[G.R. No. 127624.

November 18, 2003]

BPI LEASING CORPORATION, petitioner, vs. THE HONORABLE COURT OF APPEALS, COURT OF
TAX APPEAL AND COMMISSIONER OF INTERNAL REVENUE, respondents.
AZCUNA, J.:

The present petition for review on certiorari assails the decision[1] of the Court of Appeals in CA-G.R. SP
No. 38223 and its subsequent resolution [2]denying the motion for reconsideration. The assailed decision
and resolution affirmed the decision of the Court of Tax Appeals (CTA) which denied petitioner BPI Leasing
Corporations (BLC) claim for tax refund in CTA Case No. 4252.
The facts are not disputed.
BLC is a corporation engaged in the business of leasing properties.[3] For the calendar year 1986, BLC
paid the Commissioner of Internal Revenue (CIR) a total of P1,139,041.49 representing 4% contractors
percentage tax then imposed by Section 205 of the National Internal Revenue Code (NIRC), based on its
gross rentals from equipment leasing for the said year amounting to P27,783,725.42.[4]
On November 10, 1986, the CIR issued Revenue Regulation 19-86. Section 6.2 thereof provided that
finance and leasing companies registered under Republic Act 5980 shall be subject to gross receipt tax
of 5%-3%-1% on actual income earned. This means that companies registered under Republic Act 5980,
such as BLC, are not liable for contractors percentage tax under Section 205 but are, instead, subject to
gross receipts tax under Section 260 (now Section 122) of the NIRC. Since BLC had earlier paid the
aforementioned contractors percentage tax, it re-computed its tax liabilities under the gross receipts tax
and arrived at the amount of P361,924.44.
On April 11, 1988, BLC filed a claim for a refund with the CIR for the amount of P777,117.05,
representing the difference between the P1,139,041.49 it had paid as contractors percentage tax
and P361,924.44 it should have paid for gross receipts tax.[5] Four days later, to stop the running of the
prescriptive period for refunds, petitioner filed a petition for review with the CTA.[6]
In a decision dated May 13, 1994,[7] the CTA dismissed the petition and denied BLCs claim of
refund. The CTA held that Revenue Regulation 19-86, as amended, may only be applied
prospectively such that it only covers all leases written on or after January 1, 1987, as stated
under Section 7 of said revenue regulation:

Section 7. Effectivity These regulations shall take effect on January 1, 1987 and shall be applicable to all
leases written on or after the said date.

The CTA ruled that, since BLCs rental income was all received prior to 1986, it follows that
this was derived from lease transactions prior to January 1, 1987, and hence, not covered by
the revenue regulation.
A motion for reconsideration of the CTAs decision was filed, but was denied in a resolution dated July
26, 1995.[8] BLC then appealed the case to the Court of Appeals, which issued the aforementioned assailed
decision and resolution.[9] Hence, the present petition.
In seeking to reverse the denial of its claim for tax refund, BLC submits that the Court of Appeals and
the CTA erred in not ruling that Revenue Regulation 19-86 may be applied retroactively so as to allow BLCs
claim for a refund of P777,117.05.
Respondents, on the other hand, maintain that the provision on the date of effectivity of Revenue
Regulation 19-86 is clear and unequivocal, leaving no room for interpretation on its prospective
application. In addition, respondents argue that the petition should be dismissed on the ground that the
Verification/Certification of Non-Forum Shopping was signed by the counsel of record and not by BLC,
through a duly authorized representative, in violation of Supreme Court Circular 28-91.
In a resolution dated March 29, 2000,[10] the petition was given due course and the Court required the
parties to file their respective Memoranda.Upon submission of the Memoranda, the issues in this case were
delineated, as follows:[11]
WHETHER THE INSTANT PETITION FOR REVIEW ON CERTIORARI SUBSTANTIALLY COMPLIES WITH SUPREME
COURT CIRCULAR 28-91.
WHETHER REVENUE REGULATION 19-86, AS AMENDED, IS LEGISLATIVE OR INTERPRETATIVE IN
NATURE.
WHETHER REVENUE REGULATION 19-86, AS AMENDED, IS PROSPECTIVE OR RETROACTIVE IN ITS
APPLICATION.
WHETHER PETITIONER, AS FOUND BY THE COURT OF APPEALS, FAILED TO MEET THE QUANTUM OF
EVIDENCE REQUIRED IN REFUND CASES.
WHETHER PETITIONER, AS FOUND BY THE COURT OF APPEALS, IS ESTOPPED FROM CLAIMING ITS PRESENT
REFUND.
As to the first issue, the Court agrees with respondents contention that the petition should be
dismissed outright for failure to comply with Supreme Court Circular 28-91, now incorporated as Section 2
of Rule 42 of the Rules of Court. The records plainly show, and this has not been denied by BLC, that the
certification was executed by counsel who has not been shown to have specific authority to sign the same
for BLC.
 In BA Savings Bank v. Sia,[12] it was held that the certificate of non-forum shopping may be signed, for
and on behalf of a corporation, by a specifically authorized lawyer who has personal knowledge of the facts
required to be disclosed in such document. This ruling, however, does not mean that any lawyer, acting on
behalf of the corporation he is representing, may routinely sign a certification of non-forum shopping. The
Court emphasizes that the lawyer must be specifically authorized in order validly to sign the certification.
Corporations have no powers except those expressly conferred upon them by the Corporation Code
and those that are implied by or are incidental to its existence. These powers are exercised through their
board of directors and/or duly authorized officers and agents. Hence, physical acts, like the signing of
documents, can be performed only by natural persons duly authorized for the purpose by corporate bylaws
or by specific act of the board of directors. [13]
The records are bereft of the authority of BLCs counsel to institute the present petition and to sign the
certification of non-forum shopping. While said counsel may be the counsel of record for BLC, the
representation does not vest upon him the authority to execute the certification on behalf of his
client.There must be a resolution issued by the board of directors that specifically authorizes him to
institute the petition and execute the certification, for it is only then that his actions can be legally binding
upon BLC.
BLC however insists that there was substantial compliance with SC Circular No. 28-91 because the
verification/certification was issued by a counsel who had full personal knowledge that no other petition or
action has been filed or is pending before any other tribunal. According to BLC, said counsels law firm has
handled this case from the very beginning and could very well attest and/or certify to the absence of an
instituted or pending case involving the same or similar issues.
The argument of substantial compliance deserves no merit, given the Courts ruling
in Mendigorin v. Cabantog:[14]

The CA held that there was substantial compliance with the Rules of Court, citing Dimagiba vs. Montalvo, Jr.
[202 SCRA 641] to the effect that a lawyer who assumes responsibility for a client's cause has the duty to
know the entire history of the case, especially if any litigation is commenced. This view, however, no
longer holds authoritative value in the light of Digital Microwave Corporation vs. CA [328 SCRA 286], where
it was held that the reason the certification against forum shopping is required to be accomplished by
petitioner himself is that only the petitioner himself has actual knowledge of whether or not he has
initiated similar actions or proceedings in other courts or tribunals. Even counsel of record may be unaware
of such fact. To our mind, this view is more in accord with the intent and purpose of Revised Circular No.
28-91.

Clearly, therefore, the present petition lacks the proper certification as strictly required by
jurisprudence and the Rules of Court.
Even if the Court were to ignore the aforesaid procedural infirmity, a perusal of the arguments raised
in the petition indicates that a resolution on the merits would nevertheless yield the same outcome.
BLC attempts to convince the Court that Revenue Regulation 19-86 is legislative rather than
interpretative in character and hence, should retroact to the date of effectivity of the law it seeks to
interpret.
****Administrative issuances may be distinguished according to their nature and
substance: legislative and interpretative. A legislative rule is in the matter of subordinate
legislation, designed to implement a primary legislation by providing the details thereof . An
interpretative rule, on the other hand, is designed to provide guidelines to the law which the
administrative agency is in charge of enforcing.[15]
The Court finds the questioned revenue regulation to be legislative in nature. Section 1 of
Revenue Regulation 19-86 plainly states that it was promulgated pursuant to Section 277 of the NIRC.
Section 277 (now Section 244) is an express grant of authority to the Secretary of Finance to promulgate
all needful rules and regulations for the effective enforcement of the provisions of the NIRC. In Paper
Industries Corporation of the Philippines v. Court of Appeals,[16] the Court recognized that the application of
Section 277 calls for none other than the exercise of quasi-legislative or rule-making authority . Verily, it
cannot be disputed that Revenue Regulation 19-86 was issued pursuant to the rule-making
power of the Secretary of Finance, thus making it legislative, and not interpretative as alleged
by BLC.
BLC further posits that, assuming the revenue regulation is legislative in nature, it is invalid for want of
due process as no prior notice, publication and public hearing attended the issuance thereof. To support its
view, BLC cited CIR v. Fortune Tobacco, et al.,[17] wherein the Court nullified a revenue memorandum
circular which reclassified certain cigarettes and subjected them to a higher tax rate, holding it invalid for
lack of notice, publication and public hearing.
The doctrine enunciated in Fortune Tobacco, and reiterated in CIR v. Michel J. Lhuillier Pawnshop, Inc.,
[18]
is that when an administrative rule goes beyond merely providing for the means that can facilitate or
render less cumbersome the implementation of the law and substantially increases the burden of
those governed, it behoves the agency to accord at least to those directly affected a chance to be heard
and, thereafter, to be duly informed, before the issuance is given the force and effect of
law. In Lhuillier and Fortune Tobacco, the Court invalidated the revenue memoranda concerned because
the same increased the tax liabilities of the affected taxpayers without affording them due process. In this
case, Revenue Regulation 19-86 would be beneficial to the taxpayers as they are subjected to lesser
taxes. Petitioner, in fact, is invoking Revenue Regulation 19-86 as the very basis of its claim for refund. If it
were invalid, then petitioner all the more has no right to a refund.
After upholding the validity of Revenue Regulation 19-86, the Court now resolves whether its
application should be prospective or retroactive.
The principle is well entrenched that statutes, including administrative rules and regulations, operate
prospectively only, unless the legislative intent to the contrary is manifest by express terms or by
necessary implication.[19] In the present case, there is no indication that the revenue regulation
may operate retroactively. Furthermore, there is an express provision stating that it shall take effect
on January 1, 1987, and that it shall be applicable to all leases written on or after the said date. Being clear
on its prospective application, it must be given its literal meaning and applied without further
interpretation.[20] Thus, BLC is not in a position to invoke the provisions of Revenue Regulation 19-86 for
lease rentals it received prior to January 1, 1987.
It is also apt to add that tax refunds are in the nature of tax exemptions . As such, these are regarded
as in derogation of sovereign authority and are to be strictly construed against the person or entity
claiming the exemption. The burden of proof is upon him who claims the exemption and he must be able to
justify his claim by the clearest grant under Constitutional or statutory law, and he cannot be permitted to
rely upon vague implications.[21] Nothing that BLC has raised justifies a tax refund.
It is not necessary to rule on the remaining issues.
WHEREFORE, the petition for review is hereby DENIED, and the assailed decision and resolution
of the Court of Appeals are AFFIRMED. No pronouncement as to costs.
SO ORDERED.
G.R. No. 166715 August 14, 2008

ABAKADA GURO PARTY LIST (formerly AASJS) 1 OFFICERS/MEMBERS SAMSON S. ALCANTARA, ED

VINCENT S. ALBANO, ROMEO R. ROBISO, RENE B. GOROSPE and EDWIN R.
SANDOVAL, petitioners,
vs.
HON. CESAR V. PURISIMA, in his capacity as Secretary of Finance, HON. GUILLERMO L.
PARAYNO, JR., in his capacity as Commissioner of the Bureau of Internal Revenue, and HON.
ALBERTO D. LINA, in his Capacity as Commissioner of Bureau of Customs, respondents.

DECISION

CORONA, J.:

This petition for prohibition1 seeks to prevent respondents from implementing and enforcing Republic Act
(RA) 93352 (Attrition Act of 2005).

