Words of a particular and specific EDJUSEM GENERIS

It is a general rule of Statutory Construction that where general words follow an

enumeration of persons or things, by words of a particular and specific meaning, such
general words are not to be construed in their widest extent, but are to be held as
applying only to persons or things of the same general kind or class as those
specifically mentioned. But this rule must be discarded where the legislative intention is
plain to the contrary.

G.R. No. L-32717 November 26, 1970

AMELITO R. MUTUC vs. COMELEC

FACTS:
Petitioner Mutuc was a candidate for delegate to the Constitutional Convention. He filed
a special civil action against the respondent COMELEC when the latter informed him
through a telegram that his certificate of candidacy was given due course but he was
prohibited from using jingles in his mobile units equipped with sound systems and loud
speakers. The petitioner accorded the order to be violative of his constitutional right to
freedom of speech. COMELEC justified its prohibition on the premise that the
Constitutional Convention act provided that it is unlawful for the candidates “to
purchase, produce, request or distribute sample ballots, or electoral propaganda
gadgets such as pens, lighters, fans (of whatever nature), flashlights, athletic goods or
materials, wallets, bandanas, shirts, hats, matches, cigarettes, and the like, whether of
domestic or foreign origin.” COMELEC contended that the jingle or the recorded or
taped voice of the singer used by petitioner was a tangible propaganda material and
was, under the above statute, subject to confiscation.

ISSUE:
Whether or not the usage of the jingle by the petitioner form part of the prohibition
invoked by the COMELEC.
HELD:
The Court held that “the general words following any enumeration being applicable only
to things of the same kind or class as those specifically referred to”. The COMELEC’s
contention that a candidate’s jingle form part of the prohibition, categorized under the
phrase “and the like”, could not merit the court’s approval by principle of Ejusdem
Generis. It is quite apparent that what was contemplated in the Act was the distribution
of gadgets of the kind referred to as a means of inducement to obtain a favorable vote
for the candidate responsible for its distribution.

Furthermore, the COMELEC failed to observe construction of the statute which should
be in consonance to the express terms of the constitution. The intent of the COMELEC
for the prohibition may be laudable but it should not be sought at the cost of the
candidate’s constitutional rights

Republic of the Philippines

SUPREME COURT
Manila

EN BANC
G.R. No. 169637 June 8, 2007

BENGUET STATE UNIVERSITY represented by its President ROGELIO D.

COLTING, petitioner,
vs.
COMMISSION ON AUDIT, respondent.

DECISION

NACHURA, J.:

Before this Court is a Petition for Review on Certiorari filed by petitioner Benguet State
University (BSU) seeking to nullify Commission on Audit (COA) Decision No. 2003-
1121 and Decision No. 2005-0192 dated March 17, 2005. COA Decision No. 2003-112
affirmed COA-CAR Decision No. 2000-3, disallowing the rice subsidy and health care
allowance to the employees of BSU, while COA Decision 2005-019 denied BSU's
motion for reconsideration.

On July 6, 1997, Congress passed Republic Act No. 8292 entitled An Act Providing for
the Uniform Composition and Powers of the Governing Boards, the Manner of
Appointment and Term of Office of the President of Chartered State Universities and
Colleges, and for Other Purposes, commonly known as the Higher Education
Modernization Act of 1997. Pursuant to Section 4 (d) of the said law, the Board of
Regents of BSU passed and approved Board Resolution No. 794 on October 31, 1997,
granting rice subsidy and health care allowance to BSU’s employees. The sums were
taken from the income derived from the operations of BSU and were given to the
employees at different periods in 1998.

On October 20, 1999, the grant of this rice subsidy and health care allowance in the
total amount of P4,350,000.00 was disallowed in audit under Notice of Disallowance No.
99-001-STF (98), stating that R.A. No. 8292 does not provide for the grant of said
allowance to employees and officials of the university.3
BSU requested the lifting of the disallowance with the COA Regional Office but it was
denied in COA-CAR Decision No. 2000-3 dated January 26, 2000.4 Citing Section 55
(2) of R.A. No. 8522 or the General Appropriation Act of 1998, it held that a non-existent
item, project, activity, purpose, or object of expenditure cannot be funded by
augmentation from savings or by the use of appropriations. It further held that the grant
of said allowances lacked statutory basis, transgressed the constitutional proscription
on additional, double, or indirect compensation and ran counter to the provisions of the
Salary Standardization Law.

BSU thereafter filed a petition for review of Decision No. 2000-3 with the COA, which
petition was denied in Decision No. 2003-1125 dated July 17, 2003. The Commission
ratiocinated:

Concededly, the provision in Section 8, Article IX-B, 1987 Constitution that, "No
elective or appointive public officers or employee shall receive additional, double
or indirect compensation, unless specifically authorized by law" allows the
payment of additional compensation when specifically authorized by law. In the
instant case, BSU alleges that the grant of Rice Subsidy and Health Care
allowance to its employees in 1998 is authorized by law, specifically Section 4 of
R.A. No. 8292, otherwise known as the Higher Education Modernization Act of
1997. However, a closer perusal of the specific legal provision which reads thus:

"Sec. 4. Powers and Duties of Governing Boards

xxx

"d) x x x

Any provision of existing laws, rules and regulations to the contrary

notwithstanding, any income generated by the university or college, from
tuition fee and other charges, as well as from the operation of auxiliary
services and land grants, shall be retained by the university or college,
and may be disbursed by the Board of Regents/Trustees for instruction,
 research, extension or other programs/projects of the university or
college x x x"

clearly negate such claim of authority. It is noted that the term "other
programs/projects" refers to such programs which the university may specifically
undertake in pursuance of its primary objective which is to attain quality higher
education. The law could not have intended that the term "program/projects"
embrace all programs of BSU, for these benefits, though part of the overall
operations, are not directly related to BSU's academic program. Under the maxim
of ejusdem generis, the mention of a general term after the enumeration of
specific matters should be held to mean that the general term should be of the
same genus as the specific matters enumerated and, therefore, the "other
programs and projects" should be held to be of the same nature as instruction,
research and extension. The inclusion of an incentive such as Rice Subsidy and
Health Care Allowance to its teachers and non-teaching personnel is a patent or
blatant disregard of the statutory limitation on the powers of the governing Board
of SUCs, as these benefits are indubitably not one of instruction, research or
extension.

Furthermore, employment in government service guarantees salaries and other

compensation packages and benefits pursuant to pertinent provisions of the Civil
Service Law. Allowing other benefits to be granted in excess of those authorized
by law is illegal. As such, BSU's attempt to grant benefits over and above those
granted by the Civil Service Law cannot be countenanced.6

A motion for reconsideration was filed but was denied in the assailed Decision No.
2005-019 dated March 17, 2005.7

Hence, this petition with BSU positing these issues:

A. Whether or not Petitioner is authorized to grant Health Care Allowance and

Rice Subsidy to its employees; and
 B. Whether or not the recipients should reimburse the amounts received by
them.8

Before addressing the issues raised in the present petition, it bears noting that what was
filed before this Court is a petition captioned as a Petition for Review on Certiorari. We
point out that a petition for review on certiorari is not the proper mode by which the
COA’s decisions are reviewed by this Court. Under Rule 64, Section 2 of the 1997
Rules of Civil Procedure, a judgment or final order of the COA may be brought by an
aggrieved party to this Court on certiorari under Rule 65.9 Thus, it is only through a
petition for certiorari under Rule 65 that the COA's decisions may be reviewed and
nullified by us on the ground of grave abuse of discretion or lack or excess of
jurisdiction.10

However, though captioned as a Petition for Review on Certiorari, we treat this petition
as a petition for certiorariunder Rule 65 for it alleges "grave abuse of discretion" and
"reversible legal error." The averments in the complaint, not the nomenclature given by
the parties, determine the nature of the action.11 Likewise, in previous rulings, We have
treated differently labeled actions as special civil actions for certiorari under Rule 65 for
reasons such as justice, equity, and fair play.12

BSU ascribes legal error and grave abuse of discretion to the COA in affirming the
disallowance of the rice subsidy and health care benefits. Relying on R.A. No. 8292,
BSU maintains that it can grant said benefits to its employees. It argues that the said
law vests state universities and colleges with fiscal autonomy, and grants them ample
leeway in the appropriation and disbursement of their funds. BSU adds that the grant
did not contravene the constitutional prohibition on additional compensation because
the allowances are granted as an incentive in appreciation of services rendered and in
recognition of the economic plight of the employees. Also, the amounts used were taken
from income generated by its operation and retained by the university which, under R.A.
No. 8292, may be disbursed by its Governing Board in a manner it may determine to
carry out its programs. Finally, it argues that the Salary Standardization Law does not
expressly prohibit the benefits, because the said allowances are in the nature of a
financial assistance and not an additional income.

