EN BANC

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

ANTIPOLO REALTY CORPORATION, Petitioner, v. THE NATIONAL HOUSING AUTHORITY, HON. G.V. TOBIAS, in
his capacity as General Manager of the National Housing Authority, THE HON. JACOBO C. CLAVE, in his
capacity as Presidential Executive Assistant and VIRGILIO A. YUSON, Respondents.

SYLLABUS

1. ADMINISTRATIVE LAW; ADMINISTRATIVE AGENCIES EXERCISE AND PERFORM ADJUDICATORY POWERS AND
FUNCTION. It is by now commonplace learning that many administrative agencies exercise and perform adjudicatory
powers and functions, though to a limited extent only. Limited delegation of judicial or quasi-judicial authority to
administrative agencies (e.g., the Securities and Exchange Commission and the National Labor Relations Commission) is
well recognized in our jurisdiction, basically because the need for special competence and experience has been recognized
as essential in the resolution of questions of complex or specialized character and because of a companion recognition that
the dockets of our regular courts have remained crowded and clogged. (See Spouses Jose Abejo and Aurora Abejo, Et. Al.
v. Hon. Rafael dela Cruz, etc., Et Al., G.R. No. 63558, May 19, 1987).
2. ID.; ID.; QUANTUM OF JUDICIAL OR QUASI-JUDICIAL POWERS DEFINED IN ITS ENABLING ACT. In general, the
quantum of judicial or quasi-judicial powers which an administrative agency may exercise is defined in the enabling act of
such agency. In other words, the extent to which an administrative entity may exercise such powers depends largely, if
not wholly, on the provisions of the statute creating or empowering such agency.
3. ID.; ID.; ID.; NATIONAL HOUSING AUTHORITY. The extent to which the NHA has been vested with quasi-judicial
authority must be determined by referring to the terms of Presidential Decree No. 957, known as "The Subdivision and
Condominium Buyers Decree." Section 3 of this statute provides as follows: "National Housing Authority. The National
Housing Authority shall have exclusive jurisdiction to regulate the real estate trade and business in accordance with the
provisions of this decree." (Emphasis supplied)
4. CIVIL LAW; OBLIGATIONS AND CONTRACTS; POWER TO RESCIND AVAILABLE ONLY TO INJURED PARTY; CASE AT BAR.
Having failed to comply with its contractual obligation to complete certain specified improvements in the subdivision
within the specified period of two years from the date of the execution of the Contract to Sell, petitioner was not entitled
to exercise its options under Clause 7 of the Contract. Hence, petitioner could neither rescind the Contract to Sell nor treat
the installment payments made by the private respondent as forfeited in its favor. Indeed, under the general Civil Law, in
view of petitioners breach of its contract with private respondent, it is the latter who is vested with the option either to
rescind the contract and receive reimbursement of all installment payments (with legal interest) made for the purchase of
the subdivision lot in question, or to suspend payment of further purchase installments until such time as the petitioner
had fulfilled its obligations to the buyer. The NHA was therefore correct in holding that private respondents prior
installment payments could not be forfeited in favor of petitioner.
5. REMEDIAL LAW; MOTIONS; DUE PROCESS; PRINCIPLE NOT VIOLATED WHERE PARTY WAS GIVEN AMPLE OPPORTUNITY
TO PRESENT ITS SIDE AND TO BE HEARD. We turn to petitioners assertion that it had been denied the right to due
process. This assertion lacks substance. The record shows that a copy of the order denying the Motion to Dismiss and
scheduling the hearing of the complaint for the morning of 6 March 1978, was duly served on counsel for petitioner, as
evidenced by the annotation appearing at the bottom of said copy indicating that such service had been effected. But even
if it be assumed, arguendo, that such notice had not been served on the petitioner, nevertheless the latter was not
deprived of due process, for what the fundamental law abhors is not the absence of previous notice but rather the
absolute lack of opportunity to be heard. In the instant case, petitioner was given ample opportunity to present its side
and to be heard on a motion for reconsideration as well, and not just on a motion to dismiss; the claim of denial of due
process must hence sound even more hollow.
6. ADMINISTRATIVE LAW; SUBDIVISION AND CONDOMINIUM BUYERS DECREE (PD 957); SALE OF LOTS IN
INSTALLMENT BASIS; ORIGINAL PERIOD OF PAYMENT DEEMED EXTENDED. To permit Antipolo Realty to collect the
disputed amount in a lump sum after it had defaulted on its obligations to its lot buyers, would tend to defeat the purpose
of the authorization to lot buyers to suspend installment payments. As the NHA resolution pointed out," [s]uch must be
the case, otherwise, there is no sense in suspending payments." Upon the other hand, to condone the entire amount that
would have become due would be an excessively harsh penalty upon the petitioner and would result in the unjust
enrichment of the private respondent at the expense of the petitioner.

DECISION

FELICIANO, J.:

By virtue of a Contract to Sell dated 18 August 1970, Jose Hernando acquired prospective and beneficial ownership over
Lot. No. 15, Block IV of the Ponderosa Heights Subdivision in Antipolo, Rizal, from the petitioner Antipolo Realty
Corporation.
On 28 August 1974, Mr. Hernando transferred his rights over Lot No. 15 to private respondent Virgilio Yuson. The transfer
was embodied in a Deed of Assignment and Substitution of Obligor (Delegacion), executed with the consent of Antipolo
Realty, in which Mr. Yuson assumed the performance of the vendees obligations under the original contract, including
payment of his predecessors installments in arrears. However, for failure of Antipolo Realty to develop the subdivision
project in accordance with its undertaking under Clause 17 of the Contract to Sell, Mr. Yuson paid only the arrearages
pertaining to the period up to, and including, the month of August 1972 and stopped all monthly installment payments
falling due thereafter Clause 17 reads:chanroblesvirtualawlibrary
"Clause 17. SUBDIVISION BEAUTIFICATION. To insure the beauty of the subdivision in line with the modern trend of
urban development, the SELLER hereby obligates itself to provide the subdivision with:chanrob1es virtual 1aw library
a) Concrete curbs and gutters
b) Underground drainage system
c) Asphalt paved roads
d) Independent water system
e) Electrical installation with concrete posts.
f) Landscaping and concrete sidewalks
g) Developed park or amphitheatre
h) 24-hour security guard service.
These improvements shall be complete within a period of two (2) years from date of this contract. Failure by the SELLER
shall permit the BUYER to suspend his monthly installments without any penalties or interest charges until such time that
such improvements shall have been completed." 1
On 14 October 1976, the president of Antipolo Realty sent a notice to private respondent Yuson advising that the required
improvements in the subdivision had already been completed, and requesting resumption of payment of the monthly
installments on Lot No. 15. For his part, Mr. Yuson replied that he would conform with the request as soon as he was able
to verify the truth of the representation in the notice.
In a second letter dated 27 November 1976, Antipolo Realty reiterated its request that Mr. Yuson resume payment of his
monthly installments, citing the decision rendered by the National Housing Authority (NHA) on 25 October 1976 in Case
No. 252 (entitled "Jose B. Viado Jr., complainant v. Conrado S. Reyes, respondent") declaring Antipolo Realty to have
"substantially complied with its commitment to the lot buyers pursuant to the Contract to Sell, executed by and between
the lot buyers and the Respondent." In addition, a formal demand was made for full and immediate payment of the
amount of P16,994.73, representing installments which, Antipolo Realty alleged, had accrued during the period while the
improvements were being completed i.e., between September 1972 and October 1976.chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph
Mr. Yuson refused to pay the September 1972 - October 1976 monthly installments but agreed to pay the post October
1976 installments. Antipolo Realty responded by rescinding the Contract to Sell, and claiming the forfeiture of all
installment payments previously made by Mr. Yuson.
Aggrieved by the rescission of the Contract to Sell, Mr. Yuson brought his dispute with Antipolo Realty before public
respondent NHA through a letter-complaint dated 10 May 1977 which complaint was docketed in NHA as Case No. 2123.
Antipolo Realty filed a Motion to Dismiss which was heard on 2 September 1977. Antipolo Realty, without presenting any
evidence, moved for the consolidation of Case No. 2123 with several other cases filed against it by other subdivision lot
buyers, then pending before the NHA. In an Order issued on 7 February 1978, the NHA denied the motion to dismiss and
scheduled Case No. 2123 for hearing.

After hearing, the NHA rendered a decision on 9 March 1978 ordering the reinstatement of the Contract to Sell under the
following conditions:jgc:chanrobles.com.ph
"1) Antipolo Realty Corporation shall sent [sic] to Virgilio Yuzon a statement of account for the monthly amortizations from
November 1976 to the present;
2) No penalty interest shall be charged for the period from November 1976 to the date of the statement of account; and
3) Virgilio Yuzon shall be given sixty (60) days to pay the arrears shown in the statement of account." 2
Antipolo Realty filed a Motion for Reconsideration asserting: (a) that it had been denied due process of law since it had not
been served with notice of the scheduled hearing; and (b) that the jurisdiction to hear and decide Mr. Yusons complaint
was lodged in the regular courts, not in the NHA, since that complaint involved the interpretation and application of the
Contract to Sell.
The motion for reconsideration was denied on 28 June 1978 by respondent NHA General Manager G.V. Tobias, who
sustained the jurisdiction of the NHA to hear and decide the Yuson complaint. He also found that Antipolo Realty had in
fact been served with notice of the date of the hearing, but that its counsel had failed to attend the hearing. 3 The case
was submitted for decision, and eventually decided, solely on the evidence presented by the complainant.
On 2 October 1978, Antipolo Realty came to this Court with a Petition for Certiorari and Prohibition with Writ of Preliminary
Injunction, which was docketed as G.R. No. L-49051. Once more, the jurisdiction of the NHA was assailed. Petitioner
further asserted that, under Clause 7 of the Contract to Sell, it could validly terminate its agreement with Mr. Yuson and,
as a consequence thereof, retain all the prior installment payments made by the latter. 4
This Court denied certiorari in a minute resolution issued on 11 December 1978, "without prejudice to petitioners
pursuing the administrative remedy." 5 A motion for reconsideration was denied on 29 January 1979.
Thereafter, petitioner interposed an appeal from the NHA decision with the Office of the President which, on 9 March 1979,
dismissed the same through public respondent Presidential Executive Assistant Jacobo C. Clave. 6
In the present petition, Antipolo Realty again asserts that, in hearing the complaint of private respondent Yuson and in
ordering the reinstatement of the Contract to Sell between the parties, the NHA had not only acted on a matter beyond its
competence, but had also, in effect, assumed the performance of judicial or quasi-judicial functions which the NHA was
not authorized to perform.chanrobles virtual lawlibrary
We find the petitioners arguments lacking in merit.
It is by now commonplace learning that many administrative agencies exercise and perform adjudicatory powers and
functions, though to a limited extent only. Limited delegation of judicial or quasi-judicial authority to administrative
agencies (e.g., the Securities and Exchange Commission and the National Labor Relations Commission) is well recognized
in our jurisdiction, 7 basically because the need for special competence and experience has been recognized as essential in
the resolution of questions of complex or specialized character and because of a companion recognition that the dockets of
our regular courts have remained crowded and clogged. In Spouses Jose Abejo and Aurora Abejo, Et. Al. v. Hon. Rafael
dela Cruz, etc., Et Al., 8 the Court, through Mr. Chief Justice Teehankee, said:jgc:chanrobles.com.ph
"In the fifties, the Court taking cognizance of the move to vest jurisdiction in administrative commissions and boards the
power to resolve specialized disputes in the field of labor (as in corporations, public transportation and public utilities)
ruled that Congress in requiring the Industrial Courts intervention in the resolution of labor-management controversies
likely to cause strikes or lockouts meant such jurisdiction to be exclusive, although it did not so expressly state in the law.
The Court held that under the sense-making and expeditious doctrine of primary jurisdiction . . . the courts cannot or will
not determine a controversy involving a question which is within the jurisdiction of an administrative tribunal, where the
question demands the exercise of sound administrative discretion requiring the special knowledge, experience, and
services of the administrative tribunal to determine technical and intricate matters of fact, and a uniformity of ruling is
essential to comply with the purposes of the regulatory statute administered (Pambujan Sur United Mine Workers v.
Samar Mining Co., Inc., 94 Phil. 932, 941 [1954]).
In this era of clogged court dockets, the need for specialized administrative boards or commissions with the special
knowledge, experience and capability to hear and determine promptly disputes on technical matters or essentially factual
matters, subject to judicial review in case of grave abuse of discretion, has become well nigh indispensable. Thus, in 1984,
the Court noted that between the power lodged in an administrative body and a court, the unmistakable trend has been
to refer it to the former. "Increasingly, this Court has been committed to the view that unless the law speaks clearly and
unequivocably, the choice should fall on [an administrative agency]" (NFL v. Eisma, 127 SCRA 419, 428, citing
precedents). The Court in the earlier case of Ebon v. De Guzman (113 SCRA 52, 56 [1982]), noted that the lawmaking
authority, in restoring to the labor arbiters and the NLRC their jurisdiction to award all kinds of damages in labor cases, as
against the previous P.D. amendment splitting their jurisdiction with the regular courts, evidently, . . . had second
thoughts about depriving the Labor Arbiters and the NLRC of the jurisdiction to award damages in labor cases because
that setup would mean duplicity of suits, splitting the cause of action and possible conflicting findings and conclusions by

two tribunals on one and the same claim."

In an even more recent case, Tropical Homes, Inc. v. National Housing Authority, Et Al., 9 Mr. Justice Gutierrez, speaking
for the Court, observed that:jgc:chanrobles.com.ph
"There is no question that a statute may vest exclusive original jurisdiction in an administrative agency over certain
disputes and controversies falling within the agencys special expertise. The very definition of an administrative agency
includes its being vested with quasi-judicial powers. The ever increasing variety of powers and functions given to
administrative agencies recognizes the need for the active intervention of administrative agencies in matters calling for
technical knowledge and speed in countless controversies which cannot possibly be handled by regular courts."cralaw
virtua1aw library
In general, the quantum of judicial or quasi-judicial powers which an administrative agency may exercise is defined in the
enabling act of such agency. In other words, the extent to which an administrative entity may exercise such powers
depends largely, if not wholly, on the provisions of the statute creating or empowering such agency. 10 In the exercise of
such powers, the agency concerned must commonly interpret and apply contracts and determine the rights of private
parties under such contracts. One thrust of the multiplication of administrative agencies is that the interpretation of
contracts and the determination of private rights thereunder is no longer a uniquely judicial function, exercisable only by
our regular courts.chanrobles.com : virtual law library
Thus, the extent to which the NHA has been vested with quasi-judicial authority must be determined by referring to the
terms of Presidential Decree No. 957, known as "The Subdivision and Condominium Buyers Decree." 11 Section 3 of this
statute provides as follows:jgc:chanrobles.com.ph
"National Housing Authority. The National Housing Authority shall have exclusive jurisdiction to regulate the real estate
trade and business in accordance with the provisions of this decree." (Emphasis supplied)
The need for and therefore the scope of the regulatory authority thus lodged in the NHA are indicated in the second and
third preambular paragraphs of the statute which provide:jgc:chanrobles.com.ph
"WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators, and/or sellers have
reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage,
water systems, lighting systems and other similar basic requirements, thus endangering the health and safety of home
and lot buyers;
WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent manipulations perpetrated by
unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers or titles
free from liens and encumbrances, and to pay real estate taxes, and fraudulent sales of the same subdivision lots to
different innocent purchasers for value ." (Emphasis supplied)
Presidential Decree No. 1344 12 clarified and spelled out the quasi-judicial dimensions of the grant of regulatory authority
to the NHA in the following quite specific terms:jgc:chanrobles.com.ph
"SECTION 1. In the exercise of its functions to regulate the real estate trade and business and in addition to its powers
provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and
decide cases of the following nature:chanrob1es virtual 1aw library
A. Unsound real estate business practices:chanrob1es virtual 1aw library
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 lots or
condominium units against the owner, developer, dealer, broker or salesman." (Emphasis supplied.)
The substantive provisions being applied and enforced by the NHA in the instant case are found in Section 23 of
Presidential Decree No. 957 which reads:jgc:chanrobles.com.ph
"Sec. 23. Non-Forfeiture of Payments. No installment payment made by a buyer in a subdivision or condominium project
for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due
notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the
subdivision or condominium project according to the approved plans and within the time limit for complying with the
same. Such buyer may, at his option, be reimbursed the total amount paid including amortization and interests but
excluding delinquency interests, with interest thereon at the legal rate." (Emphasis supplied.)
Having failed to comply with its contractual obligation to complete certain specified improvements in the subdivision within
the specified period of two years from the date of the execution of the Contract to Sell, petitioner was not entitled to
exercise its options under Clause 7 of the Contract. Hence, petitioner could neither rescind the Contract to Sell nor treat
the installment payments made by the private respondent as forfeited in its favor. Indeed, under the general Civil Law, 13

in view of petitioners breach of its contract with private respondent, it is the latter who is vested with the option either to
rescind the contract and receive reimbursement of all installment payments (with legal interest) made for the purchase of
the subdivision lot in question, or to suspend payment of further purchase installments until such time as the petitioner
had fulfilled its obligations to the buyer. The NHA was therefore correct in holding that private respondents prior
installment payments could not be forfeited in favor of petitioner.chanrobles virtual lawlibrary
Neither did the NHA commit any abuse, let alone a grave abuse of discretion or act in excess of its jurisdiction when it
ordered the reinstatement of the Contract to Sell between the parties. Such reinstatement is no more than a logical
consequence of the NHAs correct ruling, just noted, that the petitioner was not entitled to rescind the Contract to Sell.
There is, in any case, no question that under Presidential Decree No. 957, the NHA was legally empowered to determine
and protect the rights of contracting parties under the law administered by it and under the respective agreements, as
well as to ensure that their obligations thereunder are faithfully performed.
We turn to petitioners assertion that it had been denied the right to due process. This assertion lacks substance. The
record shows that a copy of the order denying the Motion to Dismiss and scheduling the hearing of the complaint for the
morning of 6 March 1978, was duly served on counsel for petitioner, as evidenced by the annotation appearing at the
bottom of said copy indicating that such service had been effected. 14 But even if it be assumed, arguendo, that such
notice had not been served on the petitioner, nevertheless the latter was not deprived of due process, for what the
fundamental law abhors is not the absence of previous notice but rather the absolute lack of opportunity to be heard. 15
In the instant case, petitioner was given ample opportunity to present its side and to be heard on a motion for
reconsideration as well, and not just on a motion to dismiss; the claim of denial of due process must hence sound even
more hollow. 16
We turn finally to the question of the amount of P16,994.73 which petitioner insists had accrued during the period from
September 1972 to October 1976, when private respondent had suspended payment of his monthly installments on his
chosen subdivision lot. The NHA in its 9 March 1978 resolution ruled that the regular monthly installments under the
Contract to Sell did not accrue during the September 1972 October 1976 period:jgc:chanrobles.com.ph
" [R]espondent allowed the complainant to suspend payment of his monthly installments until the improvements in the
subdivision shall have been completed. Respondent informed complainant on November 1976 that the improvement 6
have been completed. Monthly installments during the period of suspension of payment did not become due and
demandable. Neither did they accrue. Such must be the case, otherwise, there is no sense in suspending payments. If the
suspension is lifted the debtor shall resume payments but never did he incur any arrears.
Such being the case, the demand of respondent for complainant to pay the arrears due during the period of suspension of
payment is null and void. Consequently, the notice of cancellation based on the refusal to pay the arrears that were not
due and demandable is also null and void." 17
The NHA resolution is probably too terse and in need of clarification and amplification. The NHA correctly held that no
installment payments should be considered as having accrued during the period of suspension of payments. Clearly, the
critical issue is what happens to the installment payments which would have accrued and fallen due during the period of
suspension had no default on the part of the petitioner intervened. To our mind, the NHA resolution is most appropriately
read as directing that the original period of payment in the Contract to Sell must be deemed extended by a period of time
equal to the period of suspension (i.e., by four (4) years and two (2) months) during which extended time (tacked on to
the original contract period) private respondent buyer must continue to pay the monthly installment payments until the
entire original contract price shall have been paid. We think that such is the intent of the NHA resolution which directed
that" [i]f the suspension is lifted, the debtor shall resume payments" and that such is the most equitable and just reading
that may be given to the NHA resolution. To permit Antipolo Realty to collect the disputed amount in a lump sum after it
had defaulted on its obligations to its lot buyers, would tend to defeat the purpose of the authorization (under Sec. 23 of
Presidential Decree No. 957, supra) to lot buyers to suspend installment payments. As the NHA resolution pointed out,"
[s]uch must be the case, otherwise, there is no sense in suspending payments." Upon the other hand, to condone the
entire amount that would have become due would be an excessively harsh penalty upon the petitioner and would result in
the unjust enrichment of the private respondent at the expense of the petitioner. It should be recalled that the latter had
already fulfilled, albeit tardily, its obligations to its lot buyers under their Contracts to Sell. At the same time, the lot buyer
should not be regarded as delinquent and as such charged penalty interest. The suspension of installment payments was
attributable to the petitioner, not the private Respondent. The tacking on of the period of suspension to the end of the
original period precisely prevents default on the part of the lot buyer. In the words of the NHA resolution, "never would
[the buyer] incur any arrears."cralaw virtua1aw library
WHEREFORE, the Petition for Certiorari is DISMISSED. The NHA decision appealed from is hereby AFFIRMED and clarified
as providing for the lengthening of the original contract period for payment of installments under the Contract to Sell by
four (4) years and two (2) months, during which extended time private respondent shall continue to pay the regular
monthly installment payments until the entire original contract price shall have been paid. No pronouncement as to costs.
SO ORDERED.
Teehankee, C.J., Yap, Fernan, Narvasa, Melencio-Herrera, Gutierrez, Jr., Cruz, Paras, Gancayco, Padilla, Bidden, Sarmiento
and Cortes, JJ., concur.

THIRD DIVISION
[G.R. NO. 174350 : August 13, 2008]
SPOUSES BERNYL BALANGAUAN & KATHERENE BALANGAUAN, Petitioners, v. THE HONORABLE COURT OF
APPEALS, SPECIAL NINETEENTH (19TH) DIVISION, CEBU CITY & THE HONGKONG AND SHANGHAI BANKING
CORPORATION, LTD.,Respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us is a Petition for Certiorari under Rule 65 of the Revised Rules of Court assailing the 28 April 2006
Decision1 and 29 June 2006 Resolution2 of the Court of Appeals in CA-G.R. CEB-SP No. 00068, which annulled and set
aside the 6 April 20043 and 30 August 20044 Resolutions of the Department of Justice (DOJ) in I.S. No. 02-9230-I,
entitled "The Hongkong and Shanghai Banking Corporation v. Katherine Balangauan, et al." The twin resolutions of the
DOJ affirmed, in essence, the Resolution of the Office of the City Prosecutor,5 Cebu City, which dismissed for lack of
probable cause the criminal complaint for Estafa and/or Qualified Estafa, filed against petitioner-Spouses Bernyl
Balangauan (Bernyl) and Katherene Balangauan (Katherene) by respondent Hong Kong and Shanghai Banking
Corporation, Ltd. (HSBC).
In this Petition for Certiorari, petitioners Bernyl and Katherene urge this Court to "reverse and set aside the Decision of
the Court of Appeals, Special nineteenth (sic) [19th] division (sic), Cebu City (sic) and accordingly, dismiss the complaint
against the [petitioners Bernyl and Katherene] in view of the absence of probable cause to warrant the filing of an
information before the Court and for utter lack of merit." 6
As culled from the records, the antecedents of the present case are as follows:
Petitioner Katherene was a Premier Customer Services Representative (PCSR) of respondent bank, HSBC. As a PCSR, she
managed the accounts of HSBC depositors withPremier Status. One such client and/or depositor handled by her was Roger
Dwayne York (York).
York maintained several accounts with respondent HSBC. Sometime in April 2002, he went to respondent HSBC's Cebu
Branch to transact with petitioner Katherene respecting his Dollar and Peso Accounts. Petitioner Katherene being on
vacation at the time, York was attended to by another PCSR. While at the bank, York inquired about the status of his time
deposit in the amount of P2,500,000.00. The PCSR representative who attended to him, however, could not find any
record of said placement in the bank's data base.
York adamantly insisted, though, that through petitioner Katherene, he made a placement of the aforementioned amount
in a higher-earning time deposit. York further elaborated that petitioner Katherene explained to him that the alleged
higher-earning time deposit scheme was supposedly being offered to Premier clients only. Upon further scrutiny and
examination, respondent HSBC's bank personnel discovered that: (1) on 18 January 2002, York pre-terminated
a P1,000,000.00 time deposit; (2) there were cash movement tickets and withdrawal slips all signed by York for the
amount of P1,000,000.00; and (3) there were regular movements in York's accounts, i.e., beginning in the month of
January 2002, monthly deposits in the amount of P12,500.00 and P8,333.33 were made, which York denied ever making,
but surmised were the regular interest earnings from the placement of the P2,500,000.00.
It was likewise discovered that the above-mentioned deposits were transacted using petitioner Katherene's computer and
work station using the code or personal password "CEO8." The significance of code "CEO8," according to the bank
personnel of respondent HSBC, is that, "[i]t is only Ms. Balangauan who can transact from [the] computer in the work
station CEO-8, as she is provided with a swipe card which she keeps sole custody of and only she can use, and which she
utilizes for purposes of performing bank transactions from that computer." 7
Bank personnel of respondent HSBC likewise recounted in their affidavits that prior to the filing of the complaint for estafa
and/or qualified estafa, they were in contact with petitioners Bernyl and Katherene. Petitioner Bernyl supposedly met with
them on two occasions. At first he disavowed any knowledge regarding the whereabouts of York's money but later on
admitted that he knew that his wife invested the funds with Shell Company. He likewise admitted that he made the phone
banking deposit to credit York's account with the P12,500.00 and the P8,333.33 using their landline telephone. With
respect to petitioner Katherene, she allegedly spoke to the bank personnel and York on several occasions and admitted
that the funds were indeed invested with Shell Company but that York knew about this.

So as not to ruin its name and goodwill among its clients, respondent HSBC reimbursed York the P2,500,000.00.
Based on the foregoing factual circumstances, respondent HSBC, through its personnel, filed a criminal complaint for
Estafa and/or Qualified Estafa before the Office of the City Prosecutor, Cebu City.
Petitioners Bernyl and Katherene submitted their joint counter-affidavit basically denying the allegations contained in the
affidavits of the aforenamed employees of respondent HSBC as well as that made by York. They argued that the
allegations in the Complaint-Affidavits were pure fabrications. Specifically, petitioner Katherene denied 1) having spoken
on the telephone with Dy and York; and 2) having admitted to the personnel of respondent HSBC and York that she took
the P2,500,000.00 of York and invested the same with Shell Corporation. Petitioner Bernyl similarly denied 1) having met
with Dy, Iigo, Cortes and Arcuri; and 2) having admitted to them that York knew about petitioner Katherene's move of
investing the former's money with Shell Corporation.
Respecting the P12,500.00 and P8,333.33 regular monthly deposits to York's account made using the code "CEO8,"
petitioners Bernyl and Katherene, in their defense, argued that since it was a deposit, it was her duty to accept the funds
for deposit. As regards York's time deposit with respondent HSBC, petitioners Bernyl and Katherene insisted that the funds
therein were never entrusted to Katherene in the latter's capacity as PCSR Employee of the former because monies
deposited "at any bank would not and will not be entrusted to specific bank employee but to the bank as a whole."
Following the requisite preliminary investigation, Assistant City Prosecutor (ACP) Victor C. Laborte, Prosecutor II of the
OCP, Cebu City, in a Resolution8 dated 21 February 2003, found no probable cause to hold petitioners Bernyl and
Katherene liable to stand trial for the criminal complaint of estafa and/or qualified estafa, particularly Article 315 of the
Revised Penal Code. Accordingly, the ACP recommended the dismissal of respondent HSBC's complaint.
The ACP explained his finding, viz:
As in any other cases, we may never know the ultimate truth of this controversy. But on balance, the evidence on record
tend to be supportive of respondents' contention rather than that of complaint.
xxx
First of all, it is well to dwell on what Mr. York said in his affidavit. Thus:
`18. For purposes of opening these two time deposits (sic) accounts, Ms. Balangauan asked me to sign several Bank
documents on several occasions, the nature of which I was unfamiliar with.'
`20. I discovered later that these were withdrawal slips and cash movement tickets, with which documents Ms.
Balangauan apparently was able to withdraw the amount from my accounts, and take the same from the premises of the
Bank.'
In determining the credibility of an evidence, it is well to consider the probability or improbability of one's statements for it
has been said that there is no test of the truth of human testimony except its conformity to our knowledge, observation
and experience.
Mr. York could not have been that unwary and unknowingly innocent to claim unfamiliarity with withdrawal slips and cash
movement tickets which Ms. Balangauan made him to sign on several occasions. He is a premier client of HSBC
maintaining an account in millions of pesos. A withdrawal slip and cash movement tickets could not have had such
intricate wordings or terminology so as to render them non-understandable even to an ordinary account holder. Mr. York
admittedly is a long-standing client of the bank. Within the period of 'long-standing' he certainly must have effected some
withdrawals. It goes without saying therefore that the occasions that Ms. Balangauan caused him to sign withdrawal slips
are not his first encounter with such kinds of documents.
The one ineluctable conclusion therefore that can be drawn from the premises is that Mr. York freely and knowingly knew
what was going on with his money, who has in possession of them and where it was invested. These take out the
elements of deceit, fraud, abuse of confidence and without the owner's consent in the crimes charged.
The other leg on which complainant's cause of action stands rest on its claim for sum of money against respondents
allegedly after it reimbursed Mr. York for his missing account supposedly taken/withdrawn by Ms. Balangauan. The bank's
action against respondents would be a civil suit against them which apparently it already did after the bank steps into the
shoes of Mr. York and becomes the creditor of Ms. Balangauan.9
The ACP then concluded that:

By and large, the evidence on record do (sic) not engender enough bases to establish a probable cause against
respondents.10
On 1 July 2003, respondent HSBC appealed the above-quoted resolution and foregoing comment to the Secretary of the
DOJ by means of a Petition for Review.
In a Resolution dated 6 April 2004, the Chief State Prosecutor, Jovencito R. Zuo, for the Secretary of the DOJ, dismissed
the petition. In denying respondent HSBC's recourse, the Chief State Prosecutor held that:
Sec. 12 (c) of Department Circular No. 70 dated July 2, 2000 provides that the Secretary of Justice may, motu proprio,
dismiss outright the petition if there is no showing of any reversible error in the questioned resolution.
We carefully examined the petition and its attachments and found no reversible error that would justify a reversal of the
assailed resolution which is in accord with the law and evidence on the matter.
Respondent HSBC's Motion for Reconsideration was likewise denied with finality by the DOJ in a lengthier Resolution dated
30 August 2004.
The DOJ justified its ruling in this wise:
A perusal of the motion reveals no new matter or argument which was not taken into consideration in our review of the
case. Hence, we find no cogent reason to reconsider our resolution. Appellant failed to present any iota of evidence
directly showing that respondent Katherene Balangauan took the money and invested it somewhere else. All it tried to
establish was that Katherene unlawfully took the money and fraudulently invested it somewhere else x x x, because after
the withdrawals were made, the money never reached Roger York as appellant adopted hook, line and sinker the latter's
declaration, despite York's signatures on the withdrawal slips covering the total amount of P2,500,000.00 x x x. While
appellant has every reason to suspect Katherene for the loss of theP2,500,000.00 as per York's bank statements, the cash
deposits were identified by the numerals "CEO8" and it was only Katherene who could transact from the computer in the
work station CEO-8, plus alleged photographs showing Katherene "leaving her office at 5:28 p.m. with a bulky plastic bag
presumably containing cash" since a portion of the funds was withdrawn, we do not, however, dwell on possibilities,
suspicion and speculation. We rule based on hard facts and solid evidence.
Moreover, an examination of the Petition for Review reveals that appellant failed to append thereto all annexes to
respondents' urgent manifestations x x x together with supplemental affidavits of Melanie de Ocampo and Rex B. Balucan
x x x, which are pertinent documents required under Section 5 of Department Circular No. 70 dated July 3, 2000. 11
Respondent HSBC then went to the Court of Appeals by means of a Petition for Certiorariunder Rule 65 of the Revised
Rules of Court.
On 28 April 2006, the Court of Appeals promulgated its Decision granting respondent HSBC's petition, thereby annulling
and setting aside the twin resolutions of the DOJ.
The fallo of the assailed decision reads:
WHEREFORE, in view of the foregoing premises, judgment is hereby rendered by us GRANTING the petition filed in this
case. The assailed Resolutions dated April 6, 2004 and August 30, 2004 are ANNULLED and SET ASIDE.
The City Prosecutor of Cebu City is hereby ORDERED to file the appropriate Information against the private respondents. 12
Petitioners Bernyl and Katherene's motion for reconsideration proved futile, as it was denied by the appellate court in
a Resolution dated 29 June 2006.
Hence, this Petition for Certiorari filed under Rule 65 of the Revised Rules of Court.
Petitioners Bernyl and Katherene filed the present petition on the argument that the Court of Appeals committed grave
abuse of discretion in reversing and setting aside the resolutions of the DOJ when: (1) "[i]t reversed the resolution of the
Secretary of Justice, Manila dated August 30, 2004 and correspondingly, gave due course to the Petition for Certiorari filed
by HSBC on April 28, 2006 despite want of probable cause to warrant the filing of an information against the herein
petitioners"13; (2) "[i]t appreciated the dubious evidence adduced by HSBC albeit the absence of legal standing or
personality of the latter"14; (3) "[i]t denied the motions for reconsideration on June 29, 2006 notwithstanding the glaring
evidence proving the innocence of the petitioners" 15; (4) "[i]t rebuffed the evidence of the herein petitioners in spite of the
fact that, examining such evidence alone would establish that the money in question was already withdrawn by Mr. Roger

Dwayne York"16; and (5) "[i]t failed to dismiss outright the petition by HSBC considering that the required affidavit of
service was not made part or attached in the said petition pursuant to Section 13, Rule 13 in relation to Section 3, Rule
46, and Section 2, Rule 56 of the Rules of Court."17
Required to comment on the petition, respondent HSBC remarked that the filing of the present petition is improper and
should be dismissed. It argued that the correct remedy is an appeal by certiorari under Rule 45 of the Revised Rules of
Court.
Petitioners Bernyl and Katherene, on the other hand, asserted in their Reply18 that the petition filed under Rule 65 was
rightfully filed considering that not only questions of law were raised but questions of fact and error of jurisdiction as well.
They insist that the Court of Appeals "clearly usurped into the jurisdiction and authority of the Public Prosecutor/Secretary
of justice (sic) x x x."19
Given the foregoing arguments, there is need to address, first, the issue of the mode of appeal resorted to by petitioners
Bernyl and Katherene. The present petition is one for certiorari under Rule 65 of the Revised Rules of Court. Notice that
what is being assailed in this recourse is the decision and resolution of the Court of Appeals dated 28 April 2006 and 29
June 2006, respectively. The Revised Rules of Court, particularly Rule 45 thereof, specifically provides that an appeal
by certiorari from the judgments or final orders or resolutions of the appellate court is by verified Petition for Review
on Certiorari .20
In the present case, there is no question that the 28 April 2006 Decision and 29 June 2006Resolution of the Court of
Appeals granting the respondent HSBC's petition in CA-G.R. CEB. SP No. 00068 is already a disposition on the merits.
Therefore, both decision and resolution, issued by the Court of Appeals, are in the nature of a final disposition of the case
set before it, and which, under Rule 45, are appealable to this Court via a Petition for Review on Certiorari, viz:
SECTION 1. Filing of petition with Supreme Court. - A party desiring to appeal by certiorari from a judgment or final order
or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by
law, may file with the Supreme Court a verified Petition for Review on Certiorari . The petition shall raise only questions of
law which must be distinctly set forth. (Emphasis supplied.)
It is elementary in remedial law that a writ of certiorari will not issue where the remedy of appeal is available to an
aggrieved party. A remedy is considered "plain, speedy and adequate" if it will promptly relieve the petitioners from the
injurious effects of the judgment and the acts of the lower court or agency.21 In this case, appeal was not only available
but also a speedy and adequate remedy.22 And while it is true that in accordance with the liberal spirit pervading the Rules
of Court and in the interest of substantial justice,23 this Court has, before,24 treated a Petition for Certiorari as a Petition for
Review on Certiorari, particularly if the Petition for Certiorari was filed within the reglementary period within which to file a
Petition for Review on Certiorari;25 this exception is not applicable to the present factual milieu.
Pursuant to Sec. 2, Rule 45 of the Revised Rules of Court:
SEC. 2. Time for filing; extension. - The petition shall be filed within fifteen (15) days from notice of the judgment or final
order or resolution appealed from, or of the denial of the petitioner's motion for new trial or reconsideration filed in due
time after notice of the judgment. x x x.
a party litigant wishing to file a Petition for Review on Certiorari must do so within 15 days from receipt of the judgment,
final order or resolution sought to be appealed. In this case, petitioners Bernyl and Katherene's motion for reconsideration
of the appellate court's Resolution was denied by the Court of Appeals in its Resolution dated 29 June 2006, a copy of
which was received by petitioners on 4 July 2006. The present petition was filed on 1 September 2006; thus, at the time
of the filing of said petition, 59 days had elapsed, way beyond the 15-day period within which to file a Petition for Review
under Rule 45, and even beyond an extended period of 30 days, the maximum period for extension allowed by the rules
had petitioners sought to move for such extra time. As the facts stand, petitioners Bernyl and Katherene had lost the right
to appeal via Rule 45.
Be that as it may, alternatively, if the decision of the appellate court is attended by grave abuse of discretion amounting to
lack or excess of jurisdiction, then such ruling is fatally defective on jurisdictional ground and may be questioned even
after the lapse of the period of appeal under Rule 4526 but still within the period for filing a Petition for Certiorari under
Rule 65.
We have previously ruled that grave abuse of discretion may arise when a lower court or tribunal violates and contravenes
the Constitution, the law or existing jurisprudence. By grave abuse of discretion is meant such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction. The abuse of discretion must be grave, as where the power is
exercised in an arbitrary or despotic manner by reason of passion or personal hostility and must be so patent and gross as
to amount to an evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act at all in
contemplation of law.27The word "capricious," usually used in tandem with the term "arbitrary," conveys the notion of

willful and unreasoning action. Thus, when seeking the corrective hand of certiorari, a clear showing of caprice and
arbitrariness in the exercise of discretion is imperative. 28
In reversing and setting aside the resolutions of the DOJ, petitioners Bernyl and Katherene contend that the Court of
Appeals acted with grave abuse of discretion amounting to lack or excess of jurisdiction.
The Court of Appeals, when it resolved to grant the petition in CA-G.R. CEB. SP No. 00068, did so on two grounds, i.e., 1)
that "the public respondent (DOJ) gravely abused his discretion in finding that there was no reversible error on the part of
the Cebu City Prosecutor dismissing the case against the private respondent without stating the facts and the law upon
which this conclusion was made"29; and 2) that "the public respondent (DOJ) made reference to the facts and
circumstances of the case leading to his finding that no probable cause exists, x x x (the) very facts and circumstances
(which) show that there exists a probable cause to believe that indeed the private respondents committed the crimes x x x
charged against them."30
It explained that:
In refusing to file the appropriate information against the private respondents because he 'does not dwell on possibilities,
suspicion and speculation' and that he rules 'based on hard facts and solid evidence', (sic) the public respondent exceeded
his authority and gravely abused his discretion. It must be remembered that a finding of probable cause does not require
an inquiry into whether there is sufficient evidence to procure a conviction. It is enough that it is believed that the act or
omission complained of constitutes the offense charged. The term does not mean 'actual or positive cause;' (sic) nor does
it import absolute certainty. It is merely based on opinion and reasonable belief. [Citation omitted.] A trial is there
precisely for the reception of evidence of the prosecution in support of the charge.
In this case, the petitioner had amply established that it has a prima facie case against the private respondents. As
observed by the public respondent in his second assailed resolution, petitioner was able to present photographs of private
respondent Ms. Balangauan leaving her office carrying a bulky plastic bag. There was also the fact that the transactions in
Mr. York's account used the code 'CEO8' which presumably point to the private respondent Ms. Balangauan as the author
thereof for she is the one assigned to such work station.
Furthermore, petitioner was able to establish that it was Ms. Balangauan who handled Mr. York's account and she was the
one authorized to make the placement of the sum of P2,500,000.00. Since said sum is nowhere to be found in the records
of the bank, then, apparently, Ms. Balangauan must be made to account for the same. 31
The appellate court then concluded that:
These facts engender a well-founded belief that that (sic) a crime has been committed and that the private respondents
are probably guilty thereof. In refusing to file the corresponding information against the private respondents despite the
presence of the circumstances making out a prima faciecase against them, the public respondent gravely abused his
discretion amounting to an evasion of a positive duty or to a virtual refusal either to perform the duty enjoined or to act at
all in contemplation of law.32
The Court of Appeals found fault in the DOJ's failure to identify and discuss the issues raised by the respondent HSBC in
its Petition for Review filed therewith. And, in support thereof, respondent HSBC maintains that it is incorrect to argue that
"it was not necessary for the Secretary of Justice to have his resolution recite the facts and the law on which it was
based," because courts and quasi-judicial bodies should faithfully comply with Section 14, Article VIII of the Constitution
requiring that decisions rendered by them should state clearly and distinctly the facts of the case and the law on which the
decision is based.33
Petitioners Bernyl and Katherene, joined by the Office of the Solicitor General, on the other hand, defends the DOJ and
assert that the questioned resolution was complete in that it stated the legal basis for denying respondent HSBC's Petition
for Review - "that (after) an examination (of) the petition and its attachment [it] found no reversible error that would
justify a reversal of the assailed resolution which is in accord with the law and evidence on the matter."
It must be remembered that a preliminary investigation is not a quasi-judicial proceeding, and that the DOJ is not a quasijudicial agency exercising a quasi-judicial function when it reviews the findings of a public prosecutor regarding the
presence of probable cause. InBautista v. Court of Appeals,34 this Court held that a preliminary investigation is not a
quasi-judicial proceeding, thus:
[T]he prosecutor in a preliminary investigation does not determine the guilt or innocence of the accused. He does not
exercise adjudication nor rule-making functions. Preliminary investigation is merely inquisitorial, and is often the only
means of discovering the persons who may be reasonably charged with a crime and to enable the fiscal to prepare his
complaint or information. It is not a trial of the case on the merits and has no purpose except that of determining whether
a crime has been committed and whether there is probable cause to believe that the accused is guilty thereof. While the

fiscal makes that determination, he cannot be said to be acting as a quasi-court, for it is the courts, ultimately, that pass
judgment on the accused, not the fiscal.
Though some cases35 describe the public prosecutor's power to conduct a preliminary investigation as quasi-judicial in
nature, this is true only to the extent that, like quasi-judicial bodies, the prosecutor is an officer of the executive
department exercising powers akin to those of a court, and the similarity ends at this point. 36 A quasi-judicial body is 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.37 A quasi-judicial agency performs adjudicatory functions such that its awards,
determine the rights of parties, and their decisions have the same effect as judgments of a court. Such is not the case
when a public prosecutor conducts a preliminary investigation to determine probable cause to file an Information against a
person charged with a criminal offense, or when the Secretary of Justice is reviewing the former's order or resolutions. In
this case, since the DOJ is not a quasi-judicial body, Section 14, Article VIII of the Constitution finds no application. Be
that as it may, the DOJ rectified the shortness of its first resolution by issuing a lengthier one when it resolved respondent
HSBC's motion for reconsideration.
Anent the substantial merit of the case, whether or not the Court of Appeals' decision and resolution are tainted with
grave abuse of discretion in finding probable cause, this Court finds the petition dismissible.
The Court of Appeals cannot be said to have acted with grave abuse of discretion amounting to lack or excess of
jurisdiction in reversing and setting aside the resolutions of the DOJ. In the resolutions of the DOJ, it affirmed the
recommendation of ACP Laborte that no probable cause existed to warrant the filing in court of an Information for estafa
and/or qualified estafa against petitioners Bernyl and Katherene. It was the reasoning of the DOJ that "[w]hile appellant
has every reason to suspect Katherene for the loss of theP2,500,000.00 as per York's bank statements, the cash deposits
were identified by the numerals 'CEO8' and it was only Katherene who could transact from the computer in the work
station CEO-8, plus alleged photographs showing Katherene 'leaving her office at 5:28 p.m. with a bulky plastic bag
presumably containing cash' since a portion of the funds was withdrawn, we do not, however, dwell on possibilities,
suspicion and speculation. We rule based on hard facts and solid evidence." 38
We do not agree.
Probable cause has been defined as the existence of such facts and circumstances as would excite belief in a reasonable
mind, acting on the facts within the knowledge of the prosecutor, that the person charged was guilty of the crime for
which he was prosecuted.39 A finding of probable cause merely binds over the suspect to stand trial. It is not a
pronouncement of guilt.40
The executive department of the government is accountable for the prosecution of crimes, its principal obligation being the
faithful execution of the laws of the land. A necessary component of the power to execute the laws is the right to
prosecute their violators,41 the responsibility for which is thrust upon the DOJ. Hence, the determination of whether or not
probable cause exists to warrant the prosecution in court of an accused is consigned and entrusted to the DOJ. And by the
nature of his office, a public prosecutor is under no compulsion to file a particular criminal information where he is not
convinced that he has evidence to prop up the averments thereof, or that the evidence at hand points to a different
conclusion.
But this is not to discount the possibility of the commission of abuses on the part of the prosecutor. It is entirely possible
that the investigating prosecutor has erroneously exercised the discretion lodged in him by law. This, however, does not
render his act amenable to correction and annulment by the extraordinary remedy of certiorari, absent any showing of
grave abuse of discretion amounting to excess of jurisdiction.42
And while it is this Court's general policy not to interfere in the conduct of preliminary investigations, leaving the
investigating officers sufficient discretion to determine probable cause, 43 we have nonetheless made some exceptions to
the general rule, such as when the acts of the officer are without or in excess of authority,44 resulting from a grave abuse
of discretion. Although there is no general formula or fixed rule for the determination of probable cause, since the same
must be decided in the light of the conditions obtaining in given situations and its existence depends to a large degree
upon the finding or opinion of the judge conducting the examination, such a finding should not disregard the facts before
the judge (public prosecutor) or run counter to the clear dictates of reason. 45
Applying the foregoing disquisition to the present petition, the reasons of DOJ for affirming the dismissal of the criminal
complaints for estafa and/or qualified estafa are determinative of whether or not it committed grave abuse of discretion
amounting to lack or excess of jurisdiction. In requiring "hard facts and solid evidence" as the basis for a finding of
probable cause to hold petitioners Bernyl and Katherene liable to stand trial for the crime complained of, the DOJ
disregards the definition of probable cause - that it is a reasonable ground of presumption that a matter is, or may be,
well-founded, such a state of facts in the mind of the prosecutor as would lead a person of ordinary caution and prudence
to believe, or entertain an honest or strong suspicion, that a thing is so. 46 The term does not mean "actual and positive
cause" nor does it import absolute certainty.47 It is merely based on opinion and reasonable belief; 48 that is, the belief that
the act or omission complained of constitutes the offense charged. While probable cause demands more than "bare

suspicion," it requires "less than evidence which would justify conviction." Herein, the DOJ reasoned as if no evidence was
actually presented by respondent HSBC when in fact the records of the case were teeming; or it discounted the value of
such substantiation when in fact the evidence presented was adequate to excite in a reasonable mind the probability that
petitioners Bernyl and Katherene committed the crime/s complained of. In so doing, the DOJ whimsically and capriciously
exercised its discretion, amounting to grave abuse of discretion, which rendered its resolutions amenable to correction and
annulment by the extraordinary remedy of certiorari.
From the records of the case, it is clear that a prima facie case for estafa/qualified estafa exists against petitioners Bernyl
and Katherene. A perusal of the records, i.e., the affidavits of respondent HSBC's witnesses, the documentary evidence
presented, as well as the analysis of the factual milieu of the case, leads this Court to agree with the Court of Appeals
that, taken together, they are enough to excite the belief, in a reasonable mind, that the Spouses Bernyl Balangauan and
Katherene Balangauan are guilty of the crime complained of. Whether or not they will be convicted by a trial court based
on the same evidence is not a consideration. It is enough that acts or omissions complained of by respondent HSBC
constitute the crime of estafa and/or qualified estafa.
Collectively, the photographs of petitioner Katherene leaving the premises of respondent HSBC carrying a bulky plastic bag
and the affidavits of respondent HSBC's witnesses sufficiently establish acts adequate to constitute the crime of estafa
and/or qualified estafa. What the affidavits bear out are the following: that York was a Premier Client of respondent HSBC;
that petitioner Katherene handled all the accounts of York; that not one of York's accounts reflect the P2,500,000.00
allegedly deposited in a higher yielding account; that prior to the discovery of her alleged acts and omissions, petitioner
Katherene supposedly persuaded York to invest in a "new product" of respondent HSBC, i.e., a higher interest yielding
time deposit; that York made a total of P2,500,000.00 investment in the "new product" by authorizing petitioner
Balangauan to transfer said funds to it; that petitioner Katherene supposedly asked York to sign several transaction
documents in order to transfer the funds to the "new product"; that said documents turned out to be withdrawal slips and
cash movement tickets; that at no time did York receive the cash as a result of signing the documents that turned out to
be withdrawal slips/cash movement tickets; that York's account was regularly credited "loose change" in the amounts
ofP12,500.00 and P8,333.33 beginning in the month after the alleged "transfer" of York's funds to the "new product"; that
the regular deposits of loose change were transacted with the use of petitioner Katherene's work terminal accessed by her
password "CEO8"; that the "CEO8" password was keyed in with the use of a swipe card always in the possession of
petitioner Katherene; that one of the loose-change deposits was transacted via the phone banking feature of respondent
HSBC and that when traced, the phone number used was the landline number of the house of petitioners Bernyl and
Katherene; that respondent HSBC's bank personnel, as well as York, supposedly a) talked with petitioner Katherene on the
phone, and that she allegedly admitted that the missing funds were invested with Shell Company, of which York approved,
and that it was only for one year; and b) met with petitioner Bernyl, and that the latter at first denied having knowledge
of his wife's complicity, but later on admitted that he knew of the investment with Shell Company, and that he supposedly
made the loose-change deposit via phone banking; that after 23 April 2002, York was told that respondent HSBC had no
"new product" or that it was promoting investment with Shell Company; that York denied having any knowledge that his
money was invested outside of respondent HSBC; and that petitioner Katherene would not have been able to facilitate the
alleged acts or omissions without taking advantage of her position or office, as a consequence of which, HSBC had to
reimburse York the missing P2,500,000.00.
From the above, the alleged circumstances of the case at bar make up the elements of abuse of confidence, deceit or
fraudulent means, and damage under Art. 315 of the Revised Penal Code on estafa and/or qualified estafa. They give rise
to the presumption or reasonable belief that the offense of estafa has been committed; and, thus, the filing of an
Information against petitioners Bernyl and Katherene is warranted. That respondent HSBC is supposed to have no
personality to file any criminal complaint against petitioners Bernyl and Katherene does not ipso facto clear them of prima
facie guilt. The same goes for their basic denial of the acts or omissions complained of; or their attempt at shifting the
doubt to the person of York; and their claim that witnesses of respondent HSBC are guilty of fabricating the whole
scenario. These are matters of defense; their validity needs to be tested in the crucible of a full-blown trial. Lest it be
forgotten, the presence or absence of the elements of the crime is evidentiary in nature and is a matter of defense, the
truth of which can best be passed upon after a full-blown trial on the merits. Litigation will prove petitioners Bernyl and
Katherene's innocence if their defense be true.
In fine, the relaxation of procedural rules may be allowed only when there are exceptional circumstances to justify the
same. Try as we might, this Court cannot find grave abuse of discretion on the part of the Court of Appeals, when it
reversed and set aside the resolutions of the DOJ. There is no showing that the appellate court acted in an arbitrary and
despotic manner, so patent or gross as to amount to an evasion or unilateral refusal to perform its legally mandated duty.
On the contrary, we find the assailed decision and resolution of the Court of Appeals to be more in accordance with the
evidence on record and relevant laws and jurisprudence than the resolutions of the DOJ.
Considering the allegations, issues and arguments adduced and our disquisition above, we hereby dismiss the instant
petition for being the wrong remedy under the Revised Rules of Court, as well as for petitioner Bernyl and Katherene's
failure to sufficiently show that the challenged Decision and Resolution of the Court of Appeals were rendered in grave
abuse of discretion amounting to lack or excess of jurisdiction.

WHEREFORE, premises considered, the instant Petition for Certiorari is DISMISSED for lack of merit. The 28 April
2006 Decision and the 29 June 2006 Resolution of the Court of Appeals in CA-G.R. CEB - SP No. 00068, are
hereby AFFIRMED. With costs against petitioners - - Spouses Bernyl Balangauan and Katherene Balangauan.
SO ORDERED.

EN BANC

[G.R. No. 109406. September 11, 1998]

REMEDIOS T. BLAQUERA VS ALCALA

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
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 PTA 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:
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

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.
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.

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.

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.
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.

To have the power to succeed by its corporate name.

c.

To adopt, alter, and use a corporate seal.

d.

To sue and be sued under its corporate name.

e.

To enter into any contracts of any kind and description.

f.

To own or possess personal and/or real property.

g.

To make, adopt and enforce rules and regulations to execute its powers, duties and functions.

h.

To purchase, hold, and alienate shares of stock or bonds of any corporation.

I.

To collect fees or charges as may be imposed under PD 564.

j.

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.

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 classifiedeither 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 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 government-owned 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 governmentowned 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 Labor-Management 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.
[24]

Every statute must be construed and harmonized with other statutes as to form a uniform system of jurisprudence.
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 governmentowned 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, inservice training, including overseas and local scholarships and training grants, job rotation, suggestions and
incentive award systems, and such other provisions for employees health, welfare, counseling, recreation and
similar services.
Sec. 35. Employee Suggestions and Incentive Award System. - There shall be established a government-wide
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.
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-inCharge 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 government-wide
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. (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

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.

ADMINISTRATIVE ORDER NO. 29

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;
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.

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 constitutionallyprotected 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.
[34]

Sound management and effective utilization of financial resources of government are basically executive functions,
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 government-wide 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 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.
Narvasa, C.J., Davide Jr., Romero,
Martinez and Quisumbing, JJ., concur.
Regalado, J., on official leave.

Bellosillo,

Melo,

Puno,

Vitug,

Kapunan,

Mendoza,

Panganiban,

EN BANC
[G.R. No. L-12859. November 18, 1959.]
CEBU UNITED ENTERPRISES, Plaintiff-Appellee, v. JOSE GALLOFIN, Collector of Customs, Cebu
Port, Defendant-Appellant.
Manuel A. Zoza for Appellee.
First Assistant Solicitor General Guillermo E. Torres and Solicitors Frine C. Zaballero and Pedro Ocampo
for Appellant.

SYLLABUS

1. IMPORTS; WORDS AND PHRASES; MEANING OF TERM "SHIPPED" ; GOODS DEEMED IN TRANSIT FROM ISSUANCE OF
BILL OF LADING. The date of the shipment is not the date when the vessel leaves the port or embarkation but the date
when the goods for dispatch are loaded on board the vessel, where it does not appear that the bill of lading specified any
designated day on which the vessels were lift anchor, nor was it shown that the shipper had any knowledge that the
vessels were not to depart soon after he placed his cargo on board.

DECISION

REYES, J. B. L., J.:

This suit for mandatory injunction was instituted in the Court of First Instance of Cebu by the Cebu United Enterprise to
compel Jose Gallofin, as Collector of Customs, Cebu Port, to release and deliver to the plaintiff two imported shipments of
7,834 bales of overissue newspapers purchased by the latter from the United States. As ancillary relief during the
pendency of the action, the plaintiff prayed for the issuance of a writ of preliminary mandatory injunction, which was
granted by the court after the plaintiff posted a bond in the amount of P60,000.00 in favor of the defendant. Thereafter,
the goods were released to the plaintiff, it appearing further that the advance sales tax due on the same had been duly
paid upon arrival of the merchandise at port.
The importation of the aforesaid shipments was made under and by virtue of an Import Control Commission License No.
1225 issued by the defunct Import Control Commission. Under the terms of the license, the plaintiff could import, on a nodollar remittance basis, overissue newspapers up to the amount or value of $118,000.00.
The refusal of the defendant to deliver the imported items is premised on his contention that while the five bills of lading
covering the two shipments of the overissue newspapers were all dated at Los Angeles, U.S.A. December 17, 1953, or one
day before the expiration of the import license in question, the vessels M/S VENTURA and M/S BATAAN, carrying on board
the said merchandise, actually left the ports of embarkation, Los Angeles, and San Francisco, on January 12 and January
16, 1954 respectively. Hence, according to the defendant, the importation must be considered as having been made
without a valid import license, because under the regulations issued by the Central Bank and the Monetary Board, "all
shipments that left the port of origin after June 30, 1953, and are covered by ICC licenses, may be released by the Bureau
of Customs without the need of a Central Bank release certificate; provided they left the port of origin within the period of
validity of the licenses." No Central Bank certificate for the release of the goods having been shown or presented to the
defendant, the latter refused to make the delivery.
The lower court was thus confronted with the issue of determining whether the valid period of the license in question
should be counted up to the time when the vessels carrying the imported items left the ports of origin on January 12 and
January 16, 1954, or when the corresponding bills of lading were dated, or December 17, 1953. The court chose the latter
date, and held:jgc:chanrobles.com.ph
"IN VIEW THEREFORE, this Court pronounces judgment making the writ of preliminary mandatory injunction issued
against defendant permanent, with orders for the cancellation of plaintiffs bond, this after whatever advance sales tax or
any taxes, surcharges and so forth might be due on the goods shall have been paid, without costs."cralaw virtua1aw

library
The defendant appealed to the Court of Appeals. The question raised, however, being purely one of law, the appeal was
certified to us pursuant to a resolution of said court dated July 19, 1957. The appeal has no merit.
The authority of the appellee to import was contained in the Import Control Commission License No. 17225, validated on
June 18, 1953, and under Resolution 70 of the Commission (adopted March 27, 1952), the same had a six-month period
of validity counted from the said date of June 18, 1953. This license states, among other conditions, that "Commodities covered by this license must be shipped from the country of origin before the expiry date of the license, and
are subject to sec. 13 of Republic Act No. 650."cralaw virtua1aw library
Although Republic Act No. 650, creating the Import Control Commission, expired on July 31, 1953, it is to be conceded
that its duly executed acts can have valid effects even beyond the life span of said governmental agency.
What is important to consider only is the legal connotation of the word "shipped" as the term was used in the license.
Defendant maintains that it is when the vessel leaves the port of embarkation, while plaintiff holds that it is the dates of
the bills of lading, which are usually issued after the cargo is placed on board the vessel. That the date of the shipment is
the date when the goods for dispatch are loaded on board the vessel, and not necessarily when the ship puts to sea, is
clearly implied from our ruling in the case of U.S. Tobacco Corporation v. Rufino Luna, Et Al., (87 Phil., 4), wherein we
said:jgc:chanrobles.com.ph
"By section 6 of Act No. 426, all goods including leaf tobacco have been placed under control. Petitioners merchandise left
the port of departure before the passage of that Act but arrived in Manila after its approval. For the purpose of enforcing
or applying said Section 6, there can only be one date of importation. Which was the date? The date the goods were
ordered, the date they were put on board vessel, or the date they reached the port of destination? We are of the opinion
that the date of importation is the date of shipment and not the date of arrival in Manila." (Emphasis supplied)
The issuance of the bill of lading, furthermore, presupposes or carries the presumption that the goods were delivered to
the carrier for immediate shipment (13 C.J.S. sec. 123 (2), p. 235, and cases cited therein). It does not appear here that
the bill of lading specified any designated day on which the vessels were to lift anchor, nor was it shown that plaintiff had
any knowledge that the vessels M/S VENTURA and M/S BATAAN were not to depart soon after he placed his cargo on
board and the corresponding bills of lading issued to him. From this latter time, the goods, in contemplation of law, are
deemed already in transit (New Civil Code, Arts. 1531 and 1736).
It should also be considered that it is entirely outside the shippers hands to fix the dates of departure, route or arrival of a
vessel (unless he charters the whole ship [see Art. 656, Code of Commerce]).
Defendants reliance upon Central Bank regulations that the shipment licensed must have "left the port of origin within the
period of validity of the license" is not maintainable in the present case, because the regulations came into effect only on
July 1, 1953 already after issuance of the appellees license and can not be read into the same (see 49 Off. Gaz. No. 6, p.
2189).
The Solicitor Generals contention that, assuming the six months are counted up to the date the imported goods were
placed on board the vessels for shipment the period of validity had likewise already elapsed because, legally, six months
mean 180 days, which in this case expired on December 15, cannot now be entertained because the defendant-appellant,
under paragraph 3 of his Answer to the Complaint, expressly admitted that the date appearing on the bills of lading
(December 17, 1953) as the date of loading on board the vessels "is one day before the expiration of the validity of the
import license." What he only questioned in the court below is the legal connotation of the word "shipped" under the
import license.
In the light of the resolution we have taken on the main issue, it becomes unnecessary for us to dwell further upon the
other questions raised by the parties.
Wherefore, the appeal should be dismissed and the judgment of the lower court affirmed. So ordered.
Paras, C.J., Bengzon, Padilla, Montemayor, Bautista Angelo, Labrador, Endencia, Barrera and Gutierrez David, JJ., concur.

SECOND DIVISION
[G.R. NO. 164789 : August 27, 2009]
CHRISTIAN GENERAL ASSEMBLY, INC., Petitioner, v. SPS. AVELINO C. IGNACIO and PRISCILLA T.
IGNACIO, Respondents.
DECISION
BRION, J.:
We resolve in this Rule 45 petition the legal issue of whether an action to rescind a contract to sell a subdivision lot that
the buyer found to be under litigation falls under the exclusive jurisdiction of the Housing and Land Use Regulatory Board
(HLURB).
In this petition,1 Christian General Assembly, Inc. (CGA) prays that we set aside the decision 2 issued by the Court of
Appeals (CA) in CA G.R. SP No. 75717 that dismissed its complaint for rescission filed with the Regional Trial Court (RTC)
of Bulacan for lack of jurisdiction, as well as the CA resolution 3that denied its motion for reconsideration.
FACTUAL ANTECEDENTS
The present controversy traces its roots to the case filed by CGA against the Spouses Avelino and Priscilla Ignacio
(respondents) for rescission of their Contract to Sell before the RTC, Branch 14, Malolos, Bulacan. The facts, drawn from
the records and outlined below, are not in dispute.
On April 30, 1998, CGA entered into a Contract to Sell a subdivision lot 4 (subject property) with the respondents - the
registered owners and developers of a housing subdivision known as Villa Priscilla Subdivision located in Barangay Cutcut,
Pulilan, Bulacan. Under the Contract to Sell, CGA would payP2,373,000.00 for the subject property on installment basis;
they were to pay a down payment ofP1,186,500, with the balance payable within three years on equal monthly
amortization payments ofP46,593.85, inclusive of interest at 24% per annum, starting June 1998.
On August 5, 2000, the parties mutually agreed to amend the Contract to Sell to extend the payment period from three to
five years, calculated from the date of purchase and based on the increased total consideration of P2,706,600, with equal
monthly installments of P37,615.00, inclusive of interest at 24% per annum, starting September 2000.
According to CGA, it religiously paid the monthly installments until its administrative pastor discovered that the title
covering the subject property suffered from fatal flaws and defects. CGA learned that the subject property was actually
part of two consolidated lots (Lots 2-F and 2-G Bsd-04-000829 [OLT]) that the respondents had acquired from Nicanor
Adriano (Adriano) and Ceferino Sison (Sison), respectively. Adriano and Sison were former tenant-beneficiaries of
Purificacion S. Imperial (Imperial) whose property in Cutcut, Pulilan, Bulacan 5 had been placed under Presidential Decree
(PD) No. 27's Operation Land Transfer.6 According to CGA, Imperial applied for the retention of five hectares of her land
under Republic Act No. 6657,7 which the Department of Agrarian Reform (DAR) granted in its October 2, 1997 order (DAR
Order). The DAR Order authorized Imperial to retain the farm lots previously awarded to the tenant-beneficiaries,
including Lot 2-F previously awarded to Adriano, and Lot 2-G Bsd-04-000829 awarded to Sison. On appeal, the Office of
the President8 and the CA9 upheld the DAR Order. Through the Court's Resolution dated January 19, 2005 in G.R. No.
165650, we affirmed the DAR Order by denying the Petition for Review of the appellate decision.
Understandably aggrieved after discovering these circumstances, CGA filed a complaint against the respondents before the
RTC on April 30, 2002.10 CGA claimed that the respondents fraudulently concealed the fact that the subject property was
part of a property under litigation; thus, the Contract to Sell was a rescissible contract under Article 1381 of the Civil
Code. CGA asked the trial court to rescind the contract; order the respondents to return the amounts already paid; and
award actual, moral and exemplary damages, attorney's fees and litigation expenses.

Instead of filing an answer, the respondents filed a motion to dismiss asserting that the RTC had no jurisdiction over the
case.11 Citing PD No. 95712 and PD No. 1344, the respondents claimed that the case falls within the exclusive jurisdiction of
the HLURB since it involved the sale of a subdivision lot. CGA opposed the motion to dismiss, claiming that the action is
for rescission of contract, not specific performance, and is not among the actions within the exclusive jurisdiction of the
HLURB, as specified by PD No. 957 and PD No. 1344.
On October 15, 2002, the RTC issued an order denying the respondents' motion to dismiss. The RTC held that the action
for rescission of contract and damages due to the respondents' fraudulent misrepresentation that they are the rightful
owners of the subject property, free from all liens and encumbrances, is outside the HLURB's jurisdiction.rbl
r l l lbrr
The respondents countered by filing a petition for certiorari with the CA. In its October 20, 2003 decision, the CA found
merit in the respondents' position and set the RTC order aside; the CA ruled that the HLURB had exclusive jurisdiction over
the subject matter of the complaint since it involved a contract to sell a subdivision lot based on the provisions of PD No.
957 and PD No. 1344.
Contending that the CA committed reversible error, the CGA now comes before the Court asking us to overturn the CA
decision and resolution.
THE PETITION
In its petition, CGA argues that the CA erred (1) in applying Article 1191 of the Civil Code for breach of reciprocal obligation, while the petitioner's action is for the
rescission of a rescissible contract under Article 1381 of the same Code, which is cognizable by the regular court;
andcralawlibrary
(2) in holding that the HLURB has exclusive jurisdiction over the petitioner's action by applying Antipolo Realty Corp v.
National Housing Corporation13 and other cited cases.
In essence, the main issue we are asked to resolve is which of the two - the regular court or the HLURB - has exclusive
jurisdiction over CGA's action for rescission and damages.
According to CGA, the exclusive jurisdiction of the HLURB, as set forth in PD No. 1344 and PD No. 957, is limited to cases
involving specific performance and does not cover actions for rescission.
Taking the opposing view, respondents insist that since CGA's case involves the sale of a subdivision lot, it falls under the
HLURB's exclusive jurisdiction.
THE COURT'S RULING
We find no merit in the petition and consequently affirm the CA decision.
Development of the HLURB's jurisdiction
The nature of an action and the jurisdiction of a tribunal are determined by the material allegations of the complaint and
the law governing at the time the action was commenced. The jurisdiction of the tribunal over the subject matter or
nature of an action is conferred only by law, not by the parties' consent or by their waiver in favor of a court that would
otherwise have no jurisdiction over the subject matter or the nature of an action. 14 Thus, the determination of whether the
CGA's cause of action falls under the jurisdiction of the HLURB necessitates a closer examination of the laws defining the
HLURB's jurisdiction and authority.
PD No. 957, enacted on July 12, 1976, was intended to closely supervise and regulate the real estate subdivision and
condominium businesses in order to curb the growing number of swindling and fraudulent manipulations perpetrated by
unscrupulous subdivision and condominium sellers and operators. As one of its "whereas clauses" states:
WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent manipulations perpetrated by
unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers or titles

free from liens and encumbrances, and to pay real estate taxes, and fraudulent sales of the same subdivision lots to
different innocent purchasers for value;
Section 3 of PD No. 957 granted the National Housing Authority (NHA) the "exclusive jurisdiction to regulate the real
estate trade and business." Thereafter, PD No. 1344 was issued on April 2, 1978 to expand the jurisdiction of the NHA to
include the following:
SECTION 1. In the exercise of its functions to regulate the real estate trade and business and in addition to its powers
provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and
decide cases of the following nature:
A. Unsound real estate business practices;
B. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project
owner, developer, dealer, broker or salesman; andcralawlibrary
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.
Executive Order No. 648 (EO 648), dated February 7, 1981, transferred the regulatory and quasi-judicial functions of the
NHA to the Human Settlements Regulatory Commission (HSRC). Section 8 of EO 648 provides:
SECTION 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 Commission [Human Settlements
Regulatory Commission]. x x x. Among these regulatory functions are: 1) Regulation of the real estate trade and business;
x x x 11) Hear and decide cases of unsound real estate business practices; claims involving refund filed against project
owners, developers, dealers, brokers, or salesmen; and cases of specific performance.
Pursuant to Executive Order No. 90 dated December 17, 1986, the HSRC was renamed as the HLURB.
Rationale for HLURB's extensive quasi-judicial powers
The surge in the real estate business in the country brought with it an increasing number of cases between subdivision
owners/developers and lot buyers on the issue of the extent of the HLURB's exclusive jurisdiction. In the cases that
reached us, we have consistently ruled that the HLURB has exclusive jurisdiction over complaints arising from contracts
between the subdivision developer and the lot buyer or those aimed at compelling the subdivision developer to comply
with its contractual and statutory obligations to make the subdivision a better place to live in. 15
We explained the HLURB's exclusive jurisdiction at length in Sps. Osea v. Ambrosio, 16 where we said:
Generally, the extent to which an administrative agency may exercise its powers depends largely, if not wholly, on the
provisions of the statute creating or empowering such agency. Presidential Decree (P.D.) No. 1344, "Empowering The
National Housing Authority To Issue Writ Of Execution In The Enforcement Of Its Decision Under Presidential Decree No.
957," clarifies and spells out the quasi-judicial dimensions of the grant of jurisdiction to the HLURB in the following specific
terms:
SEC. 1. In the exercise of its functions to regulate the real estate trade and business and in addition to its powers
provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and
decide cases of the following nature:
A. Unsound real estate business practices;
B. Claims involving refund and any other claims filed by subdivision lot or condominium unit buyer against the project
owner, developer, dealer, broker or salesman; andcralawlibrary
C. Cases involving specific performance of contractual and statutory obligations filed by buyers of subdivision lots or
condominium units against the owner, developer, dealer, broker or salesman.

