four agreements instead of only one. The problem is that Comelec never bothered to check. It never based its decision on documents or other proof that would concretely establish the existence of the claimed consortium or joint venture or agglomeration. It relied merely on the self-serving representation in an uncorroborated letter signed by only one individual, claiming that his company represented a consortium of several different corporations. It concluded forthwith that a consortium indeed existed, composed of such and such members, and thereafter declared that the entity was eligible to bid. True, copies of financial statements and incorporation papers of the alleged consortium members were submitted. But these papers did not establish the existence of a consortium, as they could have been provided by the companies concerned for purposes other than to prove that they were part of a consortium or joint venture. For instance, the papers may have been intended to show that those companies were each

39

qualified to be a sub-contractor (and nothing more) in a major project. Those documents did not by themselves support the assumption that a consortium or joint venture existed among the companies. In brief, despite the absence of competent proof as to the existence and eligibility of the alleged consortium (MPC), its capacity to deliver on the Contract, and the members joint and several liability therefor, Comelec nevertheless assumed that such consortium existed and was eligible. It then went ahead and considered the bid of MPC, to which the Contract was eventually awarded, in gross violation of the formers own bidding rules and procedures contained in its RFP. Therein lies Comelecs grave abuse of discretion. Sufficiency of theFour Agreements Instead of one multilateral agreement executed by, and effective and binding on, all the five consortium members -- as earlier claimed by Commissioner Tuason in open court -- it turns out that what was actually executed were four (4) separate and distinct bilateral Agreements.[42] Obviously, Comelec was furnished copies of these Agreements only after the bidding process had been terminated, as these were not included in the Eligibility Documents. These Agreements are as follows: A Memorandum of Agreement between MPEI and SK C&C A Memorandum of Agreement between MPEI and WeSolv A Teaming Agreement between MPEI and Election.com Ltd. A Teaming Agreement between MPEI and ePLDT. In sum, each of the four different and separate bilateral Agreements is valid and binding only between MPEI and the other contracting party, leaving the other consortium members total strangers thereto. Under this setup, MPEI dealt separately with each of the members, and the latter (WeSolv, SK C&C, Election.com, and ePLDT) in turn had nothing to do with one another, each dealing only with MPEI. Respondents assert that these four Agreements were sufficient for the purpose of enabling the corporations to still qualify (even at that late stage) as a consortium or joint venture, since the first two Agreements had allegedlyset forth the joint and several undertakings among the parties, whereas the latter two clarified the parties respective roles with regard to the Project, with MPEI being the independent contractor and Election.com and ePLDT the subcontractors. Additionally, the use of the phrase particular contract in the Comelecs Request for Proposal (RFP), in connection with the joint and several liabilities of companies in a joint venture, is taken by them to mean that all the members of the joint venture need not be solidarily liable for the entire project or joint venture, because it is sufficient that the lead company and the member in charge of a particular contract or aspect of the joint venture agree to be solidarily liable. At this point, it must be stressed most vigorously that the submission of the four bilateral Agreements to Comelec after the end of the bidding process did nothing to eliminate the grave abuse of discretion it had alreadycommitted on April 15, 2003. Deficiencies Have Not Been Cured In any event, it is also claimed that the automation Contract awarded by Comelec incorporates all documents executed by the consortium members, even if these documents are not referred to therein. The basis of this assertion appears to be the passages from Section 1.4 of the Contract, which is reproduced as follows: All Contract Documents shall form part of the Contract even if they or any one of them is not referre d to or mentioned in the Contract as forming a part thereof. Each of the Contract Documents shall be mutually complementary and explanatory of each other such that what is noted in one although not shown in the other shall be considered contained in all, and what is required by any one shall be as binding as if required by all, unless one item is a correction of the other.

The intent of the Contract Documents is the proper, satisfactory and timely execution and completion of the Project, in accordance with the Contract Documents. Consequently, all items necessary for the proper and timely execution and completion of the Project shall be deemed included in the Contract. Thus, it is argued that whatever perceived deficiencies there were in the supplementary contracts -those entered into by MPEI and the other members of the consortium as regards their joint and several undertakings -- have been cured. Better still, such deficiencies have supposedly been prevented from arising as a result of the above-quoted provisions, from which it can be immediately established that each of the members of MPC assumes the same joint and several liability as the other members. The foregoing argument is unpersuasive. First, the contract being referred to, entitled The Automated Counting and Canvassing Project Contract, is between Comelec and MPEI, not the alleged consortium, MPC. To repeat, it is MPEI -- not MPC -- that is a party to the Contract. Nowhere in that Contract is there any mention of a consortium or joint venture, of members thereof, much less of joint and several liability. Supposedly executed sometime in May 2003,[43] the Contract bears a notarization date of June 30, 2003, and contains the signature of Willy U. Yu signing as president of MPEI (not for and on behalf of MPC), along with that of the Comelec chair. It provides in Section 3.2 that MPEI (not MPC) is to supply the Equipment and perform the Services under the Contract, in accordance with the appendices thereof; nothing whatsoever is said about any consortium or joint venture or partnership. Second, the portions of Section 1.4 of the Contract reproduced above do not have the effect of curing (much less preventing) deficiencies in the bilateral agreements entered into by MPEI with the other members of the consortium, with respect to their joint and several liabilities. The term Contract Documents, as used in the quoted passages of Section 1.4, h as a well-defined meaning and actually refers only to the following documents: The Contract itself along with its appendices The Request for Proposal (also known as Terms of Reference) issued by the Comelec, including the Tender Inquiries and Bid Bulletins The Tender Proposal submitted by MPEI In other words, the term Contract Documents cannot be understood as referring to or including the MOAs and the Teaming Agreements entered into by MPEI with SK C&C, WeSolv, Election.com and ePLDT. This much is very clear and admits of no debate. The attempt to use the provisions of Section 1.4 to shore up the MOAs and the Teaming Agreements is simply unwarranted. Third and last, we fail to see how respondents can arrive at the conclusion that, from the abovequoted provisions, it can be immediately established that each of the members of MPC assumes the same joint and several liability as the other members. Earlier, respondents claimed exactly the opposite -- that the two MOAs (between MPEI and SK C&C, and between MPEI and WeSolv) had set forth the joint and several undertakings among the parties;whereas the two Teaming Agreements clarified the parties respective roles with regard to the Project, with MPEI being the independent contractor and Election.com and ePLDT the subcontractors. Obviously, given the differences in their relationships, their respective liabilities cannot be the same. Precisely, the very clear terms and stipulations contained in the MOAs and the Teaming Agreements -- entered into by MPEI with SK C&C, WeSolv, Election.com and ePLDT -- negate the idea that these members are on a par with one another and are, as such, assuming the same joint and several liability. Moreover, respondents have earlier seized upon the use of the term particular contract in the Comelecs Request for Proposal (RFP), in order to argue that all the members of the joint venture did not need to be solidarily liable for the entire project or joint venture. It was sufficient that the lead company and the member in charge of a particular contract or aspect of the joint venture would agree to be solidarily liable. The glaring lack of consistency leaves us at a loss. Are respondents trying to establish the same joint and solidary liability among all the members or not? Enforcement of Liabilities Problematic

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Next, it is also maintained that the automation Contract between Comelec and the MPEI confirms the solidary undertaking of the lead company and the consortium member concerned for each particular Contract, inasmuch as the position of MPEI and anyone else performing the services contemplated under the Contract is described therein as that of an independent contractor. The Court does not see, however, how this conclusion was arrived at. In the first place, the contractual provision being relied upon by respondents is Article 14, Independent Contractors, which states: Nothing contained herein shall be construed as establishing or creating between the COMELEC and MEGA the relationship of employee and employer or principal and agent, it being understood that the position of MEGA and of anyone performing the Services contemplated under this Contract, is that of an independent contractor. Obviously, the intent behind the provision was simply to avoid the creation of an employeremployee or a principal-agent relationship and the complications that it would produce. Hence, the Article states that the role or position of MPEI, or anyone else performing on its behalf, is that of an independent contractor. It is obvious to the Court that respondents are stretching matters too far when they claim that, because of this provision, the Contract in effect confirms the solidary undertaking of the lead company and the consortium member concerned for the particular phase of the project. This assertion is an absolute non sequitur. Enforcement of Liabilities Under the Civil Code Not Possible In any event, it is claimed that Comelec may still enforce the liability of the consortium members under the Civil Code provisions on partnership, reasoning that MPEI et al. represented themselves as partners and members of MPC for purposes of bidding for the Project. They are, therefore, liable to the Comelec to the extent that the latter relied upon such representation. Their liability as partners is solidary with respect to everything chargeable to the partnership under certain conditions. The Court has two points to make with respect to this argument. First, it must be recalled that SK C&C, WeSolv, Election.com and ePLDT never represented themselves as partners and members of MPC, whether for purposes of bidding or for something else. It was MPEI alone that represented them to be members of a consortium it supposedly headed. Thus, its acts may not necessarily be held against the other members. Second, this argument of the OSG in its Memorandum[44] might possibly apply in the absence of a joint venture agreement or some other writing that discloses the relationship of the members with one another. But precisely, this case does not deal with a situation in which there is nothing in writing to serve as reference, leaving Comelec to rely on mere representations and therefore justifying a falling back on the rules on partnership. For, again, the terms and stipulations of the MOAs entered into by MPEI with SK C&C and WeSolv, as well as the Teaming Agreements of MPEI with Election.com and ePLDT (copies of which have been furnished the Comelec) are very clear with respect to the extent and the limitations of the firms respective liabilities. In the case of WeSolv and SK C&C, their MOAs state that their liabilities, while joint and several with MPEI, are limited only to the particular areas of work wherein their services are engaged or their products utilized. As for Election.com and ePLDT, their separate Teaming Agreements specifically ascribe to them the role of subcontractor vis--vis MPEI as contractor and, based on the terms of their particular agreements, neither Election.com nor ePLDT is, with MPEI, jointly and severally liable to Comelec.[45] It follows then that in the instant case, there is no justification for anyone, much less Comelec, to resort to the rules on partnership and partners liabilities. Eligibility of a ConsortiumBased on the Collective Qualifications of Its Members Respondents declare that, for purposes of assessing the eligibility of the bidder, the members of MPC should be evaluated on a collective basis. Therefore, they contend, the failure of MPEI to submit financial statements (on account of its recent incorporation) should not by itself disqualify MPC, since the other members of the consortium could meet the criteria set out in the RFP. Thus, according to respondents, the collective nature of the undertaking of the members of MPC, their contribution of assets and sharing of risks, and the community of their interest in the performance of the Contract lead to these reasonable conclusions: (1) that their collective qualifications should be the basis for evaluating their eligibility; (2) that the sheer enormity of the project renders it improbable to

expect any single entity to be able to comply with all the eligibility requirements and undertake the project by itself; and (3) that, as argued by the OSG, the RFP allows bids from manufacturers, suppliers and/or distributors that have formed themselves into a joint venture, in recognition of the virtual impossibility of a single entitys ability to respond to the Invitation to Bid. Additionally, argues the Comelec, the Implementing Rules and Regulations of RA 6957 (the BuildOperate-Transfer Law) as amended by RA 7718 would be applicable, as proponents of BOT projects usually form joint ventures or consortiums. Under the IRR, a joint venture/consortium proponent shall be evaluated based on the individual or the collective experience of the member-firms of the joint venture/consortium and of the contractors the proponent has engaged for the project. Unfortunately, this argument seems to assume that the collective nature of the undertaking of the members of MPC, their contribution of assets and sharing of risks, and the community of their interest in the performance of the Contract entitle MPC to be treated as a joint venture or consortium; and to be evaluated accordingly on the basis of the members collective qualifications when, in fact, the evidence before the Court suggest otherwise. This Court in Kilosbayan v. Guingona[46] defined joint venture as an association of persons or companies jointly undertaking some commercial enterprise; generally, all contribute assets and share risks. It requires a community of interest in the performance of the subject matter, a right to direct and govern the policy in connection therewith, and [a] duty, which may be altered by agreement to share both in profit and losses. Going back to the instant case, it should be recalled that the automation Contract with Comelec was not executed by the consortium MPC -- or by MPEI for and on behalf of MPC -- but by MPEI, period. The said Contract contains no mention whatsoever of any consortium or members thereof. This fact alone seems to contradict all the suppositions about a joint undertaking that would normally apply to a joint venture or consortium: that it is a commercial enterprise involving a community of interest, a sharing of risks, profits and losses, and so on. Now let us consider the four bilateral Agreements, starting with the Memorandum of Agreement between MPEI and WeSolv Open Computing, Inc., dated March 5, 2003. The body of the MOA consists of just seven (7) short paragraphs that would easily fit in one page. It reads as follows: 1. The parties agree to cooperate in successfully implementing the Project in the substance and form as may be most beneficial to both parties and other subcontractors involved in the Project. 2. Mega Pacific shall be responsible for any contract negotiations and signing with the COMELEC and, subject to the latters approval, agrees to give WeSolv an opportunity to be present at meetings with the COMELEC concerning WeSolvs portion of the Project. 3. WeSolv shall be jointly and severally liable with Mega Pacific only for the particular products and/or services supplied by the former for the Project. 4. Each party shall bear its own costs and expenses relative to this agreement unless otherwise agreed upon by the parties. 5. The parties undertake to do all acts and such other things incidental to, necessary or desirable or the attainment of the objectives and purposes of this Agreement. 6. In the event that the parties fail to agree on the terms and conditions of the supply of the products and services including but not limited to the scope of the products and services to be supplied and payment terms, WeSolv shall cease to be bound by its obligations stated in the aforementioned paragraphs. 7. Any dispute arising from this Agreement shall be settled amicably by the parties whenever possible. Should the parties be unable to do so, the parties hereby agree to settle their dispute through arbitration in accordance with the existing laws of the Republic of the Philippines. (Underscoring supplied.) Even shorter is the Memorandum of Agreement between MPEI and SK C&C Co. Ltd., dated March 9, 2003, the body of which consists of only six (6) paragraphs, which we quote:

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1. All parties agree to cooperate in achieving the Consortiums objective of successfully implementing the Project in the substance and form as may be most beneficial to the Consortium members and in accordance w/ the demand of the RFP. 2. Mega Pacific shall have full powers and authority to represent the Consortium with the Comelec, and to enter and sign, for and in behalf of its members any and all agreement/s which maybe required in the implementation of the Project. 3. Each of the individual members of the Consortium shall be jointly and severally liable with the Lead Firm for the particular products and/or services supplied by such individual member for the project, in accordance with their respective undertaking or sphere of responsibility. 4. Each party shall bear its own costs and expenses relative to this agreement unless otherwise agreed upon by the parties. 5. The parties undertake to do all acts and such other things incidental to, necessary or desirable for the attainment of the objectives and purposes of this Agreement. 6. Any dispute arising from this Agreement shall be settled amicably by the parties whenever possible. Should the parties be unable to do so, the parties hereby agree to settle their dispute through arbitration in accordance with the existing laws of the Republic of the Philippines. (Underscoring supplied.) It will be noted that the two Agreements quoted above are very similar in wording. Neither of them contains any specifics or details as to the exact nature and scope of the parties respective undertakings, performances and deliverables under the Agreement with respect to the automation project. Likewise, the two Agreements are quite bereft of pesos-and-centavos data as to the amount of investments each party contributes, its respective share in the revenues and/or profit from the Contract with Comelec, and so forth -- all of which are normal for agreements of this nature. Yet, according to public and private respondents, the participation of MPEI, WeSolv and SK C&C comprises fully 90 percent of the entire undertaking with respect to the election automation project, which is worth about P1.3 billion. As for Election.com and ePLDT, the separate Teaming Agreements they entered into with MPEI for the remaining 10 percent of the entire project undertaking are ironically much longer and more detailed than the MOAs discussed earlier. Although specifically ascribing to them the role of subcontractor vis--vis MPEI as contractor, these Agreements are, however, completely devoid of any pricing data or payment terms. Even the appended Schedules supposedly containing prices of goods and services are shorn of any price data. Again, as mentioned earlier, based on the terms of their particular Agreements, neither Election.com nor ePLDT -- with MPEI -- is jointly and severally liable to Comelec. It is difficult to imagine how these bare Agreements -- especially the first two -- could be implemented in practice; and how a dispute between the parties or a claim by Comelec against them, for instance, could be resolved without lengthy and debilitating litigations. Absent any clear-cut statement as to the exact nature and scope of the parties respective undertakings, commitments, deliverables and covenants, one party or another can easily dodge its obligation and deny or contest its liability under the Agreement; or claim that it is the other party that should have delivered but failed to. Likewise, in the absence of definite indicators as to the amount of investments to be contributed by each party, disbursements for expenses, the parties respective shares in the profits and the like, it seems to the Court that this situation could readily give rise to all kinds of misunderstandings and disagreements over money matters. Under such a scenario, it will be extremely difficult for Comelec to enforce the supposed joint and several liabilities of the members of the consortium. The Court is not even mentioning the possibility of a situation arising from a failure of WeSolv and MPEI to agree on the scope, the terms and the conditions for the supply of the products and services under the Agreement. In that situation, by virtue of paragraph 6 of its MOA, WeSolv would perforce cease to be bound by its obligations -- including its joint and solidary liability with MPEI under the MOA -- and could forthwith disengage from the project. Effectively, WeSolv could at any time unilaterally exit from its MOA with MPEI by simply failing to agree. Where would that outcome leave MPEI and Comelec?

To the Court, this strange and beguiling arrangement of MPEI with the other companies does not qualify them to be treated as a consortium or joint venture, at least of the type that government agencies like the Comelec should be dealing with. With more reason is it unable to agree to the proposal to evaluate the members of MPC on a collective basis. In any event, the MPC members claim to be a joint venture/consortium; and respondents have consistently been arguing that the IRR for RA 6957, as amended, should be applied to the instant case in order to allow a collective evaluation of consortium members. Surprisingly, considering these facts, respondents have not deemed it necessary for MPC members to comply with Section 5.4 (a) (iii) of the IRR for RA 6957 as amended. According to the aforementioned provision, if the project proponent is a joint venture or consortium, the members or participants thereof are required to submit a sworn statement that, if awarded the contract, they shall bind themselves to be jointly, severally and solidarily liable for the project proponents obligations thereunder. This provision was supposed to mirror Section 5 of RA 6957, as amended, which states: In all cases, a consortium that participates in a bid must present proof that the members of the consortium have bound themselves jointly and severally to assume responsibility for any project. The withdrawal of any member of the consortium prior to the implementation of the project could be a ground for the cancellation of the contract. The Court has certainly not seen any joint and several undertaking by the MPC members that even approximates the tenor of that which is described above. We fail to see why respondents should invoke the IRR if it is for their benefit, but refuse to comply with it otherwise. B. DOST Technical Tests Flunked by the Automated Counting Machines Let us now move to the second subtopic, which deals with the substantive issue: the ACMs failure to pass the tests of the Department of Science and Technology (DOST). After respondent consortium and the other bidder, TIM, had submitted their respective bids on March 10, 2003, the Comelecs BAC -- through its Technical Working Group (TWG) and the DOST -evaluated their technical proposals. Requirements that were highly technical in nature and that required the use of certain equipment in the evaluation process were referred to the DOST for testing. The Department reported thus: TEST RESULTS MATRIX[47] [Technical Evaluation of Automated Counting Machine] KEY REQUIREMENTS [QUESTIONS] MEGA-PACIFIC CONSORTIUM YES 1. Does the machine have an accuracy rating of at least 99.995 percent At COLD condition environmental NO TOTAL INFORMATION MANAGEMENT YES NO

At NORMAL environmental conditions At HARSH environmental conditions 2. Accurately records and reports the date and time of

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the start and end of counting of ballots per precinct? 3. Prints election returns without any loss of date during generation of such reports? Uninterruptible back-up power system, that will engage immediately to allow operation of at least 10 minutes after outage, power surge or abnormal electrical occurrences?

Generates printouts In format specified by COMELEC 13. Prints election returns without any loss of data during generation of such report? 14. Generates an audit trail of the counting machine, both hard copy and soft copy?

4.

5. Machine reads two-sided ballots in one pass? Note: This particular requirement needs further verification

Hard copy

Soft copy

Note: This particular requirement needs further verification

6.

Machine can detect previously counted ballots and prevent previously counted ballots from being counted more than once?

7. Stores results of counted votes by precinct in external (removable) storage device? Note: This particular requirement needs further verification 8. Data stored in external media is encrypted? Note: This particular requirement needs further verification

15. Does the City/Municipal Canvassing System consolidate results from all precincts within it using the encrypted soft copy of the data generated by the counting machine and stored on the removable data storage device? 16. Does the City/Municipal Canvassing System consolidate results from all precincts within it using the encrypted soft copy of the data generated by the counting machine and transmitted through an electronic transmission media? 17. Does the system output a Zero City/Municipal Canvass Report, which is printed on election day prior to the conduct of the actual canvass operation, that shows that all totals for all the votes for all the candidates and other information, are indeed zero

Note: This particular requirement needs further verification

9.

Physical key or similar device allows, limits, or restricts operation of the machine?

Note: This particular requirement needs further verification

Note: This particular requirement needs further verification

10. CPU speed is at least 400mHz? Note: This particular requirement needs further verification

Note: This particular requirement needs further verification

11. Port to allow use of dotmatrix printers? 12. Generates printouts of the election returns in a format specified by the COMELEC?

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or null? 18. Does the system consolidate results from all precincts in the city/municipality using the data storage device coming from the counting machine? Note: This particular requirement needs further verification 19. Is the machine 100% accurate? Note: This particular requirement needs further verification Note: This particular requirement needs further verification 25. Is the Program able to detect previously downloaded precinct results and prevent these from being inputted again into the System?

further verification

Note: This particular requirement needs further verification

20. Is the Program able to detect previously downloaded precinct results and prevent these from being inputted again into the System? 21. The System is able to print the specified reports and the audit trail without any loss of data during generation of the above-mentioned reports? Prints specified reports Audit Trail

26. The System is able to print the specified reports and the audit trail without any loss of data during generation of the abovementioned reports? Prints specified reports Audit Trail Note: This particular requirement needs further verification

Note: This particular requirement needs further verification

27. Can the results of the provincial/district/national consolidation be stored in a data storage device? Note: This particular requirement needs further verification

22. Can the result of the city/municipal consolidation be stored in a data storage device? 23. Does the system consolidate results from all precincts in the provincial/district/ national using the data storage device from different levels of consolidation? 24. Is the system 100% accurate?

Note: This particular requirement needs further verification Note: This particular requirement needs further verification

According to respondents, it was only after the TWG and the DOST had conducted their separate tests and submitted their respective reports that the BAC, on the basis of these reports formulated its comments/recommendations on the bids of the consortium and TIM. The BAC, in its Report dated April 21, 2003, recommended that the Phase II project involving the acquisition of automated counting machines be awarded to MPEI. It said: After incisive analysis of the technical reports of the DOST and the Technical Working Group for Phase II Automated Counting Machine, the BAC considers adaptability to advances in modern technology to ensure an effective and efficient method, as well as the security and integrity of the system. The results of the evaluation conducted by the TWG and that of the DOST (14 April 2003 report), would show the apparent advantage of Mega-Pacific over the other competitor, TIM. The BAC further noted that both Mega-Pacific and TIM obtained some failed marks in the technical evaluation. In general, the failed marks of Total Information Management as enumerated above affect the counting machine itself which are material in nature, constituting non-compliance to the RFP. On the

Note: This particular requirement needs

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other hand, the failed marks of Mega-Pacific are mere formalities on certain documentary requirements which the BAC may waive as clearly indicated in the Invitation to Bid. In the DOST test, TIM obtained 12 failed marks and mostly attributed to the counting machine itself as stated earlier. These are requirements of the RFP and therefore the BAC cannot disregard the same. Mega-Pacific failed in 8 items however these are mostly on the software which can be corrected by reprogramming the software and therefore can be readily corrected. The BAC verbally inquired from DOST on the status of the retest of the counting machines of the TIM and was informed that the report will be forthcoming after the holy week. The BAC was informed that the retest is on a different parameters theyre being two different machines being tested. One purposely to test if previously read ballots will be read again and the other for the other features such as two sided ballots. The said machine and the software therefore may not be considered the same machine and program as submitted in the Technical proposal and therefore may be considered an enhancement of the original proposal. Advance information relayed to the BAC as of 1:40 PM of 15 April 2003 by Executive Director Ronaldo T. Viloria of DOST is that the result of the test in the two counting machines of TIM contains substantial errors that may lead to the failure of these machines based on the specific items of the RFP that DOST has to certify. OPENING OF FINANCIAL BIDS The BAC on 15 April 2003, after notifying the concerned bidders opened the financial bids in their presence and the results were as follows: Mega-Pacific: Option 1 Outright purchase: Bid Price of Php1,248,949,088.00 Option 2 Lease option: 70% Down payment of cost of hardware or Php642,755,757.07 Remainder payable over 50 months or a total of Php642,755,757.07 Discount rate of 15% p.a. or 1.2532% per month. Total Number of Automated Counting Machine 1,769 ACMs (Nationwide) TIM: Total Bid Price Php1,297,860,560.00 Total Number of Automated Counting Machine 2,272 ACMs (Mindanao and NCR only) Premises considered, it appears that the bid of Mega Pacific is the lowest calculated responsive bid, and therefore, the Bids and Awards Committee (BAC) recommends that the Phase II project re Automated Counting Machine be awarded to Mega Pacific eSolutions, Inc.[48] The BAC, however, also stated on page 4 of its Report: Based on the 14 April 2003 report (Table 6) of the DOST, it appears that both Mega-Pacific and TIM (Total Information Management Corporation) failed to meet some of the requirements. Below is a comparative presentation of the requirements wherein Mega-Pacific or TIM or both of them failed: x x x. What followed was a list of key requirements, referring to technical requirements, and an indication of which of the two bidders had failed to meet them. Failure to Meet the Required Accuracy Rating The first of the key requirements was that the counting machines were to have an accuracy rating of at least 99.9995 percent. The BAC Report indicates that both Mega Pacific and TIM failed to meet this standard.

The key requirement of accuracy rating happens to be part and parcel of the Comelecs Request for Proposal (RFP). The RFP, on page 26, even states that the ballot counting machines and ballot counting software must have an accuracy rating of 99.9995% (not merely 99.995%) or better as certified by a reliable independent testing agency. When questioned on this matter during the Oral Argument, Commissioner Borra tried to wash his hands by claiming that the required accuracy rating of 99.9995 percent had been set by a private sector group in tandem with Comelec. He added that the Commission had merely adopted the accuracy rating as part of the groups recommended bid requirements, which it had not bothered to amend even after being advised by DOST that such standard was unachievable. This excuse, however, does not in any way lessen Comelecs responsibility to adhere to its own published bidding rules, as well as to see to it that the consortium indeed meets the accuracy standard. Whichever accuracy rating is the right standard -whether 99.995 or 99.9995 percent -- the fact remains that the machines of the so-called consortium failed to even reach the lesser of the two . On this basis alone, it ought to have been disqualified and its bid rejected outright. At this point, the Court stresses that the essence of public bidding is violated by the practice of requiring very high standards or unrealistic specifications that cannot be met -- like the 99.9995 percent accuracy rating in this case -- only to water them down after the bid has been award. Such scheme, which discourages the entry of prospective bona fide bidders, is in fact a sure indication of fraud in the bidding, designed to eliminate fair competition. Certainly, if no bidder meets the mandatory requirements, standards or specifications, then no award should be made and a failed bidding declared. Failure of Software to Detect Previously Downloaded Data Furthermore, on page 6 of the BAC Report, it appears that the consortium as well as TIM failed to meet another key requirement -- for the counting machines software program to be able to detect previously downloaded precinct results and to prevent these from being entered again into the counting machine. This same deficiency on the part of both bidders reappears on page 7 of the BAC Report, as a result of the recurrence of their failure to meet the said key requirement. That the ability to detect previously downloaded data at different canvassing or consolidation levels is deemed of utmost importance can be seen from the fact that it is repeated three times in the RFP. On page 30 thereof, we find the requirement that the city/municipal canvassing system software must be able to detect previously downloaded precinct results and prevent these from being inputted again into the system. Again, on page 32 of the RFP, we read that the provincial/district canvassing system software must be able to detect previously downloaded city/municipal results and prevent these from being inputted again into the system. And once more, on page 35 of the RFP, we find the requirement that the national canvassing system software must be able to detect previously downloaded provincial/district results and prevent these from being inputted again into the system. Once again, though, Comelec chose to ignore this crucial deficiency, which should have been a cause for the gravest concern. Come May 2004, unscrupulous persons may take advantage of and exploit such deficiency by repeatedly downloading and feeding into the computers results favorable to a particular candidate or candidates. We are thus confronted with the grim prospect of election fraud on a massive scale by means of just a few key strokes. The marvels and woes of the electronic age! Inability to Print the Audit Trail But that grim prospect is not all. The BAC Report, on pages 6 and 7, indicate that the ACMs of both bidders were unable to print the audit trail without any loss of data. In the case of MPC, the audit trail system was not yet incorporated into its ACMs. This particular deficiency is significant, not only to this bidding but to the cause of free and credible elections. The purpose of requiring audit trails is to enable Comelec to trace and verify the identities of the ACM operators responsible for data entry and downloading, as well as the times when the various data were downloaded into the canvassing system, in order to forestall fraud and to identify the perpetrators.

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Thus, the RFP on page 27 states that the ballot counting machines and ballot counting software must print an audit trail of all machine operations for documentation and verification purposes. Furthermore, the audit trail must be stored on the internal storage device and be available on demand for future printing and verifying. On pages 30-31, the RFP also requires that the city/municipal canvassing system software be able to print an audit trail of the canvassing operations, including therein such data as the date and time the canvassing program was started, the log-in of the authorized users (the identity of the machine operators), the date and time the canvass data were downloaded into the canvassing system, and so on and so forth. On page 33 of the RFP, we find the same audit trail requirement with respect to the provincial/district canvassing system software; and again on pages 35-36 thereof, the same audit trail requirement with respect to the national canvassing system software. That this requirement for printing audit trails is not to be lightly brushed aside by the BAC or Comelec itself as a mere formality or technicality can be readily gleaned from the provisions of Section 7 of RA 8436, which authorizes the Commission to use an automated system for elections. The said provision which respondents have quoted several times, provides that ACMs are to possess certain features divided into two classes: those that the statute itself considers mandatory and other features or capabilities that the law deems optional. Among those considered mandatory are provisions for audit trails! Section 7 reads as follows: The System shall contain the following features: (a) use of appropriate ballots; (b) stand-alone machine which can count votes and an automated system which can consolidate the results immediately; (c) with provisions for audit trails; (d) minimum human intervention; and (e) adequate safeguard/security measures. (Italics and emphases supplied.) In brief, respondents cannot deny that the provision requiring audit trails is indeed mandatory, considering the wording of Section 7 of RA 8436. Neither can Respondent Comelec deny that it has relied on the BAC Report, which indicates that the machines or the software was deficient in that respect. And yet, the Commission simply disregarded this shortcoming and awarded the Contract to private respondent, thereby violating the very law it was supposed to implement. C. Inadequacy of Post Facto Remedial Measures Respondents argue that the deficiencies relating to the detection of previously downloaded data, as well as provisions for audit trails, are mere shortcomings or minor deficiencies in software or programming, which can be rectified. Perhaps Comelec simply relied upon the BAC Report, which states on page 8 thereof that Mega Pacific failed in 8 items[;] however these are mostly on the software which can be corrected by re-programming x x x and therefore can be readily corrected. The undersigned ponentes questions, some of which were addressed to Commissioner Borra during the Oral Argument, remain unanswered to this day. First of all, who made the determination that the eight fail marks of Mega Pacific were on account of the software -- was it DOST or TWG? How can we be sure these failures were not the results of machine defects? How was it determined that the software could actually be re-programmed and thereby rectified? Di d a q u a li fi ed t e c h n i c a l e xp e rt r e a d a n d a n a l yz e t h e s o u r c e c o d e [ 4 9 ] for the programs and conclude that these could be saved and remedied? (Such determination cannot be done by any other means save by the examination and analysis of the source code.) Who was this qualified technical expert? When did he carry out the study? Did he prepare a written report on his findings? Or did the Comelec just make a wild guess? It does not follow that all defects in software programs can be rectified, and the programs saved. In the information technology sector, it is common knowledge that there are many badly written programs, with significant programming errors written into them; hence it does not make economic sense to try to correct the programs; instead, programmers simply abandon them and just start from scratch. Theres no telling if any of these programs is unrectifiable, unless a qualified programmer reads the source code. And if indeed a qualified expert reviewed the source code, did he also determine how much work would be needed to rectify the programs? And how much time and money would be spent for that effort? Who would carry out the work? After the rectification process, who would ascertain and how would it be ascertained that the programs have indeed been properly rectified, and that they would work

properly thereafter? And of course, the most important question to ask: could the rectification be done in time for the elections in 2004? Clearly, none of the respondents bothered to think the matter through. Comelec simply took the word of the BAC as gospel truth, without even bothering to inquire from DOST whether it was true that the deficiencies noted could possibly be remedied by re-programming the software. Apparently, Comelec did not care about the software, but focused only on purchasing the machines. What really adds to the Courts dismay is the admission made by Commissioner Borra during the Oral Argument that the software currently being used by Comelec was merely the demo version, inasmuch as the final version that would actually be used in the elections was still being developed and had not yet been finalized. It is not clear when the final version of the software would be ready for testing and deployment. It seems to the Court that Comelec is just keeping its fingers crossed and hoping the final product would work. Is there a Plan B in case it does not? Who knows? But all these software programs are part and parcel of the bidding and the Contract awarded to the Consortium. Why is it that the machines are already being brought in and paid for, when there is as yet no way of knowing if the final version of the software would be able to run them properly, as well as canvass and consolidate the results in the manner required? The counting machines, as well as the canvassing system, will never work properly without the correct software programs. There is an old adage that is still valid to this day: Garbage in, garbage out. No matter how powerful, advanced and sophisticated the computers and the servers are, if the software being utilized is defective or has been compromised, the results will be no better than garbage. And to think that what is at stake here is the 2004 national elections -- the very basis of our democratic life. Correction of Defects? To their Memorandum, public respondents proudly appended 19 Certifications issued by DOST declaring that some 285 counting machines had been tested and had passed the acceptance testing conducted by the Department on October 8-18, 2003. Among those tested were some machines that had failed previous tests, but had undergone adjustments and thus passed re-testing. Unfortunately, the Certifications from DOST fail to divulge in what manner and by what standards or criteria the condition, performance and/or readiness of the machines were re-evaluated and re-appraised and thereafter given the passing mark. Apart from that fact, the remedial efforts of respondents were, not surprisingly, apparently focused again on the machines -- the hardware. Nothing was said or done about the software -- the deficiencies as to detection and prevention of downloading and entering previously downloaded data, as well as the capability to print an audit trail. No matter how many times the machines were tested and re-tested, if nothing was done about the programming defects and deficiencies, the same danger of massive electoral fraud remains. As anyone who has a modicum of knowledge of computers would say, Thats elementary! And only last December 5, 2003, an Inq7.net news report quoted the Comelec chair as saying that the new automated poll system would be used nationwide in May 2004, even as the software for the system remained unfinished. It also reported that a certain Titus Manuel of the Philippine Computer Society, which was helping Comelec test the hardware and software, said that the software for the counting still had to be submitted on December 15, while the software for the canvassing was due in early January. Even as Comelec continues making payments for the ACMs, we keep asking ourselves: who is going to ensure that the software would be tested and would work properly? At any rate, the re-testing of the machines and/or the 100 percent testing of all machines (testing of every single unit) would not serve to eradicate the grave abuse of discretion already committed by Comelec when it awarded the Contract on April 15, 2003, despite the obvious and admitted flaws in the bidding process, the failure of the winning bidder to qualify, and the inability of the ACMs and the intended software to meet the bid requirements and rules. Comelecs Latest

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Assurances Are Unpersuasive Even the latest pleadings filed by Comelec do not serve to allay our apprehensions. They merely affirm and compound the serious violations of law and gravely abusive acts it has committed. Let us examine them. The Resolution issued by this Court on December 9, 2003 required respondents to inform it as to the number of ACMs delivered and paid for, as well as the total payment made to date for the purchase thereof. They were likewise instructed to submit a certification from the DOST attesting to the number of ACMs tested, the number found to be defective; and whether the reprogrammed software has been tested and found to have complied with the requirements under Republic Act No. 8436.[50] In its Partial Compliance and Manifestation dated December 29, 2003, Comelec informed the Court that 1,991 ACMs had already been delivered to the Commission as of that date. It further certified that it had already paid the supplier the sum of P849,167,697.41, which corresponded to 1,973 ACM units that had passed the acceptance testing procedures conducted by the MIRDC-DOST[51] and which had therefore been accepted by the poll body. In the same submission, for the very first time, Comelec also disclosed to the Court the following: The Automated Counting and Canvassing Project involves not only the manufacturing of the ACM hardware but also the development of three (3) types of software, which are intended for use in the following: 1. 2. 3. Evaluation of Technical Bids Testing and Acceptance Procedures Election Day Use.

acceptance phase of the acquisition process. The previous pleadings, though -- including the DOST reports submitted to this Court -- have not heretofore mentioned any statement, allegation or representation to the effect that a particular set of software was to be developed and/or delivered by the supplier in connection with the testing and acceptance of delivered ACMs. What the records do show is that the imported ACMs were subjected to the testing and acceptance process conducted by the DOST. Since the initial batch delivered included a high percentage of machines that had failed the tests, Comelec asked the DOST to conduct a 100 percent testing; that is, to test every single one of the ACMs delivered. Among the machines tested on October 8 to 18, 2003, were some units that had failed previous tests but had subsequently been re-tested and had passed. To repeat, however, until now, there has never been any mention of a second set or type of software pertaining to the testing and acceptance process. In any event, apart from making that misplaced and uncorroborated claim, Comelec in the same submission also professes (in response to the concerns expressed by this Court) that the reprogrammed software has been tested and found to have complied with the requirements of RA 8436. It reasoned thus: Since the software program is an inherent element in the automated counting system, the certification issued by the MIRDC-DOST that one thousand nine hundred seventy-three (1,973) units passed the acceptance test procedures is an official recognition by the MIRDC-DOST that the software component of the automated election system, which has been reprogrammed to comply with the provisions of Republic Act No. 8436 as prescribed in the Ad Hoc Technical Evaluation Commi ttees ACM Testing and Acceptance Manual, has passed the MIRDC-DOST tests. The facts do not support this sweeping statement of Comelec. A scrutiny of the MIRDC-DOST letter dated December 15, 2003,[52] which it relied upon, does not justify its grand conclusion. For claritys sake, we quote in full the letter-certification, as follows: 15 December 2003 HON. RESURRECCION Z. BORRA Commissioner-in-Charge Phase II, Modernization Project Commission on Elections Intramuros, Manila Attention: Atty. Jose M. Tolentino, Jr. Project Director Dear Commissioner Borra: We are pleased to submit 11 DOST Test Certifications representing 11 lots and c overing 158 units of automated counting machines (ACMs) that we have tested from 02-12 December 2003. To date, we have tested all the 1,991 units of ACMs, broken down as follow: (sic) 1st batch - 30 units 2nd batch - 288 units 3rd batch - 414 units 4th batch - 438 units 5th batch - 438 units 6th batch - 383 units

Purchase of the First Type of Software Without Evaluation In other words, the first type of software was to be developed solely for the purpose of enabling the evaluation of the bidders technical bid. Comelec explained thus: In addition to the presentation of the ACM hardware, the bidders were required to develop a base software prog ram that will enable the ACM to function properly. Since the software program utilized during the evaluation of bids is not the actual software program to be employed on election day, there being two (2) other types of software program that will still have to be developed and thoroughly tested prior to actual election day use, defects in the base software that can be readily corrected by reprogramming are considered minor in nature, and may therefore be waived. In short, Comelec claims that it evaluated the bids and made the decision to award the Contract to the winning bidder partly on the basis of the operation of the ACMs running a base software. That software was therefore nothing but a sample or demo software, which would not be the actual one that would be used on election day. Keeping in mind that the Contract involves the acquisition of not just the ACMs or the hardware, but also the software that would run them, it is now even clearer that the Contract was awarded without Comelec having seen, much less evaluated, the final product -- the software that would finally be utilized come election day. (Not even the near-final product, for that matter). What then was the point of conducting the bidding, when the software that was the subject of the Contract was still to be created and could conceivably undergo innumerable changes before being considered as being in final form? And that is not all! No Explanation for Lapses in the Second Type of Software The second phase, allegedly involving the second type of software, is simply denominated Testing and Acceptance Procedures. As best as we can construe, Comelec is claiming that this second type of software is also to be developed and delivered by the supplier in connection with the testing an d

It should be noted that a total of 18 units have failed the test. Out of these 18 units, only one (1) unit has failed the retest. Thank you and we hope you will find everything in order. Very truly yours, ROLANDO T. VILORIA, CESO III Executive Director cum

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Chairman, DOST-Technical Evaluation Committee Even a cursory glance at the foregoing letter shows that it is completely bereft of anything that would remotely support Comelecs contention that the software component of the automated election system x x x has been reprogrammed to comply with RA 8436, and has passed the MIRDC -DOST tests. There is no mention at all of any software reprogramming. If the MIRDC-DOST had indeed undertaken the supposed reprogramming and the process turned out to be successful, that agency would have proudly trumpeted its singular achievement. How Comelec came to believe that such reprogramming had been undertaken is unclear. In any event, the Commission is not forthright and candid with the factual details. If reprogramming has been done, who performed it and when? What exactly did the process involve? How can we be assured that it was properly performed? Since the facts attendant to the alleged reprogramming are still shrouded in mystery, the Court cannot give any weight to Comelecs bare allegations. The fact that a total of 1,973 of the machines has ultimately passed the MIRDC-DOST tests does not by itself serve as an endorsement of the soundness of the software program, much less as a proof that it has been reprogrammed. In the first place, nothing on record shows that the tests and re-tests conducted on the machines were intended to address the serious deficiencies noted earlier. As a matter of fact, the MIRDC-DOST letter does not even indicate what kinds of tests or re-tests were conducted, their exact nature and scope, and the specific objectives thereof. [53] The absence of relevant supporting documents, combined with the utter vagueness of the letter, certainly fails to inspire belief or to justify the expansive confidence displayed by Comelec. In any event, it goes without saying that remedial measures such as the alleged reprogramming cannot in any way mitigate the grave abuse of discretion already committed as early as April 15, 2003. Rationale of Public Bidding Negated by the Third Type of Software Respondent Comelec tries to assuage this Courts anxiety in these words: The reprogrammed software that has already passed the requirements of Republic Act No. 8436 during the MIRDC-DOST testing and acceptance procedures will require further customization since the following additional elements, among other things, will have to be considered before the final software can be used on election day: 1. Final Certified List of Candidates x x x 2. Project of Precincts x x x 3.Official Ballot Design and Security Features x x x 4.Encryption, digital certificates and digital signatures x x x. The certified list of candidates for national elective positions will be finalized on or before 23 January 2004 while the final list of projects of precincts will be prepared also on the same date. Once all the above elements are incorporated in the software program, the Test Certification Group created by the Ad Hoc Technical Evaluation Committee will conduct meticulous testing of the final software before the same can be used on election day. In addition to the testing to be conducted by said Test Certification Group, the Comelec will conduct mock elections in selected areas nationwide not only for purposes of public information but also to further test the final election day program. Public respondent Comelec, therefore, requests that it be given up to 16 February 2004 to comply with this requirement. The foregoing passage shows the imprudent approach adopted by Comelec in the bidding and acquisition process. The Commission says that before the software can be utilized on election day, it will require customization through addition of data -- like the list of candidates, project of precincts, and so on. And inasmuch as such data will become available only in January 2004 anyway, there is therefore no perceived need on Comelecs part to rush the supplier into producing the final (or near -final) version of the software before that time. In any case, Comelec argues that the software needed for the electoral exercise can be continuously developed, tested, adjusted and perfected, practically all the way up to election day, at the same time that the Commission is undertaking all the other distinct and diverse activities pertinent to the elections. Given such a frame of mind, it is no wonder that Comelec paid little attention to the counting and canvassing software during the entire bidding process, which took place in February-March 2003. Granted that the software was defective, could not detect and prevent the re-use of previously downloaded data or produce the audit trail -- aside from its other shortcomings -- nevertheless, all those deficiencies could still be corrected down the road. At any rate, the software used for bidding purposes

would not be the same one that will be used on election day, so why pay any attention to its defects? Or to the Comelecs own bidding rules for that matter? Clearly, such jumbled ratiocinations completely negate the rationale underlying the bidding process mandated by law. At the very outset, the Court has explained that Comelec flagrantly violated the public policy on public biddings (1) by allowing MPC/MPEI to participate in the bidding even though it was not qualified to do so; and (2) by eventually awarding the Contract to MPC/MPEI. Now, with the latest explanation given by Comelec, it is clear that the Commission further desecrated the law on public bidding by permitting the winning bidder to change and alter the subject of the Contract (the software), in effect allowing a substantive amendment without public bidding. This stance is contrary to settled jurisprudence requiring the strict application of pertinent rules, regulations and guidelines for public bidding for the purpose of placing each bidder, actual or potential, on the same footing. The essence of public bidding is, after all, an opportunity for fair competition, and a fair basis for the precise comparison of bids. In common parlance, public bidding aims to level the playing field. That means each bidder must bid under the same conditions; and be subject to the same guidelines, requirements and limitations, so that the best offer or lowest bid may be determined, all other things being equal. Thus, it is contrary to the very concept of public bidding to permit a variance between the conditions under which bids are invited and those under which proposals are submitted and approved; or, as in this case, the conditions under which the bid is won and those under which the awarded Contract will be complied with. The substantive amendment of the contract bidded out, without any public bidding -after the bidding process had been concluded -- is violative of the public policy on public biddings, as well as the spirit and intent of RA 8436. The whole point in going through the public bidding exercise was completely lost. The very rationale of public bidding was totally subverted by the Commission. From another perspective, the Comelec approach also fails to make sense. Granted that, before election day, the software would still have to be customized to each precinct, municipality, city, district, and so on, there still was nothing at all to prevent Comelec from requiring prospective suppliers/bidders to produce, at the very start of the bidding process, the next-to-final versions of the software (the best software the suppliers had) -- pre-tested and ready to be customized to the final list of candidates and project of precincts, among others, and ready to be deployed thereafter. The satisfaction of such requirement would probably have provided far better bases for evaluation and selection, as between suppliers, than the so-called demo software. Respondents contend that the bidding suppliers counting machines were previously used in at least one political exercise with no less than 20 million voters. If so, it stands to reason that the software used in that past electoral exercise would probably still be available and, in all likelihood, could have been adopted for use in this instance. Paying for machines and software of that category (already tried and proven in actual elections and ready to be adopted for use) would definitely make more sense than paying the same hundreds of millions of pesos for demo software and empty promises of usable programs in the future. But there is still another gut-level reason why the approach taken by Comelec is reprehensible. It rides on the perilous assumption that nothing would go wrong; and that, come election day, the Commission and the supplier would have developed, adjusted an d re-programmed the software to the point where the automated system could function as envisioned. But what if such optimistic projection does not materialize? What if, despite all their herculean efforts, the software now being hurriedly developed and tested for the automated system performs dismally and inaccurately or, worse, is hacked and/or manipulated?[54] What then will we do with all the machines and defective software already paid for in the amount of P849 million of our tax money? Even more important, what will happen to our country in case of failure of the automation? The Court cannot grant the plea of Comelec that it be given until February 16, 2004 to be able to submit a certification relative to the additional elements of the software that will be customized, because for us to do so would unnecessarily delay the resolution of this case and would just give the poll body an unwarranted excuse to postpone the 2004 elections. On the other hand, because such certification will not cure the gravely abusive actions complained of by petitioners, it will be utterly useless.

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Is this Court being overly pessimistic and perhaps even engaging in speculation? Hardly. Rather, the Court holds that Comelec should not have gambled on the unrealistic optimism that the suppliers software development efforts would turn out well. The Commission should have adopted a much more prudent and judicious approach to ensure the delivery of tried and tested software, and readied alternative courses of action in case of failure. Considering that the nations future is at stake here, it should have done no less.

court issued a temporary restraining order [effective "for a period of five (5) days notice " 7 ] and set the case for hearing on March 18, 1985. In disposing of the petition, the said court found the material issues to be: 1) Competency of this Court to act on petition filed by the petitioners; 2) Validity of the search warrants issued by respondent State Prosecutor; 3) Whether or not the petition has become moot and academic because all the search warrants sought to be quashed had already been implemented and executed. 8 On April 16, 1985, the lower court issued the first of its challenged Orders, and held:

CASES ON CHAPTER 2 Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 83578 March 16, 1989 THE PRESIDENTIAL ANTI-DOLLAR SALTING TASK FORCE, petitioner, vs. HONORABLE COURT OF APPEALS, HONORABLE TEOFILO L, GUADIZ, JR.,Presiding Judge, REGIONAL TRIAL COURT, Branch 147: NCR (MAKATI), and KARAMFIL IMPORTEXPORT CO., INC., respondents. K. V. Faylona & Associates for respondents.

WHEREFORE, in view of all the foregoing, the Court hereby declares Search Warrant Nos. 156, 157, 158, 159, 160, and 161 to be null and void. Accordingly, the respondents are hereby ordered to return and surrender immediately all the personal properties and documents seized by them from the petitioners by virtue of the aforementioned search warrants. SO ORDERED. 9 On August 21, 1985, the trial court denied reconsideration. On April 4, 1986, the Presidential Anti-Dollar Salting Task Force went to the respondent Court of Appeals to contest, on certiorari, the twin Order(s) of the lower court. In ruling initially for the Task Force, the Appellate Court held: Herein petitioner is a special quasi-judicial body with express powers enumerated under PD 1936 to prosecute foreign exchange violations defined and punished under P.D. No. 1883. The petitioner, in exercising its quasi-judicial powers, ranks with the Regional Trial Courts, and the latter in the case at bar had no jurisdiction to declare the search warrants in question null and void.

SARMIENTO, J.: The petitioner, the Presidential Anti-Dollar Salting Task Force, the President's arm assigned to investigate and prosecute so-called "dollar salting" activities in the country (per Presidential Decree No. 1936 as amended by Presidential Decree No. 2002), asks the Court to hold as null and void two Resolutions of the Court of Appeals, dated September 24, 1987 1 and May 20, 1988, 2 reversing its Decision, dated October 24, 1986. 3 The Decision set aside an Order, dated April 16, 1985, of the Regional Trial Court, 4 as well as its Order, dated August 21, 1985. The Resolution, dated September 24, 1987 disposed of, and granted, the private respondent Karamfil Import-Export Co., Inc.'s motion for reconsideration of the October 24, 1986 Decision; the Resolution dated May 20, 1988, in turn, denied the petitioner's own motion for reconsideration. The facts are not in controversy. We quote: On March 12, 1985, State Prosecutor Jose B. Rosales, who is assigned with the Presidential Anti-Dollar Salting Task Force hereinafter referred to as PADS Task Force for purposes of convenience, issued search warrants Nos. 156, 157, 158, 159, 160 and 161 against the petitioners Karamfil Import-Export Co., Inc., P & B Enterprises Co., Inc., Philippine Veterans Corporation, Philippine Veterans Development Corporation, Philippine Construction Development Corporation, Philippine Lauan Industries Corporation, Inter-trade Development (Alvin Aquino), Amelili U. Malaquiok Enterprises and Jaime P. Lucman Enterprises. The application for the issuance of said search warrants was filed by Atty. Napoleon Gatmaytan of the Bureau of Customs who is a deputized member of the PADS Task Force. Attached to the said application is the affidavit of Josefin M. Castro who is an operative and investigator of the PADS Task Force. Said Josefin M. Castro is likewise the sole deponent in the purported deposition to support the application for the issuance of the six (6) search warrants involved in this case. The application filed by Atty. Gatmaytan, the affidavit and deposition of Josefin M. Castro are all dated March 12, 1985. 5 Shortly thereafter, the private respondent (the petitioner below) went to the Regional Trial Court on a petition to enjoin the implementation of the search warrants in question. 6 On March 13, 1985, the trial

Besides as correctly pointed out by the Assistant Solicitor General the decision of the Presidential AntiDollar Salting Task Force is appealable to the Office of the President. 10 On November 12, 1986, Karamfil Import-Export Co., Inc. sought a reconsideration, on the question primarily of whether or not the Presidential Anti-Dollar Salting Task Force is "such other responsible officer' countenanced by the 1973 Constitution to issue warrants of search and seizure. As we have indicated, the Court of Appeals, on Karamfil's motion, reversed itself and issued its Resolution, dated September 1987, and subsequently, its Resolution, dated May 20, 1988, denying the petitioner's motion for reconsideration. In its petition to this Court, the petitioner alleges that in so issuing the Resolution(s) above-mentioned, the respondent Court of Appeals "committed grave abuse of discretion and/or acted in excess of its appellate jurisdiction," 11 specifically: a) In deviating from the settled policy and rulings of the Supreme Court that no Regional Trial Courts may countermand or restrain the enforcement of lawful writs or decrees issued by a quasi-judicial body of equal and coordinate rank, like the PADS Task Force; b) For resorting to judicial legislation to arrive at its erroneous basis for reconsidering its previous Decision dated October 24, 1986 (see Annex "I") and thus promulgated the questioned Resolutions (Annexes "A" and "B"), which violated the constitutional doctrine on separation of powers; c) In not resolving directly the other important issues raised by the petitioner in its Petition in CA-G.R. No. 08622-SP despite the fact that petitioner has demonstrated sufficiently and convincingly that respondent RTC, in issuing the questioned Orders in Special Proceeding No. M-624 (see Annexes "C" and 'D"), committed grave abuse of discretion and/or acted in excess of jurisdiction: 1. In ruling that (a) the description of the things to be seized as stated in the contested search warrant were too general which allegedly render the search warrants null and void; (b) the applications for the contested search warrants actually charged two offenses in contravention of the 2nd paragraph, Section 3, Rule 126

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of the Rules of Court; and (c) this case has not become moot and academic, even if the contested search warrants had already been fully implemented with positive results; and 2. In ruling that the petitioner PADS Task Force has not been granted under PD 1936 'judicial or quasijudicial jurisdiction. 12 We find, upon the foregoing facts, that the essential questions that confront us are- (i) is the Presidential Anti-Dollar Salting Task Force a quasi-judicial body, and one co-equal in rank and standing with the Regional Trial Court, and accordingly, beyond the latter's jurisdiction; and (ii) may the said presidential body be said to be "such other responsible officer as may be authorized by law" to issue search warrants under the 1973 Constitution questions we take up seriatim.** In submitting that it is a quasi-judicial entity, the petitioner states that it is endowed with "express powers and functions under PD No. 1936, to prosecute foreign exchange violations as defined and punished under PD No. 1883." 13 "By the very nature of its express powers as conferred by the laws," so it is contended, "which are decidedly quasi-judicial or discretionary function, such as to conduct preliminary investigation on the charges of foreign exchange violations, issue search warrants or warrants of arrest, hold departure orders, among others, and depending upon the evidence presented, to dismiss the charges or to file the corresponding information in court of Executive Order No. 934, PD No. 1936 and its Implementing Rules and Regulations effective August 26, 1984), petitioner exercises quasi-judicial power or the power of adjudication ." 14 The Court of Appeals, in its Resolution now assailed, 15 was of the opinion that "[t]he grant of quasijudicial powers to petitioner did not diminish the regular courts' judicial power of interpretation. The right to interpret a law and, if necessary to declare one unconstitutional, exclusively pertains to the judiciary. In assuming this function, courts do not proceed on the theory that the judiciary is superior to the two other coordinate branches of the government, but solely on the theory that they are required to declare the law in every case which come before them." 16 This Court finds the Appellate Court to be in error, since what the petitioner puts to question is the Regional Trial Court's act of assuming jurisdiction over the private respondent's petition below and its subsequent countermand of the Presidential Anti-Dollar Salting Task Force's orders of search and seizure, for the reason that the presidential body, as an entity (allegedly) coordinate and co-equal with the Regional Trial Court, was (is) not vested with such a jurisdiction. An examination of the Presidential Anti-Dollar Salting Task Force's petition shows indeed its recognition of judicial review (of the acts of Government) as a basic privilege of the courts. Its objection, precisely, is whether it is the Regional Trial Court, or the superior courts, that may undertake such a review. Under the Judiciary Reorganization Act of 1980, 17 the Court of Appeals exercises: (3) Exclusive appellate jurisdiction over all final judgments, decisions, resolutions, orders or awards of Regional Trial Court and quasi-judicial agencies, instrumentalities, boards or commissions, except those falling within the appellate jurisdiction of the Supreme Court in accordance with the Constitution, the provisions of this Act, and of subparagraph (1) of the third paragraph and subparagraph (4) of the fourth paragraph of Section 17 of the Judiciary Act of 1948. 18 xxx xxx xxx Under the present Constitution, with respect to its provisions on Constitutional Commissions, it is provided, in part that: ... Unless otherwise provided by this Constitution or by law, any decision, order, or ruling of each Commission may be brought to the Supreme Court on certiorari by the aggrieved party within thirty days from receipt of a copy thereof. 19 On the other hand, Regional Trial Courts have exclusive original jurisdiction: (6) In all cases not within the exclusive jurisdiction of any court, tribunal, person or body exercising judicial or quasi-judicial functions. 20 xxx xxx xxx Likewise:

... The Supreme Court may designate certain branches of the Regional Trial Court to handle exclusively criminal cases, juvenile and domestic relations cases, agrarian case, urban land reform cases which do not fall under the jurisdiction of quasi- judicial bodies and agencies and/or such other special cases as the Supreme Court may determine in the interest of a speedy and efficient administration of justice. 21 xxx xxx xxx Under our Resolution dated January 11, 1983: 22 ... The appeals to the Intermediate Appellate Court [now, Court of Appeals] from quasi-judicial bodies shall continue to be governed by the provisions of Republic Act No. 5434 insofar as the same is not inconsistent with the provisions of B.P. Blg. 129. 23 The pertinent provisions of Republic Act No. 5434 are as follows: SECTION 1. Appeals from specified agencies. Any provision of existing law or Rule of Court to the contrary notwithstanding, parties aggrieved by a final ruling, award, order, decision, or judgment of the Court of Agrarian Relations; the Secretary of Labor under Section 7 of Republic Act Numbered Six hundred and two, also known as the "Minimum Wage Law"; the Department of Labor under Section 23 of Republic Act Numbered Eight hundred seventy-five, also known as the "Industrial Peace Act"; the Land Registration Commission; the Securities and Exchange Commission; the Social Security Commission; the Civil Aeronautics Board; the Patent Office and the Agricultural Inventions Board, may appeal therefrom to the Court of Appeals, within the period and in the manner herein provided, whether the appeal involves questions of fact, mixed questions of fact and law, or questions of law, or all three kinds of questions. From final judgments or decisions of the Court of Appeals, the aggrieved party may appeal by certiorari to the Supreme Court as provided in Rule 45 of the Rules of Court. 24 Because of subsequent amendments, including the abolition of various special courts, 25 jurisdiction over quasi-judicial bodies has to be, consequently, determined by the corresponding amendatory statutes. Under the Labor Code, decisions and awards of the National Labor Relations Commission are final and executory, but, nevertheless, 'reviewable by this Court through a petition for certiorari and not by way of appeal." 26 Under the Property Registration Decree, decisions of the Commission of Land Registration, en consults, are appealable to the Court of Appeals. 27 The decisions of the Securities and Exchange Commission are likewise appealable to the Appellate Court, 28 and so are decisions of the Social Security Commission.29 As a rule, where legislation provides for an appeal from decisions of certain administrative bodies to the Court of Appeals, it means that such bodies are co-equal with the Regional Trial Courts, in terms of rank and stature, and logically, beyond the control of the latter. As we have observed, the question is whether or not the Presidential Anti-Dollar Salting Task Force is, in the first place, a quasi-judicial body, and one whose decisions may not be challenged before the regular courts, other than the higher tribunals the Court of Appeals and this Court. A quasi-judicial body has been defined as "an organ of government other than a court and other than a legislature, which affects the rights of private parties through either adjudication or rule making." 30 The most common types of such bodies have been listed as follows: (1) Agencies created to function in situations wherein the government is offering some gratuity, grant, or special privilege, like the defunct Philippine Veterans Board, Board on Pensions for Veterans, and NARRA, and Philippine Veterans Administration. (2) Agencies set up to function in situations wherein the government is seeking to carry on certain government functions, like the Bureau of Immigration, the Bureau of Internal Revenue, the Board of Special Inquiry and Board of Commissioners, the Civil Service Commission, the Central Bank of the Philippines. (3) Agencies set up to function in situations wherein the government is performing some business service for the public, like the Bureau of Posts, the Postal Savings Bank, Metropolitan Waterworks & Sewerage Authority, Philippine National Railways, the Civil Aeronautics Administration.

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(4) Agencies set up to function in situations wherein the government is seeking to regulate business affected with public interest, like the Fiber Inspections Board, the Philippine Patent Office, Office of the Insurance Commissioner. (5) Agencies set up to function in situations wherein the government is seeking under the police power to regulate private business and individuals, like the Securities & Exchange Commission, Board of Food Inspectors, the Board of Review for Moving Pictures, and the Professional Regulation Commission. (6) Agencies set up to function in situations wherein the government is seeking to adjust individual controversies because of some strong social policy involved, such as the National Labor Relations Commission, the Court of Agrarian Relations, the Regional Offices of the Ministry of Labor, the Social Security Commission, Bureau of Labor Standards, Women and Minors Bureau. 31 As may be seen, it is the basic function of these bodies to adjudicate claims and/or to determine rights, and unless its decision are seasonably appealed to the proper reviewing authorities, the same attain finality and become executory. A perusal of the Presidential Anti-Dollar Salting Task Force's organic act, Presidential Decree No. 1936, as amended by Presidential Decree No. 2002, convinces the Court that the Task Force was not meant to exercise quasi-judicial functions, that is, to try and decide claims and execute its judgments. As the President's arm called upon to combat the vice of "dollar salting" or the blackmarketing and salting of foreign exchange, 32 it is tasked alone by the Decree to handle the prosecution of such activities, but nothing more. We quote: SECTION 1. Powers of the Presidential Anti-Dollar Salting Task Force.-The Presidential Anti-Dollar Salting Task Force, hereinafter referred to as Task Force, shall have the following powers and authority: a) Motu proprio or upon complaint, to investigate and prosecute all dollar salting activities, including the overvaluation of imports and the undervaluation of exports; b) To administer oaths, summon persons or issue subpoenas requiring the attendance and testimony of witnesses or the production of such books, papers, contracts, records, statements of accounts, agreements, and other as may be necessary in the conduct of investigation; c) To appoint or designate experts, consultants, state prosecutors or fiscals, investigators and hearing officers to assist the Task Force in the discharge of its duties and responsibilities; gather data, information or documents; conduct hearings, receive evidence, both oral and documentary, in all cases involving violation of foreign exchange laws or regulations; and submit reports containing findings and recommendations for consideration of appropriate authorities; d) To punish direct and indirect contempts with the appropriate penalties therefor under Rule 71 of the Rules of Court; and to adopt such measures and take such actions as may be necessary to implement this Decree. xxx xxx xxx f. After due investigation but prior to the filing of the appropriate criminal charges with the fiscal's office or the courts as the case may be, to impose a fine and/or administrative sanctions as the circumstances warrant, upon any person found committing or to have committed acts constituting blackmarketing or salting abroad of foreign exchange, provided said person voluntarily admits the facts and circumstances constituting the offense and presents proof that the foreign exchange retained abroad has already been brought into the country. Thereafter, no further civil or criminal action may be instituted against said person before any other judicial regulatory or administrative body for violation of Presidential Decree No. 1883. The amount of the fine shall be determined by the Chairman of the Presidential Anti- Dollar Salting Task Force and paid in Pesos taking into consideration the amount of foreign exchange retained abroad, the exchange rate differentials, uncollected taxes and duties thereon, undeclared profits, interest rates and such other relevant factors. The fine shall be paid to the Task Force which shall retain Twenty percent (20 %) thereof. The informer, if any, shall be entitled to Twenty percent (20 %) of the fine. Should there be no informer, the Task Force shall be entitle to retain Forty percent (40 %) of the fine and the balance shall accrue to the general funds

of the National government. The amount of the fine to be retained by the Task Force shall form part of its Confidential Fund and be utilized for the operations of the Task Force . 33 The Court sees nothing in the aforequoted provisions (except with respect to the Task Force's powers to issue search warrants) that will reveal a legislative intendment to confer it with quasi-judicial responsibilities relative to offenses punished by Presidential Decree No. 1883. Its undertaking, as we said, is simply, to determine whether or not probable cause exists to warrant the filing of charges with the proper court, meaning to say, to conduct an inquiry preliminary to a judicial recourse, and to recommend action "of appropriate authorities". It is not unlike a fiscal's office that conducts a preliminary investigation to determine whether or not prima facie evidence exists to justify haling the respondent to court, and yet, while it makes that determination, it cannot be said to be acting as a quasi-court. For it is the courts, ultimately, that pass judgment on the accused, not the fiscal. It is not unlike the Presidential Commission on Good Government either, the executive body appointed to investigate and prosecute cases involving "ill-gotten wealth". It had been vested with enormous powers, like the issuance of writs of sequestration, freeze orders, and similar processes, but that did not, on account thereof alone, make it a quasi-judicial entity as defined by recognized authorities. It cannot pronounce judgement of the accused's culpability, the jurisdiction to do which is exclusive upon the Sandiganbayan. 34 If the Presidential Anti-Dollar Salting Task Force is not, hence, a quasi-judicial body, it cannot be said to be co-equal or coordinate with the Regional Trial Court. There is nothing in its enabling statutes that would demonstrate its standing at par with the said court. In that respect, we do not find error in the respondent Court of Appeal's resolution sustaining the assumption of jurisdiction by the court a quo. It will not do to say that the fact that the Presidential Task Force has been empowered to issue warrants of arrest, search, and seizure, makes it, ergo, a "semi-court". Precisely, it is the objection interposed by the private respondent, whether or not it can under the 1973 Charter, issue such kinds of processes. It must be observed that under the present Constitution, the powers of arrest and search are exclusive upon judges. 35 To that extent, the case has become moot and academic. Nevertheless, since the question has been specifically put to the Court, we find it unavoidable to resolve it as the final arbiter of legal controversies, pursuant to the provisions of the 1973 Constitution during whose regime the case was commenced. Since the 1973 Constitution took force and effect and until it was so unceremoniously discarded in 1986, its provisions conferring the power to issue arrest and search warrants upon an officer, other than a judge, by fiat of legislation have been at best controversial. In Lim v. Ponce de Leon, 36 a 1975 decision, this Court ruled that a fiscal has no authority to issue search warrants, but held in the same vein that, by virtue of the responsible officer" clause of the 1973 Bill of Rights, "any lawful officer authorized by law can issue a search warrant or warrant of arrest.37 Authorities, however, have continued to express reservations whether or not fiscals may, by statute, be given such a power. 38 Less than a year later, we promulgated Collector of Customs v. Villaluz, 39 in which we categorically averred: Until now only the judge can issue the warrant of arrest." 40 "No law or presidential decree has been enacted or promulgated vesting the same authority in a particular responsible officer ." 41 Apparently, Villaluz had settled the debate, but the same question persisted following this Courts subsequent rulings upholding the President's alleged emergency arrest powers . 42 [Mr. Justice Hugo Gutierrez would hold, however, that a Presidential Commitment Order (PCO) is (was) not a species of "arrest" in its technical sense, and that the (deposed) Chief Executive, in issuing one, does not do so in his capacity as a "responsible officer" under the 1973 Charter, but rather, as Commander-in-Chief of the Armed Forces in times of emergency, or in order to carry out the deportation of undesirable aliens. 43 In the distinguished Justice's opinion then, these are acts that can be done without need of judicial intervention because they are not, precisely, judicial but Presidential actions.] In Ponsica v. Ignalaga,44 however, we held that the mayor has been made a "responsible officer' by the Local Government Code, 45 but had ceased to be one with the approval of the 1987 Constitution according judges sole authority to issue arrest and search warrants. But in the same breath, we did not rule the grant under the Code unconstitutional based on the provisions of the former Constitution. We were

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agreed, though, that the "responsible officer" referred to by the fundamental law should be one capable of approximating "the cold neutrality of an impartial judge." 46 In striking down Presidential Decree No. 1936 the respondent Court relied on American jurisprudence, notably,Katz v. United States, 47 Johnson v. United States, 48 and Coolidge v. New Hampshire 49 in which the American Supreme Court ruled that prosecutors (like the petitioner) cannot be given such powers because of their incapacity for a "detached scrutiny" 50 of the cases before them. We affirm the Appellate Court. We agree that the Presidential Anti-Dollar Salting Task Force exercises, or was meant to exercise, prosecutorial powers, and on that ground, it cannot be said to be a neutral and detached "judge" to determine the existence of probable cause for purposes of arrest or search. Unlike a magistrate, a prosecutor is naturally interested in the success of his case. Although his office "is to see that justice is done and not necessarily to secure the conviction of the person accused," 51 he stands, invariably, as the accused's adversary and his accuser. To permit him to issue search warrants and indeed, warrants of arrest, is to make him both judge and jury in his own right, when he is neither. That makes, to our mind and to that extent, Presidential Decree No. 1936 as amended by Presidential Decree No. 2002, unconstitutional. It is our ruling, thus, that when the 1973 Constitution spoke of "responsible officer" to whom the authority to issue arrest and search warrants may be delegated by legislation, it did not furnish the legislator with the license to give that authority to whomsoever it pleased. It is to be noted that the Charter itself makes the qualification that the officer himself must be "responsible". We are not saying, of course, that the Presidential Anti-Dollar Salting Task Force (or any similar prosecutor) is or has been irresponsible in discharging its duty. Rather, we take "responsibility", as used by the Constitution, to mean not only skill and competence but more significantly, neutrality and independence comparable to the impartiality presumed of a judicial officer. A prosecutor can in no manner be said to be possessed of the latter qualities. According to the Court of Appeals, the implied exclusion of prosecutors under the 1973 Constitution was founded on the requirements of due process, notably, the assurance to the respondent of an unbiased inquiry of the charges against him prior to the arrest of his person or seizure of his property. We add that the exclusion is also demanded by the principle of separation of powers on which our republican structure rests. Prosecutors exercise essentially an executive function (the petitioner itself is chaired by the Minister, now Secretary, of Trade and Industry), since under the Constitution, the President has pledged to execute the laws. 52 As such, they cannot be made to issue judicial processes without unlawfully impinging the prerogative of the courts. At any rate, Ponsica v. Ignalaga should foreclose all questions on the matter, although the Court hopes that this disposition has clarified a controversy that had generated often bitter debates and bickerings. The Court joins the Government in its campaign against the scourge of "dollar- salting", a pernicious practice that has substantially drained the nation's coffers and has seriously threatened its economy. We recognize the menace it has posed (and continues to pose) unto the very stability of the country, the urgency for tough measures designed to contain if not eradicate it, and foremost, the need for cooperation from the citizenry in an all-out campaign. But while we support the State's efforts, we do so not at the expense of fundamental rights and liberties and constitutional safeguards against arbitrary and unreasonable acts of Government. If in the event that as a result of this ruling, we prove to be an "obstacle" to the vital endeavour of stamping out the blackmarketing of valuable foreign exchange, we do not relish it and certainly, do not mean it. The Constitution simply does not leave us much choice. WHEREFORE, the petition is DISMISSED. No costs. SO ORDERED. SECOND DIVISION [G.R. No. 135945. March 7, 2001] THE UNITED RESIDENTS OF DOMINICAN HILL, INC., represented by its President RODRIGO S. MACARIO, SR., petitioner, vs. COMMISSION ON THE SETTLEMENT OF LAND PROBLEMS, represented by its Commissioner, RUFINO V. MIJARES; MARIO PADILAN, PONCIANO BASILAN, HIPOLITO ESLAVA, WILLIAM LUMPISA, PACITO MOISES, DIONISIO ANAS, NOLI DANGLA, NAPOLEON BALESTEROS, ELSIE MOISES, SEBIO LACWASAN, BEN FLORES, DOMINGO CANUTAB, MARCELINO GABRIANO, TINA TARNATE, ANDREW ABRAZADO, DANNY LEDDA, FERNANDO DAYAO, JONATHAN DE LA PENA, JERRY PASSION, PETER AGUINSOD, and LOLITA DURAN, respondents. DECISION DE LEON, JR., J.: Before us is a petition for prohibition and declaratory relief seeking the annulment of a status quo order[1] dated September 29, 1998 issued by the public respondent Commission on the Settlement of Land Problems (COSLAP, for brevity) in COSLAP Case No. 98-253. The facts are: The property being fought over by the parties is a 10.36-hectare property in Baguio City called Dominican Hills, formerly registered in the name of Diplomat Hills, Inc. It appeared that the property was mortgaged to the United Coconut Planters Bank (UCPB) which eventually foreclosed the mortgage thereon and acquired the same as highest bidder. On April 11, 1983, it was donated to the Republic of the Philippines by UCPB through its President, Eduardo Cojuangco. The deed of donation stipulated that Dominican Hills would be utilized for the priority programs, projects, activities in human settlements and economic development and governmental purposes of the Ministry of Human Settlements. On December 12, 1986, the then President Corazon C. Aquino issued Executive Order No. 85 abolishing the Office of Media Affairs and the Ministry of Human Settlements. All agencies under the latters supervision as well as all its assets, programs and projects, were transferred to the Presidential Management Staff (PMS).[2] On October 18, 1988, the PMS received an application from petitioner UNITED RESIDENTS OF DOMINICAN HILL, INC. (UNITED, for brevity), a community housing association composed of nonreal property owning residents of Baguio City, to acquire a portion of the Dominican Hills property. On February 2, 1990, PMS Secretary Elfren Cruz referred the application to the HOME INSURANCE GUARANTY CORPORATION (HIGC). HIGC consented to act as originator for UNITED.[3]Accordingly, on May 9, 1990, a Memorandum of Agreement was signed by and among the PMS, the HIGC, and UNITED. The Memorandum of Agreement called for the PMS to sell the Dominican Hills property to HIGC which would, in turn, sell the same to UNITED. The parties agreed on a selling price of P75.00 per square meter. Thus, on June 12, 1991, HIGC sold 2.48 hectares of the property to UNITED. The deed of conditional sale provided that ten (10) per cent of the purchase price would be paid upon signing, with the balance to be amortized within one year from its date of execution. After UNITED made its final payment on January 31, 1992, HIGC executed a Deed of Absolute Sale dated July 1, 1992. Petitioner alleges that sometime in 1993, private respondents entered the Dominican Hills property allocated to UNITED and constructed houses thereon. Petitioner was able to secure a demolition order from the city mayor.[4]

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Unable to stop the razing of their houses, private respondents, under the name DOMINICAN HILL BAGUIO RESIDENTS HOMELESS ASSOCIATION (ASSOCIATION, for brevity) filed an action [5] for injunction docketed as Civil Case No. 3316-R, in the Regional Trial Court of Baguio City, Branch 4. Private respondents were able to obtain a temporary restraining order but their prayer for a writ of preliminary injunction was later denied in an Order dated March 18, 1996. [6] While Civil Case No. 3316-R was pending, the ASSOCIATION, this time represented by the Land Reform Beneficiaries Association, Inc. (BENEFICIARIES, for brevity), filed Civil Case No. 3382-R before Branch 61 of the same court. The complaint[7]prayed for damages, injunction and annulment of the said Memorandum of Agreement between UNITED and HIGC. Upon motion of UNITED, the trial court in an Order dated May 27, 1996 dismissed Civil Case No. 3382-R.[8] The said Order of dismissal is currently on appeal with the Court of Appeals.[9] Demolition Order No. 1-96 was subsequently implemented by the Office of the City Mayor and the City Engineers Office of Baguio City. However, petitioner avers that private respondents returned and reconstructed the demolished structures. To forestall the re-implementation of the demolition order, private respondents filed on September 29, 1998 a petition[10] for annulment of contracts with prayer for a temporary restraining order, docketed as COSLAP Case No. 98-253, in the Commission on the Settlement of Land Problems (COSLAP) against petitioner, HIGC, PMS, the City Engineers Office, the City Mayor, as well as the Register of Deeds of Baguio City. On the very same day, public respondent COSLAP issued the contested order requiring the parties to maintain the status quo. Without filing a motion for reconsideration from the aforesaid status quo order, petitioner filed the instant petition questioning the jurisdiction of the COSLAP. The issues we are called upon to resolve are: 1 IS THE COMMISSION ON THE SETTLEMENT OF LAND PROBLEMS [COSLAP] CREATED UNDER EXECUTIVE ORDER NO. 561 BY THE OFFICE OF THE PHILIPPINES [sic] EMPOWERED TO HEAR AND TRY A PETITION FOR ANNULMENT OF CONTRACTS WITH PRAYER FOR A TEMPORARY RESTRAINING ORDER AND THUS, ARROGATE UNTO ITSELF THE POWER TO ISSUE STATUS QUO ORDER AND CONDUCT A HEARING THEREOF [sic]? 2 ASSUMING THAT THE COMMISSION ON THE SETTLEMENT OF LAND PROBLEMS [COSLAP] HAS JURISDICTION ON THE MATTER, IS IT EXEMPTED FROM OBSERVING A CLEAR CASE OF FORUM SHOPPING ON THE PART OF THE PRIVATE RESPONDENTS? To the extent that the instant case is denominated as one for declaratory relief, we initially clarify that we do not possess original jurisdiction to entertain such petitions.[11] Such is vested in the Regional Trial Courts.[12] Accordingly, we shall limit our review to ascertaining if the proceedings before public respondent COSLAP are without or in excess of its jurisdiction. In this wise, a recounting of the history of the COSLAP may provide useful insights into the extent of its powers and functions. The COSLAP was created by virtue of Executive Order No. 561 dated September 21, 1979. Its forerunner was the Presidential Action Committee on Land Problems (PACLAP) founded on July 31, 1970 by virtue of Executive Order No. 251. As originally conceived, the committee was tasked to expedite and coordinate the investigation and resolution of land disputes, streamline and shorten administrative procedures, adopt bold and decisive measures to solve land problems, and/or recommend other solutions. It was given the power to issue subpoenas duces tecum and ad testificandum and to call upon any department, office, agency or instrumentality of the government, including government owned or controlled corporations and local government units, for assistance in the performance of its functions. At the time, the PACLAP did not exercise quasi-judicial functions. On March 19, 1971, Executive Order No. 305 was issued reconstituting the PACLAP. [13] The committee was given exclusive jurisdiction over all cases involving public lands and other lands of the public domain and accordingly was tasked:

1. To investigate, coordinate, and resolve expeditiously land disputes, streamline administrative procedures, and in general, to adopt bold and decisive measures to solve problems involving public lands and lands of the public domain; 2. To coordinate and integrate the activities of all government agencies having to do with public lands or lands of the public domain; 3. To study and review present policies as embodied in land laws and administrative rules and regulations, in relation to the needs for land of the agro-industrial sector and small farmers, with the end in view to evolving and recommending new laws and policies and establishing priorities in the grant of public land, and the simplification of processing of land applications in order to relieve the small man from the complexities of existing laws, rules and regulations; 4. To evolve and implement a system for the speedy investigation and resolution of land disputes; 5. To receive all complaints of settlers and small farmers, involving public lands or other lands of the public domain; 6. To look into the conflicts between Christians and non-Christians, between corporations and small settlers and farmers; cause the speedy settlement of such conflicts in accordance with priorities or policies established by the Committee; and 7. To perform such other functions as may be assigned to it by the President. Thereafter, the PACLAP was reorganized pursuant to Presidential Decree No. 832 dated November 27, 1975.[14] Its jurisdiction was revised thus: xxx xxx xxx

2. Refer for immediate action any land problem or dispute brought to the attention of the PACLAP, to any member agency having jurisdiction thereof: Provided, that when the Executive Committee decides to act on a case, its resolution, order or decision thereon, shall have the force and effect of a regular administrative resolution, order or decision, and shall be binding upon the parties therein involved and upon the member agency having jurisdiction thereof; xxx xxx xxx

Notably, the said Presidential Decree No. 832 did not contain any provision for judicial review of the resolutions, orders or decisions of the PACLAP. On September 21, 1979, the PACLAP was abolished and its functions transferred to the present Commission on the Settlement of Land Problems by virtue of Executive Order No. 561. This reorganization, effected in line with Presidential Decree No. 1416, brought the COSLAP directly under the Office of the President.[15] It was only at this time that a provision for judicial review was made from resolutions, orders or decisions of the said agency, as embodied in section 3(2) thereof, to wit: Powers and functions.The Commission shall have the following powers and functions: 1. Coordinate the activities, particularly the investigation work, of the various government offices and agencies involved in the settlement of land problems or disputes, and streamline administrative procedures to relieve small settlers and landholders and members of cultural minorities of the expense and timeconsuming delay attendant to the solution of such problems or disputes; 2. Refer and follow-up for immediate action by the agency having appropriate jurisdiction any land problem or dispute referred to the Commission: Provided, that the Commission may, in the following cases, assume jurisdiction and resolve land problems or disputes which are critical and explosive in nature considering, for instance, the large number of the parties involved, the presence or emergence of social tension or unrest, or other similar critical situations requiring immediate action: (a) (b) (c) Between occupants/squatters and pasture lease agreement holders or timber concessionaires; Between occupants/squatters and government reservation grantees; Between occupants/squatters and public land claimants or applicants;

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(d) (e)

Petitions for classification, release and/or subdivision of lands of the public domain; and Other similar land problems of grave urgency and magnitude.

The Commission shall promulgate such rules of procedure as will insure expeditious resolution and action on the above cases. The resolution, order or decision of the Commission on any of the foregoing cases shall have the force and effect of a regular administrative resolution, order or decision and shall be binding upon the parties therein and upon the agency having jurisdiction over the same. Said resolution, order or decision shall become final and executory within thirty (30) days from its promulgation and shall be appealable by certiorari only to the Supreme Court. xxx xxx xxx

refer to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations.[22] Applying the principle in statutory construction of ejusdem generis, i.e., where general words follow an enumeration or persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of the same kind or class as those specifically mentioned,[23] section 3(2) of Executive Order 561 patently indicates that the COSLAPs dispositions are binding on administrative or executive agencies. The history of the COSLAP itself bolsters this view. Prior enactments enumerated its member agencies among which it was to exercise a coordinating function. The COSLAP discharges quasi-judicial functions: Quasi-judicial function is a term which applies to the actions, discretion, etc. of public administrative officers or bodies, who are required to investigate facts, or ascertain the existence of facts, hold hearings, and draw conclusions from them, as a basis for their official action and to exercise discretion of a judicial nature.[24] However, it does not depart from its basic nature as an administrative agency, albeit one that exercises quasi-judicial functions. Still, administrative agencies are not considered courts; they are neither part of the judicial system nor are they deemed judicial tribunals.[25] The doctrine of separation of powers observed in our system of government reposes the three (3) great powers into its three (3) branches the legislative, the executive, and the judiciary each department being co-equal and coordinate, and supreme in its own sphere. Accordingly, the executive department may not, by its own fiat, impose the judgment of one of its own agencies, upon the judiciary. Indeed, under the expanded jurisdiction of the Supreme Court, it is empowered to determine whether or not there has been grave abuse of discretion amounting to lack of or excess of jurisdiction on the part of any branch or instrumentality of the Gov ernment.[26] There is an equally persuasive reason to grant the petition. As an additional ground for the annulment of the assailed status quo order of COSLAP, UNITED accuses private respondents of engaging in forum shopping. Forum shopping exists when a party repetitively avail[s] of several judicial remedies in different courts, simultaneously or successively, all substantially founded on the same transactions and the same essential facts and circumstances, and all raising substantially the same issues either pending in, or already resolved adversely by some other court.[27] In this connection, Supreme Court Administrative Circular No. 04-94 dated February 8, 1994 provides: Revised Circular No. 28-91, dated February 8, 1994, applies to and governs the filing of petitions in the Supreme Court and the Court of Appeals and is intended to prevent the multiple filing of petitions or complaints involving the same issues in other tribunals or agencies as a form of forum shopping. Complementary thereto and for the same purpose, the following requirements, in addition to those in pertinent provisions of the Rules of Court and existing circulars, shall be strictly complied with in the filing of complaints, petitions, applications or other initiatory pleadings in all courts and agencies other than the Supreme Court and the Court of Appeals and shall be subject to the sanctions provided hereunder. 1. The plaintiff, petitioner, applicant or principal party seeking relief in the complaint, petition, application or other initiatory pleading shall certify under oath in such original pleading, or in a sworn certification annexed thereto and simultaneously filed therewith, to the truth of the following facts and undertakings: (a) he has not theretofore commenced any other action or proceeding involving the same issues in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (b) to the best of his knowledge, no such action or proceedings is pending in the Supreme Court, the Court of Appeals, or any other tribunal or agency; (c) if there is any such action or proceeding which is either pending or may have been terminated, he must state the status thereof; and (d) if he should thereafter learn that a similar action or proceeding has been filed or is pending before the Supreme Court, the Court of Appeals or any other tribunal or agency, he undertakes to report that fact within five (5) days therefrom to the court or agency wherein the original pleading and sworn certification contemplated herein have been filed. The complaint and other initiatory pleadings referred to and subject of this Circular are the original civil complaint, counterclaim, cross-claim, third (fourth, etc.) party complaint, or complaint-in-intervention, petition, or application wherein a party asserts his claim for relief.

In the performance of its functions and discharge of its duties, the Commission is authorized, through the Commissioner, to issue subpoena and subpoena duces tecum for the appearance of witnesses and the production of records, books and documents before it. It may also call upon any ministry, office, agency or instrumentality of the National Government, including government-owned or controlled corporations, and local governments for assistance. This authority is likewise, conferred upon the provincial offices as may be established pursuant to Section 5 of this Executive Order. In Baaga v. Commission on the Settlement of Land Problems,[16] we characterized the COSLAPs jurisdiction as being general in nature, as follows: Petitioners also contend in their petition that the COSLAP itself has no jurisdiction to resolve the protest and counter-protest of the parties because its power to resolve land problems is confined to those cases which are critical and explosive in nature. This contention is devoid of merit. It is true that Executive Order No. 561 provides that the COSLAP may take cognizance of cases which are critical and explosive in nature considering, for instance, the large number of parties involved, the presence or emergence of social tension or unrest, or other similar critical situations requiring immediate action. However, the use of the word may does not mean that the COSLAPs jurisdiction is merely confined to the above mentioned cases. The provisions of the said Executive Order are clear that the COSLAP was created as a means of providing a more effective mechanism for the expeditious settlement of land problems in general, which are frequently the source of conflicts among settlers, landowners and cultural minorities. Besides, the COSLAP merely took over from the abolished PACLAP whose functions, including its jurisdiction, power and authority to act on, decide and resolve land disputes (Sec. 2, P.D. No. 832) were all assumed by it. The said Executive Order No. 561 containing said provision, being enacted only on September 21, 1979, cannot affect the exercise of jurisdiction of the PACLAP Provincial Committee of Koronadal on September 29, 1978. Neither can it affect the decision of the COSLAP which merely affirmed said exercise of jurisdiction. Given the facts of the case, it is our view that the COSLAP is not justified in assuming jurisdiction over the controversy. As matters stand, it is not the judiciarys place to question the wisdom behind a law;[17] our task is to interpret the law. We feel compelled to observe, though, that by reason of the ambiguous terminology employed in Executive Order No. 561, the power to assume jurisdiction granted to the COSLAP provides an ideal breeding ground for forum shopping, as we shall explain subsequently. Suffice it to state at this stage that the COSLAP may not assume jurisdiction over cases which are already pending in the regular courts. The reason is simple. Section 3(2) of Executive Order 561 speaks of any resolution, order or decision of the COSLAP as having the force and effect of a regular administrative resolution, order or decision. The qualification places an unmistakable emphasis on the administrative character of the COSLAPs determinations, amplified by the statement that such resolutions, orders or decisions shall be binding upon the parties therein and upon the agency having jurisdiction over the same. An agency is defined by statute as any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein.[18] A department, on the other hand, refers to an executive department created by law.[19] Whereas, a bureau is understood to refer to any principal subdivision of any department.[20] In turn, an office refers, within the framework of governmental organization, to any major functional unit of a department or bureau including regional offices. It may also refer to any position held or occupied by individual persons, whose functions are defined by law or regulation. [21] An instrumentality is deemed to

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2. Any violation of this Circular shall be a cause for the dismissal of the complaint, petition, application or other initiatory pleading, upon motion and after hearing. However, any clearly willful and deliberate forum shopping by any other party and his counsel through the filing of multiple complaints or other initiatory pleadings to obtain favorable action shall be a ground for the summary dismissal thereof and shall constitute contempt of court. Furthermore, the submission of a false certification or non-compliance with the undertakings therein, as provided in Paragraph 1 hereof, shall constitute indirect contempt of court, without prejudice to disciplinary proceedings against the counsel and the filing of a criminal action against the party. [italics supplied] xxx xxx xxx

In this connection, we expounded on forum shopping in Viva Productions, Inc. v. Court of Appeals[33] that: Private respondents intention to engage in forum shopping becomes manifest with undoubted clarity upon the following considerations. Notably, if not only to ensure the issuance of an injunctive relief, the significance of the action for damages before theMakati court would be nil. What damages against private respondent would there be to speak about if the Paraaque court already enjoins the performance of the very same act complained of in the Makati court? Evidently, the action for damages is premature if not for the preliminary injunctive relief sought. Thus, we find grave abuse of discretion on the part of the Makati court, being a mere co-equal of the Paraaque court, in not giving due deference to the latter before which the issue of the alleged violation of thesub-judice rule had already been raised and submitted. In such instance, the Makati court, if it was wary of dismissing the action outrightly under Administrative Circular No. 04-94, should have, at least, ordered the consolidation of its case with that of theParaaque court, which had first acquired jurisdiction over the related case xxx, or it should have suspended the proceedings until the Paraaque court may have ruled on the issue xxx. xxx xxx xxx

The said Administrative Circulars use of the auxiliary verb shall imports an imperative obligation xxx inconsistent with the idea of discretion.[28] Hence, compliance therewith is mandatory.[29] It bears stressing that there is a material distinction between the requirement of submission of the certification against forum shopping from the undertakings stated therein. Accordingly, xxx [f]ailure to comply with this requirement cannot be excused by the fact that plaintiff is not guilty of forum shopping. The Court of Appeals, therefore, erred in concluding that Administrative Circular No. 04-94 did not apply to private respondents case merely because her complaint was not based on petitioners cause of action. The Circular applies to any complaint, petition, application, or other initiatory pleading, regardless of whether the party filing it has actually committed forum shopping. Every party filing a complaint or any other initiatory pleading is required to swear under oath that he has not committed nor will he commit forum shopping. Otherwise, we would have an absurd situation where the parties themselves would be the judge of whether their actions constitute a violation of said Circular, and compliance therewith would depend on their belief that they might or might not have violated the requirement. Such interpretation of the requirement would defeat the very purpose of Circular 04-94. Indeed, compliance with the certification against forum shopping is separate from, and independent of, the avoidance of forum shopping itself. Thus, there is a difference in the treatmentin terms of imposable sanctionsbetween failure to comply with the certification requirement and violation of the prohibition against forum shopping. The former is merely a cause for the dismissal, without prejudice, of the complaint or initiatory pleading, while the latter is a ground for summary dismissal thereof and constitutes direct contempt.[30] A scrutiny of the pleadings filed before the trial courts and the COSLAP sufficiently establishes private respondents propensity for forum shopping. We lay the premise that the certification against forum shopping must be executed by the plaintiff or principal party, and not by his counsel.[31] Hence, one can deduce that the certification is a peculiar personal representation on the part of the principal party, an assurance given to the court or other tribunal that there are no other pending cases involving basically the same parties, issues and causes of action. In the case at bar, private respondents litany of omissions range from failing to submit the required certification against forum shopping to filing a false certification, and then to forum shopping itself. First, the petition filed before the COSLAP conspicuously lacked a certification against forum shopping. Second, it does not appear from the record that the ASSOCIATION informed Branch 4 of the Regional Trial Court of Baguio City before which Civil Case No. 3316-R was pending, that another action, Civil Case No. 3382-R, was filed before Branch 61 of the same court. Another group of homeless residents of Dominican Hill, the LAND REFORM BENEFICIARIES ASSOCIATION, INC. initiated the latter case. The aforesaid plaintiff, however, does not hesitate to admit that it filed the second case in representation of private respondent, as one of its affiliates. In the same manner, the certification against forum shopping accompanying the complaint in Civil Case No. 3382-R does not mention the pendency of Civil Case No. 3316-R. In fact, the opposite assurance was given, that there was no action pending before any other tribunal. Another transgression is that both branches of the trial court do not appear to have been notified of the filing of the subject COSLAP Case No. 98-253. It is evident from the foregoing facts that private respondents, in filing multiple petitions, have mocked our attempts to eradicate forum shopping and have thereby upset the orderly administration of justice. They sought recourse from three (3) different tribunals in order to obtain the writ of injunction they so desperately desired. The willful attempt by private respondents to obtain a preliminary injunction in another court after it failed to acquire the same from the original court constitutes grave abuse of the judicial process.[32]

Thus, while we might admit that the causes of action before the Makati court and the Paraaque court are distinct, and that private respondent cannot seek civil indemnity in the contempt proceedings, the same being in the nature of criminal contempt, we nonetheless cannot ignore private respondents intention of seeking exactly identical reliefs when it sought the preliminary relief of injunction in the Makati court. As earlier indicated, had private respondent been completely in good faith, there would have been no hindrance in filing the action for damages with the regional trial court of Paraaque and having it consolidated with the contempt proceedings before Branch 274, so that the same issue on the alleged violation of the sub judice rule will not have to be passed upon twice, and there would be no possibility of having two courts of concurrent jurisdiction making two conflicting resolutions. Yet from another angle, it may be said that when the Paraaque court acquired jurisdiction over the said issue, it excluded all other courts of concurrent jurisdiction from acquiring jurisdiction over the same. To hold otherwise would be to risk instances where courts of concurrent jurisdiction might have conflicting orders. This will create havoc and result in an extremely disordered administration of justice. Therefore, even on the assumption that the Makati court may acquire jurisdiction over the subject matter of the action for damages, without prejudice to the application of Administrative Circular No. 04-94, it cannot nonetheless acquire jurisdiction over the issue of whether or not petitioner has violated the sub judice rule. At best, the Makati court may hear the case only with respect to the alleged injury suffered by private respondent after the Paraaque court shall have ruled favorably on the said issue. We also noted several indications of private respondents bad faith. The complaint filed in Civil Case No. 3316-R was prepared by the ASSOCIATIONs counsel, Atty. Conrado Villamor Catral, Jr. whereas the complaint filed in Civil Case No. 3382-R was signed by a different lawyer, Atty. Thomas S. Tayengco. With regard to the petition filed with the COSLAP, the same was signed by private respondents individually. As to the latter case, we noted that the petition itself could not have been prepared by ordinary laymen, inasmuch as it exhibits familiarity with statutory provisions and legal concepts, and is written in a lawyerly style. In the same manner, the plaintiffs in the three (3) different cases were made to appear as dissimilar: in Civil Case No. 3316-R, the plaintiff was ASSOCIATION of which private respondent Mario Padilan was head, while the plaintiff in Civil Case No. 3382-R was the BENEFICIARIES. Before the COSLAP, private respondents themselves were the petitioners, led again by Padilan.[34] Private respondents also attempted to vary their causes of action: in Civil Case No. 3382-R and COSLAP Case No. 98-253, they seek the annulment of the Memorandum of Agreement executed by and among UNITED, the PMS, and HIGC as well as the transfer certificates of title accordingly issued to petitioner. All three (3) cases sought to enjoin the demolition of private respondents houses. It has been held that forum shopping is evident where the elements of litis pendentia or res judicata are present. Private respondents subterfuge comes to naught, for the effects of res judicata or litis pendentia may not be avoided by varying the designation of the parties or changing the form of the action or adopting a different mode of presenting ones case.[35] In view of the foregoing, all that remains to be done is the imposition of the proper penalty. A partys willful and deliberate act of forum shopping is punishable by summary dismissal of the actions

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filed.[36] The summary dismissal of both COSLAP Case No. 98-253 and Civil Case No. 3316-R is therefore warranted under the premises. We shall refrain from making any pronouncement on Civil Case No. 3382-R, the dismissal of which was elevated on appeal to the Court of Appeals where it is still pending. WHEREFORE, the petition is hereby GRANTED. The status quo order dated September 29, 1998 issued in COSLAP Case No. 98-253 by respondent Commission On The Settlement Of Land Problems (COSLAP) is hereby SET ASIDE; and the petition filed in COSLAP Case No. 98-253 and the complaint in Civil Case No. 3316-R are hereby DISMISSED for lack of jurisdiction and forum shopping. Costs against private respondents. SO ORDERED. Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur. ECOND DIVISION [G.R. No. 134990. April 27, 2000] MANUEL M. LEYSON JR., petitioner, vs. OFFICE OF THE OMBUDSMAN, TIRSO ANTIPORDA, Chairman, UCPB and CIIF Oil Mills, and OSCAR A. TORRALBA, President, CIIF Oil Mills, respondents. ALEX DECISION BELLOSILLO, J.: On 7 February 1996 International Towage and Transport Corporation (ITTC), a domestic corporation engaged in the lighterage or shipping business, entered into a one (1)-year contract with Legaspi Oil Company, Inc. (LEGASPI OIL), Granexport Manufacturing Corporation (GRANEXPORT) and United Coconut Chemicals, Inc. (UNITED COCONUT), comprising the Coconut Industry Investment Fund (CIIF) companies, for the transport of coconut oil in bulk through MT Transasia. The majority shareholdings of these CIIF companies are owned by the United Coconut Planters Bank (UCPB) as administrator of the CIIF. Under the terms of the contract, either party could terminate the agreement provided a three (3)-month advance notice was given to the other party. However, in August 1996, or prior to the expiration of the contract, the CIIF companies with their new President, respondent Oscar A. Torralba, terminated the contract without the requisite advance notice. The CIIF companies engaged the services of another vessel, MT Marilag, operated by Southwest Maritime Corporation. miso On 11 March 1997 petitioner Manuel M. Leyson Jr., Executive Vice President of ITTC, filed with public respondent Office of the Ombudsman a grievance case against respondent Oscar A. Torralba. The following is a summary of the irregularities and corrupt practices allegedly committed by respondent Torralba: (a) breach of contract - unilateral cancellation of valid and existing contract; (b) bad faith falsification of documents and reports to stop the operation ofMT Transasia; (c) manipulation - influenced their insurance to disqualify MT Transasia; (d) unreasonable denial of requirement imposed; (e) double standards and inconsistent in favor of MT Marilag; (f) engaged and entered into a contract with Southwest Maritime Corp. which is not the owner of MT Marilag, where liabilities were waived and whose paid-up capital is only P250,000.00; and, (g) overpricing in the freight rate causing losses of millions of pesos to Cocochem.[1] On 2 January 1998 petitioner charged respondent Tirso Antiporda, Chairman of UCPB and CIIF Oil Mills, and respondent Oscar A. Torralba with violation of The Anti-Graft and Corrupt Practices Act also before the Ombudsman anchored on the aforementioned alleged irregularities and corrupt practices. spped On 30 January 1998 public respondent dismissed the complaint based on its finding that The case is a simple case of breach of contract with damages which should have been filed in the regular court. This Office has no jurisdiction to determine the legality or validity of the termination of the contract entered into by CIIF and ITTC. Besides the entities involved are private corporations (over) which this Office has no jurisdiction.[2] On 4 June 1998 reconsideration of the dismissal of the complaint was denied. The Ombudsman was unswayed in his finding that the present controversy involved breach of contract as he also took into

account the circumstance that petitioner had already filed a collection case before the Regional Trial Court of Manila-Br. 15, docketed as Civil Case No. 97-83354. Moreover, the Ombudsman found that the filing of the motion for reconsideration on 31 March 1998 was beyond the inextendible period of five (5) days from notice of the assailed resolution on 19 March 1998.[3] miso Petitioner now imputes grave abuse of discretion on public respondent in dismissing his complaint. He submits that inasmuch as Philippine Coconut Producers Federation, Inc. (COCOFED) v. PCGG[4] and Republic v. Sandiganbayan[5] have declared that the coconut levy funds are public funds then, conformably with Quimpo v. Tanodbayan,[6] corporations formed and organized from those funds or whose controlling stocks are from those funds should be regarded as government owned and/or controlled corporations. As in the present case, since the funding or controlling interest of the companies being headed by private respondents was given or owned by the CIIF as shown in the certification of their Corporate Secretary,[7] it follows that they are government owned and/or controlled corporations. Corollarily, petitioner asserts that respondents Antiporda and Torralba are public officers subject to the jurisdiction of the Ombudsman. Sdaadsc Petitioner alleges next that public respondent's conclusion that his complaint refers to a breach of contract is whimsical, capricious and irresponsible amounting to a total disregard of its main point, i. e., whether private respondents violated The Anti-Graft and Corrupt Practices Act when they entered into a contract with Southwest Maritime Corporation which was grossly disadvantageous to the government in general and to the CIIF in particular. Petitioner admits that his motion for reconsideration was filed out of time. Nonetheless, he advances that public respondent should have relaxed its rules in the paramount interest of justice; after all, the delay was just a matter of days and he, a layman not aware of technicalities, personally filed the complaint. Rtcspped Private respondents counter that the CIIF companies were duly organized and are existing by virtue of the Corporation Code. Their stockholders are private individuals and entities. In addition, private respondents contend that they are not public officers as defined under The Anti-Graft and Corrupt Practices Act but are private executives appointed by the Boards of Directors of the CIIF companies. They asseverate that petitioner's motion for reconsideration was filed through the expert assistance of a learned counsel. They then charge petitioner with forum shopping since he had similarly filed a case for collection of a sum of money plus damages before the trial court. The Office of the Solicitor General maintains that the Ombudsman approved the recommendation of the investigating officer to dismiss the complaint because he sincerely believed there was no sufficient basis for the criminal indictment of private respondents. spped We find no grave abuse of discretion committed by the Ombudsman. COCOFED v. PCGG referred to in Republic v. Sandiganbayan reviewed the history of the coconut levy funds. I These funds actually have four (4) general classes: (a) the Coconut Investment Fund created under R. A. No. 6260; [8] (b) the Coconut Consumers Stabilization Fund created under P. D. No. 276;[9] (c) the Coconut Industry Development Fund created under P. D. No. 582;[10] and, (d) the Coconut Industry Stabilization Fund created under P. D. No. 1841.[11] The various laws relating to the coconut industry were codified in 1976. On 21 October of that year, P. D. No. 961[12] was promulgated. On 11 June 1978 it was amended by P. D. No. 1468 [13] by inserting a new provision authorizing the use of the balance of the Coconut Industry Development Fund for the acquisition of "shares of stocks in corporations organized for the purpose of engaging in the establishment and operation of industries x x x commercial activities and other allied business undertakings relating to coconut and other palm oil indust(ries)."[14] From this fund thus created, or the CIIF, shares of stock in what have come to be known as the "CIIF companies" were purchased. miso We then stated in COCOFED that the coconut levy funds were raised by the State's police and taxing powers such that the utilization and proper management thereof were certainly the concern of the Government. These funds have a public character and are clearly affected with public interest. Quimpo v. Tanodbayan involved the issue as to whether PETROPHIL was a government owned or controlled corporation the employees of which fell within the jurisdictional purview of the Tanodbayan for purposes of The Anti-Graft and Corrupt Practices Act. We upheld the jurisdiction of the Tanodbayan on the ratiocination that -

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While it may be that PETROPHIL was not originally "created" as a government-owned or controlled corporation, after it was acquired by PNOC, which is a government-owned or controlled corporation, PETROPHIL became a subsidiary of PNOC and thus shed-off its private status. It is now funded and owned by the government as, in fact, it was acquired to perform functions related to government programs and policies on oil, a vital commodity in the economic life of the nation. It was acquired not temporarily but as a permanent adjunct to perform essential government or government-related functions, as the marketing arm of the PNOC to assist the latter in selling and distributing oil and petroleum products to assure and maintain an adequate and stable domestic supply. Korte But these jurisprudential rules invoked by petitioner in support of his claim that the CIIF companies are government owned and/or controlled corporations are incomplete without resorting to the definition of "government owned or controlled corporation" contained in par. (13), Sec. 2, Introductory Provisions of the Administrative Code of 1987, i. e., any agency organized as a stock or non-stock corporation vested with functions relating to public needs whether governmental or proprietary in nature, and owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock. The definition mentions three (3) requisites, namely, first, any agency organized as a stock or non-stock corporation; second, vested with functions relating to public needs whether governmental or proprietary in nature; and, third, owned by the Government directly or through its instrumentalities either wholly, or, where applicable as in the case of stock corporations, to the extent of at least fifty-one (51) percent of its capital stock. Sclaw In the present case, all three (3) corporations comprising the CIIF companies were organized as stock corporations. The UCPB-CIIF owns 44.10% of the shares of LEGASPI OIL, 91.24% of the shares of GRANEXPORT, and 92.85% of the shares of UNITED COCONUT.[15] Obviously, the below 51% shares of stock in LEGASPI OIL removes this firm from the definition of a government owned or controlled corporation. Our concern has thus been limited to GRANEXPORT and UNITED COCONUT as we go back to the second requisite. Unfortunately, it is in this regard that petitioner failed to substantiate his contentions. There is no showing that GRANEXPORT and/ or UNITED COCONUT was vested with functions relating to public needs whether governmental or proprietary in nature unlike PETROPHIL in Quimpo. The Court thus concludes that the CIIF companies are, as found by public respondent, private corporations not within the scope of its jurisdiction. Sclex With the foregoing conclusion, we find it unnecessary to resolve the other issues raised by petitioner. A brief note on private respondents' charge of forum shopping. Executive Secretary v. Gordon[16] is instructive that forum shopping consists of filing multiple suits involving the same parties for the same cause of action, either simultaneously or successively, for the purpose of obtaining a favorable judgment. It is readily apparent that the present charge will not prosper because the cause of action herein, i. e., violation of The Anti-Graft and Corrupt Practices Act, is different from the cause of action in the case pending before the trial court which is collection of a sum of money plus damages. miso WHEREFORE, the petition is DISMISSED. The Resolution of public respondent Office of the Ombudsman of 30 January 1998 which dismissed the complaint of petitioner Manuel M. Leyson Jr., as well as its Order of 4 June 1998 denying his motion for reconsideration, is AFFIRMED. Costs against petitioner. SO ORDERED.apdc

REMEDIOS T. BLAQUERA, et. al , petitioners Vs. HON. ANGEL C. ALCALA, in his capacity as the Secretary of the Department of Environment and Natural Resources, and HON. CARLITO R. ALETA, in his capacity as the Director of the Philippine Nuclear Research Institute, respondents. PURISIMA, J.: These are cases for certiorari and prohibition, challenging the constitutionality and validity of Administrative Order Nos. 29 and 268 on various grounds. The facts in G.R. Nos. 109406, 110642, 111494, and 112056 are undisputed, to wit: Petitioners are officials and employees of several government departments and agencies who were paid incentive benefits for the year 1992, pursuant to Executive Order No. 292[1] (EO 292), otherwise known as the Administrative Code of 1987, and the Omnibus Rules Implementing Book V[2]of EO 292. On January 19, 1993, then President Fidel V. Ramos (President Ramos) issued Administrative Order No. 29 (AO 29) authorizing the grant of productivity incentive benefits for the year 1992 in the maximum amount of P1,000.00[3] and reiterating the prohibition[4] under Section 7[5]of Administrative Order No. 268 (AO 268), enjoining the grant of productivity incentive benefits without prior approval of the President. Section 4 of AO 29 directed [a]ll departments, offices and agencies which authorized payment of CY 1992 Productivity Incentive Bonus in excess of the amount authorized under Section 1 hereof [are hereby directed] to immediately cause the return/refund of the excess within a period of six months to commence fifteen (15) days after the issuance of this Order. In compliance therewith, the heads of the departments or agencies of the government concerned, who are the herein respondents, caused the deduction from petitioners salaries or allowances of the amounts needed to cover the alleged overpayments. To prevent the respondents from making further deductions from their salaries or allowances, the petitioners have come before this Court to seek relief. In G.R. No. 119597, the facts are different but the petition poses a common issue with the other consolidated cases. The petitioner, Association of Dedicated Employees of the Philippine Tourism Authority (ADEPT), is an association of employees of the Philippine Tourism Authority (PTA) who were granted productivity incentive bonus for calendar year 1992 pursuant to Republic Act No. 6971 (RA 6971), otherwise known as the Productivity Incentives Act of 1990. Subject bonus was, however, disallowed by the Corporate Auditor on the ground that it was prohibited under Administrative Order No. 29 dated January 19, 1993.[6] The disallowance of the bonus in question was finally brought on appeal to the Commission on Audit (COA) which denied the appeal in its Decision [7]of March 6, 1995, ratiocinating, thus: xxx Firstly, the provisions of RA #6971 insofar as the coverage is concerned, refer to business enterprises including government owned and/or controlled corporations performing proprietary functions. Section 1a of the Supplemental Rules Implementing RA #6971 classified such coverage as: All business enterprises, with or without existing duly certified labor organizations, including government owned and/or controlled corporations performing proprietary functions which are established solely for business or profit and accordingly excluding those created, maintained or acquired in pursuance of a policy of the State enunciated in the Constitution, or by law and those whose officers and employees are covered by the Civil Service. (underscoring supplied) The PTrA is a GOCC created in pursuance of a policy of the State. Section 9 of Presidential Decree No. 189 states that To implement the policies and program of the Department (Dept. of Tourism), there is hereby created a Philippine Tourism Authority, xxx. Likewise, Section 21 of the same decree provides that All officials and employees of the Authority, xxx, shall be subject to Civil Service Law, rules and regulations, and the coverage of the Wage and Position Classification Office. Furthermore, although Supplemental Rules and Regulations implementing R.A. #6971 was issued only on December 27, 1991, the law itself is clear that it pertains to private business enterprises whose employees are covered by the Labor Code of the Philippines, as mentioned in the following provisions:

[G.R. No. 119597. September 11, 1998] ASSOCIATION OF DEDICATED EMPLOYEES OF THE PHILIPPINE TOURISM AUTHORITY (ADEPT), petitioner, vs. COMMISSION ON AUDIT (COA), respondent. DECISION EN BANC [G.R. No. 109406. September 11, 1998]

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Section 5.Labor Management Committee. xxx that at the request of any party to the negotiation, the National Wages and Productivity Commission of the Department of Labor and Employment shall provide the necessary studies, xxx. Section 8.Notification. - A business enterprise which adopts a productivity incentive program shall submit copies of the same to the National Wages and Productivity Commission and to the Bureau of Internal Revenue for their information and record. Section 9.Disputes and Grievances. - Whenever disputes, grievances, or other matters arise from the interpretation or implementation of the productivity incentive program, xxx may seek the assistance of the National Conciliation and Mediation Board of the Department of Labor and Employment for such purpose. xxx Therefore, considering the foregoing, the PTrA is within the exclusion provision of the Implementing Rules of RA #6971 and so, it (PTrA) does not fall within its coverage as being entitled to the productivity incentive bonus under RA #6971. Secondly, Administrative Order No. 29 which is the basis for the grant of the productivity incentive bonus/benefits for CY 1992 also expressly provides prohibiting payments of similar benefits in future years unless duly authorized by the President. Thirdly, the disallowance of the Auditor, PTrA has already been resolved when this Commission circularized thru COA Memorandum #92-758 dated April 3, 1992 the Supplemental to Rules Implementing RA 6971 otherwise known as the Productivity Incentives Act of 1990. xxx Lastly, considering the title of RA #6971, i.e. An Act to encourage productivity and maintain industrial peace by providing incentives to both labor and capital, and its implementing rules and regulations prepared by the Department of Labor and Employment and the Department of Finance, this Office concludes that said law/regulation pertains to agencies in the private sector whose employees are covered by the Labor Code. With the denial of its appeal, petitioner found its way here via the petition in G.R. No. 119597, to seek relief from the aforesaid decision of COA. We will first resolve the issue on the applicability of RA 6971 to petitioner ADEPT in G.R. No. 119597 before passing upon the constitutionality or validity of Administrative Orders 29 and 268. Section 3 of RA 6971, reads: SECTION 3. Coverage. This Act shall apply to all business enterprises with or without existing and duly recognized or certified labor organizations, including government-owned and controlled corporations performing proprietary functions. It shall cover all employees and workers including casual, regular, supervisory and managerial employees. (underscoring ours) Pursuant to Section 10[8] of RA 6971, the Secretary of Labor and Secretary of Finance issued Supplemental Rules to Implement the said law, as follows: Section 1. - Paragraph (a) Section 1, Rule II of the Rules Implementing RA 6971, shall be amended to read as follows: Coverage. These Rules shall apply to: (a) All business enterprises with or without existing duly certified labor organizations, including government-owned and controlled corporations performing proprietary functions which are established solely for business or profit or gain and accordingly excluding those created, maintained or acquired in pursuance of a policy of the state, enunciated in the Constitution or by law, and those whose officers and employees are covered by the Civil Service. (underscoring ours) x x x Petitioner contends that the PTA is a government-owned and controlled corporation performing proprietary function, and therefore the Secretary of Labor and Employment and Secretary of Finance exceeded their authority in issuing the aforestated Supplemental Rules Implementing RA 6971.

