G.R. No.

L-54554 March 30, 1981

EUSTAQUIO M. MEDALLA, JR., petitioner,
vs.
THE HONORABLE MARCELINO N. SAYO, Judge of
the CFI of Rizal, Branch XXXIII and HONORATO G.
MACKAY, acting Hospital Administrator of the
Caloocan City General Hospital and the CITY
MAYOR OF CALOOCAN, respondents.

MELENCIO-HERRERA, J.:
In this Petition for "Certiorari, mandamus and
Prohibition", seeking the dismissal of Civil Case No. C7770 below, we have, as factual background, the
following:
Petitioner, Dr. Eustaquio M. Medalla, Jr., is the Chief of
Clinics of the Caloocan City General Hospital, Caloocan
City. Private respondent,, Dr. Honorato G. Mackay was
the Resident Physician thereat.
When the position of Assistant, hospital Administrator
of the Caloocan City General Hospital became vacant
upon the resignation of the incumbent, former
Caloocan City Mayor Alejandro A. Fider designated and
subsequently
appointed,
as
Assistant
Hospital
Administrator private respondent Dr. Mackay, a
Resident Physician in said hospital. Petitioner, Dr.
Medalla, Jr., protested Dr. Mackay's designation and
subsequent appointment alleging among others that,
as Chief of Clinics, he (Medalla) was next-in-rank. The
then Acting City Mayor Virgilio P. Robles, who
succeeded former Mayor, now Assemblyman Alejandro
A. Fider, in his 4th Indorsement dated September 20,
1978, sustained Mackay's appointment stating:
... as of April 18, 1978 when Dr.
Honorato G. Mackay was promoted to
Assistant Hospital Administrator from
his previous position of Resident
Physician, he was next in rank to the
said higher position by reason of his
having
completed
all
academic
requirements for the Certificate in
Hospital Administration ... contrary to
the claim of Dr. Eustaquio Medalla, Jr. in
his letter of May 2, 1978.
xxx xxx xxx
Dissatisfied, Medalla elevated his case to the Civil
Service Commission on appeal. On December 29,
1978, the Civil Service Merit Systems Board issued
Resolution No. 49 sustaining Medalla's appeal and
revoking Mackay's appointment as Assistant Hospital
Administrator. The pertinent portion of the aforestated
Resolution reads:
A perusal of the records shows that
appellant Medalla is the Chief of Clinics
of the Caloocan City General Hospital;
he is a holder of the Degree of Doctor

of Medicine; he has completed the

requirements in Hospital Administration
and is recommended for the title of
Certificate in Hospital Administration;
he is also a candidate of a Masters
degree in Hospital Administration He
possesses the First Grade eligibility (BA
1080) and had undergone relevant
training in Hospital Administration. His
performance
rating
is
'Very
Satisfactory'.
On the other hand, appellee Mackay
had been a Resident Physician, the
position he held prior to his promotion
to the contested position. He is a
holder of the degree of Doctor of
Medicine and is a First Grade eligible
(BA 1080-Medical Board). He is a
graduate
student
in
Hospital
Administration and as completed all
academic requirements for a certificate
in
Hospital
Administration.
His
performance
rating
is
"Very
Satisfactory".
A perusal of the organizational chart of
the Ospital ng Caloocan approved by
the Hospital Administrator would show
that the Chief of Clinics is the next
lower position to the Assistant Hospital
Administrator. The Resident Physician
is not a next lower position to the
Assistant
Hospital
Administrator.
Therefore, Medalla and not Mackay is
the person next in rank who may be
promoted to the position involved.
Moreover, even on the basis of
competence and qualifications to
perform the duties of the position, the
records show that Dr. Medalla is more
competent and qualified than Dr.
Mackay. The qualification relied upon
by the Acting City Mayor in justifying
the appointment of Dr. Mackay which is
his having completed the academic
requirements for the Certificate in
Hospital Administration does not give
Dr. Mackay the advantage inasmuch as
Dr. Medalla has also completed the
academic requirements for a certificate
in Hospital Administration and is
recommended for a title of Certificate
in Hospital Administration apart from
being also a candidate for a Masters
degree in Hospital Administration. 1
xxx xxx xxx
Upon automatic review by the Office of the President,
pursuant to section 19(6), PD No. 807, Presidential
Executive Assistant Jacobo C. Clave rendered a
Decision on April 24, 1979 declaring that:

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WHEREFORE, premises considered, and

as recommended by Civil Service
Commission, the appointment of Dr.
Honorato G. Mackay as Assistant
Hospital Administrator in the Caloocan
City General Hospital is hereby revoked
and the position awarded in favor of
appellant Dr. Eustaquio M. Medalla. 2

Motion to Dismiss on the same ground of failure to

exhaust administrative remedies.

The Acting City Mayor, on behalf of Mackay, moved for

reconsideration.

On September 24, 1979, the Trial Court denied both

Motions to Dismiss filed by Medalla, on the one hand,
and Hon. Clave and the Civil Service Commission, on
the other, holding that Mackay's failure to await
resolution of his Motions for Reconsideration pending
before the Office of the President and the Civil Service
Commission did not deprive him of a cause of action
besides the fact that according to the respective
Manifestations of the said Offices, the Motions for
Reconsideration had already been resolved adversely
against Mackay.

On May 7, 1979, totally disregarding the Decision of

the Office of the President, the same Acting City Mayor
appointed Mackay, this time as Hospital Administrator,
and designated Dr. Tantoco as his Assistant, thereby
again completely bypassing Medalla. Mackay took his
oath of office on May 7, 1979.
On June 27, 1979, however, the Civil Service
Commission, acting on Medalla's protest, and besides
calling attention to the penal provision of P.D. No. 807,
disapproved Mackay's appointment as follows:
Wherefore, premises considered and
finding the protest of Dr. Medalla in
order, the appointment of Dr. Mackay
as hospital Administrator at P26,388
per annum effective May 7, 1979 is
hereby disapproved. it is hereby
ordered that Dr. Medalla be appointed
to
the
position
of
Hospital
Administrator of the Caloocan City
General Hospital. 3
On July 20, 1979, Mackay moved for reconsideration
asserting 1) denial of due process of law inasmuch as
the contested Resolution/Decisions were issued exparte, and 2) that the Civil Service Commission can not
ignore nor overrule an appointment made by a City
Executive.
Without awaiting the resolution of his Motion for
Consideration- Mackay filed, on July 23, 1979, before
tile Court of First Instance of Rizal, Caloocan City,
presided by respondent, Judge, a Petition for
"Certiorari, Prohibition and mandamus with Preliminary
Injunction and Damages" civil Case No. C7770) against
Hon. Jacobo Clave, the Civil Service Commission, the
Acting City Mayor, the City Treasurer, and Medalla,
praying that said respondents be restrained from
implementing the Decision of Hon. Jacobo Clave of
April 24, 1979, the Resolution No. 49 of the Merit
Systems Board dated December 29, 1978, and the
Decision of the Civil Service Commission of June 27,
1979. The Court a quo issued the Restraining Order
prayed for on July 25, 1979 enjoining implementation
of the aforestated Resolution/Decisions.
On August 2, 1979, Medalla moved to dissolve the
Restraining Order and to dismiss the Petition alleging
mainly that Mackay had not exhausted his
administrative remedies and that the latter's right to a
Writ of Preliminary Injunction was not only dubious or
debatable but was clearly non-existent. Hon. Jacobo
Clave and the Civil Service Commission likewise filed a

On August 13, 1979, Mackay moved to suspend

proceedings pending final resolution by the Civil
Service
Commission
of
his
Motion
for
the
reconsideration of the Decision of said Commission
dated June 27, 1979.

Acting on Medalla's Motion for Reconsideration thereof

as well as his Motion to Lift Restraining Order, the
Court a quo, in its Order of July 15, 1980, denied
reconsideration but lifted the Restraining Order "there
being no showing that petitioner is entitled to the
issuance of a Writ of Preliminary Injunction. "
Respondent Judge then set the case for hearing.
At this juncture, Medalla instituted this Petition before
us praying that the Court a quo be restrained from
proceeding with the hearing and that judgment be
rendered as follows:
1.
Ordering
the
Honorable Marcelino N.
Sayo, Judge of the
Court of First Instance
of Rizal Branch XXXIII,
Caloocan
City,
to
dismiss
respondent
Mackay's petitions, on
the ground of lack of
jurisdiction and/or nonexhaustion
of
administrative
remedies resulting to a
lack of cause of action;
2.
Declaring
the
decision of the Office of
the President (Annex
"C") and the Merit
Systems Board (Annex
"E")
as
valid
and
enforceable. 4
We issued a Restraining Order on August 27, 1980
enjoining respondents from proceeding with the case
below.
On November 7, 1980, we required petitioner Medalla
to implead the Mayor of Caloocan City as partyrespondent, and the latter to comment on the Petition
and to state whether he is ready to issue an

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appointment to Medalla as Hospital Administrator,

Medalla's rights thereto having been upheld by the
Civil Service Merit Systems Board and by the Office of
the President.
In his Compliance, Medalla included an additional
prayer that the City Mayor of Caloocan be ordered to
immediately appoint him as Hospital Administrator and
to pay him salary differentials.
In his Comment, the City Mayor of Caloocan invoked
the privilege of an appointing authority to determine
who can best fulfill the functions of an office citing the
case of Aguilar vs. Nieva, Jr. 5 to that effect. And as to
the matter of his readiness to issue an appointment to
Medalla, he manifested his preference to withhold
action pending Mackay's unresolved Motion for
Reconsideration of the Decision of June 27, 1979 of the
Civil Service Merit Systems Board.
Petitioner Medalla submits that the Trial Court erred in
not dismissing Mackay's Petition before it, there being
a clear showing of non-exhaustion of administrative
remedies, and that said Court was devoid of jurisdiction
in reviewing on certiorari decisions of the Office of the
President and of the Civil service Commission rendered
in the exercise of their quasi-judicial functions.
Private respondent Mackay takes the contrary view and
prays, instead, that the contested Decisions/Resolution
be declared null and void and respondent Judge
ordered to proceed with the hearing of the case below.
Although Mackay's Motions for Reconsideration were, in
fact, still pending resolution by Hon. Jacobo C. Clave
and the Civil Service Commission, respectively, at the
time private respondent Mackay filed the Petition
below, dismissal of said Petition can no longer be
anchored on the ground of non-exhaustion of
administrative remedies, as Medalla prays, considering
that Manifestations dated August 17 and 23, 1979 filed
by the said parties before the Court a quo show that
they had resolved the incidents adversely against
Mackay. 6 That issue, therefore, has become moot and
academic.
In so far as jurisdiction of the Court below to review by
certiorari decisions and/or resolutions of the Civil
Service Commission and of the Presidential Executive
Assistant is concerned, there should be no question but
that the power of judicial review should be upheld. The
following rulings buttress this conclusion:
The objection to a judicial review of a
Presidential act arises from a failure to
recognize the most important principle
in our system of government, i.e., the
separation of powers into three coequal
departments,
the
executive,
the
legislative and the judicial, each
supreme within its own assigned
powers and duties. When a presidential
act is challenged before the courts of
justice, it is not to be implied therefrom
that the Executive is being made
subject and subordinate to the courts.

The legality of his acts are under

judicial review, not because the
Executive is inferior to the courts, but
because the law is above the Chief
Executive himself, and the courts seek
only to interpret, apply or implement it
(the law). A judicial review of the
President's decision on a case of an
employee decided by the Civil Service
Board of Appeals should be viewed in
this light and the bringing of the case
to the Courts should be governed by
the same principles as govern the
judicial review of all administrative acts
of all administrative officers. 7
The courts may always examine into
the exercise of power by a ministerial
officer to the extent of determining
whether the particular power has been
granted to the officer, whether it is a
legal power that could have been
granted to him, and whether it has
been exercised in a legal manner. This
jurisdiction does not depend upon an
act of the legislature authorizing it, but
inheres in the courts of general
jurisdiction as an essential function of
the judicial department (State Racing
Commission v. Latonia Agri. Asso. 123
SW 68 1). 8 (emphasis supplied).
For the speedy determination of the controversy,
however, and considering that the position involved is
infused with public interest, rather than remand the
case to the Court below for further proceedings, we
hold that grave abuse of discretion on the part of Hon.
Jacobo C. Clave and the Civil Service Merit Systems
Board is absent.
To start with, under the Revised Charter of the City of
Caloocan RA No. 5502), it is clear that the power of
appointment by the City Mayor of heads of offices
entirely paid out of city funds is subject to Civil Service
law, rules and regulations (ibid., section 19). The
Caloocan City General Hospital is one of the city
departments provided for in the said law (ibid., sec.
17). The Hospital Administrator is appointed by the City
Mayor (ibid., section 66-B). The Hospital Administrator
is the head of the City General Hospital empowered to
administer, direct, and coordinate all activities of the
hospital to carry out its objectives as to the care of the
sick and the injured (ibid.).
Under section 19 (3) of the Civil Service Decree (PD No.
807, effective on October 6, 1975), the recruitment or
selection of employees for promotions is drawn from
the next-in-rank.
SEC. 19. Recruitment and Selection of
Employees.
xxx xxx xxx
(3) When a vacancy occurs in a
position in the second level of the

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Career Service as defined in Section 7,

the employees in the government
service who occupy the next lower
positions i the occupational group
under which the vacant position is
classified and in other functionally
related occupational groups and who
are competent, qualified and with the
appropriate civil service eligibility shall
be considered for promotion.
Section 19 (6) of the same Decree provides for the
administrative procedure by an aggrieved employee in
case of non-observance by the appointing authority of
the next-in-rank rule, thus:
Sec. 19(6) A qualified next-in-rank
employee shall have the right to
appeal initially, to the department head
and finally to the Office of the President
an appointment made ... (2. in favor of
one who is not next-in-rank, ... if the
employee making the appeal is not
satisfied with the written special reason
or reasons given by the appointing
authority for such appointment: ...
Before
deciding
a
contested
appointment the Office of the President
shall
consult
the
Civil
Service
Commission. For purposes of this
Section, .qualified next-in-rank' refers
to an employee appointed on a
permanent
basis
to
a
position
previously determined to be next-inrank to the vacancy proposed to be
filled and who meets the requisites for
appointment thereto as previously
determined by the appointing authority
and approved by the Commission.
The prescribed procedure has been followed by
petitioner Medalla He had appealed to the department
head and from thence, in view of the latter's
unfavorable action, to the Civil Service Commission
and thereafter to the Office of the President. Resolution
No. 49 of the Civil Service Merit Systems Board its
Decision of June 27, 1979, and the Decision of the
presidential Executive Assistant dated April 24, 1979,
were all rendered in Medalla's favor. The special reason
given by the Acting City Mayor for Mackay's
appointment, which is, that lie had completed all
academic requirements for the Certificate of Hospital
Administration, is not tenable, since Medalla himself
was found to be in possession of the same
qualification. But while the qualifications of both
petitioner Medalla and private respondent Mackay are
at par, yet, it is clear that the position of Chief of
Clinics is the next lower position to I hospital
Administrator under the organizational line-up of the
hospital. Consequently, at the time of Mackays
appointment as Assistant Hospital Administrator and
subsequently
hospital
Administrator,
Medalla
outranked Mackay who was only a Resident Physician
and, therefore, as the next-in rank, Medalla is entitled
to appointment as Hospital Administrator.

Respondent Mackay's urging that he was denied due

process deserves scant consideration considering that
subsequent developsments in the case establish that
he was heardon his Motions for Reconsideration by
both the Civil Service Commission and the office of the
President.
It is true that, as the respondent City Mayor alleges, a
local executive should be allowed the choice of men of
his confidence, provided they are qualified and
elligible, who in his best estimation are possesses of
the requisite reputation, integrity, knowledgeability,
energy and judgement. 9 However, as reproduced
heretofore, the Decision of the Civil Service Merit
Systems Board, upheld by the Office of the President,
contains a judicious assessment of the qualifications of
both petitioner Medalla and private respondent Mackay
for the contested position, revealing a careful study of
the controversy between the parties, which cannot be
ignored. The revocation of Mackay's appointment
reveals no arbitrariness nor grave abuse of discretion.
WHEREFORE, 1) the appointment extended to private
respondent, Dr. Honorato C. Mackay, as Hospital
Administrator is hereby declared null and void; 2)
respondent City Mayor of Caloocan City is hereby
ordered to extend an appointment to petitioner, Dr.
Eustaquio M. Medalla, as Hospital Administrator of the
Caloocan City General Hospital immediately upon
notice of this Decision; 3) petitioner, Dr. Eustaquio M.
Medalla,
shall
receive
all
compensation
and
emoluments appertaining to said position thenceforth,
but without entitlement to salary differentials; and 4)
respondent Judge is hereby permanently enjoined from
further proceeding with Civil Case No. 7770.
This Decision is immediately executory. No costs.
SO ORDERED.

[G.R. No. 86695. September 3, 1992.]

MARIA ELENA MALAGA, doing business under the
name B.E. CONSTRUCTION; JOSIELEEN NAJARRO,
doing business under the name BEST BUILT
CONSTRUCTION; JOSE N. OCCEA, doing business
under the name THE FIRM OF JOSE N. OCCEA;
and the ILOILO BUILDERS
CORPORATION, Petitioners, v. MANUEL R.
PENACHOS, JR., ALFREDO MATANGGA, ENRICO
TICAR AND TERESITA VILLANUEVA, in their
respective capacities as Chairman and Members
of the Pre-qualification Bids and Awards
Committee (PBAC)-BENIGNO PANISTANTE, in his
capacity as President of Iloilo State College of
Fisheries, as well as in their respective personal
capacities; and HON. LODRIGIO L.
LEBAQUIN, Respondents.
Salas, Villareal & Velasco, for Petitioners.
Virgilio A. Sindico for Respondents.

SYLLABUS

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1.
ADMINISTRATIVE
LAW;
GOVERNMENT
INSTRUMENTALITY,
DEFINED.

The
1987
Administrative
Code
defines
a
government
instrumentality as follows: Instrumentality refers to any
agency of the National Government, not integrated
within the department framework, vested with special
functions or jurisdiction by law, endowed with some if
not all corporate powers, administering special funds,
and enjoying operational autonomy, usually through a
charter. This term includes regulatory agencies,
chartered institutions, and government-owned or
controlled corporations. (Sec. 2 (5) Introductory
Provisions).
2.
ID.;
CHARTERED
INSTITUTION;
DEFINED;
APPLICATION IN CASE AT BAR. The 1987
Administrative Code describes a chartered institution
thus: Chartered institution refers to any agency
organized or operating under a special charter, and
vested by law with functions relating to specific
constitutional policies or objectives. This term includes
the state universities and colleges, and the monetary
authority of the state. (Sec. 2 (12) Introductory
Provisions). It is clear from the above definitions that
ISCOF is a chartered institution and is therefore
covered by P.D. 1818. There are also indications in its
charter that ISCOF is a government instrumentality.
First, it was created in pursuance of the integrated
fisheries development policy of the State, a priority
program of the government to effect the socioeconomic life of the nation. Second, the Treasurer of
the Republic of the Philippines shall also be the exofficio Treasurer of the state college with its accounts
and expenses to be audited by the Commission on
Audit or its duly authorized representative. Third,
heads of bureaus and offices of the National
Government are authorized to loan or transfer to it,
upon request of the president of the state college, such
apparatus, equipment, or supplies and even the
services of such employees as can be spared without
serious detriment to public service. Lastly, an
additional amount of P1.5M had been appropriated out
of the funds of the National Treasury and it was also
decreed in its charter that the funds and maintenance
of the state college would henceforth be included in
the General Appropriations Law. (Presidential Decree
No.
1523)
3. ID.; PROHIBITION OF ANY COURT FROM ISSUING
INJUNCTION IN CASES INVOLVING INFRASTRUCTURE
PROJECTS OF GOVERNMENT (P.D. 1818); POWER OF
THE COURTS TO RESTRAIN APPLICATION. In the case
of Datiles and Co. v. Sucaldito, (186 SCRA 704) this
Court interpreted a similar prohibition contained in P.D.
605, the law after which P.D. 1818 was patterned. It
was there declared that the prohibition pertained to the
issuance of injunctions or restraining orders by courts
against administrative acts in controversies involving
facts or the exercise of discretion in technical cases.
The Court observed that to allow the courts to judge
these matters would disturb the smooth functioning of
the administrative machinery. Justice Teodoro Padilla
made it clear, however, that on issues definitely
outside of this dimension and involving questions of
law, courts could not be prevented by P.D. No. 605
from exercising their power to restrain or prohibit

administrative acts. We see no reason why the above

ruling should not apply to P.D. 1818. There are at least
two irregularities committed by PBAC that justified
injunction of the bidding and the award of the project.
4. ID.; POLICIES AND GUIDELINES PRESCRIBED FOR
GOVERNMENT INFRASTRUCTURE (PD 1594); RULES
IMPLEMENTING
THEREOF,
NOT
SUFFICIENTLY
COMPLIED WITH IN CASE AT BAR. Under the Rules
Implementing P.D. 1594, prescribing policies and
guidelines for government infrastructure contracts,
PBAC shall provide prospective bidders with the Notice
to Pre-qualification and other relevant information
regarding the proposed work. Prospective contractors
shall be required to file their ARC-Contractors
Confidential
Application
for
Registration
&
Classifications & the PRE-C2 Confidential Prequalification Statement for the Project (prior to the
amendment of the rules, this was referred to as Pre-C1)
not later than the deadline set in the published
Invitation to Bid, after which date no PRE-C2 shall be
submitted and received. Invitations to Bid shall be
advertised for at least three times within a reasonable
period but in no case less than two weeks in at least
two newspapers of general circulations. (IB 13 1.2-19,
Implementing Rules and Regulations of P.D. 1594 as
amended) PBAC advertised the pre-qualification
deadline as December 2, 1988, without stating the
hour thereof, and announced that the opening of bids
would be at 3 oclock in the afternoon of December 12,
1988. This scheduled was changed and a notice of
such change was merely posted at the ISCOF bulletin
board. The notice advanced the cut-off time for the
submission of pre-qualification documents to 10 oclock
in the morning of December 2, 1988, and the opening
of bids to 1 oclock in the afternoon of December 12,
1988. The new schedule caused the pre-disqualification
of the petitioners as recorded in the minutes of the
PBAC meeting held on December 6, 1988. While it may
be true that there were fourteen contractors who were
pre-qualified despite the change in schedule, this fact
did not cure the defect of the irregular notice. Notably,
the petitioners were disqualified because they failed to
meet the new deadline and not because of their
expired licenses. (B.E. & Best Builts licenses were valid
until June 30, 1989. [Ex. P & O respectively: both were
marked on December 28, 1988]) We have held that
where the law requires a previous advertisement
before government contracts can be awarded, noncompliance with the requirement will, as a general rule,
render the same void and of no effect. (Caltex Phil. v.
Delgado Bros., 96 Phil. 368) The fact that an invitation
for bids has been communicated to a number of
possible bidders is not necessarily sufficient to
establish compliance with the requirements of the law
if it is shown that other possible bidders have not been
similarly
notified.
5. ID.; ID.; ID.; PURPOSE THEREOF; CASE AT BAR.
The purpose of the rules implementing P.D. 1594 is to
secure competitive bidding and to prevent favoritism,
collusion and fraud in the award of these contracts to
the detriment of the public. This purpose was defeated
by the irregularities committed by PBAC. It has been
held that the three principles in public bidding are the
offer to the public, an opportunity for competition and
a basis for exact comparison of bids. A regulation of
the matter which excludes any of these factors

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destroys the distinctive character of the system and

thwarts the purpose of its adoption. (Hannan v. Board
of Education, 25 Okla. 372) In the case at bar, it was
the lack of proper notice regarding the pre-qualification
requirement and the bidding that caused the
elimination of petitioners B.E. and Best Built. It was not
because of their expired licenses, as private
respondents now claim. Moreover, the plans and
specifications which are the contractors guide to an
intelligent bid, were not issued on time, thus defeating
the guaranty that contractors be placed on equal
footing when they submit their bids. The purpose of
competitive bidding is negated if some contractors are
informed ahead of their rivals of the plans and
specifications that are to be the subject of their bids.

their PRE-C1 documents. They also asked that if the

bidding had already been conducted, the defendants
be directed not to award the project pending resolution
of their complaint.
On the same date, Judge Lodrigio L. Lebaquin issued a
restraining order prohibiting PBAC from conducting the
bidding and awarding the project.
On December 16, 1988, the defendants filed a motion
to lift the restraining order on the ground that the
Court was prohibited from issued restraining orders,
preliminary injunctions and preliminary mandatory
injunctions by P.D. 1818.
The decree reads pertinently as follows:chanrob1es
virtual
1aw
library

DECISION

CRUZ, J.:

This controversy involves the extent and applicability

of P.D. 1818, which prohibits any court from issuing
injunctions in cases involving infrastructure projects of
the
government.
The facts are not disputed.
The Iloilo State College of Fisheries (henceforth ISCOF)
through its Pre-qualification, Bids and Awards
Committee (henceforth PBAC) caused the publication in
the November 25, 26, 28, 1988 issues of the Western
Visayas Daily an Invitation to Bid for the construction of
the Micro Laboratory Building at ISCOF. The notice
announced that the last day for the submission of prequalification requirements (PRE C-1) ** was December
2, 1988, and that the bids would be received and
opened on December 12, 1988, 3 oclock in the
afternoon.
Petitioners Maria Elena Malaga and Josieleen Najarro,
respectively doing business under the name of the B.E.
Construction and Best Built Construction, submitted
their pre-qualification documents at two oclock in the
afternoon of December 2, 1988. Petitioner Jose Occea
submitted his own PRE-C1 on December 5, 1988. All
three of them were not allowed to participate in the
bidding because their documents were considered late,
having been submitted after the cut-off time of ten
oclock in the morning of December 2, 1988.
On December 12, 1988, the petitioners filed a
complaint with the Regional Trial Court of Iloilo against
the chairman and members of PBAC in their official and
personal capacities. The plaintiffs claimed that
although they had submitted their PRE-C1 on time, the
PBAC refused without just cause to accept them. As a
result, they were not included in the list of pre-qualified
bidders, could not secure the needed plans and other
documents, and were unable to participate in the
scheduled
bidding.
In their prayer, they sought the resetting of the
December 12, 1988 bidding and the acceptance of

Section 1. No Court in the Philippines shall have

jurisdiction to issue any restraining order, preliminary
injunction, or preliminary infrastructure project, or a
mining, fishery, forest or other natural resource
development project of the government, or any public
utility operated by the government, including among
others public utilities for the transport of the goods and
commodities, stevedoring and arrastre contracts, to
prohibit any person or persons, entity or government
official from proceeding with, or continuing the
execution or implementation of any such project, or the
operation of such public utility, or pursuing any lawful
activity necessary for such execution, implementation
or operation.
The movants also contended that the question of the
propriety of a preliminary injunction had become moot
and academic because the restraining order was
received late, at 2 oclock in the afternoon of
December 12, 1988, after the bidding had been
conducted and closed at eleven thirty in the morning of
that date.
In their opposition of the motion, the plaintiffs argued
against the applicability of P.D. 1818, pointing out that
while ISCOF was a state college, it had its own charter
and separate existence and was not part of the
national government or of any local political
subdivision. Even if P.D. 1818 were applicable, the
prohibition presumed a valid and legal government
project, not one tainted with anomalies like the project
at bar.
They also cited Filipinas Marble Corp. v. IAC, 3 where
the Court allowed the issuance of a writ of preliminary
injunction despite a similar prohibition found in P.D.
385.
The
Court
therein
stated
that:
The government, however, is bound by basic principles
of fairness and decency under the due process clauses
of the Bill of Rights. P.D. 385 was never meant to
protect officials of government-lending institutions who
take over the management of a borrower corporation,
lead that corporation to bankruptcy through
mismanagement or misappropriation of its funds, and
who, after ruining it, use the mandatory provisions of
the decree to avoid the consequences of their misleads
(p. 188, Emphasis supplied).
On January 2, 1989, the trial court lifted the restraining

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order and denied the petition for preliminary injunction.

It declared that the building sought to be construed at
the ISCOF was an infrastructure project of the
government falling within the coverage of P.D. 1818.
Even if it were not, the petition for the issuance of a
writ of preliminary injunction would still fail because
the sheriffs return showed that PBAC was served a
copy of the restraining order after the bidding sought
to be restrained had already been held. Furthermore,
the members of the PBAC could not be restrained from
awarding the project because the authority to do so
was lodged in the President of the ISCOF, who was not
a party to the case.
In the petition now before us, it is reiterated that P.D.
1818 does not cover the ISCOF because of its separate
and distinct corporate personality. It is also stressed
again that the prohibition under P.D. 1818 could not
apply to the present controversy because the project
was vitiated with irregularities, to wit:
1. The invitation to bid as published fixed the deadline
of submission of pre-qualification document on
December 2, 1988 without indicating any time, yet
after 10:00 oclock of the given late, the PBAC already
refused
to
accept
petitioners
documents.
2. The time and date of bidding was published as
December 12, 1988 at 3:00 p.m. yet it was held at
10:00
oclock
in
the
morning.
3. Private respondents, for the purpose of inviting
bidders to participate, issued a mimeographed
"Invitation to Bid" form, which by law (P.D. 1594 and
Implementing Rules, Exh. B-1) is to contain the
particulars of the project subject of bidding for the
purpose of.
(i) enabling bidders to make an intelligent and accurate
bids;
(ii) for PBAC to have a uniform basis for evaluating the
bids;
(iii) to prevent collusion between a bidder and the
PBAC, by opening to all the particulars of a project.
Additionally, the Invitation to Bid prepared by the
respondents and the Itemized Bill of Quantities therein
were left blank.
And although the project in question was a
"Construction," the private respondents used an
Invitation to Bid form for "Materials."
The petitioners also point out that the validity of the
writ of preliminary injunction had not yet become moot
and academic because even if the bids had been
opened before the restraining order was issued, the
project itself had not yet been awarded. The ISCOF
president was not an indispensable party because the
signing of the award was merely a ministerial function
which he could perform only upon the recommendation
of the Award Committee. At any rate, the complaint
had already been duly amended to include him as a
party defendant.

that since the members of the board of trustees of the

ISCOF are all government officials under Section 7 of
P.D. 1523 and since the operations and maintenance of
the ISCOF are provided for in the General
Appropriations Law, it is should be considered a
government institution whose infrastructure project is
covered by P.D. 1818
Regarding the schedule for pre-qualification, the
private respondents insist that PBAC posted on the
ISCOF bulletin board an announcement that the
deadline for the submission of pre-qualifications
documents was at 10 oclock of December 2, 1988, and
the opening of bids would be held at 1 oclock in the
afternoon of December 12, 1988. As of ten oclock in
the morning of December 2, 1988, B.E. construction
and Best Built construction had filed only their letters
of intent. At two oclock in the afternoon, B.E., and Best
Built filed through their common representative,
Nenette Garuello, their pre-qualification documents
which were admitted but stamped "submitted late."
The petitioners were informed of their disqualification
on the same date, and the disqualification became final
on December 6, 1988. Having failed to take immediate
action to compel PBAC to pre-qualify them despite their
notice of disqualification, they cannot now come to this
Court to question the binding proper in which they had
not
participated.
In the petitioners Reply, they raise as an additional
irregularity the violation of the rule that where the
estimate project cost is from P1M to P5M, the issuance
of plans, specifications and proposal book forms should
made thirty days before the date of bidding. 7 They
point out that these forms were issued only on
December 2, 1988, and not at the latest on November
12, 1988, the beginning of the 30-day period prior to
the scheduled bidding.
In their Rejoinder, the private respondents aver that
the documents of B.E. and Best Built were received
although filed late and were reviewed by the Award
Committee, which discovered that the contractors had
expired licenses. B.E.s temporary certificate of
Renewal of Contractors License was valid only until
September 30, 1988, while Best Builts license was
valid only up to June 30, 1988.
The Court has considered the arguments of the parties
in light of their testimonial and documentary evidence
and the applicable laws and jurisprudence. It finds for
the
petitioners.
The 1987 Administrative Code defines a government
instrumentality as follows:
Instrumentality refers to any agency of the National
Government, not integrated within the department
framework, vested with special functions or jurisdiction
by law, endowed with some if not all corporate powers,
administering special funds, and enjoying operational
autonomy, usually through a charter. This term
includes regulatory agencies, chartered institutions,
and government-owned or controlled corporations.
(Sec. 2 (5) Introductory Provisions).
The same Code describes a chartered institution thus:

In their Comment, the private respondents maintain

ADMIN LAW 1st Set

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Chartered institution refers to any agency organized

or operating under a special charter, and vested by law
with functions relating to specific constitutional policies
or objectives. This term includes the state universities
and colleges, and the monetary authority of the state.
(Sec. 2 (12) Introductory Provisions).
It is clear from the above definitions that ISCOF is a
chartered institution and is therefore covered by P.D.
1818.
There are also indications in its charter that ISCOF is a
government instrumentality. First, it was created in
pursuance of the integrated fisheries development
policy of the State, a priority program of the
government of effect the socio-economic life of the
nation. Second, the Treasurer of the Republic of the
Philippines also be the ex-officio Treasurer of the state
college with its accounts and expenses to be audited
by the Commission on Audit or its duly authorized
representative. Third, heads of bureaus and offices of
the National Government are authorized to loan or
transfer to it, upon request of the president of the state
college, such apparatus, equipment, or supplies and
even the services of such employees as can be spared
without serious detriment to public service. Lastly, an
additional amount of P1.5M had been appropriated out
of the funds of the National Treasury and it was also
decreed in its charter that the funds and maintenance
of the state college would henceforth be included in
the General Appropriations Law.
Nevertheless, it does not automatically follow that
ISCOF is covered by the prohibition in the said decree.
In the case of Datiles and Co. v. Sucaldito, 9 this Court
interpreted a similar prohibition contained in P.D. 605,
the law after which P.D. 1818 was patterned. It was
there declared that the prohibition pertained to the
issuance of injunctions or restraining orders by courts
against administrative acts in controversies involving
facts or the exercise of discretion in technical cases.
The Court observed that to allow the courts to judge
these matters would disturb the smooth functioning of
the administrative machinery. Justice Teodoro Padilla
made it clear, however, that on issues definitely
outside of this dimension and involving questions of
law, courts could not be prevented by P.D. No. 605
from exercising their power to restrain or prohibit
administrative acts.
We see no reason why the above ruling should not
apply to P.D. 1818.
There are at least two irregularities committed by PBAC
that justified injunction of the bidding and the award of
the project.
First, PBAC set deadlines for the filing of the PRE-C1
and the opening of bids and then changed these
deadlines without prior notice to prospective
participants.
Under the Rules Implementing P.D. 1594, prescribing
policies and guidelines for government infrastructure
contracts, PBAC shall provide prospective bidders with
the Notice of Pre-qualification and other relevant
information regarding the proposed work. Prospective

contractors shall be required to file their ARCContractors Confidential Application for Registration &
Classifications & the PRE-C2 Confidential Prequalification Statement for the Project (prior to the
amendment of the rules, this was referred to as PREC1) not later than the deadline set in the published
Invitation to Bid, after which date no PRE-C2 shall be
submitted and received. Invitations to Bid shall be
advertised for at least three times within a reasonable
period but in no case less than two weeks in at least
two newspapers of general circulations.
PBAC advertised the pre-qualification deadline as
December 2, 1988, without stating the hour thereof,
and announced that the opening of bids would be at 3
oclock in the afternoon of December 12, 1988. This
schedule was changed and a notice of such change
was merely posted at the ISCOF bulletin board. The
notice advanced the cut-off time for the submission of
pre-qualification documents to 10 oclock in the
morning of December 2, 1988, and the opening of bids
to 1 oclock in the afternoon of December 12, 1988.
The new schedule caused the pre-disqualification of
the petitioners as recorded in the minutes of the PBAC
meeting held on December 6, 1988. While it may be
true that there were fourteen contractors who were
pre-qualified despite the change in schedule, this fact
did not cure the defect of the irregular notice. Notably,
the petitioners were disqualified because they failed to
meet the new deadline and not because of their
expired licenses. ***
We have held that where the law requires a previous
advertisement before government contracts can be
awarded, non-compliance with the requirement will, as
a general rule, render the same void and of no effect
11 The facts that an invitation for bids has been
communicated to a number of possible bidders is not
necessarily sufficient to establish compliance with the
requirements of the law if it is shown that other public
bidders have not been similarly notified.
Second, PBAC was required to issue to pre-qualified
applicants the plans, specifications and proposal book
forms for the project to be bid thirty days before the
date of bidding if the estimate project cost was
between P1M and P5M. PBAC has not denied that these
forms were issued only on December 2, 1988, or only
ten days before the bidding scheduled for December
12, 1988. At the very latest, PBAC should have issued
them on November 12, 1988, or 30 days before the
scheduled
bidding.
It is apparent that the present controversy did not arise
from the discretionary acts of the administrative body
nor does it involve merely technical matters. What is
involved here is non-compliance with the procedural
rules on bidding which required strict observance. The
purpose of the rules implementing P.D. 1594 is to
secure competitive bidding and to prevent favoritism,
collusion and fraud in the award of these contracts to
the detriment of the public. This purpose was defeated
by the irregularities committed by PBAC red.
It has been held that the three principles in public
bidding are the offer to the public, an opportunity for
competition and a basis for exact comparison of bids. A

ADMIN LAW 1st Set

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regulation of the matter which excludes any of these

factors destroys the distinctive character of the system
and
thwarts
and
purpose
of
its
adoption.

because it admittedly submitted its pre-qualification

documents on December 5, 1988, or three days after
the deadline.

In the case at bar, it was the lack of proper notice

regarding the pre-qualification requirement and the
bidding that caused the elimination of petitioners B.E.
and Best Built. It was not because of their expired
licenses, as private respondents now claim. Moreover,
the plans and specifications which are the contractors
guide to an intelligent bid, were not issued on time,
thus defeating the guaranty that contractors be placed
on equal footing when they submit their bids. The
purpose of competitive bidding is negated if some
contractors are informed ahead of their rivals of the
plans and specifications that are to be the subject of
their bids.

WHEREFORE, judgment is hereby rendered: a)

upholding the restraining order dated December 12,
1988, as not covered by the prohibition in P.D. 1818; b)
ordering the chairman and the members of the PBAC
board of trustees, namely Manuel R. Penachos, Jr.,
Alfredo Matangga, Enrico Ticar, and Teresita Villanueva,
to each pay separately to petitioners Maria Elena
Malaga and Josieleen Najarro nominal damages
P10,000.00 each; and c) removing the said chairman
and members from the PBAC board of trustees, or
whoever among them is still incumbent therein, for
their malfeasance in office. Costs against PBAC.

P.D. 1818 was not intended to shield from judicial

scrutiny irregularities committed by administrative
agencies such as the anomalies above described.
Hence, the challenged restraining order was not
improperly issued by the respondent judge and the writ
of preliminary injunction should not have been denied.
We note from Annex Q of the private respondents
memorandum, however, that the subject project has
already been "100% completed as to the Engineering
Standard." This fait accompli has made the petition for
a writ of preliminary injunction moot and academic.
We come now
respondents.

to

the

liabilities

of

the

private

It has been held in a long line of cases that a contract

granted without the competitive bidding required by
law is void, and the party to whom it is awarded cannot
benefit from it. 14 It has not been shown that the
irregularities committed by PBAC were induced by or
participated in by any of the contractors. Hence,
liability shall attach only to the private respondents for
the prejudice sustained by the petitioners as a result of
the anomalies described above.
As there is no evidence of the actual loss suffered by
the petitioners, compensatory damage may not be
awarded to them. Moral damages do not appear to be
due either. Even so, the Court cannot close its eyes to
the evident bad faith that characterized the conduct of
the private respondents, including the irregularities in
the announcement of the bidding and their efforts to
persuade the ISCOF president to award the project
after two days from receipt of the restraining order and
before they moved to lift such order. For such
questionable acts, they are liable in nominal damages
at least in accordance with Article 2221 of the Civil
Code, which states:
"Art. 2221. Nominal damages are adjudicated in order
that a right of the plaintiff, which has been violated or
invaded by the defendant may be vindicated or,
recognized, and not for the purpose of indemnifying
the plaintiff for any loss suffered by him.
These damages are to assessed against the private
respondents in the amount of P10,000.00 each, to be
paid separately for each of petitioners B.E.
Construction and Best Built Construction. The other
petitioner, Occea Builders, is not entitled to relief

Let a copy of this decision be sent to the Office of the

Ombudsman.
SO ORDERED.
FIRST DIVISION
G.R. No. 162784

June 22, 2007

NATIONAL HOUSING AUTHORITY, petitioner,

vs.
SEGUNDA ALMEIDA, COURT OF APPEALS, and
RTC of SAN PEDRO, LAGUNA, BR. 31, respondents.
DECISION
PUNO, C.J.:
This is a Petition for Review on Certiorari under Rule 45
filed by the National Housing Authority (NHA) against
the Court of Appeals, the Regional Trial Court of San
Pedro Laguna, Branch 31, and private respondent
Segunda Almeida.
On June 28, 1959, the Land Tenure Administration (LTA)
awarded to Margarita Herrera several portions of land
which are part of the Tunasan Estate in San Pedro,
Laguna. The award is evidenced by an Agreement to
Sell No. 3787.1 By virtue of Republic Act No. 3488, the
LTA was succeeded by the Department of Agrarian
Reform (DAR). On July 31, 1975, the DAR was
succeeded by the NHA by virtue of Presidential Decree
No. 757.2 NHA as the successor agency of LTA is the
petitioner in this case.
The records show that Margarita Herrera had two
children: Beatriz Herrera-Mercado (the mother of
private respondent) and Francisca Herrera. Beatriz
Herrera-Mercado predeceased her mother and left
heirs.
Margarita Herrera passed away on October 27, 1971.3
On August 22, 1974, Francisca Herrera, the remaining
child of the late Margarita Herrera executed a Deed of
Self-Adjudication claiming that she is the only
remaining relative, being the sole surviving daughter of

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the deceased. She also claimed to be the exclusive

legal heir of the late Margarita Herrera.
The Deed of Self-Adjudication was based on a
Sinumpaang Salaysay dated October 7, 1960, allegedly
executed by Margarita Herrera. The pertinent portions
of which are as follows:
SINUMPAANG SALAYSAY
SA SINO MAN KINAUUKULAN;
Akong si MARGARITA HERRERA, Filipina, may
83
taong
gulang,
balo,
kasalukuyang
naninirahan at tumatanggap ng sulat sa Nayon
ng San Vicente, San Pedro Laguna, sa ilalim ng
panunumpa ay malaya at kusang loob kong
isinasaysay
at
pinagtitibay
itong
mga
sumusunod:
1. Na ako ay may tinatangkilik na isang lagay
na lupang tirikan (SOLAR), tumatayo sa Nayon
ng San Vicente, San Pedro, Laguna, mayroong
PITONG DAAN AT PITUMPU'T ISANG (771)
METRONG PARISUKAT ang laki, humigit
kumulang, at makikilala sa tawag na Lote 17,
Bloke 55, at pag-aari ng Land Tenure
Administration;
2. Na ang nasabing lote ay aking binibile, sa
pamamagitan ng paghuhulog sa Land Tenure
Administration, at noong ika 30 ng Julio, 1959,
ang Kasunduang sa Pagbibile (AGREEMENT TO
SELL No. 3787) ay ginawa at pinagtibay sa
Lungsod ng Maynila, sa harap ng Notario
Publico na si G. Jose C. Tolosa, at lumalabas sa
kaniyang Libro Notarial bilang Documento No.
13, Pagina No. 4; Libro No. IV, Serie ng 1959;
3. Na dahilan sa ako'y matanda na at walang
ano mang hanap buhay, ako ay nakatira at
pinagsisilbihan nang aking anak na si Francisca
Herrera, at ang tinitirikan o solar na nasasabi
sa unahan ay binabayaran ng kaniyang sariling
cuarta sa Land Tenure Administration;
4. Na alang-alang sa nasasaysay sa unahan
nito, sakaling ako'y bawian na ng Dios ng aking
buhay, ang lupang nasasabi sa unahan ay
aking ipinagkakaloob sa nasabi kong anak na
FRANCISCA
HERRERA,
Filipina,
nasa
katamtamang gulang, kasal kay Macario
Berroya,
kasalukuyang
naninirahan
at
tumatanggap ng sulat sa Nayong ng San
Vicente, San Pedro Laguna, o sa kaniyang mga
tagapagmana at;
5. Na HINIHILING KO sa sino man kinauukulan,
na sakaling ako nga ay bawian na ng Dios ng
aking buhay ay KILALANIN, IGALANG at
PAGTIBAYIN ang nilalaman sa pangalan ng
aking anak na si Francisca Herrera ang loteng
nasasabi sa unahan.

SA KATUNAYAN NG LAHAT, ako ay nag-didiit ng

hinlalaki ng kanan kong kamay sa ibaba nito at
sa kaliwang gilid ng unang dahon, dito sa
Lungsod ng Maynila, ngayong ika 7 ng Octubre,
1960.4
The said document was signed by two witnesses and
notarized. The witnesses signed at the left-hand side of
both pages of the document with the said document
having 2 pages in total. Margarita Herrera placed her
thumbmark5 above her name in the second page and
at the left-hand margin of the first page of the
document.
The surviving heirs of Beatriz Herrera-Mercado filed a
case for annulment of the Deed of Self-Adjudication
before the then Court of First Instance of Laguna,
Branch 1 in Binan, Laguna (now, Regional Trial Court
Branch 25). The case for annulment was docketed as
Civil Case No. B-1263.6
On December 29, 1980, a Decision in Civil Case No. B1263 (questioning the Deed of Self-Adjudication) was
rendered and the deed was declared null and void.7
During trial on the merits of the case assailing the
Deed of Self-Adjudication, Francisca Herrera filed an
application with the NHA to purchase the same lots
submitting therewith a copy of the "Sinumpaang
Salaysay" executed by her mother. Private respondent
Almeida, as heir of Beatriz Herrera-Mercado, protested
the application.
In a Resolution8 dated February 5, 1986, the NHA
granted the application made by Francisca Herrera,
holding that:
From the evidence of the parties and the
records of the lots in question, we gathered the
following facts: the lots in question are portions
of the lot awarded and sold to the late
Margarita Herrera on July 28, 1959 by the
defunct Land Tenure Administration; protestant
is the daughter of the late Beatriz Herrera
Mercado who was the sister of the protestee;
protestee and Beatriz are children of the late
Margarita Herrera; Beatriz was the transferee
from Margarita of Lot Nos. 45, 46, 47, 48 and
49, Block 50; one of the lots transferred to
Beatriz, e.g. Lot 47, with an area of 148 square
meters is in the name of the protestant;
protestant occupied the lots in question with
the permission of the protestee; protestee is a
resident of the Tunasan Homesite since birth;
protestee was born on the lots in question;
protestee left the place only after marriage but
resided in a lot situated in the same Tunasan
Homesite; her (protestee) son Roberto Herrera
has been occupying the lots in question; he has
been there even before the death of the late
Margarita Herrera; on October 7, 1960,
Margarita
Herrera
executed
a
"Sinumpaang Salaysay" whereby she
waived or transferred all her rights and
interest over the lots in question in favor
of the protestee; and protestee had paid the

ADMIN LAW 1st Set

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lots in question in full on March 8, 1966 with

the defunct Land Tenure Administration.

Certificate of Title issued. Attorney's fees were also

awarded to private respondent.

This Office finds that protestee has a better preferential

right to purchase the lots in question.9

The Regional Trial Court ruled that the "Sinumpaang

Salaysay" was not an assignment of rights but a
disposition of property which shall take effect upon
death. It then held that the said document must first be
submitted to probate before it can transfer property.

Private respondent Almeida appealed to the Office of

the President.10 The NHA Resolution was affirmed by
the Office of the President in a Decision dated January
23, 1987.11
On February 1, 1987, Francisca Herrera died. Her heirs
executed an extrajudicial settlement of her estate
which they submitted to the NHA. Said transfer of
rights was approved by the NHA. 12 The NHA executed
several deeds of sale in favor of the heirs of Francisca
Herrera
and
titles
were
issued
in
their
favor.13 Thereafter, the heirs of Francisca Herrera
directed Segunda Mercado-Almeida to leave the
premises that she was occupying.
Feeling aggrieved by the decision of the Office of the
President and the resolution of the NHA, private
respondent Segunda Mercado-Almeida sought the
cancellation of the titles issued in favor of the heirs of
Francisca. She filed a Complaint on February 8, 1988,
for "Nullification of Government Lot's Award," with
the Regional Trial Court of San Pedro, Laguna, Branch
31.
In her complaint, private respondent Almeida invoked
her forty-year occupation of the disputed properties,
and re-raised the fact that Francisca Herrera's
declaration of self-adjudication has been adjudged as a
nullity because the other heirs were disregarded. The
defendant heirs of Francisca Herrera alleged that the
complaint was barred by laches and that the decision
of the Office of the President was already final and
executory.14 They also contended that the transfer of
purchase of the subject lots is perfectly valid as the
same was supported by a consideration and that
Francisca Herrera paid for the property with the use of
her own money.15 Further, they argued that plaintiff's
occupation of the property was by mere tolerance and
that they had been paying taxes thereon.16
The Regional Trial Court issued an Order dated June 14,
1988 dismissing the case for lack of jurisdiction. 17 The
Court of Appeals in a Decision dated June 26, 1989
reversed and held that the Regional Trial Court had
jurisdiction to hear and decide the case involving "title
and
possession
to
real
property
within
its
jurisdiction."18The case was then remanded for further
proceedings on the merits.
A pre-trial was set after which trial ensued.
On March 9, 1998, the Regional Trial Court rendered a
Decision setting aside the resolution of the NHA and
the decision of the Office of the President awarding the
subject lots in favor of Francisca Herrera. It declared
the deeds of sale executed by NHA in favor of Herrera's
heirs null and void. The Register of Deeds of Laguna,
Calamba Branch was ordered to cancel the Transfer

Both the NHA and the heirs of Francisca Herrera filed

their respective motions for reconsideration which were
both denied on July 21, 1998 for lack of merit. They
both appealed to the Court of Appeals. The brief for the
heirs of Francisca Herrera was denied admission by the
appellate court in a Resolution dated June 14, 2002 for
being a "carbon copy" of the brief submitted by the
NHA and for being filed seventy-nine (79) days late.
On August 28, 2003, the Court of Appeals affirmed the
decision of the Regional Trial Court, viz:
There is no dispute that the right to repurchase
the subject lots was awarded to Margarita
Herrera in 1959. There is also no dispute that
Margarita executed a "Sinumpaang Salaysay"
on October 7, 1960. Defendant NHA claims that
the "Sinumpaang Salaysay" is, in effect, a
waiver or transfer of rights and interest over
the subject lots in favor of Francisca Herrera.
This Court is disposed to believe otherwise.
After a perusal of the "Sinumpaang Salaysay"
of Margarita Herrera, it can be ascertained
from its wordings taken in their ordinary and
grammatical sense that the document is a
simple disposition of her estate to take effect
after her death. Clearly the Court finds that the
"Sinumpaang Salaysay" is a will of Margarita
Herrera. Evidently, if the intention of Margarita
Herrera was to merely assign her right over the
lots to her daughter Francisca Herrera, she
should have given her "Sinumpaang Salaysay"
to the defendant NHA or to Francisca Herrera
for submission to the defendant NHA after the
full payment of the purchase price of the lots or
even prior thereto but she did not. Hence it is
apparent that she intended the "Sinumpaang
Salaysay" to be her last will and not an
assignment of rights as what the NHA in its
resolution would want to make it appear. The
intention of Margarita Herrera was shared no
less by Francisca Herrera who after the
former's demise executed on August 22, 1974
a Deed of Self-Adjudication claiming that she is
her sole and legal heir. It was only when said
deed was questioned in court by the surviving
heirs of Margarita Herrera's other daughter,
Beatriz Mercado, that Francisca Herrera filed an
application to purchase the subject lots and
presented the "Sinumpaang Salaysay" stating
that it is a deed of assignment of rights.19
The Court of Appeals ruled that the NHA acted
arbitrarily in awarding the lots to the heirs of Francisca
Herrera. It upheld the trial court ruling that the
"Sinumpaang Salaysay" was not an assignment of
rights but one that involved disposition of property

ADMIN LAW 1st Set

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which shall take effect upon death. The issue of

whether it was a valid will must first be determined by
probate.
Petitioner NHA elevated the case to this Court.
Petitioner NHA raised the following issues:
A. WHETHER OR NOT THE RESOLUTION OF THE
NHA AND THE DECISION OF THE OFFICE OF
THE PRESIDENT HAVE ATTAINED FINALITY, AND
IF SO, WHETHER OR NOT THE PRINCIPLE OF
ADMINISTRATIVE RES
JUDICATA BARS
THE
COURT FROM FURTHER DETERMINING WHO
BETWEEN THE PARTIES HAS PREFERENTIAL
RIGHTS FOR AWARD OVER THE SUBJECT LOTS;
B. WHETHER OR NOT THE COURT HAS
JURISDICTION TO MAKE THE AWARD ON THE
SUBJECT LOTS; AND
C. WHETHER OR NOT THE AWARD OF THE
SUBJECT LOTS BY THE NHA IS ARBITRARY.
We rule for the respondents.
Res judicata is a concept applied in review of lower
court decisions in accordance with the hierarchy of
courts. But jurisprudence has also recognized the rule
of administrative res judicata: "the rule which forbids
the reopening of a matter once judicially determined
by competent authority applies as well to the judicial
and quasi-judicial facts of public, executive or
administrative officers and boards acting within their
jurisdiction as to the judgments of courts having
general judicial powers . . . It has been declared that
whenever final adjudication of persons invested with
power to decide on the property and rights of the
citizen is examinable by the Supreme Court, upon a
writ of error or a certiorari, such final adjudication may
be pleaded as res judicata."20 To be sure, early
jurisprudence were already mindful that the doctrine of
res judicata cannot be said to apply exclusively to
decisions rendered by what are usually understood as
courts without unreasonably circumscribing the scope
thereof and that the more equitable attitude is to allow
extension of the defense to decisions of bodies upon
whom judicial powers have been conferred.
In Ipekdjian Merchandising Co., Inc. v. Court of
Tax Appeals,21 the Court held that the rule prescribing
that "administrative orders cannot be enforced in the
courts in the absence of an express statutory provision
for that purpose" was relaxed in favor of quasi-judicial
agencies.
In fine, it should be remembered that quasi-judicial
powers will always be subject to true judicial power
that which is held by the courts. Quasi-judicial power is
defined as that power of adjudication of an
administrative agency for the "formulation of a final
order."22 This function applies to the actions, discretion
and similar acts of public administrative officers or
bodies who are required to investigate facts, or
ascertain the existence of facts, hold hearings, and

draw conclusions from them, as a basis for their official

action and to exercise discretion of a judicial
nature.23 However, administrative agencies are not
considered courts, in their strict sense. The doctrine of
separation of powers reposes the three great powers
into its three (3) branchesthe legislative, the
executive, and the judiciary. Each department is coequal and coordinate, and supreme in its own sphere.
Accordingly, the executive department may not, by its
own fiat, impose the judgment of one of its agencies,
upon the judiciary. Indeed, under the expanded
jurisdiction of the Supreme Court, it is empowered to
"determine whether or not there has been grave abuse
of discretion amounting to lack or excess of jurisdiction
on the part of any branch or instrumentality of the
Government."24 Courts have an expanded role under
the 1987 Constitution in the resolution of societal
conflicts under the grave abuse clause of Article VIII
which includes that duty to check whether the other
branches of government committed an act that falls
under the category of grave abuse of discretion
amounting to lack or excess of jurisdiction.25
Next, petitioner cites Batas Pambansa Blg. 129 or the
Judiciary Reorganization Act of 1980 26 where it is
therein provided that the Intermediate Appellate Court
(now, Court of Appeals) shall exercise the "exclusive
appellate jurisdiction over all final judgments,
decisions, resolutions, orders or awards, of the
Regional Trial Courts and Quasi-Judicial agencies,
instrumentalities, boards or commissions, except those
falling within the jurisdiction of the Supreme Court in
accordance with the Constitution"27 and contends
that the Regional Trial Court has no jurisdiction to rule
over awards made by the NHA.
Well-within its jurisdiction, the Court of Appeals, in its
decision of August 28, 2003, already ruled that the
issue of the trial court's authority to hear and decide
the instant case has already been settled in the
decision of the Court of Appeals dated June 26, 1989
(which has become final and executory on August 20,
1989 as per entry of judgment dated October 10,
1989).28 We find no reason to disturb this ruling. Courts
are duty-bound to put an end to controversies. The
system of judicial review should not be misused and
abused to evade the operation of a final and executory
judgment.29 The appellate court's decision becomes the
law of the case which must be adhered to by the
parties by reason of policy.30
Next, petitioner NHA contends that its resolution was
grounded on meritorious grounds when it considered
the application for the purchase of lots. Petitioner
argues that it was the daughter Francisca Herrera who
filed her application on the subject lot; that it
considered the respective application and inquired
whether she had all the qualifications and none of the
disqualifications of a possible awardee. It is the
position of the petitioner that private respondent
possessed all the qualifications and none of the
disqualifications for lot award and hence the award was
not done arbitrarily.
The petitioner further argues that assuming that the
"Sinumpaang Salaysay" was a will, it could not bind the
NHA.31 That, "insofar as [the] NHA is concerned, it is an

ADMIN LAW 1st Set

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evidence that the subject lots were indeed transferred

by Margarita Herrera, the original awardee, to
Francisca Herrera was then applying to purchase the
same before it."32
We are not impressed. When the petitioner received
the "Sinumpaang Salaysay," it should have noted that
the effectivity of the said document commences at the
time of death of the author of the instrument; in her
words "sakaling ako'y bawian na ng Dios ng aking
buhay" Hence, in such period, all the interests of the
person should cease to be hers and shall be in the
possession of her estate until they are transferred to
her heirs by virtue of Article 774 of the Civil Code
which provides that:
Art. 774. Succession is a mode of acquisition by
virtue of which the property, rights and
obligations to the extent of the value of the
inheritance, of a person are transmitted
through his death to another or others
either by his will or by operation of law.33
By considering the document, petitioner NHA should
have noted that the original applicant has already
passed away. Margarita Herrera passed away on
October 27, 1971.34 The NHA issued its resolution 35 on
February 5, 1986. The NHA gave due course to the
application made by Francisca Herrera without
considering that the initial applicant's death would
transfer all her property, rights and obligations to the
estate including whatever interest she has or may have
had over the disputed properties. To the extent of the
interest that the original owner had over the property,
the same should go to her estate. Margarita Herrera
had an interest in the property and that interest should
go to her estate upon her demise so as to be able to
properly distribute them later to her heirsin
accordance with a will or by operation of law.
The death of Margarita Herrera does not extinguish her
interest over the property. Margarita Herrera had an
existing Contract to Sell36 with NHA as the seller. Upon
Margarita Herrera's demise, this Contract to Sell was
neither nullified nor revoked. This Contract to Sell was
an obligation on both partiesMargarita Herrera and
NHA.
Obligations
are
transmissible.37 Margarita
Herrera's obligation to pay became transmissible at the
time of her death either by will or by operation of law.
If we sustain the position of the NHA that this
document is not a will, then the interests of the
decedent should transfer by virtue of an operation of
law and not by virtue of a resolution by the NHA. For as
it stands, NHA cannot make another contract to sell to
other parties of a property already initially paid for by
the decedent. Such would be an act contrary to the law
on succession and the law on sales and obligations. 38
When the original buyer died, the NHA should have
considered the estate of the decedent as the next
"person"39likely to stand in to fulfill the obligation to
pay the rest of the purchase price. The opposition of
other heirs to the repurchase by Francisca Herrera
should have put the NHA on guard as to the award of
the lots. Further, the Decision in the said Civil Case No.

B-1263 (questioning the Deed of Self-Adjudication)

which rendered the deed therein null and void 40 should
have alerted the NHA that there are other heirs to the
interests and properties of the decedent who may
claim the property after a testate or intestate
proceeding is concluded. The NHA therefore acted
arbitrarily in the award of the lots.
We need not delve into the validity of the will. The
issue is for the probate court to determine. We affirm
the Court of Appeals and the Regional Trial Court which
noted that it has an element of testamentary
disposition where (1) it devolved and transferred
property; (2) the effect of which shall transpire upon
the death of the instrument maker.41
IN VIEW WHEREOF, the petition of the National
Housing Authority is DENIED. The decision of the Court
of Appeals in CA-G.R. No. 68370 dated August 28,
2003, affirming the decision of the Regional Trial Court
of San Pedro, Laguna in Civil Case No. B-2780 dated
March 9, 1998, is hereby AFFIRMED.
No cost.
SO ORDERED.

G.R. No. 102358 November 19, 1992

SPOUSES VICENTE and GLORIA
MANALO, petitioners,
vs.
HON. NIEVES ROLDAN-CONFESOR, in her
capacity as Undersecretary of Labor and
Employment, JOSE SARMIENTO as POEA
Administrator, CAREERS PLANNERS SPECIALISTS
INTERNATIONAL, INC., and SPOUSES VICTOR and
ELNORA FERNANDEZ, respondents.

BELLOSILLO, J.:
The Court views with grave concern the alarming
incidents of illegal recruitment which demonstrate all
too clearly that overseas employment has fast
developed into a major source not only of muchneeded foreign exchanged but also, for the cunning
and the crafty, of easy money.
In response to a newspaper advertisement looking for
a couple to work as driver and tutor cum baby sitter,
petitioners Vicente and Gloria Manalo went to Career
Planners Specialists International, Inc. (CPSI), a
licensed service contracting firm owned by private
respondents, the spouses Victor and Elnora Fernandez.
After the requisite interview and testing, they were
hired to work for a family in Saudi Arabia for a monthly
salary of US$350.00 each. According to petitioners, a
placement fee of P40,000.00 was imposed as a
precondition for the processing of their papers. They
paid only P30,000.00 in cash and executed a
promissory note for the balance. Then they were
allowed by respondent Elnora Fernandez to sign their

ADMIN LAW 1st Set

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contract papers but did not issue a receipt for the

placement fee despite demand.
Shortly before boarding their flight to Saudi Arabia,
petitioners were handed their contracts. According to
Gloria, she was surprised to discover that her position
had been changed to that of domestic help. However, a
CPSI employee assured her that the change was only
for the purpose of facilitating her departure and did not
in any way alter her employment as tutor. Incidentally,
CPSI provided petitioners with the Travel Exit Pass
(TEP) of Filipino Manpower Services, Inc. (FILMAN), a
duly licensed recruitment agency.
Contrary to the representation of her recruiter, Gloria
was actually hired as a domestic help and not as a
tutor, so that after working for only twenty-five (25)
days in Jeddah, she returned to Manila. Soon after,
Vicente also resigned from his work and followed her
home. He could not stand the unbearable working
conditions of his employment. However, before leaving,
he had to execute a promissory note to cover his plane
fare which respondent Victor Fernandez advanced.
Vicente also had to sign a quitclaim in favor of CPSI
and his employer.

more inclined to give weight to

complainants' posture. Complainants'
version of the case spontaneously
presented in their pleadings is, to our
mind,
more
convincing
than
respondent's stand. Moreover, the
manner
by
which
complainants
narrated the whole incident inspired
belief in the allegation that respondent
Career is indeed guilty of illegal
exaction. Thus, the actual expenses
incurred
by
herein
complainants
computed
hereinbelow
less
the
allowable fees of P3,000.00 (P1,500.00
per worker, respondent being a service
contractor) should be returned to them.
Actual Expenses
P30,000.00

placement
fees
14.00 application
form
300.00 psychological
test
1,400.00 medical
exam
P31,000.00 total

On 29 February 1988, petitioners sued private

respondents
before
the
Philippines
Overseas
Employment Administration (POEA) charging them with
illegal exaction, 1 false adverstisement, 2 and violation
of other pertinents laws, rules and regulations. They
demanded the refund of the amount exacted from
them, plus payment of moral damages and the
imposition of administrative sanctions. 3
Private respondents countered: (1) that Gloria applied
as domestic help fully aware that she could not be a
tutor since she did not speak Arabic; (2) that the
promissory note for P10,000.00 was required of
petitioners because they were hired without paying
placement fees; (3) that it was unlikely for petitioners,
who were mature, educated and experienced in
overseas work, to part with P30,000.00 without
securing a receipt; (4) that Vicente executed a
quitclaim in favor of CPSI duly authenticated by
embassy officials in Saudi Arabia; (5) that there was no
impropriety in having the employment papers of
petitioners processed by FILMAN because it was a
sister company of CPSI, and private respondents Victor
and Elnora were officers in both agencies.
Private respondents prayed for the disqualification of
petitioners from overseas employment, and sought to
recover from them the SR 1,150 plane fare advanced
by Victor for Vicente, P10,000.00 as placement fee
evidenced by a promissory note, and attorney's fees.
Mainly, on the basis of the transcripts of petitioners'
testimonies in the clarificatory questioning before the
Rizal Provincial Prosecutor in a related criminal
case, 4 the POEA issued its Order of 7 May 1990 giving
more weight and credence to petitioners' version thus

After a careful evaluation of the facts

and the evidence presented, we are

less
3,000.00

processing
fees
at
P1,500.00 per applicant
P28,714.00 amount
to be refunded
It appearing, however, that only
respondent
Career
Planners
Specialist(s) Int'l. Inc., took part in the
collection of the aforesaid amount, the
same should be solely held liable.
We cannot likewise give credence to
the
Final
Quitclaim
signed
by
complainant Vicente Manalo before he
left for the Philippines and presented
by respondent as defense. While its
genuineness may not be in question,
we believe that it has no bearing on
the issue at bar. The aforesaid
Quitclaim deals more with matters
concerning complainants' employment
abroad. However, the subject of the
instant claim is the refund of
complainants' expenses prior to their
deployment to Saudi Arabia.
On the other hand, we hold FILMAN
liable for allowing its document such as
the TEP to be used by other agency.
Respondent's defense that there is
nothing wrong in this because FILMAN
is a sister company of CAREER does
not merit consideration because such
practice is not allowed under the POEA
Rules and Regulations. A check with

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our records, however, showed that

respondent FILMAN had been put in the
list of forever banned agencies
effective April 5, 1989.
Anent the claim for moral damages,
this Office has no jurisdiction to
entertain the same.
WHEREFORE, . . . the Authority of
Career
Planners
Specialist(s)
International is hereby suspended for
four (4) months or in lieu thereof, a fine
of P40,000.00 is hereby imposed for
illegal exaction on two counts plus
restitution of the amount of P28,714.00
to herein complainants in both
instances.
Filipino Manpower Services, Inc. is
hereby meted a fine of P40,000.00 for
two counts of misrepresentation. Its
perpetual
disqualification
from
recruitment
activities
is
hereby
reiterated.
The claim for moral damages
dismissed for lack of jurisdiction.

is

Respondent Career's counterclaim is

likewise dismissed or lack of merit. 5
Private respondents filed a motion for reconsideration
and on 4 February 1991, POEA issued a resolution
setting arise its earlier order stating that
It is worth mentioning at this point that
our sole basis for holding respondent
Career liable for illegal exaction was
the uncorroborated testimony of the
complainants.
As we have consistently held, (the)
charge of illegal exaction is a serious
charge
which
may
cause
the
suspension or cancellation of the
authority or license of the offending
agency. Hence, it should be proven and
substantiated
by
a
clear
and
convincing evidence. Mere allegation of
complainant that the agency charged
more than the authorized fee will not
suffice to indict the agency for illegal
exaction unless the allegation is
supported by other corroborative
circumstantial evidence.
Thus, for lack of concrete evidence or
proof to support our initial findings, we
are inclined to reconsider the penalty
imposed upon respondent.
Foregoing premises, the penalty of
suspension imposed upon respondent
Career
Planners
Specialist(s)

International, Inc. pursuant to our

Order dated May 7, 1990 is hereby
LIFTED.
Accordingly, the alternative fine of
P40,000.00 which was paid under
protest by respondent is hereby
ordered refunded to them. 6
Petitioners appealed to the Secretary of Labor. On 5
July 1991, then Undersecretary of Labor Ma. Nieves
Roldan-Confesor (now Secretary of Labor) sustained
the reconsideration of POEA. Her Order reads in part
We find . . . no cogent reason or
sufficient justification to reverse or
modify the assailed Order.
Records reveal that the only basis for
holding respondent Career Planners
Specialist(s) International, Inc., liable
for illegal exaction, as held in the
previous POEA Order dated May 7,
1990
was
the
uncorroborated
testimony of the complainants. There
was no concrete evidence or proof to
support the POEA Administrator's initial
findings.
We take this opportunity to inform the
complainants that the charge of illegal
exaction is a serious charge which may
cause the suspension or cancellation of
the
authority
or
license
of
a
recruitment agency. Therefore, said
charge
must
be
proven
and
substantiated by clear and convincing
evidence. A mere allegation will not
suffice to find an agency liable for
illegal exaction unless said allegation is
supported by other corroborative
circumstantial
evidence.
In
this
connection,
records
show
that
complainants could not narrate the
specific
circumstances
surrounding
their alleged payment of the amount of
P30,000.00. They could not even
remember the specific date when said
amount was paid to respondent
agency. In addition, when complainants
were separately questioned as to how
the money was kept bundled together
prior to being handed to respondent
agency for payment, Gloria Manalo
said it was wrapped in a piece of paper
while Vicente Manalo said it was placed
inside an envelope. 7
On the charge of petitioners that they were given jobs
(driver/domestic help) different from those advertised
by private respondents, the Undersecretary ruled that
there was no misrepresentation by way of false
advertisement because it was established that private
respondents also caused to be printed in the same
newspaper page a second box looking for a couple
driver/domestic help.

ADMIN LAW 1st Set

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In her Order of 9 October 1991, then Undersecretary

Ma. Nieves Roldan-Confesor denied petitioners' motion
for reconsideration. 8
In the present recourse, petitioners claim that public
respondent POEA committed a fatal jurisdictional error
when it resolved private respondents' motion for
reconsideration in violation of Rule V, Book VI of the
1985 POEA Rules and Regulations directing the
transmittal of motions for reconsideration to the
National Labor Relations Commission (NLRC) for
determination. Consequently, for want of legal
competence to act on said motion, the Order of 4
February 1991, as well as the subsequent orders of
public respondent Undersecretary of Labor dated 5 July
1991 and 9 October 1991, is null and void.
In Aguinaldo Industries Corporation v. Commissioner of
Internal Revenue 9 We ruled
To allow a litigant to assume a different
posture when he comes before the
court and challenge the position he had
accepted at the administrative level,
would be to sanction a procedure
whereby the court which is supposed
to review administrative
determinations would not review,
but determine and decide for the first
time, a question not raised at the
administrative forum. This cannot be
permitted, for the same reason that
underlies the requirement of prior
exhaustion of administrative remedies
to give administrative authorities the
prior
opportunity
to
decide
controversies within its competence,
and in much the same way that, on the
judicial level, issues not raised in the
lower court cannot be raised for the
first time on appeal.
The alleged procedural lapse by respondent POEA was
raised by petitioners only before Us, notwithstanding
that such ground was already existing when they
appealed to the Secretary of Labor. Ironically,
petitioners now question the jurisdiction of the
Secretary of Labor over the appeal which they
themselves elevated to that office. When petitioners
filed their motion for reconsideration with the
Undersecretary of Labor, this procedural issue was not
even mentioned. Clearly, it would be the height of
unfairness and inequity if We now allow petitioners to
backtrack after getting an unfavorable verdict from
public respondents whose authority they themselves
involved. In Tijam v. Sibonghanoy 10 We said: ". . . we
frown upon the "undesirable practice" of a party
submitting his case for decision and then accepting the
judgment, only if favorable, and attacking it for lack of
jurisdiction, when adverse . . . ."
In this regard, however, We find no procedural infirmity
constituting reversible error.
The 1985 POEA Rules and Regulations 11 is divided into
eight (8) Books. Book VI, cited by petitioners, is entitled

"Adjudication Rules". The procedure outlined therein

relates to the original and exclusive jurisdiction
exercised by POEA through its Adjudication Department
"to hear and decide all cases involving employeremployee relations arising out of or by virtue of a law
or contact involving Filipino workers for overseas
employment," involving "[v]iolation of the terms and
conditions of employment . . . . [d]isputes relating to
the implementation and interpretation of employment
contracts . . . [m]oney claims of workers against their
employers and/or their duly authorized agents in the
Philippines or vice versa . . . . [c]laims for death,
disability and other benefits
arising out of
employment . . . . and . . . . [v]iolations of our noncompliance with any compromise agreement entered
into by and between the parties in an overseas
employment contract."
On the other hand, Book II entitled "Licensing and
Regulations" of the 1985 POEA Rules and Regulations,
notably Rule VI cited by private respondents, refers
particularly to the procedure for suspension,
cancellation
and
revocation
of
Authority
or
License 12 through the POEA Licensing and Regulation
Office (LRO).
The controversy in the present case centers on the
liability of private respondents for illegal exaction, false
advertisement and violation of pertinent laws and rules
on recruitment of overseas workers and the resulting
imposition of penalty of suspension of the Authority of
respondent CPSI. Quite plainly, We are not concerned
here with employer-employee relations, the procedure
of which is outlined in Book VI; rather, with the
suspension or revocation of Authority embodied in
Book II.
Evidently, no jurisdictional error was accordingly
committed because in cases affecting suspension,
revocation or cancellation of Authority, the POEA has
authority under Sec. 18, Rule VI, Book II, to resolve
motions for reconsideration which may thereafter be
appealed to the Secretary of Labor. Section 18,
provides: "A motion for reconsideration of an order o
suspension (issued by POEA) or an appeal to the
Minister (now Secretary of Labor) from an order
cancelling a license or authority may be entertained
only when filed with the LRO within ten (10) working
days from the service of the order or decision"
(parenthesis supplied).
Petitioners also argue that public respondents gravely
abused their discretion when they violated petitioners'
right to administrative due process by requiring clear
and convincing evidence to establish the charge illegal
exaction. This point is well taken. There was grave
abuse of discretion.
In the administrative proceedings for cancellation,
revocation or suspension of Authority or License, no
rule requires that testimonies of complainants be
corroborated by documentary evidence, if the charge
of unlawful exaction is substantially proven. All
administrative determinations require only substantial
proof and not clear and convincing evidence as
erroneously contended by pubic respondents.

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Clear and convincing proof is ". . . more than mere

preponderance, but not to extent of such certainty as
is required beyond reasonable doubt as in criminal
cases . . ." 13 while substantial evidence ". . . consists of
more than a mere scintilla of evidence but may be
somewhat
less
than
a
preponderance . . . ." 14 Consequently, in the hierarchy
of evidentiary values, We find proof beyond reasonable
doubt at the highest level, followed by clear and
convincing evidence, preponderance of evidence, and
substantial evidence, in that order.
That the administrative determination of facts may
result in the suspension or revocation of the authority
of CPSI does not require a higher degree of proof. The
proceedings are administrative, and the consequent
imposition
of
suspension/revocation
of
Authority/License does not make the proceedings
criminal. Moreover, the sanctions are administrative
and, accordingly, their infliction does not give rise to
double jeopardy when a criminal action is instituted for
the same act.
Thus We held in Atlas Consolidated
Development Corporation v. Factoran, Jr.

Mining

and

15

. . . it is sufficient that administrative

findings of fact are supported by
evidence, or negatively stated, it is
sufficient that findings of fact are not
shown to be unsupported by evidence.
Substantial evidence is all that is
needed to support an administrative
finding of fact, and substantial
evidence is such relevant evidence as a
reasonable mind might accept as
adequate to support a conclusion (Ang
Tibay
v.
Court
of
Industrial
Relations, 69 Phil. 635, 642; Police
Commission v. Lood, 127 SCRA 762
[1984].
The POEA, after assessing the evidence of both parties,
found that private respondents collected from
petitioners
P30,000.00
as
placement
fees;
consequently, it ruled that there was illegal exaction.
Surprisingly, without altering its findings of fact, POEA
reconsidered its order. It held that uncorroborated
testimonies were not enough to conclude that illegal
exaction was committed, particularly so that this might
result in the suspension or revocation of respondents'
authority to engage in recruitment activities. The
premise that testimonies of petitioners should be
supported by some other form of evidence is, to say
the
least,
fallacious.
In Castillo
v. Court
of
Appeals, 16 where the appellate court reversed the
findings of fact of the trial court by requiring a higher
degree of proof, We held
. . . we find no strong and cogent
reason which justifies the appellate
court's deviation from the findings and
conclusions of the trial court. As
pointed
out
in
Hernandez
v.
Intermediate Appellate Court (189
SCRA 758 [1990]), in agrarian cases, all

that is required is mere substantial

evidence. Hence, the agrarian court's
findings of fact which went beyond the
minimum
evidentiary
support
demanded by law, that is, supported by
substantial evidence, are final and
conclusive and cannot be reversed by
the appellate tribunal.
The seeming discrepancy in the statements of the
witnesses (one saying the money was wrapped in
paper, the other, that the money was in an envelope;
neither testified on the specific date of the exaction),
refers only to minor details. Perhaps it would be
different if the variance refers to essential points, e.g.,
whether the amount of P30,000.00 was actually paid
by petitioners to private respondents. Consequently,
whether the money was wrapped in paper, or placed in
an envelope, or unwrapped or whether the parties
could not recall when there payment was effected is
unimportant. After all, the money could have been
wrapped in paper and placed in the envelope, or
placed in the envelope without being wrapped, or
wrapped with use of an unpasted envelope that
appeared to be the envelope itself. In either case,
petitioners, could have viewed them differently; but
the difference is ultimately inconsequential. The crucial
point to consider is that the petitioners categorically
and unequivocally testified that respondents collected
from them the amount of P30,000.00 as their
placement fees and that they paid the amount
demanded. In this regard, it may be worth to
emphasize that only substantial evidence, not
necessarily clear and convincing evidence, is required.
Moreover, when confronted with conflicting assertions,
the rule that "as between a positive and categorical
testimony which has a ring of truth on one hand, and a
bare denial on the other, the former is generally held to
prevail . . . ." 17 applies.
But even on the supposition that there was no payment
of P30,000.00, it cannot be denied that private
respondents required petitioners to execute a
promissory note for P10,000.00 purportedly because
petitioners were hired without paying placement fees.
The mere charging of P10,000.00, standing alone, is
enough to hold private respondents answerable for
illegal exaction because the allowable amount to be
collected per contract worker according to respondent
POEA was only P1,500.00, or P3,000.00 for both
petitioners.
WHEREFORE, the petition is GRANTED. The challenged
Orders of respondent Undersecretary of Labor dated 5
July 1991 and 9 October 1991, as well as the
Resolution of respondent POEA dated 4 February 1991,
having been issued with grave abuse of discretion
amounting to lack or excess of jurisdiction are SET
ASIDE, and the original Order of respondent POEA
dated 7 May 1990 is ordered REINSTATED and
AFFIRMED.
SO ORDERED.

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G.R. No. 169067

REPUBLIC OF THE PHILIPPINES,
Petitioner, - versus
ANGELO B. MALABANAN, PABLO B.
MALABANAN, GREENTHUMB REALTY AND
DEVELOPMENT CORPORATION and THE
REGISTRAR OF DEEDS OF BATANGAS,
Respondents.
Promulgated: October 6, 2010
DECISION
VILLARAMA, JR., J.:
This petition for review on certiorari under Rule
45 of the 1997 Rules of Civil Procedure, as amended,
seeks to overturn the Resolution[1] dated July 20, 2005
of the Court of Appeals (CA) in CA-G.R. CV No. 70770
dismissing petitioners appeal.
The facts are as follows:
Respondents Angelo B. Malabanan and Pablo B.
Malabanan were registered owners of a 405,000square-meter parcel of land situated in Talisay,
Batangas and covered by Transfer Certificate of Title
(TCT) No. T-24268[2] of the Register of Deeds of
Tanauan, Batangas. Said parcel of land was originally
registered on April 29, 1936 in the Register of Deeds of
Batangas under Original Certificate of Title (OCT) No. 017421[3] pursuant to Decree No. 589383[4] issued in
L.R.C. Record No. 50573. OCT No. 0-17421 was
cancelled and was replaced with TCT No. T-9076 from
which respondents title, TCT No. T-24268, was derived.
The parcel of land was later subdivided into smaller
lots resulting in the cancellation of TCT No. T-24268.
The derivative titles are now either in the names of the
Malabanans or respondent Greenthumb Realty and
Development Corporation.
Petitioner Republic of
the Philippines claims
that in an investigation conducted by the Department
of Environment and Natural Resources (Region IV), it
was revealed that the land covered by TCT No. T-24268
was
within
the
unclassified
public forest of Batangas per L.C. CM No. 10. This
prompted petitioners filing of a complaint[5] for
reversion and cancellation of title against respondents
on March 30, 1998. The case was docketed as Civil
Case No. T-1055 and raffled off to Branch 83 of the
Regional Trial Court (RTC) of Batangas. The case was
later re-docketed as Civil Case No. C-192.
On May 5, 1998, the Malabanans filed a Motion
to Dismiss.[6] They argued that the complaint failed to
state a cause of action; the court has no jurisdiction
over the subject matter; the complaint violates Section
7,[7] Rule 8 of the 1997 Rules of Civil Procedure, as
amended, since petitioner did not attach a copy of
Decree No. 589383 of the Court of First Instance of
Batangas, pursuant to which OCT No. 0-17421 was
issued in LRC Record No. 50573; and that a similar
complaint for reversion to the public domain of the
same parcels of land between the same parties has
already been dismissed by the same court.
In an Order[8] dated December 11, 1998, the
trial court dismissed the complaint. The salient portions
of the order read:
A
similar
complaint
for
reversion to the public domain of the
same parcels of land was filed with this
Court on July 14, 1997 by plaintiff
against defendants-movants. The case,

docketed as Civil Case No. T-784, was

dismissed on December 7, 1992 (sic)
for lack of jurisdiction.
As pointed out by movants, the
nullification of Original Certificate of
Title No. 0-17421 and all its derivative
titles would involve the nullification of
the judgment of the Land Registration
Court which decreed the issuance of
the title over the property. Therefore,
the applicable provision of law is
Section 9 (2) of Batas Pambansa Blg.
129 which vests upon the Court of
Appeals exclusive jurisdiction over
actions for annulment of judgments of
the Regional Trial Court.
Moreover, this Court is aware, and
takes judicial notice, of the fact
that the parcels of land, subject of
reversion had been the subject of
several cases before this Court
concerning the ownership and
possession thereof by defendantsmovants. These cases were even
elevated to the Court of Appeals
and the Supreme Court which, in
effect, upheld the ownership of the
properties
by
defendants
Malabanans. Said decisions of this
Court, the Court of Appeals, and
the Supreme Court should then
also be annulled.[9] (Emphasis and
underscoring supplied.)
On January 5, 1999, petitioner filed a Notice of
Appeal[10] from the order of dismissal. On January 18,
1999, the Malabanans moved to deny due course and
to dismiss appeal arguing that petitioner, in filing a
notice of appeal, adopted an improper mode of appeal.
The Malabanans contended that the issue of
jurisdiction of the trial court over the complaint filed by
petitioner is a question of law which should be raised
before the Supreme Court via a petition for review on
certiorari under Rule 45.[11]
On June 29, 1999, the trial court issued an
Order[12] denying due course and dismissing petitioners
appeal. However, on certiorari, [13] docketed as CA-G.R.
SP No. 54721, said order was reversed by the CA
on February 29, 2000. The CA ruled that the
determination of whether or not an appeal may be
dismissed on the ground that the issue involved is
purely a question of law is exclusively lodged within the
discretion of the CA. Consequently, the trial court was
directed to give due course to petitioners appeal and
order the transmittal of the original records on appeal
to the CA.[14]
Petitioner, in its Appeal Brief[15] filed before the
CA, raised this lone assignment of error:
THE COURT A QUO ERRED IN
DISMISSING THE COMPLAINT ON THE
GROUND OF LACK OF JURISDICTION.[16]
A perusal of the arguments in the brief reveals that not
only did petitioner raise the jurisdictional issue, it
likewise questioned the portion of the dismissal
order where it was held that several cases
involving the subject land have already been filed
and in those cases, the CA and the Supreme Court
have upheld respondents ownership. Petitioner
argued that the question of whether the right of

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the Malabanans had, in fact, been upheld is factual

in nature and necessarily requires presentation of
evidence.[17]
On July 20, 2005, however, the CA issued the
assailed Resolution dismissing petitioners appeal,
holding that the issue of jurisdiction, being a pure
question of law, is cognizable only by the Supreme
Court via a petition for review on certiorari. It
dismissed petitioners appeal under Section 2, [18] Rule
50 of the 1997 Rules of Civil Procedure, as amended.
Before us, petitioner raises the sole issue of:
WHETHER THE COURT OF APPEALS
COMMITTED A REVERSIBLE ERROR IN
DISMISSING PETITIONERS APPEAL FOR
BEING THE WRONG MODE TO ASSAIL
THE TRIAL COURTS ORDER.[19]
Petitioner argues that the issue surrounding the
validity of the order dismissing the complaint does not
only involve a question of law but also involves a
question of fact. The question of fact pertains to the
portion of the trial courts assailed order which stated
that the Malabanans ownership had been upheld by
the CA and the Supreme Court. Petitioner contends
that the question of whether such right had in fact
been upheld is factual in nature. Petitioner adds that
the trial court has jurisdiction over the complaint and
should not have dismissed the complaint in the first
place.
Respondents, on the other hand, counter that
there are no factual issues involved because they are
deemed to have hypothetically admitted the truth of
the facts alleged in the complaint when they filed a
motion to dismiss.
The petition is meritorious.
In Murillo v. Consul,[20] we had the opportunity
to clarify the three (3) modes of appeal from decisions
of the RTC, to wit: (1) by ordinary appeal or appeal by
writ of error under Rule 41,[21] where judgment was
rendered in a civil or criminal action by the RTC in the
exercise of original jurisdiction; (2) by petition for
review under Rule 42,[22]where judgment was rendered
by the RTC in the exercise of appellate jurisdiction; and
(3) by petition for review on certiorari to the Supreme
Court under Rule 45.[23] The first mode of appeal is
taken to the CA on questions of fact or mixed questions
of fact and law. The second mode of appeal is brought
to the CA on questions of fact, of law, or mixed
questions of fact and law. The third mode of appeal is
elevated to the Supreme Court only on questions of
law.[24]
And in Leoncio v. De Vera,[25] this Court has
differentiated a question of law from a question of fact.
A question of law arises when there is doubt as to what
the law is on a certain state of facts, while there is a
question of fact when the doubt arises as to the truth or
falsity of the alleged facts. For a question to be one of
law, the same must not involve an examination of the
probative value of the evidence presented by the
litigants or any of them. The resolution of the issue must
rest solely on what the law provides on the given set of
circumstances. Once it is clear that the issue invites a
review of the evidence presented, the question posed is
one of fact. Thus, the test of whether a question is one
of law or of fact is not the appellation given to such
question by the party raising the same; rather, it is
whether the appellate court can determine the issue
raised without reviewing or evaluating the evidence, in

which case, it is a question of law; otherwise it is a

question of fact.[26]
Here, petitioners appeal does not only
involve a question of law. Aside from the trial courts
ruling that it has no jurisdiction over the complaint,
petitioner likewise questioned the other basis for the
trial courts ruling, which refers to previously decided
cases allegedly upholding with finality the ownership of
the Malabanans over the disputed property. As
correctly argued by petitioner, the question of whether
the ownership of the Malabanans has in fact been
sustained with finality is factual in nature as it requires
the presentation of evidence.
Since the appeal raised mixed questions of fact
and law, no error can be imputed on petitioner for
invoking the appellate jurisdiction of the CA through an
ordinary appeal under Rule 41.
WHEREFORE, the Resolution dated July 20, 2005 of
the Court of Appeals in CA-G.R. CV No. 70770
is REVERSED and SET ASIDE. Petitioners appeal
is REINSTATED and the instant case is REMANDED to
the Court of Appeals, which is directed to proceed with
the usual appeal process therein with deliberate
dispatch.
No costs.
SO ORDERED.