We affirm the assailed Decisions.

BSU’s contention that it is authorized to grant allowances to its employees is based on

Section 4 (d) of R.A. No. 8292. The provision reads:

SECTION 4. Powers and Duties of Governing Boards. — The governing board

shall have the following specific powers and duties in addition to its general
powers of administration and the exercise of all the powers granted to the board
of directors of a corporation under Section 36 of Batas Pambansa Blg. 68,
otherwise known as the Corporation Code of the Philippines:

xxx xxx xxx

d) to fix the tuition fees and other necessary school charges, such as but not
limited to matriculation fees, graduation fees and laboratory fees, as their
respective boards may deem proper to impose after due consultations with the
involved sectors.

Such fees and charges, including government subsidies and other income
generated by the university or college, shall constitute special trust funds and
shall be deposited in any authorized government depository bank, and all
interests shall accrue therefrom shall part of the same fund for the use of the
university or college: Provided, That income derived from university hospitals
shall be exclusively earmarked for the operating expenses of the hospitals.

Any provision of existing laws, rules and regulations to the contrary

notwithstanding, any income generated by the university or college from tuition
fees and other charges, as well as from the operation of auxiliary services and
land grants, shall be retained by the university or college, and may be disbursed
by the Board of Regents/Trustees for instruction, research, extension, or other
 programs/projects of the university or college: Provided, That all fiduciary fees
shall be disbursed for the specific purposes for which they are collected.

If, for reasons beyond its control, the university or college, shall not be able to
pursue any project for which funds have been appropriated and, allocated under
its approved program of expenditures, the Board of Regents/Trustees may
authorize the use of said funds for any reasonable purpose which, in its
discretion, may be necessary and urgent for the attainment of the objectives and
goals of the universities or college;

xxx xxx xxx

Similarly, Commission on Higher Education (CHED) Memorandum No. 03-01, the

Revised Implementing Rules and Regulations (IRR) for R.A. No. 8292, provides:

RULE V

Powers and Duties of the Governing Boards

SECTION 18. Powers and Duties of Governing Boards (GBs). — The GBs of
chartered SUCs shall have the following powers and duties, in addition to its
general powers of administration and the exercise of all the powers granted to a
Board of Directors of a corporation under Section 36 of Batas Pambansa Blg. 68,
otherwise known as the "Corporation Code of the Philippines," thus:

xxx xxx xxx

(d) to fix the tuition fees and other necessary charges, such as, but not limited, to
matriculation fees, graduation fees and laboratory fees, as they may deem
proper to impose, after due consultations with the involved sectors.

Such fees and charges, including government subsidies and other income
generated by the university or college, shall constitute special trust funds and
shall be deposited in any authorized government depository bank, and all interest
 that shall accrue therefrom shall be part of the same fund for the use of the
university or college: Provided, that income derived from university or college
hospitals shall be exclusively earmarked for the operations of the hospitals.

Any income generated by the university or college from tuition fees and other
charges, as well as from the operation of auxiliary services and land grants, shall
be retained by the university or college, and may be disbursed by its GB for
instruction, research, extension, or other programs/projects of the university or
college: Provided, That all fiduciary fees shall be disbursed for the specific
purposes for which they are collected.

If, for reasons beyond its control, the university or college shall not be able to
pursue any project for which funds have been appropriated and allocated under
its approved program of expenditures, its GB may authorize the use of said funds
for any reasonable purpose which, in its discretion, may be necessary and urgent
for the attainment of the objectives and goals of the university or college;

xxx xxx xxx

What is clear from Section 4 (d) of R.A. No. 8292 cited by BSU as legal basis of its
claim as well as from its implementing rules is that income generated by the university
may be disbursed by its Governing Board for "instruction, research, extension, or other
programs/projects of the university or colleges."

BSU theorizes that the phrase "other programs/projects of the university or college" in
Section 4 (d) covers all projects and programs of the university, including those
designed to uplift the economic plight of the employees. It is not limited to those
programs which the university may specifically undertake in pursuance of its primary
objective to achieve quality education, contrary to the interpretation of the COA.

We disagree.
Under the principle of ejusdem generis, where a statute describes things of a particular
class or kind accompanied by words of a generic character, the generic word will
usually be limited to things of a similar nature with those particularly enumerated, unless
there be something in the context of the statute which would repel such inference. 13The
COA correctly ruled that the "other programs/projects" under R.A. No. 8292 and its
Implementing Rules should be of the same nature as instruction, research, and
extension. In BSU's case, the disbursements were for rice subsidy and health care
allowances which are, in no way, intended for academic programs similar to instruction,
research, or extension. Section 4 (d) cannot, therefore, be relied upon by BSU as the
legal basis for the grant of the allowances.

Furthermore, a reading of the entire provision supports the COA’s interpretation that the
authority given to the Governing Board of state universities and colleges is not plenary
and absolute. It is clear in Section 4 that the powers of the Governing Board are subject
to limitations. This belies BSU's claim of plenary and absolute authority.

Neither can BSU find solace in the academic freedom clause of the Constitution.
Academic freedom as adverted to in the Constitution and in

R.A. No. 8292 only encompasses the freedom of the institution of higher learning to
determine for itself, on academic grounds, who may teach, what may be taught, how it
shall be taught, and who may be admitted to study.14 The guaranteed academic
freedom does not grant an institution of higher learning unbridled authority to disburse
its funds and grant additional benefits sans statutory basis. Unfortunately for BSU, it
failed to present any sound legal basis that would justify the grant of these additional
benefits to its employees.

Section 8, Article IX-B of the 1987 Constitution, is clear that:

No elective or appointive public officer or employee shall receive additional,

double or indirect compensation, unless specifically authorized by law, nor
accept without the consent of Congress, any present, emolument, office or title of
any kind from any foreign government.
 Pensions or gratuities shall not be considered as additional, double or indirect
compensation.

Besides, Section 12 of R.A. No. 6758 or the Salary Standardization Law already
provides for consolidation of allowances in the standardized salary rates, thus:

SEC. 12. Consolidation of All 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.

The benefits excluded from the standardized salary rates are the "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.15 Clearly, the rice
subsidy and health care allowance granted by BSU were not among the allowances
listed in Section 12 which State workers can continue to receive under R.A. No. 6758
over and above their standardized salary rates. Hence, no abuse of discretion was
committed by the COA in disallowing the disbursement of funds.

As regards the refund of the disallowed benefits, this Court holds that the employees
need not refund the benefits they received based on our ruling in Philippine Ports
Authority v. Commission on Audit.16 In that case, the COA disallowed the payment of
hazard duty pay and birthday cash gifts to its employees. This Court sustained the
disallowance because the grant was without legal basis. However, this Court ruled
against the refund holding that:
 x x x Petitioners received the hazard duty pay and birthday cash gift in good faith
since the benefits were authorized by PPA Special Order No. 407-97 issued
pursuant to PPA Memorandum Circular No. 34-95 implementing DBM National
Compensation Circular No. 76, series of 1995, and PPA Memorandum Circular
No. 22-97, respectively. Petitioners at the time had no knowledge that the
payment of said benefits lacked legal basis. Being in good faith, petitioners need
not refund the benefits they received.17

The ruling in Philippine Ports Authority applies to this case. The BSU employees
received the rice subsidy and health care allowances in good faith since the benefits
were authorized by Board Resolution No. 794, series of 1997. They had no knowledge
that the grant of said benefits lacked statutory basis. Therefore, a refund is
unnecessary.

WHEREFORE, the instant petition is DENIED. Commission on Audit Decisions No.

2003-112 and No. 2005-019 are AFFIRMED but with MODIFICATION that BSU
employees need not refund the rice subsidy and health care allowance received per
Board Resolution No. 794, series of 1997.

No pronouncement as to costs.

SO ORDERED.

Quisumbing* , Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona,

Azcuna, Tinga, Chico-Nazario, Garcia, Velasco, Jr., JJ., concur.
Puno, C.J., on official leave.
Carpio-Morales, J., on leave.

Footnotes

* Acting Chief Justice.