Government-owned and controlled corporations may perform governmental or proprietary functions or both, depending on the purpose for which they have been created. If the purpose is to obtain special corporate benefits or earn pecuniary profit, the function is proprietary. If it is in the interest of health, safety and for the advancement of public good and welfare, affecting the public in general, the function is governmental.[9] Powers classified as proprietary are those intended for private advantage and benefit.[10] The PTA was established by Presidential Decree No. 189, as amended by Presidential Decree No. 564 (PD 564). Its general purposes [11] are: 1. To implement the policies and programs of the Department of Tourism (Department); 2. To develop tourist zones;

3. To assist private enterprises in undertaking tourism projects; 4. To operate and maintain tourist facilities; 5. To assure land availability for private investors in hotels and other tourist facilities; 6. To coordinate all tourism project plans and operations. Its specific functions and powers[12] are: 1. Planning and development of tourism projects a. To assist the Department make a comprehensive survey of the physical and natural tourism resources of the Philippines; to establish the order of priority for development of said areas; to recommend to the President the proclamation of a tourist zone; and to define and fix the boundaries of the zone; b. To formulate a development plan for each zone;

c. To submit to the President through the National Economic and Development Authority for review and approval all development plans before the same are enforced or implemented; d. To submit to the President an Annual Progress Report;

e. To assist the Department to determine the additional capacity requirements for various tourist facilities and services; to prepare a ten-year Tourism Priorities Plan; to update annually the ten year Tourism Priorities Plan. f. To gather, collate and analyze statistical data and other pertinent information for the effective implementation of PD 564. 2. Acquisition and disposition of lands and other assets for tourist zone purposes a. To acquire possession and ownership of all lands transferred to it from other government corporations and institutions and any land having tourism potential and earmarked in the Tourism Priorities Plans for intensive development into a tourist zone or as a part thereof, subject to the approval of the President. b. To acquire by purchase, by negotiation or by condemnation proceedings any private land within and without the tourist zones for any of the following reasons: (a) consolidation of lands for tourist zone development purposes, (b) prevention of land speculation in areas declared as tourist zones, (c) acquisition of right of way to the zones, (d) protection of water shed areas and natural assets with tourism value, and (e) for any other purpose expressly authorized under PD 564. c. For the purpose of providing land acquisition assistance to registered tourism enterprises, to sell, subdivide, resell, lease, sublease, rent out, or otherwise, to said registered tourism enterprises under sufficiently soft terms for use specifically in the development of hotels, recreational facilities, and other tourist services. d. To develop and/or subdivide any land in its name or undertake condominium projects thereon, and sell subdivision lots or condominium units to private persons for investment purposes.

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e. To take over or transfer to a registered tourism enterprise in accordance with law any lease on foreshore areas within a tourist zone or adjacent thereto, in cases said areas are not being utilized in accordance with the PTAs approved zone development plan and wherein the lessee concerned does not agree to conform accordingly. f. To arrange for the reclamation of any land adjacent to or adjoining a tourist zone in coordination with appropriate government agencies. 3. Infrastructure development for tourist zone purposes a. To contract, supervise and pay for infrastructure works and civil works within a tourist zone owned and operated by the PTA. b. To coordinate with appropriate government agencies the development of infrastructure requirements supporting a tourist zone. c. To take water from any public stream, river, creek, lake, spring, or waterfall and to alter, straighten, obstruct or increase the flow of water in streams. 4. Zone administration and control a. b. To formulate and implement zoning regulations. To determine and regulate the enterprises to be established within a tourist zone.

7. Other powers and functions a. To engage or retain the services of financial, management, legal, technical, and/or project consultants from the private or government sector. b. c. d. e. f. g. h. I. j. To have the power to succeed by its corporate name. To adopt, alter, and use a corporate seal. To sue and be sued under its corporate name. To enter into any contracts of any kind and description. To own or possess personal and/or real property. To make, adopt and enforce rules and regulations to execute its powers, duties and functions. To purchase, hold, and alienate shares of stock or bonds of any corporation. To collect fees or charges as may be imposed under PD 564. To contract indebtedness and issue bonds.

k. To fix and collect rentals for the lease, use or occupancy of lands, buildings, or other property owned or administered by PTA. l. To do any and all acts and things necessary to carry out the purposes for which the PTA is created.

c. To ensure, through the proper authorities concerned, the ecological preservation, maintenance and/or rehabilitation of the common and the public areas within a tourist zone and the environment thereof. d. To identify and recommend to the President the preservation and/or restoration of national monuments or preserves; to arrange for the preservation and/or restoration of the same with appropriate government agencies or with the private sector or with the owners themselves of said tourist attractions; and to identify and recommend to the appropriate authorities concerned the declaration of tourist areas and attractions as national monuments and preserves. 5. Project and investment promotions a. To identify, develop, invest in, own, manage and operate such projects as it may deem to be vital for recreation and rest but not sufficiently attractive economically for private investment. b. To construct hotel buildings and other tourist facilities within a tourist zone and in turn lease such facilities to registered tourism enterprises for operation, management and maintenance. c. To organize, finance, invest in, manage and operate wholly-owned subsidiary corporations.

Categorized in light of the foregoing provisions of law in point, PTAs governmental functions include the first, third, fourth, and sixth of the aforesaid general purposes. The second[13] and fifth general purposes fall under its proprietary functions. With respect to PTAs specific functions and powers, the first and fourth are governmental in nature while the fifth specific functions and powers are proprietary in character. The second, third, sixth, and seventh specific functions and powers can be considered partly-governmental and partly-proprietary, considering that 2(a), 2(b), 2(c), 2(d), 2(e), 3(a), 6(c), 6(d), 6(e), 7(h), 7(j), and 7(k) are proprietary functions while 2(f), 3(b), 3(c), 6(a), 6(b), 6(f), 6(g), 6(h), 7(a), 7(b), 7(c), 7(d), 7(f), 7(g), and 7(l) are governmental functions. The specific functions and powers treated in 7(e) and 7(i) may be classified either as proprietary or governmental, depending on the circumstances under which they are exercised or performed. The aforecited powers and functions of PTA are predominantly governmental, principally geared towards the development and promotion of tourism in the scenic Philippine archipelago. But it is irrefutable that PTA also performs proprietary functions, as envisaged by its charter. Reliance on the above analysis of the functions and powers of PTA does not suffice for the determination of whether or not it is within the coverage of RA 6971. For us to resolve the issues raised here solely on the basis of the classification of PTAs powers and functions may lead to the rendition of judgment repugnant to the legislative intent and to established doctrines, as well, such as on the prohibition against government workers to strike.[14] Under RA 6971, the workers have the right to strike. To ascertain whether PTA is within the ambit of RA 6971, there is need to find out the legislative intent, and to refer to other provisions of RA 6971 and other pertinent laws, that may aid the Court in ruling on the right of officials and employees of PTA to receive bonuses under RA 6971. Petitioner cites an entry in the journal of the House of Representatives to buttress its submission that PTA is within the coverage of RA 6971, to wit: Chairman Veloso: The intent of including government-owned and controlled corporations within the coverage of the Act is the recognition of the principle that when government goes into business, it (divests) itself of its immunity from suit and goes down to the level of ordinary private enterprises and subjects itself to the ordinary laws of the land just like ordinary private enterprises. Now, when people work therefore in government-owned or controlled corporations, it is as if they are also, just like in the private sector, entitled to all the benefits of all laws that apply to workers in the private sector. In my view, even

6. Direct assistance to registered enterprises a. To administer the tax and other incentives granted to registered enterprises.

b. To evaluate, approve and register or reject any and all tourism projects or enterprises established within the tourist zones. c. To grant medium and long-term loans and/or re-lend any funds borrowed for the purpose to duly qualified registered tourism enterprises. d. e. f. To guarantee local and foreign borrowings of registered enterprises. To provide equity investments in the form of cash and/or land. To extend technical, management and financial assistance to tourism projects.

g. To identify, contact and assist in negotiations of suitable partners for both local and foreign investors interested in investment or participation in the tourism industry. h. To assist registered enterprises and prospective investors to have their papers processed with dispatch by government offices.

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including the right to organize, bargain.... VELOSO (Bicameral Conference Committee on Labor and Employment, pp. 15-16) After a careful study, the Court is of the view, and so holds, that contrary to petitioners interpretation, the government-owned and controlled corporations Mr. Chairman Veloso had in mind were governmentowned and controlled corporations incorporated under the general corporation law. This is so because only workers in private corporations and government-owned and controlled corporations, incorporated under the general corporation law, have the right to bargain (collectively). Those in government corporations with special charter, which are subject to Civil Service Laws, have no right to bargain (collectively), except where the terms and conditions of employment are not fixed by law.[15] Their rights and duties are not comparable with those in the private sector. Since the terms and conditions of government employment are fixed by law, government workers cannot use the same weapons employed by workers in the private sector to secure concessions from their employers. The principle behind labor unionism in private industry is that industrial peace cannot be secured through compulsion by law. Relations between private employers and their employees rest on an essentially voluntary basis. Subject to the minimum requirements of wage laws and other labor and welfare legislation, the terms and conditions of employment in the unionized private sector are settled through the process of collective bargaining. In government employment, however, it is the legislature and, where properly given delegated power, the administrative heads of government which fix the terms and conditions of employment. And this is effected through statutes or administrative circulars, rules, and regulations, not through collective bargaining agreements. (Alliance of Government Workers v. Minister of Labor and Employment, 124 SCRA 1) (italics ours) Government corporations may be created by special charters or by incorporation under the general corporation law. Those created by special charters are governed by the Civil Service Law while those incorporated under the general corporation law are governed by the Labor Code. [16] The legislative intent to place only government-owned and controlled corporations performing proprietary functions under the coverage of RA 6971 is gleanable from the other provisions of the law. For instance, section 2[17] of said law envisions industrial peace and harmony and to provide corresponding incentives to both labor and capital; section 4[18] refers to representatives of labor and management; section 5[19] mentions of collective bargaining agent(s) of the bargaining unit(s); section 6 [20]relates to existing collective bargaining agreements, and labor and management; section 7[21] speaks of strike or lockout; and section 9[22] purports to seek the assistance of the National Conciliation and Mediation Board of the Department of Labor and Employment and include the name(s) of the voluntary arbitrators or panel of voluntary arbitrator. All the aforecited provisions of law apply only to private corporations and government-owned and controlled corporations organized under the general corporation law. Only they have collective bargaining agents, collective bargaining units, collective bargaining agreements, and the right to strike or lockout. To repeat, employees of government corporations created by special charters have neither the right to strike nor the right to bargain collectively, as defined in the Labor Code. The case of Social Security System Employees Association indicates the following remedy of government workers not allowed to strike or bargain collectively, to wit: Government employees may, therefore, through their unions or associations, either petition the Congress for the betterment of the terms and conditions of employment which are within the ambit of legislation or negotiate with the appropriate government agencies for the improvement of those which are not fixed by law. If there be any unresolved grievances, the dispute may be referred to the Public Sector LaborManagement Council for appropriate action. But employees in the civil service may not resort to strikes, walkouts and other temporary work stoppages, like workers in the private sector, to pressure the Government to accede to their demands. (supra, footnote 14, p. 698; italics ours) It is a rule in statutory construction that every part of the statute must be interpreted with reference to the context, i.e., that every part of the statute must be considered together with the other parts, and kept subservient to the general intent of the whole enactment.[23] The provisions of RA 6971, taken together, reveal the legislative intent to include only government-owned and controlled corporations performing proprietary functions within its coverage.

Every statute must be construed and harmonized with other statutes as to form a uniform system of jurisprudence.[24] We note Section 1, Rule X of the Omnibus Rules Implementing Book V of EO 292, which reads: SECTION 1. - Each department or agency of government, whether national or local, including bureaus and agencies, state colleges and universities, and government owned and controlled corporations with original charters, shall establish its own Department or Agency Employee Suggestions and Incentives Award System in accordance with these Rules and shall submit the same to the Commission for approval. (underscoring ours) It is thus evident that PTA, being a government-owned and controlled corporation with original charter subject to Civil Service Law, Rules and Regulations,[25] is already within the scope of an incentives award system under Section 1, Rule X of the Omnibus Rules Implementing EO 292 issued by the Civil Service Commission (Commission). Since government-owned and controlled corporations with original charters do have an incentive award system, Congress enacted a law that would address the same concern of officials and employees of government-owned and controlled corporations incorporated under the general corporation law. All things studiedly considered in proper perspective, the Court finds no reversible error in the finding by respondent Commission that PTA is not within the purview of RA 6971. As regards the promulgation of implementing rules and regulations, it bears stressing that the power of administrative officials to promulgate rules in the implementation of the statute is necessarily limited to what is provided for in the legislative enactment.[26] In the case under scrutiny, the Supplementary Rules Implementing RA 6971 issued by the Secretary of Labor and Employment and the Secretary of Finance accord with the intendment and provisions of RA 6971. Consequently, not being covered by RA 6971, AO 29 applies to the petitioner. We now tackle the common issue posited by the consolidated petitions on the constitutionality of AO 29 and AO 268. Petitioners contend and argue, that: I. AO 29 AND AO 268 ARE VIOLATIVE OF THE PROVISIONS OF EO 292 AND, HENCE, NULL AND VOID. II. AO 29 AND AO 268 UNLAWFULLY USURP THE CONSTITUTIONAL AUTHORITY GRANTED SOLELY TO THE CIVIL SERVICE COMMISSION. III. THE FORCED REFUND OF INCENTIVE PAY IS AN UNCONSTITUTIONAL IMPAIRMENT OF A CONTRACTUAL OBLIGATION. IV. ASSUMING, FOR THE SAKE OF ARGUMENT ONLY, THAT THE GRANT OF PRODUCTIVITY INCENTIVE BENEFITS WAS INVALID, THE SAME SHOULD BE THE PERSONAL LIABILITY OF OFFICIALS DIRECTLY RESPONSIBLE THEREFOR IN ACCORDANCE WITH SECTION 9 OF AO 268. Issued by the then President Corazon Aquino (President Aquino) on July 25, 1987 in the exercise of her legislative powers under the 1987 Constitution,[27] EO 292, or the Administrative Code of 1987, provided for the following incentive award system: Sec. 31.Career and Personnel Development Plans. - Each department or agency shall prepare a career and personnel development plan which shall be integrated into a national plan by the Commission. Such career and personnel development plans which shall include provisions on merit promotions, performance evaluation, in-service training, including overseas and local scholarships and training grants, job rotation, suggestions and incentive award systems, and such other provisions for employees heal th, welfare, counseling, recreation and similar services. Sec. 35.Employee Suggestions and Incentive Award System. - There shall be established a governmentwide employee suggestions and incentive awards system which shall be administered under such rules, regulations, and standards as maybe promulgated by the Commission. In accordance with rules, regulations, and standards promulgated by the Commission, the President or the head of each department or agency is authorized to incur whatever necessary expenses involved in the

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honorary recognition of subordinate officers and employees of the government who by their suggestions, inventions, superior accomplishment, and other personal efforts contribute to the efficiency, economy, or other improvement of government operations, or who perform such other extraordinary acts or services in the public interest in connection with, or in relation to, their official employment. Sec. 36.Personnel Relations. - (1) It shall be the concern of the Commission to provide leadership and assistance in developing employee relations programs in the department or agencies. (2) Every Secretary or head of agency shall take all proper steps toward the creation of an atmosphere conducive to good supervisor-employee relations and the improvement of employee morale. Pursuant to the provision of Section 12(2),[28] Chapter 3, Book V of EO 292, the Commission adopted and prescribed the Omnibus Rules Implementing Book V of EO 292 which, among others, provide: Sec. 1. - Each department or agency of government, whether national or local, including bureaus and agencies, state colleges and universities, and government owned and controlled corporations with original charters, shall establish its own Department or Agency Employee Suggestions and Incentives Award System in accordance with these Rules and shall submit the same to the Commission for approval. Sec. 2. - The System is designed to encourage creativity, innovativeness, efficiency, integrity and productivity in the public service by recognizing and rewarding officials and employees, individually or in groups, for their suggestions, inventions, superior accomplishments, and other personal efforts which contribute to the efficiency, economy, or other improvement in government operations, or for other extraordinary acts of services in the public interest. x x x Sec. 7. - The incentive awards shall consist of, though not limited to, the following: x x x (c) Productivity Incentive which shall be given to an employee or group of employees who has exceeded their targets or has incurred incremental improvement over existing targets. On February 21, 1992, President Aquino issued AO 268 which granted each official and employee of the government the productivity incentive benefits in a maximum amount equivalent to thirty percent (30%) of his one (1) month basic salary but in no case shall such amount be less than two thousand pesos (P2,000.00),[29] for those who have rendered at least one year of service as of December 31, 1991. [30] Said AO carried the prohibition, provided in Section 7 thereof, which reads: SECTION 7. The productivity incentive benefits herein authorized shall be granted only for Calendar Year 1991. Accordingly, all heads of agencies, including the governing boards of government-owned or controlled corporations and financial institutions, are hereby strictly prohibited from authorizing/granting productivity incentive benefits or other allowances of similar nature for Calendar Year 1992 and future years pending the result of a comprehensive study being undertaken by the Office of the President in coordination with the Civil Service Commission and the Department of Budget and Management on the matter. The formulation of the necessary implementing guidelines for Executive Order No. 486 dated 8 November 1991 establishing a performance-based incentive system for government-owned or -controlled corporations shall likewise be included in the comprehensive study referred to in the preceding paragraph. On January 19, 1993, President Ramos issued AO 29 which granted productivity incentive benefits to government employees in the maximum amount of P1,000.00[31] for the calendar year 1992 but reiterated the proscription under Section 7 of AO 268, thus: SECTION 2. The prohibition prescribed under Section 7 of Administrative Order No. 268 is hereby reiterated. Accordingly, all heads of government offices/agencies, including government-owned and/or controlled corporations, as well as their respective governing boards are hereby enjoined and prohibited from authorizing/granting Productivity Incentive Benefits or any and all similar forms of allowances/benefits without prior approval and authorization via Administrative Order by the Office of

the President. Henceforth, anyone found violating any of the mandates in this Order, including all officials/employees and the COA Auditor-in-Charge of such government office/agency found to have taken part thereof, shall be accordingly and severely dealt with in accordance with the applicable provisions of existing penal laws. Consequently, all administrative authorizations to grant any form of allowances/benefits and all forms of additional compensation usually paid outside of the prescribed basic salary under R.A. No. 6758, the Salary Standardization Law, that are inconsistent with the legislated policy on the matter or are not covered by any legislative action are hereby revoked. The implementation of Executive Order No. 486 dated November 8, 1991, as amended by Executive Order No. 518 dated May 29, 1992, is hereby deferred until a more comprehensive and equitable scheme for the grant of the benefits that can be applied government-wide is formulated by the Department of Budget and Management. Petitioners theorize that AO 29 and AO 268 violate EO 292 and since the latter is a law, it prevails over executive issuances. Petitioners likewise assert that AO 29 and AO 268 encroach upon the constitutional authority of the Civil Service Commission to adopt measures to strengthen the merit and rewards system and to promulgate rules, regulations and standards governing the incentive awards system of the civil service. The Court is not impressed with petitioners submission. AO 29 and AO 268 were issued in the valid exercise of presidential control over the executive departments. In establishing a Civil Service Commission, the 1987 Constitution delineated its function, as follows: The Civil Service Commission, as the central personnel agency of the Government, shall establish a career service and adopt measures to promote morale, efficiency, integrity, responsiveness, progressiveness, and courtesy in the civil service. It shall strengthen the merit and rewards system, integrate all human resources development programs for all levels and ranks, and institutionalize a management climate conducive to public accountability. It shall submit to the President and the Congress an annual report on its personnel programs. (Section 3, Article IX, B, 1987 Constitution) The Commission handles personnel matters of the government. As the central personnel agency of the Government, it is tasked to formulate and establish a system of incentives and rewards for officials and employees in the public sector, alike. The functions of the Commission have been decentralized to the different departments, offices, and agencies of the government -SEC. 1.Declaration of Policy. -- The State shall insure and promote the Constitutional mandate that appointments in the Civil Service shall be made only according to merit and fitness; that the Civil Service Commission, as the central personnel agency of the Government shall establish a career service, adopt measures to promote morale, efficiency, integrity, responsiveness, and courtesy in the civil service, strengthen the merit and rewards system, integrate all human resources development programs for all levels and ranks, and institutionalize a management climate conducive to public accountability; that public office is a public trust and public officers and employees must at all times be accountable to the people; and that personnel functions shall be decentralized, delegating the corresponding authority to the departments, offices and agencies where such functions can be effectively performed . (Section 1, Chapter I, Subtitle A, Title I, EO 292) (underscoring ours) Specifically, implementation of the Employee Suggestions and Incentive Award System has been decentralized to the President or to the head of each department or agency -Sec. 35.Employee Suggestions and Incentive Award System. - There shall be established a governmentwide employee suggestions and incentive awards system which shall be administered under such rules, regulations, and standards as maybe promulgated by the Commission. In accordance with rules, regulations, and standards promulgated by the Commission, the President or the head of each department or agency is authorized to incur whatever necessary expenses involved in the honorary recognition of subordinate officers and employees of the government who by their suggestions, inventions, superior accomplishment, and other personal efforts contribute to the efficiency, economy, or

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other improvement of government operations, or who perform such other extraordinary acts or services in the public interest in connection with, or in relation to, their official employment. (EO 292) (underscoring ours) The President is the head of the government. Governmental power and authority are exercised and implemented through him. His power includes the control over executive departments -The president shall have control of all the executive departments, bureaus, and offices. He shall ensure that the laws be faithfully executed. (Section 17, Article VII, 1987 Constitution) Control means the power of an officer to alter or modify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former for that of the latter.[32] It has been held that [t]he President can, by virtue of his power of control, review, modify, alter or nullify any action, or decision, of his subordinate in the executive departments, bureaus, or offices under him. He can exercise this power motu proprio without need of any appeal from any party.[33] When the President issued AO 29 limiting the amount of incentive benefits, enjoining heads of government agencies from granting incentive benefits without prior approval from him, and directing the refund of the excess over the prescribed amount, the President was just exercising his power of control over executive departments. This is decisively clear from the WHEREAS CLAUSES of AO 268 and AO 29, to wit: ADMINISTRATIVE ORDER NO. 268 x x x WHEREAS, the productivity incentive benefits granted by the different agencies are of varying amounts, causing dissension/demoralization on the part of those who had received less and those who have not yet received any such benefit, thereby defeating the purpose for which the same should be granted; and WHEREAS, there exists the need to regulate the grant of the productivity incentive benefits or other similar allowances in conformity with the policy on standardization of compensation pursuant to Republic Act No. 6758; x x x.

WHEREAS, the unilateral and uncoordinated grant of productivity incentive benefits gave rise to discontentment, dissatisfaction and demoralization among government personnel who have received less or have not received at all such benefits; x x x. The President issued subject Administrative Orders to regulate the grant of productivity incentive benefits and to prevent discontentment, dissatisfaction and demoralization among government personnel by committing limited resources of government for the equal payment of incentives and awards. The President was only exercising his power of control by modifying the acts of the respondents who granted incentive benefits to their employees without appropriate clearance from the Office of the President, thereby resulting in the uneven distribution of government resources. In the view of the President, respondents did a mistake which had to be corrected. In so acting, the President exercised a constitutionally-protected prerogative -The Presidents duty to execute the law is of constitutional origin. So, too, is his control of all executive departments. Thus it is, that department heads are men of his confidence. His is the power to appoint them; his, too, is the privilege to dismiss them at pleasure. Naturally, he controls and directs their acts. Implicit then is his authority to go over, confirm, modify or reverse the action taken by his department secretaries. In this context, it may not be said that the President cannot rule on the correctness of a decision of a department secretary. (Lacson-Magallanes Co., Inc. v. Pao, 21 SCRA 898) Neither can it be said that the President encroached upon the authority of the Commission on Civil Service to grant benefits to government personnel. AO 29 and AO 268 did not revoke the privilege of employees to receive incentive benefits. The same merely regulated the grant and amount thereof. Sound management and effective utilization of financial resources of government are basically executive functions,[34] not the Commissions. Implicit is this recognition in EO 292, which states: Sec. 35.Employee Suggestions and Incentive Award System. - There shall be established a governmentwide employee suggestions and incentive awards system which shall be administered under such rules, regulations, and standards as maybe promulgated by the Commission. In accordance with rules, regulations, and standards promulgated by the Commission, the President or the head of each department or agency is authorized to incur whatever necessary expenses involved in the honorary recognition of subordinate officers and employees of the government who by their suggestions, inventions, superior accomplishment, and other personal efforts contribute to the efficiency, economy, or other improvement of government operations, or who perform such other extraordinary acts or services in the public interest in connection with, or in relation to, their official employment. (Chapter 5, Subtitle A, Book V) (underscoring ours) Conformably, it is the President or the head of each department or agency who is authorized to incur the necessary expenses involved in the honorary recognition of subordinate officers and employees of the government. It is not the duty of the Commission to fix the amount of the incentives. Such function belongs to the President or his duly empowered alter ego. Anent petitioners contention that the forcible refund of incentive benefits is an unconstitutional impairment of a contractual obligation, suffice it to state that [n]ot all contracts entered into by the government will operate as a waiver of its non-suability; distinction must be made between its sovereign and proprietary acts (United States of America v. Ruiz, 136 SCRA 487).[35] The acts involved in this case are governmental. Besides, the Court is in agreement with the Solicitor General that the incentive pay or benefit is in the nature of a bonus which is not a demandable or enforceable obligation. It is understood that the Judiciary, Civil Service Commission, Commission on Audit, Commission on Elections, and Office of the Ombudsman, which enjoy fiscal autonomy, are not covered by the amount fixed by the President. As explained in Bengzon vs. Drilon (208 SCRA 133): As envisioned in the Constitution, the fiscal autonomy enjoyed by the Judiciary, the Civil Service Commission, the Commission on Audit, the Commission on Elections, and the Office of the Ombudsman contemplates a guarantee of full flexibility to allocate and utilize their resources with the wisdom and dispatch that their needs require. It recognizes the power and authority to levy, assess and collect fees, fix

ADMINISTRATIVE ORDER NO. 29 x x x WHEREAS, the faithful implementation of statutes, including the Administrative Code of 1987 and all laws governing all forms of additional compensation and personnel benefits is a Constitutional prerogative vested in the President of the Philippines under Section 17, Article VII of the 1987 Constitution; WHEREAS, the Constitutional prerogative includes the determination of the rates, the timing and schedule of payment, and final authority to commit limited resources of government for the payment of personnel incentives, cash awards, productivity bonus, and other forms of additional compensation and fringe benefits; WHEREAS, some government agencies have overlooked said Constitutional prerogative and have unilaterally granted to their respective officials and employees incentive awards; WHEREAS, the Office of the President issued Administrative Order No. 268, dated February 21, 1992, strictly prohibiting the grant of Productivity Incentive Bonus or other allowances of similar nature for Calendar Year 1992 and future years pending the issuance of the requisite authorization by the President; WHEREAS, notwithstanding said prohibition some government offices/agencies and government-owned and/or controlled corporations and financial institutions have granted productivity incentive benefits in varying nomenclature and amounts without the proper authorization/coordination with the Office of the President;

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rates of compensation not exceeding the highest rates authorized by law for compensation and pay plans of the government and allocate and disburse such sums as may be provided by law or prescribed by them in the course of the discharge of their functions. Fiscal autonomy means freedom from outside control. If the Supreme Court says it needs 100 typewriters but DBM rules we need only 10 typewriters and sends its recommendations to Congress without even informing us, the autonomy given by the Constitution becomes an empty and illusory platitude. The Judiciary, the Constitutional Commissions, and the Ombudsman must have the independence and flexibility needed in the discharge of their constitutional duties. The imposition of restrictions and constraints on the manner the independent constitutional offices allocate and utilize the funds appropriated for their operations is anathema to fiscal autonomy and violative not only of the express mandate of the Constitution but especially as regards the Supreme Court, of the independence and separation of powers upon which the entire fabric of our constitutional system is based. In the interest of comity and cooperation, the Supreme Court, Constitutional Commissions, and the Ombudsman have so far limited their objections to constant reminders. We now agree with the petitioners that this grant of autonomy should cease to be a meaningless provision. Untenable is petitioners contention that the herein respondents be held personally liable for the refund in question. Absent a showing of bad faith or malice, public officers are not personally liable for damages resulting from the performance of official duties.[36] Every public official is entitled to the presumption of good faith in the discharge of official duties.[37] Absent any showing of bad faith or malice, there is likewise a presumption of regularity in the performance of official duties.[38] In upholding the constitutionality of AO 268 and AO 29, the Court reiterates the well-entrenched doctrine that in interpreting statutes, that which will avoid a finding of unconstitutionality is to be preferred. [39] Considering, however, that all the parties here acted in good faith, we cannot countenance the refund of subject incentive benefits for the year 1992, which amounts the petitioners have already received. Indeed, no indicia of bad faith can be detected under the attendant facts and circumstances. The officials and chiefs of offices concerned disbursed such incentive benefits in the honest belief that the amounts given were due to the recipients and the latter accepted the same with gratitude, confident that they richly deserve such benefits. WHEREFORE, the Petitions in G.R. Nos. 109406, 110642, 111494, and 112056 are hereby DISMISSED, and as above ratiocinated, further deductions from the salaries and allowances of petitioners are hereby ENJOINED. In G.R. No. 119597, the assailed Decision of respondent Commission on Audit is AFFIRMED. No pronouncement as to costs. SO ORDERED.

FERNANDO, C.J.: This Court, pursuant to its grave responsibility of passing upon the validity of any executive or legislative act in an appropriate cases, has to resolve the crucial issue of the constitutionality of Batas Pambansa Blg. 129, entitled "An act reorganizing the Judiciary, Appropriating Funds Therefor and for Other Purposes." The task of judicial review, aptly characterized as exacting and delicate, is never more so than when a conceded legislative power, that of judicial reorganization, 1 may possibly collide with the time-honored principle of the independence of the judiciary 2as protected and safeguarded by this constitutional provision: "The Members of the Supreme Court and judges of inferior courts shall hold office during good behavior until they reach the age of seventy years or become incapacitated to discharge the duties of their office. The Supreme Court shall have the power to discipline judges of inferior courts and, by a vote of at least eight Members, order their dismissal." 3 For the assailed legislation mandates that Justices and judges of inferior courts from the Court of Appeals to municipal circuit courts, except the occupants of the Sandiganbayan and the Court of Tax Appeals, unless appointed to the inferior courts established by such Act, would be considered separated from the judiciary. It is the termination of their incumbency that for petitioners justifies a suit of this character, it being alleged that thereby the security of tenure provision of the Constitution has been ignored and disregarded, That is the fundamental issue raised in this proceeding, erroneously entitled Petition for Declaratory Relief and/or for Prohibition 4 considered by this Court as an action for prohibited petition, seeking to enjoin respondent Minister of the Budget, respondent Chairman of the Commission on Audit, and respondent Minister of Justice from taking any action implementing Batas Pambansa Blg. 129. Petitioners 5 sought to bolster their claim by imputing lack of good faith in its enactment and characterizing as an undue delegation of legislative power to the President his authority to fix the compensation and allowances of the Justices and judges thereafter appointed and the determination of the date when the reorganization shall be deemed completed. In the very comprehensive and scholarly Answer of Solicitor General Estelito P. Mendoza, 6 it was pointed out that there is no valid justification for the attack on the constitutionality of this statute, it being a legitimate exercise of the power vested in the Batasang Pambansa to reorganize the judiciary, the allegations of absence of good faith as well as the attack on the independence of the judiciary being unwarranted and devoid of any support in law. A Supplemental Answer was likewise filed on October 8, 1981, followed by a Reply of petitioners on October 13. After the hearing in the morning and afternoon of October 15, in which not only petitioners and respondents were heard through counsel but also the amici curiae, 7 and thereafter submission of the minutes of the proceeding on the debate on Batas Pambansa Blg. 129, this petition was deemed submitted for decision. The importance of the crucial question raised called for intensive and rigorous study of all the legal aspects of the case. After such exhaustive deliberation in several sessions, the exchange of views being supplemented by memoranda from the members of the Court, it is our opinion and so hold that Batas Pambansa Blg. 129 is not unconstitutional. 1. The argument as to the lack of standing of petitioners is easily resolved. As far as Judge de la Llana is concerned, he certainly falls within the principle set forth in Justice Laurel's opinion in People v. Vera. 8 Thus: "The unchallenged rule is that the person who impugns the validity of a statute must have a personal and substantial interest in the case such that he has sustained, or will sustain, direct injury as a result of its enforcement." 9 The other petitioners as members of the bar and officers of the court cannot be considered as devoid of "any personal and substantial interest" on the matter. There is relevance to this excerpt from a separate opinion in Aquino, Jr. v. Commission on Elections: 10 "Then there is the attack on the standing of petitioners, as vindicating at most what they consider a public right and not protecting their rights as individuals. This is to conjure the specter of the public right dogma as an inhibition to parties intent on keeping public officials staying on the path of constitutionalism. As was so well put by Jaffe: 'The protection of private rights is an essential constituent of public interest and, conversely, without a well-ordered state there could be no enforcement of private rights. Private and public interests are, both in substantive and procedural sense, aspects of the totality of the legal order.' Moreover, petitioners have convincingly shown that in their capacity as taxpayers, their standing to sue has been amply demonstrated. There would be a retreat from the liberal approach followed in Pascual v. Secretary of Public Works,foreshadowed by the very decision of People v. Vera where the doctrine was first fully discussed, if we act differently now. I do not think we are prepared to take that step. Respondents, however, would hark back to the American Supreme Court doctrine in Mellon v. Frothingham with their claim that what

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-57883 March 12, 1982 GUALBERTO J. DE LA LLANA Presiding Judge, Branch II of the City Court of Olongapo, ESTANISLAO L. CESA, JR., FIDELA Y. VARGAS, BENJAMIN C. ESCOLANGO, JUANITO C. ATIENZA, MANUEL REYES ROSAPAPAN, JR., VIRGILIO E. ACIERTO, and PORFIRIO AGUILLON AGUILA, petitioners, vs. MANUEL ALBA, Minister of Budget, FRANCISCO TANTUICO, Chairman, Commission on Audit, and RICARDO PUNO, Minister of Justice, Respondents.

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petitioners possess 'is an interest which is shared in common by other people and is comparatively so minute and indeterminate as to afford any basis and assurance that the judicial process can act on it.' That is to speak in the language of a bygone era even in the United States. For as Chief Justice Warren clearly pointed out in the later case of Flast v. Cohen, the barrier thus set up if not breached has definitely been lowered." 11 2. The imputation of arbitrariness to the legislative body in the enactment of Batas Pambansa Blg. 129 to demonstrate lack of good faith does manifest violence to the facts. Petitioners should have exercised greater care in informing themselves as to its antecedents. They had laid themselves open to the accusation of reckless disregard for the truth, On August 7, 1980, a Presidential Committee on Judicial Reorganization was organized. 12This Executive Order was later amended by Executive Order No. 619-A., dated September 5 of that year. It clearly specified the task assigned to it: "1. The Committee shall formulate plans on the reorganization of the Judiciary which shall be submitted within seventy (70) days from August 7, 1980 to provide the President sufficient options for the reorganization of the entire Judiciary which shall embrace all lower courts, including the Court of Appeals, the Courts of First Instance, the City and Municipal Courts, and all Special Courts, but excluding the Sandigan Bayan." 13 On October 17, 1980, a Report was submitted by such Committee on Judicial Reorganization. It began with this paragraph: "The Committee on Judicial Reorganization has the honor to submit the following Report. It expresses at the outset its appreciation for the opportunity accorded it to study ways and means for what today is a basic and urgent need, nothing less than the restructuring of the judicial system. There are problems, both grave and pressing, that call for remedial measures. The felt necessities of the time, to borrow a phrase from Holmes, admit of no delay, for if no step be taken and at the earliest opportunity, it is not too much to say that the people's faith in the administration of justice could be shaken. It is imperative that there be a greater efficiency in the disposition of cases and that litigants, especially those of modest means much more so, the poorest and the humblest can vindicate their rights in an expeditious and inexpensive manner. The rectitude and the fairness in the way the courts operate must be manifest to all members of the community and particularly to those whose interests are affected by the exercise of their functions. It is to that task that the Committee addresses itself and hopes that the plans submitted could be a starting point for an institutional reform in the Philippine judiciary. The experience of the Supreme Court, which since 1973 has been empowered to supervise inferior courts, from the Court of Appeals to the municipal courts, has proven that reliance on improved court management as well as training of judges for more efficient administration does not suffice. I hence, to repeat, there is need for a major reform in the judicial so stem it is worth noting that it will be the first of its kind since the Judiciary Act became effective on June 16, 1901." 14 I t went to say: "I t does not admit of doubt that the last two decades of this century are likely to be attended with problems of even greater complexity and delicacy. New social interests are pressing for recognition in the courts. Groups long inarticulate, primarily those economically underprivileged, have found legal spokesmen and are asserting grievances previously ignored. Fortunately, the judicially has not proved inattentive. Its task has thus become even more formidable. For so much grist is added to the mills of justice. Moreover, they are likewise to be quite novel. The need for an innovative approach is thus apparent. The national leadership, as is well-known, has been constantly on the search for solutions that will prove to be both acceptable and satisfactory. Only thus may there be continued national progress." 15 After which comes: "To be less abstract, the thrust is on development. That has been repeatedly stressed and rightly so. All efforts are geared to its realization. Nor, unlike in the past, was it to b "considered as simply the movement towards economic progress and growth measured in terms of sustained increases in per capita income and Gross National Product (GNP). 16 For the New Society, its implication goes further than economic advance, extending to "the sharing, or more appropriately, the democratization of social and economic opportunities, the substantiation of the true meaning of social justice." 17 This process of modernization and change compels the government to extend its field of activity and its scope of operations. The efforts towards reducing the gap between the wealthy and the poor elements in the nation call for more regulatory legislation. That way the social justice and protection to labor mandates of the Constitution could be effectively implemented." 18 There is likelihood then "that some measures deemed inimical by interests adversely affected would be challenged in court on grounds of validity. Even if the question does not go that far, suits may be filed concerning their interpretation and application. ... There could be pleas for injunction or restraining orders. Lack of success of such moves would not, even so, result in their prompt final disposition. Thus delay in the execution of the policies embodied in law could thus be reasonably expected. That is not conducive to progress in development." 19 For, as mentioned in such Report, equally of vital concern is the problem of clogged dockets, which "as is well known, is one of the utmost gravity. Notwithstanding the most determined efforts exerted by the Supreme Court, through the leadership of both

retired Chief Justice Querube Makalintal and the late Chief Justice Fred Ruiz Castro, from the time supervision of the courts was vested in it under the 1973 Constitution, the trend towards more and more cases has continued." 20 It is understandable why. With the accelerated economic development, the growth of population, the increasing urbanization, and other similar factors, the judiciary is called upon much oftener to resolve controversies. Thus confronted with what appears to be a crisis situation that calls for a remedy, the Batasang Pambansa had no choice. It had to act, before the ailment became even worse. Time was of the essence, and yet it did not hesitate to be duly mindful, as it ought to be, of the extent of its coverage before enacting Batas Pambansa Blg. 129. 3. There is no denying, therefore, the need for "institutional reforms," characterized in the Report as "both pressing and urgent." 21 It is worth noting, likewise, as therein pointed out, that a major reorganization of such scope, if it were to take place, would be the most thorough after four generations. 22 The reference was to the basic Judiciary Act generations .enacted in June of 1901, 23 amended in a significant way, only twice previous to the Commonwealth. There was, of course, the creation of the Court of Appeals in 1935, originally composed "of a Presiding Judge and ten appellate Judges, who shall be appointed by the President of the Philippines, with the consent of the Commission on Appointments of the National Assembly, 24 It could "sit en banc, but it may sit in two divisions, one of six and another of five Judges, to transact business, and the two divisions may sit at the same time." 25 Two years after the establishment of independence of the Republic of the Philippines, the Judiciary Act of 1948 26 was passed. It continued the existing system of regular inferior courts, namely, the Court of Appeals, Courts of First Instance, 27 the Municipal Courts, at present the City Courts, and the Justice of the Peace Courts, now the Municipal Circuit Courts and Municipal Courts. The membership of the Court of Appeals has been continuously increased. 28 Under a 1978 Presidential Decree, there would be forty-five members, a Presiding Justice and forty-four Associate Justices, with fifteen divisions. 29 Special courts were likewise created. The first was the Court of Tax Appeals in 1954, 30 next came the Court of Agrarian Relations in 1955, 31 and then in the same year a Court of the Juvenile and Domestic Relations for Manila in 1955, 32 subsequently followed by the creation of two other such courts for Iloilo and Quezon City in 1966. 33 In 1967, Circuit Criminal Courts were established, with the Judges having the same qualifications, rank, compensation, and privileges as judges of Courts of First Instance. 34 4. After the submission of such Report, Cabinet Bill No. 42, which later became the basis of Batas Pambansa Blg. 129, was introduced. After setting forth the background as above narrated, its Explanatory Note continues: "Pursuant to the President's instructions, this proposed legislation has been drafted in accordance with the guidelines of that report with particular attention to certain objectives of the reorganization, to wit, the attainment of more efficiency in disposal of cases, a reallocation of jurisdiction, and a revision of procedures which do not tend to the proper meeting out of justice. In consultation with, and upon a consensus of, the governmental and parliamentary leadership, however, it was felt that some options set forth in the Report be not availed of. Instead of the proposal to confine the jurisdiction of the intermediate appellate court merely to appellate adjudication, the preference has been opted to increase rather than diminish its jurisdiction in order to enable it to effectively assist the Supreme Court. This preference has been translated into one of the innovations in the proposed Bill." 35 In accordance with the parliamentary procedure, the Bill was sponsored by the Chairman of the Committee on Justice, Human Rights and Good Government to which it was referred. Thereafter, Committee Report No. 225 was submitted by such Committee to the Batasang Pambansa recommending the approval with some amendments. In the sponsorship speech of Minister Ricardo C. Puno, there was reference to the Presidential Committee on Judicial Reorganization. Thus: "On October 17, 1980, the Presidential Committee on Judicial Reorganization submitted its report to the President which contained the 'Proposed Guidelines for Judicial Reorganization.' Cabinet Bill No. 42 was drafted substantially in accordance with the options presented by these guidelines. Some options set forth in the aforesaid report were not availed of upon consultation with and upon consensus of the government and parliamentary leadership. Moreover, some amendments to the bill were adopted by the Committee on Justice, Human Rights and Good Government, to which The bill was referred, following the public hearings on the bill held in December of 1980. The hearings consisted of dialogues with the distinguished members of the bench and the bar who had submitted written proposals, suggestions, and position papers on the bill upon the invitation of the Committee on Justice, Human Rights and Good Government." 36 Stress was laid by the sponsor that the enactment of such Cabinet Bill would, firstly, result in the attainment of more efficiency in the disposal of cases. Secondly, the improvement in the quality of justice dispensed by the courts is expected as a necessary consequence of the easing of the court's dockets. Thirdly, the structural changes introduced in the bill, together with the reallocation of jurisdiction and the revision of the rules of procedure, are

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designated to suit the court system to the exigencies of the present day Philippine society, and hopefully, of the foreseeable future." 37 it may be observed that the volume containing the minutes of the proceedings of the Batasang Pambansa show that 590 pages were devoted to its discussion. It is quite obvious that it took considerable time and effort as well as exhaustive study before the act was signed by the President on August 14, 1981. With such a background, it becomes quite manifest how lacking in factual basis is the allegation that its enactment is tainted by the vice of arbitrariness. What appears undoubted and undeniable is the good faith that characterized its enactment from its inception to the affixing of the Presidential signature. 5. Nothing is better settled in our law than that the abolition of an office within the competence of a legitimate body if done in good faith suffers from no infirmity. The ponencia of Justice J.B.L. Reyes in Cruz v. Primicias, Jr. 38reiterated such a doctrine: "We find this point urged by respondents, to be without merit. No removal or separation of petitioners from the service is here involved, but the validity of the abolition of their offices. This is a legal issue that is for the Courts to decide. It is well-known rule also that valid abolition of offices is neither removal nor separation of the incumbents. ... And, of course, if the abolition is void, the incumbent is deemed never to have ceased to hold office. The preliminary question laid at rest, we pass to the merits of the case. As well-settled as the rule that the abolition of an office does not amount to an illegal removal of its incumbent is the principle that, in order to be valid, the abolition must be made in good faith." 39 The above excerpt was quoted with approval in Bendanillo, Sr. v. Provincial Governor, 40 two earlier cases enunciating a similar doctrine having preceded it. 41 As with the offices in the other branches of the government, so it is with the judiciary. The test remains whether the abolition is in good faith. As that element is conspicuously present in the enactment of Batas Pambansa Blg. 129, then the lack of merit of this petition becomes even more apparent. The concurring opinion of Justice Laurel in Zandueta v. De la Costa 42 cannot be any clearer. This is a quo warranto proceeding filed by petitioner, claiming that he, and not respondent, was entitled to he office of judge of the Fifth Branch of the Court of First Instance of Manila. There was a Judicial Reorganization Act in 1936, 43 a year after the inauguration of the Commonwealth, amending the Administrative Code to organize courts of original jurisdiction known as the Courts of First Instance Prior to such statute, petitioner was the incumbent of such branch. Thereafter, he received an ad interim appointment, this time to the Fourth Judicial District, under the new legislation. Unfortunately for him, the Commission on Appointments of then National Assembly disapproved the same, with respondent being appointed in his place. He contested the validity of the Act insofar as it resulted in his being forced to vacate his position This Court did not rule squarely on the matter. His petition was dismissed on the ground of estoppel. Nonetheless, the separate concurrence of Justice Laurel in the result reached, to repeat, reaffirms in no uncertain terms the standard of good faith to preclude any doubt as to the abolition of an inferior court, with due recognition of the security of tenure guarantee. Thus: " I am of the opinion that Commonwealth Act No. 145 in so far as it reorganizes, among other judicial districts, the Ninth Judicial District, and establishes an entirely new district comprising Manila and the provinces of Rizal and Palawan, is valid and constitutional. This conclusion flows from the fundamental proposition that the legislature may abolish courts inferior to the Supreme Court and therefore may reorganize them territorially or otherwise thereby necessitating new appointments and commissions. Section 2, Article VIII of the Constitution vests in the National Assembly the power to define, prescribe and apportion the jurisdiction of the various courts, subject to certain limitations in the case of the Supreme Court. It is admitted that section 9 of the same article of the Constitution provides for the security of tenure of all the judges. The principles embodied in these two sections of the same article of the Constitution must be coordinated and harmonized. A mere enunciation of a principle will not decide actual cases and controversies of every sort. (Justice Holmes in Lochner vs. New York, 198 U.S., 45; 49 Law. ed; 937)" 44 justice Laurel continued: "I am not insensible to the argument that the National Assembly may abuse its power and move deliberately to defeat the constitutional provision guaranteeing security of tenure to all judges, But, is this the case? One need not share the view of Story, Miller and Tucker on the one hand, or the opinion of Cooley, Watson and Baldwin on the other, to realize that the application of a legal or constitutional principle is necessarily factual and circumstantial and that fixity of principle is the rigidity of the dead and the unprogressive. I do say, and emphatically, however, that cases may arise where the violation of the constitutional provision regarding security of tenure is palpable and plain, and that legislative power of reorganization may be sought to cloak an unconstitutional and evil purpose. When a case of that kind arises, it will be the time to make the hammer fall and heavily. But not until then. I am satisfied that, as to the particular point here discussed, the purpose was the fulfillment of what was considered a great public need by the legislative department and that Commonwealth Act No. 145 was not enacted purposely to affect adversely the tenure of judges or of any particular judge. Under these circumstances, I am for sustaining the power of the legislative department under the Constitution. To

be sure, there was greater necessity for reorganization consequent upon the establishment of the new government than at the time Acts Nos. 2347 and 4007 were approved by the defunct Philippine Legislature, and although in the case of these two Acts there was an express provision providing for the vacation by the judges of their offices whereas in the case of Commonwealth Act No. 145 doubt is engendered by its silence, this doubt should be resolved in favor of the valid exercise of the legislative power." 45 6. A few more words on the question of abolition. In the above-cited opinion of Justice Laurel in Zandueta, reference was made to Act No. 2347 46 on the reorganization of the Courts of First Instance and to Act No. 4007 47 on the reorganization of all branches of the government, including the courts of first instance. In both of them, the then Courts of First Instance were replaced by new courts with the same appellation. As Justice Laurel pointed out, there was no question as to the fact of abolition. He was equally categorical as to Commonwealth Act No. 145, where also the system of the courts of first instance was provided for expressly. It was pointed out by Justice Laurel that the mere creation of an entirely new district of the same court is valid and constitutional. such conclusion flowing "from the fundamental proposition that the legislature may abolish courts inferior to the Supreme Court and therefore may reorganize them territorially or otherwise thereby necessitating new appointments and commissions." 48 The challenged statute creates an intermediate appellate court, 49 regional trial courts, 50 metropolitan trial courts of the national capital region, 51 and other metropolitan trial courts,52 municipal trial courts in cities, 53 as well as in municipalities, 54 and municipal circuit trial courts. 55 There is even less reason then to doubt the fact that existing inferior courts were abolished. For the Batasang Pambansa, the establishment of such new inferior courts was the appropriate response to the grave and urgent problems that pressed for solution. Certainly, there could be differences of opinion as to the appropriate remedy. The choice, however, was for the Batasan to make, not for this Court, which deals only with the question of power. It bears mentioning that in Brillo v. Eage 56 this Court, in an unanimous opinion penned by the late Justice Diokno, citing Zandueta v. De la Costa, ruled: "La segunda question que el recurrrido plantea es que la Carta de Tacloban ha abolido el puesto. Si efectivamente ha sido abolido el cargo, entonces ha quedado extinguido el derecho de recurente a ocuparlo y a cobrar el salario correspodiente. Mc Culley vs. State, 46 LRA, 567. El derecho de un juez de desempenarlo hasta los 70 aos de edad o se incapacite no priva al Congreso de su facultad de abolir, fusionar o reorganizar juzgados no constitucionales." 57 Nonetheless, such well-established principle was not held applicable to the situation there obtaining, the Charter of Tacloban City creating a city court in place of the former justice of the peace court. Thus: "Pero en el caso de autos el Juzgado de Tacloban no ha sido abolido. Solo se le ha cambiado el nombre con el cambio de forma del gobierno local." 58 The present case is anything but that. Petitioners did not and could not prove that the challenged statute was not within the bounds of legislative authority. 7. This opinion then could very well stop at this point. The implementation of Batas Pambansa Blg. 129, concededly a task incumbent on the Executive, may give rise, however, to questions affecting a judiciary that should be kept independent. The all-embracing scope of the assailed legislation as far as all inferior courts from the Courts of Appeals to municipal courts are concerned, with the exception solely of the Sandiganbayan and the Court of Tax Appeals 59 gave rise, and understandably so, to misgivings as to its effect on such cherished Ideal. The first paragraph of the section on the transitory provision reads: "The provisions of this Act shall be immediately carried out in accordance with an Executive Order to be issued by the President. The Court of Appeals, the Courts of First Instance, the Circuit Criminal Courts, the Juvenile and Domestic Relations Courts, the Courts of Agrarian Relations, the City Courts, the Municipal Courts, and the Municipal Circuit Courts shall continue to function as presently constituted and organized, until the completion of the reorganization provided in this Act as declared by the President. Upon such declaration, the said courts shall be deemed automatically abolished and the incumbents thereof shall cease to hold the office." 60 There is all the more reason then why this Court has no choice but to inquire further into the allegation by petitioners that the security of tenure provision, an assurance of a judiciary free from extraneous influences, is thereby reduced to a barren form of words. The amended Constitution adheres even more clearly to the long-established tradition of a strong executive that antedated the 1935 Charter. As noted in the work of former Vice-Governor Hayden, a noted political scientist, President Claro M. Recto of the 1934 Convention, in his closing address, in stressing such a concept, categorically spoke of providing "an executive power which, subject to the fiscalization of the Assembly, and of public opinion, will not only know how to govern, but will actually govern, with a firm and steady hand, unembarrassed by vexatious interferences by other departments, or by unholy alliances with this and that social group." 61 The above excerpt was cited with approval by Justice Laurel in Planas v.

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Gil. 62Moreover, under the 1981 Amendments, it may be affirmed that once again the principle of separation of powers, to quote from the same jurist as ponente in Angara v. Electoral Commission, 63 "obtains not through express provision but by actual division." 64 The president, under Article VII, shall be the head of state and chief executive of the Republic of the Philippines." 65 Moreover, it is equally therein expressly provided that all the powers he possessed under the 1935 Constitution are once again vested in him unless the Batasang Pambansa provides otherwise." 66 Article VII of the 1935 Constitution speaks categorically: "The Executive power shall be vested in a President of the Philippines." 67 As originally framed, the 1973 Constitution created the position of President as the "symbolic head of state." 68 In addition, there was a provision for a Prime Minister as the head of government exercising the executive power with the assistance of the Cabinet69 Clearly, a modified parliamentary system was established. In the light of the 1981 amendments though, this Court in Free Telephone Workers Union v. Minister of Labor 70 could state: "The adoption of certain aspects of a parliamentary system in the amended Constitution does not alter its essentially presidential character." 71 The retention, however, of the position of the Prime Minister with the Cabinet, a majority of the members of which shall come from the regional representatives of the Batasang Pambansa and the creation of an Executive Committee composed of the Prime Minister as Chairman and not more than fourteen other members at least half of whom shall be members of the Batasang Pambansa, clearly indicate the evolving nature of the system of government that is now operative. 72 What is equally apparent is that the strongest ties bind the executive and legislative departments. It is likewise undeniable that the Batasang Pambansa retains its full authority to enact whatever legislation may be necessary to carry out national policy as usually formulated in a caucus of the majority party. It is understandable then why in Fortun v. Labang 73 it was stressed that with the provision transferring to the Supreme Court administrative supervision over the Judiciary, there is a greater need "to preserve unimpaired the independence of the judiciary, especially so at present, where to all intents and purposes, there is a fusion between the executive and the legislative branches." 74 8. To be more specific, petitioners contend that the abolition of the existing inferior courts collides with the security of tenure enjoyed by incumbent Justices and judges under Article X, Section 7 of the Constitution. There was a similar provision in the 1935 Constitution. It did not, however, go as far as conferring on this Tribunal the power to supervise administratively inferior courts. 75 Moreover, this Court is em powered "to discipline judges of inferior courts and, by a vote of at least eight members, order their dismissal." 76 Thus it possesses the competence to remove judges. Under the Judiciary Act, it was the President who was vested with such power. 77 Removal is, of course, to be distinguished from termination by virtue of the abolition of the office. There can be no tenure to a non-existent office. After the abolition, there is in law no occupant. In case of removal, there is an office with an occupant who would thereby lose his position. It is in that sense that from the standpoint of strict law, the question of any impairment of security of tenure does not arise. Nonetheless, for the incumbents of inferior courts abolished, the effect is one of separation. As to its effect, no distinction exists between removal and the abolition of the office. Realistically, it is devoid of significance. He ceases to be a member of the judiciary. In the implementation of the assailed legislation, therefore, it would be in accordance with accepted principles of constitutional construction that as far as incumbent justices and judges are concerned, this Court be consulted and that its view be accorded the fullest consideration. No fear need be entertained that there is a failure to accord respect to the basic principle that this Court does not render advisory opinions. No question of law is involved. If such were the case, certainly this Court could not have its say prior to the action taken by either of the two departments. Even then, it could do so but only by way of deciding a case where the matter has been put in issue. Neither is there any intrusion into who shall be appointed to the vacant positions created by the reorganization. That remains in the hands of the Executive to whom it properly belongs. There is no departure therefore from the tried and tested ways of judicial power, Rather what is sought to be achieved by this liberal interpretation is to preclude any plausibility to the charge that in the exercise of the conceded power of reorganizing tulle inferior courts, the power of removal of the present incumbents vested in this Tribunal is ignored or disregarded. The challenged Act would thus be free from any unconstitutional taint, even one not readily discernidble except to those predisposed to view it with distrust. Moreover, such a construction would be in accordance with the basic principle that in the choice of alternatives between one which would save and another which would invalidate a statute, the former is to be preferred. 78 There is an obvious way to do so. The principle that the Constitution enters into and forms part of every act to avoid any constitutional taint must be applied Nuez v. Sandiganbayan, 79 promulgated last January, has this relevant excerpt: "It is true that other Sections of the Decree could have been so worded as to avoid any constitutional objection. As of now, however, no ruling is called for. The view is given expression in the concurring and dissenting opinion of Justice Makasiar

that in such a case to save the Decree from the direct fate of invalidity, they must be construed in such a way as to preclude any possible erosion on the powers vested in this Court by the Constitution. That is a proposition too plain to be committed. It commends itself for approval." 80 Nor would such a step be unprecedented. The Presidential Decree constituting Municipal Courts into Municipal Circuit Courts, specifically provides: "The Supreme Court shall carry out the provisions of this Decree through implementing orders, on a province-to-province basis." 81 It is true there is no such provision in this Act, but the spirit that informs it should not be ignored in the Executive Order contemplated under its Section 44. 82 Thus Batas Pambansa Blg. 129 could stand the most rigorous test of constitutionality. 83 9. Nor is there anything novel in the concept that this Court is called upon to reconcile or harmonize constitutional provisions. To be specific, the Batasang Pambansa is expressly vested with the authority to reorganize inferior courts and in the process to abolish existing ones. As noted in the preceding paragraph, the termination of office of their occupants, as a necessary consequence of such abolition, is hardly distinguishable from the practical standpoint from removal, a power that is now vested in this Tribunal. It is of the essence of constitutionalism to assure that neither agency is precluded from acting within the boundaries of its conceded competence. That is why it has long been well-settled under the constitutional system we have adopted that this Court cannot, whenever appropriate, avoid the task of reconciliation. As Justice Laurel put it so well in the previously cited Angara decision, while in the main, "the Constitution has blocked out with deft strokes and in bold lines, allotment of power to the executive, the legislative and the judicial departments of the government, the overlapping and interlacing of functions and duties between the several departments, however, sometimes makes it hard to say just where the one leaves off and the other begins." 84 It is well to recall another classic utterance from the same jurist, even more emphatic in its affirmation of such a view, moreover buttressed by one of those insights for which Holmes was so famous "The classical separation of government powers, whether viewed in the light of the political philosophy of Aristotle, Locke, or Motesquieu or of the postulations of Mabini, Madison, or Jefferson, is a relative theory of government. There is more truism and actuality in interdependence than in independence and separation of powers, for as observed by Justice Holmes in a case of Philippine origin, we cannot lay down 'with mathematical precision and divide the branches into water-tight compartments' not only because 'the great ordinances of the Constitution do not establish and divide fields of black and white but also because 'even the more specific of them are found to terminate in a penumbra shading gradually from one extreme to the other.'" 85 This too from Justice Tuazon, likewise expressing with force and clarity why the need for reconciliation or balancing is well-nigh unavodiable under the fundamental principle of separation of powers: "The constitutional structure is a complicated system, and overlappings of governmental functions are recognized, unavoidable, and inherent necessities of governmental coordination." 86 In the same way that the academe has noted the existence in constitutional litigation of right versus right, there are instances, and this is one of them, where, without this attempt at harmonizing the provisions in question, there could be a case of power against power. That we should avoid. 10. There are other objections raised but they pose no difficulty. Petitioners would characterize as an undue delegation of legislative power to the President the grant of authority to fix the compensation and the allowances of the Justices and judges thereafter appointed. A more careful reading of the challenged Batas Pambansa Blg. 129 ought to have cautioned them against raising such an issue. The language of the statute is quite clear. The questioned provisions reads as follows: "Intermediate Appellate Justices, Regional Trial Judges, Metropolitan Trial Judges, municipal Trial Judges, and Municipal Circuit Trial Judges shall receive such receive such compensation and allowances as may be authorized by the President along the guidelines set forth in Letter of Implementation No. 93 pursuant to Presidential Decree No. 985, as amended by Presidential Decree No. 1597." 87 The existence of a standard is thus clear. The basic postulate that underlies the doctrine of non-delegation is that it is the legislative body which is entrusted with the competence to make laws and to alter and repeal them, the test being the completeness of the statue in all its terms and provisions when enacted. As pointed out in Edu v. Ericta: 88 "To avoid the taint of unlawful delegation, there must be a standard, which implies at the very least that the legislature itself determines matters of principle and lays down fundamental policy. Otherwise, the charge of complete abdication may be hard to repel. A standard thus defines legislative policy, marks its limits, maps out its boundaries and specifies the public agency to apply it. It indicates the circumstances under which the legislative command is to be effected. It is the criterion by which legislative purpose may be carried out. Thereafter, the executive or administrative office designated may in pursuance of the above guidelines promulgate supplemental rules and regulations. The standard may be either express or implied. If the former, the non-delegation objection is easily met. The standard though does not have to be spelled

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out specifically. It could be implied from the policy and purpose of the act considered as a whole." 89 The undeniably strong links that bind the executive and legislative departments under the amended Constitution assure that the framing of policies as well as their implementation can be accomplished with unity, promptitude, and efficiency. There is accuracy, therefore, to this observation in the Free Telephone Workers Union decision: "There is accordingly more receptivity to laws leaving to administrative and executive agencies the adoption of such means as may be necessary to effectuate a valid legislative purpose. It is worth noting that a highly-respected legal scholar, Professor Jaffe, as early as 1947, could speak of delegation as the 'dynamo of modern government.'" 90 He warned against a "restrictive approach" which could be "a deterrent factor to much-needed legislation."91 Further on this point from the same opinion" "The spectre of the non-delegation concept need not haunt, therefore, party caucuses, cabinet sessions or legislative chambers." 92 Another objection based on the absence in the statue of what petitioners refer to as a "definite time frame limitation" is equally bereft of merit. They ignore the categorical language of this provision: "The Supreme Court shall submit to the President, within thirty (30) days from the date of the effectivity of this act, a staffing pattern for all courts constituted pursuant to this Act which shall be the basis of the implementing order to be issued by the President in accordance with the immediately succeeding section." 93 The first sentence of the next section is even more categorical: "The provisions of this Act shall be immediately carried out in accordance with an Executive Order to be issued by the President." 94 Certainly petitioners cannot be heard to argue that the President is insensible to his constitutional duty to take care that the laws be faithfully executed. 95 In the meanwhile, the existing inferior courts affected continue functioning as before, "until the completion of the reorganization provided in this Act as declared by the President. Upon such declaration, the said courts shall be deemed automatically abolished and the incumbents thereof shall cease to hold office." 96 There is no ambiguity. The incumbents of the courts thus automatically abolished "shall cease to hold office." No fear need be entertained by incumbents whose length of service, quality of performance, and clean record justify their being named anew, 97 in legal contemplation without any interruption in the continuity of their service. 98 It is equally reasonable to assume that from the ranks of lawyers, either in the government service, private practice, or law professors will come the new appointees. In the event that in certain cases a little more time is necessary in the appraisal of whether or not certain incumbents deserve reappointment, it is not from their standpoint undesirable. Rather, it would be a reaffirmation of the good faith that will characterize its implementation by the Executive. There is pertinence to this observation of Justice Holmes that even acceptance of the generalization that courts ordinarily should not supply omissions in a law, a generalization qualified as earlier shown by the principle that to save a statute that could be done, "there is no canon against using common sense in construing laws as saying what they obviously mean." 99 Where then is the unconstitutional flaw 11. On the morning of the hearing of this petition on September 8, 1981, petitioners sought to have the writer of this opinion and Justices Ramon C. Aquino and Ameurfina Melencio-Herrera disqualified because the first-named was the chairman and the other two, members of the Committee on Judicial Reorganization. At the hearing, the motion was denied. It was made clear then and there that not one of the three members of the Court had any hand in the framing or in the discussion of Batas Pambansa Blg. 129. They were not consulted. They did not testify. The challenged legislation is entirely the product of the efforts of the legislative body. 100 Their work was limited, as set forth in the Executive Order, to submitting alternative plan for reorganization. That is more in the nature of scholarly studies. That the undertook. There could be no possible objection to such activity. Ever since 1973, this Tribunal has had administrative supervision over interior courts. It has had the opportunity to inform itself as to the way judicial business is conducted and how it may be improved. Even prior to the 1973 Constitution, it is the recollection of the writer of this opinion that either the then Chairman or members of the Committee on Justice of the then Senate of the Philippines 101 consulted members of the Court in drafting proposed legislation affecting the judiciary. It is not inappropriate to cite this excerpt from an article in the 1975 Supreme Court Review: "In the twentieth century the Chief Justice of the United States has played a leading part in judicial reform. A variety of conditions have been responsible for the development of this role, and foremost among them has been the creation of explicit institutional structures designed to facilitate reform." 102 Also: "Thus the Chief Justice cannot avoid exposure to and direct involvement in judicial reform at the federal level and, to the extent issues of judicial federalism arise, at the state level as well." 103 12. It is a cardinal article of faith of our constitutional regime that it is the people who are endowed with rights, to secure which a government is instituted. Acting as it does through public officials, it has to grant them either expressly or impliedly certain powers. Those they exercise not for their own benefit but for the

body politic. The Constitution does not speak in the language of ambiguity: "A public office is a public trust." 104 That is more than a moral adjuration It is a legal imperative. The law may vest in a public official certain rights. It does so to enable them to perform his functions and fulfill his responsibilities more efficiently. It is from that standpoint that the security of tenure provision to assure judicial independence is to be viewed. It is an added guarantee that justices and judges can administer justice undeterred by any fear of reprisal or untoward consequence. Their judgments then are even more likely to be inspired solely by their knowledge of the law and the dictates of their conscience, free from the corrupting influence of base or unworthy motives. The independence of which they are assured is impressed with a significance transcending that of a purely personal right. As thus viewed, it is not solely for their welfare. The challenged legislation Thus subject d to the most rigorous scrutiny by this Tribunal, lest by lack of due care and circumspection, it allow the erosion of that Ideal so firmly embedded in the national consciousness There is this farther thought to consider. independence in thought and action necessarily is rooted in one's mind and heart. As emphasized by former Chief Justice Paras in Ocampo v. Secretary of Justice, 105 there is no surer guarantee of judicial independence than the God-given character and fitness of those appointed to the Bench. The judges may be guaranteed a fixed tenure of office during good behavior, but if they are of such stuff as allows them to be subservient to one administration after another, or to cater to the wishes of one litigant after another, the independence of the judiciary will be nothing more than a myth or an empty Ideal. Our judges, we are confident, can be of the type of Lord Coke, regardless or in spite of the power of Congress we do not say unlimited but as herein exercised to reorganize inferior courts." 106 That is to recall one of the greatest Common Law jurists, who at the cost of his office made clear that he would not just blindly obey the King's order but "will do what becomes [him] as a judge." So it was pointed out in the first leading case stressing the independence of the judiciary, Borromeo v. Mariano, 107 The ponencia of Justice Malcolm Identified good judges with "men who have a mastery of the principles of law, who discharge their duties in accordance with law, who are permitted to perform the duties of the office undeterred by outside influence, and who are independent and self-respecting human units in a judicial system equal and coordinate to the other two departments of government." 108 There is no reason to assume that the failure of this suit to annul Batas Pambansa Blg. 129 would be attended with deleterious consequences to the administration of justice. It does not follow that the abolition in good faith of the existing inferior courts except the Sandiganbayan and the Court of Tax Appeals and the creation of new ones will result in a judiciary unable or unwilling to discharge with independence its solemn duty or one recreant to the trust reposed in it. Nor should there be any fear that less than good faith will attend the exercise be of the appointing power vested in the Executive. It cannot be denied that an independent and efficient judiciary is something to the credit of any administration. Well and truly has it been said that the fundamental principle of separation of powers assumes, and justifiably so, that the three departments are as one in their determination to pursue the Ideals and aspirations and to fulfilling the hopes of the sovereign people as expressed in the Constitution. There is wisdom as well as validity to this pronouncement of Justice Malcolm in Manila Electric Co. v. Pasay Transportation Company, 109 a decision promulgated almost half a century ago: "Just as the Supreme Court, as the guardian of constitutional rights, should not sanction usurpations by any other department or the government, so should it as strictly confine its own sphere of influence to the powers expressly or by implication conferred on it by the Organic Act." 110 To that basic postulate underlying our constitutional system, this Court remains committed. WHEREFORE, the unconstitutionality of Batas Pambansa Blg. 129 not having been shown, this petition is dismissed. No costs. Makasiar and Escolin, JJ., concur. Concepcion, Jr., concur in the result. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 102976 October 25, 1995

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IRON AND STEEL AUTHORITY, petitioner, vs. THE COURT OF APPEALS and MARIA CRISTINA FERTILIZER CORPORATION, respondents.

Government, for the compensation of MCFC's present occupancy rights on the subject land." LOI No. 1277 also directed that should NSC and private respondent MCFC fail to reach an agreement within a period of sixty (60) days from the date of LOI No. 1277, petitioner ISA was to exercise its power of eminent domain under P.D. No. 272 and to initiate expropriation proceedings in respect of occupancy rights of private respondent MCFC relating to the subject public land as well as the plant itself and related facilities and to cede the same to the NSC. 2 Negotiations between NSC and private respondent MCFC did fail. Accordingly, on 18 August 1983, petitioner ISA commenced eminent domain proceedings against private respondent MCFC in the Regional Trial Court, Branch 1, of Iligan City, praying that it (ISA) be places in possession of the property involved upon depositing in court the amount of P1,760,789.69 representing ten percent (10%) of the declared market values of that property. The Philippine National Bank, as mortgagee of the plant facilities and improvements involved in the expropriation proceedings, was also impleaded as party-defendant. On 17 September 1983, a writ of possession was issued by the trial court in favor of ISA. ISA in turn placed NSC in possession and control of the land occupied by MCFC's fertilizer plant installation. The case proceeded to trial. While the trial was ongoing, however, the statutory existence of petitioner ISA expired on 11 August 1988. MCFC then filed a motion to dismiss, contending that no valid judgment could be rendered against ISA which had ceased to be a juridical person. Petitioner ISA filed its opposition to this motion. In an Order dated 9 November 1988, the trial court granted MCFC's motion to dismiss and did dismiss the case. The dismissal was anchored on the provision of the Rules of Court stating that "only natural or juridical persons or entities authorized by law may be parties in a civil case." 3 The trial court also referred to non-compliance by petitioner ISA with the requirements of Section 16, Rule 3 of the Rules of Court. 4 Petitioner ISA moved for reconsideration of the trial court's Order, contending that despite the expiration of its term, its juridical existence continued until the winding up of its affairs could be completed. In the alternative, petitioner ISA urged that the Republic of the Philippines, being the real party-in-interest, should be allowed to be substituted for petitioner ISA. In this connection, ISA referred to a letter from the Office of the President dated 28 September 1988 which especially directed the Solicitor General to continue the expropriation case. The trial court denied the motion for reconsideration, stating, among other things that: The property to be expropriated is not for public use or benefit [__] but for the use and benefit [__] of NSC, a government controlled private corporation engaged in private business and for profit, specially now that the government, according to newspaper reports, is offering for sale to the public its [shares of stock] in the National Steel Corporation in line with the pronounced policy of the present administration to disengage the government from its private business ventures. 5 (Brackets supplied) Petitioner went on appeal to the Court of Appeals. In a Decision dated 8 October 1991, the Court of Appeals affirmed the order of dismissal of the trial court. The Court of Appeals held that petitioner ISA, "a government regulatory agency exercising sovereign functions," did not have the same rights as an ordinary corporation and that the ISA, unlike corporations organized under the Corporation Code, was not entitled to a period for winding up its affairs after expiration of its legally mandated term, with the result that upon expiration of its term on 11 August 1987, ISA was "abolished and [had] no more legal authority to perform governmental functions." The Court of Appeals went on to say that the action for expropriation could not prosper because the basis for the proceedings, the ISA's exercise of its delegated authority to expropriate, had become ineffective as a result of the delegate's dissolution, and could not be continued in the name of Republic of the Philippines, represented by the Solicitor General: It is our considered opinion that under the law, the complaint cannot prosper, and therefore, has to be dismissed without prejudice to the refiling of a new complaint for expropriation if the Congress sees it fit." (Emphases supplied) At the same time, however, the Court of Appeals held that it was premature for the trial court to have ruled that the expropriation suit was not for a public purpose, considering that the parties had not yet rested their respective cases.

FELICIANO, J.: Petitioner Iron and Steel Authority ("ISA") was created by Presidential Decree (P.D.) No. 272 dated 9 August 1973 in order, generally, to develop and promote the iron and steel industry in the Philippines. The objectives of the ISA are spelled out in the following terms: Sec. 2.Objectives The Authority shall have the following objectives: (a) to strengthen the iron and steel industry of the Philippines and to expand the domestic and export markets for the products of the industry; (b) to promote the consolidation, integration and rationalization of the industry in order to increase industry capability and viability to service the domestic market and to compete in international markets; (c) to rationalize the marketing and distribution of steel products in order to achieve a balance between demand and supply of iron and steel products for the country and to ensure that industry prices and profits are at levels that provide a fair balance between the interests of investors, consumers suppliers, and the public at large; (d) to promote full utilization of the existing capacity of the industry, to discourage investment in excess capacity, and in coordination, with appropriate government agencies to encourage capital investment in priority areas of the industry; (e) to assist the industry in securing adequate and low-cost supplies of raw materials and to reduce the excessive dependence of the country on imports of iron and steel. The list of powers and functions of the ISA included the following: Sec. 4.Powers and Functions. The authority shall have the following powers and functions: xxx xxx xxx (j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/or lease to the companies involved if it is shown that such use of the State's power is necessary to implement the construction of capacity which is needed for the attainment of the objectives of the Authority; xxx xxx xxx (Emphasis supplied) P.D. No. 272 initially created petitioner ISA for a term of five (5) years counting from 9 August 1973. 1 When ISA's original term expired on 10 October 1978, its term was extended for another ten (10) years by Executive Order No. 555 dated 31 August 1979. The National Steel Corporation ("NSC") then a wholly owned subsidiary of the National Development Corporation which is itself an entity wholly owned by the National Government, embarked on an expansion program embracing, among other things, the construction of an integrated steel mill in Iligan City. The construction of such a steel mill was considered a priority and major industrial project of the Government. Pursuant to the expansion program of the NSC, Proclamation No. 2239 was issued by the President of the Philippines on 16 November 1982 withdrawing from sale or settlement a large tract of public land (totalling about 30.25 hectares in area) located in Iligan City, and reserving that land for the use and immediate occupancy of NSC. Since certain portions of the public land subject matter Proclamation No. 2239 were occupied by a nonoperational chemical fertilizer plant and related facilities owned by private respondent Maria Cristina Fertilizer Corporation ("MCFC"), Letter of Instruction (LOI), No. 1277, also dated 16 November 1982, was issued directing the NSC to "negotiate with the owners of MCFC, for and on behalf of the

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In this Petition for Review, the Solicitor General argues that since ISA initiated and prosecuted the action for expropriation in its capacity as agent of the Republic of the Philippines, the Republic, as principal of ISA, is entitled to be substituted and to be made a party-plaintiff after the agent ISA's term had expired. Private respondent MCFC, upon the other hand, argues that the failure of Congress to enact a law further extending the term of ISA after 11 August 1988 evinced a "clear legislative intent to terminate the juridical existence of ISA," and that the authorization issued by the Office of the President to the Solicitor General for continued prosecution of the expropriation suit could not prevail over such negative intent. It is also contended that the exercise of the eminent domain by ISA or the Republic is improper, since that power would be exercised "not on behalf of the National Government but for the benefit of NSC." The principal issue which we must address in this case is whether or not the Republic of the Philippines is entitled to be substituted for ISA in view of the expiration of ISA's term. As will be made clear below, this is really the only issue which we must resolve at this time. Rule 3, Section 1 of the Rules of Court specifies who may be parties to a civil action: Sec. 1.Who May Be Parties. Only natural or juridical persons or entities authorized by law may be parties in a civil action. Under the above quoted provision, it will be seen that those who can be parties to a civil action may be broadly categorized into two (2) groups: (a) those who are recognized as persons under the law whether natural, i.e., biological persons, on the one hand, or juridical person such as corporations, on the other hand; and (b) entities authorized by law to institute actions. Examination of the statute which created petitioner ISA shows that ISA falls under category (b) above. P.D. No. 272, as already noted, contains express authorization to ISA to commence expropriation proceedings like those here involved: Sec. 4.Powers and Functions. The Authority shall have the following powers and functions: xxx xxx xxx (j) to initiate expropriation of land required for basic iron and steel facilities for subsequent resale and/or lease to the companies involved if it is shown that such use of the State's power is necessary to implement the construction of capacity which is needed for the attainment of the objectives of the Authority; xxx xxx xxx (Emphasis supplied) It should also be noted that the enabling statute of ISA expressly authorized it to enter into certain kinds of contracts "for and in behalf of the Government" in the following terms: xxx xxx xxx (i) to negotiate, and when necessary, to enter into contracts for and in behalf of the government, for the bulk purchase of materials, supplies or services for any sectors in the industry, and to maintain inventories of such materials in order to insure a continuous and adequate supply thereof and thereby reduce operating costs of such sector; xxx xxx xxx (Emphasis supplied) Clearly, ISA was vested with some of the powers or attributes normally associated with juridical personality. There is, however, no provision in P.D. No. 272 recognizing ISA as possessing general or comprehensive juridical personality separate and distinct from that of the Government. The ISA in fact appears to the Court to be a non-incorporated agency or instrumentality of the Republic of the Philippines, or more precisely of the Government of the Republic of the Philippines. It is common knowledge that other agencies or instrumentalities of the Government of the Republic are cast in corporate form, that is to say, are incorporated agencies or instrumentalities, sometimes with and at

other times without capital stock, and accordingly vested with a juridical personality distinct from the personality of the Republic. Among such incorporated agencies or instrumentalities are: National Power Corporation; 6 Philippine Ports Authority; 7 National Housing Authority; 8 Philippine National Oil Company; 9 Philippine National Railways; 10 Public Estates Authority; 11 Philippine Virginia Tobacco Administration, 12 and so forth. It is worth noting that the term "Authority" has been used to designate both incorporated and non-incorporated agencies or instrumentalities of the Government. We consider that the ISA is properly regarded as an agent or delegate of the Republic of the Philippines. The Republic itself is a body corporate and juridical person vested with the full panoply of powers and attributes which are compendiously described as "legal personality." The relevant definitions are found in the Administrative Code of 1987: Sec. 2.General Terms Defined. Unless the specific words of the text, or the context as a whole, or a particular statute, require a different meaning: (1) Government of the Republic of the Philippines refers to the corporate governmental entity through which the functions of government are exercised throughout the Philippines, including, save as the contrary appears from the context, the various arms through which political authority is made effective in the Philippines, whether pertaining to the autonomous regions, the provincial, city, municipal or barangay subdivisions or other forms of local government. xxx xxx xxx (4) Agency of the Government refers to any of the various units of the Government, including a department, bureau, office, instrumentality, or government-owned or controlled corporation, or a local government or a distinct unit therein. xxx xxx xxx (10) Instrumentality refers to any agency of the National Government, not integrated within the department framework, vested with special functions or jurisdiction by law, endowed with some if not all corporate powers, administering special funds, and enjoying operational autonomy, usually through a charter. This term includes regulatory agencies, chartered institutions and government-owned or controlled corporations. xxx xxx xxx (Emphases supplied) When the statutory term of a non-incorporated agency expires, the powers, duties and functions as well as the assets and liabilities of that agency revert back to, and are re-assumed by, the Republic of the Philippines, in the absence of special provisions of law specifying some other disposition thereof such as, e.g., devolution or transmission of such powers, duties, functions, etc. to some other identified successor agency or instrumentality of the Republic of the Philippines. When the expiring agency is an incorporated one, the consequences of such expiry must be looked for, in the first instance, in the charter of that agency and, by way of supplementation, in the provisions of the Corporation Code. Since, in the instant case, ISA is a non-incorporated agency or instrumentality of the Republic, its powers, duties, functions, assets and liabilities are properly regarded as folded back into the Government of the Republic of the Philippines and hence assumed once again by the Republic, no special statutory provision having been shown to have mandated succession thereto by some other entity or agency of the Republic. The procedural implications of the relationship between an agent or delegate of the Republic of the Philippines and the Republic itself are, at least in part, spelled out in the Rules of Court. The general rule is, of course, that an action must be prosecuted and defended in the name of the real party in interest. (Rule 3, Section 2) Petitioner ISA was, at the commencement of the expropriation proceedings, a real party in interest, having been explicitly authorized by its enabling statute to institute expropriation proceedings. The Rules of Court at the same time expressly recognize the role of representative parties: Sec. 3.Representative Parties. A trustee of an expressed trust, a guardian, an executor or administrator, or a party authorized by statute may sue or be sued without joining the party for whose benefit the action is presented or defended; but the court may, at any stage of the proceedings, order such beneficiary to be made a party. . . . . (Emphasis supplied)

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In the instant case, ISA instituted the expropriation proceedings in its capacity as an agent or delegate or representative of the Republic of the Philippines pursuant to its authority under P.D. No. 272. The present expropriation suit was brought on behalf of and for the benefit of the Republic as the principal of ISA. Paragraph 7 of the complaint stated: 7. The Government, thru the plaintiff ISA, urgently needs the subject parcels of land for the construction and installation of iron and steel manufacturing facilities that are indispensable to the integration of the iron and steel making industry which is vital to the promotion of public interest and welfare. (Emphasis supplied) The principal or the real party in interest is thus the Republic of the Philippines and not the National Steel Corporation, even though the latter may be an ultimate user of the properties involved should the condemnation suit be eventually successful. From the foregoing premises, it follows that the Republic of the Philippines is entitled to be substituted in the expropriation proceedings as party-plaintiff in lieu of ISA, the statutory term of ISA having expired. Put a little differently, the expiration of ISA's statutory term did not by itself require or justify the dismissal of the eminent domain proceedings. It is also relevant to note that the non-joinder of the Republic which occurred upon the expiration of ISA's statutory term, was not a ground for dismissal of such proceedings since a party may be dropped or added by order of the court, on motion of any party or on the court's own initiative at any stage of the action and on such terms as are just. 13 In the instant case, the Republic has precisely moved to take over the proceedings as party-plaintiff. In E.B. Marcha Transport Company, Inc. v. Intermediate Appellate Court , 14 the Court recognized that the Republic may initiate or participate in actions involving its agents. There the Republic of the Philippines was held to be a proper party to sue for recovery of possession of property although the "real" or registered owner of the property was the Philippine Ports Authority, a government agency vested with a separate juridical personality. The Court said: It can be said that in suing for the recovery of the rentals, the Republic of the Philippines acted as principal of the Philippine Ports Authority, directly exercising the commission it had earlier conferred on the latter as its agent. . . . 15 (Emphasis supplied) In E.B. Marcha, the Court also stressed that to require the Republic to commence all over again another proceeding, as the trial court and Court of Appeals had required, was to generate unwarranted delay and create needless repetition of proceedings: More importantly, as we see it, dismissing the complaint on the ground that the Republic of the Philippines is not the proper party would result in needless delay in the settlement of this matter and also in derogation of the policy against multiplicity of suits. Such a decision would require the Philippine Ports Authority to refile the very same complaint already proved by the Republic of the Philippines and bring back as it were to square one. 16 (Emphasis supplied) As noted earlier, the Court of Appeals declined to permit the substitution of the Republic of the Philippines for the ISA upon the ground that the action for expropriation could not prosper because the basis for the proceedings, the ISA's exercise of its delegated authority to expropriate, had become legally ineffective by reason of the expiration of the statutory term of the agent or delegated i.e., ISA. Since, as we have held above, the powers and functions of ISA have reverted to the Republic of the Philippines upon the termination of the statutory term of ISA, the question should be addressed whether fresh legislative authority is necessary before the Republic of the Philippines may continue the expropriation proceedings initiated by its own delegate or agent. While the power of eminent domain is, in principle, vested primarily in the legislative department of the government, we believe and so hold that no new legislative act is necessary should the Republic decide, upon being substituted for ISA, in fact to continue to prosecute the expropriation proceedings. For the legislative authority, a long time ago, enacted a continuing or standing delegation of authority to the President of the Philippines to exercise, or cause the exercise of, the power of eminent domain on behalf of the Government of the Republic of the Philippines. The 1917 Revised Administrative Code, which was in effect at the time of the commencement of the present expropriation proceedings before the Iligan Regional Trial Court, provided that:

Sec. 64.Particular powers and duties of the President of the Philippines. In addition to his general supervisory authority, the President of the Philippines shall have such other specific powers and duties as are expressly conferred or imposed on him by law, and also, in particular, the powers and duties set forth in this Chapter. Among such special powers and duties shall be: xxx xxx xxx (h) To determine when it is necessary or advantageous to exercise the right of eminent domain in behalf of the Government of the Philippines; and to direct the Secretary of Justice, where such act is deemed advisable, to cause the condemnation proceedings to be begun in the court having proper jurisdiction . (Emphasis supplied) The Revised Administrative Code of 1987 currently in force has substantially reproduced the foregoing provision in the following terms: Sec. 12.Power of eminent domain. The President shall determine when it is necessary or advantageous to exercise the power of eminent domain in behalf of the National Government, and direct the Solicitor General, whenever he deems the action advisable, to institute expopriation proceedings in the proper court. (Emphasis supplied) In the present case, the President, exercising the power duly delegated under both the 1917 and 1987 Revised Administrative Codes in effect made a determination that it was necessary and advantageous to exercise the power of eminent domain in behalf of the Government of the Republic and accordingly directed the Solicitor General to proceed with the suit. 17 It is argued by private respondent MCFC that, because Congress after becoming once more the depository of primary legislative power, had not enacted a statute extending the term of ISA, such non-enactment must be deemed a manifestation of a legislative design to discontinue or abort the present expropriation suit. We find this argument much too speculative; it rests too much upon simple silence on the part of Congress and casually disregards the existence of Section 12 of the 1987 Administrative Code already quoted above. Other contentions are made by private respondent MCFC, such as, that the constitutional requirement of "public use" or "public purpose" is not present in the instant case, and that the indispensable element of just compensation is also absent. We agree with the Court of Appeals in this connection that these contentions, which were adopted and set out by the Regional Trial Court in its order of dismissal, are premature and are appropriately addressed in the proceedings before the trial court. Those proceedings have yet to produce a decision on the merits, since trial was still on going at the time the Regional Trial Court precipitously dismissed the expropriation proceedings. Moreover, as a pragmatic matter, the Republic is, by such substitution as party-plaintiff, accorded an opportunity to determine whether or not, or to what extent, the proceedings should be continued in view of all the subsequent developments in the iron and steel sector of the country including, though not limited to, the partial privatization of the NSC. WHEREFORE, for all the foregoing, the Decision of the Court of Appeals dated 8 October 1991 to the extent that it affirmed the trial court's order dismissing the expropriation proceedings, is hereby REVERSED and SET ASIDE and the case is REMANDED to the court a quo which shall allow the substitution of the Republic of the Philippines for petitioner Iron and Steel Authority and for further proceedings consistent with this Decision. No pronouncement as to costs. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 157542 October 10, 2008

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REBECCA A. BARBO, ELEONORA R. DE JESUS, and ANTONIO B. MAGTIBAY, petitioners, vs. COMMISSION ON AUDIT, respondent. DECISION LEONARDO-DE CASTRO, J.: By this Petition for Certiorari under Rule 64 of the Rules of Court petitioners seek to annul or reverse COA Decision No. 2000-1331 dated May 16, 2000 and Resolution2 dated February 27, 2003 rendered by the Commission on Audit (COA). In the said issuances, the COA affirmed its Regional Director's 1st Indorsement 3dated June 5, 1998, which in turn affirmed Notice of Disallowance No. 97-004 (94, 95, 96)4 dated June 30, 1997 issued by the Special Audit Team against petitioners Rebecca A. Barbo, Eleonora R. de Jesus, and Antonio B. Magtibay. Petitioners are officials of the Local Water Utilities Administration (LWUA) and designated members of the Interim Board of Directors of the San Fernando Water District (SFWD). On December 4, 1995 and February 12 1996, the LWUA Board of Trustees issued Board Resolution No. 313, Series of 1995 and Board Resolution No. 39, Series of 1996 5 respectively. These Board Resolutions authorized the Board of Directors of SFWD to receive reimbursable allowances in the form of Representation and Transportation Allowance (RATA), Travel Allowance, and Extraordinary & Miscellaneous Expense (EME); Christmas Bonus; Uniform Allowance; Rice Allowance; Medical and Dental Benefits; and Productivity Incentive Bonus. Pursuant to the said Board Resolutions, petitioners received EME, Rice Allowance, Christmas Bonus, and Productivity Bonus from SFWD during the calendar years starting 1994 until 1996. On June 30, 1997, a Special Audit Team of COA Regional Office No. III at San Fernando, Pampanga audited the financial accounts of SFWD for the period covering January 1, 1994 to July 15, 1996. The COA Special Audit Team disallowed the payment of the above-mentioned benefits and allowances received by petitioners after the same were found to be excessive and contrary to Sections 228, 162 and 163 of the Government Accounting and Auditing Manual (GAAM) and to Civil Service Commission (CSC) Resolution No. 9540736 in relation to Section 13 of Presidential Decree (PD) No. 198 (Provincial Water Utilities Act of 1973) as amended. Thus, petitioners were directed to refund the benefits and allowances subject of the disallowance. Petitioners appealed to the COA Regional Director raising the following arguments: 1. That CSC Resolution No. 954073 issued in Cruz v. Cabili cannot extend to appellants, they not having been made parties to the case; 2. That it applied to appellants, said resolution will partake the nature of an implementing rule and regulation which is beyond CSC's jurisdiction to issue; 3. That DBM, not CSC, is the appropriate authority to rule on compensation; 4. That Christmas Bonus, Productivity Bonus, Rice Allowance, and Uniform Allowance are not compensation; 5. That Extraordinary and Miscellaneous Expenses are not compensation but reimbursement of expenses; and 6. That the right of water district directors and the interim general manager to receive allowances and other benefits is appropriately recognized by LWUA. The Regional Director, in his First Indorsement dated June 5, 1998, affirmed the Special Audit Team's Notice of Disallowance No. 97-004 (94, 95, 96). The Regional Director declared that the COA Special Audit Team was correct in citing CSC Resolution No. 954073, which resolved the case of LWUA Employees Association for Progress (LEAP) v. Cabili and de Vera7, because the said resolution applied on all fours to petitioners' case. In the said resolution, the CSC held that it is illegal for any LWUA officer or employee who sits as member of the Board of Directors of a water district to receive and collect any

additional, double, or indirect compensation from said water district, except per diems, pursuant to Section 13 of PD No. 198, as amended. From the denial of their appeal by the COA Regional Director, petitioners elevated the matter to the COA via a petition for review. In the herein challenged Decision dated May 16, 2000, the COA denied the petition for review and affirmed the ruling of the COA Regional Director as contained in its First Indorsement. The COA stressed that the Directors of local water districts (LWDs) were prohibited from receiving compensation other than per diems and that LWUA Board Resolution Nos. 313 and 39 were contrary to the law which it intended to implement, specifically, Section 13 of PD No. 198, as amended. Citing the case Peralta v. Mathay,8 the COA declared that the subject bonuses and allowances received by petitioners constituted additional compensation or remuneration. The dispositive portion of the decision reads: PREMISES CONSIDERED, the instant Petition for Review of Mr. Simplicio Belisario, et al. [herein petitioners included], is hereby denied. Accordingly, the subject disallowances are affirmed with all officers and employees who received the bonuses and allowances liable for their settlement together with the officers named in the Notice of Disallowance, namely: Mr. Dionisio Polintan, General Manager, Ms. Merlita Garcia, Finance Officer, and Ms. Arsenia Sicat, Cashier / Property Management Supervisor. (Words in brackets ours) Petitioners' motion for reconsideration was denied by the COA in its challenged Resolution dated February 27, 2003. Thus, petitioners now come to this Court, imputing grave abuse of discretion amounting to lack of jurisdiction on the part of the COA in issuing COA Decision No. 2000-133 and February 27, 2003 Resolution. Specifically, petitioners raise the following issues: I. WHETHER OR NOT RESPONDENT HAS THE JURISDICTION TO MOTU PROPRIO DECLARE LWUA BOARD RESOLUTION NO. 313, SERIES OF 1995, AS AMENDED BY RESOLUTION NO. 39, SERIES OF 1996, TO BE TOTALLY IN CONFLICT WITH SEC. 13 OF PD NO. 198, AS AMENDED. II. WHETHER OR NOT SEC. 13, PD NO. 198, AS AMENDED, PROHIBIT PETITIONERS' ENTITLEMENT TO RATA, EME, BONUSES AND OTHER BENEFITS AND ALLOWANCES. III. WHETHER OR NOT PETITIONERS ARE LIABLE TO SETTLE / REFUND THE DISALLOWED ALLOWANCES, BONUSES AND OTHER BENEFITS RECEIVED BY PETITIONERS. The petition is partly meritorious. Petitioners contend that the COA lacks jurisdiction to declare whether or not LWUA Board Resolution Nos. 313 and 39 are consistent with Section 13 of PD No. 198, as amended, on matters pertaining to the compensation and "other benefits" of the Directors of the LWD. This is allegedly the function of the courts. The Court has already settled this issue in a myriad of cases.9 Particularly, in Rodolfo S. de Jesus [Catbalogan Water District] v. COA,10 the Court upheld the authority and jurisdiction of the COA to rule on the legality of the disbursement of government funds by a water district and declared that such power does not conflict with the jurisdiction of the courts, the DBM, and the LWUA. Citing Section 2, Subdivision D, Article IX of the 1987 Constitution11 the Court declared that it is the mandate of the COA to audit all government agencies, including government-owned and controlled corporations with original charters. Indeed, the Constitution specifically vests in the COA the authority to determine whether government entities comply with laws and regulations in disbursing government funds, and to disallow illegal or irregular disbursements of government funds.12 This independent constitutional body is tasked to be vigilant and conscientious in safeguarding the proper use of the government's, and ultimately the people's, property.13 Anent the second issue, a water district is a government-owned and controlled corporation with a special charter since it is created pursuant to a special law, Presidential Decree (PD) 198. It is undeniable that PD 198 expressly prohibits the grant of RATA, EME, and bonuses to members of the board of Water Districts. Section 13 of PD 198, as amended, reads as follows:

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Compensation. - Each director shall receive a per diem, to be determined by the board, for each meeting of the board actually attended by him, but no director shall receive per diems in any given month in excess of the equivalent of the total per diems of four meetings in any given month. No director shall receive other compensation for services to the district. Any per diem in excess of P50 shall be subject to approval of the Administration. In Baybay Water District v. Commission on Audit,14 the members of the board of Baybay Water District also questioned the disallowance by the COA of payment of RATA, rice allowance and excessive per diems. The Court ruled that pursuant to PD 198, members of the board of water districts cannot receive allowances and benefits more than those allowed by PD 198. Construing Section 13 of PD 198, in Baybay, the Court declared: xxx Under 13 of this Decree, per diem is precisely intended to be the compensation of members of board of directors of water districts. Indeed, words and phrases in a statute must be given their natural, ordinary, and commonly-accepted meaning, due regard being given to the context in which the words and phrases are used. By specifying the compensation which a director is entitled to receive and by limiting the amount he/she is allowed to receive in a month, and, in the same paragraph, providing "No director shall receive other compensation" than the amount provided for per diems, the law quite clearly indicates that directors of water districts are authorized to receive only the per diem authorized by law and no other compensation or allowance in whatever form. Section 13 of PD 198 is clear enough that it needs no interpretation. It expressly prohibits the grant of compensation other than the payment of per diem, thus preempting the exercise of any discretion by water districts in paying other allowances and bonuses. Lastly, the petitioners claim that they are not liable to settle or refund the disallowed payments of benefits and allowances which they have received in good faith and as de jure officers of SFWD. While we sustain the disallowance of the above benefits by respondent COA, however, we find that the SFWD affected personnel who received the above mentioned benefits and privileges acted in good faith under the honest belief that Board Resolution Nos. 313 and 39 authorized such payment. In Abanilla v. Commission On Audit15 citing Querubin v. Regional Cluster Director, Legal and Adjudication Office, COA Regional Office VI, Pavia, Iloilo City,16 this Court held: Considering, however, that all the parties here acted in good faith, we cannot countenance the refund of subject incentive benefits for the year 1992, which amounts the petitioners have already received. Indeed, no indicia of bad faith can be detected under the attendant facts and circumstances. The officials and chiefs of offices concerned disbursed such incentive benefits in the honest belief that the amounts given were due to the recipients and the latter accept the same with gratitude, confident that they richly deserve such benefits. x x x. Petitioners here received the additional allowances and bonuses in good faith under the honest belief that LWUA Board Resolution No. 313 authorized such payment. At the time petitioners received the additional allowances and bonuses, the Court had not yet decided Baybay Water District. Petitioners had no knowledge that such payment was without legal basis. Thus, being in good faith, petitioners need not refund the allowances and bonuses they received but disallowed by the COA. The foregoing disquisitions were also applied to the more recent cases of De Jesus [Metro Cariaga Water District];17 Molen [Metro Iloilo Water District]; and Magno [Mangaldan Water District]. 18 The same reasoning and conclusions of the Court were reiterated in de Jesus v. CSC19 and Cabili and de Vera v. CSC.20 We find no reason to depart from the rulings in these cases which essentially involve the same issues as the instant case. WHEREFORE, the instant petition is hereby PARTIALLY GRANTED. COA Decision No. 2000133 dated May 16, 2000 and Resolution dated February 27, 2003 are hereby AFFIRMED with the MODIFICATION that the petitioners need not refund the benefits and allowances disallowed by the COA. No costs. SO ORDERED.

FRANCISCO I. CHAVEZ Petitioner, vs. NATIONAL HOUSING AUTHORITY, R-II BUILDERS, C., R-II HOLDINGS, INC., HARBOUR CENTRE PORT TERMINAL, INC., and R. REGHIS ROMERO II,Respondents.

VELASCO, JR., J.: In this Petition for Prohibition and Mandamus with Prayer for Temporary Restraining Order and/or Writ of Preliminary Injunction under Rule 65, petitioner, in his capacity as taxpayer, seeks: to declare NULL AND VOID the Joint Venture Agreement (JVA) dated March 9, 1993 between the National Housing Authority and R-II Builders, Inc. and the Smokey Mountain Development and Reclamation Project embodied therein; the subsequent amendments to the said JVA; and all other agreements signed and executed in relation thereto including, but not limited to the Smokey Mountain Asset Pool Agreement dated 26 September 1994 and the separate agreements for Phase I and Phase II of the Projectas well as all other transactions which emanated therefrom, for being UNCONSTITUTIONAL and INVALID; to enjoin respondentsparticularly respondent NHAfrom further implementing and/or enforcing the said project and other agreements related thereto, and from further deriving and/or enjoying any rights, privileges and interest therefrom x x x; and to compel respondents to disclose all documents and information relating to the projectincluding, but not limited to, any subsequent agreements with respect to the different phases of the project, the revisions over the original plan, the additional works incurred thereon, the current financial condition of respondent R-II Builders, Inc., and the transactions made respecting the project.[1]

The Facts On March 1, 1988, then President Corazon C. Aquino issued Memorandum Order No. (MO) 161[2] approving and directing the implementation of the Comprehensive and Integrated Metropolitan Manila Waste Management Plan (the Plan). The Metro Manila Commission, in coordination with various government agencies, was tasked as the lead agency to implement the Plan as formulated by the Presidential Task Force on Waste Management created by Memorandum Circular No. 39. A day after, on March 2, 1988, MO 161-A[3] was issued, containing the guidelines which prescribed the functions and responsibilities of fifteen (15) various government departments and offices tasked to implement the Plan, namely: Department of Public Works and Highway (DPWH), Department of Health (DOH), Department of Environment and Natural Resources (DENR), Department of Transportation and Communication, Department of Budget and Management, National Economic and Development Authority (NEDA), Philippine Constabulary Integrated National Police, Philippine Information Agency and the Local Government Unit (referring to the City of Manila), Department of Social Welfare and Development, Presidential Commission for Urban Poor, National Housing Authority (NHA), Department of Labor and Employment, Department of Education, Culture and Sports (now Department of Education), and Presidential Management Staff. Specifically, respondent NHA was ordered to conduct feasibility studies and develop low-cost housing projects at the dumpsite and absorb scavengers in NHA resettlement/low-cost housing projects.[4] On the other hand, the DENR was tasked to review and evaluate proposed projects under the Plan with regard to their environmental impact, conduct regular monitoring of activities of the Plan to ensure compliance with environmental standards and assist DOH in the conduct of the study on hospital waste management.[5] At the time MO 161-A was issued by President Aquino, Smokey Mountain was a wasteland in Balut, Tondo, Manila, where numerous Filipinos resided in subhuman conditions, collecting items that

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may have some monetary value from the garbage. The Smokey Mountain dumpsite is bounded on the north by the Estero Marala, on the south by the property of the National Government, on the east by the property of B and I Realty Co., and on the west by Radial Road 10 (R-10). Pursuant to MO 161-A, NHA prepared the feasibility studies of the Smokey Mountain low-cost housing project which resulted in the formulation of the Smokey Mountain Development Plan and Reclamation of the Area Across R-10 or the Smokey Mountain Development and Reclamation Project (SMDRP; the Project). The Project aimed to convert the Smokey Mountain dumpsite into a habitable housing project, inclusive of the reclamation of the area across R-10, adjacent to the Smokey Mountain as the enabling component of the project.[6] Once finalized, the Plan was submitted to President Aquino for her approval. On July 9, 1990, the Build-Operate-and-Transfer (BOT) Law (Republic Act No. [RA] 6957) was enacted.[7] Its declared policy under Section 1 is [t]o recognize the indispensable role of the private sector as the main engine for national growth and development and provide the most appropriate favorable incentives to mobilize private resources for the purpose. Sec. 3 authorized and empowered [a]ll government infrastructure agencies, including government-owned and controlled corporations and local government units x x x to enter into contract with any duly pre-qualified private contractor for the financing, construction, operation and maintenance of any financially viable infrastructure facilities through the build-operate-transfer or build and transfer scheme. RA 6957 defined build-and-transfer scheme as [a] contractual arrangement whereby the contractor undertakes the construction, including financing, of a given infrastructure facility, and its turnover after the completion to the government agency or local government unit concerned which shall pay the contractor its total investment expended on the project, plus reasonable rate of return thereon. The last paragraph of Sec. 6 of the BOT Law provides that the repayment scheme in the case of land reclamation or the building of industrial estates may consist of [t]he grant of a portion or percentage of the reclaimed land or industrial estate built, subject to the constitutional requirements with respect to the ownership of lands. On February 10, 1992, Joint Resolution No. 03[8] was passed by both houses of Congress. Sec. 1 of this resolution provided, among other things, that: Section 1. There is hereby approved the following national infrastructure projects for implementation under the provisions of Republic Act No. 6957 and its implementing rules and regulations: xxxx (d) facilities; xxxx (k) Land reclamation, dredging and other related development facilities; Port infrastructure like piers, wharves, quays, storage handling, ferry service and related

This resolution complied with and conformed to Sec. 4 of the BOT Law requiring the approval of all national infrastructure projects by the Congress. On January 17, 1992, President Aquino proclaimed MO 415 [9] approving and directing the implementation of the SMDRP. Secs. 3 and 4 of the Memorandum Order stated: Section 3. The National Housing Authority is hereby directed to implement the Smokey Mountain Development Plan and Reclamation of the Area Across R-10 through a private sector joint venture scheme at the least cost to the government. Section 4. The land area covered by the Smokey Mountain dumpsite is hereby conveyed to the National Housing Authority as well as the area to be reclaimed across R-10. (Emphasis supplied.)

In addition, the Public Estates Authority (PEA) was directed to assist in the evaluation of proposals regarding the technical feasibility of reclamation, while the DENR was directed to (1) facilitate titling of SmokeyMountain and of the area to be reclaimed and (2) assist in the technical evaluation of proposals regarding environmental impact statements.[10] In the same MO 415, President Aquino created an Executive Committee (EXECOM) to oversee the implementation of the Plan, chaired by the National Capital Region-Cabinet Officer for Regional Development (NCR-CORD) with the heads of the NHA, City of Manila, DPWH, PEA, Philippine Ports Authority (PPA), DENR, and Development Bank of the Philippines (DBP) as members. [11] The NEDA subsequently became a member of the EXECOM. Notably, in a September 2, 1994 Letter,[12] PEA General Manager Amado Lagdameo approved the plans for the reclamation project prepared by the NHA. In conformity with Sec. 5 of MO 415, an inter-agency technical committee (TECHCOM) was created composed of the technical representatives of the EXECOM [t]o assist the NHA in the evaluation of the project proposals, assist in the resolution of all issues and problems in the project to ensure that all aspects of the development from squatter relocation, waste management, reclamation, environmental protection, land and house construction meet governing regulation of the region and to facilitate the completion of the project.[13] Subsequently, the TECHCOM put out the Public Notice and Notice to Pre-Qualify and Bid for the right to become NHAs joint venture partner in the implementation of the SMDRP. The notices were published in newspapers of general circulation on January 23 and 26 and February 1, 14, 16, and 23, 1992, respectively. Out of the thirteen (13) contractors who responded, only five (5) contractors fully complied with the required pre-qualification documents. Based on the evaluation of the pre-qualification documents, the EXECOM declared the New San Jose Builders, Inc. and R-II Builders, Inc. (RBI) as the top two contractors.[14] Thereafter, the TECHCOM evaluated the bids (which include the Pre-feasibility Study and Financing Plan) of the top two (2) contractors in this manner: (1) The DBP, as financial advisor to the Project, evaluated their Financial Proposals;

(l) Industrial estates, regional industrial centers and export processing zones including steel mills, iron-making and petrochemical complexes and related infrastructure and utilities; xxxx (p) Environmental and solid waste management-related facilities such as collection equipment, composting plants, incinerators, landfill and tidal barriers, among others; and (q) Development of new townsites and communities and related facilities.

(2) The DPWH, PPA, PEA and NHA evaluated the Technical Proposals for the Housing Construction and Reclamation; (3) The DENR evaluated Technical Proposals on Waste Management and Disposal by conducting the Environmental Impact Analysis; and (4) The NHA and the City of Manila evaluated the socio-economic benefits presented by the proposals. On June 30, 1992, Fidel V. Ramos assumed the Office of the President (OP) of the Philippines.

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On August 31, 1992, the TECHCOM submitted its recommendation to the EXECOM to approve the R-II Builders, Inc. (RBI) proposal which garnered the highest score of 88.475%.

Subsequently, the EXECOM made a Project briefing to President Ramos. As a result, President Ramos issued Proclamation No. 39[15] on September 9, 1992, which reads: WHEREAS, the National Housing Authority has presented a viable conceptual plan to convert the Smokey Mountain dumpsite into a habitable housing project, inclusive of the reclamation of the area across Road Radial 10 (R-10) adjacent to the Smokey Mountain as the enabling component of the project; xxxx These parcels of land of public domain are hereby placed under the administration and disposition of the National Housing Authority to develop, subdivide and dispose to qualified beneficiaries, as well as its development for mix land use (commercial/industrial) to provide employment opportunities to on-site families and additional areas for port-related activities. In order to facilitate the early development of the area for disposition, the Department of Environment and Natural Resources, through the Lands and Management Bureau, is hereby directed to approve the boundary and subdivision survey and to issue a special patent and title in the name of the National Housing Authority, subject to final survey and private rights, if any there be. (Emphasis supplied.)

2.02 The [RBI] shall develop the PROJECT based on the Final Report and Detailed Engineering as approved by the Office of the President. All costs and expenses for hiring technical personnel, date gathering, permits, licenses, appraisals, clearances, testing and similar undertaking shall be for the account of the [RBI]. 2.03 The [RBI] shall undertake the construction of 3,500 temporary housing units complete with basic amenities such as plumbing, electrical and sewerage facilities within the temporary housing project as staging area to temporarily house the squatter families from the Smokey Mountain while development is being undertaken. These temporary housing units shall be turned over to the [NHA] for disposition. 2.04 The [RBI] shall construct 3,500 medium rise low cost permanent housing units on the leveled Smokey Mountain complete with basic utilities and amenities, in accordance with the plans and specifications set forth in the Final Report approved by the [NHA]. Completed units ready for mortgage take out shall be turned over by the [RBI] to NHA on agreed schedule. 2.05 The [RBI] shall reclaim forty (40) hectares of Manila Bay area directly across [R-10] as contained in Proclamation No. 39 as the enabling component of the project and payment to the [RBI] as its asset share. 2.06 The [RBI] shall likewise furnish all labor materials and equipment necessary to complete all herein development works to be undertaken on a phase to phase basis in accordance with the work program stipulated therein.

On October 7, 1992, President Ramos authorized NHA to enter into a Joint Venture Agreement with RBI [s]ubject to final review and approval of the Joint Venture Agreement by the Office of the President.[16] On March 19, 1993, the NHA and RBI entered into a Joint Venture Agreement [17] (JVA) for the development of the Smokey Mountain dumpsite and the reclamation of the area across R-10 based on Presidential Decree No. (PD) 757[18] which mandated NHA [t]o undertake the physical and socioeconomic upgrading and development of lands of the public domain identified for housing, MO 161-A which required NHA to conduct the feasibility studies and develop a low-cost housing project at the Smokey Mountain, and MO 415 as amended by MO 415-A which approved the Conceptual Plan for Smokey Mountain and creation of the EXECOM and TECHCOM. Under the JVA, the Project involves the clearing of Smokey Mountain for eventual development into a low cost medium rise housing complex and industrial/commercial site with the reclamation of the area directly across [R-10] to act as the enabling component of the Project.[19] The JVA covered a lot in Tondo, Manila with an area of two hundred twelve thousand two hundred thirty-four (212,234) square meters and another lot to be reclaimed also in Tondo with an area of four hundred thousand (400,000) square meters. The Scope of Work of RBI under Article II of the JVA is as follows: a) To fully finance all aspects of development of Smokey Mountain and reclamation of no more than 40 hectares of Manila Bay area across Radial Road 10. b) To immediately commence on the preparation of feasibility report and detailed engineering with emphasis to the expedient acquisition of the Environmental Clearance Certificate (ECC) from the DENR. c) The construction activities will only commence after the acquisition of the ECC, and

The profit sharing shall be based on the approved pre-feasibility report submitted to the EXECOM, viz: For the developer (RBI): 1. 2. To own the forty (40) hectares of reclaimed land. To own the commercial area at the Smokey Mountain area composed of 1.3 hectares, and

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

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

2. To own the cleared and fenced incinerator site consisting of 5 hectares situated at the Smokey Mountain area. 3. To own the 3,500 units of permanent housing to be constructed by [RBI] at the Smokey Mountain area to be awarded to qualified on site residents. 4. 5. To own the Industrial Area site consisting of 3.2 hectares, and To own the open spaces, roads and facilities within the Smokey Mountain area.

d) Final details of the contract, including construction, duration and delivery timetables, shall be based on the approved feasibility report and detailed engineering.

In the event of extraordinary increase in labor, materials, fuel and non -recoverability of total project expenses,[20] the OP, upon recommendation of the NHA, may approve a corresponding adjustment in the enabling component. The functions and responsibilities of RBI and NHA are as follows:

Other obligations of RBI are as follows:

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For RBI: 4.01 Immediately commence on the preparation of the FINAL REPORT with emphasis to the expedient acquisition, with the assistance of the [NHA] of Environmental Compliance Certificate (ECC) from the Environmental Management Bureau (EMB) of the [DENR]. Construction shall only commence after the acquisition of the ECC. The Environment Compliance Certificate (ECC) shall form part of the FINAL REPORT. The FINAL REPORT shall provide the necessary subdivision and housing plans, detailed engineering and architectural drawings, technical specifications and other related and required documents relative to the Smokey Mountain area. With respect to the 40-hectare reclamation area, the [RBI] shall have the discretion to develop the same in a manner that it deems necessary to recover the [RBIs] investment, subject to environmental and zoning rules. 4.02 Finance the total project cost for land development, housing construction and reclamation of the PROJECT. 4.03 REPORT. Warrant that all developments shall be in compliance with the requirements of the FINAL

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

The final details of the JVA, which will include the construction duration, costs, extent of reclamation, and delivery timetables, shall be based on the FINAL REPORT which will be contained in a Supplemental Agreement to be executed later by the parties. The JVA may be modified or revised by written agreement between the NHA and RBI specifying the clauses to be revised or modified and the corresponding amendments. If the Project is revoked or terminated by the Government through no fault of RBI or by mutual agreement, the Government shall compensate RBI for its actual expenses incurred in the Project plus a reasonable rate of return not exceeding that stated in the feasibility study and in the contract as of the date of such revocation, cancellation, or termination on a schedule to be agreed upon by both parties. As a preliminary step in the project implementation, consultations and dialogues were conducted with the settlers of the Smokey Mountain Dumpsite Area. At the same time, DENR started processing the application for the Environmental Clearance Certificate (ECC) of the SMDRP. As a result however of the consultative dialogues, public hearings, the report on the on-site field conditions, the Environmental Impact Statement (EIS) published on April 29 and May 12, 1993 as required by the Environmental Management Bureau of DENR, the evaluation of the DENR, and the recommendations from other government agencies, it was discovered that design changes and additional work have to be undertaken to successfully implement the Project.[21] Thus, on February 21, 1994, the parties entered into another agreement denominated as the Amended and Restated Joint Venture Agreement[22] (ARJVA) which delineated the different phases of the Project. Phase I of the Project involves the construction of temporary housing units for the current residents of the Smokey Mountain dumpsite, the clearing and leveling-off of the dumpsite, and the construction of medium-rise low-cost housing units at the cleared and leveled dumpsite.[23] Phase II of the Project involves the construction of an incineration area for the on-site disposal of the garbage at the dumpsite.[24] The enabling component or consideration for Phase I of the Project was increased from 40 hectares of reclaimed lands across R-10 to 79 hectares.[25] The revision also provided for the enabling component for Phase II of 119 hectares of reclaimed lands contiguous to the 79 hectares of reclaimed lands for Phase I.[26] Furthermore, the amended contract delineated the scope of works and the terms and conditions of Phases I and II, thus: The PROJECT shall consist of Phase I and Phase II. Phase I shall involve the following: a. the construction of 2,992 units of temporary housing for the affected residents while clearing and development of Smokey Mountain [are] being undertaken b. the clearing of Smokey Mountain and the subsequent construction of 3,520 units of medium rise housing and the development of the industrial/commercial site within the Smokey Mountain area

4.04 Provide all administrative resources for the submission of project accomplishment reports to the [NHA] for proper evaluation and supervision on the actual implementation. 4.05 Negotiate and secure, with the assistance of the [NHA] the grant of rights of way to the PROJECT, from the owners of the adjacent lots for access road, water, electrical power connections and drainage facilities. 4.06 Provide temporary field office and transportation vehicles (2 units), one (1) complete set of computer and one (1) unit electric typewriter for the [NHAs] field personnel to be charged to the PROJECT.