G.R. No. 88550

April 18, 1990

INDUSTRIAL ENTERPRISES, INC., petitioner,

vs.
THE HON. COURT OF APPEALS, MARINDUQUE
MINING & INDUSTRIAL CORPORATION, THE HON.
GERONIMO VELASCO in his capacity as Minister
of Energy and PHILIPPINE NATIONAL
BANK, respondents.
Manuel M. Antonio and Dante Cortez for petitioner.
Pelaez, Adriano & Gregorio for respondent MMIC.
The Chief Legal Counsel for respondent PNB.

MELENCIO-HERRERA, J.:
This petition seeks the review and reversal of the
Decision of respondent Court of Appeals in CA-G.R. CV
No. 12660, 1 which ruled adversely against petitioner
herein.
Petitioner Industrial Enterprises Inc. (IEI) was granted a
coal operating contract by the Government through the
Bureau of Energy Development (BED) for the
exploration of two coal blocks in Eastern Samar.
Subsequently, IEI also applied with the then Ministry of
Energy for another coal operating contract for the
exploration of three additional coal blocks which,
together with the original two blocks, comprised the
so-called "Giporlos Area."
IEI was later on advised that in line with the objective
of rationalizing the country's over-all coal supply-

ADMIN LAW 1st Set

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demand balance . . . the logical coal operator in the

area should be the Marinduque Mining and Industrial
Corporation (MMIC), which was already developing the
coal deposit in another area (Bagacay Area) and that
the Bagacay and Giporlos Areas should be awarded to
MMIC (Rollo, p. 37). Thus, IEI and MMIC executed a
Memorandum of Agreement whereby IEI assigned and
transferred to MMIC all its rights and interests in the
two coal blocks which are the subject of IEI's coal
operating contract.
Subsequently, however, IEI filed an action for rescission
of the Memorandum of Agreement with damages
against MMIC and the then Minister of Energy
Geronimo Velasco before the Regional Trial Court of
Makati, Branch 150, 2alleging that MMIC took
possession of the subject coal blocks even before the
Memorandum of Agreement was finalized and
approved by the BED; that MMIC discontinued work
thereon; that MMIC failed to apply for a coal operating
contract for the adjacent coal blocks; and that MMIC
failed and refused to pay the reimbursements agreed
upon and to assume IEI's loan obligation as provided in
the Memorandum of Agreement (Rollo, p. 38). IEI also
prayed that the Energy Minister be ordered to approve
the return of the coal operating contract from MMIC to
petitioner, with a written confirmation that said
contract is valid and effective, and, in due course, to
convert said contract from an exploration agreement to
a development/production or exploitation contract in
IEI's favor.
Respondent, Philippine National Bank (PNB), was later
impleaded as co-defendant in an Amended Complaint
when the latter with the Development Bank of the
Philippines effected extra-judicial foreclosures on
certain mortgages, particularly the Mortgage Trust
Agreement, dated 13 July 1981, constituted in its favor
by MMIC after the latter defaulted in its obligation
totalling around P22 million as of 15 July 1984. The
Court of Appeals eventually dismissed the case against
the PNB (Resolution, 21 September 1989).
Strangely enough, Mr. Jesus
President of both IEI and MMIC.

S.

Cabarrus

is

the

In a summary judgment, the Trial Court ordered the

rescission of the Memorandum of Agreement, declared
the continued efficacy of the coal operating contract in
favor of IEI; ordered the reversion of the two coal
blocks covered by the coal operating contract; ordered
BED to issue its written affirmation of the coal
operating contract and to expeditiously cause the
conversion thereof from exploration to development in
favor of IEI; directed BED to give due course to IEI's
application for a coal operating contract; directed BED
to give due course to IEI's application for three more
coal blocks; and ordered the payment of damages and
rehabilitation expenses (Rollo, pp. 9-10).
In reversing the Trial Court, the Court of Appeals held
that the rendition of the summary judgment was not
proper since there were genuine issues in controversy
between the parties, and more importantly, that the
Trial Court had no jurisdiction over the action
considering that, under Presidential Decree No. 1206, it

is the BED that has the power to decide controversies

relative
to
the
exploration,
exploitation
and
development of coal blocks (Rollo, pp. 43-44).
Hence, this petition, to which we resolved to give due
course and to decide.
Incidentally, the records disclose that during the
pendency of the appeal before the Appellate Court, the
suit against the then Minister of Energy was dismissed
and that, in the meantime, IEI had applied with the
BED for the development of certain coal blocks.
The decisive issue in this case is whether or not the
civil court has jurisdiction to hear and decide the suit
for rescission of the Memorandum of Agreement
concerning a coal operating contract over coal blocks.
A corollary question is whether or not respondent Court
of Appeals erred in holding that it is the Bureau of
Energy Development (BED) which has jurisdiction over
said action and not the civil court.
While the action filed by IEI sought the rescission of
what appears to be an ordinary civil contract
cognizable by a civil court, the fact is that the
Memorandum of Agreement sought to be rescinded is
derived from a coal-operating contract and is
inextricably tied up with the right to develop coalbearing lands and the determination of whether or not
the reversion of the coal operating contract over the
subject coal blocks to IEI would be in line with the
integrated national program for coal-development and
with the objective of rationalizing the country's over-all
coal-supply-demand balance, IEI's cause of action was
not merely the rescission of a contract but the
reversion or return to it of the operation of the coal
blocks. Thus it was that in its Decision ordering the
rescission of the Agreement, the Trial Court, inter
alia, declared the continued efficacy of the coaloperating contract in IEI's favor and directed the BED
to give due course to IEI's application for three (3) IEI
more coal blocks. These are matters properly falling
within the domain of the BED.
For the BED, as the successor to the Energy
Development Board (abolished by Sec. 11, P.D. No.
1206, dated 6 October 1977) is tasked with the
function of establishing a comprehensive and
integrated national program for the exploration,
exploitation, and development and extraction of fossil
fuels, such as the country's coal resources; adopting a
coal development program; regulating all activities
relative thereto; and undertaking by itself or through
service contracts such exploitation and development,
all in the interest of an effective and coordinated
development of extracted resources.
Thus, the pertinent sections of P.D. No. 1206 provide:
Sec. 6. Bureau of Energy Development. There
is created in the Department a Bureau of
Energy Development, hereinafter referred to in
this Section as the Bureau, which shall have
the following powers and functions, among
others:

ADMIN LAW 1st Set

Page 20 of 151

a. Administer a national program for the

encouragement, guidance, and whenever
necessary, regulation of such business activity
relative
to
the exploration,
exploitation,
development, and extraction of fossil fuels
such as petroleum, coal, . . .
The decisions, orders, resolutions or actions of
the Bureau may be appealed to the Secretary
whose decisions are final and executory unless
appealed to the President. (Emphasis supplied.)
That law further provides that the powers and functions
of the defunct Energy Development Board relative to
the implementation of P.D. No. 972 on coal exploration
and development have been transferred to the BED,
provided that coal operating contracts including the
transfer or assignment of interest in said contracts,
shall require the approval of the Secretary (Minister) of
Energy (Sec. 12, P.D. No. 1206).
Sec. 12. . . . the powers and functions
transferred
to
the
Bureau
of
Energy
Development are:
xxx

xxx

xxx

ii. The following powers and functions of the

Energy Development Board under PD No.
910 . . .
(1) Undertake by itself or through other
arrangements, such as service contracts, the
active exploration, exploitation, development,
and extraction of energy resources . . .
(2) Regulate all activities relative to the
exploration, exploitation, development, and
extraction of fossil and nuclear fuels . . .
(P.D. No. 1206) (Emphasis supplied.)
P.D. No. 972 also provides:
Sec. 8. Each coal operating contract herein
authorized shall . . . be executed by the Energy
Development Board.
Considering the foregoing statutory provisions, the
jurisdiction of the BED, in the first instance, to pass
upon any question involving the Memorandum of
Agreement between IEI and MMIC, revolving as its does
around a coal operating contract, should be sustained.
In recent years, it has been the jurisprudential trend to
apply the doctrine of primary jurisdiction in many cases
involving matters that demand the special competence
of administrative agencies. It may occur that the Court
has jurisdiction to take cognizance of a particular case,
which means that the matter involved is also judicial in
character. However, if the case is such that its
determination requires the expertise, specialized skills
and knowledge of the proper administrative bodies
because technical matters or intricate questions of

facts are involved, then relief must first be obtained in

an administrative proceeding before a remedy will be
supplied by the courts even though the matter is within
the proper jurisdiction of a court. This is the doctrine of
primary jurisdiction. It applies "where a claim
is originally cognizable in the courts, and comes into
play whenever enforcement of the claim requires the
resolution of issues which, under a regulatory scheme,
have been placed within the special competence of an
administrative body, in such case the judicial process
is suspended pending referral of such issues to the
administrative body for its view" (United States v.
Western Pacific Railroad Co., 352 U.S. 59, Emphasis
supplied).
Clearly, the doctrine of primary jurisdiction finds
application in this case since the question of what coal
areas should be exploited and developed and which
entity should be granted coal operating contracts over
said areas involves a technical determination by the
BED as the administrative agency in possession of the
specialized expertise to act on the matter. The Trial
Court does not have the competence to decide matters
concerning activities relative to the exploration,
exploitation, development and extraction of mineral
resources like coal. These issues preclude an initial
judicial determination. It behooves the courts to stand
aside even when apparently they have statutory power
to proceed in recognition of the primary jurisdiction of
an administrative agency.
One
thrust
of
the
multiplication
of
administrative
agencies
is
that
the
interpretation
of
contracts
and
the
determination of private rights thereunder is no
longer a uniquely judicial function, exercisable
only by our regular courts (Antipolo Realty
Corp. vs. National Housing Authority, 153 SCRA
399, at 407).
The application of the doctrine of primary jurisdiction,
however, does not call for the dismissal of the case
below. It need only be suspended until after the
matters within the competence of the BED are
threshed out and determined. Thereby, the principal
purpose behind the doctrine of primary jurisdiction is
salutarily served.
Uniformity and consistency in the regulation of
business entrusted to an administrative agency
are secured, and the limited function of review
by the judiciary are more rationally exercised,
by preliminary resort, for ascertaining and
interpreting the circumstances underlying legal
issues, to agencies that are better equipped
than courts by specialization, by insight gained
through experience, and by more flexible
procedure (Far East Conference v. United
States, 342 U.S. 570).
With the foregoing conclusion arrived at, the question
as to the propriety of the summary judgment rendered
by the Trial Court becomes unnecessary to resolve.
WHEREFORE, the Court Resolved to DENY the petition.
No costs.

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Page 21 of 151

SO ORDERED.

[G.R. No. 158455. June 28, 2005]

SHERWILL
DEVELOPMENT
CORPORATION, petitioner, vs. SITIO STO.
NIO RESIDENTS ASSOCIATION, INC. and/or
NILDA DEVILLERES, and the LANDS
MANAGEMENT BUREAU, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari assailing
the Order[1] of the Regional Trial Court (RTC) of
Muntinlupa City, Branch 205, dismissing Civil Action
No. 02-237 on the ground of litis pendentia and forum
shopping.
Petitioner Sherwill Development Corporation is the
registered owner of two parcels of land in Muntinlupa,
Rizal. Lot 88 is covered by Transfer Certificate of Title
(TCT) No. 131918[2]consisting of 8,774 square meters,
while Lot 86, with an area of 16,766 square meters, is
covered by TCT No. 131919.[3] Both lots form part of the
Muntinlupa Estate, while the titles thereon were issued
by the Registry of Deeds of Rizal on September 24,
1913.
On October 16, 2002, the petitioner filed a
Complaint[4] for quieting of title against respondents
Sitio Sto. Nio Residents Association, Inc. (SSNRAI), Nilda
Devilleres, and the Lands Management Bureau (LMB).
The petitioner made the following allegations in its
complaint:
6. Since petitioner acquired subject two (2) lots in
1984, it has dutifully paid realty taxes thereon. A copy
of its latest tax-payment receipt is attached as Annex
E.
7. In the late 1960s and the 1970s, and up to the
1980s, unauthorized persons, without the prior
knowledge and consent of petitioner and/or Mr. Lipio,
by force, stealth and strategy, unlawfully entered and
occupied the lots covered by TCT Nos. 131918 and
131919. Among said unauthorized persons are
members and officers of SSNRAI, Devilleres included;
8. Said LMB Case No. 7-98 is the first step of
respondents to disturb and/or cast clouds on TCT Nos.
131918 and 131919, as in fact they are disturbing and
casting clouds over said titles. From all
indications, LMB is set to recommend to the Philippine
Government, [through] the Office of the Solicitor
General (OSG), the nullification of TCT Nos. 131918 and
131919 and/or the reversion thereof to the Philippine
Government, despite the fact that the latter, sometime
in 1927 or thereabout, sold and/or disposed of subject
lots, then covered by Original Certificate of Title (OCT)
No. 684, pursuant to Act No. 1120 and other pertinent

laws. Petitioner is the third or fourth transferee and

buyer in good faith of the lots in question. Certainly, its
titles (TCT Nos. 131918 and 131919) have long become
indefeasible and conclusive, considering that
indefeasibility and conclusiveness of titles accrue one
year after the issuance thereof.[5]
As part of its prayer for relief, the petitioner
prayed that a writ of preliminary injunction be issued,
ordering the LMB to cease and desist from proceeding
with the hearings in LMB Case No. 7-98, a case pending
before it where petitioners titles to the subject lots
were being questioned by the respondents SSNRAI and
Nilda Devilleres. Thus:
WHEREFORE, petitioner most respectfully prays for
the following:
(a) The immediate issuance of a writ of preliminary
injunction against LMB, ordering it to cease and desist
from hearing or continuing its hearing of LMB Case No.
7-98; thereafter, after due hearing, the issuance of
another order making said injunction permanent; and
(b) The quieting of title of TCT Nos. 131918 and
131919, and the complete removal of any and all
clouds thereon, and the accompanying declaration that
said titles are indefeasible and conclusive against the
whole world, as in fact they are.
Petitioner further prays for other reliefs which this
Honorable Court may deem proper to grant. [6]
The trial court set the hearing of the prayer of the
writ of preliminary injunction at 8:30 a.m. of November
22, 2002.[7] On November 6, 2002, the private
respondents, through counsel, filed a Motion to
Dismiss[8] the petition on the following grounds:
(a)

THE PETITION ITSELF IS FATALLY

DEFECTIVE AS THE CERTIFICATE OF NONFORUM SHOPPING DID NOT SPECIFY
AND/OR DISCLOSE THE PENDENCY OF THE
ADMINISTRATIVE
CASE,
LANDS
MANAGEMENT BUREAU CASE NO. 7-98;

(b)

PETITIONER IS
SHOPPING; and

GUILTY

OF

FORUM-

(c) THERE IS ANOTHER ACTION PENDING

BETWEEN THE PARTIES INVOLVING THE
SAME SUBJECT MATTER AND FOR THE
SAME CAUSE.
In its opposition to the motion to dismiss, the
petitioner averred that contrary to the private
respondents allegations, it did disclose the pendency of
LMB Case No. 7-98 in paragraph 3 of its petition, to wit:
3. Said LMB Case No. 7-98 was filed on May 5, 1995
and is, at present, being heard by [the] LMB thru
Hearing Officer Rogelio C. Mandar, the same Special
Investigator-Designate who, on Feb. 12, 1998, wrote
the LMB Director thru the Chief, Legal Division,

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recommending that an order be issued directing the

Surveys Divisions of this Office or its duly-authorized
representatives to conduct verification and relocation
survey of subject lots. In effect, Atty. Mandar as such
Hearing Officer has already prejudged the case in favor
of SSNRAI. A copy of the petition filed
by SSNRAI (minus annexes) is attached as Annex B,
and that of Atty. Mandars letter consisting of seven (7)
pages (minus annexes), as Annex C;[9]
According to the petitioner, there was no identity
of actions and reliefs sought in the two cases. The
petitioner pointed out that in LMB Case No. 7-98, the
private respondents (as the petitioners therein) sought
the declaration of the nullity of the said titles issued in
its favor, on their claim that their issuance was highly
irregular and erroneous, and that the subject properties
were not disposed of in accordance with Act No. 1120,
otherwise known as the Friar Lands Act. On the other
hand, in SP Civil Action No. 02-237, the petitioners right
of action was based on the private respondents act of
disturbing and casting clouds over TCT Nos. 131918
and 131919, considering that such titles have long
become indefeasible and conclusive.
The motion to dismiss filed by the private
respondents was submitted for resolution on November
15, 2002.[10]
In its Order[11] dated February 24, 2003, the trial
court dismissed the petition on the grounds of litis
pendencia and forum shopping. In so ruling, the trial
court made the following ratiocination:
As alleged in the petition filed with the LMB itself,
quoted elsewhere in this order, and as shown in the
copy of said petition attached to this petition, herein
petitioner is respondent therein and herein private
respondents are petitioners there. The element of
identity of parties is therefore present. The cause of
action and reliefs sought in the two sets of cases are,
likewise, identical. The ultimate issue involved in both
is who between the parties has a better right to the
properties covered by TCT Nos. 131918 and 131919
which are alleged in the LMB case to originally
constitute a portion of the Muntinlupa Friar Lands
Estate titled in the name of the government. As to the
third requirement that the result of the first action is
determinative of the second, it is true here inasmuch
as the Lands Management Bureau, public respondent
herein before which the case earlier filed is pending,
absorbed the functions and powers of the Bureau of
Lands (abolished by Executive Order No. 131) and is
mandated by law to implement the provisions of the
Public Land Act (Com. Act No. 141) which governs the
administration and disposition of lands commonly
known as friar lands, so an earlier recourse to it would
be an exercise of the doctrine of exhaustion of
administrative remedies, regardless of which party is
successful.
It is clear from the petition that what the petitioner
wants is for this court to enjoin public respondent from
proceeding with the case before it and take over the
same which it cannot and should not do.

WHEREFORE, this case is hereby dismissed on the

grounds of litis pendencia and forum shopping. No
cost.
SO ORDERED.[12]
The petitioner filed a motion for reconsideration,
which the trial court denied in an Order[13] dated May
29, 2003.
Hence, the present petition, on the following
question of law: whether or not the grounds of litis
pendentia and forum shopping insofar as SP Civil
Action No. 02-237 is concerned are applicable. The
petitioner puts forth the following arguments:
1. THE GROUNDS OF LITIS PENDENCIA AND
FORUM SHOPPING RELIED UPON BY THE
COURT A QUO IN DISMISSING SP. CIVIL
ACTION NO. 02-237 AND DENYING
PETITIONERS
MOTION
FOR
RECONSIDERATION ARE SHAKY AT BEST. IN
FACT, THEY ARE NON-EXISTENT. [14]
2.

MOREOVER, AS ALREADY RAISED BY

PETITIONER
IN
ITS
REPLIES
TO
RESPONDENTS
COMMENTS
ON
ITS
AFORESAID
MOTION
FOR
RECONSIDERATION,
LMB
HAS
NO
JURISDICTION TO TRY LMB CASE NO. 7-98
INASMUCH AS CASES LIKE THIS FALL
UNDER
THE
EXCLUSIVE
ORIGINAL
JURISDICTION
OF
REGIONAL
TRIAL
COURTS.[15]

To bolster its pose that no forum shopping and litis

pendentia exist, the petitioner invokes the ruling of the
Court in Silahis International Hotel, Inc. v. NLRC, et al.,
[16]
averring that when a party does not pursue
simultaneous remedies in fora, there is no forum
shopping. The petitioner reiterates that the issue and
the causes of action in LMB Case No. 7-98 and SP Civil
Action No. 02-237 are different. It points out that it
certainly is not a party against whom an adverse
judgment or order has been rendered in one forum;
neither has it instituted two or more actions or
proceedings grounded on the same cause. The
petitioner further insists that the LMB has no
jurisdiction to try LMB Case No. 7-98; it is the regional
trial courts that have original jurisdiction in such cases.
The petitioner points out that the private respondents
failed to file an action for nullification of TCT Nos.
131918 and 131919 within the one-year period from
the date of issuance of the subject titles and are,
therefore, barred from questioning the said titles. The
petitioner further points out that the certificates of title
under the Torrens system of registration cannot be
collaterally attacked. The petitioner concludes that the
trial court should not have dismissed SP Civil Action No.
02-237, but instead should have given it due course.
The Office of the Solicitor General (OSG), for its
part, points out that the parties in both cases are
identical. It further points out that LMB Case No. 7-98
was filed as early as 1995, and that the petitioner
subsequently initiated SP Civil Action No. 02-237

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obviously to preempt the outcome of the case before

the Lands Management Bureau. Hence, the trial court
correctly dismissed SP Civil Action No. 02-237 on the
ground of litis pendentia.

public lands, and his finding and decision as to

questions of fact, when approved by the Secretary of
Agriculture and Natural Resources (now Secretary of
Environment and Natural Resources), is conclusive.[22]

The OSG further contends that the determination

of whether there was a violation of the Friar Lands Act,
the very issue raised in the two cases, is well within the
authority of the LMB to investigate, it being the agency
of the government charged with administrative control
over Friar Land Estates under Commonwealth Act No.
2550. As such, according to the OSG, the LMB has
primary jurisdiction over the subject matter. The OSG
points out that the petitioners resort to the courts is
premature, considering that the LMB has primary
jurisdiction over the matter.

The power and authority of the Director of Lands

were discussed in the recent case of Republic of the
Philippines v. De Guzman.[23] According to the Court,
the Director of Lands does not lose authority over the
land even upon the issuance of an original certificate of
title over the same. Thus:

The OSG, likewise, avers that the petitioner is

guilty of violating Section 5, Rule 7 of the Rules of
Court, on certification against forum shopping. It points
out that the petitioners representative, Roland Leslie V.
Lipio, certified under oath that the petitioner had no
knowledge of any action pending before any tribunal or
agency. It further points out that it cannot be said that
the petitioner was unaware of LMB Case No. 7-98, since
it even filed an Answer therein on July 31, 1995. To
justify the dismissal of the case, the OSG cites the
ruling of the Court in Republic v. Carmel Development,
Inc.[17]
The Ruling of the Court
At the outset, the Court notes that the petitioner
assails an order of dismissal issued by the RTC, with
direct recourse to this Court. It must be stressed that in
so doing, the petitioner violated an established policy,
one that is necessary to prevent inordinate demands
upon the Courts time and attention which are better
devoted to those matters within its exclusive
jurisdiction, and to prevent further overcrowding of the
Courts docket.[18] There is, after all, a hierarchy of
courts which is determinative of the venue of appeals.
[19]
This rule may be relaxed only for special and
important reasons clearly and specifically set out in the
petition.[20] The petitioner should thus have filed its
petition first before the Court of Appeals, conformably
with this principle of hierarchy of courts. The Court
notes that the petitioner failed to satisfactorily explain
its failure to comply with or its non-observance of
judicial hierarchy.
Even upon the merits of the case, the petition at
bar is still destined to fail for the following additional
reasons:
First. Contrary to the petitioners contention, at this
instance, it is the courts which should defer the
exercise of jurisdiction on the matter. Jurisdiction
having been correctly assumed by the Director of
Lands over the parties conflicting claims, the case
should, in accordance with law, remain there for final
adjudication.[21] After all, the Director of Lands, who is
the officer charged with carrying out the provisions of
the Public Land Act, has control over the survey,
classification, lease, sale or any other form of
concession or disposition and management of the

The authority of the Director of Lands to investigate

conflicts over public lands is derived from Section 91 of
the Public Land Act. In fact, it is not merely his right but
his specific duty to conduct investigations of alleged
fraud in securing patents and the corresponding titles
thereto. While title issued on the basis of a patent is as
indefeasible as one judicially secured, such
indefeasibility is not a bar to an investigation by the
Director of Lands as to how such title had been
acquired, if the purpose of such investigation is to
determine whether or not fraud had been committed in
securing such title, in order that the appropriate action
for reversion may be filed by the Government.[24]
As a rule then, courts have no jurisdiction to
intrude upon matters properly falling within the powers
of the LMB.[25]
On the petitioners claim that its titles to the
subject lots have been rendered indefeasible, the
pronouncement of the Court in Republic v. Court of
Appeals[26] is instructive:
It is true that under Section 122 of the Land
Registration Act, a Torrens title issued on the basis of a
free patent or a homestead patent is as indefeasible as
one judicially secured. And in repeated previous
decisions of this Court that indefeasibility has been
emphasized by our holding that not even the
Government can file an action for annulment, but at
the same time, it has been made clear that an action
for reversion may be instituted by the Solicitor General,
in the name of the Republic of the Philippines. It is also
to the public interest that one who succeeds in
fraudulently acquiring title to a public land should not
be allowed to benefit therefrom, and the State should,
therefore, have an even existing authority, thru its
duly-authorized officers, to inquire into the
circumstances surrounding the issuance of any such
title, to the end that the Republic, thru the Solicitor
General or any other officer who may be authorized by
law, may file the corresponding action for the reversion
of the land involved to the public domain, subject
thereafter to disposal to other qualified persons in
accordance with law. In other words, the indefeasibility
of a title over land previously public is not a bar to an
investigation by the Director of Lands as to how such
title has been acquired, if the purpose of such
investigation is to determine whether or not fraud had
been committed in securing such title in order that the
appropriate action for reversion may be filed by the
Government.[27]

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Second. The OSG correctly invoked the doctrine of

primary jurisdiction in this case. Indeed, the courts
cannot and will not resolve a controversy involving a
question which is within the jurisdiction of an
administrative tribunal, especially 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.
[28]
The doctrine of primary jurisdiction applies where a
claim is originally cognizable in the courts, and comes
into play whenever enforcement of the claim requires
the resolution of issues which, under a regulatory
scheme, have been placed within the special
competence of an administrative body; in such case,
the judicial process is suspended pending referral of
such issues to the administrative body for its view. And
in such cases, the court cannot arrogate unto itself the
authority to resolve a controversy, the jurisdiction over
which is initially lodged with an administrative body of
special competence,[29] in this case, the LMB.
Third. The trial court correctly ruled that the
petitioners action was barred by the pendency of the
proceedings before the LMB. For litis pendencia to lie,
the following requisites must be satisfied:
1. Identity of parties or representation in both
cases;
2. Identity of rights asserted and relief prayed
for;
3. The relief must be founded on the same
facts and the same basis; and
4. Identity of the two preceding particulars
should be such that any judgment, which
may be rendered in the other action, will,
regardless of which party is successful,
amount to res judicata on the action under
consideration.[30]
To the Courts mind, these requisites are present in
the instant case. For one, the parties in the LMB case
and in SP Civil Action No. 02-237 are the same. There
is, likewise, identity of rights asserted and reliefs
prayed for. The petition filed by the private
respondents SSNRAI and its President Devilleres before
the LMB alleged that the lots in question had been the
subject of double titling; on the other hand, the petition
with prayer for preliminary injunction filed before the
RTC sought the declaration from the court that TCT
Nos. 131918 and 131919, in the name of the
petitioner, are indefeasible and conclusive as against
the whole world. The resolution of the foregoing issue
would likewise require the presentation of evidence
from the parties. Verily, the conclusion in one
proceeding would amount to the adjudication of the
merits on the other that is, a favorable ruling from the
LMB would have virtually removed any and all existing
clouds from the petitioners titles to the subject
property; in the same vein, a declaration of the
indefeasibility of TCT Nos. 131918 and 131919 would
preempt any ruling of the LMB on the matter.

Indeed,
the
underlying
principle
of litis
pendentia is the theory that a party is not allowed to
vex another more than once regarding the same
subject matter and for the same cause of action. This
theory is founded on the public policy that the same
subject matter should not be the subject of controversy
in court more than once in order that possible
conflicting judgments may be avoided, for the sake of
the stability of the rights and status of persons. [31] The
RTC of Muntinlupa City, Branch 205, recognized this
doctrine when it dismissed SP Civil Action No. 02-237
to avoid the possibility of two contradictory decisions
on the question of the validity of the subject titles.
In any case, should the petitioner disagree with
the ruling of the LMB, it is not precluded from taking
the matter up to with the courts of law.
Fourth. To determine whether a party violated the
rule against forum shopping, the test applied is
whether the elements of litis pendentia are present or
whether a final judgment in one case will amount
to res
judicata in
another.[32] Considering
our
pronouncement
that
the
requisites
of litis
pendentia barred the filing of SP Civil Action No. 02237, the RTC correctly dismissed the same on the
additional ground of forum shopping.
WHEREFORE, considering the foregoing, the
petition is DENIED for lack of merit. The Order of the
Regional Trial Court of Muntinlupa City, Branch 205,
dismissing SP Civil Action No. 02-237 on the ground
of litis pendentia and forum shopping, is AFFIRMED.
SO ORDERED.

Warning: Long case

[G.R. No. 95694. October 9, 1997]
VICENTE
VILLLAFLOR,
substituted
by
his
heirs, petitioner, vs. COURT OF APPEALS
and
NASIPIT
LUMBER
CO.,
INC., respondents.
DECISION
PANGANIBAN ,J.:
In this rather factually complicated case, the Court
reiterates the binding force and effect of findings of
specialized administrative agencies as well as those of
trial courts when affirmed by the Court of Appeals;
rejects petitioners theory of simulation of contracts;
and passes upon the qualifications of private
respondent corporation to acquire disposable public
agricultural lands prior to the effectivity of the 1973
Constitution.

The Case
Before
us
is
a
petition
for
review
on certiorari seeking the reversal of the Decision [1] of
the Court of Appeals, dated September 27, 1990, in
C.A. G.R. CV No. 09062, affirming the dismissal by the

ADMIN LAW 1st Set

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trial court of Petitioner Vicente Villaflors complaint

against Private Respondent Nasipit Lumber Co.,
Inc. The disposition of both the trial and the appellate
courts are quoted in the statement of facts below.

The Facts
The facts of this case, as narrated in detail by
Respondent Court of Appeals, are as follows:[2]
The evidence, testimonial and documentary, presented
during the trial show that on January 16, 1940, Cirilo
Piencenaves, in a Deed of Absolute Sale (exh. A), sold
to [petitioner], a parcel of agricultural land containing
an area of 50 hectares,[3] more or less, and particularly
described and bounded as follows:
A certain parcel of agricultural land planted to abaca
with visible concrete monuments marking the
boundaries and bounded on the NORTH by Public Land
now Private Deeds on the East by Serafin Villaflor, on
the SOUTH by Public Land; and on the West by land
claimed by H. Patete, containing an area of 60 hectares
more or less, now under Tax Dec. 29451 in the (sic) of
said Vicente Villaflor, the whole parcel of which this
particular parcel is only a part, is assessed
at P22,550.00 under the above said Tax Dec. Number.
This deed states:
That the above described land was sold to the said
VICENTE VILLAFLOR, xxx on June 22, 1937, but no
formal document was then executed, and since then
until the present time, the said Vicente Villaflor has
been in possession and occupation of (the same); (and)
That the above described property was before the sale,
of my exclusive property having inherited from my long
dead parents and my ownership to it and that of my
[sic] lasted for more than fifty (50) years, possessing
and occupying same peacefully, publicly and
continuously without interruption for that length of
time.
Also on January 16, 1940, Claudio Otero, in a Deed of
Absolute Sale (exh. C) sold to Villaflor a parcel of
agricultural land, containing an area of 24 hectares,
more or less, and particularly described and bounded
as follows:
A certain land planted to corn with visible concrete
measurements marking the boundaries and bounded
on the North by Public Land and Tungao Creek; on the
East by Agusan River; on the South by Serafin Villaflor
and Cirilo Piencenaves; and on the West by land of
Fermin Bacobo containing an area of 24 hectares more
or less, under Tax Declaration No. 29451 in the name
already of Vicente Villaflor, the whole parcel of which
this particular land is only a part, is assessed
at P22,550.00 under the above said Tax Declaration No.
29451.
This deed states:

That the above described land was sold to the said

VICENTE VILLAFLOR, xxx on June 22, 1937, but no
sound document was then executed, however since
then and until the present time, the said Vicente
Villaflor has been in open and continuous possession
and occupation of said land; (and)
That the above described land was before the sale, my
own exclusive property, being inherited from my
deceased parents, and my ownership to it and that of
my predecessors lasted more than fifty (50) years,
possessing and occupying the same, peacefully, openly
and continuously without interruption for that length of
time.
Likewise on January 16, 1940, Hermogenes Patete, in a
Deed of Absolute Sale (exh. D), sold to Villaflor, a
parcel of agricultural land, containing an area of 20
hectares, more or less, and particularly described and
bounded as follows:
A certain parcel of agricultural land planted to abaca
and corn with visible concrete monuments marking the
boundaries and bounded on the North by Public Land
area-private Road; on the East by land claimed by Cirilo
Piencenaves; on the South by Public Land containing
an area of 20 hectares more or less, now under Tax
Declaration No. 29451 in the name of Vicente Villaflor
the whole parcel of which this particular parcel, is
assessed at P22,550.00 for purposes of taxation under
the above said Tax Declaration No. 29451.
This deed states:
xxx (O)n June 22, 1937 but the formal document was
then executed, and since then until the present time,
the said VICENTE VILLAFLOR has been in continuous
and open possession and occupation of the same;
(and)
That the above described property was before the sale,
my own and exclusive property, being inherited from
my deceased parents and my ownership to it and that
of my predecessors lasted more than fifty (50) years,
possessing and occupying same, peacefully, openly
and continuously without interruption for that length of
time.
On February 15, 1940, Fermin Bocobo, in a Deed of
Absolute Sale (exh. B), sold to Villaflor, a parcel of
agricultural land, containing an area of 18 hectares,
more or less, and particularly described and bounded
as follows:
A certain parcel of agricultural land planted with abaca
with visible part marking the corners and bounded on
the North by the corners and bounded on the North by
Public Land; on the East by Cirilo Piencenaves; on the
South by Hermogenes Patete and West by Public
Land, containing an area of 18 hectares more or less
now under Tax Declaration No. 29451 in the name of
Vicente Villaflor. The whole parcel of which this
particular parcel is only a part is assessed
as P22,550.00 for purposes of taxation under the
above said Tax Declaration Number (Deed of Absolute

ADMIN LAW 1st Set

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Sale executed by Fermin Bocobo date Feb. 15,

1940). This document was annotated in Registry of
Deeds on February 16, 1940).
This deed states:
That the above described property was before the sale
of my own exclusive property, being inherited from my
deceased parents, and my ownership to it and that of
my predecessors lasted more than fifty (50) years,
possessing and occupying the same peacefully, openly
and continuously without interruption for that length of
time.
On November 8, 1946, Villaflor, in a Lease Agreement
(exh. Q),[4] leased to Nasipit Lumber Co., Inc. a parcel of
land, containing an area of two (2) hectares, together
with all the improvements existing thereon, for a
period of five (5) years from June 1, 1946 at a rental
of P200.00 per annum to cover the annual rental of
house and building sites for thirty three (33) houses or
buildings. This agreement also provides:[5]
3. During the term of this lease, the Lessee is
authorized and empowered to build and construct
additional houses in addition to the 33 houses or
buildings mentioned in the next preceding paragraph,
provided however, that for every additional house or
building constructed the Lessee shall pay unto the
Lessor an amount of fifty centavos (50) per month for
every house or building. The Lessee is empowered and
authorized by the Lessor to sublot (sic) the premises
hereby leased or assign the same or any portion of the
land hereby leased to any person, firm and
corporation; (and)
4. The Lessee is hereby authorized to make any
construction and/or improvement on the premises
hereby leased as he may deem necessary and proper
thereon, provided however, that any and all such
improvements shall become the property of the Lessor
upon the termination of this lease without obligation on
the part of the latter to reimburse the Lessee for
expenses incurred in the construction of the same.

Bounded on the North by Public Land and Tungao

Creek; on the East by Agusan River and Serafin
Villaflor; on the South by Public Land, on the West by
Public Land. Improvements thereon consist of abaca,
fruit trees, coconuts and thirty houses of mixed
materials belonging to the Nasipit Lumber
Company. Divided into Lot Nos. 5412, 5413, 5488,
5490, 5491, 5492, 5850, 5849, 5860, 5855, 5851,
5854, 5855, 5859, 5858, 5857, 5853, and
5852. Boundaries of this parcel of land are marked by
concrete monuments of the Bureau of
Lands. Containing an area of 112,000
hectares. Assessed at P17,160.00 according to Tax
Declaration No. V-315 dated April 14, 1946.
PARCEL TWO
Bounded on the North by Pagudasan Creek; on the East
by Agusan River; on the South by Tungao Creek; on the
West by Public Land. Containing an area of 48,000
hectares more or less. Divided into Lot Nos. 5411,
5410, 5409, and 5399. Improvements 100 coconut
trees, productive, and 300 cacao trees. Boundaries of
said land are marked by concrete monuments of the
Bureau pf (sic) Lands. Assessed value -- P6,290.00
according to Tax No. 317, April 14, 1946.
This Agreement to Sell provides:
3. That beginning today, the Party of the Second Part
shall continue to occupy the property not anymore in
concept of lessee but as prospective owners, it being
the sense of the parties hereto that the Party of the
Second Part shall not in any manner be under any
obligation to make any compensation to the Party of
the First Part, for the use, and occupation of the
property herein before described in such concept of
prospective owner, and it likewise being the sense of
the parties hereto to terminate as they do hereby
terminate, effective on the date of this present
instrument, the Contract of Lease, otherwise known as
Doc. No. 420, Page No. 36, Book No. II, Series of 1946
of Notary Public Gabriel R. Banaag, of the Province of
Agusan.

Villaflor claimed having discovered that after the

execution of the lease agreement, that Nasipit Lumber
in bad faith x x x surreptitiously grabbed and occupied
a big portion of plaintiffs property x x x; that after a
confrontation with the corporates (sic) field manager,
the latter, in a letter dated December 3, 1973 (exh. R),
[6]
stated recalling having made some sort of
agreement for the occupancy (of the property at
Acacia, San Mateo), but I no longer recall the details
and I had forgotten whether or not we did occupy your
land. But if, as you say, we did occupy it, then (he is )
sure that the company is obligated to pay the rental.

4. That the Party of the Second Part has bound as it

does hereby bind itself, its executors and
administrators, to pay unto the party of the First Part
the sum of Five Thousand Pesos (P5,000.00), Philippine
Currency, upon presentation by the latter to the former
of satisfactory evidence that:

On July 7, 1948, in an Agreement to Sell (exh. 2),

Villaflor conveyed to Nasipit Lumber, two (2) parcels of
land xxx described as follows:[7]

(b) That there is no other private claimant to the

properties hereinbefore described.

PARCEL ONE

(a) The Bureau of Lands will not have any objection to

the obtainment by the Party of the First Part of a
Certificate of Torrens Title in his favor, either thru
ordinary land registration proceedings or thru
administrative means procedure.

5. That the Party of the First Part has bound as he does

hereby bind to undertake immediately after the
execution of these presents to secure and obtain, or
cause to be secured and obtained, a Certificate of

ADMIN LAW 1st Set

Page 27 of 151

Torrens Title in his favor over the properties described

on Page (One) hereof, and after obtainment of such
Certificate of Torrens Title, the said Party of the First
Part shall execute a (D)eed of Absolute Sale unto and
in favor of the Party of the Second Part, its executors,
administrators and assigns, it being the sense of the
parties that the Party of the Second Part upon delivery
to it of such deed of absolute sale, shall pay unto the
Party of the First Part in cash, the sum of Twelve
Thousand (P12,000.00) Pesos in Philippine Currency,
provided, however, that the Party of the First Part, shall
be reimbursed by the Party of the Second Part with one
half of the expenses incurred by the Party of the First
Part for survey and attorneys fees; and other incidental
expenses not exceeding P300.00.

Par. 4. That the Party of the Second Part has bound as

it does hereby bind itself, its executors and
administrators, to pay unto the Party of the First Part of
the sum of FIVE THOUSAND PESOS
(P5,000.00)Philippine Currency, upon presentation by
the latter to the former of satisfactory evidence that:

On December 2, 1948, Villaflor filed Sales Application

No. V-807[8] (exh. 1) with the Bureau of Lands, Manila,
to purchase under the provisions of Chapter V, XI or IX
of Commonwealth Act. No. 141 (The Public Lands Act),
as amended, the tract of public lands x x x and
described as follows: North by Public Land; East by
Agusan River and Serafin Villaflor; South by Public Land
and West by public land (Lot Nos. 5379, 5489, 5412,
5490, 5491, 5492, 5849, 5850, 5851, 5413, 5488,
5489, 5852, 5853, 5854, 5855, 5856, 5857, 5858, 5859
and 5860 x x x containing an area of 140 hectares
xxx. Paragraph 6 of the Application, states: I
understand that this application conveys no right to
occupy the land prior to its approval, and I recognized
(sic) that the land covered by the same is of public
domain and any and all rights I may have with respect
thereto by virtue of continuous occupation and
cultivation are hereby relinquished to the Government.
[9]
(exh. 1-D)

That the First Party has on December 2, 1948,

submitted to the Bureau of Lands, a Sales Application
for the twenty-two (22) lots comprising the two
abovementioned parcels of land, the said Sales
Application was registered in the said Bureau under No.
V-807;

On December 7, 1948, Villaflor and Nasipit Lumber

executed an Agreement (exh 3).[10] This contract
provides:
1. That the First Party is the possessor since 1930 of
two (2) parcels of land situated in sitio Tungao, Barrio
of San Mateo, Municipality of Butuan, Province of
Agusan;
2. That the first parcel of land abovementioned and
described in Plan PLS-97 filed in the office of the
Bureau of Lands is made up of Lots Nos. 5412, 5413,
5488, 5490, 5491, 5492, 5849, 5850, 5851, 5852,
5853, 5854, 5855, 5856, 5857, 5858, 5859 and 5860
and the second parcel of land is made of Lots Nos.
5399, 5409, 5410 and 5411;
3. That on July 7, 1948, a contract of Agreement to Sell
was executed between the contracting parties herein,
covering the said two parcels of land, copy of said
Agreement to Sell is hereto attached marked as Annex
A and made an integral part of this document. The
parties hereto agree that the said Agreement to Sell be
maintained in full force and effect with all its terms and
conditions of this present agreement and in no way be
considered as modified.
4. That paragraph 4 of the Contract of Agreement to
Sell, marked as annex, A stipulates as follows:

a) The Bureau of Lands will have any objection to the

obtainment by Party of the First Part of a favor, either
thru ordinary land registration proceedings or thru
administrative means and procedure.
b) That there is no other private claimant to the
properties hereinabove described.

6. That in reply to the request made by the First Party

to the Bureau of Lands, in connection with the Sales
Application No. V-807, the latter informed the former
that action on his request will be expedited, as per
letter of the Chief, Public Land Division, dated
December 2, 1948, copy of which is hereto attached
marked as annex B and made an integral part of this
agreement:
7. That for and in consideration of the premises above
stated and the amount of TWENTY FOUR THOUSAND
(P24,000.00) PESOS that the Second Party shall pay to
the First Party, by these presents, the First Party hereby
sells, transfers and conveys unto the Second Party, its
successors and assigns, his right, interest and
participation under an(d) by virtue of the Sales
Application No. V-807, which he has or may have in the
lots mentioned in said Sales Application No. V-807;
8. That the amount of TWENTY FOUR THOUSAND
(P24,000.00) PESOS, shall be paid by the Second Party
to the First Party, as follows:
a) The amount of SEVEN THOUSAND (P7,000.00)
PESOS, has already been paid by the Second Party to
the First Party upon the execution of the Agreement to
Sell, on July 7, 1948;
b) The amount of FIVE THOUSAND (P5,000.00) PESOS
shall be paid upon the signing of this present
agreement; and
c) The balance of TWELVE THOUSAND (P12,000.00)
PESOS, shall be paid upon the execution by the First
Party of the Absolute Deed of Sale of the two parcels of
land in question in favor of the Second Party, and upon
delivery to the Second Party of the Certificate of
Ownership of the said two parcels of land.
9. It is specially understood that the mortgage
constituted by the First Party in favor of the Second
Party, as stated in the said contract of Agreement to
Sell dated July 7, 1948, shall cover not only the amount

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of SEVEN THOUSAND (P7,000.00) PESOS as specified in

said document, but shall also cover the amount of FIVE
THOUSAND (P5,000.00) PESOS to be paid as stipulated
in paragraph 8, sub-paragraph (b) of this present
agreement, if the First Party should fail to comply with
the obligations as provided for in paragraphs 2, 4, and
5 of the Agreement to Sell;
10. It is further agreed that the First Party obligates
himself to sign, execute and deliver to and in favor of
the Second Party, its successors and assigns, at
anytime upon demand by the Second Party such other
instruments as may be necessary in order to give full
effect to this present agreement;
In the Report dated December 31, 1949 by the public
land inspector, District Land Office, Bureau of Lands, in
Butuan, the report contains an Indorsement of the
aforesaid District Land Officer recommending rejection
of the Sales Application of Villaflor for having leased
the property to another even before he had acquired
transmissible rights thereto.
In a letter of Villaflor dated January 23, 1950,
addressed to the Bureau of Lands, he informed the
Bureau Director that he was already occupying the
property when the Bureaus Agusan River Valley
Subdivision Project was inaugurated, that the property
was formerly claimed as private properties (sic), and
that therefore, the property was segregated or
excluded from disposition because of the claim of
private ownership. In a letter of Nasipit Lumber dated
February 22, 1950 (exh. X)[11] addressed to the Director
of Lands, the corporation informed the Bureau that it
recognized Villaflor as the real owner, claimant and
occupant of the land; that since June 1946, Villaflor
leased two (2) hectares inside the land to the
company; that it has no other interest on the land; and
that the Sales Application of Villaflor should be given
favorable consideration.
xxx xxx xxx
On July 24, 1950, the scheduled date of auction of the
property covered by the Sales Application, Nasipit
Lumber offered the highest bid of P41.00 per hectare,
but since an applicant under CA 141, is allowed to
equal the bid of the highest bidder, Villaflor tendered
an equal bid, deposited the equivalent of 10% of the
bid price and then paid the assessment in full.
xxx xxx xxx
On August 16, 1950, Villaflor executed a document,
denominated as a Deed of Relinquishment of Rights
(exh. N),[12] pertinent portion of which reads:
5. That in view of my present business in Manila, and
my change in residence from Butuan, Agusan to the
City of Manila, I cannot, therefore, develope (sic) or
cultivate the land applied for as projected before;
6. That the Nasipit Lumber Company, Inc., a
corporation duly organized xxx is very much interested

in acquiring the land covered by the aforecited

application xxx;
7. That I believe the said company is qualified to
acquire public land, and has the means to develop (sic)
the above-mentioned land;
xxx xxx xxx
WHEREFORE, and in consideration of the amount of
FIVE THOUSAND PESOS (P5,000.00) to be reimbursed
to me by the aforementioned Nasipit Lumber
Company, Inc., after its receipt of the order of award,
the said amount representing part of the purchase
price of the land aforesaid, the value of the
improvements I introduced thereon, and the expenses
incurred in the publication of the Notice of Sale, I, the
applicant, Vicente J. Villaflor, hereby voluntarily
renounce and relinquish whatever rights to, and
interests I have in the land covered by my abovementioned application in favor of the Nasipit Lumber
Company, Inc.
Also on August 16, 1950, Nasipit Lumber filed a Sales
Application over the two (2) parcels of land, covering
an area of 140 hectares, more or less. This application
was also numbered V-807 (exh. Y).
On August 17, 1950 the Director of Lands issued an
Order of Award[13] in favor of Nasipit Lumber Company,
Inc., pertinent portion of which reads:
4. That at the auction sale of the land held on July 24,
1950 the highest bid received was that of Nasipit
Lumber Company, Inc. which offered P41.00 per
hectare or P5,740.00 for the whole tract, which bid was
equaled by applicant Vicente J. Villaflor, who deposited
the amount of P574.00 under Official Receipt No. B1373826 dated July 24, 1950 which is equivalent to
10% of the bid. Subsequently, the said xxx Villaflor
paid the amount of P5,160.00 in full payment of the
purchase price of the above-mentioned land and for
some reasons stated in an instrument of
relinquishment dated August 16, 1950, he (Vicente J.
Villaflor) relinquished his rights to and interest in the
said land in favor of the Nasipit Lumber Company, Inc.
who filed the corresponding application therefore.
In view of the foregoing, and it appearing that the
proceedings had xxx were in accordance with law and
in [sic] existing regulations, the land covered thereby is
hereby awarded to Nasipit Lumber Company, Inc.
at P41.00 per hectare or P5,740.00 for the whole tract.
This application should be entered in the record of this
Office as Sales Entry No. V-407.
It is Villaflors claim that he only learned of the Order of
Award on January 16, 1974, or after his arrival to the
Philippines, coming from Indonesia, where he stayed
for more than ten (10) years; that he went to Butuan
City in the latter part of 1973 upon the call of his
brother Serafin Villaflor, who was then sick and learned
that Nasipit Lumber (had) failed and refused to pay the
agreed rentals, although his brother was able to collect

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during the early years; and that Serafin died three days
after his (Vicentes) arrival, and so no accounting of the
rentals could be made; that on November 27, 1973,
Villaflor wrote a letter to Mr. G.E.C. Mears of Nasipit
Lumber, reminding him of their verbal agreement in
1955 xxx that Mr. Mears in a Reply dated December 3,
1973, appears to have referred the matter to Mr.
Noriega, the corporate general manager, but the new
set of corporate officers refused to recognize (Villaflors)
claim, for Mr. Florencio Tamesis, the general manager
of Nasipit Lumber, in a letter dated February 19, 1974,
denied Villaflors itemized claim dated January 5, 1974
(exh. V) to be without valid and legal basis. In that
5th January, 1974 letter, Villaflor claimed the total
amount of P427,000.00 x x x.
In a formal protest dated January 31, 1974[14] which
Villaflor filed with the Bureau of Lands, he protested
the Sales Application of Nasipit Lumber, claiming that
the company has not paid him P5,000.00 as provided
in the Deed of Relinquishment of Rights dated August
16, 1950.
xxx xxx xxx
x x x (T)hat in a Decision dated August 8, 1977 (exh.
8), the Director of Lands found that the payment of the
amount of P5,000.00 in the Deed xxx and the
consideration in the Agreement to Sell were duly
proven, and ordered the dismissal of Villaflors protest
and gave due course to the Sales Application of Nasipit
Lumber. Pertinent portion of the Decision penned by
Director of Lands, Ramon Casanova, in the Matter of SP
No. V-807 (C-V-407) xxx reads:
xxx xxx xxx
During the proceedings, Villaflor presented another
claim entirely different from his previous claim -- this
time, for recovery of rentals in arrears arising from a
supposed contract of lease by Villaflor as lessor in favor
of Nasipit as lessee, and indemnity for damages
supposedly caused improvements on his other
property xxx in the staggering amount of Seventeen
Million (P17,000,000.00) Pesos. Earlier, he had also
demanded from NASIPIT xxx (P427,000.00) xxx also as
indemnity for damages to improvements supposedly
caused by NASIPIT on his other real property as well as
for reimbursement of realty taxes allegedly paid by him
thereon.
xxx xxx xxx
It would seem that xxx Villaflor has sought to inject so
many collaterals, if not extraneous claims, into this
case. It is the considered opinion of this Office that any
claim not within the sphere or scope of its adjudicatory
authority as an administrative as well as quasi-judicial
body or any issue which seeks to delve into the merits
of incidents clearly outside of the administrative
competence of this Office to decide may not be
entertained.
There is no merit in the contention of Villaflor that
owing to Nasipits failure to pay the amount of xxx

(P5,000.00) xxx (assuming that Nasipit had failed) the

deed of relinquishment became null and void for lack
of consideration. xxxx.
xxx xxx xxx
x x x The records clearly show, however, that since the
execution of the deed of relinquishment xxx Villaflor
has always considered and recognized NASIPIT as
having the juridical personality to acquire public lands
for agricultural purposes. xxxx.
xxx xxx xxx
Even this Office had not failed to recognize the juridical
personality of NASIPIT to apply for the purchase of
public lands xxx when it awarded to it the land so
relinquished by Villaflor (Order of Award dated August
17, 1950) and accepted its application therefor. At any
rate, the question whether an applicant is qualified to
apply for the acquisition of public lands is a matter
between the applicant and this Office to decide and
which a third party like Villaflor has no personality to
question beyond merely calling the attention of this
Office thereto.
xxx xxx xxx
Villaflor offered no evidence to support his claim of
non-payment beyond his own self-serving assertions
and expressions that he had not been paid said
amount. As protestant in this case, he has the
affirmative of the issue. He is obliged to prove his
allegations, otherwise his action will fail. For, it is a well
settled principle () that if plaintiff upon whom rests the
burden of proving his cause of action fails to show in a
satisfactory manner the facts upon which he bases his
claim, the defendant is under no obligation to prove his
exceptions or special defenses (Belen vs. Belen, 13
Phil. 202; Mendoza vs. Fulgencio, 8 Phil. 243).
xxx xxx xxx
Consequently, Villaflors claim that he had not been
paid must perforce fail.
On the other hand, there are strong and compelling
reasons to presume that Villaflor had already been paid
the amount of Five Thousand (P5,000.00) Pesos.
First, xxx What is surprising, however, is not so much
his claims consisting of gigantic amounts as his having
forgotten to adduce evidence to prove his claim of nonpayment of the Five Thousand (P5,000.00)
Pesos during the investigation proceedings when he
had all the time and opportunity to do so. xxx The fact
that he did not adduce or even attempt to adduce
evidence in support thereof shows either that he had
no evidence to offer xxx that NASIPIT had already paid
him in fact. What is worse is that Villaflor did not even
bother to command payment, orally or in writing, of
the Five Thousand (P5,000.00) Pesos which was
supposed to be due him since August 17, 1950, the
date when the order of award was issued to Nasipit,
and when his cause of action to recover payment had

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accrued. The fact that he only made a command (sic)

for payment on January 31, 1974, when he filed his
protest or twenty-four (24) years later is immediately
nugatory of his claim for non-payment.
But Villaflor maintains that he had no knowledge or
notice that the order of award had already been issued
to NASIPIT as he had gone to Indonesia and he had
been absent from the Philippines during all those
twenty-four (24) years. This of course taxes credulity.
xxx.
Second, it should be understood that the condition that
NASIPIT should reimburse Villaflor the amount of Five
Thousand (P5,000.00) Pesos upon its receipt of the
order of award was fulfilled as said award was issued to
NASIPIT on August 17, 1950. The said deed of
relinquishment was prepared and notarized in Manila
with Villaflor and NASIPIT signing the instrument also in
Manila on August 16, 1950 (p.77, (sic)). The following
day or barely a day after that, or on August 17, 1950,
the order of award was issued by this Office to
NASIPIT also in Manila. Now, considering that Villaflor is
presumed to be more assiduous in following up with
the Bureau of Lands the expeditious issuance of the
order of award as the payment of the Five Thousand
(P5,000.00) Pesos (consideration) would depend on the
issuance of said order to award NASIPIT, would it not
be reasonable to believe that Villaflor was at hand
when the award was issued to NASIPIT on August 17,
1950, or barely a day which (sic) he executed the deed
of relinquishment on August 16, 1950, in Manila? xxx.
Third, on the other hand, NASIPIT has in his possession
a sort of order upon itself -- (the deed of
relinquishment wherein he (sic) obligated itself to
reimburse or pay Villaflor the xxx consideration of the
relinquishment upon its receipt of the order of award)
for the payment of the aforesaid amount the moment
the order of award is issued to it. It is reasonable to
presume that NASIPIT has paid the Five Thousand
(P5,000.00) Pesos to Villaflor.
A person in possession of an order on himself for the
payment of money, or the delivery of anything, has
paid the money or delivered the thing
accordingly. (Section 5(k) B-131-Revised Rules of Court.
It should be noted that NASIPIT did not produce direct
evidence as proof of its payment of the Five Thousand
(P5,000.00) Pesos to Villaflor. Nasipits explanation on
this point is found satisfactory.
x x x (I)t was virtually impossible for NASIPIT, after the
lapse of the intervening 24 years, to be able to cope up
with all the records necessary to show that the
consideration for the deed of relinquishment had been
fully paid. To expect NASIPIT to keep intact all records
pertinent to the transaction for the whole quarter of a
century would be to require what even the law does
not. Indeed, even the applicable law itself (Sec. 337,
National Internal Revenue Code) requires that all
records of corporations be preserved for only a
maximum of five years.

NASIPIT may well have added that at any rate while

there are transactions where the proper evidence is
impossible or extremely difficult to produce after the
lapse of time xxx the law creates presumptions of
regularity in favor of such transactions (20 Am. Jur.
232) so that when the basic fact is established in an
action the existence of the presumed fact must be
assumed by force of law. (Rule 13, Uniform Rules of
Evidence; 9 Wigmore, Sec. 2491).
Anent Villaflors claim that the 140-hectare land
relinquished and awarded to NASIPIT is his private
property, little (need) be said. xxxx The tracks of land
referred to therein are not identical to the lands
awarded to NASIPIT. Even in the assumption that the
lands mentioned in the deeds of transfer are the same
as the 140-hectare area awarded to NASIPIT, their
purchase by Villaflor (or) the latters occupation of the
same did not change the character of the land from
that of public land to a private property. The provision
of the law is specific that public lands can only be
acquired in the manner provided for therein and not
otherwise (Sec. 11, C.A. No. 141, as amended). The
records show that Villaflor had applied for the purchase
of the lands in question with this Office (Sales
Application No. V-807) on December 2, 1948. xxxx
There is a condition in the sales application signed by
Villaflor to the effect that he recognizes that the land
covered by the same is of public domain and any and
all rights he may have with respect thereto by virtue of
continuous occupation and cultivation are relinquished
to the Government (paragraph 6, Sales Application No.
V-807 xxx) of which Villaflor is very much aware. It also
appears that Villaflor had paid for the publication fees
appurtenant to the sale of the land. He participated in
the public auction where he was declared the
successful bidder. He had fully paid the purchase prive
(sic) thereof (sic). It would be a (sic) height of absurdity
for Villaflor to be buying that which is owned by him if
his claim of private ownership thereof is to be
believed. The most that can be said is that his
possession was merely that of a sales applicant to
when it had not been awarded because he relinquished
his interest therein in favor of NASIPIT who (sic) filed a
sales application therefor.
xxx xxx xxx
x x x During the investigation proceedings, Villaflor
presented as his Exhibit (sic) (which NASIPIT adopted
as its own exhibit and had it marked in evidence as
Exhibit 1) a duly notarized agreement to Sell dated July
7, 1948, by virtue of which Villaflor undertook to sell to
Nasipit the tracts of land mentioned therein, for a
consideration of Twenty-Four Thousand (P24,000.00)
Pesos. Said tracts of land have been verified to be
identical to the parcels of land formerly applied for by
Villaflor and which the latter had relinquished in favor
of NASIPIT under a deed of relinquishment executed by
him on August 16, 1950.In another document executed
on December 7, 1948 xxx Villaflor as FIRST PARTY and
NASIPIT as SECOND PARTY confirmed the Agreement to
Sell of July 7, 1948, which was maintained in full force
and effect with all its terms and conditions x x x (Exh.
38-A); and that for and in consideration of xxx TWENTY
FOUR THOUSAND (P24,000.00) PESOS that the Second
Party shall pay to the First Party xxx the First Party

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hereby sells, transfers and conveys unto the Second

Party xxx his right interest and participation under and
by virtue of the Sales Application No. V-807 and, in its
paragraph 8, it made stipulations as to when part of
the said consideration xxx was paid and when the
balance was to be paid, to wit:
a) the amount of SEVEN THOUSAND xxx PESOS has
already been paid by the Second Party to the First Party
upon the execution of the Agreement to Sell, on July
17, 1948;
b) the amount of FIVE THOUSAND xxx PESOS shall be
paid upon the signing of this present agreement; and
c) the amount of TWELVE THOUSAND xxx PESOS, shall
be paid upon the execution by the First Party of the
Absolute Sale of the Two parcels of land in question in
favor of the Second Party of the Certificate of
Ownership of the said two parcels of land. (Exh. 38-B).
(Emphasis ours)
It is thus clear from this subsequent document marked
Exhibit 38 ANALCO that of the consideration of the
Agreement to Sell dated July7, 1948, involving the 140hectare area relinquished by Villaflor in favor of
NASIPIT, in the amount of Twenty-Four Thousand
(P24,000.00) Pesos:
(1) the amount of Seven Thousand (P7,000.00)
Pesos was already paid upon the execution of the
Agreement to Sell on July 7, 1948, receipt of which
incidentally was admitted by Villaflor in the document
of December 7, 1948;
(2) the amount of Five Thousand (P5,000.00) Pesos was
paid when said document was signed by Vicente J.
Villaflor as the First Party and Nasipit thru its President,
as the Second Party, on December 7, 1948; and
(3) the balance of Twelve Thousand (P12,000.00) Pesos
to be paid upon the execution by the First Party of the
Absolute Deed of Sale of the two parcels of land in
favor of the Second Party, and upon delivery to the
Second Party of the Certificate of Ownership of the said
two parcels of land.
Villaflor contends that NASIPIT could not have paid
Villaflor the balance of Twelve Thousand (P12,000.00)
Pesos x x x consideration in the Agreement to Sell will
only be paid to applicant-assignor (referring to Villaflor)
upon obtaining a Torrens Title in his favor over the 140hectare of land applied for and upon execution by him
of a Deed of Absolute Sale in favor of Nasipit Lumber
Company, Inc. x x x. Inasmuch as applicant-assignor
was not able to obtain a Torrens Title over the land in
question he could not execute an absolute Deed of
(sic) Nasipit Lumber Co., Inc. Hence, the Agreement to
Sell was not carried out and no Twelve Thousand
(P12,000.00) Pesos was overpaid either to the
applicant-assignor, much less to Howard J. Nell
Company. (See MEMORANDUM FOR THE APPLICANTASSIGNOR, dated January 5, 1977). xxx.

xxx Villaflor did not adduce evidence in support of his

claim that he had not been paid the xxx (P12,000.00)
xxx consideration of the Agreement to Sell dated July
7, 1948 (Exh. 38 NALCO) beyond his mere
uncorroborated assertions. On the other hand, there is
strong evidence to show that said Twelve Thousand
(P12,000.00) Pesos had been paid by (private
respondent) to Edward J. Nell Company by virtue of the
Deed of Assignment of Credit executed by Villaflor
(Exh. 41 NALCO) for the credit of the latter.
Atty. Gabriel Banaag, resident counsel of NASIPIT who
is in a position to know the facts, testified for
NASIPIT. He described that it was he who notarized the
Agreement to Sell (Exh. F); that he knew about the
execution of the document of December 7, 1948 (Exh.
38) confirming the said Agreement to Sell having been
previously consulted thereon by Jose Fernandez, who
signed said document on behalf of NASIPIT xxx that
subsequently, in January 1949, Villaflor executed a
Deed of Assignment of credit in favor of Edward J. Nell
Company (Exh. 41 NALCO) whereby Villaflor ceded to
the latter his receivable for NASIPIT corresponding to
the remaining balance in the amount of Twelve
Thousand xxx Pesos of the total consideration xxx
stipulated in both the Agreement to Sell (Exh. F) and
the document dated December 7, 1948 (Exh. 39);
xxx. He further testified that the said assignment of
credit was communicated to (private respondent)
under cover letter dated January 24, 1949 (Exh. 41-A)
and not long thereafter, by virtue of the said
assignment of credit, (private respondent) paid the
balance of Twelve Thousand xxx due to Villaflor to
Edward J. Nell Company xxx. Atty. Banaags aforesaid
testimony stand unrebutted; hence, must be given full
weight and credit. xxx Villaflor and his counsel were
present when Atty. Banaags foregoing testimony was
given. Yet, Villaflor did not demur, nor did he rebut the
same, despite having been accorded full opportunity to
do so.
xxx xxx xxx
Having found that both the Five Thousand xxx
consideration of the deed of Relinquishment xxx and
that the remaining balance of xxx (P12,000.00) to
complete the Twenty-Four Thousand (P24,000.00)
Pesos consideration of both the Agreement to Sell
dated July 7, 1948, and the document, dated
December 7, 1948, executed by the former in favor of
the latter, have been paid Villaflor the issue on
prescription and laches becomes academic and needs
no further discussion.
But more than all the questions thus far raised and
resolved is the question whether a sales patent can be
issued to NASIPIT for the 140-hectare area awarded to
it in the light of Section 11, Article XIV of the new
Constitution which provides in its pertinent portion to
wit:
x x x No private corporation or association may hold
alienable land of the public domain except by lease not
to exceed one thousand hectares in area xxx.

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The Secretary of Justice had previous occasion to rule

on this point in his opinion No. 140, s. 1974. Said the
Honorable Justice Secretary:
On the second question, (referring to the questions
when may a public land be considered to have been
acquired by purchase before the effectivity of the new
Constitution posed by the Director of Lands in his query
on the effect on pending applications for the issuance
of sales patent in the light of Section 11, Art. XIV of the
New Constitution aforecited), you refer to this Offices
Opinion No. 64 series of 1973 in which I stated:
On the other hand, with respect to sales applications
ready for issuance of sales patent, it is my opinion that
where the applicant had, before the Constitution took
effect, fully complied with all this obligations under the
Public Land Act in order to entitle him to a Sales
patent, there would be no legal or equitable
justification for refusing to issue or release the sales
patent.
With respect to the point as to when the Sales
applicant has complied with all the terms and
conditions which would entitle him to a sales patent,
the herein above Secretary of Justice went on:
That as to when the applicant has complied with all the
terms and conditions which would entitle him to a
patent is a questioned (sic) fact which your office
would be in the best position to determine.However,
relating this to the procedure for the processing of
applications mentioned above, I think that as
the applicant has fulfilled the construction/cultivation
requirements and has fully paid the purchase price, he
should be deemed to have acquired by purchase the
particular tract of land and (sic) the area (sic) in the
provision in question of the new constitution would not
apply.

However, an examination of the technical descriptions

of the tracts of land subject of the deeds of sale will
disclose that said parcels are not identical to, and do
not tally with, the area in controversy.
It is a basic assumption of our policy that lands of
whatever classification belong to the state. Unless
alienated in accordance with law, it retains its rights
over the same as dominus, (Santiago vs. de los Santos,
L-20241, November 22, 1974, 61 SCRA 152).
For, it is well-settled that no public land can be
acquired by private persons without any grant, express
or implied from the government. It is indispensable
then that there be showing of title from the state or
any other mode of acquisition recognized by law. (Lee
Hong Hok, et al. vs. David, et al., L-30389, December
27, 1972, 48 SCRA 379.)
It is well-settled that all lands remain part of the public
domain unless severed therefrom by state grant or
unless alienated in accordance with law.
We, therefore, believe that the aforesaid deeds of sale
do not constitute clear and convincing evidence to
establish that the contested area is of private
ownership. Hence, the property must be held to be
public domain.
There being no evidence whatever that the property in
question was ever acquired by the applicants or their
ancestors either by composition title from the Spanish
Government or by possessory information title or by
any other means for the acquisition of public lands, the
property must be held to be public domain. (Lee Hong
Hok, et al., vs. David , et al., L-30389 December 27,
1972, 48 SCRA 378-379 citing Heirs of Datu Pendatun
vs. Director of Lands; see also Director of Lands vs.
Reyes, L-27594, November 28, 1975, 68 SCRA 177).

From the decision of the Director of Lands, Villaflor filed

a Motion for Reconsideration which was considered as
an Appeal M.N.R. Case 4341, to the Ministry of Natural
Resources.

Be that as it may, appellant, by filing a sales

application over the controverted land, acknowledged
unequivocably [sic] that the same is not his private
property.

On June 6, 1979, the Minister of Natural Resources

rendered a Decision (exh. 9),[15] dismissing the appeal
and affirming the decision of the Director of Lands,
pertinent portions of which reads:

As such sales applicant, appellant manifestly

acknowledged that he does not own the land and that
the same is a public land under the administration of
the Bureau of Lands, to which the application was
submitted, xxx All of its acts prior thereof, including its
real estate tax declarations, characterized its
possessions of the land as that of a sales applicant and
consequently, as one who expects to buy it, but has
not as yet done so, and is not, therefore, its owner.
(Palawan Agricultural and Industrial Co., Inc. vs.
Director of Lands, L-25914, March 21, 1972, 44 SCRA
20, 21).

After a careful study of the records and the arguments

of the parties, we believe that the appeal is not well
taken.
Firstly, the area in dispute is not the private property of
appellant.
The evidence adduced by appellant to establish his
claim of ownership over the subject area consists of
deeds of absolute sale executed in his favor on January
16, and February 15, 1940, by four (4) different
persons, namely, Cirilo Piencenaves, Fermin Balobo,
Claudio Otero and Hermogenes Patete.

Secondly, appellants alleged failure to pay the

consideration stipulated in the deed of relinquishment
neither converts said deed into one without a cause or
consideration nor ipso facto rescinds the
same.Appellant, though, has the right to demand
payment with legal interest for the delay or to demand
rescission.

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xxx xxx xxx

However, appellants cause of action, either for specific
performance or rescission of contract, with damages,
lies within the jurisdiction of civil courts, not with
administrative bodies.
xxx xxx xxx
Lastly, appellee has acquired a vested right to the
subject area and, therefore, is deemed not affected by
the new constitutional provision that no private
corporation may hold alienable land of the public
domain except by lease.
xxx xxx xxx
Implementing the aforesaid Opinion No. 64 of the
Secretary of Justice, the then Secretary of Agriculture
and Natural Resources issued a memorandum, dated
February 18, 1974, which pertinently reads as follows:
In the implementation of the foregoing opinion, sales
application of private individuals covering areas in
excess of 24 hectares and those of corporations,
associations, or partnership which fall under any of the
following categories shall be given due course and
issued patents, to wit:
1. Sales application for fishponds and for agricultural
purposes (SFA, SA and IGPSA) wherein prior to January
17, 1973;
a. the land covered thereby was awarded;
b. cultivation requirements of law were complied with
as shown by investigation reports submitted prior to
January 17, 1973;
c. land was surveyed and survey returns already
submitted to the Director of Lands for verification and
approval; and
d. purchase price was fully paid.
From the records, it is evident that the aforestated
requisites have been complied with by appellee long
before January 17, 1973, the effectivity of the New
Constitution. To restate, the disputed area was
awarded to appellee on August 17, 1950, the purchase
price was fully paid on July 26, 1951, the cultivation
requirements were complied with as per investigation
report dated December 31, 1949, and the land was
surveyed under Pls-97.
On July 6, 1978, petitioner filed a complaint [16] in
the trial court for Declaration of Nullity of Contract
(Deed of Relinquishment of Rights), Recovery of
Possession (of two parcels of land subject of the
contract), and Damages at about the same time that
he appealed the decision of the Minister of Natural
Resources to the Office of the President.

On January 28, 1983, petitioner died. The trial

court ordered his widow, Lourdes D. Villaflor, to be
substituted as petitioner. After trial in due course, the
then Court of First Instance of Agusan del Norte and
Butuan City, Branch III,[17] dismissed the complaint on
the grounds that: (1) petitioner admitted the due
execution and genuineness of the contract and was
estopped from proving its nullity, (2) the verbal lease
agreements were unenforceable under Article 1403 (2)
(e) of the Civil Code, and (3) his causes of action were
barred by extinctive prescription and/or laches. It ruled
that there was prescription and/or laches because the
alleged verbal lease ended in 1966, but the action was
filed only on January 6, 1978. The six-year period
within which to file an action on an oral contract per
Article 1145 (1) of the Civil Code expired in 1972. The
decretal portion[18] of the trial courts decision reads:
WHEREFORE, the foregoing premises duly considered,
judgment is hereby rendered in favor of the defendant
and against the plaintiff. Consequently, this case is
hereby ordered DISMISSED. The defendant is hereby
declared the lawful actual physical possessor-occupant
and having a better right of possession over the two
(2) parcels of land in litigation described in par. 1.2 of
the complaint as Parcel I and Parcel II, containing a
total area of One Hundred Sixty (160) hectares, and
was then the subject of the Sales Application No. V-807
of the plaintiff (Exhibits 1, 1-A, 1-B, pp. 421 to 421-A,
Record), and now of the Sales Application No. 807,
Entry No. V-407 of the defendant Nasipit Lumber
Company (Exhibit Y, pp. 357-358, Record). The
Agreements to Sell Real Rights, Exhibits 2 to 2-C, 3 to
3-B, and the Deed of Relinquishment of Rights, Exhibits
N to N-1, over the two parcels of land in litigation are
hereby declared binding between the plaintiff and the
defendant, their successors and assigns.
Double the costs against the plaintiff.
The heirs of petitioner appealed to Respondent
Court of Appeals[19] which, however, rendered judgment
against petitioner via the assailed Decision dated
September 27, 1990 finding petitioners prayers -- (1)
for the declaration of nullity of the deed of
relinquishment, (2) for the eviction of private
respondent from the property and (3) for the
declaration of petitioners heirs as owners to be without
basis. The decretal portion[20] of the assailed 49-page,
single-spaced Decision curtly reads:
WHEREFORE, the Decision appealed from, is hereby
AFFIRMED, with costs against plaintiff-appellants.
Not satisfied, petitioners heirs filed the instant 57page petition for review dated December 7, 1990. In a
Resolution dated June 23, 1991, the Court denied this
petition for being late. On reconsideration -- upon plea
of counsel that petitioners were poor and that a full
decision on the merits should be rendered -- the Court
reinstated the petition and required comment from
private respondent. Eventually, the petition was
granted due course and the parties thus filed their
respective memoranda.

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The Issues
Petitioner, through his heirs, attributes
following errors to the Court of Appeals:

the

I. Are the findings of the Court of Appeals conclusive

and binding upon the Supreme Court?
II. Are the findings of the Court of Appeals fortified by
the similar findings made by the Director of Lands and
the Minister of Natural Resources (as well as by the
Office of the President)?
III. Was there forum shopping?
IV. Are the findings of facts of the Court of Appeals and
the trial court supported by the evidence and the law?
V. Are the findings of the Court of Appeals supported by
the very terms of the contracts which were under
consideration by the said court?
VI. Did the Court of Appeals, in construing the subject
contracts, consider the contemporaneous and
subsequent act of the parties pursuant to article 1371
of the Civil Code?
VII. Did the Court of Appeals consider the fact and the
unrefuted claim of Villaflor that he never knew of the
award in favor of Nasipit?
VIII. Did the Court of Appeals correctly apply the rules
on evidence in its findings that Villaflor was paid
the P5,000.00 consideration because Villaflor did not
adduce any proof that he was not paid?
IX. Is the Court of Appeals conclusion that the contract
is not simulated or fictitious simply because it is
genuine and duly executed by the parties, supported
by logic or the law?
X. May the prestations in a contract agreeing to
transfer certain rights constitute estoppel when this
very contract is the subject of an action for annulment
on the ground that it is fictitious?
XI. Is the Court of Appeals conclusion that the lease
agreement between Villaflor is verbal and therefore,
unenforceable supported by the evidence and the law?
After a review of the various submissions of the
parties, particularly those of petitioner, this Court
believes and holds that the issues can be condensed
into three as follows:
(1) Did the Court of Appeals err in adopting or relying
on the factual findings of the Bureau of Lands,
especially those affirmed by the Minister (now
Secretary) of Natural Resources and the trial court?
(2) Did the Court of Appeals err in upholding the
validity of the contracts to sell and the deed of

relinquishment? Otherwise stated, did the Court of

Appeals err in finding the deed of relinquishment of
rights and the contracts to sell valid, and not simulated
or fictitious?
(3) Is the private respondent qualified to acquire title
over the disputed property?

The Courts Ruling

The petition is bereft of merit. It basically
questions the sufficiency of the evidence relied upon
by the Court of Appeals, alleging that public
respondents
factual
findings
were
based
on
speculations, surmises and conjectures. Petitioner
insists that a review of those findings is in order
because they were allegedly (1) rooted, not on specific
evidence, but on conclusions and inferences of the
Director of Lands which were, in turn, based on
misapprehension of the applicable law on simulated
contracts; (2) arrived at whimsically -- totally ignoring
the substantial and admitted fact that petitioner was
not notified of the award in favor of private respondent;
and (3) grounded on errors and misapprehensions,
particularly those relating to the identity of the
disputed area.

First Issue: Primary Jurisdiction of the Director of

Lands and Finality of Factual Findings of the
Court of Appeals
Underlying the rulings of the trial and appellate
courts is the doctrine of primary jurisdiction; i.e., courts
cannot and will not resolve a controversy involving a
question which is within the jurisdiction of an
administrative tribunal, especially 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.[21]
In recent years, it has been the jurisprudential
trend to apply this doctrine to cases involving matters
that demand the special competence of administrative
agencies even if the question involved is also judicial in
character. It applies where a claim is originally
cognizable in the courts, and comes into play
whenever enforcement of the claim requires the
resolution of issues which, under a regulatory scheme,
have been placed within the special competence of an
administrative body; in such case, the judicial process
is suspended pending referral of such issues to the
administrative body for its view.[22]
In cases where the doctrine of primary jurisdiction
is clearly applicable, the court cannot arrogate unto
itself the authority to resolve a controversy, the
jurisdiction over which is initially lodged with an
administrative
body
of
special
competence.
[23]
In Machete vs. Court of Appeals, the Court upheld
the primary jurisdiction of the Department of Agrarian
Reform Adjudicatory Board (DARAB) in an agrarian
dispute over the payment of back rentals under a

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leasehold contract.[24] In Concerned Officials of the

Metropolitan Waterworks and Sewerage System vs.
Vasquez,[25] the Court recognized that the MWSS was in
the best position to evaluate and to decide which bid
for a waterworks project was compatible with its
development plan.
The rationale underlying the doctrine of primary
jurisdiction finds application in this case, since the
questions on the identity of the land in dispute and the
factual qualification of private respondent as an
awardee of a sales application require a technical
determination by the Bureau of Lands as the
administrative agency with the expertise to determine
such matters.Because these issues preclude prior
judicial determination, it behooves the courts to stand
aside even when they apparently have statutory power
to proceed, in recognition of the primary jurisdiction of
the administrative agency.[26]
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[27]
Petitioner initiated his action with a protest before
the Bureau of Lands and followed it through in the
Ministry of Natural Resources and thereafter in the
Office of the President.Consistent with the doctrine of
primary jurisdiction, the trial and the appellate courts
had reason to rely on the findings of these specialized
administrative bodies.
The primary jurisdiction of the director of lands
and the minister of natural resources over the issues
regarding the identity of the disputed land and the
qualification of an awardee of a sales patent is
established by Sections 3 and 4 of Commonwealth Act
No. 141, also known as the Public Land Act:
Section 3. The Secretary of Agriculture and Commerce
(now Secretary of Natural Resources) shall be the
executive officer charged with carrying out the
provisions of this Act through the Director of Lands,
who shall act under his immediate control.
Section 4. Subject to said control, the Director of Lands
shall have direct executive control of the survey,
classification, lease, sale or any other form of
concession or disposition and management of the
lands of the public domain, and his decision as to
questions of fact shall be conclusive when approved by
the Secretary of Agriculture and Commerce.
Thus, the Director of Lands, in his decision, said: [28]
x x x It is merely whether or not Villaflor has been paid
the Five Thousand (P5,000.00) Pesos stipulated
consideration of the deed of relinquishment made by
him without touching on the nature of the deed of
relinquishment. The administration and disposition of
public lands is primarily vested in the Director of Lands
and ultimately with the Secretary of Agriculture and
Natural Resources (now Secretary of Natural
Resources), and to this end--

Our Supreme Court has recognized that the Director of

Lands is a quasi-judicial officer who passes on issues of
mixed facts and law (Ortua vs. Bingson Encarnacion,
59 Phil 440). Sections 3 and 4 of the Public Land Law
thus mean that the Secretary of Agriculture and
Natural Resources shall be the final arbiter on
questions of fact in public land conflicts (Heirs of Varela
vs. Aquino, 71 Phil 69; Julian vs. Apostol, 52 Phil 442).
The ruling of this Office in its order dated September
10, 1975, is worth reiterating, thus:
x x x it is our opinion that in the exercise of his power
of executive control, administrative disposition and
allegation of public land, the Director of Lands should
entertain the protest of Villaflor and conduct formal
investigation xxx to determine the following points: (a)
whether or not the Nasipit Lumber Company, Inc. paid
or reimbursed to Villaflor the consideration of the rights
in the amount of P5,000.00 and what evidence the
company has to prove payment, the relinquishment of
rights being part of the administrative process in the
disposition of the land in question xxx.
xxxx Besides, the authority of the Director of Lands to
pass upon and determine questions considered
inherent in or essential to the efficient exercise of his
powers like the incident at issue, i.e. , whether Villaflor
had been paid or not, is conceded by law.
Reliance by the trial and the appellate courts on
the factual findings of the Director of Lands and the
Minister of Natural Resources is not misplaced. By
reason of the special knowledge and expertise of said
administrative agencies over matters falling under
their jurisdiction, they are in a better position to pass
judgment thereon; thus, their findings of fact in that
regard are generally accorded great respect, if not
finality,[29] by the courts.[30] The findings of fact of an
administrative agency must be respected as long as
they are supported by substantial evidence, even if
such evidence might not be overwhelming or even
preponderant. It is not the task of an appellate court to
weigh once more the evidence submitted before the
administrative body and to substitute its own judgment
for that of the administrative agency in respect of
sufficiency of evidence.[31]
However, the rule that factual findings of an
administrative agency are accorded respect and even
finality by courts admits of exceptions. This is true also
in assessing factual findings of lower courts. [32] It is
incumbent on the petitioner to show that the resolution
of the factual issues by the administrative agency
and/or by the trial court falls under any of the
exceptions.Otherwise, this Court will not disturb such
findings.[33]
We mention and quote extensively from the
rulings of the Bureau of Lands and the Minister of
Natural Resources because the points, questions and
issues raised by petitioner before the trial court, the
appellate court and now before this Court are basically
the same as those brought up before the aforesaid
specialized administrative agencies. As held by the
Court of Appeals:[34]

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We find that the contentious points raised by appellant

in this action, are substantially the same matters he
raised in BL Claim No. 873 (N). In both actions, he
claimed private ownership over the land in question,
assailed the validity and effectiveness of the Deed of
Relinquishment of Rights he executed in August 16,
1950, that he had not been paid the P5,000.00
consideration, the value of the improvements he
introduced on the land and other expenses incurred by
him.
In this instance, both the principle of primary
jurisdiction of administrative agencies and the doctrine
of finality of factual findings of the trial courts,
particularly when affirmed by the Court of Appeals as
in this case, militate against petitioners cause. Indeed,
petitioner has not given us sufficient reason to deviate
from them.

