EN BANC

G.R. No. 180046 : April 2, 2009

REVIEW CENTER ASSOCIATION OF THE PHILIPPINES, Petitioner, vs.

EXECUTIVE SECRETARY EDUARDO ERMITA and COMMISSION ON
HIGHER EDUCATION represented by its Chairman ROMULO L. NERI,
Respondents.
CPA REVIEW SCHOOL OF THE PHILIPPINES, INC. (CPAR),
PROFESSIONAL REVIEW AND TRAINING CENTER, INC. (PRTC), ReSA
REVIEW SCHOOL, INC. (ReSA), CRC-ACE REVIEW SCHOOL, INC. (CRC-
ACE) Petitioners-Intervenors.
PIMSAT COLLEGES, Respondent-Intervenor.

DECISION

CARPIO, J.:

SEPARATE CONCURRING OPINION : BRION, J.:

The Case

Before the Court is a petition for prohibition and mandamus assailing Executive Order
No. 566 (EO 566)1 and Commission on Higher Education (CHED) Memorandum Order
No. 30, series of 2007 (RIRR).2

The Antecedent Facts

On 11 and 12 June 2006, the Professional Regulation Commission (PRC) conducted the
Nursing Board Examinations nationwide. In June 2006, licensure applicants wrote the
PRC to report that handwritten copies of two sets of examinations were circulated during
the examination period among the examinees reviewing at the R.A. Gapuz Review
Center and Inress Review Center. George Cordero, Inress Review Center's President, was
then the incumbent President of the Philippine Nurses Association. The examinees were
provided with a list of 500 questions and answers in two of the examinations' five
subjects, particularly Tests III (Psychiatric Nursing) and V (Medical-Surgical Nursing).
The PRC later admitted the leakage and traced it to two Board of Nursing members.3 On
19 June 2006, the PRC released the results of the Nursing Board Examinations. On 18
August 2006, the Court of Appeals restrained the PRC from proceeding with the oath-
taking of the successful examinees set on 22 August 2006.

Consequently, President Gloria Macapagal-Arroyo (President Arroyo) replaced all the

members of the PRC's Board of Nursing. President Arroyo also ordered the examinees to
re-take the Nursing Board Examinations.
On 8 September 2006, President Arroyo issued EO 566 which authorized the CHED to
supervise the establishment and operation of all review centers and similar entities in the
Philippines.

On 3 November 2006, the CHED, through its then Chairman Carlito S. Puno (Chairman
Puno), approved CHED Memorandum Order No. 49, series of 2006 (IRR).4

In a letter dated 24 November 2006,5 the Review Center Association of the Philippines
(petitioner), an organization of independent review centers, asked the CHED to "amend,
if not withdraw" the IRR arguing, among other things, that giving permits to operate a
review center to Higher Education Institutions (HEIs) or consortia of HEIs and
professional organizations will effectively abolish independent review centers.

In a letter dated 3 January 2007,6 Chairman Puno wrote petitioner, through its President
Jose Antonio Fudolig (Fudolig), that to suspend the implementation of the IRR would be
inconsistent with the mandate of EO 566. Chairman Puno wrote that the IRR was
presented to the stakeholders during a consultation process prior to its finalization and
publication on 13 November 2006. Chairman Puno also wrote that petitioner's comments
and suggestions would be considered in the event of revisions to the IRR.

In view of petitioner's continuing request to suspend and re-evaluate the IRR, Chairman
Puno, in a letter dated 9 February 2007,7 invited petitioner's representatives to a dialogue
on 14 March 2007. In accordance with what was agreed upon during the dialogue,
petitioner submitted to the CHED its position paper on the IRR. Petitioner also requested
the CHED to confirm in writing Chairman Puno's statements during the dialogue,
particularly on lowering of the registration fee from P400,000 to P20,000 and the
requirement for reviewers to have five years' teaching experience instead of five years'
administrative experience. Petitioner likewise requested for a categorical answer to their
request for the suspension of the IRR. The CHED did not reply to the letter.

On 7 May 2007, the CHED approved the RIRR. On 22 August 2007, petitioner filed
before the CHED a Petition to Clarify/Amend Revised Implementing Rules and
Regulations8 praying for a ruling:

1. Amending the RIRR by excluding independent review centers from the

coverage of the CHED;

2. Clarifying the meaning of the requirement for existing review centers to tie-up
or be integrated with HEIs, consortium or HEIs and PRC-recognized professional
associations with recognized programs, or in the alternative, to convert into
schools; and

3. Revising the rules to make it conform with Republic Act No. 7722 (RA 7722)9
limiting the CHED's coverage to public and private institutions of higher
education as well as degree-granting programs in post-secondary educational
institutions.
On 8 October 2007, the CHED issued Resolution No. 718-200710 referring petitioner's
request to exclude independent review centers from CHED's supervision and regulation
to the Office of the President as the matter requires the amendment of EO 566. In a letter
dated 17 October 2007,11 then CHED Chairman Romulo L. Neri (Chairman Neri) wrote
petitioner regarding its petition to be excluded from the coverage of the CHED in the
RIRR. Chairman Neri stated:

While it may be true that regulation of review centers is not one of the mandates of
CHED under Republic Act 7722, however, on September 8, 2006, Her Excellency,
President Gloria Macapagal-Arroyo, issued Executive Order No. 566 directing the
Commission on Higher Education to regulate the establishment and operation of review
centers and similar entities in the entire country.

With the issuance of the aforesaid Executive Order, the CHED now is the agency that is
mandated to regulate the establishment and operation of all review centers as provided
for under Section 4 of the Executive Order which provides that "No review center or
similar entities shall be established and/or operate review classes without the favorable
expressed indorsement of the CHED and without the issuance of the necessary permits
or authorizations to conduct review classes. x x x"

To exclude the operation of independent review centers from the coverage of CHED
would clearly contradict the intention of the said Executive Order No. 566.

Considering that the requests requires the amendment of Executive Order No. 566, the
Commission, during its 305th Commission Meeting, resolved that the said request be
directly referred to the Office of the President for appropriate action.

As to the request to clarify what is meant by tie-up/be integrated with an HEI, as required
under the Revised Implementing Rules and Regulations, tie-up/be integrated simply
means, to be in partner with an HEI.12 (Boldfacing and underscoring in the original)

On 26 October 2007, petitioner filed a petition for Prohibition and Mandamus before this
Court praying for the annulment of the RIRR, the declaration of EO 566 as invalid and
unconstitutional, and the prohibition against CHED from implementing the RIRR.

Dr. Freddie T. Bernal, Director III, Officer-In-Charge, Office of the Director IV of

CHED, sent a letter13 to the President of Northcap Review Center, Inc., a member of
petitioner, that it had until 27 November 2007 to comply with the RIRR.

On 15 February 2008,14 PIMSAT Colleges (respondent-intervenor) filed a Motion For

Leave to Intervene and To Admit Comment-in-Intervention and a Comment-in-
Intervention praying for the dismissal of the petition. Respondent-intervenor alleges that
the Office of the President and the CHED did not commit any act of grave abuse of
discretion in issuing EO 566 and the RIRR. Respondent-intervenor alleges that the
requirements of the RIRR are reasonable, doable, and are not designed to deprive existing
review centers of their review business. The Court granted the Motion for Leave to
Intervene and to Admit Comment-in-Intervention in its 11 March 2008 Resolution.15

On 23 April 2008, a Motion for Leave of Court for Intervention In Support of the Petition
and a Petition In Intervention were filed by CPA Review School of the Philippines, Inc.
(CPAR), Professional Review and Training Center, Inc. (PRTC), ReSA Review School,
Inc. (ReSA), CRC-ACE Review School, Inc. (CRC-ACE), all independent CPA review
centers operating in Manila (collectively, petitioners-intervenors). Petitioners-intervenors
pray for the declaration of EO 566 and the RIRR as invalid on the ground that both
constitute an unconstitutional exercise of legislative power. The Court granted the
intervention in its 29 April 2008 Resolution.16

On 21 May 2008, the CHED issued CHED Memorandum Order No. 21, Series of 2008
(CMO 21, s. 2008)17 extending the deadline for six months from 27 May 2008 for all
existing independent review centers to tie-up or be integrated with HEIs in accordance
with the RIRR.

In its 25 November 2008 Resolution, this Court resolved to require the parties to observe
the status quo prevailing before the issuance of EO 566, the RIRR, and CMO 21, s. 2008.

The Assailed Executive Order and the RIRR

Executive Order No. 566 states in full:

EXECUTIVE ORDER NO. 566

DIRECTING THE COMMISSION ON HIGHER EDUCATION TO REGULATE THE

ESTABLISHMENT AND OPERATION OF REVIEW CENTERS AND SIMILAR
ENTITIES

WHEREAS, the State is mandated to protect the right of all citizens to quality education
at all levels and shall take appropriate steps to make education accessible to all, pursuant
to Section 1, Article XIV of the 1987 Constitution;

WHEREAS, the State has the obligation to ensure and promote quality education through
the proper supervision and regulation of the licensure examinations given through the
various Boards of Examiners under the Professional Regulation Commission;

WHEREAS, the lack of regulatory framework for the establishment and operation of
review centers and similar entities, as shown in recent events, have adverse consequences
and affect public interest and welfare;

WHEREAS, the overriding necessity to protect the public against substandard review
centers and unethical practices committed by some review centers demand that a
regulatory framework for the establishment and operation of review centers and similar
entities be immediately instituted;
WHEREAS, Republic Act No. 7722, otherwise known as the Higher Education Act of
1994, created the Commission on Higher Education, which is best equipped to carry out
the provisions pertaining to the regulation of the establishment and operation of review
centers and similar entities.

NOW, THEREFORE, I, GLORIA MACAPAGAL-ARROYO, the President of the

Republic of the Philippines, by virtue of the powers vested in me by law, do hereby
order:

SECTION 1. Establishment of a System of Regulation for Review Centers and

Similar Entities. The Commission on Higher Education (CHED), in consultation
with other concerned government agencies, is hereby directed to formulate a
framework for the regulation of review centers and similar entities, including but
not limited to the development and institutionalization of policies, standards,
guidelines for the establishment, operation and accreditation of review centers and
similar entities; maintenance of a mechanism to monitor the adequacy,
transparency and propriety of their operations; and reporting mechanisms to
review performance and ethical practice.

SEC. 2. Coordination and Support. The Professional Regulation Commission

(PRC), Technical Skills Development Authority (TESDA), Securities and
Exchange Commission (SEC), the various Boards of Examiners under the PRC,
as well as other concerned non-government organizations life professional
societies, and various government agencies, such as the Department of Justice
(DOJ), National Bureau of Investigation (NBI), Office of the Solicitor General
(OSG), and others that may be tapped later, shall provide the necessary assistance
and technical support to the CHED in the successful operationalization of the
System of Regulation envisioned by this Executive Order.

SEC. 3. Permanent Office and Staff. To ensure the effective implementation of

the System of Regulation, the CHED shall organize a permanent office under its
supervision to be headed by an official with the rank of Director and to be
composed of highly competent individuals with expertise in educational
assessment, evaluation and testing; policies and standards development,
monitoring, legal and enforcement; and statistics as well as curriculum and
instructional materials development. The CHED shall submit the staffing pattern
and budgetary requirements to the Department of Budget and Management
(DBM) for approval.

SEC. 4. Indorsement Requirement. No review center or similar entities shall be

established and/or operate review classes without the favorable expressed
indorsement of the CHED and without the issuance of the necessary permits or
authorizations to conduct review classes. After due consultation with the
stakeholders, the concerned review centers and similar entities shall be given a
reasonable period, at the discretion of the CHED, to comply with the policies and
standards, within a period not exceeding three (3) years, after due publication of
 this Executive Order. The CHED shall see to it that the System of Regulation
including the implementing mechanisms, policies, guidelines and other necessary
procedures and documentation for the effective implementation of the System, are
completed within sixty days (60) upon effectivity of this Executive Order.

SEC. 5. Funding. The initial amount necessary for the development and
implementation of the System of Regulation shall be sourced from the CHED
Higher Education Development Fund (HEDF), subject to the usual government
accounting and auditing practices, or from any applicable funding source
identified by the DBM. For the succeeding fiscal year, such amounts as may be
necessary for the budgetary requirement of implementing the System of
Regulation and the provisions of this Executive Order shall be provided for in the
annual General Appropriations Act in the budget of the CHED. Whenever
necessary, the CHED may tap its Development Funds as supplemental source of
funding for the effective implementation of the regulatory system. In this
connection, the CHED is hereby authorized to create special accounts in the
HEDF exclusively for the purpose of implementing the provisions of this
Executive Order.

SEC. 6. Review and Reporting. The CHED shall provide for the periodic review
performance of review centers and similar entities and shall make a report to the
Office of the President of the results of such review, evaluation and monitoring.

SEC. 7. Separability. Any portion or provision of this Executive Order that may
be declared unconstitutional shall not have the effect of nullifying other
provisions hereof, as long as such remaining provisions can still subsist and be
given effect in their entirely.

SEC. 8. Repeal. All rules and regulations, other issuances or parts thereof, which
are inconsistent with this Executive Order, are hereby repealed or modified
accordingly.

SEC. 9. Effectivity. This Executive Order shall take effect immediately upon its
publication in a national newspaper of general circulation.

DONE in the City of Manila, this 8th day of September, in the year of Our Lord, Two
Thousand and Six.

(Sgd.) Gloria Macapagal-Arroyo

By the President:

(Sgd.) Eduardo R. Ermita

Executive Secretary

The pertinent provisions of the RIRR affecting independent review centers are as follows:
 Rule VII

IMPLEMENTING GUIDELINES AND PROCEDURES

Section 1. Authority to Establish and Operate - Only CHED recognized,

accredited and reputable HEIs may be authorized to establish and operate review
center/course by the CHED upon full compliance with the conditions and
requirements provided herein and in other pertinent laws, rules and regulations. In
addition, a consortium or consortia of qualified schools and/or entities may
establish and operate review centers or conduct review classes upon compliance
with the provisions of these Rules.

Rule XIV
TRANSITORY PROVISIONS

Section 1. Review centers that are existing upon the approval of Executive Order
No. 566 shall be given a grace period of up to one (1) year, to tie-up/be integrated
with existing HEIs[,] consortium of HEIs and PRC recognized Professional
Associations with recognized programs under the conditions set forth in this
Order and upon mutually acceptable covenants by the contracting parties. In the
alternative, they may convert as a school and apply for the course covered by the
review subject to rules and regulations of the CHED and the SEC with respect to
the establishment of schools. In the meantime, no permit shall be issued if there is
non-compliance with these conditions or non-compliance with the requirements
set forth in these rules.

Section 2. Only after full compliance with the requirements shall a Permit be
given by the CHED to review centers contemplated under this Rule.

Section 3. Failure of existing review centers to fully comply with the above shall
bar them from existing as review centers and they shall be deemed as operating
illegally as such. In addition, appropriate administrative and legal proceedings
shall be commence[d] against the erring entities that continue to operate and
appropriate sanctions shall be imposed after due process.

The Issues

The issues raised in this case are the following:

1. Whether EO 566 is an unconstitutional exercise by the Executive of legislative

power as it expands the CHED's jurisdiction; and

2. Whether the RIRR is an invalid exercise of the Executive's rule-making power.

The Ruling of this Court

The petition has merit.

Violation of Judicial Hierarchy

The Office of the Solicitor General (OSG) prays for the dismissal of the petition. Among
other grounds, the OSG alleges that petitioner violated the rule on judicial hierarchy in
filing the petition directly with this Court.

This Court's original jurisdiction to issue a writ of certiorari, prohibition, mandamus, quo
warranto, habeas corpus, and injunction is not exclusive but is concurrent with the
Regional Trial Courts and the Court of Appeals in certain cases.18 The Court has
explained:

This concurrence of jurisdiction is not, however, to be taken as according to parties

seeking any of the writs an absolute, unrestrained freedom of choice of the court to which
application therefor will be directed. There is after all a hierarchy of courts. That
hierarchy is determinative of the venue of appeals, and also serves as a general
determinant of the appropriate forum for petitions for the extraordinary writs. A
becoming regard of that judicial hierarchy most certainly indicates that petitions for the
issuance of extraordinary writs against first level ("inferior") courts should be filed with
the Regional Trial Court, and those against the latter, with the Court of Appeals. A direct
invocation of the Supreme Court's original jurisdiction to issue these writs should be
allowed only when there are special and important reasons therefor, clearly and
specifically set out in the petition. This is [an] established policy. It is a policy necessary
to prevent inordinate demands upon the Court's time and attention which are better
devoted to those matters within its exclusive jurisdiction, and to prevent further over-
crowding of the Court's docket.19

The Court has further explained:

The propensity of litigants and lawyers to disregard the hierarchy of courts in our judicial
system by seeking relief directly from this Court must be put to a halt for two reasons: (1)
it would be an imposition upon the precious time of this Court; and (2) it would cause an
inevitable and resultant delay, intended or otherwise, in the adjudication of cases, which
in some instances had to be remanded or referred to the lower court as the proper forum
under the rules of procedure, or as better equipped to resolve the issues because this
Court is not a trier of facts.20

The rule, however, is not absolute, as when exceptional and compelling circumstances
justify the exercise of this Court of its primary jurisdiction. In this case, petitioner alleges
that EO 566 expands the coverage of RA 7722 and in doing so, the Executive Department
usurps the legislative powers of Congress. The issue in this case is not only the validity of
the RIRR. Otherwise, the proper remedy of petitioner and petitioners-intervenors would
have been an ordinary action for the nullification of the RIRR before the Regional Trial
Court.21 The alleged violation of the Constitution by the Executive Department when it
issued EO 566 justifies the exercise by the Court of its primary jurisdiction over the case.
The Court is not precluded from brushing aside technicalities and taking cognizance of an
action due to its importance to the public and in keeping with its duty to determine
whether the other branches of the Government have kept themselves within the limits of
the Constitution.22

OSG's Technical Objections

The OSG alleges that the petition should be dismissed because the verification and
certification of non-forum shopping were signed only by Fudolig without the express
authority of any board resolution or power of attorney. However, the records show that
Fudolig was authorized under Board Resolution No. 3, series of 200723 to file a petition
before this Court on behalf of petitioner and to execute any and all documents necessary
to implement the resolution.

The OSG also alleges that the petition should be dismissed for violation of the 2004
Rules on Notarial Practice because Fudolig only presented his community tax certificate
as competent proof of identity before the notary public. The Court would have required
Fudolig to comply with the 2004 Rules on Notarial Practice except that Fudolig already
presented his Philippine passport before the notary public when petitioner submitted its
reply to the OSG's comment.

EO 566 Expands the Coverage of RA 7722

The OSG alleges that Section 3 of RA 7722 should be read in conjunction with Section 8,
enumerating the CHED's powers and functions. In particular, the OSG alleges that the
CHED has the power under paragraphs (e) and (n) of Section 8 to:

(e) monitor and evaluate the performance of programs and institutions of higher learning
for appropriate incentives as well as the imposition of sanctions such as, but not limited
to, diminution or withdrawal of subsidy, recommendation on the downgrading or
withdrawal of accreditation, program termination or school closure;

(n) promulgate such rules and regulations and exercise such other powers and functions
as may be necessary to carry out effectively the purpose and objectives of this Act[.]

The OSG justifies its stand by claiming that the term "programs x x x of higher learning"
is broad enough to include programs offered by review centers.

We do not agree.

Section 3 of RA 7722 provides:

Sec. 3. Creation of Commission on Higher Education. - In pursuance of the

abovementioned policies, the Commission on Higher Education is hereby created,
hereinafter referred to as the Commission.
The Commission shall be independent and separate from the Department of Education,
Culture and Sports (DECS), and attached to the Office of the President for administrative
purposes only. Its coverage shall be both public and private institutions of higher
education as well as degree-granting programs in all post-secondary educational
institutions, public and private. (Emphasis supplied)

Neither RA 7722 nor CHED Order No. 3, series of 1994 (Implementing Rules of RA
7722)24 defines an institution of higher learning or a program of higher learning.

"Higher education," however, is defined as "education beyond the secondary level"25 or

"education provided by a college or university."26 Under the "plain meaning" or verba
legis rule in statutory construction, if the statute is clear, plain, and free from ambiguity,
it must be given its literal meaning and applied without interpretation.27 The legislature is
presumed to know the meaning of the words, to have used words advisedly, and to have
expressed its intent by use of such words as are found in the statute.28 Hence, the term
"higher education" should be taken in its ordinary sense and should be read and
interpreted together with the phrase "degree-granting programs in all post-secondary
educational institutions, public and private." Higher education should be taken to mean
tertiary education or that which grants a degree after its completion.

Further, Articles 6 and 7 of the Implementing Rules provide:

Article 6. Scope of Application. - The coverage of the Commission shall be both public
and private institutions of higher education as well as degree granting programs in all
post-secondary educational institutions, public and private.

These Rules shall apply to all public and private educational institutions offering tertiary
degree programs.

The establishment, conversion, or elevation of degree-granting institutions shall be

within the responsibility of the Commission.

Article 7. Jurisdiction. - Jurisdiction over institutions of higher learning primarily

offering tertiary degree programs shall belong to the Commission. (Emphasis supplied)

Clearly, HEIs refer to degree-granting institutions, or those offering tertiary degree or

post-secondary programs. In fact, Republic Act No. 8292 or the Higher Education
Modernization Act of 1997 covers chartered state universities and colleges. State
universities and colleges primarily offer degree courses and programs.

Sections 1 and 8, Rule IV of the RIRR define a review center and similar entities as
follows:

Section 1. REVIEW CENTER. - refers to a center operated and owned by a duly

authorized entity pursuant to these Rules intending to offer to the public and/or to
specialized groups whether for a fee or for free a program or course of study that is
intended to refresh and enhance the knowledge and competencies and skills of reviewees
obtained in the formal school setting in preparation for the licensure examinations given
by the Professional Regulations Commission (PRC). The term review center as
understood in these rules shall also embrace the operation or conduct of review classes or
courses provided by individuals whether for a fee or not in preparation for the licensure
examinations given by the Professional Regulations Commission.

xxx

Section 8. SIMILAR ENTITIES - the term refer to other review centers providing review
or tutorial services in areas not covered by licensure examinations given by the
Professional Regulations Commission including but not limited to college entrance
examinations, Civil Service examinations, tutorial services in specific fields like English,
Mathematics and the like.

The same Rule defines a review course as follows:

Section 3. REVIEW COURSE - refers to the set of non-degree instructional program of

study and/or instructional materials/module, offered by a school with a recognized
course/program requiring licensure examination, that are intended merely to refresh and
enhance the knowledge or competencies and skills of reviewees.

The scopes of EO 566 and the RIRR clearly expand the CHED's coverage under RA
7722. The CHED's coverage under RA 7722 is limited to public and private
institutions of higher education and degree-granting programs in all public and
private post-secondary educational institutions. EO 566 directed the CHED to
formulate a framework for the regulation of review centers and similar entities.

The definition of a review center under EO 566 shows that it refers to one which offers "a
program or course of study that is intended to refresh and enhance the knowledge
or competencies and skills of reviewees obtained in the formal school setting in
preparation for the licensure examinations" given by the PRC. It also covers the
operation or conduct of review classes or courses provided by individuals whether for a
fee or not in preparation for the licensure examinations given by the PRC.

A review center is not an institution of higher learning as contemplated by RA 7722. It

does not offer a degree-granting program that would put it under the jurisdiction of the
CHED. A review course is only intended to "refresh and enhance the knowledge or
competencies and skills of reviewees." A reviewee is not even required to enroll in a
review center or to take a review course prior to taking an examination given by the PRC.
Even if a reviewee enrolls in a review center, attendance in a review course is not
mandatory. The reviewee is not required to attend each review class. He is not required to
take or pass an examination, and neither is he given a grade. He is also not required to
submit any thesis or dissertation. Thus, programs given by review centers could not be
considered "programs x x x of higher learning" that would put them under the jurisdiction
of the CHED.
Further, the "similar entities" in EO 566 cover centers providing "review or tutorial
services" in areas not covered by licensure examinations given by the PRC, which
include, although not limited to, college entrance examinations, Civil Services
examinations, and tutorial services. These review and tutorial services hardly qualify as
programs of higher learning.

Usurpation of Legislative Power

The OSG argues that President Arroyo was merely exercising her executive power to
ensure that the laws are faithfully executed. The OSG further argues that President
Arroyo was exercising her residual powers under Executive Order No. 292 (EO 292),29
particularly Section 20, Title I of Book III, thus:

Section 20. Residual Powers. - Unless Congress provides otherwise, the President shall
exercise such other powers and functions vested in the President which are provided
for under the laws and which are not specifically enumerated above, or which are not
delegated by the President in accordance with law. (Emphasis supplied)

Section 20, Title I of Book III of EO 292 speaks of other powers vested in the President
under the law.30 The exercise of the President's residual powers under this provision
requires legislation,31 as the provision clearly states that the exercise of the President's
other powers and functions has to be "provided for under the law." There is no law
granting the President the power to amend the functions of the CHED. The President may
not amend RA 7722 through an Executive Order without a prior legislation granting her
such power.

The President has no inherent or delegated legislative power to amend the functions of
the CHED under RA 7722. Legislative power is the authority to make laws and to alter or
repeal them,32 and this power is vested with the Congress under Section 1, Article VI of
the 1987 Constitution which states:

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

In Ople v. Torres,33 the Court declared void, as a usurpation of legislative power,

Administrative Order No. 308 (AO 308) issued by the President to create a national
identification system. AO 308 mandates the adoption of a national identification system
even in the absence of an enabling legislation. The Court distinguished between
Legislative and Executive powers, as follows:

The line that delineates Legislative and Executive power is not indistinct. Legislative
power is "the authority, under the Constitution, to make laws, and to alter and repeal
them." The Constitution, as the will of the people in their original, sovereign and
unlimited capacity, has vested this power in the Congress of the Philippines. The grant of
legislative power to Congress is broad, general and comprehensive. The legislative body
possesses plenary power for all purposes of civil government. Any power, deemed to be
legislative by usage and tradition, is necessarily possessed by Congress, unless the
Constitution has lodged it elsewhere. In fine, except as limited by the Constitution, either
expressly or impliedly, legislative power embraces all subjects and extends to matters of
general concern or common interest.

While Congress is vested with the power to enact laws, the President executes the laws.
The executive power is vested in the President. It is generally defined as the power to
enforce and administer laws. It is the power of carrying the laws into practical operation
and enforcing their due observance.

As head of the Executive Department, the President is the Chief Executive. He represents
the government as a whole and sees to it that all laws are enforced by the officials and
employees of his department. He has control over the executive department, bureaus and
offices. This means that he has the authority to assume directly the functions of the
executive department, bureau and office, or interfere with the discretion of its officials.
Corollary to the power of control, the President also has the duty of supervising the
enforcement of laws for the maintenance of general peace and public order. Thus, he is
granted administrative power over bureaus and offices under his control to enable him to
discharge his duties effectively.

Administrative power is concerned with the work of applying policies and enforcing
orders as determined by proper governmental organs. It enables the President to fix a
uniform standard of administrative efficiency and check the official conduct of his
agents. To this end, he can issue administrative orders, rules and regulations.

x x x. An administrative order is:

"Sec. 3. Administrative Orders. - Acts of the President which relate to particular aspects
of governmental operation in pursuance of his duties as administrative head shall be
promulgated in administrative orders."

An administrative order is an ordinance issued by the President which relates to specific

aspects in the administrative operation of government. It must be in harmony with the
law and should be for the sole purpose of implementing the law and carrying out the
legislative policy. x x x.34

Just like AO 308 in Ople v. Torres, EO 566 in this case is not supported by any enabling
law. The Court further stated in Ople:

x x x. As well stated by Fisher: "x x x Many regulations however, bear directly on the
public. It is here that administrative legislation must be restricted in its scope and
application. Regulations are not supposed to be a substitute for the general policy-
making that Congress enacts in the form of a public law. Although administrative
regulations are entitled to respect, the authority to prescribe rules and regulations is not
an independent source of power to make laws."35
Since EO 566 is an invalid exercise of legislative power, the RIRR is also an invalid
exercise of the CHED's quasi-legislative power.

Administrative agencies exercise their quasi-legislative or rule-making power through the

promulgation of rules and regulations.36 The CHED may only exercise its rule-making
power within the confines of its jurisdiction under RA 7722. The RIRR covers review
centers and similar entities which are neither institutions of higher education nor
institutions offering degree-granting programs.

Exercise of Police Power

Police power to prescribe regulations to promote the health, morals, education, good
order or safety, and the general welfare of the people flows from the recognition that
salus populi est suprema lex - the welfare of the people is the supreme law.37 Police
power primarily rests with the legislature although it may be exercised by the President
and administrative boards by virtue of a valid delegation.38 Here, no delegation of police
power exists under RA 7722 authorizing the President to regulate the operations of non-
degree granting review centers.

Republic Act No. 8981 is Not the Appropriate Law

It is argued that the President of the Philippines has adequate powers under the law to
regulate review centers and this could have been done under an existing validly delegated
authority, and that the appropriate law is Republic Act No. 898139 (RA 8981). Under
Section 5 of RA 8981, the PRC is mandated to "establish and maintain a high standard of
admission to the practice of all professions and at all times ensure and safeguard the
integrity of all licensure examinations." Section 7 of RA 8981 further states that the PRC
shall adopt "measures to preserve the integrity and inviolability of licensure
examinations."

There is no doubt that a principal mandate of the PRC is to preserve the integrity of
licensure examinations. The PRC has the power to adopt measures to preserve the
integrity and inviolability of licensure examinations. However, this power should
properly be interpreted to refer to the conduct of the examinations. The enumeration of
PRC's powers under Section 7(e) includes among others, the fixing of dates and places of
the examinations and the appointment of supervisors and watchers. The power to
preserve the integrity and inviolability of licensure examinations should be read together
with these functions. These powers of the PRC have nothing to do at all with the
regulation of review centers.

The PRC has the power to investigate any of the members of the Professional Regulatory
Boards (PRB) for "commission of any irregularities in the licensure examinations which
taint or impugn the integrity and authenticity of the results of the said examinations."40
This is an administrative power which the PRC exercises over members of the PRB.
However, this power has nothing to do with the regulation of review centers. The PRC
has the power to bar PRB members from conducting review classes in review centers.
However, to interpret this power to extend to the power to regulate review centers is
clearly an unwarranted interpretation of RA 8981. The PRC may prohibit the
members of the PRB from conducting review classes at review centers because the PRC
has administrative supervision over the members of the PRB. However, such power does
not extend to the regulation of review centers.

Section 7(y) of RA 8981 giving the PRC the power to perform "such other functions and
duties as may be necessary to carry out the provisions" of RA 8981 does not extend to the
regulation of review centers. There is absolutely nothing in RA 8981 that mentions
regulation by the PRC of review centers.

The Court cannot likewise interpret the fact that RA 8981 penalizes "any person who
manipulates or rigs licensure examination results, secretly informs or makes known
licensure examination questions prior to the conduct of the examination or tampers with
the grades in the professional licensure examinations"41 as a grant of power to regulate
review centers. The provision simply provides for the penalties for manipulation and
other corrupt practices in the conduct of the professional examinations.

The assailed EO 566 seeks to regulate not only review centers but also "similar entities."
The questioned CHED RIRR defines "similar entities" as referring to "other review
centers providing review or tutorial services in areas not covered by licensure
examinations given by the PRC including but not limited to college entrance
examinations, Civil Service examinations, tutorial services in specific fields like English,
Mathematics and the like."42 The PRC has no mandate to supervise review centers that
give courses or lectures intended to prepare examinees for licensure examinations given
by the PRC. It is like the Court regulating bar review centers just because the Court
conducts the bar examinations. Similarly, the PRC has no mandate to regulate similar
entities whose reviewees will not even take any licensure examination given by the
PRC.

WHEREFORE, we GRANT the petition and the petition-in-intervention. We

DECLARE Executive Order No. 566 and Commission on Higher Education
Memorandum Order No. 30, series of 2007 VOID for being unconstitutional.

SO ORDERED.

ANTONIO T. CARPIO
Associate Justice

FIRST DIVISION

[G.R. No. 114714.  April 21, 1995]

THE CONFERENCE OF MARITIME MANNING AGENCIES, INC., ALSTER

INTERNATIONAL SHIPPING, INC., CREAMSHIP MANAGEMENT, INC., EL
GRANDE SHIPPING CORP., EASTGATE (INT'L.) MARITIME AGENCIES, INC.,
FILIPINAS KALAYAAN OVERSEAS SHIPPING CORP., INTERWORLD SHIPPING
CORP., JZEL COMPANY, INC., LAINE SHIPPING AGENCY CORP., MARINERS
SERVICES, CORP., MARITIME SERVICES & MGT., INC., MID OCEAN (PHILS.)
MARINE AGENCY, OCEAN EAST AGENCY CORP., PASIA-PHIL. GROUP, INC.,
PHIL. MARINE CONSULTANT INC., SEASTAR MARINE SERVICES, INC., TSM
SHIPPING (PHILS.) INC., TRANS-MED (MANILA) CORPORATION, petitioners, vs.
PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, HON. NIEVES
CONFESSOR AND THE HON. FELICISIMO JOSON, respondents.

DECISION

DAVIDE, JR., J.:

Petitioner Conference of Maritime Manning Agencies, Inc., an incorporated association

of licensed Filipino manning agencies, and its co-petitioners, all licensed manning
agencies which hire and recruit Filipino seamen for and in behalf of their respective
foreign shipowner-principals, urge us to annul Resolution No. 01, series of 1994, of the
Governing Board of the Philippine Overseas Employment Administration (POEA) and
POEA Memorandum Circular No. 05, series of 1994, on the grounds that:

(1)  The POEA does not have the power and authority to fix and promulgate
rates affecting death and workmen's compensation of Filipino seamen
working in ocean-going vessels; only Congress can.

(2)  Even granting that the POEA has that power, it, nevertheless, violated the
standards for its exercise.

(3)  The resolution and the memorandum circular are unconstitutional because
they violate the equal protection and non-impairment of obligation of
contracts clauses of the Constitution.

(4)  The resolution and the memorandum circular are not valid acts of the
Governing Board because the private sector representative mandated by law
has not been appointed by the President since the creation of the POEA.

Governing Board Resolution No. 01, issued on 14 January 1994, reads as follows:

GOVERNING RESOLUTION NO. 01

SERIES OF 1994.

WHEREAS, it is the policy of the Administration to afford protection to Filipino

overseas contract workers, including seafarers and their families, promote their interest
and safeguard their welfare;
WHEREAS, the Administration under its mandate has the Power and function to secure
the best terms and conditions of employment of Filipino contract workers and ensure
compliance therewith;

WHEREAS, the minimum compensation and other benefits in cases of death, disability
and loss or damage to crew's effects provided under the POEA Standard Employment
Contract for seafarers which was revised in 1989 are now becoming very much lesser
than the prevailing international standards and those given to unionized seafarers as
provided by their collective bargaining agreements;

WHEREAS, the Tripartite Technical Working Group convened for the purpose of
deliberating the compensation and benefits provided under the POEA Standard
Employment Contract for seafarers has recommended for the upgrading of the said
compensation and benefits;

WHEREAS, for the interest of Filipino seafarers and their families, there is an urgent
need to improve and realign the minimum compensation and other benefits provided
under the POEA Standard Employment Contract for seafarers in order to keep them at
par with prevailing international standards and those provided under collective bargaining
agreements.

NOW, THEREFORE, the POEA Governing Board, in a meeting duly convened, hereby
resolves to amend and increase the compensation and other benefits as specified under
Part II, Section C, paragraph 1 and Section L, paragraphs 1 and 2 of the POEA Standard
Employment Contract for Seafarers which shall henceforth read as follows:

I.       "Section C.  COMPENSATION AN D BENEFITS

1.  In case of death of the seaman during the term of his Contract, the
employer shall pay his beneficiaries the Philippine Currency equivalent
to the amount of US$50,000 and an additional amount of US$7,000 to
each child under the age of twenty-one (21) but not exceeding four
children at the exchange rate prevailing during the time of payment.

Where the death is caused by warlike activity while sailing within a declared warzone or
war risk area, the compensation payable shall be doubled.  The employer shall undertake
appropriate warzone insurance coverage for this purpose."

xxx

III.          The maximum rate provided under Appendix I-A shall likewise be adjusted to
US$50,000 regardless of rank and position of the seafarer.

IV.    Upon effectivity, the new compensation and other benefits herein provided
shall apply to any Filipino seafarer on board any vessel, provided, that the cause
of action occurs after this Resolution takes effect.
 V.     This Resolution shall take effect after sixty (60) days from publication in a
newspaper of general circulation.

Memorandum Circular No. 05, issued on 19 January 1994 by POEA Administrator

Felicisimo Joson and addressed to all Filipino seafarers, manning agencies, shipowners,
managers and principals hiring Filipino seafarers, informed them that Governing Board
Resolution No. 01 adjusted the rates of compensation and other benefits in Part II,
Section C, paragraph 1; Section L, paragraphs 1 and 2; and Appendix 1-A of the POEA
Standard Employment Contracts for Seafarers, which adjustments took effect on 20
March 1994, and that:

IV.    Upon effectivity, the new compensation and other benefits … shall apply to
any Filipino seafarer already on-board any vessel, provided, that the cause of
action occurs after the said compensation and benefits take effect.

The Tripartite Technical Working Group mentioned in the Resolution, which convened
on 7 January 1994, was composed of the following:

1.       DA Crescencio M. Siddayao, POEA

2.       Dir. Angeles T. Wong, POEA
3.       Dir. Jaime P. Jimenez, POEA
4.       Dir. Lorna O. Fajardo, POEA
5.       OIC Salome Mendoza, POEA
6.       Capt. Gregorio Oca, AMOSUP
7.       Atty. Romeo Occena, PSU-ALU-TUCP
8.       Mr. Vicente Aldanese, FAME
9.       Capt. Emmanuel L. Regio, PAMAS
10.     Atty. Rexlito Bermudez, COMMA
11.     Atty. Alexandro M. Cruje, POEA
12.     Mr. Jay Rosauro Baluyot, POEA
13.     Ms. Magdalena Sarcos, POEA
14.     Atty. Augusto Arreza, FSA

In their comment, the public respondents contend that the petition is without merit and
should be dismissed because (a) the issuance of the challenged resolution and
memorandum circular was a valid exercise of the POEA's rule-making authority or power
of subordinate legislation which this Court had sustained in Eastern Shipping Lines, Inc.
vs. POEA (b) the "non-appointment" of the third member of the Governing Board does
not necessarily invalidate the acts of the Board, for it has been functioning "under the
advisement of the Tripartite Technical Working Group which group is incidentally
constituted by the private sector, i.e., seafarer employers and/or associations of manning
agencies including herein petitioner," for which reason "the third member complement ...
has been substantially represented by said technical working group"; and (c) the
consensus on the increase in the rates of compensation and other benefits was arrived at
after appropriate consultations with the shipowners and the private sector; the Board
therefore soundly exercised its discretion.
In view of the importance of the issues raised, we gave due course to the petition and
required the parties to submit their respective memoranda.  The petitioners did, while the
public respondents opted to adopt their comment as their memorandum.

The constitutional challenge of the rule-making power of the POEA based on

impermissible delegation of legislative power had been, as correctly contented by the
public respondents, brushed aside by this Court in Eastern Shipping Lines, Inc. vs.
POEA. The petitioner in that case assailed the constitutionality of Memorandum Circular
No. 02 of the POEA (effective 1 February 1984) which prescribed a standard contract to
be adopted by both foreign and domestic shipping companies in the hiring of Filipino
seamen for overseas employment.  The challenged resolution and memorandum circular
here merely further amended Memorandum Circular No. 02, which was earlier amended
in 1989 per Memorandum Circular No. 41, series of 1989.

In sustaining the rule-making authority of the POEA and in holding against the claimed
infirmity of delegation of legislative power, Eastern first considered the history of the
charter of the POEA and then discussed separately the above constitutional issues thus:

[T]he petitioner questions the validity of Memorandum Circular No. 2 itself as violative
of the principle of non-delegation of legislative power.  It contends that no authority had
been given the POEA to promulgate the said regulation; and even with such
authorization, the regulation represents an exercise of legislative discretion which, under
the principle, is not subject to delegation.

The authority to issue the said regulation is clearly provided in Section 4(a) of Executive
Order No. 797, reading as follows:

"x x x The governing Board of the Administration (POEA), as hereunder provided, shall
promulgate the necessary rules and regulations to govern the exercise of the adjudicatory
functions of the Administration (POEA)."

Similar authorization had been granted the National Seamen Board, which, as earlier
observed, had itself prescribed a standard shipping contract substantially the same as the
format adopted by the POEA.

The second challenge is more serious as it is true that legislative discretion as to the
substantive contents of the law cannot be delegated.  What can be delegated is the
discretion to determine how the law may be enforced, not what the law shall be.  The
ascertainment of the latter subject is a prerogative of the legislature.  This prerogative
cannot be abdicated or surrendered by the legislature to the delegate....

The principle of non-delegation of powers is applicable to all the three major powers of
the Government but is especially important in the case of the legislative power because of
the many instances when its delegation is permitted.  The occasions are rare when
executive or judicial powers have to be delegated by the authorities to which they legally
pertain.  In the case of legislative power, however, such occasions have become more and
more frequent, if not necessary.  This had led to the observation that the delegation of
legislative power has become the rule and its non-delegation the exception.

The reason is the increasing complexity of the task of government and the growing
inability of the legislature to cope directly with the myriad problems demanding its
attention.  The growth of society has ramified its activities and created peculiar and
sophisticated problems that the legislature cannot be expected reasonably to
comprehend.  Specialization even in legislation has become necessary.  To many of the
problems attendant upon present-day undertakings, the legislature may not have the
competence to provide the required direct and efficacious, not to say, specific solutions. 
These solutions may, however, be expected from its delegates, who are supposed to be
experts in the particular fields assigned to them.

The reasons given above for the delegation of legislative powers in general are
particularly applicable to administrative bodies.  With the proliferation of specialized
activities and their attendant peculiar problems, the national legislature has found it more
and more necessary to entrust to administrative agencies the authority to issue rules to
carry out the general provisions of the statute.  This is called the "power of subordinate
legislation."

With this power, administrative bodies may implement the broad policies laid down in a
statute by "filling in" the details which the Congress may not have the opportunity or
competence to provide.  This is effected by their promulgation of what are known as
supplementary regulations, such as the implementing rules issued by the Department of
Labor on the new Labor Code.  These regulations have the force and effect of law.

Memorandum Circular No. 2 is one such administrative regulation.  The model contract
prescribed thereby has been applied in a significant number of the cases without
challenge by the employer.  The power of the POEA (and before it the National Seamen
Board) in requiring the model contract is not unlimited as there is a sufficient standard
guiding the delegate in the exercise of the said authority.  That standard is discoverable in
the executive order itself which, in creating the Philippine Overseas Employment
Administration, mandated it to protect the rights of overseas Filipino workers to "fair and
equitable employment practices."

The POEA mandate referred to as providing the reasonable standard for the exercise of
the POEA's rule-making authority is found in the statement of powers and functions of
the said office in paragraph (a), Section 4 of E.O. 797, to wit:
 (a)    The Administration shall formulate and undertake in coordination where
necessary with the appropriate entities concerned, a systematic program
for promoting and monitoring the overseas employment of Filipino
workers taking into consideration domestic manpower requirements, and
to protect their rights to fair and equitable employment practices.  It shall
have original and exclusive jurisdiction over all cases, including money
claims, involving employer-employee relations arising out of or by virtue
of any law or contract involving Filipino workers for overseas
employment, including seamen.  This adjudicatory function shall be
undertaken in appropriate circumstances in consultation with the
Construction Industry Authority of the Philippines.  The governing Board
of the Administration, as hereinunder provided, shall promulgate the
necessary rules and regulations to govern the exercise of the adjudicatory
functions of the Administration.