The extent to which the HLURB has been vested with quasi-judicial authority must also be determined by referring to the
terms of P.D. No. 957, "The Subdivision And Condominium Buyers' Protective Decree." Section 3 of this statute provides:
x x x National Housing Authority [now HLURB]. - The National Housing Authority shall have exclusive jurisdiction to
regulate the real estate trade and business in accordance with the provisions of this Decree.
The need for the scope of the regulatory authority thus lodged in the HLURB is indicated in the second, third and fourth
preambular paragraphs of PD 957 which provide:
WHEREAS, numerous reports reveal that many real estate subdivision owners, developers, operators, and/or sellers have
reneged on their representations and obligations to provide and maintain properly subdivision roads, drainage, sewerage,
water systems, lighting systems, and other similar basic requirements, thus endangering the health and safety of home
and lot buyers;
WHEREAS, reports of alarming magnitude also show cases of swindling and fraudulent manipulations perpetrated by
unscrupulous subdivision and condominium sellers and operators, such as failure to deliver titles to the buyers or titles
free from liens and encumbrances, and to pay real estate taxes, and fraudulent sales of the same subdivision lots to
different innocent purchasers for value;
x

WHEREAS, this state of affairs has rendered it imperative that the real estate subdivision and condominium businesses be
closely supervised and regulated, and that penalties be imposed on fraudulent practices and manipulations committed in
connection therewith.
The provisions of PD 957 were intended to encompass all questions regarding subdivisions and condominiums. The
intention was aimed at providing for an appropriate government agency, the HLURB, to which all parties aggrieved in the
implementation of provisions and the enforcement of contractual rights with respect to said category of real estate may
take recourse. The business of developing subdivisions and corporations being imbued with public interest and welfare,
any question arising from the exercise of that prerogative should be brought to the HLURB which has the technical knowhow on the matter. In the exercise of its powers, the HLURB must commonly interpret and apply contracts and determine
the rights of private parties under such contracts. This ancillary power is no longer a uniquely judicial function, exercisable
only by the regular courts.
As observed in C.T. Torres Enterprises, Inc. v. Hibionada:
The argument that only courts of justice can adjudicate claims resoluble under the provisions of the Civil Code is out of
step with the fast-changing times. There are hundreds of administrative bodies now performing this function by virtue of a
valid authorization from the legislature. This quasi-judicial function, as it is called, is exercised by them as an incident of
the principal power entrusted to them of regulating certain activities falling under their particular expertise.
In the Solid Homes case for example the Court affirmed the competence of the Housing and Land Use Regulatory Board to
award damages although this is an essentially judicial power exercisable ordinarily only by the courts of justice. This
departure from the traditional allocation of governmental powers is justified by expediency, or the need of the government
to respond swiftly and competently to the pressing problems of the modern world. [Emphasis supplied.]
Another case - Antipolo Realty Corporation v. NHA17 - explained the grant of the HLURB's expansive quasi-judicial powers.
We said:
In this era of clogged court dockets, the need for specialized administrative boards or commissions with the special
knowledge, experience and capability to hear and determine promptly disputes on technical matters or essentially factual
matters, subject to judicial review in case of grave abuse of discretion, has become well nigh indispensable. Thus, in 1984,
the Court noted that 'between the power lodged in an administrative body and a court, the unmistakable trend has been
to refer it to the former'.
xxx
In general, the quantum of judicial or quasi-judicial powers which an administrative agency may exercise is defined in the
enabling act of such agency. In other words, the extent to which an administrative entity may exercise such powers

depends largely, if not wholly on the provisions of the statute creating or empowering such agency. In the exercise of such
powers, the agency concerned must commonly interpret and apply contracts and determine the rights of private parties
under such contracts, One thrust of the multiplication of administrative agencies is that the interpretation of contracts and
the determination of private rights thereunder is no longer a uniquely judicial function, exercisable only by our regular
courts. [Emphasis supplied.]
Subdivision cases under the RTC's jurisdiction
The expansive grant of jurisdiction to the HLURB does not mean, however, that all cases involving subdivision lots
automatically fall under its jurisdiction. As we said in Roxas v. Court of Appeals: 18
In our view, the mere relationship between the parties, i.e., that of being subdivision owner/developer and subdivision lot
buyer, does not automatically vest jurisdiction in the HLURB. For an action to fall within the exclusive jurisdiction of the
HLURB, the decisive element is the nature of the action as enumerated in Section 1 of P.D. 1344. On this matter, we have
consistently held that the concerned administrative agency, the National Housing Authority (NHA) before and now the
HLURB, has jurisdiction over complaints aimed at compelling the subdivision developer to comply with its contractual and
statutory obligations.
xxx
Note particularly pars. (b) and (c) as worded, where the HLURB's jurisdiction concerns cases commenced by subdivision
lot or condominium unit buyers. As to par. (a), concerning "unsound real estate practices," it would appear that the logical
complainant would be the buyers and customers against the sellers (subdivision owners and developers or condominium
builders and realtors ), and not vice versa. [Emphasis supplied.]
Pursuant to Roxas, we held in Pilar Development Corporation v. Villar 19 and Suntay v. Gocolay20 that the HLURB has no
jurisdiction over cases filed by subdivision or condominium owners or developers against subdivision lot or condominium
unit buyers or owners. The rationale behind this can be found in the wordings of Sec. 1, PD No. 1344, which expressly
qualifies that the cases cognizable by the HLURB are those instituted by subdivision or condomium buyers or owners
against the project developer or owner. This is also in keeping with the policy of the law, which is to curb unscrupulous
practices in the real estate trade and business.21
Thus, in the cases of Fajardo Jr. v. Freedom to Build, Inc.,[22] and Cadimas v. Carrion,23 we upheld the RTC's jurisdiction
even if the subject matter was a subdivision lot since it was the subdivision developer who filed the action against the
buyer for violation of the contract to sell.
The only instance that HLURB may take cognizance of a case filed by the developer is when said case is instituted as a
compulsory counterclaim to a pending case filed against it by the buyer or owner of a subdivision lot or condominium unit.
This was what happened in Francel Realty Corporation v. Sycip, 24 where the HLURB took cognizance of the developer's
claim against the buyer in order to forestall splitting of causes of action.
Obviously, where it is not clear from the allegations in the complaint that the property involved is a subdivision lot, as
in Javellana v. Hon. Presiding Judge, RTC, Branch 30, Manila,25 the case falls under the jurisdiction of the regular courts
and not the HLURB. Similarly, in Spouses Dela Cruz v. Court of Appeals,26 we held that the RTC had jurisdiction over a
case where the conflict involved a subdivision lot buyer and a party who owned a number of subdivision lots but was not
himself the subdivision developer.
The Present Case
In the present case, CGA is unquestionably the buyer of a subdivision lot from the respondents, who sold the property in
their capacities as owner and developer. As CGA stated in its complaint:
2.01. Defendants are the registered owners and developers of a housing subdivision presently known as Villa Priscilla
Subdivision located at Brgy. Cutcut, Pulilan, Bulacan;
2.02 On or about April 30, 1998, the plaintiff thru its Administrative Pastor bought from defendants on installment basis a
parcel of land designated at Lot 1, Block 4 of the said Villa Priscilla Subdivision xxx
xxx

2.04 At the time of the execution of the second Contract to Sell (Annex "B"), Lot 1, Block 4 of the Villa Priscilla Subdivision
was already covered by Transfer Certificate of Title No. T-127776 of the Registry of Deeds of Quezon City in the name of
Iluminada T. Soneja, married to Asterio Soneja (defendant Priscilla T. Ignacio's sister and brother-in-law) and the
defendants as co-owners, but the latter represented themselves to be the real and absolute owners thereof, as in fact it
was annotated in the title that they were empowered to sell the same. Copy of TCT No. T-127776 is hereto attached and
made part hereof as Annex "C".
2.05 Plaintiff has been religiously paying the agreed monthly installments until its Administrative Pastor discovered
recently that while apparently clean on its face, the title covering the subject lot actually suffers from fatal flaws and
defects as it is part of the property involved in litigation even before the original Contract to Sell (Annex "A"), which
defendants deliberately and fraudulently concealed from the plaintiff;
2.06 As shown in the technical description of TCT No. T-127776 (Annex "C"), it covers a portion of consolidated Lots 2-F
and 2-G Bsd-04-000829 (OLT), which were respectively acquired by defendants from Nicanor Adriano and Ceferino Sison,
former tenants-beneficiaries of Purificacion S. Imperial, whose property at Cutcut, Pulilan, Bulacan originally covered by
TCT No. 240878 containing an area of 119,431 square meters was placed under Operation Land Transfer under P.D. No.
27;
2.07 Said Purificacion S. Imperial applied for retention of five (5) hectares of her property at Cutcut, Pulilan, Bulacan
under Rep, Act No. 6657 and the same was granted by the Department of Agrarian Reform (DAR) to cover in whole or in
part farm lots previously awarded to tenants-beneficiaries, including inter alia Nicanor Adriano's Lot 2-F and Ceferino
Sison's Lot 2-G Bsd-04-000829 (OLT).
xxx
2.08 Said order of October 2, 1997 was affirmed and declared final and executory, and the case was considered closed, as
in fact there was already an Implementing Order dated November 10, 1997.
xxx
3.03 As may thus be seen, the defendants deliberately and fraudulently concealed from the plaintiff that fact that the
parcel of land sold to the latter under the Contract to Sell (Annexes "A" and "B") is part of the property already under
litigation and in fact part of the five-hectare retention awarded to the original owner, Purificacion S. Imperial.
xxx
3.05 Plaintiff is by law entitled to the rescission of the Contracts to Sell (Annexes "A" and "B") by restitution of what has
already been paid to date for the subject property in the total amount of P2,515,899.20, thus formal demand therefor was
made on the defendants thru a letter dated April 5, 2002, which they received but refused to acknowledge receipt. Copy
of said letter is hereto attached and made part hereof as Annex "J". 27 [Emphasis supplied.]
From these allegations, the main thrust of the CGA complaint is clear - to compel the respondents to refund the payments
already made for the subject property because the respondents were selling a property that they apparently did not own.
In other words, CGA claims that since the respondents cannot comply with their obligations under the contract, i.e., to
deliver the property free from all liens and encumbrances, CGA is entitled to rescind the contract and get a refund of the
payments already made. This cause of action clearly falls under the actions contemplated by Paragraph (b), Section 1 of
PD No. 1344, which reads:
SEC. 1. In the exercise of its functions to regulate the real estate trade and business and in addition to its powers
provided for in Presidential Decree No. 957, the National Housing Authority shall have exclusive jurisdiction to hear and
decide cases of the following nature:
xxx
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
We view CGA's contention - that the CA erred in applying Article 1191 of the Civil Code as basis for the contract's
rescission - to be a negligible point. Regardless of whether the rescission of contract is based on Article 1191 or 1381 of

the Civil Code, the fact remains that what CGA principally wants is a refund of all payments it already made to the
respondents. This intent, amply articulated in its complaint, places its action within the ambit of the HLURB's exclusive
jurisdiction and outside the reach of the regular courts. Accordingly, CGA has to file its complaint before the HLURB, the
body with the proper jurisdiction.
WHEREFORE, premises considered, we DENY the petition and AFFIRM the October 20, 2003 Decision of the Court of
Appeals in CA G.R. SP No. 75717 dismissing for lack of jurisdiction the CGA complaint filed with the RTC, Branch 14 of
Malolos, Bulacan.
SO ORDERED.

SECOND DIVISION
[G.R. No. 106296. July 5, 1996]
ISABELO T. CRISOSTOMO, petitioner,
PHILIPPINES, respondents.*

vs. THE

COURT

OF

APPEALS

and

the

PEOPLE

OF

THE

DECISION
MENDOZA, J.:
This is a petition to review the decision of the Court of Appeals dated July 15, 1992, the dispositive portion of which
reads:
WHEREFORE, the present petition is partially granted. The questioned Orders and writs directing (1) reinstatement of
respondent Isabelo T. Crisostomo to the position of President of the Polytechnic University of the Philippines, and (2)
payment of salaries and benefits which said respondent failed to receive during his suspension insofar as such payment
includes those accruing after the abolition of the PCC and its transfer to the PUP, are hereby set aside. Accordingly,
further proceedings consistent with this decision may be taken by the court a quo to determine the correct amounts due
and payable to said respondent by the said university.
The background of this case is as follows:
Petitioner Isabelo Crisostomo was President of the Philippine College of Commerce (PCC), having been appointed to
that position by the President of the Philippines on July 17, 1974.
During his incumbency as president of the PCC, two administrative cases were filed against petitioner for illegal use
of government vehicles, misappropriation of construction materials belonging to the college, oppression and harassment,
grave misconduct, nepotism and dishonesty. The administrative cases, which were filed with the Office of the President,
were subsequently referred to the Office of the Solicitor General for investigation.
Charges of violations of R.A. No. 3019, 3 (e) and R.A. No. 992, 20-21 and R.A. No. 733, 14 were likewise filed
against him with the Office of Tanodbayan.
On June 14, 1976, three (3) informations for violation of Sec. 3 (e) of the Anti-Graft and Corrupt Practices Act (R.A.
No. 3019, as amended) were filed against him. The informations alleged that he appropriated for himself a bahay kubo,
which was intended for the College, and construction materials worth P250,000.00, more or less. Petitioner was also
accused of using a driver of the College as his personal and family driver.[1]

On October 22, 1976, petitioner was preventively suspended from office pursuant to R.A. No. 3019, 13, as
amended. In his place Dr. Pablo T. Mateo, Jr. was designated as officer-in-charge on November 10, 1976, and then as
Acting President on May 13, 1977.
On April 1, 1978, P.D. No. 1341 was issued by then President Ferdinand E. Marcos, CONVERTING THE PHILIPPINE
COLLEGE OF COMMERCE INTO A POLYTECHNIC UNIVERSITY, DEFINING ITS OBJECTIVES, ORGANIZATIONAL STRUCTURE
AND FUNCTIONS, AND EXPANDING ITS CURRICULAR OFFERINGS.
Mateo continued as the head of the new University. On April 3, 1979, he was appointed Acting President and on
March 28, 1980, as President for a term of six (6) years.
On July 11, 1980, the Circuit Criminal Court of Manila rendered judgment acquitting petitioner of the charges against
him. The dispositive portion of the decision reads:
WHEREFORE, the Court finds the accused, Isabelo T. Crisostomo, not guilty of the violations charged in all these three
cases and hereby acquits him therefrom, with costs de oficio. The bail bonds filed by said accused for his provisional
liberty are hereby cancelled and released.
Pursuant to the provisions of Section 13, R.A. No. 3019, as amended, otherwise known as The Anti-Graft and Corrupt
Practices Act, and under which the accused has been suspended by this Court in an Order dated October 22, 1976, said
accused is hereby ordered reinstated to the position of President of the Philippine College of Commerce, now known as the
Polytechnic University of the Philippines, from which he has been suspended. By virtue of said reinstatement, he is
entitled to receive the salaries and other benefits which he failed to receive during suspension, unless in the meantime
administrative proceedings have been filed against him.
The bail bonds filed by the accused for his provisional liberty in these cases are hereby cancelled and released.
SO ORDERED.
The cases filed before the Tanodbayan (now the Ombudsman) were likewise dismissed on August 8, 1991 on the
ground that they had become moot and academic. On the other hand, the administrative cases were dismissed for failure
of the complainants to prosecute them.
On February 12, 1992, petitioner filed with the Regional Trial Court a motion for execution of the judgment,
particularly the part ordering his reinstatement to the position of president of the PUP and the payment of his salaries and
other benefits during the period of suspension.
The motion was granted and a partial writ of execution was issued by the trial court on March 6, 1992. On March 26,
1992, however, President Corazon C. Aquino appointed Dr. Jaime Gellor as acting president of the PUP, following the
expiration of the term of office of Dr. Nemesio Prudente, who had succeeded Dr. Mateo. Petitioner was one of the five
nominees considered by the President of the Philippines for the position.
On April 24, 1992, the Regional Trial Court, through respondent Judge Teresita Dy-Liaco Flores, issued another order,
reiterating her earlier order for the reinstatement of petitioner to the position of PUP president. A writ of execution,
ordering the sheriff to implement the order of reinstatement, was issued.
In his return dated April 28, 1992, the sheriff stated that he had executed the writ by installing petitioner as
President of the PUP, although Dr. Gellor did not vacate the office as he wanted to consult with the President of the
Philippines first. This led to a contempt citation against Dr. Gellor. A hearing was set on May 7, 1992. On May 5, 1992,
petitioner also moved to cite Department of Education, Culture and Sports Secretary Isidro Cario in contempt of
court. Petitioner assumed the office of president of the PUP.
On May 18, 1992, therefore, the People of the Philippines filed a petition for certiorari and prohibition (CA G.R. No.
27931), assailing the two orders and the writs of execution issued by the trial court. It also asked for a temporary
restraining order.
On June 25, 1992, the Court of Appeals issued a temporary restraining order, enjoining petitioner to cease and desist
from acting as president of the PUP pursuant to the reinstatement orders of the trial court, and enjoining further
proceedings in Criminal Cases Nos. VI-2329-2331.

On July 15, 1992, the Seventh Division of the Court of Appeals rendered a decision, [2] the dispositive portion of which
is set forth at the beginning of this opinion. Said decision set aside the orders and writ of reinstatement issued by the trial
court. The payment of salaries and benefits to petitioner accruing after the conversion of the PCC to the PUP was
disallowed. Recovery of salaries and benefits was limited to those accruing from the time of petitioners suspension until
the conversion of the PCC to the PUP. The case was remanded to the trial court for a determination of the amounts due
and payable to petitioner.
Hence this petition. Petitioner argues that P.D. No. 1341, which converted the PCC into the PUP, did not abolish the
PCC. He contends that if the law had intended the PCC to lose its existence, it would have specified that the PCC was
being abolished rather than converted and that if the PUP was intended to be a new institution, the law would have
said it was being created. Petitioner claims that the PUP is merely a continuation of the existence of the PCC, and, hence,
he could be reinstated to his former position as president.
In part the contention is well taken, but, as will presently be explained, reinstatement is no longer possible because
of the promulgation of P.D. No. 1437 by the President of the Philippines on June 10, 1978.
P.D. No. 1341 did not abolish, but only changed, the former Philippine College of Commerce into what is now the
Polytechnic University of the Philippines, in the same way that earlier in 1952, R.A. No. 778 had converted what was then
the Philippine School of Commerce into the Philippine College of Commerce. What took place was a change in academic
status of the educational institution, not in its corporate life. Hence the change in its name, the expansion of its curricular
offerings, and the changes in its structure and organization.
As petitioner correctly points out, when the purpose is to abolish a department or an office or an organization and to
replace it with another one, the lawmaking authority says so. He cites the following examples:
E.O. No. 709:
1. There is hereby created a Ministry of Trade and Industry, hereinafter referred to as the Ministry. The existing
Ministry of Trade established pursuant to Presidential Decree No. 721 as amended, and the existing Ministry established
pursuant to Presidential Decree No. 488 as amended, are abolished together with their services, bureaus and similar
agencies, regional offices, and all other entities under their supervision and control. . . .
E.O. No. 710:
1. There is hereby created a Ministry of Public Works and Highways, hereinafter referred to as the Ministry. The existing
Ministry of Public Works established pursuant to Executive Order No. 546 as amended, and the existing Ministry of Public
Highways established pursuant to Presidential Decree No. 458 as amended, are abolished together with their services,
bureaus and similar agencies, regional offices, and all other entities within their supervision and control. . . .
R.A. No. 6975:
13. Creation and Composition. - A National Police Commission, hereinafter referred to as the Commission, is hereby
created for the purpose of effectively discharging the functions prescribed in the Constitution and provided in this Act. The
Commission shall be a collegial body within the Department. It shall be composed of a Chairman and four (4) regular
commissioners, one (1) of whom shall be designated as Vice-Chairman by the President. The Secretary of the
Department shall be the ex-officio Chairman of the Commission, while the Vice-Chairman shall act as the executive officer
of the Commission.
xxx xxx

xxx

90. Status of Present NAPOLCOM, PC-INP. - Upon the effectivity of this Act, the present National Police Commission,
and the Philippine Constabulary-Integrated National Police shall cease to exist. The Philippine Constabulary, which is the
nucleus of the integrated Philippine Constabulary-Integrated National Police, shall cease to be a major service of the
Armed Forces of the Philippines. The Integrated National Police, which is the civilian component of the Philippine
Constabulary-Integrated National Police, shall cease to be the national police force and in lieu thereof, a new police force
shall be established and constituted pursuant to this Act.
In contrast, P.D. No. 1341, provides:

 1. The present Philippine College of Commerce is hereby converted into a university to be known as the Polytechnic
University of the Philippines, hereinafter referred to in this Decree as the University.
As already noted, R.A. No. 778 earlier provided:
1. The present Philippine School of Commerce, located in the City of Manila, Philippines, is hereby granted full college
status and converted into the Philippine College of Commerce, which will offer not only its present one-year and two-year
vocational commercial curricula, the latter leading to the titles of Associate in Business Education and/or Associate in
Commerce, but also four-year courses leading to the degrees of Bachelor of Science in Business in Education and Bachelor
of Science in Commerce, and five-year courses leading to the degrees of Master of Arts in Business Education and Master
of Arts in Commerce, respectively.
The appellate court ruled, however, that the PUP and the PCC are not one and the same institution but two
different entities and that since petitioner Crisostomos term was coterminous with the legal existence of the PCC,
petitioners term expired upon the abolition of the PCC. In reaching this conclusion, the Court of Appeals took into
account the following:
a) After respondent Crisostomos suspension, P.D. No. 1341 (entitled CONVERTING THE PHILIPPINE COLLEGE OF
COMMERCE INTO A POLYTECHNIC UNIVERSITY, DEFINING ITS OBJECTIVES, ORGANIZATIONAL STRUCTURE AND
FUNCTIONS, AND EXPANDING ITS CURRICULAR OFFERINGS) was issued on April 1, 1978. This decree explicitly provides
that PUPs objectives and purposes cover not only PCCs offering of programs in the field of commerce and business
administration but also programs in other polytechnic areas and in other fields such as agriculture, arts and trades and
fisheries . . . (section 2). Being a university, PUP was conceived as a bigger institution absorbing, merging and
integrating the entire PCC and other national schools as may be transferred to this new state university.
b) The manner of selection and appointment of the university head is substantially different from that provided by the PCC
Charter. The PUP President shall be appointed by the President of the Philippinesupon recommendation of the Secretary
of Education and Culture after consultation with the University Board of Regents (section 4, P.D. 1341). The President of
PCC, on the other hand, was appointed by the President of the Philippines upon recommendation of the Board of
Trustees (Section 4, R.A. 778).
c) The composition of the new universitys Board of Regents is likewise different from that of the PCC Board of Trustees
(which included the chairman of the Senate Committee on Education and the chairman of the House Committee on
Education, the President of the PCC Alumni Association as well as the President of the Chamber of Commerce of the
Philippines). Whereas, among others, the NEDA Director-General, the Secretary of Industry and the Secretary of Labor
are members of the PUP Board of Regents. (Section 6, P.D. 1341).
d) The decree moreover transferred to the new university all the properties including equipment and facilities:
. . . owned by the Philippine College of Commerce and such other National Schools as may be integrated . . . including
their obligations and appropriations . . . (Sec. 12; Italics supplied).[3]
But these are hardly indicia of an intent to abolish an existing institution and to create a new one. New course
offerings can be added to the curriculum of a school without affecting its legal existence. Nor will changes in its existing
structure and organization bring about its abolition and the creation of a new one. Only an express declaration to that
effect by the lawmaking authority will.
The Court of Appeals also cites the provision of P.D. No. 1341 as allegedly implying the abolition of the PCC and the
creation of a new one the PUP in its stead:
12. All parcels of land, buildings, equipment and facilities owned by the Philippine College of Commerce and such other
national schools as may be integrated by virtue of this decree, including their obligations and appropriations thereof, shall
stand transferred to the Polytechnic University of the Philippines, provided, however, that said national schools shall
continue to receive their corresponding shares from the special education fund of the municipal/provincial/city government
concerned as are now enjoyed by them in accordance with existing laws and/or decrees.
The law does not state that the lands, buildings and equipment owned by the PCC were being transferred to the
PUP but only that they stand transferred to it. Stand transferred simply means, for example, that lands transferred to
the PCC were to be understood as transferred to the PUP as the new name of the institution.

But the reinstatement of petitioner to the position of president of the PUP could not be ordered by the trial court
because on June 10, 1978, P.D. No. 1437 had been promulgated fixing the term of office of presidents of state universities
and colleges at six (6) years, renewable for another term of six (6) years, and authorizing the President of the Philippines
to terminate the terms of incumbents who were not reappointed. P.D. No. 1437 provides:
6. The head of the university or college shall be known as the President of the university or college. He shall be
qualified for the position and appointed for a term of six (6) years by the President of the Philippines upon
recommendation of the Secretary of Education and Culture after consulting with the Board which may be renewed for
another term upon recommendation of the Secretary of Education and Culture after consulting the Board. In case of
vacancy by reason of death, absence or resignation, the Secretary of Education and Culture shall have the authority to
designate an officer in charge of the college or university pending the appointment of the President.
The powers and duties of the President of the university or college, in addition to those specifically provided for in this
Decree shall be those usually pertaining to the office of the president of a university or college.
7. The incumbent president of a chartered state college or university whose term may be terminated according to this
Decree, shall be entitled to full retirement benefits: provided that he has served the government for at least twenty (20)
years; and provided, further that in case the number of years served is less than 20 years, he shall be entitled to one
month pay for every year of service.
In this case, Dr. Pablo T. Mateo Jr., who had been acting president of the university since April 3, 1979, was
appointed president of PUP for a term of six (6) years on March 28, 1980, with the result that petitioners term was cut
short. In accordance with 7 of the law, therefore, petitioner became entitled only to retirement benefits or the payment
of separation pay. Petitioner must have recognized this fact, that is why in 1992 he asked then President Aquino to
consider him for appointment to the same position after it had become vacant in consequence of the retirement of Dr.
Prudente.
WHEREFORE, the decision of the Court of Appeals is MODIFIED by SETTING ASIDE the questioned orders of the
Regional Trial Court directing the reinstatement of the petitioner Isabelo T. Crisostomo to the position of president of the
Polytechnic University of the Philippines and the payment to him of salaries and benefits which he failed to receive during
his suspension in so far as such payment would include salaries accruing after March 28, 1980 when petitioner
Crisostomos term was terminated. Further proceedings in accordance with this decision may be taken by the trial court to
determine the amount due and payable to petitioner by the university up to March 28, 1980.
SO ORDERED.

EN BANC
[G.R. No. 188056, January 08, 2013]
SPOUSES AUGUSTO G. DACUDAO AND OFELIA R. DACUDAO, Petitioners, v. SECRETARY OF JUSTICE RAUL M.
GONZALES OF THE DEPARTMENT OF JUSTICE, Respondent.
DECISION
BERSAMIN, J.:

Petitioners residents of Bacaca Road, Davao City - were among the investors whom Celso G. Delos Angeles, Jr. and his
associates in the Legacy Group of Companies (Legacy Group) allegedly defrauded through the Legacy Group's "buy back
agreement" that earned them check payments that were dishonored. After their written demands for the return of their
investments went unheeded, they initiated a number of charges for syndicated estafa against Delos Angeles, Jr., et al. in
the Office of the City Prosecutor of Davao City on February 6, 2009. Three of the cases were docketed as NPS Docket No.
XI-02-INV.-09-A-00356, Docket No. XI-02- INV.-09-C-00752, and Docket No. XI-02-INV.-09-C-00753. 1rl1
On March 18, 2009, the Secretary of Justice issued Department of Justice (DOJ) Order No. 182 (DO No. 182), directing all
Regional State Prosecutors, Provincial Prosecutors, and City Prosecutors to forward all cases already filed against Delos
Angeles, Jr., et al. to the Secretariat of the DOJ Special Panel in Manila for appropriate action.cralawlibrary
DO No. 182 reads:2rl1
All cases against Celso G. delos Angeles, Jr., et al. under Legacy Group of Companies, may be filed with the docket section
of the National Prosecution Service, Department of Justice, Padre Faura, Manila and shall be forwarded to the Secretariat
of the Special Panel for assignment and distribution to panel members, per Department Order No. 84 dated February 13,
2009.cralawlibrary
However, cases already filed against Celso G. delos Angeles, Jr. et al. of Legacy group of Companies in your respective
offices with the exemption of the cases filed in Cagayan de Oro City which is covered by Memorandum dated March 2,
2009, should be forwarded to the Secretariat of the Special Panel at Room 149, Department of Justice, Padre Faura,
Manila, for proper disposition.cralawlibrary
For information and guidance.
Pursuant to DO No. 182, the complaints of petitioners were forwarded by the Office of the City Prosecutor of Davao City to
the Secretariat of the Special Panel of the DOJ.3rl1
Aggrieved by such turn of events, petitioners have directly come to the Court via petition forcertiorari, prohibition
and mandamus, ascribing to respondent Secretary of Justice grave abuse of discretion in issuing DO No. 182. They claim
that DO No. 182 violated their right to due process, their right to the equal protection of the laws, and their right to the
speedy disposition of cases. They insist that DO No. 182 was an obstruction of justice and a violation of the rule against
enactment of laws with retroactive effect.cralawlibrary
Petitioners also challenge as unconstitutional the issuance of DOJ Memorandum dated March 2, 2009 exempting from the
coverage of DO No. No. 182 all the cases for syndicated estafa already filed and pending in the Office of the City
Prosecutor of Cagayan de Oro City. They aver that DOJ Memorandum dated March 2, 2009 violated their right to equal
protection under the Constitution.cralawlibrary
The Office of the Solicitor General (OSG), representing respondent Secretary of Justice, maintains the validity of DO No.
182 and DOJ Memorandum dated March 2, 2009, and prays that the petition be dismissed for its utter lack of
merit.cralawlibrary
Issues
The following issues are now to be resolved, to wit:chanroblesvirtualawlibrary
1.

Did petitioners properly bring their petition for certiorari, prohibition andmandamus directly to the
Court?

2.

Did respondent Secretary of Justice commit grave abuse of discretion in issuing DO No. 182?

3.

Did DO No. 182 and DOJ Memorandum dated March 2, 2009 violate petitioners' constitutionally
guaranteed rights?

Ruling
The petition for certiorari, prohibition and mandamus, being bereft of substance and merit, is dismissed.cralawlibrary
Firstly, petitioners have unduly disregarded the hierarchy of courts by coming directly to the Court with their petition
for certiorari, prohibition and mandamus without tendering therein any special, important or compelling reason to justify
the direct filing of the petition.cralawlibrary
We emphasize that the concurrence of jurisdiction among the Supreme Court, Court of Appeals and the Regional Trial
Courts to issue the writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus and injunction did not give

petitioners the unrestricted freedom of choice of court forum.4rl1 An undue disregard of this policy against direct
resort to the Court will cause the dismissal of the recourse. In Baez, Jr. v. Concepcion,5rl1 we explained why, to
wit:chanroblesvirtualawlibrary
The Court must enjoin the observance of the policy on the hierarchy of courts, and now affirms that the policy is not to be
ignored without serious consequences. The strictness of the policy is designed to shield the Court from having to deal with
causes that are also well within the competence of the lower courts, and thus leave time to the Court to deal with the
more fundamental and more essential tasks that the Constitution has assigned to it. The Court may act on petitions for
the extraordinary writs of certiorari,prohibition and mandamus only when absolutely necessary or when serious and
important reasons exist to justify an exception to the policy. This was why the Court stressed in Vergara, Sr. v.
Suelto:chanroblesvirtualawlibrary
x x x. The Supreme Court is a court of last resort, and must so remain if it is to satisfactorily perform the
functions assigned to it by the fundamental charter and immemorial tradition. It cannot and should not be
burdened with the task of dealing with causes in the first instance. Its original jurisdiction to issue the so-called
extraordinary writs should be exercised only where absolutely necessary or where serious and important
reasons exist therefor. Hence, that jurisdiction should generally be exercised relative to actions or proceedings before
the Court of Appeals, or before constitutional or other tribunals, bodies or agencies whose acts for some reason or another
are not controllable by the Court of Appeals. Where the issuance of an extraordinary writ is also within the
competence of the Court of Appeals or a Regional Trial Court, it is in either of these courts that the specific
action for the writ's procurement must be presented. This is and should continue to be the policy in this
regard, a policy that courts and lawyers must strictly observe. (Emphasis supplied)rbl r l
l lbrr
In People v. Cuaresma, the Court has also amplified the need for strict adherence to the policy of hierarchy of courts.
There, noting "a growing tendency on the part of litigants and lawyers to have their applications for the so-called
extraordinary writs, and sometimes even their appeals, passed upon and adjudicated directly and immediately by the
highest tribunal of the land," the Court has cautioned lawyers and litigants against taking a direct resort to the highest
tribunal, viz:chanroblesvirtualawlibrary
x x x. This Court's original jurisdiction to issue writs of certiorari(as well as prohibition, mandamus, quo
warranto, habeas corpusand injunction) is not exclusive. It is shared by this Court with Regional Trial Courts x x x,
which may issue the writ, enforceable in any part of their respective regions. It is also shared by this Court, and by the
Regional Trial Court, with the Court of Appeals x x x, although prior to the effectivity of Batas Pambansa Bilang 129 on
August 14, 1981, the latter's competence to issue the extraordinary writs was restricted to those "in aid of its appellate
jurisdiction." This concurrence of jurisdiction is not, however, to be taken as according to parties seeking any
of the writs an absolute, unrestrained freedom of choice of the court to which application therefor will be
directed. There is after all a hierarchy of courts. That hierarchy is determinative of the venue of appeals, and should also
serve as a general determinant of the appropriate forum for petitions for the extraordinary writs. A becoming regard for
that judicial hierarchy most certainly indicates that petitions for the issuance of extraordinary writs against
first level ("inferior) courts should be filed with the Regional Trial Court, and those against the latter, with
the Court of Appeals. A direct invocation of the Supreme Court's original jurisdiction to issue these writs
should be allowed only when there are special and important reasons therefor, clearly and specifically set out
in the petition. This is established policy. It is a policy that is necessary to prevent inordinate demands upon
the Court's time and attention which are better devoted to those matters within its exclusive jurisdiction, and
to prevent further over-crowding of the Court's docket. Indeed, the removal of the restriction on the jurisdiction of
the Court of Appeals in this regard, supra resulting from the deletion of the qualifying phrase, "in aid of its appellate
jurisdiction" was evidently intended precisely to relieve this Court pro tanto of the burden of dealing with applications for
the extraordinary writs which, but for the expansion of the Appellate Court corresponding jurisdiction, would have had to
be filed with it.cralawlibrary
xxxx
The Court therefore closes this decision with the declaration for the information and evidence of all
concerned, that it will not only continue to enforce the policy, but will require a more strict observance
thereof. (Emphasis supplied)rbl r l l lbrr
Accordingly, every litigant must remember that the Court is not the only judicial forum from which to seek and obtain
effective redress of their grievances. As a rule, the Court is a court of last resort, not a court of the first instance. Hence,
every litigant who brings the petitions for the extraordinary writs of certiorari, prohibition and mandamus should ever be
mindful of the policy on the hierarchy of courts, the observance of which is explicitly defined and enjoined in Section 4 of
Rule 65, Rules of Court, viz:chanroblesvirtualawlibrary
Section 4. When and where petition filed. - The petition shall be filed not later than sixty (60) days from notice of the
judgment, order or resolution. In case a motion for reconsideration or new trial is timely filed, whether such motion is
required or not, the sixty (60) day period shall be counted from notice of the denial of the said motion.cralawlibrary

The petition shall be filed in the Supreme Court or, if it relates to the acts or omissions of a lower court or of a
corporation, board, officer or person, in the Regional Trial Court exercising jurisdiction over the territorial
area as defined by the Supreme Court. It may also be filed in the Court of Appeals whether or not the same is
in the aid of its appellate jurisdiction, or in the Sandiganbayan if it is in aid of its appellate jurisdiction. If it
involves the acts or omissions of a quasi- judicial agency, unless otherwise provided by law or these rules,
the petition shall be filed in and cognizable only by the Court of Appeals.
In election cases involving an act or an omission of a municipal or a regional trial court, the petition shall be filed
exclusively with the Commission on Elections, in aid of its appellate jurisdiction. 6rl1
Secondly, even assuming arguendo that petitioners' direct resort to the Court was permissible, the petition must still be
dismissed.cralawlibrary
The writ of certiorari is available only when any tribunal, board or officer exercising judicial or quasi-judicial functions has
acted without or in excess of its or his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction, and there is no appeal, nor any plain, speedy, and adequate remedy in the ordinary course of
law.7rl1 "The sole office of the writ of certiorari," according to Delos Santos v. Metropolitan Bank and Trust
Company:8rl1
x x x is the correction of errors of jurisdiction, which includes the commission of grave abuse of discretion amounting to
lack of jurisdiction. In this regard, mere abuse of discretion is not enough to warrant the issuance of the writ. The abuse
of discretion must be grave, which means either that the judicial or quasi-judicial power was exercised in an
arbitrary or despotic manner by reason of passion or personal hostility, or that the respondent judge, tribunal
or board evaded a positive duty, or virtually refused to perform the duty enjoined or to act in contemplation
of law, such as when such judge, tribunal or board exercising judicial or quasi-judicial powers acted in a
capricious or whimsical manner as to be equivalent to lack of jurisdiction.
For a special civil action for certiorari to prosper, therefore, the following requisites must concur, namely: (a) it must be
directed against a tribunal, board or officer exercising judicial or quasi-judicial functions; (b) the tribunal, board, or officer
must have acted without or in excess of jurisdiction or with grave abuse of discretion amounting to lack or excess of
jurisdiction; and (c) there is no appeal nor any plain, speedy, and adequate remedy in the ordinary course of law.9 The
burden of proof lies on petitioners to demonstrate that the assailed order was issued without or in excess of jurisdiction or
with grave abuse of discretion amounting to lack or excess of jurisdiction.cralawlibrary
Yet, petitioners have not shown a compliance with the requisites. To start with, they merely alleged that the Secretary of
Justice had acted without or in excess of his jurisdiction. Also, the petition did not show that the Secretary of Justice was
an officer exercising judicial or quasi-judicial functions. Instead, the Secretary of Justice would appear to be not exercising
any judicial or quasi-judicial functions because his questioned issuances were ostensibly intended to ensure his
subordinates' efficiency and economy in the conduct of the preliminary investigation of all the cases involving the Legacy
Group. The function involved was purely executive or administrative.cralawlibrary
The fact that the DOJ is the primary prosecution arm of the Government does not make it a quasi-judicial office or agency.
Its preliminary investigation of cases is not a quasi-judicial proceeding. Nor does the DOJ exercise a quasi-judicial function
when it reviews the findings of a public prosecutor on the finding of probable cause in any case. Indeed, in Bautista v.
Court of Appeals,10rl1 the Supreme Court has held that a preliminary investigation is not a quasi-judicial proceeding,
stating:chanroblesvirtualawlibrary
x x x [t]he prosecutor in a preliminary investigation does not determine the guilt or innocence of the accused. He does not
exercise adjudication nor rule-making functions. Preliminary investigation is merely inquisitorial, and is often the only
means of discovering the persons who may be reasonably charged with a crime and to enable the fiscal to prepare his
complaint or information. It is not a trial of the case on the merits and has no purpose except that of determining whether
a crime has been committed and whether there is probable cause to believe that the accused is guilty thereof. While the
fiscal makes that determination, he cannot be said to be acting as a quasi-court, for it is the courts, ultimately, that pass
judgment on the accused, not the fiscal.11rl1
There may be some decisions of the Court that have characterized the public prosecutor's power to conduct a preliminary
investigation as quasi- judicial in nature. Still, this characterization is true only to the extent that the public prosecutor,
like a quasi-judicial body, is an officer of the executive department exercising powers akin to those of a court of
law.cralawlibrary
But the limited similarity between the public prosecutor and a quasi- judicial body quickly ends there. For sure, a quasijudicial body is an organ of government other than a court of law or a legislative office that affects the rights of private
parties through either adjudication or rule-making; it performs adjudicatory functions, and its awards and adjudications
determine the rights of the parties coming before it; its decisions have the same effect as the judgments of a court of law.
In contrast, that is not the effect whenever a public prosecutor conducts a preliminary investigation to determine probable
cause in order to file a criminal information against a person properly charged with the offense, or whenever the Secretary

of Justice reviews the public prosecutor's orders or resolutions.cralawlibrary

Petitioners have self-styled their petition to be also for prohibition. However, we do not see how that can be. They have
not shown in their petition in what manner and at what point the Secretary of Justice, in handing out the assailed
issuances, acted without or in excess of his jurisdiction, or with grave abuse of discretion amounting to lack or excess of
jurisdiction. On the other hand, we already indicated why the issuances were not infirmed by any defect of jurisdiction.
Hence, the blatant omissions of the petition transgressed Section 2, Rule 65 of the Rules of Court, to
wit:chanroblesvirtualawlibrary
Section 2. Petition for prohibition. When the proceedings of any tribunal, corporation, board, officer or person, whether
exercising judicial, quasi-judicial or ministerial functions, are without or in excess of its or his jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction, and there is no appeal or any other plain, speedy, and
adequate remedy in the ordinary course of law, a person aggrieved thereby may file a verified petition in the proper court,
alleging the facts with certainty and praying that judgment be rendered commanding the respondent to desist from
further proceedings in the action or matter specified therein, or otherwise granting such incidental reliefs as law and
justice may require.cralawlibrary
The petition shall likewise be accompanied by a certified true copy of the judgment, order or resolution subject thereof,
copies of all pleadings and documents relevant and pertinent thereto, and a sworn certification of non-forum shopping as
provided in the third paragraph of section 3, Rule 46. (2a)
Similarly, the petition could not be one for mandamus, which is a remedy available only when "any tribunal, corporation,
board, officer or person unlawfully neglects the performance of an act which the law specifically enjoins as a duty resulting
from an office, trust, or station, or unlawfully excludes another from the use and enjoyment of a right or office to which
such other is entitled, and there is no other plain, speedy and adequate remedy in the ordinary course of law, the person
aggrieved thereby may file a verified petition in the proper court.12rl1 The main objective of mandamus is to
compel the performance of a ministerial duty on the part of the respondent. Plainly enough, the writ of mandamusdoes
not issue to control or review the exercise of discretion or to compel a course of conduct, 13rl1which, it quickly seems
to us, was what petitioners would have the Secretary of Justice do in their favor. Consequently, their petition has not
indicated how and where the Secretary of Justice's assailed issuances excluded them from the use and enjoyment of a
right or office to which they were unquestionably entitled.cralawlibrary
Thirdly, there is no question that DO No. 182 enjoyed a strong presumption of its validity. In ABAKADA Guro Party List v.
Purisima,14rl1 the Court has extended the presumption of validity to legislative issuances as well as to rules and
regulations issued by administrative agencies, saying:chanroblesvirtualawlibrary
Administrative regulations enacted by administrative agencies to implement and interpret the law which they are
entrusted to enforce have the force of law and are entitled to respect. Such rules and regulations partake of the nature of
a statute and are just as binding as if they have been written in the statute itself. As such, they have the force and effect
of law and enjoy the presumption of constitutionality and legality until they are set aside with finality in an appropriate
case by a competent court.15rl1
DO No. 182 was issued pursuant to Department Order No. 84 that the Secretary of Justice had promulgated to govern the
performance of the mandate of the DOJ to "administer the criminal justice system in accordance with the accepted
processes thereof16rl1 as expressed in Republic Act No. 10071 (Prosecution Service Act of 2010) and Section 3,
Chapter I, Title III and Section 1, Chapter I, Title III of Book IV of Executive Order 292 (Administrative Code of
1987).cralawlibrary
To overcome this strong presumption of validity of the questioned issuances, it became incumbent upon petitioners to
prove their unconstitutionality and invalidity, either by showing that theAdministrative Code of 1987 did not authorize the
Secretary of Justice to issue DO No. 182, or by demonstrating that DO No. 182 exceeded the bounds of the Administrative
Code of 1987 and other pertinent laws. They did not do so. They must further show that the performance of the DOJ's
functions under the Administrative Code of 1987 and other pertinent laws did not call for the impositions laid down by the
assailed issuances. That was not true here, for DO No 182 did not deprive petitioners in any degree of their right to seek
redress for the alleged wrong done against them by the Legacy Group. Instead, the issuances were designed to assist
petitioners and others like them expedite the prosecution, if warranted under the law, of all those responsible for the
wrong through the creation of the special panel of state prosecutors and prosecution attorneys in order to conduct a
nationwide and comprehensive preliminary investigation and prosecution of the cases. Thereby, the Secretary of Justice
did not act arbitrarily or oppressively against petitioners.cralawlibrary
Fourthly, petitioners attack the exemption from the consolidation decreed in DO No. 182 of the cases filed or pending in
the Office of the City Prosecutor of Cagayan de Oro City, claiming that the exemption traversed the constitutional guaranty
in their favor of the equal protection of law.17rl1
The exemption is covered by the assailed DOJ Memorandum dated March 2, 2009, to wit:chanroblesvirtualawlibrary

It has come to the attention of the undersigned that cases for syndicated estafa were filed with your office against officers
of the Legacy Group of Companies. Considering the distance of the place of complainants therein to Manila, your Office is
hereby exempted from the directive previously issued by the undersigned requiring prosecution offices to forward the
records of all cases involving Legacy Group of Companies to the Task Force.cralawlibrary
Anent the foregoing, you are hereby directed to conduct preliminary investigation of all cases involving the Legacy Group
of Companies filed in your office with dispatch and to file the corresponding informations if evidence warrants and to
prosecute the same in court.
Petitioners' attack deserves no consideration. The equal protection clause of the Constitution does not require the
universal application of the laws to all persons or things without distinction; what it requires is simply equality among
equals as determined according to a valid classification. 18rl1
Hence, the Court has affirmed that if a law neither burdens a fundamental right nor targets a suspect class, the
classification stands as long as it bears a rational relationship to some legitimate government end. 19rl1
That is the situation here. In issuing the assailed DOJ Memorandum dated March 2, 2009, the Secretary of Justice took
into account the relative distance between Cagayan de Oro, where many complainants against the Legacy Group resided,
and Manila, where the preliminary investigations would be conducted by the special panel. He also took into account that
the cases had already been filed in the City Prosecutor's Office of Cagayan de Oro at the time he issued DO No. 182. Given
the considerable number of complainants residing in Cagayan de Oro City, the Secretary of Justice was fully justified in
excluding the cases commenced in Cagayan de Oro from the ambit of DO No. 182. The classification taken into
consideration by the Secretary of Justice was really valid. Resultantly, petitioners could not inquire into the wisdom behind
the exemption upon the ground that the non- application of the exemption to them would cause them some
inconvenience.cralawlibrary
Fifthly, petitioners contend that DO No. 182 violated their right to the speedy disposition of cases guaranteed by the
Constitution. They posit that there would be considerable delay in the resolution of their cases that would definitely be "a
flagrant transgression of petitioners' constitutional rights to speedy disposition of their cases.20rl1
We cannot favor their contention.cralawlibrary
In The Ombudsman v. Jurado,21rl1 the Court has clarified that although the Constitution guarantees the right to the
speedy disposition of cases, such speedy disposition is a flexible concept. To properly define that concept, the facts and
circumstances surrounding each case must be evaluated and taken into account. There occurs a violation of the right to a
speedy disposition of a case only when the proceedings are attended by vexatious, capricious, and oppressive delays, or
when unjustified postponements of the trial are sought and secured, or when, without cause or justifiable motive, a long
period of time is allowed to elapse without the party having his case tried. 22rl1 It is cogent to mention that a mere
mathematical reckoning of the time involved is not determinant of the concept. 23rl1
The consolidation of the cases against Delos Angeles, Jr., et al. was ordered obviously to obtain expeditious justice for the
parties with the least cost and vexation to them. Inasmuch as the cases filed involved similar or related questions to be
dealt with during the preliminary investigation, the Secretary of Justice rightly found the consolidation of the cases to be
the most feasible means of promoting the efficient use of public resources and of having a comprehensive investigation of
the cases.cralawlibrary
On the other hand, we do not ignore the possibility that there would be more cases reaching the DOJ in addition to those
already brought by petitioners and other parties. Yet, any delays in petitioners' cases occasioned by such other and
subsequent cases should not warrant the invalidation of DO No. 182. The Constitution prohibits only the delays that are
unreasonable, arbitrary and oppressive, and tend to render rights nugatory.24rl1 In fine, we see neither undue
delays, nor any violation of the right of petitioners to the speedy disposition of their cases.cralawlibrary
Sixthly, petitioners assert that the assailed issuances should cover only future cases against Delos Angeles, Jr., et al., not
those already being investigated. They maintain that DO No. 182 was issued in violation of the prohibition against passing
laws with retroactive effect.cralawlibrary
Petitioners' assertion is baseless.cralawlibrary
As a general rule, laws shall have no retroactive effect. However, exceptions exist, and one such exception concerns a law
that is procedural in nature. The reason is that a remedial statute or a statute relating to remedies or modes of procedure
does not create new rights or take away vested rights but only operates in furtherance of the remedy or the confirmation
of already existing rights.25rl1A statute or rule regulating the procedure of the courts will be construed as applicable to
actions pending and undetermined at the time of its passage. All procedural laws are retroactive in that sense and to that
extent. The retroactive application is not violative of any right of a person who may feel adversely affected, for, verily, no
vested right generally attaches to or arises from procedural laws.cralawlibrary
Finally, petitioners have averred but failed to establish that DO No. 182 constituted obstruction of justice. This ground of
the petition, being unsubstantiated, was unfounded.cralawlibrary

Nonetheless, it is not amiss to reiterate that the authority of the Secretary of Justice to assume jurisdiction over matters
involving the investigation of crimes and the prosecution of offenders is fully sanctioned by law. Towards that end, the
Secretary of Justice exercises control and supervision over all the regional, provincial, and city prosecutors of the country;
has broad discretion in the discharge of the DOJ's functions; and administers the DOJ and its adjunct offices and agencies
by promulgating rules and regulations to carry out their objectives, policies and functions.cralawlibrary
Consequently, unless and until the Secretary of Justice acts beyond the bounds of his authority, or arbitrarily, or
whimsically, or oppressively, any person or entity who may feel to be thereby aggrieved or adversely affected should have
no right to call for the invalidation or nullification of the rules and regulations issued by, as well as other actions taken by
the Secretary of Justice.cralawlibrary
WHEREFORE, the Court DISMISSES the omnibus petition for certiorari, prohibition, and mandamusfor lack of
merit.cralawlibrary
Petitioners shall pay the costs of suit.
SO ORDERED.

EN BANC
[G.R. No. 81954. August 8, 1989.]
CESAR Z. DARIO, Petitioner, v. HON. SALVADOR M. MISON, HON. VICENTE JAYME and HON. CATALINO
MACARAIG, JR., in their respective capacities as Commissioner of Customs, Secretary of Finance, and
Executive Secretary, Respondents.

SYLLABUS

MELENCIO-HERRERA, J., dissenting opinion:chanrob1es virtual 1aw library

1. ADMINISTRATIVE LAW; CIVIL SERVICE ACT; REMOVAL OR SUSPENSION OF CIVIL SERVICE OFFICER MUST BE FOR
CAUSE; "FOR CAUSE" CONSTRUED. The canon for the removal or suspension of a civil service officer or employee is
that it must be FOR CAUSE. That means "a guarantee of both procedural and substantive due process. Basically,
procedural due process would require that suspension or dismissal come only after notice and hearing. Substantive due
process would require that suspension or dismissal be for cause.
2. ID.; ID.; ID.; GUARANTEE ENSHRINED IN THE CONSTITUTION. The guarantee of removal FOR CAUSE is enshrined in
Article IX-B, Section 2(3) of the 1987 Constitution, which states that "No officer or employee of the civil service shall be
removed or suspended except FOR CAUSE provided by law."cralaw virtua1aw library
3. REMEDIAL LAW; SUPREME COURT; JUDGMENT; OBITER DICTUM, DEFINED. An obiter dictum or dictum has been
defined as a remark or opinion uttered, by the way. It is a statement of the court concerning a question which was not
directly before it (In re Hess, 23 A. 2d. 298, 301, 20 N.J. Misc. 12). It is language unnecessary to a decision, (a) ruling on
an issue not raised, or (an) opinion of a judge which does not embody the resolution or determination of the court, and is
made without argument or full consideration of the point (Lawson v. US, 176 F2d 49, 51, 85 U.S. App. D.C. 167). It is an
expression of opinion by the court or judge on a collateral question not directly involved, (Crescent Ring Co. v. Travelers
Indemnity Co. 132 A. 106, 107, 102 N.J. Law 85) or not necessary for the decision (Du Bell v. Union Central Life Ins. Co.,
29, So. 2d 709, 712; 211 La. 167).
4. ID.; ID.; ID.; RESOLUTION OF THE ULTIMATE ISSUES, NOT AN OBITER. The ruling of the Court, therefore, on the
Constitutional issues presented, particularly, the lapse of the period mandated by Proclamation No. 3, and the validity of
EO 127, cannot be said to be mere "obiter." They were ultimate issues directly before the Court, expressly decided in the
course of the consideration of the case, so that any resolution thereon must be considered as authoritative precedent, and
not a mere dictum (See Valli v. US, 94 F.2d 687 certiorari granted 58 S. Ct. 760, 303 U.S. 82 L. Ed. 1092; See also
Weedin v. Tayokichi Yamada 4 F. (2d) 455). Such resolution would not lose its value as a precedent just because the
disposition of the case was also made on some other ground.
5. ADMINISTRATIVE LAW; EXECUTIVE ORDER NO. 127; SEPARATION FROM OFFICE; RIGHT TO BE INFORMED OF
GROUND OF SEPARATION UNDER EXECUTIVE ORDER NO. 17, DISPENSED WITH. The right granted by EO 17 to an
employee to be informed of the ground for his separation must be deemed to have been revoked by the repealing clause
of EO 127 (Section 67) providing that "all laws, ordinances or parts thereof, which are inconsistent with this Executive
Order, are hereby repealed and modified accordingly."cralaw virtua1aw library
6. ID.; CIVIL SERVICE ACT; REMOVAL FROM CAREER SERVICE; TYPES OF REORGANIZATION. The standards laid down
are the "traditional" criteria for removal of employees from the career service, e.g. valid cause, due notice and hearing,
abolition of, or redundancy of offices. Proclamation No. 3, on the other hand, effectuates the "progressive" type of
reorganization dictated by the exigencies of the historical and political upheaval at the time. The "traditional" type is
limited in scope. It is concerned with the individual approach where the particular employee involved is charged
administratively and where the requisites of notice and hearing have to be observed. The "progressive" kind of
reorganization, on the other hand, is the collective way. It is wider in scope, and is the reorganization contemplated under
Section 16.
7. ID.; ID.; ID.; RIGHTS AVAILABLE TO A REORGANIZED EMPLOYEE. A reorganized employee is not without rights. His
right lies in his past services, the entitlement to which must be provided for by law. EO 127 provides for the same in its
Section 59, and so does SECTION 16 when the latter specified that career civil service employees separated from the
service not for cause: "shall be entitled to appropriate separation pay and to retirement and other benefits accruing to
them under the laws of general application in force at the time of their separation. In lieu thereof, at the option of the
employees, they may be considered for employment in the Government or in any of its subdivisions, instrumentalities, or
agencies, including government-owned or controlled corporations and their subsidiaries. This provision also applies to
career officers whose resignation, tendered in line with the existing policy, has been accepted."cralaw virtua1aw library
8. ID.; ID.; RIGHT TO AN OFFICE OR EMPLOYMENT WITH GOVERNMENT, NOT A VESTED RIGHT. The right to an office
or to employment with government or any of its agencies is not a vested property right, and removal therefrom will not
support the question of due process" (Yantsin v. Aberdeen, 54 Wash 2d 787, 345 P 2d 178). A civil service employee does
not have a constitutionally protected right to his position, which position is in the nature of a public office, political in
character and held by way of grant or privilege extended by government; generally he has been held to have no property
right or vested interest to which due process guaranties extend (See Taylor v. Beckham 178 U. S. 548, 44 L Ed. 1187;
Angilly v. US (CA2 NY) 199 F 2d 642; People ex. rel. Baker v. Wilson, 39 III App 2d 443, 189 NE 2d 1; Kelliheller v. NY
State Civil Service Com., 21 Misc 2d 1034, 194 NYS 2d 89).

DECISION

SARMIENTO, J.:

The Court writes finis to this controversy that has raged bitterly for the past several months. It does so out of a legitimate
presentiment of more suits reaching it as a consequence of the government reorganization and the instability it has
wrought on the performance and efficiency of the bureaucracy. The Court is apprehensive that unless the final word is
given and the ground rules are settled, the issue will fester, and likely foment a constitutional crisis for the nation, itself
beset with grave and serious problems.chanrobles virtual lawlibrary
The facts are not in dispute.
On March 25, 1986, President Corazon Aquino promulgated Proclamation No. 3, "DECLARING A NATIONAL POLICY TO
IMPLEMENT THE REFORMS MANDATED BY THE PEOPLE, PROTECTING THEIR BASIC RIGHTS, ADOPTING A PROVISIONAL
CONSTITUTION, AND PROVIDING FOR AN ORDERLY TRANSITION TO A GOVERNMENT UNDER A NEW CONSTITUTION.
Among other things, Proclamation No. 3 provided:chanrob1es virtual 1aw library
SECTION 1. . . .
The President shall give priority to measures to achieve the mandate of the people to:chanrob1es virtual 1aw library
(a) Completely reorganize the government, eradicate unjust and oppressive structures, and all iniquitous vestiges of the
previous regime; 1
Pursuant thereto, it was also provided:chanrob1es virtual 1aw library
SECTION 1. In the reorganization of the government, priority shall be given to measures to promote economy, efficiency,
and the eradication of graft and corruption.
SECTION 2. All elective and appointive officials and employees under the 1973 Constitution shall continue in office until
otherwise provided by proclamation or executive order or upon the appointment and qualification of the successors, if
such is made within a period of one year from February 25, 1986.
SECTION 3. Any public officer or employee separated from the service as a result of the organization effected under this
Proclamation shall, if entitled under the laws then in force, receive the retirement and other benefits accruing thereunder.
SECTION 4. The records, equipment, buildings, facilities and other properties of all government offices shall be carefully
preserved. In case any office or body is abolished or reorganized pursuant to this Proclamation, its funds and properties
shall be transferred to the office or body to which its powers, functions and responsibilities substantially pertain. 2
Actually, the reorganization process started as early as February 25, 1986, when the President, in her first act in office,
called upon "all appointive public officials to submit their courtesy resignation(s) beginning with the members of the
Supreme Court." 3 Later on, she abolished the Batasang Pambansa 4 and the positions of Prime Minister and Cabinet 5
under the 1973 Constitution.
Since then, the President has issued a number of executive orders and directives reorganizing various other government
offices, a number of which, with respect to elected local officials, has been challenged in this Court, 6 and two of which,
with respect to appointed functionaries, have likewise been questioned herein. 7
On May 28, 1986, the President enacted Executive Order No. 17, "PRESCRIBING RULES AND REGULATIONS FOR THE
IMPLEMENTATION OF SECTION 2, ARTICLE III OF THE FREEDOM CONSTITUTION." Executive Order No. 17 recognized the
"unnecessary anxiety and demoralization among the deserving officials and employees" the ongoing government
reorganization had generated, and prescribed as "grounds for the separation/replacement of personnel," the
following:chanrob1es virtual 1aw library
SECTION 3. The following shall be the grounds for separation/replacement of personnel:chanrob1es virtual 1aw library
1) Existence of a case for summary dismissal pursuant to Section 40 of the Civil Service Law;chanrobles virtual lawlibrary
2) Existence of a probable cause for violation of the Anti-Graft and Corrupt Practices Act as determined by the Ministry
Head concerned;
3) Gross incompetence or inefficiency in the discharge of functions;
4) Misuse of public office for partisan political purposes; 5) Any other analogous ground showing that the incumbent is
unfit to remain in the service or his separation/replacement is in the interest of the service. 8
On January 30, 1987, the President promulgated Executive Order No. 127, "REORGANIZING THE MINISTRY OF FINANCE."
9 Among other offices, Executive Order No. 127 provided for the reorganization of the Bureau of Customs 10 and
prescribed a new staffing pattern therefor.
Three days later, on February 2, 1987, 11 the Filipino people adopted the new Constitution.

On January 6, 1988, incumbent Commissioner of Customs Salvador Mison issued a Memorandum, in the nature of
"Guidelines on the Implementation of Reorganization Executive Orders," 12 prescribing the procedure in personnel
placement. It also provided:chanrob1es virtual 1aw library
1. By February 28, 1988, all employees covered by Executive Order 127 and the grace period extended to the Bureau of
Customs by the President of the Philippines on reorganization shall be:chanrob1es virtual 1aw library
a) informed of their re-appointment, or
b) offered another position in the same department or agency, or
c) informed of their termination. 13
On the same date, Commissioner Mison constituted a Reorganization Appeals Board charged with adjudicating appeals
from removals under the above Memorandum. 14 On January 26, 1988, Commissioner Mison addressed several notices to
various Customs officials, in the tenor as follows:chanrob1es virtual 1aw library
Sir:chanrob1es virtual 1aw library
Please be informed that the Bureau is now in the process of implementing the Reorganization Program under Executive
Order No. 127.
Pursuant to Section 59 of the same Executive Order, all officers and employees of the Department of Finance, or the
Bureau of Customs in particular, shall continue to perform their respective duties and responsibilities in a hold-over
capacity, and that those incumbents whose positions are not carried in the new reorganization pattern, or who are not reappointed, shall be deemed separated from the service.chanrobles.com:cralaw:red
In this connection, we regret to inform you that your services are hereby terminated as of February 28, 1988. Subject to
the normal clearances, you may receive the retirement benefits to which you may be entitled under existing laws, rules
and regulations.
In the meantime, your name will be included in the consolidated list compiled by the Civil Service Commission so that you
may be given priority for future employment with the Government as the need arises.
Sincerely yours,
(Sgd) SALVADOR M. MISON
Commissioner 15
As far as the records will yield, the following were recipients of these notices:chanrob1es virtu279al 1aw library
279 PERSONNEL
Cesar Dario is the petitioner in G.R. No. 81954; Vicente Feria, Jr., is the petitioner in G.R. No. 81967; Messrs. Adolfo
Caserano, Pacifico Lagleva, Julian C. Espiritu, Dennis A. Azarraga, Renato de Jesus, Nicasio C. Gamboa, Mesdames
Corazon Rallos Nieves and Felicitacion R. Geluz, Messrs. Leodegario H. Floresca, Subaer Pacasum, Ms. Zenaida Lanaria, Mr.
Jose B. Ortiz, Ms. Gliceria R. Dolar, Ms. Cornelia Napa, Pablo B. Santos, Fermin Rodriguez, Ms. Dalisay Bautista, Messrs.
Leonardo Jose, Alberto Lontok, Porfirio Tabino, Jose Barredo, Roberto Arnaldo, Ms. Ester Tan, Messrs. Pedro Bakal, Rosario
David, Rodolfo Afuang, Lorenzo Catre, Ms. Leoncia Catre, and Roberto Abada, are the petitioners in G.R. No. 82023; the
last 279 16 individuals mentioned are the private respondents in G.R. No. 85310.chanrobles.com : virtual law library
As far as the records will likewise reveal, 17 a total of 394 officials and employees of the Bureau of Customs were given
individual notices of separation. A number supposedly sought reinstatement with the Reorganization Appeals Board while
others went to the Civil Service Commission. The first thirty one mentioned above came directly to this Court.
On June 30, 1988, the Civil Service Commission promulgated its ruling ordering the reinstatement of the 279 employees,
the 279 private respondents in G.R. No. 85310, the dispositive portion of which reads as follows:chanrob1es virtual 1aw
library
WHEREFORE, it is hereby ordered that:chanrob1es virtual 1aw library
1. Appellants be immediately reappointed to positions of comparable or equivalent rank in the Bureau of Customs without
loss of seniority rights;
2. Appellants be paid their back salaries reckoned from the dates of their illegal termination based on the rates under the
approved new staffing pattern but not lower than their former salaries.
This action of the Commission should not, however, be interpreted as an exoneration of the appellants from any

accusation of wrongdoing and, therefore, their reappointments are without prejudice to:chanrob1es virtual 1aw library
1. Proceeding with investigation of appellants with pending administrative cases, and where investigations have been
finished, to promptly render the appropriate decisions;chanrobles virtual lawlibrary
2. The filing of appropriate administrative complaints against appellants with derogatory reports or information if evidence
so warrants.
SO ORDERED. 18
On July 15, 1988, Commissioner Mison, represented by the Solicitor General, filed a motion for reconsideration. Acting on
the motion, the Civil Service Commission, on September 20, 1988, denied reconsideration. 19
On October 20, 1988, Commissioner Mison instituted certiorari proceedings with this Court, docketed, as above-stated, as
G.R. No. 85310 of this Court.
On November 16, 1988, the Civil Service Commission further disposed the appeal (from the resolution of the
Reorganization Appeals Board) of five more employees, holding as follows:chanrob1es virtual 1aw library
WHEREFORE, it is hereby ordered that:chanrob1es virtual 1aw library
1. Appellants be immediately reappointed to positions of comparable or equivalent rank in the Bureau of Customs without
loss of seniority rights; and
2. Appellants be paid their back salaries to be reckoned from the date of their illegal termination based on the rates under
the approved new staffing pattern but not lower than their former salaries.
This action of the Commission should not, however, be interpreted as an exoneration of the herein appellants from any
accusation of any wrongdoing and therefore, their reappointments are without prejudice to:chanrob1es virtual 1aw library
1. Proceeding with investigation of appellants with pending administrative cases, if any, and where investigations have
been finished, to promptly, render the appropriate decisions; and
2. The filing of appropriate administrative complaints against appellant with derogatory reports or information, if any, and
if evidence so warrants.
SO ORDERED. 20
On January 6, 1989, Commissioner Mison challenged the Civil Service Commissions Resolution in this Court; his petition
has been docketed herein as G.R. No. 86241. The employees ordered to be reinstated are Senen Dimaguila, Romeo Arabe,
Bernardo Quintong, Gregorio Reyes, and Romulo Badillo. 21
On June 10, 1988, Republic Act No. 6656, "AN ACT TO PROTECT THE SECURITY OF TENURE OF CIVIL SERVICE OFFICERS
AND EMPLOYEES IN THE IMPLEMENTATION OF GOVERNMENT REORGANIZATION," 22 was signed into law. Under Section
7, thereof:chanrob1es virtual 1aw library
Sec. 9. All officers and employees who are found by the Civil Service Commission to have been separated in violation of
the provisions of this Act, shall be ordered reinstated or reappointed as the case may be without loss of seniority and shall
be entitled to full pay for the period of separation. Unless also separated for cause, all officers and employees, including
casuals and temporary employees, who have been separated pursuant to reorganization shall, if entitled thereto, be paid
the appropriate separation pay and retirement and other benefits under existing laws within ninety (90) days from the
date of the effectivity of their separation or from the date of the receipt of the resolution of their appeals as the case may
be: Provided, That application for clearance has been filed and no action thereon has been made by the corresponding
department or agency. Those who are not entitled to said benefits shall be paid a separation gratuity in the amount
equivalent to one (1) month salary for every year of service. Such separation pay and retirement benefits shall have
priority of payment out of the savings of the department or agency concerned. 23
On June 23, 1988, Benedicto Amasa and William Dionisio, customs examiners appointed by Commissioner Mison pursuant
to the ostensible reorganization subject of this controversy, petitioned the Court to contest the validity of the statute. The
petition is docketed as G.R. No. 83737.
On October 21, 1988, thirty-five more Customs officials whom the Civil Service Commission had ordered reinstated by its
June 30, 1988 Resolution filed their own petition to compel the Commissioner of Customs to comply with the said
Resolution. The petition is docketed as G.R. No. 85335.chanrobles lawlibrary : rednad
On November 29, 1988, we resolved to consolidate all seven petitions.
On the same date, we resolved to set the matter for hearing on January 12, 1989. At the said hearing, the parties,
represented by their counsels (a) retired Justice Ruperto Martin; (b) retired Justice Lino Patajo; (c) former Dean Froilan

Bacungan; (d) Atty. Lester Escobar; (e) Atty. Faustino Tugade; and (f) Atty. Alexander Padilla, presented their arguments.
Solicitor General Francisco Chavez argued on behalf of the Commissioner of Customs (except in G.R. 85335, in which he
represented the Bureau of Customs and the Civil Service Commission). Former Senator Ambrosio Padilla also appeared
and argued as amicus curiae. Thereafter, we resolved to require the parties to submit their respective memoranda which
they did in due time.
There is no question that the administration may validly carry out a government reorganization insofar as these cases
are concerned, the reorganization of the Bureau of Customs by mandate not only of the Provisional Constitution, supra,
but also of the various Executive Orders decreed by the Chief Executive in her capacity as sole lawmaking authority under
the 1986-1987 revolutionary government. It should also be noted that under the present Constitution, there is a
recognition, albeit implied, that a government reorganization may be legitimately undertaken, subject to certain
conditions. 24
The Court understands that the parties are agreed on the validity of a reorganization per se, the only question being, as
shall be later seen: What is the nature and extent of this government reorganization?
The Court disregards the questions raised as to procedure, failure to exhaust administrative remedies, the standing of
certain parties to sue, 25 and other technical objections, for two reasons," [b]ecause of the demands of public interest,
including the need for stability in the public service," 26 and because of the serious implications of these cases on the
administration of the Philippine civil service and the rights of public servants.
The urgings in G.R. Nos. 85335 and 85310, that the Civil Service Commissions Resolution dated June 30, 1988 had
attained a character of finality for failure of Commissioner Mison to apply for judicial review or ask for reconsideration
seasonably under Presidential Decree No. 807, 27 or under Republic Act No. 6656, 28 or under the Constitution, 29 are
likewise rejected. The records show that the Bureau of Customs had until July 15, 1988 to ask for reconsideration or come
to this Court pursuant to Section 39 of Presidential Decree No. 807. The records likewise show that the Solicitor General
filed a motion for reconsideration on July 15, 1988. 30 The Civil Service Commission issued its Resolution denying
reconsideration on September 20, 1988; a copy of this Resolution was received by the Bureau on September 23, 1988. 31
Hence the Bureau had until October 23, 1988 to elevate the matter on certiorari to this Court. 32 Since the Bureaus
petition was filed on October 20, 1988, it was filed on time.
We reject, finally, contentions that the Bureaus petition (in G.R. 85310) raises no jurisdictional questions, and is therefore
bereft of any basis as a petition for certiorari under Rule 65 of the Rules of Court. 33 We find that the questions raised in
Commissioner Misons petition (in G.R. 85310) are, indeed, proper for certiorari, if by jurisdictional questions" we mean
questions having to do with "an indifferent disregard of the law, arbitrariness and caprice, or omission to weigh pertinent
considerations, a decision arrived at without rational deliberation," 34 as distinguished from questions that require
"digging into the merits and unearthing errors of judgment" 35 which is the office, on the other hand, of review under
Rule 45 of the said Rules. What cannot be denied is the fact that the act of the Civil Service Commission of reinstating
hundreds of Customs employees Commissioner Mison had separated, has implications not only on the entire
reorganization process decreed no less than by the Provisional Constitution, but on the Philippine bureaucracy in general;
these implications are of such a magnitude that it cannot be said that assuming that the Civil Service Commission erred
the Commission committed a plain "error of judgment" that Aratuc says cannot be corrected by the extraordinary
remedy of certiorari or any special civil action. We reaffirm the teaching of Aratuc as regards recourse to this Court with
respect to rulings of the Civil Service Commission which is that judgments of the Commission may be brought to the
Supreme Court through certiorari alone, under Rule 65 of the Rules of Court.
In Aratuc, we declared:chanrob1es virtual 1aw library
It is once evident from these constitutional and statutory modifications that there is a definite tendency to enhance and
invigorate the role of the Commission on Elections as the independent constitutional body charged with the safeguarding
of free, peaceful and honest elections. The framers of the new Constitution must be presumed to have definite knowledge
of what it means to make the decisions, orders and rulings of the Commission "subject to review by the Supreme Court."
And since instead of maintaining that provision intact, it ordained that the Commissions actuations be instead "brought to
the Supreme Court on certiorari, We cannot insist that there was no intent to change the nature of the remedy,
considering that the limited scope of certiorari, compared to a review, is well known in remedial law. 36
We observe no fundamental difference between the Commission on Elections and the Civil Service Commission (or the
Commission on Audit for that matter) in terms of the constitutional intent to leave the constitutional bodies alone in the
enforcement of laws relative to elections, with respect to the former, and the civil service, with respect to the latter (or the
audit of government accounts, with respect to the Commission on Audit). As the poll body is the "sole judge" 37 of all
election cases, so is the Civil Service Commission the single arbiter of all 5 controversies pertaining to the civil service.
It should also be noted that under the new Constitution, as under the 1973 Charter, "any decision, order, or ruling of each
Commission may be brought to the Supreme Court on certiorari," 38 which, as Aratuc tells us, "technically connotes
something less than saying that the same shall be subject to review by the Supreme Court," 39 which in turn suggests an
appeal by petition for review under Rule 45. Therefore, our jurisdiction over cases emanating from the Civil Service
Commission is limited to complaints of lack or excess of jurisdiction or grave abuse of discretion tantamount to lack or
excess of jurisdiction, complaints that justify certiorari under Rule 65.chanroblesvirtual|awlibrary

While Republic Act No. 6656 states that judgments of the Commission are "final and executory" 40 and hence,
unappealable, under Rule 65, certiorari precisely lies in the absence of an appeal. 41
Accordingly, we accept Commissioner Misons petition (G.R. No. 85310) which clearly charges the Civil Service Commission
with grave abuse of discretion, a proper subject of certiorari, although it may not have so stated in explicit terms.
As to charges that the said petition has been filed out of time, we reiterate that it has been filed seasonably. It is to be
stressed that the Solicitor General had thirty days from September 23, 1988 (the date the Resolution, dated September
20, 1988, of the Civil Service Commission, denying reconsideration, was received) to commence the
instant certiorari proceedings. As we stated, under the Constitution, an aggrieved party has thirty days within which to
challenge "any decision, order, or ruling" 42 of the Commission. To say that the period should be counted from the
Solicitors receipt of the main Resolution, dated June 30, 1988, is to say that he should not have asked for reconsideration.
But to say that is to deny him the right to contest (by a motion for reconsideration) any ruling, other than the main
decision, when, precisely, the Constitution gives him such a right. That is also to place him at a "no-win" situation because
if he did not move for a reconsideration, he would have been faulted for demanding certiorari too early, under the general
rule that a motion for reconsideration should preface a resort to a special civil action. 43 Hence, we must reckon the
thirty-day period from receipt of the order of denial.chanroblesvirtuallawlibrary
We come to the merits of these cases.
G.R. Nos. 81954, 81967, 82023, and 85335:chanrob1es virtual 1aw library
The Case for the Employees
The petitioner in G.R. No. 81954, Cesar Dario, was one of the Deputy Commissioners of the Bureau of Customs until his
relief on orders of Commissioner Mison on January 26, 1988. In essence, he questions the legality of his dismissal, which
he alleges was upon the authority of Section 59 of Executive Order No. 127, supra, hereinbelow reproduced as
follows:chanrob1es virtual 1aw library
SEC. 59. New Structure and Pattern. Upon approval of this Executive Order, the officers and employees of the Ministry
shall, in a holdover capacity, continue to perform their respective duties and responsibilities and receive the corresponding
salaries and benefits unless in the meantime they are separated from government service pursuant to Executive Order No.
17 (1986) or Article III of the Freedom Constitution.
The new position structure and staffing pattern of the Ministry shall be approved and prescribed by the Minister within one
hundred twenty (120) days from the approval of this Executive Order and the authorized positions created hereunder shall
be filled with regular appointments by him or by the President, as the case may be. Those incumbents whose positions are
not included therein or who are not reappointed shall be deemed separated from the service. Those separated from the
service shall receive the retirement benefits to which they may be entitled under existing laws, rules and regulations.
Otherwise, they shall be paid the equivalent of one month basic salary for every year of service, or the equivalent nearest
fraction thereof favorable to them on the basis of highest salary received but in no case shall such payment exceed the
equivalent of 12 months salary.
No court or administrative body shall issue any writ of preliminary injunction or restraining order to enjoin the
separation/replacement of any officer or employee effected under this Executive Order. 44
a provision he claims the Commissioner could not have legally invoked. He avers that he could not have been legally
deemed to be an" [incumbent] whose [position] [is] not included therein or who [is] not reappointed" 45 to justify his
separation from the service. He contends that neither the Executive Order (under the second paragraph of the section) nor
the staffing pattern proposed by the Secretary of Finance 46 abolished the office of Deputy Commissioner of Customs,
but, rather, increased it to three. 47 Nor can it be said, so he further maintains, that he had not been "reappointed" 48
(under the second paragraph of the section) because" [r]eappointment therein presupposes that the position to which it
refers is a new one in lieu of that which has been abolished or although an existing one, has absorbed that which has been
abolished." 49 He claims, finally, that under the Provisional Constitution, the power to dismiss public officials without cause
ended on February 25, 1987, 50 and that thereafter, public officials enjoyed security of tenure under the provisions of the
1987 Constitution. 51
Like Dario, Vicente Feria, the petitioner in G.R. No. 81967, was a Deputy Commissioner at the Bureau until his separation
directed by Commissioner Mison. And like Dario, he claims that under the 1987 Constitution, he has acquired security of
tenure and that he cannot be said to be covered by Section 59 of Executive Order No. 127, having been appointed on April
22, 1986 during the effectivity of the Provisional Constitution. He adds that under Executive Order No. 39, "ENLARGING
THE POWERS AND FUNCTIONS OF THE COMMISSIONER OF CUSTOMS," 52 the Commissioner of Customs has the power"
[t]o appoint all Bureau personnel, except those appointed by the President," 53 and that his position, which is that of a
Presidential appointee, is beyond the control of Commissioner Mison for purposes of reorganization.
The petitioners in G.R. No. 82023, collectors and examiners in various ports of the Philippines, say, on the other hand,
that the purpose of reorganization is to end corruption at the Bureau of Customs and that since there is no finding that
they are guilty of corruption, they cannot be validly dismissed from the service.chanrobles law library

The Case for Commissioner Mison

In his comments, the Commissioner relies on this Courts resolution in Jose v. Arroyo, 54 in which the following statement
appears in the last paragraph thereof:chanrob1es virtual 1aw library
The contention of petitioner that Executive Order No. 127 is violative of the provision of the 1987 Constitution
guaranteeing career civil service employees security of tenure overlooks the provisions of Section 16, Article XVIII
(Transitory Provisions) which explicitly authorize the removal of career civil service employees "not for cause but as a
result of the reorganization pursuant to Proclamation No. 3 dated March 25, 1986 and the reorganization following the
ratification of this Constitution." By virtue of said provision, the reorganization of the Bureau of Customs under Executive
Order No. 127 may continue even after the ratification of the Constitution, and career civil service employees may be
separated from the service without cause as a result of such reorganization. 55
For this reason, Mison posits, claims of violation of security of tenure are allegedly no defense. He further states that the
deadline prescribed by the Provisional Constitution (February 25, 1987) has been superseded by the 1987 Constitution,
specifically, the transitory provisions thereof, 56 which allows a reorganization thereafter (after February 25, 1987) as this
very Court has so declared in Jose v. Arroyo. Mison submits that contrary to the employees argument, Section 59 of
Executive Order No. 127 is applicable (in particular, to Dario and Feria), in the sense that retention in the Bureau, under
the Executive Order, depends on either retention of the position in the new staffing pattern or reappointment of the
incumbent, and since the dismissed employees had not been reappointed, they had been considered legally separated.
Moreover, Mison proffers that under Section 59 incumbents are considered on holdover status, "which means that all those
positions were considered vacant." 57 The Solicitor General denies the applicability of Palma-Fernandez v. De la Paz 58
because that case supposedly involved a mere transfer and not a separation. He rejects, finally the force and effect of
Executive Order Nos. 17 and 39 for the reason that Executive Order No. 17, which was meant to implement the
Provisional Constitution, 59 had ceased to have force and effect upon the ratification of the 1987 Constitution, and that,
under Executive Order No. 39, the dismissals contemplated were "for cause" while the separations now under question
were "not for cause and were a result of government reorganization decreed by Executive Order No. 127. Anent Republic
Act No. 6656, he expresses doubts on the constitutionality of the grant of retroactivity therein (as regards the
reinforcement of security of tenure) since the new Constitution clearly allows reorganization after its
effectivity.chanroblesvirtual|awlibrary
G.R. Nos. 85310 and 86241
The Position of Commissioner Mison
Commissioners twin petitions are direct challenges to three rulings of the Civil Service Commission: (1) the Resolution,
dated June 30, 1988, reinstating the 265 customs employees above-stated; (2) the Resolution, dated September 20,
1988, denying reconsideration; and (3) the Resolution, dated November 16, 1988, reinstating five employees. The
Commissioners arguments are as follows:chanrob1es virtual 1aw library
1. The ongoing government reorganization is in the nature of a "progressive" 60 reorganization "impelled by the need to
overhaul the entire government bureaucracy" 61 following the people power revolution of 1986;
2. There was faithful compliance by the Bureau of the various guidelines issued by the President, in particular, as to
deliberation, and selection of personnel for appointment under the new staffing pattern;
3. The separated employees have been, under Section 59 of Executive Order No. 127, on mere holdover standing, "which
means that all positions are declared vacant;" 62
4. Jose v. Arroyo has declared the validity of Executive Order No. 127 under the transitory provisions of the 1987
Constitution;
5. Republic Act No. 6656 is of doubtful constitutionality.
The Ruling of the Civil Service Commission
The position of the Civil Service Commission is as follows:chanrob1es virtual 1aw library
1. Reorganizations occur where there has been a reduction in personnel or redundancy of functions; there is no showing
that the reorganization in question has been carried out for either purpose on the contrary, the dismissals now disputed
were carried out by mere service of notices;
2. The current Customs reorganization has not been made according to Malacaang guidelines; information on file with
the Commission shows that Commissioner Mison has been appointing unqualified personnel;
3. Jose v. Arroyo, in validating Executive Order No. 127, did not countenance illegal removals;chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph
4. Republic Act No. 6656 protects security of tenure in the course of reorganizations.

