(1) That in the elections of September 17, 1935, the petitioner,

c
 
 Jose A. Angara, and the respondents, Pedro Ynsua, Miguel
Castillo and Dionisio Mayor, were candidates voted for the
ccc c !" position of member of the National Assembly for the first
" "#  district of the Province of Tayabas;

Republic of the Philippines (2) That on October 7, 1935, the provincial board of
$%&'(%) canvassers, proclaimed the petitioner as member-elect of the
Manila National Assembly for the said district, for having received the
most number of votes;
EN BANC
(3) That on November 15, 1935, the petitioner took his oath of
c !"" "# office;

($     petitioner, (4) That on December 3, 1935, the National Assembly in

vs. session assembled, passed the following resolution:
)*)( (''+$$+(&,(-$% '+%
 $)+(
,+(+$+(' -( respondents. [No. 8]

—

  

 
 RESOLUCION CONFIRMANDO LAS
 
 
—
  


 ACTAS DE AQUELLOS DIPUTADOS
  
 CONTRA QUIENES NO SE HA

  
 PRESENTADO PROTESTA.
   
 


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This is an original action instituted in this court by the petitioner, Jose
A. Angara, for the issuance of a writ of prohibition to restrain and
prohibit the Electoral Commission, one of the respondents, from
taking further cognizance of the protest filed by Pedro Ynsua, another
respondent, against the election of said petitioner as member of the
National Assembly for the first assembly district of the Province of
Tayabas.
The facts of this case as they appear in the petition and as admitted by
the respondents are as follows:
 Que las actas de eleccion de los
Diputados contra quienes no se hubiere
presentado debidamente una protesta antes de la
adopcion de la presente resolucion sean, como
por la presente, son aprobadas y confirmadas.
Adoptada, 3 de diciembre, 1935.
(5) That on December 8, 1935, the herein respondent Pedro
Ynsua filed before the Electoral Commission a "Motion of
Protest" against the election of the herein petitioner, Jose A.
Angara, being the only protest filed after the passage of
Resolutions No. 8 aforequoted, and praying, among other-
things, that said respondent be declared elected member of the
 National Assembly for the first district of Tayabas, or that the
election of said position be nullified;
(6) That on December 9, 1935, the Electoral Commission
adopted a resolution, paragraph 6 of which provides:
6. La Comision no considerara ninguna protesta que no
se haya presentado en o antes de este dia.
(7) That on December 20, 1935, the herein petitioner, Jose A.
Angara, one of the respondents in the aforesaid protest, filed
before the Electoral Commission a "Motion to Dismiss the
Protest", alleging () that Resolution No. 8 of Dismiss the
Protest", alleging (a) that Resolution No. 8 of the National
Assembly was adopted in the legitimate exercise of its
constitutional prerogative to prescribe the period during which
protests against the election of its members should be
presented; () that the aforesaid resolution has for its object,
and is the accepted formula for, the limitation of said period;
and () that the protest in question was filed out of the
prescribed period;
(8) That on December 27, 1935, the herein respondent, Pedro
Ynsua, filed an "Answer to the Motion of Dismissal" alleging
that there is no legal or constitutional provision barring the
presentation of a protest against the election of a member of the
National Assembly after confirmation;
(9) That on December 31, 1935, the herein petitioner, Jose A.
Angara, filed a "Reply" to the aforesaid "Answer to the Motion
of Dismissal";
(10) That the case being submitted for decision, the Electoral
Commission promulgated a resolution on January 23, 1936,
denying herein petitioner's "Motion to Dismiss the Protest."
The application of the petitioner sets forth the following grounds for
the issuance of the writ prayed for:
() That the Constitution confers exclusive jurisdiction upon
the electoral Commission solely as regards the merits of
contested elections to the National Assembly;
() That the Constitution excludes from said jurisdiction the
power to regulate the proceedings of said election contests,
which power has been reserved to the Legislative Department
of the Government or the National Assembly;
() That like the Supreme Court and other courts created in
pursuance of the Constitution, whose exclusive jurisdiction
relates solely to deciding the merits of controversies submitted
to them for decision and to matters involving their internal
organization, the Electoral Commission can regulate its
proceedings only if the National Assembly has not availed of
its primary power to so regulate such proceedings;
(
) That Resolution No. 8 of the National Assembly is,
therefore, valid and should be respected and obeyed;
() That under paragraph 13 of section 1 of the ordinance
appended to the Constitution and paragraph 6 of article 7 of the
Tydings-McDuffie Law (No. 127 of the 73rd Congress of the
United States) as well as under section 1 and 3 (should be
sections 1 and 2) of article VIII of the Constitution, this
Supreme Court has jurisdiction to pass upon the fundamental
question herein raised because it involves an interpretation of
the Constitution of the Philippines.
On February 25, 1936, the Solicitor-General appeared and filed an
answer in behalf of the respondent Electoral Commission interposing
the following special defenses:
() That the Electoral Commission has been created by the
Constitution as an instrumentality of the Legislative
Department invested with the jurisdiction to decide "all
contests relating to the election, returns, and qualifications of
the members of the National Assembly"; that in adopting its
resolution of December 9, 1935, fixing this date as the last day
 for the presentation of protests against the election of any
member of the National Assembly, it acted within its
jurisdiction and in the legitimate exercise of the implied
powers granted it by the Constitution to adopt the rules and
regulations essential to carry out the power and functions
conferred upon the same by the fundamental law; that in
adopting its resolution of January 23, 1936, overruling the
motion of the petitioner to dismiss the election protest in
question, and declaring itself with jurisdiction to take
cognizance of said protest, it acted in the legitimate exercise of
its quasi-judicial functions a an instrumentality of the
Legislative Department of the Commonwealth Government,
and hence said act is beyond the judicial cognizance or control
of the Supreme Court;
() That the resolution of the National Assembly of December
3, 1935, confirming the election of the members of the
National Assembly against whom no protest had thus far been
filed, could not and did not deprive the electoral Commission
of its jurisdiction to take cognizance of election protests filed
within the time that might be set by its own rules:
() That the Electoral Commission is a body invested with
quasi-judicial functions, created by the Constitution as an
instrumentality of the Legislative Department, and is not an
"inferior tribunal, or corporation, or board, or person" within
the purview of section 226 and 516 of the Code of Civil
Procedure, against which prohibition would lie.
The respondent Pedro Ynsua, in his turn, appeared and filed an answer
in his own behalf on March 2, 1936, setting forth the following as his
special defense:
() That at the time of the approval of the rules of the Electoral
Commission on December 9, 1935, there was no existing law
fixing the period within which protests against the election of
members of the National Assembly should be filed; that in
fixing December 9, 1935, as the last day for the filing of
protests against the election of members of the National
Assembly, the Electoral Commission was exercising a power
impliedly conferred upon it by the Constitution, by reason of
its quasi-judicial attributes;
() That said respondent presented his motion of protest before
the Electoral Commission on December 9, 1935, the last day
fixed by paragraph 6 of the rules of the said Electoral
Commission;
() That therefore the Electoral Commission acquired
jurisdiction over the protest filed by said respondent and over
the parties thereto, and the resolution of the Electoral
Commission of January 23, 1936, denying petitioner's motion
to dismiss said protest was an act within the jurisdiction of the
said commission, and is not reviewable by means of a writ of
prohibition;
(
) That neither the law nor the Constitution requires
confirmation by the National Assembly of the election of its
members, and that such confirmation does not operate to limit
the period within which protests should be filed as to deprive
the Electoral Commission of jurisdiction over protest filed
subsequent thereto;
() That the Electoral Commission is an independent entity
created by the Constitution, endowed with quasi-judicial
functions, whose decision are final and unappealable;
() That the electoral Commission, as a constitutional creation,
is not an inferior tribunal, corporation, board or person, within
the terms of sections 226 and 516 of the Code of Civil
Procedure; and that neither under the provisions of sections 1
and 2 of article II (should be article VIII) of the Constitution
and paragraph 13 of section 1 of the Ordinance appended
thereto could it be subject in the exercise of its quasi-judicial
functions to a writ of prohibition from the Supreme Court;
 (a) That paragraph 6 of article 7 of the Tydings-McDuffie Law
(No. 127 of the 73rd Congress of the united States) has no
application to the case at bar.
The case was argued before us on March 13, 1936. Before it was
submitted for decision, the petitioner prayed for the issuance of a
preliminary writ of injunction against the respondent Electoral
Commission which petition was denied "without passing upon the
merits of the case" by resolution of this court of March 21, 1936.
There was no appearance for the other respondents.
The issues to be decided in the case at bar may be reduced to the
following two principal propositions:
1. Has the Supreme Court jurisdiction over the Electoral
Commission and the subject matter of the controversy upon the
foregoing related facts, and in the affirmative,
2. Has the said Electoral Commission acted without or in
excess of its jurisdiction in assuming to the cognizance of the
protest filed the election of the herein petitioner
notwithstanding the previous confirmation of such election by
resolution of the National Assembly?
We could perhaps dispose of this case by passing directly upon the
merits of the controversy. However, the question of jurisdiction having
been presented, we do not feel justified in evading the issue. Being a
three powers are to be kept separate and distinct that the Constitution
intended them to be absolutely unrestrained and independent of each
other. The Constitution has provided for an elaborate system of checks
and balances to secure coordination in the workings of the various
departments of the government. For example, the Chief Executive
under our Constitution is so far made a check on the legislative power
that this assent is required in the enactment of laws. This, however, is
subject to the further check that a bill may become a law
notwithstanding the refusal of the President to approve it, by a vote of
two-thirds or three-fourths, as the case may be, of the National
Assembly. The President has also the right to convene the Assembly in
special session whenever he chooses. On the other hand, the National
Assembly operates as a check on the Executive in the sense that its
consent through its Commission on Appointments is necessary in the
appointments of certain officers; and the concurrence of a majority of
all its members is essential to the conclusion of treaties. Furthermore,
in its power to determine what courts other than the Supreme Court
shall be established, to define their jurisdiction and to appropriate
funds for their support, the National Assembly controls the judicial
department to a certain extent. The Assembly also exercises the
judicial power of trying impeachments. And the judiciary in turn, with
the Supreme Court as the final arbiter, effectively checks the other
departments in the exercise of its power to determine the law, and
hence to declare executive and legislative acts void if violative of the
Constitution.
But in the main, the Constitution has blocked out with deft strokes and
in bold lines, allotment of power to the executive, the legislative and
case    , it would hardly be consistent with our sense
of duty to overlook the broader aspect of the question and leave it
undecided. Neither would we be doing justice to the industry and
vehemence of counsel were we not to pass upon the question of
jurisdiction squarely presented to our consideration.
The separation of powers is a fundamental principle in our system of
government. It obtains not through express provision but by actual
division in our Constitution. Each department of the government has
exclusive cognizance of matters within its jurisdiction, and is supreme
within its own sphere. But it does not follow from the fact that the
the judicial departments of the government. The overlapping and
interlacing of functions and duties between the several departments,
however, sometimes makes it hard to say just where the one leaves off
and the other begins. In times of social disquietude or political
excitement, the great landmarks of the Constitution are apt to be
forgotten or marred, if not entirely obliterated. In cases of conflict, the
judicial department is the only constitutional organ which can be
called upon to determine the proper allocation of powers between the
several departments and among the integral or constituent units
thereof.
As any human production, our Constitution is of course lacking
 presented. Any
perfection and perfectibility, but as much as it was within the power of
our people, acting through their delegates to so provide, that
instrument which is the expression of their sovereignty however
limited, has established a republican government intended to operate
and function as a harmonious whole, under a system of checks and
balances, and subject to specific limitations and restrictions provided
in the said instrument. The Constitution sets forth in no uncertain
language the restrictions and limitations upon governmental powers
and agencies. If these restrictions and limitations are transcended it
would be inconceivable if the Constitution had not provided for a
mechanism by which to direct the course of government along
constitutional channels, for then the distribution of powers would be
mere verbiage, the bill of rights mere expressions of sentiment, and the
principles of good government mere political apothegms. Certainly,
the limitation and restrictions embodied in our Constitution are real as
they should be in any living constitution. In the United States where no
express constitutional grant is found in their constitution, the
possession of this moderating power of the courts, not to speak of its
historical origin and development there, has been set at rest by popular
acquiescence for a period of more than one and a half centuries. In our
case, this moderating power is granted, if not expressly, by clear
implication from section 2 of article VIII of our constitution.
The Constitution is a definition of the powers of government. Who is
to determine the nature, scope and extent of such powers? The
Constitution itself has provided for the instrumentality of the judiciary
as the rational way. And when the judiciary mediates to allocate
constitutional boundaries, it does not assert any superiority over the
other departments; it does not in reality nullify or invalidate an act of
the legislature, but only asserts the solemn and sacred obligation
assigned to it by the Constitution to determine conflicting claims of
authority under the Constitution and to establish for the parties in an
actual controversy the rights which that instrument secures and
guarantees to them. This is in truth all that is involved in what is
termed "judicial supremacy" which properly is the power of judicial
review under the Constitution. Even then, this power of judicial review
is limited to actual cases and controversies to be exercised after full
opportunity of argument by the parties, and limited further to the
constitutional question raised or the very 
attempt at abstraction could only lead to dialectics and barren legal
questions and to sterile conclusions unrelated to actualities. Narrowed
as its function is in this manner, the judiciary does not pass upon
questions of wisdom, justice or expediency of legislation. More than
that, courts accord the presumption of constitutionality to legislative
enactments, not only because the legislature is presumed to abide by
the Constitution but also because the judiciary in the determination of
actual cases and controversies must reflect the wisdom and justice of
the people as expressed through their representatives in the executive
and legislative departments of the governments of the government.
But much as we might postulate on the internal checks of power
provided in our Constitution, it ought not the less to be remembered
that, in the language of James Madison, the system itself is not "the
chief palladium of constitutional liberty . . . the people who are authors
of this blessing must also be its guardians . . . their eyes must be ever
ready to mark, their voice to pronounce . . . aggression on the authority
of their constitution." In the Last and ultimate analysis, then, must the
success of our government in the unfolding years to come be tested in
the crucible of Filipino minds and hearts than in consultation rooms
and court chambers.
In the case at bar, the national Assembly has by resolution (No. 8) of
December 3, 1935, confirmed the election of the herein petitioner to
the said body. On the other hand, the Electoral Commission has by
resolution adopted on December 9, 1935, fixed said date as the last day
for the filing of protests against the election, returns and qualifications
of members of the National Assembly, notwithstanding the previous
confirmation made by the National Assembly as aforesaid. If, as
contended by the petitioner, the resolution of the National Assembly
has the effect of cutting off the power of the Electoral Commission to
entertain protests against the election, returns and qualifications of
members of the National Assembly, submitted after December 3,
1935, then the resolution of the Electoral Commission of December 9,
1935, is mere surplusage and had no effect. But, if, as contended by
the respondents, the Electoral Commission has the sole power of
regulating its proceedings to the exclusion of the National Assembly,
then the resolution of December 9, 1935, by which the Electoral
Commission fixed said date as the last day for filing protests against
the election, returns and qualifications of members of the National
Assembly, should be upheld.
Here is then presented an actual controversy involving as it does a
conflict of a grave constitutional nature between the National
Assembly on the one hand, and the Electoral Commission on the other.
From the very nature of the republican government established in our
country in the light of American experience and of our own, upon the
judicial department is thrown the solemn and inescapable obligation of
interpreting the Constitution and defining constitutional boundaries.

The Electoral Commission, as we shall have occasion to refer
, so must we avoid exhaustion in our constitutional system.
hereafter, is a constitutional organ, created for a specific purpose,
namely to determine all contests relating to the election, returns and
qualifications of the members of the National Assembly. Although the
Electoral Commission may not be interfered with, when and while
acting within the limits of its authority, it does not follow that it is
beyond the reach of the constitutional mechanism adopted by the
people and that it is not subject to constitutional restrictions. The
Electoral Commission is not a separate department of the government,
and even if it were, conflicting claims of authority under the
fundamental law between department powers and agencies of the
government are necessarily determined by the judiciary in justifiable
and appropriate cases. Discarding the English type and other European
types of constitutional government, the framers of our constitution
adopted the American type where the written constitution is
interpreted and given effect by the judicial department. In some
countries which have declined to follow the American example,
provisions have been inserted in their constitutions prohibiting the
courts from exercising the power to interpret the fundamental law.
This is taken as a recognition of what otherwise would be the rule that
in the absence of direct prohibition courts are bound to assume what is
logically their function. For instance, the Constitution of Poland of
1921, expressly provides that courts shall have no power to examine
the validity of statutes (art. 81, chap. IV). The former Austrian
Constitution contained a similar declaration. In countries whose
constitutions are silent in this respect, courts have assumed this power.
This is true in Norway, Greece, Australia and South Africa. Whereas,
in Czechoslovakia (arts. 2 and 3, Preliminary Law to constitutional
Charter of the Czechoslovak Republic, February 29, 1920) and Spain
(arts. 121-123, Title IX, Constitutional of the Republic of 1931)
especial constitutional courts are established to pass upon the validity
of ordinary laws. In our case, the nature of the present controversy
shows the necessity of a final constitutional arbiter to determine the
conflict of authority between two agencies created by the Constitution.
Were we to decline to take cognizance of the controversy, who will
determine the conflict? And if the conflict were left undecided and
undetermined, would not a void be thus created in our constitutional
system which may be in the long run prove destructive of the entire
framework? To ask these questions is to answer them. 
 
Upon principle, reason and authority, we are clearly of the opinion that
upon the admitted facts of the present case, this court has jurisdiction
over the Electoral Commission and the subject mater of the present
controversy for the purpose of determining the character, scope and
extent of the constitutional grant to the Electoral Commission as "the
sole judge of all contests relating to the election, returns and
qualifications of the members of the National Assembly."
Having disposed of the question of jurisdiction, we shall now proceed
to pass upon the second proposition and determine whether the
Electoral Commission has acted without or in excess of its jurisdiction
in adopting its resolution of December 9, 1935, and in assuming to
take cognizance of the protest filed against the election of the herein
petitioner notwithstanding the previous confirmation thereof by the
National Assembly on December 3, 1935. As able counsel for the
petitioner has pointed out, the issue hinges on the interpretation of
section 4 of Article VI of the Constitution which provides:
"SEC. 4. There shall be an Electoral Commission composed of three
Justice of the Supreme Court designated by the Chief Justice, and of
six Members chosen by the National Assembly, three of whom shall
be nominated by the party having the largest number of votes, and
three by the party having the second largest number of votes therein.
The senior Justice in the Commission shall be its Chairman. The
Electoral Commission shall be the sole judge of all contests relating to
the election, returns and qualifications of the members of the National
Assembly." It is imperative, therefore, that we delve into the origin
and history of this constitutional provision and inquire into the
intention of its framers and the people who adopted it so that we may
properly appreciate its full meaning, import and significance.
The original provision regarding this subject in the Act of Congress of
July 1, 1902 (sec. 7, par. 5) laying down the rule that "the assembly
shall be the judge of the elections, returns, and qualifications of its
members", was taken from clause 1 of section 5, Article I of the
Constitution of the United States providing that "Each House shall be
the Judge of the Elections, Returns, and Qualifications of its own
Members, . . . ." The Act of Congress of August 29, 1916 (sec. 18, par.
1) modified this provision by the insertion of the word "sole" as
follows: "That the Senate and House of Representatives, respectively,
shall be the sole judges of the elections, returns, and qualifications of
their elective members . . ." apparently in order to emphasize the
exclusive the Legislative over the particular case s therein specified.
This court has had occasion to characterize this grant of power to the
Philippine Senate and House of Representatives, respectively, as "full,
clear and complete" (Veloso 
Boards of Canvassers of Leyte and second largest number of votes, and as to its Chairman, one
Samar [1919], 39 Phil., 886, 888.)
The first step towards the creation of an independent tribunal for the
purpose of deciding contested elections to the legislature was taken by
the sub-committee of five appointed by the Committee on
Constitutional Guarantees of the Constitutional Convention, which
sub-committee submitted a report on August 30, 1934, recommending
the creation of a Tribunal of Constitutional Security empowered to
hear legislature but also against the election of executive officers for
whose election the vote of the whole nation is required, as well as to
initiate impeachment proceedings against specified executive and
judicial officer. For the purpose of hearing legislative protests, the
tribunal was to be composed of three justices designated by the
Supreme Court and six members of the house of the legislature to
which the contest corresponds, three members to be designed by the
majority party and three by the minority, to be presided over by the
Senior Justice unless the Chief Justice is also a member in which case
the latter shall preside. The foregoing proposal was submitted by the
Committee on Constitutional Guarantees to the Convention on
September 15, 1934, with slight modifications consisting in the
reduction of the legislative representation to four members, that is, two
senators to be designated one each from the two major parties in the
Senate and two representatives to be designated one each from the two
major parties in the House of Representatives, and in awarding
representation to the executive department in the persons of two
representatives to be designated by the President.
Meanwhile, the Committee on Legislative Power was also preparing
its report. As submitted to the Convention on September 24, 1934
subsection 5, section 5, of the proposed Article on the Legislative
Department, reads as follows:
The elections, returns and qualifications of the members of
either house and all cases contesting the election of any of their
members shall be judged by an Electoral Commission,
constituted, as to each House, by three members elected by the
members of the party having the largest number of votes
therein, three elected by the members of the party having the
Justice of the Supreme Court designated by the Chief Justice.
The idea of creating a Tribunal of Constitutional Security with
comprehensive jurisdiction as proposed by the Committee on
Constitutional Guarantees which was probably inspired by the Spanish
plan (art. 121, Constitution of the Spanish Republic of 1931), was soon
abandoned in favor of the proposition of the Committee on Legislative
Power to create a similar body with reduced powers and with specific
and limited jurisdiction, to be designated as a Electoral Commission.
The Sponsorship Committee modified the proposal of the Committee
on Legislative Power with respect to the composition of the Electoral
Commission and made further changes in phraseology to suit the
project of adopting a unicameral instead of a bicameral legislature.
The draft as finally submitted to the Convention on October 26, 1934,
reads as follows:
(6) The elections, returns and qualifications of the Members of
the National Assembly and all cases contesting the election of
any of its Members shall be judged by an Electoral
Commission, composed of three members elected by the party
 having the largest number of votes in the National Assembly,
three elected by the members of the party having the second
largest number of votes, and three justices of the Supreme
Court designated by the Chief Justice, the Commission to be
presided over by one of said justices.
During the discussion of the amendment introduced by Delegates
Labrador, Abordo, and others, proposing to strike out the whole
subsection of the foregoing draft and inserting in lieu thereof the
following: "The National Assembly shall be the soled and exclusive
judge of the elections, returns, and qualifications of the Members", the
following illuminating remarks were made on the floor of the
Convention in its session of December 4, 1934, as to the scope of the
said draft:
xxxxxxxxx
Mr. VENTURA. Mr. President, we have a doubt here as to the
scope of the meaning of the first four lines, paragraph 6, page
11 of the draft, reading: "The elections, returns and
qualifications of the Members of the National Assembly and all
cases contesting the election of any of its Members shall be
judged by an Electoral Commission, . . ." I should like to ask
from the gentleman from Capiz whether the election and
qualification of the member whose elections is not contested
shall also be judged by the Electoral Commission.
Mr. ROXAS. If there is no question about the election of the
members, there is nothing to be judged; that is why the word
"judge" is used to indicate a controversy. If there is no question
about the election of a member, there is nothing to be
a


Mr. ROXAS. There is no need of confirmation. As the
gentleman knows, the action of the House of Representatives
confirming the election of its members is just a matter of the
rules of the assembly. It is not constitutional. It is not
necessary. After a man files his credentials that he has been
elected, that is sufficient, unless his election is contested.
Mr. VENTURA. But I do not believe that that is sufficient, as
we have observed that for purposes of the auditor, in the matter
of election of a member to a legislative body, because he will
not authorize his pay.
Mr. ROXAS. Well, what is the case with regards to the
municipal president who is elected? What happens with regards
to the councilors of a municipality? Does anybody confirm
their election? The municipal council does this: it makes a
canvass and proclaims ² in this case the municipal council
proclaims who has been elected, and it ends there, unless there
is a contest. It is the same case; there is no need on the part of
the Electoral Commission unless there is a contest. The first
clause refers to the case referred to by the gentleman from
Cavite where one person tries to be elected in place of another
who was declared elected. From example, in a case when the
residence of the man who has been elected is in question, or in
case the citizenship of the man who has been elected is in
question.
However, if the assembly desires to annul the power of the
commission, it may do so by certain maneuvers upon its first
meeting when the returns are submitted to the assembly. K
 
  
 
submitted to the Electoral Commission and there is nothing to !

a


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be determined. 
#
  

When there is no contest,
there is nothing to be judged.
Mr. VENTURA. But does that carry the idea also that the
Electoral Commission shall confirm also the election of those Mr. VENTURA. Then it should be eliminated.
whose election is not contested?
Mr. ROXAS. But that is a different matter, I think Mr.
Delegate.
Mr. CINCO. Mr. President, I have a similar question as that Mr. ROXAS. By the assembly for misconduct.
propounded by the gentleman from Ilocos Norte when I arose a
while ago. However I want to ask more questions from the Mr. LABRADOR. I mean with respect to the qualifications of
delegate from Capiz. This paragraph 6 on page 11 of the draft the members.
cites cases contesting the election as separate from the first part
of the sections which refers to elections, returns and Mr. ROXAS. Yes, by the Electoral Commission.
qualifications.
Mr. LABRADOR. So that under this draft, no member of the
Mr. ROXAS. K
 
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 assembly has the right to question the eligibility of its
  



 



  members?
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Mr. ROXAS. Before a member can question the eligibility, he
must go to the Electoral Commission and make the question
Mr. CINCO. Under this paragraph, may not the Electoral before the Electoral Commission.
Commission, at its own instance, refuse to confirm the
elections of the members." Mr. LABRADOR.  



  





  


 
 



Mr. ROXAS. I do not think so, unless there is a protest.


  
Mr. LABRADOR. Mr. President, will the gentleman yield?
THE PRESIDENT. The gentleman may yield, if he so desires.
Mr. ROXAS. Willingly.
Mr. LABRADOR. Does not the gentleman from Capiz believe
that unless this power is granted to the assembly, the assembly
on its own motion does not have the right to contest the
election and qualification of its members?
Mr. ROXAS. I have no doubt but that the gentleman is right. If
this draft is retained as it is, even if two-thirds of the assembly
believe that a member has not the qualifications provided by
law, they cannot remove him for that reason.
Mr. LABRADOR. So that the right to remove shall only be
retained by the Electoral Commission.
Mr. ROXAS. "
Mr. PELAYO. Mr. President, I would like to be informed if the
Electoral Commission has power and authority to pass upon
the qualifications of the members of the National Assembly
even though that question has not been raised.
Mr. ROXAS. I have just said that they have no power, because
they can only judge.
In the same session, the first clause of the aforesaid draft reading "The
election, returns and qualifications of the members of the National
Assembly and" was eliminated by the Sponsorship Committee in
response to an amendment introduced by Delegates Francisco,
Ventura, Vinzons, Rafols, Lim, Mumar and others. In explaining the
difference between the original draft and the draft as amended,
Delegate Roxas speaking for the Sponsorship Committee said:
xxxxxxxxx
Sr. ROXAS. La diferencia, señor Presidente, consiste
solamente en obviar la objecion apuntada por varios Delegados
al efecto de que la primera clausula del

que dice: "The
elections, returns and qualifications of the members of the
National Assembly" parece que da a la Comision Electoral la
facultad de determinar tambien la eleccion de los miembros
que no ha sido protestados y para obviar esa dificultad,
creemos que la enmienda tien razon en ese sentido, si
enmendamos el

, de tal modo que se lea como sigue: "All National Assembly itself, was defeated by a vote of ninety-eight (98)
cases contesting the election", de modo que los jueces de la
Comision Electoral se limitaran solamente a los casos en que
haya habido protesta contra las actas." Before the amendment
of Delegate Labrador was voted upon the following
interpellation also took place:
El Sr. CONEJERO. Antes de votarse la enmienda, quisiera
El Sr. PRESIDENTE. ¿Que dice el Comite?
El Sr. ROXAS. Con mucho gusto.
El Sr. CONEJERO. Tal como esta el

, dando tres
miembros a la mayoria, y otros tres a la minoria y tres a la
Corte Suprema, ¿no cree Su Señoria que esto equivale
practicamente a dejar el asunto a los miembros del Tribunal
Supremo?
El Sr. ROXAS. Si y no. Creemos que si el tribunal o la
Commission esta constituido en esa forma, tanto los miembros
de la mayoria como los de la minoria asi como los miembros
de la Corte Suprema consideraran la cuestion sobre la base de
sus meritos, sabiendo que el partidismo no es suficiente para
dar el triunfo.
El Sr. CONEJERO. ¿Cree Su Señoria que en un caso como ese,
podriamos hacer que tanto los de la mayoria como los de la
minoria prescindieran del partidismo?
El Sr. ROXAS. Creo que si, porque el partidismo no les daria
el triunfo.
xxxxxxxxx
The amendment introduced by Delegates Labrador, Abordo and others
seeking to restore the power to decide contests relating to the election,
returns and qualifications of members of the National Assembly to the
against fifty-six (56).
In the same session of December 4, 1934, Delegate Cruz (C.) sought to
amend the draft by reducing the representation of the minority party
and the Supreme Court in the Electoral Commission to two members
each, so as to accord more representation to the majority party. The
Convention rejected this amendment by a vote of seventy-six (76)
against forty-six (46), thus maintaining the non-partisan character of
the commission.
As approved on January 31, 1935, the draft was made to read as
follows:
(6) All cases contesting the elections, returns and qualifications
of the Members of the National Assembly shall be judged by
an Electoral Commission, composed of three members elected
by the party having the largest number of votes in the National
Assembly, three elected by the members of the party having
the second largest number of votes, and three justices of the
Supreme Court designated by the Chief Justice, the
Commission to be presided over by one of said justices.
The Style Committee to which the draft was submitted revised it as
follows:
SEC. 4. There shall be an Electoral Commission composed of
three Justices of the Supreme Court designated by the Chief
Justice, and of six Members chosen by the National Assembly,
three of whom shall be nominated by the party having the
largest number of votes, and three by the party having the
 second largest number of votes therein. The senior Justice in
the Commission shall be its chairman. The Electoral
Commission shall be the sole judge of the election, returns, and
qualifications of the Members of the National Assembly.
When the foregoing draft was submitted for approval on February 8,
1935, the Style Committee, through President Recto, to effectuate the
original intention of the Convention, agreed to insert the phrase "All
contests relating to" between the phrase "judge of" and the words "the
elections", which was accordingly accepted by the Convention.
The transfer of the power of determining the election, returns and
qualifications of the members of the legislature long lodged in the
legislative body, to an independent, impartial and non-partisan
tribunal, is by no means a mere experiment in the science of
government.
Cushing, in his Law and Practice of Legislative Assemblies (ninth
edition, chapter VI, pages 57, 58), gives a vivid account of the
"scandalously notorious" canvassing of votes by political parties in the
disposition of contests by the House of Commons in the following
passages which are partly quoted by the petitioner in his printed
memorandum of March 14, 1936:
153. From the time when the commons established their right
to be the exclusive judges of the elections, returns, and
qualifications of their members, until the year 1770, two modes
of proceeding prevailed, in the determination of controverted
elections, and rights of membership. One of the standing
committees appointed at the commencement of each session,
was denominated the committee of privileges and elections,
whose functions was to hear and investigate all questions of
this description which might be referred to them, and to report
their proceedings, with their opinion thereupon, to the house,
from time to time. When an election petition was referred to
this committee they heard the parties and their witnesses and
other evidence, and made a report of all the evidence, together
with their opinion thereupon, in the form of resolutions, which
were considered and agreed or disagreed to by the house. The
other mode of proceeding was by a hearing at the bar of the
house itself. When this court was adopted, the case was heard
and decided by the house, in substantially the same manner as
by a committee. The committee of privileges and elections
although a select committee. The committee of privileges and
elections although a select committee was usually what is
called an open one; that is to say, in order to constitute the
committee, a quorum of the members named was required to
be present, but all the members of the house were at liberty to
attend the committee and vote if they pleased.
154. With the growth of political parties in parliament
questions relating to the right of membership gradually
assumed a political character; so that for many years previous
to the year 1770, controverted elections had been tried and
determined by the house of commons, as mere party questions,
upon which the strength of contending factions might be tested.
Thus, for Example, in 1741, Sir Robert Walpole, after repeated
attacks upon his government, resigned his office in
consequence of an adverse vote upon the Chippenham election.
Mr. Hatsell remarks, of the trial of election cases, as conducted
under this system, that "Every principle of decency and justice
were notoriously and openly prostituted, from whence the
younger part of the house were insensibly, but too successfully,
induced to adopt the same licentious conduct in more serious
matters, and in questions of higher importance to the public
welfare." Mr. George Grenville, a distinguished member of the
house of commons, undertook to propose a remedy for the evil,
and, on the 7th of March, 1770, obtained the unanimous leave
of the house to bring in a bill, "to regulate the trial of
controverted elections, or returns of members to serve in
parliament." In his speech to explain his plan, on the motion for
leave, Mr. Grenville alluded to the existing practice in the
following terms: "Instead of trusting to the merits of their
respective causes, the principal dependence of both parties is
their private interest among us; and it is scandalously notorious
that we are as earnestly canvassed to attend in favor of the
opposite sides, as if we were wholly self-elective, and not
bound to act by the principles of justice, but by the
 discretionary impulse of our own inclinations; nay, it is well
known, that in every contested election, many members of this
house, who are ultimately to judge in a kind of judicial capacity
between the competitors, enlist themselves as parties in the
contention, and take upon themselves the partial management
of the very business, upon which they should determine with
the strictest impartiality."
155. It was to put an end to the practices thus described, that
Mr. Grenville brought in a bill which met with the approbation
of both houses, and received the royal assent on the 12th of
April, 1770. This was the celebrated law since known by the
name of the Grenville Act; of which Mr. Hatsell declares, that
it "was one of the nobles works, for the honor of the house of
commons, and the security of the constitution, that was ever
devised by any minister or statesman." It is probable, that the
magnitude of the evil, or the apparent success of the remedy,
may have led many of the contemporaries of the measure to the
information of a judgement, which was not acquiesced in by
some of the leading statesmen of the day, and has not been
entirely confirmed by subsequent experience. The bill was
objected to by Lord North, Mr. De Grey, afterwards chief
justice of the common pleas, Mr. Ellis, Mr. Dyson, who had
been clerk of the house, and Mr. Charles James Fox, chiefly on
the ground, that the introduction of the new system was an
essential alteration of the constitution of parliament, and a total
abrogation of one of the most important rights and jurisdictions
of the house of commons.
As early as 1868, the House of Commons in England solved the
problem of insuring the non-partisan settlement of the controverted
elections of its members by abdicating its prerogative to two judges of
the King's Bench of the High Court of Justice selected from a rota in
accordance with rules of court made for the purpose. Having proved
successful, the practice has become imbedded in English jurisprudence
(Parliamentary Elections Act, 1868 [31 & 32 Vict. c. 125] as amended
by Parliamentary Elections and Corrupt Practices Act. 1879 [42 & 43
Vict. c. 75], s. 2; Corrupt and Illegal Practices Preventions Act, 1883
#
), the experiment has at least abiding
[46 & 47 Vict. c. 51;, s. 70; Expiring Laws Continuance Act, 1911 [1
& 2 Geo. 5, c. 22]; Laws of England, vol. XII, p. 408, vol. XXI, p.
787). In the Dominion of Canada, election contests which were
originally heard by the Committee of the House of Commons, are
since 1922 tried in the courts. Likewise, in the Commonwealth of
Australia, election contests which were originally determined by each
house, are since 1922 tried in the High Court. In Hungary, the organic
law provides that all protests against the election of members of the
Upper House of the Diet are to be resolved by the Supreme
Administrative Court (Law 22 of 1916, chap. 2, art. 37, par. 6). The
Constitution of Poland of March 17, 1921 (art. 19) and the
Constitution of the Free City of Danzig of May 13, 1922 (art. 10) vest
the authority to decide contested elections to the Diet or National
Assembly in the Supreme Court. For the purpose of deciding
legislative contests, the Constitution of the German Reich of July 1,
1919 (art. 31), the Constitution of the Czechoslovak Republic of
February 29, 1920 (art. 19) and the Constitution of the Grecian
Republic of June 2, 1927 (art. 43), all provide for an Electoral
Commission.
The creation of an Electoral Commission whose membership is
recruited both from the legislature and the judiciary is by no means
unknown in the United States. In the presidential elections of 1876
there was a dispute as to the number of electoral votes received by
each of the two opposing candidates. As the Constitution made no
adequate provision for such a contingency, Congress passed a law on
January 29, 1877 (United States Statutes at Large, vol. 19, chap. 37,
pp. 227-229), creating a special Electoral Commission composed of
five members elected by the Senate, five members elected by the
House of Representatives, and five justices of the Supreme Court, the
fifth justice to be selected by the four designated in the Act. The
decision of the commission was to be binding unless rejected by the
two houses voting separately. Although there is not much of a moral
lesson to be derived from the experience of America in this regard,
judging from the observations of Justice Field, who was a member of
that body on the part of the Supreme Court (Countryman, the Supreme
Court of the United States and its Appellate Power under the
Constitution [Albany, 1913] ² Relentless Partisanship of Electoral
Commission, p. 25 
historical interest.
The members of the Constitutional Convention who framed our
fundamental law were in their majority men mature in years and
experience. To be sure, many of them were familiar with the history
and political development of other countries of the world. When ,
therefore, they deemed it wise to create an Electoral Commission as a
constitutional organ and invested it with the exclusive function of
passing upon and determining the election, returns and qualifications
of the members of the National Assembly, they must have done so not
only in the light of their own experience but also having in view the
experience of other enlightened peoples of the world. The creation of
the Electoral Commission was designed to remedy certain evils of
which the framers of our Constitution were cognizant.
Notwithstanding the vigorous opposition of some members of the
Convention to its creation, the plan, as hereinabove stated, was
approved by that body by a vote of 98 against 58. All that can be said
now is that, upon the approval of the constitutional the creation of the
 Lewis, 45 Tex. Crim. Rep., 1;
Electoral Commission is the expression of the wisdom and "ultimate
Whisman, 36 S.D., 260; L.R.A., 1917B, 1). If we concede the
justice of the people". (Abraham Lincoln, First Inaugural Address,
March 4, 1861.)
From the deliberations of our Constitutional Convention it is evident
that the purpose was to transfer in its totality all the powers previously
exercised by the legislature in matters pertaining to contested elections
of its members, to an independent and impartial tribunal. It was not so
much the knowledge and appreciation of contemporary constitutional
precedents, however, as the long-felt need of determining legislative
contests devoid of partisan considerations which prompted the people,
acting through their delegates to the Convention, to provide for this
body known as the Electoral Commission. With this end in view, a
composite body in which both the majority and minority parties are
equally represented to off-set partisan influence in its deliberations
was created, and further endowed with judicial temper by including in
its membership three justices of the Supreme Court.
The Electoral Commission is a constitutional creation, invested with
the necessary authority in the performance and execution of the limited
and specific function assigned to it by the Constitution. Although it is
not a power in our tripartite scheme of government, it is, to all intents
and purposes, when acting within the limits of its authority, an
independent organ. It is, to be sure, closer to the legislative department
than to any other. The location of the provision (section 4) creating the
Electoral Commission under Article VI entitled "Legislative
Department" of our Constitution is very indicative. Its compositions is
also significant in that it is constituted by a majority of members of the
legislature. But it is a body separate from and independent of the
legislature.
The grant of power to the Electoral Commission to judge all contests
relating to the election, returns and qualifications of members of the
National Assembly, is intended to be as complete and unimpaired as if
it had remained originally in the legislature. The express lodging of
that power in the Electoral Commission is an implied denial of the
exercise of that power by the National Assembly. And this is as
effective a restriction upon the legislative power as an express
prohibition in the Constitution (! 
State 
power claimed in behalf of the National Assembly that said body may
regulate the proceedings of the Electoral Commission and cut off the
power of the commission to lay down the period within which protests
should be filed, the grant of power to the commission would be
ineffective. The Electoral Commission in such case would be invested
with the power to determine contested cases involving the election,
returns and qualifications of the members of the National Assembly
but subject at all times to the regulative power of the National
Assembly. Not only would the purpose of the framers of our
Constitution of totally transferring this authority from the legislative
body be frustrated, but a dual authority would be created with the
resultant inevitable clash of powers from time to time. A sad spectacle
would then be presented of the Electoral Commission retaining the
bare authority of taking cognizance of cases referred to, but in reality
without the necessary means to render that authority effective
whenever and whenever the National Assembly has chosen to act, a
situation worse than that intended to be remedied by the framers of our
Constitution. The power to regulate on the part of the National
Assembly in procedural matters will inevitably lead to the ultimate
control by the Assembly of the entire proceedings of the Electoral
Commission, and, by indirection, to the entire abrogation of the
constitutional grant. It is obvious that this result should not be
permitted.
We are not insensible to the impassioned argument or the learned
counsel for the petitioner regarding the importance and necessity of
respecting the dignity and independence of the national Assembly as a
coordinate department of the government and of according validity to
its acts, to avoid what he characterized would be practically an
unlimited power of the commission in the admission of protests
against members of the National Assembly. But as we have pointed
out hereinabove, the creation of the Electoral Commission carried with
confidence in this body in the exclusive determination of the specified
cases assigned to it, as they have given to the Supreme Court in the
proper cases entrusted to it for decision. All the agencies of the
government were designed by the Constitution to achieve specific
purposes, and each constitutional organ working within its own
particular sphere of discretionary action must be deemed to be
animated with the same zeal and honesty in accomplishing the great
ends for which they were created by the sovereign will. That the
actuations of these constitutional agencies might leave much to be
desired in given instances, is inherent in the perfection of human
institutions. In the third place, from the fact that the Electoral
it !

 the power regulative in character to limit the time Commission may not be interfered with in the exercise of its legitimate
with which protests intrusted to its cognizance should be filed. It is a
settled rule of construction that where a general power is conferred or
duty enjoined, every particular power necessary for the exercise of the
one or the performance of the other is also conferred (Cooley,
Constitutional Limitations, eight ed., vol. I, pp. 138, 139). In the
absence of any further constitutional provision relating to the
procedure to be followed in filing protests before the Electoral
Commission, therefore, the incidental power to promulgate such rules
necessary for the proper exercise of its exclusive power to judge all
contests relating to the election, returns and qualifications of members
of the National Assembly, must be deemed by necessary implication to
have been lodged also in the Electoral Commission.
It is, indeed, possible that, as suggested by counsel for the petitioner,
the Electoral Commission may abuse its regulative authority by
admitting protests beyond any reasonable time, to the disturbance of
the tranquillity and peace of mind of the members of the National
Assembly. But the possibility of abuse is not argument against the
concession of the power as there is no power that is not susceptible of
abuse. In the second place, if any mistake has been committed in the
creation of an Electoral Commission and in investing it with exclusive
jurisdiction in all cases relating to the election, returns, and
qualifications of members of the National Assembly, the remedy is
political, not judicial, and must be sought through the ordinary
processes of democracy. All the possible abuses of the government are
not intended to be corrected by the judiciary. We believe, however,
that the people in creating the Electoral Commission reposed as much
power, it does not follow that its acts, however illegal or
unconstitutional, may not be challenge in appropriate cases over which
the courts may exercise jurisdiction.
But independently of the legal and constitutional aspects of the present
case, there are considerations of equitable character that should not be
overlooked in the appreciation of the intrinsic merits of the
controversy. The Commonwealth Government was inaugurated on
November 15, 1935, on which date the Constitution, except as to the
provisions mentioned in section 6 of Article XV thereof, went into
effect. The new National Assembly convened on November 25th of
that year, and the resolution confirming the election of the petitioner,
Jose A. Angara was approved by that body on December 3, 1935. The
protest by the herein respondent Pedro Ynsua against the election of
the petitioner was filed on December 9 of the same year. The
pleadings do not show when the Electoral Commission was formally
organized but it does appear that on December 9, 1935, the Electoral
Commission met for the first time and approved a resolution fixing
said date as the last day for the filing of election protest. When,
therefore, the National Assembly passed its resolution of December 3,
1935, confirming the election of the petitioner to the National
Assembly, the Electoral Commission had not yet met; neither does it
appear that said body had actually been organized. As a mater of fact,
according to certified copies of official records on file in the archives
division of the National Assembly attached to the record of this case
upon the petition of the petitioner, the three justices of the Supreme
Court the six members of the National Assembly constituting the
Electoral Commission were respectively designated only on December
4 and 6, 1935. If Resolution No. 8 of the National Assembly
confirming non-protested elections of members of the National
Assembly had the effect of limiting or tolling the time for the
presentation of protests, the result would be that the National
Assembly ² on the hypothesis that it still retained the incidental
power of regulation in such cases ² had already barred the
presentation of protests before the Electoral Commission had had time
to organize itself and deliberate on the mode and method to be
followed in a matter entrusted to its exclusive jurisdiction by the
Constitution. This result was not and could not have been
contemplated, and should be avoided.
From another angle, Resolution No. 8 of the National Assembly
confirming the election of members against whom no protests had
been filed at the time of its passage on December 3, 1935, can not be
construed as a limitation upon the time for the initiation of election
contests. While there might have been good reason for the legislative
practice of confirmation of the election of members of the legislature
at the time when the power to decide election contests was still lodged
in the legislature, confirmation alone by the legislature cannot be
construed as depriving the Electoral Commission of the authority
incidental to its constitutional power to be "the sole judge of all contest
relating to the election, returns, and qualifications of the members of
the National Assembly", to fix the time for the filing of said election
protests. Confirmation by the National Assembly of the returns of its
members against whose election no protests have been filed is, to all
legal purposes, unnecessary. As contended by the Electoral
Commission in its resolution of January 23, 1936, overruling the
motion of the herein petitioner to dismiss the protest filed by the
respondent Pedro Ynsua, confirmation of the election of any member
is not required by the Constitution before he can discharge his duties
as such member. As a matter of fact, certification by the proper
provincial board of canvassers is sufficient to entitle a member-elect to
a seat in the national Assembly and to render him eligible to any office
in said body (No. 1, par. 1, Rules of the National Assembly, adopted
December 6, 1935).
Rama [Third District, Cebu], Sixth Philippine Legislature;
Festin [Romblon], Sixth Philippine Legislature, Record
Aldanese [Fourth District,
Under the practice prevailing both in the English House of Commons
and in the Congress of the United States, confirmation is neither
necessary in order to entitle a member-elect to take his seat. The return
of the proper election officers is sufficient, and the member-elect
presenting such return begins to enjoy the privileges of a member from
the time that he takes his oath of office (Laws of England, vol. 12, pp.
331. 332; vol. 21, pp. 694, 695; U. S. C. A., Title 2, secs. 21, 25, 26).
Confirmation is in order only in cases of contested elections where the
decision is adverse to the claims of the protestant. In England, the
judges' decision or report in controverted elections is certified to the
Speaker of the House of Commons, and the House, upon being
informed of such certificate or report by the Speaker, is required to
enter the same upon the Journals, and to give such directions for
confirming or altering the return, or for the issue of a writ for a new
election, or for carrying into execution the determination as
circumstances may require (31 & 32 Vict., c. 125, sec. 13). In the
United States, it is believed, the order or decision of the particular
house itself is generally regarded as sufficient, without any actual
alternation or amendment of the return (Cushing, Law and Practice of
Legislative Assemblies, 9th ed., sec. 166).
Under the practice prevailing when the Jones Law was still in force,
each house of the Philippine Legislature fixed the time when protests
against the election of any of its members should be filed. This was
expressly authorized by section 18 of the Jones Law making each
house the sole judge of the election, return and qualifications of its
members, as well as by a law (sec. 478, Act No. 3387) empowering
each house to respectively prescribe by resolution the time and manner
of filing contest in the election of member of said bodies. As a matter
of formality, after the time fixed by its rules for the filing of protests
had already expired, each house passed a resolution confirming or
approving the returns of such members against whose election no
protests had been filed within the prescribed time. This was interpreted
as cutting off the filing of further protests against the election of those
members not theretofore contested (Amistad vs. Claravall [Isabela],
Second Philippine Legislature, Record ² First Period, p. 89; Urguello

Fetalvero 
² First Period, pp. 637-640; Kintanar 
Cebu], Sixth Philippine Legislature, Record ² First Period, pp. 1121,
1122; Aguilar 
Corpus [Masbate], Eighth Philippine Legislature, legislative than to any of the other two departments of the
Record ² First Period, vol. III, No. 56, pp. 892, 893). The
Constitution has repealed section 18 of the Jones Law. Act No. 3387,
section 478, must be deemed to have been impliedly abrogated also,
for the reason that with the power to determine all contest relating to
the election, returns and qualifications of members of the National
Assembly, is inseparably linked the authority to prescribe regulations
for the exercise of that power. There was thus no law nor
constitutional provisions which authorized the National Assembly to
fix, as it is alleged to have fixed on December 3, 1935, the time for the
filing of contests against the election of its members. And what the
National Assembly could not do directly, it could not do by indirection
through the medium of confirmation.
Summarizing, we conclude:
() That the government established by the Constitution
follows fundamentally the theory of separation of power into
the legislative, the executive and the judicial.
execute and perform, closer for purposes of classification to the
governments.
() That the Electoral Commission is the sole judge of all
contests relating to the election, returns and qualifications of
members of the National Assembly.
(a) That under the organic law prevailing before the present
Constitution went into effect, each house of the legislature was
respectively the sole judge of the elections, returns, and
qualifications of their elective members.
() That the present Constitution has transferred all the powers
previously exercised by the legislature with respect to contests
relating to the elections, returns and qualifications of its
members, to the Electoral Commission.
() That such transfer of power from the legislature to the
Electoral Commission was full, clear and complete, and carried
with it !

 the implied power 
 to
() That the system of checks and balances and the overlapping
of functions and duties often makes difficult the delimitation of
the powers granted.
() That in cases of conflict between the several departments
and among the agencies thereof, the judiciary, with the
Supreme Court as the final arbiter, is the only constitutional
mechanism devised finally to resolve the conflict and allocate
constitutional boundaries.
(
) That judicial supremacy is but the power of judicial review
in actual and appropriate cases and controversies, and is the
power and duty to see that no one branch or agency of the
government transcends the Constitution, which is the source of
all authority.
() That the Electoral Commission is an independent
constitutional creation with specific powers and functions to
prescribe the rules and regulations as to the time and manner of
filing protests.
(') That the avowed purpose in creating the Electoral
Commission was to have an independent constitutional organ
pass upon all contests relating to the election, returns and
qualifications of members of the National Assembly, devoid of
partisan influence or consideration, which object would be
frustrated if the National Assembly were to retain the power to
prescribe rules and regulations regarding the manner of
conducting said contests.
($) That section 4 of article VI of the Constitution repealed not
only section 18 of the Jones Law making each house of the
Philippine Legislature respectively the sole judge of the
elections, returns and qualifications of its elective members,
but also section 478 of Act No. 3387 empowering each house
to prescribe by resolution the time and manner of filing
 contests against the election of its members, the time and Y
manner of notifying the adverse party, and bond or bonds, to be
required, if any, and to fix the costs and expenses of contest. Y

() That confirmation by the National Assembly of the election Y

is contested or not, is not essential before such member-elect
Y
may discharge the duties and enjoy the privileges of a member
of the National Assembly. Y

() That confirmation by the National Assembly of the Y

election of any member against whom no protest had been filed
prior to said confirmation, does not and cannot deprive the Y
Electoral Commission of its incidental power to prescribe the
time within which protests against the election of any member Y
of the National Assembly should be filed.
Y
We hold, therefore, that the Electoral Commission was acting within
Y
the legitimate exercise of its constitutional prerogative in assuming to
take cognizance of the protest filed by the respondent Pedro Ynsua Y
against the election of the herein petitioner Jose A. Angara, and that
the resolution of the National Assembly of December 3, 1935 can not Y
in any manner toll the time for filing protests against the elections,
returns and qualifications of members of the National Assembly, nor Y
prevent the filing of a protest within such time as the rules of the
Electoral Commission might prescribe. Y

In view of the conclusion reached by us relative to the character of the Y

Electoral Commission as a constitutional creation and as to the scope
Y
and extent of its authority under the facts of the present controversy,
we deem it unnecessary to determine whether the Electoral Y
Commission is an inferior tribunal, corporation, board or person within
the purview of sections 226 and 516 of the Code of Civil Procedure. Y

The petition for a writ of prohibition against the Electoral Commission Y

is hereby denied, with costs against the petitioner. So ordered.
Y
Y
Y
Y
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 by a street beside the public plaza; and on the West by
Bulok creek, which lot is designated as formerly lot No.
'+(* Yp
336 and now lot No. 355 on the new sketch plan of the
Townsite of Marbel, South Cotabato. (2nd Indorsement,
The administrative Decisions of the Office of the President of the Office of the President, February 10, 1969, p. 2, Annex
Philippines, dated 13 May 1969 and 28 September 1971, respectively, "C", Petition).
set aside by respondent Court of Appeals in its judgment, dated 28
November 1986, constitute the nucleus of the present controversy. chanroblesvirtualawlibrary chanrobles virtual law library 6. On 18 June 1954 Republic Act No. 1160 transferred the custody and
administration of the Marbel Townsite to the National Resettlement
The antecedent proceedings may be summarized thus: chanrobles virtual law library and Rehabilitation Administration (NARRA). chanroblesvirtualawl ibrary chanrobles virtual law library

1. On 15 April 1948, Jesus M. Larrabaster applied with the National
Land Settlement Administration (NLSA) for a home lot at the Marbel
Settlement District, Cotabato.
2. On 10 July 1950 Larrabaster's application was granted. Home Lot
7. On 20 August 1956 PEÑA requested NARRA to approve the above-
mentioned transfer of rights but the latter did not act thereon in view of
chanroblesvirtualawlibrary chanrobles virtual law l ibrary Proclamation No. 336, series of 1956, returning to the Bureau of Lands
the disposition of the lots which remained unallocated by the
LASEDECO at the time of its abolition. chanroblesvirtualawlibrary chanrobles virtual law li brary

No. 336 (later known as Lot No. 355) with an area of 1,500 square
meters (hereafter, the Disputed Property) was allocated to him on the 8. The Bureau of Lands did not act on PEÑA's request either,
basis of a report of the supervisor of the Settlement District that the prompting him to bring up the matter to the Board of Liquidators
subject lot was vacant and free from any claim or conflict. chanroblesvirtualawlibrary chanrobles vi rtual law library (BOL), which was created to wind up the affairs of LASEDECO. chanroblesvirtualawlibrary chanrob les virtual law library

Meanwhile, "Larrabaster leased the lot to private respondent, Basilio Although LASEDECO bad initially denied the request, it subsequently
MENDOZA, and tolerated Jorge Geller to squat on the portion confirmed the sale to PEÑA in its Resolution No. 139, series of
thereof" (2nd Indorsement, February 10, 1969, Office of the President, 1964. chanroblesvirtualawlibrary chanrobles virtual law library

p. 1, Annex "C", Petition). chanroblesvirt ualawlibrary chanrobles virtual law libra ry

9. PEÑA must have realized that the Disputed Property contained an

3. On 25 November 1952 the Land Settlement and Development area bigger than 1,500 sq. ms., hence, his request to BOL that the area
Corporation (LASEDECO) took over the functions of the NLSA. chanroblesvirtualawlib rary chanrobles virtual law l ibrary be adjusted from 1,500 to 3,616.93 sq. ms. to conform to its actual
area.
chanroblesvirtualawlibra ry chanrobles virtual law libra ry

4. On 29 June 1956 Larrabaster and his wife assigned their rights and
interests over the Disputed Property to Jose B. PEÑA. 10. In its Resolution No. 139, series of 1964, the BOL denied the
"Notwithstanding the transfer, PEÑA allowed Mendoza and Geller to request. chanroblesvirtualawlibrary chanrobles virtual law library

stay on the lot." (
., p. 2).

chanroblesvirtualawlibrary chanrobles virtual law library
PEÑA moved for reconsideration stressing that the award should be 16. On 14 May 1969 the BOL approved Resolution No. 236, series of
for 3,616.93 sq. ms., but the BOL again denied the same under its 1969, directing its LASEDECO Unit to advise PEÑA accordingly.
Resolution No. 439, series of 1967. chanroblesvirtualawlibrary chanrobles virtual law li brary And on 3 September 1969 the BOL recommended to the Director of
Lands the issuance of a patent in PEÑA's favor. chanroblesvirtualawlibrary chanrobles vi rtual law library

11. Feeling aggrieved, PEÑA appealed to the Office of the

President. chanroblesvirtualawlibrary chanrobles virtual law libra ry 17. On 1 August 1969 private respondent MENDOZA addressed a
letter-protest to the BOL, to which the latter in its Resolution No. 488,
12. Requested by that Office to comment, the BOL conducted an dated 6 August 1969, responded by advising MENDOZA to direct its
investigation and reported (a) that Lot No. 355, as awarded to protest to the Office of the President. chanroblesvirtualawlibrary chanrobles vi rtual law library

Larrabaster, contained only 1,500 sq. ms. but due to accretion, since
the lot was almost surrounded by a creek, the area increased to 18. MENDOZA did so and on ()
*+,* said Office rendered
3,616.93 sq. ms.; and (b) since home lots had an average area of 1,500 its letter-decision (the second one challenged herein) affirming its
sq. ms. only, the Bureau of Lands subdivided the Disputed Property previous Decision of 13 May 1969, having found no cogent reason to
into three [3] parts, namely: Lot No. 107 with an area of 1,455 sq. ms., depart therefrom (Annex "E", Petition). chanroblesvirtualawl ibrary chanrobles virtual law library

was allocated to Basilio Mendoza; Lot No. 108, with an area of 1,500
sq. ms., was allocated to PEÑA; and Lot No. 109, with an area of 661 19. In the meantime, on 27 January 1970, and while his protest with
sq. ms., was allocated to Arturo Roxas. The BOL then recommended the Office of the President was still pending, MENDOZA resorted to
that PEÑA be awarded Lot No. 108 instead of the whole of former Lot Civil Case No. 98 for 
  before the then Court of First Instance
No. 355.chanroblesvirtualawlibrary chanrobles virtual law libra ry of Cotabato against the petitioners-public officials and PEÑA. chanroblesvirtualawlibra ry chanrobles virtual law libra ry

13. Excepting to the above, PEÑA alleged that the lot transferred to On 23 June 1978, MENDOZA followed up with a Supplemental
him by Larrabaster contains 3,616.93 and not 1,500 sq. ms., this being Petition to annul the administrative Decision of 20 September 1971
the area embraced within the boundaries described in the denying his protest. chanroblesvirtualawlibrary chanrobles vi rtual law library

Supplementary Deed of Sale executed between him and Larrabaster on

8 September 1956. chanroblesvirtualawlibrary chanrobles virtual law l ibrary 20. On 10 May 1985 the Trial Court " rendered its Decision in Civil
Case No. 98 dismissing MENDOZA's Petition for 
  (Annex
14. On 10 February 1969 the Office of the President "ordered that the "B", Petition).
chanroblesvirtualawlibra ry chanrobles virtual law lib rary

area of PEÑA's lot (Lot No. 108, formerly a part of Lot No. 355) be
maintained at 1,500 sq. ms.. xxx' on the premise that accretion 21. On appeal, respondent Court of Appeals reversed the Trial Court in
belonged to the Government. chanroblesvirtualawlibrary chanrobles virtual law library its 28 November 1986 Decision,
with the following disposition:

15. Upon PEÑA's motion for reconsideration, the same Office, on 13 WHEREFORE, finding the appeal of petitioner Basilio
Ä 1969, modified its Decision of 10 February 1969 and held that Mendoza to be meritorious, the Decision of May 10,
"the award to PEÑA of the original Lot No. 355 is hereby maintained" 1985 of the Regional Trial Court, Branch 24, of
(p. 9, Annex "D", Petition). It reasoned out that the benefits of Koronadal, South Cotabato, in Special Civil Case No.
accretion, pursuant to Article 457 of the Civil Code, accrue to the 98 is SET ASIDE. The Decisions of February 10, 1969,
owner, PEÑA, and not to the Government. That Decision of 13 May May 13, 1969 and September 28, 1971 of the Office of
1969 is the first judgment assailed in this Petition. chanroblesvirtualawlibra ry chanrobles virtual law libra ry the President in the administrative case are likewise
SET ASIDE, without prejudice to the reopening of the
 administrative case in said Office as to accord all We uphold petitioners' submissions. chanroblesvirtualawlibra ry chanrobles virtual law library

parties concerned, including petitioner, their

constitutional rights to due process of law. chanroblesvirtualawli brary chanrobles virtual law l ibrary 1. In ruling that the Decisions of the Office of the President were
vitiated by failure to accord due process of law to MENDOZA,
IT IS SO ORDERED. (pp. 23-31, Rollo) respondent Appellate Court relied on its observations that MENDOZA
was: (1) not made a party to the administrative case; (2) not served
Hence, this Petition for Review on 
  by petitioners-public with a copy of the 10 February 1969 Decision; and (3) not notified of
officials anchored on the following submissions: proceedings before the 13 May 1969 Decision nor served a copy
thereof.
chanroblesvirtualawlib rary chanrobles virtual law lib rary

1. THE COURT OF APPEALS

GRAVELY ERRED IN HOLDING The foregoing observations do not justify the conclusion arrived at.
THAT PRIVATE RESPONDENT After the Office of the President had rendered its Decision dated 13
BASILIO MENDOZA HAS BEEN May 1969, MENDOZA filed a letter-protest on 1 August 1969 with
DENIED DUE PROCESS OF LAW.
law library
chanroblesvirtualawlibra ry chanrobles virtual the BOL. The latter office directed him to file his protest with the
Office of the President, which he did. On 28 September 1971,
2. THE COURT OF APPEALS MENDOZA's request for reconsideration was denied by said Office.
GRAVELY ERRED IN HOLDING So that, even assuming that there was absence of notice and
THAT THE ADMINISTRATIVE opportunity to be present in the administrative proceedings prior to the
DECISIONS OF THE OFFICE OF THE rendition of the 10 February 1969 and 13 May 1969 Decisions by the
PRESIDENT IN QUESTION ARE NOT Office of the President, such procedural defect was cured when
SUPPORTED BY SUBSTANTIAL MENDOZA elevated his letter protest to the Office of the President,
EVIDENCE. chanroblesvirtualawlibrary chanrobles virtual law library
which subjected the controversy to appellate review but eventually
denied reconsideration. Having thus been given a chance to be heard
3. THE COURT OF APPEALS with respect to his protest there is sufficient compliance with the
GRAVELY ERRED IN SETTING requirements of due process.
ASIDE THE ASSAILED DECISIONS
OF THE REGIONAL TRIAL COURT There is no merit likeness to the point raised by
OF SOUTH COTABATO IN CIVIL petitioners that they were not informed by respondent
CASE NO. 98 DATED MAY 10, 1985 Judge of the petition by private respondent to set aside
AND OF THE OFFICE OF THE the writ of execution. The order granting such petition
PRESIDENT DATED FEBRUARY 10, was the subject of a motion for reconsideration. 'The
1969, MAY 13, 1969 AND motion for reconsideration was thereafter denied. Under
SEPTEMBER 28, 1971 AND the circumstances, the failure to give notice to
IMPLICITLY ORDERING A petitioners had been cured. That is a well- settled
REOPENING OF THE doctrine. Their complaint was that they were not beard.
ADMINISTRATIVE CASE IN SAID They were given the opportunity to file a motion for
OFFICE. (p. 9, Petition, p. 13, Rollo) reconsideration. So they did. That was to free the order
from the alleged infirmity. Petitioners then cannot be
heard to claim that they were denied procedural due
 process.' (Dormitorio v. Fernandez, L-25897, August To the owners of lands adjoining the banks of rivers
21, 1976, 72 SCRA 388, 394-395; Montemayor vs. belong the accretion which they gradually receive from
Araneta Univ. Foundation, L- 44251, May 31, 1977, 77 the effects of the current of the waters.
SCRA 321 [1977]; also Sumpang v. Inciong, L-50992,
June 19, 1985, 137 SCRA 56 [1985]). and opined that "creeks are included within the meaning of this Civil
Code provision" (Letter-Decision, 13 May 1969, p. 7, Annex 'D',
It should also be recalled that MENDOZA filed his petition for Petition).
chanroblesvirtualawlibrary chanrobles virt ual law libra ry


  before the then Court of First Instance of Cotabato seeking
to annul the 13 May 1969 Decision. At the time it was presented on 27 And as far as the ownership of the accretion is concerned, the Office of
January 1970, MENDOZA's request for reconsideration with the the President likewise correctly held that "while it may be conceded
Office of the President, involving the same Decision, was still that Lot No. 355 technically belongs to the government because it was
pending. In fact, it was only on 28 September 1971 that said Office bought from the latter under an installment plan, it cannot be rightfully
denied reconsideration. Evidently, MENDOZA had abandoned his concluded that the benefits of accretion must still be retained by the
pending administrative request for reconsideration in favor of judicial said seller" (Letter-Decision, 13 May 1969, p. 7, Annex "D", Petition).
proceedings. Again, therefore, MENDOZA cannot justifiably claim In so ruling, that Office acted on the authority of -
 .
"

that he was denied due process. chanroblesvirtualawlibrary chanrobles virtual law l ibrary


/"

, 87 Phil. 806, at 810, 814 [1950]), reading
2. Substantial factual evidence support the questioned administrative
rulings. The Office of the President relied on the fact-finding report of
the BOL made sometime in 1969 with respect to the Disputed Property
to the effect that although the area of Lot No. 355 awarded to
Larrabaster was 1,500 sq. ms., it was found situated along a creek and
that "it had increased in area to 3,616.93 square meters by accretion."
law library
The question then which confronted the Office of the President was
the ownership over the increased area. In its Decision of 10 February
1969 it initially held, following the BOL recommendation, that the
accretion belonged to the government and that the excess of 2,116.93
sq. ms. was an unallocated area which the Bureau of Lands had
authority to dispose of so that said Bureau was not remiss in
subdividing the disputed Property into three (3 lots and allocating only
Lot No. 108, with an area of 1,500 sq. ms., to PEÑA, Lot No. 107 to
MENDOZA, and Lot No. 109 to Arturo Roxas.
Upon re-study, however, the Office of the President modified its
conclusions in its Decision of 13 May 1969, and rightly so. It took into
account Article 457 of the Civil Code, which provides:

in part:
chanrobles virtual
chanroblesvirtualawlibra ry chanrobles virtual law library
Since the Disputed Property no longer belonged to the Government the
subdivision thereof by the Bureau of Lands into three lots, as well as
... When the lot bordering on a public stream is sold on
installment basis by the government, said stream is
made the boundary. ... The stream may advance or
recede but it will always constitute the boundary or
boundaries of the lot, and the purchaser has the right to
insist that the original boundaries be preserved, and all
the area inside said boundaries be considered as
included in the sale. chanroblesvirtualawlibra ry chanrobles virtual law library
xxx xxx xxx chanrobles virtual law library
... In the sale of a friar land, lot or parcel ordering on
rivers under Act. No. 1120 pending payment in full of
the purchase price, although the government reserves
title thereto, merely for its protection, the beneficial and
equitable title is in the purchaser, and that any accretion
by the lot even before payment of the last installment
belongs to the purchaser thereof.
the allocation of said lots to two other individuals, was beyond the that the administrative decision in matters within the executive
scope of its authority. Under Proclamation No. 336, series of 1956, the jurisdiction can only be set aside on proof of gross abuse of discretion,
authority of the Bureau of Lands to dispose of lots was limited to fraud, or error of law (Lovina vs. Moreno L-17821, November 29,
"unallocated areas." As the Letter-Decision of 28 September 1971 1963, 9 SCRA 557; Timbancaya vs. Vicente, L-19100, December 27,
states: "however, it is equally true that the accretions took place after 1963, 9 SCRA 852), which we find absent herein. chanroblesvirt ualawlibrary chanrobles virt ual law libra ry

the land had been allocated and assigned to Larrabaster. Clearly,

therefore, when the accretion started. Larrabaster had already acquired To reopen the case as ordered by the Court of Appeals would open
the beneficial and equitable title over the Lot No. 355, albeit the wide the doors to a protracted litigation of a controversy that has been
Government still retained the naked title thereto. Consequently, to pending for approximately nineteen (19) years now. It is high time that
Larrabaster and now to his assignee (Peña) belong the accretions to a finish to the case be written.
chanroblesvirtualawlibrary chanrobles virtual law l ibrary

said lot which may no longer be allocated to others by the

Government." (Letter-Decision), 28 September 1971, Annex "E", WHEREFORE, the Decision of 28 November 1986 of respondent
Petition). Having been thus allocated, the area within its original Court of Appeals is hereby SET ASIDE and the Decision of 10 May
boundaries belong to the awardee whether the creek advances or 1985 of the Regional Trial Court, Branch 24, Koronadal, South
recedes. He is entitled to all the benefits which may accrue to the land Cotabato, in Civil Case No. 98, is hereby ordered REINSTATED. chanroblesvirtualawlibrary chanrobles virtual law library

as well as suffer the losses that may befall it. chanroblesvirtualawlibrary chanrobles virtual law library

SO ORDERED.
MENDOZA's filing of a Miscellaneous Sales Application over the
Disputed Property with the Bureau of Lands on 6 November 1962 Y
must similarly be held to have been inappropriate and without any
legal force and effect since the same was no longer public land subject Y
to disposition by the Government. Contrary to the finding of
respondent Appellate Court, no irregularity may be imputed to the Y
administrative decisions by reason of the fact that allegedly a copy of
Y
the investigation report of the BOL was not among those elevated to
the Trial Court or among those marked in evidence. It can be safely Y
assumed that the Office of the President could not have relied upon
said report if the same had not been before it when it rendered the Y
questioned Decisions. chanroblesvirtualawlibra ry chanrobles virtual law library

Y
3. Finally, invariable is the rule that in reviewing administrative
decisions of the Executive Branch of the government, "the findings of Y
fact made therein must be respected, as long as they are supported by
substantial evidence, even if not overwhelming or preponderant (Ang Y
Tibay vs. Court of Industrial Relations, 69 Phil. 635 [1940]); that it is
Y
not for the reviewing court to weigh the conflicting evidence,
determine the credibility of the witnesses, or otherwise substitute its Y
own judgment for that of the administrative agency on the sufficiency
of the evidence (Lao Tang Bun, et al. vs. Fabre, 81 Phil. 682 [1948]);
 public of the Philippines c4!4 4,5""""
$%&'(%)
Manila ')(&(+$,/(&')(&( )+(

 ,
vs. (%)(0 && $) 1 6(0)*
EN BANC &*++&&+$($10 ,3 () &
/ 3%  %0( % ( , '(
c4 ,5"""" )+ (2%+ 



1 (0++&+($ /+$ ,'() 1 6 c4!!,5""""



 , vs. )*'() -1( ,) 1 6(0
)*&*++&&+$($10 ,3 () & 1 (0++&+($ /+$ ,'() 1 6
/ 3%  %0(1 % (
 '(/ petitioner
)+ (2%+ 

 vs.
(%)(0 && $)*) 1 6(0)*
c !!4!,5"""" &*++&&+$($10 ,3 () &
/ 3%  %0(1 % ( , '(
1 (0++&+($ /+$ ,'() 1 6 )+ (2%+ 




 , vs. *(+)',+ ) && )(%)

$)+ $& *+'%)%
5775
 c!"##,5""""
 


&+ ,/(&')(&( )+(petitioner
c44
 !,5"""" vs.
(%)(0 && $*(' %'($+( 7
)(&'  ')&( '$(&( )+( , :&
 
c91 7"# c97c )
&+ ,/(&')(&( )+(

 , vs. )* cc9';) 1 6(0)*&*++&&+$
(%)(0 && $)78
c97c  , () &/ 3%  


)cc98(99c$799  ,(
%$1+(1 (0++&+($ /+$ ,'()  c!"#,5""""
1 6 () &/ 3%  ,$-+&$  3 
* ,3 , )' +)  

 10*('$,/(&')(&( )+(

 , vs.
)*(%)(0 && $) 1 6 ,
c4!4 ,5""""  () &/ 3%  



 ,(&( )+(


 , vs. )*(%)(0 c4#,5""""
&& $)*.%)+/%,c9)7c )
c
8(99c$799  ,(%$1+(1 (  ,,/(&')(&( )+(

 , vs.
0++&+($ /+$ ,'() 1 6 () & )*(%)(0 && $)*.%)+/%,c97
/ 3%  ,$-+&$  3 0++ ( , c )cc96(0(%)
8
* ,3 

 (99c$799 ,( +(/+) 1 (0++&+(
 $ /+$ ,'() 1 6 () & petitioner bank was placed under receivership since January 25, 1985
/ 3%  ,$-+&$  3 * ,3 , by the Central Bank pursuant to the resolution of the Monetary Board.
 )' +)  


—    ,,(1121)

Petitioners Top Management Programs Corporation (Top Management
',+ , p
for brevity) and Pilar Development Corporation (Pilar Development
for brevity) are corporations engaged in the business of developing
This refers to nine (9) consolidated cases concerning the legality of the residential subdivisions. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

closure and receivership of petitioner Banco Filipino Savings and

Mortgage Bank (Banco Filipino for brevity) pursuant to the order of Top Management obtained a loan of P4,836,000 from Banco Filipino
respondent Monetary Board. Six (6) of these cases, namely, G.R. Nos. as evidenced by a promissory note dated January 7, 1982 payable in
68878, 77255-68, 78766, 81303, 81304 and 90473 involve the three years from date. The loan was secured by real estate mortgage in
common issue of whether or not the liquidator appointed by the its various properties in Cavite. Likewise, Pilar Development obtained
respondent Central Bank (CB for brevity) has the authority to loans from Banco Filipino between 1982 and 1983 in the principal
prosecute as well as to defend suits, and to foreclose mortgages for and amounts of P6,000,000, P7,370,000 and P5,300,000 with maturity
in behalf of the bank while the issue on the validity of the receivership dates on December 28, 1984, January 5, 1985 and February 16, 1984,
and liquidation of the latter is pending resolution in G.R. No. 7004. respectively. To secure the loan, Pilar Development mortgaged to
Corollary to this issue is whether the CB can be sued to fulfill financial Banco Filipino various properties in Dasmariñas, Cavite. chanroblesvirtualawlibrary chanrobles vi rtual law library

commitments of a closed bank pursuant to Section 29 of the Central

Bank Act. On the other hand, the other three (3) cases, namely, G.R. On January 25, 1985, the Monetary Board issued a resolution finding
Nos. 70054, which is the main case, 78767 and 78894 all seek to annul Banco Filipino insolvent and unable to do business without loss to its
and set aside M.B. Resolution No. 75 issued by respondents Monetary creditors and depositors. It placed Banco Filipino under receivership of
Board and Central Bank on January 25, 1985. chanroblesvirtualawlibrary chanrobles vi rtual law library Carlota Valenzuela, Deputy Governor of the Central Bank. chanroblesvirt ualawlibrary chanrobles virtual law libra ry

chanrobles virtual law libra ry On March 22, 1985, the Monetary Board issued another resolution
placing the bank under liquidation and designating Valenzuela as
The antecedent facts of each of the nine (9) cases are as follows: liquidator. By virtue of her authority as liquidator, Valenzuela
appointed the law firm of Sycip, Salazar, et al. to represent Banco
—  0)),) Filipino in all litigations. chanroblesvirtualawlibrary chanrobles virtual law li brary