It is, of course, well established in our jurisdiction that, while the making of laws is a
non-delegable power that pertains exclusively to Congress, nevertheless, the latter may
constitutionally delegate the authority to promulgate rules and regulations to implement a
given legislation and effectuate its policies, for the reason that the legislature finds it
impracticable, if not impossible, to anticipate situations that may be met in carrying the
law into effect.  All that is required is that the regulation should be germane to the objects
and purposes of the law; that the regulation be not in contradiction to but in conformity
with the standards prescribed by the law. This is the principle of subordinate legislation
which was discussed by this Court in People vs. Rosenthal and in Pangasinan
Transportation vs. Public Service Commission. Thus in Calalang vs. Williams, this Court
stated:

In the case of People vs. Rosenthal and Osmeña, G.R. Nos. 46076 and 46077,
promulgated June 12, 1939, and in Pangasinan Transportation vs. The Public Service
Commission, G.R. No. 47065, promulgated June 26, 1940, this Court had occasion to
observe that the principle of separation of powers has been made to adapt itself to the
complexities of modern governments, giving rise to the adoption, within certain limits, of
the principle of "subordinate legislation", not only in the United States and England but
in practically all modern governments.  Accordingly, with the growing complexity of
modern life, the multiplication of the subjects of governmental regulations, and the
increased difficulty of administering the laws, the rigidity of the theory of separation of
governmental powers has, to a large extent, been relaxed by permitting the delegation of
greater powers by the legislative and vesting a larger amount of discretion in
administrative and executive officials, not only in the execution of the laws, but also in
the promulgation of certain rules and regulations calculated to promote public interest.

That the challenged resolution and memorandum circular, which merely further amended
the previous Memorandum Circular No. 02, strictly conform to the sufficient and valid
standard of "fair and equitable employment practices" prescribed in E.O. No. 797 can no
longer be disputed.
There is, as well, no merit to the claim that the assailed resolution and memorandum
circular violate the equal protection and contract clauses of the Constitution.  To support
its contention of inequality, the petitioners claim discrimination against foreign
shipowners and principals employing Filipino seamen and in favor of foreign employers
employing overseas Filipinos who are not seamen.

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

the laws is not violated by legislation based, on reasonable classification.  And for the
classification to be reasonable, it (1) must rest on substantial distinctions; (2) must be
germane to the purpose of the law; (3) must not be limited to existing conditions only;
and (4) must apply equally to all members of the same class. There can be no dispute
about the dissimilarities between land-based and sea-based Filipino overseas workers in
terms of, among other things, work environment, safety, dangers and risks to life and
limb, and accessibility to social, civic, and spiritual activities.

Nor is there merit in the claim that the resolution and memorandum circular violate the
contract clause of the Bill of Rights.

The executive order creating the POEA was enacted to further implement the social
justice provisions of the 1973 Constitution, which have been greatly enhanced and
expanded in the 1987 Constitution by placing them under a separate Article. The Article
on Social Justice was aptly described as the "heart of the new Charter" by the President of
the 1986 Constitution Commission, retired Justice Cecilia Muñoz-Palma. Social justice is
identified with the broad scope of the police power of the state and requires the extensive
use of such power. In Calalang vs. Williams, this Court, speaking through Justice Jose P.
Laurel, expounded on social justice thus:

Social justice is "neither communism, nor despotism, nor atomism, nor anarchy," but the
humanization of laws and the equalization of social and economic forces by the State so
that justice in its rational and objectively secular conception may at least be
approximated.  Social justice means the promotion or the welfare of all the people, the
adoption by the Government of measures calculated to insure economic stability of all the
competent elements of society, through the maintenance of a proper economic and social
equilibrium in the interrelations of the members of the community, constitutionally,
through the adoption of measures legally justifiable, or extra-constitutionally, through the
exercise of powers underlying the existence of all governments on the time-honored
principle of salus populi est suprema lex.

Social justice, therefore, must be founded on the recognition of the necessity of

interdependence among divers and diverse units of a society and of the protection that
should be equally and evenly extended to all groups as a combined force in our social and
economic life, consistent with the fundamental and paramount objective of the state of
promoting the health, comfort, and quiet of all persons, and of bringing about "the
greatest good to the greatest number."
The constitutional prohibition against impairing contractual obligations is not absolute
and is not to be read with literal exactness.  It is restricted to contracts with respect to
property or some object of value and which confer rights that may be asserted in a court
of justice; it has no application to statutes relating to public subjects within the domain of
the general legislative powers of the State and involving the public rights and public
welfare of the entire community affected by it.  It does not prevent a proper exercise by
the State of its police power by enacting regulations reasonably necessary to secure the
health, safety, morals, comfort, or general welfare of the community, even though
contracts may thereby be affected, for such matters cannot be placed by contract beyond
the power of the State to regulate and control them.

Verily, the freedom to contract is not absolute; all contracts and all rights are subject to
the police power of the State and not only may regulations which affect them be
established by the State, but all such regulations must be subject to change from time to
time, as the general well-being of the community may require, or as the circumstances
may change, or as experience may demonstrate the necessity. And under the Civil Code,
contracts of labor are explicitly subject to the police power of the State because they are
not ordinary contracts but are impressed with public interest.  Article 1700 thereof
expressly provides:

ART. 1700.  The relations between capital and labor are not merely contractual.  They are
so impressed with public interest that labor contracts must yield to the common good. 
Therefore, such contracts are subject to the special laws on labor unions, collective
bargaining, strikes and lockouts, closed shop, wages, working conditions, hours of labor
and similar subjects.

The challenged resolution and memorandum circular being valid implementations of E.O.
797, which was enacted under the police power of the State, they cannot be struck down
on the ground that they violate the contract clause.  To hold otherwise is to alter long-
established constitutional doctrine and to subordinate the police power to the contract
clause.

The last issue concerns the contention that without the appointment by the President of
the third member of the governing board, the POEA cannot legally function and exercise
its powers.  This contention merits scant consideration.  Section 4 of E.O. No. 797
indubitably declares the immediate creation of the POEA.  Thus upon the effectivity of
E.O. No. 797, the POEA attained its juridical personality.  The appointment of the third
member "who shall be well versed in the field of overseas employment," provided for in
paragraph (b) of the said Section, was not meant to be a sine qua non to the birth of the
POEA, much less to the validity of the acts of the Board.  As a matter of fact, in the same
paragraph the President is given the "discretion [to] designate a Deputy Administrator as
the third member of the Board."

WHEREFORE, for lack of merit, the instant petition is DISMISSED with costs against
the petitioners.
SO ORDERED.

Padilla, (Chairman), Bellosillo, Quiason, and Kapunan, JJ., concur.

Annex "A" of Petition; Rollo, 29-30.

Annex "B" of Petition; Rollo, 31-33.

Annex "2" of Comment (Minutes of the Seabased Tripartite Technical Working Group's
Meeting Held on 07 January 1993 [sic] at Deputy Administrator Siddayao's Conference
Room); Rollo, 82-84.

166 SCRA 533 [1988].

Rollo, 70-71.

Supra note 4.

Annex "1" of Comment; Rollo, 75-81.

Supra note 4, at 542-545.

People vs. Exconde, 101 Phil. 1125, 1129-1130 [1957], citing Calalang vs. Williams, 70
Phil. 726 [1940]; Pangasinan Transportation vs. Public Service Commission, 70 Phil. 22
[1940]; People vs. Rosenthal, 68 Phil. 328 [1939]; People vs. Vera, 65 Phil. 56 [1937];
and Rubi vs. Provincial Board of Mindoro, 39 Phil. 660 [1919].

Supra note 9.

Supra note 9.

Supra note 9, at 732.

In the past, this Court has held the following, inter alia, as sufficient standards for
purposes of subordinate legislation:  public welfare in Municipality of Cardona vs.
Binangonan, 36 Phil. 547 [1917]; necessary in the interest of law and order in Rubi vs.
Provincial Board, supra note 9; public interest in People vs. Rosenthal, supra note 9;
justice and equity in Antamok GoldFields Mining Co. vs. CIR, 70 Phil. 340 [1940];
public convenience and welfare in Calalang vs. Williams, supra note 9; justice and equity
and substantial merits of the case in International Hardwood and Veneer Co. vs. Pangil
Federation of Workers, 70 Phil. 602 [1940]; simplicity, economy and efficiency in
Cervantes vs. Auditor General, 91 Phil. 359 [1952]; and national interest in Free
Telephone Workers' Union vs. Minister of Labor and Employment, 108 SCRA 757
[1981].

People vs. Cayat, 68 Phil. 12, 18 [1939].

Article XIII.

Record of the Constitutional Commission, vol. V, 945, 1010.  See Aris (Phil.) Inc. vs.
NLRC, 200 SCRA 246 [1991].

ENRIQUE M. FERNANDO, The Constitution of the Philippines, 2nd ed. [1977], 79-80;
Philippine Apparel Worker's Union vs. NLRC, 106 SCRA 444 [1981].

Supra note 9, at 734-735.

16 C.J.S. Constitutional Law § 281 [1930 ed.].

THOMAS M. COOLEY, A Treatise on the Constitutional Limitations, vol. Two, Eighth

Ed., 1236-1237; Ongsiako vs. Gamboa, 86 Phil. 50, 54-55 [1950].

EN BANC
 

HOLY SPIRIT HOMEOWNERS                G.R. No. 163980

ASSOCIATION, INC. and NESTORIO

F. APOLINARIO, in his personal

capacity and as President of Holy                

Spirit Homeowners Association, Inc.,           Present:

                       Petitioners,

                                                                  

                                                                       PANGANIBAN, C.J.,

               - versus -                                                    PUNO,

                                                                       QUISUMBING,

                                                                       YNARES-SANTIAGO,

SECRETARY MICHAEL DEFENSOR,          SANDOVAL-GUTIERREZ,

in  his  capacity  as  Chairman  of  the               CARPIO,

Housing  and  Urban  Development                   AUSTRIA-MARTINEZ,

Coordinating Council (HUDCC),                      CORONA,

ATTY. EDGARDO PAMINTUAN,                 CARPIO MORALES,

in his capacity as General Manager of               CALLEJO, SR.,

the National  Housing Authority (NHA),            AZCUNA, 

MR. PERCIVAL CHAVEZ, in his                    TINGA,       

capacity as Chairman of the Presidential            CHICO-NAZARIO,

Commission for the Urban Poor (PCUP),         GARCIA,  and

MAYOR FELICIANO BELMONTE, in           VELASCO, JR., JJ.   

his capacity as Mayor of Quezon City,

SECRETARY ELISEA GOZUN, in her                                   

capacity as Secretary of the  Department

of Environment and Natural Resources

(DENR) and SECRETARY FLORENTE         Promulgated:

SORIQUEZ, in his capacity as Secretary

of the Department of  Public Works and

Highways (DPWH) as ex-officio members

of the NATIONAL GOVERNMENT                  August 3, 2006

CENTER ADMINISTRATION

COMMITTEE,

                   Respondents.       

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

DECISION

TINGA, J.:

          The instant petition for prohibition under Rule 65 of the 1997 Rules of
Civil Procedure, with prayer for the issuance of a temporary restraining
order and/or writ of preliminary injunction, seeks to prevent respondents
from enforcing the implementing rules and regulations (IRR) of Republic
Act No. 9207, otherwise known as the “National Government Center (NGC)
Housing and Land Utilization Act of 2003.”

 
          Petitioner Holy Spirit Homeowners Association, Inc. (Association) is
a homeowners association from the West Side of the NGC. It is represented
by its president, Nestorio F. Apolinario, Jr., who is a co-petitioner in his own
personal capacity and on behalf of the association.

          Named respondents are the ex-officio members of the National

Government Center Administration Committee (Committee). At the filing of
the instant petition, the Committee was composed of Secretary Michael
Defensor, Chairman of the Housing and Urban Development Coordinating
Council (HUDCC), Atty. Edgardo Pamintuan, General Manager of the
National Housing Authority (NHA), Mr. Percival Chavez, Chairman of the
Presidential Commission for Urban Poor (PCUP), Mayor Feliciano
Belmonte of Quezon City, Secretary Elisea Gozun of the Department of
Environment and Natural Resources (DENR), and Secretary Florante
Soriquez of the Department of Public Works and Highways (DPWH).

          Prior to the passage of R.A. No. 9207, a number of presidential

issuances authorized the creation and development of what is now known as
the National Government Center (NGC).     

On March 5, 1972, former President Ferdinand Marcos issued

Proclamation No. 1826, reserving a parcel of land in Constitution Hills,
Quezon City, covering a little over 440 hectares as a national government
site to be known as the NGC.
 

On August 11, 1987, then President Corazon Aquino issued

Proclamation No. 137, excluding 150 of the 440 hectares of the reserved site
from the coverage of Proclamation No. 1826 and authorizing instead the
disposition of the excluded portion by direct sale to the bona fide residents
therein.

In view of the rapid increase in population density in the portion

excluded by Proclamation No. 137 from the coverage of Proclamation No.
1826, former President Fidel Ramos issued Proclamation No. 248 on
September 7, 1993, authorizing the vertical development of the excluded
portion to maximize the number of families who can effectively become
beneficiaries of the government’s socialized housing program.

On May 14, 2003, President Gloria Macapagal-Arroyo signed into

law R.A. No. 9207. Among the salient provisions of the law are the
following:

 
 
SEC. 2. Declaration of Policy. – It is hereby declared the policy of the
State to secure the land tenure of the urban poor. Toward this end, lands located
in the NGC, Quezon City shall be utilized for housing, socioeconomic, civic,
educational, religious and other purposes.
 
 SEC. 3. Disposition of Certain Portions of the National Government
Center Site to Bona Fide Residents. – Proclamation No. 1826, Series of 1979, is
hereby amended by excluding from the coverage thereof, 184 hectares on the
west side and 238 hectares on the east side of Commonwealth Avenue, and
declaring the same open for disposition to bona fide residents therein: Provided,
That the determination of the bona fide residents on the west side shall be based
on the census survey conducted in 1994 and the determination of the bona fide
residents on the east side shall be based on the census survey conducted in 1994
and occupancy verification survey conducted in 2000: Provided, further, That all
existing legal agreements, programs and plans signed, drawn up or implemented
and actions taken, consistent with the provisions of this Act are hereby adopted.
 
SEC. 4. Disposition of Certain Portions of the National Government
Center Site for Local Government or Community Facilities, Socioeconomic,
Charitable, Educational and Religious Purposes. – Certain portions of land
within the aforesaid area for local government or community facilities,
socioeconomic, charitable, educational and religious institutions are hereby
reserved for disposition for such purposes: Provided, That only those institutions
already operating and with existing facilities or structures, or those occupying the
land may avail of the disposition program established under the provisions this
Act; Provided, further, That in ascertaining the specific areas that may be
disposed of in favor of these institutions, the existing site allocation shall be
used as basis therefore: Provided, finally. That in determining the reasonable lot
allocation of such institutions without specific lot allocations, the land area that
may be allocated to them shall be based on the area actually used by said
institutions at the time of effectivity of this Act. (Emphasis supplied.)
 
 

In accordance with Section 5 of R.A. No. 9207, the Committee

formulated the Implementing Rules and Regulations (IRR) of R.A. No. 9207
on June 29, 2004. Petitioners subsequently filed the instant petition, raising
the following issues:

WHETHER OR NOT SECTION 3.1 (A.4), 3.1 (B.2), 3.2 (A.1) AND 3.2
(C.1) OF THE RULES AND REGULATIONS OF REPUBLIC ACT NO. 9207,
OTHERWISE KNOWN AS “NATIONAL GOVERNMENT CENTER (NGC)
HOUSING AND LAND UTILIZATION ACT OF 2003” SHOULD BE
DECLARED NULL AND VOID FOR BEING INCONSISTENT WITH THE
LAW IT SEEKS TO IMPLEMENT.
 
WHETHER OR NOT SECTION 3.1 (A.4), 3.1 (B.2), 3.2 (A.1) AND 3.2
(C.1) OF THE RULES AND REGULATIONS OF REPUBLIC ACT NO. 9207,
OTHERWISE KNOWN AS “NATIONAL GOVERNMENT CENTER (NGC)
 HOUSING AND LAND UTILIZATION ACT OF 2003” SHOULD BE
DECLARED NULL AND VOID FOR BEING ARBITRARY, CAPRICIOUS
AND WHIMSICAL.           

    

First, the procedural matters.

The Office of the Solicitor General (OSG) argues that petitioner

Association cannot question the implementation of Section 3.1 (b.2) and
Section 3.2 (c.1) since it does not claim any right over the NGC East Side.
Section 3.1 (b.2) provides for the maximum lot area that may be awarded to
a resident-beneficiary of the NGC East Side, while Section 3.2 (c.1) imposes
a lot price escalation penalty to a qualified beneficiary who fails to execute a
contract to sell within the prescribed period. Also, the OSG contends that
since petitioner association is not the duly recognized people’s organization
in the NGC and since petitioners not qualify as beneficiaries, they cannot
question the manner of disposition of lots in the NGC.

“Legal standing” or locus standi has been defined as a personal and

substantial interest in the case such that the party has sustained or will
sustain direct injury as a result of the governmental act that is being
challenged….  The gist of the question of standing is whether a party alleges
“such personal stake in the outcome of the controversy as to assure that
concrete adverseness which sharpens the presentation of issues upon which
the court depends for illumination of difficult constitutional questions.”

 
 Petitioner association has the legal standing to institute the instant
petition, whether or not it is the duly recognized association of homeowners
in the NGC. There is no dispute that the individual members of petitioner
association are residents of the NGC. As such they are covered and stand to
be either benefited or injured by the enforcement of the IRR, particularly as
regards the selection process of beneficiaries and lot allocation to qualified
beneficiaries. Thus, petitioner association may assail those provisions in the
IRR which it believes to be unfavorable to the rights of its members.
Contrary to the OSG’s allegation that the failure of petitioner association and
its members to qualify as beneficiaries effectively bars them from
questioning the provisions of the IRR, such circumstance precisely operates
to confer on them the legal personality to assail the IRR. Certainly,
petitioner and its members have sustained direct injury arising from the
enforcement of the IRR in that they have been disqualified and eliminated
from the selection process. While it is true that petitioners claim rights over
the NGC West Side only and thus cannot be affected by the implementation
of Section 3.1 (b.2), which refers to the NGC East Side, the rest of the
assailed provisions of the IRR, namely, Sections 3.1 (a.4), 3.2 (a.1) and 3.2
(c.1), govern the disposition of lots in the West Side itself or all the lots in
the NGC.

 
  

We cannot, therefore, agree with the OSG on the issue of locus standi.
The petition does not merit dismissal on that ground.

There are, however, other procedural impediments to the granting of

the instant petition. The OSG claims that the instant petition for prohibition
is an improper remedy because the writ of prohibition does not lie against
the exercise of a quasi-legislative function. Since in issuing the questioned
IRR of R.A. No. 9207, the Committee was not exercising judicial, quasi-
judicial or ministerial function, which is the scope of a petition for
prohibition under Section 2, Rule 65 of the 1997 Rules of Civil Procedure,
the instant prohibition should be dismissed outright, the OSG contends. For
their part, respondent Mayor of Quezon City and respondent NHA contend
that petitioners violated the doctrine of hierarchy of courts in filing the
instant petition with this Court and not with the Court of Appeals, which has
concurrent jurisdiction over a petition for prohibition.

The cited breaches are mortal. The petition deserves to be spurned as

a consequence.

Administrative agencies possess quasi-legislative or rule-making

powers and quasi-judicial or administrative adjudicatory powers.  Quasi-
legislative or rule-making power is the power to make rules and regulations
which results in delegated legislation that is within the confines of the
granting statute and the doctrine of non-delegability and separability of
powers.

In questioning the validity or constitutionality of a rule or regulation

issued by an administrative agency, a party need not exhaust administrative
remedies before going to court.  This principle, however, applies only where
the act of the administrative agency concerned was performed pursuant to its
quasi-judicial function, and not when the assailed act pertained to its rule-
making or quasi-legislative power. 

The assailed IRR was issued pursuant to the quasi-legislative power of

the Committee expressly authorized by R.A. No. 9207. The petition rests
mainly on the theory that the assailed IRR issued by the Committee is
invalid on the ground that it is not germane to the object and purpose of the
statute it seeks to implement. Where what is assailed is the validity or
constitutionality of a rule or regulation issued by the administrative agency
in the performance of its quasi-legislative function, the regular courts have
jurisdiction to pass upon the same.

Since the regular courts have jurisdiction to pass upon the validity of
the assailed IRR issued by the Committee in the exercise of its quasi-
legislative power, the judicial course to assail its validity must follow the
doctrine of hierarchy of courts. Although the Supreme Court, Court of
Appeals and the Regional Trial Courts have concurrent jurisdiction to issue
writs of certiorari, prohibition, mandamus, quo warranto, habeas corpus
and injunction, such concurrence does not give the petitioner unrestricted
freedom of choice of court forum.

True, this Court has the full discretionary power to take cognizance of
the petition filed directly with it if compelling reasons, or the nature and
importance of the issues raised, so warrant. A direct invocation of the
Court’s original jurisdiction to issue these writs should be allowed only
when there are special and important reasons therefor, clearly and
specifically set out in the petition.

In Heirs of Bertuldo Hinog v. Melicor, the Court said that it will not
entertain direct resort to it unless the redress desired cannot be obtained in
the appropriate courts, and exceptional and compelling circumstances, such
as cases of national interest and of serious implications, justify the availment
of the extraordinary remedy of writ of certiorari, calling for the exercise of
its primary jurisdiction.  A perusal, however, of the petition for prohibition
shows no compelling, special or important reasons to warrant the Court’s
taking cognizance of the petition in the first instance. Petitioner also failed to
state any reason that precludes the lower courts from passing upon the
validity of the questioned IRR. Moreover, as provided in Section 5, Article
VIII of the
 Constitution, the Court’s power to evaluate the validity of an
implementing rule or regulation is generally appellate in nature. Thus,
following the doctrine of hierarchy of courts, the instant petition should have
been initially filed with the Regional Trial Court.  

A petition for prohibition is also not the proper remedy to assail an

IRR issued in the exercise of a quasi-legislative function. Prohibition is an
extraordinary writ directed against any tribunal, corporation, board, officer
or person, whether exercising judicial, quasi-judicial or ministerial functions,
ordering said entity or person to desist from further proceedings when said
proceedings are without or in excess of said entity’s or person’s jurisdiction,
or are accompanied with grave abuse of discretion, and there is no appeal or
any other plain, speedy and adequate remedy in the ordinary course of law.
Prohibition lies against judicial or ministerial functions, but not against
legislative or quasi-legislative functions. Generally, the purpose of a writ of
prohibition is to keep a lower court within the limits of its jurisdiction in
order to maintain the administration of justice in orderly channels.
Prohibition is the proper remedy to afford relief against usurpation of
jurisdiction or power by an inferior court, or when, in the exercise of
jurisdiction in handling matters clearly within its cognizance the inferior
court transgresses the bounds prescribed to it by the law, or where there is no
adequate remedy available in the ordinary course of law by which such relief
can be obtained. Where the principal relief sought is to invalidate an IRR,
petitioners’ remedy is an ordinary action for its nullification, an action which
properly falls under the jurisdiction of the Regional Trial Court. In any case,
petitioners’ allegation that “respondents are performing or threatening to
perform functions without or in excess of their jurisdiction” may
appropriately be enjoined by the trial court through a writ of injunction or a
temporary restraining order.

In a number of petitions, the Court adequately resolved them on other

grounds without adjudicating on the constitutionality issue when there were
no compelling reasons to pass upon the same. In like manner, the instant
petition may be dismissed based on the foregoing procedural grounds. Yet,
the Court will not shirk from its duty to rule on the merits of this petition to
facilitate the speedy resolution of this case. In proper cases, procedural rules
may be relaxed or suspended in the interest of substantial justice. And the
power of the Court to except a particular case from its rules whenever the
purposes of justice require it cannot be questioned.

Now, we turn to the substantive aspects of the petition. The outcome,

however, is just as dismal for petitioners.

Petitioners assail the following provisions of the IRR:

 
 Section 3. Disposition of Certain portions of the NGC Site to the bonafide
residents
 
3.1. Period for Qualification of Beneficiaries
 
                                    x x x x                         
 
            (a.4) Processing and evaluation of qualifications shall be based on the
Code of Policies and subject to the condition that a beneficiary is qualified to
acquire only one (1) lot with a minimum of 36 sq. m. and maximum of 54 sq. m.
and subject further to the availability of lots.
 
                                    x x x x                         
 
(b.2) Applications for qualification as beneficiary shall be processed and
evaluated based on the Code of Policies including the minimum and maximum
lot allocation of 35 sq. m. and 60 sq. m.
 
                                    x x x x                         
 

3.2. Execution of the Contract to Sell

(a) Westside
 
(a.1) All qualified beneficiaries shall execute Contract to Sell
(CTS) within sixty (60) days from the effectivity of the IRR in order to
avail of the lot at P700.00 per sq. m.
 
                                    x x x x                         
 
(c) for both eastside and westside
 
(c.1) Qualified beneficiaries who failed to execute CTS on the
deadline set in item a.1 above in case of westside and in case of eastside
six (6) months after approval of the subdivision plan shall be subjected to
lot price escalation.
 
The rate shall be based on the formula to be set by the National
Housing Authority factoring therein the affordability criteria. The new
rate shall be approved by the NGC-Administration Committee (NGC-
AC).  

 
 Petitioners contend that the aforequoted provisions of the IRR are
constitutionally infirm as they are not germane to and/or are in conflict with
the object and purpose of the law sought to be implemented.

First. According to petitioners, the limitation on the areas to be

awarded to qualified beneficiaries under Sec. 3.1 (a.4) and (b.2) of the IRR
is not in harmony with the provisions of R.A. No. 9207, which mandates
that the lot allocation to qualified beneficiaries shall be based on the area
actually used or occupied by bona fide residents without limitation to area.
The argument is utterly baseless.

The beneficiaries of lot allocations in the NGC may be classified into

two groups, namely, the urban poor or the bona fide residents within the
NGC site and certain government institutions including the local
government. Section 3, R.A. No. 9207 mandates the allocation of additional
property within the NGC for disposition to its bona fide residents and the
manner by which this area may be distributed to qualified beneficiaries.
Section 4, R.A. No. 9207, on the other hand, governs the lot disposition to
government institutions. While it is true that Section 4 of R.A. No. 9207 has
a proviso mandating that the lot allocation shall be based on the land area
actually used or occupied at the time of the law’s effectivity, this proviso
applies only to institutional beneficiaries consisting of the local government,
socioeconomic, charitable, educational and religious institutions which do
not have specific lot allocations, and not to the bona fide residents of NGC.
There is no proviso which even hints that a bona fide resident of the NGC is
likewise entitled to the lot area actually occupied by him.

Petitioners’ interpretation is also not supported by the policy of R.A.

No. 9207 and the prior proclamations establishing the NGC. The
government’s policy to set aside public property aims to benefit not only the
urban  poor  but  also  the local government and various government
institutions   devoted   to   socioeconomic,  charitable,  educational    and
  

religious purposes. Thus, although Proclamation No. 137 authorized the sale
of lots to bona fide residents in the NGC, only a third of the entire area of
the NGC was declared open for disposition subject to the condition that
those portions being used or earmarked for public or quasi-public purposes
would be excluded from the housing program for NGC residents. The same
policy of rational and optimal land use can be read in Proclamation No.
248 issued by then President Ramos. Although the proclamation recognized
the rapid increase in the population density in the NGC, it did not allocate
additional property within the NGC for urban poor housing but instead
authorized the vertical development of the same 150 hectares identified
previously by Proclamation No. 137 since the distribution of individual lots
would not adequately provide for the housing needs of all the bona fide
residents in the NGC.

In addition, as provided in Section 4 of R.A. No. 9207, the

institutional beneficiaries shall be allocated the areas actually occupied by
them; hence, the portions intended for the institutional beneficiaries is fixed
and cannot be allocated for other non-institutional beneficiaries. Thus, the
areas not intended for institutional beneficiaries would have to be equitably
distributed among the bona fide residents of the NGC. In order to
accommodate all qualified residents, a limitation on the area to be awarded
to each beneficiary must be fixed as a necessary consequence.

 
 Second. Petitioners note that while Sec. 3.2 (a.1) of the IRR fixes the
selling rate of a lot at P700.00 per sq. m., R.A. No. 9207 does not provide
for the price. They add Sec. 3.2 (c.1) penalizes a beneficiary who fails to
execute a contract to sell within six (6) months from the approval of the
subdivision plan by imposing a price escalation, while there is no such
penalty imposed by R.A. No. 9207. Thus, they conclude that the assailed
provisions conflict with R.A. No. 9207 and should be nullified. The
argument deserves scant consideration.

Where a rule or regulation has a provision not expressly stated or

contained in the statute being implemented, that provision does not
necessarily contradict the statute. A legislative rule is in the nature of
subordinate legislation, designed to implement a primary legislation by
providing the details thereof. All that is required is that the regulation should
be germane to the objects and purposes of the law; that the regulation be not
in contradiction to but in conformity with the standards prescribed by the
law.

In Section 5 of R.A. No. 9207, the Committee is granted the power to

administer, formulate guidelines and policies, and implement the disposition
of the areas covered by the law. Implicit in this authority and the statute’s
objective of urban poor housing is the power of the Committee to formulate
the manner by which the reserved property may be allocated to the
beneficiaries. Under this broad power, the Committee is mandated to fill in
the details such as the qualifications of beneficiaries, the selling price of the
lots, the terms and conditions governing the sale and other key particulars
necessary to implement the objective of the law. These details are purposely
omitted from the statute and their determination is left to the discretion of
the Committee because the latter possesses special knowledge and technical
expertise over these matters.

The Committee’s authority to fix the selling price of the lots may be
likened to the rate-fixing power of administrative agencies. In case of a
delegation of rate-fixing power, the only standard which the legislature is
required to prescribe for the guidance of the administrative authority is that
the rate be reasonable and just. However, it has been held that even in the
absence of an express requirement as to reasonableness, this standard may
be implied. In this regard, petitioners do not even claim that the selling price
of the lots is unreasonable.

The provision on the price escalation clause as a penalty imposed to a

beneficiary who fails to execute a contract to sell within the prescribed
period is also within the Committee’s authority to formulate guidelines and
policies to implement R.A. No. 9207. The Committee has the power to lay
down the terms and conditions governing the disposition of said lots,
provided that these are reasonable and just.  There is nothing objectionable
about prescribing a period within which the parties must execute the contract
to sell. This condition can ordinarily be found in a contract to sell and is not
contrary to law, morals, good customs, public order, or public policy.
  

Third. Petitioners also suggest that the adoption of the assailed IRR
suffers from a procedural flaw. According to them the IRR was adopted and
concurred in by several representatives of people’s organizations contrary to
the express mandate of R.A. No. 9207 that only two representatives from
duly recognized peoples’ organizations must compose the NGCAC which
promulgated the assailed IRR. It is worth noting that petitioner association is
not a duly recognized people’s organization.

In subordinate legislation, as long as the passage of the rule or

regulation had the benefit of a hearing, the procedural due process
requirement is deemed complied with. That there is observance of more than
the minimum requirements of due process in the adoption of the questioned
IRR is not a ground to invalidate the same. 

In sum, the petition lacks merit and suffers from procedural

deficiencies.

WHEREFORE, the instant petition for prohibition is DISMISSED.

Costs against petitioners.

SO ORDERED.
  

                                                                 DANTE O. TINGA

                                                                  
Associate Justice

                                                                   

WE CONCUR:

ARTEMIO V. PANGANIBAN

Chief Justice

REYNATO S. PUNO LEONARDO A. QUISUMBING

 Associate Justice Associate Justice

   

 
CONSUELO YNARES-SANTIAGO ANGELINA SANDOVAL-GUTIERREZ

Associate Justice Associate Justice

   

 
ANTONIO T. CARPIO MA. ALICIA AUSTRIA-MARTINEZ

Associate Justice                   Associate Justice

   

 
RENATO C. CORONA CONCHITA CARPIO MORALES

Associate Justice Associate Justice

   
  

 
ROMEO J. CALLEJO, SR. ADOLFO S. AZCUNA

Associate Justice Associate Justice

   

 
MINITA V. CHICO-NAZARIO CANCIO C. GARCIA

Associate Justice Associate Justice

   

PRESBITERO J. VELASCO, JR.

Associate Justice

C E R T I F I C A T I O N 

 
  

          Pursuant to Article VIII, Section 13 of the Constitution, it is

hereby certified that the conclusions in the above Decision were
reached in consultation before the case was assigned to the writer of the
opinion of the Court.

                                                ARTEMIO V. PANGANIBAN.

                                                              Chief Justice

Rollo, p. 6.

Id. at 7.

 
 Id.

SEC. 5. National Government Center Administration Committee. – There is

hereby created a National Government Center Administration Committee to administer,
formulate guidelines and policies, and implement the land disposition of the areas
covered by this Act. xxx

Rollo, p. 12.

Id. at 80.

Id. at 82.

Sanlakas v. Executive Secretary, G.R. No. 159085, February 3, 2004, 421 SCRA
656, 665, citing IBP v. Zamora, G.R. No. 141284, August 15, 2000, 338 SCRA 81.

Rollo, p. 81.

Id. at 51.

Id. at 66.

Smart Communications, Inc. v. National Telecommunications Commission, 456

Phil. 145, 155 (2003).

 
 Id. at 157.

Id. at 158.

Heirs of Bertuldo Hinog v. Melicor, G.R. No. 140954, April 12, 2005, 455 SCRA
460, 470.

Fortich v. Corona, 352 Phil. 461, 480 (1998).

Id. at 481.

Heirs of Bertuldo Hinog v. Melicor, supra.

Id. at 471.

CONSTITUTION, Art. VIII, Sec. 5 states: The Supreme Court shall have the
following powers:

xxx

(2) Review, revise, reverse, modify, or affirm on appeal or

certiorari, as the law or the Rules of Court may provide, final judgments
and orders of lower courts in:

                                (a) All cases in which the constitutionality or

validity of any treaty, international or executive agreement, law,
 presidential decrees, proclamation, order, instruction, ordinance, or
regulation is in question. x x x

RULES OF COURT, Rule 65, Sec. 2.

David v. Rivera, G.R. Nos. 139913 & 140159, January 16, 2004, 420 SCRA 90,
100. 

Id.

Development Bank of the Phils. v. Commission on Audit, 424 Phil. 411 (2002);
Planters Products, Inc. v. Court of Appeals, 375 Phil. 615 (1999); Spouses Mirasol v.
Court of Appeals, 403 Phil. 761 (2001). 

Philippine National Bank v. Sanao Marketing Corporation, G.R. No. 153951,

July 29, 2005.

Republic Act No.  9207 (2003), Sec. 2, provides: Declaration of Policy. – It is

hereby declared the policy of the State to secure the land tenure of the urban poor.
Toward this end, lands located in the NGC, Quezon City shall be utilized for housing,
socioeconomic, civic, educational, religious and other purposes.

Commissioner on Internal Revenue v. Court of Appeals, 329 Phil. 987, 1006-1007

(1996), citing Misamis Oriental Association of Coco Traders, Inc. v. Department of
Finance Secretary, 238 SCRA 63.

Sigre v. Court of Appeals, 435 Phil. 711, 719 (2002).

 
 Philippine Communications Satellite Corporation v. Alcuaz, G.R. No. 84818,
December 18, 1989, 180 SCRA 218, 225-226.

Republic of the Philippines

Supreme Court
Manila
 

THIRD DIVISION
 

METROPOLITAN BANK and                    G.R. NO. 144322

TRUST COMPANY, INC.,

                      Petitioner,

                                                                    Present:      

                                                                   YNARES-SANTIAGO, J.,

                                                                       (Chairperson)

               - versus -                                       AUSTRIA-MARTINEZ,

                                                                   CALLEJO, SR., and

                                                                   CHICO-NAZARIO, JJ.

 
         

NATIONAL WAGES AND

PRODUCTIVITY COMMISSION

and REGIONAL TRIPARTITE

WAGES AND PRODUCTIVITY

BOARD – REGION II,                                Promulgated:

                   Respondents.                           February 6, 2007

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

DECISION

 
AUSTRIA-MARTINEZ, J.:

          Before the Court is a Petition for Review on Certiorari under Rule 45
of the Revised Rules of Court seeking the reversal of the Decision of the
Court of Appeals (CA) dated July 19, 2000 in CA-G.R. SP No. 42240 which
denied the petition for certiorari and prohibition of Metropolitan Bank and
Trust Company, Inc. (petitioner).

          The procedural antecedents and factual background of the case are as
follows:
 

          On October 17, 1995, the Regional Tripartite Wages and Productivity
Board, Region II, Tuguegarao, Cagayan (RTWPB), by virtue of Republic
Act No. 6727 (R.A. No. 6727), otherwise known as the Wage
Rationalization Act, issued Wage Order No. R02-03 (Wage Order), as
follows:

 
Section 1. Upon effectivity of this Wage Order, all
employees/workers in the private sector throughout Region II, regardless
of the status of employment are granted an across-the-board increase of
P15.00 daily.

The Wage Order was published in a newspaper of general circulation

on December 2, 1995 and took effect on January 1, 1996. Its Implementing
Rules were approved on February 14, 1996.  Per Section 13 of the Wage
Order, any party aggrieved by the Wage Order may file an appeal with the
National Wages and Productivity Commission (NWPC) through the
RTWPB within 10 calendar days from the publication of the Wage Order.

         

In a letter-inquiry to the NWPC dated May 7, 1996, the Bankers’

Council for Personnel Management (BCPM), on behalf of its member-
banks, requested for a ruling on the eligibility of establishments with head
offices outside Region II to seek exemption from the coverage of the Wage
Order since its member-banks are already paying more than the prevailing
minimum wage rate in the National Capital Region (NCR), which is their
principal place of business.

          In a letter-reply dated July 16, 1996, the NWPC stated that the
member-banks of BCPM are covered by the Wage Order and do not fall
under the exemptible categories listed under the Wage Order.

          In a letter-inquiry to the NWPC dated July 23, 1996, petitioner sought
for interpretation of the applicability of said Wage Order. The NWPC
referred petitioner’s inquiry to the RTWPB. 

In a letter-reply dated August 12, 1996, the RTWPB clarified that the
Wage Order covers all private establishments situated in Region II,
regardless of the voluntary adoption by said establishments of the wage
orders established in Metro Manila and irrespective of the amounts already
paid by the petitioner. 

          On October 15, 1996, the petitioner filed a Petition for Certiorari and
Prohibition with the CA seeking nullification of the Wage Order on grounds
that the RTWPB acted without authority when it issued the questioned Wage
Order; that even assuming that the RTWPB was vested with the authority to
prescribe an increase, it exceeded its authority when it did so without any
ceiling or qualification; that the implementation of the Wage Order will
cause the petitioner, and other similarly situated employers, to incur huge
financial losses and suffer labor unrest. 

On March 24, 1997, the Office of the Solicitor General (OSG) filed a
Manifestation and Motion in lieu of Comment affirming the petitioner’s
claim that the RTWPB acted beyond its authority in issuing the Wage Order
prescribing an across-the-board increase to all workers and employees in
Region II, effectively granting additional or other benefits not contemplated
by R.A. No. 6727.

In view of the OSG’s manifestation, the CA directed respondents

NWPC and RTWPB to file their comment.

On September 22, 1997, respondents filed their Comment praying that

the petition should be dismissed outright for petitioner’s procedural lapses;
that certiorari and prohibition are unavailing since petitioner failed to avail
of the remedy of appeal prescribed by the Wage Order; that the Wage Order
has long been in effect; and that the issuance of the Wage Order was
performed in the exercise of a purely administrative function.

 
 On July 19, 2000, the CA rendered its Decision denying the petition.   
The appellate court held that a writ of prohibition can no longer be issued
since implementation of the Wage Order had long become fait accompli, the
Wage Order having taken effect on January 1, 1996 and its implementing
rules approved on February 14, 1996; that a writ of certiorari is improper
since the Wage Order was issued in the exercise of a purely administrative
function, not judicial or quasi-judicial; that the letter-query did not present
justiciable controversies ripe for consideration by the respondents in the
exercise of their wage-fixing function, since no appeal from the Wage Order
was filed; that petitioner never brought before the said bodies any formal
and definite challenge to the Wage Order and it cannot pass off the letter-
queries as actual applications for relief; that even if petitioner’s procedural
lapse is disregarded, a regional wage order prescribing a wage increase
across-the-board applies to banks adopting a unified wage system and a
disparity in wages between employees holding similar positions in different
regions is not wage distortion.

          Hence, the present petition anchored on the following grounds:

 
          4.1 THE COURT OF APPEALS ERRED IN REFUSING TO
DECLARE WAGE ORDER NO. R02-03 NULL AND VOID AND OF
NO LEGAL EFFECT.
 
            4.1.1 THE BOARD, IN ISSUING WAGE ORDER
NO. R02-03, EXCEEDED THE AUTHORITY
DELEGATED TO IT BY CONGRESS.
 
             4.1.2 WAGE ORDER NO. R02-03 IS AN
UNREASONABLE INTRUSION INTO THE PROPERTY
RIGHTS OF PETITIONER.
 
            4.1.3 WAGE ORDER NO. R02-03 UNDERMINES
THE VERY ESSENCE OF COLLECTIVE
BARGAINING.
 
            4.1.4 WAGE ORDER NO. R02-03 FAILS TO
TAKE INTO ACCOUNT THE VERY RATIONALE FOR
A UNIFIED WAGE STRUCTURE.
 
            4.2 PETITIONER’S RECOURSE TO A WRIT OF CERTIORARI
AND PROHIBITION WAS PROPER.

Following the submission of the Comment and Reply thereto, the

Court gave due course to the petition and required both parties to submit
their respective memoranda.  In compliance therewith, petitioner and
respondents submitted their respective memoranda.

Petitioner poses two issues for resolution, to wit: (1) whether Wage
Order No. R02-03 is void and of no legal effect; and (2) whether petitioner’s
recourse to a petition for certiorari and prohibition with the CA was proper.

Anent the first issue, petitioner maintains that the RTWPB, in issuing
said Wage Order, exceeded the authority delegated to it under R.A. No.
6727, which is limited to determining and fixing the minimum wage rate
within their respective territorial jurisdiction and with respect only to
employees who do not earn the prescribed minimum wage rate; that the
RTWPB is not authorized to grant a general across-the-board wage increase
for non-minimum wage earners; that Employers Confederation of the
Philippines v. National Wages and Productivity Commission (hereafter
referred to as “ECOP”) is not authority to rule that respondents have been
empowered to fix wages other than the minimum wage since said case dealt
with an across-the-board increase with a salary ceiling, where the wage
adjustment is applied to employees receiving a certain denominated salary
ceiling; that the Wage Order is an unreasonable intrusion into its property
rights; that the Wage Order undermines the essence of collective bargaining;
that the Wage Order fails to take into account the rationale for a unified
wage structure.

          As to the second issue, petitioner submits that ultra vires acts of
administrative agencies are correctible by way of a writ of certiorari and
prohibition; that even assuming that it did not observe the proper remedial
procedure in challenging the Wage Order, the remedy of certiorari and
prohibition remains available to it by way of an exception, on grounds of
justice and equity; that its failure to observe procedural rules could not have
validated the manner by which the disputed Wage Order was issued.

          Respondents counter that the present petition is fatally defective from
inception since no appeal from the Wage Order was filed by petitioner; that
the letter-query to the NWPC did not constitute the appeal contemplated by
law; that the validity of the Wage Order was never raised before the
respondents; that the implementation of the Wage Order had long become
fait accompli for prohibition to prosper.  Respondents insist that, even if
petitioner’s procedural lapses are disregarded, the Wage Order was issued
pursuant to the mandate of R.A. No. 6727 and in accordance with the
Court’s pronouncements in the ECOP case; that the Wage Order is not an
intrusion on property rights since it was issued after the required public
hearings; that the Wage Order does not undermine but in fact recognizes the
right to collective bargaining; that the Wage Order did not result in wage
distortion.