1 Annex "B," rollo, pp. 21-25.

2 Annex "A," id. at 17-20.

3 Annexes "C" to "C-1," id. at 26-28.

4 Annex "D," id. at 29-30.

5 Supra note 1.

6 Id. at 23-24.

7 Supra note 1.

8 BSU's Memorandum, p. 5.

9 SEC. 2. Mode of review. - A judgment or final resolution of the Commission of

Election and the Commission on Audit may be brought by the aggrieved party to
the Supreme Court on Certiorari under Rule 65, except as herein provided.

10 Reyes v. Commission on Audit, G.R. No. 125129, March 29, 1999, 305 SCRA
512, 517.

11 Partido ng Manggawa v. Commission of Elections, G.R. No. 164702, March

15, 2006, 484 SCRA 671, 684-685.

12 Id.

13 Ching v. Salinas, G.R. No. 161295, June 29, 2005, 462 SCRA 241, 261.

14 Vide: Camacho v. Coresis, G.R. No. 134372, August 22, 2002, 387 SCRA 628,
637.

15 Philippine International Trading Corporation v. Commission on Audit, G.R. No.

152688, November 19, 2003, 416 SCRA 245, 249.
 16 G.R. No. 159200, February 16, 2006, 482 SCRA 490, 498.

17 Id. at 500.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. 78413 November 8, 1989

CAGAYAN VALLEY ENTERPRISES, INC., Represented by its President, Rogelio

Q. Lim, petitioner,
vs.
THE HON. COURT OF APPEALS and LA TONDEÑA, INC., respondents.

Efren M. Cacatian for petitioners.

San Jose, Enrique, Lacas, Santos and Borje for private respondent.
REGALADO, J.:

This petition for review on certiorari seeks the nullification of the decision of the Court of
Appeals of December 5, 1986 in CA-G.R. CV No. 06685 which reversed the decision of
the trial court, and its resolution dated May 5, 1987 denying petitioner's motion for
reconsideration.

The following antecedent facts generative of the present controversy are not in dispute.

Sometime in 1953, La Tondeña, Inc. (hereafter, LTI for short) registered with the
Philippine Patent Office pursuant to Republic Act No. 623 1 the 350 c.c. white flint
bottles it has been using for its gin popularly known as "Ginebra San Miguel". This
registration was subsequently renewed on December 4, 1974. 2

On November 10, 1981, LTI filed Civil Case No. 2668 for injunction and damages in the
then Branch 1, Court of First Instance of Isabela against Cagayan Valley Enterprises,
Inc. (Cagayan, for brevity) for using the 350 c.c., white flint bottles with the mark "La
Tondeña Inc." and "Ginebra San Miguel" stamped or blown-in therein by filling the same
with Cagayan's liquor product bearing the label "Sonny Boy" for commercial sale and
distribution, without LTI's written consent and in violation of Section 2 of Republic Act
No. 623, as amended by Republic Act No. 5700. On the same date, LTI further filed
an ex parte petition for the issuance of a writ of preliminary injunction against the
defendant therein. 3 On November 16, 1981, the court a quo issued a temporary
restraining order against Cagayan and its officers and employees from using the 350
c.c. bottles with the marks "La Tondeña" and "Ginebra San Miguel." 4

Cagayan, in its answer, 5 alleged the following defenses:

1. LTI has no cause of action due to its failure to comply with Section 21 of
Republic Act No. 166 which requires the giving of notice that its aforesaid
marks are registered by displaying and printing the words "Registered in
the Phil. Patent Office" or "Reg Phil. Pat. Off.," hence no suit, civil or
criminal, can be filed against Cagayan;
 2. LTI is not entitled to any protection under Republic Act No. 623, as
amended by Republic Act No. 5700, because its products, consisting of
hard liquor, are not among those contemplated therein. What is protected
under said law are beverages like Coca-cola, Royal Tru-Orange, Lem-o-
Lime and similar beverages the bottles whereof bear the words "Reg Phil.
Pat. Off.;"

3. No reservation of ownership on its bottles was made by LTI in its sales invoices nor
does it require any deposit for the retention of said bottles; and

4. There was no infringement of the goods or products of LTI since Cagayan uses its
own labels and trademark on its product.

In its subsequent pleadings, Cagayan contended that the bottles they are using are not
the registered bottles of LTI since the former was using the bottles marked with "La
Tondeña, Inc." and "Ginebra San Miguel" but without the words "property of" indicated
in said bottles as stated in the sworn statement attached to the certificate of registration
of LTI for said bottles.

On December 18, 1981, the lower court issued a writ of preliminary injunction, upon the
filing of a bond by LTI in the sum of P50,000.00, enjoining Cagayan, its officers and
agents from using the aforesaid registered bottles of LTI. 6

After a protracted trial, which entailed five (5) motions for contempt filed by LTI against
Cagayan, the trial court rendered judgment 7 in favor of Cagayan, ruling that the
complaint does not state a cause of action and that Cagayan was not guilty of contempt.
Furthermore, it awarded damages in favor of Cagayan.

LTI appealed to the Court of Appeals which, on December 5, 1986 rendered a decision
in favor of said appellant, the dispositive portion whereof reads:

WHEREFORE, the decision appealed from is hereby SET ASIDE and

judgment is rendered permanently enjoining the defendant, its officers and
 agents from using the 350 c.c. white flint bottles with the marks of
ownership "La Tondeña, Inc." and "Ginebra San Miguel", blown-in or
stamped on said bottles as containers for defendant's products.

The writ of preliminary injunction issued by the trial court is therefore made
permanent.

Defendant is ordered to pay the amounts of:

(1) P15,000.00 as nominal or temperate damages;

(2) P50,000.00 as exemplary damages;

(3) P10,000.00 as attorney's fees; and

(4) Costs of suit. 8

On December 23, 1986, Cagayan filed a motion for reconsideration which was denied
by the respondent court in its resolution dated May 5, 1987, hence the present petition,
with the following assignment of errors:

I. The Court of Appeals gravely erred in the decision granting

that "there is, therefore, no need for plaintiff to display the
words "Reg. Phil. Pat. Off." in order for it to succeed in
bringing any injunction suit against defendant for the illegal
use of its bottles. Rep. Act No. 623, as amended by Rep. Act
No. 5700 simply provides and requires that the marks or
names shall be stamped or marked on the containers."

II. The Court of Appeals gravely erred in deciding that

"neither is there a reason to distinguish between the two (2)
sets of marked bottles-those which contain the marks
"Property of La Tondeña, Inc., Ginebra San Miguel," and
those simply marked La Tondeña Inc., Ginebra San Miguel'.
 By omitting the words "property of" plaintiff did not open itself
to violation of Republic Act No. 623, as amended, as having
registered its marks or names it is protected under the law."

III. The Honorable Court of Appeals gravely erred in deciding

that the words "La Tondeña, Inc. and Ginebra San Miguel"
are sufficient notice to the defendant which should have
inquired from the plaintiff or the Philippine Patent Office, if it
was lawful for it to re-use the empty bottles of the plaintiff.

IV. The Honorable Court of Appeals gravely erred in

deciding that defendant-appellee cannot claim good faith
from using the bottles of plaintiff with marks "La Tondeña,
Inc." alone, short for the description contained in the sworn
statement of Mr. Carlos Palanca, Jr., which was a requisite
of its original and renewal registrations.

V. The Honorable Court of Appeals gravely erred in

accommodating the appeal on the dismissals of the five (5)
contempt charges.

VI. The Honorable Court of Appeals gravely erred in

deciding that the award of damages in favor of the
defendant-appellee, petitioner herein, is not in order. Instead
it awarded nominal or temperate, exemplary damages and
attorney's fees without proof of bad faith. 9

The pertinent provisions of Republic Act No. 623, as amended by Republic Act No.
5700, provides:

SECTION 1. Persons engaged or licensed to engage in the manufacture,

bottling, or selling of soda water, mineral or aerated waters, cider, milk,
cream or other lawful beverages in bottles, boxes, casks, kegs, or barrels
and other similar containers, or in the manufacturing, compressing or
selling of gases such as oxygen, acytelene, nitrogen, carbon dioxide
ammonia, hydrogen, chloride, helium, sulphur, dioxide, butane, propane,
freon, melthyl chloride or similar gases contained in steel cylinders, tanks,
flasks, accumulators or similar containers, with the name or the names of
their principals or products, or other marks of ownership stamped or
marked thereon, may register with the Philippine Patent Office a
description of the names or marks, and the purpose for which the
containers so marked and used by them, under the same conditions,
rules, and regulations, made applicable by law or regulation to the
issuance of trademarks.