RA 9335 was enacted to optimize the revenue-generation capability and collection of the Bureau of
Internal Revenue (BIR) and the Bureau of Customs (BOC). The law intends to encourage BIR and BOC
officials and employees to exceed their revenue targets by providing a system of rewards and sanctions
through the creation of a Rewards and Incentives Fund (Fund) and a Revenue Performance Evaluation
Board (Board).3 It covers all officials and employees of the BIR and the BOC with at least six
months of service, regardless of employment status.4

The Fund is sourced from the collection of the BIR and the BOC in excess of their revenue targets for the
year, as determined by the Development Budget and Coordinating Committee (DBCC). Any incentive or
reward is taken from the fund and allocated to the BIR and the BOC in proportion to their contribution in
the excess collection of the targeted amount of tax revenue.5

The Boards in the BIR and the BOC are composed of the Secretary of the Department of Finance (DOF) or
his/her Undersecretary, the Secretary of the Department of Budget and Management (DBM) or his/her
Undersecretary, the Director General of the National Economic Development Authority (NEDA) or his/her
Deputy Director General, the Commissioners of the BIR and the BOC or their Deputy Commissioners, two
representatives from the rank-and-file employees and a representative from the officials nominated by
their recognized organization.6

Each Board has the duty to (1) prescribe the rules and guidelines for the allocation, distribution and
release of the Fund; (2) set criteria and procedures for removing from the service officials and employees
whose revenue collection falls short of the target; (3) terminate personnel in accordance with the criteria
adopted by the Board; (4) prescribe a system for performance evaluation; (5) perform other functions,
including the issuance of rules and regulations and (6) submit an annual report to Congress. 7

The DOF, DBM, NEDA, BIR, BOC and the Civil Service Commission (CSC) were tasked to promulgate and
issue the implementing rules and regulations of RA 9335, 8 to be approved by a Joint Congressional
Oversight Committee created for such purpose. 9

Petitioners, invoking their right as taxpayers filed this petition challenging the
constitutionality of RA 9335, a tax reform legislation. They contend that, by establishing a system
of rewards and incentives, the law "transform[s] the officials and employees of the BIR and the BOC into
mercenaries and bounty hunters" as they will do their best only in consideration of such rewards. Thus, the
system of rewards and incentives invites corruption and undermines the constitutionally mandated duty of
these officials and employees to serve the people with utmost responsibility, integrity, loyalty and
efficiency.

Petitioners also claim that limiting the scope of the system of rewards and incentives only to officials and
employees of the BIR and the BOC violates the constitutional guarantee of equal protection. There is no
valid basis for classification or distinction as to why such a system should not apply to officials and
employees of all other government agencies.

In addition, petitioners assert that the law unduly delegates the power to fix revenue targets to the
President as it lacks a sufficient standard on that matter. While Section 7(b) and (c) of RA 9335 provides
that BIR and BOC officials may be dismissed from the service if their revenue collections fall short of the
target by at least 7.5%, the law does not, however, fix the revenue targets to be achieved. Instead, the
fixing of revenue targets has been delegated to the President without sufficient standards. It will therefore
be easy for the President to fix an unrealistic and unattainable target in order to dismiss BIR or BOC
personnel.

**Finally, petitioners assail the creation of a congressional oversight committee on the ground
that it violates the doctrine of separation of powers. While the legislative function is deemed
accomplished and completed upon the enactment and approval of the law, the creation of the
congressional oversight committee permits legislative participation in the implementation and
enforcement of the law.

In their comment, respondents, through the Office of the Solicitor General, question the petition for
being premature as there is no actual case or controversy yet. Petitioners have not asserted any right or
claim that will necessitate the exercise of this Courts jurisdiction. Nevertheless, respondents acknowledge
that public policy requires the resolution of the constitutional issues involved in this case. They assert that
the allegation that the reward system will breed mercenaries is mere speculation and does not suffice to
invalidate the law. Seen in conjunction with the declared objective of RA 9335, the law validly classifies the
BIR and the BOC because the functions they perform are distinct from those of the other government
agencies and instrumentalities. Moreover, the law provides a sufficient standard that will guide the
executive in the implementation of its provisions. Lastly, the creation of the congressional oversight
committee under the law enhances, rather than violates, separation of powers. It ensures the fulfillment of
the legislative policy and serves as a check to any over-accumulation of power on the part of the executive
and the implementing agencies.

After a careful consideration of the conflicting contentions of the parties, the Court finds that
petitioners have failed to overcome the presumption of constitutionality in favor of RA 9335,
except as shall hereafter be discussed.

Actual Case And Ripeness

An actual case or controversy involves a conflict of legal rights, an assertion of opposite legal
claims susceptible of judicial adjudication. 10 A closely related requirement is ripeness, that is,
the question must be ripe for adjudication. And a constitutional question is ripe for
adjudication when the governmental act being challenged has a direct adverse effect on the
individual challenging it.11 Thus, to be ripe for judicial adjudication, the petitioner must show a
personal stake in the outcome of the case or an injury to himself that can be redressed by a
favorable decision of the Court.12

In this case, aside from the general claim that the dispute has ripened into a judicial controversy by the
mere enactment of the law even without any further overt act, 13 petitioners fail either to assert any
specific and concrete legal claim or to demonstrate any direct adverse effect of the law on them . They are
unable to show a personal stake in the outcome of this case or an injury to themselves. On this account,
their petition is procedurally infirm.

This notwithstanding, public interest requires the resolution of the constitutional issues raised by
petitioners. The grave nature of their allegations tends to cast a cloud on the presumption of
constitutionality in favor of the law. And where an action of the legislative branch is alleged to have
infringed the Constitution, it becomes not only the right but in fact the duty of the judiciary to settle the
dispute.14

Accountability of
Public Officers

Section 1, Article 11 of the Constitution states:

Sec. 1. Public office is a public trust. Public officers and employees must at all times be accountable to the
people, serve them with utmost responsibility, integrity, loyalty, and efficiency, act with patriotism, and
justice, and lead modest lives.

Public office is a public trust. It must be discharged by its holder not for his own personal gain but for the
benefit of the public for whom he holds it in trust. By demanding accountability and service with
responsibility, integrity, loyalty, efficiency, patriotism and justice, all government officials and employees
have the duty to be responsive to the needs of the people they are called upon to serve.

Public officers enjoy the presumption of regularity in the performance of their duties. This presumption
necessarily obtains in favor of BIR and BOC officials and employees. RA 9335 operates on the basis thereof
and reinforces it by providing a system of rewards and sanctions for the purpose of encouraging the
officials and employees of the BIR and the BOC to exceed their revenue targets and optimize their
revenue-generation capability and collection. 15

The presumption is disputable but proof to the contrary is required to rebut it. It cannot be overturned by
mere conjecture or denied in advance (as petitioners would have the Court do) specially in this case where
it is an underlying principle to advance a declared public policy.

Petitioners claim that the implementation of RA 9335 will turn BIR and BOC officials and employees into
"bounty hunters and mercenaries" is not only without any factual and legal basis; it is also purely
speculative.
A law enacted by Congress enjoys the strong presumption of constitutionality. To justify its nullification,
there must be a clear and unequivocal breach of the Constitution, not a doubtful and equivocal one. 16 To
invalidate RA 9335 based on petitioners baseless supposition is an affront to the wisdom not only of the
legislature that passed it but also of the executive which approved it.

Public service is its own reward. Nevertheless, public officers may by law be rewarded for exemplary and
exceptional performance. A system of incentives for exceeding the set expectations of a public office is not
anathema to the concept of public accountability. In fact, it recognizes and reinforces dedication to duty,
industry, efficiency and loyalty to public service of deserving government personnel.

In United States v. Matthews,17 the U.S. Supreme Court validated a law which awards to officers of the
customs as well as other parties an amount not exceeding one-half of the net proceeds of forfeitures in
violation of the laws against smuggling. Citing Dorsheimer v. United States,18 the U.S. Supreme Court said:

The offer of a portion of such penalties to the collectors is to stimulate and reward their zeal and
industry in detecting fraudulent attempts to evade payment of duties and taxes.

In the same vein, employees of the BIR and the BOC may by law be entitled to a reward when, as a
consequence of their zeal in the enforcement of tax and customs laws, they exceed their revenue targets.
In addition, RA 9335 establishes safeguards to ensure that the reward will not be claimed if it will be either
the fruit of "bounty hunting or mercenary activity" or the product of the irregular performance of official
duties. One of these precautionary measures is embodied in Section 8 of the law:

SEC. 8. Liability of Officials, Examiners and Employees of the BIR and the BOC. The officials,
examiners, and employees of the [BIR] and the [BOC] who violate this Act or who are guilty of
negligence, abuses or acts of malfeasance or misfeasance or fail to exercise extraordinary diligence
in the performance of their duties shall be held liable for any loss or injury suffered by any business
establishment or taxpayer as a result of such violation, negligence, abuse, malfeasance,
misfeasance or failure to exercise extraordinary diligence.

Equal Protection

Equality guaranteed under the equal protection clause is equality under the same conditions and among
persons similarly situated; it is equality among equals, not similarity of treatment of persons who are
classified based on substantial differences in relation to the object to be accomplished.19When things or
persons are different in fact or circumstance, they may be treated in law differently. In Victoriano v.
Elizalde Rope Workers Union,20 this Court declared:

The guaranty of equal protection of the laws is not a guaranty of equality in the application of the laws
upon all citizens of the [S]tate. It is not, therefore, a requirement, in order to avoid the constitutional
prohibition against inequality, that every man, woman and child should be affected alike by a statute.
Equality of operation of statutes does not mean indiscriminate operation on persons merely as such, but
on persons according to the circumstances surrounding them. It guarantees equality, not identity of
rights. The Constitution does not require that things which are different in fact be treated in
law as though they were the same. The equal protection clause does not forbid discrimination
as to things that are different. It does not prohibit legislation which is limited either in the
object to which it is directed or by the territory within which it is to operate.

The equal protection of the laws clause of the Constitution allows classification. Classification in law, as in
the other departments of knowledge or practice, is the grouping of things in speculation or practice
because they agree with one another in certain particulars. A law is not invalid because of simple
inequality. The very idea of classification is that of inequality, so that it goes without saying that the mere
fact of inequality in no manner determines the matter of constitutionality. All that is required of a valid
classification is that it be reasonable, which means that the classification should be based on
substantial distinctions which make for real differences, that it must be germane to the
purpose of the law; that it must not be limited to existing conditions only; and that it must
apply equally to each member of the class. This Court has held that the standard is satisfied if the
classification or distinction is based on a reasonable foundation or rational basis and is not
palpably arbitrary.

In the exercise of its power to make classifications for the purpose of enacting laws over matters within its
jurisdiction, the state is recognized as enjoying a wide range of discretion. It is not necessary that the
classification be based on scientific or marked differences of things or in their relation. Neither is it
necessary that the classification be made with mathematical nicety. Hence, legislative classification may in
many cases properly rest on narrow distinctions, for the equal protection guaranty does not preclude the
legislature from recognizing degrees of evil or harm, and legislation is addressed to evils as they may
appear.21 (emphasis supplied)

The equal protection clause recognizes a valid classification, that is, a classification that has a reasonable
foundation or rational basis and not arbitrary.22 With respect to RA 9335, its expressed public policy is the
optimization of the revenue-generation capability and collection of the BIR and the BOC. 23 Since the
subject of the law is the revenue- generation capability and collection of the BIR and the BOC, the
incentives and/or sanctions provided in the law should logically pertain to the said agencies. Moreover, the
law concerns only the BIR and the BOC because they have the common distinct primary function of
generating revenues for the national government through the collection of taxes, customs duties, fees and
charges.

The BIR performs the following functions:

Sec. 18. The Bureau of Internal Revenue. The Bureau of Internal Revenue, which shall be headed
by and subject to the supervision and control of the Commissioner of Internal Revenue, who shall be
appointed by the President upon the recommendation of the Secretary [of the DOF], shall have the
following functions:

(1) Assess and collect all taxes, fees and charges and account for all revenues collected;

(2) Exercise duly delegated police powers for the proper performance of its functions and duties;

(3) Prevent and prosecute tax evasions and all other illegal economic activities;

(4) Exercise supervision and control over its constituent and subordinate units; and

(5) Perform such other functions as may be provided by law. 24

xxx xxx xxx (emphasis supplied)

On the other hand, the BOC has the following functions:

Sec. 23. The Bureau of Customs. The Bureau of Customs which shall be headed and subject to the
management and control of the Commissioner of Customs, who shall be appointed by the President
upon the recommendation of the Secretary[of the DOF] and hereinafter referred to as
Commissioner, shall have the following functions:

(1) Collect custom duties, taxes and the corresponding fees, charges and penalties;

(2) Account for all customs revenues collected;

(3) Exercise police authority for the enforcement of tariff and customs laws;

(4) Prevent and suppress smuggling, pilferage and all other economic frauds within all ports of
entry;

(5) Supervise and control exports, imports, foreign mails and the clearance of vessels and aircrafts
in all ports of entry;

(6) Administer all legal requirements that are appropriate;

(7) Prevent and prosecute smuggling and other illegal activities in all ports under its jurisdiction;

(8) Exercise supervision and control over its constituent units;

(9) Perform such other functions as may be provided by law. 25

xxx xxx xxx (emphasis supplied)

Both the BIR and the BOC are bureaus under the DOF. They principally perform the special function of
being the instrumentalities through which the State exercises one of its great inherent functions taxation.
Indubitably, such substantial distinction is germane and intimately related to the purpose of
the law. Hence, the classification and treatment accorded to the BIR and the BOC under RA
9335 fully satisfy the demands of equal protection.