Land in Dispute Is Public Land

Petitioner argues that even if the technical
description in the deeds of sale and those in the sales
application were not identical, the area in dispute
remains his private property. He alleges that the deeds
did not contain any technical description, as they were
executed prior to the survey conducted by the Bureau
of Lands; thus, the properties sold were merely
described by reference to natural boundaries. His
private ownership thereof was also allegedly attested
to by private respondents former field manager in the
latters February 22, 1950 letter, which contained an
admission that the land leased by private respondent
was covered by the sales application.
This contention is specious. The lack of technical
description did not prove that the finding of the
Director of Lands lacked substantial evidence. Here,
the issue is not so much whether the subject land is
identical with the property purchased by petitioner. The
issue, rather, is whether the land covered by the sales
application is private or public land. In his sales
application, petitioner expressly admitted that said
property was public land. This is formidable evidence
as it amounts to an admission against interest.
In the exercise of his primary jurisdiction over the
issue, Director of Lands Casanova ruled that the land
was public:[35]
x x x Even (o)n the assumption that the lands
mentioned in the deeds of transfer are the same as the
140-hectare area awarded to Nasipit, their purchase by
Villaflor (or) the latters occupation of the same did not
change the character of the land from that of public
land to a private property. The provision of the law is
specific that public lands can only be acquired in the
manner provided for therein and not otherwise (Sec.
11, C.A. No. 141, as amended). The records show that
Villaflor had applied for the purchase of lands in
question with this Office (Sales Application No. V-807)
on December 2, 1948. xxx There is a condition in the
sales application xxx to the effect that he recognizes
that the land covered by the same is of public domain
and any and all rights he may have with respect

thereto by virtue of continuous occupation and

cultivation are relinquished to the Government
(paragraph 6, Sales Application No. V-807 of Vicente J.
Villaflor, p. 21, carpeta) of which Villaflor is very much
aware. It also appears that Villaflor had paid for the
publication fees appurtenant to the sale of the land. He
participated in the public auction where he was
declared the successful bidder. He had fully paid the
purchase prive (sic) thereor (sic). It would be a (sic)
height of absurdity for Villaflor to be buying that which
is owned by him if his claim of private ownership
thereof is to be believed. xxx.
This finding was affirmed by the Minister of
Natural Resources:[36]
Firstly, the area in dispute is not the private property of
appellant (herein petitioner).
The evidence adduced by (petitioner) to establish his
claim of ownership over the subject area consists of
deeds of absolute sale executed in his favor xxx.
However, an examination of the technical descriptions
of the tracts of land subject of the deeds of sale will
disclose that said parcels are not identical to, and do
not tally with, the area in controversy.
It is a basic assumption of our policy that lands of
whatever classification belong to the state. Unless
alienated in accordance with law, it retains its rights
over the same as dominus. (Santiago vs. de los Santos,
L-20241, November 22, 1974, 61 SCRA 152).
For it is well-settled that no public land can be acquired
by private persons without any grant, express or
implied from the government. It is indispensable then
that there be showing of title from the state or any
other mode of acquisition recognized by law. (Lee Hong
Hok, et al. vs. David, et al., L-30389, December 27,
1972, 48 SCRA 379).
xxx xxx xxx xxx
We, therefore, believe that the aforesaid deeds of sale
do not constitute clear and convincing evidence to
establish that the contested area is of private
ownership. Hence, the property must be held to be
public domain.
There being no evidence whatever that the property in
question was ever acquired by the applicants or their
ancestors either by composition title from the Spanish
Government or by possessory information title or by
any other means for the acquisition of public lands, the
property must be held to be public domain.
Be that as it may, [petitioner], by filing a sales
application over the controverted land, acknowledged
unequivocably [sic] that the same is not his private
property.
As such sales applicant manifestly acknowledged that
he does not own the land and that the same is a public

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land under the administration of the Bureau of Lands,

to which the application was submitted, xxx All of its
acts prior thereof, including its real estate tax
declarations, characterized its possessions of the land
as that of a sales applicant. And consequently, as one
who expects to buy it, but has not as yet done so, and
is not, therefore, its owner.(Palawan Agricultural and
Industrial Co., Inc. vs. Director of Lands, L-25914,
March 21, 1972, 44 SCRA 15).

the said two parcels of land. The mortgage provisions

in paragraphs 6 and 7 of the agreement state that
the P7,000.00 and P5,000.00 were earnest money or a
loan with antichresis by the free occupancy and use
given to Nasipit of the 140 hectares of land not
anymore as a lessee.If the agreement to sell
transferred ownership to Nasipit, then why was it
necessary to require petitioner, in a second agreement,
to mortgage his property in the event of nonfulfillment
of the prestations in the first agreement?

Clearly, this issue falls under the primary

jurisdiction of the Director of Lands because its
resolution
requires
survey,
classification,
xxx
disposition and management of the lands of the public
domain. It follows that his rulings deserve great
respect. As petitioner failed to show that this factual
finding of the Director of Lands was unsupported by
substantial evidence, it assumes finality. Thus, both the
trial and the appellate courts correctly relied on such
finding.[37] We can do no less.

True, the agreement to sell did not absolutely

transfer
ownership
of
the
land
to
private
respondent. This fact, however, does not show that the
agreement was simulated. Petitioners delivery of the
Certificate of Ownership and execution of the deed of
absolute sale were suspensive conditions, which gave
rise to a corresponding obligation on the part of the
private respondent, i.e., the payment of the last
installment of the consideration mentioned in the
December 7, 1948 Agreement. Such conditions did not
affect the perfection of the contract or prove
simulation. Neither did the mortgage.

Second Issue: No Simulation of Contracts Proven

Simulation occurs when an apparent contract is a

declaration of a fictitious will, deliberately made by
agreement of the parties, in order to produce, for the
purpose of deception, the appearance of a juridical act
which does not exist or is different from that which was
really executed.[40] Such an intention is not apparent in
the agreements. The intent to sell, on the other hand,
is as clear as daylight.

Petitioner insists that contrary to Article 1371 [38] of

the Civil Code, Respondent Court erroneously ignored
the contemporaneous and subsequent acts of the
parties; hence, it failed toascertain their true
intentions. However, the rule on the interpretation of
contracts that was alluded to by petitioner is used in
affirming, not negating, their validity. Thus, Article
1373,[39]which is a conjunct of Article 1371, provides
that, if the instrument is susceptible of two or more
interpretations, the interpretation which will make it
valid and effectual should be adopted. In this light, it is
not difficult to understand that the legal basis urged by
petitioner does not support his allegation that the
contracts to sell and the deed of relinquishment are
simulated and fictitious. Properly understood, such
rules on interpretation even negate petitioners thesis.
But let us indulge the petitioner awhile and
determine
whether
the
cited
contemporaneous and subsequent acts
of the parties
support his allegation of simulation. Petitioner asserts
that the relinquishment of rights and the agreements
to sell were simulated because, first, the language and
terms
of
said
contracts
negated
private
respondents acquisition of ownership of the land in
issue; and second, contemporaneous and subsequent
communications between him and private respondent
allegedly showed that the latter admitted that
petitioner
owned
and
occupied
the
two
parcels; i.e., that private respondent was not applying
for said parcels but was interested only in the two
hectares it had leased, and that private respondent
supported petitioners application for a patent.
Petitioner explains that the Agreement to Sell
dated December 7, 1948 did not and could not transfer
ownership because paragraph 8 (c) thereof stipulates
that the balance of twelve thousand pesos
(P12,000.00) shall be paid upon the execution by the
First Party [petitioner] of the Absolute Deed of Sale of
the two parcels of land in question in favor of the
Second Party, and upon delivery to the Second Party
[private respondent] of the Certificate of Ownership of

Petitioner alleges further that the deed of

relinquishment of right did not give full effect to the
two agreements to sell, because the preliminary
clauses of the deed allegedly served only to give
private respondent an interest in the property as a
future owner thereof and to enable respondent to
follow up petitioners sales application.
We disagree. Such an intention is not indicated in
the deed. On the contrary, a real and factual sale is
evident in paragraph 6 thereof, which states: That the
Nasipit Lumber Co., Inc., xxx is very much interested in
acquiring the land covered by the aforecited
application to be used for purposes of mechanized
farming and the penultimate paragraph stating: xxx
VICENTE J. VILLAFLOR, hereby voluntarily renounce and
relinquish whatever rights to, and interests I have in
the land covered by my above-mentioned application
in favor of the Nasipit Lumber Co., Inc.
We also hold that no simulation is shown either in
the letter, dated December 3, 1973, of the former field
manager of private respondent, George Mear. A
pertinent portion of the letter reads:
(a)s regards your property at Acacia, San Mateo, I
recall that we made some sort of agreement for the
occupancy, but I no longer recall the details and I had
forgotten whether or not we actually did occupy your
land. But if, as you say, we did occupy it, then I am
sure that the Company is obligated to pay a rental.
The letter did not contain any express admission
that private respondent was still leasing the land from
petitioner as of that date. According to Mear, he could
no longer recall the details of his agreement with

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petitioner. This cannot be read as evidence of the

simulation of either the deed of relinquishment or the
agreements to sell. It is evidence merely of an honest
lack of recollection.
Petitioner also alleges that he continued to pay
realty taxes on the land even after the execution of
said contracts. This is immaterial because payment of
realty taxes does not necessarily prove ownership,
much less simulation of said contracts.[41]

Nonpayment of the Consideration

Did Not Prove Simulation
Petitioner insists that nonpayment of the
consideration
in
the
contracts
proves
their
simulation. We disagree. Nonpayment, at most, gives
him only the right to sue for collection.Generally, in a
contract of sale, payment of the price is a resolutory
condition and the remedy of the seller is to exact
fulfillment or, in case of a substantial breach, to rescind
the contract under Article 1191 of the Civil Code.
[42]
However, failure to pay is not even a breach, but
merely an event which prevents the vendors obligation
to convey title from acquiring binding force.[43]
Petitioner also argues that Respondent Court
violated evidentiary rules in upholding the ruling of the
Director of Lands that petitioner did not present
evidence to show private respondents failure to pay
him. We disagree. Prior to the amendment of the rules
on evidence on March 14, 1989, Section 1, Rule 131,
states that each party must prove his or her own
affirmative allegations.[44] Thus, the burden of proof in
any cause rested upon the party who, as determined
by the pleadings or the nature of the case, asserts the
affirmative of an issue and remains there until the
termination of the action.[45] Although nonpayment is a
negative fact which need not be proved, the party
seeking payment is still required to prove the existence
of the debt and the fact that it is already due.[46]
Petitioner showed the existence of the obligation
with the presentation of the contracts, but did not
present any evidence that he demanded payment from
private respondent. The demand letters dated January
2 and 5, 1974 (Exhs. J and U), adduced in evidence by
petitioner, were for the payment of back rentals,
damages to improvements and reimbursement of
acquisition costs and realty taxes, not payment arising
from the contract to sell.
Thus, we cannot fault Respondent Court for
adopting the finding of the Director of Lands that
petitioner offered no evidence to support his claim of
nonpayment beyond his own self-serving assertions, as
he did not even demand payment, orally or in writing,
of the five thousand (P5,000.00) pesos which was
supposed to be due him since August 17, 1950, the
date when the order of award was issued to Nasipit,
and when his cause of action to recover payment had
accrued. Nonpayment of the consideration in the
contracts to sell or the deed of relinquishment was
raised for the first time in the protest filed with the
Bureau of Lands on January 31, 1974. But this protest
letter was not the demand letter required by law.

Petitioner alleges that the assignment of credit

and the letter of the former field manager of private
respondent are contemporaneous and subsequent acts
revealing the nonpayment of the consideration. He
maintains that the P12,000.00 credit assigned pertains
to the P5,000.00 and P7,000.00 initial payments in the
December 7, 1948 Agreement, because the balance
of P12,000.00 was not yet due and accruing. This is
consistent, he argues, with the representation that
private respondent was not interested in filing a sales
application over the land in issue and that Nasipit was
instead supporting petitioners application thereto
in Mears letter to the Director of Lands dated February
22, 1950 (Exh. X).[47]
This
argument
is
too
strained
to
be
acceptable. The assignment of credit did not establish
the nondelivery of these initial payments of the total
consideration. First, the assignment of credit happened
on January 19, 1949, or a month after the signing of
the December 7, 1948 Agreement and almost six
months after the July 7, 1948 Agreement to
Sell. Second, it does not overcome the recitation in the
Agreement of December 7, 1948: xxx a) The amount of
SEVEN THOUSAND (P7,000.00) PESOS has already
been paid by the Second Party to the First Party upon
the execution of the Agreement to Sell, on July 7, 1948;
b) The amount of FIVE THOUSAND (P5,000.00) PESOS
shall be paid upon the signing of this present
agreement; xxx.
Aside from these facts, the Director of Lands found
evidence of greater weight showing that payment was
actually made:[48]
x x x (T)here is strong evidence to show that said xxx
(P12,000.00) had been paid by NASIPIT to Edward J.
Nell Company by virtue of the Deed of Assignment of
Credit executed by Villaflor (Exh. 41 NALCO) for the
credit of the latter.
Atty. Gabriel Banaag, resident counsel of NASIPIT xxx
declared that it was he who notarized the Agreement
to Sell (Exh. F); xxxx that subsequently, in January
1949, Villaflor executed a Deed of Assignment of credit
in favor of Edward J. Nell Company (Exh. 41 NALCO)
whereby Villaflor ceded to the latter his receivable for
NASIPIT corresponding to the remaining balance in the
amount of xxx (P12,000.00) xxx of the total
consideration xxxx; He further testified that the said
assignment xxx was communicated to NASIPIT under
cover letter dated January 24, 1949 (Exh. 41-A) and not
long thereafter, by virtue of the said assignment of
credit, NASIPIT paid the balance xxx to Edward J. Nell
Company (p. 58, bid). Atty. Banaags aforesaid
testimony stand unrebutted; hence, must be given full
weight and credit.
xxx xxx xxx.
The Director of Lands also found that there had
been
payment
of
the
consideration
in
the
relinquishment of rights:[49]
On the other hand, there are strong and compelling
reasons to presume that Villaflor had already been paid
the amount of Five Thousand (P5,000.00) Pesos.

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First, x x x What is surprising, however, is not so much

his claims consisting of gigantic amounts as his having
forgotten to adduce evidence to prove his claim of nonpayment of the Five Thousand (P5,000.00) Pesos
during the investigation proceedings when he had all
the time and opportunity to do so. xxxx The fact that
he did not adduce or even attempt to adduce evidence
in support thereof shows either that he had no
evidence to offer of that NASIPIT had already paid him
in fact. What is worse is that Villaflor did not even
bother to command payment, orally or in writing, of
the Five Thousand (P5,000.00) Pesos which was
supposed to be due him since August 17, 1950, the
date when the order of award was issued to Nasipit,
and when his cause of action to recover payment had
accrued. The fact that he only made a command for
payment on January 31, 1974, when he filed his protest
or twenty-four (24) years later is immediately nugatory
of his claim for non-payment.
But Villaflor maintains that he had no knowledge or
notice that the order of award had already been issued
to NASIPIT as he had gone to Indonesia and he had
been absent from the Philippines during all those
twenty-four (24) years. This of course taxes
credulity.xxxx
x x x It is more in keeping with the ordinary course of
things that he should have acquired information as to
what was transpiring in his affairs in Manila x x x.
Second, it should be understood that the condition that
NASIPIT should reimburse Villaflor the amount of Five
Thousand (P5,000.00) Pesos upon its receipt of the
order of award was fulfilled as said award was issued to
NASIPIT on August 17, 1950. The said deed of
relinquishment was prepared and notarized in Manila
with Villaflor and NASIPIT signing the instrument also in
Manila. Now, considering that Villaflor is presumed to
be more assiduous in following up with the Bureau of
Lands the expeditious issuance of the order of award
as the (consideration) would depend on the issuance of
said order to award NASIPIT, would it not be reasonable
to believe that Villaflor was at hand when the award
was issued to NASIPIT on August 17, 1950, or barely a
day which he executed the deed of relinquishment on
August 16, 1950, in Manila? xxxx.
Third, on the other hand, NASIPIT has in his possession
a sort of order upon itself -- (the deed of
relinquishment wherein he(sic) obligated itself to
reimburse or pay Villaflor the xxx consideration of the
relinquishment upon its receipt of the order of award)
for the payment of the aforesaid amount the moment
the order of award is issued to it. It is reasonable to
presume that NASIPIT has paid the (consideration) to
Villaflor.
xxx xxx xxx
x x x (I)t was virtually impossible for NASIPIT, after the
lapse of the intervening 24 years, to be able to cope up
with all the records necessary to show that the
consideration for the deed of relinquishment had been
fully paid. To expect NASIPIT to keep intact all records
pertinent to the transaction for the whole quarter of a

century would be to require what even the law does

not. Indeed, even the applicable law itself (Sec. 337,
National Internal Revenue Code) requires that all
records of corporations be preserved for only a
maximum of five years.
NASIPIT may well have added that at any rate while
there are transactions where the proper evidence is
impossible or extremely difficult to produce after the
lapse of time xxx the law creates presumptions of
regularity in favor of such transactions (20 Am. Jur.
232) so that when the basic fact is established in an
action the existence of the presumed fact must be
assumed by force of law. (Rule 13, Uniform Rules of
Evidence; 9 Wigmore, Sec. 2491).
The Court also notes that Mears letter of February
22, 1950 was sent six months prior to the execution of
the deed of relinquishment of right. At the time of its
writing, private respondent had not perfected its
ownership of the land to be able to qualify as a sales
applicant. Besides, although he was a party to the July
7, 1948 Agreement to Sell, Mear was not a signatory to
the Deed of Relinquishment or to the December 7,
1948 Agreement to Sell. Thus, he cannot be expected
to know the existence of and the amendments to the
later contracts. These circumstances explain the
mistaken representations, not misrepresentations, in
said letter.

Lack of Notice of the Award

Petitioner
insists
that
private
respondent
suppressed evidence, pointing to his not having been
notified of the Order of Award dated August 17, 1950.
[50]
At the bottom of page 2 of the order, petitioner was
not listed as one of the parties who were to be
furnished a copy by Director of Lands Jose P.
Dans. Petitioner also posits that Public Land Inspector
Sulpicio A. Taeza irregularly received the copies for
both private respondent and the city treasurer of
Butuan City. The lack of notice for petitioner can be
easily explained. Plainly, petitioner was not entitled to
said notice of award from the Director of Lands,
because by then, he had already relinquished his rights
to the disputed land in favor of private respondent. In
the heading of the order, he was referred to as sales
applicant-assignor. In paragraph number 4, the order
stated that, on August 16, 1950, he relinquished his
rights to the land subject of the award to private
respondent. From such date, the sales application was
considered to be a matter between the Bureau of
Lands and private respondent only. Considering these
facts, the failure to give petitioner a copy of the notice
of the award cannot be considered as suppression of
evidence.[51] Furthermore, this order was in fact
available to petitioner and had been referred to by him
since January 31, 1974 when he filed his protest with
the Bureau of Lands.[52]

Third Issue: Private Respondent Qualified

for an Award of Public Land

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Petitioner asserts that private respondent was

legally disqualified from acquiring the parcels of land in
question because it was not authorized by its charter
to acquire disposable public agricultural lands under
Sections 121, 122 and 123 of the Public Land Act, prior
to its amendment by P.D. No. 763. We disagree. The
requirements for a sales application under the Public
Land Act are: (1) the possession of the qualifications
required by said Act (under Section 29) and (2) the lack
of the disqualifications mentioned therein (under
Sections 121, 122, and 123).However, the transfer of
ownership via the two agreements dated July 7 and
December 7, 1948 and the relinquishment of rights,
being private contracts, were binding only between
petitioner and private respondent. The Public Land Act
finds no relevance because the disputed land was
covered by said Act only after the issuance of the order
of award in favor of private respondent. Thus, the
possession of any disqualification by private
respondent under said Act is immaterial to the private
contracts between the parties thereto. (We are not,
however, suggesting a departure from the rule that
laws are deemed written in contracts.) Consideration of
said provisions of the Act will further show their
inapplicability to these contracts. Section 121 of the
Act pertains to acquisitions of public land by a
corporation from a grantee, but petitioner never
became a grantee of the disputed land. On the other
hand, private respondent itself was the direct
grantee. Sections 122 and 123 disqualify corporations,
which are not authorized by their charter, from
acquiring public land; the records do not show that
private respondent was not so authorized under its
charter.
Also, the determination by the Director of Lands
and the Minister of Natural Resources of the
qualification of private respondent to become an
awardee or grantee under the Act is persuasive on
Respondent Court. In Espinosa vs. Makalintal,[53] the
Court ruled that, by law, the powers of the Secretary of
Agriculture and Natural Resources regarding the
disposition of public lands -- including the approval,
rejection, and reinstatement of applications are of
executive and administrative nature. (Such powers,
however, do not include the judicial power to decide
controversies arising from disagreements in civil or
contractual
relations
between
the
litigants.) Consequently, the determination of whether
private respondent is qualified to become an awardee
of public land under C.A. 141 by sales application is
included therein.
All told, the only disqualification that can be
imputed to private respondent is the prohibition in the
1973 Constitution against the holding of alienable
lands of the public domain by corporations.
[54]
However, this Court earlier settled the matter, ruling
that said constitutional prohibition had no retroactive
effect and could not prevail over a vested right to the
land. In Ayog vs. Cusi, Jr.,[55] this Court declared:
We hold that the said constitutional prohibition has no
retroactive application to the sales application of Bian
Development Co., Inc. because it had already acquired
a vested right to the land applied for at the time the
1973 Constitution took effect.

That vested right has to be respected. It could not be

abrogated by the new Constitution. Section 2, Article
XIII of the 1935 Constitution allows private corporations
to purchase public agricultural lands not exceeding one
thousand and twenty-four hectares. Petitioners
prohibition action is barred by the doctrine of vested
rights in constitutional law.
A right is vested when the right to enjoyment has
become the property of some particular person or
persons as a present interest. (16 C.J.S. 1173). It is the
privilege to enjoy property legally vested, to enforce
contracts, and enjoy the rights of property conferred by
existing law (12 C.J. 955, Note 46, No. 6) or some right
or interest in property which has become fixed and
established and is no longer open to doubt or
controversy (Downs vs. Blount, 170 Fed. 15, 20, cited
in Balboa vs. Farrales, 51 Phil. 498, 502).
The due process clause prohibits the annihilation of
vested rights. A state may not impair vested rights by
legislative enactment, by the enactment or by the
subsequent repeal of a municipal ordinance, or by a
change in the constitution of the State, except in a
legitimate exercise of the police power (16 C.J.S. 117778).
It has been observed that, generally, the term vested
right expresses the concept of present fixed interest,
which in right reason and natural justice should be
protected against arbitrary State action, or an innately
just an imperative right which an enlightened free
society, sensitive to inherent and irrefragable individual
rights, cannot deny (16 C.J.S. 1174, Note 71, No. 5,
citing Pennsylvania Greyhound Lines, Inc. vs.
Rosenthal, 192 Atl. 2nd 587).
Secretary of Justice Abad Santos in his 1973 opinion
ruled that where the applicant, before the Constitution
took effect, had fully complied with all his obligations
under the Public Land Act in order to entitle him to a
sales patent, there would seem to be no legal or
equitable justification for refusing to issue or release
the sales patent (p. 254, Rollo).
In Opinion No. 140, series of 1974, he held that as soon
as the applicant had fulfilled the construction or
cultivation requirements and has fully paid the
purchase price, he should be deemed to have acquired
by purchase the particular tract of land and to him the
area limitation in the new Constitution would not apply.
In Opinion No. 185, series of 1976, Secretary Abad
Santos held that where the cultivation requirements
were fulfilled before the new Constitution took effect
but the full payment of the price was completed after
January 17, 1973, the applicant was, nevertheless,
entitled to a sales patent (p. 256, Rollo).
Such a contemporaneous construction of the
constitutional prohibition by a high executive official
carries great weight and should be accorded much
respect. It is a correct interpretation of section 11 of
Article XIV.

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In the instant case, it is incontestable that prior to the

effectivity of the 1973 Constitution the right of the
corporation to purchase the land in question had
become fixed and established and was no longer open
to doubt or controversy.
Its compliance with the requirements of the Public Land
Law for the issuance of a patent had the effect of
segregating the said land from the public domain. The
corporations right to obtain a patent for that land is
protected by law. It cannot be deprived of that right
without due process (Director of Lands vs. CA, 123 Phil.
919).
The Minister of Natural Resources ruled, and we
agree, that private respondent was similarly qualified
to become an awardee of the disputed land because its
rights to it vested prior to the effectivity of the 1973
Constitution:[56]
Lastly, appellee has acquired a vested right to the
subject area and, therefore, is deemed not affected by
the new constitutional provision that no private
corporation may hold alienable land of the public
domain except by lease.
It may be recalled that the Secretary of Justice in his
Opinion No. 64, series of 1973, had declared, to wit:
On the other hand, with respect to sales application
ready for issuance of sales patent, it is my opinion that
where the applicant had, before, the constitution took
effect, fully complied with all his obligations under the
Public Land act in order to entitle him to sales patent,
there would seem to be not legal or equitable
justification for refusing to issue or release the sales
patent.
Implementing the aforesaid Opinion No. 64 xxx, the
then Secretary of Agriculture and Natural Resources
issued a memorandum, dated February 18, 1974,
which pertinently reads as follows:

d. purchase price was fully paid.

From the records, it is evident that the aforestated
requisites have been complied with by appellee long
before January 17, 1973, the effectivity of the New
Constitution. To restate, the disputed area was
awarded to appellee on August 17, 1950, the purchase
price was fully paid on July 26, 1951, the cultivation
requirements were complied with as per investigation
report dated December 31, 1949, and the land was
surveyed under Pls-97.
The same finding was earlier made by the Director
of Lands:[57]
It is further contended by Villaflor that Nasipit has no
juridical personality to apply for the purchase of public
lands for agricultural purposes. The records clearly
show, however, that since the execution of the deed of
relinquishment of August 16, 1950, in favor of Nasipit,
Villaflor has always considered and recognized Nasipit
as having the juridical personality to acquire public
lands for agricultural purposes. In the deed of
relinquishment xxx, it is stated:
6. That the Nasipit Lumber Co., Inc., a corporation duly
organized in accordance with the laws of the
Philippines, x x x.
Even this Office had not failed to recognize the juridical
personality of Nasipit to apply for the purchase of
public lands xxx when it awarded to it the land so
relinquished by Villaflor (Order of Award dated August
17, 1950) and accepted its application therefor. At any
rate, the question whether an applicant is qualified to
apply for the acquisition of public lands is a matter
between the applicant and this Office to decide and
which a third party like Villaflor has no personality to
question beyond merely calling the attention of this
Office thereto.

a. the land covered thereby was awarded;

Needless to say, we also agree that the November

8, 1946 Lease Agreement between petitioner and
private respondent had been terminated by the
agreements to sell and the relinquishment of rights. By
the time the verbal leases were allegedly made in 1951
and 1955,[58] the disputed land had already been
acquired and awarded to private respondent. In any
event, petitioners cause of action on these alleged
lease agreements prescribed long before he filed Civil
Case No. 2072-III, as correctly found by the trial and
appellate courts.[59] Thus, it is no longer important, in
this case, to pass upon the issue of whether or not
amendments to a lease contract can be proven by
parol evidence. The same holds true as regards the
issue of forum-shopping.

b. cultivation requirements of law were complied with

as shown by investigation reports submitted prior to
January 17, 1973;

All in all, petitioner has not provided us sufficient

reason to disturb the cogent findings of the Director of
Lands, the Minister of Natural Resources, the trial court
and the Court of Appeals.

In the implementation of the foregoing opinion, sales

application of private individuals covering areas in
excess of 24 hectares and those of corporations,
associations, or partnership which fall under any of the
following categories shall be given due course and
issued patents, to wit:
Sales application for fishponds and for agricultural
purposes (SFA, SA and IGPSA) wherein prior to January
17, 1973,

c. land was surveyed and survey returns already

submitted to the Director of Lands for verification and
approval; and

WHEREFORE, the petition is hereby DISMISSED.

SO ORDERED.

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G.R. No. 109093 November 20, 1995

LOPE MACHETE, NICASIO JUMAWID, SANTIAGO
JUMAWID, JOHN JUMAWID, PEDRO GAMAYA,
RENATO DELGADO, FERNANDO OMBAHIN,
MATIAS ROLEDA, PASIANO BARO, IGNACIO BARO,
MAMERTO PLARAS and JUSTINIANO
VILLALON, petitioners,
vs.
COURT OF APPEALS and CELESTINO
VILLALON, respondents.

BELLOSILLO, J.:
Are Regional Trial Courts' vested with jurisdiction over
cases for collection of back rentals from leasehold
tenants?
On 21 July 1989 private respondent Celestino Villalon
filed a complaint for collection of back rentals and
damages before the Regional Trial Court of Tagbilaran
City against petitioners Lope Machete, Nicasio
Jumawid, Santiago Jumawid, John Jumawid, Pedro
Gamaya, Renato Delgado, Fernando Ombahin, Matias
Roleda, Pasiano Baro, Ignacio Baro, Mamerto Plaras
and Justiniano Villalon. The complaint alleged that the
parties entered into a leasehold agreement with
respect to private respondent's landholdings at
Poblacion Norte, Carmen, Bohol, under which
petitioners were to pay private respondent a certain
amount or percentage of their harvests. However,
despite repeated demands and with no valid reason,
petitioners failed to pay their respective rentals. Private
respondent thus prayed that petitioners be ordered to
pay him back rentals and damages.
Petitioners moved to dismiss the complaint on the
ground of lack of jurisdiction of the trial court over the
subject matter. They contended that the case arose out
of or was connected with agrarian relations, hence, the
subject matter of the complaint fell squarely within the
jurisdiction of the Department of Agrarian Reform
(DAR) in the exercise of its quasi-judicial powers under
Sec. 1, pars. (a) and (b), Rule II of the Revised Rules of
the Department of Agrarian Reform Adjudication Board
(DARAB).
On 22 August 1989 the trial court granted the motion
to dismiss, 1 and on 28 September 1989 denied the
motion for reconsideration. 2
Private respondent sought annulment of both orders
before respondent Court of Appeals which on 21 May
1992 rendered judgment reversing the trial court and
directing it to assume jurisdiction over the case 3 on
the basis of its finding that
. . . The CARL (RA 6657) and other
pertinent laws on agrarian reform
cannot be seen to encompass a case of
simple collection of back rentals by
virtue of an agreement, as the one at
bar, where there is no agrarian dispute

to speak of (since the allegation of

failure to pay the agreed rentals was
never controverted in the motion to
dismiss) nor the issue raised on
application, implementation,
enforcement or interpretation of these
laws. 4
On 18 January 1993 the appellate court
rejected the motion for
reconsideration. 5
Petitioners maintain that the alleged cause of action of
private respondent arose from an agrarian relation and
that respondent appellate court failed to consider that
the agreement involved is an agricultural leasehold
contract, hence, the dispute is agrarian in nature. The
laws governing its execution and the rights and
obligations of the parties thereto are necessarily R.A.
3844, 6 R.A. 6657 7 and other pertinent agrarian laws.
Considering that the application, implementation,
enforcement or interpretation of said laws are matters
which have been vested in the DAR, this case is
outside the jurisdiction of the trial court.
The petition is impressed with merit. Section 17 of E.O.
229 8 vested the DAR with quasi-judicial powers to
determine and adjudicate agrarian reform matters as
well as exclusive original jurisdiction over all matters
involving implementation of agrarian reform except
those falling under the exclusive original jurisdiction of
the Department of Agriculture and the Department of
Environment and Natural Resources in accordance with
law.
Executive Order 129-A, while in the process of
reorganizing and strengthening the DAR, created the
DARAB to assume the powers and functions with
respect to the adjudication of agrarian reform
cases. 9 Section 1, pars. (a) and (b), Rule II of the
Revised Rules of the DARAB explicitly provides
Sec. 1. Primary, Original and Appellate
Jurisdiction. The Agrarian Reform
Adjudication Board shall have primary
jurisdiction, both original and appellate,
to determine and adjudicate all
agrarian disputes, cases, controversies,
and matters or incidents involving the
implementation of the Comprehensive
Agrarian Reform Program under
Republic Act No. 6657, Executive
Orders Nos. 229, 228 and 129-A,
Republic Act No. 3844 as amended by
Republic Act No. 6389, Presidential
Decree No. 27 and other agrarian laws
and their implementing rules and
regulations. Specifically, such
jurisdiction shall extend over but not be
limited to the following: (a) Cases
involving the rights and obligations of
persons engaged in the cultivation and
use of agricultural land covered by the
Comprehensive Agrarian Reform
Program (CARP) and other agrarian
laws, (b) Cases involving the valuation

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of land, and determination and

payment of just compensation, fixing
and collection of lease rentals,
disturbance compensation,
amortization payments, and similar
disputes concerning the functions of
the Land Bank . . .
In Quismundo v. Court of Appeals, 10 this Court
interpreted the effect of Sec. 17 of E.O. 229 on P.D.
946, which amended R.A. 3844, the agrarian law then
in force
The above quoted provision (Sec. 17)
should be deemed to have
repealed 11 Sec. 12 (a) and (b) of
Presidential Decree No. 946 which
invested the then courts of agrarian
relations with original exclusive
jurisdiction over cases and questions
involving rights granted and obligations
imposed by presidential issuances
promulgated in relation to the agrarian
reform program.
Formerly, under Presidential Decree No.
946, amending Chapter IX of Republic
Act No. 3844, the courts of agrarian
relations had original and exclusive
jurisdiction over "cases involving the
rights and obligations of persons in the
cultivation and use of agricultural land
except those cognizable by the
National Labor Relations Commission"
and "questions involving rights granted
and obligations imposed by laws,
Presidential Decrees, Orders,
Instructions, Rules and Regulations
issued and promulgated in relation to
the agrarian reform program," except
those matters involving the
administrative implementation of the
transfer of land to the tenant-farmer
under Presidential Decree No. 27 and
amendments thereto which shall be
exclusively cognizable by the Secretary
of Agrarian Reform. 12
In 1980, upon the passage of Batas
Pambansa Blg. 129, otherwise known
as the Judiciary Reorganization Act, the
courts of agrarian relations were
integrated into the regional trial courts
and the jurisdiction of the former was
vested in the latter courts. 13
However, with the enactment of
Executive Order No. 229, which took
effect on August 29, 1987, fifteen (15)
days after its release for publication in
the Official Gazette, 14 the regional trial
courts were divested of their general
jurisdiction to try agrarian reform
matters. The said jurisdiction is now
vested in the Department of Agrarian
Reform.

On 15 June 1988 R.A. 6657 was passed containing

provisions which evince and support the intention of
the legislature to vest in the DAR exclusive jurisdiction
over all agrarian reform matters. 15 Section 50 thereof
substantially reiterates Sec. 17 of E.O. 229 thus
Sec. 50. Quasi-Judicial Powers of the
DAR. The DAR is hereby vested with
primary jurisdiction to determine and
adjudicate agrarian reform matters and
shall have exclusive original jurisdiction
over all matters involving the
implementation of agrarian reform,
except those falling under the
exclusive jurisdiction of the
Department of Agriculture (DA) and the
Department of Environment and
Natural Resources
(DENR) . . .
Section 3, par. (d), thereof defines the term
"agrarian dispute" as referring to any
controversy relating to tenurial arrangements,
whether leasehold, tenancy, stewardship or
otherwise, over lands devoted to agriculture,
including disputes concerning farm workers'
associations or representation of persons in
negotiating, fixing, maintaining, changing or
seeking to arrange terms or conditions of such
tenurial arrangements.
However it may be mentioned in passing that the
Regional Trial Courts have not been completely
divested of jurisdiction over agrarian reform matters.
Section 56 of R.A. 6657 confers "special jurisdiction" on
"Special Agrarian Courts," which are Regional Trial
Courts designated by this Court at least one (1)
branch within each province to act as such. These
Regional Trial Courts designated as Special Agrarian
Courts have, according to Sec. 57 of the same law,
original and exclusive jurisdiction over: (a) all petitions
for the determination of just compensation to
landowners, and (b) the prosecution of all criminal
offenses under the Act. 16
Consequently, there exists an agrarian dispute in the
case at bench which is exclusively cognizable by the
DARAB. The failure of petitioners to pay back rentals
pursuant to the leasehold contract with private
respondent is an issue which is clearly beyond the legal
competence of the trial court to resolve. The doctrine
of primary jurisdiction does not warrant a court to
arrogate unto itself the authority to resolve a
controversy the jurisdiction over which is initially
lodged with an administrative body of special
competence. 17
Thus, respondent appellate court erred in directing the
trial court to assume jurisdiction over this case. At any
rate, the present legal battle is "not altogether lost" on
the part of private respondent because as this Court
was quite emphatic in Quismundo v. Court of
Appeals, 18 the resolution by the DAR is to the best
advantage of the parties since it is in a better position
to resolve agrarian disputes, being the administrative
agency presumably possessing the necessary expertise

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on the matter. Further, the proceedings therein are

summary in nature and the department is not bound
by the technical rules of procedure and evidence, to
the end that agrarian reform disputes and other issues
will be adjudicated in a just, expeditious and
inexpensive proceeding. 19

On 2 January 1984, Honorable Cesar Lanuza, then

Administrator of the Fiber Development Authority (FIDA
for short), an agency attached to the Department of
Agriculture, appointed Agda as CHIEF FIBER
DEVELOPMENT OFFICER (Range 73) of the FIDA
effective upon assumption of office. 3

WHEREFORE, the decision of respondent Court of

Appeals as well as its resolution denying
reconsideration is REVERSED and SET ASIDE. The
orders of the Regional Trial Court of Tagbilaran City
dated 22 August and 28 September 1989 are
REINSTATED. Consequently, let the records of this case
be immediately transmitted to the appropriate
Department of Agrarian Reform Adjudication Board
(DARAB) for proper adjudication in accordance with the
ruling in Vda. de Tangub v. Court of Appeals 20 and
reiterated in Quismundo v. Court of Appeals, 21 as well
as pertinent agrarian laws.

This appointment does not indicate any specific station

or place of assignment.

SO ORDERED.
G.R. No. 87437

May 29, 1991

JOAQUIN M. TEOTICO, petitioner,

vs.
DEMOCRITO O. AGDA, SR., and HON. JUDGE
IGNACIO M. CAPULONG, Regional Trial Court,
Branch No. 134, Makati, Metro
Manila, respondents.
Ramon M. Miranda for private respondent.

DAVIDE, JR., J.:

Petitioner, Administrator of the Fiber Industry
Development Authority, assisted by the Office of the
Solicitor General, filed this original petition
for certiorari and prohibition, with a prayer for a writ of
preliminary injunction and for temporary restraining
order. He urges Us to annul the Orders of 16 and 29
December 1988 and 14 February 1989, and the writ of
injunction dated 11 May 1988 issued by respondent
Judge of Branch 134 (Makati, Metro Manila) of the
Regional Trial Court, National Capital Judicial Region, in
Civil Case No. 88-577; 1 to prohibit respondent Judge
from hearing said case; and to order the dismissal
thereof for lack of cause of action as private
respondent (petitioner therein, and who shall hereafter
be referred to as Agda) has not exhausted all
administrative remedies available to him.
In Our resolution of 12 April 1989 2 We required
respondents to comment on the petition and issued a
Temporary Restraining Order effective as of that date
and continuing until otherwise ordered by the Court.
The factual antecedents as culled from the Petition in
this case and the Amended Petition of Agda in Civil
Case No. 88-577 are as follows:

Under Special Order No. 29, series of 1984, dated 2

January 1984, which was to take effect immediately
and to "remain in force until revoked," Administrator
Lanuza designated Agda as "Acting Regional
Administrator for FIDA Regions I and II." 4
In Special Order No. 219 dated 13 November 1987,
series of 1987, Administrator Lanuza "temporarily reassigned" Agda, "in the interest of the service," at the
main office of the Administrator to perform special
functions which may be assigned to him, and one Mr.
Epitacio Lanuza, Jr., Assistant Fiber Regional
Administrator, was designated Officer in Charge of FIDA
Region I. 5
On 9 December 1987 Agda prepared for filing with the
Civil Service Commission, the Secretary of the
Department of Agriculture, and the Commission on
Audit an Urgent Petition To Stop Implementation and
Nullify Special Order No. 219, s. '87, alleging therein
that the Special Order is (a) devoid of legal basis as it
does not preserve and maintain a status quo before the
controversy, (b) against the interest of public service
considering that Epitacio Lanuza has been cited for two
cases both involving dishonesty, abuse of privileges
and character unbecoming a government official, (c)
improper, inappropriate and devoid of moral
justification, and (d) a violation of Civil Service rules
and regulation considering that it violates the rule on
nepotism since Epitacio Lanuza and Administrator
Lanuza are cousins. 6 The copy of the Civil Service
Commission was personally indorsed to it by Agda on
14 December 1987 for its "proper resolution, perusal
and appropriate action." The Merit Systems Protection
Board indorsed it on 21 January 1988 to the Secretary
of the Department of Agriculture for comment and/or
appropriate action. 7
Earlier however, or on 11 December 1987, by Special
Order No. 239, series of 1987, Administrator Lanuza
designated Mr. Wilfredo Seguritan, Supervising Fiber
Development Officer, as Officer in Charge of FIDA
Region I vice Mr. Epitacio Lanuza, Jr., who was ordered
relieved as such pending the final determination of the
case filed against him by the Board of Personnel
Inquiry of the Department of Agriculture. 8
On 7 January 1988, herein petitioner (hereafter referred
to as Teotico), as Acting Administrator of FIDA issued a
Memorandum to Agda directing him to immediately
submit his development programs for Region I for the
years 1988 to 1993 and his proposals concerning the
potentials for sericulture and the maguey industry in
the Region. 9

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In his 1st indorsement of 12 January 1988, Agda

returned the aforesaid Memorandum to Teotico with
the comment that it is in the best interest of the
service that submission of the required proposals be
deferred since Special Order No. 219 had re-assigned
him to FIDA Central Office where "he now reports up to
the present," while Wilfredo Seguritan, per Special
Order No. 239, is the OIC of FIDA for the Region. He
suggested, however, that if compliance is imperative,
Special Order No. 219 should be reconsidered and set
aside. 10
On 2 March 1988 Teotico issued a Memorandum to
Agda informing him that although Special Order No.
219 instructed him to report to the Office of the
Administrator, he has neither been seen nor officially
heard from during the past several weeks and directing
him to submit not later than 4 March 1988 an official
clarification on his whereabouts and accomplishments
for the past three weeks. 11
In his Reply of 9 March 1988 Agda reminded Teotico
that his urgent petition to stop the Implementation of
Special Order No. 219 is still unresolved; consequently,
its implementation should be held in abeyance; and, as
regards his whereabouts, he referred Teotico to the
logbook kept by the FIDA guard and certificates of
appearance "attached from the respective offices
during the past three (3) weeks." 12
On 9 March 1988 FIDA Region I OIC, Mr. Seguritan,
requested Teotico to require Agda to turn over to him
(Seguritan) the keys of the vault in FIDA Region I "for
the safekeeping of our blank cheeks, official receipts,
approved checks but not yet issued to payee creditors,
salaries and other vital official documents of the
Region"; 13 in a routing slip dated 11 March 1988,
Teotico referred the request to Agda with the note: "For
immediate compliance pls. so as not to hamper the
conduct of our operations and service in Region I." 14
On 16 March 1988 Agda indorsed the above routing
slip request to the Secretary of the Department of
Agriculture wherein he admits that he has the key of
the safety vault, but impliedly asserts that he will not
yield it to anybody alleging that his petition to stop the
implementation of Special Order No. 219 and to nullify
it is still unresolved and, besides, the intended reassignment is merely temporary; hence, it would be in
keeping with substantial justice if a status quo of things
be maintained. He also asks that the urgent petition be
resolved and that meanwhile the directive to turn over
the keys be held in abeyance. 15
On 23 March 1988 Teotico formally charged Agda for
insubordination and conduct prejudical to the best
interest of the service for, among others, his failure to
comply with the memorandum of January 7, 1988 and
with the routing slip request of 11 March 1988. 16
On 4 April 1988 Teotico placed Agda under preventive
suspension pursuant to his Special Order No. 74, to wit:
Pursuant to Section (sic) 41 and 42 of P.D. 807,
Mr. Democrito Agda, Sr. is placed under

preventive suspension for the following

reasons:
a) grave misconduct and gross
insubordinationfor refusal to turn
over the keys to the safe in Region I.
With the considerable amount of cash
advances being handled in the region,
Mr. Agda's refusal to turn over said
keys has become prejudicial to the best
interests of the service;
b) neglect in the performance of duty
for his refusal to report to the office of
the Administrator and his refusal to
accept assignment claiming that it is a
form of harassment since he still has a
pending unresolved petition; and
c) pending an investigation in some
instances involving falsification of
public documents and instances of
possible malversation of funds for
services and maintenance and
operating expenses in Region I as per
results of the recent FIDA Management
Audit.
In this regard, the cashier is instructed to
withhold the salary of Mr. Agda.
This order takes effect upon receipt of this
memorandum and shall remain in force unless
earlier revoked or until the cases involving Mr.
Agda are resolved. 17
On 8 April 1988 Agda asked Teotico for an extension of
twenty days from 11 April 1988 within which to submit
his answer to the formal charge; 18 however, in his
memorandum of 11 April 1988, Teotico granted him an
extension of only five days from receipt thereof. 19 Also
on 11 April, Teotico issued Special Order No. 26
reconstituting the Committee on Adjudication of Cases
FIDA-AC headed by Senior State Prosecutor Hipolita
Ordinario of the Department of Justice. 20
On 13 April 1988 counsel for Agda, Atty. Ramon
Miranda, submitted a letter requesting for an extension
of fifteen days to file the answer. 21 In the letter of
Senior State Prosecutor Ordinario of 14 April 1988,
Agda, through his counsel, was given until 21 April
1988 within which to file the answer. 22
It likewise appears that on 13 April 1988 Agda sent a
letter to the Commission on Elections 23 inquiring if
Special Order No. 219, series of 1987, of Administrator
Lanuza was referred and submitted to it for approval
three days before its implementation. In a letter dated
14 April 1988, Atty. Horacio SJ Apostol, Manager of the
Law Department of the Commission, informed private
respondent that "as of this date, records of the
Department do not show that aforesaid Special Order
was submitted or referred to this Commission for
approval." 24

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On 18 April 1988 Agda filed with the court below in

Civil Case No. 88-577 his Amended
Petition 25 for Certiorari, Prohibition and Injunction with
preliminary injunction and restraining order against
Teotico and the three (3) members of the FIDA-AC
alleging, in substance, that Special Order No. 219 of 13
November 1987 issued by then Fida Administrator
Lanuza is null and void for having been issued in
violation of Section 48 of P.D. No. 807 (Civil Service
Decree) which prohibits the detail or re-assignment of
civil service personnel within three months before an
election and Section 261(h) of Batas Pambansa Blg 881
(The Omnibus Election Code) which prohibits transfer
or detail of officers and employees in the civil service
within the election period except upon prior approval of
the Commission on Elections, and that all succeeding
orders or memoranda issued in connection with or by
reason of such Special Order or in implementation
thereof are likewise null and void. The election referred
to was the January 18, 1988 local election. He further
alleges therein that he "is filing" with the COMELEC
criminal charges for violation of Sections 3, 261(h) and
264 of B. P. No. 881 against former Administrator
Lanuza and Teotico. He prays inter alia, that the court
declare null and void and set aside Special Order No.
219, Teotico's Memoranda of 7 January, 2 March, and
11 March, 1988, the Formal Charges of 23 March, the
preventive suspension of 4 April, Special Order No. 86,
the Memorandum of 11 April 1988, and Ordinario's
letter of 14 April 1988, and the formal investigation to
be conducted on the charge against him.
On 18 April 1988 respondent Judge issued a restraining
order directing respondents therein to refrain from
enforcing Annexes "E", "I", "M", "O", "R", "S", and "Z" of
the amended petition until further orders of the court
and setting the hearing of the application for a writ of
preliminary injunction on 26 April 1988. 26
On 2 May 1988 Teotico and his co-respondents in the
court below filed, through the office of the Solicitor
General, a motion to dismiss the case and opposition to
the issuance of a writ of preliminary
injunction 27 alleging that the petition is premature for
failure to exhaust administrative remedies and patently
lacks merit and is merely intended to derail the
administrative investigation against Agda. Movants set
the hearing thereof on 5 May 1988.
On 4 May 1988 Agda filed an opposition to the motion
to dismiss and memorandum in support of his
application for a writ of preliminary injunction. 28

in Regions 1 and 2 with office at San Fernando,

La Union; that on November 13, 1987, three
months before the local elections, which was
held on January 18, 1987, the petitioner was
reassigned by former FIDA Administrator
Lanuza to the FIDA main office and designated
Epitacio E. Lanuza, Jr. as officer-in-charge (OIC)
of FIDA Region 1; that on December 15, 1987,
petitioner requested the Civil Service
Commission (CSC) to stay the implementation
of Special Order No. 219; that on January 7,
1988, respondent Teotico implemented said
Special Order 219, despite the fact that
petitioner requested the Civil Service
Commission to stay implementation of the said
Special Order 219; that on January 12, 1988,
petitioner requested the respondent Teotico to
defer the implementation of said Special Order
No. 219; that on March 2, 1988, respondent
Teotico again implemented Special Order 219,
requiring petitioner to submit his
accomplishment report; that on March 9, 1988,
petitioner requested respondent Teotico to
defer the implementation of said special order,
considering that the same has not yet been
resolved by the Secretary of Agriculture; that
on December 11, 1987, former FIDA
Administrator designated Wilfredo G. Siguritan
as officer-in-charge of FIDA Region 1; that on
March 9, 1988, FIDA Region 1 administrator
Siguritan requested the petitioner through
respondent Teotico to require petitioner to turn
over to him the keys of the vault in FIDA Region
1; that on March 14, 1988, respondent Teotico
implemented Special Order No. 219, requiring
petitioner to turn over said keys to OIC
Seguritan; that on March 16, 1988, petitioner
requested the Secretary of Agriculture to defer
the implementation of said special order
pending resolution of said office; that on March
23, 1988, respondent Teotico implemented
Special Order 219 by instituting administrative
charges against petitioner for insubordination
prejudicial to the best interest of the service;
that on April 4, 1988, respondent Teotico
placed the petitioner under preventive
suspension, effective April 6, 1988; that on
April 8, 1988, petitioner requested respondent
Teotico to give him twenty (20) days from April
11, 1988, within which to submit his
explanation to the formal administrative
charges.
xxx

On 11 May 1988 respondent Judge issued an Order

granting the application for a writ of preliminary
injunction upon the filing of a bond of P50,000. 00 29 on
the basis of the following findings:
xxx

xxx

xxx

After careful consideration of the pleadings and

their annexes filed by the parties, this Court
finds, to wit: the petitioner was appointed on
June 16, 1984, as Chief, Fiber Industry
Development Authority by Cesar C. Lanuza,
former Administrator of FIDA and was assigned

xxx

xxx

After careful consideration of the allegations of

the facts in this case, this Court believes that
petitioner was denied due process of law. The
fact that petitioner informed respondent
Teotico to stay and/or defer the implementation
of Special Order No. 219, considering that the
same is still pending before the Secretary of
Agriculture, despite of which, respondents,
more particularly, Teotico, in grave abuse of
discretion whimsical and capricious,
tantamounting (sic) to the denial of due
process of law to the petitioner, implemented

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the same and aggravated by the fact that

respondents Teotico filed insubordination
charges against the petitioner. This court
believes, that actuations of the respondents in
railroading the request of the petitioner to stay
the implementation of Special Order No. 219
tantamounts to the denial of due process of
law as mandated by the new (C)onstitution,
which falls under one of the principle of
exhaustion of administrative remedies. (New
Filipino Maritime Agencies, Inc. vs. Rivera, L5359-60, June 15, 1978) (De Lara, et al. vs.
Cloribin, et al., G.R. No. L-21763, May 31,
1965).
It does not appear from the records that Agda
presented evidence at a hearing on the application for
a writ of preliminary injunction. On the contrary, as
reflected in the above-quoted order of respondent
Judge, the writ was issued on the basis of his
"consideration of the pleadings and their annexes filed
by the parties."
On 17 May 1988, respondent Judge issued a Writ of
Preliminary Preventive or Prohibitory
Injunction 30 restraining Teotico and his co-respondents
from enforcing Annexes "E", "I", "K", "M", "O", "R", "S",
and "Z" of the amended petition.
On 2 June 1988 Teotico and his co-respondents below
filed a motion, dated 31 May 1988, to reconsider the
11 May Order alleging therein that the bases of the
findings of denial of due process are not supported by
facts; they set the motion for hearing on 10 June
1988. 31
On 2 June 1988 Agda filed a motion to declare
respondents below in contempt for refusing to comply
with the writ . 32 Then on 17 June 1988 he filed his
opposition 33 to the motion for reconsideration.
Teotico and his co-respondents filed on 17 June 1988
their opposition to the motion to declare them in
contempt of court. 34
The motion for contempt was ultimately denied in the
Order of respondent Judge of 8 September 1988. 35

Order before their motion for reconsideration is finally

resolved and they pray that the motion for
reconsideration dated 2 June 1988 be resolved and that
further action on its 16 December Order be deferred
until resolution of the motion. 38
On 29 December 1988 respondent Judge issued an
Order 39 denying the motion for reconsideration filed on
2 June and the motion of 22 December 1988 and
directing Teotico to comply with the Order of 16
December 1988 immediately upon receipt of said
Order of 29 December.
On 5 January 1989 Teotico and his co-respondents filed
a motion for reconsideration/clarification,
alleging, inter alia, that there is no basis for ordering
Teotico to reinstate Agda with full back wages and
allowances since not even the Order of 11 May
granting the motion for preliminary injunction ordains
the same. 40 But respondent Judge also denied this
motion in his Order of 14 February 1989. 41
Finding no other avenue of relief in the court below,
petitioner filed this petition on 27 March 1989
submitting to Us the following grounds:
I
Respondent Judge acted with grave abuse of
discretion when he ordered petitioner,
allegedly in compliance with the writ of
injunction issued, to reinstate respondent Agda
to his previous position as Fiber Regional
Administrator FIDA Region I with full backwages
and allowances notwithstanding that such act
was not mandated or even mentioned in the
prohibitory injunctive writ.
II
Respondent Judge acted with grave abuse of
discretion when he refused to dismiss
respondent's petition in Civil Case No. 88-577
despite his finding that respondent has already
availed of an administrative remedy which is
pending resolution by the Civil Service
Commission.

On September 23, 1988 Agda filed a motion to

reconsider the 8 September Order. 36
In his Order of 16 December 1988, 37 respondent Judge
held that Teotico and his co-respondents cannot be
held for contempt; however they were directed to
comply with the Order of 11 May 1988 and Teotico was
specifically ordered "to immediately reinstate the
petitioner, Democrito O. Agda, Sr., from (sic) his
previous position as Fiber Regional Administrator, FIDA
Region I, with full back wages and allowances
mandated by law."
On 22 December 1988 Teotico and his co-respondents
filed a motion to reconsider the above 16 December
1988 Order stating therein that it would be premature
for the court to order them to comply with the 11 May

III
Respondent Judge acted with grave abuse of
discretion when he issued a writ of preliminary
injunction dated May 11, 1988 without hearing
on the merits.
In compliance with Our resolution of 12 April 1989,
herein respondents filed their Comment on 2 May
1989.
As We stated in the introductory portion of this
Decision, in the resolution of 29 May 1989 We gave
due course to the petition and required the parties to
submit their Memoranda, which they complied with.

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The petition is impressed with merit.

Respondent Judge clearly acted with grave abuse of
discretion in taking cognizance of Civil Case No. 88577, in deliberately failing to act on the motion to
dismiss, in issuing a writ of preliminary injunction, and
in ordering the "reinstatement" of Agda, "as Fiber
Regional Administrator, FIDA Region I, with full back
wages and allowances mandated by law."
Agda was not appointed as Fiber Regional
Administrator, FIDA Region I, but as CHIEF FIBER
DEVELOPMENT OFFICER; he was not appointed to any
specific station.42 He was merely designated as Acting
Regional Administrator For FIDA Regions I and II. 43
Not having been appointed to any specific station, he
could be tranferred or assigned to any other place by
the head of office where in the opinion of the latter his
services may be utilized more effectively. 44
In Ibaez vs. COMELEC,

45

., We held:

Assayed upon the foregoing legal crucible the

petitioner's case suffers an initial set back. The
appointments upon which they respectively
anchor their claim state that they were merely
appointed as "Election Registrars in the
Commission on Elections. . . . ." Therefore,
there can be no gainsaying the fact that the
petitioners were not appointed to, and
consequently, not entitled to any security of
tenure or permanence in, any specific station.
On the general principle, they may be
transferred as the exigencies of the service
require. They ordinarily have no right to
complain against any change of assignment. 46
In the latest case of Department of Education, Culture
and Sports, et al. vs. The Honorable Court of Appeals,
et al., 183 SCRA 555, 562, We held:
The appointment of Navarro as principal does
not refer to any particular station or school. As
such, she could be assigned to any station and
she is not entitled to stay permanently at any
specific school. (Bongbong vs. Parado, 57 SCRA
623). When she was assigned to the Carlos
Albert High School, it would not have been with
the intention to let her stay in said school
permanently. Otherwise, her appointment
would have so stated. Consequently, she may
be assigned to any station or school in Quezon
City as the exigencies of public service require
even without her consent.
Moreover, it should be borne in mind that Special Order
No. 29 of 2 January 1984 merely designated Agda
as Acting Regional Administrator for Regions I and II.
Such being the case, the rule enunciated in Cuadra vs.
Cordova etc., 103 Phil. 391, on temporary
appointments or appointments in an acting capacity
that they are terminable at the pleasure of the
appointing authority, is applicable to Agda. He can

neither claim a vested right to the station to which he

was assigned nor to security of tenure thereat.
Accordingly, private respondent could be re-assigned
to any place and Special Order No. 219 dated 13
November 1987 reassigning private respondent at the
Office of the Administrator of the FIDA "in the interest
of the service" was in order. Although denominated as
"reassignment", it was in fact a mere detail in that
office.
The Civil Service Decree, P.D. No. 807, allows transfer,
detail and re-assignment. 47 If the employee concerned
believes that there is no justification therefore, he
"may appeal his case to" the Civil Service Commission.
Unless otherwise ordered by the Commission, the
decision to detail an employee shall be executory. Agda
invoked the appellate jurisdiction of the Commission
when he filed his Urgent Petition To Stay
Implementation and Nullify the Special Order in
question with the Civil Service Commission. 48 It does
not, however, appear to Us that he exerted genuine
and sincere efforts to obtain an expeditious resolution
thereof What appears to be clear is that he used its
pendency as an excuse for his refusal to comply with
the memorandum of Teotico of 7 January 1988 and the
routing slip request of 11 March 1988 for the key to the
safety vault.
We are not persuaded by Agda's claim that the
questioned detail was done in violation of Section
261(h) of Batas Pambansa Blg. 881 (Omnibus Election
Code) Considering that (a) he raised this matter for the
first time only in his Amended Petition, or five (5)
months after the issuance of the Special Order. No
evidence has been presented, or at least strongly and
convincingly suggested, to prove or show that no prior
approval was obtained by Administrator Lanuza from
the COMELEC for such detail, or that a case for
violation of Section 261(h) was in fact filed against
Lanuza or Teotico. All that Agda can show are his
alleged letter to the COMELEC to inquire if Special
Order No. 219 had been referred to it and an alleged
answer dated 14 April 1988 of Atty. Horacio SJ Apostol,
Manager of the Law Department of the Commission, to
the effect that the records of the Department do not
show, as of that date, that the Special Order was
submitted or referred to the Commission. The latter is
not conclusive proof that no prior authority was in fact
obtained by Administrator Lanuza for the reassignment
or detail of Agda. No law requires the submission. to
the COMELEC of special orders reassigning or detailing
employees within the prohibited period. What is
needed is "prior authority," the request for which and
its approval may be in separate documents or papers.
Moreover, although Agda alleges in his amended
petition that:
11.20. Petitioner is filing criminal charges for
violations of Secs. 3, 261(h) and 264 of B.P. 881
against former FIDA Administrator Lanuza and
respondent Teotico in the COMELEC."
(Emphasis supplied)

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none of his subsequent pleadings both before the lower

court and before Us disclose that he had in fact filed
such charges. Obviously, said allegation was a clever
attempt to show a semblance of a valid grievance.
Furthermore, even in the cases of transfer or detail
within the probihited period prior to an election, an
aggrieved party is provided an appropriate
administrative remedy. Section 6 of Rule VI of the Civil
Service Rules on Personnel Actions and Policies
provides:
Sec. 6. Except when the exigencies of the
service require, an official or employee of the
government may not be ordered detailed or
reassigned during the three-month period
before any local or national election, and if he
believes that the order for his detail or
reassignment is due to harassment, coercion,
intimidation, or other personal reasons, he may
appeal the order to the Commission. Until this
is proven, however, the order is presumed to
be in the interest of the service and
notwithstanding the appeal, the decision to
detail or reassign him shall be executory, but
the Commission may order deferment of
suspension of the detail or reassignment ex
parte."
Agda made no attempt to avail of this remedy. In his
Urgent Petition to Stay Implementation and Nullify
Special Order No. 219, nothing is mentioned about a
violation of the ban on transfer or detail. The reason
seems too obvious. Until he filed the Amended Petition
before the court below he did not consider his reassignment per Special Order No. 219 as a violation of
the ban on transfer or detail during the three-month
period before the election.
Not having yet fully exhausted the existing adequate
administrative remedy which he already took
advantage of, Agda cannot be permitted to abandon it
at his chosen time and leisure and invoke the
jurisdiction of regular courts. As aptly summarized:
Within the administrative forum the law may
provide for review of decisions by higher
authorities. Before a party can be allowed to
invoke the jurisdiction of the courts of justice,
he is expected to have exhausted all means of
administrative redress afforded him. There are
both legal and practical reasons for this. The
administrative process is intended to provide
less expensive and more speedy solutions to
disputes. Where the enabling statute indicates
a procedure for administrative review, and
provides a system of administrative appeal, or
reconsideration, the courts for reasons of law,
comity and convenience, will not entertain a
case unless the available administrative
remedies have been resorted to and the
appropriate authorities have been given
opporturity to act and correct the errors
committed in the administrative forum. 49

The doctrine of exhaustion of administrative remedies

is well-entrenched in this jurisdiction and a host of
cases has buttressed its stability. 50 There are, of
course, recognized exceptions thereto, but,
unfortunately, private respondent cannot seek safe
refuge under their protective mantle, for in respect to
the remedy provided for in Section 24(c) of P.D. No.
807, which is also the remedy provided for in Section
24(f), availment thereof is indispensable for the
viability of any judicial action. As we held
in Department of Education, Culture and Sports, et al.
vs. The Honorable Court of Appeals, et al., supra:
Finally, respondent Navarro has not exhausted
administrative remedies as she did not elevate
the matter of her transfer to the Civil Service
Commission in accordance with Section 24(c),
P.D. No. 807, otherwise known as the Civil
Service Decree, which provides:
xxx

xxx

xxx

By not appealing her case to the Civil Service

Commission before filing Special Civil Action No
Q-37025, respondent Navarro is indubitably
without cause of action.
Respondent Judge, as clearly shown in his Order of 11
May 1988, was fully aware of Agda's urgent petition
before the Civil Service Commission to suspend its
implementation of Special Order No. 219 and to nullify
the same. He had, therefore, no other business to do
except to grant the motion to dismiss. He should have,
forthwith, stayed his hands until the administrative
processes had been completed. 51 Yet, for reasons only
known to him, which We cannot divine at, he did not do
so. On the contrary, he granted the application for a
writ of preliminary injunction and issued the writ on 17
May 1988.
The writ was improvidently and capriciously issued.
The issuance of the writ, although addressed to the
sound discretion of the court, is conditioned on the
existence of a clear and positive right which should be
protected. 52Considering that the amended petition
should have been dismissed outright because Agda
prematurely invoked the jurisdiction of the court in
view of his appeal to the Civil Service Commission, it
follows that, even if he had a right, no protection was
available from the court below. But even if We
disregard for the moment the above weakness of the
amended petition and consider, as the respondent
Judge did, "the pleadings and their annexes," the
inescapable action that should follow would be denial
of the application for the issuance of the writ. The
pleadings and the annexes do not at all demonstrate a
clear and positive right for Agda, for as discussed
above, by the very nature of his appointment he had
no security of tenure in the station to where he was
assigned on 2 January 1984; besides,
his designation as acting Regional Administrator for
FIDA Regions I and II was terminable at any time at the
pleasure of the head of office. Moreover, as could be
gleaned from the annexes of the Amended Petition,
Agda impliedly accepted his re-assignment to the
Control Office of FIDA To Teotico's Memorandum of

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January 1988 addressed to Agda as "Regional

Administrator" which required him to submit his
development programs for Region I (1988-1993) and
his proposals for sericulture and the maguey industry
in said Region, Agda, in his indorsement of 12 January
1-988 claims and admits that "this representation was
reassigned to FIDA Central Office where he now reports
up to the present" and that "Mr. Wilfredo Seguritan . . .
remains up to the present as the OIC of FIDA for the
said Region." In this indorsement Agda wrote below his
signature the following: (Detailed to Central Office). To
Teotico's Memorandum of 2 March 1988 requiring him
to submit an official clarification on his whereabouts
and his accomplishments for the past three weeks
since he had not been seen or officially heard from,
Agda referred the former to the record (log book) kept
by the FIDA Guard and certificates of appearance.
Clearly then, as of the filing of the Amended Petition,
Special Order No. 219 was a fait accompli. Acts already
consummated cannot be enjoined by preliminary
injunction. 53
The respondent Judge did not stop there. As
complained by Teotico, on 16 December 1988 the
former issued an Order wherein although he denied the
motion for the reconsideration of his 8 September 1988
Order denying the motion for contempt, he ordered
Teotico to immediately reinstate Agda "from (sic) his
previous position as Fiber Regional Administrator, FIDA
Region I, with full back wages and allowances
mandated by law." This, in effect, amounted to a
mandatory injunction, issued without a hearing and in
violation of Section 5 of Rule 58 of the Rules of Court.
There was no basis for its issuance. A mandatory
injunction may only be issued upon a showing that the
invasion of the right is material and substantial; the
right of complainant is clear and unmistakable; and
there is an urgent and permanent necessity for the writ
to prevent serious damage. 54 They have not been
shown to exist in this case.
Even if the 16 December reinstatement order should
be construed to be directed against the preventive
suspension order issued by Teotico on 4 April 1988,
respondent Judge clearly capriciously breached the
limits of his discretion for nowhere in his amended
petition has Agda attacked its validity or legality on
any other ground than its being issued
to implement Special Order No. 219, 55 which he claims
was issued in violation of the pertinent provisions of
the Omnibus Election Code and the Civil Service
Decree prohibiting transfer or reassignment of civil
service officials and employees within three months
before the local election of January 18, 1988. He
assailed the suspension order not on the ground that
Teotico does not have the authority to file the formal
charge and to preventively suspend him, but solely on
the basis of his self-serving claim that both were issued
without or in excess of jurisdiction or with grave abuse
of discretion because they were meant to implement
Special Order No. 219.
Preventive suspension is allowed under Section 41 of
P.D. No. 807 which reads:

suspend any subordinate officer or employee

under his authority pending an investigation, if
the charge against such officer or employee
involves dishonesty, oppression or grave
misconduct, or neglect in the performance of
duty, or if there are reasons to believe that the
respondent is guilty of charges which would
warrant his removal from the service.
However, per Section 42 of the same decree, if the
administrative cases against the suspended officer or
employee, who is not a Presidential appointee, is not
finally decided by the disciplining authority within
ninety days after date of suspension, he shall be
automatically reinstated in the service provided that
when the delay in the disposition of the case is due to
the fault, negligence or petition of the respondent, the
period of delay shall not be counted in computing the
period of suspension.1wphi1
In the instant case, by Agda's own act and the
cooperation of respondent Judge, the administrative
case against the former is not yet even ready for
hearing. He has not filed his Answer, although he was
given until 21 April 1988 within which to do so.
Lastly, We hold that both the preliminary injunction and
the reinstatement order issued by respondent Judge
practically granted the main relief prayed for by Agda
even before the hearing on the case on the merits.
In Obias, et al., vs. Hon. Borja, et al., 136 SCRA 687, We
ruled that respondent judge acted with grave abuse of
discretion in issuing a writ of preliminary injunction
which in effect practically granted the principal relief
sought in the Mandamus case. The reason for this is
that such issuance "would, in effect, be a prejudgment
of the main case and a reversal of the rule on the
burden of proof since it would assume the proposition
which the petitioner is inceptively bound to prove. 56
The foregoing conclusions render unnecessary a
discussion on other matters raised in this case.
WHEREFORE, the Petition is GRANTED. The Orders of
respondent Judge of 11 May 1988, 16 December 1988,
29 December 1988 and 14 February 1989 and the Writ
of Injunction issued on 17 May 1987 in Civil Case No.
88-577 entitled Democrito D. Agda, Sr., vs. Joaquin M.
Teotico, et al., are SET ASIDE and said Civil Case is
hereby ordered DISMISSED. With costs against private
respondent.
SO ORDERED.

[G.R. No. 163123. April 15, 2005]

PHILIPPINE
HEALTH
INSURANCE
CORPORATION, petitioner,
vs. CHINESE
GENERAL
HOSPITAL
AND
MEDICAL
CENTER, respondent.
DECISION

Sec. 41. Preventive Suspension. The proper

disciplining authority may preventively

CORONA, J.:

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Page 51 of 151

Before
us
is
a
petition
for
review
on certiorari under Rule 45 of the Rules of Court
assailing the March 29, 2004 decision [1] of the Court of
Appeals, the dispositive portion of which read:
FOR THE FOREGOING DISQUISITIONS, the petition
is GRANTED, the Philippine Health Insurance
Corporation[2] is hereby ordered to give due course to
petitioners, Chinese General Hospital and Medical
Center, claims for the period from 1989 to 1992,
amounting to FOURTEEN MILLION TWO HUNDRED
NINETY ONE THOUSAND FIVE HUNDRED SIXTY EIGHT
PESOS and 71/100 PESOS (P14,291,568.71).[3]
The facts, as culled by the Court of Appeals,
follow.
On February 14, 1995, Republic Act No. 7875,
otherwise known as An Act Instituting a National Health
Insurance Program for all Filipinos and Establishing the
Philippine Health Insurance Corporation For the
Purpose, was approved and signed into law. As its
guiding principle, it is provided in Section 2 thereof,
thus:
Section 2. Declaration of Principles and Policies.
Section 11, Article XIII of the Constitution of the
Republic of the Philippines declares that 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 the people at affordable cost. Priority for
the needs of the underprivileged, sick, elderly,
disabled, women, and children should be recognized.
Likewise, it shall be the policy of the State to provide
free medical care to paupers.
Prior to the enactment of R.A. 7875. CGH[4] had been an
accredited health care provider under the Philippine
Medical Care Commission (PMCC), more popularly
known as Medicare. As defined by R.A. 7875, a health
care provider refers to a health care institution, which
is duly licensed and accredited devoted primarily to the
maintenance and operation of facilities for health
promotion, prevention, diagnosis, treatment and care
of individuals suffering from illness, disease, injury,
disability or deformity, or in need of obstetrical or other
medical and nursing care.[5]
As such, petitioner[6] filed its Medicare claims with the
Social Security System (SSS), which, together with the
Government Service Insurance System (GSIS),
administered the Health Insurance Fund of the PMMC.
Thus, petitioner filed its claim from 1989 to 1992 with
the SSS, amounting to EIGHT MILLION ONE HUNDRED
TWO THOUSAND SEVEN HUNDRED EIGHTY-TWO and
10/100 (P8,102,782.10). Its application for the payment
of its claim with the SSS was overtaken by the passage
of R.A. 7875, which in Section 51 and 52, provides:
SECTION 51. Merger. Within sixty (60) days from the
promulgation of the implementing rules and
regulations, all functions and assets of the Philippine
Medical Care Commission shall be merged with those
of the Corporation (PHILHEALTH) without need of

conveyance, transfer or assignment. The PMCC shall

thereafter cease to exist.
The liabilities of the PMCC shall be treated in
accordance with existing laws and pertinent rules and
regulations. xxx
SECTION 52. Transfer of Health Insurance Funds of the
SSS and GSIS. The Health Insurance Funds being
administered by the SSS and GSIS shall be transferred
to the Corporation within sixty (60) days from the
promulgation of the implementing rules and
regulations. The SSS and GSIS shall, however, continue
to perform Medicare functions under contract with the
Corporation until such time that such functions are
assumed by the Corporation xxx.
Being the successor of the PMCC, PHILHEALTH, in
compliance with the mandate of R.A. 7875,
[7]
promulgated the rules and regulations implementing
said act, Section 52 of which provides:
SECTION 52. Fee for Service Guidelines on Claims
Payment. xxx b. All claims for payment of services
rendered shall be filed within sixty (60) calendar days
from the date of discharge of the patient. Otherwise,
the claim shall be barred from payment except if the
delay in the filing of thee claim is due to natural
calamities and other fortuitous events. If the claim is
sent through mail, the date of the mailing as stamped
by the post office of origin shall be considered as the
date of the filing.
If the delay in the filing is due to natural calamities or
other fortuitous events, the health care provider shall
be accorded an extension period of sixty (60) calendar
days.
If the delay in the filing of the claim is caused by the
health care provider, and the Medicare benefits had
already been deducted, the claim will not be paid. If
the claim is not yet deducted, it will be paid to the
member chargeable to the future claims of the health
care provider.
Instead of giving due course to petitioners claims
totaling to EIGHT MILLION ONE HUNDRED TWO
THOUSAND SEVEN HUNDRED EIGHTY-TWO and 10/100
(P8,102,782.10), only ONE MILLION THREE HUNDRED
SIXTY-FIVE THOUSAND FIVE HUNDRED FIFTY-SIX and
32/100 Pesos (1,365,556.32) was paid to petitioner,
representing its claims from 1989 to 1992 (sic).
Petitioner again filed its claims representing services
rendered to its patients from 1998 to 1999, amounting
to SEVEN MILLION FIVE HUNDRED FIFTY FOUR
THOUSAND THREE HUNDRED FORTY TWO and 93/100
Pesos (P7,554,342.93). For being allegedly filed beyond
the sixty (60) day period allowed by the implementing
rules and regulations, Section 52 thereof, petitioners
claims were denied by the Claims Review Unit of
Philhealth in its letter dated January 14, 200, thus:
xxx

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This pertains to your three hundred seventy three

Philhealth medicare claims (373) which were primarily
denied by Claims Processing Department for late filing
and for which you made an appeal to this office. We
regret to inform you that after thorough evaluation of
your claims, [your] 361 medicare claims were DENIED,
due to the fact that the claims were filed 5 to 16
months after discharge. However, the
remaining medicare claims have been forwarded to
Claims Processing Department (CPD) for payment.
SECTION 52 (B) Rule 52 (B) Rule VIII of the
Implementing Rules and Regulations of 7875 provides
that all claims for payment of services rendered shall
be filed within sixty (60) days from the day of
discharge of the patient. However, Philhealth Circular
No, 31-A, series of 1998, state that all claims pending
with Philhealth as of September 15, 1998 and claims
with discharge dates from September to December 31,
1998 are given one hundred twenty (120) days from
the date of discharge to file their claim. In as much as
we would like to grant your request for reconsideration,
the Corporation could no longer extend the period of
filing xxx.

encouraged to serve an increasing number of members

when they end up on the losing end of this venture. We
must admit that the costs of operating these medical
institutions cannot be taken lightly. They must also
earn a modicum amount of profit in order to operate
properly.
Again, it is trite to emphasize that essentially, the
purpose of the national health insurance program is to
provide members immediate medical care with the
least amount of cash expended. Thus, with
PHILHEALTH, members/patients need only to present
their card to prove their membership and the
accredited health care giver is mandated by law to
provide the necessary medical assistance, said health
care giver shouldering the PHILHEALTH part of the bill.
However, it is the members/patients who bear the
brunt. Thus, they are made to shoulder the
PHILHEALTH part of the bill, and the refund thereof is
subject to whether or not the claims of the health care
providers are approved by PHILHEALTH. This is
blatantly contrary to the very purpose for which the
National Health Insurance Program was created.[8]
xxxxxxxxx

Petitioners claim was denied with finality by

PHILHEALTH in its assailed decision dated June 6, 2000.

We agree.

In a petition for review under Rule 43 of the Rules

of Court, the Court of Appeals ordered herein petitioner
Philippine Health Insurance Corporation (Philhealth) to
pay the claims in the amount of Fourteen Million Two
Hundred Ninety-one Thousand Five Hundred Sixty-eight
Pesos and 71/100 (P14,291,568.71), principally on the
ground of liberal application of the 60-day rule under
Section 52 of RA 7875s Implementing Rules and
Regulations. According to the Court of Appeals:

The state policy in creating a national health

insurance program is to grant discounted medical
coverage to all citizens, with priority to the needs of
the underprivileged, sick, elderly, disabled, women and
children, and free medical care to paupers[9].

The avowed policy in the creation of a national health

program is, as provided in Section 11, Article XIII of the
1987 Constitution, to 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. To assist the state in pursuing this
policy, hospitals and medical institutions such as herein
petitioner are accredited to provide health care. It is
true, as aptly stated by the OGCC, that petitioner was
not required by the government to take part in its
program, it did so voluntarily. But the fact that the
government did not twist petitioners arm, so to speak,
to participate does not make petitioners participation
in the program less commendable, considering that at
rate PHILHEALTH is denying claims of health care
givers, it is more risky rather than providential for
health care givers to take part in the governments
health program.

a) provide all citizens of the Philippines with

the mechanism to gain financial access
to health services;

It is Our firmly held view that the policy of the state in

creating a national health insurance program would be
better served by granting the instant petition. Thus, it
is noteworthy to mention that health care givers are
threatening to boycott PHILHEALTH, reasoning that the
claims approved by PHILHEALTH are not commensurate
to the services rendered by them to its members. Thus,
how can these accredited health care givers be

The very same policy

7875[10] which sought to:

was

adopted

in

RA

b) create the National Health Insurance

Program to serve as the means to help
the people pay for the health services;
c) prioritize and accelerate the provision of
health services to all Filipinos,
especially that segment of the
population who cannot afford such
services; and
d) establish the Philippine Health Insurance
Corporation that will administer the
program at central and local levels.[11]
To assist the state in pursuing the aforementioned
policy, health institutions were granted the privilege of
applying for accreditation as health care providers.
[12]
Respondent Chinese General Hospital and Medical
Center (CGH) was one of those which received such
accreditation.
Under the rules promulgated by the Philhealth
Board pursuant to RA 7875, any claim for payment of

ADMIN LAW 1st Set

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services rendered (to a patient) shall be filed within

sixty (60) calendar days from the date of discharge of
the patient. Otherwise, the claim is barred.[13]
But before a claim is filed with petitioner
Philhealth for services already rendered, an accredited
health care provider like respondent CGH is required to:
a. accomplish a Philhealth claim form;
b. accomplish an itemized list of the
medicines administered to and medical
supplies used by the patient concerned,
indicating therein the quality, unit, price
and total price corresponding thereto;
c. require the patient concerned and his/her
employer to accomplish and submit a
Philhealth member/employer
certification;
d. in case the patient gave birth, require her
to submit a certified true copy of the
childs birth certificate;
e. in case the patient died, require the
immediate relatives to submit a certified
true copy of the deceaseds death
certificate; and
f. in case a members dependent is
hospitalized for which the member seeks
coverage, require the member to submit
proof of relationship to the patient and to
execute an affidavit of support.[14]
Apart from the foregoing requirements which often
necessitate
securing
documents
from
other
government offices, and the fact that most patients are
unable to immediately accomplish and submit the
required documents, an accredited health care provider
like CGH has to contend with an average of about a
thousand members and/or dependents seeking
medical treatment for various illnesses per month.
Under these circumstances, it is unreasonable to
expect respondent CGH to comply 100% of the time
with the prescribed 60-day rule of Philhealth. Despite
the prescribed standard procedures, respondent has no
assurance of the members prompt submission of the
required documents. This factor is completely beyond
its control. There will always be delay not attributable
to respondent.
The unreasonably strict implementation of the 60day rule, without regard to the causes of delay beyond
respondents control, will be counter-productive to the
long-term effectiveness of the NHIP. Instead of placing
a premium on participation in the Program, Philhealth
punishes an accredited health provider like CGH by
refusing to pay its claims for services already rendered.
Under these circumstances, no accredited provider will
gamble on honoring claims with delayed supporting
papers no matter how meritorious knowing that
reimbursement from Philhealth will not be forthcoming.

This Court will not hesitate, whenever necessary,

to allow a liberal implementation of the rules and
regulations of an administrative agency in cases where
their unjustifiably rigid enforcement will result in a
deprivation of legal rights. In this case, respondent had
already rendered the services for which it was filing its
claims. Technicalities should not be allowed to defeat
respondents right to be reimbursed, specially since
petitioners
charter
itself
guarantees
such
reimbursement.
A careful reading of RA 7875 shows that the law
itself does not provide for any specific period within
which to file claims. We can safely presume therefore
that the period for filing was not per se the principal
concern of the legislature. More important than mere
technicalities is the realization of the state policy to
provide Philhealth members with the requisite medical
care at the least possible cost. Truly, nothing can be
more disheartening than to see the Acts noble
objective frustrated by the overly stringent application
of technical rules.
The fact is that it was not RA 7875 itself but
Section 52 of its Implementing Rules and Regulations
which established the 60-day cut-off for the filing of
claims.
While it is doctrinal in administrative law that the
rules and regulations of administrative bodies
interpreting the law they are entrusted to enforce have
the force of law[15], these issuances are by no means
iron-clad norms. Administrative bodies themselves can
and have in fact bent the rules for reasons of public
interest. On September 15, 1998, for instance,
petitioner issued Philhealth Circular No. 31-A: [16]
IN ORDER to allow members of the National Health
Insurance Program (NHIP) sufficient time to complete
all documents to support their medical care claims,
Philhealth is temporarily suspending the sixty (60)-day
reglementary period for filing claims.
While Section 52 (b), Rule VIII of the
Implementing Rules and Regulations of R.A.
7875 provides that all claims for payment of
services shall be filed within 60 calendar days
from the day of discharge of a patient, there is a
need to extend this period to minimize the
incidence of late filing due to members personal
difficulties and circumstances beyond their
control. (emphasis ours)
And then again, on April 20, 1999, Philhealth
Circular No. 50 was issued:
TO MINIMIZE the incidence of late filing of claims
due to members personal difficulties in
preparing the needed documents, Philhealth is
extending the period for filing of claims xxx
(emphasis ours)
The above circulars indubitably recognized the
necessity of extending the 60-day period because of
the difficulties encountered by members in completing

ADMIN LAW 1st Set

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the required documents, often due to circumstances

beyond their control. Petitioner appeared to be well
aware of the problems encountered by its members in
complying with the 60-day rule. Furthermore, implicit in
the wording of the circulars was the cognition of the
fact that the fault was not always attributable to the
health care providers like CGH but to the members
themselves.
Delay on the part of members is an ordinary
occurrence. There is no need to make a mountain out
of a molehill as far as this particular point is concerned.
To this day, members continue to encounter delay in
submitting their documents. There was therefore no
compelling reason for the exacting and meticulous
enforcement of the rule when, in at least two
instances, petitioner itself implemented it liberally and
on the same ground that it was using against
respondent.
Petitioner likewise contends that respondent failed
to exhaust administrative remedies before resorting to
judicial intervention. We disagree.
Under the doctrine of exhaustion of administrative
remedies, an administrative decision must first be
appealed to the administrative superiors at the highest
level before it may be elevated to a court of justice for
review.
This doctrine, however, is a relative one and its
flexibility is conditioned on the peculiar circumstances
of a case.[17] There are a number of instances when the
doctrine has been held to be inapplicable. Among the
established exceptions are:
1) when the question raised is purely legal;
2) when the administrative body is in estoppel;
3) when the act complained of is patently illegal;
4) when there is urgent need for judicial intervention;
5) when the claim involved is small;
6) when irreparable damage will be suffered;
7) when there is no other plain, speedy and adequate
remedy;

Filipinos who are members of PHILHEALTH and who

obviously rely on it for their health care, are
considered, nonetheless, parties to the present case.
This Court is mandated herein to take conscious and
detailed consideration of the interplay of the interests
of the state, the health care giver and the members.
With these in mind, We hold that the greater interest of
the greater number of people, mostly members of
PHILHEALTH, is paramount.
Furthermore, when the representatives of herein
petitioner met with Dr. Enrique Zalamea, PHILHEALTHs
President and Chief Executive Officer, he informed
them that, in lieu of protest to be filed directly with
him, the representatives could make representations
with the Office of the President, which petitioner did to
no avail, considering that the formal protest filed was
referred back by the Office of the President to Dr.
Zalamea. Being then the head of PHILHEALTH, and
expected to have an intimate knowledge of the law and
the rules creating the National Health Insurance
Program, under which PHILHEALTH was created, he
instructed herein petitioner to pursue a remedy not
sanctioned by the rules and not in accord with the rule
of exhaustion of administrative remedies. In so doing,
PHILHEALTH is deemed estopped from assailing the
instant petition for failure to exhaust administrative
remedies when PHILHEALTH itself, through its
president, does not subscribe to it.[19]
There is no need to belabor the fact that the
baseless denial of respondents claims will be gravely
disturbing to the health care industry, specially the
providers whose claims will be unpaid. The unfortunate
reality is that there are today some health care
providers who admit numbers for treatment and/or
confinement yet require them to pay the portion which
ought to be shouldered by Philhealth. A refund is made
only if their claim is first paid, due to the apprehension
of not being reimbursed. Simply stated, a member
cannot avail of his benefits under the NHIP at the time
he needs it most.
We cannot turn a deaf ear to respondents plea for
fairness which essentially demands that its claims for
services already rendered be honored as the National
Health Insurance Program law intended.
WHEREFORE, the assailed decision of the Court
of Appeals is hereby AFFIRMED. Petitioner is hereby
ordered to pay respondents claims representing
services rendered to its members from 1989 to 1992.

8) when strong public interest is involved;

No costs.

9) when the subject of the controversy is private land;

SO ORDERED.