The Court shall first dispose of the procedural matter relating to the
propriety of petitioner’s recourse to the CA before proceeding with the
substantive issue involving the validity of the Wage Order.  

Certiorari as a special civil action is available only if the following

essential requisites concur:  (1) it must be directed against a tribunal, board,
or officer exercising judicial or quasi-judicial functions; (2) the tribunal,
board, or officer must have acted without or in excess of jurisdiction or with
grave abuse of discretion amounting lack or excess of jurisdiction; and (3)
there is no appeal nor any plain, speedy, and adequate remedy in the
ordinary course of law.

 
 On the other hand, prohibition as a special civil action is available
only if the following essential requisites concur:  (1) it must be directed
against a tribunal, corporation, board, officer, or person exercising functions,
judicial, quasi-judicial, or ministerial; (2) the tribunal, corporation, board or
person has acted without or in excess of its jurisdiction, or with grave abuse
of discretion amounting lack or excess of jurisdiction; and (3) there is no
appeal or any other plain, speedy, and adequate remedy in the ordinary
course of law.

A respondent is said to be exercising judicial function where he has

the power to determine what the law is and what the legal rights of the
parties are, and then undertakes to determine these questions and adjudicate
upon the rights of the parties. Quasi-judicial function is a term which applies
to the action, discretion, etc., of public administrative officers or bodies, who
are required to investigate facts or ascertain the existence of facts, hold
hearings, and draw conclusions from them as a basis for their official action
and to exercise discretion of a judicial nature. Ministerial function is one
which an officer or tribunal performs in the context of a given set of facts, in
a prescribed manner and without regard to the exercise of his own judgment
upon the propriety or impropriety of the act done.

In the issuance of the assailed Wage Order, respondent RTWPB did

not act in any judicial, quasi-judicial capacity, or ministerial capacity.  It was
in the nature of subordinate legislation, promulgated by it in the exercise of
delegated power under R.A. No. 6727. It was issued in the exercise of quasi-
legislative power. Quasi-legislative or rule-making power is exercised by
administrative agencies through the promulgation of rules and regulations
within the confines of the granting statute and the doctrine of non-delegation
of certain powers flowing from the separation of the great branches of the
government. 

Moreover, the rule on the special civil actions of certiorari and

prohibition equally mandate that these extra-ordinary remedies are available
only when “there is no appeal or any other plain, speedy, and adequate
remedy in the ordinary course of law.”  A remedy is considered plain,
speedy and adequate if it will promptly relieve the petitioner from the
injurious effects of the judgment or rule, order or resolution of the lower
court or agency.

Section 13 of the assailed Wage Order explicitly provides that any

party aggrieved by the Wage Order may file an appeal with the NWPC
through the RTWPB within 10 days from the publication of the wage order.
The Wage Order was published in a newspaper of general circulation on
December 2, 1995.

In this case, petitioner did not avail of the remedy provided by law. 
No appeal to the NWPC was filed by the petitioner within 10 calendar days
from publication of the Wage Order on December 2, 1995.  Petitioner was
silent until seven months later, when it filed a letter-inquiry on July 24, 1996
with the NWPC seeking a clarification on the application of the Wage Order.
Evidently, the letter-inquiry is not an appeal. 

It must also be noted that the NWPC only referred petitioner’s letter-
inquiry to the RTWPB.  Petitioner did not appeal the letter-reply dated
August 12, 1996 of the RTWPB to the NWPC.  No direct action was taken
by the NWPC on the issuance or implementation of the Wage Order.
Petitioner failed to invoke the power of the NWPC to review regional wage
levels set by the RTWPB to determine if these are in accordance with
prescribed guidelines. Thus, not only was it improper to implead the NWPC
as party-respondent in the petition before the CA and this Court, but also
petitioner failed to avail of the primary jurisdiction of the NWPC under
Article 121 of the Labor Code, to wit:

ART. 121. Powers and Functions of the Commission. – The

Commission shall have the following powers and functions:
 
xxxx
 
           (d) To review regional wage levels set by the Regional
Tripartite Wages and Productivity Boards to determine if these are in
accordance with prescribed guidelines and national development
plans;
 
            x x x x
 
           (f)  To review plans and programs of the Regional Tripartite Wages
and Productivity Boards to determine whether these are consistent with
national development plans;
 

          (g) To exercise technical and administrative supervision over the

Regional Tripartite Wages and Productivity Boards;

                       x x x x

                       (Emphasis supplied)

Under the doctrine of primary jurisdiction, courts cannot and will not
resolve a controversy involving a question which is within the jurisdiction of
an administrative tribunal, especially where the question demands the
exercise of sound administrative discretion requiring the special knowledge,
experience and services of the administrative tribunal to determine technical
and intricate matters of fact. 

Nevertheless, the Court will proceed to resolve the substantial

issues in the present petition pursuant to the well-accepted principle
that  acceptance of a petition for certiorari or prohibition as well as the
grant of due course thereto is addressed to the sound discretion of the
court. It is a well-entrenched principle that rules of procedure are not
inflexible tools designed to hinder or delay, but to facilitate and promote
the administration of justice. Their strict and rigid application, which
would result in technicalities that tend to frustrate, rather than promote
substantial justice, must always be eschewed. 

 
 As to respondents’ submission that the implementation of the Wage
Order can no longer be restrained since it has become fait accompli, the
Wage Order having taken effect on January 1, 1996 and its implementing
rules approved on February 14, 1996, suffice it to state that courts will
decide a question otherwise moot if it is capable of repetition yet evading
review. Besides, a case becomes moot and academic only when there is no
more actual controversy between the parties or no useful purpose can be
served in passing upon the merits.  Such circumstances do not obtain in the
present case.  The implementation of the Wage Order does not in any way
render the case moot and academic, since the issue of the validity of the
wage order subsists even after its implementation and which has to be
determined and passed upon to resolve petitioner’s rights and consequent
obligations therein. 

It is worthy to quote the Court’s pronouncements in Tan v.

Commission on Elections, thus:

 
For this Honorable Court to yield to the respondents’ urging that, as there
has been fait accompli, then this Honorable Court should passively accept
and accede to the prevailing situation is an unacceptable suggestion. 
Dismissal of the instant petition, as respondents so propose is a
proposition fraught with mischief.  Respondents’ submission will create a
dangerous precedent.  Should this Honorable Court decline now to 
perform its duty of interpreting and indicating what the law is and should
be, this might tempt again those who strut about in the corridors of power
to recklessly and with ulterior motives commit illegal acts, either brazenly
or stealthily, confident that this Honorable Court will abstain from
entertaining future challenges to their acts if they manage to bring about a 
fait accompli.

 
 Having disposed of this procedural issue, the Court now comes to the
substance of the petition.

R.A. No. 6727 declared it a policy of the State to rationalize the fixing
of minimum wages and to promote productivity-improvement and gain-
sharing measures to ensure a decent standard of living for the workers and
their families; to guarantee the rights of labor to its just share in the fruits of
production; to enhance employment generation in the countryside through
industrial dispersal; and to allow business and industry reasonable returns on
investment, expansion and growth.

In line with its declared policy, R.A. No. 6727 created the NWPC,
vested with the power to prescribe rules and guidelines for the determination
of appropriate minimum wage and productivity measures at the regional,
provincial or industry levels; and authorized the RTWPB to determine and
fix the minimum wage rates applicable in their respective regions,
provinces, or industries therein and issue the corresponding wage
orders, subject to the guidelines issued by the NWPC. Pursuant to its wage
fixing authority, the RTWPB may issue wage orders which set the daily
minimum wage rates, based on the standards or criteria set by Article 124 of
the Labor Code.

 
 In ECOP, the Court declared that there are two ways of fixing the
minimum wage: the “floor-wage” method and the “salary-ceiling” method. 
The “floor-wage” method involves the fixing of a determinate amount to be
added to the prevailing statutory minimum wage rates.  On the other hand, in
the “salary-ceiling” method, the wage adjustment was to be applied to
employees receiving a certain denominated salary ceiling.  In other words,
workers already being paid more than the existing minimum wage (up to a
certain amount stated in the Wage Order) are also to be given a wage
increase. 

To illustrate: under the “floor wage method”, it would have been

sufficient if the Wage Order simply set P15.00 as the amount to be added to
the prevailing statutory minimum wage rates, while in the “salary-ceiling
method”, it would have been sufficient if the Wage Order states a specific
salary, such as P250.00, and only those earning below it shall be entitled to
the salary increase.

In the present case, the RTWPB did not determine or fix the minimum
wage rate by the “floor-wage method” or the “salary-ceiling method” in
issuing the Wage Order.  The RTWPB did not set a wage level nor a range
to which a wage adjustment or increase shall be added.  Instead, it granted
an across-the-board wage increase of P15.00 to all employees and workers
of Region 2.  In doing so, the RTWPB exceeded its authority by extending
the coverage of the Wage Order to wage earners receiving more than the
prevailing minimum wage rate, without a denominated salary ceiling.  As
correctly pointed out by the OSG, the Wage Order granted additional
benefits not contemplated by R.A. No. 6727.

In no uncertain terms must it be stressed that the function of

promulgating rules and regulations may be legitimately exercised only for
the purpose of carrying out the provisions of a law. The power of
administrative agencies is confined to implementing the law or putting it
into effect. Corollary to this guideline is that administrative regulation
cannot extend the law and amend a legislative enactment. It is axiomatic that
the clear letter of the law is controlling and cannot be amended by a mere
administrative rule issued for its implementation. Indeed, administrative or
executive acts, orders, and regulations shall be valid only when they are not
contrary to the laws or the Constitution.

Where the legislature has delegated to an executive or administrative

officers and boards authority to promulgate rules to carry out an express
legislative purpose, the rules of administrative officers and boards, which
have the effect of extending, or which conflict with the authority-granting
statute, do not represent a valid exercise of the rule-making power but
constitute an attempt by an administrative body to legislate.

 
 It has been said that when the application of an administrative
issuance modifies existing laws or exceeds the intended scope, as in this
case, the issuance becomes void, not only for being ultra vires, but also for
being unreasonable. 

Thus, the Court finds that Section 1, Wage Order No. R02-03 is void
insofar as it grants a wage increase to employees earning more than the
minimum wage rate;  and pursuant to the separability clause of the Wage
Order, Section 1 is declared valid with respect to employees earning the
prevailing minimum wage rate.

Prior to the passage of the Wage Order, the daily minimum wage rates
in Region II was set at P104.00 for the Province of Isabela, P103.00 for the
Province of Cagayan, P101.00 for the Province of Nueva Vizcaya, and
P100.00 for the Provinces of Quirino and Batanes. Only employees earning
the above-stated minimum wage rates are entitled to the P15.00 mandated
increase under the Wage Order.

Although the concomitant effect of the nullity of the Wage Order to

those employees who have received the mandated increase was not put in
issue, this Court shall make a definite pronouncement thereon to finally put
this case to rest.  As ruled by the Court in Latchme Motoomull v. Dela Paz,
“the Court will always strive to settle the entire controversy in a single
proceeding leaving no root or branch to bear the seeds of future litigation.” 

Applying by analogy, the Court’s recent pronouncement in Philippine

Ports Authority v. Commission on Audit, thus:

 
In regard to the refund of  the disallowed benefits, this Court  holds
that petitioners  need not refund the benefits received by them based on
our rulings in Blaquera v. Alcala, De Jesus v. Commission on Audit and
Kapisanan ng mga Manggagawa sa Government Service Insurance
System (KMG) v. Commission on Audit.
 
In Blaquera, the petitioners, who were officials and employees of
several government departments and agencies, were paid incentive
benefits pursuant to EO No. 292 and the Omnibus Rules Implementing
Book V of EO No. 292.  On January 3, 1993, then President Fidel V.
Ramos issued Administrative Order (AO) No. 29 authorizing the grant of
productivity incentive benefits for the year 1992 in the maximum amount
of P1,000. Section 4 of AO No. 29 directed all departments, offices and
agencies which authorized payment of CY 1992 Productivity Incentive
Bonus in excess of P1,000  to immediately cause the refund of the excess. 
Respondent heads of the departments or agencies of the government
concerned caused the deduction from petitioners’ salaries or allowances of
the amounts needed to cover the overpayments.  Petitioners therein filed a
petition for certiorari and prohibition before this Court to prevent
respondents therein from making further deductions from their salaries or
allowances.  The Court ruled against the refund, thus:
 
Considering, however, that all the parties here
acted in good faith, we cannot countenance the refund
of subject incentive benefits for the year 1992, which
amounts the petitioners have already received.  Indeed,
no indicia of bad faith can be detected under the
attendant facts and circumstances.  The officials and
chiefs of offices concerned disbursed such incentive
benefits in the honest belief that the amounts given were
due to the recipients and the latter accepted the same
with gratitude, confident that they richly deserve such
benefits. 
 
  
The said ruling in Blaquera was applied in De Jesus. 
 
 In De Jesus, COA disallowed the payment of allowances and
bonuses consisting of representation and transportation allowance, rice
allowance, productivity incentive bonus, anniversary bonus, year-end
bonus and cash gifts to members of the interim Board of Directors of the
Catbalogan Water District. This Court affirmed the disallowance because
petitioners therein were not entitled to other compensation except for
payment of per diem under PD No. 198. However, the Court ruled against
the refund of the allowances and bonuses received by petitioners, thus:
 
This ruling in Blaquera applies to the instant case. 
Petitioners here received the additional allowances and
bonuses in good faith under the honest belief that
LWUA Board Resolution No. 313 authorized such
payment.  At the time petitioners received the
additional allowances and bonuses, the Court had not
yet decided Baybay Water District.  Petitioners had no
knowledge that such payment was without legal basis. 
Thus, being in good faith, petitioners need not refund
the allowances and bonuses they received but
disallowed by the COA.
 
Further, in KMG, this Court applied the ruling in Blaquera and De
Jesus in holding that the Social Insurance Group (SIG) personnel of the
Government Service Insurance System need not refund the hazard pay
received by them although said benefit was correctly disallowed by COA. 
The Court ruled:
 
The Court however finds that the DOH and
GSIS officials concerned who granted hazard pay under
R.A. No. 7305 to the SIG personnel acted in good faith,
in the honest belief that there was legal basis for such
grant.  The SIG personnel in turn accepted the hazard
pay benefits likewise believing that they were entitled to
such benefit.  At that time, neither the concerned DOH
and GSIS officials nor the SIG personnel knew that the
grant of hazard pay to the latter is not sanctioned by
law.  Thus, following the rulings of the Court in De
Jesus v. Commission on Audit, and Blaquera v. Alcala,
the SIG personnel who previously received hazard pay
under R.A. No. 7305 need not refund such benefits.
 
  In the same vein, the rulings in Blaquera, De Jesus and KMG
apply to this case. Petitioners received the hazard duty pay and birthday
 cash gift in good faith since the benefits were authorized by PPA Special
Order No. 407-97 issued pursuant to PPA Memorandum Circular No. 34-
95 implementing DBM National Compensation Circular No. 76, series of
1995, and PPA Memorandum Circular No. 22-97, respectively. 
Petitioners at that time had no knowledge that the payment of said benefits
lacked legal basis.  Being in good faith, petitioners need not refund the
benefits they received.  (Emphasis supplied)
 

employees, other than minimum wage earners, who received the wage
increase mandated by the Wage Order need not refund the wage increase
received by them since they received the wage increase in good faith, in the
honest belief that they are entitled to such wage increase and without any
knowledge that there was no legal basis for the same.

Considering the foregoing, the Court need not delve on the other
arguments raised by the parties.

WHEREFORE, the petition is PARTIALLY GRANTED. The

Decision of the Court of Appeals dated July 19, 2000 in CA-G.R. SP No.
42240 is MODIFIED.  Section 1 of Wage Order No. R02-03 issued on
October 17, 1995 by the Regional Tripartite Wages and Productivity Board
for Region II, Tuguegarao, Cagayan is declared VALID insofar as the
mandated increase applies to employees earning the prevailing minimum
wage rate at the time of the passage of the Wage Order and VOID with
respect to its application to employees receiving more than the prevailing
minimum wage rate at the time of the passage of the Wage Order.
  

No costs.

SO ORDERED.

          MA. ALICIA AUSTRIA-MARTINEZ

       Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO

Associate Justice

Chairperson

ROMEO J. CALLEJO, SR.             MINITA V. CHICO-NAZARIO

               Associate Justice                                    Associate Justice

                  

 
  

ATTESTATION

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

CONSUELO YNARES-SANTIAGO

Associate Justice

Chairperson, Third Division

CERTIFICATION

          Pursuant to Section 13, Article VIII of the Constitution, and the
Division Chairperson’s attestation, it is hereby certified that the conclusions
in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court’s Division.

 
 
REYNATO S. PUNO

Chief Justice

              Penned by Associate Justice Godardo A. Jacinto (now retired) and concurred in
by Associate Justices Rodrigo V. Cosico and Remedios Salazar-Fernando; CA
rollo, pp. 102-123.

              Entitled “An Act to Rationalize Wage Policy Determination by Establishing the
Mechanism and Proper Standards Therefor, Amending for the Purpose Article 99
of, and Incorporating Articles 120, 121, 122, 123, 124, 126 and 127 into
Presidential Decree No. 442, as amended, Otherwise Known as the Labor Code of
the Philippines, Fixing New Wage Rates, Providing Wage Incentives for
Industrial Dispersal to the Countryside, and for Other Purposes.”  Effective July
1, 1989.

              CA rollo, p. 31 (dorsal side).

              Id. at 8.

              Section 18, Wage Order No. R02-03; CA rollo, id. at 34 (dorsal side).

              Id. at 35.

              Id. at 40.

              Id. at 41.

              Id. at 42.

            Id. at 44.

            Id. at 47.

            Id. at 2.

            Id. at 68.

            Id. at 87.

            Id. at 88.

            Id. at 102.

            Rollo, pp. 20-21.

            Id. at 166.

            Id. at 211.

            Id. at 220.

            Id. at 231 and 266.

            G.R. No. 96169, September 24, 1991, 201 SCRA 759.

            Id.

            REVISED RULES OF COURT, Rule 65, Sec. 1.

            REVISED RULES OF COURT, Rule 65, Sec. 2.

            1 FLORENZ D. REGALADO, REMEDIAL LAW  COMPENDIUM 706 (1999)

citing  Ruperto v. Torres, L-8785, February 25, 1957, and Municipal Council of
Lemery v. Provincial Board of Batangas, 56 Phil. 260, 268 (1931).

            Bautista v. Commission on Elections, 460 Phil. 459, 476 (2003); United Residents
of Dominican Hill, Inc. v. Commission on the Settlement of Land Problems, G.R.
No. 135945, March 7, 2001, 353 SCRA 782, 797; Midland Insurance
Corporation v. Intermediate Appellate Court, 227 Phil. 413, 418 (1986);  See also
Villarosa v. Commission on Elections, 377 Phil. 497, 506-507 (1999).

            De Guzman, Jr. v. Mendoza, A.M. No. P-03-1693, March 17, 2005, 453 SCRA
565, 571; Sismaet v. Sabas, A.M. No. P-03-1680, May 27, 2004, 429 SCRA 241,
247-248; Philippine Bank of Communications  v. Torio, 348 Phil. 74, 84 (1998).

            Abella, Jr. v. Civil Service Commission, G.R. No. 152574, November 17, 2004,
442 SCRA 507, 530; Bellosillo, J., Separate Opinion, Commissioner of Internal
Revenue v. Court of Appeals, 329 Phil. 987, 1017 (1996).

            Montes v. Court of Appeals, G.R. No. 143797, May 4, 2006, 489 SCRA 432, 441;
Longino v. General, G.R. No. 147956, February 16, 2005, 451 SCRA 423, 437;
National Irrigation Administration v. Court of Appeals, 376 Phil. 362, 372 (1999).

            Section 13, Wage Order No. R02-03; CA rollo, p. 34. See also LABOR CODE,
Art. 123.
            Supra note 4.

            Villaflor v. Court of Appeals, 345 Phil. 524, 559 (1997).

            Tan v. Bausch & Lomb, Inc., G.R. No. 148420, December 15, 2005, 478 SCRA
115, 120; Floren Hotel v. National Labor Relations Commission, G.R. No.
155264, May 6, 2005, 458 SCRA 128, 141.

            Jaworski v. Philippine Amusement and Gaming Corp., G.R. No. 144463, January
14, 2004, 419 SCRA 317, 323-324; Serrano v. Galant Maritime Services, Inc.,
455 Phil. 992, 999 (2003).

            Pimentel, Jr. v. Ermita, G.R. No. 164978, October 13, 2005, 472 SCRA 587, 593;
Longino v. General, supra note 30; Sanlakas v. Executive Secretary, G.R. No.
159085, February 3, 2004, 421 SCRA 656, 664; Tolentino v. Commission on
Elections, G.R. No. 148334, January 21, 2004, 420 SCRA 438, 451.

            226 Phil. 624 (1986).

            Id. at 637-638; Reiterated in City of Pasig v. Commission on Elections, 372 Phil.
864, 871 (1999).

            REPUBLIC ACT NO. 6727 (1989), Sec. 2.

            REPUBLIC ACT NO. 6727 incorporated Articles 120, 121, 122, 123, 124, 126
and 127 into the LABOR CODE.    

            LABOR CODE, Art.120.

            LABOR CODE, Art.121.

            LABOR CODE, Art.122.     

            LABOR CODE, Art. 123. Wage Order. – Whenever conditions in the region so
warrant, the Regional Board shall investigate and study all pertinent facts; and
based on the standards and criteria herein prescribed, shall proceed to
determine whether a Wage Order should be issued.  Any such Wage Order shall
take effect after fifteen (15) days from its complete publication in at least one (1)
newspaper of general circulation in the region. (Emphasis supplied)

                                In the performance of its wage determining functions, the Regional

Board shall conduct public hearings/consultations, giving notices to employees’
and employers’ groups, provincial, city and municipal officials and other
interested parties.
 Any party aggrieved by the Wage Order issued by the Regional Board
may appeal such order to the Commission within ten (10) calendar days from the
publication of such order.  It shall be mandatory for the Commission to decide
such appeal within sixty (60) calendar days from the filing thereof.

The filing of the appeal does not stay the order unless the person appealing
such order shall file with the Commission an undertaking with a surety or sureties
satisfactory to the Commission for the payment to the employees affected by the
order of the corresponding increase, in the event such order is affirmed.
(Emphasis supplied)

            LABOR CODE, Art.124. Standards/Criteria for Minimum Wage Fixing. – The regional minimum
wages to be established by the Regional Board shall be as nearly adequate as in economically
feasible to maintain the minimum standards of living necessary for the health, efficiency and
general well-being of the employees within the framework of the national economic and social
development program.  In the determination of such regional minimum wages, the Regional Board
shall, among other relevant factors, consider the following:

(a) The demand for living wages;

(b) Wage adjustment vis-à-vis the consumer price index;
(c) The cost of living and changes or increases therein;
(d) The needs of workers and their families;
(e) The need to induce industries to invest in the countryside;
(f) Improvements in standards of living;
(g) The prevailing wage levels;
(h) Fair return of the capital invested and capacity to pay of employers;
(i) Effects on employment generation and family income; and
(j) The equitable distribution of income and wealth along the imperatives of economic
and social development.
The wages prescribed in accordance with the provisions of this Title shall be the standard
prevailing minimum wages in every region.  These wages shall include wages varying within
industries, provinces or localities if in the judgment of the Regional Board conditions make such
local differentiation proper and necessary to effectuate the purpose of this Title. (Emphasis
supplied)

            Supra note 22, at 763.

            Norkis Free and Independent Workers Union v. Norkis Trading Company, Inc.,
G.R. No. 157098, June 30, 2005, 462 SCRA 485, 494.

            Land Bank of the Philippines v. Court of Appeals and Department of Agrarian
Reform v. Court of Appeals, 319 Phil. 246, 257 (1995).

            Municipality of Parañaque v. V.M. Realty Corporation, 354 Phil. 684, 694-695
(1998).
            ART. 7, CIVIL CODE OF THE PHILIPPINES.

            United BF Homeowner’s Association v. BF Homes, Inc., 369 Phil. 568, 580
(1999); People v. Maceren, G.R. No. L-32166, October 18, 1977, 79 SCRA 450,
462.

            Executive Secretary v. Southwing Heavy Industries, Inc., G.R. Nos. 164171,
164172 and 168741, February 20, 2006, 482 SCRA 673, 699.

            Section 16. All laws, orders, issuances, rules and regulations, or parts thereof
inconsistent with the provisions of this Wage Order are hereby repealed,
amended, or modified accordingly.  If any provision or part of this Wage
Order or the application thereof to any person or circumstance, is held
invalid or unconstitutional, the remainder of this Wage Order or the
application of such provision or part thereof to other persons or
circumstances shall not be affected thereby. (Emphasis supplied).

            CA rollo, p. 36.

            G.R. No. 45302, July 24, 1990, 187 SCRA 743.

            Id. at 754.

            G.R. No. 159200, February 16, 2006, 482 SCRA 490.

            Id. at 498-500.

FIRST DIVISION

[G.R. No. 109568.  August 8, 2002]

ROLANDO SIGRE, petitioner, vs. COURT OF APPEALS and LILIA Y. GONZALES,

as co-administratrix of the Estate of Matias Yusay, respondents.

[G.R. No. 113454.  August 8, 2002]

LAND BANK OF THE PHILIPPINES, petitioner, vs. COURT OF APPEALS and

LILIA Y. GONZALES, as co-administratrix of the Estate of Matias Yusay, respondents.

DECISION

AUSTRIA-MARTINEZ, J.:

In a not-so-novel attempt to challenge the long-settled constitutionality of Presidential

Decree No. 27, private respondent Lilia Y. Gonzales, as co-administratrix of the Estate of
Matias Yusay, filed with the Court of Appeals on September 15, 1992, a petition for
prohibition and mandamus docketed as CA-G.R. SP No. 28906, seeking to prohibit the
Land Bank of the Philippines (LBP) from accepting the leasehold rentals from Ernesto
Sigre (predecessor of petitioner Rolando Sigre), and for LBP to turn over to private
respondent the rentals previously remitted to it by Sigre.  It appears that Ernesto Sigre
was private respondent’s tenant in an irrigated rice land located in Barangay Naga,
Pototan, Iloilo.  He was previously paying private respondent a lease rental of sixteen
(16) cavans per crop or thirty-two (32) cavans per agricultural year.  In the agricultural
year of 1991-1992, Sigre stopped paying his rentals to private respondent and instead,
remitted it to the LBP pursuant to the Department of Agrarian Reform’s Memorandum
Circular No. 6, Series of 1978, which set the guidelines in the payment of lease
rental/partial payment by farmer-beneficiaries under the land transfer program of P.D.
No. 27.  The pertinent provision of the DAR Memorandum Circular No. 6 reads:

“A.  Where the value of the land has already been established.

“The value of the land is established on the date the Secretary or his authorized
representative has finally approved the average gross production data established by the
BCLP or upon the signing of the LTPA by landowners and tenant farmers concerned
heretofore authorized.

“Payment of lease rentals to landowners covered by OLT shall terminate on the date the
value of the land is established.  Thereafter, the tenant-farmers shall pay their lease
rentals/amortizations to the LBP or its authorized agents: provided that in case where the
value of the land is established during the month the crop is to be harvested, the cut-off
period shall take effect on the next harvest season.  With respect to cases where lease
rentals paid may exceed the value of the land, the tenant-farmers may no longer be bound
to pay such rental, but it shall be his duty to notify the landowner and the DAR Team
Leader concerned of such fact who shall ascertain immediately the veracity of the
information and thereafter resolve the matter expeditiously as possible.  If the landowner
shall insist after positive ascertainment that the tenant-farmer is to pay rentals to him, the
amount equivalent to the rental insisted to be paid shall de deposited by the tenant-farmer
with the LBP or its authorized agent in his name and for his account to be withdrawn
only upon proper written authorization of the DAR District Officer based on the result of
ascertainment or investigation.” (Emphasis ours)

According to private respondent, she had no notice that the DAR had already fixed the 3-
year production prior to October 1972 at an average of 119.32 cavans per hectare, and the
value of the land was pegged at Thirteen Thousand Four Hundred Five Pesos and Sixty-
Seven Centavos (P13,405.67). Thus, the petition filed before the Court of Appeals,
assailing, not only the validity of Memorandum Circular No. 6, but also the
constitutionality of P.D. 27.

The appellate court, in its decision dated March 22, 1993, gave due course to the petition
and declared Memorandum Circular No. 6 null and void. The LBP was directed to return
to private respondent the lease rentals paid by Sigre, while Sigre was directed to pay the
rentals directly to private respondent. In declaring Memorandum Circular No. 6 as null
and void, the appellate court ruled that there is nothing in P.D. 27 which sanctions the
contested provision of the circular; that said circular is in conflict with P.D. 816 which
provides that payments of lease rentals shall be made to the landowner, and the latter,
being a statute, must prevail over the circular; that P.D. 27 is unconstitutional in laying
down the formula for determining the cost of the land as it sets limitations on the judicial
prerogative of determining just compensation; and that it is no longer applicable, with the
enactment of Republic Act No. 6657.

Hence, this present recourse, which is a consolidation of the separate petitions for review
filed by Rolando Sigre (who substituted his predecessor Ernesto Sigre), docketed as G.R.
No. 109568 and the LBP, docketed as G.R. No. 113454.

Petitioner Sigre, in G.R. No. 109568, alleges that:

"I

“PUBLIC RESPONDENT COURT OF APPEALS ACTED WITH GRAVE ABUSE OF

DISCRETION IN RULING THAT DAR MEMORANDUM CIRCULAR NO. 6,
SERIES OF 1978 RUNS COUNTER TO PRESIDENTIAL DECREE NO. 816.

“II

“PUBLIC RESPONDENT ERRED IN RULING THAT DAR MEMORANDUM

CIRCULAR NO. 6, SERIES OF 1978 AMENDS OR EXPANDS PRESIDENTIAL
DECREE NO. 27.

“III

“PUBLIC RESPONDENT ERRED IN RULING THAT PROVISION OF

PRESIDENTIAL DECREE NO. 27 ON THE FORMULA FOR DETERMINING THE
COST OF THE LAND IS UNCONSTITUTIONAL.

“IV

“PUBLIC RESPONDENT ERRED IN RULING THAT THE PROVISION OF

PRESIDENTIAL DECREE NO. 27 ON FIXING THE JUST COMPENSATION OF
THE LAND HAS BEEN REPEALED BY REPUBLIC ACT NO. 6657.”

Petitioner LBP, in G.R.No. 113454, claims that:

“A

“THE COURT OF APPEALS GRAVELY ERRED IN NOT FINDING THAT MAR

CIRCULAR NO. 6 IS A VALID PIECE OF ADMINISTRATIVE RULES AND
REGULATION COVERING A SUBJECT GERMANE TO THE OBJECTS AND
PURPOSES OF PRESIDENTIAL DECREE NO. 27, CONFORMING TO THE
STANDARDS OF SAID LAW AND RELATING SOLELY TO CARRYING INTO
EFFECT THE GENERAL PROVISIONS OF SAID LAW.

“B

“THE COURT OF APPEALS SERIOUSLY ERRED IN RULING THAT MAR

CIRCULAR NO. 6 IS INVALID IN THAT IT SUFFERS ‘IRRECONCILABLE
CONFLICT’ WITH PRESIDENTIAL DECREE NO. 816, THUS GROSSLY
DISREGARDING THE APPLICABLE DECISION OF THE SUPREME COURT
THAT THERE IS NO ‘INCONSISTENCY OR INCOMPATIBILITY’ BETWEEN
MAR CIRCULAR NO. 6 AND P.D. 816.

“C

“THE COURT OF APPEALS GRAVELY ERRED IN RULING THAT P.D. 27,

INSOFAR AS IT SETS FORT (sic) THE FORMULA FOR DETERMINING THE
VALUE OF THE RICE/CORN LAND, IS UNCONSTITUTIONAL, THUS GROSSLY
DISREGARDING THE EXISTING JURISPRUDENCE THAT CONSISTENTLY
RULED THAT P.D. 27 IS SUSTAINED AGAINST ALL CONSTITUTIONAL
OBJECTIONS RAISED AGAINST IT.

“D

“THE COURT OF APPEALS GRAVELY ERRED IN FINDING THAT P.D. 27 HAS

BEEN IMPLIEDLY REPEALED BY REPUBLIC ACT NO. 6657.”

Presidential Decree No. 27, issued on October 21, 1972 by then Pres. Ferdinand E.
Marcos, proclaimed the entire country as a “land reform area” and decreed the
emancipation of tenants from the bondage of the soil, transferring to them the ownership
of the land they till.  To achieve its purpose, the decree laid down a system for the
purchase by tenant-farmers, long recognized as the backbone of the economy, of the
lands they were tilling. Owners of rice and corn lands that exceeded the minimum
retention area were bound to sell their lands to qualified farmers at liberal terms and
subject to conditions. It was pursuant to said decree that the DAR issued Memorandum
Circular No. 6, series of 1978.

The Court of Appeals held that P.D. No. 27 does not sanction said Circular, particularly,
the provision stating that payment of lease rentals to landowners shall terminate on the
date the value of the land is established, after which the tenant-farmer shall pay their
lease rentals/amortizations to the LBP or its authorized agents.

We disagree.  The power of subordinate legislation allows administrative bodies to

implement the broad policies laid down in a statute by "filling in" the details.  All that is
required is that the regulation should be germane to the objects and purposes of the law;
that the regulation be not in contradiction to but in conformity with the standards
prescribed by the law. One such administrative regulation is DAR Memorandum Circular
No. 6.  As emphasized in De Chavez v. Zobel, emancipation is the goal of P.D. 27., i.e.,
freedom from the bondage of the soil by transferring to the tenant-farmers the ownership
of the land they’re tilling.   As noted, however, in the whereas clauses of the Circular,
problems have been encountered in the expeditious implementation of the land reform
program, thus necessitating its promulgation, viz.:

“1.  Continued payment of lease rentals directly  to landowners by tenant-farmers may

result to situations wherein payments made may even exceed the actual value of the land.
xxx

“2.  There is difficulty in recording lease rental payments made by tenant-farmers to

landowners specifically in cases where landowners concerned refuse to issue
acknowledgment/official receipts for payments made;

“3.  Payments made by tenant-farmers to landowners after the establishment of Farmer

Amortization Schedule (FAS) through the National Computer Center were found to be
ineffectively captured or accounted for. x x x

“4. The prolonged disagreement between parties concerned on the total payments made
by the tenant-farmers has delayed program implementations.”

The rationale for the Circular was, in fact, explicitly recognized by the appellate court
when it stated that “(T)he main purpose of the circular is to make certain that the lease
rental payments of the tenant-farmer are applied to his amortizations on the purchase
price of the land.  x x x  The circular was meant to remedy the situation where the tenant-
farmer’s lease rentals to landowner were not credited in his favor against the determined
purchase price of the land, thus making him a perpetual obligor for said purchase price.”
Since the assailed Circular essentially sought to accomplish the noble purpose of P.D. 27,
it is therefore valid. Such being the case, it has the force of law and is entitled to great
respect.

The Court cannot see any “irreconcilable conflict” between P.D. No. 816 and DAR
Memorandum Circular No. 6.  Enacted in 1975, P.D. No. 816 provides that the tenant-
farmer (agricultural lessee) shall pay lease rentals to the landowner until the value of the
property has been determined or agreed upon by the landowner and the DAR.  On the
other hand, DAR Memorandum Circular No. 6, implemented in 1978, mandates that the
tenant-farmer shall pay to LBP the lease rental after the value of the land has been
determined.

In Curso v. Court of Appeals, involving the same Circular and P.D. 816, it was
categorically ruled that there is no incompatibility between these two.  Thus:

“Actually, we find no inconsistency nor incompatibility between them.  Of significance

are the two ‘whereas’ clauses of P.D. 816 quoted hereunder:

x   x   x
Clearly, under P.D. No. 816, rentals are to be paid to the landowner by the agricultural
lessee until and after the valuation of the property shall have been determined.

In the same vein, the MAR Circular provides:

x   x   x

In other words, the MAR Circular merely provides guidelines in the payment of lease
rentals/amortizations in implementation of P.D. 816.  Under both P.D. 816 and the MAR
Circular, payment of lease rentals shall terminate on the date the value of the land is
established.  Thereafter, the tenant farmers shall pay amortizations to the Land Bank
(LBP).  The rentals previously paid are to be credited as partial payment of the land
transferred to tenant-farmers.”

Private respondent, however, “splits hairs,” so to speak, and contends that the Curso case
is premised on the assumption that the Circular implements P.D. 816, whereas it is
expressly stated in the Circular that it was issued in implementation of P.D. 27. Both
Memorandum Circular No. 6 and P.D. 816 were issued pursuant to and in
implementation of P.D. 27.  These must not be read in isolation, but rather, in conjunction
with each other.  Under P.D. 816, rental payments shall be made to the landowner.  After
the value of the land has been determined/established, then the tenant-farmers shall pay
their amortizations to the LBP, as provided in DAR Circular No. 6. Clearly, there is no
inconsistency between them.  Au contraire, P.D. 816 and DAR Circular No. 6
supplement each other insofar as it sets the guidelines for the payments of lease rentals on
the agricultural property.

Further, that P.D. 27 does not suffer any constitutional infirmity is a judicial fact that has
been repeatedly emphasized by this Court in a number of cases.  As early as 1974, in the
aforecited case of De Chavez v. Zobel, P.D. 27 was assumed to be constitutional, and
upheld as part and parcel of the law of the land, viz.:

“There is no doubt then, as set forth expressly therein, that the goal is emancipation. 
What is more, the decree is now part and parcel of the law of the land according to the
revised Constitution itself.  Ejectment therefore of petitioners is simply out of the
question. That would be to set at naught an express mandate of the Constitution. Once it
has spoken, our duty is clear; obedience is unavoidable. This is not only so because of the
cardinal postulate of constitutionalism, the supremacy of the fundamental law. It is also
because any other approach would run the risk of setting at naught this basic aspiration to
do away with all remnants of a feudalistic order at war with the promise and the hope
associated with an open society. To deprive petitioners of the small landholdings in the
face of a presidential decree considered ratified by the new Constitution and precisely in
accordance with its avowed objective could indeed be contributory to perpetuating the
misery that tenancy had spawned in the past as well as the grave social problems thereby
created. There can be no justification for any other decision then whether predicated on a
juridical norm or on the traditional role assigned to the judiciary of implementing and not
thwarting fundamental policy goals.”
Thereafter, in Gonzales v. Estrella, which incidentally involves private respondent and
counsel in the case at bench, the Court emphatically declared that “Presidential Decree
No. 27 has survived the test of constitutionality.”

Then, in 1982, P.D. 27, once again, was stamped with judicial imprimatur in Association
of Rice & Corn Producers of the Philippines, Inc. v. The National Land Reform Council,
to wit:

“x  x  x  If as pointed out in the opening paragraph, the validity of Presidential Decree
No. 27 was assumed as early as 1974, on the first anniversary of the present constitution,
in De Chavez v. Zobel and specifically upheld in Gonzales v. Estrella five years later,
there cannot be any justification for holding that it is unconstitutional on its face without
any factual foundation.”

Further, in Association of Small Landowners in the Philippines, Inc. v. Secretary of

Agrarian Reform, involving the constitutionality of P.D. 27, E.O. Nos. 228 and 229, and
R.A. 6657, any other assault on the validity of P.D. 27 was ultimately foreclosed when it
was declared therein that “R.A. No. 6657, P.D. No. 27, Proc. No. 131, and E.O. Nos. 228
and 229 are SUSTAINED against all the constitutional objections raised in the herein
petition.”

The objection that P.D. 27 is unconstitutional as it sets limitations on the judicial

prerogative of determining just compensation is bereft of merit.  P.D. 27 provides:

“For the purpose of determining the cost of the land to be transferred to the tenant-farmer
pursuant to this Decree, the value of the land shall be equivalent to two and one half (2
½) times the average harvest of three normal crop years immediately preceding the
promulgation of this Decree;”

E.O. 228 supplemented such provision, viz.:

“SEC. 2.  Henceforth, the valuation of rice and corn lands covered by P.D. 27 shall be
based on the average gross production determined by the Barangay Committee on Land
Production in accordance with Department Memorandum Circular No. 26, series of 1973
and related issuances and regulation of the Department of Agrarian Reform.  The average
gross production per hectare shall be multiplied by two and a half (2.5), the product of
which shall be multiplied by Thirty Five Pesos (P35.00), the government support price
for one cavan of 50 kilos of palay on October 21, 1972, or Thirty One Pesos (P31.00), the
government support price for one cavan of 50 kilos of corn on October 21, 1972, and the
amount arrived at shall be the value of the rice and corn land, as the case may be, for the
purpose of determining its cost to the farmer and compensation to the landowner.”

The determination of just compensation under P.D. No. 27, like in Section 16 (d) of R.A.
6657 or the CARP Law, is not final or conclusive. This is evident from the succeeding
paragraph of Section 2 of E.O. 228:
“x   x   x  In the event of dispute with the landowner regarding the amount of lease rental
paid by the farmer beneficiary, the Department of  Agrarian Reform and the Barangay
Committee on Land Production concerned shall resolve the dispute within thirty (30)
days from its submission pursuant to Department of Agrarian Reform Memorandum
Circular No. 26, series of 1973, and other pertinent issuances.  In the event a party
questions in court the resolution of the dispute, the landowner’s compensation shall still
be processed for payment and the proceeds shall be held in trust by the Trust Department
of the Land Bank in accordance with the provisions of Section 5 hereof, pending the
resolution of the dispute before the court.”

Clearly therefrom, unless both the landowner and the tenant-farmer accept the valuation
of the property by the Barrio Committee on Land Production and the DAR, the parties
may bring the dispute to court in order to determine the appropriate amount of
compensation, a task unmistakably within the prerogative of the court.

Finally, the Court need not belabor the fact that R.A. 6657 or the CARP Law operates
distinctly from P.D. 27.  R.A. 6657 covers all public and private agricultural land
including other lands of the public domain suitable for agriculture as provided for in
Proclamation No. 131 and Executive Order No. 229; while, P.D. 27 covers rice and corn
lands.  On this score, E.O. 229, which provides for the mechanism of the Comprehensive
Agrarian Reform Program, specifically states: “(P)residential Decree No. 27, as amended,
shall continue to operate with respect to rice and corn lands, covered thereunder. x x x” It
cannot be gainsaid, therefore, that R.A. 6657 did not repeal or supersede, in any way,
P.D. 27.  And whatever provisions of P.D. 27 that are not inconsistent with R.A. 6657
shall be suppletory to the latter, and all rights acquired by the tenant-farmer under P.D. 27
are retained even with the passage of R.A. 6657.

WHEREFORE, the consolidated petitions filed by Rolando Sigre and the Land Bank of
the Philippines are hereby GRANTED.  The assailed Decision of the Court of Appeals is
hereby NULLIFIED and SET ASIDE and the petition in CA-G.R. SP No. 28906 is
DISMISSED for lack of merit.

SO ORDERED.

Davide, Jr., C.J., (Chairman), and Vitug, JJ., concur.

Kapunan, and Ynares-Santiago, JJ., no part.

Rollo, CA-G.R. SP No. 28906, pp. 25-26, Annex “C”.

Ibid., p. 23, Annex “A”.

Ibid., p. 24, Annex “B”.

Ibid., p. 80.
Ibid., p. 92.

Ibid., pp. 86-87.

Ibid., p. 88.

Ibid., pp.  89-90.

Ibid., p. 92.

Rollo, G.R. No. 109568, p. 4.

Rollo, G.R. 113454, pp. 9-10.