The Courts Ruling

Reorganization, Fundamental Principles of .
I.
The core provision of law involved is Section 16 Article XVIII, of the 1987 Constitution. We quote:chanrob1es virtual 1aw
library
Sec. 16. Career civil service employees separated from the service not for cause but as a result of the reorganization
pursuant to Proclamation No. 3 dated March 25, 1986 and the reorganization following the ratification of this Constitution
shall be entitled to appropriate separation pay and to retirement and other benefits accruing to them under the laws of
general application in force at the time of their separation. In lieu thereof, at the option of the employees, they may be
considered for employment in the Government or in any of its subdivisions, instrumentalities, or agencies, including
government-owned or controlled corporations and their subsidiaries. This provision also applies to career officers whose
resignation, tendered in line with the existing policy, had been accepted. 63
The Court considers the above provision critical for two reasons: (1) It is the only provision insofar as it mentions
removals not for cause that would arguably support the challenged dismissals by mere notice, and (2) It is the single
existing law on reorganization after the ratification of the 1987 Charter, except Republic Act No. 6656, which came much
later, on June 10, 1988. [Nota bene: Executive Orders No. 116 (covering the Ministry of Agriculture & Food), 117 (Ministry
of Education, Culture & Sports), 119 (Health), 120 (Tourism), 123 (Social Welfare & Development), 124 (Public Works &
Highways), 125 (Transportation & Communications), 126 (Labor & Employment), 127 (Finance), 128 (Science &
Technology), 129 (Agrarian Reform), 131 (Natural Resources), 132 (Foreign Affairs), and 133 (Trade & Industry) were all
promulgated on January 30, 1987, prior to the adoption of the Constitution on February 2, 1987]. 64
It is also to be observed that unlike the grants of power to effect reorganizations under the past Constitutions, the above
provision comes as a mere recognition of the right of the Government to reorganize its offices, bureaus, and
instrumentalities. Under Section 4, Article XVI, of the 1935 Constitution:chanrob1es virtual 1aw library
Section 4. All officers and employees in the existing Government of the Philippine Islands shall continue in office until the
Congress shall provide otherwise, but all officers whose appointments are by this Constitution vested in the President shall
vacate their respective office(s) upon the appointment and qualification of their successors, if such appointment is made
within a period of one year from the date of the inauguration of the Commonwealth of the Philippines. 65
Under Section 9, Article XVII, of the 1973 Charter:chanrob1es virtual 1aw library
Section 9. All officials and employees in the existing Government of the Republic of the Philippines shall continue in office
until otherwise provided by law or decreed by the incumbent President of the Philippines, but all officials whose
appointments are by this Constitution vested in the Prime Minister shall vacate their respective offices upon the
appointment and qualification of their successors. 66
The Freedom Constitution is, as earlier seen, couched in similar language:chanrob1es virtual 1aw library
SECTION 2. All elective and appointive officials and employees under the 1973 Constitution shall continue in office until
otherwise provided by proclamation or executive order or upon the appointment and qualification of their successors, if
such is made within a period of one year from February 25, 1986. 67
Other than references to "reorganization following the ratification of this Constitution," there is no provision for
"automatic" vacancies under the 1987 Constitution.
Invariably, transition periods are characterized by provisions for "automatic" vacancies. They are dictated by the need to
hasten the passage from the old to the new Constitution free from the "fetters" of due process and security of
tenure.chanrobles virtual lawlibrary
At this point, we must distinguish removals from separations arising from abolition of office (not by virtue of the
Constitution) as a result of reorganization carried out by reason of economy or to remove redundancy of functions. In the
latter case, the Government is obliged to prove good faith. 68 In case of removals undertaken to comply with clear and
explicit constitutional mandates, the Government is not hard put to prove anything, plainly and simply because the
Constitution allows it.
Evidently, the question is whether or not Section 16 of Article XVIII of the 1987 Constitution is a grant of a license upon
the Government to remove career public officials it could have validly done under an "automatic" -vacancy-authority and
to remove them without rhyme or reason.
As we have seen, since 1935, transition periods have been characterized by provisions for "automatic" vacancies. We take
the silence of the 1987 Constitution on this matter as a restraint upon the Government to dismiss public servants at a

moments notice.
What is, indeed, apparent is the fact that if the present Charter envisioned an "automatic" vacancy, it should have said so
in clearer terms, as its 1935, 1973, and 1986 counterparts had so stated.
The constitutional "lapse" means either one of two things: (1) The Constitution meant to continue the reorganization
under the prior Charter (of the Revolutionary Government), in the sense that the latter provides for "automatic" vacancies,
or (2) It meant to put a stop to those "automatic" vacancies. By itself, however, it is ambiguous, referring as it does to two
stages of reorganization the first, to its conferment or authorization under Proclamation No. 3 (Freedom Charter) and
the second, to its implementation on its effectivity date (February 2, 1987). But as we asserted, if the intent of Section 16
of Article XVIII of the 1987 Constitution were to extend the effects of reorganization under the Freedom Constitution, it
should have said so in clear terms. It is illogical why it should talk of two phases of reorganization when it could have
simply acknowledged the continuing effect of the first reorganization.chanroblesvirtualawlibrary
Second, plainly the concern of Section 16 is to ensure compensation for "victims" of constitutional revamps whether
under the Freedom or existing Constitution and only secondarily and impliedly, to allow reorganization. We turn to the
records of the Constitutional Commission:chanrob1es virtual 1aw library
INQUIRY OF MR. PADILLA
On the query of Mr. Padilla whether there is a need for a specific reference to Proclamation No. 3 and not merely state
"result of the reorganization following the ratification of this Constitution", Mr. Suarez, on behalf of the Committee, replied
that it is necessary, inasmuch as there are two stages of reorganization covered by the Section.
Mr. Padilla pointed out that since the proposals of the Commission on Government Reorganization have not been
implemented yet, it would be better to use the phrase "reorganization before or after the ratification of the Constitution"
to simplify the Section. Mr. Suarez instead suggested the phrase "as a result of the reorganization effected before or after
the ratification of the Constitution" on the understanding that the provision would apply to employees terminated because
of the reorganization pursuant to Proclamation No. 3 and even those affected by the reorganization during the Marcos
regime. Additionally, Mr. Suarez pointed out that it is also for this reason that the Committee specified the two
Constitutions the Freedom Constitution and the 1986 [1987] Constitution. 69
Simply, the provision benefits career civil service employees separated from the service. And the separation contemplated
must be due to or the result of (1) the reorganization pursuant to Proclamation No. 3 dated March 25, 1986, (2) the
reorganization from February 2, 1987, and (3) the resignations of career officers tendered in line with the existing policy
and which resignations have been accepted. The phrase "not for cause" is clearly and primarily exclusionary, to exclude
those career civil service employees separated "for cause." In other words, in order to be entitled to the benefits granted
under Section 16 of Article XVIII of the Constitution of 1987, two requisites, one negative and the other positive, must
concur, to wit:chanrob1es virtual 1aw library
1. the separation must not be for cause, and
2. the separation must be due to any of the three situations mentioned above.
By its terms, the authority to remove public officials under the Provisional Constitution ended on February 25, 1987,
advanced by jurisprudence to February 2, 1987. 70 It can only mean, then, that whatever reorganization is taking place is
upon the authority of the present Charter, and necessarily, upon the mantle of its provisions and safeguards. Hence, it can
not be legitimately stated that we are merely continuing what the revolutionary Constitution of the Revolutionary
Government had started. We are through with reorganization under the Freedom Constitution the first stage. We are on
the second stage that inferred from the provisions of Section 16 of Article XVIII of the permanent basic
document.chanroblesvirtuallawlibrary:red
This is confirmed not only by the deliberations of the Constitutional Commission, supra, but is apparent from the Charters
own words. It also warrants our holding in Esguerra and Palma-Fernandez, in which we categorically declared that after
February 2, 1987, incumbent officials and employees have acquired security of tenure, which is not a deterrent against
separation by reorganization under the quondam fundamental law.
Finally, there is the concern of the State to ensure that this reorganization is no "purge" like the execrated reorganizations
under martial rule. And, of course, we also have the democratic character of the Charter itself.
Commissioner Mison would have had a point, insofar as he contends that the reorganization is open-ended
("progressive"), had it been a reorganization under the revolutionary authority, specifically of the Provisional Constitution.
For then, the power to remove government employees would have been truly wide-ranging and limitless, not only because
Proclamation No. 3 permitted it, but because of the nature of revolutionary authority itself, its totalitarian tendencies, and
the monopoly of power in the men and women who wield it.
What must be understood, however, is that notwithstanding her immense revolutionary powers, the President was,
nevertheless, magnanimous in her rule. This is apparent from Executive Order No. 17, which established safeguards
against the strong arm and ruthless propensity that accompanies reorganizations notwithstanding the fact that

removals arising therefrom were "not for cause," and in spite of the fact that such removals would have been valid and
unquestionable. Despite that, the Chief Executive saw, as we said, the "unnecessary anxiety and demoralization" in the
government rank and file that reorganization was causing, and prescribed guidelines for personnel action. Specifically, she
said on May 28, 1986:chanrob1es virtual 1aw library
WHEREAS, in order to obviate unnecessary anxiety and demoralization among the deserving officials and employees,
particularly in the career civil service, it is necessary to prescribe the rules and regulations for implementing the said
constitutional provision to protect career civil servants whose qualifications and performance meet the standards of service
demanded by the New Government, and to ensure that only those found corrupt, inefficient and undeserving are
separated from the government service; 71
Noteworthy is the injunction embodied in the Executive Order that dismissals should be made on the basis of findings of
inefficiency, graft, and unfitness to render public service. **
The Presidents Memorandum of October 14, 1987 should furthermore be considered. We quote, in part:chanrob1es virtual
1aw library
Further to the Memorandum dated October 2, 1987 on the same subject, I have ordered that there will be no further layoffs this year of personnel as a result of the government reorganization. 72
Assuming, then, that this reorganization allows removals "not for cause" in a manner that would have been permissible in
a revolutionary setting as Commissioner Mison so purports, it would seem that the Commissioner would have been
powerless, in any event, to order dismissals at the Customs Bureau left and right. Hence, even if we accepted his
"progressive" reorganization theory, he would still have to come to terms with the Chief Executives subsequent directives
moderating the revolutionary authoritys plenary power to separate government officials and employees.chanrobles law
library : red
Reorganization under the 1987 Constitution, Nature, Extent, and Limitations of; Jose v. Arroyo, clarified.
The controversy seems to be that we have, ourselves, supposedly extended the effects of government reorganization
under the Provisional Constitution to the regime of the 1987 Constitution. Jose v. Arroyo 73 is said to be the authority for
this argument. Evidently, if Arroyo indeed so ruled, Arroyo would be inconsistent with the earlier pronouncement of
Esguerra and the later holding of Palma-Fernandez. The question, however, is: Did Arroyo, in fact, extend the effects of
reorganization under the revolutionary Charter to the era of the new Constitution?
There are a few points about Arroyo that have to be explained. First, the opinion expressed therein that" [b]y virtue of
said provision the reorganization of the Bureau of Customs under Executive Order No. 127 may continue even after the
ratification of this constitution and career civil service employees may be separated from the service without cause as a
result of such reorganization" 74 is in the nature of an obiter dictum. We dismissed Joses petition 75 primarily because it
was "clearly premature, speculative, and purely anticipatory, based merely on newspaper reports which do not show any
direct or threatened injury, "76 it appearing that the reorganization of the Bureau of Customs had not been, then, set in
motion. Jose therefore had no cause for complaint, which was enough basis to dismiss the petition. The remark anent
separation "without cause" was therefore not necessary for the disposition of the case. In Morales v. Paredes, 77 it was
held that an obiter dictum "lacks the force of an adjudication and should not ordinarily be regarded as such." 78
Secondly, Arroyo is an unsigned resolution while Palma-Fernandez is a full-blown decision, although both are en banc
cases. While a resolution of the Court is no less forceful than a decision, the latter has a special weight.
Thirdly, Palma-Fernandez v. De la Paz comes as a later doctrine. (Jose v. Arroyo was promulgated on August 11, 1987
while Palma-Fernandez was decided on August 31, 1987.) It is well-established that a later judgment supersedes a prior
one in case of an inconsistency.chanrobles.com.ph : virtual law library
As we have suggested, the transitory provisions of the 1987 Constitution allude to two stages of the reorganization, the
first stage being the reorganization under Proclamation No. 3 which had already been consummated the second
stage being that adverted to in the transitory provisions themselves which is underway. Hence, when we spoke, in
Arroyo, of reorganization after the effectivity of the new Constitution, we referred to the second stage of the
reorganization. Accordingly, we cannot be said to have carried over reorganization under the Freedom Constitution to its
1987 counterpart.
Finally, Arroyo is not necessarily incompatible with Palma-Fernandez (or Esguerra).
As we have demonstrated, reorganization under the aegis of the 1987 Constitution is not as stern as reorganization under
the prior Charter. Whereas the latter, sans the Presidents subsequently imposed constraints, envisioned a purgation, the
same cannot be said of the reorganization inferred under the new Constitution because, precisely, the new Constitution
seeks to usher in a democratic regime. But even if we concede ex gratia argumenti that Section 16 is an exception to due
process and no-removal- "except for cause provided by law" principles enshrined in the very same 1987 Constitution, 79
which may possibly justify removals "not for cause," there is no contradiction in terms here because, while the former
Constitution left the axe to fall where it might, the present organic act requires that removals "not for cause" must be as a
result of reorganization. As we observed, the Constitution does not provide for "automatic" vacancies. It must also pass

the test of good faith a test not obviously required under the revolutionary government formerly prevailing, but a test
well- established in democratic societies and in this government under a democratic Charter.
When, therefore, Arroyo permitted a reorganization under Executive Order No. 127 after the ratification of the 1987
Constitution, Arroyo permitted a reorganization provided that it is done in good faith. Otherwise, security of tenure would
be an insuperable impediment. 80
Reorganizations in this jurisdiction have been regarded as valid provided they are pursued in good faith. 81 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 a 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, or
otherwise not in good faith, no valid "abolition" takes place 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, 82 or where claims of economy are
belied by the existence of ample funds. 83
It is to be stressed that by predisposing a reorganization to the yardstick of good faith, we are not, as a consequence,
imposing a "cause" for restructuring. Retrenchment in the course of a reorganization in good faith is still removal "not for
cause," if by "cause" we refer to "grounds" or conditions that call for disciplinary action. ***
Good faith, as a component of a reorganization under a constitutional regime, is judged from the facts of each case.
However, under Republic Act No. 6656, we are told:chanrob1es virtual 1aw library
SEC. 2. No officer or employee in the career service shall be removed except for a valid cause and after due notice and
hearing. A valid cause for removal exists when, pursuant to a bona fide reorganization, a position has been abolished or
rendered redundant or there is a need to merge, divide, or consolidate positions in order to meet the exigencies of the
service, or other lawful causes allowed by the Civil Service Law. The existence of any or some of the following
circumstances may be considered as evidence of bad faith in the removals made as a result of reorganization, giving rise
to a claim for reinstatement or reappointment by an aggrieved party: (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 reclassification of offices in the
department or agency concerned and the reclassified offices perform substantially the same functions as the original
offices; (e) Where the removal violates the order of separation provided in Section 3 hereof. 84
It is in light hereof that we take up questions about Commissioner Misons good faith, or lack of it.
Reorganization of the Bureau of Customs,
Lack of Good Faith in.
The Court finds that after February 2, 1987 no perceptible restructuring of the Customs hierarchy except for the change
of personnel has occurred, which would have justified (all things being equal) the contested dismissals. The contention
that the staffing pattern at the Bureau (which would have furnished a justification for a personnel movement) is the same
staffing pattern prescribed by Section 34 of Executive Order No. 127 already prevailing when Commissioner Mison took
over the Customs helm, has not been successfully contradicted. 85 There is no showing that legitimate structural changes
have been made or a reorganization actually undertaken, for that matter at the Bureau since Commissioner Mison
assumed office, which would have validly prompted him to hire and fire employees. There can therefore be no actual
reorganization to speak of, in the sense, say, of reduction of personnel, consolidation of offices, or abolition thereof by
reason of economy or redundancy of functions, but a revamp of personnel pure and simple.chanrobles law library : red
The records indeed show that Commissioner Mison separated about 394 Customs personnel but replaced them with 522
as of August 18, 1988. 86 This betrays a clear intent to "pack" the Bureau of Customs. He did so, furthermore, in defiance
of the Presidents directive to halt further lay-offs as a consequence of reorganization. 87 Finally, he was aware that layoffs should observe the procedure laid down by Executive Order No. 17.
We are not, of course, striking down Executive Order No. 127 for repugnancy to the Constitution. While the act is valid,
still and all, the means with which it was implemented is not. 88
Executive Order No. 127, Specific Case of .
With respect to Executive Order No. 127, Commissioner Mison submits that under Section 59 thereof," [t]hose incumbents
whose positions are not included therein or who are not reappointed shall be deemed separated from the service." He
submits that because the 394 removed personnel have not been "reappointed," they are considered terminated. To begin
with, the Commissioners appointing power is subject to the provisions of Executive Order No. 39. Under Executive Order
No. 39, the Commissioner of Customs may "appoint all Bureau personnels except those appointed by the President." 89
Accordingly, with respect to Deputy Commissioners Cesar Dario and Vicente Feria, Jr., Commissioner Mison could not have
validly terminated them, they being Presidential appointees.

Secondly, and as we have asserted, Section 59 has been rendered inoperative according to our holding in PalmaFernandez.
That Customs employees, under Section 59 of Executive Order No. 127 had been on a mere holdover status cannot mean
that the positions held by them had become vacant. In Palma-Fernandez, we said in no uncertain terms:chanrob1es
virtual 1aw library
The argument that, on the basis of this provision, petitioners term of office ended on 30 January 1987 and that she
continued in the performance of her duties merely in a hold-over capacity and could be transferred to another position
without violating any of her legal rights, is untenable. The occupancy of a position in a hold-over capacity was conceived
to facilitate reorganization and would have lapsed on 25 February 1987 (under the Provisional Constitution), but advanced
to February 2, 1987 when the 1987 Constitution became effective (De Leon, Et Al., v. Hon. Benjamin B. Esquerra, et. al.,
G.R. No. 78059, 31 August 1987). After the said date the provisions of the latter on security of tenure govern. 90
It should be seen, finally, that we are not barring Commissioner Mison from carrying out a reorganization under the
transitory provisions of the 1987 Constitution. But such a reorganization should be subject to the criterion of good faith.
Resume.
In resume, we restate as follows:chanrob1es virtual 1aw library
1. The President could have validly removed government employees, elected or appointed, without cause but only before
the effectivity of the 1987 Constitution on February 2, 1987 (De Leon v. Esguerra, supra; Palma-Fernandez v. De la Paz,
supra); in this connection, Section 59 (on non-reappointment of incumbents) of Executive Order No. 127 cannot be a
basis for termination;
2. In such a case, dismissed employees shall be paid separation and retirement benefits or upon their option be given
reemployment opportunities (CONST. [1987], art. XVIII, sec. 16; Rep. Act No. 6656, sec. 9);
3. From February 2, 1987, the State does not loss the right to reorganize the Government resulting in the separation of
career civil service employees [CONST. (1987), supra] provided, that such a reorganization is made in good faith. (Rep.
Act No. 6656, supra.)
G.R. No. 83737
This disposition also resolves G.R. No. 83737. As we have indicated, G.R. No. 83737 is a challenge to the validity of
Republic Act No. 6656. In brief, it is argued that the Act, insofar as it strengthens security of tenure 91 and as far as it
provides for a retroactive effect, 92 runs counter to the transitory provisions of the new Constitution on removals not for
cause.
It can be seen that the Act, insofar as it provides for reinstatement of employees separated without "a valid cause and
after due notice and hearing" 93 is not contrary to the transitory provisions of the new Constitution. The Court reiterates
that although the Charters transitory provisions mention separations "not for cause," separations thereunder must
nevertheless be on account of a valid reorganization and which do not come about automatically. Otherwise, security of
tenure may be invoked. Moreover, it can be seen that the statute itself recognizes removals without cause. However, it
also acknowledges the possibility of the leadership using the artifice of reorganization to frustrate security of tenure. For
this reason, it has installed safeguards. There is nothing unconstitutional about the Act.
We recognize the injury Commissioner Misons replacements would sustain. We also commisserate with them. But our
concern is the greater wrong inflicted on the dismissed employees on account of their illegal separation from the civil
service.
WHEREFORE, THE RESOLUTIONS OF THE CIVIL SERVICE COMMISSION, DATED JUNE 30, 1988, SEPTEMBER 20, 1988,
NOVEMBER 16, 1988, INVOLVED IN G.R. NOS. 85310, 85335, AND 86241, AND MAY 8, 1989, INVOLVED IN G.R. NO.
85310, ARE AFFIRMED.
THE PETITIONS IN G.R. NOS. 81954, 81967, 82023, AND 85335 ARE GRANTED. THE PETITIONS IN G.R. NOS. 83737,
85310 AND 86241 ARE DISMISSED.
THE COMMISSIONER OF CUSTOMS IS ORDERED TO REINSTATE THE EMPLOYEES SEPARATED AS A RESULT OF HIS
NOTICES DATED JANUARY 26, 1988.
THE EMPLOYEES WHOM COMMISSIONER MISON MAY HAVE APPOINTED AS REPLACEMENTS ARE ORDERED TO VACATE
THEIR POSTS SUBJECT TO THE PAYMENT OF WHATEVER BENEFITS THAT MAY BE PROVIDED BY LAW.
NO COSTS.
IT IS SO ORDERED.

Gutierrez, Jr., Paras, Gancayco, Bidin, Cortes, Grio-Aquino and Medialdea, JJ., concur.
Padilla, J., No part, related to counsel for respondent Abaca in G.R. No. 85310.
Separate Opinions
MELENCIO-HERRERA, J., dissenting:chanrob1es virtual 1aw library
The historical underpinnings of Government efforts at reorganization hark back to the people power phenomenon of 22-24
February 1986, and Proclamation No. 1 of President Corazon C. Aquino, issued on 25 February 1986, stating in no
uncertain terms that "the people expect a reorganization of government." In its wake followed Executive Order No. 5,
issued on 12 March 1986, "Creating a Presidential Commission on Government Reorganization," with the following
relevant provisions:jgc:chanrobles.com.ph
"WHEREAS, there is need to effect the necessary and proper changes in the organizational and functional structures of the
national and local governments, its agencies and instrumentalities, including government-owned and controlled
corporations and their subsidiaries, in order to promote economy, efficiency and effectiveness in the delivery of public
services
x

"Section 2. The functional jurisdiction of the PCGR shall encompass, as necessary, the reorganization of the national and
local governments, its agencies and instrumentalities including government-owned or controlled corporations and their
subsidiaries.chanrobles virtual lawlibrary
x

x" (Emphasis supplied)

Succeeding it was Proclamation No. 3, dated 25 March 1986, also known as the Freedom Constitution, declaring, in part,
in its Preamble as follows:chanrob1es virtual 1aw library
WHEREAS, the direct mandate of the people as manifested by their extraordinary action demands the complete
reorganization of the government, . . ." (Emphasis supplied)
and pertinently providing:jgc:chanrobles.com.ph
"ARTICLE II
"Section I
". . .
"The President shall give priority to measures to achieve the mandate of the people to:jgc:chanrobles.com.ph
"(a) Completely reorganize the government and eradicate unjust and oppressive structures, and all iniquitous vestiges of
the previous regime;" (Emphasis supplied)
x

"ARTICLE III - GOVERNMENT REORGANIZATION

"Section 2. All elective and appointive officials and employees under the 1973 Constitution shall continue in office until
otherwise provided by proclamation or executive order or upon the designation or appointment and qualification of their
successors, if such is made within a period of one year from February 25, 1986.
"Section 3. Any public office or employee separated from the service as a result of the reorganization effected under this
Proclamation shall, if entitled under the laws then in force, receive the retirement and other benefits accruing thereunder."
(Emphasis ours)
On 28 May 1986, Executive Order No. 17 was issued "Prescribing Rules and Regulations for the Implementation of Section
2, Article III of the Freedom Constitution" providing, inter alia, as follows:jgc:chanrobles.com.ph
"Section 1. In the course of implementing Article III, Section 2 of the Freedom Constitution, the Head of each Ministry
shall see to it that the separation or replacement of officers and employees is made only for justifiable reasons, to prevent
indiscriminate dismissals of personnel in the career civil service whose qualifications and performance meet the standards

of public service of the New Government.

"x

"The Ministry concerned shall adopt its own rules and procedures for the review and assessment of its own personnel,
including the identification of sensitive positions which require more rigid assessment of the incumbents, and shall
complete such review/assessment as expeditiously as possible but not later than February 24, 1987 to prevent undue
demoralization in the public service.
"Section 2. The Ministry Head concerned, on the basis of such review and assessment shall determine who shall be
separated from the service. Thereafter, he shall issue to the official or employee concerned a notice of separation which
shall indicate therein the reason/s or ground/s for such separation and the fact that the separated official or employee has
the right to file a petition for reconsideration pursuant to this Order. Separation from the service shall be effective upon
receipt of such notice, either personally by the official or employee concerned or on his behalf by a person of sufficient
discretion.
"Section 3. The following shall be the grounds for separation replacement of personnel:chanrob1es virtual 1aw library
1. Existence of a case for summary dismissal pursuant to Section 40 of the Civil Service Law;
2. Existence of a probable cause for violation of the Anti Graft and Corrupt Practice Act as determined by the Ministry Head
concerned;
3. Gross incompetence or inefficiency in the discharge of functions;
4. Misuse of Public office for partisan political purposes;
5. Any other analogous ground showing that the incumbent is unfit to remain in the service or his separation/replacement
is in the interest of the service."cralaw virtua1aw library
"Section 11. This Executive Order shall not apply to elective officials or those designated to replace them, presidential
appointees, casual and contractual employees, or officials and employees removed pursuant to disciplinary proceedings
under the Civil Service Law and rules, and to those laid off as a result of the reorganization under taken pursuant to
Executive Order No. 5." (Emphasis supplied)
On 6 August 1986, Executive Order No. 39 was issued by the President "Enlarging the Powers and Functions of the
Commissioner of Customs", as follows:jgc:chanrobles.com.ph
"x

"SECTION 1. In addition to the powers and functions of the Commissioner of Customs, he is hereby authorized, subject to
the Civil Service Law and its implementing rules and regulations:chanrob1es virtual 1aw library
a) To appoint all Bureau personnel, except those appointed by the President;
b) To discipline, suspend, dismiss or otherwise penalize erring Bureau officers and employees;chanrobles virtual lawlibrary
c) To act on all matters pertaining to promotion, transfer, detail, reassignment, reinstatement, reemployment and other
personnel action, involving officers and employees of the Bureau of Customs.
x

x"

On 30 January 1987, Executive Order No. 127 was issued "Reorganizing the Ministry of Finance." Similar Orders,
approximately thirteen (13) in all, 1 were issued in respect of the other executive departments. The relevant provisions
relative to the Bureau of Customs read:jgc:chanrobles.com.ph
"RECALLING that the reorganization of the government is mandated expressly in Article II, Section l(a) and Article III of
the Freedom Constitution;
"HAVING IN MIND that pursuant to Executive Order No. 5 (1986), it is directed that the necessary and proper changes in
the organizational and functional structures of the government, its agencies and instrumentalities, be effected in order to
promote efficiency and effectiveness in the delivery of public services;
"BELIEVING that it is necessary to reorganize the Ministry of Finance to make it more capable and responsive,
organizationally and functionally, in its primary mandate of judiciously generating and efficiently managing the financial
resources of the Government, its subdivisions and instrumentalities in order to attain the socio-economic objectives of the
national development programs.
"x

x"

"SEC. 2. Reorganization. The Ministry of Finance, hereinafter referred to as Ministry, is hereby reorganized, structurally
and functionally, in accordance with the provisions of this Executive Order."cralaw virtua1aw library
"SEC. 33. Bureau of Customs.
". . . Executive Order No. 39 dated 6 August 1986 which grants autonomy to the Commissioner of Customs in matters of
appointment and discipline of Customs personnel shall remain in effect."cralaw virtua1aw library
"SEC. 55. Abolition of Units Integral to Ministry. All units not included in the structural organization as herein provided
and all positions thereof are hereby deemed abolished. . . . Their personnel shall be entitled to the benefits provided in the
second paragraph of Section 59 hereof"
"SEC. 59. New Structure and Pattern. Upon approval of this Executive Order, the officers and employees of the Ministry
shall, in a holdover capacity, continue to perform their respective duties and responsibilities and receive the corresponding
salaries and benefits unless in the meantime they are separated from government service pursuant to Executive Order No.
17 (1986) or Article III of the Freedom Constitution.
"The new position structure and staffing pattern of the Ministry shall be approved and prescribed by the Minister within
one hundred twenty (120) days from the approval of this Executive Order and the authorized positions created hereunder
shall be filled with regular appointments by him or by the President, as the case may be. Those incumbents whose
positions are not included therein or who are not reappointed shall be deemed separated from the service. Those
separated from the service shall receive the retirement benefits to which they may be entitled under the existing laws,
rules and regulations. Otherwise, they shall be paid the equivalent of one month basic salary for every year of service or
the equivalent nearest fraction thereof favorable to them on the basis of highest salary received, but in no case shall such
payment exceed the equivalent of 12 months salary.
"No court or administrative body shall issue any writ or preliminary injunction or restraining order to enjoin the
separation/replacement of any officer or employee affected under this Executive Order."cralaw virtua1aw library
"Section 67 All laws, ordinances, rules, regulations and other issuances or parts thereof, which are inconsistent with this
Executive Order, are hereby repealed or modified accordingly.
"x

x" (Emphasis supplied)

On 2 February 1987, the present Constitution took effect (De Leon, Et Al., v. Esguerra, G.R. No. 78059, August 31, 1987,
153 SCRA 602). Reorganization in the Government service pursuant to Proclamation No. 3, supra, was provided for in its
Section 16, Article XVIII entitled Transitory Provisions, reading:jgc:chanrobles.com.ph
"Section 16. Career civil service employees separated from the service not for cause but as a result of the reorganization
pursuant to Proclamation No. 3 dated March 25, 1986 and the reorganization following the ratification of this Constitution
shall be entitled to appropriate separation pay and to retirement and other benefits accruing to them under the laws of
general application in force at the time of their separation. In lieu thereof, at the option of the employees, they may be
considered for employment in the Government or in any of its subdivisions, instrumentalities, or agencies, including
government owned or controlled corporations and their subsidiaries. This provision also applies to career officers whose
resignation, tendered in line with the existing policy, has been accepted." chanrobles.com:cralaw:red
On 24 May 1987 the then Commissioner of Customs, Alexander A. Padilla, transmitted to the Department of Finance for
approval the proposed "position structure and staffing pattern" of the Bureau of Customs. Said Department gave its
imprimatur. Thereafter, the staffing pattern was transmitted to and approved by the Department of Budget and
Management on 7 September 1987 for implementation. Under the old staffing pattern, there were 7,302 positions while
under the new staffing pattern, there are 6,530 positions (CSC Resolution in CSC Case No. 1, dated 20 September 1988,
pp. 3-4).
On 22 September 1987, Salvador M. Mison assumed office as Commissioner of Customs.
On 2 October 1987 "Malacaang Memorandum Re: Guidelines on the Implementation of Reorganization Executive Orders"
was issued reading, insofar as relevant to these cases, as follows:jgc:chanrobles.com.ph
"It is my concern that ongoing process of government reorganization be conducted in a manner that is expeditious, as well
as sensitive to the dislocating consequences arising from specific personnel decisions.
"The entire process of reorganization, and in particular the process of separation from a service, must be carried out in the
most humane manner possible.
"For this purpose, the following guidelines shall be strictly followed:chanrob1es virtual 1aw library
1. By October 21, 1987, all employees covered by the Executive Orders for each agency on reorganization shall
be:chanrob1es virtual 1aw library

a. informed of their reappointment or

b. offered another position in the same department/agency, or
c. informed of their termination.
2. In the event of an offer for a lower position, there will be no reduction in the salary.
x

4. Each department/agency shall constitute a Reorganization Appeals Board at the central office, on or before October 21,
1987, to review or reconsider appeals or complaints relative to reorganization. All cases submitted to the Boards shall be
resolved subject to the following guidelines:chanrob1es virtual 1aw library
a. publication or posting of the appeal procedure promulgated by the Department Secretary;
b. adherence to due process;
c. disposition within 30 days from submission of the case;
d. written notification of the action taken and the grounds thereof.
Action by the Appeals Review Board does not preclude appeal to the Civil Service Commission.
5. Placement in the new staffing pattern of incumbent personnel shall be completed prior to the hiring of new personnel, if
any.
x

x" (Emphasis supplied)

On 25 November 1987 Commissioner Mison wrote the President requesting a grace period until the end of February 1988
within which to completely undertake the reorganization of the Bureau of Customs pursuant to Executive Order No. 127
dated 30 January 1987. Said request was granted in a letter-reply by Executive Secretary Catalino Macaraig, Jr., dated 22
December 1987.
On 6 January 1988, within the extended period requested, Bureau of Customs Memorandum "Re: Guidelines on the
Implementation of Reorganization Executive Orders" was issued in the same tenor as the Malacaang Memorandum of 2
October 1987, providing inter alia:jgc:chanrobles.com.ph
"To effectively implement the reorganization at the Bureau of Customs, particularly in the selection and placement of
personnel, and insure that the best qualified and most competent personnel in the career service are retained, the
following guidelines are hereby prescribed for the guidance of all concerned
1. By February 28, 1988 all employees covered by Executive Order No. 127 and the grace period extended to the Bureau
of Customs by the President of the Philippines on reorganization shall be:chanrob1es virtual 1aw library
a. informed of their reappointment, or
b. offered another position in the same department or agency, or
c. informed of their termination.
2. In the event of termination, the employee shall:chanrob1es virtual 1aw library
a. be included in a consolidated list compiled by the Civil Service Commission. All departments who are recruiting shall
give preference to the employees in the list; and
b. continue to receive salary and benefits until February 28, 1988, and
c. be guaranteed the release of separation benefits within 45 days from termination and in no case later than June 15,
1988.
x

x" (Emphasis supplied)

It is to be noted that paragraph 1 above and its sub-sections reproduced verbatim the Malacaang Guidelines of 2 October
1987 in that the employees concerned were merely to be informed of their termination.
On 28 January 1988 Commissioner Mison addressed identical letters of termination to Bureau of Customs officers and

employees effective on 28 February 1988.

As of 18 August 1988, Commissioner Mison appointed five hundred twenty-two (522) officials and employees of the
Bureau of Customs (CSC Resolution in CSC Case No. 1, dated 20 September 1988, p. 6). In fact, in a letter dated 27
January 1988, Commissioner Mison recommended Jose M. Balde for appointment to President Aquino as one of three (3)
Deputy Commissioners under Executive Order No. 127.chanrobles.com : virtual law library
In the interim, during the pendency of these Petitions, Republic Act No. 6656, entitled "An Act to Protect the Security of
Tenure of Civil Service Officers and Employees in the Implementation of Government Reorganization" was passed by
Congress on 9 June 1988. The President signed it into law on 10 June 1988 and the statute took effect on 29 June 1988.
On 20 June 1988 Motions were filed, in these cases pending before this Court, invoking the provisions of Republic Act No.
6656. The relevant provisions thereof read:jgc:chanrobles.com.ph
"SECTION 1. It is hereby declared the policy of the State to protect the security of tenure of civil service officers and
employees in the reorganization of the various agencies of the National government . . . .
"SECTION 2. No officer or employee in the career service shall be removed except for a valid cause and after due notice
and hearing. A valid cause for removal exists when, pursuant to a bona fide reorganization, a position has been abolished
or rendered redundant or there is a need to merge, divide, or consolidate positions in order to meet the exigencies of the
service, or other lawful causes allowed by the Civil Service Law. The existence of any or some of the following
circumstances may be considered as evidence of bad faith in the removals made as a result of reorganization, giving rise
to a claim for reinstatement or reappointment by an aggrieved party:chanrob1es virtual 1aw library
(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 reclassification of offices in the department or agency concerned and the reclassified offices perform
substantially the same functions as the original offices;
(e) Where the removal violates the order of separation provided in Section 3 hereof
x

"SECTION 9. All officers and employees who are found by the Civil Service Commission to have been separated in violation
of the provisions of this Act, shall be ordered reinstated or reappointed as the case may be without loss of seniority and
shall be entitled to full pay for the period of separation. Unless also separated for cause, all officers and employees,
including casuals and temporary employees, who have been separated pursuant to reorganization shall, if entitled thereto,
be paid the appropriate separation pay and retirement and other benefits under existing laws within ninety (90) days from
the date of the effectivity of their separation or from the date of the receipt of the resolution of their appeals as the case
may be: Provided, That application for clearance has been filed and no action thereon has been made by the
corresponding department or agency. Those who are not entitled to said benefits shall be paid a separation gratuity in the
amount equivalent to one (1) month salary for every year of service. Such separation pay and retirement benefits shall
have priority of payment out of the savings of the department or agency concerned.
x

"SECTION 11. The executive branch of the government shall implement reorganization schemes within a specified period
of time authorized by law.
"In the case of the 1987 reorganization of the executive branch, all departments and agencies which are authorized by
executive orders promulgated by the President to reorganize shall have ninety (90) days from the approval of this Act
within which to Implement their respective reorganization plans in accordance with the provisions of this Act.
x

"SECTION 13. All laws, rules and regulations or parts thereof, inconsistent with the provisions of this Act are hereby
repealed or modified accordingly. The rights and benefits under this Act shall be retroactive as of June 30, 1987.
"x

x" (Emphasis ours)

Given the foregoing statutory backdrop, the issues can now be addressed.
Scope of Section 16, Art. XVIII, 1987 Constitution
Crucial to the present controversy is the construction to be given to the abovementioned Constitutional provision
(SECTION 16, for brevity), which speaks of:jgc:chanrobles.com.ph
"Career civil service employees separated from the service not for cause
but as a result of the reorganization pursuant to Proclamation No. 3 dated March 25, 1986
and the reorganization following the ratification of this Constitution . . ." (Emphasis supplied).
To our minds, SECTION 16 clearly recognizes (1) the reorganization authorized by Proclamation No. 3; (2) that such
separation is NOT FOR CAUSE but as a result of the reorganization pursuant to said Proclamation; and (3) that the
reorganization pursuant to Proclamation No. 3 may be continued even after the ratification of the 1987 Constitution during
the transition period.
Separation NOT FOR CAUSE
The canon for the removal or suspension of a civil service officer or employee is that it must be FOR CAUSE. That means
"a guarantee of both procedural and substantive due process. Basically, procedural due process would require that
suspension or dismissal come only after notice and hearing. Substantive due process would require that suspension or
dismissal be for cause." (Bernas, The Constitution of the Republic of the Philippines: A Commentary, Vol. II, First Edition,
1988, p. 334)
The guarantee of removal FOR CAUSE is enshrined in Article IX-B, Section 2(3) of the 1987 Constitution, which states that
"No officer or employee of the civil service shall be removed or suspended except FOR CAUSE provided by law."cralaw
virtua1aw library
There can be no question then as to the meaning of the phrase FOR CAUSE. It simply means the observance of both
procedural and substantive due process in cases of removal of officers or employees of the civil service. When SECTION 16
speaks, therefore, of separation from the service NOT FOR CAUSE, it can only mean the diametrical opposite. The
constitutional intent to exempt the separation of civil service employees pursuant to Proclamation No. 3 from the
operation of Article IX-B, Section 2(3), becomes readily apparent. A distinction is explicitly made between removal FOR
CAUSE, which as aforestated, requires due process, and dismissal NOT FOR CAUSE, which implies that the latter is not
bound by the "fetters" of due process.
It is obviously for that reason that Section 16 grants separation pay and retirement benefits to those separated NOT FOR
CAUSE but as a result of the reorganization precisely to soften the impact of the non-observance of due process. "What is
envisioned in Section 16 is not a remedy for arbitrary removal of civil servants enjoying security of tenure but some form
of relief for members of the career civil service who may have been or may be legally but involuntarily reorganized out of
the service or may have voluntarily resigned pursuant to the reorganization policy" (ibid., p. 615).chanrobles virtual
lawlibrary
Reorganization Pursuant to Proclamation No. 3 to Continue Transitorily Even After Ratification
By its very context, SECTION 16 envisages the continuance of the reorganization pursuant to Proclamation No. 3 even
after ratification of the Constitution and during the transition period. The two [2] stages contemplated, namely, (1) the
stage before and (2) after ratification, refer to the same nature of separation "NOT FOR CAUSE but as a result of
Proclamation No. 3." No valid reason has been advanced for a different treatment after ratification as the majority opines,
i.e., that separation NOT FOR CAUSE is allowed before ratification but that, thereafter, separation can only be FOR CAUSE.
A fundamental principle of Constitutional construction IS to assure the realization of the purpose of the framers of the
organic law and of the people who adopted it.
That the reorganization commenced pursuant to Proclamation No. 3 was envisioned to continue even after the ratification
of the 1987 Constitution, at least transitorily, is evident from the intent of its authors discoverable from their deliberations
held on 3 October 1986 and evincing their awareness that such reorganization had not as yet been fully implemented.
Thus:jgc:chanrobles.com.ph
"Mr. PADILLA. Mr. Presiding Officer, on lines 2 to 5 is the clause pursuant to the provisions of Article III of Proclamation
No. 3, issued on March 25,1986, and the reorganization. Are those words necessary? Can we not just say result of the
reorganization following the ratification of this Constitution? In other words, must we make specific reference to
Proclamation No. 3?
"Mr. SUAREZ. Yes. I think the committee feels that is necessary, because in truth there has been a reorganization by virtue
of Proclamation No. 3. In other words, there are two stages of reorganization covered by this section.

"Mr. PADILLA. I understand there is a reorganization committee headed by a minister?

"Mr. SUAREZ. Philippine Commission on Government Reorganization.
"Mr. PADILLA. But whether that has already been implemented or not, I do not believe in it. There has been a plan, but I
do not think it has been implemented. If we want to include any previous reorganization after or before the ratification,
why do we not just say reorganization before or after the ratification to simplify the provision and eliminate two-and-ahalf sentences that may not be necessary? And as a result of the reorganization, if the committee feels there has been
reorganization before ratification and there be reorganization after, we just say before or after the ratification of this
Constitution.
Mr. SUAREZ. Something like this: as a result of the reorganization effected before or after the ratification of the
Constitution on the understanding, with the statement into the records, that this would be applicable to those reorganized
out pursuant to the Freedom Constitution also.
"Mr. PADILLA. That is understood if there has been a reorganization before the ratification or a reorganization after the
ratification." (RECORDS of the Constitutional Commission, Vol. 5, p. 416) (Emphasis provided)
It should also be recalled that the deadline for the reorganization under Proclamation No. 3 was "one year from February
25, 1986" (Article III, Section 2), or up to February 24, 1987. Executive Order No. 17 itself provided that the
review/assessment of personnel be completed "not later than February 24, 1987." But, confronted with the reality of the
ratification of the Constitution before that deadline without reorganization having been completed, there was need for a
provision allowing for its continuance even after ratification and until completed. It was also to beat that deadline that EO
127 and similar issuances, providing for the reorganization of departments of government, were all dated 30 January 1987
or prior to the plebiscite held on 2 February 1987. The intent to continue and complete the reorganizations started is selfevident in SECTION 16.
In Jose v. Arroyo, Et. Al. (G.R. No. 78435, August 11, 1987), which was a Petition for Certiorari and Prohibition to enjoin
the implementation of Executive Order No. 127, we recognized that the reorganization pursuant to Proclamation No. 3 as
mandated by SECTION 16, was to continue even after ratification when we stated:jgc:chanrobles.com.ph
"The contention of petitioner that EO No. 127 is violative of the provision of the 1987 Constitution guaranteeing career
civil service employees security of tenure overlooks the provision of Section 16, Art. XVIII (Transitory Provisions) which
explicitly authorizes the removal of career civil service employees not for cause but as a result of the reorganization
pursuant to Proclamation No. 3 dated March 25, 1986 and the reorganization following the ratification of the Constitution.
By virtue of said provision, the reorganization of the Bureau of Customs under Executive Order No. 127 may continue
even after the ratification of this Constitution and career civil service employees may be separated from the service
without cause as a result of such reorganization." (Emphasis ours)
With due respect to the majority, we disagree with its conclusion that the foregoing pronouncement is mere "obiter
dictum." chanrobles lawlibrary : rednad
"An obiter dictum or dictum has been defined as a remark or opinion uttered, by the way. It is a statement of the court
concerning a question which was not directly before it (In re Hess, 23 A. 2d. 298, 301, 20 N.J. Misc. 12). It is language
unnecessary to a decision, (a) ruling on an issue not raised, or (an) opinion of a judge which does not embody the
resolution or determination of the court, and is made without argument or full consideration of the point (Lawson v. US,
176 F2d 49, 51, 85 U.S. App. D.C. 167). It is an expression of opinion by the court or judge on a collateral question not
directly involved, (Crescent Ring Co. v. Travelers Indemnity Co. 132 A. 106, 107, 102 N.J. Law 85) or not necessary for
the decision (Du Bell v. Union Central Life Ins. Co., 29, So. 2d 709, 712; 211 La. 167)."cralaw virtua1aw library
In the case at bar, however, directly involved and squarely before the Court was the issue of whether "EO 127 violates
Section 2(3) of Article IX-B of the 1987 Constitution against removal of civil service employees except for cause."
Petitioner batted for the affirmative of the proposition, while respondents contended that "removal of civil service
employees without cause is allowed not only under the Provisional Constitution but also under the 1987 Constitution if the
same is made pursuant to a reorganization after the ratification of the Constitution."cralaw virtua1aw library
It may be that the Court dismissed that Petition for being "premature, speculative and purely anticipatory" inasmuch as
petitioner therein had "not received any communication terminating or threatening to terminate his services." But that
was only one consideration. The Court still proceeded to decide all the issues adversatively contested by the parties,
namely "1) that the expiration date of February 25, 1987 fixed by Section 2 of Proclamation No. 3 on which said Executive
order is based had already lapsed; 2) that the Executive Order has not been published in the Official Gazette as required
by Article 2 of the Civil Code and Section 11 of the Revised Administrative Code; and 3) that its enforcement violates
Section 2(3) of Article IX-B of the 1987 Constitution against removal of civil service employees except for cause."cralaw
virtua1aw library
The ruling of the Court, therefore, on the Constitutional issues presented, particularly, the lapse of the period mandated
by Proclamation No. 3, and the validity of EO 127, cannot be said to be mere "obiter." They were ultimate issues directly
before the Court, expressly decided in the course of the consideration of the case, so that any resolution thereon must be
considered as authoritative precedent, and not a mere dictum (See Valli v. US, 94 F.2d 687 certiorari granted 58 S. Ct.

760, 303 U.S. 82 L. Ed. 1092; See also Weedin v. Tayokichi Yamada 4 F. (2d) 455). Such resolution would not lose its
value as a precedent just because the disposition of the case was also made on some other ground.
". . . And this rule applies as to all pertinent questions although only incidentally involved, which are presented and
decided in the regular course of the consideration of the case, and lead up to the final conclusion (Northern Pac. Ry. Co. v.
Baker, D.C. Wash., 3 F. Suppl. 1; See also Wisconsin Power and Light Co. v. City of Beloit, 254 NW 119; Chase v. American
Cartage Co. 186 N.W. 598; City of Detroit, Et. Al. v. Public Utilities Comm. 286 N.W. 368). Accordingly, a point expressly
decided does not lose its value as a precedent because the disposition of the case is made on some other ground. (Wagner
v. Corn Products Refining Co. D.C. N.J. 28 F 2d 617) Where a case presents two or more points, any one of which is
sufficient to determine the ultimate issue, but the court actually decides all such points, the case is an authoritative
precedent as to every point decided, and none of such points can be regarded as having merely the status of a dictum
(See U.S. v. Title Insurance and Trust Co., Cal., 44 S. Ct. 621, 265 U.S. 472, 68 L. Ed. 1110; Van Dyke v. Parker 83 F. (2d)
35) and one point should not be denied authority merely because another point was more dwelt on and more fully argued
and considered. (Richmond Screw Anchor Co. v. U.S. 48 S. Ct. 194, 275 U.S. 331, 72 L. Ed. 303)" chanroblesvirtual|
awlibrary
It is true that in Palma-Fernandez v. de la Paz (G.R. No. 78946, April 15, 1986, 160 SCRA 751), we had
stated:jgc:chanrobles.com.ph
"The argument that, on the basis of this provision (Section 26 of Executive Order No. 119, or the Reorganization Act of
the Ministry of Health), petitioners term of office ended on 30 January 1987 and that she continued in the performance of
her duties merely in a hold-over capacity and could be transferred to another position without violating any of her legal
rights, is untenable. The occupancy of a position in a hold-over capacity was conceived to facilitate reorganization and
would have lapsed on 25 February 1987 (under the Provisional Constitution), but advanced to 2 February 1987 when the
1987 Constitution became effective (De Leon, Et Al., v. Hon. Esguerra, Et Al., G.R. No. 78059, 31 August 1987, 153 SCRA
602). After the said date the provisions of the latter on security of tenure govern."cralaw virtua1aw library
The factual situation in the two cases, however, radically differ. In the cited case, Dra. Palma-Fernandez, the petitioner,
had already been extended a permanent appointment as Assistant Director for Professional Services of the East Avenue
Medical Center but was still being transferred by the Medical Center Chief to the Research office against her consent.
Separation from the service as a result of reorganization was not involved. The question then arose as to whether the
latter official had the authority to transfer or whether the power to appoint and remove subordinate officers and
employees was lodged in the Secretary of Health. Related to that issue was the vital one of whether or not her transfer,
effected on 29 May 1987, was tantamount to a removal without cause. Significant, too, is the fact that the transfer was
basically made "in the interest of the service" pursuant to Section 24(c) of PD No. 807, or the Civil Service Decree, and
not because she was being reorganized out by virtue of EO 119 or the "Reorganization Act of the Ministry of Health,"
although the said Act was invoked after the fact. And so it was that SECTION 16 was never mentioned, much less invoked
in the Palma-Fernandez case.
Finally, on this point, it is inaccurate for the majority to state that there were no reorganization orders after ratification.
There were, namely, EO 181 (Reorganization Act of the Civil Service Commission), June 1, 1987; EO 193 (Reorganization
Act of the Office of Energy Affairs), June 10, 1987; EO 230 (Reorganization Act of NEDA), July 22, 1987; EO 262
(Reorganization Act of the Department of Local Government), July 25, 1987; EO 297 (Reorganization Act of the office of
the Press Secretary), July 25, 1987.
The Element of Good Faith
The majority concedes that reorganization can be undertaken provided it be in good faith but concludes that
Commissioner Mison was not in good faith.
The aforesaid conclusion is contradicted by the records.
Executive Order No. 127, dated 30 January 1987, specifically authorized the reorganization of the Bureau of Customs
"structurally and functionally" and provided for the abolition of all units and positions thereof not included in the structural
organization (Section 55).
As stated heretofore, it was the former Commissioner of Customs, Alexander A. Padilla who, on 24 May 1987, transmitted
to the Department of Finance for approval the proposed "position structure and staffing pattern" of the Bureau of
Customs. This was approved by the Department of Finance. Thereafter, it was transmitted to and approved by the
Department of Budget and Management on 7 September 1987 for implementation. Under the old staffing pattern, there
were 7,302 positions while under the new staffing pattern, there are 6,530 positions.
On 2 October 1987 "Malacaang Memorandum Re: Guidelines on the Implementation of Reorganization Executive Orders"
provided:jgc:chanrobles.com.ph
"By October 21, 1987, all employees covered by the Executive orders for each agency on reorganization shall
be:chanrob1es virtual 1aw library
a. informed of their reappointment, or

b. offered another position in the same department or agency, or

c. informed of their termination." (Emphasis supplied)
On 25 November 1987 Commissioner Mison asked for and was granted by the President an extension up to February 1988
within which to completely undertake the reorganization of the Bureau of Customs.
On 6 January 1988, he issued Bureau of Customs Memorandum "Re Guidelines on the Implementation of Reorganization
Executive Orders" reiterating the above-quoted portion of the Malacaang Memorandum of 2 October 1987. Pursuant
thereto, on 28 January 1988, Commissioner Mison addressed uniform letters of termination to the employees listed on
pages 15,16 and 17 of the majority opinion, effective on 28 February 1988, within the extended period
granted.chanroblesvirtuallawlibrary
The records further show that upon Commissioner Misons official inquiry, Secretary of Justice Secretary A. Ordoez,
rendered the following Opinion:jgc:chanrobles.com.ph
". . . It is believed that customs employees who are reorganized out in the course of the implementation of E.O. No. 127
(reorganizing the Department of Finance) need not be informed of the nature and cause of their separation from the
service. It is enough that they be informed of their termination pursuant to section 1(c) of the Memorandum dated
October 2, 1987 of President Aquino, which reads:jgc:chanrobles.com.ph
"1. By October 21,1987, all employees covered by the Executive orders for each agency on reorganization shall
be:chanrob1es virtual 1aw library
x

"c) Informed of their terminations.

"The constitutional mandate that no officer or employee of the civil service shall be removed or suspended except for
cause as provided by law (Sec. 2(4) (sic), Article IX-B of the 1987 Constitution) does not apply to employees who are
separated from office as a result of the reorganization of that Bureau as directed in Executive Order No. 127.
x

"Regarding your (third) query, the issue as to the constitutionality of Executive Order No. 127 is set at rest, after the
Supreme Court resolved to dismiss the petition for certiorari questioning its enforceability, for lack of merit (see Jose v.
Arroyo, Et Al., supra)." (Opinion No. 41, s. 1988, March 3, 1988) (Emphasis supplied)
The former Chairman of the Civil Service Commission, Celerina G. Gotladera, likewise periodically consulted by
Commissioner Mison, also expressed the opinion that "it is not a prerequisite prior to the separation of an employee
pursuant to reorganization that he be administratively charged." (Annex 16, p. 411, Rollo, G.R. No. 85310)
Moreover, the records show that the final selection and placement of personnel was done by a Placement Committee, one
of whose members is the Head of the Civil Service Commission Field Office, namely, Mrs. Purificacion Cuerdo. The
appointment of employees made by Commissioner Mison was based on the list approved by said Placement Committee.
But the majority further faults Mison for defying the Presidents directive to halt further lay-offs as a consequence of
reorganization, citing OP Memo of 14 October 1987, reading:jgc:chanrobles.com.ph
"Further to the Memorandum dated October 2, 1987 on the same subject, I have ordered that there will be no further layoffs this year of personnel as a result of the government reorganization." (p 45, Decision)
The foregoing, however, must be deemed superseded by later developments, namely, the grant to Commissioner Mison by
the President on 22 December 1987 of a grace period until the end of February 1988 within which to completely undertake
the reorganization of the Bureau of Customs, which was, in fact, accomplished by 28 February 1988.
To further show lack of good faith, the majority states that Commissioner Mison failed to observe the procedure laid down
by EO 17, supra, directing inter alia that a notice of separation be issued to an employee to be terminated indicating
therein the reason/s or ground/s for such separation. That requirement, however, does not appear in Section S9 of EO
127, which provides on the contrary "that those incumbents whose positions are not included in the new position structure
and staffing pattern of the Ministry or who are not reappointed shall be deemed separated from the service." The right
granted by EO 17 to an employee to be informed of the ground for his separation must be deemed to have been revoked
by the repealing clause of EO 127 (Section 67) providing that "all laws, ordinances or parts thereof, which are inconsistent
with this Executive Order, are hereby repealed and modified accordingly." chanrobles law library

Moreover, Section 11 of EO 17 explicitly excepts from its coverage a reorganization pursuant to EO 5. Thus
"The Executive Order shall not apply to elective officials or those designated to replace them, presidential appointees,
casual and contractual employees, or officials and employees removed pursuant to disciplinary proceedings under the Civil
Service law and rules, and to those laid off as a result of reorganization undertaken pursuant to Executive Order No. 5."
(Emphasis ours)
That EO 127 was issued pursuant to or in implementation of EO 5, is shown by its introductory portion
reading:jgc:chanrobles.com.ph
"Recalling that the reorganization of the government is mandated expressly by Article II, Section 1 (a) and Article III of
the Freedom Constitution;
"Having in mind that pursuant to Executive Order No. 5 (1986), it is directed that the necessary and proper changes in the
organizational and functional structures of the government, its agencies and instrumentalities, be effected in order to
promote efficiency and effectiveness in the delivery of public service;" (Emphasis supplied)
Constitutionality of Republic Act No. 6656
The majority also relies on Republic Act No. 6656 entitled an "Act to Protect the Security of Tenure of Civil Service Officers
and Employees in the Implementation of Government Reorganization," particularly Section 2 thereof, to test the good faith
of Commissioner Mison.
We are of the view, however, that in providing for retroactivity in its Section 13, RA 6656 clashes frontally with SECTION
16.
1) SECTION 16 clearly recognizes that career service employees separated from the service by reason of the "complete
reorganization of the government" pursuant to Proclamation No. 3 may be separated NOT FOR CAUSE. And yet, RA 6656
requires the exact opposite separation FOR CAUSE. It would not be remiss to quote the provision
again:jgc:chanrobles.com.ph
"SEC. 2. No officer or employee in the career service shall be removed except for a valid cause and after due notice and
hearing. A valid cause for removal exists when, pursuant to a bona fide reorganization, a position has been abolished or
rendered redundant or there is a need to merge, divide, or consolidate positions in order to meet the exigencies of the
service, or other lawful causes allowed by the Civil Service law. The existence of any or some of the following
circumstances may be considered as evidence of bad faith in the removals made as a result of reorganization, giving rise
to a claim for reinstatement or reappointment by an aggrieved party: (a) Where there i8 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 reclassification of offices in the
department or agency concerned and the reclassified offices perform substantially the same functions as the original
offices; (e) Where the removal violates the order of separation provided in Section 3 hereof (Republic Act No. 6156)
The standards laid down are the "traditional" criteria for removal of employees from the career service, e.g. valid cause,
due notice and hearing, abolition of, or redundancy of offices. Proclamation No. 3, on the other hand, effectuates the
"progressive" type of reorganization dictated by the exigencies of the historical and political upheaval at the time. The
"traditional" type is limited in scope. It is concerned with the individual approach where the particular employee involved is
charged administratively and where the requisites of notice and hearing have to be observed. The "progressive" kind of
reorganization, on the other hand, is the collective way. It is wider in scope, and is the reorganization contemplated under
SECTION 16.chanroblesvirtual|awlibrary
2) By providing for reinstatement in its Section 9, RA 6656 adds a benefit not included in SECTION 16. The benefits
granted by the latter provision to employees separated NOT FOR CAUSE but as a consequence of reorganization are
"separation pay, retirement, and other benefits accruing to them under the laws of general application in force at the time
of their separation." The benefit of reinstatement is not included. RA 6656, however, allows reinstatement. That it cannot
do because under SECTION 16, it is not one of the laws "in force at the time of their separation."cralaw virtua1aw library
The Constitution is the paramount law to which all laws must conform. It is from the Constitution that all statutes must
derive their bearings. The legislative authority of the State must yield to the expression of the sovereign will. No statutory
enactment can disregard the Charter from which it draws its own existence (Phil. Long Distance Telephone Co. v. Collector
of Internal Revenue, 90 Phil. 674 [1952]). But, that is exactly what RA 6656 does in providing for retroactivity it
disregards and contravenes a Constitutional imperative. To save it, it should be applied and construed prospectively and
not retroactively notwithstanding its explicit provision. Then, and only then, would it make good law.
Effects of Reorganization
To be sure, the reorganization could effect the tenure of members of the career service as defined in Section 5, Article IV
of Presidential Decree No. 807, and may even result in the separation from the office of some meritorious employees. But
even then, the greater good of the greatest number and the right of the citizenry to a good government, and as they

themselves have mandated through the vehicle of Proclamation No. 3, provide the justification for the said injury to the
individual. In terms of values, the interest to fan employee to security of tenure must yield to the interest of the entire
populace and to an efficient and honest government.
But a reorganized employee is not without rights. His right lies in his past services, the entitlement to which must be
provided for by law. EO 127 provides for the same in its Section 59, and so does SECTION 16 when the latter specified
that career civil service employees separated from the service not for cause:jgc:chanrobles.com.ph
"shall be entitled to appropriate separation pay and to retirement and other benefits accruing to them under the laws of
general application in force at the time of their separation. In lieu thereof, at the option of the employees, they may be
considered for employment in the Government or in any of its subdivisions, instrumentalities, or agencies, including
government-owned or controlled corporations and their subsidiaries. This provision also applies to career officers whose
resignation, tendered in line with the existing policy, has been accepted."cralaw virtua1aw library
This is a reward for the employees past service to the Government. But this is all. There is no vested property right to be
reemployed in a reorganized office.
"The right to an office or to employment with government or any of its agencies is not a vested property right, and
removal therefrom will not support the question of due process" (Yantsin v. Aberdeen, 54 Wash 2d 787, 345 P 2d 178). A
civil service employee does not have a constitutionally protected right to his position, which position is in the nature of a
public office, political in character and held by way of grant or privilege extended by government; generally he has been
held to have no property right or vested interest to which due process guaranties extend (See Taylor v. Beckham 178 U. S.
548, 44 L Ed. 1187; Angilly v. US (CA2 NY) 199 F 2d 642; People ex. rel. Baker v. Wilson, 39 III App 2d 443, 189 NE 2d
1; Kelliheller v. NY State Civil Service Com., 21 Misc 2d 1034, 194 NYS 2d 89).
To ensure, however, that no meritorious employee has been separated from the service, there would be no harm, in fact,
it could do a lot of good, if the Commissioner of Customs reviews the evaluation and placements he has so far made and
sees to it that those terminated are included in a consolidated list to be given preference by departments who are
recruiting (Section 2[a], BOC Memorandum, January 6, 1988).chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph
Conclusion
Premises considered, and subject to the observation hereinabove made, it is our considered view that the separation from
the service "NOT FOR CAUSE but as a result of the reorganization pursuant to Proclamation No. 3 dated March 25, 1986"
of the affected officers and employees of the Bureau of Customs should be UPHELD, and the Resolutions of the Civil
Service Commission, dated 30 June 1988, 20 September 1988, and 16 November 1988 should be SET ASIDE for having
been issued in grave abuse of discretion.
Republic Act No. 6656, in so far as it provides for retroactivity, should be declared UNCONSTITUTIONAL for being
repugnant to the letter and spirit of Section 16, Article XVIII of the 1987 Constitution.
Fernan, C.J., Narvasa, Feliciano and Regalado, JJ., concur.
CRUZ, J., concurring:chanrob1es virtual 1aw library
I concur with the majority view so ably presented by Mr. Justice Abraham F. Sarmiento. While additional comments may
seem superfluous in view of the exhaustiveness of his ponencia, I nevertheless offer the following brief observations for
whatever they may be worth.chanrobles virtual lawlibrary
Emphasizing Article XVII, Section 16 of the Constitution, the dissenting opinion considers the ongoing government
reorganization valid because it is merely a continuation of the reorganization begun during the transition period. The
reason for this conclusion is the phrase "and the reorganization following the ratification of the Constitution," that is to
say, after February 2, 1987, appearing in the said provision. The consequence (and I hope I have not misread it) is that
the present reorganization may still be undertaken with the same "absoluteness" that was allowed the revolutionary
reorganization although the Freedom Constitution is no longer in force.
Reorganization of the government may be required by the legislature even independently of specific constitutional
authorization, as in the case, for example, of R.A. No. 51 and B.P. No. 129. Being revolutionary in nature, the
reorganization decreed by Article III of the Freedom Constitution was unlimited as to its method except only as it was later
restricted by President Aquino herself through various issuances, particularly E.O. No. 17. But this reorganization, for all
its permitted summariness, was not indefinite. Under Section 3 of the said Article III, it was allowed only up to February
29, 1987 (which we advanced to February 2, 1987, when the new Constitution became effective).
The clear implication is that any government reorganization that may be undertaken thereafter must be authorized by the
legislature only and may not be allowed the special liberties and protection enjoyed by the revolutionary reorganization.
Otherwise, there would have been no necessity at all for the time limitation expressly prescribed by the Freedom
Constitution.

I cannot accept the view that Section 16 is an authorization for the open-ended reorganization of the government
"following the ratification of the Constitution." I read the provision as merely conferring benefits deservedly or not on
persons separated from the government as a result of the reorganization of the government, whether undertaken during
the transition period or as a result of a law passed thereafter. What the provision grants is privileges to the retirees, not
power to the government. It is axiomatic that grants of power are not lightly inferred, especially if these impinge on
individual rights, and I do not see why we should depart from this rule.
To hold that the present reorganization is a continuation of the one begun during the transition period is to recognize the
theory of the public respondent that all officers and employees not separated earlier remain in a hold-over capacity only
and so may be replaced at any time even without cause. That is a dangerous proposition that threatens the security and
stability of every civil servant in the executive department. What is worse is that this situation may continue indefinitely as
the claimed "progressive" reorganization has no limitation as to time.
Removal imports the forcible separation of the incumbent before the expiration of his term and can be done only for cause
as provided by law. Contrary to common belief, a reorganization does not result in removal but in a different mode of
terminating official relations known as abolition of the office (and the security of tenure attached thereto.) The erstwhile
holder of the abolished office cannot claim he has been removed without cause in violation of his constitutional security of
tenure. The reason is that the right itself has disappeared with the abolished office as an accessory following the principal.
(Ocampo v. Sec. of Justice, 51 O.G. 147; De la Llana v. Alba, 112 SCRA 294; Manalang v. Quitoriano, 94 Phil. 903.)
This notwithstanding, the power to reorganize is not unlimited. It is essential that it be based on a valid purpose, such as
the promotion of efficiency and economy in the government through a pruning of offices or the streamlining of their
functions. (Cervantes v. Auditor-General, 91 Phil. 359.) Normally, a reorganization cannot be validly undertaken as a
means of purging the undesirables for this would be a removal in disguise undertaken en masse to circumvent the
constitutional requirement of legal cause. (Eradication of graft and corruption was one of the expressed purposes of the
revolutionary organization, but this was authorized by the Freedom Constitution itself. In short, a reorganization, to be
valid, must be done in good faith. (Urgelio v. Osmea, 9 SCRA 317; Cuneta v. Court of Appeals, 1 SCRA 663; Cario v.
ACCFA, 18 SCRA 183.)
A mere recitation no matter how lengthy of the directives, guidelines, memoranda, etc. issued by the government
and the action purportedly taken thereunder does not by itself prove good faith. We know only too well that these
instructions, for an their noble and sterile purposes, are rarely followed in their actual implementation. The reality in this
case, as the majority opinion has pointed out and as clearly established in the hearing we held, is that the supposed
reorganization was undertaken with an eye not to achieving the avowed objectives but to accommodating new appointees
at the expense of the dislodged petitioners. That was also the finding of the Civil Service Commission, to which we must
accord a becoming respect as the constitutional office charged with the protection of the civil service from the evils of the
spoils system.chanroblesvirtuallawlibrary:red
The present administration deserves full support in its desire to improve the civil service, but this objective must be
pursued in a manner consistent with the Constitution. This praiseworthy purpose cannot be accomplished by an
indiscriminate reorganization that will sweep in its wake the innocent along with the redundant and inept, for the benefit
of the current favorites.

EN BANC
G.R. No. 115863 March 31, 1995
AIDA D. EUGENIO, Petitioner, v. CIVIL SERVICE COMMISSION, HON. TEOFISTO T. GUINGONA, JR. & HON.
SALVADOR ENRIQUEZ, JR., Respondents.chanrobles virtual law library
PUNO, J.:
The power of the Civil Service Commission to abolish the Career Executive Service Board is challenged in this petition
for certiorari and prohibition.chanroblesvirtualawlibrarychanrobles virtual law library

First the facts. Petitioner is the Deputy Director of the Philippine Nuclear Research Institute. She applied for a Career
Executive Service (CES) Eligibility and a CESO rank on August 2, 1993, she was given a CES eligibility. On September 15,
1993, she was recommended to the President for a CESO rank by the Career Executive Service Board. 1
All was not to turn well for petitioner. On October 1, 1993, respondent Civil Service Commission 2passed Resolution No.
93-4359, viz:
RESOLUTION NO. 93-4359chanrobles virtual law library
WHEREAS, Section 1(1) of Article IX-B provides that Civil Service shall be administered by the Civil Service
Commission, . . .;chanrobles virtual law library
WHEREAS, Section 3, Article IX-B of the 1987 Philippine Constitution provides that "The Civil Service Commission, as the
central personnel agency of the government, is mandated to establish a career service and adopt measures to promote
morale, efficiency, integrity, responsiveness, progresiveness and courtesy in the civil service, . . .";chanrobles virtual law
library
WHEREAS, Section 12 (1), Title I, Subtitle A, Book V of the Administrative Code of 1987 grants the Commission the power,
among others, to administer and enforce the constitutional and statutory provisions on the merit system for all levels and
ranks in the Civil Service;chanrobles virtual law library
WHEREAS, Section 7, Title I, Subtitle A, Book V of the Administrative Code of 1987 Provides, among others, that The
Career Service shall be characterized by (1) entrance based on merit and fitness to be determined as far as practicable by
competitive examination, or based highly technical qualifications; (2) opportunity for advancement to higher career
positions; and (3) security of tenure;chanrobles virtual law library
WHEREAS, Section 8 (c), Title I, Subtitle A, Book V of the administrative Code of 1987 provides that "The third level shall
cover Positions in the Career Executive Service";chanrobles virtual law library
WHEREAS, the Commission recognizes the imperative need to consolidate, integrate and unify the administration of all
levels of positions in the career service.chanroblesvirtualawlibrarychanrobles virtual law library
WHEREAS, the provisions of Section 17, Title I, Subtitle A. Book V of the Administrative Code of 1987 confers on the
Commission the power and authority to effect changes in its organization as the need
arises.chanroblesvirtualawlibrarychanrobles virtual law library
WHEREAS, Section 5, Article IX-A of the Constitution provides that the Civil Service Commission shall enjoy fiscal
autonomy and the necessary implications thereof;chanrobles virtual law library
NOW THEREFORE, foregoing premises considered, the Civil Service Commission hereby resolves to streamline reorganize
and effect changes in its organizational structure. Pursuant thereto, the Career Executive Service Board, shall now be
known as the Office for Career Executive Service of the Civil Service Commission. Accordingly, the existing personnel,
budget, properties and equipment of the Career Executive Service Board shall now form part of the Office for Career
Executive Service.
The above resolution became an impediment. to the appointment of petitioner as Civil Service Officer, Rank IV. In a letter
to petitioner, dated June 7, 1994, the Honorable Antonio T. Carpio, Chief Presidential legal Counsel, stated:
xxx xxx xxxchanrobles virtual law library
On 1 October 1993 the Civil Service Commission issued CSC Resolution No. 93-4359 which abolished the Career Executive
Service Board.chanroblesvirtualawlibrarychanrobles virtual law library
Several legal issues have arisen as a result of the issuance of CSC Resolution No. 93-4359, including whether the Civil
Service Commission has authority to abolish the Career Executive Service Board. Because these issues remain unresolved,
the Office of the President has refrained from considering appointments of career service eligibles to career executive
ranks.
xxx xxx xxxchanrobles virtual law library

You may, however, bring a case before the appropriate court to settle the legal issues arising from issuance by the Civil
Service Commission of CSC Resolution No. 93-4359, for guidance of all concerned.chanroblesvirtualawlibrarychanrobles
virtual law library
Thank You.
Finding herself bereft of further administrative relief as the Career Executive Service Board which recommended her CESO
Rank IV has been abolished, petitioner filed the petition at bench to annul, among others, resolution No. 93-4359. The
petition is anchored on the following arguments:
A.chanroblesvirtualawlibrarychanrobles virtual law library
IN VIOLATION OF THE CONSTITUTION, RESPONDENT COMMISSION USURPED THE LEGISLATIVE FUNCTIONS OF
CONGRESS WHEN IT ABOLISHED THE CESB, AN OFFICE CREATED BY LAW, THROUGH THE ISSUANCE OF CSC:
RESOLUTION NO. 93-4359;
B.chanroblesvirtualawlibrarychanrobles virtual law library
ALSO IN VIOLATION OF THE CONSTITUTION, RESPONDENT CSC USURPED THE LEGISLATIVE FUNCTIONS OF CONGRESS
WHEN IT ILLEGALLY AUTHORIZED THE TRANSFER OF PUBLIC MONEY, THROUGH THE ISSUANCE OF CSC RESOLUTION NO.
93-4359.
Required to file its Comment, the Solicitor General agreed with the contentions of petitioner. Respondent Commission,
however, chose to defend its ground. It posited the following position:
ARGUMENTS FOR PUBLIC RESPONDENT-CSC
I. THE INSTANT PETITION STATES NO CAUSE OF ACTION AGAINST THE PUBLIC RESPONDENTCSC.chanroblesvirtualawlibrarychanrobles virtual law library
II. THE RECOMMENDATION SUBMITTED TO THE PRESIDENT FOR APPOINTMENT TO A CESO RANK OF PETITIONER
EUGENIO WAS A VALID ACT OF THE CAREER EXECUTIVE SERVICE BOARD OF THE CIVIL SERVICE COMMISSION AND IT
DOES NOT HAVE ANY DEFECT.chanroblesvirtualawlibrarychanrobles virtual law library
III. THE OFFICE OF THE PRESIDENT IS ESTOPPED FROM QUESTIONING THE VALIDITY OF THE RECOMMENDATION OF THE
CESB IN FAVOR OF PETITIONER EUGENIO SINCE THE PRESIDENT HAS PREVIOUSLY APPOINTED TO CESO RANK FOUR (4)
OFFICIALS SIMILARLY SITUATED AS SAID PETITIONER. FURTHERMORE, LACK OF MEMBERS TO CONSTITUTE A QUORUM.
ASSUMING THERE WAS NO QUORUM, IS NOT THE FAULT OF PUBLIC RESPONDENT CIVIL SERVICE COMMISSION BUT OF
THE PRESIDENT WHO HAS THE POWER TO APPOINT THE OTHER MEMBERS OF THE
CESB.chanroblesvirtualawlibrarychanrobles virtual law library
IV. THE INTEGRATION OF THE CESB INTO THE COMMISSION IS AUTHORIZED BY LAW (Sec. 12 (1), Title I, Subtitle A,
Book V of the Administrative Code of the 1987). THIS PARTICULAR ISSUE HAD ALREADY BEEN SETTLED WHEN THE
HONORABLE COURT DISMISSED THE PETITION FILED BY THE HONORABLE MEMBERS OF THE HOUSE OF
REPRESENTATIVES, NAMELY: SIMEON A. DATUMANONG, FELICIANO R. BELMONTE, JR., RENATO V. DIAZ, AND MANUEL M.
GARCIA IN G.R. NO. 114380. THE AFOREMENTIONED PETITIONERS ALSO QUESTIONED THE INTEGRATION OF THE CESB
WITH THE COMMISSION.
We find merit in the petition. 3
The controlling fact is that the Career Executive Service Board (CESB) was created in the Presidential Decree (P.D.) No. 1
on September 1, 1974 4 which adopted the Integrated Plan. Article IV, Chapter I, Part of the III of the said Plan provides:
Article IV - Career Executive Service
1. A Career Executive Service is created to form a continuing pool of well-selected and development oriented career
administrators who shall provide competent and faithful service.chanroblesvirtualawlibrarychanrobles virtual law library
2. A Career Executive Service hereinafter referred to in this Chapter as the Board, is created to serve as the governing
body of the Career Executive Service. The Board shall consist of the Chairman of the Civil Service Commission as presiding
officer, the Executive Secretary and the Commissioner of the Budget as ex-officio members and two other members from

the private sector and/or the academic community who are familiar with the principles and methods of personnel
administration.
xxx xxx xxxchanrobles virtual law library
5. The Board shall promulgate rules, standards and procedures on the selection, classification, compensation and career
development of members of the Career Executive Service. The Board shall set up the organization and operation of the
service. (Emphasis supplied)
It cannot be disputed, therefore, that as the CESB was created by law, it can only be abolished by the legislature. This
follows an unbroken stream of rulings that the creation and abolition of public offices is primarily a legislative function. As
aptly summed up in AM JUR 2d on Public Officers and
Employees, 5 viz:
Except for such offices as are created by the Constitution, the creation of public offices is primarily a legislative function.
In so far as the legislative power in this respect is not restricted by constitutional provisions, it supreme, and the
legislature may decide for itself what offices are suitable, necessary, or convenient. When in the exigencies of government
it is necessary to create and define duties, the legislative department has the discretion to determine whether additional
offices shall be created, or whether these duties shall be attached to and become ex-officio duties of existing offices. An
office created by the legislature is wholly within the power of that body, and it may prescribe the mode of filling the office
and the powers and duties of the incumbent, and if it sees fit, abolish the office.
In the petition at bench, the legislature has not enacted any law authorizing the abolition of the CESB. On the contrary, in
all the General Appropriations Acts from 1975 to 1993, the legislature has set aside funds for the operation of CESB.
Respondent Commission, however, invokes Section 17, Chapter 3, Subtitle A. Title I, Book V of the Administrative Code of
1987 as the source of its power to abolish the CESB. Section 17 provides:
Sec. 17. Organizational Structure. - Each office of the Commission shall be headed by a Director with at least one
Assistant Director, and may have such divisions as are necessary independent constitutional body, the Commission may
effect changes in the organization as the need arises.
But as well pointed out by petitioner and the Solicitor General, Section 17 must be read together with Section 16 of the
said Code which enumerates the offices under the respondent Commission, viz:
Sec. 16. Offices in the Commission. - The Commission shall have the following offices:chanrobles virtual law library
(1) The Office of the Executive Director headed by an Executive Director, with a Deputy Executive Director shall implement
policies, standards, rules and regulations promulgated by the Commission; coordinate the programs of the offices of the
Commission and render periodic reports on their operations, and perform such other functions as may be assigned by the
Commission.chanroblesvirtualawlibrarychanrobles virtual law library
(2) The Merit System Protection Board composed of a Chairman and two (2) members shall have the following functions:
xxx xxx xxxchanrobles virtual law library
(3) The Office of Legal Affairs shall provide the Chairman with legal advice and assistance; render counselling services;
undertake legal studies and researches; prepare opinions and ruling in the interpretation and application of the Civil
Service law, rules and regulations; prosecute violations of such law, rules and regulations; and represent the Commission
before any court or tribunal.chanroblesvirtualawlibrarychanrobles virtual law library
(4) The Office of Planning and Management shall formulate development plans, programs and projects; undertake
research and studies on the different aspects of public personnel management; administer management improvement
programs; and provide fiscal and budgetary services.chanroblesvirtualawlibrarychanrobles virtual law library
(5) The Central Administrative Office shall provide the Commission with personnel, financial, logistics and other basic
support services.chanroblesvirtualawlibrarychanrobles virtual law library
(6) The Office of Central Personnel Records shall formulate and implement policies, standards, rules and regulations
pertaining to personnel records maintenance, security, control and disposal; provide storage and extension services; and
provide and maintain library services.chanroblesvirtualawlibrarychanrobles virtual law library

(7) The Office of Position Classification and Compensation shall formulate and implement policies, standards, rules and
regulations relative to the administration of position classification and compensation.chanroblesvirtualawlibrarychanrobles
virtual law library
(8) The Office of Recruitment, Examination and Placement shall provide leadership and assistance in developing and
implementing the overall Commission programs relating to recruitment, execution and placement, and formulate policies,
standards, rules and regulations for the proper implementation of the Commission's examination and placement
programs.chanroblesvirtualawlibrarychanrobles virtual law library
(9) The Office of Career Systems and Standards shall provide leadership and assistance in the formulation and evaluation
of personnel systems and standards relative to performance appraisal, merit promotion, and employee incentive benefit
and awards.chanroblesvirtualawlibrarychanrobles virtual law library
(10) The Office of Human Resource Development shall provide leadership and assistance in the development and retention
of qualified and efficient work force in the Civil Service; formulate standards for training and staff development;
administer service-wide scholarship programs; develop training literature and materials; coordinate and integrate all
training activities and evaluate training programs.chanroblesvirtualawlibrarychanrobles virtual law library
(11) The Office of Personnel Inspection and Audit shall develop policies, standards, rules and regulations for the effective
conduct or inspection and audit personnel and personnel management programs and the exercise of delegated authority;
provide technical and advisory services to Civil Service Regional Offices and government agencies in the implementation of
their personnel programs and evaluation systems.chanroblesvirtualawlibrarychanrobles virtual law library
(12) The Office of Personnel Relations shall provide leadership and assistance in the development and implementation of
policies, standards, rules and regulations in the accreditation of employee associations or organizations and in the
adjustment and settlement of employee grievances and management of employee
disputes.chanroblesvirtualawlibrarychanrobles virtual law library
(13) The Office of Corporate Affairs shall formulate and implement policies, standards, rules and regulations governing
corporate officials and employees in the areas of recruitment, examination, placement, career development, merit and
awards systems, position classification and compensation, performing appraisal, employee welfare and benefit, discipline
and other aspects of personnel management on the basis of comparable industry
practices.chanroblesvirtualawlibrarychanrobles virtual law library
(14) The Office of Retirement Administration shall be responsible for the enforcement of the constitutional and statutory
provisions, relative to retirement and the regulation for the effective implementation of the retirement of government
officials and employees.chanroblesvirtualawlibrarychanrobles virtual law library
(15) The Regional and Field Offices. - The Commission shall have not less than thirteen (13) Regional offices each to be
headed by a Director, and such field offices as may be needed, each to be headed by an official with at least the rank of an
Assistant Director.
As read together, the inescapable conclusion is that respondent Commission's power to reorganize is limited to offices
under its control as enumerated in Section 16, supra. From its inception, the CESB was intended to be an autonomous
entity, albeit administratively attached to respondent Commission. As conceptualized by the Reorganization Committee
"the CESB shall be autonomous. It is expected to view the problem of building up executive manpower in the government
with a broad and positive outlook." 6 The essential autonomous character of the CESB is not negated by its attachment to
respondent Commission. By said attachment, CESB was not made to fall within the control of respondent Commission.
Under the Administrative Code of 1987, the purpose of attaching one functionally inter-related government agency to
another is to attain "policy and program coordination." This is clearly etched out in Section 38(3), Chapter 7, Book IV of
the aforecited Code, to wit:
(3) Attachment. - (a) This refers to the lateral relationship between the department or its equivalent and attached agency
or corporation for purposes of policy and program coordination. The coordination may be accomplished by having the
department represented in the governing board of the attached agency or corporation, either as chairman or as a
member, with or without voting rights, if this is permitted by the charter; having the attached corporation or agency
comply with a system of periodic reporting which shall reflect the progress of programs and projects; and having the
department or its equivalent provide general policies through its representative in the board, which shall serve as the
framework for the internal policies of the attached corporation or agency.
Respondent Commission also relies on the case of Datumanong, et al., vs. Civil Service Commission, G. R. No. 114380
where the petition assailing the abolition of the CESB was dismissed for lack of cause of action. Suffice to state that the
reliance is misplaced considering that the cited case was dismissed for lack of standing of the petitioner, hence, the lack of
cause of action.chanroblesvirtualawlibrarychanrobles virtual law library

IN VIEW WHEREOF, the petition is granted and Resolution No. 93-4359 of the respondent Commission is hereby annulled
and set aside. No costs.chanroblesvirtualawlibrarychanrobles virtual law library
SO ORDERED.
Narvasa, C.J., Feliciano, Padilla, Bidin, Regalado, Davide, Jr., Romero, Bellosillo, Melo, Quiason, Vitug, Kapunan and
Mendoza, JJ., concur.