This is a motion for reconsideration, filed by respondent Celestina On March 26, 1985, Banco Filipino filed the petition for 
  in
Pahimuntung, of the decision promulgated by thisCourt on April 8, G.R. No. 70054 questioning the validity of the resolutions issued by
1986, granting the petition for review on 
  and reversing the the Monetary Board authorizing the receivership and liquidation of
questioned decision of respondent appellate court, which annulled the Banco Filipino.chanroblesvirtualawlibrary chanrobles virtual law library

writ of possession issued by the trial court in favor of petitioner. chanroblesvirtualawlibra ry chanrobles virtual law libra ry

In a resolution dated August 29, 1985, this Court in G.R. No. 70054
The respondent-movant contends that the petitioner has no more resolved to issue a temporary restraining order, effective during the
personality to continue prosecuting the instant case considering that same period of 30 days, enjoining the respondents from executing
further acts of liquidation of the bank; that acts such as receiving
collectibles and receivables or paying off creditors' claims and other
transactions pertaining to normal operations of a bank are not
enjoined. The Central Bank is ordered to designate a comptroller for
Banco Filipino. chanroblesvirtualawlib rary chanrobles virtual law lib rary


,),00
Subsequently, Top Management failed to pay its loan on the due date.
Hence, the law firm of Sycip, Salazar, et al. acting as counsel for
Banco Filipino under authority of Valenzuela as liquidator, applied for
extra-judicial foreclosure of the mortgage over Top Management's
properties. Thus, the Ex-Officio Sheriff of the Regional Trial Court of
Cavite issued a notice of extra-judicial foreclosure sale of the
properties on December 16, 1985.
On December 9, 1985, Top Management filed a petition for injunction
and prohibition with the respondent appellate court docketed as CA-
G.R. SP No. 07892 seeking to enjoin the Regional Trial Court of
Cavite, the ex-officio sheriff of said court and Sycip, Salazar, et al.
from proceeding with foreclosure sale.
Similarly, Pilar Development defaulted in the payment of its loans.
The law firm of Sycip, Salazar, et al. filed separate applications with
the ex-officio sheriff of the Regional Trial Court of Cavite for the
extra-judicial foreclosure of mortgage over its properties.
Hence, Pilar Development filed with the respondent appellate court a
petition for prohibition with prayer for the issuance of a writ of
preliminary injunction docketed as CA-G.R SP Nos. 08962-64 seeking
to enjoin the same respondents from enforcing the foreclosure sale of
its properties. CA-G.R. SP Nos. 07892 and 08962-64 were
consolidated and jointly decided.
On October 30, 1986, the respondent appellate court rendered a
decision dismissing the aforementioned petitions.
Hence, this petition was filed by the petitioners Top Management and
Pilar Development alleging that Carlota Valenzuela, who was
appointed by the Monetary Board as liquidator of Banco Filipino, has
no authority to proceed with the foreclosure sale of petitioners'
properties on the ground that the resolution of the issue on the validity
of the closure and liquidation of Banco Filipino is still pending with
this Court in G.R. 70054.
—
Petitioner El Grande Development Corporation (El Grande for brevity)
is engaged in the business of developing residential subdivisions. It
was extended by respondent Banco Filipino a credit accommodation to
finance its housing program. Hence, petitioner was granted a loan in
the amount of P8,034,130.00 secured by real estate mortgages on its
various estates located in Cavite. chanroblesvirt ualawlibrary chanrobles virt ual law libra ry
chanroblesvirtualawlibrary chanrobles virtual law l ibrary
On January 15, 1985, the Monetary Board forbade Banco Filipino to
do business, placed it under receivership and designated Deputy
Governor Carlota Valenzuela as receiver. On March 22, 1985, the
Monetary Board confirmed Banco Filipino's insolvency and
designated the receiver Carlota Valenzuela as liquidator. chanroblesvirtualawlibrary chanrobles virtual law l ibrary
chanroblesvirtualawlibrary chanrobles virtual law li brary
When petitioner El Grande failed to pay its indebtedness to Banco
Filipino, the latter thru its liquidator, Carlota Valenzuela, initiated the
foreclosure with the Clerk of Court and Ex-officio sheriff of RTC
Cavite. Subsequently, on March 31, 1986, the ex-officio sheriff issued
chanroblesvirtualawlibra ry chanrobles virtual law library the notice of extra-judicial sale of the mortgaged properties of El
Grande scheduled on April 30, 1986. chanroblesvirtualawlibrary chanrobles vi rtual law library
In order to stop the public auction sale, petitioner El Grande filed a
petition for prohibition with the Court of Appeals alleging that
respondent Carlota Valenzuela could not proceed with the foreclosure
of its mortgaged properties on the ground that this Court in G.R. No.
chanroblesvi rtualawlibra ry chanrobles virtual law lib rary 70054 issued a resolution dated August 29, 1985, which restrained
Carlota Valenzuela from acting as liquidator and allowed Banco
Filipino to resume banking operations only under a Central Bank
chanroblesvirtuala wlibrary chanrobles virtual law l ibrary comptroller. chanroblesvirtualawlibra ry chanrobles virtual law libra ry
On March 2, 1987, the Court of Appeals rendered a decision
dismissing the petition. chanroblesvirtualawlibrary chanro bles virtual law l ibrary
Hence this petition for review on 
  was filed alleging that the
respondent court erred when it held in its decision that although
Carlota P. Valenzuela was restrained by this Honorable Court from
exercising acts in liquidation of Banco Filipino Savings & Mortgage
Bank, she was not legally precluded from foreclosing the mortgage
over the properties of the petitioner through counsel retained by her for
the purpose.
—


)*343
On November 8, 1985, petitioner Pilar Development Corporation
(Pilar Development for brevity) filed an action against Banco Filipino,
the Central Bank and Carlota Valenzuela for specific performance,
docketed as Civil Case No. 12191. It appears that the former
management of Banco Filipino appointed Quisumbing & Associates as
counsel for Banco Filipino. On June 12, 1986 the said law firm filed
an answer for Banco Filipino which confessed judgment against Banco
Filipino.
chanroblesvi rtualawlibra ry chanrobles virtual law lib rary
On June 17, 1986, petitioner filed a second amended complaint. The
Central Bank and Carlota Valenzuela, thru the law firm Sycip, Salazar,
Hernandez and Gatmaitan filed an answer to the complaint.
On June 23, 1986, Sycip, et al., acting for all the defendants including
Banco Filipino moved that the answer filed by Quisumbing &
Associates for defendant Banco Filipino be expunged from the
  was filed, alleging that the
records. Despite opposition from Quisumbing & Associates, the trial
court granted the motion to expunge in an order dated March 17, 1987.
Petitioner Pilar Development moved to reconsider the order but the
motion was denied.
Petitioner Pilar Development filed with the respondent appellate court


+45,3
a petition for 
  and mandamus to annul the order of the trial
court. The Court of Appeals rendered a decision dismissing the
petition. A petition was filed with this Court but was denied in a
resolution dated March 22, 1988. Hence, this instant motion for
reconsideration.
—


)*345
On July 9, 1985, petitioner BF Homes Incorporated (BF Homes for
brevity) filed an action with the trial court to compel the Central Bank
to restore petitioner's; financing facility with Banco Filipino. chanroblesvirtualawli brary chanrobles virtual law l ibrary
The Central Bank filed a motion to dismiss the action. Petitioner BF
Homes in a supplemental complaint impleaded as defendant Carlota
Valenzuela as receiver of Banco Filipino Savings and Mortgage
Bank. chanroblesvirtualawlibrary chanrob les virtual law library
On April 8, 1985, petitioner filed a second supplemental complaint to
which respondents filed a motion to dismiss. chanroblesvi rtualawlibra ry chanrobles virtual law library
On July 9, 1985, the trial court granted the motion to dismiss the
supplemental complaint on the grounds (1) that plaintiff has no
contractual relation with the defendants, and (2) that the Intermediate
Appellate Court in a previous decision in AC-G.R. SP. No. 04609 had
stated that Banco Filipino has been ordered closed and placed under
receivership pending liquidation, and thus, the continuation of the
facility sued for by the plaintiff has become legally impossible and the
suit has become moot. chanroblesvirtualawlibrary chanrobles virtual law library
chanroblesvirtualawlibrary chanrobles virtual law l ibrary The order of dismissal was appealed by the petitioner to the Court of
Appeals. On November 4, 1987, the respondent appellate court
dismissed the appeal and affirmed the order of the trial court. chanroblesvirtualawlibrary chanrobles virtual law l ibrary
Hence, this petition for review on 
respondent court erred when it found that the private respondents
should not be the ones to respond to the cause of action asserted by the
petitioner and the petitioner did not have any cause of action against
chanroblesvirtualawlibrary chanrob les virtual law li brary the respondents Central Bank and Carlota Valenzuela.
—
Petitioner El Grande Development Corporation (El Grande for brevity)
obtained a loan from Banco Filipino in the amount of P8,034,130.00,
secured by a mortgage over its five parcels of land located in Cavite
which were covered by Transfer Certificate of Title Nos. T-82187, T-
109027, T-132897, T-148377, and T-79371 of the Registry of Deeds
of Cavite. chanroblesvirtualawlibrary chanrobles virtual law li brary
When Banco Filipino was ordered closed and placed under
receivership in 1985, the appointed liquidator of BF, thru its counsel
Sycip, Salazar, et al. applied with the ex-officio sheriff of the Regional
Trial Court of Cavite for the extrajudicial foreclosure of the mortgage
constituted over petitioner's properties. On March 24, 1986, the ex-
officio sheriff issued a notice of extrajudicial foreclosure sale of the
properties of petitioner.
Thus, petitioner filed with the Court of Appeals a petition for
prohibition with prayer for writ of preliminary injunction to enjoin the
respondents from foreclosing the mortgage and to nullify the notice of
foreclosure.chanroblesvirtualawli brary chanrobles virtual law l ibrary
On June 16, 1989, respondent Court of Appeals rendered a decision
dismissing the petition.
Not satisfied with the decision, petitioner filed the instant petition for
review on 
 .
—


,4415
Banco Filipino Savings and Mortgage Bank was authorized to operate
as such under M.B. Resolution No. 223 dated February 14, 1963. It
commenced operations on July 9, 1964. It has eighty-nine (89)
operating branches, forty-six (46) of which are in Manila, with more
than three (3) million depositors.
As of July 31, 1984, the list of stockholders showed the major
stockholders to be: Metropolis Development Corporation, Apex
Mortgage and Loans Corporation, Filipino Business Consultants, Tiu
Family Group, LBH Inc. and Anthony Aguirre.
Petitioner Bank had an approved emergency advance of P119.7
million under M.B. Resolution No. 839 dated June 29, 1984. This was
augmented with a P3 billion credit line under M.B. Resolution No. 934
dated July 27, 1984.
On the same date, respondent Board issued M.B. Resolution No. 955
placing petitioner bank under conservatorship of Basilio Estanislao.
He was later replaced by Gilberto Teodoro as conservator on August
10, 1984. The latter submitted a report dated January 8, 1985 to
respondent Board on the conservatorship of petitioner bank, which
report shall hereinafter be referred to as the Teodoro report. chanroblesvirtualawlibrary chanrobles virtual law l ibrary
Subsequently, another report dated January 23, 1985 was submitted to
chanroblesvirt ualawlibrary chanrobles virtual law libra ry the Monetary Board by Ramon Tiaoqui, Special Assistant to the
Governor and Head, SES Department II of the Central Bank, regarding
the major findings of examination on the financial condition of
petitioner BF as of July 31, 1984. The report, which shall be referred
to herein as the Tiaoqui Report contained the following conclusion and
recommendation:
The examination findings as of July 31, 1984, as shown
chanroblesvirtualawlibrary chanrobles virtual law l ibrary earlier, indicate one of insolvency and illiquidity and
further confirms the above conclusion of the
Conservator. chanroblesvirtualawlibrary chanrobles virtual law library
All the foregoing provides sufficient justification for
forbidding the bank from engaging in banking. chanroblesvirtualawlibrary chanrobles virtual law li brary
Foregoing considered, the following are recommended:
1. Forbid the Banco Filipino Savings &
Mortgage Bank to do business in the
chanroblesvirtualawlibra ry chanrobles virtual law libra ry Philippines effective the beginning of
office January 1985, pursuant to Sec. 29
of R.A No. 265, as amended; chanrobles virtual law l ibrary
2. Designate the Head of the
chanroblesvirtualawlibrary chanrobles virtua l law library Conservator Team at the bank, as
Receiver of Banco Filipino Savings &
Mortgage Bank, to immediately take
charge of the assets and liabilities, as
expeditiously as possible collect and
chanroblesvirtualawlibrary chanrobles virtual law library gather all the assets and administer the
same for the benefit of all the creditors,
and exercise all the powers necessary for
these purposes including but not limited
 to bringing suits and foreclosing 1. To forbid Banco Filipino Savings and
mortgages in the name of the bank. chanroblesvi rtualawlibra ry chanrobles virtual law library Mortgage Bank and all its branches to do
business in the Philippines; chanrobles vi rtual law library

3. The Board of Directors and the

principal officers from Senior Vice 2. To designate Mrs. Carlota P.
Presidents, as listed in the attached Valenzuela, Deputy Governor as
Annex "A" be included in the watchlist Receiver who is hereby directly vested
of the Supervision and Examination with jurisdiction and authority to
Sector until such time that they shall immediately take charge of the bank's
have cleared themselves. chanroblesvirtualawlibrary chanrobles virtual law l ibrary assets and liabilities, and as
expeditiously as possible collect and
4. Refer to the Central Bank's Legal gather all the assets and administer the
Department and Office of Special same for the benefit of its creditors,
Investigation the report on the findings exercising all the powers necessary for
on Banco Filipino for investigation and these purposes including but not limited
possible prosecution of directors, to, bringing suits and foreclosing
officers, and employees for activities mortgages in the name of the bank; chanrobles virtual law l ibrary

which led to its insolvent position. (pp-

61-62, Rollo) 3. To designate Mr. Arnulfo B.
Aurellano, Special Assistant to the
On January 25, 1985, the Monetary Board issued the assailed MB Governor, and Mr. Ramon V. Tiaoqui,
Resolution No. 75 which ordered the closure of BF and which further Special Assistant to the Governor and
provides: Head, Supervision and Examination
Sector Department II, as Deputy
After considering the report dated January 8, 1985 of Receivers who are likewise hereby
the Conservator for Banco Filipino Savings and directly vested with jurisdiction and
Mortgage Bank that the continuance in business of the authority to do all things necessary or
bank would involve probable loss to its depositors and proper to carry out the functions
creditors, and after discussing and finding to be true the entrusted to them by the Receiver and
statements of the Special Assistant to the Governor and otherwise to assist the Receiver in
Head, Supervision and Examination Sector (SES) carrying out the functions vested in the
Department II as recited in his memorandum dated Receiver by law or Monetary Board
January 23, 1985, that the Banco Filipino Savings & Resolutions;chanrobles virtual law library

Mortgage Bank is insolvent and that its continuance in

business would involve probable loss to its depositors 4. To direct and authorize Management
and creditors, and in pursuance of Sec. 29 of RA 265, to do all other things and carry out all
as amended, the Board decided: other measures necessary or proper to
implement this Resolution and to
 safeguard the interests of depositors, 1. Banco Filipino Savings & Mortgage Bank be liquidated pursuant to
creditors and the general public; and chanrobles vi rtual law library paragraph 3, Sec. 29 of RA No. 265, as amended; chanrobles virtual law library

5. In consequence of the foregoing, to 2. The Legal Department, through the Solicitor General, be authorized
terminate the conservatorship over to file in the proper court a petition for assistance in th liquidation of
Banco Filipino Savings and Mortgage the Bank; chanrob les virtual law library

Bank. (pp. 10-11,   , Vol. I)

3. The Statutory Receiver be designated as the Liquidator of said bank;
On February 2, 1985, petitioner BF filed a complaint docketed as Civil andchanrobles virtual law l ibrary

Case No. 9675 with the Regional Trial Court of Makati to set aside the
action of the Monetary Board placing BF under receivership. chanroblesvirtualawlibra ry chanrobles vi rtual law library 4. Management be instructed to inform the stockholders of Banco
Filipino Savings & Mortgage Bank of the Monetary Board's decision
On February 28, 1985, petitioner filed with this Court the instant liquidate the Bank. (p. 167,   , Vol. I) chanrobles virtual law library

petition for 

  and mandamus under Rule 65 of the Rules of
Court seeking to annul the resolution of January 25, 1985 as made On July 23, 1985, petitioner filed a motion before this Court praying
without or in excess of jurisdiction or with grave abuse of discretion, that a restraining order or a writ of preliminary injunction be issued to
to order respondents to furnish petitioner with the reports of enjoin respondents from causing the dismantling of BF signs in its
examination which led to its closure and to afford petitioner BF a main office and 89 branches. This Court issued a resolution on August
hearing prior to any resolution that may be issued under Section 29 of 8, 1985 ordering the issuance of the aforesaid temporary restraining
R.A. 265, also known as Central Bank Act. chanroblesvirtualawlibrary chanrob les virtual law library order. chanroblesvirtualawlibrary chanrobles vi rtual law library

On March 19, 1985, Carlota Valenzuela, as Receiver and Arnulfo On August 20, 1985, the case was submitted for resolution. chanroblesvirt ualawlibrary chanrobles virtual law libra ry

Aurellano and Ramon Tiaoqui as Deputy Receivers of Banco Filipino

submitted their report on the receivership of BF to the Monetary In a resolution dated August 29, 1985, this Court Resolved direct the
Board, in compliance with the mandate of Sec. 29 of R.A. 265 which respondents Monetary Board and Central Bank hold hearings at which
provides that the Monetary Board shall determine within sixty (60) the petitioner should be heard, and terminate such hearings and submit
days from date of receivership of a bank whether such bank may be its resolution within thirty (30) days. This Court further resolved to
reorganized/permitted to resume business or ordered to be liquidated. issue a temporary restraining order enjoining the respondents from
The report contained the following recommendation: executing further acts of liquidation of a bank. Acts such as receiving
collectibles and receivables or paying off creditors' claims and other
In view of the foregoing and considering that the transactions pertaining to normal operations of a bank were no
condition of the banking institution continues to be one enjoined. The Central Bank was also ordered to designate comptroller
of insolvency, i.e., its realizable assets are insufficient for the petitioner BF. This Court also ordered th consolidation of Civil
to meet all its liabilities and that the bank cannot Cases Nos. 8108, 9676 and 10183 in Branch 136 of the Regional Trial
resume business with safety to its depositors, other Court of Makati. chanroblesvirt ualawlibrary chanrobles virtua l law libra ry

creditors and the general public, it is recommended

that: However, on September 12, 1985, this Court in the meantime
suspended the hearing it ordered in its resolution of August 29,
1985. chanroblesvirtualawlibrary chanrobles virtual law library
On October 8, 1985, this Court submitted a resolution order ing their deponents, no such cross-examination has been conducted. The
Branch 136 of the Regional Trial Court of Makati the presided over by reception of evidence in the form of affidavits was followed
Judge Ricardo Francisco to conduct the hear ing contemplated in the throughout, until the commissioner submitted his report and
resolution of August 29, 1985 in the most expeditious manner and to recommendations to the Court. This Court also held that the
submit its resolution to this Court.
chanroblesvirtualawlibrary chanrobles virtual law l ibrary documents pertinent to the resolution of the instant petition are the
Teodoro Report, Tiaoqui Report, Valenzuela, Aurellano and Tiaoqui
In the Court's resolution of February 19, 1987, the Court stated that the Report and the supporting documents which were made as the bases
hearing contemplated in the resolution of August 29, 1985, which is to by the reporters of their conclusions contained in their respective
ascertain whether substantial administrative due process had been reports. This Court also Resolved in its resolution to re-open the
observed by the respondent Monetary Board, may be expedited by referral hearing that was terminated after Judge Cosico had submitted
Judge Manuel Cosico who now presides the court vacated by Judge his report and recommendation with the end in view of allowing
Ricardo Francisco, who was elevated to the Court of Appeals, there petitioner to complete its presentation of evidence and also for
being no legal impediment or justifiable reason to bar the former from respondents to adduce additional evidence, if so minded, and for both
conducting such hearing. Hence, this Court directed Judge Manuel parties to conduct the required cross-examination of
Cosico to expedite the hearing and submit his report to this Court. chanroblesvirtualawlibrary chanrobles virtual law libra ry witnesses/deponents, to be done within a period of three months. To
obviate all doubts on Judge Cosico's impartiality, this Court designated
On February 20, 1988, Judge Manuel Cosico submitted his report to a new hearing commissioner in the person of former Judge Consuelo
this Court with the recommendation that the resolutions of respondents Santiago of the Regional Trial Court, Makati, Branch 149 (now
Monetary Board and Central Bank authorizing the closure and Associate Justice of the Court of Appeals). chanroblesvirt ualawlibrary chanrobles virtual law libra ry

liquidation of petitioner BP be upheld. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

Three motions for intervention were filed in this case as follows: First,
On October 21, 1988, petitioner BF filed an urgent motion to reopen in G.R. No. 70054 filed by Eduardo Rodriguez and Fortunate M.
hearing to which respondents filed their comment on December 16, Dizon, stockholders of petitioner bank for and on behalf of other
1988. Petitioner filed their reply to respondent's comment of January stockholders of petitioner; second, in G.R. No. 78894, filed by the
11, 1989. After having deliberated on the grounds raised in the same stockholders, and, third, again in G.R. No. 70054 by BF
pleadings, this Court in its resolution dated August 3, 1989 declared Depositors' Association and others similarly situated. This Court, on
that its intention as expressed in its resolution of August 29, 1985 had March 1, 1990, denied the aforesaid motions for intervention. chanroblesvirtualawlibrary chanrobles virtual law li brary

not been faithfully adhered to by the herein petitioner and respondents.

The aforementioned resolution had ordered a healing on the reports On January 28, 1991, the hearing commissioner, Justice Consuelo
that led respondents to order petitioner's closure and its alleged pre- Santiago of the Court of Appeals submitted her report and
planned liquidation. This Court noted that during the referral hearing recommendation (to be hereinafter called, "Santiago Report") on the
however, a different scheme was followed. Respondents merely following issues stated therein as follows:
submitted to the commissioner their findings on the examinations
conducted on petitioner, affidavits of the private respondents relative l) Had the Monetary Board observed the
to the findings, their reports to the Monetary Board and several other procedural requirements laid down in
documents in support of their position while petitioner had merely Sec. 29 of R.A. 265, as amended to
submitted objections to the findings of respondents, counter-affidavits justify th closure of the Banco Filipino
of its officers and also documents to prove its claims. Although the Savings and Mortgage Bank? chanro bles virtual law li brary

records disclose that both parties had not waived cross-examination of

 2) On the date of BF's closure (January On February 25, 1991, respondents filed their objections to the
25, 1985) was its condition one of Santiago Report. On March 5, 1991, respondents submitted a motion
insolvency or would its continuance in for oral argument alleging that this Court is confronted with two
business involve probable loss to its conflicting reports on the same subject, one upholding on all points the
depositors or creditors? Monetary Board's closure of petitioner, (Cosico Report dated February
19, 1988) and the other (Santiago Report dated January 25, 1991)
The commissioner after evaluation of the evidence presented found holding that petitioner's closure was null and void because petitioner's
and recommended the following: insolvency was not clearly established before its closure; and that such
a hearing on oral argrument will therefore allow the parties to directly
1. That the TEODORO and TIAOQUI confront the issues before this Court. chanroblesvirtualawlibrary chanrobles virt ual law libra ry

reports did not establish in accordance

with See. 29 of the R.A. 265, as On March 12, 1991 petitioner filed its opposition to the motion for oral
amended, BF's insolvency as of July 31, argument. On March 20, 1991, it filed its reply to respondents'
1984 or that its continuance in business objections to the Santiago Report. chanroblesvirtualawlibrary chanrobles vi rtual law lib rary

thereafter would involve probable loss to

its depositors or creditors. On the On June 18, 1991, a hearing was held where both parties were heard
contrary, the evidence indicates that BF on oral argument before this Court. The parties, having submitted their
was solvent on July 31, 1984 and that on respective memoranda, the case is now submitted for decision.
January 25, 1985, the day it was closed,
its insolvency was not clearly —   ,),0,
established; chanrobles virtual law li brary

On February 2, 1985, Banco Filipino filed a complaint with the trial

2. That consequently, BF's closure on court docketed as Civil Case No. 9675 to annul the resolution of the
January 25, 1985, not having satisfied Monetary Board dated January 25, 1985, which ordered the closure of
the requirements prescribed under Sec. the bank and placed it under receivership. chanroblesvirtualawlib rary chanrobles virtual law l ibrary

29 of RA 265, as amended, was null and

void.chanroblesvirtualawli brary chanrobles virtual law library On February 14, 1985, the Central Bank and the receivers filed a
motion to dismiss the complaint on the ground that the receivers had
3. That accordingly, by way of not authorized anyone to file the action. In a supplemental motion to
correction, BF should be allowed to re- dismiss, the Central Bank cited the resolution of this Court dated
open subject to such laws, rules and October 15, 1985 in G.R. No. 65723 entitled, "Central Bank et al. v.
regulations that apply to its situation. Intermediate Appellate Court" whereby We held that a complaint
questioning the validity of the receivership established by the Central
Respondents thereafter filed a motion for leave to file objections to the Bank becomes moot and academic upon the initiation of liquidation
Santiago Report. In the same motion, respondents requested that the proceedings. chanroblesvirtualawlib rary chanrobles virtual law lib rary

report and recommendation be set for oral argument before the Court.
On February 7, 1991, this Court denied the request for oral argument While the motion to dismiss was pending resolution, petitioner herein
of the parties.
chanroblesvirtualawl ibrary chanrobles virtual law library Metropolis Development Corporation (Metropolis for brevity) filed a
motion to intervene in the aforestated civil case on the ground that as a
stockholder and creditor of Banco Filipino, it has an interest in the
subject of the action.
  with the
On July 19, 1985, the trial court denied the motion to dismiss and also
denied the motion for reconsideration of the order later filed by
Central Bank. On June 5, 1985, the trial court allowed the motion for
The Central Bank filed a supplemental motion to dismiss which was
chanroblesvirtualawl ibrary chanrobles virtual law library denied. Hence, the latter filed a petition for 
respondent appellate court to set aside the order of the trial court
denying the motion to dismiss. On March 17, 1986, the respondent
appellate court granted the petition and dismissed the complaint of
Banco Filipino with the trial court. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

intervention.chanroblesvirtualawlibrary chanrobles virtual law library

Thus, this petition for 

  was filed with the petitioner
Hence, the Central Bank and the receivers of Banco Filipino filed a contending that a bank which has been closed and placed under
petition for 
  with the respondent appellate court alleging that receivership by the Central Bank under Section 29 of RA 265 could
the trial court committed grave abuse of discretion in not dismissing file suit in court in its name to contest such acts of the Central Bank,
Civil Case No. 9675. chanroblesvirtualawlibrary chanrobles virtual law lib rary without the authorization of the CB-appointed receiver. chanroblesvirtualawlib rary chanrobles virtual law l ibrary

On March 17, 1986, the respondent appellate court rendered a decision After deliberating on the pleadings in the following cases:
annulling and setting aside the questioned orders of the trial court, and
ordering the dismissal of the complaint filed by Banco Filipino with 1. In G.R. No. 68878, the respondent's
the trial court as well as the complaint in intervention of petitioner motion for reconsideration; chanrobles virtual law library

Metropolis Development Corporation. chanroblesvirtualawlibra ry chanrobles virtual law library

2. In G.R. Nos. 77255-58, the petition,

Hence this petition was filed by Metropolis Development Corporation comment, reply, rejoinder and sur-
questioning the decision of the respondent appellate court. rejoinder; chanrobles virtual law library

—   ,))+5 2. In G.R. No. 78766, the petition,

comment, reply and rejoinder; chanrobles virtual law library

On February 2, 1985, a complaint was filed with the trial court in the
name of Banco Filipino to annul the resolution o the Monetary Board 3. In G.R. No. 81303, the petitioner's
dated January 25, 1985 which ordered the closure of Banco Filipino motion for reconsideration; chanrobles virtual law library

and placed it under receivership. The receivers appointed by the

Monetary Board were Carlota Valenzuela, Arnulfo Aurellano and 4. In G.R.No. 81304, the petition,
Ramon Tiaoqui. chanroblesvi rtualawlibra ry chanrobles vi rtual law library comment and reply; chanrobles vi rtual law library

On February 14, 1985, the Central Bank and the receiver filed a 5. Finally, in G.R. No. 90473, the
motion to dismiss the complaint on the ground that the receiver had petition comment and reply.
not authorized anyone to file the action. chanroblesvirtualawl ibrary chan robles virtual law library

We find the motions for reconsideration in G.R. Nos. 68878 and 81303
On March 22, 1985, the Monetary Board placed the bank under and the petitions in G.R. Nos. 77255-58, 78766, 81304 and 90473
liquidation and designated Valenzuela as liquidator and Aurellano and devoid of merit.chanroblesvirtualawlibra ry chanrobles virt ual law libra ry

Tiaoqui as deputy liquidators. chanroblesvirtualawlibrary chanrobles virtual law library

Section 29 of the Republic Act No. 265, as amended known as the designation by the Central Bank of a comptroller Banco Filipino alter
Central Bank Act,  


$ 



 the powers and functions; of the liquid insofar as the management of

 
 

 "
   the assets of the bank is concerned. The mere duty of the comptroller

a




$a 
$6 is to supervise counts and finances undertaken by the liquidator and to



"! 

  " 

a
 d mine the propriety of the latter's expenditures incurred behalf of the






 

 


" bank. Notwithstanding this, the liquidator is empowered under the law

 

$   
 a 
 to continue the functions of receiver is preserving and keeping intact

    
a  a




 " exercising the assets of the bank in substitution of its former management, and to
all the powers necessary for these purposes including, but not limited prevent the dissipation of its assets to the detriment of the creditors of
to, aa
  a 
aa
 
$. If the the bank. These powers and functions of the liquidator in directing the
Monetary Board shall later determine and confirm that banking operations of the bank in place of the former management or former
institution is insolvent or cannot resume business safety to depositors, officials of the bank include the retaining of counsel of his choice in
creditors and the general public, it shall, public interest requires, order actions and proceedings for purposes of administration. chanroblesvirtualawlib rary chanrobles virtual law l ibrary

its liquidation and appoint a #


 
$ 

 


     

Ä 
 Clearly, in G.R. Nos. 68878, 77255-58, 78766 and 90473, the
7 

The liquid for may, in the name of the bank and with the liquidator by himself or through counsel has the authority to bring
assistance counsel as he may retain, institute such actions as may
necessary in the appropriate court to collect and recover a counts and
assets of such institution or defend any action ft against the
institution.
chanroblesvirtualawlibrary chanrobles virtual law l ibrary
When the issue on the validity of the closure and receivership of
Banco Filipino bank was raised in G.R. No. 70054, pendency of the
case did not diminish the powers and authority of the designated
liquidator to effectuate and carry on the a ministration of the bank. In
fact when We adopted a resolute on August 25, 1985 and issued a
restraining order to respondents Monetary Board and Central Bank,
We enjoined me further acts of liquidation. Such acts of liquidation, as
explained in Sec. 29 of the Central Bank Act are those which
constitute the conversion of the assets of the banking institution to
money or the sale, assignment or disposition of the s to creditors and
other parties for the purpose of paying debts of such institution. We
did not prohibit however acts a as receiving collectibles and
receivables or paying off credits claims and

actions for foreclosure of mortgages executed by debtors in favor of
the bank. In G.R. No. 81303, the liquidator is likewise authorized to
resist or defend suits instituted against the bank by debtors and
creditors of the bank and by other private persons. Similarly, in G.R.
No. 81304, due to the aforestated reasons, the Central Bank cannot be
compelled to fulfill financial transactions entered into by Banco
Filipino when the operations of the latter were suspended by reason of
its closure. The Central Bank possesses those powers and functions
only as provided for in Sec. 29 of the Central Bank Act. chanroblesvirtualawlibrary chanrobles virtual law li brary
While We recognize the actual closure of Banco Filipino and the
consequent legal effects thereof on its operations, We cannot uphold
the legality of its closure and thus, find the petitions in G.R. Nos.
70054, 78767 and 78894 impressed with merit. We hold that the
closure and receivership of petitioner bank, which was ordered by
respondent Monetary Board on January 25, 1985, is null and void. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

  It is a well-recognized principle that administrative and discretionary

a
  
 $. There is no doubt that the functions may not be interfered with by the courts. In general, courts
prosecution of suits collection and the foreclosure of mortgages have no supervising power over the proceedings and actions of the
against debtors the bank by the liquidator are among the usual and administrative departments of the government. This is generally true
ordinary transactions pertaining to the administration of a bank. their with respect to acts involving the exercise of judgment or discretion,
did Our order in the same resolution dated August 25, 1985 for the and findings of fact. But when there is a grave abuse of discretion
which is equivalent to a capricious and whimsical exercise of liabilities, as expeditiously as possible collect and
judgment or where the power is exercised in an arbitrary or despotic gather all the assets and administer the same for the
manner, then there is a justification for the courts to set aside the benefit's of its creditors, and represent the bank
administrative determination reached (Lim, Sr. v. Secretary of personally or through counsel as he may retain in all
Agriculture and Natural Resources, L-26990, August 31, 1970, 34 actions or proceedings for or against the institution,
SCRA 751) chanrobles virtual law library exercising all the powers necessary for these purposes
including, but not limited to, bringing and foreclosing
The jurisdiction of this Court is called upon, once again, through these mortgages in the name of the bank or non-bank
petitions, to undertake the delicate task of ascertaining whether or not financial intermediary performing quasi-banking
an administrative agency of the government, like the Central Bank of functions.chanroblesvirtualawl ibrary chan robles virtual law libra ry

the Philippines and the Monetary Board, has committed grave abuse of
discretion or has acted without or in excess of jurisdiction in issuing The Monetary Board shall thereupon determine within
the assailed order. Coupled with this task is the duty of this Court not sixty days whether the institution may be reorganized or
only to strike down acts which violate constitutional protections or to otherwise placed in such a condition so that it may be
nullify administrative decisions contrary to legal mandates but also to permitted to resume business with safety to its
prevent acts in excess of authority or jurisdiction, as well as to correct depositors and creditors and the general public and shall
manifest abuses of discretion committed by the officer or tribunal prescribe the conditions under which such resumption
involved.chanroblesvirtualawl ibrary chanrobles virtual law library of business shall take place as well as the time for
fulfillment of such conditions. In such case, the
The law applicable in the determination of these issues is Section 29 of expenses and fees in the collection and administration
Republic Act No. 265, as amended, also known as the Central Bank of the assets of the institution shall be determined by
Act, which provides: the Board and shall be paid to the Central Bank out of
the assets of such institution. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

SEC. 29.  
a  . - Whenever,
upon examination by the head of the appropriate
supervising or examining department or his examiners
or agents into the condition of any bank or non-bank
financial intermediary performing quasi-banking
functions, it shall be disclosed that the condition of the
same is one of insolvency, or that its continuance in
business would involve probable loss to its depositors
or creditors, it shall be the duty of the department head
concerned forthwith, in writing, to inform the Monetary
Board of the facts. The Board may, upon finding the
statements of the department head to be true, forbid the
institution to do business in the Philippines and
designate an official of the Central Bank or a person of
recognized competence in banking or finance, as
receiver to immediately take charge of its assets and
If the Monetary Board shall determine and confirm
within the said period that the bank or non-bank
financial intermediary performing quasi-banking
functions is insolvent or cannot resume business with
safety to its depositors, creditors, and the general
public, it shall, if the public interest requires, order its
liquidation, indicate the manner of its liquidation and
approve a liquidation plan which may, when warranted,
involve disposition of any or all assets in consideration
for the assumption of equivalent liabilities. The
liquidator designated as hereunder provided shall, by
the Solicitor General, file a petition in the regional trial
court reciting the proceedings which have been taken
and praying the assistance of the court in the liquidation
of such institutions. The court shall have jurisdiction in
the same proceedings to assist in the adjudication of the
disputed claims against the bank or non-bank financial
intermediary performing quasi-banking functions and in
the enforcement of individual liabilities of the
stockholders and do all that is necessary to preserve the
assets of such institutions and to implement the
liquidation plan approved by the Monetary Board. The
Monetary Board shall designate an official of the
Central bank or a person of recognized competence in
banking or finance, as liquidator who shall take over
and continue the functions of the receiver previously
appointed by the Monetary Board under this Section.
The liquidator shall, with all convenient speed, convert
the assets of the banking institutions or non-bank
financial intermediary performing quasi-banking
function to money or sell, assign or otherwise dispose
of the same to creditors and other parties for the
purpose of paying the debts of such institution and he
may, in the name of the bank or non-bank financial
intermediary performing quasi-banking functions and
with the assistance of counsel as he may retain, institute
such actions as may be necessary in the appropriate
court to collect and recover accounts and assets of such
institution or defend any action filed against the
institution: Provided, However, That after having
reasonably established all claims against the institution,
the liquidator may, with the approval of the court, effect
partial payments of such claims for assets of the
institution in accordance with their legal priority.
The assets of an institution under receivership or
liquidation shall be deemed in 

ain the
hands of the receiver or liquidator and shall from the
moment of such receivership or liquidation, be exempt
from any order of garnishment, levy, attachment,
orexecution.chanroblesvirtualawl ibrary chanrobles virtual law library
The provisions of any law to the contrary
notwithstanding, the actions of the Monetary Board
chanroblesvirtualawl ibra ry chanrobles virtual law libra ry
of the New Rules of Court insofar as they are applicable
under this Section, Section 28-A, an the second
paragraph of Section 34 of this Act shall be final an
executory, and can be set aside by a court only if there
is convince proof, after hearing, that the action is
plainly arbitrary and made in bad faith:  

" That
the same is raised in an appropriate pleading filed by
the stockholders of record representing the majority of
th capital stock within ten (10) days from the date the
receiver take charge of the assets and liabilities of the
bank or non-bank financial intermediary performing
quasi-banking functions or, in case of conservatorship
or liquidation, within ten (10) days from receipt of
notice by the said majority stockholders of said bank or
non-bank financial intermediary of the order of its
placement under conservatorship o liquidation. No
restraining order or injunction shall be issued by an
court enjoining the Central Bank from implementing its
actions under this Section and the second paragraph of
Section 34 of this Act in th absence of any convincing
proof that the action of the Monetary Board is plainly
arbitrary and made in bad faith and the petitioner or
plaintiff files a bond, executed in favor of the Central
Bank, in an amount be fixed by the court. The
restraining order or injunction shall be refused or, if
granted, shall be dissolved upon filing by the Central
Bank of a bond, which shall be in the form of cash or
Central Bank cashier's check, in an amount twice the
amount of the bond of th petitioner or plaintiff
conditioned that it will pay the damages which the
petitioner or plaintiff may suffer by the refusal or the
dissolution of the injunction. The provisions of Rule 58
and not inconsistent with the provision of this Section
shall govern the issuance and dissolution of the re
straining order or injunction contemplated in this
Section.
xxx xxx xxx
Based on the aforequoted provision, the Monetary Board may order probable loss to its depositors or creditors; thirdly, the department
the cessation of operations of a bank in the Philippine and place it head concerned shall inform the Monetary Board in writing, of the
under receivership upon a finding of insolvency or when its facts; and lastly, the Monetary Board shall find the statements of the
continuance in business would involve probable loss its depositors or department head to be true.chanroblesvirtualawlibrary chanrobles virtual law libra ry

creditors. If the Monetary Board shall determine and confirm within

sixty (60) days that the bank is insolvent or can no longer resume Anent the first requirement, the Tiaoqui report, submitted on January
business with safety to its depositors, creditors and the general public, 23, 1985, revealed that the finding of insolvency of petitioner was
it shall, if public interest will be served, order its liquidation. chanroblesvirtualawli brary chanrobles virtual law l ibrary based on the partial list of exceptions and findings on the regular
examination of the bank as of July 31, 1984 conducted by the
Specifically, the basic question to be resolved in G.R. Nos. 70054, Supervision and Examination Sector II of the Central Bank of the
78767 and 78894 is whether or not the Central Bank and the Monetary PhilippinesCentral Bank (p. 1, Tiaoqui Report). chanroblesvirtualawlibrary chanrobles virt ual law library

Board acted arbitrarily and in bad faith in finding and thereafter

concluding that petitioner bank is insolvent, and in ordering its closure On December 17, 1984, this list of exceptions and finding was
on January 25, 1985. chanroblesvirtualawlibra ry chanrobles vi rtual law library submitted to the petitioner bank (p. 6, Tiaoqui Report) This was
attached to the letter dated December 17, 1984, of examiner-in-charge
As We have stated in Our resolution dated August 3, 1989, the Dionisio Domingo of SES Department II of the Central Bank to
documents pertinent to the resolution of these petitions are the Teodoro Arcenas, president of petitione bank, which disclosed that the
Teodoro Report, Tiaoqui Report, and the Valenzuela, Aurellano and examination of the petitioner bank as to its financial condition as of
Tiaoqui Report and the supporting documents made as bases by the July 31, 1984 was not yet completed or finished on December 17,
supporters of their conclusions contained in their respective reports. 1984 when the Central Bank submitted the partial list of findings of
We will focus Our study and discussion however on the Tiaoqui examination to th petitioner bank. The letter reads:
Report and the Valenzuela, Aurellano and Tiaoqui Report. The former
recommended the closure and receivership of petitioner bank while the In connection with the regular examination of your
latter report made the recommendation to eventually place the institution a of July 31, 1984, we are 

a
petitioner bank under liquidation. This Court shall likewise take into 
 

  !
 8
a 
consideration the findings contained in the reports of the two   

commissioners who were appointed by this Court to hold the referral
hearings, namely the report by Judge Manuel Cosico submitted Please be informed that

 
February 20, 1988 and the report submitted by Justice Consuelo


 !
 9tentatively scheduled last
Santiago on January 28, 1991. chanroblesvirtualawlibrary chan robles virtual law library December 7, 1984) and



a 




 
   

#


There is no question that under Section 29 of the Central Bank Act, the Ä  "

a8 
 
a
following are the mandatory requirements to be complied with before /

a

   

a bank found to be insolvent is ordered closed and forbidden to do
$
. These shall be submitted to you in due
business in the Philippines: Firstly, an examination shall be conducted time (p. 810, Rollo, Vol. III; emphasis ours).
by the head of the appropriate supervising or examining department or
his examiners or agents into the condition of the bank; secondly, it It is worthy to note that a conference was held on January 21, 1985 at
shall be disclosed in the examination that the condition of the bank is the Central Bank between the officials of the latter an of petitioner
one of insolvency, or that its continuance in business would involve
bank. What transpired and what was agreed upon during the K 


  
conference was explained in the Tiaoqui report.

a


 
$ 







$" 






... The discussion centered on the substantial exposure !
   
" 
$ 

of the bank to the various entities which would have a
 
÷ "
!
 
 
relationship with the bank; the manner by which some



(p. 7. Tiaoqui report; p. 59,   , Vol. I)
bank funds were made indirectly available to several
entities within the group; and the unhealth financial In his testimony in the second referral hearing before Justice Santiago,
status of these firms in which the bank was additionally Tiaoqui testified that on January 21, 1985, he met with officers of
exposed through new funds or refinancing petitioner bank to discuss the advanced findings and exceptions made
accommodation including accrued interest. chanroblesvirtualawlibrary chanrobles virt ual law libra ry by Mr. Dionisio Domingo which covered 70%-80% of the bank's loan
portfolio; that at that meeting, Fortunato Dizon (BF's Executive Vice
Queried in the impact of these clean loans, on the bank President) said that as regards the unsecured loans granted to various
solvency Mr. Dizon (BF Executive Vice President) corporations, said corporations had large undeveloped real estate
intimated that, collectively these corporations have properties which could be answerable for the said unsecured loans and
large undeveloped real estate properties in the suburbs that a reply from BF was forthcoming, that he (Tiaoqui) however
which can be made answerable for the unsecured loans prepared his report despite the absence of such reply; that he believed,
a well as the Central Bank's credit accommodations. ÷ as in fact it is stated in his report, that despite the meeting on January
   
$ 

 
 a
 21, 1985, there was still a need to discuss the recommended valuation
(pp. 58-59,   , Vol. I; emphasis ours)
Clearly, Tiaoqui based his report on an incomplete examination of
petitioner bank and outrightly concluded therein that the latter's
financial status was one of insolvency or illiquidity. He arrived at the
said conclusion from the following facts: that as of July 31, 1984, total
capital accounts consisting of paid-in capital and other capital accounts
such as surplus, surplus reserves and undivided profits aggregated
P351.8 million; that capital adjustments, however, wiped out the
capital accounts and placed the bank with a capital deficiency
amounting to P334.956 million; that the biggest adjustment which
contributed to the deficit is the provision for estimated losses on
accounts classified as doubtful and loss which was computed at P600.4
million pursuant to the examination. This provision is also known as
valuation reserves which was set up or deducted against the capital
accounts of the bank in arriving at the latter's financial condition.
Tiaoqui however admits the insufficiency and unreliability of the
findings of the examiner as to the setting up of recommended
valuation reserves from the assets of petitioner bank. He stated:
chanrob lesvirtualawlib rary chanrobles vi rtual law lib rary
reserves of petitioner bank and; that he however, did not wait anymore
for a discussion of the recommended valuation reserves and instead
prepared his report two days after January 21, 1985 (pp. 3313-3314,
  ).chanroblesvirtualawlibrary chanrobles virtual law library
Records further show that the examination of petitioner bank was
officially terminated only when Central Bank Examination-charge
Dionisio Domingo submitted his final report of examination on March
4,1985. chanroblesvirtualawlibrary chanrobles vi rtual law library
It is evident from the foregoing circumstances that the examination
contemplated in Sec. 29 of the CB Act as a mandatory requirement
was not completely and fully complied with. Despite the existence of
the partial list of findings in the examination of the bank, there were
still highly significant items to be weighed and determined such as the
matter of valuation reserves, before these can be considered in the
financial condition of the bank. It would be a drastic move to conclude
prematurely that a bank is insolvent if the basis for such conclusion is
lacking and insufficient, especially if doubt exists as to whether such
bases or findings faithfully represent the real financial status of the In the celebrated case of ÷aK
 
 %


 , 69
bank.chanroblesvirtualawlibrary chanrobles virt ual law libra ry
The actuation of the Monetary Board in closing petitioner bank on
January 25, 1985 barely four days after a conference with the latter on
the examiners' partial findings on its financial position is also violative
of what was provided in the CB Manual of Examination Procedures.
Said manual provides that only after the examination is concluded,
should a pre-closing conference led by the examiner-in-charge be held
with the officers/representatives of the institution on the
findings/exception, and a copy of the summary of the
findings/violations should be furnished the institution examined so that
corrective action may be taken by them as soon as possible (Manual of
Examination Procedures, General Instruction, p. 14). It is hard to
understand how a period of four days after the conference could be a
reasonable opportunity for a bank to undertake a responsive and
corrective action on the partial list of findings of the examiner-in-
charge. chanroblesvirtualawlibra ry chanrobles virtual law libra ry
We recognize the fact that it is the responsibility of the Central Bank
of the Philippines to administer the monetary, banking and credit
system of the country and that its powers and functions shall be
exercised by the Monetary Board pursuant to Rep. Act No. 265,
known as the Central Bank Act. Consequently, the power and
authority of the Monetary Board to close banks and liquidate them
thereafter when public interest so requires is an exercise of the police
power of the state. Police power, however, may not be done arbitratrily
or unreasonably and could be set aside if it is either capricious,
discriminatory, whimsical, arbitrary, unjust or is tantamount to a denial
of due process and equal protection clauses of the Constitution
(Central Bank v. Court of Appeals, Nos. L-50031-32, July 27, 1981,
106 SCRA 143).
In the instant case, the basic standards of substantial due process were
not observed. Time and again, We have held in several cases, that the
procedure of administrative tribunals must satisfy the fundamentals of
fair play and that their judgment should express a well-supported
conclusion.
Phil. 635, this Court laid down several cardinal primary rights which
must be respected in a proceeding before an administrative body. chanroblesvirtualawlibrary chanrobles virtual law library
However, as to the requirement of notice and hearing, Sec. 29 of RA
265 does not require a previous hearing before the Monetary Board
implements the closure of a bank, since its action is subject to judicial
scrutiny as provided for under the same law (Rural Bank of Bato v.
IAC, G.R. No. 65642, October 15, 1984, Rural Bank v. Court of
Appeals, G.R. 61689, June 20, 1988,162 SCRA 288). chanroblesvirtualawlibrary chanrobles virtual law li brary
Notwithstanding the foregoing, administrative due process does not
mean that the other important principles may be dispensed with,
namely: the decision of the administrative body must have something
to support itself and the evidence must be substantial. Substantial
evidence is more than a mere scintilla. It means such relevant evidence
as a reasonable mind might accept as adequate to support a conclusion
(Ang Tibay vs. CIR,  ). Hence, where the decision is merely
based upon pieces of documentary evidence that are not sufficiently
substantial and probative for the purpose and conclusion they are
presented, the standard of fairness mandated in the due process clause
is not met. In the case at bar, the conclusion arrived at by the
respondent Board that the petitioner bank is in an illiquid financial
position on January 23, 1985, as to justify its closure on January 25,
1985 cannot be given weight and finality as the report itself admits the
inadequacy of its basis to support its conclusion. chanroblesvirtualawlib rary chanrobles virtual law l ibrary
The second requirement provided in Section 29, R.A. 265 before a
bank may be closed is that the examination should disclose that the
condition of the bank is one of insolvency. chanroblesvirtualawl ibrary chanrobles virtual law library
chanroblesvirtualawlibra ry chanrobles virtual law libra ry As to the concept of whether the bank is solvent or not, the
respondents contend that under the Central Bank Manual of
Examination Procedures, Central Bank examiners must recommend
valuation reserves, when warranted, to be set up or deducted against
the corresponding asset account to determine the bank's true condition
or net worth. In the case of loan accounts, to which practically all the
chanroblesvirtualawlibrary chanrobles virtual law library questioned valuation reserves refer, the manual provides that: chanrobles virtual law library
1. For doubtful loans, or loans the ultimate collection of which is mean that &
/
 $or a non-bank financial
doubtful and in which a substantial loss is probable but not yet intermediary performing quasi-banking functions as determined by the
definitely ascertainable as to extent, valuation reserves of fifty per cent Central Bank are 




." chanrobles virtual law libra ry

(50%) of the accounts should be recommended to be set up. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

2. For loans classified as loss, or loans regarded by the examiner as
absolutely uncollectible or worthless, valuation reserves of one
hundred percent (100%) of the accounts should be recommended to be
set up (p. 8, Objections to Santiago report).
Hence, the contention of the Central Bank that a bank's true financial
condition is synonymous with the terms "unimpaired capital and
surplus," "combined capital accounts" and net worth after deducting
valuation reserves from the capital, surplus and unretained earnings,
chanroblesvirtualawlibrary chanrobles virtual law libra ry citing Sec. 5 of RA 337 is misplaced. chanroblesvirt ualawlibrary chanrobles virtual law libra ry

The foregoing criteria used by respondents in determining the financial
condition of the bank is based on Section 5 of RA 337, known as the
General Banking Act which states:
Sec. 5. The following terms shall be held to be
synonymous and interchangeable:
... f. Unimpaired Capital and Surplus, "Combined
capital accounts," and "Net worth," which terms shall
mean for the purposes of this Act, the total of the
"unimpaired paid-in capital, surplus, and undivided
Firstly, it is clear from the law that a solvent bank is one in which its
assets exceed its liabilities. It is a basic accounting principle that assets
are composed of liabilities and capital. The term "assets" includes
capital and surplus" (Exley v. Harris, 267 p. 970, 973, 126 Kan., 302).
On the other hand, the term "capital" includes common and preferred
chan robles virtual law library stock, surplus reserves, surplus and undivided profits. (Manual of
Examination Procedures, Report of Examination on Department of
Commercial and Savings Banks, p. 3-C). If valuation reserves would
be deducted from these items, the result would merely be the networth
or the unimpaired capital and surplus of the bank applying Sec. 5 of
RA 337 but not the total financial condition of the bank. chanroblesvirtualawlibrary chanrobles virt ual law libra ry

profits net of such valuation reserves as may be

required by the Central Bank." Secondly, the statement of assets and liabilities is used in balance
sheets. Banks use statements of condition to reflect the amounts,
There is no doubt that the Central Bank Act vests authority upon the nature and changes in the assets and liabilities. The Central Bank
Central Bank and Monetary Board to take charge and administer the Manual of Examination Procedures provides a format or checklist of a
monetary and banking system of the country and this authority statement of condition to be used by examiners as guide in the
includes the power to examine and determine the financial condition of examination of banks. The format enumerates the items which will
banks for purposes provided for by law, such as for the purpose of compose the assets and liabilities of a bank. Assets include cash and
closure on the ground of insolvency stated in Section 29 of the Central those due from banks, loans, discounts and advances, fixed assets and
Bank Act. But express grants of power to public officers should be other property owned or acquired and other miscellaneous assets. The
subjected to a strict interpretation, and will be construed as conferring amount of loans, discounts and advances to be stated in the statement
those powers which are expressly imposed or necessarily implied of condition as provided for in the manual is computed after deducting
(Floyd Mechem, Treatise on the Law of Public Offices and Officers, p. valuation reserves when deemed necessary. On the other hand,
335).chanroblesvirtualawlibrary chanrobles virtual law li brary liabilities are composed of demand deposits, time and savings
deposits, cashier's, manager's and certified checks, borrowings, due to
In this case, there can be no clearer explanation of the concept of head office, branches; and agencies, other liabilities and deferred
insolvency than what the law itself states. Sec. 29 of the Central Bank credits (Manual of Examination Procedure, p. 9). The amounts stated
Act provides that insolvency under the Act, shall be understood to in the balance sheets or statements of condition including the
computation of valuation reserves when justified, are based however, (Exley v. Harris, 267 p. 970, 973,126 Kan. 302; Alexander v.
on the assumption that the bank or company will continue in business Llewellyn, Mo. App., 70 S.W. 2n 115,117). chanroblesvirtualawlibrary chanrobles virtual law library

indefinitely, and therefore, the networth shown in the statement is in

no sense an indication of the amount that might be realized if the bank In arriving at the computation of realizable assets of petitioner bank,
or company were to be liquidated immediately (Prentice Hall respondents used its books which undoubtedly are not reflective of the
Encyclopedic Dictionary of Business Finance, p. 48). Further, based actual cash or fair market value of its assets. This is not the proper
on respondents' submissions, the allowance for probable losses on procedure contemplated in Sec. 29 of the Central Bank Act. Even the
loans and discounts represents the  

 a

 CB Manual of Examination Procedures does not confine examination

 to provide for possible losses arising from non-collection of of a bank solely with the determination of the books of the bank. The
loans and advances, and this account is also referred to as valuation latter is part of auditing which should not be confused with
reserve (p. 9, Objections to Santiago report). Clearly, the statement of examination. Examination appraises the  
 



 6
condition which contains a provision for recommended valuation 
"
#


 a





reserves should not be used as the ultimate basis to determine the 


 6  
"
a
 
Audit is a
solvency of an institution for the purpose of termination of its detailed inspection of the institution's books, accounts, vouchers,
operations.chanroblesvirtualawlibra ry chanrobles virtual law lib rary ledgers, etc. to determine the recording of all assets and liabilities.
Hence, examination concerns itself with review and appraisal, while
Respondents acknowledge that under the said CB manual, CB audit concerns itself with verification (CB Manual of Examination
examiners must recommend valuation reserves, 

, to be
set up against the corresponding asset account (p. 8, Objections to
Santiago report). Tiaoqui himself, as author of the report
recommending the closure of petitioner bank admits that the valuation
reserves should still be discussed with the petitioner bank in
compliance with standard examination procedure. Hence, for the
Monetary Board to unilaterally deduct an uncertain amount as
valuation reserves from the assets of a bank and to conclude therefrom
without sufficient basis that the bank is insolvent, would be totally
unjust and unfair.
The test of insolvency laid down in Section 29 of the Central Bank Act
is measured by determining whether the realizable assets of a bank are
leas than its liabilities. Hence, a bank is solvent if the fair cash value of
Procedures, General Instructions, p. 5). This Court however, is not in
chanroblesvirtualawlib rary chanrobles virtual law l ibrary
the position to determine how much cash or market value shall be
assigned to each of the assets and liabilities of the bank to determine
their total realizable value. The proper determination of these matters
by using the actual cash value criteria belongs to the field of fact-
finding expertise of the Central Bank and the Monetary Board.
Notwithstanding the fact that the figures arrived at by the respondent
Board as to assets and liabilities do not truly indicate their realizable
value as they were merely based on book value, We will however, take
a look at the figures presented by the Tiaoqui Report in concluding
insolvency as of July 31, 1984 and at the figures presented by the CB
authorized deputy receiver and by the Valenzuela, Aurellano and
Tiaoqui Report which recommended the liquidation of the bank by
reason of insolvency as o January 25,1985. chanroblesvirtualawlibra ry chanrobles virtual law library

all its assets, realizable within a reasonable time by a reasonable

prudent person, would equal or exceed its total liabilities exclusive of
stock liability; but if such fair cash value so realizable is not sufficient
to pay such liabilities within a reasonable time, the bank is insolvent.
(Gillian v. State, 194 N.E. 360, 363, 207 Ind. 661). Stated in other
words, the insolvency of a bank occurs when the actual cash market
value of its assets is insufficient to pay its liabilities, not considering
capital stock and surplus which are not liabilities for such purpose
The Tiaoqui report dated January 23, 1985, which was based on partial
examination findings on the bank's condition as of July 31, 1984,
states that total liabilities of P5,282.1 million exceeds total assets of
P4,947.2 million after deducting from the assets valuation reserves of
P612.2 million. Since, as We have explained in our previous
discussion that valuation reserves can not be legally deducted as there
was no truthful and complete evaluation thereof as admitted by the
Tiaoqui report itself, then an adjustment of the figures win show that testified that the reason for petitioner bank's closure was not unsound,
the liabilities of P5,282.1 million will not exceed the total assets which unsafe and fraudulent banking practices but the alleged insolvency
will amount to P5,559.4 if the 612.2 million allotted to valuation position of the bank (TSN, August 3, 1990, p. 3316,   " Vol.
reserves will not be deducted from the assets. There can be no basis VIII).
chanroblesvirtualawlibrary chanro bles virtual law li brary

therefore for both the conclusion of insolvency and for the decision of
the respondent Board to close petitioner bank and place it under Finally, another circumstance which point to the solvency of petitioner
receivership.chanroblesvirtualawlibra ry chanrobles virtual law library bank is the granting by the Monetary Board in favor of the former a
credit line in the amount of P3 billion along with the placing of
Concerning the financial position of the bank as of January 25, 1985, petitioner bank under conservatorship by virtue of M.B. Resolution
the date of the closure of the bank, the consolidated statement of No. 955 dated July 27, 1984. This paved the way for the reopening of
condition thereof as of the aforesaid date shown in the Valenzuela, the bank on August 1, 1984 after a self-imposed bank holiday on July
Aurellano and Tiaoqui report on the receivership of petitioner bank, 23, 1984. chanroblesvirtualawlibrary chanrobles virtual law library

dated March 19, 1985, indicates that total liabilities of 4,540.84

million does not exceed the total assets of 4,981.53 million. Likewise, On emergency loans and advances, Section 90 of RA 265 provides two
the consolidated statement of condition of petitioner bank as of types of emergency loans that can be granted by the Central Bank to a
January 25, 1985 prepared by the Central Bank Authorized Deputy financially distressed bank:
Receiver Artemio Cruz shows that total assets amounting to
P4,981,522,996.22 even exceeds total liabilities amounting to Sec. 90. ... % 
 a  

P4,540,836,834.15. Based on the foregoing, there was no valid reason   which directly threaten monetary and
for the Valenzuela, Aurellano and Tiaoqui report to finally recommend banking stability, the Central Bank may grant banking
the liquidation of petitioner bank instead of its rehabilitation. chanroblesvirtualawlibrary chanro bles virtual law li brary institutions extraordinary advances secured by any
assets which are defined as acceptable by by a
We take note of the exhaustive study and findings of the Cosico report concurrent vote of at least five members of the
on the petitioner bank's having engaged in unsafe, unsound and Monetary Board. While such advances are outstanding,
fraudulent banking practices by the granting of huge unsecured loans the debtor institution may not expand the total volume
to several subsidiaries and related companies. We do not see, however, of its loans or investments without the prior
that this has any material bearing on the validity of the closure. Section authorization of the Monetary Board. chanroblesvirtualawlibrary chanrobles virtual law library

34 of the RA 265, Central Bank Act empowers the Monetary Board to

take action under Section 29 of the Central Bank Act when a bank The Central Bank may, at its discretion, likewise grant
"persists in carrying on its business in an unlawful or unsafe manner." advances to banking institutions, even during normal
There was no showing whatsoever that the bank had persisted in periods, for the purpose of assisting a bank in a
committing unlawful banking practices and that the respondent Board precarious financial condition or under serious financial
had attempted to take effective action on the bank's alleged activities. pressures brought about by unforeseen events, or events
During the period from July 27, 1984 up to January 25, 1985, when which, though foreseeable, could not be prevented by
petitioner bank was under conservatorship no official of the bank was the bank concerned. Provided, however, That the
ever prosecuted, suspended or removed for any participation in unsafe Monetary Board has ascertained that the bank is not
and unsound banking practices, and neither was the entire management insolvent and has clearly realizable assets to secure the
of the bank replaced or substituted. In fact, in her testimony during the advances. Provided, further, That a concurrent vote of
second referral hearing, Carlota Valenzuela, CB Deputy Governor,
 at least five members of the Monetary Board is ... (M.B. Min. No. 35 dated July 27, 1984 cited in
obtained. (Emphasis ours) Respondents' Objections to Santiago Report, p. 26; p.
3387,   , Vol. IX; Emphasis ours).
The first paragraph of the aforequoted provision contemplates a
situation where the whole banking community is confronted with A perusal of the foregoing "Whereas" clauses unmistakably show that
financial and economic crisis giving rise to serious and widespread the clear reason for the decision to grant the emergency loan to
confusion among the public, which may eventually threaten and petitioner bank was that the latter was suffering from financial distress
gravely prejudice the stability of the banking system. Here, the and severe bank "run" as a result of which it closed on July 23, 1984
emergency or financial confusion involves the whole banking and that the release of the said amount is in accordance with the
community and not one bank or institution only. The second situation Central Bank's full support to meet Banco Filipino's depositors'
on the other hand, provides for a situation where the Central Bank withdrawal requirements (Excerpts of minutes of meeting on MB Min.
grants a loan to a bank with uncertain financial condition but not No. 35, p. 25,   , Vol. IX). Nothing therein shows that an
insolvent.chanroblesvirtualawlibra ry chanrobles virtual law lib rary extraordinary emergency situation exists affecting most banks, not
only as regards petitioner bank. This Court thereby finds that the grant
As alleged by the respondents, the following are the reasons of the of the said emergency loan was intended from the beginning to fall
Central Bank in approving the resolution granting the P3 billion loan under the second paragraph of Section 90 of the Central Bank Act,
to petitioner bank and the latter's reopening after a brief self-imposed which could not have occurred if the petitioner bank was not solvent.
banking holiday: Where notwithstanding knowledge of the irregularities and unsafe
banking practices allegedly committed by the petitioner bank, the
WHEREAS, the closure by Banco Filipino Savings and Central Bank even granted financial support to the latter and placed it
Mortgage Bank of its Banking offices on its own under conservatorship, such actuation means that petitioner bank could
initiative has worked serious hardships on its depositors still be saved from its financial distress by adequate aid and
and has affected confidence levels in the banking management reform, which was required by Central Bank's duty to
system resulting in a feeling of apprehension among maintain the stability of the banking system and the preservation of
depositors and unnecessary deposit withdrawals; chanrobles virtual law library public confidence in it (Ramos v. Central Bank, No. L-29352, October
4, 1971, 41 SCRA 565). chanroblesvirtualawlibrary chanrobles virt ual law libra ry

WHEREAS, the Central Bank is charged with the

function of administering the banking system; chanrobles virt ual law libra ry In view of the foregoing premises, We believe that the closure of the
petitioner bank was arbitrary and committed with grave abuse of
WHEREAS, the reopening of Banco Filipino would discretion. Granting in a
a
that the closure was based on
require additional credit resources from the Central justified grounds to protect the public, the fact that petitioner bank was
Bank as well as an independent management acceptable suffering from serious financial problems should not automatically
to the Central Bank; chanrobles virtual law li brary lead to its liquidation. Section 29 of the Central Bank provides that a
closed bank may be reorganized or otherwise placed in such a
WHEREAS, it is the desire of the Central Bank to condition that it may be permitted to resume business with safety to its
rapidly diffuse the uncertainty that presently exists; chanrobles virtual law library
depositors, creditors and the general public. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

We are aware of the Central Bank's concern for the safety of Banco
Filipino's depositors as well as its creditors including itself which had
granted substantial financial assistance up to the time of the latter's
closure. But there are alternatives to permanent closure and liquidation
to safeguard those interests as well as those of the general public for
the failure of Banco Filipino or any bank for that matter may be
viewed as an irreversible decline of the country's entire banking
system and ultimately, it may reflect on the Central Bank's own
viability. For one thing, the Central Bank and the Monetary Board
p Ydissenting:
should exercise strict supervision over Banco Filipino. They should
take all the necessary steps not violative of the laws that will fully
secure the repayment of the total financial assistance that the Central
Bank had already granted or would grant in the future.
ACCORDINGLY, decision is hereby rendered as follows:
1. The motion for reconsideration in G.R. Nos. 68878 and 81303, and
the petitions in G.R. Nos. 77255-58, 78766, 81304 and 90473 are
DENIED;
2. The petitions in G.R. No. 70054, 78767 and 78894 are GRANTED
and the assailed order of the Central Bank and the Monetary Board
dated January 25, 1985 is hereby ANNULLED AND SET ASIDE.
The Central Bank and the Monetary Board are ordered to reorganize
petitioner Banco Filipino Savings and Mortgage Bank and allow the
latter to resume business in the Philippines under the comptrollership
of both the Central Bank and the Monetary Board and under such
conditions as may be prescribed by the latter in connection with its
reorganization until such time that petitioner bank can continue in
business with safety to its creditors, depositors and the general
public. chanroblesvirtualawl ibrary chanrobles virtual law library
SO ORDERED.
"
:
"—
/":
$:(: c 
'+(*
chanrobles virt ual law libra ry
I join Mme. Justice Carolina G. Aquino in her dissent and vote to deny
the prayer, in G.R. No. 70054, to annul Monetary Board Resolution
chanroblesvirtualawlibrary chanrobles virtual law l ibrary
No. 75 placing Banco Filipino (BF) under receivership. chanroblesvi rtualawlibra ry chanrobles virtual law lib rary
chanrobles virtual law l ibrary
Even assuming that the BF was not, as alleged, in a literal state of
insolvency at the time of the passage of said Resolution, there was a
finding in the Teodoro report that, based on that Bank's illiquidity, to
have allowed it to continue in operation would have meant probable
chanrobles virtual law library loss to depositors and creditors. That is also a ground for placing the
bank under receivership, as a first step, pursuant to Section 29 of the
Central Bank Act (Rep. Act No. 265, as amended). The closure of BF,
therefore, can not be said to have been arbitrary or made in bad faith.
There was sufficient justification, considering its inability to meet the
heavy withdrawals by its depositors and to pay its liabilities as they
fell due, to forbid the bank from further engaging in banking. chanroblesvirtualawlib rary chanrobles virtual law lib rary
The matter of reopening, reorganization or rehabilitation of BF is not
within the competence of this Court to ordain but is better addressed to
the Monetary Board and the Central Bank considering the latter's
enormous infusion of capital into BF to the tune of approximately P3.5
Billion in total accommodations, after a thorough assessment of
whether or not BF is, indeed, possessed, as it stoutly contends, of
sufficient assets and capabilities with which to repay such huge
indebtedness, and can operate without loss to its many depositors and
"/"7

a


 

"::
" 
 
 creditors.
chanroblesvirtualawlibrary chanrobles virtual law library

"; "
"-
": 
  ":: "

$  


chanrobles virtual law libra ry

+<( 2%+(p Ydissenting: chanrobles virtual law library
Although these nine (9) Banco Filipino (BF) cases have been WHEREFORE, in addition to its prayer for mandamus
consolidated under one ponencia, all of them except one, raise issues and 
  contained in its original petition,
unrelated to the receivership and liquidation of said bank. In fact, two petitioner respectfully prays that Sections 28-A and 29
of these cases (G.R. No. 68878 and 81303) have already been decided of the Central Bank charter (R.A. 265) including its
by this Court and are only awaiting the resolution of the motions for amendatory Presidential Decrees Nos. 72, 1771, 1827
reconsideration filed therein. Only G.R. No. 70054 "Banco Filipino and 1937 be annulled as unconstitutional. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

Savings and Mortgage Bank (BF) vs. the Monetary Board (MB),
Central Bank of the Philippines (CB), et al.," is an original action for Quezon City for Manila, March 4, 1985. (p. 11-G,   
mandamus and 
  filed in this Court by former officials of BF I.)
to annul the Monetary Board Resolution No. 75 dated January 25,
1985 (ordering the closure of Banco Filipino [BF] and appointing The other eight (8) cases merely involve transactions of BF with third
Carlota Valenzuela as receiver of the bank) on the ground that the persons and certain "related" corporations which had defaulted on their
resolution was issued "without affording BF a hearing on the reports" loans and sought to prohibit the extrajudicial foreclosure of the
on which the Monetary Board based its decision to close the bank, mortgages on their properties by the receiver of BF. These eight (8)
hence, without "administrative due process.", The prayer of the cases are:chanrob les virtual law library

petition reads:
1. G.R. No. 68878 &7; %


÷ 
 



WHEREFORE, petitioner respectfully prays that a writ 
a&involves the repossession by BF of a house and lot
of mandamus be issued commanding respondents which the buyer (Pahimutang) claimed to have completely paid for on
immediately to furnish it copies of the reports of the installment plan. The appellate court's judgment for the buyer was
examination of BF employed by respondent Monetary reversed by this Court. The buyer's motion for reconsideration is
Board to support its Resolution of January 25, 1985 and awaiting resolution by this Court; chanrobles virtual law li brary

thereafter to afford it a hearing prior to any resolution

that may be issued under Section 29 of R.A. 265, 2. G.R. Nos. 77255-58, &K Äa
 a  
 

meanwhile annulling said Resolution of January 25, - 
  
   
  "
 & (CA-G.R.
1985 by writ of 
  as made without or in excess SP No. 07892) and &- 
  
  !

ofjurisdiction or with grave abuse of discretion. chanroblesvirtualawlib rary chanrobles vi rt ual law library :
a"K"
& (CA-G.R. SP Nos. 0896264) is a consolidated
petition for review of the Court of Appeals' joint decision dismissing
So as to expedite proceedings, petitioner prays that the the petitions for prohibition in which the petitioners seek to prevent the
assessment of the damages respondents should pay it be receiver/liquidator of BF from extrajudicially foreclosing the P4.8
deferred and referred to commissioners. chanroblesvirtualawlibrary chanrobles virtual law li brary million mortgage on Top Management's properties and the P18-67
million mortgage on Pilar Development properties. The Court of
Petitioner prays for such other remedy as the Court may Appeals dismissed the petitions on October 30, 1986 on the ground
deem just and equitable in the premises. chanroblesvirtualawlib rary chanrobles virtual law lib rary that "the functions of the liquidator, as receiver under Section 29 (R.A.
265), include taking charge of the insolvent's assets and administering
Quezon City for Manila, February 28, 1985. (p. 8,    the same for the benefit of its creditors and of bringing suits and
I-) foreclosing mortgages in the name of the bank;" chanrob les virtual law li brary

and the prayer of the Supplement to Petition reads:

3. G.R. No. 78766, &—
  
   
 ÷ "
 the proper steps to prevent collusion, to the prejudice of the legitimate
 "&is an appeal from the Court of Appeals' decision in CA-G.R. SP creditors, between BF and the petitioners herein which appear to be
No. 08809 dismissing El Grande's petition for prohibition to prevent owned and controlled by the same interest controlling BF" (p. 49,
the foreclosure of BF's P8 million mortgage on El Grande's properties;
chanrobles virtual law library
Rollo). The petitioners' motion for reconsideration of that decision is
pending resolution. chanroblesvirtualawlibrary chanrobles vi rtual law library

4. G.R. No. 78894, &7 ;  a
Ä 

aa7$ 
 
 ÷ "
 &is an appeal of BFs old management (using 7. G.R. No. 81304, &7; - 
  
   
 
the name of BF) from the decision of the Court of Appeals in CA-G.R. ÷ "
 &is an appeal from the decision dated November 4, 1987
SP No. 07503 entitled, "Central Bank, et al. vs. Judge Zoilo of the Court of Appeals in CA-G.R. CV No. 08565 affirming the trial
Aguinaldo, et al" dismissing the complaint of "BF" to annul the court's order dismissing BF Homes' action to compel the Central Bank
receivership, for no suit may be brought or defended in the name of the to restore the financing facilities of BF, because the plaintiff (BF
bank except by its receiver; chanrobles virtual law library
Homes) has no cause of action against the CB. chanroblesvirtualawlibrary chanrobles virtual law libra ry

5. G.R. No. 87867, &Ä

 - 
  
   
  8. G.R. No. 90473, &—
- 
  
   
 
÷ &(formerly AC-G.R. No. 07503, "Central Bank, et al. vs. ÷ "
 "&is a petition to review the decision dated June 6, 1989
Honorable Zoilo Aguinaldo, et al.') is an appeal of the intervenor in CA-G.R. SP No. 08676 dismissing El Grande's petition for
(Metropolis) from the same Court of Appeals' decision subject of G.R. prohibition to stop foreclosure proceedings against it by the receiver of
No. 78894, which also dismissed Metropolis' complaint in intervention BF.chanroblesvirt ualawlibrary chanrobles virt ual law libra ry

on the ground that a stockholder (Metropolis) may not bring suit in the
name of BF while the latter is under receivership, without the authority As previously stated, G.R. No. 70054 &7;
Ä 
7 
"

"&
of the receiver; chanrobles virt ual law libra ry
is an original special civil action for 
  and mandamus filed in
this Court by the old management of BF, through their counsel, N.J.
6. G.R. No. 81303, "- 
  
 
 
  Quisumbing & Associates, using the name of the bank and praying for
÷ "

&is an appeal from the decision dated October 22, 1987
of the Court of Appeals in CA-G.R. SP No. 12368, "Pilar
Development Corporation, et al. vs. Honorable Manuel Cosico, et al.,"
dismissing the petition for 
  against Judge Manuel Cosico, Br. had filed on February 2, 1985 Civil Case No. 9675 "Banco Filipino vs.
136, RTC, Makati, who dismissed the complaint filed by Pilar
Development Corporation against BF, for specific performance of
certain developer contracts. An answer filed by Norberto Quisumbing
and Associates, as BF's supposed counsel, virtually confessed
judgment in favor of Pilar Development. On motion of the receiver,
the answer was expunged and the complaint was dismissed. On a
petition for 
  in this Court, we held that: "As liquidator of BF
by virtue of a valid appointment from the Central Bank, private
respondent Carlota Valenzuela has the authority to direct the operation
of the bank in substitution of the former management, which authority
includes the retainer of counsel to represent it in bringing or resisting
suits in connection with such liquidation and, in the case at bar, to take
the annulment of MB Resolution No. 75 which ordered the closure of
BF and placed it under receivership. It is a "forum-shopping" case
because it was filed here on February 28, 1985 three weeks after they
Monetary Board, et al." in the Regional Trial Court of Makati, Br. 143
(presided over by Judge Zoilo Aguinaldo) for the same purpose of
securing a declaration of the nullity of MB Resolution No. 75 dated
January 25, 1985. chanroblesvirtualawlibrary chanrobles virtual law library
On August 25, 1985, this Court ordered the transfer and consolidation
of Civil Case No. 9676 (to annul the receivership) from Br. 143 to Br.
136 (Judge Manuel Cosico) of the Makati Regional Trial Court where
Civil Case No. 8108 (to annul the conservatorship) and Civil Case No.
10183 (to annul the liquidation) of BF were and are still pending. All
these three (3) cases were archived on June 30, 1988 by Judge Cosico
pending the resolution of G.R. No. 70054 by this Court. chanroblesvirtualawlibrary chanrobles virtual law library
Because of my previous participation, as a former member of the  a
!a
 

 !
Court of Appeals, in the disposition of AC-G.R. No. 02617 (now G.R. a


 

  $a


 "
No. 68878) and AC-G.R. SP No. 07503 (now G.R. Nos. 78767 and 

 



 

  

78894), I am taking no part in G.R. Nos. 68878, 78767 and 78894. It   " 


 

may be mentioned in this connection that neither in AC-G.R. SP No.  
    