SEC. 2. It shall be unlawful for any person, without the written consent of
the manufacturer, bottler, or seller, who has succesfully registered the
marks of ownership in accordance with the provisions of the next
preceding section, to fill such bottles, boxes, kegs, barrels, steel cylinders,
tanks, flasks, accumulators or other similar containers so marked or
stamped, for the purpose of sale, or to sell, disposed of, buy or traffic in, or
wantonly destroy the same, whether filled or not, to use the same, for
drinking vessels or glasses or drain pipes, foundation pipes, for any other
purpose than that registered by the manufacturer, bottler or seller. Any
violation of this section shall be punished by a fine of not more than one
thousand pesos or imprisonment of not more than one year or both.

SEC. 3. The use by any person other than the registered manufacturer,
bottler or seller, without written permission of the latter of any such bottle,
cask, barrel, keg, box, steel cylinders, tanks, flask, accumulators, or other
similar containers, or the possession thereof without written permission of
the manufacturer, by any junk dealer or dealer in casks, barrels, kegs
boxes, steel cylinders, tanks, flasks, accumulators or other similar
containers, the same being duly marked or stamped and registered as
 herein provided, shall give rise to a prima facie presumption that such use
or possession is unlawful.

The above-quoted provisions grant protection to a qualified manufacturer who

successfully registered with the Philippine Patent Office its duly stamped or marked
bottles, boxes, casks and other similar containers. The mere use of registered bottles or
containers without the written consent of the manufacturer is prohibited, the only
exceptions being when they are used as containers for "sisi," bagoong," "patis" and
similar native products. 10

It is an admitted fact that herein petitioner Cagayan buys from junk dealers and retailers
bottles which bear the marks or names La Tondeña Inc." and "Ginebra San Miguel" and
uses them as containers for its own liquor products. The contention of Cagayan that the
aforementioned bottles without the words "property of" indicated thereon are not the
registered bottles of LTI, since they do not conform with the statement or description in
the supporting affidavits attached to the original registration certificate and renewal, is
untenable.

Republic Act No. 623 which governs the registration of marked bottles and containers
merely requires that the bottles, in order to be eligible for registration, must be stamped
or marked with the names of the manufacturers or the names of their principals or
products, or other marks of ownership. No drawings or labels are required but, instead,
two photographs of the container, duly signed by the applicant, showing clearly and
legibly the names and other marks of ownership sought to be registered and a bottle
showing the name or other mark or ownership, irremovably stamped or marked, shall be
submitted. 11

The term "Name or Other Mark of Ownership" 12 means the name of the applicant or the
name of his principal, or of the product, or other mark of ownership. The second set of
bottles of LTI without the words "property of" substantially complied with the
requirements of Republic Act No. 623, as amended, since they bear the name of the
principal, La Tondeña Inc., and of its product, Ginebra San Miguel. The omitted words
"property of" are not of such vital indispensability such that the omission thereof will
remove the bottles from the protection of the law. The owner of a trade-mark or trade-
name, and in this case the marked containers, does not abandon it by making minor
modifications in the mark or name itself. 13 With much more reason will this be true
where what is involved is the mere omission of the words "property of" since even
without said words the ownership of the bottles is easily Identifiable. The words "La
Tondeña Inc." and "Ginebra San Miguel" stamped on the bottles, even without the
words "property of," are sufficient notice to the public that those bottles so marked are
owned by LTI.

The claim of petitioner that hard liquor is not included under the term "other lawful
beverages" as provided in Section I of Republic Act No. 623, as amended by Republic
Act No. 5700, is without merit. The title of the law itself, which reads " An Act to
Regulate the Use of Duly Stamped or Marked Bottles, Boxes, Casks, Kegs, Barrels and
Other Similar Containers" clearly shows the legislative intent to give protection to all
marked bottles and containers of all lawful beverages regardless of the nature of their
contents. The words "other lawful beverages" is used in its general sense, referring to
all beverages not prohibited by law. Beverage is defined as a liquor or liquid for
drinking. 14 Hard liquor, although regulated, is not prohibited by law, hence it is within
the purview and coverage of Republic Act No. 623, as amended.

Republic Act No. 623, as amended, has for its purpose the protection of the health of
the general public and the prevention of the spread of contagious diseases. It further
seeks to safeguard the property rights of an important sector of Philippine industry. 15 As
held by this Court in Destileria Ayala, Inc. vs. Tan Tay & Co.,16 the purpose of then Act
3070, was to afford a person a means of Identifying the containers he uses in the
manufacture, preservation, packing or sale of his products so that he may secure their
registration with the Bureau of Commerce and Industry and thus prevent other persons
from using them. Said Act 3070 was substantially reenacted as Republic Act No. 623. 17

The proposition that Republic Act No. 623, as amended, protects only the containers of
the soft drinks enumerated by petitioner and those similar thereto, is unwarranted and
specious. The rule of ejusdem generis cannot be applied in this case. To limit the
coverage of the law only to those enumerated or of the same kind or class as those
specifically mentioned will defeat the very purpose of the law. Such rule of ejusdem
generis is to be resorted to only for the purpose of determining what the intent of the
legislature was in enacting the law. If that intent clearly appears from other parts of the
law, and such intent thus clearly manifested is contrary to the result which would be
reached by the appreciation of the rule of ejusdem generis, the latter must give way.18

Moreover, the above conclusions are supported by the fact that the Philippine Patent
Office, which is the proper and competent government agency vested with the authority
to enforce and implement Republic Act No. 623, registered the bottles of respondent LTI
as containers for gin and issued in its name a certificate of registration with the following
findings:

It appearing, upon due examination that the applicant is entitled to have

the said MARKS OR NAMES registered under R.A. No. 623, the said
marks or names have been duly registered this day in the PATENT
OFFICE under the said Act, for gin, Ginebra San Miguel. 19

While executive construction is not necessarily binding upon the courts, it is entitled to
great weight and consideration. The reason for this is that such construction comes
from the particular branch of government called upon to implement the particular law
involved. 20

Just as impuissant is petitioners contention that respondent court erred in holding that
there is no need for LTI to display the words "Reg Phil. Pat. Off." in order to succeed in
its injunction suit against Cagayan for the illegal use of the bottles. To repeat, Republic
Act No. 623 governs the registration of marked bottles and containers and merely
requires that the bottles and/or containers be marked or stamped by the names of the
manufacturer or the names of their principals or products or other marks of ownership.
The owner upon registration of its marked bottles, is vested by law with an exclusive
right to use the same to the exclusion of others, except as a container for native
products. A violation of said right gives use to a cause of action against the violator or
infringer.

While Republic Act No. 623, as amended, provides for a criminal action in case of
violation, a civil action for damages is proper under Article 20 of the Civil Code which
provides that every person who, contrary to law, wilfully or negligently causes damage
to another, shall indemnify the latter for the same. This particular provision of the Civil
Case was clearly meant to complement all legal provisions which may have
inadvertently failed to provide for indemnification or reparation of damages when proper
or called for. In the language of the Code Commission "(t)he foregoing rule pervades
the entire legal system, and renders it impossible that a person who suffers damage
because another has violated some legal provisions, should find himself without
relief." 21 Moreover, under Section 23 of Republic Act No. 166, as amended, a person
entitled to the exclusive use of a registered mark or tradename may recover damages in
a civil action from any person who infringes his rights. He may also, upon proper
showing, be granted injunction.

It is true that the aforesaid law on trademarks provides:

SEC. 21. Requirements of notice of registration of trade-mark.-The

registrant of a trade-mark, heretofore registered or registered under the
provisions of this Act, shall give notice that his mark is registered by
displaying with the same as used the words 'Registered in the Philippines
Patent Office' or 'Reg Phil. Pat. Off.'; and in any suit for infringement under
this Act by a registrant failing so to mark the goods bearing the registered
trade-mark, no damages shall be recovered under the provisions of this
Act, unless the defendant has actual notice of the registration.

Even assuming that said provision is applicable in this case, the failure of LTI to make
said marking will not bar civil action against petitioner Cagayan. The aforesaid
requirement is not a condition sine qua non for filing of a civil action against the infringer
for other reliefs to which the plaintiff may be entitled. The failure to give notice of
registration will not deprive the aggrieved party of a cause of action against the infringer
but, at the most, such failure may bar recovery of damages but only under the
provisions of Republic Act No. 166.