G.R. No. 131255 May 20, 1998

HON. EDUARDO NONATO JOSON, in his capacity as the Governor of the Province of Nueva Ecija,petitioner,
vs.
EXECUTIVE SECRETARY RUBEN D. TORRES, the DEPARTMENT OF THE INTERIOR & LOCAL GOVERNMENTS,
represented by SECRETARY ROBERT Z. BARBERS and UNDERSECRETARY MANUEL R. SANCHEZ, MR. OSCAR C.
TINIO, in his capacity as Provincial Vice-Governor of Nueva Ecija, and MR. LORETO P. PANGILINAN, MR.
CRISPULO S. ESGUERRA, MS. SOLITA C. SANTOS, MR. VICENTE C. PALILIO, and MR. NAPOLEON G. INTERIOR,
in their capacity as Provincial Board Members of Nueva Ecija,respondents.

PUNO, J.:
The case at bar involves the validity of the suspension from office of petitioner Eduardo Nonato Joson as Governor of the
province of Nueva Ecija. Private respondent Oscar C. Tinio is the Vice-Governor of said province while private respondents

Loreto P. Pangilinan, Crispulo S. Esguerra, Solita C. Santos, Vicente C. Palilio and Napoleon Interior are members of the
Sangguniang Panlalawigan.
On September 17, 1996, private respondents filed with the Office of the President a letter-complaint dated September 13,
1997 charging petitioner with grave misconduct and abuse of authority. Private respondents alleged that in the morning of
September 12, 1996, they were at the session hall of the provincial capitol for a scheduled session of the Sangguniang
Panlalawigan when petitioner belligerently barged into the Hall; petitioner angrily kicked the door and chairs in the Hall
and uttered threatening words at them; close behind petitioner were several men with long and short firearms who
encircled the area. Private respondents claim that this incident was an offshoot of their resistance to a pending legislative
measure supported by petitioner that the province of Nueva Ecija obtain a loan of P150 million from the Philippine National
Bank; that petitioner's acts were intended to harass them into approving this loan; that fortunately, no session of the
Sangguniang Panlalawigan was held that day for lack of quorum and the proposed legislative measure was not considered;
that private respondents opposed the loan because the province of Nueva Ecija had an unliquidated obligation of more
than P70 million incurred without prior authorization from the Sangguniang Panlalawigan; that the provincial budget
officer and treasurer had earlier disclosed that the province could not afford to contract another obligation; that
petitioner's act of barging in and intimidating private respondents was a serious insult to the integrity and independence of
the Sangguniang Panlalawigan; and that the presence of his private army posed grave danger to private respondents' lives
and safety. Private respondents prayed for the suspension or removal of petitioner; for an emergency audit of the
provincial treasury of Nueva Ecija; and for the review of the proposed loan in light of the financial condition of the
province, to wit:
In this regard, we respectfully request for the following assistance from your good office:
1. To immediately suspend Governor N. [sic] Joson considering the actual dangers that we are facing now, and
provide adequate police security detail for the Sangguniang Panlalawigan of Nueva Ecija. Should the evidence
warrant after investigation, to order his removal from office.
2. To conduct an emergency audit of the provincial treasury of Nueva Ecija by the auditors from the Commission
on Audit Central Office with adequate police security assistance. Should the evidence so warrant, to file necessary
charges against responsible and accountable officers.
3. To advise the Philippine National Bank to review the capability of the province of Nueva Ecija to secure more
loans and the feasibility of the same in the light of the present financial condition of the province. Or if said loan
will be contrary to sound banking practice, recommend its disapproval. 1
The letter-complaint was submitted with the joint affidavit of Elnora Escombien and Jacqueline Jane Perez, two (2)
employees of the Sangguniang Panlalawigan who witnessed the incident. The letter was endorsed by Congressmen
Eleuterio Violago and Pacifico Fajardo of the Second and Third Districts of Nueva Ecija, former Congressman Victorio
Lorenzo of the Fourth District, and Mayor Placido Calma, President of the Mayors' League of said province. 2
The President acted on the complaint by writing on its margin the following:
17 Sep 96
To: SILG info Exec. Sec. and Sec. of Justice:
1. Noted. There appears no justification for the use of force, intimidation or armed followers in the situation of 12
Sep at the Session Hall. 2. Take appropriate preemptive and investigative actions. 3 BREAK NOT the PEACE.
FIDEL V. RAMOS
(Signed). 3
President Ramos noted that the situation of "12 Sep at the Session Hall," i.e., the refusal of the members of the
Sangguniang Panlalawigan to approve the proposed loan, did not appear to justify "the use of force, intimidation or armed
followers." He thus instructed the then Secretary of the Interior and Local Governments (SILG) Robert Barbers to "[t]ake
appropriate preemptive and investigative actions," but to "[b]reak not the peace."
The letter-complaint together with the President's marginal notes were sent to Secretary Robert Z. Barbers on September
20, 1996. Acting upon the instructions of the President, Secretary Barbers notified petitioner of the case against him 4 and
attached to the notice a copy of the complaint and its annexes. In the same notice, Secretary Barbers directed petitioner
"to submit [his] verified/sworn answer thereto, not a motion to dismiss, together with such documentary evidence that
[he] has in support thereof, within fifteen (15) days from receipt. 5

Immediately thereafter, Secretary Barbers proceeded to Nueva Ecija and summoned petitioner and private respondents to
a conference to settle the controversy. The parties entered into an agreement whereby petitioner promised to maintain
peace and order in the province while private respondents promised to refrain from filing cases that would adversely affect
their peaceful co-existence. 6
The peace agreement was not respected by the parties and the private respondents reiterated their letter-complaint.
Petitioner was again ordered to file his answer to the letter-complaint within fifteen days from receipt. Petitioner received
a copy of this order on November 13, 1996. On the same day, petitioner requested for an extension of thirty (30) days to
submit his answer because he was "trying to secure the services of legal counsel experienced in administrative law
practice. 7 The Department of the Interior and Local Government (DILG), acting through Director Almario de los Santos,
Officer-In-Charge of the Legal Service, granted the motion, with the thirty-day extension to be reckoned, however, from
November 13, 1996, i.e., the day petitioner received the order to answer. 8
In a letter dated December 9, 1996, petitioner moved for another extension of thirty (30) days to file his answer. He
stated that he had already sent letters to various law firms in Metro Manila but that he had not yet contracted their
services; that the advent of the Christmas season kept him busy with "numerous and inevitable official
engagements." 9 The DILG granted the request for extension "for the last time up to January 13 only." 10
On January 7, 1997, petitioner requested for another extension of thirty (30) days to file his answer. According to him, the
Christmas season kept him very busy and preoccupied with his numerous official engagements; that the law firms he
invited to handle his case have favorably replied but that he needed time to confer with them personally; and that during
this period, he, with the help of his friends, was exploring the possibility of an amicable settlement of the case. 11 The
DILG granted petitioner's request "for the last time" but gave him an extension of only ten (10) days from January 13,
1997 to January 23, 1997. The DILG also informed him that his "failure to submit answer will be considered a waiver and
that the plaintiff [shall] be allowed to present his evidence ex parte." 12
Petitioner moved for reconsideration of the order. He reiterated his prayer for an extension of thirty (30) days on the
following grounds: (a) that he was still in the process of choosing competent and experienced counsel; (b) that some law
firms refused to accept his case because it was perceived to be politically motivated; and (c) the multifarious activities,
appointments and official functions of his office hindered his efforts to secure counsel of
choice. 13
Three months later, on April 22, 1997, Undersecretary Manuel Sanchez, then Acting Secretary of the DILG, issued an
order declaring petitioner in default and to have waived his right to present evidence. Private respondents were ordered to
present their evidence ex-parte. The order reads as follows:
ORDER
It appearing that respondent failed to submit his answer to the complaint despite the grant to him of three (3)
extensions, such unreasonable failure is deemed a waiver of his right to present evidence in his behalf pursuant
to Section 4, Rule 4 of Administrative Order No. 23 dated December 17, 1992, as amended.
Respondent is hereby declared in default, meanwhile, complainants are directed to present their evidenceexparte. However, considering the prohibition on the conduct of administrative investigation due to the forthcoming
barangay elections, complainants will be notified on the date after the barangay election for them to present their
evidence.
SO ORDERED. 14
Two days later, on April 24, 1997, the law firm of Padilla, Jimenez, Kintanar & Asuncion, representing petitioner, filed with
the DILG an "Entry of Appearance with Motion for Time to File Answer Ad Cautelam."
Petitioner received a copy of the order of default on May 2, 1997. Through counsel, he moved for reconsideration. On May
19, 1997, Undersecretary Sanchez reconsidered the order of default in the interest of justice. He noted the appearance of
petitioner's counsel and gave petitioner "for the last time" fifteen (15) days from receipt to file his answer. 15
On June 23, 1997, Undersecretary Sanchez issued an order stating that petitioner's counsel, whose office is in Manila,
should have received a copy of the May 19, 1997 order ten days after mailing on May 27, 1997. Since petitioner still failed
to file his answer, he was deemed to have waived his right to present evidence in his behalf. Undersecretary Sanchez
reinstated the order of default and directed private respondents to present their evidence ex-parte on July 15, 1997. 16

The following day, June 24, 1997, petitioner, through counsel, filed a "Motion to Dismiss." Petitioner alleged that the lettercomplaint was not verified on the day it was filed with the Office of the President; and that the DILG had no jurisdiction
over the case and no authority to require him, to answer the complaint.
On July 4, 1997, petitioner filed an "Urgent Ex-Parte Motion for Reconsideration" of the order of June 23, 1997 reinstating
the order of default. Petitioner also prayed that the hearing on the merits of the case be held in abeyance until after the
"Motion to Dismiss" shall have been resolved.
On July 11, 1997, on recommendation of Secretary Barbers, Executive Secretary Ruben Torres issued an order, by
authority of the President, placing petitioner under preventive suspension for sixty (60) days pending investigation of the
charges against him. 17
Secretary Barbers directed the Philippine National Police to assist in the implementation of the order of preventive
suspension. In petitioner's stead, Secretary Barbers designated Vice-Governor Oscar Tinio as Acting Governor until such
time as petitioner's temporary legal incapacity shall have ceased to exist. 18
Forthwith, petitioner filed a petition for certiorari and prohibition with the Court of Appeals challenging the order of
preventive suspension and the order of default. 19
Meanwhile, the proceedings before the DILG continued. On August 20, 1997, Undersecretary Sanchez issued an order
denying petitioner's "Motion to Dismiss" and " Urgent Ex-Parte Motion for Reconsideration." In the same order, he required
the parties to submit their position papers within an inextendible period of ten days from receipt after which the case shall
be deemed submitted for resolution, to wit:
WHEREFORE, for lack of merit, both motions are denied. However, for this office to have a better appreciation of
the issues raised in the instant case, the parties, through their respective counsels are hereby directed to submit
their position papers within a period of ten (10) days from receipt hereof, which period is inextendible, after
which the case is deemed submitted for resolution. 20
On August 27, 1997, petitioner filed with the DILG a "Motion to Lift Order of Preventive Suspension." On September 10,
1997, petitioner followed this with a "Motion to Lift Default Order and Admit Answer Ad Cautelam."21 Attached to the
motion was the "Answer Ad Cautelam". 22 and sworn statements of his witnesses. On the other hand, complainants
(private respondents herein) manifested that they were submitting the case for decision based on the records, the
complaint and affidavits of their witnesses. 23
In his Answer Ad Cautelam, petitioner alleged that in the morning of September 12, 1996, while he was at his district
office in the town of Munoz, he received a phone call from Sangguniang Panlalawigan member Jose del Mundo. Del Mundo,
who belonged to petitioner's political party, informed him that Vice-Governor Tinio was enraged at the members of the
Sangguniang Panlalawigan who were in petitioner's party because they refused to place on the agenda the ratification of
the proposed P150 million loan of the province. Petitioner repaired to the provincial capitol to advise his party-mates on
their problem and at the same time attend to his official functions. Upon arrival, he went to the Session Hall and asked the
members present where Vice-Governor Tinio was. However, without waiting for their reply, he left the Hall and proceeded
to his office.
Petitioner claimed that there was nothing in his conduct that threatened the members of the Sangguniang Panlalawigan or
caused alarm to the employees. He said that like Vice-Governor Tinio, he was always accompanied by his official security
escorts whenever he reported for work. He also alleged that the joint affidavit of Elnora Escombien and Jacqueline Jane
Perez was false. Escombien was purportedly not inside the session hall during the incident but was at her desk at the
office and could not in any way have seen petitioner in the hall. To attest to the truth of his allegations, petitioner
submitted three (3) joint affidavits two (2) affidavits executed by six (6) and ten (10) employees, respectively, of the
provincial government, and a third by four members of the Sangguniang Panlalawigan. 24
On September 11, 1997, petitioner filed an "Urgent Motion for Reconsideration" of the order of August 20, 1997 denying
his motion to dismiss. The "Urgent Motion for Reconsideration" was rejected by Undersecretary Sanchez on October 8,
1997. Undesecretary Sanchez, however, granted the "Motion to Lift Default Order and to Admit Answer Ad Cautelam" and
admitted the "Answer Ad Cautelam" as petitioner's position paper pursuant to the order of August 20, 1997. 25
On October 15, 1997, petitioner filed a "Motion to Conduct Formal Investigation." Petitioner prayed that a formal
investigation of his case be conducted pursuant to the provisions of the Local Government Code of 1991 and Rule 7 of
Administrative Order No. 23; and that this be held at the province of Nueva Ecija. 26 On October 29, 1997, petitioner
submitted a "Manifestation and Motion" before the DILG reiterating his right to a formal investigation.
In the meantime, on October 24, 1997, the Court of Appeals dismissed petitioner's petition. 27

Hence this recourse.

The proceedings before the DILG continued however. In an order dated November 11, 1997, the DILG denied petitioner's
"Motion to Conduct Formal Investigation" declaring that the submission of position papers substantially complies with the
requirements of procedural due process in administrative proceedings. 28
A few days after filing the petition before this Court, petitioner filed a "Motion for Leave to File Herein Incorporated Urgent
Motion for the Issuance of a Temporary Restraining Order and/or a Writ of Preliminary Injunction." Petitioner alleged that
subsequent to the institution of this petition, the Secretary of the Interior and Local Governments rendered a resolution on
the case finding him guilty of the offenses charged. 29 His finding was based on the position papers and affidavits of
witnesses submitted by the parties. The DILG Secretary found the affidavits of complainants' witnesses to be "more
natural, reasonable and probable" than those of herein petitioner Joson's. 30
On January 8, 1998, the Executive Secretary, by authority of the President, adopted the findings and recommendation of
the DILG Secretary. He imposed on petitioner the penalty of suspension from office for six (6) months without pay, to wit:
WHEREFORE, as recommended by the Secretary of the Interior and Local Government, respondent Nueva Ecija
Governor Eduardo Nonato Joson is hereby found guilty of the offenses charged and is meted the penalty of
suspension from office for a period of six (6) months without pay. 31
On January 14, 1998, we issued a temporary restraining order enjoining the implementation of the order of the Executive
Secretary.
On January 19, 1998, private respondents submitted a Manifestation informing this Court that the suspension of petitioner
was implemented on January 9, 1998; that on the same day, private respondent Oscar Tinio was installed as Acting
Governor of the province; and that in view of these events, the temporary restraining order had lost its purpose and
effectivity and was fait accompli. 32 We noted this Manifestation.
In his petition, petitioner alleges that:
I THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT RULES OF PROCEDURE AND EVIDENCE SHOULD
NOT BE STRICTLY APPLIED IN THE ADMINISTRATIVE DISCIPLINARY AND CLEARLY PUNITIVE PROCEEDINGS IN
THE CASE AGAINST PETITIONER GOVERNOR EDNO JOSON;
II THE COURT OF APPEALS GRAVELY ERRED IN APPLYING THE ALTER-EGO PRINCIPLE BECAUSE, CONTRARY TO
LAW, IT WAS THE SECRETARY OF THE DILG WHO WAS EXERCISING THE POWERS OF THE PRESIDENT WHICH
ARE CLEARLY VESTED BY LAW ONLY UPON HIM OR THE EXECUTIVE SECRETARY.
III THE COURT OF APPEALS ERRED IN RULING THAT THE PETITIONER WAS PROPERLY DECLARED IN DEFAULT
WHEN HE FILED A MOTION TO DISMISS INSTEAD OF AN ANSWER, AS DIRECTED BY THE DILG, BECAUSE A
MOTION TO DISMISS BASED ON JURISDICTIONAL GROUNDS IS NOT A PROHIBITIVE [sic] PLEADING IN
ADMINISTRATIVE DISCIPLINARY CASES.
IV THE COURT OF APPEALS ERRED IN RULING THAT THE IMPOSITION OF PREVENTIVE SUSPENSION AGAINST
THE PETITIONER WAS PROPER BECAUSE THERE WAS NO JOINDER OF ISSUES YET UPON ITS IMPOSITION AND
THERE WAS NO EVIDENCE OF GUILT AGAINST PETITIONER. 33
In his "Motion for Leave to File Herein Incorporated Urgent Motion for the Issuance of a Temporary Restraining Order
and/or a Writ of Preliminary Injunction," petitioner also claims that:
I THE RESOLUTION OF JANUARY 8, 1998 AND THE MEMORANDA ISSUED PURSUANT THERETO (i.e., ANNEXES
"C," "D," "E," "F," AND "G" HEREOF) WERE ISSUED WITH UNDUE HASTE, IN VIOLATION OF THE PERTINENT
PROVISIONS OF THE 1991 LOCAL GOVERNMENT CODE AND ADMINISTRATIVE ORDER NO. 23, AND IN COMPLETE
DISREGARD OF PETITIONER'S CONSTITUTIONAL RIGHT TO DUE PROCESS.
II THE IMPLEMENTATION OF THE INVALID RESOLUTION OF JANUARY 8, 1998 (ANNEX "C" HEREOF) BY THE
PUBLIC RESPONDENTS ENTITLES PETITIONER TO THE IMMEDIATE ISSUANCE OF THE TEMPORARY RESTRAINING
ORDER/WRIT OF PRELIMINARY INJUNCTION HEREIN PRAYED FOR. 34
We find merit in the petition.

Administrative disciplinary proceedings against elective local officials are governed by the Local Government Code of 1991,
the Rules and Regulations Implementing the Local Government Code of 1991, and Administrative Order No. 23 entitled
"Prescribing the Rules and Procedures on the Investigation of Administrative Disciplinary Cases Against Elective Local
Officials of Provinces, Highly Urbanized Cities, Independent Component Cities, and Cities and Municipalities in Metropolitan
Manila." 35 In all matters not provided in A.O. No. 23, the Rules of Court and the Administrative Code of 1987 apply in a
suppletory character. 36
I
Section 60 of Chapter 4, Title II, Book I of the Local Government Code enumerates the grounds for which an elective local
official may be disciplined, suspended or removed from office. Section 60 reads:
Sec. 60. Grounds for Disciplinary Actions. An elective local official may be disciplined, suspended, or removed
from office on any of the following grounds:
(a) Disloyalty to the Republic of the Philippines;
(b) Culpable violation of the Constitution;
(c) Dishonesty, oppression, misconduct in office, gross negligence, or dereliction of duty;
(d) Commission of any offense involving moral turpitude or an offense punishable by at least prision mayor;
(e) Abuse of authority;
(f) Unauthorized absence for fifteen (15) consecutive working days, except in the case of members of the
sangguniang panlalawigan, sangguniang panlunsod, sangguniang bayan, and sangguniang barangay;
(g) Application for, or acquisition of, foreign citizenship or residence or the status of an immigrant of another
country; and
(h) Such other grounds as may be provided in this Code and other laws.
An elective local official may be removed from office on the grounds enumerated above by order of the proper
court.
When an elective local official commits an act that falls under the grounds for disciplinary action, the administrative
complaint against him must be verified and filed with any of the following:
Sec. 61. Form and Filing of Administrative Complaints. A verified complaint against any erring local elective
official shall be prepared as follows:
(a) A complaint against any elective official of a province, a highly urbanized city, an independent component city
or component city shall be filed before the Office of the President.
(b) A complaint against any elective official of a municipality shall be filed before the sangguniang panlalawigan
whose decision may be appealed to the Office of the President; and
(c) A complaint against any elective barangay official shall be filed before the sangguniang panlungsod or
sangguniang bayan concerned whose decision shall be final and executory. 37
An administrative complaint against an erring elective official must be verified and filed with the proper government office.
A complaint against an elective provincial or city official must be filed with the Office of the President. A complaint against
an elective municipal official must be filed with the Sangguniang Panlalawigan while that of a barangay official must be
filed before the Sangguniang Panlungsod or Sangguniang Bayan.
In the instant case, petitioner Joson is an elective official of the province of Nueva Ecija. The letter-complaint against him
was therefore properly filed with the Office of the President. According to petitioner, however, the letter-complaint failed to
conform with the formal requirements set by the Code. He alleges that the complaint was not verified by private
respondents and was not supported by the joint affidavit of the two witnesses named therein; that private respondents
later realized these defects and surreptitiously inserted the verification and sworn statement while the complaint was still

pending with the Office of the President. 38 To prove his allegations, petitioner submitted: (a) the sworn statement of
private respondent Solita C. Santos attesting to the alleged fact that after the letter-complaint was filed, Vice-Governor
Tinio made her and the other members of the Sangguniang Panlalawigan sign an additional page which he had later
notarized; and (b) the fact that the verification of the letter-complaint and the joint affidavit of the witnesses do not
indicate the document, page or book number of the notarial register of the notary public before whom they were made. 39
We find no merit in the contention of the petitioner. The absence of the document, page or book number of the notarial
register of the subscribing officer is insufficient to prove petitioner's claim. The lack of these entries may constitute proof
of neglect on the part of the subscribing officer in complying with the requirements for notarization and proper verification.
They may give grounds for the revocation of his notarial commission. 40 But they do not indubitably prove that the
verification was inserted or intercalated after the letter-complaint was filed with the Office of the President.
Nor is the fact of intercalation sufficiently established by the affidavit of Solita C. Santos. Private respondent Santos was
one of the signatories to the letter-complaint. In her affidavit, she prayed that she be dropped as one of the complainants
since she had just joined the political party of petitioner Joson. She decided to reveal the intercalation because she was
disillusioned with the "dirty tactics" of Vice-Governor Tinio to grab power from petitioner Joson. 41 Private respondent
Santos cannot in anyway be considered an unbiased witness. Her motive and change of heart render her affidavit suspect.
Assuming, nonetheless, that the letter-complaint was unverified when submitted to the Office of the President, the defect
was not fatal. The requirement of verification was deemed waived by the President himself when he acted on the
complaint.
Verification is a formal, not jurisdictional requisite. 42 Verification is mainly intended to secure an assurance that the
allegations therein made are done in good faith or are true and correct and not mere speculation. 43 The lack of verification
is a mere formal defect. 44 The court may order the correction of the pleading, if not verified, or act on the unverified
pleading if the attending circumstances are such that a strict compliance with the rule may be dispensed with in order that
the ends of justice may be served. 45
II
In his second assigned error, petitioner questions the jurisdiction and authority of the DILG Secretary over the case. He
contends that under the law, it is the Office of the President that has jurisdiction over the letter-complaint and that the
Court of Appeals erred in applying the alter-ego principle because the power to discipline elective local officials lies with
the President, not with the DILG Secretary.
Jurisdiction over administrative disciplinary actions against elective local officials is lodged in two authorities: the
Disciplining Authority and the Investigating Authority. This is explicit from A.O. No. 23, to wit:
Sec. 2. Disciplining Authority. All administrative complaints, duly verified, against elective local officials mentioned
in the preceding Section shall be acted upon by the President. The President, who may act through the Executive
Secretary, shall hereinafter be referred to as the Disciplining Authority.
Sec. 3. Investigating Authority. The Secretary of the Interior and Local Government is hereby designated as the
Investigating Authority. He may constitute an Investigating Committee in the Department of the Interior and
Local Government for the purpose.
The Disciplining Authority may, however, in the interest of the service, constitute a Special Investigating
Committee in lieu of the Secretary of the Interior and Local Government. 46
Pursuant to these provisions, the Disciplining Authority is the President of the Philippines, whether acting by himself or
through the Executive Secretary. The Secretary of the Interior and Local Government is the Investigating Authority, who
may act by himself or constitute an Investigating Committee. The Secretary of the DILG, however, is not the exclusive
Investigating Authority. In lieu of the DILG Secretary, the Disciplinary Authority may designate a Special Investigating
Committee.
The power of the President over administrative disciplinary cases against elective local officials is derived from his power
of general supervision over local governments. Section 4, Article X of the 1987 Constitution provides:
Sec. 4. The President of the Philippines shall exercise general supervision over local governments. Provinces with
respect to component cities and municipalities, and cities and municipalities with respect to component barangays
shall ensure that the acts of their component units are within the scope of their prescribed powers and
functions. 47

The power of supervision means "overseeing or the authority of an officer to see that the subordinate officers perform
their duties." 48 If the subordinate officers fail or neglect to fulfill their duties, the official may take such action or step as
prescribed by law to make them perform their duties. 49 The President's power of general supervision means no more than
the power of ensuring that laws are faithfully executed, or that subordinate officers act within the law. 50Supervision is not
incompatible with discipline. 51 And the power to discipline and ensure that the laws be faithfully executed must be
construed to authorize the President to order an investigation of the act or conduct of local officials when in his opinion the
good of the public service so requires. 52 Thus:
Independently of any statutory provision authorizing the President to conduct an investigation of the nature
involved in this proceeding, and in view of the nature and character of the executive authority with which the
President of the Philippines is invested, the constitutional grant to him of power to exercise general supervision
over all local governments and to take care that the laws be faithfully executed must be construed to authorize
him to order an investigation of the act or conduct of the petitioner herein. Supervision is not a meaningless
thing. It is an active power. It is certainly not withou t limitation, but it at least implies authority to inquire into
facts and conditions in order to render the power real and effective. If supervision is to be conscientious and
rational, and not automatic and brutal, it must be founded upon a knowledge of actual facts and conditions
disclosed after careful study and investigation. 53
The power to discipline evidently includes the power to investigate. As the Disciplining Authority, the President has the
power derived from the Constitution itself to investigate complaints against local government officials. A.O. No. 23,
however, delegates the power to investigate to the DILG or a Special Investigating Committee, as may be constituted by
the Disciplining Authority. This is not undue delegation, contrary to petitioner Joson's claim. The President remains the
Disciplining Authority. What is delegated is the power to investigate, not the power to discipline. 54
Moreover, the power of the DILG to investigate administrative complaints is based on the alter-ego principle or the
doctrine of qualified political agency. Thus:
Under this doctrine, which recognizes the establishment of a single executive, 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 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. 55
This doctrine is corollary to the control power of the President. 56 The power of control is provided in the Constitution,
thus:
Sec. 17. The President shall have control of all the executive departments, bureaus, and offices. He shall ensure
that the laws be faithfully executed. 57
Control is said to be the very heart of the power of the presidency. 58 As head of the Executive Department, the President,
however, may delegate some of his powers to the Cabinet members except when he is required by the Constitution to act
in person or the exigencies of the situation demand that he acts personally. 59 The members of Cabinet may act for and in
behalf of the President in certain matters because the President cannot be expected to exercise his control (and
supervisory) powers personally all the time. Each head of a department is, and must be, the President's alter ego in the
matters of that department where the President is required by law to exercise authority. 60
The procedure how the Disciplining and Investigating Authorities should exercise their powers is distinctly set forth in the
Local Government Code and A.O. No. 23. Section 62 of the Code provides:
Sec. 62. Notice of Hearing. (a) Within seven (7) days after the administrative complaint is filed, the Office of
the President or the sanggunian concerned, as the case may be, shall require the respondent to submit his
verified answer within fifteen (15) days from receipt thereof, and commence investigation of the case within ten
(10) days after receipt of such answer of the respondent.
xxx xxx xxx
Sections 1 and 3, Rule 5 61 of A.O. No. 23 provide:
Sec. 1. Commencement. Within forty-eight (48) hours from receipt of the answer, the Disciplining Authority shall
refer the complaint and answer, together with their attachments and other relevant papers, to the Investigating
Authority who shall commence the investigation of the case within ten (10) days from receipt of the same.

xxx xxx xxx

Sec. 3. Evaluation. Within twenty (20) days from receipt of the complaint and answer, the Investigating Authority
shall determine whether there is a prima facie case to warrant the institution of formal administrative
proceedings.
When an administrative complaint is therefore filed, the Disciplining Authority shall issue an order requiring the
respondent to submit his verified answer within fifteen (15) days from notice. Upon filing of the answer, the Disciplining
Authority shall refer the case to the Investigating Authority for investigation.
In the case at bar, petitioner claims that the DILG Secretary usurped the power of the President when he required
petitioner to answer the complaint. Undisputably, the letter-complaint was filed with the Office of the President but it was
the DILG Secretary who ordered petitioner to answer.
Strictly applying the rules, the Office of the President did not comply with the provisions of A.O. No. 23. The Office should
have first required petitioner to file his answer. Thereafter, the complaint and the answer should have been referred to the
Investigating Authority for further proceedings. Be that as it may, this procedural lapse is not fatal. The filing of the
answer is necessary merely to enable the President to make a preliminary assessment of the case. 62 The President found
the complaint sufficient in form and substance to warrant its further investigation. The judgment of the President on the
matter is entitled to respect in the absence of grave abuse of discretion.
III
In his third assigned error, petitioner also claims that the DILG erred in declaring him in default for filing a motion to
dismiss. He alleges that a motion to dismiss is not a pleading prohibited by the law or the rules and therefore the DILG
Secretary should have considered it and given him time to file his answer.
It is true that a motion to dismiss is not a pleading prohibited under the Local Government Code of 1991 nor in A.O. No.
23. Petitioner, however, was instructed not to file a motion to dismiss in the order to file answer. Thrice, he requested for
extension of time to file his answer citing as reasons the search for competent counsel and the demands of his official
duties. And, thrice, his requests were granted. Even the order of default was reconsidered and petitioners was given
additional time to file answer. After al the requests and seven months later, he filed a motion to dismiss!
Petitioner should know that the formal investigation of the case is required by law to be finished within one hundred
twenty (120) days from the time of formal notice to the respondent. The extensions petitioners requested consumed fiftyfive (55) days of this period. 63 Petitioner, in fact, filed his answer nine (9) months after the first notice. Indeed, this was
more than sufficient time for petitioner to comply with the order to file answer.
The speedy disposition of administrative complaints is required by public service. The efficiency of officials under
investigation is impaired when a case hangs over their heads. Officials deserve to be cleared expeditiously if they are
innocent, also expeditiously if guilty, so that the business of government will not be prejudiced. 64
IV
In view of petitioner's inexcusable failure to file answer, the DILG did not err in recommending to the Disciplining Authority
his preventive suspension during the investigation. Preventive suspension is authorized under Section 63 of the Local
Government Code, viz:
Sec. 63. Preventive Suspension. (a) Preventive suspension may be imposed:
(1) By the President, if the respondent is an elective official of a province, a highly urbanized or an independent
component city;
xxx xxx xxx
(b) Preventive suspension may be imposed at any time after the issues are joined, when the evidence of guilt is
strong, and given the gravity of the offense, there is great probability that the continuance in office of the
respondent could influence the witnesses or pose a threat to the safety and integrity of the records and other
evidence; Provided, That, any single preventive suspension of local elective officials shall not extend beyond sixty
(60) days: Provided, further, That in the event that several administrative cases are filed against an elective
official, he cannot be preventively suspended for more than ninety (90) days within a single year on the same
ground or grounds existing and known at the time of the first suspension.

xxx xxx xxx

In sum, preventive suspension may be imposed by the Disciplining Authority at any time (a) after the issues are joined;
(b) when the evidence of guilt is strong; and (c) given the gravity of the offense, there is great probability that the
respondent, who continues to hold office, could influence the witnesses or pose a threat to the safety and integrity of the
records and other evidence.
Executive Secretary Torres, on behalf of the President, imposed preventive suspension on petitioner Joson after finding
that:
xxx xxx xxx
DILG Secretary Robert Z. Barbers, in a memorandum for the President, dated 23 June 1997, recommends that
respondent be placed under preventive suspension considering that all the requisites to justify the same are
present. He stated therein that:
"Preventive suspension may be imposed at any time after the issues are joined, that is, after
respondent has answered the complaint, when the evidence of guilt is strong and, given the
gravity of the offense, there is a great possibility that the continuance in office of the
respondent could influence the witnesses or pose a threat to the safety and integrity of the
records and other evidence (Sec. 3, Rule 6 of Administrative Order No. 23).
The failure of respondent to file his answer despite several opportunities given him is construed
as a waiver of his right to present evidence in his behalf (Sec. 4, Rule 4 of Administrative Order
No. 23). The requisite of joinder of issues is squarely met with respondent's waiver of right to
submit his answer. The act of respondent in allegedly barging violently into the session hall of
the Sangguniang Panlalawigan in the company of armed men constitutes grave misconduct. The
allegations of complainants are bolstered by the joint-affidavit of two (2) employees of the
Sangguniang Panlalawigan. Respondent who is the chief executive of the province is in a
position to influence the witnesses. Further, the history of violent confrontational politics in the
province dictates that extreme precautionary measures be taken."
Upon scrutiny of the records and the facts and circumstances attendant to this case, we concur with the findings
of the Secretary of the Interior and Local Government and find merit in the aforesaid recommendation.
WHEREFORE, and as recommended by the Department of the Interior and Local Government, respondent
EDUARDO N. JOSON, Governor of Nueva Ecija, is hereby placed under PREVENTIVE SUSPENSION FOR A PERIOD
OF SIXTY (60) DAYS, effective 11 July 1997, pending investigation of the charges filed against him.
SO ORDERED. 65
Executive Secretary Torres found that all the requisites for the imposition of preventive suspension had been complied
with. Petitioner's failure to file his answer despite several opportunities given him was construed as a waiver of his right to
file answer and present evidence; and as a result of this waiver, the issues were deemed to have been joined. The
Executive Secretary also found that the evidence of petitioner Joson's guilt was strong and that his continuance in office
during the pendency of the case could influence the witnesses and pose a threat to the safety and integrity of the
evidence against him.
V
We now come to the validity of the January 8, 1998 Resolution of the Executive Secretary finding petitioner guilty as
charged and imposing on him the penalty of suspension from office for six (6) months from office without pay.
Petitioner claims that the suspension was made without formal investigation pursuant to the provisions of Rule 7 of A.O.
No. 23. Petitioner filed a "Motion To Conduct Formal Investigation" three months before the issuance of the order of
suspension and this motion was denied by the DILG for the following reasons:
On November 19, 1997, complainants, through counsel, filed a Manifestation calling our attention to the Decision
dated October 24, 1997 of the Court of Appeals, Fifth Division in CA-G.R. SP No. 44694, entitled "Eduardo Nonato
Joson versus Executive Secretary Ruben D. Torres, et. al." In the aforestated decision, the Court of Appeals
resolved to sustain the authority of this Department to investigate this administrative case and has likewise
validated the order of default as well as the order of preventive suspension of the respondent.

We offer no objection and concur with the assertion of respondent that he has the right for the conduct of formal
investigation. However, before there shall be a formal investigation, joinder of issues must already be present or
respondent's answer has already been filed. In the case at bar, the admission of respondent's answer after having
been declared in default was conditioned on the fact of submission of position papers by the parties, after which,
the case shall be deemed submitted for resolution. Respondent, instead of submitting his position paper filed his
subject motion while complainants manifested to forego the submission of position paper and submit the case for
resolution on the basis of the pleadings on hand.
Settled is the rule that in administrative proceedings, technical rules of procedure and evidence are not strictly
applied (Concerned Officials of the Metropolitan Waterworks and Sewerage System v. Vasquez, 240 SCRA 502).
The essence of due process is to be found in the reasonable opportunity to be heard and to submit evidence one
may have in support of one's defense (Tajonera v. Lamaroza, 110 SCRA 438). To be heard does not only mean
verbal arguments in court; one may be heard also through pleadings. Where opportunity to be heard, either
through oral arguments or pleadings, is accorded, there is no denial of procedural due process (Juanita Y. Say, et.
al; vs. IAC, G.R. No. 73451). Thus, when respondent failed to submit his position paper as directed and insisted
for the conduct of formal investigation, he was not denied of his right of procedural process.
WHEREFORE, the Motion for the Conduct of Formal Investigation, for lack of merit, is DENIED.
SO ORDERED. 66
The denial of petitioner's Motion to Conduct Formal Investigation is erroneous. Petitioner's right to a formal investigation is
spelled out in the following provisions of A.O. No. 23, viz:
Sec. 3 Evaluation. Within twenty (20) days from receipt of the complaint and answer, the Investigating Authority
shall determine whether there is a prima facie case to warrant the institution of formal administrative
proceedings.
Sec. 4. Dismissal motu proprio. If the Investigating Authority determines that there is no prima facie case to
warrant the institution of formal administrative proceedings, it shall, within the same period prescribed under the
preceding Section, submit its recommendation to the Disciplining Authority for the motu proprio dismissal of the
case, together with the recommended decision, resolution, and order.
Sec. 5. Preliminary conference. If the Investigating Authority determines that there is prima facie case to warrant
the institution of formal administrative proceedings, it shall, within the same period prescribed under the
preceding Section, summon the parties to a preliminary conference to consider the following:
a) whether the parties desire a formal investigation or are willing to submit the case for
resolution on the basis of the evidence on record; and
b) If the parties desire a formal investigation, to consider the simplification of issues, the
possibility of obtaining stipulation or admission of facts and of documents, specifically affidavits
and depositions, to avoid unnecessary proof, the limitation of number of witnesses, and such
other matters as may be aid the prompt disposition of the case.
The Investigating Authority shall encourage the parties and their counsels to enter, at any stage of the
proceedings, into amicable settlement, compromise and arbitration, the terms and conditions of which shall be
subject to the approval of the Disciplining Authority.
After the preliminary conference, the Investigating Authority shall issue an order reciting the matters taken up
thereon, including the facts stipulated and the evidences marked, if any. Such order shall limit the issues for
hearing to those not disposed of by agreement or admission of the parties, and shall schedule the formal
investigation within ten (10) days from its issuance, unless a later date is mutually agreed in writing by the
parties concerned. 67
The records show that on August 27, 1997, petitioner submitted his Answer Ad Cautelam where he disputed the truth of
the allegations that he barged into the session hall of the capitol and committed physical violence to harass the private
respondents who were opposed to any move for the province to contract a P150 million loan from PNB. In his Order of
October 8, 1997, Undersecretary Sanchez admitted petitioner's Answer Ad Cautelam but treated it as a position paper. On
October 15, 1997, petitioner filed a Motion to Conduct Formal Investigation. Petitioner reiterated this motion on October
29, 1997. Petitioner's motion was denied on November 11, 1997. Secretary Barbers found petitioner guilty as charged on
the basis of the parties' position papers. On January 8, 1998, Executive Secretary Torres adopted Secretary Barbers'
findings and recommendations and imposed on petitioner the penalty of six (6) months suspension without pay.

The rejection of petitioner's right to a formal investigation denied him procedural due process. Section 5 of A.O. No. 23
provides that at the preliminary conference, the Investigating Authority shall summon the parties to consider whether they
desire a formal investigation. This provision does not give the Investigating Authority the discretion to determine whether
a formal investigation would be conducted. The records show that petitioner filed a motion for formal investigation. As
respondent, he is accorded several rights under the law, to wit:
Sec. 65. Rights of Respondent. The respondent shall be accorded full opportunity to appear and defend himself
in person or by counsel, to confront and cross-examine the witnesses against him, and to require the attendance
of witnesses and the production of documentary evidence in his favor through compulsory process
of subpoena or subpoena duces tecum.
An erring elective local official has rights akin to the constitutional rights of an accused. 68 These rights are essentially part
of procedural due process. 69 The local elective official has the (1) the right to appear and defend himself in person or by
counsel; (2) the right to confront and cross-examine the witnesses against him; and (3) the right to compulsory
attendance of witness and the production of documentary evidence. These rights are reiterated in the Rules Implementing
the Local Government Code 70 and in A.O. No. 23. 71 Well to note, petitioner, formally claimed his right to a formal
investigation after his Answer Ad Cautelam has been admitted by Undersecretary Sanchez.
Petitioner's right to a formal investigation was not satisfied when the complaint against him was decided on the basis of
position papers. There is nothing in the Local Government Code and its Implementing Rules and Regulations nor in A.O.
No. 23 that provide that administrative cases against elective local officials can be decided on the basis of position papers.
A.O. No. 23 states that the Investigating Authority may require the parties to submit their respective memoranda but this
is only after formal investigation and hearing. 72 A.O. No. 23 does not authorize the Investigating Authority to dispense
with a hearing especially in cases involving allegations of fact which are not only in contrast but contradictory to each
other. These contradictions are best settled by allowing the examination and cross-examination of witnesses. Position
papers are often-times prepared with the assistance of lawyers and their artful preparation can make the discovery of
truth difficult. The jurisprudence cited by the DILG in its order denying petitioner's motion for a formal investigation
applies to appointive officials and employees. Administrative disciplinary proceedings against elective government officials
are not exactly similar to those against appointive officials. In fact, the provisions that apply to elective local officials are
separate and distinct from appointive government officers and employees. This can be gleaned from the Local Government
Code itself.
In the Local Government Code, the entire Title II of Book I of the Code is devoted to elective officials. It provides for their
qualifications and
election, 73 vacancies and succession, 74 local legislation, 75 disciplinary
actions, 76 and recall. 77 Appointive officers and employees are covered in Title III of Book I of the Code entitled "Human
Resources and Development." All matters pertinent to human resources and development in local government units are
regulated by "the civil service law and such rules and regulations and other issuances promulgated thereto, unless
otherwise provided in the Code." 78 The "investigation and adjudication of administrative complaints against appointive
local officials and employees as well as their suspension and removal" are "in accordance with the civil service law and
rules and other pertinent laws," the results of which "shall be reported to the Civil Service Commission." 79
It is the Administrative Code of 1987, specifically Book V on the Civil Service, that primarily governs appointive officials
and employees. Their qualifications are set forth in the Omnibus Rules Implementing Book V of the said Code. The
grounds for administrative disciplinary action in Book V are much more in number and are specific than those enumerated
in the Local Government Code against elective local officials. 80 The disciplining authority in such actions is the Civil Service
Commission. 81 although the Secretaries and heads of agencies and instrumentalities, provinces, cities and municipalities
are also given the power to investigate and decide disciplinary actions against officers and employees under their
jurisdiction. 82 When a complaint is filed and the respondent answers, he must "indicate whether or not he elects a formal
investigation if his answer is not considered satisfactory." 83 If the officer or employee elects a formal investigation, the
direct evidence for the complainant and the respondent "consist[s] of the sworn statement and documents submitted in
support of the complaint and answer, as the case may be, without prejudice to the presentation of additional evidence
deemed necessary . . ., upon which the cross-examination by respondent and the complainant, respectively, is
based." 84 The investigation is conducted without adhering to the technical rules applicable in judicial
proceedings." 85Moreover, the appointive official or employee may be removed or dismissed summarily if (1) the charge is
serious and the evidence of guilt is strong; (2) when the respondent is a recidivist; and (3) when the respondent is
notoriously undesirable. 86
The provisions for administrative disciplinary actions against elective local officials are markedly different from appointive
officials. 87 The rules on the removal and suspension of elective local officials are more stringent. The procedure of
requiring position papers in lieu of a hearing in administrative cases is expressly allowed with respect to appointive
officials but not to those elected. An elective official, elected by popular vote, is directly responsible to the community that
elected him. The official has a definite term of office fixed by law which is relatively of short duration. Suspension and
removal from office definitely affects and shortens this term of office. When an elective official is suspended or removed,
the people are deprived of the services of the man they had elected. Implicit in the right of suffrage is that the people are

entitled to the services of the elective official of their choice. 88 Suspension and removal are thus imposed only after the
elective official is accorded his rights and the evidence against him strongly dictates their imposition.
IN VIEW WHEREOF, the Resolution of January 8, 1998 of the public respondent Executive Secretary is declared null and
void and is set aside. No Cost.
SO ORDERED.
Regalado, Melo, Mendoza and Martinez, JJ., concur.

EN BANC
[G.R. No. 112745. October 16, 1997]
AQUILINO T. LARIN, Petitioner, v. THE EXECUTIVE SECRETARY, SECRETARY OF FINANCE, COMMISSIONER OF
THE BUREAU OF INTERNAL REVENUE AND THE COMMITTEE CREATED TO INVESTIGATE THE ADMINISTRATIVE
COMPLAINT AGAINST AQUILINO T. LARIN, COMPOSED OF FRUMENCIO A. LAGUSTAN, JOSE B. ALEJANDRINO
and JAIME M. MAZA, Respondents.
DECISION
TORRES, JR., J.:
Challenge in this petition is the validity of petitioners removal from service as Assistant Commissioner of the Excise Tax
Service of the Bureau of Internal Revenue. Incidentally, he questions Memorandum order no. 164 issued by the Office of
the President, which provides for the creation of A Committee to Investigate the Administrative Complaint Against Aquilino
T. Larin, Assistant Commissioner, Bureau of Internal Revenue as well as the investigation made in pursuance thereto and

Administrative Order No. 101 dated December 2, 1993 which found him guilty of grave misconduct in the administrative
charge and imposed upon him the penalty of dismissal from office.
Likewise, petitioner seeks to assail the legality of Executive Order No. 132, issued by President Ramos on October 26,
1993, which provides for the Streamlining of the Bureau of Internal Revenue, and of its implementing rules issued by the
Bureau of Internal Revenue, namely: a) Administrative Order No. 4-93, which provides for the Organizational Structure
and Statement of General Functions of Offices in the National Office and b) Administrative Order No. 5-93, which provides
for Redefining the Areas of Jurisdiction and Renumbering of Regional And District Offices.
The antecedent facts of the instant case as succinctly related by the Solicitor General are as follows:
On September 18, 1992, 1 a decision was rendered by the Sandiganbayan convicting herein petitioner Aquilino T. Larin,
Revenue Specific Tax Officer, then Assistant Commisioner of the Bureau of Internal Revenue and his co-accused (except
Justino E. Galban, Jr.) of the crimes of violation of Section 268 (4) of the National Internal Revenue Code and Section 3
(e) of R.A. 3019 in Criminal Cases Nos. 14208-14209, entitled People of the Philippines, Plaintiff vs. Aquilino T. Larin,
Teodoro T. Pareno, Justino E. Galban, Jr. and Potenciana N. Evangelista, Accused, the dispositive portion of the judgment
reads:
"WHEREFORE, judgment is now rendered in Criminal Cases Nos. 14208 and 14209 convicting
accused Assistant Commissioner for Specific Tax Aquilino T. Larin, Chief of the Alcohol tax Division
TEODORO P. PARENO, and Chief of the Revenue accounting Division POTENCIANA M. EVANGELISTA:
xxx
SO ORDERED.
The fact of petitioners conviction was reported to the President of the Philippines by the then Acting Finance Secretary
Leong through a memorandum dated June 4, 1993. The memorandum states, inter alia:
This is a report in the case of Assistant Commissioner AQUILINO T. LARIN of the Excise tax Service, Bureau of
Internal Revenue, a presidential appointee, one of those convicted in the Criminal Case Nos. 14208-14209,
entitled People of the Philippines vs. Aquilino T. Larin, et. al. Referred to the Department of Finace by the
Commissioner of Internal Revenue.
The cases against Pareno and Evangelista are being acted upon by the Bureau of Internal revenue as they nonpresidential appointees.
xxx
It is clear from the foregoing that Mr. Larin has found beyond reasonable doubt to have committed acts
constituting grave misconduct. Under the Civil Service Laws and Rules which require only preponderance of
evidence, grave misconduct is punishable by dismissal.
Acting by authority of the President, Sr. Deputy Executive Secretary Leonardo A. Quisumbing issued Memorandum Order
No. 164 dated August 25, 1993 which provides for the creation of an Executive Committee to investigate the
administrative charge against herein petitioner Aquilino T. Larin. It states thus:
A Committee is hereby created to investigate the administrative complaint filed against Aquilino T. Larin,
Assistant Commissioner, Bureau of Internal Revenue, to be composed of:
Atty. Frumencio A. Lagustan Chairman
Assistant Executive Secretary for Legislation
Mr. Jose B. Alejandro Member
Presidential Assistant
Atty. Jaime M. Maza Member
Assistant commissioner of Inspector services
Bureau of Internal Revenue
The Committee shall have the powers and prerogatives of (an) investigating committee under the administrative
Code of 1987 including the power to summon witnesses, administer oath or take testimony or evidence relevant
to the investigation by subpoena ad testificandum and subpoena duces tecum:

xxx
The Committee shall convene immediately, conduct the investigation in the most expeditious manner, and
terminate the same as soon as practicable from its first scheduled date of hearing.
xxx
Consequently, the Committee directed the petitioner to respond to the administrative charge leveled against him through
a letter dated September 17, 1993, thus:
Presidential Memorandum Order No. 164 dated August 25, 1993, a xerox copy of which is hereto attached for
your ready reference, created an Investigation Committee to look into the charges against you which are also the
subject of the Criminal Cases No. 14208 and 14209 entitled People of the Philippines vs. Aquilino T. Larin, et. al.
The committee has its possession a certified true copy of the Decision of the Sandiganbayan in the abovementioned cases.
Pursuant to Presidential Memorandum Order No. 164, you are hereby directed to file your position paper on the
aforementioned charges within seven (7) days from receipt hereof xxx.
Failure to file the required position paper shall be considered as a waiver on your part to submit such paper or to
be heard, in which case, the Committee shall deem the case submitted on the basis of the documents and
records at hand.
In compliance, petitioner submitted a letter dated September 30, 1993 which was addressed to Atty. Frumencio A.
Lagustan, the Chairman of the Investigating Committee. In said latter, he asserts that,
The case being sub-judice, I may not, therefore, comment on the merits of issues involved for fear of being cited
in contempt of Court. This position paper is thus limited to furnishing the Committee pertinent documents
submitted with the Supreme Court and other tribunal which took cognizance of the case in the past, as follows:
xxx
The foregoing documents readily show that I am not administratively liable or criminally culpable of the charges
leveled against me, and that the aforesaid cases are mere prosecutions caused to be filed and are being
orchestrated by taxpayers who were prejudiced by multi-million peso assessments I caused to be issued against
them in my official capacity as Assistant Commissioner, Excise Tax office of Bureau of Internal Revenue.
In the same letter, petitioner claims that the administrative complaint against him is already barred: a) on jurisdictional
ground as the Office of the Ombudsman had already taken cognizance of the case and had caused the filing only of the
criminal charges against him, b) by res judicata, c) double jeopardy, and d) because to proceed with the case would be
redundant, oppressive and a plain persecution against him.
Meanwhile, the President issued the challenged Executive order No. 132 dated October 26, 1993 which mandates for the
streamlining of the Bureau of Internal Revenue. Under said order, some positions and functions are either abolished,
renamed, decentralized or transferred to other offices, while other offices are also created. The Excise Tax Service or the
Specific Tax Service, of which petitioner was the Assistant Commissioner, was one of those offices that was abolished by
said executive order.
The corresponding implementing rules of Executive Order No. 132, namely, revenue Administrative Orders Nos. 4-93 and
5-93, were subsequently issued.by the Bureau of Internal Revenue.
On October 27, 1993, or one day after the promulgation of Executive Order No.132, the President appointed the following
as BIR Assistant Commissioners:
1. Bernardo A. Frianeza
2. Dominador L. Galura
3. Jaime D. Gonzales
4. Lilia C. Guillermo
5. Rizalina S. Magalona
6. Victorino C. Mamalateo
7. Jaime M. Masa
8. Antonio N. Pangilinan
9. Melchor S. Ramos
10. Joel L. Tan-Torres

Consequently, the president, in the assailed Administrative Order No. 101 dated December 2, 1993, found petitioner guilty
of grave misconduct in the administrative charge and imposed upon him the penalty of dismissal with forfeiture of his
leave credits and retirement benefits including disqualification for reappointment in the government service.
Aggrieved, petitioner filed directly with this Court the instant petition on December 13, 1993 to question basically his
alleged unlawful removal from office.
On April 17, 1996 and while the instant petition is pending, this Court set aside the conviction of the petitioner in Criminal
Case Nos. 14208 and 14209.
In his petition, petitioner challenged the authority of the President to dismiss him from office. He argued that in so far as
presidential appointees who are Career Executive Service Officers are concerned, the President exercises only the power
of control not the power to remove. He also averred that the administrative investigation conducted under Memorandum
Order No. 164 is void as it violated his right to due process. According to him, the letter of the Committee dated
September 17, 1993 and his position paper dated September 30, 1993 are not sufficient for purposes of complying with
the requirements of due process. He alleged that he was not informed of the administrative charges leveled against him
nor was he given official notice of his dismissal.
Petitioner likewise claimed that he was removed as a result of the reorganization made by the Executive Department in
the BIR pursuant to Executive Order No. 132. Thus, he assailed said Executive Order No. 132 and its implementing rules,
namely, Revenue Administrative Orders 4-93 and 5-93 for being ultra vires. He claimed that there is yet no law enacted by
Congress which authorizes the reorganization by the Executive Department of executive agencies, particularly the Bureau
of Internal revenue. He said that the reorganization sought to be effected by the Executive Department on the basis of
E.O. No. 132 is tainted with bad faith in apparent violation of Section 2 of R.A. 6656, otherwise known as the Act
Protecting the Security of Tenure of Civil Service Officers and Employees in the Implementation of Government
Reorganization.
On the other hand, respondents contended that since petitioner is the presidential appointee, he falls under the
disciplining authority of the President. They also contended that E.O. No. 132 and its implementing rules were validly
issued pursuant to Sections 48 and 62 of Republic Act No. 7645. Apart from this, the other legal bases of E.O. No. 132 as
stated in its preamble are Section 63 of E.O No.127 (Reorganizing the Ministry of Finance), and Section 20, Book III of
E.O. No. 292, otherwise known as the Administrative Code of 1987. In addition, it is clear that in Section 11 of R.A
No.6656 future reorganization is expressly contemplated and nothing in said law that prohibits subsequent reorganization
through an executive order. Significantly, respondents clarified that petitioner was not dismissed by virtue of EO 132.
Respondents claimed that he was removed from office because he was found guilty of grave misconduct in the
administrative cases filed against him.
The ultimate issue to be resolved in the instant case falls on the determination of the validity of petitioners dismissal from
office. Incidentally, in order to resolve this matter, it is imperative that We consider these questions : a) Who has the
power to discipline the petitioner?, b) Were the proceedings taken pursuant to Memorandum Order No. 164 in accord with
due process?, c) What is the effect of petitioners acquittal in the criminal case to his administrative charge? d) Does the
President have the power to reorganize the BIR or to issue the questioned E.O. NO. 132?, e) Is the reorganization of BIR
pursuant to E.O. No. 132 tainted with bad faith?
At the outset, it is worthy to note that the position of the Assistant Commissioner of the BIR is part of the Career
Executive Service.2 Under the law,3 Career Executive Service officers, namely Undersecretary, Assistant Secretary, Bureau
director, Assistant Bureau Director, Regional Director, Assistant Regional Director, Chief of Department Service and other
officers of equivalent rank as may be identified by the Career Executive Service Board, are all appointed by the President.
Concededly, petitioner was appointed as Assistant Commissioner in January, 1987 by then President Aquino. Thus,
petitioner is a presidential appointee who belongs to career service of the Civil Service. Being a presidential appointee, he
comes under the direct diciplining authority of the President. This is in line with the well settled principle that the power to
remove is inherent in the power to appoint conferred to the President by Section 16, Article VII of the Constitution. Thus,
it is ineluctably clear that Memorandum Order No. 164, which created a committee to investigate the administrative
charge against petitioner, was issued pursuant to the power of removal of the President. This power of removal, however,
is not an absolute one which accepts no reservation. It must be pointed out that petitioner is a career service officer.
Under the Administrative Code of 1987, career service is characterized by the existence of security of tenure, as contradistinguished from non-career service whose tenure is co-terminus with that of the appointing or subject to his pleasure,
or limited to a period specified by law or to the duration of a particular project for which purpose the employment was
made. As a career service officer, petitioner enjoys the right to security of tenure. No less than the 1987 Constitution
guarantees the right of security of tenure of the employees of the civil service. Specifically, Section 36 of P.D. No. 807, as
amended, otherwise known as Civil Service Decree of the Philippines, is emphatic that career service officers and
employees who enjoy security of tenure may be removed only for any of the causes enumerated in said law. In other
words, the fact that the petitioner is a presidential appointee does not give the appointing authority the license to remove
him at will or at his pleasure for it is an admitted fact that he is likewise a career service officer who under the law is the
recipient of tenurial protection, thus, may only be removed for a cause and in accordance with procedural due process.

Was petitioner then removed from office for a legal cause under a valid proceeding?
Although the proceedings taken complied with the requirements of procedural due process, this Court, however, considers
that petitioner was not dismissed for a valid cause.
It should be noted that what precipitated the creation of the investigative committee to look into the administrative charge
against petitioner is his conviction by the Sandiganbayan in criminal Case Nos. 14208 and 14209. As admitted by the
respondents, the administrative case against petitioner is based on the Sandiganbayan Decision of September 18, 1992.
Thus, in the Administrative Order No. 101 issued by Senior Deputy Executive Secretary Quisumbing which found petitioner
guilty of grave misconduct, it clearly states that:
"This pertains to the administrative charge against Assistant Commissioner Aquilino T. Larin of the Bureau of
Internal Revenue, for grave misconduct by virtue of a Memorandum signed by Acting Secretary Leong of the
Department of Finance, on the basis of decision handed down by the Hon. Sandiganbayan convicting Larin, et.
al. in Criminal Cases No. 14208 and 14209."4chanroblesvirtuallawlibrary
In a nutshell, the criminal cases against petitioner refer to his alleged violation of Section 268 (4) of the National Internal
Revenue Code and of section 3(e) of R.A. No.3019 as a consequence of his act of favorably recommending the grant of tax
credit to Tanduay Distillery, Inc.. The pertinent portion of the judgment of the Sandiganbayan reads:
"As above pointed out, the accused had conspired in knowingly preparing false memoranda and certification in
order to effect a fraud upon taxes due to the government. By their separate acts which had resulted in an
appropriate tax credit of P180,701,682.00 in favor of Tanduay. The government had been defrauded of a tax
revenue - for the full amount, if one is to look at the availments or utilization thereof (Exhibits 'AA' to 'AA-31-a'),
or for a substantial portion thereof (P73,000,000.00) if we are to rely on the letter of Deputy Commissioner
Eufracio D. Santos (Exhibits '21' for all the accused).
As pointed out above, the confluence of acts and omissions committed by accused Larin, Pareno and Evangelista
adequately prove conspiracy among them for no other purpose than to bring about a tax credit which Tanduay
did not deserve. These misrepresentations as to how much Tanduay had paid in ad valorem taxes obviously
constituted a fraud of tax revenue of the government xxx.' 5chanroblesvirtuallawlibrary
However, it must be stressed at this juncture that the conviction of petitioner by the Sandiganbayan was set aside by this
court in our decision promulgated on April 17, 1996 in G.R. Nos. 108037-38 and 107119-20. We specifically ruled in no
uncertain terms that : a) petitioner cannot be held negligent in relying on the certification of a co-equal unit in the BIR, b)
it is not incumbent upon Larin to go beyond the certification made by the Revenue Accounting Division that Tanduay
Distillery, Inc. had paid the ad valorem taxes, c) there is nothing irregular or anything false in Larin's marginal note on the
memorandum addressed to Pareno, the Chief of Alcohol Tax Division who was also one of the accused, but eventually
acquitted, in the said criminal cases, and d) there is no proof of actual agreement between the accused, including
petitioner, to commit the illegal acts charged. We are emphatic in our resolution in said cases that there is nothing "illegal
with the acts committed by the petitioner(s)." We also declare that "there is no showing that petitioner(s) had acted
irregularly, or performed acts outside of his (their) official functions." Significantly, these acts which We categorically
declare to be not unlawful and improper in G.R. Nos. 108037-38 and G.R. Nos. 107119-20 are the very same acts for
which petitioner is held to be administratively responsible. Any charge of malfeasance or misfeasance on the part of the
petitioner is clearly belied by our conclusion in said cases. In the light of this decisive pronouncement, We see no reason
for the administrative charge to continue - it must, thus, be dismissed.
We are not unaware of the rule that since administrative cases are independent from criminal actions for the same act or
omission, the dismissal or acquittal of the criminal charge does not foreclose the institution of administrative action nor
carry with it the relief from administrative liability.6 However, the circumstantial setting of the instant case sets it miles
apart from the foregoing rule and placed it well within the exception. Corollarily, where the very basis of the administrative
case against petitioner is his conviction in the criminal action which was later on set aside by this court upon a categorical
and clear findings that the acts for which he was administratively held liable are not unlawful and irregular, the acquittal of
the petitioner in the criminal case necessarily entails the dismissal of the administrative action against him, because in
such a case, there is no basis nor justifiable reason to maintain the administrative suit.
On the aspect of procedural due process, suffice it to say that petitioner was given every chance to present his side. The
rule is well settled that the essence of due process in administrative proceedings is that a party be afforded a reasonable
opportunity to be heard and to submit any evidence he may have in support of his defense. 7 The records clearly show that
on October 1, 1993 petitioner submitted his letter-response dated September 30, 1993 to the administrative charged filed
against him. Aside from his letter, he also submitted various documents attached as annexes to his letter, all of which are
evidences supporting his defense. Prior to this, he received a letter dated September 17, 1993 from the Investigation
Committee requiring him to explain his side concerning the charge. It cannot therefore be argued that petitioner was
denied of due process.

Let us now examine Executive Order No. 132.

As stated earlier, with the issuance of Executive Order No. 132, some of the positions and offices, including the office of
Excise Tax Services of which petitioner was the Assistant Commissioner, were abolished or otherwise decentralized.
Consequently, the President released the list of appointed Assistant Commissioners of the BIR. Apparently, petitioner was
not included.
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.
Under its Preamble, E.O. No. 132 lays down the legal basis of its issuance, namely: a) Section 48 and 62 of R.A. No. 7645,
b) Section 63 of E.O. No. 127, and c) Section 20, Book III of E.O. No. 292.
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 rules and regulations. xxx. Actual scaling down, phasing out or abolition of the
activities shall be effective pursuant to Circulars or Orders issued for the purpose by the Office of the President."
(italics ours)
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.
The contention of petitioner that the two provisions are riders deserves scant consideration. Well settled is the rule that
every law has in its favor the presumption of constitutionality.8 Unless and until a specific provision of the law is declared
invalid and unconstitutional, the same is valid and binding for all intents and purposes.
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." (italics ours)
This provision speaks of such other powers vested in the President under the law. What law then which gives him the
power to reorganize? It is Presidential Decree No. 17729which 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."10 So far, there is yet no law amending or repealing said decrees. Significantly, the Constitution itself
recognizes future reorganizations in the government as what is revealed in Section 16 of Article XVIII, thus:
"Sec. 16. Career civil service employees separated from service not for cause but as a result of the xxx
reorganization following the ratification of this Constitution shall be entitled to appropriate separation pay xxx."
However, We can not consider E.O. No. 127 signed on January 30, 1987 as a legal basis for the reorganization of the BIR.
E.O. No. 127 should be related to the second paragraph of Section 11 of Republic Act No. 6656.
Section 11 provides inter alia:

"xxx
In the case of the 1987 reorganization of the executive branch, all departments and agencies which are
authorized by executive orders promulgated by the President to reorganize shall have ninety days from the
approval of this act within which to implement their respective reorganization plans in accordance with the
provisions of this Act." (italics ours)
Executive Order No. 127 was part of the 1987 reorganization contemplated under said provision. Obviously, it had become
stale by virtue of the expiration of the ninety day deadline period. It can not thus be used as a proper basis for the
reorganization of the BIR. Nevertheless, as shown earlier, there are other legal bases to sustain the authority of the
President to issue the questioned E.O. No. 132.
While the President's power to reorganize can not be denied, this does not mean however that the reorganization itself is
properly made in accordance with law. Well-settled is the rule that reorganization is regarded as valid provided it is
pursued in good faith. Thus, in Dario vs. Mison, this court has had the occasion to clarify that:
"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 or separation actually occurs because the position itself
ceases to exist. And in that case the 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, or otherwise not in good faith, no valid abolition takes place 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." 11chanroblesvirtuallawlibrary
In this regard, it is worth mentioning that Section 2 of R.A. No. 6656 lists down the circumstances evidencing bad faith in
the removal of employees as a result of the reorganization, thus:
Sec. 2. No officer or employee in the career service shall be removed except for a valid cause and after due
notice and hearing. A valid cause for removal exist when, pursuant to a bona fide reorganization, a position has
been abolished or rendered redundant or there is a need to merge, divide, or consolidate positions in order to
meet the exigencies of the service, or other lawful causes allowed by the Civil Service Law. The existence of any
or some of the following circumstances may be considered as evidence of bad faith in the removals made as a
result of the reorganization, giving rise to a claim for reinstatement or reappointment by an aggrieved party:
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 reclassification of offices in the department or agency concerned and the reclassified offices perform
substantially the same functions as the original offices;
e) Where the removal violates the order of separation provided in Section 3 hereof."
A reading of some of the provisions of the questioned E.O. No. 132 clearly leads us to an inescapable conclusion that there
are circumstances considered as evidences of bad faith in the reorganization of the BIR.
Section 1.1.2 of said executive order provides that:
"1.1.2 The Intelligence and Investigation Office and the Inspection Service are abolished. An Intelligence and
Investigation Service is hereby created to absorb thesame functions of the abolished office and service. xxx"
(italics ours)
This provision is a clear illustration of the circumstance mentioned in Section 2 (b) of R.A. No. 6656 that an office is
abolished and another one performing substantially the same function is created.
Another circumstance is the creation of services and divisions in the BIR resulting to a significant increase in the number
of positions in the said bureau as contemplated in paragraph (a) of section 2 of R.A. No. 6656. Under Section 1.3 of E.O.
No. 132, the Information Systems Group has two newly created Systems Services. Aside from this, six new divisions are

also created. Under Section 1.2.1, three more divisions of the Assessment Service are formed. With this newly created
offices, there is no doubt that a significant increase of positions will correspondingly follow.
Furthermore, it is perceivable that the non-reappointment of the petitioner as Assistant Commissioner violates Section 4
of R.A. No. 6656. Under said provision, officers holding permanent appointments are given preference for appointment to
the new positions in the approved staffing pattern comparable to their former position or in case there are not enough
comparable positions to positions next lower in rank. It is undeniable that petitioner is a career executive officer who is
holding a permanent position. Hence, he should have given preference for appointment in the position of Assistant
Commissioner. As claimed by petitioner, Antonio Pangilinan who was one of those appointed as Assistant Commissioner, "is
an outsider of sorts to the bureau, not having been an incumbent officer of the bureau at the time of the reorganization."
We should not lose sight of the second paragraph of Section 4 of R.A. No. 6656 which explicitly states that no new
employees shall be taken in until all permanent officers shall have been appointed for permanent position.
IN VIEW OF THE FOREGOING, the petition is granted, and petitioner is hereby reinstated to his position as Assistant
Commissioner without loss of seniority rights and shall be entitled to full backwages from the time of his separation from
service until actual reinstatement unless, in the meanwhile, he would have reached the compulsory retirement age of
sixty-five years in which case, he shall be deemed to have retired at such age and entitled thereafter to the corresponding
retirement benefits.
SO ORDERED.

EN BANC
[G.R. No. 117565. November 18, 1997.]
ARSENIO P. LUMIQUED (deceased), Regional Director, DAR-CAR, Represented by his Heirs, Francisca A.
Lumiqued, May A. Lumiqued, Arlene A. Lumiqued and Richard A. Lumiqued,Petitioners, v. Honorable
APOLONIO G. EXEVEA, ERDOLFO V. BALAJADIA and FELIX T. CABADING, All Members of Investigating
Committee, created by DOJ Order No. 145 on May 30, 1992; HON. FRANKLIN M. DRILON, SECRETARY OF
JUSTICE, HON. ANTONIO T. CARPIO, Chief Presidential Legal Adviser/Counsel; and HON. LEONARDO A.
QUISUMBING, Senior Deputy Executive Secretary of the Office of the President, and JEANNETTE OBARZAMUDIO, Private Respondent, Respondents.