Undue Delegation

***Two tests determine the validity of delegation of legislative power: (1) the completeness
test and (2) the sufficient standard test. A law is complete when it sets forth therein the policy
to be executed, carried out or implemented by the delegate. 26 It lays down a sufficient
standard when it provides adequate guidelines or limitations in the law to map out the
boundaries of the delegates authority and prevent the delegation from running riot .27 To be
sufficient, the standard must specify the limits of the delegates authority, announce the
legislative policy and identify the conditions under which it is to be implemented.28
RA 9335 adequately states the policy and standards to guide the President in fixing revenue
targets and the implementing agencies in carrying out the provisions of the law. Section 2 spells
out the policy of the law:

SEC. 2. Declaration of Policy. It is the policy of the State to optimize the revenue-generation capability
and collection of the Bureau of Internal Revenue (BIR) and the Bureau of Customs (BOC) by providing for a
system of rewards and sanctions through the creation of a Rewards and Incentives Fund and a Revenue
Performance Evaluation Board in the above agencies for the purpose of encouraging their officials and
employees to exceed their revenue targets.

Section 4 "canalized within banks that keep it from overflowing" 29 the delegated power to the President to
fix revenue targets:

SEC. 4. Rewards and Incentives Fund. A Rewards and Incentives Fund, hereinafter referred to as the Fund,
is hereby created, to be sourced from the collection of the BIR and the BOC in excess of their respective
revenue targets of the year, as determined by the Development Budget and Coordinating
Committee (DBCC), in the following percentages:

Excess of Collection of the Percent (%) of the Excess Collection to

Excess the Revenue Targets Accrue to the Fund
30% or below 15%
More than 30% 15% of the first 30% plus 20% of the
remaining excess

The Fund shall be deemed automatically appropriated the year immediately following the year when the
revenue collection target was exceeded and shall be released on the same fiscal year.

Revenue targets shall refer to the original estimated revenue collection expected of the BIR
and the BOC for a given fiscal year as stated in the Budget of Expenditures and Sources of
Financing (BESF) submitted by the President to Congress. The BIR and the BOC shall submit to the
DBCC the distribution of the agencies revenue targets as allocated among its revenue districts in the case
of the BIR, and the collection districts in the case of the BOC.

Revenue targets are based on the original estimated revenue collection expected respectively of the BIR
and the BOC for a given fiscal year as approved by the DBCC and stated in the BESF submitted by the
President to Congress.30 Thus, the determination of revenue targets does not rest solely on the
President as it also undergoes the scrutiny of the DBCC.

On the other hand, Section 7 specifies the limits of the Boards authority and identifies the conditions
under which officials and employees whose revenue collection falls short of the target by at least 7.5%
may be removed from the service:

SEC. 7. Powers and Functions of the Board. The Board in the agency shall have the following
powers and functions:

(b) To set the criteria and procedures for removing from service officials and employees whose
revenue collection falls short of the target by at least seven and a half percent (7.5%), with
due consideration of all relevant factors affecting the level of collection as provided in the rules
and regulations promulgated under this Act, subject to civil service laws, rules and regulations and
compliance with substantive and procedural due process: Provided, That the following exemptions
shall apply:

1. Where the district or area of responsibility is newly-created, not exceeding two years in operation, as
has no historical record of collection performance that can be used as basis for evaluation; and

2. Where the revenue or customs official or employee is a recent transferee in the middle of the period
under consideration unless the transfer was due to nonperformance of revenue targets or potential
nonperformance of revenue targets: Provided, however, That when the district or area of responsibility
covered by revenue or customs officials or employees has suffered from economic difficulties brought
about by natural calamities or force majeure or economic causes as may be determined by the Board,
termination shall be considered only after careful and proper review by the Board.

(c) To terminate personnel in accordance with the criteria adopted in the preceding paragraph: Provided,
That such decision shall be immediately executory: Provided, further, That the application of the
criteria for the separation of an official or employee from service under this Act shall be
without prejudice to the application of other relevant laws on accountability of public officers
and employees, such as the Code of Conduct and Ethical Standards of Public Officers and
Employees and the Anti-Graft and Corrupt Practices Act;
Clearly, RA 9335 in no way violates the security of tenure of officials and employees of the BIR
and the BOC. The guarantee of security of tenure only means that an employee cannot be
dismissed from the service for causes other than those provided by law and only after due
process is accorded the employee.31 In the case of RA 9335, it lays down a reasonable yardstick
for removal (when the revenue collection falls short of the target by at least 7.5%) with due
consideration of all relevant factors affecting the level of collection. This standard is analogous to
inefficiency and incompetence in the performance of official duties, a ground for disciplinary action under
civil service laws.32 The action for removal is also subject to civil service laws, rules and regulations and
compliance with substantive and procedural due process.

***At any rate, this Court has recognized the following as sufficient standards: "public interest," "justice
and equity," "public convenience and welfare" and "simplicity, economy and welfare." 33 In this case, the
declared policy of optimization of the revenue-generation capability and collection of the BIR and
the BOC is infused with public interest.

Separation Of Powers

Section 12 of RA 9335 provides:

SEC. 12. Joint Congressional Oversight Committee. There is hereby created a Joint Congressional
Oversight Committee composed of seven Members from the Senate and seven Members from the House of
Representatives. The Members from the Senate shall be appointed by the Senate President, with at least
two senators representing the minority. The Members from the House of Representatives shall be
appointed by the Speaker with at least two members representing the minority. After the Oversight
Committee will have approved the implementing rules and regulations (IRR) it shall thereafter
become functus officio and therefore cease to exist.

***The Joint Congressional Oversight Committee in RA 9335 was created for the purpose of
approving the implementing rules and regulations (IRR) formulated by the DOF, DBM, NEDA,
BIR, BOC and CSC. On May 22, 2006, it approved the said IRR. From then on, it became functus
officio and ceased to exist. Hence, the issue of its alleged encroachment on the executive
function of implementing and enforcing the law may be considered moot and academic.

This notwithstanding, this might be as good a time as any for the Court to confront the issue of the
constitutionality of the Joint Congressional Oversight Committee created under RA 9335 (or other similar
laws for that matter).

The scholarly discourse of Mr. Justice (now Chief Justice) Puno on the concept of congressional
oversight in Macalintal v. Commission on Elections34 is illuminating:

Concept and bases of congressional oversight

***Broadly defined, the power of oversight embraces all activities undertaken by Congress to
enhance its understanding of and influence over the implementation of legislation it has
enacted. Clearly, oversight concerns post-enactment measures undertaken by Congress: (a) to
monitor bureaucratic compliance with program objectives, (b) to determine whether agencies
are properly administered, (c) to eliminate executive waste and dishonesty, (d) to prevent
executive usurpation of legislative authority, and (d) to assess executive conformity with the
congressional perception of public interest.

The power of oversight has been held to be intrinsic in the grant of legislative power itself and
integral to the checks and balances inherent in a democratic system of government. x x x x x x x x
x

Over the years, Congress has invoked its oversight power with increased frequency to check the perceived
"exponential accumulation of power" by the executive branch. By the beginning of the 20 th century,
Congress has delegated an enormous amount of legislative authority to the executive branch and the
administrative agencies. Congress, thus, uses its oversight power to make sure that the administrative
agencies perform their functions within the authority delegated to them. x x x x x x x x x

Categories of congressional oversight functions

The acts done by Congress purportedly in the exercise of its oversight powers may be divided
into three categories, namely: scrutiny, investigation and supervision.

a. Scrutiny

Congressional scrutiny implies a lesser intensity and continuity of attention to administrative

operations. Its primary purpose is to determine economy and efficiency of the operation of
government activities. In the exercise of legislative scrutiny, Congress may request information and
report from the other branches of government. It can give recommendations or pass resolutions for
consideration of the agency involved.

b. Congressional investigation

While congressional scrutiny is regarded as a passive process of looking at the facts that are readily
available, congressional investigation involves a more intense digging of facts. The power of Congress to
conduct investigation is recognized by the 1987 Constitution under section 21, Article VI, xxx xxx
xxx

c. Legislative supervision

The third and most encompassing form by which Congress exercises its oversight power is thru legislative
supervision. "Supervision" connotes a continuing and informed awareness on the part of a congressional
committee regarding executive operations in a given administrative area. While both congressional
scrutiny and investigation involve inquiry into past executive branch actions in order to influence future
executive branch performance, congressional supervision allows Congress to scrutinize the exercise of
delegated law-making authority, and permits Congress to retain part of that delegated authority.

Congress exercises supervision over the executive agencies through its veto power. It typically utilizes
veto provisions when granting the President or an executive agency the power to promulgate regulations
with the force of law. These provisions require the President or an agency to present the proposed
regulations to Congress, which retains a "right" to approve or disapprove any regulation before it takes
effect. Such legislative veto provisions usually provide that a proposed regulation will become a law after
the expiration of a certain period of time, only if Congress does not affirmatively disapprove of the
regulation in the meantime. Less frequently, the statute provides that a proposed regulation will become
law if Congress affirmatively approves it.

Supporters of legislative veto stress that it is necessary to maintain the balance of power between the
legislative and the executive branches of government as it offers lawmakers a way to delegate vast power
to the executive branch or to independent agencies while retaining the option to cancel particular exercise
of such power without having to pass new legislation or to repeal existing law. They contend that this
arrangement promotes democratic accountability as it provides legislative check on the activities of
unelected administrative agencies. One proponent thus explains:

It is too late to debate the merits of this delegation policy: the policy is too deeply embedded in our law
and practice. It suffices to say that the complexities of modern government have often led Congress-
whether by actual or perceived necessity- to legislate by declaring broad policy goals and general
statutory standards, leaving the choice of policy options to the discretion of an executive officer. Congress
articulates legislative aims, but leaves their implementation to the judgment of parties who may or may
not have participated in or agreed with the development of those aims. Consequently, absent safeguards,
in many instances the reverse of our constitutional scheme could be effected: Congress proposes, the
Executive disposes. One safeguard, of course, is the legislative power to enact new legislation or to change
existing law. But without some means of overseeing post enactment activities of the executive branch,
Congress would be unable to determine whether its policies have been implemented in accordance with
legislative intent and thus whether legislative intervention is appropriate.

Its opponents, however, criticize the legislative veto as undue encroachment upon the executive
prerogatives. They urge that any post-enactment measures undertaken by the legislative branch
should be limited to scrutiny and investigation; any measure beyond that would undermine
the separation of powers guaranteed by the Constitution. They contend that legislative veto
constitutes an impermissible evasion of the Presidents veto authority and intrusion into the powers vested
in the executive or judicial branches of government. Proponents counter that legislative veto enhances
separation of powers as it prevents the executive branch and independent agencies from accumulating too
much power. They submit that reporting requirements and congressional committee investigations allow
Congress to scrutinize only the exercise of delegated law-making authority. They do not allow Congress to
review executive proposals before they take effect and they do not afford the opportunity for ongoing and
binding expressions of congressional intent. In contrast, legislative veto permits Congress to participate
prospectively in the approval or disapproval of "subordinate law" or those enacted by the executive
branch pursuant to a delegation of authority by Congress. They further argue that legislative veto "is a
necessary response by Congress to the accretion of policy control by forces outside its chambers." In an
era of delegated authority, they point out that legislative veto "is the most efficient means Congress has
yet devised to retain control over the evolution and implementation of its policy as declared by statute."

In Immigration and Naturalization Service v. Chadha, the U.S. Supreme Court resolved the validity of
legislative veto provisions. The case arose from the order of the immigration judge suspending the
deportation of Chadha pursuant to 244(c)(1) of the Immigration and Nationality Act. The United States
House of Representatives passed a resolution vetoing the suspension pursuant to 244(c)(2) authorizing
either House of Congress, by resolution, to invalidate the decision of the executive branch to allow a
particular deportable alien to remain in the United States. The immigration judge reopened the deportation
proceedings to implement the House order and the alien was ordered deported. The Board of Immigration
Appeals dismissed the aliens appeal, holding that it had no power to declare unconstitutional an act of
Congress. The United States Court of Appeals for Ninth Circuit held that the House was without
constitutional authority to order the aliens deportation and that 244(c)(2) violated the constitutional
doctrine on separation of powers.