Entitled, “Decreeing the Emancipation of Tenants from the Bondage of the Soil
Transferring to Them the Ownership of the Land they Till and Providing the Instruments
and Mechanism therefore.”

Pagtalunan v. Tamayo, 183 SCRA 252, 258 [1990].

The Conference of Maritime Manning Agencies, Inc. vs. POEA, 243 SCRA 666, 675
[1995].

55 SCRA 26 [1974].

Rollo, CA-G.R. SP No. 28906, pp. 87-88.

Grego vs. Commission on Elections, 274 SCRA 481, 498 [1997].

Vinzons-Magana vs. Estrella, 201 SCRA 536, 540 [1991].

Presidential Decree No. 816 entitled, “Providing that Tenant-Farmers/Agricultural

Lessees Shall Pay the Leasehold Rentals When They Fall Due and Providing Penalties
Therefor,” issued on October 21, 1975.

128 SCRA 567 [1984].

Ibid., pp. 573-574.

Rollo, pp. 178-179; Memorandum, pp. 4-5.

Supra., Curso vs. Court of Appeals; see also P.D. 816 and DAR Memorandum Circular
No. 6.

55 SCRA 26 [1974]
Ibid., p. 31.

91 SCRA 294 [1979]

Ibid., p. 295.

113 SCRA 798 [1982]

Ibid., p. 801.

175 SCRA 343 [1989]

Issued on July 17, 1987, entitled “Declaring Full Land Ownership to Qualified Farmer
Beneficiaries Covered by Presidential Decree No. 27; Determining the Value of
Remaining Unvalued Rice and Corn Lands Subject of P.D. 27; and Providing for the
Manner of Payment by the Farmer Beneficiary and Mode of Compensation to the
Landowner.”

Issued on July 22, 1987, entitled “Providing the Mechanisms for the Implementation of
the Comprehensive Agrarian Reform Program.”

Signed into law on June 10, 1988, entitled “An Act Instituting a Comprehensive Agrarian
Reform Program to Promote Social Justice and Industrialization; Providing the
Mechanism for its Implementation, and For Other Purposes.”

Supra., note no. 19, p. 393.

Vinzons case, note 18, p. 541; Association of Small Landowners in the Philippines, Inc.
case, note 30, p. 382.

Section 2 of R.A. 6657.

Section 27 of E.O. 229.

Section 75 of R.A. 6657.

Association of Small Landowners in the Philippines, Inc. case, note 30, p. 391.

THIRD DIVISION

[G.R. No. 134495.  December 28, 1998]

PERFECTO R. YASAY, JR., petitioner, vs. HONORABLE OMBUDSMAN ANIANO

A. DESIERTO and THE FACT-FINDING AND INVESTIGATION BUREAU,
represented by ATTY. RIZALDE F.  LAUDENCIA, respondents.
RESOLUTION

KAPUNAN, J.:

This is a petition for certiorari under Rule 65 of the Revised Rules of Court seeking:  (1)
the nullification of the Order dated July 22, 1998 of the respondent Ombudsman in
OMB-ADM-0-98-0365 (“Fact-Finding and Investigation Bureau v. Perfecto R. Yasay,
Jr.”) where petitioner Perfecto R. Yasay, Jr. was placed under preventive suspension for a
period of ninety (90) days without pay; and (2) the dismissal of the administrative
charges filed against him.

Petitioner also filed an Urgent Omnibus Motion dated October 26, 1998 praying of this
Court  “(a) to lift or set aside the preventive suspension order and order extending the
same, and  (b) for resolution of the instant petition, with prayer for the issuance of
temporary restraining order and/or writ of preliminary injunction” to enjoin the
enforcement of the respondent Ombudsman’s  Extension Order dated October 23, 1998,
extending the period of petitioner’s preventive suspension for another ninety (90) days
following the expiration of the original ninety-day period.  We shall consider this Urgent
Omnibus Motion as an integral part of the petition and regard it in consolidation with the
petition.

We first consider the issues raised in the petition which are:  (1) whether the respondent
Ombudsman has jurisdiction over the subject matter of the administrative case against
petitioner on his contention that what is involved is an “intra-membership dispute in a
private condominium corporation and does not involve the exercise of a governmental
duty or function;” (2) whether the respondent Ombudsman gravely abused his discretion
in giving due course to the administrative charges against petitioner; and (3) whether the
respondent Ombudsman gravely abused his discretion in issuing the order placing
petitioner under preventive suspension.

The antecedents are as follows:

In a Complaint-Affidavit dated June 17, 1997 filed with the respondent Ombudsman,
Donato Teodoro, Sr., as President and Chairman of the Board of Donsol Development &
Commercial Corporation and D.B. Teodoro Securities, Inc., charged petitioner with
Estafa under the Revised Penal Code and violation of Sec. 3 (e) of R.A. No. 3019,
otherwise known as the Anti-Graft and Corrupt Practices Act, which provides thus:

Sec. 3.    Corrupt Practice of Public Officers. -  In  addition to acts or omissions of public
officers already penalized by existing law, the following shall constitute corrupt practices
of any public officer and are hereby declared to be unlawful;

x x x                                                x x x                                        x x x
e.  Causing any undue injury to any party, including the Government x x x   x x x in the
discharge of his official, administrative or judicial functions through bad faith or gross
inexcusable negligence.  x x x  x x x

The complaint reads:

3.  At all times, material thereto, DONSOL and D.B. TEODORO are the registered
owners of condominium units designated as G-02 and G-03 located at the ground floor of
the SEC Building, EDSA, Mandaluyong City, their titles over said units are evidenced by
Condominium Certificate of Title Nos. 4074 and 1706 of the Registry of Deeds of Metro
Manila, District II, issued in accordance with the provisions of Republic Act No. 47261
as early as 1982 x x x;

4.  The condominium units designated as G-03 and portions of G-02 was leased, and
occupied by one Mrs. Emily Mendoza, the latter used the area as coffee shop;

5.  Before however, the lease of Mrs. Mendoza (on the premises) expired, respondent,
acting in representation of the Securities and Exchange Commission and the SEC
Building Condominium Corp. which entities he is the President and Chairman, intimated
to me (being the President and Board Chairman of DONSOL and DB TEODORO) SEC
and SBCC’s intention to lease the premises; he represented to me that the premises (G-03
and portion of G-02) will be used exclusively as SEC and SBCC’s “display” area;

6.  Although problems cropped-up to transfer Mrs. Mendoza (whose lease in the premises
has not yet expired) to other units within the building in order to accommodate the
respondent, we were able to finally convince Mrs. Mendoza to transfer to unit 208
located at the second floor (of the building) at our expense;

7.  Among the conditions of the lease which was agreed upon, are as follows:

7a.   as  to  the  period of lease – four (4) months to commence on September 1, 1996 up
to December 31, 1996;

7b.  as to the amounts of rentals – P14,000.00 every month to be shared by

SEC and SBCC at P7,000.00 each;

7c.  as to the use of the premises – exclusively for `display’;

It was further, agreed that after the expiration of the lease, the same shall be continued
until terminated by the parties;

8.  After the premises was vacated by Mrs. Mendoza, respondent caused to demolish the
structure (coffee shop) constructed by the former, and thereupon, entered, and occupied
the premises.
9.  However, despite the occupancy of the premises, respondent as Chairman and
President of SEC and SBCC did not only fail to execute the lease contract with DONSOL
and DB SECURITIES, but he also miserably failed and refused to pay the monthly
rentals of the premises without justifiable reason and despite verbal and written demands
made upon him;

10.  DONSOL and DB SECURITIES referred the respondents’ failure above-stated to

their lawyer who addressed him a letter dated April 11, 1997.  In the said letter, the
demand for him to execute the lease contract of the premises, and to pay the rentals for
the periods, October to December 1996 at P14,000.00 every month, and the rentals for
the periods,  January to March 1997 to P16,000.00 (20% increase) per month  was
reiterated x x x;

11.  However, instead of complying with the demands, respondent addressed us a letter
through our lawyer dated April 24, 1997.  In his said letter, he stated that SEC and SBCC
will not enter into such contract of lease because allegedly, the premises is a common
area.  He further stated that the appropriation of the premises to any unit owners is in
violation of the Condominium Act x x x;

12.  Amazed of the respondent’s stand (on our demands), our lawyer addressed him a
letter dated May 13, 1997 informing him of DONSOL and DB SECURITIES’s title(s)
over the premises issued by the Registry of Deeds of the Province of Rizal in accordance
with the provisions of the Condominium Acts as early as 1982.  We informed him of the
conclusiveness, and finality of our title(s), and his failure to question the same within the
prescriptive period, copy of said letter is hereto attached and made part hereof, Annex,
‘D’;

13.  Despite knowledge of the validity, conclusiveness, and finality of DONSOL and DB
SECURITIES titles over the premises, respondent with grave abuse of confidence and in
bad faith, failed and refused and continue to fail and refuse to heed and/or comply with
the demand(s) to the damage and prejudice of DONSOL and DB SECURITIES.

The complaint-affidavit was referred to the Evaluation and Preliminary Investigation

Bureau, which required petitioner to file his counter-affidavit.

Petitioner filed his counter-affidavit on October 15, 1997 where he alleged the following,
inter alia:

4.  The truth of the matter is that the area referred to as unit G-03 and portion of G-02 by
the complainant, Mr. Teodoro, and which used to be a canteen/coffee shop, is a part of
the ground floor lobby/hallway which is held in common by all the condominium unit
owners of the SEC Building.  The operator/owner of the said canteen at the ground floor
lobby, Ms. Melisa Mendoza, was repeatedly directed by the SEC and the SBCC to vacate
the premises because of the findings of the Mandaluyong City Fire Department that the
structure serving as a canteen is a fire hazard and poses serious and imminent threat to the
unit owners of the building and the public in general considering that the majority or a
substantial portion of the building is being occupied by the Securities and Exchange
Commission (SEC).  When said Mrs. Mendoza persistently refused to vacate the
premises and remove the illegal structure built therein, the herein affiant, acting in his
capacity as Chairman and President of SEC and SBCC, respectively, wrote an official
letter requiring Mrs. Mendoza to immediately vacate the premises, as the illegal structure
(canteen) built therein was a serious threat to the large number of the people or the public
who come and go to the SEC, not to mention the unit owners occupying their respective
units.  A copy of the said letter is hereto attached and marked as Annex ‘C’ and made
part hereof.

5.  The said letter clearly indicates the stand of the SEC and SBCC – that the illegal
structure which is being used as a canteen dangerously impedes the egress of the public
from the building and that the premises intended as a common area for the comfort and
safety of the public.  It would therefore be absurd and sheer illogic for herein affiant to
‘intimate’ to Mr. Teodoro, as the latter would claim, the commission of the illegal act like
the lease of the said premises, knowing that the area is part of the ground floor hallway
which is held in common by all the units owners of the SEC Building, and such
intimation is contrary to law (National Building Code), morals, good custom and public
policy.

6.  Emily S. Mendoza, in her letter to the SEC dated October 11, 1996, clearly
acknowledged that the area she occupied and used as a canteen/coffee shop is part of the
ground floor lobby/hallway, as she later on willingly complied with the order  to vacate. 
A copy of the said letter is hereto attached and marked as Annex ‘D’ and made part
hereof.

7.  There is no truth to the allegation that there was a contract of lease agreed upon
between the corporations of Mr. Teodoro as one party and the SEC and SBCC as the
other party.  This claim is a bald-face lie and manifestly false in that Mr. Teodoro is
evidently imagining a fact that does not exist, as he could not even make up his mind as
to the terms of the alleged contract of lease.  Prior to the filing of the civil complaint
before the Metropolitan Trial Court, he sent to SEC and SBCC for signing an alleged
contract of lease purportedly embodying the agreement of the parties.  The preparation of
the contract and its transmission to the SEC and SBCC was a subterfuge, a devious
scheme to lend semblance to the existence of an alleged fact which does not exist and,
per se, illegal.  A copy of the said document is hereto attached and marked as Annex ‘E’
and made part hereof.  The said document stated in paragraph 1 of the alleged terms and
conditions the monthly rental of that they call unit G-03 which is P14,000.00, to be
shared by the lessees as follows:  SEC –P9,800.00 and SBCC – P4,200.00.

8.  Compare this with paragraph 7 of the Complaint-Affidavit where it was alleged that
monthly rental agreed upon the parties was P14,000.00 to be shared by SEC and SBCC at
P7,000.00 each.  This glaring discrepancy as to the rental sharing in the alleged contract
of lease and the allegation in the complaint-affidavit filed before this Honorable Court is
an eloquent proof that there was really no agreement to lease the premises and the alleged
contract of lease is just a malicious concoction of a scheming mind.  In other words, there
is no contract to speak of in the first place.

9.  The area where the canteen used to be situated is now being used as a
passageway/lobby by the unit owners and their visitors and the public who come and
transact business with the SEC.  Needless to say, SEC and SBCC is under no obligation
to pay any rent, as it is not occupying the area in the first place, and secondly, the area is
held in common by all the unit owners of the condominium and, as aforesaid, being used
by the public.

10.  Mr. Teodoro’s claim that ‘respondent (has) misappropriated and converted to his
own personal use and benefit the amount(s) of rentals due to DONSOL and DB
SECURITIES’, hence the ‘provisions of the Revised Penal Code on Estafa x x x was
committed by respondent,’ are wild conjectures, speculations and conclusions of law
without any factual basis, as the complaint never specified the necessary relevant facts
supportive of such very  liberal inference.  Nowhere in the Complaint-Affidavit was there
any narration of facts that proves or even remotely points to any misappropriation or
conversion of the monthly rentals.  The acts constituting misappropriation or conversion
must be clearly alleged, otherwise the complaint must necessarily fall.  The refusal to
execute the alleged contract of lease, for the reasons aforestated, cannot even be remotely
construed as misappropriation or conversion such refusal was in accord with the law
and/or public policy.

11.  Sec. 3(e) of RA 3019 cited by complainant does not also apply to herein affiant. 
Affiant, in the discharge of his official functions, never gave any unwarranted benefit,
advantage or preference to any private party.  His refusal to sign the alleged contract of
lease cannot possibly be construed as bad faith or malice or even gross inexcusable
negligence on his part.  For one, affiant never misrepresented himself.  His stand, as well
as that of SEC and SBCC, is consistent from the very start – that the illegal structure at
the ground floor lobby must be removed as it is sitting on a common area and is
dangerously impeding the egress of the public from the building.  Such a structure is a
fire hazard and poses serious threat to the unit owners and the public in general.  For
another, there was really no lease agreement to speak of.

Thereafter, the Fact-Finding and Intelligence Bureau submitted a Report dated June 10,
1998 where the investigators recommended the filing of criminal charges against
petitioner for violation of Section 3 (e) of R.A. No. 3019 and administrative charges of
dishonesty, gross misconduct, abuse of authority and conduct unbecoming of a public
official.  The investigators further recommended the preventive suspension of petitioner.

On July 23, 1998, the Ombudsman issued the assailed order.

As a preliminary matter, we must note that petitioner admits he did not file with the
Office of the Ombudsman a motion for reconsideration of the assailed order, on the
assertion that “[t]here is no plain, adequate and speedy remedy in the course of law
available to petitioner against the assailed order and the remedy of a motion for
reconsideration of the order has been foreclosed and rendered inadequate and useless, in
view of the `immediately executory’ nature of said order.”

Such failure to file a motion for reconsideration is fatal.

The rule is that the special civil action of certiorari will not lie unless the aggrieved party
has no other plain, speedy and adequate remedy in the ordinary course of law. The Rules
of Procedure of the Office of the Ombudsman allows a party to file a motion for
reconsideration of an approved order or resolution within fifteen (15) days in criminal
cases, or ten (10) days in administrative cases, from notice thereof, on specified grounds.
Such is the plain, speedy and adequate remedy which petitioner should have availed of.
Verily, the motion for reconsideration is intended to afford the Ombudsman an
opportunity to re-examine his order and to correct whatever if any mistakes or errors he
may have committed, without the intervention of a higher court.

That the assailed order was stated to be “immediately executory” cannot mean that the
remedy of filing a motion for reconsideration is foreclosed to petitioner.  An order for
preventive suspension need be “immediately executory” considering that it is a
preliminary step in an administrative investigation, and considering further its purpose,
which is to prevent the respondent from using the position or office to influence
prospective witnesses or tamper with the records which may be vital in the prosecution of
the case against him.

On the substantive issues, we find no merit in petitioner’s stance.

Petitioner first argues that the Ombudsman has no jurisdiction over the subject matter of
the administrative case because the subject thereof pertains to a private intra-membership
dispute in a private condominium corporation and does not involve the exercise of a
governmental duty or  function. He asserts that “[h]e acted in representation of the
Securities and Exchange Commission as a unit owner in the SEC building and member of
SBCC, not in his capacity as Chairman of the Securities and Exchange Commission as a
government agency.”

Petitioner’s effort to make a distinction between his being the Chairman of the Securities
and Exchange Commission and the President of the SEC Building Condominium
Corporation is vacuous.  The Solicitor General points out, and we agree that:

[p]etitioner cannot make a distinction between his position as chairman of the SEC as a
government agency and chairman of the SEC but this time as condominium unit owner in
the building owned by SEC as a government agency.  The distinction is simply
hairsplitting, a sterile attempt to make a difference where there is none.  His being the
president or chairman of the SEC Building Condominium Corporation (BCC) is
inseparable and completely appendant to his title as chairman of the government agency. 
He cannot become the president of the SBCC unless he is the chairman, or at least an
officer, of the SEC.  Differently stated, his standing as SBCC president arises from or is
the necessary effect of his being the chairman of the SEC, and not because of anything
else.  Consequently, his acts or omissions as SBCC president must also be viewed in the
light of his powers and functions as SEC chairman.

It is worthy of note that in petitioner’s counter-affidavit filed with the Evaluation and
Preliminary Investigation Bureau, he  asserted that he was “acting in his capacity as
Chairman and President of SEC and SBCC, respectively, [when he] wrote an official
letter [dated October 23, 1996] requiring Ms. Mendoza to immediately vacate the
premises,” that “said letter clearly indicates the stand of the SEC and SBCC,” and further,
as a matter of defense, that “affiant, in the discharge of his official functions, never gave
any unwarranted benefit, advantage or preference to any private party.” Also, the letter
dated October 23, 1996 referred to by petitioner bore the Securities and Exchange
Commission letterhead and was signed by petitioner as “Chairman.”

The second argument raised by petitioner is that the respondent Ombudsman gravely
abused his discretion in giving due course to the administrative charges against petitioner
because he contends that the evidence on record does not support the finding of grave
misconduct and gross dishonesty.

Petitioner raises matters of defense, for example, that he acted as a member of a collegial
body, which are best ventilated in the Office of Ombudsman, the proper investigative
authority.

Furthermore, the arguments raised are not proper in a certiorari proceeding.  We cannot,
as petitioner prays, go over the evidence on record and make the determination of
whether such evidence supports the administrative charges against him.  Under Section
14 of R.A. No. 6770, otherwise known as An Act Providing for the Functional and
Structural Organization of the Office of the Ombudsman, and for Other Purposes, “[n]o
court shall hear any appeal or application for remedy against the decision or findings of
the Ombudsman, except the Supreme Court, on pure question of law.”

Petitioner next assails the respondent Ombudsman’s order placing him under preventive
suspension.

The power of the Ombudsman to place under preventive suspension a public officer or
employee pending investigation is provided for in R. A. No. 6770, thus:

Sec. 24.  Preventive Suspension – The Ombudsman or his deputy may preventively
suspend any officer or employee under his authority pending an investigation, if in his
judgment the evidence of guilt is strong, and (a) the charge against such officer or
employee involves dishonesty, oppression or grave misconduct or neglect in the
performance of duty;  (b) the charges would warrant removal from the service; or (c) the
respondent’s continued stay in office may prejudice the case filed against him.

The preventive suspension shall continue until the case is terminated by the Office of the
Ombudsman but not more than six months, without pay, except when the delay in the
disposition of the case by the Office of the Ombudsman is due to the fault, negligence or
petition of the respondent, in which case the period of such delay shall not be counted in
computing the period of suspension herein provided.

The companion provision in the Rules of Procedure of the Office of the Ombudsman
reads:

Sec. 9.  Preventive suspension.-  Pending investigation, the respondent may be

preventively suspended without pay for a period of not more than six (6) months if, in the
judgment of the Ombudsman or his proper deputy, the evidence of guilt is strong, and (a)
the charge against such officer or employee involves dishonesty, oppression or gross
misconduct, or neglect in the performance of duty; or (b) the charge would warrant
removal from the service; or (c) the respondent’s continued stay in office may prejudice
the case filed against him.

If the administrative investigation is not terminated within the period the respondent is
suspended, the respondent shall be automatically reinstated unless the delay in the
disposition of the case is due to fault, negligence, or any cause attributable to the
respondent, in which case the period of such delay shall not be counted in computing the
period of suspension.

In the assailed order, the Ombudsman concluded that “the essential elements that must
concur to impose preventive suspension of [petitioner] exist.”  He noted that “the
evidence is strong showing acts of grave misconduct and gross dishonesty on the part of
[petitioner]” and that “the offenses are serious which call for a penalty of dismissal from
the service if [petitioner] is found guilty thereof,” and further that “the preventive
suspension is urgent considering that the continued  exercise of authority on the part of
[petitioner] may affect an impartial investigation of the administrative charges.”

In support of the above conclusions, the Ombudsman made the following findings in the
assailed order:

Based on the evidence on record, it is clear that a deceptive scheme or subterfuge was
employed by Respondent [petitioner herein] in the following manner:

1) Respondent made representations with complainant Teodoro and agreed to lease the
premises being occupied by Mrs. Mendoza.  This matter was discussed during the SEC
Meeting and Meeting of the SEC Building Condominium Corporation (SBCC) (Minutes
of the Meeting pp. 017 and 035, Record) and corroborated by the Affidavits of SEC
Commissioner Edijer Martinez (p. 069) and Mr. Pacifico So (p. 071);

2) The tricky scheme is very obvious because Respondent never questioned the
complainant’s titles of ownership over the area occupied by the canteen before the
demolition and while the negotiation for the lease of the subject premises was going on. 
But after taking possession of the premises, Respondent assumed that the premises
constitute a common area not subject to ownership by any one unit owner.  That
DONSOL and D.B. TEODORO Securities, Inc., represented by complainant Donato B.
Teodoro, Sr., are the registered owners of the condominium units G-02 and G-03 is
evidenced by Condominium Certificates of Title Nos. 4074 and 1706 of the Register of
Deeds for Metro Manila, District II issued in 1986 and 1982, respectively (pp. 012 and
014);

3)  The contemplated lease agreement between Teodoro and SEC enabled Respondent
Yasay to effect his occupancy and the demolition of the canteen with little resistance
because of his assurance that the SEC and SBCC would lease the premises from
Complainant Teodoro after termination of the lease agreement with Mrs. Mendoza.  To
accommodate Respondent’s request, Mr. Teodoro convinced Mrs. Mendoza to vacate the
premises alleging that her canteen is a fire hazard.  He also threatened to demolish her
structure if she failed to dismantle her canteen (Letter of P. Yasay dated October 23,
1996, p. 060, Record)

In other  words, what constitutes the deception and dishonesty is the employment by
Respondent of an apparent scheme to take possession of the premises and effect the
demolition under the guise of entering into a lease contract with complainant Teodoro.  In
so doing, Respondent impliedly recognized ownership of the complainant but when he
had acquired possession thereof, he started claiming that the premises constituted a
common area and that the SEC and SBCC would not enter into a lease contract with
complainant because the appropriation of a common area to any unit owner was in
violation of the Condominium Act.  The apparent misconduct is aggravated by the
demolition of the canteen of Complainant’s lessee, Mrs. Mendoza, even before the
expiration of the latter’s lease agreement with Complainant.

The rule is that whether the evidence of guilt is strong, as required in Section 24 of R.A.
No. 6770, is left to the determination of the Ombudsman by taking into account the
evidence before him. In the very words of Section 24, the Ombudsman may preventively
suspend a public official pending investigation if “in his judgment” the evidence
presented before him tends to show that the official’s guilt is strong and if the further
requisites enumerated in Section 24 are present. The Court cannot substitute its own
judgment for that of the Ombudsman on this matter, absent clear showing of grave abuse
of discretion. Petitioner has failed to show such grave abuse of discretion on the part of
respondent Ombudsman.

 Petitioner also asserts that by making the findings and conclusions in the assailed order
justifying the preventive suspension, the Ombudsman was “clearly laying the basis for
petitioner’s eventual dismissal” and that he had “already prejudged the case.”

We find that there is no prejudging of the merits of the case at this stage of the
proceedings. As pointed out by the Solicitor General, an order of preventive suspension is
not a demonstration of a public official’s guilt, which can be pronounced only after trial
on the merits.
We now consider the Urgent Omnibus Motion dated October 26, 1988 filed by petitioner
seeking to enjoin respondent Ombudsman’s Extension Order dated October 23, 1998,
reproduced in its entirety hereunder:

Considering that the respondent [herein petitioner] opted for a formal hearing which
could not be terminated within the 90-day preventive suspension period, and it appearing
that the complexion of the case has not been changed, accordingly, pursuant to Section 24
of R.A. 6770 the preventive suspension of herein respondent is hereby extended for
another ninety (90) days without pay from date of expiration of the July 22, 1998 Order
of this Office, effective immediately upon receipt of this Order.

We must set aside the extension order and direct the lifting of the second ninety-day
period of preventive suspension imposed upon petitioner.

On the matter of the period of preventive suspension, Section 24 of R.A. No. 6770 and
Section 9, Rule III of the Rules of Procedure must be read together, the former being
couched in general terms, with the latter categorically providing that the respondent must
be automatically reinstated at the end of the period of preventive suspension.  The rules
of procedure were promulgated by the Office of the Ombudsman itself, in the form of
subordinate legislation,  “for the effective exercise or performance of its powers,
functions, and duties” by virtue of delegated power in Section 18 of  R.A. No. 6770.

The second paragraph of Section 9, Rule III of the Rules of Procedure of the Office of the
Ombudsman provides that “[I]f the administrative investigation is not terminated within
the period the respondent is suspended, the respondent shall automatically be reinstated
unless the delay in the disposition of the case is due to the fault, negligence, or any cause
attributable to the respondent, in which case the period of such delay shall not be counted
in computing the period of suspension.”

Petitioner reported for work on October 22, 1998, the day following the last days of the
period of his preventive suspension. At this time, the investigation of his case was still
pending before the Ombudsman’s office.  Respondent Ombudsman issued the extension
order the following day, on October 23, 1998.

The import of Section 9, Rule III of the Rules of Procedure is that the respondent must be
reinstated to work at the end of the period of suspension even if the investigation of his
case is still pending.  The period of suspension is “extended” only if respondent causes a
delay in the investigation, with the actual days delay tolling the period of suspension. 
There is in actuality, no additional or second period, but merely that the original period
seems longer because the interruptions in the investigation caused by the respondent’s
delay is “not counted in computing the period of suspension.”

The reason given by the Ombudsman for the second ninety-day period of preventive
suspension, reading from the assailed extension order, was that “petitioner opted for a
formal investigation.” 
We find that this is not the delay “due to the fault, negligence, or any cause attributable to
the respondent” contemplated by Section 9 of the Rules of Procedure. Petitioner’s having
availed of the procedure allowed by Section 5, Rule III of the Rules of Procedure can in
no way be construed as “fault” or “negligence” or even as a cause analogous to these two
causes.  Examples of such fault or cause are the respondent’s own absences from
scheduled hearings, the filing of motions for postponement and the filing of requests to
transfer venue.

It is the contention of the Solicitor General that petitioner caused the delay of the
investigation, first, when he filed the instant petition for certiorari; second, when he filed
criminal and administrative cases against the Ombudsman before his own office; third,
when he filed a motion for inhibition dated September 8, 1998 against the panel of
investigators hearing his case; and fourth, when he filed a motion to suspend proceedings
dated September 15, 1998.

We disagree. 

Petitioner’s filing of the instant petition cannot, as the Solicitor General says “weigh
down the administrative proceeding.” The rule is that the filing of an original action for
certiorari is an independent action and does not interrupt the course of the principal
action. No temporary restraining order was issued by this Court to arrest the course of the
proceedings below.

We also do not see how petitioner’s having filed administrative and criminal cases
against the Ombudsman can delay the investigation of his (petitioner’s) own
administrative case.  Though related by virtue of the dramatis personae involved, these
cases, however,  are independent of each other.

Anent the motion to suspend proceedings and motion for inhibition filed by petitioner,
these were resolved and denied by the Fact-Finding & Intelligence Board through an
Order dated October 12, 1998, within the ninety-day period of petitioner’s preventive
suspension.  We see no reason why proceedings need be halted pending resolution of
these motions.  Furthermore, resolution of these motions, certainly common to such a
body as the Office of the Ombudsman, is a matter simple enough as  not  to  entail much
research and require extensive man-hours.

Notably, the proceedings of the formal investigation is within the control of the Hearing
Panel constituted by the Administrative Adjudication Bureau of the Ombudsman’s office
to hear petitioner’s case.  The Hearing Panel had, under Section 5, Rule III of the Rules
of Procedure, at its command, processes which are aimed at expediting proceedings
before it, such as the preliminary conference – “to determine the nature of the charge,
[arrive at a] stipulation of facts, a definition of the issues, [for the] identification and
marking of exhibits, limitation of witnesses and such other matters as would expedite the
proceedings,” and the issuance of a preliminary conference order.  Consequently, any
delay from any cause whatsoever can be averted and forestalled and the course of the
proceedings scheduled judiciously.
We must add that it is axiomatic that before the respondent Ombudsman made the initial
determination as to the period of preventive suspension to be imposed upon a respondent,
he considered all pertinent matters such as the nature of the charge, the issues involved
and the evidence of the parties.  Needless to say, the Ombudsman had sufficient evidence
before him to make such a determination as to the period of preventive suspension, as he
had sufficient evidence to establish that the evidence of guilt was strong as to warrant the
issuance itself of the order for preventive suspension.

CONSIDERING the foregoing, the Court RESOLVED to:

(a) DISMISS the petition insofar as it assails the Order dated July 22, 1998 of the
Ombudsman in OMB-ADM-0-98-0365 and prays for the dismissal of the administrative
case against petitioner Perfecto R. Yasay, Jr., on the ground that no grave abuse of
discretion was committed by respondent Ombudsman; and

(b) SET ASIDE the Extension Order dated October 23, 1998 thereby lifting the
preventive suspension imposed upon petitioner by virtue of said order.  This directive is
IMMEDIATELY EXECUTORY.

SO ORDERED.

Romero (Chairman), Purisima, and Pardo, JJ., concur.

Filed July 28, 1998.

Petition,  pp. 2,  and 14.

Id., at  7.

Ibid.

Ibid.

Annex “A-3” of the Petition.

Annex “A-8” of the Petition.

Annex “A-1” of the Petition.

Annex “A” of the Petition.

Petition, p. 3.

Tan v. The Honorable Sandiganbayan (Third Division), G.R. No. 128764, July 10, 1998
citing cases.
Administrative Order No. 07 dated April 10, 1990.

Section 7, Rule II and Section 8, Rule III of the Rules of Procedure.

See Philippine National Construction Corporation (PNCC) v. National Labor Relations

Commission, 245 SCRA 668 (1995).

Philippine National Construction Corporation, supra; Tan, Jr. v. The Honorable

Sandiganbayan, G.R. No. 128764, July 10, 1998; Zapata v. National Labor Relations
Commission, 175 SCRA 56 (1989); Labudahon v. National Labor Relations Commission,
251 SCRA 129 (1995); Darama v. National Labor Relations Commission, 236 SCRA 280
(1994)/

Alonzo v. Capulong, 244 SCRA 80 (1995).

Ibid.; Pimentel v. Gartichorena, 208 SCRA 122 (1992); Lacson v. Roque, 92 Phil. 450
(1953).

Petition, p. 7.

Ibid.

Comment, pp. 18-19.

Paragraph 4.

Paragraph 5.

Id., at  11.

Annex “A-11” of the Petition.

Petition, p. 13.

Section 15 of R.A. No. 6770; See Deloso v. Domingo, 191 SCRA 545 (1990).

  Buenaseda v. Flavier, 226 SCRA 645 (1993); Lastimosa v. Vasquez, 243 SCRA 497
(1995).

  See Castillo-Co v. Barbers, G.R. No. 129952, June 16, 1998.

  Petition, p. 12.

  Comment, p. 2.

  Urgent Omnibus Motion, p. 2.

  See the following similar provisions—

Section 27, Rule XIV of the Omnibus Rules Implementing Rule V of Executive
Order No. 292 and Other Pertinent Civil Service Laws provides thus:

When the administrative case against a non-presidential officer or employee under

preventive suspension is not finally decided by the disciplining authority within the
period of ninety (90) days after the date of his preventive suspension, he shall be
automatically reinstated in the service:  Provided, That when the delay in the disposition
of the case is due to the fault, negligence or petition of the respondent, the period of delay
should not be included in the counting of the ninety (90) calendar day-period of
preventive suspension.

               Section 42 of P.D. No. 807, otherwise known as the Civil Service Decree of the
Philippines provides thus:

Lifting of Preventive Suspension Pending Administrative Investigation. – When

the administrative case against the officer or employee under preventive suspension is not
finally decided by the disciplining authority within the period of ninety (90) days after the
date of suspension of the respondent who is not a presidential appointee, the respondent
shall be automatically reinstated in the service:  Provided, That when the delay in the
disposition of the case is due to the fault, negligence or petition of the respondent, the
period of delay shall not be counted in computing the period of suspension herein
provided.

See also Layug v. Quisumbing, 182 SCRA 46 (1990).

  Layug, supra.

  Comment on the Urgent Omnibus Motion, p.6.

  Reyes v. Commission on Elections, 254 SCRA 514 (1996) citing Palomares v. Jimenez,
90 Phil. 773 (1952).

  Id..

SECOND DIVISION

[G.R. No. 126594.  September 5, 1997]

IMELDA MARCOS, petitioner, vs., The Honorable COURT OF APPEALS; Honorable

Judge GUILLERMO L. LOJA, SR., the Presiding Judge of Branch 26 of the RTC at
Manila; and the PEOPLE OF THE PHILIPPINES, respondents.

RESOLUTION
REGALADO, J.:

In a petition for review on certiorari filed on November 5, 1996, petitioner Imelda R.

Marcos prays this Court to set aside the decision of respondent Court of Appeals
promulgated in CA-G.R. SP No. 35719 on May 23, 1996, as well as its resolution of
September 27, 1996 denying her motion for the reconsideration of the judgment in said
case.

Preliminary, her motion for extension of time to file this petition was denied for non-
compliance with Revised Circular No. 1-88 and Circular No. 19-91 because the affidavit
of service, although otherwise sufficient in form and substance, was not signed by the
affiant, and the registry receipt proving service of a copy of said motion to the Solicitor
General was not attached thereto.  Hence, the petition subsequently filed by her was
dismissed for having been filed out of time in this Court’s resolution of November 27,
1996.

Petitioner then moved for reconsideration, explaining the cause for the procedural lapses
and contending that, on the merits, the trial court had no jurisdiction over the offenses
charged; that no offenses actually charged or that the facts alleged do not constitute the
imputed offenses; and, consequently, that the court a quo gravely abused its discretion in
denying the motion to quash.

Considering the number of criminal cases filed against petitioner, relief from which is
sought in the petition at bar and the issues wherein may possibly be raised again in other
cases of a similar nature, the Court resolved on February 24, 1997 to require the Solicitor
General to comment thereon, in order that the adjudication of petitioner’s plaints may not
go off only on procedural points.  In due time, such comment was filed, albeit in
abbreviated form, the Solicitor General correctly pointing out that all the substantive
issues now being raised before us had also been extensively argued in and resolved by
respondent appellate court.

Indeed, an overall review of the allegations in the present petition reveals that the same
are merely a rehash of those already submitted to respondent court and that this petition is
apparently a reprise of the certiorari petition in CA-G.R. SP No. 35719 filed in the Court
of Appeals.

For facility of presentation, therefore, we need merely to reproduce herein the findings in
the assailed decision of respondent appellate court, which are fully sustained by the
records, excluding therefrom those cases pertaining to CA-G.R. SP No. 35928 (except
when involved in the narration of the antecedents of this case) which was jointly resolved
by it but from which no appeals or other recourse was taken by the petitioners therein.

We accordingly give credit to respondent court and adopt its recital of the antecedents of
the instant petition, to wit:
In CA-G.R. SP No. 35719, petitioner Marcos assails the Order dated June 9, 1994 which
denied her Motion to Quash the eight (8) informations filed against her in the
consolidated Criminal Case Nos. 91-101732 to 91-101739 and the other fourteen (14)
informations filed against her, Benedicto and Rivera in the consolidated Criminal Case
Nos. 91-101879 to 91-101892, and Order dated August 30, 1994 which denied her
Motion for Reconsideration.

xxx

On October 21, 1983, pursuant to Monetary Board Resolution Nos. 1632 and 1718 dated
September 30, 1983 and October 21, 1983, respectively, the Central Bank (CB) of the
Philippines (now Bangko Sentral ng Pilipinas) issued Circular No. 960. The circular,
which consolidated the various rules and regulations promulgated by the CB concerning
foreign exchange non-trade transactions including those on gold and silver, prohibits in
its Section 4 residents, firms, association, or corporations from maintaining foreign
exchange accounts abroad without prior authorization from the CB or without being
permitted by CB regulations; and requires in Section 10 thereof all residents who
habitually earn or receive foreign exchange from invisibles locally or from abroad to
submit reports of such earnings or receipts in prescribed form with the proper CB
department and to register with the Foreign Exchange Department of the CB within 90
days from October 21, 1983.  Violation of the provisions of the circular is punishable as a
criminal offense under Section 34 of R.A. No.265, as amended (the Central Bank Act).

On December 20, 1991 or nearly six years after the 1986 EDSA Revolution which
toppled the Marcos regime, Marcos was, for allegedly opening and maintaining foreign
exchange accounts abroad on various dates from 1968 to 1991 without prior authorization
from the CB or otherwise allowed by CB regulations, charged with violating Section 4 of
CB Circular 960 before the RTC of Manila in eight (8) essentially identically worded
informations docketed as Criminal Case Nos. 91-101732 to 101739, one of which reads
as follows:

“That from 1968 to June 6, 1991, both dates inclusive, the above-named accused, in
conspiracy with her late husband, then President Ferdinand E. Marcos, while both
residing in Malacañang Palace in the City of Manila, Philippines, and within the
jurisdiction of this Honorable Court did, then and there wilfully, unlawfully and
feloniously open and maintain foreign exchange accounts abroad, particularly in Swiss
Bank Corporation (SBC) in Geneva, Switzerland, in the name of Maler Establishment,
later transformed into Maler Foundation, which was organized by their dummies,
nominees, fronts, agents or duly appointed administrators among them Jean Louis Sunier
who received instructions from the accused and her husband who signed with their alias
‘JOHN LEWIS’ in order to maintain two accounts, one of which is Account No. 98929
NY under Maler II with a balance of SF 16,195,258.00, without prior permission from
the Central Bank of the Philippines, and such act of maintaining foreign account abroad
was not permitted under Central Bank regulations.”

- (Rollo, CA-G.R. SP No.35719, pp. 45-46)

The wordings of the other seven (7) informations differed only in the dates of
commission of the offense charged, the name/s of the dummy/dummies, the balance of
the foreign exchange accounts maintained abroad and the name/s of the foreign bank/s
where such accounts were maintained.

Likewise, for allegedly failing to submit a report of their foreign exchange earnings from
abroad and/or to register with the Foreign Exchange Department of the CB within the
period mandated by Section 10 of CB Circular No. 960, Marcos, Benedicto and Rivera
were similarly indicted on December 27, 1991 for violation of Section 10, CB Circular
No. 960 in relation to Section 34 of the Central Bank Act in five (5) informations filed
with the RTC of Manila which were docketed as Criminal Case Nos. 91-101879 – 91-
101883.  On the same date, nine (9) more informations essentially charging the same
offense were filed with the RTC of Manila, but this time only against Marcos and
Benedicto, which were docketed as Criminal Case Nos. 91-101884 to 91-101892.  One of
the informations reads:

“That from September 21, 1983 up to December 26, 1985, both dates inclusive, and for
sometime thereafter, all accused, conspiring and confederating with one another and with
the late President Ferdinand E. Marcos, all residing and/or doing business in Manila,
Philippines, within the jurisdiction of this Honorable Court, and assisted by their foreign
agent or attorney-in-fact Stephen G. Cattaui, did then and there wilfully, unlawfully and
feloniously fail to submit reports in the prescribed form and/or register with the Foreign
Exchange Department of the Central Bank within 90 days from October 21, 1983 as
required of them being residents habitually/customarily earning, acquiring/receiving
foreign exchange from whatever source or from invisibles locally or from abroad, despite
the fact that they actually earned interests regularly for their investment of FIFTEEN
MILLION ($15-million) DOLLARS, U.S. Currency, in Philippine-issued dollar-
denominated treasury notes with floating rates and in bearer form, in the name of Banque
de Paris et des Pays-Bas (also known as Banque Paribas) in Geneva, Switzerland but
which was transferred on May 17, 1984 to Lombard, Odier et Cie, a bank also in Geneva,
for the account of COGES 00777 being managed by Mr. Stephane Cattaui for the
marcoses who also arranged the said investment of $15-million through respondents
Roberto S. Benedicto and Hector T. Rivera by using the Royal Traders Bank in Manila as
the custodian of the said dollar-denominated treasury notes, which earned, acquired or
received for the accused Imelda Romualdez Marcos and her late husband an interest of
$13,229.16 for delay (December 16-19, 1995) plus redemption of $15-million which was
remitted to Lombard, Odier et Cie through Chicago International Banking Corporation in
New York, United States of America, for the credit of said Account COGES 00777 of the
Marcoses for further investment outside the Philippines without first complying with the
reporting/registering requirements of the Central Bank”.

- (Rollo, CA-G.R. SP No. 35928, pp. 45-46)

On January 3, 1992, eleven (11) more informations for alleged violation of the aforesaid
Section 10, CB Circular 960 were filed against Marcos and Benedicto with the same
court which were docketed as Criminal Case Nos. 92-101959 to 92-101969.
 xxx

All these thirty-three (33) cases were consolidated before Branch 26 of the RTC of
Manila presided by herein public respondent Judge Loja, Sr.

Marcos was arraigned on February 12, 1992 while Benedicto and Rivera were arraigned
on February 28, 1994.

During the pendency of these cases, CB Circular No. 1318 (Revised Manual of Rules and
Regulations Governing Non-Trade Foreign Exchange Transactions) dated January 3,
1992 and CB Circular No. 1353 (Further Liberalizing Foreign Exchange Regulations)
dated August 24, 1992 were issued by the CB. CB Circular No. 1318 repeals insofar as
inconsistent therewith all existing provisions of CB Circular No. 960, among other
circulars, while CB Circular No. 1353 repeals all the provisions of Chapter X of CB
Circular No. 1318 only insofar as they are inconsistent therewith.  Both circulars,
however, contain a saving clause excepting from the circular pending criminal actions
involving violations of CB Circular No. 960 and CB Circular No. 1318.  (Italics supplied)

Invoking the abovementioned repeal as one of her grounds, Marcos filed a Motion to
Quash on May 23, 1994 seeking the dismissal of the cases or the quashal of the
informations filed against her in Criminal Case Nos. 91-101732 to 91-101739 and 91-
101879 to 91-101892.  Respondent People of the Philippines opposed the same on June
2, 1994.

Petitioners Marcos’ aforesaid motion was denied by the trial court in an order dated June
9, 1994 and her motion for reconsideration was likewise repudiated in an order of August
30, 1994.  She then filed a petition for certiorari and prohibition with respondent Court of
Appeals ascribing abuse of discretion on the part of respondent trial judge.  What
transpired there is best taken from the account thereof in the following portion of the
impugned decision of respondent appellate court.