 
 
02617, nor in AC-G.R. SP No. 07503, did the Court of Appeals rule on 

"it shall be the duty of the department head
the constitutionality of Sections 28-A and 29 of Republic Act 265 concerned forthwith, in writing, to inform the Monetary
(Central Bank Act), as amended, and the validity of MB Resolution Board of the facts, and the Board may, upon finding the
No. 75, for those issues were not raised in the Court of Appeals. chanroblesvirtualawl ibrary chanrobles virtual law library statements of the department head to be true, forbid the
institution to do business in the Philippines and shall
I  with the insofar as it denies the motion for designate an official of the Central Bank as receiver to
reconsideration in G.R. No. 81303, and dismisses the petitions for immediately take charge of its assets and liabilities, as
review in G.R. Nos. 77255-58, 78766, 81304, and 90473. chanroblesvirtualawlibrary chanrobles virtual law library expeditiously as possible collect and gather all the
assets and administer the same for the benefit of its
I respectfully

from the majority opinion in G.R. No. 70054 creditors, exercising all the powers necessary for these
annulling and setting aside MB Resolution No. 75 and ordering the purposes including, but not limited to, bringing suits
respondents, Central Bank of the Philippines and the Monetary Board - and foreclosing mortgages in the name of the banking
institution.
chanroblesvirtualawlibrary chanrobles virtual law l ibrary

to reorganize petitioner Banco Filipino Savings and

Mortgage Bank, and allow the latter to resume business The Monetary Board shall thereupon determine within
in the Philippines under the comptrollership of both the !

 whether the institution may be reorganized or
Central Bank and the Monetary Board and under such otherwise placed in such a condition so that it may be
conditions as may be prescribed by the latter until such permitted to resume business with safety to its
time that petitioner bank can continue in business with
 
and creditors 

a  and
safety to its creditors, depositors and the general public. shall prescribe the conditions under which such
resumption of business shall take place as well as the
for I believe that this Court has neither the authority nor the time for fulfillment of such conditions. In such case, the
competence to determine whether or not, and under what conditions, expenses and fees in the collection and administration
BF should be reorganized and reopened. That decision should be made of the assets of the institution shall be determined by
by the Central Bank and the Monetary Board, not by this Court. chanroblesvirtualawlibrary chanrobles virtual law libra ry
the Board and shall be paid to the Central Bank out of
the assets of such banking institution. chanroblesvirtualawlibra ry chanrobles virtual law library

All that we may determine in this case is whether the actions of the
Central Bank and the Monetary Board in closing BF and placing it If the Monetary Board shall determine and confirm
under receivership were "plainly arbitrary and made in bad faith. chanroblesvi rtualawlibra ry chanrobles virtual law library
within the said period that the banking institution is
insolvent or cannot resume business with safety to its
Section 29 of Republic Act No. 265 provides: depositors, creditors and the general public, it shall, if
the public interest requires, order its liquidation,
Section 29. Proceedings upon insolvency. - Whenever, indicate the manner of its liquidation and approve a
 !
 

 
  
 liquidation plan. The Central Bank shall, by the
Solicitor General, file a petition in the Court of First refused or, if granted, shall be dissolved upon filing by
Instance, reciting the proceedings which have been the Central Bank of a bond, which shall be in the form
taken and praying the assistance of the court in the of cash or Central Bank cashier's check, in an amount
liquidation of the banking institutions. The court shall twice the amount of the bond of the petitioner or
have jurisdiction in the same proceedings to adjudicate plaintiff, conditioned that it will paythe which the
disputed claims against the bank and enforce individual petitioner or plaintiff may suffer by the refusalor the
liabilities of the stockholders and do all that is dissolution of the injunction. The provisions of Rule 58
necessary to preserve the assets of the banking of the new Rules of Court insofar as they are applicable
institution and to implement the liquidation plan and not inconsistent with the provisions of this section
approved by the Monetary Board. The Monetary Board shall govern the issuance and dissolution of the
shall designate an official of the Central Bank as restraining order or injunction contemplated in this
liquidator who shall take over the functions of the section.
receiver previously appointed by the Monetary Board
under this section. The liquidator shall, with all % "

÷
"




convenient speed, convert the assets of the banking

 $a


 
 


institution to money or sell, assign or otherwise dispose 



 
  
of the same to creditors and other parties for the " provided, however, that this shall not include
purpose of paying the debts of such bank and he may, the inability to pay of an otherwise non-insolvent bank
in the name of the banking institution, institute such caused by extra-ordinary demands induced by financial
actions as may be necessary in the appropriate court to panic commonly evidenced by a run on the banks in the
collect and recover accounts and assets of the banking banking community.
institution.
chanroblesvirtualawlibrary chanrobles virtual law l ibrary

The determinative factor in the closure, receivership, and liquidation

The provisions of any law to the contrary of a bank is the finding, upon examination by the SES of the Central
notwithstanding,

  
Ä 
7 
 Bank, that its condition "is one of insolvency, or that its continuance in
under this section and the second paragraph of Section business would involve probable loss to its depositors and creditors."
34 of this Act 
!
"
 (Sec. 29, R.A. 265.) It should be pointed out that insolvency is not the



 
 
 a   only statutory ground for the closure of a bank. The other ground is




  



 when "its continuance in business would involve probable loss to its

 No restraining order or injunction shall be issued depositors and creditors. chanroblesvirtualawlibrary chanrobles virtual law library

by the court enjoining the Central Bank from

implementing its actions under this section and the
second paragraph of Section 34 of this Act, unless there
is convincing proof that the action of the Monetary
Board is plainly arbitrary and made in bad faith and the
petitioner or plaintiff files with the clerk or judge of the
court in which the action is pending a bond executed in
Was BF insolvent i.e., unable to pay its liabilities as they fell due in
the usual and ordinary course of business, on and for some time before
January 25, 1985 when the Monetary Board issued Resolution No. 75
closing the bank and placing it under receivership? Would its
continued operation involve probable loss to its depositors and
creditors?chanrobles virtual law l ibrary

favor of the Central Bank, in an amount to be fixed by

the court. The restraining order or injunction shall be
The answer to both questions is yes. Both the conservator Gilberts Besides the conservatorship team, Teodoro hired financial consultants
Teodoro and the head of the SES (Supervision and Examination Messrs. Tirso G. Santillan, Jr. and Plorido P. Casuela to make an
Sector) Ramon V. Tiaoqui opined that BF's continuance in business analysis of BF's financial condition. Teodoro also engaged the
would cause probable loss to depositors and creditors. Tiaoqui further accounting firm of Sycip, Gorres, Velayo and Company to make an
categorically found that BF was insolvent. Why was this so? chanrobles virt ual law libra ry asset evaluation. The Philippine Appraisal Company (PAC) appraised
BFs real estate properties, acquired assets, and collaterals held. On
The Teodoro and Tiaoqui reports as well as the report of the receivers, January 9, 1985, Teodoro submitted his Report. Three weeks later, on
Carlota Valenzuela, Arnulfo B. Aurellano and Ramon V. Tiaoqui, January 23, 1985, Tiaoqui also submitted his Report. Both reports
showed that since the end of November 1983 BF had already been showedthat, in violation of Section 37 of the General Banking Act
incurring "chronic reserve deficiencies' and experiencing severe (R.A.337):

liquidity problems. So much so, that it had become "a substantial

borrower in the call loans market" and in June 1984 it obtained a P30 1. BF had been continually deficient in
million emergency loan from the Central Bank. (p. 2, Receiver's liquidity reserves (Teodoro Report). The
Report.) Additional emergencyt loans (a total of P119.7 millions) were bank had been experiencing a severe
extended by the Central Bank to BF that month (MB Res. No. 839 drop in liquidity levels. K
  
dated June 29,1984). On July 12, 1984, BFs chairman, Anthony #



 

  a
Aguirre, offered to "turn over the administration of the affairs of the a
  
(4<

2*+)3"

bank" to the Central Bank (Aguirre's letter to Governor Jose  
) 0<
2Ä*+)5" much
Fernandez, Annex 7 of Manifestation dated May 3,1991). On July below the statutory requirements of 24%
23,1984, unable to meet heavy deposit withdrawals, BF's management for demand deposits/deposit substitutes

   " without obtaining the conformity of the Central Bank, and 14% for savings and time deposits.
closed the bank and declared a bank holiday. On July 27, 1984, the (p. 2, Tiaoqui Report.) chanrobles virtual law library

CB, responding to BFs pleas for additional financial assistance,

granted BF a P3 billion credit line (MB Res. No. 934 of July 27, 1984) 2. Deficiencies in average daily legal
to enable it to reopen and resume business on August 1, 1984. P2.3601 reserves rose from P63.0 million during
billions of the credit line were availed of by the end of 1984 exclusive the week of November 21-25, 1983 to a
of an overdraft of P932.4 millions (p. 2, Tiaoqui Report). Total high of P435.9 million during the week
accommodations granted to BF amounted to P3.4122 billions (p. 19, of June 11-15, 1984 (pp. 2-3, Tiaoqui
Cosico Report). chanroblesvirtualawlibrary chanrobles virtual law libra ry Report). Accumulated penalties on
reserve deficiencies amounted to P37.4
Presumably to assure that the financial assistance would be properly million by July 31, and rose to P48
used, the MB appointed Basilio Estanislao as conservator of the bank. million by the end of 1984. (Tiaoqui
A conservatorship team of 78 examiners and accountants was assigned Report.)chanrobles virtual law library

at the bank to keep track of its activities and ascertain its financial
condition (p. 8, Tiaoqui Report). chanroblesvirtualawlibrary chanrobles virtual law li brary 3. Deposit levels, which were at P3,845
million at end-May l984 (its last
Estanislao resigned after two weeks for health reasons. He was "normal" month), dropped to P935
succeeded by Gilberto Teodoro as conservator in August, 1984 up to million at the end of November 1984 or
January 8, 1985. chanroblesvirtualawlibrary chan robles virtual law library a loss of P2,910 million. This
represented an average monthly loss of million in the next two months. (pp. 2-3,
P485 million vs. an average monthly Tiaoqui Report.) chanrobles virtual law library

gain of P26 million during the first 5

months of 1984. (pp. 2-3, Tiaoqui
Report.)chanrobles virtual law library
4. Deposits had declined at the rate of
P20 million during the month of
December 1984, but expenses of about
P17 million per month were required to
maintain the bank's operation. (p. 6,
Teodoro Report.)
9. The loan portfolio stood at P3.679
billion at the end of July 1984, 56.2% of
it channeled to companies whose
stockholders, directors and officers were
related to the officers, directors, and
some stockholders of BF. (p. 8, Tiaoqui
Report.) Here again BF violated the
General Banking Act (R.A. 337). 
chanrobles virtual law library

10. Some of the loans were used to

5. Based on the projected outlook, the
Bank's average yield on assets of 16.3%
p.a., was insufficient to meet the average
cost of funds of 19.5% p.a. and operating
expenses of 4.8% p.a. (p. 5 Teodoro
Report.)chanrobles virtual law library
6. An imprudently large proportion of
assets were locked into long-term
applications. (Teodoro Report.)
chanrobles virtual law library
acquire preferred stocks of BF. Between
September 17, 1983 and February 10,
1984, P49.9 million of preferred non-
convertible stocks were issued. About
85% or P42.4 million was paid out of the
proceeds of loans to stockholders/
borrowers with relationship to the bank
(Annex D). Around P18.8 million were
issued in the name of an entity other than
the purchaser of the stocks. (Tiaoqui
Report.)chanrobles virtual law library

7. BF overextended itself in lending to

the real estate industry, committing as 11. Loans amounting to some P69.3
much as 52% of its peso deposits to its million were granted simply to pay-off
affiliates or "related accounts" to which old loans including accrued interest, as
it continued lending even when it was an accommodation for the direct
already suffering from liquidity stresses. maturing loans of some firms and as a
(Teodoro Report.) This was done in way of paying-off loans of other
violation of Section 38 of the General borrower firms which have their own
Banking Act (R.A. 337). # credit lines with the bank. These helped
to make otherwise delinquent loans
8. During the period of marked decline appear "current" and deceptively
in liquidity levels the loan portfolio a "improved" the quality of the loan
by P417.3 million in the first five portfolio. (Tiaoqui Report.) chanrobles virtual law library

months of 1984 - and by another P105.l

12. Examination of the collaterals for the
loan accounts of 63 major borrowers and
32 other selected borrowers as of July
31, 1984, showed that:
(a) 2,658 TCT's which BF
evaluated to be worth
P1,487 million were
appraised by PAC to be
worth only P1,196
million, hence, deficient
by P291 million.
(b) Other properties
(collaterals) supposedly
0
amounted to P586.2
million. BF Homes, Inc.,
a related company which
has filed with the SEC a
petition for suspension of
payments, owes P502
million to BF.
13. BF had been suffering heavy losses.
-
chanroblesvirtualawlibra ry chanrobles virtual law libra ry a) For the eleven (11)
months ended November
30, 1984, the estimated
net loss was 3,(
worth P711 million could Ä ;chanrobles virtual law li brary

not be evaluated by PAC

because the details b) For the twelve (12)
submitted by the bank months from November
were insufficient; chanrobles virtual law l ibrary 1984, the projected net
loss would be 3+4 ,
(c) While P674 million in Ä  and would
loans were supposedly continue unabated; (p. 2,
guaranteed by the Home Teodoro Report) chanrobles virtual law libra ry

Financing Corporation
(HFIC), the latter c) Around 71.7% of the
confirmed only P427 total accommodations of
million. P247 million in P2.0677 billions to the
loans were not guaranteed related/linked entities
by HFC. (Teodoro were adversely classified.
Report.)chanrobles virtual law library Close to 33.7% or P697.1
millions were clean loans
(d) Per SGV's report, or against PNs
loans totalling P1.882 (promissory notes) of
million including accrued these entities. Of the
interest, were secured by latter, 52.6% were
collateral worth only classified as loss." (P. 5,
Pl.54 billion. Hence, BFs Tiaoqui Report.) chanrobles virtual law library

unsecured exposure
d) K$6 entities related with each
 

  

  other and to the bank,
!
 "after setting several of which showed
up the additional distressed conditions. (p.
valuation reserves of 7, Tiaoqui Report.)
P612.2 millions and
accumulated net loss of Teodoro's conclusion was that "the continuance of the bank in business
P48.2 millions, 

 would involve probable loss to its depositors and creditors." He
   Total recommended "that the Monetary Board take a more effective and
liabilities of P5,282.1 responsible action to protect the depositors and creditors ... in the light
million exceeds total of the bank's worsening condition." (p. 5, Teodoro Report.) chanrobles virtual law library

assets of P4,947.2 million

by 6.8%. Total capital On January 23, 1985, Tiaoqui submitted his report to the Monetary
account of P334.9 Board, Like Teodoro, Tiaoqui believed that the principal cause of the
million) is deficient by bank's failure was that in violation of the General Banking Law and
P322.7 million against the CB rules and regulations, BF's major stockholders, directors and
minimum capital required officers, through their "related" companies: (i.e. companies owned or
of P657.6 million (Annex controlled by them of their relatives) had been "borrowing" huge
F). Capital to risk assets chunks of the money of the depositors. His Conclusion and
ratio is negative Recommendations were:
10.38%. chanroblesvirtualawlibrary chanrobles virt ual law libra ry

The Conservator, in his report to the Monetary Board

e) Total loans and dated January 8, 1985, has stated that the  

investment portfolio 
$ 
    

amounted to P3,914.3 

 



. It has recommended that a
millions (gross), of which more effective action be taken to protect depositors and
P194.0 millions or 5.0% creditors. chanroblesvirtualawlibrary chanrobles virtual law library

were past due and

P1,657.1 millions or The examination findings as of July 31, 1984 as shown
42.3% were adversely earlier, indicate one of insolvency and illiquidity and
classified (Substandard - further confirms the above conclusion of the
P1,011.4 millions; Conservator.
Doubtful - P274.6
millions and Loss - ÷
 a a  

'

  
P371.1 millions).  

a
$ 
aaa
Accounts adversely $a. chanroblesvirtualawlibrary chan robles virtual law libra ry

classified included
unmatured loan of Foregoing considered, the following are recommended:
Pl,482.0 million to
1. Forbid the Banco have cleared
Filipino Savings & themselves. chanroblesvirt ualawlibrary chanrobles virt ual law libra ry

Mortgage Bank to do
business in the 4. Refer to the Central
Philippines effective the Banles Legal Department
beginning of office on and Office of Special
January, 1985, pursuant Investigation the report
to Sec. 29 of R.A. No. on the findings on Banco
265, as amended; chanrobles virtual law libra ry Filipino for investigation
and possible prosecution
2. Designate the Head of of directors, officers and
the Conservator Team at employees for activities
the bank, as Receiver of which led to its insolvent
Banco Filipino Savings & position." (pp. 9-10,
Mortgage Bank, to Tiaoqui Report.)
immediately take charge
of the assets and On January 25, 1985 or two days after the submission of Tiaoqui's
liabilities, as Report, and three weeks after it received Teodoro's Report, the
expeditiously as possible Monetary Board, then composed of:
collect and gather all the
assets and administer the Chairman: Jose B. Fernandez, Jr.
same for the benefit of all CB Governor
the creditors, and exercise
all the powers necessary Members:
for these purposes
including but not limited 1. Cesar E.A. Virata, Prime Minister &
to bringing suits and Concurrently Minister of Finance chanrobles virt ual law libra ry

foreclosing mortgages in
the name of the bank.
library
chanroblesvirtualawlibra ry chanrobles virtual law
2. Roberto V. Ongpin, Minister of Trade
& Industry & Chairman of Board of
3. The Board of directors Investment chanrobles virtual law l ibrary

and the principal officers

from Senior Vice 3. Vicente B. Valdepeñas, Jr., Minister
President, as listed in the of Economic Planning & Director
attached Annex "A" be General of NEDA chanrobles virtual law lib rary

included in the watchlist

of the Supervision and 4. Cesar A. Buenaventura, President of
Examination Sector until Filipinas Shell Petroleum Corp. (p. 37,
such time that they shall Annual Report 1985)
issued Resolution No. 75 closing BF and placing it under receivership. these purposes including,
The MB Resolution reads as follows: but not limited to,
bringing suits and
After considering the report dated January 8, 1985 of foreclosing mortgages in
the Conservator for Banco Filipino Savings and the name of the bank; chanrobles virtual law l ibrary

Mortgage Bank that the continuance in business of the

bank would involve probable loss to its depositors and 3. To designate Mr.
creditors, and after discussing and finding to be true the Arnulfo B. Aurellano,
statements of the Special Assistant to the Governor and Special Assistant to the
Head, Supervision and Examination Sector (SES) Governor, and Mr.
Department II, as recited in his memorandum dated Ramon V. Tiaoqui,
January 23, 1985. that the Banco Filipino Savings and Special Assistant to the
Mortgage Bank is insolvent and that its continuance in Governor and Head,
business would involve probable loss to its depositors Supervision and
and creditors, and in pursuance of Section 29 of R.A. Examination Sector
No. 265, as amended, the Board decided: Department II. as Deputy
Receivers who are
1. To forbid Banco likewise hereby directly
Filipino Savings and vested with jurisdiction
Mortgage Bank and all its and authority to do all
branches to do business in things necessary or
the Philippines;chanrobles virtual law libra ry proper to carry out the
functions entrusted to
2. To designate Mrs. them by the Receiver and
Carlota P. Valenzuela, otherwise to assist the
Deputy Governor, as Receiver in carrying out
Receiver who is hereby the functions vested in the
directly vested with Receiver by law or
jurisdiction and authority Monetary Board
to immediately take resolutions;
chan robles virtual law library

charge of the bank's

assets and liabilities, and 4. To direct and authorize
as expeditiously as Management to do all
possible collect and other things and carry out
gather all the assets and all other measures
administer the same for necessary or proper to
the benefit of its implement this
creditors, exercising all Resolution and to
the- powers necessary for safeguard the interests of
 depositors/credition and advance of P569.49 million from Central Bank, and additional
the general public; and chanrobles virtual law library valuation reserves of P124.5 million. (pp. 3-4, Receivers' Report.) chanrobles virtual law library

5. In consequence of the The Receivers further noted that -

foregoing, to terminate
the conservatorship over After BF was closed as of January 25, 1985, there were
Banco Filipino Savings no collections from loans granted to firms related to
and Mortgage Bank. (pp. each other and to BF classified as "doubtful" or "loss,"
126-127, Rollo I.) there were no substantial improvements on other loans
classified "doubtful"or "loss;" there was no further
On March 19,1985, the receiver, Carlota Valenzuela, and the deputy increase in the value of assets owned/acquired
receivers, Arnulfo B. Aurellano and Ramon V. Tiaoqui, submitted a supported by new appraisals and there was no infusion
report to the Monetary Board as required in Section 29, 2nd paragraph of additional capital such that the estimated realizable
of R.A. 265 which provides that within sixty (60) days from date of assets of BF remained at P3,909.23, (millions) while
the receivership, the Monetary Board shall determine whether the bank the total liabilities amounted to P5,159.44 (millions).
may be reorganized and permitted to resume business, or be liquidated.
with estimated deficiency
The receivers recommended that BF be placed under litigation. For,
among other things, they found that:
1. BF had been suffering a capital deficiency of P336.5 million as of
July 31, 1984 (pp. 2 and 4, Receivers' Report).
2. The bank's weekly reserve deficiencies averaged P146.67 million
from November 25, 1983 up to March 16, 1984, rising to a peak of
P338.09 million until July 27, 1984. Its reserve deficiencies against
deposits and deposit substitutes began on the week ending June 15,
1984 up to December 7, 1984, with average daily reserve deficiencies
of P2.98 million.chanroblesvi rtualawlibra ry chanrobles vi rtual law library
3. Estimated losses or "unhooked valuation reserves" for loans to
entities with relationships to certain stockholder/directors and officers
of the bank amounted to P600.5 million. Combined with other
adjustments in the amount of P73.2 million, they will entirely wipe out
the bank's entire capital account and leave a capital deficiency of
P336.5 million. The bank was already insolvent on July 31, 1984. The
capital deficiency increased to P908.4 million as of January 26, 1985
on account of unhooked penalties for deficiencies in legal reserves
(P49.07 million), unhooked interest on overdrawings, emergency
Thus, BF remains  
to creditors of Pl,250.21 (millions). chanroblesvirtualawlibra ry chanrobles virtual law library
chanrobles virtual law libra ry
Moreover, there were no efforts on the part of the
stockholders of the bank to improve its financial
chanroblesvirtualawlibrary chanrobles vi rtual law lib ra ry condition and the possibility of rehabilitation has
become more remote. (P. 8, Receivers' Report.)
In the light of the results of the examination of BF by the Teodoro and
Tiaoqui teams, I do not find that the CB's Resolution No. 75 ordering
BF to cease banking operations and placing it under receivership was
"plainly arbitrary and made in bad faith." The receivership was
justified because BF was insolvent and its continuance in business
would cause loss to its depositors and creditors. Insolvency, as defined
in Rep. Act 265, means 'the inability of a banking institution to pay its
liabilities as they fall due in the usual and ordinary course of business.
Since June 1984, BF had been unable to meet the heavy cash
withdrawals of its depositors and pay its liabilities to its creditors, the
biggest of them being the Central Bank, hence, the Monetary Board
correctly found its condition to be one of insolvency. chan roblesvirtualawl ibrary chanrobles virtual law library
All the discussion in the Santiago Report concerning the bank's assets
and liabilities as determinants of BF's solvency or insolvency is
irrelevant and inconsequential, for under Section 29 of Rep. Act. 265,
a bank's insolvency is not determined by its excess of liabilities over
assets, but by its "inability to pay its liabilities as they fall due in the
ordinary course of business" and it was abundantly shown that BF was
unable to pay its liabilities to depositors for over a six-month-period
before it was placed under receivership.
Even if assets and liabilities were to be factored into a formula for
determining whether or not BF was already insolvent on or before
January 25, 1985, the result would be no different. The bank's assets as
of the end of 1984 amounted to P4.891 billions (not P6 billions)
according to the Report signed and submitted to the CB by BF's own
president, and its total liabilities were P4.478 billions (p. 58, Cosico
Report). While Aguirre's Report showed BF ahead with a net worth of
P412.961 millions, said report did not make any provision for
estimated valuation reserves amounting to P600.5 millions, (50% of
face value of

 loans and 100% of face value of   accounts)
which BF had granted to its related/linked companies. The estimated
valuation reserves of P600.5 millions plus BF's admitted liabilities of
P4.478 billions, put together, would wipe out BFs realizable assets of
P4.891 billions and confirm its insolvent condition to the tune of
P187.538 millions. chanroblesvirtualawlibrary chanrobles virtual law li brary
BF's and Judge (now CA Justice) Consuelo Y. Santiago's argument
that valuation reserves should not be considered because the matter
was not discussed by Tiaoqui with BF officials is not well taken for:
(1) The records of the defaulting debtors were in the possession of
BF.chanroblesvirt ualawlibrary chanrobles virt ual law libra ry
(2) The "adversely classified" loans were in fact included in the List of
Exceptions and Findings (of irregularities and violations of laws and
CB rules and regulations) prepared by the SES, a copy of which was
furnished BF on December 1 7, 1984;
(3) A conference on the matter washeld on January 2l, 1985 with
senior officials of BF headed by EVP F. Dizon,. (pp. 14-15, Cosico
Report.) BF did not formally protest against the CBs estimate of
valuation reserves. The CB could not wait forever for BF to respond
for the CB had to act with reasonable promptness to protect the
depositors and creditors of BF because the bank continued to
operate. chanroblesvirtualawlibrary chanrobles virtual law libra ry
(4) Subsequent events proved correct the SES classification of the loan
chanroblesvirtualawlibra ry chanrobles virtual law libra ry accounts as "doubtful" or "loss' because as of January 25, 1985 none of
the loans, except three, had been paid either partially or in full, even if
they had already matured (p. 53, Cosico Report). chanroblesvirtualawlibrary chanrobles virtual law library
The recommended provision for valuation reserves of P600.5 millions
for "doubtful" and "loss" accounts was a proper factor to consider in
the capital adjustments of BF and was in accordance with accounting
rules. For, if the uncollectible loan accounts would be entered in the
assets column as "receivables," without a corresponding entry in the
liabilities column for estimated losses or valuation reserves arising
from their uncollectability, the result would be a gravely distorted
picture of the financial condition of BF. chanroblesvirtualawl ibrary chanrobles virtual law libra ry
BF's strange argument that it was not insolvent for otherwise the CB
would not have given it financial assistance does not merit serious
consideration for precisely BF needed financial assistance because it
was insolvent. chanroblesvirtualawlibrary chanrobles virtual law library
Tiaoqui's admission that the examination of BF had "not yet been
officially terminated" when he submitted his report on January 23,
chanrobles virtual law lib rary 1985 did not make the action of the Monetary Board of closing the
bank and appointing receivers for it, 'plainly arbitrary and in bad
faith." For what had been examined by the SES was more than enough
to warrant a finding that the bank was "insolvent and could not
continue in business without probable loss to its depositors or
creditors," and what had not been examined was negligible and would
not have materially altered the result. In any event, the official
termination of the examination with the submission by the Chief
chanrobles virtual law library Examiner of his report to the Monetary Board in March 1985, did not
contradict, but in fact confirmed, the findings in the Tiaoqui Report.
chanrobles virtual law library
chanroblesvirtualawlibrary
The responsibility of administering the Philippine monetary and
banking systems is vested by law in the Central Bank whose duty it is
to use the powers granted to it under the law to achieve the objective,
among others, of maintaining monetary stability in the country (Sec. 2, Y
Rep. Act 265). I do not think it would be proper and advisable for this
Court to interfere with the CB's exercise of its prerogative and duty to Y
discipline banks which have persistently engaged in illegal, unsafe,
unsound and fraudulent banking practices causing tremendous losses Y
and unimaginable anxiety and prejudice to depositors and creditors
Y
and generating widespread distrust and loss of confidence in the
banking system. The damage to the banking system and to the Y
depositing public is bigger when the bank, like Banco Filipino, is big.
With 89 branches nationwide, 46 of them in Metro Manila alone, Y
pumping the hard-earned savings of 3 million depositors into the bank,
BF had no reason to go bankrupt if it were properly managed. The Y
Central Bank had to infuse almost P3.5 billions into the bank in its
endeavor to save it. But even this financial assistance was misused, for Y
instead of satisfying the depositors' demands for the withdrawal of
their money, BF channeled and diverted a substantial portion of the Y
finds into the coffers of its related/linked companies. Up to this time,
Y
its officers, directors and major stockholders have neither repaid the
Central Bank's P3.6 billion financial assistance, nor put up adequate Y
collaterals therefor, nor submitted a credible plan for the rehabilitation
of the bank. What authority has this Court to require the Central Bank Y
to reopen and rehabilitate the bank, and in effect risk more of the
Government's money in the moribund bank? I respectfully submit that Y
decision is for the Central Bank, not for this Court, to make.chanroblesvirt ualawlibrary chanrobles virt ual law libra ry

Y
WHEREFORE, I vote to dismiss the petition for 
  and
mandamus in G.R. No. 70054 for lack of merit. Y

  ": "   Y

Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Republic of the Philipppines she will kick him. But Lucas touched her again and so she hit Mr.
$%&'(%) Lucas. Suddenly Mr. Lucas shouted at her saying lumabas ka na at
Manila huwag na huwag ka nang papasok dito kahit kailan A verbal exchange
then ensued and respondent Lucas grabbed Raquel by the arm and
EN BANC shoved her towards the door causing her to stumble, her both hands
protected her face from smashing upon the door. chanroblesvirtualawlibrary

 




 
Mr. Lucas, bent on literally throwing the affiant out of the office,
CIVIL SERVICE COMMISSION, 

 ". JOSE J. LUCAS, grabbed her the second time while she attempted to regain her posture
 

. after being pushed the first time. x x x while doing all this, Mr. Lucas
shouted at the affiant, saying, labas, huwag ka nang papasok dito kahit
DECISION kailan.[4]chanroblesvirtualawlibrary

PARDO, : : chanroblesvirtualawlibrary On June 8, 1992, the Board of Personnel Inquiry, DA, issued a
summons requiring respondent to answer the complaint, not to file a
The petition for review on 
  before the Court assails the motion to dismiss, within five (5) days from receipt. On June 17, 1992,
decision of the Court of Appeals[1] which set aside the resolution of respondent Lucas submitted a letter to Jose P. Nitullano, assistant
the Civil Service Commission[2] and reinstated that of the Board of head, BOPI, denying the charges. According to Lucas, he did not
Personnel Inquiry (BOPI for brevity), Office of the Secretary, touch the thigh of complainant Linatok, that what transpired was that
Department of Agriculture,[3] suspending respondent for one month, he accidentally brushed Linatoks leg when he reached for his shoes
for simple misconduct. chanroblesvirtualawlibrary
and that the same was merely accidental and he did not intend nor was
there malice when his hand got in contact with Linatoks leg. chanroblesvirtualawlib rary

To provide a factual backdrop of the case, a recital of the facts is

necessary. chanroblesvirtualawlibrary
On May 31, 1993, after a formal investigation by the BOPI, DA, the
board issued a resolution finding respondent guilty of 
Y
On May 26, 1992, Raquel P. Linatok, an assistant information officer

[5]Yand recommending a penalty of suspension for one (1)
at the Agricultural Information Division, Department of Agriculture month and one (1) day. The Secretary of Agriculture approved the
(DA for brevity), filed with the office of the Secretary, DA, an recommendation. chanroblesvirtualawlibra ry

affidavit-complaint against respondent Jose J. Lucas, a photographer

of the same agency, for misconduct. chanroblesvirtualawlibrary
In due time, respondent appealed the decision to the Civil Service
Commission (CSC). On July 7, 1994, the CSC issued a resolution
Raquel described the incident in the following manner: chanroblesvirtualawlibrary finding respondent guilty of  Y

 and imposing on him
the penalty of dismissal from the service.[6] Respondent moved for
While standing before a mirror, near the office door of Jose J. Lucas, reconsideration but the CSC denied the motion. chanroblesvirtualawlibrary

Raquel noticed a chair at her right side which Mr. Jose Lucas, at that
very instant used to sit upon. Thereafter, Mr. Lucas bent to reach for Then, respondent appealed to the Court of Appeals. On October 29,
his shoe. At that moment she felt Mr. Lucas hand touching her thigh 1996, the Court of Appeals promulgated its decision setting aside the
and running down his palm up to her ankle. She was shocked and resolution of the CSC and reinstating the resolution of the BOPI, DA,
suddenly faced Mr. Lucas and admonished him not to do it again or stating thus: It is true that the Civil Service Act does not define grave
and simple misconduct. There is, however, no question that these Landrito vs. Civil Service Commission, we held that in grave
offenses fall under different categories. This is clear from a perusal of misconduct as distinguished from simple misconduct, the elements of
memorandum circular No. 49-89 dated August 3, 1989 (also known as corruption, clear intent to violate the law or flagrant disregard of
the guidelines in the application of penalties in administrative cases) established rule, must be manifest,[10] which is obviously lacking in
itself which classifies administrative offenses into three: grave, less respondents case. Respondent maintains that as he was charged with
grave and light offenses. The charge of grave misconduct falls under simple misconduct, the CSC deprived him of his right to due process
the classification of grave offenses while simple misconduct is by convicting him of grave misconduct. chanroblesvirtualawlibrary

classified as a less grave offense. The former is punishable by

dismissal while the latter is punishable either by suspension (one We sustain the ruling of the Court of Appeals[11] that: (a) a basic
month and one day to six months), if it is the first offense; or by requirement of due process is that a person must be duly informed of
dismissal, if it is the second. Thus, they should be treated as separate the charges against him[12] and that (b) a person can not be convicted
and distinct offenses.[7] chanroblesvirtualawlibrary of a crime with which he was not charged.[13] chanroblesvirtualawlibrary

The Court of Appeals further ruled that a basic requirement of due Administrative proceedings are not exempt from basic and
process on the other hand is that a person must be duly informed of the fundamental procedural principles, such as the right to due process in
charges against him (Felicito Sajonas vs. National Labor Relations investigations and hearings.[14] chanroblesvirtualawlibrary

Commission, 183 SCRA 182). In the instant case however, Lucas

came to know of the modification of the charge against him only when The right to substantive and procedural due process is applicable in
he received notice of the resolution dismissing him from the service.[8]
chanroblesvirtualawlibrary
administrative proceedings.[15] chanroblesvirtualawlibrary

Hence, this petition. chanroblesvirtualawlibrary

Of course, we do not in any way condone respondents act. Even in
jest, he had no right to touch complainants leg. However, under the
The issues are (a) whether respondent Lucas was denied due process circumstances, such act is not constitutive of grave misconduct, in the
when the CSC found him guilty of grave misconduct on a charge of absence of proof that respondent was maliciously motivated. We note
simple misconduct, and (b) whether the act complained of constitutes that respondent has been in the service for twenty (20) years and this is
grave misconduct. chanroblesvirtualawlibrary
his first offense. chanroblesvirtualawlibrary

Petitioner anchors its position on the view that the formal charge +/+==*(0, the Court hereby DENIES the petition for
against a respondent in an administrative case need not be drafted with review on 
  and AFFIRMS thedecision of the Court of
the precision of an information in a criminal prosecution. It is Appeals in CA-G. R. SP No. 37137. chanroblesvirtualawlibrary

sufficient that he is apprised of the substance of the charge against

him; what is controlling is the allegation of the acts complained of, and No costs. chanroblesvirtualawlibrary

not the designation of the offense.[9] chanroblesvirtualawlibrary

SO ORDERED. chanroblesvirtualawlibrary

We deny the petition. chanroblesvirtualawlibra ry

( Yp Y p Y
 Y YY

Y 
Y
Y
As well stated by the Court of Appeals, there is an existing guideline  Y Y  Y


 Y

Y
Y
of the CSC distinguishing simple and grave misconduct. In the case of  YYpp Y

Republic of the Philipppines After due proceedings, on August 14, 2000, the Court of Appeals
$%&'(%) promulgated its decision [6] annulling and setting aside the order of
Manila preventive suspension against respondent for having been issued by
the Ombudsman in grave abuse of discretion. chanroblesvirtuallawlibrary
0+$),+/+$+(
On October 06, 2000, the Court of Appeals denied a motion for
>c" #!#"
"? reconsideration filed by the Solicitor General. chanroblesvirtuallawlibrary

(5
  + ( ,$+)(ccc  Hence, this petition. [7]

 )(  '&+
: ,('+($,()(
   Y(+$+/$)   The Facts chanroblesvirtuallawlibrary

,+$+( On January 26, 2000, elements of Task Force Aduana headed by

petitioner Doctor conducted an entrapment operation in a case of
& ,(p@ bribery involving Atty. Redempto C. Somera, Hearing Officer, Law
Division, Bureau of Customs, Manila, and Indian nationals who had
The Case chanroblesvirtuallawlibrary pending cases of seizure with the former. chanroblesvirtuallawlibrary

The petition is one for review on 

  [1] seeking to set aside (a) After the pay-off materialized, petitioner Doctor announced the
the decision of the Court of Appeals [2] nullifying the preventive entrapment and then arrested Atty. Somera and two (2) Indian
suspension order issued by petitioner Ombudsman; and (b) the nationals, namely, Murli Tejoomal Mohrani and Kumar Rupchand
resolution [3] denying petitioners motion for reconsideration. Khiatani, for violation of Article 210 of the Revised Penal Code. As a
chanroblesvirtuallawlibrary
consequence, the Task Force filed with the Regional Trial Court,
Manila, charges of bribery, violation of R. A. No. 3019, and corruption
The Ombudsman issued an order of preventive suspension [4] in
of public officials against them. chanroblesvirtuallawlibrary
connection with the administrative charges for grave misconduct,
dishonesty and conduct prejudicial to the best interest of the service
Likewise, the Task Force filed with the Ombudsman administrative
that Task Force Aduana filed with the Office of the Ombudsman
charges for grave misconduct, dishonesty and conduct prejudicial to
against respondent Ronnie C. Silvestre and Atty. Redempto Somera.
chanroblesvirtuallawlibrary the best interest of the service against respondent Ronnie C. Silvestre
and Atty. Somera.
On February 14, 2000, respondent filed with the Ombudsman a motion
for the lifting of the order of preventive suspension. However, on April The Issue chanroblesvirtuallawlibrary
03, 2000, the Ombudsman denied the motion. chanroblesvirtuallawlibrary
The issue is whether the Ombudsman has authority to suspend from
On May 31, 2000, respondent filed with the Court of Appeals [5] a office respondent Ronnie C. Silvestre indefinitely on the basis of the
petition for 
  and prohibition with temporary restraining order administrative complaint filed with his office showing that evidence of
and writ of preliminary injunction questioning the order of preventive guilt is strong.
suspension issued by petitioner Ombudsman. chanroblesvirtuallawlibrary
The Courts Ruling chanroblesvirtuallawlibrary
We need not resolve the issue presented. We dismiss the petition. It
has become moot. chanroblesvirtuallawlibrary
On February 14, 2001, the Ombudsman dismissed the administrative
charges against respondent. In dismissing the charges, the Ombudsman
categorically ruled as follows: chanroblesvirtuallawlibrary
It is another story, however, as regards respondent SILVESTRE. In
implicating respondent SILVESTRE in the instant case, Atty.
DOCTOR stated in his AFFIDAVIT OF ARREST AND
COMPLAINT, the following:chanroblesvirtuallawlibrary
6. That after the hearing of the case (S.I. No. 00-005) on January 20,
2000, ATTY. SOMERA approached me and invited me to the room of
ATTY. RONNIE SILVESTRE (herein petitioner), Head of the Law
Department of the Port of Manila wherein the duo convinced me to
cooperate with them in the withdrawal of the complaint and its
eventual dismissal;chanroblesvirtuallawlibrary
7. That I did not commit myself to their proposition to drop the case
but I just continued talking with them with the plan in mind to report
the same to LT. GEN. JOSE T. CALIMLIM, Task Force Commander
of Presidential Anti-Smuggling Task Force
ADUANA;chanroblesvirtuallawlibrary
Except this bare allegation of the complainant, however, practically no
other evidence was ever presented to substantiate the charge against
respondent SILVESTRE. At this point, it may be noted that well
settled is the rule that within the field of administrative law, while
strict rules of evidence are not applicable to quasi-judicial proceedings,
nevertheless, in adducing evidence constitutive of substantial
evidence, the basic rule that mere allegation is not evidence cannot be
Y
Y Y
light of subsequent Order of the District Collector of the Port of
Manila dated March 2, 2000, releasing the said kitchen wares which
were indeed, not covered by the Warrant of Seizure and Detention
(WSD) x x xchanroblesvirtuallawlibrary
Worthy of note also is the DECISION of the Court of Appeals in CA-
G. R. SP No. 58958 dated August 14, 2000 entitled RONNIE C.
SILVESTRE vs. OMBUDSMAN ANIANO A. DESIERTO, (pages
253 to 254, Records) where in granting the petition for certiorari and
prohibition involving the preventive suspension order on respondent
SILVESTRE, the said appellate court stated, thus:
xxx xxx xxx chanroblesvirtuallawlibrary
While the above DECISION may not necessarily be controlling in the
resolution of the merits of the instant case insofar as it pertains to
respondent SILVESTRE, we cannot help but note its relevancy
inasmuch as practically no other evidence was presented by the
complainant, other than his AFFIDAVIT OF ARREST AND
COMPLAINT to support the charge against respondent SILVESTRE.
Needless to state, this is also the very same and only evidence
presented before the Court of Appeals which rendered the aforequoted
DECISION.chanroblesvirtuallawlibrary
=*0(the Court hereby DISMISSES the petition for
mootness. chanroblesvirtuallawlibrary
No costs. chanroblesvirtuallawlibrary
SO ORDERED. chanroblesvirtuallawlibrary

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disregarded.chanroblesvirtuallawlibrary Y



  



We are, therefore inclined to believe the defense of respondent ( Yp Y p Y!
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SILVESTRE, that what was discussed between him, respondent
SOMERA and Atty. DOCTOR on January 20, 2000, was the legal Y
issue on the continued detention of some kitchen wares which were
Y
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 ublic of the Philippines officers were also distinguished from engaging in business activities
$%&'(%) involving garment and textile exports. The decision of the Board was
Manila based on the following initial findings of the Bureau of Customs, to
wit:
FIRST DIVISION
1. Two 40-footer containers declared to consist of 210
c 44!05
!"! bales of acrylic staple fiber weighing 48.211 kgs. with a
value (including taxes and duties) of P1,240,857.00
' 1%* -).)+'+$(&( )+(

 , vs. arrived from Kobe, Japan on 12 February 1983 on
'++$)(1)(/(&+ 0,(&+(,(,  board the S/S Breadeverette. chanroblesvirtualawlibrary chanrobles vi rtual law library

, ,()(,$+ $ '(0 ( 

 ')$ ,).)+.&()1( , ,)* 2. Examination of the shipment reveals the following -
+)',+ ) && )(%) 

. chanrobles virtual law library

a. About 100 bales of acrylic staple

fibers were found in the first half of the
containers; and chanrobles virtual law li brary

%)+3p
chanrobles virtual law library

b. Assorted textile piece goods for

This petition for certiorari seeks to annul the decision of the blouses, shirts and dresses were found
Intermediate Appellate Court dated January 6, 1984 which upheld the midway through the containers.
cancellation of petitioner's export quota allocations and the suspension
of its officers even as it set aside the basis of such cancellation and 3. The estimated value of the actual contents of the 2
suspension on the ground of violation of due process. chanroblesvirtualawl ibrary chanrobles virtual law library containers is P2.5 Million.

Petitioner Mabuhay Textile Mills Corporation (Mabuhay) is a The Bureau of Customs conducted an investigation pursuant to the
corporation engaged in the garments and textile import business for the above initial findings. On July 25, 1983, it rendered a decision
last twenty-seven years. Among the government requirements for absolving the petitioner from any irregularity relative to the subject
engaging in this type of business are the export quota allocations shipment in the initial findings. It ruled:
issued by the respondent Garments and Textile Export Board. chanroblesvirtualawlibrary chanrobles virt ual law libra ry

xxx xxx xxx chanrobles virtual law library

Sometime in 1982, the Board granted export quota allocations for

1983 to the petitioner. These export quotas have been granted annually During the hearing, it was shown that Mr. James Dy,
to the petitioner since 1976. They are automatically renewed every Executive Vice-President of Mabuhay contacted the
year provided the grantee has utilized its quotas during the previous shipper in Japan, Daiwa Trading Co., Ltd. demanding
years.
chanroblesvirtualawlibrary chanrobles vi rtual law library explanation for the textile contents of the shipment and
the shipper answered that those (sic) was an interchange
On March 2, 1983, the petitioner received a letter from the Board in the loading of the materials destined for Manila and
informing it that its 1983 export quota allocations were revoked another shipment destined for Indonesia (Exh. "O" and
effective February, 1983. Furthermore, its major stockholders and Stipulation No. 9). chanroblesvirtualawlibrary chanrobles virtual law li brary
Subsequently, Mr. Dy wrote another letter to the Chief,
CIID (Exh. "P") enclosing therewith two letters from
Daiwa Trading Co., Ltd. dated February 21, 1983 and
February 25, 1983 explaining the supposed
interchanging of the materials destined for Manila and
that destined for Indonesia (Exhs. "P-1" and "P-2"); a
copy of a Bill of Lading of Samudera Indonesia
Shipping Line for the S/S 'OCEAN PRIMA'
purportedly covering 150 crate piece goods consigned
to 'P.T. GADING AJU DJAZA JL 'of Jakarta (Exhs.
"P.3" & "J-A"); a photo of an invoice addressed to 'P.T.
GADING AJU DJAZA JL' containing a detailed
description of assorted design/color of the fabrics and
their corresponding values (Exh, " P-4 " and " 5-B ")
and a photocopy of a Packing List (Exh. "P-5" also "5-
C") containing the description and yardage of the
fabrics mentioned in the aforementioned invoice. The
aforementioned photocopies of the shipping documents
were sent by DAIWA TRADING CO., LTD., to
Mabuhay for purposes of explaining the alleged
interchanging of the materials in the two shipments and
which Mabuhay, through its Executive Vice-Presidents,
submitted to the CIID.
Thereafter, through a series of communications with
customs authorities in Jakarta and a personal inspection
in Jakarta by the Commissioner of Customs, while he
was there, it was discovered that no such containers
with Nos. ICSU-4868538 and ICSU-5219207
containing 110 bales of acrylic staple fiber was on
board the 'OCEAN PRIMA' and that Bill of Lading No.
CJ-4 covers a shipment of steel sheets (Exh. "O-4 ";
Exhs. "R" to "R-2") thus debunking the claim of
interchanged shipments by DAIWA TRADING CO.,
LTD. chanroblesvirtualawlibrary chanrobles virt ual law libra ry
The claimant, on the other hand, showed during the
hearing that it opened a letter of credit for the
importation of 42,000 kilos of Acryhc Staple Fiber C8
chanroblesvirtualawlibrary chanrobles vi rtual law library
3D V64 at US$1.6 per kilo (Exh. "1") based on a Pro
Forma Invoice of Daiwa Trading Co., Ltd. (Exh. "l-A").
Upon receipt of the shipping documents, i.e., the
Invoice (Exh. "D"); the Packing List (Exh. "C") and the
Bill of Lading (Exh. "B" also Exh. "1") wherein it is
indicated that the shipment was Shipper's Load &
Count' (Exh. "1-A"), the same were given to its broker
in line with its used business practice, for the purpose
of filing the import entry.
chanroblesvirtualawl ibrary chanrobles virtual law libra ry
When the claimant received information that the
shipment contained fabrics which it did not import, an
explanation was required from the shipper, DAIWA
TRADING CORPORATION, LTD. The latter, in two
letters addressed to the claimant (Exhs. "P1" and "P-2"
also Exhs. "4" & "5") alleged that there was an inter
change of materials in the shipment to the claimant and
another shipment consigned to a customer in Indonesia.
Also sent to the claimant by Daiwa were photocopies of
a Bill of Lading (Exh. "P-3"); and Invoice (Exh. "P-4")
and a packing list (Exh. "P-5") supposedly covering a
shipment of piece goods consigned to 'P.T. GADING
AJU DJAZA JL' which the claimant forthwith
submitted to the CIID. Later, in the letter dated March
14, 1983, addressed to the Claimant, the shipper
admitted its culpability in claimant interchanging the
shipments (Exh. "8"). Thereafter, the Claimant filed a
suit against the shipper for the damages caused to it by
the latter's action and petitioned for the issuance of a
Writ of Preliminary Attachment (Exh. "7" to "7-6").
library
chanroblesvirtualawlibrary chanrobles virtual law
A careful scrutiny of the facts and the circumstances
attendant to the case show that the Mabuhay Textile
Mills have no participation in the irregularity relative to
the subject shipment. The same was exported to the
Philippines under a 'Shipper's Load and Count Bill of
Lading (Exh. " l-A") which means that it was the
shipper who was responsible for putting the contents
inside the container. The spurious documents (Exhs. "P-
3", "P-4" and "P-5") came from the shipper, Daiwa or consignee concerning the importation or exportation
Trading Co., Ltd. and were forwarded by Mabuhay to of such articles; chanrobles virtual law library

the Bureau of Customs for checking and evaluation.

Lastly, and most important, Daiwa Trading Co., Ltd., in If Mabuhay is prejudiced by such actions, its recourse is
a letter to Mabuhay dated March 14, 1983 (Exh. "l") against the exporter by way of damages and other
admitted that its staff was responsible for the story remedies provided by law, as in fact, Mabuhay have so
about the supposed mix-up with the alleged shipment to done by filling of the corresponding complaint against
Indonesia.chanroblesvi rtualawlibra ry chanrobles virtual law l ibrary the exporter and petitioning for the issuance of the
necessary Writ of Attachment. chanroblesvirtualawlibra ry chanrobles virtual law l ibrary

However, good faith should not be isolated alone on the

part of importer/consignee, but it should be proven also xxx xxx xxx
on the part of the supplier/exporter. It should be
reckoned that in matter of importation there are two On the basis of such decision, the petitioner, on August 10, 1983,
primary personalities involved, the supplier and the moved to reconsider the revocation of its export quota allocations and
importer. The supplier in order to maintain his the disqualification of its officers from the export business. As the
credibility to his client/importer, should exercise an Board failed to reply to such a request, two similar letters were sent by
utmost care and extreme caution in shipping orders of the petitioner on September 13, and 23, 1983 respectively. Again, the
his importer otherwise there is always the risk of losing Board did not reply. chanroblesvirt ualawlibrary chanrobles virtual law lib rary

huge amount of investment capital by his importers

which ultimately produce tremendous damages on the Finally on September 26 and 29, 1983, two letters were respectively
part of the importer similar to the instant case. He must sent by the Board to the petitioner informing the latter that it had
maintain his honest relationship to his importers. referred petitioner's letters to the Commissioner of Customs for
Within the contemplation of the Customs Code, the comment. chanroblesvirtualawlibrary chanrobles vi rtual law library

defense of the importer of good faith must be mutually

tie up with the supplier. A good faith of the importer On October 14, 1983, the Commissioner of Customs responded
does not in anyway offset the damage committed by the through a letter-comment addressed to the Board stating the following:
supplier/exporter for it is crystal clear on the provision
of Section 2530 (1) 3, 4 of the Tariff and Customs xxx xxx xxx chanrobles virtual law library

Code, the liability of the exporter is explicit, thus: chanrobles virtual law libra ry

Kindly be informed that seizure proceedings are

xxx xxx xxx chanrob les virtual law library
proceedings instituted against the articles or goods.
Whenever a decision is rendered in a seizure
(3) On the strength of a false documents or affidavit proceeding, it is final and conclusive as to the goods but
executed by the owner, importer, ! 
 or consignee not as to the persons involved therein where another
concerning the importation of such articles; chanrobles vi rtual law library
proceeding is necessary. Hence, any findings made in a
seizure proceeding, with respect to the culpability or
(4) On the strength of a false invoice or other non-culpability of the persons involved, cannot be
documents executed by the owner, importer, ! 
 considered binding as to affect the judgment that may
be rendered in another. Seizure proceedings cannot
 make a final and conclusive pronouncement as to the
guilt or innocence of persons.
On October 19, 1983, petitioner filed an action for prohibition and
injunction with preliminary injunction and restraining order against the
Board. On October 24, 1983, the trial court issued a restraining order
directing the Board and its officials to desist and to stop from
implementing the decision revoking the petitioner's export quota
allocations and from disqualifying its principal stockholder and
officers from engaging in the textile and garment export business. chanrob lesvirtualawlib rary
The Board moved to reconsider but the same was denied. On
November 14, 1983, the lower court issued a writ of preliminary
injunction. This, notwithstanding, the next day, the Board denied
petitioner's request for reinstatement "on the basis of the above letter
(the letter of the Commissioner of Customs dated October 14, 1983)
and for the reason that no new issues had been presented to warrant the
reinstatement. "chanrobles virtual law library
After hearing, the trial court rendered judgment in favor of the
petitioner, and among others directed the Board to issue to the
petitioner within two days from service of the writ, K!
! 

condemns, which proceeds upon inquiry and renders
judgment only after trial. The meaning is that every
citizen shall hold his life, liberty, property, and
immunities under the protection of the general rules
which govern society. (cited in Philippine
Constitutional Law, p. 168 by Neptali Gonzales, 1975
ed.)chanrobles virtual law library
Administrative due process requires that there be an
chanrobles virtual law library impartial tribunal constituted to determine the right
involved; that due notice and opportunity to be heard be
given; that the procedure at the hearing be consistent
with the essentials of a fair trial; and that the
proceedings be conducted in such a way that there will
be opportunity for a court to determine whether the
applicable rules of law and procedure were observed.
(42 Am. Jur. p. 451, cited by Neptali Gonzales, p. 183,
Philippine Constitutional Law).
The Board appealed the decision to the Intermediate Appellate
Court.chanroblesvirtualawlibrary chanrobles virtual law library
Nos. 23292, 22583 and 14321, and to issue the pertinent On January 4, 1984, the appellate court modified the trial court's
clearances with respect to the textile export shipments of the petitioner decision. It affirmed all the findings of fact of the court and held that
after filing of the required papers and documents. In its decision, the the petitioner was denied due process by the Board when it cancelled
trial court stated: the export quota allocations. It set aside the letters of the Board dated
March 2, 1983 and November 14, 1983. However, the appellate court
The summary revocation of the export quotas and ordered the Board to give the petitioner and its officers due hearing to
export authorizations issued in favor of the petitioner determine whether or not any of its rules and regulations had been
without hearing violates not only the above-mentioned violated as to warrant the imposition of any penalty against them. Until
provisions of the Rules and Regulations of the such hearings were held, the petitioner's export quota allocations were
respondent board but also the 'due process of law' to remain cancelled and its officers suspended. This modification is
clause of the Constitution of the Philippines to the now the subject of this petition. chanroblesvirtualawli brary chanrobles virtual law library

effect that 'no person shall be deprived of life, liberty,

or property without due process of law, nor shall any The petitioner contends that the appellate court committed grave abuse
person be denied equal protection of the laws.' (Article of discretion when it ordered a new hearing to be conducted
IV, Sec. 1, New Constitution). According to Daniel unnecessarily since even without controverting evidence, the evidence
Webster in the Dartmouth College case, due process is on record relied upon by the Board failed miserably to measure up to
the equivalent of the law; a law which hears before it the requisite of "substantial evidence. " chanrobles virtual law l ibrary
This contention has no merit. chanroblesvirtualawlibrary chanrobles vi rtual law lib rary questioned order but once the basis for its action proved non-existent,
it refused to lift its erroneous and unfounded order. chanroblesvirtualawlibrary chanrobles virtual law libra ry

Executive Order No. 823 provides, among others:

However, since the Board has reason to believe that the petitioner
The GTEB shall have the following powers and might have violated its rules and regulations in connection with the
functions:chanrobles virtual law libra ry importation of materials for the petitioner's garment industry then it
has the discretion to conduct a proper hearing to determine the
h. In case of violations of its rules and regulations, petitioner's culpability or non-culpability. It does not have to rely on
cancel or suspend quota allocations, export the findings of other agencies to discharge this function. chanroblesvirtualawl ibrary chanrobles vi rtual law library

authorizations and licences for the operation of bonded

garment manufacturing warehouses. (Sec. 2[h] Exec. In its second assignment of error, the petitioner maintains that the
Order No. 823 amended Sec. 3[h] of Exec. Order No. appellate court erred in allowing the implementation of the orders of
537). the respondent Board when such orders were set aside for having been
issued without a hearing. chanroblesvirtualawlibra ry chanrobles virtual law l ibrary

Likewise, under its Rules and Regulations, said Executive Order

provides: There is merit in this contention. chanroblesvirtualawl ibrary chanrobles vi rtual law lib rary


a
  The appellate court should have reversed and set aside the cancellation
of petitioner's export quota allocations and the suspension of its
Section III. 
.- Any act or misrepresentation or
violation of these Rules and Regulations shall, after due
hearing, constitute sufficient ground for the imposition
of a fine of not more than ten per cent (10%) of the
gross FOB value of the goods exported or for a total or
partial forfeiture of the offender's Export Quota, Export
Authorization and Export License and permit or
temporary disqualification from enjoying the privilege
to export under all Agreements on textiles, without
prejudice to any liabilities under other applicable laws.
(Sec. III, Part 111, Rules and Regulations).
It is clear from the above provisions that the respondent Board is the
body charged with the function of granting export quota allocations,
issuing licenses to operate bonded warehouses and revoking or
cancelling the same. Correspondingly, it is also authorized to conduct
hearings to determine whether or not violations have been committed
by the grantee .The Board acted arbitrarily when, after acting solely
upon the initial findings of the Bureau of Customs, it issued the
officers since the very bases of these measures were set aside because
of lack of due process. As the trial court correctly pointed out:
It is worthwhile to note that the basis of the revocation
of the export quotas and export authorizations issued in
favor of the petitioner was based on the initial findings
of the Bureau of Customs regarding certain shipments
but subsequently the acting collector of customs of the
port of Manila, Mr. Bienvenido P. Alano, Jr., cleared
the petitioner of any wrongdoing and declared that it
had no participation in the irregularities relative to the
subject shipments. (Decision dated July 25, 1983,
Exhibit "A"). The decision of the acting collector of
customs of the port of Manila became final on August
18, 1983. The basis of the revocation has, therefore,
become ineffective and unenforceable so that the
revocation has no more leg to stand on. chanroblesvirtualawlibra ry chanrobles virtual law l ibrary
The petitioner has shown by its evidence and the
allegations of its verified petition that it is entitled to the
 reliefs demanded and the whole or part of such reliefs
consists in restraining the commission or continuance
of the acts complained of and that great or irreparable
injury would result to the petitioner before the trial or
termination of this case. It has been shown by the
evidence presented during the hearing for the issuance
of the writs of preliminary injunction prayed for by the
petitioner that foreign companies with whom the
petitioner have entered into contracts regarding its
 
judicial perspective in administrative decision making
and for maintaining the vision which led to the creation
of the administrative office. (Citing Amberto V. Court
of Appeals, 89 SCRA 240 and Baguio Country Club
Corporation v. National Labor Relations Commission,
118 SCRA 557).
Equally important are the requisites of due process in administrative
proceedings reiterated in the case of 
 %


export business like Itoman (U.S.A.) Inc., New York, 
 " (136 SCRA 112, 131):
N.Y., and the C. ITOH and Co., Ltd. Tokyo, Japan,
have threatened to cancel their contracts with the
petitioner and to sue the latter for damages if it cannot
comply with its commitments to them (Exhs. "I" and
"J"), thereby showing that the petitioner would suffer
great and irreparable injury if the injunctions prayed for
will not be granted. Aside from this, the 700 employees
and workers of the petitioner will be practically jobless
and they and their families will suffer greatly for the
duration of this case if the injuctions will not be
granted.
To hold that there was a violation of petitioner's right to due process
but at the same time sustain the end results of such violation would be
tantamount to denying the right to due process just the same. Indeed,
the importance of this right which is guaranteed by the Constitution
cannot be stressed strongly enough. In the case of 7
 , (132 635, cited on p. 84, Philippine Constitutional Law,
SCRA 690, 704), we ruled:
The principle of due process furnishes a standard to
which governmental action should conform in order to
impress it with the stamp of validity. Fidelity to such
standard must of necessity be the overriding concern of
government agencies exercising quasi-judicial
functions. Although a speedy administration of action
implies a speedy trial, speed is not the chief objective of
a trial. Respect for the rights of all parties and the
requirements of procedural due process equally apply in
proceedings before administrative agencies with quasi-
xxx xxx xxx chanrobles virtual law library
. . . It is a settled rule that in administrative proceedings,
or cases coming before administrative tribunals
exercising quasi-judicial powers, due process requires
not only notice and hearing, but also the consideration
by the administrative tribunal of the evidence
presented; the existence of evidence to support the
decision; its substantiality; a decision based thereon or
at least contained in the record and disclosed to the
parties, such decision by the administrative tribunal
resting on its own independent consideration of the law
and facts of the controversy; and such decision
acquainting the parties with the various issues involved
and the reasons therefor (Ang Tibay v. Court, 69 Phil.
Fernando, 1984 ed.)
In the case at bar, the petitioner was never given the chance to present
its side before its export quota allocations were revoked and its
officers suspended. While it is true that such allocations as alleged by
the Board are mere privileges which it can revoke and cancel as it may
deem fit, these privileges have been accorded to petitioner for so long
that they have become impressed with property rights especially since
not only do these privileges determine the continued existence of the
petitioner with assets of over P80,000,000.00 but also the livelihood of
some 700 workers who are employed by the petitioner and their
families. As the appellate court correctly pointed out:
 xxx xxx xxx
. . . This reliance on the 'right privilege' dichotomy has
long been denigrated by leading lights in administrative
law as 'too crude for consistent application' by courts.
Indeed, considering the total topography of this case,
the resort to the right-privilege distinction is too feeble
a refutation of the fact that there has been a disregard of
the due process requirement of the Constitution by the
petitioner Board. For the irrefutable fact is that the
private respondent has long been granted its export
 
chanrob les virtual law library knew why its export quota allocations had been cancelled was the
initial findings of the Bureau of Customs which were made the sole
basis by the Board for such cancellation. It is only but logical that
petitioner would only touch on this issue and nothing else. Thus, such
request for reinstatement and the subsequent denial by the Board can
hardly be considered a motion for reconsideration that "cured" the
non-observance of due process. Again, as pointed out by the appellate
court:
Nor are We persuaded by the proposition that the
subsequent requests for restoration of its export
  on their basis, valuable contracts calling for
textile export shipments have been concluded between
the private respondent and foreign corporation. Stated
otherwise, these export allocations can not anymore be
categorized as mere 'privilege' but are already
impressed with property rights of the private
respondent, They cannot be arbitrarily revoked without
causing a collision with the constitutional call that there
must be due process before anybody can be denied his
right to property.
Neither can the petitioner's request for reinstatement be considered as
substantial compliance with the due process requirement so much so
that any defect in the initial cancellation of the export quota allocations
by the Board is deemed to have been cured by petitioner's request for
reinstatement; an action which is alleged by the Board as being
tantamount to a motion for reconsideration.
allocations made by the private respondent cured the
due process deficiency on the part of the Board. The
requests for restoration rest on the allegation of the
private respondent and its principal officers that they
had no hand in the illicit importation of the
apprehended shipment. The allegation is buttressed by
the decision itself of the Acting Collector of Customs of
the Port of Manila holding that '. . . a careful scrutiny of
the facts and the circumstance attendant to the case
show that the Mabuhay Textile Mills have no
participation in the irregularity relative to the subject
shipment.' It may be technically true that this statement
does not settle the criminal culpability of the private
respondent and its officers for as pointed out by
petitioner Brig. Gen. Ramon Farolan, Acting
Commissioner of Customs, a decision in a seizure
chanroblesvirtualawlibrary chanrobles virtual law libra ry proceedings is'. . final and conclusive as to the a

but 


   involved therein where
It should be noted that no reply was given by the Board when another proceeding is necessary.' But this all the more
petitioner requested for reinstatement of its allocations until an action sharpens the need for a real hearing where the private
for injunction was filed by petitioner. Only then did the Board deny respondent and its officers should be given a fair
petitioner's request on the basis of the letter of the Commissioner of opportunity to establish their innocence-a factual issue
Customs that his findings were not conclusive as to the persons that cannot be resolved by mere resolution of its
involved therein and on the ground that no new issues were presented requests for reinstatement on the basis of in. formation
by herein petitioner.chanroblesvirtualawlibrary chanrobles virtual law library known to the Board but unknown to the private
respondent such as the exchange of communications
How can petitioner present any "new issues" when it was never given between petitioner Farolan and the Director General of
the chance by the Board? Furthermore, the only reason the petitioner Customs of Indonesia. Indeed even in judicial
 proceedings, the irreducible rule is that the dismissal of Y
an action upon a motion to dismiss constitutes a denial
of due process of law if from a consideration of the Y
pleadings it appears that there are  
which
cannot be decided without a trial of the case on the Y
merits. In quasi-judicial proceedings, the counterpart
Y
rule is that where an 
'


is at issue, a trial-
type hearing ought to be held. (Londoner v. Denver, Y
210 US 373, 386, 28 S. Ct. 708, 714, 52 L. ed. 1103
119081). Y

While there is no controlling and precise definition of due process, the Y

guidelines laid down in the ÷aK  
case,  , and all
subsequent cases reiterating the same furnish an unavoidable standard Y
to which government action must conform in order that any
deprivation of life, liberty, and property, in each appropriate case, may Y
be valid. (See Eastern Broadcasting Corporation v. Dans, Jr., 137
Y
SCRA 628). chanroblesvirtualawlibrary chanrobles virt ual law libra ry

Y
WHEREFORE, IN VIEW OF THE FOREGOING, the petition is
GRANTED and the decision of the appellate court dated January 6, Y
1984 and its order of June 6, 1984 are SET ASIDE. The respondent
Board is hereby ordered to conduct a hearing where the petitioner is Y
accorded due process to determine whether or not the petitioner has
violated any of its rules and regulations. Pending such hearing, and to Y
maintain the status quo ante of the parties, the Board is directed to
issue Textile Export Clearances in favor of the petitioner without Y
prejudice to the revocation of the same if the petitioner is found to be
Y
guilty of any such violation. No costs. chanroblesvirtualawlibrary chanrobles vi rtual law lib rary

Y
SO ORDERED.
Y
Y
Y
Y
Y
Y
Y
Y
 1
 misconduct[7] because he failed to explain his side and settle his
accountabilities in OMB-L-A-03-1060-K. He was meted the penalty of
>c"4 4#$:5""
!? one year suspension from office. In the same decision, however,
OMB-L-A-03-1061-K was dismissed in view of respondent's
(00+(0)*('1%,$'
&)+)+(/$($ restitution of his accountability.[8]
$
'
+(>"?$&(,)
 Via a petition for review on certiorari under Rule 43 with a motion for
,+$+( the issuance of a writ of preliminary injunction in the CA, respondent
assailed the April 11, 2005 joint decision of the Office of the
((
@ Ombudsman insofar as it found him liable in OMB-L-A-03-1060-K.
This petition was captioned : a    
This is a petition for review under Rule 45 of the Rules of Court ÷

" ÷

6".a 
"÷and docketed
assailing the resolutions[2] of the Court of Appeals (CA) dated as CA - G.R. SP No. 89999. His prayer for the issuance of a writ of
September 11, 2006 and November 21, 2006 in CA-G.R. SP No. preliminary injunction was granted.
89999 captioned : 
a 
   ÷

"
 ÷

6 ÷".a 
"÷. Since it was not impleaded as a respondent in CA- G.R. SP No. 89999,
The facts follow.
Respondent Joel S. Samaniego was the City Treasurer of Ligao City,
Albay. On separate dates, the Commission on Audit (COA) through its
Regional Cluster Director Atty. Francisco R. Velasco[3] filed two
administrative complaints against Samaniego, docketed as OMB-L-A-
03-1060-K[4] and OMB-L-A-03-1061-K,[5] for dishonesty and grave
misconduct.
In these administrative complaints, the COA alleged that respondent
incurred shortages in his accountabilities for two separate periods.[6]
,
)(0)*(00+
Respondent received letters of demand requiring him to explain his
side and settle his accountabilities.
In his counter-affidavit, respondent averred, among others, that OMB-
L-A-03-1060-K was bereft of factual basis. He likewise averred that
the alleged amount of his accountability in OMB-L-A-03-1061-K was
the same amount cited in OMB-L-A-03-1060-K. He also pleaded the
defense of restitution of his alleged accountabilities.
In a joint decision dated April 11, 2005, the Office of the Deputy
Ombudsman for Luzon found respondent liable for grave
the Office of the Ombudsman filed a motion for intervention and to
admit the attached motion to recall the writ of preliminary injunction.
The motions were denied.
The Office of the Ombudsman now claims that the CA erred in
denying its right to intervene, considering that its joint decision was
the subject of the appeal. It also asserts that the writ of preliminary
injunction should be recalled.
We rule for the Office of the Ombudsman.[9]
'
(0)*('1%,$'
Section 27, Article II of the Constitution reads:
The State shall maintain honesty and integrity in the public service and
take positive and effective measures against graft and corruption.
To implement this, the Constitution established the Office of the
Ombudsman, composed of the Ombudsman, one overall deputy and at
least one Deputy each for Luzon, Visayas and Mindanao.[10] It was the
intention of the Constitution to make the Ombudsman independent.
The purpose of the Office of the Ombudsman is enunciated in Section
12, Article XI of the Constitution:
The Ombudsman and his Deputies, as protectors of the people, shall
act promptly on complaints filed in any form or manner against public
officials or employees of the government, or any subdivision, agency
or instrumentality thereof, including government-owned or controlled
corporations, and shall, in appropriate cases, notify the complainants
of the action taken and the result thereof.
The Office of the Ombudsman is a unique position in the 1987
Constitution.[11] The Ombudsman and his deputies function essentially
as a complaints and action bureau.[12] Congress enacted Republic Act
(RA) 6770[13] providing broad powers,[14] as well as a functional and
structural organization, to the Office of the Ombudsman to enable it to
perform its constitutionally-mandated functions.
RA 6770 states the mandate of the Ombudsman:
SEC. 13. Mandate. - The Ombudsman and his deputies, as protectors
of the people, shall act promptly on complaints filed in any form or
manner against officers or employees of the Government, or of any
subdivision, agency or instrumentality thereof, including government-
owned or controlled corporations, and enforce their administrative,
civil and criminal liability in every case where the evidence warrants
: :c5c  :5c99c:c
B 
57
 
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: .xxx (emphasis supplied)
Full disciplinary authority is one of the broad powers granted to it by
the Constitution and RA 6770. These broad powers, functions and
duties are generally categorized into: investigatory power, prosecutory
power, public assistance functions, authority to inquire and obtain
information, and the function to adopt, institute and implement
preventive measures.[17]
Actions of the Ombudsman that do not fall squarely under any of these
general headings are not to be construed outright as illegal. The
avowed purpose of preserving public trust and accountability must be
considered. So long as the Ombudsman's actions are reasonably in line
with its official functions and are not contrary to law and the
Constitution, they should be upheld. Defending its decisions in the CA
is one such power.
The Ombudsman is expected to be an "activist watchman," not merely
a passive onlooker.[18] A statute granting powers to an agency created
by the Constitution ⼇ such as RA 6770 ⼇ should be liberally
construed to advance the objectives for which it was created.[19] In
in order to promote efficient service by the Government to the people. 7

;"[20] we held that any interpretation of RA 6770
To aid the Ombudsman in carrying out its tasks, it was vested with that hampers the work of the Ombudsman should be avoided.
disciplinary authority over government officials.[15] The scope of this
authority was discussed in  