On appeal, the U.S. Supreme Court declared 244(c)(2) unconstitutional. But the Court shied away
from the issue of separation of powers and instead held that the provision violates the presentment
clause and bicameralism. It held that the one-house veto was essentially legislative in purpose and effect.
As such, it is subject to the procedures set out in Article I of the Constitution requiring the passage by a
majority of both Houses and presentment to the President. x x x x x x x x x

Two weeks after the Chadha decision, the Court upheld, in memorandum decision, two lower court
decisions invalidating the legislative veto provisions in the Natural Gas Policy Act of 1978 and the Federal
Trade Commission Improvement Act of 1980. Following this precedence, lower courts invalidated statutes
containing legislative veto provisions although some of these provisions required the approval of both
Houses of Congress and thus met the bicameralism requirement of Article I. Indeed, some of these veto
provisions were not even exercised.35(emphasis supplied)

In Macalintal, given the concept and configuration of the power of congressional oversight and considering
the nature and powers of a constitutional body like the Commission on Elections, the Court struck down
the provision in RA 9189 (The Overseas Absentee Voting Act of 2003) creating a Joint Congressional
Committee. The committee was tasked not only to monitor and evaluate the implementation of the said
law but also to review, revise, amend and approve the IRR promulgated by the Commission on Elections.
The Court held that these functions infringed on the constitutional independence of the Commission on
Elections.36

With this backdrop, it is clear that congressional oversight is not unconstitutional per se, meaning, it
neither necessarily constitutes an encroachment on the executive power to implement laws nor
undermines the constitutional separation of powers. Rather, it is integral to the checks and balances
inherent in a democratic system of government. It may in fact even enhance the separation of powers as it
prevents the over-accumulation of power in the executive branch.

However, to forestall the danger of congressional encroachment "beyond the legislative sphere," the
Constitution imposes two basic and related constraints on Congress. 37 It may not vest itself, any of its
committees or its members with either executive or judicial power. 38 And, when it exercises its legislative
power, it must follow the "single, finely wrought and exhaustively considered, procedures" specified under
the Constitution,39 including the procedure for enactment of laws and presentment.

Thus, any post-enactment congressional measure such as this should be limited to scrutiny
and investigation. In particular, congressional oversight must be confined to the following:

(1) scrutiny based primarily on Congress power of appropriation and the budget hearings
conducted in connection with it, its power to ask heads of departments to appear before and
be heard by either of its Houses on any matter pertaining to their departments and its power
of confirmation40 and

(2) investigation and monitoring 41 of the implementation of laws pursuant to the power of
Congress to conduct inquiries in aid of legislation.42

Any action or step beyond that will undermine the separation of powers guaranteed by the Constitution.
Legislative vetoes fall in this class.

Legislative veto is a statutory provision requiring the President or an administrative agency to present
the proposed implementing rules and regulations of a law to Congress which, by itself or through a
committee formed by it, retains a "right" or "power" to approve or disapprove such regulations before they
take effect. As such, a legislative veto in the form of a congressional oversight committee is in the form of
an inward-turning delegation designed to attach a congressional leash (other than through scrutiny and
investigation) to an agency to which Congress has by law initially delegated broad powers. 43 It radically
changes the design or structure of the Constitutions diagram of power as it entrusts to Congress a direct
role in enforcing, applying or implementing its own laws.44

Congress has two options when enacting legislation to define national policy within the broad horizons of
its legislative competence.45 It can itself formulate the details or it can assign to the executive branch the
responsibility for making necessary managerial decisions in conformity with those standards. 46 In the latter
case, the law must be complete in all its essential terms and conditions when it leaves the hands of the
legislature.47 Thus, what is left for the executive branch or the concerned administrative agency when it
formulates rules and regulations implementing the law is to fill up details (supplementary rule-making) or
ascertain facts necessary to bring the law into actual operation (contingent rule-making). 48

Administrative regulations enacted by administrative agencies to implement and interpret the law which
they are entrusted to enforce have the force of law and are entitled to respect. 49 Such rules and regulations
partake of the nature of a statute 50 and are just as binding as if they have been written in the statute itself.
As such, they have the force and effect of law and enjoy the presumption of constitutionality and legality
until they are set aside with finality in an appropriate case by a competent court.51 Congress, in the guise
of assuming the role of an overseer, may not pass upon their legality by subjecting them to its stamp of
approval without disturbing the calculated balance of powers established by the Constitution. In
exercising discretion to approve or disapprove the IRR based on a determination of whether or
not they conformed with the provisions of RA 9335, Congress arrogated judicial power unto
itself, a power exclusively vested in this Court by the Constitution.

Considered Opinion of
Mr. Justice Dante O. Tinga

Moreover, the requirement that the implementing rules of a law be subjected to approval by Congress as a
condition for their effectivity violates the cardinal constitutional principles of bicameralism and the rule on
presentment.52

Section 1, Article VI of the Constitution states:

Section 1. The legislative power shall be vested in the Congress of the Philippines which
shall consist of a Senate and a House of Representatives, except to the extent reserved to
the people by the provision on initiative and referendum. (emphasis supplied)

Legislative power (or the power to propose, enact, amend and repeal laws) 53 is vested in Congress which
consists of two chambers, the Senate and the House of Representatives. A valid exercise of legislative
power requires the act of both chambers. Corrollarily, it can be exercised neither solely by one of the two
chambers nor by a committee of either or both chambers. Thus, assuming the validity of a legislative veto,
both a single-chamber legislative veto and a congressional committee legislative veto are invalid.

Additionally, Section 27(1), Article VI of the Constitution provides:

Section 27. (1) Every bill passed by the Congress shall, before it becomes a law, be
presented to the President. If he approves the same, he shall sign it, otherwise, he shall veto it
and return the same with his objections to the House where it originated, which shall enter the
objections at large in its Journal and proceed to reconsider it. If, after such reconsideration, two-
thirds of all the Members of such House shall agree to pass the bill, it shall be sent, together with
the objections, to the other House by which it shall likewise be reconsidered, and if approved by
two-thirds of all the Members of that House, it shall become a law. In all such cases, the votes of
each House shall be determined by yeas or nays, and the names of the members voting for or
against shall be entered in its Journal. The President shall communicate his veto of any bill to the
House where it originated within thirty days after the date of receipt thereof; otherwise, it shall
become a law as if he had signed it. (emphasis supplied)

Every bill passed by Congress must be presented to the President for approval or veto. In the absence of
presentment to the President, no bill passed by Congress can become a law. In this sense, law-making
under the Constitution is a joint act of the Legislature and of the Executive. Assuming that legislative veto
is a valid legislative act with the force of law, it cannot take effect without such presentment even if
approved by both chambers of Congress.

In sum, two steps are required before a bill becomes a law . First, it must be approved by both Houses of
Congress.54 Second, it must be presented to and approved by the President. 55 As summarized by Justice
Isagani Cruz56 and Fr. Joaquin G. Bernas, S.J.57, the following is the procedure for the approval of bills:

A bill is introduced by any member of the House of Representatives or the Senate except for some
measures that must originate only in the former chamber.

The first reading involves only a reading of the number and title of the measure and its referral by
the Senate President or the Speaker to the proper committee for study.

The bill may be "killed" in the committee or it may be recommended for approval, with or without
amendments, sometimes after public hearings are first held thereon. If there are other bills of the
same nature or purpose, they may all be consolidated into one bill under common authorship or as
a committee bill.

Once reported out, the bill shall be calendared for second reading. It is at this stage that the bill is
read in its entirety, scrutinized, debated upon and amended when desired. The second reading is
the most important stage in the passage of a bill.

The bill as approved on second reading is printed in its final form and copies thereof are distributed
at least three days before the third reading. On the third reading, the members merely register their
votes and explain them if they are allowed by the rules. No further debate is allowed.
 Once the bill passes third reading, it is sent to the other chamber, where it will also undergo the
three readings. If there are differences between the versions approved by the two chambers, a
conference committee58 representing both Houses will draft a compromise measure that if ratified
by the Senate and the House of Representatives will then be submitted to the President for his
consideration.

The bill is enrolled when printed as finally approved by the Congress, thereafter authenticated with
the signatures of the Senate President, the Speaker, and the Secretaries of their respective
chambers59

The Presidents role in law-making.

The final step is submission to the President for approval. Once approved, it takes effect as law after
the required publication.60

Where Congress delegates the formulation of rules to implement the law it has enacted pursuant to
sufficient standards established in the said law, the law must be complete in all its essential terms and
conditions when it leaves the hands of the legislature. And it may be deemed to have left the hands of the
legislature when it becomes effective because it is only upon effectivity of the statute that legal rights and
obligations become available to those entitled by the language of the statute. Subject to the indispensable
requisite of publication under the due process clause, 61 the determination as to when a law takes effect is
wholly the prerogative of Congress. 62 As such, it is only upon its effectivity that a law may be executed and
the executive branch acquires the duties and powers to execute the said law. Before that point, the role of
the executive branch, particularly of the President, is limited to approving or vetoing the law. 63

***From the moment the law becomes effective, any provision of law that empowers Congress
or any of its members to play any role in the implementation or enforcement of the law
violates the principle of separation of powers and is thus unconstitutional. Under this principle, a
provision that requires Congress or its members to approve the implementing rules of a law after it has
already taken effect shall be unconstitutional, as is a provision that allows Congress or its members to
overturn any directive or ruling made by the members of the executive branch charged with the
implementation of the law.

Following this rationale, Section 12 of RA 9335 should be struck down as unconstitutional. While there may
be similar provisions of other laws that may be invalidated for failure to pass this standard, the Court
refrains from invalidating them wholesale but will do so at the proper time when an appropriate case
assailing those provisions is brought before us.64

The next question to be resolved is: what is the effect of the unconstitutionality of Section 12 of RA 9335
on the other provisions of the law? Will it render the entire law unconstitutional? No.

Section 13 of RA 9335 provides:

SEC. 13. Separability Clause. If any provision of this Act is declared invalid by a competent court,
the remainder of this Act or any provision not affected by such declaration of invalidity shall remain
in force and effect.

In Tatad v. Secretary of the Department of Energy,65 the Court laid down the following rules:

The general rule is that where part of a statute is void as repugnant to the Constitution, while
another part is valid, the valid portion, if separable from the invalid, may stand and be enforced.
The presence of a separability clause in a statute creates the presumption that the legislature
intended separability, rather than complete nullity of the statute. To justify this result, the valid
portion must be so far independent of the invalid portion that it is fair to presume that the
legislature would have enacted it by itself if it had supposed that it could not constitutionally enact
the other. Enough must remain to make a complete, intelligible and valid statute, which carries out
the legislative intent. x x x

The exception to the general rule is that when the parts of a statute are so mutually dependent and
connected, as conditions, considerations, inducements, or compensations for each other, as to
warrant a belief that the legislature intended them as a whole, the nullity of one part will vitiate the
rest. In making the parts of the statute dependent, conditional, or connected with one another, the
legislature intended the statute to be carried out as a whole and would not have enacted it if one
part is void, in which case if some parts are unconstitutional, all the other provisions thus
dependent, conditional, or connected must fall with them.

The separability clause of RA 9335 reveals the intention of the legislature to isolate and detach any invalid
provision from the other provisions so that the latter may continue in force and effect. The valid portions
can stand independently of the invalid section. Without Section 12, the remaining provisions still constitute
a complete, intelligible and valid law which carries out the legislative intent to optimize the revenue-
generation capability and collection of the BIR and the BOC by providing for a system of rewards and
sanctions through the Rewards and Incentives Fund and a Revenue Performance Evaluation Board.

To be effective, administrative rules and regulations must be published in full if their purpose is to enforce
or implement existing law pursuant to a valid delegation. The IRR of RA 9335 were published on May 30,
2006 in two newspapers of general circulation 66 and became effective 15 days thereafter.67 Until and
unless the contrary is shown, the IRR are presumed valid and effective even without the approval of the
Joint Congressional Oversight Committee.

WHEREFORE, the petition is hereby PARTIALLY GRANTED. Section 12 of RA 9335 creating a Joint
Congressional Oversight Committee to approve the implementing rules and regulations of the law is
declared UNCONSTITUTIONAL and therefore NULL and VOID. The constitutionality of the remaining
provisions of RA 9335 is UPHELD. Pursuant to Section 13 of RA 9335, the rest of the provisions remain in
force and effect.