In CA-G.R. SP No. 35719, Marcos relied on two grounds in taking respondent court to
task, to wit: (1) respondent court has no jurisdiction over the offenses charged; and (2)
respondent court acted with grave abuse of discretion amounting to lack of jurisdiction in
denying her Motion to Quash.

Anent the first ground, Marcos argues that respondent court has no jurisdiction over the
cases as the informations clearly allege that the acts complained of were committed
outside Philippine territory, and that her constitutional right to equal protection of the
laws was violated, the saving clause contained in CB Circular No. 1318 which repealed
CB Circular No. 960 being patently discriminatory as it was purposedly designed to
preserve the criminal cases lodged against her and her co-accused.

As to the second ground, Marcos argues that the facts alleged in the informations, even if
true, do not constitute offenses and that in any event the offenses charged have
“disappeared” due to repeal.
Marcos asseverates that the saving clause (Section 111, Chapter X) of CB Circular No.
1318 is invalid since the Monetary Board has no authority to except therefrom pending
criminal prosecutions, the power being purely legislative and is not expressly granted in
its charter; that even assuming ad arguendo that the Monetary Board has the power, the
same  is still invalid for being an encroachment and an invalid delegation thereof, the
power to declare what constitutes a crime and how it should be punished being vested
solely and exclusively in the legislature; that even further assuming that there is no
invalid delegation of power to incorporate the saving clause, it is still invalid for being
ultra vires as it is not germane to the object and purpose of the Central Bank Act which is
to stabilize the monetary system; and in any event, even if the power is unquestioned, the
clause is still invalid for being violative of the equal protection of (t)he law clause of the
constitution, it having been designed solely for the purpose of preserving the criminal
cases against her and her co-accused.

As regards the assertion that the facts alleged in the informations do not constitute an
offense, Marcos contends that since the allegations unequivocally state that foreign
foundations or trust, not the Marcoses, opened and maintained the subject Swiss accounts
and earned and received the interest therefrom, she has no duty to report any earnings and
if at all, she was a mere beneficiary of the foreign foundations or trusts; and that the acts
having been committed abroad, they are beyond the jurisdiction of respondent court.

xxx

Petitioners do not dispute the validity of CB Circular No. 960, the law under which they
are being prosecuted, and of CB Circular Nos. 1318 and 1353 which they allege repealed
CB Circular No. 960, nor do they challenge the authority of the Monetary Board to issue
them.

Petitioners likewise do not dispute that violation of Section 4 of CB Circular No. 960, as
amended, which provides:

“SEC. 4. Foreign exchange retention abroad.  No person shall promote, finance, enter
into or participate in any foreign exchange transactions where the foreign exchange
involved is paid, retained, delivered or transferred abroad while the corresponding pesos
are paid for or are received in the Philippines, except when specifically authorized by the
Central Bank or otherwise allowed under Central Bank regulations.

Residents, firms, associations, or corporations unless otherwise permitted under CB

regulations are prohibited from maintaining foreign exchange accounts abroad.”

Or of section 10 thereof, the pertinent portions of which provide:

“SEC. 10. Reports of foreign exchange earners.  All resident persons who
habitually/customarily earn, acquire, or receive foreign exchange from invisibles locally
or from abroad, shall submit reports in the prescribed form of such earnings, acquisition
or receipts with the appropriate CB department.  Those required to submit reports under
this section shall include, but need not necessarily be limited to the following:

xxx      xxx      xxx

Residents, firms or establishments habitually/customarily earning, acquiring or receiving

foreign exchange from sales of merchandise, services or from whatever source shall
register with the Foreign Exchange Department of the Central Bank within ninety (90)
days from the date of this Circular.”

is punishable as a criminal offense under Section 34 of the Central Bank Act the pertinent
portion of which provides:

“SEC. 34 Proceedings upon violation of laws and regulations. -- Whenever any person or
entity wilfully violates this Act or any order, instruction, rule or regulation issued by the
Monetary Board, the person or persons responsible for such violation shall be punished
by a fine of not more than twenty thousand pesos and by imprisonment of not more than
five years.”

In respondent Court of Appeals, however, it was petitioner’s insistent position that

violations of CB Circular No. 960, specifically Sections 4 and 10 thereof, ceased to be
punishable upon the issuance in 1992 of CB Circular Nos. 1318 and 1353, on the theory
that the latter circulars completely repealed the former, and that the reservations made in
each of the repealing clauses of the latter circulars are invalid.  She now reiterates the
same contentions before us.  Respondent appellate court rejected her thesis on this score;
we are sufficiently persuaded to do likewise.

The saving clause in CB Circular No. 1318, which petitioner questions, provides:

SEC. 111.  Repealing Clause.  All existing provisions of Circulars 363, 960 and 1028,
including amendments thereto, with the exception of the second paragraph of Section 68
of Circular 1028, as well as all other existing Central Bank rules and regulations or parts
thereof, which are inconsistent with or contrary to the provisions of this Circular, are
hereby repealed or modified accordingly:  Provided, however, that regulations,
violations of which are the subject of pending actions or investigations, shall not be
considered repealed insofar as such pending actions or investigations are concerned, it
being understood that as to such pending actions or investigations, the regulations
existing at the time the cause of action accrued shall govern (Italics ours).

The assailed saving clause in CB Circular No. 1353 is as follows:

SEC. 16. Final Provisions of CB Circular No. 1318.  All the provisions in Chapter X of
CB Circular No. 1318 insofar as they are not inconsistent with, or contrary to the
provisions of this circular, shall remain in full force and effect:  Provided, however, that
any regulation on non-trade foreign exchange transactions which has been repealed,
amended or modified by this Circular, violations of which are the subject of pending
actions or investigations, shall not be considered repealed insofar as such pending
actions or investigations are concerned, it being understood that as to such pending
actions or investigations, the regulations existing at the time of the cause of action
accrued shall govern (Italics also supplied).

We agree with respondent appellate court that such amendments and saving clauses are
valid and were authorized enactments under a delegated power of the Monetary Board.
Section 14 of the Central Bank Act expressly grants the Monetary Board the power to
“prepare and issue rules and regulations necessary for the effective discharge of the
responsibilities and exercise of the powers assigned to the Monetary Board and to the
Central Bank under this Act,” and to report the same thereafter to the President and
Congress.  In fact, this power of subordinate legislation and its validity was admitted by
petitioner in the respondent appellate court.

It cannot be plausibly claimed that there was undue delegation of legislative power in this
particular instance since it was the Central Bank itself which defined the offense and
provided the penalty therefor.  As respondent Court of Appeals points out, administrative
bodies have the authority to issue administrative regulations which are penal in nature
where the law itself makes the violation of the administrative regulation punishable and
provides for its penalty. This is still the rule on the matter and, in the instant case, the
Central Bank Act defined the offense and its penalty while the questioned circular merely
spelled out the details of the offense. Ironically, petitioner concedes the greater power of
the Board to repeal CB Circular No. 960 through CB Circular No. 1318, yet she
inexplicably questions the lesser and incidental power to provide for saving clauses
therein.

Petitioner’s argument that the saving clauses are not germane to the purposes of the
Central Bank Act, and consequently ultra vires, has been roundly confuted by respondent
Court of Appeals.  If, as she claims, one of the objectives of that law is to stabilize the
monetary system, that is precisely why Congress punished as criminal offenses the
violations of the issuance of the Monetary Board necessary for the effective discharged of
its responsibilities, and to carry out which the Board deemed it necessary to provide for
the challenged saving clauses.  Obviously, these saving clauses were dictated by the need
to continue the prosecution of those who had already committed acts of monetary
destabilization.  The opposite view posited by petitioner would result in an absurdity.

Her lamentations that the aforementioned provisions are discriminatory because they are
aimed at her and her co-accused do not assume the dignity of a legal argument since they
are unwarranted conjectures belied by even the text of the circulars alone.  Hence, as
respondent appellate court correctly concludes, the foregoing facts clearly disprove
petitioner’s claim that her constitutional right to equal protection of the law was violated. 
Should she nonetheless desire to pursue such objection, she may always adduce
additional evidence at the trial of these cases since that is the proper stage therefor, and
not at their present posture.
Lastly, there is no need for us to tarry on petitioner’s hypothesis that the acts charged in
the questioned informations were committed by foreign agents or juridical persons
outside Philippine territory and that, she being supposedly a mere beneficiary, this
scenario divests the trial court of jurisdiction over her insofar as the violations resulting
from such acts abroad are concerned.  This is too simplistic an argument because it would
have the Court assume that she only had a passive participation thereon or, if she is to be
believed, none at all.

That is why respondent Court of Appeals decided to just graciously quote, in refutation of
such imposition on judicial credulity, the perceptively succinct observation of respondent
trial judge, to wit:

x x x In no uncertain terms, the corresponding informations clearly state that the accused,
in conspiracy with the late president x x x opened and maintained foreign accounts
abroad in the name of foundations organized by their dummies.  The same observation
holds true in Criminal Cases Nos. 91-101879-92 where the accused and her co-accused
are charged (with) violation of section 10, CB Circular 960.  As easily gleaned therefrom,
(the) criminal informations are not only sufficient but clear in alleging that the accused
earned foreign exchange without proper reporting therof although camouflaged in the
name of foundations.

x         x         x

x  x  x accused’s contention that the acts charged were committed by persons or agents
who managed said foundation outside the country and therefore beyond the jurisdiction
of this court is misplaced argument.  As already stated and discussed, it is the accused
who (was alleged to have) maintained foreign accounts and earned foreign exchange
abroad camouflaged in the name of foreign agents and/or foundations but neither
obtained authority to do so nor reported the earnings to the Central Bank. (Words in
parenthesis supplied).

All the way from the trial court, through the Court of Appeals, and now before this court,
petitioner has insistently repeated the selfsame issues and arguments for the quashal of
the charges against her, with the result that the same have been deep-frozen since 1991. 
Inevitably, the three-tiered adjudicature to which they have been subjected has merely
resulted in reiterations by the parties of their set issues, congealed arguments and
invariable conclusions.

It is time then to thaw those cases from the frigidity of their present status so that
petitioner may have the opportunity to prove her defenses on the merits, instead of having
those cases indefinitely sidelined by legal strategy contingent on expectancies.  For, in
the present posture thereof, it does not appear that respondent Court of Appeals has
committed any abuse of discretion, much less of a grave or arbitrary nature, as would call
for the extraordinary writ of certiorari.  We accordingly uphold the denial of petitioner’s
motion to quash so that the interlocutory proceedings may now move on to trial wherein
she can present such evidence as may possibly place her protestations in another light as
she claims.

WHEREFORE, the petition at bar is DENIED and the challenged judgment of

respondent Court of Appeals is AFFIRMED, with costs against petitioner.

SO ORDERED.

Romero, Mendoza, and Torres, Jr., JJ., concur.

Puno, J., Please see separate opinion.

Both per Carpio Morales, J., with the concurrence of De Pano, Jr. and Martin, Jr., JJ.,
together with CA-G.R. SP No. 35929, “Benedicto, et al. vs. Loja, Sr., etc., et al.,” which
was consolidated therewith; Rollo, 42-66, 67-68.

Rollo, 230.

Rollo, 43-48.

Ibid., 49-54.

Rollo, CA-G.R. SP No. 35719, 23.

Citing U.S. vs. Barrias, 11 Phil. 327 (1908).

Rollo, CA-G.R. SP No. 35719, 127-128.

EN BANC

[G.R. No. 102782.  December 11, 1991]

THE SOLICITOR GENERAL, RODOLFO A. MALAPIRA, STEPHEN A.

MONSANTO, DAN R. CALDERON, and GRANDY N. TRIESTE, petitioners, vs. THE
METROPOLITAN MANILA AUTHORITY and the MUNICIPALITY OF
MANDALUYONG, respondents.

DECISION

CRUZ, J.:

In Metropolitan Traffic Command, West Traffic District v. Hon. Arsenio M. Gonong,

G.R. No. 91023, promulgated on July 13, 1990, the Court held that the confiscation of the
license plates of motor vehicles for traffic violations was not among the sanctions that
could be imposed by the Metro Manila Commission under PD 1605 and was permitted
only under the conditions laid down by LOI 43 in the case of stalled vehicles obstructing
the public streets.  It was there also observed that even the confiscation of driver’s
licenses for traffic violations was not directly prescribed by the decree nor was it allowed
by the decree to be imposed by the Commission.  No motion for reconsideration of that
decision was submitted.  The judgment became final and executory on August 6, 1990,
and it was duly entered in the Book of Entries of Judgments on July 13, 1990.

Subsequently, the following developments transpired:

In a letter dated October 17, 1990, Rodolfo A. Malapira complained to the Court that
when he was stopped for an alleged traffic violation, his driver’s license was confiscated
by Traffic Enforcer Angel de los Reyes in Quezon City.

On December 18, 1990, the Caloocan-Manila Drivers and Operators Association sent a
letter to the Court asking who should enforce the decision in the above-mentioned case,
whether they could seek damages for confiscation of their driver’s licenses, and where
they should file their complaints.

Another letter was received by the Court on February 14, 1991, from Stephen L.
Monsanto, complaining against the confiscation of his driver’s license by Traffic
Enforcer A.D. Martinez for an alleged traffic violation in Mandaluyong.

This was followed by a letter-complaint filed on March 7, 1991, from Dan R. Calderon, a
lawyer, also for confiscation of his driver’s license by Pat. R.J. Tano-an of the Makati
Police Force.

Still another complaint was received by the Court dated April 29, 1991, this time from
Grandy N. Trieste, another lawyer, who also protested the removal of his front license
plate by E. Ramos of the Metropolitan Manila Authority-Traffic Operations Center and
the confiscation of his driver’s license by Pat. A.V. Emmanuel of the Metropolitan Police
Command-Western Police District.

Required to submit a Comment on the complaint against him, Allan D. Martinez invoked
Ordinance No. 7, Series of 1988, of Mandaluyong, authorizing the confiscation of
driver’s licenses and the removal of license plates of motor vehicles for traffic violations.

For his part, A.V. Emmanuel said he confiscated Trieste’s driver’s license pursuant to a
memorandum dated February 27, 1991, from the District Commander of the Western
Traffic District of the Philippine National Police, authorizing such sanction under certain
conditions.

Director General Cesar P. Nazareno of the Philippine National Police assured the Court
in his own Comment that his office had never authorized the removal of the license plates
of illegally parked vehicles and that he had in fact directed full compliance with the
above-mentioned decision in a memorandum, copy of which he attached entitled
Removal of Motor Vehicle License Plates and dated February 28, 1991.
Pat. R.J. Tano-an, on the other hand, argued that the Gonong decision prohibited only the
removal of license plates and not the confiscation of driver’s licenses.

On May 24, 1990, the Metropolitan Manila Authority issued Ordinance No. 11, Series of
1991, authorizing itself “to detach the license plate/tow and impound
attended/unattended/abandoned motor vehicles illegally parked or obstructing the flow of
traffic in Metro Manila.”

On July 2, 1991, the Court issued the following resolution:

The attention of the Court has been called to the enactment by the Metropolitan Manila
Authority of Ordinance No. 11, Series of 1991, providing inter alia that:

Section 2.  Authority to Detach Plate/Tow and Impound.  The Metropolitan Manila
Authority, thru the Traffic Operations Center, is authorized to detach the license
plate/tow and impound attended/unattended/abandoned motor vehicles illegally parked or
obstructing the flow of traffic in Metro Manila.

The provision appears to be in conflict with the decision of the Court in the case
at bar (as reported in 187 SCRA 432), where it was held that the license plates of
motor vehicles may not be detached except only under the conditions prescribed
in LOI 43.  Additionally, the Court has received several complaints against the
confiscation by police authorities of driver’s licenses for alleged traffic violations,
which sanction is, according to the said decision, not among those that may be
imposed under PD 1605.

To clarify these matters for the proper guidance of law-enforcement officers and
motorists, the Court Resolved to require the Metropolitan Manila Authority and
the Solicitor General to submit, within ten (10) days from notice hereof, separate
COMMENTS on such sanctions in light of the said decision.

In its Comment, the Metropolitan Manila Authority defended the said ordinance
on the ground that it was adopted pursuant to the powers conferred upon it by EO 392.  It
particularly cited Section 2 thereof vesting in the Council (its governing body) the
responsibility among others of:

1.  Formulation of policies on the delivery of basic services requiring

coordination or consolidation for the Authority; and

2.  Promulgation of resolutions and other issuances of metropolitan wide

application, approval of a code of basic services requiring coordination, and
exercise of its rule-making powers.  (Emphasis supplied)

The Authority argued that there was no conflict between the decision and the ordinance
because the latter was meant to supplement and not supplant the latter.  It stressed that the
decision itself said that the confiscation of license plates was invalid in the absence of a
valid law or ordinance, which was why Ordinance No. 11 was enacted.  The Authority
also pointed out that the ordinance could not be attacked collaterally but only in a direct
action challenging its validity.

For his part, the Solicitor General expressed the view that the ordinance was null and
void because it represented an invalid exercise of a delegated legislative power.  The flaw
in the measure was that it violated existing law, specifically PD 1605, which does not
permit, and so impliedly prohibits, the removal of license plates and the confiscation of
driver’s licenses for traffic violations in Metropolitan Manila.  He made no mention,
however, of the alleged impropriety of examining the said ordinance in the absence of a
formal challenge to its validity.

On October 24, 1991, the Office of the Solicitor General submitted a motion for the early
resolution of the questioned sanctions, to remove once and for all the uncertainty of their
validity.  A similar motion was filed by the Metropolitan Manila Authority, which
reiterated its contention that the incidents in question should be dismissed because there
was no actual case or controversy before the Court.

The Metropolitan Manila Authority is correct in invoking the doctrine that the validity of
a law or act can be challenged only in a direct action and not collaterally.  That is indeed
the settled principle.  However, that rule is not inflexible and may be relaxed by the Court
under exceptional circumstances, such as those in the present controversy.

The Solicitor General notes that the practices complained of have created a great deal of
confusion among motorists about the state of the law on the questioned sanctions.  More
importantly, he maintains that these sanctions are illegal, being violative of law and the
Gonong decision, and should therefore be stopped.  We also note the disturbing report
that one policeman who confiscated a driver’s license dismissed the Gonong decision as
“wrong” and said the police would not stop their “habit” unless they received orders
“from the top.” Regrettably, not one of the complainants has filed a formal challenge to
the ordinances, including Monsanto and Trieste, who are lawyers and could have been
more assertive of their rights.

Given these considerations, the Court feels it must address the problem squarely
presented to it and decide it as categorically rather than dismiss the complaints on the
basis of the technical objection raised and thus, through its inaction, allow them to fester.

The step we now take is not without legal authority or judicial precedent. 
Unquestionably, the Court has the power to suspend procedural rules in the exercise of its
inherent power, as expressly recognized in the Constitution, to promulgate rules
concerning “pleading, practice and procedure in all courts.” In proper cases, procedural
rules may be relaxed or suspended in the interest of substantial justice, which otherwise
may be miscarried because of a rigid and formalistic adherence to such rules.

The Court has taken this step in a number of such cases, notably Araneta v. Dinglasan,
where Justice Tuason justified the deviation on the ground that “the transcendental
importance to the public of these cases demands that they be settled promptly and
definitely, brushing aside, if we must, technicalities of procedure.”

We have made similar rulings in other cases, thus:

Be it remembered that rules of procedure are but mere tools designed to facilitate the
attainment of justice.  Their strict and rigid application, which would result in
technicalities that tend to frustrate rather than promote substantial justice, must always be
avoided.  (Aznar III v. Bernad, G.R. No. 81190, May 9, 1988, 161 SCRA 276.) Time and
again, this Court has suspended its own rules and excepted a particular case from their
operation whenever the higher interests of justice so require.  In the instant petition, we
forego a lengthy disquisition of the proper procedure that should have been taken by the
parties involved and proceed directly to the merits of the case.  (Piczon v. Court of
Appeals, 190 SCRA 31.)

Three of the cases were consolidated for argument and the other two were
argued separately on other dates.  Inasmuch as all of them present the same
fundamental question which, in our view, is decisive, they will be disposed of
jointly.  For the same reason we will pass up the objection to the personality or
sufficiency of interest of the petitioners in case G.R. No. L-3054 and case G.R.
No. L-3056 and the question whether prohibition lies in cases G.R. Nos. L-2044
and L-2756.  No practical benefit can be gained from a discussion of these
procedural matters, since the decision in the cases wherein the petitioners’ cause
of action or the propriety of the procedure followed is not in dispute, will be
controlling authority on the others.  Above all, the transcendental importance to
the public of these cases demands that they be settled promptly and definitely,
brushing aside, if we must, technicalities of procedure.  (Avelino v. Cuenco, G.R.
No. L-2821 cited in Araneta v. Dinglasan, 84 Phil. 368.)

Accordingly, the Court will consider the motion to resolve filed by the Solicitor
General a petition for prohibition against the enforcement of Ordinance No. 11-Series of
1991, of the Metropolitan Manila Authority, and Ordinance No. 7, Series of 1988, of the
Municipality of Mandaluyong.  Stephen A. Monsanto, Rodolfo A. Malapira, Dan R.
Calderon, and Grandy N. Trieste are considered co-petitioners and the Metropolitan
Manila Authority and the Municipality of Mandaluyong are hereby impleaded as
respondents.  This petition is docketed as G.R. No. 102782.  The comments already
submitted are duly noted and shall be taken into account by the Court in the resolution of
the substantive issues raised.

It is stressed that this action is not intended to disparage procedural rules, which the Court
has recognized often enough as necessary to the orderly administration of justice.  If we
are relaxing them in this particular case, it is because of the failure of the proper parties to
file the appropriate proceeding against the acts complained of, and the necessity of
resolving, in the interest of the public, the important substantive issues raised.

Now to the merits.

The Metro Manila Authority sustains Ordinance No. 11-Series of 1991, under the specific
authority conferred upon it by EO 392, while Ordinance No. 7, Series of 1988, is justified
on the basis of the General Welfare Clause embodied in the Local Government Code. It is
not disputed that both measures were enacted to promote the comfort and convenience of
the public and to alleviate the worsening traffic problems in Metropolitan Manila due in
large part to violations of traffic rules.

The Court holds that there is a valid delegation of legislative power to promulgate such
measures, it appearing that the requisites of such delegation are present.  These requisites
are:  1) the completeness of the statute making the delegation; and 2) the presence of a
sufficient standard.

Under the first requirement, the statute must leave the legislature complete in all its terms
and provisions such that all the delegate will have to do when the statute reaches it is to
implement it.  What only can be delegated is not the discretion to determine what the law
shall be but the discretion to determine how the law shall be enforced.  This has been
done in the case at bar.

As a second requirement, the enforcement may be effected only in accordance with a

sufficient standard, the function of which is to map out the boundaries of the delegate’s
authority and thus “prevent the delegation from running riot.” This requirement has also
been met.  It is settled that the “convenience and welfare” of the public, particularly the
motorists and passengers in the case at bar, is an acceptable sufficient standard to delimit
the delegate’s authority.

But the problem before us is not the validity of the delegation of legislative power.  The
question we must resolve is the validity of the exercise of such delegated power.

The measures in question are enactments of local governments acting only as agents of
the national legislature.  Necessarily, the acts of these agents must reflect and conform to
the will of their principal.  To test the validity of such acts in the specific case now before
us, we apply the particular requisites of a valid ordinance as laid down by the accepted
principles governing municipal corporations.

According to Elliot, a municipal ordinance, to be valid:  1) must not contravene the

Constitution or any statute; 2) must not be unfair or oppressive; 3) must not be partial or
discriminatory; 4) must not prohibit but may regulate trade; 5) must not be unreasonable;
and 7) must be general and consistent with public policy.

A careful study of the Gonong decision will show that the measures under
consideration do not pass the first criterion because they do not conform to existing law. 
The pertinent law is PD 1605.  PD 1605 does not allow either the removal of license
plates or the confiscation of driver’s licenses for traffic violations committed in
Metropolitan Manila.  There is nothing in the following provisions of the decree
authorizing the Metropolitan Manila Commission (and now the Metropolitan Manila
Authority) to impose such sanctions:
Section 1.  The Metropolitan Manila Commission shall have the power to impose fines
and otherwise discipline drivers and operators of motor vehicles for violations of traffic
laws, ordinances, rules and regulations in Metropolitan Manila in such amounts and
under such penalties as are herein prescribed.  For this purpose, the powers of the Land
Transportation Commission and the Board of Transportation under existing laws over
such violations and punishment thereof are hereby transferred to the Metropolitan Manila
Commission.  When the proper penalty to be imposed is suspension or revocation of
driver’s license or certificate of public convenience, the Metropolitan Manila
Commission or its representatives shall suspend or revoke such license or certificate.  The
suspended or revoked driver’s license or the report of suspension of revocation of the
certificate of public convenience shall be sent to the Land Transportation Commission or
the Board of Transportation, as the case may be, for their records update.

x          x          x

Section 3.  Violations of traffic laws, ordinances, rules and regulations, committed within
a twelve-month period, reckoned from the date of birth of the licensee, shall subject the
violator to graduated fines as follows:  P10.00 for the first offense, P20.00 for the second
offense, P50.00 for the third offense, a one-year suspension of driver’s license for the
fourth offense, and a revocation of the driver’s license for the fifth offense:  Provided,
That the Metropolitan Manila Commission may impose higher penalties as it may deem
proper for violations of its ordinances prohibiting or regulating the use of certain public
roads, streets or thoroughfares in Metropolitan Manila.

x          x          x

Section 5.  In case of traffic violations, the driver’s license shall not be confiscated but
the erring driver shall be immediately issued a traffic citation ticket prescribed by the
Metropolitan Manila Commission which shall state the violation committed, the amount
of fine imposed for the violation and an advice that he can make payment to the city or
municipal treasurer where the violation was committed or to the Philippine National
Bank or Philippine Veterans Bank or their branches within seven days from the date of
issuance of the citation ticket.

If the offender fails to pay the fine imposed within the period herein prescribed, the
Metropolitan Manila Commission or the law-enforcement agency concerned shall
endorse the case to the proper fiscal for appropriate proceedings preparatory to the filing
of the case with the competent traffic court, city or municipal court.

If at the time a driver renews his driver’s license and records show that he has an unpaid
fine, his driver’s license shall not be renewed until he has paid the fine and corresponding
surcharges.

x          x          x
Section 8.  Insofar as the Metropolitan Manila area is concerned, all laws, decrees, orders,
ordinances, rules and regulations, or parts thereof inconsistent herewith are hereby
repealed or modified accordingly.  (Emphasis supplied).

In fact, the above provisions prohibit the imposition of such sanctions in Metropolitan
Manila.  The Commission was allowed to “impose fines and otherwise discipline” traffic
violators only “in such amounts and under such penalties as are herein prescribed,” that
is, by the decree itself.  Nowhere is the removal of license plates directly imposed by the
decree or at least allowed by it to be imposed by the Commission.  Notably, Section 5
thereof expressly provides that “in case of traffic violations, the driver’s license shall not
be confiscated.” These restrictions are applicable to the Metropolitan Manila Authority
and all other local political subdivisions comprising Metropolitan Manila, including the
Municipality of Mandaluyong.

The requirement that the municipal enactment must not violate existing law
explains itself.  Local political subdivisions are able to legislate only by virtue of a valid
delegation of legislative power from the national legislature (except only that the power
to create their own sources of revenue and to levy taxes is conferred by the Constitution
itself). They are mere agents vested with what is called the power of subordinate
legislation.  As delegates of the Congress, the local government unit cannot contravene
but must obey at all times the will of their principal.  In the case before us, the enactments
in question, which are merely local in origin, cannot prevail against the decree, which has
the force and effect of a statute.

The self-serving language of Section 2 of the challenged ordinance is worth noting. 

Curiously, it is the measure itself, which was enacted by the Metropolitan Manila
Authority, that authorizes the Metropolitan Manila Authority to impose the questioned
sanction.

In Villacorta v. Bernardo, the Court nullified an ordinance enacted by the Municipal

Board of Dagupan City for being violative of the Land Registration Act.  The decision
held in part:

In declaring the said ordinance null and void, the court a quo declared:

“From the above-recited requirements, there is no showing that would justify the
enactment of the questioned ordinance.  Section 1 of said ordinance clearly conflicts with
Section 44 of Act 496, because the latter law does not require subdivision plans to be
submitted to the City Engineer before the same is submitted for approval to and
verification by the General Land Registration Office or by the Director of Lands as
provided for in Section 58 of said Act.  Section 2 of the same ordinance also contravenes
the provisions of Section 44 of Act 496, the latter being silent on a service fee of P0.03
per square meter of every lot subject of such subdivision application; Section 3 of the
ordinance in question also conflicts with Section 44 of Act 496, because the latter law
does not mention of a certification to be made by the City Engineer before the Register of
Deeds allows registration of the subdivision plan; and the last section of said ordinance
imposes a penalty for its violation, which Section 44 of Act 496 does not impose.  In
other words, Ordinance 22 of the City of Dagupan imposes upon a subdivision owner
additional conditions.

x             x          x

“The Court takes note of the laudable purpose of the ordinance in bringing to a halt the
surreptitious registration of lands belonging to the government.  But as already intimated
above, the powers of the board in enacting such a laudable ordinance cannot be held valid
when it shall impede the exercise of rights granted in a general law and/or make a general
law subordinated to a local ordinance.”

We affirm.

To sustain the ordinance would be to open the floodgates to other ordinances amending
and so violating national laws in the guise of implementing them.  Thus, ordinances could
be passed imposing additional requirements for the issuance of marriage licenses, to
prevent bigamy; the registration of vehicles, to minimize carnapping; the execution of
contracts, to forestall fraud; the validation of passports, to deter imposture; the exercise of
freedom of speech, to reduce disorder; and so on.  The list is endless, but the means, even
if the end be valid, would be ultra vires.

The measures in question do not merely add to the requirement of PD 1605 but, worse,
impose sanctions the decree does not allow and in fact actually prohibits.  In so doing, the
ordinances disregard and violate and in effect partially repeal the law.

We here emphasize the ruling in the Gonong Case that PD 1605 applies only to the
Metropolitan Manila area.  It is an exception to the general authority conferred by R.A.
No. 4136 on the Commissioner of Land Transportation to punish violations of traffic
rules elsewhere in the country with the sanctions therein prescribed, including those here
questioned.

The Court agrees that the challenged ordinances were enacted with the best of motives
and shares the concern of the rest of the public for the effective reduction of traffic
problems in Metropolitan Manila through the imposition and enforcement of more
deterrent penalties upon traffic violators.  At the same time, it must also reiterate the
public misgivings over the abuses that may attend the enforcement of such sanctions,
including the illicit practices described in detail in the Gonong decision.  At any rate, the
fact is that there is no statutory authority for - and indeed there is a statutory prohibition
against – the imposition of such penalties in the Metropolitan Manila area.  Hence,
regardless of their merits, they cannot be imposed by the challenged enactments by virtue
only of the delegated legislative powers.

It is for Congress to determine, in the exercise of its own discretion, whether or not to
impose such sanctions, either directly through a statute or by simply delegating authority
to this effect to the local governments in Metropolitan Manila.  Without such action, PD
1605 remains effective and continues to prohibit the confiscation of license plates of
motor vehicles (except under the conditions prescribed in LOI 43) and of driver’s
licenses as well for traffic violations in Metropolitan Manila.

WHEREFORE, judgment is hereby rendered:

(1) declaring Ordinance No. 11, Series of 1991, of the Metropolitan Manila
Authority and Ordinance No. 7, Series of 1988, of the Municipality of
Mandaluyong, NULL and VOID; and

(2) enjoining all law-enforcement authorities in Metropolitan Manila from removing

the license plates of motor vehicles (except when authorized under LOI 43) and
confiscating driver’s licenses for traffic violations within the said area.

SO ORDERED.

Narvasa, C.J., Melencio-Herrera, Gutierrez, Jr., Paras, Feliciano, Padilla, Bidin, Griño-
Aquino, Medialdea, Regalado, Davide, Jr., and Romero, JJ., concur.

Nocon, J., no part.

En Banc.  187 SCRA 432.

Constitution, Article VIII, Section 5(5).

84 Phil. 368.

R.A. 7160, Title One, Chapter 2, Section 16.

Pelaez v. Auditor General, 15 SCRA 569.

Calalang v. Williams, 70 Phil. 726.

U.S. v. Abendan, 24 Phil. 165.

Article X, Section 5.

143 SCRA 480.

EN BANC

 
ROMEO P. GEROCHI, G.R. No. 159796
KATULONG NG BAYAN (KB)
and ENVIRONMENTALIST  
CONSUMERS NETWORK, INC.
(ECN), Present:       

       Petitioners,  

  PUNO, C.J.,

  -versus-    QUISUMBING,       

  YNARES-SANTIAGO,

DEPARTMENT OF ENERGY SANDOVAL-GUTIERREZ,

(DOE), ENERGY REGULATORY
COMMISSION (ERC), CARPIO,   
NATIONAL POWER
AUSTRIA-MARTINEZ,
CORPORATION (NPC), POWER
SECTOR ASSETS AND CORONA,
LIABILITIES MANAGEMENT
GROUP (PSALM Corp.), CARPIO MORALES,
STRATEGIC POWER
UTILITIES GROUP (SPUG), and AZCUNA,
PANAY ELECTRIC COMPANY
INC. (PECO), TINGA,

Respondents. CHICO-NAZARIO,

  GARCIA,

VELASCO, JR. and

NACHURA, JJ.

Promulgated:

 
 July 17, 2007

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

DECISION

NACHURA, J.:

         Petitioners Romeo P. Gerochi, Katulong Ng Bayan (KB), and

Environmentalist Consumers Network, Inc. (ECN) (petitioners), come
before this Court in this original action praying that Section 34 of Republic
Act (RA) 9136, otherwise known as the “Electric Power Industry Reform
Act of 2001” (EPIRA), imposing the Universal Charge, and Rule 18 of the
Rules and Regulations (IRR) which seeks to implement the said imposition,
be declared unconstitutional. Petitioners also pray that the Universal Charge
imposed upon the consumers be refunded and that a preliminary injunction
and/or temporary restraining order (TRO) be issued directing the
respondents to refrain from implementing, charging, and collecting the said
charge.  The assailed provision of law reads:

SECTION 34. Universal Charge. — Within one (1) year from the
effectivity of this Act, a universal charge to be determined, fixed and
 approved by the ERC, shall be imposed on all electricity end-users for the
following purposes:
 
(a)   Payment for the stranded debts in excess of the amount assumed by
the National Government and stranded contract costs of NPC and as
well as qualified stranded contract costs of distribution utilities
resulting from the restructuring of the industry;
 
(b)   Missionary electrification;
 
(c)   The equalization of the taxes and royalties applied to indigenous or
renewable sources of energy vis-à-vis imported energy fuels;
 
(d)  An environmental charge equivalent to one-fourth of one centavo per
kilowatt-hour (P0.0025/kWh), which shall accrue to an environmental
fund to be used solely for watershed rehabilitation and management.
Said fund shall be managed by NPC under existing arrangements; and
 
(e)  A charge to account for all forms of cross-subsidies for a period not
exceeding three (3) years.
 
The universal charge shall be a non-bypassable charge which shall be
passed on and collected from all end-users on a monthly basis by the
distribution utilities. Collections by the distribution utilities and the
TRANSCO in any given month shall be remitted to the PSALM Corp. on
or before the fifteenth (15th) of the succeeding month, net of any amount
due to the distribution utility. Any end-user or self-generating entity not
connected to a distribution utility shall remit its corresponding universal
charge directly to the TRANSCO.  The PSALM Corp., as administrator of
the fund, shall create a Special Trust Fund which shall be disbursed only
for the purposes specified herein in an open and transparent manner. All
amount collected for the universal charge shall be distributed to the
respective beneficiaries within a reasonable period to be provided by the
ERC.
 
 

The Facts

         Congress enacted the EPIRA on June 8, 2001; on June 26, 2001, it
took effect.
 

         On April 5, 2002, respondent National Power Corporation-Strategic

Power Utilities Group (NPC-SPUG) filed with respondent Energy
Regulatory Commission (ERC) a petition for the availment from the
Universal Charge of its share for Missionary Electrification, docketed as
ERC Case No. 2002-165.

         On May 7, 2002, NPC filed another petition with ERC, docketed as
ERC Case No. 2002-194, praying that the proposed share from the Universal
Charge for the Environmental charge of P0.0025 per kilowatt-hour (/kWh),
or a total of P119,488,847.59, be approved for withdrawal from the Special
Trust   Fund   (STF)  managed   by   respondent   Power  Sector  Assets   and
Liabilities Management Group (PSALM) for the rehabilitation and
management of watershed areas. 

         On December 20, 2002, the ERC issued an Order in ERC Case No.
2002-165 provisionally approving the computed amount of P0.0168/kWh as
the share of the NPC-SPUG from the Universal Charge for Missionary
Electrification and authorizing the National Transmission Corporation
(TRANSCO) and Distribution Utilities to collect the same from its end-users
on a monthly basis.      

         On June 26, 2003, the ERC rendered its Decision  (for ERC Case No.
2002-165) modifying its Order of December 20, 2002, thus:

WHEREFORE, the foregoing premises considered, the provisional

authority granted to petitioner National Power Corporation-Strategic
Power Utilities Group (NPC-SPUG) in the Order dated December 20,
2002 is hereby modified to the effect that an additional amount of P0.0205
per kilowatt-hour should be added to the P0.0168 per kilowatt-hour
provisionally authorized by the Commission in the said Order.
Accordingly, a total amount of P0.0373 per kilowatt-hour is hereby
APPROVED for withdrawal from the Special Trust Fund managed by
PSALM as its share from the Universal Charge for Missionary
Electrification (UC-ME) effective on the following billing cycles:
 
(a)       June 26-July 25, 2003 for National Transmission
Corporation (TRANSCO); and
(b)       July 2003 for Distribution Utilities (Dus).
 
 Relative thereto, TRANSCO and Dus are directed to collect the
UC-ME in the amount of P0.0373 per kilowatt-hour and remit the same to
PSALM on or before the 15th day of the succeeding month.
 
In the meantime, NPC-SPUG is directed to submit, not later than
April 30, 2004, a detailed report to include Audited Financial Statements
and physical status (percentage of completion) of the projects using the
prescribed format.
 
Let copies of this Order be furnished petitioner NPC-SPUG and all
distribution utilities (Dus).
 
SO ORDERED.
 
 

         On August 13, 2003, NPC-SPUG filed a Motion for Reconsideration

asking the ERC, among others, to set aside the above-mentioned Decision,
which the ERC granted in its Order dated October 7, 2003, disposing:

            WHEREFORE, the foregoing premises considered, the “Motion

for Reconsideration” filed by petitioner National Power Corporation-
Small Power Utilities Group (NPC-SPUG) is hereby GRANTED.
Accordingly, the Decision dated June 26, 2003 is hereby modified
accordingly.
 
            Relative thereto, NPC-SPUG is directed to submit a quarterly
report on the following:
 
1.      Projects for CY 2002 undertaken;
2.      Location
3.      Actual amount utilized to complete the project;
4.      Period of completion;
5.      Start of Operation; and
6.      Explanation of the reallocation of UC-ME funds, if any.
 
            SO ORDERED.    
 
 
          Meanwhile, on April 2, 2003, ERC decided ERC Case No. 2002-194,
authorizing the NPC to draw up to P70,000,000.00 from PSALM for its
2003 Watershed Rehabilitation Budget subject to the availability of funds
for the Environmental Fund component of the Universal Charge.

         On the basis of the said ERC decisions, respondent Panay Electric
Company, Inc. (PECO) charged  petitioner  Romeo P. Gerochi  and  all other
end-users with the Universal Charge as reflected in their respective electric
bills starting from the month of July 2003.

         Hence, this original action.

         Petitioners submit that the assailed provision of law and its IRR which
sought to implement the same are unconstitutional on the following grounds:

1)      The universal charge provided for under Sec. 34 of the EPIRA and
sought to be implemented under Sec. 2, Rule 18 of the IRR of the said
law is a tax which is to be collected from all electric end-users and
self-generating entities. The power to tax is strictly a legislative
function and as such, the delegation of said power to any executive or
administrative agency like the ERC is unconstitutional, giving the
same unlimited authority. The assailed provision clearly provides that
the Universal Charge is to be determined, fixed and approved by the
ERC, hence leaving to the latter complete discretionary legislative
authority.
 
2)      The ERC is also empowered to approve and determine where the
funds collected should be used.
 
3)      The imposition of the Universal Charge on all end-users is oppressive
and confiscatory and amounts to taxation without representation as the
consumers were not given a chance to be heard and represented. 

Petitioners contend that the Universal Charge has the characteristics of

a tax and is collected to fund the operations of the NPC.  They argue that the
cases invoked by the respondents clearly show the regulatory purpose of the
charges imposed therein, which is not so in the case at bench. In said cases,
the respective funds were created in order to balance and stabilize the prices
of oil and sugar, and to act as buffer to counteract the changes and
adjustments in prices, peso devaluation, and other variables which cannot be
adequately and timely monitored by the legislature.  Thus, there was a need
to delegate powers to administrative bodies.  Petitioners posit that the
Universal Charge is imposed not for a similar purpose.

  

         On the other hand, respondent PSALM through the Office of the
Government Corporate Counsel (OGCC) contends that unlike a tax which is
imposed to provide income for public purposes, such as support of the
government, administration of the law, or payment of public expenses, the
assailed Universal Charge is levied for a specific regulatory purpose, which
is to ensure the viability of the country's electric power industry. Thus, it is
exacted by the State in the exercise of its inherent police power. On this
premise, PSALM submits that there is no undue delegation of legislative
power to the ERC since the latter merely exercises a limited authority or
discretion as to the execution and implementation of the provisions of the
EPIRA.

         Respondents Department of Energy (DOE), ERC, and NPC, through

the Office of the Solicitor General (OSG), share the same view that the
Universal Charge is not a tax because it is levied for a specific regulatory
purpose, which is to ensure the viability of the country's electric power
industry, and is, therefore, an exaction in the exercise of the State's police
power. Respondents further contend that said Universal Charge does not
possess the essential characteristics of a tax, that its imposition would
redound to the benefit of the electric power industry and not to the public,
and that its rate is uniformly levied on electricity end-users, unlike a tax
which is imposed based on the individual taxpayer's ability to pay.
Moreover, respondents deny that there is undue delegation of legislative
power to the ERC since the EPIRA sets forth sufficient determinable
standards which would guide the ERC in the exercise of the powers granted
to it. Lastly, respondents argue that the imposition of the Universal Charge is
not oppressive and confiscatory since it is an exercise of the police power of
the State and it complies with the requirements of due process.          

         On its part, respondent PECO argues that it is duty-bound to collect

and remit the amount pertaining to the Missionary Electrification and
Environmental Fund components of the Universal Charge, pursuant to Sec.
34 of the EPIRA and the Decisions in ERC Case Nos. 2002-194 and 2002-
165.  Otherwise, PECO could be held liable under Sec. 46 of the EPIRA,
which imposes fines and penalties for any violation of its provisions or its
IRR.

 
 The Issues

         The ultimate issues in the case at bar are:

1)      Whether or not, the Universal Charge imposed under Sec. 34 of the
EPIRA is a tax; and
 
2)      Whether or not there is undue delegation of legislative power to tax on
the part of the ERC.

Before we discuss the issues, the Court shall first deal with an obvious
procedural lapse.

Petitioners filed before us an original action particularly denominated

as a Complaint assailing the constitutionality of Sec. 34 of the EPIRA
imposing the Universal Charge and Rule 18 of the EPIRA's IRR. No doubt,
petitioners have locus standi. They impugn the constitutionality of Sec. 34
of the EPIRA because they sustained a direct injury as a result of the
imposition of the Universal Charge as reflected in their electric bills.