For the NHA: 4.07 The [NHA] shall be responsible for the removal and relocation of all squatters within Smokey Mountain to the Temporary Housing Complex or to other areas prepared as relocation areas with the assistance of the [RBI]. The [RBI] shall be responsible in releasing the funds allocated and committed for relocation as detailed in the FINAL REPORT. 4.08 Assist the [RBI] and shall endorse granting of exemption fees in the acquisition of all necessary permits, licenses, appraisals, clearances and accreditations for the PROJECT subject to existing laws, rules and regulations. 4.09 The [NHA] shall inspect, evaluate and monitor all works at the Smokey Mountain and Reclamation Area while the land development and construction of housing units are in progress to determine whether the development and construction works are undertaken in accordance with the FINAL REPORT. If in its judgment, the PROJECT is not pursued in accordance with the FINAL REPORT, the [NHA] shall require the [RBI] to undertake necessary remedial works. All expenses, charges and penalties incurred for such remedial, if any, shall be for the account of the [RBI]. 4.10 The [NHA] shall assist the [RBI] in the complete electrification of the PROJECT. x x x

4.11 Handle the processing and documentation of all sales transactions related to its assets shares from the venture such as the 3,500 units of permanent housing and the allotted industrial area of 3.2 hectares.

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c. the reclamation and development of a 79 hectare area directly across Radial Road 10 to serve as the enabling component of Phase I Phase II shall involve the following: a. the construction and operation of an incinerator plant that will standards of the DENR b. the reclamation and development of 119-hectare area Phase I to serve as the enabling component of Phase II. conform to the emission

Under the JVA, the specific costs of the Project were not stipulated but under the ARJVA, the stipulated cost for Phase I was pegged at six billion six hundred ninety-three million three hundred eighty-seven thousand three hundred sixty-four pesos (PhP 6,693,387,364). In his February 10, 1994 Memorandum, the Chairperson of the SMDRP EXECOM submitted the ARJVA for approval by the OP. After review of said agreement, the OP directed that certain terms and conditions of the ARJVA be further clarified or amended preparatory to its approval. Pursuant to the Presidents directive, the parties reached an agreement on the clarifications and amendments required to be made on the ARJVA. On August 11, 1994, the NHA and RBI executed an Amendment To the Amended and Restated Joint Venture Agreement (AARJVA)[29] clarifying certain terms and condition of the ARJVA, which was submitted to President Ramos for approval, to wit:

contiguous to that to be reclaimed under

Under the ARJVA, RBI shall construct 2,992 temporary housing units, a reduction from 3,500 units under the JVA.[27] However, it was required to construct 3,520 medium-rise low-cost permanent housing units instead of 3,500 units under the JVA. There was a substantial change in the design of the permanent housing units such that a loft shall be incorporated in each unit so as to increase the living space from 20 to 32 square meters. The additions and changes in the Original Project Component are as follows: ORIGINAL 1. TEMPORARY HOUSING Concrete/Steel Frame Structure Sheet usable life of 3 gauge 26 G.I. roofing sheets future 12 SM floor use as permanent structures for factory and warehouses 17 sm & 12 sm floor area. CHANGES/REVISIONS

Phase II shall involve the following: a. the construction and operation of an incinerator plant that will conform to the emission standards of the DENR b. the reclamation and development of 119-hectare area contiguous to that to be reclaimed under Phase I to serve as the enabling component of Phase II, the exact size and configuration of which shall be approved by the SMDRP Committee[30]

Wood/Plywood, ga. 31 G.I. years, area. mixed 2. MEDIUM RISE MASS HOUSING

Other substantial amendments are the following:

4. Paragraph 2.05 of Article II of the ARJVA is hereby amended to read as follows: Box type precast Shelter meter floor area with 2.4 meter type, 160 units/ building. Conventional and precast component 20 square concrete structures, 32 square meter floor area with loft floor height; bare (sleeping quarter) 3.6 m. floor height, painted and improved architectural faade, 80 units/ building. 2.05. The DEVELOPER shall reclaim seventy nine (79) hectares of the Manila Bay area directly across Radial Road 10 (R-10) to serve as payment to the DEVELOPER as its asset share for Phase I and to develop such land into commercial area with port facilities; provided, that the port plan shall be integrated with the Philippine Port Authoritys North Harbor plan for the Manila Bay area and provided further, that the final reclamation and port plan for said reclaimed area shall be submitted for approval by the Public Estates Authority and the Philippine Ports Authority, respectively: provided finally, that subject to par. 2.02 above, actual reclamation work may commence upon approval of the final reclamation plan by the Public Estates Authority. xxxx 9. A new paragraph to be numbered 5.05 shall be added to Article V of the ARJVA, and shall read as follows: Use of Steel Sheet Piles needed for longer depth of embedment. 5.05. In the event this Agreement is revoked, cancelled or terminated by the AUTHORITY through no fault of the DEVELOPER, the AUTHORITY shall compensate the DEVELOPER for the value of the completed portions of, and actual expenditures on the PROJECT plus a reasonable rate of return thereon, not exceeding that stated in the Cost Estimates of Items of Work previously approved by the SMDRP Executive Committee and the AUTHORITY and stated in this Agreement, as of the date of such revocation, cancellation, or termination, on a schedule to be agreed upon by the parties, provided that said completed portions of Phase I are in accordance with the approved FINAL REPORT.

3. MITIGATING MEASURES 3.1 For reclamation work Use of clean dredgefill material below the MLLW and SM material mixed with dredgefill above MLLW. a. 100% use of Smokey Mountain material as dredgefill b. Concrete Sheet Piles short depth of embedment c. Silt removal approximately 1.0 meter only Need to remove more than 3.0 meters of silt after sub-soil investigation.[28]

These material and substantial modifications served as justifications for the increase in the share of RBI from 40 hectares to 79 hectares of reclaimed land.

Afterwards, President Ramos issued Proclamation No. 465 dated August 31, 1994[31] increasing the proposed area for reclamation across R-10 from 40 hectares to 79 hectares,[32] to wit:

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NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by virtue of the powers vested in me by the law, and as recommended by the SMDRP Executive Committee, do hereby authorize the increase of the area of foreshore or submerged lands of Manila Bay to be reclaimed, as previously authorized under Proclamation No. 39 (s. 1992) and Memorandum Order No. 415 (s. 1992), from Four Hundred Thousand (400,000) square meters, more or less, to Seven Hundred Ninety Thousand (790,000) square meters, more or less. On September 1, 1994, pursuant to Proclamation No. 39, the DENR issued Special Patent No. 3591 conveying in favor of NHA an area of 211,975 square meters covering the Smokey Mountain Dumpsite. In its September 7, 1994 letter to the EXECOM, the OP through then Executive Secretary Teofisto T. Guingona, Jr., approved the ARJVA as amended by the AARJVA. On September 8, 1994, the DENR issued Special Patent 3592 pursuant to Proclamation No. 39, conveying in favor of NHA a 401,485-square meter area. On September 26, 1994, the NHA, RBI, Home Insurance and Guaranty Corporation (HIGC), now known as the Home Guaranty Corporation, and the Philippine National Bank (PNB)[33] executed the Smokey Mountain Asset Pool Formation Trust Agreement (Asset Pool Agreement). [34] Thereafter, a Guaranty Contract was entered into by NHA, RBI, and HIGC. On June 23, 1994, the Legislature passed the Clean Air Act. [35] The Act made the establishment of an incinerator illegal and effectively barred the implementation of the planned incinerator project under Phase II. Thus, the off-site disposal of the garbage at the Smokey Mountain became necessary.[36] The land reclamation was completed in August 1996.[37] Sometime later in 1996, pursuant likewise to Proclamation No. 39, the DENR issued Special Patent No. 3598 conveying in favor of NHA an additional 390,000 square meter area. During the actual construction and implementation of Phase I of the SMDRP, the Inter-Agency Technical Committee found and recommended to the EXECOM on December 17, 1997 that additional works were necessary for the completion and viability of the Project. The EXECOM approved the recommendation and so, NHA instructed RBI to implement the change orders or necessary works.[38] Such necessary works comprised more than 25% of the original contract price and as a result, the Asset Pool incurred direct and indirect costs. Based on C1 12 A of the Implementing Rules and Regulations of PD 1594, a supplemental agreement is required for all change orders and extra work orders, the total aggregate cost of which being more than twenty-five (25%) of the escalated original contract p rice. The EXECOM requested an opinion from the Department of Justice (DOJ) to determine whether a bidding was required for the change orders and/or necessary works. The DOJ, through DOJ Opinion Nos. 119 and 155 dated August 26, 1993 and November 12, 1993, opined that a rebidding, pursuant to the aforequoted provisions of the implementing rules (referring to PD 1594) would not be necessary where the change orders inseparable from the original scope of the project, in which case, a negotiation with the incumbent contractor may be allowed. Thus, on February 19, 1998, the EXECOM issued a resolution directing NHA to enter into a supplemental agreement covering said necessary works. On March 20, 1998, the NHA and RBI entered into a Supplemental Agreement covering the aforementioned necessary works and submitted it to the President on March 24, 1998 for approval. Outgoing President Ramos decided to endorse the consideration of the Supplemental Agreement to incoming President Joseph E. Estrada. On June 30, 1998, Estrada became the 13th Philippine President. However, the approval of the Supplemental Agreement was unacted upon for five months. As a result, the utilities and the road networks were constructed to cover only the 79-hectare original enabling component

granted under the ARJVA. The 220-hectare extension of the 79-hectare area was no longer technically feasible. Moreover, the financial crises and unreliable real estate situation made it difficult to sell the remaining reclaimed lots. The devaluation of the peso and the increase in interest cost led to the substantial increase in the cost of reclamation. On August 1, 1998, the NHA granted RBIs request to suspend work on the SMDRP due to the delay in the approval of the Supplemental Agreement, the consequent absence of an enabling component to cover the cost of the necessary works for the project, and the resulting inability to replenish the Asset Pool funds partially used for the completion of the necessary works.[39] As of August 1, 1998 when the project was suspended, RBI had already accomplished a portion of the necessary works and change orders which resulted in [RBI] and the Asset Pool incurring advances for direct and indirect cost which amount can no longer be covered by the 79-hectare enabling component under the ARJVA.[40] Repeated demands were made by RBI in its own capacity and on behalf of the asset pool on NHA for payment for the advances for direct and indirect costs subject to NHA validation. In November 1998, President Estrada issued Memorandum Order No. 33 reconstituting the SMDRP EXECOM and further directed it to review the Supplemental Agreement and submit its recommendation on the completion of the SMDRP. The reconstituted EXECOM conducted a review of the project and recommended the amendment of the March 20, 1998 Supplemental Agreement to make it more feasible and to identify and provide new sources of funds for the project and provide for a new enabling component to cover the payment for the necessary works that cannot be covered by the 79-hectare enabling component under the ARJVA.[41] The EXECOM passed Resolution Nos. 99-16-01 and 99-16-02[42] which approved the modification of the Supplemental Agreement, to wit: a) Approval of 150 hectares additional reclamation in order to part of the enabling component. make the reclamation feasible as

b) The conveyance of the 15-hectare NHA Vitas property (actually surveys) to the SMDRP Asset Pool.

17 hectares based on

c) The inclusion in the total development cost of other additional, necessary and indispensable infrastructure works and the revision of the original cost stated in the Supplemental Agreement dated March 20, 1998 from PhP 2,953,984,941.40 to PhP 2,969,134,053.13. d) Revision in the sharing agreement between the parties.

In the March 23, 2000 OP Memorandum, the EXECOM was authorized to proceed and complete the SMDRP subject to certain guidelines and directives. After the parties in the case at bar had complied with the March 23, 2000 Memorandum, the NHA November 9, 2000 Resolution No. 4323 approved the conveyance of the 17-hectare Vitas property in favor of the existing or a newly created Asset Pool of the project to be developed into a mixed commercial-industrial area, subject to certain conditions. On January 20, 2001, then President Estrada was considered resigned. On the same day, President Gloria M. Arroyo took her oath as the 14th President of the Philippines. As of February 28, 2001, the estimated total project cost of the SMDRP has reached P8.65 billion comprising of P4.78 billion in direct cost and P3.87 billion in indirect cost,[43] subject to validation by the NHA.

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On August 28, 2001, NHA issued Resolution No. 4436 to pay for the various necessary works/change orders to SMDRP, to effect the corresponding enabling component consisting of the conveyance of the NHAs Vitas Property and an additional 150-hectare reclamation area and to authorize the release by NHA of PhP 480 million as advance to the project to make the Permanent Housing habitable, subject to reimbursement from the proceeds of the expanded enabling component. [44] On November 19, 2001, the Amended Supplemental Agreement (ASA) was signed by the parties, and on February 28, 2002, the Housing and Urban Development Coordinating Council (HUDCC) submitted the agreement to the OP for approval. In the July 20, 2002 Cabinet Meeting, HUDCC was directed to submit the works covered by the PhP 480 million [advance to the Project] and the ASA to public bidding.[45] On August 28, 2002, the HUDCC informed RBI of the decision of the Cabinet. In its September 2, 2002 letter to the HUDCC Chairman, RBI lamented the decision of the government to bid out the remaining works under the ASA thereby unilaterally terminating the Project with RBI and all the agreements related thereto. RBI demanded the payment of just compensation for all accomplishments and costs incurred in developing the SMDRP plus a reasonable rate of return thereon pursuant to Section 5.05 of the ARJVA and Section 6.2 of the ASA.[46] Consequently, the parties negotiated the terms of the termination of the JVA and other subsequent agreements. On August 27, 2003, the NHA and RBI executed a Memorandum of Agreement (MOA) whereby both parties agreed to terminate the JVA and other subsequent agreements, thus:

agreed upon later within a period of three months from the time a substantial amount representing the unpaid balance has been validated pursuant hereto including, but not limited to the programming of quarterly cash payments to be sourced by the NHA from its budget for debt servicing, from its income or from any other sources. 5.3 In any case the unpaid balance is agreed to be paid, either partially or totally through conveyance of properties, the parties shall agree on which properties shall be subject to conveyance. The NHA and DEVELOPER hereby agree to determine the valuation of the properties to be conveyed by getting the average of the appraisals to be made by two (2) mutually acceptable independent appraisers.

Meanwhile, respondent Harbour Centre Port Terminal, Inc. (HCPTI) entered into an agreement with the asset pool for the development and operations of a port in the Smokey Mountain Area which is a major component of SMDRP to provide a source of livelihood and employment for Smokey Mountain residents and spur economic growth. A Subscription Agreement was executed between the Asset Pool and HCPTI whereby the asset pool subscribed to 607 million common shares and 1,143 million preferred shares of HCPTI. The HCPTI preferred shares had a premium and penalty interest of 7.5% per annum and a mandatory redemption feature. The asset pool paid the subscription by conveying to HCPTI a 10-hectare land which it acquired from the NHA being a portion of the reclaimed land of the SMDRP. Corresponding certificates of titles were issued to HCPTI, namely: TCT Nos. 251355, 251356, 251357, and 251358. Due to HCPTIs failure to obtain a license to handle foreign containerized cargo from PPA, it suffered a net income loss of PhP 132,621,548 in 2002 and a net loss of PhP 15,540,063 in 2003. The Project Governing Board of the Asset Pool later conveyed by way of dacion en pago a number of HCPTI shares to RBI in lieu of cash payment for the latters work in SMDRP. On August 5, 2004, former Solicitor General Francisco I. Chavez, filed the instant petition which impleaded as respondents the NHA, RBI, R-II Holdings, Inc. (RHI), HCPTI, and Mr. Reghis Romero II, raising constitutional issues. The NHA reported that thirty-four (34) temporary housing structures and twenty-one (21) permanent housing structures had been turned over by respondent RBI. It claimed that 2,510 beneficiaryfamilies belonging to the poorest of the poor had been transferred to their permanent homes and benefited from the Project. The Issues The grounds presented in the instant petition are: I NEITHER RESPONDENT NHA NOR RESPONDENT R-II BUILDERS MAY VALIDLY RECLAIM FORESHORE AND SUBMERGED LAND BECAUSE: 1. RESPONDENT NHA AND R-II BUILDERS WERE NEVER GRANTED ANY POWER AND AUTHORITY TO RECLAIM LANDS OF THE PUBLIC DOMAIN AS THIS POWER IS VESTED EXCLUSIVELY WITH THE PEA. 2. EVEN ASSUMING THAT RESPONDENTS NHA AND R-II BUILDERS WERE GIVEN THE POWER AND AUTHORITY TO RECLAIM FORESHORE AND SUBMERGED LAND, THEY WERE NEVER GIVEN THE AUTHORITY BY THE DENR TO DO SO. II RESPONDENT R-II BUILDERS CANNOT ACQUIRE THE RECLAIMED FORESHORE AND SUBMERGED LAND AREAS BECAUSE:

1.

TERMINATION

1.1 In compliance with the Cabinet directive dated 30 July 2002 to submit the works covered by the P480 Million and the ASA to public bidding, the following agreements executed by and between the NHA and the DEVELOPER are hereby terminated, to wit: a. Joint Venture Agreement (JVA) dated 19 March 1993 b. Amended and Restated Joint Venture Agreement (ARJVA) dated 21 February 1994 c. Amendment and Restated Joint Venture Agreement dated 11 August 1994 d. Supplemental Agreement dated 24 March 1998 e. Amended Supplemental Agreement (ASA) dated 19 November 2001. xxxx 5. SETTLEMENT OF CLAIMS

5.1 Subject to the validation of the DEVELOPERs claims, the NHA hereby agrees to initially compensate the Developer for the abovementioned costs as follows: a. Direct payment to DEVELOPER of the amounts herein listed in the following manner: a.1 P250 Million in cash from the escrow account in accordance with Section 2 herewith; a.2 Conveyance of a 3 hectare portion of the Vitas Industrial area immediately after joint determination of the appraised value of the said property in accordance with the procedure herein set forth in the last paragraph of Section 5.3. For purposes of all payments to be made through conveyance of real properties, the parties shall secure from the NHA Board of Directors all documents necessary and sufficient to effect the transfer of title over the properties to be conveyed to RBI, which documents shall be issued within a reasonable period. 5.2 Any unpaid balance of the DEVELOPERS claims determined after the validation process referred to in Section 4 hereof, may be paid in cash, bonds or through the conveyance of properties or any combination thereof. The manner, terms and conditions of payment of the balance shall be specified and

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1. THE RECLAIMED FORESHORE AND SUBMERGED PARCELS OF LAND ARE INALIENABLE PUBLIC LANDS WHICH ARE BEYOND THE COMMERCE OF MAN. 2. ASSUMING ARGUENDO THAT THE SUBJECT RECLAIMED FORESHORE AND SUBMERGED PARCELS OF LAND WERE ALREADY DECLARED ALIENABLE LANDS OF THE PUBLIC DOMAIN, RESPONDENT R-II BUILDERS STILL COULD NOT ACQUIRE THE SAME BECAUSE THERE WAS NEVER ANY DECLARATION THAT THE SAID LANDS WERE NO LONGER NEEDED FOR PUBLIC USE. 3. EVEN ASSUMING THAT THE SUBJECT RECLAIMED LANDS ARE ALIENABLE AND NO LONGER NEEDED FOR PUBLIC USE, RESPONDENT R-II BUILDERS STILL CANNOT ACQUIRE THE SAME BECAUSE THERE WAS NEVER ANY LAW AUTHORIZING THE SALE THEREOF. 4. THERE WAS NEVER ANY PUBLIC BIDDING AWARDING THE SUBJECT LAND TO RESPONDENT R-II BUILDERS. OWNERSHIP OF

in the Project by means of Smokey Mountain Project Participation Certificates (SMPPCs) bought by some government agencies. Hence, petitioner, as a taxpayer, is a proper party to the instant petition before the court. Whether petitioners direct recourse to this Court was proper Respondents are one in asserting that petitioner circumvents the principle of hierarchy of courts in his petition. Judicial hierarchy was made clear in the case of People v. Cuaresma, thus: There is after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals, and should also serve as a general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard for that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against first level (inferior) courts should be filed with the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct invocation of the Supreme Courts original jurisdiction to issue these writs should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition. This is established policy. It is a policy that is necessary to prevent inordinate demands upon the Courts time and attention which are better devoted to those matters within its exclusive jurisdiction, and to prevent further over-crowding of the Courts docket.[51] x x x

5. ASSUMING THAT ALL THE REQUIREMENTS FOR A VALID TRANSFER OF ALIENABLE PUBLIC HAD BEEN PERFORMED, RESPONDENT R-II BUILDERS, BEING PRIVATE CORPORATION IS NONETHELESS EXPRESSLYPROHIBITED BY THE PHILIPPINE CONSTITUTION TO ACQUIRE LANDS OF THE PUBLIC DOMAIN. III RESPONDENT HARBOUR, BEING A PRIVATE CORPORATION WHOSE MAJORITY STOCKS ARE OWNED AND CONTROLLED BY RESPONDENT ROMEROS CORPORATIONS R-II BUILDERS AND R-II HOLDINGS IS DISQUALIFIED FROM BEING A TRANSFEREE OF PUBLIC LAND. IV RESPONDENTS MUST BE COMPELLED TO DISCLOSE ALL INFORMATION RELATED TO THE SMOKEY MOUNTAIN DEVELOPMENT AND RECLAMATION PROJECT. The Courts Ruling Before we delve into the substantive issues raised in this petition, we will first deal with several procedural matters raised by respondents.

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

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

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

Whether petitioner has the requisite locus standi to file this case Respondents argue that petitioner Chavez has no legal standing to file the petition. Only a person who stands to be benefited or injured by the judgment in the suit or entitled to the avails of the suit can file a complaint or petition.[47] Respondents claim that petitioner is not a proper party-ininterest as he was unable to show that he has sustained or is in immediate or imminent danger of sustaining some direct and personal injury as a result of the execution and enforcement of the assailed contracts or agreements.[48] Moreover, they assert that not all government contracts can justify a taxpayers suit especially when no public funds were utilized in contravention of the Constitution or a law. We explicated in Chavez v. PCGG[49] that in cases where issues of transcendental public importance are presented, there is no necessity to show that petitioner has experienced or is in actual danger of suffering direct and personal injury as the requisite injury is assumed. We find our ruling in Chavez v. PEA[50] as conclusive authority on locus standi in the case at bar since the issues raised in this petition are averred to be in breach of the fair diffusion of the countrys natural resources and the constitutional right of a citizen to information which have been declared to be matters of transcendental public importance. Moreover, the pleadings especially those of respondents readily reveal that public funds have been indirectly utilized The instant petition challenges the constitutionality and legality of the SMDRP involving several hectares of government land and hundreds of millions of funds of several government agencies. Moreover, serious constitutional challenges are made on the different aspects of the Project which allegedly affect the right of Filipinos to the distribution of natural resources in the country and the right to information of a citizenmatters which have been considered to be of extraordinary significance and grave consequence to the public in general. These concerns in the instant action compel us to turn a blind eye to the judicial structure meant to provide an orderly dispensation of justice and consider the instant petition as a justified deviation from an established precept.

Core factual matters undisputed Respondents next challenge the projected review by this Court of the alleged factual issues intertwined in the issues propounded by petitioner. They listed a copious number of questions seemingly factual in nature which would make this Court a trier of facts.[53] We find the position of respondents bereft of merit.

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For one, we already gave due course to the instant petition in our January 18, 2005 Resolution.[54] In said issuance, the parties were required to make clear and concise statements of established facts upon which our decision will be based. Secondly, we agree with petitioner that there is no necessity for us to make any factual findings since the facts needed to decide the instant petition are well established from the admissions of the parties in their pleadings[55] and those derived from the documents appended to said submissions. Indeed, the core facts which are the subject matter of the numerous issues raised in this petition are undisputed.

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

Now we will tackle the issues that prop up the instant petition. Since petitioner has cited our decision in PEA as basis for his postulations in a number of issues, we first resolve the queryis PEA applicable to the case at bar?

First Issue: Whether respondents NHA and RBI have been grantedthe power and authority to reclaim lands of the public domain as this power is vested exclusively in PEA as claimed by petitioner Petitioner contends that neither respondent NHA nor respondent RBI may validly reclaim foreshore and submerged land because they were not given any power and authority to reclaim lands of the public domain as this power was delegated by law to PEA. Asserting that existing laws did not empower the NHA and RBI to reclaim lands of public domain, the Public Estates Authority (PEA), petitioner claims, is the primary authority for t he reclamation of all foreshore and submerged lands of public domain, and relies on PEA where this Court held: Moreover, Section 1 of Executive Order No. 525 provides that PEA shall be primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government. The same section also states that [A]ll reclamation projects shall be approved by the President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any person or entity; x x x. Thus, under EO No. 525, in relation to PD No. 3 A and PD No. 1084, PEA became the primary implementing agency of the National Government to reclaim foreshore and submerged lands of the public domain. EO No. 525 recognized PEA as the government entity to undertake the reclamation of lands and ensure their maximum utilization in promoting public welfare and interests. Since large portions of these reclaimed lands would obviously be needed for public service, there must be a formal declaration segregating reclaimed lands no longer needed for public service from those still needed for public service. [60] In the Smokey Mountain Project, petitioner clarifies that the reclamation was not done by PEA or through a contract executed by PEA with another person or entity but by the NHA through an agreement with respondent RBI. Therefore, he concludes that the reclamation is null and void. Petitioners contention has no merit. EO 525 reads: Section 1. The Public Estates Authority (PEA) shall be primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government. All reclamation projects shall be approved by the President upon recommendation of the PEA, and shall be undertaken by the PEA or through a proper contract executed by it with any person or entity; Provided, that, reclamation projects of any national government agency or entity authorized under its charter shall be undertaken in consultation with the PEA upon approval of the President . (Emphasis supplied.) The aforequoted provision points to three (3) requisites for a legal and valid reclamation project, viz:

A juxtaposition of the facts in the two cases constrains the Court to rule in the negative. The Court finds that PEA is not a binding precedent to the instant petition because the facts in said case are substantially different from the facts and circumstances in the case at bar, thus: (1) The reclamation project in PEA was undertaken through a JVA entered into between PEA and AMARI. The reclamation project in the instant NHA case was undertaken by the NHA, a national government agency in consultation with PEA and with the approval of two Philippine Presidents; (2) In PEA, AMARI and PEA executed a JVA to develop the Freedom Islands and reclaim submerged areas without public bidding on April 25, 1995. In the instant NHA case, the NHA and RBI executed a JVA after RBI was declared the winning bidder on August 31, 1992 as the JVA partner of the NHA in the SMDRP after compliance with the requisite public bidding. (3) In PEA, there was no law or presidential proclamation classifying the lands to be reclaimed as alienable and disposal lands of public domain. In this RBI case, MO 415 of former President Aquino and Proclamation No. 39 of then President Ramos, coupled with Special Patents Nos. 3591, 3592, and 3598, classified the reclaimed lands as alienable and disposable; (4) In PEA, the Chavez petition was filed before the amended JVA was executed by PEA and AMARI. In this NHA case, the JVA and subsequent amendments were already substantially implemented. Subsequently, the Project was terminated through a MOA signed on August 27, 2003. Almost one year later on August 5, 2004, the Chavez petition was filed; (5) In PEA, AMARI was considered to be in bad faith as it signed the amended JVA after the Chavez petition was filed with the Court and after Senate Committee Report No. 560 was issued finding that the subject lands are inalienable lands of public domain. In the instant petition, RBI and other respondents are considered to have signed the agreements in good faith as the Project was terminated even before the Chavez petition was filed; (6) The PEA-AMARI JVA was executed as a result of direct negotiation between the parties and not in accordance with the BOT Law. The NHA-RBI JVA and subsequent amendments constitute a BOT contract governed by the BOT Law; and (7) In PEA, the lands to be reclaimed or already reclaimed were transferred to PEA, a government entity tasked to dispose of public lands under Executive Order No. (EO) 525. [56] In the NHA case, the reclaimed lands were transferred to NHA, a government entity NOT tasked to dispose of public land and therefore said alienable lands were converted to patrimonial lands upon their transfer to NHA. [57] Thus the PEA Decision[58] cannot be considered an authority or precedent to the instant case. The principle of stare decisis[59] has no application to the different factual setting of the instant case.

(1) (2) (3)

approval by the President; favorable recommendation of PEA; and undertaken by any of the following: a. b. by PEA by any person or entity pursuant to a contract it executed

with PEA

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c. by the National Government agency or entity authorized charter to reclaim lands subject to consultation with PEA

under its

Without doubt, PEA under EO 525 was designated as the agency primarily responsible for integrating, directing, and coordinating all reclamation projects. Primarily means mainly, principally, mostly, generally.Thus, not all reclamation projects fall under PEAs authority of supervision, integration, and coordination. The very charter of PEA, PD 1084,[61] does not mention that PEA has the exclusive and sole power and authority to reclaim lands of public domain. EO 525 even reveals the exceptionreclamation projects by a national government agency or entity authorized by its charter to reclaim land. One example is EO 405 which authorized the Philippine Ports Authority (PPA) to reclaim and develop submerged areas for port related purposes. Under its charter, PD 857, PPA has the power to reclaim, excavate, enclose or raise any of the lands vested in it. Thus, while PEA under PD 1084 has the power to reclaim land and under EO 525 is primarily responsible for integrating, directing and coordinating reclamation projects, such authority is NOT exclusive and such power to reclaim may be granted or delegated to another government agency or entity or may even be undertaken by the National Government itself, PEA being only an agency and a part of the National Government. Let us apply the legal parameters of Sec. 1, EO 525 to the reclamation phase of SMDRP. After a scrutiny of the facts culled from the records, we find that the project met all the three (3) requirements, thus: 1. There was ample approval by the President of the Philippines; as a matter of fact, two Philippine Presidents approved the same, namely: Presidents Aquino and Ramos. President Aquino sanctioned the reclamation of both the SMDRP housing and commercial-industrial sites through MO 415 (s. 1992) which approved the SMDRP under Sec. 1 and directed NHA x x x to implement the Smokey Mountain Development Plan and Reclamation of the Area across R-10 through a private sector joint venture scheme at the least cost to government under Section 3.

Section 2. An Executive Committee is hereby created to oversee the implementation of the Plan, chaired by the NCR-CORD, with the heads of the following agencies as members: The National Housing Authority, the City of Manila, the Department of Public Works and Highways, the Public Estates Authority, the Philippine Ports Authority, the Department of Environment and Natural Resources and the Development Bank of the Philippines. (Emphasis supplied.) The favorable recommendation by PEA of the JVA and subsequent amendments were incorporated as part of the recommendations of the EXECOM created under MO 415. While there was no specific recommendation on the SMDRP emanating solely from PEA, we find that the approbation of the Project and the land reclamation as an essential component by the EXECOM of which PEA is a member, and its submission of the SMDRP and the agreements on the Project to the President for approval amply met the second requirement of EO 525.

3. The third element was also presentthe reclamation was undertaken either by PEA or any person or entity under contract with PEA or by the National Government agency or entity authorized under its charter to reclaim lands subject to consultation with PEA. It cannot be disputed that the reclamation phase was not done by PEA or any person or entity under contract with PEA. However, the reclamation was implemented by the NHA, a national government agency whose authority to reclaim lands under consultation with PEA is derived from its charterPD 727 and other pertinent lawsRA 7279[62] and RA 6957 as amended by RA 7718.

While the authority of NHA to reclaim lands is challenged by petitioner, we find that the NHA had more than enough authority to do so under existing laws. While PD 757, the charter of NHA, does not explicitly mention reclamation in any of the listed powers of the agency, we rule that the NHA has an implied power to reclaim land as this is vital or incidental to effectively, logically, and successfully implement an urban land reform and housing program enunciated in Sec. 9 of Article XIII of the 1987 Constitution. Basic in administrative law is the doctrine that a government agency or office has express and implied powers based on its charter and other pertinent statutes. Express powers are those powers granted, allocated, and delegated to a government agency or office by express provisions of law. On the other hand, implied powers are those that can be inferred or are implicit in the wordings of the law[63] or conferred by necessary or fair implication in the enabling act. [64] In Angara v. Electoral Commission, the Court clarified and stressed that when a general grant of power is conferred or duty enjoined, every particular power necessary for the exercise of the one or the performance of the other is also conferred by necessary implication.[65] It was also explicated that when the statute does not specify the particular method to be followed or used by a government agency in the exercise of the power vested in it by law, said agency has the authority to adopt any reasonable method to carry out its functions. [66]

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

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

As a result of Proclamations Nos. 39 and 465, Special Patent No. 3591 covering 211,975 square meters of Smokey Mountain, Special Patent No. 3592 covering 401,485 square meters of reclaimed land, and Special Patent No. 3598 covering another 390,000 square meters of reclaimed land were issued by the DENR.

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

1. Thus, the first requirement of presidential imprimatur on the SMDRP has been satisfied. NHA: 2. The requisite favorable endorsement of the reclamation phase was impliedly granted by PEA. President Aquino saw to it that there was coordination of the project with PEA by designating its general manager as member of the EXECOM tasked to supervise the project implementation. The assignment was made in Sec. 2 of MO 415 which provides:

NHAs power to reclaim derived from PD 757 provisions: a. Sec. 3 of PD 757 implies that reclamation may be resorted to in order to attain the goals of

Section 3. Progress and Objectives. The Authority shall have the following purposes and objectives: xxxx b) To undertake housing, development, resettlement or other activities as would enhance the provision of housing to every Filipino;

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c) To harness and promote private participation in housing ventures in terms of capital expenditures, land, expertise, financing and other facilities for the sustained growth of the housing industry. (Emphasis supplied.) Land reclamation is an integral part of the development of resources for some of the housing requirements of the NHA. Private participation in housing projects may also take the form of land reclamation. b. Sec. 5 of PD 757 serves as proof that the NHA, as successor of the Tondo Foreshore Development Authority (TFDA), has the power to reclaim, thus:

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

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

Section 5. Dissolution of Existing Housing Agencies. The People's Homesite and Housing Corporation (PHHC), the Presidential Assistant on Housing Resettlement Agency (PAHRA), the Tondo Foreshore Development Authority (TFDA), the Central Institute for the Training and Relocation of Urban Squatters (CITRUS), the Presidential Committee for Housing and Urban Resettlement (PRECHUR), Sapang Palay Development Committee, Inter-Agency Task Force to Undertake the Relocation of Families in Barrio Nabacaan, Villanueva, Misamis Oriental and all other existing government housing and resettlement agencies, task forces and ad-hoc committees, are hereby dissolved. Their powers and functions, balance of appropriations, records, assets, rights, and choses in action, are transferred to, vested in, and assumed by the Authority. x x x (Emphasis supplied.)

Sec. 6. Powers and functions of the Authority.The Authority shall have the following powers and functions to be exercised by the Board in accordance with its established national human settlements plan prepared by the Human Settlements Commission:

(a) Develop and implement the comprehensive and integrated housing program provided for in Section hereof; xxxx

PD 570 dated October 30, 1974 created the TFDA, which defined its objectives, powers, and functions. Sec. 2 provides: Section 2. Objectives and Purposes. The Authority shall have the following purposes and objectives: a) To undertake all manner of activity, business or development projects for the establishment of harmonious, comprehensive, integrated and healthy living community in the Tondo Foreshoreland and its resettlement site; b) To undertake and promote the physical and socio-economic amelioration of the Tondo Foreshore residents in particular and the nation in general (Emphasis supplied.) The powers and functions are contained in Sec. 3, to wit: a) To develop and implement comprehensive and integrated urban renewal programs for the Tondo Foreshore and Dagat-dagatan lagoon and/or any other additional/alternative resettlement site and to formulate and enforce general and specific policies for its development which shall ensure reasonable degree of compliance with environmental standards. b) To prescribe guidelines and standards for the reservation, conservation and utilization of public lands covering the Tondo Foreshore land and its resettlement sites ; c) To construct, acquire, own, lease, operate and maintain infrastructure facilities, housing complex, sites and services; d) To determine, regulate and supervise the establishment and operation of housing, sites, services and commercial and industrial complexes and any other enterprises to be constructed or established within the Tondo Foreshore and its resettlement sites; e) To undertake and develop, by itself or through joint ventures with other public or private entities, all or any of the different phases of development of the Tondo Foreshore land and its resettlement sites; f) To acquire and own property, property-rights and interests, and encumber or otherwise dispose of the same as it may deem appropriate (Emphasis supplied.)

(c) Prescribe guidelines and standards for the reservation, conservation and utilization of public lands identified for housing and resettlement; xxxx (e) Develop and undertake housing development and/or resettlement projects through joint ventures or other arrangements with public and private entities; xxxx (k) Enter into contracts whenever necessary under such terms and conditions as it may deem proper and reasonable; (l) Acquire property rights and interests and encumber or otherwise dispose the same as it may deem appropriate; xxxx

(s) Perform such other acts not inconsistent with this Decree, as may be necessary to effect the policies and objectives herein declared. (Emphasis supplied.) The NHAs authority to reclaim land can be inferred from the aforequoted provisions. It can make use of public lands under letter (c) of Sec. 6 which includes reclaimed land as site for its comprehensive and integrated housing projects under letter (a) which can be undertaken through joint ventures with private entities under letter (e). Taken together with letter (s) which authorizes NHA to perform such other activities necessary to effect the policies and objectives of PD 757, it is safe to conclude that the NHAs power to reclaim lands is a power that is implied from the exercise of its explicit powers under Sec. 6 in order to effectively accomplish its policies and objectives under Sec. 3 of its charter. Thus, the reclamation of land is an indispensable component for the development and construction of the SMDRP housing facilities. 2. NHAs implied power to reclaim land is enhanced by RA 7279.

PD 757 identifies NHAs mandate to [d]evelop and undertake housing development and/or resettlement projects through joint ventures or other arrangements with public and private entities.

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The power of the NHA to undertake reclamation of land can be inferred from Secs. 12 and 29 of RA 7279, which provide: Section 12. Disposition of Lands for Socialized Housing.The National Housing Authority, with respect to lands belonging to the National Government, and the local government units with respect to other lands within their respective localities, shall coordinate with each other to formulate and make available various alternative schemes for the disposition of lands to the beneficiaries of the Program. These schemes shall not be limited to those involving transfer of ownership in fee simple but shall include lease, with option to purchase, usufruct or such other variations as the local government units or the National Housing Authority may deem most expedient in carrying out the purposes of this Act. xxxx Section 29. Resettlement.With two (2) years from the effectivity of this Act, the local government units, in coordination with the National Housing Authority, shall implement the relocation and resettlement of persons living in danger areas such as esteros, railroad tracks, garbage dumps, riverbanks, shorelines, waterways, and in other public places as sidewalks, roads, parks, and playgrounds. The local government unit, in coordination with the National Housing Authority, shall provide relocation or resettlement sites with basic services and facilities and access to employment and livelihood opportunities sufficient to meet the basic needs of the affected families. (Emphasis supplied.) Lands belonging to the National Government include foreshore and submerged lands which can be reclaimed to undertake housing development and resettlement projects.

Even without an implied power to reclaim lands under NHAs charter, we rule that the authority granted to NHA, a national government agency, by the President under PD 3-A reinforced by EO 525 is more than sufficient statutory basis for the reclamation of lands under the SMDRP. PD 3-A is a law issued by then President Ferdinand E. Marcos under his martial law powers on September 23, 1972. It provided that [t]he provisions of any law to the contrary notwithstanding, the reclamation of areas, underwater, whether foreshore or inland, shall be limited to the National Government or any person authorized by it under the proper contract. It repealed, in effect, RA 1899 which previously delegated the right to reclaim lands to municipalities and chartered cities and revested it to the National Government.[68] Under PD 3-A, national government can only mean the Executive Branch headed by the President. It cannot refer to Congress as it was dissolved and abolished at the time of the issuance of PD 3-A on September 23, 1972. Moreover, the Executive Branch is the only implementing arm in the government with the equipment, manpower, expertise, and capability by the very nature of its assigned powers and functions to undertake reclamation projects. Thus, under PD 3-A, the Executive Branch through the President can implement reclamation of lands through any of its departments, agencies, or offices. Subsequently, on February 4, 1977, President Marcos issued PD 1084 creating the PEA, which was granted, among others, the power to reclaim land, including foreshore and submerged areas by dredging, filling or other means or to acquire reclaimed lands. The PEAs power to reclaim is not however exclusive as can be gleaned from its charter, as the President retained his power under PD 3-A to designate another agency to reclaim lands. On February 14, 1979, EO 525 was issued. It granted PEA primary responsibility for integrating, directing, and coordinating reclamation projects for and on behalf of the National Government although other national government agencies can be designated by the President to reclaim lands in coordination with the PEA. Despite the issuance of EO 525, PD 3-A remained valid and subsisting. Thus, the National Government through the President still retained the power and control over all reclamation projects in the country. The power of the National Government through the President over reclamation of areas, that is, underwater whether foreshore or inland, was made clear in EO 543 [69] which took effect on June 24, 2006. Under EO 543, PEA was renamed the Philippine Reclamation Authority (PRA) and was granted the authority to approve reclamation projects, a power previously reposed in the President under EO 525. EO 543 reads:

3.

MO 415 explains the undertaking of the NHA in SMDRP:

WHEREAS, Memorandum Order No. 161-A mandated the National Housing Authority to conduct feasibility studies and develop low-cost housing projects at the dumpsites of Metro Manila ; WHEREAS, the National Housing Authority has presented a viable Conceptual Plan to convert the Smokey Mountain dumpsite into a habitable housing project inclusive of the reclamation area across R-10 as enabling component of the Project; WHEREAS, the said Plan requires the coordinated and synchronized efforts of the City of Manila and other government agencies and instrumentalities to ensure effective and efficient implementation;

WHEREAS, the government encourages private sector initiative in the implementation of its projects. (Emphasis supplied.) Proceeding from these whereas clauses, it is unequivocal that reclamation of land in the Smokey Mountain area is an essential and vital power of the NHA to effectively implement its avowed goal of developing low-cost housing units at the Smokey Mountain dumpsites. The interpretation made by no less than the President of the Philippines as Chief of the Executive Branch, of which the NHA is a part, must necessarily command respect and much weight and credit. 4. RA 6957 as amended by RA 7718the BOT Lawserves as an exception to PD 1084 and EO 525. Based on the provisions of the BOT Law and Implementing Rules and Regulations, it is unequivocal that all government infrastructure agencies like the NHA can undertake infrastructure or development projects using the contractual arrangements prescribed by the law, and land reclamation is one of the projects that can be resorted to in the BOT project implementation under the February 10, 1992 Joint Resolution No. 3 of the 8th Congress. From the foregoing considerations, we find that the NHA has ample implied authority to undertake reclamation projects.

Section 1. The power of the President to approve reclamation projects is hereby delegated to the Philippine Reclamation Authority [formerly PEA], through its governing board, subject to compliance with existing laws and rules and subject to the condition that reclamation contracts to be executed with any person or entity go through public bidding.

Section 2. Nothing in the Order shall be construed as diminishing the Presidents authority to modify, amend or nullify PRAs action.

Section 3. All executive issuances inconsistent with this Executive Order are hereby repealed or amended accordingly. (Emphasis supplied.)

Sec. 2 of EO 543 strengthened the power of control and supervision of the President over reclamation of lands as s/he can modify, amend, or nullify the action of PEA (now PRA). From the foregoing issuances, we conclude that the Presidents delegation to NHA, a national government agency, to reclaim lands under the SMDRP, is legal and valid, firmly anchored on PD 3-A buttressed by EO 525 notwithstanding the absence of any specific grant of power under its charter, PD 757.

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Second Issue: Whether respondents NHA and RBI were given the power and authority by DENR to reclaim foreshore and submergedlands Petitioner Chavez puts forth the view that even if the NHA and RBI were granted the authority to reclaim, they were not authorized to do so by the DENR. Again, reliance is made on our ruling in PEA where it was held that the DENRs authority is necessary in order for the government to validly reclaim foreshore and submerged lands. In PEA, we expounded in this manner: As manager, conservator and overseer of the natural resources of the State, DENR exercises supervision and control over alienable and disposable public lands. DENR also exercises exclusive jurisdiction on the management and disposition of all lands of the public domain. Thus, DENR decides whether areas under water, like foreshore or submerged areas of Manila Bay, should be reclaimed or not. This means that PEA needs authorization from DENR before PEA can undertake reclamation projects in Manila Bay, or in any part of the country.

implementation of a certain project or activity and requires said department to implement it. Such is a presidential prerogative as long as it involves the department or office authorized by law to supervise or execute the Project. Thus, as in this case, when the President approved and ordered the development of a housing project with the corresponding reclamation work, making DENR a member of the committee tasked to implement the project, the required authorization from the DENR to reclaim land can be deemed satisfied. It cannot be disputed that the ultimate power over alienable and disposable public lands is reposed in the President of the Philippines and not the DENR Secretary. To still require a DENR authorization on the Smokey Mountain when the President has already authorized and ordered the implementation of the Project would be a derogation of the powers of the President as the head of the executive branch. Otherwise, any department head can defy or oppose the implementation of a project approved by the head of the executive branch, which is patently illegal and unconstitutional.

In Chavez v. Romulo, we stated that when a statute imposes a specific duty on the executive department, the President may act directly or order the said department to undertake an activity, thus: [A]t the apex of the entire executive officialdom is the President. Section 17, Article VII of the Constitution specifies [her] power as Chief executive departments, bureaus and offices. [She] shall ensure that the laws be faithfully executed. As Chief Executive, President Arroyo holds the steering wheel that controls the course of her government. She lays down policies in the execution of her plans and programs. Whatever policy she chooses, she has her subordinates to implement them. In short, she has the power of control. Whenever a specific function is entrusted by law or regulation to her subordinate, she may act directly or merely direct the performance of a duty x x x. Such act is well within the prerogative of her office (emphasis supplied).[72] Moreover, the power to order the reclamation of lands of public domain is reposed first in the Philippine President. The Revised Administrative Code of 1987 grants authority to the President to reserve lands of public domain for settlement for any specific purpose, thus: Section 14. Power to Reserve Lands of the Public and Private Domain of the Government. (1) The President shall have the power to reserve for settlement or public use, and for specific public purposes, any of the lands of the public domain, the use of which is not otherwise directed by law. The reserved land shall thereafter remain subject to the specific public purpose indicated until otherwise provided by law or proclamation. (Emphasis supplied.)

DENR also exercises exclusive jurisdiction over the disposition of all lands of the public domain. Hence, DENR decides whether reclaimed lands of PEA should be classified as alienable under Sections 6 and 7 of CA No. 141. Once DENR decides that the reclaimed lands should be so classified, it then recommends to the President the issuance of a proclamation classifying the lands as alienable or disposable lands of the public domain open to disposition. We note that then DENR Secretary Fulgencio S. Factoran, Jr. countersigned Special Patent No. 3517 in compliance with the Revised Administrative Code and Sections 6 and 7 of CA No. 141. In short, DENR is vested with the power to authorize the reclamation of areas under water, while PEA is vested with the power to undertake the physical reclamation of areas under water, whether directly or through private contractors. DENR is also empowered to classify lands of the public domain into alienable or disposable lands subject to the approval of the President. On the other hand, PEA is tasked to develop, sell or lease the reclaimed alienable lands of the public domain.[70]

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

Notwithstanding the need for DENR permission, we nevertheless find petitioners position bereft of merit. The DENR is deemed to have granted the authority to reclaim in the Smokey Mountain Project for the following reasons: 1. Sec. 17, Art. VII of the Constitution provides that the President shall have control of all executive departments, bureaus and offices. The President is assigned the task of seeing to it that all laws are faithfully executed. Control, in administrative law, means the power of an officer to alter, modify, nullify or set aside what a subordinate officer has done in the performance of his duties and to substitute the judgment of the former for that of the latter.[71] As such, the President can exercise executive power motu proprio and can supplant the act or decision of a subordinate with the Presidents own. The DENR is a department in the executive branch under the President, and it is only an alter ego of the latter. Ordinarily the proposed action and the staff work are initially done by a department like the DENR and then submitted to the President for approval. However, there is nothing infirm or unconstitutional if the President decides on the

President Aquino reserved the area of the Smokey Mountain dumpsite for settlement and issued MO 415 authorizing the implementation of the Smokey Mountain Development Project plus the reclamation of the area across R-10. Then President Ramos issued Proclamation No. 39 covering the 21-hectare dumpsite and the 40-hectare commercial/industrial area, and Proclamation No. 465 and MO 415 increasing the area of foreshore and submerged lands of Manila Bay to be reclaimed from 40 to 79 hectares. Having supervision and control over the DENR, both Presidents directly assumed and exercised the power granted by the Revised Administrative Code to the DENR Secretary to authorize the NHA to reclaim said lands. What can be done indirectly by the DENR can be done directly by the President. It would be absurd if the power of the President cannot be exercised simply because the head of a department in the executive branch has not acted favorably on a project already approved by the President. If such arrangement is allowed then the department head will become more powerful than the President. 2. Under Sec. 2 of MO 415, the DENR is one of the members of the EXECOM chaired by the NCR-CORD to oversee the implementation of the Project. The EXECOM was the one which recommended approval of the project plan and the joint venture agreements. Clearly, the DENR retained its power of supervision and control over the laws affected by the Project since it was tasked to facilitate the titling of theSmokey Mountain and of the area to be reclaimed, which shows that it had tacitly given its authority to the NHA to undertake the reclamation. 3. Former DENR Secretary Angel C. Alcala issued Special Patents Nos. 3591 and 3592 while then Secretary Victor O. Ramos issued Special Patent No. 3598 that embraced the areas covered by the reclamation. These patents conveyed the lands to be reclaimed to the NHA and granted to said agency the administration and disposition of said lands for subdivision and disposition to qualified beneficiaries and

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for development for mix land use (commercial/industrial) to provide employment opportunities to on -site families and additional areas for port related activities. Such grant of authority to administer and dispose of lands of public domain under the SMDRP is of course subject to the powers of the EXECOM of SMDRP, of which the DENR is a member. 4. The issuance of ECCs by the DENR for SMDRP is but an exercise of its power of supervision and control over the lands of public domain covered by the Project. Based on these reasons, it is clear that the DENR, through its acts and issuances, has ratified and confirmed the reclamation of the subject lands for the purposes laid down in Proclamations Nos. 39 and 465.

additional areas for port-related activities. Said directive carries with it the pronouncement that said lands have been transformed to alienable and disposable lands. Otherwise, there is no legal way to convey it to the beneficiaries.

(3) Proclamation No. 465 likewise issued by President Ramos enlarged the reclaimed area to 79 hectares to be developed and disposed of in the implementation of the SMDRP. The authority put into the hands of the NHA to dispose of the reclaimed lands tacitly sustains the conversion to alienable and disposable lands. Secondly, Special Patents Nos. 3591, 3592, and 3598 issued by the DENR anchored on Proclamations Nos. 39 and 465 issued by President Ramos, without doubt, classified the reclaimed areas as alienable and disposable.

Third Issue: Whether respondent RBI can acquire reclaimedforeshore and submerged lands considered as inalienable andoutside the commerce of man Petitioner postulates that respondent RBI cannot acquire the reclaimed foreshore and submerged areas as these are inalienable public lands beyond the commerce of man based on Art. 1409 of the Civil Code which provides: Article 1409. The following contracts are inexistent and void from the beginning: (1) Those whose cause, object or purpose is contrary to law, morals, good customs, public order or public policy; xxxx (7) waived. Secs.2 and 3, Art. XII of the Constitution declare that all natural resources are owned by the State and they cannot be alienated except for alienable agricultural lands of the public domain. One of the States natural resources are lands of public domain which include reclaimed lands. Petitioner contends that for these reclaimed lands to be alienable, there must be a law or presidential proclamation officially classifying these reclaimed lands as alienable and disposable and open to disposition or concession. Absent such law or proclamation, the reclaimed lands cannot be the enabling component or consideration to be paid to RBI as these are beyond the commerce of man. We are not convinced of petitioners postulation. The reclaimed lands across R-10 were classified alienable and disposable lands of public domain of the State for the following reasons, viz: First, there were three (3) presidential proclamations classifying the reclaimed lands across R-10 as alienable or disposable hence open to disposition or concession, to wit: Those expressly prohibited or declared void by law.

Admittedly, it cannot be said that MO 415, Proclamations Nos. 39 and 465 are explicit declarations that the lands to be reclaimed are classified as alienable and disposable. We find however that such conclusion is derived and implicit from the authority given to the NHA to transfer the reclaimed lands to qualified beneficiaries. The query is, when did the declaration take effect? It did so only after the special patents covering the reclaimed areas were issued. It is only on such date that the reclaimed lands became alienable and disposable lands of the public domain. This is in line with the ruling in PEA where said issue was clarified and stressed:

These contracts cannot be ratified. Neither can the right to set up the defense of illegality be

PD No. 1085, coupled with President Aquinos actual issuance of a special patent covering the Freedom Islands, is equivalent to an official proclamation classifying the Freedom Islands as alienable or disposable lands of the public domain. PD No. 1085 and President Aquinos issuance of a land patent also constitute a declaration that the Freedom Islands are no longer needed for public service. The Freedom Islands are thus alienable or disposable lands of the public domain, open to disposition or concession to qualified parties.[73] (Emphasis supplied.) Thus, MO 415 and Proclamations Nos. 39 and 465 cumulatively and jointly taken together with Special Patent Nos. 3591, 3592, and 3598 more than satisfy the requirement in PEA that [t]here must be a law orpresidential proclamation officially classifying these reclaimed lands as alienable or disposable and open to disposition or concession (emphasis supplied).[74] Apropos the requisite law categorizing reclaimed land as alienable or disposable, we find that RA 6957 as amended by RA 7718 provides ample authority for the classification of reclaimed land in the SMDRP for the repayment scheme of the BOT project as alienable and disposable lands of public domain. Sec. 6 of RA 6957 as amended by RA 7718 provides:

(1) MO 415 issued by President Aquino, of which Sec. 4 states that [t]he land covered by the Smokey Mountain Dumpsite is hereby conveyed to the National Housing Authority as well as the area to be reclaimed across R-10. The directive to transfer the lands once reclaimed to the NHA implicitly carries with it the declaration that said lands are alienable and disposable. Otherwise, the NHA cannot effectively use them in its housing and resettlement project.

For the financing, construction, operation and maintenance of any infrastructure projects undertaken through the build-operate-and transfer arrangement or any of its variations pursuant to the provisions of this Act, the project proponent x x x may likewise be repaid in the form of a share in the revenue of the project or other non-monetary payments, such as, but not limited to, the grant of a portion or percentage of the reclaimed land, subject to the constitutional requirements with respect to the ownership of the land. (Emphasis supplied.) While RA 6957 as modified by RA 7718 does not expressly declare that the reclaimed lands that shall serve as payment to the project proponent have become alienable and disposable lands and opened for disposition; nonetheless, this conclusion is necessarily implied, for how else can the land be used as the enabling component for the Project if such classification is not deemed made? It may be argued that the grant of authority to sell public lands, pursuant to PEA, does not convert alienable lands of public domain into private or patrimonial lands. We ruled in PEA that alienable lands of public domain must be transferred to qualified private parties, or to government entities not

(2) Proclamation No. 39 issued by then President Ramos by which the reclaimed lands were conveyed to NHA for subdivision and disposition to qualified beneficiaries and for development into a mixed land use (commercial/industrial) to provide employment opportunities to on-site families and

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

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

From the foregoing considerations, we find that the 79-hectare reclaimed land has been declared alienable and disposable land of the public domain; and in the hands of NHA, it has been reclassified as patrimonial property. Petitioner, however, contends that the reclaimed lands were inexistent prior to the three (3) Presidential Acts (MO 415 and Proclamations Nos. 39 and 465) and hence, the declaration that such areas are alienable and disposable land of the public domain, citing PEA, has no legal basis. Petitioners contention is not well-taken.

It is true that, once a patent is registered and the corresponding certificate of title is issued, the land covered by them ceases to be part of the public domain and becomes private property, and the Torrens Title issued pursuant to the patent becomes indefeasible upon the expiration of one year from the date of issuance of such patent.[78] The doctrine was reiterated in Republic v. Heirs of Felipe Alijaga, Sr.,[79] Heirs of Carlos Alcaraz v. Republic,[80] and the more recent case of Doris Chiongbian-Oliva v. Republic of the Philippines.[81] Thus, the 79-hectare reclaimed land became patrimonial property after the issuance of certificates of titles to the NHA based on Special Patents Nos. 3592 and 3598. One last point. The ruling in PEA cannot even be applied retroactively to the lots covered by Special Patents Nos. 3592 (40 hectare reclaimed land) and 3598 (39-hectare reclaimed land). The reclamation of the land under SMDRP was completed in August 1996 while the PEA decision was rendered on July 9, 2002. In the meantime, subdivided lots forming parts of the reclaimed land were already sold to private corporations for value and separate titles issued to the buyers. The Project was terminated through a Memorandum of Agreement signed on August 27, 2003. The PEA decision became final through the November 11, 2003 Resolution. It is a settled precept that decisions of the Supreme Court can only be applied prospectively as they may prejudice vested rights if applied retroactively. In Benzonan v. Court of Appeals, the Court trenchantly elucidated the prospective application of its decisions based on considerations of equity and fair play, thus: At that time, the prevailing jurisprudence interpreting section 119 of R.A. 141 as amended was that enunciated in Monge and Tupas cited above. The petitioners Benzonan and respondent Pe and the DBP are bound by these decisions for pursuant to Article 8 of the Civil Code judicial decisions applying or interpreting the laws of the Constitution shall form a part of the legal system of the Philippines. But while our decisions form part of the law of the land, they are also subject to Article 4 of the Civil Code which provides that laws shall have no retroactive effect unless the contrary is provided. This is expressed in the familiar legal maxim lex prospicit, non respicit, the law looks forward not backward. The rationale against retroactivity is easy to perceive. The retroactive application of a law usually divests rights that have already become vested or impairs the obligations of contract and hence, is unconstitutional. The same consideration underlies our rulings giving only prospective effect to decisions enunciating new doctrines. Thus, we emphasized in People v. Jabinal, 55 SCRA 607 [1974] x x x when a doctrine of this Court is overruled and a different view is adopted, the new doctrine should be applied prospectively and should not apply to parties who had relied on the old doctrine and acted on the faith thereof.[82] Fourth Issue: Whether respondent RBI can acquire reclaimed lands when there was no declaration that said lands are nolonger needed for public use

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

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

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

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Petitioner Chavez avers that despite the declaration that the reclaimed areas are alienable lands of the public domain, still, the reclamation is flawed for there was never any declaration that said lands are no longer needed for public use. We are not moved by petitioners submission. Even if it is conceded that there was no explicit declaration that the lands are no longer needed for public use or public service, there was however an implicit executive declaration that the reclaimed areas R-10 are not necessary anymore for public use or public service when President Aquino through MO 415 conveyed the same to the NHA partly for housing project and related commercial/industrial development intended for disposition to and enjoyment of certain beneficiaries and not the public in general and partly as enabling component to finance the project. President Ramos, in issuing Proclamation No. 39, declared, though indirectly, that the reclaimed lands of the Smokey Mountain project are no longer required for public use or service, thus: These parcels of land of public domain are hereby placed under the administration and disposition of the National Housing Authority to develop, subdivide and dispose to qualified beneficiaries, as well as its development for mix land use (commercial/industrial) to provide employment opportunities to onsite families and additional areas for port related activities. (Emphasis supplied.) While numerical count of the persons to be benefited is not the determinant whether the property is to be devoted to public use, the declaration in Proclamation No. 39 undeniably identifies only particular individuals as beneficiaries to whom the reclaimed lands can be sold, namely the Smokey Mountain dwellers. The rest of the Filipinos are not qualified; hence, said lands are no longer essential for the use of the public in general. In addition, President Ramos issued on August 31, 1994 Proclamation No. 465 increasing the area to be reclaimed from forty (40) hectares to seventy-nine (79) hectares, elucidating that said lands are undoubtedly set aside for the beneficiaries of SMDRP and not the public declaring the power of NHA to dispose of land to be reclaimed, thus: The authority to administer, develop, or dispose lands identified and reserved by this Proclamation and Proclamation No. 39 (s.1992), in accordance with the SMDRP, as enhance, is vested with the NHA, subject to the provisions of existing laws. (Emphasis supplied.) MO 415 and Proclamations Nos. 39 and 465 are declarations that proclaimed the non-use of the reclaimed areas for public use or service as the Project cannot be successfully implemented without the withdrawal of said lands from public use or service. Certainly, the devotion of the reclaimed land to public use or service conflicts with the intended use of the Smokey Mountain areas for housing and employment of the Smokey Mountain scavengers and for financing the Project because the latter cannot be accomplished without abandoning the public use of the subject land. Without doubt, the presidential proclamations on SMDRP together with the issuance of the special patents had effectively removed the reclaimed lands from public use. More decisive and not in so many words is the ruling in PEA which we earlier cited, that PD No. 1085 and President Aquinos issuance of a land patent also constitute a declaration that the Freedom Islands are no longer needed for public service. Consequently, we ruled in that case that the reclaimed lands are open to disposition or concession to qualified parties.[83] In a similar vein, presidential Proclamations Nos. 39 and 465 jointly with the special patents have classified the reclaimed lands as alienable and disposable and open to disposition or concession as they would be devoted to units for Smokey Mountain beneficiaries. Hence, said lands are no longer intended for public use or service and shall form part of the patrimonial properties of the State under Art. 422 of the Civil Code.[84] As discussed a priori, the lands were classified as patrimonial properties of the NHA ready for disposition when the titles were registered in its name by the Register of Deeds. Moreover, reclaimed lands that are made the enabling components of a BOT infrastructure project are necessarily reclassified as alienable and disposable lands under the BOT Law; otherwise, absurd and illogical consequences would naturally result. Undoubtedly, the BOT contract will not be accepted by the BOT contractor since there will be no consideration for its contractual obligations. Since reclaimed land will be conveyed to the contractor pursuant to the BOT Law, then there is an implied declaration that such land is no longer intended for public use or public service and, hence, considered patrimonial property of the State.

Fifth Issue: Whether there is a law authorizing sale of reclaimed lands Petitioner next claims that RBI cannot acquire the reclaimed lands because there was no law authorizing their sale. He argues that unlike PEA, no legislative authority was granted to the NHA to sell reclaimed land. This position is misplaced. Petitioner relies on Sec. 60 of Commonwealth Act (CA) 141 to support his view that the NHA is not empowered by any law to sell reclaimed land, thus: Section 60. Any tract of land comprised under this title may be leased or sold, as the case may be, to any person, corporation or association authorized to purchase or lease public lands for agricultural purposes. The area of the land so leased or sold shall be such as shall, in the judgment of the Secretary of Agriculture and Natural Resources, be reasonably necessary for the purposes for which such sale or lease if requested and shall in no case exceed one hundred and forty-four hectares: Provided, however, That this limitation shall not apply to grants, donations, transfers, made to a province, municipality or branch or subdivision of the Government for the purposes deemed by said entities conducive to the public interest; but the land so granted donated or transferred to a province, municipality, or branch or subdivision of the Government shall not be alienated, encumbered, or otherwise disposed of in a manner affecting its title, except when authorized by Congress; Provided, further, That any person, corporation, association or partnership disqualified from purchasing public land for agricultural purposes under the provisions of this Act, may lease land included under this title suitable for industrial or residential purposes, but the lease granted shall only be valid while such land is used for the purposes referred to. (Emphasis supplied.) Reliance on said provision is incorrect as the same applies only to a province, municipality or branch or subdivision of the Government. The NHA is not a government unit but a government corporation performing governmental and proprietary functions. In addition, PD 757 is clear that the NHA is empowered by law to transfer properties acquired by it under the law to other parties, thus: Section 6. Powers and functions of the Authority. The Authority shall have the following powers and functions to be exercised by the Boards in accordance with the established national human settlements plan prepared by the Human Settlements Commission: xxxx (k) Enter into contracts whenever necessary under such terms and conditions as it may deem proper and reasonable; (l) Acquire property rights and interests, and encumber or otherwise dispose the same as it may deem appropriate (Emphasis supplied.) Letter (l) is emphatic that the NHA can acquire property rights and interests and encumber or otherwise dispose of them as it may deem appropriate. The transfer of the reclaimed lands by the National Government to the NHA for housing, commercial, and industrial purposes transformed them into patrimonial lands which are of course owned by the State in its private or proprietary capacity. Perforce, the NHA can sell the reclaimed lands to any Filipino citizen or qualified corporation. Sixth Issue: Whether the transfer of reclaimed lands to RBI was done by public bidding Petitioner also contends that there was no public bidding but an awarding of ownership of said reclaimed lands to RBI. Public bidding, he says, is required under Secs. 63 and 67 of CA 141 which read: Section 63. Whenever it is decided that lands covered by this chapter are not needed for public purposes, the Director of Lands shall ask the Secretary of Agriculture and Commerce for authority to dispose of the same. Upon receipt of such authority, the Director of Lands shall give notice by public advertisement in the same manner as in the case of leases or sales of agricultural public land, that the Government will

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lease or sell, as the case may be, the lots or blocks specified in the advertisement, for the purpose stated in the notice and subject to the conditions specified in this chapter. xxxx Section 67. The lease or sale shall be made through oral bidding; and adjudication shall be made to the highest bidder. However, where an applicant has made improvements on the land by virtue of a permit issued to him by competent authority, the sale or lease shall be made by sealed bidding as prescribed in section twenty-six of this Act, the provisions of which shall be applied whenever applicable. If all or part of the lots remain unleased or unsold, the Director of Lands shall from time to time announce in the Official Gazette or in any other newspapers of general circulation, the lease of sale of those lots, if necessary. He finds that the NHA and RBI violated Secs. 63 and 67 of CA 141, as the reclaimed lands were conveyed to RBI by negotiated contract and not by public bidding as required by law. This stand is devoid of merit. There is no doubt that respondent NHA conducted a public bidding of the right to become its joint venture partner in the Smokey Mountain Project. Notices or Invitations to Bid were published in the national dailies on January 23 and 26, 1992 and February 1, 14, 16, and 23, 1992. The bidding proper was done by the Bids and Awards Committee (BAC) on May 18, 1992. On August 31, 1992, the Inter-Agency Techcom made up of the NHA, PEA, DPWH, PPA, DBP, and DENR opened the bids and evaluated them, resulting in the award of the contract to respondent RBI on October 7, 1992. On March 19, 1993, respondents NHA and RBI signed the JVA. On February 23, 1994, said JVA was amended and restated into the ARJVA. On August 11, 1994, the ARJVA was again amended. On September 7, 1994, the OP approved the ARJVA and the amendments to the ARJVA. From these factual settings, it cannot be gainsaid that there was full compliance with the laws and regulations governing public biddings involving a right, concession, or property of the government. Petitioner concedes that he does not question the public bidding on the right to be a joint venture partner of the NHA, but the absence of bidding in the sale of alienable and disposable lands of public domain pursuant to CA 141 as amended. Petitioners theory is incorrect. Secs. 63 and 67 of CA 141, as amended, are in point as they refer to government sale by the Director of Lands of alienable and disposable lands of public domain. This is not present in the case at bar. The lands reclaimed by and conveyed to the NHA are no longer lands of public domain. These lands became proprietary lands or patrimonial properties of the State upon transfer of the titles over the reclaimed lands to the NHA and hence outside the ambit of CA 141. The NHA can therefore legally transfer patrimonial land to RBI or to any other interested qualified buyer without any bidding conducted by the Director of Lands because the NHA, unlike PEA, is a government agency not tasked to sell lands of public domain. Hence, it can only hold patrimonial lands and can dispose of such lands by sale without need of public bidding. Petitioner likewise relies on Sec. 79 of PD 1445 which requires public bidding when government property has become unserviceable for any cause or is no lon ger needed. It appears from the Handbook on Property and Supply Management System, Chapter 6, that reclaimed lands which have become patrimonial properties of the State, whose titles are conveyed to government agencies like the NHA, which it will use for its projects or programs, are not within the ambit of Sec. 79. We quote the determining factors in the Disposal of Unserviceable Property, thus: Determining Factors in the Disposal of Unserviceable Property

Property that has become obsolete or outmoded because of changes in technology; Serviceable property that has been rendered unnecessary due to change in the agencys function or mandate; Unused supplies, materials and spare parts that were procured in excess of requirements; and Unused supplies and materials that [have] become dangerous to use because of long storage or use of which is determined to be hazardous.[85] Reclaimed lands cannot be considered unserviceable properties. The reclaimed lands in question are very much needed by the NHA for the Smokey Mountain Project because without it, then the projects will not be successfully implemented. Since the reclaimed lands are not unserviceable properties and are very much needed by NHA, then Sec. 79 of PD 1445 does not apply. More importantly, Sec. 79 of PD 1445 cannot be applied to patrimonial properties like reclaimed lands transferred to a government agency like the NHA which has entered into a BOT contract with a private firm. The reason is obvious. If the patrimonial property will be subject to public bidding as the only way of disposing of said property, then Sec. 6 of RA 6957 on the repayment scheme is almost impossible or extremely difficult to implement considering the uncertainty of a winning bid during public auction. Moreover, the repayment scheme of a BOT contract may be in the form of non-monetary payment like the grant of a portion or percentage of reclaimed land. Even if the BOT partner participates in the public bidding, there is no assurance that he will win the bid and therefore the payment in kind as agreed to by the parties cannot be performed or the winning bid prize might be below the estimated valuation of the land. The only way to harmonize Sec. 79 of PD 1445 with Sec. 6 of RA 6957 is to consider Sec. 79 of PD 1445 as inapplicable to BOT contracts involving patrimonial lands. The law does not intend anything impossible (lex non intendit aliquid impossibile).

Seventh Issue: Whether RBI, being a private corporation,is barred by the Constitution to acquire lands of public domain Petitioner maintains that RBI, being a private corporation, is expressly prohibited by the 1987 Constitution from acquiring lands of public domain. Petitioners proposition has no legal mooring for the following reasons: 1. RA 6957 as amended by RA 7718 explicitly states that a contractor can be paid a portion as percentage of the reclaimed land subject to the constitutional requirement that only Filipino citizens or corporations with at least 60% Filipino equity can acquire the same. It cannot be denied that RBI is a private corporation, where Filipino citizens own at least 60% of the stocks. Thus, the transfer to RBI is valid and constitutional. 2. When Proclamations Nos. 39 and 465 were issued, inalienable lands covered by said proclamations were converted to alienable and disposable lands of public domain. When the titles to the reclaimed lands were transferred to the NHA, said alienable and disposable lands of public domain were automatically classified as lands of the private domain or patrimonial properties of the State because the NHA is an agency NOT tasked to dispose of alienable or disposable lands of public domain. The only way it can transfer the reclaimed land in conjunction with its projects and to attain its goals is when it is automatically converted to patrimonial properties of the State. Being patrimonial or private properties of the State, then it has the power to sell the same to any qualified person under the Constitution, Filipino citizens as private corporations, 60% of which is owned by Filipino citizens like RBI. 3. The NHA is an end-user entity such that when alienable lands of public domain are transferred to said agency, they are automatically classified as patrimonial properties. The NHA is similarly situated as BCDA which was granted the authority to dispose of patrimonial lands of the government under RA 7227. The nature of the property holdings conveyed to BCDA is elucidated and stressed in the May 6, 2003 Resolution in Chavez v. PEA, thus: BCDA is an entirely different government entity. BCDA is authorized by law to sell specific government lands that have long been declared by presidential proclamations as

Property, which can no longer be repaired or reconditioned; Property whose maintenance costs of repair more than outweigh the benefits and services that will be derived from its continued use;

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military reservations for use by the different services of the armed forces under the Department of National Defense. BCDAs mandate is specific and limited in area, while PEAs mandate is gen eral and national. BCDA holds government lands that have been granted to end-user government entitiesthe military services of the armed forces. In contrast, under Executive Order No. 525, PEA holds the reclaimed public lands, not as an end-user entity, but as the government agency primarily responsible for integrating, directing, and coordinating all reclamation projects for and on behalf of the National Government. x x x Well-settled is the doctrine that public land granted to an end-user government agency for a specific public use may subsequently be withdrawn by Congress from public use and declared patrimonial property to be sold to private parties. R.A. No. 7227 creating the BCDA is a law that declares specific military reservations no longer needed for defense or military purposes and reclassifies such lands as patrimonial property for sale to private parties. Government owned lands, as long as they are patrimonial property, can be sold to private parties, whether Filipino citizens or qualified private corporations. Thus, the so-called Friar Lands acquired by the government under Act No. 1120 are patrimonial property which even private corporations can acquire by purchase. Likewise, reclaimed alienable lands of the public domain if sold or transferred to a public or municipal corporation for a monetary consideration become patrimonial property in the hands of the public or municipal corporation. Once converted to patrimonial property, the land may be sold by the public or municipal corporation to private parties, whether Filipino citizens or qualified private corporations.[86] (Emphasis supplied.) The foregoing Resolution makes it clear that the SMDRP was a program adopted by the Government under Republic Act No. 6957 (An Act Authorizing the Financing, Construction, Operation and Maintenance of Infrastructure Projects by the Private Sector, and For Other Purposes), as amended by RA 7718, which is a special law similar to RA 7227. Moreover, since the implementation was assigned to the NHA, an end-user agency under PD 757 and RA 7279, the reclaimed lands registered under the NHA are automatically classified as patrimonial lands ready for disposition to qualified beneficiaries.

SEC. 28. Subject to reasonable conditions prescribed by law, the State adopts and implements a policy of full public disclosure of all its transactions involving public interest. ARTICLE III

SEC. 7. The right of the people to information on matters of public concern shall be recognized. Access to official records, and to documents, and papers pertaining to official acts, transactions, or decisions, as well as to government research data used as basis for policy development, shall be afforded the citizen, subject to such limitations as may be provided by law. In Valmonte v. Belmonte, Jr., this Court explicated this way:

[A]n essential element of these freedoms is to keep open a continuing dialogue or process of communication between the government and the people. It is in the interest of the State that the channels for free political discussion be maintained to the end that the government may perceive and be responsive to the peoples will. Yet, this open dialogue can be effective only to the extent that the citizenry is informed and thus able to formulate its will intelligently. Only when the participants in the discussion are aware of the issues and have access to information relating thereto can such bear fruit.[87] In PEA, this Court elucidated the rationale behind the right to information: These twin provisions of the Constitution seek to promote transparency in policy-making and in the operations of the government, as well as provide the people sufficient information to exercise effectively other constitutional rights. These twin provisions are essential to the exercise of freedom of expression. If the government does not disclose its official acts, transactions and decisions to citizens, whatever citizens say, even if expressed without any restraint, will be speculative and amount to nothing. These twin provisions are also essential to hold public officials at all times x x x accountable to the people, for unless citizens have the proper information, they cannot hold public officials accountable for anything. Armed with the right information, citizens can participate in public discussions leading to the formulation of government policies and their effective implementation. An informed citizenry is essential to the existence and proper functioning of any democracy.[88] Sec. 28, Art. II compels the State and its agencies to fully disclose all of its transactions involving public interest. Thus, the government agencies, without need of demand from anyone, must bring into public view all the steps and negotiations leading to the consummation of the transaction and the contents of the perfected contract.[89] Such information must pertain to definite propositions of the government, meaning official recommendations or final positions reached on the different matters subject of negotiation. The government agency, however, need not disclose intra-agency or inter-agency recommendations or communications during the stage when common assertions are still in the process of being formulated or are in the exploratory stage. The limitation also covers privileged communication like information on military and diplomatic secrets; information affecting national security; information on investigations of crimes by law enforcement agencies before the prosecution of the accused; information on foreign relations, intelligence, and other classified information.

The foregoing reasons likewise apply to the contention of petitioner that HCPTI, being a private corporation, is disqualified from being a transferee of public land. What was transferred to HCPTI is a 10-hectare lot which is already classified as patrimonial property in the hands of the NHA. HCPTI, being a qualified corporation under the 1987 Constitution, the transfer of the subject lot to it is valid and constitutional. Eighth Issue: Whether respondents can be compelled to disclose all information related to the SMDRP Petitioner asserts his right to information on all documents such as contracts, reports, memoranda, and the like relative to SMDRP. Petitioner asserts that matters relative to the SMDRP have not been disclosed to the public like the current stage of the Project, the present financial capacity of RBI, the complete list of investors in the asset pool, the exact amount of investments in the asset pool and other similar important information regarding the Project. He prays that respondents be compelled to disclose all information regarding the SMDRP and furnish him with originals or at least certified true copies of all relevant documents relating to the said project including, but not limited to, the original JVA, ARJVA, AARJVA, and the Asset Pool Agreement. This relief must be granted. The right of the Filipino people to information on matters of public concern is enshrined in the 1987 Constitution, thus: ARTICLE II xxxx

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

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

Thus, the duty to disclose information should be differentiated from the duty to permit access to information. There is no need to demand from the government agency disclosure of information as this is mandatory under the Constitution; failing that, legal remedies are available. On the other hand, the interested party must first request or even demand that he be allowed access to documents and papers in the particular agency. A request or demand is required; otherwise, the government office or agency will not know of the desire of the interested party to gain access to such papers and what papers are needed. The duty to disclose covers only transactions involving public interest, while the duty to allow access has a broader scope of information which embraces not only transactions involving public interest, but any matter contained in official communications and public documents of the government agency. We find that although petitioner did not make any demand on the NHA to allow access to information, we treat the petition as a written request or demand. We order the NHA to allow petitioner access to its official records, documents, and papers relating to official acts, transactions, and decisions that are relevant to the said JVA and subsequent agreements relative to the SMDRP. Ninth Issue: Whether the operative fact doctrine applies to the instant petition Petitioner postulates that the operative fact doctrine is inapplicable to the present case because it is an equitable doctrine which could not be used to countenance an inequitable result that is contrary to its proper office.

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

Moreover, we certainly cannot nullify the City Governments order of suspension, a s we have no reason to do so, much less retroactively apply such nullification to deprive private respondent of a compelling and valid reason for not filing the leave application. For as we have held, a void act though in law a mere scrap of paper nonetheless confers legitimacy upon past acts or omissions done in reliance thereof. Consequently, the existence of a statute or executive order prior to its being adjudged void is an operative fact to which legal consequences are attached. It would indeed be ghastly unfair to prevent private respondent from relying upon the order of suspension in lieu of a formal leave application.[92] (Emphasis supplied.) The principle was further explicated in the case of Rieta v. People of the Philippines, thus: In similar situations in the past this Court had taken the pragmatic and realistic course set forth in Chicot County Drainage District vs. Baxter Bank to wit: The courts below have proceeded on the theory that the Act of Congress, having been found to be unconstitutional, was not a law; that it was inoperative, conferring no rights and imposing no duties, and hence affording no basis for the challenged decree. x x x It is quite clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to [the determination of its invalidity], is an operative fact and may have consequences which cannot justly be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects with respect to particular conduct, private and official. Questions of rights claimed to have become vested, of status, of prior determinations deemed to have finality and acted upon accordingly, of public policy in the light of the nature both of the statute and of its previous application, demand examination. These questions are among the most difficult of those which have engaged the attention of courts, state and federal, and it is manifest from numerous decisions that an all-inclusive statement of a principle of absolute retroactive invalidity cannot be justified. In the May 6, 2003 Resolution in Chavez v. PEA,[93] we ruled that De Agbayani[94] is not applicable to the case considering that the prevailing law did not authorize private corporations from owning land. The prevailing law at the time was the 1935 Constitution as no statute dealt with the same issue. In the instant case, RA 6957 was the prevailing law at the time that the joint venture agreement was signed. RA 6957, entitled An Act Authorizing The Financing, Construction, Operation And Maintenance Of Infrastructure Projects By The Private Sector And For Other Purposes, which was passed by Congress on July 24, 1989, allows repayment to the private contractor of reclaimed lands.[95] Such law was relied upon by respondents, along with the above-mentioned executive issuances in pushing through with the Project. The existence of such law and issuances is an operative fact to which legal consequences have attached. This Court is constrained to give legal effect to the acts done in consonance with such executive and legislative acts; to do otherwise would work patent injustice on respondents. Further, in the May 6, 2003 Resolution in Chavez v. PEA, we ruled that in certain cases, the transfer of land, although illegal or unconstitutional, will not be invalidated on considerations of equity and social justice. However, in that case, we did not apply the same considering that PEA, respondent in said case, was not entitled to equity principles there being bad faith on its part, thus:

On the other hand, the petitioner Solicitor General argues that the existence of the various agreements implementing the SMDRP is an operative fact that can no longer be disturbed or simply ignored, citing Rieta v. People of the Philippines.[90] The argument of the Solicitor General is meritorious. The operative fact doctrine is embodied in De Agbayani v. Court of Appeals, wherein it is stated that a legislative or executive act, prior to its being declared as unconstitutional by the courts, is valid and must be complied with, thus: As the new Civil Code puts it: When the courts declare a law to be inconsistent with the Constitution, the former shall be void and the latter shall govern. Administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws of the Constitution. It is understandable why it should be so, the Constitution being supreme and paramount. Any legislative or executive act contrary to its terms cannot survive. Such a view has support in logic and possesses the merit of simplicity. It may not however be sufficiently realistic. It does not admit of doubt that prior to the declaration of nullity such challenged legislative or executive act must have been in force and had to be complied with. This is so as until after the judiciary, in an appropriate case, declares its invalidity, it is entitled to obedience and respect. Parties may have acted under it and may have changed their positions. What could be more fitting than that in a subsequent litigation regard be had to what has been done while such legislative or executive act was in operation and presumed to be valid in all respects. It is now accepted as a doctrine that prior to its being nullified, its existence as a fact must be reckoned with. This is merely to reflect awareness that precisely because the judiciary is the governmental organ which has the final say on whether or not a legislative or executive measure is valid, a period of time may have elapsed before it can exercise the power of judicial review that may lead to a declaration of nullity. It would be to deprive the law of its quality of fairness and justice then, if there be no recognition of what had transpired prior to such adjudication.

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There are, moreover, special circumstances that disqualify Amari from invoking equity principles. Amari cannot claim good faith because even before Amari signed the Amended JVA on March 30, 1999, petitioner had already filed the instant case on April 27, 1998 questioning precisely the qualification of Amari to acquire the Freedom Islands. Even before the filing of this petition, two Senate Committees had already approved on September 16, 1997 Senate Committee Report No. 560. This Report concluded, after a well-publicized investigation into PEAs sale of the Freedom Islands to Amari, that the Freedom Islands are inalienable lands of the public domain. Thus, Amari signed the Amended JVA knowing and assuming all the attendant risks, including the annulment of the Amended JVA. [96] Such indicia of bad faith are not present in the instant case. When the ruling in PEA was rendered by this Court on July 9, 2002, the JVAs were all executed. Furthermore, when petitioner filed the instant case against respondents on August 5, 2004, the JVAs were already terminated by virtue of the MOA between the NHA and RBI. The respondents had no reason to think that their agreements were unconstitutional or even questionable, as in fact, the concurrent acts of the executive department lent validity to the implementation of the Project. The SMDRP agreements have produced vested rights in favor of the slum dwellers, the buyers of reclaimed land who were issued titles over said land, and the agencies and investors who made investments in the project or who bought SMPPCs. These properties and rights cannot be disturbed or questioned after the passage of around ten (10) years from the start of the SMDRP implementation. Evidently, the operative fact principle has set in. The titles to the lands in the hands of the buyers can no longer be invalidated. The Courts Dispositions Based on the issues raised in this petition, we find that the March 19, 1993 JVA between NHA and RBI and the SMDRP embodied in the JVA, the subsequent amendments to the JVA and all other agreements signed and executed in relation to it, including, but not limited to, the September 26, 1994 Smokey Mountain Asset Pool Agreement and the agreement on Phase I of the Project as well as all other transactions which emanated from the Project, have been shown to be valid, legal, and constitutional. Phase II has been struck down by the Clean Air Act. With regard to the prayer for prohibition, enjoining respondents particularly respondent NHA from further implementing and/or enforcing the said Project and other agreements related to it, and from further deriving and/or enjoying any rights, privileges and interest from the Project, we find the same prayer meritless.

Whatever is left to be done in relation to the August 27, 2003 MOA, terminating the JVA and other related agreements, certainly does not involve ministerial functions of the NHA but instead requires exercise of judgment. In fact, Item No. 4 of the MOA terminating the JVAs provides for validation of the developers (RBIs) claims arising from the termination of the SMDRP through the various government agencies.[98] Such validation requires the exercise of discretion. In addition, prohibition does not lie against the NHA in view of petitioners failure to avail and exhaust all administrative remedies. Clear is the rule that prohibition is only available when there is no adequate remedy in the ordinary course of law. More importantly, prohibition does not lie to restrain an act which is already a fait accompli. The operative fact doctrine protecting vested rights bars the grant of the writ of prohibition to t he case at bar. It should be remembered that petitioner was the Solicitor General at the time SMDRP was formulated and implemented. He had the opportunity to question the SMDRP and the agreements on it, but he did not. The moment to challenge the Project had passed. On the prayer for a writ of mandamus, petitioner asks the Court to compel respondents to disclose all documents and information relating to the project, including, but not limited to, any subsequent agreements with respect to the different phases of the Project, the revisions of the original plan, the additional works incurred on the Project, the current financial condition of respondent RBI, and the transactions made with respect to the project. We earlier ruled that petitioner will be allowed access to official records relative to the SMDRP. That would be adequate relief to satisfy petitioners right to the information gateway.

WHEREFORE, the petition is PARTIALLY GRANTED. The prayer for a writ of prohibition is DENIED for lack of merit. The prayer for a writ of mandamus is GRANTED. Respondent NHA is ordered to allow access to petitioner to all public documents and official records relative to the SMDRPincluding, but not limited to, the March 19, 1993 JVA between the NHA and RBI and subsequent agreements related to the JVA, the revisions over the original plan, and the additional works incurred on and the transactions made with respect to the Project.

Sec. 2 of Rule 65 of the 1997 Rules of Civil Procedure provides: Sec. 2. Petition for prohibition.When the proceedings of any tribunal, corporation, board, officer or person, whether exercising judicial, quasi-judicial or ministerial functions, are without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court, alleging the facts with certainty and praying that judgment be rendered commanding the respondent to desist from further proceedings in the action or matter specified therein, or otherwise granting such incidental reliefs as law and justice may require.

No costs. SO ORDERED. CASES ON CHAPTER 3 Republic of the Philippines SUPREME COURT Manila THIRD DIVISION

G.R. No. 110120 March 16, 1994 It has not been shown that the NHA exercised judicial or quasi-judicial functions in relation to the SMDRP and the agreements relative to it. Likewise, it has not been shown what ministerial functions the NHA has with regard to the SMDRP. LAGUNA LAKE DEVELOPMENT AUTHORITY, petitioner, vs. COURT OF APPEALS, HON. MANUEL JN. SERAPIO, Presiding Judge RTC, Branch 127, Caloocan City, HON. MACARIO A. ASISTIO, JR., City Mayor of Caloocan and/or THE CITY GOVERNMENT OF CALOOCAN,respondents. Alberto N. Hidalgo and Ma.Teresa T. Oledan for petitioner. The City Legal Officer & Chief, Law Department for Mayor Macario A. Asistio, Jr. and the City Government of Caloocan.

A ministerial duty is one which is so clear and specific as to leave no room for the exercise of discretion in its performance. It is a duty which an officer performs in a given state of facts in a prescribed manner in obedience to the mandate of legal authority, without regard to the exercise of his/her own judgment upon the propriety of the act done.[97]

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ROMERO, J.: The clash between the responsibility of the City Government of Caloocan to dispose off the 350 tons of garbage it collects daily and the growing concern and sensitivity to a pollution-free environment of the residents of Barangay Camarin, Tala Estate, Caloocan City where these tons of garbage are dumped everyday is the hub of this controversy elevated by the protagonists to the Laguna Lake Development Authority (LLDA) for adjudication. The instant case stemmed from an earlier petition filed with this Court by Laguna Lake Development Authority (LLDA for short) docketed as G.R. No. 107542 against the City Government of Caloocan, et al. In the Resolution of November 10, 1992, this Court referred G.R. No. 107542 to the Court of Appeals for appropriate disposition. Docketed therein as CA-G.R. SP No. 29449, the Court of Appeals, in a decision 1 promulgated on January 29, 1993 ruled that the LLDA has no power and authority to issue a cease and desist order enjoining the dumping of garbage in Barangay Camarin, Tala Estate, Caloocan City. The LLDA now seeks, in this petition, a review of the decision of the Court of Appeals. The facts, as disclosed in the records, are undisputed. On March 8, 1991, the Task Force Camarin Dumpsite of Our Lady of Lourdes Parish, Barangay Camarin, Caloocan City, filed a letter-complaint 2 with the Laguna Lake Development Authority seeking to stop the operation of the 8.6-hectare open garbage dumpsite in Tala Estate, Barangay Camarin, Caloocan City due to its harmful effects on the health of the residents and the possibility of pollution of the water content of the surrounding area. On November 15, 1991, the LLDA conducted an on-site investigation, monitoring and test sampling of the leachate 3 that seeps from said dumpsite to the nearby creek which is a tributary of the Marilao River. The LLDA Legal and Technical personnel found that the City Government of Caloocan was maintaining an open dumpsite at the Camarin area without first securing an Environmental Compliance Certificate (ECC) from the Environmental Management Bureau (EMB) of the Department of Environment and Natural Resources, as required under Presidential Decree No. 1586, 4 and clearance from LLDA as required under Republic Act No. 4850, 5 as amended by Presidential Decree No. 813 and Executive Order No. 927, series of 1983. 6 After a public hearing conducted on December 4, 1991, the LLDA, acting on the complaint of Task Force Camarin Dumpsite, found that the water collected from the leachate and the receiving streams could considerably affect the quality, in turn, of the receiving waters since it indicates the presence of bacteria, other than coliform, which may have contaminated the sample during collection or handling. 7 On December 5, 1991, the LLDA issued a Cease and Desist Order 8 ordering the City Government of Caloocan, Metropolitan Manila Authority, their contractors, and other entities, to completely halt, stop and desist from dumping any form or kind of garbage and other waste matter at the Camarin dumpsite. The dumping operation was forthwith stopped by the City Government of Caloocan. However, sometime in August 1992 the dumping operation was resumed after a meeting held in July 1992 among the City Government of Caloocan, the representatives of Task Force Camarin Dumpsite and LLDA at the Office of Environmental Management Bureau Director Rodrigo U. Fuentes failed to settle the problem. After an investigation by its team of legal and technical personnel on August 14, 1992, the LLDA issued another order reiterating the December 5, 1991, order and issued an Alias Cease and Desist Order enjoining the City Government of Caloocan from continuing its dumping operations at the Camarin area. On September 25, 1992, the LLDA, with the assistance of the Philippine National Police, enforced its Alias Cease and Desist Order by prohibiting the entry of all garbage dump trucks into the Tala Estate, Camarin area being utilized as a dumpsite. Pending resolution of its motion for reconsideration earlier filed on September 17, 1992 with the LLDA, the City Government of Caloocan filed with the Regional Trial Court of Caloocan City an action for the declaration of nullity of the cease and desist order with prayer for the issuance of writ of injunction, docketed as Civil Case No. C-15598. In its complaint, the City Government of Caloocan sought to be

declared as the sole authority empowered to promote the health and safety and enhance the right of the people in Caloocan City to a balanced ecology within its territorial jurisdiction. 9 On September 25, 1992, the Executive Judge of the Regional Trial Court of Caloocan City issued a temporary restraining order enjoining the LLDA from enforcing its cease and desist order. Subsequently, the case was raffled to the Regional Trial Court, Branch 126 of Caloocan which, at the time, was presided over by Judge Manuel Jn. Serapio of the Regional Trial Court, Branch 127, the pairing judge of the recently-retired presiding judge. The LLDA, for its part, filed on October 2, 1992 a motion to dismiss on the ground, among others, that under Republic Act No. 3931, as amended by Presidential Decree No. 984, otherwise known as the Pollution Control Law, the cease and desist order issued by it which is the subject matter of the complaint is reviewable both upon the law and the facts of the case by the Court of Appeals and not by the Regional Trial Court. 10 On October 12, 1992 Judge Manuel Jn. Serapio issued an order consolidating Civil Case No. C-15598 with Civil Case No. C-15580, an earlier case filed by the Task Force Camarin Dumpsite entitled "Fr. John Moran, et al. vs. Hon. Macario Asistio." The LLDA, however, maintained during the trial that the foregoing cases, being independent of each other, should have been treated separately. On October 16, 1992, Judge Manuel Jn. Serapio, after hearing the motion to dismiss, issued in the consolidated cases an order 11 denying LLDA's motion to dismiss and granting the issuance of a writ of preliminary injunction enjoining the LLDA, its agent and all persons acting for and on its behalf, from enforcing or implementing its cease and desist order which prevents plaintiff City of Caloocan from dumping garbage at the Camarin dumpsite during the pendency of this case and/or until further orders of the court. On November 5, 1992, the LLDA filed a petition for certiorari, prohibition and injunction with prayer for restraining order with the Supreme Court, docketed as G.R. No. 107542, seeking to nullify the aforesaid order dated October 16, 1992 issued by the Regional Trial Court, Branch 127 of Caloocan City denying its motion to dismiss. The Court, acting on the petition, issued a Resolution 12 on November 10, 1992 referring the case to the Court of Appeals for proper disposition and at the same time, without giving due course to the petition, required the respondents to comment on the petition and file the same with the Court of Appeals within ten (10) days from notice. In the meantime, the Court issued a temporary restraining order, effective immediately and continuing until further orders from it, ordering the respondents: (1) Judge Manuel Jn. Serapio, Presiding Judge, Regional Trial Court, Branch 127, Caloocan City to cease and desist from exercising jurisdiction over the case for declaration of nullity of the cease and desist order issued by the Laguna Lake Development Authority (LLDA); and (2) City Mayor of Caloocan and/or the City Government of Caloocan to cease and desist from dumping its garbage at the Tala Estate, Barangay Camarin, Caloocan City. Respondents City Government of Caloocan and Mayor Macario A. Asistio, Jr. filed on November 12, 1992 a motion for reconsideration and/or to quash/recall the temporary restraining order and an urgent motion for reconsideration alleging that ". . . in view of the calamitous situation that would arise if the respondent city government fails to collect 350 tons of garbage daily for lack of dumpsite (i)t is therefore, imperative that the issue be resolved with dispatch or with sufficient leeway to allow the respondents to find alternative solutions to this garbage problem." On November 17, 1992, the Court issued a Resolution 13 directing the Court of Appeals to immediately set the case for hearing for the purpose of determining whether or not the temporary restraining order issued by the Court should be lifted and what conditions, if any, may be required if it is to be so lifted or whether the restraining order should be maintained or converted into a preliminary injunction. The Court of Appeals set the case for hearing on November 27, 1992, at 10:00 in the morning at the Hearing Room, 3rd Floor, New Building, Court of Appeals. 14 After the oral argument, a conference was set on December 8, 1992 at 10:00 o'clock in the morning where the Mayor of Caloocan City, the General Manager of LLDA, the Secretary of DENR or his duly authorized representative and the Secretary of DILG or his duly authorized representative were required to appear.

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It was agreed at the conference that the LLDA had until December 15, 1992 to finish its study and review of respondent's technical plan with respect to the dumping of its garbage and in the event of a rejection of respondent's technical plan or a failure of settlement, the parties will submit within 10 days from notice their respective memoranda on the merits of the case, after which the petition shall be deemed submitted for resolution.15 Notwithstanding such efforts, the parties failed to settle the dispute. On April 30, 1993, the Court of Appeals promulgated its decision holding that: (1) the Regional Trial Court has no jurisdiction on appeal to try, hear and decide the action for annulment of LLDA's cease and desist order, including the issuance of a temporary restraining order and preliminary injunction in relation thereto, since appeal therefrom is within the exclusive and appellate jurisdiction of the Court of Appeals under Section 9, par. (3), of Batas Pambansa Blg. 129; and (2) the Laguna Lake Development Authority has no power and authority to issue a cease and desist order under its enabling law, Republic Act No. 4850, as amended by P.D. No. 813 and Executive Order No. 927, series of 1983. The Court of Appeals thus dismissed Civil Case No. 15598 and the preliminary injunction issued in the said case was set aside; the cease and desist order of LLDA was likewise set aside and the temporary restraining order enjoining the City Mayor of Caloocan and/or the City Government of Caloocan to cease and desist from dumping its garbage at the Tala Estate, Barangay Camarin, Caloocan City was lifted, subject, however, to the condition that any future dumping of garbage in said area, shall be in conformity with the procedure and protective works contained in the proposal attached to the records of this case and found on pages 152-160 of the Rollo, which was thereby adopted by reference and made an integral part of the decision, until the corresponding restraining and/or injunctive relief is granted by the proper Court upon LLDA's institution of the necessary legal proceedings. Hence, the Laguna Lake Development Authority filed the instant petition for review on certiorari, now docketed as G.R. No. 110120, with prayer that the temporary restraining order lifted by the Court of Appeals be re-issued until after final determination by this Court of the issue on the proper interpretation of the powers and authority of the LLDA under its enabling law. On July, 19, 1993, the Court issued a temporary restraining order 16 enjoining the City Mayor of Caloocan and/or the City Government of Caloocan to cease and desist from dumping its garbage at the Tala Estate, Barangay Camarin, Caloocan City, effective as of this date and containing until otherwise ordered by the Court. It is significant to note that while both parties in this case agree on the need to protect the environment and to maintain the ecological balance of the surrounding areas of the Camarin open dumpsite, the question as to which agency can lawfully exercise jurisdiction over the matter remains highly open to question. The City Government of Caloocan claims that it is within its power, as a local government unit, pursuant to the general welfare provision of the Local Government Code, 17 to determine the effects of the operation of the dumpsite on the ecological balance and to see that such balance is maintained. On the basis of said contention, it questioned, from the inception of the dispute before the Regional Trial Court of Caloocan City, the power and authority of the LLDA to issue a cease and desist order enjoining the dumping of garbage in the Barangay Camarin over which the City Government of Caloocan has territorial jurisdiction. The Court of Appeals sustained the position of the City of Caloocan on the theory that Section 7 of Presidential Decree No. 984, otherwise known as the Pollution Control law, authorizing the defunct National Pollution Control Commission to issue an ex-parte cease and desist order was not incorporated in Presidential Decree No. 813 nor in Executive Order No. 927, series of 1983. The Court of Appeals ruled that under Section 4, par. (d), of Republic Act No. 4850, as amended, the LLDA is instead required "to institute the necessary legal proceeding against any person who shall commence to implement or continue implementation of any project, plan or program within the Laguna de Bay region without previous clearance from the Authority." The LLDA now assails, in this partition for review, the abovementioned ruling of the Court of Appeals, contending that, as an administrative agency which was granted regulatory and adjudicatory powers and functions by Republic Act No. 4850 and its amendatory laws, Presidential Decree No. 813 and Executive Order No. 927, series of 1983, it is invested with the power and authority to issue a cease and desist order

pursuant to Section 4 par. (c), (d), (e), (f) and (g) of Executive Order No. 927 series of 1983 which provides, thus: Sec. 4.Additional Powers and Functions. The authority shall have the following powers and functions: xxx xxx xxx (c) Issue orders or decisions to compel compliance with the provisions of this Executive Order and its implementing rules and regulations only after proper notice and hearing. (d) Make, alter or modify orders requiring the discontinuance of pollution specifying the conditions and the time within which such discontinuance must be accomplished. (e) Issue, renew, or deny permits, under such conditions as it may determine to be reasonable, for the prevention and abatement of pollution, for the discharge of sewage, industrial waste, or for the installation or operation of sewage works and industrial disposal system or parts thereof. (f) After due notice and hearing, the Authority may also revoke, suspend or modify any permit issued under this Order whenever the same is necessary to prevent or abate pollution. (g) Deputize in writing or request assistance of appropriate government agencies or instrumentalities for the purpose of enforcing this Executive Order and its implementing rules and regulations and the orders and decisions of the Authority. The LLDA claims that the appellate court deliberately suppressed and totally disregarded the above provisions of Executive Order No. 927, series of 1983, which granted administrative quasi-judicial functions to LLDA on pollution abatement cases. In light of the relevant environmental protection laws cited which are applicable in this case, and the corresponding overlapping jurisdiction of government agencies implementing these laws, the resolution of the issue of whether or not the LLDA has the authority and power to issue an order which, in its nature and effect was injunctive, necessarily requires a determination of the threshold question: Does the Laguna Lake Development Authority, under its Charter and its amendatory laws, have the authority to entertain the complaint against the dumping of garbage in the open dumpsite in Barangay Camarin authorized by the City Government of Caloocan which is allegedly endangering the health, safety, and welfare of the residents therein and the sanitation and quality of the water in the area brought about by exposure to pollution caused by such open garbage dumpsite? The matter of determining whether there is such pollution of the environment that requires control, if not prohibition, of the operation of a business establishment is essentially addressed to the Environmental Management Bureau (EMB) of the DENR which, by virtue of Section 16 of Executive Order No. 192, series of 1987, 18 has assumed the powers and functions of the defunct National Pollution Control Commission created under Republic Act No. 3931. Under said Executive Order, a Pollution Adjudication Board (PAB) under the Office of the DENR Secretary now assumes the powers and functions of the National Pollution Control Commission with respect to adjudication of pollution cases. 19 As a general rule, the adjudication of pollution cases generally pertains to the Pollution Adjudication Board (PAB), except in cases where the special law provides for another forum. It must be recognized in this regard that the LLDA, as a specialized administrative agency, is specifically mandated under Republic Act No. 4850 and its amendatory laws to carry out and make effective the declared national policy 20 of promoting and accelerating the development and balanced growth of the Laguna Lake area and the surrounding provinces of Rizal and Laguna and the cities of San Pablo, Manila, Pasay, Quezon and Caloocan 21 with due regard and adequate provisions for environmental management and control, preservation of the quality of human life and ecological systems, and the prevention of undue ecological disturbances, deterioration and pollution. Under such a broad grant and power and authority, the LLDA, by virtue of its special charter, obviously has the responsibility to protect the inhabitants of the Laguna Lake region from the deleterious effects of pollutants emanating from the discharge of wastes from the surrounding areas. In carrying out the aforementioned declared policy, the LLDA is mandated, among others, to pass upon and approve or disapprove all plans, programs, and projects proposed by local government offices/agencies within the region, public corporations, and private persons or enterprises where such plans, programs and/or projects are related to those of the LLDA for the development of the region. 22

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In the instant case, when the complainant Task Force Camarin Dumpsite of Our Lady of Lourdes Parish, Barangay Camarin, Caloocan City, filed its letter-complaint before the LLDA, the latter's jurisdiction under its charter was validly invoked by complainant on the basis of its allegation that the open dumpsite project of the City Government of Caloocan in Barangay Camarin was undertaken without a clearance from the LLDA, as required under Section 4, par. (d), of Republic Act. No. 4850, as amended by P.D. No. 813 and Executive Order No. 927. While there is also an allegation that the said project was without an Environmental Compliance Certificate from the Environmental Management Bureau (EMB) of the DENR, the primary jurisdiction of the LLDA over this case was recognized by the Environmental Management Bureau of the DENR when the latter acted as intermediary at the meeting among the representatives of the City Government of Caloocan, Task Force Camarin Dumpsite and LLDA sometime in July 1992 to discuss the possibility of re-opening the open dumpsite. Having thus resolved the threshold question, the inquiry then narrows down to the following issue: Does the LLDA have the power and authority to issue a "cease and desist" order under Republic Act No. 4850 and its amendatory laws, on the basis of the facts presented in this case, enjoining the dumping of garbage in Tala Estate, Barangay Camarin, Caloocan City. The irresistible answer is in the affirmative. The cease and desist order issued by the LLDA requiring the City Government of Caloocan to stop dumping its garbage in the Camarin open dumpsite found by the LLDA to have been done in violation of Republic Act No. 4850, as amended, and other relevant environment laws, 23 cannot be stamped as an unauthorized exercise by the LLDA of injunctive powers. By its express terms, Republic Act No. 4850, as amended by P.D. No. 813 and Executive Order No. 927, series of 1983, authorizes the LLDA to " make, alter or modify order requiring the discontinuance or pollution." 24(Emphasis supplied) Section 4, par. (d) explicitly authorizes the LLDA to make whatever order may be necessary in the exercise of its jurisdiction. To be sure, the LLDA was not expressly conferred the power "to issue and ex-parte cease and desist order" in a language, as suggested by the City Government of Caloocan, similar to the express grant to the defunct National Pollution Control Commission under Section 7 of P.D. No. 984 which, admittedly was not reproduced in P.D. No. 813 and E.O. No. 927, series of 1983. However, it would be a mistake to draw therefrom the conclusion that there is a denial of the power to issue the order in question when the power "to make, alter or modify orders requiring the discontinuance of pollution" is expressly and clearly bestowed upon the LLDA by Executive Order No. 927, series of 1983. Assuming arguendo that the authority to issue a "cease and desist order" were not expressly conferred by law, there is jurisprudence enough to the effect that the rule granting such authority need not necessarily be express.25 While it is a fundamental rule that an administrative agency has only such powers as are expressly granted to it by law, it is likewise a settled rule that an administrative agency has also such powers as are necessarily implied in the exercise of its express powers. 26 In the exercise, therefore, of its express powers under its charter as a regulatory and quasi-judicial body with respect to pollution cases in the Laguna Lake region, the authority of the LLDA to issue a "cease and desist order" is, perforce, implied. Otherwise, it may well be reduced to a "toothless" paper agency. In this connection, it must be noted that in Pollution Adjudication Board v. Court of Appeals, et al., 27 the Court ruled that the Pollution Adjudication Board (PAB) has the power to issue an ex-parte cease and desist order when there is prima facie evidence of an establishment exceeding the allowable standards set by the anti-pollution laws of the country. Theponente, Associate Justice Florentino P. Feliciano, declared: Ex parte cease and desist orders are permitted by law and regulations in situations like that here presented precisely because stopping the continuous discharge of pollutive and untreated effluents into the rivers and other inland waters of the Philippines cannot be made to wait until protracted litigation over the ultimate correctness or propriety of such orders has run its full course, including multiple and sequential appeals such as those which Solar has taken, which of course may take several years. The relevant pollution control statute and implementing regulations were enacted and promulgated in the exercise of that pervasive, sovereign power to protect the safety, health, and general welfare and comfort of the public, as well as the protection of plant and animal life, commonly designated as the police power. It is a constitutional commonplace that the ordinary requirements of procedural due process yield to the

necessities of protecting vital public interests like those here involved, through the exercise of police power. . . . The immediate response to the demands of "the necessities of protecting vital public interests" gives vitality to the statement on ecology embodied in the Declaration of Principles and State Policies or the 1987 Constitution. Article II, Section 16 which provides: The State shall protect and advance the right of the people to a balanced and healthful ecology in accord with the rhythm and harmony of nature. As a constitutionally guaranteed right of every person, it carries the correlative duty of non-impairment. This is but in consonance with the declared policy of the state "to protect and promote the right to health of the people and instill health consciousness among them." 28 It is to be borne in mind that the Philippines is party to the Universal Declaration of Human Rights and the Alma Conference Declaration of 1978 which recognize health as a fundamental human right. 29 The issuance, therefore, of the cease and desist order by the LLDA, as a practical matter of procedure under the circumstances of the case, is a proper exercise of its power and authority under its charter and its amendatory laws. Had the cease and desist order issued by the LLDA been complied with by the City Government of Caloocan as it did in the first instance, no further legal steps would have been necessary. The charter of LLDA, Republic Act No. 4850, as amended, instead of conferring upon the LLDA the means of directly enforcing such orders, has provided under its Section 4 (d) the power to institute "necessary legal proceeding against any person who shall commence to implement or continue implementation of any project, plan or program within the Laguna de Bay region without previous clearance from the LLDA." Clearly, said provision was designed to invest the LLDA with sufficiently broad powers in the regulation of all projects initiated in the Laguna Lake region, whether by the government or the private sector, insofar as the implementation of these projects is concerned. It was meant to deal with cases which might possibly arise where decisions or orders issued pursuant to the exercise of such broad powers may not be obeyed, resulting in the thwarting of its laudabe objective. To meet such contingencies, then the writs of mandamus and injunction which are beyond the power of the LLDA to issue, may be sought from the proper courts. Insofar as the implementation of relevant anti-pollution laws in the Laguna Lake region and its surrounding provinces, cities and towns are concerned, the Court will not dwell further on the related issues raised which are more appropriately addressed to an administrative agency with the special knowledge and expertise of the LLDA. WHEREFORE, the petition is GRANTED. The temporary restraining order issued by the Court on July 19, 1993 enjoining the City Mayor of Caloocan and/or the City Government of Caloocan from dumping their garbage at the Tala Estate, Barangay Camarin, Caloocan City is hereby made permanent. SO ORDERED. Feliciano, Bidin, Melo and Vitug, JJ., concur. epublic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 73140 May 29, 1987 RIZAL EMPIRE INSURANCE GROUP AND/OR SERGIO CORPUS, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION, TEODORICO L. RUIZ, as Labor Arbiter and ROGELIO R. CORIA, respondents. Ambrosio Padilla, Mempin & Reyes Law Offices for petitioners. Guillermo H. Pulia for private respondent.

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PARAS, J.: This is a petition for review on certiorari of the March 14, 1985 Decision of Labor Arbiter Teodorico L. Ruiz which held that herein private respondent Rogelio R. Coria was illegally dismissed; and of the Resolution of the National Labor Relations Commission which dismissed petitioner's appeal on the ground that the same was filed out of time. In August, 1977, herein private respondent Rogelio R. Coria was hired by herein petitioner Rizal Empire Insurance Group as a casual employee with a salary of P10.00 a day. On January 1, 1978, he was made a regular employee, having been appointed as clerk-typist, with a monthly salary of P300.00. Being a permanent employee, he was furnished a copy of petitioner company's "General Information, Office Behavior and Other Rules and Regulations." In the same year, without change in his position-designation, he was transferred to the Claims Department and his salary was increased to P450,00 a month. In 1980, he was transferred to the Underwriting Department and his salary was increased to P580.00 a month plus cost of living allowance, until he was transferred to the Fire Department as filing clerk. In July, 1983, he was made an inspector of the Fire Division with a monthly salary of P685.00 plus allowances and other benefits. On October 15, 1983, private respondent Rogelio R. Coria was dismissed from work, allegedly, on the grounds of tardiness and unexcused absences. Accordingly, he filed a complaint with the Ministry of Labor and Employment (MOLE), and in a Decision dated March 14, 1985 (Record, pp. 80-87), Labor Arbiter Teodorico L. Ruiz reinstated him to his position with back wages. Petitioner filed an appeal with the National labor Relations Commission (NLRC) but, in a Resolution dated November 15, 1985 (Ibid, pp. 31-32), the appeal was dismissed on the ground that the same had been filed out of time. Hence, the instant petition (Ibid, pp. 2-22). In compliance with the resolution of the Second Division of this Court dated April 30, 1986 (Ibid., p. 94), private respondent filed his Comment on May 23, 1986 (Ibid., pp. 97-101) and public respondent on July 2, 1986 (Ibid.,pp. 120-124). On June 6, 1986, petitioners filed their Reply to private respondent's Comment (Ibid, pp. 102-105) and on July 25, 1986, their Reply to public respondent's Comment (Ibid., pp. 126-131). In a Resolution dated August 18, 1986, the Second Division of this Court resolved to give due course to the petition and to require the parties to submit their respective memoranda (Ibid., P. 132). In compliance with the above mentioned Resolution, petitioners filed the,.r memorandum on November 10, 1986; while private respondent filed his Memorandum on October 17, 1986 (Ibid, pp. 139-144), and public respondent on November 16, 1986 (Ibid., pp. 160-166). Before going however, into the merits of the case, an important point to consider is whether or not it is still within the jurisdiction of this Court to review. Rule VIII of the Revised Rules of the National Labor Relations Commission on appeal, provides: SECTION 1. (a) Appeal. Decision or orders of a labor Arbiter shall be final and executory unless appealed to the Commission by any or both of the parties within ten (10) calendar days from receipt of notice thereof. xxx xxx xxx SECTION 6.No extension of period. No motion or request for extension of the period within which to perfect an appeal shall be entertained. The record shows that the employer (petitioner herein) received a copy of the decision of the Labor Arbiter on April 1, 1985. It filed a Motion for Extension of Time to File Memorandum of Appeal on April 11, 1985 and filed the Memorandum of Appeal on April 22, 1985. Pursuant to the "no extension policy" of the National Labor Relations Commission, aforesaid motion for extension of time was denied in its resolution dated November 15, 1985 and the appeal was dismissed for having been filed out of time (Rollo, pp. 31-32).