SO ORDERED.
VICTORIA C. GUTIERREZ, G.R. No. 153266
JOEL R. PEREZ, ARACELI L. YAMBOT, CORAZON F.
SORIANO, LORNA P. TAMOR, ROMEO S. CONSIGNADO,
DIVINA R. SULIT, ESTRELITA F. IRESARE, ROSALINDA L.
ALPAY, AUREA L. ILAGAN AND ALL THE OTHER
CONCERNED EMPLOYEES OF THE OFFICE OF THE
SOLICITOR GENERAL,
Petitioners, Present:
Puno, C.J.,
Carpio,
Corona,
Carpio Morales,
Velasco, Jr.,
Nachura,
- versus - Leonardo-De Castro,
Brion,
Peralta,
Bersamin,
Del Castillo,
Abad,
Villarama, Jr.,
Perez, and
Mendoza, JJ.
DEPARTMENT OF BUDGET AND MANAGEMENT, HONORABLE
SECRETARY EMILIA T. BONCODIN AND DIRECTOR LUZ M.
CANTOR,
Respondents,

UNIVERSITY OF THE PHILIPPINES,

AMADO EUROPA, MERCEDITA REYES, CONCHITA ABARCAR, LUCIO

ABERIN, BIENVENIDO BIONG, SOLOMON CELIZ, WILFREDO CORNEL,
TOMAS FORIO, ROGELIO JUNTERIAL, JAIME PERALTA, PILAR RILLAS,
WILFREDO SAGUN, JESUS SUGUITAN, LUIS TORRES, JOSE VERSOZA
AND ALL THE OTHER CONCERNED INCUMBENT AND RETIRED
EMPLOYEES OF THE SOCIAL SECURITY SYSTEM v. SOCIAL
SECURITY SYSTEM***

CONSUELO A. TAGARO, REYNALDO S. CALLANO, AIDA A.

MARTINEZ, PRISCILLA P. COSTES, RICELI C. MENDOZA, ARISTON
CALVO, SAMSON L. MOLAO, MANUEL SABUTAN, VILMA GONZALES,
RUTH C. MAPANAO, NELSON M. BELGIRA, JESUS ANTONIO G.
DERIJE v. UNIVERSITY OF SOUTHERN MINDANAO***

CONFEDERATION OF INDEPENDENT UNIONS IN THE PUBLIC

SECTOR (CIU)

ESTHER I. ABADIANO AND OTHER FORTY ONE THOUSAND

INDIVIDUAL TEACHERS INTERVENORS

ELPIDIO F. FERRER, MARIKINA CITY FEDERATION OF PUBLIC

SCHOOL TEACHERS, INC., REPRESENTED BY ITS PRESIDENT
ELPIDIO F. FERRER, AND ALL OTHER INDIVIDUAL PUBLIC SCHOOL
TEACHERS IN CENTRAL LUZON, NORTHERN LUZON, SOUTHERN
TAGALOG, NATIONAL CENTRAL REGION, CARR AND MINDANAO
REPRESENTED BY THEIR RESPECTIVE ATTORNEYS-IN-FACT,
ATTORNEYS DANTE ILAYA AND VIRGINIA SUAREZ-PINLAC AND
ACTION AND SOLIDARITY FOR THE EMPOWERMENT OF TEACHERS
(ASSERT), REPRESENTED BY ITS PRESIDENT AMABLE TUIBEIO, ET
AL.

HARRIS M. SINOLINDING, KALANTONGAN P. AKIL, DAUNDI B.

BAKONG, TERESITA C. DE GUZMAN, QUEENIE A. HABIBUN, JOSE T.
MAUN, VIVIENLE P. MARAGGUN, SAAVEDRA M. MANTIKAYAN, GIJIT C.
PARON, IRWIN R. QUINAIN, DATUMANONG O. TAGITICAN AND HYDIE
P. WONG, AND ALL OTHER CONCERNED EMPLOYEES OF THE
COTABATO FOUNDATION COLLEGE OF SCIENCE AND TECHNOLOGY
(CFCST) v. COTABATO FOUNDATION COLLEGE OF SCIENCE AND
TECHNOLOGY AND DEPARTMENT OF BUDGET AND MANAGEMENT***
FRANCISCA C. CASTRO, DARIO C. VARGAS, MA. DEBBIE M. RESMA,
RAMON P. CASIL, TERESITA C. BUSADRE, CRISTINA V. MANALO, SAUL
SAN RAMON, ALEXIS R. REBURIANO, ROSALITO D. ROSA, DR.
FERNANDO C. JAVIER, DR. ROSEMARIE M. YAGUIE, DR. GIL T.
MAGBANUA, AND ALL OTHER CONCERNED PUBLIC SCHOOL
TEACHERS OF QUEZON CITY v. DEPARTMENT OF BUDGET AND
MANAGEMENT***

WILMA Q. NOBLEZA, ELEANOR M. CASTRO, JOSE B. BUSTILLO, JR.,

ABELARDO E. DE GUZMAN, EDWIN F. FABRIQUIER, ET AL. v. DBM
SECRETARY ROMULO NERI AND DEPARTMENT OF BUDGET AND
MANAGEMENT***

EVA VALDEZ FERIA, WILHELMINA BALDO, ROSE MARIE L. YCASA,

GLORIA G. IGNACIO AND HJI.AKMAD A. ALSAD AND OTHER TWELVE
THOUSAND FIVE HUNDRED INDIVIDUAL TEACHERS

BUREAU OF PLANT INDUSTRY EMPLOYEES ASSOCIATION, MARY ANN

GUERRERO, ET AL.
Intervenors.

x ------------------------------------------------------------ x

ESTRELLITA C. AMPONIN, JUDITH G.R. No. 159007

A. CUDAL, ROMEO A. PAGALAN, MARISSA F. PARIAS, AND
RAYMOND F. FLORES, ET AL.,
Petitioners,

- versus -

COMMISSION ON AUDIT, GUILERMO N. CARAGUE, IN HIS

CAPACITY AS CHAIRMAN, RAUL C. FLORES, IN HIS CAPACITY
AS COMMISSIONER, COMMISSION ON AUDIT, AND
EMMANUEL M. DALMAN, IN HIS CAPACITY AS
COMMISSIONER, COMMISSION ON AUDIT,
Respondents.

x -------------------------------------------------- x

AUGUSTO R. NIEVES, BONIFACIO G.R. No. 159029

H. ATIVO, TARCELA P. DETERA, NILDA G. CIELO, ANTHONY M.
BRAVO, MARIA LOURDES G. BARROZO, ANTONIO E.
FUENTES, ALFREDO D. DONOR, RICO B. NAVA, SR., DOLORES
C. HUIDEM AND ALL THE OTHER CONCERNED EMPLOYEES OF
THE SORSOGON STATE COLLEGE,
Petitioners,

- versus -

DEPARTMENT OF BUDGET AND MANAGEMENT AND

HONORABLE SECRETARY EMILIA T. BONCODIN,
Respondents.

x ------------------------------------------------- x

KAPISANAN NG MGA MANGGAGAWA G.R. No. 170084

SA BUREAU OF AGRICULTURAL STATISTICS (KMB), EVELYN C.
TIDON, RIPOL O. ABALOS, BEATRIZ L. HUBILLA, MA. CHERYL
J. TAJONERA, LOLITA DE HERNANDEZ, FLORA M. MABAMBA,
DELILAH G. BASSIG AND ALL CONCERNED INCUMBENT AND
RETIRED EMPLOYEES OF THE BUREAU OF AGRICULTURAL
STATISTICS, DEPARTMENT OF AGRICULTURE,
Petitioners,

- versus -

DEPARTMENT OF BUDGET AND MANAGEMENT AND

HONORABLE SECRETARY ROMULO NERI***,
Respondents.
x ------------------------------------------------- x

NATIONAL HOUSING AUTHORITY, G.R. No. 172713

Petitioner,

- versus -
EPIFANIO P. RECANA, MERCEDES AMURAO, ERASMO
APOSTOL, FLORENDO ASUNCION, FIORELLO JOSEFINA
BALTAZAR, ET AL.,
Respondents.

x ------------------------------------------------- x

INSURANCE COMMISSION OFFICERS G.R. No. 173119

AND EMPLOYEES, REPRESENTED BY INSURANCE
COMMISSION EMPLOYEES WELFARE ASSOCIATION (ICEWA),
ET AL.,
Petitioners,

- versus -

DEPARTMENT OF BUDGET AND MANAGEMENT AND/OR

HONORABLE SECRETARY ROLANDO G. ANDAYA, JR.,
Respondents.

x ------------------------------------------------- x

FIBER INDUSTRY DEVELOPMENT G.R. No. 176477

AUTHORITY EMPLOYEES ASSOCIATION (FIDAEA), REMEDIOS
V.J. ABGONA, CELERINA T. HILARIO, QUIRINO U. SANTOS,
GRACE AURORA F. PASTORES, RHISA V. PEGENIA, ET AL.,
Petitioners,

- versus -

DEPARTMENT OF BUDGET AND MANAGEMENT AND/OR

HONORABLE SECRETARY ROLANDO G. ANDAYA, JR.***,
Respondents.

x ------------------------------------------------- x

BUREAU OF ANIMAL INDUSTRY G.R. No. 177990

EMPLOYEES ASSOCIATION (BAIEA), LORY C. BANGALISAN,
EDGARDO VINCULADO, LORENZO J. ABARCA, ROLANDO M.
VASQUEZ, ALFREDO B. DUCUSIN, ET AL.,
Petitioners,

- versus -

DEPARTMENT OF BUDGET AND MANAGEMENT AND/OR

HONORABLE SECRETARY ROLANDO G. ANDAYA, JR.***,
Respondents.

x ------------------------------------------------- x

RE: REQUEST OF SANDIGANBAYAN A.M. No. 06-4-02-SB

FOR AUTHORITY TO USE THEIR SAVINGS TO PAY THEIR COLA
DIFFERENTIAL FROM JULY 1, 1989 TO MARCH 16, 1999,
Promulgated:

March 18, 2010

x ---------------------------------------------------------------------------------------- x

DECISION

ABAD, J.:
 These consolidated cases question the inclusion of certain allowances and fringe benefits into the
standardized salary rates for offices in the national government, state universities and colleges, and local
government units as required by the Compensation and Position Classification Act of 1989 and
implemented through the challenged National Compensation Circular 59 (NCC 59).

The Facts and the Case

Congress enacted in 1989 Republic Act (R.A.) 6758, called the Compensation and Position
Classification Act of 1989 to rationalize the compensation of government employees. Its Section 12
directed the consolidation of allowances and additional compensation already being enjoyed by employees
into their standardized salary rates. But it exempted certain additional compensations that the employees
may be receiving from such consolidation. Thus:

Section 12. Consolidation of Allowances and Compensation. -- All allowances, except for
representation and transportation allowances; clothing and laundry allowances;
subsistence allowance of marine officers and crew on board government vessels and
hospital personnel; hazard pay; allowances of foreign service personnel stationed
abroad; and such other additional compensation not otherwise specified herein as may
be determined by the DBM, shall be deemed included in the standardized salary rates
herein prescribed. Such other additional compensation, whether in cash or in kind,
being received by incumbents only as of July 1, 1989 not integrated into the
standardized salary rates shall continue to be authorized.

Pursuant to the above, the Department of Budget and Management (DBM) issued NCC 59 dated
September 30, 1989,[1] covering the offices of the national government, state universities and colleges,
and local government units. NCC 59 enumerated the specific allowances and additional compensations
which were deemed integrated in the basic salaries and these included the Cost of Living Allowance
(COLA) and Inflation Connected Allowance (ICA). The DBM re-issued and published NCC 59 on May 3, 2004.
[2]

The DBM also issued Corporate Compensation Circular (CCC) 10 dated October 2, 1989, [3] covering
all government-owned or controlled corporations and government financial institutions. The DBM re-issued
this circular on February 15, 1999[4] and published it on March 16, 1999. Accordingly, the Commission on
Audit (COA) disallowed the payments of honoraria and other allowances which were deemed integrated
into the standardized salary rates. Employees of government-owned or controlled corporations questioned
the validity of CCC 10 due to its non-publication. In De Jesus v. Commission on Audit,[5] this Court declared
CCC 10 ineffective because of such non-publication. Until then, it ordered the COA to pass on audit the
employees honoraria which they were receiving prior to the effectivity of R.A. 6758.