However, in this case an award of damages to LTI is ineluctably called for. Petitioner
cannot claim good faith. The record shows that it had actual knowledge that the bottles
with the blown-in marks "La Tondeña Inc." and "Ginebra San Miguel" are duly
registered. In Civil Case No. 102859 of the Court of First Instance of Manila, entitled "La
Tondeña Inc. versus Diego Lim, doing business under the name and style 'Cagayan
Valley Distillery,' " a decision was rendered in favor of plaintiff therein on the basis of the
admission and/or acknowledgment made by the defendant that the bottles marked only
with the words "La Tondeña Inc." and "Ginebra San Miguel" are registered bottles of
LTI. 22

Petitioner cannot avoid the effect of the admission and/or acknowledgment made by
Diego Lim in the said case. While a corporation is an entity separate and distinct from
its stock-holders and from other corporations with which it may be connected, where the
discreteness of its personality is used to defeat public convenience, justify wrong,
protect fraud, or defend crime, the law will regard the corporation as an association of
persons, or in the case of two corporations, merge them into one. When the corporation
is the mere alter ego or business conduit of a person, it may be disregaded. 23

Petitioner's claim that it is separate and distinct from the former Cagayan Valley
Distillery is belied by the evidence on record. The following facts warrant the conclusion
that petitioner, as a corporate entity, and Cagayan Valley Distillery are one and the
same. to wit: (1) petitioner is being managed by Rogelio Lim, the son of Diego Lim, the
owner and manager of Cagayan Valley Distellery; (2) it is a family corporation; 24 (3) it is
an admitted fact that before petitioner was incorporated it was under a single
proprietorship; 25 (4) petitioner is engaged in the same business as Cagayan Valley
Distillery, the manufacture of wines and liquors; and (5) the factory of petitioner is
located in the same place as the factory of the former Cagayan Valley Distillery.
It is thus clear that herein petitioner is a mere continuation and successor of Cagayan
Valley Distillery. It is likewise indubitable that the admission made in the former case, as
earlier explained, is binding on it as cogent proof that even before the filing of this case
it had actual knowledge that the bottles in dispute were registered containers of LTI As
held in La Campana Coffee Factory, Inc., et al. vs. Kaisahan Ng Mga Manggagawa sa
La Campana (KKM), et al., 26 where the main purpose in forming the corporation was to
evade one's subsidiary liability for damages in a criminal case, the corporation may not
be heard to say that it has a personality separate and distinct from its members,
because to allow it to do so would be to sanction the use of the fiction of corporate entity
as a shield to further an end subversive of justice.

Anent the several motions of private respondent LTI to have petitioner cited for
contempt, we reject the argument of petitioner that an appeal from a verdict of acquittal
in a contempt, proceeding constitutes double jeopardy. A failure to do something
ordered by the court for the benefit of a party constitutes civil contempt. 27 As we held
in Converse Rubber Corporation vs. Jacinto Rubber & Plastics Co., Inc.:

...True it is that generally, contempt proceedings are characterized as

criminal in nature, but the more accurate juridical concept is that contempt
proceedings may actually be either civil or criminal, even if the distinction
between one and the other may be so thin as to be almost imperceptible.
But it does exist in law. It is criminal when the purpose is to vindicate the
authority of the court and protect its outraged dignity. It is civil when there
is failure to do something ordered by a court to be done for the benefit of a
party (3 Moran Rules of Court, pp. 343-344, 1970 ed.; see also Perkins vs.
Director of Prisons, 58 Phil. 272; Harden vs. Director of Prisons, 81 Phil.
741.) And with this distinction in mind, the fact that the injunction in the
instant case is manifestly for the benefit of plaintiffs makes of the contempt
herein involved civil, not criminal. Accordingly, the conclusion is inevitable
that appellees have been virtually found by the trial court guilty of civil
contempt, not criminal contempt, hence, the rule on double jeopardy may
not be invoked. 28
The contempt involved in this case is civil and constructive in nature, it having arisen
from the act of Cagayan in violating the writ of preliminary injunction of the lower court
which clearly defined the forbidden act, to wit:

NOW THEREFORE, pending the resolution of this case by the court, you
are enjoined from using the 350 c.c. white flint bottles with the marks La
Tondeña Inc.,' and 'Ginebra San Miguel' blown-in or stamped into the
bottles as containers for the defendant's products. 19

On this incident, two considerations must be borne in mind. Firstly, an injunction duly
issued must be obeyed, however erroneous the action of the court may be, until its
decision is overruled by itself or by a higher court. 30Secondly, the American rule that
the power to judge a contempt rests exclusively with the court contemned does not
apply in this Jurisdiction. The provision of the present Section 4, Rule 71 of the Rules of
Court as to where the charge may be filed is permissive in nature and is merely
declaratory of the inherent power of courts to punish contumacious conduct. Said rules
do not extend to the determination of the jurisdiction of Philippine courts. 31 In
appropriate case therefore, this Court may, in the interest of expedient justice, impose
sanctions on contemners of the lower courts.

Section 3 of Republic Act No. 623, as amended, creates a prima facie presumption
against Cagayan for its unlawful use of the bottles registered in the name of LTI
Corollarily, the writ of injunction directing petitioner to desist from using the subject
bottles was properly issued by the trial court. Hence, said writ could not be simply
disregarded by Cagayan without adducing proof sufficient to overcome the aforesaid
presumption. Also, based on the findings of respondent court, and the records before us
being sufficient for arbitrament without remanding the incident to the court
a quo petitioner can be adjudged guilty of contempt and imposed a sanction in this
appeal since it is a cherished rule of procedure for this Court to always strive to settle
the entire controversy in a single proceeding, 32We so impose such penalty concordant
with the preservative principle and as demanded by the respect due the orders, writs
and processes of the courts of justice.
WHEREFORE, judgment is hereby rendered DENYING the petition in this case and
AFFIRMING the decision of respondent Court of Appeals. Petitioner is hereby declared
in contempt of court and ORDERED to pay a fine of One Thousand Pesos (P1,000.00),
with costs.

SO ORDERED.

Paras, Padilla and Sarmiento, JJ., concur.

Melencio-Herrera (Chairperson), J., is on leave.

Footnotes

1 An Act to Regulate the Use of Duly Stamped or Marked Bottles. Boxes,

Casks, Kegs, Barrels and Other Similar Containers.

2 Original Record, Civil Case No. 2668. 6-12.

3 Ibid., Id., 1-14.

4 Ibid., Id., 44.

5 Ibid., Id., 45-53.

6 Ibid., Id., 71-73.

7 Penned by Judge Efren N. Ambrosia.

8 Rollo. 45-, Justice Jose C. Campos Jr., ponente, with Justice Venancio
D. Aldecoa, Jr. concurring and Justice Reynato S. Puno concurring in the
result.

9 Rollo, 7-8, 13-14. 16, 18.

10 Sec. 6. Republic Act No. 623, as amended.

11 Rules 128 and 129, Revised Rules of Practice Before the Philippine
Patent Office in Trademark Cases.

12 Rule 33, Id., citing Sec. 1, Republic Act No. 623.

13 Drexel Enterprises, Inc. vs. Richardson, (CA10 Kan) 312 F2d 525,
Beech-Nut Packing Co. vs. P. Lorillard Co. (DC NJ) 299 F 834, affd f(CA3
NJ) 7 F2d 967, affd 273 US 629, 71 L. Ed 810, 47 SCT 481, as cited in 74
Am. Jur. 2d, 726.

14 Burntein vs. U.S., CC. A. Cal., 55 F2d 599, 603; Black's Law
Dictionary, Fourth Edition. 204.

15 Congressional Record, Vol. 11, No. 69, 942; Exh. 6. Civil Case No.
2668, Folio of Exhibits, 3.

16 74 Phil. 301 (1943).

17 Explanatory Note, House Bill No. 1112, Congressional Record, 2-733-

2734, Second Congress of the Republic, First Session, Vol. I, No. 80.
Session of May 18.1950.

18 U. S. vs. Sto. Nino, 13 Phil. 141 (1909).

19 Exh. B, Original Record,. Civil Case No. 2668, 6.

20 Ramos vs. Court of Industrial Relations, 21 SCRA 1282 (1967).

21 Report of the Code Commission on the Proposed Civil Code of the

Philippines (1948), 39.