Petitioners claim, among other things, that respondent Commission committed a grave abuse of discretion amounting to lack of jurisdiction in arbitrarily dismissing petitioners' appeal on a technicality (Rollo, p. 9). It invokes the Rules of Court provision on liberal construction of the Rules in the interest of substantial justice. It will be noted however, that the foregoing provision refers to the Rules of Court. On the other hand, the Revised Rules of the National Labor Relations Commission are clear and explicit and leave no room for interpretation. Moreover, it is an elementary rule in administrative law that administrative regulations and policies enacted by administrative bodies to interpret the law which they are entrusted to enforce, have the force of law, and are entitled to great respect (Espanol v. Philippine Veterans Administration, 137 SCRA 314 [1985]). Under the above-quoted provisions of the Revised NLRC Rules, the decision appealed from in this case has become final and executory and can no longer be subject to appeal. Even on the merits, the ruling of the Labor Arbiter appears to be correct; the consistent promotions in rank and salary of the private respondent indicate he must have been a highly efficient worker, who should be retained despite occasional lapses in punctuality and attendance. Perfection cannot after all be demanded. WHEREFORE, this petition is DISMISSED. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-75697 June 18, 1987 VALENTIN TIO doing business under the name and style of OMI ENTERPRISES, petitioner, vs. VIDEOGRAM REGULATORY BOARD, MINISTER OF FINANCE, METRO MANILA COMMISSION, CITY MAYOR and CITY TREASURER OF MANILA, respondents. Nelson Y. Ng for petitioner. The City Legal Officer for respondents City Mayor and City Treasurer.

MELENCIO-HERRERA, J.: This petition was filed on September 1, 1986 by petitioner on his own behalf and purportedly on behalf of other videogram operators adversely affected. It assails the constitutionality of Presidential Decree No. 1987 entitled "An Act Creating the Videogram Regulatory Board" with broad powers to regulate and supervise the videogram industry (hereinafter briefly referred to as the BOARD). The Decree was promulgated on October 5, 1985 and took effect on April 10, 1986, fifteen (15) days after completion of its publication in the Official Gazette. On November 5, 1985, a month after the promulgation of the abovementioned decree, Presidential Decree No. 1994 amended the National Internal Revenue Code providing, inter alia: SEC. 134. Video Tapes. There shall be collected on each processed video-tape cassette, ready for playback, regardless of length, an annual tax of five pesos; Provided, That locally manufactured or imported blank video tapes shall be subject to sales tax. On October 23, 1986, the Greater Manila Theaters Association, Integrated Movie Producers, Importers and Distributors Association of the Philippines, and Philippine Motion Pictures Producers Association, hereinafter collectively referred to as the Intervenors, were permitted by the Court to intervene in the case, over petitioner's opposition, upon the allegations that intervention was necessary for the complete protection of their rights and that their "survival and very existence is threatened by the unregulated

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proliferation of film piracy." The Intervenors were thereafter allowed to file their Comment in Intervention. The rationale behind the enactment of the DECREE, is set out in its preambular clauses as follows: 1. WHEREAS, the proliferation and unregulated circulation of videograms including, among others, videotapes, discs, cassettes or any technical improvement or variation thereof, have greatly prejudiced the operations of moviehouses and theaters, and have caused a sharp decline in theatrical attendance by at least forty percent (40%) and a tremendous drop in the collection of sales, contractor's specific, amusement and other taxes, thereby resulting in substantial losses estimated at P450 Million annually in government revenues; 2. WHEREAS, videogram(s) establishments collectively earn around P600 Million per annum from rentals, sales and disposition of videograms, and such earnings have not been subjected to tax, thereby depriving the Government of approximately P180 Million in taxes each year; 3. WHEREAS, the unregulated activities of videogram establishments have also affected the viability of the movie industry, particularly the more than 1,200 movie houses and theaters throughout the country, and occasioned industry-wide displacement and unemployment due to the shutdown of numerous moviehouses and theaters; 4. "WHEREAS, in order to ensure national economic recovery, it is imperative for the Government to create an environment conducive to growth and development of all business industries, including the movie industry which has an accumulated investment of about P3 Billion; 5. WHEREAS, proper taxation of the activities of videogram establishments will not only alleviate the dire financial condition of the movie industry upon which more than 75,000 families and 500,000 workers depend for their livelihood, but also provide an additional source of revenue for the Government, and at the same time rationalize the heretofore uncontrolled distribution of videograms; 6. WHEREAS, the rampant and unregulated showing of obscene videogram features constitutes a clear and present danger to the moral and spiritual well-being of the youth, and impairs the mandate of the Constitution for the State to support the rearing of the youth for civic efficiency and the development of moral character and promote their physical, intellectual, and social well-being; 7. WHEREAS, civic-minded citizens and groups have called for remedial measures to curb these blatant malpractices which have flaunted our censorship and copyright laws; 8. WHEREAS, in the face of these grave emergencies corroding the moral values of the people and betraying the national economic recovery program, bold emergency measures must be adopted with dispatch; ... (Numbering of paragraphs supplied). Petitioner's attack on the constitutionality of the DECREE rests on the following grounds: 1. Section 10 thereof, which imposes a tax of 30% on the gross receipts payable to the local government is a RIDER and the same is not germane to the subject matter thereof; 2. The tax imposed is harsh, confiscatory, oppressive and/or in unlawful restraint of trade in violation of the due process clause of the Constitution; 3. There is no factual nor legal basis for the exercise by the President of the vast powers conferred upon him by Amendment No. 6; 4. There is undue delegation of power and authority; 5. The Decree is an ex-post facto law; and 6. There is over regulation of the video industry as if it were a nuisance, which it is not. We shall consider the foregoing objections in seriatim. 1. The Constitutional requirement that "every bill shall embrace only one subject which shall be expressed in the title thereof" 1 is sufficiently complied with if the title be comprehensive enough to include the general purpose which a statute seeks to achieve. It is not necessary that the title express each and every

end that the statute wishes to accomplish. The requirement is satisfied if all the parts of the statute are related, and are germane to the subject matter expressed in the title, or as long as they are not inconsistent with or foreign to the general subject and title. 2 An act having a single general subject, indicated in the title, may contain any number of provisions, no matter how diverse they may be, so long as they are not inconsistent with or foreign to the general subject, and may be considered in furtherance of such subject by providing for the method and means of carrying out the general object." 3 The rule also is that the constitutional requirement as to the title of a bill should not be so narrowly construed as to cripple or impede the power of legislation. 4 It should be given practical rather than technical construction. 5 Tested by the foregoing criteria, petitioner's contention that the tax provision of the DECREE is a rider is without merit. That section reads, inter alia: Section 10. Tax on Sale, Lease or Disposition of Videograms. Notwithstanding any provision of law to the contrary, the province shall collect a tax of thirty percent (30%) of the purchase price or rental rate, as the case may be, for every sale, lease or disposition of a videogram containing a reproduction of any motion picture or audiovisual program. Fifty percent (50%) of the proceeds of the tax collected shall accrue to the province, and the other fifty percent (50%) shall acrrue to the municipality where the tax is collected; PROVIDED, That in Metropolitan Manila, the tax shall be shared equally by the City/Municipality and the Metropolitan Manila Commission. xxx xxx xxx The foregoing provision is allied and germane to, and is reasonably necessary for the accomplishment of, the general object of the DECREE, which is the regulation of the video industry through the Videogram Regulatory Board as expressed in its title. The tax provision is not inconsistent with, nor foreign to that general subject and title. As a tool for regulation 6 it is simply one of the regulatory and control mechanisms scattered throughout the DECREE. The express purpose of the DECREE to include taxation of the video industry in order to regulate and rationalize the heretofore uncontrolled distribution of videograms is evident from Preambles 2 and 5, supra. Those preambles explain the motives of the lawmaker in presenting the measure. The title of the DECREE, which is the creation of the Videogram Regulatory Board, is comprehensive enough to include the purposes expressed in its Preamble and reasonably covers all its provisions. It is unnecessary to express all those objectives in the title or that the latter be an index to the body of the DECREE. 7 2. Petitioner also submits that the thirty percent (30%) tax imposed is harsh and oppressive, confiscatory, and in restraint of trade. However, it is beyond serious question that a tax does not cease to be valid merely because it regulates, discourages, or even definitely deters the activities taxed. 8 The power to impose taxes is one so unlimited in force and so searching in extent, that the courts scarcely venture to declare that it is subject to any restrictions whatever, except such as rest in the discretion of the authority which exercises it. 9 In imposing a tax, the legislature acts upon its constituents. This is, in general, a sufficient security against erroneous and oppressive taxation. 10 The tax imposed by the DECREE is not only a regulatory but also a revenue measure prompted by the realization that earnings of videogram establishments of around P600 million per annum have not been subjected to tax, thereby depriving the Government of an additional source of revenue. It is an end-user tax, imposed on retailers for every videogram they make available for public viewing. It is similar to the 30% amusement tax imposed or borne by the movie industry which the theater-owners pay to the government, but which is passed on to the entire cost of the admission ticket, thus shifting the tax burden on the buying or the viewing public. It is a tax that is imposed uniformly on all videogram operators. The levy of the 30% tax is for a public purpose. It was imposed primarily to answer the need for regulating the video industry, particularly because of the rampant film piracy, the flagrant violation of intellectual property rights, and the proliferation of pornographic video tapes. And while it was also an objective of the DECREE to protect the movie industry, the tax remains a valid imposition. The public purpose of a tax may legally exist even if the motive which impelled the legislature to impose the tax was to favor one industry over another. 11 It is inherent in the power to tax that a state be free to select the subjects of taxation, and it has been repeatedly held that "inequities which result from a singling out of one particular class for taxation or

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exemption infringe no constitutional limitation". 12 Taxation has been made the implement of the state's police power.13 At bottom, the rate of tax is a matter better addressed to the taxing legislature. 3. Petitioner argues that there was no legal nor factual basis for the promulgation of the DECREE by the former President under Amendment No. 6 of the 1973 Constitution providing that "whenever in the judgment of the President ... , there exists a grave emergency or a threat or imminence thereof, or whenever the interim Batasang Pambansa or the regular National Assembly fails or is unable to act adequately on any matter for any reason that in his judgment requires immediate action, he may, in order to meet the exigency, issue the necessary decrees, orders, or letters of instructions, which shall form part of the law of the land." In refutation, the Intervenors and the Solicitor General's Office aver that the 8th "whereas" clause sufficiently summarizes the justification in that grave emergencies corroding the moral values of the people and betraying the national economic recovery program necessitated bold emergency measures to be adopted with dispatch. Whatever the reasons "in the judgment" of the then President, considering that the issue of the validity of the exercise of legislative power under the said Amendment still pends resolution in several other cases, we reserve resolution of the question raised at the proper time. 4. Neither can it be successfully argued that the DECREE contains an undue delegation of legislative power. The grant in Section 11 of the DECREE of authority to the BOARD to "solicit the direct assistance of other agencies and units of the government and deputize, for a fixed and limited period, the heads or personnel of such agencies and units to perform enforcement functions for the Board" is not a delegation of the power to legislate but merely a conferment of authority or discretion as to its execution, enforcement, and implementation. "The true distinction is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring authority or discretion as to its execution to be exercised under and in pursuance of the law. The first cannot be done; to the latter, no valid objection can be made." 14 Besides, in the very language of the decree, the authority of the BOARD to solicit such assistance is for a "fixed and limited period" with the deputized agencies concerned being "subject to the direction and control of the BOARD." That the grant of such authority might be the source of graft and corruption would not stigmatize the DECREE as unconstitutional. Should the eventuality occur, the aggrieved parties will not be without adequate remedy in law. 5. The DECREE is not violative of the ex post facto principle. An ex post facto law is, among other categories, one which "alters the legal rules of evidence, and authorizes conviction upon less or different testimony than the law required at the time of the commission of the offense." It is petitioner's position that Section 15 of the DECREE in providing that: All videogram establishments in the Philippines are hereby given a period of forty-five (45) days after the effectivity of this Decree within which to register with and secure a permit from the BOARD to engage in the videogram business and to register with the BOARD all their inventories of videograms, including videotapes, discs, cassettes or other technical improvements or variations thereof, before they could be sold, leased, or otherwise disposed of. Thereafter any videogram found in the possession of any person engaged in the videogram business without the required proof of registration by the BOARD, shall be prima facie evidence of violation of the Decree, whether the possession of such videogram be for private showing and/or public exhibition. raises immediately a prima facie evidence of violation of the DECREE when the required proof of registration of any videogram cannot be presented and thus partakes of the nature of an ex post facto law. The argument is untenable. As this Court held in the recent case of Vallarta vs. Court of Appeals, et al. 15 ... it is now well settled that "there is no constitutional objection to the passage of a law providing that the presumption of innocence may be overcome by a contrary presumption founded upon the experience of human conduct, and enacting what evidence shall be sufficient to overcome such presumption of innocence" (People vs. Mingoa 92 Phil. 856 [1953] at 858-59, citing 1 COOLEY, A TREATISE ON THE CONSTITUTIONAL LIMITATIONS, 639-641). And the "legislature may enact that when certain facts have been proved that they shall be prima facie evidence of the existence of the guilt of the accused and shift the burden of proof provided there be a rational connection between the facts proved and the ultimate

facts presumed so that the inference of the one from proof of the others is not unreasonable and arbitrary because of lack of connection between the two in common experience". 16 Applied to the challenged provision, there is no question that there is a rational connection between the fact proved, which is non-registration, and the ultimate fact presumed which is violation of the DECREE, besides the fact that the prima facie presumption of violation of the DECREE attaches only after a fortyfive-day period counted from its effectivity and is, therefore, neither retrospective in character. 6. We do not share petitioner's fears that the video industry is being over-regulated and being eased out of existence as if it were a nuisance. Being a relatively new industry, the need for its regulation was apparent. While the underlying objective of the DECREE is to protect the moribund movie industry, there is no question that public welfare is at bottom of its enactment, considering "the unfair competition posed by rampant film piracy; the erosion of the moral fiber of the viewing public brought about by the availability of unclassified and unreviewed video tapes containing pornographic films and films with brutally violent sequences; and losses in government revenues due to the drop in theatrical attendance, not to mention the fact that the activities of video establishments are virtually untaxed since mere payment of Mayor's permit and municipal license fees are required to engage in business. 17 The enactment of the Decree since April 10, 1986 has not brought about the "demise" of the video industry. On the contrary, video establishments are seen to have proliferated in many places notwithstanding the 30% tax imposed. In the last analysis, what petitioner basically questions is the necessity, wisdom and expediency of the DECREE. These considerations, however, are primarily and exclusively a matter of legislative concern. Only congressional power or competence, not the wisdom of the action taken, may be the basis for declaring a statute invalid. This is as it ought to be. The principle of separation of powers has in the main wisely allocated the respective authority of each department and confined its jurisdiction to such a sphere. There would then be intrusion not allowable under the Constitution if on a matter left to the discretion of a coordinate branch, the judiciary would substitute its own. If there be adherence to the rule of law, as there ought to be, the last offender should be courts of justice, to which rightly litigants submit their controversy precisely to maintain unimpaired the supremacy of legal norms and prescriptions. The attack on the validity of the challenged provision likewise insofar as there may be objections, even if valid and cogent on its wisdom cannot be sustained. 18 In fine, petitioner has not overcome the presumption of validity which attaches to a challenged statute. We find no clear violation of the Constitution which would justify us in pronouncing Presidential Decree No. 1987 as unconstitutional and void. WHEREFORE, the instant Petition is hereby dismissed. Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-32166 October 18, 1977 THE PEOPLE OF THE PHILIPPINES, plaintiff-appellant, vs. HON. MAXIMO A. MACEREN CFI, Sta. Cruz, Laguna, JOSE BUENAVENTURA, GODOFREDO REYES, BENJAMIN REYES, NAZARIO AQUINO and CARLO DEL ROSARIO, accused-appellees. Office of the Solicitor General for appellant. Rustics F. de los Reyes, Jr. for appellees.

AQUINO, J.:t.hqw

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This is a case involving the validity of a 1967 regulation, penalizing electro fishing in fresh water fisheries, promulgated by the Secretary of Agriculture and Natural Resources and the Commissioner of Fisheries under the old Fisheries Law and the law creating the Fisheries Commission. On March 7, 1969 Jose Buenaventura, Godofredo Reyes, Benjamin Reyes, Nazario Aquino and Carlito del Rosario were charged by a Constabulary investigator in the municipal court of Sta. Cruz, Laguna with having violated Fisheries Administrative Order No. 84-1. It was alleged in the complaint that the five accused in the morning of March 1, 1969 resorted to electro fishing in the waters of Barrio San Pablo Norte, Sta. Cruz by "using their own motor banca, equipped with motor; with a generator colored green with attached dynamo colored gray or somewhat white; and electrocuting device locally known as sensored with a somewhat webbed copper wire on the tip or other end of a bamboo pole with electric wire attachment which was attached to the dynamo direct and with the use of these devices or equipments catches fish thru electric current, which destroy any aquatic animals within its cuffed reach, to the detriment and prejudice of the populace" (Criminal Case No. 5429). Upon motion of the accused, the municipal court quashed the complaint. The prosecution appealed. The Court of First Instance of Laguna affirmed the order of dismissal (Civil Case No. SC-36). The case is now before this Court on appeal by the prosecution under Republic Act No. 5440. The lower court held that electro fishing cannot be penalize because electric current is not an obnoxious or poisonous substance as contemplated in section I I of the Fisheries Law and that it is not a substance at all but a form of energy conducted or transmitted by substances. The lower court further held that, since the law does not clearly prohibit electro fishing, the executive and judicial departments cannot consider it unlawful. As legal background, it should be stated that section 11 of the Fisheries Law prohibits "the use of any obnoxious or poisonous substance" in fishing. Section 76 of the same law punishes any person who uses an obnoxious or poisonous substance in fishing with a fine of not more than five hundred pesos nor more than five thousand, and by imprisonment for not less than six months nor more than five years. It is noteworthy that the Fisheries Law does not expressly punish .electro fishing." Notwithstanding the silence of the law, the Secretary of Agriculture and Natural Resources, upon the recommendation of the Commissioner of Fisheries, promulgated Fisheries Administrative Order No. 84 (62 O.G. 1224), prohibiting electro fishing in all Philippine waters. The order is quoted below: +.wph!1 SUBJECT: PROHIBITING ELECTRO FISHING IN ALL WATERS +.wph!1 OF THE PHILIPPINES. Pursuant to Section 4 of Act No. 4003, as amended, and Section 4 of R.A. No. 3512, the following rules and regulations regarding the prohibition of electro fishing in all waters of the Philippines are promulgated for the information and guidance of all concerned.+.wph!1 SECTION 1. Definition. Words and terms used in this Order 11 construed as follows: (a) Philippine waters or territorial waters of the Philippines' includes all waters of the Philippine Archipelago, as defined in the t between the United States and Spain, dated respectively the tenth of December, eighteen hundred ninety eight and the seventh of November, nineteen hundred. For the purpose of this order, rivers, lakes and other bodies of fresh waters are included. (b) Electro Fishing. Electro fishing is the catching of fish with the use of electric current. The equipment used are of many electrical devices which may be battery or generator-operated and from and available source of electric current. (c) 'Persons' includes firm, corporation, association, agent or employee. (d) 'Fish' includes other aquatic products. SEC. 2. Prohibition. It shall be unlawful for any person to engage in electro fishing or to catch fish by the use of electric current in any portion of the Philippine waters except for research, educational and

scientific purposes which must be covered by a permit issued by the Secretary of Agriculture and Natural Resources which shall be carried at all times. SEC. 3. Penalty. Any violation of the provisions of this Administrative Order shall subject the offender to a fine of not exceeding five hundred pesos (P500.00) or imprisonment of not extending six (6) months or both at the discretion of the Court. SEC. 4. Repealing Provisions. All administrative orders or parts thereof inconsistent with the provisions of this Administrative Order are hereby revoked. SEC. 5. Effectivity. This Administrative Order shall take effect six (60) days after its publication in the Office Gazette. On June 28, 1967 the Secretary of Agriculture and Natural Resources, upon the recommendation of the Fisheries Commission, issued Fisheries Administrative Order No. 84-1, amending section 2 of Administrative Order No. 84, by restricting the ban against electro fishing to fresh water fisheries (63 O.G. 9963). Thus, the phrase "in any portion of the Philippine waters" found in section 2, was changed by the amendatory order to read as follows: "in fresh water fisheries in the Philippines, such as rivers, lakes, swamps, dams, irrigation canals and other bodies of fresh water." The Court of First Instance and the prosecution (p. 11 of brief) assumed that electro fishing is punishable under section 83 of the Fisheries Law (not under section 76 thereof), which provides that any other violation of that law "or of any rules and regulations promulgated thereunder shall subject the offender to a fine of not more than two hundred pesos (P200), or in t for not more than six months, or both, in the discretion of the court." That assumption is incorrect because 3 of the aforequoted Administrative Order No. 84 imposes a fm of not exceeding P500 on a person engaged in electro fishing, which amount the 83. It seems that the Department of Fisheries prescribed their own penalty for swift fishing which penalty is less than the severe penalty imposed in section 76 and which is not Identified to the at penalty imposed in section 83. Had Administrative Order No. 84 adopted the fighter penalty prescribed in on 83, then the crime of electro fishing would be within the exclusive original jurisdiction of the inferior court (Sec. 44 [f], Judiciary Law; People vs. Ragasi, L-28663, September 22, We have discussed this pre point, not raised in the briefs, because it is obvious that the crime of electro fishing which is punishable with a sum up to P500, falls within the concurrent original jurisdiction of the inferior courts and the Court of First instance (People vs. Nazareno, L-40037, April 30, 1976, 70 SCRA 531 and the cases cited therein). And since the instant case was filed in the municipal court of Sta. Cruz, Laguna, a provincial capital, the order of d rendered by that municipal court was directly appealable to the Court, not to the Court of First Instance of Laguna (Sec. 45 and last par. of section 87 of the Judiciary Law; Esperat vs. Avila, L-25992, June 30, 1967, 20 SCRA 596). It results that the Court of First Instance of Laguna had no appellate jurisdiction over the case. Its order affirming the municipal court's order of dismissal is void for lack of motion. This appeal shall be treated as a direct appeal from the municipal court to this Court. (See People vs. Del Rosario, 97 Phil. 67). In this appeal, the prosecution argues that Administrative Orders Nos. 84 and 84-1 were not issued under section 11 of the Fisheries Law which, as indicated above, punishes fishing by means of an obnoxious or poisonous substance. This contention is not well-taken because, as already stated, the Penal provision of Administrative Order No. 84 implies that electro fishing is penalized as a form of fishing by means of an obnoxious or poisonous substance under section 11. The prosecution cites as the legal sanctions for the prohibition against electro fishing in fresh water fisheries (1) the rule-making power of the Department Secretary under section 4 of the Fisheries Law; (2) the function of the Commissioner of Fisheries to enforce the provisions of the Fisheries Law and the regulations Promulgated thereunder and to execute the rules and regulations consistent with the purpose for the creation of the Fisheries Commission and for the development of fisheries (Sec. 4[c] and [h] Republic Act No. 3512; (3) the declared national policy to encourage, Promote and conserve our fishing

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resources (Sec. 1, Republic Act No. 3512), and (4) section 83 of the Fisheries Law which provides that "any other violation of" the Fisheries Law or of any rules and regulations promulgated thereunder "shall subject the offender to a fine of not more than two hundred pesos, or imprisonment for not more than six months, or both, in the discretion of the court." As already pointed out above, the prosecution's reference to section 83 is out of place because the penalty for electro fishing under Administrative order No. 84 is not the same as the penalty fixed in section 83. We are of the opinion that the Secretary of Agriculture and Natural Resources and the Commissioner of Fisheries exceeded their authority in issuing Fisheries Administrative Orders Nos. 84 and 84-1 and that those orders are not warranted under the Fisheries Commission, Republic Act No. 3512. The reason is that the Fisheries Law does not expressly prohibit electro fishing. As electro fishing is not banned under that law, the Secretary of Agriculture and Natural Resources and the Commissioner of Fisheries are powerless to penalize it. In other words, Administrative Orders Nos. 84 and 84-1, in penalizing electro fishing, are devoid of any legal basis. Had the lawmaking body intended to punish electro fishing, a penal provision to that effect could have been easily embodied in the old Fisheries Law. That law punishes (1) the use of obnoxious or poisonous substance, or explosive in fishing; (2) unlawful fishing in deepsea fisheries; (3) unlawful taking of marine molusca, (4) illegal taking of sponges; (5) failure of licensed fishermen to report the kind and quantity of fish caught, and (6) other violations. Nowhere in that law is electro fishing specifically punished. Administrative Order No. 84, in punishing electro fishing, does not contemplate that such an offense fails within the category of "other violations" because, as already shown, the penalty for electro fishing is the penalty next lower to the penalty for fishing with the use of obnoxious or poisonous substances, fixed in section 76, and is not the same as the penalty for "other violations" of the law and regulations fixed in section 83 of the Fisheries Law. The lawmaking body cannot delegate to an executive official the power to declare what acts should constitute an offense. It can authorize the issuance of regulations and the imposition of the penalty provided for in the law itself. (People vs. Exconde 101 Phil. 11 25, citing 11 Am. Jur. 965 on p. 11 32). Originally, Administrative Order No. 84 punished electro fishing in all waters. Later, the ban against electro fishing was confined to fresh water fisheries. The amendment created the impression that electro fishing is not condemnable per se. It could be tolerated in marine waters. That circumstances strengthens the view that the old law does not eschew all forms of electro fishing. However, at present, there is no more doubt that electro fishing is punishable under the Fisheries Law and that it cannot be penalized merely by executive revolution because Presidential Decree No. 704, which is a revision and consolidation of all laws and decrees affecting fishing and fisheries and which was promulgated on May 16, 1975 (71 O.G. 4269), expressly punishes electro fishing in fresh water and salt water areas. That decree provides: +.wph!1 SEC. 33. Illegal fishing, dealing in illegally caught fish or fishery/aquatic products. It shall he unlawful for any person to catch, take or gather or cause to be caught, taken or gathered fish or fishery/aquatic products in Philippine waters with the use of explosives, obnoxious or poisonous substance, or by the use of electricity as defined in paragraphs (1), (m) and (d), respectively, of Section 3 hereof: ... The decree Act No. 4003, as amended, Republic Acts Nos. 428, 3048, 3512 and 3586, Presidential Decrees Nos. 43, 534 and 553, and all , Acts, Executive Orders, rules and regulations or parts thereof inconsistent with it (Sec. 49, P. D. No. 704). The inclusion in that decree of provisions defining and penalizing electro fishing is a clear recognition of the deficiency or silence on that point of the old Fisheries Law. It is an admission that a mere executive regulation is not legally adequate to penalize electro fishing. Note that the definition of electro fishing, which is found in section 1 (c) of Fisheries Administrative Order No. 84 and which is not provided for the old Fisheries Law, is now found in section 3(d) of the

decree. Note further that the decree penalty electro fishing by "imprisonment from two (2) to four (4) years", a punishment which is more severe than the penalty of a time of not excluding P500 or imprisonment of not more than six months or both fixed in section 3 of Fisheries Administrative Order No. 84. An examination of the rule-making power of executive officials and administrative agencies and, in particular, of the Secretary of Agriculture and Natural Resources (now Secretary of Natural Resources) under the Fisheries Law sustains the view that he ex his authority in penalizing electro fishing by means of an administrative order. Administrative agent are clothed with rule-making powers because the lawmaking body finds it impracticable, if not impossible, to anticipate and provide for the multifarious and complex situations that may be encountered in enforcing the law. All that is required is that the regulation should be germane to the defects and purposes of the law and that it should conform to the standards that the law prescribes (People vs. Exconde 101 Phil. 1125; Director of Forestry vs. Mu;oz, L-24796, June 28, 1968, 23 SCRA 1183, 1198; Geukeko vs. Araneta, 102 Phil. 706, 712). The lawmaking body cannot possibly provide for all the details in the enforcement of a particular statute (U.S. vs. Tupasi Molina, 29 Phil. 119, 125, citing U.S. vs. Grimaud 220 U.S. 506; Interprovincial Autobus Co., Inc. vs. Coll. of Internal Revenue, 98 Phil. 290, 295-6). The grant of the rule-making power to administrative agencies is a relaxation of the principle of separation of powers and is an exception to the nondeleption of legislative, powers. Administrative regulations or "subordinate legislation calculated to promote the public interest are necessary because of "the growing complexity of modem life, the multiplication of the subjects of governmental regulations, and the increased difficulty of administering the law" Calalang vs. Williams, 70 Phil. 726; People vs. Rosenthal and Osme;a, 68 Phil. 328). Administrative regulations adopted under legislative authority by a particular department must be in harmony with the provisions of the law, and should be for the sole purpose of carrying into effect its general provisions. By such regulations, of course, the law itself cannot be extended. (U.S. vs. Tupasi Molina, supra). An administrative agency cannot amend an act of Congress (Santos vs. Estenzo, 109 Phil. 419, 422; Teoxon vs. Members of the d of Administrators, L-25619, June 30, 1970, 33 SCRA 585; Manuel vs. General Auditing Office, L-28952, December 29, 1971, 42 SCRA 660; Deluao vs. Casteel, L21906, August 29, 1969, 29 SCRA 350). The rule-making power must be confined to details for regulating the mode or proceeding to carry into effect the law as it his been enacted. The power cannot be extended to amending or expanding the statutory requirements or to embrace matters not covered by the statute. Rules that subvert the statute cannot be sanctioned. (University of Santo Tomas vs. Board of Tax A 93 Phil. 376, 382, citing 12 C.J. 845-46. As to invalid regulations, see of Internal Revenue vs. Villaflor 69 Phil. 319, Wise & Co. vs. Meer, 78 Phil. 655, 676; Del March vs. Phil. Veterans Administrative, L-27299, June 27, 1973, 51 SCRA 340, 349). There is no question that the Secretary of Agriculture and Natural Resources has rule-making powers. Section 4 of the Fisheries law provides that the Secretary "shall from time to time issue instructions, orders, and regulations consistent" with that law, "as may be and proper to carry into effect the provisions thereof." That power is now vested in the Secretary of Natural Resources by on 7 of the Revised Fisheries law, Presidential December No. 704. Section 4(h) of Republic Act No. 3512 empower the Co of Fisheries "to prepare and execute upon the approval of the Secretary of Agriculture and Natural Resources, forms instructions, rules and regulations consistent with the purpose" of that enactment "and for the development of fisheries." Section 79(B) of the Revised Administrative Code provides that "the Department Head shall have the power to promulgate, whenever he may see fit do so, all rules, regulates, orders, memorandums, and other instructions, not contrary to law, to regulate the proper working and harmonious and efficient administration of each and all of the offices and dependencies of his Department, and for the strict enforcement and proper execution of the laws relative to matters under the jurisdiction of said Department; but none of said rules or orders shall prescribe penalties for the violation thereof, except as expressly authorized by law."

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Administrative regulations issued by a Department Head in conformity with law have the force of law (Valerie vs. Secretary of culture and Natural Resources, 117 Phil. 729, 733; Antique Sawmills, Inc. vs. Zayco, L- 20051, May 30, 1966, 17 SCRA 316). As he exercises the rule-making power by delegation of the lawmaking body, it is a requisite that he should not transcend the bound demarcated by the statute for the exercise of that power; otherwise, he would be improperly exercising legislative power in his own right and not as a surrogate of the lawmaking body. Article 7 of the Civil Code embodies the basic principle that administrative or executive acts, orders and regulations shall be valid only when they are not contrary to the laws or the Constitution." As noted by Justice Fernando, "except for constitutional officials who can trace their competence to act to the fundamental law itself, a public office must be in the statute relied upon a grant of power before he can exercise it." "department zeal may not be permitted to outrun the authority conferred by statute." (Radio Communications of the Philippines, Inc. vs. Santiago, L-29236, August 21, 1974, 58 SCRA 493, 496-8). "Rules and regulations when promulgated in pursuance of the procedure or authority conferred upon the administrative agency by law, partake of the nature of a statute, and compliance therewith may be enforced by a penal sanction provided in the law. This is so because statutes are usually couched in general terms, after expressing the policy, purposes, objectives, remedies and sanctions intended by the legislature. The details and the manner of carrying out the law are oftentimes left to the administrative agency entrusted with its enforcement. In this sense, it has been said that rules and regulations are the product of a delegated power to create new or additional legal provisions that have the effect of law." The rule or regulation should be within the scope of the statutory authority granted by the legislature to the administrative agency. (Davis, Administrative Law, p. 194, 197, cited in Victories Milling Co., Inc. vs. Social Security Commission, 114 Phil. 555, 558). In case of discrepancy between the basic law and a rule or regulation issued to implement said law, the basic law prevails because said rule or regulation cannot go beyond the terms and provisions of the basic law (People vs. Lim, 108 Phil. 1091). This Court in its decision in the Lim case, supra, promulgated on July 26, 1960, called the attention of technical men in the executive departments, who draft rules and regulations, to the importance and necessity of closely following the legal provisions which they intend to implement so as to avoid any possible misunderstanding or confusion. The rule is that the violation of a regulation prescribed by an executive officer of the government in conformity with and based upon a statute authorizing such regulation constitutes an offense and renders the offender liable to punishment in accordance with the provisions of the law (U.S. vs. Tupasi Molina, 29 Phil. 119, 124). In other words, a violation or infringement of a rule or regulation validly issued can constitute a crime punishable as provided in the authorizing statute and by virtue of the latter (People vs. Exconde 101 Phil. 1125, 1132). It has been held that "to declare what shall constitute a crime and how it shall be punished is a power vested exclusively in the legislature, and it may not be delegated to any other body or agency" (1 Am. Jur. 2nd, sec. 127, p. 938; Texas Co. vs. Montgomery, 73 F. Supp. 527). In the instant case the regulation penalizing electro fishing is not strictly in accordance with the Fisheries Law, under which the regulation was issued, because the law itself does not expressly punish electro fishing. The instant case is similar to People vs. Santos, 63 Phil. 300. The Santos case involves section 28 of Fish and Game Administrative Order No. 2 issued by the Secretary of Agriculture and Natural Resources pursuant to the aforementioned section 4 of the Fisheries Law. Section 28 contains the proviso that a fishing boat not licensed under the Fisheries Law and under the said administrative order may fish within three kilometers of the shoreline of islands and reservations over which jurisdiction is exercised by naval and military reservations authorities of the United States only upon receiving written permission therefor, which permission may be granted by the Secretary upon recommendation of the military or naval authorities concerned. A violation of the proviso may be proceeded against under section 45 of the Federal Penal Code.

Augusto A. Santos was prosecuted under that provision in the Court of First Instance of Cavite for having caused his two fishing boats to fish, loiter and anchor without permission from the Secretary within three kilometers from the shoreline of Corrigidor Island. This Court held that the Fisheries Law does not prohibit boats not subject to license from fishing within three kilometers of the shoreline of islands and reservations over which jurisdiction is exercised by naval and military authorities of the United States, without permission from the Secretary of Agriculture and Natural Resources upon recommendation of the military and naval authorities concerned. As the said law does not penalize the act mentioned in section 28 of the administrative order, the promulgation of that provision by the Secretary "is equivalent to legislating on the matter, a power which has not been and cannot be delegated to him, it being expressly reserved" to the lawmaking body. "Such an act constitutes not only an excess of the regulatory power conferred upon the Secretary but also an exercise of a legislative power which he does not have, and therefore" the said provision "is null and void and without effect". Hence, the charge against Santos was dismiss. A penal statute is strictly construed. While an administrative agency has the right to make ranks and regulations to carry into effect a law already enacted, that power should not be confused with the power to enact a criminal statute. An administrative agency can have only the administrative or policing powers expressly or by necessary implication conferred upon it. (Glustrom vs. State, 206 Ga. 734, 58 Second 2d 534; See 2 Am. Jr. 2nd 129-130). Where the legislature has delegated to executive or administrative officers and boards authority to promulgate rules to carry out an express legislative purpose, the rules of administrative officers and boards, which have the effect of extending, or which conflict with the authority granting statute, do not represent a valid precise of the rule-making power but constitute an attempt by an administrative body to legislate (State vs. Miles, Wash. 2nd 322, 105 Pac. 2nd 51). In a prosecution for a violation of an administrative order, it must clearly appear that the order is one which falls within the scope of the authority conferred upon the administrative body, and the order will be scrutinized with special care. (State vs. Miles supra). The Miles case involved a statute which authorized the State Game Commission "to adopt, promulgate, amend and/or repeal, and enforce reasonable rules and regulations governing and/or prohibiting the taking of the various classes of game. Under that statute, the Game Commission promulgated a rule that "it shall be unlawful to offer, pay or receive any reward, prize or compensation for the hunting, pursuing, taking, killing or displaying of any game animal, game bird or game fish or any part thereof." Beryl S. Miles, the owner of a sporting goods store, regularly offered a ten-down cash prize to the person displaying the largest deer in his store during the open for hunting such game animals. For that act, he was charged with a violation of the rule Promulgated by the State Game Commission. It was held that there was no statute penalizing the display of game. What the statute penalized was the taking of game. If the lawmaking body desired to prohibit the display of game, it could have readily said so. It was not lawful for the administrative board to extend or modify the statute. Hence, the indictment against Miles was quashed. The Miles case is similar to this case. WHEREFORE, the lower court's decision of June 9, 1970 is set aside for lack of appellate jurisdiction and the order of dismissal rendered by the municipal court of Sta. Cruz, Laguna in Criminal Case No. 5429 is affirmed. Costs de oficio. SO ORDERED.

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Sec. 3. Employers covered. . . . (The law applies) to all employers except to: xxx xxx xxx c) Employers already paying their employers a 13-month pay or more in calendar year or is equivalent at the time of this issuance; xxx xxx xxx e) Employers of those who are paid on purely commission, boundary, or task basis, and those who are paid a fixed amount for performing a specific work, irrespective of the time consumed in the performance thereof, except where the workers are paid on piece-rate basis in which case the employer shall be covered by this issuance insofar as such workers are concerned. xxx xxx xxx The term "its equivalent" as used in paragraph (c) shall include Christmas bonus, mid-year bonus, profitsharing payments and other cash bonuses amounting to not less than 1/12th of the basic salary but shall not include cash and stock dividends, cost of living allowances and all other allowances regularly enjoyed by the employee, as well as non-monetary benefits. Where an employer pays less than 1/12th of the employee's basic salary, the employer shall pay the difference. Supplementary Rules and Regulations implementing P.D. 851 were subsequently issued by Minister Ople whichinter alia set out items of compensation not included in the computation of the 13th month pay, viz.: Sec. 4. Overtime pay, earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th month pay. On August 13, 1986, President Corazon C. Aquino promulgated Memorandum Order No. 28, which contained a single provision modifying Presidential Decree No. 851 by removing the salary ceiling of P1,000.00 a month set by the latter, as follows: Section 1 of Presidential Decree No. 851 is hereby modified to the extent that all employers are hereby required to pay all their rank-and-file employees a 13th month pay not later than December 24, of every year. Slightly more than a year later, on November 16, 1987, Revised Guidelines on the Implementation of the 13th Month Pay Law were promulgated by then Labor Secretary Franklin Drilon which, among other things, defined with particularity what remunerative items were and were not embraced in the concept of 13th month pay, and specifically dealt with employees who are paid a fixed or guaranteed wage plus commission. The relevant provisions read: 4. Amount and payment of 13th Month Pay. xxx xxx xxx The basic salary of an employee for the purpose of computing the 13th month pay shall include all remunerations or earnings paid by the employer for services rendered but does not include allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary, such as the cash equivalent of unused vacation and sick leave credits, overtime, premium, night differential and holiday pay, and cost-of-living allowances. However, these salary-related benefits should be included as part of the basic salary in the computation of the 13th month pay if by individual or collective agreement, company practice or policy, the same are treated as part of the basic salary of the employees. xxx xxx xxx 5. 13th Month Pay for Certain Types of Employees. (a) Employees Paid by Results. Employees who are paid on piece work basis are by law entitled to the 13th month pay. Employees who are paid a fixed or guaranteed wage plus commission are also entitled to the mandated 13th month pay based on their total earnings during the calendar year, i.e., on both their fixed or guaranteed wage and commission.

SECOND DIVISION G.R. No. 92174 December 10, 1993 BOIE-TAKEDA CHEMICALS, INC., petitioner, vs. HON. DIONISIO DE LA SERNA, Acting Secretary of the Department of Labor and Employment, respondent. G.R. No. L-102552 December 10, 1993 PHILIPPINE FUJI XEROX CORP., petitioner, vs. CRESENCIANO B. TRAJANO, Undersecretary of the Department of Labor and Employment, and PHILIPPINE FUJI XEROX EMPLOYEES UNION, respondents. Herrera, Laurel, De los Reyes, Roxas & Teehankee for Boie-Takeda Chemicals, Inc. and Phil Xerox Corp. The Solicitor General for public respondents. NARVASA, C.J.: What items or items of employee remuneration should go into the computation of thirteenth month pay is the basic issue presented in these consolidated petitions. Otherwise stated, the question is whether or not the respondent labor officials in computing said benefit, committed "grave abuse of discretion amounting to lack of jurisdiction," by giving effect to Section 5 of the Revised Guidelines on the implementation of the Thirteenth Month Pay (Presidential Decree No. 851) promulgated by then Secretary of Labor and Employment, Hon. Franklin Drilon, and overruling petitioner's contention that said provision constituted a usurpation of legislative power because not justified by or within the authority of the law sought to be implemented besides being violative of the equal protection of the law clause of the Constitution. Resolution of the issue entails, first, a review of the pertinent provisions of the laws and implementing regulations. Sections 1 and 2 of Presidential Decree No. 851, the Thirteenth Month Pay Law, read as follows: Sec 1. All employees are hereby required to pay all their employees receiving basic salary of not more than P1,000.00 a month, regardless of the nature of the employment, a 13th month pay not later than December 24 of every year. Sec. 2. Employers already paying their employees a 13th month pay or its equivalent are not covered by this Decree. The Rules and Regulations Implementing P.D. 851 promulgated by then Labor Minister Blas Ople on December 22, 1975 contained the following relevant provisions relative to the concept of "thirteenth month pay" and the employers exempted from giving it, to wit: Sec. 2.Definition of certain terms. . . . a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic salary of an employee within a calendar year; b) "Basic Salary" shall include all remunerations or earnings paid by an employer to an employee for services rendered but may not include cost of living allowances granted pursuant to Presidential Decree No. 525 or Letter of Instructions No. 174, profit sharing payments, and all allowances and monetary benefits which are not considered or integrated as part of the regular or basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975.

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This was the state of the law when the controversies at bar arose out of the following antecedents: (RE G.R. No. 92174) A routine inspection was conducted on May 2, 1989 in the premises of petitioner Boie-Takeda Chemicals, Inc. by Labor and Development Officer Reynaldo B. Ramos under Inspection Authority No. 4-209-89. Finding that Boie-Takeda had not been including the commissions earned by its medical representatives in the computation of their 13th month pay, Ramos served a Notice of Inspection Results 1 on Boie-Takeda through its president, Mr. Benito Araneta, requiring Boie-Takeda within ten (10) calendar days from notice to effect restitution or correction of "the underpayment of 13th month pay for the year(s) 1986, 1987 and 1988 of Med Rep (Revised Guidelines on the Implementation of 13th month pay # 5) in the total amount of P558,810.89." Boie-Takeda wrote the Labor Department contesting the Notice of Inspection Results, and expressing the view "that the commission paid to our medical representatives are not to be included in the computation of the 13th month pay . . . (since the) law and its implementing rules speak of REGULAR or BASIC salary and therefore exclude all other remunerations which are not part of the REGULAR salary." It pointed out that, "if no sales is (sic) made under the effort of a particular representative, there is no commission during the period when no sale was transacted, so that commissions are not and cannot be legally defined as regular in nature. 2 Regional Director Luna C. Piezas directed Boie-Takeda to appear before his Office on June 9 and 16, 1989. On the appointed dates, however, and despite due notice, no one appeared for Boie-Takeda, and the matter had perforce to be resolved on the basis of the evidence at hand. On July 24, 1989, Director Piezas issued an Order 3directing Boie-Takeda: . . . to pay . . . (its) medical representatives and its managers the total amount of FIVE HUNDRED SIXTY FIVE THOUSAND SEVEN HUNDRED FORTY SIX AND FORTY SEVEN CENTAVOS (P565,746.47) representing underpayment of thirteenth (13th) month pay for the years 1986, 1987, 1988, inclusive, pursuant to the . . . revised guidelines within ten (10) days from receipt of this Order. A motion for reconsideration 4 was seasonably filed by Boie-Takeda under date of August 3, 1989. Treated as an appeal, it was resolved on January 17, 1990 by then Acting Labor Secretary Dionisio de la Serna, who affirmed the July 24, 1989 Order with modification that the sales commissions earned by Boie-Takeda's medical representatives before August 13, 1989, the effectivity date of Memorandum Order No. 28 and its Implementing Guidelines, shall be excluded in the computation of their 13th month pay. 5 Hence the petition docketed as G.R. No. 92174. (RE G.R. No. 102552) A similar Routine Inspection was conducted in the premises of Philippine Fuji Xerox Corp. on September 7, 1989 pursuant to Routine Inspection Authority No. NCR-LSED-RI-494-89. In his Notice of Inspection Results, 6 addressed to the Manager, Mr. Nicolas O. Katigbak, Senior Labor and Employment Officer Nicanor M. Torres noted the following violation committed by Philippine Fuji Xerox Corp., to wit: Underpayment of 13th month pay of 62 employees, more or less pursuant to Revised Guidelines on the Implementation of the 13th month pay law for the period covering 1986, 1987 and 1988. Philippine Fuji Xerox was requested to effect rectification and/or restitution of the noted violation within five (5) working days from notice. No action having been taken thereon by Philippine Fuji Xerox, Mr. Eduardo G. Gonzales, President of the Philxerox Employee Union, wrote then Labor Secretary Franklin Drilon requesting a follow-up of the inspection findings. Messrs. Nicolas and Gonzales were summoned to appear before Labor Employment and Development Officer Mario F. Santos, NCR Office, Department of Labor for a conciliation conference. When no amicable settlement was reached, the parties were required to file their position papers. Subsequently, Regional Director Luna C. Piezas issued an Order dated August 23, 1990, 7 disposing as follows:

WHEREFORE, premises considered, Respondent PHILIPPINE FUJI XEROX is hereby ordered to restitute to its salesmen the portion of the 13th month pay which arose out of the non-implementation of the said revised guidelines, ten (10) days from receipt hereof, otherwise, MR. NICANOR TORRES, the SR. LABOR EMPLOYMENT OFFICER is hereby Ordered to proceed to the premises of the Respondent for the purpose of computing the said deficiency (sic) should respondent fail to heed his Order. Philippine Fuji Xerox appealed the aforequoted Order to the Office of the Secretary of Labor. In an Order dated October 120, 1991, Undersecretary Cresenciano B. Trajano denied the appeal for lack of merit. Hence, the petition in G.R. No. 102552, which was ordered consolidated with G.R. No. 92174 as involving the same issue. In their almost identically-worded petitioner, petitioners, through common counsel, attribute grave abuse of discretion to respondent labor officials Hon. Dionisio dela Serna and Undersecretary Cresenciano B. Trajano in issuing the questioned Orders of January 17, 1990 and October 10, 1991, respectively. They maintain that under P.D. 851, the 13th month pay is based solely on basic salary. As defined by the law itself and clarified by the implementing and Supplementary Rules as well as by the Supreme Court in a long line of decisions, remunerations which do not form part of the basic or regular salary of an employee, such as commissions, should not be considered in the computation of the 13th month pay. This being the case, the Revised Guidelines on the Implementation of the 13th Month Pay Law issued by then Secretary Drilon providing for the inclusion of commissions in the 13th month pay, were issued in excess of the statutory authority conferred by P.D. 851. According to petitioners, this conclusion becomes even more evident when considered in light of the opinion rendered by Labor Secretary Drilon himself in "In Re: Labor Dispute at the Philippine Long Distance Telephone Company" which affirmed the contemporaneous interpretation by then Secretary Ople that commissions are excluded from the basic salary. Petitioners further contend that assuming that Secretary Drilon did not exceed the statutory authority conferred by P.D. 851, still the Revised Guidelines are null and void as they violate the equal protection of the law clause. Respondents through the Office of the Solicitor General question the propriety of petitioners' attack on the constitutionality of the Revised Guidelines in a petition for certiorari which, they contend, should be confined purely to the correction of errors and/or defects of jurisdiction, including matters of grave abuse of discretion amounting to lack or excess of jurisdiction and not extend to a collateral attack on the validity and/or constitutionality of a law or statute. They aver that the petitions do not advance any cogent reason or state any valid ground to sustain the allegation of grave abuse of discretion, and that at any rate, P.D. No. 851, otherwise known as the 13th Month Pay Law has already been amended by Memorandum Order No. 28 issued by President Corazon C. Aquino on August 13, 1986 so that commissions are now imputed into the computation of the 13th Month Pay. They add that the Revised Guidelines issued by then Labor Secretary Drilon merely clarified a gray area occasioned by the silence of the law as to the nature of commissions; and worked no violation of the equal protection clause of the Constitution, said Guidelines being based on reasonable classification. Respondents point to the case of Songco vs. National Labor Relations Commission, 183 SCRA 610, wherein the Court declared that Article 97(f) of the Labor Code is explicit that commission is included in the definition of the term "wage". We rule for the petitioners. Contrary to respondents' contention, Memorandum Order No. 28 did not repeal, supersede or abrogate P.D. 851. As may be gleaned from the language of the Memorandum Order No. 28, it merely "modified" Section 1 of the decree by removing the P1,000.00 salary ceiling. The concept of 13th Month Pay as envisioned, defined and implemented under P.D. 851 remained unaltered, and while entitlement to said benefit was no longer limited to employees receiving a monthly basic salary of not more than P1,000.00, said benefit was, and still is, to be computed on the basic salary of the employee-recipient as provided under P.D. 851. Thus, the interpretation given to the term "basic salary" as defined in P.D. 851 applies equally to "basic salary" under Memorandum Order No. 28. In the case of San Miguel Corp. vs. Inciong, 103 SCRA 139, this Court delineated the coverage of the term "basic salary" as used in P.D. 851. We said at some length: Under Presidential Decree 851 and its implementing rules, the basic salary of an employee is used as the basis in the determination of his 13th month pay. Any compensations or remunerations which are deemed not part of the basic pay is excluded as basis in the computation of the mandatory bonus.

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Under the Rules and Regulations implementing Presidential Decree 851, the following compensations are deemed not part of the basic salary: a) Cost-of-living allowances granted pursuant to Presidential Decree 525 and Letter of Instructions No. 174; b) Profit-sharing payments; c) All allowances and monetary benefits which are not considered or integrated as part of the regular basic salary of the employee at the time of the promulgation of the Decree on December 16, 1975. Under a later set of Supplementary Rules and Regulations Implementing Presidential Decree 851 Presidential Decree 851 issued by then Labor Secretary Blas Ople, overtime pay, earnings and other remunerations are excluded as part of the basic salary and in the computation of the 13th month pay. The exclusion of the cost-of-living allowances under Presidential Decree 525 and Letter of Instructions No. 174, and profit-sharing payments indicate the intention to strip basic salary of other payments which are properly considered as "fringe" benefits. Likewise, the catch-all exclusionary phrase "all allowances and monetary benefits which are not considered or integrated as part of the basic salary" shows also the intention to strip basic salary of any and all additions which may be in the form of allowances or "fringe" benefits. Moreover, the Supplementary Rules and Regulations Implementing Presidential Decree 851 is even more emphatic in declaring that earnings and other remunerations which are not part of the basic salary shall not be included in the computation of the 13th-month pay. While doubt may have been created by the prior Rules and Regulations Implementing Presidential Decree 851 which defines basic salary to include all remunerations or earnings paid by an employer to an employee, this cloud is dissipated in the later and more controlling Supplementary Rules and Regulations which categorically exclude from the definitions of basic salary earnings and other remunerations paid by an employer to an employee. A cursory perusal of the two sets of Rules indicates that what has hitherto been the subject of a broad inclusion is now a subject of broad exclusion. The Supplementary Rules and Regulations cure the seeming tendency of the former rules to include all remunerations and earnings within the definition of basic salary. The all embracing phrase "earnings and other remunerations" which are deemed not part of the basic salary includes within its meaning payments for sick, vacation, or maternity leaves, premium for works performed on rest days and special holidays, pays for regular holidays and night differentials. As such they are deemed not part of the basic salary and shall not be considered in the computation of the 13thmonth pay. If they were not excluded, it is hard to find any "earnings and other remunerations" expressly excluded in the computation of the 13th month pay. Then the exclusionary provision would prove to be idle and with no purpose. This conclusion finds strong support under the Labor Code of the Philippines. To cite a few provisions: Art. 87. Overtime Work. Work may be performed beyond eight (8) hours a day provided that the employee is paid for the overtime work, additional compensation equivalent to his regular wage plus at least twenty-five (25%) percent thereof. It is clear that overtime pay is an additional compensation other than and added to the regular wage or basic salary, for reason of which such is categorically excluded from the definition of basic salary under the Supplementary Rules and Regulations Implementing Presidential Decree 851. In Article 93 of the same Code, paragraph c) work performed on any special holiday shall be paid an additional compensation of at least thirty percent (30%) of the regular wage of the employee. It is likewise clear the premiums for special holiday which is at least 30% of the regular wage is anadditional pay other than and added to the regular wage or basic salary. For similar reason, it shall not be considered in the computation of the 13th month pay.

Quite obvious from the foregoing is that the term "basic salary" is to be understood in its common, generally-accepted meaning, i.e., as a rate of pay for a standard work period exclusive of such additional payments as bonuses and overtime. 8 This is how the term was also understood in the case of Pless v. Franks, 308 S.W. 2nd. 402, 403, 202 Tenn. 630, which held that in statutes providing that pension should not less than 50 percent of "basic salary" at the time of retirement, the quoted words meant the salary that an employee (e.g., a policeman) was receiving at the time he retired without taking into consideration any extra compensation to which he might be entitled for extra work. 9 In remunerative schemes consisting of a fixed or guaranteed wage plus commission, the fixed or guaranteed wage is patently the "basic salary" for this is what the employee receives for a standard work period. Commissions are given for extra efforts exerted in consummating sales or other related transactions. They are, as such, additional pay, which this Court has made clear do not form part of the "basic salary." Respondents would do well to distinguish this case from Songco vs. National Labor Relations Commission, supra, upon which they rely so heavily. What was involved therein was the term "salary" without the restrictive adjective "basic". Thus, in said case, we construed the term in its generic sense to refer to all types of "direct remunerations for services rendered," including commissions. In the same case, we also took judicial notice of the fact "that some salesmen do not receive any basic salary but depend on commissions and allowances or commissions alone, although an employer-employee relationship exists," which statement is quite significant in that it speaks of a "basic salary" apart and distinct from "commissions" and "allowances". Instead of supporting respondents' stand, it would appear that Songco itself recognizes that commissions are not part of "basic salary." In including commissions in the computation of the 13th month pay, the second paragraph of Section 5(a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law unduly expanded the concept of "basic salary" as defined in P.D. 851. It is a fundamental rule that implementing rules cannot add to or detract from the provisions of the law it is designed to implement. Administrative regulations adopted under legislative authority by a particular department must be in harmony with the provisions of the law they are intended to carry into effect. They cannot widen its scope. An administrative agency cannot amend an act of Congress. 10 Having reached this conclusion, we deem it unnecessary to discuss the other issues raised in these petitions. WHEREFORE, the consolidated petitions are hereby GRANTED. The second paragraph of Section 5 (a) of the Revised Guidelines on the Implementation of the 13th Month Pay Law issued on November 126, 1987 by then Labor Secretary Franklin M. Drilon is declared null and void as being violative of the law said Guidelines were issued to implement, hence issued with grave abuse of discretion correctible by the writ of prohibition andcertiorari. The assailed Orders of January 17, 1990 and October 10, 1991 based thereon are SET ASIDE. SO ORDERED.

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More Premium M. 100's Sec. 142, (c), (2) More Premium International Sec. 142, (c), (2) Champion Int'l. M. 100's [G.R. No. 119761. August 29, 1996] COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. HON. COURT OF APPEALS, HON. COURT OF TAX APPEALS and FORTUNE TOBACCO CORPORATION, respondents. DECISION VITUG, J.: The Commissioner of Internal Revenue ("CIR") disputes the decision, dated 31 March 1995, of respondent Court of Appeals[1] affirming the 10th August 1994 decision and the 11th October 1994 resolution of the Court of Tax Appeals[2] ("CTA") in C.T.A. Case No. 5015, entitled "Fortune Tobacco Corporation vs. Liwayway Vinzons-Chato in her capacity as Commissioner of Internal Revenue." The facts, by and large, are not in dispute. Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of different brands of cigarettes. On various dates, the Philippine Patent Office issued to the corporation separate certificates of trademark registration over "Champion," "Hope," and "More" cigarettes. In a letter, dated 06 January 1987, of then Commissioner of Internal Revenue Bienvenido A. Tan, Jr., to Deputy Minister Ramon Diaz of the Presidential Commission on Good Government, "the initial position of the Commission was to classify 'Champion,' 'Hope,' and 'More' as foreign brands since they were listed in the World Tobacco Directory as belonging to foreign companies. However, Fortune Tobacco changed the names of 'Hope' to Hope Luxury' and 'More' to 'Premium More,' thereby removing the said brands from the foreign brand category. Proof was also submitted to the Bureau (of Internal Revenue ['BIR']) that 'Champion' was an original Fortune Tobacco Corporation register and therefore a local brand."[3] Ad Valorem taxes were imposed on these brands,[4] at the following rates: Sec. 142, (c), (2) Champion M. 100's Sec. 142, (c), (2) Champion M. King Sec. 142, (c), last par. Champion Lights Sec. 142, (c), last par. 15% 20%"[5] 15% 20% 40% 45% 40% 45% 40% 45% 40% 45%

A bill, which later became Republic Act ("RA") No. 7654, [6] was enacted, on 10 June 1993, by the legislature and signed into law, on 14 June 1993, by the President of the Philippines. The new law became effective on 03 July 1993. It amended Section 142(c)(1) of the National Internal Revenue Code ("NIRC") to read; as follows: "SEC. 142. Cigars and Cigarettes. "x x x xxx x x x.

"(c) Cigarettes packed by machine. - There shall be levied, assessed and collected on cigarettes packed by machine a tax at the rates prescribed below based on the constructive manufacturer's wholesale price or the actual manufacturer's wholesale price, whichever is higher: "(1) On locally manufactured cigarettes which are currently classified and taxed at fifty-five percent (55%) or the exportation of which is not authorized by contract or otherwise, fifty-five (55%) provided that the minimum tax shall not be less than Five Pesos (P5.00) per pack. "(2). On other locally manufactured cigarettes, forty-five percent (45%) provided that the minimum tax shall not be less than Three Pesos (P3.00) per pack.

"BRAND AD VALOREM TAX RATE E.O. 22 06-23-86 07-01-86 and E.O. 273 07-25-87 01-01-88 RA 6956 06-18-90 07-05-90

"x x x x x x

x x x.

"When the registered manufacturer's wholesale price or the actual manufacturer's wholesale price whichever is higher of existing brands of cigarettes, including the amounts intended to cover the taxes, of cigarettes packed in twenties does not exceed Four Pesos and eighty centavos (P4.80) per pack, the rate shall be twenty percent (20%)."[7] (Italics supplied.) About a month after the enactment and two (2) days before the effectivity of RA 7654, Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was issued by the BIR the full text of which expressed: "REPUBLIKA NG PILIPINAS KAGAWARAN NG PANANALAPI KAWANIHAN NG RENTAS INTERNAS July 1, 1993

Hope Luxury M. 100's Sec. 142, (c), (2) Hope Luxury M. King Sec. 142, (c), (2) 40% 45% 40% 45%

REVENUE MEMORANDUM CIRCULAR NO. 37-93 SUBJECT : Reclassification of Cigarettes Subject to Excise Tax TO : All Internal Revenue Officers and Others Concerned.

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"In view of the issues raised on whether 'HOPE,' 'MORE' and 'CHAMPION' cigarettes which are locally manufactured are appropriately considered as locally manufactured cigarettes bearing a foreign brand, this Office is compelled to review the previous rulings on the matter. "Section 142(c)(1) National Internal Revenue Code, as amended by R.A. No. 6956, provides: "'On locally manufactured cigarettes bearing a foreign brand, fifty-five percent (55%) Provided, That this rate shall apply regardless of whether or not the right to use or title to the foreign brand was sold or transferred by its owner to the local manufacturer. Whenever it has to be determined whether or not a cigarette bears a foreign brand, the listing of brands manufactured in foreign countries appearing in the current World Tobacco Directory shall govern." "Under the foregoing, the test for imposition of the 55% ad valorem tax on cigarettes is that the locally manufactured cigarettes bear a foreign brand regardless of whether or not the right to use or title to the foreign brand was sold or transferred by its owner to the local manufacturer. The brand must be originally owned by a foreign manufacturer or producer. If ownership of the cigarette brand is, however, not definitely determinable, 'x x x the listing of brands manufactured in foreign countries appearing in the current World Tobacco Directory shall govern. x x x' "'HOPE' is listed in the World Tobacco Directory as being manufactured by (a) Japan Tobacco, Japan and (b) Fortune Tobacco, Philippines. 'MORE' is listed in the said directory as being manufactured by: (a) Fills de Julia Reig, Andorra; (b) Rothmans, Australia; (c) RJR-Macdonald, Canada; (d) Rettig-Strenberg, Finland; (e) Karellas, Greece; (f) R.J. Reynolds, Malaysia; (g) Rothmans, New Zealand; (h) Fortune Tobacco, Philippines; (i) R.J. Reynolds, Puerto Rico; (j) R.J. Reynolds, Spain; (k) Tabacalera, Spain; (l) R.J. Reynolds, Switzerland; and (m) R.J. Reynolds, USA. 'Champion' is registered in the said directory as being manufactured by (a) Commonwealth Bangladesh; (b) Sudan, Brazil; (c) Japan Tobacco, Japan; (d) Fortune Tobacco, Philippines; (e) Haggar, Sudan; and (f) Tabac Reunies, Switzerland. "Since there is no showing who among the above-listed manufacturers of the cigarettes bearing the said brands are the real owner/s thereof, then it follows that the same shall be considered foreign brand for purposes of determining the ad valorem tax pursuant to Section 142 of the National Internal Revenue Code. As held in BIR Ruling No. 410-88, dated August 24, 1988, 'in cases where it cannot be established or there is dearth of evidence as to whether a brand is foreign or not, resort to the World Tobacco Directory should be made.' "In view of the foregoing, the aforesaid brands of cigarettes, viz: 'HOPE,' 'MORE' and 'CHAMPION' being manufactured by Fortune Tobacco Corporation are hereby considered locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes. "Any ruling inconsistent herewith is revoked or modified accordingly. (SGD) LIWAYWAY VINZONS-CHATO Commissioner" On 02 July 1993, at about 17:50 hours, BIR Deputy Commissioner Victor A. Deoferio, Jr., sent via telefax a copy of RMC 37-93 to Fortune Tobacco but it was addressed to no one in particular. On 15 July 1993, Fortune Tobacco received, by ordinary mail, a certified xerox copy of RMC 37-93. In a letter, dated 19 July 1993, addressed to the appellate division of the BIR, Fortune Tobacco, requested for a review, reconsideration and recall of RMC 37-93. The request was denied on 29 July 1993. The following day, or on 30 July 1993, the CIR assessed Fortune Tobacco for ad valorem tax deficiency amounting to P9,598,334.00. On 03 August 1993, Fortune Tobacco filed a petition for review with the CTA. [8] On 10 August 1994, the CTA upheld the position of Fortune Tobacco and adjudged: "WHEREFORE, Revenue Memorandum Circular No. 37-93 reclassifying the brands of cigarettes, viz: `HOPE,' `MORE' and `CHAMPION' being manufactured by Fortune Tobacco Corporation as locally manufactured cigarettes bearing a foreign brand subject to the 55% ad valorem tax on cigarettes is found to be defective, invalid and unenforceable, such that when R.A. No. 7654 took effect on July 3, 1993, the brands in question were not CURRENTLY CLASSIFIED AND TAXED at 55% pursuant to Section

1142(c)(1) of the Tax Code, as amended by R.A. No. 7654 and were therefore still classified as other locally manufactured cigarettes and taxed at 45% or 20% as the case may be. "Accordingly, the deficiency ad valorem tax assessment issued on petitioner Fortune Tobacco Corporation in the amount of P9,598,334.00, exclusive of surcharge and interest, is hereby canceled for lack of legal basis. "Respondent Commissioner of Internal Revenue is hereby enjoined from collecting the deficiency tax assessment made and issued on petitioner in relation to the implementation of RMC No. 37-93. "SO ORDERED." [9] In its resolution, dated 11 October 1994, the CTA dismissed for lack of merit the motion for reconsideration. The CIR forthwith filed a petition for review with the Court of Appeals, questioning the CTA's 10th August 1994 decision and 11th October 1994 resolution. On 31 March 1993, the appellate court's Special Thirteenth Division affirmed in all respects the assailed decision and resolution. In the instant petition, the Solicitor General argues: That "I. RMC 37-93 IS A RULING OR OPINION OF THE COMMISSIONER OF INTERNAL REVENUE INTERPRETING THE PROVISIONS OF THE TAX CODE. "II. BEING AN INTERPRETATIVE RULING OR OPINION, THE PUBLICATION OF RMC 37-93, FILING OF COPIES THEREOF WITH THE UP LAW CENTER AND PRIOR HEARING ARE NOT NECESSARY TO ITS VALIDITY, EFFECTIVITY AND ENFORCEABILITY. "III. PRIVATE RESPONDENT IS DEEMED TO HAVE BEEN NOTIFIED OR RMC 37-93 ON JULY 2, 1993. IV. RMC 37-93 IS NOT DISCRIMINATORY SINCE IT APPLIES TO ALL LOCALLY MANUFACTURED CIGARETTES SIMILARLY SITUATED AS 'HOPE,' 'MORE' AND 'CHAMPION' CIGARETTES. "V. PETITIONER WAS NOT LEGALLY PROSCRIBED FROM RECLASS IFYING HOPE, MORE AND CHAMPION CIGARETTES BEFORE THE EFFECTIVITY OF R.A. NO. 7654. VI. SINCE RMC 37-93 IS AN INTERPRETATIVE RULE, THE INQUIRY IS NOT INTO ITS VALIDITY, EFFECTIVITY OR ENFORCEABILITY BUT INTO ITS CORRECTNESS OR PROPRIETY; RMC 37-93 IS CORRECT." [10] In fine, petitioner opines that RMC 37-93 is merely an interpretative ruling of the BIR which can thus become effective without any prior need for notice and hearing, nor publication, and that its issuance is not discriminatory since it would apply under similar circumstances to all locally manufactured cigarettes. The Court must sustain both the appellate court and the tax court. Petitioner stresses on the wide and ample authority of the BIR in the issuance of rulings for the effective implementation of the provisions of the National Internal Revenue Code. Let it be made clear that such authority of the Commissioner is not here doubted. Like any other government agency, however, the CIR may not disregard legal requirements or applicable principles in the exercise of its quasi-legislative powers. Let us first distinguish between two kinds of administrative issuances - a legislative rule and an interpretative rule. In Misamis Oriental Association of Coco Traders, Inc., vs. Department of Finance Secretary, [11] the Court expressed: "x x x a legislative rule is in the nature of subordinate legislation, designed to implement a primary legislation by providing the details thereof. In the same way that laws must have the benefit of public hearing, it is generally required that before a legislative rule is adopted there must be hearing. In this connection, the Administrative Code of 1987 provides:

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"Public Participation. - If not otherwise required by law, an agency shall, as far as practicable, publish or circulate notices of proposed rules and afford interested parties the opportunity to submit their views prior to the adoption of any rule. "(2) In the fixing of rates, no rule or final order shall be valid unless the proposed rates shall have been published in a newspaper of general circulation at least two (2) weeks before the first hearing thereon. "(3) In case of opposition, the rules on contested cases shall be observed.

"xxx

xxx

xxx

"(5). Strict compliance with the foregoing procedures is enjoined." [13] Nothing on record could tell us that it was either impossible or impracticable for the BIR to observe and comply with the above requirements before giving effect to its questioned circular. Not insignificantly, RMC 37-93 might have likewise infringed on uniformity of taxation. Article VI, Section 28, paragraph 1, of the 1987 Constitution mandates taxation to be uniform and equitable. Uniformity requires that all subjects or objects of taxation, similarly situated, are to be treated alike or put on equal footing both in privileges and liabilities.[14] Thus, all taxable articles or kinds of property of the same class must be taxed at the same rate[15] and the tax must operate with the same force and effect in every place where the subject may be found. Apparently, RMC 37-93 would only apply to "Hope Luxury," Premium More" and "Champion" cigarettes and, unless petitioner would be willing to concede to the submission of private respondent that the circular should, as in fact my esteemed colleague Mr. Justice Bellosillo so expresses in his separate opinion, be considered adjudicatory in nature and thus violative of due process following the Ang Tibay[16] doctrine, the measure suffers from lack of uniformity of taxation. In its decision, the CTA has keenly noted that other cigarettes bearing foreign brands have not been similarly included within the scope of the circular, such as "1. Locally manufactured by ALHAMBRA INDUSTRIES, INC. (a) `PALM TREE' is listed as manufactured by office of Monopoly, Korea (Exhibit `R') "2. Locally manufactured by LA SUERTE CIGAR and CIGARETTE COMPANY (a) `GOLDEN KEY' is listed being manufactured by United Tobacco, Pakistan (Exhibit `S') (b) `CANNON' is listed as being manufactured by Alpha Tobacco, Bangladesh (Exhibit `T') "3. Locally manufactured by LA PERLA INDUSTRIES, INC. (a) `WHITE HORSE' is listed as being manufactured by Rothman's, Malaysia (Exhibit `U') (b) `RIGHT' is listed as being manufactured by SVENSKA, Tobaks, Sweden (Exhibit `V-1') "4. Locally manufactured by MIGHTY CORPORATION (a) 'WHITE HORSE' is listed as being manufactured by Rothman's, Malaysia (Exhibit 'U-1') "5. Locally manufactured by STERLING TOBACCO CORPORATION (a) UNION' is listed as being manufactured by Sumatra Tobacco, Indonesia and Brown and Williamson, USA (Exhibit 'U-3') (b) WINNER' is listed as being manufactured by Alpha Tobacco, Bangladesh; Nanyang, Hongkong; Joo Lan, Malaysia; Pakistan Tobacco Co., Pakistan; Premier Tobacco, Pakistan and Haggar, Sudan (Exhibit 'U-4')." [17] The court quoted at length from the transcript of the hearing conducted on 10 August 1993 by the Committee on Ways and Means of the House of Representatives; viz: "THE CHAIRMAN. So you have specific information on Fortune Tobacco alone. You don't have specific information on other tobacco manufacturers. Now, there are other brands which are similarly situated. They are locally manufactured bearing foreign brands. And may I enumerate to you all these brands, which are also listed in the World Tobacco Directory x x x. Why were these brands not reclassified at 55 if your want to give a level playing field to foreign manufacturers? "MS. CHATO. Mr. Chairman, in fact, we have already prepared a Revenue Memorandum Circular that was supposed to come after RMC No. 37-93 which have really named specifically the list of locally manufactured cigarettes bearing a foreign brand for excise tax purposes and includes all these brands that you mentioned at 55 percent except that at that time, when we had to come up with this, we were forced to study the brands of Hope, More and Champion because we were given documents that would

"In addition such rule must be published. On the other hand, interpretative rules are designed to provide guidelines to the law which the administrative agency is in charge of enforcing." [12] It should be understandable that when an administrative rule is merely interpretative in nature, its applicability needs nothing further than its bare issuance for it gives no real consequence more than what the law itself has already prescribed. When, upon the other hand, the administrative rule goes beyond merely providing for the means that can facilitate or render least cumbersome the implementation of the law but substantially adds to or increases the burden of those governed, it behooves the agency to accord at least to those directly affected a chance to be heard, and thereafter to be duly informed, before that new issuance is given the force and effect of law. A reading of RMC 37-93, particularly considering the circumstances under which it has been issued, convinces us that the circular cannot be viewed simply as a corrective measure (revoking in the process the previous holdings of past Commissioners) or merely as construing Section 142(c)(1) of the NIRC, as amended, but has, in fact and most importantly, been made in order to place "Hope Luxury," "Premium More" and "Champion" within the classification of locally manufactured cigarettes bearing foreign brands and to thereby have them covered by RA 7654. Specifically, the new law would have its amendatory provisions applied to locally manufactured cigarettes whichat 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. Hence, without RMC 37-93, the enactment of RA 7654, would have had no new tax rate consequence on private respondent's products. Evidently, in order to place "Hope Luxury," "Premium More," and "Champion" cigarettes within the scope of the amendatory law and subject them to an increased tax rate, the now disputed RMC 37-93 had to be issued. In so doing, the BIR not simply interpreted the law; verily, it legislated under its quasi-legislative authority. The due observance of the requirements of notice, of hearing, and of publication should not have been then ignored. Indeed, the BIR itself, in its RMC 10-86, has observed and provided: "RMC NO. 10-86 Effectivity of Internal Revenue Rules and Regulations "It has been observed that one of the problem areas bearing on compliance with Internal Revenue Tax rules and regulations is lack or insufficiency of due notice to the tax paying public. Unless there is due notice, due compliance therewith may not be reasonably expected. And most importantly, their strict enforcement could possibly suffer from legal infirmity in the light of the constitutional provision on `due process of law' and the essence of the Civil Code provision concerning effectivity of laws, whereby due notice is a basic requirement (Sec. 1, Art. IV, Constitution; Art.2, New Civil Code). "In order that there shall be a just enforcement of rules and regulations, in conformity with the basic element of due process, the following procedures are hereby prescribed for the drafting, issuance and implementation of the said Revenue Tax Issuances: "(1). This Circular shall apply only to (a) Revenue Regulations; (b) Revenue Audit Memorandum Orders; and (c) Revenue Memorandum Circulars and Revenue Memorandum Orders bearing on internal revenue tax rules and regulations. "(2). Except when the law otherwise expressly provides, the aforesaid internal revenue tax issuances shall not begin to be operative until after due notice thereof may be fairly presumed. "Due notice of the said issuances may be fairly presumed only after the following procedures have been taken:

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indicate the that these brands were actually being claimed or patented in other countries because we went by Revenue Memorandum Circular 1488 and we wanted to give some rationality to how it came about but we couldn't find the rationale there. And we really found based on our own interpretation that the only test that is given by that existing law would be registration in the World Tobacco Directory. So we came out with this proposed revenue memorandum circular which we forwarded to the Secretary of Finance except that at that point in time, we went by the Republic Act 7654 in Section 1 which amended Section 142, C-1, it said, that on locally manufactured cigarettes which are currently classified and taxed at 55 percent. So we were saying that when this law took effect in July 3 and if we are going to come up with this revenue circular thereafter, then I think our action would really be subject to question but we feel that . . . Memorandum Circular Number 37-93 would really cover even similarly situated brands. And in fact, it was really because of the study, the short time that we were given to study the matter that we could not include all the rest of the other brands that would have been really classified as foreign brand if we went by the law itself. I am sure that by the reading of the law, you would without that ruling by Commissioner Tan they would really have been included in the definition or in the classification of foregoing brands. These brands that you referred to or just read to us and in fact just for your information,we really came out with a proposed revenue memorandum circular for those brands . (Italics supplied) "Exhibit 'FF-2-C', pp. V-5 TO V-6, VI-1 to VI-3). "x x x xxx x x x.

G.R. No. 95832 August 10, 1992 MAYNARD R. PERALTA, petitioner, vs. CIVIL SERVICE COMMISSION, respondent. Tranquilino F. Meris Law Office for petitioner.

PADILLA, J.: Petitioner was appointed Trade-Specialist II on 25 September 1989 in the Department of Trade and Industry (DTI). His appointment was classified as "Reinstatement/Permanent". Before said appointment, he was working at the Philippine Cotton Corporation, a government-owned and controlled corporation under the Department of Agriculture. On 8 December 1989, petitioner received his initial salary, covering the period from 25 September to 31 October 1989. Since he had no accumulated leave credits, DTI deducted from his salary the amount corresponding to his absences during the covered period, namely, 29 September 1989 and 20 October 1989, inclusive of Saturdays and Sundays. More specifically, the dates of said absences for which salary deductions were made, are as follows: 1. 29 September 1989 Friday 2. 30 September 1989 Saturday 3. 01 October 1989 Sunday 4. 20 October 1989 Friday 5. 21 October 1989 Saturday 6. 22 October 1989 Sunday Petitioner sent a memorandum to Amando T. Alvis (Chief, General Administrative Service) on 15 December 1989 inquiring as to the law on salary deductions, if the employee has no leave credits. Amando T. Alvis answered petitioner's query in a memorandum dated 30 January 1990 citing Chapter 5.49 of the Handbook of Information on the Philippine Civil Service which states that "when an employee is on leave without pay on a day before or on a day immediately preceding a Saturday, Sunday or Holiday, such Saturday, Sunday, or Holiday shall also be without pay (CSC, 2nd Ind., February 12, 1965)." Petitioner then sent a latter dated 20 February 1990 addressed to Civil Service Commission (CSC) Chairman Patricia A. Sto. Tomas raising the following question: Is an employee who was on leave of absence without pay on a day before or on a day time immediately preceding a Saturday, Sunday or Holiday, also considered on leave of absence without pay on such Saturday, Sunday or Holiday? 1 Petitioner in his said letter to the CSC Chairman argued that a reading of the General Leave Law as contained in the Revised Administrative Code, as well as the old Civil Service Law (Republic Act No. 2260), the Civil Service Decree (Presidential Decree No. 807), and the Civil Service Rules and Regulation fails to disclose a specific provision which supports the CSC rule at issue. That being the case, the petitioner contented that he cannot be deprived of his pay or salary corresponding to the intervening

"MS. CHATO. x x x But I do agree with you now that it cannot and in fact that is why I felt that we . . . I wanted to come up with a more extensive coverage and precisely why I asked that revenue memorandum circular that would cover all those similarly situated would be prepared but because of the lack of time and I came out with a study of RA 7654, it would not have been possible to really come up with the reclassification or the proper classification of all brands that are listed there. x x x' (italics supplied) (Exhibit 'FF-2d', page IX-1) "x x x xxx x x x.

"HON. DIAZ. But did you not consider that there are similarly situated? "MS. CHATO. That is precisely why, Sir, after we have come up with this Revenue Memorandum Circular No. 37-93, the other brands came about the would have also clarified RMC 37-93 by I was saying really because of the fact that I was just recently appointed and the lack of time, the period that was allotted to us to come up with the right actions on the matter, we were really caught by the July 3 deadline. But in fact, We have already prepared a revenue memorandum circular clarifying with the other . . . does not yet, would have been a list of locally manufactured cigarettes bearing a foreign brand for excise tax purposes which would include all the other brands that were mentioned by the Honorable Chairman. (Italics supplied) (Exhibit 'FF-2-d,' par. IX-4)."18 All taken, the Court is convinced that the hastily promulgated RMC 37-93 has fallen short of a valid and effective administrative issuance. WHEREFORE, the decision of the Court of Appeals, sustaining that of the Court of Tax Appeals, is AFFIRMED. No costs. SO ORDERED.

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Saturdays, Sundays or Holidays (in the factual situation posed), and that the withholding (or deduction) of the same is tantamount to a deprivation of property without due process of law. On 25 May 1990, respondent Commission promulgated Resolution No. 90-497, ruling that the action of the DTI in deducting from the salary of petitioner, a part thereof corresponding to six (6) days (September 29, 30, October 1, 20, 21, 22, 1989) is in order. 2 The CSC stated that: In a 2nd Indorsement dated February 12, 1965 of this Commission, which embodies the policy on leave of absence without pay incurred on a Friday and Monday, reads: Mrs. Rosalinda Gonzales is not entitled to payment of salary corresponding to January 23 and 24, 1965, Saturday and Sunday, respectively, it appearing that she was present on Friday, January 22, 1965 but was on leave without pay beginning January 25, the succeeding Monday. It is the view of this Office that an employee who has no more leave credit in his favor is not entitled to the payment of salary on Saturdays, Sundays or holidays unless such non-working days occur within the period of service actually rendered. (Emphasis supplied) The rationale for the above ruling which applies only to those employees who are being paid on monthly basis, rests on the assumption that having been absent on either Monday or Friday, one who has no leave credits, could not be favorably credited with intervening days had the same been working days. Hence, the above policy that for an employee on leave without pay to be entitled to salary on Saturdays, Sundays or holidays, the same must occur between the dates where the said employee actually renders service. To rule otherwise would allow an employee who is on leave of absent (sic) without pay for a long period of time to be entitled to payment of his salary corresponding to Saturdays, Sundays or holidays. It also discourages the employees who have exhausted their leave credits from absenting themselves on a Friday or Monday in order to have a prolonged weekend, resulting in the prejudice of the government and the public in general. 3 Petitioner filed a motion for reconsideration and in Resolution No. 90-797, the respondent Commission denied said motion for lack of merit. The respondent Commission in explaining its action held: The Primer on the Civil Service dated February 21, 1978, embodies the Civil Service Commission rulings to be observed whenever an employee of the government who has no more leave credits, is absent on a Friday and/or a Monday is enough basis for the deduction of his salaries corresponding to the intervening Saturdays and Sundays. What the Commission perceived to be without basis is the demand of Peralta for the payment of his salaries corresponding to Saturdays and Sundays when he was in fact on leave of absence without pay on a Friday prior to the said days. A reading of Republic Act No. 2260 (sic) does not show that a government employee who is on leave of absence without pay on a day before or immediately preceding Saturdays, Sunday or legal holiday is entitled to payment of his salary for said days. Further, a reading of Senate Journal No. 67 dated May 4, 1960 of House Bill No. 41 (Republic Act No. 2625) reveals that while the law excludes Saturdays, Sundays and holidays in the computation of leave credits, it does not, however, include a case where the leave of absence is without pay. Hence, applying the principle of inclusio unius est exclusio alterius, the claim of Peralta has no merit. Moreover, to take a different posture would be in effect giving more premium to employees who are frequently on leave of absence without pay, instead of discouraging them from incurring further absence without pay. 4 Petitioner's motion for reconsideration having been denied, petitioner filed the present petition. What is primarily questioned by the petitioner is the validity of the respondent Commission's policy mandating salary deductions corresponding to the intervening Saturdays, Sundays or Holidays where an employee without leave credits was absent on the immediately preceding working day. During the pendency of this petition, the respondent Commission promulgated Resolution No. 91-540 dated 23 April 1991 amending the questioned policy, considering that employees paid on a monthly basis are not required to work on Saturdays, Sunday or Holidays. In said amendatory Resolution, the respondent Commission resolved "to adopt the policy that when an employee, regardless of whether he has leave credits or not, is absent without pay on day immediately preceding or succeeding Saturday, Sunday or holiday, he shall not be considered absent on those days." Memorandum Circular No. 16 Series of 1991 dated 26 April 1991, was also issued by CSC Chairman Sto. Tomas adopting and promulgating the new policy and directing the Heads of Departments, Bureaus and Agencies in the national and local

governments, including government-owned or controlled corporations with original charters, to oversee the strict implementation of the circular. Because of these developments, it would seem at first blush that this petition has become moot and academic since the very CSC policy being questioned has already been amended and, in effect, Resolutions No. 90-497 and 90-797, subject of this petition for certiorari, have already been set aside and superseded. But the issue of whether or not the policy that had been adopted and in force since 1965 is valid or not, remains unresolved. Thus, for reasons of public interest and public policy, it is the duty of the Court to make a formal ruling on the validity or invalidity of such questioned policy. The Civil Service Act of 1959 (R.A. No. 2260) conferred upon the Commissioner of Civil Service the following powers and duties: Sec. 16 (e) with the approval by the President to prescribe, amend and enforce suitable rules and regulations for carrying into effect the provisions of this Civil Service Law, and the rules prescribed pursuant to the provisions of this law shall become effective thirty days after publication in the Official Gazette; xxx xxx xxx (k) To perform other functions that properly belong to a central personnel agency. 5 Pursuant to the foregoing provisions, the Commission promulgated the herein challenged policy. Said policy was embodied in a 2nd Indorsement dated 12 February 1965 of the respondent Commission involving the case of a Mrs. Rosalinda Gonzales. The respondent Commission ruled that an employee who has no leave credits in his favor is not entitled to the payment of salary on Saturdays, Sundays or Holidays unless such non-working days occur within the period of service actually rendered. The same policy is reiterated in the Handbook of Information on the Philippine Civil Service. 6 Chapter Five on leave of absence provides that: 5.51. When intervening Saturday, Sunday or holiday considered as leave without pay when an employee is on leave without pay on a day before or on a day immediately preceding a Saturday, Sunday or holiday, such Saturday, Sunday or holiday shall also be without pay. (CSC, 2nd Ind., Feb. 12, 1965). It is likewise illustrated in the Primer on the Civil Service 7 in the section referring to Questions and Answers on Leave of Absences, which states the following: 27. How is leave of an employee who has no more leave credits computed if: (1) he is absent on a Friday and the following Monday? (2) if he is absent on Friday but reports to work the following Monday? (3) if he is absent on a Monday but present the preceding Friday? - (1) He is considered on leave without pay for 4 days covering Friday to Monday; - (2) He is considered on leave without pay for 3 days from Friday to Sunday; - (3) He is considered on leave without pay for 3 days from Saturday to Monday. When an administrative or executive agency renders an opinion or issues a statement of policy, it merely interprets a pre-existing law; and the administrative interpretation of the law is at best advisory, for it is the courts that finally determine what the law means. 8 It has also been held that interpretative regulations need not be published. 9 In promulgating as early as 12 February 1965 the questioned policy, the Civil Service Commission interpreted the provisions of Republic Act No. 2625 (which took effect on 17 June 1960) amending the Revised Administrative Code, and which stated as follows: Sec. 1. Sections two hundred eighty-four and two hundred eighty-five-A of the Administrative Code, as amended, are further amended to read as follows: Sec. 284. After at least six months' continues (sic) faithful, and satisfactory service, the President or proper head of department, or the chief of office in the case of municipal employees may, in his discretion, grant

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to an employee or laborer, whether permanent or temporary, of the national government, the provincial government, the government of a chartered city, of a municipality, of a municipal district or of government-owned or controlled corporations other than those mentioned in Section two hundred sixtyeight, two hundred seventy-one and two hundred seventy-four hereof, fifteen days vacation leave of absence with full pay, exclusive of Saturdays, Sundays and holidays, for each calendar year of service. Sec. 285-A. In addition to the vacation leave provided in the two preceding sections each employee or laborer, whether permanent or temporary, of the national government, the provincial government, the government of a chartered city, of a municipality or municipal district in any regularly and specially organized province, other than those mentioned in Section two hundred sixty-eight, two hundred seventyone and two hundred seventy-four hereof, shall be entitled to fifteen days of sick leave for each year of service with full pay, exclusive of Saturdays, Sundays and holidays: Provided, That such sick leave will be granted by the President, Head of Department or independent office concerned, or the chief of office in case of municipal employees, only on account of sickness on the part of the employee or laborer concerned or of any member of his immediate family. The Civil Service Commission in its here questioned Resolution No. 90-797 construed R.A. 2625 as referring only to government employees who have earned leave credits against which their absences may be charged with pay, as its letters speak only of leaves of absence with full pay. The respondent Commission ruled that a reading of R.A. 2625 does not show that a government employee who is on leave of absence without pay on a day before or immediately preceding a Saturday, Sunday or legal holiday is entitled to payment of his salary for said days. Administrative construction, if we may repeat, is not necessarily binding upon the courts. Action of an administrative agency may be disturbed or set aside by the judicial department if there is an error of law, or abuse of power or lack of jurisdiction or grave abuse of discretion clearly conflicting with either the letter or the spirit of a legislative enactment. 10 We find this petition to be impressed with merit. As held in Hidalgo vs. Hidalgo: 11 . . . . where the true intent of the law is clear that calls for the application of the cardinal rule of statutory construction that such intent or spirit must prevail over the letter thereof, for whatever is within the spirit of a statute is within the statute, since adherence to the letter would result in absurdity, injustice and contradictions and would defeat the plain and vital purpose of the statute. The intention of the legislature in the enactment of R.A. 2625 may be gleaned from, among others, the sponsorship speech of Senator Arturo M. Tolentino during the second reading of House Bill No. 41 (which became R.A. 2625). He said: The law actually provides for sick leave and vacation leave of 15 days each year of service to be with full pay. But under the present law, in computing these periods of leaves, Saturday, Sunday and holidays are included in the computation so that if an employee should become sick and absent himself on a Friday and then he reports for work on a Tuesday, in the computation of the leave the Saturday and Sunday will be included, so that he will be considered as having had a leave of Friday, Saturday, Sunday and Monday, or four days. The purpose of the present bill is to exclude from the computation of the leave those days, Saturdays and Sundays, as well as holidays, because actually the employee is entitled not to go to office during those days. And it is unfair and unjust to him that those days should be counted in the computation of leaves. 12 With this in mind, the construction by the respondent Commission of R.A. 2625 is not in accordance with the legislative intent. R.A. 2625 specifically provides that government employees are entitled to fifteen (15) days vacation leave of absence with full pay and fifteen (15) days sick leave with full pay, exclusive of Saturdays, Sundays and Holidays in both cases. Thus, the law speaks of the granting of a right and the law does not provide for a distinction between those who have accumulated leave credits and those who have exhausted their leave credits in order to enjoy such right. Ubi lex non distinguit nec nos distinguere debemus. The fact remains that government employees, whether or not they have accumulated leave credits, are not required by law to work on Saturdays, Sundays and Holidays and thus they can not be declared absent on such non-working days. They cannot be or are not considered absent on non-working days; they cannot and should not be deprived of their salary corresponding to said non-working days just

because they were absent without pay on the day immediately prior to, or after said non-working days. A different rule would constitute a deprivation of property without due process. Furthermore, before their amendment by R.A. 2625, Sections 284 and 285-A of the Revised Administrative Code applied to all government employee without any distinction. It follows that the effect of the amendment similarly applies to all employees enumerated in Sections 284 and 285-A, whether or not they have accumulated leave credits. As the questioned CSC policy is here declared invalid, we are next confronted with the question of what effect such invalidity will have. Will all government employees on a monthly salary basis, deprived of their salaries corresponding to Saturdays, Sundays or legal holidays (as herein petitioner was so deprived) since 12 February 1965, be entitled to recover the amounts corresponding to such non-working days? The general rule vis-a-vis legislation is that an unconstitutional act is not a law; it confers no rights; it imposes no duties; it affords no protection; it creates no office; it is in legal contemplation as inoperative as though it had never been passed. 13 But, as held in Chicot County Drainage District vs. Baxter State Bank: 14 . . . . It is quite clear, however, that such broad statements as to the effect of a determination of unconstitutionality must be taken with qualifications. The actual existence of a statute, prior to such determination is an operative fact and may have consequences which cannot always be ignored. The past cannot always be erased by a new judicial declaration. The effect of the subsequent ruling as to invalidity may have to be considered in various aspects with respect to particular relations, individual and corporate; and particular conduct, private and official. To allow all the affected government employees, similarly situated as petitioner herein, to claim their deducted salaries resulting from the past enforcement of the herein invalidated CSC policy, would cause quite a heavy financial burden on the national and local governments considering the length of time that such policy has been effective. Also, administrative and practical considerations must be taken into account if this ruling will have a strict restrospective application. The Court, in this connection, calls upon the respondent Commission and the Congress of the Philippines, if necessary, to handle this problem with justice and equity to all affected government employees. It must be pointed out, however, that after CSC Memorandum Circular No. 16 Series of 1991 amending the herein invalidated policy was promulgated on 26 April 1991, deductions from salaries made after said date in contravention of the new CSC policy must be restored to the government employees concerned. WHEREFORE, the petition is GRANTED, CSC Resolutions No. 90-497 and 90-797 are declared NULL and VOID. The respondent Commission is directed to take the appropriate action so that petitioner shall be paid the amounts previously but unlawfully deducted from his monthly salary as above indicated. No costs. SO ORDERED.

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E. To grant petitioner's application would only result in ruinous competition contrary to Section 4(d) of R.A. 776."[5] At the initial hearing for the application, petitioner raised the issue of lack of jurisdiction of the Board to hear the application because GrandAir did not possess a legislative franchise. SECOND DIVISION [G.R. No. 119528. March 26, 1997] PHILIPPINE AIRLINES, INC., petitioner, vs. CIVIL AERONAUTICS BOARD and GRAND INTERNATIONAL AIRWAYS, INC., respondents. DECISION TORRES, JR., J.: This Special Civil Action for Certiorari and Prohibition under Rule 65 of the Rules of Court seeks to prohibit respondent Civil Aeronautics Board from exercising jurisdiction over private respondent's Application for the issuance of a Certificate of Public Convenience and Necessity, and to annul and set aside a temporary operating permit issued by the Civil Aeronautics Board in favor of Grand International Airways (GrandAir, for brevity) allowing the same to engage in scheduled domestic air transportation services, particularly the Manila-Cebu, Manila-Davao, and converse routes. The main reason submitted by petitioner Philippine Airlines, Inc. (PAL) to support its petition is the fact that GrandAir does not possess a legislative franchise authorizing it to engage in air transportation service within the Philippines or elsewhere. Such franchise is, allegedly, a requisite for the issuance of a Certificate of Public Convenience or Necessity by the respondent Board, as mandated under Section 11, Article XII of the Constitution. Respondent GrandAir, on the other hand, posits that a legislative franchise is no longer a requirement for the issuance of a Certificate of Public Convenience and Necessity or a Temporary Operating Permit, following the Court's pronouncements in the case of Albano vs. Reyes,[1] as restated by the Court of Appeals in Avia Filipinas International vs. Civil Aeronautics Board[2] and Silangan Airways, Inc. vs. Grand International Airways, Inc., and the Hon. Civil Aeronautics Board.[3] On November 24, 1994, private respondent GrandAir applied for a Certificate of Public Convenience and Necessity with the Board, which application was docketed as CAB Case No. EP-12711.[4] Accordingly, the Chief Hearing Officer of the CAB issued a Notice of Hearing setting the application for initial hearing on December 16, 1994, and directing GrandAir to serve a copy of the application and corresponding notice to all scheduled Philippine Domestic operators. On December 14, 1994, GrandAir filed its Compliance, and requested for the issuance of a Temporary Operating Permit. Petitioner, itself the holder of a legislative franchise to operate air transport services, filed an Opposition to the application for a Certificate of Public Convenience and Necessity on December 16, 1995 on the following grounds: "A. The CAB has no jurisdiction to hear the petitioner's application until the latter has first obtained a franchise to operate from Congress. B. The petitioner's application is deficient in form and substance in that: 1. The application does not indicate a route structure including a computation of trunkline, secondary and rural available seat kilometers (ASK) which shall always be maintained at a monthly level at least 5% and 20% of the ASK offered into and out of the proposed base of operations for rural and secondary, respectively. 2. It does not contain a project/feasibility study, projected profit and loss statements, projected balance sheet, insurance coverage, list of personnel, list of spare parts inventory, tariff structure, documents supportive of financial capacity, route flight schedule, contracts on facilities (hangars, maintenance, lot) etc. C. Approval of petitioner's application would violate the equal protection clause of the constitution. D. There is no urgent need and demand for the services applied for. On December 20, 1994, the Chief Hearing Officer of CAB issued an Order denying petitioner's Opposition. Pertinent portions of the Order read: "PAL alleges that the CAB has no jurisdiction to hear the petitioner's application until the latter has first obtained a franchise to operate from Congress. The Civil Aeronautics Board has jurisdiction to hear and resolve the application. In Avia Filipina vs. CAB, CA G.R. No. 23365, it has been ruled that under Section 10 (c) (I) of R.A. 776, the Board possesses this specific power and duty. In view thereof, the opposition of PAL on this ground is hereby denied. SO ORDERED." Meantime, on December 22, 1994, petitioner this time, opposed private respondent's application for a temporary permit maintaining that: "1. The applicant does not possess the required fitness and capability of operating the services applied for under RA 776; and, 2. Applicant has failed to prove that there is clear and urgent public need for the services applied for." [6] On December 23, 1994, the Board promulgated Resolution No. 119(92) approving the issuance of a Temporary Operating Permit in favor of Grand Air[7] for a period of three months, i.e., from December 22, 1994 to March 22, 1994. Petitioner moved for the reconsideration of the issuance of the Temporary Operating Permit on January 11, 1995, but the same was denied in CAB Resolution No. 02 (95) on February 2, 1995.[8] In the said Resolution, the Board justified its assumption of jurisdiction over GrandAir's application. "WHEREAS, the CAB is specifically authorized under Section 10-C (1) of Republic Act No. 776 as follows: '(c) The Board shall have the following specific powers and duties: (1) In accordance with the provision of Chapter IV of this Act, to issue, deny, amend revise, alter, modify, cancel, suspend or revoke, in whole or in part, upon petitioner-complaint, or upon its own initiative, any temporary operating permit or Certificate of Public Convenience and Necessity; Provided, however; that in the case of foreign air carriers, the permit shall be issued with the approval of the President of the Republic of the Philippines." WHEREAS, such authority was affirmed in PAL vs. CAB, (23 SCRA 992), wherein the Supreme Court held that the CAB can even on its own initiative, grant a TOP even before the presentation of evidence; WHEREAS, more recently, Avia Filipinas vs. CAB, (CA-GR No. 23365), promulgated on October 30, 1991, held that in accordance with its mandate, the CAB can issue not only a TOP but also a Certificate of Public Convenience and Necessity (CPCN) to a qualified applicant therefor in the absence of a legislative franchise, citing therein as basis the decision of Albano vs. Reyes (175 SCRA 264) which provides (inter alia) that: a) Franchises by Congress are not required before each and every public utility may operate when the law has granted certain administrative agencies the power to grant licenses for or to authorize the operation of certain public utilities; b) The Constitutional provision in Article XII, Section 11 that the issuance of a franchise, certificate or other form of authorization for the operation of a public utility does not necessarily imply that only Congress has the power to grant such authorization since our statute books are replete with laws granting specified agencies in the Executive Branch the power to issue such authorization for certain classes of public utilities.

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WHEREAS, Executive Order No. 219 which took effect on 22 January 1995, provides in Section 2.1 that a minimum of two (2) operators in each route/link shall be encouraged and that routes/links presently serviced by only one (1) operator shall be open for entry to additional operators. RESOLVED, (T)HEREFORE, that the Motion for Reconsideration filed by Philippine Airlines on January 05, 1995 on the Grant by this Board of a Temporary Operating Permit (TOP) to Grand International Airways, Inc. alleging among others that the CAB has no such jurisdiction, is hereby DENIED, as it hereby denied, in view of the foregoing and considering that the grounds relied upon by the movant are not indubitable." On March 21, 1995, upon motion by private respondent, the temporary permit was extended for a period of six (6) months or up to September 22, 1995. Hence this petition, filed on April 3, 1995. Petitioners argue that the respondent Board acted beyond its powers and jurisdiction in taking cognizance of GrandAirs application for the issuance of a Certificate of Public Convenience and Necessity, and in issuing a temporary operating permit in the meantime, since GrandAir has not been granted and does not possess a legislative franchise to engage in scheduled domestic air transportation. A legislative franchise is necessary before anyone may engage in air transport services, and a franchise may only be granted by Congress. This is the meaning given by the petitioner upon a reading of Section 11, Article XII,[9] and Section 1, Article VI,[10] of the Constitution. To support its theory, PAL submits Opinion No. 163, S. 1989 of the Department of Justice, which reads: Dr. Arturo C. Corona Executive Director Civil Aeronautics Board PPL Building, 1000 U.N. Avenue Ermita, Manila Sir: This has reference to your request for opinion on the necessity of a legislative franchise before the Civil Aeronautics Board (CAB) may issue a Certificate of Public Convenience and Necessity and/or permit to engage in air commerce or air transportation to an individual or entity. You state that during the hearing on the application of Cebu Air for a congressional franchise, the House Committee on Corporations and Franchises contended that under the present Constitution, the CAB may not issue the abovestated certificate or permit, unless the individual or entity concerned possesses a legislative franchise. You believe otherwise, however, for the reason that under R.A. No. 776, as amended, the CAB is explicitly empowered to issue operating permits or certificates of public convenience and necessity and that this statutory provision is not inconsistent with the current charter. We concur with the view expressed by the House Committee on Corporations and Franchises. In an opinion rendered in favor of your predecessor-in-office, this Department observed that,xxx it is useful to note the distinction between the franchise to operate and a permit to commence operation. The former is sovereign and legislative in nature; it can be conferred only by the lawmaking authority (17 W and P, pp. 691-697). The latter is administrative and regulatory in character (In re Application of Fort Crook-Bellevue Boulevard Line, 283 NW 223); it is granted by an administrative agency, such as the Public Service Commission [now Board of Transportation], in the case of land transportation, and the Civil Aeronautics Board, in case of air services. While a legislative franchise is a pre-requisite to a grant of a certificate of public convenience and necessity to an airline company, such franchise alone cannot constitute the authority to commence operations, inasmuch as there are still matters relevant to such operations which are not determined in the franchise, like rates, schedules and routes, and which matters are resolved in the process of issuance of permit by the administrative. (Secretary of Justice opn No. 45, s. 1981)

Indeed, authorities are agreed that a certificate of public convenience and necessity is an authorization issued by the appropriate governmental agency for the operation of public services for which a franchise is required by law (Almario, Transportation and Public Service Law, 1977 Ed., p. 293; Agbayani, Commercial Law of the Phil., Vol. 4, 1979 Ed., pp. 380-381). Based on the foregoing, it is clear that a franchise is the legislative authorization to engage in a business activity or enterprise of a public nature, whereas a certificate of public convenience and necessity is a regulatory measure which constitutes the franchises authority to commence operations. It is thus logical that the grant of the former should precede the latter. Please be guided accordingly. (SGD.) SEDFREY A. ORDOEZ Secretary of Justice" Respondent GrandAir, on the other hand, relies on its interpretation of the provisions of Republic Act 776, which follows the pronouncements of the Court of Appeals in the cases of Avia Filipinas vs. Civil Aeronautics Board, and Silangan Airways, Inc. vs. Grand International Airways (supra). In both cases, the issue resolved was whether or not the Civil Aeronautics Board can issue the Certificate of Public Convenience and Necessity or Temporary Operating Permit to a prospective domestic air transport operator who does not possess a legislative franchise to operate as such. Relying on the Court's pronouncement in Albano vs. Reyes (supra), the Court of Appeals upheld the authority of the Board to issue such authority, even in the absence of a legislative franchise, which authority is derived from Section 10 of Republic Act 776, as amended by P.D. 1462.[11] The Civil Aeronautics Board has jurisdiction over GrandAir's Application for a Temporary Operating Permit. This rule has been established in the case of Philippine Air Lines Inc., vs. Civil Aeronautics Board, promulgated on June 13, 1968.[12] The Board is expressly authorized by Republic Act 776 to issue a temporary operating permit or Certificate of Public Convenience and Necessity, and nothing contained in the said law negates the power to issue said permit before the completion of the applicant's evidence and that of the oppositor thereto on the main petition. Indeed, the CAB's authority to grant a temporary permit "upon its own initiative" strongly suggests the power to exercise said authority, even before the presentation of said evidence has begun. Assuming arguendo that a legislative franchise is prerequisite to the issuance of a permit, the absence of the same does not affect the jurisdiction of the Board to hear the application, but tolls only upon the ultimate issuance of the requested permit. The power to authorize and control the operation of a public utility is admittedly a prerogative of the legislature, since Congress is that branch of government vested with plenary powers of legislation. "The franchise is a legislative grant, whether made directly by the legislature itself, or by any one of its properly constituted instrumentalities. The grant, when made, binds the public, and is, directly or indirectly, the act of the state."[13] The issue in this petition is whether or not Congress, in enacting Republic Act 776, has delegated the authority to authorize the operation of domestic air transport services to the respondent Board, such that Congressional mandate for the approval of such authority is no longer necessary. Congress has granted certain administrative agencies the power to grant licenses for, or to authorize the operation of certain public utilities. With the growing complexity of modern life, the multiplication of the subjects of governmental regulation, and the increased difficulty of administering the laws, there is a constantly growing tendency towards the delegation of greater powers by the legislature, and towards the approval of the practice by the courts.[14] It is generally recognized that a franchise may be derived indirectly from the state through a duly designated agency, and to this extent, the power to grant franchises has frequently been delegated, even to agencies other than those of a legislative nature.[15] In pursuance of this, it has been held that privileges conferred by grant by local authorities as agents for the state constitute as much a legislative franchise as though the grant had been made by an act of the Legislature. [16] The trend of modern legislation is to vest the Public Service Commissioner with the power to regulate and control the operation of public services under reasonable rules and regulations, and as a general rule,

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courts will not interfere with the exercise of that discretion when it is just and reasonable and founded upon a legal right.[17] It is this policy which was pursued by the Court in Albano vs. Reyes. Thus, a reading of the pertinent issuances governing the Philippine Ports Authority,[18] proves that the PPA is empowered to undertake by itself the operation and management of the Manila International Container Terminal, or to authorize its operation and management by another by contract or other means, at its option. The latter power having been delegated to the PPA, a franchise from Congress to authorize an entity other than the PPA to operate and manage the MICP becomes unnecessary. Given the foregoing postulates, we find that the Civil Aeronautics Board has the authority to issue a Certificate of Public Convenience and Necessity, or Temporary Operating Permit to a domestic air transport operator, who, though not possessing a legislative franchise, meets all the other requirements prescribed by the law. Such requirements were enumerated in Section 21 of R.A. 776. There is nothing in the law nor in the Constitution, which indicates that a legislative franchise is an indispensable requirement for an entity to operate as a domestic air transport operator. Although Section 11 of Article XII recognizes Congress' control over any franchise, certificate or authority to operate a public utility, it does not mean Congress has exclusive authority to issue the same. Franchises issued by Congress are not required before each and every public utility may operate. [19] In many instances, Congress has seen it fit to delegate this function to government agencies, specialized particularly in their respective areas of public service. A reading of Section 10 of the same reveals the clear intent of Congress to delegate the authority to regulate the issuance of a license to operate domestic air transport services: SECTION 10.Powers and Duties of the Board. (A) Except as otherwise provided herein, the Board shall have the power to regulate the economic aspect of air transportation, and shall have general supervision and regulation of, the jurisdiction and control over air carriers, general sales agents, cargo sales agents, and air freight forwarders as well as their property rights, equipment, facilities and franchise, insofar as may be necessary for the purpose of carrying out the provision of this Act. In support of the Board's authority as stated above, it is given the following specific powers and duties: (C) The Board shall have the following specific powers and duties: (1) In accordance with the provisions of Chapter IV of this Act, to issue, deny, amend, revise, alter, modify, cancel, suspend or revoke in whole or in part upon petition or complaint or upon its own initiative any Temporary Operating Permit or Certificate of Public Convenience and Necessity: Provided however, That in the case of foreign air carriers, the permit shall be issued with the approval of the President of the Republic of the Philippines. Petitioner argues that since R.A. 776 gives the Board the authority to issue "Certificates of Public Convenience and Necessity", this, according to petitioner, means that a legislative franchise is an absolute requirement. It cites a number of authorities supporting the view that a Certificate of Public Convenience and Necessity is issued to a public service for which a franchise is required by law, as distinguished from a "Certificate of Public Convenience" which is an authorization issued for the operation of public services for which no franchise, either municipal or legislative, is required by law. [20] This submission relies on the premise that the authority to issue a certificate of public convenience and necessity is a regulatory measure separate and distinct from the authority to grant a franchise for the operation of the public utility subject of this particular case, which is exclusively lodged by petitioner in Congress. We do not agree with the petitioner. Many and varied are the definitions of certificates of public convenience which courts and legal writers have drafted. Some statutes use the terms "convenience and necessity" while others use only the words "public convenience." The terms "convenience and necessity", if used together in a statute, are usually held not to be separable, but are construed together. Both words modify each other and must be construed together. The word 'necessity' is so connected, not as an additional requirement but to modify and qualify what might otherwise be taken as the strict significance of the word necessity. Public convenience and

necessity exists when the proposed facility will meet a reasonable want of the public and supply a need which the existing facilities do not adequately afford. It does not mean or require an actual physical necessity or an indispensable thing.[21] "The terms 'convenience' and 'necessity' are to be construed together, although they are not synonymous, and effect must be given both. The convenience of the public must not be circumscribed by according to the word 'necessity' its strict meaning or an essential requisites."[22] The use of the word "necessity", in conjunction with "public convenience" in a certificate of authorization to a public service entity to operate, does not in any way modify the nature of such certification, or the requirements for the issuance of the same. It is the law which determines the requisites for the issuance of such certification, and not the title indicating the certificate. Congress, by giving the respondent Board the power to issue permits for the operation of domestic transport services, has delegated to the said body the authority to determine the capability and competence of a prospective domestic air transport operator to engage in such venture. This is not an instance of transforming the respondent Board into a mini-legislative body, with unbridled authority to choose who should be given authority to operate domestic air transport services. "To be valid, the delegation itself must be circumscribed by legislative restrictions, not a "roving commission" that will give the delegate unlimited legislative authority. It must not be a delegation "running riot" and "not canalized with banks that keep it from overflowing." Otherwise, the delegation is in legal effect an abdication of legislative authority, a total surrender by the legislature of its prerogatives in favor of the delegate."[23] Congress, in this instance, has set specific limitations on how such authority should be exercised. Firstly, Section 4 of R.A. No. 776, as amended, sets out the following guidelines or policies: "SECTION 4.Declaration of policies. In the exercise and performance of its powers and duties under this Act, the Civil Aeronautics Board and the Civil Aeronautics Administrator shall consider the following, among other things, as being in the public interest, and in accordance with the public convenience and necessity: (a) The development and utilization of the air potential of the Philippines; (b) The encouragement and development of an air transportation system properly adapted to the present and future of foreign and domestic commerce of the Philippines, of the Postal Service and of the National Defense; (c) The regulation of air transportation in such manner as to recognize and preserve the inherent advantages of, assure the highest degree of safety in, and foster sound economic condition in, such transportation, and to improve the relations between, and coordinate transportation by, air carriers; (d) The promotion of adequate, economical and efficient service by air carriers at reasonable charges, without unjust discriminations, undue preferences or advantages, or unfair or destructive competitive practices; (e) Competition between air carriers to the extent necessary to assure the sound development of an air transportation system properly adapted to the need of the foreign and domestic commerce of the Philippines, of the Postal Service, and of the National Defense; (f) To promote safety of flight in air commerce in the Philippines; and, (g) The encouragement and development of civil aeronautics. More importantly, the said law has enumerated the requirements to determine the competency of a prospective operator to engage in the public service of air transportation. SECTION 12.Citizenship requirement. Except as otherwise provided in the Constitution and existing treaty or treaties, a permit authorizing a person to engage in domestic air commerce and/or air transportation shall be issued only to citizens of the Philippines. [24]

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SECTION 21.Issuance of permit. The Board shall issue a permit authorizing the whole or any part of the service covered by the application, if it finds: (1) that the applicant is fit, willing and able to perform such service properly in conformity with the provisions of this Act and the rules, regulations, and requirements issued thereunder; and (2) that such service is required by the public convenience and necessity; otherwise the application shall be denied. Furthermore, the procedure for the processing of the application of a Certificate of Public Convenience and Necessity had been established to ensure the weeding out of those entities that are not deserving of public service.[25] In sum, respondent Board should now be allowed to continue hearing the application of GrandAir for the issuance of a Certificate of Public Convenience and Necessity, there being no legal obstacle to the exercise of its jurisdiction. ACCORDINGLY, in view of the foregoing considerations, the Court RESOLVED to DISMISS the instant petition for lack of merit. The respondent Civil Aeronautics Board is hereby DIRECTED to CONTINUE hearing the application of respondent Grand International Airways, Inc. for the issuance of a Certificate of Public Convenience and Necessity. SO ORDERED.

In view of the need to establish mechanisms that will enhance the protection for Filipino domestic helpers going to Hong Kong, the recruitment of the same by private employment agencies is hereby temporarily suspended effective 1 July 1991. As such, the DOLE through the facilities of the Philippine Overseas Employment Administration shall take over the processing and deployment of household workers bound for Hong Kong, subject to guidelines to be issued for said purpose. In support of this policy, all DOLE Regional Directors and the Bureau of Local Employment's regional offices are likewise directed to coordinate with the POEA in maintaining a manpower pool of prospective domestic helpers to Hong Kong on a regional basis. For compliance.(Emphasis ours; p. 30, Rollo.) Pursuant to the above DOLE circular, the POEA issued Memorandum Circular No. 30, Series of 1991, dated July 10, 1991, providing GUIDELINES on the Government processing and deployment of Filipino domestic helpers to Hong Kong and the accreditation of Hong Kong recruitment agencies intending to hire Filipino domestic helpers. Subject: Guidelines on the Temporary Government Processing and Deployment of Domestic Helpers to Hong Kong. Pursuant to Department Order No. 16, series of 1991 and in order to operationalize the temporary government processing and deployment of domestic helpers (DHs) to Hong Kong resulting from the temporary suspension of recruitment by private employment agencies for said skill and host market, the following guidelines and mechanisms shall govern the implementation of said policy. I. Creation of a joint POEA-OWWA Household Workers Placement Unit (HWPU) An ad hoc, one stop Household Workers Placement Unit [or HWPU] under the supervision of the POEA shall take charge of the various operations involved in the Hong Kong-DH industry segment: The HWPU shall have the following functions in coordination with appropriate units and other entities concerned: 1. Negotiations with and Accreditation of Hong Kong Recruitment Agencies 2. Manpower Pooling 3. Worker Training and Briefing 4. Processing and Deployment 5. Welfare Programs

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 101279 August 6, 1992 PHILIPPINE ASSOCIATION OF SERVICE EXPORTERS, INC., petitioner, vs. HON. RUBEN D. TORRES, as Secretary of the Department of Labor & Employment, and JOSE N. SARMIENTO, as Administrator of the PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION,respondents. De Guzman, Meneses & Associates for petitioner.