DECISION

ROMERO, J.:

Does the due process clause encompass the right to be assisted by counsel during an administrative inquiry?
Arsenio P. Lumiqued was the Regional Director of the Department of Agrarian Reform Cordillera Autonomous Region
(DAR-CAR) until President Fidel V. Ramos dismissed him from that position pursuant to Administrative Order No. 52 dated

May 12, 1993. In view of Lumiqueds death on May 19, 1994, his heirs instituted this petition for certiorari and
mandamus, questioning such order.
The dismissal was the aftermath of three complaints filed by DAR-CAR Regional Cashier and private respondent Jeannette
Obar-Zamudio with the Board of Discipline of the DAR. The first affidavit-complaint dated November 16, 1989, 1 charged
Lumiqued with malversation through falsification of official documents. From May to September 1989, Lumiqued allegedly
committed at least 93 counts of falsification by padding gasoline receipts. He even submitted a vulcanizing shop receipt
worth P550.00 for gasoline bought from the shop, and another receipt for P660.00 for a single vulcanizing job. With the
use of falsified receipts, Lumiqued claimed and was reimbursed the sum of P44,172.46. Private respondent added that
Lumiqued seldom made field trips and preferred to stay in the office, making it impossible for him to consume the nearly
120 liters of gasoline he claimed everyday.
In her second affidavit-complaint dated November 22, 1989, 2 private respondent accused Lumiqued with violation of
Commission on Audit (COA) rules and regulations, alleging that during the months of April, May, July, August, September
and October 1989, he made unliquidated cash advances in the total amount of P116,000.00. Lumiqued purportedly
defrauded the government "by deliberately concealing his unliquidated cash advances through the falsification of
accounting entries in order not to reflect on Cash advances of other officials under code 8-70-600 of accounting
rules."cralaw virtua1aw library
The third affidavit-complaint dated December 15, 1989, 3 charged Lumiqued with oppression and harassment. According
to private respondent, her two previous complaints prompted Lumiqued to retaliate by relieving her from her post as
Regional Cashier without just cause.
The three affidavit-complaints were referred in due course to the Department of Justice (DOJ) for appropriate action. On
May 20, 1992, Acting Justice Secretary Eduardo G. Montenegro issued Department Order No. 145 creating a committee to
investigate the complaints against Lumiqued. The order appointed Regional State Prosecutor Apolinario Exevea as
committee chairman with City Prosecutor Erdolfo Balajadia and Provincial Prosecutor Felix Cabading as members. They
were mandated to conduct an investigation within thirty days from receipt of the order, and to submit their report and
recommendation within fifteen days from its conclusion.
The investigating committee accordingly issued a subpoena directing Lumiqued to submit his counter-affidavit on or before
June 17, 1992. Lumiqued, however, filed instead an urgent motion to defer submission of his counter-affidavit pending
actual receipt of two of private respondents complaints. The committee granted the motion and gave him a five-day
extension.
In his counter-affidavit dated June 23, 1992, 4 Lumiqued alleged, inter alia, that the cases were filed against him to extort
money from innocent public servants like him, and were initiated by private respondent in connivance with a certain
Benedict Ballug of Tarlac and a certain Benigno Aquino III. He claimed that the apparent weakness of the charge was
bolstered by private respondents execution of an affidavit of desistance. 5
Lumiqued admitted that his average daily gasoline consumption was 108.45 liters. He submitted, however, that such
consumption was warranted as it was the aggregate consumption of the five service vehicles issued under his name and
intended for the use of the Office of the Regional Director of the DAR. He added that the receipts which were issued
beyond his region were made in the course of his travels to Ifugao Province, the DAR Central Office in Diliman, Quezon
City, and Laguna, where he attended a seminar. Because these receipts were merely turned over to him by drivers for
reimbursement, it was not his obligation but that of auditors and accountants to determine whether they were falsified. He
affixed his signature on the receipts only to signify that the same were validly issued by the establishments concerned in
order that official transactions of the DAR-CAR could be carried out.
Explaining why a vulcanizing shop issued a gasoline receipt, Lumiqued said that he and his companions were cruising
along Santa Fe, Nueva Vizcaya on their way to Ifugao when their service vehicle ran out of gas. Since it was almost
midnight, they sought the help of the owner of a vulcanizing shop who readily furnished them with the gasoline they
needed. The vulcanizing shop issued its own receipt so that they could reimburse the cost of the gasoline. Domingo
Lucero, the owner of said vulcanizing shop, corroborated this explanation in an affidavit dated June 25, 1990. 6 With
respect to the accusation that he sought reimbursement in the amount of P660.00 for one vulcanizing job, Lumiqued
submitted that the amount was actually only P6.60. Any error committed in posting the amount in the books of the
Regional Office was not his personal error or accountability.
To refute private respondents allegation that he violated COA rules and regulations in incurring unliquidated cash
advances in the amount of P116,000.00, Lumiqued presented a certification 7 of DAR-CAR Administrative Officer
Deogracias F. Almora that he had no outstanding cash advances on record as of December 31, 1989.
In disputing the charges of oppression and harassment against him, Lumiqued contended that private respondent was not
terminated from the service but was merely relieved of her duties due to her prolonged absences. While admitting that
private respondent filed the required applications for leave of absence, Lumiqued claimed that the exigency of the service
necessitated disapproval of her application for leave of absence. He allegedly rejected her second application for leave of
absence in view of her failure to file the same immediately with the head office or upon her return to work. He also
asserted that no medical certificate supported her application for leave of absence.

In the same counter-affidavit, Lumiqued also claimed that private respondent was corrupt and dishonest because a COA
examination revealed that her cash accountabilities from June 22 to November 23, 1989, were short by P30,406.87.
Although private respondent immediately returned the amount on January 18, 1990, the day following the completion of
the cash examination, Lumiqued asserted that she should be relieved from her duties and assigned to jobs that would not
require handling of cash and money matters.
Committee hearings on the complaints were conducted on July 3 and 10, 1992, but Lumiqued was not assisted by
counsel. On the second hearing date, he moved for its resetting to July 17, 1992, to enable him to employ the services of
counsel. The committee granted the motion, but neither Lumiqued nor his counsel appeared on the date he himself had
chosen, so the committee deemed the case submitted for resolution.
On August 12, 1992, Lumiqued filed an urgent motion for additional hearing, 8 alleging that he suffered a stroke on July
10, 1992. The motion was forwarded to the Office of the State Prosecutor apparently because the investigation had
already been terminated. In an order dated September 7, 1992, 9 State Prosecutor Zoila C. Montero denied the motion,
viz.:jgc:chanrobles.com.ph
"The medical certificate given show(s) that respondent was discharged from the Sacred Heart Hospital on July 17, 1992,
the date of the hearing, which date was upon the request of respondent (Lumiqued). The records do not disclose that
respondent advised the Investigating committee of his confinement and inability to attend despite his discharge, either by
himself or thru counsel. The records likewise do not show that efforts were exerted to notify the Committee of
respondents condition on any reasonable date after July 17, 1992. It is herein noted that as early as June 23, 1992,
respondent was already being assisted by counsel.
Moreover an evaluation of the counter-affidavit submitted reveal(s) the sufficiency, completeness and thoroughness of the
counter-affidavit together with the documentary evidence annexed thereto, such that a judicious determination of the case
based on the pleadings submitted is already possible. cdti
Moreover, considering that the complaint-affidavit was filed as far back as November 16, 1989 yet, justice can not be
delayed much longer."cralaw virtua1aw library
Following the conclusion of the hearings, the investigating committee rendered a report dated July 31, 1992, 10 finding
Lumiqued liable for all the charges against him. It made the following findings:jgc:chanrobles.com.ph
"After a thorough evaluation of the evidences (sic) submitted by the parties, this committee finds the evidence submitted
by the complainant sufficient to establish the guilt of the respondent for Gross Dishonesty and Grave Misconduct.
That most of the gasoline receipts used by the respondent in claiming for the reimbursement of his gasoline expenses
were falsified is clearly established by the 15 Certified Xerox Copies of the duplicate receipts (Annexes G-1 to G-15) and
the certifications issued by the different gasoline stations where the respondent purchased gasoline. Annexes G-1 to G15 show that the actual average purchase made by the respondent is about 8.46 liters only at a purchase price of P50.00,
in contrast to the receipts used by the respondent which reflects an average of 108.45 liters at a purchase price of
P550.00. Here, the greed of the respondent is made manifest by his act of claiming reimbursements of more than 10
times the value of what he actually spends. While only 15 of the gasoline receipts were ascertained to have been falsified,
the motive, the pattern and the scheme employed by the respondent in defrauding the government has, nevertheless,
been established.
That the gasoline receipts have been falsified was not rebutted by the Respondent. In fact, he had in effect admitted that
he had been claiming for the payment of an average consumption of 108.45 liters/day by justifying that this was being
used by the 4 vehicles issued to his office. Besides he also admitted having signed the receipts.
Respondents act in defrauding the government of a considerable sum of money by falsifying receipts constitutes not only
Dishonesty of a high degree but also a criminal offense for Malversation through Falsification of Official Documents.
This committee likewise finds that the respondent have (sic) unliquidated cash advances in the year 1989 which is in
violation of established office and auditing rules. His cash advances totaling to about P116,000.00 were properly
documented. The requests for obligation of allotments and the vouchers covering the amounts were all signed by him. The
mere certification issued by the Administrative Officer of the DAR-CAR cannot therefore rebut these concrete evidences
(sic).
On the third complaint, this committee likewise believes that the respondents act in relieving the complainant of her
functions as a Regional Cashier on December 1, 1989 was an act of harassment. It is noted that this was done barely two
weeks after the complainant filed charges against her (sic). The recommendation of Jose G. Medina of the Commission on
Audit came only on May 11, 1990 or almost six months after the respondents order relieving the complainant was issued.
His act in harassing a subordinate employee in retaliation to a complaint she filed constitute(s) Gross Misconduct on the
part of the respondent who is a head of office.
The affidavits of Joseph In-uyay and Josefina Guting are of no help to the Respondent. In fact, this only show(s) that he is
capable of giving bribes if only to have the cases against him dismissed. He could not have given a certain Benigno Aquino
III the sum of P10,000.00 for any other purpose."cralaw virtua1aw library

Accordingly, the investigating committee recommended Lumiqueds dismissal or removal from office, without prejudice to
the filing of the appropriate criminal charges against him.
Acting on the report and recommendation, former Justice Secretary Franklin M. Drilon adopted the same in his
Memorandum to President Fidel V. Ramos dated October 22, 1992. He added that the filing of the affidavit of desistance
11 would not prevent the issuance of a resolution on the matter considering that what was at stake was not only "the
violation of complainants (herein private respondents) personal rights" but also "the competence and fitness of the
respondent (Lumiqued) to remain in public office." He opined that, in fact, the evidence on record could call for "a punitive
action against the respondent on the initiative of the DAR."cralaw virtua1aw library
On December 17, 1992, Lumiqued filed a motion for reconsideration of "the findings of the Committee" with the DOJ. 12
Undersecretary Ramon S. Esguerra indorsed the motion to the investigating committee. 13 In a letter dated April 1, 1993,
the three-member investigating committee informed Undersecretary Esguerra that the committee "had no more authority
to act on the same (motion for reconsideration) considering that the matter has already been forwarded to the Office of
the President" and that their authority under Department Order No. 145 ceased when they transmitted their report to the
DOJ. 14 Concurring with this view, Undersecretary Esguerra informed Lumiqued that the investigating committee could no
longer act on his motion for reconsideration. He added that the motion was also prematurely filed because the Office of
the President (OP) had yet to act on Secretary Drilons recommendation. 15
On May 12, 1993, President Fidel V. Ramos himself issued Administrative Order No. 52 (A.O. No. 52), 16 finding Lumiqued
administratively liable for dishonesty in the alteration of fifteen gasoline receipts, and dismissing him from the service,
with forfeiture of his retirement and other benefits. Thus:jgc:chanrobles.com.ph
"That the receipts were merely turned over to him by his drivers and that the auditor and accountant of the DAR-CAR
should be the ones to be held liable is untenable. The receipts in question were signed by respondent for the purpose of
attesting that those receipts were validly issued by the commercial establishments and were properly disbursed and used
in the official business for which it was intended.cralawnad
This Office is not about to shift the blame for all these to the drivers employed by the DAR-CAR as respondent would want
us to do."cralaw virtua1aw library
The OP, however, found that the charges of oppression and harassment, as well as that of incurring unliquidated cash
advances, were not satisfactorily established.
In a "petition for appeal" 17 addressed to President Ramos, Lumiqued prayed that A.O. No. 52 be reconsidered and that
he be reinstated to his former position "with all the benefits accorded to him by law and existing rules and regulations."
This petition was basically premised on the affidavit dated May 27, 1993, of a certain Dwight L. Lumiqued, a former driver
of the DAR-CAR, who confessed to having authored the falsification of gasoline receipts and attested to petitioner
Lumiqueds being an "honest man" who had no "premonition" that the receipts he (Dwight) turned over to him were
"altered." 18
Treating the "petition for appeal" as a motion for reconsideration of A.O. No. 52, the OP, through Senior Deputy Executive
Secretary Leonardo A. Quisumbing, denied the same on August 31, 1993.
Undaunted, Lumiqued filed a second motion for reconsideration, alleging, among other things, that he was denied the
constitutional right to counsel during the hearing. 19 On May 19, 1994, 20 however, before his motion could be resolved,
Lumiqued died. On September 28, 1994, 21 Secretary Quisumbing denied the second motion for reconsideration for lack
of merit.
Hence, the instant petition for certiorari and mandamus praying for the reversal of the Report and Recommendation of the
Investigating Committee, the October 22, 1992, Memorandum of then Justice Secretary Drilon, A.O. No. 52 issued by
President Ramos, and the orders of Secretary Quisumbing. In a nutshell, it prays for the "payment of retirement benefits
and other benefits accorded to deceased Arsenio Lumiqued by law, payable to his heirs; and the backwages from the
period he was dismissed from service up to the time of his death on May 19, 1994." 22
Petitioners fault the investigating committee for its failure to inform Lumiqued of his right to counsel during the hearing.
They maintain that his right to counsel could not be waived unless the waiver was in writing and in the presence of
counsel. They assert that the committee should have suspended the hearing and granted Lumiqued a reasonable time
within which to secure a counsel of his own. If suspension was not possible, the committee should have appointed a
counsel de oficio to assist him.
These arguments are untenable and misplaced. The right to counsel, which cannot be waived unless the waiver is in
writing and in the presence of counsel, is a right afforded a suspect or an accused during custodial investigation. 23 It is
not an absolute right and may, thus, be invoked or rejected in a criminal proceeding and, with more reason, in an
administrative inquiry. In the case at bar, petitioners invoke the right of an accused in criminal proceedings to have
competent and independent counsel of his own choice. Lumiqued, however, was not accused of any crime in the
proceedings below. The investigation conducted by the committee created by Department Order No. 145 was for the
purpose of determining if he could be held administratively liable under the law for the complaints filed against him. The

order issued by Acting Secretary of Justice Montenegro states thus:jgc:chanrobles.com.ph

"In the interest of the public service and pursuant to the provisions of existing laws, a Committee to conduct the formal
investigation of the administrative complaint for oppression, dishonesty, disgraceful and immoral conduct, being
notoriously undesirable and conduct prejudicial to the best interest of the service against Mr. ARSENIO P. LUMIQUED,
Regional Director, Department of Agrarian Reform, Cordillera Autonomous Region, is hereby created . . ." 24
As such, the hearing conducted by the investigating committee was not part of a criminal prosecution. This was even
made more pronounced when, after finding Lumiqued administratively liable, it hinted at the filing of a criminal case for
malversation through falsification of public documents in its report and recommendation.
Petitioners misconception on the nature of the investigation 25 conducted against Lumiqued appears to have been
engendered by the fact that the DOJ conducted it. While it is true that under the Administrative Code of 1987, the DOJ
shall "administer the criminal justice system in accordance with the accepted processes thereof consisting in the
investigation of the crimes, prosecution of offenders and administration of the correctional system," 26 conducting criminal
investigations is not its sole function. By its power to "perform such other functions as may be provided by law," 27
prosecutors may be called upon to conduct administrative investigations. Accordingly, the investigating committee created
by Department Order No. 145 was duty-bound to conduct the administrative investigation in accordance with the rules
therefor.
While investigations conducted by an administrative body may at times be akin to a criminal proceeding, the fact remains
that under existing laws, a party in an administrative inquiry may or may not be assisted by counsel, irrespective of the
nature of the charges and of the respondents capacity to represent himself, and no duty rests on such a body to furnish
the person being investigated with counsel. 28 In an administrative proceeding such as the one that transpired below, a
respondent (such as Lumiqued) has the option of engaging the services of counsel or not. This is clear from the provisions
of Section 32, Article VII of Republic Act No. 2260 29 (otherwise known as the Civil Service Act) and Section 39,
paragraph 2, Rule XIV (on Discipline) of the Omnibus Rules Implementing Book V of Executive Order No. 292 30
(otherwise known as the Administrative Code of 1987). Excerpts from the transcript of stenographic notes of the hearings
attended by Lumiqued 31 clearly show that he was confident of his capacity and so opted to represent himself . Thus, the
right to counsel is not imperative in administrative investigations because such inquiries are conducted merely to
determine whether there are facts that merit disciplinary measures against erring public officers and employees, with the
purpose of maintaining the dignity of government service.chanrobles.com:cralaw:red
Furthermore, petitioners reliance on Resolution No. 94-0521 of the Civil Service Commission on the Uniform Procedure in
the Conduct of Administrative Investigation stating that a respondent in an administrative complaint must be "informed of
his right to the assistance of a counsel of his choice," 32 is inappropriate. In the first place, this resolution is applicable
only to cases brought before the Civil Service Commission. 33 Secondly, said resolution, which is dated January 25, 1994,
took effect fifteen days following its publication in a newspaper of general circulation, 34 much later than the July 1992
hearings of the investigating committee created by Department Order No. 145. Thirdly, the same committee was not
remiss in the matter of reminding Lumiqued of his right to counsel. Thus, at the July 3, 1992, hearing, Lumiqued was
repeatedly appraised of his option to secure the services of counsel:jgc:chanrobles.com.ph
"RSP EXEVEA:chanrob1es virtual 1aw library
This is an administrative case against Director Lumiqued. Director Lumiqued is present. The complainant is present, Janet
Obar-Zamudio. Complainant has just been furnished with a copy of the counter-affidavit of the Respondent. Do you have a
counsel, Director?
DIR. LUMIQUED:chanrob1es virtual 1aw library
I did not bring anybody, Sir, because when I went to see him, he told me, Sir, that he has already set a hearing, morning
and afternoon today.
RSP EXEVEA:chanrob1es virtual 1aw library
So, we will proceed with the hearing even without your counsel? You are willing to proceed with the hearing even without
your counsel?
DIR. LUMIQUED:chanrob1es virtual 1aw library
Yes, I am confident . . .
CP BALAJADIA:chanrob1es virtual 1aw library
You are confident that you will be able to represent yourself?
DIR. LUMIQUED:chanrob1es virtual 1aw library
That is my concern." 35 (Emphasis supplied)

In the course of private respondents damaging testimony, the investigating committee once again reminded Lumiqued of
his need for a counsel. Thus:jgc:chanrobles.com.ph
"CP BALAJADIA:chanrob1es virtual 1aw library
Q. (To Director Lumiqued) You really wish to go through with this even without your counsel?
DIRECTOR LUMIQUED:chanrob1es virtual 1aw library
A. I think so, Sir.
CP BALAJADIA:chanrob1es virtual 1aw library
Let us make it of record that we have been warning you to proceed with the assistance of counsel but you said that you
can take care of yourself so we have no other alternative but to proceed." 36 (Emphasis supplied)
Thereafter, the following colloquies transpired:jgc:chanrobles.com.ph
"CP BALAJADIA:chanrob1es virtual 1aw library
We will suspend in the meantime that we are waiting for the supplemental affidavit you are going to present to us. Do you
have any request from the panel of investigators, Director Lumiqued?
DIRECTOR LUMIQUED:chanrob1es virtual 1aw library
I was not able to bring a lawyer since the lawyer I requested to assist me and was the one who prepared my counteraffidavit is already engaged for a hearing and according to him he is engaged for the whole month of July.
RSP EXEVEA:chanrob1es virtual 1aw library
We cannot wait. . .
CP BALAJADIA:chanrob1es virtual 1aw library
Why dont you engage the services of another counsel. The charges against you are quite serious. We are not saying you
are guilty already. We are just apprehensive that you will go through this investigation without a counsel. We would like
you to be protected legally in the course of this investigation. Why dont you get the services of another counsel. There
are plenty here in Baguio. . .
DIRECTOR LUMIQUED:chanrob1es virtual 1aw library
I will try to see, Sir. . .
CP BALAJADIA:chanrob1es virtual 1aw library
Please select your date now, we are only given one month to finish the investigation, Director Lumiqued.
RSP EXEVEA:chanrob1es virtual 1aw library
We will not entertain any postponement. With or without counsel, we will proceed.
CP BALAJADIA:chanrob1es virtual 1aw library
Madam Witness, will you please submit the document which we asked for and Director Lumiqued, if you have other
witnesses, please bring them but reduce their testimonies in affidavit form so that we can expedite with the proceedings."
37
At the hearing scheduled for July 10, 1992, Lumiqued still did not avail of the services of counsel. Pertinent excerpts from
said hearing follow:jgc:chanrobles.com.ph
"FISCAL BALAJADIA:chanrob1es virtual 1aw library
I notice also Mr. Chairman that the respondent is not being represented by a counsel. The last time he was asked to invite
his lawyer in this investigation. May we know if he has a lawyer to represent him in this investigation?
DIR. LUMIQUED:chanrob1es virtual 1aw library
There is none Sir because when I went to my lawyer, he told me that he had set a case also at 9:30 in the other court and

he told me if there is a possibility of having this case postponed anytime next week, probably Wednesday so we will have
good time (sic) of presenting the affidavit.
FISCAL BALAJADIA:chanrob1es virtual 1aw library
Are you moving for a postponement Director? May I throw this to the panel. The charges in this case are quite serious and
he should be given a chance to the assistance of a counsel/lawyer.
RSP EXEVEA:chanrob1es virtual 1aw library
And is (sic) appearing that the supplemental-affidavit has been furnished him only now and this has several documents
attached to it so I think we could grant him one last postponement considering that he has already asked for an
extension.
DIR. LUMIQUED:chanrob1es virtual 1aw library
Furthermore Sir, I am now being bothered by my heart ailment." 38
The hearing was reset to July 17, 1992, the date when Lumiqued was released from the hospital. Prior to said date,
however, Lumiqued did not inform the committee of his confinement. Consequently, because the hearing could not push
through on said date, and Lumiqued had already submitted his counter-affidavit, the committee decided to wind up the
proceedings. This did not mean, however, that Lumiqued was short-changed in his right to due process.
Lumiqued, a Regional Director of a major department in the executive branch of the government, graduated from the
University of the Philippines (Los Baos) with the degree of Bachelor of Science major in Agriculture, was a recipient of
various scholarships and grants, and underwent training seminars both here and abroad. 39 Hence, he could have
defended himself if need be, without the help of counsel, if truth were on his side. This, apparently, was the thought he
entertained during the hearings he was able to attend. In his statement, "That is my concern," one could detect that it had
been uttered testily, if not exasperatedly, because of the doubt or skepticism implicit in the question, "You are confident
that you will be able to represent yourself?" despite his having positively asserted earlier, "Yes, I am confident." He was
obviously convinced that he could ably represent himself. Beyond repeatedly reminding him that he could avail himself of
counsel and as often receiving the reply that he is confident of his ability to defend himself, the investigating committee
could not do more. One can lead a horse to water but cannot make him drink.
The right to counsel is not indispensable to due process unless required by the Constitution or the law. In Nera v. Auditor
General, 40 the Court said:jgc:chanrobles.com.ph
". . . There is nothing in the Constitution that says that a party in a non-criminal proceeding is entitled to be represented
by counsel and that, without such representation, he shall not be bound by such proceedings. The assistance of lawyers,
while desirable, is not indispensable. The legal profession was not engrafted in the due process clause such that without
the participation of its members, the safeguard is deemed ignored or violated. The ordinary citizen is not that helpless that
he cannot validly act at all except only with a lawyer at his side."cralaw virtua1aw library
In administrative proceedings, the essence of due process is simply the opportunity to explain ones side. One may be
heard, not solely by verbal presentation but also, and perhaps even much more creditably as it is more practicable than
oral arguments, through pleadings. 41 An actual hearing is not always an indispensable aspect of due process. 42 As long
as a party was given the opportunity to defend his interests in due course, he cannot be said to have been denied due
process of law, for this opportunity to be heard is the very essence of due process. 43 Moreover, this constitutional
mandate is deemed satisfied if a person is granted an opportunity to seek reconsideration of the action or ruling
complained of. 44 Lumiqueds appeal and his subsequent filing of motions for reconsideration cured whatever irregularity
attended the proceedings conducted by the committee. 45
The constitutional provision on due process safeguards life, liberty and property. 46 In the early case of Cornejo v. Gabriel
and Provincial Board of Rizal 47 the Court held that a public office is not property within the sense of the constitutional
guarantee of due process of law for it is a public trust or agency. This jurisprudential pronouncement has been enshrined
in the 1987 Constitution under Article XI, Section 1, on accountability of public officers, as follows:jgc:chanrobles.com.ph
"Section 1. Public office is a public trust. Public officers and employees must at all times be accountable to the people,
serve them with utmost responsibility, integrity, loyalty, and efficiency, act with patriotism and justice, and lead modest
lives."cralaw virtua1aw library
When the dispute concerns ones constitutional right to security of tenure, however, public office is deemed analogous to
property in a limited sense; hence, the right to due process could rightfully be invoked. Nonetheless, the right to security
of tenure is not absolute. Of equal weight is the countervailing mandate of the Constitution that all public officers and
employees must serve with responsibility, integrity, loyalty and efficiency. 48 In this case, it has been clearly shown that
Lumiqued did not live up to this constitutional precept.
The committees findings pinning culpability for the charges of dishonesty and grave misconduct upon Lumiqued were not,
as shown above, fraught with procedural mischief. Its conclusions were founded on the evidence presented and evaluated

as facts. Well-settled in our jurisdiction is the doctrine that findings of fact of administrative agencies must be respected as
long as they are supported by substantial evidence, even if such evidence is not overwhelming or preponderant. 49 The
quantum of proof necessary for a finding of guilt in administrative cases is only substantial evidence or such relevant
evidence as a reasonable mind might accept as adequate to support a conclusion. 50
Consequently, the adoption by Secretary Drilon and the OP of the committees recommendation of dismissal may not in
any way be deemed tainted with arbitrariness amounting to grave abuse of discretion. Government officials are presumed
to perform their functions with regularity. Strong evidence is not necessary to rebut that presumption, 51 which
petitioners have not successfully disputed in the instant case.cralawnad
Dishonesty is a grave offense penalized by dismissal under Section 23 of Rule XIV of the Omnibus Rules Implementing
Book V of the Administrative Code of 1987. Under Section 9 of the same Rule, the penalty of dismissal carries with it
"cancellation of eligibility, forfeiture of leave credits and retirement benefits, and the disqualification for reemployment in
the government service." The instant petition, which is aimed primarily at the "payment of retirement benefits and other
benefits," plus back wages from the time of Lumiqueds dismissal until his demise, must, therefore, fail.
WHEREFORE, the instant petition for certiorari and mandamus is hereby DISMISSED and Administrative Order No. 52 of
the Office of the President is AFFIRMED. Costs against petitioners.
SO ORDERED.
Regalado, Davide, Jr., Bellosillo, Melo, Puno, Vitug, Kapunan, Mendoza, Francisco and Panganiban,JJ., concur.
Narvasa, C.J., is on leave.

EN BANC [GR No. L-387. October 25, 1946.] BALBINA MENDOZA, appellant, against PACIANO DIZON, in his
capacity as Auditor General, appealed. Messrs. Eulalio Chaves and Eugene P. La Rosa, in representation of the
appellant. Mr. Assistant Attorney General and the Attorney Alvendza Mr. Carreon, in representation of
appeal.
SYLLABUS

1. ADMINISTRATIVE LAW; BONUS (Gratuity); SIGNIFICANCE OR CONCEPT. - Administrative Order No.27 of December 7,
1945, using the gratuity word that has a known, categorical and conclusive in law and jurisprudence significance. The
government has issued together that gratuity is not to wages, salary, or any other emolument. Means gift, prize, present,
something given and received by lucrative title. In this case more accentuated the difference between the two concepts,
considering that Congress, in its Joint Resolution No. 5 adopted on July 28, 1945, recommended the study of "ways and
means to pay the back salaries, gratuities, bonuses or other emoluments of the loyal and deserving employees of the
Commonwealth.... " The fact, therefore, that the President chose the term gratuity, leaving aside other words, indicates
that this is a calculated concession; clearly shows the intention to strictly limit the scope of the privilege to the letter of
the law.

DECISION

BRIONES, M. :

Versa this file on the application submitted originariarnente before this Court by Balbina Mendoza, recurrent, in which the
requests that, under the jurisdiction and powers conferred on us by rule 45 of the Rules of the ibunales Tl, let's review the
opinion issued by the Paciano office resorted Dizon, in his concept of Auditor General in the matter of gratification or
gratuity of the late John M. Cuevas, legitimate son of recurrent. Facts and key points of the case are as follows: virtual
library chanrob1es 1aw
Fulfilling its office of Auditor of the province of Ilocos Sur, Juan M. Cuevas died in Vigan, capital of the province, on
November 3, 1945. At the outbreak of War on December 8, 1941, was on active duty as such Auditor. In 1932 he married
Cuevas Cocadiz Florence. This marriage definitely stay dissolved March 21, 1944 under a firm divorce decree issued by the
Court of First Instance of gatangas on that date. There was no offspring. It is undisputed that Balbina Mendoza, the
appellant, is the next most relative of the deceased and, therefore, entitled to inherit, with exclusion of brothers and
nephews that he himself left. On 7 December 1945 the President of the Commonwealth of Philippines issued your
Administrative Order No.27 in which under certain conditions the payment of gratuities to officers and employees of the
national government that had been in active service on December 8, 1941 were available, whether or not called to take
back to their positions after release. This Administrative Order by the President "was issued under the authority conferred
by my existing law (it alludes to the emergency powers) and to carry out the recommendations of the Joint Committee
established under Resolution No. 5 of Congress Philippines adopted on July 28, 1945. " cralaw virtua1aw library Before
December 7, ie the 4th of that month, since the appellant had sent a request to the Auditor General, accompanied by the
relevant documents that supported it, exposing the ciicunstancia its relationship with the late John M. Cuevas and ulla
relationship relict this property, including certain amounts of money with the Government, the Philippine National Bank
and Postal Savings Bank, and consequently asking "that the designate as the missus more next to enable it to receive
without delay any amount that was due to her dead son.... " cralaw virtua1aw library Cocadiz Florence, the divorced wife
has no company officially peared before the Auditor General, nor has presented any instance. The Xpediente shows that
initially the Auditor General Delegate raised the matter in consultation with the Department of Justice seeking to obtain an
opinion, among other things, whether "the divorced wife mentioned here has any right to gratification or gratuity to which
the deceased husband or intestate is acreedo And Administrative Order No. 27 dated December 7, 1945, whereas this
sratlvity is equivalent to its suel two corresponding to ios months of January and February, 1942. "The Department of
Justice refused to issue the requested review, among other reasons because the request concerns a hypothetical case,
considering that there was no conflict of claims, as the wife divociada was not complaining, not HAVlNG instance more
than that presented by Balbina Mendoza, Mother survivor. Later - March 12, 1946 - the Auditor General Delegate,
evidently making use of the power under Article 262 of the Administrative Code, resolved on your Balbina instance
Mendoza, dictating the following error: jgc: chanrobles.com.ph"Memorandum for Auditor Pedro Rivera "Central office "As
the gratuity of the late John M. Cuevas under Administrative Order No. 27, dated December July 1945, Corresponds to His
salary for the months of January and February, 1942 , During Which His marriage in 1932 Cocadiz With Florence was not
yet Dissolved, the decree of Their divorce Having Been issued by the Court of First Instance of Batangas only on March 21,
1944, the gratuity Said Should be Deemed to be a part of Their conjugal estate. Only one half thereof may, THEREFORE
be paid to surviving His mother, the claimant HEREIN, lowest Hereby is designated as His next of kin, the other half Being
payable to His divorced wife as her share.
(Sgd.) "JUAN CONCON "Deputy Auditor General"
In this ruling the petitioner has timely filed his appeal, which we now proceed to decide. The Attorney General, in his brief
filed in the name and behalf of the Government, raises the contention between the parties in the following summary,
made with appropriate brevity and fairness : jgc: chanrobles.com.ph "The question raised by the appellant is whether the
gratification (gratuity) payable to the deceased Juan Cuevas under Administrative Order No. 27 dated December 7, 1945,
belongs to the vacant inheritance, or if such gratuity should be considered perticiente to marital property of the deceased
and his wife divorced Government, itself, has no interest in the matter;. supports the obligation to pay the gratuity and is
willing to do to whom it is declared eligible . to it "The appellant argues that Addministrativa Order No. 27, to arrange
payment dde gratuities, use this vovablo and not another; that gratuity is sinomina or equivalent freely given gift or
present; that the consideration paid in such Administrative Ordden only have become due and payable desdde its
promulgation; and therefore, the right of deceased Cuevas reciber such gratuities to stay effective long after the derecto
have remained firm for which he is divorcing his wife. After mature deliberation, this representation feels compelled, for
the reasons given by the appellant and other later will be present, to give their adhesion to the view that the gratuities in
question must belong to the vacant inheritance of the deceased Cuevas. "(Case Attorney General, pages 2 and 3.) We
judged successful and arranged to right concluciones appraisals and Attorney General. The bonuses or gratuities dde
question must be governed by the law which provides, that is, by Order Administrative No. 27 having character and force
of law under emergency powers granted by the Legislature President Philippines to root dae dae war, sane with the
Constitution. The article 1090 of the Civil Code precentua that "the obligations the law does not presume. Are enforceable
only those expressly set forth in this Code or in special laws, and shall be governed by the precept of the law which has
established; . . . . " cralaw virtua1aw library Now that Order Management uses the word gratuity having a known,
categorical and conclusive in law and jurisprudence significance. The government has issued together that gratuity is not
to wages, salary, or any other emolument. It means gift, prize, present, something given and received by lucrative title. In
this case more accentuated the difference between the two concepts, considering that Congress, in its Joint Resolution No.
5 adopted on 28 July 1945, recommended studying "ways and means to pay the back salaries, gratuities, bonuses or
other emoluments of the loyal and deserving employees of the Commonwealth. . . . "The fact therefore that the escogiel-a
President's term gratuity, leaving aside other revocable, indicates that this is a calculated concession, clearly shows the

intention to strictly limit the scope of the privilege to the letter . of the law When there is no ambiguity in the phraseology
of the law, the function is necessarily literalist, ministerial -.... does not have to do subtleties and deductions, playing with
concepts like the juggler with his cups Lo expressed by the Auditor in its opinion that the gratuity in question corresponds
to the salaries of Cuevas for the months of January and February 1942 and that, therefore, the divorced wife is entitled to
half because at that time the spouses no were even legally divorced, has absolutely no foundation, for there is nothing in
Administrative Order No. 27 which says that gratuities it granted correspond specifically to the months referred The terms
of the arrangement are as follows:. "The gratuities HEREIN Authorized Shall be equivalent to two months' basic salary at
the rates whos Received on December 8, 1941. "It is clear that the phrase" two months "is here placed only for purposes
of computation or determination of the amount of the gratuity, and the same may correspond to any two months of 1942,
1943 in June 1944, and two other any month of the year 1945, after already liberation. It seems superfluous to say that
the decision in this case has nothing to do with the question of whether officials and Commonwealth Government
employees in active service at the outbreak of war had passed or not entitled to back pay (back wages), have not served
during the enemy occupation, or the other question of whether the Gobrierno of the Republic is or is not required to pay
them such salaries. None of these issues is before us. For determination and resuluci. In merits of the foregoing, the
appeal dectamen object is modified and declares that the appellant is entitled to the full amount of the gratuity belonging
to the late John M. Cuevas , subject of course to any valid claim against the estate of said deceased relict low as legal
provisions for goods dead. No costs. Asi. Is ordered Moran, Pres., Fair, Paul, Perfect, Bengzon, Padilla and Tuason, JJ.,
concur.

Mitchell Coal & Coke Co. v. Pennsylvania R. Co., 230 U.S. 247 (1913)

Mitchell Coal & Coke Company v.

Pennsylvania Railroad Company

No. 674

Submitted December 4, 1912

Decided June 9, 1913

230 U.S. 247

ERROR TO THE DISTRICT COURT OF THE UNITED STATES

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

Syllabus

Pennsylvania Railroad Co. v. International Coal Co., ante, p. 230 U. S. 184, followed to effect that the courts have
jurisdiction of a case brought by a shipper against a carrier for the amount of damages actually sustained by him for
charging him the full tariff when it was carrying the same goods the same distance for other shippers at lower rates, but
that such damages must be sustained by proof as to the amount thereof.

The courts have not jurisdiction of a suit brought by a shipper against a carrier for damages by reason of paying other
shippers of similar

Page 230 U. S. 248

goods an unreasonable amount for services in connection with such transportation, unless and until there has been a
finding by the Interstate Commerce Commission that the payments so made to the other shippers were unreasonably
large.

A carrier has the right under the Act to Regulate Commerce to pay shippers a reasonable allowance for services in
connection with transportation of goods shipped by them, and the allowance paid must be treated by the courts as prima
facie reasonable until the Interstate Commerce Commission has determined otherwise.

When the case is here on a question of jurisdiction only, this Court cannot pass upon questions which go to the merits.

There is a necessity, which is recognized by the Act to Regulate Commerce, of having questions as to reasonableness of
rates and allowances settled by a single tribunal in order to avoid the conflicting decisions which would result if several
different tribunals could pass upon the same question, and the act itself has designated the Interstate Commerce
Commission as that tribunal.

Allowances for lateral hauling may be lawfully paid, as they become unlawful only when unreasonable; whether
unreasonable either past or future is a rate-making question over which the courts have no jurisdiction, even if the parties
attempt to give it by consent.

This action, having been commenced without any application's having been made to the Interstate Commerce Commission
to declare unreasonable the allowances paid by the carrier for lateral hauling, the case must be remanded for dismissal,
but the dismissal is stayed to give plaintiff an opportunity to make such application with the right to the carrier to be
heard on the defense of limitations, as well as other defenses.

192 F. 475 affirmed in part and reversed in part.

The tacts are stated in the opinion.

MR. JUSTICE LAMAR delivered the opinion of the Court.

On November 20, 1905, the Mitchell Coal & Coke Company brought suit in the Circuit Court of the United States for the
Eastern District of Pennsylvania against

Page 230 U. S. 249

the Pennsylvania Railroad for damages alleged to have been occasioned by the payment of rebates to the Altoona, Glen
White, Millwood, Latrobe, and Bolivar Companies. The complaint alleged that, between April 1, 1897, and May 1, 1901,
the plaintiff, in competition with these companies, made shipments of coal and coke over the Pennsylvania road from the
Clearfield District to the same general markets in other states, and that, during all that time, the carrier paid rebates to
these companies, pretending that the money given them was an allowance for transportation services rendered by them in
hauling cars over spur tracks between their mines and the railroad station.

The parties stipulated that the case should be submitted to a referee, who should have the powers of a special master. His
findings were in favor of the plaintiff. His report, modified as to the measure of damages, was confirmed (181 F. 403), but
before judgment was entered thereon, the carrier moved to dismiss the case because the court, as a federal court, had no
jurisdiction of the cause of action until after the Interstate Commerce Commission had passed upon the legality of the
allowances and the reasonableness of the amount paid to shippers for hauling cars between their mines and the station.
The motion was granted (183 F. 908), and the case was taken by writ of error to the circuit court of appeals, which
dismissed the case (192 F. 475) upon the ground that the question could only be reviewed by the Supreme Court of the
United States. A writ of certiorari was denied (223 U.S. 733), and the plaintiff thereupon brought the case here by direct
writ of error, the judge certifying the following as the jurisdictional question:

"Has the circuit court of the United States, in advance of any application to the Interstate Commerce Commission and
action thereon by that body, jurisdiction to entertain an action of trespass brought by a shipper of coal

Page 230 U. S. 250

and coke, to recover damages because of the alleged unlawful preferential rates accorded to other and competing shippers
of coal and coke when such alleged preferential rates are claimed to have resulted from payments made to such other
shippers, which payments, the plaintiff claimed, were rebates from the published and filed freight rate, and the defendant
claimed were made as compensation for services rendered by such shippers or for other accounts which justified it in
making the same, and when it further appeared that such payments had been made pursuant to a practice of
longstanding, and that a number of shippers other than the plaintiff were interested in the question of the lawfulness
thereof."

1. The plaintiff's cause of action for damages occasioned by the payment of illegal or unreasonable allowances was one
which, under 8 and 9 of the Commerce Act (24 Stat. 382), could only be brought in a district or circuit court of the

United States. The motion to dismiss challenged the jurisdiction of the court, as a federal court, and its power "primarily to
hear complaints concerning wrongs of the character of the one here complained of." Texas &c. Ry. Co. v. Abilene Co.,204
U. S. 442; B. & O. R. Co. v. Pitcairn Coal Co.,215 U. S. 495; Robinson v. B. & O.,222 U. S. 506. The order of dismissal was
founded on the denial of jurisdiction, and this Court has power to review that ruling. Ira M. Hedges,218 U. S. 270; The
Steamship Jefferson,215 U. S. 130. The case differs from Darnell v. Illinois R. Co.,225 U. S. 243. There, the Commission
had found that the rate was unreasonable. The demurrer, based on the failure to allege that a reparation order had been
made in favor of the plaintiff, did not attack the jurisdiction of the court, as a federal court, since the cause of action
sought to be enforced was one which, if properly brought, could, under the Act of 1910 (36 Stat. 539, 554, c. 309), have
been maintained either in a state or federal court.

Page 230 U. S. 251

2. In the present case, the motion to dismiss for want of jurisdiction was made at the end of the trial, and was based not
upon the pleadings, but upon the evidence. It becomes necessary, therefore, to make a statement of the facts material to
that issue. The plaintiff, the Mitchell Coal & Mine Coke Company, owned six coal mines in the Clearfield District, and
between 1897 and May 1, 1901, shipped its products over the Pennsylvania Railroad in state and interstate commerce.
During that time, the provisions of the Commerce Act were constantly violated, and there were many instances in which
the carrier gave secret rates to shippers from whom it collected the full tariff and subsequently refunded the difference
between the legal and the illegal rate. Many such rebates were paid to the plaintiff, the Mitchell Company, which in this
case claimed the right to recover, as damages, the difference between these rebates paid to it and what it claimed were
the additional rebates paid to the Altoona and other companies mentioned in the declaration. The referee found that, for a
part of the time, 70 percent of plaintiff's shipments had been made at secret rates, and held, citing Pa. R. Co. v.
International Co., 173 F. 1, 9, that, as to this tonnage, the plaintiff was as much a violator of the statute as was the
carrier, and that no cause of action arising out of this illegal contract would be enforced by the courts. He therefore limited
the inquiry to a consideration of the damages in respect to that part of the plaintiff's shipments on which no rebates had
been paid.

From the referee's report, and the testimony returned therewith, it appears that Clearfield District is the name given to a
large coal field reached by the lines of the Pennsylvania Railroad. In this district, there were many mines, some near the
railroad and others at considerable distances therefrom, but all reached by lateral lines or spur tracks, over which cars
were carried to and from the

Page 230 U. S. 252

mines. This Clearfield District was treated as a single shipping station, and the rates from all points therein were the same
where the coal was transported to the same point beyond the state. The published tariff named the rate from station to
destination, but it was uniformly construed to include the haul from the mine. The published rate was so applied on all
shipments made by the plaintiff, as well as on those made by the Altoona and other companies named in the complaint.

It further appeared that to these companies the carrier paid what is called a trackage or lateral allowance, claiming that it
was compensation allowed them for hauling cars from their mines to the station. The defendant's contention that there
was no concealment of these payments is controverted by the plaintiff, which insists that it had no knowledge of such
payments until 1898, when its officers were informed that the railway was paying some companies 10 cents a ton for such
services. The Mitchell Company, the plaintiff, thereupon bought an engine to be used for that purpose at its Gallitzing
mine, and with this engine hauled cars, loaded and empty, between that mine and the station. For this work it demanded
that the defendant should pay the same lateral allowance of 10 cents a ton that the railroad paid other companies for
similar services. The carrier contended that it was itself prepared to do the switching at the Gallitzing mine, though, on
account of dissimilarity of conditions, it could not economically do so at the Altoona and other mines referred to in the
complaint. It therefore declined to pay a lateral allowance to the plaintiff, but offered to continue to treat this haul as
included in the rate, and to do that work without extra charge to the Mitchell Company. The plaintiff then offered to do the
hauling for less than 10 cents, the exact amount not appearing. The proposition having been declined in 1899, the
plaintiff, on November 20, 1905, brought this suit, offering evidence to show that in some

Page 230 U. S. 253

cases the allowance was as high as 18 cents a ton instead of 10 cents, as it had previously understood.

In addition to the Gallitzing mine, the plaintiff owned five others in the Clearfield District. They were located at points from
1, 100 to 3,000 feet from the railroad, and were reached by spur tracks belonging to the plaintiff, over which cars were
hauled by the locomotives belonging to the Pennsylvania Railroad. For this service, the carrier made no extra charge,
treating it as included in the rate, though the tariff published the rate as from station to destination.

The mines of the Altoona, Glen White, and Millwood Companies were located in the Clearfield District, while those of the
Latrobe and Bolivar Companies were near by in the Latrobe District.

The Millwood was reached by a narrow gauge track, over which cars were hauled by that coal company's narrow gauge
engines. For doing that work, it was paid a lateral allowance of 15 cents a ton until April, 1899, and after that date 10
cents a ton.

The Glen White mine was about three miles from the main road, and was reached by a spur having light rails, steep
grades, and sharp curves, over which the evidence tended to show that the engines of the railroad could not be safely or
economically operated. This company transported the coal cars with its own engine, and for doing that work the defendant
paid it a lateral allowance of 15 cents a ton. On December 28, 1901 (subsequent to the transactions involved in this
litigation), the carrier gave notice that it would discontinue lateral allowances on coke, but would allow 15 cents per ton on
coal.

The Altoona mine was reached by a spur track over which, with its own engines, the Altoona Company hauled cars and
was paid a lateral allowance of 13 cents on coal and 10 cents on coke to points on the Hollidaysburg branch, and 18 cents
on coal and 20 cents on coke to

Page 230 U. S. 254

points east of Altoona. On December 28, 1901, this lateral allowance on coal was discontinued, and that, on coke reduced
to 12 cents a ton. On January 1, 1902, all lateral allowances were discontinued.

Inasmuch as the payments to the Altoona were larger than those to any other coal company, the plaintiff claimed that
they were the legal measure by which damages were to be assessed. The evidence was therefore specially directed to the
situation at this mine, which was a little over three miles in an air line from the railroad, and 800 feet above the station
level. The grade was not only very steep, but it was necessary to make use of three switchbacks in order to reach the
elevation of the mine. The line was thus lengthened so as to be about 5 miles in length. The curves on this track were
very sharp; the rails were light, and only specially constructed engines could be used. There was evidence that, before the
Pennsylvania's locomotives could have been operated over this spur, it would have been necessary to put in heavy rails,
strengthen the culverts, and realign the track. Owing to the steep grade, only four cars could be hauled at a time, and it
required from three to six times as long to do the same amount of transportation work as at the Gallitzing mine.

3. The plaintiff insists that these facts demonstrate that the payments to the Altoona and other companies were not
measured by the value of the track or locomotive, or by the cost of the service rendered, but were unreasonable in
amount, were arbitrarily fixed, lowered, or withdrawn, and constituted a mere cover for rebating. On the other hand, the
defendant insisted that, though bound to haul the cars to and from the mines, it could not economically do the work on
account of the physical conditions at the Altoona, Millwood, and Glen White mines, and that it therefore employed those
companies to perform that transportation service, paying them therefor an allowance

Page 230 U. S. 255

which is prima facie reasonable, and must be so treated by the courts until the Commission has determined that it was
excessive or constituted an unjust discrimination.

On this hearing, involving a matter of jurisdiction, we cannot pass upon these questions which go to the merits of the
controversy. But these claims of the parties emphasize the fact that there are two classes of acts which may form the
basis of a suit for damages. In one, the legal quality of the practice complained of may not be definitely fixed by the
statute, so that an allowance, otherwise permissible, is lawful or unlawful, according as it is reasonable or unreasonable.
But to determine that question involves a consideration and comparison of many and various facts, and calls for the
exercise of the discretion of the rate-regulating tribunal. The courts have not been given jurisdiction to fix rates or
practices in direct proceedings, nor can they do so collaterally during the progress of a lawsuit when the action is based on
the claim that unreasonable allowances have been paid. If the decision of such questions was committed to different

courts, with different juries, the results would not only vary in degree, but might often be opposite in character -- to the
destruction of the uniformity in rate and practice which was the cardinal object of the statute.

4. The necessity under the statute of having such questions settled by a single tribunal in order to secure singleness of
practice and uniformity of rate has been pointed out and settled in the Abilene, Pitcairn, and Robinson cases, and is
referred to here because this record and that in Pennsylvania R. Co. v. International Co., ante, p. 230 U. S. 184, furnish a
striking illustration of the results which would follow if the reasonableness of an allowance could be decided by different
tribunals. Both cases involve the payment of 18 cents a ton to the Altoona Company during the same period and for
identically the same reasons. In both, the plaintiff insisted that the payment

Page 230 U. S. 256

was a rebate, and the carrier that it was compensation for services rendered. In the International case, the judge treated
the Altoona allowance as lawful and reasonable. In this case, the referee found that it was a rebate, while the trial judge,
in passing on exceptions to the report, held that it was a question of fact about which the evidence was conflicting, and
thereupon approved the referee's report. Treating it as a question of fact, there may have been sufficient testimony to
sustain the finding in both instances, although the conclusion was diametrically opposite. And, applying the rule that
appellate courts will not disturb findings of fact where the evidence is conflicting, contradictory judgments might have
been affirmed, and one plaintiff could have been awarded damages on the theory that the Altoona allowance was unlawful
and the other been mulcted in cost because the Altoona allowance was legal. This and like considerations compelled the
holding that, as the courts have no primary jurisdiction to fix rates, neither can they do so at the suit of a single plaintiff
who claims to have been damaged because an allowance paid its competitors was unreasonable in amount.

It is argued that this conclusion ignores 9 and 22, which give the shipper the option of suing in the courts or applying
to the Commission. The same argument was made and answer in the Abilene case by showing that to permit suits based
on the charge that a particular practice was unreasonable, without previous action by the Commission, would repeal the
many provisions of the statute requiring uniformity and equality. For, manifestly, such uniformity and equality cannot be
secured by separate suits before separate tribunals involving the reasonableness of a rate or practice. The evidence might
vary, and, of course, the verdicts would vary, with the result that one shipper would succeed before one jury and another
fail before a different jury, where the reasonableness

Page 230 U. S. 257

of the same practice was involved. Manifestly, different verdicts would occasion inequality between the two shippers, and
it is equally manifest that, if the Commission had made one order of which both could avail themselves, there would have
been one finding, of which one, two, or a score of shippers could equally avail themselves. The claim that this conclusion
nullifies 9 is concretely answered by the fact that the Court has just decided to the contrary in Pennsylvania R. Co. v.
International Coal Company. There, the carrier insisted that a suit for damages occasioned by rebating could not be

maintained without preliminary action by the Commission. This contention was overruled, and it was held that, for doing
an act prohibited by the statute, the injured party might sue the carrier without previous action by the Commission,
because the courts could apply the law prohibiting a departure from the tariff to the facts of the case. But where the suit is
based upon unreasonable charges or unreasonable practices, there is no law fixing what is unreasonable and therefore
prohibited. In such cases, the whole scope of the statute shows that it was intended that the Commission, and not the
courts, should pass upon that administrative question. When such order is made, it is as though the law for that particular
practice had been fixed, and the courts could then apply that order not to one case, but to every case, thereby giving
every shipper equal rights and preserving uniformity of practice. Section 9 gives the plaintiff the option of going before the
Commission or the courts for damages occasioned by a violation of the statute. But since the Commission is charged with
the duty of determining whether the practice was so unreasonable as to be a violation of the law, the plaintiff must, as a
condition to his right to succeed, produce an order from the Commission that the practice or the rate was thus
unreasonable, and therefore illegal and prohibited.

Page 230 U. S. 258

5. It is argued that, under the Abilene, Robinson, and Pitcairn cases, this may be true as to existing rates in which the
public have an interest, but it is urged that a claim based upon the unreasonableness of past rates and discontinued
practices raises a judicial question, of which the courts, and not the Commission, have jurisdiction.

There are several answers to this proposition. In the first place, the plaintiff cannot claim under the act against it. To say
the least, it is extremely doubtful whether, at common law, one shipper had a cause of action because the carrier paid
another shipper more than the market value of transportation services rendered to the carrier. I.C.C. v. B. & O. R. Co.,145
U. S. 275. But if any such right existed, it was abrogated or forbidden by the Commerce Act, and one was given which, as
a condition of the right to recover, required a finding by the Commission that the allowance was unreasonable and
operated as unjust discrimination, or as an undue preference. Texas &c. Ry. v. Cisco Oil Mill,204 U. S. 449; Texas &c. Ry.
v. Abilene Co.,204 U. S. 444; Southern Ry. v. Tift,206 U. S. 437; United States v. Pacific & Arctic R. Co.,228 U. S. 87.
Such orders, so far as they are administrative, are conclusive, whether they relate to past or present rates, and can be
given general and uniform operation, since all shippers who have been or may be affected by the rate can take advantage
of the ruling and avail themselves of the reparation order. They are quasi-judicial, and only prima facie correct insofar as
they determine the fact and amount of damage -- as to which, since it involves the payment of money and taking of
property, the carrier is, by 16 of the act, given its day in court and the right to a judicial hearing (March 2, 1889, 25
Stat. 855, 859, c. 382).

In considering the administrative questions as to reasonableness, the elements of the problem are the

Page 230 U. S. 259

same, whether they involve the validity of obsolete allowances, discarded tariffs, or current rates and practices. In both
classes of cases, there is a call for the exercise of the rate-regulating discretion, and the same necessity for having the
matter settled by a single tribunal. For if, at the suit of one shipper, a court could hold a past rate or allowance to have
been unreasonable and award damages accordingly, it is manifest that such shipper would secure a belated but undue
preference over others who had not sued and could not avail themselves of the verdict. But, more than this, to permit
separate suits and separate findings would not only destroy the equality which the statute intended should be permanent,
even after the rates had been changed, but it would bring about direct conflict in the administration of the law. Under the
statute, the carrier has the primary right to fix rates, and, so long as they are acquiesced in by the Commission, the
carrier and shippers are alike bound to treat them as lawful. After the rate had been abandoned, the carrier is still obliged
to treat it as having been lawful, and cannot refund what had been collected under it until the Commission determines
that what was apparently reasonable had in fact been unreasonable. But such a determination cannot be made by the
courts, for they would not only have first to exercise an administrative function and make a rate by which to measure the
reasonableness of the charge collected, but they would have to go further and treat as unreasonable a rate, past or
present, which the statute had declared should be deemed lawful until it had been held to be otherwise by the
Commission.

As to past and present practices or allowances, the Commission has the same power, and there is the same necessity to
take preliminary action. This was recognized in Texas &c. Ry. v. Abilene Cotton Co.,204 U. S. 426, where, after
considering 8 and 22, relating to jurisdiction and the statutory and common law remedy, it was said that,

Page 230 U. S. 260

although a railroad might alter its rates voluntarily or in obedience to an order of the Commission, yet it can

"not be doubted that the power of the Commission would nevertheless extend to hearing legal complaints of and awarding
reparation to individuals for wrongs unlawfully suffered from the application of the unreasonable schedule during the
period when such schedule was in force."

A contrary ruling would upset a useful, time-saving, economical, and established practice. For, in accordance with this
construction of the act, the Commission, after the abandonment of a rate, has repeatedly received and heard complaints,
and, upon finding that it had been unreasonable, has granted reparation accordingly. See Arkansas Fuel Co. v. C., M. &
St.P. Ry. Co., 16 I.C.C. 98; Allen & Co. v. C., M. & St.P. Ry. Co., 16 I.C.C. 295.

The plaintiff insists, however, that all these reasons are answered by the decision in Wight v. United States,167 U. S. 512,
where the Court, without preliminary action by the Commission, held that an allowance paid a consignee for hauling his
freight in wagons from depot to warehouse was a rebate, and thereupon inflicted the statutory punishment.

But that case did not involve any question of reasonableness of rate or allowance. Nor was the Court there called on to
indirectly exercise rate-regulating power, but only to pass upon the question of fact as to whether, as charged in the

indictment, the defendant had paid a secret rebate to a favored consignee. It appeared that the carrier's published rate of
15 cents included the haul from Cincinnati to the yard in Pittsburg. Neither by its terms nor by general practice did the
rate include delivery at warehouses in the city and distant from the railroad tracks. Not having undertaken to furnish free
cartage, it was unlawful for the carrier to perform that service for one patron and not for all others. Paying the

Page 230 U. S. 261

favored consignee for rendering a service the carrier was not bound to furnish was a gift -- a rebate -- a thing ipso
facto illegal and prohibited by the statute, and for which the guilty carrier was subject to criminal indictment and for which
damages could have been awarded on the civil side of the court. It was therefore not necessary to have a preliminary
ruling by the Commission, because the statute itself prohibited the payment of rebates, and the courts could apply the law
accordingly.

6. The plaintiff thereupon insists that, even on this view of the case, the judgment should be reversed, claiming that the
payments here were of that prohibited character, so that, even if the allowance was reasonable in amount, its payment
was nevertheless unlawful because (a) given for a service not included in the rate, and (b) not mentioned in the tariff.

Under the Elkins Act of 1903, 32 Stat. 847, c. 708 (United States v. Chicago & A. Ry. 148 F. 646, s.c. 156 F. 558, affirmed
by a divided Court in 212 U. S. 563), and under the Hepburn Act of June 29, 1906, 34 Stat. 584, c. 3591 (Victor Fuel Co.
v. Atchison, Ry., 14 I.C.C. 120), it has been held that the carrier must give notice in the tariff of free cartage, lighterage,
ferriage, or any other accessorial service that will be furnished, as well as of any allowance that will be made to shippers
who furnish transportation facilities or service. But the present case is not to be governed by those statutes, but by the
law of force between 1897 and 1901, when the transactions complained of took place. At that time, the Commerce
Act * required the carrier to give notice of

Page 230 U. S. 262

every charge it would make against the shipper. But the statute was not construed to compel the railroad to publish what
free cartage or accessorial service it would furnish (Detroit v. United States,167 U. S. 646), nor what sums it would pay
shippers for transportation service rendered by them to the carrier. Failure to publish these items could, however, easily
lead to unjust discrimination, and the Court, in the case last cited, held that the Commission might, by a general order,
require such matters to be published in the rate sheet. We are not cited to any such order for the period now under
investigation, and, so far as we can discover, by the general and public custom of all carriers, acquiesced in by the
Commission, the tariffs at that time uniformly omitted any statement of allowances that would be paid to the shipper for
the use of private cars, or private tracks, or for transportation service in switching, hauling, lightering, or other work,
included in the rate, but actually performed by the shipper.

But, although the statute then of force was not construed to require the publication of allowances, their payment

Page 230 U. S. 263

was lawful only when supported by a consideration. To pay shippers for doing their own work would have been a mere
gratuity, and if here the carrier was not bound to haul from the mine, it had no more right to pay these companies for
bringing their coal over the spur track to the junction than it would have had to pay a merchant for hauling his goods in a
wagon to the railroad depot. The plaintiff insists that such is the case here, and that, as the tariff named the rate from the
station, it could not lawfully include the haul from the mine, and consequently paying the shippers for doing their own
hauling was a mere rebate.

Such undoubtedly it would have been if naming the rate from station to destination meant that the haul had to begin at
the depot building. But neither the statute nor the tariff defines what are station limits, nor do they fix the exact point
from which the transportation must begin, nor the territory within which the delivery must be made. These limits
necessarily vary with the size of the communities, the extent of the yards, the practice of the carrier, and the bounds
within which it uniformly receives and delivers freight. This is particularly true in a case like the present, where the
Clearfield District was treated as a single shipping point, and where the rate, though named and published as from the
station, was universally applied from the mines of the Mitchell Company as well as the other companies named in the
declaration and all others located in the Clearfield District.

Inasmuch as this rate included the haul, the railroad was bound to transport the coal from the mouth of the mines, and
could use its own engines for that purpose, or it could employ the coal companies to render that service, paying them
proper compensation therefor. In case any question arose as to the reasonableness of the practice, the limits within which
the station rates should

Page 230 U. S. 264

apply, or the reasonableness of the allowance paid those shippers who supplied motive power, the Commission alone could
act. For the courts are no more authorized to determine the reasonableness of an allowance for a haul over a spur track,
between mine and station, than they are to pass upon the reasonableness of a rate for a haul, over a trunk line, between
station and station. What is or was a proper allowance is not a matter of law until after it has been fixed by the rateregulating body. The courts can then apply that law, and, measuring what has been charged by what the Commission
declares should have been charged, can award damages to the extent of the injuries occasioned by the payment of the
allowance found to have been unreasonable and unlawful.

That station rates may be applied from mill or mine reached by spur tracks is recognized by the ruling of the Commission
in the Tap Line Cases, 23 I.C.C. 277, where, in dealing with the practice of paying an allowance for hauling lumber from
sawmills, the Commission said:

"In all cases, it is apparently the practice of the trunk lines, where no allowance is made, to set the empty car at the mill,
and to receive the loaded car at the same point. Indeed, they do this in many cases even when an allowance is made to

the tap line. But whenever this service is performed by the trunk line, it is included in the lumber rate, and is done without
additional charge. In some instances, the switch or spur track connecting the mill with the trunk line is as much as three
miles long. In other words, by their common practice, the public carriers interpret the lumber rate as applying from mills
in this territory apparently as far as three miles from their own lines. So far as the manufactured lumber is concerned, it
may therefore be said that, where a mill has a physical connection with a trunk line, and is not more than three miles
distant, the transportation offered by the trunk line

Page 230 U. S. 265

commences at the mill. If, therefore, a lumber company, having a mill within that distance of a trunk line, undertakes, by
arrangement with the trunk line, to use its own power to set the empty car at the mill, and to deliver it when loaded to the
trunk line, it is doing for itself what the trunk line, under its tariffs, offers to do under the rate. In such a case, the lumber
company may therefore fairly be said to furnish a facility of transportation for which it may reasonably be compensated
under 15, whether its tap line is incorporated or unincorporated. In other words, the lumber company thus does for itself
what the trunk line does with its own power at other mills without additional charge, and what it must therefore do for the
particular lumber company without additional charge. Under such circumstances, we think the lumber company, under
15, may have reasonable compensation when it relieves the trunk line of the duty. But an allowance under such
circumstances is lawful only when the trunk line prefers, for reasons of its own and without discrimination, to have the
lumber company perform the service. It is not lawful when the lumber company refuses to permit the trunk line to do the
work."

Ibid.

In view of this ruling, it is apparent that lateral allowances might have been lawfully paid. They became unlawful only
when unreasonable. Whether they were so or not was a ratemaking question as to which parties were directly at issue,
and which the courts had no jurisdiction to determine so far as it concerned the allowance to the Altoona, Millwood, and
Glen White mines. Having no jurisdiction, the parties could not by consent give it to the court, to the judge, nor to the
referee. And if, as claimed, the stipulation to submit the case to the referee estops the defendant from insisting on the
plea of the statute of limitations, that, with all other relevant issues, can then be determined, if the Commission decides
that

Page 230 U. S. 266

the allowance was unlawful, and the carrier has no other defense.

7. But the situation of the Bolivar and Latrobe Companies was very different from that at the Altoona, Glen White, and
Millwood mines, and a different conclusion must therefore follow. The Latrobe and Boliver Companies' mines were located
in the Latrobe District, where the rates to eastern points were about 20 cents higher than from the Clearfield District,
except that for a part of the time they were the same, though the shipments were then small by comparison with those

from the Clearfield District. During that period, the plaintiff shipped in competition with the Latrobe and Bolivar
Companies. These companies owned no engines, and they hauled no cars between mine and station. That work was
included in the rate, and the Pennsylvania did the hauling with its own locomotives and crews. It therefore owed nothing
to the Latrobe and Bolivar Companies for the service which the carrier itself performed, and the so-called allowance,
regardless of the amount, was a mere gift -- a rebate, absolutely forbidden by the statute and ipso facto illegal. Being an
act prohibited by law, it was not necessary to have any preliminary decision to that effect by the Commission, but the
courts could, as in any other case, apply the law to the facts proven and award damages to the person injured. The
decision just rendered inInternational Coal Co. v. Pennsylvania Railroad makes it unnecessary further to discuss this
branch of the case. For the Court undoubtedly had jurisdiction to proceed with this branch of the case.

The judgment therefore must be reversed insofar as the action is based upon payments to the Latrobe and Bolivar
Companies, and affirmed insofar as based upon payments to the Altoona, Glen White, and Millwood Companies. But,
owing to the peculiar facts of this case, the unsettled state of the law at the time the

Page 230 U. S. 267

suit was begun, and the failure of the defendant to make the jurisdictional point in limine, so that the plaintiff could then
have presented its claim to the Commission and obtained an order as to the reasonableness of the practice or allowance -direction is given that the dismissal be stayed so as to give the plaintiff a reasonable opportunity within which to apply to
the Commission for a ruling as to the reasonableness of the practice and the allowance involved; and, if in favor of the
plaintiff, with the right to proceed with the trial of the cause in the district court, in which the defendant shall have the
right to be heard on its plea of the statute of limitations as of the time the suit was filed, and any other defense which it
may have.

Affirmed and modified in part and in part reversed.

"SEC. 6. . . . The schedules printed as aforesaid by any such common carrier shall plainly state the places upon its railroad
between which property and passengers will be carried, and shall contain the classification of freight in force, and shall
also state separately the terminal charges and any rules or regulations which in anywise change, affect, or determine any
part or the aggregate of such aforesaid rates and fares and charges. . . ."

"And when any such common carrier shall have established and published its rates, fares, and charges in compliance with
the provisions of this section, it shall be unlawful for such common carrier to charge, demand, collect, or receive from any
person or persons a greater or less compensation for the transportation of passengers or property, or for any services in
connection therewith, than is specified in such published schedule of rates, fares, and charges as may at the time be in
force."

"Every common carrier subject to the provisions of this act shall file with the Commission hereinafter provided for copies
of its schedules of rates, fares, and charges which have been established and published in compliance with the
requirements of this section, and shall promptly notify said Commission of all changes made in the same. Every such
common carrier shall also file with said Commission copies of all contracts, agreements, or arrangements with other
common carriers in relation to any traffic affected by the provisions of this act to which it may be a party."

Act of February 4, 1887, 24 Stat. 379, 380, 381.

MR. JUSTICE PITNEY, dissenting:

Since the result reached by the Court in these cases has the effect of virtually eliminating the option conferred by 9 of
the Interstate Commerce Act upon shippers aggrieved by unjust discriminations practiced by common carriers in violation
of 2 and 3 -- the option to "either make complaint to the Commission" or to "bring suit for the recovery of the
damages" -- and of conferring upon the carrier, in some cases at least, the choice of two lines of procedure by selecting
the character of the defense to be interposed, and since in this and in other respects aggrieved shippers are to be
deprived, in very large measure, of the right of redress by private action at law conferred by 8 and 9 for violations of
2 and 3, I deem it my duty to express, somewhat at length, the grounds of my dissent.

The case of the Mitchell Coal and Coke Company (No.

Page 230 U. S. 268

674) presents the question whether an action for a violation of 2 of the Act, based upon the ground of a discrimination
accomplished by means of secret rebates to competitors of the plaintiff, where the defense is that the rebates were paid
(under the name of "trackage or lateral allowances") as compensation for services rendered by the shipper in aid of the
carrier, can be maintained without a prior application to the Interstate Commerce Commission, and a determination by
that body as to whether the alleged "trackage or lateral allowances" were reasonable and proper. This case arose in the
years 1897 to 1901. The action was commenced in 1905.

The case of the Morrisdale Coal Company (No. 207) raises the question whether an action can be maintained for a
violation of 3 of the Act in respect of unfair discrimination in car distribution, without previous action by the Commission
upon the question of the reasonableness of the treatment accorded by the carrier to the complaining shipper, or the
propriety of the method of car distribution that was pursued. The cause of action accrued during the years 1902 to 1905,
inclusive. Suit was commenced in 1908.

These questions are answered in the negative, upon the authority of Texas & Pacific Ry. Co. v. Abilene Cotton Oil Co.,204
U. S. 426;Balt. & Ohio R. Co. v. Pitcairn Coal Co.,215 U. S. 495, and Robinson v. Balt. & Ohio R. Co.,222 U. S. 506. I do
not at all question the authority of these cases, or the propriety of the grounds upon which they were decided. But it
seems to me that the Pitcairn case, as well as the case of Interstate Commerce Commission v. Illinois Central R. Co.,215

U. S. 452, has no direct bearing upon the questions now presented, and that the authority of the Abilene Cotton Oil
Co. case and the case of Robinson v. Balt. & Ohio R. Co., and the reasoning of the Court therein, are directly opposed to
the result reached in the present cases.

Page 230 U. S. 269

The Abilene case held that a carrier who observed the established and published schedules of rates without preference or
discrimination could not be held liable to an action at law to recover for alleged excessive charges when the freights
charged were those prescribed by the schedule, and that, although 22 of the Act declared that

"nothing in this act contained shall in any way abridge or alter the remedies now existing at common law or by statute,
but the provisions of this act are in addition to such remedies,"

this saving clause must necessarily be limited so as to exclude an action based upon common law principles when such
action would run counter to the very means prescribed by 6 of the same Act for producing uniformity and preventing
discriminations.

And in the Robinson case, it was held, upon like reasoning, that a differential in rate between coal loaded into cars from
wagons and coal loaded from a tippel embodied in the filed and published schedules could not be deemed unjustly
discriminatory in an action at law, because the Act forbade any deviation from such published schedules while they
remained in effect.

In both those cases the carriers had strictly observed the filed and published tariffs, and were for this reason held exempt
from action upon what would have been their common law liability if an unqualified meaning had been attributed to the
language of 22.

The present case is the very opposite of these, and the like reasoning should, I think, lead to the opposite result. For, in
the Mitchell Company case, the carrier, instead of observing the published schedules, itself departed from them. And the
alleged "trackage and lateral allowances" had no sanction of filing or publishing, nor of any order made by the Interstate
Commerce Commission. And in theMorrisdale Company case, the car distribution scheme pursued by the defendant had
not been sanctioned by the Commission.

Page 230 U. S. 270

Moreover, both of the present cases relate to past transactions exclusively, and for this reason are not at all within the
doctrine of thePitcairn case, which related wholly to matters in futuro.

If the discriminations attributed to "trackage and lateral allowances" in the Mitchell case had received any previous
sanction such as by 6 of the Act is given to the filed and published schedules of rates, or if, in the Morrisdale case, the

method of car distribution had been established or approved by an order of the Commission, made in the exercise of its
administrative powers conferred by the Act, I should agree that the reasoning and authority of
the Abilene and Robinson and Illinois Central cases would control. If either of the cases at bar had to do with the control of
rates or of practices in the future, it would seem to me that the authority and reasoning of thePitcairn case would control.

But, to my mind, it seems a misapplication of the Abilene, Robinson, and Pitcairn cases, as well as a complete perversion
of the act of Congress, to say that, respecting transactions in the past, which are by lapse of time put beyond the
cognizance of an administrative body that normally deals only with matters in futuro and respecting which the Commission
has not acted, there shall be no right of action in the courts without previous application to such administrative body.

With great respect, it seems to me that the opinions in both the present cases err in confusing legislative and
administrative functions, on the one hand, with judicial functions, on the other. Thus, in the Mitchell case, after reciting the
insistence of the plaintiff that the alleged "trackage and lateral allowances" were arbitrarily fixed, and constituted a mere
cover for rebating, and the contention of the defendant, on the other hand, that the allowances were made bona fide for
services actually performed by the shipper in aid of the carrier, and that they were

Page 230 U. S. 271

prima facie reasonable, and must be so treated by the courts until the Commission had determined otherwise, the opinion
proceeds as follows:

"These claims of the parties emphasize the fact that there are two classes of acts which may form the basis of a suit for
damages. In one, the legal quality of the practice complained of may not be definitely fixed by the statute, so that an
allowance, otherwise permissible, is lawful or unlawful according as it is reasonable or unreasonable. But to determine that
question involves a consideration and comparison of many and various facts, and calls for the exercise of the discretion of
the rate-regulating tribunal. The courts have not been given jurisdiction to fix rates or practices in direct proceedings, nor
can they do so collaterally during the progress of a lawsuit when the action is based on the claim that unreasonable
allowances have been paid. If the decision of such questions were committed to different courts, with different juries, the
results would not only vary in degree, but might often be opposite in character, to the destruction of the uniformity in rate
and practice which was the cardinal object of the statute."

This is the theory upon which both opinions proceed, the language employed in the Mitchell Company case being:

"The courts have no primary jurisdiction to fix rates. . . . In considering the administrative question as to reasonableness,
the elements of the problem are the same, whether they involve the validity of obsolete allowances, discarded tariffs, or
current rates and practices. . . . As to past and present practices or allowances, the Commission has the same power, and
there is the same necessity to take preliminary action."

And in the opinion in the Morrisdale Company case (No. 207), referring to the different views that have been expressed
upon the question of car distribution, the opinion proceeds:

"These rulings as to the validity of a particular practice, and the facts that would warrant a departure

Page 230 U. S. 272

from a proper rule actually in force, are sufficient to show that the question as to the reasonableness of a rule of car
distribution is administrative in its character, and calls for the exercise of the powers and discretion conferred by Congress
upon the Commission,"

citing the Pitcairn case, 215 U. S. 481, and the Illinois Central case, 215 U. S. 452.

It is, of course, sufficiently obvious that, where a legislative or administrative body is called upon to inquire with respect to
the reasonableness of existing rates and practices and the propriety of sanctioning these or establishing others for the
future, it is called upon to make somewhat the same kind of investigation of facts, conditions, and circumstances that a
court and a jury or a referee must make when adjudicating upon the lawfulness and reasonableness of practices in the
past respecting which redress is sought by a suitor. Nevertheless, the function performed in the one case is legislative or
administrative, as the case may be, and in the other case judicial.

Courts and juries and referees time out of mind have been called upon to investigate the reasonableness of the past
practices of common carriers. They did it long before commissions and other administrative boards were devised, and
when legislation for the future rested wholly in Parliament and Congress and state legislatures.

It seems to me erroneous to conclude that, because the things that a court must do in order to pass judgment upon a
past transaction respecting the rates or practices of a carrier are like the things that a commission or a committee or other
administrative or legislative body must do in order to perform their proper functions respecting present management and
future regulation, therefore all investigations into the past practices or rates of a carrier are administrative or legislative.

Legislation consists in laying down laws or rules for

Page 230 U. S. 273

the future. Administration has to do with the carrying of those laws into effect -- their practical application to current
affairs by way of management and oversight, including investigation, regulation, and control, in accordance with, and in
execution of, the principles prescribed by the lawmaker. The judicial function is confined to injunctions, etc., preventing
wrongs for the future, and judgments giving redress for those of the past.

The Interstate Commerce Act, as I look upon it, clearly recognizes these distinctions.

In the Act as originally passed and under which these cases arose (February 4, 1887, 24 Stat. 379, c. 104), the duties of
the company and the prohibitions of discrimination in rates and otherwise are prescribed, and the Commission is
established for the purpose, I submit, primarily of seeing that those duties are observed in the future.See the proviso of
4, permitting the Commission to relieve the carrier from the operation of the long and short haul clause, and the
requirement in 6 that copies of the schedules of rates, fares, and charges established and published in compliance with
the same section shall be filed with the Commission, and notice given to it of all changes made in the same; that all traffic
agreements or arrangements with other common carriers shall be likewise filed; that joint tariffs on through rates shall be
filed, and these

"shall be made public by such common carriers when directed by said Commission insofar as may, in the judgment of the
Commission, be deemed practicable, and said Commission shall from time to time prescribe the measure of publicity
which shall be given to such rates,"

etc. And for a refusal by the carrier to file or publish schedules the carrier shall be subject to a writ of mandamus at the
relation of the Commissioners, and the Commissioners as complainant may apply for an injunction.