10) in quo warranto proceedings.[18]

As explained by the appellate court:
It is Our view that the instant case falls as one of the
exceptions, concerning as it does public interest. As
mentioned earlier, although they were not made
parties to the instant case, the rights of millions of

G.R. No. 85502 February 24, 1992

SUNVILLE TIMBER PRODUCTS, INC., petitioner,
vs.
HON. ALFONSO G. ABAD, as Judge RTC, Br. 22 of
Pagadian City, COURT OF APPEALS, ISIDRO

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GILBOLINGO AND ROBUSTIANO

BUGTAI, respondents.
Manuel V. Trinida for petitioner.
Adolf Leo P. Boncavil for private respondents.
CRUZ, J.:
The Court will focus its attention only on one of the
issues raised in this petition the correct application
of the doctrine of exhaustion of administrative
remedies.
The petitioner was granted a Timber License
Agreement (TLA), authorizing it to cut, remove and
utilize timber within the concession area covering
29,500 hectares of forest land in Zamboanga del Sur,
for a period of ten years expiring on September 31,
1992.
On July 31, 1987, the herein private respondents filed a
petition with the Department of Environment and
Natural Resources for the cancellation of the TLA on
the ground of serious violations of its conditions and
the provisions of forestry laws and regulations.
The same charges were subsequently made, also by
the herein private respondents, in a complaint for
injunction with damages against the petitioner, which
was docketed as Civil Case No. 2732 in the Regional
Trial Court of Pagadian City.
The petitioner moved to dismiss this case on three
grounds, to wit: 1) the court had no jurisdiction over
the complaint; 2) the plaintiffs had not yet exhausted
administrative remedies; and 3) the injunction sought
was expressly prohibited by section 1 of PD 605.
Judge Alfonso G. Abad denied the motion to dismiss on
December 11, 1987, 1 and the motion for
reconsideration on February 15, 1988. 2 The petitioner
then elevated the matter to the respondent Court of
Appeals, which sustained the trial court in a decision
dated July 4, 1988, 3 and in its resolution of September
27, 1988, denying the motion for reconsideration. 4
The Court of Appeals held that the doctrine of
exhaustion of administrative remedies was not without
exception and pointed to the several instances
approved by this Court where it could be dispensed
with. The respondent court found that in the case
before it, the applicable exception was the urgent need
for judicial intervention, which it explained thus:
The lower court found out that sometime on
July 1981, the City Council of Pagadian in its
Resolution No. 111 requested the Bureau of
Forest Development to reserve 1,000 hectares
in Lison Valley. This request remained unacted
upon. Instead in 1982, a TLA covering 29,500
hectares, including the area requested, was
given to petitioner.

Then the fear expressed by the City Council of

Pagadian in its resolution became reality.
"As averred in the complaint, the
erosion caused by the logging
operations of the defendant has caused
heavy siltation not only in the
Labangan River (as predicted by the
City Council of Pagadian City in 1981)
but also in the Tukuran River, Salug
River, Sindangan River, and Sibuguey
River. In other words, the adverse
effects of the logging operations of the
defendant have already covered a
wider area than that feared to be
adversely affected by the City Council
of Pagadian City.
Floods are unknown phenomena in
heavily forested areas years back,
particularly in the Island of Mindanao.
When the grant of logging concessions
started, so was the denudation of
forests. . . . It is common knowledge
that heavy floods have occurred in
areas/places adjoining logging
concessions. (Resolution dated
December 11, 1987, p. 5).
Thus, it is urgent that indiscriminate
logging be stopped. Irreparable
damage would ensue unless the court
intervenes. Reliance on the DENR may
not be enough, judging from its
inaction on the council's request seven
years back.
The respondent court cited in support of this conclusion
the case of De Lara v. Cloribel, 5 where "irreparable
damage and injury" was allowed as an exceptional
ground, and Arrow Transportation Corporation v. Board
of Transportation, 6 where the doctrine was waived
because of "the strong public interest in having the
matter settled" as soon as possible.
The decision also declared invalid Section 1 of PD 605,
which provides:
Sec. 1. No court of the Philippines shall
have jurisdiction to issue any
restraining order, preliminary injunction
or preliminary mandatory injunction in
any case involving or growing out of
the issuance, approval or disapproval,
revocation or suspension of, or any
action whatsoever by the proper
administrative official or body on
concessions, licenses, permits, patents,
or public grants of any kind in
connection with the disposition,
exploitation, utilization, exploration
and/or development of the natural
resources of the Philippines.
This was held to be an encroachment on the judicial
power vested in the Supreme Court and the lower

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Page 56 of 151

courts by Article VIII, Section 1, of the Constitution. The

respondent court cited Export Processing Zone
Authority v. Dulay, 7where several presidential decrees
were declared unconstitutional for divesting the courts
of the judicial power to determine just compensation in
expropriation cases.
The petitioner is now before the Court, contending that
the doctrine of exhaustion of administrative remedies
was not correctly applied and that the declaration of
the unconstitutionality of Section 1 of PD 605 was
improper.
The doctrine of exhaustion of administrative remedies
calls for resort first to the appropriate administrative
authorities in the resolution of a controversy falling
under their jurisdiction before the same may be
elevated to the courts of justice for review. Nonobservance of the doctrine results in lack of a cause of
action, 8 which is one of the grounds allowed in the
Rules of Court for the dismissal of the complaint. The
deficiency is not jurisdictional. Failure to invoke it
operates as a waiver of the objection as a ground for a
motion to dismiss and the court may then proceed with
the case as if the doctrine had been observed.
One of the reasons for the doctrine of exhaustion is the
separation of powers, which enjoins upon the Judiciary
a becoming policy of non-interference with matters
coming primarily (albeit not exclusively) within the
competence of the other departments. The theory is
that the administrative authorities are in a better
position to resolve questions addressed to their
particular expertise and that errors committed by
subordinates in their resolution may be rectified by
their superiors if given a chance to do so. A no less
important consideration is that administrative
decisions are usually questioned in the special civil
actions of certiorari, prohibition and mandamus, which
are allowed only when there is no other plain, speedy
and adequate remedy available to the petitioner. It
may be added that strict enforcement of the rule could
also relieve the courts of a considerable number of
avoidable cases which otherwise would burden their
heavily loaded dockets. 9
As correctly suggested by he respondent court,
however, there are a number of instances when the
doctrine may be dispensed with and judicial action
validly resorted to immediately. Among these
exceptional cases are: 1) when the question raised is
purely legal; 10 2) when the administrative body is in
estoppel; 11 3) when the act complained of is patently
illegal; 12 4) when there is urgent need for judicial
intervention; 13 5) when the claim involved is
small; 14 6) when irreparable damage will be
suffered; 15 7) when there is no other plain, speedy and
adequate remedy; 16 8) when strong public interest is
involved; 17 9) when the subject of the controversy is
private land; 18 and 10) in quo warranto proceedings. 19
The private respondents now submit that their
complaint comes under the exceptions because
forestry laws do not require observance of the doctrine
as a condition precedent to judicial action; the question
they are raising is purely legal; application of the

doctrine will cause great and irreparable damage; and

public interest is involved.
We rule for the petitioner.
Even if it be assumed that the forestry laws do not
expressly require prior resort to administrative
remedies, the reasons for the doctrine above given, if
nothing else, would suffice to still require its
observance. Even if such reasons were disregarded,
there would still be the explicit language of pertinent
laws vesting in the DENR the power and function "to
regulate the development, disposition, extraction,
exploration and use of the country's forests" and "to
exercise exclusive jurisdiction" in the "management
and disposition of all lands of the public
domain," 20 and in the Forest Management Bureau
(formerly the Bureau of Forest Development) the
responsibility for the enforcement of the forestry laws
aid regulations 21 here claimed to have been violated.
This comprehensive conferment clearly implies at the
very least that the DENR should be allowed to rule in
the first instance on any controversy coming under its
express powers before the courts of justice may
intervene.
The argument that the questions raised in the petition
are purely legal is also not acceptable. The private
respondents have charged, both in the administrative
case before the DENR and in the civil case before the
Regional Trial Court of Pagadian City, that the petitioner
has violated the terms and conditions of the TLA and
the provisions of forestry laws and regulations. The
charge involves factual issues calling for the
presentation of supporting evidence. Such evidence is
best evaluated first by the administrative authorities,
employing their specialized knowledge of the
agreement and the rules allegedly violated, before the
courts may step in to exercise their powers of review.
As for the alleged urgent necessity for judicial action
and the claimed adverse impact of the case on the
national interest, the record does not show that the
petitioners have satisfactorily established these
extraordinary circumstances to justify deviation from
the doctrine by exhaustion of administrative remedies
and immediate resort to the courts of justice. In fact,
this particular submission must fall flat against the
petitioner's uncontested contention that it has since
1988 stopped its operations under the TLA in
compliance with the order of the DENR.
In the Petition for prohibition filed with the respondent
court, the petitioner alleged that its logging operations
had been suspended pursuant to a
telegram 22 received on February 23, 1988, by the
District Forester from the Regional Executive Director
of the DENR, Zamboanga City; reading as follows:
DISTRICT FORESTER
PAGADIAN CITY
QUOTED HEREUNDER IS RADIO MESSAGE DATED
FEBRUARY 22, 1988 FROM SECRETARY
FULGENCIO S. FACTORAN, JR. QUOTE EFFECTIVE
IMMEDIATELY CMA SUSPEND ALL LOGGING

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Page 57 of 151

OPERATIONS OF SUNVILLE IN VIEW OF SERIOUS

VIOLATIONS OF FOREST PROTECTION AND
REFORESTATION UNQUOTE SUBMIT REPORT
ASAP. AN
The petition now before us contains the allegations
that the "petition for cancellation of petitioner's TLA is
still pending up to this date and that petitioner's
logging operations (were) ordered suspended by the
Secretary of the DENR pending further
investigation." 23
In the memorandum filed by the petitioner with this
Court, it is informed that "the Secretary of the DENR
suspended petitioner's logging operations until further
investigation. The suspension is still in force up to this
date after the lapse of almost 3 years." 24
These statements have not been disputed by the
private respondents in their pleadings before the
respondent court and this Court and are therefore
deemed admitted.
There in no question that Civil Case No. 2732 comes
within the jurisdiction of the respondent court.
Nevertheless, as the wrong alleged in the complaint
was supposedly committed as a result of the unlawful
logging activities of the petitioner, it will be necessary
first to determine whether or not the TLA and the
forestry laws and regulations had indeed been violated.
To repeat for emphasis, determination of this question
is the primary responsibility of the Forest Management
Bureau of the DENR. The application of the expertise of
the administrative agency in the resolution of the issue
raised is a condition precedent for the eventual
examination, if still necessary, of the same question by
a court of justice.
In view of the above observations, we find that there
was no need for the respondent court to declare the
unconstitutionality of Section 1 of PD 605. The rule is
that a question of constitutionality must be avoided
where the case can be decided on some other
available ground, 25 as we have done in the case before
us. The resolution of this same question must await
another case, where all the indispensable requisites of
a judicial inquiry into a constitutional question are
satisfactorily established. In such an event, it will be
time for the Court "to make the hammer fall, and
heavily," in the words of Justice Laurel, if such action is
warranted.
WHEREFORE, the petition is GRANTED. The decision of
the respondent court dated July 4, 1988, and its
resolution dated September 27, 1988, as well as the
resolutions of the trial court dated December 11, 1987
and February 15, 1988, are all REVERSED and SET
ASIDE. Civil Case No. 2732 in the Regional Trial Court of
Pagadian City is hereby DISMISSED.
SO ORDERED.

HAZEL
ANTOLIN,

MA.

C.

G.R. No. 165036

Petitioner,
- versus ABELARDO
T.
DOMONDON,
JOSE A. GANGAN, and
VIOLETA J. JOSEF,
Respondents.
x------------------- - - - - - - -x
HAZEL MA. C. ANTOLIN
Petitioner,

G.R. No. 175705

Present:
CORONA,
C. J.,
Chairperson,
VELASCO, JR.,
LEONARDO-DE CASTRO,
DEL CASTILLO, and
PEREZ, JJ.

- versus -

ANTONIETA FORTUNAIBE,
Respondent.

Promulgated:
July 5, 2010

DECISION
DEL CASTILLO, J.:
Examinations have a two-fold purpose. First, they are
summative; examinations are intended to assess and record
what and how much the students have learned. Second,
and perhaps more importantly, they are formative;
examinations are intended to be part and parcel of the
learning process. In a perfect system, they are tools for
learning. In view of the pedagogical aspect of national
examinations, the need for all parties to fully ventilate their
respective positions, and the view that government
transactions can only be improved by public scrutiny, we
remand these cases to the trial court for further
proceedings.
Factual Antecedents
Petitioner took the accountancy licensure
examinations (the Certified Public Accountant [CPA] Board
Exams) conducted by the Board of Accountancy (the Board)
in October 1997.[1]The examination results were released
on October 29, 1997; out of 6,481 examinees, only 1,171
passed. Unfortunately, petitioner did not make it. When the
results were released, she received failing grades in four out
of the seven subjects.[2]
Subject
Theory of Accounts
Business Law
Management Services
Auditing Theory
Auditing Problems
Practical Accounting I
Practical Accounting II

ADMIN LAW 1st Set

Petitioners Grade
65 %
66 %
69 %
82 %
70 %
68 %
77 %

Page 58 of 151

Convinced that she deserved to pass the

examinations, she wrote to respondent Abelardo T.
Domondon (Domondon), Acting Chairman of the Board of
Accountancy, and requested that her answer sheets be recorrected.[3] On November 3, 1997, petitioner was shown
her answer sheets, but these consisted merely of shaded
marks, so she was unable to determine why she failed the
exam.[4] Thus, on November 10, 1997, she again wrote to
the Board to request for copies of (a) the questionnaire in
each of the seven subjects (b) her answer sheets; (c) the
answer keys to the questionnaires, and (d) an explanation of
the grading system used in each subject (collectively, the
Examination Papers).[5]
Acting Chairman Domondon denied petitioners
request on two grounds: first, that Section 36, Article III of
the Rules and Regulations Governing the Regulation and
Practice of Professionals, as amended by Professional
Regulation Commission (PRC) Resolution No. 332, series of
1994, only permitted access to the petitioners answer sheet
(which she had been shown previously), and that
reconsideration of her examination result was only proper
under the grounds stated therein:
Sec. 36 An examinee shall be allowed to
have access or to go over his/her test
papers or answer sheets on a date not
later than thirty (30) days from the official
release of the results of the examination.
Within ten (10) days from such date,
he/she may file his/her request for
reconsideration of ratings. Reconsideration
of rating shall be effected only on grounds
of mechanical error in the grading of
his/her testpapers or answer sheets, or
malfeasance.[6]
Second, Acting Chairman Domondon clarified that
the Board was precluded from releasing the Examination
Papers (other than petitioners answer sheet) by Section 20,
Article IV of PRC Resolution No. 338, series of 1994, which
provides:
Sec. 20. Illegal, Immoral, Dishonorable,
Unprofessional Acts The hereunder acts
shall constitute prejudicial, illegal, grossly
immoral, dishonorable, or unprofessional
conduct:
A. Providing, getting, receiving,
holding, using or reproducing
questions

Proceedings before the Regional Trial

Court
Undeterred, on January 12, 1998, petitioner filed a
Petition for Mandamus with Damages against the Board of
Accountancy and its members[10] before the Regional Trial
Court (RTC) of Manila. The case was raffled to Branch 33,
and docketed as Civil Case No. 98-86881. The Petition
included a prayer for the issuance of a preliminary
mandatory injunction ordering the Board of Accountancy
and its members (the respondents) to furnish petitioner with
copies of the Examination Papers. Petitioner also prayed
that final judgment be issued ordering respondents to
furnish petitioner with all documents and other materials as
would enable her to determine whether respondents fairly
administered the examinations and correctly graded
petitioners performance therein, and, if warranted, to issue
to her a certificate of registration as a CPA.[11]
On February 5, 1998, respondents filed their
Opposition to the Application for a Writ of Preliminary
Mandatory Injunction, and argued, inter alia, that petitioner
was not entitled to the relief sought, that the respondents
did not have the duty to furnish petitioner with copies of the
Examination Papers, and that petitioner had other plain,
speedy, adequate remedy in the ordinary course of law,
namely, recourse to the PRC.[12] Respondents also filed their
Answer with Compulsory Counterclaim in the main case,
which asked that the Petition for Mandamus with Damages
be dismissed for lack of merit on the following grounds: (1)
petitioner failed to exhaust administrative remedies; (2) the
petition stated no cause of action because there was no
ministerial duty to release the information demanded; and
(3) the constitutional right to information on matters of
public concern is subject to limitations provided by law,
including Section 20, Article IV, of PRC Resolution No. 338,
series of 1994.[13]
On March 3, 1998, petitioner filed an Amended
Petition (which was admitted by the RTC), where she
included the following allegation in the body of her petition:
The allegations in this amended petition
are meant only to plead a cause of action
for access to the documents requested,
not for re-correction which petitioner shall
assert in the proper forum depending on,
among others, whether she finds sufficient
error in the documents to warrant such or
any other relief. None of the allegations in
this amended petition, including those in
the following paragraphs, is made to assert
a cause of action for re-correction.[14]

xxxx
3. that have been given in the
examination except if the
test bank for the subject
has on deposit at least
two thousand (2,000)
questions.[7]
After a further exchange of correspondence,[8] the
Board informed petitioner that an investigation was
conducted into her exam and there was no mechanical error
found in the grading of her test papers.[9]

If only to underscore the fact that she was not asking for a
re-checking of her exam, the following prayer for relief was
deleted from the Amended Petition: and, if warranted, to
issue to her a certificate of registration as a CPA.
On June 23, 1998, respondents filed a Manifestation
and Motion to Dismiss Application for Writ of Preliminary
Mandatory Injunction, on the ground that petitioner had
taken and passed the May 1998 CPA Licensure Examination
and had taken her oath as a CPA.[15] Petitioner filed her
Opposition on July 8, 1998.[16] Subsequently, on October 29,
1998, respondents filed their Answer with Counterclaim to

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the amended petition. They reiterated their original

allegations and further alleged that there was no cause of
action because at the time the Amended Petition was
admitted, they had ceased to be members of the Board of
Accountancy and they were not in possession of the
documents sought by the petitioner.[17]
Ruling of the Regional Trial Court
In an Order dated October 16, 1998, the trial court
granted respondents Motion to Dismiss Petitioners
Application for a Writ of Preliminary Mandatory Injunction
(not the main case), ruling that the matter had become
moot since petitioner passed the May CPA Licensure 1998
Examination and had already taken her oath as a CPA.[18]
Undaunted, petitioner sought and obtained leave to
file a Second Amended Petition for Mandamus with
Damages[19] where she finally impleaded the PRC as
respondent and included the following plea in her prayer:
WHEREFORE, petitioner respectfully prays
that:
xxxx

the case the moment it is impleaded as a

respondent in the Second Amended
Petition for Mandamus filed by the
petitioner which this Court is inclined to
grant.
As to the Motion for Conservatory
Measures filed by the petitioner, the Court
denies the same. It is clear that the PRC
has in custody the documents being
requested by the petitioner. It has also an
adequate facility to preserve and
safeguard the documents. To be sure that
the questioned documents are preserved
and safeguarded, the Court will order the
PRC to preserve and safeguard the
documents and make them available
anytime the Court or petitioner needs
them.
WHEREFORE, the Order of this Court
dated June 20, 2002 is reconsidered and
set aside. The Professional Regulation
Commission is ordered to preserve and
safeguard the following documents:

2. Judgment be issued

a)

(a) commanding respondents to give

petitioner all documents and other
materials as would enable her to
determine whether respondents fairly
administered the same examinations and
correctly graded petitioners performance
therein and, if warranted, to make the
appropriate revisions on the results
of her examination. (Emphasis ours)
On June 21, 2002, the trial court dismissed the
petition on the ground that the petition had already become
moot, since petitioner managed to pass the 1998 CPA Board
examinations.[20] Petitioner sought reconsideration[21] which
was granted by the trial court in its Omnibus
Order[22] dated November 11, 2002. The Omnibus Order
provides in part:
On the motion for reconsideration filed by
the petitioner, the Court is inclined to
reconsider its Order dismissing the
petition. The Court agrees with the
petitioner that the passing of the petitioner
in the subsequent CPA examination did not
render the petition moot and academic
because the relief and if warranted, to
issue to her a certificate of registration as
Certified Public Accountant was deleted
from the original petition. As regard the
issue of whether the petitioner has the
constitutional right to have access to the
questioned documents, the Court would
want first the parties to adduce evidence
before it can resolve the issue so that it
can make a complete determination of the
rights of the parties.
The Court would also want the Professional
Regulation Commission to give its side of

b)
c)

Questionnaire in
each of the seven subjects
comprising the Accountancy
Examination of October,
1997;
Petitioners
Answer Sheets; and
Answer keys to
the questionnaires.

SO ORDERED.[23]
Respondents filed a motion for reconsideration which was
denied.[24]
Proceedings before
the Court of Appeals
The RTC Decisions led to the filing of three separate
petitions for certiorari before the Court of Appeals (CA):
(a)
(b)
(c)

CA-GR SP No. 76498, a

petition filed by respondents Domondon,
Gangan, and Josef on April 11, 2003;
CA-GR SP No. 76546, a
petition filed by respondent Ibe on April 30,
2003; and
CA-GR SP No. 76545, a
petition filed by the Board of Accountancy
and PRC.

It is the first two proceedings that are pending

before us. In both cases, the CA set aside the RTC Decisions
and ordered the dismissal of Civil Case No. 98-8681.
Ruling of the Court of Appeals
In its December 11, 2006 Decision[25] in CA-GR SP
No. 76546, the CA ruled that the petition has become moot
in view of petitioners eventual passing of the 1998 CPA

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Board Exam. In CA-GR SP No. 76498, the CA found, in a

Decision dated February 16, 2004,[26] that (i) Section 20,
Article IV of PRC Resolution No. 338 constituted a valid
limitation on petitioners right to information and access to
government documents; (ii) the Examination Documents
were not of public concern, because petitioner merely
sought review of her failing marks; (iii) it was not the
ministerial or mandatory function of the respondents to
review and reassess the answers to examination questions
of a failing examinee; (iv) the case has become moot, since
petitioner already passed the May 1998 CPA Board
Examinations and took her oath as a CPA; and (v) petitioner
failed to exhaust administrative remedies, because, having
failed to secure the desired outcome from the respondents,
she did not elevate the matter to the PRC before seeking
judicial intervention.[27]
CA-GR SP No. 76498 and CA-GR SP No. 76546 were
brought before us by the petitioner and docketed as G.R.
Nos. 165036 and 175705, respectively. The cases were then
consolidated, in view of the similarity of the factual
antecedents and issues, and to avoid the possibility of
conflicting decisions by different divisions of this Court.[28]
Issues
Before us, petitioner argues that she has a right to
obtain copies of the examination papers so she can
determine for herself why and how she failed and to ensure
that the Board properly performed its duties. She argues
that the Constitution[29] as well as the Code of Conduct and
Ethical
Standards
for
Public
Officials
and
Employees[30] support her right to demand access to the
Examination Papers. Furthermore, she claims that there was
no need to exhaust administrative remedies, since no
recourse to the PRC was available, and only a pure question
of law is involved in this case. Finally, she claims that her
demand for access to documents was not rendered moot by
her passing of the 1998 CPA Board Exams.
Our Ruling

ministerial and mandatory one,

hence, not within the scope of the
writ of mandamus. The obvious remedy
of the petitioners from the adverse
judgment by the Medical Board of
Examiners was an appeal to the
Professional Regulation Commission itself,
and thence to the Court of Appeals; and
since they did not apply for relief to the
Commission prior to their institution of the
special civil action of mandamus in the
Regional Trial Court, the omission was fatal
to the action under the familiar doctrine
requiring exhaustion of administrative
remedies. Apart from the obvious
undesirability of a procedure which would
allow Courts to substitute their judgment
for that of Government boards in the
determination of successful examinees in
any administered examination an area in
which courts have no expertise and the
circumstance that the law declares the
Court of Appeals to be the appropriate
review Court, the Regional Trial Court was
quite correct in refusing to take cognizance
of an action seeking reversal of the quasijudicial action taken by the Medical Board
of Examiners.[32] (Emphasis ours)
For a writ of mandamus to issue, the applicant must
have a well-defined, clear, and certain legal right to the
thing demanded. The corresponding duty of the respondent
to perform the required act must be equally clear. [33] No such
clarity exists here; neither does petitioners right to demand
a revision of her examination results. And despite petitioners
assertions that she has not made any demand for recorrection, the most cursory perusal of her Second
Amended
Petition
and
her
prayer
that
the
respondents make the appropriate revisions on the results
of her examination belies this claim.

Propriety of Writ of Mandamus

At the very outset let us be clear of our ruling. Any claim for
re-correction or revision of her 1997 examination cannot be
compelled by mandamus. This much was made evident by
our ruling in Agustin-Ramos v. Sandoval,[31] where we
stated:
After deliberating on the petition in relation
to the other pleadings filed in the
proceedings at bar, the Court resolved to
DENY said petition for lack of merit. The
petition at bar prays for the setting aside of
the Order of respondent Judge dismissing
petitioners mandamus action to compel
the other respondents (Medical Board of
Examiners and the Professional Regulation
Commission) to reconsider, recorrect
and/or rectify the board ratings of the
petitioners from their present failing grades
to higher or passing marks. The function
of reviewing and re-assessing the
petitioners
answers
to
the
examination questions, in the light of
the facts and arguments presented
by them x x x is a discretionary
function of the Medical Board, not a

Like the claimants in Agustin, the remedy of

petitioner from the refusal of the Board to release the
Examination Papers should have been through an appeal to
the PRC. Undoubtedly, petitioner had an adequate remedy
from the Boards refusal to provide her with copies of the
Examination Papers. Under Section 5(a) of Presidential
Decree No. 223,[34] the PRC has the power to promulgate
rules and regulations to implement policies for the
regulation of the accounting profession.[35] In fact, it is one
such regulation (PRC Resolution No. 338) that is at issue in
this case. In addition, under Section 5(c), the PRC has the
power to
review, coordinate, integrate and
approve the policies, resolutions,
rules and regulations, orders or
decisions promulgated by the various
Boards with respect to the profession or
occupation under
their
jurisdictions
including the results of their licensure
examinations but their decisions on
administrative cases shall be final and
executory unless appealed to the
Commission within thirty (30) days from
the date of promulgation thereof.

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Petitioner posits that no remedy was available because the

PRCs power to review and approve in Section 5(c) only
refers to appeals in decisions concerning administrative
investigations[36]and not to instances where documents are
being requested. Not only is this position myopic and selfserving, it is bereft of either statutory or jurisprudential
basis. The PRCs quasi-legislative and enforcement powers,
encompassing its authority to review and approve policies,
resolutions, rules and regulations, orders, or decisions cover
more than administrative investigations conducted pursuant
to its quasi-judicial powers.[37] More significantly, since the
PRC itself issued the resolution questioned by the petitioner
here, it was in the best position to resolve questions
addressed to its area of expertise. Indeed, petitioner could
have saved herself a great deal of time and effort had she
given the PRC the opportunity to rectify any purported errors
committed by the Board.
One of the reasons for exhaustion of administrative
remedies is our well-entrenched doctrine on separation of
powers, which enjoins upon the Judiciary a becoming policy
of non-interference with matters falling primarily (albeit not
exclusively) within the competence of other departments.
[38]
Courts, for reasons of law, comity and convenience,
should not entertain suits unless the available administrative
remedies have first been resorted to and the proper
authorities have been given an appropriate opportunity to
act and correct their alleged errors, if any, committed in the
administrative forum. [39]
However, the principle of exhaustion of
administrative remedies is subject to exceptions, among
which is when only a question of law is involved. [40] This is
because issues of law such as whether petitioner has a
constitutional right to demand access to the Examination
Papers - cannot be resolved with finality by the
administrative officer.[41]
Issues of Mootness
We now turn to the question of whether the petition
has become moot in view of petitioners having passed the
1998 CPA examination. An issue becomes moot and
academic when it ceases to present a justiciable
controversy, so that a declaration on the issue would be of
no practical use or value.[42]
In this jurisdiction, any citizen may challenge any
attempt to obstruct the exercise of his or her right to
information and may seek its enforcement by mandamus.
[43]
And since every citizen possesses the inherent right to be
informed by the mere fact of citizenship, [44] we find that
petitioners belated passing of the CPA Board Exams does
not automatically mean that her interest in the Examination
Papers has become mere superfluity. Undoubtedly, the
constitutional question presented, in view of the likelihood
that the issues in this case will be repeated, warrants review.
[45]

The crux of this case is whether petitioner may

compel access to the Examination Documents through
mandamus. As always, our inquiry must begin with the
Constitution. Section 7, Article III provides:
Sec.7. The right of the people to
information on matters of public concern
shall be recognized. Access to official
records, and to documents, and papers

pertaining to official acts, transactions, or

decisions, as well to government research
data used as basis for policy development,
shall be afforded the citizen, subject to
such limitations as may be provided by
law.
Together with the guarantee of the right to
information, Section 28, Article II promotes full disclosure
and transparency in government, viz:
Sec. 28. Subject to reasonable conditions
prescribed by law, the State adopts and
implements a policy of full public disclosure
of all its transactions involving public
interest.
Like all the constitutional guarantees, the right to
information is not absolute. The people's right to information
is limited to "matters of public concern," and is further
"subject to such limitations as may be provided by
law." Similarly, the State's policy of full disclosure is limited
to "transactions involving public interest," and is "subject to
reasonable conditions prescribed by law". The Court has
always grappled with the meanings of the terms "public
interest" and "public concern." As observed in Legaspi v.
Civil Service Commission:[46]
In determining whether x x x a particular
information is of public concern there is no
rigid test which can be applied. "Public
concern" like "public interest" is a term that
eludes exact definition. Both terms
embrace a broad spectrum of subjects
which the public may want to know, either
because these directly affect their lives, or
simply because such matters naturally
arouse the interest of an ordinary citizen. In
the final analysis, it is for the courts to
determine on a case by case basis whether
the matter at issue is of interest or
importance, as it relates to or affects the
public.
We have also recognized the need to preserve a
measure of confidentiality on some matters, such as
national security, trade secrets and banking transactions,
criminal matters, and other confidential matters.[47]
We are prepared to concede that national board
examinations such as the CPA Board Exams are matters of
public concern. The populace in general, and the examinees
in particular, would understandably be interested in the fair
and competent administration of these exams in order to
ensure that only those qualified are admitted into the
accounting profession. And as with all matters pedagogical,
these examinations could be not merely quantitative means
of assessment, but also means to further improve the
teaching and learning of the art and science of accounting.
On the other hand, we do realize that there may be valid
reasons to limit access to the Examination Papers in order to
properly administer the exam. More than the mere
convenience of the examiner, it may well be that there exist
inherent difficulties in the preparation, generation, encoding,

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administration, and checking of these multiple choice exams

that require that the questions and answers remain
confidential for a limited duration. However, the PRC is not a
party to these proceedings. They have not been given an
opportunity to explain the reasons behind their regulations
or articulate the justification for keeping the Examination
Documents confidential. In view of the far-reaching
implications of this case, which may impact on every board
examination administered by the PRC, and in order that all
relevant issues may be ventilated, we deem it best to
remand these cases to the RTC for further proceedings.
IN VIEW OF THE FOREGOING, the petitions
are GRANTED. The December 11, 2006 and February 16,
2004 Decisions of the Court of Appeals in CA-GR SP No.
76546 and CA-GR SP No. 76498, respectively, are
hereby SET ASIDE. The November 11, 2002 and January
30, 2003 Orders of the Regional Trial Court of Manila, Branch
33, in Civil Case No. 98-86881 are AFFIRMED. The case is
remanded to the Regional Trial Court for further proceedings.
SO ORDERED.
FIRST DIVISION
MERIDA WATER DISTRICT, ITS BOARD
OF
DIRECTORS,
NAMELY: SUSANO
TOREJAS,
JR., LOURDES QUINTE,
ROMULO PALES, CARMELITA DE LOS
ANGELES, VILLAFRANCA ROSAL, AND
MWD GENERAL MANAGER NILO C.
LUCERO,
Petitioners,
- versus FRANCISCO
BACARRO,
VICTORINO
DOMANILLO, PATRICK BACOL, CARLITO
BARRERA, RUSTICA MENDOLA, JOSE
DELIO HERMOSO, CHARITO TOLORIO,
MA. VICTORIA MAINGQUE, ELMER GO,
AND GERARDO BIOCO,
Respondents.

Torejas, Jr.; members of the Board of Directors, Lourdes

Quinte, Romulo Pales, Carmelita de los Angeles, and
Villafranca Rosal; and General Manager, Nilo C. Lucero.
On October 10, 2001, Merida Water District conducted
a public hearing for the purpose of increasing the water
rate.[5]
On March 7, 2002, Merida Water District
received a letter from the Local Water Utilities
Administration (LWUA).[6] The letter stated that
on March 5, 2002, the LWUA Board of Trustees, per
Board Resolution No. 63, series of 2002, confirmed
Merida Water Districts proposed water rates.
[7]
Attached to the letter was the Rate Schedule of
Approved Water Rates containing a progressive
increase of water rates over a certain period.[8]
On September 3, 2002, Merida Water District
approved Resolution No. 006-02, implementing a water
rate increase of P90 for the first ten cubic meters of
water consumption.[9] Thereafter, petitioners issued
notices of disconnection to concessionaires who
refused to pay the water rate increase and did not
render service to those who opted to pay the increased
rate on installment basis.[10]

G.R. NO. 165993 On February 13, 2003, respondents, consumers

of Merida Water District, filed a Petition for Injunction,
etc.[11] against petitioners before the RTC. Respondents
sought to enjoin the petitioners from collecting
payment of P90 for the first ten cubic meters of water
Present: consumption. Respondents alleged that the imposed
rate was contrary to the rate increase agreed upon
PUNO,
during the public hearing. Respondents claimed that
CARPIO, petitioners violated Letter of Instructions (LOI) No. 700
AZCUNA, by: (1) implementing a water rate increase exceeding
REYES,
60% of the previous rate; and (2) failing to conduct a
LEONARDO-DE
public
CASTRO,
hearing for the imposed rate of P90.[12]

On February 26, 2003, petitioners filed a

Motion to Dismiss, alleging that respondents petition
lacked a cause of action as they failed to exhaust
administrative remedies under Presidential Decree
(P.D.) No. 198, the Provincial Water Utilities Act of 1973,
Promulgated:
as amended by P.D. Nos. 768 and 1479. [13] On the same
date, respondents questioned the legality of the water
rate increase before the National Water Resources
SEPTEMBER
Board
30, 2008
(NWRB).[14]
x----------------------------------------------------------------------------------------x
In its Order[15] dated March 3, 2003, the RTC
denied petitioners motion to dismiss. The RTC held
DECISION
there was no need to exhaust administrative remedies,
because petitioners: (1) failed to comply with the legal
PUNO, C.J.:
requisites of hearing and notice; and (2) violated LOI
No. 700 for prescribing a water rate increase of almost
This Petition for Review on Certiorari seeks to set aside
100% from the previous rate. Petitioners Motion for
the Decision[1]
Reconsideration[16] was denied on March 31, 2003.[17]
and Resolution[2] of the Court of Appeals (CA),
dated January 30, 2004 and September 16, 2004,
respectively, in CA-G.R. SP No.77141, which affirmed
the Orders[3] of the Regional Trial Court (RTC) in favor of
respondents.
Petitioners are Merida Water District, a
government-owned and controlled corporation[4] that
operates
the
water
utility
services
in
the municipality of Merida, Leyte; its Chairman, Susano

On April 15, 2003, petitioners filed a Petition

for Certiorari[18] with the CA, assailing the trial court
orders for lack of jurisdiction. The CA affirmed the
orders, upholding the RTCs jurisdiction and the
propriety of respondents recourse to the trial court
notwithstanding the rule on the exhaustion of
administrative remedies. Petitioners filed a Motion for
Reconsideration,[19] which the CA denied.

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Petitioners reiterate their arguments before

this Court, alleging the impropriety of the respondents
recourse to the trial court considering their failure to
exhaust administrative remedies. Thus, the sole issue
for resolution is whether respondents recourse to the
trial court is proper despite their failure to exhaust
administrative remedies.
At the outset, it must be clarified that the case
at bar concerns a local water districts establishment of
a rate increase. As can be gleaned from the material
averments in the complaint below, respondents
allegations, that petitioners committed a patently
illegal act by implementing a water rate increase
beyond that prescribed by LOI No. 700 and that
petitioners violated due process in implementing a rate
not agreed upon during the public hearing, point to the
conclusion that this controversy arose from the
determination of the rate itself.
P.D. No. 198 as amended by P.D. No. 1479
provides for the administrative remedies regarding a
review of water rates, to determine whether a local
water district complied with the legal requirements in
establishing such rates:
SEC. 11. The last paragraph of Section
63 of the same decree is hereby
amended to read as follows:
The rates or charges
established by such local
district, after hearing shall
have been conducted for
the purpose, shall be
subject to review by the
Administration to establish
compliance
with
the
abovestated
provisions.
Said review of rates or
charges
shall
be
executory and enforceable
after the lapse of seven
calendar
days
from
posting thereof in a public
place in the locality of the
water
district,
without
prejudice to an appeal
being taken therefrom by
a water concessionaire to
the
[NWRB]
whose
decision thereon shall be
appealable to the Office of
the President. An appeal
to the [NWRB] shall be
perfected within thirty
days after the expiration
of the seven-day period of
posting. The [NWRB] shall
decide on appeal within
thirty
days
from
perfection.[20]
After LWUA reviews the rates established by a local
water district, a water concessionaire may appeal the
same to the NWRB. The NWRBs decision may then be
appealed to the Office of the President.

Respondents failed to exhaust administrative

remedies by their failure to appeal to the NWRB. Nonexhaustion of administrative remedies renders the
action premature.[21] The Court has consistently
reiterated the rationale behind the doctrine of
exhaustion of administrative remedies:
One of the reasons for the doctrine of
exhaustion is the separation of powers,
which enjoins upon the Judiciary a
becoming policy of non-interference
with matters coming primarily (albeit
not exclusively) within the competence
of the other departments. The theory is
that the administrative authorities are in
a better position to resolve questions
addressed to their particular expertise
and
that
errors
committed
by
subordinates in their resolution may be
rectified by their superiors if given a
chance to do so It may be added that
strict enforcement of the rule could also
relieve the courts of a considerable
number of avoidable cases which
otherwise would burden their heavily
loaded dockets.[22]
Respondents justify their failure to observe the
administrative process due to the following grounds:
(1) that petitioners increase of the water rate is
patently illegal; and (2) a denial of due process.
We are not convinced.
The argument of patent illegality is without
merit. The first paragraph of LOI No. 700 provides that
the LWUA shall:
(f) Ensure that the water rates are not
abruptly increased beyond the water
users ability to pay, seeing to it that
each increase if warranted, does not
exceed 60% of the current rate.[23]
The non-observance of the doctrine of exhaustion has
been upheld in cases when the patent illegality of the
assailed act is clear, undisputed, and more
importantly, evident outright.[24] In these cases, the
assailed act did not require the consideration of the
existence and relevancy of specific surrounding
circumstances and their relation to each other for the
Court to conclude that the act was indeed patently
illegal. In the case at bar, certain facts need to be
resolved first, to determine whether petitioners
increase of the water rate is a patently illegal act.
The determination of the current rate from
which to compute the allowable increase of 60% is a
question of fact that cannot be properly threshed out
before this Court. The NWRB must be given an
opportunity to make a factual finding with respect to
this question. This Court accords the factual findings of
administrative agencies with utmost consideration
because of the special knowledge and expertise
gained by these quasi-judicial tribunals from handling
specific matters falling under their jurisdiction.
[25]
Considering that the LWUA confirmed the Rate
Schedule of Approved Water Rates for Merida Water
District, a schedule that contains different rates that
gradually increase, the determination of whether the

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computation of the percentage increase complies with

the 60% limitation is a factual matter best left to the
competence of the NWRB.
The argument of denial of due process deserves scant
consideration. The non-observance of the doctrine of
exhaustion has been recognized in cases where the
party seeking outright judicial intervention was denied
the opportunity to be heard in administrative
proceedings.[26] In the case at bar, respondents were
not denied the opportunity to be heard, as Merida
Water District conducted a public hearing on October
10, 2001 regarding the increase of water rates.
The allegation of a denial of due process actually
involves the question of whether the public hearing
on October 10, 2001 complied with the legal
requirement of conducting a public hearing prior to
increasing water rates. The fifth paragraph of LOI No.
700 requires the water district concerned to conduct a
public hearing prior to any increase in water rates.
[27]
The third paragraph of LOI No. 744 requires the
LWUA and water districts to prepare a system of public
consultation through hearings when considering
increases in water rates.[28] Furthermore, Section 63 of
P.D. No. 198, as amended by P.D. No. 1479 requires
the following:
The rates or charges established by
such local district, after hearing shall
have been conducted for the purpose,
shall be subject to review by the
Administration to establish compliance
with the abovestated provisions. Said
review of rates or charges shall be
executory and enforceable after the
lapse of seven calendar days from
posting thereof in a public place in the
locality of the water district x x x.
When a local water district increases water rates, the
law requires the district concerned to conduct a public
hearing regarding these rates. The same rates are
subject to review by the LWUA, which is tasked to
determine whether the establishment of the rates
complies with the law.[29] Thus, compliance with the
public hearing requirement means that the rates
presented in the hearing should be the same rates
submitted to the LWUA for review and approval.
Considering that there was no finding with regard to
this question of fact, whether the rates presented in
the hearing were the same rates approved by the
LWUA, the NWRB must be given the opportunity to
resolve this matter.
IN VIEW WHEREOF, the petition is GRANTED. The
Decision and Resolution of the Court of Appeals in CAG.R. SP No.77141 dated January 30, 2004 and
September 16, 2004, respectively, are REVERSED and
SET ASIDE.
SO ORDERED.
Warning: Long case

SOUTHERN
CROSS
CEMENT
CORPORATION, petitioner, vs.
CEMENT
MANUFACTURERS ASSOCIATION OF THE
PHILIPPINES, THE SECRETARY OF THE
DEPARTMENT OF TRADE AND INDUSTRY,
THE SECRETARY OF THE DEPARTMENT OF
FINANCE and THE COMMISSIONER OF THE
BUREAU OF CUSTOMS, respondents.
RESOLUTION
TINGA, J.:
Cement is hardly an exciting subject for litigation.
Still, the parties in this case have done their best to put
up a spirited advocacy of their respective positions,
throwing in everything including the proverbial kitchen
sink. At present, the burden of passion, if not proof, has
shifted to public respondents Department of Trade and
Industry (DTI) and private respondent Philippine
Cement Manufacturers Corporation (Philcemcor),[1] who
now seek reconsideration of our Decision dated 8 July
2004 (Decision), which granted the petition of
petitioner
Southern Cross
Cement
Corporation
(Southern Cross).
This case, of course, is ultimately not just about
cement. For respondents, it is about love of country
and the future of the domestic industry in the face of
foreign competition. For this Court, it is about
elementary statutory construction, constitutional
limitations on the executive power to impose tariffs
and similar measures, and obedience to the law. Just as
much was asserted in the Decision, and the same holds
true with this present Resolution.
An extensive narration of facts can be found in
the Decision.[2] As can well be recalled, the case
centers on the interpretation of provisions of Republic
Act No. 8800, the Safeguard Measures Act (SMA),
which was one of the laws enacted by Congress soon
after the Philippines ratified the General Agreement on
Tariff and Trade (GATT) and the World Trade
Organization (WTO) Agreement.[3] The SMA provides
the structure and mechanics for the imposition of
emergency measures, including tariffs, to protect
domestic industries and producers from increased
imports which inflict or could inflict serious injury on
them.[4]
A brief summary as to how the present petition
came to be filed by Southern Cross. Philcemcor, an
association of at least eighteen (18) domestic cement
manufacturers filed with the DTI a petition seeking the
imposition of safeguard measures on gray Portland
cement,[5] in accordance with the SMA. After the DTI
issued
a
provisional
safeguard
measure, [6] the
application was referred to the Tariff Commission for a
formal investigation pursuant to Section 9 of the SMA
and its Implementing Rules and Regulations, in order to
determine whether or not to impose a definitive
safeguard measure on imports of gray Portland
cement. The Tariff Commission held public hearings
and conducted its own investigation, then on 13 March
2002, issued its Formal Investigation Report (Report).
The Report determined as follows:

[G.R. No. 158540. August 3, 2005]

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The elements of serious injury and imminent threat of

serious injury not having been established, it is hereby
recommended that no definitive general safeguard
measure be imposed on the importation of gray
Portland cement.[7]
The DTI sought the opinion of the Secretary of
Justice whether it could still impose a definitive
safeguard measure notwithstanding the negative
finding of the Tariff Commission. After the Secretary of
Justice opined that the DTI could not do so under the
SMA,[8] the
DTI
Secretary
then
promulgated
a Decision[9] wherein
he
expressed
the
DTIs
disagreement with the conclusions of the Tariff
Commission, but at the same time, ultimately denying
Philcemcors application for safeguard measures on the
ground that the he was bound to do so in light of the
Tariff Commissions negative findings.[10]
Philcemcor challenged this Decision of the DTI
Secretary by filing with the Court of Appeals a Petition
for Certiorari, Prohibition and Mandamus[11] seeking to
set aside the DTI Decision, as well as the Tariff
Commissions Report. It prayed that the Court of
Appeals direct the DTI Secretary to disregard the
Report and to render judgment independently of the
Report. Philcemcor argued that the DTI Secretary,
vested as he is under the law with the power of review,
is not bound to adopt the recommendations of the
Tariff Commission; and, that the Report is void, as it is
predicated on a flawed framework, inconsistent
inferences and erroneous methodology.[12]
The Court of Appeals Twelfth Division, in
a Decision[13] penned by Court of Appeals Associate
Justice
Elvi
John
Asuncion, [14] partially
granted
Philcemcors petition. The appellate court ruled that it
had jurisdiction over the petition for certiorari since it
alleged grave abuse of discretion. While it refused to
annul the findings of the Tariff Commission, [15] it also
held that the DTI Secretary was not bound by the
factual findings of the Tariff Commission since such
findings are merely recommendatory and they fall
within the ambit of the Secretarys discretionary review.
It determined that the legislative intent is to grant the
DTI Secretary the power to make a final decision on the
Tariff Commissions recommendation.[16]
On 23 June 2003, Southern Cross filed the present
petition, arguing that the Court of Appeals has no
jurisdiction over Philcemcors petition, as the proper
remedy is a petition for review with the CTA
conformably with the SMA, and; that the factual
findings of the Tariff Commission on the existence or
non-existence of conditions warranting the imposition
of general safeguard measures are binding upon the
DTI Secretary.
Despite
the
fact
that
the
Court
of
Appeals Decision had not yet become final, its binding
force was cited by the DTI Secretary when he issued a
new Decision on 25 June 2003, wherein he ruled that
that in light of the appellate courts Decision, there was
no longer any legal impediment to his deciding
Philcemcors application for definitive safeguard
measures.[17] He made a determination that, contrary
to the findings of the Tariff Commission, the local
cement industry had suffered serious injury as a result
of the import surges.[18] Accordingly, he imposed a

definitive safeguard measure on the importation of

gray Portland cement, in the form of a definitive
safeguard duty in the amount of P20.60/40 kg. bag for
three years on imported gray Portland Cement.[19]
On 7 July 2003, Southern Cross filed with the Court
a Very Urgent Application for a Temporary Restraining
Order
and/or
A
Writ
of
Preliminary
Injunction (TRO Application), seeking to enjoin the DTI
Secretary from enforcing his Decision of 25 June 2003
in view of the pending petition before this Court.
Philcemcor filed an opposition, claiming, among others,
that it is not this Court but the CTA that has jurisdiction
over the application under the law.
On 1 August 2003, Southern Cross filed with the
CTA a Petition for Review, assailing the DTI Secretarys
25 June 2003 Decision which imposed the definite
safeguard measure. Yet Southern Cross did not
promptly inform this Court about this filing. The first
time the Court would learn about this Petition with the
CTA was when Southern Cross mentioned such fact in a
pleading dated 11 August 2003 and filed the next day
with this Court.[20]
Philcemcor argued before this Court that Southern
Cross had deliberately and willfully resorted to forumshopping; that the CTA, being a special court of limited
jurisdiction, could only review the ruling of the DTI
Secretary when a safeguard measure is imposed; and
that the factual findings of the Tariff Commission are
not binding on the DTI Secretary.[21]
After
giving
due
course
to
Southern
Crosss Petition, the Court called the case for oral
argument on 18 February 2004.[22] At the oral
argument, attended by the counsel for Philcemcor and
Southern Cross and the Office of the Solicitor General,
the Court simplified the issues in this wise: (i) whether
the Decision of the DTI Secretary is appealable to the
CTA or the Court of Appeals; (ii) assuming that the
Court
of
Appeals
has
jurisdiction,
whether
its Decision is in accordance with law; and, whether
a Temporary Restraining Order is warranted.[23]
After the parties had filed their respective
memoranda, the Courts Second Division, to which the
case
had
been
assigned,
promulgated
its Decision granting
Southern
Crosss Petition.
[24]
The Decision was unanimous, without any separate
or concurring opinion.
The Court ruled that the Court of Appeals had no
jurisdiction over Philcemcors Petition, the proper
remedy under Section 29 of the SMA being a petition
for review with the CTA; and that the Court of Appeals
erred in ruling that the DTI Secretary was not bound by
the negative determination of the Tariff Commission
and could therefore impose the general safeguard
measures, since Section 5 of the SMA precisely
required that the Tariff Commission make a positive
final determination before the DTI Secretary could
impose these measures. Anent the argument that
Southern Cross had committed forum-shopping, the
Court concluded that there was no evident malicious
intent to subvert procedural rules so as to match the
standard under Section 5, Rule 7 of the Rules of Court
of willful and deliberate forum shopping. Accordingly,
the Decision of the Court of Appeals dated 5 June 2003
was declared null and void.

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The Court likewise found it necessary to nullify

the Decision of the DTI Secretary dated 25 June 2003,
rendered after the filing of this present Petition.
This Decision by the DTI Secretary had cited the
obligatory force of the null and void Court of
Appeals Decision, notwithstanding the fact that the
decision of the appellate court was not yet final and
executory. Considering that the decision of the Court of
Appeals was a nullity to begin with, the inescapable
conclusion was that the new decision of the DTI
Secretary, prescinding as it did from the imprimatur of
the decision of the Court of Appeals, was a nullity as
well.
After the Decision was reported in the media,
there was a flurry of newspaper articles citing alleged
negative reactions to the ruling by the counsel for
Philcemcor, the DTI Secretary, and others. [25] Both
respondents promptly filed their respective motions for
reconsideration.
On
21
September
2004,
the
Court En
Banc resolved, upon motion of respondents, to accept
the
petition
and
resolve
the Motions
for
Reconsideration.[26] The case was then reheard[27] on
oral argument on 1 March 2005. During the hearing,
the Court elicited from the parties their arguments on
the two central issues as discussed in the
assailed Decision, pertaining to the jurisdictional
aspect and to the substantive aspect of whether the
DTI Secretary may impose a general safeguard
measure despite a negative determination by the Tariff
Commission.
The
Court
chose
not
to
hear
argumentation on the peripheral issue of forumshopping,[28] although this question shall be tackled
herein shortly. Another point of concern emerged
during oral arguments on the exercise of quasi-judicial
powers by the Tariff Commission, and the parties were
required by the Court to discuss in their respective
memoranda whether the Tariff Commission could
validly exercise quasi-judicial powers in the exercise of
its mandate under the SMA.
The Court has likewise been notified that
subsequent to the rendition of the Courts Decision,
Philcemcor filed a Petition for Extension of the
Safeguard Measure with the DTI, which has been
referred to the Tariff Commission. [29] In an Urgent
Motion dated 21 December 2004, Southern Cross
prayed that Philcemcor, the DTI, the Bureau of
Customs, and the Tariff Commission be directed to
cease and desist from taking any and all actions
pursuant to or under the null and void CA Decision and
DTI Decision, including proceedings to extend the
safeguard
measure.[30] In
a Manifestation
and
Motion dated 23 June 2004, the Tariff Commission
informed the Court that since no prohibitory injunction
or order of such nature had been issued by any court
against the Tariff Commission, the Commission
proceeded to complete its investigation on the petition
for extension, pursuant to Section 9 of the SMA, but
opted to defer transmittal of its report to the DTI
Secretary pending guidance from this Court on the
propriety
of
such
a
step
considering
this
pending Motion
for
Reconsideration.
In
a Resolutiondated 5 July 2005, the Court directed the
parties to maintain the status quo effective of even
date, and until further orders from this Court. The
denial of the pending motions for reconsideration will

obviously render the pending petition for extension

academic.

I. Jurisdiction of the Court of Tax Appeals

Under Section 29 of the SMA
The
first
core
issue
resolved
in
the
assailed Decision was whether the Court of Appeals
had jurisdiction over the special civil action
for certiorari filed by Philcemcor assailing the 5 April
2002 Decision of the DTI Secretary. The general
jurisdiction of the Court of Appeals over special civil
actions for certiorari is beyond doubt. The Constitution
itself assures that judicial review avails to determine
whether or not there has been a grave abuse of
discretion amounting to lack or excess of jurisdiction on
the part of any branch or instrumentality of the
Government. At the same time, the special civil action
of certiorari is available only when there is no plain,
speedy and adequate remedy in the ordinary course of
law.[31] Philcemcors recourse of special civil action
before
the
Court
of
Appeals
to
challenge
the Decision of the DTI Secretary not to impose the
general safeguard measures is not based on the SMA,
but on the general rule on certiorari. Thus, the Court
proceeded to inquire whether indeed there was no
other plain, speedy and adequate remedy in the
ordinary course of law that would warrant the
allowance of Philcemcors special civil action.
The answer hinged on the proper interpretation of
Section 29 of the SMA, which reads:
Section 29. Judicial Review. Any interested party who is
adversely affected by the ruling of the Secretary in
connection with the imposition of a safeguard
measure may file with the CTA, a petition for review of
such ruling within thirty (30) days from receipt thereof.
Provided, however, that the filing of such petition for
review shall not in any way stop, suspend or otherwise
toll the imposition or collection of the appropriate tariff
duties or the adoption of other appropriate safeguard
measures, as the case may be.
The petition for review shall comply with the same
requirements and shall follow the same rules of
procedure and shall be subject to the same disposition
as in appeals in connection with adverse rulings on tax
matters to the Court of Appeals.[32] (Emphasis supplied)
The matter is crucial for if the CTA properly had
jurisdiction over the petition challenging the DTI
Secretarys ruling not to impose a safeguard measure,
then the special civil action of certiorari resorted to
instead by Philcemcor would not avail, owing to the
existence of a plain, speedy and adequate remedy in
the ordinary course of law.[33] The Court of Appeals, in
asserting that it had jurisdiction, merely cited the
general rule on certiorari jurisdiction without bothering
to refer to, or possibly even study, the import of
Section 29. In contrast, this Court duly considered the
meaning and ramifications of Section 29, concluding
that it provided for a plain, speedy and adequate
remedy that Philcemcor could have resorted to instead

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of filing the special civil action before the Court of

Appeals.

more than just a ruling imposing the safeguard

measure.

Philcemcor still holds on to its hypothesis that the

petition for review allowed under Section 29 lies only if
the DTI Secretarys ruling imposes a safeguard
measure. If, on the other hand, the DTI Secretarys
ruling is not to impose a safeguard measure, judicial
review under Section 29 could not be resorted to since
the provision refers to rulings in connection with the
imposition of the safeguard measure, as opposed to
the non-imposition. Since the Decision dated 5 April
2002 resolved against imposing a safeguard measure,
Philcemcor claims that the proper remedial recourse is
a petition for certiorari with the Court of Appeals.

The key phrase remains in connection with. It has

connotations that are obvious even to the layman. A
ruling issued in connection with the imposition of a
safeguard measure would be one that bears some
relation to the imposition of a safeguard measure.
Obviously, a ruling imposing a safeguard measure is
covered by the phrase in connection with, but such
ruling is by no means exclusive. Rulings which modify,
suspend or terminate a safeguard measure are
necessarily in connection with the imposition of a
safeguard measure. So does a ruling allowing for a
provisional safeguard measure. So too, a ruling by the
DTI Secretary refusing to refer the application for a
safeguard measure to the Tariff Commission. It is clear
that there is an entire subset of rulings that the DTI
Secretary may issue in connection with the imposition
of a safeguard measure, including those that are
provisional, interlocutory, or dispositive in character.
[36]
By the same token, a ruling not to impose a
safeguard measure is also issued in connection with
the imposition of a safeguard measure.

Interestingly, Republic Act No. 9282, promulgated

on 30 March 2004, expressly vests unto the CTA
jurisdiction over [d]ecisions of the Secretary of Trade
and Industry, in case of nonagricultural product,
commodity or article . . . involving . . . safeguard
measures under Republic Act No. 8800, where
either party may appeal the decision to impose
or not to impose said duties.[34] It is clear that any
future attempts to advance the literalist position of the
respondents would consequently fail. However, since
Republic Act No. 9282 has no retroactive effect, this
Court had to decide whether Section 29 vests
jurisdiction on the CTA over rulings of the DTI Secretary
not to impose a safeguard measure. And the Court, in
its assailed Decision, ruled that the CTA is endowed
with such jurisdiction.
Both respondents reiterate their fundamentalist
reading that Section 29 authorizes the petition for
review before the CTA only when the DTI Secretary
decides to impose a safeguard measure, but not when
he decides not to. In doing so, they fail to address what
the Court earlier pointed out would be the absurd
consequences if their interpretation is followed to its
logical end. But in affirming, as the Court now does, its
previous holding that the CTA has jurisdiction over
petitions for review questioning the non-imposition of
safeguard measures by the DTI Secretary, the Court
relies on the plain reading that Section 29 explicitly
vests jurisdiction over such petitions on the CTA.
Under Section 29, there are three requisites to
enable the CTA to acquire jurisdiction over the petition
for review contemplated therein: (i) there must be a
ruling by the DTI Secretary; (ii) the petition must be
filed by an interested party adversely affected by the
ruling; and (iii) such ruling must be in connection with
the imposition of a safeguard measure. Obviously,
there are differences between a ruling for the
imposition of a safeguard measure, and one issued in
connection with the imposition of a safeguard measure.
The first adverts to a singular type of ruling, namely
one that imposes a safeguard measure. The second
does not contemplate only one kind of ruling, but a
myriad of rulings issued in connection with the
imposition of a safeguard measure.
Respondents argue that the Court has given an
expansive interpretation to Section 29, contrary to the
established rule requiring strict construction against
the existence of jurisdiction in specialized courts.
[35]
But it is the express provision of Section 29,
and not this Court, that mandates CTA
jurisdiction to be broad enough to encompass

In arriving at the proper interpretation of in

connection with, the Court referred to the U.S.
Supreme Court cases of Shaw v. Delta Air Lines, Inc.
[37]
and New York State Blue Cross Plans v. Travelers Ins.
[38]
Both cases considered the interpretation of the
phrase relates to as used in a federal statute, the
Employee
Retirement
Security
Act
of
1974.
Respondents criticize the citations on the premise that
the cases are not binding in our jurisdiction and do not
involve safeguard measures. The criticisms are offtangent considering that our ruling did not call for the
application of the Employee Retirement Security Act of
1974 in the Philippine milieu. The American cases are
not relied upon as precedents, but as guides of
interpretation. Certainly, if there are applicable local
precedents pertaining to the interpretation of the
phrase in connection with, then these certainly would
have some binding force. But none avail, and neither
do the respondents demonstrate a countervailing
holding in Philippine jurisprudence.
Yet we should consider the claim that an
expansive interpretation was favored in Shaw because
the law in question was an employees benefit law that
had to be given an interpretation favorable to its
intended
beneficiaries.[39] In
the
next
breath,
Philcemcor notes that the U.S. Supreme Court itself
was alarmed by the expansive interpretation
in Shaw and thus in Blue Cross, the Shaw ruling was
reversed and a more restrictive interpretation was
applied based on congressional intent.[40]
Respondents would like to make it appear that the
Court acted rashly in applying a discarded precedent
in Shaw, a non-binding foreign precedent nonetheless.
But the Court did make the following observation in
its Decision pertaining to Blue Cross:
Now, let us determine the maximum scope and reach
of the phrase in connection with as used in Section 29
of the SMA. A literalist reading or linguistic survey may
not satisfy. Even the U.S. Supreme Court in New York
State Blue Cross Plans v. Travelers Ins.[41] conceded
that the phrases relate to or in connection with may be

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extended to the farthest stretch of indeterminacy for,

universally, relations or connections are infinite and
stop nowhere.[42] Thus, in the case the U.S. High
Court, examining the same phrase of the same
provision of law involved in Shaw, resorted to
looking at the statute and its objectives as the
alternative to an uncritical literalism. A similar
inquiry into the other provisions of the SMA is in
order to determine the scope of review accorded
therein to the CTA.[43]
In the next four paragraphs of the Decision,
encompassing four pages, the Court proceeded to
inquire into the SMA and its objectives as a means to
determine the scope of rulings to be deemed as in
connection with the imposition of a safeguard measure.
Certainly, this Court did not resort to the broadest
interpretation possible of the phrase in connection
with, but instead sought to bring it into the context of
the scope and objectives of the SMA. The ultimate
conclusion of the Court was that the phrase includes all
rulings of the DTI Secretary which arise from the time
an application or motu proprio initiation for the
imposition of a safeguard measure is taken. [44] This
conclusion was derived from the observation that the
imposition of a general safeguard measure is a
process, initiated motu proprio or through application,
which undergoes several stages upon which the DTI
Secretary is obliged or may be called upon to issue a
ruling.
It should be emphasized again that by utilizing the
phrase in connection with, it is the SMA that expressly
vests jurisdiction on the CTA over petitions questioning
the non-imposition by the DTI Secretary of safeguard
measures. The Court is simply asserting, as it should,
the clear intent of the legislature in enacting the SMA.
Without in connection with or a synonymous phrase,
the Court would be compelled to favor the respondents
position that only rulings imposing safeguard measures
may be elevated on appeal to the CTA. But considering
that the statute does make use of the phrase, there is
little sense in delving into alternate scenarios.
Respondents fail to convincingly address the
absurd consequences pointed out by the Decision had
their proposed interpretation been adopted. Indeed,
suffocated beneath the respondents legalistic tinsel is
the elemental questionwhat sense is there in vesting
jurisdiction on the CTA over a decision to impose a
safeguard measure, but not on one choosing not to
impose. Of course, it is not for the Court to inquire into
the wisdom of legislative acts, hence the rule that
jurisdiction must be expressly vested and not
presumed. Yet ultimately, respondents muddle the
issue by making it appear that the Decision has
uniquely expanded the jurisdictional rules. For the
respondents, the proper statutory interpretation of the
crucial phrase in connection with is to pretend that the
phrase did not exist at all in the statute. The Court, in
taking the effort to examine the meaning and extent of
the phrase, is merely giving breath to the legislative
will.
The Court likewise stated that the respondents
position calls for split jurisdiction, which is judicially
abhorred. In rebuttal, the public respondents cite
Sections 2313 and 2402 of the Tariff and Customs Code
(TCC), which allegedly provide for a splitting of

jurisdiction of the CTA. According to public

respondents, under Section 2313 of the TCC, a decision
of the Commissioner of Customs affirming a decision of
the Collector of Customs adverse to the government is
elevated for review to the Secretary of Finance.
However, under Section 2402 of the TCC, a ruling of
the Commissioner of the Bureau of Customs against a
taxpayer must be appealed to the Court of Tax
Appeals, and not to the Secretary of Finance.
Strictly speaking, the review by the Secretary of
Finance of the decision of the Commissioner of
Customs is not judicial review, since the Secretary of
Finance holds an executive and not a judicial office.
The contrast is apparent with the situation in this case,
wherein the interpretation favored by the respondents
calls for the exercise of judicial review by two different
courts over essentially the same questionwhether the
DTI Secretary should impose general safeguard
measures. Moreover, as petitioner points out, the
executive department cannot appeal against itself. The
Collector of Customs, the Commissioner of Customs
and the Secretary of Finance are all part of the
executive branch. If the Collector of Customs rules
against the government, the executive cannot very
well bring suit in courts against itself. On the other
hand, if a private person is aggrieved by the decision of
the Collector of Customs, he can have proper recourse
before the courts, which now would be called upon to
exercise judicial review over the action of the executive
branch.
More fundamentally, the situation involving split
review of the decision of the Collector of Customs
under the TCC is not apropos to the case at bar. The
TCC in that instance is quite explicit on the divergent
reviewing body or official depending on which party
prevailed at the Collector of Customs level. On the
other hand, there is no such explicit expression of
bifurcated appeals in Section 29 of the SMA.
Public
respondents
likewise
cite Fabian
v.
Ombudsman[45] as another instance wherein the Court
purportedly allowed split jurisdiction. It is argued that
the Court, in ruling that it was the Court of Appeals
which possessed appellate authority to review
decisions of the Ombudsman in administrative cases
while the Court retaining appellate jurisdiction of
decisions of the Ombudsman in non-administrative
cases, effectively sanctioned split jurisdiction between
the Court and the Court of Appeals.[46]
Nonetheless, this argument is successfully
undercut by Southern Cross, which points out the
essential differences in the power exercised by the
Ombudsman in administrative cases and nonadministrative cases relating to criminal complaints. In
the former, the Ombudsman may impose an
administrative penalty, while in acting upon a criminal
complaint what the Ombudsman undertakes is a
preliminary investigation. Clearly, the capacity in which
the Ombudsman takes on in deciding an administrative
complaint is wholly different from that in conducting a
preliminary investigation. In contrast, in ruling upon a
safeguard measure, the DTI Secretary acts in one and
the same role. The variance between an order granting
or denying an application for a safeguard measure is
polar though emanating from the same equator, and

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does not arise from the distinct character of the

putative actions involved.
Philcemcor imputes intelligent design behind the
alleged intent of Congress to limit CTA review only to
impositions of the general safeguard measures. It
claims that there is a necessary tax implication in case
of an imposition of a tariff where the CTAs expertise is
necessary, but there is no such tax implication, hence
no need for the assumption of jurisdiction by a
specialized agency, when the ruling rejects the
imposition of a safeguard measure. But of course,
whether the ruling under review calls for the imposition
or non-imposition of the safeguard measure, the
common question for resolution still is whether or not
the tariff should be imposed an issue definitely fraught
with a tax dimension. The determination of the
question will call upon the same kind of expertise that
a specialized body as the CTA presumably possesses.
In response to the Courts observation that the
setup proposed by respondents was novel, unusual,
cumbersome and unwise, public respondents invoke
the maxim that courts should not be concerned with
the wisdom and efficacy of legislation.[47] But this
prescinds from the bogus claim that the CTA may not
exercise judicial review over a decision not to impose a
safeguard measure, a prohibition that finds no
statutory support. It is likewise settled in statutory
construction that an interpretation that would cause
inconvenience
and
absurdity
is
not
favored.
Respondents do not address the particular illogic that
the Court pointed out would ensue if their position on
judicial review were adopted. According to the
respondents, while a ruling by the DTI Secretary
imposing a safeguard measure may be elevated on
review to the CTA and assailed on the ground of errors
in fact and in law, a ruling denying the imposition of
safeguard measures may be assailed only on the
ground that the DTI Secretary committed grave abuse
of discretion. As stressed in the Decision, [c]ertiorari is
a remedy narrow in its scope and inflexible in its
character. It is not a general utility tool in the legal
workshop.[48]
It is incorrect to say that the Decision bars any
effective remedy should the Tariff Commission act or
conclude erroneously in making its determination
whether the factual conditions exist which necessitate
the imposition of the general safeguard measure. If the
Tariff
Commission
makes
a
negative
final
determination, the DTI Secretary, bound as he is by
this negative determination, has to render a decision
denying the application for safeguard measures citing
the Tariff Commissions findings as basis. Necessarily
then, such negative determination of the Tariff
Commission being an integral part of the DTI
Secretarys ruling would be open for review before the
CTA, which again is especially qualified by reason of its
expertise to examine the findings of the Tariff
Commission. Moreover, considering that the Tariff
Commission is an instrumentality of the government,
its actions (as opposed to those undertaken by the DTI
Secretary under the SMA) are not beyond the pale of
certiorari jurisdiction. Unfortunately for Philcemcor, it
hinged its cause on the claim that the DTI Secretarys
actions may be annulled on certiorari, notwithstanding
the explicit grant of judicial review over that cabinet
members actions under the SMA to the CTA.

Finally on this point, Philcemcor argues that

assuming this Courts interpretation of Section 29 is
correct, such ruling should not be given retroactive
effect, otherwise, a gross violation of the right to due
process would be had. This erroneously presumes that
it was this Court, and not Congress, which vested
jurisdiction on the CTA over rulings of non-imposition
rendered by the DTI Secretary. We have repeatedly
stressed that Section 29 expressly confers CTA
jurisdiction over rulings in connection with the
imposition of the safeguard measure, and the
reassertion of this point in the Decision was a matter of
emphasis, not of contrivance. The due process
protection does not shield those who remain purposely
blind to the express rules that ensure the sporting play
of procedural law.
Besides, respondents claim would also apply every
time this Court is compelled to settle a novel question
of law, or to reverse precedent. In such cases, there
would always be litigants whose causes of action might
be vitiated by the application of newly formulated
judicial doctrines. Adopting their claim would unwisely
force this Court to treat its dispositions in
unprecedented, sometimes landmark decisions not as
resolutions to the live cases or controversies, but as
legal doctrine applicable only to future litigations.

II. Positive Final Determination

By the Tariff Commission an
Indispensable Requisite to the
Imposition of General Safeguard Measures
The second core ruling in the Decision was that
contrary to the holding of the Court of Appeals, the DTI
Secretary was barred from imposing a general
safeguard
measure
absent
a
positive
final
determination rendered by the Tariff Commission. The
fundamental premise rooted in this ruling is based on
the acknowledgment that the required positive final
determination of the Tariff Commission exists as a
properly enacted constitutional limitation imposed on
the delegation of the legislative power to impose tariffs
and imposts to the President under Section 28(2),
Article VI of the Constitution.

Congressional Limitations Pursuant

To Constitutional Authority on the
Delegated Power to Impose
Safeguard Measures
The safeguard measures imposable under the SMA
generally involve duties on imported products, tariff
rate quotas, or quantitative restrictions on the
importation of a product into the country. Concerning
as they do the foreign importation of products into the
Philippines, these safeguard measures fall within the
ambit of Section 28(2), Article VI of the Constitution,
which states:
The Congress may, by law, authorize the
President to fix within specified limits, and

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subject to such limitations and restrictions as it

may impose, tariff rates, import and export quotas,
tonnage and wharfage dues, and other duties or
imposts within the framework of the national
development program of the Government.[49]
The Court acknowledges the basic postulates
ingrained in the provision, and, hence, governing in
this case. They are:
(1) It is Congress which authorizes the
President to impose tariff rates, import and
export quotas, tonnage and wharfage dues, and
other duties or imposts. Thus, the authority cannot
come from the Finance Department, the National
Economic Development Authority, or the World Trade
Organization, no matter how insistent or persistent
these bodies may be.
(2) The
authorization
granted
to
the
President must be embodied in a law. Hence, the
justification cannot be supplied simply by inherent
executive powers. It cannot arise from administrative
or executive orders promulgated by the executive
branch or from the wisdom or whim of the President.
(3) The authorization to the President can be
exercised only within the specified limits set in
the law and is further subject to limitations and
restrictions
which
Congress
may
impose. Consequently, if Congress specifies that the
tariff rates should not exceed a given amount, the
President cannot impose a tariff rate that exceeds such
amount. If Congress stipulates that no duties may be
imposed on the importation of corn, the President
cannot impose duties on corn, no matter how actively
the local corn producers lobby the President. Even the
most picayune of limits or restrictions imposed by
Congress must be observed by the President.
There is one fundamental principle that animates
these constitutional postulates. These impositions
under Section 28(2), Article VI fall within the
realm of the power of taxation, a power which is
within the sole province of the legislature under
the Constitution.
Without Section 28(2), Article VI, the
executive branch has no authority to impose
tariffs and other similar tax levies involving the
importation of foreign goods. Assuming that
Section 28(2) Article VI did not exist, the enactment of
the SMA by Congress would be voided on the ground
that it would constitute an undue delegation of the
legislative power to tax. The constitutional provision
shields such delegation from constitutional infirmity,
and should be recognized as an exceptional grant of
legislative power to the President, rather than the
affirmation of an inherent executive power.
This being the case, the qualifiers mandated by
the Constitution on this presidential authority attain
primordial consideration. First, there must be a law,
such as the SMA. Second, there must be specified
limits, a detail which would be filled in by the law. And
further, Congress is further empowered to impose
limitations and restrictions on this presidential
authority. On this last power, the provision does not
provide for specified conditions, such as that the
limitations and restrictions must conform to prior

statutes, internationally accepted practices, accepted

jurisprudence, or the considered opinion of members of
the executive branch.
The Court recognizes that the authority delegated
to the President under Section 28(2), Article VI may be
exercised, in accordance with legislative sanction, by
the alter egos of the President, such as department
secretaries. Indeed, for purposes of the Presidents
exercise of power to impose tariffs under Article VI,
Section 28(2), it is generally the Secretary of Finance
who acts as alter ego of the President. The SMA
provides an exceptional instance wherein it is the DTI
or Agriculture Secretary who is tasked by Congress, in
their capacities as alter egos of the President, to
impose such measures. Certainly, the DTI Secretary
has no inherent power, even as alter ego of the
President, to levy tariffs and imports.
Concurrently, the tasking of the Tariff Commission
under the SMA should be likewise construed within the
same context as part and parcel of the legislative
delegation of its inherent power to impose tariffs and
imposts to the executive branch, subject to limitations
and restrictions. In that regard, both the Tariff
Commission and the DTI Secretary may be regarded as
agents of Congress within their limited respective
spheres, as ordained in the SMA, in the implementation
of the said law which significantly draws its strength
from the plenary legislative power of taxation. Indeed,
even the President may be considered as an
agent of Congress for the purpose of imposing
safeguard measures. It is Congress, not the
President, which possesses inherent powers to
impose tariffs and imposts. Without legislative
authorization through statute, the President has
no power, authority or right to impose such
safeguard
measures
because
taxation
is
inherently legislative, not executive.
When Congress tasks the President or
his/her alter egos to impose safeguard measures
under the delineated conditions, the President
or the alter egos may be properly deemed as
agents of Congress to perform an act that
inherently belongs as a matter of right to the
legislature. It is basic agency law that the agent may
not act beyond the specifically delegated powers or
disregard the restrictions imposed by the principal. In
short, Congress may establish the procedural
framework under which such safeguard measures may
be imposed, and assign the various offices in the
government bureaucracy respective tasks pursuant to
the imposition of such measures, the task assignment
including the factual determination of whether the
necessary
conditions
exists
to
warrant
such
impositions. Under the SMA, Congress assigned the DTI
Secretary and the Tariff Commission their respective
functions[50] in the legislatures scheme of things.
There is only one viable ground for challenging the
legality of the limitations and restrictions imposed by
Congress under Section 28(2) Article VI, and that is
such limitations and restrictions are themselves
violative of the Constitution. Thus, no matter how
distasteful or noxious these limitations and restrictions
may seem, the Court has no choice but to uphold their
validity unless their constitutional infirmity can be
demonstrated.

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What are these limitations and restrictions that

are material to the present case? The entire SMA
provides for a limited framework under which the
President, through the DTI and Agriculture Secretaries,
may impose safeguard measures in the form of tariffs
and similar imposts. The limitation most relevant to
this case is contained in Section 5 of the SMA,
captioned Conditions for the Application of General
Safeguard Measures, and stating:
The Secretary shall apply a general safeguard
measure upon a positive final determination of
the [Tariff] Commission that a product is being
imported into the country in increased quantities,
whether absolute or relative to the domestic
production, as to be a substantial cause of serious
injury or threat thereof to the domestic industry;
however, in the case of non-agricultural products, the
Secretary shall first establish that the application of
such safeguard measures will be in the public interest.
[51]

Positive Final Determination

By Tariff Commission Plainly
Required by Section 5 of SMA
There is no question that Section 5 of the SMA
operates as a limitation validly imposed by Congress
on the presidential[52] authority under the SMA to
impose tariffs and imposts. That the positive final
determination operates as an indispensable requisite
to the imposition of the safeguard measure, and that it
is the Tariff Commission which makes such
determination, are legal propositions plainly expressed
in Section 5 for the easy comprehension for everyone
but respondents.
Philcemcor attributes this Courts conclusion on the
indispensability of the positive final determination to
flawed syllogism in that we read the proposition if A
then B as if it stated if A, and only A, then B.
[53]
Translated in practical terms, our conclusion,
according to Philcemcor, would have only been justified
had Section 5 read shall apply a general safeguard
measure upon, and only upon, a positive final
determination of the Tariff Commission.
Statutes are not designed for the easy
comprehension of the five-year old child. Certainly,
general propositions laid down in statutes need not be
expressly qualified by clauses denoting exclusivity in
order that they gain efficacy. Indeed, applying this
argument, the President would, under the Constitution,
be authorized to declare martial law despite the
absence of the invasion, rebellion or public safety
requirement just because the first paragraph of Section
18, Article VII fails to state the magic word only. [54]
But let us for the nonce pursue Philcemcors logic
further. It claims that since Section 5 does not allegedly
limit the circumstances upon which the DTI Secretary
may impose general safeguard measures, it is a worthy
pursuit to determine whether the entire context of the
SMA, as discerned by all the other familiar indicators of
legislative intent supplied by norms of statutory
interpretation, would justify safeguard measures

absent a positive final determination by the Tariff

Commission.
The first line of attack employed is on Section 5
itself, it allegedly not being as clear as it sounds. It is
advanced that Section 5 does not relate to the legal
ability of either the Tariff Commission or the DTI
Secretary to bind or foreclose review and reversal by
one or the other. Such relationship should instead be
governed by domestic administrative law and remedial
law. Philcemcor thus would like to cast the proposition
in this manner: Does it run contrary to our legal order
to assert, as the Court did in its Decision, that a body
of relative junior competence as the Tariff Commission
can bind an administrative superior and cabinet officer,
the DTI Secretary? It is easy to see why Philcemcor
would like to divorce this DTI Secretary-Tariff
Commission interaction from the confines of the SMA.
Shorn of context, the notion would seem radical and
unjustifiable that the lowly Tariff Commission can bind
the hands and feet of the DTI Secretary.
It can be surmised at once that respondents
preferred interpretation is based not on the express
language of the SMA, but from implications derived in a
roundabout manner. Certainly, no provision in the SMA
expressly authorizes the DTI Secretary to impose a
general safeguard measure despite the absence of a
positive final recommendation of the Tariff Commission.
On the other hand, Section 5 expressly states that the
DTI Secretary shall apply a general safeguard measure
upon a positive final determination of the [Tariff]
Commission. The causal connection in Section 5
between the imposition by the DTI Secretary of the
general safeguard measure and the positive final
determination of the Tariff Commission is patent, and
even respondents do not dispute such connection.
As stated earlier, the Court in its Decision found
Section 5 to be clear, plain and free from ambiguity so
as to render unnecessary resort to the congressional
records to ascertain legislative intent. Yet respondents,
on the dubitable premise that Section 5 is not as
express as it seems, again latch on to the record of
legislative deliberations in asserting that there was no
legislative intent to bar the DTI Secretary from
imposing the general safeguard measure anyway
despite the absence of a positive final determination
by the Tariff Commission.
Let us take the bait for a moment, and examine
respondents commonly cited portion of the legislative
record. One would presume, given the intense
advocacy for the efficacy of these citations, that they
contain a smoking gun express declarations from the
legislators that the DTI Secretary may impose a
general safeguard measure even if the Tariff
Commission refuses to render a positive final
determination. Such smoking gun, if it exists, would
characterize our Decision as disingenuous for ignoring
such contrary expression of intent from the legislators
who enacted the SMA. But as with many things, the
anticipation is more dramatic than the truth.
The excerpts cited by respondents are derived
from the interpellation of the late Congressman Marcial
Punzalan Jr., by then (and still is) Congressman Simeon
Datumanong.[55]Nowhere in these records is the view
expressed that the DTI Secretary may impose the
general safeguard measures if the Tariff Commission

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issues a negative final determination or otherwise is

unable to make a positive final determination. Instead,
respondents hitch on the observations of Congressman
Punzalan Jr., that the results of the [Tariff] Commissions
findings . . . is subsequently submitted to [the DTI
Secretary] for the [DTI Secretary] to impose or not to
impose; and that the [DTI Secretary] here iswho would
make the final decision on the recommendation that is
made by a more technical body [such as the Tariff
Commission].[56]
There is nothing in the remarks of Congressman
Punzalan
which
contradict
our Decision.
His
observations fall in accord with the respective roles of
the Tariff Commission and the DTI Secretary under the
SMA. Under the SMA, it is the Tariff Commission that
conducts an investigation as to whether the conditions
exist to warrant the imposition of the safeguard
measures. These conditions are enumerated in Section
5, namely; that a product is being imported into the
country in increased quantities, whether absolute or
relative to the domestic production, as to be a
substantial cause of serious injury or threat thereof to
the domestic industry. After the investigation of the
Tariff Commission, it submits a report to the DTI
Secretary which states, among others, whether the
above-stated conditions for the imposition of the
general safeguard measures exist. Upon a positive final
determination that these conditions are present, the
Tariff Commission then is mandated to recommend
what appropriate safeguard measures should be
undertaken by the DTI Secretary. Section 13 of the SMA
gives five (5) specific options on the type of safeguard
measures the Tariff Commission recommends to the
DTI Secretary.
At the same time, nothing in the SMA obliges the
DTI Secretary to adopt the recommendations made by
the Tariff Commission. In fact, the SMA requires that
the DTI Secretary establish that the application of such
safeguard measures is in the public interest,
notwithstanding
the
Tariff
Commissions
recommendation on the appropriate safeguard
measure upon its positive final determination. Thus,
even if the Tariff Commission makes a positive final
determination, the DTI Secretary may opt not to
impose a general safeguard measure, or choose a
different type of safeguard measure other than that
recommended by the Tariff Commission.
Congressman Punzalan was cited as saying that
the DTI Secretary makes the decision to impose or not
to impose, which is correct since the DTI Secretary may
choose not to impose a safeguard measure in spite of a
positive final determination by the Tariff Commission.
Congressman Punzalan also correctly stated that it is
the DTI Secretary who makes the final decision on the
recommendation that is made [by the Tariff
Commission], since the DTI Secretary may choose to
impose a general safeguard measure different from
that recommended by the Tariff Commission or not to
impose a safeguard measure at all. Nowhere in these
cited deliberations was Congressman Punzalan, or any
other member of Congress for that matter, quoted as
saying that the DTI Secretary may ignore a negative
determination by the Tariff Commission as to the
existence of the conditions warranting the imposition
of general safeguard measures, and thereafter proceed
to impose these measures nonetheless. It is too late in

the day to ascertain from the late Congressman

Punzalan himself whether he had made these remarks
in order to assure the other legislators that the DTI
Secretary may impose the general safeguard measures
notwithstanding a negative determination by the Tariff
Commission. But certainly, the language of Section 5 is
more resolutory to that question than the recorded
remarks of Congressman Punzalan.
Respondents employed considerable effort to
becloud Section 5 with undeserved ambiguity in order
that a proper resort to the legislative deliberations may
be had. Yet assuming that Section 5 deserves to be
clarified through an inquiry into the legislative record,
the excerpts cited by the respondents are far more
ambiguous than the language of the assailed provision
regarding the key question of whether the DTI
Secretary may impose safeguard measures in the face
of a negative determination by the Tariff Commission.
Moreover, even Southern Cross counters with its own
excerpts of the legislative record in support of their
own view.[57]
It will not be difficult, especially as to heavilydebated legislation, for two sides with contrapuntal
interpretations of a statute to highlight their respective
citations from the legislative debate in support of their
particular views.[58] A futile exercise of second-guessing
is happily avoided if the meaning of the statute is clear
on its face. It is evident from the text of Section 5
that there must be a positive final determination
by the Tariff Commission that a product is being
imported into the country in increased quantities
(whether absolute or relative to domestic
production), as to be a substantial cause of
serious injury or threat to the domestic industry.
Any disputation to the contrary is, at best, the product
of wishful thinking.
For the same reason that Section 5 is explicit as
regards
the
essentiality
of
a
positive
final
determination by the Tariff Commission, there is no
need to refer to the Implementing Rules of the SMA to
ascertain a contrary intent. If there is indeed a
provision in the Implementing Rules that allows the DTI
Secretary to impose a general safeguard measure even
without the positive final determination by the Tariff
Commission, said rule is void as it cannot supplant the
express language of the legislature. Respondents
essentially rehash their previous arguments on this
point, and there is no reason to consider them anew.
The Decision made it clear that nothing in Rule 13.2 of
the Implementing Rules, even though captioned Final
Determination by the Secretary, authorizes the DTI
Secretary to impose a general safeguard measure in
the absence of a positive final determination by the
Tariff
Commission.[59] Similarly,
the
Rules
and
Regulations to Govern the Conduct of Investigation by
the Tariff Commission Pursuant to Republic Act No.
8800 now cited by the respondent does not contain
any provision that the DTI Secretary may impose the
general safeguard measures in the absence of a
positive final determination by the Tariff Commission.
Section 13 of the SMA further bolsters the
interpretation as argued by Southern Cross and upheld
by the Decision. The first paragraph thereof states that
[u]pon its positive determination, the [Tariff]
Commission shall recommend to the Secretary an

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appropriate definitive measure, clearly referring to the

Tariff Commission as the entity that makes the positive
determination. On the other hand, the penultimate
paragraph of the same provision states that [i]n the
event of a negative final determination, the DTI
Secretary is to immediately issue through the
Secretary of Finance, a written instruction to the
Commissioner of Customs authorizing the return of the
cash bonds previously collected as a provisional
safeguard measure. Since the first paragraph of the
same provision states that it is the Tariff Commission
which makes the positive determination, it necessarily
follows that it, and not the DTI Secretary, makes the
negative final determination as referred to in the
penultimate paragraph of Section 13.[60]
The Separate
Opinion considers
as
highly
persuasive of former Tariff Commission Chairman Abon,
who stated that the Commissions findings are merely
recommendatory.[61] Again, the considered opinion of
Chairman Abon is of no operative effect if the statute
plainly states otherwise, and Section 5 bluntly does
require a positive final determination by the Tariff
Commission before the DTI Secretary may impose a
general safeguard measure.[62]Certainly, the Court
cannot give controlling effect to the statements of any
public officer in serious denial of his duties if the law
otherwise imposes the duty on the public office or
officer.
Nonetheless, if we are to render persuasive effect
on the considered opinion of the members of the
Executive Branch, it bears noting that the Secretary of
the Department of Justice rendered an Opinion wherein
he concluded that the DTI Secretary could not impose
a general safeguard measure if the Tariff Commission
made
a
negative
final
determination. [63] Unlike
Chairman Abons impromptu remarks made during a
hearing, the DOJ Opinion was rendered only after a
thorough study of the question after referral to it by the
DTI. The DOJ Secretary is the alter ego of the President
with a stated mandate as the head of the principal law
agency of the government.[64] As the DOJ Secretary has
no denominated role in the SMA, he was able to render
his Opinion from the vantage of judicious distance.
Should not his Opinion, studied and direct to the point
as it is, carry greater weight than the spontaneous
remarks of the Tariff Commissions Chairman which do
not even expressly disavow the binding power of the
Commissions positive final determination?