GRIO-AQUINO, J.: This petition for prohibition with temporary restraining order was filed by the Philippine Association of Service Exporters (PASEI, for short), to prohibit and enjoin the Secretary of the Department of Labor and Employment (DOLE) and the Administrator of the Philippine Overseas Employment Administration (or POEA) from enforcing and implementing DOLE Department Order No. 16, Series of 1991 and POEA Memorandum Circulars Nos. 30 and 37, Series of 1991, temporarily suspending the recruitment by private employment agencies of Filipino domestic helpers for Hong Kong and vesting in the DOLE, through the facilities of the POEA, the task of processing and deploying such workers. PASEI is the largest national organization of private employment and recruitment agencies duly licensed and authorized by the POEA, to engaged in the business of obtaining overseas employment for Filipino landbased workers, including domestic helpers. On June 1, 1991, as a result of published stories regarding the abuses suffered by Filipino housemaids employed in Hong Kong, DOLE Secretary Ruben D. Torres issued Department Order No. 16, Series of 1991, temporarily suspending the recruitment by private employment agencies of "Filipino domestic helpers going to Hong Kong" (p. 30, Rollo). The DOLE itself, through the POEA took over the business of deploying such Hong Kong-bound workers.

II. Documentary Requirements and Other Conditions for Accreditation of Hong Kong Recruitment Agencies or Principals Recruitment agencies in Hong Kong intending to hire Filipino DHs for their employers may negotiate with the HWPU in Manila directly or through the Philippine Labor Attache's Office in Hong Kong. xxx xxx xxx X. Interim Arrangement All contracts stamped in Hong Kong as of June 30 shall continue to be processed by POEA until 31 July 1991 under the name of the Philippine agencies concerned. Thereafter, all contracts shall be processed with the HWPU. Recruitment agencies in Hong Kong shall submit to the Philippine Consulate General in Hong kong a list of their accepted applicants in their pool within the last week of July. The last day of acceptance shall be July 31 which shall then be the basis of HWPU in accepting contracts for processing. After the exhaustion of their respective pools the only source of applicants will be the POEA manpower pool. For strict compliance of all concerned. (pp. 31-35, Rollo.) On August 1, 1991, the POEA Administrator also issued Memorandum Circular No. 37, Series of 1991, on the processing of employment contracts of domestic workers for Hong Kong.

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TO: All Philippine and Hong Kong Agencies engaged in the recruitment of Domestic helpers for Hong Kong Further to Memorandum Circular No. 30, series of 1991 pertaining to the government processing and deployment of domestic helpers (DHs) to Hong Kong, processing of employment contracts which have been attested by the Hong Kong Commissioner of Labor up to 30 June 1991 shall be processed by the POEA Employment Contracts Processing Branch up to 15 August 1991 only. Effective 16 August 1991, all Hong Kong recruitment agent/s hiring DHs from the Philippines shall recruit under the new scheme which requires prior accreditation which the POEA. Recruitment agencies in Hong Kong may apply for accreditation at the Office of the Labor Attache, Philippine Consulate General where a POEA team is posted until 31 August 1991. Thereafter, those who failed to have themselves accredited in Hong Kong may proceed to the POEA-OWWA Household Workers Placement Unit in Manila for accreditation before their recruitment and processing of DHs shall be allowed. Recruitment agencies in Hong Kong who have some accepted applicants in their pool after the cut-off period shall submit this list of workers upon accreditation. Only those DHs in said list will be allowed processing outside of the HWPU manpower pool. For strict compliance of all concerned. (Emphasis supplied, p. 36, Rollo.) On September 2, 1991, the petitioner, PASEI, filed this petition for prohibition to annul the aforementioned DOLE and POEA circulars and to prohibit their implementation for the following reasons: 1. that the respondents acted with grave abuse of discretion and/or in excess of their rule-making authority in issuing said circulars; 2. that the assailed DOLE and POEA circulars are contrary to the Constitution, are unreasonable, unfair and oppressive; and 3. that the requirements of publication and filing with the Office of the National Administrative Register were not complied with. There is no merit in the first and second grounds of the petition. Article 36 of the Labor Code grants the Labor Secretary the power to restrict and regulate recruitment and placement activities. Art. 36. Regulatory Power. The Secretary of Labor shall have the power to restrict and regulate the recruitment and placement activities of all agencies within the coverage of this title [Regulation of Recruitment and Placement Activities] and is hereby authorized to issue orders and promulgate rules and regulations to carry out the objectives and implement the provisions of this title . (Emphasis ours.) On the other hand, the scope of the regulatory authority of the POEA, which was created by Executive Order No. 797 on May 1, 1982 to take over the functions of the Overseas Employment Development Board, the National Seamen Board, and the overseas employment functions of the Bureau of Employment Services, is broad and far-ranging for: 1. Among the functions inherited by the POEA from the defunct Bureau of Employment Services was the power and duty: "2. To establish and maintain a registration and/or licensing system to regulate private sector participation in the recruitment and placement of workers, locally and overseas, . . ." (Art. 15, Labor Code, Emphasis supplied). (p. 13, Rollo.) 2. It assumed from the defunct Overseas Employment Development Board the power and duty: 3. To recruit and place workers for overseas employment of Filipino contract workers on a government to government arrangement and in such other sectors as policy may dictate . . . (Art. 17, Labor Code.) (p. 13, Rollo.) 3. From the National Seamen Board, the POEA took over:

2. To regulate and supervise the activities of agents or representatives of shipping companies in the hiring of seamen for overseas employment; and secure the best possible terms of employment for contract seamen workers and secure compliance therewith. (Art. 20, Labor Code.) The vesture of quasi-legislative and quasi-judicial powers in administrative bodies is not unconstitutional, unreasonable and oppressive. It has been necessitated by "the growing complexity of the modern society" (Solid Homes, Inc. vs. Payawal, 177 SCRA 72, 79). More and more administrative bodies are necessary to help in the regulation of society's ramified activities. "Specialized in the particular field assigned to them, they can deal with the problems thereof with more expertise and dispatch than can be expected from the legislature or the courts of justice" (Ibid.). It is noteworthy that the assailed circulars do not prohibit the petitioner from engaging in the recruitment and deployment of Filipino landbased workers for overseas employment. A careful reading of the challenged administrative issuances discloses that the same fall within the "administrative and policing powers expressly or by necessary implication conferred" upon the respondents (People vs. Maceren, 79 SCRA 450). The power to "restrict and regulate conferred by Article 36 of the Labor Code involves a grant of police power (City of Naga vs. Court of Appeals, 24 SCRA 898). To "restrict" means "to confine, limit or stop" (p. 62, Rollo) and whereas the power to "regulate" means "the power to protect, foster, promote, preserve, and control with due regard for the interests, first and foremost, of the public, then of the utility and of its patrons" (Philippine Communications Satellite Corporation vs. Alcuaz, 180 SCRA 218). The Solicitor General, in his Comment, aptly observed: . . . Said Administrative Order [i.e., DOLE Administrative Order No. 16] merely restricted the scope or area of petitioner's business operations by excluding therefrom recruitment and deployment of domestic helpers for Hong Kong till after the establishment of the "mechanisms" that will enhance the protection of Filipino domestic helpers going to Hong Kong. In fine, other than the recruitment and deployment of Filipino domestic helpers for Hongkong, petitioner may still deploy other class of Filipino workers either for Hongkong and other countries and all other classes of Filipino workers for other countries. Said administrative issuances, intended to curtail, if not to end, rampant violations of the rule against excessive collections of placement and documentation fees, travel fees and other charges committed by private employment agencies recruiting and deploying domestic helpers to Hongkong. [They are reasonable, valid and justified under the general welfare clause of the Constitution, since the recruitment and deployment business, as it is conducted today, is affected with public interest. xxx xxx xxx The alleged takeover [of the business of recruiting and placing Filipino domestic helpers in Hongkong] is merely a remedial measure, and expires after its purpose shall have been attained. This is evident from the tenor of Administrative Order No. 16 that recruitment of Filipino domestic helpers going to Hongkong by private employment agencies are hereby "temporarily suspended effective July 1, 1991." The alleged takeover is limited in scope, being confined to recruitment of domestic helpers going to Hongkong only. xxx xxx xxx . . . the justification for the takeover of the processing and deploying of domestic helpers for Hongkong resulting from the restriction of the scope of petitioner's business is confined solely to the unscrupulous practice of private employment agencies victimizing applicants for employment as domestic helpers for Hongkong and not the whole recruitment business in the Philippines. (pp. 62-65,Rollo.) The questioned circulars are therefore a valid exercise of the police power as delegated to the executive branch of Government. Nevertheless, they are legally invalid, defective and unenforceable for lack of power publication and filing in the Office of the National Administrative Register as required in Article 2 of the Civil Code, Article 5 of the Labor Code and Sections 3(1) and 4, Chapter 2, Book VII of the Administrative Code of 1987 which provide:

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Art. 2. Laws shall take effect after fifteen (15) days following the completion of their publication in the Official Gazatte, unless it is otherwise provided. . . . (Civil Code.) Art. 5. Rules and Regulations. The Department of Labor and other government agencies charged with the administration and enforcement of this Code or any of its parts shall promulgate the necessary implementing rules and regulations. Such rules and regulations shall become effective fifteen (15) days after announcement of their adoption in newspapers of general circulation. (Emphasis supplied, Labor Code, as amended.) Sec. 3.Filing. (1) Every agency shall file with the University of the Philippines Law Center, three (3) certified copies of every rule adopted by it. Rules in force on the date of effectivity of this Code which are not filed within three (3) months shall not thereafter be the basis of any sanction against any party or persons. (Emphasis supplied, Chapter 2, Book VII of the Administrative Code of 1987.) Sec. 4.Effectivity. In addition to other rule-making requirements provided by law not inconsistent with this Book, each rule shall become effective fifteen (15) days from the date of filing as above provided unless a different date is fixed by law, or specified in the rule in cases of imminent danger to public health, safety and welfare, the existence of which must be expressed in a statement accompanying the rule. The agency shall take appropriate measures to make emergency rules known to persons who may be affected by them. (Emphasis supplied, Chapter 2, Book VII of the Administrative Code of 1987). Once, more we advert to our ruling in Taada vs. Tuvera, 146 SCRA 446 that: . . . Administrative rules and regulations must also be published if their purpose is to enforce or implement existing law pursuant also to a valid delegation. (p. 447.) 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 published. Neither is publication required of the socalled letters of instructions issued by administrative superiors concerning the rules or guidelines to be followed by their subordinates in the performance of their duties. (p. 448.) We agree that publication must be in full or it is no publication at all since its purpose is to inform the public of the content of the laws. (p. 448.) For lack of proper publication, the administrative circulars in question may not be enforced and implemented. WHEREFORE, the writ of prohibition is GRANTED. The implementation of DOLE Department Order No. 16, Series of 1991, and POEA Memorandum Circulars Nos. 30 and 37, Series of 1991, by the public respondents is hereby SUSPENDED pending compliance with the statutory requirements of publication and filing under the aforementioned laws of the land. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 78385 August 31, 1987 PHILIPPINE CONSUMERS FOUNDATION, INC., petitioner, vs. THE SECRETARY OF EDUCATION, CULTURE AND SPORTS, respondent.

respondent Secretary of Education, Culture and Sports is a ranking cabinet member who heads the Department of Education, Culture and Sports of the Office of the President of the Philippines. On February 21, 1987, the Task Force on Private Higher Education created by the Department of Education, Culture and Sports (hereinafter referred to as the DECS) submitted a report entitled "Report and Recommendations on a Policy for Tuition and Other School Fees." The report favorably recommended to the DECS the following courses of action with respect to the Government's policy on increases in school fees for the schoolyear 1987 to 1988 (1) Private schools may be allowed to increase its total school fees by not more than 15 per cent to 20 per cent without the need for the prior approval of the DECS. Schools that wish to increase school fees beyond the ceiling would be subject to the discretion of the DECS; (2) Any private school may increase its total school fees in excess of the ceiling, provided that the total schools fees will not exceed P1,000.00 for the schoolyear in the elementary and secondary levels, and P50.00 per academic unit on a semestral basis for the collegiate level. 1 The DECS took note of the report of the Task Force and on the basis of the same, the DECS, through the respondent Secretary of Education, Culture and Sports (hereinafter referred to as the respondent Secretary), issued an Order authorizing, inter alia, the 15% to 20% increase in school fees as recommended by the Task Force. The petitioner sought a reconsideration of the said Order, apparently on the ground that the increases were too high. 2 Thereafter, the DECS issued Department Order No. 37 dated April 10, 1987 modifying its previous Order and reducing the increases to a lower ceiling of 10% to 15%, accordingly. 3 Despite this reduction, the petitioner still opposed the increases. On April 23, 1987, the petitioner, through counsel, sent a telegram to the President of the Philippines urging the suspension of the implementation of Department Order No. 37. 4 No response appears to have been obtained from the Office of the President. Thus, on May 20, 1987, the petitioner, allegedly on the basis of the public interest, went to this Court and filed the instant Petition for prohibition, seeking that judgment be rendered declaring the questioned Department Order unconstitutional. The thrust of the Petition is that the said Department Order was issued without any legal basis. The petitioner also maintains that the questioned Department Order was issued in violation of the due process clause of the Constitution in asmuch as the petitioner was not given due notice and hearing before the said Department Order was issued. In support of the first argument, the petitioner argues that while the DECS is authorized by law to regulate school fees in educational institutions, the power to regulate does not always include the power to increase school fees. 5 Regarding the second argument, the petitioner maintains that students and parents are interested parties that should be afforded an opportunity for a hearing before school fees are increased. In sum, the petitioner stresses that the questioned Order constitutes a denial of substantive and procedural due process of law. Complying with the instructions of this Court, 6 the respondent Secretary submitted a Comment on the Petition. 7 The respondent Secretary maintains, inter alia, that the increase in tuition and other school fees is urgent and necessary, and that the assailed Department Order is not arbitrary in character. In due time, the petitioner submitted a Reply to the Comment. 8 Thereafter, We considered the case submitted for resolution. After a careful examination of the entire record of the case, We find the instant Petition devoid of merit. We are not convinced by the argument that the power to regulate school fees "does not always include the power to increase" such fees. Section 57 (3) of Batas Pambansa Blg. 232, otherwise known as The Education Act of 1982, vests the DECS with the power to regulate the educational system in the country, to wit: SEC. 57.Educations and powers of the Ministry. The Ministry shall: xxx xxx xxx (3) Promulgate rules and regulations necessary for the administration, supervision and regulation of the educational system in accordance with declared policy.

GANCAYCO, J.: This is an original Petition for prohibition with a prayer for the issuance of a writ of preliminary injunction. The record of the case discloses that the herein petitioner Philippine Consumers Foundation, Inc. is a nonstock, non-profit corporate entity duly organized and existing under the laws of the Philippines. The herein

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xxx xxx xxx 9 Section 70 of the same Act grants the DECS the power to issue rules which are likewise necessary to discharge its functions and duties under the law, to wit: SEC. 70.Rule-making Authority. The Minister of Education and Culture, charged with the administration and enforcement of this Act, shall promulgate the necessary implementing rules and regulations. In the absence of a statute stating otherwise, this power includes the power to prescribe school fees. No other government agency has been vested with the authority to fix school fees and as such, the power should be considered lodged with the DECS if it is to properly and effectively discharge its functions and duties under the law. We find the remaining argument of the petitioner untenable. The petitioner invokes the due process clause of the Constitution against the alleged arbitrariness of the assailed Department Order. The petitioner maintains that the due process clause requires that prior notice and hearing are indispensable for the Department Order to be validly issued. We disagree. The function of prescribing rates by an administrative agency may be either a legislative or an adjudicative function. If it were a legislative function, the grant of prior notice and hearing to the affected parties is not a requirement of due process. As regards rates prescribed by an administrative agency in the exercise of its quasi-judicial function, prior notice and hearing are essential to the validity of such rates. When the rules and/or rates laid down by an administrative agency are meant to apply to all enterprises of a given kind throughout the country, they may partake of a legislative character. Where the rules and the rates imposed apply exclusively to a particular party, based upon a finding of fact, then its function is quasi-judicial in character. 9a Is Department Order No. 37 issued by the DECS in the exercise of its legislative function? We believe so. The assailed Department Order prescribes the maximum school fees that may be charged by all private schools in the country for schoolyear 1987 to 1988. This being so, prior notice and hearing are not essential to the validity of its issuance. This observation notwithstanding, there is a failure on the part of the petitioner to show clear and convincing evidence of such arbitrariness. As the record of the case discloses, the DECS is not without any justification for the issuance of the questioned Department Order. It would be reasonable to assume that the report of the Task Force created by the DECS, on which it based its decision to allow an increase in school fees, was made judiciously. Moreover, upon the instance of the petitioner, as it so admits in its Petition, the DECS had actually reduced the original rates of 15% to 20% down to 10% to 15%, accordingly. Under the circumstances peculiar to this case, We cannot consider the assailed Department Order arbitrary. Under the Rules of Court, it is presumed that official duty has been regularly performed. 10 In the absence of proof to the contrary, that presumption prevails. This being so, the burden of proof is on the party assailing the regularity of official proceedings. In the case at bar, the petitioner has not successfully disputed the presumption. We commend the petitioner for taking the cudgels for the public, especially the parents and the students of the country. Its zeal in advocating the protection of the consumers in its activities should be lauded rather than discouraged. But a more convincing case should be made out by it if it is to seek relief from the courts some time in the future. Petitioner must establish that respondent acted without or in excess of her jurisdiction; or with grave abuse of discretion, and there is no appeal or any other plain, speedy, and adequate remedy in the ordinary course of law before the extraordinary writ of prohibition may issue. 11 This Court, however, does not go to the extent of saying that it gives its judicial imprimatur to future increases in school fees. The increases must not be unreasonable and arbitrary so as to amount to an outrageous exercise of government authority and power. In such an eventuality, this Court will not hesitate to exercise the power of judicial review in its capacity as the ultimate guardian of the Constitution.

WHEREFORE, in view of the foregoing, the instant Petition for prohibition is hereby DISMISSED for lack of merit. We make no pronouncement as to costs. SO ORDERED. Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 148083 July 21, 2006

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. BICOLANDIA DRUG CORPORATION (Formerly known as ELMAS DRUG CO.), respondent. DECISION VELASCO, JR., J.: In cases of conflict between the law and the rules and regulations implementing the law, the law shall always prevail. Should Revenue Regulations deviate from the law they seek to implement, they will be struck down. The Facts In 1992, Republic Act No. 7432, otherwise known as "An Act to Maximize the Contribution of Senior Citizens to Nation Building, Grant Benefits and Special Privileges and For Other Purposes," granted senior citizens several privileges, one of which was obtaining a 20 percent discount from all establishments relative to the use of transportation services, hotels and similar lodging establishments, restaurants and recreation centers and purchase of medicines anywhere in the country. 1 The law also provided that the private establishments giving the discount to senior citizens may claim the cost as tax credit.2 In compliance with the law, the Bureau of Internal Revenue issued Revenue Regulations No. 2-94, which defined "tax credit" as follows: Tax Credit refers to the amount representing the 20% discount granted to a qualified senior citizen by all establishments relative to their utilization of transportation services, hotels and similar lodging establishments, restaurants, halls, circuses, carnivals and other similar places of culture, leisure and amusement, which discount shall be deducted by the said establishments from their gross income for income tax purposes and from their gross sales for value-added tax or other percentage tax purposes.3 In 1995, respondent Bicolandia Drug Corporation, a corporation engaged in the business of retailing pharmaceutical products under the business style of "Mercury Drug," granted the 20 percent sales discount to qualified senior citizens purchasing their medicines in compliance with R.A. No. 7432.4 Respondent treated this discount as a deduction from its gross income in compliance with Revenue Regulations No. 294, which implemented R.A. No. 7432.5 On April 15, 1996, respondent filed its 1995 Corporate Annual Income Tax Return declaring a net loss position with nil income tax liability.6 On December 27, 1996, respondent filed a claim for tax refund or credit in the amount of PhP 259,659.00 with the Appellate Division of the Bureau of Internal Revenuebecause its net losses for the year 1995 prevented it from benefiting from the treatment of sales discounts as a deduction from gross sales during the said taxable year.7 It alleged that the petitioner Commissioner of Internal Revenue erred in treating the 20 percent sales discount given to senior citizens as a deduction from its gross income for income tax purposes or other percentage tax purposes rather than as a tax credit.8 On April 6, 1998, respondent appealed to the Court of Tax Appeals in order to toll the running of two (2)year prescriptive period to file a claim for refund pursuant to Section 230 of the Tax Code then.9 Respondent argued that since Section 4 of R.A. No. 7432 provided that discounts granted to senior citizens may be claimed as tax credit, Section 2(i) of Revenue Regulations No. 2-94, which referred to the tax credit as the amount representing the 20 percent discount that "shall be deducted by the said establishments from their gross income for income tax purposes and from their gross sales for value-added

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tax or other percentage tax purposes,"10 is illegal, void and without effect for being inconsistent with the statute it implements. Petitioner maintained that Revenue Regulations No. 2-94 is valid since the law tasked the Department of Finance, among other government offices, with the issuance of the necessary rules and regulations to carry out the objectives of the law.11 Ruling of the Court of Tax Appeals The Court of Tax Appeals declared that the provisions of R.A. No. 7432 would prevail over Section 2(i) of Revenue Regulations No. 2-94, whose definition of "tax credit" deviated from the intendment of the law; and as a result, partially granted the respondent's claim for a refund. After examining the evidence on record, the Court of Tax Appeals reduced the claimed 20 percent sales discount, thus reducing the refund to be given. It ruled that "Respondent is hereby ORDERED to REFUND in favor of Petitioner the amount of P236,321.52, representing overpaid income tax for the year 1995."12 Ruling of the Court of Appeals On appeal, the Court of Appeals modified the decision of the Court of Tax Appeals as the law provided for a tax credit, not a tax refund. The fallo of the Decision states: WHEREFORE, premises considered, the present appeal is hereby GRANTED and the Decision of the Court of Tax Appeals in C.T.A. Case No. 5599 is hereby MODIFIED in the sense that the award of tax refund is ANNULLED and SET ASIDE. Instead, the petitioner is hereby ORDERED to issue a tax credit certificate in favor of the respondent in the amount of P 236,321.52. No pronouncement as to costs.13 The Issue Petitioner now argues that the Court of Appeals erred in holding that the 20 percent sales discount granted to qualified senior citizens by the respondent pursuant to R.A. No. 7432 may be claimed as a tax credit, instead of a deduction from gross income or gross sales.14 The Court's Ruling The petition is not meritorious. Redefining "Tax Credit" as "Tax Deduction" The problem stems from the issuance of Revenue Regulations No. 2-94, which was supposed to implement R.A. No. 7432, and the radical departure it made when it defined the "tax credit" that would be granted to establishments that give 20 percent discount to senior citizens. Under Revenue Regulations No. 2-94, the tax credit is "the amount representing the 20 percent discount granted to a qualified senior citizen by all establishments relative to their utilization of transportation services, hotels and similar lodging establishments, restaurants, drugstores, recreation centers, theaters, cinema houses, concert halls, circuses, carnivals and other similar places of culture, leisure and amusement, which discount shall be deducted by the said establishments from their gross income for income tax purposes and from their gross sales for value-added tax or other percentage tax purposes."15 It equated "tax credit" with "tax deduction," contrary to the definition in Black's Law Dictionary, which defined tax credit as: An amount subtracted from an individual's or entity's tax liability to arrive at the total tax liability. A tax credit reduces the taxpayer's liability x x x, compared to a deduction which reduces taxable income upon which the tax liability is calculated. A credit differs from deduction to the extent that the former is subtracted from the tax while the latter is subtracted from income before the tax is computed.16 The interpretation of an administrative government agency, which is tasked to implement the statute, is accorded great respect and ordinarily controls the construction of the courts. 17 Be that as it may, the definition laid down in the questioned Revenue Regulations can still be subjected to scrutiny. Courts will not hesitate to set aside an executive interpretation when it is clearly erroneous. There is no need for interpretation when there is no ambiguity in the rule, or when the language or words used are clear and plain or readily understandable to an ordinary reader.18 The definition of the term "tax credit" is plain and clear, and the attempt of Revenue Regulations No. 2-94 to define it differently is the root of the conflict.

Tax Credit is not Tax Refund Petitioner argues that the tax credit is in the nature of a tax refund and should be treated as a return for tax payments erroneously or excessively assessed against a taxpayer, in line with Section 204(c) of Republic Act No. 8424, or the National Internal Revenue Code of 1997. Petitioner claims that there should first be payment of the tax before the tax credit can be claimed. However, in the National Internal Revenue Code, we see at least one instance where this is not the case. Any VAT-registered person, whose sales are zerorated or effectively zero-rated may, within two (2) years after the close of the taxable quarter when the sales were made, apply for the issuance of a tax credit certificate or refund of creditable input tax due or paid attributable to such sales, except transitional input tax, to the extent that such input tax has not been applied against output tax.19 It speaks of a tax credit for tax due, so payment of the tax has not yet been made in that particular example. The Court of Appeals expressly recognized the differences between a "tax credit" and a "tax refund," and stated that the same are not synonymous with each other, which is why it modified the ruling of the Court of Tax Appeals. Revenue Regulations No. 2-94 vs. R.A. No. 7432 and R.A. No. 7432 vs. the National Internal Revenue Code Petitioner contends that since R.A. No. 7432 used the word "may," the availability of the tax credit to private establishments is only permissive and not absolute or mandatory. From that starting point, petitioner further argues that the definition of the term "tax credit" in Revenue Regulations No. 2-94 was validly issued under the authority granted by the law to the Department of Finance to formulate the needed guidelines. It further explained that Revenue Regulations No. 2-94 can be harmonized with R.A No. 7432, such that the definition of the term "tax credit" in Revenue Regulations No. 2-94 is controlling. It claims that to do otherwise would result in Section 4(a) of R.A. No. 7432 impliedly repealing Section 204 (c) of the National Internal Revenue Code. These arguments must also fail. Revenue Regulations No. 2-94 is still subordinate to R.A. No. 7432, and in cases of conflict, the implementing rule will not prevail over the law it seeks to implement. While seemingly conflicting laws must be harmonized as far as practicable, in this particular case, the conflict cannot be resolved in the manner the petitioner wishes. There is a great divide separating the idea of "tax credit" and "tax deduction," as seen in the definition in Black's Law Dictionary. The claimed absurdity of Section 4(a) of R.A. No. 7432 impliedly repealing Section 204(c) of the National Internal Revenue Code could only come about if it is accepted that a tax credit is akin to a tax refund wherein payment of taxes must be made in order for it to be claimed. But as shown in Section 112(a) of the National Internal Revenue Code, it is not always necessary for payment to be made for a tax credit to be available. Looking into R.A. No. 7432 Finally, petitioner argues that should private establishments, which count respondent in their number, be allowed to claim tax credits for discounts given to senior citizens, they would be earning and not just be reimbursed for the discounts given. It cannot be denied that R.A. No. 7432 has a laudable goal. Moreover, it cannot be argued that it was the intent of lawmakers for private establishments to be the primary beneficiaries of the law. However, while the purpose of the law to benefit senior citizens is praiseworthy, the concerns of the affected private establishments were also considered by the lawmakers. As in other cases wherein private property is taken by the State for public use, there must be just compensation. In this particular case, it took the form of the tax credit granted to private establishments, purposely chosen by the lawmakers. In the similar case of Commissioner of Internal Revenue v. Central Luzon Drug Corporation,20 scrutinizing the deliberations of the Bicameral Conference Committee Meeting on Social Justice on February 5, 1992 which finalized R.A. No. 7432, the discussions of the lawmakers clearly showed the intent that the cost of the 20 percent discount may be claimed by the private establishments as a tax credit. An excerpt from the deliberations is as follows:

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SEN. ANGARA. In the case of private hospitals they got the grant of 15% discount, provided that, the private hospitals can claim the expense as a tax credit. REP. AQUINO. Yah could be allowed as deductions in the preparation of (inaudible) income. SEN. ANGARA. I-tax credit na lang natin para walang cash-out? REP. AQUINO. Oo, tax credit.Tama. Okay. Hospitals ba o lahat ng establishments na covered. THE CHAIRMAN.Sa kuwan lang yon, as private hospitals lang. REP. AQUINO. Ano ba yung establishments na covered? SEN. ANGARA. Restaurant, lodging houses, recreation centers. REP. AQUINO. All establishments covered siguro? SEN. ANGARA. From all establishments. Alisin na natin `yung kuwan kung ganon. Can we go back to Section 4 ha? REP. AQUINO. Oho. SEN. ANGARA. Letter A. To capture that thought, we'll say the grant of 20% discount from all establishments et cetera, et cetera, provided that said establishments may claim the cost as a tax credit. Ganon ba `yon? REP. AQUINO. Yah. SEN. ANGARA. Dahil kung government, they don't need to claim it. THE CHAIRMAN.Tax credit. SEN. ANGARA. As a tax credit [rather] than a kuwan deduction, Okay.21 It is clear that the lawmakers intended the grant of a tax credit to complying private establishments like the respondent. If the private establishments appear to benefit more from the tax credit than originally intended, it is not for petitioner to say that they shouldn't. The tax credit may actually have provided greater incentive for the private establishments to comply with R.A. No. 7432, or quicker relief from the cut into profits of these businesses. Revenue Regulations No. 2-94 Null and Void From the above discussion, it must be concluded that Revenue Regulations No. 2-94 is null and void for failing to conform to the law it sought to implement. In case of discrepancy between the basic law and a rule or regulation issued to implement said law, the basic law prevails because said rule or regulation cannot go beyond the terms and provisions of the basic law.22 Revenue Regulations No. 2-94 being null and void, it must be ruled then that under R.A. No. 7432, which was effective at the time, respondent is entitled to its claim of a tax credit, and the ruling of the Court of Appeals must be affirmed. But even as this particular case is decided in this manner, it must be noted that the concerns of the petitioner regarding tax credits granted to private establishments giving discounts to senior citizens have been addressed. R.A. No. 7432 has been amended by Republic Act No. 9257, the "Expanded Senior Citizens Act of 2003." In this, the term "tax credit" is no longer used. The 20 percent discount granted by hotels and similar lodging establishments, restaurants and recreation centers, and in the purchase of medicines in all establishments for the exclusive use and enjoyment of senior citizens is treated in the following manner: The establishment may claim the discounts granted under (a), (f), (g) and (h) as tax deduction based on the net cost of the goods sold or services rendered: Provided, That the cost of the discount shall be allowed as deduction from gross income for the same taxable year that the discount is granted. Provided, further, that the total amount of the claimed tax deduction net of value added tax if applicable, shall be included in

their gross sales receipts for tax purposes and shall be subject to proper documentation and to the provisions of the National Internal Revenue Code, as amended.23 This time around, there is no conflict between the law and the implementing Revenue Regulations. Under Revenue Regulations No. 4-2006, "(o)nly the actual amount of the discount granted or a sales discount not exceeding 20% of the gross selling price can be deducted from the gross income, net of value added tax, if applicable, for income tax purposes, and from gross sales or gross receipts of the business enterprise concerned, for VAT or other percentage tax purposes."24 Under the new law, there is no tax credit to speak of, only deductions. Petitioner can find some vindication in the amendment made to R.A. No. 7432 by R.A. No. 9257, which may be more in consonance with the principles of taxation, but as it was R.A. No. 7432 in force at the time this case arose, this law controls the result in this particular case, for which reason the petition must fail. This case should remind all heads of executive agencies which are given the power to promulgate rules and regulations, that they assume the roles of lawmakers. It is well-settled that a regulation should not conflict with the law it implements. Thus, those drafting the regulations should study well the laws their rules will implement, even to the extent of reviewing the minutes of the deliberations of Congress about its intent when it drafted the law. They may also consult the Secretary of Justice or the Solicitor General for their opinions on the drafted rules. Administrative rules, regulations and orders have the efficacy and force of law so long as they do not contravene any statute or the Constitution. 25 It is then the duty of the agencies to ensure that their rules do not deviate from or amend acts of Congress, for their regulations are always subordinate to law. WHEREFORE, the Petition is hereby DENIED. The assailed Decision of the Court of Appeals is AFFIRMED. There is no pronouncement as to costs.

HOLY SPIRIT HOMEOWNERS A SOCIATION, INC. and NESTORIO F. APOLINARIO, in his personalcapacity and as President of Holy Spirit Homeowners Association, Inc., Petitioners, Vs. SECRETARY MICHAEL DEFENSOR, his capacity as Chairman of the Housing and Urban Development Coordinating Council (HUDCC), TINGA, J.:

The instant petition for prohibition under Rule 65 of the 1997 Rules of Civil Procedure, with prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction, seeks to prevent respondents from enforcing the implementing rules and regulations (IRR) of Republic Act No. 9207, otherwise known as the National Government Center (NGC) Housing and Land Utilization Act of 2003. Petitioner Holy Spirit Homeowners Association, Inc. (Association) is a homeowners association from the West Side of the NGC. It is represented by its president, Nestorio F. Apolinario, Jr., who is a copetitioner in his own personal capacity and on behalf of the association. Named respondents are the ex-officio members of the National Government Center Administration Committee (Committee). At the filing of the instant petition, the Committee was composed of Secretary Michael Defensor, Chairman of the Housing and Urban Development Coordinating Council (HUDCC), Atty. Edgardo Pamintuan, General Manager of the National Housing Authority (NHA), Mr. Percival Chavez, Chairman of the Presidential Commission for Urban Poor (PCUP), Mayor Feliciano Belmonte of Quezon City, Secretary Elisea Gozun of the Department of Environment and Natural Resources (DENR), and Secretary Florante Soriquez of the Department of Public Works and Highways (DPWH). Prior to the passage of R.A. No. 9207, a number of presidential issuances authorized the creation and development of what is now known as the National Government Center (NGC).

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On March 5, 1972, former President Ferdinand Marcos issued Proclamation No. 1826, reserving a parcel of land in Constitution Hills, Quezon City, covering a little over 440 hectares as a national government site to be known as the NGC.[1] On August 11, 1987, then President Corazon Aquino issued Proclamation No. 137, excluding 150 of the 440 hectares of the reserved site from the coverage of Proclamation No. 1826 and authorizing instead the disposition of the excluded portion by direct sale to the bona fide residents therein.[2] In view of the rapid increase in population density in the portion excluded by Proclamation No. 137 from the coverage of Proclamation No. 1826, former President Fidel Ramos issued Proclamation No. 248 on September 7, 1993, authorizing the vertical development of the excluded portion to maximize the number of families who can effectively become beneficiaries of the governments socialized housing program. [3] On May 14, 2003, President Gloria Macapagal-Arroyo signed into law R.A. No. 9207. Among the salient provisions of the law are the following: SEC. 2. Declaration of Policy. It is hereby declared the policy of the State to secure the land tenure of the urban poor. Toward this end, lands located in the NGC, Quezon City shall be utilized for housing, socioeconomic, civic, educational, religious and other purposes. SEC. 3. Disposition of Certain Portions of the National Government Center Site to Bona Fide Residents. Proclamation No. 1826, Series of 1979, is hereby amended by excluding from the coverage thereof, 184 hectares on the west side and 238 hectares on the east side of Commonwealth Avenue, and declaring the same open for disposition to bona fide residents therein: Provided, That the determination of the bona fide residents on the west side shall be based on the census survey conducted in 1994 and the determination of the bona fide residents on the east side shall be based on the census survey conducted in 1994 and occupancy verification survey conducted in 2000: Provided, further, That all existing legal agreements, programs and plans signed, drawn up or implemented and actions taken, consistent with the provisions of this Act are hereby adopted. SEC. 4. Disposition of Certain Portions of the National Government Center Site for Local Government or Community Facilities, Socioeconomic, Charitable, Educational and Religious Purposes. Certain portions of land within the aforesaid area for local government or community facilities, socioeconomic, charitable, educational and religious institutions are hereby reserved for disposition for such purposes: Provided, That only those institutions already operating and with existing facilities or structures, or those occupying the land may avail of the disposition program established under the provisions this Act; Provided, further, That in ascertaining the specific areas that may be disposed of in favor of these institutions, the existing site allocation shall be used as basis therefore: Provided, finally. That in determining the reasonable lot allocation of such institutions without specific lot allocations, the land area that may be allocated to them shall be based on the area actually used by said institutions at the time of effectivity of this Act. (Emphasis supplied.) In accordance with Section 5 of R.A. No. 9207,[4] the Committee formulated the Implementing Rules and Regulations (IRR) of R.A. No. 9207 on June 29, 2004. Petitioners subsequently filed the instant petition, raising the following issues: WHETHER OR NOT SECTION 3.1 (A.4), 3.1 (B.2), 3.2 (A.1) AND 3.2 (C.1) OF THE RULES AND REGULATIONS OF REPUBLIC ACT NO. 9207, OTHERWISE KNOWN AS NATIONAL GOVERNMENT CENTER (NGC) HOUSING AND LAND UTILIZATION ACT OF 2003 SHOULD BE DECLARED NULL AND VOID FOR BEING INCONSISTENT WITH THE LAW IT SEEKS TO IMPLEMENT. WHETHER OR NOT SECTION 3.1 (A.4), 3.1 (B.2), 3.2 (A.1) AND 3.2 (C.1) OF THE RULES AND REGULATIONS OF REPUBLIC ACT NO. 9207, OTHERWISE KNOWN AS NATIONAL GOVERNMENT CENTER (NGC) HOUSING AND LAND UTILIZATION ACT OF 2003 SHOULD BE DECLARED NULL AND VOID FOR BEING ARBITRARY, CAPRICIOUS AND WHIMSICAL.[5] First, the procedural matters. The Office of the Solicitor General (OSG) argues that petitioner Association cannot question the implementation of Section 3.1 (b.2) and Section 3.2 (c.1) since it does not claim any right over the NGC

East Side. Section 3.1 (b.2) provides for the maximum lot area that may be awarded to a residentbeneficiary of the NGC East Side, while Section 3.2 (c.1) imposes a lot price escalation penalty to a qualified beneficiary who fails to execute a contract to sell within the prescribed period. [6] Also, the OSG contends that since petitioner association is not the duly recognized peoples organization in the NGC and since petitioners not qualify as beneficiaries, they cannot question the manner of disposition of lots in the NGC.[7]

Legal standing or locus standi has been defined as a personal and substantial interest in the case such that the party has sustained or will sustain direct injury as a result of the governmental act that is being challenged. The gist of the question of standing is whether a party alleges such personal stake in the outcome of the controversy as to assure that concrete adverseness which sharpens the presentation of issues upon which the court depends for illumination of difficult constitutional questions. [8]

Petitioner association has the legal standing to institute the instant petition, whether or not it is the duly recognized association of homeowners in the NGC. There is no dispute that the individual members of petitioner association are residents of the NGC. As such they are covered and stand to be either benefited or injured by the enforcement of the IRR, particularly as regards the selection process of beneficiaries and lot allocation to qualified beneficiaries. Thus, petitioner association may assail those provisions in the IRR which it believes to be unfavorable to the rights of its members. Contrary to the OSGs allegation that the failure of petitioner association and its members to qualify as beneficiaries effectively bars them from questioning the provisions of the IRR, such circumstance precisely operates to confer on them the legal personality to assail the IRR. Certainly, petitioner and its members have sustained direct injury arising from the enforcement of the IRR in that they have been disqualified and eliminated from the selection process. While it is true that petitioners claim rights over the NGC West Side only and thus cannot be affected by the implementation of Section 3.1 (b.2), which refers to the NGC East Side, the rest of the assailed provisions of the IRR, namely, Sections 3.1 (a.4), 3.2 (a.1) and 3.2 (c.1), govern the disposition of lots in the West Side itself or all the lots in the NGC. We cannot, therefore, agree with the OSG on the issue of locus standi. The petition does not merit dismissal on that ground. There are, however, other procedural impediments to the granting of the instant petition. The OSG claims that the instant petition for prohibition is an improper remedy because the writ of prohibition does not lie against the exercise of a quasi-legislative function.[9] Since in issuing the questioned IRR of R.A. No. 9207, the Committee was not exercising judicial, quasi-judicial or ministerial function, which is the scope of a petition for prohibition under Section 2, Rule 65 of the 1997 Rules of Civil Procedure, the instant prohibition should be dismissed outright, the OSG contends. For their part, respondent Mayor of Quezon City[10] and respondent NHA[11] contend that petitioners violated the doctrine of hierarchy of courts in filing the instant petition with this Court and not with the Court of Appeals, which has concurrent jurisdiction over a petition for prohibition. The cited breaches are mortal. The petition deserves to be spurned as a consequence. Administrative agencies possess quasi-legislative or rule-making powers and quasi-judicial or administrative adjudicatory powers. Quasi-legislative or rule-making power is the power to make rules and regulations which results in delegated legislation that is within the confines of the granting statute and the doctrine of non-delegability and separability of powers.[12] In questioning the validity or constitutionality of a rule or regulation issued by an administrative agency, a party need not exhaust administrative remedies before going to court. This principle, however, applies only where the act of the administrative agency concerned was performed pursuant to its quasi-judicial function, and not when the assailed act pertained to its rule-making or quasi-legislative power.[13]

The assailed IRR was issued pursuant to the quasi-legislative power of the Committee expressly authorized by R.A. No. 9207. The petition rests mainly on the theory that the assailed IRR issued by the Committee is invalid on the ground that it is not germane to the object and purpose of the statute it seeks

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to implement. Where what is assailed is the validity or constitutionality of a rule or regulation issued by the administrative agency in the performance of its quasi-legislative function, the regular courts have jurisdiction to pass upon the same.[14]

Now, we turn to the substantive aspects of the petition. The outcome, however, is just as dismal for petitioners. Petitioners assail the following provisions of the IRR: Section 3. Disposition of Certain portions of the NGC Site to the bonafide residents

Since the regular courts have jurisdiction to pass upon the validity of the assailed IRR issued by the Committee in the exercise of its quasi-legislative power, the judicial course to assail its validity must follow the doctrine of hierarchy of courts. Although the Supreme Court, Court of Appeals and the Regional Trial Courts have concurrent jurisdiction to issue writs of certiorari, prohibition, mandamus, quo warranto, habeas corpusand injunction, such concurrence does not give the petitioner unrestricted freedom of choice of court forum.[15] True, this Court has the full discretionary power to take cognizance of the petition filed directly with it if compelling reasons, or the nature and importance of the issues raised, so warrant.[16] A direct invocation of the Courts original jurisdiction to issue these writs should be allowed only when there are special and important reasons therefor, clearly and specifically set out in the petition.[17] In Heirs of Bertuldo Hinog v. Melicor,[18] the Court said that it will not entertain direct resort to it unless the redress desired cannot be obtained in the appropriate courts, and exceptional and compelling circumstances, such as cases of national interest and of serious implications, justify the availment of the extraordinary remedy of writ of certiorari, calling for the exercise of its primary jurisdiction. [19] A perusal, however, of the petition for prohibition shows no compelling, special or important reasons to warrant the Courts taking cognizance of the petition in the first instance. Petitioner also failed to state any reason that precludes the lower courts from passing upon the validity of the questioned IRR. Moreover, as provided in Section 5, Article VIII of the Constitution,[20] the Courts power to evaluate the validity of an implementing rule or regulation is generally appellate in nature. Thus, following the doctrine of hierarchy of courts, the instant petition should have been initially filed with the Regional Trial Court.

3.1. Period for Qualification of Beneficiaries xxxx (a.4) Processing and evaluation of qualifications shall be based on the Code of Policies and subject to the condition that a beneficiary is qualified to acquire only one (1) lot with a minimum of 36 sq. m. and maximum of 54 sq. m. and subject further to the availability of lots. xxxx (b.2) Applications for qualification as beneficiary shall be processed and evaluated based on the Code of Policies including the minimum and maximum lot allocation of 35 sq. m. and 60 sq. m. xxxx 3.2. Execution of the Contract to Sell (a) Westside (a.1) All qualified beneficiaries shall execute Contract to Sell (CTS) within sixty (60) days from the effectivity of the IRR in order to avail of the lot at P700.00 per sq. m. xxxx (c) for both eastside and westside (c.1) Qualified beneficiaries who failed to execute CTS on the deadline set in item a.1 above in case of westside and in case of eastside six (6) months after approval of the subdivision plan shall be subjected to lot price escalation. The rate shall be based on the formula to be set by the National Housing Authority factoring therein the affordability criteria. The new rate shall be approved by the NGC-Administration Committee (NGCAC). Petitioners contend that the aforequoted provisions of the IRR are constitutionally infirm as they are not germane to and/or are in conflict with the object and purpose of the law sought to be implemented. First. According to petitioners, the limitation on the areas to be awarded to qualified beneficiaries under Sec. 3.1 (a.4) and (b.2) of the IRR is not in harmony with the provisions of R.A. No. 9207, which mandates that the lot allocation to qualified beneficiaries shall be based on the area actually used or occupied by bona fide residents without limitation to area. The argument is utterly baseless. The beneficiaries of lot allocations in the NGC may be classified into two groups, namely, the urban poor or the bona fide residents within the NGC site and certain government institutions including the local government. Section 3, R.A. No. 9207 mandates the allocation of additional property within the NGC for disposition to its bona fide residents and the manner by which this area may be distributed to qualified beneficiaries. Section 4, R.A. No. 9207, on the other hand, governs the lot disposition to government institutions. While it is true that Section 4 of R.A. No. 9207 has a proviso mandating that the lot allocation shall be based on the land area actually used or occupied at the time of the laws effectivity, this proviso applies only to institutional beneficiaries consisting of the local government, socioeconomic, charitable, educational and religious institutions which do not have specific lot allocations, and not to the bona fide residents of NGC. There is no proviso which even hints that a bona fide resident of the NGC is likewise entitled to the lot area actually occupied by him. Petitioners interpretation is also not supported by the policy of R.A. No. 9207 and the prior proclamations establishing the NGC. The governments policy to set aside public property aims to benefit not only the urban poor but also the local government and various government

A petition for prohibition is also not the proper remedy to assail an IRR issued in the exercise of a quasilegislative function. Prohibition is an extraordinary writ directed against any tribunal, corporation, board, officer or person, whether exercising judicial, quasi-judicial or ministerial functions, ordering said entity or person to desist from further proceedings when said proceedings are without or in excess of said entitys or persons jurisdiction, or are accompanied with grave abuse of discretion, and there is no appeal or any other plain, speedy and adequate remedy in the ordinary course of law. [21] Prohibition lies against judicial or ministerial functions, but not against legislative or quasi-legislative functions. Generally, the purpose of a writ of prohibition is to keep a lower court within the limits of its jurisdiction in order to maintain the administration of justice in orderly channels.[22] Prohibition is the proper remedy to afford relief against usurpation of jurisdiction or power by an inferior court, or when, in the exercise of jurisdiction in handling matters clearly within its cognizance the inferior court transgresses the bounds prescribed to it by the law, or where there is no adequate remedy available in the ordinary course of law by which such relief can be obtained.[23] Where the principal relief sought is to invalidate an IRR, petitioners remedy is an ordinary action for its nullification, an action which properly falls under the jurisdiction of the Regional Trial Court. In any case, petitioners allegation that respondents are performing or threatening to perform functions without or in excess of their jurisdiction may appropriately be enjoined by the trial court through a writ of injunction or a temporary restraining order.

In a number of petitions,[24] the Court adequately resolved them on other grounds without adjudicating on the constitutionality issue when there were no compelling reasons to pass upon the same. In like manner, the instant petition may be dismissed based on the foregoing procedural grounds. Yet, the Court will not shirk from its duty to rule on the merits of this petition to facilitate the speedy resolution of this case. In proper cases, procedural rules may be relaxed or suspended in the interest of substantial justice. And the power of the Court to except a particular case from its rules whenever the purposes of justice require it cannot be questioned.[25]

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institutions devoted to socioeconomic, charitable, educational and religious purposes.[26] Thus, although Proclamation No. 137 authorized the sale of lots to bona fide residents in the NGC, only a third of the entire area of the NGC was declared open for disposition subject to the condition that those portions being used or earmarked for public or quasi-public purposes would be excluded from the housing program for NGC residents. The same policy of rational and optimal land use can be read in Proclamation No. 248 issued by then President Ramos. Although the proclamation recognized the rapid increase in the population density in the NGC, it did not allocate additional property within the NGC for urban poor housing but instead authorized the vertical development of the same 150 hectares identified previously by Proclamation No. 137 since the distribution of individual lots would not adequately provide for the housing needs of all the bona fide residents in the NGC. In addition, as provided in Section 4 of R.A. No. 9207, the institutional beneficiaries shall be allocated the areas actually occupied by them; hence, the portions intended for the institutional beneficiaries is fixed and cannot be allocated for other non-institutional beneficiaries. Thus, the areas not intended for institutional beneficiaries would have to be equitably distributed among the bona fide residents of the NGC. In order to accommodate all qualified residents, a limitation on the area to be awarded to each beneficiary must be fixed as a necessary consequence. Second. Petitioners note that while Sec. 3.2 (a.1) of the IRR fixes the selling rate of a lot at P700.00 per sq. m., R.A. No. 9207 does not provide for the price. They add Sec. 3.2 (c.1) penalizes a beneficiary who fails to execute a contract to sell within six (6) months from the approval of the subdivision plan by imposing a price escalation, while there is no such penalty imposed by R.A. No. 9207. Thus, they conclude that the assailed provisions conflict with R.A. No. 9207 and should be nullified. The argument deserves scant consideration. Where a rule or regulation has a provision not expressly stated or contained in the statute being implemented, that provision does not necessarily contradict the statute. A legislative rule is in the nature of subordinate legislation, designed to implement a primary legislation by providing the details thereof.[27] All that is required is that the regulation should be germane to the objects and purposes of the law; that the regulation be not in contradiction to but in conformity with the standards prescribed by the law.[28] In Section 5 of R.A. No. 9207, the Committee is granted the power to administer, formulate guidelines and policies, and implement the disposition of the areas covered by the law. Implicit in this authority and the statutes objective of urban poor housing is the power of the Committee to formulate the manner by which the reserved property may be allocated to the beneficiaries. Under this broad power, the Committee is mandated to fill in the details such as the qualifications of beneficiaries, the selling price of the lots, the terms and conditions governing the sale and other key particulars necessary to implement the objective of the law. These details are purposely omitted from the statute and their determination is left to the discretion of the Committee because the latter possesses special knowledge and technical expertise over these matters. The Committees authority to fix the selling price of the lots may be likened to the rate-fixing power of administrative agencies. In case of a delegation of rate-fixing power, the only standard which the legislature is required to prescribe for the guidance of the administrative authority is that the rate be reasonable and just. However, it has been held that even in the absence of an express requirement as to reasonableness, this standard may be implied.[29] In this regard, petitioners do not even claim that the selling price of the lots is unreasonable. The provision on the price escalation clause as a penalty imposed to a beneficiary who fails to execute a contract to sell within the prescribed period is also within the Committees authority to formulate guidelines and policies to implement R.A. No. 9207. The Committee has the power to lay down the terms and conditions governing the disposition of said lots, provided that these are reasonable and just. There is nothing objectionable about prescribing a period within which the parties must execute the contract to sell. This condition can ordinarily be found in a contract to sell and is not contrary to law, morals, good customs, public order, or public policy. Third. Petitioners also suggest that the adoption of the assailed IRR suffers from a procedural flaw. According to them the IRR was adopted and concurred in by several representatives of peoples organizations contrary to the express mandate of R.A. No. 9207 that only two representatives from duly

recognized peoples organizations must compose the NGCAC which promulgated the assailed IRR. It is worth noting that petitioner association is not a duly recognized peoples organization. In subordinate legislation, as long as the passage of the rule or regulation had the benefit of a hearing, the procedural due process requirement is deemed complied with. That there is observance of more than the minimum requirements of due process in the adoption of the questioned IRR is not a ground to invalidate the same. In sum, the petition lacks merit and suffers from procedural deficiencies.WHEREFORE, the instant petition for prohibition is DISMISSED. Costs against petitioners.

CASES ON CHAPTER 4 Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. L-25024 March 30, 1970 TEODORO C. SANTIAGO, JR. Minor, Represented by his Mother, Mrs. Angelita C. Santiago, petitioner-appellant, vs. MISS JUANITA BAUTISTA, ROSALINDA ALPAS, REBECCA MATUGAS, MILKITA INAMAC, ROMEO AGUSTIN, AIDA CAMINO, LUNA SARMAGO, AURORA LORENA, SOLEDAD FRANCISCO and MR. FLOR MARCELO,respondents-appellees. Teodoro M. Santiago for petitioner-appellant. Ramon C. Carag for respondent-apellees.

BARREDO, J.: Appeal from the order of the Court of First Instance of Cotabato dismissing, on a motion to dismiss, its Civil Case No. 2012 for certiorari, injunction and damages on the ground that the complaint therein states no cause of action, and from the subsequent order of the court a quo denying the motion for the reconsideration of the said order of dismissal. The record shows that at the time Civil Case No. 2012 was commenced in the court below, appellant Teodoro Santiago, Jr. was a pupil in Grade Six at the public school named Sero Elementary School in Cotabato City. As the school year 1964-1965 was then about to end, the "Committee On The Rating Of Students For Honor" was constituted by the teachers concerned at said school for the purpose of selecting the "honor students" of its graduating class. With the school Principal, Mrs. Aurora Lorena, as chairman, and Juanita Bautista, Rosalinda Alpas, Rebecca Matugas, Milkita Inamac, Romeo Agustin, Aida Camino and Luna Sarmago, as members, the above-named committee deliberated and finally adjudged Socorro Medina, Patricia Ligat and Teodoro C. Santiago, Jr. as first, second and third honors, respectively. The school's graduation exercises were thereafter set for May 21, 1965; but three days before that date, the "third placer" Teodoro Santiago, Jr., represented by his mother, and with his father as counsel, sought the invalidation of the "ranking of honor students" thus made, by instituting the above-mentioned civil case in the Court of First Instance of Cotabato, against the above-named committee members along with the District Supervisor and the Academic Supervisor of the place. The corresponding complaint filed alleged, inter alia: that plaintiff-petitioner Teodoro C. Santiago, Jr. is a sixth grader at the Sero Elementary School in Cotabato City scheduled to be graduated on May 21st, 1965 with thehonor rank of third place, which is disputed; that the teachers of the school had been made respondents as they compose the "Committee on the Rating of Student for Honor", whose grave abuse of official discretion is the subject of suit, while the other defendants were included as Principal, District

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Supervisor and Academic Supervisor of the school; that Teodoro Santiago, Jr. had been a consistent honor pupil from Grade I to Grade V of the Sero Elementary School, while Patricia Ligat (second placer in the disputed ranking in Grade VI) had never been a close rival of petitioner before, except in Grade V wherein she ranked third; that Santiago, Jr. had been prejudiced, while his closest rival had been so much benefited, by the circumstance that the latter, Socorro Medina, was coached and tutored during the summer vacation of 1964 by Mrs. Alpas who became the teacher of both pupils in English in Grade VI, resulting in the far lead Medina obtained over the other pupil; that the committee referred to in this case had been illegally constituted as the same was composed of all the Grade VI teachers only, in violation of the Service Manual for Teachers of the Bureau of Public Schools which provides that the committee to select the honor students should be composed of all teachers in Grades V and VI; that there are direct and circumstantial matters, which shall be proven during the trial, wherein respondents have exercised grave abuse of discretion and irregularities, such as the changing of the final ratings on the grading sheets of Socorro Medina and Patricia Ligat from 80% to 85%, and some teachers giving petitioner a starting grade of 75% in Grade VI, which proves that there has already an intention to pull him to a much lower rank at the end of the school year; that several district examinations outside of teachers' daily units and other than periodical tests were given, ratings in which were heavily considered in the determination of periodical ratings, whereas according to the Academic Supervisor and Acting Division Superintendent of schools of the place such district examinations were not advisable; that there was a unanimous agreement and understanding among the respondent teachers to insult and prejudice the second and third honors by rating Socorro Medina with a perfect score, which is very unnatural; that the words "first place" in petitioner's certificate in Grade I was erased and replaced with the words "second place", which is an instance of the unjust and discriminating abuses committed by the respondent teachers in the disputed selection of honor pupils they made; that petitioner personally appealed the matter to the School Principal, to the District Supervisor, and to the Academic Supervisor, but said officials "passed the buck to each other" to delay his grievances, and as to appeal to higher authorities will be too late, there is no other speedy and adequate remedy under the circumstances; and, that petitioner and his parents suffered mental and moral damages in the amount of P10,000.00. They prayed the court, among others, to set aside the final list of honor students in Grade VI of the Sero Elementary School for that school year 1964-1965, and, during the pendency of the suit, to enjoin the respondent teachers from officially and formally publishing and proclaiming the said honor pupils in Grade VI in the graduation exercises the school was scheduled to hold on the 21st of May of that year 1965. The injunction prayed for was denied by the lower court in its order of May 20, 1965, the said court reasoning out that the graduation exercises were then already set on the following day, May 21, 1965, and the restraining of the same would be shocking to the school authorities, parents, and the community who had eagerly looked forward to the coming of that yearly happy event. As scheduled, the graduation exercises of the Sero Elementary School for the school year 1964-1965 was held on May 21, with the same protested list of honor students. Having been required by the above-mentioned order to answer the petition within ten (10) days, respondents moved for the dismissal of the case instead. Under date of May 24, 1965, they filed a motion to dismiss, on the grounds (1) that the action for certiorari was improper, and (2) that even assuming the propriety of the action, the question brought before the court had already become academic. This was opposed by petitioner. In an order dated June 4, 1965, the motion to dismiss of respondents was granted, the court reasoning thus: The respondents now move to dismiss the petition for being improper and for being academic. In order to resolve the motion to dismiss, the Court has carefully examined the petition to determine the sufficiency of the alleged cause of action constituting the special civil action of certiorari. The pertinent portions of the petition alleging 'grave abuse of discretion' are found in paragraphs 3, 4, 5, 6, 7, 8, 9 and 10. These allegations may be substantially summarized as follows: Paragraph 3 alleges that since grades one to six, the students closely contending for class honors were Socorro Medina, Teodoro Santiago, Jr., Dolores Dalican and Patricia Ligat. Socorro Medina obtained first honor thrice (grades I, V and VI); once second honor (grade IV), and twice third place (grades II and III). Teodoro Santiago, Jr. obtained first place once (grade IV); four times second place (grades I, II, III, and V) and once third place (grade VI). Dolores Dalican obtained twice first place (grades II, III); once third place (grade I).

Patricia Ligat once third place (grade V); and once second place (grade VI). That as now ranked in the graduation Ligat is given second place while Teodoro Santiago, Jr., is given the third place only. This is the ranking now disputed by petitioner, Teodoro Santiago, Jr. Paragraph 4 alleges that Socorro Medina was tutored in the summer of 1964 by Mrs. Rosalinda Alpas who became her English teacher in the sixth grade; that as such, Mrs. Alpas unjustly favored Socorro against her rivals. Paragraph 5 alleges that the teachers who composed the committee on honor students are all grade six teachers while the Service Manual For Teachers provides that the committee shall be composed of the teachers from the fifth and sixth grades. Paragraph 6 alleges that there are direct and circumstantial evidence showing the change of ratings of Socorro Medina and Patricia Ligat from 80% to 85% and the intention to junk petitioner to a lower rank. Paragraph 7 alleges that the giving of district examinations upon which ratings were partly based were not advisable. Paragraph 8 alleges that the teachers rated Socorro Medina a perfect pupil which is unnatural. Paragraph 9 alleges that on the first grade certificate of the petitioner the word "First Place" was erased and changed to "Second Place". Paragraph 10 alleges that petitioner personally appealed to the school authorities but they only 'passed the buck to each other.' SECOND PARAGRAPH VIOLATED Rule 65, Section 1 of the Rules of Court provides: 'Section 1.Petition for certiorari. When any tribunal, board, or officer exercising judicial functions, has acted without or in excess of its or his jurisdiction, or with grave abuse of discretion and there is no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court alleging the facts with certainty and praying that judgment be rendered annulling or modifying the proceedings, as the law requires, of such tribunal, board or officer.' 'The petition shall be accompanied by a certified true copy of the judgment or order subject thereof, together with copies of all pleadings and documents relevant and pertinent thereto.' It is striking, indeed, that this petition has not been accompanied by a certified true copy of the judgment or order complained of, together with all pleadings and documents which are relevant thereto, as required by the second, paragraph of the aforequoted rule. This violation renders the petition extremely indefinite and uncertain. There is no written formal judgment or order of respondents that is submitted for revision or correction of this Court. This violation is fatal to the petition. ADMINISTRATIVE REMEDIES NEGLECTED All that the petition alleges is that the petitioner personally appealed to the school authorities who only 'passed the buck to each other.' This allegation does not show that petitioner formally availed of and exhausted the administrative remedies of the Department of Education. The petition implies that this is the first formal complaint of petitioner against his teachers. The administrative agencies of the Department of Education could have investigated the grievances of the petitioner with dispatch and give effective remedies, but petitioner negligently abandoned them. Petitioner cannot now claim that he lacked any plain, speedy and adequate remedy. NO GRAVE ABUSE OF DISCRETION Allegations relating to the alleged 'grave abuse of discretion' on the part of teachers refer to errors, mistakes, or irregularities rather than to real grave abuse of discretion that would amount to lack of jurisdiction. Mere commission of errors in the exercise of jurisdiction may not be corrected by means of certiorari.

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In view of the foregoing, the Court is of the opinion, and so holds, that the petition states no cause of action and should be, as it is hereby dismissed. Upon receipt of a copy of the above-quoted order, the petitioner moved for the reconsideration thereof, but the same proved to be futile, hence, this appeal. Appellant here assails the holding of the lower court that his petition states no cause of action on the grounds discussed by the court a quo in the appealed order above-quoted (1) that the petition does not comply with the second paragraph of Sec. 1 of Rule 65 because it has not been accompanied by a certified true copy of the judgment or order subject thereof, together with copies of all pleadings and documents relevant and pertinent thereto; (2) that administrative remedies were not first exhausted; and (3) that there was no grave abuse of discretion on the part of the teachers who constituted the committee referred to. On the other hand, appellees maintain that the court below did not err in dismissing the case on said grounds. Further, they argue in favor of the questioned order of dismissal upon the additional ground that the "committee on the ratings of students for honor" whose actions are here condemned by appellant is not the "tribunal, board or officer exercising judicial functions" against which an action for certiorari may lie under Section 1 of Rule 65. The last point raised by appellees deserves first consideration, for if really the said committee of teachers does not fall within the category of the tribunal, board, or officer exercising judicial functions contemplated by Rule 65, further discussion of the issues raised by appellant may no longer be necessary. To resolve this problem the following tests may be employed: In this jurisdiction certiorari is a special civil action instituted against 'any tribunal, board, or officer exercising judicial functions.' (Section 1, Rule 67.) A judicial function is an act performed by virtue of judicial powers; the exercise of a judicial function is the doing of something in the nature of the action of the court (34 C.J. 1182). In order that a special civil action of certiorari may be invoked in this jurisdiction the following circumstances must exist: (1) that there must be a specific controversy involving rights of persons or property and said controversy is brought before a tribunal, board or officer for hearing and determination of their respective rights and obligations. 'Judicial action is an adjudication upon the rights of parties who in general appear or are brought before the tribunal by notice or process, and upon whose claims some decision or judgment is rendered. It implies impartiality, disinterestedness, a weighing of adverse claims, and is inconsistent with discretion on the one hand for the tribunal must decide according to law and the rights of the parties or with dictation on the other; for in the first instance it must exercise its own judgment under the law, and not act under a mandate from another power. ... The character of its action in a given case must decide whether that action is judicial, ministerial, or legislative, or whether it be simply that of a public agent of the country or State, as in its varied jurisdictions it may by turns be each.' (In Re Saline County Subscription, 100 Am. Dec. 337, 338, cited in Southeastern Greyhound Lines v. Georgia Public Service Commission, 181 S. E. 836837.) 'It may be said generally that the exercise of judicial function is to determine what the law is, and what the legal rights of parties are, with respect to a matter in controversy; and whenever an officer is clothed with that authority, and undertakes to determine those questions, he acts judicially.' (State ex rel. Board of Commissioners of St. Louis County, et al. v. Dunn, 90 N. W. 772-773.) (2) the tribunal, board or officer before whom the controversy is brought must have the power and authority to pronounce judgment and render a decision on the controversy construing and applying the laws to that end. 'The phrase "judicial power" is not capable of a precise definition which would be applicable to all cases. The term has been variously defined as the authority to determine the rights of persons or property by arbitrating between adversaries in specific controversies at the instance of a party thereto; the authority exercised by that department of government which is charged with the declaration of what the law is and its construction so far as it is written law; the authority or power vested in the judges or in the courts; the authority vested in some court, officer, or persons to hear and determine when the rights of persons or property or the propriety of doing an act is the subject matter of adjudication; the power belonging to or emanating from a judge as such; the power conferred upon a public officer, involving the exercise of judgment and discretion in the determination of questions of right in specific cases affecting the interest of persons or property, as distinguished from ministerial power or authority to carry out the mandates of

judicial power or the law; the power exercised by courts in hearing and determining cases before them, or some matter incidental thereto, and of which they have jurisdiction; the power of a court to decide and pronounce a judgment; the power which adjudicates upon and protects the rights and interests of individual citizens, and to that end construes and applies the law. "Judicial power" implies the construction of laws and the adjudication of legal rights. It includes the power to hear and determine but not everyone who may hear and determine has judicial power. The term "judicial power" does not necessarily include the power to hear and determine a matter that is not in the nature of a suit or action between the parties.' (34 C.J. 1183-1184.) . (3) the tribunal, board or officer must pertain to that branch of the sovereign power which belongs to the judiciary, or at least, which does not belong to the legislative or executive department. ... the distinction between legislative or ministerial functions and judicial functions is difficult to point out. What is a judicial function does not depend solely upon the mental operation by which it is performed or the importance of the act. In solving this question, due regard must be had to the organic law of the state and the division of power of government. In the discharge of executive and legislative duties, the exercise of discretion and judgment of the highest order is necessary, and matters of the greatest weight and importance are dealt with. It is not enough to make a function judicial that it requires discretion, deliberation, thought, and judgment. It must be the exercise of discretion and judgment within that subdivision of the sovereign power which belongs to the judiciary, or, at least, which does not belong to the legislative or executive department. If the matter, in respect to which it is exercised, belongs to either of the two last-named departments of government, it is not judicial. As to what is judicial and what is not seems to be better indicated by the nature of a thing, than its definition.' (Whealing & Elm Grove Railroad Co. Appt. v. Town of Triadelphia, et al., 4 L.R.A. (N. S.) pp. 321, 328-329.) [Emphasis supplied]1 'WHAT ARE JUDICIAL OR QUASI JUDICIAL ACTS. It is difficult, if not impossible, precisely to define what are judicial or quasi judicial acts, and there is considerable conflict in the decisions in regard thereto, in connection with the law as to the right to the writ of certiorari. It is clear, however, that it is the nature of the act to be performed, rather than of the office, board, or body which performs it, that determines whether or not it is the discharge of a judicial or quasi-judicial function. It is not essential that the proceedings should be strictly and technically judicial, in the sense in which that word is used when applied to the courts of justice, but it is sufficient if they are quasi judicial. It is enough if the officers act judicially in making their decision, whatever may be their public character. ...' "In State ex rel. Board of Commrs.vs. Dunn (86 Minn. 301, 304), the following statements were made: 'The precise line of demarkation between what are judicial and what are administrative or ministerial functions is often difficult to determine. The exercise of judicial functions may involve the performance of legislative or administrative duties, and the performance of administrative or ministerial duties, may, in a measure, involve the exercise of judicial functions. It may be said generally that the exercise of judicial functions is to determine what the law is, and what the legal rights of parties are, with respect to a matter in controversy; and whenever an officer is clothed with that authority, and undertakes to determine those questions, he acts judicially.'2 It is evident, upon the foregoing authorities, that the so called committee on the rating of students for honor whose actions are questioned in this case exercised neither judicial nor quasi judicial functions in the performance of its assigned task. From the above-quoted portions of the decision cited, it will be gleaned that before tribunal board, or officer may exercise judicial or quasi judicial acts, it is necessary that there be a law that give rise to some specific rights of persons or property under which adverse claims to such rights are made, and the controversy ensuing therefrom is brought, in turn, before the tribunal, board or officer clothed with power and authority to determine what that law is and thereupon adjudicate the respective rights of the contending parties. As pointed out by appellees, 3 however, there is nothing on record about any rule of law that provides that when teachers sit down to assess the individual merits of their pupils for purposes of rating them for honors, such function involves the determination of what the law is and that they are therefore automatically vested with judicial or quasi judicial functions. Worse still, this Court has not even been appraised by appellant of the pertinent provisions of the Service Manual of Teachers for Public Schools appellees allegedly violated in the composition of the committee they constituted thereunder, and, in the performance of that committee's duties. At any rate, the situation brought before Us in this case, the seemingly one of first impression, is not without substantial parallel. In the case of Felipe vs. Leuterio, etc., et al.,4 the issue presented for

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determination was whether or not the courts have the authority to reverse the award of the board of judges of an oratorical contest, and this Court declared that the judiciary has no power to reverse the award of the board of judges of that contest and, for that matter, it would not interfere in literary contests, beauty contests and similar competitions. It was reasoned out thus: For more than thirty years oratorical tilts have been held periodically by schools and colleges in this islands. Inter-collegiate oratorical competitions are of more recent origin. Members of this court have taken part in them either as contestants in their school days (In the College of Law, U.P. annual oratorical contest, first prize was awarded to Justice Montemayor in 1914 and to Justice Labrador in 1916), or as members of the board of judges afterwards. They know some few verdicts did not reflect the audience's preference and that errors have sometimes been ascribed to the award of the judges. Yet no party ever presumed to invoke judicial intervention; for it is unwritten law in such contests that the board's decision is final and unappealable. Like the ancient tournaments of the Sword, these tournaments of the Word apply the highest tenets of sportsmanship: finality of referee's verdict. No alibis, no murmurs of protest. The participants are supposed to join the competition to contribute to its success by striving their utmost: the prizes are secondary. No rights to the prizes may be asserted by the contestants, because theirs was merely the privilege to compete for the prize, and that privilege did not ripen into a demandable right unless and until they were proclaimed winners of the competition by the appointed arbiters or referees or judges. Incidentally, these school activities have been imported from the United States. We found in American jurisprudence no litigation questioning the determination of the board of judges. Now, the fact that a particular action has had no precedent during a long period affords some reason for doubting the existence of the right sought to be enforced, especially where occasion for its assertion must have often arisen; and courts are cautious before allowing it, being loath to establish a new legal principle not in harmony with the generally accepted views thereon. (See C.J.S. Vol. 1, p. 1012.) We observe that in assuming jurisdiction over the matter, the respondent judge reasoned out that where there is a wrong there is a remedy and that courts of first instance are courts of general jurisdiction. The flaw in his reasoning lies in the assumption that Imperial suffered some wrong at the hands of the board of judges. If at all, there was error on the part of one judge, at most. Error and wrong do not mean the same thing. 'Wrong' as used in the aforesaid principle is the deprivation or violation of a right. As stated before, a contestant has no right to the prize unless and until he or she is declared winner by the board of referees or judges. Granting that Imperial suffered some loss or injury, yet in law there are instances of 'damnum absque injuria'. This is one of them. If fraud or malice had been proven, it would be a different proposition. But then her action should be directed against the individual judge or judges who fraudulently or maliciously injured her. Not against the other judges. But even were We to assume for the moment, as the court below apparently did, that judicial intervention might be sought in cases of this nature, still, We are inclined to sustain the order of dismissal appealed from for failure on the part of appellant to comply with the requirements of Section 1 of Rule 65. To be sure, the lower court's holding that appellant's failure to accompany his petition with a copy of the judgment or order subject thereof together with copies of all pleadings and documents relevant and pertinent thereto "is fatal to his cause" is supported not only by the provision of that Rule but by precedents as well. In the case of Alajar, et al. vs. Court of Industrial Relations,5 where it was claimed by therein petitioners that the respondent court had acted with grave abuse of discretion in estimating certain rice harvests involved in the case in terms of cavans instead of cans, allegedly in complete disregard of the decision of the Court of First Instance of Batangas in Expropriation Proceedings No. 84 and of this Court in G.R. No. L-6191,6 and in ordering thereafter the division of the said rice harvests on the ratio of 70-30 in favor of the tenants, this Court denied the petition for certiorari on the ground, among others, of failure on the part of said petitioners to attach to their petition copies of the decisions allegedly violated. Speaking thru Mr. Justice J.B.L. Reyes then, this Court held:

The petition is patently without merit. In the first place, it is not even sufficient in form and substance to justify the issuance of the writ of certiorari prayed for. It charges that the Court of Industrial Relations abused its discretion in disregarding the decision of the Court of First Instance of Batangas in Expropriation Proceedings No. 84 and of this Court in G.R. No. L-6191; yet it does not attach to the petition the decisions allegedly violated by the Court below and point out which particular portion or portions thereof have been disregarded by the respondent Court. The same principle was applied in the more recent case of NAWASA vs. Municipality of Libmanan, et al.,7 wherein this Court dismissed (by Resolution) the petition for certiorari and mandamus filed by the National Waterworks and Sewerage Authority against the Court of First Instance of Camarines Sur, and the municipality of Libmanan. In the following language, this Court emphasized the importance of complying with the said requirement of Rule 65: While paragraph 3 of the petition speaks of the complaint filed by the respondent municipality with the respondent court for recovery of property with damages (Civil Case No. L-161) no copy thereof is attached to the petition. Similarly, paragraph 4 of the petition mentions the decision rendered by the respondent court on December 10, 1965, but no copy thereof is attached to the petition. Again, paragraph 5 of the petition speaks of the order of default entered by the respondent court and of the motion for reconsideration filed by petitioner in the case above-mentioned, but no copy of the order of default is attached to its petition. Bearing in mind that the petition under consideration was filed for the purpose of enjoining the respondent court from executing the decision rendered in Civil Case No. L-161, the importance of the missing pleadings is obvious. Moreover, the petition is also for the purpose of securing an order commanding the respondent court to approve either the original or the amended record on appeal filed petition, but no copy of either is attached to its petition. In view of the foregoing, the petition under consideration is dismissed. It might be true, as pointed out by appellant, that he received a copy of the programme of the graduation exercises held by the Sero Elementary School in the morning of the very day of that graduation exercises, implying that he could not have attached then a copy thereof (to show the decision of the committee of teachers in the ranking of students complained of) to his petition. The stubborn fact remains, however, that appellant had known of such decision of the said committee of teachers much earlier, as shown by the circumstance that according to him, even before the filing of his petition with the lower court on the 19th of May, 1965, he had personally appealed the said committee's decision with various higher authorities of the above-named school, who merely passed the buck to each other. Moreover, appellant mentions in his petition various other documents or papers as the Service Manual for Teachers allegedly violated by appellees in the constitution of their committee; altered grading sheets; and erasures in his Grade I certificate which appellant never bothered to attach to his petition. There could be no doubt then that he miserably failed to comply with the requirement of Rule 65 above-mentioned. With this conclusion, it is no longer necessary to pass upon the other two errors assigned by appellant. FOR THE FOREGOING CONSIDERATIONS, the judgment appealed from is affirmed, with costs against appellant. Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee and Villamor, JJ., concur.

CYNTHIA CRUZ KHEMANI and SHANKER N. KHEMANI, Petitioners, vs. THE HEIRS OF ANASTACIO TRINIDAD, represented by NAPOLEON and ROLANDO TRINIDAD,Respondents.

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YNARES-SANTIAGO, J.: This petition for review on certiorari assails the July 31, 2000 Decision of the Court of Appeals in CA-G.R. SP No. 55581, which affirmed the May 24, 1999 Order[3] of the Regional Trial Court, Branch 24, Koronadal, South Cotabato in Civil Case No. 1122, entitled Heirs of Anastacio and Francisca Trinidad, et al. v. Heirs of Jose Pea, et al. Also assailed is the January 8, 2001 Resolution[4] denying the motion for reconsideration. The factual antecedents are as follows: Petitioner Cynthia Cruz Khemani is the registered owner of Lot No. 107, Ts-1032 (Lot No. 107), which is covered by Transfer Certificate of Title (TCT) No. 58976 issued on March 10, 1994.[5] Khemani purchased the lot from the heirs of Jose B. Pea (the Pea Heirs) on February 17, 1994. Shanker N. Khemani is her brother-in-law and duly authorized representative.
[1] [2]

In the case of Assistant Executive Secretary for Legal Affairs of the Office of the President v. Court of Appeals[6] which was decided on January 9, 1989, the Supreme Court rejected Mendozas claim over Lot No. 107 and found the Miscellaneous Sales Application without legal force and effect since the object thereof was no longer public land. Thus, Peas right of ownership over the entire area of Lot No. 355, which consists of Lot Nos. 107, 108 and 109, was affirmed.

On September 20, 1993, the Pea Heirs were awarded a patent by the Department of Environment and Natural Resources (DENR), and on September 21, 1993, Original Certificate of Title No. P33658[7] covering Lot No. 107 was issued in their name.

Subject of the instant case is a 340 square meter portion (the Disputed Property) of Lot No. 107 over which respondents Heirs of Anastacio Trinidad, represented by Napoleon and Rolando Trinidad, are claiming ownership. Respondents allege that they and their predecessors-in-interest, Spouses Anastacio and Francisca Trinidad, have openly, peacefully, publicly and adversely possessed the Disputed Property in the concept of owner since 1950. Lot No. 107 and Lot Nos. 108 and 109, constitute Lot No. 355 which was part of the public domain. On July 10, 1950, Lot No. 355 with an original area of 1,500 square meters was awarded to Jesus M. Larrabaster by the National Land Settlement Administration (NLSA) who subsequently sold his rights and interests over the said property to Jose B. Pea (Pea) on June 29, 1956.

On January 27, 1994, respondents filed with the Regional Trial Court, Branch 24, Koronadal, South Cotabato a verified complaint[8] against the Pea Heirs,[9] the DENR Region IX Office, and the BOL for Review of Decree of Registration and/or Reconveyance with Prayer for Issuance of Writ of Preliminary Prohibitory Injunction and Temporary Restraining Order, which was docketed as Civil Case No. 1122. Respondents filed the complaint on the strength of their own and their predecessors open, peaceful, public and adverse possession of the Disputed Property in the concept of owner since 1950.

Respondents also claimed that on July 16, 1976, their predecessor-in-interest, Anastacio, applied for a Miscellaneous Sales Application over the Disputed Property which was designated as a portion of Lot No. 107, Ts-1032.[10] On March 2, 1979, the BOL allegedly issued Certification No. 3445 certifying that the Disputed Property was awarded to Anastacio and that the transfer had been duly investigated and approved per Board Resolution No. 133, Series of 1979. Instead of an answer, the Pea Heirs filed a Motion to Dismiss[11] alleging that the Regional Trial Court lacks jurisdiction over the nature of the action or the suit; that respondents have no legal capacity to sue as only the government may seek nullification of the land grant in their favor; and that the cause of action is barred by prior judgment or the statute of limitations. They asserted that the issue of ownership over the Disputed Property has long been settled in the Assistant Executive Secretary case. Further, they argued that respondents predecessor-in-interest, Anastacio, was a mere squatter who had been allowed by Mendoza to occupy a portion of Lot No. 107 sometime in 1960.

Thereafter, the original area of Lot No. 355 which was 1,500 square meters increased to 3,616.93 square meters due to accretion. Pea then requested the Bureau of Lands (BOL) to adjust the area of the lot awarded to him but the BOL denied the request on the ground that the accretion belonged to the government.

Aggrieved, Pea appealed to the Office of the President. The BOL recommended that Lot No. 355 be subdivided into three parts, to wit, Lot Nos. 107, 108 and 109, and that Lot No. 108 with an area of 1,500 square meters, be awarded to Pea, instead of the whole of Lot No. 355. Meanwhile, Lot Nos. 107 and 109 would be allocated to Basilio Mendoza (Mendoza) and Arturo Roxas, respectively.

In respondents Comment/Opposition,[12] they claimed that the Disputed Property had long ceased to be public land by virtue of their open, public, continuous, adverse and exclusive possession in the concept of owner for more than 40 years, and that they were never parties in the Assistant Executive Secretary case involving Mendoza.

The Office of the President initially adopted the recommendation of the BOL. Upon reconsideration, however, it modified its decision and held that the entire area of Lot No. 355, including the accretion, belonged to Pea and not to the government. Thus, Lot Nos. 107, 108, and 109 were awarded to him.

On September 3, 1997, Judge Rodolfo C. Soledad (Judge Soledad) granted petitioners moti on to dismiss and held that respondents are bound by the ruling of this Court in the Assistant Executive Secretary case.[13]

On January 27, 1970, Mendoza filed a special civil action for certiorari against the Assistant Executive Secretary for Legal Affairs of the Office of the President, the BOL, the Director of Lands, and Pea before Branch 24 of the Court of First Instance of South Cotabato, which was docketed as Civil Case No. 98. Claiming that he was denied due process, Mendoza assailed the decision of the Office of the President awarding the entire area of Lot No. 355 to Pea. He asserted ownership over Lot No. 107 on the strength of a Miscellaneous Sales Application he allegedly filed with the BOL on November 6, 1962.

Respondents filed a motion for reconsideration[14] alleging that res judicata does not apply and that their action is not barred by the Assistant Executive Secretary case. They argued that neither they, nor Anastacio, were parties in the said case and that there is no identity of causes of action.

On May 10, 1985, the trial court rendered a decision dismissing Mendozas petition for certiorari but the same was reversed by the Court of Appeals on appeal. Hence, Mendoza filed a petition for review on certiorari before the Supreme Court.

In 1998, Judge Soledad died without resolving the motion for reconsideration filed by respondents. Judge Francisco S. Ampig (Judge Ampig) was designated Acting Judge. On May 24, 1999, Judge Ampig granted the motion for reconsideration, reinstated Civil Case No. 1122, and directed the Pea Heirs to file an answer.

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The Pea Heirs, together with herein petitioner as the new owner of Lot No. 107, filed a petition for certiorari[15] before the Court of Appeals which was docketed as CA-G.R. SP No. 55581. On July 31, 2000, the Court of Appeals rendered the assailed decision dismissing the petition. It ruled that a petition for certiorari is not the proper remedy against an order denying a motion to dismiss. Further, it held that there is no res judicata. Thus: Moreover, petitioners have plain, speedy and adequate remedy in the ordinary course of law. The remedy against an adverse interlocutory order, such as the assailed orders, is not certiorari but to continue with the case in due course and, when an unfavorable verdict is handed down, to take an appeal in the manner authorized by law. x x x With the denial of the motion to dismiss and reinstatement of the case, petitioners will still answer the complaint. Upon joinder of issues, the parties will enter into trial, after which, the lower court will render a verdict. And if adverse to them, petitioners may appeal the decision together with the assailed orders. The case at bench does not fall under any of the exceptional circumstances where the extraordinary writ of certiorari may be resorted to despite availability of appeal. xxxx

The petition lacks merit. It has long been settled that an order denying a motion to dismiss is an interlocutory order. It neither terminates nor finally disposes of a case, as it leaves something to be done by the court before the case is finally decided on the merits. As such, the general rule is that the denial of a motion to dismiss cannot be questioned in a special civil action for certiorari.[17]

However, there are exceptions to the general rule. In Velarde v. Lopez, Jr.,[18] the Court held that resort to a special civil action for certiorari is allowed when the ground for the motion to dismiss is improper venue, lack of jurisdiction, or res judicata as in the case at bar.[19] Thus, petitioner did not commit a procedural error in filing a petition for certiorari before the Court of Appeals.

Nevertheless, as to the substantive issue raised herein, the petition must fail. We find that Judge Ampig did not commit grave abuse of discretion in denying petitioners motion to dismiss and reinstating Civil Case No. 1122.

Private respondents are not parties in the first action. Neither are they the successors-in-interest of any of the parties therein. The first action is in personam. The final judgment in said action is only binding and conclusive upon the parties therein and their successors-in-interest. xxxx Mendoza, the petitioner in the first action, laid claim in Lot 107 on the basis of his possession thereof and Miscellaneous Sales Application. On the other hand, private respondents interest in the contested property is anchored on their own possession and Miscellaneous Sales Application. In other words, private respondents are not asserting rights under Mendoza. Consequently, they have no community of interests in the contested property; in fact, their interests are antagonistic to each other.

In Oropeza Marketing Corp. v. Allied Banking Corp.,[20] we held that res judicata literally means a matter adjudged; a thing judicially acted upon or decided; a thing or matter settled by judgment. It lays the rule that an existing final judgment or decree rendered on the merits, and without fraud or collusion, by a court of competent jurisdiction, upon any matter within its jurisdiction, is conclusive of the rights of the parties or their privies, in all other actions or suits in the same or any other judicial tribunal of concurrent jurisdiction on the points and matters in issue in the first suit. [21]

A case is barred by prior judgment or res judicata when the following requisites concur: (1) the former judgment is final; (2) it is rendered by a court having jurisdiction over the subject matter and the parties; (3) it is a judgment or an order on the merits; and (4) there is between the first and the second actions identity of parties, subject matter, and causes of action.[22]

On the other hand, the test often used in determining whether causes of action are identical is to ascertain whether the same evidence which is necessary to sustain the second action would have been sufficient to authorize recovery in the first, even if the forms or nature of the two actions be different (Carlet vs. Court of Appeals, 275 SCRA 97). Considering that the foundation of private respondents action is different from that of Mendoza, the evidence necessary to sustain the latters claim in the first action would be separate and distinct from that required to establish private respondents cause of action.

In this case, it is not disputed that the first three elements are present. Likewise, there is no controversy regarding the identity of the subject matter. The question, therefore, is whether there is identity of parties and causes of action. We find that there is none.

Since not all requisites of res judicata are present, respondent judge acted rightly in issuing the assailed orders. In short, he committed no abuse of discretion.WHEREFORE, the petition is DISMISSED for lack of merit.SO ORDERED.[16] The motion for reconsideration of the foregoing decision was denied hence, this petition. Petitioner claims that the case of Assistant Executive Secretary bars the filing of Civil Case No. 1122, and that a petition for certiorari under Rule 65 of the Rules of Court is the proper remedy in assailing the order of the Regional Trial Court denying the motion to dismiss. Respondents argue that they have been in open, peaceful, public and adverse possession of the Disputed Property in the concept of owner since 1950; that the patent and original certificate of title were fraudulently issued in favor of the Pea Heirs; and that their action for review of decree of registration and/or reconveyance is not barred by the Courts ruling in Assistant Executive Secretary. The issues for resolution are as follows: 1) whether a petition for certiorari under Rule 65 is the proper remedy in assailing an order denying a motion to dismiss; and 2) whether Judge Ampig committed grave abuse of discretion in denying petitioners motion to dismiss and reinstating Civil Case No. 1122.

Civil Case No. 98 was a special civil action for certiorari filed by Mendoza against the Assistant Executive Secretary for Legal Affairs of the Office of the President, the BOL, the Director of Lands, and Pea. On the other hand, Civil Case No. 1122 is an action for review of decree of registration and/or reconveyance. The parties are respondents Trinidad, the Pea Heirs, the DENR Region IX Office, and the BOL. Mendozas action in Civil Case No. 98 was based on alleged grave abuse of discretion of the Office of the President in awarding the entire area of Lot No. 355 to Pea. He claimed ownership over Lot No. 7 and in support thereof, presented the Miscellaneous Sales Application he filed with the BOL on November 6, 1962. Meanwhile, respondents action in Civil Case No. 1122 was based on their continued possession of the Disputed Property in the concept of owner for over 40 years, and the alleged fraudulent issuance of a patent and certificate of title to the Pea Heirs. True, res judicata does not require absolute but only substantial identity of parties. However, there is substantial identity only when the additional party acts in the same capacity or is in privity with the parties in the former action.[23] This is not so in the present case. It must be emphasized that respondents are not asserting rights under Mendoza. Indeed, the records will show that the parties in the two cases have their own rights and interests in relation to the subject matter in litigation.

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Moreover, as correctly found by the Court of Appeals, the basis of respondents action was different from that of Mendoza; the evidence necessary to sustain the latters claim is separate and distinct from that required to establish respondents cause of action.[24] While Mendoza relied on the Miscellaneous Sales Application as evidence to support his claim, herein respondents would have to present proof of their alleged continuous possession of the Disputed Property as well as fraud in the issuance of the patent and title in favor of the Pea Heirs. In Morato v. Court of Appeals,[25] we held that the test of identity of causes of action lies not in the form of action but in whether the same facts or evidence would support and establish the former and present causes of action.[26] Thus, res judicata does not apply in the instant case there being no identity of parties and causes of action. Nevertheless, the public policy underlying the principle of res judicata must be considered together with the policy that a party shall not be deprived of a fair adversary proceeding wherein to present his case.[27] It bears stressing that respondents action for review of decree of registration is sanctioned under Section 32 of Presidential Decree No. 1529,[28] which provides that a person deprived of his land through actual fraud may institute an action to reopen or review a decree of registration within one year from entry of such decree. It states: Section 32. Review of decree of registration; Innocent purchaser for value. The decree of registration shall not be reopened or revised by reason of absence, minority, or other disability of any person adversely affected thereby, nor by any proceeding in any court for reversing judgments, subject, however, to the right of any person, including the government and the branches thereof, deprived of land or of any estate or interest therein by such adjudication or confirmation of title obtained by actual fraud, to file in the proper Court of First Instance a petition for reopening and review of the decree of registration not later than one year from and after the date of the entry of such decree of registration, but in no case shall such petition be entertained by the court where an innocent purchaser for value has acquired the land or an interest therein, whose rights may be prejudiced. Whenever the phrase innocent purchaser for value or an equivalent phrase occurs in this Decree, it shall be deemed to include an innocent lessee, mortgagee, or other encumbrancer for value.

A final note. It appears from the records that after our ruling in the Assistant Executive Secretary case in 1989, the BOL issued a Patent on September 20, 1993 in favor of the Pea Heirs which became the basis for the issuance of OCT No. P-33658 covering Lot No. 107. However, as held in the Assistant Executive Secretary case, Lot No. 107 as accretions to the original lot (Lot No. 355) awarded to Larrabaster on July 10, 1950 no longer belonged to the Government[,] the subdivision thereof by the Bureau of Lands into three lots (Lot No. 107, Lot No. 108 and Lot No. 109), as well as the allocation of said lots to two other individuals, was beyond the scope of its authority.[33] As a result, while Lot No. 107 may no longer be acquired under the provisions of the Public Land Act, it does not absolutely foreclose the possibility that, as a private property, a portion thereof (the Disputed Property) may have been acquired by respondents through acquisitive prescription under the Civil Code. These matters, however, are the proper subject of a separate action should one be filed subject, of course, to such claims and defenses that either party may have under relevant laws.

All told, it would be premature to order the dismissal of respondents complaint as they have yet to be given an opportunity to substantiate their claims. We note that respondents are in actual physical possession of the Disputed Property up to this date, and the fact of their physical possession over many years is not disputed by petitioner. [34] Under the circumstances, it would be more in keeping with the standards of fairness to have a full-blown trial where the evidentiary matters are threshed out.

WHEREFORE, the petition is DENIED. The July 31, 2000 Decision, and the January 8, 2001 Resolution of the Court of Appeals in CA-G.R. SP No. 55581 are AFFIRMED. The trial court is ORDERED to resume trial in Civil Case No. 1122 and to resolve the same with dispatch.

SO ORDERED. Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. 70054 December 11, 1991

The Court has repeatedly applied the foregoing provision of law to a patent issued by the Director of Lands, approved by the Secretary of Natural Resources, under the signature of the President of the Philippines. The date of the issuance of the patent corresponds to the date of the issuance of the decree in ordinary cases.[29]

In this case, the patent was issued in favor of the Pea Heirs on September 20, 1993. Respondents filed Civil Case No. 1122 for Review of Decree of Registration and/or Reconveyance with Prayer for Issuance of Writ of Preliminary Prohibitory Injunction and Temporary Restraining Order on January 27, 1994, or well within the prescribed one-year period. Likewise, records show that TCT No. 58976 under petitioners name bears a Notice of Lis Pendens.[30] Thus, it cannot be said that petitioner is an innocent purchaser for value as she was well aware of respondents claim over the Disputed Property.

BANCO FILIPINO SAVINGS AND MORTGAGE BANK, petitioner, vs. THE MONETARY BOARD, CENTRAL BANK OF THE PHILIPPINES, JOSE B. FERNANDEZ, CARLOTA P. VALENZUELA, ARNULFO B. AURELLANO and RAMON V. TIAOQUI, respondents.

MEDIALDEA, J.:p Further, even assuming arguendo that respondents filed their action after one year, they may still be entitled to relief. An aggrieved party may file an action for reconveyance based on implied or constructive trust, which prescribes in ten years from the date of the issuance of the certificate of title over the property provided that the property has not been acquired by an innocent purchaser for value. [31] This refers to nine (9) consolidated cases concerning the legality of the closure and receivership of petitioner Banco Filipino Savings and Mortgage Bank (Banco Filipino for brevity) pursuant to the order of respondent Monetary Board. Six (6) of these cases, namely, G.R. Nos. 68878, 77255-68, 78766, 81303, 81304 and 90473 involve the common issue of whether or not the liquidator appointed by the respondent Central Bank (CB for brevity) has the authority to prosecute as well as to defend suits, and to foreclose mortgages for and in behalf of the bank while the issue on the validity of the receivership and liquidation of the latter is pending resolution in G.R. No. 7004. Corollary to this issue is whether the CB can be sued to fulfill financial commitments of a closed bank pursuant to Section 29 of the Central Bank Act. On the other hand, the other three (3) cases, namely, G.R. Nos. 70054, which is the main case, 78767 and 78894 all seek to annul and set aside M.B. Resolution No. 75 issued by respondents Monetary Board and Central Bank on January 25, 1985.

Respondents clearly asserted in their complaint that they and their predecessors-in-interest have long been the owners of the Disputed Property and that they were fraudulently deprived of ownership thereof when the Pea Heirs obtained a patent and certificate of title in their favor. These allegations certainly measure up to the requisite statement of facts to constitute an action for reconveyance. [32]

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The antecedent facts of each of the nine (9) cases are as follows: G.R No. 68878 This is a motion for reconsideration, filed by respondent Celestina Pahimuntung, of the decision promulgated by thisCourt on April 8, 1986, granting the petition for review on certiorari and reversing the questioned decision of respondent appellate court, which annulled the writ of possession issued by the trial court in favor of petitioner. The respondent-movant contends that the petitioner has no more personality to continue prosecuting the instant case considering that petitioner bank was placed under receivership since January 25, 1985 by the Central Bank pursuant to the resolution of the Monetary Board. G.R. Nos. 77255-58 Petitioners Top Management Programs Corporation (Top Management for brevity) and Pilar Development Corporation (Pilar Development for brevity) are corporations engaged in the business of developing residential subdivisions. Top Management obtained a loan of P4,836,000 from Banco Filipino as evidenced by a promissory note dated January 7, 1982 payable in three years from date. The loan was secured by real estate mortgage in its various properties in Cavite. Likewise, Pilar Development obtained loans from Banco Filipino between 1982 and 1983 in the principal amounts of P6,000,000, P7,370,000 and P5,300,000 with maturity dates on December 28, 1984, January 5, 1985 and February 16, 1984, respectively. To secure the loan, Pilar Development mortgaged to Banco Filipino various properties in Dasmarias, Cavite. On January 25, 1985, the Monetary Board issued a resolution finding Banco Filipino insolvent and unable to do business without loss to its creditors and depositors. It placed Banco Filipino under receivership of Carlota Valenzuela, Deputy Governor of the Central Bank. On March 22, 1985, the Monetary Board issued another resolution placing the bank under liquidation and designating Valenzuela as liquidator. By virtue of her authority as liquidator, Valenzuela appointed the law firm of Sycip, Salazar, et al. to represent Banco Filipino in all litigations. On March 26, 1985, Banco Filipino filed the petition for certiorari in G.R. No. 70054 questioning the validity of the resolutions issued by the Monetary Board authorizing the receivership and liquidation of Banco Filipino. In a resolution dated August 29, 1985, this Court in G.R. No. 70054 resolved to issue a temporary restraining order, effective during the same period of 30 days, enjoining the respondents from executing further acts of liquidation of the bank; that acts such as receiving collectibles and receivables or paying off creditors' claims and other transactions pertaining to normal operations of a bank are not enjoined. The Central Bank is ordered to designate a comptroller for Banco Filipino. Subsequently, Top Management failed to pay its loan on the due date. Hence, the law firm of Sycip, Salazar, et al. acting as counsel for Banco Filipino under authority of Valenzuela as liquidator, applied for extra-judicial foreclosure of the mortgage over Top Management's properties. Thus, the Ex-Officio Sheriff of the Regional Trial Court of Cavite issued a notice of extra-judicial foreclosure sale of the properties on December 16, 1985. On December 9, 1985, Top Management filed a petition for injunction and prohibition with the respondent appellate court docketed as CA-G.R. SP No. 07892 seeking to enjoin the Regional Trial Court of Cavite, the ex-officio sheriff of said court and Sycip, Salazar, et al. from proceeding with foreclosure sale. Similarly, Pilar Development defaulted in the payment of its loans. The law firm of Sycip, Salazar, et al. filed separate applications with the ex-officio sheriff of the Regional Trial Court of Cavite for the extrajudicial foreclosure of mortgage over its properties. Hence, Pilar Development filed with the respondent appellate court a petition for prohibition with prayer for the issuance of a writ of preliminary injunction docketed as CA-G.R SP Nos. 08962-64 seeking to enjoin the same respondents from enforcing the foreclosure sale of its properties. CA-G.R. SP Nos. 07892 and 08962-64 were consolidated and jointly decided.

On October 30, 1986, the respondent appellate court rendered a decision dismissing the aforementioned petitions. Hence, this petition was filed by the petitioners Top Management and Pilar Development alleging that Carlota Valenzuela, who was appointed by the Monetary Board as liquidator of Banco Filipino, has no authority to proceed with the foreclosure sale of petitioners' properties on the ground that the resolution of the issue on the validity of the closure and liquidation of Banco Filipino is still pending with this Court in G.R. 70054. G.R. No. 78766 Petitioner El Grande Development Corporation (El Grande for brevity) is engaged in the business of developing residential subdivisions. It was extended by respondent Banco Filipino a credit accommodation to finance its housing program. Hence, petitioner was granted a loan in the amount of P8,034,130.00 secured by real estate mortgages on its various estates located in Cavite. On January 15, 1985, the Monetary Board forbade Banco Filipino to do business, placed it under receivership and designated Deputy Governor Carlota Valenzuela as receiver. On March 22, 1985, the Monetary Board confirmed Banco Filipino's insolvency and designated the receiver Carlota Valenzuela as liquidator. When petitioner El Grande failed to pay its indebtedness to Banco Filipino, the latter thru its liquidator, Carlota Valenzuela, initiated the foreclosure with the Clerk of Court and Ex-officio sheriff of RTC Cavite. Subsequently, on March 31, 1986, the ex-officio sheriff issued the notice of extra-judicial sale of the mortgaged properties of El Grande scheduled on April 30, 1986. In order to stop the public auction sale, petitioner El Grande filed a petition for prohibition with the Court of Appeals alleging that respondent Carlota Valenzuela could not proceed with the foreclosure of its mortgaged properties on the ground that this Court in G.R. No. 70054 issued a resolution dated August 29, 1985, which restrained Carlota Valenzuela from acting as liquidator and allowed Banco Filipino to resume banking operations only under a Central Bank comptroller. On March 2, 1987, the Court of Appeals rendered a decision dismissing the petition. Hence this petition for review on certiorari was filed alleging that the respondent court erred when it held in its decision that although Carlota P. Valenzuela was restrained by this Honorable Court from exercising acts in liquidation of Banco Filipino Savings & Mortgage Bank, she was not legally precluded from foreclosing the mortgage over the properties of the petitioner through counsel retained by her for the purpose. G.R. No. 81303 On November 8, 1985, petitioner Pilar Development Corporation (Pilar Development for brevity) filed an action against Banco Filipino, the Central Bank and Carlota Valenzuela for specific performance, docketed as Civil Case No. 12191. It appears that the former management of Banco Filipino appointed Quisumbing & Associates as counsel for Banco Filipino. On June 12, 1986 the said law firm filed an answer for Banco Filipino which confessed judgment against Banco Filipino. On June 17, 1986, petitioner filed a second amended complaint. The Central Bank and Carlota Valenzuela, thru the law firm Sycip, Salazar, Hernandez and Gatmaitan filed an answer to the complaint. On June 23, 1986, Sycip, et al., acting for all the defendants including Banco Filipino moved that the answer filed by Quisumbing & Associates for defendant Banco Filipino be expunged from the records. Despite opposition from Quisumbing & Associates, the trial court granted the motion to expunge in an order dated March 17, 1987. Petitioner Pilar Development moved to reconsider the order but the motion was denied. Petitioner Pilar Development filed with the respondent appellate court a petition for certiorari and mandamus to annul the order of the trial court. The Court of Appeals rendered a decision dismissing the petition. A petition was filed with this Court but was denied in a resolution dated March 22, 1988. Hence, this instant motion for reconsideration. G.R. No. 81304

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On July 9, 1985, petitioner BF Homes Incorporated (BF Homes for brevity) filed an action with the trial court to compel the Central Bank to restore petitioner's; financing facility with Banco Filipino. The Central Bank filed a motion to dismiss the action. Petitioner BF Homes in a supplemental complaint impleaded as defendant Carlota Valenzuela as receiver of Banco Filipino Savings and Mortgage Bank. On April 8, 1985, petitioner filed a second supplemental complaint to which respondents filed a motion to dismiss. On July 9, 1985, the trial court granted the motion to dismiss the supplemental complaint on the grounds (1) that plaintiff has no contractual relation with the defendants, and (2) that the Intermediate Appellate Court in a previous decision in AC-G.R. SP. No. 04609 had stated that Banco Filipino has been ordered closed and placed under receivership pending liquidation, and thus, the continuation of the facility sued for by the plaintiff has become legally impossible and the suit has become moot. The order of dismissal was appealed by the petitioner to the Court of Appeals. On November 4, 1987, the respondent appellate court dismissed the appeal and affirmed the order of the trial court. Hence, this petition for review on certiorari was filed, alleging that the respondent court erred when it found that the private respondents should not be the ones to respond to the cause of action asserted by the petitioner and the petitioner did not have any cause of action against the respondents Central Bank and Carlota Valenzuela. G.R. No. 90473 Petitioner El Grande Development Corporation (El Grande for brevity) obtained a loan from Banco Filipino in the amount of P8,034,130.00, secured by a mortgage over its five parcels of land located in Cavite which were covered by Transfer Certificate of Title Nos. T-82187, T-109027, T-132897, T148377, and T-79371 of the Registry of Deeds of Cavite. When Banco Filipino was ordered closed and placed under receivership in 1985, the appointed liquidator of BF, thru its counsel Sycip, Salazar, et al. applied with the ex-officio sheriff of the Regional Trial Court of Cavite for the extrajudicial foreclosure of the mortgage constituted over petitioner's properties. On March 24, 1986, the ex-officio sheriff issued a notice of extrajudicial foreclosure sale of the properties of petitioner. Thus, petitioner filed with the Court of Appeals a petition for prohibition with prayer for writ of preliminary injunction to enjoin the respondents from foreclosing the mortgage and to nullify the notice of foreclosure. On June 16, 1989, respondent Court of Appeals rendered a decision dismissing the petition. Not satisfied with the decision, petitioner filed the instant petition for review on certiorari. G.R. No. 70054 Banco Filipino Savings and Mortgage Bank was authorized to operate as such under M.B. Resolution No. 223 dated February 14, 1963. It commenced operations on July 9, 1964. It has eighty-nine (89) operating branches, forty-six (46) of which are in Manila, with more than three (3) million depositors. As of July 31, 1984, the list of stockholders showed the major stockholders to be: Metropolis Development Corporation, Apex Mortgage and Loans Corporation, Filipino Business Consultants, Tiu Family Group, LBH Inc. and Anthony Aguirre. Petitioner Bank had an approved emergency advance of P119.7 million under M.B. Resolution No. 839 dated June 29, 1984. This was augmented with a P3 billion credit line under M.B. Resolution No. 934 dated July 27, 1984. On the same date, respondent Board issued M.B. Resolution No. 955 placing petitioner bank under conservatorship of Basilio Estanislao. He was later replaced by Gilberto Teodoro as conservator on August 10, 1984. The latter submitted a report dated January 8, 1985 to respondent Board on the conservatorship of petitioner bank, which report shall hereinafter be referred to as the Teodoro report.

Subsequently, another report dated January 23, 1985 was submitted to the Monetary Board by Ramon Tiaoqui, Special Assistant to the Governor and Head, SES Department II of the Central Bank, regarding the major findings of examination on the financial condition of petitioner BF as of July 31, 1984. The report, which shall be referred to herein as the Tiaoqui Report contained the following conclusion and recommendation: The examination findings as of July 31, 1984, as shown earlier, indicate one of insolvency and illiquidity and further confirms the above conclusion of the Conservator. All the foregoing provides sufficient justification for forbidding the bank from engaging in banking. Foregoing considered, the following are recommended: 1. Forbid the Banco Filipino Savings & Mortgage Bank to do business in the Philippines effective the beginning of office January 1985, pursuant to Sec. 29 of R.A No. 265, as amended; 2. Designate the Head of the Conservator Team at the bank, as Receiver of Banco Filipino Savings & Mortgage Bank, to immediately take charge of the assets and liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefit of all the creditors, and exercise all the powers necessary for these purposes including but not limited to bringing suits and foreclosing mortgages in the name of the bank. 3. The Board of Directors and the principal officers from Senior Vice Presidents, as listed in the attached Annex "A" be included in the watchlist of the Supervision and Examination Sector until such time that they shall have cleared themselves. 4. Refer to the Central Bank's Legal Department and Office of Special Investigation the report on the findings on Banco Filipino for investigation and possible prosecution of directors, officers, and employees for activities which led to its insolvent position. (pp- 61-62, Rollo) On January 25, 1985, the Monetary Board issued the assailed MB Resolution No. 75 which ordered the closure of BF and which further provides: After considering the report dated January 8, 1985 of the Conservator for Banco Filipino Savings and Mortgage Bank that the continuance in business of the bank would involve probable loss to its depositors and creditors, and after discussing and finding to be true the statements of the Special Assistant to the Governor and Head, Supervision and Examination Sector (SES) Department II as recited in his memorandum dated January 23, 1985, that the Banco Filipino Savings & Mortgage Bank is insolvent and that its continuance in business would involve probable loss to its depositors and creditors, and in pursuance of Sec. 29 of RA 265, as amended, the Board decided: 1. To forbid Banco Filipino Savings and Mortgage Bank and all its branches to do business in the Philippines; 2. To designate Mrs. Carlota P. Valenzuela, Deputy Governor as Receiver who is hereby directly vested with jurisdiction and authority to immediately take charge of the bank's assets and liabilities, and as expeditiously as possible collect and gather all the assets and administer the same for the benefit of its creditors, exercising all the powers necessary for these purposes including but not limited to, bringing suits and foreclosing mortgages in the name of the bank; 3. To designate Mr. Arnulfo B. Aurellano, Special Assistant to the Governor, and Mr. Ramon V. Tiaoqui, Special Assistant to the Governor and Head, Supervision and Examination Sector Department II, as Deputy Receivers who are likewise hereby directly vested with jurisdiction and authority to do all things necessary or proper to carry out the functions entrusted to them by the Receiver and otherwise to assist the Receiver in carrying out the functions vested in the Receiver by law or Monetary Board Resolutions; 4. To direct and authorize Management to do all other things and carry out all other measures necessary or proper to implement this Resolution and to safeguard the interests of depositors, creditors and the general public; and 5. In consequence of the foregoing, to terminate the conservatorship over Banco Filipino Savings and Mortgage Bank. (pp. 10-11, Rollo, Vol. I)

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On February 2, 1985, petitioner BF filed a complaint docketed as Civil Case No. 9675 with the Regional Trial Court of Makati to set aside the action of the Monetary Board placing BF under receivership. On February 28, 1985, petitioner filed with this Court the instant petition for certiorari and mandamus under Rule 65 of the Rules of Court seeking to annul the resolution of January 25, 1985 as made without or in excess of jurisdiction or with grave abuse of discretion, to order respondents to furnish petitioner with the reports of examination which led to its closure and to afford petitioner BF a hearing prior to any resolution that may be issued under Section 29 of R.A. 265, also known as Central Bank Act. On March 19, 1985, Carlota Valenzuela, as Receiver and Arnulfo Aurellano and Ramon Tiaoqui as Deputy Receivers of Banco Filipino submitted their report on the receivership of BF to the Monetary Board, in compliance with the mandate of Sec. 29 of R.A. 265 which provides that the Monetary Board shall determine within sixty (60) days from date of receivership of a bank whether such bank may be reorganized/permitted to resume business or ordered to be liquidated. The report contained the following recommendation: In view of the foregoing and considering that the condition of the banking institution continues to be one of insolvency, i.e., its realizable assets are insufficient to meet all its liabilities and that the bank cannot resume business with safety to its depositors, other creditors and the general public, it is recommended that: 1. Banco Filipino Savings & Mortgage Bank be liquidated pursuant to paragraph 3, Sec. 29 of RA No. 265, as amended; 2. The Legal Department, through the Solicitor General, be authorized to file in the proper court a petition for assistance in th liquidation of the Bank; 3. The Statutory Receiver be designated as the Liquidator of said bank; and 4. Management be instructed to inform the stockholders of Banco Filipino Savings & Mortgage Bank of the Monetary Board's decision liquidate the Bank. (p. 167, Rollo, Vol. I) On July 23, 1985, petitioner filed a motion before this Court praying that a restraining order or a writ of preliminary injunction be issued to enjoin respondents from causing the dismantling of BF signs in its main office and 89 branches. This Court issued a resolution on August 8, 1985 ordering the issuance of the aforesaid temporary restraining order. On August 20, 1985, the case was submitted for resolution. In a resolution dated August 29, 1985, this Court Resolved direct the respondents Monetary Board and Central Bank hold hearings at which the petitioner should be heard, and terminate such hearings and submit its resolution within thirty (30) days. This Court further resolved to issue a temporary restraining order enjoining the respondents from executing further acts of liquidation of a bank. Acts such as receiving collectibles and receivables or paying off creditors' claims and other transactions pertaining to normal operations of a bank were no enjoined. The Central Bank was also ordered to designate comptroller for the petitioner BF. This Court also ordered th consolidation of Civil Cases Nos. 8108, 9676 and 10183 in Branch 136 of the Regional Trial Court of Makati. However, on September 12, 1985, this Court in the meantime suspended the hearing it ordered in its resolution of August 29, 1985. On October 8, 1985, this Court submitted a resolution order ing Branch 136 of the Regional Trial Court of Makati the presided over by Judge Ricardo Francisco to conduct the hear ing contemplated in the resolution of August 29, 1985 in the most expeditious manner and to submit its resolution to this Court. In the Court's resolution of February 19, 1987, the Court stated that the hearing contemplated in the resolution of August 29, 1985, which is to ascertain whether substantial administrative due process had been observed by the respondent Monetary Board, may be expedited by Judge Manuel Cosico who now presides the court vacated by Judge Ricardo Francisco, who was elevated to the Court of Appeals, there being no legal impediment or justifiable reason to bar the former from conducting such hearing. Hence, this Court directed Judge Manuel Cosico to expedite the hearing and submit his report to this Court.

On February 20, 1988, Judge Manuel Cosico submitted his report to this Court with the recommendation that the resolutions of respondents Monetary Board and Central Bank authorizing the closure and liquidation of petitioner BP be upheld. On October 21, 1988, petitioner BF filed an urgent motion to reopen hearing to which respondents filed their comment on December 16, 1988. Petitioner filed their reply to respondent's comment of January 11, 1989. After having deliberated on the grounds raised in the pleadings, this Court in its resolution dated August 3, 1989 declared that its intention as expressed in its resolution of August 29, 1985 had not been faithfully adhered to by the herein petitioner and respondents. The aforementioned resolution had ordered a healing on the reports that led respondents to order petitioner's closure and its alleged pre-planned liquidation. This Court noted that during the referral hearing however, a different scheme was followed. Respondents merely submitted to the commissioner their findings on the examinations conducted on petitioner, affidavits of the private respondents relative to the findings, their reports to the Monetary Board and several other documents in support of their position while petitioner had merely submitted objections to the findings of respondents, counter-affidavits of its officers and also documents to prove its claims. Although the records disclose that both parties had not waived cross-examination of their deponents, no such cross-examination has been conducted. The reception of evidence in the form of affidavits was followed throughout, until the commissioner submitted his report and recommendations to the Court. This Court also held that the documents pertinent to the resolution of the instant petition are the Teodoro Report, Tiaoqui Report, Valenzuela, Aurellano and Tiaoqui Report and the supporting documents which were made as the bases by the reporters of their conclusions contained in their respective reports. This Court also Resolved in its resolution to re-open the referral hearing that was terminated after Judge Cosico had submitted his report and recommendation with the end in view of allowing petitioner to complete its presentation of evidence and also for respondents to adduce additional evidence, if so minded, and for both parties to conduct the required cross-examination of witnesses/deponents, to be done within a period of three months. To obviate all doubts on Judge Cosico's impartiality, this Court designated a new hearing commissioner in the person of former Judge Consuelo Santiago of the Regional Trial Court, Makati, Branch 149 (now Associate Justice of the Court of Appeals). Three motions for intervention were filed in this case as follows: First, in G.R. No. 70054 filed by Eduardo Rodriguez and Fortunate M. Dizon, stockholders of petitioner bank for and on behalf of other stockholders of petitioner; second, in G.R. No. 78894, filed by the same stockholders, and, third, again in G.R. No. 70054 by BF Depositors' Association and others similarly situated. This Court, on March 1, 1990, denied the aforesaid motions for intervention. On January 28, 1991, the hearing commissioner, Justice Consuelo Santiago of the Court of Appeals submitted her report and recommendation (to be hereinafter called, "Santiago Report") on the following issues stated therein as follows: l) Had the Monetary Board observed the procedural requirements laid down in Sec. 29 of R.A. 265, as amended to justify th closure of the Banco Filipino Savings and Mortgage Bank? 2) On the date of BF's closure (January 25, 1985) was its condition one of insolvency or would its continuance in business involve probable loss to its depositors or creditors? The commissioner after evaluation of the evidence presented found and recommended the following: 1. That the TEODORO and TIAOQUI reports did not establish in accordance with See. 29 of the R.A. 265, as amended, BF's insolvency as of July 31, 1984 or that its continuance in business thereafter would involve probable loss to its depositors or creditors. On the contrary, the evidence indicates that BF was solvent on July 31, 1984 and that on January 25, 1985, the day it was closed, its insolvency was not clearly established; 2. That consequently, BF's closure on January 25, 1985, not having satisfied the requirements prescribed under Sec. 29 of RA 265, as amended, was null and void. 3. That accordingly, by way of correction, BF should be allowed to re-open subject to such laws, rules and regulations that apply to its situation. Respondents thereafter filed a motion for leave to file objections to the Santiago Report. In the same motion, respondents requested that the report and recommendation be set for oral argument before the Court. On February 7, 1991, this Court denied the request for oral argument of the parties.