But then comes 8, declaring the common carrier to be liable to the person injured for the full amount of damages

Page 230 U. S. 274

sustained in consequence of any violation of the Act, with a counsel fee to be fixed by the court.

The next section has been so completely overlooked that it may be well to quote it:

"SEC. 9. That any person or persons claiming to be damaged by any common carrier subject to the provisions of this
act may either make complaint to the Commission, as hereinafter provided for, or may bring suit in his or their own behalf
for the recovery of the damages for which such common carrier may be liable under the provisions of this act, in any
district or circuit court of the United States of competent jurisdiction; but such person or persons shall not have the right
to pursue both of said remedies, and must in each case elect which one of the two methods of procedure herein provided
for, he or they will adopt. In any such action brought for the recovery of damages, the court before which the same shall
be pending may compel any director, [etc.] to attend, appear, . . . [give testimony, etc.] and may compel the production of
the books and papers of such corporation,"

etc. No similar compulsory powers are given to the Commission.

Sec. 11 authorizes the appointment of the Interstate Commerce Commission and prescribes the qualifications.

Sec. 12 prescribes the general duties of the Commission, and remains for the most part unaltered by subsequent
amendments. Unimportant amendments were made by the Act of March 2, 1889, 25 Stat. 855, c. 382, and a somewhat

more important one respecting the production of evidence, and the use of testimony taken under depositions elsewhere,
was made by the Act of February 10, 1891, 26 Stat. 743, c. 128. But an examination of 12 is convincing of the purpose
of Congress to establish the Commission as an administrative body, the language being that it

"shall have authority to inquire into the management of the business of all common carriers subject to the provisions of
this act, and shall keep itself informed as

Page 230 U. S. 275

to the manner and method in which the same is conducted, and shall have the right to obtain from such common carriers
full and complete information necessary to enable the Commission to perform the duties and carry out the objects for
which it was created;"

and (amendment of 1889), "the Commission is hereby authorized and required to execute and enforce the provisions of
this Act," etc. The remaining provisions of this section relate entirely to the machinery by which these duties are to be
performed.

Sec. 13 provides for complaints or charges to be made by any person, association, municipal organization, etc., respecting
anything done or omitted to be done, by a common carrier in contravention of the provisions of the Act; that a statement
of the charges

"shall be forwarded by the Commission to such common carrier, who shall be called upon to satisfy the complaint or to
answer the same in writing within a reasonable time, to be specified by the commission. If such common carrier, within
the time specified, shall make reparation for the injury alleged to have been done, said carrier shall be relieved of liability
to the complainant only for the particular violation of law thus complained of. If such carrier shall not satisfy the complaint
within the time specified, or there shall appear to be any reasonable ground for investigating said complaint, it shall be the
duty of the Commission to investigate the matters complained of in such manner and by such means as it shall deem
proper,"

etc.

By 14,

"whenever an investigation shall be made by said Commission, it shall be its duty to make a report in writing in respect
thereto, which shall include the findings of fact upon which the conclusions of the Commission are based, together with
its recommendation as to what reparation, if any, should be made by the common carrier to any party or parties who may
be found to have been injured, and such findings so made shall thereafter, in all

Page 230 U. S. 276

judicial proceedings, be deemed prima facie evidence as to each and every fact found."

By 15, it is made the duty of the Commission to deliver a copy of its report to the common carrier, with a notice
to cease and desist from the violation of the law, or to make reparation for the injury found to have been done, or both,
within a reasonable time, and if the carrier does so,

"a statement to that effect shall be entered of record by the Commission, and the said common carrier shall thereupon
be relieved from further liability or penalty for such particular violation of law."

By 16, if the carrier violates or refuses to obey a lawful order or requirement of the Commission, the latter is to apply in
a summary way by petition to the United States circuit court for an injunction, mandatory or otherwise. The amendment
of this section made by Act of March 2, 1889, 25 Stat. 860, c. 382, expressly saves the right of trial by jury in
controversies requiring such a trial under the Seventh Amendment. In any such proceeding, the findings of the
Commission are made prima facie evidence of the matters therein stated.

The remaining provisions of the Act are, as it seems to me, all in accord with the general policy indicated by those above
cited. The Commission is not primarily, or in any proper sense, a judicial tribunal. It can render no judgment binding upon
the parties, can hold no trial by jury, cannot enforce its awards by process against the person or against property; its
awards are merely prima facie evidence, without any conclusive effect, and must be enforced through the aid of the courts
of law. It is an administrative body, a branch of the executive department, charged with the duty of aiding in the
enforcement of the duties imposed upon the carrier by the Act, and with incidental -- and only incidental -- authority to
award reparation, or, rather, to recommend reparation where it happens, in the course of its investigations,

Page 230 U. S. 277

to learn that some improper practice of the carrier has produced an injury to the shipper that calls for such redress.

The Mitchell case arose in the years 1897 to 1901, the Morrisdale case during the period from March, 1902, to December,
1905, both inclusive. Both actions arose therefore prior to the Hepburn Act of June 29, 1906, 34 Stat. 584 c. 3591, and
the Acts of April 13, 1908, 35 Stat. 60, c. 143, and June 18, 1910, 36 Stat. 539, c. 309.

I do not see, however, that any of the amendments makes any material change in the duties of the carriers, or the
remedies for breach of them, or in the functions of the Interstate Commerce Commission, or the mode in which they are
to be performed, so far as the question now under consideration is concerned. By those amendments, and by the Elkins
Act of February 19, 1903, 32 Stat. 847, c. 708, the original scheme of the Interstate Commerce Act has been elaborated
and the powers of the Commission extended, including a grant of the ratemaking power, the power to prevent advances in
rates, etc. But this only emphasizes that the Commission was established as a body having executive and legislative,
rather than judicial powers. For the ratemaking power is a branch of the legislative.

There is another important distinction, very clearly recognized in the opinion of the court in the Abilene Cotton Oil Co. case
and pretty nearly lost sight of, as it seems to me, in the present decisions, and that is the distinction between the general
rules of conduct prescribed by the Act and the standards by which obedience to those rules is to be tested. Thus, by 1,
the rates shall not be unreasonable, and by 2, they shall not be discriminatory. They are the general rules, but the
method of enforcing them in the practical operations of the carrier is by the rate sheets prescribed by 6, and the
function committed to the Commission to revise them.

Page 230 U. S. 278

Where the rate sheet has been filed, etc., it, of course, becomes binding as the particular expression of the general
principle. Again, in 4, there is the general prohibition known as the "long and short haul clause," but, for a particular
expression of it as applicable to the management of a given railroad system, the Commission may act as the proviso to
that section declares. Clearly, until the Commission acts, the general prohibition is unqualified, and when the Commission
has acted, its modification is as much law as the general prohibition was before. And this reasoning, I think, applies to the
respective causes of action now under consideration. Section 2 says "No unjust discrimination." If and when the rates are
duly published, or the Commission has lawfully acted, the schedule or the order furnishes for the time the measure for
determining what is an unjust discrimination. But until the rates are filed or the Commission has acted, it is, like every
other case of violation of law, a question for the courts, to be determined according to the terms of the law. And so with
3, prohibiting undue and unreasonable preferences and advantages to particular shippers, of which, of course,
discrimination in car distribution is an instance. When the Commission has lawfully taken action in accordance with its
administrative duties, prescribed by the Act, its order or requirement becomes applicable; but until such order or
requirement is made, the duty prescribed by 3 remains unqualified. And if, under either section, the question of
reasonableness arises in the course of an action in the courts, it must be determined according to the facts and the law,
just as courts determine any and every other question of reasonableness in cases within their cognizance.

In the Abilene case, the Court recognized that something must be taken from the force and effect of 9 and 22 in order
to give full effect to the context and the general scheme of the Act, and therefore it naturally (and, as

Page 230 U. S. 279

I concede, necessarily) held that the right of action conferred by 9

"must be confined to redress of such wrongs as can, consistently with the context of the Act, be redressed by courts
without previous action by the Commission, and therefore does not imply the power in a court to primarily hear
complaints concerning wrongs of the character of the one here complained of."

That is to say, complaints against a carrier who had observed the established schedule that was made by the Act the
conclusive evidence (until modified by the Commission) of what rates should be deemed reasonable in law could not be

entertained by the courts (prior to action by the Commission) upon the theory that, although reasonable in law, the rates
were excessive in fact.

This, however, in plain terms left open the doors of the courts to the suitor seeking pecuniary redress for other violations
of the Act, not sanctioned by published schedules or by any other regulation declared obligatory by the Act. And within
that category, as I think, are these present actions, brought against a carrier that (as we must assume in order to
determine the jurisdictional question) violated the Act, instead of observing it; that so far from adhering to published
regulations, or mandate of the Commission, or other order rendered obligatory by the Act, set up its own standard of
practices and discriminations and maintained them in defiance of the right of these plaintiffs to fair and equal treatment.

But the effect of the present decisions, if I apprehend them correctly, is to leave no force whatever remaining to 9.
The Abilene case excluded from it wrongs of the character of the one there complained of; the present decisions exclude
from it wrongs of the opposite character. That case exempted from action the carrier who had consistently observed the
published schedules; the present (Mitchell) case shields the carrier who systematically departs from the published
schedules, and, by a parity

Page 230 U. S. 280

of reasoning, the decision in the Morrisdale case exempts from primary liability at law the carrier who systematically
violates the rule of equality with respect to car distribution.

In the numerous amendments that have been enacted by Congress during the twenty-five years that the Interstate
Commerce act has been in force, in no instance has any change been made in either of the sections ( 2, 3, 8 and 9)
that are here important. Nor have any of the changes made in the duties of the Commission operated to deprive the
aggrieved shipper of his private action at law. Indeed, in the third section of the Elkins Act of February 19, 1903, 32 Stat.
848, c. 708, Congress -- while authorizing the Commission to apply to the federal court for an enforcement of the
published tariffs, or a discontinuance of discrimination, and authorizing the district attorneys under the direction of the
Attorney General, to institute and prosecute such proceedings -- was careful to declare that

"[t]he proceedings provided for by this Act shall not preclude the bringing of suit for the recovery of damages by any party
injured, or any other action provided by said Act approved February fourth, eighteen hundred and eighty-seven, entitled,"

etc.

But, according to the construction now for the first time adopted, in the majority of instances, the right of the aggrieved
shipper to resort to the ordinary courts of law for the recovery of his damages is subjected to an onerous condition
precedent, or at least it may be so subjected at the option of the carrier, for, in No. 674 (the Mitchell Coal Co. case), the
shipper is driven to the Interstate Commerce Commission in respect of part of his claim because of the defense that the

carrier interposed, while with respect to the residue of his claim, because the character of the defense was different, the
action must proceed at law.

In short, without any legislative repeal of 9, the option

Page 230 U. S. 281

there conferred upon the shipper has been transferred to the carrier.

How serious is the difference becomes apparent upon a little reflection. The shipper must go first to the Commission. But
when he gets before the Commission, he may or may not succeed, and if he succeeds, he gets no adjudication that is
binding upon the carrier, for, by the terms of the Act, such findings are only prima facie correct insofar as they determine
the fact and amount of damage. In order to recover them, he must still resort to the courts. Thus, the shipper has a
chance to lose his case before the Commission, but no chance to win it there. The ruling of the Commission may conclude
the case against him, but cannot conclude it in his favor.

Now, let us suppose the normal case of a bona fide claim, where there is no more probability that the complaining party
will succeed than that he will fail. The probability of success before the Commission is represented by the fraction 1/2. If
successful, he must then go to the court, and the finding of the Commission being no more than evidence, and not even
shifting the burden of proof, the shipper's probability of success is again represented by the fraction 1/2. Since he must
receive two concurring awards, his probability of ultimate success in both tribunals is represented by 1/2 x 1/2 = 1/4. In
short, instead of having the option that Congress gave him, he is confined to a single line of procedure, contrary to the
tenor of the Act, and his probability of success is reduced from "equal chances" down to "one chance out of four."

It is said that the questions that arise about these practices of rebating and car distribution are complicated and difficult.
Certainly that objection is not pertinent to the present cases. I see nothing beyond the grasp of a court of law in
the Mitchell case. The question that, as this Court now holds, must await the determination of the Commission concerns
the allowances

Page 230 U. S. 282

to the Altoona, Milwood and Glen White mines, and it is in substance a mere question of fact as to whether anything, and
if so, how much, ought to be allowed for certain hauling services, and the like; if too much was allowed, the allowance was
a cover for rebating; otherwise, not. And the Morrisdale case reduces itself, according to the opinion, to a narrow question
of law upon admitted facts. It is the old question whether, during periods of car shortage, when the carrier is unable to
furnish all the cars necessary to meet the demands for transportation, shippers having cars privately owned by
themselves, or railroads having cars of their own, used to transport their fuel, shall, by reason of these "private cars" or
"fuel cars," have a greater share in the distribution of the gross facilities for transportation than would be the case if the
carrier undertook to supply cars of its own for all shippers. It is a familiar question that has been several times before the

Interstate Commerce Commission and decided by them as a question of law upon the authority and reasoning of the
decisions of the courts of law. Railroad Com of Ohio v. Hocking Valley R. Co., 12 I.C.C. 398; Traer v. Chicago & Alton R.
Co., 13 I.C.C. 451; Hillsdale Coal & Coke Co. v. Pa. R. Co., 19 I.C.C. 356, 364. The order of the Commission in the Hocking
Valley case, 12 I.C.C. 398, is the same that was sustained by this Court in the Illinois Central case, 215 U.S. 215 U. S.
452.

But, conceding everything that may be claimed respecting the inherent difficulty of properly passing upon such cases, they
are no more difficult than many others with which courts of law and of equity have to grapple. The Interstate Commerce
Commission, so far as it passes any quasi-judicial judgment upon such matters, does so by pursuing methods that are
modeled upon those of the courts, and which this Court has recently held cannot be departed from without rendering the
proceedings void. Int. Com. Comm. v. Louisville & Nashville R. Co.,227 U. S. 88.

Page 230 U. S. 283

But if all the federal judges in all the federal courts, and the masters and referees who are at their command, are unable,
as a practical matter, to grapple with these questions, what shall be said of the probability that the Interstate Commerce
Commission, a single body, with headquarters at Washington, with limited powers, and with enormous labors in the line of
its legitimate administrative functions, will be able to properly dispose of the mass of judicial work that is now to be
imposed upon it?

It is said that it is necessary to have these matters of rate discriminations and other preferential practices settled by a
single tribunal. But is not this a question for Congress? And did not Congress in plain terms confer upon the aggrieved
shipper the option of going to the courts, rather than to the Commission? And has Congress manifested any intent to
repeal the second, third, eighth, and ninth sections of the Act?

The opinion in the Mitchell case recognizes that the orders of the Commission are only

"quasi-judicial, and only prima facie correct insofar as they determine the fact and amount of damage -- as to which, since
it involves the payment of money and taking of property, the carrier is by 16 of the Act, given its day in court and the
right to a judicial hearing (25 Stat. 859)."

But is the shipper not entitled to his day in court and to a judicial hearing? Has the Constitution any greater regard for the
right of a carrier to trial by jury than it has for the right of a shipper? Conceding, as I do, that Congress could not, because
of the Fifth Amendment, make the finding of an administrative body, acting without jury trial, final as against the carrier, I
submit, with great respect, that it gives an unconstitutional meaning to the Act if we construe it as depriving the shipper
of his remedy without trial by jury.

It is said that, if actions were to be brought in the courts,

"to permit separate suits and separate findings would not only destroy the equality which the statute

Page 230 U. S. 284

intended should be permanent, but would bring about direct conflict in the administration of the law."

I confess myself unable to understand how giving redress by a private action for the consequences of past
maladministration can conflict in any way with the proper administration of the law, which, if I understand the term,
applies to the execution of it in the present and for the future. It is unfortunately true that, since courts and juries are
human, the result in one case does not always seem to accord with the result in another. This is theoretically true of all
suits at law; practically, the successful administration of justice in the courts belies the theory.

The court sees in the Act a purpose to have all matters affecting rates and the regulation of practices that have to do with
equality of service on the part of the carrier towards the shippers "settled by a single tribunal." I have no difficulty in
finding in the Act a purpose to confer the administrative power, the regulating power, upon a single tribunal, to-wit, the
Commission. But I find nothing, and the opinions refer to nothing, indicating a purpose that past transgressions of the Act,
and the cognizance of suits brought for the redress of injuries consequent upon such transgressions, shall be determined
by a single tribunal. It would seem more probable that Congress considered precise uniformity with respect to
administering justice for past offenses to be an unattainable dream. I repeat -- administration, management, regulation,
concern themselves with the present and the future. The awarding of relief for past offenses is properly a judicial function.
And, as I read the Act, Congress conferred jurisdiction over such offenses upon the courts, giving at the same time an
option to the shipper to resort, if he would, to the Commission in the first instance, doubtless on the theory that the
simple cases, and those involving small amounts, would go (as experience demonstrates that they have gone) to the
Commission, and that thereby that body,

Page 230 U. S. 285

while enabled to accomplish (by its recommendations and warnings) much in the way of remedying past grievances,
would at the same time be put in possession of information from sources that otherwise would hardly be accessible, so
that, on the basis of that information, it could proceed to establish regulations for the future.

Be this as it may, it seems to me highly illogical to say that damages shall not be awarded to a shipper for violations of the
law committed by the common carrier in the past, because the shipper would thereby "secure a belated but undue
preference." The argument overlooks the fact that, upon the hypothesis that a cause of action exists, it is the carrier who
has given a preference to the plaintiff's competitor; it is for the damages resulting from that preference that the action is
brought; and, if the action be justly determined, it gives to the aggrieved shipper a belated but presumably a due
recompense.

That I have not misunderstood the real questions at issue in the Abilene, the Robinson, the Illinois Central, and
the Pitcairn cases will, I think, appear from a critical examination of those cases, in aid of which the following extracts and
comments are submitted (the italics, in most instances, being my own).

Texas & Pacific Ry. Co. v. Abilene Cotton Oil Co. (1907), 204 U. S. 426, was a review under 709, Rev.Stat., of a
judgment of a Texas state court. The Abilene Cotton Oil Company sued on common law principles to recover moneys
alleged to have been exacted for freight on cotton seed over and above a just and reasonable charge. There were
averments (p. 204 U. S. 430) "that the rate exacted was discriminatory, constituted an undue preference, and amounted
to charging more for a shorter than for a longer haul." But (p. 204 U. S. 432) these averments were eliminated in the
course of the trial. The findings, as condensed by the court below, were (p.204 U. S. 432) that it was an interstate
shipment, and the rates charged by the railroad company were those

Page 230 U. S. 286

established under the interstate commerce law, and had been duly filed and published; but that they were in fact
unreasonable and excessive. This Court (by the present CHIEF JUSTICE, then MR. JUSTICE, WHITE) said (p. 204 U. S.
436) that the question presented was:

"The scope and effect of the Act to Regulate Commerce upon the right of a shipper to maintain an action at law against a
common carrier to recover damages because of the exaction of an alleged unreasonable rate, although the rate collected
and complained of was the rate stated in the schedule filed with the Interstate Commerce Commission, and published
according to the requirements of the Act to Regulate Commerce, and which it was the duty of the carrier under the law to
enforce as against shippers."

After pointing out that the right of recovery sustained by the court below was clearly within the common law principles
stated, and was not in so many words abrogated by the Commerce Act, the Court proceeded to inquire whether this
common law right had been impliedly taken away by the Act, and to what extent. The general scope of the Act was then
reviewed as follows:

"Let us, without going into detail, give an outline of the general scope of that Act, with the object of fixing the rights which
it was intended to conserve or create, the wrongs which it proposed to redress, and the remedies which the Act
established to accomplish the purposes which the lawmakers had in view."

"The Act made it the duty of carriers subject to its provisions to charge only just and reasonable rates. To that end, the
duty was imposed of establishing and publishing schedules of such rates. It forbade all unjust preferences and
discriminations, made it unlawful to depart from the rates in the established schedules until the same were changed as
authorized by the Act, and such departure was made an offense punishable by fine or imprisonment, or both, and the
prohibitions of the Act and the punishments

Page 230 U. S. 287

which it imposed were directed not only against carriers, but against shippers, or any person who, directly or indirectly, by
any machination or device, in any manner whatsoever, accomplished the result of producing the wrongful discriminations
or preferences which the Act forbade. It was made the duty of carriers subject to the Act to file with the Interstate
Commerce Commission created by that Act copies of established schedules, and power was conferred upon that body to
provide as to the form of the schedules, and penalties were imposed for not establishing and filing the required schedules.
The Commission was endowed with plenary administrative power to supervise the conduct of carriers, to investigate their
affairs, their accounts, and their methods of dealing, andgenerally to enforce the provisions of the Act. To that end, it was
made the duty of the district attorneys of the United States, under the direction of the Attorney General, to prosecute
proceedings commenced by the Commission to enforce compliance with the Act. The Act specially provided that, whenever
any common carrier subject to its provisions"

"shall do, cause to be done, or permit to be done any act, matter, or thing in this Act prohibited or declared to be unlawful,
or shall omit to do any act, matter, or thing in this Act required to be done, such common carrier shall be liable to the
person or persons injured thereby for the full amount of damages sustained in consequence of any such violation of the
provisions of this Act. . . ."

"Power was conferred upon the Commission to hear complaints concerning violations of the Act, to investigate the same,
and, if the complaints were well founded, to direct not only the making of reparation to the injured persons, but to order
the carrier to desist from such violation in the future. In the event of the failure of a carrier to obey the order of the
Commission, that body, or the party in whose favor an award of reparation was made, was empowered to compel
compliance by invoking the authority of the courts of the

Page 230 U. S. 288

United States in the manner pointed out in the statute, prima facie effect in such courts being given to the findings of fact
made by the Commission. By the ninth section of the Act it was provided as follows:"

" That any person or persons claiming to be damaged by any common carrier subject to the provisions of this Act may
either make complaint to the Commission, as hereinafter provided for, or may bring suit in his or their own behalf for the
recovery of the damages for which such common carrier may be liable under the provisions of this Act, in any district or
circuit court of the United States of competent jurisdiction, but such person or persons shall not have the right to pursue
both of said remedies, and must in each case elect which one of the two methods of procedure herein provided for he or
they will adopt. . . ."

"And by 22, which we shall hereafter fully consider, existing appropriate common law and statutory remedies were
saved."

"When the Act to Regulate Commerce was enacted, there was contrariety of opinion whether, when a rate charged by a
carrier was, in and of itself, reasonable, the person from whom such a charge was exacted had at common law an action
against the carrier because of damage asserted to have been suffered by a discrimination against such person, or a
preference given by the carrier to another.Parsons v. Chicago & Northwestern Ry.,167 U. S. 447, 167 U. S.
455; Interstate Commerce Commission v. Baltimore & Ohio R. Co.,145 U. S. 263, 145 U. S. 275. That the Act to Regulate
Commerce was intended to afford an effective means for redressing the wrongs resulting from unjust discrimination and
undue preference is undoubted. Indeed, it is not open to controversy that to provide for these subjects was among the
principal purposes of the Act. Interstate Commerce Commission v. Cincinnati, New Orleans & Texas Pacific Ry. Co.,167 U.
S. 479, 167 U. S. 494. And it is apparent that the means by which these great purposes

Page 230 U. S. 289

were to be accomplished was the placing upon all carriers the positive duty to establish schedules of reasonable rates
which should have a uniform application to all, and which should not be departed from so long as the established schedule
remained unaltered in the manner provided by law.Cincinnati, New Orleans & Texas Pacific Ry. Co. v. Interstate
Commerce Commission,162 U. S. 184;Interstate Commerce Commission v. Cincinnati, New Orleans & Texas Pacific Ry.
Co.,167 U. S. 479."

"When the general scope of the Act is enlightened by the considerations just stated, it becomes manifest that there is not
only a relation, but an indissoluble unity, between the provision for the establishment and maintenance of rates until
corrected in accordance with the statute and the prohibitions against preferences and discrimination. This follows because,
unless the requirement of a uniform standard of rates be complied with, it would result that violations of the statute as to
preferences and discrimination would inevitably follow. This is clearly so, for if it be that the standard of rates fixed in the
mode provided by the statute could be treated on the complaint of a shipper by a court and jury as unreasonable, without
reference to prior action by the Commission finding the established rate to be unreasonable and ordering the carrier to
desist in the future from violating the Act, it would come to pass that a shipper might obtain relief upon the basis that the
established rate was unreasonable, in the opinion of a court and jury, and thus such shipper would receive a preference or
discrimination not enjoyed by those against whom the schedule of rates was continued to be enforced. This can only be
met by the suggestion that the judgment of a court, when based upon a complaint made by a shipper without previous
action by the Commission, would give rise to a change of the schedule rate, and thus cause the new rate resulting from
the action of the court to be applicable in future as to all. This suggestion, however,

Page 230 U. S. 290

is manifestly without merit, and only serves to illustrate the absolute destruction of the Act and the remedial provisions
which it created, which would arise from a recognition of the right asserted. For if, without previous action by the
Commission, power might be exerted by courts and juries generally to determine the reasonableness of an established
rate, it would follow that, unless all courts reached an identical conclusion, a uniform standard of rates in the future would

be impossible, as the standard would fluctuate and vary, dependent upon the divergent conclusions reached as to
reasonableness by the various courts called upon to consider the subject as an original question. Indeed, the recognition
of such a right is wholly inconsistent with the administrative power conferred upon the Commission,and with the duty,
which the statute casts upon that body, of seeing to it that the statutory requirement as to uniformity and equality of rates
is observed. Equally obvious is it that the existence of such a power in the courts, independent of prior action by the
Commission, would lead to favoritism, to the enforcement of one rate in one jurisdiction and a different one in another,
would destroy the prohibitions against preferences and discrimination, and afford, moreover, a ready means by which,
through collusive proceedings, the wrongs which the statute was intended to remedy could be successfully inflicted.
Indeed, no reason can be perceived for the enactment of the provision endowing the administrative tribunal, which the Act
created, with power, on due proof, not only to award reparation to a particular shipper, but to command the carrier to
desist from violation of the Act in the future, thus compelling the alteration of the old or the filing of a new schedule,
conformably to the action of the Commission, if the power was left in courts to grant relief on complaint of any shipper,
upon the theory that the established rate could be disregarded and be treated as unreasonable without reference to
previous action by the

Page 230 U. S. 291

Commission in the premises. This must be, because, if the power existed in both courts and the Commission to originally
hear complaints on this subject, there might be a divergence between the action of the Commission and the decision of a
court. In other words, the established schedule might be found reasonable by the Commission in the first instance, and
unreasonable by a court acting originally, and thus a conflict would arise which would render the enforcement of the Act
impossible."

"Nor is there merit in the contention that 9 of the Act compels to the conclusion that it was the purpose of Congress to
confer power upon courts primarily to relieve from the duty of enforcing the established rate by finding that the same as
to a particular person or corporation was so unreasonable as to justify an award of damages. True it is that the general
terms of the section, when taken alone, might sanction such a conclusion, but when the provision of that section is read in
connection with the context of the Act, and in the light of the considerations which we have enumerated, we think the
broad construction contended for is not admissible. And this becomes particularly cogent when it is observed that the
power of the courts to award damages to those claiming to have been injured, as provided in the section, contemplates
only a decree in favor of the individual complainant, redressing the particular wrong asserted to have been done, and does
not embrace the power to direct the carrier to abstain in the future from similar violations of the Act; in other words, to
command a correction of the established schedules, which power, as we have shown, is conferred by the Act upon the
Commission in express terms. In other words, we think that it inevitably follows from the context of the Act that the
independent right of an individual originally to maintain actions in courts to obtain pecuniary redress for violations of the
Act conferred by the ninth section must be confined to redress of such wrongs as can, consistently

Page 230 U. S. 292

with the context of the Act, be redressed by courts without previous action by the Commission, and therefore does not
imply the power in a court to primarily hear complaints concerning wrongs of the character of the one here complained
of. Although an established schedule of rates may have been altered by a carrier voluntarily, or as the result of the
enforcement of an order of the Commission to desist from violating the law, rendered in accordance with the provisions of
the statute, it may not be doubted that the power of the Commission would nevertheless extend to hearing legal
complaints of and awarding reparation to individuals for wrongs unlawfully suffered from the application of the
unreasonable schedule during the period when such schedule was in force."

After citing two decisions in the lower federal courts, and distinguishing several previous decisions of this Court, and
relying upon theHefley case, 158 U. S. 98, and the Mugg case, 202 U. S. 242, as showing that the established rates were
binding, the opinion proceeds (p. 204 U. S. 445):

"In view of the binding effect of the established rates upon both the carrier and the shipper, as expounded in the two
decisions of this Court just referred to, the contention now made, if adopted, would necessitate the holding that a cause of
action in favor of a shipper arose from the failure of the carrier to make an agreement when, if the agreement had been
made, both the carrier and the shipper would have been guilty of a criminal offense, and the agreement would have been
so absolutely void as to be impossible of enforcement. Nor is there force in the suggestion that a like dilemma arises from
the recognition of power in the Commission to award reparation in favor of an individual because of a finding by that body
that a rate in an established schedule was unreasonable. As we have shown, there is a wide distinction between the two
cases. When the Commission is called upon, on the complaint of an individual, to consider the reasonableness of an
established

Page 230 U. S. 293

rate, its power is invoked not merely to authorize a departure from such rate in favor of the complainant alone, but to
exert the authority conferred upon it by the Act, if the complaint is found to be just, to compel the establishment of a new
schedule of rates, applicable to all. And like reasoning would be applicable to the granting of reparation to an individual
after the establishment of a new schedule because of a wrong endured during the period when the unreasonable schedule
was enforced by the carrier, and before its change and the establishment of a new one. In other words, the difference
between the two is that which, on the one hand, would arise from destroying the uniformity of rates which it was the
object of the statute to secure, and, on the other, from enforcing that equality which the statute commands."

"But it is insisted that, however cogent may be the views previously stated, they should not control, because the following
provision contained in 22 of the Act to Regulate Commerce, viz.:"

" . . . Nothing in this Act contained shall in any way abridge or alter the remedies now existing at common law or by
statute, but the provisions of this Act are in addition to such remedies."

"This clause, however, cannot in reason be construed as continuing in shippers a common law right, the continued
existence of which would be absolutely inconsistent with the provisions of the Act. In other words, the Act cannot be held
to destroy itself. The clause is concerned alone with rights recognized in or duties imposed by the Act, and the manifest
purpose of the provision in question was to make plain the intention that any specific remedy given by the Act should be
regarded as cumulative when other appropriate common law or statutory remedies existed for the redress of the
particular grievance or wrong dealt with in the Act."

"The proposition that, if the statute be construed as depriving courts generally, at the instance of shippers, of the power to
grant redress upon the basis that an established

Page 230 U. S. 294

rate was unreasonable without previous action by the Commission, great harm will result is only an argument of
inconvenience which assails the wisdom of the legislation or its efficiency, and affords no justification for so interpreting
the statute as to destroy it. Even, however, if, in any case, we were at liberty to depart from the obvious and necessary
intent of a statute upon considerations of expediency, we are admonished that the suggestions of expediency here
advanced are not shown on this record to be justified. As we have seen, although the Act to Regulate Commerce has been
in force for many years, it appears that, by judicial exposition and in practical execution, it has been interpreted and
applied in accordance with the construction which we give it. That the result of such long continued uniform construction
has not been considered as harmful to the public interests is persuasively demonstrated by the fact that the amendments
which have been made to the Act have not only not tended to repudiate such construction, but, on the contrary, have had
the direct effect of strengthening and making, if possible, more imperative the provisions of the Act requiring the
establishment of rates and the adhesion by both carriers and shippers to the rates as established until set aside in
pursuance to the provisions of the Act. Thus, by section 1 of the Act approved February 19, 1903, commonly known as the
Elkins Act, which, although enacted since the shipments in question, is yet illustrative, the willful failure upon the part of
any carrier to file and publish 'the tariffs or rates and charges,' as required by the Act to Regulate Commerce and the Acts
amendatory thereof, 'or strictly to observe such tariffs until changed according to law,' was made a misdemeanor, and it
was also made a misdemeanor to offer, grant, give, solicit, accept, or receive any rebate from published rates, or other
concession or discrimination. And, in the closing sentence of section 1, it was provided as follows: "

Page 230 U. S. 295

" Whenever any carrier files with the Interstate Commerce Commission or publishes a particular rate under the provisions
of the Act to Regulate Commerce or acts amendatory thereof, or participates in any rates so filed or published, that rate,
as against such carrier, its officers or agents, in any prosecution begun under this Act, shall be conclusively deemed to be
the legal rate, and any departure from such rate, or any offer to depart therefrom, shall be deemed to be an offense
under this section of this Act."

"And, by section 3, power was conferred upon the Interstate Commerce Commission to invoke the equitable powers of a
circuit court of the United States to enforce an observance of the published tariffs."

"Concluding, as we do, that a shipper seeking reparation predicated upon the unreasonableness of the established rate
must, under the Act to Regulate Commerce, primarily invoke redress through the Interstate Commerce Commission,
which body alone is vested with power originally to entertain proceedings for the alternation of an established schedule
because the rates fixed therein are unreasonable, it is unnecessary for us to consider whether the court below would have
had jurisdiction to afford relief if the right asserted had not been repugnant to the provisions of the Act to Regulate
Commerce. It follows from what we have said that the court below erred in the construction which it gave to the Act to
Regulate Commerce."

"In short, what the Abilene Cotton Oil case decides is that, with respect to interstate commerce, the Act, by its own
language, prescribed how it should be determined what rates should be charged by carriers, and how such rates should be
made manifest, and that, while 1 of the Act prohibited any charge beyond just and reasonable rates, it imposed the duty
of establishing and publishing schedules to the very end of enforcing that provision, and, in the effort to prevent unjust
preferences and discriminations, it rendered itunlawful to depart from the established schedules

Page 230 U. S. 296

until they were changed by the administrative Commission; wherefore the rate thus established and published must be
deemed in law a reasonable rate for all purposes affecting the rights of the carrier and shipper between themselves until it
had been altered by the Commission, which might be done if they found it unreasonable in fact. The entire reasoning of
the opinion is quite consistent and logical, as well as most cogent and convincing, if confined to that subject matter."

But to so apply that reasoning as to make it support the contention that discriminations by the carrier in the
past, amounting to adeparture by the carrier from the established schedule and effectuated by the giving of secret rebates
to competitors in violation of 2, or by other discriminatory practices violative of 3, and where the conduct of the carrier
has no prima facie sanction under the law by reason of the filing and publishing of a schedule, or otherwise, shall not be
actionable in the ordinary course of law without a previous investigation or determination by the Commission upon the
subject, is not only to ignore the essential differences between the facts in this case and those in the Abilene case, but is
to virtually eliminate 9 of the Interstate Commerce Act, which Congress in all its amendments has been scrupulously
careful to leave untouched, and to make of the Interstate Commerce Commission, instead of an administrative and quasilegislative body, with duties to perform respecting the laying down of rules for the future and seeing that the carriers
continue to conform to their duties under the Act, a judicial body, but without judicial powers, proceeding not by the
ordinary process of law, but by written notices, sent here and there and everywhere to the persons concerned, not in
actions inter partes, but in omnibus investigations conducted with associations of shippers and municipal corporations and
other organizations, as parties of the one part, and groups of railroads, as parties of the other part, holding their sessions
in Washington or wherever

Page 230 U. S. 297

it pleases them, without ample power to enforce the production of evidence and without any power to enforce their
findings.

Robinson v. Baltimore & Ohio R. Co. (1912), 222 U. S. 506, is in principle exactly like the Abilene case, and was decided
upon its authority. There, the schedule published and filed conformably to the Act made a differential between coal loaded
into the car from wagons and coal loaded from a tipple. Robinson's shipments having come under the higher rate, he sued
to recover from the company $150, which was the excess paid by him over what would have been required if his coal had
been loaded from a tipple. There was an agreed statement of facts, but in it was no suggestion that the schedule had been
the subject of complaint before the Interstate Commerce Commission, or had been found by that Commission to be
unjustly discriminatory, or that any order had been made about it. Naturally and properly, this Court held that there was
no right of action. The pith of the reasoning is lucidly expressed in the opinion of the Court (by MR. JUSTICE VAN
DEVANTER) as follows (pp. 222 U. S. 508-509):

"The Act, c. 104, 24 Stat. 379, c. 382, 25 Stat. 855, c. 61, 28 Stat. 643, c. 708, 32 Stat. 847, whilst prohibiting
unreasonable charges, unjust discriminations, and undue preferences by carriers subject to its provisions, also prescribed
the manner in which that prohibition should be enforced -- that is to say, the Act laid upon every such carrier the duty of
publishing and filing in a prescribed mode, schedules of the rates to be charged for the transportation of property over its
road, declared that the rates named in schedules so established should be conclusively deemed to be the legal rates until
changed as provided in the Act, forbade any deviation from them while they remained in effect, invested the Interstate
Commerce Commission with authority to receive complaints against rates so established, and to inquire and find whether
they were in any wise violative

Page 230 U. S. 298

of the prohibitions of the Act, and, if so, what, if any, injury had been done thereby to the person complaining or to
others, and further authorized the Commission to direct the carrier to desist from any violation found to exist, and to
make reparation for any injury found to have been done. Provision was also made for the enforcement of the order for
reparation, by an action in the circuit court of the United States, if the carrier failed to comply with it."

"Thus, for the purpose of preventing unreasonable charges, unjust discriminations, and undue preferences, a system of
establishing, maintaining, and altering rate schedules, and of redressing injuries resulting from their enforcement, was
adopted whereby publicity would be given to the rates, their application would be obligatory and uniform while they
remained in effect, and the matter of their conformity to prescribed standards would be committed primarily to a single
tribunal, clothed with authority to investigate complaints, and to order the correction of any nonconformity to those
standards by an appropriate change in schedules, and by due reparation to the injured persons."

"When the purpose of the Act and the means selected for the accomplishment of that purpose are understood, it is
altogether plain that the Act contemplated that such an investigation and order by the designated tribunal, the Interstate
Commerce Commission, should be a prerequisite to the right to seek reparation in the courts because of exactions under
an established schedule alleged to be violative of the prescribed standards."

The Abilene and Robinson cases maintain the binding force of published rates and differentials established pursuant to the
Act, until modified by the Commission in the manner provided by the Act.

The present decisions give the same force to discriminatory practices established by the carrier without leave of the
Commission, not included in the published rates

Page 230 U. S. 299

and differentials, the practices being in direct violation of the Act.

Interstate Commerce Commission v. Illinois Central R. Co. (1910), 215 U. S. 452, was a suit brought by the railroad
company in the United States circuit court to restrain the enforcement of an order of the Interstate Commerce
Commission respecting car distribution. The issues were recited in the opinion of the Court (by the present CHIEF
JUSTICE, then MR. JUSTICE, WHITE) as follows (p. 215 U. S. 465):

"Being unwilling to comply with the order of the Commission, the Illinois Central Railroad Company commenced the suit
which is now before us to enjoin in all respects the enforcement of the order of the Commission. It was averred that,
although the company was adequately equipped with coal cars and with sufficient motive power and operative forces, yet
at times an inadequate supply of coal cars to meet the demand arose from the circumstances which we have previously
stated. It was alleged that the regulations adopted by the company for ascertaining the capacity of the mines and for the
distribution of cars were in all respects just and reasonable, and it was charged that the order of the Commission,
directing and taking into account of private cars in the distribution of cars, was unjust, unreasonable, oppressive, and
unlawful because it deprived the owners of such cars of the right to the use of their own property. It was further alleged
that, as to the foreign railway fuel cars, the order was also unjust, unreasonable, oppressive, and unlawful because such
cars constituted no part of the equipment of the road, and failing to count them could not constitute an unlawful
discrimination or the giving of an unjust preference within the intendment of the Act to Regulate Commerce. Besides
charging that the order to count the company fuel cars was unjust, unreasonable, etc., it was averred that the attempt of
the Commission to deal with such cars was

Page 230 U. S. 300

beyond its power, and was but an effort to deprive the company of its lawful right to freely contract for the purchase of
the fuel necessary for the operation of its road. In addition, the proceedings in the suit brought by the Majestic Coal
Company were set out, the granting of a temporary injunction therein as to counting foreign railway fuel cars and private

cars was alleged, and it was charged that, in any event, as to those two classes of cars, the order of the Commission was
not lawful, since it compelled the company to violate the injunction which was yet in force. The Commission answered by
asserting the validity in all respects of the order by it made substantially upon the grounds which had been set out in its
report and opinion announced when the order was made. All the averments in the complaint as to want of power were
traversed, and it was expressly charged that the subject of the distribution of coal cars as dealt with by the order was
within the administrative power delegated to the Commission by the terms of the Act to Regulate Commerce."

The circuit court enjoined the Commission from enforcing its order

"insofar as it directed the taking into account the company fuel cars in the distribution of coal cars in times of car
shortage, and insofar as it directed the future taking of such cars into account."

The Interstate Commerce Commission appealed to this Court, and the decree was reversed on the ground that, so far as
it related to the company fuel cars, the order of the Commission was within its administrative power.

Baltimore & Ohio R. Co. v. Pitcairn Coal Co. (1910) 215 U. S. 481, arose on a petition of the coal company for a
mandamus upon the railroad company to restrain discrimination in the distribution of cars in the "Fairmont region" of West
Virginia, alleged to be in violation of 3 of the Interstate Commerce Act. The petition was filed January 16, 1907, in the
United States circuit court, under 10 of the Act of March 2, 1889, 25 Stat.

Page 230 U. S. 301

855, 862, c. 382, sometimes called 23 of the Interstate Commerce Act, because printed under that number in the
pamphlet compilation of interstate commerce laws. This section provided that, for a violation of any of the provisions of
the Act of 1887 and amendments, preventing the relator from having interstate traffic moved at the same rates as are
charged, or upon terms or conditions as favorable as those given by said common carrier for like traffic under similar
circumstances to any other shipper,

"a mandamus might be issued commanding such common carrier to move and transport the traffic, or to furnish cars or
other facilities for transportation for the party applying for the writ."

There were numerous grounds of complaint, some of which were abandoned at the hearing and, of the others, the United
States circuit court (154 F. 108, 120) overruled all except one, and with respect to that awarded a writ of mandamus.
There were cross-writs of error from the circuit court of appeals which court affirmed the judgment so far as questioned
by the defendant's writ of error and reversed it in part so far as questioned by the relator's writ of error (165 F. 113, 132).
Upon review in this Court, it was pointed out in the opinion (by the present CHIEF JUSTICE) at p. 215 U. S. 492, that the
question was whether the Court could grant the relief prayed, consistently with the provisions of the Act to Regulate
Commerce, and (p. 215 U. S. 493):

"That a prohibition, by way of mandamus, against the Act, is sought, and an order, by way of mandamus, was invoked and
was allowed, which must operate, by judicial decree, upon all the numerous parties and various interests as a rule or
regulation as to the matters complained of for the conduct of interstate commerce in the future. When the situation is thus
defined, we see no escape from the conclusion that the grievances complained of were primarily within the administrative
competency of the Interstate Commerce Commission, and not subject to be judicially enforced; at least,

Page 230 U. S. 302

until that body, clothed by the statute with authority on the subject, had been afforded, by a complaint made to it, the
opportunity to exert its administrative functions."

And, after referring to the decision in the Abilene case, which dealt with the provisions of the Act as they existed prior to
the amendment of 1906, the opinion pointed out (p. 215 U. S. 494) that the amendment adopted in 1906 to 15 of the
Act (34 Stat. 584, 589, c. 3591) had the effect of partially repealing (what was called 23 of the Act of 1887, but was
really) 10 of the Act of March 2, 1889, 25 Stat. 855, 862, c. 382, already referred to, which permitted the courts to
award mandamus in certain cases. The opinion discusses at length the effect of the 1906 amendment of 15 upon the
remedy by mandamus conferred by the previous act, with the result of holding that there was an implied repeal so far as
the adjustment of the car shortage regulations in the case under consideration was concerned.

But it will be observed that the aid of the courts was there invoked with respect to future regulations, and it was denied
because, by the terms of the Act of 1906, it was placed within the administrative functions of the Interstate Commerce
Commission, and the mode in which their orders were to be carried into effect was by the same amendment prescribed.

I confess myself unable to find in the Illinois Central and Pitcairn cases, or in the reasoning of the opinions therein, any
ground for holding that the general right of action conferred by 8 of the original Interstate Commerce Act for a violation
of 2 or 3, or the option conferred upon the party injured by 9 of the same Act, has been repealed as to past
transactions, where the conduct of the carrier has not the sanction of an order of the Commission, or (what is, in essence,
the same thing) has not the sanction of a formal compliance with the Act, which the Act itself declares shall be prima facie
lawful, as was the case with

Page 230 U. S. 303

the published tariffs that were under consideration in the Abilene and Robinson cases.

To declare, as was declared in the Abilene case, that a carrier shall not be held actionable as for extortion in the past
where it has merely charged the rates that were fixed in the schedule established in accordance with the Act is, to my
mind, as far as possible from declaring that past practices of the carrier that are not sanctioned by any finding or
schedule, or otherwise protected from attack by the provisions of the Act, are exempt from court inquiry, or that the
carrier is exempt from an ordinary action at law for violations of the Act, when 8 and 9 in plain terms declare that the

carrier shall, for such violations, be subject to an ordinary action at law, and declare also that the aggrieved shipper shall
have the option whether he will make complaint to the Commission or bring his action in court.

In answer to the suggestion that the result reached in these cases virtually nullifies 9 of the Act, it is said that the
contrary is shown by the decision just announced in Pennsylvania Railroad v. International Coal Co., No. 14, ante, p. 230
U. S. 184. As I have endeavored to point out in the dissenting opinion in that case, the Court there concedes the right of
action but in effect denies the right of recovery, for it excludes from consideration the only measure of damages that has
ever been, or can be, generally applied in actions of that character.

The result of the decisions in these three cases, taken together, is, as it seems to me, to so greatly restrict and hamper
the private right of action that Congress intended to confer by 8 and 9 of the Act that it is difficult to conceive of a case
where the injured shipper can, by the simple and direct mode of an action at law, recover any substantial compensation
for the discriminations practiced upon him by the carrier.

EN BANC
[G.R. No. 81385. February 21, 1989.]
EDUARDO B. OLAGUER AND CONRADO S. REYES in their official capacity as FISCAL AGENTS OF THE
PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT, Petitioners, v. THE REGIONAL TRIAL COURT,
NATIONAL CAPITAL JUDICIAL REGION, BRANCH 48, MANILA, PRESIDED BY THE HONORABLE JUDGE
DEMETRIO M. BATARIO, JR., M.B. OLIVARES, AUGUSTO VILLANUEVA, ARACELLI LINSANGAN, LUISA
LINSANGAN, ALEJANDRO MARAMAG, MANUEL SALAK, TURNITA SORIANO, LINO SISON, DOMINGO FLORES,
MILAGROS HIZON, and CARIDAD ORPIADA, Respondents.
The Solicitor General, for Petitioners.
Delia L. Hermoso for Private Respondents.

SYLLABUS

1. CONSTITUTIONAL LAW; PRESIDENTIAL COMMISSION ON GOOD GOVERNMENT (PCGG); CO-EQUAL BODY WITH THE
REGIONAL TRIAL COURTS AND THE COURT OF APPEALS. In the exercise of its functions, the PCGG is a co-equal body
with the regional trial courts and co-equal bodies have no power to control the other. The regional trial courts and the
Court of Appeals have no jurisdiction over the PCGG in the exercise of its powers under the applicable Executive Orders
and Section 26, Article XVIII of the 1987 Constitution and, therefore, may not interfere with and restrain or set aside the
orders and actions of the PCGG. By the same token, the regional trial courts have no jurisdiction over the acts of fiscal
agents of the PCGG acting for and in behalf of said commission.
2. ID.; ID.; SEC. 4(a), EXECUTIVE ORDER NO. 1; AFFORDED MEMBERS OF SAID COMMISSION IMMUNITY FROM SUIT
FOR DAMAGES. The Commission should not be embroiled in and swamped by legal suits before inferior courts all over
the land. Otherwise, the Commission will be forced to spend valuable time defending all its actuations in such courts. This
will defeat the very purpose behind the creation of the Commission. Accordingly, Section 4(a) of Executive Order No. 1
expressly accorded the Commission and its members immunity from suit for damages in that: "No civil action shall lie
against the Commission or any member thereof for anything done or omitted in the discharge of the task contemplated by
this order."cralaw virtua1aw library
3. SANDIGANBAYAN; VESTED WITH JURISDICTION OVER CASES INVOLVING MEMBERS AND AGENTS OF THE PCGG.
Petitioners, as fiscal agents of the PCGG, cannot be sued in such capacity before the ordinary courts. The tribunal for such
purpose is the Sandiganbayan. It necessarily follows that the issues raised by the private respondents before the
respondent judge to the effect that petitioners are usurpers and have no right to sit in the board of directors or act as
corporate officers of the PJI are issues which should be addressed to the Sandiganbayan.

DECISION

GANCAYCO, J.:

The parameters of the jurisdiction of the ordinary courts in relation to the Securities and Exchange Commission (SEC) and
the Sandiganbayan are put into issue in this petition.

On December 17, 1987, private respondents filed a complaint for injunction and damages, with a prayer for the issuance
of a writ of preliminary injunction and/or temporary restraining order, in the Regional Trial Court (RTC) of Manila against
petitioners and Winston Marbella, Gaston Ortigas, Robeto Federis, Manuel C. Villa-Real, Emanuel Soriano, Jack Arroyo and
Benjamin Tulio.
The complaint alleges, among others, that private respondents are only stockholders with the right to vote of the
Philippine Journalists, Inc. (PJI), Publisher of several daily periodicals such as Manila Journal, Peoples Journal, etc.
Sometime in 1977, PJI, obtained from Development Bank of the Philippines (DBP) certain financing accommodations and
as security thereof executed a first mortgage in favor of DBP on its assets enumerated in a list attached to the mortgage.
The PJI stockholders assigned to DBP the voting rights over 67% of the total subscribed and outstanding voting shares of
stock of the company held by them. The DBP appointed said PJI stockholders as proxies to exercise its right to vote. Due
to some financial difficulty on its part, PJI requested for a restructuring of its loan obligation with certain conditions. The
request was granted by the DBP in a letter dated August 4, 1986. Due to the default on the part of the PJI, the DBP
cancelled the proxies in favor of the assigning stockholders on September 30, 1986 and designated as its proxies
petitioner Eduardo Olaguer, Jose Mari Velez and Manuel de Leon. DBP scheduled a special stockholders meeting for the
purpose of electing new set of directors.
It is also alleged in the complaint that before the special meeting, petitioner Olaguer asked private respondent Rosario M.
Barreto Olivares to assign qualifying shares not only to the three proxies of DBP but also to two others to be chosen by
him so as to enable the five of them to sit in the PJI board of directors, and that, accordingly, they may be able to
coordinate more effectively with DBP as regards the early evaluation and approval of the request for another restructuring
of the PJI loan. Thus respondent Olivares assigned her shareholdings covered by Stock Certificate No. 34 (which were at
that time assigned to DBP) to petitioner Olaguer, Marbella, Ortigas, Mari Velez and de Leon, at one share each. The deeds
of assignment provided that the said assignment are valid only as long as the nominees is the person designated by the
DBP as its representative to sit in the board of directors.
The complaint also alleges that although Olaguer was elected chairman of the board and chief executive officer of PJI, he
failed to comply with his commitment and that this gave private respondents a reason to cancel the assignment. Olaguer
also committed certain illegal acts which gave rise to the filing of several complaints against him. However, before these
cases could be resolved, Olaguers appointment as member of the board of directors of DBP was terminated by President
Corazon C. Aquino effective September 9, 1987. He was informed about his termination through two letters dated August
27 and October 12, 1987.chanrobles.com : virtual law library
It is likewise alleged that, the termination notwithstanding, Olaguer continued to exercise and retain full management and
control of PJI. The DBP chief legal counsel wrote to petitioner Reyes informing him of Olaguers removal from office and
enjoining him from implementing or complying with any instructions from Olaguer and from disposing of the properties of
PJI and disbursing any funds without prior approval of the board of directors of PJI which will soon be elected, except such
amounts needed in the ordinary course of business. Accordingly, the DBP, acting through its Chairman, Jesus Estanislao
and its Director-in-Charge, Jose Mari Velez, entered into an Interim Agreement with private respondents. The said
agreement called for a special stockholders meeting for the purpose of electing a new board of directors which shall hold
office until the next regular stockholders meeting to be held on February 2, 1988.
The complaint further alleges that in a letter dated December 14, 1987, the DBP chief legal counsel informed the private
respondents that the said Interim Agreement cannot be implemented because Olaguer claims that he has just been
designated the fiscal and team leader of the Presidential Commission on Good Government (PCGG) assigned to the PJI
and that all his actions are sanctioned and reported to PC. Chairman Ramon A. Diaz, and that it is the PCGG which
exercises the voting rights of all PJI common stocks sequestered since 1986, including those assigned to DBP and that the
PJI qualifying share now held by PJI Directors came from shares sequestered by the PCGG. These observations are
contained in a letter dated October 31, 1987 written by petitioner Reyes in his capacity as chief legal counsel and
corporate secretary of PJI. It is stated therein that Olaguer, together with Marbella, Ortigas, Soriano, Federis, Arroyo and
Villa-Real have been acting as corporate officers and/or members of the board without their having been elected by the
majority vote of stockholders and without their owning in their own right even a single qualifying share.
In addition, it is alleged that petitioner Reyes had been sending out notices to private respondents about an alleged
stockholders meeting to be held on December 21, 1987 at the PJI building, and that in the letter written by the DBP chief
legal counsel, 1 it is stated that petitioner Olaguer and his associates who claim to be members of the board and corporate
officers of PJI do not represent DBP and that they are not authorized to act in its behalf.
The complaint emphasizes that the claim of petitioner Reyes that Olaguer can sit as chairman of the board of directors of
PJI even if he is no longer a director of DBP but as long as he is the fiscal agent and team leader of the PCGG assigned is
baseless because: (a) the writs of sequestration on the shares of respondents Hizon, Orpiada, Maramag, Flores and Sison,
served on them on or about February 19, 1987, and on respondents Linsangan, Salak, Soriano and Villanueva, served on
them on or about April 28, 1987, had been automatically lifted last August 19, 1987 and October 28, 1987, respectively,
pursuant to Section 26, Article XVIII of the 1987 Constitution; and only the sequestration on the shares of respondent
Olivares has not been lifted since a complaint was filed against her before the expiration of the constitutional deadline for
filing cases; (b) the sequestered shares of respondent Olivares could not be voted upon by petitioners herein and their
companions under their claim of being PCGG fiscal agents under the recent pronouncement of the Supreme Court in
several cases clearly stating that sequestration does not involve the right of ownership; (c) no other meeting has been
validly called for the election of a new set of directors after the members of the board elected last October 2, 1986 had

ceased to be such directors, either by virtue of the cancellation of their qualifying shares or their resignation; (d) with the
filing of Civil Case No. 35 before the Sandiganbayan where the PJI was listed as one of the involved corporations, all
actions affecting said corporation, including those which will affect rights of ownership and disposition of assets, must
have the prior approval of the Sandiganbayan which exercises jurisdiction over these corporations as one of the properties
in litigation; and (e) by order of President Aquino, petitioner Olaguers separation from the PJI was called for; that the acts
of all the petitioners and their companions of either continuing to sit in the board of directors of PJI and/or representing
and acting as its corporate officers are illegal and are the acts of usurpers and intruders violative of the rights of private
respondents as stockholders and are causing great damage and prejudice to them as well as to the rights of the DBP
under the Deed of Assignment, and that such acts of usurpation should be enjoined by the trial court.
Under the second cause of action for damages, it is alleged that Olaguer acted illegally and outside the authority granted
him as nominee of DBP and, accordingly, Olivares cancelled the Deed of Assignment of one qualifying share to him as well
as the Deed of Assignment in favor of Marbella and Ortigas. The notice of cancellation was served upon them on
December 5, 1986. As a consequence of such cancellation, the three failed to qualify to sit as members of the board of
PJI.chanrobles law library : red
Private respondents also alleged that despite such notice, petitioner and his associates continued to sit in the board and
that Olaguer took over the complete management of the corporation and even caused the appointment of other members
of the board and/or corporate officers even if such appointees do not own PJI shares of stock in their own right. It is
likewise alleged that the petitioner and his associates should be enjoined from committing further acts of usurpation and
that they should be held liable for all unlawful disbursements they have made. It is further alleged that some of the
private respondents had been unlawfully dismissed and/or retired one after another thereby depriving them of all benefits
they are entitled to and subjecting them to great mental anguish, sleepless nights, deep humiliation and great anxiety for
which they must be paid damages in an amount left to the sound discretion of the court. Private respondents also asked
for exemplary damages as well as the sum of P200,000.00 for attorneys fees and expenses litigation.
Private respondents prayed that pending a hearing on the merits of the case, a writ of preliminary injunction or a
temporary restraining order be issued against petitioner Reyes enjoining him from holding the special stockholders
meeting scheduled at 8:00 A.M. on December 21, 1987, and enjoining Olaguer and his associates from sitting and acting
as members of the board of directors of PJI or as corporate officers private respondents also prayed that such temporary
restraining order and/or writ of preliminary injunction be made permanent after due hearing and that Petitioner Olaguer
and his associates be made to pay, jointly and severally, actual damages as may be proved after audit, including moral
and exemplary damages, attorneys fees and litigation expenses in the amount of P200,000.00, and the costs of the suit.
2
On December 18, 1987, an order was issued by the trial court setting the petition for the issuance of a writ of preliminary
injunction for hearing on January 4, 1988 at 1:30 in the afternoon. A temporary restraining order was issued enjoining
petitioner Reyes from holding the special stockholders meeting scheduled for December 21, 1987 and enjoining all the
other petitioners including Olaguer from sitting and acting as members of the board and/or corporate officers of PJI until
further orders of the court.
On January 4, 1988, a motion to dismiss was filed by the petitioners on the ground that the court has no jurisdiction over
the persons of petitioners; that they were not served summons and that the subject matter of the action involves
controversies arising out of intra-corporate relations between and among stockholders which are covered by the provisions
of Section 5 of Presidential Decree No. 902-A so that the matter is within the original and exclusive jurisdiction of the
Securities and Exchange Commission (SEC); that the venue for a petition seeking injunctive relief should be the
Sandiganbayan where aforesaid PCGG Case No. 0035 against Benjamin Romualdez, Rosario Olivares, Et. Al. is pending,
pursuant to Executive Order No. 14 defining the jurisdiction over cases involving the alleged ill-gotten wealth of Former
President Marcos, Et. Al.; that it is the SEC which should exercise jurisdiction over the case pursuant to Section 6 of
Presidential Decree No. 902-A; and that the complaint states no cause of action inasmuch as the petitioners and the other
defendants hold shares emanating from the PCGG, and not from the DBP; that the shares issued to DBP for Olivares, et al
on the basis of an erroneous DBP legal opinion have been declared void ab initio and cancelled by the PCGG on November
4, 1987 so that the DBP is not a stockholder of record; that the call for the stockholders meeting by petitioner Reyes was
with the approval of the PCGG Chairman; that PJI is a sequestered corporation listed as item No. 49 under "Shares of
Stock" in "Assets and Other Property of Benjamin Romualdez" marked Annex "A", in Case No. 0035 for "Reconveyance,
Reversion, Accounting, Restitution and Damages," entitled "Republic of the Philippines, plaintiff versus Benjamin (Kokoy)
Romualdez, Et Al.," ; that the PJI, pursuant to its Board Resolution No. 43, dated November 14, 1987, has authorized the
filing of criminal complaints against Benjamin (Kokoy) Romualdez, Rosario Olivares, Tuynita Soriano, Jose T. Abundo,
Evelyn Nicasio, Alejandro Maramag, Caridad Orpiada and other former and present PJI officers and employees who
defrauded the company by conspiring in and/or authorizing the illegal disbursements of PJI funds amounting to P10.6
million, all for the account and upon instructions of said Romualdez who was neither an officer, director, stockholder of
record of PJI nor a creditor or supplier thereof; that regarding the sequestration of PJI pursuant to orders of the PCGG
dated April 22, 1986 and February 19, 1987, the actual sequestration proceedings have not been terminated upon the
filing of PCGG & Case No. 0035 before the Sandiganbayan on July 31, 1987.
Petitioners maintain that under the pertinent provisions of the 1987 Constitution, the commencement of a judicial action
does not ipso facto lift the sequestration order. It is the non-filing of a judicial action within six months from the ratification
of the 1987 Constitution if the sequestration order is issued before the ratification, or within six months from the time
sequestration order was issued if the same was issued after such ratification, which will automatically lift the sequestration

order. Petitioners also stated that while the PJI suffered huge loses under the administration of private respondents, the
corporation realized profits under the management of petitioner Olaguer. All the common and preferred stocks of private
respondents have been sequestered pursuant to the orders of the PCGG dated April 22, 1986 and February 19, 1987 and
it is the PCGG which exercises the voting rights pertaining to said sequestered shares pursuant to the Memorandum of
President Aquino to the PCGG dated June 26, 1986.
A Memorandum in support of the prayer for the issuance of a writ of preliminary injunction and opposition to the motion to
dismiss was filed by counsel for Private Respondents.
On January 14, 1988, an order was issued by the trial court denying the motion to dismiss and issuing a writ of
preliminary injunction as prayed for upon a bond in the amount of P50,000.00 to be filed by private respondents.
Hence, the herein petition for certiorari and prohibition with a prayer for the issuance of a temporary restraining order
and/or a writ of preliminary injunction wherein the main issue is whether or not the trial court has jurisdiction over the
subject matter of the action.
On January 26, 1988, a resolution was issued by this Court requiring the respondents to comment therein within ten (10)
days from notice. A temporary restraining order was issued enjoining the respondent judge to cease and desist from
enforcing the order of the trial court dated January 14, 1988 in Civil Case No. 87-43156 as well as the writ of preliminary
injunction issued against petitioners.chanrobles law library
Acting on the manifestation and motion filed by counsel for private respondents on February 4, 1988, this Court issued a
resolution enjoining petitioner Reyes and/or the corporate officers of PJI from holding another special stockholders
meeting on February 5, 1988 or at any date thereafter pending resolution of this case, and directing the parties to
maintain the status quo until further orders from the Court.
The private respondents filed their comment on the petition. Thereafter, the petitioners filed their reply. On April 5, 1988,
the court resolved to give due course to the petition and considered the case submitted for decision. Nevertheless, the
private respondents filed a rejoinder.
The petition is impressed with merit. There is no dispute that the PJI is now under sequestration by the PCGG and that
Civil Case No. 0035 was filed in the Sandiganbayan wherein the PJI is listed as among the corporations involved in the
unexplained wealth case against former President Marcos, Romualdez and many others. The records likewise show that
petitioner Olaguer, among others, is a fiscal agent of the PCGG and that as Chairman of the Board of Directors of the PJI,
he was acting for and in behalf of the PCGG. Under Section 2 of Executive Order No. 14, the Sandiganbayan has exclusive
and original jurisdiction over all cases regarding "the funds, moneys, assets and properties illegally acquired by Former
President Ferdinand E. Marcos, Mrs. Imelda Romualdez Marcos, their close relatives, subordinate, business associates,
dummies, agents, or nominees," 3 civil or criminal, including incidents arising from such cases. The Decision of the
Sandiganbayan is subject to review on certiorari exclusively by the Supreme Court. 4
In the exercise of its functions, the PCGG is a co-equal body with the regional trial courts and co-equal bodies have no
power to control the other. 5 The regional trial courts and the Court of Appeals have no jurisdiction over the PCGG in the
exercise of its powers under the applicable Executive Orders and Section 26, Article XVIII of the 1987 Constitution and,
therefore, may not interfere with and restrain or set aside the orders and actions of the PCGG. 6 By the same token, the
regional trial courts have no jurisdiction over the acts of fiscal agents of the PCGG acting for and in behalf of said
commission.
The Commission should not be embroiled in and swamped by legal suits before inferior courts all over the land. Otherwise,
the Commission will be forced to spend valuable time defending all its actuations in such courts. This will defeat the very
purpose behind the creation of the Commission. Accordingly, Section 4(a) of Executive Order No. 1 expressly accorded the
Commission and its members immunity from suit for damages in that: "No civil action shall lie against the Commission or
any member thereof for anything done or omitted in the discharge of the task contemplated by this order."cralaw
virtua1aw library
Civil Case No. 87-43156 pending before the respondent judge is denominated as one for "injunction with prayer for writ of
preliminary injunction and/or temporary restraining order and damages." Particularly, under paragraph 17(d) of the
complaint, private respondents admitted that the PJI is listed as one of the involved corporations in Civil Case No. 0035
pending before the Sandiganbayan which now exercises jurisdiction over the said corporation. Petitioners Olaguer and
Reyes appear to be fiscal agents of the PCGG. There can be no doubt, herefore, that the subject matter of the action (the
PJI, its properties and assets) falls within the exclusive jurisdiction of the Sandiganbayan.chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph
Petitioners, as fiscal agents of the PCGG, cannot be sued in such capacity before the ordinary courts. The tribunal for such
purpose is the Sandiganbayan.
It necessarily follows that the issues raised by the private respondents before the respondent judge to the effect that
petitioners are usurpers and have no right to sit in the board of directors or act as corporate officers of the PJI are issues
which should be addressed to the Sandiganbayan.

WHEREFORE, the petition is GRANTED. The respondent judge is permanently enjoined from enforcing the order of the Trial
Court dated January 14, 1988. The restraining order issued by this Court dated February 4, 1988 enjoining petitioner
Reyes and/or the corporate officers of the PJI from holding the special stockholders meeting on February 5, 1988 or a any
date thereafter, and to preserve and maintain the status quo, is hereby lifted. The order of the trial court dated January
14, 1988 is hereby SET ASIDE and another order is hereby issued dismissing the complaint, without pronouncement as to
costs. This Decision is immediately executory.
SO ORDERED.
Fernan C.J., Narvasa, Melencio-Herrera, Cruz, Paras, Padilla, Bidin, Sarmiento, Corts, Grio-Aquino, Medialdea and
Regalado, JJ., concur.
Separate Opinions
GUTIERREZ, JR. J., dissenting:chanrob1es virtual 1aw library
I reiterate my dissent in PCGG v. Pea, G.R. No. 77663, April 12, 1988.
FELICIANO, J., concurring:chanrob1es virtual 1aw library
I concur in the result, for the reasons and with the qualification is set out in my separate opinion in PCGG v. Pea, G.R.
No. 77553, 12 April 1988.