III. DTI Secretary has No Power of Review

Over Final Determination of the Tariff Commission
We should reemphasize that it is only because of
the SMA, a legislative enactment, that the executive
branch has the power to impose safeguard measures.
At the same time, by constitutional fiat, the exercise of
such power is subjected to the limitations and
restrictions similarly enforced by the SMA. In examining
the relationship of the DTI and the Tariff Commission as
established in the SMA, it is essential to acknowledge
and consider these predicates.
It is necessary to clarify the paradigm established
by the SMA and affirmed by the Constitution under

which the Tariff Commission and the DTI operate,

especially in light of the suggestions that the Courts
rulings on the functions of quasi-judicial power find
application in this case. Perhaps the reflexive
application of the quasi-judicial doctrine in this case,
rooted as it is in jurisprudence, might allow for some
convenience in ruling, yet doing so ultimately betrays
ignorance of the fundamental power of Congress to
reorganize the administrative structure of governance
in ways it sees fit.
The Separate
Opinion operates
from
wholly
different premises which are incomplete. Its main
stance, similar to that of respondents, is that the DTI
Secretary, acting as alter ego of the President, may
modify and alter the findings of the Tariff Commission,
including the latters negative final determination by
substituting
it
with
his
own
negative
final
determination to pave the way for his imposition of a
safeguard measure.[65] Fatally, this conclusion is arrived
at without considering the fundamental constitutional
precept under Section 28(2), Article VI, on the ability of
Congress to impose restrictions and limitations in its
delegation to the President to impose tariffs and
imposts, as well as the express condition of Section 5
of the SMA requiring a positive final determination of
the Tariff Commission.
Absent Section 5 of the SMA, the President
has no inherent, constitutional, or statutory
power to impose a general safeguard measure.
Tellingly, the Separate Opinion does not directly
confront the inevitable question as to how the DTI
Secretary may get away with imposing a general
safeguard
measure
absent
a
positive
final
determination from the Tariff Commission without
violating Section 5 of the SMA, which along with
Section 13 of the same law, stands as the only direct
legal authority for the DTI Secretary to impose such
measures. This is a constitutionally guaranteed
limitation of the highest order, considering that the
presidential authority exercised under the SMA is
inherently legislative.
Nonetheless, the Separate Opinion brings to fore
the issue of whether the DTI Secretary, acting either
as alter ego of the President or in his capacity as head
of an executive department, may review, modify or
otherwise alter the final determination of the Tariff
Commission under the SMA. The succeeding discussion
shall focus on that question.
Preliminarily, we should note that none of the
parties question the designation of the DTI or
Agriculture secretaries under the SMA as the imposing
authorities of the safeguard measures, even though
Section 28(2) Article VI states that it is the President to
whom the power to impose tariffs and imposts may be
delegated by Congress. The validity of such
designation under the SMA should not be in doubt. We
recognize that the authorization made by Congress in
the SMA to the DTI and Agriculture Secretaries was
made in contemplation of their capacities as alter
egos of the President.
Indeed, in Marc Donnelly & Associates v.
Agregado[66] the Court upheld the validity of a Cabinet
resolution fixing the schedule of royalty rates on metal
exports and providing for their collection even though
Congress, under Commonwealth Act No. 728, had

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specifically empowered the President and not any other

official of the executive branch, to regulate and curtail
the export of metals. In so ruling, the Court held that
the members of the Cabinet were acting as alter egos
of the President.[67] In this case, Congress itself
authorized the DTI Secretary as alter ego of the
President to impose the safeguard measures. If the
Court was previously willing to uphold the alter egos
tariff authority despite the absence of explicit
legislative grant of such authority on the alter ego, all
the more reason now when Congress itself expressly
authorized the alter ego to exercise these powers to
impose safeguard measures.
Notwithstanding, Congress in enacting the SMA
and prescribing the roles to be played therein by the
Tariff Commission and the DTI Secretary did not
envision that the President, or his/her alter ego, could
exercise
supervisory
powers
over
the
Tariff
Commission. If truly Congress intended to allow the
traditional alter ego principle to come to fore in the
peculiar setup established by the SMA, it would have
assigned the role now played by the DTI Secretary
under the law instead to the NEDA. The Tariff
Commission is an attached agency of the National
Economic Development Authority,[68] which in turn is
the independent planning agency of the government.
[69]

The Tariff Commission does not fall under the

administrative supervision of the DTI. [70] On the other
hand, the administrative relationship between the
NEDA and the Tariff Commission is established not only
by the Administrative Code, but similarly affirmed by
the Tariff and Customs Code.
Justice
Florentino
Feliciano,
in
his ponencia in Garcia
v.
Executive
Secretary[71],
acknowledged the interplay between the NEDA and the
Tariff Commission under the Tariff and Customs Code
when he cited the relevant provisions of that law
evidencing such setup. Indeed, under Section 104 of
the Tariff and Customs Code, the rates of duty fixed
therein are subject to periodic investigation by the
Tariff Commission and may be revised by the President
upon recommendation of the NEDA.[72] Moreover, under
Section 401 of the same law, it is upon periodic
investigations
by
the
Tariff
Commission
and
recommendation of the NEDA that the President may
cause a gradual reduction of protection levels granted
under the law.[73]
At the same time, under the Tariff and Customs
Code, no similar role or influence is allocated to the DTI
in the matter of imposing tariff duties. In fact, the longstanding tradition has been for the Tariff Commission
and the DTI to proceed independently in the exercise of
their respective functions. Only very recently have our
statutes directed any significant interplay between the
Tariff Commission and the DTI, with the enactment in
1999 of Republic Act No. 8751 on the imposition of
countervailing duties and Republic Act No. 8752 on the
imposition of anti-dumping duties, and of course the
promulgation a year later of the SMA. In all these three
laws, the Tariff Commission is tasked, upon referral of
the matter by the DTI, to determine whether the
factual conditions exist to warrant the imposition by
the DTI of a countervailing duty, an anti-dumping duty,
or a general safeguard measure, respectively. In all

three laws, the determination by the Tariff Commission

that these required factual conditions exist is
necessary before the DTI Secretary may impose the
corresponding duty or safeguard measure. And in all
three laws, there is no express provision authorizing
the DTI Secretary to reverse the factual determination
of the Tariff Commission.[74]
In fact, the SMA indubitably establishes that the
Tariff Commission is no mere flunky of the DTI
Secretary when it mandates that the positive final
recommendation of the former be indispensable to the
latters imposition of a general safeguard measure.
What the law indicates instead is a relationship of
interdependence between two bodies independent of
each other under the Administrative Code and the SMA
alike. Indeed, even the ability of the DTI Secretary to
disregard the Tariff Commissions recommendations as
to the particular safeguard measures to be imposed
evinces the independence from each other of these
two bodies. This is properly so for two reasons the DTI
and the Tariff Commission are independent of each
other under the Administrative Code; and impropriety
is avoided in cases wherein the DTI itself is the one
seeking the imposition of the general safeguard
measures, pursuant to Section 6 of the SMA.
Thus, in ascertaining the appropriate legal milieu
governing the relationship between the DTI and the
Tariff Commission, it is imperative to apply foremost, if
not exclusively, the provisions of the SMA. The
argument that the usual rules on administrative control
and supervision apply between the Tariff Commission
and the DTI as regards safeguard measures is severely
undercut by the plain fact that there is no longstanding tradition of administrative interplay between
these two entities.
Within the administrative apparatus, the Tariff
Commission appears to be a lower rank relative to the
DTI. But does this necessarily mean that the DTI has
the intrinsic right, absent statutory authority, to
reverse the findings of the Tariff Commission? To insist
that it does, one would have to concede for instance
that, applying the same doctrinal guide, the Secretary
of the Department of Science and Technology (DOST)
has the right to reverse the rulings of the Civil
Aeronautics Board (CAB) or the issuances of the
Philippine Coconut Authority (PCA). As with the Tariff
Commission-DTI, there is no statutory authority
granting the DOST Secretary the right to overrule the
CAB or the PCA, such right presumably arising only
from the position of subordinacy of these bodies to the
DOST. To insist on such a right would be to invite
department secretaries to interfere in the exercise of
functions by administrative agencies, even in areas
wherein such secretaries are bereft of specialized
competencies.
The Separate Opinion notes that notwithstanding
above, the Secretary of Department of Transportation
and Communication may review the findings of the
CAB, the Agriculture Secretary may review those of the
PCA, and that the Secretary of the Department of
Environment and Natural Resources may pass upon
decisions of the Mines and Geosciences Board. [75] These
three officers may be alter egos of the President, yet
their authority to review is limited to those agencies or
bureaus which are, pursuant to statutes such as the

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Administrative Code of 1987, under the administrative

control
and
supervision
of
their
respective
departments. Thus, under the express provision of the
Administrative Code expressly provides that the CAB is
an attached agency of the DOTC [76], and that the PCA is
an attached agency of the Department of Agriculture.
[77]
The same law establishes the Mines and GeoSciences Bureau as one of the Sectoral Staff
Bureaus[78] that forms part of the organizational
structure of the DENR.[79]
As repeatedly stated, the Tariff Commission does
not fall under the administrative control of the DTI, but
under the NEDA, pursuant to the Administrative Code.
The reliance made by the Separate Opinion to those
three examples are thus misplaced.
Nonetheless, the Separate Opinion asserts that
the SMA created a functional relationship between the
Tariff Commission and the DTI Secretary, sufficient to
allow the DTI Secretary to exercise alter ego powers to
reverse the determination of the Tariff Commission.
Again, considering that the power to impose tariffs in
the first place is not inherent in the President but arises
only from congressional grant, we should affirm the
congressional prerogative to impose limitations and
restrictions on such powers which do not normally
belong to the executive in the first place. Nowhere in
the SMA does it state that the DTI Secretary may
impose general safeguard measures without a positive
final determination by the Tariff Commission, or that
the DTI Secretary may reverse or even review the
factual determination made by the Tariff Commission.
Congress in enacting the SMA and prescribing the
roles to be played therein by the Tariff Commission and
the DTI Secretary did not envision that the President,
or his/her alter egocould exercise supervisory powers
over the Tariff Commission. If truly Congress intended
to allow the traditional alter ego principle to come to
fore in the peculiar setup established by the SMA, it
would have assigned the role now played by the DTI
Secretary under the law instead to the NEDA, the body
to which the Tariff Commission is attached under the
Administrative Code.
The Court has no issue with upholding
administrative control and supervision exercised by the
head of an executive department, but only over those
subordinate offices that are attached to the
department, or which are, under statute, relegated
under its supervision and control. To declare that a
department secretary, even if acting as alter ego of the
President, may exercise such control or supervision
over all executive offices below cabinet rank would
lead to absurd results such as those adverted to above.
As applied to this case, there is no legal justification for
the DTI Secretary to exercise control, supervision,
review or amendatory powers over the Tariff
Commission and its positive final determination. In
passing, we note that there is, admittedly, a feasible
mode by which administrative review of the Tariff
Commissions final determination could be had, but it is
not the procedure adopted by respondents and now
suggested for affirmation. This mode shall be discussed
in a forthcoming section.
The Separate Opinion asserts that the President,
or his/her alter ego cannot be made a mere rubber
stamp of the Tariff Commission since Section 17, Article

VII of the Constitution denominates the Chief Executive

exercises control over all executive departments,
bureaus and offices.[80] But let us be clear that such
executive control is not absolute. The definition of the
structure of the executive branch of government, and
the corresponding degrees of administrative control
and supervision, is not the exclusive preserve of the
executive. It may be effectively be limited by the
Constitution, by law, or by judicial decisions.
The Separate
Opinion cites
the
respected
constitutional law authority Fr. Joaquin Bernas, in
support of the proposition that such plenary power of
executive control of the President cannot be restricted
by a mere statute passed by Congress. However, the
cited passage from Fr. Bernas actually states, Since the
Constitution has given the President the power of
control, with all its awesome implications, it is the
Constitution alone which can curtail such power.
[81]
Does the President have such tariff powers under
the Constitution in the first place which may be
curtailed by the executive power of control? At the risk
of redundancy, we quote Section 28(2), Article VI: The
Congress may, by law, authorize the President to fix
within specified limits, and subject to such limitations
and restrictions as it may impose, tariff rates, import
and export quotas, tonnage and wharfage dues, and
other duties or imposts within the framework of the
national development program of the Government.
Clearly the power to impose tariffs belongs to Congress
and not to the President.
It is within reason to assume the framers of the
Constitution deemed it too onerous to spell out all the
possible limitations and restrictions on this presidential
authority to impose tariffs. Hence, the Constitution
especially allowed Congress itself to prescribe such
limitations and restrictions itself, a prudent move
considering that such authority inherently belongs to
Congress and not the President. Since Congress has no
power to amend the Constitution, it should be taken to
mean that such limitations and restrictions should be
provided by mere statute. Then again, even the
presidential authority to impose tariffs arises only by
mere statute. Indeed, this presidential privilege is
both contingent in nature and legislative in
origin. These characteristics, when weighed
against the aspect of executive control and
supervision, cannot militate against Congresss
exercise of its inherent power to tax.
The bare fact is that the administrative
superstructure, for all its unwieldiness, is mere putty in
the hands of Congress. The functions and mandates of
the particular executive departments and bureaus are
not created by the President, but by the legislative
branch through the Administrative Code. [82] The
President is the administrative head of the executive
department, as such obliged to see that every
government office is managed and maintained properly
by the persons in charge of it in accordance with
pertinent laws and regulations, and empowered to
promulgate rules and issuances that would ensure a
more efficient management of the executive branch,
for so long as such issuances are not contrary to law.
[83]
Yet the legislature has the concurrent power to
reclassify or redefine the executive bureaucracy,
including
the
relationship
between
various
administrative agencies, bureaus and departments,

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and ultimately, even the power to abolish executive

departments and their components, hamstrung only by
constitutional limitations. The DTI itself can be
abolished with ease by Congress through deleting Title
X, Book IV of the Administrative Code. The Tariff
Commission can similarly be abolished through
legislative enactment. [84]
At the same time, Congress can enact additional
tasks or responsibilities on either the Tariff Commission
or the DTI Secretary, such as their respective roles on
the imposition of general safeguard measures under
the SMA. In doing so, the same Congress, which
has the putative authority to abolish the Tariff
Commission or the DTI, is similarly empowered
to alter or expand its functions through
modalities which do not align with established
norms in the bureaucratic structure. The Court is
bound to recognize the legislative prerogative to
prescribe such modalities, no matter how atypical they
may be, in affirmation of the legislative power to
restructure the executive branch of government.
There are further limitations on the executive
control adverted to by the Separate Opinion. The
President, in the exercise of executive control, cannot
order a subordinate to disobey a final decision of this
Court or any courts. If the subordinate chooses to
disobey, invoking sole allegiance to the President, the
judicial processes can be utilized to compel obeisance.
Indeed, when public officers of the executive
department take their oath of office, they swear
allegiance and obedience not to the President, but to
the Constitution and the laws of the land. The
invocation of executive control must yield when under
its subsumption includes an act that violates the law.
The Separate Opinion concedes that the exercise
of executive control and supervision by the President is
bound by the Constitution and law. [85] Still, just three
sentences after asserting that the exercise of executive
control must be within the bounds of the Constitution
and law, the Separate Opinion asserts, the control
power of the Chief Executive emanates from the
Constitution; no act of Congress may validly curtail it.
[86]
Laws are acts of Congress, hence valid confusion
arises whether the Separate Opinion truly believes the
first proposition that executive control is bound by law.
This is a quagmire for the Separate Opinion to resolve
for itself
The Separate Opinion unduly considers executive
control as the ne plus ultra constitutional standard
which must govern in this case. But while the President
may generally have the power to control, modify or set
aside the actions of a subordinate, such powers may be
constricted by the Constitution, the legislature, and the
judiciary. This is one of the essences of the check-andbalance system in our tri-partite constitutional
democracy. Not one head of a branch of government
may operate as a Caesar within his/her particular
fiefdom.
Assuming there is a conflict between the specific
limitation in Section 28 (2), Article VI of the
Constitution and the general executive power of control
and supervision, the former prevails in the specific
instance of safeguard measures such as tariffs and
imposts, and would thus serve to qualify the general

grant to the President of the power to exercise control

and supervision over his/her subalterns.
Thus, if the Congress enacted the law so that the
DTI Secretary is bound by the Tariff Commission in the
sense the former cannot impose general safeguard
measures absent a final positive determination from
the latter the Court is obliged to respect such
legislative
prerogative,
no
matter
how
such
arrangement deviates from traditional norms as may
have been enshrined in jurisprudence. The only ground
under which such legislative determination as
expressed in statute may be successfully challenged is
if such legislation contravenes the Constitution. No
such argument is posed by the respondents, who do
not challenge the validity or constitutionality of the
SMA.
Given these premises, it is utterly reckless to
examine the interrelationship between the Tariff
Commission and the DTI Secretary beyond the context
of the SMA, applying instead traditional precepts on
administrative control, review and supervision. For that
reason, the Decision deemed inapplicable respondents
previous citations of Cario v. Commissioner on Human
Rights and Lamb v. Phipps, since the executive power
adverted to in those cases had not been limited by
constitutional restrictions such as those imposed under
Section 28(2), Article VI.[87]
A similar observation can be made on the case
of Sharp International Marketing v. Court of Appeals,
[88]
now cited by Philcemcor, wherein the Court asserted
that the Land Bank of the Philippines was required to
exercise independent judgment and not merely rubberstamp deeds of sale entered into by the Department of
Agrarian Reform in connection with the agrarian reform
program. Philcemcor attempts to demonstrate that the
DTI Secretary, as with the Land Bank of the Philippines,
is required to exercise independent discretion and is
not expected to just merely accede to DAR-approved
compensation packages. Yet again, such grant of
independent discretion is expressly called for by
statute, particularly Section 18 of Rep. Act No. 6657
which specifically requires the joint concurrence of the
landowner and the DAR and the [Land Bank of the
Philippines] on the amount of compensation. Such
power of review by the Land Bank is a consequence of
clear statutory language, as is our holding in
the Decision that Section 5 explicitly requires a positive
final determination by the Tariff Commission before a
general safeguard measure may be imposed.
Moreover, such limitations under the SMA are coated
by the constitutional authority of Section 28(2), Article
VI of the Constitution.
Nonetheless, is this administrative setup, as
envisioned by Congress and enshrined into the SMA,
truly
noxious
to
existing
legal
standards?
The Decision acknowledged the internal logic of the
statutory framework, considering that the DTI cannot
exercise review powers over an agency such as the
Tariff Commission which is not within its administrative
jurisdiction; that the mechanism employed establishes
a measure of check and balance involving two
government offices with different specializations; and
that safeguard measures are the exception rather than
the rule, pursuant to our treaty obligations.[89]

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We see no reason to deviate from these

observations, and indeed can add similarly oriented
comments. Corollary to the legislative power to decree
policies through legislation is the ability of the
legislature to provide for means in the statute itself to
ensure that the said policy is strictly implemented by
the body or office tasked so tasked with the duty. As
earlier stated, our treaty obligations dissuade the State
for now from implementing default protectionist trade
measures such as tariffs, and allow the same only
under
specified
conditions.[90]The
conditions
enumerated under the GATT Agreement on Safeguards
for the application of safeguard measures by a member
country are the same as the requisites laid down in
Section 5 of the SMA.[91] To insulate the factual
determination from political pressure, and to assure
that it be conducted by an entity especially qualified by
reason of its general functions to undertake such
investigation, Congress deemed it necessary to
delegate to the Tariff Commission the function of
ascertaining whether or not the those factual
conditions exist to warrant the atypical imposition of
safeguard measures. After all, the Tariff Commission
retains a degree of relative independence by virtue of
its attachment to the National Economic Development
Authority, an independent planning agency of the
government,[92] and also owing to its vaunted expertise
and specialization.
The matter of imposing a safeguard measure
almost always involves not just one industry, but the
national interest as it encompasses other industries as
well. Yet in all candor, any decision to impose a
safeguard measure is susceptible to all sorts of
external pressures, especially if the domestic industry
concerned is well-organized. Unwarranted impositions
of safeguard measures may similarly be detrimental to
the national interest. Congress could not be blamed if it
desired to insulate the investigatory process by
assigning it to a body with a putative degree of
independence and traditional expertise in ascertaining
factual conditions. Affected industries would have
cause to lobby for or against the safeguard measures.
The decision-maker is in the unenviable position of
having to bend an ear to listen to all concerned voices,
including those which may speak softly but carry a big
stick. Had the law mandated that the decision be made
on the sole discretion of an executive officer, such as
the DTI Secretary, it would be markedly easier for
safeguard measures to be imposed or withheld based
solely on political considerations and not on the factual
conditions that are supposed to predicate the decision.
Reference
of
the
binding
positive
final
determination to the Tariff Commission is of course, not
a fail-safe means to ensure a bias-free determination.
But at least the legislated involvement of the
Commission in the process assures some measure of
measure of check and balance involving two different
governmental agencies with disparate specializations.
There is no legal or constitutional demand for such a
setup, but its wisdom as policy should be
acknowledged. As prescribed by Congress, both the
Tariff Commission and the DTI Secretary operate within
limited frameworks, under which nobody acquires an
undue advantage over the other.
We recognize that Congress deemed it necessary
to insulate the process in requiring that the factual

determination to be made by an ostensibly

independent body of specialized competence, the Tariff
Commission.
This
prescribed
framework,
constitutionally sanctioned, is intended to prevent the
baseless,
whimsical,
or
consideration-induced
imposition of safeguard measures. It removes from the
DTI Secretary jurisdiction over a matter beyond his
putative specialized aptitude, the compilation and
analysis of picayune facts and determination of their
limited causal relations, and instead vests in the
Secretary the broad choice on a matter within his
unquestionable competence, the selection of what
particular safeguard measure would assist the duly
beleaguered local industry yet at the same time
conform to national trade policy. Indeed, the SMA
recognizes, and places primary importance on the DTI
Secretarys mandate to formulate trade policy, in his
capacity as the Presidents alter ego on trade, industry
and investment-related matters.
At the same time, the statutory limitations on this
authorized power of the DTI Secretary must prevail
since the Constitution itself demands the enforceability
of those limitations and restrictions as imposed by
Congress. Policy wisdom will not save a law from
infirmity if the statutory provisions violate the
Constitution. But since the Constitution itself provides
that the President shall be constrained by the limits
and restrictions imposed by Congress and since these
limits and restrictions are so clear and categorical, then
the Court has no choice but to uphold the reins.
Even assuming that this prescribed setup made
little sense, or seemed uncommonly silly, [93] the Court
is bound by propriety not to dispute the wisdom of the
legislature as long as its acts do not violate the
Constitution.
Since
there
is
no
convincing
demonstration that the SMA contravenes the
Constitution, the Court is wont to respect the
administrative regimen propounded by the law, even if
it allots the Tariff Commission a higher degree of
puissance than normally expected. It is for this reason
that the traditional conceptions of administrative
review or quasi-judicial power cannot control in this
case.
Indeed, to apply the latter concept would cause
the Court to fall into a linguistic trap owing to the
multi-faceted denotations the term quasi-judicial has
come to acquire.
Under the SMA, the Tariff Commission undertakes
formal hearings,[94] receives and evaluates testimony
and evidence by interested parties,[95] and renders a
decision is rendered on the basis of the evidence
presented, in the form of the final determination. The
final determination requires a conclusion whether the
importation of the product under consideration is
causing serious injury or threat to a domestic industry
producing like products or directly competitive
products, while evaluating all relevant factors having a
bearing on the situation of the domestic industry.
[96]
This process aligns conformably with definition
provided by Blacks Law Dictionary of quasi-judicial as
the action, discretion, etc., of public administrative
officers or bodies, who are required to investigate
facts, or ascertain the existence of facts, hold hearings,
weigh evidence, and draw conclusions from them, as a

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basis for their official action, and to exercise discretion

of a judicial nature.[97]
However, the Tariff Commission is not empowered
to hear actual cases or controversies lodged directly
before it by private parties. It does not have the power
to issue writs of injunction or enforcement of its
determination. These considerations militate against a
finding of quasi-judicial powers attributable to the Tariff
Commission, considering the pronouncement that
quasi-judicial adjudication would mean a determination
of rights privileges and duties resulting in a decision or
order which applies to a specific situation.[98]
Indeed, a declaration that the Tariff Commission
possesses quasi-judicial powers, even if ascertained for
the limited purpose of exercising its functions under
the SMA, may have the unfortunate effect of expanding
the Commissions powers beyond that contemplated by
law. After all, the Tariff Commission is by convention, a
fact-finding body, and its role under the SMA, burdened
as it is with factual determination, is but a mere
continuance of this tradition. However, Congress
through the SMA offers a significant deviation from this
traditional role by tying the decision by the DTI
Secretary to impose a safeguard measure to the
required positive factual determination by the Tariff
Commission. Congress is not bound by past traditions,
or even by the jurisprudence of this Court, in enacting
legislation it may deem as suited for the times. The
sole
benchmark
for
judicial
substitution
of
congressional wisdom is constitutional transgression, a
standard which the respondents do not even attempt
to match.

Respondents Suggested Interpretation

Of the SMA Transgresses Fair Play
Respondents have belabored the argument that
the Decisions interpretation of the SMA, particularly of
the role of the Tariff Commission vis--vis the DTI
Secretary, is noxious to traditional notions of
administrative control and supervision. But in doing so,
they have failed to acknowledge the congressional
prerogative to redefine administrative relationships, a
license which falls within the plenary province of
Congress under our representative system of
democracy. Moreover, respondents own suggested
interpretation falls wayward of expectations of practical
fair play.
Adopting respondents suggestion that the DTI
Secretary may disregard the factual findings of the
Tariff Commission and investigatory process that
preceded it, it would seem that the elaborate
procedure undertaken by the Commission under the
SMA, with all the attendant guarantees of due process,
is but an inutile spectacle. As Justice Garcia noted
during the oral arguments, why would the DTI
Secretary bother with the Tariff Commission and
instead conduct the investigation himself.[99]
Certainly, nothing in the SMA authorizes the DTI
Secretary, after making the preliminary determination,
to personally oversee the investigation, hear out the
interested parties, or receive evidence.[100] In fact, the
SMA does not even require the Tariff Commission,

which is tasked with the custody of the submitted

evidence,[101] to turn over to the DTI Secretary such
evidence it had evaluated in order to make its factual
determination.[102] Clearly, as Congress tasked it to be,
it is the Tariff Commission and not the DTI Secretary
which acquires the necessary intimate acquaintance
with the factual conditions and evidence necessary for
the imposition of the general safeguard measure. Why
then favor an interpretation of the SMA that leaves the
findings of the Tariff Commission bereft of operative
effect and makes them subservient to the wishes of the
DTI Secretary, a personage with lesser working
familiarity with the relevant factual milieu? In fact, the
bare theory of the respondents would effectively allow
the DTI Secretary to adopt, under the subterfuge of his
discretion, the factual determination of a private
investigative group hired by the industry concerned,
and reject the investigative findings of the Tariff
Commission as mandated by the SMA. It would be
highly irregular to substitute what the law clearly
provides for a dubious setup of no statutory basis that
would be readily susceptible to rank chicanery.
Moreover, the SMA guarantees the right of all
concerned parties to be heard, an elemental
requirement of due process, by the Tariff Commission
in the context of its investigation. The DTI Secretary is
not similarly empowered or tasked to hear out the
concerns of other interested parties, and if he/she does
so, it arises purely out of volition and not compulsion
under law.
Indeed, in this case, it is essential that the position
of other than that of the local cement industry should
be given due consideration, cement being an
indispensable need for the operation of other industries
such as housing and construction. While the general
safeguard measures may operate to the better
interests of the domestic cement industries, its
deprivation of cheaper cement imports may similarly
work to the detriment of these other domestic
industries and correspondingly, the national interest.
Notably, the Tariff Commission in this case heard the
views on the application of representatives of other
allied industries such as the housing, construction, and
cement-bag industries, and other interested parties
such as consumer groups and foreign governments.
[103]
It is only before the Tariff Commission that their
views had been heard, and this is because it is only the
Tariff Commission which is empowered to hear their
positions. Since due process requires a judicious
consideration of all relevant factors, the Tariff
Commission, which is in a better position to hear these
parties than the DTI Secretary, is similarly more
capable to render a determination conformably with
the due process requirements than the DTI Secretary.
In a similar vein, Southern Cross aptly notes that
in instances when it is the DTI Secretary who
initiates motu proprio the application for the safeguard
measure pursuant to Section 6 of the SMA,
respondents suggested interpretation would result in
the awkward situation wherein the DTI Secretary would
rule upon his own application after it had been
evaluated by the Tariff Commission. Pertinently cited is
our ruling in Corona v. Court of Appeals[104] that no man
can be at once a litigant and judge. [105] Certainly, this
anomalous situation is avoided if it is the Tariff
Commission which is tasked with arriving at the final

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determination whether the conditions exist to warrant

the general safeguard measures. This is the setup
provided for by the express provisions of the SMA, and
the problem would arise only if we adopt the
interpretation urged upon by respondents.

The Possibility for Administrative Review

Of the Tariff Commissions Determination
The Court has been emphatic that a positive final
determination from the Tariff Commission is required in
order that the DTI Secretary may impose a general
safeguard measure, and that the DTI Secretary has no
power to exercise control and supervision over the
Tariff Commission and its final determination. These
conclusions are the necessary consequences of the
applicable provisions of the Constitution, the SMA, and
laws such as the Administrative Code. However, the
law is silent though on whether this positive final
determination may otherwise be subjected to
administrative review.
There is no evident legislative intent by the
authors of the SMA to provide for a procedure of
administrative review. If ever there is a procedure for
administrative review over the final determination of
the Tariff Commission, such procedure must be done in
a manner that does not contravene or disregard
legislative prerogatives as expressed in the SMA or the
Administrative Code, or fundamental constitutional
limitations.
In order that such procedure of administrative
review would not contravene the law and the
constitutional scheme provided by Section 28(2),
Article VI, it is essential to assert that the positive final
determination
by
the
Tariff
Commission
is
indispensable as a requisite for the imposition of a
general safeguard measure. The submissions of private
respondents and the Separate Opinion cannot be
sustained insofar as they hold that the DTI Secretary
can
peremptorily
ignore
or
disregard
the
determinations made by the Tariff Commission.
However, if the mode of administrative review were in
such a manner that the administrative superior of the
Tariff Commission were to modify or alter its
determination, then such reversal may still be valid
within the confines of Section 5 of the SMA, for
technically it is still the Tariff Commissions
determination, administratively revised as it may be,
that would serve as the basis for the DTI Secretarys
action.
However, and fatally for the present petitions,
such administrative review cannot be conducted by the
DTI Secretary. Even if conceding that the Tariff
Commissions findings may be administratively
reviewed, the DTI Secretary has no authority to review
or modify the same. We have been emphatic on the
reasons such as that there is no traditional or statutory
basis placing the Commission under the control and
supervision of the DTI; that to allow such would
contravene due process, especially if the DTI itself
were to apply for the safeguard measures motu
proprio. To hold otherwise would destroy the
administrative hierarchy, contravene constitutional due

process, and disregard the limitations or restrictions

provided in the SMA.
Instead, assuming administrative review were
available, it is the NEDA that may conduct such review
following the principles of administrative law, and the
NEDAs decision in turn is reviewable by the Office of
the President. The decision of the Office of the
President
then
effectively
substitutes
as the
determination of the Tariff Commission, which now
forms the basis of the DTI Secretarys decision, which
now would be ripe for judicial review by the CTA under
Section 29 of the SMA. This is the only way that
administrative review of the Tariff Commissions
determination may be sustained without violating the
SMA and its constitutional restrictions and limitations,
as well as administrative law.
In bare theory, the NEDA may review, alter or
modify the Tariff Commissions final determination, the
Commission being an attached agency of the NEDA.
Admittedly, there is nothing in the SMA or any other
statute that would prevent the NEDA to exercise such
administrative review, and successively, for the
President to exercise in turn review over the NEDAs
decision.
Nonetheless, in acknowledging this possibility, the
Court, without denigrating the bare principle that
administrative officers may exercise control and
supervision over the acts of the bodies under its
jurisdiction, realizes that this comes at the expense of
a speedy resolution to an application for a safeguard
measure, an application dependent on fluctuating
factual conditions. The further delay would foster
uncertainty and insecurity within the industry
concerned, as well as with all other allied industries,
which in turn may lead to some measure of economic
damage. Delay is certain, since judicial review
authorized by law and not administrative review would
have the final say. The fact that the SMA did not
expressly prohibit administrative review of the final
determination of the Tariff Commission does not negate
the supreme advantages of engendering exclusive
judicial review over questions arising from the
imposition of a general safeguard measure.
In any event, even if we conceded the possibility
of administrative review of the Tariff Commissions final
determination by the NEDA, such would not deny merit
to the present petition. It does not change the fact that
the Court of Appeals erred in ruling that the DTI
Secretary was not bound by the negative final
determination of the Tariff Commission, or that the DTI
Secretary acted without jurisdiction when he imposed
general safeguard measures despite the absence of
the statutory positive final determination of the
Commission.

IV. Courts Interpretation of SMA

In Harmony with Other
Constitutional Provisions
In response to our citation of Section 28(2), Article
VI, respondents elevate two arguments grounded in
constitutional law. One is based on another
constitutional provision, Section 12, Article XIII, which

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mandates that [t]he State shall promote the

preferential use of Filipino labor, domestic materials
and locally produced goods and adopt measures that
help make them competitive. By no means does this
provision dictate that the Court favor the domestic
industry in all competing claims that it may bring
before this Court. If it were so, judicial proceedings in
this country would be rendered a mockery, resolved as
they would be, on the basis of the personalities of the
litigants and not their legal positions.
Moreover, the duty imposed on by Section 12,
Article XIII falls primarily with Congress, which in that
regard enacted the SMA, a law designed to protect
domestic industries from the possible ill-effects of our
accession to the global trade order. Inconveniently
perhaps for respondents, the SMA also happens to
provide for a procedure under which such protective
measures may be enacted. The Court cannot just
impose what it deems as the spirit of the law without
giving due regard to its letter.
In
like-minded
manner,
the Separate
Opinion loosely states that the purpose of the SMA is to
protect or safeguard local industries from increased
importation of foreign products.[106]This inaccurately
leaves the impression that the SMA ipso facto unravels
a protective cloak that shelters all local industries and
producers, no matter the conditions. Indeed, our
country has knowingly chosen to accede to the world
trade regime, as expressed in the GATT and WTO
Agreements, despite the understanding that local
industries might suffer ill-effects, especially with the
easier entry of competing foreign products. At the
same time, these international agreements were
designed to constrict protectionist trade policies by its
member-countries. Hence, the median, as expressed
by the SMA, does allow for the application of
protectionist measures such as tariffs, but only after an
elaborate process of investigation that ensures factual
basis and indispensable need for such measures. More
accurately, the purpose of the SMA is to provide a
process for the protection or safeguarding of domestic
industries that have duly established that there is
substantial injury or threat thereof directly caused by
the increased imports. In short, domestic industries are
not entitled to safeguard measures as a matter of right
or influence.
Respondents also make the astounding argument
that the imposition of general safeguard measures
should not be seen as a taxation measure, but instead
as an exercise of police power. The vain hope of
respondents in divorcing the safeguard measures from
the concept of taxation is to exclude from
consideration Section 28(2), Article VI of the
Constitution.
This argument can be debunked at length, but it
deserves little attention. The motivation behind many
taxation measures is the implementation of police
power goals. Progressive income taxes alleviate the
margin between rich and poor; the so-called sin taxes
on alcohol and tobacco manufacturers help dissuade
the consumers from excessive intake of these
potentially
harmful
products.
Taxation
is
distinguishable from police power as to the means
employed to implement these public good goals. Those
doctrines that are unique to taxation arose from

peculiar considerations such as those especially

punitive effects of taxation,[107] and the belief that taxes
are the lifeblood of the state. [108] These considerations
necessitated the evolution of taxation as a distinct
legal concept from police power. Yet at the same time,
it has been recognized that taxation may be made the
implement of the states police power.[109]
Even assuming that the SMA should be construed
exclusively as a police power measure, the Court
recognizes that police power is lodged primarily in the
national legislature, though it may also be exercised by
the executive branch by virtue of a valid delegation of
legislative power.[110] Considering these premises, it is
clear that police power, however illimitable in theory, is
still exercised within the confines of implementing
legislation. To declare otherwise is to sanction rule by
whim instead of rule of law. The Congress, in enacting
the SMA, has delegated the power to impose general
safeguard measures to the executive branch, but at
the same time subjected such imposition to limitations,
such as the requirement of a positive final
determination by the Tariff Commission under Section
5. For the executive branch to ignore these boundaries
imposed by Congress is to set up an ignoble clash
between the two co-equal branches of government.
Considering that the exercise of police power emanates
from legislative authority, there is little question that
the prerogative of the legislative branch shall prevail in
such a clash.

V. Assailed Decision Consistent

With Ruling in Taada v. Angara
Public respondents allege that the Decision is
contrary to our holding in Taada v. Angara,[111] since the
Court noted therein that the GATT itself provides builtin protection from unfair foreign competition and trade
practices, which according to the public respondents,
was a reason why the Honorable [Court] ruled the way
it did. On the other hand, the Decision eliminates
safeguard measures as a mode of defense.
This is balderdash, as with any and all claims that
the Decision allows foreign industries to ride roughshod
over our domestic enterprises. The Decision does not
prohibit the imposition of general safeguard measures
to protect domestic industries in need of protection. All
it affirms is that the positive final determination of the
Tariff Commission is first required before the general
safeguard measures are imposed and implemented, a
neutral proposition that gives no regard to the
nationalities of the parties involved. A positive
determination by the Tariff Commission is hardly the
elusive Shangri-la of administrative law. If a particular
industry finds it difficult to obtain a positive final
determination from the Tariff Commission, it may be
simply because the industry is still sufficiently
competitive even in the face of foreign competition.
These safeguard measures are designed to ensure
salvation, not avarice.
Respondents well have the right to drape
themselves in the colors of the flag. Yet these postures
hardly advance legal claims, or nationalism for that
matter. The fineries of the costume pageant are no

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better measure of patriotism than simple obedience to

the laws of the Fatherland. And even assuming that
respondents are motivated by genuine patriotic
impulses, it must be remembered that under the setup
provided by the SMA, it is the facts, and not impulse,
that determine whether the protective safeguard
measures should be imposed. As once orated, facts are
stubborn things; and whatever may be our wishes, our
inclinations, or the dictates of our passions, they
cannot alter the state of facts and evidence.[112]
It is our goal as judges to enforce the law, and not
what we might deem as correct economic policy.
Towards this end, we should not construe the SMA to
unduly favor or disfavor domestic industries, simply
because the law itself provides for a mechanism by
virtue of which the claims of these industries are
thoroughly evaluated before they are favored or
disfavored. What we must do is to simply uphold what
the law says. Section 5 says that the DTI Secretary
shall impose the general safeguard measures upon the
positive final determination of the Tariff Commission.
Nothing in the whereas clauses or the invisible ink
provisions of the SMA can magically delete the words
positive final determination and Tariff Commission from
Section 5.

VI. On Forum-Shopping
We remain convinced that there was no willful and
deliberate forum-shopping in this case by Southern
Cross. The causes of action that animate this present
petition for review and the petition for review with the
CTA are distinct from each other, even though they
relate to similar factual antecedents. Yet it also appears
that contrary to the undertaking signed by the
President of Southern Cross, Hironobu Ryu, to inform
this Court of any similar action or proceeding pending
before any court, tribunal or agency within five (5)
days from knowledge thereof, Southern Cross informed
this Court only on 12 August 2003 of the petition it had
filed with the CTA eleven days earlier. An appropriate
sanction is warranted for such failure, but not the
dismissal of the petition.

VII. Effects of Courts Resolution

Philcemcor argues that the granting of Southern
Crosss Petition should not necessarily lead to the
voiding of the Decision of the DTI Secretary dated 5
August 2003 imposing the general safeguard
measures. For Philcemcor, the availability of appeal to
the CTA as an available and adequate remedy would
have made the Court of Appeals Decision merely
erroneous or irregular, but not void. Moreover, the
said Decision merely required the DTI Secretary to
render a decision, which could have very well been a
decision not to impose a safeguard measure; thus, it
could not be said that the annulled decision resulted
from the judgment of the Court of Appeals.
The Court of Appeals Decision was annulled
precisely because the appellate court did not have the

power to rule on the petition in the first place.

Jurisdiction is necessarily the power to decide a case,
and a court which does not have the power to
adjudicate a case is one that is bereft of jurisdiction.
We find no reason to disturb our earlier finding that the
Court of Appeals Decision is null and void.
At the same time, the Court in its Decision paid
particular heed to the peculiarities attaching to the 5
August 2003 Decision of the DTI Secretary. In the DTI
Secretarys Decision, he expressly stated that as a
result of the Court of Appeals Decision, there is no legal
impediment for the Secretary to decide on the
application. Yet the truth remained that there was a
legal impediment, namely, that the decision of the
appellate court was not yet final and executory.
Moreover, it was declared null and void, and since the
DTI Secretary expressly denominated the Court of
Appeals Decision as his basis for deciding to impose
the safeguard measures, the latter decision must be
voided as well. Otherwise put, without the Court of
Appeals Decision, the DTI Secretarys Decision of 5
August 2003 would not have been rendered as well.
Accordingly, the Court reaffirms as a nullity the
DTI Secretarys Decision dated 5 August 2003. As a
necessary consequence, no further action can be taken
on Philcemcors Petition for Extension of the Safeguard
Measure. Obviously, if the imposition of the general
safeguard measure is void as we declared it to be, any
extension thereof should likewise be fruitless. The
proper remedy instead is to file a new application for
the imposition of safeguard measures, subject to the
conditions prescribed by the SMA. Should this step be
eventually availed of, it is only hoped that the parties
involved would content themselves in observing the
proper procedure, instead of making a mockery of the
rule of law.
WHEREFORE,
respondents Motions
Reconsideration are DENIED WITH FINALITY.

for

Respondent DTI Secretary is hereby ENJOINED

from taking any further action on the pending Petition
for Extension of the Safeguard Measure.
Hironobu Ryu, President of petitioner Southern
Cross Cement Corporation, and Angara Abello
Concepcion Regala & Cruz, counsel petitioner, are
hereby given FIVE (5) days from receipt of
this Resolution to EXPLAIN why they should not be
meted disciplinary sanction for failing to timely inform
the Court of the filing of Southern Crosss Petition for
Review with the Court of Tax Appeals, as adverted to
earlier in this Resolution.
SO ORDERED.

[G.R. No. 151908. August 12, 2003]

SMART

COMMUNICATIONS, INC. (SMART) and

PILIPINO
TELEPHONE
CORPORATION
(PILTEL), petitioners,
vs. NATIONAL
TELECOMMUNICATIONS
COMMISSION
(NTC), respondent.
[G.R. No. 152063. August 12, 2003]

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GLOBE

TELECOM, INC. (GLOBE) and ISLA

COMMUNICATIONS
CO.,
INC.
(ISLACOM), petitioners,
vs. COURT
OF
APPEALS (The Former 6th Division) and
the
NATIONAL
TELECOMMUNICATIONS
COMMISSION, respondents.
DECISION

YNARES-SANTIAGO, J.:
Pursuant to its rule-making and regulatory powers,
the National Telecommunications Commission (NTC)
issued on June 16, 2000 Memorandum Circular No. 136-2000, promulgating rules and regulations on the
billing of telecommunications services. Among its
pertinent provisions are the following:
(1) The billing statements shall be received by the
subscriber of the telephone service not later than 30
days from the end of each billing cycle. In case the
statement is received beyond this period, the
subscriber shall have a specified grace period within
which to pay the bill and the public
telecommunications entity (PTEs) shall not be allowed
to disconnect the service within the grace period.
(2) There shall be no charge for calls that are diverted
to a voice mailbox, voice prompt, recorded message or
similar facility excluding the customers own
equipment.
(3) PTEs shall verify the identification and address of
each purchaser of prepaid SIM cards. Prepaid call cards
and SIM cards shall be valid for at least 2 years from
the date of first use. Holders of prepaid SIM cards shall
be given 45 days from the date the prepaid SIM card is
fully consumed but not beyond 2 years and 45 days
from date of first use to replenish the SIM card,
otherwise the SIM card shall be rendered invalid. The
validity of an invalid SIM card, however, shall be
installed upon request of the customer at no additional
charge except the presentation of a valid prepaid call
card.
(4) Subscribers shall be updated of the remaining value
of their cards before the start of every call using the
cards.
(5) The unit of billing for the cellular mobile telephone
service whether postpaid or prepaid shall be reduced
from 1 minute per pulse to 6 seconds per pulse. The
authorized rates per minute shall thus be divided by
10.[1]
The Memorandum Circular provided that it shall
take effect 15 days after its publication in a newspaper
of general circulation and three certified true copies
thereof furnished the UP Law Center. It was published
in the newspaper, The Philippine Star, on June 22,
2000.[2] Meanwhile, the provisions of the Memorandum
Circular pertaining to the sale and use of prepaid cards
and the unit of billing for cellular mobile telephone
service took effect 90 days from the effectivity of the
Memorandum Circular.

On August 30, 2000, the NTC issued a

Memorandum to all cellular mobile telephone service
(CMTS) operators which contained measures to
minimize if not totally eliminate the incidence of
stealing of cellular phone units. The Memorandum
directed CMTS operators to:
a. strictly comply with Section B(1) of MC 136-2000 requiring the presentation and
verification of the identity and addresses
of prepaid SIM card customers;
b. require all your respective prepaid SIM
cards dealers to comply with Section B(1)
of MC 13-6-2000;
c. deny acceptance to your respective
networks
prepaid
and/or
postpaid
customers using stolen cellphone units or
cellphone units registered to somebody
other than the applicant when properly
informed of all information relative to the
stolen cellphone units;
d. share all necessary information of stolen
cellphone units to all other CMTS
operators in order to prevent the use of
stolen cellphone units; and
e. require all your existing prepaid SIM card
customers to register and present valid
identification cards.[3]
This was followed by another Memorandum dated
October
6,
2000
addressed
to
all
public
telecommunications entities, which reads:
This is to remind you that the validity of all
prepaid cards sold on 07 October 2000 and
beyond shall be valid for at least two (2) years
from date of first use pursuant to MC 13-6-2000.
In addition, all CMTS operators are reminded that
all SIM packs used by subscribers of prepaid
cards sold on 07 October 2000 and beyond shall
be valid for at least two (2) years from date of
first use.Also, the billing unit shall be on a six (6)
seconds pulse effective 07 October 2000.
For strict compliance.[4]
On
October
20,
2000,
petitioners
Isla
Communications Co., Inc. and Pilipino Telephone
Corporation
filed
against
the
National
Telecommunications
Commission,
Commissioner
Joseph A. Santiago, Deputy Commissioner Aurelio M.
Umali and Deputy Commissioner Nestor C. Dacanay,
an action for declaration of nullity of NTC Memorandum
Circular No. 13-6-2000 (the Billing Circular) and the
NTC Memorandum dated October 6, 2000, with prayer
for the issuance of a writ of preliminary injunction and
temporary restraining order. The complaint was
docketed as Civil Case No. Q-00-42221 at the Regional
Trial Court of Quezon City, Branch 77.[5]

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Petitioners Islacom and Piltel alleged, inter

alia, that the NTC has no jurisdiction to regulate the
sale of consumer goods such as the prepaid call cards
since such jurisdiction belongs to the Department of
Trade and Industry under the Consumer Act of the
Philippines; that the Billing Circular is oppressive,
confiscatory and violative of the constitutional
prohibition against deprivation of property without due
process of law; that the Circular will result in the
impairment of the viability of the prepaid cellular
service by unduly prolonging the validity and
expiration of the prepaid SIM and call cards; and that
the requirements of identification of prepaid card
buyers
and
call
balance
announcement
are
unreasonable. Hence, they prayed that the Billing
Circular be declared null and void ab initio.
Soon thereafter, petitioners Globe Telecom, Inc
and Smart Communications, Inc. filed a joint Motion for
Leave to Intervene and to Admit Complaint-inIntervention.[6] This was granted by the trial court.
On October 27, 2000, the trial court issued a
temporary restraining order enjoining the NTC from
implementing Memorandum Circular No. 13-6-2000
and the Memorandum dated October 6, 2000.[7]
In the meantime, respondent NTC and its codefendants filed a motion to dismiss the case on the
ground of petitioners failure to exhaust administrative
remedies.
Subsequently, after hearing petitioners application
for preliminary injunction as well as respondents
motion to dismiss, the trial court issued on November
20, 2000 an Order, the dispositive portion of which
reads:

order of the court a quo denying the petitioners motion

to dismiss as well as the order of the court a
quo granting the private respondents prayer for a writ
of preliminary injunction, and the writ of preliminary
injunction issued thereby, are hereby ANNULLED and
SET ASIDE. The private respondents complaint and
complaint-in-intervention below are hereby DISMISSED,
without prejudice to the referral of the private
respondents grievances and disputes on the assailed
issuances of the NTC with the said agency.
SO ORDERED.[10]
Petitioners motions for reconsideration were
denied in a Resolution dated January 10, 2002 for lack
of merit.[11]
Hence, the instant petition for review filed by
Smart and Piltel, which was docketed as G.R. No.
151908, anchored on the following grounds:
A.
THE HONORABLE COURT OF APPEALS GRAVELY
ERRED IN HOLDING THAT THE NATIONAL
TELECOMMUNICATIONS COMMISSION (NTC)
AND NOT THE REGULAR COURTS HAS
JURISDICTION OVER THE CASE.
B.
THE HONORABLE COURT OF APPEALS ALSO
GRAVELY ERRED IN HOLDING THAT THE
PRIVATE RESPONDENTS FAILED TO EXHAUST
AN AVAILABLE ADMINISTRATIVE REMEDY.
C.

WHEREFORE, premises considered, the defendants

motion to dismiss is hereby denied for lack of
merit. The plaintiffs application for the issuance of a
writ of preliminary injunction is hereby
granted.Accordingly, the defendants are hereby
enjoined from implementing NTC Memorandum Circular
13-6-2000 and the NTC Memorandum, dated October
6, 2000, pending the issuance and finality of the
decision in this case. The plaintiffs and intervenors are,
however, required to file a bond in the sum of FIVE
HUNDRED THOUSAND PESOS (P500,000.00), Philippine
currency.
SO ORDERED.[8]
Defendants filed a motion for reconsideration,
which was denied in an Order dated February 1, 2001.
[9]

Respondent NTC thus filed a special civil action for

certiorari and prohibition with the Court of Appeals,
which was docketed as CA-G.R. SP. No. 64274. On
October 9, 2001, a decision was rendered, the decretal
portion of which reads:
WHEREFORE, premises considered, the instant petition
for certiorari and prohibition is GRANTED, in that, the

THE HONORABLE COURT OF APPEALS ERRED

IN NOT HOLDING THAT THE BILLING CIRCULAR
ISSUED BY THE RESPONDENT NTC IS
UNCONSTITUTIONAL AND CONTRARY TO LAW
AND PUBLIC POLICY.
D.
THE HONORABLE COURT OF APPEALS ERRED
IN HOLDING THAT THE PRIVATE RESPONDENTS
FAILED TO SHOW THEIR CLEAR POSITIVE
RIGHT TO WARRANT THE ISSUANCE OF A WRIT
OF PRELIMINARY INJUNCTION.[12]
Likewise, Globe and Islacom filed a petition for
review, docketed as G.R. No. 152063, assigning the
following errors:
1. THE HONORABLE COURT OF APPEALS SO
GRAVELY
ERRED
BECAUSE
THE
DOCTRINES OF PRIMARY JURISDICTION
AND EXHAUSTION OF ADMINISTRATIVE
REMEDIES DO NOT APPLY SINCE THE
INSTANT
CASE
IS
FOR
LEGAL
NULLIFICATION (BECAUSE OF LEGAL
INFIRMITIES AND VIOLATIONS OF LAW) OF

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A PURELY ADMINISTRATIVE REGULATION

PROMULGATED BY AN AGENCY IN THE
EXERCISE OF ITS RULE MAKING POWERS
AND INVOLVES ONLY QUESTIONS OF LAW.

promulgated by an administrative body, as well as with

respect to what fields are subject to regulation by it. It
may not make rules and regulations which are
inconsistent with the provisions of the Constitution or a
statute, particularly the statute it is administering or
which created it, or which are in derogation of, or
defeat, the purpose of a statute. In case of conflict
between a statute and an administrative order, the
former must prevail.[18]

2. THE HONORABLE COURT OF APPEALS SO

GRAVELY ERRED BECAUSE THE DOCTRINE
ON EXHAUSTION OF ADMINISTRATIVE
REMEDIES DOES NOT APPLY WHEN THE
QUESTIONS RAISED ARE PURELY LEGAL
QUESTIONS.

Not to be confused with the quasi-legislative or

rule-making power of an administrative agency is its
quasi-judicial
or
administrative
adjudicatory
power. This is the power to hear and determine
questions of fact to which the legislative policy is to
apply and to decide in accordance with the standards
laid down by the law itself in enforcing and
administering the same law.The administrative body
exercises its quasi-judicial power when it performs in a
judicial manner an act which is essentially of an
executive or administrative nature, where the power to
act in such manner is incidental to or reasonably
necessary for the performance of the executive or
administrative duty entrusted to it. In carrying out their
quasi-judicial functions, the administrative officers or
bodies are required to investigate facts or ascertain the
existence of facts, hold hearings, weigh evidence, and
draw conclusions from them as basis for their official
action and exercise of discretion in a judicial nature.[19]

3. THE HONORABLE COURT OF APPEALS SO

GRAVELY ERRED BECAUSE THE DOCTRINE
OF EXHAUSTION OF ADMINISTRATIVE
REMEDIES DOES NOT APPLY WHERE THE
ADMINISTRATIVE ACTION IS COMPLETE
AND EFFECTIVE, WHEN THERE IS NO
OTHER REMEDY, AND THE PETITIONER
STANDS
TO
SUFFER
GRAVE
AND
IRREPARABLE INJURY.
4. THE HONORABLE COURT OF APPEALS SO
GRAVELY ERRED BECAUSE PETITIONERS IN
FACT EXHAUSTED ALL ADMINISTRATIVE
REMEDIES AVAILABLE TO THEM.
5. THE HONORABLE COURT OF APPEALS SO
GRAVELY
ERRED
IN
ISSUING
ITS
QUESTIONED RULINGS IN THIS CASE
BECAUSE GLOBE AND ISLA HAVE A CLEAR
RIGHT TO AN INJUNCTION.[13]
The two petitions were consolidated
Resolution dated February 17, 2003.[14]

in

On March 24, 2003, the petitions were given due

course and the parties were required to submit their
respective memoranda.[15]
We find merit in the petitions.
Administrative agencies possess quasi-legislative
or
rule-making
powers
and
quasi-judicial
or
administrative adjudicatory powers. Quasi-legislative or
rule-making power is the power to make rules and
regulations which results in delegated legislation that is
within the confines of the granting statute and the
doctrine of non-delegability and separability of powers.
[16]

The rules and regulations that administrative

agencies promulgate, which are the product of a
delegated legislative power to create new and
additional legal provisions that have the effect of law,
should be within the scope of the statutory authority
granted by the legislature to the administrative
agency. It is required that the regulation be germane to
the objects and purposes of the law, and be not in
contradiction to, but in conformity with, the standards
prescribed by law.[17] They must conform to and be
consistent with the provisions of the enabling statute in
order
for
such
rule
or
regulation
to
be
valid. Constitutional and statutory provisions control
with respect to what rules and regulations may be

In questioning the validity or constitutionality of a

rule or regulation issued by an administrative agency,
a party need not exhaust administrative remedies
before going to court. This principle applies only where
the act of the administrative agency concerned was
performed pursuant to its quasi-judicial function, and
not when the assailed act pertained to its rule-making
or quasi-legislative power. In Association of Philippine
Coconut Dessicators v. Philippine Coconut Authority,
[20]
it was held:
The rule of requiring exhaustion of administrative
remedies before a party may seek judicial review, so
strenuously urged by the Solicitor General on behalf of
respondent, has obviously no application here.The
resolution in question was issued by the PCA in the
exercise of its rule- making or legislative
power. However, only judicial review of decisions of
administrative agencies made in the exercise of their
quasi-judicial function is subject to the exhaustion
doctrine.
Even assuming arguendo that the principle of
exhaustion of administrative remedies apply in this
case, the records reveal that petitioners sufficiently
complied with this requirement.Even during the
drafting and deliberation stages leading to the
issuance of Memorandum Circular No. 13-6-2000,
petitioners were able to register their protests to the
proposed billing guidelines. They submitted their
respective position papers setting forth their objections
and submitting proposed schemes for the billing
circular.[21] After the same was issued, petitioners wrote
successive letters dated July 3, 2000[22] and July 5,
2000,[23] asking for the suspension and reconsideration
of the so-called Billing Circular. These letters were not
acted upon until October 6, 2000, when respondent

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NTC issued the second assailed Memorandum

implementing certain provisions of the Billing
Circular. This was taken by petitioners as a clear denial
of the requests contained in their previous letters, thus
prompting them to seek judicial relief.
In like manner, the doctrine of primary jurisdiction
applies only where the administrative agency exercises
its quasi-judicial or adjudicatory function. Thus, in
cases involving specialized disputes, the practice has
been to refer the same to an administrative agency of
special competence pursuant to the doctrine of
primary jurisdiction. The courts will not determine a
controversy involving a question which is within the
jurisdiction of the administrative tribunal prior to the
resolution of that question by the administrative
tribunal, where the question demands the exercise of
sound administrative discretion requiring the special
knowledge,
experience
and
services
of
the
administrative tribunal to determine technical and
intricate matters of fact, and a uniformity of ruling is
essential to comply with the premises of the regulatory
statute administered. The objective of the doctrine of
primary jurisdiction is to guide a court in determining
whether it should refrain from exercising its jurisdiction
until after an administrative agency has determined
some question or some aspect of some question
arising in the proceeding before the court. It applies
where the claim is originally cognizable in the courts
and comes into play whenever enforcement of the
claim requires the resolution of issues which, under a
regulatory scheme, has been placed within the special
competence of an administrative body; in such case,
the judicial process is suspended pending referral of
such issues to the administrative body for its view. [24]
However, where what is assailed is the validity or
constitutionality of a rule or regulation issued by the
administrative agency in the performance of its quasilegislative function, the regular courts have jurisdiction
to pass upon the same. The determination of whether a
specific rule or set of rules issued by an administrative
agency contravenes the law or the constitution is
within the jurisdiction of the regular courts. Indeed, the
Constitution vests the power of judicial review or the
power to declare a law, treaty, international or
executive agreement, presidential decree, order,
instruction, ordinance, or regulation in the courts,
including the regional trial courts. [25] This is within the
scope of judicial power, which includes the authority of
the courts to determine in an appropriate action the
validity of the acts of the political departments.
[26]
Judicial power includes the duty of the courts of
justice to settle actual controversies involving rights
which are legally demandable and enforceable, and to
determine whether or not there has been a grave
abuse of discretion amounting to lack or excess of
jurisdiction on the part of any branch or instrumentality
of the Government.[27]
In the case at bar, the issuance by the NTC of
Memorandum Circular No. 13-6-2000 and its
Memorandum dated October 6, 2000 was pursuant to
its quasi-legislative or rule-making power. As such,
petitioners were justified in invoking the judicial power
of the Regional Trial Court to assail the constitutionality

and validity of the said issuances. In Drilon v. Lim,[28] it

was held:
We stress at the outset that the lower court had
jurisdiction to consider the constitutionality of Section
187, this authority being embraced in the general
definition of the judicial power to determine what are
the valid and binding laws by the criterion of their
conformity to the fundamental law. Specifically, B.P.
129 vests in the regional trial courts jurisdiction over
all civil cases in which the subject of the litigation is
incapable of pecuniary estimation, even as the accused
in a criminal action has the right to question in his
defense the constitutionality of a law he is charged
with violating and of the proceedings taken against
him, particularly as they contravene the Bill of
Rights. Moreover, Article X, Section 5(2), of the
Constitution vests in the Supreme Court appellate
jurisdiction over final judgments and orders of lower
courts in all cases in which the constitutionality or
validity of any treaty, international or executive
agreement, law, presidential decree, proclamation,
order, instruction, ordinance, or regulation is in
question.[29]
In their complaint before the Regional Trial Court,
petitioners averred that the Circular contravened Civil
Code
provisions
on
sales
and
violated
the
constitutional prohibition against the deprivation of
property without due process of law. These are within
the competence of the trial judge. Contrary to the
finding of the Court of Appeals, the issues raised in the
complaint
do
not
entail
highly
technical
matters. Rather, what is required of the judge who will
resolve this issue is a basic familiarity with the
workings of the cellular telephone service, including
prepaid SIM and call cards and this is judicially known
to be within the knowledge of a good percentage of our
population and expertise in fundamental principles of
civil law and the Constitution.
Hence, the Regional Trial Court has jurisdiction to
hear and decide Civil Case No. Q-00-42221. The Court
of Appeals erred in setting aside the orders of the trial
court and in dismissing the case.
WHEREFORE, in view of the foregoing, the
consolidated petitions are GRANTED. The decision of
the Court of Appeals in CA-G.R. SP No. 64274 dated
October 9, 2001 and its Resolution dated January 10,
2002 are REVERSED and SET ASIDE. The Order dated
November 20, 2000 of the Regional Trial Court of
Quezon City, Branch 77, in Civil Case No. Q-00-42221 is
REINSTATED. This case is REMANDED to the court a
quo for continuation of the proceedings.
SO ORDERED.

[G.R. No. 156109. November 18, 2004]

KHRISTINE REA M. REGINO, Assisted and
Represented
by
ARMANDO
REGINO, petitioner,
vs. PANGASINAN

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COLLEGES OF SCIENCE AND TECHNOLOGY,

RACHELLE A. GAMUROT and ELISSA
BALADAD, respondents.
DECISION
PANGANIBAN, J.:
Upon enrolment, students and their school enter
upon a reciprocal contract. The students agree to abide
by the standards of academic performance and codes
of conduct, issued usually in the form of manuals that
are distributed to the enrollees at the start of the
school term. Further, the school informs them of the
itemized fees they are expected to pay. Consequently,
it cannot, after the enrolment of a student, vary the
terms of the contract. It cannot require fees other than
those it specified upon enrolment.
The Case
Before the Court is a Petition for Review under
Rule 45,[1] seeking to nullify the July 12, 2002 [2] and the
November 22, 2002[3] Orders of the Regional Trial Court
(RTC) of Urdaneta City, Pangasinan (Branch 48) in Civil
Case No. U-7541. The decretal portion of the first
assailed Order reads:
WHEREFORE, the Court
GRANTS the instant motion to
dismiss for lack of cause of action.[4]
The second challenged Order denied petitioners
Motion for Reconsideration.
The Facts
Petitioner Khristine Rea M. Regino was a first year
computer science student at Respondent Pangasinan
Colleges of Science and Technology (PCST). Reared in a
poor family, Regino went to college mainly through the
financial support of her relatives. During the second
semester of school year 2001-2002, she enrolled in
logic and statistics subjects under Respondents
Rachelle A. Gamurot and Elissa Baladad, respectively,
as teachers.
In February 2002, PCST held a fund raising
campaign dubbed the Rave Party and Dance
Revolution, the proceeds of which were to go to the
construction of the schools tennis and volleyball courts.
Each student was required to pay for two tickets at the
price of P100 each. The project was allegedly
implemented
by
recompensing
students
who
purchased tickets with additional points in their test
scores; those who refused to pay were denied the
opportunity to take the final examinations.
Financially strapped and prohibited by her religion
from attending dance parties and celebrations, Regino
refused to pay for the tickets. On March 14 and March
15, 2002, the scheduled dates of the final
examinations in logic and statistics, her teachers -Respondents Rachelle A. Gamurot and Elissa Baladad --

allegedly disallowed her from taking the tests.

According to petitioner, Gamurot made her sit out her
logic class while her classmates were taking their
examinations. The next day, Baladad, after announcing
to the entire class that she was not permitting
petitioner and another student to take their statistics
examinations for failing to pay for their tickets,
allegedly ejected them from the classroom. Petitioners
pleas ostensibly went unheeded by Gamurot and
Baladad, who unrelentingly defended their positions as
compliance with PCSTs policy.
On April 25, 2002, petitioner filed, as a pauper
litigant, a Complaint[5] for damages against PCST,
Gamurot and Baladad. In her Complaint, she prayed
for P500,000 as nominal damages; P500,000 as moral
damages;
at
least P1,000,000
as
exemplary
damages; P250,000 as actual damages; plus the costs
of litigation and attorneys fees.
On May 30, 2002, respondents filed a Motion to
Dismiss[6] on the ground of petitioners failure to
exhaust administrative remedies. According to
respondents, the question raised involved the
determination of the wisdom of an administrative
policy of the PCST; hence, the case should have been
initiated before the proper administrative body, the
Commission of Higher Education (CHED).
In her Comment to respondents Motion, petitioner
argued that prior exhaustion of administrative
remedies was unnecessary, because her action was not
administrative in nature, but one purely for damages
arising from respondents breach of the laws on human
relations. As such, jurisdiction lay with the courts.
On July 12, 2002, the RTC dismissed the Complaint
for lack of cause of action.
Ruling of the Regional Trial Court
In granting respondents Motion to Dismiss, the
trial court noted that the instant controversy involved a
higher institution of learning, two of its faculty
members and one of its students. It added that Section
54 of the Education Act of 1982 vested in the
Commission on Higher Education (CHED) the
supervision and regulation of tertiary schools. Thus, it
ruled that the CHED, not the courts, had jurisdiction
over the controversy.[7]
In its dispositive portion, the assailed Order
dismissed the Complaint for lack of cause of action
without, however, explaining this ground.
Aggrieved, petitioner filed the present Petition on
pure questions of law.[8]
Issues
In her Memorandum, petitioner
following issues for our consideration:

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raises

the

Page 87 of 151

Whether or not the principle of exhaustion of

administrative remedies applies in a civil action
exclusively for damages based on violation of the
human relation provisions of the Civil Code, filed by a
student against her former school.
Whether or not there is a need for prior declaration of
invalidity of a certain school administrative policy by
the Commission on Higher Education (CHED) before a
former student can successfully maintain an action
exclusively for damages in regular courts.
Whether or not the Commission on Higher Education
(CHED) has exclusive original jurisdiction over actions
for damages based upon violation of the Civil Code
provisions on human relations filed by a student
against the school.[9]
All of the foregoing point to one issue -- whether
the doctrine of exhaustion of administrative remedies
is applicable. The Court, however, sees a second issue
which, though not expressly raised by petitioner, was
impliedly contained in her Petition: whether the
Complaint stated sufficient cause(s) of action.

given the appropriate opportunity to

act and correct their alleged errors, if
any, committed in the administrative
forum. x x x.[13]
Petitioner is not asking for the reversal of the
policies of PCST. Neither is she demanding it to allow
her to take her final examinations; she was already
enrolled in another educational institution. A reversal of
the acts complained of would not adequately redress
her grievances; under the circumstances, the
consequences of respondents acts could no longer be
undone or rectified.
Second, exhaustion of administrative remedies is
applicable when there is competence on the part of the
administrative body to act upon the matter complained
of.[14] Administrative agencies are not courts; they are
neither part of the judicial system, nor are they
deemed judicial tribunals.[15] Specifically, the CHED
does not have the power to award damages. [16]Hence,
petitioner could not have commenced her case before
the Commission.

First Issue:

Third, the exhaustion doctrine admits of

exceptions, one of which arises when the issue is
purely legal and well within the jurisdiction of the trial
court.[17] Petitioners action for damages inevitably calls
for the application and the interpretation of the Civil
Code, a function that falls within the jurisdiction of the
courts.[18]

Exhaustion of Administrative Remedies

Second Issue:

Respondents anchored their Motion to Dismiss on

petitioners alleged failure to exhaust administrative
remedies before resorting to the RTC. According to
them, the determination of the controversy hinge on
the validity, the wisdom and the propriety of PCSTs
academic policy. Thus, the Complaint should have been
lodged in the CHED, the administrative body tasked
under Republic Act No. 7722 to implement the state
policy to protect, foster and promote the right of all
citizens to affordable quality education at all levels and
to take appropriate steps to ensure that education is
accessible to all.[10]

Cause of Action

The Courts Ruling

The Petition is meritorious.

Petitioner counters that the doctrine finds no

relevance to the present case since she is praying for
damages, a remedy beyond the domain of the CHED
and well within the jurisdiction of the courts. [11]
Petitioner is correct. First, the doctrine of
exhaustion of administrative remedies has no bearing
on the present case. In Factoran Jr. v. CA,[12] the Court
had occasion to elucidate on the rationale behind this
doctrine:
The doctrine of exhaustion of
administrative remedies is basic.
Courts, for reasons of law, comity, and
convenience, should not entertain suits
unless the available administrative
remedies have first been resorted to
and the proper authorities have been

Sufficient Causes of Action Stated

in the Allegations in the Complaint
As a rule, every complaint must sufficiently allege
a cause of action; failure to do so warrants its
dismissal.[19] A complaint is said to assert a sufficient
cause of action if, admitting what appears solely on its
face to be correct, the plaintiff would be entitled to the
relief prayed for. Assuming the facts that are alleged to
be true, the court should be able to render a valid
judgment in accordance with the prayer in the
complaint.[20]
A motion to dismiss based on lack of cause of
action hypothetically admits the truth of the alleged
facts. In their Motion to Dismiss, respondents did not
dispute any of petitioners allegations, and they
admitted that x x x the crux of plaintiffs cause of action
is the determination of whether or not the assessment
of P100 per ticket is excessive or oppressive. [21] They
thereby premised their prayer for dismissal on the
Complaints alleged failure to state a cause of action.
Thus, a reexamination of the Complaint is in order.
The Complaint contains the following factual
allegations:

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10. In the second week of February 2002,

defendant Rachelle A. Gamurot, in
connivance with PCST, forced
plaintiff and her classmates to buy
or take two tickets each, x x x;
11. Plaintiff and many of her classmates
objected to the forced distribution
and selling of tickets to them but
the said defendant warned them
that if they refused [to] take or
pay the price of the two tickets
they would not be allowed at all to
take the final examinations;
12. As if to add insult to injury, defendant
Rachelle
A.
Gamurot
bribed
students with additional fifty
points or so in their test score in
her subject just to unjustly
influence and compel them into
taking the tickets;
13. Despite the students refusal, they were
forced to take the tickets because
[of]
defendant
Rachelle
A.
Gamurots coercion and act of
intimidation, but still many of
them including the plaintiff did not
attend the dance party imposed
upon them by defendants PCST
and Rachelle A. Gamurot;
14. Plaintiff was not able to pay the price of
her own two tickets because aside
form the fact that she could not
afford to pay them it is also
against her religious practice as a
member of a certain religious
congregation to be attending
dance parties and celebrations;
15. On March 14, 2002, before defendant
Rachelle A. Gamurot gave her
class its final examination in the
subject Logic she warned that
students who had not paid the
tickets would not be allowed to
participate in the examination, for
which threat and intimidation
many students were eventually
forced to make payments:

classroom that she was not

allowing plaintiff and another
student to take the examination
for their failure and refusal to pay
the price of the tickets, and
thenceforth she ejected plaintiff
and the other student from the
classroom;
18. Plaintiff pleaded for a chance to take the
examination but all defendants
could say was that the prohibition
to give the examinations to nonpaying
students
was
an
administrative decision;
19. Plaintiff has already paid her tuition fees
and other obligations in the
school;
20. That the above-cited incident was not a
first since PCST also did another
forced distribution of tickets to its
students in the first semester of
school year 2001-2002; x x x [22]
The foregoing allegations show two causes of
action; first, breach of contract; and second, liability for
tort.
Reciprocity of the
School-Student Contract
In Alcuaz v. PSBA,[23] the Court characterized the
relationship between the school and the student as a
contract, in which a student, once admitted by the
school is considered enrolled for one semester. [24] Two
years later, in Non v. Dames II,[25] the Court modified
the termination of contract theory in Alcuaz by holding
that the contractual relationship between the school
and the student is not only semestral in duration,
but for the entire period the latter are expected
to complete it.[26] Except for the variance in the
period during which the contractual relationship is
considered to subsist, both Alcuaz and Non were
unanimous in characterizing the school-student
relationship as contractual in nature.

16. Because plaintiff could not afford to pay,

defendant Rachelle A. Gamurot
inhumanly made plaintiff sit out
the class but the defendant did
not allow her to take her final
examination in Logic;

The school-student relationship is also reciprocal.

Thus, it has consequences appurtenant to and inherent
in all contracts of such kind -- it gives rise to bilateral or
reciprocal rights
and obligations. The school
undertakes to provide students with education
sufficient to enable them to pursue higher education or
a profession. On the other hand, the students agree to
abide by the academic requirements of the school and
to observe its rules and regulations.[27]

17. On March 15, 2002 just before the giving

of the final examination in the
subject Statistics, defendant Elissa
Baladad,
in connivance with
defendants Rachelle A. Gamurot
and PCST, announced in the

The terms of the school-student contract are

defined at the moment of its inception -- upon
enrolment of the student. Standards of academic
performance and the code of behavior and discipline
are usually set forth in manuals distributed to new
students at the start of every school year. Further,

ADMIN LAW 1st Set

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schools inform prospective enrollees the amount of

fees and the terms of payment.
In practice, students are normally required to
make a down payment upon enrollment, with the
balance to be paid before every preliminary, midterm
and final examination. Their failure to pay their
financial obligation is regarded as a valid ground for
the school to deny them the opportunity to take these
examinations.
The foregoing practice does not merely ensure
compliance with financial obligations; it also underlines
the importance of major examinations. Failure to take a
major examination is usually fatal to the students
promotion to the next grade or to graduation.
Examination results form a significant basis for their
final grades. These tests are usually a primary and an
indispensable requisite to their elevation to the next
educational level and, ultimately, to their completion of
a course.
Education is not a measurable commodity. It is not
possible to determine who is better educated than
another. Nevertheless, a students grades are an
accepted approximation of what would otherwise be an
intangible product of countless hours of study. The
importance of grades cannot be discounted in a setting
where education is generally the gate pass to
employment opportunities and better life; such grades
are often the means by which a prospective employer
measures whether a job applicant has acquired the
necessary tools or skills for a particular profession or
trade.
Thus, students expect that upon their payment of
tuition fees, satisfaction of the set academic standards,
completion of academic requirements and observance
of school rules and regulations, the school would
reward them by recognizing their completion of the
course enrolled in.
The obligation on the part of the school has been
established in Magtibay v. Garcia,[28] Licup v. University
of San Carlos[29] and Ateneo de Manila University v.
Garcia,[30] in which the Court held that, barring any
violation of the rules on the part of the students, an
institution of higher learning has a contractual
obligation
to
afford
its
students
a fair
opportunity to complete the course they seek to
pursue.

consultation and approval by the parents of the

students, the Court held that the school committed no
actionable wrong in refusing to admit the children of
the petitioners therein for their failure to pay the land
purchase deposit and the 2.5 percent monthly
surcharge thereon.
In the present case, PCST imposed the assailed
revenue-raising measure belatedly, in the middle of the
semester. It exacted the dance party fee as a condition
for the students taking the final examinations, and
ultimately for its recognition of their ability to finish a
course. The fee, however, was not part of the schoolstudent contract entered into at the start of the school
year. Hence, it could not be unilaterally imposed to the
prejudice of the enrollees.
Such contract is by no means an ordinary one.
In Non, we stressed that the school-student contract is
imbued with public interest, considering the high
priority given by the Constitution to education and the
grant to the State of supervisory and regulatory powers
over all educational institutions. [32] Sections 5 (1) and
(3) of Article XIV of the 1987 Constitution provide:
The State shall protect and
promote the right of all citizens to
quality education at all levels and
shall take appropriate steps to make
such declaration accessible to all.
Every student has a right to
select a profession or course of study,
subject to fair, reasonable and
equitable admission and academic
requirements.
The same state policy resonates in Section 9(2) of
BP 232, otherwise known as the Education Act of 1982:
Section 9. Rights of Students
in School. In addition to other rights,
and subject to the limitations
prescribed by law and regulations,
students and pupils in all schools shall
enjoy the following rights:
xxxxxxxxx
(2) The right
to freely choose
their field of study
subject to existing
curricula and to
continue their
course therein up
to graduation,
except in cases of
academic
deficiency, or
violation of
disciplinary
regulations.

We recognize the need of a school to fund its

facilities and to meet astronomical operating costs; this
is a reality in running it. Crystal v. Cebu International
School[31] upheld the imposition by respondent school
of a land purchase deposit in the amount of P50,000
per student to be used for the purchase of a piece of
land and for the construction of new buildings and
other facilities x x x which the school would transfer
[to] and occupy after the expiration of its lease
contract over its present site.
The amount was refundable after the student
graduated or left the school. After noting that the
imposition of the fee was made only after prior

Liability for Tort

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In her Complaint, petitioner also charged that

private respondents inhumanly punish students x x x
by reason only of their poverty, religious practice or
lowly station in life, which inculcated upon [petitioner]
the feelings of guilt, disgrace and unworthiness; [33] as a
result of such punishment, she was allegedly unable to
finish any of her subjects for the second semester of
that school year and had to lag behind in her studies
by a full year. The acts of respondents supposedly
caused her extreme humiliation, mental agony and
demoralization of unimaginable proportions in violation
of Articles 19, 21 and 26 of the Civil Code. These
provisions of the law state thus:
Article 19. Every person must, in the exercise of his
rights and in the performance of his duties, act with
justice, give everyone his due, and observe honesty
and good faith.
Article 21. Any person who wilfully causes loss or injury
to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for
the damage.
Article 26. Every person shall respect the dignity,
personality, privacy and peace of mind of his neighbors
and other persons. The following and similar acts,
though they may not constitute a criminal offense,
shall produce a cause of action for damages,
prevention and other relief:
(1) Prying into the privacy
anothers residence;

of

(2) Meddling with or disturbing the

private life or family relations of
another;
(3) Intriguing to cause another to
be alienated from his friends;
(4) Vexing or humiliating another
on account of his beliefs, lowly
station in life, place of birth,
physical
defect,
or
other
personal condition.
Generally, liability for tort arises only between
parties not otherwise bound by a contract. An
academic institution, however, may be held liable for
tort even if it has an existing contract with its students,
since the act that violated the contract may also be a
tort. We ruled thus in PSBA vs. CA,[34] from which we
quote:
x x x A perusal of Article 2176 [of the Civil
Code] shows that obligations arising from
quasi-delicts or tort, also known as extracontractual obligations, arise only between
parties not otherwise bound by contract,
whether express or implied. However, this
impression has not prevented this Court from
determining the existence of a tort even when
there obtains a contract. In Air France v.
Carrascoso(124 Phil. 722), the private

respondent was awarded damages for his

unwarranted expulsion from a first-class seat
aboard the petitioner airline. It is noted,
however, that the Court referred to the
petitioner-airlines liability as one arising from
tort, not one arising form a contract of
carriage. In effect, Air France is authority for
the view that liability from tort may exist even
if there is a contract, for the act that breaks the
contract may be also a tort. x x x This view was
not all that revolutionary, for even as early as
1918, this Court was already of a similar mind.
In Cangco v. Manila Railroad(38 Phil. 780), Mr.
Justice Fisher elucidated thus: x x x. When such
a contractual relation exists the obligor may
break the contract under such conditions
that the same act which constitutes a breach
of the contract would have constituted the
source of an extra-contractual obligation had
no contract existed between the parties.
Immediately what comes to mind is the
chapter of the Civil Code on Human Relations,
particularly Article 21 x x x.[35]
Academic Freedom
In their Memorandum, respondents harp on their
right to academic freedom. We are not impressed.
According to present jurisprudence, academic freedom
encompasses the independence of an academic
institution to determine for itself (1) who may teach,
(2) what may be taught, (3) how it shall teach, and (4)
who may be admitted to study. [36] In Garcia v. the
Faculty Admission Committee, Loyola School of
Theology,[37] the Court upheld the respondent therein
when it denied a female students admission to
theological studies in a seminary for prospective
priests. The Court defined the freedom of an academic
institution thus: to decide for itself aims and objectives
and how best to attain them x x x free from outside
coercion or interference save possibly when overriding
public welfare calls for some restraint.[38]
In Tangonan v. Pao,[39] the Court upheld, in the
name of academic freedom, the right of the school to
refuse readmission of a nursing student who had been
enrolled on probation, and who had failed her nursing
subjects. These instances notwithstanding, the Court
has emphasized that once a school has, in the name of
academic freedom, set its standards, these should be
meticulously observed and should not be used to
discriminate
against
certain
students.[40] After
accepting them upon enrollment, the school cannot
renege on its contractual obligation on grounds other
than those made known to, and accepted by, students
at the start of the school year.
In sum, the Court holds that the Complaint alleges
sufficient causes of action against respondents, and
that it should not have been summarily dismissed.
Needless to say, the Court is not holding respondents
liable for the acts complained of. That will have to be
ruled upon in due course by the court a quo.

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WHEREFORE, the Petition is hereby GRANTED,

and the assailed Orders REVERSED. The trial court is
DIRECTED to reinstate the Complaint and, with all
deliberate speed, to continue the proceedings in Civil
Case No. U-7541. No costs.

1.
2.
3.

SO ORDERED.

4.
5.

CIVIL
SERVICE
COMMISSION,
Petitioner,

- versus -

DEPARTMENT
OF
BUDGET
AND
MANAGEMENT,
Respondent.

G.R. No. 158791

Present:
DAVIDE,
JR., C.J.,
PUNO,
PANGANIBAN,
QUISUMBING,
YNARES-SANTIAGO,
SANDOVALGUTIERREZ,
CARPIO,
AUSTRIAMARTINEZ,
CORONA,
CARPIO
MORALES,
CALLEJO, SR.,
AZCUNA,
TINGA,
CHICO-NAZARIO,
and
GARCIA, JJ.
Promulgated:

July 22, 2005

_______________________
DECISION
CARPIO MORALES, J.:
The Civil Service Commission (petitioner) via the
present petition for mandamus seeks to compel the
Department of Budget and Management (respondent)
to release the balance of its budget for fiscal year
2002. At the same time, it seeks a determination by
this Court of the extent of the constitutional concept of
fiscal autonomy.
By petitioners claim, the amount of P215,270,000.00
was appropriated for its Central Office by the General
Appropriations Act (GAA) of 2002, while the total
allocations for the same Office, if all sources of funds
are
considered,
amount
to P285,660,790.44.[1] It
complains, however, that the total fund releases by
respondent to its Central Office during the fiscal year
2002 was only P279,853,398.14, thereby leaving an
unreleased balance of P5,807,392.30.
To petitioner, this balance was intentionally withheld by
respondent on the basis of its no report, no release
policy whereby allocations for agencies are withheld
pending their submission of the documents mentioned
in Sections 3.8 to 3.10 and Section 7.0 of National
Budget Circular No. 478 on Guidelines on the Release
of the FY 2002 Funds,[2]which documents are:

6.
7.
8.
9.
10.