Meanwhile, the DBM also issued Budget Circular 2001-03 dated November 12, 2001,
[6]
clarifying that only the exempt allowances under Section 12 of R.A. 6758 may continue to be granted the
employees; all others were deemed integrated in the standardized salary rates. Thus, the payment of
allowances and compensation such as COLA, amelioration allowance, and ICA, among others, which were
already deemed integrated in the basic salary were unauthorized. The Courts ruling in subsequent cases
involving government-owned or controlled corporations followed the De Jesus ruling.

On May 16, 2002 employees of the Office of the Solicitor General filed a petition
for certiorari and mandamus in G.R. 153266, questioning the propriety of integrating their COLA into their
standardized salary rates. Employees of other offices of the national government followed suit. In addition,
petitioners in G.R. 159007 questioned the disallowance of the allowances and fringe benefits that the
COA auditing personnel assigned to the Government Service Insurance System (GSIS) used to
get. Petitioners in G.R. 173119 questioned the disallowance of the ICA that used to be paid to the officials
and employees of the Insurance Commission.

The Court caused the consolidation of the petitions and treated them as a class suit for all
government employees, excluding the employees of government-owned or controlled corporations and
government financial institutions.[7]

On October 26, 2005 the DBM issued National Budget Circular 2005-502 [8] which provided that all
Supreme Court rulings on the integration of allowances, including COLA, of government employees under
R.A. 6758 applied only to specific government-owned or controlled corporations since the consolidated
cases covering the national government employees are still pending with this Court. Consequently, the
payment of allowances and other benefits to them, such as COLA and ICA, remained prohibited until
otherwise provided by law or ruled by this Court. The circular further said that all agency heads and other
responsible officials and employees found to have authorized the grant of COLA and other allowances and
benefits already integrated in the basic salary shall be personally held liable for such payment.

The Issues Presented

The common issues presented in these consolidated cases are:

1. Whether or not the COLA should be deemed integrated into the standardized salary rates of the
concerned government employees by virtue of Section 12 of R.A. 6758;

2. Whether or not the ICA may still be paid to officials and employees of the Insurance Commission;

3. Whether or not the GSIS may still pay the allowances and fringe benefits to COA auditing
personnel assigned to it;

4. Whether or not the non-publication of NCC 59 dated September 30, 1989 in the Official Gazette
or newspaper of general circulation nullifies the integration of the COLA into the standardized salary rates;
and

5. Whether or not the grant of COLA to military and police personnel to the exclusion of other
government employees violates the equal protection clause.

The Courts Ruling

One. Petitioners espouse the common theory that the DBM needs to promulgate rules and
regulations before the COLA that they were getting prior to the passage of R.A. 6758 can be deemed
integrated in their standardized salary rates. Respondent DBM counters that R.A. 6758 already specified
the allowances and benefits that were not to be integrated in the new salary rates. All other allowances,
DBM adds, such as COLA, are deemed integrated into those salary rates.

At the heart of the present controversy is Section 12 of R.A. 6758 which is quoted anew for clarity:

Section 12. Consolidation of Allowances and Compensation. -- All

allowances, except for representation and transportation allowances; clothing
and laundry allowances; subsistence allowance of marine officers and crew on
board government vessels and hospital personnel; hazard pay; allowances of
foreign service personnel stationed abroad; and such other additional
compensation not otherwise specified herein as may be determined by the DBM,
shall be deemed included in the standardized salary rates herein prescribed. Such
other additional compensation, whether in cash or in kind, being received by
incumbents only as of July 1, 1989 not integrated into the standardized salary
rates shall continue to be authorized.

As will be noted from the first sentence above, all allowances were deemed integrated into the
standardized salary rates except the following:

(1) representation and transportation allowances;

(2) clothing and laundry allowances;
(3) subsistence allowances of marine officers and crew on board government vessels;
(4) subsistence allowances of hospital personnel;
(5) hazard pay;
(6) allowances of foreign service personnel stationed abroad; and
(7) such other additional compensation not otherwise specified in Section 12 as may be determined
by the DBM.

But, while the provision enumerated certain exclusions, it also authorized the DBM to identify such
other additional compensation that may be granted over and above the standardized salary
rates. In Philippine Ports Authority Employees Hired After July 1, 1989 v. Commission on Audit ,[9] the Court
has ruled that while Section 12 could be considered self-executing in regard to items (1) to (6), it was not
so in regard to item (7). The DBM still needed to amplify item (7) since one cannot simply assume what
other allowances were excluded from the standardized salary rates. It was only upon the issuance
and effectivity of the corresponding implementing rules and regulations that item (7) could be
deemed legally completed.
 Delegated rule-making is a practical necessity in modern governance because of the increasing
complexity and variety of public functions. Congress has endowed administrative agencies like respondent
DBM with the power to make rules and regulations to implement a given legislation and effectuate its
policies.[10] Such power is, however, necessarily limited to what the law provides. Implementing rules
and regulations cannot extend the law or expand its coverage, as the power to amend or
repeal a statute belongs to the legislature. Administrative agencies implement the broad policies laid
down in a law by filling in only its details. The regulations must be germane to the objectives and
purposes of the law and must conform to the standards prescribed by law. [11]

In this case, the DBM promulgated NCC 59 [and CCC 10]. But, instead of identifying some of
the additional exclusions that Section 12 of R.A. 6758 permits it to make, the DBM made a list
of what allowances and benefits are deemed integrated into the standardized salary
rates. More specifically, NCC 59 identified the following allowances/additional compensation
that are deemed integrated:

(1) Cost of Living Allowance (COLA);

(2) Inflation connected allowance;
(3) Living Allowance;
(4) Emergency Allowance;
(5) Additional Compensation of Public Health Nurses assigned to public
health nursing;
(6) Additional Compensation of Rural Health Physicians;
(7) Additional Compensation of Nurses in Malacaang Clinic;
(8) Nurses Allowance in the Air Transportation Office;
(9) Assignment Allowance of School Superintendents;
(10) Post allowance of Postal Service Office employees;
(11) Honoraria/allowances which are regularly given except the following:
a. those for teaching overload;
b. in lieu of overtime pay;
c. for employees on detail with task forces/special projects;
d. researchers, experts and specialists who are acknowledged
authorities in their field of specialization;
e. lecturers and resource persons;
f. Municipal Treasurers deputized by the Bureau of Internal
Revenue to collect and remit internal revenue collections; and
g. Executive positions in State Universities and Colleges filled by
designation from among their faculty members.
(12) Subsistence Allowance of employees except those authorized under EO
[Executive Order] 346 and uniformed personnel of the Armed Forces of
the Philippines and Integrated National Police;
(13) Laundry Allowance of employees except those hospital/sanitaria
personnel who attend directly to patients and who by the nature of their
duties are required to wear uniforms, prison guards and uniformed
personnel of the Armed Forces of the Philippines and Integrated National
Police; and
(14) Incentive allowance/fee/pay except those authorized under the General
Appropriations Act and Section 33 of P.D. 807.

The drawing up of the above list is consistent with Section 12 above . R.A. 6758 did not
prohibit the DBM from identifying for the purpose of implementation what fell into the class of all
allowances. With respect to what employees benefits fell outside the term apart from those that the law
specified, the DBM, said this Court in a case,[12] needed to promulgate rules and regulations
identifying those excluded benefits. This leads to the inevitable conclusion that until and
unless the DBM issues such rules and regulations, the enumerated exclusions in items (1) to
(6) remain exclusive. Thus so, not being an enumerated exclusion, COLA is deemed already
incorporated in the standardized salary rates of government employees under the general rule
of integration.

In any event, the Court finds the inclusion of COLA in the standardized salary rates
proper. In National Tobacco Administration v. Commission on Audit,[13] the Court ruled that the enumerated
fringe benefits in items (1) to (6) have one thing in commonthey belong to one category of privilege called
allowances which are usually granted to officials and employees of the government to defray or reimburse
the expenses incurred in the performance of their official functions. Consequently, if these allowances are
consolidated with the standardized salary rates, then the government official or employee will be
compelled to spend his personal funds in attending to his duties. On the other hand, item (7) is a catch-all
proviso for benefits in the nature of allowances similar to those enumerated. [14]
Clearly, COLA is not in the nature of an allowance intended to reimburse expenses incurred by officials and
employees of the government in the performance of their official functions. It is not payment in
consideration of the fulfillment of official duty.[15] As defined, cost of living refers to the level of prices
relating to a range of everyday items[16] or the cost of purchasing those goods and services
which are included in an accepted standard level of consumption.[17] Based on this premise, COLA
is a benefit intended to cover increases in the cost of living. Thus, it is and should be integrated
into the standardized salary rates.

Two. Petitioning officials and employees of the Insurance Commission question the disallowance of
their ICA on the ground that it is a benefit similar to the educational assistance granted by the Court
in National Tobacco Administration[18] based on the second sentence of Section 12 of R.A. 6758 that reads:

Such other additional compensation, whether in cash or in kind, being received by

incumbents only as of July 1, 1989 not integrated into the standardized salary
rates shall continue to be authorized.

In National Tobacco Administration, the Court interpreted this provision as referring to benefits in
the nature of financial assistance, or a bonus or other payment made to employees in addition to
guaranteed hourly wages, as contradistinguished from the allowance in the first sentence, which cannot,
strictly speaking, be treated as a bonus or additional income. In financial assistance, reimbursement is not
necessary, while in the case of allowance, reimbursement is required. [19]

To be entitled to the financial assistance under this provision, the following requisites must concur:
(1) the recipients were incumbents when R.A. 6758 took effect on July 1, 1989; (2) they were in fact,
receiving the same, at the time; and (3) such additional compensation is distinct and separate from the
excepted allowances under CCC 10, as it is not integrated into the standardized salary rates. [20]

In this case, ICA, like COLA, falls under the general rule of integration. The DBM specifically
identified it as an allowance or additional compensation integrated into the standardized salary rates. By
its very nature, ICA is granted due to inflation and upon determination that the current salary
of officials and employees of the Insurance Commission is insufficient to address the
problem. The DBM determines whether a need for ICA exists and the fund from which it will be
taken. The Insurance Commission cannot, on its own, determine what allowances are necessary and then
grant them to its officials and employees without the approval of the DBM.

Moreover, ICA does not qualify under the second sentence of Section 12 of R.A. 6758 since the
employees failed to show that they were actually receiving it as of June 30, 1989 or immediately prior to
the implementation of R.A. 6758. The Commissioner of the Insurance Commission requested for authority
to grant ICA from the DBM for the years 1981[21] and 1984[22] only. There is no evidence that the ICAwere
paid in subsequent years. In the absence of a subsequent authorization granting or restoring ICA to the
officials and employees of the Insurance Commission, there can be no valid legal basis for its continued
grant from July 1, 1986.

Three. Petitioners COA auditing personnel assigned to the GSIS question the disallowance of
their allowances and fringe benefits based on the allowances given to GSIS personnel, namely:

5.6. Payment of other allowances/fringe benefits and all other forms of

compensation granted on top of basic salary, whether in cash or in
kind, x x x shall be discontinued effective November 1, 1989. Payment made for
such allowances/fringe benefits after said date shall be considered as illegal
disbursement of public funds.

They alleged that since CCC 10 was declared ineffective, the disallowance should be lifted until the
issuance was published on March 16, 1999.

But, although petitioners alleged that the subject benefits were withheld from them on the basis of
CCC 10, it is clear that the benefits were actually withheld from them on the basis of Section 18 of R.A.
6758, which reads:

Section 18. Additional Compensation of Commission on Audit Personnel and of Other

Agencies. - In order to preserve the independence and integrity of the Commission on
Audit (COA), its officials and employees are prohibited from receiving salaries,
honoraria, bonuses, allowances or other emoluments from any government entity, local
government unit, and government-owned and controlled corporations, and government
financial institution, except those compensation paid directly by the COA out of its
appropriations and contributions.

Government entities, including government-owned or controlled corporations including

financial institutions and local government units are hereby prohibited from assessing
or billing other government entities, government-owned or controlled corporations
including financial institutions or local government units for services rendered by its
officials and employees as part of their regular functions for purposes of paying
additional compensation to said officials and employees.

As aptly pointed out by the COA, Section 18 of R.A. 6758 was complete in itself and was operative
without the aid of any supplementary or enabling legislation.
[23]
The implementing rules and regulations were necessary only for those provisions, such as item (7) of
Section 12, which requires further clarification and interpretation. Thus, notwithstanding the initial non-
publication of CCC 10, the disallowance of petitioners allowances and fringe benefits as COA auditing
personnel assigned to the GSIS was valid upon the effectivity of R.A. 6758.