22 Exh. F, F-2, Original Record, Civil Case No. 2668, 270-275,

 23 Yutivo & Sons Hardware Company vs. Court of Tax Appeals, 1 SCRA
161 (1961)

24 Original Record, Civil Case No. 2668, TSN, Sept. 19, 1984. 3

25 Ibid., Id., TSN, Nov. 13, 1984, 120-121.

26 93 Phil.. 160 (1953).

27 Mabale, et al. vs. Apalisok, et al., 88 SCRA 234 (1979).

28 97 SCRA 158 (1980),

29 Original Record, Civil Case No. 2668,109.

30 Harden vs. Pena, et al., 87 Phil. 620 (1950).

31 People vs.De Luna. et al., 102 Phil. 968 (1958).

32 Alger Electric Inc. vs. Court of Appeals, et al., 135 SCRA 37 (1985);
Lianga Bay Logging Co., Inc., et al. vs. Court of Appeals, et al., 157 SCRA
357 (1988).

Republic of the Philippines

SUPREME COURT
Baguio City

EN BANC

G.R. No. 198271 April 1, 2014

ARNALDO M. ESPINAS, LILLIAN N. ASPRER, and ELEANORA R. DE

JESUS, Petitioners,
vs.
COMMISSION ON AUDIT, Respondent.
 DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for certiorari1 is respondent Commission on Audit's (CoA)

Decision No. 2011-0392 dated August 8, 2011 which affirmed Notice of Disallowance
No. 09-001-GF(06)3 dated July 21, 2009 covering petitioners’ reimbursement claims for
extraordinary and miscellaneous expenses for the period January to December 2006.

The Facts

The Local Water Utilities Administration (LWUA) is a government-owned and controlled

corporation (GOCC) created4 pursuant to Presidential Decree No. (PD) 198,5 as
amended, otherwise known as the "Provincial Water Utilities Act of 1973."

Petitioners are department managers of the LWUA who, together with 28 other LWUA
officials, sought reimbursement of their extraordinary and miscellaneous expenses
(EME) for the period January to December 2006. According to petitioners, the
reimbursement claims were within the ceiling provided under the LWUA Calendar Year
2006 Corporate Operating Budget approved by the LWUA Board of Trustees and the
Department of Budget and Management.6

On April 16, 2007, the Office of the CoA Auditor, through Priscilla DG. Cruz, the
Supervising Auditor assigned to the LWUA (SA Cruz), issued Audit Observation
Memorandum (AOM) No. AOM-2006-27,7 revealing that the 31 LWUA officials were
able to reimburse ₱16,900,705.69 in EME, including expenses for official entertainment,
service awards, gifts and plaques, membership fees, and seminars/conferences. 8 Out of
the said amount, ₱13,110,998.26 was reimbursed only through an attached certification
attesting to their claimed incurrence ("certification").9According to the AOM, this violated
CoA Circular No. 2006-0110 dated January 3, 2006 (CoA Circular No. 2006-01), which
pertinently states that the "claim for reimbursement of such expenses shall be
supported by receipts and/or other documents evidencing disbursements." 11
During the CoA Exit Conference held sometime in April 2007, LWUA management
officials, including herein petitioners, manifested that they were unaware of the
existence of CoA Circular No. 2006-01, particularly during the period January to
December 2006.12

After the post-audit of the LWUA EME account for the same period, SA Cruz issued
Notice of Disallowance No. 09-001-GF(06)13 dated July 21, 2009, disallowing the EME
reimbursement claims of the 31 LWUA officials, in the total amount of ₱13,110,998.26,
for the reason that they "were not supported by receipts and/or [other] documents
evidencing disbursements as required under [Item III(3)] of [CoA Circular No. 2006-
01]."14

Pursuant to the CoA’s 2009 Revised Rules of Procedure, petitioners appealed the
notice of disallowance to the CoA Cluster Director (Corporate Sector - Cluster
B),15 contending that the "certification" they attached in support of their EME
reimbursement claims was originally allowed under Section 397 of the Government
Accounting and Auditing Manual, Volume I (GAAM - Vol. I),16 which is a reproduction of
Item III(4) of CoA Circular No. 89-30017 dated March 21, 1989 (CoA Circular No. 89-
300), viz.:

4. x x x The corresponding claim for reimbursement of such expenses shall be

supported by receipts and/or other documents evidencing disbursement, if these are
available, or, in lieu thereof, by a certification executed by the official concerned that the
expenses sought to be reimbursed have been incurred for any of the purposes
contemplated under Section 19 and other related sections of RA 6688 (or similar
provision[s] in subsequent General Appropriations Acts) in relation to or by reason of his
position. In the case of miscellaneous expenses incurred for an office specified in the
law, such certification shall be executed solely by the head of the office. 18 (Emphasis
supplied)

Further, petitioners alleged that CoA Circular No. 2006-01 is violative of the equal
protection clause since officials of GOCCs, such as the LWUA officials, are, among
others, prohibited by virtue of the same issuance from supporting their reimbursement
claims with "certifications," unlike officials of the national government agencies (NGAs)
who have been so permitted.19

To this end, petitioners argued that the employees of NGAs and GOCCs are similarly
situated and that there exists no substantial distinction between them. 20

Finally, petitioners submitted that CoA Circular No. 2006-01 was not duly published in
the Official Gazette, or in a newspaper of general circulation and thus, unenforceable. 21

The CoA Cluster Director’s Ruling

Petitioners’ appeal was denied by CoA Cluster Director IV Divinia M. Alagon (CoA
Cluster Director Alagon) in Decision No. 2010-00322 dated April 13, 2010, thereby
affirming Notice of Disallowance No. 09-001-GF(06).

Applying the statutory construction principle of ejusdem generis,23 CoA Cluster Director
Alagon held that a certification executed by the official concerned for the purpose of
claiming EME cannot be construed to fall under the phrase "other documents
evidencing disbursements" as provided under Item III(3) of CoA Circular No. 2006-
01.24 She explained that a certification is not of the same class as a receipt because the
latter is issued by a third person, while the former is issued by the claimant, and usually
self-serving.25 Moreover, certifications are not evidence of disbursements but are just
assertions made by the claimants that they have spent a fixed amount every month for
meetings, seminars, public relations and the like.26 In this relation, CoA Cluster Director
Alagon noted that CoA Circular No. 2006-01 is stricter as it does not mention a
certification as an alternative supporting document for the claim for
reimbursement.27 This is based on the observation that boards of GOCCs and
government financial institutions (GFIs) are invariably empowered to appropriate
through resolutions such amounts as they deem proper for EME.28 Thus, the exclusion
of said certifications in CoA Circular No. 2006-01 is a control measure purposely
integrated thereto to regulate the incurrence of these expenditures and to ensure the
prevention and disallowance of irregular, unnecessary, excessive, extravagant or
unconscionable expenditures or uses of government funds.29

CoA Cluster Director Alagon also opined that there lies no violation of the equal
protection clause since GOCCs and GFIs are empowered to appropriate EME through
board resolutions, while the EME for NGAs must be provided in a law enacted by
Congress (i.e., the General Appropriations Act [GAA]).30 Accordingly, there is a
reasonable classification which is germane to the purpose of CoA Circular No. 2006-
01.31

Finally, CoA Cluster Director Alagon stated that CoA Circular No. 2006-01 was
published in the Manila Standard Today in its February 24, 2006 issue; hence,
petitioners’ assertion on this score was found to be baseless.32

Unconvinced, petitioners elevated the ruling to the Commission Proper, docketed as

CoA CP Case No. 2010-101,33averring that: (a) the principle of ejusdem generis does
not apply since there is no enumeration of things followed by general words in CoA
Circular No. 2006-01;34 (b) the certifications fall under the category of documents
evidencing disbursements under Item III(3) of the same issuance, which, in any case,
have been previously allowed under Section 397 of GAAM - Vol. I and CoA Circular No.
89-300;35 and (c) there exists no valid classification between officials of NGAs and
officials of GOCCs and GFIs.36 Petitioners’ previous contention on the circular’s lack of
publication was no longer raised in their petition to the Commission Proper.

The Commission Proper’s Ruling

In its Decision No. 2011-03937 dated August 8, 2011, the CoA affirmed Notice of
Disallowance No. 09-001-GF(06) but differed from CoA Cluster Director Alagon’s
reasoning.