÷:[16] Taking all this into consideration, the Ombudsman is in a league of its
[The Office of the Ombudsman] is vested with "full administrative
disciplinary authority" including the power to "determine the
appropriate penalty imposable on erring public officers or employees
as warranted by the evidence, and necessarily, impose the said
penalty." Thus, the provisions in [RA] 6770 taken together reveal the
manifest intent of the lawmakers to bestow on the Office of the
Ombudsman  administrative disciplinary authority. )7
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own. It is different from other investigatory and prosecutory agencies
of the government because the people under its jurisdiction are public
officials who, through pressure and influence, can quash, delay or
dismiss investigations directed against them.[21] Its function is critical
because public interest (in the accountability of public officers and
employees) is at stake.
The Ombudsman concept originated in Sweden and other
Scandinavian countries.[22] Its original and classic notion was that of
an independent and politically neutral office which merely received
and processed the people's complaints against corrupt and abusive
government personnel.[23] The Philippine Ombudsman deviated from
the classic model. It retained the characteristic independence and
political neutrality but the range of its functions and powers was
enlarged.
÷,[31] the interest which entitles a person
Given the foregoing premises, we cannot limit the powers of the
Ombudsman if its acts are not contrary to law or the Constitution.
+)/)+(1-)*('1%,$'
+ subject" mean a direct interest in the cause of action as pleaded and

$$+=*+*+)$,+$+(+$
$$
+, which would put the intervenor in a legal position to litigate a fact
Section 1, Rule 19 of the Rules of Court provides:
Section 1. Who may intervene. - A person who has a legal interest in
the matter in litigation, or in the success of either parties, or an interest
against both, or is so situated as to be adversely affected by a
distribution or other disposition of property in the disposition of the
court or of an officer thereof may, with leave of court be allowed to
intervene in the action. xxx
Intervention is a remedy by which a third party, not originally
impleaded in the proceedings, becomes a litigant therein to enable him
to protect or preserve a right or interest which may be affected by such
proceeding.[24] Its purpose is to settle in one action and by a single
judgment the whole controversy (among) the persons involved.[25]
Intervention is not an absolute right[26] as it can be secured only in
accordance with the terms of the applicable statute or rule. In claiming
the right to intervene, the intervenor must comply with the
requirements laid down by Rule 19 of the Rules of Court which
provides that the intervenor must have a legal interest in any of the
following:
(a) the matter in controversy;
(b) the success of either of the parties;
(c) against both parties or
(d) be so situated as to be adversely affected by a distribution or other
disposition of property in the disposition of the court or of an
officer thereof.[27]
Intervention must not unduly delay or prejudice the adjudication of
rights of the original parties.[28] Moreover, it must be shown that the
intervenor's rights may not be fully protected in a separate
proceeding.[29]
The legal interest must be actual and material, direct and immediate.[30]
In Äa2.

to intervene in a suit:
[m]ust be on the matter in litigation and of such direct and immediate
character that the intervenor will either gain or lose by the direct legal
operation and effect of the judgment. The words "an interest in the
alleged in the complaint, without the establishment of which plaintiff
could not recover.
The CA denied petitioner's motion for intervention for lack of basis,
reasoning that:
In the instant case, the Ombudsman's intervention is not proper
considering that, other than its objection to the issuance of the
injunctive writ, no legal interest in the matter subject of litigation has
been alleged by the Ombudsman in the motion for intervention. xxx
We disagree.
The Office of the Ombudsman sufficiently alleged its legal interest in
the subject matter of litigation. Paragraph 2 of its motion for
intervention and to admit the attached motion to recall writ of
preliminary injunction averred:
2. As a competent disciplining body, the Ombudsman has the right to
seek redress on the apparently erroneous issuance by this Honorable
Court of the Writ of Preliminary Injunction enjoining the
implementation of the Ombudsman's Joint Decision imposing upon
petitioner the penalty of suspension for one (1) year, consistent with
the doctrine laid down by the Supreme Court in &1>?,
xxx and $>?,cc, xxx; (citations omitted; emphasis in the
original)
In asserting that it was a "competent disciplining body," the Office of
the Ombudsman correctly summed up its legal interest in the matter in
controversy. In support of its claim, it invoked its role as a
constitutionally mandated "protector of the people," a disciplinary
authority vested with quasi-judicial function to resolve administrative
disciplinary cases against public officials.[32] To hold otherwise would
have been tantamount to abdicating its salutary functions as the
guardian of public trust and accountability.[33]

Moreover, the Office of the Ombudsman had a clear legal interest in
the inquiry into whether respondent committed acts constituting grave
misconduct,[34] an offense punishable under the Uniform Rules in
Administrative Cases in the Civil Service.[35] It was in keeping with its
duty to act as a champion of the people and preserve the integrity of
public service[36] that petitioner had to be given the opportunity to act
fully within the parameters of its authority.
It is true that under our rule on intervention, the allowance or
disallowance of a motion to intervene is left to the sound discretion of
the court[37] after a consideration of the appropriate circumstances.[38]
However, such discretion is not without limitations.[39] One of the
limits in the exercise of such discretion is that it must not be exercised
in disregard of law and the Constitution. The CA should have
considered the nature of the Ombudsman's powers as provided in the
Constitution and RA 6770.
Moreover, the rule on intervention is a rule of procedure whose object
improper). But the Office of the Ombudsman could properly intervene
in the appeal filed by respondent and therefore, the CA could
determine whether a recall of the injunctive writ was proper.
In the interest of justice and practicality, we will rule on the propriety
of the issuance of the injunctive writ.
The applicable provision of law is Section 7, Rule III of the Rules of
Procedure of the Ombudsman, as amended:[43]
Section 7. Finality and execution of decision. - xxx where the penalty
imposed is public censure or reprimand, suspension of not more than
one month, or a fine equivalent to one month salary, the decision shall
be final, executory and unappealable. In all other cases, the decision
may be appealed to the Court of Appeals xxx.
An appeal shall not stop the decision from being executory. xxx.
A literal reading of this rule shows that the mere filing of an appeal
does not prevent the decision of the Ombudsman from becoming
executory. However, we clarified this rule in  


is to make the powers of the court fully and completely available for
.':[44]
justice, not to hinder or delay it.[40]
Both the CA[41] and respondent likened the Office of the Ombudsman
to a judge whose decision was in question.[42] This was a tad too
simplistic (or perhaps even rather disdainful) of the power, duties and
functions of the Office of the Ombudsman. The Office of the
Ombudsman cannot be detached, disinterested and neutral specially
when defending its decisions. Moreover, in administrative cases
against government personnel, the offense is committed against the
government and public interest. What further proof of a direct
constitutional and legal interest in the accountability of public officers
is necessary?
:
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The CA anchored its denial of the motion to recall the writ of
preliminary injunction on its lack of authority over the case. (The
Office of the Ombudsman's motion for intervention was allegedly

[O]nly orders, directives or decisions of the Office of the Ombudsman
in administrative cases imposing the penalty of public censure,
reprimand, or suspension of not more than one month, or a fine not
equivalent to one month salary shall be final and unappealable hence,
immediately executory. + c7
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as a matter of right. )7977(5
 
nature of these judgments as being appealable would be rendered
nugatory. (emphasis in the original).
The penalty meted out to respondent was suspension for one year
without pay. He filed an appeal of the Ombudsman's joint decision on
time. In his appeal, he included a prayer for the issuance of a writ of Y
preliminary injunction in order to stay the execution of the decision
against him. Following  


.', we hold that Y
the mere filing by respondent of an appeal sufficed to stay the
execution of the joint decision against him. Respondent's prayer for the Y
issuance of a writ of preliminary injunction (for purposes of staying
Y
the execution of the decision against him) was therefore a superfluity.
The execution of petitioner's joint decision against respondent should Y
be stayed during the pendency of CA-G.R. SP No. 89999.
Y
=*0(the petition is hereby 
),. The resolutions
of the Court of Appeals dated September 11, 2006 and November 21, Y
2006 are hereby /$,
$)
$+,Accordingly, the
Court of Appeals is ordered to allow the intervention of the Office of Y
the Ombudsman in CA-G.R. SP No. 89999. The writ of preliminary
injunction is hereby +0),as the execution of the decision in Y
OMB-L-A-03-1060-K was (and still is) stayed by the filing and
Y
pendency of CA-G.R. SP No. 89999.
Y
No costs.
Y
$((,,
Y
 "
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official leave.
Y Y

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 2. To pay complainant actual, nominal and moral
damages, the amount of which will be proved in the
c"4# " hearing; chanrobles vi rtual law lib rary

 )-.* /)%(&( )+( ,D( 3. To pay complainant attorney's fee in the sum of
' ,+=  )-(&( )+(

 , vs. P10,000.00; chanrobles virtual law library

%+ $$,+(
7(00+(0)*.%)+/

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 'E '  4. To pay complainant exemplary damages in the sum
 

. of P10,000.00 to set an example and to avoid a
repetition of such illegal and unsound business
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chanrobles virtual law library practices of the respondent. chanrobles virtual law library

Private respondent Lucina C. Sendino entered into a reservation This petition was amended on August 17, 1990 by impleading
agreement with Realty Exchange Venture, Inc. (REVI) for a 120- petitioners Magdiwang Realty Corporation (MRC) which appeared to
square meter lot in Raymondville Subdivision in Sucat, Paranaque for be the registered owner of the subject lot as per TCT No. 76023. chanroblesvirtualawlibrary chanrobles virtual law libra ry

P307,800.00 as its purchase price. "She paid P1,000.00 as partial

reservation fee on January 15, 1989 and completed payment of this fee On April 3, 1991 the HLURB, whose authority to hear and decide the
on January 20, 1989 by paying P4,000.00.
chanrobles virtual law libra ry complaint was challenged by REVI in its answer, 4rendered its
judgment in favor of private respondent and ordered petitioners to
On July 18, 1989, private respondent paid REVI P16,600.00 as full continue with the sale of the house and lot and to pay private
downpayment on the purchase price. #However, she was advised by respondent P5,000 as moral damages, P5,000 as exemplary damages
REVI to change her co-maker, which she agreed, asking for an and P6,000 as attorney's fees and costs of the suit. !An appeal from
extension of one month to do so.
chanroblesvirtualawlibrary chanrobles vi rtual law library this decision was taken to the HLURB OAALA Arbiter, which
affirmed the Board's decision. The decision of the OAALA Arbiter
For alleged non-compliance with the requirement of submission of the was appealed to the Office of the President, herein public
appropriate documents under the terms of the original agreement,  respondent. chanroblesvirtualawlibra ry chanrobles virtual law library

REVI, through its Vice-President for Marketing, informed respondent

of the cancellation of the contract on the 31st of July 1989. chanrobles virtual law li brary On January 7, 1993, the public respondent rendered its decision
dismissing the petitioners' appeal. Motion for reconsideration of the
On April 20, 1990, private respondent filed a complaint for Specific decision was denied by the public respondent on January 26, 1993.
Performance against REVI with the office of Appeals, Adjudication Consequently petitioners come before this Court, in this petition,
and Legal Affairs (OAALA) of the Housing and Land Use Regulatory which the Court resolves to treat as a petition for 
 , raising the
Board (HLURB) asking that respondent be ordered: following issues:

1. To comply and continue with the sale of the house I chanrobles virtual law library

and lot, Block 4, Lot 17 at the Raymondville

Subdivision, Sucat Road, Paranaque, Metro Manila; chanrobles virtual law li brary PUBLIC RESPONDENT COMMITTED SERIOUS
ERROR IN DECLARING THAT THE HOUSING
AND LAND USE REGULATORY BOARD HAS
 =@÷%2:@-%%÷.FUNCTIONS, technicalities of the Rules of Court. Under the circumstances, it was
NOTWITHSTANDING ABSENCE OF EXPRESS certainly appropriate for the HLURB-OAALA to have acted on the
GRANT BY EXECUTIVE ORDER NO. 90 OF substantive questions relating to the validity of petitioners' unilateral
DECEMBER 17, 1986 WHICH CREATED IT. AND rescission of the contract without unduly concerning itself with a mere
EVEN IF THE HLURB HAS QUASI-JUDICIAL procedural slip, the non-joinder of private petitioner's husband in the
FUNCTIONS, PUBLIC RESPONDENT LIKEWISE original complaint before the HLURB. Moreover, since petitioners
SERIOUSLY ERRED IN DECLARING THAT THE participated in the administrative proceedings without objecting to or
BOARD OF COMMISSIONERS IS ALLOWED TO raising the procedural infirmity, they were certainly estopped from
SIT IN A DECISION TO RENDER JUDGMENT raising it on appeal before the Office of the President and before this
AND TO DELEGATE ITS QUASI-JUDICIAL Court.chanroblesvirtualawlibrary chanrobles virtual law library

AUTHORITY TO A SUBORDINATE OFFICE.

Proceeding to the principal issues raised by the petitioner, while E.O.
II chanrobles virtual law library 85 dated 12 December 1986 abolished the Ministry of Human
Settlements (MHS), it is patently clear from a reading of its provisions
PUBLIC RESPONDENT GRAVELY ABUSED ITS that the said executive order did not abolish the Human Settlements
DISCRETION IN DECLARING THAT THE LOT Regulatory Commission (HSRC) which continued to exercise its
SUBJECT OF THE CONTRACT SOUGHT TO BE powers and functions even after the Ministry of Human Settlements
ENFORCED IS PARAPHERNAL DESPITE ceased to exist. In spite of the Aquino Government's stated intention of
ADMISSION OF ITS CONJUGAL NATURE. eradicating what it considered the vestiges of the previous regime, it
was not its intention to create a vacuum by abolishing those juridical
III chanrobles virtual law library entities, agencies, corporations, etc., attached to or supervised by the
MHS, which performed vital administrative functions. Pertinently,
PUBLIC RESPONDENT GRAVELY ABUSED ITS Section 3 of E.O. 85 mandates that:
DISCRETION IN DECLARING THAT ONLY
NOTARIAL NOTICE OF RESCISSION MAY . . . The final disposition and final organizational
VALIDLY CANCEL A RESERVATION alignment or attachment of the juridical entities,
AGREEMENT PURSUANT TO REPUBLIC ACT agencies, corporations and councils attached to, or
NO. 6552. under the administrative supervision of the MHS
including their respective existing projects,
As the first and third issues raised by the petitioners strike at the core appropriations and other assets shall be subject to
of the case at bench, this Court deems it appropriate to initially dispose subsequent enactments by the President.
of the issue of private respondent's capacity to bring her complaint
before the HLURB-OAALA. chanroblesvirtualawlibrary chanrobles virtual law l ibrary Pursuant to this provision therefore, the President subsequently issued
Executive Order No. 90, series of 1986, recognizing the Human
It is settled that rules of procedure are as a matter of course construed Settlements Regulatory Commission (renamed the HLURB) as one of
liberally in proceedings before administrative bodies. In the instant the principal housing agencies of the government. Prior to this,
case, the original suit for specific performance and damages was filed Executive Order No. 648 in 1981 transferred all the functions of the
by the private respondent with the HLURB-OAALA, an National Housing Authority (pursuant to Presidential Decrees Nos.
administrative body not hamstrung by the strict procedural 957, 1216 and 1344) to the Human Settlements Regulatory
Commission (HSRC) consolidating all regulatory functions relating to 
 
 
 
land use and housing development in a single entity. "Being the sole  

a

 "
a
 body for housing and land development, the renamed body,
 "
" $ 
the HLURB, ""would have been reduced to a functionally sterile entity (Emphasis Ours)
if, as the petitioner contends, it lacked the powers exercised by its
predecessor which included the power to settle disputes concerning This is reinforced by section 8 of EO 648 (otherwise
land use and housing development and acquisition. Moreover, this known as the Charter of the Human Settlements
Court has had the occasion to definitively rule on the question as to Regulatory Commission) which took effect on February
whether or not the Housing and Land Use Regulatory Board could 7, 1981, thus:
chanrobles virtual law l ibrary

exercise the same quantum of judicial or quasi-judicial powers

possessed by the HSRC under the Ministry of Human Settlements in Sec. 8. K ;
 . - The Regulatory
the exercise of its regulatory functions when it held, in @

 a functions of the National Housing Authority pursuant to
  
 
 
-
"
that:
As explicitly provided by law, jurisdiction over actions
for specific performance of contractual and statutory
obligations filed by buyers of subdivision lot or
condominium unit against the owner or developer, is
vested exclusively in the HSRC, Section 1 of PD 1344,
Presidential Decree Nos. 957, 1216, 1344 and other
related laws are hereby transferred to the Human
Settlements Regulatory Commission. . . . Among the
regulatory functions are . . . (11) Hear and decide cases
of unsound real estate business practices, claims
involving refund filed against project owners,
developers, dealers, brokers, or salesmen and cases of
in no uncertain terms, provides:
Sec. 1. In the exercise of its functions to regulate real
estate trade and business and in addition to its powers
provided for in Presidential Decree No. 957, the
National Housing Authority shall have exclusive
jurisdiction to hear and decide cases of the following
nature:
A. Unsound real estate business
chanrobles virtual law libra ry
    (Emphasis Ours). chanroblesvirtualawlibrary chanrob les virtual law library
Private respondents reliance, therefore, on sections 1
and 8 of the Judiciary Reorganization Act of 1980 is
untenable. Thus, as correctly pointed out by petitioner,
section 19, paragraph 6 of said law is material to the
issue of where jurisdiction lies, and We quote:
Sec. 19. . . . chanroblesvirtualawlibrary chanrobles virt ual law libra ry
practices; chanrobles virt ual law libra ry (6) In all other cases 



!'

   
"
B. Claims involving refund and any
"   
 exercising
other claims filed by subdivision lot or judicial or quasi-judicial functions.
condominium unit buyer against the
project owner, developer, dealer, broker xxx xxx xxx chanrobles virtual law library

or salesman; and chanrobles virtual law lib rary

Neither can We accede to private

C. Cases involving    respondents' claim that resort to the
 





 a
  courts is justified under section 41 of PD
 957 specifically under the phrase "legal
remedies that may be  to
aggrieved subdivision lot buyers."
There is no question that a statute may vest exclusive
original jurisdiction in an administrative agency over
certain disputes and controversies falling within the
agency's special expertise. The constitutionality of such
grant of exclusive jurisdiction to the National Housing
Authority (now Housing and Land Use Regulatory
Board) over cases involving the sale of lots in
commercial subdivisions was upheld in K  
possessed jurisdiction over the actions for specific performance for
contractual and statutory obligations filed by buyers of subdivision lots
against developers - had suddenly lots its adjudicatory powers by the
mere fiat of a change in name through E.O. 90. One thrust of the
multiplication of administrative agencies is that the interpretation of
such contracts and agreements and the determination of private rights
under these agreements is no longer a uniquely judicial function. " 
The absence of any provision, express or implied, in E.O. 90, repealing
those quasi-judicial powers inherited by the HSRC from the National
Housing Authority, furthermore militates against petitioners' position
on the question.chanroblesvirtualawlibrary chanrobles vi rtual law library
%


  a÷
 
 (152 SCRA 540 Going to petitioners' contention that the decision of the OAALA
[1987]) and again sustained in a later decision in should have been rendered by the Board of Commissioners sitting 
÷
  
  
 

  a , we find ample authority - both in the statutes and in
÷
 
 (153 SCRA 399 [1987]) where We restated jurisprudence-justifying the Board's act of dividing itself into divisions
that the National Housing Authority (now HLURB) of three. Under Section 5 of E.O. 648 which defines the powers and
shall have exclusive jurisdiction to regulate the real duties of the Commission, the Board is specifically mandated to
estate trade and business in accordance with the terms "(a)dopt rules of procedure for the conduct of its business" and
of PD No. 957 which defines the quantum of judicial or perform such functions necessary for the effective accomplishment of
#2'
 powers of said agency. "#chanrobles virtual law l ibrary (its) above mentioned functions." Since nothing in the provisions of
either E.O. 90 or E.O. 648 denies or withholds the power or authority
Clearly, therefore, the HLURB properly exercised its jurisdiction over to delegate adjudicatory functions to a division, we cannot see how the
the case filed by the petitioners with its adjudicative body, the Board, for the purpose of effectively carrying out its administrative
OAALA, in ordering petitioners to comply with their obligations responsibilities and quasi-judicial powers as a regulatory body should
arising from the Reservation Agreement. In general, the quantum of be denied the power, as a matter of practical administrative procedure,
judicial or quasi-judicial powers which an administrative agency may to constitute its adjudicatory boards into various divisions. After all,
exercise is defined in the agency's enabling act. In view of the Court's the power conferred upon an administrative agency to issue rules and
pronouncement in @

 a  
 
 
-
" regulations necessary to carry out its functions has been held "to be an
 , recognizing the HLURB as the successor agency of the HSRC's
powers and functions, it therefore follows that the transfer of such
functions from the NHA to the HRSC effected by Section 8 of E.O.
648, series of 1981, thereby resulted in the acquisition by the HLURB
of adjudicatory powers which included the power to "(h)ear and decide
cases of unsound real estate business practices . . . and cases of
specific performance." "Obviously, in the exercise of its powers and
functions, the HLURB must interpret and apply contracts, determine
the rights of the parties under these contracts, and award damages
whenever appropriate. " We fail to see how the HSRC - which
adequate source of authority to delegate a particular function, unless
by express provision of the Act or by implication it has been
withheld." "4The practical necessity of establishing a procedure
whereby cases are decided by three (3) Commissioners furthermore
assumes greater significance when one notes that the HLURB, as
constituted, only has four (4) full time commissioners and five (5) part
time commissioners to deal with all the functions, administrative,
adjudicatory, or otherwise, entrusted to
it. "!As the Office of the President noted in its February 26, 1993
Resolution denying petitioners' Motion for Reconsideration, "it is
impossible and very impractical to gather the four (4) full time and results in its effective emasculation as an important regulatory body in
five (5) part time commissioners (together) just to decide a case." an area vital to the national economy.chanroblesvirtualawlibrary chanrobles vi rtual law library

Considering that its part time commissioners act merely in an !2

 capacity, requiring a majority of the Board to sit on The acute housing shortage problem has prompted thousands of
each and every case brought before it would result in an administrative middle and lower class buyers of houses and lots and condominium
nightmare. "chanrobles virtual law library units to enter into all sorts of agreements with private housing
developers involving all manner of installment schemes under
Finally, petitioners' assertion that RA 6552 is inapplicable in the contracts drawn exclusively by these developers. Many of these virtual
instant case because the said law does not apply to cases of reservation contracts of adhesion entrap innocent buyers by requiring cash
agreements finds no merit in the case at bench in view of Section 24 of deposits under reservation agreements which include, sometimes in the
P.D. 957 which provides: fine print, default clauses guaranteeing huge monetary windfalls for
the developers in the event that their buyers (oftentimes for the
Sec. 24. ;
%

 - The rights of the flimsiest of reasons) default by failing to come up with certain
buyer in the event of his failure to pay the installments
due for reasons other than the failure of the owner or
developer to develop the project shall be governed by
Republic Act No. 6552.
As the Solicitor General correctly pointed out, RA 6552 makes no
requirements. While the Court can take judicial notice of this
pernicious practice, it can only hope that future legislation would
address the need to protect the innocent middle or lower class home
purchaser. In the case of the individual victim, this Court can only go
to the extent of awarding such damages as may be proper under the
peculiar circumstances of the cases brought before it. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

distinction between "option" and "sale"

which, under P.D. 957 also
includes "an exchange or attempt to sell, an option of sale or purchase, WHEREFORE, premises considered, the petition is hereby
a solicitation of a sale or an offer to sell directly."
"This all- DISMISSED for lack of merit. Costs against petitioners. chanroblesvirtualawlibra ry chanrobles virtual law lib rary

embracing definition virtually includes all transactions concerning

land and housing acquisition, including reservation agreements. Since SO ORDERED.
R.A. 6552 mandates cancellation by notarial
act - among other requirements - before any cancellation of a contract /"-
": "7  
= ":: "  
may be effected, petitioners' precipitate cancellation of its contract
with private respondent without observing the conditions imposed by Y
the said law was invalid and improper. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

Y
In fine, the HLURB-OAALA acted within the scope of its authority in
ordering petitioners to comply and continue with the sale of the house Y
and lot subject of the contract between the original parties. It cannot be
Y
gainsaid that the quasi-judicial functions exercised by the body are
necessary incidents to the proper exercise of its powers and functions Y
under E.O. 90 and the laws enacted delineating the scope of authority
of its Board of Commissioners. Denying the body those functions so Y
necessary in carrying out its power to regulate housing and land use
Y
 EN BANC respectively. The school's graduation exercises were thereafter set for
May 21, 1965; but three days before that date, the "third placer"
c

'7#"4 Teodoro Santiago, Jr., represented by his mother, and with his father
as counsel, sought the invalidation of the "ranking of honor students"
)(,(($
)+
(' c: 
57 thus made, by instituting the above-mentioned civil case in the Court
'c7'
$ cpetitioner-appellant, of First Instance of Cotabato, against the above-named committee
-versus- members along with the District Supervisor and the Academic
'+$$%
+)
1
%)+$)
($
+,

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$1
 Supervisor of the place.
'
)%
$'+6+)
+
'
('(
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+,


'+(%
$
'
(
%(
(
$(,
, The corresponding complaint filed alleged, 
: that plaintiff-
0
+$(
'0('
(respondents-appellees. petitioner Teodoro C. Santiago, Jr. is a sixth grader at the Sero
Elementary School in Cotabato City scheduled to be graduated on May
K
 Ä

a   

 2 

 21st, 1965 with the   $ 

 , which is disputed; that
the teachers of the school had been made respondents as they compose
 
a  

2 
 the "Committee on the Rating of Student for Honor", whose grave
abuse of official discretion is the subject of suit, while the other
defendants were included as Principal, District Supervisor and
Academic Supervisor of the school; that Teodoro Santiago, Jr. had
1
,(p
been a consistent honor pupil from Grade I to Grade V of the Sero
Elementary School, while Patricia Liñgat (second placer in the
Appeal from the order of the Court of First Instance of Cotabato disputed ranking in Grade VI) had never been a close rival of
dismissing, on a motion to dismiss, its Civil Case No. 2012 ² for petitioner before, except in Grade V wherein she ranked third; that

 , injunction and damages ² on the ground that the complaint Santiago, Jr. had been prejudiced, while his closest rival had been so
therein states no cause of action, and from the subsequent order of the much benefited, by the circumstance that the latter, Socorro Medina,
court # denying the motion for the reconsideration of the said was coached and tutored during the summer vacation of 1964 by Mrs.
order of dismissal. Alpas who became the teacher of both pupils in English in Grade VI,
resulting in the far lead Medina obtained over the other pupil; that the
The record shows that at the time Civil Case No. 2012 was committee referred to in this case had been illegally constituted as the
commenced in the court below, appellant Teodoro Santiago, Jr. was a same was composed of all the Grade VI teachers only, in violation of
pupil in Grade Six at the public school named Sero Elementary School the Service Manual for Teachers of the Bureau of Public Schools
in Cotabato City. As the school year 1964-1965 was then about to end, which provides that the committee to select the honor students should
the "Committee On The Rating Of Students For Honor" was be composed of all teachers in Grades V and VI; that there are direct
constituted by the teachers concerned at said school for the purpose of and circumstantial matters, which shall be proven during the trial,
selecting the "honor students" of its graduating class. With the school wherein respondents have exercised grave abuse of discretion and
Principal, Mrs. Aurora Lorena, as chairman, and Juanita Bautista, irregularities, such as the changing of the final ratings on the grading
Rosalinda Alpas, Rebecca Matugas, Milkita Inamac, Romeo Agustin, sheets of Socorro Medina and Patricia Liñgat from 80% to 85%, and
Aida Camino and Luna Sarmago, as members, the above-named some teachers giving petitioner a starting grade of 75% in Grade VI,
committee deliberated and finally adjudged Socorro Medina, Patricia which proves that there has already an intention to pull him to a much
Liñgat and Teodoro C. Santiago, Jr. as first, second and third honors, lower rank at the end of the school year; that several district
examinations outside of teachers' daily units and other than periodical
tests were given, ratings in which were heavily considered in the
determination of periodical ratings, whereas according to the
Academic Supervisor and Acting Division Superintendent of schools
of the place such district examinations were not advisable; that there
was a unanimous agreement and understanding among the respondent
teachers to insult and prejudice the second and third honors by rating
Socorro Medina with a perfect score, which is very unnatural; that the
words "first place" in petitioner's certificate in Grade I was erased and
replaced with the words "second place", which is an instance of the
unjust and discriminating abuses committed by the respondent teachers
in the disputed selection of honor pupils they made; that petitioner
 .
personally appealed the matter to the School Principal, to the District
Supervisor, and to the Academic Supervisor, but said officials "passed
the buck to each other" to delay his grievances, and as to appeal to
higher authorities will be too late, there is no other speedy and
adequate remedy under the circumstances; and, that petitioner and his
parents suffered mental and moral damages in the amount of
P10,000.00. They prayed the court, among others, to set aside the final
list of honor students in Grade VI of the Sero Elementary School for
that school year 1964-1965, and, during the pendency of the suit, to
enjoin the respondent teachers from officially and formally publishing
and proclaiming the said honor pupils in Grade VI in the graduation
exercises the school was scheduled to hold on the 21st of May of that
year 1965. The injunction prayed for was denied by the lower court in
its order of May 20, 1965, the said court reasoning out that the
graduation exercises were then already set on the following day, May
21, 1965, and the restraining of the same would be shocking to the
school authorities, parents, and the community who had eagerly
looked forward to the coming of that yearly happy event. As
scheduled, the graduation exercises of the Sero Elementary School for
the school year 1964-1965 was held on May 21, with the same
protested list of honor students.
Having been required by the above-mentioned order to answer the
petition within ten (10) days, respondents moved for the dismissal of
the case instead. Under date of May 24, 1965, they filed a motion to
dismiss, on the grounds (1) that the action for certiorari was improper,
and (2) that even assuming the propriety of the action, the question
brought before the court had already become academic. This was
opposed by petitioner.
In an order dated June 4, 1965, the motion to dismiss of respondents
was granted, the court reasoning thus:
The respondents now move to dismiss the petition for
being improper and for being academic. In order to
resolve the motion to dismiss, the Court has carefully
examined the petition to determine the sufficiency of
the alleged cause of action constituting the special civil
action of 
The pertinent portions of the petition alleging 'grave
abuse of discretion' are found in paragraphs 3, 4, 5, 6, 7,
8, 9 and 10. These allegations may be substantially
summarized as follows: Paragraph 3 alleges that since
grades one to six, the students closely contending for
class honors were Socorro Medina, Teodoro Santiago,
Jr., Dolores Dalican and Patricia Liñgat.
Socorro Medina obtained first honor thrice (grades I, V
and VI); once second honor (grade IV), and twice third
place (grades II and III).
Teodoro Santiago, Jr. obtained first place once (grade
IV); four times second place (grades I, II, III, and V)
and once third place (grade VI).
Dolores Dalican obtained twice first place (grades II,
III); once third place (grade I).
Patricia Liñgat once third place (grade V); and once second place
(grade VI).
That as now ranked in the graduation Liñgat is given
second place while Teodoro Santiago, Jr., is given the
third place only. This is the ranking now disputed by
petitioner, Teodoro Santiago, Jr.
Paragraph 4 alleges that Socorro Medina was tutored in
the summer of 1964 by Mrs. Rosalinda Alpas who
became her English teacher in the sixth grade; that as
such, Mrs. Alpas unjustly favored Socorro against her
rivals.
Paragraph 5 alleges that the teachers who composed the
committee on honor students are all grade six teachers
while the Service Manual For Teachers provides that
the committee shall be composed of the teachers from
the fifth and sixth grades.
Paragraph 6 alleges that there are direct and
circumstantial evidence showing the change of ratings
of Socorro Medina and Patricia Liñgat from 80% to
85% and the intention to junk petitioner to a lower rank.
Paragraph 7 alleges that the giving of district
examinations upon which ratings were partly based
were not advisable.
Paragraph 8 alleges that the teachers rated Socorro
Medina a perfect pupil which is unnatural.
Paragraph 9 alleges that on the first grade certificate of
the petitioner the word "First Place" was erased and
changed to "Second Place".
Paragraph 10 alleges that petitioner personally appealed
to the school authorities but they only 'passed the buck
to each other.'
SECOND PARAGRAPH VIOLATED
Rule 65, Section 1 of the Rules of Court provides:
'Section 1. Petition for 
 . ² the administrative remedies of the Department of
When any tribunal, board, or officer
exercising judicial functions, has acted
without or in excess of its or his
jurisdiction, or with grave abuse of
discretion and there is no appeal, nor any
plain, speedy, and adequate remedy in
the ordinary course of law, a person
aggrieved thereby may file a verified
petition in the proper court alleging the
facts with certainty and praying that
judgment be rendered annulling or
modifying the proceedings, as the law
requires, of such tribunal, board or
officer.'
'The petition shall be accompanied by a
certified true copy of the judgment or
order subject thereof, together with
copies of all pleadings and documents
relevant and pertinent thereto.'
It is striking, indeed, that this petition has not been
accompanied by a certified true copy of the judgment or
order complained of, together with all pleadings and
documents which are relevant thereto, as required by
the second, paragraph of the aforequoted rule. This
violation renders the petition extremely indefinite and
uncertain. There is no written formal judgment or order
of respondents that is submitted for revision or
correction of this Court. This violation is fatal to the
petition.
ADMINISTRATIVE REMEDIES NEGLECTED
All that the petition alleges is that the petitioner
personally appealed to the school authorities who only
'passed the buck to each other.' This allegation does not
show that petitioner formally availed of and exhausted
Education. The petition implies that this is the first
formal complaint of petitioner against his teachers. The
 administrative agencies of the Department of Education
could have investigated the grievances of the petitioner
with dispatch and give effective remedies, but petitioner
negligently abandoned them. Petitioner cannot now
claim that he lacked any plain, speedy and adequate
remedy.
"tribunal, board or officer exercising judicial functions" against which
an action for certiorari may lie under Section 1 of Rule 65.
The last point raised by appellees deserves first consideration, for if
really the said committee of teachers does not fall within the category
of the
" 
"  !a'

 
NO GRAVE ABUSE OF DISCRETION
Allegations relating to the alleged 'grave abuse of
discretion' on the part of teachers refer to errors,
 is a special civil action
mistakes, or irregularities rather than to real grave
abuse of discretion that would amount to lack of
jurisdiction. Mere commission of errors in the exercise
of jurisdiction may not be corrected by means of

 . doing of something in the nature of the action of the
In view of the foregoing, the Court is of the opinion,
and so holds, that the petition states no cause of action
and should be, as it is hereby dismissed.
Upon receipt of a copy of the above-quoted order, the petitioner
moved for the reconsideration thereof, but the same proved to be
futile, hence, this appeal.
Appellant here assails the holding of the lower court that his petition
states no cause of action on the grounds ² discussed by the court 
# in the appealed order above-quoted ² (1) that the petition does
not comply with the second paragraph of Sec. 1 of Rule 65 because it
has not been accompanied by a certified true copy of the judgment or
order subject thereof, together with copies of all pleadings and
documents relevant and pertinent thereto; (2) that administrative
remedies were not first exhausted; and (3) that there was no grave
abuse of discretion on the part of the teachers who constituted the
committee referred to. On the other hand, appellees maintain that the
court below did not err in dismissing the case on said grounds. Further,
they argue in favor of the questioned order of dismissal upon the
additional ground that the "committee on the ratings of students for
contemplated by Rule 65, further discussion of the issues raised by
appellant may no longer be necessary. To resolve this problem the
following tests may be employed:
In this jurisdiction 
instituted against 'any tribunal, board, or officer
exercising judicial functions.' (Section 1, Rule 67.) A
judicial function is an act performed by virtue of
judicial powers; the exercise of a judicial function is the
court (34 C.J. 1182). In order that a special civil action
of certiorari may be invoked in this jurisdiction the
following circumstances must exist: (1) that there must
be a specific controversy involving rights of persons or
property and said controversy is brought before a
tribunal, board or officer for hearing and determination
of their respective rights and obligations.
'Judicial action is an adjudication upon
the rights of parties who in general
appear or are brought before the tribunal
by notice or process, and upon whose
claims some decision or judgment is
rendered. It implies impartiality,
disinterestedness, a weighing of adverse
claims, and is inconsistent with
discretion on the one hand ² for the
tribunal must decide according to law
and the rights of the parties ² or with
dictation on the other; for in the first
instance it must exercise its own
judgment under the law, and not act
honor" whose actions are here condemned by appellant is 
the under a mandate from another power. ...
 The character of its action in a given
case must decide whether that action is
judicial, ministerial, or legislative, or
whether it be simply that of a public
agent of the country or State, as in its
varied jurisdictions it may by turns be
each.' (In Re Saline County
Subscription, 100 Am. Dec. 337, 338,
cited in Southeastern Greyhound Lines
v. Georgia Public Service Commission,
181 S. E. 836-837.)
'It may be said generally that the
exercise of judicial function is to
determine what the law is, and what the
legal rights of parties are, with respect to
a matter in controversy; and whenever
an officer is clothed with that authority,
and undertakes to determine those
questions, he acts judicially.' (State ex
rel. Board of Commissioners of St. Louis
County, et al. v. Dunn, 90 N. W. 772-
773.)
(2) the tribunal, board or officer before whom the
controversy is brought must have the power and
authority to pronounce judgment and render a decision
on the controversy construing and applying the laws to
that end.
'The phrase "judicial power" is not
capable of a precise definition which
would be applicable to all cases. The
term has been variously defined as the
authority to determine the rights of
persons or property by arbitrating
between adversaries in specific
controversies at the instance of a party
thereto; the authority exercised by that
department of government which is
charged with the declaration of what the
law is and its construction so far as it is
written law; the authority or power
vested in the judges or in the courts; the
authority vested in some court, officer,
or persons to hear and determine when
the rights of persons or property or the
propriety of doing an act is the subject
matter of adjudication; the power
belonging to or emanating from a judge
as such; the power conferred upon a
public officer, involving the exercise of
judgment and discretion in the
determination of questions of right in
specific cases affecting the interest of
persons or property, as distinguished
from ministerial power or authority to
carry out the mandates of judicial power
or the law; the power exercised by courts
in hearing and determining cases before
them, or some matter incidental thereto,
and of which they have jurisdiction; the
power of a court to decide and
pronounce a judgment; the power which
adjudicates upon and protects the rights
and interests of individual citizens, and
to that end construes and applies the law.
"Judicial power" implies the
construction of laws and the adjudication
of legal rights. It includes the power to
hear and determine but not everyone
who may hear and determine has judicial
power. The term "judicial power" does
not necessarily include the power to hear
and determine a matter that is not in the
nature of a suit or action between the
parties.' (34 C.J. 1183-1184.) .
(3) the tribunal, board or officer must pertain to that 'WHAT ARE JUDICIAL OR QUASI
branch of the sovereign power which belongs to the JUDICIAL ACTS. It is difficult, if not
judiciary, or at least, which does not belong to the impossible, precisely to define what are
legislative or executive department. judicial or quasi judicial acts, and there
is considerable conflict in the decisions
... the distinction between legislative or in regard thereto, in connection with the
ministerial functions and judicial law as to the right to the writ of
functions is difficult to point out. What 
 
%
" "



is a judicial function does not depend

 


  
"
solely upon the mental operation by 

 
 " 
" 

which it is performed or the importance   
"




of the act. In solving this question, due 
 



a 
regard must be had to the organic law of '
 #2'

 . It is
the state and the division of power of
government. In the discharge of
executive and legislative duties, the
exercise of discretion and judgment of
the highest order is necessary, and
matters of the greatest weight and
importance are dealt with. It is not
enough to make a function judicial that it

!

requires discretion, deliberation, thought,

not essential that the proceedings should
be strictly and technically judicial, in the
sense in which that word is used when
applied to the courts of justice, but it is
sufficient if they are quasi judicial. It is
enough if the officers act judicially in
making their decision, whatever may be
their public character. ...' "In 
7 
  
-(86 Minn.
and judgment. %


!  301, 304), the following statements were


 
'
a



 made:

  
 a 
 a

'
" "
 'The precise line of demarkation between

"

 a

 what are judicial and what are
a
 !

 

. If administrative or ministerial functions is
the matter, in respect to which it is
exercised, belongs to either of the two
last-named departments of government,
it is not judicial. As to what is judicial
and what is not seems to be better
indicated by the nature of a thing, than
its definition.' (Whealing & Elm Grove
Railroad Co. Appt. v. Town of
Triadelphia, et al., 4 L.R.A. (N. S.) pp.
321, 328-329.) [Emphasis supplied]"
often difficult to determine. The exercise
of judicial functions may involve the
performance of legislative or
administrative duties, and the
performance of administrative or
ministerial duties, may, in a measure,
involve the exercise of judicial
functions. It may be said generally that
the exercise of judicial functions is to
determine what the law is, and what the
legal rights of parties are, with respect to
 a matter in controversy; and whenever
an officer is clothed with that authority,
and undertakes to determine those
questions, he acts judicially.'
 recent origin. Members of this court have taken part in
It is evident, upon the foregoing authorities, that the so called
committee on the rating of students for honor whose actions are
questioned in this case exercised neither judicial nor quasi judicial
functions in the performance of its assigned task. From the above-
quoted portions of the decision cited, it will be gleaned that before
tribunal board, or officer may exercise judicial or quasi judicial acts, it
is necessary that there be a law that give rise to some specific rights of
persons or property under which adverse claims to such rights are
made, and the controversy ensuing therefrom is brought, in turn,
before the tribunal, board or officer clothed with power and authority
to determine what that law is and thereupon adjudicate the respective
rights of the contending parties. As pointed out by appellees,#
however, there is nothing on record about any rule of law that provides
that when teachers sit down to assess the individual merits of their
pupils for purposes of rating them for honors, such function involves
the determination of what the law is and that they are therefore
automatically vested with judicial or quasi judicial functions. Worse
still, this Court has not even been appraised by appellant of the
pertinent provisions of the Service Manual of Teachers for Public
Schools appellees allegedly violated in the composition of the
committee they constituted thereunder, and, in the performance of that
committee's duties.
At any rate, the situation brought before Us in this case, the seemingly
one of first impression, is not without substantial parallel. In the case
of ; 
.
 "

"

"the issue presented for Incidentally, these school activities have been imported
determination was whether or not the courts have the authority to
reverse the award of the board of judges of an oratorical contest, and
this Court declared that the judiciary has no power to reverse the
award of the board of judges of that contest and, for that matter, it
would not interfere in literary contests, beauty contests and similar
competitions. It was reasoned out thus:
For more than thirty years oratorical tilts have been
held periodically by schools and colleges in this islands.
Inter-collegiate oratorical competitions are of more
them either as contestants in their school days (In the
College of Law, U.P. annual oratorical contest, first
prize was awarded to Justice Montemayor in 1914 and
to Justice Labrador in 1916), or as members of the
board of judges afterwards. They know some few
verdicts did not reflect the audience's preference and
that errors have sometimes been ascribed to the award
of the judges. Yet no party ever presumed to invoke
judicial intervention; for it is unwritten law in such
contests that the board's decision is final and
unappealable.
Like the ancient tournaments of the Sword, these
tournaments of the Word apply the highest tenets of
sportsmanship: finality of referee's verdict. No alibis,
no murmurs of protest. The participants are supposed to
join the competition to contribute to its success by
striving their utmost: the prizes are secondary.
No rights to the prizes may be asserted by the
contestants, because theirs was merely the privilege to
compete for the prize, and that privilege did not ripen
into a demandable right unless and until they were
proclaimed winners of the competition by the appointed
arbiters or referees or judges.
from the United States. We found in American
jurisprudence no litigation questioning the
determination of the board of judges.
Now, the fact that a particular action has had no
precedent during a long period affords some reason for
doubting the existence of the right sought to be
enforced, especially where occasion for its assertion
 must have often arisen; and courts are cautious before
allowing it, being loath to establish a new legal
principle not in harmony with the generally accepted
views thereon. (See C.J.S. Vol. 1, p. 1012.)
We observe that in assuming jurisdiction over the
matter, the respondent judge reasoned out that where
there is a wrong there is a remedy and that courts of
 on the ground, among others, of failure on
first instance are courts of general jurisdiction.
The flaw in his reasoning lies in the assumption that
respondent court had acted with grave abuse of discretion in estimating
certain rice harvests involved in the case in terms of cavans instead of
cans, allegedly in complete disregard of the decision of the Court of
First Instance of Batangas in Expropriation Proceedings No. 84 and of
this Court in G.R. No.
L-6191, and in ordering thereafter the division of the said rice
harvests on the ratio of 70-30 in favor of the tenants, this Court denied
the petition for 
the part of said petitioners to attach to their petition copies of the
decisions allegedly violated. Speaking thru Mr. Justice J.B.L. Reyes
then, this Court held:
Imperial suffered some  aat the hands of the board
of judges. If at all, there was  on the part of one
judge, at most. Error and wrong do not mean the same
thing. 'Wrong' as used in the aforesaid principle is the
deprivation or violation of a right. As stated before, a
The petition is patently without merit. In the first place,
it is not even sufficient in form and substance to justify
the issuance of the writ of certiorari prayed for. It
charges that the Court of Industrial Relations abused its
contestant  a
to the prize unless and until he discretion in disregarding the decision of the Court of
or she is declared winner by the board of referees or First Instance of Batangas in Expropriation Proceedings
judges. No. 84 and of this Court in G.R. No. L-6191; yet it does
not attach to the petition the decisions allegedly
Granting that Imperial suffered some loss or injury, yet violated by the Court below and point out which
in law there are instances of 6
#'6.
This is one of them. If fraud or malice had been proven,
it would be a different proposition. But then her action
should be directed against the individual judge or
judges who fraudulently or maliciously injured her. Not
particular portion or portions thereof have been
disregarded by the respondent Court.
The same principle was applied in the more recent case of ÷ ÷÷

Ä 
 ."

"4wherein this Court dismissed (by
against the other judges. Resolution) the petition for certiorari and mandamus filed by the
National Waterworks and Sewerage Authority against the Court of
But even were We to assume for the moment, as the court below First Instance of Camarines Sur, and the municipality of Libmanan. In
apparently did, that judicial intervention might be sought in cases of the following language, this Court emphasized the importance of
this nature, still, We are inclined to sustain the order of dismissal complying with the said requirement of Rule 65:
appealed from for failure on the part of appellant to comply with the
requirements of Section 1 of Rule 65. To be sure, the lower court's While paragraph 3 of the petition speaks of the
holding that appellant's failure to accompany his petition with a copy complaint filed by the respondent municipality with the
of the judgment or order subject thereof together with copies of all respondent court for recovery of property with damages
pleadings and documents relevant and pertinent thereto "is fatal to his (Civil Case No. L-161) no copy thereof is attached to
cause" is supported not only by the provision of that Rule but by the petition.
precedents as well. In the case of ÷'"


 
 %



 , where it was claimed by therein petitioners that the
 Similarly, paragraph 4 of the petition mentions the
decision rendered by the respondent court on December
10, 1965, but no copy thereof is attached to the petition.
Again, paragraph 5 of the petition speaks of the order of
default entered by the respondent court and of the
motion for reconsideration filed by petitioner in the
case above-mentioned, but no copy of the order of
default is attached to its petition.
in the constitution of their committee; altered grading sheets; and
erasures in his Grade I certificate ² which appellant never bothered to
attach to his petition. There could be no doubt then that he miserably
failed to comply with the requirement of Rule 65 above-mentioned.
With this conclusion, it is no longer necessary to pass upon the other
two errors assigned by appellant.
FOR THE FOREGOING CONSIDERATIONS, the judgment
appealed from is affirmed, with costs against appellant.

Bearing in mind that the petition under consideration    " : "": 7 . "-/ "Ä$
"A
"
 "
was filed for the purpose of enjoining the respondent ;
"K$
> ":: " 
court from executing the decision rendered in Civil
Case No. L-161, the importance of the missing Y
pleadings is obvious.
Y
Moreover, the petition is also for the purpose of
securing an order commanding the respondent court to Y
approve either the original or the amended record on
Y
appeal filed petition, but no copy of either is attached to
its petition. Y

In view of the foregoing, the petition under Y

consideration is dismissed.
Y
It might be true, as pointed out by appellant, that he received a copy of
the programme of the graduation exercises held by the Sero Y
Elementary School in the morning of the very day of that graduation
exercises, implying that he could not have attached then a copy thereof Y
(to show the decision of the committee of teachers in the ranking of
Y
students complained of) to his petition. The stubborn fact remains,
however, that appellant had known of such decision of the said Y
committee of teachers much earlier, as shown by the circumstance that
according to him, even before the filing of his petition with the lower Y
court on the 19th of May, 1965, he had personally appealed the said
committee's decision with various higher authorities of the above- Y
named school, who merely passed the buck to each other. Moreover,
appellant mentions in his petition various other documents or papers Y
² as the Service Manual for Teachers allegedly violated by appellees
 c"!
44@$:5"
" the motion. On December 29, 2005 it further issued an Order declaring
its September 5, 2005 decision final and executory.
$&(%$$$)(+'
3
+,
+' 

 , vs.
%1-$*)1%+,$
,
)-,/(&') Notwithstanding the OP's above Order, on January 31, 2006 Ruby
(&(
)+(  

. Shelter filed a motion for extension of time to file a petition for review
,+$+( moved for the issuance of a writ of execution, which the HLURB LSG
1
,p

This case is about the jurisdiction of the Housing and Land Use
Regulatory Board (HLURB) over an action to compel a land developer
to deliver a promised title over one-fourth of a subdivided lot.
The Facts and the Case
Sometime in May 2001 petitioners Ernesto and Zenaida Lim (the
Lims) bought for P190,000.00 a 318-square meter lot that then formed
part of a bigger lot1 in Barangay Triangulo, Naga City. Respondent
cralaw
Ruby Shelter Builders and Realty Development Corporation (Ruby
Shelter), the seller and owner, undertook to subdivide the lot and, upon
approval by the Bureau of Lands, execute a deed of absolute sale in
favor of the Lims. In December 2001 Ruby Shelter delivered the deed
of sale to the spouses with a promise to give them the title to the lot as
soon as the subdivision plan had been approved.
Ruby Shelter then caused the approval of a subdivision plan for its lot,
dividing it into four, including the one sold to the Lims, identified as
Lot 9-E-2-B. But, despite repeated demands, Ruby Shelter did not
deliver the Lims' title. Consequently, the latter filed an action against it
for delivery of title with damages before the HLURB.
On March 1, 2004 the HLURB Legal Services Group (LSG) rendered
a decision for the Lims, which decision the HLURB Board of
Commissioners affirmed. On September 5, 2005, acting on Ruby
Shelter's appeal, the Office of the President (OP) upheld the HLURB
decision, a copy of which Ruby Shelter got on September 20, 2005.
On October 11, 2005 the latter filed a motion for leave to be allowed
to file an attached belated motion for reconsideration. The OP denied
with the Court of Appeals (CA). On October 23, 2006 the Lims
nad
granted.
Meanwhile, the CA gave due course to Ruby Shelter's petition for
review and on December 6, 2007 rendered a decision granting the
same and setting aside the OP's rulings. The CA ruled that the HLURB
had no jurisdiction over the claim of the spouses, thus, this petition.
The Issue Presented
The sole issue presented in this case is whether or not the Lims' action
falls within the jurisdiction of the HLURB.
)7 c97c
The jurisdiction of a court or a quasi-judicial body over the subject
matter of the action is determined by the nature of the action pleaded
as appearing in the allegations of the complaint.2 But where the actual
cralaw
issues are evident from the records of the case, then jurisdiction over
the subject matter need not depend upon the literal assertions in the
complaint, but on the law as applied to established facts based on the
evidence that the parties presented in due course.3 cralaw
Section 1 of Presidential Decree 13444 vests in the National Housing
cralaw
Authority (now HLURB) exclusive jurisdiction to hear and decide the
following cases: (a) unsound real estate business practices; (b) claims
involving refund and any other claims filed by subdivision lot or
condominium unit buyer against the project owner, developer, dealer,
broker or salesman; and (c) cases involving specific performance of
contractual and statutory obligations filed by buyers of subdivision lot
or condominium unit against the owner, developer, dealer, broker or
salesman.
This provision must be read in the light of the law's preamble, which
explains the reasons for enactment of the law or the contextual basis
for its interpretation. The law's introductory clause states that the
HLURB exercises regulatory authority over cases of swindling and
fraudulent manipulations perpetrated by unscrupulous subdivision
sellers and operators, such as failure to deliver titles to the buyers or
titles free from liens and encumbrances.5 cralaw
belief that Ruby Shelter, as licensed land developer, shall abide by its
duties and obligations under its contract and the laws.
Lastly, the CA committed a grave error in giving due course to Ruby
Shelter's petition when the OP's Decision dated September 5, 2005 had
already attained finality and had become executory.

=*0(, the Court GRANTS the petition, REVERSES and

To determine if the HLURB has jurisdiction over the complaint of the
spouses, the law must be interpreted as applied to the facts. Here,
Ruby Shelter never offered any excuse in refusing to deliver the title to
the spouses other than the alleged lack of jurisdiction of that body over
the action. It did not deny the sale and its obligation to deliver the title
of the land to the spouses.
SETS ASIDE the Decision of the Court of Appeals in CA-G.R. SP
93138 dated December 6, 2007 and its Resolution dated April 25,
2008, and REINSTATES the Decision of the Office of the President
dated September 5, 2005 and its Order dated December 29, 2005.
SO ORDERED.

The plain fact is that the Lims bought a fourth of a parcel of land from Y
Ruby Shelter for P190,000.00. The parties agreed that Ruby Shelter
shall cause the subdivision of the lot and upon approval by the Bureau Y
of Lands, execute the deed of sale. Subsequently, Ruby Shelter gave
that deed to the Lims with a promise to give the title once its Y
subdivision plan had been approved. Ruby Shelter later delivered a
Y
copy of the approved plan to the Lims showing the segregation of the
portion they bought from the rest of the original lot. But Ruby Shelter Y
failed on its promise to deliver the title to the Lims, despite repeated
demands. These circumstances clearly present a case for specific Y
performance that the subdivision lot buyers brought against Ruby
Shelter, a matter properly cognizable by the HLURB. Y

Ruby Shelter of course claims that the transaction did not relate to a Y
land developer's contractual and statutory obligations to a buyer of a
subdivision lot since the lot that the Lims bought from it did not form Y
part of a subdivision development, the size of a community. It merely
Y
subdivided a lot into four and sold one portion to the Lims.
Y
But the controlling fact is not the size of the original lot that Ruby
Shelter had subdivided but the fact that the Lims bought their portion Y
of that lot from a licensed land developer whose dealings on properties
are regulated by the HLURB. The Lims bought their lot relying on the Y
 ECOND DIVISION Both petitioner and private respondent Sultan Rent-a-Car are domestic
corporations. The former has in his favor a certificate of public
convenience to operate a public utility bus air-conditioned-auto-truck
service from Cebu City to Mactan International Airport and vice-versa
c# '7
""4 with the use of twenty (20) units. Private respondent on September
12, 1974 filed a petition with the respondent Board for the issuance of
(=) $&() )+((&( )+(petitioner, a certificate of public convenience to operate a similar service on the
-versus- same line. Eight days later, without the required publication, the
1( ,(0) $&() )+(
$%) )   Board issued an order granting it provisional permit to operate such
+respondents. auto-truck service on the line applied for.4 There was a motion for
reconsideration and for the cancellation of such provisional permit
Ä% a  

   filed on October 21, 1974,! but without awaiting final action thereon,
this petition was filed. This is the explanation: "That petitioner has
 
 
—

 Ä
/
÷

 not waited for the resolution of his Motion for Reconsideration before
 
—
    

7 
 going to this Court considering that the question involved herein is
purely a legal one, aside from the fact that the issuance of the Order

 7

—  
 

 without the Board having acquired jurisdiction of the case yet, is
patently illegal or was performed without jurisdiction." "

So it was set forth in the petition filed on November 16, 1974. As a

0
,(p
preliminary injunction was likewise sought, a hearing was scheduled
for November 29, 1974. It was cancelled, this Court issuing a
It must have been the realization that a challenge to a provisional resolution instead, requiring respondents to file an answer not later
permit issued by respondent Board of Transportation" based on the than December 6, 1974 and setting the hearing on the merits of the
absence of a hearing is not likely to be attended with success that case on Wednesday, December 11, 1974. In the answer submitted the
prompted petitioner to rely on another aspect of procedural due facts alleged were substantially admitted. "" It denied the allegation
process, the infirmity alleged being traceable to what it considered that there must be a publication before a provisional permit can be
lack of jurisdiction.
There is the invocation of  . a issued, reference being made, as noted, to Presidential Decree No. 101,
-
K    
Ä
# with its mention of both which authorized respondent Board to grant provisional permits when
competitors and the public being notified. It does not suffice.
Something more, which more, is necessary. The reliance is misplaced.
The case was then argued on
Its applicability is by no means obvious. As was pointed out in the
answer of respondent Board of Transportation, such a claim is hardly
persuasive with the procedure set forth in Presidential Decree No. 101
being followed and the provisional authority to operate being based on
an urgent public need. Such a contention merits the approval of the
Court. The petition cannot prosper.
warranted by compelling circumstances and to proceed promptly along
the method of legislative inquiry. "
December 11, 1974, Attorney Manuel Imbong appearing for petitioner
and Assistant Solicitor General Reynato S. Puno appearing for
respondent Board of Transportation. "# Thereafter, the parties were
given twenty days to file their respective memoranda and an additional
ten-day period to submit replies thereto if so minded. In time all the
pleadings were submitted, and the case was ready for decision.
The petition, to repeat, cannot prosper.
1. It is to be, admitted that the claim for relief on the asserted could it have appealed from that decision ² it had no standing in that
constitutional deficiency based on procedural due process, not from case. Even if we treat Araneta's reexamination petition as one for
the standpoint of the absence of a hearing but from the lack of reconsideration, the time therefor has long passed. "! It was then
jurisdiction without the required publication having been made, was stated: The reexamination herein sought by Araneta, perforce seeks the
argued vigorously and developed exhaustively in the memoranda of fixing of new and different rates. " Further: Araneta in effect,
petitioner. The arguments set forth, while impressed with plausibility, institutes a
do not suffice to justify the grant of 
 . Moreover, the doctrine 

  ² for new rates different from those already established. Such
announced in the Philippine Long Distance Telephone Company
decision, heavily leaned on by petitioner is, at the most, a frail and
 The conclusion,
insubstantial support and gives way to decisions of this Court that have
an even more specific bearing on this litigation.
2. A barrier to petitioner's pretension, not only formidable but also
insurmountable, is the well-settled doctrine that for a provisional
" Under the facts of that case, the procedural due
permit, an ! 
 hearing suffices. " The decisive consideration is process infirmity amounting to lack of jurisdiction is quite apparent.
the existence of the public need. " That was shown in this case,
respondent Board, on the basis of demonstrable data, being satisfied of
the pressing necessity for the grant of the provisional permit sought.
There is no warrant for the nullification of what was ordered by it. It
must have been, as already noted, this state of the law that did lead
petitioner to harp on its interpretation of what for it is the teaching of
the Philippine Long Distance Telephone Company decision. " There
was therein stated that one of the compelling reasons that led this
Court to hold that the defunct Public Service Commission did not
acquire jurisdiction was that no provision was made for bringing in as
parties thereto the competitors of the Philippine Long Distance
Telephone Company. "4 That is the basis for the objection on
procedural due process ground. While no doubt such a holding was
necessary for the decision of that case which dealt with a petition for
the reexamination of a decision that was held to be final and
executory, it finds no application to this controversy dealing with a
provisional permit. This is made clear by this portion of the opinion of
Justice Sanchez: "Araneta seeks reexamination of the rates approved
by the Commission. Araneta avers that PLDT can carry out its
improvement and expansion program at less onerous terms to the
subscribers. But Araneta [University] was not a party to the rate-fixing
case or to any of the other proceedings below. These rate-fixing and
allied cases terminated with the final judgment of January 9, 1964. Not
being a party, it could not have moved to reconsider said decision. Nor
petition is a proceeding separate and distinct from those concluded by
the final judgment of PSC of January 9, 1964.
therefore, necessarily follows:" We hold that the Public Service
Commission may not reduce or increase rates established in a
judgment that has become final, without proper notice; and that a
Commission order reducing or increasing said rates without such
notice is void."
The opposite is true with this present petition which deals with a grant
of provisional permit. It would be to lift out of context the reference
made in the aforesaid opinion with reference to notification to the
competitors to give a color of applicability to the situation before us.
Clearly then, the allegation of a failure to follow the command of the
due process guarantee is bereft of any legal foundation.
3. The question of whether the controversy is ripe for judicial
determination was likewise argued by the parties. For it is undeniable
that at the time the petition was filed. there was pending with the
respondent Board a motion for reconsideration. Ordinarily, its
resolution should be awaited. Prior thereto, an objection grounded on
prematurity can be raised. Nonetheless, counsel for petitioner would
stress that certiorari lies as the failure to observe procedural due
process ousted respondent Board of whatever jurisdiction it could have
had in the premises. This Court was impelled to go into the merits of
the controversy at this stage, not only because of the importance of the
issue raised but also because of the strong public interest in having the
matter settled. As was set forth in Executive Order No. 101 which
prescribes the procedure to be followed by respondent Board, it is the
policy of the State, as swiftly as possible, to improve the deplorable
condition of vehicular traffic, obtain maximum utilization of existing
public motor vehicles and eradicate the harmful and unlawful trade of
clandestine operators, as well as update the standard of those carrying
such business, making it "imperative to provide, among other urgently Y
needed measures, more expeditious methods in prescribing, redefining,
or modifying the lines and mode of operation of public utility motor Y
vehicles that now or thereafter, may operate in this country.

It is
essential then both from the standpoint of the firms engaged as well as Y
of the riding public to ascertain whether or not the procedure followed
Y
in this case and very likely in others of a similar nature satisfies the
procedural due process requirement. Thus its ripeness for adjudication Y
becomes apparent.
Y
To paraphrase what was said in 
 

# where the validity of a
legislation was passed upon in a certiorari proceeding to annul and set Y
aside a writ of preliminary injunction, to so act would be to conserve
both time and effort. Those desiring to engage in public utility Y
business as well as the public are both vitally concerned with the final
determination of the standards to be followed in the procedure that Y
must be observed. There is, to repeat, a great public interest in a
Y
definitive outcome of the crucial issue involved. One of the most noted
authorities on Administrative Law, professor Kenneth Culp Davis, Y
discussing the ripeness concept, is of the view that the resolution of
what could be a debilitating uncertainty with the conceded ability of Y
the judiciary to work out a solution of the problem posed is a potent
argument for minimizing the emphasis laid on its technical aspect.
 Y

WHEREFORE, the petition for 

  is dismissed. No costs. Y

Ä$
" : "7
"÷
 
;
/":: "  Y

Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
 0+$),+/+$+( complaint praying for the same reliefs.

>c" !4  "!

!? On June 3, 1995, Labor Arbiter Rogelio P. Legaspi rendered a
Decision declaring that petitioners were illegally dismissed from the

3%
'


$/-1
((,
*+$ service and ordering respondents to reinstate them to their former or
(0%,+)*()$(&c $%-
)$ equivalent positions without loss of seniority rights, and to pay them
')
-$*((&
3(
%1+
 their backwages, salary differential, 13th month pay differential, and
=+-

)1+)(

)()+'()
 service incentive leave benefits ⼜as of June 20, 1995.â¼
:c
  Respondents were likewise directed to pay petitioners moral and
 exemplary damages.
,+$+(
On appeal by respondents, the NLRC, in its Decision dated February
$
,(/
%)+3@ 20, 1996, reversed the Arbiter⼌s judgment, holding that petitioners
are contractual employees and that respondents merely allowed their
For our resolution is the instant Petition for Review on 
  contracts to lapse.
seeking to reverse the Resolution of the Court of Appeals (Seventh
Division) dated October 29, 2001 in CA-G.R. SP No. 67068; its Petitioners timely filed a motion for reconsideration, but it was denied
Resolution of May 8, 2003 denying the motion for reconsideration; by the NLRC in its Resolution dated April 17, 1996.
and its Resolution of October 10, 2003, denying the motion for
reconsideration of the Resolution of May 8, 2003. Petitioners then filed with the Court of Appeals a petition for

 "docketed as CA-G.R. SP No. 50531.
The facts of the case are:
On October 28, 1999, the Court of Appeals (Special Sixteenth
Azucena Magallanes, Evelyn Bacolod, Judith Cotecson (represented Division) rendered its Decision,[1] the dispositive portion of which
by her heirs), petitioners, Grace Gonzales, and Bella Gonzales were all reads:
employed as teachers in the Sun Yat Sen Elementary School in WHEREFORE, the instant petition is GRANTED with respect to
Surigao City. petitioners Cotecson, Bacolod, and Magallanes, the questioned
Resolutions of the NLRC dated February 20 and April 1996 are hereby
Paz Go and Elena Cubillan are principals of the said school. Willy REVERSED and SET ASIDE as to them.
Ang Gan Teng and Benito Ang are its directors, while Teotimo Tan is
the school treasurer. They are all respondents herein. The Decision dated July 3, 1995 of the Labor Arbiter is hereby
REINSTATED as to the said petitioners except as to the award of
On May 22, 1994, respondents terminated the services of petitioners. moral and exemplary damages which is hereby DELETED.
Thus, on August 3, 1994, they filed with the Sub-Regional Arbitration
Branch No. X, National Labor Relations Commission (NLRC), Butuan SO ORDERED.
City, complaints against respondents for illegal dismissal, The Court of Appeals (Special Sixteenth Division) ruled that in lieu of
underpayment of wages, payment of backwages, 13th month pay, reinstatement, petitioners Cotecson, Bacolod, and Magallanes
ECOLA, separation pay, moral damages, and attorney⼌s fees. ⼜shall be entitled to separation pay equivalent to one month salary
Likewise, on August 22, 1994, petitioner Cotecson filed a separate and backwages computed from the time of their illegal dismissal up to
the time of the promulgation of its Decision.â¼ With respect to Bella
Gonzales and Grace Gonzales, the Court of Appeals found that that
they have not acquired the status of regular employees having rendered
only two years of service.
Consequently, their dismissal from the service is valid. Under the
Manual of Regulations for Private Schools, only full-time teachers
who have rendered three (3) years of consecutive service shall be
considered permanent.
Respondents filed a motion for reconsideration but it was denied by
the appellate court in its Resolution dated January 13, 2000.
Respondents then filed with this Court a petition for 
 "
docketed as G.R. No. 142270. However, it was dismissed for lack of
merit in a Minute Resolution dated April 12, 2000. Their motion for
reconsideration was denied with finality by this Court on July 19,
$&c  #" instead
2000.
$&c 4 !. Their error was compounded by stating
Meanwhile, on October 4, 2000, petitioners filed with the Labor
Arbiter a motion for execution of his Decision as modified by the
Court of Appeals.
In an Order dated January 8, 2001, the Labor Arbiter computed the
petitioners⼌ monetary awards reckoned from the time of their
illegal dismissal in June 1994 up to October 29, 1999, pursuant to the
Decision of the Court of Appeals (Special Sixteenth Division) in CA-
G.R. SP No. 50531. Respondents interposed an appeal to the NLRC
(docketed as NLRC Case No. M-006176-2001), contending that the
computation should only be up to June 20, 1995 (the date indicated in
the Labor Arbiter⼌s Decision).
In an Order dated March 30, 2001, the NLRC modified the Labor
Arbiter⼌s computation and ruled that the monetary awards due to
petitioners should be computed from June 1994 up to June 20, 1995.
Petitioners then filed a petition for 
  with the Court of records of CA-G.R. SP No. 67068.
Appeals, docketed as CA-G.R. SP No. 67068, raffled off to the
Seventh Division. However, in its Resolution of October 29, 2001, the
petition was dismissed outright for their failure to attach to their
petition copies of the pleadings filed with the Labor Arbiter, thus:
No copies of the pleadings filed before the Labor Arbiter appear to
have been attached to the petition in violation of the provisions of
Section 1, Rule 65 and Section 3, Rule 46 of the 1997 Rules of Civil
Procedure, as amended, which requires that the petition:
x x x shall be accompanied by a clearly legible duplicate original or
certified true copy of the judgment, order, resolution or ruling subject
thereof, such material portions of the record as are referred to therein
and other documents relevant or pertinent thereto x x x
WHEREFORE, the instant petition is DISMISSED OUTRIGHT
pursuant to Section 3, Rule 46 of the 1997 Rules of Civil Procedure.
SO ORDERED.
Petitioners filed a motion for reconsideration, but they erroneously
indicated therein the case number as 
of 
that the petition was with the Special Sixteenth Division, instead of the
Seventh Division. As a result, the Special Sixteenth Division issued a
Minute Resolution dated April 22, 2002 which merely noted the
motion, thus:
The petitioners⼌ motion for reconsideration dated November 22,
2001 and filed by registered mail on November 26, 2001 is merely
noted since there was no October 29, 2001 resolution that was issued
in this case which the motion for reconsideration seeks to be
reconsidered.
On realizing their mistake, petitioners then filed with the Seventh
Division a Motion to Transfer The Case to it.
In a Resolution promulgated on May 8, 2003, the Seventh Division
denied petitioners⼌ Motion To Transfer The Case on the ground,
among others, that the motion is ⼜non-existent⼠since it does not
bear the correct case number, hence, could not be attached to the
Unfazed, petitioners filed a motion for reconsideration, but it was
denied by the Seventh Division in its Resolution of October 10, 2003.

At first glance, the petition before us appears to be a futile attempt to
revive an extinct motion denied by the appellate court (Seventh
Division) by reason of technicality. But in the interest of speedy
administration of justice, we should not only delve in technicalities.
We shall then address these two issues: (1) whether the Court of
Appeals (Seventh Division) erred in holding that affixing a wrong
docket number on a motion renders it ⼜non-existent;⼠and (2)
whether the issuance by the NLRC of the Order dated March 30, 2001,
amending the amounts of separation pay and backwages, awarded by
the Court of Appeals (Sixteenth Division) to petitioners and computed
by the Labor Arbiter, is tantamount to grave abuse of discretion
amounting to lack or excess of jurisdiction.
On the
"the Court of Appeals (Seventh Division) is correct promote the welfare and well-being of the working man. Its spirit and
when it ruled that petitioners⼌ motion for reconsideration of its
Resolution dated October 29, 2001 in CA-G.R. SP No. 67068 is
⼜non-existent.â¼ Petitioners⼌ counsel placed a wrong case
number in their motion, indicating CA-G.R. SP No. 50531 (Special
Sixteenth Division) instead of CA-G.R. SP No. 50531 (Seventh
thereto would result in outright deprivation of the client⼌s liberty
or property or where the interests of justice so require.[5]$c
this
Court is not a slave of technical rules, shorn of judicial discretion â¼³
in rendering justice, it is guided by the norm that on the balance,
technicalities take a backseat against substantive rights. Thus, if the
application of the rules would tend to frustrate rather than promote
justice, it is always within this Court⼌s power to suspend the rules
or except a particular case from its application.[6]
This case involving a labor dispute has dragged on for over a decade
now. Petitioners have waited too long for what is due them under the
law. One of the original petitioners, Judith Cotecson, died last
September 28, 2003 and has been substituted by her heirs. It is time to
write finis to this controversy. The Labor Code was promulgated to
intent mandate the speedy administration of justice, with least attention
to technicalities but without sacrificing the fundamental requisites of
due process.[7]
We recall that in CA-G.R. SP No. 50531, the Court of Appeals
Division), the correct case number. In .
 
 
 ÷ "[2] (Special Sixteenth Division) held that petitioners Cotecson, Bacolod,
we ruled that where a pleading bears an erroneous docket number and and Magallanes ⼜shall be entitled to separation pay equivalent to
thus ⼜could not be attached to the correct case,⼠the said one month salary and backwages c:
9c7c97
pleading is, for all intents and purposes, ⼜non-existent.⼠As aptly 
:c7c97:cc c97
stated by the Special Sixteenth Division, it has neither the duty nor the
c â¼ This Decision was promulgated on October 28, 1999.
obligation to correct the error or to transfer the case to the Seventh The respondents⼌ motion for reconsideration was denied by the
Division. In Äa.
 