Annual Cash Program (ACP)

Requests for the Release of Special
Allotment Release Order (SARO) and
Notice of Cash Allocation (NCA)
Summary List of Checks Issued and
Cancelled
Statement of Allotment, Obligations
and Balances
Monthly Statement of Charges to
Accounts Payable
Quarterly Report of Actual Income
Quarterly
Financial
Report
of
Operations
Quarterly
Physical
Report
of
Operations
FY 2001 Preliminary and Final Trial
Balance
Statement of Accounts Payable

Petitioner contends that the application of the no

report,
no
release
policy
upon
independent
constitutional bodies of which it is one is a violation of
the principle of fiscal autonomy and, therefore,
unconstitutional.
Respondent, at the outset, opposes the petition on
procedural grounds. It contends that first, petitioner did
not exhaust administrative remedies as it could have
sought clarification from respondents Secretary
regarding the extent of fiscal autonomy before
resorting to this Court. Second, even assuming that
administrative remedies were exhausted, there are no
exceptional and compelling reasons to justify the direct
filing of the petition with this Court instead of the trial
court, thus violating the hierarchy of courts.
On the merits, respondent, glossing over the issue
raised by petitioner on the constitutionality of
enforcing the no report, no release policy, denies
having strictly enforced the policy upon offices vested
with fiscal autonomy, it claiming that it has applied by
extension to these offices the Resolution of this
Court in A.M. No. 92-9-029-SC(Constitutional
Mandate on the Judiciarys Fiscal Autonomy) issued on
June 3, 1993, [3] particularly one of the guiding
principles established therein governing the budget of
the Judiciary, to wit:
5.
The
Supreme
Court may submit to the Department
of Budget and Management reports of
operation and income, current plantilla
of personnel, work and financial plans
and similar reports only for recording
purposes. The
submission
thereof
concerning
funds
previously
released shall not be a condition
precedent for subsequent fund
releases. (Emphasis and underscoring
supplied)
Respondent proffers at any rate that the delay in
releasing the balance of petitioners budget was not on
account of any failure on petitioners part to submit the
required reports; rather, it was due to a shortfall in
revenues.[4]

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The rule on exhaustion of administrative remedies

invoked by respondent applies only where there is an
express legal provision requiring such administrative
step as a condition precedent to taking action in court.
[5]
As petitioner is not mandated by any law to seek
clarification from the Secretary of Budget and
Management prior to filing the present action, its
failure to do so does not call for the application of the
rule.
As for the rule on hierarchy of courts, it is not absolute.
A direct invocation of this Court's original jurisdiction
may be allowed where there are special and important
reasons therefor, clearly and specifically set out in the
petition.[6] Petitioner justifies its direct filing of the
petition with this Court as the matter involves the
concept of fiscal autonomy granted to [it] as well as
other constitutional bodies, a legal question not
heretofore determined and which only the Honorable
Supreme Court can decide with authority and finality.
[7]
To this Court, such justification suffices for allowing
the petition.
Now on the substantive issues.
That the no report, no release policy may not be validly
enforced against offices vested with fiscal autonomy is
not disputed. Indeed, such policy cannot be enforced
against offices possessing fiscal autonomy without
violating Article IX (A), Section 5 of the Constitution
which provides:
Sec. 5. The Commission shall enjoy
fiscal
autonomy.
Their
approved
appropriations shall be automatically
and regularly released.
In Province of Batangas v. Romulo,[8] this Court, in
construing the phrase automatic release in Section 6,
Article X of the Constitution reading:
Section 6. Local government units shall
have a just share, as determined by
law, in the national taxes which shall
be automatically released to them,
held:
Websters
Third
New
International
Dictionary
defines
automatic as involuntary either wholly
or to a major extent so that any activity
of the will is largely negligible; of a
reflex
nature;
without
volition;
mechanical; like or suggestive of an
automaton.
Further,
the
word
automatically is defined as in an
automatic manner: without thought or
conscious intention. Being automatic,
thus, connotes something mechanical,
spontaneous and perfunctory. As such
the LGUs are not required to
perform any act to receive the just
share accruing to them from the
national coffers. x x x (Emphasis and
underscoring supplied)[9]

By parity of construction, automatic release of

approved annual appropriations to petitioner, a
constitutional commission which is vested with fiscal
autonomy, should thus be construed to mean that no
condition to fund releases to it may be imposed. This
conclusion is consistent with the above-cited June 3,
1993 Resolution of this Court which effectively
prohibited the enforcement of a no report, no release
policy against the Judiciary which has also been
granted fiscal autonomy by the Constitution.[10]
Respecting respondents justification for the withholding
of funds from petitioner as due to a shortfall in
revenues, the same does not lie. In the first place, the
alleged shortfall is totally unsubstantiated. In the
second place, even assuming that there was indeed
such a shortfall, that does not justify non-compliance
with the mandate of above-quoted Article IX (A),
Section 5 of the Constitution.
Asturias Sugar Central, Inc. v. Commissioner of
Customs teaches that [a]n interpretation should, if
possible, be avoided under which a statute or provision
being construed is defeated, or as otherwise
expressed, nullified, destroyed, emasculated, repealed,
explained away, or rendered insignificant, meaningless,
inoperative, or nugatory.[11]
If respondents theory were adopted, then the
constitutional mandate to automatically and regularly
release approved appropriations would be suspended
every year, or even every month[12] that there is a
shortfall in revenues, thereby emasculating to a
significant degree, if not rendering insignificant
altogether, such mandate.
Furthermore, the Constitution grants the enjoyment of
fiscal autonomy only to the Judiciary, the Constitutional
Commissions of which petitioner is one, and the
Ombudsman. To hold that petitioner may be subjected
to withholding or reduction of funds in the event of a
revenue shortfall would, to that extent, place petitioner
and the other entities vested with fiscal autonomy on
equal footing with all others which are not granted the
same autonomy, thereby reducing to naught the
distinction established by the Constitution.
The agencies which the Constitution has vested with
fiscal autonomy should thus be given priority in the
release of their approved appropriations over all other
agencies not similarly vested when there is a revenue
shortfall.
Significantly, the Year 2002 GAA itself distinguished
between two types of public institutions in the matter
of fund releases. With respect to government agencies
in general, the pertinent General Provisions of the GAA
read as follows:
Sec. 62. Prohibition Against
Impoundment
of
Appropriations. No
appropriations
authorized in this Act shall be
impounded through deduction or
retention, unless in accordance with
the guidelines for the imposition
and release of reserves and the
rules
and
regulations
for

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deduction, retention or deferral of

releases shall have been issued by
the DBM in coordination with the
House Committee on Appropriations
and the Senate Committee on Finance.
Accordingly, all the funds appropriated
for the purposes, programs, projects
and activities authorized in this Act,
except those covered by Special
Provision No. 1 of the Unprogrammed
Fund shall be regularly and automa
tically released in accordance with
the established allotment period and
system by the DBM without any
deduction, retention or imposition of
reserves. (Emphasis and underscoring
supplied)
Sec.
63.
Unmanageable
National
Government
Budget
Deficit. Retention or reduction of
appropriations
authorized
in
this
Act shall be effected only in cases
where
there
is unmanageable national
government budget deficit.
Unmanageable
national
government budget deficit as used in
this Section shall be construed to mean
that the actual national government
budget
deficit
has exceeded the
quarterly
budget
deficit
targets consistent with the full-year
target deficit of P130.0 billion as
indicated in the FY 2002 Budget of
Expenditures and Sources of Financing
submitted by the President to Congress
pursuant to Section 22, Article VII of
the Constitution or there are clear
economic indications of an impending
occurrence of such condition, as
determined
by
the
Development
Budget Coordinating Committee and
approved by the President. (Emphasis
and underscoring supplied)
In contrast, the immediately succeeding provision of
the Year 2002 GAA, which specifically applied to offices
vested with fiscal autonomy, stated:
Sec. 64. Appropriations of
Agencies
Vested
with
Fiscal
Autonomy. Any provision of law to
the contrary notwithstanding, the
appropriations authorized in this Act for
the
Judiciary,
Congress
of
the
Philippines, the Commission on Human
Rights,
the
Office
of
the
Ombudsman, the Civil Service
Commission, the Commission on Audit
and the Commission on Elections shall
be automatically and regularly
released. (Emphasis and underscoring
supplied)

Clearly, while the retention or reduction of

appropriations for an office is generally allowed when
there is an unmanageable budget deficit, the Year 2002
GAA,
in
conformity
with
the
Constitution, excepted from
such
rule
the
appropriations for entities vested with fiscal autonomy.
Thus, even assuming that there was a revenue shortfall
as respondent claimed, it could not withhold full
release of petitioners funds without violating not only
the Constitution but also Section 64 of the General
Provisions of the Year 2002 GAA.
This Court is not unaware that its above-cited June 3,
1993 Resolution also states as a guiding principle on
the Constitutional Mandate on the Judiciarys Fiscal
Autonomy that:
4. After approval by Congress, the
appropriations for the Judiciary shall be
automatically
and
regularly
released subject to availability of
funds. (Underscoring supplied)
This phrase subject to availability of funds does not,
however, contradict the present ruling that the funds of
entities vested with fiscal autonomy should be
automatically and regularly released, a shortfall in
revenues notwithstanding. What is contemplated in the
said quoted phrase is a situation where total revenue
collections are so low that they are not sufficient to
cover the total appropriations for all entities vested
with fiscal autonomy. In such event, it would be
practically impossible to fully release the Judiciarys
appropriations or any of the entities also vested with
fiscal autonomy for that matter, without violating the
right of such other entities to an automatic release of
their own appropriations. It is under that situation that
a relaxation of the constitutional mandate to
automatically and regularly release appropriations is
allowed.
Considering that the budget for agencies enjoying
fiscal autonomy is only a small portion of the total
national budget, only in the most extreme
circumstances will the total revenue collections fall
short of the requirements of such agencies. To
illustrate, in the Year 2002 GAA the budget for agencies
vested
with
fiscal
autonomy
amounted
only
to P14,548,620,000.00, which is 2.53% of the total
appropriations in the amount of P575,123,728,000.00.
[13]
In Year 2003 GAA, which was re-enacted in 2004,
the
budget
for
the
same
agencies
was P13,807,932,000.00, which is 2.27% of the total
appropriations amounting to P609,614,730,000.00.
[14]
And in the Year 2005, the budget for the same
agencies was only P13,601,124,000.00, which is 2.28%
of
the
total
appropriations
amounting
to P597,663,400,000.00.[15]
Finally, petitioners claim that its budget may not be
reduced by Congress lower than that of the previous
fiscal year, as is the case of the Judiciary, must be
rejected.
For with respect to the Judiciary, Art. VIII, Section 3 of
the Constitution explicitly provides:

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Section 3. The Judiciary shall enjoy

fiscal autonomy. Appropriations for the
Judiciary may not be reduced by the
legislature below
the
amount
appropriated for the previous
year and, after approval, shall be
automatically and regularly released.
[16]
(Emphasis
and
underscoring
supplied)
On the other hand, in the parallel provision granting
fiscal autonomy to Constitutional Commissions, a
similar
proscription
against
the
reduction
of
appropriations below the amount for the previous year
is clearly absent. Article IX (A), Section 5 merely states:
Section 5. The Commission shall enjoy
fiscal autonomy. Their approved annual
appropriations shall be automatically
and regularly released.
The plain implication of the omission of the provision
proscribing such reduction of appropriations below that
for the previous year is that Congress is not prohibited
from reducing the appropriations of Constitutional
Commissions below the amount appropriated for them
for the previous year.
WHEREFORE, the petition is, in light of all the
foregoing discussions, GRANTED. Respondents act of
withholding the subject funds from petitioner due to
revenue
shortfall
is
hereby
declared UNCONSTITUTIONAL.
Accordingly, respondent is directed to release to
petitioner the amount of Five Million Eight Hundred
Seven Thousand, Three hundred Ninety Two Pesos and
Thirty Centavos (P5,807,392.30) representing the
unreleased balance of petitioners appropriation for its
Central Office by the General Appropriations Act for FY
2002.
SO ORDERED.

[G.R. No. 115634. April 27, 2000]

FELIPE CALUB and RICARDO VALENCIA,
DEPARTMENT of ENVIRONMENT and NATURAL
RESOURCES (DENR), CATBALOGAN,
SAMAR, petitioners, vs. COURT OF APPEALS,
MANUELA T. BABALCON, and CONSTANCIO
ABUGANDA, respondents.
DECISION
QUISUMBING, J.:
For review is the decision.[1] dated May 27, 1994, of the
Court of Appeals in CA-G.R. SP No. 29191, denying the
petition filed by herein petitioners for certiorari,
prohibition and mandamus, in order to annul the Order
dated May 27, 1992, by the Regional Trial Court of
Catbalogan, Samar. Said Order had denied petitioners

(a) Motion to Dismiss the replevin case filed by herein

private respondents, as well as (b) petitioners Motion
for Reconsideration of the Order of said trial court
dated April 24, 1992, granting an application for a Writ
of replevin..[2] h Y
The pertinent facts of the case, borne by the records,
are as follows:
On January 28, 1992, the Forest Protection and Law
Enforcement Team of the Community Environment and
Natural Resources Office (CENRO) of the DENR
apprehended two (2) motor vehicles, described as
follows:
"1. Motor Vehicle with Plate No. HAK733 loaded with one thousand and
twenty six (1,026) board feet of
illegally sourced lumber valued at
P8,544.75, being driven by one Pio
Gabon and owned by [a certain] Jose
Vargas.
2. Motor Vehicle with Plate No. FCN-143
loaded with one thousand two hundred
twenty four and ninety seven
(1,224.97) board feet of illegallysourced lumber valued at P9,187.27,
being driven by one Constancio
Abuganda and owned by [a certain]
Manuela Babalcon. ".[3]
Constancio Abuganda and Pio Gabon, the drivers of the
vehicles, failed to present proper documents and/or
licenses. Thus, the apprehending team seized and
impounded the vehicles and its load of lumber at the
DENR-PENR (Department of Environment and Natural
Resources-Provincial Environment and Natural
Resources) Office in Catbalogan..[4] Seizure receipts
were issued but the drivers refused to accept the
receipts..[5] Felipe Calub, Provincial Environment and
Natural Resources Officer, then filed before the
Provincial Prosecutors Office in Samar, a criminal
complaint against Abuganda, in Criminal Case No.
3795, for violation of Section 68 [78), Presidential
Decree 705 as amended by Executive Order 277,
otherwise known as the Revised Forestry Code.[6] Mis sc
On January 31, 1992, the impounded vehicles were
forcibly taken by Gabon and Abuganda from the
custody of the DENR, prompting DENR Officer Calub
this time to file a criminal complaint for grave coercion
against Gabon and Abuganda. The complaint was,
however, dismissed by the Public Prosecutor..[7]
On February 11, 1992, one of the two vehicles, with
plate number FCN 143, was again apprehended by a
composite team of DENR-CENR in Catbalogan and
Philippine Army elements of the 802nd Infantry Brigade
at Barangay Buray, Paranas, Samar. It was again
loaded with forest products with an equivalent volume
of 1,005.47 board feet, valued at P10,054.70. Calub
duly filed a criminal complaint against Constancio
Abuganda, a certain Abegonia, and several John Does,
in Criminal Case No. 3625, for violation of Section 68
[78], Presidential Decree 705 as amended by Executive

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Order 277, otherwise known as the Revised Forestry

Code..[8]
In Criminal Cases Nos. 3795 and 3625, however,
Abegonia and Abuganda were acquitted on the ground
of reasonable doubt. But note the trial court ordered
that a copy of the decision be furnished the Secretary
of Justice, in order that the necessary criminal action
may be filed against Noe Pagarao and all other persons
responsible for violation of the Revised Forestry Code.
For it appeared that it was Pagarao who chartered the
subject vehicle and ordered that cut timber be loaded
on it..[9]
Subsequently, herein private respondents Manuela
Babalcon, the vehicle owner, and Constancio
Abuganda, the driver, filed a complaint for the recovery
of possession of the two (2) impounded vehicles with
an application for replevin against herein petitioners
before the RTC of Catbalogan. The trial court granted
the application for replevin and issued the
corresponding writ in an Order dated April 24, 1992. .
[10]
Petitioners filed a motion to dismiss which was
denied by the trial court.[11]
Thus, on June 15, 1992, petitioners filed with the
Supreme Court the present Petition for Certiorari,
Prohibition and Mandamus with application for
Preliminary Injunction and/or a Temporary Restraining
Order. The Court issued a TRO, enjoining respondent
RTC judge from conducting further proceedings in the
civil case for replevin; and enjoining private
respondents from taking or attempting to take the
motor vehicles and forest products seized from the
custody of the petitioners. The Court further instructed
the petitioners to see to it that the motor vehicles and
other forest products seized are kept in a secured place
and protected from deterioration, said property being
in custodia legis and subject to the direct order of the
Supreme Court..[12]In a Resolution issued on September
28, 1992, the Court referred said petition to respondent
appellate court for appropriate disposition..[13]
On May 27, 1994, the Court of Appeals denied said
petition for lack of merit. It ruled that the mere seizure
of a motor vehicle pursuant to the authority granted by
Section 68 [78] of P.D. No. 705 as amended by E.O. No.
277 does not automatically place said conveyance
in custodia legis. According to the appellate court, such
authority of the Department Head of the DENR or his
duly authorized representative to order the
confiscation and disposition of illegally obtained forest
products and the conveyance used for that purpose is
not absolute and unqualified. It is subject to pertinent
laws, regulations, or policies on that matter, added the
appellate court. The DENR Administrative Order No. 59,
series of 1990, is one such regulation, the appellate
court said. For it prescribes the guidelines in the
confiscation, forfeiture and disposition of conveyances
used in the commission of offenses penalized under
Section 68 [78] of P.D. No. 705 as amended by E.O. No.
277..[14]
Additionally, respondent Court of Appeals noted that
the petitioners failed to observe the procedure outlined
in DENR Administrative Order No. 59, series of 1990.

They were unable to submit a report of the seizure to

the DENR Secretary, to give a written notice to the
owner of the vehicle, and to render a report of their
findings and recommendations to the Secretary.
Moreover, petitioners failure to comply with the
procedure laid down by DENR Administrative Order No.
59, series of 1990, was confirmed by the admission of
petitioners counsel that no confiscation order has been
issued prior to the seizure of the vehicle and the filing
of the replevin suit. Therefore, in failing to follow such
procedure, according to the appellate court, the
subject vehicles could not be considered in custodia
legis..[15]
Respondent Court of Appeals also found no merit in
petitioners claim that private respondents complaint
for replevin is a suit against the State. Accordingly,
petitioners could not shield themselves under the
principle of state immunity as the property sought to
be recovered in the instant suit had not yet been
lawfully adjudged forfeited in favor of the government.
Moreover, according to respondent appellate court,
there could be no pecuniary liability nor loss of
property that could ensue against the government. It
reasoned that a suit against a public officer who acted
illegally or beyond the scope of his authority could not
be considered a suit against the State; and that a
public officer might be sued for illegally seizing or
withholding the possession of the property of another. .
[16]

Respondent court brushed aside other grounds raised

by petitioners based on the claim that the subject
vehicles were validly seized and held in custody
because they were contradicted by its own findings. .
[17]
Their petition was found without merit.[18] Rtc spped
Now, before us, the petitioners assign the following
errors:.[19]
(1) THE COURT OF APPEALS ERRED IN
HOLDING THAT MERE SEIZURE OF A
CONVEYANCE PURSUANT TO SECTION
68-A [78-A] OF P.D. NO. 705 AS
AMENDED BY EXECUTIVE ORDER 277
DOES NOT PLACE SAID CONVEYANCE
IN CUSTODIA LEGIS;
(2) THE COURT OF APPEALS ERRED IN
NOT HOLDING THAT THE OPERATIVE
ACT GIVING RISE FOR THE SUBJECT
CONVEYANCE TO BE IN CUSTODIA
LEGIS IS ITS LAWFUL SEIZURE BY THE
DENR PURSUANT TO SECTION 68-A [78A] OF P.D. NO. 705, AS AMENDED BY
E.O. NO. 277; AND
(3) THE COURT OF APPEALS ERRED IN
HOLDING THAT THE COMPLAINT FOR
REPLEVIN AGAINST THE PETITIONERS IS
NOT A SUIT AGAINST THE STATE.
In brief, the pertinent issues for our consideration are:

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(1) Whether or not the DENR-seized motor vehicle, with

plate number FCN 143, is in custodia legis.
(2) Whether or not the complaint for the recovery of
possession of impounded vehicles, with an application
for replevin, is a suit against the State.
We will now resolve both issues.
The Revised Forestry Code authorizes the DENR to
seize all conveyances used in the commission of an
offense in violation of Section 78. Section 78 states:
Sec. 78. Cutting, Gathering, and or
Collecting Timber, or Other Forest
Products without License. Any person
who shall cut, gather, collect, remove
timber or other forest products from
any forestland, or timber from alienable
or disposable public land, or from
private land, without any authority, or
possess timber or other forest products
without the legal documents as
required under existing forest laws and
regulations, shall be punished with the
penalties imposed under Articles 309
and 310 of the Revised Penal Codeslx
mis
The Court shall further order the
confiscation in favor of the government
of the timber or any forest products
cut, gathered, collected, removed, or
possessed, as well as the machinery,
equipment, implements and tools
illegally used in the area where the
timber or forest products are found.
This provision makes mere possession of timber or
other forest products without the accompanying legal
documents unlawful and punishable with the penalties
imposed for the crime of theft, as prescribed in Articles
309-310 of the Revised Penal Code. In the present
case, the subject vehicles were loaded with forest
products at the time of the seizure. But admittedly no
permit evidencing authority to possess and transport
said load of forest products was duly presented. These
products, in turn, were deemed illegally sourced. Thus
there was a prima facieviolation of Section 68 [78] of
the Revised Forestry Code, although as found by the
trial court, the persons responsible for said violation
were not the ones charged by the public prosecutor.
The corresponding authority of the DENR to seize all
conveyances used in the commission of an offense in
violation of Section 78 of the Revised Forestry Code is
pursuant to Sections 78-A and 89 of the same Code.
They read as follows: Sc
Sec. 78-A. Administrative Authority of
the Department Head or His Duly
Authorized Representative to Order
Confiscation. -- In all cases of violation
of this Code or other forest laws, rules
and regulations, the Department Head

or his duly authorized representative,

may order the confiscation of any
forest products illegally cut, gathered,
removed, or possessed or abandoned,
and all conveyances used either by
land, water or air in the commission of
the offense and to dispose of the same
in accordance with pertinent laws,
regulations or policies on the matter.
Sec. 89. Arrest; Institution of criminal
actions. -- A forest officer or employee
of the Bureau [Department] or any
personnel of the Philippine
Constabulary/Philippine National Police
shall arrest even without warrant any
person who has committed or is
committing in his presence any of the
offenses defined in this Chapter. He
shall also seize and confiscate, in favor
of the Government, the tools and
equipment used in committing the
offense... [Emphasis supplied.]
Note that DENR Administrative Order No. 59, series of
1990, implements Sections 78-A and 89 of the Forestry
Code, as follows:
Sec. 2. Conveyances Subject to
Confiscation and Forfeiture. -- All
conveyances used in the transport of
any forest product obtained or
gathered illegally whether or not
covered with transport documents,
found spurious or irregular in
accordance with Sec. 68-A [78-A] of
P.D. No. 705, shall be confiscated in
favor of the government or disposed of
in accordance with pertinent laws,
regulations or policies on the matter.
Sec. 4. Who are Authorized to Seize
Conveyance. -- The Secretary or his
duly authorized representative such as
the forest officers and/or natural
resources officers, or deputized officers
of the DENR are authorized to
seize said conveyances subject to
policies and guidelines pertinent
thereto. Deputized military personnel
and officials of other agencies
apprehending illegal logs and other
forest products and their conveyances
shall notify the nearest DENR field
offices, and turn over said forest
products and conveyances for proper
action and disposition. In case where
the apprehension is made by DENR
field officer, the conveyance shall be
deposited with the nearest
CENRO/PENRO/RED Office as the case
may be, for safekeeping wherever it is
most convenient and secured.
[Emphasis supplied.]

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Upon apprehension of the illegally-cut timber while

being transported without pertinent documents that
could evidence title to or right to possession of said
timber, a warrantless seizure of the involved vehicles
and their load was allowed under Section 78 and 89 of
the Revised Forestry Code. Slxs c
Note further that petitioners failure to observe the
procedure outlined in DENR Administrative Order No.
59, series of 1990 was justifiably explained. Petitioners
did not submit a report of the seizure to the Secretary
nor give a written notice to the owner of the vehicle
because on the 3rd day following the seizure, Gabon
and Abuganda, drivers of the seized vehicles, forcibly
took the impounded vehicles from the custody of the
DENR. Then again, when one of the motor vehicles was
apprehended and impounded for the second time, the
petitioners, again were not able to report the seizure to
the DENR Secretary nor give a written notice to the
owner of the vehicle because private respondents
immediately went to court and applied for a writ of
replevin. The seizure of the vehicles and their load was
done upon their apprehension for a violation of the
Revised Forestry Code. It would be absurd to require a
confiscation order or notice and hearing before said
seizure could be effected under the circumstances.
Since there was a violation of the Revised Forestry
Code and the seizure was in accordance with law, in
our view the subject vehicles were validly deemed
in custodia legis. It could not be subject to an action for
replevin. For it is property lawfully taken by virtue of
legal process and considered in the custody of the law,
and not otherwise..[20]
In Mamanteo, et. al. v. Deputy Sheriff Magumun, A.M.
No. P-98-1264, promulgated on July 28, 1999, the case
involves property to be seized by a Deputy Sheriff in a
replevin suit. But said property were already
impounded by the DENR due to violation of forestry
laws and, in fact, already forfeited in favor of the
government by order of the DENR. We said that such
property was deemed in custodia legis. The sheriff
could not insist on seizing the property already subject
of a prior warrant of seizure. The appropriate action
should be for the sheriff to inform the trial court of the
situation by way of partial Sheriffs Return, and wait for
the judges instructions on the proper procedure to be
observed.
Note that property that is validly deposited in custodia
legis cannot be the subject of a replevin suit. In
Mamanteo v. Deputy Sheriff Magumun, we elucidated
further:

". . . the writ of replevin has been

repeatedly used by unscrupulous
plaintiffs to retrieve their chattel earlier
taken for violation of the Tariff and
Customs Code, tax assessment,
attachment or execution. Officers of
the court, from the presiding judge to
the sheriff, are implored to be vigilant
in their execution of the law otherwise,
as in this case, valid seizure and
forfeiture proceedings could easily be
undermined by the simple devise of a
writ of replevin...".[21] Scslx
On the second issue, is the complaint for the recovery
of possession of the two impounded vehicles, with an
application for replevin, a suit against the State?
Well established is the doctrine that the State may not
be sued without its consent..[22] And a suit against a
public officer for his official acts is, in effect, a suit
against the State if its purpose is to hold the State
ultimately liable..[23] However, the protection afforded
to public officers by this doctrine generally applies only
to activities within the scope of their authority in good
faith and without willfulness, malice or corruption. [24] In
the present case, the acts for which the petitioners are
being called to account were performed by them in the
discharge of their official duties. The acts in question
are clearly official in nature.[25] In implementing and
enforcing Sections 78-A and 89 of the Forestry Code
through the seizure carried out, petitioners were
performing their duties and functions as officers of the
DENR, and did so within the limits of their authority.
There was no malice nor bad faith on their part. Hence,
a suit against the petitioners who represent the DENR
is a suit against the State. It cannot prosper without
the States consent.
Given the circumstances in this case, we need not
pursue the Office of the Solicitor Generals line for the
defense of petitioners concerning exhaustion of
administrative remedies. We ought only to recall that
exhaustion must be raised at the earliest time possible,
even before filing the answer to the complaint or
pleading asserting a claim, by a motion to dismiss. .[26] If
not invoked at the proper time, this ground for
dismissal could be deemed waived and the court could
take cognizance of the case and try it.[27] Mesm
ACCORDINGLY, the Petition is GRANTED, and the
assailed Decision of the Court of Appeals in CA-G.R. SP
No. 29191 is SET ASIDE. Consequently, the Order
issued by the Regional Trial Court of Catbalogan, dated
May 27, 1992, and the Writ of replevin issued in the
Order dated April 24, 1992, are ANNULLED. The
Sheriff of the Regional Trial Court of Catbalogan,
Branch 29, is directed to take possession of the subject
motor vehicle, with plate number FCN 143, for delivery
to the custody of and appropriate disposition by
petitioners. Let a copy of this decision be provided the
Honorable Secretary of Justice for his appropriate
action, against any and all persons responsible for the
abovecited violation of the Revised Forestry Code.
Costs against private respondents.

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SO ORDERED.

[G.R. No. 111107. January 10, 1997]

LEONARDO A. PAAT, in his capacity as Officer-inCharge (OIC), Regional Executive Director
(RED), Region 2 and JOVITO LAYUGAN, JR.,
in
his
capacity
as
Community
Environment
and
Natural
Resources
Officer (CENRO), both of the Department
of Environment and Natural Resources
(DENR), petitioners,
vs.
COURT
OF
APPEALS, HON. RICARDO A. BACULI in his
capacity as Presiding Judge of Branch 2,
Regional Trial Court at Tuguegarao,
Cagayan, and SPOUSES BIENVENIDO and
VICTORIA DE GUZMAN, respondents.
DECISION
TORRES, JR., J.:
Without violating the principle of exhaustion of
administrative
remedies,
may
an
action
for replevin prosper to recover a movable property
which is the subject matter of an administrative
forfeiture
proceeding
in
the
Department
of
Environment and Natural Resources pursuant to
Section 68-A of P. D. 705, as amended, entitled The
Revised Forestry Code of the Philippines?
Are the Secretary of DENR and his representatives
empowered to confiscate and forfeit conveyances used
in transporting illegal forest products in favor of the
government?
These are two fundamental questions presented
before us for our resolution.
The controversy on hand had its incipiency on May
19, 1989 when the truck of private respondent Victoria
de Guzman while on its way to Bulacan from San Jose,
Baggao, Cagayan, was seized by the Department of
Environment and Natural Resources (DENR, for brevity)
personnel in Aritao, Nueva Vizcaya because the driver
could not produce the required documents for the
forest products found concealed in the truck. Petitioner
Jovito Layugan, the Community Environment and
Natural Resources Officer (CENRO) in Aritao, Cagayan,
issued on May 23, 1989 an order of confiscation of the
truck and gave the owner thereof fifteen (15) days
within which to submit an explanation why the truck
should not be forfeited. Private respondents, however,
failed to submit the required explanation. On June 22,
1989,[1] Regional Executive Director Rogelio Baggayan
of DENR sustained petitioner Layugans action of
confiscation andordered the forfeiture of the truck
invoking Section 68-A of Presidential Decree No. 705 as
amended by Executive Order No. 277. Private
respondents filed a letter of reconsideration dated June
28, 1989 of the June 22, 1989 order of Executive
Director Baggayan, which was, however, denied in a
subsequent order of July 12, 1989.[2] Subsequently, the

case was brought by the petitioners to the Secretary of

DENR pursuant to private respondents statement in
their letter dated June 28, 1989 that in case their letter
for reconsideration would be denied then this letter
should be considered as an appeal to the Secretary.
[3]
Pending resolution however of the appeal, a suit for
replevin, docketed as Civil Case 4031, was filed by the
private respondents against petitioner Layugan and
Executive Director Baggayan[4] with the Regional Trial
Court, Branch 2 of Cagayan,[5] which issued a writ
ordering the return of the truck to private respondents.
[6]
Petitioner Layugan and Executive Director Baggayan
filed a motion to dismiss with the trial court
contending, inter alia, that private respondents had no
cause of action for their failure to exhaust
administrative remedies. The trial court denied the
motion to dismiss in an order dated December 28,
1989.[7] Their motion for reconsideration having been
likewise denied, a petition for certiorari was filed by the
petitioners with the respondent Court of Appeals which
sustained the trial courts order ruling that the question
involved is purely a legal question. [8] Hence, this
present
petition,[9] with
prayer
for
temporary
restraining order and/or preliminary injunction, seeking
to reverse the decision of the respondent Court of
Appeals was filed by the petitioners on September 9,
1993. By virtue of the Resolution dated September 27,
1993,[10] the prayer for the issuance of temporary
restraining order of petitioners was granted by this
Court.
Invoking
the
doctrine
of
exhaustion
of
administrative remedies, petitioners aver that the trial
court could not legally entertain the suit for replevin
because the truck was under administrative seizure
proceedings pursuant to Section 68-A of P.D. 705, as
amended by E.O. 277. Private respondents, on the
other hand, would seek to avoid the operation of this
principle asserting that the instant case falls within the
exception of the doctrine upon the justification that (1)
due process was violated because they were not given
the chance to be heard, and (2) the seizure and
forfeiture was unlawful on the grounds: (a) that the
Secretary of DENR and his representatives have no
authority to confiscate and forfeit conveyances utilized
in transporting illegal forest products, and (b) that the
truck as admitted by petitioners was not used in the
commission of the crime.
Upon a thorough and delicate scrutiny of the
records and relevant jurisprudence on the matter, we
are of the opinion that the plea of petitioners for
reversal is in order.
This Court in a long line of cases has consistently
held that before a party is allowed to seek the
intervention of the court, it is a pre-condition that he
should have availed of all the means of administrative
processes afforded him. Hence, if a remedy within the
administrative machinery can still be resorted to by
giving the administrative officer concerned every
opportunity to decide on a matter that comes within
his jurisdiction then such remedy should be exhausted
first before courts judicial power can be sought. The
premature invocation of courts intervention is fatal to
ones cause of action.[11] Accordingly, absent any finding
of waiver or estoppel the case is susceptible of

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dismissal for lack of cause of action. [12] This doctrine of

exhaustion of administrative remedies was not without
its practical and legal reasons, for one thing, availment
of administrative remedy entails lesser expenses and
provides for a speedier disposition of controversies. It
is no less true to state that the courts of justice for
reasons of comity and convenience will shy away from
a dispute until the system of administrative redress has
been completed and complied with so as to give the
administrative agency concerned every opportunity to
correct its error and to dispose of the case. However,
we are not amiss to reiterate that the principle of
exhaustion of administrative remedies as tested by a
battery of cases is not an ironclad rule. This doctrine is
a relative one and its flexibility is called upon by
the peculiarity and uniqueness of the factual and
circumstantial settings of a case. Hence, it is
disregarded (1) when there is a violation of due
process,[13] (2) when the issue involved is purely a legal
question,[14] (3) when the administrative action is
patently illegal amounting to lack or excess of
jurisdiction,[15] (4) when there is estoppel on the part of
the administrative agency concerned, [16] (5) when there
is irreparable injury,[17] (6) when the respondent is a
department secretary whose acts as an alter ego of the
President bears the implied and assumed approval of
the latter,[18] (7) when to require exhaustion of
administrative remedies would be unreasonable, [19] (8)
when it would amount to a nullification of a claim, [20] (9)
when the subject matter is a private land in land case
proceedings,[21] (10) when the rule does not provide a
plain, speedy and adequate remedy, and (11) when
there are circumstances indicating the urgency of
judicial intervention.[22]
In the case at bar, there is no question that the
controversy was pending before the Secretary of DENR
when it was forwarded to him following the denial by
the petitioners of the motion for reconsideration of
private respondents through the order of July 12,
1989. In their letter of reconsideration dated June 28,
1989,[23] private respondents clearly recognize the
presence of an administrative forum to which they
seek to avail, as they did avail, in the resolution of their
case. The letter, reads, thus:
xxx
If this motion for reconsideration does not merit your
favorable action, then this letter should be considered
as an appeal to the Secretary.[24]
It was easy to perceive then that the private
respondents looked up to the Secretary for the review
and disposition of their case. By appealing to him, they
acknowledged the existence of an adequate and plain
remedy still available and open to them in the ordinary
course of the law. Thus, they cannot now, without
violating the principle of exhaustion of administrative
remedies, seek courts intervention by filing an action
for replevin for the grant of their relief during the
pendency of an administrative proceedings.
Moreover, it is important to point out that the
enforcement of forestry laws, rules and regulations and
the protection, development and management of forest

lands fall within the primary and special responsibilities

of the Department of Environment and Natural
Resources. By the very nature of its function, the DENR
should be given a free hand unperturbed by judicial
intrusion to determine a controversy which is well
within its jurisdiction. The assumption by the trial
court, therefore, of the replevin suit filed by private
respondents
constitutes
an
unjustified
encroachment into the domain of the administrative
agencys prerogative. The doctrine of primary
jurisdiction does not warrant a court to arrogate unto
itself the authority to resolve a controversy the
jurisdiction over which is initially lodged with an
administrative body of special competence. [25] In Felipe
Ismael, Jr. and Co. vs. Deputy Executive Secretary,
[26]
which was reiterated in the recent case of
Concerned Officials of MWSS vs. Vasquez, [27] this Court
held:
Thus, while the administration grapples with the
complex and multifarious problems caused by
unbriddled exploitation of these resources, the
judiciary will stand clear. A long line of cases establish
the basic rule that the courts will not interfere in
matters which are addressed to the sound discretion of
government agencies entrusted with the regulation of
activities coming under the special technical
knowledge and training of such agencies.
To sustain the claim of private respondents would
in effect bring the instant controversy beyond the pale
of the principle of exhaustion of administrative
remedies and fall within the ambit of excepted cases
heretofore
stated. However,
considering
the
circumstances prevailing in this case, we can not but
rule out these assertions of private respondents to be
without merit. First, they argued that there was
violation of due process because they did not receive
the May 23, 1989 order of confiscation of petitioner
Layugan. This contention has no leg to stand on. Due
process does not necessarily mean or require a
hearing, but simply an opportunity or right to be heard.
[28]
One may be heard , not solely by verbal
presentation but also, and perhaps many times more
creditably and practicable than oral argument, through
pleadings.[29] In administrative proceedings moreover,
technical rules of procedure and evidence are not
strictly applied; administrative process cannot be fully
equated with due process in its strict judicial sense.
[30]
Indeed, deprivation of due process cannot be
successfully invoked where a party was given the
chance to be heard on his motion for reconsideration,
[31]
as in the instant case, when private respondents
were undisputedly given the opportunity to present
their side when they filed a letter of reconsideration
dated June 28, 1989 which was, however, denied in an
order of July 12, 1989 of Executive Director Baggayan.
In Navarro III vs. Damasco,[32] we ruled that :
The essence of due process is simply an opportunity to
be heard, or as applied to administrative proceedings,
an opportunity to explain ones side or an opportunity
to seek a reconsideration of the action or ruling
complained of. A formal or trial type hearing is not at
all times and in all instances essential. The
requirements are satisfied when the parties are
afforded fair and reasonable opportunity to explain

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their side of the controversy at hand. What is frowned

upon is the absolute lack of notice or hearing.
Second, private respondents imputed the patent
illegality of seizure and forfeiture of the truck because
the administrative officers of the DENR allegedly have
no power to perform these acts under the law. They
insisted that only the court is authorized to confiscate
and forfeit conveyances used in transporting illegal
forest products as can be gleaned from the second
paragraph of Section 68 of P.D. 705, as amended by
E.O. 277. The pertinent provision reads as follows:
SECTION 68. xxx
xxx
The court shall further order the confiscation in favor of
the government of the timber or any forest
products cut, gathered, collected, removed, or
possessed, as well as the machinery, equipments,
implements and tools illegaly [sic] used in the area
where the timber or forest products are found.
(Underline ours)
A reading, however, of the law persuades us not to
go along with private respondents thinking not only
because the aforequoted provision apparently does not
mention nor include conveyances that can be the
subject of confiscation by the courts, but to a large
extent, due to the fact that private respondents
interpretation of the subject provision unduly restricts
the clear intention of the law and inevitably reduces
the other provision of Section 68-A , which is quoted
herein below:
SECTION 68-A. Administrative Authority of the
Department or His Duly Authorized Representative To
Order Confiscation. In all cases of violation of this Code
or other forest laws, rules and regulations,
theDepartment Head or his duly authorized
representative, may order the confiscation of any
forest products illegally cut, gathered, removed, or
possessed or abandoned, and all conveyances used
either by land, water or air in the commission of the
offense and to dispose of the same in accordance with
pertinent laws, regulations and policies on the matter.
(Underline ours)

It is, thus, clear from the foregoing provision that

the Secretary and his duly authorized representatives
are given the authority to confiscate and forfeit
any conveyances utilized in violating the Code or other
forest laws, rules and regulations. The phrase to
dispose of the same is broad enough to cover the act
of forfeiting conveyances in favor of the government.
The only limitation is that it should be made in
accordance with pertinent laws, regulations or policies
on the matter. In the construction of statutes, it must
be read in such a way as to give effect to the purpose
projected in the statute. [33] Statutes should be
construed in the light of the object to be achieved and
the evil or mischief to be suppressed, and they should
be given such construction as will advance the object,
suppress the mischief, and secure the benefits
intended.[34] In this wise, the observation of the Solicitor
General is significant, thus:
But precisely because of the need to make forestry
laws more responsive to present situations and realities
and in view of the urgency to conserve the remaining
resources of the country, that the government opted to
add Section 68-A. This amendatory provision is
an administrative remedy totally separate and distinct
from criminal proceedings. More than anything else, it
is intended to supplant the inadequacies that
characterize enforcement of forestry laws through
criminal actions. The preamble of EO 277-the law that
added Section 68-A to PD 705-is most revealing:
WHEREAS, there is an urgency to conserve the
remaining forest resources of the country for the
benefit and welfare of the present and future
generations of Filipinos;
WHEREAS, our forest resources may be effectively
conserved and protected through the vigilant
enforcement and implementation of our forestry laws,
rules and regulations;
WHEREAS, the implementation of our forestry
laws suffers from technical difficulties, due to certain
inadequacies in the penal provisions of the Revised
Forestry Code of the Philippines; and
WHEREAS, to overcome this difficulties, there is a need
to penalize certain acts more responsive to present
situations and realities;
It is interesting to note that Section 68-A is a new
provision authorizing the DENR to confiscate, not only
conveyances, but forest products as well. On the other
hand, confiscation of forest products by the court in a
criminal action has long been provided for in Section
68. If as private respondents insist, the power on
confiscation cannot be exercised except only through
the court under Section 68, then Section 68-A would
have no purpose at all. Simply put, Section 68-A would
not have provided any solution to the problem
perceived in EO 277, supra.[35]
Private respondents, likewise, contend that the
seizure was illegal because the petitioners themselves
admitted in the Order dated July 12, 1989 of Executive
Director
Baggayan that
the
truck
of
private

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respondents was not used in the commission of the

crime. This order, a copy of which was given to and
received by the counsel of private respondents, reads
in part , viz. :
xxx while it is true that the truck of your client was not
used by her in the commission of the crime, we uphold
your claim that the truck owner is not liable for the
crime and in no case could a criminal case be filed
against her as provided under Article 309 and 310 of
the Revised Penal Code. xxx[36]
We observed that private respondents misread the
content of the aforestated order and obviously
misinterpreted the intention of petitioners. What
is contemplated by the petitioners when they stated
that the truck "was not used in the commission of the
crime" is that it was not used in the commission of the
crime of theft, hence, in no case can a criminal action
be filed against the owner thereof for violation of
Article 309 and 310 of the Revised Penal Code.
Petitioners did not eliminate the possibility that the
truck was being used in the commission of another
crime, that is, the breach of Section 68 of P.D.705 as
amended by E.O. 277. In the same order of July 12,
1989, petitioners pointed out:
xxx However, under Section 68 of P.D.705 as amended
and further amended by Executive Order No.277
specifically provides for the confiscation of the
conveyance used in the transport of forest products not
covered by the required legal documents. She may not
have been involved in the cutting and gathering of the
product in question but the fact that she accepted the
goods for a fee or fare the same is therefor liable.
xxx[37]
Private respondents, however, contended that
there is no crime defined and punishable under Section
68 other than qualified theft, so that, when petitioners
admitted in the July 12, 1989 order that private
respondents could not be charged for theft as provided
for under Articles 309 and 310 of the Revised Penal
Code, then necessarily private respondents could not
have committed an act constituting a crime under
Section 68. We disagree. For clarity, the provision of
Section 68 of P.D. 705 before its amendment by E.O.
277 and the provision of Section 1 of E.O. No.277
amending the aforementioned Section 68 are
reproduced herein, thus:
SECTION 68. Cutting, gathering and/or collecting
timber or other products without license. - Any person
who shall cut , gather , collect , or remove timber or
other forest products from any forest land, or timber
from alienable and disposable public lands, or from
private lands, without any authority under a license
agreement, lease, license or permit, shall be guilty of
qualified theft as defined and punished under Articles
309 and 310 of the Revised Penal Code
xxx. (Underscoring ours; Section 68, P.D.705 before its
amendment by E.O.277 )
SECTION 1. Section 68 of Presidential Decree No.705,
as amended, is hereby amended to read as follows:

Section 68. Cutting, gathering and/or collecting timber

or other forest products without license. -Any person
who shall cut, gather, collect, remove timber or other
forest products from any forest land, or timber from
alienable or disposable public land, or from private
land, without any authority, or possess timber or other
forest products without the legal documents as
required under existing forest laws and regulations,
shall be punished with the penalties imposed under
Articles 309 and 310 of the Revised Penal
Code xxx." (Underscoring ours; Section 1, E.O No. 277
amending Section 68, P.D. 705 as amended)
With the introduction of Executive Order No. 277
amending Section 68 of P.D. 705, the act of cutting,
gathering, collecting, removing, or possessing forest
products without authority constitutes a distinct
offense independent now from the crime of theft under
Articles 309 and 310 of the Revised Penal Code, but the
penalty to be imposed is that provided for under Article
309 and 310 of the Revised Penal Code. This is clear
from the language of Executive Order No. 277 when it
eliminated the phrase shall be guilty of qualified theft
as defined and punished under Articles 309 and 310 of
the Revised Penal Code and inserted the words shall be
punished with the penalties imposed under Article 309
and 310 of the Revised Penal Code . When the statute
is clear and explicit, there is hardly room for any
extended court ratiocination or rationalization of the
law.[38]
From the foregoing disquisition, it is clear that a
suit for replevin can not be sustained against the
petitioners for the subject truck taken and retained by
them for administrative forfeiture proceedings in
pursuant to Section 68-A of the P. D. 705, as amended.
Dismissal of the replevin suit for lack of cause of action
in view of the private respondents failure to exhaust
administrative remedies should have been the proper
course of action by the lower court instead of assuming
jurisdiction over the case and consequently issuing the
writ ordering the return of the truck. Exhaustion of the
remedies in the administrative forum, being a condition
precedent prior to ones recourse to the courts and
more importantly, being an element of private
respondents right of action, is too significant to be
waylaid by the lower court.
It is worth stressing at this point, that a suit for
replevin is founded solely on the claim that the
defendant wrongfully withholds the property sought to
be recovered. It lies to recover possession of personal
chattels that are unlawfully detained. [39] To detain is
defined as to mean to hold or keep in custody, [40] and it
has been held that there is tortuous taking whenever
there is an unlawful meddling with the property, or an
exercise or claim of dominion over it, without any
pretense of authority or right; this, without manual
seizing of the property is sufficient. [41] Under the Rules
of Court, it is indispensable in replevin proceedings,
that the plaintiff must show by his own affidavit that he
is entitled to the possession of property, that the
property is wrongfully detained by the defendant,
alleging the cause of detention, that the same has not
been taken for tax assessment, or seized under
execution, or attachment, or if so seized, that it is
exempt from such seizure, and the actual value of the

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property.[42] Private respondents miserably failed to

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

G.R. No. L-12944

March 30, 1959

MARIA NATIVIDAD VDA. DE TAN, petitionerappellee,

vs.
VETERANS BACKPAY COMMISSION, respondentappellant.
Atilano R. Cinco and Aguilan and Rosero Law Offices
for appellee.
Acting Solicitor General Guillermo E. Torres and
Solicitor Camilo D. Quiason for appellant.

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

On March 5, 1957, petitioner-appellee, Maria Natividad
vda. de Tan filed with the Court of First Instance of
Manila a verified petition for mandamus seeking an
order to compel the respondent-appellant Veterans
Back Pay Commission: (1) to declare deceased Lt. Tan
Chiat Bee alias Tan Lian Lay, a Chinese national,
entitled to backpay rights, privileges, and prerogatives
under Republic Act No. 304, as amended by Republic
Act No. 897; and (2) to give due course to the claim of
petitioner, as the widow of the said veterans, by
issuing to her the corresponding backpay certificate of
indebtedness.
Respondent Commission filed its answer in due time
asserting certain special and affirmative defenses, on
the basis of which, the Commission unsuccessfully
moved to dismiss the petition.
The parties then submitted a stipulation of facts
hereinbelow reproduced:
Come now the petitioner and respondent in the
above-entitled case through their respective
counsel, and to this Honorable Court
respectfully agree and stipulate that the
following facts are true:
1. That the petitioner is of legal age, widow,
and a resident of 400 Lallana, Tondo, Manila;
that the respondent is a government
instrumentality or agency, with offices in the
City of Manila, Philippines, duly vested with
authority to implement the provisions of the
Backpay Law, otherwise known as Republic Act
No. 879, further amending Republic Act No.
304;
2. That the petitioner is the widow of the late
Lt. Tan Chiat Bee alias Tan Lian Lay, a Chinese
national, and a bona fide member of the 1st
Regiment, United States-Chinese Volunteers in
the Philippines;
3. That the United States-Chinese Volunteers in
the Philippines is a guerrilla organization duly
recognized by the Army of the United States
and forming part and parcel of the Philippine
Army;
4. That Tan Chiat Bee alias Tan Lian Lay died in
the service on April 4, 1945 in the battle at Ipo
Dam, Rizal Province, Philippines; he was duly
recognized as a guerrilla veteran and certified
to by the Armed Forces of the Philippines as
having rendered meritorious military services
during the Japanese occupation;
5. That petitioner as the widow of the said
recognized deceased veteran, filed an
application for back pay under the provisions of
Republic Act No. 897, the resolution of the
Veterans Back Pay Commissions dated
November 19, 1953 and the letter of the

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Veterans Back Pay Commission dated

December 9, 1953;

Annex GLetter of Back Pay Commission dated

February 26, 1954 to Secretary of Justice.

6. That on June 18, 1955, the Secretary and the

Chief of Office Staff of Veterans Back Pay
Commission sent a letter to General Vicente
Lopez of the United States-Chinese Volunteers
in the Philippines apprising the latter that the
Commission has reaffirmed its resolution
granting the back pay to alien members;

Annex HOpinion No. 213 series of 1956 of the

Secretary of Justice.

7. That the Adjutant, Armed Forces of the

Philippines, has verified and certified that
deceased veteran has rendered service as a
recognized guerrilla for the period indicated in
his (Adjutant's) indorsement to the Chief,
Finance Service Armed Forces of the
Philippines;

Annex IReply of Veterans Backpay

Commission.
Annex JExplanatory Note to House Bill No.
1953.
Annex KExplanatory note to Senate Bill No.
10.
Annex LExplanatory note to House Bill No.
1228, now Republic Act No. 897.

8. That, likewise, the Chief of Finance Service,

Camp Murphy, has computed the backpay due
the petitioner and the same was passed in
audit by representatives of the Auditor
General;

Annex MJoint Resolution No. 5 of the First

Congress of the Philippines.

9. That after due liberation respondent revoked

its previous stands and ruled that aliens are
not entitled to back pay;

14. That the respondents will file its

memorandum within ten (10) days from August
1, 1957 and the petitioner may file her
memorandum within ten (10) days from receipt
of respondent's memorandum, after which the
case is deemed submitted for decision.

10. That on February 13, 1957, the respondent

Veterans Back Pay Commission, through its
Secretary & Chief of Office Staff, made a formal
reply to the aforesaid claim of the herein
petitioner denying her request on the ground
that aliens are not entitled to back pay;
11. That upon refusal of the Veterans Back Pay
Commission the petitioner brought the case
direct to this Honorable Court by way
of mandamus;
12. That petitioner and respondent admit the
existence and authenticity of the following
documents;
Annex AResolution of the Veterans Back Pay
dated November 19, 1953.
Annex BLetter dated December 9, 1953.
Annex CLetter dated June 18, 1955.
Annex DExecutive Order No. 21 dated
October 28, 1944.
Annex EExecutive Order No. 68 dated
September 26, 1945.
Annex FMinutes of the Resolution of the Back
Pay Commission regarding the opinion of the
Secretary of Justice dated February 8, 1956.

13. That the parties waive the presentation of

further evidence;

Manila, July 31, 1957.

Based on the foregoing, the lower court rendered
judgment the dispositive portion of which, reads:
Wherefore, the petition is granted, ordering
respondent Commission to give due course to
the claim of herein petitioner to the backpay to
which her deceased husband was entitled as
member of a duly recognized guerrilla
organization.
Against the decision, the respondent instituted this
appeal averring once more, in its assignment of errors,
the special and affirmative defenses that the petitioner
failed to exhaust available administrative remedies;
that the suit is, in effect, an action to enforce a money
claim against the government without its consent;
that mandamus will not lie to compel the exercise of
a discretionary function; and that the Republic Act
Nos. 304 and 897 already referred to were never
intended to benefit aliens.
We find no merit in the appeal. As to the claim
that mandamus is not the proper remedy to correct the
exercise of discretion of the Commission, it may well be
remembered that its discretion is limited to the facts of
the case, i.e., in merely evaluating the evidence
whether or not the claimant is a member of a guerrilla
force duly recognized by the United States Army.
Nowhere in the law is the respondent Commission
given the power to adjudicate or determine rights after
such facts are established. Having been satisfied that

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deceased Tan Chiat Bee was an officer of a duly

recognized guerrilla outfit, certified to by the Armed
Forces of the Philippines, having served under the
United States-Chinese Volunteers in the Philippines, a
guerrilla unit recognized by the United States army and
forming part of the Philippine Army, it becomes
the ministerial duty of the respondent to give due
course to his widow's application. (See sections 1 and
6, Republic Act 897). Note that the Chief of the
Finance Service, Camp Murphy, has accepted the
backpay due the petitioner's husband and the same
was passed in audit by the representatives of the
Auditor General.
It is insisted by the respondent Commission that aliens
are not included within the purview of the law. We
disagree. The law is contained in Republic Act Nos. 304
and 897 is explicit enough, and it extends its benefits
to members of "guerrilla forces duly recognized by the
Army of the United States." From the plain and clear
language thereof, we fail to see any indication that its
operation should be limited to citizens of the
Philippines only, for all that is required is that the
guerrilla unit be duly recognized by the Army of the
United States. We are in full accord with Opinion No.
213, series of 1956, of the Secretary of Justice, which
reads:
Section 1 of the cited Act (Republic act No. 304,
as amended by Republic Act No. 897),
otherwise known as the Back Pay Law,
recognizes the rights to the backpay of
members of "guerrilla forces duly recognized
by the Army of the United States, among
others. A perusal of its provisions reveals
nothing which may be construed to mean that
only Filipino citizens are entitled to back pay
thereunder. On the contrary, the statute
expressly includes within its coverage "persons
under contract with the Government of the
Commonwealth", which clause was construed
by this office to refer to service" by the
government (Opinion No. 137, s. 1953), a
majority of whom were non-citizens. Thus, the
Opinion No. 30, s. 1949, this office ruled that a
civil service employee of the U.S. Coast and
Geodetic Survey rendering the service to the
Philippine Government when war broke out on
December 8, 1941, was entitled to back pay.
As regards guerrillas, it seems clear that all the
law requires is that they be "duly recognized by
the Army of the United States." Section 1 of the
Back Pay Law, it is also noted, enumerates
those who are not entitled to its benefits;
recognized guerrillas who were not Filipino
citizens are not among those expressly
mentioned. The maxim expressio unius est
exclusio alterius, I think, finds application here.
Moreover, Executive Order No. 21, dated
October 28, 1944, expressly declared that,
Sections 22 (a) and 27 of Commonwealth Act
No. 1 to the contrary notwithstanding, "all
persons of any nationality or citizenship, who
are actively serving in recognized military
forces in the Philippines, are thereby

considered to be on active service in the

Philippine Army."
It is the respondent's main argument that it could not
have been the intention of Congress to extend its
benefit to aliens, as the purpose of the law was
"precisely to help rehabilitate members of the Armed
Forces of the Philippines and recognized guerrillas by
giving them the right to acquire public lands and public
property by using the back pay certificate", and "it is
fundamental under the Constitution that aliens except
American citizens cannot acquire public lands or
exploit our natural resources". Respondent Commission
fails to realize that this is just one of the various uses
of the certificate; and that it may also be utilized for
the payment of obligations to the Government or to
any of its branches or instrumentalities, i.e., taxes,
government hospital bills, etc. (See Sec. 2, Rep. act No.
897).
As further observed by the lower court:
It is one thing to be entitled to backpay and to
receive acknowledgment therefor, and another
thing to receive backpay certificates in
accordance with the resolutions of the
Commission and to make use of the same.
It was, therefore, unreasonable if not arbitrary on the
part of respondent Commission to deny petitioner's
claim on the basis.
It is further contended by the Commission that the
petitioner should have first exhausted her
administrative remedies by appealing to the President
of the Philippines, and that her failure to do so is a bar
to her action in court (Montes vs. The Civil Service
Board of Appeals, 101 Phil., 490; 54 Off. Gaz. [7] 2174.
The respondent Commission is in estoppel to invoke
this rule, considering that in its resolution (Annex F of
the Stipulation of Facts) reiterating its obstinate refusal
to abide by the opinion of the Secretary of Justice, who
is the legal adviser of the Executive Department, the
Commission declared that
The opinions promulgated by the Secretary of
Justice are advisory in nature, which may either
be accepted or ignored by the office seeking
the opinion, and any aggrieved party has the
court for recourse, (Annex F)
thereby leading the petitioner to conclude that only a
final judicial ruling in her favor would be accepted by
the Commission.
Neither is there substance in the contention that the
petition is, in effect, a suit against the government
without its consent. the relief prayed for is simply "the
recognition of the petitioner-appellee" under the
provisions of sections 1 and 2 of Republic Act No. 897,
and consists in "directing an agency of the government
to perform an act . . . it is bound to perform." Republic
Act Nos. 304 and 897 necessarily embody state
consent to an action against the officers entrusted with

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the implementation of said Acts in case of unjustified

refusal to recognize the rights of proper applicants.
The decision appealed from should be, and hereby is,
affirmed. No costs. So ordered.

G.R. No. 158253

March 2, 2007

REPUBLIC OF THE PHILIPPINES, represented by

the DEPARTMENT OF PUBLIC WORKS AND
HIGHWAYS, COMMISSION ON AUDIT and THE
NATIONAL TREASURER, Petitioner,
vs.
CARLITO LACAP, doing business under the name
and style CARWIN CONSTRUCTION AND
CONSTRUCTION SUPPLY, Respondent.
DECISION
AUSTRIA-MARTINEZ, J.:
Before the Court is a Petition for Review on Certiorari
under Rule 45 of the Revised Rules of Court assailing
the Decision1 dated April 28, 2003 of the Court of
Appeals (CA) in CA-G.R. CV No. 56345 which affirmed
with modification the Decision2 of the Regional Trial
Court, Branch 41, San Fernando, Pampanga (RTC) in
Civil Case No. 10538, granting the complaint for
Specific Performance and Damages filed by Carlito
Lacap (respondent) against the Republic of the
Philippines (petitioner).
The factual background of the case is as follows:
The District Engineer of Pampanga issued and duly
published an "Invitation To Bid" dated January 27,
1992. Respondent, doing business under the name and
style Carwin Construction and Construction Supply
(Carwin Construction), was pre-qualified together with
two other contractors. Since respondent submitted the
lowest bid, he was awarded the contract for the
concreting of Sitio 5 Bahay Pare.3 On November 4,
1992, a Contract Agreement was executed by
respondent and petitioner.4 On September 25, 1992,
District Engineer Rafael S. Ponio issued a Notice to
Proceed with the concreting
of Sitio 5 Bahay Pare.5 Accordingly, respondent
undertook the works, made advances for the purchase
of the materials and payment for labor costs.6
On October 29, 1992, personnel of the Office of the
District Engineer of San Fernando, Pampanga
conducted a final inspection of the project and found it
100% completed in accordance with the approved
plans and specifications. Accordingly, the Office of the
District Engineer issued Certificates of Final Inspection
and Final Acceptance.7
Thereafter, respondent sought to collect payment for
the completed project.8 The DPWH prepared the
Disbursement Voucher in favor of petitioner. 9 However,
the DPWH withheld payment from respondent after the

District Auditor of the Commission on Audit (COA)

disapproved the final release of funds on the ground
that the contractors license of respondent had expired
at the time of the execution of the contract. The
District Engineer sought the opinion of the DPWH Legal
Department on whether the contracts of Carwin
Construction for various Mount Pinatubo rehabilitation
projects were valid and effective although its
contractors license had already expired when the
projects were contracted.10
In a Letter-Reply dated September 1, 1993, Cesar D.
Mejia, Director III of the DPWH Legal Department
opined that since Republic Act No. 4566 (R.A. No.
4566), otherwise known as the Contractors License
Law, does not provide that a contract entered into after
the license has expired is void and there is no law
which expressly prohibits or declares void such
contract, the contract is enforceable and payment may
be paid, without prejudice to any appropriate
administrative liability action that may be imposed on
the contractor and the government officials or
employees concerned.11
In a Letter dated July 4, 1994, the District Engineer
requested clarification from the DPWH Legal
Department on whether Carwin Construction should be
paid for works accomplished despite an expired
contractors license at the time the contracts were
executed.12
In a First Indorsement dated July 20, 1994, Cesar D.
Mejia, Director III of the Legal Department,
recommended that payment should be made to Carwin
Construction, reiterating his earlier legal
opinion.13 Despite such recommendation for payment,
no payment was made to respondent.
Thus, on July 3, 1995, respondent filed the complaint
for Specific Performance and Damages against
petitioner before the RTC.14
On September 14, 1995, petitioner, through the Office
of the Solicitor General (OSG), filed a Motion to Dismiss
the complaint on the grounds that the complaint states
no cause of action and that the RTC had no jurisdiction
over the nature of the action since respondent did not
appeal to the COA the decision of the District Auditor to
disapprove the claim.15
Following the submission of respondents Opposition to
Motion to Dismiss,16 the RTC issued an Order dated
March 11, 1996 denying the Motion to Dismiss.17 The
OSG filed a Motion for Reconsideration18 but it was
likewise denied by the RTC in its Order dated May 23,
1996.19
On August 5, 1996, the OSG filed its Answer invoking
the defenses of non-exhaustion of administrative
remedies and the doctrine of non-suability of the
State.20
Following trial, the RTC rendered on February 19, 1997
its Decision, the dispositive portion of which reads as
follows:

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WHEREFORE, in view of all the foregoing consideration,

judgment is hereby rendered in favor of the plaintiff
and against the defendant, ordering the latter, thru its
District Engineer at Sindalan, San Fernando,
Pampanga, to pay the following:
a) P457,000.00 representing the contract for the
concreting project of Sitio 5 road, Bahay Pare,
Candaba, Pampanga plus interest at 12% from demand
until fully paid; and
b) The costs of suit.
SO ORDERED.21
The RTC held that petitioner must be required to pay
the contract price since it has accepted the completed
project and enjoyed the benefits thereof; to hold
otherwise would be to overrun the long standing and
consistent pronouncement against enriching oneself at
the expense of another.22
Dissatisfied, petitioner filed an appeal with the CA. 23 On
April 28, 2003, the CA rendered its Decision sustaining
the Decision of the RTC. It held that since the case
involves the application of the principle of estoppel
against the government which is a purely legal
question, then the principle of exhaustion of
administrative remedies does not apply; that by its
actions the government is estopped from questioning
the validity and binding effect of the Contract
Agreement with the respondent; that denial of
payment to respondent on purely technical grounds
after successful completion of the project is not
countenanced either by justice or equity.
The CA rendered herein the assailed Decision dated
April 28, 2003, the dispositive portion of which reads:
WHEREFORE, the decision of the lower court is hereby
AFFIRMED with modification in that the interest shall be
six percent (6%) per annum computed from June 21,
1995.
SO ORDERED.24
Hence, the present petition on the following ground:
THE COURT OF APPEALS ERRED IN NOT FINDING THAT
RESPONDENT HAS NO CAUSE OF ACTION AGAINST
PETITIONER, CONSIDERING THAT:
(a) RESPONDENT FAILED TO EXHAUST ADMINISTRATIVE
REMEDIES; AND
(b) IT IS THE COMMISSION ON AUDIT WHICH HAS THE
PRIMARY JURISDICTION TO RESOLVE RESPONDENTS
MONEY CLAIM AGAINST THE GOVERNMENT.25
Petitioner contends that respondents recourse to
judicial action was premature since the proper remedy
was to appeal the District Auditors disapproval of
payment to the COA, pursuant to Section 48,
Presidential Decree No. 1445 (P.D. No. 1445), otherwise

known as the Government Auditing Code of the

Philippines; that the COA has primary jurisdiction to
resolve respondents money claim against the
government under Section 2(1),26 Article IX of the 1987
Constitution and Section 2627 of P.D. No. 1445; that
non-observance of the doctrine of exhaustion of
administrative remedies and the principle of primary
jurisdiction results in a lack of cause of action.
Respondent, on the other hand, in his
Memorandum28 limited his discussion to Civil Code
provisions relating to human relations. He submits that
equity demands that he be paid for the work
performed; otherwise, the mandate of the Civil Code
provisions relating to human relations would be
rendered nugatory if the State itself is allowed to
ignore and circumvent the standard of behavior it sets
for its inhabitants.
The present petition is bereft of merit.
The general rule is that before a party may seek the
intervention of the court, he should first avail of all the
means afforded him by administrative processes.29 The
issues which administrative agencies are authorized to
decide should not be summarily taken from them and
submitted to a court without first giving such
administrative agency the opportunity to dispose of the
same after due deliberation.30
Corollary to the doctrine of exhaustion of
administrative remedies is the doctrine of primary
jurisdiction; that is, courts cannot or will not determine
a controversy involving a question which is within the
jurisdiction of the administrative tribunal prior to the
resolution of that question by the administrative
tribunal, where the question demands the exercise of
sound administrative discretion requiring the special
knowledge, experience and services of the
administrative tribunal to determine technical and
intricate matters of fact.31
Nonetheless, the doctrine of exhaustion of
administrative remedies and the corollary doctrine of
primary jurisdiction, which are based on sound public
policy and practical considerations, are not inflexible
rules. There are many accepted exceptions, such as:
(a) where there is estoppel on the part of the party
invoking the doctrine; (b) where the challenged
administrative act is patently illegal, amounting to lack
of jurisdiction; (c) where there is unreasonable delay or
official inaction that will irretrievably prejudice the
complainant; (d) where the amount involved is
relatively small so as to make the rule impractical and
oppressive; (e) where the question involved is purely
legal and will ultimately have to be decided by the
courts of justice;32 (f) where judicial intervention is
urgent; (g) when its application may cause great and
irreparable damage; (h) where the controverted acts
violate due process; (i) when the issue of nonexhaustion of administrative remedies has been
rendered moot;33 (j) when there is no other plain,
speedy and adequate remedy; (k) when strong public
interest is involved; and, (l) in quo warranto
proceedings.34 Exceptions (c) and (e) are applicable to
the present case.

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Notwithstanding the legal opinions of the DPWH Legal

Department rendered in 1993 and 1994 that payment
to a contractor with an expired contractors license is
proper, respondent remained unpaid for the completed
work despite repeated demands. Clearly, there was
unreasonable delay and official inaction to the great
prejudice of respondent.
Furthermore, whether a contractor with an expired
license at the time of the execution of its contract is
entitled to be paid for completed projects, clearly is a
pure question of law. It does not involve an
examination of the probative value of the evidence
presented by the parties. There is a question of law
when the doubt or difference arises as to what the law
is on a certain state of facts, and not as to the truth or
the falsehood of alleged facts.35Said question at best
could be resolved only tentatively by the
administrative authorities. The final decision on the
matter rests not with them but with the courts of
justice. Exhaustion of administrative remedies does not
apply, because nothing of an administrative nature is
to be or can be done.36 The issue does not require
technical knowledge and experience but one that
would involve the interpretation and application of law.
Thus, while it is undisputed that the District Auditor of
the COA disapproved respondents claim against the
Government, and, under Section 4837 of P.D. No. 1445,
the administrative remedy available to respondent is
an appeal of the denial of his claim by the District
Auditor to the COA itself, the Court holds that, in view
of exceptions (c) and (e) narrated above, the complaint
for specific performance and damages was not
prematurely filed and within the jurisdiction of the RTC
to resolve, despite the failure to exhaust administrative
remedies. As the Court aptly stated in Rocamora v.
RTC-Cebu (Branch VIII):38
The plaintiffs were not supposed to hold their breath
and wait until the Commission on Audit and the
Ministry of Public Highways had acted on the claims for
compensation for the lands appropriated by the
government. The road had been completed; the Pope
had come and gone; but the plaintiffs had yet to be
paid for the properties taken from them. Given this
official indifference, which apparently would continue
indefinitely, the private respondents had to act to
assert and protect their interests.39
On the question of whether a contractor with an
expired license is entitled to be paid for completed
projects, Section 35 of R.A. No. 4566 explicitly
provides:
SEC. 35. Penalties. Any contractor who, for a price,
commission, fee or wage, submits or attempts to
submit a bid to construct, or contracts to or undertakes
to construct, or assumes charge in a supervisory
capacity of a construction work within the purview of
this Act, without first securing a license to engage in
the business of contracting in this country; or who shall
present or file the license certificate of another, give
false evidence of any kind to the Board, or any
member thereof in obtaining a certificate or license,
impersonate another, or use an expired or revoked

certificate or license, shall be deemed guilty of

misdemeanor, and shall, upon conviction, be
sentenced to pay a fine of not less than five hundred
pesos but not more than five thousand pesos.
(Emphasis supplied)
The "plain meaning rule" or verba legis in statutory
construction is that if the statute is clear, plain and free
from ambiguity, it must be given its literal meaning
and applied without interpretation.40 This rule derived
from the maxim Index animi sermo est (speech is the
index of intention) rests on the valid presumption that
the words employed by the legislature in a statute
correctly express its intention or will and preclude the
court from construing it differently. The legislature is
presumed to know the meaning of the words, to have
used words advisedly, and to have expressed its intent
by use of such words as are found in the
statute.41 Verba legis non est recedendum, or from the
words of a statute there should be no departure.42
The wordings of R.A. No. 4566 are clear. It does not
declare, expressly or impliedly, as void contracts
entered into by a contractor whose license had already
expired. Nonetheless, such contractor is liable for
payment of the fine prescribed therein. Thus,
respondent should be paid for the projects he
completed. Such payment, however, is without
prejudice to the payment of the fine prescribed under
the law.
Besides, Article 22 of the Civil Code which embodies
the maxim Nemo ex alterius incommode debet
lecupletari (no man ought to be made rich out of
anothers injury) states:
Art. 22. Every person who through an act of
performance by another, or any other means, acquires
or comes into possession of something at the expense
of the latter without just or legal ground, shall return
the same to him.
This article is part of the chapter of the Civil Code on
Human Relations, the provisions of which were
formulated as "basic principles to be observed for the
rightful relationship between human beings and for the
stability of the social order, x x x designed to indicate
certain norms that spring from the fountain of good
conscience, x x x guides human conduct [that] should
run as golden threads through society to the end that
law may approach its supreme ideal which is the sway
and dominance of justice."43 The rules thereon apply
equally well to the Government.44 Since respondent
had rendered services to the full satisfaction and
acceptance by petitioner, then the former should be
compensated for them. To allow petitioner to acquire
the finished project at no cost would undoubtedly
constitute unjust enrichment for the petitioner to the
prejudice of respondent. Such unjust enrichment is not
allowed by law.
WHEREFORE, the present petition is DENIED for lack of
merit. The assailed Decision of the Court of Appeals
dated April 28, 2003 in CA-G.R. CV No. 56345
is AFFIRMED. No pronouncement as to costs.

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SO ORDERED.

status in view of the latters advertisement in [the]

Manila Bulletin.

[G.R. No. 139371. April 4, 2001]

INDIANA
AEROSPACE
UNIVERSITY, petitioner,
vs. COMMISSION ON HIGHER EDUCATION
(CHED), respondent.
DECISION

In a letter dated October 24, 1996, Dr. Vera formally

referred the aforesaid letter to Chairman Alcala with a
request that the concerned Regional Office of [CHED]
be directed to conduct appropriate investigation on the
alleged misrepresentation by [petitioner]. Thereafter,
[CHED] referred the matter to its Regional Director in
Cebu City, requesting said office to conduct an
investigation and submit its report. The [R]eport
submitted in January 1997, stated in substance:

PANGANIBAN, J.:

xxx xxx xxx

When the delayed filing of an answer causes no

prejudice to the plaintiff, default orders should be
avoided. Inasmuch
as
herein
respondent
was
improvidently declared in default, its Petition for
Certiorari to annul its default may be given due
course. The act of the Commission on Higher Education
enjoining petitioner from using the word university in it
corporate name and ordering it to revert to its
authorized name does not violate its proprietary rights
or constitute irreparable damage to the school. Indeed,
petitioner has no vested right to misrepresent itself to
the public. An injunction is a remedy in equity and
should not be used to perpetuate a falsehood.
The Case

Before us is a Petition for Review on Certiorari

under Rule 45 of the Rules of Court, challenging the
July 21, 1999 Decision[1] of the Court of Appeals (CA) in
CA-GR SP No. 51346. The appellate court directed the
Regional Trial Court (RTC) of Makati City, Branch 136, to
cease and desist from proceeding with Civil Case No.
98-811 and to dismiss the Complaint for Damages filed
by the Indiana Aerospace University against the
Commission
on
Higher
Education
(CHED). The
dispositive portion of the CA Decision reads as follows:
WHEREFORE, in the light of the foregoing
consideration, and pursuant to pertinent existing laws
and jurisprudence on the matter, [the trial court] is
hereby DIRECTED to cease and desist from proceeding
with Civil case No. 98-811 and to order the dismissal of
[petitioners] Petition dated March 31, 1999 in Civil
Case No. 98-911 for lack of merit and valid cause of
action.[2]

To recall it was in the month of May 1996, [that]

Director Ma. Lilia Gaduyon met the school [p]resident
in the regional office and verbally talked[with] and
advised them not to use University when it first came
out in an advertisement column of a local daily
newspaper in Cebu City. It was explained that there
was a violation [committed by] his institution [when it
used] the term university unless the school ha[d]
complied [with] the basic requirement of being a
university as prescribed in CHED Memorandum Order
No. 48, s. 1996.
x x x x x x x x x.
As a consequence of said Report, [respondents] Legal
Affairs Service was requested to take legal action
against [petitioner]. Subsequently, on February 3,
1997, [respondent] directed [petitioner] to desist from
using the term University, including the use of the
same in any of its alleged branches. In the course of it
investigation, [respondent] was able to verify from the
Securities and Exchange Commission (SEC) that
[petitioner had] filed a proposal to amend its corporate
name from Indiana School of Aeronautics to Indiana
Aerospace University, which was supposedly favorably
recommended by the Department of Education, Culture
and Sports (DECS) per its Indorsement dated 17 July
1995, and on [that] basis, SEC issued to [petitioner]
Certificate of Registration No. AS-083-002689 dated
August 7, 1995. Surprisingly, however, it ought to be
noted, that SEC Chairman Perfecto R. Yasay, Jr. wrote
the following letter to the [c]hairman of [respondent]:
Hon. Angel C. Alcala
Chairman

The Facts

Commission on Higher Education

The facts of this case we are summarized by the
CA, as follows:
Sometime in October 1996, Dr. Reynaldo B. Vera,
Chairman, Technical Panel for Engineering,
Architecture, and Maritime Education (TPRAM) of
[CHED], received a letter dated October 18, 1998
(Annex C) from Douglas R. Macias, Chairman, Board of
Aeronautical Engineering, Professional Regulat[ory]
Commission (PRC) and Chairman, Technical Committee
for Aeronautical Engineering (TPRAME) inquiring
whether [petitioner] had already acquired [u]niversity

DAP Bldg., San Miguel Avenue

Ortigas Center, Pasig City
Dear Chairman Alcala:
This refers to your letter dated September 18, 1997
requesting this Commission to make appropriate
changes in the Articles of Incorporation of Indiana

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School of aeronautics, Inc. due to its unauthorized use

of the term University in its corporate name.

against [respondent], docketed as Civil Case No. 98811 before public respondent judge.

Relative thereto, please be informed that our records

show that the above-mentioned corporation has not
filed any amended articles of incorporation that
changed its corporate name to include the term
University.

On April 7, 1998, [respondent] filed a Special

Appearance with Motion to Dismiss, based on 1)
improper venue; 2) lack of authority of the person
instituting the action; and 3) lack of cause of action. On
April 17, 1998, [petitioner] filed its Opposition to the
Motion to Dismiss [on] grounds stated therein, to which
[respondent] filed a Reply on April 21, 1998, reiterating
the same arguments in its Motion to Dismiss.After due
hearing, [petitioner] formally offered its evidence on
July 23, 1998 while [respondent] made a formal offer of
evidence on July 28, 1998 to which [petitioner] filed its
Comments/Objections and finally, [respondent]
submitted its Memorandum relative thereto on October
1, 1998.

In the case the corporation submit[s] an application for

change of name, your Cease and Desist Order shall be
considered accordingly.
Very truly yours,
(SGD.) PERFECTO R. YASAY, JR.
Chairman
In reaction to [respondents] order for [petitioner] to
desist from using the word University, Jovenal Toring,
[c]hairman and [f]ounder of [petitioner] wrote a letter
dated February 24, 1997 (Annex G) appealing for
reconsideration of [respondents] Order, with a promise
to follow the provisions of CMO No. 48, pertinent
portions of which have been quoted in the Petition, to
wit:
On 07 August 1995, in line with the call of the
government to go for global competitiveness and our
vision to help in the development of aerospace
technology, the Board of Directors applied with the SEC
for the amendment of Article I of the Articles of
Incorporation to read as Indiana Aerospace University
instead of Indiana School of Aeronautics, Inc.
xxxxxxxxx
In view thereof, we would like to appeal to you Fr.
Delagoza to please reconsider your order of February
3, 1997, otherwise the school will encounter financial
difficulties and suffer damages which will eventually
result in the mass dislocation of xxx thousand[s] of
students. The undersigned, being the [c]hairman and
[f]ounder, will try our very best to follow the provisions
of CHED MEMO No. 48, series of 1996 that took effect
last June 18, 1996.
xxxxxxxxx
Thank you very much for giving me a copy of said
CHED MEMO order No. 48. More power and God Bless
You.

Public respondent judge, in an Order dated August 14,

1998, denied [respondents] Motion to Dismiss and at
the same time, issued a Writ of preliminary Injunction
in favor of [petitioner]. [Respondent], in the same
Order, was directed to file its Answer within fifteen
(15)days from receipt of said Order, which was August
15, 1998.
xxxxxxxxx
WHEREFORE, and in consideration of all the foregoing
[respondents] Motion to Dismiss is hereby denied, and
the [respondent] is directed to file its [A]nswer to the
[C]omplaint within fifteen (15) days from receipt of this
Order.
In the meantime, [respondent], its officials, employees
and all parties acting under its authority are hereby
enjoined to observe the following during the pendency
of this case.
1. Not to publish or circulate any announcement in the
newspaper, radio or television regarding its Cease and
Desist Order against xxx [petitioner];
2. Not to enforce the Cease and Desist Order issued
against xxx [petitioner];
3. To maintain the status quo by not withholding the
issuance of yearly school permits and special order to
all graduates.
Let a writ of preliminary Injunction to that effect issue
upon posting by [petitioner] of an injunction bond in
the amount of One Hundred Thousand Pesos
(P100,000.00), and subject to the approval of the
Court.

x x x x x x x x x.
SO ORDERED.
The appeal of [petitioner] was however rejected by
[respondent] in its decision dated July 30, 1998 and the
[the latter] ordered the former to cease and desist from
using the word University. However, prior to said date,
on April 2, 1998, [petitioner] filed a Complaint for
Damages with prayer for Writ of preliminary and
Mandatory Injunction and Temporary Restraining Order

On September 22, 1998, [petitioner] filed before public

respondent a Motion To Declare [Respondent] in
[D]efault pursuant to Section 3, Rule 9 in relation to
Section 4, Rule 16 of the Rules of Court, as amended,
and at the same time praying [for] the Motion to [S]et
for [H]earing on October 30, 1998 at 8:30 a.m. On the

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same date, [respondent] filed a Motion For Extension of

Time to File its Answer, x x x until November 18,
1998. On November 17, 1998, [respondent] filed its
[A]nswer.
[Petitioner], on November 11, 1998 filed its Opposition
to the Motion for Extension of Time to File
[Respondents] Answer and on November 9, 1998, a
Motion to Expunge [Respondents] answer and at the
same time praying that its [M]otion be heard on
November 27, 1998 at 9:00 a.m. On even date, public
respondent judge issued an Order directing the Office
of the Solicitor General to file within a period of ten
(10) days from date its written Opposition to the
Motion to Expunge [Respondents] answer and within
the same period to file a written [N]otice of
[A]ppearance in the case. Unable to file their written
Opposition to the Motion to Expunge within the period
given by public respondent, the OSG filed a Motion to
Admit Written Opposition stating the reasons for the
same, attaching thereto the Opposition with [F]ormal
[E]ntry of [A]ppearance.
In an Order dated December 9, 1998, (Annex A), public
respondent judge ruled on [Petitioners ] Motion to
Declare [Respondent in Default], to wit:
WHEREFORE, and in view of all the foregoing, the
present motion is granted. [Petitioner] is hereby
directed to present its evidence ex-parte before the
[b]ranch [c]lerk of [c]ourt, who is designated as
[c]ommissioner for the purpose, within ten (10) days
from receipt of this [O]rder, and for the latter to submit
his report within twenty (20) days from the date the
case is submitted for decision.

For the same reason, the appellate court also

ruled that the Writ of Preliminary Injunction had
improvidently been issued. The doubtful right claimed
by petitioner is subordinate to the public interest to
protect unsuspecting students and their parents from
the unauthorized operation and misrepresentation of
an educational institution.
Respondent should not have been declared in
default, because its answer had been filed long before
the RTC ruled upon petitioners Motion to declare
respondent in default. Thus, respondent had not
obstinately refused to file an Answer; on the contrary,
its failure to do so on time was due to excusable
negligence. Declaring it in default did not serve the
ends of justice, but only prevented it from pursuing the
merits of its case.
Hence, this Petition.[4]
Issues

Petitioner alleges that the appellate

committed the following reversible errors:

court

A. In giving due course to respondent CHEDs

Petition for Certiorari filed way beyond the
60-day reglementary period prescribed by
Section 4, Rule 65 of the Rules of Court;
B. In not requiring Respondent CHED to first
file a motion to Set Aside the Order of
Default dated December 9, 1998; and
C. In ordering the dismissal of Civil Case No.
98-811.[5]

SO ORDERED.[3]
On February 23, 1999, respondent filed with the
CA a Petition for certiorari, arguing that the RTC had
committed grave abuse of discretion (a) in denying the
formers Motion to Dismiss, (b) in issuing a Writ of
Preliminary Injunction, and (c) in declaring respondent
in default despite its filing an Answer.

In its Memorandum, petitioner adds that the CA

erred in dissolving the Writ of Preliminary Injunction
issued by the RTC. We shall take up these issues in the
following order: (1) timeliness of the certiorari petition,
(2) validity of the default order, (3) validity of the
preliminary injunction, and (4) dismissal of the
Complaint.

Ruling of the Court of Appeals

This Courts Ruling

The CA ruled that petitioner had no cause of

action against respondent. Petitioner failed to show any
evidence that it had been granted university status by
respondent as required under existing law and CHED
rules and regulations. A certificate of incorporation
under an Unauthorized name does not confer upon
petitioner the right to use the word university in its
name. The evidence submitted by respondent showed
that the Securities and Exchange Commission (SEC)
had denied that petitioner had ever amended its
Articles of Incorporation to include university in its
corporate name. For its part, the Department of
Education, Culture and Sports (DECS) denied having
issued the alleged Certification dated May 18, 1998,
indorsing the change in petitioners corporate
name. Besides, neither the Corporation Code nor the
SEC Charter vests the latter with the authority to
confer university status on a corporation that it
regulates.

The Petition is partly meritorious.

First Issue: Timeliness of Certiorari

Petitioner claims that the Petition for certiorari of

respondent should have been dismissed by the CA,
because it was filed out of time and was not preceded
by a motion for reconsideration in the RTC.The copy of
the Order of August 14, 1998 had been served at
respondents office on August 15, 1998, but its Answer
was filed only after 180 days which, according to
petitioner, could not be considered a reasonable
period. On the other hand, the Office of the Solicitor
General (OSG) argues that the Order is null and void
and, hence, may be assailed at any time.