The CoA agreed with petitioners that the principle of ejusdem generis was not
applicable since CoA Circular No. 2006-01 does not contain any enumeration of specific
terms which are followed by a general word or phrase. However, it held that the
principle’s non-applicability does not necessarily buttress petitioners’ main argument
that the phrase "and/or other documents evidencing disbursements" includes the
"certifications" issued to support the claim for EME reimbursement. This is because the
"other documents evidencing disbursements" must refer to documents that evidence
disbursement, of which the certifications – being mere general statements that the
certified amount was used as EME, and is within the prescribed ceiling therefor – are
not.38

It further debunked petitioners’ reliance on the provisions of Section 397 of GAAM - Vol.
I and Item III(4) of CoA Circular No. 89-300 as these issuances actually show the
contrary intention to include "certifications" in the phrase "other documents evidencing
disbursements" as among the documents sufficient to support the claim for EME
reimbursement under Item III(3) of CoA Circular No. 2006-01. The "certification" is
separate and distinct from the term "other documents evidencing disbursements"
whether under Section 397 of GAAM - Vol. I or Item III(4) of CoA Circular No. 89-300.
The certification under these issuances is "in lieu of" the receipts and/or other
documents evidencing disbursement. Moreover, the CoA observed that if the term
"certification" is intended to be included in the term or among the "other documents
evidencing disbursements" that will support a claim for EME reimbursement, then
Section 397 of GAAM - Vol. I and Item III(4) of CoA Circular No. 89-300 would have
stated so; however, the latter provisions did not. Besides, the CoA pointed out that CoA
Circular No. 2006-01 specifically applies to GOCCs, GFIs and their subsidiaries, while
CoA Circular No. 89-300, from which Section 397 of GAAM - Vol. I was lifted,
exclusively applies to NGAs.39

Finally, the CoA maintained that there is a substantial distinction between the officials of
NGAs and the officials of the GOCCs, GFIs and their subsidiaries insofar as their
entitlement to EME is concerned. The former’s EME is sourced from the annual GAA,
while the latter’s EME is provided by their corporate operating budget approved by their
respective governing boards. In connection therewith, the CoA emphasized that the
issuance of CoA Circular No. 2006-01 is pursuant to its exclusive constitutional authority
to promulgate accounting and auditing rules and regulations, including those for the
prevention and disallowance of irregular, unnecessary, excessive, extravagant, or
unconscionable expenditures or uses of government funds. It is therefore within the
purview of its mandate and the above-stated distinctions that CoA Circular No. 2006-01
must be interpreted.40

Dissatisfied, petitioners filed the present certiorari petition, imputing grave abuse of
discretion on the part of the CoA.

The Issue Before the Court

The primordial issue for the Court’s resolution is whether or not grave abuse of
discretion attended the CoA’s ruling in this case.

The Court’s Ruling

The petition lacks merit.

The CoA’s audit power is among the constitutional mechanisms that gives life to the
check-and-balance system inherent in our system of government.41 As an essential
complement, the CoA has been vested with the exclusive authority to promulgate
accounting and auditing rules and regulations, including those for the prevention and
disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable
expenditures or uses of government funds and properties. This is found in Section 2,
Article IX-D of the 1987 Philippine Constitution which provides that:

Sec. 2. x x x.

(2) The Commission shall have exclusive authority, subject to the limitations in this
Article, to define the scope of its audit and examination, establish the techniques and
methods required therefor, and promulgate accounting and auditing rules and
regulations, including those for the prevention and disallowance of irregular,
unnecessary, excessive, extravagant, or unconscionable expenditures or uses of
government funds and properties. (Emphases supplied)
As an independent constitutional body conferred with such power, it reasonably follows
that the CoA’s interpretation of its own auditing rules and regulations, as enunciated in
its decisions, should be accorded great weight and respect. In the recent case of Delos
Santos v. CoA,42 the Court explained the general policy of the Court towards CoA
decisions reviewed under certiorari43 parameters:44

[T]he CoA is endowed with enough latitude to determine, prevent, and disallow
irregular, unnecessary, excessive, extravagant or unconscionable expenditures of
government funds. It is tasked to be vigilant and conscientious in safeguarding the
proper use of the government's, and ultimately, the people's property. The exercise of
its general audit power is among the constitutional mechanisms that gives life to the
check and balance system inherent in our form of government.1âwphi1

x x x [I]t is the general policy of the Court to sustain the decisions of administrative
authorities, especially one which is constitutionally-created, such as the CoA, not only
on the basis of the doctrine of separation of powers but also for their presumed
expertise in the laws they are entrusted to enforce. Findings of administrative agencies
are accorded not only respect but also finality when the decision and order are not
tainted with unfairness or arbitrariness that would amount to grave abuse of discretion.
It is only when the CoA has acted without or in excess of jurisdiction, or with grave
abuse of discretion amounting to lack or excess of jurisdiction, that this Court entertains
a petition questioning its rulings. x x x. (Emphases and underscoring supplied)

The concept is well-entrenched: grave abuse of discretion exists when there is an

evasion of a positive duty or a virtual refusal to perform a duty enjoined by law or to act
in contemplation of law as when the judgment rendered is not based on law and
evidence but on caprice, whim, and despotism.45 Not every error in the proceedings, or
every erroneous conclusion of law or fact, constitutes grave abuse of discretion. The
abuse of discretion to be qualified as "grave" must be so patent or gross as to constitute
an evasion of a positive duty or a virtual refusal to perform the duty or to act at all in
contemplation of law.46
Viewed in the foregoing light, the Court finds that the CoA did not commit any grave
abuse of discretion as its affirmance of Notice of Disallowance No. 09-001-GF(06) is
based on cogent legal grounds.

First off, the Court concurs with the CoA’s conclusion that the "certification" submitted
by petitioners cannot be properly considered as a supporting document within the
purview of Item III(3) of CoA Circular No. 2006-01 which pertinently states that a "claim
for reimbursement of [EME] expenses shall be supported by receipts and/or other
documents evidencing disbursements." Similar to the word "receipts," the "other
documents" pertained to under the above-stated provision is qualified by the phrase
"evidencing disbursements." Citing its lexicographic definition, the CoA stated that the
term "disbursement" means "to pay out commonly from a fund" or "to make payment in
settlement of debt or account payable."47

That said, it then logically follows that petitioners’ "certification," so as to fall under the
phrase "other documents" under Item III(3) of CoA Circular No. 2006-01, must
substantiate the "paying out of an account payable," or, in simple term, a
disbursement.48 However, an examination of the sample "certification"49 attached to the
petition does not, by any means, fit this description. The signatory therein merely
certifies that he/she has spent, within a particular month, a certain amount for meetings,
seminars, conferences, official entertainment, public relations, and the like, and that the
certified amount is within the ceiling authorized under the LWUA corporate budget.
Accordingly, since petitioners’ reimbursement claims were solely supported by this
"certification," the CoA properly disallowed said claims for failure to comply with CoA
Circular No. 2006-01.

The CoA also correctly rejected petitioners’ invocation of the provisions of Section 397
of GAAM - Vol. I and CoA Circular No. 89-300 since, at the outset, such rules are
applicable only to NGAs, and not to GOCCs, GFIs and their subsidiaries which are
specifically governed by CoA Circular No. 2006-01.50 A perusal of CoA Circular No. 89-
300, from which Section 397 of GAAM - Vol. I was merely reproduced, clearly indicates
in Item II thereof, captioned "Scope and Coverage," that the rules thereunder applies to
"appropriations authorized under [the GAA of 1989] for National Government agencies
[that] may be used for incurrence of extraordinary and miscellaneous expenses at the
rates and by the offices and officials specified therein for, among others x x x." 51 A
similar inference may be reached from a reading of Item I of CoA Circular No. 89-300,
captioned as "Rationale," which states that the circular was made in response to the
"increasing number of queries and requests for clarification as to the real import and
true intent of [the provisions of the GAA of 1989] authorizing the use by certain national
government officials of appropriations authorized for their agencies for extraordinary
and miscellaneous expenses."52 On the other hand, Item II of CoA Circular No. 2006-
01, captioned as "Scope and Coverage," explicitly states that "[t]his circular shall be
applicable to all GOCCs, GFIs and their subsidiaries" and shall cover their
"extraordinary and miscellaneous expenses and other similar expenses." 53 Item I of
CoA Circular No. 2006-01, captioned as "Rationale," also mentions the CoA’s declared
policy to "prescribe rules and regulations specifically for government corporations to
regulate the incurrence of these expenditures and ensure the prevention and
disallowance of irregular, unnecessary, excessive, extravagant, or unconscionable
expenditures or uses of government funds" considering that "[g]overning boards of
[GOCCs/GFIs] are invariably empowered to appropriate through resolutions such
amounts as they deem appropriate for extraordinary and miscellaneous
expenses."54 Based on the foregoing, it is readily apparent that petitioners’ reliance on
Section 397 of GAAM - Vol. I and Item III(4) of CoA Circular No. 89-300 was improper,
hence, the CoA’s apt dismissal of the same.