- 
  
 
 Court of Appeals (Former Special Sixteenth Division) on January 13,
2 

   
 ,[3] which likewise involves a wrong 2000. On April 12, 2000, this Court dismissed respondents⼌
docket number in a motion, we ruled that the duty to correct the
 " docketed as G.R. No. 142270, and denied their
mistake falls solely on the party litigant whose fault caused the
anomaly. To hold otherwise would be to impose upon appellate courts
the burden of being nannies to appellants, ensuring the absence of
pitfalls that hinder the perfection of petitions and appeals. Strictly
speaking, it is a dogma that the mistake or negligence of counsel binds
the clients[4] and appellate courts have no share in that burden.
However, we opt for liberality in the application of the rules to the
instant case in light of the following considerations.0 the rule that
negligence of counsel binds the client may be relaxed where adherence
petition for 
motion for reconsideration with finality as early as July 19, 2000.
Clearly, the Decision in CA-G.R. SP No. 50531 had long become final
and executory. The Labor Arbiter computed the monetary awards due
to petitioners corresponding to the period from June 1994 to October
28, 1999, in accordance with the Decision of the Court of Appeals
(Special Sixteenth Division). The award for backwages and money
claims is in the total sum of P912,086.15.
It does not escape our attention that upon respondents⼌ appeal from
the Labor Arbiter⼌s Order computing the benefits due to Y
petitioners, the NLRC c
9
79 
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a lesser amount of P147,673.16.
Y
We sustain petitioners⼌ contention that the NLRC, in modifying Y
the award of the Court of Appeals, committed grave abuse of
discretion amounting to lack or excess of jurisdiction. 2A
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principle of immutability of judgments, any alteration or amendment
which substantially affects a final and executory judgment is void for Y
lack of jurisdiction.[8] We thus rule that the Order dated March 30,
2001 of the NLRC directing that the monetary award should be Y
computed from June 1994, the date petitioners were dismissed from
Y
the service, up to June 20, 1995 only, is c

Y
=*0( we 
) the petition. The challenged
Resolutions dated October 29, 2001, May 8, 2003, and October 10, Y
2003 in CA-G.R. SP No. 67068 are /$, The Order of the
NLRC dated March 30, 2001 in NLRC Case No. M-006176-2001 is Y
$)
$+,. The Order of the Labor Arbiter dated January 8, 2001 is
+$)
), Y

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1  limited to, economic sabotage, smuggling, tax evasion, and dollar-
salting, investigate the same and aid in the prosecution of
>c"
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"? cases;chanroblesvirtuallawlibrary

1%6(,6
=
+++1$
&($
,
 F5GCoordinate with external agencies in monitoring the financial
',+($&+$
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'+6*(1+( and economic activities of persons or entities, whether domestic
'

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Y*(.%)+/ or foreign, which may adversely affect national financial interest
$)
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($&
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- FGProvide all intelligence units of operating Bureaus or Offices

)'+()%2%(,&
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  the conduct of intelligence and investigating
works;chanroblesvirtuallawlibrary
,+$+(
F
GSupervise, monitor and coordinate all the intelligence and
$
,(/
%)+3p@ chanroblesvirtuallawlibrary investigation operations of the operating Bureaus and Offices
under the Ministry;chanroblesvirtuallawlibrary
In this petition for 
 , prohibition and 
, petitioners
Buklod Ng Kawaning EIIB, Cesar Posada, Remedios Princesa, FG Investigate, hear and file, upon clearance by the Minister, anti-
Benjamin Kho, Benigno Manga and Lulu Mendoza, for themselves graft and corruption cases against personnel of the Ministry and
and in behalf of others with whom they share a common or general its constituents units;chanroblesvirtuallawlibrary
interest, seek the nullification of O 
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Y% Y&'& [1] and
O 
 Y$

Y% Y(() [2] on the ground that they were issued by F9GPerform such other appropriate functions as may be assigned
the Office of the President with grave abuse of discretion and in by the Minister or his deputies.[5] chanroblesvirtuallawlibrary
violation of their constitutional right to security of tenure.
chanroblesvirtuallawlibrary
In a desire to achieve harmony of efforts and to prevent possible
conflicts among agencies in the course of their anti-smuggling
The facts are undisputed: chanroblesvirtuallawlibrary
operations, President Aquino issued Memorandum Order No. 225 on
March 17, 1989, providing, among others, that the EIIB

On June 30, 1987, former President Corazon C. Aquino, issued
a   
 
2aaa 
 
Executive Order No. 127 [3] establishing the Economic Intelligence






 


  
and Investigation Bureau (EIIB) as part of the structural organization
'

  
7 

[6] chanroblesvirtuallawlibrary
of the Ministry of Finance. [4] The EIIB was designated to perform the
following functions: chanroblesvirtuallawlibrary
Eleven years after, or on January 7, 2000, President Joseph Estrada
issued Executive Order No. 191 entitled -

  
  
FGReceive, gather and evaluate intelligence reports and
%
a
%
a
 7
[7] Motivated by the fact that
information and evidence on the nature, modes and extent of
the designated functions of the EIIB are also being performed by the
illegal activities affecting the national economy, such as, but not
other existing agencies of the government and that there is a need to
constantly monitor the overlapping of functions among these agencies,
former President Estrada ordered the deactivation of EIIB and the
transfer of its functions to the Bureau of Customs and the National
Bureau of Investigation. chanroblesvirtuallawlibrary
Meanwhile, President Estrada issued Executive Order No. 196 [8]
Petitioners contend that the issuance of the afore-mentioned executive
orders is: FGa violation of their right to security of tenure;F5Gtainted
with bad faith as they were not actually intended to make the
bureaucracy more efficient but to give way to Task Force Aduana, the
functions of which are essentially and substantially the same as that of
EIIB; and FGa usurpation of the power of Congress to decide whether
creating the Presidential Anti-Smuggling Task Force ÷
. [9] or not to abolish the EIIB. chanroblesvirtuallawlibrary
chanroblesvirtuallawlibrary

Arguing in behalf of respondents, the Solicitor General maintains that:

Then the day feared by the EIIB employees came. On March 29, 2000, FG the President enjoys the totality of the executive power provided
President Estrada issued Executive Order No. 223 [10] providing that under Sections 1 and 7, Article VII of the Constitution, thus, he has the
all EIIB personnel occupying positions specified therein shall be authority to issue Executive Order Nos. 191 and 223; F5G the said
deemed separated from the service effective April 30, 2000, pursuant executive orders were issued in the interest of national economy, to
to a  
 reorganization resulting to abolition, redundancy,
merger, division, or consolidation of positions. [11] chanroblesvirtuallawlibrary


. chanroblesvirtuallawlibrary
Agonizing over the loss of their employment, petitioners now come
before this Court invoking our power of judicial review of Executive
Order Nos. 191 and 223. They anchor their petition on the following
arguments:
Achanroblesvirtuallawlibrary
avoid duplicity of work and to streamline the functions of the
bureaucracy; and FGthe EIIB was not  
, it was only


The petition is bereft of merit. chanroblesvirtuallawlibrary
Despite the presence of some procedural flaws in the instant petition,
such as, petitioners disregard of the hierarchy of courts and the non-
exhaustion of administrative remedies, we deem it necessary to
address the issues. It is in the interest of the State that questions
8(
c""


#7c
5 
7 relating to the status and existence of a public office be settled without
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F#G
+.1c9 delay. We are not without precedent. In - 
Ä " [12] 
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liberally decreed: chanroblesvirtuallawlibrary
The Court disregards the questions raised as to procedure, failure to
exhaust administrative remedies, the standing of certain parties to sue,
for two reasons, ®>5?c97

c9:5 
 
 7 
9c5 7:5,'and because of
the serious implications of these cases on the administration of the
c""


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c99c Hc c97 Philippine civil service and the rights of public
++17c Hc B
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97 servants.chanroblesvirtuallawlibrary
C.chanroblesvirtuallawlibrary At first glance, it seems that the resolution of this case hinges on the
question - - 



  %%7 


 
  
)7&
 7 c7cc5c77 CHowever, after coming to terms with the prevailing law and
++1chanroblesvirtuallawlibrary jurisprudence, we are certain that the ultimate queries should be G
- 




 

 a/
!
 Initially, it is argued that there is no law yet which empowers the

 

C
"5G  

 a/
 
 
C President to issue E.O. No. 132 or to reorganize the
chanroblesvirtuallawlibrary
BIR.chanroblesvirtuallawlibrary
Surely, there exists a distinction between the words


 and We do not agree.
 . To


 means to render inactive or ineffective or to
break up by discharging or reassigning personnel, [13] while to x x x x x x chanroblesvirtuallawlibrary
  means to do away with, to annul, abrogate or destroy
completely. [14] In essence, abolition denotes an intention to do away Section 48 of R.A. 7645 provides that:chanroblesvirtuallawlibrary
with the office   and 
. [15] Thus, while in  
 "
the office ceases to exist, the same is not true in


 where the $!.a- 

 ÷

 ÷a 

office continues to exist, 
remaining dormant or inoperative. Be
!
7. The heads of departments, bureaus and offices
that as it may, deactivation and abolition are both reorganization and agencies are hereby directed to identify their respective activities
measures. chanroblesvirtuallawlibrary which are no longer essential in the delivery of public services and
which may be

" 
 
  
" subject to civil
The Solicitor General only invokes the above distinctions on the service rules and regulations. X x x. ÷
a
" a 

mistaken assumption that the President has no power to abolish an  
  of the activities shall be effected pursuant to Circulars or
office. chanroblesvirtuallawlibrary
The general rule has always been that the power to abolish a public
office is lodged with the legislature. [16] This proceeds from the legal
precept that the power to create includes the power to destroy. A
public office is either created by the Constitution, by statute, or by
authority of law. [17] Thus, except where the office was created by the
Constitution itself, it may be abolished by the same legislature that
brought it into existence. [18] chanroblesvirtuallawlibrary
Orders issued for the purpose by the Office of the
President.chanroblesvirtuallawlibrary
Said provision clearly mentions the acts of  
cB :7 c

5cc of offices only and does not cover the creation of offices
or transfer of functions. Nevertheless, the act of creating and
decentralizing is included in the subsequent provision of Section 62
which provides that:chanroblesvirtuallawlibrary
$
@
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 a/
 a
2 Unless otherwise
The exception, however, is that as far as bureaus, agencies or offices in
the executive department are concerned, the Presidents power of
control may justify him to inactivate the functions of a particular
office, [19] or certain laws may grant him the broad authority to carry
created by law or directed by the President of the Philippines, no
organizational unit or changes in key positions in any department or
agency shall be authorized in their respective organization structures
and be funded from appropriations by this Act. (italics
out reorganization measures. [20] The case in point is .
 ours)chanroblesvirtuallawlibrary
!


[21] In this case, it was argued that there is no
law which empowers the President to reorganize the BIR. In decreeing )79cc :cc 
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otherwise, this Court sustained the following legal basis, thus:
chanroblesvirtuallawlibrary
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x x x x x x chanroblesvirtuallawlibrary
Another legal basis of E.O. No. 132 is Section 20, Book III of E.O. We adhere to the precedentor ruling in Larin that this provision
No. 292 which states:chanroblesvirtuallawlibrary recognizes the authority of the President to effect organizational
changes in the department or agency under the executive structure.
Sec. 20. 
Y 
. Unless Congress provides otherwise, the Such a ruling further finds support in Section 78 of Republic Act No.
President shall exercise 
 

 


 8760. [22] Under this law, the heads of departments, bureaus, offices


  

 

and which are not and agencies and other entities in the Executive Branch are directed
specifically enumerated above or which are not delegated by the FGto conduct a comprehensive review of their respective mandates,
President in accordance with law. (italic ours)chanroblesvirtuallawlibrary missions, objectives, functions, programs, projects, activities and
systems and procedures; F5G identify activities which are no longer
)7:cc :;c97c7:cB
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  essential in the delivery of public services and which may be scaled

7B=7B7 77:cBcc HI down, phased-out or abolished; and FG adopt measures that will result
+&
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&
  in the streamlined organization and improved overall performance of
,c"" )7
8: 7&
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7&7:: 7c   7ccc H7 c  that the 

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[24] The

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c law has spoken clearly. We are left only with the duty to sustain.
chanroblesvirtuallawlibrary


H
The validity of these two decrees
are unquestionable. The 1987 Constitution clearly provides that all
laws, decrees, executive orders, proclamations, letters of instructions But of course, the list of legal basis authorizing the President to
and other executive issuances not inconsistent with this Constitution reorganize any department or agency in the executive branch does not
shall remain operative until amended, repealed or revoked. So far, have to end here. We must not lose sight of the very source of the
there is yet no law amending or repealing said decrees. (Emphasis power that which constitutes an express grant of power. Under Section
supplied)chanroblesvirtuallawlibrary 31, Book III of Executive Order No. 292 (otherwise known as the


 *+),), 7&
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Now, let us take a look at the assailed executive order.
chanroblesvirtuallawlibrary
In the w clause of E.O. No. 191, former President Estrada
÷

78(99
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  For this
purpose, he may transfer the functions of other Departments or
anchored his authority to deactivate EIIB on Section 77 of Republic Agencies to the Office of the President. In  /

÷a" [25]
Act 8745 (;*+++—÷  
 ÷
), a provision similar we ruled that reorganization  c7
c c9:c 
to Section 62 of R.A. 7645 quoted in Larin" thus; chanroblesvirtuallawlibrary c c
c c9c99c5cc 7c95c c9c c
c

 c99 c  It takes place when there is an alteration
$44 a/
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57&
 c97&7:: , no changes in key
positions or organizational units in any department or agency shall be
authorized in their respective organizational structures and funded
from appropriations provided by this Act.chanroblesvirtuallawlibrary
of the existing structure of government offices or units therein,
including the lines of control, authority and responsibility between
them. The EIIB is a bureau attached to the Department of Finance.
[26] It falls under the Office of the President. Hence, it is subject to the
Presidents continuing authority to reorganize. chanroblesvirtuallawlibrary
It having been duly established that the President has the authority to :cc B7 7 B775c 

carry out reorganization in any branch or agency of the executive :c c7);0c$ 7:c B77
department, what is then left for us to resolve is whether or not the );9cc 5Bc9  Y
Y 
7 7
reorganization is valid. In this jurisdiction, reorganizations have been

7c
7 
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regarded as valid provided they are pursued in good faith.
Reorganization is carried out in good faith if it is for the purpose of
:c B778  
77Bc
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chanroblesvirtuallawlibrary

economy or to make bureaucracy more efficient. [27] Pertinently,

Republic Act No. 6656 [28] provides for the circumstances which may
be considered as evidence of bad faith in the removal of civil service
employees made as a result of reorganization, to wit: FGwhere there is
a significant increase in the number of positions in the new staffing
pattern of the department or agency concerned; F5Gwherean office is
abolished and another performing substantially the same functions is
G to select and recruit personnel from
 
, the thrust of E.O. No. 196 is to have a small group of
military men under the direct control and supervision of the President
as base of the governments anti-smuggling campaign. Such a smaller
base has the necessary powers"G to enlist the assistance of any
department, bureau, or office and to use their respective personnel,
facilities and resources; and
created; FGwhere incumbents are replaced by those less qualified in
to the Task Force.
terms of status of appointment, performance and merit; F
Gwhere there
is a classification of offices in the department or agency concerned and
the reclassified offices perform substantially the same functions as the
original offices, and FGwhere the removal violates the order of
separation. [29] chanroblesvirtuallawlibrary
Petitioners claim that the deactivation of EIIB was done in bad faith
because four days after its deactivation, President Estrada created the

" it is evident from the yearly budget appropriation of the
within the PSG and ISAFP for a
(5c7
c c7Hc c9:c 
9
cc97
8 
: 
 5 
c9    
:
 
c99B7B7cc9:c 
9 The EIIB had
proven itself burdensome for the government because it maintained
separate offices in every region in the Philippines. chanroblesvirtuallawlibrary
And
Task Force ÷

chanroblesvirtuallawlibrary government that the creation of the Task Force Aduana was especially
intended to lessen EIIBs expenses. Tracing from the yearly General
We are not convinced. chanroblesvirtuallawlibrary Appropriations Act, it appears that the allotted amount for the EIIBs
general administration, support, and operations for the year 1995, was
An examination of the pertinent Executive Orders [30] shows that the &"
!#"; [31] for 1996, &"!
" J [32] for 1998,
deactivation of EIIB and the creation of Task Force Aduana were done &
"!!J [33] and, for 1999, &
#!4# [34] Theseamounts
in good faith. It was not for the purpose of removing the EIIB were far above the &  [35] allocation to the Task Force
employees, but to achieve the ultimate purpose of E.O. No. 191, which
is economy. While Task Force Aduana was created to take the place of
EIIB, its creation does not entail expense to the government.
chanroblesvirtuallawlibrary
;
, 7 c:c c9 B:c c 7);
÷
for the year 2000. chanroblesvirtuallawlibrary
While basically, the functions of the EIIB have devolved upon the
Task Force Aduana, we find the latter to have additional new powers.
The Task Force Aduana, being composed of elements from the
Presidential Security Group (PSG) and Intelligence Service Armed
0c(c" :c
777 
 
 Forces of the Philippines (ISAFP), [36] has the essential 


:99c9++1c5c:c
c9:c:B7c

The EIIB did not have this power. The

 7:575 :cc9c7
8  )7 B77);0cBc
c 5
"/

Task Force Aduana has the power to enlist the assistance of any
department, bureau, office, or instrumentality of the government,
including government-owned or controlled corporations; and to use
their personnel, facilities and resources. Again, the EIIB did not have
this power. And, the Task Force Aduana has the additional authority to
conduct investigation of cases involving ill-gotten wealth. This was
not expressly granted to the EIIB. chanroblesvirtuallawlibrary
Consequently, it cannot be said that there is a feigned reorganization.
In 7#
While we cast a commiserating look upon the plight of all the EIIB
employees whose lives perhaps are now torn with uncertainties, we
cannot ignore the unfortunate reality that our government is also
battling the impact of a plummeting economy. Unless the government
is given the chance to recuperate by instituting economy and efficiency
in its system, the EIIB will not be the last agency to suffer the impact.
We cannot frustrate valid measures which are designed to rebuild the
  , [37] we ruled that a executive department. chanroblesvirtuallawlibrary
reorganization in good faith is one designed to trim the fat off the
bureaucracy and institute economy and greater efficiency in its =*0(the petition is hereby DENIED. No costs.
operation. chanroblesvirtuallawlibrary chanroblesvirtuallawlibrary

Lastly, we hold that petitioners right to security of tenure is not SO ORDERED. chanroblesvirtuallawlibrary
violated. Nothing is better settled in our law than that the abolition of
an office within the competence of a legitimate body if done in good ( Yp Y p Y YY
Y 
Y
Y Y
faith suffers from no infirmity. Valid abolition of offices is neither  Y
  Y Y(Y*Yp Ypp Y
Y Y
  
    Y
removal nor separation of the incumbents. [38] In the instructive
words laid down by this Court in -  Ä " [39] through Justice  Y Y


 Ypp Y YY 
 Y  
     Y
Abraham F. Sarmiento: chanroblesvirtuallawlibrary
Yp YY Y
Reorganizations in this jurisdiction have been regarded as valid
provided they are pursued in good faith. As a general rule, a Y
reorganization is carried out in good faith if it is for the purpose of
economy or to make bureaucracy more efficient. + 7  c Y

F c9
Gc:c c
57:cc 9c8
 7 Y
c9 Bc
 c57 BBe that as it may, if the
abolition, which is nothing else but a separation or removal, is done for Y
political reasons or purposely to defeat security of tenure, otherwise
not in good faith, no valid abolition takes and whatever abolition is Y
done, is void ab initio. There is an invalid abolition as where there is
Y
merely a change of nomenclature of positions, or where claims of
economy are belied by the existence of ample funds.chanroblesvirtuallawlibrary Y

Indeed, there is no such thing as an absolute right to hold office. Y

Except constitutional offices which provide for special immunity as
regards salary and tenure, no one can be said to have any vested right Y
in an office or its salary. [40] chanroblesvirtuallawlibrary
Y
 c 05""
But in an resolution dated December 27, 1990, We simply
required the public respondents to file their Comment, without
+)+3 )(+(' &+(

 , vs. )* however giving due course to the petition and the prayer therein.
.%)+/$) -)*$) -(0(  Hence, the Act took effect after fifteen days following its publication,
(/')$)*$) -(0 )+(  or on January 1, 1991. # chanrobles virtual law library

,0$
)* )+( ) $% 


. chanrobles virtual law library

Before we settle down on the merits of the petition, it would likewise

be well to discuss albeit briefly the history of our police force and the
reasons for the ordination of Section 6, Article XVI in our present
&  $p
chanrobles virtual law library
Constitution.chanroblesvirtualawlibra ry chanrobles virtual law libra ry

At the very outset, it should be well to set forth the constitutional During the Commonwealth period, we had the Philippine
provision that is at the core of the controversy now confronting us, Constabulary as the nucleus of the Philippine Ground Force (PGF),
thus: now the Armed Forces of the Philippines (AFP). The PC was made
part of the PGF but its administrative, supervisory and directional
Article XVI, Section 6: chanrobles virtual law libra ry
control was handled by the then Department of the Interior. After the
war, it remained as the "National Police" under the Department of
The State shall establish and maintain one police force, National Defense, as a major service component of the AFP.  chanrobles virtual law libra ry

which stall be national in scope and civilian in

character, to be administered and controlled by a
national police commission. The authority of local
executives over the police units in their jurisdiction
shall be provided by law. "
Later, the Integration Act of 1975 created the Integrated National
Police (INP) under the Office of the President, with the PC as the
nucleus, and the local police forces as the civilian components. The
chanrobles virtual law l ibrary
PC-INP was headed by the PC Chief who, as concurrent Director-
General of the INP, exercised command functions over the INP. chanrobles virtual law library

With the aforequoted provision in mind, Congress passed Republic

Act No. 6975 entitled "AN ACT ESTABLISHING THE PHILIPPINE
NATIONAL POLICE UNDER A REORGANIZED DEPARTMENT
OF THE INTERIOR AND LOCAL GOVERNMENT, AND FOR
OTHER PURPOSES" as the consolidated version of House Bill No.
23614 and Senate Bill No. 463.
The National Police Commission (NAPOLCOM) 4 exercised
administrative control and supervision while the local executives
exercised operational supervision and direction over the INP units
assigned within their respective localities. !
chanroblesvirtualawlibrary chanrobles virtual law library

The set-up whereby the INP was placed under the command of the
Following the said Act's approval by President Corazon C. Aquino on military component, which is the PC, severely eroded the INP's
December 13, 1990, it was published on December 17, 1990.
chanrobles virtual law library
civilian character and the multiplicity in the governance of the PC-INP
resulted in inefficient police service.  Moreover, the integration of the
Presently, however, petitioner as citizen, taxpayer and member of the national police forces with the PC also resulted in inequities since the
Philippine Bar sworn to defend the Constitution, filed the petition now military component had superior benefits and privileges. " chanrobles virtual law library

at bar on December 20, 1990, seeking this Court's declaration of

unconstitutionality of RA 6975 with prayer for temporary restraining
order.chanroblesvirtualawlibrary chanrobles vi rtual law library
The Constitutional Commission of 1986 was fully aware of the And so we now come to the merits of the petition at hand. chanroblesvirtualawlib rary chanrobles virtual law lib rary

structural errors that beset the system. Thus, Com. Teodulo C.

Natividad explained that: In the main, petitioner herein respectfully advances the view that RA
6975 emasculated the National Police Commission by limiting its
xxx xxx xxx power "to 


 control" over the Philippine National Police
(PNP), thus, " 
 " remained with the Department Secretary under
MR. NATIVIDAD. . . . The basic tenet whom both the National Police Commission and the PNP were placed.
"
of a modern police organization is to chanrobles virtual law library

remove it from the military. ""

We do not share this view. chanroblesvirtualawlibrary chanrob les virtual law li brary

xxx xxx xxx chanrobles virtual law library

To begin with, one need only refer to the fundamentally accepted

Here in our draft Constitution, we have already made a principle in Constitutional Law that the President has control of all
constitutional postulate that the military cannot occupy executive departments, bureaus, and offices to lay at rest petitioner's
any civil service position [in Section 6 of the Article on contention on the matter. chanroblesvirtualawlibrary chanrobles virtual law library

the Civil Service "

] Therefore, in keeping with this and
because of the universal acceptance that a police force This presidential power of control over the executive branch of
is a civilian function, a public service, and should not government extends over all executive officers from Cabinet Secretary
be performed by military force, one of the basic reforms to the lowliest clerk "4 and has been held by us, in the landmark case of
we are presenting here is that it should be separated Ä 
 . , "! to mean "the power of [the President] to alter
from the military force which is the PC. "# or modify or nullify or set aside what a subordinate officer had done in
the performance of his duties and to substitute the judgment of the
xxx xxx xxx chanrobles virtual law library former with that of the latter." It is said to be at the very "heart of the
meaning of Chief Executive." " chanrobles virtual law library

Furthermore:
xxx xxx xxx
. . . the civilian police cannot blossom into full
 he will have to delegate some of them to
profession because most of the key positions are being
chanrobles virtual law library
Equally well accepted, as a corollary rule to the control powers of the
President, is the "Doctrine of Qualified Political Agency". As the
President cannot be expected to exercise his control powers all at the
same time and in person,
his Cabinet members. chanroblesvirtualawlibrary chanrobles virtual law libra ry

occupied by the military So, it is up to this Commission

to remove the police from such a situation so that it can Under this doctrine, which recognizes the establishment of a single
develop into a truly professional civilian police. . . . " chanrobles virtual law executive,
" "all executive and administrative organizations are
adjuncts of the Executive Department, the heads of the various
library

Hence, the "one police force, national in scope, and civilian in executive departments are assistants and agents of the Chief Executive,
character" provision that is now Article XVI, Section 6 of the 1987 and, except in cases where the Chief Executive is required by the
Constitution.
chanroblesvirtualawlibra ry chanrobles virtual law libra ry
Constitution or law to act in person on the exigencies of the situation
demand that he act personally, the multifarious executive and
administrative functions of the Chief Executive are performed by and
through the executive departments, and the 
 

  imposed upon members of the Philippine National

 

"  

  a


a   Police by the Chief of the PNP; chanrobles virtual law libra ry

"
  
   



!




 
!
."

(emphasis ours) chanrobles virtual law library (k) Exercise appellate jurisdiction through .the regional.
appellate boards over administrative cases against
Thus, and in short, "the President's power of control is directly policemen and over decisions on claims for police
exercised by him over the members of the Cabinet who, in turn, and by benefits;
his authority, control the bureaus and other offices under their
respective jurisdictions in the executive department."
# chanrobles virtual law library xxx xxx xxx chanrobles virtual law library

Additionally, the circumstance that the NAPOLCOM and the PNP are Sec. 26. The Command and direction of the PNP shall
placed under the reorganized Department of Interior and Local be vested in the Chief of the PNP . . . Such command
Government is merely an administrative realignment that would and direction of the Chief of the PNP may be delegated
bolster a system of coordination and cooperation among the citizenry, to subordinate officials with respect to the units under
local executives and the integrated law enforcement agencies and their respective commands, in accordance with the rules
public safety agencies created under the assailed Act,
 the funding of and regulations prescribed by the Commission. . . .
the PNP being in large part subsidized by the national government.
library
chanroblesvirtualawlibra ry chanrobles virtual law

xxx xxx xxx chanrobles virtual law library

Such organizational set-up does not detract from the mandate of the
Constitution that the national police force shall be administered and Sec. 35. . . . To enhance police operational efficiency
controlled by a national police commission as at any rate, and in fact, and effectiveness, the Chief of the PNP may constitute
the Act in question adequately provides for administration and  
  such other support units as may be necessary subject to
at the commission level, as shown in the following provisions, to wit: the approval of the Commission. . . .

Sec. 14.  
;

  
  . - xxx xxx xxx chanrobles virtual law library

The Commission shall exercise the following powers

and functions: Sec. 37. . . . There shall be established a performance
evaluation system which shall be administered in
xxx xxx xxx chanrobles virtual law library
accordance with the rules, regulations and standards;
and a code of conduct promulgated by the Commission
(i) Approve or modify plans and programs on education for members of the PNP. . . .
and training, logistical requirements, communications,
records, information systems, crime laboratory, crime xxx xxx xxx
prevention and crime reporting; chanrobles virtual law libra ry

Petitioner further asserts that in manifest derogation of the power of

(j) Affirm, reverse or modify, through the National control of the NAPOLCOM over the PNP, RA 6975 vested the power
Appellate Board, personnel disciplinary actions to choose the PNP Provincial Director and the Chiefs of Police in the
involving demotion or dismissal from the service Governors and Mayors, respectively; the power of "operational
supervision and control" over police units in city and municipal
mayors; in the Civil Service Commission, participation in Governors and mayors 
 
/

appointments to the positions of Senior Superintendent to Deputy

 of the Commission in their respective
Director-General as well as the administration of qualifying entrance
examinations; disciplinary powers over PNP members in the "People's
Law Enforcement Boards" and in city and municipal mayors.
Once more, we find no real controversy upon the foregoing
assertions. chanroblesvirt ualawlibrary chanrobles virt ual law libra ry
It is true that when the Constitutional Commissioners of 1986 provided
that the authority of local executives over the police units in their
jurisdiction shall be provided by law, they intended that the day-to-day
functions of police work like crime, investigation, crime prevention
activities, traffic control, etc., would be under the operational control
of the local executives as it would not be advisable to give full control
of the police to the local executives.
They reasoned that in the past, this gave rise to warlordism, bossism,
and sanctuaries for vices and abuses.
4 chanrobles virtual law libra ry
It would appear then that by vesting in the local executives the power
to choose the officers in question, the Act went beyond the bounds of
the Constitution's intent.
Not so. We find light in the principle of constitutional construction that
every presumption should be indulged in favor of constitutionality and
the court in considering the validity of the statute in question should
give it such reasonable construction as can be reached to bring it
within the fundamental
 
territorial jurisdictions. ÷, the local executives
shall discharge the following functions: chanrobles virtual law libra ry
chanrobles virtual law library
a.) Provincial Governor - (1) . . . chanroblesvirtualawlibrary chanrobles virtual law l ibrary
The provincial governor shall choose the provincial
director from a list of three (3) eligibles recommended
by the PNP Regional Director. chanroblesvirtualawlibrary chanrobles virtual law l ibrary
4) . . . City and municipal mayors shall have the
following authority over the PNP units in their
respective jurisdictions: chanrobles virtual law l ibrary
chanrobles virtual law library i.) Authority to choose the chief of police from a list of
five (5) eligibles recommended by the Provincial Police
Director. . . . (Emphasis ours)
full control remains with the National Police Commission. chanroblesvirtualawlib rary chanrobles virtual law lib rary
We agree, and so hold, with the view of the Solicitor General that
chanroblesvirtualawlibrary chanrobles virtual law library "there is no usurpation of the power of control of the NAPOLCOM
under Section 51 because under this very same provision, it is clear
that the local executives are only acting as representatives of the
NAPOLCOM. . . . As such deputies, they are answerable to the
NAPOLCOM for their actions in the exercise of their functions under
that section. Thus, unless countermanded by the NAPOLCOM, their
acts are valid and binding as acts of the NAPOLCOM."
 It is
law.
!
chanrobles virtual law libra ry significant to note that the local officials, as NAPOLCOM
representatives, will choose the officers concerned from a list of
Under the questioned provisions, which read as follows: eligibles (those who meet the general qualifications for appointment to
the PNP) # to be recommended by PNP officials. chanroblesvirtuala wlibrary chanro bles virtual law l ibrary

D. PARTICIPATION OF LOCAL EXECUTIVES IN

THE ADMINISTRATION OF THE PNP. chanroblesvirtualawlibrary chanrobles virt ual law libra ry The same holding is true with respect to the contention on the
operational supervision and control exercised by the local officials.
Sec. 51.   . — 
 
 Those officials would simply be acting as representatives of the
@
 ; . chanroblesvirtualawlib rary chanrobles virtual law lib rary Commission. chanroblesvirtualawlibrary chanrobles virtual law l ibrary
As regards the assertion involving the Civil Service Commission, and the said mayors. This is so under Section 20(c). Furthermore, it is
suffice it to say that the questioned provisions, which read: the Commission which shall issue the implementing guidelines and
procedures to be adopted by the PLEB for in the conduct of its
Sec. 31. ÷ 

 
Ä. - hearings, and it may assign NAPOLCOM hearing officers to act as
The Appointment of the officers and members of the legal consultants of the PLEBs (Section 43-d4, d5). chanroblesvirtualawlibrary chan robles virtual law libra ry

PNP shall be effected in the following manner: chanrob les virtual law library

As a disciplinary board primarily created to hear and decide citizen's

a.) Police Officer I to Senior Police Officer IV. - complaints against erring officers and members of the PNP, the
Appointed by the PNP regional director for regional establishment of PLEBs in every city, and municipality would all the
personnel or by the Chief of the PNP for national more help professionalize the police force. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

headquarters personnel and attested by the Civil Service

Commission; chanrobles virtual law library Petitioner would likewise have this Court imagine that Section 12 of
the questioned Act, the pertinent portion of which reads:
b.) Inspector to Superintendent. - Appointed by the
Chief of the PNP, as recommended by their immediate Sec. 12. 
   
- 




superiors, and attested by the Civil Service - 

 
 -. - During a period of
Commission; chanrobles virtual law library twenty- four (24) months from the effectivity of this
Act, the Armed Forces of the Philippines (AFP) shall
c.) Senior Superintendent to Deputy Director-General. - continue its present role of preserving the internal and
Appointed by the President upon recommendation of external security of the State:  

, that said period
the Chief of the PNP, with proper endorsement by the may be extended by the President, if he finds it
Chairman of the Civil Service justifiable, for another period not exceeding twenty-
Commission . . . chanroblesvirtualawlibrary chanrobles virtual law library four (24) months, after which, the Department shall
automatically take over from the AFP the primary role
Sec. 32. !
   . - The Civil of preserving internal security, leaving to the AFP its
Service Commission shall administer the qualifying primary role of preserving external security.
entrance examinations for policemen on the basis of the
standards set by the NAPOLCOM. xxx xxx xxx

precisely underscore the civilian character of the national police force, constitutes an "encroachment upon, interference with, and an
and will undoubtedly professionalize the same. chanroblesvirtualawlib rary chanrobles virtual la w library abdication by the President of, executive control and commander-in-
chief powers."chanrobles virtual law library

The grant of disciplinary powers over PNP members to the "People's

Law Enforcement Boards" (or the PLEB) and city and municipal That We are not disposed to do for such is not the case at all here. A
mayors is also not in derogation of the commission's power of control rejection thus of petitioner's submission anent Section 12 of the Act
over the PNP. chanroblesvirtualawlibrary chanrobles virtual law library should be in order in the light of the following exchanges during the
CONCOM deliberations of Wednesday, October 1, 1986:
Pursuant to the Act, the Commission exercises appellate jurisdiction,
thru the regional appellate boards, over decisions of both the PLEB xxx xxx xxx chanrobles virtual law library
MR. RODRIGO. Just a few questions. The President of MR. NATIVIDAD. Yes, in fact, the National Police
the Philippines is the Commander-in-Chief of all the Commission is under the Office of the President.
armed forces.chanroblesvirtualawlibrary chanrobles virtual law library (CONCOM RECORDS, Vol. 5, p. 296)

MR. NATIVIDAD. Yes, Madam President. chanroblesvirtualawlibra ry chanrobles virtual law library It thus becomes all too apparent then that the provision herein assailed
precisely gives muscle to and enforces the proposition that the national
MR. RODRIGO. Since the national police is not police force does not fall under the Commander-in-Chief powers of the
integrated with the armed forces, I do not suppose they President. This is necessarily so since the police force, not being
come under the Commander-in-Chief powers of the integrated with the military, is not a part of the Armed Forces of the
President of the Philippines. chanroblesvirtualawlibra ry chanrobles virtual law library Philippines. As a civilian agency of the government, it properly comes
within, and is subject to, the exercise by the President of the power of
MR. NATIVIDAD. They do, Madam President. By law executive control. chanroblesvirtualawlibrary chanrob les virtual law li brary

they are under the supervision and control of the

President of the Philippines. chanroblesvirtualawlibra ry chanrobles virtual law library Consequently, Section 12 does not constitute abdication of
commander-in-chief powers. It simply provides for the transition
MR. RODRIGO. Yes, but the President is not the period or process during which the national police would gradually
Commander-in-Chief of the national police. chanroblesvirtualawlibra ry chanrobles virtual law library assume the civilian function of safeguarding the internal security of the
State. Under this instance, the President, to repeat, abdicates nothing of
MR. NATIVIDAD. He is the President. chanroblesvirtualawlibrary chanrobles vi rtual law library his war powers. It would bear to here state, in reiteration of the
preponderant view, that the President, as Commander-in-Chief, is not a
MR. RODRIGO. Yes, the Executive. But they do not member of the Armed Forces. He remains a civilian whose duties
come under that specific provision that the President is under the Commander-in-Chief provision "represent only a part of the
Commander-in-Chief of all the armed forces. chanroblesvirtualawlibrary chanrob les virtual law library
organic duties imposed upon him. All his other functions are clearly
civil in nature." #"His position as a civilian Commander-in-Chief is
MR. NATIVIDAD. No, not under the Commander-in- consistent with, and a testament to, the constitutional principle that
Chief provision. chanroblesvi rtualawlibra ry chanrobles vi rtual law library
"civilian authority is, at all times, supreme over the military." (Article
II, Section 3, 1987 Constitution) chanrobles virtual law l ibrary

MR. RODRIGO. There are two other powers of the

President. The President has control over departments, Finally, petitioner submits that the creation of a "Special Oversight
bureaus and offices, and supervision over local Committee" under Section 84 of the Act, especially the inclusion
governments. Under which does the police fall, under therein of some legislators as members (namely: the respective
control or under supervision? chanrobles virtual law library
Chairmen of the Committee on Local Government and the Committee
on National Defense and Security in the Senate, and the respective
MR. NATIVIDAD. Both, Madam President. chanroblesvirtualawlibrary chanrobles virtual law l ibrary
Chairmen of the Committee on Public Order and Security and the
Committee on National Defense in the House of Representatives) is an
MR. RODRIGO. Control and Supervision. chanroblesvirtualawlibra ry chanrobles virtual law library
"unconstitutional encroachment upon and a diminution of, the
President's power of control over all executive departments, bureaus
and offices."chanrobles virtual law libra ry
But there is not the least interference with the President's power of This commission is, for obvious reasons, not in the same category as
control under Section 84. The Special Oversight Committee is simply the 
 

Constitutional Commissions of Article IX and the
an 
 or transitory body, established and tasked solely with other constitutionally created 
 

Office, namely, the
planning and overseeing the immediate "transfer, merger and/or Commission on Human Rights. chanroblesvirtualawlibrary chanrobles virtual law libra ry

absorption" into the Department of the Interior and Local

Governments of the "involved agencies." This it will undertake in By way of resume, the three Constitutional Commissions (Civil
accordance with the phases of implementation already laid down in Service, Audit, Elections) and the additional commission created by
Section 85 of the Act and once this is carried out, its functions as well the Constitution (Human Rights) are all 
 

of the Executive;
as the committee itself would cease altogether. #
As an 
  body, but the National Police Commission 
. # In fact, it was stressed
its creation and the functions it exercises, decidedly do not constitute during the CONCOM deliberations that this commission would be
an encroachment and in diminution of the power of control which under the President, and hence may be controlled by the President,
properly belongs to the President. What is more, no executive thru his or her 
a , the Secretary of the Interior and Local
department, bureau or office is placed under the control or authority, Government. chanroblesvirtualawlibrary chanrobles virtual law library

of the committee. ## chanrobles virtual law library

WHEREFORE, having in view all of the foregoing holdings, the

As a last word, it would not be amiss to point out here that under the instant petition is hereby DISMISSED for lack of merit. chanroblesvirtualawlibrary chanrobles vi rtual law library

Constitution, there are the so-called 
 


Constitutional
Commissions, namely: The Civil Service Commission, Commission SO ORDERED.
on Audit, and the Commission on Elections. (Article IX-A, Section 1)
virtual law library
chanrobles

".: "Ä 2"—

/": "/"; "
As these Commissions perform vital governmental functions, they 
"7
"—D 2÷# "Ä

"a
"-
": "
have to be protected from external influences and political pressures.   
  ":: " 
Hence, they were made constitutional bodies, independent of and not
under any department of the government. # Certainly, they are not 
under the control of the President. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

Y
The Constitution also created an 
 

office called the
"Commission on Human Rights." (Article XIII, Section Y
17[1]).However, this Commission is not on the same level as the
Constitutional Commissions under Article IX, although it is Y
independent like the latter Commissions. # It still had to be constituted
Y
thru Executive Order No. 163 (dated May 5, 1987). chanroblesvirtualawlibrary chanrobles virtual law libra ry

Y
In contrast, Article XVI, Section 6 thereof, merely mandates the
statutory creation of a national police commission that will administer Y
and control the national police force to be established thereunder. chanroblesvirtualawlibra ry chanrobles vi rtual law library

Y
 epublic of the Philippines obtained a rating of 81.78% in the senior teacher (promotional)
$%&'(%) examination ... contains certain unauthorized erasures and insertions"
Manila which make it different from the notice as originally issued. chanroblesvirtualawlibrary chanrobles vi rtual law library

EN BANC After a formal investigation at which he denied making the alleged

erasures and insertions, petitioner-appellant was found guilty of
serious misconduct consisting of falsification of a civil service rating
card in Administrative Case No. R-24579 of the Civil Service
c
4!!405

"4" Commission and was accordingly dismissed from the service by the
Civil Service Commissioner effective on the last day of duty with pay
0 +$('%* (petitioner-appellant, vs. *( in a decision dated August 6, 1965. In the same decision, the Civil
1 ,($%1+,(cc c9$*( Service Commission likewise directed that the said decision be
/+) + (1 ,+(,cc9&5$7cc
 executed immediately in the public interest (Annex A, petition, pp. 12-
'&,($ /+),c $: 
 c9$7cc 14, rec.).
chanroblesvirtualawlibrary chanrobles virt ual law libra ry

,crespondents-appellees.
The Civil Service Commissioner coursed the aforesaid decision
' 6 $+ p
chanrobles virtual law library
through the respondent Director of Public Schools, who in turn
transmitted the same to the respondent superintendent of city schools
This petition for 
  and prohibition with the prayer for the of Davao City in a letter dated September 30, 1965, directing that the
issuance of a writ of preliminary mandatory injunction was filed by decision of the Civil Service Commissioner be executed immediately
petitioner-appellant Francisco M. Cucharo by way of appeal (p. 144, "but not beyond ten days from receipt thereof" and requesting that
rec.) from the order dated July 20, 1966 respectively dismissing the three copies of the special order covering the dismissal of petitioner-
petition as well as denying appellant's motion for summary judgment appellant from the service together with the advice of the date he
and from the order of August 4, 1966 denying the motion for acknowledges receipt of the decision be furnished his office (Director
reconsideration of the order of July 20, 1966 (pp. 128, 142., rec.).chanroblesvirtualawlibrary chanrob les virtual law li brary
of Public Schools) by return indorsement thereof (Annex B of the
petition, p. 14, rec.). chanroblesvirtualawlibrary chanrobles virtual law library

It is undisputed that petitioner-appellant Francisco M. Cucharo was

formerly the principal of Calinan Elementary School, Calinan District, Pursuant to the aforesaid instructions of the Director of Public
Davao City. On January 28, 1956, a senior teacher (regular) Schools, the respondent superintendent of city schools of Davao City
examination was given by the Civil Service Commission. When he issued Division Order No. 677, s. 1965, dated December 1, 1965
was promoted as District Supervisor sometime in 1960 by virtue of his making of record the separation of the petitioner-appellant from the
junior teacher eligibility, he gave as additional qualification has senior service pursuant to the order of dismissal by the Commissioner of
teacher (promotional) eligibility, claiming that he received on March Civil Service effective that day, December 1, 1965 (Annex C of the
28, 1958 from the Civil Service Commissioner a report of his rating petition or Exh. 2 - Motion, pp. 15, 173, rec.); and transmitted the said
showing that he obtained a passing mark of 81.78% in the senior Division Order No. 677 together with his first indorsement dated
teacher examination. Because he actually failed in the said senior December 1, 1965 to petitioner-appellant inviting attention to the basic
teacher examination, in a third indorsement dated August 27, 1962, the communication of the Director of Public Schools and to the enclosed
Commissioner of Civil Service required him to explain why "the decision of the Commissioner of Civil Service, and requesting that
notice of rating dated March 28, 1958 purporting to show that he petitioner-appellant acknowledges receipt of the enclosed decision of
the Civil Service Commissioner by return indorsement (Exh. 1, preliminary mandatory injunction in the Court of First Instance of
Opposition, p. 172, rec.). chanroblesvirtualawlibrary chanrobles virtual law library Davao: (1) to declare the Civil Service Commissioner with having
acted with grave abuse of discretion and without authority of law in
In his second indorsement dated December 1, 1965, petitioner- ordering his immediate dismissal; (2) to declare null and void the
appellant acknowledged receipt at 3 o'clock in the afternoon of that decision of the Civil Service Commissioner dismissing him from the
day, December 1, 1965, "the said order of dismissal entitled Division service; (3) to declare the respondent superintendent of city schools as
Order No. 677, series of 1965, together with a copy of the letter of the without authority of law in issuing Division Order No. 677, series of
Director of Public Schools, dated September 30, 1965, to the Division 1965, as well as to declare said order null and void; and (4) to declare
Superintendent of Schools, Davao City, to execute immediately the respondent-appellee Director of Public Schools as having acted with
alleged decision of the Commissioner of Civil Service in grave abuse of discretion and without authority of law in amending the
Administrative Case No. R-24579, a copy of which is attached to the decision of the Civil Service Commission with respect to the execution
said letter," expressly stating therein that he is receiving the same thereof (pp. 1-21, rec.). chanroblesvirtualawlibrary chanrobles vi rtual law library

"UNDER PROTEST because the said copy of the decision is ordered

executed before he could receive it and before he could have the On December 4, 1965, the lower court issued ex parte a writ of
opportunity to read it, thereby arbitrarily denying and prevailing him preliminary injunction directing the respondents-appellees to refrain
from filing a motion for its reconsideration or appealing the same ..." from executing the decision in Administrative Case No. R-24579 and
(Annex D, petition or Exh. T, Motion, p. 16, rec.). chanroblesvirtualawlibrary chanrobles vi rtual law library to refrain from replacing petitioner-appellant (p. 22-23, 26-27, rec.).
chanrobles virtual law library
chanroblesvirtualawlibrary

In another letter also dated December 1, 1965 addressed to Mr. On December 27, 1965, petitioner-appellant filed a motion to declare
Primitivo Raquel, Principal of Calinan Central Elementary School, respondent division superintendent of city schools in contempt of court
Davao City, the respondent-appellee superintendent of city schools for having designated the principal teacher of Calinan Elementary
designated the former "as Principal in Charge of Calinan District vice School to assume the duties of District Supervisor of Calinan District
Mr. Francisco Cucharo, separated, effective immediately" and in violation of the preliminary injunction, claiming that he never
instructed him to receive all money and property responsibility from vacated the position, much less turned over the same to the one
Mr. Cucharo, herein petitioner-appellant (Exh. Q, Motion, p. 168, designated to perform its duties (pp. 30-41, rec.). chanroblesvirtualawlibrary chanrobles virtual law li brary

rec.).
chanroblesvirtualawlibrary chanrobles virt ual law libra ry

On December 27, 1965, the Civil Service Commission received

In his letter-circular dated December 6, 1965, addressed to all petitioner-appellant's motion for reconsideration on the decision of the
principals/head teachers, Principal In Charge Primitivo R. Raquel Civil Service Commissioner dated August 6, 1965, which motion was
quoted verbatim the letter of respondent-appellee superintendent of referred to the Director of Public Schools by the first indorsement
city schools dated December 1, 1965 for their information and dated January 17, 1966 for comment and recommendation (par. 2[b] of
guidance (Exh. R - Motion, p. 169, rec.); and on the same day as such respondent's Answer dated January 21, 1966, pp. 83-84 rec.). chanroblesvirtualawlibrary chanrobles virtual law lib rary

principal-in-charge, he issued another letter circular to all principals/

head teachers and teacher-in-charge in the Calinan District informing On December 31, 1965, respondent superintendent of city schools
them that there will be a meeting on December 8, 1965 at 7:30 in the filed a motion to quash preliminary writ of injunction and an
morning (Exh. S, Motion, p. 170, rec.). chanroblesvirtualawlibrary chanrobles virtual law library
opposition to the motion to declare him in contempt of court (pp. 45-
47, rec.). chanroblesvirtualawlibrary chanrobles virt ual law libra ry

Not satisfied with the decision, petitioner-appellant filed on December

2, 1965 the present petition for 
  and prohibition with writ of
On January 3, 1966, petitioner-appellant filed a motion to declare July 1, 1966; (2) in dismissing the petition; and (3) in not granting the
respondent superintendent of city schools in default (p. 42, rec.). chanroblesvirtualawlibrary chanrobles virt ual law libra ry motion for summary judgment. chanroblesvirtualawlibra ry chanrobles virtual law library

On January 5, 1966, the trial court, after hearing, issued an order The three errors assigned by petitioner-appellant shall be discussed
dissolving the writ of preliminary injunction issued on December 4, jointly.
chanroblesvirtualawlibrary chanrob les virtual law library

1965 and denied the motion to declare respondent superintendent of

city schools in contempt of court on the ground that respondent As a major premise, it has been the repeated pronouncement of this
superintendent of city schools had already accomplished the acts Supreme Tribunal that the Civil Service Commissioner has the
sought to be restrained (p. 49, rec.). In another order issued on the discretion to order the immediate execution in the public interest of his
same day, the lower court denied the motion to declare respondent decision separating petitioner-appellant from the service, always
superintendent of city schools in default (p. 44, rec.). chanroblesvirtualawlibrary chanrobles virt ual law libra ry subject however to the rule that, in the event the Civil Service Board of
Appeals or the proper court determines that his dismissal is illegal, he
On January 11, 1966, petitioner-appellant filed an urgent motion for should be paid the salary corresponding to the period of his separation
reconsideration of the two orders dated January 5, 1966 dissolving the from the service until his reinstatement." chanrobles virtual law library

writ of preliminary injunction and denying the motion to declare

respondent superintendent of city schools in default (pp. 50-59, 60-62, As elucidated by Mr. Justice Arsenio Dizon in the Cabigao case,
rec.).
chanroblesvirtualawlibrary chanrobles virt ual law libra ry "although the decision of the Commissioner of Civil Service adverse
to the government employee under investigation is appealable to the
On July 1, 1966, the date set for pre-trial, the lower court issued an Civil Service Board of Appeals, the Commissioner has discretion to
order granting respondent superintendent of city schools five days enforce it and make it effective pending appeal, to protect public
within which to file a motion to dismiss the petition and petitioner- interest. However, the removal or the continued suspension of the
appellant was given a similar period to file an opposition (p. 107, rec). employee effected through the execution of the appealed decision shall
On July 6, l966, a motion to dismiss was filed (pp. 109-111, rec.) and be considered as unjustified should said decision be reversed by the
on July 8, 1966, petitioner-appellant filed his opposition thereto with a Civil Service Board of Appeals and, in such case, as provided for in
counter-motion for summary judgment (pp. 112-121, rec.). chanroblesvirtualawlibrary chanrobles virt ual law libra ry Section 35 of the Civil Service Act of 1959, the employee 'shall be
restored to his position with full pay for the period of suspension'."
chanrobles virtual law libra ry

On July 20, 1966, the lower court issued an order dismissing the
petition and denied is without merit petitioner-appellant's motion for Petitioner-appellant is indulging in euphemism when he states that the
summary of judgement. (p. 128, rec.). chanroblesvirtualawlibrary chanrobles virtual law library decision dismissing him from the service cannot be executed
immediately before he could receive it and before he could have the
Hence, this appeal (p. 144, rec.). chanroblesvirtualawlibrary chanrobles virt ual law libra ry opportunity to read the same, thereby arbitrarily preventing him from
filing a motion for reconsideration or appealing the same; because he
Petitioner-appellant claims that the lower court erred: (1) in not actually received the copy of the decision consisting only of two pages
resolving his urgent motion for reconsideration of the order dated (see Annex A to the petition, pp. 12-13, rec.) which will not take him
January 5,1966 particularly the portion dissolving the writ of five minutes to read and comprehend its contents. chanroblesvirtualawlibrary chanrobles virtual law lib rary

preliminary injunction, and the motion for reconsideration of order

dated January 5, 1966 denying his motion to declare respondent While he received only a copy of the decision, he does not impugn its
superintendent of city schools in default before setting the pre-trial on correctness or accuracy. At any rate, he was fortunate for the decision
dated August 6, 1965, was executed only on December 1, 1965 or over January 5, 1966 denying his motion to declare respondent
three months thereafter. chanroblesvirtualawlibrary chanrobles virtual law lib rary superintendent of city schools in default, which would merely be an
exercise in futility. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

That the Commissioner of Civil Service concluded that "the facts of

this case engender reasonable belief that respondent is guilty of the While it is true that exhausting of administrative remedies is a general
charge" is only one way of expressing the idea that the facts support rule, the case of the petitioner-appellant does not fall under anyone of
the reasonable conclusion that petitioner-appellant is guilty of the the recognized exceptions thereto as enunciated by this Tribunal, some
charge against him. As to the intrinsic merits of the findings of facts of


,  .
the Civil Service Commissioner, the same would still depend on the
appreciation thereof by the Civil Service Board of Appeals. As
heretofore stated, should he be exonerated by the Civil Service Board
of Appeals or my the Civil Service Commissioner himself acting on
his motion for reconsideration, petitioner-appellant would be entitled
to recover back salaries. chanroblesvirtualawlibrary chanrobles virtual law library
The basic ground that the petition states no cause of action, upon
which respondent superintendent of city schools predicates his motion
to dismiss before the lower court, which is also alleged as a special
defense in the Answer filed by the Solicitor General (p. 85, rec.), is
predicated on the fact that petitioner-appellant has not exhausted
administrative remedies by filing a motion for reconsideration of the
>/"
.! does not apply to the case at
decision filed with the Civil Service Commissioner (which he
subsequently filed on December 27, 1965) and an appeal to the Civil
Service Board of Appeals, before he can seek any remedy from the
court. There is nothing in the record indicating the status of his motion
for reconsideration of the decision of the Civil Service Commissioner
or whether he has filed an appeal with the Civil Service Board of
Appeals. Such an omission to exhaust all administrative remedies open
to him under the law is fatal to his petition, for it signifies lack of a
cause of action.#
chanrobles virtual law library
Because the order of the trial court dated August 6, 1966 dismissing
the petition and denying his motion for summary judgment, after
considering the grounds invoked in the motion to dismiss as well as
the reasons advanced by petitioner-appellant in opposition thereto and
of which are re-stated in 
chanroblesvirtualawlibrary chanrobles vi rtual law library
Petitioner-appellant will not suffer irreparable injury or damage by
awaiting a final administrative action in his case;" because he can
collect back salaries should his dismissal be adjudged illegal. The
issues involved in the decision the Civil Service Commissioner
separating him from the service are not purely illegal questions. The
act of the Commissioner of Civil Service is not patently devoid of any
color of authority or manifestly illegal; neither did the Civil Service
Commissioner act without or in excess of his jurisdiction nor commit a
grave abuse of discretion amounting to lack of
jurisdiction.4
chanrobles virtual law l ibrary
The case of —
 
bar. In the Guisadio case, the execution of the decision was enjoined
by the trial court; because in a case, which the decision of the
Commissioner of Civil Service "considered Guisadio resigned from
the service effective on (his) last day of service with pay," it did not
expressly direct that the said decision is immediately executory in the
public interest. It was the respondent District Supervisor therein who
wanted its immediate execution, for he directed Guisadio to turn over
all his (Guisado's ) property accountabilities before Guisadio received
a copy of the decision itself, which immediate implementation was
joined by trial court therein. In the instant case, the decision of the
Civil Service Commissioner expressly directs its immediate execution
in public interest. We ruled in the Guisadio case that based "on the
facts presented to the trial judge," the trial judge "adopted the proper
view" and "did not err" in enjoining the immediate execution of the
to support his counter-motion for summary judgment, is proper and decision of the Civil Service Commissioner. chanrobles virtual law library

legal, there was no need for the lower court to resolve petitioner-
appellant's motion for reconsideration of the order dated January 5, However that may be, the case of  
 7a "K   
1966 quashing the writ of preliminary injunction and the order dated 
, ÷
 ÷

—and a  -  ,
which were decided subsequently to the Guisadio case, should be Y
decisive of the case at bar since the relevant facts of the aforesaid
cases and of the instant case are analogous. chanroblesvirtualawlibrary chanrobles virtual law library
Y

Neither can petitioner-appellant properly invoke the case of ÷  Y

>a"
. " In the instant case, the decision of the Civil Service
Y
Commissioner was promulgated after an administrative investigation
of the charges against appellant. In said Abaya case, the petitioner Y
therein was ordered dismissed from the service without prior
investigation or hearing. In the Abaya case, only a purely legal Y
question was involved, and the order of dismissal therein was patently
illegal by reason of the fact that the petitioner therein was denied due Y
process, which issues removed the Abaya case from being governed
by the doctrine of exhaustion of administrative remedies. 11 As Y
heretofore stated, such exceptions do not obtain here. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

Y
We are therefore constrained to dismiss as We hereby dismiss the
Y
appeal. With costs against petitioner-appellant.
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
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 c!!  :"!" adjacent coal blocks; and that MMIC failed and refused to pay the
reimbursements agreed upon and to assume IEI's loan obligation as
+,%$)+ )&+$$+

 , vs. )**( provided in the Memorandum of Agreement (  , p. 38). IEI also
(%)(0 && $' +,%2%'++K prayed that the Energy Minister be ordered to approve the return of the
+,%$)+ (&( )+()**((+'( coal operating contract from MMIC to petitioner, with a written
/ $( 7:' c9 
 confirmation that said contract is valid and effective, and, in due
&*++&&+ )+( 1 6 

. course, to convert said contract from an exploration agreement to a
development/production or exploitation contract in IEI's favor. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

'+(* p

Respondent, Philippine National Bank (PNB), was later impleaded as
This petition seeks the review and reversal of the Decision of co-defendant in an Amended Complaint when the latter with the
respondent Court of Appeals in CA-G.R. CV No. 12660, " which ruled Development Bank of the Philippines effected extra-judicial
adversely against petitioner herein.chanroblesvirt ualawlibrary chanrobles virt ual law libra ry foreclosures on certain mortgages, particularly the Mortgage Trust
Agreement, dated 13 July 1981, constituted in its favor by MMIC after
Petitioner Industrial Enterprises Inc. (IEI) was granted a coal operating the latter defaulted in its obligation totalling around P22 million as of
contract by the Government through the Bureau of Energy 15 July 1984. The Court of Appeals eventually dismissed the case
Development (BED) for the exploration of two coal blocks in Eastern against the PNB (Resolution, 21 September 1989). chanroblesvirtualawlibra ry chanrobles virtual law lib rary

Samar. Subsequently, IEI also applied with the then Ministry of

Energy for another coal operating contract for the exploration of three Strangely enough, Mr. Jesus S. Cabarrus is the President of both IEI
additional coal blocks which, together with the original two blocks, and MMIC. chanroblesvirtualawlibrary chanrobles virtual law library

comprised the so-called "Giporlos Area." chanrobles virtual law l ibrary

In a summary judgment, the Trial Court ordered the rescission of the

IEI was later on advised that in line with the objective of rationalizing Memorandum of Agreement, declared the continued efficacy of the
the country's over-all coal supply-demand balance . . . the logical coal coal operating contract in favor of IEI; ordered the reversion of the two
operator in the area should be the Marinduque Mining and Industrial coal blocks covered by the coal operating contract; ordered BED to
Corporation (MMIC), which was already developing the coal deposit issue its written affirmation of the coal operating contract and to
in another area (Bagacay Area) and that the Bagacay and Giporlos expeditiously cause the conversion thereof from exploration to
Areas should be awarded to MMIC (  , p. 37). Thus, IEI and development in favor of IEI; directed BED to give due course to IEI's
MMIC executed a Memorandum of Agreement whereby IEI assigned application for a coal operating contract; directed BED to give due
and transferred to MMIC all its rights and interests in the two coal course to IEI's application for three more coal blocks; and ordered the
blocks which are the subject of IEI's coal operating contract. chanroblesvirtualawlibrary chanrobles vi rtual law library payment of damages and rehabilitation expenses (  , pp. 9-10). chanroblesvirtualawlibrary chanrobles virtual law lib rary

Subsequently, however, IEI filed an action for rescission of the In reversing the Trial Court, the Court of Appeals held that the
Memorandum of Agreement with damages against MMIC and the then rendition of the summary judgment was not proper since there were
Minister of Energy Geronimo Velasco before the Regional Trial Court genuine issues in controversy between the parties, and more
of Makati, Branch 150,
alleging that MMIC took possession of the importantly, that the Trial Court had no jurisdiction over the action
subject coal blocks even before the Memorandum of Agreement was considering that, under Presidential Decree No. 1206, it is the BED
finalized and approved by the BED; that MMIC discontinued work that has the power to decide controversies relative to the exploration,
thereon; that MMIC failed to apply for a coal operating contract for the exploitation and development of coal blocks (  , pp. 43-44). chanroblesvirtualawlibrary chanrobles virtual law library
Hence, this petition, to which we resolved to give due course and to thereto; and undertaking by itself or through service contracts such
decide. chanroblesvirtualawlibrary chanrobles vi rtual law library exploitation and development, all in the interest of an effective and
coordinated development of extracted resources. chanroblesvirtualawlibrary cha nrobles virtual law l ibrary

Incidentally, the records disclose that during the pendency of the

appeal before the Appellate Court, the suit against the then Minister of Thus, the pertinent sections of P.D. No. 1206 provide:
Energy was dismissed and that, in the meantime, IEI had applied with
the BED for the development of certain coal blocks. chanroblesvirtualawlibrary chanrobles vi rtual law library Sec. 6. 7 a- 
. There is created
in the Department a Bureau of Energy Development,
The decisive issue in this case is whether or not the civil court has hereinafter referred to in this Section as the Bureau,
jurisdiction to hear and decide the suit for rescission of the which shall have the following powers and functions,
Memorandum of Agreement concerning a coal operating contract over among others: chanrobles virtual law library

coal blocks. A corollary question is whether or not respondent Court of

Appeals erred in holding that it is the Bureau of Energy Development a. Administer a 
   a for the
(BED) which has jurisdiction over said action and not the civil encouragement, guidance, and whenever necessary,
court.chanroblesvirtualawlibrary chanrobles virtual law l ibrary regulation of such business activity relative to the
!  
 "!  

 "
 
"
!

 
While the action filed by IEI sought the rescission of what appears to   
 " , . . . chanroblesvirtualawlibra ry chanrobles virtual law libra ry

be an ordinary civil contract cognizable by a civil court, the fact is that

the Memorandum of Agreement sought to be rescinded is derived from The decisions, orders, resolutions or actions of the
a coal-operating contract and is inextricably tied up with the right to Bureau may be appealed to the Secretary whose
develop coal-bearing lands and the determination of whether or not the decisions are final and executory unless appealed to the
reversion of the coal operating contract over the subject coal blocks to President. (Emphasis supplied.)
IEI would be in line with the integrated national program for coal-
development and with the objective of rationalizing the country's over- That law further provides that the powers and functions of the defunct
all coal-supply-demand balance, IEI's cause of action was not merely Energy Development Board relative to the implementation of P.D. No.
the rescission of a contract but the reversion or return to it of the 972 on coal exploration and development have been transferred to the
operation of the coal blocks. Thus it was that in its Decision ordering BED, provided that coal operating contracts including the transfer or
the rescission of the Agreement, the Trial Court, 
" declared
the continued efficacy of the coal-operating contract in IEI's favor and
directed the BED to give due course to IEI's application for three (3)
IEI more coal blocks. These are matters properly falling within the
domain of the BED.
assignment of interest in said contracts, shall require the approval of
the Secretary (Minister) of Energy (Sec. 12, P.D. No. 1206).
Sec. 12. . . . the powers and functions transferred to the
chanroblesvirtualawlibrary chanrobles virt ual law libra ry Bureau of Energy Development are:

For the BED, as the successor to the Energy Development Board xxx xxx xxx chanrobles virtual law library

(abolished by Sec. 11, P.D. No. 1206, dated 6 October 1977) is tasked
with the function of establishing a comprehensive and integrated ii. The following powers and functions of the Energy
national program for the exploration, exploitation, and development Development Board under PD No. 910 . . . chanroblesvirtualawlibrary chanrobles virtual law l ibrary

and extraction of fossil fuels, such as the country's coal resources;

adopting a coal development program; regulating all activities relative
 (1)@

$
 
 a
a
" 



 
&(United States v. Western Pacific
 

"

!  
 " Railroad Co., 352 U.S. 59, Emphasis supplied). chanroblesvirtualawlibra ry chanrobles virtual law library

!  

 "
 
"
!

  a
  . . .chanroblesvirtualawlibrary chanrobles virtual law library Clearly, the doctrine of primary jurisdiction finds application in this
case since the question of what coal areas should be exploited and
(2) a





!  
 " developed and which entity should be granted coal operating contracts
!  

 "
 
"
!

   
 over said areas involves a technical determination by the BED as the
. . . chanroblesvirtualawlibrary chanrobles virtua l law libra ry administrative agency in possession of the specialized expertise to act
on the matter. The Trial Court does not have the competence to decide
(P.D. No. 1206) (Emphasis supplied.) matters concerning activities relative to the exploration, exploitation,
development and extraction of mineral resources like coal. These
P.D. No. 972 also provides: issues preclude an initial judicial determination. It behooves the courts
to stand aside even when apparently they have statutory power to
Sec. 8. Each coal operating contract herein authorized proceed in recognition of the primary jurisdiction of an administrative
shall . . . be executed by the Energy Development agency.
Board.
One thrust of the multiplication of administrative
Considering the foregoing statutory provisions, the jurisdiction of the agencies is that the interpretation of contracts and the
BED, in the first instance, to pass upon any question involving the determination of private rights thereunder is no longer a
Memorandum of Agreement between IEI and MMIC, revolving as its uniquely judicial function, exercisable only by our
does around a coal operating contract, should be sustained. chanroblesvirtualawlibrary chanrobles virtual law library regular courts (Antipolo Realty Corp. vs. National
Housing Authority, 153 SCRA 399, at 407).
In recent years, it has been the jurisprudential trend to apply the
doctrine of primary jurisdiction in many cases involving matters that The application of the doctrine of primary jurisdiction, however, does
demand the special competence of administrative agencies. It may not call for the dismissal of the case below. It need only be suspended
occur that the Court has jurisdiction to take cognizance of a particular until after the matters within the competence of the BED are threshed
case, which means that the matter involved is also judicial in character. out and determined. Thereby, the principal purpose behind the doctrine
However, if the case is such that its determination requires the of primary jurisdiction is salutarily served.
expertise, specialized skills and knowledge of the proper
administrative bodies because technical matters or intricate questions Uniformity and consistency in the regulation of
of facts are involved, then relief must first be obtained in an business entrusted to an administrative agency are
administrative proceeding before a remedy will be supplied by the secured, and the limited function of review by the
courts even though the matter is within the proper jurisdiction of a judiciary are more rationally exercised, by preliminary
court. This is the doctrine of primary jurisdiction. It applies "where a resort, for ascertaining and interpreting the
claim is a a/
 
" and comes into play circumstances underlying legal issues, to agencies that
whenever enforcement of the claim requires the resolution of issues are better equipped than courts by specialization, by
which, under a regulatory scheme, have been placed within the special insight gained through experience, and by more flexible
competence of an administrative body, in such case
'
 procedure (Far East Conference v. United States, 342
  

 
a 

 U.S. 570).
With the foregoing conclusion arrived at, the question as to the 
propriety of the summary judgment rendered by the Trial Court
becomes unnecessary to resolve. chanroblesvirtualawl ibrary chanrobles virtual law library

WHEREFORE, the Court Resolved to DENY the petition. No costs.

chanrobles virtual law library
chanroblesvirtualawlibrary


SO ORDERED.

"
"

a
":: "  

 7 c5B 5


























 ublic of the Philippines the present case, acted otherwise than according to law. They cite the
$%&'(%) following statement in the opinion of the Court:
Manila
The voting on petitioners' standing in the previous case
EN BANC was a narrow one, with seven (7) members sustaining
petitioners' standing and six (6) denying petitioners'
right to bring the suit. The majority was thus a tenuous
one that is not likely to be maintained in any subsequent
c""!"c5" " litigation. In addition, there have been changes in the
membership of the Court, with the retirement of
6+($1 - +(&( ),(/+)($ (  Justices Cruz and Bidin and the appointment of the
++( +($' '1 '++( &%( writer of this opinion and Justice Francisco. Given this
($) &((&* +'),(0 ,( fact it is hardly tenable to insist on the maintenance of
$ )+ (($ 1,*+$)+)  0  the ruling as to petitioners' standing.
0 ,( (%//+)(+(($%  
2%+)+$,((' $0,,+=11$ Petitioners claim that this statement "conveys a none too subtle
=+1)() < , &(6& (-(

 , suggestion, perhaps a Freudian slip, that the two new
vs. ' %'( )( 7:7 c97 appointees, regardless of the merit of the Decision in the first
&7:: 7$B:;(99
7&*++&&+ Kilosbayan case against the lotto (Kilosbayan, et al. v.
 '+'  ')(&( )+( 

 Guingona, 232 SCRA 110 (1994)) must of necessity align
themselves with all the Ramos appointees who were dissenters
RESOLUTION in the first case and constitute the new majority in the second
lotto case." And petitioners ask, " 

 C"

Petitioners ask a question to which they have made up an answer.

',(3 p
chanrobles virtual law library
Their attempt at psychoanalysis, detecting a Freudian slip where none
exists, may be more revealing of their own unexpressed wish to find
Petitioners seek reconsideration of our decision in this case. They motives where there are none which they can impute to some members
insist that the decision in the first case has already settled (1) whether of the Court.chanroblesvirtualawlibrary chanrobles virtual law lib rary

petitioner Kilosbayan, Inc. has a standing to sue and (2) whether under
its charter (R.A. No. 1169, as amended) the Philippine Charity For the truth is that the statement is no more than an effort to !  -
Sweepstakes Office can enter into any form of association or rather than to'
 - the majority's decision to overrule the ruling in
collaboration with any party in operating an on-line lottery. the previous case. It is simply meant to explain that because the five
Consequently, petitioners contend, these questions can no longer be members of the Court who dissented in the first case (Melo, Quiason,
reopened. chanroblesvirtualawlibrary chanrobles virt ual law libra ry
Puno, Vitug and Kapunan, ::.) and the two new members (Mendoza
and Francisco, ::.) thought the previous ruling to be erroneous 
its
Because two members of the Court did not consider themselves bound reexamination not to be barred by 

, '

or
by the decision in the first case, petitioners suggest that the two, in conclusiveness of judgment, or law of the case, it was hardly tenable
joining the dissenters in the first case in reexamining the questions in for petitioners to insist on the first ruling. chanroblesvirtualawlibra ry chanrobles virtual law library
Consequently to petitioners' question " 

a

 

 pronouncements of this Honorable Court in its Decision

a
," implying some ulterior motives on the part of the new of May 5, 1995.
majority in reexamining the two questions, the answer is: None, except
a conviction on the part of the five, who had been members of the The PGMC made substantially the same manifestation as the
Court at the time they dissented in the first case, and the two new PCSO.
members that the previous ruling was erroneous. The eighth Justice
(Padilla, :.) on the other hand agrees with the seven Justices that the There was thus no "formal commitment" - but 

  -
ELA is in a real sense a lease agreement and therefore does not violate
R.A. No. 1169. chanroblesvirtualawlibrary chan robles virtual law libra ry
The decision in the first case was a split decision: 7-6. With the
retirement of one of the original majority (Cruz, :.) and one of the
dissenters (Bidin, :.) it was not surprising that the first decision in the
first case was later reversed.

, '

 or conclusiveness of judgment or law of the
It is argued that, in any case, a reexamination of the two questions is
barred because the PCSO and the Philippine Gaming Management
Corporation made a "  
chanroblesvirtualawlibra ry chanrobles vi rtual law library
that the parties were not filing a motion for reconsideration. Even if
the parties made a "formal commitment," the six (6) dissenting
Justices certainly could not be bound thereby not to insist on their
contrary view on the question of standing. Much less were the two
new members bound by any "formal commitment" made by the
parties. They believed that the ruling in the first case was erroneous.
Since in their view reexamination was not barred by the doctrine of

case, they voted the way they did with the remaining five (5)
dissenters in the first case to form a new majority of eight. chanroblesvirtualawlibrary chanrobles virtual law libra ry

not to ask for a
reconsideration of the Decision in the first lotto case and instead Petitioners ask, "  

 C" Because, as explained in the
submit a new agreement that would be in conformity with the PCSO decision, the first decision was erroneous 
no legal doctrine stood
Charter (R.A. No. 1169, as amended) and with the Decision of the in the way of its reexamination. It can, therefore, be asked "with equal
Supreme Court in the first Kilosbayan case against on-line, hi-tech candor": "Why should this 
be so?" chanrobles virt ual law libra ry

lotto."
chanrobles virtual law libra ry

Nor is this the first time a split decision was tested, if not reversed, in a
To be sure, a new contract was entered into which the majority of the subsequent case because of change in the membership of a court. In
Court finds has been purged of the features which made the first 1957, this Court, voting 6-5, held in ; .÷#, G.R. No. L-
contract objectionable. Moreover, what the PCSO said in its 10201, Sept. 23, 1957 that the phrase "at the time of the election" in
manifestation in the first case was the following: —2174 of the Revised Administrative Code of 1917 meant that a
candidate for municipal elective position must be at least 23 years of
1. They are no longer filing a motion for age on the

 

 . On the other hand, the dissenters
reconsideration of the Decision of this Honorable Court argued that it was enough if he attained that age on the day he assumed
dated May 5, 1994, a copy of which was received on office.
chanroblesvirtualawlib rary chanrobles virtual law lib rary

May 6, 1994. chanroblesvirtualawlibrary chanrobles virtual law libra ry

Less than three years later, the same question was before the Court
2. Respondents PCSO and PGMC are presently again, as a candidate for municipal councilor stated under oath in her
negotiating a new lease agreement consistent with the certificate of candidacy that she was eligible for that position although
authority of PCSO under its charter (R.A. No. 1169, as she attained the requisite age (23 years) only when she assumed office.
amended by B.P. Blg. 42) and conformable with the The question was whether she could be prosecuted for falsification. In
 .a, 107 Phi. 888 (1960), the Court ruled she could 
.
Justice, later Chief Justice, Benison, who dissented in the first case, Congressional effort to limit the appointing power of President
; . ÷#,  , wrote the opinion of the Court, holding Johnson. Voting 5-3, the Court declared the acts void. Chief Justice
that while the statement that the accused was eligible was "inexact or Chase wrote the opinion of the Court in which four others, including
erroneous, according to the majority in the Feliciano case," the Justice Grier, concurred. Justices Miller, Swayne and Davis dissented.
accused could not be held liable for falsification, because A private memorandum left by the dissenting Justices described how
an effort was made "to convince an aged and infirm member of the
the question [whether the law really required candidates court [Justice Grier] that he had not understood the question on which
to have the required age on the day of the election or he voted," with the result that what was originally a 4-4 vote was
whether it was sufficient that they attained it at the converted into a majority (5-3) for holding the acts invalid. chanroblesvi rtualawlibra ry chanrobles virtual law library

beginning of the term of office] 




,
 

  ; we simply On the day the decision was announced, President Grant nominated to
for the purpose of this decision that the doctrine the Court William Strong and Joseph P. Bradley to fill the vacancy
stands. caused by the resignation of Justice Grier and to restore the
membership of the Court to nine. In 1871,  .— 
was
Thus because in the meantime there had been a change in the overruled in the Legal Tender Cases, as E !..came to be
membership of the Court with the retirement of two members (Recess known, in an opinion by Justice Strong, with a dissenting opinion by
and Flex, ::.) who had taken part in the decision in the first case and Chief Justice Chase and the three other surviving members of the
their replacement by new members (Barrera and Gutierrez-David, ::.) former majority. There were allegations that the new Justices were
and the fact that the vote in the first case was a narrow one (6 to 5), the appointed for their known views on the validity of the Legal Tender
Court allowed that the continuing validity of its ruling in the first case Acts, just as there were others who defended the character and
might well be doubted. For this reason it gave the accused the benefit independence of the new Justices. History has vindicated the
of the doubt that she had acted in the good faith belief that it was overruling of the Hepburn case by the new majority. The Legal Tender
sufficient that she was 23 years of age when she assumed office. chanroblesvirtualawlibrary chanrobles virtual law library Cases proved to be the Court's means of salvation from what Chief
Justice Hughes later described as one of the Court's "self-inflicted
In that case, the change in the membership of the Court and the wounds.""
possibility of change in the ruling were noted without anyone - much
less would-be psychoanalysts - finding in the statement of the Court We now consider the specific grounds for petitioners' motion for
any Freudian slip. The possibility of change in the rule as a result of reconsideration. chanroblesvirt ualawlibrary chanrobles virt ual law libra ry

change in membership was accepted as a sufficient reason for finding

good faith and lack of criminal intent on the part of the accused. chanroblesvirtualawl ibrary chanrobles virtual law library I. We have held that because there are no genuine issues of
constitutionality in this case, the rule concerning  


,
Indeed, a change in the composition of the Court could prove the applicable to private litigation rather than the more liberal rule on
means of undoing an erroneous decision. This was the lesson of E ! 

a, applies to petitioners. Two objections are made against that
.., 12 Wall. 457 (1871). The Legal Tender Acts, which were ruling: (1) that the constitutional policies and principles invoked by
passed during the Civil War, made U.S. notes (greenbacks) legal petitioners, while not supplying the basis for affirmative relief from
tender for the payment of debts, public or private, with certain the courts, may nonetheless be resorted to for striking down laws or
exceptions. The validity of the acts, as applied to preexisting debts, official actions which are inconsistent with them and (2) that the
was challenged in  .— 
, 8 Wall. 603 (1869). The Constitution, by guaranteeing to independent people's organizations
Court was then composed of only eight (8) Justices because of "effective and reasonable participation at all levels of social, political
and economic decision-making" (Art. XIII, —16), grants them 
." (Magtajas v. Pryce Properties Corp., Inc., 234 SCRA 255,
standing to sue on constitutional grounds. chanroblesvirtualawlibrary chanrobles virtual law li brary
268 [1994]). chanroblesvirtualawlibrary chanrobles vi rtual law library

The policies and principles of the Constitution invoked by petitioner It is noteworthy that petitioners do not question the validity of the law
read: allowing lotteries. It is the contract entered into by the PCSO and the
PGMC which they are assailing. This case, therefore, does not raise
Art. II, —5. The maintenance of peace and order, the issues of constitutionality but only of contract law, which petitioners,
protection life, liberty, and property, and the  
  not being privies to the agreement, cannot raise. chanroblesvirtualawlib rary chanrobles virtual law lib rary


a are essential for the enjoyment
by all the people of the blessings of democracy.
%
., —12. The natural and primary right and duty of
parents in the rearing of the youth for civic efficiency
Nor does Kilosbayan's status as a people's organization give it the
requisite personality to question the validity of the contract in this
case. The Constitution provides that "the State shall respect the role of
independent people's organizations to enable the people to pursue and
and the
 
  
shall receive protect, within the democratic framework, their legitimate and
the support of the Government. collective interests and aspirations through peaceful and lawful
means," that their right to "effective and reasonable participation at all
%
., —13. The State recognizes the vital role of the levels of social, political, and economic decision-making shall not be
youth in nation-building and shall promote and protect abridged." (Art. XIII, —— 15-16) chanrobles virtual law libra ry

their physical,  " 

, intellectual, 
 
2a. It shall inculcate in the youth patriotism and These provisions have not changed the traditional rule that only 
nationalism, and encourage their involvement in public 


or
 


a, as the case may be, may
and civic affairs.
%
., —17. The State shall give priority to education,
science and technology, arts, culture, and sports to
foster patriotism and nationalism, accelerate social
progress, and promote total human liberation and
development.
As already stated, however, these provisions are not self-executing.
They do not confer rights which can be enforced in the courts but only
invoke the judicial power. The jurisdiction of this Court, even in cases
involving constitutional questions, is limited by the "case and
controversy" requirement of Art. VIII, —5. This requirement lies at
the very heart of the judicial function. It is what differentiates
decision-making in the courts from decision-making in the political
departments of the government and bars the bringing of suits by just
any party.chanroblesvi rtualawlibra ry chanrobles vi rtual law library
Petitioners quote extensively from the speech of Commissioner Garcia
before the Constitutional Commission, explaining the provisions on
provide a
 a
 !