However, petitioners violated the doctrine of hierarchy of courts when

they filed this “Complaint” directly with us.  Furthermore, the Complaint is
bereft of any allegation of grave abuse of discretion on the part of the ERC
or any of the public respondents, in order for the Court to consider it as a
petition for certiorari or prohibition.

Article VIII, Section 5(1) and (2) of the 1987 Constitution

categorically provides that:

SECTION 5. The Supreme Court shall have the following powers:

1.      Exercise original jurisdiction over cases affecting ambassadors, other

public ministers and consuls, and over petitions for certiorari,
prohibition, mandamus, quo warranto, and habeas corpus.

2.      Review, revise, reverse, modify, or affirm on appeal or certiorari, as

the law or the rules of court may provide, final judgments and orders
of lower courts in:

(a) All cases in which the constitutionality or validity of

any treaty, international or executive agreement, law,
presidential decree, proclamation, order, instruction,
ordinance, or regulation is in question.

 
But this Court's jurisdiction to issue writs of certiorari, prohibition,
mandamus, quo warranto, and habeas corpus, while concurrent with that of
the regional trial courts and the Court of Appeals, does not give litigants
unrestrained freedom of choice of forum from which to seek such relief. It
has long been established that this Court will not entertain direct resort to it
unless the redress desired cannot be obtained in the appropriate courts, or
where exceptional and compelling circumstances justify availment of a
remedy within and call for the exercise of our primary jurisdiction. This
circumstance alone warrants the outright dismissal of the present action.
 

This procedural infirmity notwithstanding, we opt to resolve the

constitutional issue raised herein.  We are aware that if the constitutionality
of Sec. 34 of the EPIRA is not resolved now, the issue will certainly
resurface in the near future, resulting in a repeat of this litigation, and
probably involving the same parties. In the public interest and to avoid
unnecessary delay, this Court renders its ruling now.

The instant complaint is bereft of merit.

The First Issue

To resolve the first issue, it is necessary to distinguish the State’s

power of taxation from the police power.

          The power to tax is an incident of sovereignty and is unlimited in its

range, acknowledging in its very nature no limits, so that security against its
abuse is to be found only in the responsibility of the legislature which
imposes the tax on the constituency that is to pay it. It is based on the
principle that taxes are the lifeblood of the government, and their prompt and
certain availability is an imperious need. Thus, the theory behind the
exercise of the power to tax emanates from necessity; without taxes,
government cannot fulfill its mandate of promoting the general welfare and
well-being of the people.

         On the other hand, police power is the power of the state to promote
public welfare by restraining and regulating the use of liberty and property.
It is the most pervasive, the least limitable, and the most demanding of the
three fundamental powers of the State. The justification is found in the Latin
maxims salus populi est suprema lex (the welfare of the people is the
supreme law) and sic utere tuo ut alienum non laedas (so use your property
as not to injure the property of others). As an inherent attribute of
sovereignty which virtually extends to all public needs, police power grants
a wide panoply of instruments through which the State, as parens patriae,
gives effect to a host of its regulatory powers.  We have held that the power
to "regulate" means the power to protect, foster, promote, preserve, and
control, with due regard for the interests, first and foremost, of the public,
then of the utility and of its patrons.

The conservative and pivotal distinction between these two powers

rests in the purpose for which the charge is made.  If generation of revenue
is the primary purpose and regulation is merely incidental, the imposition is
a tax; but if regulation is the primary purpose, the fact that revenue is
incidentally raised does not make the imposition a tax.

        

         In exacting the assailed Universal Charge through Sec. 34 of the

EPIRA, the State's police power, particularly its regulatory dimension, is
invoked. Such can be deduced from Sec. 34 which enumerates the purposes
for which the Universal Charge is imposed and which can be amply
discerned as regulatory in character.  The EPIRA resonates such regulatory
purposes, thus:

 
SECTION 2.   Declaration of Policy. — It is hereby declared the policy of
the State:
 
(a)   To ensure and accelerate the total electrification of the country;
(b)   To ensure the quality, reliability, security and affordability of the
supply of electric power;
(c)   To ensure transparent and reasonable prices of electricity in a regime
of free and fair competition and full public accountability to achieve
greater operational and economic efficiency and enhance the
competitiveness of Philippine products in the global market; 
(d)   To enhance the inflow of private capital and broaden the ownership
base of the power generation, transmission and distribution sectors;
(e)   To ensure fair and non-discriminatory treatment of public and private
sector entities in the process of restructuring the electric power
industry;  
(f)    To protect the public interest as it is affected by the rates and services
of electric utilities and other providers of electric power;
(g)   To assure socially and environmentally compatible energy sources
and infrastructure;
(h)   To promote the utilization of indigenous and new and renewable
energy resources in power generation in order to reduce dependence
on imported energy;
(i)    To provide for an orderly and transparent privatization of the assets
and liabilities of the National Power Corporation (NPC);
 (j)    To establish a strong and purely independent regulatory body and
system to ensure consumer protection and enhance the competitive
operation of the electricity market; and
(k)   To encourage the efficient use of energy and other modalities of
demand side management.
 
 

         From the aforementioned purposes, it can be gleaned that the assailed
Universal Charge is not a tax, but an exaction in the exercise of the State's
police power. Public welfare is surely promoted. 

         Moreover, it is a well-established doctrine that the taxing power may

be used as an implement of police power. In Valmonte v. Energy Regulatory
Board, et al. and in Gaston v. Republic Planters Bank, this Court held that
the Oil Price Stabilization Fund (OPSF) and the Sugar Stabilization Fund
(SSF) were exactions made in the exercise of the police power.  The doctrine
was reiterated in Osmeña v. Orbos with respect to the OPSF.  Thus, we
disagree with petitioners that the instant case is different from the
aforementioned cases.  With the Universal Charge, a Special Trust Fund
(STF) is also created under the administration of PSALM.  The STF has
some notable characteristics similar to the OPSF and the SSF, viz.:

1)      In the implementation of stranded cost recovery, the ERC shall

conduct a review to determine whether there is under-recovery or over
recovery and adjust (true-up) the level of the stranded cost recovery
charge. In case of an over-recovery, the ERC shall ensure that any
excess amount shall be remitted to the STF. A separate account shall
be created for these amounts which shall be held in trust for any future
claims of distribution utilities for stranded cost recovery. At the end of
 the stranded cost recovery period, any remaining amount in this
account shall be used to reduce the electricity rates to the end-users.
 
2)      With respect to the assailed Universal Charge, if the total amount
collected for the same is greater than the actual availments against it,
the PSALM shall retain the balance within the STF to pay for periods
where a shortfall occurs.
 
3)      Upon expiration of the term of PSALM, the administration of the STF
shall be transferred to the DOF or any of the DOF attached agencies as
designated by the DOF Secretary.

The OSG is in point when it asseverates:

 
Evidently, the establishment and maintenance of the Special Trust Fund,
under the last paragraph of Section 34, R.A. No. 9136, is well within the
pervasive and non-waivable power and responsibility of the government to
secure the physical and economic survival and well-being of the
community, that comprehensive sovereign authority we designate as the
police power of the State.
 
 

         This feature of the Universal Charge further boosts the position that the
same is an exaction imposed primarily in pursuit of the State's police
objectives. The STF reasonably serves and assures the attainment and
perpetuity of the purposes for which the Universal Charge is imposed, i.e., to
ensure the viability of the country's electric power industry.

The Second Issue

  

The principle of separation of powers ordains that each of the three

branches of government has exclusive cognizance of and is supreme in
matters falling within its own constitutionally allocated sphere. A logical
corollary to the doctrine of separation of powers is the principle of non-
delegation of powers, as expressed in the Latin maxim potestas delegata
non delegari potest (what has been delegated cannot be delegated). This is
based on the ethical principle that such delegated power constitutes not only
a right but a duty to be performed by the delegate through the
instrumentality of his own judgment and not through the intervening mind of
another.  

         In the face of the increasing complexity of modern life, delegation of

legislative power to various specialized administrative agencies is allowed
as an exception to this principle. Given the volume and variety of
interactions in today's society, it is doubtful if the legislature can promulgate
laws that will deal adequately with and respond promptly to the minutiae of
everyday life.  Hence, the need to delegate to administrative bodies - the
principal agencies tasked to execute laws in their specialized fields - the
authority to promulgate rules and regulations to implement a given statute
and effectuate its policies. All that is required for the valid exercise of this
power of subordinate legislation is that the regulation be germane to the
objects and purposes of the law and that the regulation be not in
contradiction to, but in conformity with, the standards prescribed by the law.
These requirements are denominated as the completeness test and the
sufficient standard test.

         Under the first test, the law must be complete in all its terms and
conditions when it leaves the legislature such that when it reaches the
delegate, the only thing he will have to do is to enforce it. The second test
mandates adequate guidelines or limitations in the law to determine the
boundaries of the delegate's authority and prevent the delegation from
running riot.

         The Court finds that the EPIRA, read and appreciated in its entirety, in
relation to Sec. 34 thereof, is complete in all its essential terms and
conditions, and that it contains sufficient standards.

         Although Sec. 34 of the EPIRA merely provides that “within one (1)
year from the effectivity thereof, a Universal Charge to be determined, fixed
and approved by the ERC, shall be imposed on all electricity end-users,” and
therefore, does not state the specific amount to be paid as Universal Charge,
the amount nevertheless is made certain by the legislative parameters
provided in the law itself.  For one, Sec. 43(b)(ii) of the EPIRA provides:

 
 SECTION 43.  Functions of the ERC. — The ERC shall promote
competition, encourage market development, ensure customer choice and
penalize abuse of market power in the restructured electricity industry. In
appropriate cases, the ERC is authorized to issue cease and desist order
after due notice and hearing. Towards this end, it shall be responsible for
the following key functions in the restructured industry:
 
xxxx
 
(b)  Within six (6) months from the effectivity of this Act, promulgate and
enforce, in accordance with law, a National Grid Code and a Distribution
Code which shall include, but not limited to the following:
 
xxxx
 
(ii)     Financial  capability  standards  for   the  generating companies, the
TRANSCO, distribution utilities and suppliers: Provided, That in the
formulation of the financial capability standards, the nature and function
of the entity shall be considered: Provided, further, That such standards
are set to ensure that the electric power industry participants meet the
minimum financial standards to protect the public interest. Determine, fix,
and approve, after due notice and public hearings the universal charge, to
be imposed on all electricity end-users pursuant to Section 34 hereof;
 

         Moreover, contrary to the petitioners’ contention, the ERC does not
enjoy a wide latitude of discretion in the determination of the Universal
Charge.  Sec. 51(d) and (e) of the EPIRA clearly provides:

SECTION 51. Powers. — The PSALM Corp. shall, in the performance of

its functions and for the attainment of its objective, have the following
powers:
 
xxxx
 
 (d)   To calculate the amount of the stranded debts and stranded contract
costs of NPC which shall form the basis for ERC in the
determination of the universal charge;
 
(e)   To liquidate the NPC stranded contract costs, utilizing the proceeds
from sales and other property contributed to it, including the
proceeds from the universal charge.
 
 
 
 
 

Thus, the law is complete and passes the first test for valid delegation

of legislative power.

         As to the second test, this Court had, in the past, accepted as sufficient
standards the following: "interest of law and order;" "adequate and efficient
instruction;" "public interest;" "justice and equity;" "public convenience and
welfare;" "simplicity, economy and efficiency;" "standardization and
regulation of medical education;" and "fair and equitable employment
practices."   Provisions of the EPIRA such as, among others, “to ensure the
total electrification of the country and the quality, reliability, security and
affordability of the supply of electric power” and “watershed rehabilitation
and management” meet the requirements for valid delegation, as they
provide the limitations on the ERC’s power to formulate the IRR. These are
sufficient standards.

 
         It may be noted that this is not the first time that the ERC's conferred
powers were challenged. In Freedom from Debt Coalition v. Energy
Regulatory Commission, the Court had occasion to say:   

         In determining the extent of powers possessed by the ERC, the

provisions of the EPIRA must not be read in separate parts. Rather, the
law must be read in its entirety, because a statute is passed as a whole, and
is animated by one general purpose and intent. Its meaning cannot to be
extracted from any single part thereof but from a general consideration of
the statute as a whole. Considering the intent of Congress in enacting the
EPIRA and reading the statute in its entirety, it is plain to see that the law
has expanded the jurisdiction of the regulatory body, the ERC in this case,
to enable the latter to implement the reforms sought to be accomplished by
the EPIRA. When the legislators decided to broaden the jurisdiction of the
ERC, they did not intend to abolish or reduce the powers already
conferred upon ERC's predecessors. To sustain the view that the ERC
possesses only the powers and functions listed under Section 43 of the
EPIRA is to frustrate the objectives of the law.
 
 

         In his Concurring and Dissenting Opinion in the same case, then
Associate Justice, now Chief Justice, Reynato S. Puno described the
immensity of police power in relation to the delegation of powers to the
ERC and its regulatory functions over electric power as a vital public utility,
to wit:

Over the years, however, the range of police power was no longer
limited to the preservation of public health, safety and morals, which used
to be the primary social interests in earlier times. Police power now
requires the State to "assume an affirmative duty to eliminate the excesses
and injustices that are the concomitants of an unrestrained industrial
economy." Police power is now exerted "to further the public welfare — a
concept as vast as the good of society itself." Hence, "police power is but
another name for the governmental authority to further the welfare of
 society that is the basic end of all government." When police power is
delegated to administrative bodies with regulatory functions, its exercise
should be given a wide latitude. Police power takes on an even broader
dimension in developing countries such as ours, where the State must take
a more active role in balancing the many conflicting interests in society.
The Questioned Order was issued by the ERC, acting as an agent of the
State in the exercise of police power. We should have exceptionally good
grounds to curtail its exercise. This approach is more compelling in the
field of rate-regulation of electric power rates. Electric power generation
and distribution is a traditional instrument of economic growth that
affects not only a few but the entire nation. It is an important factor in
encouraging investment and promoting business. The engines of progress
may come to a screeching halt if the delivery of electric power is
impaired. Billions of pesos would be lost as a result of power outages or
unreliable electric power services. The State thru the ERC should be able
to exercise its police power with great flexibility, when the need arises.  
 
 
 
 
 
 

         This was reiterated in National Association of Electricity Consumers

for Reforms v. Energy Regulatory Commission where the Court held that the
ERC, as regulator, should have sufficient power to respond in real time to
changes wrought by multifarious factors affecting public utilities.

         From the foregoing disquisitions, we therefore hold that there is no

undue delegation of legislative power to the ERC.

Petitioners failed to pursue in their Memorandum the contention in the

Complaint that the imposition of the Universal Charge on all end-users is
oppressive and confiscatory, and amounts to taxation without representation.
Hence, such contention is deemed waived or abandoned per Resolution of
August 3, 2004. Moreover, the determination of whether or not a tax is
excessive, oppressive or confiscatory is an issue which essentially involves
questions of fact, and thus, this Court is precluded from reviewing the same.

         As a penultimate statement, it may be well to recall what this Court

said of EPIRA:

 
            One of the landmark pieces of legislation enacted by Congress in
recent years is the EPIRA. It established a new policy, legal structure and
regulatory framework for the electric power industry. The new thrust is to
tap private capital for the expansion and improvement of the industry as
the large government debt and the highly capital-intensive character of the
industry itself have long been acknowledged as the critical constraints to
the program. To attract private investment, largely foreign, the jaded
structure of the industry had to be addressed. While the generation and
transmission sectors were centralized and monopolistic, the distribution
side was fragmented with over 130 utilities, mostly small and uneconomic.
The pervasive flaws have caused a low utilization of existing generation
capacity; extremely high and uncompetitive power rates; poor quality of
service to consumers; dismal to forgettable performance of the
government power sector; high system losses; and an inability to develop
a clear strategy for overcoming these shortcomings.
 
            Thus, the EPIRA provides a framework for the restructuring of the
industry, including the privatization of the assets of the National Power
Corporation (NPC), the transition to a competitive structure, and the
delineation of the roles of various government agencies and the private
entities. The law ordains the division of the industry into four (4) distinct
sectors,    namely:    generation,   transmission,   distribution   and   supply.
Corollarily, the NPC generating plants have to privatized and its
transmission business spun off and privatized thereafter.
 
 

         Finally, every law has in its favor the presumption of constitutionality,
and to justify its nullification, there must be a clear and unequivocal breach
of the Constitution and not one that is doubtful, speculative, or
argumentative. Indubitably, petitioners failed to overcome this presumption
in favor of the EPIRA.  We find no clear violation of the Constitution which
would warrant a pronouncement that Sec. 34 of the EPIRA and Rule 18 of
its IRR are unconstitutional and void.

         WHEREFORE, the instant case is hereby DISMISSED for lack of

merit.

         SO ORDERED.

ANTONIO EDUARDO B. NACHURA

Associate Justice

 
WE CONCUR:

REYNATO S. PUNO

Chief Justice

      LEONARDO A. QUISUMBING                      CONSUELO YNARES-SANTIAGO

        Associate Justice                                               Associate Justice

   ANGELINA SANDOVAL-GUTIERREZ                     ANTONIO T. CARPIO

           Associate Justice                                            Associate Justice

 
  MA. ALICIA AUSTRIA-MARTINEZ                      RENATO C. CORONA

           Associate Justice                                                       Associate Justice

     CONCHITA CARPIO MORALES                          ADOLFO S. AZCUNA

            Associate Justice                                               Associate Justice

             

       DANTE O. TINGA                                MINITA V. CHICO-NAZARIO

          Associate Justice                                                 Associate Justice

 
 

    CANCIO C. GARCIA                             PRESBITERO J. VELASCO, JR.

   Associate Justice                                                 Associate Justice

CERTIFICATION

Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above Decision had been reached in consultation before the case was
assigned to the writer of the opinion of the Court.

                            REYNATO S. PUNO

                              Chief Justice

              Sec. 4 (ddd) of the EPIRA provides that  the Universal Charge refers to the
charge, if any, imposed for the recovery of the stranded cost and other purposes pursuant
to Section 34 hereof.

             Rules and Regulations to Implement Republic Act No. 9136, entitled "Electric
Power Industry Reform Act of 2001, (IRR) approved on February 27, 2002, particularly
Rule 4 (rrrr) provides that the "Universal Charge" refers to the charge, if any, imposed for
the recovery of the Stranded Debts, Stranded Contract Costs of NPC, and Stranded
Contract Costs of Eligible Contracts of Distribution Utilities and other purposes pursuant
to Section 34 of the EPIRA.

              Particularly denominated as Complaint dated September 15, 2003; rollo, pp. 3-
15.

              Sec. 4 [vv] of the EPIRA provides that Stranded Debts of NPC refer to any unpaid financial
obligations of NPC which have not been liquidated by the proceeds from the sales and privatization of NPC
assets.

              Sec. 4 [uu] of the EPIRA also provides that Stranded contract costs of NPC or distribution utility
refer to the excess of the contracted cost of electricity under eligible contracts over the actual selling price
of the contracted energy output of such contracts in the market. Such contracts shall have been approved   
by the ERB as of December 31, 2000.

              Rule 4 (ddd) of the IRR provides that Missionary Electrification refers to the
provision of basic      electricity service in Unviable Areas with the ultimate aim of
bringing the operations in these areas to      viability levels.

               Manila Electric Company, Inc. v. Lualhati, G.R. Nos. 166769 and 166818,  December 6, 2006.

              IRR, Rule 4 (bbbb) states that Small Power Utilities Group or SPUG refers to the functional unit
of NPC created to pursue Missionary Electrification function.

              ERC Record for ERC Case No. 2002-165, pp. 1-7.

             PSALM is a government-owned and controlled corporation created under Sec. 49

of the EPIRA, which shall take ownership of all existing NPC generation assets,
liabilities, IPP contracts, real estate and all other disposable assets. All outstanding
obligations of the NPC arising from loans, issuances of bonds, securities and other
instruments of indebtedness shall be transferred to and assumed by the PSALM.

             ERC Record for ERC Case No. 2002-194, pp. 1-5.

             Supra note 9, at 110-122.

             Id. at 215-224.

             NPC-SPUG's Motion for Reconsideration dated August 13, 2003 also prayed 
that it be allowed (1) to have flexibility in the utilization of UC-ME considering its
mandate to implement the MEDP responsive to the needs and constraints of missionary
electrification; (2) to authorize it to re-prioritize its CAPEX and its OPEX to the extent
possible, for  CY 2003; and (3) to give it the flexibility to reallocate available UC-ME
funds among the revised priority activities/projects for CY 2003, Id. at 225-236.

             Id. at 237-239.

            Supra note 11, at 110-122.

                  Rollo, p. 8.

             Supra note 3.

             Osmeña v. Orbos, G.R. No. 99886, March 31, 1993, 220 SCRA 703; Valmonte v. Energy
Regulatory Board, G.R. Nos. L-79601-03, June  23, 1988, 162 SCRA 521; and Gaston v. Republic
Planters Bank, No. L-77194, March 15, 1988, 158 SCRA 626.

             These funds are the Oil Price Stabilization Fund (OPSF) and Sugar Stabilization
Fund (SSF).

             Petitioners' Memorandum dated October 6, 2004; rollo, pp. 123-138.

             PSALM's Memorandum dated December 8, 2004; id. at 154-167.

             OSG's Memorandum dated January 4, 2005; id. at 168-187.

             SECTION 46. Fines and Penalties. — The fines and penalties that shall be imposed by the ERC for
any violation of or non-compliance with this Act or the IRR shall range from a minimum of Fifty thousand
pesos (P50,000.00) to a maximum of Fifty million pesos (P50,000,000.00).

                Any person who is found guilty of any of the prohibited acts pursuant to Section 45 hereof shall
suffer the penalty of prision mayor and a fine ranging from Ten thousand pesos (P10,000.00) to Ten million
pesos (P10,000.000.00), or both, at the discretion of the court.

                The members of the Board of Directors of the juridical companies participating in or covered in
the generation companies, the distribution utilities, the TRANSCO or its concessionaire or supplier who
violate the provisions of this Act may be fined by an amount not exceeding double the amount of damages
caused by the offender or by imprisonment of one (1) year or two (2) years or both at the discretion of the
court. This rule shall apply to the members of the Board who knowingly or by neglect allows the
commission or omission under the law.

                If the offender is a government official or employee, he shall, in addition, be dismissed from the
government service with prejudice to reinstatement and with perpetual or temporary disqualification from
holding any elective or appointive office.

                If the offender is an alien, he may, in addition to the penalties prescribed, be deported without
further proceedings after service of sentence.

                Any case which involves question of fact shall be appealable to the Court of Appeals and those
which involve question of law shall be directly appealable to the Supreme Court.
                The administrative sanction that may be imposed by the ERC shall be without prejudice to the
filing of a criminal action, if warranted.

                To ensure compliance with this Act, the penalty of prision correccional or a fine ranging from
Five thousand pesos (P5,000.00) to Five million pesos (P5,000,000.00), or both, at the discretion of the
court, shall be imposed on any person, including but not limited to the president, member of the Board,
Chief Executive Officer or Chief Operating Officer of the corporation, partnership, or any other entity
involved, found guilty of violating or refusing to comply with any provision of this Act or its IRR, other
than those provided herein.

                Any party to an administrative proceeding may, at any time, make an offer to the ERC,
conditionally or otherwise, for a consented decree, voluntary compliance or desistance and other settlement
of the case. The offer and any or all of the ultimate facts upon which the offer is based shall be considered
for settlement purposes only and shall not be used as evidence against any party for any other purpose and
shall not constitute an admission by the party making the offer of any violation of the laws, rules,
regulations, orders and resolutions of the ERC, nor as a waiver to file any warranted criminal actions.

                In addition, Congress may, upon recommendation of the DOE and/or ERC, revoke such franchise
or privilege granted to the party who violated the provisions of this Act.

             PECO's Memorandum dated April 18, 2005; rollo, pp. 205-210.

            Supra note 21, at 125.

             Emphasis supplied.

             Francisco, Jr. v. Fernando, G.R. No. 166501, November 16, 2006, citing People
v. Cuaresma, 172 SCRA 415, 423-424 (1989).

            Lacson Hermanas, Inc. v. Heirs of Cenon Ignacio, G.R. No. 165973, June 29,
2005, 462 SCRA 290, 294 and Santiago v. Vasquez, G.R. Nos. 99289-90, January 27,
1993, 217 SCRA 633, 652.

                  Mactan Cebu International Airport Authority v. Marcos, 330 Phil. 392, 404
(1996).

                  Proton Pilipinas Corporation v. Republic of the Philippines, G.R. No. 165027,
October 16, 2006, citing Province of Tarlac v. Alcantara, 216 SCRA 790, 798 (1992).

                  National Power Corporation v. City of Cabanatuan, 449 Phil.  233, 248
(2003).

             Didipio Earth-Savers' Multi-Purpose Association, Inc. (DESAMA)  v. Gozun, G.R. No. 157882, 
March 30, 2006, 485 SCRA 586, 604, citing U.S. v. Torribio, 15 Phil. 85, 93 (1910) and Rubi v. The
Provincial Board of Mindoro, 39 Phil. 660, 708 (1919).

                  JMM Promotion and Management, Inc. v.  Court of Appeals, G.R. No.
120095, August 5, 1996, 260 SCRA 319, 324.
             Philippine Association of Service Exporters, Inc. v. Hon. Ruben D. Torres, G.R. No. 101279,
August 6, 1992, 212 SCRA 298, 304, citing Philippine Communications Satellite Corporation v. Alcuaz,
180 SCRA 218 (1989).

             Progressive Development Corporation  vs. Quezon City, G.R. No. 36081, April
24, 1989, 172 SCRA 629, 635, citing Manila Electric Company v. El Auditor General y
La Comision de Servicios Publicos, 73 Phil. 133 (1941);  Republic v. Philippine Rabbit
Lines, 143 Phil. 158, 163 (1970).

             The purposes are:

(a)           Payment for the stranded debts in excess of the amount assumed by the National
Government and stranded contract costs of NPC and as well as qualified stranded contract costs of
distribution utilities resulting from the restructuring of the industry;

(b)           Missionary electrification;  

(c)           The equalization of the taxes and royalties applied to indigenous or renewable sources of
energy vis-à-vis imported energy fuels;

(d)           An environmental charge equivalent to one-fourth of one centavo per kilowatt-hour
(P0.0025/kWh), which shall accrue to an environmental fund to be used solely for watershed rehabilitation
and management. Said fund shall be managed by NPC under existing arrangements; and

(e)           A charge to account for all forms of cross-subsidies for a period not exceeding three (3)
years.

                  Osmeña v. Orbos, supra note 19, at 710, Gaston v. Republic Planters Bank,
supra note 19, at 632, Tio v. Videogram Regulatory Board, No. L-75697, June 18, 1987,
151 SCRA 208, 216, and Lutz v. Araneta, 98 Phil. 148 (1955). 

             Supra note 19, at 539; Decided jointly with Citizen's Alliance for Consumer
Protection v. Energy Regulatory Board., G.R. Nos. L-78888-90, and Kilusang Mayo Uno
Labor Center v. Energy Regulatory, Board., G.R. Nos. L-79690-92.

            Supra note 19, at 632-633.

             Id. at 710-711.

             Last paragraph, Sec. 34, EPIRA provides: The PSALM Corp., as administrator of
the fund, shall create a Special Trust Fund which shall be disbursed only for the purposes
specified herein in an open and transparent manner. All amount collected for the
universal charge shall be distributed to the respective beneficiaries within a reasonable
period to be provided by the ERC.

                IRR of the EPIRA, Rule 18, SECTION 6, also provides:

                (a)           Pursuant to the last paragraph of Section 34 of the Act, PSALM shall
act as the administrator of the funds generated from the Universal Charge. For this
purpose, the PSALM shall create a STF to be established in the Bureau of Treasury (BTr)
or in a Government Financing Institution (GFI) that is acceptable to the DOF. Separate
STFs shall be established for each of the intended purposes of the Universal Charge.
Funds shall be disbursed in an open and transparent manner and shall only be used for the
intended purposes specified in Section 3 of this Rule.

             EPIRA, Sec. 33, last paragraph and IRR, Sec. 5 (f), Rule 17.

             IRR, Sec. 6 (f), Rule 18.

             IRR, Sec. 4, Rule 21.

             Supra note 23, at 177-178, citing Osmeña v. Orbos, supra note 19.

                  Abakada Guro Party List v. Ermita, G.R. Nos. 168056, 168207, 168461,
168463 and 168730, September 1, 2005, 469 SCRA 10, 115-116.

            The recognized exceptions to the general principle are as follows:

(1)           Delegation of tariff powers to the President under Section 28(2) of Article VI of the Constitution;

(2)           Delegation of emergency powers to the President under Section 23(2) of Article VI of the
Constitution;

(3)           Delegation to the people at large;

(4)           Delegation to local governments; and

(5)           Delegation to administrative bodies. Abakada Guro Party List v. Ermita, supra note 47, at 117
and Santiago v. Comelec, 336 Phil. 848, 897-898 (1997), citing People v. Vera, 65 Phil. 56 (1937).

                  Equi-Asia Placement, Inc. v. DFA, G.R. No. 152214,  September 19, 2006,
citing Beltran v. Secretary of Health, 476 SCRA 168, 191 (2005); The Conference of
Maritime Manning Agencies v. Philippine Overseas Employment Agency, 313 Phil. 592,
606 (1995); and Eastern Shipping Lines, Inc. v. Philippine Overseas Employment
Agency, G.R. No. L-76633, October 18, 1998, 166 SCRA 533, 543.

             Emphasis supplied.

                  Rubi v. Provincial Board of Mindoro, supra note 33, at 706.

                  Philippine Association of Colleges and University v. Secretary of Education,

97 Phil. 806, 814 (1955).

                  People v. Rosenthal, 68 Phil. 328, 342 (1939).

                  Antamok Gold Fields v. CIR, 70 Phil. 340 (1940).

                  Calalang v. Williams, 70 Phil. 726, 733 (1940).

                  Cervantes v. Auditor General, 91 Phil 359, 364 (1952).

                  Tablarin v. Gutierrez, No. L-78164, July 31, 1987, 152 SCRA 731.

                  The Conference of Maritime Manning Agencies, Inc. v. Philippine Overseas

Employment Administration, supra note 49.

            Sec. 2(a) and (b), Declaration of Policies of the EPIRA.

            Supra note 37.

             G.R. No. 161113, June 15, 2004, 432 SCRA 157, 182.

            Id. at 219-220 (Emphasis supplied).

             G.R. No. 163935, February 2, 2006, 481 SCRA 480, 515-516, citing Freedom from Debt Coalition
v. Energy Regulatory Commission, supra note 61.

            Rollo, pp. 108-109

            Republic v. Kalaw, G.R. No. 155138, June 8, 2004, 431 SCRA 401, 406.

            Lopez v. City of Manila, G.R. No. 127139, February 19, 1999, 303 SCRA 448,
460, citing Ty v. Trampe,  250 SCRA 500 (1995).

             Freedom from Debt Coalition v. Energy Regulatory Commission, supra note 61, at 171-172.

             Arceta v. Mangrobang, G.R. Nos. 152895 & 153151, June 15, 2004, 432 SCRA 136, 142, citing
Lacson v. The Executive Secretary, 361 Phil. 251, 263 (1999).

EN BANC
 

 
HON. EXECUTIVE
SECRETARY,                   G.R. No. 164171
HON. SECRETARY OF THE

DEPARTMENT OF TRANSPORTATION

AND COMMUNICATIONS (DOTC),

COMMISSIONER OF CUSTOMS,

ASSISTANT SECRETARY, LAND

TRANSPORTATION OFFICE (LTO),

COLLECTOR OF CUSTOMS, SUBIC

BAY FREE PORT ZONE, AND CHIEF

OF LTO, SUBIC BAY FREE PORT ZONE,

Petitioners,
                                      
Present:
 

                                                                     Panganiban, C.J.,      

                                                                     Puno,

                                                                     Quisumbing,

                                                                     Ynares-Santiago,

  Sandoval-Gutierrez,

- versus -                                            Carpio,

  Austria-Martinez,

  Corona,
   Carpio-Morales,

  Callejo, Sr.,

  Azcuna,

  Tinga,

  Chico-Nazario, and

  Garcia, JJ.

SOUTHWING HEAVY INDUSTRIES,

INC., represented by its President JOSE

T. DIZON, UNITED AUCTIONEERS,

INC., represented by its President

DOMINIC SYTIN, and MICROVAN,

INC., represented by its President              

MARIANO C. SONON,

                             Respondents.    

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

HON. EXECUTIVE
SECRETARY,                   G.R. No. 164172
SECRETARY OF THE DEPARTMENT
OF TRANSPORTATION AND

COMMUNICATION (DOTC),

COMMISSIONER OF CUSTOMS,

ASSISTANT SECRETARY, LAND

TRANSPORTATION OFFICE (LTO),

COLLECTOR OF CUSTOMS, SUBIC

BAY FREE PORT ZONE AND CHIEF OF

LTO, SUBIC BAY FREE PORT ZONE,

Petitioners,
 

- versus -

         

SUBIC INTEGRATED MACRO

VENTURES CORP., represented

by its President YOLANDA AMBAR,

                             Respondent.      

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

HON. EXECUTIVE
SECRETARY,                   G.R. No. 168741
HON. SECRETARY OF FINANCE,

THE CHIEF OF THE LAND

TRANSPORTATION OFFICE, THE

COMMISSIONER OF CUSTOMS,

and THE COLLECTOR OF CUSTOMS,

SUBIC SPECIAL ECONOMIC ZONE,

Petitioners,
 

- versus -

         

MOTOR VEHICLE IMPORTERS

ASSOCIATION OF SUBIC BAY

FREEPORT, INC., represented by                Promulgated:     

its President ALFREDO S. GALANG,

                             Respondent.                            February 20, 2006

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

DECISION
 

YNARES-SANTIAGO, J.:
 
The instant consolidated petitions seek to annul and set aside
the Decisions of the Regional Trial Court of Olongapo City, Branch
72, in Civil Case No. 20-0-04 and Civil Case No. 22-0-04, both dated
May 24, 2004; and the February 14, 2005 Decision of the Court of
Appeals in CA-G.R. SP. No. 83284, which declared Article 2, Section
3.1 of Executive Order No. 156 (EO 156) unconstitutional.  Said
executive issuance prohibits the importation into the country,
inclusive of the Special Economic and Freeport Zone or the Subic
Bay Freeport (SBF or Freeport), of used motor vehicles, subject to a
few exceptions.

The undisputed facts show that on December 12, 2002,

President Gloria Macapagal-Arroyo, through Executive Secretary
Alberto G. Romulo, issued EO 156, entitled “PROVIDING FOR A
COMPREHENSIVE INDUSTRIAL POLICY AND DIRECTIONS FOR
THE MOTOR VEHICLE DEVELOPMENT PROGRAM AND ITS
IMPLEMENTING GUIDELINES.”  The challenged provision states:

 
3.1       The importation into the country, inclusive of the
Freeport, of all types of used motor vehicles is prohibited,
except for the following:
 
3.1.1   A vehicle that is owned and for the personal use of a
returning resident or immigrant and covered by an authority to
import issued under the No-dollar Importation Program.  Such
vehicles cannot be resold for at least three (3) years;
 
 3.1.2   A vehicle for the use of an official of the Diplomatic
Corps and authorized to be imported by the Department of Foreign
Affairs;
 
3.1.3   Trucks excluding pickup trucks;
1.         with GVW of 2.5-6.0 tons covered by an
authority to import issued by the DTI.
2.         With GVW above 6.0 tons.
 
3.1.4   Buses:
1.         with GVW of 6-12 tons covered by an
authority to import issued by DTI;
2.         with GVW above 12 tons.
 
3.1.5   Special purpose vehicles:

1.      fire trucks

2.      ambulances

3.      funeral hearse/coaches

4.      crane lorries

5.      tractor heads and truck tractors

6.      boom trucks

7.      tanker trucks

8.      tank lorries with high pressure spray gun

9.      reefers or refrigerated trucks

10. mobile drilling derricks

11. transit/concrete mixers

12. mobile radiological units

13. wreckers or tow trucks

14. concrete pump trucks

15. aerial/bucket flat-form trucks

 16. street sweepers

17. vacuum trucks

18. garbage compactors

19. self loader trucks

20. man lift trucks

21. lighting trucks

22. trucks mounted with special purpose equipment

23. all other types of vehicle designed for a specific use.

          The issuance of EO 156 spawned three separate actions for

declaratory relief before Branch 72 of the Regional Trial Court of
Olongapo City, all seeking the declaration of the unconstitutionality of
Article 2, Section 3.1 of said executive order.  The cases were filed by
herein respondent entities, who or whose members, are classified as
Subic Bay Freeport Enterprises and engaged in the business of,
among others, importing and/or trading used motor vehicles.

G.R. No. 164171:

On January 16, 2004, respondents Southwing Heavy

Industries, Inc., (SOUTHWING) United Auctioneers, Inc. (UNITED
AUCTIONEERS), and Microvan, Inc. (MICROVAN), instituted a
declaratory relief case docketed as Civil Case No. 20-0-04,[1] against
the Executive Secretary, Secretary of Transportation and
Communication, Commissioner of Customs, Assistant Secretary and
Head of the Land Transportation Office, Subic Bay Metropolitan
Authority (SBMA), Collector of Customs for the Port at Subic Bay
Freeport Zone, and the Chief of the Land Transportation Office at
Subic Bay Freeport Zone.

SOUTHWING, UNITED AUCTIONEERS and MICROVAN

prayed that judgment be rendered (1) declaring Article 2, Section 3.1
of EO 156 unconstitutional and illegal; (2) directing the Secretary of
Finance, Commissioner of Customs, Collector of Customs and the
Chairman of the SBMA to allow the importation of used motor
vehicles; (2) ordering the Land Transportation Office and its
subordinates inside the Subic Special Economic Zone to process the
registration of the imported used motor vehicles; and (3) in general, to
allow the unimpeded entry and importation of used motor vehicles
subject only to the payment of the required customs duties. 

Upon filing of petitioners’ answer/comment, respondents

SOUTHWING and MICROVAN filed a motion for summary judgment
which was granted by the trial court.  On May 24, 2004, a summary
judgment was rendered declaring that Article 2, Section 3.1 of EO
156 constitutes an unlawful usurpation of legislative power vested by
the Constitution with Congress.  The trial court further held that the
proviso is contrary to the mandate of Republic Act No. 7227 (RA
7227) or the Bases Conversion and Development Act of 1992 which
allows the free flow of goods and capital within the Freeport.  The
dispositive portion of the said decision reads:

WHEREFORE, judgment is hereby rendered in favor of

petitioner declaring Executive Order 156 [Article 2, Section] 3.1 for
being unconstitutional and illegal; directing respondents Collector of
Customs based at SBMA to allow the importation and entry of used
motor vehicles pursuant to the mandate of RA 7227; directing
respondent Chief  of the Land Transportation Office and its
subordinates inside the Subic Special Economic Zone or SBMA to
process the registration of imported used motor vehicle; and in
general, to allow unimpeded entry and importation of used motor
vehicles to the Philippines subject only to the payment of the
required customs duties.
 
SO ORDERED.[2]

From the foregoing decision, petitioners sought relief before this

Court via a petition for review on certiorari, docketed as G.R. No.
164171.

G.R. No. 164172:

          On January 20, 2004, respondent Subic Integrated Macro

Ventures Corporation (MACRO VENTURES) filed with the same trial
court, a similar action for declaratory relief docketed as Civil Case No.
22-0-04,[3] with the same prayer and against the same parties [4] as
those in Civil Case No. 20-0-04.

In this case, the trial court likewise rendered a summary

judgment on May 24, 2004, holding that Article 2, Section 3.1 of EO
156, is repugnant to the constitution.[5]  Elevated to this Court via a
petition for review on certiorari, Civil Case No. 22-0-04 was docketed
as G.R. No. 164172.

G.R. No. 168741

On January 22, 2003, respondent Motor Vehicle Importers

Association of Subic Bay Freeport, Inc. (ASSOCIATION), filed
another action for declaratory relief with essentially the same prayer
as those in Civil Case No. 22-0-04 and Civil Case No. 20-0-04,
against the Executive Secretary, Secretary of Finance, Chief of the
Land Transportation Office, Commissioner of Customs, Collector of
Customs at SBMA and the Chairman of SBMA.  This was docketed
as Civil Case No. 30-0-2003,[6] before the same trial court. 

 
 In a decision dated March 10, 2004, the court a quo granted the
ASSOCIATION’s prayer and declared the assailed proviso as
contrary to the Constitution, to wit:

 
WHEREFORE, judgment is hereby rendered in favor of
petitioner declaring Executive Order 156 [Article 2, Section] 3.1 for
being unconstitutional and illegal; directing respondents Collector of
Customs based at SBMA to allow the importation and entry of used
motor vehicles pursuant to the mandate of RA 7227; directing
respondent Chief of the Land Transportation Office and its
subordinates inside the Subic Special Economic Zone or SBMA to
process the registration of imported used motor vehicles; directing
the respondent Chairman of the SBMA to allow the entry into the
Subic Special Economic Zone or SBMA imported used motor
vehicle; and in general, to allow unimpeded entry and importation of
used motor vehicles to the Philippines subject only to the payment
of the required customs duties.
 
SO ORDERED.[7]

Aggrieved, the petitioners in Civil Case No. 30-0-2003, filed a

petition for certiorari[8] with the Court of Appeals (CA-G.R. SP. No.
83284) which denied the petition on February 14, 2005 and sustained
the finding of the trial court that Article 2, Section 3.1 of EO 156, is
void for being repugnant to the constitution.  The dispositive portion
thereof, reads:

WHEREFORE, the instant petition for certiorari is hereby

DENIED.  The assailed decision of the Regional Trial Court, Third
Judicial Region, Branch 72, Olongapo City, in Civil Case No. 30-0-
2003, accordingly, STANDS.
 
SO ORDERED.[9]
  

The aforequoted decision of the Court of Appeals was elevated

to this Court and docketed as G.R. No. 168741.  In a Resolution
dated October 4, 2005,[10] said case was consolidated with G.R. No.
164171 and G.R. No. 164172.

Petitioners are now before this Court contending that Article 2,

Section 3.1 of EO 156 is valid and applicable to the entire country,
including the Freeeport.  In support of their arguments, they raise
procedural and substantive issues bearing on the constitutionality of
the assailed proviso.  The procedural issues are: the lack of
respondents’ locus standi to question the validity of EO 156, the
propriety of challenging EO 156 in a declaratory relief proceeding and
the applicability of a judgment on the pleadings in this case. 

Petitioners argue that respondents will not be affected by the

importation ban considering that their certificate of registration and
tax exemption do not authorize them to engage in the importation
and/or trading of used cars.  They also aver that the actions filed by
respondents do not qualify as declaratory relief cases.  Section 1,
Rule 63 of the Rules of Court provides that a petition for declaratory
relief may be filed before there is a breach or violation of rights. 
Petitioners claim that there was already a breach of respondents’
supposed right because the cases were filed more than a year after
the issuance of EO 156.  In fact, in Civil Case No. 30-0-2003,
numerous warrants of seizure and detention were issued against
imported used motor vehicles belonging to respondent
ASSOCIATION’s members.

Petitioners’ arguments lack merit.

The established rule that the constitutionality of a law or

administrative issuance can be challenged by one who will sustain a
direct injury as a result of its enforcement[11] has been satisfied in the
instant case.   The broad subject of the prohibited importation is “all
types of used motor vehicles.”  Respondents would definitely suffer
a direct injury from the implementation of EO 156 because their
certificate of registration and tax exemption authorize them to trade
and/or import new and used motor vehicles and spare parts,
except “used cars.”[12] Other types of motor vehicles imported and/or
traded by respondents and not falling within the category of used
cars would thus be subjected to the ban to the prejudice of their
business. Undoubtedly, respondents have the legal standing to assail
the validity of EO 156.