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On February 25, 1991, respondents filed their objections to the Santiago Report. On March 5, 1991, respondents submitted a motion for oral argument alleging that this Court is confronted with two conflicting reports on the same subject, one upholding on all points the Monetary Board's closure of petitioner, (Cosico Report dated February 19, 1988) and the other (Santiago Report dated January 25, 1991) holding that petitioner's closure was null and void because petitioner's insolvency was not clearly established before its closure; and that such a hearing on oral argrument will therefore allow the parties to directly confront the issues before this Court. On March 12, 1991 petitioner filed its opposition to the motion for oral argument. On March 20, 1991, it filed its reply to respondents' objections to the Santiago Report. On June 18, 1991, a hearing was held where both parties were heard on oral argument before this Court. The parties, having submitted their respective memoranda, the case is now submitted for decision. G.R. No. 78767 On February 2, 1985, Banco Filipino filed a complaint with the trial court docketed as Civil Case No. 9675 to annul the resolution of the Monetary Board dated January 25, 1985, which ordered the closure of the bank and placed it under receivership. On February 14, 1985, the Central Bank and the receivers filed a motion to dismiss the complaint on the ground that the receivers had not authorized anyone to file the action. In a supplemental motion to dismiss, the Central Bank cited the resolution of this Court dated October 15, 1985 in G.R. No. 65723 entitled, "Central Bank et al. v. Intermediate Appellate Court" whereby We held that a complaint questioning the validity of the receivership established by the Central Bank becomes moot and academic upon the initiation of liquidation proceedings. While the motion to dismiss was pending resolution, petitioner herein Metropolis Development Corporation (Metropolis for brevity) filed a motion to intervene in the aforestated civil case on the ground that as a stockholder and creditor of Banco Filipino, it has an interest in the subject of the action. On July 19, 1985, the trial court denied the motion to dismiss and also denied the motion for reconsideration of the order later filed by Central Bank. On June 5, 1985, the trial court allowed the motion for intervention. Hence, the Central Bank and the receivers of Banco Filipino filed a petition for certiorari with the respondent appellate court alleging that the trial court committed grave abuse of discretion in not dismissing Civil Case No. 9675. On March 17, 1986, the respondent appellate court rendered a decision annulling and setting aside the questioned orders of the trial court, and ordering the dismissal of the complaint filed by Banco Filipino with the trial court as well as the complaint in intervention of petitioner Metropolis Development Corporation. Hence this petition was filed by Metropolis Development Corporation questioning the decision of the respondent appellate court. G.R. No. 78894 On February 2, 1985, a complaint was filed with the trial court in the name of Banco Filipino to annul the resolution o the Monetary Board dated January 25, 1985 which ordered the closure of Banco Filipino and placed it under receivership. The receivers appointed by the Monetary Board were Carlota Valenzuela, Arnulfo Aurellano and Ramon Tiaoqui. On February 14, 1985, the Central Bank and the receiver filed a motion to dismiss the complaint on the ground that the receiver had not authorized anyone to file the action. On March 22, 1985, the Monetary Board placed the bank under liquidation and designated Valenzuela as liquidator and Aurellano and Tiaoqui as deputy liquidators. The Central Bank filed a supplemental motion to dismiss which was denied. Hence, the latter filed a petition forcertiorari with the respondent appellate court to set aside the order of the trial court denying

the motion to dismiss. On March 17, 1986, the respondent appellate court granted the petition and dismissed the complaint of Banco Filipino with the trial court. Thus, this petition for certiorari was filed with the petitioner contending that a bank which has been closed and placed under receivership by the Central Bank under Section 29 of RA 265 could file suit in court in its name to contest such acts of the Central Bank, without the authorization of the CB-appointed receiver. After deliberating on the pleadings in the following cases: 1. In G.R. No. 68878, the respondent's motion for reconsideration; 2. In G.R. Nos. 77255-58, the petition, comment, reply, rejoinder and sur-rejoinder; 2. In G.R. No. 78766, the petition, comment, reply and rejoinder; 3. In G.R. No. 81303, the petitioner's motion for reconsideration; 4. In G.R.No. 81304, the petition, comment and reply; 5. Finally, in G.R. No. 90473, the petition comment and reply. We find the motions for reconsideration in G.R. Nos. 68878 and 81303 and the petitions in G.R. Nos. 77255-58, 78766, 81304 and 90473 devoid of merit. Section 29 of the Republic Act No. 265, as amended known as the Central Bank Act, provides that when a bank is forbidden to do business in the Philippines and placed under receivership, the person designated as receiver shall immediately take charge of the bank's assets and liabilities, as expeditiously as possible, collect and gather all the assets and administer the same for the benefit of its creditors, and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution, exercising all the powers necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in the name of the bank. If the Monetary Board shall later determine and confirm that banking institution is insolvent or cannot resume business safety to depositors, creditors and the general public, it shall, public interest requires, order its liquidation and appoint a liquidator who shall take over and continue the functions of receiver previously appointed by Monetary Board. The liquid for may, in the name of the bank and with the assistance counsel as he may retain, institute such actions as may necessary in the appropriate court to collect and recover a counts and assets of such institution or defend any action ft against the institution. When the issue on the validity of the closure and receivership of Banco Filipino bank was raised in G.R. No. 70054, pendency of the case did not diminish the powers and authority of the designated liquidator to effectuate and carry on the a ministration of the bank. In fact when We adopted a resolute on August 25, 1985 and issued a restraining order to respondents Monetary Board and Central Bank, We enjoined me further acts of liquidation. Such acts of liquidation, as explained in Sec. 29 of the Central Bank Act are those which constitute the conversion of the assets of the banking institution to money or the sale, assignment or disposition of the s to creditors and other parties for the purpose of paying debts of such institution. We did not prohibit however acts a as receiving collectibles and receivables or paying off credits claims and other transactions pertaining to normal operate of a bank. There is no doubt that the prosecution of suits collection and the foreclosure of mortgages against debtors the bank by the liquidator are among the usual and ordinary transactions pertaining to the administration of a bank. their did Our order in the same resolution dated August 25, 1985 for the designation by the Central Bank of a comptroller Banco Filipino alter the powers and functions; of the liquid insofar as the management of the assets of the bank is concerned. The mere duty of the comptroller is to supervise counts and finances undertaken by the liquidator and to d mine the propriety of the latter's expenditures incurred behalf of the bank. Notwithstanding this, the liquidator is empowered under the law to continue the functions of receiver is preserving and keeping intact the assets of the bank in substitution of its former management, and to prevent the dissipation of its assets to the detriment of the creditors of the bank. These powers and functions of the liquidator in directing the operations of the bank in place of the former management or former officials of the bank include the retaining of counsel of his choice in actions and proceedings for purposes of administration.

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Clearly, in G.R. Nos. 68878, 77255-58, 78766 and 90473, the liquidator by himself or through counsel has the authority to bring actions for foreclosure of mortgages executed by debtors in favor of the bank. In G.R. No. 81303, the liquidator is likewise authorized to resist or defend suits instituted against the bank by debtors and creditors of the bank and by other private persons. Similarly, in G.R. No. 81304, due to the aforestated reasons, the Central Bank cannot be compelled to fulfill financial transactions entered into by Banco Filipino when the operations of the latter were suspended by reason of its closure. The Central Bank possesses those powers and functions only as provided for in Sec. 29 of the Central Bank Act. While We recognize the actual closure of Banco Filipino and the consequent legal effects thereof on its operations, We cannot uphold the legality of its closure and thus, find the petitions in G.R. Nos. 70054, 78767 and 78894 impressed with merit. We hold that the closure and receivership of petitioner bank, which was ordered by respondent Monetary Board on January 25, 1985, is null and void. It is a well-recognized principle that administrative and discretionary functions may not be interfered with by the courts. In general, courts have no supervising power over the proceedings and actions of the administrative departments of the government. This is generally true with respect to acts involving the exercise of judgment or discretion, and findings of fact. But when there is a grave abuse of discretion which is equivalent to a capricious and whimsical exercise of judgment or where the power is exercised in an arbitrary or despotic manner, then there is a justification for the courts to set aside the administrative determination reached (Lim, Sr. v. Secretary of Agriculture and Natural Resources, L-26990, August 31, 1970, 34 SCRA 751) The jurisdiction of this Court is called upon, once again, through these petitions, to undertake the delicate task of ascertaining whether or not an administrative agency of the government, like the Central Bank of the Philippines and the Monetary Board, has committed grave abuse of discretion or has acted without or in excess of jurisdiction in issuing the assailed order. Coupled with this task is the duty of this Court not only to strike down acts which violate constitutional protections or to nullify administrative decisions contrary to legal mandates but also to prevent acts in excess of authority or jurisdiction, as well as to correct manifest abuses of discretion committed by the officer or tribunal involved. The law applicable in the determination of these issues is Section 29 of Republic Act No. 265, as amended, also known as the Central Bank Act, which provides: SEC. 29.Proceedings upon insolvency. Whenever, upon examination by the head of the appropriate supervising or examining department or his examiners or agents into the condition of any bank or nonbank financial intermediary performing quasi-banking functions, it shall be disclosed that the condition of the same is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors, it shall be the duty of the department head concerned forthwith, in writing, to inform the Monetary Board of the facts. The Board may, upon finding the statements of the department head to be true, forbid the institution to do business in the Philippines and designate an official of the Central Bank or a person of recognized competence in banking or finance, as receiver to immediately take charge of its assets and liabilities, as expeditiously as possible collect and gather all the assets and administer the same for the benefit's of its creditors, and represent the bank personally or through counsel as he may retain in all actions or proceedings for or against the institution, exercising all the powers necessary for these purposes including, but not limited to, bringing and foreclosing mortgages in the name of the bank or non-bank financial intermediary performing quasi-banking functions. The Monetary Board shall thereupon determine within sixty days whether the institution may be reorganized or otherwise placed in such a condition so that it may be permitted to resume business with safety to its depositors and creditors and the general public and shall prescribe the conditions under which such resumption of business shall take place as well as the time for fulfillment of such conditions. In such case, the expenses and fees in the collection and administration of the assets of the institution shall be determined by the Board and shall be paid to the Central Bank out of the assets of such institution. If the Monetary Board shall determine and confirm within the said period that the bank or non-bank financial intermediary performing quasi-banking functions is insolvent or cannot resume business with safety to its depositors, creditors, and the general public, it shall, if the public interest requires, order its liquidation, indicate the manner of its liquidation and approve a liquidation plan which may, when warranted, involve disposition of any or all assets in consideration for the assumption of equivalent liabilities. The liquidator designated as hereunder provided shall, by the Solicitor General, file a petition in the regional trial court reciting the proceedings which have been taken and praying the assistance of the

court in the liquidation of such institutions. The court shall have jurisdiction in the same proceedings to assist in the adjudication of the disputed claims against the bank or non-bank financial intermediary performing quasi-banking functions and in the enforcement of individual liabilities of the stockholders and do all that is necessary to preserve the assets of such institutions and to implement the liquidation plan approved by the Monetary Board. The Monetary Board shall designate an official of the Central bank or a person of recognized competence in banking or finance, as liquidator who shall take over and continue the functions of the receiver previously appointed by the Monetary Board under this Section. The liquidator shall, with all convenient speed, convert the assets of the banking institutions or non-bank financial intermediary performing quasi-banking function to money or sell, assign or otherwise dispose of the same to creditors and other parties for the purpose of paying the debts of such institution and he may, in the name of the bank or non-bank financial intermediary performing quasi-banking functions and with the assistance of counsel as he may retain, institute such actions as may be necessary in the appropriate court to collect and recover accounts and assets of such institution or defend any action filed against the institution: Provided, However, That after having reasonably established all claims against the institution, the liquidator may, with the approval of the court, effect partial payments of such claims for assets of the institution in accordance with their legal priority. The assets of an institution under receivership or liquidation shall be deemed in custodia legis in the hands of the receiver or liquidator and shall from the moment of such receivership or liquidation, be exempt from any order of garnishment, levy, attachment, orexecution. The provisions of any law to the contrary notwithstanding, the actions of the Monetary Board under this Section, Section 28-A, an the second paragraph of Section 34 of this Act shall be final an executory, and can be set aside by a court only if there is convince proof, after hearing, that the action is plainly arbitrary and made in bad faith: Provided, That the same is raised in an appropriate pleading filed by the stockholders of record representing the majority of th capital stock within ten (10) days from the date the receiver take charge of the assets and liabilities of the bank or non-bank financial intermediary performing quasi-banking functions or, in case of conservatorship or liquidation, within ten (10) days from receipt of notice by the said majority stockholders of said bank or non-bank financial intermediary of the order of its placement under conservatorship o liquidation. No restraining order or injunction shall be issued by an court enjoining the Central Bank from implementing its actions under this Section and the second paragraph of Section 34 of this Act in th absence of any convincing proof that the action of the Monetary Board is plainly arbitrary and made in bad faith and the petitioner or plaintiff files a bond, executed in favor of the Central Bank, in an amount be fixed by the court. The restraining order or injunction shall be refused or, if granted, shall be dissolved upon filing by the Central Bank of a bond, which shall be in the form of cash or Central Bank cashier's check, in an amount twice the amount of the bond of th petitioner or plaintiff conditioned that it will pay the damages which the petitioner or plaintiff may suffer by the refusal or the dissolution of the injunction. The provisions of Rule 58 of the New Rules of Court insofar as they are applicable and not inconsistent with the provision of this Section shall govern the issuance and dissolution of the re straining order or injunction contemplated in this Section. xxx xxx xxx Based on the aforequoted provision, the Monetary Board may order the cessation of operations of a bank in the Philippine and place it under receivership upon a finding of insolvency or when its continuance in business would involve probable loss its depositors or creditors. If the Monetary Board shall determine and confirm within sixty (60) days that the bank is insolvent or can no longer resume business with safety to its depositors, creditors and the general public, it shall, if public interest will be served, order its liquidation. Specifically, the basic question to be resolved in G.R. Nos. 70054, 78767 and 78894 is whether or not the Central Bank and the Monetary Board acted arbitrarily and in bad faith in finding and thereafter concluding that petitioner bank is insolvent, and in ordering its closure on January 25, 1985. As We have stated in Our resolution dated August 3, 1989, the documents pertinent to the resolution of these petitions are the Teodoro Report, Tiaoqui Report, and the Valenzuela, Aurellano and Tiaoqui Report and the supporting documents made as bases by the supporters of their conclusions contained in their respective reports. We will focus Our study and discussion however on the Tiaoqui Report and the Valenzuela, Aurellano and Tiaoqui Report. The former recommended the closure and receivership of petitioner bank while the latter report made the recommendation to eventually place the petitioner bank

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under liquidation. This Court shall likewise take into consideration the findings contained in the reports of the two commissioners who were appointed by this Court to hold the referral hearings, namely the report by Judge Manuel Cosico submitted February 20, 1988 and the report submitted by Justice Consuelo Santiago on January 28, 1991. There is no question that under Section 29 of the Central Bank Act, the following are the mandatory requirements to be complied with before a bank found to be insolvent is ordered closed and forbidden to do business in the Philippines: Firstly, an examination shall be conducted by the head of the appropriate supervising or examining department or his examiners or agents into the condition of the bank; secondly, it shall be disclosed in the examination that the condition of the bank is one of insolvency, or that its continuance in business would involve probable loss to its depositors or creditors; thirdly, the department head concerned shall inform the Monetary Board in writing, of the facts; and lastly, the Monetary Board shall find the statements of the department head to be true. Anent the first requirement, the Tiaoqui report, submitted on January 23, 1985, revealed that the finding of insolvency of petitioner was based on the partial list of exceptions and findings on the regular examination of the bank as of July 31, 1984 conducted by the Supervision and Examination Sector II of the Central Bank of the PhilippinesCentral Bank (p. 1, Tiaoqui Report). On December 17, 1984, this list of exceptions and finding was submitted to the petitioner bank (p. 6, Tiaoqui Report) This was attached to the letter dated December 17, 1984, of examiner-in-charge Dionisio Domingo of SES Department II of the Central Bank to Teodoro Arcenas, president of petitione bank, which disclosed that the examination of the petitioner bank as to its financial condition as of July 31, 1984 was not yet completed or finished on December 17, 1984 when the Central Bank submitted the partial list of findings of examination to th petitioner bank. The letter reads: In connection with the regular examination of your institution a of July 31, 1984, we are submitting herewith a partial list of our exceptions/findings for your comments. Please be informed that we have not yet officially terminated our examination (tentatively scheduled last December 7, 1984) and that we are still awaiting for the unsubmitted replies to our previous letters requests. Moreover, other findings/ observations are still being summarized including the classification of loans and other risk assets. These shall be submitted to you in due time (p. 810, Rollo, Vol. III; emphasis ours). It is worthy to note that a conference was held on January 21, 1985 at the Central Bank between the officials of the latter an of petitioner bank. What transpired and what was agreed upon during the conference was explained in the Tiaoqui report. ... The discussion centered on the substantial exposure of the bank to the various entities which would have a relationship with the bank; the manner by which some bank funds were made indirectly available to several entities within the group; and the unhealth financial status of these firms in which the bank was additionally exposed through new funds or refinancing accommodation including accrued interest. Queried in the impact of these clean loans, on the bank solvency Mr. Dizon (BF Executive Vice President) intimated that, collectively these corporations have large undeveloped real estate properties in the suburbs which can be made answerable for the unsecured loans a well as the Central Bank's credit accommodations. A formal reply of the bank would still be forthcoming. (pp. 58-59, Rollo, Vol. I; emphasis ours) Clearly, Tiaoqui based his report on an incomplete examination of petitioner bank and outrightly concluded therein that the latter's financial status was one of insolvency or illiquidity. He arrived at the said conclusion from the following facts: that as of July 31, 1984, total capital accounts consisting of paidin capital and other capital accounts such as surplus, surplus reserves and undivided profits aggregated P351.8 million; that capital adjustments, however, wiped out the capital accounts and placed the bank with a capital deficiency amounting to P334.956 million; that the biggest adjustment which contributed to the deficit is the provision for estimated losses on accounts classified as doubtful and loss which was computed at P600.4 million pursuant to the examination. This provision is also known as valuation reserves which was set up or deducted against the capital accounts of the bank in arriving at the latter's financial condition.

Tiaoqui however admits the insufficiency and unreliability of the findings of the examiner as to the setting up of recommended valuation reserves from the assets of petitioner bank. He stated: The recommended valuation reserves as bases for determining the financial status of the bank would need to be discussed with the bank, consistent with standard examination procedure, for which the bank would in turn reply. Also, the examination has not been officially terminated. (p. 7. Tiaoqui report; p. 59, Rollo, Vol. I) In his testimony in the second referral hearing before Justice Santiago, Tiaoqui testified that on January 21, 1985, he met with officers of petitioner bank to discuss the advanced findings and exceptions made by Mr. Dionisio Domingo which covered 70%-80% of the bank's loan portfolio; that at that meeting, Fortunato Dizon (BF's Executive Vice President) said that as regards the unsecured loans granted to various corporations, said corporations had large undeveloped real estate properties which could be answerable for the said unsecured loans and that a reply from BF was forthcoming, that he (Tiaoqui) however prepared his report despite the absence of such reply; that he believed, as in fact it is stated in his report, that despite the meeting on January 21, 1985, there was still a need to discuss the recommended valuation reserves of petitioner bank and; that he however, did not wait anymore for a discussion of the recommended valuation reserves and instead prepared his report two days after January 21, 1985 (pp. 3313-3314, Rollo). Records further show that the examination of petitioner bank was officially terminated only when Central Bank Examination-charge Dionisio Domingo submitted his final report of examination on March 4,1985. It is evident from the foregoing circumstances that the examination contemplated in Sec. 29 of the CB Act as a mandatory requirement was not completely and fully complied with. Despite the existence of the partial list of findings in the examination of the bank, there were still highly significant items to be weighed and determined such as the matter of valuation reserves, before these can be considered in the financial condition of the bank. It would be a drastic move to conclude prematurely that a bank is insolvent if the basis for such conclusion is lacking and insufficient, especially if doubt exists as to whether such bases or findings faithfully represent the real financial status of the bank. The actuation of the Monetary Board in closing petitioner bank on January 25, 1985 barely four days after a conference with the latter on the examiners' partial findings on its financial position is also violative of what was provided in the CB Manual of Examination Procedures. Said manual provides that only after the examination is concluded, should a pre-closing conference led by the examiner-in-charge be held with the officers/representatives of the institution on the findings/exception, and a copy of the summary of the findings/violations should be furnished the institution examined so that corrective action may be taken by them as soon as possible (Manual of Examination Procedures, General Instruction, p. 14). It is hard to understand how a period of four days after the conference could be a reasonable opportunity for a bank to undertake a responsive and corrective action on the partial list of findings of the examiner-in-charge. We recognize the fact that it is the responsibility of the Central Bank of the Philippines to administer the monetary, banking and credit system of the country and that its powers and functions shall be exercised by the Monetary Board pursuant to Rep. Act No. 265, known as the Central Bank Act. Consequently, the power and authority of the Monetary Board to close banks and liquidate them thereafter when public interest so requires is an exercise of the police power of the state. Police power, however, may not be done arbitratrily or unreasonably and could be set aside if it is either capricious, discriminatory, whimsical, arbitrary, unjust or is tantamount to a denial of due process and equal protection clauses of the Constitution (Central Bank v. Court of Appeals, Nos. L-50031-32, July 27, 1981, 106 SCRA 143). In the instant case, the basic standards of substantial due process were not observed. Time and again, We have held in several cases, that the procedure of administrative tribunals must satisfy the fundamentals of fair play and that their judgment should express a well-supported conclusion. In the celebrated case of Ang Tibay v. Court of Industrial Relations, 69 Phil. 635, this Court laid down several cardinal primary rights which must be respected in a proceeding before an administrative body. However, as to the requirement of notice and hearing, Sec. 29 of RA 265 does not require a previous hearing before the Monetary Board implements the closure of a bank, since its action is subject to judicial scrutiny as provided for under the same law (Rural Bank of Bato v. IAC, G.R. No. 65642, October 15, 1984, Rural Bank v. Court of Appeals, G.R. 61689, June 20, 1988,162 SCRA 288).

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Notwithstanding the foregoing, administrative due process does not mean that the other important principles may be dispensed with, namely: the decision of the administrative body must have something to support itself and the evidence must be substantial. Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion (Ang Tibay vs. CIR, supra). Hence, where the decision is merely based upon pieces of documentary evidence that are not sufficiently substantial and probative for the purpose and conclusion they are presented, the standard of fairness mandated in the due process clause is not met. In the case at bar, the conclusion arrived at by the respondent Board that the petitioner bank is in an illiquid financial position on January 23, 1985, as to justify its closure on January 25, 1985 cannot be given weight and finality as the report itself admits the inadequacy of its basis to support its conclusion. The second requirement provided in Section 29, R.A. 265 before a bank may be closed is that the examination should disclose that the condition of the bank is one of insolvency. As to the concept of whether the bank is solvent or not, the respondents contend that under the Central Bank Manual of Examination Procedures, Central Bank examiners must recommend valuation reserves, when warranted, to be set up or deducted against the corresponding asset account to determine the bank's true condition or net worth. In the case of loan accounts, to which practically all the questioned valuation reserves refer, the manual provides that: 1. For doubtful loans, or loans the ultimate collection of which is doubtful and in which a substantial loss is probable but not yet definitely ascertainable as to extent, valuation reserves of fifty per cent (50%) of the accounts should be recommended to be set up. 2. For loans classified as loss, or loans regarded by the examiner as absolutely uncollectible or worthless, valuation reserves of one hundred percent (100%) of the accounts should be recommended to be set up (p. 8, Objections to Santiago report). The foregoing criteria used by respondents in determining the financial condition of the bank is based on Section 5 of RA 337, known as the General Banking Act which states: Sec. 5. The following terms shall be held to be synonymous and interchangeable: ... f. Unimpaired Capital and Surplus, "Combined capital accounts," and "Net worth," which terms shall mean for the purposes of this Act, the total of the "unimpaired paid-in capital, surplus, and undivided profits net of such valuation reserves as may be required by the Central Bank." There is no doubt that the Central Bank Act vests authority upon the Central Bank and Monetary Board to take charge and administer the monetary and banking system of the country and this authority includes the power to examine and determine the financial condition of banks for purposes provided for by law, such as for the purpose of closure on the ground of insolvency stated in Section 29 of the Central Bank Act. But express grants of power to public officers should be subjected to a strict interpretation, and will be construed as conferring those powers which are expressly imposed or necessarily implied (Floyd Mechem, Treatise on the Law of Public Offices and Officers, p. 335). In this case, there can be no clearer explanation of the concept of insolvency than what the law itself states. Sec. 29 of the Central Bank Act provides that insolvency under the Act, shall be understood to mean that "the realizable assets of a bank or a non-bank financial intermediary performing quasi-banking functions as determined by the Central Bank are insufficient to meet its liabilities." Hence, the contention of the Central Bank that a bank's true financial condition is synonymous with the terms "unimpaired capital and surplus," "combined capital accounts" and net worth after deducting valuation reserves from the capital, surplus and unretained earnings, citing Sec. 5 of RA 337 is misplaced. Firstly, it is clear from the law that a solvent bank is one in which its assets exceed its liabilities. It is a basic accounting principle that assets are composed of liabilities and capital. The term "assets" includes capital and surplus" (Exley v. Harris, 267 p. 970, 973, 126 Kan., 302). On the other hand, the term "capital" includes common and preferred stock, surplus reserves, surplus and undivided profits. (Manual of Examination Procedures, Report of Examination on Department of Commercial and Savings Banks, p. 3-C). If valuation reserves would be deducted from these items, the result would merely be the networth or the unimpaired capital and surplus of the bank applying Sec. 5 of RA 337 but not the total financial condition of the bank.

Secondly, the statement of assets and liabilities is used in balance sheets. Banks use statements of condition to reflect the amounts, nature and changes in the assets and liabilities. The Central Bank Manual of Examination Procedures provides a format or checklist of a statement of condition to be used by examiners as guide in the examination of banks. The format enumerates the items which will compose the assets and liabilities of a bank. Assets include cash and those due from banks, loans, discounts and advances, fixed assets and other property owned or acquired and other miscellaneous assets. The amount of loans, discounts and advances to be stated in the statement of condition as provided for in the manual is computed after deducting valuation reserves when deemed necessary. On the other hand, liabilities are composed of demand deposits, time and savings deposits, cashier's, manager's and certified checks, borrowings, due to head office, branches; and agencies, other liabilities and deferred credits (Manual of Examination Procedure, p. 9). The amounts stated in the balance sheets or statements of condition including the computation of valuation reserves when justified, are based however, on the assumption that the bank or company will continue in business indefinitely, and therefore, the networth shown in the statement is in no sense an indication of the amount that might be realized if the bank or company were to be liquidated immediately (Prentice Hall Encyclopedic Dictionary of Business Finance, p. 48). Further, based on respondents' submissions, the allowance for probable losses on loans and discounts represents the amount set up against current operations to provide for possible losses arising from non-collection of loans and advances, and this account is also referred to as valuation reserve (p. 9, Objections to Santiago report). Clearly, the statement of condition which contains a provision for recommended valuation reserves should not be used as the ultimate basis to determine the solvency of an institution for the purpose of termination of its operations. Respondents acknowledge that under the said CB manual, CB examiners must recommend valuation reserves,when warranted, to be set up against the corresponding asset account (p. 8, Objections to Santiago report). Tiaoqui himself, as author of the report recommending the closure of petitioner bank admits that the valuation reserves should still be discussed with the petitioner bank in compliance with standard examination procedure. Hence, for the Monetary Board to unilaterally deduct an uncertain amount as valuation reserves from the assets of a bank and to conclude therefrom without sufficient basis that the bank is insolvent, would be totally unjust and unfair. The test of insolvency laid down in Section 29 of the Central Bank Act is measured by determining whether the realizable assets of a bank are leas than its liabilities. Hence, a bank is solvent if the fair cash value of all its assets, realizable within a reasonable time by a reasonable prudent person, would equal or exceed its total liabilities exclusive of stock liability; but if such fair cash value so realizable is not sufficient to pay such liabilities within a reasonable time, the bank is insolvent. (Gillian v. State, 194 N.E. 360, 363, 207 Ind. 661). Stated in other words, the insolvency of a bank occurs when the actual cash market value of its assets is insufficient to pay its liabilities, not considering capital stock and surplus which are not liabilities for such purpose (Exley v. Harris, 267 p. 970, 973,126 Kan. 302; Alexander v. Llewellyn, Mo. App., 70 S.W. 2n 115,117). In arriving at the computation of realizable assets of petitioner bank, respondents used its books which undoubtedly are not reflective of the actual cash or fair market value of its assets. This is not the proper procedure contemplated in Sec. 29 of the Central Bank Act. Even the CB Manual of Examination Procedures does not confine examination of a bank solely with the determination of the books of the bank. The latter is part of auditing which should not be confused with examination. Examination appraises the soundness of the institution's assets, the quality and character of management and determines the institution's compliance with laws, rules and regulations. Audit is a detailed inspection of the institution's books, accounts, vouchers, ledgers, etc. to determine the recording of all assets and liabilities. Hence, examination concerns itself with review and appraisal, while audit concerns itself with verification (CB Manual of Examination Procedures, General Instructions, p. 5). This Court however, is not in the position to determine how much cash or market value shall be assigned to each of the assets and liabilities of the bank to determine their total realizable value. The proper determination of these matters by using the actual cash value criteria belongs to the field of fact-finding expertise of the Central Bank and the Monetary Board. Notwithstanding the fact that the figures arrived at by the respondent Board as to assets and liabilities do not truly indicate their realizable value as they were merely based on book value, We will however, take a look at the figures presented by the Tiaoqui Report in concluding insolvency as of July 31, 1984 and at the figures presented by the CB authorized deputy receiver and by the Valenzuela, Aurellano and Tiaoqui Report which recommended the liquidation of the bank by reason of insolvency as o January 25,1985.

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The Tiaoqui report dated January 23, 1985, which was based on partial examination findings on the bank's condition as of July 31, 1984, states that total liabilities of P5,282.1 million exceeds total assets of P4,947.2 million after deducting from the assets valuation reserves of P612.2 million. Since, as We have explained in our previous discussion that valuation reserves can not be legally deducted as there was no truthful and complete evaluation thereof as admitted by the Tiaoqui report itself, then an adjustment of the figures win show that the liabilities of P5,282.1 million will not exceed the total assets which will amount to P5,559.4 if the 612.2 million allotted to valuation reserves will not be deducted from the assets. There can be no basis therefore for both the conclusion of insolvency and for the decision of the respondent Board to close petitioner bank and place it under receivership. Concerning the financial position of the bank as of January 25, 1985, the date of the closure of the bank, the consolidated statement of condition thereof as of the aforesaid date shown in the Valenzuela, Aurellano and Tiaoqui report on the receivership of petitioner bank, dated March 19, 1985, indicates that total liabilities of 4,540.84 million does not exceed the total assets of 4,981.53 million. Likewise, the consolidated statement of condition of petitioner bank as of January 25, 1985 prepared by the Central Bank Authorized Deputy Receiver Artemio Cruz shows that total assets amounting to P4,981,522,996.22 even exceeds total liabilities amounting to P4,540,836,834.15. Based on the foregoing, there was no valid reason for the Valenzuela, Aurellano and Tiaoqui report to finally recommend the liquidation of petitioner bank instead of its rehabilitation. We take note of the exhaustive study and findings of the Cosico report on the petitioner bank's having engaged in unsafe, unsound and fraudulent banking practices by the granting of huge unsecured loans to several subsidiaries and related companies. We do not see, however, that this has any material bearing on the validity of the closure. Section 34 of the RA 265, Central Bank Act empowers the Monetary Board to take action under Section 29 of the Central Bank Act when a bank "persists in carrying on its business in an unlawful or unsafe manner." There was no showing whatsoever that the bank had persisted in committing unlawful banking practices and that the respondent Board had attempted to take effective action on the bank's alleged activities. During the period from July 27, 1984 up to January 25, 1985, when petitioner bank was under conservatorship no official of the bank was ever prosecuted, suspended or removed for any participation in unsafe and unsound banking practices, and neither was the entire management of the bank replaced or substituted. In fact, in her testimony during the second referral hearing, Carlota Valenzuela, CB Deputy Governor, testified that the reason for petitioner bank's closure was not unsound, unsafe and fraudulent banking practices but the alleged insolvency position of the bank (TSN, August 3, 1990, p. 3316, Rollo, Vol. VIII). Finally, another circumstance which point to the solvency of petitioner bank is the granting by the Monetary Board in favor of the former a credit line in the amount of P3 billion along with the placing of petitioner bank under conservatorship by virtue of M.B. Resolution No. 955 dated July 27, 1984. This paved the way for the reopening of the bank on August 1, 1984 after a self-imposed bank holiday on July 23, 1984. On emergency loans and advances, Section 90 of RA 265 provides two types of emergency loans that can be granted by the Central Bank to a financially distressed bank: Sec. 90. ... In periods of emergency or of imminent financial panic which directly threaten monetary and banking stability, the Central Bank may grant banking institutions extraordinary advances secured by any assets which are defined as acceptable by by a concurrent vote of at least five members of the Monetary Board. While such advances are outstanding, the debtor institution may not expand the total volume of its loans or investments without the prior authorization of the Monetary Board. The Central Bank may, at its discretion, likewise grant advances to banking institutions, even during normal periods, for the purpose of assisting a bank in a precarious financial condition or under serious financial pressures brought about by unforeseen events, or events which, though foreseeable, could not be prevented by the bank concerned. Provided, however, That the Monetary Board has ascertained that the bank is not insolvent and has clearly realizable assets to secure the advances. Provided, further, That a concurrent vote of at least five members of the Monetary Board is obtained. (Emphasis ours) The first paragraph of the aforequoted provision contemplates a situation where the whole banking community is confronted with financial and economic crisis giving rise to serious and widespread confusion among the public, which may eventually threaten and gravely prejudice the stability of the banking system. Here, the emergency or financial confusion involves the whole banking community and

not one bank or institution only. The second situation on the other hand, provides for a situation where the Central Bank grants a loan to a bank with uncertain financial condition but not insolvent. As alleged by the respondents, the following are the reasons of the Central Bank in approving the resolution granting the P3 billion loan to petitioner bank and the latter's reopening after a brief selfimposed banking holiday: WHEREAS, the closure by Banco Filipino Savings and Mortgage Bank of its Banking offices on its own initiative has worked serious hardships on its depositors and has affected confidence levels in the banking system resulting in a feeling of apprehension among depositors and unnecessary deposit withdrawals; WHEREAS, the Central Bank is charged with the function of administering the banking system; WHEREAS, the reopening of Banco Filipino would require additional credit resources from the Central Bank as well as an independent management acceptable to the Central Bank; WHEREAS, it is the desire of the Central Bank to rapidly diffuse the uncertainty that presently exists; ... (M.B. Min. No. 35 dated July 27, 1984 cited in Respondents' Objections to Santiago Report, p. 26; p. 3387, Rollo, Vol. IX; Emphasis ours). A perusal of the foregoing "Whereas" clauses unmistakably show that the clear reason for the decision to grant the emergency loan to petitioner bank was that the latter was suffering from financial distress and severe bank "run" as a result of which it closed on July 23, 1984 and that the release of the said amount is in accordance with the Central Bank's full support to meet Banco Filipino's depositors' withdrawal requirements (Excerpts of minutes of meeting on MB Min. No. 35, p. 25, Rollo, Vol. IX). Nothing therein shows that an extraordinary emergency situation exists affecting most banks, not only as regards petitioner bank. This Court thereby finds that the grant of the said emergency loan was intended from the beginning to fall under the second paragraph of Section 90 of the Central Bank Act, which could not have occurred if the petitioner bank was not solvent. Where notwithstanding knowledge of the irregularities and unsafe banking practices allegedly committed by the petitioner bank, the Central Bank even granted financial support to the latter and placed it under conservatorship, such actuation means that petitioner bank could still be saved from its financial distress by adequate aid and management reform, which was required by Central Bank's duty to maintain the stability of the banking system and the preservation of public confidence in it (Ramos v. Central Bank, No. L-29352, October 4, 1971, 41 SCRA 565). In view of the foregoing premises, We believe that the closure of the petitioner bank was arbitrary and committed with grave abuse of discretion. Granting in gratia argumenti that the closure was based on justified grounds to protect the public, the fact that petitioner bank was suffering from serious financial problems should not automatically lead to its liquidation. Section 29 of the Central Bank provides that a closed bank may be reorganized or otherwise placed in such a condition that it may be permitted to resume business with safety to its depositors, creditors and the general public. We are aware of the Central Bank's concern for the safety of Banco Filipino's depositors as well as its creditors including itself which had granted substantial financial assistance up to the time of the latter's closure. But there are alternatives to permanent closure and liquidation to safeguard those interests as well as those of the general public for the failure of Banco Filipino or any bank for that matter may be viewed as an irreversible decline of the country's entire banking system and ultimately, it may reflect on the Central Bank's own viability. For one thing, the Central Bank and the Monetary Board should exercise strict supervision over Banco Filipino. They should take all the necessary steps not violative of the laws that will fully secure the repayment of the total financial assistance that the Central Bank had already granted or would grant in the future. ACCORDINGLY, decision is hereby rendered as follows: 1. The motion for reconsideration in G.R. Nos. 68878 and 81303, and the petitions in G.R. Nos. 77255-58, 78766, 81304 and 90473 are DENIED; 2. The petitions in G.R. No. 70054, 78767 and 78894 are GRANTED and the assailed order of the Central Bank and the Monetary Board dated January 25, 1985 is hereby ANNULLED AND SET ASIDE. The Central Bank and the Monetary Board are ordered to reorganize petitioner Banco Filipino Savings and Mortgage Bank and allow the latter to resume business in the Philippines under the comptrollership of

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both the Central Bank and the Monetary Board and under such conditions as may be prescribed by the latter in connection with its reorganization until such time that petitioner bank can continue in business with safety to its creditors, depositors and the general public. SO ORDERED. Narvasa, C.J., Gutierrez, Jr., Cruz, Bidin and Regalado, JJ., concur. Paras, Feliciano, Padilla, Davide, Jr. and Nocon, JJ., took no part.

Then, respondent appealed to the Court of Appeals. On October 29, 1996, the Court of Appeals promulgated its decision setting aside the resolution of the CSC and reinstating the resolution of the BOPI, DA, stating thus: It is true that the Civil Service Act does not define grave and simple misconduct. There is, however, no question that these offenses fall under different categories. This is clear from a perusal of memorandum circular No. 49-89 dated August 3, 1989 (also known as the guidelines in the application of penalties in administrative cases) itself which classifies administrative offenses into three: grave, less grave and light offenses. The charge of grave misconduct falls under the classification of grave offenses while simple misconduct is classified as a less grave offense. The former is punishable by dismissal while the latter is punishable either by suspension (one month and one day to six months), if it is the first offense; or by dismissal, if it is the second. Thus, they should be treated as separate and distinct offenses.[7] The Court of Appeals further ruled that a basic requirement of due process on the other hand is that a person must be duly informed of the charges against him (Felicito Sajonas vs. National Labor Relations Commission, 183 SCRA 182). In the instant case however, Lucas came to know of the modification of the charge against him only when he received notice of the resolution dismissing him from the service.[8] Hence, this petition. The issues are (a) whether respondent Lucas was denied due process when the CSC found him guilty of grave misconduct on a charge of simple misconduct, and (b) whether the act complained of constitutes grave misconduct. Petitioner anchors its position on the view that the formal charge against a respondent in an administrative case need not be drafted with the precision of an information in a criminal prosecution. It is sufficient that he is apprised of the substance of the charge against him; what is controlling is the allegation of the acts complained of, and not the designation of the offense. [9] We deny the petition. As well stated by the Court of Appeals, there is an existing guideline of the CSC distinguishing simple and grave misconduct. In the case of Landrito vs. Civil Service Commission, we held that in grave misconduct as distinguished from simple misconduct, the elements of corruption, clear intent to violate the law or flagrant disregard of established rule, must be manifest,[10] which is obviously lacking in respondents case. Respondent maintains that as he was charged with simple misconduct, the CSC deprived him of his right to due process by convicting him of grave misconduct. We sustain the ruling of the Court of Appeals[11] that: (a) a basic requirement of due process is that a person must be duly informed of the charges against him[12] and that (b) a person can not be convicted of a crime with which he was not charged.[13] Administrative proceedings are not exempt from basic and fundamental procedural principles, such as the right to due process in investigations and hearings.[14] The right to substantive and procedural due process is applicable in administrative proceedings. [15] Of course, we do not in any way condone respondents act. Even in jest, he had no right to touch complainants leg. However, under the circumstances, such act is not constitutive of grave misconduct, in the absence of proof that respondent was maliciously motivated. We note that respondent has been in the service for twenty (20) years and this is his first offense. IN VIEW WHEREOF, the Court hereby DENIES the petition for review on certiorari and AFFIRMS the decision of the Court of Appeals in CA-G. R. SP No. 37137. FIRST DIVISION [G.R. No. 145389. July 31, 2001] Ombudsman ANIANO A. DESIERTO, Customs Commissioner RENATO A. AMPIL and Captain DOMINGO S. DOCTOR, JR., petitioners, vs. RONNIE C. SILVESTRE, respondent. DECISION

EN BANC [G.R. No. 127838. January 21, 1999] CIVIL SERVICE COMMISSION, petitioner, vs. JOSE J. LUCAS, respondent. DECISION PARDO, J.: The petition for review on certiorari before the Court assails the decision of the Court of Appeals[1] which set aside the resolution of the Civil Service Commission[2] and reinstated that of the Board of Personnel Inquiry (BOPI for brevity), Office of the Secretary, Department of Agriculture,[3] suspending respondent for one month, for simple misconduct. To provide a factual backdrop of the case, a recital of the facts is necessary. On May 26, 1992, Raquel P. Linatok, an assistant information officer at the Agricultural Information Division, Department of Agriculture (DA for brevity), filed with the office of the Secretary, DA, an affidavit-complaint against respondent Jose J. Lucas, a photographer of the same agency, for misconduct. Raquel described the incident in the following manner: While standing before a mirror, near the office door of Jose J. Lucas, Raquel noticed a chair at her right side which Mr. Jose Lucas, at that very instant used to sit upon. Thereafter, Mr. Lucas bent to reach for his shoe. At that moment she felt Mr. Lucas hand touching her thigh and running down his palm up to her ankle. She was shocked and suddenly faced Mr. Lucas and admonished him not to do it again or she will kick him. But Lucas touched her again and so she hit Mr. Lucas. Suddenly Mr. Lucas shouted at her saying lumabas ka na at huwag na huwag ka nang papasok dito kahit kailan A verbal exchange then ensued and respondent Lucas grabbed Raquel by the arm and shoved her towards the door causing her to stumble, her both hands protected her face from smashing upon the door. Mr. Lucas, bent on literally throwing the affiant out of the office, grabbed her the second time while she attempted to regain her posture after being pushed the first time. x x x while doing all this, Mr. Lucas shouted at the affiant, saying, labas, huwag ka nang papasok dito kahit kailan. [4] On June 8, 1992, the Board of Personnel Inquiry, DA, issued a summons requiring respondent to answer the complaint, not to file a motion to dismiss, within five (5) days from receipt. On June 17, 1992, respondent Lucas submitted a letter to Jose P. Nitullano, assistant head, BOPI, denying the charges. According to Lucas, he did not touch the thigh of complainant Linatok, that what transpired was that he accidentally brushed Linatoks leg when he reached for his shoes and that the same was merely accidental and he did not intend nor was there malice when his hand got in contact with Linatoks leg. On May 31, 1993, after a formal investigation by the BOPI, DA, the board issued a resolution finding respondent guilty of simple misconduct[5] and recommending a penalty of suspension for one (1) month and one (1) day. The Secretary of Agriculture approved the recommendation. In due time, respondent appealed the decision to the Civil Service Commission (CSC). On July 7, 1994, the CSC issued a resolution finding respondent guilty of grave misconduct and imposing on him the penalty of dismissal from the service.[6]Respondent moved for reconsideration but the CSC denied the motion.

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PARDO, J.: The Case The petition is one for review on certiorari[1] seeking to set aside (a) the decision of the Court of Appeals[2] nullifying the preventive suspension order issued by petitioner Ombudsman; and (b) the resolution[3] denying petitioners motion for reconsideration. The Ombudsman issued an order of preventive suspension [4] in connection with the administrative charges for grave misconduct, dishonesty and conduct prejudicial to the best interest of the service that Task Force Aduana filed with the Office of the Ombudsman against respondent Ronnie C. Silvestre and Atty. Redempto Somera. On February 14, 2000, respondent filed with the Ombudsman a motion for the lifting of the order of preventive suspension. However, on April 03, 2000, the Ombudsman denied the motion. On May 31, 2000, respondent filed with the Court of Appeals[5] a petition for certiorari and prohibition with temporary restraining order and writ of preliminary injunction questioning the order of preventive suspension issued by petitioner Ombudsman. After due proceedings, on August 14, 2000, the Court of Appeals promulgated its decision [6] annulling and setting aside the order of preventive suspension against respondent for having been issued by the Ombudsman in grave abuse of discretion. On October 06, 2000, the Court of Appeals denied a motion for reconsideration filed by the Solicitor General. Hence, this petition.[7] The Facts On January 26, 2000, elements of Task Force Aduana headed by petitioner Doctor conducted an entrapment operation in a case of bribery involving Atty. Redempto C. Somera, Hearing Officer, Law Division, Bureau of Customs, Manila, and Indian nationals who had pending cases of seizure with the former. After the pay-off materialized, petitioner Doctor announced the entrapment and then arrested Atty. Somera and two (2) Indian nationals, namely, Murli Tejoomal Mohrani and Kumar Rupchand Khiatani, for violation of Article 210 of the Revised Penal Code. As a consequence, the Task Force filed with the Regional Trial Court, Manila, charges of bribery, violation of R. A. No. 3019, and corruption of public officials against them. Likewise, the Task Force filed with the Ombudsman administrative charges for grave misconduct, dishonesty and conduct prejudicial to the best interest of the service against respondent Ronnie C. Silvestre and Atty. Somera. The Issue The issue is whether the Ombudsman has authority to suspend from office respondent Ronnie C. Silvestre indefinitely on the basis of the administrative complaint filed with his office showing that evidence of guilt is strong. The Courts Ruling We need not resolve the issue presented. We dismiss the petition. It has become moot. On February 14, 2001, the Ombudsman dismissed the administrative charges against respondent. In dismissing the charges, the Ombudsman categorically ruled as follows: It is another story, however, as regards respondent SILVESTRE. In implicating respondent SILVESTRE in the instant case, Atty. DOCTOR stated in his AFFIDAVIT OF ARREST AND COMPLAINT, the following: 6. That after the hearing of the case (S.I. No. 00-005) on January 20, 2000, ATTY. SOMERA approached me and invited me to the room of ATTY. RONNIE SILVESTRE (herein petitioner), Head of

the Law Department of the Port of Manila wherein the duo convinced me to cooperate with them in the withdrawal of the complaint and its eventual dismissal; 7. That I did not commit myself to their proposition to drop the case but I just continued talking with them with the plan in mind to report the same to LT. GEN. JOSE T. CALIMLIM, Task Force Commander of Presidential Anti-Smuggling Task Force ADUANA; Except this bare allegation of the complainant, however, practically no other evidence was ever presented to substantiate the charge against respondent SILVESTRE. At this point, it may be noted that well settled is the rule that within the field of administrative law, while strict rules of evidence are not applicable to quasi-judicial proceedings, nevertheless, in adducing evidence constitutive of substantial evidence, the basic rule that mere allegation is not evidence cannot be disregarded. We are, therefore inclined to believe the defense of respondent SILVESTRE, that what was discussed between him, respondent SOMERA and Atty. DOCTOR on January 20, 2000, was the legal issue on the continued detention of some kitchen wares which were not covered by the Warrant of Seizure and Detention (WSD). This, in light of subsequent Order of the District Collector of the Port of Manila dated March 2, 2000, releasing the said kitchen wares which were indeed, not covered by the Warrant of Seizure and Detention (WSD) x x x Worthy of note also is the DECISION of the Court of Appeals in CA-G. R. SP No. 58958 dated August 14, 2000 entitled RONNIE C. SILVESTRE vs. OMBUDSMAN ANIANO A. DESIERTO, (pages 253 to 254, Records) where in granting the petition for certiorari and prohibition involving the preventive suspension order on respondent SILVESTRE, the said appellate court stated, thus: xxx xxx xxx

While the above DECISION may not necessarily be controlling in the resolution of the merits of the instant case insofar as it pertains to respondent SILVESTRE, we cannot help but note its relevancy inasmuch as practically no other evidence was presented by the complainant, other than his AFFIDAVIT OF ARREST AND COMPLAINT to support the charge against respondent SILVESTRE. Needless to state, this is also the very same and only evidence presented before the Court of Appeals which rendered the aforequoted DECISION. WHEREFORE, the Court hereby DISMISSES the petition for mootness. No costs. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-67784 February 28, 1986 MABUHAY TEXTILE MILLS CORPORATION, petitioner, vs. MINISTER ROBERTO V. ONGPIN, ALFREDO PIO DE RODA, JR., EDGARDO L. TORDESILLAS, RAMON J. FAROLAN, GARMENTS AND TEXTILE EXPORT BOARD AND THE INTERMEDIATE APPELLATE COURT,respondents.

GUTIERREZ, JR., J.: This petition for certiorari seeks to annul the decision of the Intermediate Appellate Court dated January 6, 1984 which upheld the cancellation of petitioner's export quota allocations and the suspension of its officers even as it set aside the basis of such cancellation and suspension on the ground of violation of due process. Petitioner Mabuhay Textile Mills Corporation (Mabuhay) is a corporation engaged in the garments and textile import business for the last twenty-seven years. Among the government requirements for engaging

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in this type of business are the export quota allocations issued by the respondent Garments and Textile Export Board. Sometime in 1982, the Board granted export quota allocations for 1983 to the petitioner. These export quotas have been granted annually to the petitioner since 1976. They are automatically renewed every year provided the grantee has utilized its quotas during the previous years. On March 2, 1983, the petitioner received a letter from the Board informing it that its 1983 export quota allocations were revoked effective February, 1983. Furthermore, its major stockholders and officers were also distinguished from engaging in business activities involving garment and textile exports. The decision of the Board was based on the following initial findings of the Bureau of Customs, to wit: 1. Two 40-footer containers declared to consist of 210 bales of acrylic staple fiber weighing 48.211 kgs. with a value (including taxes and duties) of P1,240,857.00 arrived from Kobe, Japan on 12 February 1983 on board the S/S Breadeverette. 2. Examination of the shipment reveals the following a. About 100 bales of acrylic staple fibers were found in the first half of the containers; and b. Assorted textile piece goods for blouses, shirts and dresses were found midway through the containers. 3. The estimated value of the actual contents of the 2 containers is P2.5 Million. The Bureau of Customs conducted an investigation pursuant to the above initial findings. On July 25, 1983, it rendered a decision absolving the petitioner from any irregularity relative to the subject shipment in the initial findings. It ruled: xxx xxx xxx During the hearing, it was shown that Mr. James Dy, Executive Vice-President of Mabuhay contacted the shipper in Japan, Daiwa Trading Co., Ltd. demanding explanation for the textile contents of the shipment and the shipper answered that those (sic) was an interchange in the loading of the materials destined for Manila and another shipment destined for Indonesia (Exh. "O" and Stipulation No. 9). Subsequently, Mr. Dy wrote another letter to the Chief, CIID (Exh. "P") enclosing therewith two letters from Daiwa Trading Co., Ltd. dated February 21, 1983 and February 25, 1983 explaining the supposed interchanging of the materials destined for Manila and that destined for Indonesia (Exhs. "P-1" and "P-2"); a copy of a Bill of Lading of Samudera Indonesia Shipping Line for the S/S 'OCEAN PRIMA' purportedly covering 150 crate piece goods consigned to 'P.T. GADING AJU DJAZA JL 'of Jakarta (Exhs. "P.3" & "J-A"); a photo of an invoice addressed to 'P.T. GADING AJU DJAZA JL' containing a detailed description of assorted design/color of the fabrics and their corresponding values (Exh, " P-4 " and " 5-B ") and a photocopy of a Packing List (Exh. "P-5" also "5-C") containing the description and yardage of the fabrics mentioned in the aforementioned invoice. The aforementioned photocopies of the shipping documents were sent by DAIWA TRADING CO., LTD., to Mabuhay for purposes of explaining the alleged interchanging of the materials in the two shipments and which Mabuhay, through its Executive Vice-Presidents, submitted to the CIID. Thereafter, through a series of communications with customs authorities in Jakarta and a personal inspection in Jakarta by the Commissioner of Customs, while he was there, it was discovered that no such containers with Nos. ICSU-4868538 and ICSU-5219207 containing 110 bales of acrylic staple fiber was on board the 'OCEAN PRIMA' and that Bill of Lading No. CJ-4 covers a shipment of steel sheets (Exh. "O-4 "; Exhs. "R" to "R-2") thus debunking the claim of interchanged shipments by DAIWA TRADING CO., LTD. The claimant, on the other hand, showed during the hearing that it opened a letter of credit for the importation of 42,000 kilos of Acryhc Staple Fiber C8 3D V64 at US$1.6 per kilo (Exh. "1") based on a Pro Forma Invoice of Daiwa Trading Co., Ltd. (Exh. "l-A").Upon receipt of the shipping documents, i.e., the Invoice (Exh. "D"); the Packing List (Exh. "C") and the Bill of Lading (Exh."B" also Exh."1") wherein it is indicated that the shipment was Shipper's Load & Count' (Exh. "1-A"), the same were given to its broker in line with its used business practice, for the purpose of filing the import entry.

When the claimant received information that the shipment contained fabrics which it did not import, an explanation was required from the shipper, DAIWA TRADING CORPORATION, LTD. The latter, in two letters addressed to the claimant (Exhs. "P1" and "P-2" also Exhs. "4" & "5") alleged that there was an inter change of materials in the shipment to the claimant and another shipment consigned to a customer in Indonesia. Also sent to the claimant by Daiwa were photocopies of a Bill of Lading (Exh. "P-3"); and Invoice (Exh. "P-4") and a packing list (Exh."P-5") supposedly covering a shipment of piece goods consigned to 'P.T. GADING AJU DJAZA JL' which the claimant forthwith submitted to the CIID. Later, in the letter dated March 14, 1983, addressed to the Claimant, the shipper admitted its culpability in claimant interchanging the shipments (Exh. "8"). Thereafter, the Claimant filed a suit against the shipper for the damages caused to it by the latter's action and petitioned for the issuance of a Writ of Preliminary Attachment (Exh. "7" to "7-6"). A careful scrutiny of the facts and the circumstances attendant to the case show that the Mabuhay Textile Mills have no participation in the irregularity relative to the subject shipment. The same was exported to the Philippines under a 'Shipper's Load and Count Bill of Lading (Exh. " l-A") which means that it was the shipper who was responsible for putting the contents inside the container.The spurious documents (Exhs. "P-3", "P-4" and "P-5") came from the shipper, Daiwa Trading Co., Ltd. and were forwarded by Mabuhay to the Bureau of Customs for checking and evaluation. Lastly, and most important, Daiwa Trading Co., Ltd., in a letter to Mabuhay dated March 14, 1983 (Exh. "l") admitted that its staff was responsible for the story about the supposed mix-up with the alleged shipment to Indonesia. However, good faith should not be isolated alone on the part of importer/consignee, but it should be proven also on the part of the supplier/exporter. It should be reckoned that in matter of importation there are two primary personalities involved, the supplier and the importer. The supplier in order to maintain his credibility to his client/importer, should exercise an utmost care and extreme caution in shipping orders of his importer otherwise there is always the risk of losing huge amount of investment capital by his importers which ultimately produce tremendous damages on the part of the importer similar to the instant case. He must maintain his honest relationship to his importers. Within the contemplation of the Customs Code, the defense of the importer of good faith must be mutually tie up with the supplier. A good faith of the importer does not in anyway offset the damage committed by the supplier/exporter for it is crystal clear on the provision of Section 2530 (1) 3, 4 of the Tariff and Customs Code, the liability of the exporter is explicit, thus: xxx xxx xxx (3) On the strength of a false documents or affidavit executed by the owner, importer, exporter or consignee concerning the importation of such articles; (4) On the strength of a false invoice or other documents executed by the owner, importer, exporteror consignee concerning the importation or exportation of such articles; If Mabuhay is prejudiced by such actions, its recourse is against the exporter by way of damages and other remedies provided by law, as in fact, Mabuhay have so done by filling of the corresponding complaint against the exporter and petitioning for the issuance of the necessary Writ of Attachment. xxx xxx xxx On the basis of such decision, the petitioner, on August 10, 1983, moved to reconsider the revocation of its export quota allocations and the disqualification of its officers from the export business. As the Board failed to reply to such a request, two similar letters were sent by the petitioner on September 13, and 23, 1983 respectively. Again, the Board did not reply. Finally on September 26 and 29, 1983, two letters were respectively sent by the Board to the petitioner informing the latter that it had referred petitioner's letters to the Commissioner of Customs for comment. On October 14, 1983, the Commissioner of Customs responded through a letter-comment addressed to the Board stating the following: xxx xxx xxx Kindly be informed that seizure proceedings are proceedings instituted against the articles or goods. Whenever a decision is rendered in a seizure proceeding, it is final and conclusive as to the goods but not

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as to the persons involved therein where another proceeding is necessary. Hence, any findings made in a seizure proceeding, with respect to the culpability or non-culpability of the persons involved, cannot be considered binding as to affect the judgment that may be rendered in another. Seizure proceedings cannot make a final and conclusive pronouncement as to the guilt or innocence of persons. On October 19, 1983, petitioner filed an action for prohibition and injunction with preliminary injunction and restraining order against the Board. On October 24, 1983, the trial court issued a restraining order directing the Board and its officials to desist and to stop from implementing the decision revoking the petitioner's export quota allocations and from disqualifying its principal stockholder and officers from engaging in the textile and garment export business. The Board moved to reconsider but the same was denied. On November 14, 1983, the lower court issued a writ of preliminary injunction. This, notwithstanding, the next day, the Board denied petitioner's request for reinstatement "on the basis of the above letter (the letter of the Commissioner of Customs dated October 14, 1983) and for the reason that no new issues had been presented to warrant the reinstatement. " After hearing, the trial court rendered judgment in favor of the petitioner, and among others directed the Board to issue to the petitioner within two days from service of the writ, Textile Export Clearances Nos. 23292, 22583 and 14321, and to issue the pertinent clearances with respect to the textile export shipments of the petitioner after filing of the required papers and documents. In its decision, the trial court stated: The summary revocation of the export quotas and export authorizations issued in favor of the petitioner without hearing violates not only the above-mentioned provisions of the Rules and Regulations of the respondent board but also the 'due process of law' clause of the Constitution of the Philippines to the effect that 'no person shall be deprived of life, liberty, or property without due process of law, nor shall any person be denied equal protection of the laws.' (Article IV, Sec. 1, New Constitution). According to Daniel Webster in the Dartmouth College case, due process is the equivalent of the law; a law which hears before it condemns, which proceeds upon inquiry and renders judgment only after trial. The meaning is that every citizen shall hold his life, liberty, property, and immunities under the protection of the general rules which govern society. (cited in Philippine Constitutional Law, p. 168 by Neptali Gonzales, 1975 ed.) Administrative due process requires that there be an impartial tribunal constituted to determine the right involved; that due notice and opportunity to be heard be given; that the procedure at the hearing be consistent with the essentials of a fair trial; and that the proceedings be conducted in such a way that there will be opportunity for a court to determine whether the applicable rules of law and procedure were observed. (42 Am. Jur. p. 451, cited by Neptali Gonzales, p. 183, Philippine Constitutional Law). The Board appealed the decision to the Intermediate Appellate Court. On January 4, 1984, the appellate court modified the trial court's decision. It affirmed all the findings of fact of the court and held that the petitioner was denied due process by the Board when it cancelled the export quota allocations. It set aside the letters of the Board dated March 2, 1983 and November 14, 1983. However, the appellate court ordered the Board to give the petitioner and its officers due hearing to determine whether or not any of its rules and regulations had been violated as to warrant the imposition of any penalty against them. Until such hearings were held, the petitioner's export quota allocations were to remain cancelled and its officers suspended. This modification is now the subject of this petition. The petitioner contends that the appellate court committed grave abuse of discretion when it ordered a new hearing to be conducted unnecessarily since even without controverting evidence, the evidence on record relied upon by the Board failed miserably to measure up to the requisite of "substantial evidence. " This contention has no merit. Executive Order No. 823 provides, among others: The GTEB shall have the following powers and functions: h. In case of violations of its rules and regulations, cancel or suspend quota allocations, export authorizations and licences for the operation of bonded garment manufacturing warehouses. (Sec. 2[h] Exec. Order No. 823 amended Sec. 3[h] of Exec. Order No. 537). Likewise, under its Rules and Regulations, said Executive Order provides:

Rules and Regulations: Section III. Penalties.- Any act or misrepresentation or violation of these Rules and Regulations shall, after due hearing, constitute sufficient ground for the imposition of a fine of not more than ten per cent (10%) of the gross FOB value of the goods exported or for a total or partial forfeiture of the offender's Export Quota, Export Authorization and Export License and permit or temporary disqualification from enjoying the privilege to export under all Agreements on textiles, without prejudice to any liabilities under other applicable laws. (Sec. III, Part 111, Rules and Regulations). It is clear from the above provisions that the respondent Board is the body charged with the function of granting export quota allocations, issuing licenses to operate bonded warehouses and revoking or cancelling the same. Correspondingly, it is also authorized to conduct hearings to determine whether or not violations have been committed by the grantee .The Board acted arbitrarily when, after acting solely upon the initial findings of the Bureau of Customs, it issued the questioned order but once the basis for its action proved non-existent, it refused to lift its erroneous and unfounded order. However, since the Board has reason to believe that the petitioner might have violated its rules and regulations in connection with the importation of materials for the petitioner's garment industry then it has the discretion to conduct a proper hearing to determine the petitioner's culpability or non-culpability. It does not have to rely on the findings of other agencies to discharge this function. In its second assignment of error, the petitioner maintains that the appellate court erred in allowing the implementation of the orders of the respondent Board when such orders were set aside for having been issued without a hearing. There is merit in this contention. The appellate court should have reversed and set aside the cancellation of petitioner's export quota allocations and the suspension of its officers since the very bases of these measures were set aside because of lack of due process. As the trial court correctly pointed out: It is worthwhile to note that the basis of the revocation of the export quotas and export authorizations issued in favor of the petitioner was based on the initial findings of the Bureau of Customs regarding certain shipments but subsequently the acting collector of customs of the port of Manila, Mr. Bienvenido P. Alano, Jr., cleared the petitioner of any wrongdoing and declared that it had no participation in the irregularities relative to the subject shipments. (Decision dated July 25, 1983, Exhibit "A"). The decision of the acting collector of customs of the port of Manila became final on August 18, 1983. The basis of the revocation has, therefore, become ineffective and unenforceable so that the revocation has no more leg to stand on. The petitioner has shown by its evidence and the allegations of its verified petition that it is entitled to the reliefs demanded and the whole or part of such reliefs consists in restraining the commission or continuance of the acts complained of and that great or irreparable injury would result to the petitioner before the trial or termination of this case. It has been shown by the evidence presented during the hearing for the issuance of the writs of preliminary injunction prayed for by the petitioner that foreign companies with whom the petitioner have entered into contracts regarding its export business like Itoman (U.S.A.) Inc., New York, N.Y., and the C. ITOH and Co., Ltd. Tokyo, Japan, have threatened to cancel their contracts with the petitioner and to sue the latter for damages if it cannot comply with its commitments to them (Exhs. "I" and "J"), thereby showing that the petitioner would suffer great and irreparable injury if the injunctions prayed for will not be granted. Aside from this, the 700 employees and workers of the petitioner will be practically jobless and they and their families will suffer greatly for the duration of this case if the injuctions will not be granted. To hold that there was a violation of petitioner's right to due process but at the same time sustain the end results of such violation would be tantamount to denying the right to due process just the same. Indeed, the importance of this right which is guaranteed by the Constitution cannot be stressed strongly enough. In the case of Bacus v. Ople, (132 SCRA 690, 704), we ruled: The principle of due process furnishes a standard to which governmental action should conform in order to impress it with the stamp of validity. Fidelity to such standard must of necessity be the overriding concern of government agencies exercising quasi-judicial functions. Although a speedy administration of action implies a speedy trial, speed is not the chief objective of a trial. Respect for the rights of all parties

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and the requirements of procedural due process equally apply in proceedings before administrative agencies with quasi-judicial perspective in administrative decision making and for maintaining the vision which led to the creation of the administrative office. (Citing Amberto V. Court of Appeals, 89 SCRA 240 and Baguio Country Club Corporation v. National Labor Relations Commission, 118 SCRA 557). Equally important are the requisites of due process in administrative proceedings reiterated in the case of Halili v. Court of Industrial Relations, (136 SCRA 112, 131): xxx xxx xxx . . . It is a settled rule that in administrative proceedings, or cases coming before administrative tribunals exercising quasi-judicial powers, due process requires not only notice and hearing, but also the consideration by the administrative tribunal of the evidence presented; the existence of evidence to support the decision; its substantiality; a decision based thereon or at least contained in the record and disclosed to the parties, such decision by the administrative tribunal resting on its own independent consideration of the law and facts of the controversy; and such decision acquainting the parties with the various issues involved and the reasons therefor (Ang Tibay v. Court, 69 Phil. 635, cited on p. 84, Philippine Constitutional Law, Fernando, 1984 ed.) In the case at bar, the petitioner was never given the chance to present its side before its export quota allocations were revoked and its officers suspended. While it is true that such allocations as alleged by the Board are mere privileges which it can revoke and cancel as it may deem fit, these privileges have been accorded to petitioner for so long that they have become impressed with property rights especially since not only do these privileges determine the continued existence of the petitioner with assets of over P80,000,000.00 but also the livelihood of some 700 workers who are employed by the petitioner and their families. As the appellate court correctly pointed out: xxx xxx xxx . . . This reliance on the 'right privilege' dichotomy has long been denigrated by leading lights in administrative law as 'too crude for consistent application' by courts. Indeed, considering the total topography of this case, the resort to the right-privilege distinction is too feeble a refutation of the fact that there has been a disregard of the due process requirement of the Constitution by the petitioner Board. For the irrefutable fact is that the private respondent has long been granted its export allocations on their basis, valuable contracts calling for textile export shipments have been concluded between the private respondent and foreign corporation. Stated otherwise, these export allocations can not anymore be categorized as mere 'privilege' but are already impressed with property rights of the private respondent, They cannot be arbitrarily revoked without causing a collision with the constitutional call that there must be due process before anybody can be denied his right to property. Neither can the petitioner's request for reinstatement be considered as substantial compliance with the due process requirement so much so that any defect in the initial cancellation of the export quota allocations by the Board is deemed to have been cured by petitioner's request for reinstatement; an action which is alleged by the Board as being tantamount to a motion for reconsideration. It should be noted that no reply was given by the Board when petitioner requested for reinstatement of its allocations until an action for injunction was filed by petitioner. Only then did the Board deny petitioner's request on the basis of the letter of the Commissioner of Customs that his findings were not conclusive as to the persons involved therein and on the ground that no new issues were presented by herein petitioner. How can petitioner present any "new issues" when it was never given the chance by the Board? Furthermore, the only reason the petitioner knew why its export quota allocations had been cancelled was the initial findings of the Bureau of Customs which were made the sole basis by the Board for such cancellation. It is only but logical that petitioner would only touch on this issue and nothing else. Thus, such request for reinstatement and the subsequent denial by the Board can hardly be considered a motion for reconsideration that "cured" the non-observance of due process. Again, as pointed out by the appellate court: Nor are We persuaded by the proposition that the subsequent requests for restoration of its export allocations made by the private respondent cured the due process deficiency on the part of the Board. The requests for restoration rest on the allegation of the private respondent and its principal officers that they had no hand in the illicit importation of the apprehended shipment. The allegation is buttressed by the

decision itself of the Acting Collector of Customs of the Port of Manila holding that '. . . a careful scrutiny of the facts and the circumstance attendant to the case show that the Mabuhay Textile Mills have no participation in the irregularity relative to the subject shipment.' It may be technically true that this statement does not settle the criminal culpability of the private respondent and its officers for as pointed out by petitioner Brig. Gen. Ramon Farolan, Acting Commissioner of Customs, a decision in a seizure proceedings is'. . final and conclusive as to the goods but not as to the persons involved therein where another proceeding is necessary.' But this all the more sharpens the need for a real hearing where the private respondent and its officers should be given a fair opportunity to establish their innocence-a factual issue that cannot be resolved by mere resolution of its requests for reinstatement on the basis of in. formation known to the Board but unknown to the private respondent such as the exchange of communications between petitioner Farolan and the Director General of Customs of Indonesia. Indeed even in judicial proceedings, the irreducible rule is that the dismissal of an action upon a motion to dismiss constitutes a denial of due process of law if from a consideration of the pleadings it appears that there are issues of fact which cannot be decided without a trial of the case on the merits. In quasi-judicial proceedings, the counterpart rule is that where an adjudicative fact is at issue, a trial-type hearing ought to be held. (Londoner v. Denver, 210 US 373, 386, 28 S. Ct. 708, 714, 52 L. ed. 1103 119081). While there is no controlling and precise definition of due process, the guidelines laid down in the Ang Tibay v. Court case, supra, and all subsequent cases reiterating the same furnish an unavoidable standard to which government action must conform in order that any deprivation of life, liberty, and property, in each appropriate case, may be valid. (See Eastern Broadcasting Corporation v. Dans, Jr., 137 SCRA 628). WHEREFORE, IN VIEW OF THE FOREGOING, the petition is GRANTED and the decision of the appellate court dated January 6, 1984 and its order of June 6, 1984 are SET ASIDE. The respondent Board is hereby ordered to conduct a hearing where the petitioner is accorded due process to determine whether or not the petitioner has violated any of its rules and regulations. Pending such hearing, and to maintain the status quo ante of the parties, the Board is directed to issue Textile Export Clearances in favor of the petitioner without prejudice to the revocation of the same if the petitioner is found to be guilty of any such violation. No costs. SO ORDERED. Republic of the Philippines SUPREME COURT Manila FIRST DIVISION

G.R. No. 109703 July 5, 1994 REALTY EXCHANGE VENTURE CORPORATION AND/OR MAGDIWANG, REALTY CORPORATION, petitioner, vs. LUCINA S. SENDINO and the OFFICE OF THE EXECUTIVE SECRETARY, Office of the President, Malacaang, Manila, respondents. Siruelo, Muyco & Associates Law Office for petitioner. Sisenando Villaluz, Jr. for private respondent.

KAPUNAN, J.: Private respondent Lucina C. Sendino entered into a reservation agreement with Realty Exchange Venture, Inc. (REVI) for a 120-square meter lot in Raymondville Subdivision in Sucat, Paranaque for P307,800.00 as its purchase price. 1 She paid P1,000.00 as partial reservation fee on January 15, 1989 and completed payment of this fee on January 20, 1989 by paying P4,000.00. 2

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On July 18, 1989, private respondent paid REVI P16,600.00 as full downpayment on the purchase price. 3However, she was advised by REVI to change her co-maker, which she agreed, asking for an extension of one month to do so. For alleged non-compliance with the requirement of submission of the appropriate documents under the terms of the original agreement, 4 REVI, through its Vice-President for Marketing, informed respondent of the cancellation of the contract on the 31st of July 1989. 5 On April 20, 1990, private respondent filed a complaint for Specific Performance against REVI with the office of Appeals, Adjudication and Legal Affairs (OAALA) of the Housing and Land Use Regulatory Board (HLURB) asking that respondent be ordered: 1. To comply and continue with the sale of the house and lot, Block 4, Lot 17 at the Raymondville Subdivision, Sucat Road, Paranaque, Metro Manila; 2. To pay complainant actual, nominal and moral damages, the amount of which will be proved in the hearing; 3. To pay complainant attorney's fee in the sum of P10,000.00; 4. To pay complainant exemplary damages in the sum of P10,000.00 to set an example and to avoid a repetition of such illegal and unsound business practices of the respondent. 6 This petition was amended on August 17, 1990 by impleading petitioners Magdiwang Realty Corporation (MRC) which appeared to be the registered owner of the subject lot as per TCT No. 76023. On April 3, 1991 the HLURB, whose authority to hear and decide the complaint was challenged by REVI in its answer, 7 rendered its judgment in favor of private respondent and ordered petitioners to continue with the sale of the house and lot and to pay private respondent P5,000 as moral damages, P5,000 as exemplary damages and P6,000 as attorney's fees and costs of the suit. 8 An appeal from this decision was taken to the HLURB OAALA Arbiter, which affirmed the Board's decision. The decision of the OAALA Arbiter was appealed to the Office of the President, herein public respondent. On January 7, 1993, the public respondent rendered its decision dismissing the petitioners' appeal. Motion for reconsideration of the decision was denied by the public respondent on January 26, 1993. Consequently petitioners come before this Court, in this petition, which the Court resolves to treat as a petition for certiorari, raising the following issues: I PUBLIC RESPONDENT COMMITTED SERIOUS ERROR IN DECLARING THAT THE HOUSING AND LAND USE REGULATORY BOARD HAS QUASI-JUDICIAL FUNCTIONS, NOTWITHSTANDING ABSENCE OF EXPRESS GRANT BY EXECUTIVE ORDER NO. 90 OF DECEMBER 17, 1986 WHICH CREATED IT. AND EVEN IF THE HLURB HAS QUASI-JUDICIAL FUNCTIONS, PUBLIC RESPONDENT LIKEWISE SERIOUSLY ERRED IN DECLARING THAT THE BOARD OF COMMISSIONERS IS ALLOWED TO SIT IN A DECISION TO RENDER JUDGMENT AND TO DELEGATE ITS QUASI-JUDICIAL AUTHORITY TO A SUBORDINATE OFFICE. II PUBLIC RESPONDENT GRAVELY ABUSED ITS DISCRETION IN DECLARING THAT THE LOT SUBJECT OF THE CONTRACT SOUGHT TO BE ENFORCED IS PARAPHERNAL DESPITE ADMISSION OF ITS CONJUGAL NATURE. III PUBLIC RESPONDENT GRAVELY ABUSED ITS DISCRETION IN DECLARING THAT ONLY NOTARIAL NOTICE OF RESCISSION MAY VALIDLY CANCEL A RESERVATION AGREEMENT PURSUANT TO REPUBLIC ACT NO. 6552. As the first and third issues raised by the petitioners strike at the core of the case at bench, this Court deems it appropriate to initially dispose of the issue of private respondent's capacity to bring her complaint before the HLURB-OAALA.

It is settled that rules of procedure are as a matter of course construed liberally in proceedings before administrative bodies. 9 In the instant case, the original suit for specific performance and damages was filed by the private respondent with the HLURB-OAALA, an administrative body not hamstrung by the strict procedural technicalities of the Rules of Court. Under the circumstances, it was certainly appropriate for the HLURB-OAALA to have acted on the substantive questions relating to the validity of petitioners' unilateral rescission of the contract without unduly concerning itself with a mere procedural slip, the nonjoinder of private petitioner's husband in the original complaint before the HLURB. Moreover, since petitioners participated in the administrative proceedings without objecting to or raising the procedural infirmity, they were certainly estopped from raising it on appeal before the Office of the President and before this Court. Proceeding to the principal issues raised by the petitioner, while E.O. 85 dated 12 December 1986 abolished the Ministry of Human Settlements (MHS), it is patently clear from a reading of its provisions that the said executive order did not abolish the Human Settlements Regulatory Commission (HSRC) which continued to exercise its powers and functions even after the Ministry of Human Settlements ceased to exist. In spite of the Aquino Government's stated intention of eradicating what it considered the vestiges of the previous regime, it was not its intention to create a vacuum by abolishing those juridical entities, agencies, corporations, etc., attached to or supervised by the MHS, which performed vital administrative functions. Pertinently, Section 3 of E.O. 85 mandates that: . . . The final disposition and final organizational alignment or attachment of the juridical entities, agencies, corporations and councils attached to, or under the administrative supervision of the MHS including their respective existing projects, appropriations and other assets shall be subject to subsequent enactments by the President. Pursuant to this provision therefore, the President subsequently issued Executive Order No. 90, series of 1986, recognizing the Human Settlements Regulatory Commission (renamed the HLURB) as one of the principal housing agencies of the government. Prior to this, Executive Order No. 648 in 1981 transferred all the functions of the National Housing Authority (pursuant to Presidential Decrees Nos. 957, 1216 and 1344) to the Human Settlements Regulatory Commission (HSRC) consolidating all regulatory functions relating to land use and housing development in a single entity. 10 Being the sole regulatory body for housing and land development, the renamed body, the HLURB, 11 would have been reduced to a functionally sterile entity if, as the petitioner contends, it lacked the powers exercised by its predecessor which included the power to settle disputes concerning land use and housing development and acquisition. Moreover, this Court has had the occasion to definitively rule on the question as to whether or not the Housing and Land Use Regulatory Board could exercise the same quantum of judicial or quasi-judicial powers possessed by the HSRC under the Ministry of Human Settlements in the exercise of its regulatory functions when it held, in United Housing Corporation vs. Hon. Dayrit 12 that: As explicitly provided by law, jurisdiction over actions for specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner or developer, is vested exclusively in the HSRC, Section 1 of PD 1344, in no uncertain terms, provides: Sec. 1. In the exercise of its functions to regulate real estate trade and business and in addition to its powers provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and decide cases of the following nature: A. Unsound real estate business practices; B. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project owner, developer, dealer, broker or salesman; and C. Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lot or condominium unit against the owner, developer, dealer, broker or salesman. (Emphasis Ours) This is reinforced by section 8 of EO 648 (otherwise known as the Charter of the Human Settlements Regulatory Commission) which took effect on February 7, 1981, thus: Sec. 8.Transfer of Functions. The Regulatory functions of the National Housing Authority pursuant to Presidential Decree Nos. 957, 1216, 1344 and other related laws are hereby transferred to the Human Settlements Regulatory Commission. . . . Among the regulatory functions are . . . (11) Hear and decide

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cases of unsound real estate business practices, claims involving refund filed against project owners, developers, dealers, brokers, or salesmen and cases of specific performance(Emphasis Ours). Private respondents reliance, therefore, on sections 1 and 8 of the Judiciary Reorganization Act of 1980 is untenable. Thus, as correctly pointed out by petitioner, section 19, paragraph 6 of said law is material to the issue of where jurisdiction lies, and We quote: Sec. 19. . . . (6) In all other cases not within the exclusive jurisdiction of any court, tribunal, persons or body exercising judicial or quasi-judicial functions. xxx xxx xxx Neither can We accede to private respondents' claim that resort to the courts is justified under section 41 of PD 957 specifically under the phrase "legal remedies that may beavailable to aggrieved subdivision lot buyers." There is no question that a statute may vest exclusive original jurisdiction in an administrative agency over certain disputes and controversies falling within the agency's special expertise. The constitutionality of such grant of exclusive jurisdiction to the National Housing Authority (now Housing and Land Use Regulatory Board) over cases involving the sale of lots in commercial subdivisions was upheld in Tropical Homes Inc. v. National Housing Authority (152 SCRA 540 [1987]) and again sustained in a later decision in Antipolo Realty Corporation v. National Housing Authority (153 SCRA 399 [1987]) where We restated that the National Housing Authority (now HLURB) shall have exclusive jurisdiction to regulate the real estate trade and business in accordance with the terms of PD No. 957 which defines the quantum of judicial or quasi-judicial powers of said agency. 13 Clearly, therefore, the HLURB properly exercised its jurisdiction over the case filed by the petitioners with its adjudicative body, the OAALA, in ordering petitioners to comply with their obligations arising from the Reservation Agreement. In general, the quantum of judicial or quasi-judicial powers which an administrative agency may exercise is defined in the agency's enabling act. In view of the Court's pronouncement in United Housing Corporation vs. Hon. Dayrit, supra, recognizing the HLURB as the successor agency of the HSRC's powers and functions, it therefore follows that the transfer of such functions from the NHA to the HRSC effected by Section 8 of E.O. 648, series of 1981, thereby resulted in the acquisition by the HLURB of adjudicatory powers which included the power to "(h)ear and decide cases of unsound real estate business practices . . . and cases of specific performance." 14 Obviously, in the exercise of its powers and functions, the HLURB must interpret and apply contracts, determine the rights of the parties under these contracts, and award damages whenever appropriate. 15 We fail to see how the HSRC which possessed jurisdiction over the actions for specific performance for contractual and statutory obligations filed by buyers of subdivision lots against developers had suddenly lots its adjudicatory powers by the mere fiat of a change in name through E.O. 90. One thrust of the multiplication of administrative agencies is that the interpretation of such contracts and agreements and the determination of private rights under these agreements is no longer a uniquely judicial function. 16 The absence of any provision, express or implied, in E.O. 90, repealing those quasi-judicial powers inherited by the HSRC from the National Housing Authority, furthermore militates against petitioners' position on the question. Going to petitioners' contention that the decision of the OAALA should have been rendered by the Board of Commissioners sitting en banc, we find ample authority both in the statutes and in jurisprudencejustifying the Board's act of dividing itself into divisions of three. Under Section 5 of E.O. 648 which defines the powers and duties of the Commission, the Board is specifically mandated to "(a)dopt rules of procedure for the conduct of its business" and perform such functions necessary for the effective accomplishment of (its) above mentioned functions." Since nothing in the provisions of either E.O. 90 or E.O. 648 denies or withholds the power or authority to delegate adjudicatory functions to a division, we cannot see how the Board, for the purpose of effectively carrying out its administrative responsibilities and quasi-judicial powers as a regulatory body should be denied the power, as a matter of practical administrative procedure, to constitute its adjudicatory boards into various divisions. After all, the power conferred upon an administrative agency to issue rules and regulations necessary to carry out its functions has been held "to be an adequate source of authority to delegate a particular function, unless by express provision of the Act or by implication it has been withheld." 17 The practical necessity of establishing a

procedure whereby cases are decided by three (3) Commissioners furthermore assumes greater significance when one notes that the HLURB, as constituted, only has four (4) full time commissioners and five (5) part time commissioners to deal with all the functions, administrative, adjudicatory, or otherwise, entrusted to it. 18 As the Office of the President noted in its February 26, 1993 Resolution denying petitioners' Motion for Reconsideration, "it is impossible and very impractical to gather the four (4) full time and five (5) part time commissioners (together) just to decide a case." Considering that its part time commissioners act merely in an ex-officio capacity, requiring a majority of the Board to sit en banc on each and every case brought before it would result in an administrative nightmare.19 Finally, petitioners' assertion that RA 6552 is inapplicable in the instant case because the said law does not apply to cases of reservation agreements finds no merit in the case at bench in view of Section 24 of P.D. 957 which provides: Sec. 24.Failure to Pay Installments The rights of the buyer in the event of his failure to pay the installments due for reasons other than the failure of the owner or developer to develop the project shall be governed by Republic Act No. 6552. As the Solicitor General correctly pointed out, RA 6552 makes no distinction between "option" and "sale" 20 which, under P.D. 957 also includes "an exchange or attempt to sell, an option of sale or purchase, a solicitation of a sale or an offer to sell directly." 21 This all-embracing definition virtually includes all transactions concerning land and housing acquisition, including reservation agreements. Since R.A. 6552 mandates cancellation by notarial act among other requirements before any cancellation of a contract may be effected, petitioners' precipitate cancellation of its contract with private respondent without observing the conditions imposed by the said law was invalid and improper. In fine, the HLURB-OAALA acted within the scope of its authority in ordering petitioners to comply and continue with the sale of the house and lot subject of the contract between the original parties. It cannot be gainsaid that the quasi-judicial functions exercised by the body are necessary incidents to the proper exercise of its powers and functions under E.O. 90 and the laws enacted delineating the scope of authority of its Board of Commissioners. Denying the body those functions so necessary in carrying out its power to regulate housing and land use results in its effective emasculation as an important regulatory body in an area vital to the national economy. The acute housing shortage problem has prompted thousands of middle and lower class buyers of houses and lots and condominium units to enter into all sorts of agreements with private housing developers involving all manner of installment schemes under contracts drawn exclusively by these developers. Many of these virtual contracts of adhesion entrap innocent buyers by requiring cash deposits under reservation agreements which include, sometimes in the fine print, default clauses guaranteeing huge monetary windfalls for the developers in the event that their buyers (oftentimes for the flimsiest of reasons) default by failing to come up with certain requirements. While the Court can take judicial notice of this pernicious practice, it can only hope that future legislation would address the need to protect the innocent middle or lower class home purchaser. In the case of the individual victim, this Court can only go to the extent of awarding such damages as may be proper under the peculiar circumstances of the cases brought before it. WHEREFORE, premises considered, the petition is hereby DISMISSED for lack of merit. Costs against petitioners. SO ORDERED. Cruz, Davide, Jr., Bellosillo and Quiason, JJ., concur.

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CASES ON CHAPTER 5 Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

1974, Attorney Manuel Imbong appearing for petitioner and Assistant Solicitor General Reynato S. Puno appearing for respondent Board of Transportation. 13 Thereafter, the parties were given twenty days to file their respective memoranda and an additional ten-day period to submit replies thereto if so minded. In time all the pleadings were submitted, and the case was ready for decision. The petition, to repeat, cannot prosper. 1. It is to be, admitted that the claim for relief on the asserted constitutional deficiency based on procedural due process, not from the standpoint of the absence of a hearing but from the lack of jurisdiction without the required publication having been made, was argued vigorously and developed exhaustively in the memoranda of petitioner. The arguments set forth, while impressed with plausibility, do not suffice to justify the grant of certiorari. Moreover, the doctrine announced in the Philippine Long Distance Telephone Company decision, heavily leaned on by petitioner is, at the most, a frail and insubstantial support and gives way to decisions of this Court that have an even more specific bearing on this litigation. 2. A barrier to petitioner's pretension, not only formidable but also insurmountable, is the well-settled doctrine that for a provisional permit, an ex parte hearing suffices. 14 The decisive consideration is the existence of the public need.15 That was shown in this case, respondent Board, on the basis of demonstrable data, being satisfied of the pressing necessity for the grant of the provisional permit sought. There is no warrant for the nullification of what was ordered by it. It must have been, as already noted, this state of the law that did lead petitioner to harp on its interpretation of what for it is the teaching of the Philippine Long Distance Telephone Company decision. 16 There was therein stated that one of the compelling reasons that led this Court to hold that the defunct Public Service Commission did not acquire jurisdiction was that no provision was made for bringing in as parties thereto the competitors of the Philippine Long Distance Telephone Company. 17 That is the basis for the objection on procedural due process ground. While no doubt such a holding was necessary for the decision of that case which dealt with a petition for the reexamination of a decision that was held to be final and executory, it finds no application to this controversy dealing with a provisional permit. This is made clear by this portion of the opinion of Justice Sanchez: "Araneta seeks reexamination of the rates approved by the Commission. Araneta avers that PLDT can carry out its improvement and expansion program at less onerous terms to the subscribers. But Araneta [University] was not a party to the rate-fixing case or to any of the other proceedings below. These rate-fixing and allied cases terminated with the final judgment of January 9, 1964. Not being a party, it could not have moved to reconsider said decision. Nor could it have appealed from that decision it had no standing in that case. Even if we treat Araneta's reexamination petition as one for reconsideration, the time therefor has long passed. 18 It was then stated: The reexamination herein sought by Araneta, perforce seeks the fixing of new and different rates. 19 Further: Araneta in effect, institutes a fresh petition for new rates different from those already established. Such petition is a proceeding separate and distinct from those concluded by the final judgment of PSC of January 9, 1964. 20 The conclusion, therefore, necessarily follows:" We hold that the Public Service Commission may not reduce or increase rates established in a judgment that has become final, without proper notice; and that a Commission order reducing or increasing said rates without such notice is void." 21 Under the facts of that case, the procedural due process infirmity amounting to lack of jurisdiction is quite apparent. The opposite is true with this present petition which deals with a grant of provisional permit. It would be to lift out of context the reference made in the aforesaid opinion with reference to notification to the competitors to give a color of applicability to the situation before us. Clearly then, the allegation of a failure to follow the command of the due process guarantee is bereft of any legal foundation. 3. The question of whether the controversy is ripe for judicial determination was likewise argued by the parties. For it is undeniable that at the time the petition was filed. there was pending with the respondent Board a motion for reconsideration. Ordinarily, its resolution should be awaited. Prior thereto, an objection grounded on prematurity can be raised. Nonetheless, counsel for petitioner would stress that certiorari lies as the failure to observe procedural due process ousted respondent Board of whatever jurisdiction it could have had in the premises. This Court was impelled to go into the merits of the controversy at this stage, not only because of the importance of the issue raised but also because of the strong public interest in having the matter settled. As was set forth in Executive Order No. 101 which prescribes the procedure to be followed by respondent Board, it is the policy of the State, as swiftly as possible, to improve the deplorable condition of vehicular traffic, obtain maximum utilization of existing public motor vehicles and eradicate the harmful and unlawful trade of clandestine operators, as well as

G.R. No. L-39655 March 21, 1975 ARROW TRANSPORTATION CORPORATION, petitioner, vs. BOARD OF TRANSPORTATION and SULTAN RENT-A-CAR, INC., respondents. Manuel Imbong for petitioner. Office of the Solicitor General Estelito P. Mendoza and Assistant Solicitor General Reynato S. Puno for respondent Board. Pastor C. Bacani and Ernesto Ganiban for private respondent.

FERNANDO, J.:+.wph!1 It must have been the realization that a challenge to a provisional permit issued by respondent Board of Transportation 1 based on the absence of a hearing is not likely to be attended with success that prompted petitioner to rely on another aspect of procedural due process, the infirmity alleged being traceable to what it considered lack of jurisdiction. 2 There is the invocation of Philippine Long Distance Telephone Company v. Medina 3 with its mention of both competitors and the public being notified. It does not suffice. Something more, which more, is necessary. The reliance is misplaced. Its applicability is by no means obvious. As was pointed out in the answer of respondent Board of Transportation, such a claim is hardly persuasive with the procedure set forth in Presidential Decree No. 101 being followed and the provisional authority to operate being based on an urgent public need. Such a contention merits the approval of the Court. The petition cannot prosper. Both petitioner and private respondent Sultan Rent-a-Car are domestic corporations. 4 The former has in his favor a certificate of public convenience to operate a public utility bus air-conditioned-auto-truck service from Cebu City to Mactan International Airport and vice-versa with the use of twenty (20) units. 5 Private respondent on September 12, 1974 filed a petition with the respondent Board for the issuance of a certificate of public convenience to operate a similar service on the same line. 6 Eight days later, without the required publication, the Board issued an order granting it provisional permit to operate such auto-truck service on the line applied for. 7 There was a motion for reconsideration and for the cancellation of such provisional permit filed on October 21, 1974, 8 but without awaiting final action thereon, this petition was filed. 9 This is the explanation: "That petitioner has not waited for the resolution of his Motion for Reconsideration before going to this Court considering that the question involved herein is purely a legal one, aside from the fact that the issuance of the Order without the Board having acquired jurisdiction of the case yet, is patently illegal or was performed without jurisdiction." 10 So it was set forth in the petition filed on November 16, 1974. As a preliminary injunction was likewise sought, a hearing was scheduled for November 29, 1974. It was cancelled, this Court issuing a resolution instead, requiring respondents to file an answer not later than December 6, 1974 and setting the hearing on the merits of the case on Wednesday, December 11, 1974. In the answer submitted the facts alleged were substantially admitted. 11 It denied the allegation that there must be a publication before a provisional permit can be issued, reference being made, as noted, to Presidential Decree No. 101, which authorized respondent Board to grant provisional permits when warranted by compelling circumstances and to proceed promptly along the method of legislative inquiry. 12 The case was then argued on December 11,

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update the standard of those carrying such business, making it "imperative to provide, among other urgently needed measures, more expeditious methods in prescribing, redefining, or modifying the lines and mode of operation of public utility motor vehicles that now or thereafter, may operate in this country. 22 It is essential then both from the standpoint of the firms engaged as well as of the riding public to ascertain whether or not the procedure followed in this case and very likely in others of a similar nature satisfies the procedural due process requirement. Thus its ripeness for adjudication becomes apparent. To paraphrase what was said in Edu v. Ericta 23 where the validity of a legislation was passed upon in a certiorari proceeding to annul and set aside a writ of preliminary injunction, to so act would be to conserve both time and effort. Those desiring to engage in public utility business as well as the public are both vitally concerned with the final determination of the standards to be followed in the procedure that must be observed. There is, to repeat, a great public interest in a definitive outcome of the crucial issue involved. One of the most noted authorities on Administrative Law, professor Kenneth Culp Davis, discussing the ripeness concept, is of the view that the resolution of what could be a debilitating uncertainty with the conceded ability of the judiciary to work out a solution of the problem posed is a potent argument for minimizing the emphasis laid on its technical aspect. 24 WHEREFORE, the petition for certiorari is dismissed. No costs. Makalintal, C.J., Barredo, Antonio and Fernandez, JJ., concur.1wph1.t Aquino, J., is on leave. EN BANC [G.R. No. 142801-802. July 10, 2001] BUKLOD NG KAWANING EIIB, CESAR POSADA, REMEDIOS G. PRINCESA, BENJAMIN KHO, BENIGNO MANGA, LULU MENDOZA, petitioners, vs. HON. EXECUTIVE SECRETARY RONALDO B. ZAMORA, HON. SECRETARY JOSE PARDO, DEPARTMENT OF FINANCE, HON. SECRETARY BENJAMIN DIOKNO, DEPARTMENT OF BUDGET AND MANAGEMENT, HON. SECRETARY ARTEMIO TUQUERO, DEPARTMENT OF JUSTICE, respondents. DECISION SANDOVAL-GUTIERREZ, J.: In this petition for certiorari, prohibition and mandamus, petitioners Buklod Ng Kawaning EIIB, Cesar Posada, Remedios Princesa, Benjamin Kho, Benigno Manga and Lulu Mendoza, for themselves and in behalf of others with whom they share a common or general interest, seek the nullification of Executive Order No. 191[1] and Executive Order No. 223[2] on the ground that they were issued by the Office of the President with grave abuse of discretion and in violation of their constitutional right to security of tenure. The facts are undisputed: On June 30, 1987, former President Corazon C. Aquino, issued Executive Order No. 127 [3] establishing the Economic Intelligence and Investigation Bureau (EIIB) as part of the structural organization of the Ministry of Finance.[4] The EIIB was designated to perform the following functions: (a) Receive, gather and evaluate intelligence reports and information and evidence on the nature, modes and extent of illegal activities affecting the national economy, such as, but not limited to, economic sabotage, smuggling, tax evasion, and dollar-salting, investigate the same and aid in the prosecution of cases; (b) Coordinate with external agencies in monitoring the financial and economic activities of persons or entities, whether domestic or foreign, which may adversely affect national financial interest with the goal of regulating, controlling or preventing said activities; (c) Provide all intelligence units of operating Bureaus or Offices under the Ministry with the general framework and guidelines in the conduct of intelligence and investigating works; (d) Supervise, monitor and coordinate all the intelligence and investigation operations of the operating Bureaus and Offices under the Ministry;

(e) Investigate, hear and file, upon clearance by the Minister, anti-graft and corruption cases against personnel of the Ministry and its constituents units; (f) Perform such other appropriate functions as may be assigned by the Minister or his deputies. [5] In a desire to achieve harmony of efforts and to prevent possible conflicts among agencies in the course of their anti-smuggling operations, President Aquino issued Memorandum Order No. 225 on March 17, 1989, providing, among others, that the EIIBshall be the agency of primary responsibility for antismuggling operations in all land areas and inland waters and waterways outside the areas of sole jurisdiction of the Bureau of Customs.[6] Eleven years after, or on January 7, 2000, President Joseph Estrada issued Executive Order No. 191 entitled Deactivation of the Economic Intelligence and Investigation Bureau. [7] Motivated by the fact that the designated functions of the EIIB are also being performed by the other existing agencies of the government and that there is a need to constantly monitor the overlapping of functions among these agencies, former President Estrada ordered the deactivation of EIIB and the transfer of its functions to the Bureau of Customs and the National Bureau of Investigation. Meanwhile, President Estrada issued Executive Order No. 196[8] creating the Presidential Anti-Smuggling Task Force Aduana.[9] Then the day feared by the EIIB employees came. On March 29, 2000, President Estrada issued Executive Order No. 223[10] providing that all EIIB personnel occupying positions specified therein shall be deemed separated from the service effective April 30, 2000, pursuant to a bona fide reorganization resulting to abolition, redundancy, merger, division, or consolidation of positions. [11] Agonizing over the loss of their employment, petitioners now come before this Court invoking our power of judicial review of Executive Order Nos. 191 and 223. They anchor their petition on the following arguments: A Executive Order Nos. 191 and 223 should be annulled as they are unconstitutional for being violative of Section 2(3), Article IX-B of the Philippine Constitution and/or for having been issued with grave abuse of discretion amounting to lack or excess of jurisdiction. B. The abolition of the EIIB is a hoax. Similarly, if Executive Order Nos. 191 and 223 are considered to effect a reorganization of the EIIB, such reorganization was made in bad faith. C. The President has no authority to abolish the EIIB. Petitioners contend that the issuance of the afore-mentioned executive orders is: (a) a violation of their right to security of tenure; (b) tainted with bad faith as they were not actually intended to make the bureaucracy more efficient but to give way to Task Force Aduana, the functions of which are essentially and substantially the same as that of EIIB; and (c) a usurpation of the power of Congress to decide whether or not to abolish the EIIB. Arguing in behalf of respondents, the Solicitor General maintains that: (a) the President enjoys the totality of the executive power provided under Sections 1 and 7, Article VII of the Constitution, thus, he has the authority to issue Executive Order Nos. 191 and 223; (b) the said executive orders were issued in the interest of national economy, to avoid duplicity of work and to streamline the functions of the bureaucracy; and (c) the EIIB was not abolished, it was only deactivated. The petition is bereft of merit. Despite the presence of some procedural flaws in the instant petition, such as, petitioners disregard of the hierarchy of courts and the non-exhaustion of administrative remedies, we deem it necessary to address the issues. It is in the interest of the State that questions relating to the status and existence of a public office be settled without delay. We are not without precedent. In Dario v. Mison,[12] we liberally decreed:

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The Court disregards the questions raised as to procedure, failure to exhaust administrative remedies, the standing of certain parties to sue, for two reasons, `[b]ecause of the demands of public interest, including the need for stability in the public service,' and because of the serious implications of these cases on the administration of the Philippine civil service and the rights of public servants. At first glance, it seems that the resolution of this case hinges on the question - Does the deactivation of EIIB constitute abolition of an office? However, after coming to terms with the prevailing law and jurisprudence, we are certain that the ultimate queries should be a) Does the President have the authority to reorganize the executive department? and, b) How should the reorganization be carried out? Surely, there exists a distinction between the words deactivate and abolish. To deactivate means to render inactive or ineffective or to break up by discharging or reassigning personnel,[13] while to abolish means to do away with, to annul, abrogate or destroy completely.[14] In essence, abolition denotes an intention to do away with the office wholly and permanently.[15] Thus, while in abolition, the office ceases to exist, the same is not true in deactivation where the office continues to exist, albeit remaining dormant or inoperative. Be that as it may, deactivation and abolition are both reorganization measures. The Solicitor General only invokes the above distinctions on the mistaken assumption that the President has no power to abolish an office. The general rule has always been that the power to abolish a public office is lodged with the legislature.[16] This proceeds from the legal precept that the power to create includes the power to destroy. A public office is either created by the Constitution, by statute, or by authority of law. [17] Thus, except where the office was created by the Constitution itself, it may be abolished by the same legislature that brought it into existence.[18] The exception, however, is that as far as bureaus, agencies or offices in the executive department are concerned, the Presidents power of control may justify him to inactivate the functions of a particular office,[19] or certain laws may grant him the broad authority to carry out reorganization measures. [20] The case in point is Larin v. Executive Secretary.[21] In this case, it was argued that there is no law which empowers the President to reorganize the BIR. In decreeing otherwise, this Court sustained the following legal basis, thus: Initially, it is argued that there is no law yet which empowers the President to issue E.O. No. 132 or to reorganize the BIR. We do not agree. x x x x x x

Another legal basis of E.O. No. 132 is Section 20, Book III of E.O. No. 292 which states: Sec. 20. Residual Powers. Unless Congress provides otherwise, the President shall exercise such other powers and functions vested in the President which are provided for under the laws and which are not specifically enumerated above or which are not delegated by the President in accordance with law. (italic ours) This provision speaks of such other powers vested in the President under the law. What law then gives him the power to reorganize? It is Presidential Decree No. 1772 which amended Presidential Decree No. 1416. These decrees expressly grant the President of the Philippines the continuing authority to reorganize the national government, which includes the power to group, consolidate bureaus and agencies, to abolish offices, to transfer functions, to create and classify functions, services and activities and to standardize salaries and materials. The validity of these two decrees are unquestionable. The 1987 Constitution clearly provides that all laws, decrees, executive orders, proclamations, letters of instructions and other executive issuances not inconsistent with this Constitution shall remain operative until amended, repealed or revoked. So far, there is yet no law amending or repealing said decrees. (Emphasis supplied) Now, let us take a look at the assailed executive order. In the whereas clause of E.O. No. 191, former President Estrada anchored his authority to deactivate EIIB on Section 77 of Republic Act 8745 (FY 1999 General Appropriations Act), a provision similar to Section 62 of R.A. 7645 quoted in Larin, thus; Sec. 77. Organized Changes. Unless otherwise provided by law or directed by the President of the Philippines, no changes in key positions or organizational units in any department or agency shall be authorized in their respective organizational structures and funded from appropriations provided by this Act. We adhere to the precedent or ruling in Larin that this provision recognizes the authority of the President to effect organizational changes in the department or agency under the executive structure. Such a ruling further finds support in Section 78 of Republic Act No. 8760.[22] Under this law, the heads of departments, bureaus, offices and agencies and other entities in the Executive Branch are directed (a) to conduct a comprehensive review of their respective mandates, missions, objectives, functions, programs, projects, activities and systems and procedures; (b) identify activities which are no longer essential in the delivery of public services and which may be scaled down, phased-out or abolished; and (c) adopt measures that will result in the streamlined organization and improved overall performance of their respective agencies.[23] Section 78 ends up with the mandate that the actual streamlining and productivity improvement in agency organization and operation shall be effected pursuant to Circulars or Orders issued for the purpose by the Office of the President .[24] The law has spoken clearly. We are left only with the duty to sustain. But of course, the list of legal basis authorizing the President to reorganize any department or agency in the executive branch does not have to end here. We must not lose sight of the very source of the power that which constitutes an express grant of power. Under Section 31, Book III of Executive Order No. 292 (otherwise known as the Administrative Code of 1987), the President, subject to the policy in the Executive Office and in order to achieve simplicity, economy and efficiency, shall have the continuing authority to reorganize the administrative structure of the Office of the President. For this purpose, he may transfer the functions of other Departments or Agencies to the Office of the President. In Canonizado v. Aguirre,[25] we ruled that reorganization involves the reduction of personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of functions. It takes place when there is an alteration of the existing structure of government offices or units therein, including the lines of control, authority and responsibility between them. The EIIB is a bureau attached to the Department of Finance.[26] It falls under the Office of the President. Hence, it is subject to the Presidents continuing authority to reorganize. It having been duly established that the President has the authority to carry out reorganization in any branch or agency of the executive department, what is then left for us to resolve is whether or not the reorganization is valid. In this jurisdiction, reorganizations have been regarded as valid provided they are pursued in good faith. Reorganization is carried out in good faith if it is for the purpose of economy or to make bureaucracy more efficient.[27] Pertinently, Republic Act No. 6656[28] provides for the

Section 48 of R.A. 7645 provides that: Sec. 48. Scaling Down and Phase Out of Activities of Agencies Within the Executive Branch . The heads of departments, bureaus and offices and agencies are hereby directed to identify their respective activities which are no longer essential in the delivery of public services and which may be scaled down, phased out or abolished, subject to civil service rules and regulations. X x x. Actual scaling down, phasing out or abolition of the activities shall be effected pursuant to Circulars or Orders issued for the purpose by the Office of the President. Said provision clearly mentions the acts of scaling down, phasing out and abolition of offices only and does not cover the creation of offices or transfer of functions. Nevertheless, the act of creating and decentralizing is included in the subsequent provision of Section 62 which provides that: Sec. 62. Unauthorized organizational charges.- Unless otherwise created by law or directed by the President of the Philippines, no organizational unit or changes in key positions in any department or agency shall be authorized in their respective organization structures and be funded from appropriations by this Act. (italics ours) The foregoing provision evidently shows that the President is authorized to effect organizational changes including the creation of offices in the department or agency concerned. x x x x x x

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circumstances which may be considered as evidence of bad faith in the removal of civil service employees made as a result of reorganization, to wit: (a) where there is a significant increase in the number of positions in the new staffing pattern of the department or agency concerned; (b) where an office is abolished and another performing substantially the same functions is created; (c) where incumbents are replaced by those less qualified in terms of status of appointment, performance and merit; (d) where there is a classification of offices in the department or agency concerned and the reclassified offices perform substantially the same functions as the original offices, and (e) where the removal violates the order of separation.[29] Petitioners claim that the deactivation of EIIB was done in bad faith because four days after its deactivation, President Estrada created the Task Force Aduana. We are not convinced. An examination of the pertinent Executive Orders[30] shows that the deactivation of EIIB and the creation of Task Force Aduana were done in good faith. It was not for the purpose of removing the EIIB employees, but to achieve the ultimate purpose of E.O. No. 191, which is economy. While Task Force Aduana was created to take the place of EIIB, its creation does not entail expense to the government. Firstly, there is no employment of new personnel to man the Task Force. E.O. No. 196 provides that the technical, administrative and special staffs of EIIB are to be composed of people who are already in the public service, they being employees of other existing agencies. Their tenure with the Task Force would only be temporary, i.e., only when the agency where they belong is called upon to assist the Task Force. Since their employment with the Task force is only by way of detail or assignment, they retain their employment with the existing agencies. And should the need for them cease, they would be sent back to the agency concerned. Secondly, the thrust of E.O. No. 196 is to have a small group of military men under the direct control and supervision of the President as base of the governments anti-smuggling campaign. Such a smaller base has the necessary powers 1) to enlist the assistance of any department, bureau, or office and to use their respective personnel, facilities and resources; and 2) to select and recruit personnel from within the PSG and ISAFP for assignment to the Task Force. Obviously, the idea is to encourage the utilization of personnel, facilities and resources of the already existing departments, agencies, bureaus, etc., instead of maintaining an independent office with a whole set of personnel and facilities. The EIIB had proven itself burdensome for the government because it maintained separate offices in every region in the Philippines. And thirdly, it is evident from the yearly budget appropriation of the government that the creation of the Task Force Aduana was especially intended to lessen EIIBs expenses. Tracing from the yearly General Appropriations Act, it appears that the allotted amount for the EIIBs general administration, support, a nd operations for the year 1995, was P128,031,000;[31] for 1996, P182,156,000;[32] for 1998, P219,889,000;[33] and, for 1999, P238,743,000.[34] These amounts were far above theP50,000,000[35] allocation to the Task Force Aduana for the year 2000. While basically, the functions of the EIIB have devolved upon the Task Force Aduana, we find the latter to have additional new powers. The Task Force Aduana, being composed of elements from the Presidential Security Group (PSG) and Intelligence Service Armed Forces of the Philippines (ISAFP),[36] has the essential power to effect searches, seizures and arrests. The EIIB did not have this power. The Task Force Aduana has the power to enlist the assistance of any department, bureau, office, or instrumentality of the government, including government-owned or controlled corporations; and to use their personnel, facilities and resources. Again, the EIIB did not have this power. And, the Task Force Aduana has the additional authority to conduct investigation of cases involving ill-gotten wealth. This was not expressly granted to the EIIB. Consequently, it cannot be said that there is a feigned reorganization. In Blaquera v. Civil Sevice Commission, [37] we ruled that a reorganization in good faith is one designed to trim the fat off the bureaucracy and institute economy and greater efficiency in its operation. Lastly, we hold that petitioners right to security of tenure is not violated. Nothing is better settled in our law than that the abolition of an office within the competence of a legitimate body if done in good faith suffers from no infirmity. Valid abolition of offices is neither removal nor separation of the

incumbents.[38] In the instructive words laid down by this Court in Dario v. Mison,[39] through Justice Abraham F. Sarmiento: Reorganizations in this jurisdiction have been regarded as valid provided they are pursued in good faith. As a general rule, a reorganization is carried out in good faith if it is for the purpose of economy or to make bureaucracy more efficient. In that event, no dismissal (in case of dismissal) or separation actually occurs because the position itself ceases to exist. And in that case, security of tenure would not be a Chinese wall. Be that as it may, if the abolition, which is nothing else but a separation or removal, is done for political reasons or purposely to defeat security of tenure, otherwise not in good faith, no valid abolition takes and whatever abolition is done, is void ab initio. There is an invalid abolition as where there is merely a change of nomenclature of positions, or where claims of economy are belied by the existence of ample funds. Indeed, there is no such thing as an absolute right to hold office. Except constitutional offices which provide for special immunity as regards salary and tenure, no one can be said to have any vested right in an office or its salary.[40] While we cast a commiserating look upon the plight of all the EIIB employees whose lives perhaps are now torn with uncertainties, we cannot ignore the unfortunate reality that our government is also battling the impact of a plummeting economy. Unless the government is given the chance to recuperate by instituting economy and efficiency in its system, the EIIB will not be the last agency to suffer the impact. We cannot frustrate valid measures which are designed to rebuild the executive department. WHEREFORE, the petition is hereby DENIED. No costs. SO ORDERED. Davide, Jr., C.J., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Pardo, Buena,YnaresSantiago, and De Leon, Jr., JJ., concur. Panganiban and Quisumbing, JJ., in the result. Gonzaga-Reyes, J., on leave.

Republic of the Philippines SUPREME COURT Manila EN BANC

G.R. No. 96409 February 14, 1992 CITIZEN J. ANTONIO M. CARPIO, petitioner, vs.

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THE EXECUTIVE SECRETARY, THE SECRETARY OF LOCAL GOVERNMENTS, THE SECRETARY OF NATIONAL DEFENSE and THE NATIONAL TREASURER, respondents.

xxx xxx xxx Here in our draft Constitution, we have already made a constitutional postulate that the military cannot occupy any civil service position [in Section 6 of the Article on the Civil Service 12] Therefore, in keeping with this and because of the universal acceptance that a police force is a civilian function, a public service, and should not be performed by military force, one of the basic reforms we are presenting here is that it should be separated from the military force which is the PC. 13 xxx xxx xxx Furthermore: xxx xxx xxx . . . the civilian police cannot blossom into full profession because most of the key positions are being occupied by the military So, it is up to this Commission to remove the police from such a situation so that it can develop into a truly professional civilian police. . . . 14 Hence, the "one police force, national in scope, and civilian in character" provision that is now Article XVI, Section 6 of the 1987 Constitution. And so we now come to the merits of the petition at hand. In the main, petitioner herein respectfully advances the view that RA 6975 emasculated the National Police Commission by limiting its power "to administrative control" over the Philippine National Police (PNP), thus, "control" remained with the Department Secretary under whom both the National Police Commission and the PNP were placed. 15 We do not share this view. To begin with, one need only refer to the fundamentally accepted principle in Constitutional Law that the President has control of all executive departments, bureaus, and offices to lay at rest petitioner's contention on the matter. This presidential power of control over the executive branch of government extends over all executive officers from Cabinet Secretary to the lowliest clerk 17 and has been held by us, in the landmark case of Mondano vs. Silvosa, 18 to mean "the power of [the President] to alter or modify or nullify or set aside what a subordinate officer had done in the performance of his duties and to substitute the judgment of the former with that of the latter." It is said to be at the very "heart of the meaning of Chief Executive." 19 Equally well accepted, as a corollary rule to the control powers of the President, is the "Doctrine of Qualified Political Agency". As the President cannot be expected to exercise his control powers all at the same time and in person, 20 he will have to delegate some of them to his Cabinet members. Under this doctrine, which recognizes the establishment of a single executive, 21 "all executive and administrative organizations are adjuncts of the Executive Department, the heads of the various executive departments are assistants and agents of the Chief Executive, and, except in cases where the Chief Executive is required by the Constitution or law to act in person on the exigencies of the situation demand that he act personally, the multifarious executive and administrative functions of the Chief Executive are performed by and through the executive departments, and the acts of the Secretaries of such departments, performed and promulgated in the regular course of business, unless disapproved or reprobated by the Chief Executive presumptively the acts of the Chief Executive." 22 (emphasis ours) Thus, and in short, "the President's power of control is directly exercised by him over the members of the Cabinet who, in turn, and by his authority, control the bureaus and other offices under their respective jurisdictions in the executive department." 23 Additionally, the circumstance that the NAPOLCOM and the PNP are placed under the reorganized Department of Interior and Local Government is merely an administrative realignment that would bolster a system of coordination and cooperation among the citizenry, local executives and the integrated law enforcement agencies and public safety agencies created under the assailed Act, 24 the funding of the PNP being in large part subsidized by the national government.