THIRD DIVISION
[G.R. No. 141949. October 14, 2002.]
CEFERINO PADUA, Petitioner, v. HON. SANTIAGO RANADA, PRESIDING JUDGE OF MAKATI, RTC, BRANCH 137,
PHILIPPINE NATIONAL CONSTRUCTION CORP., TOLL REGULATORY BOARD, DEPARTMENT OF PUBLIC WORKS
AND HIGHWAYS, and REPUBLIC OF THE PHILIPPINES, Respondents.
[G.R. No. 151108. October 14, 2002.]
EDUARDO C. ZIALCITA, Petitioner, v. TOLL REGULATORY BOARD AND CITRA METRO MANILA TOLLWAYS
CORPORATION, Respondents.
DECISION

SANDOVAL-GUTIERREZ, J.:

The focal point upon which these two consolidated cases converge is whether Resolution No. 2001-89 issued by the Toll
Regulatory Board (TRB) is valid.
A brief narration of the factual backdrop is imperative, thus:chanrob1es virtua1 1aw 1ibrary
On November 9, 2001, the TRB issued Resolution No. 2001-89 authorizing provisional toll rate adjustments at the Metro
Manila Skyway, effective January 1, 2002, 1 thus:jgc:chanrobles.com.ph
"NOW THEREFORE, it is RESOLVED, as it is hereby RESOLVED:chanrob1es virtual 1aw library
1. That in view of urgent public interest, the Board hereby GRANTS to the Metro Manila Skyway Project, Provisional Relief
in accordance with Rule 10, Section 3 of the Rules of Practice and Procedure Governing Hearing before the Toll Regulatory
Board which states, among others "that the Board may grant (provisional relief) . . . in its own initiative . . . without
prejudice to the final decision after completion of the hearing. . .;"
2. That the Provisional Relief shall be in form of an interim toll rate adjustment in accordance with Section 7.04(3) of the
Supplemental Toll Operation Agreement, dated November 27, 1995, referring to Interim Adjustments in Toll Rates upon

the occurrence of a significant currency devaluation:chanrob1es virtua1 1aw 1ibrary

"Be APPROVED, as it is hereby APPROVED.
"RESOLVED FURTHER, as it is hereby RESOLVED:jgc:chanrobles.com.ph
"That the Provisional Toll Rates, which are not to exceed the following:chanrob1es virtual 1aw library
Section Unrounded Toll Rates for Implementation
Toll Rates CLASS 1 CLASS 2 CLASS 3
Elevated Portion 75.00 75.00 150.00 225.00
At-Grade Portion
Magallanes to 19.35 19.50 38.50 58.00
Bicutan
Bicutan to Sucat 11.21 11.00 22.50 34.00
Sucat to Alabang 10.99 11.00 21.00 32.50
* includes C5 entry/exit and Merville exit.
"For implementation starting January 1, 2002 after its publication once a week for three (3) consecutive weeks in a
newspaper of general circulation and that said Provisional Toll Rate Increase shall remain in effect until such time that the
TRB Board has determined otherwise:jgc:chanrobles.com.ph
"Be APPROVED as it is hereby APPROVED.
"RESOLVED FURTHERMORE, as it is hereby RESOLVED that the Provisional Toll Rates be implemented in two (2) stages in
accordance with the following schedule:chanrob1es virtual 1aw library
Section Unrounded Toll Toll Rates for Implementation
Rates as For Class 1 as Reference
Maximum for JANUARY 1, JULY 1, 2002,
One (1) Year 2002 to to DECEMBER
JUNE 30, 2002 31 2002
Elevated Portion 75.00 65.00 75.00
At-Grade Portion
Magallanes to 19.35 15.00 20.00
Bicutan
Bicutan to Sucat 11.21 9.00 11.00
Sucat to Alabang 10.99 9.00 11.00
"PROVIDED that the recovery of the sum from the interim rate adjustment shall be applied starting the year 2003.
"APPROVED as it is hereby APPROVED."cralaw virtua1aw library
On December 17, 24 and 31, 2001, the above Resolution approving provisional toll rate adjustments was published in the
newspapers of general circulation. 2
Tracing back the events that led to the issuance of the said Resolution, it appears that on February 27, 2001 the Citra
Metro Manila Tollways Corporation (CITRA) filed with the TRB an application for an interim adjustment of the toll rates at
the Metro Manila Skyway Project Stage 1. 3 CITRA moored its petition on the provisions of the "Supplemental Toll
Operation Agreement" (STOA), 4 authorizing it, as the investor, to apply for and if warranted, to be granted an interim
adjustment of toll rates in the event of a "significant currency devaluation." The relevant portions of the STOA

read:chanrob1es virtual 1aw library

a. The Investor and/or the Operator shall be entitled to apply for and if warranted, to be granted an interim adjustment of
Toll Rates upon the occurrence of any of the following events:chanrob1es virtual 1aw library
x

(ii) a significant currency devaluation

(i) A currency devaluation shall be deemed "significant" if it results in a depreciation of the value of the Philippine peso
relative to the US dollar by at least 10%. For purposes hereof the exchange rate between the Philippine peso and the US
dollar which shall be applicable shall be the exchange rate between the above mentioned currencies in effect as of the
date of approval of the prevailing preceding Toll Rate.
(ii) The Investors right to apply for an interim Toll Rate adjustment under section 7.04 (3) (a) (ii) shall be effective only
while any Financing is outstanding and have not yet been paid in full.
x

(iv) An interim adjustment in Toll Rate shall be considered such amount as may be required to provide interim relief to the
Investor from a substantial increase in debt-service burden resulting from the devaluation." 5
Claiming that the peso exchange rate to a U.S. dollar had devaluated from P26.1671 in 1995 to P48.00 in 2000, CITRA
alleged that there was a compelling need for the increase of the toll rates to meet the loan obligations of the Project and
the substantial increase in debt-service burden.
Due to heavy opposition, CITRAs petition remained unresolved. This prompted CITRA to file on October 9, 2001 an
"Urgent Motion for Provisional Approval," 6 this time, invoking Section 3, Rule 10 of the "Rules of Practice and Procedure
Governing Hearing Before the Toll Regulatory Board" (TRB Rules of Procedure) which provides:jgc:chanrobles.com.ph
"SECTION 3. Provisional Relief. Upon the filing of an application or petition for the approval of the initial toll rate or toll
rate adjustment, or at any stage, thereafter, the Board may grant on motion of the pleader or in its own initiative, the
relief prayed for without prejudice to a final decision after completion of the hearing should the Board find that the
pleading, together with the affidavits and supporting documents attached thereto and such additional evidence as may
have been requested and presented, substantially support the provisional order; Provided: That the Board may, motu
proprio, continue to issue orders or grant relief in the exercise of its powers of general supervision under existing laws.
Provided: Finally, that pending finality of the decision, the Board may require the Petitioner to deposit in whole or in part
in escrow the provisionally approved adjustment or initial toll rates." (Emphasis supplied)
On October 30, 2001, CITRA moved to withdraw 7 its "Urgent Motion for Provisional Approval" without prejudice to its
right to seek or be granted provisional relief under the above-quoted provisions of the TRB Rules of Procedure, obviously,
referring to the power of the Board to act on its own initiative.
On November 7, 2001, CITRA wrote a letter 8 to TRB expressing its concern over the undue delay in the proceeding,
stressing that any further setback would bring the Projects financial condition, as well as the Philippine banking system, to
a total collapse. CITRA recounted that out of the US$354 million funding from creditors, two-thirds (2/3) thereof came
from the Philippine banks and financial institutions, such as the Landbank of the Philippines and the Government Service
Insurance Services. Thus, CITRA requested TRB to find a timely solution to its predicament.
On November 9, 2001, TRB granted CITRAs motion to withdraw 9 the Urgent Motion for Provisional Approval and, at the
same time, issued Resolution No. 2001-89, 10 earlier quoted.
Hence, petitioners Ceferino Padua and Eduardo Zialcita assail before this Court the validity and legality of TRB Resolution
No. 2001-89.
Petitioner Ceferino Padua, as a toll payer, filed an "Urgent Motion for a Temporary Restraining Order to Stop Arbitrary Toll
Fee Increases" 11 in G.R. No. 141949, 12 a petition for mandamus earlier filed by him. In that petition, Padua seeks to
compel respondent Judge Santiago Ranada of the Regional Trial Court, Branch 137, Makati City, to issue a writ of
execution for the enforcement of the Court of Appeals Decision dated August 4, 1989 in CA-G.R. SP No. 13235. In its
Decision, the Court of Appeals ordered the exclusion of certain portions of the expressways (from Villamor Air Base to
Alabang in the South, and from Balintawak to Tabang in the North) from the franchise of the PNCC.
In his urgent motion, petitioner Padua claims that: (1) Resolution No. 2001-89 was issued without the required publication

and in violation of due process; (2) alone, TRB Executive Director Jaime S. Dumlao, Jr., could not authorize the provisional
toll rate adjustments because the TRB is a collegial body; and (3) CITRA has no standing to apply for a toll fee increase
since it is an "investor" and not a "franchisee-operator."cralaw virtua1aw library
On January 4, 2002, petitioner Padua filed a "Supplemental Urgent Motion for a TRO against Toll Fee Increases," 13
arguing further that: (1) Resolution 2001-89 refers exclusively to the Metro Manila Skyway Project, hence, there is no
legal basis for the imposition of the increased rate at the at-grade portions; (2) Resolution No. 2001-89 was issued
without basis considering that while it was signed by three (3) of the five members of the TRB, none of them actually
attended the hearing; and 3) the computation of the rate adjustment under the STOA is inconsistent with the rate
adjustment formula under Presidential Decree No. 1894. 14
On January 10, 2002, the Office of the Solicitor General (OSG) filed, in behalf of public respondent TRB, Philippine National
Construction Corporation (PNCC), Department of Public Works and Highways (DPWH) and Judge Ranada, a "Consolidated
Comment" 15 contending that: (1) the TRB has the exclusive jurisdiction over all matters relating to toll rates; (2)
Resolution No. 2001-89 covers both the Skyway and the at-grade level of the South Luzon Expressway as provided under
the STOA; (3) that while Resolution No. 2001-89 does not mention any factual basis to justify its issuance, however, it
does not mean that TRBs finding of facts is not supported by evidence; and (4) petitioner Padua cannot assail the validity
of the STOA because he is not a party thereto.
Upon the other hand, on January 9, 2002, petitioner Eduardo Zialcita, as a taxpayer and as Congressman of Paraaque
City, filed the present petition for prohibition 16 with prayer for a temporary restraining order and/or writ of preliminary
injunction against TRB and CITRA, docketed as G.R. No. 151108, impugning the same Resolution No. 2001-89.
Petitioner Zialcita asserts that the provisional toll rate adjustments are exorbitant and that the TRB violated its own
Charter, Presidential Decree No. 1112, 17 when it promulgated Resolution No. 2001-89 without the benefit of any public
hearing. He also maintains that the TRB violated the Constitution when it did not express clearly and distinctly the facts
and the law on which Resolution No. 2001-89 was based. And lastly, he claims that Section 3, Rule 10 of the TRB Rules of
Procedure is not sanctioned by P.D. No. 1112.chanrob1es virtua1 1aw 1ibrary
Private respondent CITRA, in its comment 18 on Congressman Zialcitas petition, counters that: (1) the TRB has primary
administrative jurisdiction over all matters relating to toll rates; (2) prohibition is an inappropriate remedy because its
function is to restrain acts about to be done and not acts already accomplished; (3) Resolution No. 2001-89 was issued in
accordance with law; (4) Section 3, Rule 10 of the TRB Rules is constitutional; and (5) private respondent and the
Republic of the Philippines would suffer more irreparable damages than petitioner.
The TRB, through the OSG, filed a separate comment 19 reiterating the same arguments raised by private respondent
CITRA.
On January 11, 2002, this Court resolved to consolidate the instant petitions, G.R. No. 141949 and G.R. No. 151108. 20
We rule for the respondents.
In assailing Resolution No. 2001-89, petitioners came to us via two unconventional remedies one is an urgent motion
for a TRO to stop arbitrary toll fee increases; and the other is a petition for prohibition. Unfortunately, both are
procedurally impermissible.
I
Petitioner Paduas motion is a leap to a legal contest of different dimension. As previously stated, G.R. No. 141949 is a
petition for mandamus seeking to compel respondent Judge Ranada to issue a writ of execution for the enforcement of the
Court of Appeals Decision dated August 4, 1989 in CA-G.R. SP No. 13235. The issue therein is whether the application for
a writ of execution should be by a mere motion or by an action for revival of judgment. Thus, for petitioner Padua to
suddenly interject in the same petition the issue of whether Resolution No. 2001-89 is valid is to drag this Court to his web
of legal convolution. Courts cannot, as a case progresses, resolve the intrinsic merit of every issue that comes along its
way, particularly those which bear no relevance to the resolution of the case.
Certainly, petitioner Paduas recourse in challenging the validity of TRB Resolution No. 2001-89 should have been to
institute an action, separate and independent from G.R. No. 141949.
II
The remedy of prohibition initiated by petitioner Zialcita in G.R. No. 151108 also suffers several infirmities. Initially, it
violates the twin doctrine of primary administrative jurisdiction and non-exhaustion of administrative remedies.
P.D. No. 1112 explicitly provides that "the decisions of the TRB on petitions for the increase of toll rate shall be appealable
to the Office of the President within ten (10) days from the promulgation thereof." 21 P.D. No. 1894 reiterates this

instruction and further provides:jgc:chanrobles.com.ph

"SECTION 9. The GRANTEE shall have the right and authority to adjust any existing toll being charged the users of the
Expressways under the following guidelines:chanrob1es virtual 1aw library
x

c) Any interested Expressways user shall have the right to file, within a period of ninety (90) days after the date of
publication of the adjusted toll rate(s), a petition with the Toll Regulatory Board for a review of the adjusted toll rate(s);
provided, however, that notwithstanding the filing of such petition and the pendency of the resolution thereof, the adjusted
toll shall be enforceable and collectible by the GRANTEE effective on the first day of January in accordance with the
immediately preceding paragraph.
x

e) Decisions of the Toll Regulatory Board on petitions for review of adjusted toll shall be appealable to the Office of the
President within ten (10) days from the promulgation thereof."cralaw virtua1aw library
These same provisions are incorporated in the TRB Rules of Procedure, particularly in Section 6, Rule 5 and Section 1,
Rule 12 thereof. 22
Obviously, the laws and the TRB Rules of Procedure have provided the remedies of an interested Expressways user. 23 The
initial proper recourse is to file a petition for review of the adjusted toll rates with the TRB. The need for a prior resort to
this body is with reason. The TRB, as the agency assigned to supervise the collection of toll fees and the operation of toll
facilities, has the necessary expertise, training and skills to judiciously decide matters of this kind. As may be gleaned
from the petition, the main thrust of petitioner Zialcitas argument is that the provisional toll rate adjustments are
exorbitant, oppressive, onerous and unconscionable. This is obviously a question of fact requiring knowledge of the
formula used and the factors considered in determining the assailed rates. Definitely, this task is within the province of the
TRB.
We take cognizance of the wealth of jurisprudence on the doctrine of primary administrative jurisdiction and exhaustion of
administrative remedies. In this era of clogged court dockets, the need for specialized administrative boards or
commissions with the special knowledge, experience and capability to hear and determine promptly disputes on technical
matters or intricate questions of facts, subject to judicial review in case of grave abuse of discretion, is indispensable.
Between the power lodged in an administrative body and a court, the unmistakable trend is to refer it to the former." 24
In Industrial Enterprises, Inc. v. Court of Appeals, 25 we ruled:jgc:chanrobles.com.ph
". . ., 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."cralaw virtua1aw library
Moreover, petitioner Zialcitas resort to prohibition is intrinsically inappropriate. It bears stressing that the office of this
remedy is not to correct errors of judgment but to prevent or restrain usurpation of jurisdiction or authority by inferior
tribunals and to compel them to observe the limitation of their jurisdictions. G.R. No. 151108, while designated as a
petition for prohibition, has for its object the setting aside of Resolution No. 2001-89 on the ground that it was issued
without prior notice, hearing and publication and that the provisional toll rate adjustments are exorbitant. This is not the
proper subject of prohibition because as long as the inferior court, tribunal or board has jurisdiction over the person and
subject matter of the controversy, the writ will not lie to correct errors and irregularities in procedure, or to prevent an
erroneous decision or an enforcement of an erroneous judgment. And even in cases of encroachment, usurpation, and
improper assumption of jurisdiction, the writ will not issue where an adequate and applicable remedy by appeal, writ or
error, certiorari, or other prescribed methods of review are available. 26 In this case, petitioner Zialcita should have
sought a review of the assailed Resolution before the TRB.
III
Even granting that petitioners recourse to the instant remedies is in order, still, we cannot rule in their favor.
For one, it is not true that the provisional toll rate adjustments were not published prior to its implementation on January
1, 2002. Records show that they were published on December 17, 24 and 31, 2001 27 in three newspapers of general
circulation, particularly the Philippine Star, Philippine Daily Inquirer and The Manila Bulletin. Surely, such publications
sufficiently complied with Section 5 of P.D. No. 1112 which mandates that "no new rates shall be collected unless
published in a newspaper of general publication at least once a week for three consecutive weeks." At any rate, it must be
pointed out that under Letter of Instruction No. 1334-A, 28 the TRB may grant and issue ex parte to any petitioner,
without need of notice, publication or hearing, provisional authority to collect, pending hearing and decision on the merits

of the petition, the increase in rates prayed for or such lesser amount as the TRB may in its discretion provisionally grant.
That LOI No. 1334-A has the force and effect of law finds support in a catena of cases decreeing that "all proclamations,
orders, decrees, instructions, and acts promulgated, issued, or done by the former President (Ferdinand E. Marcos) are
part of the law of the land, and shall remain valid, legal, binding, and effective, unless modified, revoked or superseded by
subsequent proclamations, orders, decrees, instructions, or other acts of the President." 29 In Association of Small
Landowners in the Philippines, Inc. v. Secretary of Agrarian Reform, 30 this Court held:jgc:chanrobles.com.ph
"The Court wryly observes that during the past dictatorship, every presidential issuance, by whatever name it was called,
had the force and effect of law because it came from President Marcos. Such are the ways of despots. Hence, it is futile to
argue, as the petitioners do in G.R. No. 79744, that LOI 474 could not have repealed P.D. No. 27 because the former was
only a letter of instruction. The important thing is that it was issued by President Marcos, whose word was law during that
time." (Emphasis supplied)
For another, it is not true that it was TRB Executive Director Dumlao, Jr. alone who issued Resolution No. 2001-89. The
Resolution itself contains the signature of the four TRB Directors, namely, Simeon A. Datumanong, Emmanuel P. Bonoan,
Ruben S. Reinoso, Jr. and Mario K. Espinosa. 31 Petitioner Padua would argue that while these Directors signed the
Resolution, none of them personally attended the hearing. This argument is misplaced. Under our jurisprudence, an
administrative agency may employ other persons, such as a hearing officer, examiner or investigator, to receive evidence,
conduct hearing and make reports, on the basis of which the agency shall render its decision. Such a procedure is practical
necessity." 32 Thus, in Mollaneda v. Umacob, 33 we ruled:jgc:chanrobles.com.ph
". . . At any rate, it cannot be gainsaid that the term "administrative body or agency" Includes the subordinate officials
upon whose hand the body or agency delegates a portion of its authority. Included therein are the hearing officers through
whose eyes and ears the administrative body or agency observes the demeanor, conduct and attitude of the witnesses and
listens to their testimonies.
"It must be emphasized that the appointment of competent officers to hear and receive evidence is commonly resorted to
by administrative bodies or agencies in the interest of an orderly and efficient disposition of administrative cases. . .
". . . Corollarily, in a catena of cases, this Court laid down the cardinal requirements of due process in administrative
proceedings, one of which is that "the tribunal or body or any of its judges must act on its or his own independent
consideration of the law and facts of the controversy, and not simply accept the views of a subordinate." Thus, it is logical
to say that this mandate was rendered precisely to ensure that in cases where the hearing or reception of evidence is
assigned to a subordinate, the body or agency shall not merely rely on his recommendation but instead shall personally
weigh and assess the evidence which the said subordinate has gathered."cralaw virtua1aw library
Be that as it may, we must stress that the TRBs authority to grant provisional toll rate adjustments does not require the
conduct of a hearing. Pertinent laws and jurisprudence support this conclusion.
It may be recalled that Former President Ferdinand E. Marcos promulgated P.D. No. 1112 creating the TRB on March 31,
1977. The end in view was to authorize the collection of toll fees for the use of certain public improvements in order to
attract private sector investment in the government infrastructure projects. The TRB was tasked to supervise the collection
of toll fees and the operation of toll facilities. One of its powers is to "issue, modify and promulgate from time to time the
rates of toll that will be charged the direct users of toll facilities and upon notice and hearing, to approve or disapprove
petitions for the increase thereof." 34
To clarify the intent of P.D. No. 1112 as to the extent of the TRBs power, 35 Former President Marcos further issued LOI
No. 1334-A expressly allowing the TRB to grant ex parte provisional or temporary increase in toll rates, thus:chanrob1es
virtua1 1aw 1ibrary
"NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Republic of the Philippines, by virtue of the powers vested
in me by the Constitution, do hereby direct, order and instruct the Toll Regulatory Board to grant and issue ex-parte to
any petitioner, without need of notice, publication or hearing, provisional authority to collect, pending hearing of and
decision on the merits of such petition, the increase in rates prayed for or such lesser amount as the Board may in its
discretion provisionally grant, upon (a) a finding that the said petition is sufficient in form and substance, (b) the
submission of an affidavit by the petitioner showing that the increase in rates substantially conforms to the formula, if any
stipulated in the franchise or toll operation agreement/certificate of the petitioner and that failure to immediately impose
and collect the increase in rates would result in outright delay or stoppage of urgently needed improvements, expansion or
repairs of toll facilities and/or in great irreparable injury to the petitioner, and (c) the submission by the petitioner to the
Board of a bond, in such amount and from such surety or sureties and under such terms and conditions as the Board shall
fix, to guarantee the refund of the increase in rates to the affected toll payers in case it is finally determined, after notice
and hearing, that the petitioner is not entitled, in whole or in part, to the same. Any provisional toll rate increases shall be
effective immediately upon approval without need of publication."cralaw virtua1aw library
Thereafter, the TRB promulgated as part of its Rules of Procedure, the following provision:jgc:chanrobles.com.ph
"RULE 5
PROCEDURE FOR APPROVAL OF TOLL RATE

"Section 2. Provisional Relief Upon initial findings of the Board that the Petition for the approval of initial toll rate or the
petition for toll rate adjustment is in accordance with Sections 1 and 2 of Rule 2, Section 2 of Rule 3 and Section 1 of Rule
4 hereof, the Board within a reasonable time after the filing of the Petition, may in an en banc decision provisionally
approve the initial toll rate or toll rate adjustment, without the necessity of any notice and hearing."cralaw virtua1aw
library
From the foregoing, it is clear that a hearing is not necessary for the grant of provisional toll rate adjustment. The
language of LOI No. 1334-A is not susceptible of equivocation. It "directs, orders and instructs" the TRB to issue
provisional toll rates adjustment ex parte without the need of notice, hearing and publication. All that is necessary is that
it be issued upon (1) a finding that the main petition is sufficient in form and substance; (2) the submission of an affidavit
showing that the increase in rates substantially conforms to the formula, if any is stipulated in the franchise or toll
operation agreement, and that failure to immediately impose and collect the increase in rates would result in great
irreparable injury to the petitioner; and (3) the submission of a bond. Again, whether or not CITRA complied with these
requirements is an issue that must be addressed to the TRB.
The practice is not something peculiar. We have ruled in a number of cases that an administrative agency may be
empowered to approve provisionally, when demanded by urgent public need, rates of public utilities without a hearing. The
reason is easily discerned from the fact that provisional rates are by their nature temporary and subject to adjustment in
conformity with the definitive rates approved after final hearing. 36 In Maceda v. Energy Regulatory Board, 37 we ruled
that while the ERB is not precluded from conducting a hearing on the grant of provisional authority which is of course,
the better procedure however, it can not be stigmatized if it failed to conduct one. Citing Citizens Alliance for Consumer
Protection v. Energy Regulatory Board, 38 this Court held:chanrob1es virtual 1aw library
In the light of Section 8 quoted above, public respondent Board need not even have conducted formal hearings in these
cases prior to issuance of its Order of 14 August 1987 granting a provisional increase of prices. The Board, upon its own
discretion and on the basis of documents and evidence submitted by private respondents, could have issued an order
granting provisional relief immediately upon filing by private respondents of their respective applications. In this respect,
the Court considers the evidence presented by private respondents in support of their applications i.e., evidence
showing that importation costs of petroleum products had gone up; that the peso had depreciated in value; and that the
Oil Price Stabilization Fund (OPSF) had been depleted as substantial and hence constitutive of at least prima facie basis
for issuance by the Board of a provisional relief order granting an increase in the prices of petroleum products.
Anent petitioner Paduas contention that CITRA has no standing to apply for a toll fee increase, suffice it to say that
CITRAs right stems from the STOA which was entered into by no less than the Republic of the Philippines and by the
PNCC. Section 7.04 of the STOA provides that the Investor, CITRA, and/or the Operator, PNCC, shall be entitled to apply
for and if warranted, to be granted an interim adjustment of toll rates in case of force majeure and a significant currency
valuation. 39 Now, unless set aside through proper action, the STOA has the force and effect of law between the
contracting parties, and is entitled to recognition by this Court. 40 On the same breath, we cannot sustain Paduas
contention that the term "Metro Manila Skyway" Project excludes the at-grade portions of the South Luzon Expressway
considering that under the same STOA the "Metro Manila Skyway" includes:" (a) the South Metro Manila Skyway, coupled
with the rehabilitated at grade portion of the South Luzon Expressway, from Alabang to Quirino Avenue; (b) the Central
Metro Manila Skyway, from Quirino Avenue to A. Bonifacio Avenue; . . . ." 41
Petitioner Zialcita faults the TRB for not stating the facts and the law on which Resolution No. 2001-89 is based. Petitioner
is wrong. Suffice it to state that while Section 14, Article VIII of the 1987 Constitution provides that "no decision shall be
rendered by any court without expressing therein clearly and distinctly the facts and the law on which it is based," this
rule applies only to a decision of a court of justice, not TRB. 42
At this point, let it be stressed that we are not passing upon the reasonableness of the provisional toll rate adjustments.
As we have earlier mentioned, this matter is best addressed to the TRB.
IV
In fine, as what we intimated in Philippine National Construction Corp. v. Court of Appeals, 43 we commend petitioners for
devoting their time and effort on a matter so imbued with public interest as in this case. But we can do no better than to
brush aside their chief objections to the provisional toll rate adjustments, for a different approach would lead this Court
astray into the field of factual conflict where its pronouncements would not rest on solid grounds. Time and again, we have
impressed that this Court is not a trier of facts, more so, in the consideration of an extraordinary remedy of prohibition
where only questions of lack or excess of jurisdiction or grave abuse of discretion is to be entertained.chanrob1es virtua1
1aw 1ibrary
And to accord the main petition for mandamus in G.R. No. 141949 the full deliberation it deserves, we deem it appropriate
to discuss its merit on another occasion. Anyway, G.R. No. 141949 was consolidated with G.R. No. 151108 only by reason
of petitioner Paduas deviant motion assailing Resolution 2001-89. As we have previously said, the main petition in G.R.
No. 141949 presents an entirely different issue and is set on a different factual landscape.
WHEREFORE, petitioner Paduas "Urgent Motion for Temporary Restraining Order to Stop Arbitrary Toll Fee Increases" is

DENIED and petitioner Zialcitas "Petition for Prohibition" is DISMISSED.

SO ORDERED.
Puno, Corona, and Carpio-Morales, JJ., concur.
Separate Opinions
PANGANIBAN, J.:

I vote to deny the Petitions but only on the procedural grounds discussed in Items I and II, pages 11-15 of the ponencia
of Justice Gutierrez. However, I reserve my vote on the validity and the reasonability of the toll rate increases if and when
the appropriate proceedings are brought to this Court in due course.

SECOND DIVISION
[G.R. No. 108461. October 21, 1996.]
PHILIPPINE INTERNATIONAL TRADING CORPORATION, Petitioners, v. HON. PRESIDING JUDGE ZOSIMO Z.
ANGELES, BRANCH 58, RTC, MAKATI; REMINGTON INDUSTRIAL SALES CORPORATION; AND FIRESTONE
CERAMIC, INC., Respondents.

DECISION

TORRES, JR., J.:

The PHILIPPINE INTERNATIONAL TRADING CORPORATION (PITC, for brevity) filed this Petition for Review on Certiorari,
seeking the reversal of the Decision dated January 4, 1993 of public respondent Hon. Zosimo Z. Angeles, Presiding Judge
of the Regional Trial Court of Makati, Branch 58, in Civil Case No. 92-158 entitled Remington Industrial Sales Corporation.
et. al. v. Philippine Industrial Trading Corporation.
The said decision upheld the Petition for Prohibition and Mandamus of REMINGTON INDUSTRIAL SALES CORPORATION
(Remington, for brevity) and FIRESTONE CERAMICS, INC. (Firestone, for brevity), and, in the process, declared as null
and void and unconstitutional, PITCs Administrative Order No. SOCPEC 89-08-01 and its appurtenant regulations. The
dispositive portion of the decision reads:jgc:chanrobles.com.ph
"WHEREFORE, premises considered, judgment is hereby rendered in favor of Petitioner and Intervenor and against the
Respondent, as follows:chanrob1es virtual 1aw library
1) Enjoining the further implementation by the respondent of the following issuances relative to the applications for
importation of products from the Peoples Republic of China, to Wit:chanrob1es virtual 1aw library
a) Administrative Order No. SOCPEC 89-08-01 dated August 30, 1989 (Annex A, Amended Petition);
b) Prescribed Export Undertaking Form (Annex B, Id.);
c) Prescribed Importer-Exporter Agreement Form for non-exporter-importer (Annex C, Id.);
d) Memorandum dated April 16, 1990 relative to amendments of Administrative Order No. SOCPEC 89-08-01 (Annex D,
Id.);
e) Memorandum dated May 6, 1991 relative to Revised Schedule of Fees for the processing of import applications
(Annexes E, E-1., Ind.);

f) Rules and Regulations relative to liquidation of unfulfilled Undertakings and expired export credits (Annex Z,
Supplemental Petition),
the foregoing being all null and void and unconstitutional, and,
2) Commanding respondent to approve forthwith all the pending applications of, and all those that may hereafter be filed
by, the petitioner and the Intervenor, free from and without the requirements prescribed in the above-mentioned
issuances.
IT IS SO ORDERED."cralaw virtua1aw library
The controversy springs from the issuance by the PITC of Administrative Order No. SOCPEC 89-08-01, 1 under which,
applications to the PITC for importation from the Peoples Republic of China (PROC, for brevity) must be accompanied by a
viable and confirmed Export Program of Philippine Products to PROC carried out by the importer himself or through a tieup with a legitimate importer in an amount equivalent to the value of the importation from PROC being applied for, or,
simply, at one is to one ratio.
Pertinent provisions of the questioned administrative order read:chanrob1es virtual 1aw library
3. COUNTERPART EXPORTS TO PROC
In addition to existing requirements for the processing of import application for goods and commodities originating from
PROC, it is declared that:chanrob1es virtual 1aw library
3.1 All applications covered by these rules must be accompanied by a viable and confirmed EXPORT PROGRAM of
Philippine products to PROC in an amount equivalent to the value of the importation from PROC being applied for. Such
export program must be carried out and completed within six (6) months from date of approval of the Import Application
by PITC. PITC shall reject/deny any application for importation from PROC without the accompanying export program
mentioned above.
3.2 The EXPORT PROGRAM may be carried out by any of the following:chanrob1es virtual 1aw library
a. By the IMPORTER himself if he has the capabilities and facilities to carry out the export of Philippine products to PROC
in his own name; or
b. Through a tie-up between the IMPORTER and a legitimate exporter (of Philippine products) who is willing to carry out
the export commitments of the IMPORTER under these rules. The tie-up shall not make the IMPORTER the exporter of the
goods but shall merely ensure that the importation sought to be approved is matched one-to-one (1:1) in value with a
corresponding export of Philippine products to PROC. 2
3.3 EXPORT PROGRAM DOCUMENTS which are to be submitted by the importer together with his Import Application are as
follows:chanrob1es virtual 1aw library
a) Firm Contract, Sales Invoice or Letter of Credit.
b) Export Performance Guarantee (See Article 4 hereof).
c) IMPORTER-EXPORTER AGREEMENT for non-exporter IMPORTER (PITC Form No. M-1006). This form should be used if
IMPORTER has a tie-up with an exporter for the export of Philippine Products to PROC.
4. EXPORT GUARANTEE
To ensure that the export commitments of the IMPORTER are carried out in accordance with these rules, all IMPORTERS
concerned are required to submit an EXPORT PERFORMANCE GUARANTEE (the "Guarantee") at the time of filing of the
Import Application. The amount of the guarantee shall be as follows:chanrob1es virtual 1aw library
For essential commodities: 15% of the value of the imports applied for.
For other commodities: 50% of the value of the imports applied for.
4.1 The guarantee may be in the form of (i) a non-interest bearing cash deposit; (ii) Bank hold-out in favor of PITC (PITC
Form No. M-1007) or (iii) a Domestic Letter of Credit (with all bank opening charges for account-of Importer) opened in
favor of PITC as beneficiary.
4.2 The guarantee shall be made in favor of PITC and will be automatically forfeited in favor of PITC, fully or partially, if
the required export program is not completed by the importer within six (6) months from date of approval of the Import
Application.
4.3 Within the six (6) months period above stated, the IMPORTER is entitled to a (i) refund of the cash deposited without

interest; (ii) cancellation of the Bank holdout or (iii) Cancellation of the Domestic Letter of Credit upon showing that he
has completed the export commitment pertaining to his importation and provided further that the following documents are
submitted to PITC:chanrob1es virtual 1aw library
a) Final Sales Invoice
b) Bill of lading or Airway bill
c) Bank Certificate of Inward Remittance
d) PITC EXPORT APPLICATION FOR NO. M-1005
5. MISCELLANEOUS
5.1 All other requirements for importations of goods and commodities from PROC must be complied with in addition to the
above.
5.2 PITC shall have the right to disapprove any and all import applications not in accordance with the rules and regulations
herein prescribed.
5.3 Should the IMPORTER or any of his duly authorized representatives make any false statements or fraudulent
misrepresentations in the Import/Export Application, or falsify, forge or simulate any document required under these rules
and regulations, PITC is authorized to reject all pending and future import/export applications of said IMPORTER and/or
disqualify said IMPORTER from doing any business with SOCPEC through PITC."cralaw virtua1aw library
Desiring to make importations from PROC, private respondents Remington and Firestone, both domestic corporations,
organized and existing under Philippine-laws, individually applied for authority to import from PROC with the petitioner.
They were granted such authority after satisfying the requirements for importers, and after they executed respective
undertakings to balance their importations from PROC with corresponding export of Philippine products to PROC.
Private respondent Remington was allowed to import tools, machineries and other similar goods. Firestone, on the other
hand, imported Calcine Vauxite, which it used for the manufacture of fire bricks, one of its products.
Subsequently, for failing to comply with their undertakings to submit export credits equivalent to the value of their
importations, further import applications were withheld by petitioner PITC from private respondents, such that the latter
were both barred from importing goods from PROC. 3
Consequently, Remington filed a Petition for Prohibition and Mandamus, with prayer for issuance of Temporary Restraining
Order and/or Writ of Preliminary Injunction on January 20, 1992, against PITC in the RTC Makati Branch 58. 4 The court
issued a Temporary Restraining Order on January 21, 1992, ordering PITC to cease from exercising any power to process
applications of goods from PROC. 5 Hearings on the application for writ of preliminary injunction ensued.
Private respondent Firestone was allowed to intervene in the petition on July 2, 1992, 6 thus joining Remington in the
latters charges against PITC. It specifically asserts that the questioned Administrative Order is an undue restriction of
trade, and hence, unconstitutional.
Upon trial, it was agreed that the evidence adduced upon the hearing on the Preliminary Injunction was sufficient to
completely adjudicate the case, thus, the parties deemed it proper that the entire case be submitted for decision upon the
evidence so far presented.
The court rendered its Decision 7 on January 4, 1992. The court ruled that PITCs authority to process and approve
applications for imports from SOCPEC and to issue rules and regulations pursuant to LOI 444 and P.D. No. 1071, has
already been repealed by EO No. 133, issued on February 27, 1987 by President Aquino.
The court observed:jgc:chanrobles.com.ph
"Given such obliteration and/or withdrawal of what used to be PITCs regulatory authority under the Special provisions
embodied in LOI 444 from the enumeration of powers that it could exercise effective February 27. 1987 in virtue of
Section 16 (d), EO No. 133, it may now be successfully argued that the PITC can no longer exercise such specific
regulatory power in question conformably with the legal precept "expresio unius est exclusio alterius."cralaw virtua1aw
library
Moreover, the court continued, none of the Trade protocols of 1989, 1990 or 1991, has empowered the PITC, expressly or
impliedly to formulate or promulgate the assailed Administrative Order. This fact, makes the continued exercise by PITC of
the regulatory powers in question unworthy of judicial approval. Otherwise, it would be sanctioning an undue exercise of
legislative power vested solely in the Congress of the Philippines by Section 1, Article VII of the 1987 Philippine
Constitution.
The lower court stated that the subject Administrative Order and other similar issuances by PITC suffer from serious

constitutional infirmity, having been promulgated in pursuance of an international agreement (the Memorandum of
Agreement between the Philippines and PROC), which has not been concurred in by at least 2/3 of all the members of the
Philippine Senate as required by Article VII, Section 21, of the 1987 Constitution, and therefore, null and void.
"Section 21. No treaty or international agreement shall be valid and effective unless concurred in by at least two-thirds of
all the Members of the Senate."cralaw virtua1aw library
Furthermore, the subject Administrative Order was issued in restraint of trade in violation of Sections 1 and 19, Article XII
of the 1987 Constitution, which reads:jgc:chanrobles.com.ph
"Section 1. The goals of the national economy are a more equitable distribution of opportunities income and wealth; a
sustained increase in the amount of goods and services produced by the nation for the benefit of the people; and, an
expanding productivity as the key to raising the equality of life for all, especially the underprivileged."cralaw virtua1aw
library
"Section 19. The State shall regulate or prohibit monopolies when the public interest so requires. No combination in
restraint of trade or unfair competition shall be allowed."cralaw virtua1aw library
Lastly the court declared the Administrative Order to be null and void, since the same was not published, contrary to
Article 2 of the New Civil Code which provides, that:jgc:chanrobles.com.ph
"Article 2. Laws shall take effect fifteen (15) days following the completion of their publication in the Official Gazette,
unless the law otherwise provides. . . ."cralaw virtua1aw library
Petitioner now comes to us on a Petition for Review on Certiorari, 8 questioning the courts decision particularly on the
propriety of the lower courts declarations on the validity of Administrative Order No. 89-08-01. The Court directed the
respondents to file their respective Comments.
Subsequent events transpired, how-ever, which affect to some extent, the submissions of the parties to the present
petition.
Following President Fidel V. Ramos trip to Beijing, Peoples Republic of China (PROC), from April 25 to 30, 1993, a new
trade agreement was entered into between the Philippines and PROC, encouraging liberalization of trade between the two
countries. In line therewith, on April 20, 1993, the President, through Chief Presidential Legal Counsel Antonio T. Carpio,
directed the Department of Trade and Industry and the PITC to cease implementing Administrative Order No. SOCPEC 8908-01, as amended by PITC Board Resolution Nos. 92-01-05 and 92-03-08. 9
In the implementation of such order, PITC President Jose Luis U. Yulo, Jr. issued a corporate Memorandum 10 instructing
that all import applications for the PROC filled with the PITC as of April 20, 1993 shall no longer be covered by the trade
balancing program outlined in the Administrative Order.
Forthwith, the PITC allowed the private respondents to import anew from the PROC, without being required to comply
anymore with the lifted requirement of balancing its imports with exports of Philippine products to PROC. 11 In its
Constancia 12 filed with the Court on November 22, 1993, Remington expressed its desire to have the present action
declared moot and academic considering the new supervening developments. For its part, respondent Firestone made a
Manifestation 13 in lieu of its Memorandum, informing the court of the aforesaid developments of the new trade program
of the Philippines with China, and prayed for the courts early resolution of the action.
To support its submission that the present action is now moot and academic, respondent Remington cites Executive Order
No. 244, 14 issued by President Ramos on May 12, 1995. The Executive Order states:jgc:chanrobles.com.ph
"WHEREAS, continued coverage of the Peoples Republic of China by Letter of Instructions No. 444 is no longer consistent
with the countrys national interest, as coursing Republic of the Philippines-Peoples Republic of China Trade through the
Philippine International Trading Corporation as provided for under Letter of Instructions No. 444 is becoming an
unnecessary barrier to trade;
NOW, THEREFORE, I, FIDEL V. RAMOS, President of the Republic of the Philippines, by virtue of the powers vested in me
by law, do hereby order:chanrob1es virtual 1aw library
The Committee on Scientific and Technical Cooperation with Socialist Countries to delete the Peoples Republic of China
from the list of countries covered by Letter of Instructions No. 444.
Done in the City of Manila, this 12th day of day in the year of Our Lord, Nineteen Hundred and Ninety-Five."cralaw
virtua1aw library
PITC filed its own Manifestation 15 on December 15, 1993, wherein it adopted the arguments raised in its Petition as its
Memorandum. PITC disagrees with Remington on the latters submission that the case has become moot and academic as
a result of the abrogation of Administrative Order SOCPEC No. 89-08-01, since respondent Remington had incurred
obligations to the petitioner consisting of charges for the 0.5% Counter Export Development Service provided by PITC to

Remington, which obligations remain outstanding. 16 The propriety of such charges must still be resolved, petitioner
argues, thereby maintaining the issue of the validity of SOCPEC Order No 89-08-01, before it was abrogated by Executive
fiat.
There is no question that from April 20, 1993, when trade balancing measures with PROC were lifted by the President,
Administrative Order SOCPEC No. 89-08-0l no longer has force and effect, and respondents are thus entitled anew to
apply for authority to import from the PROC, without the trade balancing requirements previously imposed on proposed
importers. Indeed, it appears that since the lifting of the trade balancing measures Remington had been allowed to import
anew from PROC.
There remains, however, the matter of the outstanding obligations of the respondents for the charges relating to the 0.5%
Counter Export Development Service in favor of PITC, for the period when the questioned Administrative Order remained
in effect. Is he obligation still subsisting, or are the respondents freed from it?
To resolve this issue, we are tasked to consider the constitutionality of Administrative Order No. SOCPEC 89-08-01, based
on the arguments set up by the parties in their Petition and Comment. In so doing, we must inquire into the nature of the
functions of the PITC, in the light of present realities.
The PITC is a government owned or controlled corporation created under P.D. No. 252 17 dated August 6, 1973. P.D. No.
1071, 18 issued on May 9. 1977 which revised the provisions of P.D. 252. The purposes and powers of the said
governmental entity were enumerated under Sections 5 and 6 thereof. 19, 19-a, 19-b, 19-c
On August 9, 1976, the late President Ferdinand Marcos issued Letter of Instruction (LOI) No. 444, 20 directing, inter alia,
that trade (export or import of all commodities), whether direct or indirect, between the Philippines and any of the
Socialist and other Centrally Planned Economy Countries (SOCPEC), including the Peoples Republic of China (PROC) shall
be undertaken or coursed through the PITC. Under the LOI, PITC was mandated to: l) participate in all official trade and
economic discussions between the Philippines and SOCPEC; 2) adopt such measures and issue such rules and regulations
as may be necessary for the effective discharge of its functions under its instruction; and, 3) undertake the processing and
approval of all applications for export to or import from the SOCPEC.
Pertinent provisions of the Letter of Instruction are herein reproduced:chanrob1es virtual 1aw library
LETTER OF INSTRUCTION 444
x

II. CHANNELS OF TRADE

1. The trade, direct or indirect, between the Philippines and any of the Socialist and other centrally-planned economy
countries shall upon issuance hereof, be undertaken by or coursed through the Philippine International Trading
Corporation. This-shall apply to the export and import of all commodities of products including those specified for export
or import by expressly authorized government agencies.
x

4. The Philippine International Trading Corporation shall participate in all official trade and economic discussions between
the Philippines and other centrally-planned economy countries.
V. SPECIAL PROVISIONS
The Philippine International Trading Corporation shall adopt such measures and issue such rules and regulations as may
be necessary for the effective discharge of its functions under these instructions. In this connection, the processing and
approval of applications for export to or import from the Socialist and other centrally-planned economy countries shall,
henceforth, be performed by the said Corporation. (Emphasis ours)
After the EDSA Revolution, or more specifically on February 27, 1987, then President Corazon C. Aquino promulgated
Executive Order (EO) No. 133 21 reorganizing the Department of Trade and Industry (DTI) empowering the said
department to be the "primary coordinative, promotive, facilitative and regulatory arm of the government for the countrys
trade, industry and investment activities" (Sec. 2, EO 133). The PITC was made one of DTIs line agencies. 22
The Executive Order reads in part:chanrob1es virtual 1aw library
EXECUTIVE ORDER NO. 133
x

Section 16. Line Corporate Agencies and Government Entities.

The following line corporate agencies and government entities defined in Section 9 (c) of this Executive Order that will
perform their specific regulatory functions, particularly developmental responsibilities and specialized business activities in
a manner consonant with the Department mandate, objectives, policies, plans and programs:chanrob1es virtual 1aw
library
x

d) Philippine International Trading Corporation. This corporation, which shall be supervised by the Undersecretary for
International Trade. shall only engage in both export and trading on new or non-traditional products and markets not
normally pursued by the private business sector; provide a wide range of export oriented auxiliary services to the private
sector: arrange for or establish comprehensive system and physical facilities for handling the collection, processing, and
distribution of cargoes and other commodities monitor or coordinate risk insurance services for existing institutions;
promote and organize, whenever warranted, production enterprises and industrial establishments and collaborate or
associate in joint venture with any person, association, company or entity whether domestic or foreign, in the fields of
production, marketing, procurement, and other relate businesses; and provide technical advisory, investigatory,
consultancy and management services with respect to any and all of the functions, activities, and operations of the
corporation.
Sometime in April, 1988, following the State visit of President Aquino to the PROC, the Philippines and PROC entered into
a Memorandum of Understanding 23 (MOU) wherein the two countries agreed to make joint efforts within the next five
years to expand bilateral trade to US S600-US S800 Million by 1992, and to strive for a steady progress towards achieving
a balance between the value of their imports and exports during the period, agreeing for the purpose that upon the
signing of the memorandum, both sides shall undertake to establish the necessary steps and procedures to be adopted
within the framework of the annual midyear review meeting under the Trade Protocol, in order to monitor and ensure the
implementation of the MOU.
Conformably with the MOU, the Philippines and PROC entered into a Trade Protocol for the years 1989, 1990 and 1991, 24
under which was specified the commodities to be traded between them. The protocols affirmed their agreement to jointly
endeavor to achieve more or less a balance between the values of their imports and exports in their bilateral trade.
It is allegedly in line with its powers under LOI 444 and in keeping with the MOU and Trade Protocols with PROC that PITC
issued its now assailed Administrative Order No. SOCPEC 89-08-01 25 on August 30, 1989 (amended in March, 1992).
Undoubtedly, President Aquino, in issuing EO 133, is empowered to modify and amend the provisions of LOI 444, which
was issued by then President Marcos, both issuances being executive directives. As observed by us in Philippine
Association of Service Exporters, Inc. v. Torres, 26
"there is no need for legislative delegation of power to the President to revoke the Letter of Instruction by way of an
Executive Order. This is notwithstanding the fact that the subject LOI 1190 was issued by President Marcos, when he was
extraordinarily empowered to exercise legislative powers, whereas EO 450 was issued by Pres. Aquino when her
transitional legislative powers have already ceased, since it was found that LOI 1190 was a mere administrative directive,
hence, may be repealed, altered, or modified by EO 450."cralaw virtua1aw library
We do not agree, however, with the trial courts ruling that PITCs authority to issue rules and regulations pursuant to the
Special Provision of LOI 444 and P.D. No. 1071, have already been repealed by EO 133.
While PITCs power to engage in commercial import and export activities is expressly recognized and allowed under
Section 16 (d) of EO 133, the same is now limited only to new or non-traditional products and markets not normally
pursued by the private business sector. There is no indication in the law of the removal of the powers of the PITC to
exercise its regulatory functions in the area of importations from SOCPEC countries. Though it does not mention the grant
of regulatory power, EO 133, as worded, is silent as to the abolition or limitation of such powers, previously granted under
P.D. 1071, from the PITC.
Likewise, the general repealing clause in EO 133 stating that "all laws, ordinances, rules, and regulations, or other parts
thereof, which are inconsistent with the Executive Order are hereby repealed or modified accordingly, cannot operate to
abolish the grant of regulatory powers to the PITC. There can be no repeal of the said powers, absent any cogency of
irreconcilable inconsistency or repugnancy between the issuances, relating to the regulatory power of the PITC.
The President, in promulgating EO 133, had not intended to overhaul the functions of the PITC. The DTI was established,
and was given powers and duties including those previously held by the PITC as an independent government entity, under
P.D. 1071 and LOI 444. The PITC was thereby attached to the DTI-as an implementing arm of the said department.
EO 133 established the DTI as the primary coordinative, promotive, facilitative and regulatory arm of government for the
countrys trade, industry and investment activities, which shall act as a catalyst for intensified private sector activity in

order to accelerate and sustain economic growth. 27 In furtherance of this mandate, the DTI was empowered, among
others, to plan, implement, and coordinate activities of the government related to trade industry and investments; to
formulate and administer policies and guidelines for the investment priorities plan and the delivery of investment
incentives; to formulate country and product export strategies which will guide the export promotion and development
thrusts of the government. 28 Corollarily, the Secretary of Trade and Industry is given the power to promulgate rules and
regulations necessary to carry out the departments objectives, policies, plans, programs and projects.
The PITC, on the other hand, was attached as an integral part to the said department as one of its line agencies, 29 and
was given the focal task of implementing the departments programs. 30 The absence of the regulatory power formerly
enshrined in the Special Provision of LOI 444, from Section 16 of EO 133, and the limitation of its previously wide range of
functions, is noted. This does not mean, however, that PITC has lost the authority to issue the questioned Administrative
Order. It is our view that PITC still holds such authority, and may legally exercise it, as an implementing arm, and under
the supervision of, the Department of Trade and Industry.
Furthermore, the lower courts ruling to the effect that the PITCs authority to process and approve applications for
imports from SOCPEC and to issue rules and regulations pursuant to LOI 444 and P.D. 1071 has been repealed by EO 133,
is misplaced, and did not-consider the import behind the issuance of the later presidential edict.
The President could not have intended to deprive herself of the power to regulate the flow of trade between the Philippines
and PROC under the two countries Memorandum of Understanding, a power which necessarily flows from her office as
Chief Executive. In issuing Executive Order 133, the President intended merely to reorganize the Department of Trade and
Industry to cope with the need of a streamlined bureaucracy. 31
Thus, there is no real inconsistency between LOI 444 and EO 133. There is, admittedly, a rearranging of the administrative
functions among the administrative bodies affected by the edict, but not an abolition of executive power. Consistency in
statutes as in executive issuances, is of prime importance, and, in the absence of a showing to the contrary, all laws are
presumed to be consistent with each other. Where it is possible to do so, it is the duty of courts, in the construction of
statutes, to harmonize and reconcile them, and to adopt a construction of a statutory provision which harmonizes and
reconciles it with other statutory provisions. 32 The fact that a later enactment may relate to the same subject matter as
that of an earlier statute is not of itself sufficient to cause an implied repeal of the latter, since the law may be cumulative
or a continuation of the old one. 33
Similarly, the grant of quasi-legislative powers in administrative bodies is not unconstitutional. Thus, as a result of the
growing complexity of the modern society it has become necessary to create more and more administrative bodies to help
in the regulation of its ramified activities. Specialized in the particular 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. This
is the reason for the increasing vesture of quasi-legislative and quasi-judicial powers in what is now not unreasonably
called the fourth department of the government. 34 Evidently, in the exercise of such powers, the agency concerned must
commonly interpret and apply contracts and determine the rights of private parties under such contracts. One thrust of
the multiplication of administrative agencies is that the interpretation of contracts and the determination of private rights
thereunder is no longer uniquely judicial function, exercisable only by our regular courts. (Antipolo Realty Corporation v.
National Housing Authority, G.R No. L-50444, August 31, 1987, 153 SCRA 399).
With global trade and business becoming more intricate may even with new discoveries in technology and electronics
notwithstanding, the time has come to grapple with legislations and even judicial decisions aimed at resolving issues
affecting not only individual rights but also activities of which foreign governments or entities may have interests. Thus,
administrative policies and regulations must be devised to suit these changing business needs in a faster rate than to
resort to traditional acts of the legislature.
This tendency finds support in a well-stated work on the subject, viz.: Since legislatures had neither the time nor the
knowledge to create- detailed rules, however, it was soon clear that new governmental arrangements would be needed to
handle the job of rule-making. The courts, moreover, many of them already congested, would have been swamped if they
had to adjudicate all the controversies that the new legislation was bound to create; and the judges, already obliged to
handle a great diversity of cases, would have been hard pressed to acquire the knowledge they needed to deal
intelligently with all the new types of controversy.
So the need to "create a large number of specialized administrative agencies and to give them broader powers than
administrators had traditionally exercised. These included the power to issue regulations having the force of law, and the
power to hear and decide cases powers that had previously been reserved to the legislatures and the courts.
(Houghteling/Pierce, Lawmaking by Administrative Agencies, p. 166)
The respondents likewise argue that PITC is not empowered to issue the Administrative Order because no grant of such
power was made under the Trade Protocols of 1989, 1990 or 1991. We do not agree. The Trade Protocols aforesaid, are
only the enumeration of the products and goods which the signatory countries have agreed to trade. They do not bestow
any regulatory power, for executive power is vested in the Executive Department, 35 and it is for the latter to delegate the
exercise of such power among its designated agencies.
In sum, the PITC was legally empowered to issue Administrative Orders, as a valid exercise of a power ancillary to
legislation.

This does not imply however, that the subject Administrative Order is valid exercise of such quasi-legislative power. The
original Administrative Order issued on August 30, 1989, under which the respondents filed their applications for
importation, was not published in the Official Gazette or in a newspaper of general circulation. The questioned
Administrative Order, legally, until it is published, is invalid within the context of Article 2 of Civil Code, which
reads:jgc:chanrobles.com.ph
"Article 2. Laws shall take effect after fifteen days following the completion of their publication in the Official Gazette (or in
a newspaper of general circulation in the Philippines), unless it is otherwise provided.. . ."cralaw virtua1aw library
The fact that the amendments to Administrative Order No. SOCPEC 89 08-01 were filed with, and published by the UP Law
Center in the National Administrative Register, does not cure the defect related to the effectivity of the Administrative
Order.
This court, in Taada v. Tuvera 36 stated, thus:jgc:chanrobles.com.ph
"We hold therefore that all statutes, including those of local application and private laws, shall be published as a condition
for their effectivity, which shall begin fifteen days after publication unless a different effectivity is fixed by the legislature.
Covered by this rule are presidential decrees and executive orders promulgated by the President in the exercise of
legislative powers or, at present, directly conferred by the Constitution. Administrative Rules and Regulations must also be
published if their purpose is to enforce or implement existing law pursuant also to a valid delegation.
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 so-called letters of instructions
issued by administrative superiors concerning the rules or guidelines to be followed by their subordinates in the
performance of their duties.
x

We agree that the publication must be in full or it is no publication at all since its purpose is to inform the public of the
contents of the laws."cralaw virtua1aw library
The Administrative Order under consideration is one of those issuances which should be published for its effectivity, since
its purpose is to enforce and implement an existing law pursuant to a valid delegation, i.e., P.D. 1071, in relation to LOI
444 and EO 133.
Thus, even before the trade balancing measures issued by the petitioner were lifted by President Fidel V. Ramos, the same
were never legally effective, and private respondents, therefore, cannot be made subject to them, because Administrative
Order 89-08-0l embodying the same was never published, as mandated by law, for its effectivity. It was only on March 30,
1992 when the amendments to the said Administrative Order were filed in the UP Law Center, and published in the
National Administrative Register as required by the Administrative Code of 1987.
Finally, it is the declared Policy of the Government to develop and strengthen trade relations with the Peoples Republic of
China. As declared by the President in EO 244 issued on May 12, 1995, continued coverage of the Peoples Republic of
China by Letter of Instructions No. 444 is no longer consistent with the countrys national interest, as coursing RP-PROC
trade through the PITC as provided for under Letter of Instructions No. 444 is becoming an unnecessary barrier to trade.
37
Conformably with such avowed policy, any remnant of the restrained atmosphere of trading between the Philippines and
PROC should be done away with so as to allow economic growth and renewed trade relations with our neighbors to flourish
and may be encouraged.
ACCORDINGLY, the assailed decision of the lower court is hereby AFFIRMED, to the effect that judgment is hereby
rendered in favor of the private respondents, subject to the following MODIFICATIONS:chanrob1es virtual 1aw library
1) Enjoining the petitioner:chanrob1es virtual 1aw library
a) From further charging the petitioners the Counter Export Development Service fee of 0.5% of the total value of the
unliquidated or unfulfilled Undertakings of the private respondents;
b) From further implementing the provisions of Administrative Order No. SOCPEC 89-08-01 and its appurtenant rules;
and,
2) Requiring petitioner to approve forthwith all the pending applications of, and all those that may hereafter be filed by,
the petitioner and the Intervenor, free from and without complying with the requirements prescribed in the above-stated
issuances.

SO ORDERED.
Regalado, Romero, Puno and Mendoza, JJ., concur.
PICHAY JR VS EXECUTIVE SECRETARY FOR SECRETARY FOR LEGAL AFFAIRS INVESTIGATIVE AND ADJUDICATORY
DIVISION,
PERLAS-BERNABE, J.:
The Case This is a Petition for Certiorari and Prohibition with a prayer for the issuance of a temporary restraining order,
seeking to declare as unconstitutional Executive Order No. 13, entitled, Abolishing the Presidential Anti-Graft Commission
and Transferring Its Investigative, Adjudicatory and Recommendatory Functions to the Office Of The Deputy Executive
Secretary For Legal Affairs, Office of the President, 1 and to permanently prohibit respondents from administratively
proceeding against petitioner on the strength of the assailed executive order.
The Facts
On April 16, 2001, then President Gloria Macapagal-Arroyo issued Executive Order No. 12 (E.O. 12) creating the
Presidential Anti-Graft Commission (PAGC) and vesting it with the power to investigate or hear administrative cases or
complaints for possible graft and corruption, among others, against presidential appointees and to submit its report and
recommendations to the President.
Pertinent portions of E.O. 12 provide:
Section 4. Jurisdiction, Powers and Functions. (a) xxx xxx xxx (b) The Commission, acting as a collegial body, shall have
the authority to investigate or hear administrative cases or complaints against all presidential appointees in the
government and any of its agencies or instrumentalities xxx xxx xxx xxx xxx xxx xxx
Section 8. Submission of Report and Recommendations. After completing its investigation or hearing, the Commission en
banc shall submit its report and recommendations to the President. The report and recommendations shall state, among
others, the factual findings and legal conclusions, as well as the penalty recommend (sic) to be imposed or such other
action that may be taken.
On November 15, 2010, President Benigno Simeon Aquino III issued Executive Order No. 13 (E.O. 13), abolishing the
PAGC and transferring its functions to the Office of the Deputy Executive Secretary for Legal Affairs (ODESLA), more
particularly to its newly-established Investigative and Adjudicatory Division (IAD).
The full text of the assailed executive order reads:
EXECUTIVE ORDER NO. 13 ABOLISHING THE PRESIDENTIAL ANTI-GRAFT COMMISSION AND TRANSFERRING ITS
INVESTIGATIVE, ADJUDICATORY AND RECOMMENDATORY FUNCTIONS TO THE OFFICE OF THE DEPUTY EXECUTIVE
SECRETARY FOR LEGAL AFFAIRS, OFFICE OF THE PRESIDENT
WHEREAS, this administration has a continuing mandate and advocacy to fight and eradicate corruption in the different
departments, bureaus, offices and other government agencies and instrumentalities;
WHEREAS, the government adopted a policy of streamlining the government bureaucracy to promote economy and
efficiency in government;
WHEREAS, Section VII of the 1987 Philippine Constitution provides that the President shall have control of all the
executive departments, bureaus and offices;
WHEREAS, Section 31 Chapter 10, Title III, Book III of Executive Order 292 (Administrative Code of 1987) provides for
the continuing authority of the President to reorganize the administrative structure of the Office of the President;
WHEREAS, Presidential Decree (PD) No. 1416 (Granting Continuing Authority to the President of the Philippines to
Reorganize the National Government), as amended by PD 1722, provides that the President of the Philippines shall have
continuing authority to reorganize the administrative structure of the National Government and may, at his discretion,
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;
WHEREAS, Section 78 of the General Provisions of Republic Act No. 9970 (General Appropriations Act of 2010) authorizes
the President of the Philippines to direct changes in the organizational units or key positions in any department or agency;
NOW, THEREFORE, I, BENIGNO S. AQUINO III, President of the Philippines, by virtue of the powers vested in me by law,
do hereby order the following:

SECTION 1. Declaration of Policy. It is the policy of the government to fight and eradicate graft and corruption in the
different departments, bureaus, offices and other government agencies and instrumentalities. The government adopted a
policy of streamlining the government bureaucracy to promote economy and efficiency in the government.
SECTION 2. Abolition of Presidential Anti-Graft Commission (PAGC). To enable the Office of the President (OP) to directly
investigate graft and corrupt cases of Presidential appointees in the Executive Department including heads of governmentowned and controlled corporations, the Presidential Anti-Graft Commission (PAGC) is hereby abolished and their vital
functions and other powers and functions inherent or incidental thereto, transferred to the Office of the Deputy Executive
Secretary for Legal Affairs (ODESLA), OP in accordance with the provisions of this Executive Order.
SECTION 3. Restructuring of the Office of the Deputy Executive Secretary for Legal Affairs, OP. In addition to the Legal and
Legislative Divisions of the ODESLA, the Investigative and Adjudicatory Division shall be created. The newly created
Investigative and Adjudicatory Division shall perform powers, functions and duties mentioned in Section 2 hereof, of
PAGC. The Deputy Executive Secretary for Legal Affairs (DESLA) will be the recommending authority to the President, thru
the Executive Secretary, for approval, adoption or modification of the report and recommendations of the Investigative
and Adjudicatory Division of ODESLA.
SECTION 4. Personnel Who May Be Affected By the Abolition of PAGC. The personnel who may be affected by the abolition
of the PAGC shall be allowed to avail of the benefits provided under existing laws if applicable. The Department of Budget
and Management (DBM) is hereby ordered to release the necessary funds for the benefits of the employees.
SECTION 5. Winding Up of the Operation and Disposition of the Functions, Positions, Personnel, Assets and Liabilities of
PAGC. The winding up of the operations of PAGC including the final disposition or transfer of their functions, positions,
personnel, assets and liabilities as may be necessary, shall be in accordance with the applicable provision(s) of the Rules
and Regulations Implementing EO 72 (Rationalizing the Agencies Under or Attached to the Office of the President) dated
March 15, 2002. The winding up shall be implemented not later than 31 December 2010. The Office of the Executive
Secretary, with the assistance of the Department of Budget and Management, shall ensure the smooth and efficient
implementation of the dispositive actions and winding-up of the activities of PAGC.
SECTION 6. Repealing Clause. All executive orders, rules, regulations and other issuances or parts thereof, which are
inconsistent with the provisions of this Executive Order, are hereby revoked or modified accordingly.
SECTION 7. Effectivity. This Executive Order shall take effect immediately after its publication in a newspaper of general
circulation.
On April 6, 2011, respondent Finance Secretary Cesar V. Purisima filed before the IAD-ODESLA a complaint affidavit 2 for
grave misconduct against petitioner Prospero A. Pichay, Jr., Chairman of the Board of Trustees of the Local Water Utilities
Administration (LWUA), as well as the incumbent members of the LWUA Board of Trustees, namely, Renato Velasco,
Susana Dumlao Vargas, Bonifacio Mario M. Pena, Sr. and Daniel Landingin, which arose from the purchase by the LWUA of
Four Hundred Forty-Five Thousand Three Hundred Seventy Seven (445,377) shares of stock of Express Savings Bank, Inc.
On April 14, 2011, petitioner received an Order 3 signed by Executive Secretary Paquito N. Ochoa, Jr. requiring him and
his co-respondents to submit their respective written explanations under oath. In compliance therewith, petitioner filed a
Motion to Dismiss Ex Abundante Ad Cautelam manifesting that a case involving the same transaction and charge of grave
misconduct entitled, Rustico B. Tutol, et al. v. Prospero Pichay, et al., and docketed as OMB-C-A-10-0426-I, is already
pending before the Office of the Ombudsman.
Now alleging that no other plain, speedy and adequate remedy is available to him in the ordinary course of law, petitioner
has resorted to the instant petition for certiorari and prohibition upon the following grounds:
I.
II.
III.
IV.
V.
VI.

E.O. 13 IS UNCONSTITUTIONAL FOR USURPING THE POWER OF THE LEGISLATURE TO CREATE A PUBLIC
OFFICE.
E.O. 13 IS UNCONSTITUTIONAL FOR USURPING THE POWER OF THE LEGISLATURE TO APPROPRIATE FUNDS.
E.O. 13 IS UNCONSTITUTIONAL FOR USURPING THE POWER OF CONGRESS TO DELEGATE QUASI-JUDICIAL
POWERS TO ADMINISTRATIVE AGENCIES. 2 Docketed as OP-DC Case No. 11-D-008. 3 Rollo, p. 54.
E.O. 13 IS UNCONSTITUTIONAL FOR ENCROACHING UPON THE POWERS OF THE OMBUDSMAN.
E.O. 13 IS UNCONSTITUTIONAL FOR VIOLATING THE GUARANTEE OF DUE PROCESS.
E.O. 13 IS UNCONSTITUTIONAL FOR VIOLATING THE EQUAL PROTECTION CLAUSE.

Our Ruling In assailing the constitutionality of E.O. 13, petitioner asseverates that the President is not authorized under
any existing law to create the Investigative and Adjudicatory Division, Office of the Deputy Executive Secretary for Legal
Affairs (IAD-ODESLA) and that by creating a new, additional and distinct office tasked with quasi-judicial functions, the
President has not only usurped the powers of congress to create a public office, appropriate funds and delegate quasijudicial functions to administrative agencies but has also encroached upon the powers of the Ombudsman.
Petitioner avers that the unconstitutionality of E.O. 13 is also evident when weighed against the due process requirement
and equal protection clause under the 1987 Constitution.

The contentions are unavailing.

The President has Continuing Authority to Reorganize the Executive Department under E.O. 292.
Section 31 of Executive Order No. 292 (E.O. 292), otherwise known as the Administrative Code of 1987, vests in the
President the continuing authority to reorganize the offices under him in order to achieve simplicity, economy and
efficiency. E.O. 292 sanctions the following actions undertaken for such purpose:
(1)Restructure the internal organization of the Office of the President Proper, including the immediate Offices, the
Presidential Special Assistants/Advisers System and the Common Staff Support System, by abolishing, consolidating, or
merging units thereof or transferring functions from one unit to another;
(2)Transfer any function under the Office of the President to any other Department or Agency as well as transfer functions
to the Office of the President from other Departments and Agencies; and
(3)Transfer any agency under the Office of the President to any other Department or Agency as well as transfer agencies
to the Office of the President from other departments or agencies. 4
In the case of Buklod ng Kawaning EIIB v. Zamora 5 the Court affirmed that the President's authority to carry out a
reorganization in any branch or agency of the executive department is an express grant by the legislature by virtue of E.O.
292, thus:
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 of 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. (Emphasis
supplied)
And in Domingo v. Zamora, 6 the Court gave the rationale behind the President's continuing authority in this wise: The law
grants the President this power in recognition of the recurring need of every President to reorganize his office to achieve
simplicity, economy and efficiency. The Office of the President is the nerve center of the Executive Branch. To remain
effective and efficient, the Office of the President must be capable of being shaped and reshaped by the President in the
manner he deems fit to carry out his directives and policies. After all, the Office of the President is the command post of
the President. (Emphasis supplied)
Clearly, the abolition of the PAGC and the transfer of its functions to a division specially created within the ODESLA is
properly within the prerogative of the President under his continuing delegated legislative authority to reorganize his
own office pursuant to E.O. 292.
Generally, this authority to implement organizational changes is limited to transferring either an office or a function from
the Office of the President to another Department or Agency, and the other way around. 7 Only Section 31(1) gives the
President a virtual freehand in dealing with the internal structure of the Office of the President Proper by allowing him to
take actions as extreme as abolition, consolidation or merger of units, apart from the less drastic move of transferring
functions and offices from one unit to another. Again, in Domingo v. Zamora 8 the Court noted: However, the President's
power to reorganize the Office of the President under Section 31 (2) and (3) of EO 292 should be distinguished from his
power to reorganize the Office of the President Proper. Under Section 31 (1) of EO 292, the President can reorganize the
Office of the President Proper by abolishing, consolidating or merging units, or by transferring functions from one unit to
another. In contrast, under Section 31 (2) and (3) of EO 292, the 6 President's power to reorganize offices outside the
Office of the President Proper but still within the Office of the President is limited to merely transferring functions or
agencies from the Office of the President to Departments or Agencies, and vice versa.
The distinction between the allowable organizational actions under Section 31(1) on the one hand and Section 31 (2) and
(3) on the other is crucial not only as it affects employees' tenurial security but also insofar as it touches upon the validity
of the reorganization, that is, whether the executive actions undertaken fall within the limitations prescribed under E.O.
292. When the PAGC was created under E.O. 12, it was composed of a Chairman and two (2) Commissioners who held the
ranks of Presidential Assistant II and I, respectively, 9 and was placed directly under the Office of the President. 10 On
the other hand, the ODESLA, to which the functions of the PAGC have now been transferred, is an office within the Office
of the President Proper. 11 Since both of these offices belong to the Office of the President Proper, the reorganization by
way of abolishing the PAGC and transferring its functions to the ODESLA is allowable under Section 31 (1) of E.O. 292.
Petitioner, however, goes on to assert that the President went beyond the authority granted by E.O. 292 for him to
reorganize the executive department since his issuance of E.O. 13 did not merely involve the abolition of an office but the
creation of one as well. He argues that nowhere in the legal definition laid down by the Court in several cases does a
reorganization include the act of creating an office.

The contention is misplaced. 9

The Reorganization Did not Entail the Creation of a New, Separate and Distinct Office.
The abolition of the PAGC did not require the creation of a new, additional and distinct office as the duties and functions
that pertained to the defunct anti-graft body were simply transferred to the ODESLA, which is an existing office within the
Office of the President Proper. The reorganization required no more than a mere alteration of the administrative structure
of the ODESLA through the establishment of a third division the Investigative and Adjudicatory Division through which
ODESLA could take on the additional functions it has been tasked to discharge under E.O. 13. In Canonizado v. Aguirre, 12
We ruled that Reorganization 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. It involves a reduction of
personnel, consolidation of offices, or abolition thereof by reason of economy or redundancy of functions.
The Reorganization was Pursued in Good Faith.
A valid reorganization must not only be exercised through legitimate authority but must also be pursued in good faith. A
reorganization is said to be carried out in good faith if it is done for purposes of economy and efficiency. 13 It appears in
this case that the streamlining of functions within the Office of the President Proper was pursued with such purposes in
mind. 12
In its Whereas clauses, E.O. 13 cites as bases for the reorganization the policy dictates of eradicating corruption in the
government and promoting economy and efficiency in the bureaucracy. Indeed, the economical effects of the
reorganization is shown by the fact that while Congress had initially appropriated P22 Million for the PAGC's operation in
the 2010 annual budget, 14 no separate or added funding of such a considerable amount was ever required after the
transfer of the PAGC functions to the IAD-ODESLA.
Apparently, the budgetary requirements that the IAD-ODESLA needed to discharge its functions and maintain its personnel
would be sourced from the following year's appropriation for the President's Offices under the General Appropriations Act
of 2011. 15 Petitioner asseverates, however, that since Congress did not indicate the manner by which the appropriation
for the Office of the President was to be distributed, taking therefrom the operational funds of the IAD-ODESLA would
amount to an illegal appropriation by the President. The contention is without legal basis.
There is no usurpation of the legislative power to appropriate public funds.
In the chief executive dwell the powers to run government. Placed upon him is the power to recommend the budget
necessary for the operation of the Government, 16 which implies that he has the necessary authority to evaluate and
determine the structure that each government agency in the executive department would need to operate in the most
economical and efficient manner. 17 Hence, the express recognition under Section 78 of R.A. 9970 or the General
Appropriations Act of 2010 of the Presidents authority to direct changes in the organizational units or key positions in
any department or agency. The aforecited provision, often and consistently included in the general appropriations laws,
recognizes the extent of the Presidents power to reorganize the executive offices and agencies under him, which is, even
to the extent of modifying and realigning appropriations for that purpose. 18
And to further enable the President to run the affairs of the executive department, he is likewise given constitutional
authority to augment any item in the General Appropriations Law using the savings in other items of the appropriation for
his office. 19 In fact, he is explicitly allowed by law to transfer any fund appropriated for the different departments,
bureaus, offices and agencies of the Executive Department which is included in the General Appropriations Act, to any
program, project or activity of any department, bureau or office included in the General Appropriations Act or approved
after its enactment. 20
Thus, while there may be no specific amount earmarked for the IADODESLA from the total amount appropriated by
Congress in the annual budget for the Office of the President, the necessary funds for the IADODESLA may be properly
sourced from the President's own office budget without committing any illegal appropriation. After all, there is no
usurpation of the legislature's power to appropriate funds when the President simply allocates the existing funds
previously appropriated by Congress for his office.
The IAD-ODESLA is a factfinding and recommendatory body not vested with quasijudicial powers.
Petitioner next avers that the IAD-ODESLA was illegally vested with judicial power which is reserved to the Judicial
Department and, by way of exception through an express grant by the legislature, to administrative agencies. He points
out that the name Investigative and Adjudicatory Division is proof itself that the IAD-ODESLA wields quasi-judicial power.
The argument is tenuous. As the OSG aptly explained in its Comment, 21 while the term adjudicatory appears part of its
appellation, the IAD-ODESLA cannot try and resolve cases, its authority being limited to the conduct of investigations,
preparation of reports and submission of recommendations. E.O. 13 explicitly states that the IAD-ODESLA shall perform
powers, functions and duties xxx, of PAGC. 22

Under E.O. 12, the PAGC was given the authority to investigate or hear administrative cases or complaints against all
presidential appointees in the government 23 and to submit its report and recommendations to the President. 24 The
IAD-ODESLA is a fact-finding and recommendatory body to the President, not having the power to settle controversies and
adjudicate cases. As the Court ruled in Cario v. Commission on Human Rights, 25 and later reiterated in Biraogo v. The
Philippine Truth Commission: 26
Fact-finding is not adjudication and it cannot be likened to the judicial function of a court of justice, or even a quasijudicial agency or office. The function of receiving evidence and ascertaining therefrom the facts of a controversy is not a
judicial function. To be considered as such, the act of receiving evidence and arriving at factual conclusions in a
controversy must be accompanied by the authority of applying the law to the factual conclusions to the end that the
controversy may be decided or determined authoritatively, finally and definitively, subject to such appeals or modes of
review as may be provided by law.
The President's authority to issue E.O. 13 and constitute the IADODESLA as his fact-finding investigator cannot be
doubted. After all, as Chief Executive, he is granted full control over the Executive Department to ensure the enforcement
of the laws.
Section 17, Article VII of the Constitution provides:
Section 17. The President shall have control of all the executive departments, bureaus and offices. He shall ensure that
the laws be faithfully executed. The obligation to see to it that laws are faithfully executed necessitates the corresponding
power in the President to conduct investigations into the conduct of officials and employees in the executive department.
27
The IAD-ODESLA does not encroach upon the powers and duties of the Ombudsman. 25
Contrary to petitioner's contention, the IAD-ODESLA did not encroach upon the Ombudsman's primary jurisdiction when it
took cognizance of the complaint affidavit filed against him notwithstanding the earlier filing of criminal and administrative
cases involving the same charges and allegations before the Office of the Ombudsman. The primary jurisdiction of the
Ombudsman to investigate and prosecute cases refers to criminal cases cognizable by the Sandiganbayan and not to
administrative cases. It is only in the exercise of its primary jurisdiction that the Ombudsman may, at any time, take over
the investigation being conducted by another investigatory agency. Section 15 (1) of R.A. No. 6770 or the Ombudsman
Act of 1989, empowers the Ombudsman to
(1)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 government, the investigation of such cases. (Emphasis supplied)
Since the case filed before the IAD-ODESLA is an administrative disciplinary case for grave misconduct, petitioner may not
invoke the primary jurisdiction of the Ombudsman to prevent the IAD-ODESLA from proceeding with its investigation. In
any event, the Ombudsman's authority to investigate both elective and appointive officials in the government, extensive
as it may be, is by no means exclusive. It is shared with other similarly authorized government agencies. 28
While the Ombudsman's function goes into the determination of the existence of probable cause and the adjudication of
the merits of a criminal accusation, the investigative authority of the IAD-ODESLA is limited to that of a fact-finding
investigator whose determinations and recommendations remain so until acted upon by the President. As such, it commits
no usurpation of the Ombudsman's constitutional duties.
Executive Order No. 13 Does Not Violate Petitioner's Right to Due Process and the Equal Protection of the Laws.
Petitioner goes on to assail E.O. 13 as violative of the equal protection clause pointing to the arbitrariness of limiting the
IAD-ODESLA's investigation only to presidential appointees occupying upper-level positions in the government. The equal
protection of the laws is a guaranty against any form of undue favoritism or hostility from the government. 29 It is
embraced under the due process concept and simply requires that, in the application of the law, all persons or things
similarly situated should be treated alike, both as to rights conferred and responsibilities imposed. 30 The equal
protection clause, however, is not absolute but subject to reasonable classification so that aggrupations bearing substantial
distinctions may be treated differently from each other. This we ruled in Farinas v. Executive Secretary, 31 wherein we
further stated that
The equal protection of the law clause is against undue favor and individual or class privilege, as well as hostile
discrimination or the oppression of inequality. It is not intended to prohibit legislation which is limited either in the object
to which it is directed or by territory within which it is to operate. It does not demand absolute equality among residents;
it merely requires that all persons shall be treated alike, under like circumstances and conditions both as to privileges
conferred and liabilities enforced. The equal protection clause is not infringed by legislation which applies only to those
persons falling within a specified class, if it applies alike to all persons within such class, and reasonable grounds exist for
making a distinction between those who fall within such class and those who do not. (Emphasis supplied)

Presidential appointees come under the direct disciplining authority of the President. This proceeds from the well settled
principle that, in the absence of a contrary law, the power to remove or to discipline is lodged in the same authority on
which the power to appoint is vested. 32 Having the power to remove and/or discipline presidential appointees, the
President has the corollary authority to investigate such public officials and look into their conduct in office. 33 Petitioner is
a presidential appointee occupying the high-level position of Chairman of the LWUA. Necessarily, he comes under the
disciplinary jurisdiction of the President, who is well within his right to order an investigation into matters that require his
informed decision.
There are substantial distinctions that set apart presidential appointees occupying upper-level positions in government
from non-presidential appointees and those that occupy the lower positions in government. In Salumbides v. Office of the
Ombudsman, 34 we had ruled extensively on the substantial distinctions that exist between elective and appointive public
officials, thus:
Substantial distinctions clearly exist between elective officials and appointive officials. The former occupy their office by
virtue of the mandate of the electorate. They are elected to an office for a definite term and may be removed therefrom
only upon stringent conditions. On the other hand, appointive officials hold their office by virtue of their designation
thereto by an appointing authority. Some appointive officials hold their office in a permanent capacity and are entitled to
security of tenure while others serve at the pleasure of the appointing authority.
x x x x An election is the embodiment of the popular will, perhaps the purest expression of the sovereign power of the
people. It involves the choice or selection of candidates to public office by popular vote. Considering that elected officials
are put in office by their constituents for a definite term, x x x complete deference is accorded to the will of the electorate
that they be served by such officials until the end of the term for which they were elected. In contrast, there is no such
expectation insofar as appointed officials are concerned. (Emphasis supplied)
Also, contrary to petitioner's assertions, his right to due process was not violated when the IAD-ODESLA took cognizance
of the administrative complaint against him since he was given sufficient opportunity to oppose the formal complaint filed
by Secretary Purisima. In administrative proceedings, the filing of charges and giving reasonable opportunity for the
person so charged to answer the accusations against him constitute the minimum requirements of due process, 35 which
simply means having the opportunity to explain ones side. 36 Hence, as long as petitioner was given the opportunity to
explain his side and present evidence, the requirements of due process are satisfactorily complied with because what the
law abhors is an absolute lack of opportunity to be heard. 37 The records show that petitioner was issued an Order
requiring him to submit his written explanation under oath with respect to the charge of grave misconduct filed against
him. His own failure to submit his explanation despite notice defeats his subsequent claim of denial of due process.
Finally, petitioner doubts that the IAD-ODESLA can lawfully perform its duties as an impartial tribunal, contending that
both the IAD-ODESLA and respondent Secretary Purisima are connected to the President. The mere suspicion of partiality
will not suffice to invalidate the actions of the IADODESLA. Mere allegation is not equivalent to proof. Bias and partiality
cannot be presumed. 38 Petitioner must present substantial proof to show that the lAD-ODES LA had unjustifiably sided
against him in the conduct of the investigation. No such evidence has been presented as to defeat the presumption of
regularity m the perfonnance of the fact-finding investigator's duties. The assertion, therefore, deserves scant
consideration.
Every law has in its favor the presumption of constitutionality, and to justify its nullification, there must be a clear and
unequivocal breach of the Constitution, not a doubtful and argumentative one. 39 Petitioner has failed to discharge the
burden of proving the illegality of E.O. 13, which IS indubitably a valid exercise of the President's continuing authority to
reorganize the Office of the President.
WHEREFORE, premises considered, the petition IS hereby DISMISSED.

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 IMPORT-EXPORT CO., INC., Respondents.
K. V. Faylona & Associates for respondents.
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.chanroblesvirtualawlibrary chanrobles virtual law library
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 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.chanroblesvirtualawlibrary chanrobles virtual law library
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; chanrobles virtual law library
2) Validity of the search warrants issued by respondent State Prosecutor; chanrobles virtual law library
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 chanrobles virtual law library
On April 16, 1985, the lower court issued the first of its challenged Orders, and held:
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.chanroblesvirtualawlibrary chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles virtual
law library
Besides as correctly pointed out by the Assistant Solicitor General the decision of the Presidential Anti-Dollar Salting Task
Force is appealable to the Office of the President.10 chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles virtual law library
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; chanrobles virtual law library
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; chanrobles virtual law library
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: chanrobles virtual law library
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 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 chanrobles virtual law library
2. In ruling that the petitioner PADS Task Force has not been granted under PD 1936 'judicial or quasi-judicial
jurisdiction. 12 chanrobles virtual law library
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 quasi-judicial 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.chanroblesvirtualawlibrary chanrobles virtual law library
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 chanrobles virtual law library
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. 19chanrobles virtual law library
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 quasijudicial functions. 20 chanrobles virtual law library
xxx xxx xxx chanrobles virtual law library
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. 21chanrobles virtual law library
xxx xxx xxx chanrobles virtual law library
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 chanrobles virtual law library
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, 25jurisdiction 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 chanrobles virtual law library

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.chanroblesvirtualawlibrarychanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles virtual law library
(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.chanroblesvirtualawlibrary chanrobles virtual law library
(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.chanroblesvirtualawlibrary chanrobles virtual law library
(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.chanroblesvirtualawlibrary chanrobles virtual law library
(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.chanroblesvirtualawlibrary chanrobles virtual law library
(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: chanrobles virtual law library
a) Motu proprio or upon complaint, to investigate and prosecute all dollar salting activities, including the overvaluation of
imports and the undervaluation of exports; chanrobles virtual law library
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; chanrobles virtual law library

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; chanrobles virtual
law library
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.chanroblesvirtualawlibrarychanrobles virtual law
library
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.chanroblesvirtualawlibrary chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles virtual law library
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 chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles
virtual law library

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 chanrobles virtual law
library
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 chanrobles virtual law library
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.] chanrobles virtual law library
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 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 chanrobles virtual law library
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 andCoolidge 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.chanroblesvirtualawlibrary chanrobles virtual law
library
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.chanroblesvirtualawlibrary chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles virtual law library
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.chanroblesvirtualawlibrary chanrobles virtual law
library
WHEREFORE, the petition is DISMISSED. No costs. SO ORDERED.
Fernan, C.J., Narvasa, Gutierrez, Jr., Paras, Gancayco, Padilla, Bidin, Grio-Aquino, Medialdea and Regalado, JJ.,
concur.chanroblesvirtualawlibrary chanrobles virtual law library
Cruz, Feliciano and Cortes, JJ. concur in the result.chanroblesvirtualawlibrary chanrobles virtual law library
Melencio-Herrera, J., took no part.chanroblesvirtu

FIRST DIVISION
[G.R. No. 109703. July 5, 1994.]
REALTY EXCHANGE VENTURE CORPORATION AND/OR MAGDIWANG REALTY CORPORATION,Petitioner, v.
LUCINA S. SENDINO and the OFFICE OF THE EXECUTIVE SECRETARY, Office of the President, Malacaang,
Manila, Respondents.