As to the propriety of declaratory relief as a vehicle for assailing

the executive issuance, suffice it to state that any breach of the rights
of respondents will not affect the case.  In Commission on Audit of
the Province of Cebu v. Province of Cebu,[13]  the Court entertained a
suit for declaratory relief to finally settle the doubt as to the proper
interpretation of the conflicting laws involved, notwithstanding a
violation of the right of the party affected.  We find no reason to
deviate from said ruling mindful of the significance of the present
case to the national economy.

So also, summary judgments were properly rendered by the

trial court because the issues involved in the instant case were pure
questions of law.  A motion for summary judgment is premised on the
assumption that the issues presented need not be tried either
because these are patently devoid of substance or that there is no
genuine issue as to any pertinent fact.  It is a method sanctioned by
the Rules of Court for the prompt disposition of a civil action in which
the pleadings raise only a legal issue, not a genuine issue as to any
material fact.[14]

 At any rate, even assuming the procedural flaws raised by

petitioners truly exist, the Court is not precluded from brushing aside
these technicalities and taking cognizance of the action filed by
respondents considering its importance to the public and in keeping
with the duty to determine whether the other branches of the
government have kept themselves within the limits of the
Constitution.[15]

We now come to the substantive issues, which are: (1)

whether there is statutory basis for the issuance of EO 156; and (2) if
the answer is in the affirmative, whether the application of Article 2,
Section 3.1 of EO 156, reasonable and within the scope provided by
law.

The main thrust of the petition is that EO 156 is constitutional

because it was issued pursuant to EO 226, the Omnibus Investment
Code of the Philippines and that its application should be extended to
the Freeport because the guarantee of RA 7227 on the free flow of
goods into the said zone is merely an exemption from customs duties
and taxes on items brought into the Freeport and not an open
floodgate for all kinds of goods and materials without restriction.

In G.R. No. 168741, the Court of Appeals invalidated Article 2,

Section 3.1 of EO 156, on the ground of lack of any statutory basis for
the President to issue the same.  It held that the prohibition on the
importation of used motor vehicles is an exercise of police power
vested on the legislature and absent any enabling law, the exercise
thereof by the President through an executive issuance, is void.
  

Police power is inherent in a government to enact laws, within

constitutional limits, to promote the order, safety, health, morals, and
general welfare of society.  It is lodged primarily with the legislature. 
By virtue of a valid delegation of legislative power, it may also be
exercised by the President and administrative boards, as well as the
lawmaking bodies on all municipal levels, including the barangay.[16] 
Such delegation confers upon the President quasi-legislative power
which may be defined as the authority delegated by the law-making
body to the administrative body to adopt rules and regulations
intended to carry out the provisions of the law and implement
legislative policy.[17]  To be valid, an administrative issuance, such as
an executive order, must comply with the following requisites:

(1)       Its promulgation must be authorized by the legislature;

(2)       It must be promulgated in accordance with the prescribed

procedure;

(3)       It must be within the scope of the authority given by the legislature;
and

(4)       It must be reasonable.[18]

Contrary to the conclusion of the Court of Appeals, EO 156

actually satisfied the first requisite of a valid administrative order.  It
has both constitutional and statutory bases. 

 
 Delegation of legislative powers to the President is permitted in
Section 28(2) of Article VI of the Constitution.   It provides:

(2)       The Congress may, by law, authorize the President

to fix within specified limits, and subject to such limitations and
restrictions as it may impose, tariff rates, import and export quotas,
tonnage and wharfage dues, and other duties or imposts within the
framework of the national development program of the
Government.[19] (Emphasis supplied)
 
 

The relevant statutes to execute this provision are:

1)      The Tariff and Customs Code which authorizes the

President, in the interest of national economy, general welfare and/or
national security, to, inter alia, prohibit the importation of any
commodity.  Section 401 thereof, reads:

Sec. 401. Flexible Clause. —

 
a.         In the interest of national economy, general
welfare and/or national security, and subject to the limitations
herein prescribed, the President, upon recommendation of the
National Economic and Development Authority (hereinafter
referred to as NEDA), is hereby empowered: x x x (2) to
establish import quota or to ban imports of any commodity, as
may be necessary; x x x Provided, That upon periodic
investigations by the Tariff Commission and recommendation of the
NEDA, the President may cause a gradual reduction of protection
levels granted in Section One hundred and four of this Code,
including those subsequently granted pursuant to this section. 
(Emphasis supplied)

 
 2)      Executive Order No. 226, the Omnibus Investment Code
of the Philippines which was issued on July 16, 1987, by then
President Corazon C. Aquino, in the exercise of legislative power
under the Provisional Freedom Constitution,[20] empowers the
President to approve or reject the prohibition on the importation of
any equipment or raw materials or finished products.  Pertinent
provisions thereof, read:

 
ART. 4. Composition of the board.  The Board of
Investments shall be composed of seven (7) governors: The
Secretary of Trade and Industry, three (3) Undersecretaries of
Trade and Industry to be chosen by the President; and three (3)
representatives from the government agencies and the private
sector x x x.
 
ART. 7.  Powers and duties of the Board.
 
xxxx
 
(12)     Formulate and implement rationalization programs for
certain industries whose operation may result in dislocation,
overcrowding or inefficient use of resources, thus impeding
economic growth.  For this purpose, the Board may formulate
guidelines for progressive manufacturing programs, local content
programs, mandatory sourcing requirements and dispersal of
industries.  In appropriate cases and upon approval of the
President, the Board may restrict, either totally or partially, the
importation of any equipment or raw materials or finished
products involved in the rationalization program; (Emphasis
supplied)

3)      Republic Act No. 8800, otherwise known as the

“Safeguard Measures Act” (SMA), and entitled “An Act Protecting
Local Industries By Providing Safeguard Measures To Be Undertaken
In Response To Increased Imports And Providing Penalties For
Violation Thereof,”[21] designated the Secretaries[22] of the Department
of Trade and Industry (DTI) and the Department of Agriculture, in
their capacity as alter egos of the President, as the implementing
authorities of the safeguard measures, which include, inter alia,
modification or imposition of any quantitative restriction on the
importation of a product into the Philippines.  The purpose of the SMA
is stated in the declaration of policy, thus:

 
SEC. 2. Declaration of Policy. – The State shall promote
competitiveness of domestic industries and producers based on
sound industrial and agricultural development policies, and efficient
use of human, natural and technical resources. In pursuit of this
goal and in the public interest, the State shall provide safeguard
measures to protect domestic industries and producers from
increased imports which cause or threaten to cause serious injury
to those domestic industries and producers.

There are thus explicit constitutional and statutory permission

authorizing the President to ban or regulate importation of articles
and commodities into the country. 

Anent the second requisite, that is, that the order must be
issued or promulgated in accordance with the prescribed procedure,
it is necessary that the nature of the administrative issuance is
properly determined.  As in the enactment of laws, the general rule is
that, the promulgation of administrative issuances requires previous
notice and hearing, the only exception being where the legislature
itself requires it and mandates that the regulation shall be based on
certain facts as determined at an appropriate investigation.[23]  This
exception pertains to the issuance of legislative rules as
distinguished from interpretative rules which give no real
consequence more than what the law itself has already prescribed;[24]
and are designed merely to provide guidelines to the law which the
administrative agency is in charge of enforcing.[25]  A legislative rule,
on the other hand, is in the nature of subordinate legislation, crafted
to implement a primary legislation. 

 In Commissioner of Internal Revenue v. Court of Appeals,[26] 

and   Commissioner of Internal Revenue v. Michel J. Lhuillier
Pawnshop, Inc.,[27] the Court enunciated the doctrine that when an
administrative rule goes beyond merely providing for the means that
can facilitate or render less cumbersome the implementation of the
law and substantially increases the burden of those governed, it
behooves the agency to accord at least to those directly affected a
chance to be heard and, thereafter, to be duly informed, before the
issuance is given the force and effect of law. 

In the instant case, EO 156 is obviously a legislative rule as it

seeks to implement or execute primary legislative enactments
intended to protect the domestic industry by imposing a ban on the
importation of a specified product not previously subject to such
prohibition.   The due process requirements in the issuance thereof
are embodied in Section 401[28] of the Tariff and Customs Code and
Sections 5 and 9 of the SMA[29] which essentially mandate the
conduct of investigation and public hearings before the regulatory
measure or importation ban may be issued.

In the present case, respondents neither questioned before this

Court nor with the courts below the procedure that paved the way for
the issuance of EO 156.  What they challenged in their petitions
before the trial court was the absence of “substantive due process” in
the issuance of the EO.[30]  Their main contention before the court a
quo is that the importation ban is illogical and unfair because it
unreasonably drives them out of business to the prejudice of the
national economy.

Considering the settled principle that in the absence of strong

evidence to the contrary, acts of the other branches of the
government are presumed to be valid,[31] and there being no objection
from the respondents as to the procedure in the promulgation of EO
156, the presumption is that said executive issuance duly complied
with the procedures and limitations imposed by law.

 
 To determine whether EO 156 has complied with the third and
fourth requisites of a valid administrative issuance, to wit, that it was
issued within the scope of authority given by the legislature and that it
is reasonable, an examination of the nature of a Freeport under RA
7227 and the primordial purpose of the importation ban under the
questioned EO is necessary.

RA 7227 was enacted providing for, among other things, the

sound and balanced conversion of the Clark and Subic military
reservations and their extensions into alternative productive uses in
the form of Special Economic and Freeport Zone, or the Subic Bay
Freeport, in order to promote the economic and social development
of Central Luzon in particular and the country in general. 

The Rules and Regulations Implementing RA 7227 specifically

defines the territory comprising the Subic Bay Freeport, referred to as
the Special Economic and Freeport Zone in Section 12 of RA 7227 as
"a separate customs territory consisting of the City of Olongapo and
the Municipality of Subic, Province of Zambales, the lands occupied
by the Subic Naval Base and its contiguous extensions as embraced,
covered and defined by the 1947 Philippine-U.S. Military Base
Agreement as amended and within the territorial jurisdiction of
Morong and  Hermosa, Province of Bataan, the metes and bounds of
which shall be delineated by the President of the Philippines;
provided further that pending establishment of secure perimeters
around the entire SBF, the SBF shall refer to the area demarcated by
the SBMA pursuant to Section 13[32] hereof."

Among the salient provisions of RA 7227 are as follows:

SECTION 12.   Subic Special Economic Zone. — 

 
xxxx
 
The abovementioned zone shall be subject to the following
policies:
 
xxxx
 
(a)       Within the framework and subject to the mandate and
limitations of the Constitution and the pertinent provisions of the
Local Government Code, the Subic Special Economic Zone shall
be developed into a self-sustaining, industrial, commercial, financial
and investment center to generate employment opportunities in and
around the zone and to attract and promote productive foreign
investments;
 
(b)       The Subic Special Economic Zone shall be operated
and managed as a separate customs territory ensuring free flow or
movement of goods and capital within, into and exported  out of the
Subic Special Economic Zone, as well as provide incentives such
as tax and duty-free importations of raw materials, capital and
equipment. However, exportation or removal of goods from the
territory of the Subic Special Economic Zone to the other parts of
the Philippine territory shall be subject to customs duties and taxes
under the Customs and Tariff Code and other relevant tax laws of
the Philippines;

 
 The Freeport was designed to ensure free flow or movement of
goods and capital within a portion of the Philippine territory in order to
attract investors to invest their capital in a business climate with the
least governmental intervention.  The concept of this zone was
explained by Senator Guingona in this wise:

Senator Guingona.  Mr. President, the special economic

zone is successful in many places, particularly Hong Kong, which is
a free port.  The difference between a special economic zone and
an industrial estate is simply expansive in the sense that the
commercial activities, including the establishment of banks,
services, financial institutions, agro-industrial activities, maybe
agriculture to a certain extent.
 
This delineates the activities that would have the least of
government intervention, and the running of the affairs of the
special economic zone would be run principally by the
investors themselves, similar to a housing subdivision, where
the subdivision owners elect their representatives to run the
affairs of the subdivision, to set the policies, to set the
guidelines.
 
We would like to see Subic area converted into a little
Hong Kong, Mr. President, where there is a hub of free port
and free entry, free duties and activities to a maximum spur
generation of investment and jobs.
 
While the investor is reluctant to come in the Philippines, as
a rule, because of red tape and perceived delays, we envision this
special economic zone to be an area where there will be minimum
government interference.
 
The initial outlay may not only come from the Government or
the Authority as envisioned here, but from them themselves,
because they would be encouraged to invest not only for the land
but also for the buildings and factories.  As long as they are
convinced that in such an area they can do business and reap
reasonable profits, then many from other parts, both local and
foreign, would invest, Mr. President.[33] (Emphasis, added)
  

With minimum interference from the government, investors can,

in general, engage in any kind of business as well as import and
export any article into and out of the Freeport.  These are among the
rights accorded to Subic Bay Freeport Enterprises under Section 39
of the Rules and Regulations Implementing RA 7227, thus –

 
SEC. 39.  Rights and Obligations.- SBF Enterprises shall
have the following rights and obligations:
 
a.         To freely engage in any business, trade, manufacturing,
financial or service activity, and to import and export freely
all types of goods into and out of the SBF, subject to the
provisions of the Act, these Rules and other regulations that
may be promulgated by the SBMA;

Citing, inter alia, the interpellations of Senator Enrile, petitioners

claim that the “free flow or movement of goods and capital” only
means that goods and material brought within the Freeport shall not
be subject to customs duties and other taxes and should not be
construed as an open floodgate for entry of all kinds of goods.  They
thus surmise that the importation ban on motor vehicles is applicable
within the Freeport.  Pertinent interpellations of Senator Enrile on the
concept of Freeport is as follows:

Senator Enrile: Mr. President, I think we are talking here of

sovereign concepts, not territorial concepts.  The concept that we
are supposed to craft here is to carve out a portion of our terrestrial
 domain as well as our adjacent waters and say to the world: “Well,
you can set up your factories in this area that we are
circumscribing, and bringing your equipment and bringing your
goods, you are not subject to any taxes and duties because you are
not within the customs jurisdiction of the Republic of the
Philippines, whether you store the goods or only for purposes of
transshipment or whether you make them into finished products
again to be reexported to other lands.”
 
xxxx
 
My understanding of a “free port” is, we are in effect
carving out a part of our territory and make it as if it were
foreign territory for purposes of our customs laws, and that
people can come, bring their goods, store them there and
bring them out again, as long as they do not come into the
domestic commerce of the Republic.
 
We do not really care whether these goods are stored here. 
The only thing that we care is for our people to have an
employment because of the entry of these goods that are being
discharged, warehoused and reloaded into the ships so that they
can be exported.  That will generate employment for us.  For as
long as that is done, we are saying, in effect, that we have the least
contact with our tariff and customs laws and our tax laws. 
Therefore, we consider these goods as outside of the customs
jurisdiction of the Republic of the Philippines as yet, until we draw
them from this territory and bring them inside our domestic
commerce.  In which case, they have to pass through our customs
gate.  I thought we are carving out this entire area and convert it
into this kind of concept.[34]

However, contrary to the claim of petitioners, there is nothing in

the foregoing excerpts which absolutely limits the incentive to
Freeport investors only to exemption from customs duties and taxes. 
Mindful of the legislative intent to attract investors, enhance
investment and boost the economy, the legislature could not have
limited the enticement only to exemption from taxes.  The minimum
interference policy of the government on the Freeport extends to the
kind of business that investors may embark on and the articles which
they may import or export into and out of the zone.  A contrary
interpretation would defeat the very purpose of the Freeport and drive
away investors.

It does not mean, however, that the right of Freeport

enterprises to import all types of goods and article is absolute.  Such
right is of course subject to the limitation that articles absolutely
prohibited by law cannot be imported into the Freeport.[35]  
Nevertheless, in determining whether the prohibition would apply to
the Freeport, resort to the purpose of the prohibition is necessary.

In issuing EO 156, particularly the prohibition on importation

under Article 2, Section 3.1, the President envisioned to rationalize
the importation of used motor vehicles and to enhance the
capabilities of the Philippine motor manufacturing firms to be globally
competitive producers of completely build-up units and their parts and
components for the local and export markets.[36]  In justifying the
issuance of EO 156, petitioners alleged that there has been a decline
in the sales of new vehicles and a remarkable growth of the sales of
imported used motor vehicles.  To address the same, the President
issued the questioned EO to prevent further erosion of the already
depressed market base of the local motor vehicle industry and to
curtail the harmful effects of the increase in the importation of used
motor vehicles.[37] 

Taking our bearings from the foregoing discussions, we hold

that the importation ban runs afoul the third requisite for a valid
administrative order.  To be valid, an administrative issuance must
not be ultra vires or beyond the limits of the authority conferred. It
must not supplant or modify the Constitution, its enabling statute and
other existing laws, for such is the sole function of the legislature
which the other branches of the government cannot usurp.  As held in
United BF Homeowner’s Association v. BF Homes, Inc.:[38]

The rule-making power of a public administrative body is a

delegated legislative power, which it may not use either to abridge
the authority given it by Congress or the Constitution or to enlarge
its power beyond the scope intended.  Constitutional and statutory
provisions control what rules and regulations may be promulgated
by such a body, as well as with respect to what fields are subject to
regulation by it.  It may not make rules and regulations which are
inconsistent with the provisions of the Constitution or a statute,
particularly the statute it is administering or which created it, or
which are in derogation of, or defeat, the purpose of a statute.
 
 

In the instant case, the subject matter of the laws authorizing

the President to regulate or forbid importation of used motor vehicles,
is the domestic industry.  EO 156, however, exceeded the scope of
its application by extending the prohibition on the importation of used
cars to the Freeport, which RA 7227, considers to some extent, a
foreign territory. The domestic industry which the EO seeks to
protect is actually the “customs territory” which is defined under the
Rules and Regulations Implementing RA 7227, as follows:

“the portion of the Philippines outside the Subic Bay Freeport

where the Tariff and Customs Code of the Philippines and
other national tariff and customs laws are in force and
effect.”[39]

The proscription in the importation of used motor vehicles

should be operative only outside the Freeport and the inclusion of
said zone within the ambit of the prohibition is an invalid modification
of RA 7227.  Indeed, when the application of an administrative
issuance modifies existing laws or exceeds the intended scope, as in
the instant case, the issuance becomes void, not only for being ultra
vires, but also for being unreasonable.

This brings us to the fourth requisite.  It is an axiom in

administrative law that administrative authorities should not act
arbitrarily and capriciously in the issuance of rules and regulations. 
To be valid, such rules and regulations must be reasonable and fairly
adapted to secure the end in view.  If shown to bear no reasonable
relation to the purposes for which they were authorized to be issued,
then they must be held to be invalid.[40]
  

There is no doubt that the issuance of the ban to protect the

domestic industry is a reasonable exercise of police power.  The
deterioration of the local motor manufacturing firms due to the influx
of imported used motor vehicles is an urgent national concern that
needs to be swiftly addressed by the President.  In the exercise of
delegated police power, the executive can therefore validly proscribe
the importation of these vehicles.  Thus, in Taxicab Operators of
Metro Manila, Inc. v. Board of Transportation,[41] the Court held that a
regulation phasing out taxi cabs more than six years old is a valid
exercise of police power.  The regulation was sustained as
reasonable holding that the purpose thereof was to promote the
convenience and comfort and protect the safety of the passengers.

The problem, however, lies with respect to the application of the

importation ban to the Freeport.  The Court finds no logic in the all
encompassing application of the assailed provision to the Freeport
which is outside the customs territory.  As long as the used motor
vehicles do not enter the customs territory, the injury or harm sought
to be prevented or remedied will not arise.  The application of the law
should be consistent with the purpose of and reason for the law. 
Ratione cessat lex, et cessat lex.  When the reason for the law
ceases, the law ceases.  It is not the letter alone but the spirit of the
law also that gives it life.[42]   To apply the proscription to the Freeport
would not serve the purpose of the EO.  Instead of improving the
general economy of the country, the application of the importation
ban in the Freeport would subvert the avowed purpose of RA 7227
which is to create a market that would draw investors and ultimately
boost the national economy. 

In similar cases, we also declared void the administrative

issuance or ordinances concerned for being unreasonable.  To
illustrate, in De la Cruz v. Paras,[43] the Court held as unreasonable
and unconstitutional an ordinance characterized by overbreadth.  In
that case, the Municipality of Bocaue, Bulacan, prohibited the
operation of all night clubs, cabarets and dance halls within its
jurisdiction for the protection of public morals.  As explained by the
Court:

 
x x x It cannot be said that such a sweeping exercise of a
lawmaking power by Bocaue could qualify under the term
reasonable.  The objective of fostering public morals, a worthy and
desirable end can be attained by a measure that does not
encompass too wide a field.  Certainly the ordinance on its face is
characterized by overbreadth.  The purpose sought to be achieved
could have been attained by reasonable restrictions rather than by
an absolute prohibition.  The admonition in Salaveria should be
heeded: “The Judiciary should not lightly set aside legislative action
when there is not a clear invasion of personal or property rights
under the guise of police regulation.”  It is clear that in the guise of
a police regulation, there was in this instance a clear invasion of
personal or property rights, personal in the case of those individuals
desirous of patronizing those night clubs and property in terms of
the investments made and salaries to be earned by those therein
employed.
 
 
 Lupangco v. Court of Appeals,[44] is a case involving a resolution
issued by the Professional Regulation Commission which prohibited
examinees from attending review classes and receiving handout
materials, tips, and the like three days before the date of examination
in order to preserve the integrity and purity of the licensure
examinations in accountancy. Besides being unreasonable on its face
and violative of academic freedom, the measure was found to be
more sweeping than what was necessary, viz: 

Needless to say, the enforcement of Resolution No. 105 is

not a guarantee that the alleged leakages in the licensure
examinations will be eradicated or at least minimized. Making the
examinees suffer by depriving them of legitimate means of review
or preparation on those last three precious days — when they
should be refreshing themselves with all that they have learned in
the review classes and preparing their mental and psychological
make-up for the examination day itself — would be like uprooting
the tree to get rid of a rotten branch. What is needed to be done by
the respondent is to find out the source of such leakages and stop it
right there. If corrupt officials or personnel should be terminated
from their loss, then so be it. Fixers or swindlers should be flushed
out. Strict guidelines to be observed by examiners should be set up
and if violations are committed, then licenses should be suspended
or revoked. x x x

In Lucena Grand Central Terminal, Inc. v. JAC Liner, Inc.,[45] the

Court  likewise struck down as unreasonable and overbreadth a city
ordinance granting an exclusive franchise for 25 years, renewable for
another 25 years, to one entity for the construction and operation of
one common bus and jeepney terminal facility in Lucena City.  While
professedly aimed towards alleviating the traffic congestion alleged to
have been caused by the existence of various bus and jeepney
terminals within the city, the ordinance was held to be beyond what is
reasonably necessary to solve the traffic problem in the city.

By parity of reasoning, the importation ban in this case should

also be declared void for its too sweeping and unnecessary
application to the Freeport which has no bearing on the objective of
the prohibition.  If the aim of the EO is to prevent the entry of used
motor vehicles from the Freeport to the customs territory, the solution
is not to forbid entry of these vehicles into the Freeport, but to
intensify governmental campaign and measures to thwart illegal
ingress of used motor vehicles into the customs territory.

At this juncture, it must be mentioned that on June 19, 1993,

President Fidel V. Ramos issued Executive Order No. 97-A, “Further
Clarifying The Tax And Duty-Free Privilege Within The Subic Special
Economic And Free Port Zone,” Section 1 of which provides:

 
SECTION 1.  The following guidelines shall govern the tax
and duty-free privilege within the Secured Area of the Subic Special
Economic and Free Port Zone:
 
1.1.      The Secured Area consisting of the presently fenced-
in former Subic Naval Base shall be the only completely tax and
duty-free area in the SSEFPZ.  Business enterprises and
individuals (Filipinos and foreigners) residing within the Secured
Area are free to import raw materials, capital goods, equipment,
and consumer items tax and dutry-free.  Consumption items,
however, must be consumed within the Secured Area.  Removal of
 raw materials, capital goods, equipment and consumer items out of
the Secured Area for sale to non-SSEFPZ registered enterprises
shall be subject to the usual taxes and duties, except as may be
provided herein.

In Tiu v. Court of Appeals [46] as reiterated in Coconut Oil

Refiners Association, Inc. v. Torres,[47] this provision limiting the
special privileges on tax and duty-free importation in the presently
fenced-in former Subic Naval Base has been declared valid and
constitutional and in accordance with RA 7227.  Consistent with these
rulings and for easier management and monitoring of activities and to
prevent fraudulent importation of merchandise and smuggling, the
free flow and importation of used motor vehicles shall be operative
only within the “secured area.” 

In sum, the Court finds that Article 2, Section 3.1 of EO 156 is

void insofar as it is made applicable to the presently secured fenced-
in former Subic Naval Base area as stated in Section 1.1 of EO 97-
A.     Pursuant to the separability clause[48] of EO 156, Section 3.1 is
declared valid insofar as it applies to the customs territory or the
Philippine territory outside the presently secured fenced-in former
Subic Naval Base area as stated in Section 1.1 of EO 97-A.  Hence,
used motor vehicles that come into the Philippine territory via the
secured fenced-in former Subic Naval Base area may be stored,
used or traded therein, or exported out of the Philippine territory, but
they cannot be imported into the Philippine territory outside of the
secured fenced-in former Subic Naval Base area.

          WHEREFORE, the petitions are PARTIALLY GRANTED and

the May 24, 2004 Decisions of Branch 72, Regional Trial Court of
Olongapo City, in Civil Case No. 20-0-04 and Civil Case No. 22-0-04;
and the February 14, 2005 Decision of the Court of Appeals in CA-
G.R. SP No. 63284, are MODIFIED insofar as they declared Article 2,
Section 3.1 of Executive Order No. 156, void in its entirety.

          Said provision is declared VALID insofar as it applies to the

Philippine territory outside the presently fenced-in former Subic Naval
Base area and VOID with respect to its application to the secured
fenced-in former Subic Naval Base area.

SO ORDERED.

                                                CONSUELO YNARES-SANTIAGO

                                                               Associate Justice

         

WE CONCUR:

ARTEMIO V. PANGANIBAN

Chief Justice

 
REYNATO S. PUNO             LEONARDO A. QUISUMBING   
    Associate Justice                            Associate Justice

 
ANGELINA SANDOVAL-GUTIERREZ       ANTONIO T. CARPIO

        Associate Justice                               Associate Justice

 
MA. ALICIA AUSTRIA-MARTINEZ            RENATO C. CORONA

     Associate Justice                                  Associate Justice

 
 

CONCHITA CARPIO-MORALES           ROMEO J. CALLEJO, SR.

     Associate Justice                                Associate Justice

         ADOLFO S. AZCUNA                          DANTE O. TINGA

               Associate Justice                              Associate

Justice

MINITA V. CHICO-NAZARIO                       CANCIO C. GARCIA

           Associate Justice                                              

Associate Justice

CERTIFICATION
 

Pursuant to Section 13, Article VIII of the Constitution, it is

hereby certified that the conclusions in the above Decision were
reached in consultation before the case was assigned to the writer of
the opinion of the Court.
  

ARTEMIO V. PANGANIBAN

      Chief Justice

[1] Rollo (G.R. No. 164171), pp. 81-90.

[2] Id. at 68; rollo (G.R. No. 164172), p. 65.  Penned by Judge Eliodoro G. Ubiadas.

[3] Rollo (G.R. No. 164172), pp. 78-86.

[4]The Executive Secretary, Secretary of Transportation and Communication, Commissioner of Customs,

Assistant Secretary and Head of the Land Transportation Office, Subic Bay Metropolitan Authority
(SBMA), Collector of Customs for the Port at Subic Bay Freeport Zone, and the Chief of the Land
Transportation Office at Subic Bay Freeport Zone. 

[5]The dispositive portion thereof is identically worded as the quoted decretal portion of
the decision in Civil Case No. 20-0-04. 

[6] Rollo (G.R. No. 168741), pp. 139-153.

[7] Id. at 264.  Penned by Judge Eliodoro G. Ubiadas.

[8] Docketed as CA-G.R. SP. No. 83284.

[9]Dated February 14, 2005, rollo (G.R. No. 168741), p. 125.  Penned by Associate
Justice Perlita J. Tria Tirona and concurred in by Associate Justices Delilah Vidallon-
Magtolis and Jose C. Reyes, Jr.  Petitioners filed a motion for reconsideration but was
denied by the Court of Appeals on June 28, 2004, id. at 126.

[10] Id. at 354.

[11] Miranda v. Aguirre, 373 Phil. 386, 397 (1999).

[12] Rollo (G.R. No. 164171), pp. 94-96 and rollo (G.R. No. 164172), p. 88.

[13] 422 Phil. 519, 531 (2001).

Republic v. Sandiganbayan, G.R. No. 152154, November 18, 2003, 416 SCRA 133,
[14]
140.
 Coconut Oil Refiners Association, Inc. v. Torres, G.R. No. 132527, July 29, 2005, 465
[15]
SCRA 47, 62.

[16] Camarines Norte Electric Cooperative, Inc. v. Torres, 350 Phil. 315, 331 (1998).

[17] Cruz, Philippine Administrative Law, 2003 Edition, p. 24.

[18] Id. at 41.

[19] Essentially the same provision is embodied in the 1935 and 1973 Constitutions.

Constitution (1935), Art. VI, Sec 22, par. (2):

The Congress may by law authorize the President, subject to such limitations and restrictions as it may
impose, to fix, within specified limits, tariff rates, import or export quotas, and tonnage and wharfage dues.

Constitution (1973), Art. VII, Sec 17, par. (2):

 The Batasang Pambansa may by law authorize the President to fix within specified limits, and subject to
such limitations and restrictions as it may impose, tariff rates, import and export quotas, tonnage and
wharfage dues, and other duties or imposts.

[20]Bernas, S.J., The 1987 Constitution of the Philippines: A Commentary, 1996 Edition,
p. 610.

Enacted on July 17, 2000.  See Filipino Metals Corporation v. Secretary of Trade and
[21]
Industry, G.R. No. 157498, July 15, 2005, 463 SCRA 616, 619.

“Secretary” as defined under Section 4 (n) of the SMA refers to either the Secretary of
[22]
the Department of Trade and Industry in the case of non-agricultural products or the
Secretary of the Department of Agriculture in the case of agricultural products.

[23] Cruz, supra note 17 at 53.

[24] Commissioner of Internal Revenue v. Court of Appeals, 329 Phil. 987, 1007 (1996).

[25]Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance

Secretary, G.R. No. 108524, November 10, 1994, 238 SCRA 63, 69.

[26] Supra.

[27] 453 Phil. 1043, 1058 (2003).

[28] Sec. 401.  Flexible Clause. —

a.             In the interest of national economy, general welfare and/or national security, and subject
to the limitations herein prescribed, the President, upon recommendation of the National Economic and
Development Authority (hereinafter referred to as NEDA), is hereby empowered: (1) to increase, reduce or
remove existing protective rates of import duty (including any necessary change in classification). The
existing rates may be increased or decreased but in no case shall the reduced rate of import duty be lower
than the basic rate of ten (10) per cent ad valorem, nor shall the increased rate of import duty be higher than
a maximum of one hundred (100) per cent ad valorem; (2) to establish import quota or to ban imports of
any commodity, as may be necessary; and (3) to impose an additional duty on all imports not exceeding ten
(10) per cent ad valorem whenever necessary; Provided, That upon periodic investigations by the Tariff
Commission and recommendation of the NEDA, the President may cause a gradual reduction of protection
levels granted in Section One Hundred and Four of this Code, including those subsequently granted
pursuant to this section. 

b.             Before any recommendation is submitted to the President by the NEDA pursuant to the
provisions of this section, except in the imposition of an additional duty not exceeding ten (10) per cent ad
valorem, the Commission shall conduct an investigation in the course of which they shall hold public
hearings wherein interested parties shall be afforded reasonable opportunity to be present, produce
evidence and to be heard. The Commission shall also hear the views and recommendations of any
government office, agency or instrumentality concerned. The Commission shall submit their findings and
recommendations to the NEDA within thirty (30) days after the termination of the public hearings.

[29] SEC. 5. Conditions for the Application of General Safeguard Measures. – The Secretary shall apply a
general safeguard measure upon a positive final determination of the Commission that a product is being
imported into the country in increased quantities, whether absolute or relative to the domestic production,
as to be a substantial cause of serious injury or threat thereof to the domestic industry; however, in the case
of non-agricultural products, the secretary shall first establish that the application of such safeguard
measures will be in the public interest.

SEC. 9. Formal Investigation. – Within five (5) working days from receipt of the request from the
Secretary, the Commission shall publish the notice of the commencement of the investigation, and public
hearings which shall afford interested parties and consumers an opportunity to be present, or to present
evidence, to respond to the presentation of other parties and consumers, and otherwise be heard.   Evidence
and positions with respect to the importation of the subject article shall be submitted to the Commission
within fifteen (15) days after the initiation of the investigation by the Commission.

The Commission shall complete its investigation and submit its report to the Secretary within one
hundred twenty (120) calendar days from receipt of the referral by the Secretary, except when the Secretary
certifies that the same is urgent, in which case the Commission shall complete the investigation and submit
the report to the Secretary within sixty (60) days.

Rollo (G.R. No. 168741), pp. 144-145; rollo (G.R. No. 164172), pp. 205-206; rollo
[30]
(G.R. No. 164171), pp. 87-86.

[31] Coconut Oil Refiners Association, Inc. v. Torres, supra note 15 at 62-63.

[32]Section 13 of the Rules and Regulations Implementing RA 7227 provides: 

Establishment of Secure Perimeters, Points of Entry and Duty and Tax Free Areas of the
SBF. -  Pending the establishment of secure perimeters around the entire SBF, the SBMA
shall have the authority to establish and demarcate areas of the SBF with secure
perimeters within which articles and merchandise free of duties and internal revenue
taxes may be limited, without prejudice to the availment of other benefits conferred by
the Act and these Rules in the SBF outside such areas.  The SBMA shall furthermore
have the authority to establish, regulate and maintain points of entry to the SBF or to any
limited duty and tax-free areas of the SBF.
[33] RECORDS, SENATE 8TH CONGRESS, SESSION (JANUARY 14, 1992).

[34] Id.

[35]SEC. 45. Importation of Articles. – In general, all articles may be imported by SBF
Enterprises into the SBF free of customs and import duties and national internal revenue
taxes, except those articles prohibited by the SBMA and those absolutely prohibited by
law. (Rules and Regulations Implementing RA 7227)

[36] Whereas clauses of EO 156.

Rollo (G.R. No. 168741), pp. 77-79; rollo (G.R. No. 164172), p. 46; rollo (G.R. No.
[37]
164171), p. 48.

[38] 369 Phil. 568, 579-580 (1999).

[39] Definitions, Section 3 (n).

Lupangco v. Court of Appeals, G.R. No. L-77372, April 29, 1988, 160 SCRA 848,
[40]
858-859.

[41] 202 Phil. 925, 935-936 (1982).

[42] Vergara v. People, G.R. No. 160328, February 4, 2005, 450 SCRA 495, 508.

[43] 208 Phil. 490, 499-500 (1983).

[44] Supra note 40 at 860.

[45] G.R. No. 148339, February 23, 2005, 452 SCRA 174.

[46] 361 Phil. 229 (1999).

[47] Supra note 15.

[48] Article 7, Section 3:

Sec. 3. Separability Clause. – The provisions of this Executive Order are hereby
declared separable and in the event any of such provisions is declared unconstitutional,
the other provisions, which are not affected, thereby remain in force and effect.

EN BANC

[G.R. No. 154599.  January 21, 2004]

THE LIGA NG MGA BARANGAY NATIONAL, petitioner, vs. THE CITY MAYOR
OF MANILA, HON. JOSE ATIENZA, JR., and THE CITY COUNCIL OF MANILA,
respondents.

DECISION

DAVIDE, JR., C.J.:

This petition for certiorari under Rule 65 of the Rules of Court seeks the nullification of
Manila City Ordinance No. 8039, Series of 2002, and respondent City Mayor’s Executive
Order No. 011, Series of  2002, dated 15 August 2002 , for being patently contrary to
law.

The antecedents are as follows:

Petitioner Liga ng mga Barangay National (Liga for brevity) is the national organization
of all the barangays in the Philippines, which pursuant to Section 492 of Republic Act
No. 7160, otherwise known as The Local Government Code of 1991, constitutes the duly
elected presidents of highly-urbanized cities, provincial chapters, the metropolitan Manila
Chapter, and metropolitan political subdivision chapters.

Section 493 of that law provides that “[t]he 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.”  All other matters not provided
for in the law affecting the internal organization of the leagues of local government units
shall be governed by their respective constitution and by-laws, which must always
conform to the provisions of the Constitution and existing laws.

On 16 March 2000, the Liga adopted and ratified its own Constitution and By-laws to
govern its internal organization. Section 1, third paragraph, Article XI of said
Constitution and By-Laws states:

All other election matters not covered in this Article shall be governed by the “Liga
Election Code” or such other rules as may be promulgated by the National Liga
Executive Board in conformity with the provisions of existing laws.

By virtue of the above-cited provision, the Liga adopted and ratified its own Election
Code. Section 1.2, Article I of the Liga Election Code states:

1.2     Liga ng mga Barangay Provincial, Metropolitan, HUC/ICC Chapters. There shall
be nationwide synchronized elections for the provincial, metropolitan, and HUC/ICC
chapters to be held on the third Monday of the month immediately after the month when
the synchronized elections in paragraph 1.1 above was held.  The incumbent Liga chapter
president concerned duly assisted by the proper government agency, office or
department, e.g. Provincial/City/NCR/Regional Director, shall convene all the duly
elected Component City/Municipal Chapter Presidents and all the current elected Punong
Barangays (for HUC/ICC) of the respective chapters in any public place within its area of
jurisdiction for the purpose of reorganizing and electing the officers and directors of the
provincial, metropolitan or HUC/ICC Liga chapters.  Said president duly assisted by the
government officer aforementioned, shall notify, in writing, all the above concerned at
least fifteen (15) days before the scheduled election meeting on the exact date, time, place
and requirements of the said meeting.

The Liga thereafter came out with its Calendar of Activities and Guidelines in the
Implementation of the Liga Election Code of 2002, setting on 21 October 2002 the
synchronized elections for highly urbanized city chapters, such as the Liga Chapter of
Manila, together with independent component city, provincial, and metropolitan chapters.

On 28 June 2002, respondent City Council of Manila enacted Ordinance No. 8039, Series
of 2002, providing, among other things, for the election of representatives of the District
Chapters in the City Chapter of Manila and setting the elections for both chapters thirty
days after the barangay elections. Section 3 (A) and (B) of the assailed ordinance read:

SEC.  3. Representation Chapters. — Every Barangay shall be represented in the said

Liga Chapters … by the Punong Barangay…or, in his absence or incapacity, by the
kagawad duly elected for the purpose among its members….

A.      District Chapter

All elected Barangay Chairman in each District shall elect from among themselves the
President, Vice-President and five (5) members of the Board….

B.      City Chapter

The District Chapter representatives shall automatically become members of the Board
and they shall elect from among themselves a President, Vice-President, Secretary,
Treasurer, Auditor and create other positions as it may deem necessary for the
management of the chapter.

The assailed ordinance was later transmitted to respondent City Mayor Jose L. Atienza,
Jr., for his signature and approval.

On 16 July 2002, upon being informed that the ordinance had been forwarded to the
Office of the City Mayor, still unnumbered and yet to be officially released, the Liga sent
respondent Mayor of Manila a letter requesting him that said ordinance be vetoed
considering that it encroached upon, or even assumed, the functions of the Liga through
legislation, a function which was clearly beyond the ambit of the powers of the City
Council.

Respondent Mayor, however, signed and approved the assailed city ordinance and issued
on 15 August 2002 Executive Order No. 011, Series of 2002, to implement the ordinance.
Hence, on 27 August 2002, the Liga filed the instant petition raising the following issues:

WHETHER OR NOT THE RESPONDENT CITY COUNCIL OF MANILA

COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR
IN EXCESS OF JURISDICTION, WHEN IT ENACTED CITY ORDINANCE NO.
8039 S. 2002 PURPOSELY TO GOVERN THE ELECTIONS OF THE MANILA
CHAPTER OF THE LIGA NG MGA BARANGAYS AND WHICH PROVIDES A
DIFFERENT MANNER OF ELECTING ITS OFFICERS, DESPITE THE FACT THAT
SAID CHAPTER’S ELECTIONS, AND THE ELECTIONS OF ALL OTHER
CHAPTERS OF THE LIGA NG MGA BARANGAYS FOR THAT MATTER, ARE BY
LAW MANDATED TO BE GOVERNED BY THE LIGA CONSTITUTION AND BY-
LAWS AND THE LIGA ELECTION CODE.

II

WHETHER OR NOT THE RESPONDENT CITY MAYOR OF MANILA

COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR
IN EXCESS OF JURISDICTION WHEN HE ISSUED EXECUTIVE ORDER NO. 011
TO IMPLEMENT THE QUESTIONED CITY ORDINANCE NO. 8039 S. 2002.

In support of its petition, the Liga argues that City Ordinance No. 8039, Series of 2002,
and Executive Order No. 011, Series of 2002, contradict the Liga Election Code and are
therefore invalid. There exists neither rhyme nor reason, not to mention the absence of
legal basis, for the Manila City Council to encroach upon, or even assume, the functions
of the Liga by prescribing, through legislation, the manner of conducting the Liga
elections other than what has been provided for by the Liga Constitution and By-laws and
the Liga Election Code.  Accordingly, the subject ordinance is an ultra vires act of the
respondents and, as such, should be declared null and void.

As for its prayer for the issuance of a temporary restraining order, the petitioner cites as
reason therefor the fact that under Section 5 of the assailed city ordinance, the Manila
District Chapter elections would be held thirty days after the regular barangay elections.
Hence, it argued that the issuance of a temporary restraining order and/or preliminary
injunction would be imperative to prevent the implementation of the ordinance and
executive order.

On 12 September 2002, Barangay Chairman Arnel Peña, in his capacity as a member of

the Liga ng mga Barangay in the City Chapter of Manila, filed a Complaint in
Intervention with Urgent Motion for the Issuance of Temporary Restraining Order and/or
Preliminary Injunction. He supports the position of the Liga and prays for the declaration
of the questioned ordinance and executive order, as well as the elections of the Liga ng
mga Barangay pursuant thereto, to be null and void.  The assailed ordinance prescribing
for an “indirect manner of election” amended, in effect, the provisions of the Local
Government Code of 1991, which provides for the election of the Liga officers at large. 
It also violated and curtailed the rights of the petitioner and intervenor, as well as the
other 896 Barangay Chairmen in the City of Manila, to vote and be voted upon in a direct
election.

On 25 October 2002, the Office of the Solicitor General (OSG) filed a Manifestation in
lieu of Comment. It supports the petition of the Liga, arguing that the assailed city
ordinance and executive order are clearly inconsistent with the express public policy
enunciated in R.A. No. 7160. Local political subdivisions are able to legislate only by
virtue of a valid delegation of legislative power from the national legislature.  They are
mere agents vested with what is called the power of subordinate legislation.  Thus, the
enactments in question, which are local in origin, cannot prevail against the decree, which
has the force and effect of law.

On the issue of non-observance by the petitioners of the hierarchy-of-courts rule, the

OSG posits that technical rules of procedure should be relaxed in the instant petition. 
While Batas Pambansa Blg. 129, as amended, grants original jurisdiction over cases of
this nature to the Regional Trial Court (RTC), the exigency of the present petition,
however, calls for the relaxation of this rule.  Section 496 (should be Section 491) of the
Local Government Code of 1991 primarily intended that the Liga ng mga Barangay
determine the representation of the Liga in the sanggunians for the immediate ventilation,
articulation, and crystallization of issues affecting barangay government administration. 
Thus, the immediate resolution of this petition is a must.