PARAS, J.: At the very outset, it should be well to set forth the constitutional provision that is at the core of the controversy now confronting us, thus: Article XVI, Section 6: The State shall establish and maintain one police force, which stall be national in scope and civilian in character, to be administered and controlled by a national police commission. The authority of local executives over the police units in their jurisdiction shall be provided by law. 1 With the aforequoted provision in mind, Congress passed Republic Act No. 6975 entitled "AN ACT ESTABLISHING THE PHILIPPINE NATIONAL POLICE UNDER A REORGANIZED DEPARTMENT OF THE INTERIOR AND LOCAL GOVERNMENT, AND FOR OTHER PURPOSES" as the consolidated version of House Bill No. 23614 and Senate Bill No. 463. Following the said Act's approval by President Corazon C. Aquino on December 13, 1990, it was published on December 17, 1990. 2 Presently, however, petitioner as citizen, taxpayer and member of the Philippine Bar sworn to defend the Constitution, filed the petition now at bar on December 20, 1990, seeking this Court's declaration of unconstitutionality of RA 6975 with prayer for temporary restraining order. But in an en banc resolution dated December 27, 1990, We simply required the public respondents to file their Comment, without however giving due course to the petition and the prayer therein. Hence, the Act took effect after fifteen days following its publication, or on January 1, 1991. 3 Before we settle down on the merits of the petition, it would likewise be well to discuss albeit briefly the history of our police force and the reasons for the ordination of Section 6, Article XVI in our present Constitution. During the Commonwealth period, we had the Philippine Constabulary as the nucleus of the Philippine Ground Force (PGF), now the Armed Forces of the Philippines (AFP). The PC was made part of the PGF but its administrative, supervisory and directional control was handled by the then Department of the Interior. After the war, it remained as the "National Police" under the Department of National Defense, as a major service component of the AFP. 4 Later, the Integration Act of 1975 created the Integrated National Police (INP) under the Office of the President, with the PC as the nucleus, and the local police forces as the civilian components. The PC-INP was headed by the PC Chief who, as concurrent Director-General of the INP, exercised command functions over the INP. 6 The National Police Commission (NAPOLCOM) 7 exercised administrative control and supervision while the local executives exercised operational supervision and direction over the INP units assigned within their respective localities. 8 The set-up whereby the INP was placed under the command of the military component, which is the PC, severely eroded the INP's civilian character and the multiplicity in the governance of the PC-INP resulted in inefficient police service. 9 Moreover, the integration of the national police forces with the PC also resulted in inequities since the military component had superior benefits and privileges. 10 The Constitutional Commission of 1986 was fully aware of the structural errors that beset the system. Thus, Com. Teodulo C. Natividad explained that: xxx xxx xxx MR. NATIVIDAD. . . . The basic tenet of a modern police organization is to remove it from the military. 11
5

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Such organizational set-up does not detract from the mandate of the Constitution that the national police force shall be administered and controlled by a national police commission as at any rate, and in fact, the Act in question adequately provides for administration and control at the commission level, as shown in the following provisions, to wit: Sec. 14.Powers and Functions of the Commission. The Commission shall exercise the following powers and functions: xxx xxx xxx (i) Approve or modify plans and programs on education and training, logistical requirements, communications, records, information systems, crime laboratory, crime prevention and crime reporting; (j) Affirm, reverse or modify, through the National Appellate Board, personnel disciplinary actions involving demotion or dismissal from the service imposed upon members of the Philippine National Police by the Chief of the PNP; (k) Exercise appellate jurisdiction through .the regional. appellate boards over administrative cases against policemen and over decisions on claims for police benefits; xxx xxx xxx Sec. 26. The Command and direction of the PNP shall be vested in the Chief of the PNP . . . Such command and direction of the Chief of the PNP may be delegated to subordinate officials with respect to the units under their respective commands, in accordance with the rules and regulations prescribed by the Commission. . . . xxx xxx xxx Sec. 35. . . . To enhance police operational efficiency and effectiveness, the Chief of the PNP may constitute such other support units as may be necessary subject to the approval of the Commission. . . . xxx xxx xxx Sec. 37. . . . There shall be established a performance evaluation system which shall be administered in accordance with the rules, regulations and standards; and a code of conduct promulgated by the Commission for members of the PNP. . . . xxx xxx xxx Petitioner further asserts that in manifest derogation of the power of control of the NAPOLCOM over the PNP, RA 6975 vested the power to choose the PNP Provincial Director and the Chiefs of Police in the Governors and Mayors, respectively; the power of "operational supervision and control" over police units in city and municipal mayors; in the Civil Service Commission, participation in appointments to the positions of Senior Superintendent to Deputy Director-General as well as the administration of qualifying entrance examinations; disciplinary powers over PNP members in the "People's Law Enforcement Boards" and in city and municipal mayors. 25 Once more, we find no real controversy upon the foregoing assertions. It is true that when the Constitutional Commissioners of 1986 provided that the authority of local executives over the police units in their jurisdiction shall be provided by law, they intended that the dayto-day functions of police work like crime, investigation, crime prevention activities, traffic control, etc., would be under the operational control of the local executives as it would not be advisable to give full control of the police to the local executives.26 They reasoned that in the past, this gave rise to warlordism, bossism, and sanctuaries for vices and abuses. 27 It would appear then that by vesting in the local executives the power to choose the officers in question, the Act went beyond the bounds of the Constitution's intent. Not so. We find light in the principle of constitutional construction that every presumption should be indulged in favor of constitutionality and the court in considering the validity of the statute in question

should give it such reasonable construction as can be reached to bring it within the fundamental law. 28 Under the questioned provisions, which read as follows: D. PARTICIPATION OF LOCAL EXECUTIVES IN THE ADMINISTRATION OF THE PNP. Sec. 51.Powers of Local Government Officials over the PNP Units or Forces. Governors and mayors shall be deputized as representatives of the Commission in their respective territorial jurisdictions. As such, the local executives shall discharge the following functions: a.) Provincial Governor (1) . . . The provincial governor shall choose the provincial director from a list of three (3) eligibles recommended by the PNP Regional Director. 4) . . . City and municipal mayors shall have the following authority over the PNP units in their respective jurisdictions: i.) Authority to choose the chief of police from a list of five (5) eligibles recommended by the Provincial Police Director. . . . (Emphasis ours) full control remains with the National Police Commission. We agree, and so hold, with the view of the Solicitor General that "there is no usurpation of the power of control of the NAPOLCOM under Section 51 because under this very same provision, it is clear that the local executives are only acting as representatives of the NAPOLCOM. . . . As such deputies, they are answerable to the NAPOLCOM for their actions in the exercise of their functions under that section. Thus, unless countermanded by the NAPOLCOM, their acts are valid and binding as acts of the NAPOLCOM." 29 It is significant to note that the local officials, as NAPOLCOM representatives, will choose the officers concerned from a list of eligibles (those who meet the general qualifications for appointment to the PNP) 30 to be recommended by PNP officials. The same holding is true with respect to the contention on the operational supervision and control exercised by the local officials. Those officials would simply be acting as representatives of the Commission. As regards the assertion involving the Civil Service Commission, suffice it to say that the questioned provisions, which read: Sec. 31.Appointment of PNP Officers and Members. The Appointment of the officers and members of the PNP shall be effected in the following manner: a.) Police Officer I to Senior Police Officer IV. Appointed by the PNP regional director for regional personnel or by the Chief of the PNP for national headquarters personnel and attested by the Civil Service Commission; b.) Inspector to Superintendent. Appointed by the Chief of the PNP, as recommended by their immediate superiors, and attested by the Civil Service Commission; c.) Senior Superintendent to Deputy Director-General. Appointed by the President upon recommendation of the Chief of the PNP, with proper endorsement by the Chairman of the Civil Service Commission . . . Sec. 32.Examinations for Policemen. The Civil Service Commission shall administer the qualifying entrance examinations for policemen on the basis of the standards set by the NAPOLCOM. precisely underscore the civilian character of the national police force, and will undoubtedly professionalize the same. The grant of disciplinary powers over PNP members to the "People's Law Enforcement Boards" (or the PLEB) and city and municipal mayors is also not in derogation of the commission's power of control over the PNP.

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Pursuant to the Act, the Commission exercises appellate jurisdiction, thru the regional appellate boards, over decisions of both the PLEB and the said mayors. This is so under Section 20(c). Furthermore, it is the Commission which shall issue the implementing guidelines and procedures to be adopted by the PLEB for in the conduct of its hearings, and it may assign NAPOLCOM hearing officers to act as legal consultants of the PLEBs (Section 43-d4, d5). As a disciplinary board primarily created to hear and decide citizen's complaints against erring officers and members of the PNP, the establishment of PLEBs in every city, and municipality would all the more help professionalize the police force. Petitioner would likewise have this Court imagine that Section 12 of the questioned Act, the pertinent portion of which reads: Sec. 12.Relationship of the Department with the Department of National Defense. During a period of twenty- four (24) months from the effectivity of this Act, the Armed Forces of the Philippines (AFP) shall continue its present role of preserving the internal and external security of the State: Provided, that said period may be extended by the President, if he finds it justifiable, for another period not exceeding twentyfour (24) months, after which, the Department shall automatically take over from the AFP the primary role of preserving internal security, leaving to the AFP its primary role of preserving external security. xxx xxx xxx constitutes an "encroachment upon, interference with, and an abdication by the President of, executive control and commander-in-chief powers." That We are not disposed to do for such is not the case at all here. A rejection thus of petitioner's submission anent Section 12 of the Act should be in order in the light of the following exchanges during the CONCOM deliberations of Wednesday, October 1, 1986: xxx xxx xxx MR. RODRIGO. Just a few questions. The President of the Philippines is the Commander-in-Chief of all the armed forces. MR. NATIVIDAD. Yes, Madam President. MR. RODRIGO. Since the national police is not integrated with the armed forces, I do not suppose they come under the Commander-in-Chief powers of the President of the Philippines. MR. NATIVIDAD. They do, Madam President. By law they are under the supervision and control of the President of the Philippines. MR. RODRIGO. Yes, but the President is not the Commander-in-Chief of the national police. MR. NATIVIDAD. He is the President. MR. RODRIGO. Yes, the Executive. But they do not come under that specific provision that the President is Commander-in-Chief of all the armed forces. MR. NATIVIDAD. No, not under the Commander-in-Chief provision. MR. RODRIGO. There are two other powers of the President. The President has control over departments, bureaus and offices, and supervision over local governments. Under which does the police fall, under control or under supervision? MR. NATIVIDAD. Both, Madam President. MR. RODRIGO. Control and Supervision. MR. NATIVIDAD. Yes, in fact, the National Police Commission is under the Office of the President. (CONCOM RECORDS, Vol. 5, p. 296) It thus becomes all too apparent then that the provision herein assailed precisely gives muscle to and enforces the proposition that the national police force does not fall under the Commander-in-Chief powers of the President. This is necessarily so since the police force, not being integrated with the military, is not

a part of the Armed Forces of the Philippines. As a civilian agency of the government, it properly comes within, and is subject to, the exercise by the President of the power of executive control. Consequently, Section 12 does not constitute abdication of commander-in-chief powers. It simply provides for the transition period or process during which the national police would gradually assume the civilian function of safeguarding the internal security of the State. Under this instance, the President, to repeat, abdicates nothing of his war powers. It would bear to here state, in reiteration of the preponderant view, that the President, as Commander-in-Chief, is not a member of the Armed Forces. He remains a civilian whose duties under the Commander-in-Chief provision "represent only a part of the organic duties imposed upon him. All his other functions are clearly civil in nature." 31 His position as a civilian Commander-in-Chief is consistent with, and a testament to, the constitutional principle that "civilian authority is, at all times, supreme over the military." (Article II, Section 3, 1987 Constitution) Finally, petitioner submits that the creation of a "Special Oversight Committee" under Section 84 of the Act, especially the inclusion therein of some legislators as members (namely: the respective Chairmen of the Committee on Local Government and the Committee on National Defense and Security in the Senate, and the respective Chairmen of the Committee on Public Order and Security and the Committee on National Defense in the House of Representatives) is an "unconstitutional encroachment upon and a diminution of, the President's power of control over all executive departments, bureaus and offices." But there is not the least interference with the President's power of control under Section 84. The Special Oversight Committee is simply an ad hoc or transitory body, established and tasked solely with planning and overseeing the immediate "transfer, merger and/or absorption" into the Department of the Interior and Local Governments of the "involved agencies." This it will undertake in accordance with the phases of implementation already laid down in Section 85 of the Act and once this is carried out, its functions as well as the committee itself would cease altogether. 32 As an ad hoc body, its creation and the functions it exercises, decidedly do not constitute an encroachment and in diminution of the power of control which properly belongs to the President. What is more, no executive department, bureau or office is placed under the control or authority, of the committee. 33 As a last word, it would not be amiss to point out here that under the Constitution, there are the socalledindependent Constitutional Commissions, namely: The Civil Service Commission, Commission on Audit, and the Commission on Elections. (Article IX-A, Section 1) As these Commissions perform vital governmental functions, they have to be protected from external influences and political pressures. Hence, they were made constitutional bodies, independent of and not under any department of the government. 34 Certainly, they are not under the control of the President. The Constitution also created an independent office called the "Commission on Human Rights." (Article XIII, Section 17[1]).However, this Commission is not on the same level as the Constitutional Commissions under Article IX, although it is independent like the latter Commissions. 35 It still had to be constituted thru Executive Order No. 163 (dated May 5, 1987). In contrast, Article XVI, Section 6 thereof, merely mandates the statutory creation of a national police commission that will administer and control the national police force to be established thereunder. This commission is, for obvious reasons, not in the same category as the independent Constitutional Commissions of Article IX and the other constitutionally created independent Office, namely, the Commission on Human Rights. By way of resume, the three Constitutional Commissions (Civil Service, Audit, Elections) and the additional commission created by the Constitution (Human Rights) are all independent of the Executive; but the National Police Commission is not. 36 In fact, it was stressed during the CONCOM deliberations that this commission would be under the President, and hence may be controlled by the President, thru his or her alter ego, the Secretary of the Interior and Local Government. WHEREFORE, having in view all of the foregoing holdings, the instant petition is hereby DISMISSED for lack of merit. SO ORDERED.

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Republic of the Philippines SUPREME COURT Manila EN BANC

indorsement dated December 1, 1965 to petitioner-appellant inviting attention to the basic communication of the Director of Public Schools and to the enclosed decision of the Commissioner of Civil Service, and requesting that petitioner-appellant acknowledges receipt of the enclosed decision of the Civil Service Commissioner by return indorsement (Exh. 1, Opposition, p. 172, rec.). In his second indorsement dated December 1, 1965, petitioner-appellant acknowledged receipt at 3 o'clock in the afternoon of that day, December 1, 1965, "the said order of dismissal entitled Division Order No. 677, series of 1965, together with a copy of the letter of the Director of Public Schools, dated September 30, 1965, to the Division Superintendent of Schools, Davao City, to execute immediately the alleged decision of the Commissioner of Civil Service in Administrative Case No. R-24579, a copy of which is attached to the said letter," expressly stating therein that he is receiving the same "UNDER PROTEST because the said copy of the decision is ordered executed before he could receive it and before he could have the opportunity to read it, thereby arbitrarily denying and prevailing him from filing a motion for its reconsideration or appealing the same ..." (Annex D, petition or Exh. T, Motion, p. 16, rec.). In another letter also dated December 1, 1965 addressed to Mr. Primitivo Raquel, Principal of Calinan Central Elementary School, Davao City, the respondent-appellee superintendent of city schools designated the former "as Principal in Charge of Calinan District vice Mr. Francisco Cucharo, separated, effective immediately" and instructed him to receive all money and property responsibility from Mr. Cucharo, herein petitioner-appellant (Exh. Q, Motion, p. 168, rec.). In his letter-circular dated December 6, 1965, addressed to all principals/head teachers, Principal In Charge Primitivo R. Raquel quoted verbatim the letter of respondent-appellee superintendent of city schools dated December 1, 1965 for their information and guidance (Exh. R Motion, p. 169, rec.); and on the same day as such principal-in-charge, he issued another letter circular to all principals/ head teachers and teacher-in-charge in the Calinan District informing them that there will be a meeting on December 8, 1965 at 7:30 in the morning (Exh. S, Motion, p. 170, rec.). Not satisfied with the decision, petitioner-appellant filed on December 2, 1965 the present petition for certiorariand prohibition with writ of preliminary mandatory injunction in the Court of First Instance of Davao: (1) to declare the Civil Service Commissioner with having acted with grave abuse of discretion and without authority of law in ordering his immediate dismissal; (2) to declare null and void the decision of the Civil Service Commissioner dismissing him from the service; (3) to declare the respondent superintendent of city schools as without authority of law in issuing Division Order No. 677, series of 1965, as well as to declare said order null and void; and (4) to declare respondent-appellee Director of Public Schools as having acted with grave abuse of discretion and without authority of law in amending the decision of the Civil Service Commission with respect to the execution thereof (pp. 1-21, rec.). On December 4, 1965, the lower court issued ex parte a writ of preliminary injunction directing the respondents-appellees to refrain from executing the decision in Administrative Case No. R-24579 and to refrain from replacing petitioner-appellant (p. 22-23, 26-27, rec.). On December 27, 1965, petitioner-appellant filed a motion to declare respondent division superintendent of city schools in contempt of court for having designated the principal teacher of Calinan Elementary School to assume the duties of District Supervisor of Calinan District in violation of the preliminary injunction, claiming that he never vacated the position, much less turned over the same to the one designated to perform its duties (pp. 30-41, rec.). On December 27, 1965, the Civil Service Commission received petitioner-appellant's motion for reconsideration on the decision of the Civil Service Commissioner dated August 6, 1965, which motion was referred to the Director of Public Schools by the first indorsement dated January 17, 1966 for comment and recommendation (par. 2[b] of respondent's Answer dated January 21, 1966, pp. 83-84 rec.). On December 31, 1965, respondent superintendent of city schools filed a motion to quash preliminary writ of injunction and an opposition to the motion to declare him in contempt of court (pp. 45-47, rec.). On January 3, 1966, petitioner-appellant filed a motion to declare respondent superintendent of city schools in default (p. 42, rec.). On January 5, 1966, the trial court, after hearing, issued an order dissolving the writ of preliminary injunction issued on December 4, 1965 and denied the motion to declare respondent superintendent of city

G.R. No. L-27887 February 22, 1971 FRANCISCO M. CUCHARO, petitioner-appellant, vs. HON. ABELARDO SUBIDO, Commissioner of Civil Service, HON. VITALIANO BERNARDINO, Director of Public Schools and MR. PEDRO SAN VICENTE, Division Superintendent of Schools, Davao City,respondents-appellees. Teodoro V. Nano, Sr. for petitioner-appellant. Office of the Solicitor General Antonio P. Barredo, Assistant Solicitor General Pacifico P. De Castro, Solicitor Tomas M. Dilig and Special Attorney Ernesto R. Basa for respondents-appellees.

MAKASIAR, J.: This petition for certiorari and prohibition with the prayer for the issuance of a writ of preliminary mandatory injunction was filed by petitioner-appellant Francisco M. Cucharo by way of appeal (p. 144, rec.) from the order dated July 20, 1966 respectively dismissing the petition as well as denying appellant's motion for summary judgment and from the order of August 4, 1966 denying the motion for reconsideration of the order of July 20, 1966 (pp. 128, 142., rec.). It is undisputed that petitioner-appellant Francisco M. Cucharo was formerly the principal of Calinan Elementary School, Calinan District, Davao City. On January 28, 1956, a senior teacher (regular) examination was given by the Civil Service Commission. When he was promoted as District Supervisor sometime in 1960 by virtue of his junior teacher eligibility, he gave as additional qualification has senior teacher (promotional) eligibility, claiming that he received on March 28, 1958 from the Civil Service Commissioner a report of his rating showing that he obtained a passing mark of 81.78% in the senior teacher examination. Because he actually failed in the said senior teacher examination, in a third indorsement dated August 27, 1962, the Commissioner of Civil Service required him to explain why "the notice of rating dated March 28, 1958 purporting to show that he obtained a rating of 81.78% in the senior teacher (promotional) examination ... contains certain unauthorized erasures and insertions" which make it different from the notice as originally issued. After a formal investigation at which he denied making the alleged erasures and insertions, petitionerappellant was found guilty of serious misconduct consisting of falsification of a civil service rating card in Administrative Case No. R-24579 of the Civil Service Commission and was accordingly dismissed from the service by the Civil Service Commissioner effective on the last day of duty with pay in a decision dated August 6, 1965. In the same decision, the Civil Service Commission likewise directed that the said decision be executed immediately in the public interest (Annex A, petition, pp. 12-14, rec.). The Civil Service Commissioner coursed the aforesaid decision through the respondent Director of Public Schools, who in turn transmitted the same to the respondent superintendent of city schools of Davao City in a letter dated September 30, 1965, directing that the decision of the Civil Service Commissioner be executed immediately "but not beyond ten days from receipt thereof" and requesting that three copies of the special order covering the dismissal of petitioner-appellant from the service together with the advice of the date he acknowledges receipt of the decision be furnished his office (Director of Public Schools) by return indorsement thereof (Annex B of the petition, p. 14, rec.). Pursuant to the aforesaid instructions of the Director of Public Schools, the respondent superintendent of city schools of Davao City issued Division Order No. 677, s. 1965, dated December 1, 1965 making of record the separation of the petitioner-appellant from the service pursuant to the order of dismissal by the Commissioner of Civil Service effective that day, December 1, 1965 (Annex C of the petition or Exh. 2 Motion, pp. 15, 173, rec.); and transmitted the said Division Order No. 677 together with his first

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schools in contempt of court on the ground that respondent superintendent of city schools had already accomplished the acts sought to be restrained (p. 49, rec.). In another order issued on the same day, the lower court denied the motion to declare respondent superintendent of city schools in default (p. 44, rec.). On January 11, 1966, petitioner-appellant filed an urgent motion for reconsideration of the two orders dated January 5, 1966 dissolving the writ of preliminary injunction and denying the motion to declare respondent superintendent of city schools in default (pp. 50-59, 60-62, rec.). On July 1, 1966, the date set for pre-trial, the lower court issued an order granting respondent superintendent of city schools five days within which to file a motion to dismiss the petition and petitioner-appellant was given a similar period to file an opposition (p. 107, rec). On July 6, l966, a motion to dismiss was filed (pp. 109-111, rec.) and on July 8, 1966, petitioner-appellant filed his opposition thereto with a counter-motion for summary judgment (pp. 112-121, rec.). On July 20, 1966, the lower court issued an order dismissing the petition and denied is without merit petitioner-appellant's motion for summary of judgement. (p. 128, rec.). Hence, this appeal (p. 144, rec.). Petitioner-appellant claims that the lower court erred: (1) in not resolving his urgent motion for reconsideration of the order dated January 5,1966 particularly the portion dissolving the writ of preliminary injunction, and the motion for reconsideration of order dated January 5, 1966 denying his motion to declare respondent superintendent of city schools in default before setting the pre-trial on July 1, 1966; (2) in dismissing the petition; and (3) in not granting the motion for summary judgment. The three errors assigned by petitioner-appellant shall be discussed jointly. As a major premise, it has been the repeated pronouncement of this Supreme Tribunal that the Civil Service Commissioner has the discretion to order the immediate execution in the public interest of his decision separating petitioner-appellant from the service, always subject however to the rule that, in the event the Civil Service Board of Appeals or the proper court determines that his dismissal is illegal, he should be paid the salary corresponding to the period of his separation from the service until his reinstatement. 1 As elucidated by Mr. Justice Arsenio Dizon in the Cabigao case, "although the decision of the Commissioner of Civil Service adverse to the government employee under investigation is appealable to the Civil Service Board of Appeals, the Commissioner has discretion to enforce it and make it effective pending appeal, to protect public interest. However, the removal or the continued suspension of the employee effected through the execution of the appealed decision shall be considered as unjustified should said decision be reversed by the Civil Service Board of Appeals and, in such case, as provided for in Section 35 of the Civil Service Act of 1959, the employee 'shall be restored to his position with full pay for the period of suspension'." 2 Petitioner-appellant is indulging in euphemism when he states that the decision dismissing him from the service cannot be executed immediately before he could receive it and before he could have the opportunity to read the same, thereby arbitrarily preventing him from filing a motion for reconsideration or appealing the same; because he actually received the copy of the decision consisting only of two pages (see Annex A to the petition, pp. 12-13, rec.) which will not take him five minutes to read and comprehend its contents. While he received only a copy of the decision, he does not impugn its correctness or accuracy. At any rate, he was fortunate for the decision dated August 6, 1965, was executed only on December 1, 1965 or over three months thereafter. That the Commissioner of Civil Service concluded that "the facts of this case engender reasonable belief that respondent is guilty of the charge" is only one way of expressing the idea that the facts support the reasonable conclusion that petitioner-appellant is guilty of the charge against him. As to the intrinsic merits of the findings of facts of the Civil Service Commissioner, the same would still depend on the appreciation thereof by the Civil Service Board of Appeals. As heretofore stated, should he be exonerated by the Civil Service Board of Appeals or my the Civil Service Commissioner himself acting on his motion for reconsideration, petitioner-appellant would be entitled to recover back salaries.

The basic ground that the petition states no cause of action, upon which respondent superintendent of city schools predicates his motion to dismiss before the lower court, which is also alleged as a special defense in the Answer filed by the Solicitor General (p. 85, rec.), is predicated on the fact that petitioner-appellant has not exhausted administrative remedies by filing a motion for reconsideration of the decision filed with the Civil Service Commissioner (which he subsequently filed on December 27, 1965) and an appeal to the Civil Service Board of Appeals, before he can seek any remedy from the court. There is nothing in the record indicating the status of his motion for reconsideration of the decision of the Civil Service Commissioner or whether he has filed an appeal with the Civil Service Board of Appeals. Such an omission to exhaust all administrative remedies open to him under the law is fatal to his petition, for it signifies lack of a cause of action. 3 Because the order of the trial court dated August 6, 1966 dismissing the petition and denying his motion for summary judgment, after considering the grounds invoked in the motion to dismiss as well as the reasons advanced by petitioner-appellant in opposition thereto and to support his counter-motion for summary judgment, is proper and legal, there was no need for the lower court to resolve petitionerappellant's motion for reconsideration of the order dated January 5, 1966 quashing the writ of preliminary injunction and the order dated January 5, 1966 denying his motion to declare respondent superintendent of city schools in default, which would merely be an exercise in futility. While it is true that exhausting of administrative remedies is a general rule, the case of the petitionerappellant does not fall under anyone of the recognized exceptions thereto as enunciated by this Tribunal, some of which are re-stated in Escalante vs. Subido, supra. Petitioner-appellant will not suffer irreparable injury or damage by awaiting a final administrative action in his case;" because he can collect back salaries should his dismissal be adjudged illegal. 5 The issues involved in the decision the Civil Service Commissioner separating him from the service are not purely illegal questions. 6 The act of the Commissioner of Civil Service is not patently devoid of any color of authority or manifestly illegal; neither did the Civil Service Commissioner act without or in excess of his jurisdiction nor commit a grave abuse of discretion amounting to lack of jurisdiction. 7 The case of Guisadio vs. Villaluz, et al. 8 does not apply to the case at bar. In the Guisadio case, the execution of the decision was enjoined by the trial court; because in a case, which the decision of the Commissioner of Civil Service "considered Guisadio resigned from the service effective on (his) last day of service with pay," it did not expressly direct that the said decision is immediately executory in the public interest. It was the respondent District Supervisor therein who wanted its immediate execution, for he directed Guisadio to turn over all his (Guisado's ) property accountabilities before Guisadio received a copy of the decision itself, which immediate implementation was joined by trial court therein. In the instant case, the decision of the Civil Service Commissioner expressly directs its immediate execution in public interest. We ruled in the Guisadio case that based "on the facts presented to the trial judge," the trial judge "adopted the proper view" and "did not err" in enjoining the immediate execution of the decision of the Civil Service Commissioner. 9 However that may be, the case of Yarcia vs. City of Baguio, Trocio vs. Subido, Austria vs. Auditor General andCabigao v. Del Rosario, which were decided subsequently to the Guisadio case, should be decisive of the case at bar since the relevant facts of the aforesaid cases and of the instant case are analogous. Neither can petitioner-appellant properly invoke the case of Abaya vs. Villegas, et al. 10 In the instant case, the decision of the Civil Service Commissioner was promulgated after an administrative investigation of the charges against appellant. In said Abaya case, the petitioner therein was ordered dismissed from the service without prior investigation or hearing. In the Abaya case, only a purely legal question was involved, and the order of dismissal therein was patently illegal by reason of the fact that the petitioner therein was denied due process, which issues removed the Abaya case from being governed by the doctrine of exhaustion of administrative remedies. 11 As heretofore stated, such exceptions do not obtain here. We are therefore constrained to dismiss as We hereby dismiss the appeal. With costs against petitionerappellant.

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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 88550 April 18, 1990 INDUSTRIAL ENTERPRISES, INC., petitioner, vs. THE HON. COURT OF APPEALS, MARINDUQUE MINING & INDUSTRIAL CORPORATION, THE HON. GERONIMO VELASCO in his capacity as Minister of Energy and PHILIPPINE NATIONAL BANK,respondents. Manuel M. Antonio and Dante Cortez for petitioner. Pelaez, Adriano & Gregorio for respondent MMIC. The Chief Legal Counsel for respondent PNB.

two coal blocks covered by the coal operating contract; ordered BED to issue its written affirmation of the coal operating contract and to expeditiously cause the conversion thereof from exploration to development in favor of IEI; directed BED to give due course to IEI's application for a coal operating contract; directed BED to give due course to IEI's application for three more coal blocks; and ordered the payment of damages and rehabilitation expenses (Rollo, pp. 9-10). In reversing the Trial Court, the Court of Appeals held that the rendition of the summary judgment was not proper since there were genuine issues in controversy between the parties, and more importantly, that the Trial Court had no jurisdiction over the action considering that, under Presidential Decree No. 1206, it is the BED that has the power to decide controversies relative to the exploration, exploitation and development of coal blocks (Rollo, pp. 43-44). Hence, this petition, to which we resolved to give due course and to decide. Incidentally, the records disclose that during the pendency of the appeal before the Appellate Court, the suit against the then Minister of Energy was dismissed and that, in the meantime, IEI had applied with the BED for the development of certain coal blocks. The decisive issue in this case is whether or not the civil court has jurisdiction to hear and decide the suit for rescission of the Memorandum of Agreement concerning a coal operating contract over coal blocks. A corollary question is whether or not respondent Court of Appeals erred in holding that it is the Bureau of Energy Development (BED) which has jurisdiction over said action and not the civil court. While the action filed by IEI sought the rescission of what appears to be an ordinary civil contract cognizable by a civil court, the fact is that the Memorandum of Agreement sought to be rescinded is derived from a coal-operating contract and is inextricably tied up with the right to develop coal-bearing lands and the determination of whether or not the reversion of the coal operating contract over the subject coal blocks to IEI would be in line with the integrated national program for coal-development and with the objective of rationalizing the country's over-all coal-supply-demand balance, IEI's cause of action was not merely the rescission of a contract but the reversion or return to it of the operation of the coal blocks. Thus it was that in its Decision ordering the rescission of the Agreement, the Trial Court, inter alia, declared the continued efficacy of the coal-operating contract in IEI's favor and directed the BED to give due course to IEI's application for three (3) IEI more coal blocks. These are matters properly falling within the domain of the BED. For the BED, as the successor to the Energy Development Board (abolished by Sec. 11, P.D. No. 1206, dated 6 October 1977) is tasked with the function of establishing a comprehensive and integrated national program for the exploration, exploitation, and development and extraction of fossil fuels, such as the country's coal resources; adopting a coal development program; regulating all activities relative thereto; and undertaking by itself or through service contracts such exploitation and development, all in the interest of an effective and coordinated development of extracted resources. Thus, the pertinent sections of P.D. No. 1206 provide: Sec. 6.Bureau of Energy Development. There is created in the Department a Bureau of Energy Development, hereinafter referred to in this Section as the Bureau, which shall have the following powers and functions, among others: a. Administer a national program for the encouragement, guidance, and whenever necessary, regulation of such business activity relative to the exploration, exploitation, development, and extraction of fossil fuels such as petroleum, coal, . . . The decisions, orders, resolutions or actions of the Bureau may be appealed to the Secretary whose decisions are final and executory unless appealed to the President. (Emphasis supplied.) That law further provides that the powers and functions of the defunct Energy Development Board relative to the implementation of P.D. No. 972 on coal exploration and development have been transferred to the BED, provided that coal operating contracts including the transfer or assignment of interest in said contracts, shall require the approval of the Secretary (Minister) of Energy (Sec. 12, P.D. No. 1206). Sec. 12. . . . the powers and functions transferred to the Bureau of Energy Development are: xxx xxx xxx

MELENCIO-HERRERA, J.: This petition seeks the review and reversal of the Decision of respondent Court of Appeals in CA-G.R. CV No. 12660, 1 which ruled adversely against petitioner herein. Petitioner Industrial Enterprises Inc. (IEI) was granted a coal operating contract by the Government through the Bureau of Energy Development (BED) for the exploration of two coal blocks in Eastern Samar. Subsequently, IEI also applied with the then Ministry of Energy for another coal operating contract for the exploration of three additional coal blocks which, together with the original two blocks, comprised the so-called "Giporlos Area." IEI was later on advised that in line with the objective of rationalizing the country's over-all coal supplydemand balance . . . the logical coal operator in the area should be the Marinduque Mining and Industrial Corporation (MMIC), which was already developing the coal deposit in another area (Bagacay Area) and that the Bagacay and Giporlos Areas should be awarded to MMIC (Rollo, p. 37). Thus, IEI and MMIC executed a Memorandum of Agreement whereby IEI assigned and transferred to MMIC all its rights and interests in the two coal blocks which are the subject of IEI's coal operating contract. Subsequently, however, IEI filed an action for rescission of the Memorandum of Agreement with damages against MMIC and the then Minister of Energy Geronimo Velasco before the Regional Trial Court of Makati, Branch 150, 2alleging that MMIC took possession of the subject coal blocks even before the Memorandum of Agreement was finalized and approved by the BED; that MMIC discontinued work thereon; that MMIC failed to apply for a coal operating contract for the adjacent coal blocks; and that MMIC failed and refused to pay the reimbursements agreed upon and to assume IEI's loan obligation as provided in the Memorandum of Agreement (Rollo, p. 38). IEI also prayed that the Energy Minister be ordered to approve the return of the coal operating contract from MMIC to petitioner, with a written confirmation that said contract is valid and effective, and, in due course, to convert said contract from an exploration agreement to a development/production or exploitation contract in IEI's favor. Respondent, Philippine National Bank (PNB), was later impleaded as co-defendant in an Amended Complaint when the latter with the Development Bank of the Philippines effected extra-judicial foreclosures on certain mortgages, particularly the Mortgage Trust Agreement, dated 13 July 1981, constituted in its favor by MMIC after the latter defaulted in its obligation totalling around P22 million as of 15 July 1984. The Court of Appeals eventually dismissed the case against the PNB (Resolution, 21 September 1989). Strangely enough, Mr. Jesus S. Cabarrus is the President of both IEI and MMIC. In a summary judgment, the Trial Court ordered the rescission of the Memorandum of Agreement, declared the continued efficacy of the coal operating contract in favor of IEI; ordered the reversion of the

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ii. The following powers and functions of the Energy Development Board under PD No. 910 . . . (1) Undertake by itself or through other arrangements, such as service contracts, the active exploration, exploitation, development, and extraction of energy resources . . . (2) Regulate all activities relative to the exploration, exploitation, development, and extraction of fossil and nuclear fuels . . . (P.D. No. 1206) (Emphasis supplied.) P.D. No. 972 also provides: Sec. 8. Each coal operating contract herein authorized shall . . . be executed by the Energy Development Board. Considering the foregoing statutory provisions, the jurisdiction of the BED, in the first instance, to pass upon any question involving the Memorandum of Agreement between IEI and MMIC, revolving as its does around a coal operating contract, should be sustained. In recent years, it has been the jurisprudential trend to apply the doctrine of primary jurisdiction in many cases involving matters that demand the special competence of administrative agencies. It may occur that the Court has jurisdiction to take cognizance of a particular case, which means that the matter involved is also judicial in character. However, if the case is such that its determination requires the expertise, specialized skills and knowledge of the proper administrative bodies because technical matters or intricate questions of facts are involved, then relief must first be obtained in an administrative proceeding before a remedy will be supplied by the courts even though the matter is within the proper jurisdiction of a court. This is the doctrine of primary jurisdiction. It applies "where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body, in such case the judicial process is suspended pending referral of such issues to the administrative body for its view" (United States v. Western Pacific Railroad Co., 352 U.S. 59, Emphasis supplied). Clearly, the doctrine of primary jurisdiction finds application in this case since the question of what coal areas should be exploited and developed and which entity should be granted coal operating contracts over said areas involves a technical determination by the BED as the administrative agency in possession of the specialized expertise to act on the matter. The Trial Court does not have the competence to decide matters concerning activities relative to the exploration, exploitation, development and extraction of mineral resources like coal. These issues preclude an initial judicial determination. It behooves the courts to stand aside even when apparently they have statutory power to proceed in recognition of the primary jurisdiction of an administrative agency. One thrust of the multiplication of administrative agencies is that the interpretation of contracts and the determination of private rights thereunder is no longer a uniquely judicial function, exercisable only by our regular courts (Antipolo Realty Corp. vs. National Housing Authority, 153 SCRA 399, at 407). The application of the doctrine of primary jurisdiction, however, does not call for the dismissal of the case below. It need only be suspended until after the matters within the competence of the BED are threshed out and determined. Thereby, the principal purpose behind the doctrine of primary jurisdiction is salutarily served. Uniformity and consistency in the regulation of business entrusted to an administrative agency are secured, and the limited function of review by the judiciary are more rationally exercised, by preliminary resort, for ascertaining and interpreting the circumstances underlying legal issues, to agencies that are better equipped than courts by specialization, by insight gained through experience, and by more flexible procedure (Far East Conference v. United States, 342 U.S. 570). With the foregoing conclusion arrived at, the question as to the propriety of the summary judgment rendered by the Trial Court becomes unnecessary to resolve. WHEREFORE, the Court Resolved to DENY the petition. No costs. SO ORDERED. G.R. No. 118910 November 16, 1995 KILOSBAYAN, INCORPORATED, JOVITO R. SALONGA, CIRILO A. RIGOS, ERME CAMBA, EMILIO C. CAPULONG, JR., JOSE T. APOLO, EPHRAIM TENDERO, FERNANDO SANTIAGO, JOSE ABCEDE, CHRISTINE TAN, RAFAEL G. FERNANDO, RAOUL V. VICTORINO, JOSE CUNANAN, QUINTIN S. DOROMAL, SEN. FREDDIE WEBB, SEN. WIGBERTO TAADA, REP. JOKER P. ARROYO, petitioners, vs. MANUEL L. MORATO, in his capacity as Chairman of the Philippine Charity Sweepstakes Office, and the PHILIPPINE GAMING MANAGEMENT CORPORATION, respondents. RESOLUTION

MENDOZA, J.: Petitioners seek reconsideration of our decision in this case. They insist that the decision in the first case has already settled (1) whether petitioner Kilosbayan, Inc. has a standing to sue and (2) whether under its charter (R.A. No. 1169, as amended) the Philippine Charity Sweepstakes Office can enter into any form of association or collaboration with any party in operating an on-line lottery. Consequently, petitioners contend, these questions can no longer be reopened. Because two members of the Court did not consider themselves bound by the decision in the first case, petitioners suggest that the two, in joining the dissenters in the first case in reexamining the questions in the present case, acted otherwise than according to law. They cite the following statement in the opinion of the Court: The voting on petitioners' standing in the previous case was a narrow one, with seven (7) members sustaining petitioners' standing and six (6) denying petitioners' right to bring the suit. The majority was thus a tenuous one that is not likely to be maintained in any subsequent litigation. In addition, there have been changes in the membership of the Court, with the retirement of Justices Cruz and Bidin and the appointment of the writer of this opinion and Justice Francisco. Given this fact it is hardly tenable to insist on the maintenance of the ruling as to petitioners' standing. Petitioners claim that this statement "conveys a none too subtle suggestion, perhaps a Freudian slip, that the two new appointees, regardless of the merit of the Decision in the first Kilosbayan case against the lotto (Kilosbayan, et al. v. Guingona, 232 SCRA 110 (1994)) must of necessity align themselves with all the Ramos appointees who were dissenters in the first case and constitute the new majority in the second lotto case." And petitioners ask, "why should it be so?" Petitioners ask a question to which they have made up an answer. Their attempt at psychoanalysis, detecting a Freudian slip where none exists, may be more revealing of their own unexpressed wish to find motives where there are none which they can impute to some members of the Court. For the truth is that the statement is no more than an effort to explain rather than to justify the majority's decision to overrule the ruling in the previous case. It is simply meant to explain that because the five members of the Court who dissented in the first case (Melo, Quiason, Puno, Vitug and Kapunan, JJ.) and the two new members (Mendoza and Francisco, JJ.) thought the previous ruling to be erroneous and its reexamination not to be barred by stare decisis, res judicata or conclusiveness of judgment, or law of the case, it was hardly tenable for petitioners to insist on the first ruling. Consequently to petitioners' question "What is the glue that holds them together," implying some ulterior motives on the part of the new majority in reexamining the two questions, the answer is: None, except a conviction on the part of the five, who had been members of the Court at the time they dissented in the

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first case, and the two new members that the previous ruling was erroneous. The eighth Justice (Padilla, J.) on the other hand agrees with the seven Justices that the ELA is in a real sense a lease agreement and therefore does not violate R.A. No. 1169. The decision in the first case was a split decision: 7-6. With the retirement of one of the original majority (Cruz, J.) and one of the dissenters (Bidin, J.) it was not surprising that the first decision in the first case was later reversed. It is argued that, in any case, a reexamination of the two questions is barred because the PCSO and the Philippine Gaming Management Corporation made a " formal commitment not to ask for a reconsideration of the Decision in the first lotto case and instead submit a new agreement that would be in conformity with the PCSO Charter (R.A. No. 1169, as amended) and with the Decision of the Supreme Court in the first Kilosbayan case against on-line, hi-tech lotto." To be sure, a new contract was entered into which the majority of the Court finds has been purged of the features which made the first contract objectionable. Moreover, what the PCSO said in its manifestation in the first case was the following: 1. They are no longer filing a motion for reconsideration of the Decision of this Honorable Court dated May 5, 1994, a copy of which was received on May 6, 1994. 2. Respondents PCSO and PGMC are presently negotiating a new lease agreement consistent with the authority of PCSO under its charter (R.A. No. 1169, as amended by B.P. Blg. 42) and conformable with the pronouncements of this Honorable Court in its Decision of May 5, 1995. The PGMC made substantially the same manifestation as the PCSO. There was thus no "formal commitment" but only a manifestation that the parties were not filing a motion for reconsideration. Even if the parties made a "formal commitment," the six (6) dissenting Justices certainly could not be bound thereby not to insist on their contrary view on the question of standing. Much less were the two new members bound by any "formal commitment" made by the parties. They believed that the ruling in the first case was erroneous. Since in their view reexamination was not barred by the doctrine of stare decisis, res judicata or conclusiveness of judgment or law of the case, they voted the way they did with the remaining five (5) dissenters in the first case to form a new majority of eight. Petitioners ask, "Why should this be so?" Because, as explained in the decision, the first decision was erroneousand no legal doctrine stood in the way of its reexamination. It can, therefore, be asked "with equal candor": "Why should this not be so?" Nor is this the first time a split decision was tested, if not reversed, in a subsequent case because of change in the membership of a court. In 1957, this Court, voting 6-5, held in Feliciano v. Aquinas, G.R. No. L10201, Sept. 23, 1957 that the phrase "at the time of the election" in 2174 of the Revised Administrative Code of 1917 meant that a candidate for municipal elective position must be at least 23 years of age on the date of the election. On the other hand, the dissenters argued that it was enough if he attained that age on the day he assumed office. Less than three years later, the same question was before the Court again, as a candidate for municipal councilor stated under oath in her certificate of candidacy that she was eligible for that position although she attained the requisite age (23 years) only when she assumed office. The question was whether she could be prosecuted for falsification. In People v. Yang, 107 Phi. 888 (1960), the Court ruled she could not. Justice, later Chief Justice, Benison, who dissented in the first case, Feliciano v. Aquinas, supra, wrote the opinion of the Court, holding that while the statement that the accused was eligible was "inexact or erroneous, according to the majority in the Feliciano case," the accused could not be held liable for falsification, because the question [whether the law really required candidates to have the required age on the day of the election or whether it was sufficient that they attained it at the beginning of the term of office] has not been discussed anew, despite the presence of new members; we simply assume for the purpose of this decision that the doctrine stands.

Thus because in the meantime there had been a change in the membership of the Court with the retirement of two members (Recess and Flex, JJ.) who had taken part in the decision in the first case and their replacement by new members (Barrera and Gutierrez-David, JJ.) and the fact that the vote in the first case was a narrow one (6 to 5), the Court allowed that the continuing validity of its ruling in the first case might well be doubted. For this reason it gave the accused the benefit of the doubt that she had acted in the good faith belief that it was sufficient that she was 23 years of age when she assumed office. In that case, the change in the membership of the Court and the possibility of change in the ruling were noted without anyone much less would-be psychoanalysts finding in the statement of the Court any Freudian slip. The possibility of change in the rule as a result of change in membership was accepted as a sufficient reason for finding good faith and lack of criminal intent on the part of the accused. Indeed, a change in the composition of the Court could prove the means of undoing an erroneous decision. This was the lesson of Knox v. Lee, 12 Wall. 457 (1871). The Legal Tender Acts, which were passed during the Civil War, made U.S. notes (greenbacks) legal tender for the payment of debts, public or private, with certain exceptions. The validity of the acts, as applied to preexisting debts, was challenged in Hepburn v. Griswold, 8 Wall. 603 (1869). The Court was then composed of only eight (8) Justices because of Congressional effort to limit the appointing power of President Johnson. Voting 5-3, the Court declared the acts void. Chief Justice Chase wrote the opinion of the Court in which four others, including Justice Grier, concurred. Justices Miller, Swayne and Davis dissented. A private memorandum left by the dissenting Justices described how an effort was made "to convince an aged and infirm member of the court [Justice Grier] that he had not understood the question on which he voted," with the result that what was originally a 4-4 vote was converted into a majority (5-3) for holding the acts invalid. On the day the decision was announced, President Grant nominated to the Court William Strong and Joseph P. Bradley to fill the vacancy caused by the resignation of Justice Grier and to restore the membership of the Court to nine. In 1871, Hepburn v. Griswold was overruled in the Legal Tender Cases, as Knox v. Lee came to be known, in an opinion by Justice Strong, with a dissenting opinion by Chief Justice Chase and the three other surviving members of the former majority. There were allegations that the new Justices were appointed for their known views on the validity of the Legal Tender Acts, just as there were others who defended the character and independence of the new Justices. History has vindicated the overruling of the Hepburn case by the new majority. The Legal Tender Cases proved to be the Court's means of salvation from what Chief Justice Hughes later described as one of the Court's "selfinflicted wounds." 1 We now consider the specific grounds for petitioners' motion for reconsideration. I. We have held that because there are no genuine issues of constitutionality in this case, the rule concerning real party in interest, applicable to private litigation rather than the more liberal rule on standing, applies to petitioners. Two objections are made against that ruling: (1) that the constitutional policies and principles invoked by petitioners, while not supplying the basis for affirmative relief from the courts, may nonetheless be resorted to for striking down laws or official actions which are inconsistent with them and (2) that the Constitution, by guaranteeing to independent people's organizations "effective and reasonable participation at all levels of social, political and economic decision-making" (Art. XIII, 16), grants them standing to sue on constitutional grounds. The policies and principles of the Constitution invoked by petitioner read: Art. II, 5. The maintenance of peace and order, the protection life, liberty, and property, and thepromotion of the general welfare are essential for the enjoyment by all the people of the blessings of democracy. Id., 12. The natural and primary right and duty of parents in the rearing of the youth for civic efficiency and the development of moral character shall receive the support of the Government. Id., 13. The State recognizes the vital role of the youth in nation-building and shall promote and protect their physical, moral, spiritual, intellectual, and social well-being. It shall inculcate in the youth patriotism and nationalism, and encourage their involvement in public and civic affairs. Id., 17. The State shall give priority to education, science and technology, arts, culture, and sports to foster patriotism and nationalism, accelerate social progress, and promote total human liberation and development.

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As already stated, however, these provisions are not self-executing. They do not confer rights which can be enforced in the courts but only provide guidelines for legislative or executive action. By authorizing the holding of lottery for charity, Congress has in effect determined that consistently with these policies and principles of the Constitution, the PCSO may be given this authority. That is why we said with respect to the opening by the PAGCOR of a casino in Cagayan de Oro, "the morality of gambling is not a justiciable issue. Gambling is not illegalper se. . . . It is left to Congress to deal with the activity as it sees fit." (Magtajas v. Pryce Properties Corp., Inc., 234 SCRA 255, 268 [1994]). It is noteworthy that petitioners do not question the validity of the law allowing lotteries. It is the contract entered into by the PCSO and the PGMC which they are assailing. This case, therefore, does not raise issues of constitutionality but only of contract law, which petitioners, not being privies to the agreement, cannot raise. Nor does Kilosbayan's status as a people's organization give it the requisite personality to question the validity of the contract in this case. The Constitution provides that "the State shall respect the role of independent people's organizations to enable the people to pursue and protect, within the democratic framework, their legitimate and collective interests and aspirations through peaceful and lawful means," that their right to "effective and reasonable participation at all levels of social, political, and economic decision-making shall not be abridged." (Art. XIII, 15-16) These provisions have not changed the traditional rule that only real parties in interest or those with standing, as the case may be, may invoke the judicial power. The jurisdiction of this Court, even in cases involving constitutional questions, is limited by the "case and controversy" requirement of Art. VIII, 5. This requirement lies at the very heart of the judicial function. It is what differentiates decision-making in the courts from decision-making in the political departments of the government and bars the bringing of suits by just any party. Petitioners quote extensively from the speech of Commissioner Garcia before the Constitutional Commission, explaining the provisions on independent people's organizations. There is nothing in the speech, however, which supports their claim of standing. On the contrary, the speech points the way to the legislative and executive branches of the government, rather than to the courts, as the appropriate fora for the advocacy of petitioners' views. 2 Indeed, the provisions on independent people's organizations may most usefully be read in connection with the provision on initiative and referendum as a means whereby the people may propose or enact laws or reject any of those passed by Congress. For the fact is that petitioners' opposition to the contract in question is nothing more than an opposition to the government policy on lotteries. It is nevertheless insisted that this Court has in the past accorded standing to taxpayers and concerned citizens in cases involving "paramount public interest." Taxpayers, voters, concerned citizens and legislators have indeed been allowed to sue but then only (1) in cases involving constitutional issues and (2) under certain conditions. Petitioners do not meet these requirements on standing. Taxpayers are allowed to sue, for example, where there is a claim of illegal disbursement of public funds. (Pascual v. Secretary of Public Works, 110 Phi. 331 (1960); Sanidad v. Comelec, 73 SCRA 333 (1976); Bugnay Const. & Dev. v. Laron, 176 SCRA 240 (1989); City Council of Cebu v. Cuizon, 47 SCRA 325 [1972]) or where a tax measure is assailed as unconstitutional. (VAT Cases [Tolentino v. Secretary of Finance], 235 SCRA 630 [1994])Voters are allowed to question the validity of election laws because of their obvious interest in the validity of such laws. (Gonzales v. Comelec, 21 SCRA 774 [1967]) Concerned citizens can bring suits if the constitutional question they raise is of "transcendental importance" which must be settled early. (Emergency Powers Cases [Araneta v. Dinglasan], 84 Phi. 368 (1949); Iloilo Palay and Corn Planters Ass'n v. Feliciano, 121 Phi. 358 (1965); Philconsa v. Gimenez, 122 Phi. 894 (1965); CLU v. Executive Secretary, 194 SCRA 317 [1991]) Legislators are allowed to sue to question the validity of any official action which they claim infringes their prerogatives qua legislators. (Philconsa v. Enriquez, 235 506 (1994); Guingona v. PCGG, 207 SCRA 659 (1992); Gonzales v. Macaraig, 191 SCRA 452 (1990); Tolentino v. Comelec, 41 SCRA 702 (1971); Tatad v. Garcia, G.R. No. 114222, April 16, 1995 (Mendoza,J., concurring)) Petitioners do not have the same kind of interest that these various litigants have. Petitioners assert an interest as taxpayers, but they do not meet the standing requirement for bringing taxpayer's suits as set forth in Dumlao v.Comelec, 95 SCRA 392, 403 (1980), to wit:

While, concededly, the elections to be held involve the expenditure of public moneys, nowhere in their Petition do said petitioners allege that their tax money is "being extracted and spent in violation of specific constitutional protections against abuses of legislative power " (Flast v. Cohen, 392 U.S., 83 [1960]), or that there is a misapplication of such funds by respondent COMELEC (see Pascual vs. Secretary of Public Works, 110 Phil. 331 [1960]), or that public money is being deflected to any improper purpose. Neither do petitioners seek to restrain respondent from wasting public funds through the enforcement of an invalid or unconstitutional law. (Philippine Constitution Association vs. Mathay, 18 SCRA 300 [1966]), citing Philippine Constitution Association vs. Gimenez, 15 SCRA 479 [1965]). Besides, the institution of a taxpayer's suit, per se, is no assurance of judicial review . As held by this Court in Tan vs. Macapagal (43 SCRA 677 [1972]), speaking through our present Chief Justice, this Court is vested with discretion as to whether or not a taxpayer's suit should be entertained. (Emphasis added) Petitioners' suit does not fall under any of these categories of taxpayers' suits. Neither do the other cases cited by petitioners support their contention that taxpayers have standing to question government contracts regardless of whether public funds are involved or not. In Gonzales v. National Housing, Corp., 94 SCRA 786 (1979), petitioner filed a taxpayer's suit seeking the annulment of a contract between the NHC and a foreign corporation. The case was dismissed by the trial court. The dismissal was affirmed by this Court on the grounds of res judicata and pendency of a prejudicial question, thus avoiding the question of petitioner's standing. On the other hand, in Gonzales v. Raquiza, 180 SCRA 254 (1989), petitioner sought the annulment of a contract made by the government with a foreign corporation for the purchase of road construction equipment. The question of standing was not discussed, but even if it was, petitioner's standing could be sustained because he was a minority stockholder of the Philippine National Bank, which was one of the defendants in the case. In the other case cited by petitioners, City Council of Cebu v. Cuizon, 47 SCRA 325 (1972), members of the city council were allowed to sue to question the validity of a contract entered into by the city government for the purchase of road construction equipment because their contention was that the contract had been made without their authority. In addition, as taxpayers they had an interest in seeing to it that public funds were spent pursuant to an appropriation made by law. But, in the case at bar, there is an allegation that public funds are being misapplied or misappropriated. The controlling doctrine is that of Gonzales v. Marcos, 65 SCRA 624 (1975) where it was held that funds raised from contributions for the benefit of the Cultural Center of the Philippines were not public funds and petitioner had no standing to bring a taxpayer's suit to question their disbursement by the President of the Philippines. Thus, petitioners' right to sue as taxpayers cannot be sustained. Nor as concerned citizens can they bring this suit because no specific injury suffered by them is alleged. As for the petitioners, who are members of Congress, their right to sue as legislators cannot be invoked because they do not complain of any infringement of their rights as legislators. Finally, in Valmonte v. PCSO, G.R. No. 78716, September 22, 1987, we threw out a petition questioning another form of lottery conducted by the PCSO on the ground that petitioner, who claimed to be a "citizen, lawyer, taxpayer and father of three minor children," had no direct and personal interest in the lottery. We said: "He must be able to show, not only that the law is invalid, but also that he has sustained or is in immediate danger of sustaining some direct injury as a result of its enforcement, and not merely that he suffers thereby in some indefinite way. It must appear that the person complaining has been or is about to be denied some right or privilege to which he is lawfully entitled or that he is about to be subjected to some burdens or penalties by reason of the statute complained of. " In the case at bar, petitioners have not shown why, unlike petitioner in the Valmonte case, they should be accorded standing to bring this suit. The case of Oposa v. Factoran, Jr. 224 SCRA 792 (1993) is different. Citizens' standing to bring a suit seeking the cancellation of timber licenses was sustained in that case because the Court considered Art. II, 16 a right-conferring provision which can be enforced in the courts. That provision states: The State shall protect and advance the right of the people to a balanced and healthful ecology in accord with the rhythm and harmony of nature. (Emphasis)

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In contrast, the policies and principles invoked by petitioners in this case do not permit of such categorization. Indeed, as already stated, petitioners' opposition is not really to the validity of the ELA but to lotteries which they regard to be immoral. This is not, however, a legal issue, but a policy matter for Congress to decide and Congress has permitted lotteries for charity. Nevertheless, although we have concluded that petitioners do not have standing, we have not stopped there and dismissed their case. For in the view we take, whether a party has a cause of action and, therefore, is a real party in interest or one with standing to raise a constitutional question must turn on whether he has a right which has been violated. For this reason the Court has not ducked the substantive issues raised by petitioners. II. R.A. No. 1169, as amended by B.P No . 42, states: 1. The Philippine Charity Sweepstakes Office. The Philippine Charity Sweepstakes Office, hereinafter designated the Office, shall be the principal government agency for raising and providing for funds for health programs, medical assistance and services and charities of national character, and as such shall have the general powers conferred in section thirteen of Act Numbered One Thousand Four Hundred FiftyNine, as amended, and shall have the authority: A. To hold and conduct charity sweepstakes races, lotteries and other similar activities, in such frequency and manner, as shall be determined, and subject to such rules and regulations as shall be promulgated by the Board of Directors. B. Subject to the approval of the Minister of Human Settlements, to engage in health and welfare-related investments, programs, projects and activities which may be profit-oriented, by itself or in collaboration, association or joint venture with any person, association, company or entity, whether domestic or foreign, except for the activities mentioned in the preceding paragraph (A), for the purpose of providing for permanent and continuing sources of funds for health programs, including the expansion of existing ones, medical assistance and services, and/or charitable grants: Provided, That such investments will not compete with the private sector in areas where investments are adequate as may be determined by the National Economic and Development Authority. Petitioners insist on the ruling in the previous case that the PCSO cannot hold and conduct charity sweepstakes, lotteries and other similar activities in collaboration, association or joint venture with any other party because of the clause "except for the activities mentioned in the preceding paragraph (A)" in paragraph (B) of 1. Petitioners contend that the ruling is the law of this case because the parties are the same and the case involves the same issue, i.e., the meaning of this statutory provision. The "law of the case" doctrine is inapplicable, because this case is not a continuation of the first one. Petitioners also say that inquiry into the same question as to the meaning of the statutory provision is barred by the doctrine of res judicata. The general rule on the "conclusiveness of judgment," however, is subject to the exception that a question may be reopened if it is a legal question and the two actions involve substantially different claims. This is generally accepted in American law from which our Rules of Court was adopted. (Montana v. United States, 440 U.S. 59 L.Ed.2d 147, 210 (1979); RESTATEMENT OF THE LAW 2d, ON JUDGMENTS, 28; P. BATOR, D. MELTZER, P. MISHKIN AND D. SHAPIRO, THE FEDERAL COURTS AND THE FEDERAL SYSTEM 1058, n.2 [3rd Ed., 1988]) There is nothing in the record of this case to suggest that this exception is inapplicable in this jurisdiction. Indeed, the questions raised in this case are legal questions and the claims involved are substantially different from those involved in the prior case between the parties. As already stated, the ELA is substantially different from the Contract of Lease declared void in the first case. Borrowing from the dissenting opinion of Justice Feliciano, petitioners argue that the phrase "by itself or in collaboration, association or joint venture with any other party" qualifies not only 1 (B) but also 1 (A), because the exception clause ("except for the activities mentioned in the preceding paragraph [A]") "operates, as it were, as a renvoi clause which refers back to Section 1(A) and in this manner avoids the necessity of simultaneously amending the text of Section 1(A)." This interpretation, however, fails to take into account not only the location of the phrase in paragraph (B), when it should be in paragraph (A) had that been the intention of the lawmaking authority, but also the

phrase "by itself." In other words, under paragraph (B), the PCSO is prohibited from "engag[ing] in . . . investments, programs, projects and activities" if these involve sweepstakes races, lotteries and other similar activities not only "in collaboration, association or joint venture" with any other party but also "by itself." Obviously, this prohibition cannot apply when the PCSO conducts these activities itself. Otherwise, what paragraph (A) authorizes the PCSO to do, paragraph (B) would prohibit. The fact is that the phrase in question does not qualify the authority of the PCSO under paragraph (A), but rather the authority granted to it by paragraph (B). The amendment of paragraph (B) by B.P. Blg. 42 was intended to enable the PCSO to engage in certain investments, programs, projects and activities for the purpose of raising funds for health programs and charity. That is why the law provides that such investments by the PCSO should "not compete with the private sector in areas where investments are adequate as may be determined by the National Economic and Development Authority." Justice Davide, then an Assemblyman, made a proposal which was accepted, reflecting the understanding that the bill they were discussing concerned the authority of the PCSO to invest in the business of others. The following excerpt from the Record of the Batasan Pambansa shows this to be the subject of the discussion: MR. DAVIDE. May I introduce an amendment after "adequate". The intention of the amendment is not to leave the determination of whether it is adequate or not to anybody. And my amendment is to add after "adequate" the words AS MAY BE DETERMINED BY THE NATIONAL ECONOMIC AND DEVELOPMENT AUTHORITY. As a mater of fact, it will strengthen the authority to invest in these areas, provided that the determination of whether the private sector's activity is already adequate must be determined by the National Economic and Development Authority. Mr. ZAMORA. Mr. Speaker, the committee accepts the proposed amendment. MR. DAVIDE. Thank you, Mr. Speaker. (2 RECORD OF THE BATASAN PAMBANSA, Sept. 6, 1979, p. 1007) Thus what the PCSO is prohibited from doing is from investing in a business engaged in sweepstakes races, lotteries and other similar activities. It is prohibited from doing so whether "in collaboration, association or joint venture" with others or "by itself." This seems to be the only possible interpretation of 1 (A) and (B) in light of its text and its legislative history. That there is today no other entity engaged in sweepstakes races, lotteries and the like does not detract from the validity of this interpretation. III. The Court noted in its decision that the provisions of the first contract, which were considered to be features of a joint venture agreement, had been removed in the new contract. For instance, 5 of the ELA provides that in the operation of the on-line lottery, the PCSO must employ "its own competent and qualified personnel." Petitioners claim, however, that the "contemporaneous interpretation" of PGMC officials of this provision is otherwise. They cite the testimony of Glen Barroga of the PGMC before a Senate committee to the effect that under the ELA the PGMC would be operating the lottery system "side by side" with PCSO personnel as part of the transfer of technology. Whether the transfer of technology would result in a violation of PCSO's franchise should be determined by facts and not by what some officials of the PGMC state by way of opinion. In the absence of proof to the contrary, it must be presumed that 5 reflects the true intention of the parties. Thus, Art. 1370 of the Civil Code says that "If the terms of a contract are clear and leave no doubt upon the intention of the contracting parties, the literal meaning of its stipulations shall control." The intention of the parties must be ascertained from their "contemporaneous and subsequent acts." (Art. 1371; Atlantic Gulf Co. v. Insular Government, 10 Phil. 166 [1908]) It cannot simply be judged from what one of them says. On the other hand, the claim of third parties, like petitioners, that the clause on upgrading of equipment would enable the parties after a while to change the contract and enter into something else in violation of the law is mere speculation and cannot be a basis for judging the validity of the contract. IV. It is contended that 1 of E.O. No. 301 covers all types of "contract[s] for public services or for furnishing of supplies, materials and equipment to the government or to any of its branches, agencies or instrumentalities" and not only contracts of purchase and sale. Consequently, a lease of equipment, like the ELA, must be submitted to public bidding in order to be valid. This contention is based on two premises: (1) that 1 of E.O. No. 301 applies to any contract whereby the government acquires title to or the use of the equipment and (2) that the words "supplies," "materials," and "equipment" are distinct from

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each other so that when an exception in 1 speaks of "supplies," it cannot be construed to mean "equipment." Petitioners' contention will not bear analysis. For example, the term "supplies" is used in paragraph (a), which provides that a contract for the furnishing of "supplies" in order to meet an emergency is exempt from public bidding. Unless "supplies" is construed to include "equipment," however, the lease of heavy equipment needed for rescue operations in case of a calamity will have to be submitted to public bidding before it can be entered into by the government. In dissent Justice Feliciano says that in such a situation the government can simply resort to expropriation, paying compensation afterward. This is just like purchasing the equipment through negotiation when the question is whether the purchase should be by public bidding, not to mention the fact that the power to expropriate may not be exercised when the government can very well negotiate with private owners. Indeed, there are fundamental difficulties in simultaneously contending (1) that E.O. No. 301, 1 covers both contracts of sale and lease agreements and (2) that the words "supplies," "materials" and "equipment" can not be interchanged. Thus, under paragraph (b) of 1, public bidding is not required "whenever the supplies are to be used in connection with a project or activity which cannot be delayed without causing detriment to the public service." Following petitioners' theory, there should be a public bidding before the government can enter into a contract for the lease of bulldozers and dredging equipment even if these are urgently needed in areas ravaged by lahar because, first, lease contracts are covered by the general rule and, second, the exception to public bidding in paragraph (b) covers only "supplies" but not equipment. To take still another example. Paragraph (d), which does away with the requirement of public bidding "whenever the supplies under procurement have been unsuccessfully placed on bid for at least two consecutive times, either due to lack of bidders or the offers received in each instance were exorbitant or nonconforming to specifications." Again, following the theory of the petitioners, a contract for the lease of equipment cannot be entered into even if there are no bids because, first, lease contracts are governed by the general rule on public bidding and, second, the exception to public bidding in paragraph (d) applies only to contracts for the furnishing of "supplies." Other examples can be given to show the absurdity of interpreting 1 as applicable to any contract for the furnishing of supplies, materials and equipment and of considering the words "supplies," "materials" and "equipment" to be not interchangeable. Our ruling that 1 of E.O. No. 301 does not cover the lease of equipment avoids these fundamental difficulties and is supported by the text of 1, which is entitled "Guidelines for Negotiated Contracts" and by the fact that the only provisions of E.O. No. 301 on leases, namely, 6 and 7, concern the lease of buildings by or to the government. Thus the text of 1 reads: 1. Guidelines for Negotiated Contracts. Any provision of law, decree, executive order or other issuances to the contrary notwithstanding, no contract for public services or for furnishing supplies, materials and equipment to the government or any of its branches, agencies or instrumentalities shall be renewed or entered into without public bidding, except under any of the following situations: a. Whenever the supplies are urgently needed to meet an emergency which may involve the loss of, or danger to, life and/or property; b. Whenever the supplies are to be used in connection with a project or activity which cannot be delayed without causing detriment to the public service; c. Whenever the materials are sold by an exclusive distributor or manufacturer who does not have subdealers selling at lower prices and for which no suitable substitute can be obtained elsewhere at more advantageous terms to the government; d. Whenever the supplies under procurement have been unsuccessfully placed on bid for at least two consecutive times, either due to lack of bidders or the offers received in each instance were exhorbitant or non-conforming to specifications; e. In cases where it is apparent that the requisition of the needed supplies through negotiated purchase is most advantageous to the government to be determined by the Department Head concerned; and f. Whenever the purchase is made from an agency of the government.

Indeed, the purpose for promulgating E.O. No. 301 was merely to decentralize the system of reviewing negotiated contracts of purchase for the furnishing of supplies, materials and equipment as well as lease contracts of buildings. Theretofore, E.O. No. 298, promulgated on August 12, 1940, required consultation with the Secretary of Justice and the Department Head concerned and the approval of the President of the Philippines before contracts for the furnishing of supplies, materials and equipment could be made on a negotiated basis, without public bidding. E.O. No. 301 changed this by providing as follows: 2. Jurisdiction over Negotiated Contracts. In line with the principles of decentralization and accountability, negotiated contracts for public services or for furnishing supplies, materials or equipment may be entered into by the department or agency head or the governing board of the government-owned or controlled corporation concerned, without need of prior approval by higher authorities, subject to availability of funds, compliance with the standards or guidelines prescribed in Section 1 hereof, and to the audit jurisdiction of the commission on Audit in accordance with existing rules and regulations. Negotiated contracts involving P2,000,000 up to P10,000,000 shall be signed by the Secretary and two other Undersecretaries. xxx xxx xxx 7. Jurisdiction Over Lease Contracts. The heads of agency intending to rent privately-owned buildings or spaces for their use, or to lease out government-owned buildings or spaces for private use, shall have authority to determine the reasonableness of the terms of the lease and the rental rates thereof, and to enter into such lease contracts without need of prior approval by higher authorities, subject to compliance with the uniform standards or guidelines established pursuant to Section 6 hereof by the DPWH and to the audit jurisdiction of COA or its duly authorized representative in accordance with existing rules and regulations. In sum, E.O. No. 301 applies only to contracts for the purchase of supplies, materials and equipment, and it was merely to change the system of administrative review of emergency purchases, as theretofore prescribed by E.O. No. 298, that E.O. No. 301 was issued on July 26, 1987. Part B of this Executive Order applies to leases of buildings, not of equipment, and therefore does not govern the lease contract in this case. Even if it applies, it does not require public bidding for entering into it. Our holding that E.O. No. 301, 1 applies only to contracts of purchase and sale is conformable to P.D. No. 526, promulgated on August 2, 1974, which is in pari materia. P.D. No. 526 requires local governments to hold public bidding in the "procurement of supplies." By specifying "procurement of supplies" and excepting from the general rule "purchases" when made under certain circumstances, P.D. No. 526, 12 indicates quite clearly that it applies only to contracts of purchase and sale. This provision reads: 12. Procurement without public bidding. Procurement of supplies may be made without the benefit of public bidding in the following modes: (1) Personal canvass of responsible merchants; (2) Emergency purchases; (3) Direct purchases from manufacturers or exclusive distributors; (4) Thru the Bureau of Supply Coordination; and (5) Purchase from other government entities or foreign governments. Sec. 3 broadly defines the term "supplies" as including everything except real estate, which may be needed in the transaction of public business, or in the pursuit of any undertaking, project, or activity, whether of the nature of equipment, furniture, stationery, materials for construction, or personal property of any sort, including non-personal or contractual services such as the repair and maintenance of equipment and furniture, as well as trucking, hauling, janitorial, security, and related or analogous services. Thus, the texts of both E.O. No. 301, 1 and of P.D. No. 526, 1 and 12, make it clear that only contracts for the purchase and sale of supplies, materials and equipment are contemplated by the rule concerning public biddings.

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Finally, it is contended that equipment leases are attractive and commonly used in place of contracts of purchase and sale because of "multifarious credit and tax constraints" and therefore could not have been left out from the requirement of public bidding. Obviously these credit and tax constraints can have no attraction to the government when considering the advantages of sale over lease of equipment. The fact that lease contracts are in common use is not a reason for implying that the rule on public bidding applies not only to government purchases but also to lease contracts. For the fact also is that the government leases equipment, such as copying machines, personal computers and the like, without going through public bidding. FOR THE FOREGOING REASONS, the motion for reconsideration of petitioners is DENIED with finality. SO ORDERED. SECOND DIVISION [G.R. No. 111107. January 10, 1997] LEONARDO A. PAAT, in his capacity as Officer-in-Charge (OIC), Regional Executive Director (RED), Region 2 and JOVITO LAYUGAN, JR., in his capacity as Community Environment and Natural Resources Officer (CENRO), both of the Department of Environment and Natural Resources (DENR), petitioners, vs. COURT OF APPEALS, HON. RICARDO A. BACULI in his capacity as Presiding Judge of Branch 2, Regional Trial Court at Tuguegarao, Cagayan, and SPOUSES BIENVENIDO and VICTORIA DE GUZMAN, respondents. DECISION TORRES, JR., J.: Without violating the principle of exhaustion of administrative remedies, may an action for replevin prosper to recover a movable property which is the subject matter of an administrative forfeiture proceeding in the Department of Environment and Natural Resources pursuant to Section 68-A of P. D. 705, as amended, entitled The Revised Forestry Code of the Philippines? Are the Secretary of DENR and his representatives empowered to confiscate and forfeit conveyances used in transporting illegal forest products in favor of the government? These are two fundamental questions presented before us for our resolution. The controversy on hand had its incipiency on May 19, 1989 when the truck of private respondent Victoria de Guzman while on its way to Bulacan from San Jose, Baggao, Cagayan, was seized by the Department of Environment and Natural Resources (DENR, for brevity) personnel in Aritao, Nueva Vizcaya because the driver could not produce the required documents for the forest products found concealed in the truck. Petitioner Jovito Layugan, the Community Environment and Natural Resources Officer (CENRO) in Aritao, Cagayan, issued on May 23, 1989 an order of confiscation of the truck and gave the owner thereof fifteen (15) days within which to submit an explanation why the truck should not be forfeited. Private respondents, however, failed to submit the required explanation. On June 22, 1989,[1] Regional Executive Director Rogelio Baggayan of DENR sustained petitioner Layugans action of confiscation and ordered the forfeiture of the truck invoking Section 68-A of Presidential Decree No. 705 as amended by Executive Order No. 277. Private respondents filed a letter of reconsideration dated June 28, 1989 of the June 22, 1989 order of Executive Director Baggayan, which was, however, denied in a subsequent order of July 12, 1989.[2] Subsequently, the case was brought by the petitioners to the Secretary of DENR pursuant to private respondents statement in their letter dated June 28, 1989 that in case their letter for reconsideration would be denied then this letter should be considered as an appeal to the Secretary.[3] Pending resolution however of the appeal, a suit for replevin, docketed as Civil Case 4031, was filed by the private respondents against petitioner Layugan and Executive Director Baggayan[4] with the Regional Trial Court, Branch 2 of Cagayan,[5] which issued a writ ordering the return of the truck to private respondents.[6] Petitioner Layugan and Executive Director Baggayan filed a motion to dismiss with the trial court contending, inter alia, that private respondents had no cause of action for their failure to exhaust administrative remedies. The trial court denied the motion to dismiss in an order dated December 28, 1989.[7] Their motion for reconsideration having been likewise denied, a petition for certiorari was filed by the petitioners with the respondent Court of Appeals which sustained the trial

courts order ruling that the question involved is purely a legal question. [8] Hence, this present petition,[9] with prayer for temporary restraining order and/or preliminary injunction, seeking to reverse the decision of the respondent Court of Appeals was filed by the petitioners on September 9, 1993. By virtue of the Resolution dated September 27, 1993,[10] the prayer for the issuance of temporary restraining order of petitioners was granted by this Court. Invoking the doctrine of exhaustion of administrative remedies, petitioners aver that the trial court could not legally entertain the suit for replevin because the truck was under administrative seizure proceedings pursuant to Section 68-A of P.D. 705, as amended by E.O. 277. Private respondents, on the other hand, would seek to avoid the operation of this principle asserting that the instant case falls within the exception of the doctrine upon the justification that (1) due process was violated because they were not given the chance to be heard, and (2) the seizure and forfeiture was unlawful on the grounds: (a) that the Secretary of DENR and his representatives have no authority to confiscate and forfeit conveyances utilized in transporting illegal forest products, and (b) that the truck as admitted by petitioners was not used in the commission of the crime. Upon a thorough and delicate scrutiny of the records and relevant jurisprudence on the matter, we are of the opinion that the plea of petitioners for reversal is in order. This Court in a long line of cases has consistently held that before a party is allowed to seek the intervention of the court, it is a pre-condition that he should have availed of all the means of administrative processes afforded him. Hence, if a remedy within the administrative machinery can still be resorted to by giving the administrative officer concerned every opportunity to decide on a matter that comes within his jurisdiction then such remedy should be exhausted first before courts judicial power can be sought. The premature invocation of courts intervention is fatal to ones cause of action.[11] Accordingly, absent any finding of waiver or estoppel the case is susceptible of dismissal for lack of cause of action.[12] This doctrine of exhaustion of administrative remedies was not without its practical and legal reasons, for one thing, availment of administrative remedy entails lesser expenses and provides for a speedier disposition of controversies. It is no less true to state that the courts of justice for reasons of comity and convenience will shy away from a dispute until the system of administrative redress has been completed and complied with so as to give the administrative agency concerned every opportunity to correct its error and to dispose of the case. However, we are not amiss to reiterate that the principle of exhaustion of administrative remedies as tested by a battery of cases is not an ironclad rule. This doctrine is a relative one and its flexibility is called upon by the peculiarity and uniqueness of the factual and circumstantial settings of a case. Hence, it is disregarded (1) when there is a violation of due process,[13] (2) when the issue involved is purely a legal question,[14] (3) when the administrative action is patently illegal amounting to lack or excess of jurisdiction,[15] (4) when there is estoppel on the part of the administrative agency concerned,[16] (5) when there is irreparable injury,[17] (6) when the respondent is a department secretary whose acts as an alter ego of the President bears the implied and assumed approval of the latter,[18] (7) when to require exhaustion of administrative remedies would be unreasonable, [19] (8) when it would amount to a nullification of a claim,[20] (9) when the subject matter is a private land in land case proceedings,[21] (10) when the rule does not provide a plain, speedy and adequate remedy, and (11) when there are circumstances indicating the urgency of judicial intervention. [22] In the case at bar, there is no question that the controversy was pending before the Secretary of DENR when it was forwarded to him following the denial by the petitioners of the motion for reconsideration of private respondents through the order of July 12, 1989. In their letter of reconsideration dated June 28, 1989,[23] private respondents clearly recognize the presence of an administrative forum to which they seek to avail, as they did avail, in the resolution of their case. The letter, reads, thus: xxx If this motion for reconsideration does not merit your favorable action, then this letter should be considered as an appeal to the Secretary.[24] It was easy to perceive then that the private respondents looked up to the Secretary for the review and disposition of their case. By appealing to him, they acknowledged the existence of an adequate and plain remedy still available and open to them in the ordinary course of the law. Thus, they cannot now, without violating the principle of exhaustion of administrative remedies, seek courts intervention by filing an action for replevin for the grant of their relief during the pendency of an administrative proceedings.

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Moreover, it is important to point out that the enforcement of forestry laws, rules and regulations and the protection, development and management of forest lands fall within the primary and special responsibilities of the Department of Environment and Natural Resources. By the very nature of its function, the DENR should be given a free hand unperturbed by judicial intrusion to determine a controversy which is well within its jurisdiction. The assumption by the trial court, therefore, of the replevin suit filed by private respondents constitutes an unjustified encroachment into the domain of the administrative agencys prerogative. The doctrine of primary jurisdiction does not warrant a court to arrogate unto itself the authority to resolve a controversy the jurisdiction over which is initially lodged with an administrative body of special competence.[25] In Felipe Ismael, Jr. and Co. vs. Deputy Executive Secretary,[26] which was reiterated in the recent case of Concerned Officials of MWSS vs. Vasquez, [27] this Court held: Thus, while the administration grapples with the complex and multifarious problems caused by unbriddled exploitation of these resources, the judiciary will stand clear. A long line of cases establish the basic rule that the courts will not interfere in matters which are addressed to the sound discretion of government agencies entrusted with the regulation of activities coming under the special technical knowledge and training of such agencies. To sustain the claim of private respondents would in effect bring the instant controversy beyond the pale of the principle of exhaustion of administrative remedies and fall within the ambit of excepted cases heretofore stated. However, considering the circumstances prevailing in this case, we can not but rule out these assertions of private respondents to be without merit. First, they argued that there was violation of due process because they did not receive the May 23, 1989 order of confiscation of petitioner Layugan. This contention has no leg to stand on. Due process does not necessarily mean or require a hearing, but simply an opportunity or right to be heard.[28] One may be heard , not solely by verbal presentation but also, and perhaps many times more creditably and practicable than oral argument, through pleadings. [29] In administrative proceedings moreover, technical rules of procedure and evidence are not strictly applied; administrative process cannot be fully equated with due process in its strict judicial sense. [30] Indeed, deprivation of due process cannot be successfully invoked where a party was given the chance to be heard on his motion for reconsideration,[31] as in the instant case, when private respondents were undisputedly given the opportunity to present their side when they filed a letter of reconsideration dated June 28, 1989 which was, however, denied in an order of July 12, 1989 of Executive Director Baggayan. In Navarro III vs. Damasco,[32] we ruled that : The essence of due process is simply an opportunity to be heard, or as applied to administrative proceedings, an opportunity to explain ones side or an opportunity to seek a reconsideration of the action or ruling complained of. A formal or trial type hearing is not at all times and in all instances essential. The requirements are satisfied when the parties are afforded fair and reasonable opportunity to explain their side of the controversy at hand. What is frowned upon is the absolute lack of notice or hearing. Second, private respondents imputed the patent illegality of seizure and forfeiture of the truck because the administrative officers of the DENR allegedly have no power to perform these acts under the law. They insisted that only the court is authorized to confiscate and forfeit conveyances used in transporting illegal forest products as can be gleaned from the second paragraph of Section 68 of P.D. 705, as amended by E.O. 277. The pertinent provision reads as follows: SECTION 68.xxx xxx The court shall further order the confiscation in favor of the government of the timber or any forest products cut, gathered, collected, removed, or possessed, as well as the machinery, equipments, implements and tools illegaly [sic] used in the area where the timber or forest products are found. (Underline ours) A reading, however, of the law persuades us not to go along with private respondents thinking not only because the aforequoted provision apparently does not mention nor include conveyances that can be the subject of confiscation by the courts, but to a large extent, due to the fact that private respondents interpretation of the subject provision unduly restricts the clear intention of the law and inevitably reduces the other provision of Section 68-A , which is quoted herein below:

SECTION 68-A. Administrative Authority of the Department or His Duly Authorized Representative To Order Confiscation. In all cases of violation of this Code or other forest laws, rules and regulations, the Department Head or his duly authorized representative, may order the confiscation of any forest products illegally cut, gathered, removed, or possessed or abandoned, and all conveyances used either by land, water or air in the commission of the offense and to dispose of the same in accordance with pertinent laws, regulations and policies on the matter. (Underline ours) It is, thus, clear from the foregoing provision that the Secretary and his duly authorized representatives are given the authority to confiscate and forfeit any conveyances utilized in violating the Code or other forest laws, rules and regulations. The phrase to dispose of the same is broad enough to cover the act of forfeiting conveyances in favor of the government. The only limitation is that it should be made in accordance with pertinent laws, regulations or policies on the matter. In the construction of statutes, it must be read in such a way as to give effect to the purpose projected in the statute.[33] Statutes should be construed in the light of the object to be achieved and the evil or mischief to be suppressed, and they should be given such construction as will advance the object, suppress the mischief, and secure the benefits intended.[34] In this wise, the observation of the Solicitor General is significant, thus: But precisely because of the need to make forestry laws more responsive to present situations and realities and in view of the urgency to conserve the remaining resources of the country, that the government opted to add Section 68-A. This amendatory provision is an administrative remedy totally separate and distinct from criminal proceedings. More than anything else, it is intended to supplant the inadequacies that characterize enforcement of forestry laws through criminal actions. The preamble of EO 277-the law that added Section 68-A to PD 705-is most revealing: WHEREAS, there is an urgency to conserve the remaining forest resources of the country for the benefit and welfare of the present and future generations of Filipinos; WHEREAS, our forest resources may be effectively conserved and protected through the vigilant enforcement and implementation of our forestry laws, rules and regulations; WHEREAS, the implementation of our forestry laws suffers from technical difficulties, due to certain inadequacies in the penal provisions of the Revised Forestry Code of the Philippines; and WHEREAS, to overcome this difficulties, there is a need to penalize certain acts more responsive to present situations and realities; It is interesting to note that Section 68-A is a new provision authorizing the DENR to confiscate, not only conveyances, but forest products as well. On the other hand, confiscation of forest products by the court in a criminal action has long been provided for in Section 68. If as private respondents insist, the power on confiscation cannot be exercised except only through the court under Section 68, then Section 68-A would have no purpose at all. Simply put, Section 68-A would not have provided any solution to the problem perceived in EO 277, supra.[35] Private respondents, likewise, contend that the seizure was illegal because the petitioners themselves admitted in the Order dated July 12, 1989 of Executive Director Baggayan that the truck of private respondents was not used in the commission of the crime. This order, a copy of which was given to and received by the counsel of private respondents, reads in part , viz. : xxx while it is true that the truck of your client was not used by her in the commission of the crime, we uphold your claim that the truck owner is not liable for the crime and in no case could a criminal case be filed against her as provided under Article 309 and 310 of the Revised Penal Code. xxx [36] We observed that private respondents misread the content of the aforestated order and obviously misinterpreted the intention of petitioners. What is contemplated by the petitioners when they stated that the truck "was not used in the commission of the crime" is that it was not used in the commission of the crime of theft, hence, in no case can a criminal action be filed against the owner thereof for violation of Article 309 and 310 of the Revised Penal Code. Petitioners did not eliminate the possibility that the truck was being used in the commission of another crime, that is, the breach of Section 68 of P.D.705 as amended by E.O. 277. In the same order of July 12, 1989, petitioners pointed out : xxx However, under Section 68 of P.D.705 as amended and further amended by Executive Order No.277 specifically provides for the confiscation of the conveyance used in the transport of forest products not

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covered by the required legal documents. She may not have been involved in the cutting and gathering of the product in question but the fact that she accepted the goods for a fee or fare the same is therefor liable. xxx[37] Private respondents, however, contended that there is no crime defined and punishable under Section 68 other than qualified theft, so that, when petitioners admitted in the July 12, 1989 order that private respondents could not be charged for theft as provided for under Articles 309 and 310 of the Revised Penal Code, then necessarily private respondents could not have committed an act constituting a crime under Section 68. We disagree. For clarity, the provision of Section 68 of P.D. 705 before its amendment by E.O. 277 and the provision of Section 1 of E.O. No.277 amending the aforementioned Section 68 are reproduced herein, thus: SECTION 68. Cutting, gathering and/or collecting timber or other products without license. - Any person who shall cut , gather , collect , or remove timber or other forest products from any forest land, or timber from alienable and disposable public lands, or from private lands, without any authority under a license agreement, lease, license or permit, shall be guilty of qualified theft as defined and punished under Articles 309 and 310 of the Revised Penal Code xxx. (Underscoring ours; Section 68, P.D.705 before its amendment by E.O.277 ) SECTION 1. Section 68 of Presidential Decree No.705, as amended, is hereby amended to read as follows: Section 68. Cutting, gathering and/or collecting timber or other forest products without license. -Any person who shall cut, gather, collect, remove timber or other forest products from any forest land, or timber from alienable or disposable public land, or from private land, without any authority, or possess timber or other forest products without the legal documents as required under existing forest laws and regulations, shall be punished with the penalties imposed under Articles 309 and 310 of the Revised Penal Code xxx." (Underscoring ours; Section 1, E.O No. 277 amending Section 68, P.D. 705 as amended) With the introduction of Executive Order No. 277 amending Section 68 of P.D. 705, the act of cutting, gathering, collecting, removing, or possessing forest products without authority constitutes a distinct offense independent now from the crime of theft under Articles 309 and 310 of the Revised Penal Code, but the penalty to be imposed is that provided for under Article 309 and 310 of the Revised Penal Code. This is clear from the language of Executive Order No. 277 when it eliminated the phrase shall be guilty of qualified theft as defined and punished under Articles 309 and 310 of the Revised Penal Code and inserted the words shall be punished with the penalties imposed under Article 309 and 310 of the Revised Penal Code . When the statute is clear and explicit, there is hardly room for any extended court ratiocination or rationalization of the law.[38] From the foregoing disquisition, it is clear that a suit for replevin can not be sustained against the petitioners for the subject truck taken and retained by them for administrative forfeiture proceedings in pursuant to Section 68-A of the P. D. 705, as amended. Dismissal of the replevin suit for lack of cause of action in view of the private respondents failure to exhaust administrative remedies should have been the proper course of action by the lower court instead of assuming jurisdiction over the case and consequently issuing the writ ordering the return of the truck. Exhaustion of the remedies in the administrative forum, being a condition precedent prior to ones recourse to the courts and more importantly, being an element of private respondents right of action, is too significant to be waylaid by the lower court. It is worth stressing at this point, that a suit for replevin is founded solely on the claim that the defendant wrongfully withholds the property sought to be recovered. It lies to recover possession of personal chattels that are unlawfully detained.[39] To detain is defined as to mean to hold or keep in custody,[40] and it has been held that there is tortuous taking whenever there is an unlawful meddling with the property, or an exercise or claim of dominion over it, without any pretense of authority or right; this, without manual seizing of the property is sufficient.[41] Under the Rules of Court, it is indispensable in replevin proceedings, that the plaintiff must show by his own affidavit that he is entitled to the possession of property, that the property is wrongfully detained by the defendant, alleging the cause of detention, that the same has not been taken for tax assessment, or seized under execution, or attachment, or if so seized, that it is exempt from such seizure, and the actual value of the property.[42] Private respondents miserably failed to convince this Court that a wrongful detention of the subject truck obtains in the instant case. It should be noted that the truck was seized by the petitioners because it was transporting forest products

with out the required permit of the DENR in manifest contravention of Section 68 of P.D. 705 as amended by E.O 277. Section 68-A of P.D. 705, as amended, unquestionably warrants the confiscation as well as the disposition by the Secretary of DENR or his duly authorized representatives of the conveyances used in violating the provision of forestry laws. Evidently, the continued possession or detention of the truck by the petitioners for administrative forfeiture proceeding is legally permissible, hence , no wrongful detention exists in the case at bar. Moreover, the suit for replevin is never intended as a procedural tool to question the orders of confiscation and forfeiture issued by the DENR in pursuance to the authority given under P.D.705, as amended. Section 8 of the said law is explicit that actions taken by the Director of the Bureau of Forest Development concerning the enforcement of the provisions of the said law are subject to review by the Secretary of DENR and that courts may not review the decisions of the Secretary except through a special civil action for certiorari or prohibition. It reads : SECTION 8 . REVIEW - All actions and decisions of the Director are subject to review, motu propio or upon appeal of any person aggrieved thereby, by the Department Head whose decision shall be final and executory after the lapse of thirty (30) days from the receipt of the aggrieved party of said decision, unless appealed to the President in accordance with Executive Order No. 19, Series of 1966. The Decision of the Department Head may not be reviewed by the courts except through a special civil action for certiorari or prohibition. WHEREFORE, the Petition is GRANTED; the Decision of the respondent Court of Appeals dated October 16, 1991 and its Resolution dated July 14, 1992 are hereby SET ASIDE AND REVERSED; the Restraining Order promulgated on September 27, 1993 is hereby made permanent; and the Secretary of DENR is directed to resolve the controversy with utmost dispatch. SO ORDERED. Regalado, (Chairman), Romero, Puno, and Mendoza, JJ., concur.

PHILIPPINE VETERANS BANK,Petitioner, vs JUSTINA CALLANGAN, in her capacity as Director of the Corporation Finance Department of the Securities and Exchange Commission and/or the SECURITIES AND EXCHANGE COMMISSION,Respondent. BRION, J.: We resolve the motion for reconsideration[1] filed by petitioner Philippine Veterans Bank (the Bank) dated August 5, 2010, addressing our June 16, 2010 Resolution that denied the Banks petition for review oncertiorari. Factual Antecedents

On March 17, 2004, respondent Justina F. Callangan, the Director of the Corporation Finance Department of the Securities and Exchange Commission (SEC), sent the Bank a letter, informing it that it qualifies as a public company under Section 17.2 of the Securities Regulation Code (SRC) in relation with Rule 3(1)(m) of the Amended Implementing Rules and Regulations of the SRC. The Bank is thus required to comply with the reportorial requirements set forth in Section 17.1 of the SRC. [2]

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The Bank responded by explaining that it should not be considered a public company because it is a private company whose shares of stock are available only to a limited class or sector, i.e., to World War II veterans, and not to the general public.[3]

17.2. The reportorial requirements of Subsection 17.1 shall apply to the following: xxxx

In a letter dated April 20, 2004, Director Callangan rejected the Banks explanation and assessed it a total penalty of One Million Nine Hundred Thirty-Seven Thousand Two Hundred Sixty-Two and 80/100 Pesos (P1,937,262.80) for failing to comply with the SRC reportorial requirements from 2001 to 2003. The Bank moved for the reconsideration of the assessment, but Director Callangan denied the motion in SEC-CFD Order No. 085, Series of 2005 dated July 26, 2005.[4] When the SEC En Banc also dismissed the Banks appeal for lack of merit in its Order dated August 31, 2006, prompting the Bank to file a petition for review with the Court of Appeals (CA).[5]

c) An issuer with assets of at least Fifty million pesos (P50,000,000.00) or such other amount as the Commission shall prescribe, and having two hundred (200) or more holders each holding at least one hundred (100) shares of a class of its equity securities: Provided, however, That the obligation of such issuer to file reports shall be terminated ninety (90) days after notification to the Commission by the issuer that the number of its holders holding at least one hundred (100) shares is reduced to less than one hundred (100). (emphases supplied)

On March 6, 2008, the CA dismissed the petition and affirmed the assailed SEC ruling, with the modification that the assessment of the penalty be recomputed from May 31, 2004. [6]

We also cite Rule 3(1)(m) of the Amended Implementing Rules and Regulations of the SRC, which defines a public company as any corporation with a class of equity securities li sted on an Exchange or withassets in excess of Fifty Million Pesos (P50,000,000.00) and having two hundred (200) or more holders, at least two hundred (200) of which are holding at least one hundred (100) shares of a class of its equity securities.

The CA also denied the Banks motion for reconsideration,[7] opening the way for the Banks petition for review on certiorari filed with this Court.[8]

On June 16, 2010, the Court denied the Banks petition for failure to show any reversible error in the assailed CA decision and resolution.[9]

From these provisions, it is clear that a public company, as contemplated by the SRC, is not limited to a company whose shares of stock are publicly listed; even companies like the Bank, whose shares are offered only to a specific group of people, are considered a public company, provided they meet the requirements enumerated above.

The Motion for Reconsideration

The records establish, and the Bank does not dispute, that the Bank has assets exceeding P50,000,000.00 and has 395,998 shareholders.[10] It is thus considered a public company that must comply with the reportorial requirements set forth in Section 17.1 of the SRC.

The Bank reiterates that it is not a public company subject to the reportorial requirements under Section 17.1 of the SRC because its shares can be owned only by a specific group of people, namely, World War II veterans and their widows, orphans and compulsory heirs, and is not open to the investing public in general. The Bank also asks the Court to take into consideration the financial impact to the cause of veteranism; compliance with the reportorial requirements under the SRC, if the Bank would be considered a public company, would compel the Bank to spend approximately P40 million just to reproduce and mail the Information Statement to its 400,000 shareholders nationwide.

The Bank also argues that even assuming it is considered a public company pursuant to Section 17 of the SRC, the Court should interpret the pertinent SRC provisions in such a way that no financial prejudice is done to the thousands of veterans who are stockholders of the Bank. Given that the legislature intended the SRC to apply only to publicly traded companies, the Court should exempt the Bank from complying with the reportorial requirements.

The Courts Ruling We DENY the motion for reconsideration for lack of merit. To determine whether the Bank is a public company burdened with th e reportorial requirements ordered by the SEC, we look to Subsections 17.1 and 17.2 of the SRC, which provide:

On this point, the Bank is apparently referring to the obligation set forth in Subsections 17.5 and 17.6 of the SRC, which provide:

Section 17.5. Every issuer which has a class of equity securities satisfying any of the requirements in Subsection 17.2 shall furnish to each holder of such equity security an annual report in such form and containing such information as the Commission shall prescribe.

Section 17.Periodic and Other Reports of Issuers. 17.1. Every issuer satisfying the requirements in Subsection 17.2 hereof shall file with the Commission: a) Within one hundred thirty-five (135) days, after the end of the issuers fiscal year, or such other time as the Commission may prescribe, an annual report which shall include, among others, a balance sheet, profit and loss statement and statement of cash flows, for such last fiscal year, certified by an independent certified public accountant, and a management discussion and analysis of results of operations; and b) Such other periodical reports for interim fiscal periods and current reports on significant developments of the issuer as the Commission may prescribe as necessary to keep current information on the operation of the business and financial condition of the issuer. Section 17.6. Within such period as the Commission may prescribe preceding the annual meeting of the holders of any equity security of a class entitled to vote at such meeting, the issuer shall transmit to such holders an annual report in conformity with Subsection 17.5. (emphases supplied) In making this argument, the Bank ignores the fact that the first and fundamental duty of the Court is to apply the law.[11] Construction and interpretation come only after a demonstration that the application of the law is impossible or inadequate unless interpretation is resorted to.[12] In this case, we see the law to be very clear and free from any doubt or ambiguity; thus, no room exists for construction or interpretation.

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Additionally, and contrary to the Banks claim, the Banks obligation to provide its stockholders with copies of its annual report is actually for the benefit of the veterans-stockholders, as it gives these stockholders access to information on the Banks financial status and operations, resulting in greater transparency on the part of the Bank. While compliance with this requirement will undoubtedly cost the Bank money, the benefit provided to the shareholders clearly outweighs the expense. For many stockholders, these annual reports are the only means of keeping in touch with the state of health of their investments; to them, these are invaluable and continuing links with the Bank that immeasurably contribute to the transparency in public companies that the law envisions.

x x x x3 Attached thereto was a photograph of Donato, Jr. The letter-complaint was immediately forwarded to the CSCRO 1, City of San Fernando, La Union, which required Donato, Jr. and Arce to submit their respective answers thereto. In his Answer dated May 19, 1999, Arce vehemently denied committing such act of dishonesty. He claimed that he was "the same person who took the said examination and through [his] own merit successfully passed the same." In support thereof, he attached the joint-affidavit of Gerry Cabrera and David Arce attesting that, on August 5, 1990, they all, including Arce, took the Career Service Sub-Professional Examination given by the CSC at the Binmaley Catholic High School, Binmaley, Pangasinan. Donato, Jr., for his part, averred in his Answer dated May 24, 1999 that: I was greatly troubled that my picture appeared in the Seat Plan. The appearance of my picture would substantiate the allegation of the anonymous complaint, whoever he/she is. The truth is that Mr. Arce asked me once to take the test for him, but I vehemently refused the offer knowing that this would [be] tantamount to cheating, and that it would put me in hot waters. Mr. Arce told me that he had taken the examination, but did not make it. It was then that he asked me to take the examination for him, of which I refused knowing that the Honorable Commission has some pertinent records of myself such as copies of my Appointment Papers, PDS, PBET, and other similar documents. The fact is, I advised him to try again, which he did. He even asked me to accompany him in Binmaley to help him locate his testing room. After we had found his testing room, I immediately left him knowing that there was nothing else I could do. I proceeded to Lingayen to visit my mother.

WHEREFORE, premises considered, petitioner Philippine Veterans Banks motion for reconsideration is hereby DENIED with finality.

G.R. No. 165788

February 7, 2007

After some time, Mr. Arce announced to me that he passed the test with a very high rating. How my picture was used, I have no idea. All I know is that I used that picture when I took my PBET in November 1998 in Dagupan City. I had other copies of that picture, two of which I submitted to Mrs. Erlinda C. Tadeo, my former principal, for loan purposes. As for the rest, I could no longer locate them because I either misplaced them or lost them. I suspect that my picture was used for personal vendetta against me, to harass me in order that I desist from furthering my case filed before the Honorable Commission against my former principal. I, therefore, vehemently deny the allegation of the Honorable Anonymous Complaint, whoever he/she is.4 The Picture Seat Plan (PSP) of Examination Room No. 24 in Binmaley Catholic High School for the August 5, 1990 Career Service Sub-Professional Examination (where the name Gil Arce appeared) showed that the identification (ID) picture pasted above the name Gil Arce was that of Donato, Jr. It was also observed that the signature appearing thereon was different from the signature of Arce in his Answer. Taking into consideration the foregoing, a Formal Charge dated October 12, 1999 was filed by Romeo C. De Leon, Director IV of CSCRO 1, against Donato, Jr. and Arce for dishonesty and falsification of official document. The case was docketed as Administrative Case No. 99-27. Donato, Jr. and Arce were, accordingly, required to file their respective answers to the said formal charge. In his Answer5 dated December 14, 1999, Arce basically adopted the allegations in his previous answer. In addition thereto, he claimed that ever since he was a child, it was his habit to keep photographs of members of his family and friends in his wallet, including that of Donato, Jr. According to Arce, during the said examination, he may have mistakenly submitted the ID picture of Donato, Jr. With respect to the signature, Arce maintained that the signature on the PSP was one of his signatures and that the one that appeared on his answer was what he was using at the time. In his Answer6 dated December 24, 1999, Donato, Jr. adopted the averments in his previous answer. Additionally, he harped on the apparent discrepancy in the dates considering that the anonymous lettercomplaint stated that the date of examination was in 1995 while in the formal charge, two different dates were mentioned: August 5, 1990 and August 5, 1999. The discrepancy in the dates allegedly rendered him incapable of addressing head-on the charges against him. He vigorously denied that he misrepresented himself as Arce and that he took the said government examination in the latters stead. He claimed that he

ALEJANDRO V. DONATO, JR. Petitioner, vs. CIVIL SERVICE COMMISSION REGIONAL OFFICE NO. 1, Respondent. DECISION CALLEJO, SR., J.: Before the Court is the Petition for Review on Certiorari filed by Alejandro V. Donato, Jr. which seeks to reverse and set aside the Decision1 dated October 11, 2004 of the Court of Appeals in CA-G.R. SP No. 73854. The assailed decision affirmed Resolution No. 020348 dated March 7, 2002 and Resolution No. 021423 dated October 23, 2002 of the Civil Service Commission (CSC) which had, in turn, affirmed the decision of the Civil Service Commission Regional Office No. 1 (CSCRO 1) finding petitioner Donato, Jr. guilty of dishonesty and falsification of official document and ordering his dismissal from the service. The case arose from the following facts: Donato, Jr. was a secondary school teacher at the San Pedro Apartado National High School in Alcala, Pangasinan while Gil C. Arce held the position of Assessment Clerk II at the Office of the Municipal Treasurer of the said municipality. On October 5, 1998, the Management Information Office of the CSC in Diliman, Quezon City received an anonymous letter-complaint requesting an investigation on the alleged dishonest act committed by Donato, Jr. It was alleged that Donato, Jr., falsely representing himself as Arce during the Career Service Sub-Professional Examination held in 1995,2 took the said examination in behalf of the latter.1avvphi1.net The anonymous complaint stated in part: I have the honor to request your good Office to investigate the dishonesty committed by Mr. Alejandro V. Donato, Jr. who impersonated Mr. Gil C. Arce during the Sub-Professional Examination taken in 1995. They are working in San Pedro Apartado National High School, Alcala, Pangasinan and in the Municipality of Alcala, respectively. They are cheating the government and as far as rumors this is not only the examination anomaly he committed.

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was at his residence in Poblacion East, Alcala, Pangasinan the whole day of August 5, 1990 and, in fact, he received some visitors thereat. He submitted the affidavits of Diosdado Tamayo and Baldomino Batuan attesting that they went to see him at his house on the said date. Subsequently, a trial-type hearing was conducted where the parties, particularly Donato, Jr. and Arce, were given the opportunity to proffer documentary and testimonial evidence. Thereafter, the CSCRO 1, through Lorenzo S. Danipog, Director IV, rendered Decision No. 2001-1137 dated May 30, 2001 in Administrative Case No. 99-27, dismissing Donato, Jr. and Arce from the service for dishonesty and falsification of official document. Donato, Jr. and Arce sought reconsideration of the said decision and/or new trial but their respective motions were denied by the CSCRO 1 for lack of merit. By way of appeal, they elevated the case to the CSC. After due consideration of the pleadings, the CSC promulgated Resolution No. 020348 dated March 7, 2002, affirming the earlier decision of the CSCRO 1. The CSC ruled that there was substantial evidence to hold both Donato, Jr. and Arce guilty of the charges of dishonesty and falsification of official document. Specifically, the ID picture of Donato, Jr. pasted on the PSP during the August 5, 1990 Career Service Sub-Professional Examination above Arces name and the marked dissimilarity between Arces purported signature thereon and his signature as appearing in his answer were taken by the CSC as indicative of the fact that it was Donato, Jr. who actually took the said examination in behalf of Arce. The dispositive portion of CSC Resolution No. 020348 reads: WHEREFORE, the appeal of Gil Arce and Alejandro Donato, Jr. is hereby DISMISSED. Accordingly, the Decision dated May 30, 2001 of the Civil Service Commission Regional Office (CSCRO) No. 1, San Fernando City, La Union, finding them guilty of Dishonesty and Falsification of Official Document and dismissing them from the service stands. IRMO and CSCRO 1 are directed to effect the revocation of the civil service eligibilities of Gil Arce and Alejandro Donato, Jr. in the implementation of this resolution.8 A motion for reconsideration thereof was filed by Donato, Jr. and Arce but it was denied by the CSC in its Resolution No. 021423 dated October 23, 2002. In this resolution, the CSC stressed that "the guilt of Arce and Donato, Jr. was sufficiently proven by substantial evidence; hence, there is no cogent reason to warrant the reversal or modification of CSC Resolution No. 020348 dated March 7, 2002." 9 Donato, Jr. and Arce forthwith filed with the Court of Appeals (CA) a petition for review assailing the aforesaid resolutions of the CSC. The CA, however, in the assailed Decision dated October 11, 2004, affirmed CSC Resolution Nos. 020348 and 021423. The CA did not give credence to their insistence that the letter-complaint should have been dismissed outright for non-compliance with Section 8,10 Rule II of the Uniform Rules on Administrative Cases in the Civil Service. In particular, it was Donato, Jr. and Arces contention that the CSC should have dismissed outright the anonymous letter-complaint. Addressing this argument, the CA, echoing the reasoning of the CSC, pointed out that the basis for the formal investigation against them was not the anonymous complaint but the finding of a prima facie case against them after a fact-finding investigation.11 The CA, likewise, considered as puerile Donato, Jr. and Arces claim that the documentary evidence against them had no probative value as the public officials who were in custody of these documents were not presented. The CA reasoned that the documentary evidence against Donato, Jr. and Arce are public documents and the probative weight accorded these documents is enunciated in Section 23, Rule 132 of the Revised Rules on Evidence, to wit: SEC. 23.Public documents as evidence. Documents consisting of entries in public records made in the performance of a duty by a public officer are prima facie evidence of the facts therein stated. All other public documents are evidence, even against a third person, of the fact which gave rise to their execution and of the date of the latter. Specifically, the evidentiary value of the PSP for Examination Room No. 24 of the Binmaley Catholic High School in which the ID picture of Donato, Jr. was past ed above Arces name was, according to the CA, correctly given evidentiary weight by the CSC in consonance with the above-quoted provision, and

especially when viewed in the context of Arces assertion that he may have mistakenly submitted Donato Jr.s ID picture when he took the said government examination. Lacking a satisfactory explanation for Donato, Jr.s ID picture on the said PSP and the variance between Arces purported signature thereon and that on the answer that he filed with the CSCRO 1, the CA held that Donato, Jr. and Arce were correctly found liable for dishonesty and falsification of official document. Donato, Jr. and Arces claim of violation of their right to due process when they were found administratively liable, allegedly despite the absence of witnesses against them, was given short shrift by the CA. It pointed out that the records clearly showed that they were accorded the opportunity to present their side and, in fact, they submitted evidence to controvert the charges against them. The CA ruled that under the circumstances the requirements of due process had been sufficiently met. The dispositive portion of the assailed CA decision reads: WHEREFORE, the petition for review is DENIED for lack of merit and respondents assailed Resolution Nos. 020348 and 021423 are AFFIRMED in toto. SO ORDERED.12 Only Donato, Jr. (the petitioner) filed the present petition for review seeking to reverse and set aside the Decision dated October 11, 2004 of the CA. He raises the following issues for the Courts resolution: I WHETHER OR NOT THE PROCEEDINGS, UNDERTAKEN BY THE RESPONDENT, THE FORUM OF ORIGIN, ARE TAINTED WITH IRREGULARITY, INCLUDING DENIAL TO PETITIONER OF THE RIGHT OF CONFRONTATION, SUCH THAT THERE IS NOT A SINGLE PIECE OF EVIDENCE ADDUCED AGAINST PETITIONER; II WHETHER OR NOT THE FORUM OF ORIGIN AND THE SUBSEQUENT FORA IN WHICH THIS CASE PASSED THROUGH ON APPEAL ARE CORRECT IN CONCLUDING THAT PETITIONER IMPERSONATED GIL C. ARCE BECAUSE OF THE PRESENCE OF THE FORMERS PICTURE IN THE SPACE INTENDED FOR THE PICTURE OF THE LATTER IN THE PICTURE SEAT PLAN (EXHIBIT "C") OF THE AUGUST 5, 1990 CIVIL SERVICE EXAMINATION AT ROOM 24, BINMALEY CATHOLIC HIGH SCHOOL, BINMALEY, PANGASINAN.13 The petitioner mainly assails the reliance by the CSCRO 1, the CSC and the CA on the Picture Seat Plan (marked as Exhibit "C"), which contained his ID picture above the name of Arce, in finding them both guilty of the administrative charges of dishonesty and falsification of official document. It is his contention that the PSP was erroneously considered as evidence when what was presented during the proceedings conducted by the CSCRO 1 was only a photocopy thereof. Upon the petitioners demand, at the hearing of August 8, 2000, the counsel of CSCRO 1 produced a document which he claimed was an original copy of the PSP. However, the petitioner objected to the manner of presentation because the counsel was not allegedly the custodian of the said document. Moreover, he was not put on the witness stand and, consequently, was not subjected to cross-examination. The petitioner emphasizes that the PSP was not identified and formally offered in evidence. The petitioner claims violation of his right to due process because he was not able to confront the person who prepared, and who was in custody of, the PSP. He maintains that the presence of his ID picture above Arces name could be made by any person by simply pasting it over another ID picture for an evil purpose. In this connection, he accuses his former principal, Mrs. Erlinda Tadeo, as the one responsible therefor because he (the petitioner), together with his co-teachers, filed an administrative case against her, for which she was meted a fine equivalent to her six months salary. The petition is bereft of merit. It must be stated, at the outset, that the CSCRO 1, the CSC and the CA uniformly found the petitioner liable for the charges of dishonesty and falsification of official document. In so doing, the PSP, on which the ID picture of the petitioner appeared above the name of Arce, was given credence by the CSCRO 1, the CSC and the CA to support the administrative charges against the petitioner and Arce.

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No rule is more entrenched in this jurisdiction than that the findings of facts of administrative bodies, if based on substantial evidence, are controlling on the reviewing authority. 14 Stated in another manner, as a general rule, factual findings of administrative agencies, such as the CSC, that are affirmed by the CA, are conclusive upon and generally not reviewable by this Court.15 To be sure, there are recognized exceptions to this rule, to wit: (1) when the findings are grounded entirely on speculation, surmises, or conjectures; (2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6) when in making its findings, the CA went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioners main and reply briefs are not disputed by the respondent; (10) when the findings of facts are premised on the supposed absence of evidence and contradicted by the evidence on record; and (11) when the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly considered, would justify a different conclusion. 16None of these exceptions has been shown to be attendant in the present case. On the other hand, petitioner would like this Court to re-examine the evidence against him as he impugns, in particular, the PSP which contained his ID picture above Arces name. However, it is not the function of this Court to analyze or weigh all over again the evidence and credibility of witnesses presented before the lower court, tribunal or office. This flows from the basic principle that the Supreme Court is not a trier of facts. Its jurisdiction is limited to reviewing and revising errors of law imputed to the lower court, the latters findings of fact being conclusive and not reviewable by this Court.17 The petitioners contention that his right to due process was violated because he was not able to cross examine the person who had custody of the PSP is unavailing. In another case, the Court addressed a similar contention by stating that the petitioner therein could not argue that she had been deprived of due process merely because no cross-examination took place.18 Indeed, in administrative proceedings, due process is satisfied when the parties are afforded fair and reasonable opportunity to explain their side of the controversy or given opportunity to move for a reconsideration of the action or ruling complained of.19 Such minimum requirements have been satisfied in this case for, in fact, hearings were conducted by the CSCRO 1 and the petitioner and Arce actively participated therein and even submitted their respective evidence. Moreover, they were able to seek reconsideration of the decision of the CSCRO 1 and, subsequently, to elevate the case for review to the CSC and the CA. Likewise unavailing is the petitioners protestation that the PSP was not identified and formally offered in evidence. The CSC, including the CSCRO 1 in this case, being an administrative body with quasi-judicial powers, is not bound by technical rules of procedure and evidence in the adjudication of cases, subject only to limitations imposed by basic requirements of due process.20 As earlier opined, these basic requirements of due process have been complied with by the CSC, including the CSCRO 1. It is well, at this point, to quote with approval the following ratiocination made by the CSC: The picture of Donato pasted over the name of Gil Arce in the PSP during the Career Service Subprofesssional Examination on August 5, 1990 is indicative of the fact that respondent Arce did not personally take the said examination but Donato in his behalf. This is so because as a matter of procedure, the room examiners assigned to supervise the conduct of examination closely examine the pictures submitted by the examinees. An examinee is not allowed by the examiners to take the examination if he does not look like the person in the picture he submitted and affixed in the PSP (CSC Resolution No. 953694 dated June 20, 1995 cited in CSC Resolution No. 97-0217 dated January 14, 1997). Obviously, the person whose picture is pasted on the PSP was the one who took the examination for and in behalf of Arce. In the offense of impersonation, there are always two persons involved. The offense cannot prosper without the active participation of both persons (CSC Resolution No. 94-6582). Further, by engaging or colluding with another person to take the test in his behalf and thereafter by claiming the resultant passing rate as his, clinches the case against him. In cases of impersonation, the Commission has consistently rejected claims of good faith, for "it is contrary to human nature that a person will do (impersonation) without the consent of the person being impersonated." (CSC resolution No. 94-0826) It has been a settled rule in this jurisdiction that the duly accomplished form of the Civil Service is an official document of the Commission, which, by its very nature is considered in the same category as that

of a public document, admissible in evidence without need of further proof. As official document, the contents/entries therein made in the course of official duty are prima facie evidence of the facts stated therein (Maradial vs. CSC, CA-G.R. SP No. 40764 dated September 27, 1996).21 Additionally, the petitioners proposition that the matter could be the handiwork of his former principal, who had an axe to grind against him, is utterly preposterous. This bare and gratuitous allegation cannot stand against the ruinous evidence against him and Arce. Those government employees who prepared the PSP and who supervised the conduct of the Career Service Sub-Professional Examination on August 5, 1990, enjoy the presumption that they regularly performed their duties and this presumption cannot be disputed by mere conjectures and speculations.22 In fine, the CA committed no reversible error when it affirmed the resolutions of the CSC finding the petitioner guilty of dishonesty and falsification of official document. The petitioner has miserably failed to present any cogent reason for the Court to deviate from the salutary rule that factual findings of administrative agencies, especially when affirmed by the CA, are generally held to be binding and final so long as they are supported by substantial evidence in the record of the case.23 WHEREFORE, premises considered, the petition is DENIED for lack of merit. The Decision dated October 11, 2004 of the Court of Appeals in CA-G.R. SP No. 73854 is AFFIRMED in toto. SO ORDERED.