SYLLABUS

1. POLITICAL LAW; ADMINISTRATIVE LAW; ADMINISTRATIVE PROCEEDINGS; NOT HAMSTRUNG BY STRICT PROCEDURAL
TECHNICALITIES; CASE AT BAR. It is settled that rules of procedure are as a matter of course construed liberally in
proceedings before administrative bodies. 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 non-joinder of private petitioners 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.
2. ID.; ID.; EXECUTIVE ORDER NO. 648; TRANSFER OF ALL FUNCTIONS OF THE NATIONAL HOUSING AUTHORITY (NHA)
TO THE HUMAN SETTLEMENTS REGULATORY COMMISSION (HSRC) RENAMED HOUSING AND LAND USE REGULATORY
BOARD (HLURB); EFFECT THEREOF; CASE AT BAR. 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. Being the sole regulatory body for housing and land development, the renamed body, the HLURB, 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.
3. ID.; ID.; ID.; ID.; HLURBs POWER TO HEAR AND DECIDE CASES OF UNSOUND REAL ESTATE BUSINESS PRACTICE
AND OF SPECIFIC PERFORMANCE, UPHELD; CASE AT BAR. In general, the quantum of judicial or quasi-judicial powers
which an administrative agency may exercise is defined in the agencys enabling act. In view of the Courts
pronouncement in United Housing Corporation v. Hon. Dayrit, supra, recognizing the HLURB as the successor agency of
the HSRCs 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." 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. 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.
4. ID.; ID.; ID.; ID.; ID.; HLURBS POWER TO DELEGATE ADJUDICATORY FUNCTIONS TO A DIVISION, JUSTIFIED; CASE
AT BAR. 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 jurisprudence-justifying the Boards
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."cralaw
virtua1aw library
5. ID.; ID.; REPUBLIC ACCT 6552; COVERAGE THEREOF; REQUIREMENT THAT CANCELLATION OF CONTRACT MUST BE BY
NOTARIAL ACT, APPLICABLE TO RESERVATION AGREEMENTS; CASE AT BAR. 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. . . . As the Solicitor General correctly pointed out, RA 6552 makes no
distinction between "option" and "sale" 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." 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.

DECISION

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, Paraaque 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 .
On July 18, 1989, private respondent paid REVI P16,600.00 as full downpayment on the purchase price. 3 However, 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:jgc:chanrobles.com.ph
"1. To comply and continue with the sale of the house and lot, Block 4, Lot 17 at the Raymondville Subdivision, Sucat
Road, Paraaque, Metro Manila.
"2. To pay complaint actual, nominal and moral damages, the amount of which will be proved in the hearing;
"3. To pay complainant attorneys 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 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 attorneys fees

and costs of the suit. 8 An appeal from this decision was taken to the HLURB OAALA Arbiter, which affirmed the Boards
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:chanrob1es virtual 1aw library
"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 WAS 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."cralaw virtua1aw library
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 respondents capacity to bring her complaint before the HLURBOAALA.
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 non-joinder of private petitioners 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 Governments 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:jgc:chanrobles.com.ph
". . . 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."cralaw virtua1aw library
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 v. Hon. Dayrit 12
that:jgc:chanrobles.com.ph
"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:chanrob1es virtual 1aw library
Section 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:chanrob1es virtual 1aw library
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:jgc:chanrobles.com.ph
"Section 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 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:chanrob1es virtual 1aw library
Section 19. . . . .
(6) In all other cases not within the exclusive jurisdiction of any court, tribunal, persons or body exercising judicial or
quasi-judicial functions.
x

"Neither can We accede to private respondents claim that resort to the court is justified under section 41 of PD 957
specifically under the phrase legal remedies that may be available 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 agencys 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
agencys enabling act. In view of the Courts pronouncement in United Housing Corporation v. Hon. Dayrit, supra,
recognizing the HLURB as the successor agency of the HSRCs 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 lost 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.chanrobles virtualawlibrary
chanrobles.com:chanrobles.com.ph
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 jurisprudence-justifying the Boards 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:jgc:chanrobles.com.ph
"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."cralaw virtua1aw library
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.chanrobles virtual
lawlibrary
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.

SECURITIES AND EXCHANGE COMMISSION V. CHENERY CORP. , 332 U.S. 194 (1947)
332 U.S. 194
SECURITIES AND EXCHANGE COMMISSION
v.
CHENERY CORPORATION et al.

SAME
v.
FEDERAL WATER & GAS CORPORATION.
Nos. 81 and 82.
Argued Dec. 13-16, 1946.
Decided June 23, 1947.
Rehearing Denied Oct. 13, 1947. See . [ Securities and Exchange Commission v. Chenery Corp. 332 U.S.
194(1947) ] [332 U.S. 194 , 195]
Mr. Roger S. Foster, of Philadelphia, Pa., for petitioner.
[332 U.S. 194 , 196]

Mr. Spencer Gordon, of Washington, D.C., for Chenery Corporation and others.

Mr. Allen S. Hubbard, of New York City, for Federal Water & Gas Corporation.
Mr. Justice MURPHY delivered the opinion of the Court.
This case is here for the second time. In S.E.C. v. Chenery Corporation, 318 U.S. 80 , we held that an order of the
Scurities a nd Exchange Commission could not be sustained on the grounds upon which that agency acted. We therefore
directed that the case be remanded to the Commission for such further proceedings as might be appropriate. On remand,
the Commission reexamined the problem, recast its rationale and reached the same result. The issue now is whether the
Commission's action is proper in light of the principles established in our prior decision.
When the case was first here, we emphasized a simple but fundamental rule of administrative law. That rule is to the
effect that a reviewing court, in dealing with a determination or judgment which an administrative agency alone is
authorized to make, must judge the propriety of such action solely by the grounds invoked by the agency. If those
grounds are inadequate or improper, the court is powerless to affirm the administrative action by substituting what it
considers to be a more adequate or proper basis. To do so would propel the court into the domain which Congress has set
aside exclusively for the administrative agency.
We also emphasized in our prior decision an important corollary of the foregoing rule. If the administrative action is to be
tested by the basis upon which it purports to rest, that basis must be set forth with such clarity as to be understandable.
It will not do for a court to be com- [332 U.S. 194 , 197]

pelled to guess at the theory underlying the agency's action;

nor can a court be expected to chisel that which must be precise from what the agency has left vague and indecisive. In
other words, 'We must know what a decision means before the duty becomes ours to say whether it is right or wrong.'
United States v. Chicago, M., St. P. & P.R. Co., 294 U.S. 499, 511 , 467.
Applying this rule and its corollary, the Court was unable to sustain the Commission's original action. The Commission had
been dealing with the reorganization of the Federal Water Service Corporation (Federal), a holding company registered
under the Public Utility Holding Company Act of 1935, 49 Stat. 803, 15 U.S.C.A. 79 et seq. During the period when
successive reorganization plans proposed by the management were before the Commission, the officers, directors and
controlling stockholders of Federal purchased a substantial amount of Federal's preferred stock on the over-the-counter
market. Under the fourth reorganization plan, this preferred stock was to be converted into common stock of a new
corporation; on the basis of the purchases of preferred stock, the management would have received more than 10% of

this new common stock. It was frankly admitted that the management's purpose in buying the preferred stock was to
protect its interest in the new company. It was also plain that there was no fraud or lack of disclosure in making these
purchases.
But the Commission would not approve the fourth plan so long as the preferred stock purchased by the management was
to be treated on a parity with the other preferred stock. It felt that the officers and directors of a holding company in
process of reorganization under the Act were fiduciaries and were under a duty not to trade in the securities of that
company during the reorganization period. 8 S.E.C. 893, 915-921. And so the plan was amended to provide that the
preferred stock acquired by the management, unlike that held by others, was not to be con- [332 U.S. 194 , 198]

verted

into the new common stock; instead, it was to be surrendered at cost plus dividends accumulated since the purchase
dates. As amended, the plan was approved by the Commission over the management's objections. 10 S. E.C. 200.
The Court interpreted the Commission's order approving this amended plan as grounded solely upon judicial authority. The
Commission appeared to have treated the preferred stock acquired by the management in accordance with what it
thought were standards theretofore recognized by courts. If it intended to create new standards growing out of its
experience in effectuating the legislative poliy, it fail ed to express itself with sufficient clarity and precision to be so
understood. Hence the order was judged by the only standards clearly invoked by the Commission. On that basis, the
order could not stand. The opinion pointed out that courts do not impose upon officers and directors of a corporation any
fiduciary duty to its stockholders which precludes them merely because they are officers and directors, from buying and
selling the corporation's stock. Nor was it felt that the cases upon which the Commission relied established any principles
of law or equity which in themselves would be sufficient to justify this order.
The opinion further noted that neither Congress nor the Commission had promulgated any general rule proscribing such
action as the purchase of preferred stock by Federal's management. And the only judge-made rule of equity which might
have justified the Commission's order related to fraud or mismanagement of the reorganization by the officers and
directors, matters which were admittedly absent in this situation.
After the case was remanded to the Commission, Federal Water and Gas Corp. (Federal Water), the surviving corporation
under the reorganization plan, made an application for approval of an amendment to the plan to provide [332 U.S. 194 ,
199]

for the issuance of now common stock of the reorganized company. This stock was to be distributed to the

members of Federal's management on the basis of the shares of the old preferred stock which they had acquired during
the period of reorganization, thereby placing them in the same position as the public holders of the old preferred stock.
The intervening members of Federal's management joined in this request. The Commission denied the application in an
order issued on February 7, 1945. Holding Company Act Release No. 5584. That order was reversed by the Court of
Appeals, 154 F.2d 6, which felt that our prior decision precluded such action by the Commission.
The latest order of the Commission definitely avoids the fatal error of relying on judicial precedents which do not sustain
it. This time, after a thorough reexamination of the problem in light of the purposes and standards of the Holding
Company Act, the Commission has concluded that the proposed transaction is inconsistent with the standards of 7 and 11
of the Act. It has drawn heavily upon its accumulated experience in dealing with utility reorganizations. And it has
expressed its reasons with a clarity and thoroughness that admit of no doubt as to the underlying basis of its order.
The argument is pressed upon us, however, that the Commission was foreclosed from taking such a step following our
prior decision. It is said that, in the absence of findings of conscious wrongdoing on the part of Federal's management, the
Commission could not determine by an order in this particular case that it was inconsistent with the statutory standards to
permit Federal's management to realize a profit through the reorganization purchases. All that it could do was to enter an

order allowing an amendment to the plan so that the proposed transaction could be consummated. Under this view, the
Commission would be free only to promulgate a general rule [332 U.S. 194 , 200]

outlawing such profits in future utility

reorganizations; but such a rule would have to be prospective in nature and have no retroactive effect upon the instant
situation.
We reject this contention, for it grows out of a misapprehension of our prior decision and of the Commission's statutory
duties. We held no more and no less than that the Commission's first order was unsupportable for the reasons supplied by
that agency. But when the case left this Court, the problem whether Federal's management should be treated equally with
other preferred stockholders still lacked a final and complete answer. It was clear that the Commission could not give a
negative answer by resort to prior judicial declarations. And it was also clear that the Commission was not bound by
settled judicial precedents in asituation of this nature. 318 U.S. at page 89, 63 S.Ct. at page 460. Still unsettled, however,
was the answer the Commission might give were it to bring to bear on the facts the proper administrative and statutory
considerations, a function which belongs exclusively to the Commission in the first instance. The administrative process
had taken an erroneous rather than a final turn. Hence we carefully refrained from expressing any views as to the
propriety of an order rooted in the proper and relevant considerations. See Siegel v. Federal Trade Commission, 327 U.S.
608 , 613, 614, 760, 761.
When the case was directed to be remanded to the Commission for such further proceedings as might be appropriate, it
was with the thought that the Commission would give full effect to its duties in harmony with the views we had expressed.
Ford Motor Co. v. National Labor Relations Board, 305 U.S. 364, 374 , 307; Federal Radio Commission v. Nelson Bros.
Bond & Mortgage Co., 289 U.S. 266, 278 , 633, 89 A.L.R. 406. This obviously meant something more than the entry of a
perfunctory order giving parity treatment to the management holdings of preferred stock. The fact that the Commission
had committed a legal error in its first disposition of the case certainly gave Federal's [332 U.S. 194 , 201]

management

no vested right to receive the benefits of such an order. See Federal Communications Commission v. Pottsville
Broadcasting Co., 309 U.S. 134, 145 , 442. After the remand was made, therefore, the Commission was bound to deal
with the problem afresh, performing the function delegated to it by Congress. It was again charged with the duty of
measuring the proposed treatment of the management's preferred stock holdings by relevant and proper standards. Only
in that way could the legislative policies embodied in the Act be effectuated.
The absence of a general rule or regulation governing management trading during reorganization did not affect the
Commission's duties in relation to the particular proposal before it. The Commission was asked to grant or deny
effectiveness to a proposed amendment to Federal's reorganization plan whereby the management would be accorded
parity treatment on its holdings. It could do that only in the form of an order, entered after a due consideration of the
particular facts in light of the relevant and proper standards. That was true regardless of whether those standards
previously had been spelled out in a general rule or regulation. Indeed, if the Commission rightly felt that the proposed
amendment was inconsistent with those standards, an order giving effect to the amendment merely because there was no
general rule or regulation covering the matter would be unjustified.
It is true that our prior decision explicitly recognized the possibility that the Commission might have promulgated a
general rule dealing with this problem under its statutory rule-making powers, in which case the issue for our
consideration would have been entirely different from that which did confront us. 318 U.S. at pages 92, 93, 63 S.Ct. at
pages 461, 462. But we did not mean to imply thereby that the failure of the Commission to anticipate this problem and to
promulgate a general rule withdrew all power from that agency to per- [332 U.S. 194 , 202]

form its statutory duty in

this case. To hold that the Commission had no alternative in this proceeding but to approve the proposed transaction,
while formulating any general rules it might desire for use in future cases of this nature, would be to stultify the
administrative process. That we refuse to do.

Since the Commission, unlike a court, does have the ability to make new law prospectively through the exercise of its rulemaking powers, it has less reason to rely upon ad hoc adjudication to formulate new standards of conduct within the
framework of the Holding Company Act. The function of filling in the interstics of the A ct should be performed, as much as
possible, through this quasi-legislative promulgation of rules to be applied in the future. But any rigid requirement to that
effect would make the administrative process inflexible and incapable of dealing with many of the specialized problems
which arise. See Report of the Attorney General's Committee on Administrative Procedure in Government Agencies, S.
Doc. No. 8, 77th Cong., 1st Sess., p. 29. Not every principle essential to the effective administration of a statute can or
should be cast immediately into the mold of a general rule. Some principles must await their own development, while
others must be adjusted to meet particular, unforeseeable situations. In performing its important functions in these
respects, therefore, an administrative agency must be equipped to act either by general rule or by individual order. To
insist upon one form of action to the exclusion of the other is to exalt form over necessity.
In other words, problems may arise in a case which the administrative agency could not reasonably foresee, problems
which must be solved despite the absence of a relevant general rule. Or the agency may not have had sufficient
experience with a particular problem to warrant rigidifying its tentative judgment into a hard and fast rule. Or [332 U.S.
194 , 203]

the problem may be so specialized and varying in nature as to be impossible of capture within the boundaries

of a general rule. In those situations, the agency must retain power to deal with the problems on a case-to-case basis if
the administrative process is to be effective. There is thus a very definite place for the case-by-case evolution of statutory
standards. And the choice made between proceeding by general rule or by individual, ad hoc litigation is one that lies
primarily in the informed discretion of the administrative agency. See Columbia Broadcasting System v. United States, 316
U.S. 407, 421 , 1202.
Hence we refuse to say that the Commission, which had not previously been confronted with the problem of management
trading during reorganization, was forbidden from utilizing this particular proceeding for announcing and applying a new
standard of conduct. Cf. Federal Trade Commission v. R. F. Keppel & Bro., 291 U.S. 304 . That such action might have a
retroactive effect was not necessarily fatal to its validity. Every case of first impression has a retroactive effect, whether
the new principle is announced by a court or by an administrative agency. But such retroactivity must be balanced against
the mischief of producing a result which is contrary to a statutory design or to legal and equitable principles. If that
mischief is greater than the ill effect of the retroactive application of a new standard, it is not the type of retroactivity
which is condemned by law. See Addison v. Holly Hill Co., 322 U.S. 607, 620 , 1222, 153 A.L.R. 1007.
And so in this case, the fact that the Commission's order might retroactively prevent Federal's management from securing
the profits and control which were the objects of the preferred stock purchases may well be outweighed by the dangers
inherent in such purchases from the statutory standpoint. If that is true, the argument of retroactivity becomes nothing
more than a claim that the Commission lacks power to enforce the standards of [332 U.S. 194 , 204]

the Act in this

proceeding. Such a claim deserves rejection.

The problem in this case thus resolves itself into a determination of whether the Commission's action in denying
effectiveness to the proposed amendment to the Federal reorganization plan can be justified on the basis upon which it
clearly rests. As we have noted, the Commission avoided placing its sole reliance on inapplicable judicial precedents.
Rather it has derived its conclusions from the particular facts in the case, its general experience in reorganization matters
and its informed view of statutory requirements. It is hose matters which are the guide for our review.
The Commission concluded that it could not find that the reorganization plan, if amended as proposed, would be 'fair and
equitable to the persons affected (thereby)' within the meaning of 11(e) of the Act, under which the reorganization was
taking place. Its view was that the amended plan would involve the issuance of securities on terms 'detrimental to the

public interest or the interest of investors' contrary to 7(d)(6) and 7(e), and would result in an 'unfair or inequitable
distribution of voting power' among the Federal security holders within the meaning of 7(e). It was led to this result 'not
by proof that the interveners (Federal's management) committed acts of conscious wrongdoing but by the character of the
conflicting interests created by the interveners' program of stock purchases carried out while plans for reorganization were
under consideration.'
The Commission noted that Federal's management controlled a large multi-state utility system and that its influence
permeated down to the lowest tier of operating companies. The financial, operational and accounting policies of the parent
and its subsidiaries were therefore under the management's strict control. The broad range of business judgments vested
in Federal's management [332 U.S. 194 , 205]

multiplied opportunities for affecting the market price of Federal's

outstanding securities and made the exercise of judgment on any matter a subject of greatest significance to investors.
Added to these normal managerial powers, the Commission pointed out that a holding company management obtains
special powers in the course of a voluntary reorganization under 11(e) of the Holding Company Act. The management
represents the stockholders in such a reorganization, initiates the proceeding, draws up and files the plan, and can file
amendments thereto at any time. These additional powers may introduce conflicts between the management's normal
interests and its responsibilities to the various classes of stockholders which it represents in the reorganization. Moreover,
because of its representative status, the management has special opportunities to obtain advance information of the
attitude of the Commission.
Drawing upon its experience, the Commission indicated that all these normal and special powers of the holding company
management during the course of a 11(e) reorganization placed in the management's command 'a formidable battery of
devices that would enable it, if it should choose to use them selfishly, to affect in material degree the ultimate allocation of
new securities among the various existing classes, to influence the market for its own gain and to manipulate or obstruct
the reorganization required by the mandate of the statute.' In that setting, the Commission felt that a management
program of stock purchase would give rise to the temptation and the opportunity to shape the reorganization proceeding
so as to encourage public selling on the market at low prices. No management could engage in such a program without
raising serious questions as to whether its personal interests had not opposed its duties 'to exercise disinterested
judgment in matters pertaining to subsidiaries' accounting, budgetary and dividend policies, to present [332 U.S. 194 ,
206] publicly an unprejudiced financial picture of the enterprise, and to effectuate a fair and feasible plan expeditiously.'
The Commission further felt that its answer should be the same even where proof of intentional wrongdoing on the
management's part is lacking. Assuming a conflict of interests, the Commission thought that the absence of actual
misconduct is immaterial; injury to the public investors and to the corporation may result just as readily. 'Questionable
transactions may be explained away, and an abuse of investors and the administrative process may be perpetrated
without evil intent, yet the injury will remain.' Moreover, the Commission was of the view that the delays and the
difficulties involved in pobing the mental processes and personal integrity of corporate officials do not warrant any
distinction on the basis of evil intent, the plain fact being 'that an absence of unfairness or detriment in cases of this sort
would be practically impossible to establish by proof.'
Turning to the facts in this case, the Commission noted the salient fact that the primary object of Federal's management in
buying the preferred stock was admittedly to obtain the voting power that was accruing to that stock through the
reorganization and to profit from the investment therein. That stock had been purchased in the market at prices that were
depressed in relation to what the management anticipated would be, and what in fact was, the earning and asset value of
its reorganization equivalent. The Commission admitted that the good faith and personal integrity of this management
were not in question; but as to the management's justification of its motives, the Commission concluded that it was
merely trying to 'deny that they made selfish use of their powers during the period when their conflict of interest, vis-a-vis

public investors was in existence owing to their purchase program.' Federal's management had [332 U.S. 194 , 207]

thus

placed itself in a position where it was 'peculiarly susceptible to temptation to conduct the reorganization for personal gain
rather than the public good' and where its desire to make advantageous purchases of stock could have an important
influence, even though subconsciously, upon many of the decisions to be made in the course of the reorganization.
Accordingly, the Commission felt that all of its general considerations of the problem were applicable to this case.
The scope of our review of an administrative order wherein a new principle is announced and applied is no different from
that which pertains to ordinary administrative action. The wisdom of the principle adopted is none of our concern. See
Board of Trade of Kansas City, Mo. v. United States, 314 U.S. 534, 548 , 373. Our duty is at an end when it becomes
evident that the Commission's action is based upon substantial evidence and is consistent with the authority granted by
Congress. See National Broadcasting Co. v. United States, 319 U.S. 190, 224 , 1013.
We are unable to say in this case that the Commission erred in reaching the result it did. The facts being undisputed, we
are free to disturb the Commission's conclusion only if it lacks any rational and statutory foundation. In that connection,
the Commission has made a thorough examination of the problem, utilizing statutory standards and its own accumulated
experience with reorganization matters. In essence, it has made what we indicated in our prior opinion would be an
informed, expert judgment on the problem. It has taken into account 'those more subtle factors in the marketing of utility
company securities that gave rise to the very grave evils which the Public Utility Holding Company Act of 1935 was
designed to correct' and has relied upon the fact that 'Abuse of corporate position, influence, and access to information
may raise questions so subtle that the law can deal with them effectively only by prohi- [332 U.S. 194 , 208]

bitions not

concerned with the fairness of a particular transaction.' 318 U.S. at page 92, 63 S.Ct. at page 461.
Such factors may properly be considered by the Commission in determining whether to approve a plan of reorganization of
a utility holding company, or an amendment to such a plan. The 'fair and equitable' rule of 11(e) and the standard of what
is 'detrimental to the public interest or the interest of investors or consumers' under 7(d)(6) and 7(e) were inserted by the
framers of the Act in order that the Commission might have broad powers to protect the various interests at stake. 318
U.S. at pages 90, 91, 63 S.Ct. at pages 460, 461. The application of those critera, whether in the form of a particular
order or a general regulaton, necess arily requires the use of informal discretion by the Commission. The very breath of
the statutory language precludes a reversal of the Commission's judgment save where it has plainly abused its discretion
in these matters. See United States v. Lowden, 308 U.S. 225 ; I.C.C. v. Railway Labor Executives Ass'n, 315 U.S. 373 .
Such an abuse is not present in this case.
The purchase by a holding company management of that company's securities during the course of a reorganization may
well be thought to be so fraught with danger as to warrant a denial of the benefits and profits accruing to the
management. The possibility that such a stock purchase program will result in detriment to the public investors is not a
fanciful one. The influence that program may have upon the important decisions to be made by the management during
reorganization is not inconsequential. Since the officers and directors occupy fiduciary positions during this period, their
actions are to be held to a higher standard than that imposed upon the general investing public. There is thus a
reasonable basis for a value judgment that the benefits and profits accruing to the management from the stock purchases
should be prohibited, regardless of the good faith involved. And [332 U.S. 194 , 209]

it is a judgment that can justifiably

be reached in terms of fairness and equitableness, to the end that the interests of the public, the investors and the
consumers might be protected. But it is a judgment based upon public policy, a judgment which Congress has indicated is
of the type for the Commission to make.
The Commission's conclusion here rests squarely in that area where administrative judgments are entitled to the greatest
amount of weight by appellate courts. It is the product of administrative experience, appreciation of the complexities of

the problem, realization of the statutory policies, and responsible treatment of the uncontested facts. It is the type of
judgment which administrative agencies are best equipped to make and which justifies the use of the administrative
process. See Republic Aviation Corporation v. National Labor Relations Board, 324 U.S. 793, 800 , 986, 157 A.L.R. 1081.
Whether we agree or disagree with the result reached, it is an allowable judgment which we cannot disturb.
Reversed.
Mr. Justice BURTON concurs in the result.
The CHIEF JUSTICE and Mr. Justice DOUGLAS took no part in the consideration or decision of this case.
Mr. Justice FRANKFURTER and Mr. Justice JACKSON dissent, but there is not now opportunity for a response adequate to
the issues raised by the Court's opinion. These concern the rule of law in its application to the administrative process and
the function of this Court in reviewing administrative action. Accordingly, the detailed grounds for dissent will be filed in
due course.
For dissenting opinion of Mr. Justice JACKSON, see 332 U.S. 194 , 67 S. Ct. 1760.
Mr. Justice JACKSON, dissenting.
The Court by this present decision sustains the identical administrative order which only recently it held invalid. [332 U.S.
194 , 210]

Securities and Exchange Commission v. Chenery Corp., 318 U.S. 80 . As the Court correctly notes, the

Commission has only 'recast its rationale and reached the same result.' (Par. 1.)1 There being no change in the order, no
additional evidence in the record and no amendment of relevant legislation, it is clear that there has been a shift in
attitude between that of the controlling membership of the Court when the case was first here and that of those who have
the power of decision on this second review.
Mr. Justice JACKSON announced that he has filed an opinion, in which Mr. Justice FRANKFURTER joins, setting forth the
detailed grounds for his dissent from the opinion and judgment of the Court entered June 23, 1947, in these cases.
I feel constrained to disagree with the reasoning offered to rationalize this shift. It makes judicial review of administrative
orders a hopeless formality for the litigant, even where granted to him by Congress. It reduces the judicial process in such
cases to a mere feint. While the opinion does not have the adherence of a majority of the full Court, if its pronouncements
should become governing principles they would, in practice, put most administrative orders over and above the law.
I.
The essential facts are few and are not in dispute. 2 This corporation filed with the Securities and Exchange Commission a
voluntary plan of reorganization. While the reorganization proceedings were pending sixteen officers and directors bought
on the open market about 7 1/2% of the corporation's preferred stock. Both the Commission and the Court admit that
these purchases were not forbidden by any law, judicial precedent, regulation or rule of the Commission. Nevertheless,
the Commission has [332 U.S. 194 , 211]

ordered these individuals to surrender their shares to the corporation at cost,

plus 4% interest, and the Court now approves that order.

It is helpful, before considering whether this order is authorized by law, to reflect on what it is and what it is not. It is not
conceivably a discharge of the Commission's duty to determine whether a proposed plan of reorganization would be 'fair
and equitable.' It has nothing to do with the corporate structure, or the classes and amounts of stock, or voting rights or
dividend preferences. It does not remotely affect the impersonal financial or legal factors of the plan. It is a personal

deprivation denying particular persons the right to cntinue to own their stock and to exercise its privileges. Other persons
who bought at the same time and price in the open market would be allowed to keep and convert their stock. Thus, the
order is in no sense an exercise of the function of control over the terms and relations of the corporate securities.
Neither is the order one merely to regulate the future use of property. It literally takes valuable property away from its
lawful owners for the benefit of other private parties without full compensation and the Court expressly approves the
taking. It says that the stock owned by these persons is denied conversion along with similar stock owned by others;
'instead, it was to be surrendered at cost plus dividends accumulated since the purchase dates.' (Par. 5.) It should be
noted that this formula was subsequently altered to read 'cost plus 4% interest.' That this basis was less than its value is
recognized, for the Court says 'That stock had been purchased in the market at prices that were depressed in relation to
what the management anticipated would be, and what in fact was, the earning and asset value of its reorganization
equivalent.' (Par. 24.) Admittedly, the value above cost, and interest on it, simply is taken from the owners, [332 U.S. 194
, 212]

without compensation. No such power has ever been confirmed in any administrative body.

It should also be noted that neither the Court nor the Commission purports to adjudge a forfeiture of this property as a
consequence of sharp dealing or breach of trust. The Court says, 'The Commission admitted that the good faith and
personal integrity of this management were not in question; * * *.' (Par. 24.) And again, 'It was frankly admitted that the
management's purpose in buying the preferred stock was to protect its interest in the new company. It was also plain that
there was no fraud or lack of disclosure in making these purchases.' (Par. 4.)
II.
The reversal of the position of this Court is due to a fundamental change in prevailing philosophy. The basic assumption of
the earlier opinion as therein stated was, 'But before transactions otherwise legal can be outlawed or denied their usual
business consequences, they must fall under the ban of some standards of conduct prescribed by an agency of
government authorized to prescribe such standards.' Securities and Exchange Commission v. Chenery Corp., 318 U.S. 80 ,
92, 93, 461. The basic assumption of the present opinion is stated thus: 'The absence of a general rule or regulation
governing management trading during reorganization did not affect the Commission's duties in relation to the particular
proposal before it.' (Par. 13.) This puts in juxtaposition the two conflicting philosophies which produce opposite results in
the same case and on the same facts. The difference between the first and the latest decision of the Court is thus simply
the difference between holding that administrative orders must have a basis in law and a holding that absence of a legal
basis is no ground on which courts may annul them.
As there admittedly is no law or regulation to support this order we peruse the Court's opinion diligently to find[332 U.S.
194 , 213]

on what grounds it is now held that the Court of Appeals, on pain of being reversed for error, was required to

stamp this order with its approval. We find but one. That is the principle of judicial deference to administrative experience.
That argument is five times stressed in as many different contexts, and I quote just enough to identify the instances: 'The
Commission,' it says, 'has drawn heavily upon its accumulated experience in dealing with utility reorganizations.' (Par. 9.)
'Rather it has derived its conclusions from the particular facts in the case, its general experience in reorganization matters
and its informed view of statutory requirements.' (Par. 19.) 'Drawing upon its experience, the Commission indicated * * *,'
etc. (Par. 22.) '* * * the Commission has made a thorough examination of the problem, utilzing statu tory standards and
its own accumulated experience with reorganization matters.' (Par. 26.) And finally, of the order the Court says, 'It is the
product of administrative experience,' etc. (Par. 29.)
What are we to make of this reiterated deference to 'administrative experience' when in another context the Court says,
'Hence we refuse to say that the Commission, which had not previously been confronted with the problem of management

trading during reorganization, was forbidden from utilizing this particular proceeding for announcing and applying a new
standard of conduct.'? (Par. 17.) (Emphasis supplied.)
The Court's reasoning adds up to this: The Commission must be sustained because of its accumulated experience in
solving a problem with which it had never before been confronted!
Of course, thus to uphold the Commission by professing to find that it has enunciated a 'new standard of conduct,' brings
the Court squarely against the invalidity of retroactive law-making. But the Court does not falter. 'That such action might
have a retroactive effect [332 U.S. 194 , 214]

was not necessarily fatal to its validity.' (Par. 17.) 'But such retroactivity

must be balanced against the mischief of producing a result which is contrary to a statutory design or to legal and
equitable principles.' (Par. 17.) Of course, if what these parties did really was condemned by 'statutory design' or 'legal
and equitable principles,' it could be stopped without resort to a new rule and there would be no retroactivity to condone.
But if it had been the Court's view that some law already prohibited the purchases, it would hardly have been necessary
three sentences earlier to hold that the Commission was not prohibited 'from utilizing this particular proceeding for
announcing and applying a new standard of conduct.' (Par. 17.) (Emphasis supplied.)
I give up. Now I realize fully what Mark Twain meant when he said, 'The more you explain it, the more I don't understand
it.'
III.
But one does not need to comprehend the processes by which other minds reach a given result in order to estimate the
practical consequences of their pronouncement upon judicial review of administrative orders.
If it is of no consequence that no rule of law be existent to support an administrative order, and the Court of Appeals is
obliged to defer to administrative experience and to sustain a Commission's power merely because it has been asserted
and exercised, of what use is it to print a record or briefs in the case, or to hear argument? Administrative experience
always is present, at least to the degree that it is here, and would always dictate a like deference by this Court to an
assertion of administrative power. Must the reviewing court, as this Court does in this opinion, support the order on a
presumptive or imputed experience even though the Court is obliged to discredit such experience in the very same
opinion? Is [332 U.S. 194 , 215]

fictitious experience to be conclusive in matters of law and particularly in the

interpretation of statutes, as the Court's opinion now intimates, or just in fact finding which has been the function which
the Court has heretofore sustained upon the argument of administrative experience?
I suggest that administrative experience is of weight in judicial review only to this point-it is a persuasive reason for
deference to the Commission in the exercise of its discretionary powers under and within the law. It cannot be invoked to
support action outside of the law. And what action is, and what is not within the law must be determined by courts, when
authorized to review, no matter how much deference is due to the agency's fact finding. Surely an administrative agency
is not a law unto itself, but the Court does not really face up to the fact that this is the justification it is offering for
sustaining the Commission action.
Even if the Commission had, as the Court says, utilized this case to announce a new legal standard of conduct, there
would be hurdles to be cleared, but we need not dwell on them now. Because to promulgate a general rule of law, either
by regulation or by case law, is something the Commission expressly declined to do. It did not previously promulgate, and
it does not by this order profess to promulgate, any rule or regulation to prohibit such purchases absolutely or under
stated conditions. On the other hand, its position is that no such rule or standard would be fair and equitable in all
cases. 3

[332 U.S. 194 , 216]

IV.

Whether, as matter of policy, corporate managers during reorganization should be prohibited from buying or selling its
stock, is not a question for us to decide. But it is for us to decide whether, so long as no law or regulation prohibits them
from buying, their purchases may be forfeited, or not, in the discretion of the Commission. If such a power exists in words
of the statute or in their implication, it would be possible to point it out and thus end the case. Instead, the Court admits
that there was no law prohibiting these purchases when they were made, or at any time thereafter. And, except for this
decision, there is none now.
The truth is that in this decision the Court approves the Commission's assertion of power to govern the matter without
law, power to force surrender of stock so purchased whenever it will, and power also to overlook such acquisitions if it so
chooses. The reasons which will lead it to take one course as against the other remain locked in its own breast, and it has
not and apparently does not intend to commit them to any rule or regulation. This administrative authoritarianism, this
power to decide without law, is what the Court seems to approve in so many words: 'The absence of a general rule or
regulation [332 U.S. 194 , 217]

governing management trading during reorganization did not affect the Commission's

duties * * *' (Par. 13). This seems to me to undervalue and to belittle the place of law, even in the system of
administrative justice. It calls to mind Mr. Justice Cardozo's statement that 'Law as a guide to conduct is reduced to the
level of mere futility if it is unknown and unknowable.'4
V.
The Court's averment concerning this order that 'It is the type of judgment which administrative agencies are best
equipped to make and which justifies the use of the administrative process,' (Par. 29) is the first instance in which the
administrative process is sustained by reliance on that disregard of law which enemies of the process have always alleged
to be its principal evil. It is the first encouragement this Court has given to conscious lawlessness as a permissible rule of
administrative action. This decision is an ominous one to those who believe that men should be governed by laws that
they may ascertain and abide by, and which will guide the action of those in authoity as wel l as of those who are subject
to authority. 5
I have long urged, and still believe, that the administrative process deserves fostering in our system as an expeditious and
nontechnical method of applying law in special- [332 U.S. 194 , 218]

ized fields. 6 I can not agree that it be used, and I

think its continued effectiveness is endangered when it is used, as a method of dispensing with law in those fields.
Mr. Justice FRANKFURTER joins in this opinion.

EN BANC
[G.R. NO. 167324 : July 17, 2007]
TONDO MEDICAL CENTER EMPLOYEES ASSOCIATION, RESEARCH INSTITUTE FOR TROPICAL MEDICINE
EMPLOYEES ASSOCIATION, NATIONAL ORTHOPEDIC WORKERS UNION, DR. JOSE R. REYES MEMORIAL
HOSPITAL EMPLOYEES UNION, SAN LAZARO HOSPITAL EMPLOYEES ASSOCIATION, ALLIANCE OF HEALTH
WORKERS, INC., HEALTH ALLIANCE FOR DEMOCRACY, COUNCIL FOR HEALTH DEVELOPMENT, NETWORK
OPPOSED TO PRIVATIZATION, COMMUNITY MEDICINE DEVELOPMENT FOUNDATION INC., PHILIPPINE
SOCIETY OF SANITARY ENGINEERS INC., KILUSANG MAYO UNO, GABRIELA, KILUSANG MAGBUBUKID NG
PILIPINAS, KALIPUNAN NG DAMAYAN NG MGA MARALITA, ELSA O. GUEVARRA, ARCADIO B. GONZALES, JOSE
G. GALANG, DOMINGO P. MANAY, TITO P. ESTEVES, EDUARDO P. GALOPE, REMEDIOS M. YSMAEL, ALFREDO
BACUATA, EDGARDO J. DAMICOG, REMEDIOS M. MALTU AND REMEGIO S. MERCADO, Petitioners, v. THE
COURT OF APPEALS, EXECUTIVE SECRETARY ALBERTO G. ROMULO, SECRETARY OF HEALTH MANUEL M.
DAYRIT, SECRETARY OF BUDGET AND MANAGEMENT EMILIA T. BONCODIN, Respondents.
DECISION

CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari, under Rule 45 of the Rules of Court, assailing the Decision, 1 promulgated by the
Court of Appeals on 26 November 2004, denying a petition for the nullification of the Health Sector Reform Agenda
(HSRA) Philippines 1999-2004 of the Department of Health (DOH); and Executive Order No. 102, "Redirecting the
Functions and Operations of the Department of Health," which was issued by then President Joseph Ejercito Estrada on 24
May 1999.
Prior hereto, petitioners originally filed a Petition for Certiorari, Prohibition and Mandamus under Rule 65 of the 1997
Revised Rules of Civil Procedure before the Supreme Court on 15 August 2001. However, the Supreme Court, in a
Resolution dated 29 August 2001, referred the petition to the Court of Appeals for appropriate action.
HEALTH SECTOR REFORM AGENDA (HSRA)
In 1999, the DOH launched the HSRA, a reform agenda developed by the HSRA Technical Working Group after a series of
workshops and analyses with inputs from several consultants, program managers and technical staff possessing the
adequate expertise and experience in the health sector. It provided for five general areas of reform: (1) to provide fiscal
autonomy to government hospitals; (2) secure funding for priority public health programs; (3) promote the development
of local health systems and ensure its effective performance; (4) strengthen the capacities of health regulatory agencies;
and (5) expand the coverage of the National Health Insurance Program (NHIP). 2
Petitioners questioned the first reform agenda involving the fiscal autonomy of government hospitals, particularly the
collection of socialized user fees and the corporate restructuring of government hospitals. The said provision under the
HSRA reads:
Provide fiscal autonomy to government hospitals. Government hospitals must be allowed to collect socialized user fees so
they can reduce the dependence on direct subsidies from the government. Their critical capacities like diagnostic
equipment, laboratory facilities and medical staff capability must be upgraded to effectively exercise fiscal autonomy. Such
investment must be cognizant of complimentary capacity provided by public-private networks. Moreover such capacities
will allow government hospitals to supplement priority public health programs. Appropriate institutional arrangement must
be introduced such as allowing them autonomy towards converting them into government corporations without
compromising their social responsibilities. As a result, government hospitals are expected to be more competitive and
responsive to health needs.
Petitioners also assailed the issuance of a draft administrative order issued by the DOH, dated 5 January 2001, entitled
"Guidelines and Procedure in the Implementation of the Corporate Restructuring of Selected DOH Hospitals to Achieve
Fiscal Autonomy, and Managerial Flexibility to Start by January 2001;" 3 and Administrative Order No. 172 of the DOH,
entitled "Policies and Guidelines on the Private Practice of Medical and Paramedical Professionals in Government Health
Facilities,"4 dated 9 January 2001, for imposing an added burden to indigent Filipinos, who cannot afford to pay for
medicine and medical services.5
Petitioners alleged that the implementation of the aforementioned reforms had resulted in making free medicine and free
medical services inaccessible to economically disadvantaged Filipinos. Thus, they alleged that the HSRA is void for being in
violation of the following constitutional provisions:6
ART. III, SEC. 1. No person shall be deprived of life, liberty or property without due process of law, nor shall any person be
denied the equal protection of the law.
ART II, SEC. 5. The maintenance of peace and order, the protection of life, liberty, and property, and the promotion of the
general welfare are essential for the enjoyment of all the people of the blessings of democracy.
ART II, SEC. 9. The State shall promote a just and dynamic social order that will ensure the prosperity and independence
of the nation and free the people from poverty through policies that provide adequate social services, promote full
employment, a rising standard of living and an improved quality of life for all.
ART II, SEC. 10. The State shall promote social justice in all phases of national development.
ART II, SEC. 11. The State values the dignity of every human person and guarantees full respect for human rights.
ART II, SEC. 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 x x x.

ART II, SEC. 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and
promote their welfare.
ART XV, SEC. 1. The State recognizes the Filipino family as the foundation of the nation. Accordingly, it shall strengthen its
solidarity and actively promote its total development.
ART XV, SEC. 3. The State shall defend:
xxx
(2) the right of children to assistance, including proper care and nutrition, and special protection from all forms of neglect,
abuse, cruelty, exploitation and other conditions prejudicial to their development.
xxx
ART XIII, SEC. 14. The State shall protect working women by providing safe and healthful working conditions, taking into
account their maternal functions, and such facilities and opportunities that will enhance their welfare and enable them to
realize their full potential in the service of the nation.
ART II, SEC. 15. The State shall protect and promote the right to health of the people and instill health consciousness
among them.
ART XIII, SEC. 11. The State shall adopt an integrated and comprehensive approach to health development which shall
endeavor to make essential goods, health and other social services available to all people at affordable cost. There shall be
priority for the needs of the underprivileged sick, elderly, disabled, women, and children. The State shall endeavor to
provide free medical care to paupers.
EXECUTIVE ORDER NO. 102
On 24 May 1999, then President Joseph Ejercito Estrada issued Executive Order No. 102, entitled "Redirecting the
Functions and Operations of the Department of Health," which provided for the changes in the roles, functions, and
organizational processes of the DOH. Under the assailed executive order, the DOH refocused its mandate from being the
sole provider of health services to being a provider of specific health services and technical assistance, as a result of the
devolution of basic services to local government units. The provisions for the streamlining of the DOH and the deployment
of DOH personnel to regional offices and hospitals read:
Sec. 4. Preparation of a Rationalization and Streamlining Plan. In view of the functional and operational redirection in the
DOH, and to effect efficiency and effectiveness in its activities, the Department shall prepare a Rationalization and
Streamlining Plan (RSP) which shall be the basis of the intended changes. The RSP shall contain the following:
a) the specific shift in policy directions, functions, programs and activities/strategies;
b) the structural and organizational shift, stating the specific functions and activities by organizational unit and the
relationship of each units;
c) the staffing shift, highlighting and itemizing the existing filled and unfilled positions; andcralawlibrary
d) the resource allocation shift, specifying the effects of the streamline set-up on the agency budgetary allocation and
indicating where possible, savings have been generated.
The RSP shall [be] submitted to the Department of Budget and Management for approval before the corresponding shifts
shall be affected (sic) by the DOH Secretary.
Sec. 5. Redeployment of Personnel. The redeployment of officials and other personnel on the basis of the approved RSP
shall not result in diminution in rank and compensation of existing personnel. It shall take into account all pertinent Civil
Service laws and rules.
Section 6. Funding. The financial resources needed to implement the Rationalization and Streamlining Plan shall be taken
from funds available in the DOH, provided that the total requirements for the implementation of the revised staffing
pattern shall not exceed available funds for Personnel Services.

Section 7. Separation Benefits. Personnel who opt to be separated from the service as a consequence of the
implementation of this Executive Order shall be entitled to the benefits under existing laws. In the case of those who are
not covered by existing laws, they shall be entitled to separation benefits equivalent to one month basic salary for every
year of service or proportionate share thereof in addition to the terminal fee benefits to which he/she is entitled under
existing laws.
Executive Order No. 102 was enacted pursuant to Section 17 of the Local Government Code (Republic Act No. 7160),
which provided for the devolution to the local government units of basic services and facilities, as well as specific healthrelated functions and responsibilities. 7
Petitioners contended that a law, such as Executive Order No. 102, which effects the reorganization of the DOH, should be
enacted by Congress in the exercise of its legislative function. They argued that Executive Order No. 102 is void, having
been issued in excess of the President's authority.8
Moreover, petitioners averred that the implementation of the Rationalization and Streamlining Plan (RSP) was not in
accordance with law. The RSP was allegedly implemented even before the Department of Budget and Management (DBM)
approved it. They also maintained that the Office of the President should have issued an administrative order to carry out
the streamlining, but that it failed to do so.9
Furthermore, petitioners Elsa O. Guevarra, Arcadio B. Gonzales, Jose G. Galang, Domingo P. Manay, Eduardo P. Galope,
Remedios M. Ysmael, Alfredo U. Bacuata and Edgardo J. Damicog, all DOH employees, assailed the validity of Executive
Order No. 102 on the ground that they were likely to lose their jobs, and that some of them were suffering from the
inconvenience of having to travel a longer distance to get to their new place of work, while other DOH employees had to
relocate to far-flung areas.10
Petitioners also pointed out several errors in the implementation of the RSP. Certain employees allegedly suffered
diminution of compensation,11 while others were supposedly assigned to positions for which they were neither qualified nor
suited.12 In addition, new employees were purportedly hired by the DOH and appointed to positions for which they were
not qualified, despite the fact that the objective of the ongoing streamlining was to cut back on costs. 13 It was also averred
that DOH employees were deployed or transferred even during the three-month period before the national and local
elections in May 2001,14in violation of Section 2 of the Republic Act No. 7305, also known as "Magna Carta for Public
Health Workers."15 Petitioners, however, failed to identify the DOH employees referred to above, much less include them
as parties to the petition.
The Court of Appeals denied the petition due to a number of procedural defects, which proved fatal: 1) Petitioners failed to
show capacity or authority to sign the certification of non-forum shopping and the verification; 2) Petitioners failed to
show any particularized interest for bringing the suit, nor any direct or personal injury sustained or were in the immediate
danger of sustaining; 3) the Petition, brought before the Supreme Court on 15 August 1999, was filed out of time, or
beyond 60 days from the time the reorganization methods were implemented in 2000; and 4) certiorari, Prohibition and
Mandamus will not lie where the President, in issuing the assailed Executive Order, was not acting as a tribunal, board or
officer exercising judicial or quasi-judicial functions.
In resolving the substantial issues of the case, the Court of Appeals ruled that the HSRA cannot be declared void for
violating Sections 5, 9, 10, 11, 13, 15, 18 of Article II; Section 1 of Article III; Sections 11 and 14 of Article XIII; and
Sections 1 and 3(2) of Article XV, all of the 1987 Constitution, which directly or indirectly pertain to the duty of the State
to protect and promote the people's right to health and well-being. It reasoned that the aforementioned provisions of the
Constitution are not self-executing; they are not judicially enforceable constitutional rights and can only provide guidelines
for legislation.
Moreover, the Court of Appeals held that the petitioners' assertion that Executive Order No. 102 is detrimental to the
health of the people cannot be made a justiciable issue. The question of whether the HSRA will bring about the
development or disintegration of the health sector is within the realm of the political department.
Furthermore, the Court of Appeals decreed that the President was empowered to issue Executive Order No. 102, in
accordance with Section 17 Article VII of the 1987 Constitution. It also declared that the DOH did not implement Executive
Order No. 102 in bad faith or with grave abuse of discretion, as alleged by the petitioners, as the DOH issued Department
Circular No. 275-C, Series of 2000, which created the different committees tasked with the implementation of the RSP,
only after both the DBM and Presidential Committee on Effective Governance (PCEG) approved the RSP on 8 July 2000
and 17 July 2000, respectively.chanrobles virtual law library
Petitioners filed with the Court of Appeals a Motion for Reconsideration of the Decision rendered on 26 November 2004,
but the same was denied in a Resolution dated 7 March 2005.
Hence, the present petition, where the following issues are raised:

I.
THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN RULING THAT ANY QUESTION ON THE WISDOM
AND EFFICACY OF THE HEALTH SECTOR REFORM AGENDA IS NOT A JUSTICIABLE CONTROVERSY AND THAT THE
CONSTITUTIONAL PROVISIONS PROTECTING THE HEALTH OF THE FILIPINO PEOPLE ARE NOT JUDICIALLY ENFORCEABLE;
II.
THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN RULING THAT PETITIONERS' COMPLAINT THAT
EXECUTIVE ORDER NO. 102 IS DETRIMENTAL TO THE FILIPINO IS LIKEWISE NOT A JUSTICIABLE CONTROVERSY AND
THAT THE PRESIDENT HAS THE AUTHORITY TO ISSUE SAID ORDER; AND
III.
THE HONORABLE COURT OF APPEALS COMMITTED MANIFEST ERROR IN UPHOLDING TECHNICALITIES OVER AND ABOVE
THE ISSUES OF TRANSCENDENTAL IMPORTANCE RAISED IN THE PETITION BELOW.16
The Court finds the present petition to be without merit.
Petitioners allege that the HSRA should be declared void, since it runs counter to the aspiration and ideals of the Filipino
people as embodied in the Constitution.17 They claim that the HSRA's policies of fiscal autonomy, income generation, and
revenue enhancement violate Sections 5, 9, 10, 11, 13, 15 and 18 of Article II, Section 1 of Article III; Sections 11 and 14
of Article XIII; and Sections 1 and 3 of Article XV of the 1987 Constitution. Such policies allegedly resulted in making
inaccessible free medicine and free medical services. This contention is unfounded.
As a general rule, the provisions of the Constitution are considered self-executing, and do not require future legislation for
their enforcement. For if they are not treated as self-executing, the mandate of the fundamental law can be easily nullified
by the inaction of Congress.18 However, some provisions have already been categorically declared by this Court as non
self-executing.
In Tanada v. Angara,19 the Court specifically set apart the sections found under Article II of the 1987 Constitution as non
self-executing and ruled that such broad principles need legislative enactments before they can be implemented:
By its very title, Article II of the Constitution is a "declaration of principles and state policies." x x x. These principles in
Article II are not intended to be self-executing principles ready for enforcement through the courts. They are used by the
judiciary as aids or as guides in the exercise of its power of judicial review, and by the legislature in its enactment of laws.
In Basco v. Philippine Amusement and Gaming Corporation,20 this Court declared that Sections 11, 12, and 13 of Article II;
Section 13 of Article XIII; and Section 2 of Article XIV of the 1987 Constitution are not self-executing provisions. In
Tolentino v. Secretary of Finance,21 the Court referred to Section 1 of Article XIII and Section 2 of Article XIV of the
Constitution as moral incentives to legislation, not as judicially enforceable rights. These provisions, which merely lay
down a general principle, are distinguished from other constitutional provisions as non self-executing and, therefore,
cannot give rise to a cause of action in the courts; they do not embody judicially enforceable constitutional rights. 22
Some of the constitutional provisions invoked in the present case were taken from Article II of the Constitution - specifically, Sections 5, 9, 10, 11, 13, 15 and 18 - - the provisions of which the Court categorically ruled to be non selfexecuting in the aforecited case of Taada v. Angara.23
Moreover, the records are devoid of any explanation of how the HSRA supposedly violated the equal protection and due
process clauses that are embodied in Section 1 of Article III of the Constitution. There were no allegations of
discrimination or of the lack of due process in connection with the HSRA. Since they failed to substantiate how these
constitutional guarantees were breached, petitioners are unsuccessful in establishing the relevance of this provision to the
petition, and consequently, in annulling the HSRA.
In the remaining provisions, Sections 11 and 14 of Article XIII and Sections 1 and 3 of Article XV, the State accords
recognition to the protection of working women and the provision for safe and healthful working conditions; to the
adoption of an integrated and comprehensive approach to health; to the Filipino family; and to the right of children to
assistance and special protection, including proper care and nutrition. Like the provisions that were declared as non selfexecutory in the cases of Basco v. Philippine Amusement and Gaming Corporation 24 and Tolentino v. Secretary of
Finance,25 they are mere statements of principles and policies. As such, they are mere directives addressed to the
executive and the legislative departments. If unheeded, the remedy will not lie with the courts; but rather, the electorate's
displeasure may be manifested in their votes.

The rationale for this is given by Justice Dante Tinga in his Separate Opinion in the case of Agabon v. National Labor
Relations Commission26 :
x x x However, to declare that the constitutional provisions are enough to guarantee the full exercise of the rights
embodied therein, and the realization of the ideals therein expressed, would be impractical, if not unrealistic. The espousal
of such view presents the dangerous tendency of being overbroad and exaggerated. x x x Subsequent legislation is still
needed to define the parameters of these guaranteed rights. x x x Without specific and pertinent legislation, judicial bodies
will be at a loss, formulating their own conclusion to approximate at least the aims of the Constitution.
The HSRA cannot be nullified based solely on petitioners' bare allegations that it violates the general principles expressed
in the non self-executing provisions they cite herein. There are two reasons for denying a cause of action to an alleged
infringement of broad constitutional principles: basic considerations of due process and the limitations of judicial power.27
Petitioners also claim that Executive Order No. 102 is void on the ground that it was issued by the President in excess of
his authority. They maintain that the structural and functional reorganization of the DOH is an exercise of legislative
functions, which the President usurped when he issued Executive Order No. 102. 28 This line of argument is without basis.
This Court has already ruled in a number of cases that the President may, by executive or administrative order, direct the
reorganization of government entities under the Executive Department. 29 This is also sanctioned under the Constitution, as
well as other statutes.
Section 17, Article VII of the 1987 Constitution, clearly states: "[T]he president shall have control of all executive
departments, bureaus and offices." Section 31, Book III, Chapter 10 of Executive Order No. 292, also known as the
Administrative Code of 1987 reads:
SEC. 31. Continuing Authority of the President to Reorganize his Office - The President, subject to the policy in the
Executive Office and in order to achieve simplicity, economy and efficiency, shall have continuing authority to reorganize
the administrative structure of the Office of the President. For this purpose, he may take any of the following actions:
(1) Restructure the internal organization of the Office of the President Proper, including the immediate offices, the
Presidential Special Assistants/Advisers System and the Common Staff Support System, by abolishing consolidating or
merging units thereof or transferring functions from one unit to another;
(2) Transfer any function under the Office of the President to any other Department or Agency as well as transfer functions
to the Office of the President from other Departments or Agencies; andcralawlibrary
(3) Transfer any agency under the Office of the President to any other department or agency as well as transfer agencies
to the Office of the President from other Departments or agencies.
In Domingo v. Zamora,30 this Court explained the rationale behind the President's continuing authority under the
Administrative Code to reorganize the administrative structure of the Office of the President. The law grants the President
the power to reorganize the Office of the President in recognition of the recurring need of every President to reorganize his
or her office "to achieve simplicity, economy and efficiency." To remain effective and efficient, it must be capable of being
shaped and reshaped by the President in the manner the Chief Executive deems fit to carry out presidential directives and
policies.
The Administrative Code provides that the Office of the President consists of the Office of the President Proper and the
agencies under it.31 The agencies under the Office of the President are identified in Section 23, Chapter 8, Title II of the
Administrative Code:
Sec. 23. The Agencies under the Office of the President. The agencies under the Office of the President refer to those
offices placed under the chairmanship of the President, those under the supervision and control of the President, those
under the administrative supervision of the Office of the President, those attached to it for policy and program
coordination, and those that are not placed by law or order creating them under any specific department. (Emphasis
provided.)
Section 2(4) of the Introductory Provisions of the Administrative Code defines the term "agency of the government" as
follows:
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.

Furthermore, the DOH is among the cabinet-level departments enumerated under Book IV of the Administrative Code,
mainly tasked with the functional distribution of the work of the President. 32 Indubitably, the DOH is an agency which is
under the supervision and control of the President and, thus, part of the Office of the President. Consequently, Section 31,
Book III, Chapter 10 of the Administrative Code, granting the President the continued authority to reorganize the Office of
the President, extends to the DOH.
The power of the President to reorganize the executive department is likewise recognized in general appropriations laws.
As early as 1993, Sections 48 and 62 of Republic Act No. 7645, the "General Appropriations Act for Fiscal Year 1993,"
already contained a provision stating that:
Sec. 48. Scaling Down and Phase Out of Activities 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 activities shall be effected pursuant to Circulars or Orders issued for
the purpose by the Office of the President. (Emphasis provided.)
Sec. 62. Unauthorized Organizational Changes. 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 organizational structures and be funded form appropriations by this Act.
Again, in the year when Executive Order No. 102 was issued, "The General Appropriations Act of Fiscal Year 1999"
(Republic Act No. 8745) conceded to the President the power to make any changes in any of the key positions and
organizational units in the executive department 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.
Clearly, Executive Order No. 102 is well within the constitutional power of the President to issue. The President did not
usurp any legislative prerogative in issuing Executive Order No. 102. It is an exercise of the President's constitutional
power of control over the executive department, supported by the provisions of the Administrative Code, recognized by
other statutes, and consistently affirmed by this Court.
Petitioners also pointed out several flaws in the implementation of Executive Order No. 102, particularly the RSP. However,
these contentions are without merit and are insufficient to invalidate the executive order.
The RSP was allegedly implemented even before the DBM approved it. The facts show otherwise. It was only after the
DBM approved the Notice of Organization, Staffing and Compensation Action on 8 July 2000, 33 and after the Presidential
Committee on Effective Governance (PCEG) issued on 17 July 2000 Memorandum Circular No. 62, 34 approving the RSP,
that then DOH Secretary Alberto G. Romualdez issued on 28 July 2000 Department Circular No. 275-C, Series of
2000,35 creating the different committees to implement the RSP.
Petitioners also maintain that the Office of the President should have issued an administrative order to carry out the
streamlining, but that it failed to do so. Such objection cannot be given any weight considering that the acts of the DOH
Secretary, as an alter ego of the President, are presumed to be the acts of the President. The members of the Cabinet are
subject at all times to the disposition of the President since they are merely his alter egos. 36 Thus, their acts, performed
and promulgated in the regular course of business, are, unless disapproved by the President, presumptively acts of the
President.37 Significantly, the acts of the DOH Secretary were clearly authorized by the President, who, thru the PCEG,
issued the aforementioned Memorandum Circular No. 62, sanctioning the implementation of the RSP.
Petitioners Elsa Odonzo Guevarra, Arcadio B. Gonzales, Jose G. Galang, Domingo P. Manay, Eduardo P. Galope, Remedios
M. Ysmael, Alfredo U. Bacuata, and Edgardo Damicog, all DOH employees, assailed the validity of Executive Order No.
102 on the ground that they were likely to lose their jobs, and that some of them were suffering from the inconvenience
of having to travel a longer distance to get to their new place of work, while other DOH employees had to relocate to farflung areas.
In several cases, this Court regarded reorganizations of government units or departments as valid, for so long as they are
pursued in good faith that is, for the purpose of economy or to make bureaucracy more efficient. 38 On the other hand, if
the reorganization is done for the purpose of defeating security of tenure or for ill-motivated political purposes, any
abolition of position would be invalid. None of these circumstances are applicable since none of the petitioners were
removed from public service, nor did they identify any action taken by the DOH that would unquestionably result in their
dismissal. The reorganization that was pursued in the present case was made in good faith. The RSP was clearly designed
to improve the efficiency of the department and to implement the provisions of the Local Government Code on the
devolution of health services to local governments. While this Court recognizes the inconvenience suffered by public

servants in their deployment to distant areas, the executive department's finding of a need to make health services
available to these areas and to make delivery of health services more efficient and more compelling is far from being
unreasonable or arbitrary, a determination which is well within its authority. In all, this Court finds petitioners' contentions
to be insufficient to invalidate Executive Order No. 102.
Without identifying the DOH employees concerned, much less including them as parties to the petition, petitioners went on
identifying several errors in the implementation of Executive Order No. 102. First, they alleged that unidentified DOH
employees suffered from a diminution of compensation by virtue of the provision on Salaries and Benefits found in
Department Circular No. 312, Series of 2000, issued on 23 October 2000, which reads:
2. Any employee who was matched to a position with lower salary grade (SG) shall not suffer a reduction in salary except
where his/her current salary is higher than the maximum step of the SG of the new position, in which case he/she shall be
paid the salary corresponding to the maximum step of the SG of the new position. RATA shall no longer be received, if
employee was matched to a Non-Division Chief Position.
Incidentally, the petition shows that none of the petitioners, who are working in the DOH, were entitled to receive RATA at
the time the petition was filed. Nor was it alleged that they suffered any diminution of compensation. Secondly, it was
claimed that certain unnamed DOH employees were matched with unidentified positions for which they were supposedly
neither qualified nor suited. New employees, again unnamed and not included as parties, were hired by the DOH and
appointed to unidentified positions for which they were purportedly not qualified, despite the fact that the objective of the
ongoing streamlining was to cut back on costs. Lastly, unspecified DOH employees were deployed or transferred during
the three-month period before the national and local elections in May 2001, in violation of Section 2 of the Republic Act
No. 7305, also known as "Magna Carta for Public Health Workers."
Petitioners' allegations are too general and unsubstantiated by the records for the Court to pass upon. The persons
involved are not identified, details of their appointments and transfers - such as position, salary grade, and the date they
were appointed - are not given; and the circumstances which attended the alleged violations are not specified.
Even granting that these alleged errors were adequately proven by the petitioners, they would still not invalidate
Executive Order No. 102. Any serious legal errors in laying down the compensation of the DOH employees concerned can
only invalidate the pertinent provisions of Department Circular No. 312, Series of 2000. Likewise, any questionable
appointments or transfers are properly addressed by an appeal process provided under Administrative Order No. 94,
series of 2000;39 and if the appeal is meritorious, such appointment or transfer may be invalidated. The validity of
Executive Order No. 102 would, nevertheless, remain unaffected. Settled is the rule that courts are not at liberty to
declare statutes invalid, although they may be abused or misabused, and may afford an opportunity for abuse in the
manner of application. The validity of a statute or ordinance is to be determined from its general purpose and its efficiency
to accomplish the end desired, not from its effects in a particular case. 40
In a number of cases,41 the Court upheld the standing of citizens who filed suits, wherein the "transcendental importance"
of the constitutional question justified the granting of relief. In spite of these rulings, the Court, in Domingo v.
Carague,42 dismissed the petition when petitioners therein failed to show any present substantial interest. It demonstrated
how even in the cases in which the Court declared that the matter of the case was of transcendental importance, the
petitioners must be able to assert substantial interest. Present substantial interest, which will enable a party to question
the validity of the law, requires that a party sustained or will sustain direct injury as a result of its enforcement. 43It is
distinguished from a mere expectancy or future, contingent, subordinate, or inconsequential interest. 44
In the same way, the Court, in Telecommunications & Broadcast Attorneys of the Philippines, Inc. v. Comelec, 45 ruled that
a citizen is allowed to raise a constitutional question only when he can show that he has personally suffered some actual
or threatened injury as a result of the allegedly illegal conduct of the government; the injury is fairly traceable to the
challenged action; and the injury is likely to be redressed by a favorable action. This case likewise stressed that the rule
on constitutional questions which are of transcendental importance cannot be invoked where a party's substantive claim is
without merit. Thus, a party's standing is determined by the substantive merit of his case or a preliminary estimate
thereof. After a careful scrutiny of the petitioners' substantive claims, this Court finds that the petitioners miserably failed
to show any merit to their claims.
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. This Court AFFIRMS the assailed Decision of the Court of
Appeals, promulgated on 26 November 2004, declaring both the HSRA and Executive Order No. 102 as valid. No costs.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC

May 19, 1903

G.R. No. 1051

THE UNITED STATES, complainant-appellee,
vs.
FRED L. DORR, ET AL., defendants-appellants.
F. G. Waite for appellants.
Solicitor-General Araneta for appellee.
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.
Arellano, C.J. Torres, Willard and Mapa, JJ., concur.

EN BANC
[G.R. No. 115844. August 15, 1997]
CESAR G. VIOLA, Chairman, Bgy. 167, Zone 15, District II, Manila, petitioner, vs. HON. RAFAEL M. ALUNAN
III, Secretary, DILG, ALEX L. DAVID, President/Secretary General, National Liga ng mga Barangay,
LEONARDO L. ANGAT, President, City of Manila, Liga ng mga Barangay,respondents.
DECISION

MENDOZA, J.:
This is a petition for prohibition challenging the validity of Art. III, 1-2 of the Revised Implementing Rules and
Guidelines for the General Elections of the Liga ng mga Barangay Officers so far as they provide for the election of first,
second and third vice presidents and for auditors for the National Liga ng mga Barangay and its chapters. The provisions
in question read:
1. Local Liga Chapters. The Municipal, City, Metropolitan and Provincial Chapters shall directly elect the following officers
and directors to constitute their respective Board of Directors, namely:
1.1 President
1.2 Executive Vice-President
1.3 First Vice-President
1.4 Second Vice-President
1.5 Third Vice-President
1.6 Auditor
1.7 Five (5) Directors
2. National Liga. The National Liga shall directly elect the following officers and directors to constitute the National Liga
Board of Directors namely:
2.1 President
2.2 Executive Vice-President
2.3 First Vice-President
2.4 Second Vice-President
2.5 Third Vice-President
2.6 Secretary General
2.7 Auditor
2.8 Five (5) Directors
Petitioner Cesar G. Viola brought this action as barangay chairman of Bgy. 167, Zone 15, District II, Manila against
then Secretary of Interior and Local Government Rafael M. Alunan III, Alex L. David, president/secretary general of the
National Liga ng mga Barangay, and Leonardo L. Angat, president of the City of Manila Liga ng mga Barangay, to restrain
them from carrying out the elections for the questioned positions on July 3, 1994.
Petitioners contention is that the positions in question are in excess of those provided in the Local Government Code
(R.A. No. 7160), 493 of which mentions as elective positions only those of president, vice president, and five members of
the board of directors in each chapter at the municipal, city, provincial, metropolitan political subdivision, and national
levels. Petitioner argues that, in providing for the positions of first, second and third vice presidents and auditor for each
chapter, 1-2 of the Implementing Rules expand the number of positions authorized in 493 of the Local Government
Code in violation of the principle that implementing rules and regulations cannot add or detract from the provisions of the
law they are designed to implement.
Although the elections are now over, the issues raised in this case are likely to arise again in future elections of
officers of the Liga ng mga Barangay. For one thing, doubt may be cast on the validity of the acts of those elected. For

another, this comes within the rule that courts will decide a question which is otherwise moot and academic if it is capable
of repetition, yet evading review.[1]
We will therefore proceed to the merits of this case.
Petitioners contention that the additional positions in question have been created without authority of law is
untenable. To begin with, the creation of these positions was actually made in the Constitution and By-laws of the Liga ng
Mga Barangay, which was adopted by the First Barangay National Assembly on January 11, 1994. This Constitution and
By-laws provide in pertinent parts:
ARTICLE VI
OFFICERS AND DIRECTORS
Section 1. Organization of Board of Directors of Local Chapters. - The chapters shall directly elect their respective officers,
namely, a president; executive vice president; first, second, and third vice presidents; auditor; and five (5) members to
constitute the Board of Directors of their respective chapter. Thereafter, the Board shall appoint a secretary, treasurer,
and public relations officer from among the five (5) members, with the rest serving as Directors of Board. The Board may
create such other positions as it may deem necessary for the management of the chapter. Pending elections of the
president of the municipal, city, provincial and metropolitan chapters of the Liga, the incumbent presidents of the ABCs of
the municipality, city province and Metropolitan Manila shall continue to act as presidents of the corresponding Liga
chapters, subject to the provisions of the Local Government Code of 1991.
Section 2. Organization of Board of Directors of the National Liga. - The National Liga shall be composed of the presidents
of the provincial Liga chapters, highly urbanized and independent component city chapters, and the metropolitan chapter
who shall directly elect their respective officers, namely, a president, executive vice president; first, second, and third vice
president, auditor, secretary general; and five (5) members to constitute the Board of Directors of the National
Liga. Thereafter, the Board shall appoint a treasurer, secretary and public relations officers from among the five (5)
members with the rest serving as directors of the Board. The Board may create such other positions as it may deem
necessary for the management of the National Liga. Pending election of Secretary-General, the incumbent president of
the Pambansang Katipunan ng mga Barangay (PKB) shall act as the Secretary-General. The incumbent members of the
Board of the PKB, headed by the Secretary-General who continue to be presidents of the respective chapters of the Liga to
which they belong, shall constitute a committee to exercise the powers and duties of the National Liga and with the
primordial responsibility of drafting a Constitution and By-Laws needed for the organization of the Liga as a whole
pursuant to the provisions of the Local Government Code of 1991.
The post of executive vice president is in reality that of the vice president in 493 of the LGC, so that the only
additional positions created for each chapter in the Constitution and By-laws are those of first, second and third vice
presidents and auditor. Contrary to petitioners contention, the creation of the additional positions is authorized by the
LGC which provides as follows:
493. Organization. The liga at the municipal, city, provincial, metropolitan political subdivision, and national levels
directly elect a president, a vice-president, and five (5) members of the board of directors. The board shall appoint its
secretary and treasurer and create such other positions as it may deem necessary for the management of the chapter. A
secretary-general shall be elected from among the members of the national liga and shall be charged with the overall
operation of the liga on the national level. The board shall coordinate the activities of the chapters of the liga. (emphasis
added)
This provision in fact requires and not merely authorizes the board of directors to create such other positions
as it may deem necessary for the management of the chapter and belies petitioners claim that said provision (493)
limits the officers of a chapter to the president, vice president, five members of the board of directors, secretary, and
treasurer. That Congress can delegate the power to create positions such as these has been settled by our decisions
upholding the validity of reorganization statutes authorizing the President of the Philippines to create, abolish or merge
offices in the executive department. [2] The question is whether, in making a delegation of this power to the board of
directors of each chapter of the Liga ng Mga Barangay, Congress provided a sufficient standard so that, in the phrase of
Justice Cardozo, administrative discretion may be canalized within proper banks that keep it from overflowing.[3]
Statutory provisions authorizing the President of the Philippines to make reforms and changes in government owned
or controlled corporations for the purpose of promoting simplicity, economy and efficiency [4] in their operations and
empowering the Secretary of Education to prescribe minimum standards of adequate and efficient instruction [5] in private
schools and colleges have been found to be sufficient for the purpose of valid delegation. Judged by these cases, we hold

that 493 of the Local Government Code, in directing the board of directors of the liga to create such other positions as
may be deemed necessary for the management of the chapter[s], embodies a fairly intelligible standard. There is no
undue delegation of power by Congress.
Justice Davide contends in dissent, however, that only the Board of Directors and not any other body is vested
with the power to create other positions as may be necessary for the management of the chapter and that, in any case,
there is no showing that the Barangay National Assembly was authorized to draft the Constitution and By-laws because he
is unable to find any law creating it. The Barangay National Assembly is actually the Pambansang Katipunan ng mga
Barangay (PKB) referred to in Art. 210(f)(2)(3) of the Rules and Regulations Implementing the Local Government Code of
1991, which Justice Davides dissent cites. It will be helpful to quote these provisions:
(2)
A secretary-general shall be elected from among the members of the national liga who shall be responsible for the
overall operation of the liga. Pending election of a secretary-general under this rule, the incumbent president of the
pambansang katipunan ng mga barangay shall act as the secretary-general. The incumbent members of the board of the
pambansang katipunan ng mga barangay, headed by the secretary-general, who continue to be presidents of the
respective chapters of the liga to which they belong, shall constitute a committee to exercise the powers and duties of the
national liga and draft or amend the constitution and by-laws of the national liga to conform to the provisions of this Rule.
(3)

The board of directors shall coordinate the activities of the various chapters of the liga.

(Emphasis added)
Pursuant to these provisions, pending the organization of the Liga ng mga Barangay, the board of directors of the
PKB was constituted into a committee, headed by the PKB president, who acted as secretary general, with a two-fold
mandate: [1] exercise the powers and duties of the national liga and [2] draft or amend the constitution and by-laws of
the national liga to conform to the provisions of this Rule. The board of directors of the PKB, functioning in place of the
board of directors of the National Liga ng mga Barangay, exercised one of these powers of the National Liga board,
namely, to create additional positions which it deemed necessary for the management of a chapter. There is therefore no
basis for the claim that because the power to create additional positions in the Liga or its chapters is vested only in the
board of directors the exercise of this power by the Barangay National Assembly is unauthorized and illegal and the
positions created are void. The Barangay National Assembly was actually the Pambansang Katipunan ng mga Barangay or
PKB. Pending the organization of the Liga ng mga Barangay, it served as the Liga.
But it is contended in the dissent that Section 493 of the LGC . . . vests the power to create additional positions in
the Board of Directors of the chapter. The implication seems to be that the board of the directors at the national level did
not have that power. It is necessary to consider the organizational structure of the Liga ng mga Barangay as provided in
the LGC, as follows:
492. Representation, Chapters, National Liga. - Every barangay shall be represented in said liga by the punong
barangay, or in his absence or incapacity, by a sanggunian member duly elected for the purpose among its members, who
shall attend all meetings or deliberations called by the different chapters of the liga.
The liga shall have chapters at the municipal, city, provincial and metropolitan political subdivision levels.
The municipal and city chapters of the liga shall be composed of the barangay representatives of municipal and city
barangays, respectively. The duly elected presidents of component municipal and city chapters shall constitute the
provincial chapter or the metropolitan political subdivision chapter. The duly elected presidents of highly-urbanized cities,
provincial chapters, the Metropolitan Manila chapter and metropolitan political subdivision chapters shall constitute the
National Liga ng mga Barangay.
493. Organization. The liga at the municipal, city, provincial, metropolitan political subdivision, and national
levels directly elect a president, a vice-president, and five (5) members of the board of directors. The board shall appoint
its secretary and treasurer and create such other positions as it may deem necessary for the management of the
chapter. A secretary-general shall be elected from among the members of the national liga and shall be charged with the
overall operation of the liga on the national level. The board shall coordinate the activities of the chapters of the liga.
(Emphasis added)
While the board of directors of a local chapter can create additional positions to provide for the needs of the chapter,
the board of directors of the National Liga must be deemed to have the power to create additional positions not only for its

management but also for that of all the chapters at the municipal, city, provincial and metropolitan political subdivision
levels. Otherwise the National Liga would be no different from the local chapters. There would then be only so many local
chapters without a national one, when what is contemplated in the above-quoted provisions of the LGC is that there
should be one Liga ng mga Barangay with local chapters at all levels of local government units. The dissent, by denying to
the board of directors at the National Liga the power to create additional positions in the local chapters, would reduce such
board to a board of a local chapter. The fact is that 493 grants the power to create positions not only to the boards of
the local chapters but to the board of the Liga at the national level as well.
Indeed what was done in the Constitution and By-laws of their liga was to create additional positions in each chapter,
whether national or local, without however precluding the boards of directors of the chapters as well as that of the
national liga from creating other positions for their peculiar needs. The creation by the board of the National Liga of the
positions of first, second and third vice presidents, auditors and public relations officers was intended to provide uniform
officers for the various chapters in line with the mandate in Art. 210(g)(2) of the Rules and Regulations Implementing the
Local Government Code of 1991 to the Barangay National Assembly to formulate uniform constitution and by-laws
applicable to the national liga and all local chapters. The various chapters could have different minor officers depending
on their local needs, but they must have the same major elective officers, meaning to say, the additional vice presidents
and auditors.
The dissent further argues that, following the rule of ejusdem generis, what may be created as additional positions
can only be appointive ones because the positions of secretary and treasurer are appointive positions. The rule might
apply if what is involved is the appointment of other officers. But what we are dealing with in this case is the creation of
additional positions. Section 493 actually gives the board the power to [1] appoint its secretary and treasurer and
[2] create such other positions as it may deem necessary for the management of the chapter. The additional positions to
be created need not therefore be appointive positions.
Nor is it correct to say that 493, in providing that additional positions to be created must be those which are
deemed necessary for the management of the chapter, contemplates only appointive positions. Management positions
are not necessarily limited to appointive positions. Elective officers, such as the president and vice president, can be
expected to be involved in the general administration or management of the chapter. Hence, the creation of other elective
positions which may be deemed necessary for the management of the chapter is within the purview of 493.
WHEREFORE, the petition for prohibition is DISMISSED for lack of merit.
SO ORDERED.
Narvasa, C.J., Padilla, Regalado, Bellosillo, Melo, Puno, Kapunan, Francisco, and Hermosisima, Jr., JJ., concur.
Davide, Jr., J., see dissenting opinion.
Romero, Vitug, and Panganiban, JJ., joins the dissent of J. Davide.
Torres, Jr., J. took no part, on leave.