In Tejada v. Domingo,[24] this Court explained that COA personnel assigned to auditing units of
government-owned or controlled corporations or government financial institutions can receive only such
salaries, allowances or fringe benefits paid directly by the COA out of its appropriations and
contributions. The contributions referred to are the cost of audit services which did not include the extra
emoluments or benefits, such as bank equity pay, longevity pay, amelioration allowance, and meal
allowance, which petitioners claim. The COA is further barred from assessing or billing government-owned
or controlled corporations and government financial institutions for services rendered by its personnel as
part of their regular audit functions for purposes of paying additional compensation to such personnel.

In upholding the disallowance, the Court ruled in Villarea v. Commission on Audit[25] that valid
reasons exist to treat COA officials differently from other national government officials. The primary
function of an auditor is to prevent irregular, unnecessary, excessive or extravagant expenditures of
government funds. To be able to properly perform their constitutional mandate, COA officials
need to be insulated from unwarranted influences, so that they can act with independence and
integrity.

Rightly so, the disallowance in this case is valid.

Four. Petitioners argue that since CCC 10 dated October 2, 1989 covering all government-owned or
controlled corporations and government financial institutions was ineffective until its re-issuance and
publication on March 16, 1999, its counterpart, NCC 59 dated September 30, 1989 covering the offices of
the national government, state universities and colleges, and local government units should also be
regarded as ineffective until its re-issuance and publication on May 3, 2004. Thus, the COLA should not be
deemed integrated into the standardized salary rates from 1989 to 2004. Respondents counter that the
fact that NCC 59 was not published should not be considered as an obstacle to the integration of COLA into
the standardized salary rates. Accordingly, Budget Circular 2001-03, insofar as it reiterates NCC 59, should
not be treated as ineffective since it merely reaffirms the fact of consolidation of COLA into the employees
salary as mandated by Section 12 of R.A. 6758.

It is a settled rule that publication is required as a condition precedent to the effectivity of a law to
inform the public of its contents before their rights and interests are affected by the same.
[26]
Administrative rules and regulations must also be published if their purpose is to enforce or implement
existing law pursuant also to a valid delegation.[27]

Nonetheless, as previously discussed, the integration of COLA into the standardized salary
rates is not dependent on the publication of CCC 10 and NCC 59. This benefit is deemed
included in the standardized salary rates of government employees since it falls under the
general rule of integrationall allowances.

More importantly, the integration was not by mere legal fiction since it was factually integrated into
the employees salaries. Records show that the government employees were informed by their respective
offices of their new position titles and their corresponding salary grades when they were furnished with the
Notices of Position Allocation and Salary Adjustment (NPASA). The NPASA provided the breakdown of the
employees gross monthly salary as of June 30, 1989 and the composition of his standardized pay under
R.A. 6758.[28] Notably, the COLA was considered part of the employees monthly income.
 In truth, petitioners never really suffered any diminution in pay as a consequence of the
consolidation of COLA into their standardized salary rates. There is thus nothing in these cases
which can be the subject of a back pay since the amount corresponding to COLA was never
withheld from petitioners in the first place. [29]

Consequently, the non-publication of CCC 10 and NCC 59 in the Official Gazette or

newspaper of general circulation does not nullify the integration of COLA into the standardized
salary rates upon the effectivity of R.A. 6758. As the Court has said in Philippine International
Trading Corporation v. Commission on Audit,[30] the validity of R.A. 6758 should not be made to depend on
the validity of its implementing rules.

Five. Petitioners contend that the continued grant of COLA to military and police personnel under
CCC 10 and NCC 59 to the exclusion of other government employees violates the equal protection clause
of the Constitution.

But as respondents pointed out, while it may appear that petitioners are questioning the
constitutionality of these issuances, they are in fact attacking the very constitutionality of Section 11 of
R.A. 6758. It is actually this provision which allows the uniformed personnel to continue receiving their
COLA over and above their basic pay, thus:

Section 11. Military and Police Personnel. - The base pay of uniformed
personnel of the Armed Forces of the Philippines and the Integrated National
Police shall be as prescribed in the salary schedule for these personnel in R.A.
6638 and R.A. 6648. The longevity pay of these personnel shall be as prescribed
under R.A. 6638, and R.A. 1134 as amended by R.A. 3725 and R.A. 6648:
Provided, however, That the longevity pay of uniformed personnel of the
Integrated National Police shall include those services rendered as uniformed
members of the police, jail and fire departments of the local government units
prior to the police integration.
All existing types of allowances authorized for uniformed personnel of the
Armed Forces of the Philippines and Integrated National Police such as cost of
living allowance, longevity pay, quarters allowance, subsistence allowance,
clothing allowance, hazard pay and other allowances shall continue to be
authorized.

Nothing is more settled than that the constitutionality of a statute cannot be attacked collaterally
because constitutionality issues must be pleaded directly and not collaterally.[31]

In any event, the Court is not persuaded that the continued grant of COLA to the uniformed
personnel to the exclusion of other national government officials run afoul the equal protection clause of
the Constitution. The fundamental right of equal protection of the laws is not absolute, but is subject to
reasonable classification. If the groupings are characterized by substantial distinctions that make real
differences, one class may be treated and regulated differently from another. The classification must also
be germane to the purpose of the law and must apply to all those belonging to the same class. [32]

To be valid and reasonable, the classification must satisfy the following requirements: (1) it must
rest on substantial distinctions; (2) it must be germane to the purpose of the law; (3) it must not be limited
to existing conditions only; and (4) it must apply equally to all members of the same class. [33]

It is clear from the first paragraph of Section 11 that Congress intended the uniformed
personnel to be continually governed by their respective compensation laws. Thus, the
military is governed by R.A. 6638, [34] as amended by R.A. 9166[35] while the police is governed
by R.A. 6648,[36] as amended by R.A. 6975.[37]

Certainly, there are valid reasons to treat the uniformed personnel differently from other national
government officials. Being in charged of the actual defense of the State and the maintenance of internal
peace and order, they are expected to be stationed virtually anywhere in the country. They are likely to be
assigned to a variety of low, moderate, and high-cost areas. Since their basic pay does not vary based on
location, the continued grant of COLA is intended to help them offset the effects of living in higher cost
areas.[38]

WHEREFORE, the Court GRANTS the petition in G.R. No. 172713 and DENIES the petitions in G.R.
153266, 159007, 159029, 170084, 173119, 176477, 177990 and A.M. 06-4-02-SB.

SO ORDERED.
 THE BOARD OF TRUSTEES G.R. No. 170463

OF THE GOVERNMENT SERVICE

INSURANCE SYSTEM and
Present:
WINSTON F. GARCIA, in his
capacity

as GSIS President and General CARPIO, J., Chairperson,

Manager,
NACHURA,
Petitioners,
PERALTA,

ABAD, and
- versus -
MENDOZA, JJ.
ALBERT M. VELASCO and MARIO I.
MOLINA, Promulgated: February 2, 2011

Respondents.
The Case

This is a petition for review 1 of the 24 September 2004 Decision 2 and the 7 October 2005 Order3 of the
Regional Trial Court of Manila, Branch 19 (trial court), in Civil Case No. 03-108389. In its 24 September
2004 Decision, the trial court granted respondents Albert M. Velasco 4 and Mario I. Molinas5 (respondents)
petition for prohibition. In its 7 October 2005 Order, the trial court denied petitioners Board of Trustees of
the Government Service Insurance System (GSIS) and Winston F. Garcias (petitioners) motion for
reconsideration.

The Facts

On 23 May 2002, petitioners charged respondents administratively with grave misconduct and placed
them under preventive suspension for 90 days.6Respondents were charged for their alleged participation in
the demonstration held by some GSIS employees denouncing the alleged corruption in the GSIS and calling
for the ouster of its president and general manager, petitioner Winston F. Garcia. 7

In a letter dated 4 April 2003, respondent Mario I. Molina (respondent Molina) requested GSIS Senior Vice
President Concepcion L. Madarang (SVP Madarang) for the implementation of his step increment.8 On 22
April 2003, SVP Madarang denied the request citing GSIS Board Resolution No. 372 (Resolution No.
372)9 issued by petitioner Board of Trustees of the GSIS (petitioner GSIS Board) which approved the new
GSIS salary structure, its implementing rules and regulations, and the adoption of the supplemental
guidelines on step increment and promotion.10 The pertinent provision of Resolution No. 372 provides:

A. Step Increment
xxxx
III. Specific Rules:
x x xx
3. The step increment adjustment of an employee who is on preventive suspension shall
be withheld until such time that a decision on the case has been rendered. x x x x

Respondents also asked that they be allowed to avail of the employee privileges under GSIS Board
Resolution No. 306 (Resolution No. 306) approving Christmas raffle benefits for all GSIS officials and
employees effective year 2002.11 Respondents request was again denied because of their pending
administrative case.

On 27 August 2003, petitioner GSIS Board issued Board Resolution No. 197 (Resolution No. 197) approving
the following policy recommendations:

B. On the disqualification from promotion of an employee with a pending administrative case

To adopt the policy that an employee with pending administrative case shall be disqualified
from the following during the pendency of the case:

a) Promotion; c) Performance-Based Bonus; and

b) Step Increment; d) Other benefits and privileges.

 On 14 November 2003, respondents filed before the trial court a petition for prohibition with prayer for a
writ of preliminary injunction.12Respondents claimed that they were denied the benefits which GSIS
employees were entitled under Resolution No. 306. Respondents also sought to restrain and prohibit
petitioners from implementing Resolution Nos. 197 and 372. Respondents claimed that the denial of the
employee benefits due them on the ground of their pending administrative cases violates their right to be
presumed innocent and that they are being punished without hearing. Respondent Molina also added that
he had already earned his right to the step increment before Resolution No. 372 was enacted. Respondents
also argued that the three resolutions were ineffective because they were not registered with the
University of the Philippines (UP) Law Center pursuant to the Revised Administrative Code of 1987. 13

On 24 November 2003, petitioners filed their comment with motion to dismiss and opposition. 14 On 2
December 2003, respondents filed their opposition to the motion to dismiss. 15 On 5 December 2003,
petitioners filed their reply.16

On 16 January 2004, the trial court denied petitioners motion to dismiss and granted
respondents prayer for a writ of preliminary injunction. 17

Petitioners filed a motion for reconsideration. 18 In its 26 February 2004 Order, the trial court denied
petitioners motion.19

In its 24 September 2004 Decision, the trial court granted respondents petition for prohibition. The
dispositive portion of the 24 September 2004 Decision provides:

WHEREFORE, the petition is GRANTED and respondents Board Resolution No. 197 of August 27, 2003 and
No. 372 of November 21, 2000 are hereby declared null and void. The writ of preliminary injunction issued
by this Court is hereby made permanent.

SO ORDERED.20

Petitioners filed a motion for reconsideration. In its 7 October 2005 Order, the trial court denied petitioners
motion.

Hence, this petition.

The Ruling of the Trial Court

On the issue of jurisdiction, the trial court said it can take cognizance of the petition because the territorial
area referred to in Section 4, Rule 65 of the Rules of Court does not necessarily delimit to a particular
locality but rather to the judicial region where the office or agency is situated so that the prohibitive writ
can be enforced.

On the merits of the case, the trial court ruled that respondents were entitled to all employee benefits as
provided under the law by reason of their employment. According to the trial court, to deny respondents
these employee benefits for the reason alone that they have pending administrative cases is unjustified
since it would deprive them of what is legally due them without due process of law, inflict punishment on
them without hearing, and violate their right to be presumed innocent.

The trial court also found that the assailed resolutions were not registered with the UP Law Center, per
certification of the Office of the National Administrative Register (ONAR). 21 Since they were not registered,
the trial court declared that the assailed resolutions have not become effective citing Sections 3 and 4,
Chapter 2, Book 7 of the Revised Administrative Code of 1987.22

The Issues

Petitioners raise the following issues:

Whether the jurisdiction over the subject matter of Civil Case No. 03-108389 (Velasco, et al. vs. The Board
of Trustees of GSIS, et al., RTC-Manila, Branch 19) lies with the Civil Service Commission (CSC) and not with
the Regional Trial Court of Manila, Branch 19.

II Whether a Special Civil Action for Prohibition against the GSIS Board or its President and General
Manager exercising quasi-legislative and administrative functions in Pasay City is outside the territorial
jurisdiction of RTC-Manila, Branch 19.