 . By authorizing independent people's organizations. There is nothing in the speech,
the holding of lottery for charity, Congress has in effect determined however, which supports their claim of standing. On the contrary, the
that consistently with these policies and principles of the Constitution, speech points the way to the legislative and executive branches of the
the PCSO may be given this authority. That is why we said with government, rather than to the courts, as the appropriate fora for the
respect to the opening by the PAGCOR of a casino in Cagayan de Oro, advocacy of petitioners' views.
Indeed, the provisions on independent
"the morality of gambling is not a justiciable issue. Gambling is not people's organizations may most usefully be read in connection with
illegal . . . . %


 a






 the provision on initiative and referendum as a means whereby the
people may propose or enact laws or reject any of those passed by While, concededly, the elections to be held involve the
Congress. For the fact is that petitioners' opposition to the contract in expenditure of public moneys,  


 
question is nothing more than an opposition to the government policy

 

 a



! "a
on lotteries.
chanroblesvirtualawlib rary chanrobles virtual law lib rary !



 
 
   
 


  

 a
 a

It is nevertheless insisted that this Court has in the past accorded " (Flast v. Cohen, 392 U.S., 83 [1960]), or that
standing to taxpayers and concerned citizens in cases involving there is a misapplication of such funds by respondent
"paramount public interest." Taxpayers, voters, concerned citizens and COMELEC (see Pascual vs. Secretary of Public Works,
legislators have indeed been allowed to sue but then only (1)  110 Phil. 331 [1960]), or that public money is being
 a 


  and deflected to any improper purpose. Neither do
(2) 

 

 . Petitioners do not meet these petitioners seek to restrain respondent from wasting
requirements on standing. public funds through the enforcement of an invalid or
unconstitutional law. (Philippine Constitution
K! are allowed to sue, for example, where there is a claim of Association vs. Mathay, 18 SCRA 300 [1966]), 
a
illegal disbursement of public funds. (Pascual v. Secretary of Public Philippine Constitution Association vs. Gimenez, 15
Works, 110 Phi. 331 (1960); Sanidad v. Comelec, 73 SCRA 333 SCRA 479 [1965]). 7
"



  
(1976); Bugnay Const. & Dev. v. Laron, 176 SCRA 240 (1989); City
! 6
" "  '

Council of Cebu v. Cuizon, 47 SCRA 325 [1972]) or where a tax
measure is assailed as unconstitutional. (VAT Cases [Tolentino v.
Secretary of Finance], 235 SCRA 630 [1994]) >
 are allowed to
question the validity of election laws because of their obvious interest
in the validity of such laws. (Gonzales v. Comelec, 21 SCRA 774
. As held by this Court in Tan vs. Macapagal (43
SCRA 677 [1972]), speaking through our present Chief
Justice, this Court is vested with discretion as to
whether or not a taxpayer's suit should be entertained.
(Emphasis added)
[1967])  

/can bring suits if the constitutional
question they raise is of "transcendental importance" which must be Petitioners' suit does not fall under any of these categories of
settled early. (Emergency Powers Cases [Araneta v. Dinglasan], 84 taxpayers' suits.
Phi. 368 (1949); Iloilo Palay and Corn Planters Ass'n v. Feliciano, 121
Phi. 358 (1965); Philconsa v. Gimenez, 122 Phi. 894 (1965); CLU v. Neither do the other cases cited by petitioners support their contention
Executive Secretary, 194 SCRA 317 [1991]) .a
are allowed that taxpayers have standing to question government contracts
to sue to question the validity of any official action which they claim regardless of whether public funds are involved or not. In — /.
infringes their prerogatives #legislators. (Philconsa v. Enriquez, 
  a"  ., 94 SCRA 786 (1979), petitioner filed a
235 506 (1994); Guingona v. PCGG, 207 SCRA 659 (1992); Gonzales
v. Macaraig, 191 SCRA 452 (1990); Tolentino v. Comelec, 41 SCRA
702 (1971); Tatad v. Garcia, G.R. No. 114222, April 16, 1995
(Mendoza, :., concurring))
 and pendency of a prejudicial question, thus avoiding the
Petitioners do not have the same kind of interest that these various
chanrobles virtual law l ibrary
taxpayer's suit seeking the annulment of a contract between the NHC
and a foreign corporation. The case was dismissed by the trial court.
The dismissal was affirmed by this Court on the grounds of 
'

question of petitioner's standing.
chanroblesvirtualawl ibrary chanrobles virtual law library
litigants have. Petitioners assert an interest as taxpayers, but they do On the other hand, in — /.#/, 180 SCRA 254 (1989),
not meet the standing requirement for bringing taxpayer's suits as set petitioner sought the annulment of a contract made by the government
forth in - .  , 95 SCRA 392, 403 (1980), to wit: with a foreign corporation for the purchase of road construction
equipment. The question of standing was not discussed, but even if it 


 

 

'


 
 
was, petitioner's standing could be sustained because he was a 
  



  
 
" In the case at bar,
minority stockholder of the Philippine National Bank, which was one petitioners have not shown why, unlike petitioner in the Valmonte
of the defendants in the case. chanroblesvirtualawlibrary chanrobles virtual law l ibrary case, they should be accorded standing to bring this suit. chanroblesvirtualawlibrary chanrobles virt ual law libra ry

In the other case cited by petitioners, City Council of ./ , The case of  .;
, :. 224 SCRA 792 (1993) is different.
47 SCRA 325 (1972), members of the city council were allowed to sue Citizens' standing to bring a suit seeking the cancellation of timber
to question the validity of a contract entered into by the city licenses was sustained in that case because the Court considered Art.
government for the purchase of road construction equipment because II, —16 a right-conferring provision which can be enforced in the
their contention was that the contract had been made without their courts. That provision states:
authority. In addition, as taxpayers they had an interest in seeing to it
that public funds were spent pursuant to an appropriation made by The State shall protect and advance
a
 

law.chanroblesvirtualawlibrary chanrobles virt ual law libra ry
  to a balanced and healthful ecology in accord
with the rhythm and harmony of nature. (Emphasis)
But, in the case at bar, there is an allegation that public funds are being
misapplied or misappropriated. The controlling doctrine is that of In contrast, the policies and principles invoked by petitioners in
— /. Ä , 65 SCRA 624 (1975) where it was held that funds this case do not permit of such categorization.
raised from contributions for the benefit of the Cultural Center of the
Philippines were not public funds and petitioner had no standing to Indeed, as already stated, petitioners' opposition is not really to the
bring a taxpayer's suit to question their disbursement by the President validity of the ELA but to lotteries which they regard to be immoral.
of the Philippines. chanroblesvirtualawlibrary chanrobles virtual law l ibrary
This is not, however, a legal issue, but a policy matter for Congress to
decide and Congress has permitted lotteries for charity. chanroblesvi rtualawlibra ry chanrobles vi rtual law library

Thus, petitioners' right to sue 

! cannot be sustained. Nor 
 

/can they bring this suit because no specific injury Nevertheless, although we have concluded that petitioners do not have
suffered by them is alleged. As for the petitioners, who are members of standing, we have not stopped there and dismissed their case. For in
Congress, their right to sue a
cannot be invoked because the view we take, whether a party has a cause of action and, therefore,
they do not complain of any infringement of their rights as is a real party in interest or one with standing to raise a constitutional
legislators. chanroblesvirtualawlibrary chanrobles vi rtual law library
question must turn on whether he has a right which has been violated.
For this reason the Court has not ducked the substantive issues raised
Finally, in > 
., G.R. No. 78716, September 22, 1987, by petitioners.chanroblesvirtualawlibrary chanrobles virtual law library

we threw out a petition questioning another form of lottery conducted

by the PCSO on the ground that petitioner, who claimed to be a II. R.A. No. 1169, as amended by B.P No . 42, states:
"citizen, lawyer, taxpayer and father of three minor children," had no
direct and personal interest in the lottery. We said: "He must be able to —1. The Philippine Charity Sweepstakes Office. - The
show, not only that the law is invalid, but also that he has sustained or Philippine Charity Sweepstakes Office, hereinafter
is in immediate danger of sustaining some direct injury as a result of designated the Office, shall be the principal government
its enforcement, and not merely that he suffers thereby in some agency for raising and providing for funds for health
indefinite way. %

 


    a  programs, medical assistance and services and charities
 



 a
  a

 of national character, and as such shall have the general the doctrine of '

. The general rule on the "conclusiveness of
powers conferred in section thirteen of Act Numbered judgment," however, is subject to the e!
 

#
 
One Thousand Four Hundred Fifty-Nine, as amended,  

a#
 


 
  
and shall have the authority: chanrobles virtual law libra ry 



. This is generally accepted in American
A. To hold and conduct charity sweepstakes races,
lotteries and other similar activities, in such frequency
and manner, as shall be determined, and subject to such
rules and regulations as shall be promulgated by the
Board of Directors.
B. Subject to the approval of the Minister of Human
Settlements, to engage in health and welfare-related
investments, programs, projects and activities which
may be profit-oriented, by itself or in collaboration,
association or joint venture with any person,
association, company or entity, whether domestic or
foreign, except for the activities mentioned in the
preceding paragraph (A), for the purpose of providing
for permanent and continuing sources of funds for
health programs, including the expansion of existing
ones, medical assistance and services, and/or charitable
law from which our Rules of Court was adopted. (Montana v. United
States, 440 U.S. 59 L.Ed.2d 147, 210 (1979); RESTATEMENT OF
THE LAW 2d, ON JUDGMENTS, —28; P. BATOR, D. MELTZER,
P. MISHKIN AND D. SHAPIRO, THE FEDERAL COURTS AND
THE FEDERAL SYSTEM 1058, n.2 [3rd Ed., 1988]) There is nothing
chanroblesvirtualawlibrary chanrobles virtual law l ibrary
in the record of this case to suggest that this exception is inapplicable
in this jurisdiction. chanroblesvirtualawli brary chanrobles virtual law l ibrary
Indeed, the questions raised in this case are legal questions and the
claims involved are substantially different from those involved in the
prior case between the parties. As already stated, the ELA is
substantially different from the Contract of Lease declared void in the
first case.
chanroblesvirtualawlibrary chanrobles virtual law libra ry
Borrowing from the dissenting opinion of Justice Feliciano, petitioners
argue that the phrase "by itself or in collaboration, association or joint
venture with any other party" qualifies not only —1 (B) but also —1
(A), because the exception clause ("except for the activities mentioned
grants:  

, That such investments will not in the preceding paragraph [A]") "operates, as it were, as a  
compete with the private sector in areas where clause which refers back to Section 1(A) and in this manner avoids the
investments are adequate as may be determined by the necessity of simultaneously amending the text of Section 1(A)." chanrobles virtual law library

National Economic and Development Authority.

This interpretation, however, fails to take into account not only the
Petitioners insist on the ruling in the previous case that the PCSO location of the phrase in paragraph (B), when it should be in paragraph
cannot hold and conduct charity sweepstakes, lotteries and other (A) had that been the intention of the lawmaking authority, but also the
similar activities in collaboration, association or joint venture with any phrase "by itself." In other words, under paragraph (B), the PCSO is
other party because of the clause "except for the activities mentioned prohibited from "engag[ing] in . . . investments, programs, projects and
in the preceding paragraph (A)" in paragraph (B) of —1. Petitioners activities" if these involve sweepstakes races, lotteries and other
contend that the ruling is the law of this case because the parties are similar activities not only "in collaboration, association or joint
the same and the case involves the same issue, .., the meaning of this venture" with any other party but also "by itself." Obviously, this
statutory provision.chanroblesvirtualawlibra ry chanrobles virtual law library
prohibition cannot apply when the PCSO conducts these activities
itself. Otherwise, what paragraph (A) authorizes the PCSO to do,
The "law of the case" doctrine is inapplicable, because this case is not paragraph (B) would prohibit. chanroblesvirtualawlibra ry chanrobles virtual law library

a continuation of the first one. Petitioners also say that inquiry into the
same question as to the meaning of the statutory provision is barred by
The fact is that the phrase in question does not qualify the authority of activities. %
  

 
a 
"  
 "
the PCSO under paragraph (A), but rather the authority granted to it by  
  ' 

"

 "
 " This seems to
paragraph (B). The amendment of paragraph (B) by B.P. Blg. 42 was be the only possible interpretation of —1 (A) and (B) in light of its text
intended to enable the PCSO to engage in certain investments, and its legislative history. That there is today no other entity engaged
programs, projects and activities for the purpose of raising funds for in sweepstakes races, lotteries and the like does not detract from the
health programs and charity. That is why the law provides that such validity of this interpretation. chanroblesvirtualawlibra ry chanrobles vi rtual law library

investments by the PCSO should "not compete with the private sector
in areas where investments are adequate as may be determined by the III. The Court noted in its decision that the provisions of the first
National Economic and Development Authority." Justice Davide, then contract, which were considered to be features of a joint venture
an Assemblyman, made a proposal which was accepted, reflecting the agreement, had been removed in the new contract. For instance, —5 of
understanding that the bill they were discussing concerned the the ELA provides that in the operation of the on-line lottery, the PCSO
authority of the PCSO to invest in the business of others. The must employ "its own competent and qualified personnel." Petitioners
following excerpt from the Record of the Batasan Pambansa shows claim, however, that the "contemporaneous interpretation" of PGMC
this to be the subject of the discussion: officials of this provision is otherwise. They cite the testimony of Glen
Barroga of the PGMC before a Senate committee to the effect that
MR. DAVIDE. May I introduce an amendment after under the ELA the PGMC would be operating the lottery system "side
"adequate". The intention of the amendment is not to by side" with PCSO personnel as part of the transfer of technology. chanroblesvirtualawlibrary chanrob les virtual

leave the determination of whether it is adequate or not

law library

to anybody. And my amendment is to add after Whether the transfer of technology would result in a violation of
"adequate" the words AS MAY BE DETERMINED PCSO's franchise should be determined by facts and not by what some
BY THE NATIONAL ECONOMIC AND officials of the PGMC state by way of opinion. In the absence of proof
DEVELOPMENT AUTHORITY. As a mater of fact, it to the contrary, it must be presumed that —5 reflects the true intention
will strengthen the 
 


in these areas, of the parties. Thus, Art. 1370 of the Civil Code says that "If the terms
provided that the determination of whether the private of a contract are clear and leave no doubt upon the intention of the
sector's activity is already adequate must be determined contracting parties, the literal meaning of its stipulations shall control."
by the National Economic and Development The intention of the parties must be ascertained from their
Authority.chanroblesvi rtualawlibra ry chanrobles vi rtual law library

"contemporaneous and subsequent acts." (Art. 1371; Atlantic Gulf Co.

v. Insular Government, 10 Phil. 166 [1908]) It cannot simply be
Mr. ZAMORA. Mr. Speaker, the committee accepts the judged from what one of them says. On the other hand, the claim of
proposed amendment. chanroblesvirtualawlibrary chanrobles virtual law library

third parties, like petitioners, that the clause on upgrading of

equipment would enable the parties after a while to change the
MR. DAVIDE. Thank you, Mr. Speaker. chanroblesvirtualawlibrary chanrobles virtual law li brary

contract and enter into something else in violation of the law is mere
speculation and cannot be a basis for judging the validity of the
(2 RECORD OF THE BATASAN PAMBANSA, Sept. contract. chanroblesvirtualawlibrary chan robles virtual law library

6, 1979,
p. 1007) IV. It is contended that —1 of E.O. No. 301 covers all types of
" 

[] for public services or a of supplies, materials
Thus what the PCSO is prohibited from doing is from investing in a and equipment to the government or to any of its branches, agencies or
business engaged in sweepstakes races, lotteries and other similar
instrumentalities" and not only contracts of purchase and sale. To take still another example. Paragraph (d), which does away with
Consequently, a lease of equipment, like the ELA, must be submitted the requirement of public bidding "whenever the supplies under
to public bidding in order to be valid. This contention is based on two procurement have been unsuccessfully placed on bid for at least two
premises: (1) that —1 of E.O. No. 301 applies to any contract whereby consecutive times, either due to lack of bidders or the offers received
the government acquires title to or the use of the equipment and (2) in each instance were exorbitant or nonconforming to specifications."
that the words "supplies," "materials," and "equipment" are distinct Again, following the theory of the petitioners, a contract for the lease
from each other so that when an exception in —1 speaks of "supplies," of equipment cannot be entered into even if there are no bids because,
it cannot be construed to mean "equipment." chanrobles virtual law li brary
first, lease contracts are governed by the general rule on public bidding
and, second, the exception to public bidding in paragraph (d) applies
Petitioners' contention will not bear analysis. For example, the term only to contracts for the furnishing of "supplies." chanrobles virtual law library

"supplies" is used in paragraph (a), which provides that a contract for

the furnishing of "supplies" in order to meet an emergency is exempt Other examples can be given to show the absurdity of interpreting —1
from public bidding. Unless "supplies" is construed to include as applicable to any contract for the furnishing of supplies, materials
"equipment," however, the lease of heavy equipment needed for rescue and equipment 
of considering the words "supplies," "materials"
operations in case of a calamity will have to be submitted to public and "equipment" to be not interchangeable. Our ruling that —1 of E.O.
bidding before it can be entered into by the government. chanroblesvirtualawlibrary chanrobles virtual law library No. 301 does not cover the lease of equipment avoids these
fundamental difficulties and is supported by the
!
of —1, which is
In dissent Justice Feliciano says that in such a situation the entitled "Guidelines for a


 

" and by the fact that the
government can simply resort to expropriation, paying compensation only provisions of E.O. No. 301 on leases, namely, ——6 and 7,
afterward. This is just like purchasing the equipment through concern the lease of buildings by or to the government. Thus the text
negotiation when the question is whether the purchase should be by of —1 reads:
public bidding, not to mention the fact that the power to expropriate
may not be exercised when the government can very well negotiate —1. —
 a


 

.- Any
with private owners.chanroblesvirtualawlibrary chanrobles virtual law libra ry

provision of law, decree, executive order or other

issuances to the contrary notwithstanding, no contract
Indeed, there are fundamental difficulties in simultaneously for public services or for furnishing supplies, materials
contending (1) that E.O. No. 301, —1 covers both contracts of sale and and equipment to the government or any of its
lease agreements and (2) that the words "supplies," "materials" 
 branches, agencies or instrumentalities shall be renewed
"equipment" can not be interchanged. Thus, under paragraph (b) of or entered into without public bidding, except under
—1, public bidding is not required "whenever the supplies are to be any of the following situations:
used in connection with a project or activity which cannot be delayed
without causing detriment to the public service." Following petitioners' a. Whenever the supplies are urgently
theory, there should be a public bidding before the government can needed to meet an emergency which
enter into a contract for the lease of bulldozers and dredging may involve the loss of, or danger to, life
equipment even if these are urgently needed in areas ravaged by lahar and/or property; chanrobles virtual law libra ry

because, 
, lease contracts are covered by the general rule and,
second, the exception to public bidding in paragraph (b) covers only b. Whenever the supplies are to be used
"supplies" but not equipment. chanroblesvirtualawlibrary chanrobles virtual law library
in connection with a project or activity
 which cannot be delayed without —2. Jurisdiction over Negotiated Contracts. - In line
causing detriment to the public service;
law library
chanrobles virtual
with the principles of decentralization and
accountability, negotiated contracts for public services
c. Whenever the 
 
by an or for furnishing supplies, materials or equipment may
exclusive distributor or manufacturer be entered into by the department or agency head or the
who does not have subdealers selling at governing board of the government-owned or
lower prices and for which no suitable controlled corporation concerned, without need of prior
substitute can be obtained elsewhere at approval by higher authorities, subject to availability of
more advantageous terms to the funds, compliance with the standards or guidelines
government; chanrobles virtual law library prescribed in Section 1 hereof, and to the audit
jurisdiction of the commission on Audit in accordance
d. Whenever the supplies under with existing rules and regulations. chanroblesvirtualawlibrary chanrobles virtual law li brary

procurement have been unsuccessfully

placed on bid for at least two Negotiated contracts involving P2,000,000 up to
consecutive times, either due to lack of P10,000,000 shall be signed by the Secretary and two
bidders or the offers received in each other Undersecretaries.
instance were exhorbitant or non-
conforming to specifications; chanrobles vi rtual law lib rary xxx xxx xxx chanrobles virtual law library

e. In cases where it is apparent that the —7. Jurisdiction Over Lease Contracts. - The heads of
requisition of the needed supplies agency intending to rent privately-owned buildings or

 aa


  is most spaces for their use, or to lease out government-owned
advantageous to the government to be buildings or spaces for private use, shall have authority
determined by the Department Head to determine the reasonableness of the terms of the
concerned; and chanrobles virtual law library lease and the rental rates thereof, and to enter into such
lease contracts without need of prior approval by higher
f. Whenever
  is made from authorities, subject to compliance with the uniform
an agency of the government. standards or guidelines established pursuant to Section
6 hereof by the DPWH and to the audit jurisdiction of
Indeed, the purpose for promulgating E.O. No. 301 was merely to COA or its duly authorized representative in
decentralize the system of reviewing a


 

 of purchase
for the furnishing of supplies, materials and equipment as well as lease
contracts of buildings. Theretofore, E.O. No. 298, promulgated on
August 12, 1940, required consultation with the Secretary of Justice
and the Department Head concerned and the approval of the President
of the Philippines before contracts for the furnishing of supplies,
materials and equipment could be made on a negotiated basis, without
public bidding. E.O. No. 301 changed this by providing as follows:
accordance with existing rules and regulations.
In sum, E.O. No. 301 applies only to contracts for the purchase of
supplies, materials and equipment, and it was merely to change the
system of administrative review of emergency purchases, as
theretofore prescribed by E.O. No. 298, that E.O. No. 301 was issued
on July 26, 1987. Part B of this Executive Order applies to leases of
buildings, not of equipment, and therefore does not govern the lease
contract in this case. Even if it applies, it does not require public such as the repair and maintenance of
bidding for entering into it. chanroblesvirtualawlibrary chanrobles vi rtual law library equipment and furniture, as well as
trucking, hauling, janitorial, security,
Our holding that E.O. No. 301, —1 applies only to contracts of and related or analogous services.
purchase and sale is conformable to P.D. No. 526, promulgated on
August 2, 1974, which is  
. P.D. No. 526 requires local Thus, the texts of both E.O. No. 301, —1 and of P.D. No. 526, ——1
governments to hold public bidding in the &  
of supplies." and 12, make it clear that only contracts for the purchase and sale of
By specifying &  
of supplies" and excepting from the supplies, materials and equipment are contemplated by the rule
general rule & & when made under certain circumstances, P.D. concerning public biddings. chanroblesvirtualawlibra ry chanrobles virtual law library

No. 526, —12 indicates quite clearly that it applies only to contracts of
purchase and sale. This provision reads: Finally, it is contended that equipment leases are attractive and
commonly used in place of contracts of purchase and sale because of
—12.  

 
 

a. - "multifarious credit and tax constraints" and therefore could not have
Procurement of supplies may be made without the been left out from the requirement of public bidding. Obviously these
benefit of public bidding in the following modes: chanrobles virtual law library
credit and tax constraints can have no attraction to the government
when considering the advantages of sale over lease of equipment. The
(1) Personal canvass of responsible 
; chanrob les virtual law library
fact that lease contracts are in common use is not a reason for implying
that the rule on public bidding applies not only to government
(2) a ; chanrobles vi rtual law library
purchases but also to lease contracts. ; 

 



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distributors;chanrobles virtual law library

FOR THE FOREGOING REASONS, the motion for reconsideration

(4) Thru the Bureau of Supply Coordination; and chanrobles virtual law li brary
of petitioners is DENIED with finality. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

(5)  
a 


 or foreign SO ORDERED.
governments.
 
 


Sec. 3 broadly defines the term "supplies" as including -

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everything except real estate, which may

be needed in the transaction of public " : 
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business, or in the pursuit of any

undertaking, project, or activity, whether 
of the nature of equipment, furniture,
stationery, materials for construction, or 
personal property of any sort, including
non-personal or contractual services 
Republic of the Philippines Department of Environment and Natural Resources (DENR, for
$%&'(%) brevity) personnel in Aritao, Nueva Vizcaya because the driver could
Manila not produce the required documents for the forest products found
concealed in the truck. Petitioner Jovito Layugan, the Community
$(,,+/+$+( Environment and Natural Resources Officer (CENRO) in Aritao,
Cagayan, issued on May 23, 1989 an order of confiscation of the truck
>c""""4 ""4? and gave the owner thereof fifteen (15) days within which to submit an
explanation why the truck should not be forfeited. Private respondents,
(
,(
&

) 7:(99 7 however, failed to submit the required explanation. On June 22,
F(+Gc 8,cF,Gc 

(/+)( 1989,[1] Regional Executive Director Rogelio Baggayan of DENR

-%
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 sustained petitioner Layugans action of confiscation and ordered the
c(99F(G5c7c97,: c9 forfeiture of the truck invoking Section 68-A of Presidential Decree
 c  
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Y No. 705 as amended by Executive Order No. 277. Private respondents
(%)(0
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:&
 
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c )c 1989 order of Executive Director Baggayan, which was, however,
)c 
$&(%$$1+/+,(
 denied in a subsequent order of July 12, 1989.[2] Subsequently, the
/+)(+
,%3'
  case was brought by the petitioners to the Secretary of DENR pursuant
to private respondents statement in their letter dated June 28, 1989 that
,+$+( in case their letter for reconsideration would be denied then this letter
should be considered as an appeal to the Secretary.[3] Pending
)($p@ chanroblesvirtualawlibrary
resolution however of the appeal, a suit for replevin, docketed as Civil
Case 4031, was filed by the private respondents against petitioner
Without violating the principle of exhaustion of administrative Layugan and Executive Director Baggayan[4] with the Regional Trial
remedies, may an action for replevin prosper to recover a movable Court, Branch 2 of Cagayan,[5] which issued a writ ordering the return
property which is the subject matter of an administrative forfeiture of the truck to private respondents.[6] Petitioner Layugan and
proceeding in the Department of Environment and Natural Resources Executive Director Baggayan filed a motion to dismiss with the trial
pursuant to Section 68-A of P. D. 705, as amended, entitled The
, that private respondents had no cause of
Revised Forestry Code of the Philippines?
Are the Secretary of DENR and his representatives empowered to
confiscate and forfeit conveyances used in transporting illegal forest
  was filed by the petitioners with the
products in favor of the government? chanroblesvirtualawlibra ry
These are two fundamental questions presented before us for our
resolution.
chanroblesvirtualawl ibrary
The controversy on hand had its incipiency on May 19, 1989 when the
truck of private respondent Victoria de Guzman while on its way to
Bulacan from San Jose, Baggao, Cagayan, was seized by the
court contending, 
chanrob lesvirtualawlib rary
action for their failure to exhaust administrative remedies. The trial
court denied the motion to dismiss in an order dated December 28,
1989.[7] Their motion for reconsideration having been likewise
denied, a petition for 
respondent Court of Appeals which sustained the trial courts order
ruling that the question involved is purely a legal question.[8] Hence,
this present petition,[9] with prayer for temporary restraining order
and/or preliminary injunction, seeking to reverse the decision of the
respondent Court of Appeals was filed by the petitioners on September
9, 1993. By virtue of the Resolution dated September 27, 1993,[10] the
prayer for the issuance of temporary restraining order of petitioners
was granted by this Court. chanroblesvirtualawlibrary
Invoking the doctrine of exhaustion of administrative remedies,
petitioners aver that the trial court could not legally entertain the suit
for replevin because the truck was under administrative seizure
proceedings pursuant to Section 68-A of P.D. 705, as amended by E.O.
277. Private respondents, on the other hand, would seek to avoid the
operation of this principle asserting that the instant case falls within
the exception of the doctrine upon the justification that (1) due process
 on the part of the administrative agency
was violated because they were not given the chance to be heard, and
(2) the seizure and forfeiture was unlawful on the grounds: (a) that the
Secretary of DENR and his representatives have no authority to
confiscate and forfeit conveyances utilized in transporting illegal forest
products, and (b) that the truck as admitted by petitioners was not used
in the commission of the crime. chanroblesvirtualawlibrary
Upon a thorough and delicate scrutiny of the records and relevant
jurisprudence on the matter, we are of the opinion that the plea of
petitioners for reversal is in order. chanroblesvirtualawlibrary
This Court in a long line of cases has consistently held that before a
party is allowed to seek the intervention of the court, it is a pre-
condition that he should have availed of all the means of
administrative processes afforded him. Hence, if a remedy within the
administrative machinery can still be resorted to by giving the
administrative officer concerned every opportunity to decide on a
matter that comes within his jurisdiction then such remedy should be
exhausted first before courts judicial power can be sought. The
premature invocation of courts intervention is fatal to ones cause of
action.[11] Accordingly, absent any finding of waiver or 
the
case is susceptible of dismissal for lack of cause of action.[12] This
doctrine of exhaustion of administrative remedies was not without its
practical and legal reasons, for one thing, availment of administrative
remedy entails lesser expenses and provides for a speedier disposition
of controversies. It is no less true to state that the courts of justice for
reasons of comity and convenience will shy away from a dispute until
the system of administrative redress has been completed and complied
with so as to give the administrative agency concerned every
opportunity to correct its error and to dispose of the case. However, we
are not amiss to reiterate that the principle of exhaustion of
administrative remedies as tested by a battery of cases is not an
ironclad rule. This doctrine is a relative one and its flexibility is called
upon by the peculiarity and uniqueness of the factual and
circumstantial settings of a case. Hence, it is disregarded (1) when
there is a violation of due process,[13] (2) when the issue involved is
purely a legal question,[14] (3) when the administrative action is
patently illegal amounting to lack or excess of jurisdiction,[15] (4)
when there is 
concerned,[16] (5) when there is irreparable injury,[17] (6) when the
respondent is a department secretary whose acts as an alter ego of the
President bears the implied and assumed approval of the latter,[18] (7)
when to require exhaustion of administrative remedies would be
unreasonable,[19] (8) when it would amount to a nullification of a
claim,[20] (9) when the subject matter is a private land in land case
proceedings,[21] (10) when the rule does not provide a plain, speedy
and adequate remedy, and (11) when there are circumstances
indicating the urgency of judicial intervention.[22] chanroblesvirtualawlibrary
In the case at bar, there is no question that the controversy was
pending before the Secretary of DENR when it was forwarded to him
following the denial by the petitioners of the motion for
reconsideration of private respondents through the order of July 12,
1989. In their letter of reconsideration dated June 28, 1989,[23] private
respondents clearly recognize the presence of an administrative forum
to which they seek to avail, as they did avail, in the resolution of their
case. The letter, reads, thus: chanroblesvirtualawlib rary
xxx chanroblesvirtualawlibrary
If this motion for reconsideration does not merit your favorable action,
then this letter should be considered as an appeal to the Secretary.[24]
chanroblesvirtualawlibrary
It was easy to perceive then that the private respondents looked up to
the Secretary for the review and disposition of their case. By appealing
to him, they acknowledged the existence of an adequate and plain
remedy still available and open to them in the ordinary course of the
law. Thus, they cannot now, without violating the principle of
exhaustion of administrative remedies, seek courts intervention by
filing an action for replevin for the grant of their relief during the
pendency of an administrative proceedings. chanroblesvirtualawli brary
Moreover, it is important to point out that the enforcement of forestry
laws, rules and regulations and the protection, development and
management of forest lands fall within the primary and special
responsibilities of the Department of Environment and Natural
Resources. By the very nature of its function, the DENR should be
given a free hand unperturbed by judicial intrusion to determine a
controversy which is well within its jurisdiction. The assumption by
the trial court, therefore, of the replevin suit filed by private
respondents constitutes an unjustified encroachment into the domain of
the administrative agencys prerogative. The doctrine of primary
jurisdiction does not warrant a court to arrogate unto itself the
authority to resolve a controversy the jurisdiction over which is
initially lodged with an administrative body of special
competence.[25] In Felipe Ismael, Jr. and Co. vs. Deputy Executive
Secretary,[26] which was reiterated in the recent case of Concerned
Officials of MWSS vs. Vasquez,[27] this Court held:
Thus, while the administration grapples with the complex and
multifarious problems caused by unbriddled exploitation of these
resources, the judiciary will stand clear. A long line of cases establish
the basic rule that the courts will not interfere in matters which are
addressed to the sound discretion of government agencies entrusted
with the regulation of activities coming under the special technical
knowledge and training of such agencies. chanroblesvirtualawli brary
To sustain the claim of private respondents would in effect bring the
instant controversy beyond the pale of the principle of exhaustion of
administrative remedies and fall within the ambit of excepted cases
heretofore stated. However, considering the circumstances prevailing
in this case, we can not but rule out these assertions of private
respondents to be without merit. First, they argued that there was
violation of due process because they did not receive the May 23, 1989
order of confiscation of petitioner Layugan. This contention has no leg
to stand on. Due process does not necessarily mean or require a
hearing, but simply an opportunity or right to be heard.[28] One may
be heard, not solely by verbal presentation but also, and perhaps many
times more creditably and practicable than oral argument, through
pleadings.[29] In administrative proceedings moreover, technical rules
of procedure and evidence are not strictly applied; administrative
process cannot be fully equated with due process in its strict judicial
sense.[30] Indeed, deprivation of due process cannot be successfully
invoked where a party was given the chance to be heard on his motion
for reconsideration,[31] as in the instant case, when private
respondents were undisputedly given the opportunity to present their
side when they filed a letter of reconsideration dated June 28, 1989
which was, however, denied in an order of July 12, 1989 of Executive
Director Baggayan. In Navarro III vs. Damasco,[32] we ruled that : chanroblesvirtualawlibrary
The essence of due process is simply an opportunity to be heard, or as
applied to administrative proceedings, an opportunity to explain ones
side or an opportunity to seek a reconsideration of the action or ruling
complained of. A formal or trial type hearing is not at all times and in
all instances essential. The requirements are satisfied when the parties
are afforded fair and reasonable opportunity to explain their side of the
chanroblesvirtualawlibrary controversy at hand. What is frowned upon is the absolute lack of
notice or hearing. chanroblesvirtualawlibrary
Second, private respondents imputed the patent illegality of seizure
and forfeiture of the truck because the administrative officers of the
DENR allegedly have no power to perform these acts under the law.
They insisted that only the court is authorized to confiscate and forfeit
conveyances used in transporting illegal forest products as can be
gleaned from the second paragraph of Section 68 of P.D. 705, as
amended by E.O. 277. The pertinent provision reads as follows: chanroblesvirtualawli brary
SECTION 68. xxx chanroblesvirtualawl ibrary
xxxchanroblesvirtualawlibrary
The court shall further order the confiscation in favor of the
government of the timber or any forest products cut, gathered,
collected, removed, or possessed, as well as the machinery,
equipments, implements and tools illegaly [sic] used in the area where
the timber or forest products are found. (Underline ours) chanroblesvirtualawlibrary
A reading, however, of the law persuades us not to go along with proceedings. More than anything else, it is intended to supplant the
private respondents thinking not only because the aforequoted inadequacies that characterize enforcement of forestry laws through
provision apparently does not mention nor include conveyances that criminal actions. The preamble of EO 277-the law that added Section
can be the subject of confiscation by the courts, but to a large extent, 68-A to PD 705-is most revealing: chanroblesvirtualawlibrary

due to the fact that private respondents interpretation of the subject

provision unduly restricts the clear intention of the law and inevitably WHEREAS, there is an urgency to conserve the remaining forest
reduces the other provision of Section 68-A, which is quoted herein resources of the country for the benefit and welfare of the present and
below:chanroblesvirtualawl ibrary future generations of Filipinos; chanroblesvirt ualawlibrary

SECTION 68-A. ÷



÷
 
 
- 

  WHEREAS, our forest resources may be effectively conserved and
-÷
 /
 

K 
 

In all cases of protected through the vigilant enforcement and implementation of our
violation of this Code or other forest laws, rules and regulations, the
Department Head or his duly authorized representative, may order the
confiscation of any forest products illegally cut, gathered, removed, or
possessed or abandoned, and all conveyances used either by land,
water or air in the commission of the offense and to dispose of the
same in accordance with pertinent laws, regulations and policies on the
matter. (Underline ours) chanroblesvirtualawlibrary
It is, thus, clear from the foregoing provision that the Secretary and his
duly authorized representatives are given the authority to confiscate
and forfeit any conveyances utilized in violating the Code or other
forest laws, rules and regulations. The phrase to dispose of the same is
broad enough to cover the act of forfeiting conveyances in favor of the
government. The only limitation is that it should be made in
accordance with pertinent laws, regulations or policies on the matter.
In the construction of statutes, it must be read in such a way as to give
effect to the purpose projected in the statute.[33] Statutes should be
construed in the light of the object to be achieved and the evil or
mischief to be suppressed, and they should be given such construction
as will advance the object, suppress the mischief, and secure the
benefits intended.[34] In this wise, the observation of the Solicitor
General is significant, thus: chanroblesvirtualawlibrary
But precisely because of the need to make forestry laws more
responsive to present situations and realities and in view of the
: chanroblesvirtualawlibrary
urgency to conserve the remaining resources of the country, that the
government opted to add Section 68-A. This amendatory provision is
an administrative remedy totally separate and distinct from criminal
forestry laws, rules and regulations; chanroblesvirtualawlibrary
WHEREAS, the implementation of our forestry laws suffers from
technical difficulties, due to certain inadequacies in the penal
provisions of the Revised Forestry Code of the Philippines; and chanroblesvi rtualawlibra ry
WHEREAS, to overcome this difficulties, there is a need to penalize
certain acts more responsive to present situations and realities; chanroblesvirt ualawlibrary
It is interesting to note that Section 68-A is a new provision
authorizing the DENR to confiscate, not only conveyances, but forest
products as well. On the other hand, confiscation of forest products by
the court in a criminal action has long been provided for in Section 68.
If as private respondents insist, the power on confiscation cannot be
exercised except only through the court under Section 68, then Section
68-A would have no purpose at all. Simply put, Section 68-A would
not have provided any solution to the problem perceived in EO 277,
 .[35] chanroblesvirtualawlibrary
Private respondents, likewise, contend that the seizure was illegal
because the petitioners themselves admitted in the Order dated July 12,
1989 of Executive Director Baggayan that the truck of private
respondents was not used in the commission of the crime. This order, a
copy of which was given to and received by the counsel of private
respondents, reads in part, /
xxx while it is true that the truck of your client was not used by her in
the commission of the crime, we uphold your claim that the truck
owner is not liable for the crime and in no case could a criminal case
be filed against her as provided under Article 309 and 310 of the
Revised Penal Code. xxx[36]chanroblesvirtuallawlibrary
chanroblesvirtualawlibrary
We observed that private respondents misread the content of the
aforestated order and obviously misinterpreted the intention of
petitioners. What is contemplated by the petitioners when they stated
that the truck "was not used in the commission of the crime" is that it
was not used in the commission of the crime of theft, hence, in no case
can a criminal action be filed against the owner thereof for violation of
Article 309 and 310 of the Revised Penal Code. Petitioners did not
timber from alienable and disposable public lands, or from private
lands, without any authority under a license agreement, lease, license
or permit, shall be guilty of qualified theft as defined and punished
under Articles 309 and 310 of the Revised Penal Code xxx.
(Underscoring ours; Section 68, P.D.705 before its amendment by
E.O.277 ) chanroblesvirtualawlibrary
SECTION 1. Section 68 of Presidential Decree No.705, as amended, is
hereby amended to read as follows: chan roblesvirtualawli brary
Section 68. 

a"a
a
8  
a
 
 

eliminate the possibility that the truck was being used in the 


 

2Any person who shall cut, gather, collect,
commission of another crime, that is, the breach of Section 68 of
P.D.705 as amended by E.O. 277. In the same order of July 12, 1989,
petitioners pointed out@ chanroblesvirtualawlibrary
xxx However, under Section 68 of P.D.705 as amended and further
amended by Executive Order No.277 specifically provides for the
confiscation of the conveyance used in the transport of forest products
not covered by the required legal documents. She may not have been
involved in the cutting and gathering of the product in question but the
fact that she accepted the goods for a fee or fare the same is therefor
liable. xxx[37]chanroblesvirtuallawlibrary
chanroblesvirtualawlibrary
Private respondents, however, contended that there is no crime defined
and punishable under Section 68 other than qualified theft, so that,
when petitioners admitted in the July 12, 1989 order that private
respondents could not be charged for theft as provided for under
Articles 309 and 310 of the Revised Penal Code, then necessarily
private respondents could not have committed an act constituting a
crime under Section 68. We disagree. For clarity, the provision of
Section 68 of P.D. 705 before its amendment by E.O. 277 and the
provision of Section 1 of E.O. No.277 amending the aforementioned
Section 68 are reproduced herein, thus: chanroblesvirtualawlibrary
SECTION 68. 
remove timber or other forest products from any forest land, or timber
from alienable or disposable public land, or from private land, without
any authority, or possess timber or other forest products without the
legal documents as required under existing forest laws and regulations,
shall be punished with the penalties imposed under Articles 309 and
310 of the Revised Penal Code xxx." (Underscoring ours; Section 1,
E.O No. 277 amending Section 68, P.D. 705 as amended) chanroblesvirtualawl ibrary
With the introduction of Executive Order No. 277 amending Section
68 of P.D. 705, the act of cutting, gathering, collecting, removing, or
possessing forest products without authority constitutes a distinct
offense independent now from the crime of theft under Articles 309
and 310 of the Revised Penal Code, but the penalty to be imposed is
that provided for under Article 309 and 310 of the Revised Penal
Code. This is clear from the language of Executive Order No. 277
when it eliminated the phrase shall be guilty of qualified theft as
defined and punished under Articles 309 and 310 of the Revised Penal
Code and inserted the words shall be punished with the penalties
imposed under Article 309 and 310 of the Revised Penal Code. When
the statute is clear and explicit, there is hardly room for any extended
court ratiocination or rationalization of the law.[38]chanroblesvirtuallawlibrary
chanroblesvirtualawlibrary
From the foregoing disquisition, it is clear that a suit for replevin can

a"a
a
8  
a
 
 not be sustained against the petitioners for the subject truck taken and



 

2Any person who shall cut, gather, collect, retained by them for administrative forfeiture proceedings in pursuant
or remove timber or other forest products from any forest land, or to Section 68-A of the P. D. 705, as amended. Dismissal of the
replevin suit for lack of cause of action in view of the private
respondents failure to exhaust administrative remedies should have
been the proper course of action by the lower court instead of
assuming jurisdiction over the case and consequently issuing the writ
ordering the return of the truck. Exhaustion of the remedies in the
administrative forum, being a condition precedent prior to ones
recourse to the courts and more importantly, being an element of
private respondents right of action, is too significant to be waylaid by
  or prohibition. It
the lower court.chanroblesvirtualawlibrary
It is worth stressing at this point, that a suit for replevin is founded
solely on the claim that the defendant wrongfully withholds the
property sought to be recovered. It lies to recover possession of
personal chattels that are unlawfully detained.[39] To detain is defined
as to mean to hold or keep in custody,[40] and it has been held that
there is tortuous taking whenever there is an unlawful meddling with
the property, or an exercise or claim of dominion over it, without any
pretense of authority or right; this, without manual seizing of the
 or prohibition. chanroblesvirtualawlibrary
property is sufficient.[41] Under the Rules of Court, it is indispensable
in replevin proceedings, that the plaintiff must show by his own
affidavit that he is entitled to the possession of property, that the
property is wrongfully detained by the defendant, alleging the cause of
detention, that the same has not been taken for tax assessment, or
seized under execution, or attachment, or if so seized, that it is exempt
from such seizure, and the actual value of the property.[42] Private
respondents miserably failed to convince this Court that a wrongful
detention of the subject truck obtains in the instant case. It should be
noted that the truck was seized by the petitioners because it was
Moreover, the suit for replevin is never intended as a procedural tool
to question the orders of confiscation and forfeiture issued by the
DENR in pursuance to the authority given under P.D.705, as amended.
Section 8 of the said law is explicit that actions taken by the Director
of the Bureau of Forest Development concerning the enforcement of
the provisions of the said law are subject to review by the Secretary of
DENR and that courts may not review the decisions of the Secretary
except through a special civil action for 
reads :chanroblesvirtualawlibrary
SECTION 8. REVIEW - All actions and decisions of the Director are
subject to review, motu propio or upon appeal of any person aggrieved
thereby, by the Department Head whose decision shall be final and
executory after the lapse of thirty (30) days from the receipt of the
aggrieved party of said decision, unless appealed to the President in
accordance with Executive Order No. 19, Series of 1966. The Decision
of the Department Head may not be reviewed by the courts except
through a special civil action for 
=*0(, the Petition is GRANTED; the Decision of the
respondent Court of Appeals dated October 16, 1991 and its
Resolution dated July 14, 1992 are hereby SET ASIDE AND
REVERSED; the Restraining Order promulgated on September 27,
1993 is hereby made permanent; and the Secretary of DENR is
directed to resolve the controversy with utmost dispatch. chanroblesvirtualawlibrary
$((,,. chanroblesvirtualawlibrary
transporting forest products with out the required permit of the DENR  Y!

"Y

Y
Y Y Ypp Y


in manifest contravention of Section 68 of P.D. 705 as amended by
E.O 277. Section 68-A of P.D. 705, as amended, unquestionably 
warrants the confiscation as well as the disposition by the Secretary of
DENR or his duly authorized representatives of the conveyances used 
in violating the provision of forestry laws. Evidently, the continued
possession or detention of the truck by the petitioners for

administrative forfeiture proceeding is legally permissible, hence, no
wrongful detention exists in the case at bar.chanroblesvirtualawlibrary


 >c"#
4 4 "!
? chanrobles virtual law libra ry Since this case was filed only on January 26, 1994, the
fifteen-day period provided for under Section 51 of
&*++&&+/) $1 6   Y )* Republic Act 6657 which is the Comprehensive
*((%)(0 && $*($) -(0 Agrarian Reform Law within which to appeal, already
)*,&)(0  + 0(',&)(0 lapsed.
 + 0(' ,%,+ )+(1( ,
Section 51 of Republic Act No. 6657 provides:
, / (+)-
 ,1 6(0)*
&*++&&+$  Section 51. Finality of Determination. -
Any case or controversy before it (DAR)
,+$+( chanrobles virtual law library

shall be decided within thirty (30) days

after it is submitted for resolution. Only
',(3 p@ chanrobles virtual law library

one (1) motion for reconsideration shall

be allowed. Any order, ruling or decision
This is a petition for review of the decision of the Court of Appeals,[1] shall be final after the lapse of fifteen
dated August 28, 1997, affirming the dismissal by the Regional Trial (15) days from receipt of a copy thereof.
Court, Branch 2, Tagum, Davao, of the petition for judicial
chanrobles virtual law lib rary

determination of the just compensation filed by petitioner for the On appeal to the Court of Appeals, the decision was affirmed. It was
taking of its property under the Comprehensive Agrarian Reform held that:
Program. chanrobles virtual law library

Jurisdiction over land valuation cases is lodged in the

The facts are as follows: chanrobles virtual law library

Department of Agrarian Reform Adjudication Board, as

is plainly provided under Rule II of the DARAB
Petitioner Philippine Veterans Bank owned four parcels of land in Revised Rules of Procedure. Jksm
Tagum, Davao, which are covered by Transfer Certificates of Title
Nos. T-38666, T-38667, T-6236, and T-27591. The lands were taken $c " 
!
by the Department of Agrarian Reform for distribution to landless a
÷ 
:

 . The
farmers pursuant to the Comprehensive Agrarian Reform Law (R.A. Board shall have primary and exclusive
No. 6657). Dissatisfied with the valuation of the land made by jurisdiction, both original and appellate,
respondents Land Bank of the Philippines and the Department of to determine and adjudicate all agrarian
Agrarian Reform Adjudication Board (DARAB), petitioner filed a disputes, involving the implementation
petition for a determination of the just compensation for its property. of the Comprehensive Agrarian Reform
The petition was filed on January 26, 1994 with the Regional Trial Program (CARP) under Republic Act
Court, Branch 2, Tagum, Davao, which on February 23, 1995, No. 6657, Executive Order Nos. 228,
dismissed the petition on the ground that it was filed beyond the 15- 229, and 129-A, Republic Act No. 3844
day reglementary period for filing appeals from the orders of the as amended by Republic Act No. 6389,
DARAB. Its order[2] states in pertinent parts: Presidential Decree No. 27 and other
agrarian laws and their implementing
 rules and regulations. Specifically, such
jurisdiction shall include but not be
limited to the following:
....
b) The valuation of land, and
determination and payment of just
compensation, fixing and collection of
lease rentals, disturbance compensation,
amortization payments, and similar
disputes concerning the functions of the
Land Bank of the Philippines.
....
The above provision does not negate the original and
exclusive jurisdiction vested in Special Agrarian Court
over all petitions for the determination of just
compensation to landowners as provided in Section 51
of R.A. 6657.
Note, however, must be taken of Rule XIII, Section 11
of the DARAB Rules of Procedure, which specifically
states that,
The decision of the Adjudicator on land
valuation and preliminary determination
and payment of just compensation shall
not be appealable to the Board but shall
be brought directly to the Regional Trial
Court designated as Special Agrarian
Courts within fifteen (15) days from
receipt of the notice thereof. Any party
shall be entitled to only one motion for
reconsideration.
....
In pursuance thereof, it is clear that the right of a
landowner who disagrees with the valuation fixed by
the DAR to file a petition for the judicial fixing of just
compensation before special agrarian courts must be
exercised within the period provided in Rule XIII,
Section 11.
In this case, appellant neither gives information
regarding the date of its receipt of the questioned Order
of the DAR Provincial Adjudicator, nor disputes the
conclusion made by the trial court that, "(s)ince this
case was filed only on January 26, 1994, the fifteen-day
period provided for under Section 51 of Republic Act
6657 which is the Comprehensive Agrarian Reform
Law within which to appeal already lapsed". The court
a quos conclusion therefore stands. It did not commit an
error in dismissing the petition filed by Philippine
Veterans Bank for having been filed out of time.[3] Esmsc
chanrobles virtual law lib rary
Petitioner filed a motion for reconsideration, but its motion was
likewise denied. Hence, this petition for review. Petitioner raises the
following issue:
SHOULD A PETITION FOR THE JUDICIAL
FIXING OF JUST COMPENSATION BEFORE
SPECIAL AGRARIAN COURT BE [FILED] WITHIN
THE PERIOD PROVIDED IN RULE XIII, SECTION
11 OF THE DARAB RULES OF PROCEDURE AND
BEFORE THE DECISION OF THE DAR
PROVINCIAL ADJUDICATOR BECOMES FINAL
AND EXECUTORY? chanrobles virtual law library
Petitioner argues that DAR adjudicators have no jurisdiction to
determine the just compensation for the taking of lands under the
Comprehensive Agrarian Reform Program, because such jurisdiction
is vested in Regional Trial Courts designated as Special Agrarian
Courts and, therefore, a petition for the fixing of just compensation can
be filed beyond the 15-day period of appeal provided from the determination of questions of just compensation, and the provision of
decision of the DAR adjudicator. chanrobles virtual law library 57 granting Regional Trial Courts "original and exclusive jurisdiction"
over (1) all petitions for the determination of just compensation to
On the other hand, respondents argue that actions for the fixing of just landowner, and (2) prosecutions of criminal offenses under R.A. No.
compensation must be filed in the appropriate courts within 15 days 6657.[4] The first refers to administrative proceedings, while the
from receipt of the decision of the DAR adjudicator, otherwise such second refers to judicial proceedings. Under R.A. No. 6657, the Land
decision becomes final and executory, pursuant to 51 of R.A. No. Bank of the Philippines is charged with the preliminary determination
6657.chanrobles virtual law libra ry of the value of lands placed under land reform program and the
compensation to be paid for their taking. It initiates the acquisition of
Petitioners contention has no merit. chanrobles virtual law libra ry agricultural lands by notifying the landowner of the governments
intention to acquire his land and the valuation of the same as
The pertinent provisions of R.A. No. 6657 provides: determined by the Land Bank.[5] Within 30 days from receipt of notice,
the landowner shall inform the DAR of his acceptance or rejection of
Sec. 50. =2:
  
-÷. - The DAR the offer.[6] In the event the landowner rejects the offer, a summary
is hereby vested with primary jurisdiction to determine administrative proceeding is held by the provincial (PARAD), the
and adjudicate agrarian reform matters and shall have regional (RARAD) or the central (DARAB) adjudicator, as the case
exclusive original jurisdiction over all matters involving may be, depending on the value of the land, for the purpose of
the implementation of agrarian reform, except those determining the compensation for the land. The landowner, the Land
falling under the exclusive jurisdiction of the Bank, and other interested parties are then required to submit evidence
Department of Agriculture (DA) and the Department of as to the just compensation for the land. The DAR adjudicator decides
Environment and Natural Resources (DENR) . . . . the case within 30 days after it is submitted for decision.[7] If the
landowner finds the price unsatisfactory, he may bring the matter
Sec. 57.  :

 . - The Special Agrarian directly to the appropriate Regional Trial Court.[8]chanrobles virtual law libra ry

Courts shall have original and exclusive jurisdiction

over all petitions for the determination of just To implement the provisions of R.A. No. 6657, particularly 50 thereof,
compensation to landowners, and the prosecution of all Rule XIII, 11 of the DARAB Rules of Procedure provides:
criminal offenses under this Act. The Rules of Court
shall apply to all proceedings before the Special .
>
 
-

 

Agrarian Courts, unless modified by this Act. 
 :
  
 . - The decision of the
Adjudicator on land valuation and preliminary
The Special Agrarian Courts shall decide all determination and payment of just compensation shall
appropriate cases under their special jurisdiction within not be appealable to the Board but shall be brought
thirty (30) days from submission of the case for directly to the Regional Trial Courts designated as
decision. Esmmis
chanrobles virtual law library
Special Agrarian Courts within fifteen (15) days from
receipt of the notice thereof. Any party shall be entitled
There is nothing contradictory between the provision of 50 granting to only one motion for reconsideration. Chief chanrobles virtual law li brary

the DAR primary jurisdiction to determine and adjudicate "agrarian

reform matters" and exclusive original jurisdiction over "all matters As we held in    
 ÷ ,[9] this rule is an
involving the implementation of agrarian reform," which includes the acknowledgment by the DARAB that the power to decide just
compensation cases for the taking of lands under R.A. No. 6657 is 
vested in the courts. It is error to think that, because of Rule XIII, 11,
the original and exclusive jurisdiction given to the courts to decide 
petitions for determination of just compensation has thereby been
transformed into an appellate jurisdiction. It only means that, in 
accordance with settled principles of administrative law, primary
jurisdiction is vested in the DAR as an administrative agency to
determine in a preliminary manner the reasonable compensation to be 
paid for the lands taken under the Comprehensive Agrarian Reform
Program, but such determination is subject to challenge in the courts. chanrobles virtual law

library

The jurisdiction of the Regional Trial Courts is not any less "original 
and exclusive" because the question is first passed upon by the DAR,
as the judicial proceedings are not a continuation of the administrative 
determination. For that matter, the law may provide that the decision
of the DAR is final and unappealable. Nevertheless, resort to the 
courts cannot be foreclosed on the theory that courts are the guarantors
of the legality of administrative action.[10] chanrobles virtual law library


Accordingly, as the petition in the Regional Trial Court was filed
beyond the 15-day period provided in Rule XIII, 11 of the Rules of 
Procedure of the DARAB, the trial court correctly dismissed the case
and the Court of Appeals correctly affirmed the order of dismissal. chanrobles virtual law li brary


=*0(, the decision of the Court of Appeals is AFFIRMED.

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 Not satisfied with the decision of the BES, Quejano filed a Petition for
Review of the decision of the BES with the Regional Trial Court of
)*+,,+/+$+( Palawan and Puerto Princesa City (RTC). On April 26, 1999, Onon
filed a motion to dismiss the Petition for Review raising the issue of
>c"#!"# #"
"? jurisdiction. Onon claimed that the RTC had no jurisdiction to review
the decisions rendered by the BES in any post proclamation electoral
(1+)(((  
Y Y*(%,+
-
& protest in connection with the 1997 Liga ng mga Barangay election of
0
,3)1 &c& 
&B  officers and directors. In his motion to dismiss, Onon claimed that the

+(2%
(  Supplemental Guidelines for the 1997 Liga ng mga Barangay election
issued by the DILG on August 11, 1997 in its Memorandum Circular
,+$+( No. 97-193, providing for review of decisions or resolutions of the
BES by the regular courts of law is an 
 act and is void for
(3

-$p@ chanroblesvirtuallawlibrary being issued without or in excess of jurisdiction, as its issuance is not a
mere act of supervision but rather an exercise of control over the Ligas
This Petition for 
  and Prohibition with prayer for the internal organization. chanroblesvirtuallawlibrary
issuance of a temporary restraining order and writ of injunction seeks
the reversal of the Order of the Regional Trial Court of Palawan and On June 22, 1999, the RTC denied Onons motion to dismiss. In its
Puerto Princesa City, [1] Branch 50 in SPL. PROC. NO. 1056 entitled order, the RTC ratiocinated that the Secretary of the Department of
Elegio F. Quejano, Jr., petitioner vs. Joel Bito-Onon, et. al., Interior and Local Government [2] is vested with the power to
respondents which denied herein petitioners motion to dismiss the establish and prescribe rules, regulations and other issuances and
Petition for Review of the Resolution of the Board of Election implementing laws on the general supervision of local government
Supervisors dated August 25, 1997 in case number L-10-97 filed by units and the promotion of local autonomy and monitor compliance
herein private respondent with said court. chanroblesvirtuallawlibrary thereof by said units. [3] The RTC added that DILG Circular No. 97-
193 was issued by the DILG Secretary pursuant to his rule-making
It appears from the records that the petitioner, Joel Bito-Onon is the power as provided for under Section 7, Chapter II, Book IV of the
duly elected Barangay Chairman of Barangay Tacras, Narra, Palawan Administrative Code. [4] Consequently, the RTC ruled that it had
and is the Municipal Liga Chapter President for the Municipality of jurisdiction over the petition for review filed by Quejada. [5]
chanroblesvirtuallawlibrary
Narra, Palawan. The private respondent, Elegio Quejano, Jr. on the
other hand, is the duly elected Barangay Chairman of Barangay Rizal, Motion for reconsideration of the aforesaid Order was denied [6]
Magsaysay, Palawan and is the Municipal Liga Chapter President for prompting the petitioner to file the present petition wherein the
the Municipality of Magsaysay, Palawan. Both Onon and Quejano following issues are raised: chanroblesvirtuallawlibrary
were candidates for the position of Executive Vice-President in the
August 23, 1997 election for the Liga ng Barangay Provincial Chapter
=*)*(())*2%$)+(,&(/+$+(
of the province of Palawan. Onon was proclaimed the winning +''(
,%'+%
4"#=
$+$$%,1-
candidate in the said election prompting Quejano to file a post )*,+$)
-+.$$(0*+$
proclamation protest with the Board of Election Supervisors (BES),
%)*(+)-chanroblesvirtuallawlibrary
which was decided against him on August 25, 1997. chanroblesvirtuallawlibrary
 1=*)*(())*$&(,)%,
(''+)),
/
1%$(0,+$)+(+ control. The Solicitor General submits that the RTC committed grave
+$$%+)*2%$)+(,(,$.[7] chanroblesvirtuallawlibrary
In support of his petition, Onon argues that the Supplemental
Guidelines for the 1997 Synchronized Election of the Provincial and
Metropolitan Chapters and for the Election of the National Chapter of
the Liga ng mga Barangay contradicts the Implementing Rules and
Guidelines for the 1997 General Elections of the Liga ng mga
Barangay Officers and Directors and is therefore invalid. Onon alleges
that the Liga ng mga Barangay (LIGA) is not a local government unit
considering that a local government unit must have its own source of
income, a certain number of population, and a specific land area in
order to exist or be created as such. Consequently, the DILG only has
a limited supervisory authority over the LIGA. Moreover, Onon argues
that even if the DILG has supervisory authority over the LIGA, the act
of the DILG in issuing Memorandum Circular No. 97-193 or the
supplemental rules and guidelines for the conduct of the 1997 LIGA
elections had the effect of modifying, altering and nullifying the rules
prescribed by the National Liga Board. Onon posits that the issuance
of said guidelines allowing an appeal of the decision of the BES to the
regular courts rather than to the National Liga Board is no longer an
exercise of supervision but an exercise of control. [8] chanroblesvirtuallawlibrary
 


Board. This act was no longer a mere act of supervision but one of
abuse of discretion in not dismissing the petition for review of the BES
decision filed before it for failure of the petitioner to exhaust the
rightful remedy which was to appeal to the National Liga Board. [10]
chanroblesvirtuallawlibrary
On October 27, 1999, this Court denied petitioner Onons motion for
the issuance of restraining order for lack of merit. chanroblesvirtuallawlibrary
After a careful review of the case, we sustain the position of the
petitioner. chanroblesvirtuallawlibrary
The resolution of the present controversy requires an examination of
the questioned provision of Memorandum Circular No. 97-193 and the
Implementing Rules and Guidelines for the 1997 General Elections of
the Liga ng mga Barangay Officers and Directors (GUIDELINES).
The memorandum circular reads, insofar as pertinent, as follows:
chanroblesvirtuallawlibrary
Any post-proclamation protest must be filed with the BES within
twenty-four (24) hours from the closing of the election. The BES shall
decide the same within forty-eight (48) hours from receipt thereof. The
decision of the BES shall be final and immediately executory 
'

a 

  

a 

In his comment to the petition, private respondent Quejano argues that 
[11] (emphasis supplied) chanroblesvirtuallawlibrary
the Secretary of the DILG has competent authority to issue rules and
regulations like Memorandum Circular No. 97-893. The Secretary of On the other hand, the GUIDELINES provides that the BES shall have
DILGs rule-making power is conferred by the Administrative Code. the following among its duties: chanroblesvirtuallawlibrary
Considering that the Memorandum Circular was issued pursuant to his
rule making power, Quejano insists that the lower court did not To resolve any post-proclamation electoral protest which must be
commit any reversible error when it denied Onons motion to dismiss. submitted in writing to this Board within twenty-four (24) hours from
[9] chanroblesvirtuallawlibrary the close of election; provided said Board shall render its decision
within forty-eight (48) hours from receipt hereof; and provided further
On the other hand, the public respondent represented herein by the that the decision must be submitted to the National Liga Headquarters
Solicitor General, filed a separate Manifestation and Motion in Lieu of within twenty-four (24) hours from the said decision. The decision of
Comment agreeing with the position of petitioner Onon. The Solicitor the Board of Election Supervisors in this respect '


General affirms Onons claim that in issuing the questioned 

 .a7 


  
Memorandum Circular, the Secretary of the DILG effectively 
!
.[12] (emphasis supplied) chanroblesvirtuallawlibrary
amended the rules and guidelines promulgated by National Liga
Memorandum Circular No. 97-193 was issued by the DILG Secretary
pursuant to the power of general supervision of the President over all
local government units which was delegated to the DILG Secretary by
virtue of Administrative Order No. 267 dated February 18, 1992. [13]
The Presidents power of general supervision over local government
units is conferred upon him by the Constitution. [14] The power of
supervision is defined as the power of a superior officer to see to it that
lower officers perform their functions in accordance with law. [15]
This is distinguished from the power of control or the power of an
officer to alter or modify or set aside what a subordinate officer had
done in the performance of his duties and to substitute the judgment of
the former for the latter. [16] chanroblesvirtuallawlibrary
On many occasions in the past, this court has had the opportunity to
distinguish the power of supervision from the power of control. In
K
government organization, being an association, federation, league or
union created by law or by authority of law, whose members are either
appointed or elected government officials. The Local Government
Code [21] defines the liga ng mga barangay as an organization of all
barangays for the primary purpose of determining the representation of
the liga in the sanggunians, and for ventilating, articulating and
crystallizing issues affecting barangay government administration and
securing, through proper and legal means, solutions thereto. [22] The
liga shall have chapters at the municipal, city, provincial and
metropolitan political subdivision levels. The municipal and city
chapters of the liga shall be composed of the barangay representatives
of the municipal and city barangays respectively. The duly elected
presidents of the component municipal and city chapters shall
constitute the provincial chapter or the metropolitan political
subdivision chapter. The duly elected presidents of highly urbanized

, [17] we held that the Chief Executive wielded no cities, provincial chapters, the Metropolitan Manila chapter and
more authority than that of checking whether a local government or
the officers thereof perform their duties as provided by statutory
enactments. He cannot interfere with local governments provided that
the same or its officers act within the scope of their authority.
Supervisory power, when contrasted with control, is the power of mere
oversight over an inferior body; it does not include any restraining
authority over such body. [18] Officers in control lay down the rules in
the doing of an act. If they are not followed, it is discretionary on his
part to order the act undone or re-done by his subordinate or he may
even decide to do it himself. Supervision does not cover such
authority. Supervising officers merely sees to it that the rules are
followed, but he himself does not lay down such rules, nor does he
have the discretion to modify or replace them. If the rules are not
observed, he may order the work done or re-done to conform to the
prescribed rules. He cannot prescribe his own manner for the doing of
the act. [19] chanroblesvirtuallawlibrary
Does the Presidents power of general supervision extend to the liga ng
mga barangay, which is not a local government unit? [20]
chanroblesvirtuallawlibrary
We rule in the affirmative. In Opinion No. 41, Series of 1995, the
Department of Justice ruled that the liga ng mga barangay is a
metropolitan political subdivision chapters shall constitute the
National Liga ng mga Barangay. [23] chanroblesvirtuallawlibrary
The liga at the municipal, city, provincial, metropolitan political
subdivision, and national levels directly elect a president, a vice-
president and five (5) members of the board of directors. The board
shall appoint its secretary and treasurer and create such other positions
as it may deem necessary for the management of the chapter. [24]
chanroblesvirtuallawlibrary
The ligas are primarily governed by the provisions of the Local
Government Code. [25] However, their respective constitution and by-
laws shall govern all other matters affecting the internal organization
of the liga not otherwise provided for in the Local Government Code
provided that the constitution and by-laws shall be suppletory to the
provisions of Book III, Title VI of the Local Government Code and
shall always conform to the provisions of the Constitution and existing
laws. [26] chanroblesvirtuallawlibrary
Having in mind the foregoing principles, we rule that Memorandum
Circular No. 97-193 of the DILG insofar as it authorizes the filing a
Petition for Review of the decision of the BES with the regular courts
in a post proclamation electoral protest is of doubtful constitutionality.
We agree with both the petitioner and the Solicitor General that in 
authorizing the filing of the petition for review of the decision of the
BES with the regular courts, the DILG Secretary in effect amended 
and modified the GUIDELINES promulgated by the National Liga
Board and adopted by the LIGA which provides that the decision of 
the BES shall be subject to review by the National Liga Board. The
amendment of the GUIDELINES is more than an exercise of the
power of supervision but is an exercise of the power of control, which 
the President does not have over the LIGA. Although the DILG is
given the power to prescribe rules, regulations and other issuances, the 
Administrative Code limits its authority to merely monitoring
compliance by local government units of such issuances. [27] To 
monitor means to watch, observe or check and is compatible with the
power of supervision of the DILG Secretary over local governments, 
which is limited to checking whether the local government unit
concerned or the officers thereof perform their duties as per statutory 
enactments. [28] Besides, any doubt as to the power of the DILG
Secretary to interfere with local affairs should be resolved in favor of

the greater autonomy of the local government. [29] chanroblesvirtuallawlibrary

The public respondent judge therefore committed grave abuse of 

discretion amounting to lack or excess of jurisdiction in not dismissing
the respondents Petition for Review for failure to exhaust all 
administrative remedies and for lack of jurisdiction. chanroblesvirtuallawlibrary

=*0(, the instant petition is hereby GRANTED. The Order
of the Regional Trial Court dated June 22, 1999 is REVERSED and 
SET ASIDE. The Petition for Review filed by the private respondent
docketed as SPL. PROC. NO. 1056 is DISMISSED. chanroblesvirtuallawlibrary

SO ORDERED. chanroblesvirtuallawlibrary

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 Pursuant to Section 10, Article X of the Constitution, [2] the
Commission on Elections (COMELEC), on December 16, 2000,
Republic of the Philipppines conducted a plebiscite in the Municipalities of Bacon and Sorsogon
$%&'(%) and submitted the matter for ratification. chanroblesvirtuallawlibrary
Manila
On December 17, 2000, the Plebiscite City Board of Canvassers
1  (PCBC) proclaimed [3] the creation of the City of Sorsogon as having
been ratified and approved by the majority of the votes cast in the
>c" #"(c5

"? plebiscite. [4] chanroblesvirtuallawlibrary

1
'+
=
+  
 )* Invoking his right as a resident and taxpayer of the former
(''+$$+(()+($
:0 c:7 Municipality of Sorsorgon, Benjamin E. Cawaling, Jr. filed on January

c  2, 2001 the present petition for certiorari (G.R. No. 146319) seeking
the annulment of the plebiscite on the following grounds:
chanroblesvirtuallawlibrary
>c" #
(c5

"?
A. The December 16, 2000 plebiscite was conducted beyond the
1
'+
=
+  
 )* required 120-day period from the approval of R.A. 8806, in violation
.%)+/$)
-)()*&$+,)(0)* of Section 54 thereof; andchanroblesvirtuallawlibrary
&%1+(0)*&*++&&+$$)
-(0)*
+)+(
,(
(/')$)
-(0 B. Respondent COMELEC failed to observe the legal requirement of
)*,&
)')(01%,)
,'