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We hold that respondents Petition for Certiorari

was seasonably filed. In computing its timeliness, what
should have been considered was not the Order of
August 14, 1998, but the date when respondent
received the December 9, 1998 Order declaring it in
default. Since it received this Order only on January 13,
1999, and filed its Petition for Certiorari on February
23, 1999, it obviously complied with the sixty-day
reglementary period stated in Section 4, Rule 65 of the
1997 Rules of Court. Moreover, the August 14, 1998
Order was not a proper subject of certiorari or appeal,
since it was merely an interlocutory order.
Exhaustion of Available Remedies

Petitioner also contends that certiorari cannot

prosper in this case, because respondent did not file a
motion for reconsideration before filing its Petition for
Certiorari with the CA. Respondent counters that
reconsideration should be dispensed with, because the
December 9, 1998 Order is a patent nullity.
The general rule is that, in order to give the lower
court the opportunity to correct itself, a motion for
reconsideration is a prerequisite to certiorari. It also
basic that petitioner must exhaust all other available
remedies before resorting to certiorari. This rule,
however, is subject to certain exceptions such as any
of the following: (1) the issues raised are purely legal in
nature, (2) public interest is involved, (3) extreme
urgency is obvious or (4) special circumstances warrant
immediate or more direct action. [6] It is patently clear
that the regulation or administration of educational
institutions, especially on the tertiary level, is invested
with public interest. Hence, the haste with which the
solicitor general raised these issues before the
appellate court is understandable. For the reason
mentioned, we rule that respondents Petition for
Certiorari did not require prior resort to a motion for
reconsideration.
Second Issue: Validity of the Default Order

Petitioner avers the RTC was justified in declaring

respondent in default, because the August 14, 1998
Order directing the filing of an answer had been served
on August 25, 1998. And as late as October 30, 1998,
respondent could only file a Motion for Extension of
Time, which the trial court denied because of the
expiry of the fifteen-day period. Petitioner adds that
respondents proper remedy would have been a Motion
to Set Aside the Order of Default, pursuant to Section
3(b), Rule 9 of the Rules of Court.
Respondent, in turn, avers that certiorari was the
only plain, speedy and adequate remedy in the
ordinary course of law, because the default Order had
improvidently been issued.
We agree with respondent. Lina v. Court of
Appeals[7] discussed the remedies available to a
defendant declared in default, as follows: (1) a motion
to set aside the order of default under Section 3(b),
Rule 9 of the Rules of Court, if the default was
discovered before judgment could be rendered; (2) a
motion for new trial under Section 1(a) of Rule 37, if

the default was discovered after judgment but while

appeal is still available; (3) a petition for relief under
Rule 38, if judgment has become final and executory;
and (4) an appeal from the judgment under Section 1,
Rule 41, even if no petition to set aside the order of
default has been resorted to.
These remedies, however, are available only to a
defendant who has been validly declared in
default. Such defendant irreparably loses the right to
participate in the trial. On the other hand, a defendant
improvidently declared in default may retain and
exercise such right after the order of default and the
subsequent judgment by default are annulled, and the
case remanded to the court of origin. The former is
limited to the remedy set forth in section 2, paragraph
3 of Rule 41 of the pre 1997 Rules of Court, and can
therefore contest only the judgment by default on the
designated ground that it is contrary to evidence or
law. The latter, however, has the following options: to
resort to this same remedy; to interpose a petition for
certiorari seeking the nullification of the order of
default, even before the promulgation of a judgment by
default; or in the event that judgment has been
rendered, to have such order and judgment declared
void.
In prohibiting appeals from interlocutory orders,
the law does not intend to accord executory force to
such writs, particularly when the effect would be to
cause irreparable damage. If in the course of trial, a
judge proceeds without or in excess of jurisdiction, this
rule prohibiting an appeal does not leave the aggrieved
party without any remedy.[8] In a case like this, a
special civil action of certiorari is the plain, speedy and
adequate remedy.
Herein respondent controverts the judgment by
default, not on the ground that it is unsubstantiated by
evidence or that it is contrary to law, but on the ground
that it is intrinsically void for having been rendered
pursuant to a patently invalid order of default.[9]
Grave Abuse of Discretion

Petitioner claims that in issuing the default Order,

the RTC did not act with grave abuse of discretion,
because respondent had failed to file its answer within
fifteen days after receiving the August 14, 1998 Order.
We disagree. Quite the contrary, the trial court
gravely abused its discretion when it declared
respondent in default despite the latters filing of an
Answer.[10] Placing respondent in default thereafter
served no practical purpose.
Petitioner was lax in calling the attention of the
Court to the fifteen-day period for filing an answer. It
moved to declare respondent in default only on
September 20, 1998, when the filing period had
expired on August 30, 1998. The only conclusion in this
case is that petitioner has not been prejudiced by the
delay. The same leniency can also be accorded to the
RTC, which declared respondent in default only on
December 9, 1998, or twenty-two days after the latter
had
filed
its
Answer
on
November
17,

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1998. Defendants Answer should be admitted, because

it had been filed before it was declared in default, and
no prejudice was caused to plaintiff. The hornbook rule
is that default judgments are generally disfavored.[11]
While there are instances when a party may be
properly declared in default, these cases should be
deemed exceptions to the rule and should be resorted
to only in clear cases of obstinate refusal or inordinate
neglect in complying with the orders of the court. [12] In
the present case, however, no such refusal or neglect
can be attributed to respondent.
It appears that respondent failed to file its Answer
because of excusable negligence. Atty. Joel Voltaire
Mayo, director of the Legal Affairs Services of CHED,
had to relinquish his position in accordance with the
Memorandum dated July 7, 1998, requiring all nonCESO eligibles holding non-career positions to vacate
their respective offices. It was only on September 25,
1998, after CHED Special Order No. 63 had been
issued,
when
he
resumed
his
former
position. Respondent also presented a meritorious
defense in its Answer -- that it was duty-bound to
pursue that state policy of protecting, fostering and
promoting the right of all citizens to affordable quality
education at all levels. In stark contrast, petitioner
neither qualified for nor was ever conferred university
status by respondent.
Judges, as a rule, should avoid issuing default
orders that deny litigants the chance to be
heard. Instead, the former should give the latter every
opportunity to present their conflicting claims on the
merits of the controversy, as much as possible
avoiding any resort to procedural technicalities.[13]

We also agree with the finding of the CA that the

act sought to be enjoined by petitioner is not violative
of the latters rights. Respondents Cease and Desist
Order of July 30, 1997 merely restrained petitioner
from using the term university in its name. It was not
ordered to close, but merely to revert to its authorized
name; hence, its proprietary rights were not violated.
Fourth Issue: Dismissal of the Complaint

Petitioner claims that the CA went beyond its

limited jurisdiction under Rule 65 when it reversed the
trial court and dismissed the Complaint on the ground
that petitioner had failed to state a cause of
action. The RTC had yet to conduct trial, but the CA
already determined the factual issue regarding
petitioners acquisition of university status, a
determination that is not permitted in certiorari
proceedings.
The CA ruled that the trial court gravely abused its
discretion in denying respondents Motion to dismiss on
the ground of lack of cause of action because of
petitioners lack of legal authority or right to use the
word university. Said appellate court:
x x x. No matter how we interpret the Corporation Code
and the law granting the Securities and Exchange
Commission its powers and duties, there is nothing
there which grants it the power or authority to confer
University Status to an educational
institution. Fundamental is the rule that when there is
no power granted, none exist[s], not even implied ones
for there is none from where to infer. The mere fact of
securing an alleged Certificate of Incorporation under
an unauthorized name does not confer the right to use
such name.

Third Issue: Preliminary Injunction

Petitioner contends that the RTC validly issued the

Writ of Preliminary Injunction. According to the trial
court,
respondents
actions
adversely
affected
petitioners interests, faculty and students. In fact, the
very existence of petitioner as a business concern
would have been jeopardized had its proprietary rights
not been protected.
We disagree. We concur with the CA that the trial
court acted with grave abuse of discretion in issuing
the
Writ
of
Preliminary
Injunction
against
respondent. Petitioner failed to establish a clear right
to continue representing itself to the public as a
university. Indeed, it has no vested right to
misrepresent itself. Before an injunction can be issued,
it is essential that (1) there must be a right in esse to
be protected, and (2) the act against which the
injunction is to be directed must have violated such
right.[14] The establishment and the operation of
schools are subject to prior authorization from the
government.No school may claim to be a university
unless it has first complied with the prerequisites
provided in Section 34 of the Manual of Regulations for
Private Schools. Section 3, Rule 58 of the Rules of
Court, limits the grant of preliminary injunction to
cases in which the plaintiff is clearly entitled to the
relief prayed for.

But what makes the conclusion of [the trial court] even

anomalous, to say the least, is that no less than the
Chairman of the SEC in his letter to the [respondent]
(Exh. J) expressly said that [petitioner] never filed any
Amended Articles of Incorporation so as to have a
change of corporate name to include the term
university. Worse, the records officer of DECS issued a
Certification dated May 18, 1998 (Annex AA) to the
effect that there was no Indorsement made by that
office addressed to the SEC or the Proposed Amended
Article of Incorporation of Indiana Aeronautics. x x x.
Under such clear pattern of deceitful maneuvering to
circumvent the requirement for acquiring University
Status, it is [a] patently reversible error for [the trial
court] to hold that [petitioner] has a right to use the
word University which must be protected. Dismissal of
[petitioners] Complaint for lack of a valid cause of
action should have been the proper action taken by
[the trial court] judge.[15]
An order denying a motion to dismiss is
interlocutory, and so the proper remedy in such a case
is to appeal after a decision has been rendered. A writ
of certiorari is not intended to correct every
controversial interlocutory ruling; it is resorted to only
to correct a grave abuse of discretion or a whimsical
exercise of judgment equivalent to lack of

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jurisdiction. Its function is limited to keeping an inferior

court within its jurisdiction and to relieve persons from
arbitrary acts -- acts which courts or judges have no
power or authority in law to perform. It is not designed
to correct erroneous findings and conclusions made by
the court.[16]
In the case at bar, we find no grave abuse of
discretion in the RTCs denial of the Motion to Dismiss,
as contained in the August 14, 1998 Order. The CA
erred in ruling other wise. The trial court stated in its
Decision that petitioner was an educational institution,
originally registered with the Securities and Exchange
Commission as the Indiana School of Aeronautics,
Inc. That name was subsequently changed to Indiana
Aerospace University after the Department of
Education, Culture and Sports had interposed no
objection to such change.[17]
Respondent issued a formal Cease and Desist
Order directing petitioner to stop using the word
university in its corporate name. The former also
published an announcement in the March 21, 1998
issue of Freeman, a local newspaper in Cebu City, that
there was no institution of learning by that name. The
counsel of respondent was quoted as saying in the
March 28, 1998 issue of the newspaper Today that
petitioner had been ordered closed by the respondent
for illegal advertisement, fraud and misrepresentation
of itself as a university. Such acts, according to the RTC
undermined the publics confidence in petitioner as an
educational institution.[18] This was a clear statement of
a sufficient cause of action.
When a motion to dismiss is grounded on the
failure to state a cause of action, a ruling thereon
should be based only on the facts alleged in the
complaint.[19] The court must pass upon this issue
based solely on such allegations, assuming them to be
true. For it to do otherwise would be a procedural error
and a denial of plaintiffs right to due process.[20]
WHEREFORE, the Petition is hereby GRANTED IN
PART, and the assailed Decision MODIFIED. The trial
court is DIRECTED to SET ASIDE the Order of default of
December 9, 1998; to ADMIT the Answer dated
November 5, 1998; to LIFT the preliminary injunction;
and to CONTINUE, with all deliberate speed, the
proceedings in Civil Case No. 98-811.
SO ORDERED.

[G.R. No. 139492. November 19, 2002]

LAGUNA
CATV
NETWORK,
INC., petitioner,
vs. HON. ALEX E. MARAAN, Regional
Director, Region IV, Dept. of Labor and
Employment (DOLE), ENRICO SAGMIT,
Acting Deputy Sheriff, DOLE Region IV,
PEDRO IGNACIO, DIOMEDES CASTRO, FE
ESPERANZA CANDILLA, RUBEN LAMINA,
JR.,
JOEL
PERSIUNCULA,
ALVINO
PRUDENTE,
JOEL
RAYMUNDO,
REGIE
ROCERO,
LINDA
RODRIGUEZ, JOHN
SELUDO, ALBERTO REYES, and ANACLETA
VALOIS, respondents.

DECISION
SANDOVAL-GUTIERREZ, J.:
On March 3, 1998, private respondents Pedro
Ignacio, Diomedes Castro, Fe Esperanza Candilla,
Ruben Lamina, Jr., Joel Persiuncula, Alvino Prudente,
Joel Raymundo, Regie Rocero, Linda Rodriguez, John
Seludo, Alberto Reyes and Anacleta Valois filed with the
Department of Labor and Employment, Regional Office
No. IV (DOLE Region IV), separate complaints for
underpayment of wages and non-payment of other
employee benefits.[1] Impleaded as respondent was
their employer, Laguna CATV Network, Inc. (Laguna
CATV).
Private
respondents
filed
their
separate
complaints pursuant to Article 128 of the Labor Code,
as amended by Republic Act No. 7730, [2] which
provides:
Article 128. Visitorial and enforcement powers. - (a)
The Secretary of Labor or his duly authorized
representatives, including labor regulation officers,
shall have access to employers records and premises
at any time of the day or night whenever work is being
undertaken therein, and the right to copy therefrom, to
question any employee and investigate any fact,
condition or matter which may be necessary to
determine violations or which may aid in the
enforcement of this Code and of any labor law, wage
order or rules and regulations issued pursuant thereto.
(b) x x x
An order issued by the duly authorized
representative of the Secretary of Labor and
Employment under this article may
be appealed to the latter. In case said order
involves a monetary award, an appeal by the employer
may be perfected only upon the posting of a cash or
surety bond issued by a reputable bonding company
duly accredited by the Secretary of Labor and
Employment in the amount equivalent to the monetary
award in the order appealed from. (emphasis added)
x x x.
On April 1, 1998, DOLE Region IV conducted an
inspection within the premises of Laguna CATV and
found that the latter violated the laws on payment of
wages and other benefits. Thereupon, DOLE Region IV
requested Laguna CATV to correct its violations but the
latter refused, prompting Regional Director Alex E.
Maraan to set the case for summary investigation.
[3]
Thereafter, he issued an Order dated August 19,
1998[4] directing Laguna CATV to pay the concerned
employees the sum of Two Hundred Sixty-One
Thousand, Nine and 19/100 (P261,009.19) Pesos
representing their unpaid claims, within 10 days from
notice, and to submit proof of payment within the same
period. Forthwith, Laguna CATV filed a motion for
reconsideration.[5]
In view of Laguna CATVs failure to comply with the
Order directing it to pay the unpaid claims of its
employees, DOLE Regional Director Maraan issued a

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writ of execution on January 29, 1999 [6] ordering Sheriff

Enrico Sagmit to collect in cash from Laguna CATV the
amount specified in the writ or, in lieu thereof, to
attach its goods and chattels or those of its owner, Dr.
Bernardino Bailon. Sheriff Sagmit subsequently levied
on Dr. Bailons L300 van and garnished his bank
deposits.
On March 2, 1999, Laguna CATV and Dr. Bailon, in
his personal capacity, filed a motion to quash the writ
of execution, notice of levy and sale on execution and
garnishment of bank deposits,[7] alleging that the writ
was premature because Laguna CATVs motion for
reconsideration of the Order dated August 19, 1998
has not yet been resolved by Regional Director
Maraan. On
April
21,
1999,
he
issued
an
Order[8] denying the motion to quash the writ of
execution, stating inter alia, that Laguna CATV failed to
perfect its appeal of the August 19, 1998 Order
because it did not comply with the mandatory
requirement of posting a bond equivalent to the
monetary award of P261,009.19; and that the writ of
execution dated January 29, 1999 should be considered
as an overt denial of Laguna CATVs motion for
reconsideration.[9]
Instead of appealing to the Secretary of Labor,
Laguna CATV filed with the Court of Appeals a motion
for extension of time to file a petition for review.
[10]
Laguna CATV was of the view that an appeal to the
Secretary of Labor would be an exercise in futility
considering that the said appeal will be filed with the
Regional Office and it will surely be disapproved.[11]
On May 13, 1999, the Court of Appeals issued a
Resolution[12] denying Laguna CATVs motion for
extension and dismissing the case. The Appellate Court
found, among others, that it failed to exhaust
administrative remedies.
Laguna CATV filed a motion for reconsideration
but was denied by the Court of Appeals in its
Resolution dated July 22, 1999.[13] Hence, it filed the
instant petition for review on certiorari.[14]
Specifically, petitioner contends that the Court of
Appeals erred in denying its motion for extension and
in dismissing the case.
Private respondents, in their comment on the
petition, claim that the assailed Orders of DOLE Region
IV have become final and executory for petitioners
failure to appeal to the Secretary of Labor.

alleged errors, if any, committed in the administrative

forum.[15] Observance of this doctrine is a sound
practice and policy. As succinctly explained by this
Court in Carale vs. Abarintos:[16]
It (the doctrine of exhaustion of administrative
remedies) ensures an orderly procedure which favors a
preliminary sifting process, particularly with respect to
matters peculiarly within the competence of the
administrative agency, avoidance of interference with
functions of the administrative agency by withholding
judicial action until the administrative process had run
its course, and prevention of attempts to swamp the
courts by a resort to them in the first instance.[17]
This Court, in a long line of cases, has consistently
held that if a remedy within the administrative
machinery can still be resorted to by giving the
administrative officer concerned every opportunity to
decide on a matter that comes within his jurisdiction,
then such remedy should be exhausted first before the
courts judicial power can be sought. [18] The party with
an administrative remedy must not merely initiate
the prescribed administrative procedure to
obtain relief but also pursue it to its appropriate
conclusion before seeking judicial intervention in
order to give the administrative agency an opportunity
to decide the matter itself correctly and prevent
unnecessary and premature resort to the court. [19] The
underlying principle of the rule rests on the
presumption that the administrative agency, if afforded
a complete chance to pass upon the matter will decide
the same correctly.[20] Therefore, petitioner should have
completed the administrative process by appealing the
questioned Orders to the Secretary of Labor.
Although this Court has allowed certain exceptions
to the doctrine of exhaustion of administrative
remedies, such as:

1) when there is a violation of due process;

2) when the issue involved is a purely legal
question;
3) when the administrative action is patently
illegal amounting to lack or excess of
jurisdiction;
4) when there is estoppel on the part of the
administrative agency concerned;

The petition lacks merit. The Court of Appeals was

correct in holding that petitioner failed to exhaust all
administrative remedies.

5) when there is irreparable injury;

As provided under Article 128 of the Labor Code,

as amended, earlier quoted, an order issued by the
duly authorized representative of the Secretary of
Labor may be appealed to the latter. Thus, petitioner
should have first appealed to the Secretary of Labor
instead of filing with the Court of Appeals a motion for
extension of time to file a petition for review.

7)

Courts, for reasons of law, comity and

convenience, should not entertain suits unless the
available administrative remedies have first been
resorted to and the proper authorities have been given
an appropriate opportunity to act and correct their

6) when the respondent is a Department

Secretary whose acts as an alter ego of
the President bears the implied and
assumed approval of the latter;
when
to
require
exhaustion
administrative
remedies
would
unreasonable;

of
be

8) when it would amount to a nullification of a

claim;
9) when the subject matter is a private land
in land case proceedings;

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10) when the rule does not provide a plain,

speedy, adequate remedy;
11) when there are circumstances indicating
the urgency of judicial intervention;
12) when no administrative
provided by law;

review

is

13) where the rule of qualified political

agency applies; and
14) when the issue of non-exhaustion of
administrative remedies has been rendered moot,[21]
petitioner fails to show that the instant case falls under
any of the exceptions. Its contention that an appeal to
the Secretary of Labor would be futile as it will surely
be disapproved, is purely conjectural and definitely
misplaced.
In the recent case of Republic of the Philippines
vs. Express Telecommunication Co.,[22] this Court held
that the premature invocation of the courts
intervention
is
fatal
to
ones
cause
of
action. Accordingly, absent any finding of waiver,
estoppel, or any of the exceptions to the doctrine of
exhaustion of administrative remedies, the case is
susceptible of dismissal for lack of cause of action. [23]
WHEREFORE, the
is DENIED.

instant

petition

for

review

SO ORDERED.

EN BANC

On February 4, 1977, then President Ferdinand E.

Marcos issued Presidential Decree No. 1084 creating
PEA. PD No. 1084 tasked PEA "to reclaim land,
including foreshore and submerged areas," and "to
develop, improve, acquire, x x x lease and sell any and
all kinds of lands."1 On the same date, then President
Marcos issued Presidential Decree No. 1085
transferring to PEA the "lands reclaimed in the
foreshore and offshore of the Manila Bay"2 under the
Manila-Cavite Coastal Road and Reclamation Project
(MCCRRP).
On December 29, 1981, then President Marcos issued a
memorandum directing PEA to amend its contract with
CDCP, so that "[A]ll future works in MCCRRP x x x shall
be funded and owned by PEA." Accordingly, PEA and
CDCP executed a Memorandum of Agreement dated
December 29, 1981, which stated:
"(i) CDCP shall undertake all reclamation,
construction, and such other works in the
MCCRRP as may be agreed upon by the
parties, to be paid according to progress of
works on a unit price/lump sum basis for items
of work to be agreed upon, subject to price
escalation, retention and other terms and
conditions provided for in Presidential Decree
No. 1594. All the financing required for such
works shall be provided by PEA.
xxx

Warning: Long case

G.R. No. 133250

II of the Manila-Cavite Coastal Road. CDCP obligated

itself to carry out all the works in consideration of fifty
percent of the total reclaimed land.

July 9, 2002

FRANCISCO I. CHAVEZ, petitioner,

vs.
PUBLIC ESTATES AUTHORITY and AMARI COASTAL
BAY DEVELOPMENT CORPORATION, respondents.
CARPIO, J.:
This is an original Petition for Mandamus with prayer
for a writ of preliminary injunction and a temporary
restraining order. The petition seeks to compel the
Public Estates Authority ("PEA" for brevity) to disclose
all facts on PEA's then on-going renegotiations with
Amari Coastal Bay and Development Corporation
("AMARI" for brevity) to reclaim portions of Manila Bay.
The petition further seeks to enjoin PEA from signing a
new agreement with AMARI involving such reclamation.
The Facts
On November 20, 1973, the government, through the
Commissioner of Public Highways, signed a contract
with the Construction and Development Corporation of
the Philippines ("CDCP" for brevity) to reclaim certain
foreshore and offshore areas of Manila Bay. The
contract also included the construction of Phases I and

(iii) x x x CDCP shall give up all its

development rights and hereby agrees to cede
and transfer in favor of PEA, all of the rights,
title, interest and participation of CDCP in and
to all the areas of land reclaimed by CDCP in
the MCCRRP as of December 30, 1981 which
have not yet been sold, transferred or
otherwise disposed of by CDCP as of said date,
which areas consist of approximately NinetyNine Thousand Four Hundred Seventy Three
(99,473) square meters in the Financial Center
Area covered by land pledge No. 5 and
approximately Three Million Three Hundred
Eighty Two Thousand Eight Hundred Eighty
Eight (3,382,888) square meters of reclaimed
areas at varying elevations above Mean Low
Water Level located outside the Financial
Center Area and the First Neighborhood Unit."3
On January 19, 1988, then President Corazon C. Aquino
issued Special Patent No. 3517, granting and
transferring to PEA "the parcels of land so reclaimed
under the Manila-Cavite Coastal Road and Reclamation
Project (MCCRRP) containing a total area of one million
nine hundred fifteen thousand eight hundred ninety
four (1,915,894) square meters." Subsequently, on
April 9, 1988, the Register of Deeds of the Municipality
of Paraaque issued Transfer Certificates of Title Nos.
7309, 7311, and 7312, in the name of PEA, covering
the three reclaimed islands known as the "Freedom

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Islands" located at the southern portion of the ManilaCavite Coastal Road, Paraaque City. The Freedom
Islands have a total land area of One Million Five
Hundred Seventy Eight Thousand Four Hundred and
Forty One (1,578,441) square meters or 157.841
hectares.
On April 25, 1995, PEA entered into a Joint Venture
Agreement ("JVA" for brevity) with AMARI, a private
corporation, to develop the Freedom Islands. The JVA
also required the reclamation of an additional 250
hectares of submerged areas surrounding these islands
to complete the configuration in the Master
Development Plan of the Southern Reclamation ProjectMCCRRP. PEA and AMARI entered into the JVA through
negotiation without public bidding.4 On April 28, 1995,
the Board of Directors of PEA, in its Resolution No.
1245, confirmed the JVA.5On June 8, 1995, then
President Fidel V. Ramos, through then Executive
Secretary Ruben Torres, approved the JVA.6
On November 29, 1996, then Senate President Ernesto
Maceda delivered a privilege speech in the Senate and
denounced the JVA as the "grandmother of all scams."
As a result, the Senate Committee on Government
Corporations and Public Enterprises, and the
Committee on Accountability of Public Officers and
Investigations, conducted a joint investigation. The
Senate Committees reported the results of their
investigation in Senate Committee Report No. 560
dated September 16, 1997.7 Among the conclusions of
their report are: (1) the reclaimed lands PEA seeks to
transfer to AMARI under the JVA are lands of the public
domain which the government has not classified as
alienable lands and therefore PEA cannot alienate
these lands; (2) the certificates of title covering the
Freedom Islands are thus void, and (3) the JVA itself is
illegal.
On December 5, 1997, then President Fidel V. Ramos
issued Presidential Administrative Order No. 365
creating a Legal Task Force to conduct a study on the
legality of the JVA in view of Senate Committee Report
No. 560. The members of the Legal Task Force were the
Secretary of Justice,8 the Chief Presidential Legal
Counsel,9 and the Government Corporate
Counsel.10 The Legal Task Force upheld the legality of
the JVA, contrary to the conclusions reached by the
Senate Committees.11
On April 4 and 5, 1998, the Philippine Daily
Inquirer and Today published reports that there were
on-going renegotiations between PEA and AMARI under
an order issued by then President Fidel V. Ramos.
According to these reports, PEA Director Nestor Kalaw,
PEA Chairman Arsenio Yulo and retired Navy Officer
Sergio Cruz composed the negotiating panel of PEA.
On April 13, 1998, Antonio M. Zulueta filed before the
Court a Petition for Prohibition with Application for the
Issuance of a Temporary Restraining Order and
Preliminary Injunction docketed as G.R. No. 132994
seeking to nullify the JVA. The Court dismissed the
petition "for unwarranted disregard of judicial
hierarchy, without prejudice to the refiling of the case
before the proper court."12

On April 27, 1998, petitioner Frank I. Chavez

("Petitioner" for brevity) as a taxpayer, filed the
instant Petition for Mandamus with Prayer for the
Issuance of a Writ of Preliminary Injunction and
Temporary Restraining Order. Petitioner contends the
government stands to lose billions of pesos in the sale
by PEA of the reclaimed lands to AMARI. Petitioner
prays that PEA publicly disclose the terms of any
renegotiation of the JVA, invoking Section 28, Article II,
and Section 7, Article III, of the 1987 Constitution on
the right of the people to information on matters of
public concern. Petitioner assails the sale to AMARI of
lands of the public domain as a blatant violation of
Section 3, Article XII of the 1987 Constitution
prohibiting the sale of alienable lands of the public
domain to private corporations. Finally, petitioner
asserts that he seeks to enjoin the loss of billions of
pesos in properties of the State that are of public
dominion.
After several motions for extension of time,13 PEA and
AMARI filed their Comments on October 19, 1998 and
June 25, 1998, respectively. Meanwhile, on December
28, 1998, petitioner filed an Omnibus Motion: (a) to
require PEA to submit the terms of the renegotiated
PEA-AMARI contract; (b) for issuance of a temporary
restraining order; and (c) to set the case for hearing on
oral argument. Petitioner filed a Reiterative Motion for
Issuance of a TRO dated May 26, 1999, which the Court
denied in a Resolution dated June 22, 1999.
In a Resolution dated March 23, 1999, the Court gave
due course to the petition and required the parties to
file their respective memoranda.
On March 30, 1999, PEA and AMARI signed the
Amended Joint Venture Agreement ("Amended JVA," for
brevity). On May 28, 1999, the Office of the President
under the administration of then President Joseph E.
Estrada approved the Amended JVA.
Due to the approval of the Amended JVA by the Office
of the President, petitioner now prays that on
"constitutional and statutory grounds the renegotiated
contract be declared null and void."14
The Issues
The issues raised by petitioner, PEA15 and AMARI16 are
as follows:
I. WHETHER THE PRINCIPAL RELIEFS PRAYED
FOR IN THE PETITION ARE MOOT AND
ACADEMIC BECAUSE OF SUBSEQUENT EVENTS;
II. WHETHER THE PETITION MERITS DISMISSAL
FOR FAILING TO OBSERVE THE PRINCIPLE
GOVERNING THE HIERARCHY OF COURTS;
III. WHETHER THE PETITION MERITS DISMISSAL
FOR NON-EXHAUSTION OF ADMINISTRATIVE
REMEDIES;
IV. WHETHER PETITIONER HAS LOCUS
STANDI TO BRING THIS SUIT;

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V. WHETHER THE CONSTITUTIONAL RIGHT TO

INFORMATION INCLUDES OFFICIAL
INFORMATION ON ON-GOING NEGOTIATIONS
BEFORE A FINAL AGREEMENT;
VI. WHETHER THE STIPULATIONS IN THE
AMENDED JOINT VENTURE AGREEMENT FOR
THE TRANSFER TO AMARI OF CERTAIN LANDS,
RECLAIMED AND STILL TO BE RECLAIMED,
VIOLATE THE 1987 CONSTITUTION; AND
VII. WHETHER THE COURT IS THE PROPER
FORUM FOR RAISING THE ISSUE OF WHETHER
THE AMENDED JOINT VENTURE AGREEMENT IS
GROSSLY DISADVANTAGEOUS TO THE
GOVERNMENT.
The Court's Ruling
First issue: whether the principal reliefs prayed
for in the petition are moot and academic
because of subsequent events.
The petition prays that PEA publicly disclose the "terms
and conditions of the on-going negotiations for a new
agreement." The petition also prays that the Court
enjoin PEA from "privately entering into, perfecting
and/or executing any new agreement with AMARI."
PEA and AMARI claim the petition is now moot and
academic because AMARI furnished petitioner on June
21, 1999 a copy of the signed Amended JVA containing
the terms and conditions agreed upon in the
renegotiations. Thus, PEA has satisfied petitioner's
prayer for a public disclosure of the renegotiations.
Likewise, petitioner's prayer to enjoin the signing of the
Amended JVA is now moot because PEA and AMARI
have already signed the Amended JVA on March 30,
1999. Moreover, the Office of the President has
approved the Amended JVA on May 28, 1999.
Petitioner counters that PEA and AMARI cannot avoid
the constitutional issue by simply fast-tracking the
signing and approval of the Amended JVA before the
Court could act on the issue. Presidential approval does
not resolve the constitutional issue or remove it from
the ambit of judicial review.
We rule that the signing of the Amended JVA by PEA
and AMARI and its approval by the President cannot
operate to moot the petition and divest the Court of its
jurisdiction. PEA and AMARI have still to implement the
Amended JVA. The prayer to enjoin the signing of the
Amended JVA on constitutional grounds necessarily
includes preventing its implementation if in the
meantime PEA and AMARI have signed one in violation
of the Constitution. Petitioner's principal basis in
assailing the renegotiation of the JVA is its violation of
Section 3, Article XII of the Constitution, which prohibits
the government from alienating lands of the public
domain to private corporations. If the Amended JVA
indeed violates the Constitution, it is the duty of the
Court to enjoin its implementation, and if already
implemented, to annul the effects of such
unconstitutional contract.

The Amended JVA is not an ordinary commercial

contract but one which seeks to transfer title and
ownership to 367.5 hectares of reclaimed lands
and submerged areas of Manila Bay to a single
private corporation. It now becomes more
compelling for the Court to resolve the issue to insure
the government itself does not violate a provision of
the Constitution intended to safeguard the national
patrimony. Supervening events, whether intended or
accidental, cannot prevent the Court from rendering a
decision if there is a grave violation of the Constitution.
In the instant case, if the Amended JVA runs counter to
the Constitution, the Court can still prevent the transfer
of title and ownership of alienable lands of the public
domain in the name of AMARI. Even in cases where
supervening events had made the cases moot, the
Court did not hesitate to resolve the legal or
constitutional issues raised to formulate controlling
principles to guide the bench, bar, and the public. 17
Also, the instant petition is a case of first impression.
All previous decisions of the Court involving Section 3,
Article XII of the 1987 Constitution, or its counterpart
provision in the 1973
Constitution,18 covered agricultural lands sold to
private corporations which acquired the lands from
private parties. The transferors of the private
corporations claimed or could claim the right
to judicial confirmation of their imperfect
titles19 under Title II of Commonwealth Act. 141 ("CA
No. 141" for brevity). In the instant case, AMARI seeks
to acquire from PEA, a public corporation, reclaimed
lands and submerged areas for nonagricultural purposes by purchase under PD No.
1084 (charter of PEA) and Title III of CA No. 141.
Certain undertakings by AMARI under the Amended JVA
constitute the consideration for the purchase. Neither
AMARI nor PEA can claim judicial confirmation of their
titles because the lands covered by the Amended JVA
are newly reclaimed or still to be reclaimed. Judicial
confirmation of imperfect title requires open,
continuous, exclusive and notorious occupation of
agricultural lands of the public domain for at least
thirty years since June 12, 1945 or earlier. Besides, the
deadline for filing applications for judicial confirmation
of imperfect title expired on December 31, 1987.20
Lastly, there is a need to resolve immediately the
constitutional issue raised in this petition because of
the possible transfer at any time by PEA to AMARI of
title and ownership to portions of the reclaimed lands.
Under the Amended JVA, PEA is obligated to transfer to
AMARI the latter's seventy percent proportionate share
in the reclaimed areas as the reclamation progresses.
The Amended JVA even allows AMARI to mortgage at
any time the entire reclaimed area to raise financing
for the reclamation project.21
Second issue: whether the petition merits
dismissal for failing to observe the principle
governing the hierarchy of courts.
PEA and AMARI claim petitioner ignored the judicial
hierarchy by seeking relief directly from the Court. The
principle of hierarchy of courts applies generally to
cases involving factual questions. As it is not a trier of
facts, the Court cannot entertain cases involving

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factual issues. The instant case, however, raises

constitutional issues of transcendental importance to
the public.22 The Court can resolve this case without
determining any factual issue related to the case. Also,
the instant case is a petition for mandamus which falls
under the original jurisdiction of the Court under
Section 5, Article VIII of the Constitution. We resolve to
exercise primary jurisdiction over the instant case.
Third issue: whether the petition merits
dismissal for non-exhaustion of administrative
remedies.
PEA faults petitioner for seeking judicial intervention in
compelling PEA to disclose publicly certain information
without first asking PEA the needed information. PEA
claims petitioner's direct resort to the Court violates
the principle of exhaustion of administrative remedies.
It also violates the rule that mandamus may issue only
if there is no other plain, speedy and adequate remedy
in the ordinary course of law.
PEA distinguishes the instant case from Taada v.
Tuvera23 where the Court granted the petition for
mandamus even if the petitioners there did not initially
demand from the Office of the President the publication
of the presidential decrees. PEA points out that in
Taada, the Executive Department had an affirmative
statutory duty under Article 2 of the Civil Code24 and
Section 1 of Commonwealth Act No. 63825 to publish
the presidential decrees. There was, therefore, no need
for the petitioners in Taada to make an initial demand
from the Office of the President. In the instant case,
PEA claims it has no affirmative statutory duty to
disclose publicly information about its renegotiation of
the JVA. Thus, PEA asserts that the Court must apply
the principle of exhaustion of administrative remedies
to the instant case in view of the failure of petitioner
here to demand initially from PEA the needed
information.
The original JVA sought to dispose to AMARI public
lands held by PEA, a government corporation. Under
Section 79 of the Government Auditing Code,26 the
disposition of government lands to private parties
requires public bidding. PEA was under a positive
legal duty to disclose to the public the terms and
conditions for the sale of its lands. The law
obligated PEA to make this public disclosure even
without demand from petitioner or from anyone. PEA
failed to make this public disclosure because the
original JVA, like the Amended JVA, was the result of
a negotiated contract, not of a public bidding.
Considering that PEA had an affirmative statutory duty
to make the public disclosure, and was even in breach
of this legal duty, petitioner had the right to seek direct
judicial intervention.
Moreover, and this alone is determinative of this issue,
the principle of exhaustion of administrative remedies
does not apply when the issue involved is a purely
legal or constitutional question.27 The principal issue in
the instant case is the capacity of AMARI to acquire
lands held by PEA in view of the constitutional ban
prohibiting the alienation of lands of the public domain
to private corporations. We rule that the principle of

exhaustion of administrative remedies does not apply

in the instant case.
Fourth issue: whether petitioner has locus standi
to bring this suit
PEA argues that petitioner has no standing to
institute mandamus proceedings to enforce his
constitutional right to information without a showing
that PEA refused to perform an affirmative duty
imposed on PEA by the Constitution. PEA also claims
that petitioner has not shown that he will suffer any
concrete injury because of the signing or
implementation of the Amended JVA. Thus, there is no
actual controversy requiring the exercise of the power
of judicial review.
The petitioner has standing to bring this taxpayer's suit
because the petition seeks to compel PEA to comply
with its constitutional duties. There are two
constitutional issues involved here. First is the right of
citizens to information on matters of public concern.
Second is the application of a constitutional provision
intended to insure the equitable distribution of
alienable lands of the public domain among Filipino
citizens. The thrust of the first issue is to compel PEA to
disclose publicly information on the sale of government
lands worth billions of pesos, information which the
Constitution and statutory law mandate PEA to
disclose. The thrust of the second issue is to prevent
PEA from alienating hundreds of hectares of alienable
lands of the public domain in violation of the
Constitution, compelling PEA to comply with a
constitutional duty to the nation.
Moreover, the petition raises matters of transcendental
importance to the public. In Chavez v. PCGG,28 the
Court upheld the right of a citizen to bring a taxpayer's
suit on matters of transcendental importance to the
public, thus "Besides, petitioner emphasizes, the matter of
recovering the ill-gotten wealth of the Marcoses
is an issue of 'transcendental importance to the
public.' He asserts that ordinary taxpayers
have a right to initiate and prosecute actions
questioning the validity of acts or orders of
government agencies or instrumentalities, if
the issues raised are of 'paramount public
interest,' and if they 'immediately affect the
social, economic and moral well being of the
people.'
Moreover, the mere fact that he is a citizen
satisfies the requirement of personal interest,
when the proceeding involves the assertion of
a public right, such as in this case. He invokes
several decisions of this Court which have set
aside the procedural matter of locus standi,
when the subject of the case involved public
interest.
xxx

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In Taada v. Tuvera, the Court asserted that

when the issue concerns a public right and the
object of mandamus is to obtain the
enforcement of a public duty, the people are
regarded as the real parties in interest; and
because it is sufficient that petitioner is a
citizen and as such is interested in the
execution of the laws, he need not show that
he has any legal or special interest in the result
of the action. In the aforesaid case, the
petitioners sought to enforce their right to be
informed on matters of public concern, a right
then recognized in Section 6, Article IV of the
1973 Constitution, in connection with the rule
that laws in order to be valid and enforceable
must be published in the Official Gazette or
otherwise effectively promulgated. In ruling for
the petitioners' legal standing, the Court
declared that the right they sought to be
enforced 'is a public right recognized by no less
than the fundamental law of the land.'
Legaspi v. Civil Service Commission, while
reiterating Taada, further declared that 'when
a mandamus proceeding involves the assertion
of a public right, the requirement of personal
interest is satisfied by the mere fact that
petitioner is a citizen and, therefore, part of the
general 'public' which possesses the right.'
Further, in Albano v. Reyes, we said that while
expenditure of public funds may not have been
involved under the questioned contract for the
development, management and operation of
the Manila International Container Terminal,
'public interest [was] definitely involved
considering the important role [of the subject
contract] . . . in the economic development of
the country and the magnitude of the financial
consideration involved.' We concluded that, as
a consequence, the disclosure provision in the
Constitution would constitute sufficient
authority for upholding the petitioner's
standing.
Similarly, the instant petition is anchored on
the right of the people to information and
access to official records, documents and
papers a right guaranteed under Section 7,
Article III of the 1987 Constitution. Petitioner, a
former solicitor general, is a Filipino citizen.
Because of the satisfaction of the two basic
requisites laid down by decisional law to
sustain petitioner's legal standing, i.e. (1) the
enforcement of a public right (2) espoused by a
Filipino citizen, we rule that the petition at bar
should be allowed."
We rule that since the instant petition, brought by a
citizen, involves the enforcement of constitutional
rights - to information and to the equitable diffusion of
natural resources - matters of transcendental public
importance, the petitioner has the requisite locus
standi.

Fifth issue: whether the constitutional right to

information includes official information on ongoing negotiations before a final agreement.
Section 7, Article III of the Constitution explains the
people's right to information on matters of public
concern in this manner:
"Sec. 7. The right of the people to information
on matters of public concern shall be
recognized. Access to official records, and
to documents, and papers pertaining to
official acts, transactions, or decisions, as
well as to government research data used as
basis for policy development, shall be afforded
the citizen, subject to such limitations as may
be provided by law." (Emphasis supplied)
The State policy of full transparency in all transactions
involving public interest reinforces the people's right to
information on matters of public concern. This State
policy is expressed in Section 28, Article II of the
Constitution, thus:
"Sec. 28. Subject to reasonable conditions
prescribed by law, the State adopts and
implements a policy of full public
disclosure of all its transactions involving
public interest." (Emphasis supplied)
These twin provisions of the Constitution seek to
promote transparency in policy-making and in the
operations of the government, as well as provide the
people sufficient information to exercise effectively
other constitutional rights. These twin provisions are
essential to the exercise of freedom of expression. If
the government does not disclose its official acts,
transactions and decisions to citizens, whatever
citizens say, even if expressed without any restraint,
will be speculative and amount to nothing. These twin
provisions are also essential to hold public officials "at
all times x x x accountable to the people,"29 for unless
citizens have the proper information, they cannot hold
public officials accountable for anything. Armed with
the right information, citizens can participate in public
discussions leading to the formulation of government
policies and their effective implementation. An
informed citizenry is essential to the existence and
proper functioning of any democracy. As explained by
the Court in Valmonte v. Belmonte, Jr.30
"An essential element of these freedoms is to
keep open a continuing dialogue or process of
communication between the government and
the people. It is in the interest of the State that
the channels for free political discussion be
maintained to the end that the government
may perceive and be responsive to the
people's will. Yet, this open dialogue can be
effective only to the extent that the citizenry is
informed and thus able to formulate its will
intelligently. Only when the participants in the
discussion are aware of the issues and have
access to information relating thereto can such
bear fruit."

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PEA asserts, citing Chavez v. PCGG,31 that in cases of

on-going negotiations the right to information is limited
to "definite propositions of the government." PEA
maintains the right does not include access to "intraagency or inter-agency recommendations or
communications during the stage when common
assertions are still in the process of being formulated
or are in the 'exploratory stage'."
Also, AMARI contends that petitioner cannot invoke the
right at the pre-decisional stage or before the closing of
the transaction. To support its contention, AMARI cites
the following discussion in the 1986 Constitutional
Commission:
"Mr. Suarez. And when we say 'transactions'
which should be distinguished from contracts,
agreements, or treaties or whatever, does the
Gentleman refer to the steps leading to the
consummation of the contract, or does he refer
to the contract itself?
Mr. Ople: The 'transactions' used here, I
suppose is generic and therefore, it can
cover both steps leading to a contract
and already a consummated contract, Mr.
Presiding Officer.
Mr. Suarez: This contemplates inclusion of
negotiations leading to the
consummation of the transaction.
Mr. Ople: Yes, subject only to reasonable
safeguards on the national interest.
Mr. Suarez: Thank you."

32

(Emphasis supplied)

AMARI argues there must first be a consummated

contract before petitioner can invoke the right.
Requiring government officials to reveal their
deliberations at the pre-decisional stage will degrade
the quality of decision-making in government agencies.
Government officials will hesitate to express their real
sentiments during deliberations if there is immediate
public dissemination of their discussions, putting them
under all kinds of pressure before they decide.
We must first distinguish between information the law
on public bidding requires PEA to disclose publicly, and
information the constitutional right to information
requires PEA to release to the public. Before the
consummation of the contract, PEA must, on its own
and without demand from anyone, disclose to the
public matters relating to the disposition of its property.
These include the size, location, technical description
and nature of the property being disposed of, the terms
and conditions of the disposition, the parties qualified
to bid, the minimum price and similar information. PEA
must prepare all these data and disclose them to the
public at the start of the disposition process, long
before the consummation of the contract, because the
Government Auditing Code requires public bidding. If
PEA fails to make this disclosure, any citizen can
demand from PEA this information at any time during
the bidding process.

Information, however, on on-going evaluation or

review of bids or proposals being undertaken by the
bidding or review committee is not immediately
accessible under the right to information. While the
evaluation or review is still on-going, there are no
"official acts, transactions, or decisions" on the bids or
proposals. However, once the committee makes
its official recommendation, there arises a "definite
proposition" on the part of the government. From this
moment, the public's right to information attaches, and
any citizen can access all the non-proprietary
information leading to such definite proposition.
In Chavez v. PCGG,33 the Court ruled as follows:
"Considering the intent of the framers of the
Constitution, we believe that it is incumbent
upon the PCGG and its officers, as well as other
government representatives, to disclose
sufficient public information on any proposed
settlement they have decided to take up with
the ostensible owners and holders of ill-gotten
wealth. Such information, though, must pertain
to definite propositions of the
government, not necessarily to intra-agency
or inter-agency recommendations or
communications during the stage when
common assertions are still in the process of
being formulated or are in the "exploratory"
stage. There is need, of course, to observe the
same restrictions on disclosure of information
in general, as discussed earlier such as on
matters involving national security, diplomatic
or foreign relations, intelligence and other
classified information." (Emphasis supplied)
Contrary to AMARI's contention, the commissioners of
the 1986 Constitutional Commission understood that
the right to information "contemplates inclusion of
negotiations leading to the consummation of the
transaction." Certainly, a consummated contract is
not a requirement for the exercise of the right to
information. Otherwise, the people can never exercise
the right if no contract is consummated, and if one is
consummated, it may be too late for the public to
expose its defects.1wphi1.nt
Requiring a consummated contract will keep the public
in the dark until the contract, which may be grossly
disadvantageous to the government or even illegal,
becomes a fait accompli. This negates the State policy
of full transparency on matters of public concern, a
situation which the framers of the Constitution could
not have intended. Such a requirement will prevent the
citizenry from participating in the public discussion of
any proposed contract, effectively truncating a basic
right enshrined in the Bill of Rights. We can allow
neither an emasculation of a constitutional right, nor a
retreat by the State of its avowed "policy of full
disclosure of all its transactions involving public
interest."
The right covers three categories of information which
are "matters of public concern," namely: (1) official
records; (2) documents and papers pertaining to official
acts, transactions and decisions; and (3) government
research data used in formulating policies. The first
category refers to any document that is part of the

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public records in the custody of government agencies

or officials. The second category refers to documents
and papers recording, evidencing, establishing,
confirming, supporting, justifying or explaining official
acts, transactions or decisions of government agencies
or officials. The third category refers to research data,
whether raw, collated or processed, owned by the
government and used in formulating government
policies.
The information that petitioner may access on the
renegotiation of the JVA includes evaluation reports,
recommendations, legal and expert opinions, minutes
of meetings, terms of reference and other documents
attached to such reports or minutes, all relating to the
JVA. However, the right to information does not compel
PEA to prepare lists, abstracts, summaries and the like
relating to the renegotiation of the JVA.34 The right only
affords access to records, documents and papers,
which means the opportunity to inspect and copy
them. One who exercises the right must copy the
records, documents and papers at his expense. The
exercise of the right is also subject to reasonable
regulations to protect the integrity of the public records
and to minimize disruption to government operations,
like rules specifying when and how to conduct the
inspection and copying.35
The right to information, however, does not extend to
matters recognized as privileged information under the
separation of powers.36 The right does not also apply to
information on military and diplomatic secrets,
information affecting national security, and information
on investigations of crimes by law enforcement
agencies before the prosecution of the accused, which
courts have long recognized as confidential.37 The right
may also be subject to other limitations that Congress
may impose by law.
There is no claim by PEA that the information
demanded by petitioner is privileged information
rooted in the separation of powers. The information
does not cover Presidential conversations,
correspondences, or discussions during closed-door
Cabinet meetings which, like internal deliberations of
the Supreme Court and other collegiate courts, or
executive sessions of either house of Congress, 38 are
recognized as confidential. This kind of information
cannot be pried open by a co-equal branch of
government. A frank exchange of exploratory ideas
and assessments, free from the glare of publicity and
pressure by interested parties, is essential to protect
the independence of decision-making of those tasked
to exercise Presidential, Legislative and Judicial
power.39This is not the situation in the instant case.
We rule, therefore, that the constitutional right to
information includes official information on on-going
negotiations before a final contract. The information,
however, must constitute definite propositions by the
government and should not cover recognized
exceptions like privileged information, military and
diplomatic secrets and similar matters affecting
national security and public order.40 Congress has also
prescribed other limitations on the right to information
in several legislations.41

Sixth issue: whether stipulations in the Amended

JVA for the transfer to AMARI of lands, reclaimed
or to be reclaimed, violate the Constitution.
The Regalian Doctrine
The ownership of lands reclaimed from foreshore and
submerged areas is rooted in the Regalian doctrine
which holds that the State owns all lands and waters of
the public domain. Upon the Spanish conquest of the
Philippines, ownership of all "lands, territories and
possessions" in the Philippines passed to the Spanish
Crown.42The King, as the sovereign ruler and
representative of the people, acquired and owned all
lands and territories in the Philippines except those he
disposed of by grant or sale to private individuals.
The 1935, 1973 and 1987 Constitutions adopted the
Regalian doctrine substituting, however, the State, in
lieu of the King, as the owner of all lands and waters of
the public domain. The Regalian doctrine is the
foundation of the time-honored principle of land
ownership that "all lands that were not acquired from
the Government, either by purchase or by grant,
belong to the public domain."43 Article 339 of the Civil
Code of 1889, which is now Article 420 of the Civil
Code of 1950, incorporated the Regalian doctrine.
Ownership and Disposition of Reclaimed Lands
The Spanish Law of Waters of 1866 was the first
statutory law governing the ownership and disposition
of reclaimed lands in the Philippines. On May 18, 1907,
the Philippine Commission enacted Act No. 1654 which
provided for the lease, but not the sale, of
reclaimed lands of the government to
corporations and individuals. Later, on November
29, 1919, the Philippine Legislature approved Act No.
2874, the Public Land Act, which authorized the lease,
but not the sale, of reclaimed lands of the
government to corporations and individuals. On
November 7, 1936, the National Assembly passed
Commonwealth Act No. 141, also known as the Public
Land Act, which authorized the lease, but not the
sale, of reclaimed lands of the government to
corporations and individuals. CA No. 141 continues
to this day as the general law governing the
classification and disposition of lands of the public
domain.
The Spanish Law of Waters of 1866 and the Civil
Code of 1889
Under the Spanish Law of Waters of 1866, the shores,
bays, coves, inlets and all waters within the maritime
zone of the Spanish territory belonged to the public
domain for public use.44 The Spanish Law of Waters of
1866 allowed the reclamation of the sea under Article
5, which provided as follows:

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"Article 5. Lands reclaimed from the sea in

consequence of works constructed by the
State, or by the provinces, pueblos or private
persons, with proper permission, shall become
the property of the party constructing such
works, unless otherwise provided by the terms
of the grant of authority."
Under the Spanish Law of Waters, land reclaimed from
the sea belonged to the party undertaking the
reclamation, provided the government issued the
necessary permit and did not reserve ownership of the
reclaimed land to the State.
Article 339 of the Civil Code of 1889 defined property
of public dominion as follows:
"Art. 339. Property of public dominion is
1. That devoted to public use, such as roads,
canals, rivers, torrents, ports and bridges
constructed by the State, riverbanks, shores,
roadsteads, and that of a similar character;
2. That belonging exclusively to the State
which, without being of general public use, is
employed in some public service, or in the
development of the national wealth, such as
walls, fortresses, and other works for the
defense of the territory, and mines, until
granted to private individuals."
Property devoted to public use referred to property
open for use by the public. In contrast, property
devoted to public service referred to property used for
some specific public service and open only to those
authorized to use the property.
Property of public dominion referred not only to
property devoted to public use, but also to property not
so used but employed to develop the national
wealth. This class of property constituted property of
public dominion although employed for some economic
or commercial activity to increase the national wealth.
Article 341 of the Civil Code of 1889 governed the reclassification of property of public dominion into
private property, to wit:
"Art. 341. Property of public dominion, when no
longer devoted to public use or to the defense
of the territory, shall become a part of the
private property of the State."
This provision, however, was not self-executing. The
legislature, or the executive department pursuant to
law, must declare the property no longer needed for
public use or territorial defense before the government
could lease or alienate the property to private parties.45
Act No. 1654 of the Philippine Commission
On May 8, 1907, the Philippine Commission enacted
Act No. 1654 which regulated the lease of reclaimed

and foreshore lands. The salient provisions of this law

were as follows:
"Section 1. The control and disposition of
the foreshore as defined in existing law, and
the title to all Government or public lands
made or reclaimed by the Government by
dredging or filling or otherwise throughout
the Philippine Islands, shall be retained by
the Government without prejudice to vested
rights and without prejudice to rights conceded
to the City of Manila in the Luneta Extension.
Section 2. (a) The Secretary of the Interior shall
cause all Government or public lands made or
reclaimed by the Government by dredging or
filling or otherwise to be divided into lots or
blocks, with the necessary streets and
alleyways located thereon, and shall cause
plats and plans of such surveys to be prepared
and filed with the Bureau of Lands.
(b) Upon completion of such plats and plans
the Governor-General shall give notice to
the public that such parts of the lands so
made or reclaimed as are not needed for
public purposes will be leased for
commercial and business purposes, x x x.
xxx
(e) The leases above provided for shall be
disposed of to the highest and best
bidder therefore, subject to such regulations
and safeguards as the Governor-General may
by executive order prescribe." (Emphasis
supplied)
Act No. 1654 mandated that the government should
retain title to all lands reclaimed by the
government. The Act also vested in the government
control and disposition of foreshore lands. Private
parties could lease lands reclaimed by the government
only if these lands were no longer needed for public
purpose. Act No. 1654 mandated public bidding in
the lease of government reclaimed lands. Act No. 1654
made government reclaimed lands sui generis in that
unlike other public lands which the government could
sell to private parties, these reclaimed lands were
available only for lease to private parties.
Act No. 1654, however, did not repeal Section 5 of the
Spanish Law of Waters of 1866. Act No. 1654 did not
prohibit private parties from reclaiming parts of the sea
under Section 5 of the Spanish Law of Waters. Lands
reclaimed from the sea by private parties with
government permission remained private lands.
Act No. 2874 of the Philippine Legislature
On November 29, 1919, the Philippine Legislature
enacted Act No. 2874, the Public Land Act.46 The salient
provisions of Act No. 2874, on reclaimed lands, were as
follows:

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"Sec. 6. The Governor-General, upon the

recommendation of the Secretary of
Agriculture and Natural Resources, shall
from time to time classify the lands of the
public domain into

same are not necessary for the public

service and are open to disposition under
this chapter. The lands included in class (d)
may be disposed of by sale or lease under
the provisions of this Act." (Emphasis
supplied)

(a) Alienable or disposable,

(b) Timber, and
(c) Mineral lands, x x x.
Sec. 7. For the purposes of the government and
disposition of alienable or disposable public
lands, the Governor-General, upon
recommendation by the Secretary of
Agriculture and Natural Resources, shall
from time to time declare what lands are
open to disposition or concession under
this Act."
Sec. 8. Only those lands shall be declared
open to disposition or concession which
have been officially delimited or
classified x x x.
xxx
Sec. 55. Any tract of land of the public domain
which, being neither timber nor mineral land,
shall be classified as suitable for residential
purposes or for commercial, industrial, or
other productive purposes other than
agricultural purposes, and shall be open to
disposition or concession, shall be disposed of
under the provisions of this chapter, and not
otherwise.
Sec. 56. The lands disposable under this
title shall be classified as follows:
(a) Lands reclaimed by the
Government by dredging, filling,
or other means;
(b) Foreshore;
(c) Marshy lands or lands covered
with water bordering upon the shores
or banks of navigable lakes or rivers;
(d) Lands not included in any of the
foregoing classes.
x x x.
Sec. 58. The lands comprised in classes
(a), (b), and (c) of section fifty-six shall
be disposed of to private parties by lease
only and not otherwise, as soon as the
Governor-General, upon recommendation
by the Secretary of Agriculture and
Natural Resources, shall declare that the

Section 6 of Act No. 2874 authorized the GovernorGeneral to "classify lands of the public domain into x x
x alienable or disposable"47 lands. Section 7 of the Act
empowered the Governor-General to "declare what
lands are open to disposition or concession." Section 8
of the Act limited alienable or disposable lands only to
those lands which have been "officially delimited and
classified."
Section 56 of Act No. 2874 stated that lands
"disposable under this title48 shall be classified" as
government reclaimed, foreshore and marshy lands, as
well as other lands. All these lands, however, must be
suitable for residential, commercial, industrial or other
productive non-agricultural purposes. These
provisions vested upon the Governor-General the
power to classify inalienable lands of the public domain
into disposable lands of the public domain. These
provisions also empowered the Governor-General to
classify further such disposable lands of the public
domain into government reclaimed, foreshore or
marshy lands of the public domain, as well as other
non-agricultural lands.
Section 58 of Act No. 2874 categorically mandated that
disposable lands of the public domain classified as
government reclaimed, foreshore and marshy
lands "shall be disposed of to private parties by
lease only and not otherwise." The GovernorGeneral, before allowing the lease of these lands to
private parties, must formally declare that the lands
were "not necessary for the public service." Act No.
2874 reiterated the State policy to lease and not to sell
government reclaimed, foreshore and marshy lands of
the public domain, a policy first enunciated in 1907 in
Act No. 1654. Government reclaimed, foreshore and
marshy lands remained sui generis, as the only
alienable or disposable lands of the public domain that
the government could not sell to private parties.
The rationale behind this State policy is obvious.
Government reclaimed, foreshore and marshy public
lands for non-agricultural purposes retain their inherent
potential as areas for public service. This is the reason
the government prohibited the sale, and only allowed
the lease, of these lands to private parties. The State
always reserved these lands for some future public
service.
Act No. 2874 did not authorize the reclassification of
government reclaimed, foreshore and marshy lands
into other non-agricultural lands under Section 56 (d).
Lands falling under Section 56 (d) were the only lands
for non-agricultural purposes the government could sell
to private parties. Thus, under Act No. 2874, the
government could not sell government reclaimed,
foreshore and marshy lands to private parties, unless
the legislature passed a law allowing their sale.49

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Act No. 2874 did not prohibit private parties from

reclaiming parts of the sea pursuant to Section 5 of the
Spanish Law of Waters of 1866. Lands reclaimed from
the sea by private parties with government permission
remained private lands.
Dispositions under the 1935 Constitution
On May 14, 1935, the 1935 Constitution took effect
upon its ratification by the Filipino people. The 1935
Constitution, in adopting the Regalian doctrine,
declared in Section 1, Article XIII, that
"Section 1. All agricultural, timber, and mineral
lands of the public domain, waters, minerals,
coal, petroleum, and other mineral oils, all
forces of potential energy and other natural
resources of the Philippines belong to the
State, and their disposition, exploitation,
development, or utilization shall be limited to
citizens of the Philippines or to corporations or
associations at least sixty per centum of the
capital of which is owned by such citizens,
subject to any existing right, grant, lease, or
concession at the time of the inauguration of
the Government established under this
Constitution. Natural resources, with the
exception of public agricultural land, shall
not be alienated, and no license, concession,
or lease for the exploitation, development, or
utilization of any of the natural resources shall
be granted for a period exceeding twenty-five
years, renewable for another twenty-five years,
except as to water rights for irrigation, water
supply, fisheries, or industrial uses other than
the development of water power, in which
cases beneficial use may be the measure and
limit of the grant." (Emphasis supplied)
The 1935 Constitution barred the alienation of all
natural resources except public agricultural lands,
which were the only natural resources the State could
alienate. Thus, foreshore lands, considered part of the
State's natural resources, became inalienable by
constitutional fiat, available only for lease for 25 years,
renewable for another 25 years. The government could
alienate foreshore lands only after these lands were
reclaimed and classified as alienable agricultural lands
of the public domain. Government reclaimed and
marshy lands of the public domain, being neither
timber nor mineral lands, fell under the classification of
public agricultural lands.50 However, government
reclaimed and marshy lands, although subject to
classification as disposable public agricultural lands,
could only be leased and not sold to private parties
because of Act No. 2874.

The prohibition on private parties from acquiring

ownership of government reclaimed and marshy lands
of the public domain was only a statutory prohibition
and the legislature could therefore remove such
prohibition. The 1935 Constitution did not prohibit
individuals and corporations from acquiring
government reclaimed and marshy lands of the public
domain that were classified as agricultural lands under
existing public land laws. Section 2, Article XIII of the
1935 Constitution provided as follows:
"Section 2. No private corporation or
association may acquire, lease, or hold
public agricultural lands in excess of one
thousand and twenty four hectares, nor
may any individual acquire such lands by
purchase in excess of one hundred and
forty hectares, or by lease in excess of
one thousand and twenty-four hectares,
or by homestead in excess of twenty-four
hectares. Lands adapted to grazing, not
exceeding two thousand hectares, may be
leased to an individual, private corporation, or
association." (Emphasis supplied)
Still, after the effectivity of the 1935 Constitution, the
legislature did not repeal Section 58 of Act No. 2874 to
open for sale to private parties government reclaimed
and marshy lands of the public domain. On the
contrary, the legislature continued the long established
State policy of retaining for the government title and
ownership of government reclaimed and marshy lands
of the public domain.
Commonwealth Act No. 141 of the Philippine
National Assembly
On November 7, 1936, the National Assembly
approved Commonwealth Act No. 141, also known as
the Public Land Act, which compiled the then existing
laws on lands of the public domain. CA No. 141, as
amended, remains to this day the existing general
law governing the classification and disposition of
lands of the public domain other than timber and
mineral lands.51
Section 6 of CA No. 141 empowers the President to
classify lands of the public domain into "alienable or
disposable"52 lands of the public domain, which prior to
such classification are inalienable and outside the
commerce of man. Section 7 of CA No. 141 authorizes
the President to "declare what lands are open to
disposition or concession." Section 8 of CA No. 141
states that the government can declare open for
disposition or concession only lands that are "officially
delimited and classified." Sections 6, 7 and 8 of CA No.
141 read as follows:
"Sec. 6. The President, upon the
recommendation of the Secretary of
Agriculture and Commerce, shall from
time to time classify the lands of the
public domain into
(a) Alienable or disposable,

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(b) Timber, and

(d) Lands not included in any of the

foregoing classes.

(c) Mineral lands,

and may at any time and in like manner
transfer such lands from one class to
another,53 for the purpose of their
administration and disposition.
Sec. 7. For the purposes of the administration
and disposition of alienable or disposable
public lands, the President, upon
recommendation by the Secretary of
Agriculture and Commerce, shall from
time to time declare what lands are open
to disposition or concession under this Act.
Sec. 8. Only those lands shall be declared
open to disposition or concession which
have been officially delimited and
classified and, when practicable,
surveyed, and which have not been
reserved for public or quasi-public uses,
nor appropriated by the Government, nor in
any manner become private property, nor
those on which a private right authorized and
recognized by this Act or any other valid law
may be claimed, or which, having been
reserved or appropriated, have ceased to be
so. x x x."
Thus, before the government could alienate or dispose
of lands of the public domain, the President must first
officially classify these lands as alienable or disposable,
and then declare them open to disposition or
concession. There must be no law reserving these
lands for public or quasi-public uses.
The salient provisions of CA No. 141, on government
reclaimed, foreshore and marshy lands of the public
domain, are as follows:
"Sec. 58. Any tract of land of the public
domain which, being neither timber nor
mineral land, is intended to be used for
residential purposes or for commercial,
industrial, or other productive purposes
other than agricultural, and is open to
disposition or concession, shall be
disposed of under the provisions of this
chapter and not otherwise.
Sec. 59. The lands disposable under this
title shall be classified as follows:
(a) Lands reclaimed by the
Government by dredging, filling,
or other means;
(b) Foreshore;
(c) Marshy lands or lands covered
with water bordering upon the shores
or banks of navigable lakes or rivers;

Sec. 60. Any tract of land comprised under this

title may be leased or sold, as the case may
be, to any person, corporation, or association
authorized to purchase or lease public lands for
agricultural purposes. x x x.
Sec. 61. The lands comprised in classes
(a), (b), and (c) of section fifty-nine shall
be disposed of to private parties by lease
only and not otherwise, as soon as the
President, upon recommendation by the
Secretary of Agriculture, shall declare that
the same are not necessary for the public
service and are open to disposition under this
chapter. The lands included in class (d)
may be disposed of by sale or lease under
the provisions of this Act." (Emphasis
supplied)
Section 61 of CA No. 141 readopted, after the
effectivity of the 1935 Constitution, Section 58 of Act
No. 2874 prohibiting the sale of government reclaimed,
foreshore and marshy disposable lands of the public
domain. All these lands are intended for residential,
commercial, industrial or other non-agricultural
purposes. As before, Section 61 allowed only the lease
of such lands to private parties. The government could
sell to private parties only lands falling under Section
59 (d) of CA No. 141, or those lands for non-agricultural
purposes not classified as government reclaimed,
foreshore and marshy disposable lands of the public
domain. Foreshore lands, however, became inalienable
under the 1935 Constitution which only allowed the
lease of these lands to qualified private parties.
Section 58 of CA No. 141 expressly states that
disposable lands of the public domain intended for
residential, commercial, industrial or other productive
purposes other than agricultural "shall be disposed
of under the provisions of this chapter and not
otherwise." Under Section 10 of CA No. 141, the term
"disposition" includes lease of the land. Any disposition
of government reclaimed, foreshore and marshy
disposable lands for non-agricultural purposes must
comply with Chapter IX, Title III of CA No. 141, 54 unless
a subsequent law amended or repealed these
provisions.
In his concurring opinion in the landmark case
of Republic Real Estate Corporation v. Court of
Appeals,55Justice Reynato S. Puno summarized
succinctly the law on this matter, as follows:
"Foreshore lands are lands of public dominion
intended for public use. So too are lands
reclaimed by the government by dredging,
filling, or other means. Act 1654 mandated that
the control and disposition of the foreshore and
lands under water remained in the national
government. Said law allowed only the 'leasing'
of reclaimed land. The Public Land Acts of 1919
and 1936 also declared that the foreshore and
lands reclaimed by the government were to be

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"disposed of to private parties by lease only

and not otherwise." Before leasing, however,
the Governor-General, upon recommendation
of the Secretary of Agriculture and Natural
Resources, had first to determine that the land
reclaimed was not necessary for the public
service. This requisite must have been met
before the land could be disposed of. But even
then, the foreshore and lands under
water were not to be alienated and sold
to private parties. The disposition of the
reclaimed land was only by lease. The
land remained property of the State."
(Emphasis supplied)
As observed by Justice Puno in his concurring opinion,
"Commonwealth Act No. 141 has remained in effect at
present."
The State policy prohibiting the sale to private parties
of government reclaimed, foreshore and marshy
alienable lands of the public domain, first implemented
in 1907 was thus reaffirmed in CA No. 141 after the
1935 Constitution took effect. The prohibition on the
sale of foreshore lands, however, became a
constitutional edict under the 1935 Constitution.
Foreshore lands became inalienable as natural
resources of the State, unless reclaimed by the
government and classified as agricultural lands of the
public domain, in which case they would fall under the
classification of government reclaimed lands.
After the effectivity of the 1935 Constitution,
government reclaimed and marshy disposable lands of
the public domain continued to be only leased and not
sold to private parties.56 These lands remained sui
generis, as the only alienable or disposable lands of
the public domain the government could not sell to
private parties.
Since then and until now, the only way the government
can sell to private parties government reclaimed and
marshy disposable lands of the public domain is for the
legislature to pass a law authorizing such sale. CA No.
141 does not authorize the President to reclassify
government reclaimed and marshy lands into other
non-agricultural lands under Section 59 (d). Lands
classified under Section 59 (d) are the only alienable or
disposable lands for non-agricultural purposes that the
government could sell to private parties.
Moreover, Section 60 of CA No. 141 expressly requires
congressional authority before lands under Section 59
that the government previously transferred to
government units or entities could be sold to private
parties. Section 60 of CA No. 141 declares that
"Sec. 60. x x x The area so leased or sold shall
be such as shall, in the judgment of the
Secretary of Agriculture and Natural Resources,
be reasonably necessary for the purposes for
which such sale or lease is requested, and shall
not exceed one hundred and forty-four
hectares: Provided, however, That this
limitation shall not apply to grants, donations,
or transfers made to a province, municipality or

branch or subdivision of the Government for

the purposes deemed by said entities
conducive to the public interest; but the land
so granted, donated, or transferred to a
province, municipality or branch or
subdivision of the Government shall not
be alienated, encumbered, or otherwise
disposed of in a manner affecting its title,
except when authorized by Congress: x x
x." (Emphasis supplied)
The congressional authority required in Section 60 of
CA No. 141 mirrors the legislative authority required in
Section 56 of Act No. 2874.
One reason for the congressional authority is that
Section 60 of CA No. 141 exempted government units
and entities from the maximum area of public lands
that could be acquired from the State. These
government units and entities should not just turn
around and sell these lands to private parties in
violation of constitutional or statutory limitations.
Otherwise, the transfer of lands for non-agricultural
purposes to government units and entities could be
used to circumvent constitutional limitations on
ownership of alienable or disposable lands of the public
domain. In the same manner, such transfers could also
be used to evade the statutory prohibition in CA No.
141 on the sale of government reclaimed and marshy
lands of the public domain to private parties. Section
60 of CA No. 141 constitutes by operation of law a lien
on these lands.57
In case of sale or lease of disposable lands of the
public domain falling under Section 59 of CA No. 141,
Sections 63 and 67 require a public bidding. Sections
63 and 67 of CA No. 141 provide as follows:
"Sec. 63. Whenever it is decided that lands
covered by this chapter are not needed for
public purposes, the Director of Lands shall ask
the Secretary of Agriculture and Commerce
(now the Secretary of Natural Resources) for
authority to dispose of the same. Upon receipt
of such authority, the Director of Lands shall
give notice by public advertisement in the
same manner as in the case of leases or sales
of agricultural public land, x x x.
Sec. 67. The lease or sale shall be made by
oral bidding; and adjudication shall be
made to the highest bidder. x x x."
(Emphasis supplied)
Thus, CA No. 141 mandates the Government to put to
public auction all leases or sales of alienable or
disposable lands of the public domain.58
Like Act No. 1654 and Act No. 2874 before it, CA No.
141 did not repeal Section 5 of the Spanish Law of
Waters of 1866. Private parties could still reclaim
portions of the sea with government permission.
However, the reclaimed land could become private
land only if classified as alienable agricultural
land of the public domain open to disposition under
CA No. 141. The 1935 Constitution prohibited the

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alienation of all natural resources except public

agricultural lands.
The Civil Code of 1950
The Civil Code of 1950 readopted substantially the
definition of property of public dominion found in the
Civil Code of 1889. Articles 420 and 422 of the Civil
Code of 1950 state that
"Art. 420. The following things are property of
public dominion:
(1) Those intended for public use, such as
roads, canals, rivers, torrents, ports and
bridges constructed by the State, banks,
shores, roadsteads, and others of similar
character;
(2) Those which belong to the State, without
being for public use, and are intended for some
public service or for the development of the
national wealth.
x x x.
Art. 422. Property of public dominion, when no
longer intended for public use or for public
service, shall form part of the patrimonial
property of the State."
Again, the government must formally declare that the
property of public dominion is no longer needed for
public use or public service, before the same could be
classified as patrimonial property of the State.59 In the
case of government reclaimed and marshy lands of the
public domain, the declaration of their being
disposable, as well as the manner of their disposition,
is governed by the applicable provisions of CA No. 141.
Like the Civil Code of 1889, the Civil Code of 1950
included as property of public dominion those
properties of the State which, without being for public
use, are intended for public service or the
"development of the national wealth." Thus,
government reclaimed and marshy lands of the State,
even if not employed for public use or public service, if
developed to enhance the national wealth, are
classified as property of public dominion.
Dispositions under the 1973 Constitution
The 1973 Constitution, which took effect on January 17,
1973, likewise adopted the Regalian doctrine. Section
8, Article XIV of the 1973 Constitution stated that
"Sec. 8. All lands of the public domain, waters,
minerals, coal, petroleum and other mineral
oils, all forces of potential energy, fisheries,
wildlife, and other natural resources of the
Philippines belong to the State. With the
exception of agricultural, industrial or
commercial, residential, and resettlement
lands of the public domain, natural

resources shall not be alienated, and no

license, concession, or lease for the
exploration, development, exploitation, or
utilization of any of the natural resources shall
be granted for a period exceeding twenty-five
years, renewable for not more than twenty-five
years, except as to water rights for irrigation,
water supply, fisheries, or industrial uses other
than the development of water power, in which
cases, beneficial use may be the measure and
the limit of the grant." (Emphasis supplied)
The 1973 Constitution prohibited the alienation of all
natural resources with the exception of "agricultural,
industrial or commercial, residential, and resettlement
lands of the public domain." In contrast, the 1935
Constitution barred the alienation of all natural
resources except "public agricultural lands." However,
the term "public agricultural lands" in the 1935
Constitution encompassed industrial, commercial,
residential and resettlement lands of the public
domain.60 If the land of public domain were neither
timber nor mineral land, it would fall under the
classification of agricultural land of the public
domain. Both the 1935 and 1973 Constitutions,
therefore, prohibited the alienation of all natural
resources except agricultural lands of the public
domain.
The 1973 Constitution, however, limited the alienation
of lands of the public domain to individuals who were
citizens of the Philippines. Private corporations, even if
wholly owned by Philippine citizens, were no longer
allowed to acquire alienable lands of the public domain
unlike in the 1935 Constitution. Section 11, Article XIV
of the 1973 Constitution declared that
"Sec. 11. The Batasang Pambansa, taking into
account conservation, ecological, and
development requirements of the natural
resources, shall determine by law the size of
land of the public domain which may be
developed, held or acquired by, or leased to,
any qualified individual, corporation, or
association, and the conditions therefor. No
private corporation or association may
hold alienable lands of the public domain
except by lease not to exceed one thousand
hectares in area nor may any citizen hold such
lands by lease in excess of five hundred
hectares or acquire by purchase, homestead or
grant, in excess of twenty-four hectares. No
private corporation or association may hold by
lease, concession, license or permit, timber or
forest lands and other timber or forest
resources in excess of one hundred thousand
hectares. However, such area may be
increased by the Batasang Pambansa upon
recommendation of the National Economic and
Development Authority." (Emphasis supplied)
Thus, under the 1973 Constitution, private corporations
could hold alienable lands of the public domain only
through lease. Only individuals could now acquire
alienable lands of the public domain, and private
corporations became absolutely barred from
acquiring any kind of alienable land of the public

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domain. The constitutional ban extended to all kinds

of alienable lands of the public domain, while the
statutory ban under CA No. 141 applied only to
government reclaimed, foreshore and marshy alienable
lands of the public domain.
PD No. 1084 Creating the Public Estates
Authority
On February 4, 1977, then President Ferdinand Marcos
issued Presidential Decree No. 1084 creating PEA, a
wholly government owned and controlled corporation
with a special charter. Sections 4 and 8 of PD No. 1084,
vests PEA with the following purposes and powers:
"Sec. 4. Purpose. The Authority is hereby
created for the following purposes:
(a) To reclaim land, including foreshore
and submerged areas, by dredging, filling
or other means, or to acquire reclaimed
land;
(b) To develop, improve, acquire, administer,
deal in, subdivide, dispose, lease and sell
any and all kinds of lands, buildings, estates
and other forms of real property, owned,
managed, controlled and/or operated by the
government;
(c) To provide for, operate or administer such
service as may be necessary for the efficient,
economical and beneficial utilization of the
above properties.
Sec. 5. Powers and functions of the Authority.
The Authority shall, in carrying out the
purposes for which it is created, have the
following powers and functions:
(a)To prescribe its by-laws.
xxx
(i) To hold lands of the public domain in
excess of the area permitted to private
corporations by statute.
(j) To reclaim lands and to construct work
across, or otherwise, any stream, watercourse,
canal, ditch, flume x x x.

permanently under water regardless of the ebb and

flow of the tide.62 Foreshore and submerged areas
indisputably belong to the public domain63 and are
inalienable unless reclaimed, classified as alienable
lands open to disposition, and further declared no
longer needed for public service.
The ban in the 1973 Constitution on private
corporations from acquiring alienable lands of the
public domain did not apply to PEA since it was then,
and until today, a fully owned government corporation.
The constitutional ban applied then, as it still applies
now, only to "private corporations and associations."
PD No. 1084 expressly empowers PEA "to hold lands
of the public domain" even "in excess of the area
permitted to private corporations by statute." Thus,
PEA can hold title to private lands, as well as
title to lands of the public domain.
In order for PEA to sell its reclaimed foreshore and
submerged alienable lands of the public domain, there
must be legislative authority empowering PEA to sell
these lands. This legislative authority is necessary in
view of Section 60 of CA No.141, which states
"Sec. 60. x x x; but the land so granted,
donated or transferred to a province,
municipality, or branch or subdivision of the
Government shall not be alienated,
encumbered or otherwise disposed of in a
manner affecting its title, except when
authorized by Congress; x x x." (Emphasis
supplied)
Without such legislative authority, PEA could not sell
but only lease its reclaimed foreshore and submerged
alienable lands of the public domain. Nevertheless, any
legislative authority granted to PEA to sell its reclaimed
alienable lands of the public domain would be subject
to the constitutional ban on private corporations from
acquiring alienable lands of the public domain. Hence,
such legislative authority could only benefit private
individuals.
Dispositions under the 1987 Constitution
The 1987 Constitution, like the 1935 and 1973
Constitutions before it, has adopted the Regalian
doctrine. The 1987 Constitution declares that all
natural resources are "owned by the State," and
except for alienable agricultural lands of the public
domain, natural resources cannot be alienated.
Sections 2 and 3, Article XII of the 1987 Constitution
state that

xxx
(o) To perform such acts and exercise such
functions as may be necessary for the
attainment of the purposes and objectives
herein specified." (Emphasis supplied)
PD No. 1084 authorizes PEA to reclaim both foreshore
and submerged areas of the public domain. Foreshore
areas are those covered and uncovered by the ebb and
flow of the tide.61 Submerged areas are those

"Section 2. All lands of the public domain,

waters, minerals, coal, petroleum and other
mineral oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are
owned by the State. With the exception
of agricultural lands, all other natural
resources shall not be alienated. The
exploration, development, and utilization of
natural resources shall be under the full control
and supervision of the State. x x x.

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Section 3. Lands of the public domain are

classified into agricultural, forest or timber,
mineral lands, and national parks. Agricultural
lands of the public domain may be further
classified by law according to the uses which
they may be devoted. Alienable lands of the
public domain shall be limited to
agricultural lands. Private corporations or
associations may not hold such alienable
lands of the public domain except by
lease, for a period not exceeding twentyfive years, renewable for not more than
twenty-five years, and not to exceed one
thousand hectares in area. Citizens of the
Philippines may lease not more than five
hundred hectares, or acquire not more than
twelve hectares thereof by purchase,
homestead, or grant.
Taking into account the requirements of
conservation, ecology, and development, and
subject to the requirements of agrarian reform,
the Congress shall determine, by law, the size
of lands of the public domain which may be
acquired, developed, held, or leased and the
conditions therefor." (Emphasis supplied)
The 1987 Constitution continues the State policy in the
1973 Constitution banning private corporations
from acquiring any kind of alienable land of the
public domain. Like the 1973 Constitution, the 1987
Constitution allows private corporations to hold
alienable lands of the public domain only through
lease. As in the 1935 and 1973 Constitutions, the
general law governing the lease to private corporations
of reclaimed, foreshore and marshy alienable lands of
the public domain is still CA No. 141.
The Rationale behind the Constitutional Ban
The rationale behind the constitutional ban on
corporations from acquiring, except through lease,
alienable lands of the public domain is not well
understood. During the deliberations of the 1986
Constitutional Commission, the commissioners probed
the rationale behind this ban, thus:
"FR. BERNAS: Mr. Vice-President, my questions
have reference to page 3, line 5 which says:
`No private corporation or association may
hold alienable lands of the public domain
except by lease, not to exceed one thousand
hectares in area.'
If we recall, this provision did not exist under
the 1935 Constitution, but this was introduced
in the 1973 Constitution. In effect, it prohibits
private corporations from acquiring alienable
public lands. But it has not been very clear
in jurisprudence what the reason for this
is. In some of the cases decided in 1982 and
1983, it was indicated that the purpose of
this is to prevent large landholdings. Is
that the intent of this provision?

MR. VILLEGAS: I think that is the spirit of the provision.