III Whether internal rules and regulations need not require publication with the Office of the National
[Administrative] Register for their effectivity, contrary to the conclusion of the RTC-Manila, Branch 19.

IV Whether a regulation, which disqualifies government employees who have pending administrative cases
from the grant of step increment and Christmas raffle benefits is unconstitutional.
V Whether the nullification of GSIS Board Resolutions is beyond an action for prohibition, and a writ of
preliminary injunction cannot be made permanent without a decision ordering the issuance of a writ of
prohibition.23

The Ruling of the Court

The petition is partly meritorious.

Petitioners argue that the Civil Service Commission (CSC), not the trial court, has jurisdiction over Civil
Case No. 03-108389 because it involves claims of employee benefits. Petitioners point out that the trial
court should have dismissed the case for lack of jurisdiction.

Sections 2 and 4, Rule 65 of the Rules of Court provide:

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

Sec. 4. Where petition filed. - The petition may be filed not later than sixty (60) days from notice of the
judgment, order or resolution sought to be assailed in the Supreme Court or, if it related to acts or
omissions of a lower court or of a corporation, board, officer or person in the Regional Trial
Court exercising jurisdiction over the territorial area as defined by the Supreme Court. It may
also be filed in the Court of Appeals whether or not the same is in aid of its appellate jurisdiction, or in
the Sandiganbayan if it is in aid of its jurisdiction. If it involves the acts or omissions of a quasi-judicial
agency, and unless otherwise provided by law or these Rules, the petition shall be filed in and cognizable
only by the Court of Appeals. (Emphasis supplied)

Civil Case No. 03-108389 is a petition for prohibition with prayer for the issuance of a writ of preliminary
injunction. Respondents prayed that the trial court declare all acts emanating from Resolution Nos. 372,
197, and 306 void and to prohibit petitioners from further enforcing the said resolutions. 24 Therefore, the
trial court, not the CSC, has jurisdiction over respondents petition for prohibition.

Petitioners also claim that the petition for prohibition was filed in the wrong territorial jurisdiction because
the acts sought to be prohibited are the acts of petitioners who hold their principal office in Pasay City,
while the petition for prohibition was filed in Manila.

Section 18 of Batas Pambansa Blg. 129 (BP 129)25 provides:

SEC. 18. Authority to define territory appurtenant to each branch. - The Supreme Court shall define
the territory over which a branch of the Regional Trial Court shall exercise its authority. The
territory thus defined shall be deemed to be the territorial area of the branch concerned for
purposes of determining the venue of all suits, proceedings or actions, whether civil or
criminal, as well as determining the Metropolitan Trial Courts, Municipal Trial Courts, and Municipal Circuit
Trial Courts over which the said branch may exercise appellate jurisdiction. The power herein granted shall
be exercised with a view to making the courts readily accessible to the people of the different parts of the
region and making attendance of litigants and witnesses as inexpensive as possible. (Emphasis supplied)

In line with this, the Supreme Court issued Administrative Order No. 3 26 defining the territorial jurisdiction
of the regional trial courts in the National Capital Judicial Region, as follows:

a. Branches I to LXXXII, inclusive, with seats at Manila over the City of Manila only.

b. Branches LXXXIII to CVII, inclusive, with seats at Quezon City over Quezon City only.

c. Branches CVIII to CXIX, inclusive, with seats at Pasay City over Pasay City only.

The petition for prohibition filed by respondents is a special civil action which may be filed in the Supreme
Court, the Court of Appeals, the Sandiganbayan or the regional trial court, as the case may be. 27 It is also a
personal action because it does not affect the title to, or possession of real property, or interest therein.
Thus, it may be commenced and tried where the plaintiff or any of the principal plaintiffs resides, or where
the defendant or any of the principal defendants resides, at the election of the plaintiff. 28 Since respondent
Velasco, plaintiff before the trial court, is a resident of the City of Manila, 29 the petition could properly be
filed in the City of Manila.30 The choice of venue is sanctioned by Section 2, Rule 4 of the Rules of Court.

Moreover, Section 21(1) of BP 129 provides:

Sec. 21. Original jurisdiction in other cases. - Regional Trial Courts shall exercise original jurisdiction:

(1) In the issuance of writs of certiorari, prohibition, mandamus, quo warranto, habeas
corpus and injunction, which may be enforced in any part of their respective regions;
x x x (Emphasis supplied)

Since the National Capital Judicial Region is comprised of the cities of Manila, Quezon, Pasay,
Caloocan, Malabon, Mandaluyong, Makati, Pasig, Marikina, Paraaque, Las Pias, Muntinlupa, and Valenzuela
and the municipalities of Navotas, San Juan, Pateros, and Taguig, a writ of prohibition issued by the
regional trial court sitting in the City of Manila, is enforceable in Pasay City. Clearly, the RTC did not err
when it took cognizance of respondents petition for prohibition because it had jurisdiction over the action
and the venue was properly laid before it.

Petitioners also argue that Resolution Nos. 372, 197, and 306 need not be filed with the UP Law Center
ONAR since they are, at most, regulations which are merely internal in nature regulating only the
personnel of the GSIS and not the public.

Not all rules and regulations adopted by every government agency are to be filed with the UP
Law Center. Only those of general or of permanent character are to be filed. According to the UP
Law Centers guidelines for receiving and publication of rules and regulations, interpretative regulations
and those merely internal in nature, that is, regulating only the personnel of the Administrative
agency and not the public, need not be filed with the UP Law Center.

Resolution No. 372 was about the new GSIS salary structure, Resolution No. 306 was about the
authority to pay the 2002 Christmas Package, and Resolution No. 197 was about the GSIS
merit selection and promotion plan. Clearly, the assailed resolutions pertained only to internal rules
meant to regulate the personnel of the GSIS. There was no need for the publication or filing of these
resolutions with the UP Law Center.

Petitioners insist that petitioner GSIS Board has the power to issue the assailed resolutions. According to
petitioners, it was within the power of petitioner GSIS Board to disqualify respondents for step increment
and from receiving GSIS benefits from the time formal administrative charges were filed against them until
the cases are resolved.

The Court notes that the trial court only declared Resolution Nos. 197 and 372 void. The trial court made
no ruling on Resolution No. 306 and respondents did not appeal this matter. Therefore, we will limit our
discussion to Resolution Nos. 197 and 372, particularly to the effects of preventive suspension on the grant
of step increment because this was what respondents raised before the trial court.

First, entitlement to step increment depends on the rules relative to the grant of such benefit.
In point are Section 1(b), Rule II and Section 2, Rule III of Joint Circular No. 1, series of 1990, which provide:

Rule II. Selection Criteria

Section 1. Step increments shall be granted to all deserving officials and employees x x x

(b) Length of Service For those who have rendered continuous satisfactory service in a particular position
for at least three (3) years.

Rule III. Step Increments

Section 2. Length of Service A one (1) step increment shall be granted officials and employees for every
three (3) years of continuous satisfactory service in the position. Years of service in the position shall
include the following:

(a) Those rendered before the position was reclassified to a position title with a lower or the same salary
grade allocation; and

(b) Those rendered before the incumbent was transferred to another position within the same agency or to
another agency without a change in position title and salary grade allocation.

In the initial implementation of step increments in 1990, an incumbent shall be granted step increments
equivalent to one (1) step for every three (3) years of continuous satisfactory service in a given position
occupied as of January 1, 1990.

A grant of step increment on the basis of length of service requires that an employee must have rendered
at least three years of continuous and satisfactory service in the same position to which he is an
incumbent.31 To determine whether service is continuous, it is necessary to define what actual service
is.32 Actual service refers to the period of continuous service since the appointment of the
official or employee concerned, including the period or periods covered by any previously
approved leave with pay.33

Second, while there are no specific rules on the effects of preventive suspension on step
increment, we can refer to the CSC rules and rulings on the effects of the penalty of
suspension and approved vacation leaves without pay on the grant of step increment for
guidance.

Section 56(d), Rule IV of the Uniform Rules on Administrative Cases in the Civil Service provides:

Section 56. Duration and effect of administrative penalties. - The following rules shall govern in the
imposition of administrative penalties: x x x

(d) The penalty of suspension shall result in the temporary cessation of work for a period not exceeding
one (1) year.

Suspension of one day or more shall be considered a gap in the continuity of service. During the period
of suspension, respondent shall not be entitled to all money benefits including leave credits.

If an employee is suspended as a penalty, it effectively interrupts the continuity of his government service
at the commencement of the service of the said suspension. This is because a person under penalty of
suspension is not rendering actual service. The suspension will undoubtedly be considered a gap in the
continuity of the service for purposes of the computation of the three year period in the grant of step
increment.34 However, this does not mean that the employee will only be entitled to the step increment
after completing another three years of continuous satisfactory service reckoned from the time the
employee has fully served the penalty of suspension. 35 The CSC has taken this to mean that the
computation of the three year period requirement will only be extended by the number of days that the
employee was under suspension. 36 In other words, the grant of step increment will only be delayed by the
same number of days that the employee was under suspension.

This is akin to the status of an employee who incurred vacation leave without pay for purposes of the
grant of step increment.37 Employees who were on approved vacation leave without pay enjoy the liberal
application of the rule on the grant of step increment under Section 60 of CSC Memorandum Circular No.
41, series of 1998, which provides:

Section 60. Effect of vacation leave without pay on the grant of length of service step increment. - For
purposes of computing the length of service for the grant of step increment, approved vacation leave
without pay for an aggregate of fifteen (15) days shall not interrupt the continuity of the three-year service
requirement for the grant of step increment. However, if the total number of authorized vacation leave
without pay included within the three-year period exceeds fifteen (15) days, the grant of one-step
increment will only be delayed for the same number of days that an official or employee was
absent without pay. (Emphasis supplied)

Third, on preventive suspension, Sections 51 and 52, Chapter 7, Subtitle A, Title I, Book V of the
Revised Administrative Code of 1987 provide:

SEC. 51. Preventive Suspension. - The proper disciplining authority may preventively 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.

SEC. 52. Lifting of Preventive Suspension. Pending Administrative Investigation. - When the
administrative case against the officer or employee under preventive suspension is not finally
decided by the disciplining authority within the period of ninety (90) days after the date of
suspension of the respondent who is not a presidential appointee, the respondent 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 herein provided. (Emphasis supplied)

Preventive suspension pending investigation is not a penalty.38 It is a measure intended to enable

the disciplining authority to investigate charges against respondent by preventing the latter from
intimidating or in any way influencing witnesses against him. 39 If the investigation is not finished and a
decision is not rendered within that period, the suspension will be lifted and the respondent will
automatically be reinstated.

Therefore, on the matter of step increment, if an employee who was suspended as a penalty will be
treated like an employee on approved vacation leave without pay, 40 then it is only fair and reasonable to
apply the same rules to an employee who was preventively suspended, more so considering that
preventive suspension is not a penalty. If an employee is preventively suspended, the employee is not
rendering actual service and this will also effectively interrupt the continuity of his government service.
Consequently, an employee who was preventively suspended will still be entitled to step increment after
serving the time of his preventive suspension even if the pending administrative case against him has not
yet been resolved or dismissed. The grant of step increment will only be delayed for the same number of
days, which must not exceed 90 days, that an official or employee was serving the preventive suspension.

Fourth, the trial court was correct in declaring that respondents had the right to be presumed innocent
until proven guilty. This means that an employee who has a pending administrative case filed against him
is given the benefit of the doubt and is considered innocent until the contrary is proven. 41

In this case, respondents were placed under preventive suspension for 90 days beginning on 23 May
2002. Their preventive suspension ended on 21 August 2002. Therefore, after serving the period of
their preventive suspension and without the administrative case being finally resolved,
respondents should have been reinstated and, after serving the same number of days of their
suspension, entitled to the grant of step increment.

On a final note, social legislation like the circular on the grant of step increment, being remedial in
character, should be liberally construed and administered in favor of the persons to be benefited. The
liberal approach aims to achieve humanitarian purposes of the law in order that the efficiency, security and
well-being of government employees may be enhanced.42

WHEREFORE, we DENY the petition. We AFFIRM with MODIFICATION the 24 September 2004
Decision and the 7 October 2005 Order of the Regional Trial Court of Manila, Branch 19 in Civil Case No. 03-
108389. We DECLARE the assailed provisions on step increment in GSIS Board Resolution Nos. 197 and
372 VOID. We MODIFY the 24 September 2004 Decision of the Regional Trial Court of Manila, Branch 19
and rule that GSIS Board Resolution Nos. 197, 306 and 372 need not be filed with the University of the
Philippines Law Center. SO ORDERED