') twenty (20) day extensive information campaign in the Municipalities
$(++)(
&(/+(0$($(( of Bacon and Sorsogon before conducting the
'%++&
+)-(0$($(('%++&
+)-(0 plebiscite.chanroblesvirtuallawlibrary
1
( 
Two days after filing the said action, or on January 4, 2001, petitioner
,+$+( instituted another petition (G.R. No. 146342), this time for prohibition,
seeking to enjoin the further implementation of R.A. No. 8806 for
$
,(/
%)+3p@chanroblesvirtuallawlibrary being unconstitutional, contending, in essence, that: chanroblesvirtuallawlibrary
Before us are two (2) separate petitions challenging the 1. The creation of Sorsogon City by merging two municipalities
constitutionality of Republic Act No. 8806 which created the City of violates Section 450(a) of the Local Government Code of 1991 (in
Sorsogon and the validity of the plebiscite conducted pursuant thereto. relation to Section 10, Article X of the Constitution) which requires
chanroblesvirtuallawlibrary
that only a municipality or a cluster of barangays may be converted
On August 16, 2000, former President Joseph E. Estrada signed into into a component city; andchanroblesvirtuallawlibrary
law R.A. No. 8806, an Act Creating The City Of Sorsogon By
Merging The Municipalities Of Bacon And Sorsogon In The Province 2. R.A. No. 8806 contains two (2) subjects, namely, the (a) creation of
Of Sorsogon, And Appropriating Funds Therefor. [1] chanroblesvirtuallawlibrary the City of Sorsogon and the (b) abolition of the Municipalities of
Bacon and Sorsogon, thereby violating the one subject-one bill rule
prescribed by Section 26(1), Article VI of the
Constitution.chanroblesvirtuallawlibrary
Hence, the present petitions which were later consolidated. [5]
chanroblesvirtuallawlibrary
Significantly, during the pendency of these cases, specifically during
the May 14, 2001 elections, the newly-created Sorsogon City had the
first election of its officials. Since then, the City Government of
Sorsogon has been regularly discharging its corporate and political
powers pursuant to its charter, R.A. No. 8806. chanroblesvirtuallawlibrary
We shall first delve on petitioners constitutional challenge against
R.A. No. 8806 in c" #
. chanroblesvirtuallawlibrary
Every statute has in its favor the presumption of constitutionality. [6]
This presumption is rooted in the doctrine of separation of powers
which enjoins upon the three coordinate departments of the
Government a becoming courtesy for each others acts. [7] The theory
is that every law, being the joint act of the Legislature and the
Executive, has passed careful scrutiny to ensure that it is in accord
with the fundamental law. [8] This Court, however, may declare a law,
or portions thereof, unconstitutional, where a petitioner has shown a
clear and unequivocal breach of the Constitution, not merely a
doubtful or argumentative one. [9] In other words, the grounds for
nullity must be beyond reasonable doubt, [10] for to doubt is to
sustain. [11] chanroblesvirtuallawlibrary
Petitioner initially rejects R.A. No. 8806 because it violates Section
The criteria for the creation of a city is prescribed in Section 450 of the
Local Government Code of 1991 (the Code), thus: chanroblesvirtuallawlibrary
Section 450. C9cc . (a) A municipality or a cluster
of barangays may be converted into a component city if it has an
average annual income, as certified by the Department of Finance, of
at least Twenty million (P20,000,000.00) for the last two (2)
consecutive years based on 1991 constant prices, and if it has either of
the following requisites:chanroblesvirtuallawlibrary
(i) a contiguous territory of at least one hundred (100) square
kilometers, as certified by the Lands Management Bureau;
orchanroblesvirtuallawlibrary
(ii) a population of not less than one hundred fifty thousand (150,000)
inhabitants, as certified by the National Statistics
Office:chanroblesvirtuallawlibrary
Provided, That, the creation thereof shall not reduce the land area,
population, and income of the original unit or units at the time of said
creation to less than the minimum requirements prescribed
herein.chanroblesvirtuallawlibrary
(b) The territorial jurisdiction of a newly-created city shall be properly
identified by metes and bounds. The requirement on land area shall not
apply where the city proposed to be created is composed of one (1) or
more islands. The territory need not be contiguous if it comprises two
(2) or more islands.chanroblesvirtuallawlibrary
10, Article X of the Constitution which provides, 
: (c) The average annual income shall include the income accruing to
chanroblesvirtuallawlibrary
Section 10. No province, city, municipality, or barangay may be
created, divided, merged, abolished, or its boundary substantially
altered, except in accordance with the criteria established in the local
government code and subject to approval by a majority of the votes
cast in a plebiscite in the political units directly affected. (Emphasis
ours)chanroblesvirtuallawlibrary
the general fund, exclusive of specific funds, transfers, and non-
recurring income. (Emphasis ours)chanroblesvirtuallawlibrary
Petitioner is not concerned whether the creation of Sorsogon City
through R.A. No. 8806 complied with the criteria set by the Code as to
income, population and land area. What he is assailing is its mode of
creation. He contends that under Section 450(a) of the Code, a
component city may be created only by converting a municipality or a
cluster of a, not by merging two municipalities, as what R.A.
No. 8806 has done. chanroblesvirtuallawlibrary
This contention is devoid of merit. chanroblesvirtuallawlibrary
Petitioners constricted reading of Section 450(a) of the Code is
expediency of legislation. In the exercise of judicial power, we are
allowed only to settle actual controversies involving rights which are
legally demandable and enforceable, [13] and may not annul an act of
the political departments simply because we feel it is unwise or
impractical. [14] chanroblesvirtuallawlibrary
erroneous. The phrase A municipality or a cluster of a may
be c 
into a component city is not a criterion but simply one of
the c
 by which a city may be created. Section 10, Article X of the
Constitution, quoted earlier and which petitioner cited in support of his
posture, allows the  of local government units to create a
Next, petitioner assails R.A. No. 8806 since it contravenes the one
subject-one bill rule enunciated in Section 26 (1), Article VI of the
Constitution, to wit: chanroblesvirtuallawlibrary
Section 26 (1). Every bill passed by the Congress shall embrace only
province, , municipality or a in accordance with the
criteria established by the Code. Thus, Section 8 of the Code distinctly
provides: chanroblesvirtuallawlibrary
Section 8. Division and Merger. ,c and  of existing local
government units 7c:B77C 7 
:5
9c7c : Provided, however, That such division
shall not reduce the income, population, or land area of the local
government unit or units concerned to less than the minimum
requirements prescribed in this Code: Provided, further, That the
income classification of the original local government unit or units
shall not fall below its current income classification prior to such
division. x x x. (Emphasis ours)chanroblesvirtuallawlibrary
Verily, the creation of an entirely new local government unit through a

c or a  of existing local government units is c H

under the Constitution, provided that such merger or division 7
c:B77C :5
57c

chanroblesvirtuallawlibrary
Petitioner further submits that, in any case, there is no compelling
reason for merging the Municipalities of Bacon and Sorsogon in order
to create the City of Sorsogon considering that the Municipality of
Sorsogon alone already qualifies to be upgraded to a component city.
This argument goes into the B
c of R.A. No. 8806, a matter which
c 5AB77758:
 77c9 (emphasis
ours)chanroblesvirtuallawlibrary
Petitioner contends that R.A. No. 8806 actually embraces two
principal subjects which are: (1) the creation of the City of Sorsogon,
and (2) the abolition of the Municipalities of Bacon and Sorsogon.
While the title of the Act sufficiently informs the public about the
creation of Sorsogon City, petitioner claims that no such information
has been provided on the abolition of the Municipalities of Bacon and
Sorsogon. chanroblesvirtuallawlibrary
The argument is far from persuasive. Contrary to petitioners assertion,
there is only one subject embraced in the title of the law, that is, the
creation of the City of Sorsogon. The abolition/cessation of the
corporate existence of the Municipalities of Bacon and Sorsogon due
to their merger is not a subject separate and distinct from the creation
of Sorsogon City. Such abolition/cessation was but the logical, natural
and inevitable consequence of the merger. Otherwise put, it is the
necessary means by which the City of Sorsogon was created. Hence,
the title of the law, An Act Creating the City of Sorsogon by Merging
the Municipalities of Bacon and Sorsogon in the Province of
Sorsogon, and Appropriating Funds Therefor, cannot be said to
exclude the incidental effect of abolishing the two municipalities, nor
can it be considered to have deprived the public of fair information on
this consequence. chanroblesvirtuallawlibrary
we are not competent to rule. In ÷
Y YO
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[12] this Court, through Justice Jose P. Laurel, made it clear that the It is well-settled that the one title-one subject rule does not require the
judiciary does not pass upon questions of wisdom, justice or Congress to employ in the title of the enactment language of such
precision as to mirror, fully index or catalogue all the contents and the
minute details therein. [15] The rule is sufficiently complied with if the
title is comprehensive enough as to include the general object which
the statute seeks to effect, [16] and where, as here, the persons
interested are informed of the nature, scope and consequences of the
-,
proposed law and its operation. [17] Moreover, this Court has
invariably adopted a liberal rather than technical construction of the
rule so as not to cripple or impede legislation. [18] chanroblesvirtuallawlibrary
Consequently, we hold that petitioner has failed to present clear and
convincing proof to defeat the presumption of constitutionality of R.A.
No. 8806. chanroblesvirtuallawlibrary
Sec. 65. Effectivity. - This Act shall take effect upon its publication in
at least two (2) newspapers of general and local
circulation.chanroblesvirtuallawlibrary
The law was first published in the August 25, 2000 issue of )(,
a newspaper of general circulation. Then on September 01, 2000, it
was published in a newspaper of local circulation in the Province of
Sorsogon. Thus, the publication of the law was completed on
September 1, 2000 , which date, according to the COMELEC, should
be the reckoning point in determining the 120-day period within which
to conduct the plebiscite, not from the date of its approval (August 16,
2000) when the law had not yet been published. The COMELEC
argues that since publication is indispensable for the effectivity of a
We now turn to c" #" wherein petitioner assails the

, [19] it could only
validity of the plebiscite conducted by the COMELEC for the
ratification of the creation of Sorsogon City. chanroblesvirtuallawlibrary
Petitioner asserts that the plebiscite required by R.A. No. 8806 should
be conducted within 120 days from the approval of said Act per
express provision of its Section 54, viz: chanroblesvirtuallawlibrary
Sec. 54. Plebiscite. The City of Sorsogon shall acquire corporate
existence upon the ratification of its creation by a majority of the votes
cast by the qualified voters in a plebiscite to be conducted in the
present municipalities of Bacon and Sorsogon within c 7


B F"
G
from the ::c of this Act. x x x. (Emphasis
ours)chanroblesvirtuallawlibrary
The Act was approved on August 16, 2000 by former President Joseph
E. Estrada. Thus, petitioner claims, the December 16, 2000 plebiscite
was conducted one (1) day late from the expiration of the 120-day
period after the ::c of the Act. This 120-day period having
expired without a plebiscite being conducted, the Act itself expired
and could no longer be ratified and approved in the plebiscite held on
December 16, 2000. chanroblesvirtuallawlibrary
In its comment, the COMELEC asserts that it scheduled the plebiscite
on December 16, 2000 based on the date of the effectivity of the Act.
Section 65 of the Act states: chanroblesvirtuallawlibrary
law, citing the landmark case of K Y YK
schedule the plebiscite after the Act took effect. Thus, the COMELEC
concludes, the December 16, 2000 plebiscite was well within the 120-
day period from the effectivity of the law on September 1, 2000.
chanroblesvirtuallawlibrary
The COMELEC is correct. chanroblesvirtuallawlibrary
In addition, Section 10 of the Code provides: chanroblesvirtuallawlibrary
Section 10. &5C . No creation, division, merger,
abolition, or substantial alteration of boundaries of local government
units shall take effect unless approved by a majority of the votes cast
in a plebiscite called for the purpose in the political unit or units
directly affected. Such plebiscite shall be conducted by the
Commission on Elections within one hundred twenty (120) days from
the
c9799 of the law or ordinance affecting such
action,  
Bcc
  98 c7
. (Emphasis
ours) chanroblesvirtuallawlibrary
Quite plainly, the last sentence of Section 10 mandates that the
plebiscite shall be conducted within 120 days from the date of the
99 of the law, not from its approval. While the same provision
allows a law or ordinance to fix another date for conducting a
plebiscite, still such date must be reckoned from the date of the
effectivity of the law. chanroblesvirtuallawlibrary
Consequently, the word approval in Section 54 of R.A. No. 8806, SO ORDERED. chanroblesvirtuallawlibrary
which should be read together with Section 65 (effectivity of the Act)
thereof, could only mean effectivity as used and contemplated in ( Yp
Y p Y YY
Y
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Section 10 of the Code. This construction is in accord with the  Y


 Y
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fundamental rule that all provisions of the laws relating to the same *Yp
Ypp Yc 7 c5B5
subject should be read together and reconciled to avoid inconsistency
or repugnancy to established jurisprudence. As we stated in K 
Y  
Yp YY##  Y Y
chanroblesvirtuallawlibrary


Art. 2. Laws shall take effect after fifteen days following the
completion of their publication in the Official Gazette, unless it is 
otherwise provided. This Code shall take effect one year after such
publication.chanroblesvirtuallawlibrary 

After a careful study of this provision and of the arguments of the 

parties, both on the original petition and on the instant motion, we
have come to the conclusion, and so hold, that the clause unless it is 
otherwise provided refers to the date of effectivity and not to the
requirement of publication itself, which cannot in any event be 
omitted. )7
c c 77;
7B99
:c ::ccc  c7
 
B7c:c:5c (Emphasis
supplied)chanroblesvirtuallawlibrary 

To give section 54 a literal and strict interpretation would in effect 

make the Act effective even before its publication, which scenario is

precisely abhorred in K  Ychanroblesvirtuallawlibrary

Lastly, petitioner alleges that the COMELEC failed to conduct an
extensive information campaign on the proposed Sorsogon cityhood 
20 days prior to the scheduled plebiscite as required by Article 11
(b.4.ii), Rule II of the Rules and Regulations Implementing the Code. 
However, no proof whatsoever was presented by petitioner to
substantiate his allegation. Consequently, we sustain the presumption 
[20] that the COMELEC regularly performed or complied with its duty
under the law in conducting the plebiscite. chanroblesvirtuallawlibrary 

=*0(, the instant petitions are DISMISSED for lack of 

merit. Costs against petitioner. chanroblesvirtuallawlibrary
 epublic of the Philippines ',(3 p
chanrobles virtual law library

$%&'(%)
Manila These suits challenge the validity of a provision of the Organic Act for
the Autonomous Region in Muslim Mindanao (R.A. No. 6734),
EN BANC authorizing the President of the Philippines to "merge" by
administrative determination the regions remaining after the
establishment of the Autonomous Region, and the Executive Order
issued by the President pursuant to such authority, "Providing for the
c 4  

" Reorganization of Administrative Regions in Mindanao." A temporary

restraining order prayed for by the petitioners was issued by this Court
($$'  '$*+(1+ F)7
, on January 29, 1991, enjoining the respondents from enforcing the
$c7cc5cG ,1)= )(+(F0, Executive Order and statute in question. chanroblesvirtualawl ibrary chanrobles virtual law library

$c7cc5cG=+0,( +)F)7
,
35c 
cG*+ +( '+(F$c
 The facts are as follows: chanrobles virtual law lib rary

,c '(
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,35c 
cG /+, $Fc , Pursuant to Art. X, —18 of the 1987 Constitution, Congress passed
1 G 1,% *',+' &((F$c
, c R.A. No. 6734, the Organic Act for the Autonomous Region in

cG
($$=(' ' +     Muslim Mindanao, calling for a plebiscite to be held in the provinces
(1 )Fc ,35c Gpetitioners, vs. of Basilan, Cotobato, Davao del Sur, Lanao del Norte, Lanao del Sur,
*(($ '(1($8$J(''+)) Maguindanao, Palawan, South Cotabato, Sultan Kudarat, Sulu, Tawi-
* +' $0+,/ '($ 1+)(00+$ Tawi, Zamboanga del Norte, and Zamboanga del Sur, and the cities of
0(+( ,/(&')0(+($. , Cotabato, Dapitan, Dipolog, General Santos, Iligan, Marawi, Pagadian,
.++* +' (0)*+( ,/(&') Puerto Princesa and Zamboanga. In the ensuing plebiscite held on
(%+0(+(.* +' $%$/ -   November 16, 1989, four provinces voted in favor of creating an
 1+)(00+$0(+( ,/(&')0( autonomous region. These are the provinces of Lanao del Sur,
+($.+
.++,& )')(0(  Maguindanao, Sulu and Tawi-Tawi. In accordance with the
(/') )+( (('+ , constitutional provision, these provinces became the Autonomous
,/(&') %)*(+)-$) + ) Region in Muslim Mindanao. chanroblesvirtualawlibrary chanrobles virtual law libra ry

&$+,)+ '  ')$) 00*(%+'(

  %$c97,& )')(01%,)
 On the other hand, with respect to provinces and cities not voting in
'  ')J
*(($ + $ %%'(+ favor of the Autonomous Region, Art. XIX, — 13 of R.A. No. 6734
c ) 

. provides,

+'' % ,(


 , vs. *(.%)+/ That only the provinces and cities voting favorably in
$) -($ '(1($*(0+, '($*( such plebiscites shall be included in the Autonomous
$) -%+$$ )($ ,*( )+(  Region in Muslim Mindanao. The provinces and cities
) $%($ +  %(' 

. chanrobles virtual law library
which in the plebiscite do not vote for inclusion in the
Autonomous Region shall remain in the existing
 administrative regions.  

" , that the restructure them to new administrative regions. On the
President may, by administrative determination, merge other hand, the law (Sec. 13, Art. XIX, R.A. 6734) is
the existing regions. specific to the point, that is, that "the provinces and
cities which in the plebiscite do not vote for inclusion in
Pursuant to the authority granted by this provision, then President the Autonomous Region shall remain in the existing
Corazon C. Aquino issued on October 12, 1990 Executive Order No. administrative regions." chanrobles virt ual law libra ry

429, "providing for the Reorganization of the Administrative Regions

in Mindanao." Under this Order, as amended by E.O. No. 439 - The transfer of the provinces of Misamis Occidental
from Region X to Region IX; Lanao del Norte from
(1) Misamis Occidental, at present part of Region X, Region XII to Region IX, and South Cotobato from
will become part of Region IX. chanroblesvirtualawlibra ry chanrobles virtual law library Region XI to Region XII are alterations of the existing
structures of governmental units, in other words,
(2) Oroquieta City, Tangub City and Ozamiz City, at  a/
 . This can be gleaned from Executive
present parts of Region X will become parts of Region
IX. chanroblesvirtualawlibrary chanrobles virtual law l ibrary
(3) South Cotobato, at present a part of Region XI, will
become part of Region XII.
(4) General Santos City, at present part of Region XI,
will become part of Region XII.
(5) Lanao del Norte, at present part of Region XII, will
become part of Region IX.
(6) Iligan City and Marawi City, at present part of
Region XII, will become part of Region IX.
Petitioners in G.R. No. 96754 are, or at least at the time of the filing of
their petition, members of Congress representing various legislative
districts in South Cotobato, Zamboanga del Norte, Basilan, Lanao del
Norte and Zamboanga City. On November 12, 1990, they wrote then
President Aquino protesting E.O. No. 429. They contended that
There is no law which authorizes the President to pick
certain provinces and cities within the existing regions -
some of which did not even take part in the plebiscite as
in the case of the province of Misamis Occidental and
the cities of Oroquieta, Tangub and Ozamiz - and
Order No. 429, thus
Whereas, there is an urgent need to
reorganize the administrative regions in
chanroblesvirtualawlibrary chanrobles virtual law lib rary Mindanao to guarantee the effective
delivery of field services of government
agencies taking into consideration the
chanroblesvirtualawlibrary chanrobles virtual law library formation of the Autonomous Region in
Muslim Mindanao.
chanroblesvirtualawlibrary chanrobles virtual law library With due respect to Her Excellency, we submit that
while the authority necessarily includes the authority to
merge, the authority to merge does not include the
authority to reorganize. Therefore, the President's
authority under RA 6734 to "merge existing regions"
cannot be construed to include the authority to
reorganize them. To do so will violate the rules of
statutory construction.chanroblesvirtualawlibrary chanrobles virtual law library
The transfer of regional centers under Executive Order
429 is actually a restructuring (reorganization) of
administrative regions. While this reorganization, as in
Executive Order 429, does not affect the apportionment
of congressional representatives, the same is not valid
under the penultimate paragraph of Sec. 13, Art. XIX of
R.A. 6734 and Ordinance appended to the 1986
 Constitution apportioning the seats of the House of Ä 
 7a ,# in which the power of the Governor-
Representatives of Congress of the Philippines to the General to fix municipal boundaries was sustained on the ground that -
different legislative districts in provinces and cities." chanrobles virtual law libra ry

[such power] is simply a transference of certain details

As their protest went unheeded, while Inauguration Ceremonies of the with respect to provinces, municipalities, and
New Administrative Region IX were scheduled on January 26, 1991, townships, many of them newly created, and all of them
petitioners brought this suit for 
  and prohibition. chanroblesvirtualawlibrary chanrobles virtual law library subject to a more or less rapid change both in
development and centers of population, the proper
On the other hand, the petitioner in G.R. No. 96673, Immanuel Jaldon, regulation of which might require not only prompt
is a resident of Zamboanga City, who is suing in the capacity of action but action of such a detailed character as not to
taxpayer and citizen of the Republic of the Philippines. chanroblesvirtualawlib rary chanrobles virtual law li brary permit the legislative body, as such, to take it
efficiently.
Petitioners in both cases contend that Art. XIX, —13 of R.A. No. 6734
is unconstitutional because (1) it unduly delegates legislative power to The Solicitor General justifies the grant to the President of the power
the President by authorizing him to "merge [by administrative "to merge the existing regions" as something fairly embraced in the
determination] the existing regions" or at any rate provides no standard title of R.A. No. 6734, to wit, "An Act Providing for an Organic Act
for the exercise of the power delegated and (2) the power granted is for the Autonomous Region in Muslim Mindanao," because it is
not expressed in the title of the law. chanroblesvirtua lawlibrary chanrobles virtual law libra ry
germane to it.chanroblesvirtualawlibrary chanrobles virtual law l ibrary

In addition, petitioner in G.R. No. 96673 challenges the validity of He argues that the power is not limited to the merger of those regions
E.O. No. 429 on the ground that the power granted by Art. XIX, —13 in which the provinces and cities which took part in the plebiscite are
to the President is only to "merge regions IX and XII" but not to located but that it extends to all regions in Mindanao as necessitated by
reorganize the entire administrative regions in Mindanao and certainly the establishment of the autonomous region. chanroblesvirtualawlibra ry chanrobles virtual law library

not to transfer the regional center of Region IX from Zamboanga City

to Pagadian City. chanroblesvirtualawlibra ry chanrobles virtual law lib rary
Finally, he invokes P.D. No. 1416, as amended by P.D. No. 1772
which provides:
The Solicitor General defends the reorganization of regions in
Mindanao by E.O. No. 429 as merely the exercise of a power 1. The President of the Philippines shall have the
"traditionally lodged in the President," as held in ÷. ,
continuing authority to reorganize the National
and as a mere incident of his power of general supervision over local Government. In exercising this authority, the President
governments and control of executive departments, bureaus and shall be guided by generally acceptable principles of
offices under Art. X, —16 and Art. VII, —17, respectively, of the good government and responsive national government,
Constitution.chanroblesvirtualawlibra ry chanrobles virtual law libra ry
including but not limited to the following guidelines for
a more efficient, effective, economical and
He contends that there is no undue delegation of legislative power but development-oriented governmental framework:
only a grant of the power to "fill up" or provide the details of
legislation because Congress did not have the facility to provide for (a) More effective planning
them. He cites by analogy the case of Ä 
 
. implementation, and review functions; chanrobles virtual law library
 (b) Greater decentralization and f. Create, abolish, group, consolidate,
responsiveness in decision-making merge, or integrate entities, agencies,
process; chanrobles vi rtual law library instrumentalities, and units of the
National Government, as well as expand,
(c) Further minimization, if not, amend, change, or otherwise modify
elimination, of duplication or their powers, functions and authorities,
overlapping of purposes, functions, including, with respect to government-
activities, and programs; chanrobles vi rtual law library owned or controlled corporations, their
corporate life, capitalization, and other
(d) Further development of as relevant aspects of their charters. chanroblesvirtualawlibrary chanrobles virtual law l ibrary

standardized as possible ministerial, sub-

ministerial and corporate organizational
structures;
(e) Further development of the
regionalization process; and
g. Take such other related actions as may
chanrobles virtual law library be necessary to carry out the purposes
and objectives of this Decree.
chanrobles vi rtual law lib rary Considering the arguments of the parties, the issues are: chanrobles virtual law library

(f) Further rationalization of the (1) whether the power to "merge" administrative regions is legislative
functions of and administrative in character, as petitioners contend, or whether it is executive in
relationships among government character, as respondents claim it is, and, in any event, whether Art.
entities.
chanroblesvi rtualawlibra ry chanrobles vi rtual law library XIX, —13 is invalid because it contains no standard to guide the
President's discretion; chanrobles virtual law li brary

For purposes of this Decree, the

coverage of the continuing authority of (2) whether the power given is fairly expressed in the title of the
the President to reorganize shall be statute; andchanrobles virtual law li brary

interpreted to encompass all agencies,

entities, instrumentalities, and units of (3) whether the power granted authorizes the reorganization even of
the National Government, including all regions the provinces and cities in which either did not take part in the
government owned or controlled plebiscite on the creation of the Autonomous Region or did not vote in
corporations as well as the entire range favor of it; and chanrobles virtual law libra ry

of the powers, functions, authorities,

administrative relationships, acid related (4) whether the power granted to the President includes the power to
aspects pertaining to these agencies, transfer the regional center of Region IX from Zamboanga City to
entities, instrumentalities, and units. Pagadian City. chan roblesvirtualawli brary chanrobles virtual law library

2. [T]he President may, at his discretion, take the It will be useful to recall first the nature of administrative regions and
following actions: the basis and purpose for their creation. On September 9, 1968, R.A.
No. 5435 was passed "authorizing the President of the Philippines,
xxx xxx xxx
with the help of a Commission on Reorganization, to reorganize the
different executive departments, bureaus, offices, agencies and
instrumentalities of the government, including banking or financial
institutions and corporations owned or controlled by it." The purpose
was to promote "simplicity, economy and efficiency in the
government." The Commission on Reorganization created under the

over local governments [ Art. X, —4 of the Constitution]." The
regions themselves are not territorial and political divisions like
provinces, cities, municipalities and barangays but are "mere
groupings of contiguous provinces for administrative purposes."4 The
power conferred on the President is similar to the power to adjust
municipal boundaries! which has been described in /.÷

law was required to submit an integrated reorganization plan not later
than December 31, 1969 to the President who was in turn required to
submit the plan to Congress within forty days after the opening of its
next regular session. The law provided that any reorganization plan
submitted would become effective only upon the approval of
Congress. 
Accordingly, the Reorganization Commission prepared an Integrated
Reorganization Plan which divided the country into eleven
administrative regions. By P.D. No. 1, the Plan was approved and
made part of the law of the land on September 24, 1972. P.D. No. 1
was twice amended in 1975, first by P.D. No. 742 which
"restructur[ed] the regional organization of Mindanao, Basilan, Sulu
and Tawi-Tawi" and later by P.D. No. 773 which further
"restructur[ed] the regional organization of Mindanao and divid[ed]
Region IX into two sub-regions." In 1978, P.D. No. 1555 transferred
the regional center of Region IX from Jolo to Zamboanga City. chanroblesvirtualawl ibrary chanrobles virtual law library
Thus the creation and subsequent reorganization of administrative
regions have been by the President pursuant to authority granted to
him by law. In conferring on the President the power "to merge [by
administrative determination] the existing regions" following the
establishment of the Autonomous Region in Muslim Mindanao,
Congress merely followed the pattern set in previous legislation dating
back to the initial organization of administrative regions in 1972. The
choice of the President as delegate is logical because the division of
the country into regions is intended to facilitate not only the
administration of local governments but also the direction of executive
departments which the law requires should have regional offices. As
this Court observed in ÷, "while the power to merge
administrative regions is not expressly provided for in the
Constitution, it is a power which has traditionally been lodged with the
President to facilitate the exercise of the power of general supervision
— or as "administrative in nature." chanrobles virtual law library
There is, therefore, no abdication by Congress of its legislative power
in conferring on the President the power to merge administrative
regions. The question is whether Congress has provided a sufficient
standard by which the President is to be guided in the exercise of the
power granted and whether in any event the grant of power to him is
included in the subject expressed in the title of the law. chanroblesvirtualawlibrary chanrobles virt ual law libra ry
First, the question of standard. A legislative standard need not be
expressed. It may simply be gathered or implied. " Nor need it be
found in the law challenged because it may be embodied in other
statutes on the same subject as that of the challenged legislation. ""
With respect to the power to merge existing administrative regions, the
standard is to be found in the same policy underlying the grant to the
President in R.A. No. 5435 of the power to reorganize the Executive
Department, to wit: "to promote simplicity, economy and efficiency in
the government to enable it to pursue programs consistent with
national goals for accelerated social and economic development and to
improve the service in the transaction of the public business.""
Indeed, as the original eleven administrative regions were established
in accordance with this policy, it is logical to suppose that in
authorizing the President to "merge [by administrative determination]
the existing regions" in view of the withdrawal from some of those
regions of the provinces now constituting the Autonomous Region, the
purpose of Congress was to reconstitute the original basis for the
organization of administrative regions. chanroblesvirt ualawlibrary chanrobles virt ual law libra ry
Nor is Art. XIX, —13 susceptible to charge that its subject is not
embraced in the title of R.A. No. 6734. The constitutional requirement
that "every bill passed by the Congress shall embrace only one subject
which shall be expressed in the title thereof" "# has always been given the Autonomous Region in Muslim Mindanao, as
a practical rather than a technical construction. The title is not required provided under RA No. 6734. " chanrobles virtual law library

to be an index of the content of the bill. It is a sufficient compliance

with the constitutional requirement if the title expresses the general
subject and all provisions of the statute are germane to that subject. " provinces and cities which do not vote for inclusion in the
Certainly the reorganization of the remaining administrative regions is
germane to the general subject of R.A. No. 6734, which is the
establishment of the Autonomous Region in Muslim Mindanao. chanroblesvirtualawlibrary chanrobles virtual law libra ry
Finally, it is contended that the power granted to the President is
limited to the reorganization of administrative regions in which some
of the provinces and cities which voted in favor of regional autonomy
are found, because Art. XIX, —13 provides that those which did not
The contention has no merit. While Art. XIX, —13 provides that "The
Autonomous Region shall remain in the existing administrative
regions," this provision is subject to the qualification that "the
President may by administrative determination merge the existing
regions." This means that while non-assenting provinces and cities are
to remain in the regions as designated upon the creation of the
Autonomous Region, they may nevertheless be regrouped with
contiguous provinces forming other regions as the exigency of
administration may require. chanroblesvi rtualawlibra ry chanrobles vi rtual law lib rary

vote for autonomy "shall remain in the existing administrative

regions." More specifically, petitioner in G.R. No. 96673 claims: The regrouping is done only on paper. It involves no more than are
definition or redrawing of the lines separating administrative regions
The questioned Executive Order No. 429 distorted and, for the purpose of facilitating the administrative supervision of local
in fact, contravened the clear intent of this provision by government units by the President and insuring the efficient delivery
moving out or transferring certain political subdivisions of essential services. There will be no "transfer" of local governments
(provinces/cities) out of their legally designated from one region to another except as they may thus be regrouped so
regions. Aggravating this unacceptable or untenable that a province like Lanao del Norte, which is at present part of Region
situation is EO No. 429's effecting certain movements XII, will become part of Region IX. chanroblesvirtualawlib rary chanrobles virtual law li brary

on areas which did not even participate in the

November 19, 1989 plebiscite. The unauthorized action The regrouping of contiguous provinces is not even analogous to a
of the President, as effected by and under the redistricting or to the division or merger of local governments, which
questioned EO No. 429, is shown by the following all have political consequences on the right of people residing in those
dispositions: (1) Misamis Occidental, formerly of political units to vote and to be voted for. It cannot be overemphasized
Region X and which did not even participate in the that administrative regions are mere groupings of contiguous provinces
plebiscite, was moved from said Region X to Region for administrative purposes, not for political representation. chanroblesvirtualawl ibrary chanrobles virtual law libra ry

IX; (2) the cities of Ozamis, Oroquieta, and Tangub, all

formerly belonging to Region X, which likewise did not Petitioners nonetheless insist that only those regions, in which the
participate in the said plebiscite, were transferred to provinces and cities which voted for inclusion in the Autonomous
Region IX; (3) South Cotobato, from Region XI to Region are located, can be "merged" by the President. chanroblesvirtualawlibrary chanrobles virtual law libra ry

Region XII; (4) General Santos City: from Region XI to

Region XII; (5) Lanao del Norte, from Region XII to To be fundamental reason Art. XIX, —13 is not so limited. But the
Region IX; and (6) the cities of Marawi and Iligan from more fundamental reason is that the President's power cannot be so
Region XII to Region IX. All of the said provinces and limited without neglecting the necessities of administration. It is
cities voted "NO", and thereby rejected their entry into noteworthy that the petitioners do not claim that the reorganization of
the regions in E.O. No. 429 is irrational. The fact is that, as they 
themselves admit, the reorganization of administrative regions in E.O.
No. 429 is based on relevant criteria, to wit: (1) contiguity and 
geographical features; (2) transportation and communication facilities;
(3) cultural and language groupings; (4) land area and population; (5) 
existing regional centers adopted by several agencies; (6) socio-
economic development programs in the regions and (7) number of 
provinces and cities. chanroblesvirtualawl ibrary chanrobles virtual law libra ry


What has been said above applies to the change of the regional center

from Zamboanga City to Pagadian City. Petitioners contend that the
determination of provincial capitals has always been by act of 
Congress. But as, this Court said in Abbas, " administrative regions
are mere "groupings of contiguous provinces for administrative 
purposes, . . . [They] are not territorial and political subdivisions like
provinces, cities, municipalities and barangays." There is, therefore, no 
basis for contending that only Congress can change or determine
regional centers. To the contrary, the examples of P.D. Nos. 1, 742, 
773 and 1555 suggest that the power to reorganize administrative
regions carries with it the power to determine the regional center. chanroblesvirtualawlibrary chanrobles virtual law l ibrary 

It may be that the transfer of the regional center in Region IX from 

Zamboanga City to Pagadian City may entail the expenditure of large
sums of money for the construction of buildings and other 
infrastructure to house regional offices. That contention is addressed to
the wisdom of the transfer rather than to its legality and it is settled 
that courts are not the arbiters of the wisdom or expediency of
legislation. In any event this is a question that we will consider only if 
fully briefed and upon a more adequate record than that presented by

petitioners.
chanroblesvirtualawl ibrary chanrobles virtual law libra ry


WHEREFORE, the petitions for 
  and prohibition are
DISMISSED for lack of merit. chanroblesvirtualawlibrary chanrob les virtual law library


SO ORDERED. 

" : "; "
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Republic of the Philipppines On March 15, 1994, the Department of Budget and Management
$%&'(%) (DBM) issued the disputed Local Budget Circular No. 55 (LBC 55)
Manila which provided that:chanroblesvirtuallawlibrary

1  xxx xxx xxxchanroblesvirtuallawlibrary

>c"
# ,5#

? 2.3.2. In the light of the authority granted to the local government units
under the Local Government Code to provide for additional
*()%,$',$, ,(F8 allowances and other benefits to national government officials and

1 7
!G%+ )F&
 
1 7 employees assigned in their locality, 


  


G %$)+/$)+F&
 
1 7 G*(     



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a*"444 44  

')%,$)'+$)($'1(*($)F&
 
 

,44 44 
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subject to the
1 7"G/+)0 + F
, 1 7
G following conditions:chanroblesvirtuallawlibrary

=+0,( ,  ) F&
 
1 7#G
c9'
   Y (''+$$+(( %,+) a) That the grant is not mandatory on the part of the
  LGUs;chanroblesvirtuallawlibrary

,+$+( b) That all contractual and statutory obligations of the LGU including
the implementation of R.A. 6758 shall have been fully provided in the
(( @chanroblesvirtuallawlibrary budget;chanroblesvirtuallawlibrary

Before us is a petition for certiorariunder Rule 64 to annul the
decision  and resolution , dated September 21, 1995 and May 28,
1996, respectively, of the respondent Commission on Audit (COA)
affirming the notices of the Mandaue City Auditor which diminished
the monthly additional allowances received by the petitioner judges of
the Regional Trial Court (RTC) and Municipal Trial Court (MTC)
stationed in Mandaue City. chanroblesvirtuallawlibrary
c) That the budgetary requirements/limitations under Section 324 and
325 of R.A. 7160 should be satisfied and/or complied with;
andchanroblesvirtuallawlibrary
d) That the LGU has fully implemented the devolution of
functions/personnel in accordance with R.A. 7160.[3] (italics
supplied)chanroblesvirtuallawlibrary

The undisputed facts are as follows:chanroblesvirtuallawlibrary xxx xxx xxxchanroblesvirtuallawlibrary

In 1986, the RTC and MTC judges of Mandaue City started receiving
monthly allowances of P1,260 each through the yearly appropriation
ordinance enacted by the Sangguniang Panlungsod of the said city. In
1991, Mandaue City increased the amount to P1,500 for each judge.
chanroblesvirtuallawlibrary
The said circular likewise provided for its immediate effectivity
without need of publication:chanroblesvirtuallawlibrary
5.0 EFFECTIVITYchanroblesvirtuallawlibrary

This Circular shall take effect immediately.chanroblesvirtuallawlibrary

Acting on the DBM directive, the Mandaue City Auditor issued
notices of disallowance to herein petitioners, namely, Honorable RTC
Judges Mercedes G. Dadole, Ulric R. Caete, Agustin R. Vestil,
Honorable MTC Judges Temistocles M. Boholst, Vicente C. Fanilag
and Wilfredo A. Dagatan, in excess of the amount authorized by LBC
55. Beginning October, 1994, the additional monthly allowances of the
petitioner judges were reduced to P1,000 each. They were also asked
to reimburse the amount they received in excess of P1,000 from April
to September, 1994. chanroblesvirtuallawlibrary
The petitioner judges filed with the Office of the City Auditor a protest
against the notices of disallowance. But the City Auditor treated the
protest as a motion for reconsideration and indorsed the same to the
COA Regional Office No. 7. In turn, the COA Regional Office
referred the motion to the head office with a recommendation that the
same be denied. chanroblesvirtuallawlibrary
On September 21, 1995, respondent COA rendered a decision denying
petitioners motion for reconsideration. The COA held
that:chanroblesvirtuallawlibrary
The issue to be resolved in the instant appeal is whether or not the City
Ordinance of Mandaue which provides a higher rate of allowances to
the appellant judges may prevail over that fixed by the DBM under
Local Budget Circular No. 55 dated March 15, 1994.chanroblesvirtuallawlibrary
xxx xxx xxxchanroblesvirtuallawlibrary
Applying the foregoing doctrine, appropriation ordinance of local
government units is subject to the organizational, budgetary and
compensation policies of budgetary authorities (COA 5th Ind., dated
March 17, 1994 re: Province of Antique; COA letter dated May 17,
1994 re: Request of Hon. Renato Leviste, Cong. 1st Dist. Oriental
Mindoro). In this regard, attention is invited to Administrative Order
No. 42 issued on March 3, 1993 by the President of the Philippines
clarifying the role of DBM in the compensation and classification of
local government positions under RA No. 7160 vis-avis the provisions
of RA No. 6758 in view of the abolition of the JCLGPA. Section 1 of
said Administrative Order provides that:chanroblesvirtuallawlibrary
Section 1. The Department of Budget and Management as the lead
administrator of RA No. 6758 shall, through its Compensation and
Position Classification Bureau, continue to have the following
responsibilities in connection with the implementation of the Local
Government Code of 1991:
a) Provide guidelines on the classification of local
government positions and on the specific rates of pay
therefore;
b) Provide criteria and guidelines for the grant of all
allowances and additional forms of compensation to
local government employees; xxx. (underscoring
supplied)chanroblesvirtuallawlibrary
To operationalize the aforecited presidential directive, DBM issued
LBC No. 55, dated March 15, 1994, whose effectivity clause provides
that:chanroblesvirtuallawlibrary
xxx xxx xxxchanroblesvirtuallawlibrary
5.0 EFFECTIVITYchanroblesvirtuallawlibrary
This Circular shall take effect immediately.chanroblesvirtuallawlibrary
It is a well-settled rule that implementing rules and regulations
promulgated by administrative or executive officer in accordance with,
and as authorized by law, has the force and effect of law or partake the
nature of a statute (Victorias Milling Co., Inc., vs. Social Security
Commission, 114 Phil. 555, cited in Agpalos Statutory Construction,
2nd Ed. P. 16; Justice Cruzs Phil. Political Law, 1984 Ed., p. 103;
Espanol vs. Phil Veterans Administration, 137 SCRA 314; Antique
Sawmills Inc. vs. Tayco, 17 SCRA 316).chanroblesvirtuallawlibrary
xxx xxx xxxchanroblesvirtuallawlibrary
There being no statutory basis to grant additional allowance to judges
in excess of P1,000.00 chargeable against the local government units
where they are stationed, this Commission finds no substantial grounds
or cogent reason to disturb the decision of the City Auditor, Mandaue
City, disallowing in audit the allowances in question. Accordingly, the
above-captioned appeal of the MTC and RTC Judges of Mandaue
City, insofar as the same is not covered by Circular Letter No. 91-7, is
hereby dismissed for lack of merit.chanroblesvirtuallawlibrary
xxx xxx xxx[4]chanroblesvirtuallawlibrary
On November 27, 1995, Executive Judge Mercedes Gozo-Dadole, for
and in behalf of the petitioner judges, filed a motion for
reconsideration of the decision of the COA. In a resolution dated May
28, 1996, the COA denied the motion. chanroblesvirtuallawlibrary
Hence, this petition for certiorari by the petitioner judges, submitting
the following questions for resolution:
Ichanroblesvirtuallawlibrary
HAS THE CITY OF MANDAUE STATUTORY AND
CONSTITUTIONAL BASIS TO PROVIDE ADDITIONAL
ALLOWANCES AND OTHER BENEFITS TO JUDGES
STATIONED IN AND ASSIGNED TO THE CITY?
IIchanroblesvirtuallawlibrary
CAN AN ADMINISTRATIVE CIRCULAR OR GUIDELINE SUCH
PER MONTH NOTWITHSTANDING THAT THEY HAVE BEEN
RECEIVING ALLOWANCES OF P1,500.00 MONTHLY FOR THE
PAST FIVE YEARS?
IVchanroblesvirtuallawlibrary
IS LOCAL BUDGET CIRCULAR NO. 55 DATED MARCH 15,
1994 ISSUED BY THE DEPARTMENT OF BUDGET AND
MANAGEMENT VALID AND ENFORCEABLE CONSIDERING
THAT IT WAS NOT DULY PUBLISHED IN ACCODANCE WITH
LAW?[5]chanroblesvirtuallawlibrary
Petitioner judges argue that LBC 55 is void for infringing on the local
autonomy of Mandaue City by dictating a uniform amount that a local
government unit can disburse as additional allowances to judges
stationed therein. They maintain that said circular is not supported by
any law and therefore goes beyond the supervisory powers of the
President. They further allege that said circular is void for lack of
publication. chanroblesvirtuallawlibrary
On the other hand, the yearly appropriation ordinance providing for
additional allowances to judges is allowed by Section 458, par.
(a)(1)[xi], of RA 7160, otherwise known as the Local Government
Code of 1991, which provides that:chanroblesvirtuallawlibrary
Sec. 458.  "-
";
 
  

(a) The
AS LOCAL BUDGET CIRCULAR NO. 55 RENDER
INOPERATIVE THE POWER OF THE LEGISLATIVE BODY OF
A CITY BY SETTING A LIMIT TO THE EXTENT OF THE
EXERCISE OF SUCH POWER?
IIIchanroblesvirtuallawlibrary
HAS THE COMMISSION ON AUDIT CORRECTLY
INTERPRETED LOCAL BUDGET CIRCULAR NO. 55 TO
INCLUDE MEMBERS OF THE JUDICIARY IN FIXING THE
CEILING OF ADDITIONAL ALLOWANCES AND BENEFITS TO
sangguniang panlungsod, as the legislative body of the city, shall enact
ordinances, approve resolutions and appropriate funds for the general
welfare of the city and its inhabitants pursuant to Section 16 of this
Code and in the proper exercise of the corporate powers of the city as
provided for under Section 22 of this Code, and shall:chanroblesvirtuallawlibrary
(1) Approve ordinances and pass resolutions necessary for an efficient
and effective city government, and in this connection, shall:
xxx xxx xxx
BE PROVIDED TO JUDGES STATIONED IN AND ASSIGNED TO 9!B 
 

a 
 "  
 
MANDAUE CITY BY THE CITY GOVERNMENT AT P1,000.00 


  



'
a"  
" 


a 
"


 a 
 Assuming a
that LBC 55 is void, respondent COA maintains


 
 a



F (italics that the provisions of the yearly approved ordinance granting
supplied)chanroblesvirtuallawlibrary
Instead of filing a comment on behalf of respondent COA, the
Solicitor General filed a manifestation supporting the position of the
petitioner judges. The Solicitor General argues that (1) DBM only
enjoys the power to review and determine whether the disbursements
of funds were made in accordance with the ordinance passed by a local
government unit while (2) the COA has no more than auditorial
visitation powers over local government units pursuant to Section 348
of RA 7160 which provides for the power to inspect at any time the
financial accounts of local government units. chanroblesvirtuallawlibrary
Moreover, the Solicitor General opines that the DBM and the
respondent are only authorized under RA 7160 to promulgate a Budget
Operations Manual for local government units, to improve and
systematize methods, techniques and procedures employed in budget
preparation, authorization, execution and accountability pursuant to
Section 354 of RA 7160. The Solicitor General points out that LBC 55
was not exercised under any of the aforementioned provisions.
chanroblesvirtuallawlibrary
Respondent COA, on the other hand, insists that the constitutional and
statutory authority of a city government to provide allowances to
judges stationed therein is not absolute. Congress may set limitations
on the exercise of autonomy. It is for the President, through the DBM,
to check whether these legislative limitations are being followed by the
local government units. chanroblesvirtuallawlibrary
One such law imposing a limitation on a local government units
autonomy is Section 458, par. (a) (1) [xi], of RA 7160, which
authorizes the disbursement of additional allowances and other
benefits to judges '


additional allowances to judges are still prohibited by the
appropriation laws passed by Congress every year. COA argues that
Mandaue City gets the funds for the said additional allowances of
judges from the Internal Revenue Allotment (IRA). But the General
Appropriations Acts of 1994 and 1995 do not mention the
disbursement of additional allowances to judges as one of the
allowable uses of the IRA. Hence, the provisions of said ordinance
granting additional allowances, taken from the IRA, to herein
petitioner judges are void for being contrary to law. chanroblesvirtuallawlibrary
To resolve the instant petition, there are two issues that we must
address: (1) whether LBC 55 of the DBM is void for going beyond the
supervisory powers of the President and for not having been published
and (2) whether the yearly appropriation ordinance enacted by the City
of Mandaue that provides for additional allowances to judges
contravenes the annual appropriation laws enacted by Congress.
chanroblesvirtuallawlibrary
We rule in favor of the petitioner judges.chanroblesvirtuallawlibrary
On the first issue, we declare LBC 55 to be null and void.
chanroblesvirtuallawlibrary
We recognize that, although our Constitution   guarantees autonomy
to local government units, the exercise of local autonomy remains
subject to the power of control by Congress and the power of
supervision by the President. Section 4 of Article X of the 1987
Philippine Constitution provides that:chanroblesvirtuallawlibrary
Sec. 4. The President of the Philippines shall exercise general
supervision over local governments. x x xchanroblesvirtuallawlibrary
 

 


 


a 
 
 
. Thus, DBM is merely enforcing In 

÷a $, we defined the supervisory power of the
the condition of the law when it sets a uniform maximum amount for President and distinguished it from the power of control exercised by
the additional allowances that a city government can release to judges Congress. Thus:chanroblesvirtuallawlibrary
stationed therein. chanroblesvirtuallawlibrary
This provision (Section 4 of Article X of the 1987 Philippine execution of the act. They have no discretion on this matter except to
Constitution) has been interpreted to exclude the power of control. In see to it that the rules are followed.chanroblesvirtuallawlibrary
Ä 
 
 ,[i][5] the Court contrasted the President's power of
supervision over local government officials with that of his power of
control over executive officials of the national government. It was
emphasized that the two terms -- supervision and control -- differed in
meaning and extent. The Court distinguished them as
follows:chanroblesvirtuallawlibrary
"x x x In administrative law, supervision means overseeing or the
power or authority of an officer to see that subordinate officers
perform their duties. If the latter fail or neglect to fulfill them, the
former may take such action or step as prescribed by law to make them
perform their duties. Control, on the other hand, means the power of
an officer to alter or modify or nullify or set aside what a subordinate
officer ha[s] done in the performance of his duties and to substitute the
judgment of the former for that of the latter."[ii][6]chanroblesvirtuallawlibrary
In K
Under our present system of government, executive power is vested in
the President.[vi][10] The members of the Cabinet and other executive
officials are merely alter egos. As such, they are subject to the power
of control of the President, at whose will and behest they can be
removed from office; or their actions and decisions changed,
suspended or reversed.[vii][11] In contrast, the heads of political
subdivisions are elected by the people. Their sovereign powers
emanate from the electorate, to whom they are directly accountable.
By constitutional fiat, they are subject to the Presidents supervision
only, not control, so long as their acts are exercised within the sphere
of their legitimate powers. By the same token, the President may not
withhold or alter any authority or power given them by the
Constitution and the law.chanroblesvirtuallawlibrary
Clearly then, the President can only interfere in the affairs and

"[iii][7]we further stated that the Chief Executive activities of a local government unit if he or she finds that the latter has
wielded no more authority than that of checking whether local
governments or their officials were performing their duties as provided
by the fundamental law and by statutes. He cannot interfere with local
a  cannot interfere in local affairs as long as the
governments, so long as they act within the scope of their authority.
"Supervisory power, when contrasted with control, is the power of
mere oversight over an inferior body; it does not include any
a  seeking to alter the wisdom of a law-conforming
restraining authority over such body,"[iv][8] we said.chanroblesvirtuallawlibrary
acted contrary to law. This is the scope of the Presidents supervisory
powers over local government units. Hence, the President or any of his
or her 
concerned local government unit acts within the parameters of the law
and the Constitution. Any directive therefore by the President or any of
his or her 
judgment on local affairs of a local government unit is a patent nullity
because it violates the principle of local autonomy and separation of
In a more recent case, - 
."[v][9] the difference between powers of the executive and legislative departments in governing
control and supervision was further delineated. Officers in control lay
down the rules in the performance or accomplishment of an act. If
these rules are not followed, they may, in their discretion, order the act
undone or redone by their subordinates or even decide to do it
themselves. On the other hand, supervision does not cover such
authority. Supervising officials merely see to it that the rules are
followed, but they themselves do not lay down such rules, nor do they
have the discretion to modify or replace them. If the rules are not
observed, they may order the work done or redone, but only to
conform to such rules. They may not prescribe their own manner of
municipal corporations.chanroblesvirtuallawlibrary
Does LBC 55 go beyond the law it seeks to implement? Yes.
chanroblesvirtuallawlibrary
LBC 55 provides that the additional monthly allowances to be given
by a local government unit should not exceed P1,000 in provinces and
cities and P700 in municipalities. Section 458, par. (a)(1)(xi), of RA
7160, the law that supposedly serves as the legal basis of LBC 55,
allows the grant of additional allowances to judges when the finances
of the city government allow. The said provision does not authorize
setting a definite maximum limit to the additional allowances granted
to judges. Thus, we need not belabor the point that the finances of a
city government may allow the grant of additional allowances higher
than P1,000 if the revenues of the said city government exceed its
annual expenditures. Thus, to illustrate, a city government with locally
generated annual revenues of P40 million and expenditures of P35
K,
million can afford to grant additional allowances of more than P1,000
each to, say, ten judges inasmuch as the finances of the city can afford
it. chanroblesvirtuallawlibrary
Setting a uniform amount for the grant of additional allowances is an
inappropriate way of enforcing the criterion found in Section 458, par.
(a)(1)(xi), of RA 7160. The DBM over-stepped its power of
supervision over local government units by imposing a prohibition that
did not correspond with the law it sought to implement. In other
words, the prohibitory nature of the circular had no legal basis.
chanroblesvirtuallawlibrary
Furthermore, LBC 55 is void on account of its lack of publication, in
violation of our ruling in K

K 6$where we held to deprive government workers of their allowance and additional
that:chanroblesvirtuallawlibrary
7
xxx. Administrative rules and regulations must also be published if
their purpose is to enforce or implement existing law pursuant to a
valid delegation.chanroblesvirtuallawlibrary
Interpretative regulations and those merely internal in nature, that is,
regulating only the personnel of an administrative agency and the
public, need not be published. Neither is publication required of the
so-called letters of instruction issued by administrative superiors
concerning the rules or guidelines to be followed by their subordinates
in the performance of their duties. chanroblesvirtuallawlibrary
and employees. In refuting respondent COAs argument that said
circular was merely an internal regulation, we ruled
that:chanroblesvirtuallawlibrary
On the need for publication of subject DBM-CCC No. 10, we rule in
the affirmative. Following the doctrine enunciated in K

publication in the Official Gazette or in a newspaper of general
circulation in the Philippines is required since ,1'c" 
7 c9 
 7::cc9B77c
 9cc:  8 B Stated differently, to be
effective and enforceable, DBM-CCC No. 10 must go through the
requisite publication in the Official Gazette or in a newspaper of
general circulation in the Philippines. chanroblesvirtuallawlibrary
In the present case under scrutiny, it is decisively clear that DBM-CCC
No. 10, which completely disallows payment of allowances and other
additional compensation to government officials and employees,
starting November 1, 1989, is not a mere interpretative or internal
regulation. It is something more than that. And why not, when it tends
compensation sorely needed to keep body and soul together.
59c7

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supplied)chanroblesvirtuallawlibrary
In  %

 K
a  
 
   
Respondent COA claims that publication is not required for LBC 55 ÷

7$, we again declared the same circular as void, for lack of
inasmuch as it is merely an interpretative regulation applicable to the publication, despite the fact that it was re-issued and then submitted
personnel of an LGU. We disagree. In -:
    for publication. Emphasizing the importance of publication to the
÷

"$ where we dealt with the same issue, this Court declared void, effectivity of a regulation, we therein held that:chanroblesvirtuallawlibrary
for lack of publication, a DBM circular that disallowed payment of
allowances and other additional compensation to government officials
It has come to our knowledge that DBM-CCC No. 10 has been re-
issued in its entirety and submitted for publication in the Official
Gazette per letter to the National Printing Office dated March 9, 1999.
Would the subsequent publication thereof cure the defect and retroact
to the time that the above-mentioned items were disallowed in
audit?chanroblesvirtuallawlibrary
The answer is in the negative, precisely for the reason that publication
additional allowances of judges. Respondent COA thus argues that the
provisions in the ordinance providing for such disbursement are
against the law, considering that the grant of the subject allowances is
not within the specified use allowed by the aforesaid yearly
appropriations acts. chanroblesvirtuallawlibrary
We disagree.chanroblesvirtuallawlibrary
is required as a  

  

to the effectivity of a law to Respondent COA failed to prove that Mandaue City used the IRA to
inform the public of the contents of the law or rules and regulations
before their rights and interests are affected by the same. From the
time the COA disallowed the expenses in audit up to the filing of
herein petition the subject circular remained in legal limbo due to its
non-publication. As was stated in K

K"prior publication of revenues, the deficit, the surplus and the IRA received each year.
laws before they become effective cannot be dispensed with, for the
reason that it would deny the public knowledge of the laws that are
supposed to govern it.[11]chanroblesvirtuallawlibrary
We now resolve the second issue of whether the yearly appropriation
ordinance enacted by Mandaue City providing for fixed allowances for
judges contravenes any law and should therefore be struck down as
null and void. chanroblesvirtuallawlibrary
According to respondent COA, even if LBC 55 were void, the
ordinances enacted by Mandaue City granting additional allowances to
the petitioner judges would still (be) bereft of legal basis for want of a
spend for the additional allowances of the judges. There was no
evidence submitted by COA showing the breakdown of the expenses
of the city government and the funds used for said expenses. All the
COA presented were the amounts expended, the locally generated
Aside from these items, no data or figures were presented to show that
Mandaue City deducted the subject allowances from the IRA. In other
words, just because Mandaue Citys locally generated revenues were
not enough to cover its expenditures, this did not mean that the
additional allowances of petitioner judges were taken from the IRA
and not from the citys own revenues. chanroblesvirtuallawlibrary
Moreover, the DBM neither conducted a formal review nor ordered a
disapproval of Mandaue Citys appropriation ordinances, in accordance
with the procedure outlined by Sections 326 and 327 of RA 7160
which provide that:chanroblesvirtuallawlibrary
lawful source of funds considering that the IRA 

  Section 326. Review of Appropriation Ordinances of Provinces,
  . Respondent COA showed that Mandaue Citys funds Highly Urbanized Cities, Independent Component Cities, and
consisted of locally generated revenues and the IRA. From 1989 to Municipalities within the Metropolitan Manila Area. The Department
1995, Mandaue Citys yearly expenditures exceeded its locally of Budget and Management shall review ordinances authorizing the
generated revenues, thus resulting in a deficit. During all those years, it annual or supplemental appropriations of provinces, highly-urbanized
was the IRA that enabled Mandaue City to incur a surplus. Respondent cities, independent component cities, and municipalities within the
avers that Mandaue City used its IRA to pay for said additional Metropolitan Manila Area  c
 B77

allowances and this violated paragraph 2 of the Special Provisions, 
 $c chanroblesvirtuallawlibrary
page 1060, of RA 7845 (The General Appropriations Act of 1995) 
and paragraph 3 of the Special Provision, page 1225, of RA 7663 (The Section 327. Review of Appropriation Ordinances of Component
General Appropriations Act of 1994) 
 which specifically identified Cities and Municipalities.- The sangguninang panlalawigan shall
the objects of expenditure of the IRA. Nowhere in said provisions of review the ordinance authorizing annual or supplemental
the two budgetary laws does it say that the IRA can be used for appropriations of component cities and municipalities in the same
manner and within the same period prescribed for the review of other 
ordinances. chanroblesvirtuallawlibrary

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chanroblesvirtuallawlibrary

Within 90 days from receipt of the copies of the appropriation
ordinance, the DBM should have taken positive action. Otherwise, 
such ordinance was deemed to have been properly reviewed and
deemed to have taken effect. Inasmuch as, in the instant case, the 
DBM did not follow the appropriate procedure for reviewing the
subject ordinance of Mandaue City and allowed the 90-day period to 
lapse, it can no longer question the legality of the provisions in the said

ordinance granting additional allowances to judges stationed in the
said city. chanroblesvirtuallawlibrary

=*0(, the petition is hereby GRANTED, and the assailed 
decision and resolution, dated September 21, 1995 and May 28, 1996,
respectively, of the Commission on Audit are hereby set aside. 
chanroblesvirtuallawlibrary


No costs. chanroblesvirtuallawlibrary

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 EN BANC MUNICIPALITY OF BAYBAY,

PROVINCE OF LEYTE;

MUNICIPALITY OF BOGO,

LEAGUE OF CITIES OF THE G.R. No. 176951 PROVINCE OF CEBU;

PHILIPPINES (LCP) represented MUNICIPALITY OF CATBALOGAN,

by LCP National President PROVINCE OF WESTERN SAMAR;

JERRY P. TREAS, CITY OF MUNICIPALITY OF TANDAG,

ILOILO represented by PROVINCE OF SURIGAO DEL SUR;

MAYOR JERRY P. TREAS, MUNICIPALITY OF BORONGAN,

CITY OF CALBAYOG PROVINCE OF EASTERN SAMAR;

represented by MAYOR and MUNICIPALITY OF TAYABAS,

MEL SENEN S. SARMIENTO, PROVINCE OF QUEZON,

and JERRY P. TREAS in his Respondents.

personal capacity as taxpayer,

Petitioners, CITY OF TARLAC, CITY OF SANTIAGO,

CITY OF IRIGA, CITY OF LIGAO,

- versus - CITY OF LEGAZPI, CITY OF

COMMISSION ON ELECTIONS; TAGAYTAY, CITY OF SURIGAO,

CITY OF BAYAWAN, CITY OF LEAGUE OF CITIES OF THE G.R. No. 177499

SILAY, CITY OF GENERAL SANTOS, PHILIPPINES (LCP) represented

CITY OF ZAMBOANGA, CITY OF by LCP National President

GINGOOG, CITY OF CAUAYAN, JERRY P. TREAS, CITY OF

CITY OF PAGADIAN, CITY OF ILOILO represented by

SAN CARLOS, CITY OF MAYOR JERRY P. TREAS,

SAN FERNANDO, CITY OF CITY OF CALBAYOG

TACURONG, CITY OF TANGUB, represented by MAYOR

CITY OF OROQUIETA, CITY OF MEL SENEN S. SARMIENTO,

URDANETA, CITY OF VICTORIAS, and JERRY P. TREAS in his

CITY OF CALAPAN, CITY OF personal capacity as taxpayer,

HIMAMAYLAN, CITY OF Petitioners,

BATANGAS, CITY OF BAIS,

CITY OF CADIZ, and - versus -

CITY OF TAGUM,

Petitioners-In-Intervention. COMMISSION ON ELECTIONS;

x-----------------------------x MUNICIPALITY OF LAMITAN,

PROVINCE OF BASILAN;
MUNICIPALITY OF TABUK, CITY OF TAGAYTAY, CITY OF SURIGAO,

PROVINCE OF KALINGA; CITY OF BAYAWAN, CITY OF

MUNICIPALITY OF BAYUGAN, SILAY, CITY OF GENERAL SANTOS,

PROVINCE OF AGUSAN DEL SUR; CITY OF ZAMBOANGA, CITY OF

MUNICIPALITY OF BATAC, GINGOOG, CITY OF CAUAYAN,

PROVINCE OF ILOCOS NORTE; CITY OF PAGADIAN, CITY OF

MUNICIPALITY OF MATI, SAN CARLOS, CITY OF

PROVINCE OF DAVAO ORIENTAL; SAN FERNANDO, CITY OF

and MUNICIPALITY OF GUIHULNGAN, TACURONG, CITY OF TANGUB,

PROVINCE OF NEGROS ORIENTAL, CITY OF OROQUIETA, CITY OF

Respondents. URDANETA, CITY OF VICTORIAS,

CITY OF CALAPAN, CITY OF

HIMAMAYLAN, CITY OF

BATANGAS, CITY OF BAIS,

CITY OF CADIZ, and

CITY OF TARLAC, CITY OF CITY OF TAGUM,

SANTIAGO, CITY OF IRIGA, Petitioners-In-Intervention.

CITY OF LIGAO, CITY OF LEGAZPI, x - - - - - - - - - - - - - - - - - - - - - - - - - - --x

 MENDOZA, and

LEAGUE OF CITIES OF THE G.R. No. 178056 COMMISSION ON ELECTIONS; SERENO, ::.

PHILIPPINES (LCP) represented MUNICIPALITY OF CABADBARAN,

by LCP National President Present: PROVINCE OF AGUSAN

JERRY P. TREAS, CITY OF DEL NORTE; MUNICIPALITY

ILOILO represented by CORONA,  : , OF CARCAR, PROVINCE OF

MAYOR JERRY P. TREAS, CARPIO, CEBU; and MUNICIPALITY OF

CITY OF CALBAYOG CARPIO MORALES, EL SALVADOR, MISAMIS

represented by MAYOR VELASCO, JR., ORIENTAL,

MEL SENEN S. SARMIENTO, NACHURA, Respondents.

and JERRY P. TREAS in his LEONARDO-DE CASTRO,

personal capacity as taxpayer,BRION,

Petitioners, PERALTA, CITY OF TARLAC, CITY OF

BERSAMIN, SANTIAGO, CITY OF IRIGA,

DEL CASTILLO, CITY OF LIGAO, CITY OF LEGAZPI,

- versus - ABAD, CITY OF TAGAYTAY, CITY OF SURIGAO,

VILLARAMA, JR., CITY OF BAYAWAN, CITY OF SILAY,

PEREZ, CITY OF GENERAL SANTOS,

CITY OF ZAMBOANGA, CITY OF RESOLUTION

GINGOOG, CITY OF CAUAYAN,

CITY OF PAGADIAN, CITY OF

SAN CARLOS, CITY OF  &+(p@

SAN FERNANDO, CITY OF For resolution are (1) the 
 
 motion for
TACURONG, CITY OF TANGUB, reconsideration and (2) motion to annul the Decision of 21
December 2009 filed by petitioners League of Cities of the
CITY OF OROQUIETA, CITY OF
Philippines, et al. and (3) the 
 
 motion for
URDANETA, CITY OF VICTORIAS,
reconsideration filed by petitioners-in-intervention Batangas
CITY OF CALAPAN, CITY OF City, Santiago City, Legazpi City, Iriga City, Cadiz City,
HIMAMAYLAN, CITY OF and Oroquieta City.

BATANGAS, CITY OF BAIS, On 18 November 2008, the Supreme Court  7" by a

CITY OF CADIZ, and Promulgated: majority vote, struck down the subject 16 Cityhood Laws for

CITY OF TAGUM, violating Section 10, Article X of the 1987 Constitution and
the equal protection clause. On 31 March 2009, the Supreme
Petitioners-In-Intervention. August 24, 2010
Court  7, again by a majority vote, denied the
x----------------------------------------- respondents' first motion for reconsideration. On 28 April
---------x
2009, the Supreme Court  7, by a  
vote, denied
the respondents' second motion for reconsideration.
Accordingly, the 18 November 2008 Decision became final
and executory and was recorded, in due course, in the Book
of Entries of Judgments on 21 May 2009.
However, after the finality of the 18 November 2008
Decision and without any exceptional and compelling
one Local Government Code.1 The Constitution requires
Congress to stipulate in the Local Government Code all the
criteria necessary for the creation of a city, including the
conversion of a municipality into a city. Congress cannot
write such criteria in any other law, like the Cityhood Laws.
reason, the Court 7 unprecedentedly reversed the 18
November 2008 Decision by upholding the constitutionality
of the Cityhood Laws in the Decision of 21 December 2009.
Upon reexamination, the Court finds the motions for
reconsideration meritorious and accordingly reinstates the
18 November 2008 Decision declaring the 16 Cityhood
Laws unconstitutional.
÷
> 
The clear intent of the Constitution is to insure that the
creation of cities and other political units must follow 7
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. Any derogation or
deviation from the criteria prescribed in the Local
Government Code violates Section 10, Article X of the
Constitution.
RA 9009 amended Section 450 of the Local Government
  
 *4"÷
G 
 


  Code to increase the income requirement from P20 million
"* 9c7c 7c
Section 10, Article X of the 1987 Constitutionprovides:
No province, city, municipality, or barangay shall be created, divided,
merged, abolished or its boundary substantially altered, except in
accordance with the criteria established in the local government code
and subject to approval by a majority of the votes cast in a plebiscite in
the political units directly affected. (  
)
The Constitution is clear. The creation of local government
units must follow the 57
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to respondent municipalities, even though their cityhood
bills were pending in Congress when Congress passed RA
9009. The Cityhood Laws, all enacted #
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the increased income requirement in Section 450 of the
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 Moreover, the fact of pendency of a cityhood bill in the 11th
Congress limits the exemption to a specific condition

existing at the time of passage of RA 9009. That specific

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7 c5 
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. - Where the
Further, the exemption provision in the Cityhood Laws
gives the 16 municipalities a unique advantage based on an
arbitrary date í the filing of their cityhood bills before the
end of the 11th Congress - as against all other municipalities
that want to convert into cities after the effectivity of RA
9009.
court  is equally divided in opinion, or the necessary
majority cannot be had, the case shall again be deliberated
on, and if after such deliberation no decision is reached, the
original action commenced in the court shall be dismissed;
in appealed cases, the judgment or order appealed from shall
stand affirmed; and on all incidental matters, the petition or
motion shall be denied. (  
)
In addition, limiting the exemption only to the 16
municipalities violates the requirement that the classification
must apply to all similarly situated. Municipalities with the
same income as the 16 respondent municipalities cannot
convert into cities, while the 16 respondent municipalities
can. Clearly, as worded, the exemption provision found in
the Cityhood Laws, even if it were written in Section 450 of
the Local Government Code, would still be unconstitutional
for violation of the equal protection clause.
( YK YYY Y#
Y 
The 7 Resolution of 26 January 1999 in A.M. No.
99-1-09-SC, reads:
A MOTION FOR THE CONSIDERATION OF A D E C I S
I O N OR RESOLUTION OF THE COURT 7÷ OR
OF A DIVISION MAY BE GRANTED UPON A VOTE
OF A MAJORITY OF THE MEMBERS OF THE 
7÷ OR OF A DIVISION, AS THE CASE MAY BE,
WHO ACTUALLY TOOK PART IN THE
DELIBERATION OF THE MOTION.
IF THE VOTING RESULTS IN A TIE, THE MOTION
FOR RECONSIDERATION IS DEEMED DENIED.
(  
)
  The clear and simple language of the clarificatory  
Resolution requires no further explanation. If the voting of
Section 7, Rule 56 of the Rules of Court provides:
the Court   results in a tie, the motion for
reconsideration is deemed denied. The Court's prior majority
 4
action on the main decision stands affirmed. cȮa This prior 18 November 2008 Decision and 31 March 2009
clarificatory Resolution applies to all cases heard by the Resolution, and thus the second motion for reconsideration
Court " which includes not only cases involving the must be denied.
constitutionality of a law, but also, as expressly stated in
Section 4(2), Article VIII of the Constitution, "all other
cases which under the Rules of Court are required to be Further, the tie-vote on the second motion for
heard ." reconsideration did not mean that the present cases were left
undecided because there remain the Decision of 18
November 2008 and the Resolution of 31 March 2009 where
The 6-6 tie-vote by the Court  on the second motion
for reconsideration necessarily resulted in the denial of the
second motion for reconsideration. Since the Court was
evenly divided, there could be no reversal of the 18
November 2008 Decision,  
2
a majority of the Court   concurred in declaring the
unconstitutionality of the sixteen Cityhood Laws. In short,
the 18 November 2008 Decision and the 31 March 2009
Resolution, which were both reached with the concurrence


 of a majority of the Court " are not reconsidered but
 
 
 

.5 The judgment stands in full force.6
cȮa cȮa stand affirmed. 7
These prior majority actions of the Court
Undeniably, the 6-6 tie-vote did not overrule the prior  can only be overruled by a new majority vote, not a
majority  Decision of 18 November 2008, as well as tie-vote because a tie-vote cannot overrule a prior
the prior majority   Resolution of 31 March 2009
denying reconsideration. The tie-vote on the second motion
for reconsideration is not the same as a tie-vote on the main
decision where there is no prior decision. Here, the tie-vote
plainly signifies that there is no majority to overturn the
affirmative action.
The denial, by a split vote, of the second motion for
reconsideration inevitably rendered the 18 November 2008
Decision final. In fact, in its Resolution of 28 April 2009,
denying the second motion for reconsideration, the Court 
  
 reiterated that no further pleadings shall be entertained
and stated that entry of judgment be made in due course.
The dissenting opinion stated that "a deadlocked vote of six
is not a majority and a non-majority does not constitute a
rule with precedential value."8
Indeed, a tie-vote is a non-majority - a non-majority which
cannot overrule a prior affirmative action, that is the 18
November 2008 Decision striking down the Cityhood Laws.
In short, the 18 November 2008 Decision stands affirmed.
And assuming a non-majority lacks any precedential value,
the 18 November 2008 Decision, which was unreversed as a
result of the tie-vote on the respondents' second motion for
reconsideration, nevertheless remains binding on the
parties.9

Section 10, Article X of the Constitution expressly provides
that "no x x x city shall be created x x x except in
accordance with the criteria established in the local
government code." This provision can only be interpreted in
one way, that is, all the criteria for the creation of cities must
be embodied exclusively in the Local Government Code. In
this case, the Cityhood Laws, which are unmistakably laws
other than the Local Government Code, provided an
exemption from the increased income requirement for the
creation of cities under Section 450 of the Local
Government Code, as amended by RA 9009. Clearly, the
Cityhood Laws contravene the letter and intent of Section
10, Article X of the Constitution.
Adhering to the explicit prohibition in Section 10, Article X
of the Constitution does not cripple Congress' power to
make laws. In fact, Congress is not prohibited from
amending the Local Government Code itself, as what
Congress did by enacting RA 9009. Indisputably, the act of
amending laws comprises an integral part of the
Legislature's law-making power. The unconstitutionality of
the Cityhood Laws lies in the fact that Congress provided an
exemption contrary to the express language of the
Constitution that "[n]o x x x city x x x shall be created 
except in accordance with the criteria established in the local

government code."In other words, Congress exceeded and
abused its law-making power, rendering the challenged 
Cityhood Laws void for being violative of the Constitution.



WHEREFORE, we GRANT the motions for reconsideration 
of the 21 December 2009 Decision and REINSTATE the 18

November 2008 Decision declaring

%($)+)%)+(  the Cityhood Laws, namely:

Republic Act Nos. 9389, 9390, 9391, 9392, 9393, 9394,

9398, 9404, 9405, 9407, 9408, 9409, 9434, 9435, 9436, and

9491.



We NOTE petitioners' motion to annul the Decision of 21
December 2009. 

SO ORDERED. 