FR. BERNAS: In existing decisions involving the
Iglesia ni Cristo, there were instances where
the Iglesia ni Cristo was not allowed to acquire
a mere 313-square meter land where a chapel
stood because the Supreme Court said it would
be in violation of this." (Emphasis supplied)
In Ayog v. Cusi,64 the Court explained the rationale
behind this constitutional ban in this way:
"Indeed, one purpose of the constitutional
prohibition against purchases of public
agricultural lands by private corporations is to
equitably diffuse land ownership or to
encourage 'owner-cultivatorship and the
economic family-size farm' and to prevent a
recurrence of cases like the instant case. Huge
landholdings by corporations or private persons
had spawned social unrest."
However, if the constitutional intent is to prevent huge
landholdings, the Constitution could have simply
limited the size of alienable lands of the public domain
that corporations could acquire. The Constitution could
have followed the limitations on individuals, who could
acquire not more than 24 hectares of alienable lands of
the public domain under the 1973 Constitution, and not
more than 12 hectares under the 1987 Constitution.
If the constitutional intent is to encourage economic
family-size farms, placing the land in the name of a
corporation would be more effective in preventing the
break-up of farmlands. If the farmland is registered in
the name of a corporation, upon the death of the
owner, his heirs would inherit shares in the corporation
instead of subdivided parcels of the farmland. This
would prevent the continuing break-up of farmlands
into smaller and smaller plots from one generation to
the next.
In actual practice, the constitutional ban strengthens
the constitutional limitation on individuals from
acquiring more than the allowed area of alienable lands
of the public domain. Without the constitutional ban,
individuals who already acquired the maximum area of
alienable lands of the public domain could easily set up
corporations to acquire more alienable public lands. An
individual could own as many corporations as his
means would allow him. An individual could even hide
his ownership of a corporation by putting his nominees
as stockholders of the corporation. The corporation is a
convenient vehicle to circumvent the constitutional
limitation on acquisition by individuals of alienable
lands of the public domain.
The constitutional intent, under the 1973 and 1987
Constitutions, is to transfer ownership of only a limited
area of alienable land of the public domain to a
qualified individual. This constitutional intent is
safeguarded by the provision prohibiting corporations
from acquiring alienable lands of the public domain,
since the vehicle to circumvent the constitutional
intent is removed. The available alienable public lands
are gradually decreasing in the face of an ever-growing

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population. The most effective way to insure faithful

adherence to this constitutional intent is to grant or sell
alienable lands of the public domain only to individuals.
This, it would seem, is the practical benefit arising from
the constitutional ban.
The Amended Joint Venture Agreement
The subject matter of the Amended JVA, as stated in its
second Whereas clause, consists of three properties,
namely:
1. "[T]hree partially reclaimed and substantially
eroded islands along Emilio Aguinaldo
Boulevard in Paranaque and Las Pinas, Metro
Manila, with a combined titled area of
1,578,441 square meters;"
2. "[A]nother area of 2,421,559 square meters
contiguous to the three islands;" and
3. "[A]t AMARI's option as approved by PEA, an
additional 350 hectares more or less to
regularize the configuration of the reclaimed
area."65
PEA confirms that the Amended JVA involves "the
development of the Freedom Islands and further
reclamation of about 250 hectares x x x," plus an
option "granted to AMARI to subsequently reclaim
another 350 hectares x x x."66
In short, the Amended JVA covers a reclamation area of
750 hectares. Only 157.84 hectares of the 750hectare reclamation project have been
reclaimed, and the rest of the 592.15 hectares
are still submerged areas forming part of Manila
Bay.
Under the Amended JVA, AMARI will reimburse PEA the
sum of P1,894,129,200.00 for PEA's "actual cost" in
partially reclaiming the Freedom Islands. AMARI will
also complete, at its own expense, the reclamation of
the Freedom Islands. AMARI will further shoulder all the
reclamation costs of all the other areas, totaling 592.15
hectares, still to be reclaimed. AMARI and PEA will
share, in the proportion of 70 percent and 30 percent,
respectively, the total net usable area which is defined
in the Amended JVA as the total reclaimed area less 30
percent earmarked for common areas. Title to AMARI's
share in the net usable area, totaling 367.5 hectares,
will be issued in the name of AMARI. Section 5.2 (c) of
the Amended JVA provides that
"x x x, PEA shall have the duty to execute
without delay the necessary deed of transfer or
conveyance of the title pertaining to AMARI's
Land share based on the Land Allocation
Plan. PEA, when requested in writing by
AMARI, shall then cause the issuance and
delivery of the proper certificates of title
covering AMARI's Land Share in the name
of AMARI, x x x; provided, that if more than
seventy percent (70%) of the titled area at any
given time pertains to AMARI, PEA shall deliver

to AMARI only seventy percent (70%) of the

titles pertaining to AMARI, until such time when
a corresponding proportionate area of
additional land pertaining to PEA has been
titled." (Emphasis supplied)
Indisputably, under the Amended JVA AMARI will
acquire and own a maximum of 367.5 hectares of
reclaimed land which will be titled in its name.
To implement the Amended JVA, PEA delegated to the
unincorporated PEA-AMARI joint venture PEA's
statutory authority, rights and privileges to reclaim
foreshore and submerged areas in Manila Bay. Section
3.2.a of the Amended JVA states that
"PEA hereby contributes to the joint venture its
rights and privileges to perform Rawland
Reclamation and Horizontal Development as
well as own the Reclamation Area, thereby
granting the Joint Venture the full and exclusive
right, authority and privilege to undertake the
Project in accordance with the Master
Development Plan."
The Amended JVA is the product of a renegotiation of
the original JVA dated April 25, 1995 and its
supplemental agreement dated August 9, 1995.
The Threshold Issue
The threshold issue is whether AMARI, a private
corporation, can acquire and own under the Amended
JVA 367.5 hectares of reclaimed foreshore and
submerged areas in Manila Bay in view of Sections 2
and 3, Article XII of the 1987 Constitution which state
that:
"Section 2. All lands of the public domain,
waters, minerals, coal, petroleum, and other
mineral oils, all forces of potential energy,
fisheries, forests or timber, wildlife, flora and
fauna, and other natural resources are owned
by the State. With the exception of
agricultural lands, all other natural
resources shall not be alienated. x x x.
xxx
Section 3. x x x Alienable lands of the public
domain shall be limited to agricultural
lands. Private corporations or associations
may not hold such alienable lands of the
public domain except by lease, x x
x."(Emphasis supplied)
Classification of Reclaimed Foreshore and
Submerged Areas
PEA readily concedes that lands reclaimed from
foreshore or submerged areas of Manila Bay are
alienable or disposable lands of the public domain. In
its Memorandum,67 PEA admits that

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"Under the Public Land Act (CA 141, as

amended), reclaimed lands are classified
as alienable and disposable lands of the
public domain:
'Sec. 59. The lands disposable under
this title shall be classified as follows:
(a) Lands reclaimed by the government
by dredging, filling, or other means;
x x x.'" (Emphasis supplied)
Likewise, the Legal Task Force68 constituted under
Presidential Administrative Order No. 365 admitted in
its Report and Recommendation to then President Fidel
V. Ramos, "[R]eclaimed lands are classified as
alienable and disposable lands of the public
domain."69 The Legal Task Force concluded that

Chancery of the Philippine Embassy. Although the

Chancery had transferred to another location thirteen
years earlier, the Court still ruled that, under Article
42274of the Civil Code, a property of public dominion
retains such character until formally declared
otherwise. The Court ruled that
"The fact that the Roppongi site has not been
used for a long time for actual Embassy service
does not automatically convert it to patrimonial
property. Any such conversion happens only if
the property is withdrawn from public use
(Cebu Oxygen and Acetylene Co. v. Bercilles,
66 SCRA 481 [1975]. A property continues
to be part of the public domain, not
available for private appropriation or
ownership 'until there is a formal
declaration on the part of the
government to withdraw it from being
such' (Ignacio v. Director of Lands, 108 Phil.
335 [1960]." (Emphasis supplied)

"D. Conclusion
Reclaimed lands are lands of the public
domain. However, by statutory authority, the
rights of ownership and disposition over
reclaimed lands have been transferred to PEA,
by virtue of which PEA, as owner, may validly
convey the same to any qualified person
without violating the Constitution or any
statute.
The constitutional provision prohibiting private
corporations from holding public land, except
by lease (Sec. 3, Art. XVII,70 1987 Constitution),
does not apply to reclaimed lands whose
ownership has passed on to PEA by statutory
grant."
Under Section 2, Article XII of the 1987 Constitution,
the foreshore and submerged areas of Manila Bay are
part of the "lands of the public domain, waters x x x
and other natural resources" and consequently "owned
by the State." As such, foreshore and submerged areas
"shall not be alienated," unless they are classified as
"agricultural lands" of the public domain. The mere
reclamation of these areas by PEA does not convert
these inalienable natural resources of the State into
alienable or disposable lands of the public domain.
There must be a law or presidential proclamation
officially classifying these reclaimed lands as alienable
or disposable and open to disposition or concession.
Moreover, these reclaimed lands cannot be classified
as alienable or disposable if the law has reserved them
for some public or quasi-public use.71
Section 8 of CA No. 141 provides that "only those lands
shall be declared open to disposition or concession
which have been officially delimited and
classified."72 The President has the authority to
classify inalienable lands of the public domain into
alienable or disposable lands of the public domain,
pursuant to Section 6 of CA No. 141. In Laurel vs.
Garcia,73 the Executive Department attempted to sell
the Roppongi property in Tokyo, Japan, which was
acquired by the Philippine Government for use as the

PD No. 1085, issued on February 4, 1977, authorized

the issuance of special land patents for lands reclaimed
by PEA from the foreshore or submerged areas of
Manila Bay. On January 19, 1988 then President
Corazon C. Aquino issued Special Patent No. 3517 in
the name of PEA for the 157.84 hectares comprising
the partially reclaimed Freedom Islands. Subsequently,
on April 9, 1999 the Register of Deeds of the
Municipality of Paranaque issued TCT Nos. 7309, 7311
and 7312 in the name of PEA pursuant to Section 103
of PD No. 1529 authorizing the issuance of certificates
of title corresponding to land patents. To this day,
these certificates of title are still in the name of PEA.
PD No. 1085, coupled with President Aquino's actual
issuance of a special patent covering the Freedom
Islands, is equivalent to an official proclamation
classifying the Freedom Islands as alienable or
disposable lands of the public domain. PD No. 1085
and President Aquino's issuance of a land patent also
constitute a declaration that the Freedom Islands are
no longer needed for public service. The Freedom
Islands are thus alienable or disposable lands of
the public domain, open to disposition or
concession to qualified parties.
At the time then President Aquino issued Special Patent
No. 3517, PEA had already reclaimed the Freedom
Islands although subsequently there were partial
erosions on some areas. The government had also
completed the necessary surveys on these islands.
Thus, the Freedom Islands were no longer part of
Manila Bay but part of the land mass. Section 3, Article
XII of the 1987 Constitution classifies lands of the
public domain into "agricultural, forest or timber,
mineral lands, and national parks." Being neither
timber, mineral, nor national park lands, the reclaimed
Freedom Islands necessarily fall under the classification
of agricultural lands of the public domain. Under the
1987 Constitution, agricultural lands of the public
domain are the only natural resources that the State
may alienate to qualified private parties. All other
natural resources, such as the seas or bays, are
"waters x x x owned by the State" forming part of the

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public domain, and are inalienable pursuant to Section

2, Article XII of the 1987 Constitution.
AMARI claims that the Freedom Islands are private
lands because CDCP, then a private corporation,
reclaimed the islands under a contract dated
November 20, 1973 with the Commissioner of Public
Highways. AMARI, citing Article 5 of the Spanish Law of
Waters of 1866, argues that "if the ownership of
reclaimed lands may be given to the party constructing
the works, then it cannot be said that reclaimed lands
are lands of the public domain which the State may not
alienate."75 Article 5 of the Spanish Law of Waters
reads as follows:
"Article 5. Lands reclaimed from the sea in
consequence of works constructed by the
State, or by the provinces, pueblos or private
persons, with proper permission, shall become
the property of the party constructing such
works, unless otherwise provided by the
terms of the grant of authority." (Emphasis
supplied)
Under Article 5 of the Spanish Law of Waters of 1866,
private parties could reclaim from the sea only with
"proper permission" from the State. Private parties
could own the reclaimed land only if not "otherwise
provided by the terms of the grant of authority." This
clearly meant that no one could reclaim from the sea
without permission from the State because the sea is
property of public dominion. It also meant that the
State could grant or withhold ownership of the
reclaimed land because any reclaimed land, like the
sea from which it emerged, belonged to the State.
Thus, a private person reclaiming from the sea without
permission from the State could not acquire ownership
of the reclaimed land which would remain property of
public dominion like the sea it replaced.76 Article 5 of
the Spanish Law of Waters of 1866 adopted the timehonored principle of land ownership that "all lands that
were not acquired from the government, either by
purchase or by grant, belong to the public domain." 77
Article 5 of the Spanish Law of Waters must be read
together with laws subsequently enacted on the
disposition of public lands. In particular, CA No. 141
requires that lands of the public domain must first be
classified as alienable or disposable before the
government can alienate them. These lands must not
be reserved for public or quasi-public
purposes.78 Moreover, the contract between CDCP and
the government was executed after the effectivity of
the 1973 Constitution which barred private
corporations from acquiring any kind of alienable land
of the public domain. This contract could not have
converted the Freedom Islands into private lands of a
private corporation.
Presidential Decree No. 3-A, issued on January 11,
1973, revoked all laws authorizing the reclamation of
areas under water and revested solely in the National
Government the power to reclaim lands. Section 1 of
PD No. 3-A declared that

"The provisions of any law to the contrary

notwithstanding, the reclamation of areas
under water, whether foreshore or inland, shall
be limited to the National Government or
any person authorized by it under a
proper contract. (Emphasis supplied)
x x x."
PD No. 3-A repealed Section 5 of the Spanish Law of
Waters of 1866 because reclamation of areas under
water could now be undertaken only by the National
Government or by a person contracted by the National
Government. Private parties may reclaim from the sea
only under a contract with the National Government,
and no longer by grant or permission as provided in
Section 5 of the Spanish Law of Waters of 1866.
Executive Order No. 525, issued on February 14, 1979,
designated PEA as the National Government's
implementing arm to undertake "all reclamation
projects of the government," which "shall be
undertaken by the PEA or through a proper
contract executed by it with any person or
entity." Under such contract, a private party receives
compensation for reclamation services rendered to
PEA. Payment to the contractor may be in cash, or in
kind consisting of portions of the reclaimed land,
subject to the constitutional ban on private
corporations from acquiring alienable lands of the
public domain. The reclaimed land can be used as
payment in kind only if the reclaimed land is first
classified as alienable or disposable land open to
disposition, and then declared no longer needed for
public service.
The Amended JVA covers not only the Freedom Islands,
but also an additional 592.15 hectares which are still
submerged and forming part of Manila Bay. There is
no legislative or Presidential act classifying
these submerged areas as alienable or
disposable lands of the public domain open to
disposition. These submerged areas are not covered
by any patent or certificate of title. There can be no
dispute that these submerged areas form part of the
public domain, and in their present state
are inalienable and outside the commerce of
man. Until reclaimed from the sea, these submerged
areas are, under the Constitution, "waters x x x owned
by the State," forming part of the public domain and
consequently inalienable. Only when actually reclaimed
from the sea can these submerged areas be classified
as public agricultural lands, which under the
Constitution are the only natural resources that the
State may alienate. Once reclaimed and transformed
into public agricultural lands, the government may
then officially classify these lands as alienable or
disposable lands open to disposition. Thereafter, the
government may declare these lands no longer needed
for public service. Only then can these reclaimed lands
be considered alienable or disposable lands of the
public domain and within the commerce of man.
The classification of PEA's reclaimed foreshore and
submerged lands into alienable or disposable lands
open to disposition is necessary because PEA is tasked

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under its charter to undertake public services that

require the use of lands of the public domain. Under
Section 5 of PD No. 1084, the functions of PEA include
the following: "[T]o own or operate railroads, tramways
and other kinds of land transportation, x x x; [T]o
construct, maintain and operate such systems of
sanitary sewers as may be necessary; [T]o construct,
maintain and operate such storm drains as may be
necessary." PEA is empowered to issue "rules and
regulations as may be necessary for the proper use by
private parties of any or all of the highways, roads,
utilities, buildings and/or any of its
properties and to impose or collect fees or tolls for
their use." Thus, part of the reclaimed foreshore and
submerged lands held by the PEA would actually be
needed for public use or service since many of the
functions imposed on PEA by its charter constitute
essential public services.
Moreover, Section 1 of Executive Order No. 525
provides that PEA "shall be primarily responsible for
integrating, directing, and coordinating all reclamation
projects for and on behalf of the National Government."
The same section also states that "[A]ll reclamation
projects shall be approved by the President upon
recommendation of the PEA, and shall be undertaken
by the PEA or through a proper contract executed by it
with any person or entity; x x x." Thus, under EO No.
525, in relation to PD No. 3-A and PD No.1084, PEA
became the primary implementing agency of the
National Government to reclaim foreshore and
submerged lands of the public domain. EO No. 525
recognized PEA as the government entity "to undertake
the reclamation of lands and ensure their maximum
utilization in promoting public welfare and
interests."79 Since large portions of these reclaimed
lands would obviously be needed for public service,
there must be a formal declaration segregating
reclaimed lands no longer needed for public service
from those still needed for public service.1wphi1.nt
Section 3 of EO No. 525, by declaring that all lands
reclaimed by PEA "shall belong to or be owned by the
PEA," could not automatically operate to classify
inalienable lands into alienable or disposable lands of
the public domain. Otherwise, reclaimed foreshore and
submerged lands of the public domain would
automatically become alienable once reclaimed by
PEA, whether or not classified as alienable or
disposable.
The Revised Administrative Code of 1987, a later law
than either PD No. 1084 or EO No. 525, vests in the
Department of Environment and Natural Resources
("DENR" for brevity) the following powers and
functions:
"Sec. 4. Powers and Functions. The Department
shall:
(1) x x x
xxx
(4) Exercise supervision and control over
forest lands, alienable and disposable

public lands, mineral resources and, in the

process of exercising such control, impose
appropriate taxes, fees, charges, rentals and
any such form of levy and collect such
revenues for the exploration, development,
utilization or gathering of such resources;
xxx
(14) Promulgate rules, regulations and
guidelines on the issuance of licenses,
permits, concessions, lease agreements
and such other privileges concerning the
development, exploration and utilization
of the country's marine, freshwater, and
brackish water and over all aquatic
resources of the country and shall
continue to oversee, supervise and police
our natural resources; cancel or cause to
cancel such privileges upon failure, noncompliance or violations of any regulation,
order, and for all other causes which are in
furtherance of the conservation of natural
resources and supportive of the national
interest;
(15) Exercise exclusive jurisdiction on the
management and disposition of all lands
of the public domain and serve as the
sole agency responsible for classification,
sub-classification, surveying and titling of lands
in consultation with appropriate
agencies."80 (Emphasis supplied)
As manager, conservator and overseer of the natural
resources of the State, DENR exercises "supervision
and control over alienable and disposable public
lands." DENR also exercises "exclusive jurisdiction on
the management and disposition of all lands of the
public domain." Thus, DENR decides whether areas
under water, like foreshore or submerged areas of
Manila Bay, should be reclaimed or not. This means
that PEA needs authorization from DENR before PEA
can undertake reclamation projects in Manila Bay, or in
any part of the country.
DENR also exercises exclusive jurisdiction over the
disposition of all lands of the public domain. Hence,
DENR decides whether reclaimed lands of PEA should
be classified as alienable under Sections 6 81 and 782 of
CA No. 141. Once DENR decides that the reclaimed
lands should be so classified, it then recommends to
the President the issuance of a proclamation classifying
the lands as alienable or disposable lands of the public
domain open to disposition. We note that then DENR
Secretary Fulgencio S. Factoran, Jr. countersigned
Special Patent No. 3517 in compliance with the Revised
Administrative Code and Sections 6 and 7 of CA No.
141.
In short, DENR is vested with the power to authorize
the reclamation of areas under water, while PEA is
vested with the power to undertake the physical
reclamation of areas under water, whether directly or
through private contractors. DENR is also empowered
to classify lands of the public domain into alienable or

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disposable lands subject to the approval of the

President. On the other hand, PEA is tasked to develop,
sell or lease the reclaimed alienable lands of the public
domain.
Clearly, the mere physical act of reclamation by PEA of
foreshore or submerged areas does not make the
reclaimed lands alienable or disposable lands of the
public domain, much less patrimonial lands of PEA.
Likewise, the mere transfer by the National
Government of lands of the public domain to PEA does
not make the lands alienable or disposable lands of the
public domain, much less patrimonial lands of PEA.
Absent two official acts a classification that these
lands are alienable or disposable and open to
disposition and a declaration that these lands are not
needed for public service, lands reclaimed by PEA
remain inalienable lands of the public domain. Only
such an official classification and formal declaration
can convert reclaimed lands into alienable or
disposable lands of the public domain, open to
disposition under the Constitution, Title I and Title III 83of
CA No. 141 and other applicable laws.84
PEA's Authority to Sell Reclaimed Lands
PEA, like the Legal Task Force, argues that as alienable
or disposable lands of the public domain, the reclaimed
lands shall be disposed of in accordance with CA No.
141, the Public Land Act. PEA, citing Section 60 of CA
No. 141, admits that reclaimed lands transferred to a
branch or subdivision of the government "shall not be
alienated, encumbered, or otherwise disposed of in a
manner affecting its title, except when authorized
by Congress: x x x."85 (Emphasis by PEA)
In Laurel vs. Garcia,86 the Court cited Section 48 of
the Revised Administrative Code of 1987, which states
that
"Sec. 48. Official Authorized to Convey Real
Property. Whenever real property of the
Government is authorized by law to be
conveyed, the deed of conveyance shall be
executed in behalf of the government by the
following: x x x."
Thus, the Court concluded that a law is needed to
convey any real property belonging to the Government.
The Court declared that "It is not for the President to convey real
property of the government on his or her own
sole will. Any such conveyance must be
authorized and approved by a law
enacted by the Congress. It requires
executive and legislative concurrence."
(Emphasis supplied)
PEA contends that PD No. 1085 and EO No. 525
constitute the legislative authority allowing PEA to sell
its reclaimed lands. PD No. 1085, issued on February 4,
1977, provides that

"The land reclaimed in the foreshore and

offshore area of Manila Bay pursuant to the
contract for the reclamation and construction
of the Manila-Cavite Coastal Road Project
between the Republic of the Philippines and the
Construction and Development Corporation of
the Philippines dated November 20, 1973
and/or any other contract or reclamation
covering the same area is hereby
transferred, conveyed and assigned to
the ownership and administration of the
Public Estates Authority established
pursuant to PD No. 1084; Provided, however,
That the rights and interests of the
Construction and Development Corporation of
the Philippines pursuant to the aforesaid
contract shall be recognized and respected.
Henceforth, the Public Estates Authority shall
exercise the rights and assume the obligations
of the Republic of the Philippines (Department
of Public Highways) arising from, or incident to,
the aforesaid contract between the Republic of
the Philippines and the Construction and
Development Corporation of the Philippines.
In consideration of the foregoing transfer and
assignment, the Public Estates Authority shall
issue in favor of the Republic of the Philippines
the corresponding shares of stock in said entity
with an issued value of said shares of stock
(which) shall be deemed fully paid and nonassessable.
The Secretary of Public Highways and the
General Manager of the Public Estates
Authority shall execute such contracts or
agreements, including appropriate agreements
with the Construction and Development
Corporation of the Philippines, as may be
necessary to implement the above.
Special land patent/patents shall be
issued by the Secretary of Natural
Resources in favor of the Public Estates
Authority without prejudice to the
subsequent transfer to the contractor or
his assignees of such portion or portions
of the land reclaimed or to be reclaimed
as provided for in the above-mentioned
contract. On the basis of such patents,
the Land Registration Commission shall
issue the corresponding certificate of
title." (Emphasis supplied)
On the other hand, Section 3 of EO No. 525, issued on
February 14, 1979, provides that "Sec. 3. All lands reclaimed by PEA shall
belong to or be owned by the PEA which
shall be responsible for its administration,
development, utilization or disposition in
accordance with the provisions of Presidential
Decree No. 1084. Any and all income that the
PEA may derive from the sale, lease or use of
reclaimed lands shall be used in accordance

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with the provisions of Presidential Decree No.

1084."
There is no express authority under either PD No. 1085
or EO No. 525 for PEA to sell its reclaimed lands. PD No.
1085 merely transferred "ownership and
administration" of lands reclaimed from Manila Bay to
PEA, while EO No. 525 declared that lands reclaimed by
PEA "shall belong to or be owned by PEA." EO No. 525
expressly states that PEA should dispose of its
reclaimed lands "in accordance with the provisions of
Presidential Decree No. 1084," the charter of PEA.
PEA's charter, however, expressly tasks PEA "to
develop, improve, acquire, administer, deal in,
subdivide, dispose, lease and sell any and all kinds
of lands x x x owned, managed, controlled and/or
operated by the government."87 (Emphasis
supplied) There is, therefore, legislative authority
granted to PEA to sell its lands, whether
patrimonial or alienable lands of the public
domain. PEA may sell to private parties
its patrimonial properties in accordance with the
PEA charter free from constitutional limitations. The
constitutional ban on private corporations from
acquiring alienable lands of the public domain does not
apply to the sale of PEA's patrimonial lands.
PEA may also sell its alienable or disposable lands
of the public domain to private individuals since,
with the legislative authority, there is no longer any
statutory prohibition against such sales and the
constitutional ban does not apply to individuals. PEA,
however, cannot sell any of its alienable or disposable
lands of the public domain to private corporations
since Section 3, Article XII of the 1987 Constitution
expressly prohibits such sales. The legislative authority
benefits only individuals. Private corporations remain
barred from acquiring any kind of alienable land of the
public domain, including government reclaimed lands.
The provision in PD No. 1085 stating that portions of
the reclaimed lands could be transferred by PEA to the
"contractor or his assignees" (Emphasis supplied)
would not apply to private corporations but only to
individuals because of the constitutional ban.
Otherwise, the provisions of PD No. 1085 would violate
both the 1973 and 1987 Constitutions.
The requirement of public auction in the sale of
reclaimed lands
Assuming the reclaimed lands of PEA are classified as
alienable or disposable lands open to disposition, and
further declared no longer needed for public service,
PEA would have to conduct a public bidding in selling
or leasing these lands. PEA must observe the
provisions of Sections 63 and 67 of CA No. 141
requiring public auction, in the absence of a law
exempting PEA from holding a public auction.88 Special
Patent No. 3517 expressly states that the patent is
issued by authority of the Constitution and PD No.
1084, "supplemented by Commonwealth Act No. 141,
as amended." This is an acknowledgment that the
provisions of CA No. 141 apply to the disposition of
reclaimed alienable lands of the public domain unless

otherwise provided by law. Executive Order No.

654,89 which authorizes PEA "to determine the kind and
manner of payment for the transfer" of its assets and
properties, does not exempt PEA from the requirement
of public auction. EO No. 654 merely authorizes PEA to
decide the mode of payment, whether in kind and in
installment, but does not authorize PEA to dispense
with public auction.
Moreover, under Section 79 of PD No. 1445, otherwise
known as the Government Auditing Code, the
government is required to sell valuable government
property through public bidding. Section 79 of PD No.
1445 mandates that
"Section 79. When government
property has become unserviceable for any
cause, or is no longer needed, it shall, upon
application of the officer accountable therefor,
be inspected by the head of the agency or his
duly authorized representative in the presence
of the auditor concerned and, if found to be
valueless or unsaleable, it may be destroyed in
their presence. If found to be valuable, it
may be sold at public auction to the
highest bidder under the supervision of the
proper committee on award or similar body in
the presence of the auditor concerned or other
authorized representative of the
Commission, after advertising by printed
notice in the Official Gazette, or for not
less than three consecutive days in any
newspaper of general circulation, or where
the value of the property does not warrant the
expense of publication, by notices posted for a
like period in at least three public places in the
locality where the property is to be sold. In the
event that the public auction fails, the
property may be sold at a private sale at
such price as may be fixed by the same
committee or body concerned and
approved by the Commission."
It is only when the public auction fails that a negotiated
sale is allowed, in which case the Commission on Audit
must approve the selling price.90 The Commission on
Audit implements Section 79 of the Government
Auditing Code through Circular No. 89-29691 dated
January 27, 1989. This circular emphasizes that
government assets must be disposed of only through
public auction, and a negotiated sale can be resorted
to only in case of "failure of public auction."
At the public auction sale, only Philippine citizens are
qualified to bid for PEA's reclaimed foreshore and
submerged alienable lands of the public domain.
Private corporations are barred from bidding at the
auction sale of any kind of alienable land of the public
domain.
PEA originally scheduled a public bidding for the
Freedom Islands on December 10, 1991. PEA imposed
a condition that the winning bidder should reclaim
another 250 hectares of submerged areas to regularize
the shape of the Freedom Islands, under a 60-40
sharing of the additional reclaimed areas in favor of the

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winning bidder.92 No one, however, submitted a bid. On

December 23, 1994, the Government Corporate
Counsel advised PEA it could sell the Freedom Islands
through negotiation, without need of another public
bidding, because of the failure of the public bidding on
December 10, 1991.93
However, the original JVA dated April 25, 1995 covered
not only the Freedom Islands and the additional 250
hectares still to be reclaimed, it also granted an option
to AMARI to reclaim another 350 hectares. The original
JVA, a negotiated contract, enlarged the reclamation
area to 750 hectares.94 The failure of public bidding
on December 10, 1991, involving only 407.84
hectares,95 is not a valid justification for a negotiated
sale of 750 hectares, almost double the area publicly
auctioned. Besides, the failure of public bidding
happened on December 10, 1991, more than three
years before the signing of the original JVA on April 25,
1995. The economic situation in the country had
greatly improved during the intervening period.
Reclamation under the BOT Law and the Local
Government Code
The constitutional prohibition in Section 3, Article XII of
the 1987 Constitution is absolute and clear: "Private
corporations or associations may not hold such
alienable lands of the public domain except by lease, x
x x." Even Republic Act No. 6957 ("BOT Law," for
brevity), cited by PEA and AMARI as legislative
authority to sell reclaimed lands to private parties,
recognizes the constitutional ban. Section 6 of RA No.
6957 states
"Sec. 6. Repayment Scheme. - For the
financing, construction, operation and
maintenance of any infrastructure projects
undertaken through the build-operate-andtransfer arrangement or any of its variations
pursuant to the provisions of this Act, the
project proponent x x x may likewise be repaid
in the form of a share in the revenue of the
project or other non-monetary payments, such
as, but not limited to, the grant of a portion or
percentage of the reclaimed land, subject to
the constitutional requirements with
respect to the ownership of the land: x x
x." (Emphasis supplied)
A private corporation, even one that undertakes the
physical reclamation of a government BOT project,
cannot acquire reclaimed alienable lands of the public
domain in view of the constitutional ban.
Section 302 of the Local Government Code, also
mentioned by PEA and AMARI, authorizes local
governments in land reclamation projects to pay the
contractor or developer in kind consisting of a
percentage of the reclaimed land, to wit:
"Section 302. Financing, Construction,
Maintenance, Operation, and Management of
Infrastructure Projects by the Private Sector. x x
x

xxx
In case of land reclamation or construction of
industrial estates, the repayment plan may
consist of the grant of a portion or percentage
of the reclaimed land or the industrial estate
constructed."
Although Section 302 of the Local Government Code
does not contain a proviso similar to that of the BOT
Law, the constitutional restrictions on land ownership
automatically apply even though not expressly
mentioned in the Local Government Code.
Thus, under either the BOT Law or the Local
Government Code, the contractor or developer, if a
corporate entity, can only be paid with leaseholds on
portions of the reclaimed land. If the contractor or
developer is an individual, portions of the reclaimed
land, not exceeding 12 hectares96 of non-agricultural
lands, may be conveyed to him in ownership in view of
the legislative authority allowing such conveyance.
This is the only way these provisions of the BOT Law
and the Local Government Code can avoid a direct
collision with Section 3, Article XII of the 1987
Constitution.
Registration of lands of the public domain
Finally, PEA theorizes that the "act of conveying the
ownership of the reclaimed lands to public respondent
PEA transformed such lands of the public domain to
private lands." This theory is echoed by AMARI which
maintains that the "issuance of the special patent
leading to the eventual issuance of title takes the
subject land away from the land of public domain and
converts the property into patrimonial or private
property." In short, PEA and AMARI contend that with
the issuance of Special Patent No. 3517 and the
corresponding certificates of titles, the 157.84 hectares
comprising the Freedom Islands have become private
lands of PEA. In support of their theory, PEA and AMARI
cite the following rulings of the Court:
1. Sumail v. Judge of CFI of Cotabato,97 where
the Court held
"Once the patent was granted and the
corresponding certificate of title was issued,
the land ceased to be part of the public domain
and became private property over which the
Director of Lands has neither control nor
jurisdiction."
2. Lee Hong Hok v. David,98 where the Court
declared "After the registration and issuance of the
certificate and duplicate certificate of title
based on a public land patent, the land covered
thereby automatically comes under the
operation of Republic Act 496 subject to all the
safeguards provided therein."3. Heirs of
Gregorio Tengco v. Heirs of Jose
Aliwalas,99 where the Court ruled -

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"While the Director of Lands has the power to

review homestead patents, he may do so only
so long as the land remains part of the public
domain and continues to be under his exclusive
control; but once the patent is registered and a
certificate of title is issued, the land ceases to
be part of the public domain and becomes
private property over which the Director of
Lands has neither control nor jurisdiction."
4. Manalo v. Intermediate Appellate
Court,100 where the Court held
"When the lots in dispute were certified as
disposable on May 19, 1971, and free patents
were issued covering the same in favor of the
private respondents, the said lots ceased to be
part of the public domain and, therefore, the
Director of Lands lost jurisdiction over the
same."
5.Republic v. Court of Appeals,101 where the
Court stated
"Proclamation No. 350, dated October 9, 1956,
of President Magsaysay legally effected a land
grant to the Mindanao Medical Center, Bureau
of Medical Services, Department of Health, of
the whole lot, validly sufficient for initial
registration under the Land Registration Act.
Such land grant is constitutive of a 'fee simple'
title or absolute title in favor of petitioner
Mindanao Medical Center. Thus, Section 122 of
the Act, which governs the registration of
grants or patents involving public lands,
provides that 'Whenever public lands in the
Philippine Islands belonging to the Government
of the United States or to the Government of
the Philippines are alienated, granted or
conveyed to persons or to public or private
corporations, the same shall be brought
forthwith under the operation of this Act (Land
Registration Act, Act 496) and shall become
registered lands.'"
The first four cases cited involve petitions to cancel the
land patents and the corresponding certificates of
titles issued to private parties. These four cases
uniformly hold that the Director of Lands has no
jurisdiction over private lands or that upon issuance of
the certificate of title the land automatically comes
under the Torrens System. The fifth case cited involves
the registration under the Torrens System of a 12.8hectare public land granted by the National
Government to Mindanao Medical Center, a
government unit under the Department of Health. The
National Government transferred the 12.8-hectare
public land to serve as the site for the hospital
buildings and other facilities of Mindanao Medical
Center, which performed a public service. The Court
affirmed the registration of the 12.8-hectare public
land in the name of Mindanao Medical Center under
Section 122 of Act No. 496. This fifth case is an
example of a public land being registered under Act No.
496 without the land losing its character as a property
of public dominion.

In the instant case, the only patent and certificates of

title issued are those in the name of PEA, a wholly
government owned corporation performing public as
well as proprietary functions. No patent or certificate of
title has been issued to any private party. No one is
asking the Director of Lands to cancel PEA's patent or
certificates of title. In fact, the thrust of the instant
petition is that PEA's certificates of title should remain
with PEA, and the land covered by these certificates,
being alienable lands of the public domain, should not
be sold to a private corporation.
Registration of land under Act No. 496 or PD No. 1529
does not vest in the registrant private or public
ownership of the land. Registration is not a mode of
acquiring ownership but is merely evidence of
ownership previously conferred by any of the
recognized modes of acquiring ownership. Registration
does not give the registrant a better right than what
the registrant had prior to the registration.102 The
registration of lands of the public domain under the
Torrens system, by itself, cannot convert public lands
into private lands.103
Jurisprudence holding that upon the grant of the patent
or issuance of the certificate of title the alienable land
of the public domain automatically becomes private
land cannot apply to government units and entities like
PEA. The transfer of the Freedom Islands to PEA was
made subject to the provisions of CA No. 141 as
expressly stated in Special Patent No. 3517 issued by
then President Aquino, to wit:
"NOW, THEREFORE, KNOW YE, that by
authority of the Constitution of the Philippines
and in conformity with the provisions of
Presidential Decree No. 1084, supplemented
by Commonwealth Act No. 141, as
amended, there are hereby granted and
conveyed unto the Public Estates Authority the
aforesaid tracts of land containing a total area
of one million nine hundred fifteen thousand
eight hundred ninety four (1,915,894) square
meters; the technical description of which are
hereto attached and made an integral part
hereof." (Emphasis supplied)
Thus, the provisions of CA No. 141 apply to the
Freedom Islands on matters not covered by PD No.
1084. Section 60 of CA No. 141 prohibits, "except when
authorized by Congress," the sale of alienable lands of
the public domain that are transferred to government
units or entities. Section 60 of CA No. 141 constitutes,
under Section 44 of PD No. 1529, a "statutory lien
affecting title" of the registered land even if not
annotated on the certificate of title.104 Alienable lands
of the public domain held by government entities
under Section 60 of CA No. 141 remain public lands
because they cannot be alienated or encumbered
unless Congress passes a law authorizing their
disposition. Congress, however, cannot authorize the
sale to private corporations of reclaimed alienable
lands of the public domain because of the
constitutional ban. Only individuals can benefit from
such law.

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The grant of legislative authority to sell public lands in

accordance with Section 60 of CA No. 141 does not
automatically convert alienable lands of the public
domain into private or patrimonial lands. The alienable
lands of the public domain must be transferred to
qualified private parties, or to government entities not
tasked to dispose of public lands, before these lands
can become private or patrimonial lands. Otherwise,
the constitutional ban will become illusory if Congress
can declare lands of the public domain as private or
patrimonial lands in the hands of a government agency
tasked to dispose of public lands. This will allow private
corporations to acquire directly from government
agencies limitless areas of lands which, prior to such
law, are concededly public lands.
Under EO No. 525, PEA became the central
implementing agency of the National Government to
reclaim foreshore and submerged areas of the public
domain. Thus, EO No. 525 declares that
"EXECUTIVE ORDER NO. 525
Designating the Public Estates Authority as the
Agency Primarily Responsible for all
Reclamation Projects
Whereas, there are several reclamation
projects which are ongoing or being proposed
to be undertaken in various parts of the
country which need to be evaluated for
consistency with national programs;
Whereas, there is a need to give further
institutional support to the Government's
declared policy to provide for a coordinated,
economical and efficient reclamation of lands;
Whereas, Presidential Decree No. 3-A requires
that all reclamation of areas shall be limited to
the National Government or any person
authorized by it under proper contract;
Whereas, a central authority is needed to
act on behalf of the National Government
which shall ensure a coordinated and
integrated approach in the reclamation of
lands;
Whereas, Presidential Decree No. 1084
creates the Public Estates Authority as a
government corporation to undertake
reclamation of lands and ensure their
maximum utilization in promoting public
welfare and interests; and
Whereas, Presidential Decree No. 1416
provides the President with continuing
authority to reorganize the national
government including the transfer, abolition, or
merger of functions and offices.
NOW, THEREFORE, I, FERDINAND E. MARCOS,
President of the Philippines, by virtue of the
powers vested in me by the Constitution and

pursuant to Presidential Decree No. 1416, do

hereby order and direct the following:
Section 1. The Public Estates Authority
(PEA) shall be primarily responsible for
integrating, directing, and coordinating
all reclamation projects for and on behalf
of the National Government. All reclamation
projects shall be approved by the President
upon recommendation of the PEA, and shall be
undertaken by the PEA or through a proper
contract executed by it with any person or
entity; Provided, that, reclamation projects of
any national government agency or entity
authorized under its charter shall be
undertaken in consultation with the PEA upon
approval of the President.
x x x ."
As the central implementing agency tasked to
undertake reclamation projects nationwide, with
authority to sell reclaimed lands, PEA took the place of
DENR as the government agency charged with leasing
or selling reclaimed lands of the public domain. The
reclaimed lands being leased or sold by PEA are not
private lands, in the same manner that DENR, when it
disposes of other alienable lands, does not dispose of
private lands but alienable lands of the public domain.
Only when qualified private parties acquire these lands
will the lands become private lands. In the hands of
the government agency tasked and authorized
to dispose of alienable of disposable lands of the
public domain, these lands are still public, not
private lands.
Furthermore, PEA's charter expressly states that PEA
"shall hold lands of the public domain" as well as
"any and all kinds of lands." PEA can hold both lands of
the public domain and private lands. Thus, the mere
fact that alienable lands of the public domain like the
Freedom Islands are transferred to PEA and issued land
patents or certificates of title in PEA's name does not
automatically make such lands private.
To allow vast areas of reclaimed lands of the public
domain to be transferred to PEA as private lands will
sanction a gross violation of the constitutional ban on
private corporations from acquiring any kind of
alienable land of the public domain. PEA will simply
turn around, as PEA has now done under the
Amended JVA, and transfer several hundreds of
hectares of these reclaimed and still to be reclaimed
lands to a single private corporation in only one
transaction. This scheme will effectively nullify the
constitutional ban in Section 3, Article XII of the 1987
Constitution which was intended to diffuse equitably
the ownership of alienable lands of the public domain
among Filipinos, now numbering over 80 million strong.
This scheme, if allowed, can even be applied to
alienable agricultural lands of the public domain since
PEA can "acquire x x x any and all kinds of lands." This
will open the floodgates to corporations and even
individuals acquiring hundreds of hectares of alienable
lands of the public domain under the guise that in the

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hands of PEA these lands are private lands. This will

result in corporations amassing huge landholdings
never before seen in this country - creating the very
evil that the constitutional ban was designed to
prevent. This will completely reverse the clear direction
of constitutional development in this country. The 1935
Constitution allowed private corporations to acquire
not more than 1,024 hectares of public lands.105 The
1973 Constitution prohibited private corporations from
acquiring any kind of public land, and the 1987
Constitution has unequivocally reiterated this
prohibition.
The contention of PEA and AMARI that public lands,
once registered under Act No. 496 or PD No. 1529,
automatically become private lands is contrary to
existing laws. Several laws authorize lands of the
public domain to be registered under the Torrens
System or Act No. 496, now PD No. 1529, without
losing their character as public lands. Section 122 of
Act No. 496, and Section 103 of PD No. 1529,
respectively, provide as follows:
Act No. 496
"Sec. 122. Whenever public lands in the
Philippine Islands belonging to the x x x
Government of the Philippine Islands are
alienated, granted, or conveyed to persons or
the public or private corporations, the
same shall be brought forthwith under the
operation of this Act and shall become
registered lands."
PD No. 1529
"Sec. 103. Certificate of Title to Patents.
Whenever public land is by the Government
alienated, granted or conveyed to any person,
the same shall be brought forthwith under the
operation of this Decree." (Emphasis supplied)
Based on its legislative history, the phrase "conveyed
to any person" in Section 103 of PD No. 1529 includes
conveyances of public lands to public corporations.
Alienable lands of the public domain "granted,
donated, or transferred to a province, municipality, or
branch or subdivision of the Government," as provided
in Section 60 of CA No. 141, may be registered under
the Torrens System pursuant to Section 103 of PD No.
1529. Such registration, however, is expressly subject
to the condition in Section 60 of CA No. 141 that the
land "shall not be alienated, encumbered or otherwise
disposed of in a manner affecting its title, except
when authorized by Congress." This provision refers
to government reclaimed, foreshore and marshy lands
of the public domain that have been titled but still
cannot be alienated or encumbered unless expressly
authorized by Congress. The need for legislative
authority prevents the registered land of the public
domain from becoming private land that can be
disposed of to qualified private parties.

The Revised Administrative Code of 1987 also

recognizes that lands of the public domain may be
registered under the Torrens System. Section 48,
Chapter 12, Book I of the Code states
"Sec. 48. Official Authorized to Convey Real
Property. Whenever real property of the
Government is authorized by law to be
conveyed, the deed of conveyance shall be
executed in behalf of the government by the
following:
(1) x x x
(2) For property belonging to the Republic
of the Philippines, but titled in the name
of any political subdivision or of any
corporate agency or instrumentality, by
the executive head of the agency or
instrumentality." (Emphasis supplied)
Thus, private property purchased by the National
Government for expansion of a public wharf may be
titled in the name of a government corporation
regulating port operations in the country. Private
property purchased by the National Government for
expansion of an airport may also be titled in the name
of the government agency tasked to administer the
airport. Private property donated to a municipality for
use as a town plaza or public school site may likewise
be titled in the name of the municipality.106 All these
properties become properties of the public domain, and
if already registered under Act No. 496 or PD No. 1529,
remain registered land. There is no requirement or
provision in any existing law for the de-registration of
land from the Torrens System.
Private lands taken by the Government for public use
under its power of eminent domain become
unquestionably part of the public domain.
Nevertheless, Section 85 of PD No. 1529 authorizes the
Register of Deeds to issue in the name of the National
Government new certificates of title covering such
expropriated lands. Section 85 of PD No. 1529 states
"Sec. 85. Land taken by eminent domain.
Whenever any registered land, or interest
therein, is expropriated or taken by eminent
domain, the National Government, province,
city or municipality, or any other agency or
instrumentality exercising such right shall file
for registration in the proper Registry a
certified copy of the judgment which shall state
definitely by an adequate description, the
particular property or interest expropriated, the
number of the certificate of title, and the
nature of the public use. A memorandum of the
right or interest taken shall be made on each
certificate of title by the Register of Deeds, and
where the fee simple is taken, a new
certificate shall be issued in favor of the
National Government, province, city,
municipality, or any other agency or
instrumentality exercising such right for the
land so taken. The legal expenses incident to
the memorandum of registration or issuance of

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a new certificate of title shall be for the

account of the authority taking the land or
interest therein." (Emphasis supplied)
Consequently, lands registered under Act No. 496 or PD
No. 1529 are not exclusively private or patrimonial
lands. Lands of the public domain may also be
registered pursuant to existing laws.
AMARI makes a parting shot that the Amended JVA is
not a sale to AMARI of the Freedom Islands or of the
lands to be reclaimed from submerged areas of Manila
Bay. In the words of AMARI, the Amended JVA "is not a
sale but a joint venture with a stipulation for
reimbursement of the original cost incurred by PEA for
the earlier reclamation and construction works
performed by the CDCP under its 1973 contract with
the Republic." Whether the Amended JVA is a sale or a
joint venture, the fact remains that the Amended JVA
requires PEA to "cause the issuance and delivery of the
certificates of title conveying AMARI's Land Share in
the name of AMARI."107
This stipulation still contravenes Section 3, Article XII of
the 1987 Constitution which provides that private
corporations "shall not hold such alienable lands of the
public domain except by lease." The transfer of title
and ownership to AMARI clearly means that AMARI will
"hold" the reclaimed lands other than by lease. The
transfer of title and ownership is a "disposition" of the
reclaimed lands, a transaction considered a sale or
alienation under CA No. 141,108 the Government
Auditing Code,109 and Section 3, Article XII of the 1987
Constitution.
The Regalian doctrine is deeply implanted in our legal
system. Foreshore and submerged areas form part of
the public domain and are inalienable. Lands reclaimed
from foreshore and submerged areas also form part of
the public domain and are also inalienable, unless
converted pursuant to law into alienable or disposable
lands of the public domain. Historically, lands
reclaimed by the government are sui generis, not
available for sale to private parties unlike other
alienable public lands. Reclaimed lands retain their
inherent potential as areas for public use or public
service. Alienable lands of the public domain,
increasingly becoming scarce natural resources, are to
be distributed equitably among our ever-growing
population. To insure such equitable distribution, the
1973 and 1987 Constitutions have barred private
corporations from acquiring any kind of alienable land
of the public domain. Those who attempt to dispose of
inalienable natural resources of the State, or seek to
circumvent the constitutional ban on alienation of
lands of the public domain to private corporations, do
so at their own risk.
We can now summarize our conclusions as follows:
1. The 157.84 hectares of reclaimed lands
comprising the Freedom Islands, now covered
by certificates of title in the name of PEA,
are alienable lands of the public domain.
PEA may lease these lands to private
corporations but may not sell or transfer

ownership of these lands to private

corporations. PEA may only sell these lands to
Philippine citizens, subject to the ownership
limitations in the 1987 Constitution and
existing laws.
2. The 592.15 hectares of submerged areas of
Manila Bay remain inalienable natural
resources of the public domain until classified
as alienable or disposable lands open to
disposition and declared no longer needed for
public service. The government can make such
classification and declaration only after PEA
has reclaimed these submerged areas. Only
then can these lands qualify as agricultural
lands of the public domain, which are the only
natural resources the government can alienate.
In their present state, the 592.15 hectares of
submerged areas are inalienable and
outside the commerce of man.
3. Since the Amended JVA seeks to transfer to
AMARI, a private corporation, ownership of
77.34 hectares110 of the Freedom Islands, such
transfer is void for being contrary to Section 3,
Article XII of the 1987 Constitution which
prohibits private corporations from acquiring
any kind of alienable land of the public domain.
4. Since the Amended JVA also seeks to
transfer to AMARI ownership of 290.156
hectares111 of still submerged areas of Manila
Bay, such transfer is void for being contrary to
Section 2, Article XII of the 1987 Constitution
which prohibits the alienation of natural
resources other than agricultural lands of the
public domain. PEA may reclaim these
submerged areas. Thereafter, the government
can classify the reclaimed lands as alienable or
disposable, and further declare them no longer
needed for public service. Still, the transfer of
such reclaimed alienable lands of the public
domain to AMARI will be void in view of Section
3, Article XII of the 1987 Constitution which
prohibits private corporations from acquiring
any kind of alienable land of the public domain.
Clearly, the Amended JVA violates glaringly Sections 2
and 3, Article XII of the 1987 Constitution. Under Article
1409112 of the Civil Code, contracts whose "object or
purpose is contrary to law," or whose "object is outside
the commerce of men," are "inexistent and void from
the beginning." The Court must perform its duty to
defend and uphold the Constitution, and therefore
declares the Amended JVA null and void ab initio.
Seventh issue: whether the Court is the proper
forum to raise the issue of whether the Amended
JVA is grossly disadvantageous to the
government.
Considering that the Amended JVA is null and void ab
initio, there is no necessity to rule on this last issue.
Besides, the Court is not a trier of facts, and this last
issue involves a determination of factual matters.

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WHEREFORE, the petition is GRANTED. The Public

Estates Authority and Amari Coastal Bay Development
Corporation are PERMANENTLY ENJOINED from
implementing the Amended Joint Venture Agreement
which is hereby declared NULL and VOID ab initio.
SO ORDERED.

G.R. No. L-27793 February 28, 1972

LETICIA CIPRIANO, petitioner,
vs.
GREGORIO P. MARCELINO and the HONORABLE
RAFAEL DELA CRUZ, Presiding Judge of the Third
Branch, Court of First Instance, Camarines
Sur, respondents.
Jaime C. Viola for petitioner.
Borja and Noval for respondent Gregorio P. Marcelino.

CASTRO, J.:p
Leticia Cipriano served as record clerk in the office of
municipal treasurer Gregorio P. Marcelino of Calabanga,
Camarines Sur, from January 1, 1963 to January 15,
1966, at a monthly salary of eighty pesos (P80). On the
latter date she resigned. Because the respondent
municipal treasurer, upon her severance from the
service, refused to pay her salary corresponding to the
period from September 1, 1965 to January 15, 1966,
inclusive (P349), as well as the commutation
equivalent of her accumulated vacation and sick leaves
(P600), Cipriano filed on May 5, 1966 with the Court of
First Instance of Camarines Sur an action
for mandamus (civil case 6152) to compel the said
municipal treasurer to pay her the total amount of
P949. She also asked for moral and exemplary
damages, attorney's fees and costs of suit.
Marcelino moved to dismiss upon the ground that she
had not "exhausted all administrative remedies before
filing the present action," arguing that exhaustion of all
administrative remedies is a condition precedent
before an aggrieved party may have judicial recourse.
Granting the motion, the court a quo ordered the
dismissal of the case. Cipriano's motion for
reconsideration was denied on May 15, 1967.

adequate; that the doctrine of exhaustion is not

applicable when the questions to be resolved are
purely of law; that the payment of her claim being a
ministerial duty of the municipal
treasurer, mandamus is the proper remedy to compel
such payment; and, finally, that to require a small
government employee such as the petitioner Cipriano
to appeal all the way up to the President of the
Philippines on such an inconsequential matter as the
collection of the sum of P949, would be oppressive and
expensive not only to the employee but also to her
dependents as well.
Upon the other hand, Marcelino insists that the petition
for mandamus below states no cause of action as the
petitioner Cipriano has not exhausted all administrative
remedies available to her; that she has not acquired
any right to be paid her salary and accumulated
vacation and sick leave pay by reason of her failure to
comply with the requirements prescribed in the 1966
Manual on Pre-audit of Government Disbursements;
and that she still has outstanding accountability in the
sense she has not accounted for the missing triplicate
copies of three official receipts which were in her
custody.
The documents required to be accomplished before
Cipriano can be paid her salary and her accumulated
vacation and sick leave pay are (a) a letter of
resignation duly accepted, (b) a certificate of clearance
from money and property accountability, and (c) a
certificate of clearance from the Government Service
Insurance System (p. 9, 1966 Manual on Pre-audit of
Government Disbursements).
In her memorandum filed on December 22, 1967 with
this Court, Cipriano avers that she has a written
resignation duly accepted by the mayor of Calabanga;
that in the investigation conducted personally by the
respondent Marcelino with respect to the triplicate
copies adverted to by him, it was his finding that other
persons, and not the petitioner, are accountable for
them; that the petitioner has no money or property
accountability; and, finally, that she need not present a
certificate of clearance from the GSIS because she is
not a member of the System.
These assertions are not controverted.

Hence, the present petition for certiorari on pure

questions of law.

We have held time and time again that the principle of

exhaustion of administrative remedies is not without
exception, 1 not is it a condition precedent to judicial
relief. 2 The principle may be disregarded when it does
not provide a plain, speedy and adequate remedy. 3 It
may and should be relaxed when its application may
cause great and irreparable damage. 4

Cipriano contends that there is no law that requires an

appeal to the Provincial Treasurer, Secretary of Finance,
Auditor General and then the President of the
Philippines, from the refusal by a municipal treasurer to
pay the salary and money value of the unused vacation
and sick leaves of a municipal employee; that
assuming that an appeal all the way up to the
President of the Philippines is an administrative remedy
authorized by law, the same is not plain, speedy and

It is altogether too obvious that to require the

petitioner Cipriano to go all the way to the President of
the Philippines on appeal in the matter of the collection
of the small total of nine hundred forty-nine (P949)
pesos, would not only be oppressive but would be
patently unreasonable. By the time her appeal shall
have been decided by the President, the amount of
much more than P949, which is the total sum of her
claim, would in all likelihood have been spent.

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In De Leon vs. Libay (see footnote 3), this Court, with

considerable emphasis, made this statement which
is apropos of the case at bar: .
The theory that a party must first
exhaust his remedies in the
administrative branch before seeking
the aid of the strong arm of equity
must give way to the reality that a
government employee must depend for
the support of himself and his family
upon his salary, and were he to be
deprived of that even alone for a few
months, possibly even less, that must
mean starvation because more often
than not, a government employee lives
hand-to-mouth existence and he awaits
with eager hands the arrival of the
forthnightly envelope because upon it
must hinge the supply of rice and fish
and clothing of his spouse and children
and himself and with it only can be
maintained, and therefore were the
dogmatic rule of exhaustion of
administrative remedies be made to
mean that he should wait for the most
final administrative decision in his
case, the only logical result must be
vital disaster to his dependents and to
himself, so that this is the reason why
the rule of exhaustion of administrative
remedies has always been understood
to mean that the same have furnished
a plain, speedy and adequate remedy.
All the documents required to support payment of
Cipriano's salary and the cash commutation of her
unused vacation and sick leaves have been
accomplished. Cipriano having thus earned the right to
the said payment, it has become the corresponding
duty of the respondent treasurer to recognize such
right and effect payment.
ACCORDINGLY, the present petition is granted, and the
orders a quo of April 14 and May 14, 1967 are set
aside. The municipal treasurer of the Municipality of
Calabanga, Camarines Sur, is hereby ordered to pay to
the petitioner, Leticia Cipriano, without further delay,
the total sum of nine hundred forty-nine (P949) pesos.
No pronouncement as to costs.

BENJAMIN
PAREDES,
LUZ
BUENSUCESO,
AUGUSTO
SEVERINO,
RODRIGO
TABANERA,
STEPHEN
SOLIVEN
and
ROBERTO
SANCHEZ; petitioners,
vs. COURT OF APPEALS, RIZALINO S.
NAVARRO,
as
Secretary
of
Trade
and Industry, and IGNACIO S. SAPAL,
Director of the Bureau of Patents,
Trademarks
and
Technology
Transfer, respondents.
RESOLUTION
KAPUNAN, J.:
This is an appeal by certiorari under Rule 45 of the
Revised Rules of Court from the Decision dated 27
October 1993 of the Court of Appeals in CA-G.R. SP No.
30388 which dismissed petitioners Special Civil Action
for Prohibition and said courts Resolution dated 10
January 1994 which denied petitioners motion for
reconsideration of the said decision.
On 9 November 1992, public respondents
promulgated Administrative Order Nos. 1 and 2, Series
of 1992, revising the rules of practice before the
Bureau of Patents, Trademarks and Technology Transfer
(BPTTT) in patent and trademark cases, to take effect
on 15 March 1993. Among the provisions of said
administrative orders are Rule 16 of A.O. No. 1 and
Rule 15 of A.O. No. 2, which increased the fees payable
to the BPTTT for registration of patents and trademarks
and Rule 59 of A.O. No. 2 which prohibited the filing of
multi-class applications, that is, one application
covering several classes of goods.[1]
On 11 March 1993, petitioners, who are registered
patent agents, filed with the Court of Appeals a Petition
for Prohibition with prayer for the issuance of a Writ of
Preliminary Injunction to stop public respondents from
enforcing
the
aforementioned
administrative
orders[2] and to declare Rule 16 of A.O. No. 1 and Rules
15 and 59 of A.O. No. 2, series of 1992 of the BPTTT
null and void.
On 27 October 1993, the Court of Appeals
dismissed the petition for prohibition and on 10 January
1994, denied the motion for reconsideration filed by
petitioners on 18 November 1993.[3]
In the present appeal, petitioners assign the
following errors:

FIRST DIVISION
I
[G.R. No. 113357. February 1, 1996]
THE RESPONDENT COURT ERRED IN DISMISSING THE
PETITION ON THE GROUND OF NON-EXHAUSTION OF
ADMINISTRATIVE REMEDIES.
II
THE RESPONDENT COURT ERRED IN NOT HOLDING
THAT THE QUESTIONED ADMINISTRATIVE ORDERS ARE
NULL AND VOID FOR FAILURE TO COMPLY WITH THE

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PUBLICATION REQUIREMENTS OF BOTH THE

ADMINISTRATIVE CODE AND B.P. NO. 325.
III
THE RESPONDENT COURT ERRED IN NOT DECLARING
NULL AND VOID RULE 59 OF ADMINISTRATIVE ORDER
NO. 1 ON THE GROUND THAT THE PUBLIC
RESPONDENTS DO NOT HAVE THE POWER TO AMEND
THE TRADEMARK LAW.[4]
Petitioners do not dispute that public respondents
are expressly authorized to revise their fees and
charges under B.P. Blg. 325, entitled An Act Authorizing
Heads of Ministries, Offices, Agencies and Commissions
of the National Government, including the Supreme
Court and Constitutional Bodies, to Revise the Rates of
Fees and Charges, which took effect on 1 January 1983.

act and correct the errors committed in the

administrative forum.
And in Philnabank Employees v. Estanislao, [10] we
declared:
Secondly, although not inflexible, we have
repeatedly declined on grounds of prematurity, as well
as in the interest of good order, a hasty recourse to the
courts when administrative avenues are still open.
In the instant case, we concur with the ruling of
the Court of Appeals that:
. . . herein petitioners have still another available
recourse under the law being relied upon. Section 2 of
B.P. 325 reads in part:

[5]

Petitioners,
however,
claim
that
the
aforementioned administrative orders, particularly Rule
16 of A.O. No. I and Rules 15 and 59 of A.O. No. 2,
series of 1992, are null and void for failure of public
respondents to comply with the requirements of
Cabinet approval and publication as specifically
provided in Sections 2 and 5 of B.P. BIg. 325.[6]
We deny the petition.
Prohibition is not the proper remedy. The enabling
law itself, which is B.P. Blg. 325, has specifically tasked
the Cabinet to review and approve any proposed
revisions of rates of fees and charges. Petitioners
should have availed of this easy and accessible remedy
instead of immediately resorting to the judicial process.
Our legislature in delegating to administrative
officers the authority to revise fees and charges
expressly required cabinet approval for the proper
exercise of said power. Petitioners should not have
wasted the opportunity to utilize this built-in remedy.
The grant (or denial) of a writ of prohibition is
ordinarily within the sound discretion of the court to be
exercised with caution and forbearance, according to
the circumstances of the particular case, and only
where the right to seek relief is clear.[7]
Prohibition is granted only in cases where no other
remedy is available which is sufficient to afford
redress. That the petitioners have another and
complete remedy at law either by appeal or otherwise,
is generally a sufficient reason for dismissing the writ. [8]
Hence, in Chua Huat v. CA,[9] we ruled that:
Where the enabling statute indicates a procedure for
administrative review, and provides a system of
administrative appeal, or reconsideration, the courts,
for reasons of law, comity and convenience, will not
entertain a case unless the available administrative
remedies have been resorted to and the
appropriate authorities have been given opportunity to

Sec. 2. Determination of Ratio.- xxx. The revision of

rates shall be determined by the respective ministry
heads or equivalent functionaries conformably with the
rules and regulations of the Ministry of Finance issued
pursuant to Section 4 hereof, upon recommendation of
the imposing and collecting authorities concerned,
subject to the approval of the Cabinet. xx x (Italics
supplied)
The above provision envisions a three-step
process involving a hierarchy of authority before the
rate increases and charges can be imposed and
collected. First, the BPTTT, which is the imposing and
collecting agency, makes a recommendation of the fee
increases and charges. Those recommended rates and
charges are submitted to the Secretary of the DTI for
his evaluation and approval. Second, if the Secretary of
the DTI finds that the rate increases and charges
conform with the rules and regulations of the Ministry
of Finance, then the same are approved and in turn
become
the
rates
of
the
department. The
determination of the supposed rates and charges does
not end here. As mentioned in Section 2 above; the
rates as determined by the department head
are subject to the approval of the Cabinet.
The phrase subject to is one qualification. It
means under the control, power or dominion of or
subordinated to, a higher authority (cf. PNB vs. Deputy,
G.R. No. 35515-R, December 12, 1970). Meaning, that
the proposed rates and charges still have to obtain the
imprimatur of the Cabinet, and prior to which, they
have to undergo Cabinet scrutiny. Thus, there is the
contingency that the same may not obtain the
approval of the Cabinet.[11]
Petitioners are not unaware of this remedy
provided by law. They have, in fact, raised the lack of
Cabinet approval as one of the reasons for seeking the
nullification of the aforementioned administrative
orders.[12]
Petitioners claim that public respondents should
have brought the revised schedule of fees to the
Cabinet for the latters approval [13] is trivial considering
that prior to the filing of the petition for prohibition,
petitioners admittedly requested public respondents to

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reconsider or defer implementation of the subject

administrative orders.[14] They were already in the
process of availing themselves of the administrative
process when they suddenly abandoned the recourse
and went to court.
Petitioners further contend that there was no
appeal or other plain, speedy and adequate remedy
available to them considering the alleged absence of
any mechanism or procedure in the administrative
branch of the government to stop public respondents
from enforcing the questioned fee increases. They
insist that the Cabinet is not an appellate body with the
authority to pass upon the legality of the acts of
department heads.[15]
We do not agree. The provisions of Section 2 of
B.P. 325 cannot be any clearer. The recommended
rates and charges are submitted to the Secretary of
the DTI for his evaluation and approval. The rate
increases should be in conformity with the rules and
regulations of the Secretary of Finance and are subject
to the approval of the Cabinet. Since according to
petitioners the rate increases and charges have not
been submitted to the Cabinet for approval, judicial
review thereof is certainly premature.
The need for Cabinet approval can further be
gleaned from Sec. 5 of B.P. Blg. 325, which provides:
Sec. 5. Publication requirement. - Upon review and
approval by the Cabinet of the adjusted rates of fees or
charges, the heads of ministries, offices, agencies or
commissions concerned, including the courts and
constitutional bodies, shall each cause the revised
schedule of fees and charges to be published once a
week for two consecutive weeks in two newspapers of
general circulation in the Philippines in lieu of
publication in the Official Gazette and the same shall
be effective fifteen days after the last publication.
(Italics ours.)
However, we reject the claim of public
respondents that the required Cabinet approval was
deemed to have been fulfilled with the issuance of
Executive Order (E.O.) No. 159, dated 23 February
1994, the pertinent portions of which provide:
xxx xxx xxx
Section 1. All departments, bureaus, offices, units, and
agencies, including government-owned or controlled
corporations, are hereby directed to revise their fees
and charges to recover at least the full cost of services
rendered.

The full cost of services for the year rendered by a

government department, bureau, office, unit, or
agency, including government-owned or controlled
corporation, shall be equivalent to the appropriation of
said department, bureau, office, unit, or agency for the
year under the relevant General Appropriations Act or
under the Corporate Operating Budget submitted by
the government-owned or controlled corporation as
approved by the Department of Budget and
Management.
The revised rates shall, wherever practicable, be
uniform for similar or comparable services and
functions and shall be determined by the respective
department heads, governing boards, or equivalent
functionaries; Provided that, this Executive Order shall
not apply to fees charged by departments, bureaus,
offices, units. and agencies, including governmentowned or controlled corporations, related to
constitutionally mandated free or subsidized services,
such as in education and health, as well as to those
exempted by international agreements, as shall be
determined by the President.
Section 2. The heads of departments shall be
responsible for the implementation of this Executive
Order by the bureaus, offices, units, and agencies,
including government-owned or controlled
corporations, within their respective jurisdictions.
xxx xxx xxx
It is private respondents thesis that E.O. No. 159
explicitly eliminated the requisite Cabinet approval. It
is a general rule that laws shall have prospective
effect.[16] E.O. No. 159 was promulgated on 23 February
1994 or two years after the subject administrative
orders were issued and, therefore, has no application in
the case at bench.
Anent the second assigned error, it is petitioners
submission that the questioned administrative orders
are null and void for failure to comply with the
publication requirement of B.P. Blg. 325 and of the
Administrative Code. We do not agree.
B.P. BIg. 325 requires Cabinet review and approval
of the impugned administrative orders before their
publication. However, since the Cabinet has yet to
review and approve the proposed revised rates of fees
and charges, there can be no proper publication. The
letter sent by the Office of the National Administrative
Register dated 30 September 1993acknowledging in
general the filing of the administrative orders issued by
the BPTTT can hardly stand as proof of the due
publication and filing of the particular administrative
orders assailed in the present case, said letter not
having specified what administrative orders were thus
filed.
Finally, as to the third issue, we concur with the
findings of the Court of Appeals as follows:
At this point in time, since the challenged
administrative orders have not yet been submitted to

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the Cabinet for its consideration and approval, this

Court finds it untimely to discuss and resolve the
merits of the questions of whether or not the rate
increases and charges are just and reasonable
sufficient to cover administrative costs, and/or that the
same are practicable and uniform for similar or
comparable services and functions, and/or that those
rates conform with the rules and regulations of the
Ministry of Finance. Certainly, the questions raised in
this petition are not yet ripe for judicial determination,
in the light of Matienzo vs. Abellera, (162 SCRA 1,9),
that courts should be reluctant to interfere with
administrative action prior to its completion or finality,
the reason being that absence of a final order or
decision, the power of the administrative agency
concerned has not been fully exercised and there can
be no irreparable harm. The rule of finality of
administrative action for purposes of judicial review
also finds substance in Rochester Telephone Co. vs.
U.S. (307 U.S. 125) and Federal Power Commission vs.
Metropolitan Edison Co. (304 U.S. 375). The principle of
exhaustion of administrative remedies which mandates
that relief should first be sought from the highest or
most superior admistrative agency, the likes of the
Cabinet, may prove that a resort to the courts would be
unnecessary (Wee Poco vs. Posadas, 65 Phil. 648),
prevent the courts from being swamped by a resort to
them in the first instance (U.S. vs. Sing Tuck, 194 U.S.
161), strengthened by the rule on comity and
convenience which requires Us to raise our hands until
the administrative process has been finally completed
(Matienzo vs. Abellana, supra; Railroad and Warehouse
Commission vs. Duluth, St. R. Co., 273 US 625), and
thus it is after judicial review is no longer premature
that the courts may ascertain, in process cases,
whether the administrative action or findings are not in
violation of law, whether they are free from fraud or
imposition and whether they find substantial support
from the evidence.[17]
WHEREFORE,
PREMISES
the petition is hereby DENIED.

This is a special civil action for certiorari under

Rule 65 of the Rules of Court to annul and set aside
Resolution No. 2879 of the Commission on Elections
(COMELEC) of 12 December 1996, which adopted the
calendar of activities for the recall election of the
Mayor, Vice Mayor and six (6) members of
Sangguniang Bayan of the Municipality of Basilisa,
Province of Surigao del Norte, and scheduled said recall
election on 25 January 1997.
Petitioners, as the officials sought to be recalled,
submit that:
1. Not all the members of the Preparatory Recall
Assembly were notified of the meeting for the recall of
said municipal officials;
2. The notice of the meeting did not state the purpose
thereof, much less, that it was for the recall of the
Mayor, Vice Mayor and six Sangguniang Bayan
members;
3. The meeting was not open to the public, but behind
closed doors; and
4. The recall election is scheduled on January 25, 1997,
within one year immediately preceding a regular
election of barangay officials in May, 1997.
As regards the first, petitioners allege that seven
(7) of the twenty-seven (27) Barangay Captains of the
Municipality of Basilisa and fifty-five (55) members of
the different Sangguniang Barangays (SB) thereof did
not receive notice of the Preparatory Recall Assembly
(PRA) Meeting held on 24 August 1996 and which
passed the resolution of recall. These 7 Barangay
Captains and 55 SB members executed affidavits to
this effect which were attached to the petition.

CONSIDERED,

SO ORDERED.

As to the notice of meeting, petitioners allege that

it was in the form reproduced on page 8 of the
petition[1] and carried the following heading:
ASSOCIATION OF BARANGAY COUNCILS

[G.R. No. 127456. March 20, 1997]

Basilisa, Surigao del Norte

JESUS A. JARIOL, Municipal Mayor of Basilisa,

Surigao del Norte; ROMEO P. ECLEO, Vice
Mayor of Basilisa, Surigao del Norte;
ANIANO BUSMEON, ALBERTO TUBO, JUAN
DIGAL, JR., GENEROSO SAREN, ISIDRO
MONESIT and SATURNINO
LANUGON,
Sangguniang Bayan Member of Basilisa,
Surigao del Norte, petitioners, vs. THE
COMMISSION ON ELECTIONS, FELIPE A.
YCOT and DAISY
LUMAMBAS, respondents.

MUNICIPAL PREPARATORY RECALL ASSEMBLY

DECISION
DAVIDE, JR. J.:

It did not contain a statement of the purpose of the

meeting which was to be held in the remote barangay
of Sering at a school building located about one-half
kilometer away from the barangay proper. The
meeting was likewise held behind closed doors.
Affidavits of witnesses to such fact were also attached
to the petition.
Petitioners then contend that the meeting was
held in violation of Section 70 of the Local Government
Code of 1991 (R.A. No. 7160), which reads as follows:
SEC. 74. Limitations on Recall. - (a) Any elective local
official may be the subject of a recall election only once
during his term of office for loss of confidence.

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(b) No recall shall take place within one (1) year from
the date of the officials assumption to office or one (1)
year immediately preceding a regular local election.
As to the last ground, petitioners contend that
under Section 74(b) of RA No. 7160, no recall should
take place within one (1) year from the date of the
official's assumption to office or one (1) year
immediately preceding a regular local election. Under
Section 43(c) of the same Code, the term of office of
barangay officials and members of the Sangguniang
Kabataan shall be for three (3) years, which shall begin
after the regular election of barangay officials on the
second Monday of May, 1994. Per Resolution No. 2880
of 27 December 1996, the COMELEC stated that the
next barangay election would be on 12 May 1997
hence, no recall election could be done within one year
immediately preceding 12 May 1997. The recall then in
this case falls within the prohibited period.
On 21 January 1997 we issued a Temporary
Restraining Order ordering the respondent COMELEC to
cease and desist from implementing its questioned
Resolution No. 2879 and directing the respondents to
Comment on the petition within a non-extendible
period of ten (10) days.
In its Comment for public respondent COMELEC,
the Office of the Solicitor General alleges that per
Report of the Election Officer of Basilisa, Surigao del
Norte, the PRA meeting was attended by 109
members, a number sufficient to constitute a quorum
since Basilisa is composed of 27 barangays with eight
officers for each unit. All of the 109 "signed the
minutes of the meeting as they affixed therein their
signatures and thumbmarks signifying their assent to
the assembly; and the COMELEC, (u)pon examination
of the signatures and the minutes of the meeting,"
"affirmed the authenticity of the signatures and
thumbmarks of the members of the PRA." Thereafter,
the Office of the Solicitor General further states, the
COMELECs
Deputy
Executive
Director
for
Operation recommended to the Comelec en banc the
holding of the recall election." Pursuant thereto, the
COMELEC en banc issued on 12 December 1996 the
challenged
Resolution,
whose
reconsideration
petitioner never sought .
The Office of the Solicitor General then urges us to
dismiss the petition because: (a) of prematurity, since
petitioners had not asked the COMELEC to reconsider
Resolution No. 2879; (b) it raises factual issues which
are not proper subjects of a petition for certiorari; and
(c) the barangay election on 12 May 1997 will not bar
the recall election in question in light of our decision
in Paras v. Commission on Elections (G.R. No. 123169,
4 November 1996) where we held that the regular
election referred to in Section 74(b) of the Local
Government Code of 1991 refers to the election where
the office held by the local elective official sought to be
recalled will be contested and be filled by the
electorate, which is not the barangay election on 12
May 1997, but the election for Mayor, Vice Mayor and
members of the SB in May of 1998.

In their Comment, private respondents contend

that there was compliance with the requirements of
due process as all members of the PRA were duly
notified of the date and place of meeting for the
purpose of recall. The PRA of Basilisa is composed of
243 members, representing the total number of
elected barangay officials of the 27 barangays
thereof. They were all furnished and served with notice
of said meeting, which they received in due time as
evidenced by 243 registry receipts issued by the Post
Office and which form part of the records in the
COMELEC. Only 123 responded and attended the PRA
meeting, while 114 did not respond nor attend the
meeting, the whereabouts of 5 were unknown and 1
had earlier resigned.
Private respondents further claim that the
meetings venue was the Sering High School building in
barangay Sering, which is definitely a public place; and
that the meeting was attended by a majority of the
barangay officials constituting the PRA, as well as
Barangay residents of the different barangays.
Private respondents finally claim that the instant
petition is part of a continuing scheme to unjustly
prevent a recall process. According to them, the first
meeting of the Association of Barangay Councils to
formally organize the Municipal Preparatory Recall
Assembly was set for 5 July 1996, but had to be
postponed to 9 July 1996 because petitioner Mayor
Jariol, upon learning of it, called a meeting of barangay
officials also on 5 July 1996. Again, on 9 July 1996,
Mayor Jariol called a meeting of the barangay officials
to prevent the latter from convening a Municipal
PRA. Despite threats of disciplinary action by Mayor
Jariol, the barangay officials nevertheless met, formally
convened and constituted themselves into the
Municipal Preparatory Recall Assembly. On 15 July
1996, respondent Felipe Ycot and 107 other barangay
officials who attended the aforesaid meeting of 9 July
1996 were administratively charged before the
Sangguniang Bayan of Basilisa with dereliction of duty
for their failure to attend the meeting called by Mayor
Jariol on 9 July 1996. Respondents therein moved to
inhibit the members of the SB, petitioners herein; but,
the motion was peremptorily denied. A motion for
reconsideration was denied on 13 September 1996. On
even date the SB handed down a decision dismissing
from office the herein private respondents with the 106
other barangay officials. Fortunately, on appeal to the
Sangguniang Panlalawigan (SP) of Surigao del Norte,
the decision was reversed in the decision of the SP of
22 November 1996. This was followed on 2 December
1996 by the letter of the Governor of Surigao del Norte
directing petitioner Jariol to reinstate the barangay
officials, which Jariol refused to comply with.
In their Joint [Consolidated] Reply, petitioners
reiterate their reliance on the sworn statements of 7
barangay captains and 55 SB members that they did
not receive notice of the meeting, and as to the 243
registry receipts alleged by private respondents,
petitioners maintain that it is not mentioned when
these registered notices were sent, from which Post
Office, and when these were received. They even claim
that it is rather unusual that the notices were sent
allegedly by registered mail because notices of

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meetings of barangay officials are normally sent by

personal delivery.
As to whether the notice of meeting stated a
purpose and the meeting was public or held in closed
doors, petitioners reiterated their earlier submission
and further assert that the sworn statements of 11
persons which they attached to the petition were not
traversed by any sworn statement.
As regards the claim of COMELEC that petitioners
should have first contested the factual findings of the
PRA before the COMELEC instead of filing this petition,
petitioners allege that they did not have enough
opportunity to do so for the challenged resolution was
promulgated on 12 December 1996 and the recall
election was scheduled on 25 January 1997. Further,
the Resolution was first published only on 20 December
1996, and petitioners only learned of this the following
day in Surigao City as no newspapers are circulated in
Basilisa, and the copy of the resolution sent to
petitioners was delivered to petitioner Jariol on or
about 3 January 1997.
Petitioners were silent on the charge of private
respondents that this petition was part of the formers
scheme to harass the private respondents to unjustly
prevent the recall process.
After due deliberation on the arguments adduced
in the foregoing pleadings, we resolved to DISMISS this
petition for prematurity and for petitioners failure to
sufficiently show that respondent Commission on
Elections committed grave abuse of discretion in giving
due course to the recall petition and in promulgating
Resolution No. 2879.
As correctly pointed out by the Office of the
Solicitor General, if petitioners were unsatisfied with
the findings of the COMELEC, they should have first
moved for reconsideration before filing this special civil
action for certiorari under Rule 65 of the Rules of
Court. The petitioners were fully aware of the
proceedings before the COMELEC.
The COMELEC performed a purely administrative
function when it promulgated Resolution No. 2879. A
party aggrieved thereby must not merely initiate the
prescribed administrative procedure to obtain relief,
but also must pursue it to its appropriate conclusion
before seeking judicial intervention in order to give that
administrative agency an opportunity to decide the
matter by itself correctly and prevent unnecessary and
premature resort to the court. (Cruz v. del Rosario, 9
SCRA 755, 758 [1963]; Manuel v. Jimenez, 17 SCRA 55,
57 [1966]). This is the rule on exhaustion of
administrative remedies. A motion for reconsideration
then is a pre-requisite to the viability of a special civil
action for certiorari, unless the party who avails of the
latter can convincingly show that his case falls under
any of the following exceptions to the rule: (1) where
the question is purely legal, (2) where judicial
intervention is urgent, (3) where its application may
cause great and irreparable damage, (4) where the
controverted acts violate due process, (5) failure of a
high government official from whom relief is sought to

act on the matter, and (6) when the issue for nonexhaustion of administrative remedies has been
rendered moot. (See Severino S. Tabios, Annotation on
Failure to Exhaust Administrative Remedies As a
Ground for Motion to Dismiss, 165 SCRA 352, 357-362
[1988]).
In the instant case, the only reason advanced by
petitioner was lack of enough opportunity to do so. We
disagree. Petitioner first learned of the promulgation of
the Resolution on 21 December 1996 through the 20
December 1996 issue of the Manila Bulletin and
formally received a copy of the Resolution on 3 January
1997. They had sufficient time to file a motion for its
reconsideration since the recall election was scheduled
on 25 January 1997. Instead of filing this petition on 6
January 1997, petitioners should have first filed a
motion for reconsideration.
Verily, the principal issue in this case is focused on
the factual findings of COMELEC. Petitioners sought to
disprove them by sworn statements which they
attached to the petition at bar.Obviously, these were
not offered before the COMELEC, thus the latter could
not have passed upon their admissibility or probative
value. It cannot then be said that the COMELEC acted
with grave abuse of discretion in ruling on the recall on
the basis of, among other things, the Report of its
Municipal Election Officer assigned in Basilisa, Surigao
del Norte. The latter has in his favor the presumption of
regularity in the performance of his duty (Sec. 3(M),
Rule 131, Rules of Court). Petitioners had the burden to
disprove that presumption, which they miserably failed
to do. They did not even assail the Report nor impute
any improper motive on the Election Officer as to
create doubt as to the integrity of his Report.
Finally, the scheduled barangay election on 12
May 1997 is not the regular election contemplated in
Section 74(b) of the Local Government Code of 1991
whose conduct is the basis for computing the one-year
prohibited period. As we held in Paras v. Commission
on Elections (supra):
It would, therefore, be in keeping with the intent of the
recall provision of the Code to construe regular local
election as one referring to an election where the office
held by the local elective official sought to be recalled
could be contested and be filled by the electorate.
Hence the holding of the recall election in question can
be validly done at any time before the commencement
of the one (1) year period immediately preceding the
next general election for municipal elective officials in
May of 1998.
IN VIEW OF ALL THE FOREGOING, the instant
petition is DISMISSED for lack of merit and the
Temporary Restraining Order issued on 21 January
1997 is LIFTED. The Commission on Elections is
DIRECTED to set anew and hold the RECALL
ELECTION in question not later than 15 April 1997.
Costs against petitioners.

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SO ORDERED.

G.R. No. L-45839 June 1, 1988

RUFINO MATIENZO, GODOFREDO ESPIRITU,
DIOSCORRO FRANCO, AND LA SUERTE
TRANSPORTATION CORPORATION, petitioners,
vs.
HON. LEOPOLDO M. ABELLERA, ACTING
CHAIRMAN OF THE BOARD OF TRANSPORTATION,
HON. GODOFREDO Q. ASUNCION, MEMBER OF
THE BOARD OF TRANSPORTATION, ARTURO DELA
CRUZ, MS TRANSPORTATION CO., INC., NEW
FAMILIA TRANSPORTATION CO., ROBERTO
MOJARES, ET AL., respondents.

GUTIERREZ, JR., J.:

This is a petition for certiorari and prohibition, with
application for preliminary injunction, seeking the
annulment and inhibition of the grant or award of
provisional permits or special authority by the
respondent Board of Transportation (BOT) to
respondent taxicab operators, for the operation and
legalization of "excess taxicab units" under certain
provisions of Presidential Decree No. 101 "despite the
lapse of the power to do so thereunder," and "in
violation of other provisions of the Decree, Letter of
Instructions No. 379 and other relevant rules of the
BOT."
The petitioners and private respondents are all
authorized taxicab operators in Metro Manila. The
respondents, however, admittedly operate "colorum"
or "kabit" taxicab units. On or about the second week
of February, 1977, private respondents filed their
petitions with the respondent Board for the legalization
of their unauthorized "excess" taxicab units citing
Presidential Decree No. 101, promulgated on January
17, 1973, "to eradicate the harmful and unlawful trade
of clandestine operators, by replacing or allowing them
to become legitimate and responsible operators."
Within a matter of days, the respondent Board
promulgated its orders setting the applications for
hearing and granting applicants provisional authority to
operate their "excess taxicab units" for which
legalization was sought. Thus, the present petition.
Opposing the applications and seeking to restrain the
grant of provisional permits or authority, as well as the
annulment of permits already granted under PD 101,
the petitioners allege that the BOT acted without
jurisdiction in taking cognizance of the petitions for
legalization and awarding special permits to the private
respondents.

Presidential Decree No. 101 vested in the Board of

Transportation the power, among others "To grant
special permits of limited term for the operation of
public utility motor vehicles as may, in the judgment of
the Board, be necessary to replace or convert
clandestine operators into legitimate and responsible
operators." (Section 1, PD 101)
Citing, however, Section 4 of the Decree which
provides:
SEC. 4. Transitory Provision. Six
months after the promulgation of this
Decree, the Board of Transportation,
the Bureau of Transportation, The
Philippine Constabulary, the city and
municipal forces, and the provincial
and city fiscals shall wage a concerted
and relentless drive towards the total
elimination and punishment of all
clandestine and unlawful operators of
public utility motor vehicles."
the petitioners argue that neither the Board of
Transportation chairman nor any member thereof had
the power, at the time the petitions were filed (i.e. in
1977), to legitimize clandestine operations under PD
101 as such power had been limited to a period of six
(6) months from and after the promulgation of the
Decree on January 17, 1973. They state that,
thereafter, the power lapses and becomes functus
officio.
To reinforce their stand, the petitioners refer to certain
provisions of the Rules and Regulations implementing
PD 101 issued by respondent Board, Letter of
Instructions No. 379, and BOT Memorandum Circular
No. 76-25 (a). In summary, these rules provide inter
alia that (1) only applications for special permits for
"colorum" or "kabit" operators filed before July 17,
1973 shall be accepted and processed (Secs. 3 and 16
(c), BOT-LTC-HPG Joint Regulations Implementing PD
101, pp. 33 and 47, Rollo); (2) Every provisional
authority given to any taxi operator shall be cancelled
immediately and no provisional authority shall
thereafter be issued (par. 6, Letter of Instructions No.
379, issued March 10, 1976, p. 58, Rollo); (3) Effective
immediately, no provisional authorities on applications
for certificates of public convenience shall be granted
or existing provisional authorities on new applications
extended to, among others, taxi denominations in
Metro Manila (BOT Memorandum Circular No. 75-25 (a),
August 30, 1976, p. 64, Rollo); (4) All taxis authorized
to operate within Metro Manila shall obtain new special
permits from the BOT, which permits shall be the only
ones recognized within the area (par. 8, LOI No. 379,
supra); and (5) No bonafide applicant may apply for
special permit to operate, among others, new taxicab
services, and, no application for such new service shall
be accepted for filing or processed by any LTC agency
or granted under these regulations by any LTC Regional
Office until after it shall have announced its program of
development for these types of public motor vehicles
(Sec. 16d, BOT-LTC-HPG Joint Regulations, p. 47, Rollo).
The petitioners raise the following issues:

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I. WHETHER OR NOT THE BOARD OF

TRANSPORTATION HAS THE POWER TO
GRANT PROVISIONAL PERMITS TO
OPERATE DESPITE THE BAN THEREON
UNDER LETTER OF INSTRUCTIONS NO.
379;
II. WHETHER OR NOT THE BOARD OF
TRANSPORTATION HAS THE POWER TO
LEGALIZE, AT THIS TIME, CLANDESTINE
AND UNLAWFUL TAXICAB OPERATIONS
UNDER SECTION 1, P.D. 101; AND
III. WHETHER OR NOT THE PROCEDURE
BEING FOLLOWED BY THE BOARD IN
THE CASES IN QUESTION SATISFIES
THE PROCEDURAL DUE PROCESS
REQUIREMENTS. (p. 119, Rollo)
We need not pass upon the first issue raised anent the
grant of provisional authority to respondents.
Considering that the effectivity of the provisional
permits issued to the respondents was expressly
limited to June 30, 1977, as evidenced by the BOT
orders granting the same (Annexes G, H, I and J among
others) and Memorandum Circular No. 77-4 dated
January 20, 1977 (p. 151, Rollo), implementing
paragraph 6 of LOI 379 (ordering immediate
cancellation of all provisional authorities issued to
taxicab operators, supra), which provides:
5. After June 30, 1977, all provisional
authorities are deemed cancelled, even
if hearings on the main application
have not been terminated.
the issue is MOOT and ACADEMIC. Only the issue on
legalization remains under consideration.
Justifying its action on private respondent's
applications, the respondent Board emphasizes public
need as the overriding concern. It is argued that under
PD 101, it is the fixed policy of the State "to eradicate
the harmful and unlawful trade of clandestine
operators by replacing or allowing them to become
legitimate and responsible ones" (Whereas clause, PD
101). In view thereof, it is maintained that respondent
Board may continue to grant to "colorum" operators
the benefits of legalization under PD 101, despite the
lapse of its power, after six (6) months, to do so,
without taking punitive measures against the said
operators.
Indeed, a reading of Section 1, PD 101, shows a grant
of powers to the respondent Board to issue provisional
permits as a step towards the legalization of colorum
taxicab operations without the alleged time limitation.
There is nothing in Section 4, cited by the petitioners,
to suggest the expiration of such powers six (6) months
after promulgation of the Decree. Rather, it merely
provides for the withdrawal of the State's waiver of its
right to punish said colorum operators for their illegal
acts. In other words, the cited section declares when
the period of moratorium suspending the relentless
drive to eliminate illegal operators shall end. Clearly,
there is no impediment to the Board's exercise of

jurisdiction under its broad powers under the Public

Service Act to issue certificates of public convenience
to achieve the avowed purpose of PD 101 (Sec. 16a,
Public Service Act, Nov. 7, 1936).
It is a settled principle of law that in determining
whether a board or commission has a certain power,
the authority given should be liberally construed in the
light of the purposes for which it was created, and that
which is incidentally necessary to a full implementation
of the legislative intent should be upheld as being
germane to the law. Necessarily, too, where the end is
required, the appropriate means are deemed given
(Martin, Administrative Law, 1979, p. 46). Thus, as
averred by the respondents:
... [A]ll things considered, the question
is what is the best for the interest of
the public. Whether PD 101 has lost its
effectiveness or not, will in no way
prevent this Board from resolving the
question in the same candor and
spirit that P.D. 101 and LOI 379 were
issued to cope with the multifarious ills
that plague our transport system. ...
(Emphasis supplied) (pp. 91-92, Rollo)
This, the private respondents appreciate, as they make
reference to PD 101, merely to cite the compassion
with which colorum operators were dealt with under
the law. They state that it is "in the same vein and
spirit that this Honorable Board has extended the
Decree of legalization to the operatives of the various
PUJ and PUB services along legislative methods," that
respondents pray for authorization of their colorum
units in actual operation in Metro Manila (Petitions for
Legalization, Annexes E & F, par. 7, pp. 65-79, Rollo).
Anent the petitioners' reliance on the BOT Rules and
Regulations Implementing PD 101 as well as its
Memorandum Circular No. 76-25(a), the BOT itself has
declared:
In line with its duty to rationalize the
transport industry, the Board shall.
from time to time, re- study the public
need for public utilities in any area in
the Philippines for the purpose of reevaluating the policies. (p. 64, Rollo)
Thus, the respondents correctly argue that "as the
need of the public changes and oscillates with the
trends of modern life, so must the Memo Orders issued
by respondent jibe with the dynamic and flexible
standards of public needs. ... Respondent Board is not
supposed to 'tie its hands' on its issued Memo Orders
should public interest demand otherwise" (Answer of
private respondents, p. 121, Rollo).
The fate of the private respondent's petitions is initially
for the Board to determine. From the records of the
case, acceptance of the respondent's applications
appears to be a question correctly within the discretion
of the respondent Board to decide. As a rule, where the
jurisdiction of the BOT to take cognizance of an
application for legalization is settled, the Court enjoins

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the exercise thereof only when there is fraud, abuse of

discretion or error of law. Furthermore, the court does
not interfere, as a rule, with administrative action prior
to its completion or finality . It is only after judicial
review is no longer premature that we ascertain in
proper cases whether the administrative findings are
not in violation of law, whether they are free from fraud
or imposition and whether they find substantial support
from the evidence.
Finally, with respect to the last issue raised by the
petitioners alleging the denial of due process by
respondent Board in granting the provisional permits to
the private respondents and in taking cognizance of
their applications for legalization without notice and
hearing, suffice it to say that PD 101 does not require
such notice or hearing for the grant of temporary
authority . The provisional nature of the authority and
the fact that the primary application shall be given a
full hearing are the safeguards against its abuse. As to
the applications for legalization themselves, the Public
Service Act does enjoin the Board to give notice and
hearing before exercising any of its powers under Sec.
16 thereof. However, the allegations that due process
has been denied are negated by the hearings set by
the Board on the applications as expressed in its orders
resolving the petitions for special permits (Annexes G,
H, I, pp. 80-102, Rollo).

The grounds involved in the petition

are of first impression. It cannot resolve
the issue ex-parte. It needs to hear the
views of other parties who may have
an interest, or whose interest may be
affected by any decision that this Board
may take.
The Board therefore, decides to set the
petition for hearing.
xxx xxx xxx
As to the required notice, it is impossible for the
respondent Board to give personal notice to all parties
who may be interested in the matter, which parties are
unknown to it. Its aforementioned order substantially
complies with the requirement. The petitioners having
been able to timely oppose the petitions in question,
any lack of notice is deemed cured.
WHEREFORE. the petition is hereby DISMISSED for lack
of merit. The questioned orders of the then Board of
Transportation are AFFIRMED.
SO ORDERED.

The Board stated:

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