Lastly, the Court upholds the CoA’s finding that there exists a substantial
distinction55 between officials of NGAs and the officials of GOCCs, GFIs and their
subsidiaries which justify the peculiarity in regulation. Since the EME of GOCCs, GFIs
and their subsidiaries, are, pursuant to law, allocated by their own internal governing
boards, as opposed to the EME of NGAs which are appropriated in the annual GAA
duly enacted by Congress, there is a perceivable rational impetus for the CoA to impose
nuanced control measures to check if the EME disbursements of GOCCs, GFIs and
their subsidiaries constitute irregular, unnecessary, excessive, extravagant, or
unconscionable government expenditures. Case in point is the LWUA Board of Trustees
which, pursuant to Section 69 of PD 198, as amended, is "authorized to appropriate out
of any funds of the Administration, such amounts as it may deem necessary for the
operational and other expenses of the Administration including the purchase of
necessary equipment." Indeed, the Court recognizes that denying GOCCs, GFIs and
their subsidiaries the benefit of submitting a secondary-alternate document in support of
an EME reimbursement, such as the "certification" discussed herein, is a CoA policy
intended to address the disparity in EME disbursement autonomy. As pertinently stated
in CoA Circular No. 2006-01, the consideration underlying the rules and regulations
contained therein is the fact that "[g]overning boards of [GOCCs/GFIs] are invariably
empowered to appropriate through resolutions such amounts as they deem appropriate
for extraordinary and miscellaneous expenses."56 Hence, in due deference to the CoA’s
constitutional prerogatives, the Court, absent any semblance of grave abuse of
discretion in this case, respects the regulation, and consequently dismisses the petition.
With these pronouncements, the Court finds it unnecessary to delve on the other
ancillary issues raised by the parties in their pleadings. Notice of Disallowance No. 09-
001-GF(06) dated July 21, 2009 is therefore upheld and the persons therein held liable
are ordered to duly return the disallowed amount of ₱13,110,998.26.

WHEREFORE, the petition is DISMISSED. Accordingly, Notice of Disallowance No. 09-

001-GF(06) dated July 21, 2009 is hereby AFFIRMED.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice

WE CONCUR:

MARIA LOURDES P.A. SERENO

Chief Justice
 ANTONIO T. CARPIO PRESBITERO J. VELASCO, JR.
Associate Justice Associate Justice

TERESITA J. LEONARDO-DE
ARTURO D. BRION
CASTRO
Associate Justice
Associate Justice

DIOSDADO M. PERALTA LUCAS P. BERSAMIN

Associate Justice Associate Justice

MARIANO C. DEL CASTILLO ROBERTO A. ABAD

Associate Justice Associate Justice

MARTIN S. VILLARAMA, JR. JOSE PORTUGAL PEREZ

Associate Justice Associate Justice

On official leave
BIENVENIDO L. REYES
JOSE CATRAL MENDOZA*
Associate Justice
Associate Justice

MARVIC MARIO VICTOR F. LEONEN

Associate Justice

CERTIFICATION

I certify that the conclusions in the above Decision had been reached in consultation
before the case was assigned to the writer of the opinion of the Court.

MARIA LOURDES P.A. SERENO

Chief Justice
Footnotes

* On official leave.

1 Filed under Rule 64 in relation to Rule 65 of the Rules of Court; rollo, pp. 3-18.

2 Id. at 21-28. Signed by Chairperson Ma. Gracia M. Pulido-Tan and

Commissioners Juanito G. Espino, Jr. and Heidi L. Mendoza.

3 Id. at 38-47.

4 Section 49 of PD 198, as amended, provides as follows:

SEC. 49. Charter. - There is hereby chartered, created and formed a

government corporation to be known as the ‘Local Water Utilities
Administration’ which is hereby attached to the Office of the President.
The provisions of this Title shall be and constitute the charter of the
Administration.

5 Entitled "DECLARING A NATIONAL POLICY FAVORING LOCAL OPERATION

AND CONTROL OF WATER SYSTEMS; AUTHORIZING THE FORMATION OF
LOCAL WATER DISTRICTS AND PROVIDING FOR THE GOVERNMENT AND
ADMINISTRATION OF SUCH DISTRICTS; CHARTERING A NATIONAL
ADMINISTRATION TO FACILITATE IMPROVEMENT OF LOCAL WATER
UTILITIES; GRANTING SAID ADMINISTRATION SUCH POWERS AS ARE
NECESSARY TO OPTIMIZE PUBLIC SERVICE FROM WATER UTILITY
OPERATIONS, AND FOR OTHER PURPOSES."

6 Citing LWUA Board of Trustees Resolution No. 225, series of 2005, dated
November 30, 2005 which was issued pursuant to Section 69 of PD 198, as
amended, authorizing the LWUA Board to appropriate such amounts as it may
deem necessary for its operational expenses. (See rollo, pp. 4-5.)

7 Id. at 32-34.

8 Id. at 5-6.

9 Id. at 6.

10 Entitled "GUIDELINES ON THE DISBURSEMENT OF EXTRAORDINARY

AND MISCELLANEOUS EXPENSES AND OTHER SIMILAR EXPENSES IN
GOVERNMENT-OWNED AND CONTROLLED
CORPORATIONS/GOVERNMENT FINANCIAL INSTITUTIONS AND THEIR
SUBSIDIARIES," id. at 35-37.

11 Id. at 32-33; emphases and underscoring supplied.

12 Id. at 6.

13 Id. at 38-47.

14 Id. at 38.

15 Id. at 48-66.

16 Id. at 50-51

17 Id. at 91-92.

18 Id. at 92.

19 Id. at 58-63.

20 Id. at 59-60.

21 Id. at 63-64.
22 Id. at 68-71.

23 "The basic statutory construction principle of ejusdem generis states that

where a general word or phrase follows an enumeration of particular and specific
words of the same class, the general word or phrase is to be construed to include
– or to be restricted to – things akin to or resembling, or of the same kind or class
as, those specifically mentioned." (Liwag v. Happy Glen Loop Homeowners
Association, Inc., G.R. No. 189755, July 4, 2012, 675 SCRA 744, 754.)

24 Rollo, pp. 69-70

25 Id. at 70.

26 Id.

27 Id.

28 Id.

29 Id. at 70.

30 Id. at 71.

31 Id.

32 Id.

33 Id. at 72-90.

34 Id. at 77-78.

35 Id. at 79-81.

36 Id. at 81-87.

37 Id. at 21-28.
38 Id. at 24.

39 Id. at 24-26.

40 Id. at 26-27.

41 Dimapilis-Baldoz v. CoA, G.R. No. 199114, July 16, 2013.

42 G.R. No. 198457, August 13, 2013.

43 "Under Rule 64, Section 2 of the 1997 Rules of Civil Procedure, a judgment or
final order of the COA may be brought by an aggrieved party to this Court on
certiorari under Rule 65. Thus, it is only through a petition for certiorari under
Rule 65 that the COA's decisions may be reviewed and nullified by us on the
ground of grave abuse of discretion or lack or excess of jurisdiction." (Benguet
State University v. CoA, 551 Phil. 878, 883 [2007]).

44 Delos Santos v. CoA, supra note 42.

45 Id.; citations omitted.

46 Dimapilis-Baldoz v. CoA, supra note 41; citations omitted.

47 Rollo, p. 24.

48 Id., citing BLACK’S LAW DICTIONARY, 6th Ed., p. 463.

49 Id. at 67.

50 Id. at 26.

51 Id. at 91.

52 Id.

53 Id. at 36.
54 Id. at 35.

55 "Substantial distinctions" is a requirement for valid classification. As held in the

landmark case on the subject of equal protection, People v. Cayat (68 Phil. 12,
18 [1939]):

It is an established principle of constitutional law that the guaranty of the

equal protection of the laws is not violated by a legislation based on
reasonable classification. And the classification, to be reasonable, (1)
must rest on substantial distinctions; (2) must be germane to the purposes
of the law; (3) must not be limited to existing conditions only; and (4) must
apply equally to all members of the same class. (Emphasis supplied;
citations omitted)

56 Rollo, p. 35.