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EN BANC National Government Agencies concerned pursuant to the Local
Government Code.´ The Oversight Committee (referred to as the
[G.R. No. 152774. May 27, 2004] Devolution Committee in E.O. No. 48) constituted under Section
533(b) of Republic Act No. 7160 (The Local Government Code of
THE PROVINCE OF BATANGAS, represented by its Governor, 1991) has been tasked to formulate and issue the appropriate rules and
HERMILANDO I. MANDANAS, 

 "
HON. ALBERTO G. regulations necessary for its effective implementation. Further, to
ROMULO, Executive Secretary and Chairman of the Oversight address the funding shortfalls of functions and services devolved to the
Committee on Devolution; HON. EMILIA BONCODIN, Secretary, LGUs and other funding requirements of the program, the ³Devolution
Department of Budget and Management; HON. JOSE D. LINA, JR., Adjustment and Equalization Fund´ was created. For 1998, the DBM
Secretary, Department of Interior and Local Government,  


was directed to set aside an amount to be determined by the Oversight
Committee based on the devolution status appraisal surveys
DECISION undertaken by the DILG. The initial fund was to be sourced from the
available savings of the national government for CY 1998. For 1999
CALLEJO, SR., :.: and the succeeding years, the corresponding amount required to
sustain the program was to be incorporated in the annual GAA. The
The Province of Batangas, represented by its Governor, Hermilando I. Oversight Committee has been authorized to issue the implementing
Mandanas, filed the present petition for 
 , prohibition and rules and regulations governing the equitable allocation and
mandamus under Rule 65 of the Rules of Court, as amended, to distribution of said fund to the LGUs.
declare as unconstitutional and void certain provisos contained in the
General Appropriations Acts (GAA) of 1999, 2000 and 2001, insofar
—÷÷ *+++
as they uniformly earmarked for each corresponding year the amount
of five billion pesos (P5,000,000,000.00) of the Internal Revenue
Allotment (IRA) for the Local Government Service Equalization Fund
(LGSEF) and imposed conditions for the release thereof.
Named as respondents are Executive Secretary Alberto G. Romulo, in
his capacity as Chairman of the Oversight Committee on Devolution,
Secretary Emilia Boncodin of the Department of Budget and
Management (DBM) and Secretary Jose Lina of the Department of
Interior and Local Government (DILG).
Background
On December 7, 1998, then President Joseph Ejercito Estrada issued
Executive Order (E.O.) No. 48 entitled ³ESTABLISHING A
PROGRAM FOR DEVOLUTION ADJUSTMENT AND
EQUALIZATION.´ The program was established to ³facilitate the
process of enhancing the capacities of local government units (LGUs)
in the discharge of the functions and services devolved to them by the
K.—;
In Republic Act No. 8745, otherwise known as the GAA of 1999, the
program was renamed as the LOCAL GOVERNMENT SERVICE
EQUALIZATION FUND (LGSEF). Under said appropriations law,
the amount of P96,780,000,000 was allotted as the share of the LGUs
in the internal revenue taxes. Item No. 1, Special Provisions, Title
XXXVI ± A. Internal Revenue Allotment of Rep. Act No. 8745
contained the following proviso:
... PROVIDED, That the amount of FIVE BILLION PESOS
(P5,000,000,000) shall be earmarked for the Local Government
Service Equalization Fund for the funding requirements of projects
and activities arising from the full and efficient implementation of
devolved functions and services of local government units pursuant to
R.A. No. 7160, otherwise known as the Local Government Code of
1991: PROVIDED, FURTHER, That such amount shall be released to
the local government units subject to the implementing rules and
regulations, including such mechanisms and guidelines for the
equitable allocations and distribution of said fund among local
government units subject to the guidelines that may be prescribed by
the Oversight Committee on Devolution as constituted pursuant to
Book IV, Title III, Section 533(b) of R.A. No. 7160. The Internal
Revenue Allotment shall be released directly by the Department of
Budget and Management to the Local Government Units concerned.
On July 28, 1999, the Oversight Committee (with then Executive
Secretary Ronaldo B. Zamora as Chairman) passed Resolution Nos.
OCD-99-003, OCD-99-005 and OCD-99-006 entitled as follows:
OCD-99-005
RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR
THE PhP5 BILLION CY 1999 LOCAL GOVERNMENT SERVICE
EQUALIZATION FUND (LGSEF) AND REQUESTING HIS
EXCELLENCY PRESIDENT JOSEPH EJERCITO ESTRADA TO
APPROVE SAID ALLOCATION SCHEME.
OCD-99-006
RESOLUTION ADOPTING THE ALLOCATION SCHEME FOR
THE PhP4.0 BILLION OF THE 1999 LOCAL GOVERNMENT
SERVICE EQUALIZATION FUND AND ITS CONCOMITANT
GENERAL FRAMEWORK, IMPLEMENTING GUIDELINES AND
MECHANICS FOR ITS IMPLEMENTATION AND RELEASE, AS
PROMULGATED BY THE OVERSIGHT COMMITTEE ON
DEVOLUTION.
OCD-99-003
RESOLUTION REQUESTING HIS EXCELLENCY PRESIDENT
JOSEPH EJERCITO ESTRADA TO APPROVE THE REQUEST OF
THE OVERSIGHT COMMITTEE ON DEVOLUTION TO SET
ASIDE TWENTY PERCENT (20%) OF THE LOCAL
GOVERNMENT SERVICE EQUALIZATION FUND (LGSEF) FOR
LOCAL AFFIRMATIVE ACTION PROJECTS AND OTHER
PRIORITY INITIATIVES FOR LGUs INSTITUTIONAL AND
CAPABILITY BUILDING IN ACCORDANCE WITH THE
IMPLEMENTING GUIDELINES AND MECHANICS AS
PROMULGATED BY THE COMMITTEE.
These OCD resolutions were approved by then President Estrada on
October 6, 1999.
Under the allocation scheme adopted pursuant to Resolution No.
OCD-99-005, the five billion pesos LGSEF was to be allocated as
follows:
1. The PhP4 Billion of the LGSEF shall be allocated in accordance
with the allocation scheme and implementing guidelines and
mechanics promulgated and adopted by the OCD. To wit:
a. The first PhP2 Billion of the LGSEF shall be allocated in
accordance with the codal formula sharing scheme as
prescribed under the 1991 Local Government Code;
b. The second PhP2 Billion of the LGSEF shall be allocated
in accordance with a modified 1992 cost of devolution
fund (CODEF) sharing scheme, as recommended by the
respective leagues of provinces, cities and
municipalities to the OCD. The modified CODEF
sharing formula is as follows:
Province : 40%
Cities : 20%
Municipalities : 40%
This is applied to the P2 Billion after the approved amounts
granted to individual provinces, cities and municipalities as
assistance to cover decrease in 1999 IRA share due to
reduction in land area have been taken out.
2. The remaining PhP1 Billion of the LGSEF shall be earmarked to
support local affirmative action projects and other priority initiatives
submitted by LGUs to the Oversight Committee on Devolution for
approval in accordance with its prescribed guidelines as promulgated
and adopted by the OCD.
In Resolution No. OCD-99-003, the Oversight Committee set aside the
one billion pesos or 20% of the LGSEF to support Local Affirmative
Action Projects (LAAPs) of LGUs. This remaining amount was
intended to ³respond to the urgent need for additional funds assistance,
otherwise not available within the parameters of other existing fund
sources.´ For LGUs to be eligible for funding under the one-billion-
peso portion of the LGSEF, the OCD promulgated the following:
III. CRITERIA FOR ELIGIBILITY:
1. LGUs (province, city, municipality, or barangay),
individually or by group or multi-LGUs or leagues of
LGUs, especially those belonging to the 5th and 6th
class, may access the fund to support any projects or
activities that satisfy any of the aforecited purposes. A
barangay may also access this fund directly or through
their respective municipality or city.
2. The proposed project/activity should be need-based, a local
priority, with high development impact and are
congruent with the socio-cultural, economic and
development agenda of the Estrada Administration,
such as food security, poverty alleviation,
electrification, and peace and order, among others.
3. Eligible for funding under this fund are projects arising
from, but not limited to, the following areas of concern:
a. delivery of local health and sanitation services,
hospital services and other tertiary services;
b. delivery of social welfare services;
c. provision of socio-cultural services and facilities for
youth and community development;
d. provision of agricultural and on-site related research;
e. improvement of community-based forestry projects
and other local projects on environment and
natural resources protection and conservation;
f. improvement of tourism facilities and promotion of
tourism;
g. peace and order and public safety;
h. construction, repair and maintenance of public works
and infrastructure, including public buildings
and facilities for public use, especially those
destroyed or damaged by man-made or natural
calamities and disaster as well as facilities for
water supply, flood control and river dikes;
i. provision of local electrification facilities;
j. livelihood and food production services, facilities and
equipment;
k. other projects that may be authorized by the OCD
consistent with the aforementioned objectives
and guidelines;
4. Except on extremely meritorious cases, as may be
determined by the Oversight Committee on Devolution,
this portion of the LGSEF shall not be used in
expenditures for personal costs or benefits under
existing laws applicable to governments. Generally,
this fund shall cover the following objects of
expenditures for programs, projects and activities
arising from the implementation of devolved and
regular functions and services:
a. acquisition/procurement of supplies and materials
critical to the full and effective implementation
of devolved programs, projects and activities;
 b. repair and/or improvement of facilities;
c. repair and/or upgrading of equipment;
d. acquisition of basic equipment;
e. construction of additional or new facilities;
f. counterpart contribution to joint arrangements or
collective projects among groups of
municipalities, cities and/or provinces related to
devolution and delivery of basic services.
5. To be eligible for funding, an LGU or group of LGU shall
submit to the Oversight Committee on Devolution
through the Department of Interior and Local
Governments, within the prescribed schedule and
timeframe, a Letter Request for Funding Support from
the Affirmative Action Program under the LGSEF, duly
signed by the concerned LGU(s) and endorsed by
cooperators and/or beneficiaries, as well as the duly
(e) total cost requirement of the project;
(f) proponent¶s counterpart funding share, if any, and
identified source(s) of counterpart funds for the
full implementation of the project;
(g) requested amount of project cost to be covered by
the LGSEF.
Further, under the guidelines formulated by the Oversight Committee
as contained in Attachment - Resolution No. OCD-99-003, the LGUs
were required to identify the projects eligible for funding under the
one-billion-peso portion of the LGSEF and submit the project
proposals thereof and other documentary requirements to the DILG for
appraisal. The project proposals that passed the DILG¶s appraisal
would then be submitted to the Oversight Committee for review,
evaluation and approval. Upon its approval, the Oversight Committee
would then serve notice to the DBM for the preparation of the Special
Allotment Release Order (SARO) and Notice of Cash Allocation
(NCA) to effect the release of funds to the said LGUs.
signed Resolution of Endorsement by the respective
—÷÷ (444
Sanggunian(s) of the LGUs concerned. The LGU-
proponent shall also be required to submit the Project
Request (PR), using OCD Project Request Form No.
99-02, that details the following:
(a) general description or brief of the project;
(b) objectives and justifications for undertaking the
project, which should highlight the benefits to
the locality and the expected impact to the local
program/project arising from the full and
efficient implementation of social services and
facilities, at the local levels;
(c) target outputs or key result areas;
(d) schedule of activities and details of requirements;
K.—;
Under Rep. Act No. 8760, otherwise known as the GAA of 2000, the
amount of P111,778,000,000 was allotted as the share of the LGUs in
the internal revenue taxes. As in the GAA of 1999, the GAA of 2000
contained a proviso earmarking five billion pesos of the IRA for the
LGSEF. This proviso, found in Item No. 1, Special Provisions, Title
XXXVII ± A. Internal Revenue Allotment, was similarly worded as
that contained in the GAA of 1999.
The Oversight Committee, in its Resolution No. OCD-2000-023 dated
June 22, 2000, adopted the following allocation scheme governing the
five billion pesos LGSEF for 2000:
1. The PhP3.5 Billion of the CY 2000 LGSEF shall be
allocated to and shared by the four levels of LGUs, i.e.,
provinces, cities, municipalities, and barangays, using
 the following percentage-sharing formula agreed upon
and jointly endorsed by the various Leagues of LGUs:
For Provinces 26%
or P 910,000,000
For Cities 23% or 805,000,000
For Municipalities 35% or 1,225,000,000
For Barangays 16% or 560,000,000
Provided that the respective Leagues representing the
provinces, cities, municipalities and barangays shall
draw up and adopt the horizontal distribution/sharing
schemes among the member LGUs whereby the
Leagues concerned may opt to adopt direct financial
assistance or project-based arrangement, such that the
LGSEF allocation for individual LGU shall be released
directly to the LGU concerned;
Provided further that the individual LGSEF shares to
LGUs are used in accordance with the general purposes
and guidelines promulgated by the OCD for the
implementation of the LGSEF at the local levels
pursuant to Res. No. OCD-99-006 dated October 7,
1999 and pursuant to the Leagues¶ guidelines and
mechanism as approved by the OCD;
and local affirmative action projects, to be endorsed to
and approved by the Oversight Committee on
Devolution in accordance with the OCD agreements,
guidelines, procedures and documentary requirements:
On July 5, 2000, then President Estrada issued a Memorandum
authorizing then Executive Secretary Zamora and the DBM to
implement and release the 2.5 billion pesos LGSEF for 2000 in
accordance with Resolution No. OCD-2000-023.
Thereafter, the Oversight Committee, now under the administration of
President Gloria Macapagal-Arroyo, promulgated Resolution No.
OCD-2001-29 entitled ³ADOPTING RESOLUTION NO. OCD-2000-
023 IN THE ALLOCATION, IMPLEMENTATION AND RELEASE
OF THE REMAINING P2.5 BILLION LGSEF FOR CY 2000.´
Under this resolution, the amount of one billion pesos of the LGSEF
was to be released in accordance with paragraph 1 of Resolution No.
OCD-2000-23, to complete the 3.5 billion pesos allocated to the
LGUs, while the amount of 1.5 billion pesos was allocated for the
LAAP. However, out of the latter amount, P400,000,000 was to be
allocated and released as follows: P50,000,000 as financial assistance
to the LAAPs of LGUs; P275,360,227 as financial assistance to cover
the decrease in the IRA of LGUs concerned due to reduction in land
area; and P74,639,773 for the LGSEF Capability-Building Fund.
—÷÷ (44*
Provided further that each of the Leagues shall submit
to the OCD for its approval their respective allocation
scheme, the list of LGUs with the corresponding
LGSEF shares and the corresponding project categories
if project-based;
K.—;
In view of the failure of Congress to enact the general appropriations
law for 2001, the GAA of 2000 was deemed re-enacted, together with
the IRA of the LGUs therein and the proviso earmarking five billion
pesos thereof for the LGSEF.

Provided further that upon approval by the OCD, the On January 9, 2002, the Oversight Committee adopted Resolution No.
lists of LGUs shall be endorsed to the DBM as the basis OCD-2002-001 allocating the five billion pesos LGSEF for 2001 as
for the preparation of the corresponding NCAs, follows:
SAROs, and related budget/release documents.
Modified Codal Formula P 3.000 billion
2. The remaining P1,500,000,000 of the CY 2000 LGSEF Priority Projects 1.900 billion
shall be earmarked to support the following initiatives Capability Building Fund .100 billion
 P 5.000 billion On January 25, 2002, Pres. Macapagal-Arroyo approved Resolution
No. OCD-2002-001.
RESOLVED FURTHER, that the P3.0 B of the CY 2001 LGSEF
which is to be allocated according to the modified codal formula shall The Petitioner¶s Case
be released to the four levels of LGUs, i.e., provinces, cities,
municipalities and barangays, as follows: The petitioner now comes to this Court assailing as unconstitutional
and void the provisos in the GAAs of 1999, 2000 and 2001, relating to
LGUs Percentage Amount the LGSEF. Similarly assailed are the Oversight Committee¶s
Resolutions Nos. OCD-99-003, OCD-99-005, OCD-99-006, OCD-
Provinces 25 P 0.750 billion 2000-023, OCD-2001-029 and OCD-2002-001 issued pursuant
thereto. The petitioner submits that the assailed provisos in the GAAs
Cities 25 0.750 and the OCD resolutions, insofar as they earmarked the amount of five
billion pesos of the IRA of the LGUs for 1999, 2000 and 2001 for the
Municipalities 35 1.050 LGSEF and imposed conditions for the release thereof, violate the
Constitution and the Local Government Code of 1991.
Barangays 15 0.450
Section 6, Article X of the Constitution is invoked as it mandates that
100 P 3.000 billion the ³just share´ of the LGUs shall be automatically released to them.
Sections 18 and 286 of the Local Government Code of 1991, which
RESOLVED FURTHER, that the P1.9 B earmarked for priority enjoin that the ³just share´ of the LGUs shall be ³automatically and
projects shall be distributed according to the following criteria: directly´ released to them ³without need of further action´ are,
likewise, cited.
1.0 For projects of the 4th, 5th and 6th class LGUs; or
The petitioner posits that to subject the distribution and release of the
2.0 Projects in consonance with the President¶s State of the five-billion-peso portion of the IRA, classified as the LGSEF, to
Nation Address (SONA)/summit commitments. compliance by the LGUs with the implementing rules and regulations,
including the mechanisms and guidelines prescribed by the Oversight
RESOLVED FURTHER, that the remaining P100 million LGSEF Committee, contravenes the explicit directive of the Constitution that
capability building fund shall be distributed in accordance with the the LGUs¶ share in the national taxes ³shall be automatically released
recommendation of the Leagues of Provinces, Cities, Municipalities to them.´ The petitioner maintains that the use of the word ³shall´
and Barangays, and approved by the OCD. must be given a compulsory meaning.

Upon receipt of a copy of the above resolution, Gov. Mandanas wrote
to the individual members of the Oversight Committee seeking the
reconsideration of Resolution No. OCD-2002-001. He also wrote to
Pres. Macapagal-Arroyo urging her to disapprove said resolution as it
violates the Constitution and the Local Government Code of 1991.
To further buttress this argument, the petitioner contends that to vest
the Oversight Committee with the authority to determine the
distribution and release of the LGSEF, which is a part of the IRA of
the LGUs, is an anathema to the principle of local autonomy as
embodied in the Constitution and the Local Government Code of
1991. The petitioner cites as an example the experience in 2001 when
the release of the LGSEF was long delayed because the Oversight
Committee was not able to convene that year and no guidelines were
issued therefor. Further, the possible disapproval by the Oversight
Committee of the project proposals of the LGUs would result in the
diminution of the latter¶s share in the IRA.
Another infringement alleged to be occasioned by the assailed OCD
resolutions is the improper amendment to Section 285 of the Local
Government Code of 1991 on the percentage sharing of the IRA
among the LGUs. Said provision allocates the IRA as follows:
Provinces ± 23%; Cities ± 23%; Municipalities ± 34%; and Barangays
± 20%. This formula has been improperly amended or modified, with
respect to the five-billion-peso portion of the IRA allotted for the
LGSEF, by the assailed OCD resolutions as they invariably provided
for a different sharing scheme.
The modifications allegedly constitute an illegal amendment by the
executive branch of a substantive law. Moreover, the petitioner
mentions that in the Letter dated December 5, 2001 of respondent
Executive Secretary Romulo addressed to respondent Secretary
Boncodin, the former endorsed to the latter the release of funds to
The Respondents¶ Arguments
The respondents, through the Office of the Solicitor General, urge the
Court to dismiss the petition on procedural and substantive grounds.
On the latter, the respondents contend that the assailed provisos in the
GAAs of 1999, 2000 and 2001 and the assailed resolutions issued by
the Oversight Committee are not constitutionally infirm. The
respondents advance the view that Section 6, Article X of the
Constitution does not specify that the ³just share´ of the LGUs shall be
determined solely by the Local Government Code of 1991. Moreover,
the phrase ³as determined by law´ in the same constitutional provision
means that there exists no limitation on the power of Congress to
determine what is the ³just share´ of the LGUs in the national taxes.
In other words, Congress is the arbiter of what should be the ³just
share´ of the LGUs in the national taxes.
The respondents further theorize that Section 285 of the Local
Government Code of 1991, which provides for the percentage sharing
of the IRA among the LGUs, was not intended to be a fixed
determination of their ³just share´ in the national taxes. Congress may
certain LGUs from the LGSEF  





 enact other laws, including appropriations laws such as the GAAs of



  

÷  . Thus, the LGUs are at a loss as to 1999, 2000 and 2001, providing for a different sharing formula.
how a portion of the LGSEF is actually allocated. Further, there are
still portions of the LGSEF that, to date, have not been received by the
petitioner; hence, resulting in damage and injury to the petitioner.
The petitioner prays that the Court declare as unconstitutional and void
the assailed provisos relating to the LGSEF in the GAAs of 1999,
2000 and 2001 and the assailed OCD resolutions (Resolutions Nos.
OCD-99-003, OCD-99-005, OCD-99-006, OCD-2000-023, OCD-
2001-029 and OCD-2002-001) issued by the Oversight Committee
pursuant thereto. The petitioner, likewise, prays that the Court direct
the respondents to rectify the unlawful and illegal distribution and
releases of the LGSEF for the aforementioned years and release the
same in accordance with the sharing formula under Section 285 of the
Local Government Code of 1991. Finally, the petitioner urges the
Court to declare that the entire IRA should be released automatically
without further action by the LGUs as required by the Constitution and
the Local Government Code of 1991.
Section 285 of the Local Government Code of 1991 was merely
intended to be the ³default share´ of the LGUs to do away with the
need to determine annually by law their ³just share.´ However, the
LGUs have no vested right in a permanent or fixed percentage as
Congress may increase or decrease the ³just share´ of the LGUs in
accordance with what it believes is appropriate for their operation.
There is nothing in the Constitution which prohibits Congress from
making such determination through the appropriations laws. If the
provisions of a particular statute, the GAA in this case, are within the
constitutional power of the legislature to enact, they should be
sustained whether the courts agree or not in the wisdom of their
enactment.
On procedural grounds, the respondents urge the Court to dismiss the
petition outright as the same is defective. The petition allegedly raises
factual issues which should be properly threshed out in the lower
courts, not this Court, not being a trier of facts. Specifically, the
petitioner¶s allegation that there are portions of the LGSEF that it has
not, to date, received, thereby causing it (the petitioner) injury and
damage, is subject to proof and must be substantiated in the proper
venue, 

, the lower courts. upon which the court so largely depends for illumination of difficult
Further, according to the respondents, the petition has already been
rendered moot and academic as it no longer presents a justiciable
controversy. The IRAs for the years 1999, 2000 and 2001, have
already been released and the government is now operating under the
2003 budget. In support of this, the respondents submitted
certifications issued by officers of the DBM attesting to the release of
the allocation or shares of the petitioner in the LGSEF for 1999, 2000
and 2001. There is, therefore, nothing more to prohibit.
Finally, the petitioner allegedly has no legal standing to bring the suit
because it has not suffered any injury. In fact, the petitioner¶s ³just
share´ has even increased. Pursuant to Section 285 of the Local
Government Code of 1991, the share of the provinces is 23%. OCD
Nos. 99-005, 99-006 and 99-003 gave the provinces 40% of P2 billion
of the LGSEF. OCD Nos. 2000-023 and 2001-029 apportioned 26%
of P3.5 billion to the provinces. On the other hand, OCD No. 2001-
001 allocated 25% of P3 billion to the provinces. Thus, the petitioner
has not suffered any injury in the implementation of the assailed
provisos in the GAAs of 1999, 2000 and 2001 and the OCD
resolutions.
The Ruling of the Court
 
%
Before resolving the petition on its merits, the Court shall first rule on
the following procedural issues raised by the respondents: (1) whether
the petitioner has legal standing or  
The gist of the question of standing is whether a party has ³alleged
such a personal stake in the outcome of the controversy as to assure
that concrete adverseness which sharpens the presentation of issues
constitutional questions.´ Accordingly, it has been held that the
interest of a party assailing the constitutionality of a statute must be
direct and personal. Such party must be able to show, not only that the
law or any government act is invalid, but also that he has sustained or
is in imminent danger of sustaining some direct injury as a result of its
enforcement, and not merely that he suffers thereby in some indefinite
way. It must appear that the person complaining has been or is about
to be denied some right or privilege to which he is lawfully entitled or
that he is about to be subjected to some burdens or penalties by reason
of the statute or act complained of.
The Court holds that the petitioner possesses the requisite standing to
maintain the present suit. The petitioner, a local government unit,
seeks relief in order to protect or vindicate an interest of its own, and
of the other LGUs. This interest pertains to the LGUs¶ share in the
national taxes or the IRA. The petitioner¶s constitutional claim is, in
substance, that the assailed provisos in the GAAs of 1999, 2000 and
2001, and the OCD resolutions contravene Section 6, Article X of the
Constitution, mandating the ³automatic release´ to the LGUs of their
share in the national taxes. Further, the injury that the petitioner
claims to suffer is the diminution of its share in the IRA, as provided
under Section 285 of the Local Government Code of 1991, occasioned
by the implementation of the assailed measures. These allegations are
sufficient to grant the petitioner standing to question the validity of the
assailed provisos in the GAAs of 1999, 2000 and 2001, and the OCD
resolutions as the petitioner clearly has ³a plain, direct and adequate
interest´ in the manner and distribution of the IRA among the LGUs.

 to file the present suit; K 

  a

(2) whether the petition involves factual questions that are properly
cognizable by the lower courts; and (3) whether the issue had been
rendered moot and academic.
K 
a
The crux of the instant controversy is whether the assailed provisos
contained in the GAAs of 1999, 2000 and 2001, and the OCD
  

 resolutions infringe the Constitution and the Local Government Code



 


of 1991. This is undoubtedly a legal question. On the other hand, the
following facts are not disputed:
1. The earmarking of five billion pesos of the IRA for the LGSEF in
the assailed provisos in the GAAs of 1999, 2000 and re-enacted budget
for 2001;
2. The promulgation of the assailed OCD resolutions providing for
the allocation schemes covering the said five billion pesos and the
implementing rules and regulations therefor; and
3. The release of the LGSEF to the LGUs only upon their
compliance with the implementing rules and regulations, including the
guidelines and mechanisms, prescribed by the Oversight Committee.
Considering that these facts, which are necessary to resolve the legal
question now before this Court, are no longer in issue, the same need
not be determined by a trial court. In any case, the rule on hierarchy of
courts will not prevent this Court from assuming jurisdiction over the
new appropriations law, still, there is compelling reason for this Court
to resolve the substantive issue raised by the instant petition.
Supervening events, whether intended or accidental, cannot prevent
the Court from rendering a decision if there is a grave violation of the
Constitution. Even in cases where supervening events had made the
cases moot, the Court did not hesitate to resolve the legal or
constitutional issues raised to formulate controlling principles to guide
the bench, bar and public.
Another reason justifying the resolution by this Court of the
substantive issue now before it is the rule that courts will decide a
question otherwise moot and academic if it is ³capable of repetition,
yet evading review.´ For the GAAs in the coming years may contain
provisos similar to those now being sought to be invalidated, and yet,
the question may not be decided before another GAA is enacted. It,
thus, behooves this Court to make a categorical ruling on the
substantive issue now.


%
petition. The said rule may be relaxed when the redress desired cannot
be obtained in the appropriate courts or where exceptional and As earlier intimated, the resolution of the substantive legal issue in this
compelling circumstances justify availment of a remedy within and case calls for the application of a most important constitutional policy
calling for the exercise of this Court¶s primary jurisdiction. and principle, that of local autonomy. In Article II of the Constitution,
the State has expressly adopted as a policy that:
The crucial legal issue submitted for resolution of this Court entails the
proper legal interpretation of constitutional and statutory provisions. Section 25. The State shall ensure the autonomy of local governments.
Moreover, the ³transcendental importance´ of the case, as it
necessarily involves the application of the constitutional principle on An entire article (Article X) of the Constitution has been devoted to
local autonomy, cannot be gainsaid. The nature of the present guaranteeing and promoting the autonomy of LGUs. Section 2 thereof
controversy, therefore, warrants the relaxation by this Court of reiterates the State policy in this wise:
procedural rules in order to resolve the case forthwith.
Section 2. The territorial and political subdivisions shall enjoy local
K



 
autonomy.




a
 a

Consistent with the principle of local autonomy, the Constitution
Granting a
that, as contended by the respondents, the confines the President¶s power over the LGUs to one of general
resolution of the case had already been overtaken by supervening supervision. This provision has been interpreted to exclude the power
events as the IRA, including the LGSEF, for 1999, 2000 and 2001, had of control. The distinction between the two powers was enunciated in
already been released and the government is now operating under a - 
.:
An officer in control lays down the rules in the doing of an act. If they
are not followed, he may, in his discretion, order the act undone or re-
done by his subordinate or he may even decide to do it himself.
Supervision does not cover such authority. The supervisor or
superintendent merely sees to it that the rules are followed, but he
himself does not lay down such rules, nor does he have the discretion
to modify or replace them. If the rules are not observed, he may order
the work done or re-done but only to conform to the prescribed rules.
He may not prescribe his own manner for doing the act. He has no
judgment on this matter except to see to it that the rules are followed.
The Local Government Code of 1991 was enacted to flesh out the
mandate of the Constitution. The State policy on local autonomy is
amplified in Section 2 thereof:
Sec. 6. Local government units shall have a A7, as

 
5B, in the national taxes which shall be
c released to them.
When parsed, it would be readily seen that this provision mandates
that (1) the LGUs shall have a ³just share´ in the national taxes; (2) the
³just share´ shall be determined by law; and (3) the ³just share´ shall
be automatically released to the LGUs.
The Local Government Code of 1991, among its salient provisions,
underscores the automatic release of the LGUs¶ ³just share´ in this
wise:
Sec. 18.  
—

÷  . Local government
units shall have the power and authority to establish an organization
Sec. 2. -
   . ± (a) It is hereby declared the policy of that shall be responsible for the efficient and effective implementation
the State that the territorial and political subdivisions of the State shall
enjoy genuine and meaningful local autonomy to enable them to attain
their fullest development as self-reliant communities and make them
more effective partners in the attainment of national goals. Toward
this end, the State shall provide for a more responsive and accountable
local government structure instituted through a system of
decentralization whereby local government units shall be given more
powers, authority, responsibilities, and resources. The process of
decentralization shall proceed from the National Government to the
local government units.

 . (a) The share of each local
Guided by these precepts, the Court shall now determine whether the
assailed provisos in the GAAs of 1999, 2000 and 2001, earmarking for
each corresponding year the amount of five billion pesos of the IRA
for the LGSEF and the OCD resolutions promulgated pursuant thereto,
transgress the Constitution and the Local Government Code of 1991.
of their development plans, program objectives and priorities; to create
their own sources of revenue and to levy taxes, fees, and charges
which shall accrue exclusively for their use and disposition and which
shall be retained by them; to have a just share in national taxes which
shall be automatically and directly released to them without need of
further action;
...
Sec. 286. ÷
government unit shall be released, without need of any further action,
directly to the provincial, city, municipal or barangay treasurer, as the
case may be, on a quarterly basis within five (5) days after the end of
each quarter, and which shall not be subject to any lien or holdback
that may be imposed by the national government for whatever
purpose.

K
   
—÷÷ *+++"(444 (b) Nothing in this Chapter shall be understood to diminish the share

(44*

- 
  

 of local government units under existing laws.
 


  
  
 
Webster¶s Third New International Dictionary defines ³automatic´ as
Section 6, Article X of the Constitution reads: ³involuntary either wholly or to a major extent so that any activity of
the will is largely negligible; of a reflex nature; without volition;
mechanical; like or suggestive of an automaton.´ Further, the word
³automatically´ is defined as ³in an automatic manner: without
thought or conscious intention.´ Being ³automatic,´ thus, connotes
something mechanical, spontaneous and perfunctory. As such, the
LGUs are not required to perform any act to receive the ³just share´
accruing to them from the national coffers. As emphasized by the
Local Government Code of 1991, the ³just share´ of the LGUs shall be
released to them ³without need of further action.´ Construing Section
The ³just share´ of the LGUs is incorporated as the IRA in the
appropriations law or GAA enacted by Congress annually. Under the
assailed provisos in the GAAs of 1999, 2000 and 2001, a portion of
the IRA in the amount of five billion pesos was earmarked for the
LGSEF, and these provisos imposed the condition that ³such amount
shall be released to the local government units subject to the
implementing rules and regulations, including such mechanisms and
guidelines for the equitable allocations and distribution of said fund
286 of the LGC, we held in 
":

÷a, /: among local government units subject to the guidelines that may be
prescribed by the Oversight Committee on Devolution.´ Pursuant
Section 4 of AO 372 cannot, however, be upheld. A basic feature of thereto, the Oversight Committee, through the assailed OCD
local fiscal autonomy is the 

 release of the shares of LGUs in resolutions, apportioned the five billion pesos LGSEF such that:
the National internal revenue. This is mandated by no less than the
Constitution. The Local Government Code specifies further that the For 1999
release shall be made directly to the LGU concerned within five (5)
days after every quarter of the year and ³
'

 P2 billion - allocated according to Sec. 285 LGC
  
$

 


 a 
  P2 billion - Modified Sharing Formula (Provinces ±

  .´ As a rule, the term ³$*
´ is a word of 40%;
command that must be given a compulsory meaning. The provision is, Cities ± 20%; Municipalities ± 40%)
therefore, +'&
)+/. P1 billion ± projects (LAAP) approved by OCD.

Section 4 of AO 372, however, orders the withholding, effective For 2000

January 1, 1998, of 10 percent of the LGUs¶ IRA ³pending the
assessment and evaluation by the Development Budget Coordinating
Committee of the emerging fiscal situation´ in the country. Such
withholding clearly contravenes the Constitution and the law.
Although temporary, it is equivalent to a holdback, which means
³something held back or withheld, often temporarily.´ Hence, the
³temporary´ nature of the retention by the national government does
not matter. Any retention is prohibited.
In sum, while Section 1 of AO 372 may be upheld as an advisory
effected in times of national crisis, Section 4 thereof has no color of
validity at all. The latter provision effectively encroaches on the fiscal
autonomy of local governments. Concededly, the President was well-
intentioned in issuing his Order to withhold the LGUs¶ IRA, but the
rule of law requires that even the best intentions must be carried out
within the parameters of the Constitution and the law. Verily, laudable
purposes must be carried out by legal methods.
P3.5 billion ± Modified Sharing Formula (Provinces ± 26%;
Cities ± 23%; Municipalities ± 35%; Barangays ±
16%);
P1.5 billion ± projects (LAAP) approved by the OCD.
For 2001
P3 billion ± Modified Sharing Formula (Provinces ± 25%;
Cities ± 25%; Municipalities ± 35%; Barangays ±
15%)
P1.9 billion ± priority projects
P100 million ± capability building fund.
Significantly, the LGSEF could not be released to the LGUs without
the Oversight Committee¶s prior approval. Further, with respect to the
portion of the LGSEF allocated for various projects of the LGUs (P1
billion for 1999; P1.5 billion for 2000 and P2 billion for 2001), the
Oversight Committee, through the assailed OCD resolutions, laid
down guidelines and mechanisms that the LGUs had to comply with
before they could avail of funds from this portion of the LGSEF. The
guidelines required (a) the LGUs to identify the projects eligible for
funding based on the criteria laid down by the Oversight Committee;
(b) the LGUs to submit their project proposals to the DILG for
appraisal; (c) the project proposals that passed the appraisal of the
DILG to be submitted to the Oversight Committee for review,
evaluation and approval. It was only upon approval thereof that the
Oversight Committee would direct the DBM to release the funds for
the projects.
To the Court¶s mind, the entire process involving the distribution and
release of the LGSEF is constitutionally impermissible. The LGSEF is
part of the IRA or ³just share´ of the LGUs in the national taxes. To
subject its distribution and release to the vagaries of the implementing
rules and regulations, including the guidelines and mechanisms
unilaterally prescribed by the Oversight Committee from time to time,
as sanctioned by the assailed provisos in the GAAs of 1999, 2000 and
2001 and the OCD resolutions, makes the release cautomatic, a
flagrant violation of the constitutional and statutory mandate that the
³just share´ of the LGUs ³shall be automatically released to them.´
The LGUs are, thus, placed at the mercy of the Oversight Committee.
Where the law, the Constitution in this case, is clear and unambiguous,
it must be taken to mean exactly what it says, and courts have no
choice but to see to it that the mandate is obeyed. Moreover, as
correctly posited by the petitioner, the use of the word ³shall´ connotes
a mandatory order. Its use in a statute denotes an imperative
obligation and is inconsistent with the idea of discretion.
Indeed, the Oversight Committee exercising discretion, even control,
over the distribution and release of a portion of the IRA, the LGSEF, is
an anathema to and subversive of the principle of local autonomy as
embodied in the Constitution. Moreover, it finds no statutory basis at
all as the Oversight Committee was created merely to formulate the
rules and regulations for the efficient and effective implementation of
the Local Government Code of 1991 to ensure ³compliance with the
principles of local autonomy as defined under the Constitution.´ In
fact, its creation was placed under the title of ³Transitory Provisions,´
signifying its 
 character. According to Senator Aquilino Q.
Pimentel, the principal author and sponsor of the bill that eventually
became Rep. Act No. 7160, the Committee¶s work was supposed to be
done a year from the approval of the Code, or on October 10, 1992.
The Oversight Committee¶s authority is undoubtedly limited to the
implementation of the Local Government Code of 1991, not to
supplant or subvert the same. Neither can it exercise control over the
IRA, or even a portion thereof, of the LGUs.
That the automatic release of the IRA was precisely intended to
guarantee and promote local autonomy can be gleaned from the
discussion below between Messrs. Jose N. Nolledo and Regalado M.
Maambong, then members of the 1986 Constitutional Commission, to
wit:
MR. MAAMBONG. Unfortunately, under Section 198 of the Local
Government Code, the existence of subprovinces is still acknowledged
by the law, but the statement of the Gentleman on this point will have
to be taken up probably by the Committee on Legislation. A second
point, Mr. Presiding Officer, is that under Article 2, Section 10 of the
1973 Constitution, we have a provision which states:
The State shall guarantee and promote the autonomy of local
government units, especially the barrio, to insure their fullest
development as self-reliant communities.
This provision no longer appears in the present configuration;
does this mean that the concept of giving local autonomy to
local governments is no longer adopted as far as this Article
is concerned?
MR. NOLLEDO. No. In the report of the Committee on Preamble,
National Territory, and Declaration of Principles, that concept is
included and widened upon the initiative of Commissioner Bennagen.
MR. MAAMBONG. Thank you for that.
With regard to Section 6, sources of revenue, the creation of sources as
provided by previous law was ³subject to limitations as may be
provided by law,´ but now, we are using the term ³subject to such
guidelines as may be fixed by law.´ In Section 7, mention is made
about the ³unique, distinct and exclusive charges and contributions,´
and in Section 8, we talk about ³exclusivity of local taxes and the
share in the national wealth.´ Incidentally, I was one of the authors of
this provision, and I am very thankful. Does this indicate local
autonomy, or was the wording of the law changed to give more
autonomy to the local government units?
MR. NOLLEDO. Yes. In effect, those words indicate also
³decentralization´ because local political units can collect taxes, fees
and charges subject merely to guidelines, as recommended by the
league of governors and city mayors, with whom I had a dialogue for
almost two hours. They told me that limitations may be questionable
in the sense that Congress may limit and in effect deny the right later
on.
MR. MAAMBONG. Also, this provision on ³automatic release of
national tax share´ points to more local autonomy. Is this the
intention?
MR. NOLLEDO. Yes, the Commissioner is perfectly right.
however limited, and for no other purpose than precisely, albeit
paradoxically, to enhance self-government.
As we observed in one case, decentralization means devolution of
national administration ± but not power ± to the local levels. Thus:
Now, autonomy is either decentralization of administration or
decentralization of power. There is decentralization of administration
when the central government delegates administrative powers to
political subdivisions in order to broaden the base of government
power and in the process to make local governments µmore responsive
and accountable¶ and µensure their fullest development as self-reliant
communities and make them more effective partners in the pursuit of
national development and social progress.¶ At the same time, it
relieves the central government of the burden of managing local affairs
and enables it to concentrate on national concerns. The President
exercises µgeneral supervision¶ over them, but only to µensure that
local affairs are administered according to law.¶ He has no control
over their acts in the sense that he can substitute their judgments with
his own.
Decentralization of power, on the other hand, involves an abdication of
political power in the [sic] favor of local governments [sic] units
declared to be autonomous. In that case, the autonomous government
is free to chart its own destiny and shape its future with minimum
The concept of local autonomy was explained in —/ 
 
  intervention from central authorities. According to a constitutional
÷  in this wise: author, decentralization of power amounts to µself-immolation,¶ since
in that event, the autonomous government becomes accountable not to
As the Constitution itself declares, local autonomy µmeans a more the central authorities but to its constituency.
responsive and accountable local government structure instituted
through a system of decentralization.¶ The Constitution, as we Local autonomy includes both administrative and fiscal autonomy.
observed, does nothing more than to break up the monopoly of the The fairly recent case of 

÷a is particularly
national government over the affairs of local governments and as put instructive. The Court declared therein that local fiscal autonomy
by political adherents, to ³liberate the local governments from the
, allocate their resources
imperialism of Manila.´ Autonomy, however, is not meant to end the
relation of partnership and interdependence between the central
administration and local government units, or otherwise, to usher in a
regime of federalism. The Charter has not taken such a radical step.
Local governments, under the Constitution, are subject to regulation,
includes the power of the LGUs to, 
in accordance with their own priorities:
Under existing law, local government units, in addition to having
administrative autonomy in the exercise of their functions, enjoy fiscal
autonomy as well. Fiscal autonomy means that local governments
have the power to create their own sources of revenue in addition to
their equitable share in the national taxes released by the national
government, as well as the power to allocate their resources in
accordance with their own priorities. It extends to the preparation of
their budgets, and local officials in turn have to work within the
constraints thereof. They are not formulated at the national level and
imposed on local governments, whether they are relevant to local
needs and resources or not ...
Further, a basic feature of local fiscal autonomy is the constitutionally
mandated 

 release of the shares of LGUs in the national officers of both Houses of Congress and the presidents of the liga, to
internal revenue.
unmanageable public sector deficit" and only upon compliance with
stringent requirements set forth in the same section:
Sec. 284. ...
 

, That in the event that the national government incurs an
unmanageable public sector deficit, the President of the Philippines is
hereby authorized, upon recommendation of Secretary of Finance,
Secretary of Interior and Local Government and Secretary of Budget
and Management, and subject to consultation with the presiding
make the necessary adjustments in the internal revenue allotment of
local government units but in no case shall the allotment be less than
Following this ratiocination, the Court in 
 struck down as thirty percent (30%) of the collection of the national internal revenue
unconstitutional Section 4 of Administrative Order (A.O.) No. 372
which ordered the withholding, effective January 1, 1998, of ten
 That in the first year of the effectivity of this Code,
percent of the LGUs¶ IRA ³pending the assessment and evaluation by
the Development Budget Coordinating Committee of the emerging
fiscal situation.´
In like manner, the assailed provisos in the GAAs of 1999, 2000 and
2001, and the OCD resolutions constitute a ³withholding´ of a portion
of the IRA. They put on hold the distribution and release of the five
billion pesos LGSEF and subject the same to the implementing rules
and regulations, including the guidelines and mechanisms prescribed
by the Oversight Committee from time to time. Like Section 4 of A.O.
372, the assailed provisos in the GAAs of 1999, 2000 and 2001 and
the OCD resolutions effectively encroach on the fiscal autonomy
enjoyed by the LGUs and must be struck down. They cannot,
therefore, be upheld.
taxes of the third fiscal year preceding the current fiscal year;
 

,
the local government units shall, in addition to the thirty percent (30%)
internal revenue allotment which shall include the cost of devolved
functions for essential public services, be entitled to receive the
amount equivalent to the cost of devolved personnel services.
Thus, from the above provision, the only possible exception to the
mandatory automatic release of the LGUs¶ IRA is if the national
internal revenue collections for the current fiscal year is less than 40
percent of the collections of the preceding third fiscal year, in which
case what should be automatically released shall be a proportionate
amount of the collections for the current fiscal year. The adjustment
may even be made on a quarterly basis depending on the actual
collections of national internal revenue taxes for the quarter of the
current fiscal year. In the instant case, however, there is no allegation
that the national internal revenue tax collections for the fiscal years
K
   
—÷÷ *+++"(444 1999, 2000 and 2001 have fallen compared to the preceding three

(44*

- 
 

fiscal years.

 ()1 
. — 

 *++*
Section 285 then specifies how the IRA shall be allocated among the
Section 284 of the Local Government Code provides that, beginning LGUs:
the third year of its effectivity, the LGUs¶ share in the national internal
revenue taxes shall be 40%. This percentage is fixed and may not be
reduced except ³in the event the national government incurs an
Sec. 285. ÷ 
 
. — 
@
. ± The share of local amend other laws, because clearly these kinds of laws have no place in
government units in the internal revenue allotment shall be allocated in
the following manner:
(a) Provinces ± Twenty-three (23%)
(b) Cities ± Twenty-three percent (23%);
(c) Municipalities ± Thirty-four (34%); and
(d) Barangays ± Twenty percent (20%).
However, this percentage sharing is not followed with respect to the
five billion pesos LGSEF as the assailed OCD resolutions,
implementing the assailed provisos in the GAAs of 1999, 2000 and
2001, provided for a different sharing scheme. For example, for 1999,
P2 billion of the LGSEF was allocated as follows: Provinces ± 40%;
Cities ± 20%; Municipalities ± 40%. For 2000, P3.5 billion of the
LGSEF was allocated in this manner: Provinces ± 26%; Cities ± 23%;
Municipalities ± 35%; Barangays ± 26%. For 2001, P3 billion of the
LGSEF was allocated, thus: Provinces ± 25%; Cities ± 25%;
Municipalities ± 35%; Barangays ± 15%.
The respondents argue that this modification is allowed since the
Constitution does not specify that the ³just share´ of the LGUs shall
an appropriations bill.
Increasing or decreasing the IRA of the LGUs or modifying their
percentage sharing therein, which are fixed in the Local Government
Code of 1991, are matters of general and substantive law. To permit
Congress to undertake these amendments through the GAAs, as the
respondents contend, would be to give Congress the unbridled
authority to unduly infringe the fiscal autonomy of the LGUs, and thus
put the same in jeopardy every year. This, the Court cannot sanction.
It is relevant to point out at this juncture that, unlike those of 1999,
2000 and 2001, the GAAs of 2002 and 2003 do not contain provisos
similar to the herein assailed provisos. In other words, the GAAs of
2002 and 2003 have not earmarked any amount of the IRA for the
LGSEF. Congress had perhaps seen fit to discontinue the practice as it
recognizes its infirmity. Nonetheless, as earlier mentioned, this Court
has deemed it necessary to make a definitive ruling on the matter in
order to prevent its recurrence in future appropriations laws and that
the principles enunciated herein would serve to guide the bench, bar
and public.
only be determined by the Local Government Code of 1991. That it is
within the power of Congress to enact other laws, including the GAAs,
to increase or decrease the ³just share´ of the LGUs. This contention
is untenable. The Local Government Code of 1991 is a substantive
law. And while it is conceded that Congress may amend any of the
provisions therein, it may not do so through appropriations laws or
GAAs. Any amendment to the Local Government Code of 1991
should be done in a separate law, not in the appropriations law,
because Congress cannot include in a general appropriation bill
matters that should be more properly enacted in a separate legislation.
A general appropriations bill is a special type of legislation, whose
content is limited to specified sums of money dedicated to a specific
purpose or a separate fiscal unit. Any provision therein which is
intended to amend another law is considered an ³inappropriate
provision.´ The category of ³inappropriate provisions´ includes
unconstitutional provisions and provisions which are intended to
  
In closing, it is well to note that the principle of local autonomy, while
concededly expounded in greater detail in the present Constitution,
dates back to the turn of the century when President William
McKinley, in his Instructions to the Second Philippine Commission
dated April 7, 1900, ordered the new Government ³to devote their
attention in the first instance to the establishment of municipal
governments in which the natives of the Islands, both in the cities and
in the rural communities, shall be afforded the opportunity to manage
their own affairs to the fullest extent of which they are capable, and
subject to the least degree of supervision and control in which a careful
study of their capacities and observation of the workings of native
control show to be consistent with the maintenance of law, order and
loyalty.´ While the 1935 Constitution had no specific article on local
autonomy, nonetheless, it limited the executive power over local
governments to ³general supervision ... as may be provided by law.´
Subsequently, the 1973 Constitution explicitly stated that ³[t]he State 
shall guarantee and promote the autonomy of local government units,
especially the barangay to ensure their fullest development as self- 
reliant communities.´ An entire article on Local Government was
incorporated therein. The present Constitution, as earlier opined, has 
broadened the principle of local autonomy. The 14 sections in Article
X thereof markedly increased the powers of the local governments in 
order to accomplish the goal of a more meaningful local autonomy.

Indeed, the value of local governments as institutions of democracy is

measured by the degree of autonomy that they enjoy. As eloquently
put by M. De Tocqueville, a distinguished French political writer, 
³[l]ocal assemblies of citizens constitute the strength of free nations.
Township meetings are to liberty what primary schools are to science; 
they bring it within the people¶s reach; they teach men how to use and
enjoy it. A nation may establish a system of free governments but 
without the spirit of municipal institutions, it cannot have the spirit of
liberty.´ 

Our national officials should not only comply with the constitutional 
provisions on local autonomy but should also appreciate the spirit and
liberty upon which these provisions are based. 

=*0(, the petition is GRANTED. The assailed provisos in 

the General Appropriations Acts of 1999, 2000 and 2001, and the
assailed OCD Resolutions, are declared UNCONSTITUTIONAL. 


SO ORDERED.

Vitug, (Acting Chief Justice), Panganiban, Quisumbing, Ynares-
Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez, Co 
 
 
 
 
1  TINGA,*

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NAZARIO, and
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Petitioner,chanroblesvirtuallawlibrary chanroblesvirtuallawlibrary
Present:
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Respondent. November 17, 2004
DAVIDE, JR.,  : ,
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EN BANC Administrative Code. Then Vice-President Emmanuel Pelaez filed a
special civil action for a writ of prohibition, alleging in main that the
[G.R. No. 161414. January 17, 2005] Executive Orders were null and void, Section 68 having been repealed
by Republic Act No. 2370,[6] and said orders constituting an undue
SULTAN OSOP B. CAMID, 

 ,  THE OFFICE OF THE delegation of legislative power.[7]
PRESIDENT, DEPARTMENT OF THE INTERIOR AND LOCAL
GOVERNMENT, AUTONOMOUS REGION IN MUSLIM After due deliberation, the Court unanimously held that the challenged
MINDANAO, DEPARTMENT of FINANCE, DEPARTMENT of Executive Orders were null and void. A majority of five justices, led
BUDGET AND MANAGEMENT, COMMISSION ON AUDIT, and by the 
, Justice (later Chief Justice) Roberto Concepcion, ruled
the CONGRESS OF THE PHILIPPINES (HOUSE of that Section 68 of the Revised Administrative Code did not meet the
REPRESENTATIVES AND SENATE),  

. well-settled requirements for a valid delegation of legislative power to
the executive branch,[8] while three justices opined that the nullity of
DECISION the issuances was the consequence of the enactment of the 1935
Constitution, which reduced the power of the Chief Executive over
TINGA, :.: local governments.[9] / was disposed in this wise:

This 

  
  presents this Court with the prospect of WHEREFORE, the Executive Orders in question are declared null and
our own 7a
[1]²the municipality of Andong, Lanao del
 and the respondent permanently restrained from passing
Surʊwhich like its counterpart in filmdom, is a town that is not
supposed to exist yet is anyway insisted by some as actually alive and
thriving. Yet unlike in the movies, there is nothing mystical, ghostly or
anything even remotely charming about the purported existence of
Andong. The creation of the putative municipality was declared  

void 
in audit any expenditure of public funds in implementation of said
Executive Orders or any disbursement by the municipalities above
referred to. It is so ordered.[10]
Among the Executive Orders annulled was Executive Order No. 107

 by this Court four decades ago, but the present petition insists which created the Municipality of Andong. Nevertheless, the core
that in spite of this insurmountable obstacle Andong thrives on, and issue presented in the present petition is the continued efficacy of the
hence, its legal personality should be given judicial affirmation. We judicial annulment of the Municipality of Andong.
disagree.
Petitioner Sultan Osop B. Camid (Camid) represents himself as a
The factual antecedents derive from the promulgation of our ruling in current resident of Andong,[11] suing as a private citizen and taxpayer
/
÷

—[2] in 1965. As discussed therein, then whose  

 ³is of public and paramount interest especially to
President Diosdado Macapagal issued several Executive Orders[3]
creating thirty-three (33) municipalities in Mindanao. Among them
was Andong in Lanao del Sur which was created by virtue of
Executive Order No. 107.[4]
These executive orders were issued after legislative bills for the
creation of municipalities involved in that case had failed to pass
Congress.[5] President Diosdado Macapagal justified the creation of
these municipalities citing his powers under Section 68 of the Revised
the people of the Municipality of Andong, Province of Lanao del
Sur.´[12] He alleges that Andong ³has metamorphosed into a full-blown
municipality with a complete set of officials appointed to handle
essential services for the municipality and its constituents,´[13] even
though he concedes that since 1968, no person has been appointed,
elected or qualified to serve any of the elective local government
positions of Andong.[14] Nonetheless, the municipality of Andong has
its own high school, Bureau of Posts, a Department of Education,
Culture and Sports office, and at least seventeen (17) ³barangay units´
with their own respective chairmen.[15] From 1964 until 1972,
according to Camid, the public officials of Andong ³have been serving
their constituents through the minimal means and resources with least
(sic) honorarium and recognition from the Office of the then former
President Diosdado Macapagal.´ Since the time of Martial Law in
1972, Andong has allegedly been getting by despite the absence of

including said municipality in its records and official database as [an]
existing regular municipality.´[21] He characterizes such non-
classification as unequal treatment to the detriment of Andong,
especially in light of the current recognition given to the eighteen (18)
municipalities similarly annulled by reason of /. As appropriate
relief, Camid prays that the Court annul the DILG 
  dated
public funds, with the ³Interim Officials´ serving their constituents ³in 21 November 2003; direct the DILG to classify Andong as a ³regular
their own little ways and means.´[16] existing municipality;´ all public respondents, to extend full
recognition and support to Andong; the Department of Finance and the
In support of his claim that Andong remains in existence, Camid Department of Budget and Management, to immediately release the
presents to this Court a 

  issued by the Office of the internal revenue allotments of Andong; and the public respondents,
Community Environment and Natural Resources (CENRO) of the particularly the DILG, to recognize the ³Interim Local Officials´ of
Department of Environment and Natural Resources (DENR) certifying Andong.[22]
the total land area of the Municipality of Andong, ³created under
Executive Order No. 107 issued [last] October 1, 1964.´[17] He also Moreover, Camid insists on the continuing validity of Executive Order
submits a 

  issued by the Provincial Statistics Office of No. 107. He argues that / has already been modified by
Marawi City concerning the population of Andong, which is pegged at supervening events consisting of subsequent laws and jurisprudence.
fourteen thousand fifty nine (14,059) strong. Camid also enumerates a Particularly cited is our - Ä 
  

list of governmental agencies and private groups that allegedly  
Ä
/,[23] wherein the Court affirmed the unique status of the
recognize Andong, and notes that other municipalities have
municipal
recommended to the Speaker of the Regional Legislative Assembly for
the immediate implementation of the revival or re-establishment of
municipality of San Andres in Quezon as a ³
 
corporation.´[24] Similar to Andong, the municipality of San Andres
was created by way of executive order, precisely the manner which the
Andong.[18] Court in Pelaez had declared as unconstitutional. Moreover, 
 cited, as Camid does, Section 442(d) of the Local Government
The petition assails a 

  dated 21 November 2003, issued by Code of 1991 as basis for the current recognition of the impugned
the Bureau of Local Government Supervision of the Department of municipality. The provision reads:
Interior and Local Government (DILG).[19] The 

 
enumerates eighteen (18) municipalities certified as ³existing,´ per Section 442. #
 

- xxx
DILG records. Notably, these eighteen (18) municipalities are among
the thirty-three (33), along with Andong, whose creations were voided
by this Court in /. These municipalities are Midaslip, Pitogo,
Naga, and Bayog in Zamboanga del Sur; Siayan and Pres. Manuel A.
Roxas in Zamboanga del Norte; Magsaysay, Sta. Maria and New
Corella in Davao; Badiangan and Mina in Iloilo; Maguing in Lanao
del Sur; Gloria in Oriental Mindoro; Maasim in Sarangani; Kalilangan
and Lantapan in Bukidnon; and Maco in Compostela Valley.[20]
Camid imputes grave abuse of discretion on the part of the DILG ³in
not classifying [Andong] as a regular existing municipality and in not
(d) Municipalities existing as of the date of the effectivity of this Code
shall continue to exist and operate as such. Existing municipal districts
organized pursuant to presidential issuances or executive orders and
which have their respective sets of elective municipal officials holding
office at the time of the effectivity of (the) Code shall henceforth be
considered as regular municipalities.[25]
There are several reasons why the petition must be dismissed. These
can be better discerned upon examination of the proper scope and
application of Section 442(d), which does not sanction the recognition
of just any municipality. This point shall be further explained further
on.
Notably, as pointed out by the public respondents, through the Office
of the Solicitor General (OSG), the case is not a fit subject for the
special civil actions of certiorari and mandamus, as it pertains to the

What is clearly essential is a factual demonstration of the continuous
exercise by the municipal corporation of its corporate powers, as well
as the acquiescence thereto by the other instrumentalities of the state.
Camid does not have the opportunity to make an initial factual
demonstration of those circumstances before this Court. Indeed, the
factual deficiencies aside, Camid¶s plaint should have undergone the
  appreciation of factual questions. There is indeed no way to
confirm several of Camid¶s astonishing factual allegations pertaining
to the purported continuing operation of Andong in the decades since
it was annulled by this Court. No trial court has had the opportunity to
ascertain the validity of these factual claims, the appreciation of which
is beyond the function of this Court since it is not a trier of facts.
The importance of proper factual ascertainment cannot be gainsaid,
especially in light of the legal principles governing the recognition of

usual administrative gauntlet and, once that was done, should have
been filed first with the Court of Appeals, which at least would have
had the power to make the necessary factual determinations. Camid¶s
seeming ignorance of the principles of exhaustion of administrative
remedies and hierarchy of courts, as well as the concomitant
prematurity of the present petition, cannot be countenanced.
It is also difficult to capture the sense and viability of Camid¶s present
action. The assailed issuance is the 
  issued by the DILG.

 
municipal corporations. It has been opined that municipal But such 

  does not pretend to bear the authority to create
corporations may exist by prescription where it is shown that the or revalidate a municipality. Certainly, the annulment of the
community has claimed and exercised corporate functions, with the 

 n will really do nothing to serve Camid¶s ultimate cause

knowledge and acquiescence of the legislature, and without the recognition of Andong. Neither does the 

  even
interruption or objection for period long enough to afford title by
prescription.[26] These municipal corporations have exercised their
powers for a long period without objection on the part of the

expressly refute the claim that Andong still exists, as there is nothing
in the document that comments on the present status of Andong.
Perhaps the 
  is assailed before this Court if only to present
government that although no charter is in existence, it is presumed that
they were duly incorporated in the first place and that their charters
had been lost.[27] They are especially common in England, which, as

an actual issuance, rather than a long-standing habit or pattern of
action that can be annulled through the special civil action of
certiorari. Still, the relation of the 
  to Camid¶s central
well-worth noting, has existed as a state for over a thousand years. The
reason for the development of that rule in England is understandable,
since that country was settled long before the Roman conquest by
nomadic Celtic tribes, which could have hardly been expected to
obtain a municipal charter in the absence of a national legal authority.
argument is forlornly strained.
These disquisitions aside, the central issue remains whether a
municipality whose creation by executive fiat was previously voided
by this Court may attain recognition in the absence of any curative or
reimplementing statute. Apparently, the question has never been
In the United States, municipal corporations by prescription are less
common, but it has been held that when no charter or act of
incorporation of a town can be found, it may be shown to have claimed
and exercised the powers of a town with the knowledge and assent of
the legislature, and without objection or interruption for so long a
period as to furnish evidence of a prescriptive right.[28]
decided before,  and its kindred cases pertaining as they
did to municipalities whose bases of creation were dubious yet were
never judicially nullified. The effect of Section 442(d) of the Local
Government Code on municipalities such as Andong warrants
explanation. Besides, the residents of Andong who belabor under the
impression that their town still exists, much less those who may
comport themselves as the municipality¶s ³Interim Government,´
would be well served by a rude awakening.
The Court can employ a simplistic approach in resolving the Two years after / was decided, the issue again came to fore in
substantive aspect of the petition, merely by pointing out that the Ä 
 : #
.[37] The Municipality of Lawigan
Municipality of Andong never existed.[29] Executive Order No. 107, was created by virtue of Executive Order No. 436 in 1961. Lawigan
which established Andong, was declared ³null and void 
 ´ in was not one of the municipalities ordered annulled in /. A
1965 by this Court in /, along with thirty-three (33) other petition for prohibition was filed contesting the legality of the
executive orders. The phrase ³
 ´ means ³from the executive order, again on the ground that Section 68 of the Revised
beginning,´[30] ³at first,´[31] ³from the inception.´[32] / was never Administrative Code was unconstitutional. The trial court dismissed
reversed by this Court but rather it was expressly affirmed in the cases the petition, but the Supreme Court reversed the ruling and entered a
of Ä 
 : #
"[33]Ä 
 Äa
 new decision declaring Executive Order No. 436 void  
 . The
7
"[34]
Ä 
 E  a
Ä .[35] No subsequent Court reasoned without elaboration that the issue had already been
ruling by this Court declared Pelaez as overturned or inoperative. No squarely taken up and settled in / which agreed with the
subsequent legislation has been passed since 1965 creating a argument posed by the challengers to Lawigan¶s validity.[38]
Municipality of Andong. Given these facts, there is hardly any reason
to elaborate why Andong does not exist as a duly constituted In the 1969 case of Ä 
 Äa
7
,[39] what was
municipality. challenged is the validity of the constitution of the Municipality of
Balabagan in Lanao del Sur, also created by an executive order,[40] and
This ratiocination does not admit to patent legal errors and has the which, similar to Lawigan, was not one of the municipalities annulled
additional virtue of blessed austerity. Still, its sweeping adoption may in /. This time, the officials of Balabagan invoked

status
not be advisedly appropriate in light of Section 442(d) of the Local as a municipal corporation in order to dissuade the Court from
Government Code and our ruling in Ä 
  , both nullifying action. They alleged that its status as a

corporation
of which admit to the possibility of
 
municipal corporations. cannot be collaterally attacked but should be inquired into directly in
an action for # 
at the instance of the State, and not by a
To understand the applicability of Ä 
  and private individual as it was in that case. In response, the Court
Section 442(b) of the Local Government Code to the situation of conceded that an inquiry into the legal existence of a municipality is
Andong, it is necessary again to consider the ramifications of our
, but only if the
decision in /.
corporation.[41]
The eminent legal doctrine enunciated in / was that the President

was then, and still is, not empowered to create municipalities through
executive issuances. The Court therein recognized ³that the President
has, for many years, issued executive orders creating municipal
corporations, and that the same have been organized and in actual
operation . . . .´[36] However, the Court ultimately nullified only those
corporation can exist
thirty-three (33) municipalities, including Andong, created during the
period from 4 September to 29 October 1964 whose existence
petitioner Vice-President Pelaez had specifically assailed before this
corporation.
Court. No pronouncement was made as to the other municipalities
which had been previously created by the President in the exercise of
municipal corporation was recognized as
power the Court deemed unlawful.
reserved to the State in a proceeding for # 
municipal corporation is a
 
Ultimately, the Court refused to acknowledge Balabagan as a

corporation, even though it had been organized prior to the Court¶s
decision in /. The Court declared void the executive order
creating Balabagan and restrained its municipal officials from
performing their official duties and functions.[42] It cited conflicting
American authorities on whether a

where the statute or charter creating it is unconstitutional.[43] But the
Court¶s final conclusion was unequivocal that Balabagan was not a


In the cases where a

such despite the fact that the statute creating it was later invalidated,
the decisions could fairly be made to rest on the consideration that which did cite / as authority.[50] The RTC dismissed the petition
there was some other valid law giving corporate vitality to the for lack of cause of action, and the petitioners therein elevated the
organization. Hence, in the case at bar, the mere fact that Balabagan matter to this Court.
was organized at a time when the statute had not been invalidated
cannot conceivably make it a

corporation, as, independently In dismissing the petition, the Court delved in the merits of the
of the Administrative Code provision in question, there is no other petition, if only to resolve further doubt on the legal status of San
valid statute to give color of authority to its creation.[44] Andres. It noted a circumstance which is not present in the case at
bar²that San Andres was in existence for nearly thirty (30) years
The Court did clarify in Äa that the previous acts done by the
municipality in the exercise of its corporate powers were not
necessarily a nullity.[45] Camid devotes several pages of his petition in
citing this point,[46] yet the relevance of the citation is unclear
considering that Camid does not assert the validity of any corporate act
of Andong prior to its judicial dissolution. Notwithstanding, the Court
before its legality was challenged. The Court did not declare the
executive order creating San Andres null and void. Still, acting on the
premise that the said executive order was a complete nullity, the Court
noted ³peculiar circumstances´ that led to the conclusion that San
Andres had attained the unique status of a ³de facto municipal
corporation.´[51] It noted that / limited its nullificatory effect only
in Äa retained an emphatic attitude as to the unconstitutionality to those executive orders specifically challenged therein, despite the
of the power of the President to create municipal corporations by way fact that the Court then could have very well extended the decision to
of presidential promulgations, as authorized under Section 68 of the invalidate San Andres as well.[52] This statement squarely contradicts
Revised Administrative Code. Camid¶s reading of  that the creation of San Andres, just
like Andong, had been declared a complete nullity on the same ground
This principle was most recently affirmed in 1988, in Ä 
  of unconstitutional delegation of legislative power found in /.[53]
E  a
Ä .[47] The municipality of Santo Tomas, created by
President Carlos P. Garcia, filed a complaint against another
municipality, who challenged Santo Tomas¶s legal personality to
institute suit. Again, Santo Tomas had not been expressly nullified by
prior judicial action, yet the Court refused to recognize its legal
existence. The blunt but simple ruling: ³Now then, as ruled in the
Pelaez case  , the President has no power to create a municipality.
Since [Santo Tomas] has no legal personality, it can not be a party to
any civil action«.´[48]
The Court also considered the applicability of Section 442(d)[54] of the
Local Government Code of 1991. It clarified the implication of the
provision as follows:
Equally significant is Section 442(d) of the Local Government Code to
the effect that municipal districts "organized pursuant to presidential
issuances or executive orders and which have their respective sets of
elective municipal officials holding office at the time of the effectivity
of (the) Code shall henceforth be considered as regular
Nevertheless, when the Court decided Ä 
   [49] municipalities." No pretension of unconstitutionality  of Section
in 1995, it indicated a shift in the jurisprudential treatment of 442(d) of the Local Government Code is preferred. It is doubtful
municipalities created through presidential issuances. The questioned whether such a pretext, even if made, would succeed. )7:cBc
municipality of San Andres, Quezon was created on 20 August 1959 :c5
c 9 c c97
by Executive Order No. 353 issued by President Carlos P. Garcia. c 

A7B7 7 c:c
$c 
F
G 
Executive Order No. 353 was not one of the thirty-three issuances 7c
. Curative laws, which in essence are retrospective, and
annulled by / in 1965. The legal status of the Municipality of San aimed at giving "validity to acts done that would have been invalid
Andres was first challenged only in 1989, through a petition for #  under existing laws, as if existing laws have been complied with," are

filed with the Regional Trial Court of Gumaca, Quezon,
validly accepted in this jurisdiction, subject to the usual qualification considered part of a legislative district in the Constitution apportioning
against impairment of vested rights. (Emphasis supplied)[55] the seats in the House of Representatives. Above all, it was held that
whatever doubt there might be as to the
 ' character of the
The holding in San Narciso was subsequently affirmed in Ä 
 municipality must be deemed to have been put to rest by the Local

'
 
 ÷ [56]
Ä 
 :/
 Government Code of 1991 (R. A. No. 7160), §442(d) of which
7/[57] In 
', the juridical personality of the Municipality of provides that "municipal districts organized pursuant to presidential
Alicia, created in a 1949 executive order, was attacked only beginning issuances or executive orders and which have their respective sets of
in 1984. / was again invoked in support of the challenge, but the elective officials holding office at the time of the effectivity of this
Court refused to invalidate the municipality, citing  at Code shall henceforth be considered as regular municipalities."
length. The Court noted that the situation of the Municipality of Alicia
was strikingly similar to that in  ; hence, the town should
likewise ³benefit from the effects of Section 442(d) of the Local
Government Code, and should [be] considered as a regular,
'
municipality.´ [58]
÷

Here, the same factors are present so as to confer on Sinacaban the
status of at least a de facto municipal corporation in the sense that its
legal existence has been recognized and acquiesced publicly and
officially. Sinacaban had been in existence for sixteen years when
/
— was decided on December 24, 1965. Yet the
The valid existence of Municipality of Sinacaban, created in a 1949 validity of E.O. No. 258 creating it had never been questioned. Created
executive order, was among the issues raised in :/. The Court, in 1949, it was only 40 years later that its existence was questioned
through Justice Mendoza, provided an expert summation of the and only because it had laid claim to an area that apparently is desired
evolution of the rule. for its revenue. This fact must be underscored because under Rule 66,
§16 of the Rules of Court, a # 
suit against a corporation
The principal basis for the view that Sinacaban was not validly created for forfeiture of its charter must be commenced within five (5) years
as a municipal corporation is the ruling in /
÷

— from the time the act complained of was done or committed. On the
that the creation of municipal corporations is essentially a legislative contrary, the State and even the Municipality of Jimenez itself have
matter and therefore the President was without power to create by recognized Sinacaban's corporate existence. Under Administrative
executive order the Municipality of Sinacaban. The ruling in this case Order No. 33 dated June 13, 1978 of this Court, as reiterated by §31 of
has been reiterated in a number of cases later decided. However, we the Judiciary Reorganization Act of 1980 (B. P. Blg. 129), Sinacaban
have since held that where a municipality created as such by executive is constituted part of a municipal circuit for purposes of the
order is later impliedly recognized and its acts are accorded legal establishment of Municipal Circuit Trial Courts in the country. For its
validity, its creation can no longer be questioned. In Ä 
  part, Jimenez had earlier recognized Sinacaban in 1950 by entering
 "=/ 
Ä
/"
, this Court considered the into an agreement with it regarding their common boundary. The
following factors as having validated the creation of a municipal agreement was embodied in Resolution No. 77 of the Provincial Board
corporation, which, like the Municipality of Sinacaban, was created by of Misamis Occidental.
executive order of the President before the ruling in /
÷


—: (1) the fact that for nearly 30 years the validity of the Indeed Sinacaban has attained
' status by virtue of the Ordinance
creation of the municipality had never been challenged; (2) the fact appended to the 1987 Constitution, apportioning legislative districts
that following the ruling in Pelaez no # 
suit was filed to throughout the country, which considered Sinacaban part of the
question the validity of the executive order creating such municipality; Second District of Misamis Occidental. Moreover, following the ruling
and (3) the fact that the municipality was later classified as a fifth class in Ä 
  "=/ 
Ä
/"., 442(d) of the
municipality, organized as part of a municipal circuit court and
Local Government Code of 1991 must be deemed to have cured any
defect in the creation of Sinacaban«.[59]
From this survey of relevant jurisprudence, we can gather the
applicable rules. / and its offspring cases ruled that the President
has no power to create municipalities, yet limited its nullificatory
effects to the particular municipalities challenged in actual cases
before this Court. However, with the promulgation of the Local
Government Code in 1991, the legal cloud was lifted over the
municipalities similarly created by executive order but not judicially
annulled. The

status of such municipalities as San Andres,
Alicia and Sinacaban was recognized by this Court, and Section
The failure to appropriate funds for Andong and the absence of
elections in the municipality in the last four decades are eloquent
indicia of the non-recognition by the State of the existence of the town.
The certifications relied upon by Camid, issued by the DENR-CENRO
and the National Statistics Office, can hardly serve the purpose of
attesting to Andong¶s legal efficacy. In fact, both these certifications
qualify that they were issued upon the request of Camid, ³to support
the restoration or re-operation of the Municipality of Andong, Lanao
del Sur,´[61] thus obviously conceding that the municipality is at
present inoperative.
We may likewise pay attention to the Ordinance appended to the 1987
442(b) of the Local Government Code deemed curative whatever legal Constitution, which had also been relied upon in :/

defects to title these municipalities had labored under.  . This Ordinance, which apportioned the seats of the House of
Representatives to the different legislative districts in the Philippines,
Is Andong similarly entitled to recognition as a

municipal enumerates the various municipalities that are encompassed by the
corporation? It is not. There are eminent differences between Andong various legislative districts. Andong is not listed therein as among the
and municipalities such as San Andres, Alicia and Sinacaban. Most municipalities of Lanao del Sur, or of any other province for that
prominent is the fact that the executive order creating Andong was matter.[62] On the other hand, the municipalities of San Andres, Alicia
expressly annulled by order of this Court in 1965. If we were to affirm and Sinacaban are mentioned in the Ordinance as part of Quezon,[63]
Andong¶s

status by reason of its alleged continued existence Bohol,[64] and Misamis Occidental[65] respectively.
despite its nullification, we would in effect be condoning defiance of a
valid order of this Court. Court decisions cannot obviously lose their How about the eighteen (18) municipalities similarly nullified in
efficacy due to the sheer defiance by the parties aggrieved. / but certified as existing in the DILG 

  presented by
It bears noting that based on Camid¶s own admissions, Andong does
not meet the requisites set forth by Section 442(d) of the Local
Government Code. Section 442(d) requires that in order that the
municipality created by executive order may receive recognition, they
must ³have their respective set of elective municipal officials holding
office at the time of the effectivity of [the Local Government] Code.´
Camid admits that Andong has never elected its municipal officers at
all.[60] This incapacity ties in with the fact that Andong was judicially
annulled in 1965. Out of obeisance to our ruling in /, the national
government ceased to recognize the existence of Andong, depriving it
of its share of the public funds, and refusing to conduct municipal
elections for the void municipality.
Camid? The petition fails to mention that subsequent to the ruling in
/" legislation was enacted to reconstitute these municipalities.[66]
It is thus not surprising that the DILG certified the existence of these
eighteen (18) municipalities, or that these towns are among the
municipalities enumerated in the Ordinance appended to the
Constitution. Andong has not been similarly reestablished through
statute. Clearly then, the fact that there are valid organic statutes
passed by legislation recreating these eighteen (18) municipalities is
sufficient legal basis to accord a different legal treatment to Andong as
against these eighteen (18) other municipalities.
We thus assert the proper purview to Section 442(d) of the Local
Government Code²that it does not serve to affirm or reconstitute the
judicially dissolved municipalities such as Andong, which had been
previously created by presidential issuances or executive orders. The
provision affirms the legal personalities only of those municipalities Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Ynares-Santiago,
such as San Narciso, Alicia, and Sinacaban, which may have been Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-
created using the same infirm legal basis, yet were fortunate enough Morales, Callejo, Sr., Azcuna, Chico-Nazario and Garcia, JJ., concur.
not to have been judicially annulled. On the other hand, the
municipalities judicially dissolved in cases such as /" 
: #"andÄa, remain inexistent, unless recreated through
specific legislative enactments, as done with the eighteen (18)
municipalities certified by the DILG. Those municipalities derive their
legal personality not from the presidential issuances or executive
orders which originally created them or from Section 442(d), but from
the respective legislative statutes which were enacted to revive them.

And what now of Andong and its residents? Certainly, neither /
or this decision has obliterated Andong into a hole on the ground. The
legal effect of the nullification of Andong in / was to revert the
constituent barrios of the voided town back into their original
municipalities, namely the municipalities of Lumbatan, Butig and
Tubaran.[67] These three municipalities subsist to this day as part of
Lanao del Sur,[68] and presumably continue to exercise corporate
powers over the barrios which once belonged to Andong.

If there is truly a strong impulse calling for the reconstitution of

Andong, the solution is through the legislature and not judicial
confirmation of void title. If indeed the residents of Andong have, all
these years, been governed not by their proper municipal governments
but by a ragtag ³Interim Government,´ then an expedient political and
legislative solution is perhaps necessary. Yet we can hardly sanction
the retention of Andong¶s legal personality solely on the basis of
collective amnesia that may have allowed Andong to somehow
pretend itself into existence despite its judicial dissolution. Maybe
those who insist Andong still exists prefer to remain unperturbed in
their blissful ignorance, like the inhabitants of the cave in Plato¶s
famed allegory. But the time has come for the light to seep in, and for
the petitioner and like-minded persons to awaken to legal reality.

=*0(, the 

  is DISMISSED for lack of merit. Costs
against petitioner.

SO ORDERED.