THIRD DIVISION SALVADOR A. PLEYTO, Petitioner, vs. PHILIPPINE NATIONAL POLICE CRIMINAL INVESTIGATION AND DETECTION GROUP (PNP-CIDG), Respondent. CHICO-NAZARIO, J.:

Before this Court is a Petition for Review on Certiorari[1] under Rule 45 of the Rules of Court, assailing the dismissal from service of petitioner Salvador A. Pleyto after being found guilty of grave misconduct and dishonesty by the Office of the Ombudsman in its Decision,[2] dated 27 May 2004, in OMB-C-A-03-0347-I, affirmed by the Court of Appeals in its Decision,[3] dated 20 July 2005, in CA-G.R. SP No. 87086.

The present Petition stems from a Complaint,[4] dated 28 July 2003, filed by respondent Philippine National Police-Criminal Investigation and Detection Group (PNP-CIDG), through its Director, Eduardo S.Matillano, with the Office of the Ombudsman, which charges petitioner and the rest of his family as follows:

The undersigned Director of the PNP Criminal Investigation and Detection Group is hereby filing complaints for Violation of RA 1379 (An Act Declaring Forfeiture in favor of the State any property

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found to have been unlawfully acquired by any public officer) in relation to Section 8, RA 3019 (AntiGraft and Corrupt Practices Act, as amended, Section 8(a) of RA 6713, (Code of Ethical Standard for Public official and employee) and Section 7 of RA 3019 (Statement of Assets and Liabilities) and for violation of Article 171 para 4, RPC (Perjury/Falsification of Public Official Documents) against the following: 1. 2. 3. 4. 5. USEC SALVADOR A. PLEYTO- # 1 May Street, Congressional Village, Quezon City; MIGUELA PLEYTO (Wife)- # 1 May Street, Congressional Village, Quezon City; SALVADOR G. PLEYTO, JR.,- # 1 May Street, Congressional Village, Quezon City; MARY GRACE PLETYO- # 1 May Street, Congressional Village, Quezon City; and RUSSEL PLEYTO- 64 P. Santiago Street, Sta. Maria, Bulacan.
[5]

several businesses in Bulacan, including lending, piggery, and pawnshop, for the last 25 years; (3) his children are not financially dependent on petitioner and his wife, but are full-fledged entrepreneurs and professionals; and (4) the computation of their travel expenses is exaggerated and inaccurate since most of petitioners trips were sponsored by foreign and local organizations, his wifes trips were promotional travel packages to Asian destinations, and his childrens trips were at their own expense. On 28 June 2004, the Office of the Ombudsman promulgated its Decision [9] in OMB-C-A-03-0347I, dismissing petitioner from service. The dispositive portion of said Decision reads WHEREFORE, premises considered, respondent SALVADOR A. PLEYTO, is hereby found guilty of GRAVE MISCONDUCT and DISHONESTY and is meted the penalty of DISMISSAL FROM THE SERVICE with cancellation of eligibility, forfeiture of retirement benefits, and the perpetual disqualification for reemployment in the government service. The Honorable Secretary, Department of Public Works and Highways, Port Area, Manila, is hereby directed to implement this Order immediately upon receipt hereof and to promptly inform this Office of compliance therewith.[10] Petitioners Motion for Reconsideration was denied by the Office of the Ombudsman in an Order[11] dated 12 October 2004. Petitioner then assailed before the Court of Appeals the Decision, dated 28 June 2004, and Order, dated 12 October 2004, of the Office of the Ombudsman in OMB-C-A-03-0347-I by filing a Petition for Review under Rule 43 of the Rules of Court with Prayer for Temporary Restraining Order and/or Writ of Preliminary Injunction, docketed as CA-G.R. SP No. 87086. Petitioner prayed to the appellate court that: 1. Upon filing of the petition, a Temporary Restraining Order and/or Writ of Preliminary Injunction be immediately issued directing the Office of the Ombudsman, its officials and agents, or persons acting for and on it [sic] behalf, including the Secretary of the Department of Public Works and Highways from implementing the assailed Decision of the Ombudsman dated 28 June 2004 and its Order dated 12 October 2004. 2. After hearing on the merits, that judgment be rendered nullifying the assailed Decision of the Ombudsman dated June 28, 2004 and Order dated October 12, 2004 in OMB-C-A-03-0347-I. Other relief and remedies just and equitable under the premises are likewise prayed for.[12] On 5 November 2004, the Court of Appeals issued a Temporary Restraining Order against the implementation of the assailed Decision of the Office of the Ombudsman dismissing petitioner from service and directed the PNP-CIDG, the named respondent in petitioners Petition for Review, to file its Comment thereto. The Office of the Solicitor General (OSG), on behalf of the PNP-CIDG, requested an extension of 30 days, or until 28 December 2004, within which to file its Comment on the Petition. However, even before the OSG could file its Comment, the Office of the Ombudsman filed its own Comment (with Motions to Intervene; Admit Comment; and Recall Temporary Restraining Order) on 29 December 2004. It sought leave from the Court of Appeals to adduce pertinent facts and arguments to show that it acted with due process and impartiality, and relied only on the evidence on record in adjudging petitioner guilty of grave misconduct and dishonesty. The Office of the Ombudsman insisted that it has been shown by overwhelming evidence, as well as by petitioners own admissions in his counter-affidavit and other pleadings before the Office of the Ombudsman and his Petition before the Court of Appeals, that petitioner committed gross dishonesty for amassing wealth grossly disproportionate to his known lawful income, and refusing to fully declare many of his other properties. Hence, the Office of the Ombudsman submits that the administrative penalty of dismissal from the service imposed on petitioner stands on solid legal and factual grounds, which should be accorded weight and respect, if not finality, by the appellate court. Petitioner promptly filed a Reply Ad Cautelam (To Ombudsmans Comment) with Supplemental Plea. In addition to opposing the intervention of the Office of the Ombudsman in CA-G.R. SP No. 87086, petitioner also addressed the arguments presented by the Office of the Ombudsman in its Comment on the propriety of his dismissal from service. He avers that he has adequately controverted by clear and

The said Complaint was based on the investigation/inquiry on the alleged lavish lifestyle and nefarious activities of certain personnel of the Department of Public Works and Highways (DPWH) conducted by a team, composed of Atty. Virgilio T. Pablico (Atty. Pablico) and Crime Investigator II Dominador D. Ellazar, Jr. (Investigator Ellazar, Jr.) of the PNP-CIDG, together with investigating officers from other government agencies. Petitioner, then serving as a DPWH Undersecretary, was one of the subjects of the investigating team since he reportedly amassed unexplained wealth. Investigating officers, Atty. Pablico and Investigator Ellazar, Jr., executed a Joint Affidavit,[6] essentially stating that: (1) petitioner and the rest of his family accumulated numerous real properties in Bulacan, other than their newly renovated residence in Quezon City; (2) petitioner did not honestly fill out his Statements of Assets and Liabilities and Networth (SALNs) for the years 2001 and 2002 for he failed to declare therein all of his and his wifes real and personal properties, the true value thereof, and their business interests; (3) petitioner and his family also took frequent foreign trips from 1993 to 2002; and (4) the properties and foreign trips of petitioner and his family are grossly disproportionate to petitioners income.

The Investigating Panel from the Preliminary Investigation and Administrative Adjudication Bureau A (PIAB-A) of the Office of the Ombudsman, tasked to evaluate the Complaint against petitioner and his family, issued a Report on 9 September 2003, recommending that the said Complaint be docketed as separate administrative and criminal cases. Pursuant thereto, the administrative complaint was docketed as OMB-C-A-03-0347-1, while the criminal complaint was docketed as OMB-C-C-03-05130-1. It is the administrative complaint, OMB-C-A-03-0347-1, for grave misconduct and dishonesty, which presently concerns this Court.[7]

In its initial evaluation of the numerous pieces of evidence which were attached to the Complaint, the Office of the Ombudsman, in its Order, dated 25 September 2003,[8] found that the evidence warranted the preventive suspension of petitioner for six months without pay pending the conduct of the administrative proceedings against him. The said Preventive Suspension Order shall be deemed immediately effective andexecutory. The petitioner filed with the Court of Appeals CA-G.R. SP No. 79516, a Petition for Certiorari under Rule 65 of the Rules of Court, praying for the nullification of the Preventive Suspension Order issued by the Office of the Ombudsman. However, the said Preventive Suspension Order had already lapsed even before the Court of Appeals could resolve the Petition in CAG.R. SP No. 79516, thus, rendering the same moot and academic.

In the meantime, petitioner, his wife, and his children filed their respective Counter-Affidavits and Supplemental Affidavits before the Office of the Ombudsman, presenting the following defenses: (1) petitioner admits ownership of the real properties identified in the Complaint but alleges that they were acquired by way of foreclosure or dacion en pago in the course of his wifes lending business in Sta. Maria, Bulacan; (2) petitioner is not solely dependent on his salary since his wife has been operating

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convincing evidence the unsubstantiated charges against him. Petitioner thus pleads anew for the immediate and urgent grant of his prayer for a writ of preliminary injunction to enjoin the execution of the order of dismissal of the Office of the Ombudsman. On 26 January 2005, the Court of Appeals issued a Resolution admitting the Comment of the Office of the Ombudsman, again directing the OSG to file its Comment on the Petition on behalf of PNP-CIDG, and submitting for resolution petitioners application for the issuance of a writ of preliminary injunction. The OSG, representing the PNP-CIDG, eventually filed its Comment on 31 January 2005.

b) The Court of Appeals gravely erred in adopting in toto the appealed judgment of the Ombudsman, the finding being inconsistent with the evidence on record and the burden of proof required by law being higher than mere substantial evidence as the penalty involves dismissal from service. [17]

c) The Court of Appeals committed grave error in law in declaring that petitioners resort to the Compliance and Review Procedure under Sec. 10 of R.A. 6713 is completely unavailing.[18] Pursuant to a Resolution issued by this Court on 26 June 2006, a temporary restraining order was issued in the following tenor: NOW, THEREFORE, you (the Court of Appeals, the Office of the Ombudsman and the Secretary of the Department of Public Works and Highways), your officers, agents, representatives, and/or persons acting upon your orders or, in your place or stead, are hereby ENJOINED, ORDERED, COMMANDED and DIRECTED to desist from implementing the assailed decision and order dated June 28, 2004 and October 12, 2004, respectively, of the Office of the Ombudsman in OMB-C-A-03-0347-I entitled Philippine National Police-Criminal Investigation and Detection Group vs. Salvador A. Pleyto dismissing herein petitioner from the service, as affirmed in the decision and resolution dated July 20, 2005 and October 4, 2005, respectively, of the Court of Appeals in CA-G.R. SP No. 87086 entitled Salvador A. Pleyto vs. Philippine National Police-Criminal Investigation and Detection Group.[19] Having established the facts leading to the Petition at bar, this Court shall now proceed to review petitioners assigned errors one at a time.

Finding that the execution of the judgment of dismissal from service of petitioner pending his appeal thereof would possibly work injustice to petitioner, or tend to render the judgment on his appeal ineffectual, the Court of Appeals issued a Resolution[13] on 1 March 2005 granting the writ of preliminary injunction, thus, ordering the Office of the Ombudsman and all persons action on its behalf from implementing its assailed Decision, dated 28 June 2004, and Order, dated 12 October 2004, pending final determination of CA-G.R. SP No. 87086. The appellate court further directed the parties to submit their memoranda.

Petitioner and the Office of the Ombudsman filed their respective Memoranda, while the OSG manifested that it was adopting its Comment and the Comment of the Office of the Ombudsman on the Petition as its Memorandum.

On 20 July 2005, the Court of Appeals promulgated its Decision in CA-G.R. SP No. 87086, dismissing the Petition and affirming the dismissal from the service of petitioner as adjudged by the Office of the Ombudsman. It summed up its findings thus:

I Petitioner raises before this Court his continued objection to the intervention of the Office of the Ombudsman in the proceedings before the Court of Appeals. It should be recalled that the Office of the Ombudsman, although not named as a respondent in CA-G.R. SP No. 87086, filed its Comment and Memorandum therein, which were admitted by the Court of Appeals. The Office of the Ombudsman moved to intervene in the Court of Appeals proceedings in representation of the States interests. As a competent disciplining body, it asserts its rights to defend its own findings of fact and law relative to the imposition of its decisions and ensure that its judgments in administrative disciplinary cases be upheld by the appellate court, consistent with the doctrine laid down by this Court in Civil Service Commission v. Dacoycoy[20] and Philippine National Bank v. Garcia.[21] As the agency which rendered the assailed Decision, it is best equipped with the knowledge of the facts, laws and circumstances that led to the finding of guilt against petitioner. Petitioner opposed from the very beginning the intervention of the Office of the Ombudsman in the appellate court proceedings. He pointed out to the Court of Appeals that only the PNP-CIDG was named as a respondent in his Petition for Review, and the Office of the Ombudsman was not impleaded because Section 6, Rule 43 of the Rules of Court expressly mandates that the court or agency which rendered the assailed decision should not be impleaded in the petition. He argued that the non-inclusion of the court or tribunal as respondent in cases elevated on appeal is founded on the doctrine that the court is not a combatant in the appeal proceedings. He called attention to previous rulings of this Court admonishing judges to maintain a posture of detachment in cases where their decisions are elevated on appeal or review. Petitioner, in the instant Petition, presents the same arguments in support of his first assignment of error. It is noted that the OSG, representing the PNP-CIDG, in its Comment and Memorandum before this Court, did not address the issue on the intervention of the Office of the Ombudsman in CA-G.R. SP No. 87086, focusing solely on the issue on the propriety of the dismissal from service of petitioner. After a review of both positions on the matter of the intervention of the Office of the Ombudsman in the proceedings before the Court of Appeals, this Court rules in favor of petitioner. The Court of Appeals indeed committed an error in admitting the Comment and Memorandum of the Office of the Ombudsman in CA-G.R. SP No. 87086.

To repeat, the administrative liabilities of the petitioner proven by substantial evidence is his failure to file a truthful and accurate SALN and possession of assets manifestly out of proportion of ( sic) his legitimate income. Either one is legal basis for dismissal or removal from office. As a final recourse, the petitioner asks for the chance to correct his SALN before he should be held administratively liable. The Ombudsman ripostes that this would be a mockery of the law, saying that the SALN is not a misdeclare-first-and correct-if-caught instrument, but a full and solemn recording under oath of al (sic) the items required to be reported. Ipse dixit.

IN VIEW OF THE FOREGOING, the decision appealed from is AFFIRMED, and the petition DISMISSED. The writ of preliminary injunction is LIFTED.[14]

The Court of Appeals, in a Resolution,[15] dated 4 October 2005, found that the arguments raised in petitioners Motion for Reconsideration had already been discussed and passed upon in its Decision, dated 20 July 2005, and there was no cogent reason to warrant reconsideration, much less, a reversal of the appellate courts original findings. Hence, petitioners Motion for Reconsideration was denied.

Petitioner now comes before this Court via a Petition for Review on Certiorari under Rule 45 of the Rules of Court, assailing the Decision, dated 20 July 2005, and Resolution, dated 4 October 2005, of the Court of Appeals, based on the following grounds:

a) The Court of Appeals committed grave error in law in allowing the active intervention of the Ombudsman in the review proceedings and invoking its arguments raised on appeal in the resolution of the case.[16]

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Fabian v. Hon. Desierto[22] already settled that appeals in administrative disciplinary cases from the Office of the Ombudsman should be brought first to the Court of Appeals via a verified Petition for Review under Rule 43 of the Rules of Court. Rule 43 of the Rules of Court, together with Supreme Court Administrative Circular No. 1-95, governs appeals to the Court of Appeals from judgments or final orders of quasi-judicial agencies. In specifying the contents of such a Petition for Review, both Rule 43 of the Rules of Court[23] and Administrative Circular No. 1-95[24] require the full names of the parties to the case without impleading the lower courts or agencies as petitioners or respondents. The only parties in an appeal are the appellant as petitioner and the appellee as respondent. The court, or in this case, the administrative agency which rendered the judgment appealed from, is not a party in said appeal. [25] This is not a case wherein the petitioner improperly impleaded the Office of the Ombudsman in his Petition for Review in CA-G.R. SP No. 87086. In fact, the petitioner adhered to Rule 43 of the Rules of Court and Administrative Circular No. 1-95, by naming as respondent only the PNP-CIDG, the original complainant against him. It is the Office of the Ombudsman who actively sought to intervene in CA-G.R. SP No. 87086.

the administrative case is filed for the purpose of disciplinary action which may take the form of suspension, demotion in rank or salary, transfer, removal or dismissal from office and not included are cases where the penalty imposed is suspension for not more then thirty (30) days or fine in an amount not exceeding thirty days salary or when the respondent is exonerated of the charges, there is no occasion for appeal. In other words, we overrule prior decisions holding that the Civil Service Law does not contemplate a review of decisions exonerating officers or employees from administrative charges enunciated in Paredes v. Civil Service Commission; Mendez v. Civil Service Commission; Magpale v. Civil Service Commission; Navarro v. Civil Service Commission and Export Processing Zone Authority and more recently Del Castillo v. Civil Service Commission.[27] The similar issue arose in Garcia. In said case, the Philippine National Bank (PNB) imposed upon its employee Garcia the penalty of forced resignation for gross neglect of duty. On appeal, the CSC exonerated Garcia from the administrative charges against him. In accordance with its ruling in Dacoycoy, this Court affirmed the standing of the PNB to appeal to the Court of Appeals the CSC resolution exonerating Garcia. After all, PNB was the aggrieved party which complained of Garcias acts of dishonesty. Should Garcia be finally exonerated, it might then be incumbent upon PNB to take him back into its fold. PNB should therefore be allowed to appeal a decision that, in its view, hampered its right to select honest and trustworthy employees, so that it can protect and preserve its name as a premier banking institution in the country. Having established the foregoing, the Office of the Ombudsman cannot use Dacoycoy and Garcia to support its intervention in the appellate court proceedings for the following reasons: First, petitioner was not exonerated from the administrative charges against him, and was in fact dismissed for grave misconduct and dishonesty by the Office of the Ombudsman in its decision in the administrative case, OMB-C-A-03-0347-I. Thus, it was petitioner who appealed to the Court of Appeals being, unquestionably, the party aggrieved by the judgment on appeal.

It is a well-known doctrine that a judge should detach himself from cases where his decision is appealed to a higher court for review. The raison d'etre for such doctrine is the fact that a judge is not an active combatant in such proceeding and must leave the opposing parties to contend their individual positions and the appellate court to decide the issues without his active participation. When a judge actively participates in the appeal of his judgment, he, in a way, ceases to be judicial and has become adversarial instead.[26] The court or the quasi-judicial agency must be detached and impartial, not only when hearing and resolving the case before it, but even when its judgment is brought on appeal before a higher court. The judge of a court or the officer of a quasi-judicial agency must keep in mind that he is an adjudicator who must settle the controversies between parties in accordance with the evidence and the applicable laws, regulations, and/or jurisprudence. His judgment should already clearly and completely state his findings of fact and law. There must be no more need for him to justify further his judgment when it is appealed before appellate courts. When the court judge or the quasi-judicial officer intervenes as a party in the appealed case, he inevitably forsakes his detachment and impartiality, and his interest in the case becomes personal since his objective now is no longer only to settle the controversy between the original parties (which he had already accomplished by rendering his judgment), but more significantly, to refute the appellants assignment of errors, defend his judgment, and prevent it from being overturned on appeal.

Second, the issue herein is the right of the Office of the Ombudsman to intervene in the appeal of its decision, not its right to appeal. Its decision has not even been reversed yet so no question has arisen as to the standing of the Office of the Ombudsman to appeal from the reversal of its judgment. The Office of the Ombudsman only wishes to intervene in CA-G.R. SP No. 87086 to make sure that its decision dismissing petitioner from service is upheld by the appellate court.

The reliance of the Office of the Ombudsman on this Courts pronouncements in Dacoycoy and Garcia cases are misplaced. The issue in the landmark case Dacoycoy, was the right of the Civil Service Commission (CSC) to file an appeal with this Court from the decision of the Court of Appeals exonerating the civil service officerDacoycoy from the administrative charges against him. According to Section 39 of the Civil Service Law, appeals, where allowable, shall be made by the party adversely affected by the decision within 15 days from receipt of the decision unless a petition for reconsideration is seasonably filed, which petition shall be decided within 15 days. Previous decisions of this Court ruled that the party adversely affected in Section 39 of the Civil Service Law, refers solely to the public officer or employee who was administratively disciplined and, hence, an appeal may be availed of only in a case where the respondent is found guilty. It is within the foregoing context that this Court ruled in Dacoycoy in the following manner: Subsequently, the Court of Appeals reversed the decision of the Civil Service Commission and held respondent not guilty of nepotism. Who now may appeal the decision of the Court of Appeals to the Supreme Court? Certainly not the respondent, who was declared not guilty of the charge. Nor the complainant George P. Suan, who was merely a witness for the government. Consequently, the Civil Service Commission has become the party adversely affected by such ruling, which seriously prejudices the civil service system. Hence, as an aggrieved party, it may appeal the decision of the Court of Appeals to the Supreme Court. By this ruling, we now expressly abandon and overrule extant jurisprudence that the phrase party adversely affected by the decision refers to the government employee against whom

And third, Dacoycoy and Garcia should be read together with Mathay, Jr. v. Court of Appeals[28] and National Appellate Board of the National Police Commission v. Mamauag,[29] in which this Court qualified and clarified the exercise of the right of a government agency to actively participate in the appeal of decisions in administrative cases. In Mamauag, this Court ruled:

RA 6975 itself does not authorize a private complainant to appeal a decision of the disciplining authority. Sections 43 and 45 of RA 6975 authorize either party to appeal in the instances that the l aw allows appeal. One party is the PNP member-respondent when the disciplining authority imposes the penalty of demotion or dismissal from the service. The other party is the government when the disciplining authority imposes the penalty of demotion but the government believes that dismissal from the service is the proper penalty.

However, the government party that can appeal is not the disciplining authority or tribunal which previously heard the case and imposed the penalty of demotion or dismissal from the service. The government party appealing must be one that is prosecuting the administrative case against the respondent. Otherwise, an anomalous situation will result where the disciplining authority or tribunal hearing the case, instead of being impartial and detached, becomes an active participant in prosecuting the respondent. Thus, in Mathay, Jr. v. Court of Appeals, decided after Dacoycoy, the Court declared:

167

To be sure, when the resolutions of the Civil Service Commission were brought before the Court of Appeals, the Civil Service Commission was included only as a nominal party. As a quasi-judicial body, the Civil Service Commission can be likened to a judge who should detach himself from cases where his decision is appealed to a higher court for review.

excess or lack of jurisdiction;[34] or whenthe precise issue in the case on appeal is whether there is substantial evidence supporting the findings of the administrative agency. [35] The last exception exists in this case and compels this Court to review the findings of fact of the Office of the Ombudsman, as affirmed by the Court of Appeals.

In instituting G.R. No. 126354, the Civil Service Commission dangerously departed from its role as adjudicator and became an advocate. Its mandated function is to hear and decide administrative cases instituted by or brought before it directly or on appeal, including contested appointments and to review decisions and actions of its offices and agencies, not to litigate.[30]

There are two principal findings against petitioner as a result of the proceedings below: (1) petitioner failed to satisfactorily prove that his acquisition of properties, as well as his foreign travels, were within his lawful income; and (2) petitioner willfully concealed and misdeclared his assets in his 2001 and 2002 Statement of Assets, Liabilities and Net Worth (SALN). It was on the basis thereof that petitioner was found guilty of gross misconduct and dishonesty by both the Office of the Ombudsman and the Court of Appeals. The Complaint of the PNP-CIDG and the attached Joint Affidavit of its investigating officers identified the following properties in the name of petitioner and his wife:

Should the Office of the Ombudsman insist on its right to intervene based on Dacoycoy and Garcia, then its exercise of such right should likewise be qualified according to Mathay and Mamauag. As the disciplining authority or tribunal which heard the case and imposed the penalty, it must remain partial and detached. It must be mindful of its role as an adjudicator, not an advocate. It should just have allowed the government agency prosecuting the administrative charges against petitioner, namely, the PNP-CIDG, appropriately represented by the OSG, to participate in CA-G.R. SP No. 87086.

a) b)

One residential house and lot in Quezon City; Poblacion, Sta. Maria, Bulacan: Three residential lots measuring 998, 998 and 359 sq. m.; One residential house built on a lot measuring 356 sq. m.;

Not being an appropriate party to intervene in CA-G.R. SP No. 87086, any participation of the Office of the Ombudsman therein, more particularly, through its Comment, Memorandum, and other pleadings, should not have been considered by the Court of Appeals. Not even the adoption by the OSG of the Comment of the Office of the Ombudsman as its Memorandum can cure the defect of such Comment which was filed by a non-party to the case. To rule otherwise would be to condone the wrongful intervention of the Office of the Ombudsman in the appellate court proceedings and to allow a circumvention of a fundamental rule of procedure, for it would still afford the Office of the Ombudsman the opportunity to effectively present its position and arguments in the case despite its absence of interest or personality therein, a dangerous precedent indeed.

c)

Pulong Buhangin, Sta. Maria, Bulacan: Two commercial lots measuring 462 and 898 sq. m.; Two residential lots measuring 143 and 152 sq. m.; Four agricultural lots measuring 6,597; 1,000; 3,000; and 746 sq. m.

d) Intervention of the Office of the Ombudsman cannot be allowed on liberality. Obedience to the requirements of procedural rules is needed if the parties are to expect fair results therefrom, and utter disregard of the rules cannot justly be rationalized by harping on the policy of liberal construction.[31] Procedural rules are tools designed to facilitate the adjudication of cases. Courts and litigants alike are thus enjoined to abide strictly by the rules. And while the Court, in some instances, allows a relaxation in the application of the rules, this was never intended to forge a bastion for erring litigants to violate the rules with impunity. The liberality in the interpretation and application of the rules applies only in proper cases and under justifiable causes and circumstances. While it is true that litigation is not a game of technicalities, it is equally true that every case must be prosecuted in accordance with the prescribed procedure to ensure an orderly and speedy administration of justice.[32]

Caypombo, Sta. Maria, Bulacan:

Eight residential lots each measuring 340 sq. m.; Four agricultural lots two of which measuring 140 sq. m. each and the other two measuring 450 sq. m. each.; and e) Three residential lots measuring 50, 500, and 600 sq. m., in Catmon, Sta. Maria, Bulacan.[36]

The same Complaint and Joint Affidavit also attributed to petitioner ownership of the following properties registered in the names of his children who were alleged to have no substantial income to acquire the same: a) One residential house built on a lot measuring 632 sq. m. in the name of Russel Pleyto; One residential lot measuring 113 sq. m. in the name of Russel Pleyto, married to Shirley Pleyto; One commercial building on three commercial lots in the name of Mary Grace Pleyto; One residential lot measuring 244 sq. m. in the name of Salvador Pleyto, Jr.; and

II. This Court now proceeds to petitioners second assignment of error in which he alleges that the judgment against him was grossly inconsistent with the evidence on record and the burden of proof required by law. Undoubtedly, petitioner is requesting that this Court consider and weigh again the evidence presented before the Office of the Ombudsman, as well as the Court of Appeals, and make its own findings of fact.

b) c) d)

While it is an established rule in administrative law that the courts of justice should respect the findings of fact of said administrative agencies, the same is not absolute and there are recognized exceptions thereto. Courts may not be bound by the findings of fact of an administrative agency when there is absolutely no evidence in support thereof or such evidence is clearly, manifestly and patently insubstantial;[33] when there is a clear showing that the administrative agency acted arbitrarily or with grave abuse of discretion or in a capricious and whimsical manner, such that its action may amount to an

e) One residential lot measuring 138 sq. m. in the name of Mary Grace Pleyto.[37] All these properties are worth P16,686,643.20, based on their 2003 adjusted market value as determined by the local assessor, way over the total value of real properties declared by petitioner in his 2001 and 2002 SALNs,i.e., P5,956,400.00 and P9,384,090.25, respectively.

168

In support of its foregoing allegations, the PNP-CIDG submitted the transfer certificates of title (TCTs), tax declarations, and pictures of the real properties in the names of the petitioner, his wife and children. It also presented copies of petitioners 2001 and 2002 SALNs so that the list of real properties and their values declared therein may be compared with the actual list of real properties and their values as uncovered by the PNP-CIDG in its investigation. Petitioner does not deny ownership of the real properties in his and his wifes names. What he contests with regard to the said real properties are the findings that these were beyond his and his wifes financial capacity to acquire and, thus, deemed to have been acquired illegally. Petitioner and his wife submitted their respective Counter-Affidavits, attaching thereto certificates of business registration, income tax returns, audited balance sheets, deeds of sale, and bank promissory notes, all meant to establish how petitioner and his wife acquired the said real properties.

2001 2002

5,956,400.00 9,384,090.25

4,029,641.40 7,400,695.70

5,401,488.80 10,828,566.2 0

4,584,552.60 5,956,219.75

197,575.90 1,371,667.15

314,784.00 319,380.00

This table was meant to illustrate that it was impossible for petitioner to have acquired the real properties considering his annual salary. Based on the said table, the Court of Appeals agreed with the Office of the Ombudsman that the progressive, albeit unexplained rise in petitioners net worth, is prima facie evidence of ill-gotten wealth. This Court is not convinced. The Court of Appeals applies against the petitioner the prima facie presumption laid down in Section 2 of Republic Act No. 1379 (An Act Declaring Forfeiture in Favor of the State Any Property Found to Have Been Unlawfully Acquired by any Public Officer or Employee And Providing for the Proceedings Therefor), which reads: Sec. 2. Filing of petition. Whenever any public officer or employee has acquired during his incumbency an amount of property which is manifestly out of proportion to his salary as such public officer or employee and to his other lawful income and the income from legitimately acquired property, said property shall be presumed prima facie to have been unlawfully acquired. x x x (Emphasis supplied.) A prima facie presumption, also referred to as disputable, rebuttable or juris tantum,[39] is satisfactory if uncontradicted, but may be contradicted and overcome by other evidence.[40] The presumption in Section 2 of Republic Act No. 1379 is merely prima facie and may still be overcome by evidence to the contrary. In fact, Section 5 of the same statute requires the court, before which the petition for forfeiture is filed, to set public hearings during which the public officer or employee may be given ample opportunity to explain to the satisfaction of the court how he had acquired the property in question. Similarly, the public officer or employee administratively charged before the Office of the Ombudsman, such as petitioner herein, must be given sufficient opportunity to present evidence to rebut the prima facie presumption applied against him: that his properties were illegally acquired.

It is worthy to note that in its Decision, dated 27 May 2004, in OMB-C-A-03-0347-I, the Office of the Ombudsman determined the value of the real properties in the names of petitioner and his wife to beP16,686,643.20, based on the 2003 adjusted market value of said real properties as assessed by the local assessor. While it may be conceded that the adjusted market value of the real properties is true and correct, such valuation bears no significance to the issue in this case, namely, whether petitioner and his wife had the financial capacity to acquire the real properties. To answer this question, the relevant valuation would be the acquisition cost of the real properties vis--vis, the financial capacity of the petitioner and his wife at the time of their acquisition. Any appreciation (or depreciation) in the value of the real properties after their acquisition until present has no bearing herein.

To address this apparent faux pas, the Office of the Ombudsman, in its Order, dated 12 October 2004, prepared a table,[38] this time, using the acquisition costs of petitioners real and personal properties as declared in his SALNs, to determine his net worth, which is then compared to his annual salary from 1992 to 2002, to wit:

SUMMARY OF SALNs AND ANNUAL SALARY OF UNDERSECRETARY PLEYTO INC./(DEC) OF NETWORT H OVER PREVIOUS YEAR 1992 1993 1994 1995 1996 1997 1998 1999 2000 P1,004,100.0 0 1,314,400.00 1,314,100.00 2,064,100.00 3,456,400.00 3,526,400.00 4,526,400.00 4,526,400.00 5,826,400.00 P1,316,791.0 0 1,210,900.00 1,558,287.00 1,714,677.30 2,303,544.60 2,884,066.00 3,352,294.50 4,105,107.50 3,854,407.20 P1,425,000.0 0 1,045,000.00 1,080,000.00 1,780,000.00 3,507,000.00 3,800,000.00 4,595,200.00 4,340,142.80 5,293,830.50 P895,891.00 1,480,300.00 1,792,387.00 1,998,777.30 2,252,944.60 2,610,466.00 3,283,494.50 4,291,364.70 4,386,976.70 P584,409.00 312,087.00 206,390.30 254,167.30 357,521.40 673,028.50 1,007,870.20 95,612.00 P136,620.0 0 166,980.00 190,560.00 202,560.00 217,716.00 239,472.00 259,404.00 265,896.00 292,488.00 To rebut the supposed prima facie presumption against him, petitioner submitted evidence to explain the circumstances surrounding the acquisition of each of the real properties in his and his wifes names, and to show that his and his wifes combined incomes were sufficient for them to acquire said real properties. Indeed, after a cursory look at the table, it would be easy to conclude that petitioners annual salary cannot support his yearly increase in net worth, thus, giving rise to the prima facie presumption that petitioners properties, specifically the real properties, were acquired unlawfully.

YEA R

REAL PROPERTIE S

PERSONAL PROPERTIE S

LIABILITIE S

NETWORT H

ANNUAL SALARY

Nonetheless, this Court finds that the table prepared by the Office of the Ombudsman, using what the petitioner referred to as the net-worth-to-income-discrepancy analysis, may be effective only as an initial evaluation tool, meant to raise warning bells as to possible unlawful accumulation of wealth by a public officer or employee, but it is far from being conclusive proof of the same. While the variations in net worth from year to year may be readily apparent by mere comparison, the reasons therefor may not be so easily discerned. An increase in net worth in the succeeding year may not always be due to the acquisition of more properties by purchase. Many factors may account for the increase in net worth, such as the reduction or payment of liabilities in the succeeding year resulting in an increase in net worth even though the assets remain constant; or a donation or inheritance which may significantly increase the assets without any or with very minimal corresponding liability. Hence, net-worth-to-income-discrepancy analysis may seem deceptively simple, but it is, in fact, more complex, and prudence must be exercised in drawing conclusions therefrom.

169

In his Petition before this Court, petitioner presented his own table[41] summarizing the properties he and his wife acquired and the evidence they submitted in support thereof. Said table is reproduced below:

osSupplemental CounterAffidavit (Annex I of the Petition)

PROPERTY

AREA (in square meters )

YEAR OF ACQU ISITIO N

PURCHAS E PRICE (In Pesos)

MODE OF ACQUISITION

PREVIOUS OWNER

SUPPORTING EVIDENCE 4. Residential Lo t Caypombo, Sta. Maria 340 1979 1,500.00 Purchase Anacoreta Reye s -do-

1. Residential Lo tQuezon City

385.4

1977

69,372.00

Purchase -through installme nt

Urban Estates, Incorporated

Contract to SellAttached as Annex 12 of SalvadorPleytos CounterAffidavit (Annex H of the Petition)

Attached as Annexes 2 and 47 to 48 of Miguela Pleyt osSupplemental CounterAffidavit (Annex I of the Petition)

5. Residential Lo t Caypombo, Sta. Maria

340

1979

1,500.00

Purchase

Anacoreta Reye s

-do-

2. Residential Lo t Caypombo, Sta. Maria

340

1979

1,500.00

Purchase

Anacoreta Reye s

STANDARD DEED OF SALE FORM used by Mrs. Pleyto in her lending business in cases where the defaulting debtor opts to settle the unpaid account with property.

Attached as Annexes 2 and 47 to 48 of Miguela Pleyt osSupplemental CounterAffidavit (Annex I of the Petition)

6. Residential Lo t Caypombo, Sta. Maria

340

1979

2,000.00

Purchase

Anacoreta Reye s

-do-

Attached as Annexes 2 and 47 to 48 of Miguela Pleyt osSupplemental CounterAffidavit (Annex I of the Petition)

Attached as Annexes 2 and 47 to 48 of Miguela Pleyt osSupplemental CounterAffidavit (Annex I of the Petition)

3. Residential Lo t Caypombo, Sta. Maria

340

1979

1,500.00

Purchase

Anacoreta Reye s

-do-

7. Residential Lo t Caypombo, Sta. Maria

340

1979

2,000.00

Purchase

Anacoreta Reye s

-do-

Attached as Annexes 2 and 47 to 48 of Miguela Pleyt

Attached as Annexes 2 and 47 to 48

170

of Miguela Pleyt osSupplemental CounterAffidavit (Annex I of the Petition)

Maria

issued in 1993 under TCT No. 182666 )

8. Residential Lo t Caypombo, Sta. Maria

340

1980

2,000.00

Purchase

Anacoreta Reye s

-do12. Residential Lo t Poblacion, Sta. Maria 356 1988 40,000.00 Purchase Thelma CruzCelestino

Attached as Annexes 30-31 of MiguelaPleyto s Supplemental Counter Affidavit (Annex I of the Petition)

Attached as Annexes 2 and 47 to 48 of Miguela Pleyt osSupplemental CounterAffidavit (Annex I of the Petition)

STANDARD DEED OF SALE FORM used by Mrs. Pleyto in her lending business in cases where the defaulting debtor opts to settle the unpaid account with property.

9. Residential Lo t Caypombo, Sta. Maria

340

1980

2,000.00

Purchase

Magno andAzu cena Reyes

-doAttached as Annex 34 of MiguelaPleyot s [sic] Supplemental CounterAffidavit (Annex I of the Petition)

Attached as Annex 49 of MiguelaPleyto s Supplemental CounterAffidavit (Annex I of the Petition) 13. Residential Lo t Poblacion, Sta. Maria 359 1995 251,300.00 Purchase DionisioBuenav entura

-do-

10. Residential Lo t Poblacion, Sta. Maria

998

1987 (The TCT was issued in 1991 under TCT No. 141909 )

Inheritan ce

CandidoGuball a and Maria Diaz

-doExtra-Judicial Partition and Subdivision Plan

Attached as Annexes 30-31 of MiguelaPleyto s Supplemental Counter Affidavit (Annex I of the Petition)

Attached as Annex 32 of MiguelaPleyto s Supplemental CounterAffidavit (Annex I of the Petition)

14. AgriculturalLo t Pulong Buhan gin, Sta. Maria

1,000

1996

60,000.00

Purchase

Anita Caidoy

-do-

11. Residential Lo t Poblacion, Sta.

998

1987 (The TCT was

Inheritan ce

CandidoGuball a and Maria Diaz

-doExtra-Judicial Partition and Subdivision Plan

Attached as Annex 44 of MiguelaPleyto s Supplemental Counter-

171

Affidavit (Annex I of the Petition)

19. Residential Lo t Catmon, Sta. Maria

100

1998

100,000.00

Purchase

RositaResurrec cion

-do-

15. Residentia l Lot Pulong Buhan gin, Sta. Maria

152

1996

40,000.00

Purchase

Ramon and ElizabethHamb re

-do-

Attached as Annex 42 of MiguelaPleyto s Supplemental CounterAffidavit (Annex I of the Petition)

Annex 50 ofMiguela Pleyto sSupplemental Counter Affidavit (attached as Annex I of the Petition)

20. Residential Lo t Catmon, Sta. Maria

500

1998

200,000.00

Purchase

Macaria andHer minigildoRamo s

-do-

16. Commercial L ot Pulong Buhan gin, Sta. Maria

462

1997

138,600.00

Purchase

MarieConcepci on J. Nicolas

-do-

Attached as Annex 38 of MiguelaPleyto s Supplemental CounterAffidavit (Annex I of the Petition)

Attached as Annex 51 of MiguelaPleyto s Supplemental CounterAffidavit (Annex I of the Petition)

21. Residential Lo t Catmon, Sta. Maria

600

1998

300,000.00

Purchase

Zosima andTeot imo delaCruz

-do-

17. Commercial L ot Pulong Buhan gin, Sta. Maria

898

1997

120,000.00

Purchase

Ma. Concepcio nNicolas and Madonna Nicolas

-do-

Attached as Annex 40 of MiguelaPleyto s Supplemental CounterAffidavit (Annex I of the Petition)

Attached as Annex 52 of MiguelaPleyto s Supplemental CounterAffidavit (Annex I of the Petition)

22. Residential Lo t Pulong Buhan gin, Sta. Maria

143

1999

42,900.00

Purchase

18. AgriculturalLo t Pulong Buhan gin, Sta. Maria

6,587

1998

500,000.00

Purchase

Reynaldo Evangelista

-do-

Lorenzo Gonzales andRemediosG onzales

-do-

Attached as Annex 43 of MiguelaPleyto s Supplemental CounterAffidavit (Annex I of the Petition)

Attached as Annex 41 of MiguelaPleyto s Supplemental CounterAffidavit (Annex I of the Petition)

23. AgriculturalLo

3,000

1999

153,909.30

Foreclos

EliseoHermoge

Real Estate MortgageAttache

172

t Pulong Buhan gin, Sta. Maria

ure/ Dacion

nes

d as Annexes 45 and 46 ofMiguela Pleyto sSupplemental CounterAffidavit (Annex I of the Petition)

Petitioner asserts that, other than his salary as a government employee, he and his wife had other sources of income which enabled them to acquire real properties. Petitioners wife, Miguela Pleyto, has been a successful businesswoman since 1976, operating several businesses, particularly, a piggery and poultry farm, a pawnshop, and a lending investor business. To prove that these are legitimate businesses, petitioner submitted registration papers and certifications from the Department of Trade and Industry.[42] Also to establish the profits from these businesses, petitioner presented the income tax returns and financial statements of his wifes businesses.[43] Moreover, petitioner annexed to his CounterAffidavit a schedule of loans availed of by petitioner and his wife from different banks from 1979 to 2002, secured by real estate mortgages[44]constituted on their existing real properties and annotated on the appropriate TCTs.

24. AgriculturalLo t Pulong Buhan gin, Sta. Maria

746

1999

38,272.00

Purchase

EliseoHermoge nes

STANDARD DEED OF SALE FORM used by Mrs. Pleyto in her lending business in cases where the defaulting debtor opts to settle the unpaid account with property.

As petitioner explained, the properties were accumulated over the last two decades. Most of the properties are integral to his wifes piggery and lending business. Twelve of the properties he and his wife acquired, including four structures, were devoted to the piggery, while the others were used as collaterals for shortterm loans, the proceeds of which were used by his wife in her lending business and which, in turn, enabled her to acquire more properties when defaulting borrowers settled their obligations through dacion en pago or foreclosure of mortgages.

The Court of Appeals, however, rejected petitioners allegations and evidence of other legitimate sources of income, for the following reasons:

Attached as Annex 46 of MiguelaPleyto s Supplemental CounterAffidavit (Annex I of the Petition)

Logic will dictate that the whole divide between assets and income may be closed by evidence that the wife was herself earning enough to account for the acquisition of properties. The spirited position taken by the petitioner on this point, however, did not wash with the Ombudsman. The reason seems to be that he was trying to tout his wifes gross income as proof of her capacity when he should prove her disposable income after deducting her taxes and expenses. The Ombudsman insisted on this approach after realizing that the petitioner and his family had indulged in rather heavy spending. x x x The argument meets with the concurrence of the Solicitor General. He says in his comments, that the gross income of the wife from her business should not be made a barometer of her financial capacity, but to be believable, she should specify her available income after deducting all expenses and taxes, a procedure she did not follow.[45]

In addition to the foregoing 24 lots identified by the PNP-CIDG in its Complaint, petitioner voluntarily disclosed two more lots in his and his wifes names in Caysio, Sta. Maria, Bulacan, which they acquired through foreclosure in 2002.

Petitioners table comprehensively presents his and his wifes real properties, the names of the previous owners, the cost, year and mode of their acquisitions, and the supporting evidence. It reveals that the petitioner and his wife acquired their real properties in a span of 22 years, from 1977 to 1999. A number of the real properties were acquired before 1992, the year from which the Office of the Ombudsman began his net-worth-to-income-discrepancy analysis. Petitioner and his wife acquired the real properties by four modes: (1) purchase by installment; (2) inheritance; (3) dacion en pago, by which the defaulting debtor settles his outstanding account with petitioners wife with property; and (4) foreclosure of mortgage. The last two modes of acquisition, dacion en pago and foreclosure of mortgage, are exercised in the regular conduct of the lending business of petitioners wife. Irrefragably, these are legitimate modes of acquiring properties. On their face, the supporting documents for the transactions by which petitioner and his wife acquired their real properties appear to be in order. Notably, the PNPCIDG, the Office of the Ombudsman, and the Court of Appeals did not challenge the validity or authenticity of any of these documentary evidences. They, instead, focused on questioning the financial capacity of petitioner and his wife to acquire all these real properties.

It is worthy to note that the Office of the Ombudsman, in preparing the table in its 12 October 2004 Order, used petitioners gross annual salary for comparison with his annual net worth. Thus, it is only understandable that, in challenging the said table, petitioner touted his wifes gross annual business income, which he urged should be combined with his gross annual salary. Also considering that the information the Court of Appeals was looking for could actually be deduced and computed from the income tax returns and financial statements already submitted by petitioner, this Court finds it arbitrary for the appellate court to simply brush aside petitioners evidence just because it was not presented in the form that it expected. Bearing in mind the significance and impact on the case of petitioners evidence, it deserves a closer and more thorough review.

Furthermore, in his Motion for Reconsideration with the Court of Appeals, petitioner directly addressed the afore-quoted observation of the appellate court by presenting the following table[46] in which taxes and expenses were already deducted from his wifes business income:

DATE

YEARLY INCREASE/ DECREASE IN

SALARY INCOME

BUSINESS INCOME

TOTAL INCOME

173

NETWORTH

(Income from Business + Depreciation Cost)

(Salary Income + Business Income

trip (Annexes 81 and 82); His wife Miguela had seventeen (17) travels abroad (Annex 83) while his other son, Russel had six (6) travels abroad (Annex 84)

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 TOTAL

584,409.00 312,087.00 206,390.30 254,167.30 357,521.40 673,028.50 1,007,870.20 95,612.00 197,575.90 1,371,667.15 5,060,328.75

136,620.00 166,980.00 190,560.00 202,560.00 217,716.00 239,472.00 259,404.00 265,896.00 292,488.00 314,784.00 319,380.00 2,605,860.00

180,438.50 181,703.00 242,817.60 240,917.62 333,908.96 489,023.46 485,105.79 507,845.21 570,280.67 596,980.95 969,565.05 4,798,586.81

317,058.50 348,683.00 433,377.60 443,477.62 551,624.96 728,495.46 744,509.79 773,741.21 862,768.67 911,764.95 1,288,945.05 7,404,446.81

11. We have estimated that the sum total of the expenses incurred by Mr. Salvador A. Pleyto for the travels abroad by him, his wife and children, at P100,000.00 per travel amounted to THREE MILLION SEVEN HUNDRED THOUSAND PESOS (P3,700,000.00), broken down as follows:

Salvador A. Pleyto 9 travels Miguela G. Pleyto 17 travels Russel G. Pleyto 6 travels Salvador G. Pleyto Jr., 5 travels TOTAL

P900,000.00 1,700,000.00 600,000.00 500,000.00 P3,700,000.00

While the investigating officers of the PNP-CIDG also referred to the trips abroad taken by petitioners children, this Court shall discuss first only the foreign travels of petitioner and his wife. The foreign travels, as well as the real properties of their children, shall be the subject of a separate and later discussion.

After going through the records, the only evidence presented by the PNP-CIDG as regards the foreign travels of petitioner and his family are the travel records[49] provided by the Bureau of Immigration and Deportation (BID), from which the following information were derived:

The figures in the business income column were derived from the income statements of Miguela Pleyto, annexed to her income tax returns, which were prepared by a certified public accountant and submitted to the Bureau of Internal Revenue. The business income figures are already net of business expenses and provisions for income taxes, but include the amounts of depreciation[47] of buildings, equipment, and furniture/fixtures. Based on the foregoing table, the increase in petitioners net worth from 1992 to 2002 (P5,060,328.75) no longer appears to be grossly disproportionate to his and his wifes combined income for the same period (P7,404,446.81).

TRAVEL INFORMATION OF SALVADOR A. PLEYTO

Full Name DOB Nationality Passport No.

: : : : :

Salvador Pleyto y Aquino March 22, 1942 Filipino K862613/CC272892 No. 1 May Street, Congressional Village, Quezon City

At this point, it is undeniable that petitioner had other sources of income apart from his salary. His wife was also earning substantial income from her businesses. According to Section 2 of Republic Act No. 1379, the prima facie presumption of unlawful acquisition would arise only when the amount of property is manifestly out of proportion to the salary of the public officer or employee and to his other lawful income and the income from legitimately acquired property.

Address

Other than the real properties, both the Office of the Ombudsman and the Court of Appeals deemed the numerous foreign travels of petitioner, his wife, and his children as proof of petitioners unexplained wealth, relying on the following attestations[48] of the investigating officers of the PNP-CIDG:

Departure Date

Destination

Arrival Date

10. Our verification with the Bureau of Immigration and Deportation on the travels abroad made by Mr. Pleyto (and his son Salvador Juan Jr) for the duration of his stint as a DPWH official revealed that since 1995, Mr. Pleyto had made seventeen (17) travels abroad. Our cross-checking with the declared official travels abroad of Mr. Pleyto, as appearing in his Personal Data Sheet, revealed that he had made a total of nine (9) unofficial travels abroad. BID records also show that in his two (2) trips abroad, he brought along his son Salvador Juan Pleyto, Jr. that is, when he went on the REAAA council meeting in Kuala Lumpur in October 1999 and when he went to the US also in October 2000 on an unofficial October 25, 1995 May 17, 1996 June 15, 1997 October 01, 1997

Tapei Seoul Hongkong Tokyo Honolulu

April 22, 1995 November 06, 1995 May 19, 1996 July 04, 1997 October 17, 1997

174

October 07, 1998 March 27, 1999 May 07, 1999 October 02, 1999 March 27, 2000 September 03, 2000 October 24, 2000 March 20, 2001 April 18, 2002 May 10, 2002 October 02, 2002 May 18, 2003

USA Los Angeles Hongkong Kuala Lumpur Hongkong USA USA USA USA -

October 10, 1998 April 06, 1999 May 09, 1999 October 10, 1999 May 02, 2000 October 01, 2000 May 01, 2001 April 22, 2002 October 08, 2002 June 25, 2003

October 05, 1999 July 14, 2000 October 29, 2000 April 20, 2001 April 18, 2002 May 10, 2002 September 30, 2002 May 18, 2003

San Francisco Bangkok Hongkong USA Los Angeles Bangkok Bangkok Bangkok

October 14, 1999 July 19, 2000 November 06, 2000 July 22, 2001 May 01, 2001 April 22, 2002 October 08, 2002 May 25, 2003

Total No. of Travels Abroad:

Seventeen (17)

Total No. of Travels Abroad:

Seventeen (17)

From 1995 to 2003, petitioner traveled abroad 17 times; 8 trips were found by the investigating officers to be official and only 9 were unofficial. Their summary, though, failed to indicate which of petitioners trips were official and which were unofficial. It would appear that only the 9 unofficial foreign trips are being charged against petitioner. For the same period, petitioners wife also took 17 trips abroad. Petitioner offered the following explanation for his and his wifes foreign travels:

TRAVEL INFORMATION OF MIGUELA PLEYTO

Full Name DOB Nationality Passport No. Address

: : : : :

Miguela Pleyto y Guballa March 28, 1940 Filipino K850031/CC264659/JJ329075 No. 1 May Street, Congressional Village, Quezon City

As to petitioner Pleyto, his alleged travel expense of Php 900 thousand is unfounded. His (9) unofficial travels (official time but with no cost to the government) were all shouldered by sponsoring organizations such as the Road Engineering Association of Asia and Australia (REEAA) and the American Society of Civil Engineers, Philippine Chapter, where he has served as President. The sponsorship includes travel and accommodation and sometimes even one (1) companion. These facts have not been disputed on record. (In fact, for this year, petitioner Pleyto was again a beneficiary of sponsorship travel extended by REEA (sic) where he continues to serve as President.)

Departure Date

Destination

Arrival Date

As to Mrs. Pleyto, her alleged travel expense of Php 1.7 M (at Php 100,000 per travel) is bloated and unsubstantiated. To begin with, the number of travels appears to be inaccurate as previously explained. Besides, the estimated expense of Php 100,000 per travel is grossly exaggerated as most of the travels were to Asian destinations. As shown by evidence, the travel package (fare and accommodation) only averages from Php 15,000 to Php 25,000 which contention has not been disputed by contrary evidence. Besides, Mrs. Pleyto, who is already in her senior years and with no more children to support, is entitled to enjoy the comforts of travel.[50]

October 25, 1995 May 17, 1996 July 12, 1996 October 01, 1997 May 19, 1998 October 07, 1998 March 27, 1999 May 07, 1999 October 05, 1999

Seoul/Korea Hongkong Honolulu Los Angeles USA Los Angeles Hongkong Singapore

November 06, 1995 May 19, 1996 July 29, 1996 October 17, 1997 May 27, 1998 October 10, 1998 April 06, 1999 May 09, 1999 October 10, 1999 The travel records from the BID could only establish the details on the trips taken by petitioner and his wife, specifically, the dates of departure and arrival, the destination, and the frequency thereof. Even these details were at times incomplete or contradictory. Take for example the travel information of petitioner, with several missing entries on the dates of departure and arrival and destination. As for the travel information of petitioners wife, it failed to identify her destination for her trip on 12 to 29 July While 26 foreign trips[51] may indeed seem excessive, it should be kept in mind that these were taken by two individuals in a span of 9 years. Frequency of foreign travel, by itself, is not proof of unexplained wealth of a public officer or employee. More importantly, it must be established that the trips abroad are beyond his financial capacity, taking into account his salary and his other lawful sources of income.

175

1996. The travel information also states that petitioners wife was in Singapore from 5 to 10 October 1999, yet, in the immediately succeeding entry, it provides that she was in San Francisco, United States of America (USA) from 5 to 14 October 1999. Also according to the travel information, petitioners wife left for Bangkok, Thailand on 10 May 2002 and returned to the country on 22 April 2002. It appears to this Court that complete reliance was made on the travel records provided by the BID. No further effort was exerted to complete the travel information of petitioner and his wife and clarify or reconcile confusing entries.

It is a long jump to conclude just from the BID travel records that the foreign travels taken by petitioner and his wife were beyond their financial capacity. As this Court has already found, petitioner had other sources of lawful income apart from his salary as a public official. His wife was also earning substantial income from her businesses. Now the question is, whether the petitioner and his wife could afford all their trips abroad considering their combined income. Obviously, before this question can be answered, the cost of the trips must be initially determined. The investigating officers of the PNP-CIDG estimated the cost of each trip to be P100,000.00, an estimation subsequently adopted by the Office of the Ombudsman and the Court of Appeals. This Court, though, cannot simply affirm such estimation. Other than the USA (wherein Los Angeles, San Francisco, and Honolulu are located), petitioner and his wife only traveled to cities in East and Southeast Asia (namely, Taipei, Seoul, Hongkong, Tokyo, Kuala Lumpur, and Bangkok). The costs of the trips to the USA and to the neighboring Asian countries cannot be the same; the latter would undeniably be cheaper. The investigating officers, in fixing the amount of all the foreign trips at P100,000.00 each, offered no explanation or substantiation for the same. With utter lack of basis, the figure of P100,000.00 as cost for each foreign travel is random and arbitrary and, thus, unacceptable to this Court. Without a reasonable estimation of the costs of the foreign travels of petitioner and his wife, there is no way to determine whether these were within their lawful income. This Court finds equally baseless the conclusion that petitioners children are withou t substantial income of their own, hence, their properties and foreign travels should be attributed to petitioner and considered as additional evidence of his unexplained wealth. Petitioners children are all grown up with the youngest, at the time the case was pending before the Office of the Ombudsman, being 27 years old. Russel and Mary Grace Pleyto, the two older children, are engaged in businesses, while Salvador Pleyto, Jr., is gainfully employed in his mothers businesses. The following real properties are registered and duly covered by certificates of title in their names: a) 1. 2. b) Russel Pleyto (2 properties) one residential house and lot measuring 632 sq. m. in Poblacion, Sta. Maria, Bulacan; one (1) residential lot measuring 113 sq. m. in Pulong Buhangin, Sta. Maria, Bulacan; Mary Grace Pleyto (2 properties)

Without presenting any supporting evidence, the investigating officers of the PNP-CIDG alleged in their Joint Affidavit that it can be immediately deduced that the real properties, both the houses and lots, registered in the names of their three (3) children, namely: Russel Pleyto, Mary Grace Pleyto and Salvador Juan Pleyto, Jr., are [petitioners] unexplained wealth, since all of them have no substantial income to show that they have the capacity to lawfully acquire the same. [54] The use of the words immediately deduced is very revealing of the attitude and approach taken by the investigating officers in this case, again, jumping to a conclusion without reference to and presentation of the evidence in support thereof. The same can also be said of the foreign travels of Russel Pleyto and Salvador Pleyto, Jr., which, without any explanation or basis whatsoever, were included in the computation of travel expenses charged against petitioner. It is thus surprising that the Office of the Ombudsman affirmed the bare allegations of the investigating officers of the PNP-CIDG, by ruling that: [T]he following real properties registered in the name of respondent Pleytos three (3) children, are actually the [petitioner]s unexplainable wealth, since all of them have no substantial income to show that they have lawfully acquired the same, xx x. xxxx The annexes submitted do not show substantial net disposable income earned by them. With respect to Salvador, Jr., no income tax return was submitted. Further, there was no credible explanation for the sizeable start-up capitals for their alleged businesses. No proof was submitted as to the alleged donation of P200,000.00 from the parents of respondent Russel Pleytos wife. As to the alleged donation of P60,000.00, it admittedly came from respondents Salvador andMiguela Pleyto.[55] This Court cannot sustain such finding. Although strictly, the burden of evidence had not shifted to petitioner, he still endeavored to elucidate on how his children legitimately acquired their respective properties, to wit: As to Russel G. Pleyto, the following facts and explanations are uncontroverted by any contrary evidence Since 1991 or for over ten years, Russel and his wife, Shirley Yap, daughter of established businessman in Bulacan, have been engaged in businesses in Sta. Maria, starting with grocery and garments which they built from a meager capital of Php60,000.00 extended by Mr. and Mrs. Pleyto by way of a deed of donation during their marriage as well as Php2 00,000.00 from Shirleys parents. They also obtained financial accommodations and stocks for their grocery and garments from Shirleys family who are also engaged in the same line of business. Their financial capacity is shown by documentary evidence such as business permits/licenses of their business enterprises; financial statements and income tax returns from 1998 to 2002, showing gross sales/receipts from grocery and video sales rentals amounting to P7,271,137; various credit lines extended to Shirley Yap-Pleyto in the grocery business. In the course of their business, Russel and Shirley Yap-Pleyto were able to acquire two (2) properties: the first refers to their residential house and lot in Poblacion, Sta. Maria, which was acquired six years after their marriage; the second refers to a small parcel of land consisting of 113 sq. meters in the interior side of Pulong Buhangin. Since both of them are engaged in gainful business, there is no way they cannot acquired (sic) the subject properties. As to Mary Grace G. Pleyto, the following explanations and evidence are uncontroverted by any contrary evidence Mary Grace has been an entrepreneur since 1995, starting off with small laundry business and branching to water refilling and video sales. While she obtained her course from UP, she learned the ropes of entrepreneurship from her own mother. And if she has received any assistance in her business, it was also from her mother, and not from any imputed unexplained wealth of her father. Like her mother, she also made use of banks to support her business requirements.

1. one (1) residential lot measuring 138 sq. m. in Pulong Buhangin, Bulacan; 2. one (1) commercial lot measuring 133 sq. m., broken down into three lots at 41, 59, and 43 sq. m., in Poblacion, Sta. Maria, Bulacan; and c) 1. Salvador, Jr. (1 property) one (1) residential lot measuring 244 sq. m. in Pulong Buhangin, Sta. Maria, Bulacan.[52]

Given these circumstances, the presumption in Section 2 of Republic Act No. 1379, cannot be automatically extended to the properties that are registered in the names of petitioners children. The burden is upon the PNP-CIDG, as the complainant against petitioner, to establish that these properties are actually owned by petitioner by proving first that his children had no financial means to acquire the said properties. Fundamental is the rule that the burden of evidence lies with the person who asserts an affirmative allegation.[53] Unfortunately, the PNP-CIDG miserably failed in this regard.

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From 1997 to 2001, she was able to acquire the commercial property in Sta. Maria measuring 143 sq. meters, broken down into three (3) lots at 41 sq. meters, 59 sq. meters, and 43 sq. meters. This property was broken down into three lots because she acquired it portion by portion and in a span of four years. In addition, she also acquired a residential lot in the interior side of Pulong Buhangin measuring only 138 sq. meteres (TCT No. 397717[M]).

have established and maintained their own businesses must be supported by evidence, of which none was submitted herein. As a final note on this matter, the charges that petitioner is the true owner of the properties registered in his childrens names and that he spent for their foreign travels must be proven by the PNP -CIDG as the complainant in the administrative case, before the burden of evidence shifts to the petitioner to prove the contrary. The PNP-CIDG cannot just make bare allegations, with tremendous implications and damaging effects, then leave it to the public official charged to successfully and effectively defend himself with controverting evidence. Such is what has happened in this case. Worse, despite the total absence of evidence on the part of the PNP-CIDG regarding the properties and sources of income of petitioners children, the Office of the Ombudsman hastily dismissed the value of petitioners evidence.

When she purchased her first two properties valued at Php131,600, her BIR records and financial statements for the preceding years (1995-1996) already reflect an income of Php531,930, which is more than enough to cover the purchase. As proof of her financial capacity, she has been extended loans by Metrobank using as collateral the same property she acquired. Based on her income tax return and loan documents, there is no reason why she cannot acquire the two (2) properties owned and registered in her name. As to Salvador G. Pleyto, Jr., the following explanations and evidence are uncontroverted by any contrary evidence Salvador Jr., a La Salle graduate in B.S. Management, has been gainfully employed since 1998 in her mothers businesses, managing R.S. Pawnshop and R.S. Lending Investor. Based on his income tax returns for the years 1999 to 2002 (sic), his earnings amounted to P186, 520. In 2001, he was able acquire a property in the interior side of Pulong Buhangin, Sta. Maria for only P20,000 as evidenced by the purchase document.

The last administrative charge against petitioner is that he failed to declare all his assets in the SALN, of which the Office of the Ombudsman and the Court of Appeals found petitioner guilty. The Court of Appeals made the following findings on this point: Second, failing to declare all his assets in the SALN. A treasure trove of properties admitted by the petitioner to be owned by him and his wife could not be accounted for in the SALN. The non-declaration of his numerous acquisitions was thus willful. The Ombudsman senses that the unexplained rise in the reported net worth of the petitioner would be more astronomical if he were forthright in his declarations. xxxx The Ombudsman has found that there are, indeed, properties not reported in the SALN. The laundry list of undeclared assets include properties acquired in 1979, 1980, 1982, 1988, 1993, 1995, 1996, 1997 and 1999. While the petitioners wife claims to be extensively engaged in business, th e SALN also did not report the nature and other particulars of these concerns. She signed the 2001 SALN without answering the question: Do you have any business interest and other financial connections including those of your spouse x x x?

Considering his reported income in the preceding years (1999 to 2000) as reflected in his BIR tax records, there is no reason why he could not have acquired the subject property for Php20,000. [56] To substantiate his foregoing assertions, petitioner presented the TCTs in his childrens names, deeds of sale executed by the previous owners to his children, his childrens income tax returns and financial statements, business registrations, and bank documents on loans and credit lines. [57]

Certificates of title are the best proof of ownership[58] that may only be rebutted by competent evidence to the contrary. In this case, the TCTs are in the names of petitioners children. Indubitably, mere allegation that the properties covered by the TCTs are actually owned by someone else is insufficient. The Office of the Ombudsman disparaged the other documentary evidence submitted by petitioner because they do not show substantial net disposable income earned by petitioners children. To the contrary, the petitioner presented his childrens income tax returns and financial statements that sta te their gross income, as well as expenses, taxes, and any other deductible liabilities, from which the childrens respective net incomes may be determined. Moreover, it is futile for the Office of the Ombudsman to require the petitioner to present the net disposable income of his children when the PNP-CIDG failed to establish the acquisition costs of these properties. What the investigating officers of the PNP-CIDG stated in their Joint-Affidavit were the adjusted market values of the childrens properti es. As this Court has ruled, financial capacity shall be adjudged vis--vis the cost of the properties at the time of acquisition. The subsequent increase (or decrease) in the value of the properties is irrelevant. Without the acquisition costs of the properties, there are no figures that may be measured against the earning capacity of petitioners children at the time they acquired their properties.

It is clear that the SALN does not reflect a true and accurate record of the assets of the petitioner in violation of the Anti-Graft and Corrupt Practices Act. The addition of the acquisition costs of the unreported assets to the net worth, moreover, will increase it. As dramatized by the Ombudsmans table, the increase in the net worth could not be explained by the petitioners salary alone and, hence should be treated as unexplained wealth.[59] Republic Act No. 3019, otherwise known as the Anti-Graft and Corrupt Practices Act, requires that a public officer file his statement of assets and liabilities under the following circumstances: SEC. 7. Statement of Assets and Liabilities. Every public officer, within thirty days after assuming office and, thereafter, on or before the fifteenth day of April following the close of every calendar year, as well as upon the expiration of his term of office, or upon his resignation or separation from office, shall prepare and file with the office of the corresponding Department Head, or in the case of Head of Department or Chief of an independent office, with the Office of the President, a true, detailed and sworn statement of assets and liabilities, including a statement of the amounts and sources of his income, the amounts of his personal and family expenses and the amount of income taxes paid for the next preceding calendar year: Provided, That public officers assuming office less than two months before the end of the calendar year, may file their first statement or before the fifteenth day of April following the close of said calendar year. A similar requirement is provided in Section 8 of Republic Act No. 6713, otherwise known as the Code of Conduct and Ethical Standards for Public Officials and Employees, which reads: SEC. 8. Statements and Disclosure. Public officials and employees have an obligation to accomplish and submit declarations under oath of, and the public has the right to know, their assets, liabilities, net worth and financial and business interests including those of their spouses and of unmarried children under eighteen (18) years of age living in their households.

Furthermore, faced with overwhelming evidence that petitioners two older children, Russel and Mary Grace Pleyto, had their own businesses from which they derived substantial income, the Office of the Ombudsman changed the direction of its attack by questioning their source of capital. This is plainly a different theory from the one originally presented in the PNP-CIDG complaint that petitioners children could not have acquired their properties because they had no substantial income of their own. No longer is it just a question of ownership of the properties in the childrens names, but it is now extended to the ownership of the childrens businesses. Just the same, the assertion that petitioners children could not

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(A) Statement of Assets and Liabilities and Financial Disclosure. All public officials and employees, except those who serve in an honorary capacity, laborers and casual or temporary workers, shall file under oath their Statement of Assets, Liabilities and Net Worth and the Disclosure of Business Interests and Financial Connections and those of their spouses and unmarried children under eighteen (18) years of age living in their households.

information in the limited number of spaces provided in the printed SALN form. And these inaccuracies are repeated year after year, since the common practice is copying the entries in the immediately preceding year and just adding any subsequent acquisitions.

In his 2004 SALN,[60] petitioner took pains to rectify the inaccuracies in his previous SALN and declared his real properties as follows: The two documents shall contain information on the following: (a) real property, its improvements, acquisition costs, assessed value and current fair market value; (b) personal property and acquisition cost; (c) all other assets such as investments, cash on hand or in banks, stocks, bonds, and the like; 1H&L (d) liabilities; and (e) all business interests and financial connections. 1H&L 1 Lot I Lot 1 Lot 1 Lot 1 Lot All public officials and employees required under this section to file the aforestated documents shall also execute within thirty (30) days from the date of their assumption of office, the necessary authority in favor of the Ombudsman to obtain from all appropriate government agencies, including the Bureau of Internal Revenue, such documents as may show their liabilities, net worth, and also their business interests and financial connections in previous years, including, if possible the year when they first assumed any office in the government. It is undisputed that petitioner has been religiously filing his SALN every year while he was in government service. The allegation of gross misconduct and dishonesty against him is rooted in his purported failure to declare all his assets and business interests in his SALNs. 1 Lot 1 Lot 1 Lot (impvt) 1 Lot (impvt) 1 Lot (impvt) 1 Lot (impvt) Caypombo, Bulacan - do - do - do - do - do - do - do - do - do - do - do 1979 1979 1980 1982 Purchase - do - do - do - do - do - do - do - do - do - do - do 190,000.00 Quezon City 197[7] Purchase 2,630,000.00 Kind Location Year Mode of Acquisition Acquisition Cost (Land, Bldg., Imrpovement, etc.)

The documents must be filed: (a) within thirty (30) days after assumption of office;

(b) on or before April 30, of every year thereafter; and (c) within thirty (30) days after separation from service.

Petitioners 2002 SALN declared only 13 properties with a total acquisition cost of P9,384,090.25. Petitioner though admitted in the course of these proceedings that he and his wife owned 28 of the 33 real properties identified by the PNP-CIDG, with the clarification that four of those are mere improvements consisting of piggery structures. Hence, petitioner professes ownership by him and his wife of 24 lots, plus the improvements found thereon. He further volunteers the information that he and his wife acquired two more additional properties in Caysio, Sta. Maria, Bulacan, in 2002, thus, bringing the total number of his and his wifes real property acquisition to 26. Petitioner denies he was being dishonest or that he had the deliberate intent to conceal his wealth in his 2002 SALN, although he acknowledges that he failed to pay attention to the details therein. His SALNs are prepared by a family bookkeeper/accountant. Also, his wife has been running their financial affairs, including property acquisitions which form part and parcel of her lending business. Thus, as he was not directly involved in the various transactions relating to the lending business, petitioner failed to keep track of the real property acquisitions by reason thereof. Consequently, petitioners SALN was not filed in proper form, containing several inaccurate information, such as discrepancies in the year and mode of acquisition of the declared properties, and imprecise descriptions of the said properties since some of the properties were not broken down to their individual titles and, instead, treated as one entry since they are contiguous to one another and to fit all the

1H&L 1 Lot 1 Lot 1 Lot 1 Lot

Poblacion, Bulacan - do - do - do - do -

1988 1987 1991 1993 1995

Purchase Inheritance - do - do Purchase/Foreclosure 1,937,700.00

1 Lot 1 Lot 1H&L 1 Lot

P. Buhangin, Bulacan - do - do - do -

1996 1996 1997 1998

Purchase/Foreclosure - do - do - do -

178

1 Lot 1 Lot 1 Lot 1 Lot

- do - do - do - do -

1999 1999 1999 1999

- do - do - do - do -

1,898,700.00

Petitioner is charged with gross misconduct and dishonesty for failing to comply with Section 7 of the Anti-Graft and Corrupt Practices Act, and Section 8 of the Code of Conduct and Ethical Standards for Public Officials and Employees, requiring the submission of a statement of assets and liabilities by a public officer or employee. As for gross misconduct, the adjective is gross or serious, important, weighty, momentous, and not trifling; while the noun is "misconduct," defined as a transgression of some established and definite rule of action, more particularly, unlawful behavior or gross negligence by the public officer. The word "misconduct" implies a wrongful intention and not a mere error of judgment. For gross misconduct to exist, there must be reliable evidence showing that the acts complained of were corrupt or inspired by an intention to violate the law, or were in persistent disregard of well-known legal rules.[62]

1 Lot 1 Lot 1 Lot

Catmon, Bulacan - do - do -

1998

Purchase/Foreclosure - do - do 1,300,000.00

And as for dishonesty, it is committed by intentionally making a false statement in any material fact, or practicing or attempting to practice any deception or fraud in securing his examination, registration, appointment or promotion. Dishonesty is understood to imply a disposition to lie, cheat, deceive, or defraud; untrustworthiness; lack of integrity.[63] 1,427,690.25 Clear from the foregoing legal definitions of gross misconduct and dishonesty is that intention is an important element in both. Petitioners candid admission of his shortcomings in properly and completely filling out his SALN, his endeavor to clarify the entries therein and provide all other necessary information, and his submission of supporting documents as to the acquisition of the real properties in his and his wifes names, negate any intention on his part to conceal his properties. Furthermore, in view of this Courts findings that these properties were lawfully acquired, there is simply no justification for petitioner to hide them. Missing the essential element of intent to commit a wrong, this Court cannot declare petitioner guilty of gross misconduct and dishonesty. Neither can petitioners failure to answer the question, Do you have any business interest and other financial connections including those of your spouse and unmarried children living in your house hold? be tantamount to gross misconduct or dishonesty. On the front page of petitioners 2002 SALN, it is already clearly stated that his wife is a businesswoman, and it can be logically deduced that she had business interests. Such a statement of his wifes occupation would be inconsistent with the intention to conceal his and his wifes business interests. That petitioner and/or his wife had business interests is thus readily apparent on the face of the SALN; it is just that the missing particulars may be subject of an inquiry or investigation. An act done in good faith, which constitutes only an error of judgment and for no ulterior motives and/or purposes, does not qualify as gross misconduct, and is merely simple negligence. [64] Thus, at most, petitioner is guilty of negligence for having failed to ascertain that his SALN was accomplished properly, accurately, and in more detail. Negligence is the omission of the diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. [65] In the case of public officials, there is negligence when there is a breach of duty or failure to perform the obligation, and there is gross negligence when a breach of duty is flagrant and palpable. [66] Both Section 7 of the Anti-Graft and Corrupt Practices Act and Section 8 of the Code of Conduct and Ethical Standards for Public Officials and Employees require the accomplishment and submission of a true, detailed and sworn statement of assets and liabilities. Petitioner was negligent for failing to comply with his duty to provide a detailed list of his assets and business interests in his SALN. He was also negligent in relying on the family bookkeeper/accountant to fill out his SALN and in signing the same without checking or verifying the entries therein. Petitioners negligence, though, is only simple and not gross, in the absence of bad faith or the intent to mislead or deceive on his part, and in consideration of the fact that his SALNs actually disclose the full extent of his assets and the fact that he and his wife had other business interests. Gross misconduct and dishonesty are serious charges which warrant the removal or dismissal from service of the erring public officer or employee, together with the accessory penalties, such as cancellation of eligibility, forfeiture of retirement benefits, and perpetual disqualification from reemployment in government service. Hence, a finding that a public officer or employee is administratively liable for such charges must be supported by substantial evidence.

2 Lots w/ imprvt

Caysio, Sta. Maria,Bulacan

2002

Purchase/Foreclosure

1 Lot

P. Buhangin, Bulacan

2003

Purchase/Foreclosure

100,000.00

TOTAL COST

P 9,484,090.25

Except for the lot in Pulong Buhangin, Bulacan, which was purchased only in 2003, the afore-quoted declaration of petitioners real properties in his 2004 SALN tallies with that in his 2002 SALN. Disregarding the most recent acquisition, the longer and more detailed list of real properties in the 2004 SALN has the same total acquisition cost as the 13 entries in the 2002 SALN, i.e., P9,384,090.25. As additional proof that his 2002 SALN actually includes all his real properties, petitioner points out that the total acquisition cost thereof, P9,384,090.25, is not so far off their 2003 adjusted market value (excluding the real properties in the names of petitioners children) of P14,002,109.20 as determined by the PNP-CIDG; the difference can be accounted for by the increase in the value of the real properties through the years. In contrast, according to the investigating officers of the PNP-CIDG, [s]ince Mr. Pleyto did not specify in his SALs the exact location of the real properties he and his own wife own, it would not be too easy for the investigators to ascertain which specifically of these numerous real estate properties acquired by the spouses were or were not declared in his latest statement of assets. [61] Hence, there is no categorical finding by the investigating officers that certain properties were intentionally excluded or concealed by petitioner from his 2002 SALN. Much of the difficulty in reconciling the list of real properties in the names of petitioner and his wife vis--vis the entries in petitioners 2002 SALN is due to the inaccuracies in the latter as previously discussed. Without considering the elucidation offered by petitioner and refusing to concede that inaccuracies were committed in the preparation of the 2002 SALN, the Office of the Ombudsman could not reconcile any of the real properties admittedly owned by petitioner and his wife with the real properties declared in the 2002 SALN. This includes petitioners residence in Quezon City, which evidence shows he and his wife acquired in 1977, but was erroneously reported in his 2002 SALN to have been acquired in 1975. Following the ratiocination of the Office of the Ombudsman, then it would appear that petitioner completely falsified his declaration of real properties in his 2002 SALN. However, it must be pointed out that petitioner was originally accused of and found guilty by the Office of the Ombudsman and the Court of Appeals of the relatively less serious charge of excluding or concealing some of his properties.

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The quantum of evidence required in administrative cases is substantial evidence. The landmark case Ang Tibay v. Court of Industrial Relations[67] laid down the guidelines for quasi-judicial administrative proceedings, including the following: (4) Not only must there be some evidence to support a finding or conclusion (City of Manila vs. Agustin, G. R. No. 45844, promulgated November 29, 1937, XXXVI 0.G. 1335), but the evidence must be "substantial. (Washington,Virginia & Maryland Coach Co. v. National Labor Relations Board, 301 U. S. 142, 147, 57 S. Ct. 648, 650, 81 Law. ed. 965.) "Substantial evidence is more than a mere scintilla. It means such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." (Appalachian Electric Power v. National Labor Relations Board, 4 Cir., 93 F. 2d 985, 989; National Labor Relations Board v. Thompson Products, 6 Cir., 97 F. 2d 13, 15; Ballston-Stillwater Knitting Co. v. National Labor Relations Board, 2 Cir., 98 F. 2d 758, 760.) * * * The statute provides that 'the rules of evidence prevailing in courts of law and equity shall not be controlling.' The obvious purpose of this and similar provisions is to free administrative boards from the compulsion of technical rules so that the mere admission of matter which would be deemed incompetent in judicial proceedings would not invalidate the administrative order. (Interstate Commerce Commission v. Baird, 194 U. S. 25, 44, 24 S. Ct. 563, 568, 48 Law. ed. 860; Interstate Commerce Commission v. Louisville & Nashville R. Co., 227 U. S. 88, 93, 33 S. Ct. 185, 187, 57 Law. ed. 431; United States v. Abilene & Southern Ry. Co., 265 U. S. 274, 288, 44 S. Ct. 565, 569, 68 Law. ed. 1016; Tagg Bros. & Moorhead v. United States, 280 U. S. 420, 442, 50 S. Ct. 220, 225, 74 Law. ed. 624.) But this assurance of a desirable flexibility in administrative procedure does not go so far as to justify orders without a basis in evidence having rational probative force. Mere uncorroborated hearsay or rumor does not constitute substantial evidence. (Consolidated Edison Co. v. National Labor Relations Board, 59 S. Ct. 206, 83 Law. ed. No. 4, Adv. Op., p. 131.) " (5) The decision must be rendered on the evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected. (Interstate Commence Commission vs. L. & N. R. Co., 227 U. S. 88, 33 S. Ct. 185, 57 Law. ed. 431.) Only by confining the administrative tribunal to the evidence disclosed to the parties, can the latter be protected in their right to know and meet the case against them. It should not, however, detract from their duty actively to see that the law is enforced, and for that purpose, to use the authorized legal methods of securing evidence and informing itself of facts material and relevant to the controversy. Boards of inquiry may be appointed for the purpose of investigating and determining the facts in any given case, but their report and decision are only advisory. (Section 9, Commonwealth Act No. 103.) x x x. (Emphasis supplied.) In the Petition at bar, great, if not absolute, reliance was made by the Office of the Ombudsman on the Complaint of the PNP-CIDG and the attached Joint Affidavit of its investigating officers. Although certain pieces of documentary evidence were also attached to the said Complaint, such as TCTs and tax declarations of the real properties in the names of petitioner, his wife, and his children, and the travel information provided by the BID, these mostly prove facts which were not denied by petitioner, but for which he had credible explanation or qualification. These pieces of evidence may have been sufficient to give rise to a prima faciepresumption of unlawfully acquired wealth against petitioner; however, such a presumption is disputable or rebuttable. When petitioner presented evidence in support of his defense, the Office of the Ombudsman proceeded to question and challenge and, ultimately, disregard in totality petitioners evidence, despite the fact that the PNP-CIDG no longer presented any evidence to controvert the same. Each party in an administrative case must prove his affirmative allegation with substantial evidence the complainant has to prove the affirmative allegations in his complaint, and the respondent has to prove the affirmative allegations in his affirmative defenses and counterclaims.[68] In this case, contrary to the findings of the Office of the Ombudsman and the Court of Appeals, this Court pronounces that substantial evidence sways in favor of the petitioner and against complainant PNP-CIDG. While this Court commends the efforts of the PNP-CIDG and the Office of the Ombudsman to hold accountable public officers and employees with unexplained wealth and unlawfully acquired properties, it cannot countenance unsubstantiated charges against a hapless public official just to send a message that the government is serious in its campaign against graft and corruption. No matter how noble the intentions of the PNP-CIDG and the Office of the Ombudsman are in pursuing this administrative case against petitioner, it will do them well to remember that good intentions do not win cases; evidence does.

III. Petitioners third assignment of error concerns the review and compliance procedure provided in Section 10 of the Code of Conduct and Ethical Standards for Public Officials and Employees, reproduced in full below:

SEC. 10. Review and Compliance Procedure. (a) The designated Committees of both Houses of the Congress shall establish procedures for the review of statements to determine whether said statements have been submitted on time, are complete and are in proper form. In the event a determination is made that a statement is not so filed, the appropriate Committee shall so inform the reporting individual and direct him to take the necessary corrective action.

(b) In order to carry out their responsibilities under this Act, the designated Committees of both Houses of the Congress shall base the power, within their respective jurisdictions, to render any opinion interpreting this Act, in writing, to persons covered by this Act, subject in each instance to the approval by affirmative vote of the majority of the particular House concerned. The individual to whom an opinion is rendered, and any other individual involved in a similar factual situation, and who, after issuance of the opinion acts in good faith in accordance with it shall not be subject to any sanction provided in this Act. (c) The heads of other offices shall perform the duties stated in subsections (a) and (b) hereof insofar as their respective offices are concerned, subject to the approval of the Secretary of Justice, in the case of the Executive Department and the Chief Justice of the Supreme Court, in the case of the Judicial Department. Petitioner argues that he should have been given the opportunity to correct his obviously incomplete and/or not properly filed SALN in accordance with the afore-quoted review and compliance procedure. This Court is unconvinced. From a reading of the provision in question, it is apparent that it primarily imposes upon the heads of offices the duty to review the SALNs of their subordinates. If a head of office finds that the SALN of a certain subordinate is incomplete or not in the proper form, then the head of office must inform the subordinate concerned and direct him to take corrective action. Unquestionably, it is an internal procedure limited within the office concerned. It does not even provide for instances when a complainant, not the head of office, may question the SALN of a public officer or employee. Such a procedure does not find application in the Petition at bar, because petitioners SALN was not being reviewed or questioned by his head of office, but by the Office of the Ombudsman. Whether or not petitioners SALN was actually reviewed by his head of office is irrelevant and cannot bar the Office of the Ombudsman from conducting an investigation of petitioner for violation of Section 8 of the Code of Conduct and Ethical Standards for Public Officials and Employees, as well as Section 7 of the Anti-Graft and Corrupt Practices Act, upon the filing of a Complaint by the PNP-CIDG. The mandate of the Office of the Ombudsman is expressed in Section 12, Article XI of the Constitution, in this wise: Sec. 12. The Ombudsman and his Deputies, as protectors of the people, shall act promptly on complaints filed in any form or manner against public officials or employees of the Government, or any subdivision, agency, or instrumentality thereof, including government-owned or controlled corporations, and shall, in appropriate cases, notify the complainants of the action taken and the result thereof. Section 13 thereof, vests in the Office of the Ombudsman the following powers, functions, and duties: (1) Investigate on its own, or on complaint by any person, any act or omission of any public official, employee, office or agency, when such act or omission appears to be illegal, unjust, improper, or inefficient;

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(2) Direct, upon complaint or at its own instance, any public official or employee of the Government, or any subdivision, agency or instrumentality thereof, as well as of any government-owned and controlled corporation with original charter, to perform and expedite any act or duty required by law, or to stop, prevent and correct any abuse or impropriety in the performance of duties; (3) Direct the officer concerned to take appropriate action against a public official or employee at fault, and recommend his removal, suspension, demotion, fine, censure, or prosecution, and ensure compliance therewith; (4) Direct the officer concerned, in any appropriate case, and subject to such limitations as may be provided by law, to furnish it with copies of documents relating to contracts or transactions entered into by his office involving the disbursement or use of public funds or properties, and report any irregularity to the Commission on Audit for appropriate action; (5) Request any government agency for assistance and information necessary in the discharge of its responsibilities, and to examine, if necessary, pertinent records and documents; (6) Publicize matters covered by its investigation when circumstances so warrant and with due prudence; (7) Determine the causes of inefficiency, red tape, mismanagement, fraud and corruption in the Government and make recommendations for their elimination and the observance of high standards of ethics and efficiency; and (8) Promulgate its rules of procedure and exercise such other powers or perform such functions or duties as may be provided by law. The authority of the Ombudsman to conduct administrative investigations is beyond cavil. Republic Act No. 6770, otherwise known as The Ombudsman Act of 1989, intended to bestow on the Office of the Ombudsman full administrative disciplinary authority. The provisions of The Ombudsman Act of 1989 cover the entire gamut of administrative adjudication which entails the authority to, inter alia, receive complaints, conduct investigations, hold hearings in accordance with its rules of procedure, summon witnesses and require the production of documents, place under preventive suspension public officers and employees pending an investigation, determine the appropriate penalty imposable on erring public officers or employees as warranted by the evidence, and, necessarily, impose the said penalty. [69] Given its mandate, the Office of the Ombudsman can review the SALN of a public officer or employee if a complaint is filed against the latter, separate and independent of the review of the SALN by the public officer or employees head of office. In the event that a complaint is filed against a public officer or employee concerning his SALN, the Office of the Ombudsman shall be obliged to comply, not with the review procedure for heads of office in the Code of Conduct and Ethical Standards for Public Officials and Employees, but with the procedure for administrative complaints as laid out in Rule III of the Rules of Procedure of the Office of the Ombudsman. Although in an administrative case before the Office of the Ombudsman, the public officer or employee is no longer afforded the opportunity for corrective action on his SALN, he is still allowed to file counter-affidavits and other evidence in his defense.[70]

forfeiture of his retirement benefits. Therefore, petitioner is entitled to his retirement benefits, having served the government since 1966, or for a span of 41 years. And since petitioner is already compulsorily retired, he can no longer serve his suspension; yet, this Court can still order, in lieu of such penalty, the forfeiture of the amount equivalent to petitioners salary for six months from his retirement benefits.

WHEREFORE, premises considered, the instant Petition for Review is hereby GRANTED. The Decision, dated 20 July 2005, and Resolution, dated 4 October 2005, of the Court of Appeals in CA-G.R. SP No. 87086, which affirmed the Decision, dated 28 June 2004, and Order, dated 12 October 2004, of the Office of the Ombudsman in OMB-C-A-03-0347-I, dismissing petitioner Salvador A. Pleyto from service for grave misconduct and dishonesty, are REVERSED and SET ASIDE. Petitioner Salvador A. Pleyto is found GUILTY of NEGLIGENCE in accomplishing his Statement of Assets and Liabilities for the year 2002, and as penaltytherefor, it is ORDERED that the amount equivalent to his salary for six (6) months be forfeited from his retirement benefits.

SO ORDERED.

FIRST DIVISION G.R. No. 160876 January 18, 2008

AZUCENA MAGALLANES, EVELYN BACOLOD and HEIRS OF JUDITH COTECSON, petitioners, vs. SUN YAT SEN ELEMENTARY SCHOOL, PAZ GO, ELENA CUBILLAN, WILLY ANG GAN TENG, BENITO ANG, and TEOTIMO TAN, respondents. DECISION SANDOVAL-GUTIERREZ, J.: For our resolution is the instant Petition for Review on Certiorari seeking to reverse the Resolution of the Court of Appeals (Seventh Division) dated October 29, 2001 in CA-G.R. SP No. 67068; its Resolution of May 8, 2003 denying the motion for reconsideration; and its Resolution of October 10, 2003, denying the motion for reconsideration of the Resolution of May 8, 2003. The facts of the case are: Azucena Magallanes, Evelyn Bacolod, Judith Cotecson (represented by her heirs), petitioners, Grace Gonzales, and Bella Gonzales were all employed as teachers in the Sun Yat Sen Elementary School in Surigao City. Paz Go and Elena Cubillan are principals of the said school. Willy Ang Gan Teng and Benito Ang are its directors, while Teotimo Tan is the school treasurer. They are all respondents herein. On May 22, 1994, respondents terminated the services of petitioners. Thus, on August 3, 1994, they filed with the Sub-Regional Arbitration Branch No. X, National Labor Relations Commission (NLRC), Butuan City, complaints against respondents for illegal dismissal, underpayment of wages, payment of

In sum, this Court finds substantial evidence that petitioner and his wife have lawful sources of income other than petitioners salary as a government official that enabled them to acquire several real properties in their names and travel abroad. It also rules that while petitioner may be guilty of negligence in accomplishing his SALN, he did not commit gross misconduct or dishonesty, for there is no substantial evidence of his intent to deceive the authorities and conceal his other sources of income or any of the real properties in his and his wifes names. Hence, the imposition of the penalty of removal or dismissal from public service and all other accessory penalties on petitioner is indeed too harsh. Nevertheless, petitioner failed to pay attention to the details and proper form of his SALN, resulting in the imprecision of the property descriptions and inaccuracy of certain information, for which suspension from office for a period of six months, without pay, would have been appropriate penalty.[71] However, this Court takes judicial notice that petitioners birth date is on 22 March 1942, and that he had reached the compulsory retirement age of 65 for public officials on 22 March 2007, while the present Petition was still pending. The reversal by this Court of the judgment of dismissal rendered against petitioner also consequently lifts the accessory penalties imposed upon him, including the

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backwages, 13th month pay, ECOLA, separation pay, moral damages, and attorneys fees. Likewise, on August 22, 1994, petitioner Cotecson filed a separate complaint praying for the same reliefs. On June 3, 1995, Labor Arbiter Rogelio P. Legaspi rendered a Decision declaring that petitioners were illegally dismissed from the service and ordering respondents to reinstate them to their former or equivalent positions without loss of seniority rights, and to pay them their backwages, salary differential, 13th month pay differential, and service incentive leave benefits "as of June 20, 1995." Respondents were likewise directed to pay petitioners moral and exemplary damages. On appeal by respondents, the NLRC, in its Decision dated February 20, 1996, reversed the Arbiters judgment, holding that petitioners are contractual employees and that respondents merely allowed their contracts to lapse. Petitioners timely filed a motion for reconsideration, but it was denied by the NLRC in its Resolution dated April 17, 1996. Petitioners then filed with the Court of Appeals a petition for certiorari, docketed as CA-G.R. SP No. 50531. On October 28, 1999, the Court of Appeals (Special Sixteenth Division) rendered its Decision,1 the dispositive portion of which reads: WHEREFORE, the instant petition is GRANTED with respect to petitioners Cotecson, Bacolod, and Magallanes, the questioned Resolutions of the NLRC dated February 20 and April 1996 are hereby REVERSED and SET ASIDE as to them. The Decision dated July 3, 1995 of the Labor Arbiter is hereby REINSTATED as to the said petitioners except as to the award of moral and exemplary damages which is hereby DELETED. SO ORDERED. The Court of Appeals (Special Sixteenth Division) ruled that in lieu of reinstatement, petitioners Cotecson, Bacolod, and Magallanes "shall be entitled to separation pay equivalent to one month salary and backwages computed from the time of their illegal dismissal up to the time of the promulgation of its Decision." With respect to Bella Gonzales and Grace Gonzales, the Court of Appeals found that that they have not acquired the status of regular employees having rendered only two years of service. Consequently, their dismissal from the service is valid. Under the Manual of Regulations for Private Schools, only full-time teachers who have rendered three (3) years of consecutive service shall be considered permanent. Respondents filed a motion for reconsideration but it was denied by the appellate court in its Resolution dated January 13, 2000. Respondents then filed with this Court a petition for certiorari, docketed as G.R. No. 142270. However, it was dismissed for lack of merit in a Minute Resolution dated April 12, 2000. Their motion for reconsideration was denied with finality by this Court on July 19, 2000. Meanwhile, on October 4, 2000, petitioners filed with the Labor Arbiter a motion for execution of his Decision as modified by the Court of Appeals. In an Order dated January 8, 2001, the Labor Arbiter computed the petitioners monetary awards reckoned from the time of their illegal dismissal in June 1994 up to October 29, 1999, pursuant to the Decision of the Court of Appeals (Special Sixteenth Division) in CA-G.R. SP No. 50531. Respondents interposed an appeal to the NLRC (docketed as NLRC Case No. M-006176-2001), contending that the computation should only be up to June 20, 1995 (the date indicated in the Labor Arbiters Decision). In an Order dated March 30, 2001, the NLRC modified the Labor Arbiters computation and ruled that the monetary awards due to petitioners should be computed from June 1994 up to June 20, 1995. Petitioners then filed a petition for certiorari with the Court of Appeals, docketed as CA-G.R. SP No. 67068, raffled off to the Seventh Division. However, in its Resolution of October 29, 2001, the petition was dismissed outright for their failure to attach to their petition copies of the pleadings filed with the Labor Arbiter, thus:

No copies of the pleadings filed before the Labor Arbiter appear to have been attached to the petition in violation of the provisions of Section 1, Rule 65 and Section 3, Rule 46 of the 1997 Rules of Civil Procedure, as amended, which requires that the petition: x x x shall be accompanied by a clearly legible duplicate original or certified true copy of the judgment, order, resolution or ruling subject thereof, such material portions of the record as are referred to therein and other documents relevant or pertinent thereto x x x WHEREFORE, the instant petition is DISMISSED OUTRIGHT pursuant to Section 3, Rule 46 of the 1997 Rules of Civil Procedure. SO ORDERED. Petitioners filed a motion for reconsideration, but they erroneously indicated therein the case number as CA-G.R. SP No. 50531, instead of CA-G.R. SP No. 67068. Their error was compounded by stating that the petition was with the Special Sixteenth Division, instead of the Seventh Division. As a result, the Special Sixteenth Division issued a Minute Resolution dated April 22, 2002 which merely noted the motion, thus: The petitioners motion for reconsideration dated November 22, 2001 and filed by registered mail on November 26, 2001 is merely noted since there was no October 29, 2001 resolution that was issued in this case which the motion for reconsideration seeks to be reconsidered. On realizing their mistake, petitioners then filed with the Seventh Division a Motion to Transfer The Case to it. In a Resolution promulgated on May 8, 2003, the Seventh Division denied petitioners Motion To Transfer The Case on the ground, among others, that the motion is "non-existent" since it does not bear the correct case number, hence, could not be attached to the records of CA-G.R. SP No. 67068. Unfazed, petitioners filed a motion for reconsideration, but it was denied by the Seventh Division in its Resolution of October 10, 2003. At first glance, the petition before us appears to be a futile attempt to revive an extinct motion denied by the appellate court (Seventh Division) by reason of technicality. But in the interest of speedy administration of justice, we should not only delve in technicalities. We shall then address these two issues: (1) whether the Court of Appeals (Seventh Division) erred in holding that affixing a wrong docket number on a motion renders it "non-existent;" and (2) whether the issuance by the NLRC of the Order dated March 30, 2001, amending the amounts of separation pay and backwages, awarded by the Court of Appeals (Sixteenth Division) to petitioners and computed by the Labor Arbiter, is tantamount to grave abuse of discretion amounting to lack or excess of jurisdiction. On the first issue, the Court of Appeals (Seventh Division) is correct when it ruled that petitioners motion for reconsideration of its Resolution dated October 29, 2001 in CA-G.R. SP No. 67068 is "non-existent." Petitioners counsel placed a wrong case number in their motion, indicating CA-G.R. SP No. 50531 (Special Sixteenth Division) instead of CA-G.R. SP No. 50531 (Seventh Division), the correct case number. In Llantero v. Court of Appeals,2we ruled that where a pleading bears an erroneous docket number and thus "could not be attached to the correct case," the said pleading is, for all intents and purposes, "non-existent." As aptly stated by the Special Sixteenth Division, it has neither the duty nor the obligation to correct the error or to transfer the case to the Seventh Division. In Mega Land Resources and Development Corporation v. C-E Construction Corporation,3 which likewise involves a wrong docket number in a motion, we ruled that the duty to correct the mistake falls solely on the party litigant whose fault caused the anomaly. To hold otherwise would be to impose upon appellate courts the burden of being nannies to appellants, ensuring the absence of pitfalls that hinder the perfection of petitions and appeals. Strictly speaking, it is a dogma that the mistake or negligence of counsel binds the clients 4 and appellate courts have no share in that burden. However, we opt for liberality in the application of the rules to the instant case in light of the following considerations. First, the rule that negligence of counsel binds the client may be relaxed where adherence thereto would result in outright deprivation of the clients liberty or property or where the interests of justice so require.5Second, this Court is not a slave of technical rules, shorn of judicial discretion in rendering justice, it is guided by the norm that on the balance, technicalities take a backseat against

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substantive rights. Thus, if the application of the rules would tend to frustrate rather than promote justice, it is always within this Courts power to suspend the rules or except a particular case from its application. 6 This case involving a labor dispute has dragged on for over a decade now. Petitioners have waited too long for what is due them under the law. One of the original petitioners, Judith Cotecson, died last September 28, 2003 and has been substituted by her heirs. It is time to write finis to this controversy. The Labor Code was promulgated to promote the welfare and well-being of the working man. Its spirit and intent mandate the speedy administration of justice, with least attention to technicalities but without sacrificing the fundamental requisites of due process.7 We recall that in CA-G.R. SP No. 50531, the Court of Appeals (Special Sixteenth Division) held that petitioners Cotecson, Bacolod, and Magallanes "shall be entitled to separation pay equivalent to one month salary and backwages computed from the time of their illegal dismissal up to the time of the promulgation of this decision." This Decision was promulgated on October 28, 1999. The respondents motion for reconsideration was denied by the Court of Appeals (Former Special Sixteenth Division) on January 13, 2000. On April 12, 2000, this Court dismissed respondents petition for certiorari, docketed as G.R. No. 142270, and denied their motion for reconsideration with finality as early as July 19, 2000. Clearly, the Decision in CA-G.R. SP No. 50531 had long become final and executory. The Labor Arbiter computed the monetary awards due to petitioners corresponding to the period from June 1994 to October 28, 1999, in accordance with the Decision of the Court of Appeals (Special Sixteenth Division). The award for backwages and money claims is in the total sum of P912,086.15. It does not escape our attention that upon respondents appeal from the Labor Arbiters Order computing the benefits due to petitioners, the NLRC modified the final and executory Decision of the Court of Appeals (Special Sixteenth Division) when it decreed that the monetary award due to petitioners should be computed up to June 20, 1995 only (not October 28, 1999) , thus, amounting to a lesser amount ofP147,673.16. We sustain petitioners contention that the NLRC, in modifying the award of the Court of Appeals, committed grave abuse of discretion amounting to lack or excess of jurisdiction. Quasi-judicial agencies have neither business nor power to modify or amend the final and executory Decisions of the appellate courts. Under the principle of immutability of judgments, any alteration or amendment which substantially affects a final and executory judgment is void for lack of jurisdiction.8 We thus rule that the Order dated March 30, 2001 of the NLRC directing that the monetary award should be computed from June 1994, the date petitioners were dismissed from the service, up to June 20, 1995 only, is void. WHEREFORE, we GRANT the petition. The challenged Resolutions dated October 29, 2001, May 8, 2003, and October 10, 2003 in CA-G.R. SP No. 67068 are REVERSED. The Order of the NLRC dated March 30, 2001 in NLRC Case No. M-006176-2001 is SET ASIDE. The Order of the Labor Arbiter dated January 8, 2001 isREINSTATED. SO ORDERED. This Petition for Review on Certiorari[1] under Rule 45 of the 1997 Rules of Civil Procedure assails the 31 March 2004 Decision[2] of the Court of Appeals affirming the resolution of the Social Security Commission (SSC),[3] as well as the 23 July 2004 Resolution[4] of the same court denying petitioners motion for reconsideration.

G.R. No. 173582 Yolanda Signey, Petitioner vs. SSS, Editha Castillo and Gina Servano, respondents TINGA, J:

We are called to determine who is entitled to the social security benefits of a Social Security System (SSS) member who was survived not only by his legal wife, but also by two common-law wives with whom he had six children.

The facts as culled from the records are as follows:

Rodolfo Signey, Sr., a member of the SSS, died on 21 May 2001. In his members records, he had designated Yolanda Signey (petitioner) as primary beneficiary and his four children with her as secondary beneficiaries. On 6 July 2001, petitioner filed a claim for death benefits with the public respondent SSS.[5] She revealed in her SSS claim that the deceased had a common-law wife, Gina Servano (Gina), with whom he had two minor children namey, Ginalyn Servano (Ginalyn), born on 13 April 1996, and Rodelyn Signey (Rodelyn), born on 20 April 2000.[6]

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Petitioners declaration was confirmed when Gina herself filed a claim for the same death benefits on 13 July 2001 in which she also declared that both she and petitioner were common-law wives of the deceased and that Editha Espinosa (Editha) was the legal wife. In addition, in October 2001, Editha also filed an application for death benefits with the SSS stating that she was the legal wife of the deceased.[7] The SSS, through a letter dated 4 December 2001,[8] denied the death benefit claim of petitioner. However, it recognized Ginalyn and Rodelyn, the minor children of the deceased with Gina, as the primary beneficiaries under the SSS Law. The SSS also found that the 20 March 1992 marriage between petitioner and the deceased was null and void because of a prior subsisting marriage contracted on 29 October 1967between the deceased and Editha, as confirmed with the Local Civil Registry of Cebu City. Thereafter, petitioner filed a petition[9] with the SSC in which she attached a waiver of rights[10] executed by Editha whereby the latter waived any/all claims from National Trucking Forwarding Corporation (NTFC) under the supervision of National Development Corporation (NDC), Social Security System (SSS) and other (i)nsurance (b)enefits due to the deceased Rodolfo Signey Sr., who died intestate on May 21, 2001 at Manila Doctors, and further declared that I am legally married to Mr. Aquilino Castillo and not to Mr. Rodolfo P. Signey Sr.[11] In a Resolution[12] dated 29 January 2003, the SSC affirmed the decision of the SSS. The SSC gave more weight to the SSS field investigation and the confirmed certification of marriage showing that the deceased was married to Editha on 29 October 1967, than to the aforestated declarations of Editha in her waiver of rights. It found that petitioner only relied on the waiver of Editha, as she failed to present any evidence to invalidate or otherwise controvert the confirmed marriage certificate. The SSC also found, based on the SSS field investigation report dated 6 November 2001 that even if Editha was the legal wife, she was not qualified to the death benefits since she herself admitted that she was not dependent on her deceased husband for support inasmuch as she was cohabiting with a certain Aquilino Castillo.[13]

requisites of a valid waiver is the existence of an actual right which could be renounced, petitioner in effect recognized thatEditha had a right over the benefits of the deceased thereby enabling her to renounce said right in favor of petitioner and her children. The declaration by Editha that she was not married to the deceased is not only contrary to the records of the Local Civil Registrar of Cebu City which state that they were married on 29 October 1967 but also renders nugatory the waiver of right itself, for if she was not married to the deceased then she would have no rights that may be waived. Petitioner had argued that the illegitimate children of the deceased with Gina failed to show proof that they were indeed dependent on the deceased for support during his lifetime. The SSC observed that Section 8(e) of the SSS Law, as amended, provides among others that dependents include the legitimate, legitimated or legally adopted, and illegitimate child who is unmarried, not gainfully employed, and has not reached 21 years of age. The provision vested the right of the benefit to his illegitimate minor children, Ginalyn and Rodelyn, irrespective of any proof that they had been dependent on the support of the deceased.[18] Petitioner appealed the judgment of the SSC to the Court of Appeals by filing a Petition for Review[19] under Rule 43 of the 1997 Rules of Civil Procedure. The appellate court affirmed the decision of the SSC in its31 March 2004 Decision. Resolving the determinative question of who between petitioner and the illegitimate children of the deceased are the primary beneficiaries lawfully entitled to the social security benefits accruing by virtue of the latters death, it held that based on Section 8(e) of R. A. No. 8282, a surviving spouse claiming death benefits as a dependent must be the legal spouse. Petitioners presentation of a marriage certificate attesting to her marriage to the deceased was futile, according to the appellate court, as said marriage is null and void in view of the previous marriage of the deceased to Editha as certified by the Local Civil Registrar ofCebu City. The appellate court also held that the law is clear that for a child to be qualified as dependent, he must be unmarried, not gainfully employed and must not be 21 years of age, or if over 21 years of age, he is congenitally or while still a minor has been permanently incapacitated and incapable of self-support, physically or mentally. And in this case, only the illegitimate children of the deceased with Gina namely, Ginalyn andRodelyn, are the qualified beneficiaries as they were still minors at the time of the death of their father. Considering petitioner is disqualified to be a beneficiary and the absence of any legitimate children of the deceased, it follows that the dependent illegitimate minor children of the deceased should be entitled to the death benefits as primary beneficiaries, the Court of Appeals concluded.[20] The Court of Appeals denied the motion for reconsideration of petitioner in a Resolution [21] dated 23 July 2004. It found that there was no new matter of substance which would warrant a modification and/or reversal of the 31 March 2004 Decision. Hence, this petition for review on certiorari. Petitioner raises issues similar to the ones which have been adequately resolved by the SSC and the appellate court. The first issue is whether petitioners marriage with the deceased is valid. The second issue is whether petitioner has a superior legal right over the SSS benefits as against the illegitimate minor children of the deceased. There is no merit in the petition. We deemed it best not to disturb the findings of fact of the SSS which are supported by substantial evidence[22] and affirmed by the SSC and the Court of Appeals. Moreover, petitioner ought to be reminded of the basic rule that this Court is not a trier of facts.[23] It is a well-known rule that in proceedings before administrative bodies, technical rules of procedure and evidence are not binding.[24] The important consideration is that both parties were afforded an opportunity to be heard and they availed themselves of it to present their respective positions on the matter in dispute.[25] It must likewise be noted that under Section 2, Rule 1[26] of the SSC Revised Rules of Procedure, the rules of evidence prevailing in the courts of law shall not be controlling. In the case at bar, the existence of a prior subsisting marriage between the deceased and Editha is supported by substantial evidence. Petitioner, who has fully availed of her right to be heard, only relied on the waiver of Editha and failed to present any evidence to invalidate or otherwise controvert the confirmed marriage certificate

Considering that petitioner, Editha, and Gina were not entitled to the death benefits, the SSC applied Section 8(e) and (k) of Republic Act (RA) No. 8282, the SSS Law which was in force at the time of the members death on 21 May 2001, and held that the dependent legitimate and illegitimate minor child ren of the deceased member were also considered primary beneficiaries. The records disclosed that the deceased had one legitimate child, Ma. Evelyn Signey, who predeceased him, and several illegitimate children with petitioner and with Gina. Based on their respective certificates of live birth, the deceased SSS members four illegitimate children with petitioner could no longer be considered dependents at the time of his death because all of them were over 21 years old when he died on 21 May 2001, the youngest having been born on 31 March 1978. On the other hand, the deceased SSS members illegitimate children with Gina were qualified to be his primary beneficiaries for they were still minors at the time of his death, Ginalyn having been born on 13 April 1996, andRodelyn on 20 April 2000.[14]

The SSC denied the motion for reconsideration filed by petitioner in an Order [15] dated 9 April 2003. This order further elaborated on the reasons for the denial of petitioners claims. It held that the mere designation of petitioner and her children as beneficiaries by the deceased member was not the controlling factor in the determination of beneficiaries. Sections 13, 8(e) and 8(k) of the SSS Law, as amended, provide that dependent legal spouse entitled by law to receive support from the member and dependent legitimate, legitimated or legally adopted, and illegitimate children of the member shall be the primary beneficiaries of the latter.[16] Based on the certification dated 25 July 2001 issued by the Office of the Local Civil Registrar of Cebu City, the marriage of the deceased and Editha on 29 October 1967 at the Metropolitan Cathedral, Cebu City was duly registered under LCR Registry No. 2083 on 21 November 1967. The SSS field investigation reports verified the authenticity of the said certification. [17]

The SSC did not give credence to the waiver executed by Editha, which manifested her lack of interest in the outcome of the case, considering that she was not entitled to the benefit anyway because of her admitted cohabitation with Aquilino Castillo. Moreover, the SSC held that considering that one of the

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registered under LCR Registry No. 2083 on 21 November 1967. She did not even try to allege and prove any infirmity in the marriage between the deceased and Editha.

only 50% of the share of the said legitimate child. Since the legitimate child of the deceased predeceased him, Ginalyn andRodelyn, as the only qualified primary beneficiaries of the deceased, are entitled to 100% of the benefits. WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals is AFFIRMED. Cost against petitioner.

As to the issue of who has the better right over the SSS death benefits, Section 8(e) and (k) of R. A. No. 8282[27] is very clear. Hence, we need only apply the law. Under the principles of statutory construction, if a statute is clear, plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. This plain meaning rule or verba legis, derived from the maxim index animi sermo est(speech is the index of intention), rests on the valid presumption that the words employed by the legislature in a statute correctly express its intent by the use of such words as are found in the statute. Verba legis non estrecedendum, or, from the words of a statute there should be no departure.[28] Section 8(e) and (k) of R.A. No. 8282 provides: SEC. 8. Terms Defined.For the purposes of this Act, the following terms shall, unless the context indicates otherwise, have the following meanings: xxx (e) Dependents The dependent shall be the following: (1) The legal spouse entitled by law to receive support from the member; 2) The legitimate, legitimated, or legally adopted, and illegitimate child who is unmarried, not gainfully employed and has not reached twenty-one years (21) of age, or if over twenty-one (21) years of age, he is congenitally or while still a minor has been permanently incapacitated and incapable of selfsupport, physically or mentally; and 3) The parent who is receiving regular support from the member. xxx (k) Beneficiaries The dependent spouse until he or she remarries, the dependent legitimate, legitimated or legally adopted, and illegitimate children, who shall be the primary beneficiaries of the member: Provided, That the dependent illegitimate children shall be entitled to fifty percent (50%) of the share of the legitimate, legitimated or legally adopted children: Provided, further, That in the absence of the dependent legitimate, legitimated or legally adopted children of the member, his/her dependent illegitimate children shall be entitled to one hundred percent (100%) of the benefits. In their absence, the dependent parents who shall be the secondary beneficiaries of the member. In the absence of all of the foregoing, any other person designated by the member as his/her secondary beneficiary. SEC. 13. Death Benefits. Upon the death of a member who has paid at least thirty-six (36) monthly contributions prior to the semester of death, his primary beneficiaries shall be entitled to the monthly pension: Provided, That if he has no primary beneficiaries, his secondary beneficiaries shall be entitled to a lump sum benefit equivalent to thirty-six (36) times the monthly pension. If he has not paid the required thirty-six (36) monthly contributions, his primary or secondary beneficiaries shall be entitled to a lump sum benefit equivalent to the monthly pension times the number of monthly contributions paid to the SSS or twelve (12) times the monthly pension, whichever is higher. (Emphasis supplied). Whoever claims entitlement to the benefits provided by law should establish his or her right thereto by substantial evidence. Since petitioner is disqualified to be a beneficiary and because the deceased has no legitimate child, it follows that the dependent illegitimate minor children of the deceased shall be entitled to the death benefits as primary beneficiaries. The SSS Law is clear that for a minor child to qualify as a dependent,[29] the only requirements are that he/she must be below 21 years of age, not married nor gainfully employed.[30]

In this case, the minor illegitimate children Ginalyn and Rodelyn were born on 13 April 1996 and 20 April 2000, respectively. Had the legitimate child of the deceased and Editha survived and qualified as a dependent under the SSS Law, Ginalyn and Rodelyn would have been entitled to a share equivalent to

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