On the other hand, the respondents defend the validity of the assailed ordinance and
executive order and pray for the dismissal of the present petition on the following
grounds: (1) certiorari under Rule 65 of the Rules of Court is unavailing; (2) the petition
should not be entertained by this Court in view of the pendency before the Regional Trial
Court of Manila of two actions or petitions questioning the subject ordinance and
executive order; (3) the petitioner is guilty of forum shopping; and (4) the act sought to
be enjoined is fait accompli.

The respondents maintain that certiorari is an extraordinary remedy available to one

aggrieved by the decision of a tribunal, officer, or board exercising judicial or quasi-
judicial functions. The City Council and City Mayor of Manila are not the “board” and
“officer” contemplated in Rule 65 of the Rules of Court because both do not exercise
judicial functions. The enactment of the subject ordinance and issuance of the questioned
executive order are legislative and executive functions, respectively, and thus, do not fall
within the ambit of “judicial functions.” They are both within the prerogatives, powers,
and authority of the City Council and City Mayor of Manila, respectively.  Furthermore,
the petition failed to show with certainty that the respondents acted without or in excess
of jurisdiction or with grave abuse of discretion.

The respondents also asseverate that the petitioner cannot claim that it has no other
recourse in addressing its grievance other than this petition for certiorari.  As a matter of
fact, there are two cases pending before Branches 33 and 51 of the RTC of Manila (one is
for mandamus; the other, for declaratory relief) and three in the Court of Appeals (one is
for prohibition; the two other cases, for quo warranto), which are all akin to the present
petition in the sense that the relief being sought therein is the declaration of the invalidity
of the subject ordinance.  Clearly, the petitioner may ask the RTC or the Court of Appeals
the relief being prayed for before this Court.  Moreover, the petitioner failed to prove
discernible compelling reasons attending the present petition that would warrant
cognizance of the present petition by this Court.

Besides, according to the respondents, the petitioner has transgressed the proscription
against forum-shopping in filing the instant suit.  Although the parties in the other
pending cases and in this petition are different individuals or entities, they represent the
same interest.

With regard to petitioner's prayer for temporary restraining order and/ or preliminary
injunction in its petition, the respondents maintain that the same had become moot and
academic in view of the elections of officers of the City Liga ng mga Barangay on 15
September 2002 and their subsequent assumption to their respective offices. Since the
acts to be enjoined are now fait accompli, this petition for certiorari with an application
for provisional remedies must necessarily fail.  Thus, where the records show that during
the pendency of the case certain events or circumstances had taken place that render the
case moot and academic, the petition for certiorari must be dismissed.

After due deliberation on the pleadings filed, we resolve to dismiss this petition for
certiorari.

First, the respondents neither acted in any judicial or quasi-judicial capacity nor
arrogated unto themselves any judicial or quasi-judicial prerogatives.  A petition for
certiorari under Rule 65 of the 1997 Rules of Civil Procedure is a special civil action that
may be invoked only against a tribunal, board, or officer exercising judicial or quasi-
judicial functions.

Section 1, Rule 65 of the 1997 Rules of Civil Procedure provides:

SECTION 1.  Petition for certiorari. — When any tribunal, board or officer exercising
judicial or quasi-judicial functions has acted without or in excess of its or his jurisdiction,
or with grave abuse of discretion amounting to lack or excess of jurisdiction, and there is
no appeal, or 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 of such tribunal, board or officer, and granting such incidental reliefs as law
and justice may require.

Elsewise stated, for a writ of certiorari to issue, the following requisites must concur:  (1)
it must be directed against a tribunal, board, or officer exercising judicial or quasi-judicial
functions; (2) the tribunal, board, or officer must have acted without or in excess of
jurisdiction or with grave abuse of discretion amounting lack or excess of jurisdiction;
and (3) there is no appeal or any plain, speedy, and adequate remedy in the ordinary
course of law.

A respondent is said to be exercising judicial function where he has the power to

determine what the law is and what the legal rights of the parties are, and then undertakes
to determine these questions and adjudicate upon the rights of the parties.

Quasi-judicial function, on the other hand, is “a term which applies to the actions,
discretion, etc., of public administrative officers or bodies … required to investigate facts
or ascertain the existence of facts, hold hearings, and draw conclusions from them as a
basis for their official action and to exercise discretion of a judicial nature.”

Before a tribunal, board, or officer may exercise judicial or quasi-judicial acts, it is

necessary that there be a law that gives 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 before a tribunal, board, or officer clothed with power and authority
to determine the law and adjudicate the respective rights of the contending parties.

The respondents do not fall within the ambit of tribunal, board, or officer exercising
judicial or quasi-judicial functions.  As correctly pointed out by the respondents, the
enactment by the City Council of Manila of the assailed ordinance and the issuance by
respondent Mayor of the questioned executive order were done in the exercise of
legislative and executive functions, respectively, and not of judicial or quasi-judicial
functions.  On this score alone, certiorari will not lie.

Second, although the instant petition is styled as a petition for certiorari, in essence, it
seeks the declaration by this Court of the unconstitutionality or illegality of the
questioned ordinance and executive order.  It, thus, partakes of the nature of a petition for
declaratory relief over which this Court has only appellate, not original, jurisdiction.
Section 5, Article VIII of the Constitution provides:

Sec. 5.  The Supreme Court shall have the following powers:

(1)           Exercise original jurisdiction over cases affecting ambassadors, other

public ministers and consuls, and over petitions for certiorari, prohibition,
mandamus, quo warranto, and habeas corpus.

(2)           Review, revise, reverse, modify, or affirm on appeal or certiorari as the

law or the Rules of Court may provide, final judgments and orders of
lower courts in:

(a)    All cases in which the constitutionality or validity of any treaty,

international or executive agreement, law, presidential decree,
proclamation, order, instruction, ordinance, or regulation is in
question. (Italics supplied).
As such, this petition must necessary fail, as this Court does not have original jurisdiction
over a petition for declaratory relief even if only questions of law are involved.

Third, even granting arguendo that the present petition is ripe for the extraordinary writ
of certiorari, there is here a clear disregard of the hierarchy of courts. No special and
important reason or exceptional and compelling circumstance has been adduced by the
petitioner or the intervenor why direct recourse to this Court should be allowed.

We have held that this Court’s original jurisdiction to issue a writ of certiorari (as well as
of prohibition, mandamus, quo warranto, habeas corpus and injunction) is not exclusive,
but is concurrent with the Regional Trial Courts and the Court of Appeals in certain
cases. As aptly stated in People v. Cuaresma:

This concurrence of jurisdiction is not, however, to be taken as according to parties

seeking any of the writs an absolute, unrestrained freedom of choice of the court to which
application therefor0 will be directed.  There is after all a hierarchy of courts.  That
hierarchy is determinative of the venue of appeals, and also serves as a general
determinant of the appropriate forum for petitions for the extraordinary writs.  A
becoming regard of that judicial hierarchy most certainly indicates that petitions for the
issuance of extraordinary writs against first level (“inferior”) courts should be filed with
the Regional Trial Court, and those against the latter, with the Court of Appeals.  A direct
invocation of the Supreme Court’s original jurisdiction to issue these writs should be
allowed only when there are special and important reasons therefor, clearly and
specifically set out in the petition.  This is [an] established policy.  It is a policy necessary
to prevent inordinate demands upon the Court’s time and attention which are better
devoted to those matters within its exclusive jurisdiction, and to prevent further over-
crowding of the Court’s docket.

As we have said in Santiago v. Vasquez, the propensity of litigants and lawyers to

disregard the hierarchy of courts in our judicial system by seeking relief directly from this
Court must be put to a halt for two reasons: (1) it would be an imposition upon the
precious time of this Court; and (2) it would cause an inevitable and resultant delay,
intended or otherwise, in the adjudication of cases, which in some instances had to be
remanded or referred to the lower court as the proper forum under the rules of procedure,
or as better equipped to resolve the issues because this Court is not a trier of facts.

Thus, we shall reaffirm the judicial policy that this Court will not entertain direct resort to
it unless the redress desired cannot be obtained in the appropriate courts, and exceptional
and compelling circumstances justify the availment of the extraordinary remedy of writ
of certiorari, calling for the exercise of its primary jurisdiction.

Petitioner’s reliance on Pimentel v. Aguirre is misplaced because the non-observance of

the hierarchy-of-courts rule was not an issue therein.  Besides, what was sought to be
nullified in the petition for certiorari and prohibition therein was an act of the President
of the Philippines, which would have greatly affected all local government units.  We
reiterated therein that when an act of the legislative department is seriously alleged to
have infringed the Constitution, settling the controversy becomes the duty of this Court. 
The same is true when what is seriously alleged to be unconstitutional is an act of the
President, who in our constitutional scheme is coequal with Congress.

We hesitate to rule that the petitioner and the intervenor are guilty of forum-shopping. 
Forum-shopping exists where the elements of litis pendentia are present or when a final
judgment in one case will amount to res judicata in the other.  For litis pendentia to exist,
the following requisites must be present: (1) identity of parties, or at least such parties as
are representing the same interests in both actions; (2) identity of rights asserted and
reliefs prayed for, the reliefs being founded  on the same facts; and (3) identity with
respect to the two preceding particulars in the two cases, such that any judgment that may
be rendered in the pending case, regardless of which party is successful, would amount to
res judicata in the other case.

In the instant petition, and as admitted by the respondents, the parties in this case and in
the alleged other pending cases are different individuals or entities; thus, forum-shopping
cannot be said to exist.  Moreover, even assuming that those five petitions are indeed
pending before the RTC of Manila and the Court of Appeals, we can only guess the
causes of action and issues raised before those courts, considering that the respondents
failed to furnish this Court with copies of the said petitions.

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

Davide, Jr., C.J., Puno, Vitug, Quisumbing, Ynares-Santiago, Sandoval-Gutierrez,

Carpio, Austria-Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, and Tinga, JJ.,
concur.

Panganiban, J., in the result.

Entitled An Ordinance Prescribing a Procedure for the Election of Officers of the Liga ng
mga Barangay and the Panlungsod na Pederasyon ng Sangguniang Kabataan in the City
of Manila. Rollo, 16-17.

Entitled Creating the Committee on Election to Supervise and Implement the Election of
the Liga ng mga Barangay and the Panlungsod na Pederasyon ng Sangguniang Kabataan
in the City of Manila. Rollo, 18-19.

Section 507, R.A. No. 7160.

Rollo, 20-39.

Id., 40-52.

Rollo, 53-56.
Rollo, 61-64.

Rollo, 69-77.

Id., 103-111.

Rollo, 130-136.

1 FLORENZ D. REGALADO, REMEDIAL LAW  COMPENDIUM 706 (1999) citing

Ruperto v. Torres, L-8785, 25 February 1957, and Municipal Council of Lemery v.
Provincial Board of Batangas, 56 Phil. 260, 268 (1931).

Midland Insurance Corp. v. Intermediate Appellate Court, L-71905, 13 August 1986, 143
SCRA 458, 462.  See also Villarosa v. Commission on Elections, G.R. No. 133927, 29
November 1999, 319 SCRA 470, 479; United Residents of Dominican Hill, Inc. v.
Commission on the Settlement of Land Problems, G.R. No. 135945, 7 March 2001, 353
SCRA 782,797.

Santiago v. Bautista, 143 Phil. 209, 219 (1970).

Philnabank Employees Association v. Estanislao, G.R. No. 104209, 16 November 1993,

227 SCRA 804, 811.

Tano v. Socrates, G.R. No. 110249, 21 August 1997, 278 SCRA 154, 172; Macasiano v.
National Housing Authority, G.R. No. 107921, 1 July 1993, 224 SCRA 236, 243.

G.R. No. 67787, 18 April 1989, 172 SCRA 415, 424.

G.R. Nos. 99289-90, 27 January 1993, 217 SCRA 633.

Tano v. Socrates, supra note 15, at 174.

G.R. No. 132988, 19 July 2000, 336 SCRA 201.

Veluz v. Court of Appeals, G.R. No. 139951, 23 November 2000, 345 SCRA 756, 764-
765.

FIRST DIVISION

[G.R. No. 127624.  November 18, 2003]

BPI LEASING CORPORATION, petitioner, vs. THE HONORABLE COURT OF

APPEALS, COURT OF TAX APPEAL AND COMMISSIONER OF INTERNAL
REVENUE, respondents.

DECISION
AZCUNA, J.:

The present petition for review on certiorari assails the decision of the Court of Appeals
in CA-G.R. SP No. 38223 and its subsequent resolution denying the motion for
reconsideration.  The assailed decision and resolution affirmed the decision of the Court
of Tax Appeals (CTA) which denied petitioner BPI Leasing Corporation’s (BLC) claim
for tax refund in CTA Case No. 4252.

The facts are not disputed.

BLC is a corporation engaged in the business of leasing properties.  For the calendar year
1986, BLC paid the Commissioner of Internal Revenue (CIR) a total of P1,139,041.49
representing 4% “contractor’s percentage tax” then imposed by Section 205 of the
National Internal Revenue Code (NIRC), based on its gross rentals from equipment
leasing for the said year amounting to P27,783,725.42.

On November 10, 1986, the CIR issued Revenue Regulation 19-86. Section 6.2 thereof
provided that finance and leasing companies registered under Republic Act 5980 shall be
subject to gross receipt tax of 5%-3%-1% on actual income earned.  This means that
companies registered under Republic Act 5980, such as BLC, are not liable for
“contractor’s percentage tax” under Section 205 but are, instead, subject to “gross
receipts tax” under Section 260 (now Section 122) of the NIRC. Since BLC had earlier
paid the aforementioned “contractor’s percentage tax,” it re-computed its tax liabilities
under the “gross receipts tax” and arrived at the amount of P361,924.44.

On April 11, 1988, BLC filed a claim for a refund with the CIR for the amount of
P777,117.05, representing the difference between the P1,139,041.49 it had paid as
“contractor’s percentage tax” and P361,924.44 it should have paid for “gross receipts
tax.”  Four days later, to stop the running of the prescriptive period for refunds, petitioner
filed a petition for review with the CTA.

In a decision dated May 13, 1994, the CTA dismissed the petition and denied BLC’s
claim of refund.  The CTA held that Revenue Regulation 19-86, as amended, may only
be applied prospectively such that it only covers all leases written on or after January 1,
1987, as stated under Section 7 of said revenue regulation:

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

The CTA ruled that, since BLC’s rental income was all received prior to 1986, it follows
that this was derived from lease transactions prior to January 1, 1987, and hence, not
covered by the revenue regulation.

A motion for reconsideration of the CTA’s decision was filed, but was denied in a
resolution dated July 26, 1995.  BLC then appealed the case to the Court of Appeals,
which issued the aforementioned assailed decision and resolution.  Hence, the present
petition.

In seeking to reverse the denial of its claim for tax refund, BLC submits that the Court of
Appeals and the CTA erred in not ruling that Revenue Regulation 19-86 may be applied
retroactively so as to allow BLC’s claim for a refund of P777,117.05.

Respondents, on the other hand, maintain that the provision on the date of effectivity of
Revenue Regulation 19-86 is clear and unequivocal, leaving no room for interpretation
on its prospective application.  In addition, respondents argue that the petition should be
dismissed on the ground that the Verification/Certification of Non-Forum Shopping was
signed by the counsel of record and not by BLC, through a duly authorized
representative, in violation of Supreme Court Circular 28-91.

In a resolution dated March 29, 2000, the petition was given due course and the Court
required the parties to file their respective Memoranda.  Upon submission of the
Memoranda, the issues in this case were delineated, as follows:

WHETHER THE INSTANT PETITION FOR REVIEW ON CERTIORARI

SUBSTANTIALLY COMPLIES WITH SUPREME COURT CIRCULAR 28-91.

WHETHER REVENUE REGULATION 19-86, AS AMENDED, IS LEGISLATIVE OR

INTERPRETATIVE IN NATURE.

WHETHER REVENUE REGULATION 19-86, AS AMENDED, IS PROSPECTIVE

OR RETROACTIVE IN ITS APPLICATION.

WHETHER PETITIONER, AS FOUND BY THE COURT OF APPEALS, FAILED TO

MEET THE QUANTUM OF EVIDENCE REQUIRED IN REFUND CASES.

WHETHER PETITIONER, AS FOUND BY THE COURT OF APPEALS, IS

ESTOPPED FROM CLAIMING ITS PRESENT REFUND.

As to the first issue, the Court agrees with respondents’ contention that the petition
should be dismissed outright for failure to comply with Supreme Court Circular 28-91,
now incorporated as Section 2 of Rule 42 of the Rules of Court.  The records plainly
show, and this has not been denied by BLC, that the certification was executed by
counsel who has not been shown to have specific authority to sign the same for BLC.

In BA Savings Bank v. Sia, it was held that the certificate of non-forum shopping may be
signed, for and on behalf of a corporation, by a specifically authorized lawyer who has
personal knowledge of the facts required to be disclosed in such document.  This ruling,
however, does not mean that any lawyer, acting on behalf of the corporation he is
representing, may routinely sign a certification of non-forum shopping.  The Court
emphasizes that the lawyer must be “specifically authorized” in order validly to sign the
certification.
Corporations have no powers except those expressly conferred upon them by the
Corporation Code and those that are implied by or are incidental to its existence.  These
powers are exercised through their board of directors and/or duly authorized officers and
agents.  Hence, physical acts, like the signing of documents, can be performed only by
natural persons duly authorized for the purpose by corporate bylaws or by specific act of
the board of directors.

The records are bereft of the authority of BLC’s counsel to institute the present petition
and to sign the certification of non-forum shopping.  While said counsel may be the
counsel of record for BLC, the representation does not vest upon him the authority to
execute the certification on behalf of his client.  There must be a resolution issued by the
board of directors that specifically authorizes him to institute the petition and execute the
certification, for it is only then that his actions can be legally binding upon BLC.

BLC however insists that there was substantial compliance with SC Circular No. 28-91
because the verification/certification was issued by a counsel who had full personal
knowledge that no other petition or action has been filed or is pending before any other
tribunal.  According to BLC, said counsel’s law firm has handled this case from the very
beginning and could very well attest and/or certify to the absence of an instituted or
pending case involving the same or similar issues.

The argument of substantial compliance deserves no merit, given the Court’s ruling in
Mendigorin v. Cabantog:

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

Clearly, therefore, the present petition lacks the proper certification as strictly required by
jurisprudence and the Rules of Court.

Even if the Court were to ignore the aforesaid procedural infirmity, a perusal of the
arguments raised in the petition indicates that a resolution on the merits would
nevertheless yield the same outcome.

BLC attempts to convince the Court that Revenue Regulation 19-86 is legislative rather
than interpretative in character and hence, should retroact to the date of effectivity of the
law it seeks to interpret.
Administrative issuances may be distinguished according to their nature and substance:
legislative and interpretative. A legislative rule is in the matter of subordinate legislation,
designed to implement a primary legislation by providing the details thereof.  An
interpretative rule, on the other hand, is designed to provide guidelines to the law which
the administrative agency is in charge of enforcing.

The Court finds the questioned revenue regulation to be legislative in nature.  Section 1
of Revenue Regulation 19-86 plainly states that it was promulgated pursuant to Section
277 of the NIRC. Section 277 (now Section 244) is an express grant of authority to the
Secretary of Finance to promulgate all needful rules and regulations for the effective
enforcement of the provisions of the NIRC.  In Paper Industries Corporation of the
Philippines v. Court of Appeals, the Court recognized that the application of Section 277
calls for none other than the exercise of quasi-legislative or rule-making authority. 
Verily, it cannot be disputed that Revenue Regulation 19-86 was issued pursuant to the
rule-making power of the Secretary of Finance, thus making it legislative, and not
interpretative as alleged by BLC.

BLC further posits that, assuming the revenue regulation is legislative in nature, it is
invalid for want of due process as no prior notice, publication and public hearing attended
the issuance thereof.  To support its view, BLC cited CIR v. Fortune Tobacco, et al.,
wherein the Court nullified a revenue memorandum circular which reclassified certain
cigarettes and subjected them to a higher tax rate, holding it invalid for lack of notice,
publication and public hearing.

The doctrine enunciated in Fortune Tobacco, and reiterated in CIR v. Michel J. Lhuillier
Pawnshop, Inc., is that when an administrative rule goes beyond merely providing for the
means that can facilitate or render less cumbersome the implementation of the law and
substantially increases the burden of those governed, it behooves the agency to accord
at least to those directly affected a chance to be heard and, thereafter, to be duly
informed, before the issuance is given the force and effect of law.  In Lhuillier and
Fortune Tobacco, the Court invalidated the revenue memoranda concerned because the
same increased the tax liabilities of the affected taxpayers without affording them due
process.  In this case, Revenue Regulation 19-86 would be beneficial to the taxpayers as
they are subjected to lesser taxes.  Petitioner, in fact, is invoking Revenue Regulation 19-
86 as the very basis of its claim for refund.  If it were invalid, then petitioner all the more
has no right to a refund.

After upholding the validity of Revenue Regulation 19-86, the Court now resolves
whether its application should be prospective or retroactive.

The principle is well entrenched that statutes, including administrative rules and
regulations, operate prospectively only, unless the legislative intent to the contrary is
manifest by express terms or by necessary implication.  In the present case, there is no
indication that the revenue regulation may operate retroactively.  Furthermore, there is an
express provision stating that it “shall take effect on January 1, 1987,” and that it “shall
be applicable to all leases written on or after the said date.”  Being clear on its
prospective application, it must be given its literal meaning and applied without further
interpretation.  Thus, BLC is not in a position to invoke the provisions of Revenue
Regulation 19-86 for lease rentals it received prior to January 1, 1987.

It is also apt to add that tax refunds are in the nature of tax exemptions.  As such, these
are regarded as in derogation of sovereign authority and are to be strictly construed
against the person or entity claiming the exemption.  The burden of proof is upon him
who claims the exemption and he must be able to justify his claim by the clearest grant
under Constitutional or statutory law, and he cannot be permitted to rely upon vague
implications.  Nothing that BLC has raised justifies a tax refund.

It is not necessary to rule on the remaining issues.

WHEREFORE, the petition for review is hereby DENIED, and the assailed decision and
resolution of the Court of Appeals are AFFIRMED.   No pronouncement as to costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Panganiban, Ynares-Santiago, and Carpio, JJ., concur.

Rollo, pp. 28-36.

Id., pp. 37-38.

Id., p. 9.

Id., pp. 89-96.

Id., pp. 97-98.

Id., pp. 87-88.

Id., pp. 47-57.

Id., pp. 70-78 & 46-57.

Id., pp. 79-86.

Id., p. 202.

BLC’s Memorandum dated July 20, 2000, Rollo, p. 236.

336 SCRA 484 (2000).

Yao Ka Sin Trading v. Court of Appeals, 209 SCRA 763 (1992).

G.R. No. 136449, August 22, 2002.

Misamis Oriental Association of Coco Traders, Inc. v. Department of Finance Secretary,

238 SCRA 63 (1994).

250 SCRA 434 (1995).

261 SCRA 236 (1996).

G.R. No. 150947, July 15, 2003.

Republic v. Sandiganbayan, 269 SCRA316 (1997), citing Lee v. Rodil, 175 SCRA 100
(1989) and State Prosecutors v. Muro, 236 SCRA 505 (1994); Al-Amanah Islamic
Investment Bank of the Philippines v. Civil Service Commission, 207 SCRA801 (1992).

Bustamante v. NLRC, 265 SCRA 61 (1996).

CIR v. Procter & Gamble Phil., 204 SCRA 377 (1991).

FIRST DIVISION

[G.R. No. 119761.  August 29, 1996]

COMMISSIONER OF INTERNAL REVENUE, petitioner, vs. HON. COURT OF

APPEALS, HON. COURT OF TAX APPEALS and FORTUNE TOBACCO
CORPORATION, respondents.

DECISION

VITUG, J.:

The Commissioner of Internal Revenue ("CIR") disputes the decision, dated 31 March
1995, of respondent Court of Appeals affirming the 10th August 1994 decision and the
11th October 1994 resolution of the Court of Tax Appeals ("CTA") in C.T.A. Case No.
5015, entitled "Fortune Tobacco Corporation vs. Liwayway Vinzons-Chato in her
capacity as Commissioner of Internal Revenue."

The facts, by and large, are not in dispute.

Fortune Tobacco Corporation ("Fortune Tobacco") is engaged in the manufacture of

different brands of cigarettes.

On various dates, the Philippine Patent Office issued to the corporation separate
certificates of trademark registration over "Champion," "Hope," and "More" cigarettes. 
In a letter, dated 06 January 1987, of then Commissioner of Internal Revenue Bienvenido
A. Tan, Jr., to Deputy Minister Ramon Diaz of the Presidential Commission on Good
Government, "the initial position of the Commission was to classify 'Champion,' 'Hope,'
and 'More' as foreign brands since they were listed in the World Tobacco Directory as
belonging to foreign companies.  However, Fortune Tobacco changed the names of
'Hope' to Hope Luxury' and 'More' to 'Premium More,' thereby removing the said brands
from the foreign brand category.  Proof was also submitted to the Bureau (of Internal
Revenue ['BIR']) that 'Champion' was an original Fortune Tobacco Corporation register
and therefore a local brand." Ad Valorem taxes were imposed on these brands, at the
following rates:

"BRAND  AD VALOREM TAX RATE

     E.O. 22

06-23-86

07-01-86 and E.O. 273

07-25-87

01-01-88 RA 6956

06-18-90

07-05-90

Hope Luxury M. 100's

Sec. 142, (c), (2)                         40%    45%   

Hope Luxury M. King

Sec. 142, (c), (2)                         40%    45%   

More Premium M. 100's

Sec. 142, (c), (2)                         40%    45%   

More Premium International

Sec. 142, (c), (2)                         40%    45%   

Champion Int'l. M. 100's

Sec. 142, (c), (2)                         40%    45%   

Champion M. 100's
Sec. 142, (c), (2)                         40%    45%   

Champion M. King

Sec. 142, (c), last par.              15%    20%   

Champion Lights

Sec. 142, (c), last par.              15%    20%"

A bill, which later became Republic Act ("RA") No. 7654, was enacted, on 10 June 1993,
by the legislature and signed into law, on 14 June 1993, by the President of the
Philippines.  The new law became effective on 03 July 1993.  It amended Section 142(c)
(1) of the National Internal Revenue Code ("NIRC") to read; as follows:

"SEC. 142.  Cigars and Cigarettes. -

"x x x                            x x x                                 x x x.

"(c)     Cigarettes packed by machine. - There shall be levied, assessed and collected on
cigarettes packed by machine a tax at the rates prescribed below based on the
constructive manufacturer's wholesale price or the actual manufacturer's wholesale price,
whichever is higher:

"(1)    On locally manufactured cigarettes which are currently classified and taxed at
fifty-five percent (55%) or the exportation of which is not authorized by contract or
otherwise, fifty-five (55%) provided that the minimum tax shall not be less than Five
Pesos (P5.00) per pack.

"(2).   On other locally manufactured cigarettes, forty-five percent (45%) provided that
the minimum tax shall not be less than Three Pesos (P3.00) per pack.

"x x x  x x x      x x x.

"When the registered manufacturer's wholesale price or the actual manufacturer's

wholesale price whichever is higher of existing brands of cigarettes, including the
amounts intended to cover the taxes, of cigarettes packed in twenties does not exceed
Four Pesos and eighty centavos (P4.80) per pack, the rate shall be twenty percent (20%)."
(Italics supplied.)

About a month after the enactment and two (2) days before the effectivity of RA 7654,
Revenue Memorandum Circular No. 37-93 ("RMC 37-93"), was issued by the BIR the
full text of which expressed:
 "REPUBLIKA NG PILIPINAS
KAGAWARAN NG PANANALAPI
KAWANIHAN NG RENTAS INTERNAS

July 1, 1993

REVENUE MEMORANDUM CIRCULAR NO. 37-93

SUBJECT : Reclassification of Cigarettes Subject to Excise Tax

TO     : All Internal Revenue Officers and Others Concerned.

"In view of the issues raised on whether 'HOPE,' 'MORE' and 'CHAMPION' cigarettes
which are locally manufactured are appropriately considered as locally manufactured
cigarettes bearing a foreign brand, this Office is compelled to review the previous rulings
on the matter.

"Section 142(c)(1) National Internal Revenue Code, as amended by R.A. No. 6956,
provides:

"'On locally manufactured cigarettes bearing a foreign brand, fifty-five percent (55%)
Provided, That this rate shall apply regardless of whether or not the right to use or title to
the foreign brand was sold or transferred by its owner to the local manufacturer. 
Whenever it has to be determined whether or not a cigarette bears a foreign brand, the
listing of brands manufactured in foreign countries appearing in the current World
Tobacco Directory shall govern."

"Under the foregoing, the test for imposition of the 55% ad valorem tax on cigarettes is
that the locally manufactured cigarettes bear a foreign brand regardless of whether or not
the right to use or title to the foreign brand was sold or transferred by its owner to the
local manufacturer.  The brand must be originally owned by a foreign manufacturer or
producer.  If ownership of the cigarette brand is, however, not definitely determinable, 'x
x x the listing of brands manufactured in foreign countries appearing in the current World
Tobacco Directory shall govern.  x x x'

"'HOPE' is listed in the World Tobacco Directory as being manufactured by (a) Japan
Tobacco, Japan and (b) Fortune Tobacco, Philippines.  'MORE' is listed in the said
directory as being manufactured by: (a) Fills de Julia Reig, Andorra; (b) Rothmans,
Australia; (c) RJR-Macdonald, Canada; (d) Rettig-Strenberg, Finland; (e) Karellas,
Greece; (f) R.J. Reynolds, Malaysia; (g) Rothmans, New Zealand; (h) Fortune Tobacco,
Philippines; (i) R.J. Reynolds, Puerto Rico; (j) R.J. Reynolds, Spain; (k) Tabacalera,
Spain; (l) R.J. Reynolds, Switzerland; and (m) R.J. Reynolds, USA.  'Champion' is
registered in the said directory as being manufactured by (a) Commonwealth Bangladesh;
(b) Sudan, Brazil; (c) Japan Tobacco, Japan; (d) Fortune Tobacco, Philippines; (e)
Haggar, Sudan; and (f) Tabac Reunies, Switzerland.
"Since there is no showing who among the above-listed manufacturers of the cigarettes
bearing the said brands are the real owner/s thereof, then it follows that the same shall be
considered foreign brand for purposes of determining the ad valorem tax pursuant to
Section 142 of the National Internal Revenue Code.  As held in BIR Ruling No. 410-88,
dated August 24, 1988, 'in cases where it cannot be established or there is dearth of
evidence as to whether a brand is foreign or not, resort to the World Tobacco Directory
should be made.'

"In view of the foregoing, the aforesaid brands of cigarettes, viz:  'HOPE,' 'MORE' and
'CHAMPION' being manufactured by Fortune Tobacco Corporation are hereby
considered locally manufactured cigarettes bearing a foreign brand subject to the 55% ad
valorem tax on cigarettes.

"Any ruling inconsistent herewith is revoked or modified accordingly.

(SGD)
LIWAYWAY
VINZONS-CHATO
Commissioner"

On 02 July 1993, at about 17:50 hours, BIR Deputy Commissioner Victor A. Deoferio,
Jr., sent via telefax a copy of RMC 37-93 to Fortune Tobacco but it was addressed to no
one in particular.  On 15 July 1993, Fortune Tobacco received, by ordinary mail, a
certified xerox copy of RMC 37-93.

In a letter, dated 19 July 1993, addressed to the appellate division of the BIR, Fortune
Tobacco, requested for a review, reconsideration and recall of RMC 37-93.  The request 
was denied on 29 July 1993.  The following day, or on 30 July 1993, the CIR assessed
Fortune Tobacco for ad valorem tax deficiency amounting to P9,598,334.00.

On 03 August 1993, Fortune Tobacco filed a petition for review with the CTA.

On 10 August 1994, the CTA upheld the position of Fortune Tobacco and adjudged:

"WHEREFORE, Revenue Memorandum Circular No. 37-93 reclassifying the brands of

cigarettes, viz: `HOPE,' `MORE' and `CHAMPION' being manufactured by Fortune
Tobacco Corporation as locally manufactured cigarettes bearing a foreign brand subject
to the 55% ad valorem tax on cigarettes is found to be defective, invalid and
unenforceable, such that when R.A. No. 7654 took effect on July 3, 1993, the brands in
question were not CURRENTLY CLASSIFIED AND TAXED at 55% pursuant to
Section 1142(c)(1) of the Tax Code, as amended by R.A. No. 7654 and were therefore
still classified as other locally manufactured cigarettes and taxed at 45% or 20% as the
case may be.
"Accordingly, the deficiency ad valorem tax assessment issued on petitioner Fortune
Tobacco Corporation in the amount of P9,598,334.00, exclusive of surcharge and
interest, is hereby canceled for lack of legal basis.

"Respondent Commissioner of Internal Revenue is hereby enjoined from collecting the

deficiency tax assessment made and issued on petitioner in relation to the implementation
of RMC No. 37-93.

"SO ORDERED."

In its resolution, dated 11 October 1994, the CTA dismissed for lack of merit the motion
for reconsideration.

The CIR forthwith filed a petition for review with the Court of Appeals, questioning the
CTA's 10th August 1994 decision and 11th October 1994 resolution.  On 31 March 1993,
the appellate court's Special Thirteenth Division affirmed in all respects the assailed
decision and resolution.

In the instant petition, the Solicitor General argues:  That -

"I.       RMC 37-93 IS A RULING OR OPINION OF THE COMMISSIONER OF

INTERNAL REVENUE INTERPRETING THE PROVISIONS OF THE TAX CODE.

"II.       BEING AN INTERPRETATIVE RULING OR OPINION, THE PUBLICATION

OF RMC 37-93, FILING OF COPIES THEREOF WITH THE UP LAW CENTER AND
PRIOR HEARING ARE NOT NECESSARY TO ITS VALIDITY, EFFECTIVITY AND
ENFORCEABILITY.

"III.      PRIVATE RESPONDENT IS DEEMED TO HAVE BEEN NOTIFIED OR

RMC 37-93 ON JULY 2, 1993.

“IV.     RMC 37-93 IS NOT DISCRIMINATORY SINCE IT APPLIES TO ALL

LOCALLY MANUFACTURED CIGARETTES SIMILARLY SITUATED AS 'HOPE,'
'MORE' AND 'CHAMPION' CIGARETTES.

"V.     PETITIONER WAS NOT LEGALLY PROSCRIBED FROM RECLASSIFYING

‘HOPE,’ ‘MORE’ AND ‘CHAMPION’ CIGARETTES BEFORE THE EFFECTIVITY
OF R.A. NO. 7654.

“VI.     SINCE RMC 37-93 IS AN INTERPRETATIVE RULE, THE INQUIRY IS NOT

INTO ITS VALIDITY, EFFECTIVITY OR ENFORCEABILITY BUT INTO ITS
CORRECTNESS OR PROPRIETY; RMC 37-93 IS CORRECT."

In fine, petitioner opines that RMC 37-93 is merely an interpretative ruling of the BIR
which can thus become effective without any prior need for notice and hearing, nor
publication, and that its issuance is not discriminatory since it would apply under similar
circumstances to all locally manufactured cigarettes.

The Court must sustain both the appellate court and the tax court.

Petitioner stresses on the wide and ample authority of the BIR in the issuance of rulings
for the effective implementation of the provisions of the National Internal Revenue
Code.  Let it be made clear that such authority of the Commissioner is not here doubted. 
Like any other government agency, however, the CIR may not disregard legal
requirements or applicable principles in the exercise of its quasi-legislative powers.

Let us first distinguish between two kinds of administrative issuances - a legislative rule
and an interpretative rule.

In Misamis Oriental Association of Coco Traders, Inc., vs. Department of Finance

Secretary, the Court expressed:

"x x x a legislative rule is in the nature of subordinate legislation, designed to implement

a primary legislation by providing the details thereof.  In the same way that laws must
have the benefit of public hearing, it is generally required that before a legislative rule is
adopted there must be hearing.  In this connection, the Administrative Code of 1987
provides:

"Public Participation. - If not otherwise required by law, an agency shall, as far as

practicable, publish or circulate notices of proposed rules and afford interested parties the
opportunity to submit their views prior to the adoption of any rule.

"(2)    In the fixing of rates, no rule or final order shall be valid unless the proposed rates
shall have been published in a newspaper of general circulation at least two (2) weeks
before the first hearing thereon.

"(3)    In case of opposition, the rules on contested cases shall be observed.

"In addition such rule must be published.  On the other hand, interpretative rules are
designed to provide guidelines to the law which the administrative agency is in charge of
enforcing."

It should be understandable that when an administrative rule is merely interpretative in

nature, its applicability needs nothing further than its bare issuance for it gives no real
consequence more than what the law itself has already prescribed.  When, upon the other
hand, the administrative rule goes beyond merely providing for the means that can
facilitate or render least cumbersome the implementation of the law but substantially adds
to or increases the burden of those governed, it behooves the agency to accord at least to
those directly affected a chance to be heard, and thereafter to be duly informed, before
that new issuance is given the force and effect of law.
A reading of RMC 37-93, particularly considering the circumstances under which it has
been issued, convinces us that the circular cannot be viewed simply as a corrective
measure (revoking in the process the previous holdings of past Commissioners) or merely
as construing Section 142(c)(1) of the NIRC, as amended, but has, in fact and most
importantly, been made in order to place "Hope Luxury," "Premium More" and
"Champion" within the classification of locally manufactured cigarettes bearing foreign
brands and to thereby have them covered by RA 7654.  Specifically, the new law would
have its amendatory provisions applied to locally manufactured cigarettes which at the
time of its effectivity were not so classified as bearing foreign brands.  Prior to the
issuance of the questioned circular, "Hope Luxury," "Premium More," and "Champion"
cigarettes were in the category of locally manufactured cigarettes not bearing foreign
brand subject to 45% ad valorem tax.  Hence, without RMC 37-93, the enactment of RA
7654, would have had no new tax rate consequence on private respondent's products.  
Evidently, in order to place "Hope Luxury," "Premium More," and "Champion" cigarettes
within the scope of the amendatory law and subject them to an increased  tax rate, the
now disputed RMC 37-93 had to be issued.  In so doing, the BIR not simply interpreted
the law; verily, it legislated under its quasi-legislative authority.  The due observance of
the requirements of notice, of hearing, and of publication should not have been then
ignored.

Indeed, the BIR itself, in its RMC 10-86, has observed and provided:

"RMC NO. 10-86

Effectivity of Internal Revenue Rules and Regulations

"It has been observed that one of the problem areas bearing on compliance with Internal
Revenue Tax rules and regulations is lack or insufficiency of due notice to the tax paying
public.  Unless there is due notice, due compliance therewith may not be reasonably
expected.  And most importantly, their strict enforcement could possibly suffer from legal
infirmity in the light of the constitutional provision on `due process of law' and the
essence of the Civil Code provision concerning effectivity of laws, whereby due notice is
a basic requirement (Sec. 1, Art. IV, Constitution; Art. 2, New Civil Code).

"In order that there shall be a just enforcement of rules and regulations, in conformity
with the basic element of due process, the following procedures are hereby prescribed for
the drafting, issuance and implementation of the said Revenue Tax Issuances:

"(1).  This Circular shall apply only to (a) Revenue Regulations; (b) Revenue Audit
Memorandum Orders; and (c) Revenue Memorandum Circulars and Revenue
Memorandum Orders bearing on internal revenue tax rules and regulations.

"(2).  Except when the law otherwise expressly provides, the aforesaid internal revenue
tax issuances shall not begin to be operative until after due notice thereof may be fairly
presumed.
"Due notice of the said issuances may be fairly presumed only after the following
procedures have been taken:

"xxx                       xxx                       xxx

"(5).  Strict compliance with the foregoing procedures is enjoined."

Nothing on record could tell us that it was either impossible or impracticable for the BIR
to observe and comply with the above requirements before giving effect to its questioned
circular.

Not insignificantly, RMC 37-93 might have likewise infringed on uniformity of taxation.

Article VI, Section 28, paragraph 1, of the 1987 Constitution mandates taxation to be
uniform and equitable.  Uniformity requires that all subjects or objects of taxation,
similarly situated, are to be treated alike or put on equal footing both in privileges and
liabilities. Thus, all taxable articles or kinds of property of the same class must be taxed
at the same rate and the tax must operate with the same force and effect in every place
where the subject may be found.

Apparently, RMC 37-93 would only apply to "Hope Luxury," Premium More" and
"Champion" cigarettes and, unless petitioner would be willing to concede to the
submission of private respondent that the circular should, as in fact my esteemed
colleague Mr. Justice Bellosillo so expresses in his separate opinion, be considered
adjudicatory in nature and thus violative of due process following the Ang Tibay
doctrine,  the measure suffers from lack of uniformity of taxation.  In its decision, the
CTA has keenly noted that other cigarettes bearing foreign brands have not been
similarly included within the scope of the circular, such as -

"1. Locally manufactured by ALHAMBRA INDUSTRIES, INC.

(a)  `PALM TREE' is listed as manufactured by office of Monopoly, Korea (Exhibit `R')

"2. Locally manufactured by LA SUERTE CIGAR and CIGARETTE COMPANY

(a)  `GOLDEN KEY' is listed being manufactured by United Tobacco, Pakistan (Exhibit
`S')

(b)  `CANNON' is listed as being manufactured  by Alpha Tobacco, Bangladesh (Exhibit

`T')

"3.  Locally manufactured by LA PERLA INDUSTRIES, INC.

(a)  `WHITE HORSE' is listed as being manufactured by Rothman's, Malaysia (Exhibit

`U')
(b)  `RIGHT' is listed as being manufactured by SVENSKA, Tobaks, Sweden (Exhibit
`V-1')

"4.  Locally manufactured by MIGHTY CORPORATION

(a)  'WHITE HORSE' is listed as being manufactured by Rothman's, Malaysia (Exhibit

'U-1')

"5.  Locally manufactured by STERLING TOBACCO CORPORATION

(a)  ‘UNION' is listed as being manufactured by Sumatra Tobacco, Indonesia and Brown
and Williamson, USA (Exhibit 'U-3')

(b)  ‘WINNER' is listed as being manufactured by Alpha Tobacco, Bangladesh;

Nanyang, Hongkong; Joo Lan, Malaysia; Pakistan Tobacco Co., Pakistan; Premier
Tobacco, Pakistan and Haggar, Sudan (Exhibit 'U-4')."

The court quoted at length from the transcript of the hearing conducted on 10 August
1993 by the Committee on Ways and Means of the House of Representatives; viz:

"THE CHAIRMAN.  So you have specific information on Fortune Tobacco alone.  You
don't have specific information on other tobacco manufacturers.  Now, there are other
brands which are similarly situated.  They are locally manufactured bearing foreign
brands.  And may I enumerate to you all these brands, which are also listed in the World
Tobacco Directory x x x.  Why were these brands not reclassified at 55 if your want to
give a level playing field to foreign manufacturers?

"MS. CHATO.  Mr. Chairman, in fact, we have already prepared a Revenue

Memorandum Circular that was supposed to come after RMC No. 37-93 which have
really named specifically the list of locally manufactured cigarettes bearing a  foreign
brand for excise tax purposes and includes all these brands that you mentioned at 55
percent except that at that time, when we had to come up with this, we were forced to
study the brands of Hope, More and Champion because we were given documents that
would indicate the that these brands were actually being claimed or patented in other
countries because we went by Revenue Memorandum Circular 1488 and we wanted to
give some rationality to how it came about but we couldn't find the rationale there.  And
we really found based on our own interpretation that the only test that is given by that
existing law would be registration in the World Tobacco Directory.  So we came out with
this proposed revenue memorandum circular which we forwarded to the Secretary of
Finance except that at that point in time, we went by the Republic Act 7654 in Section 1
which amended Section 142, C-1, it said, that on locally manufactured cigarettes which
are currently classified and taxed at 55 percent.  So we were saying that when this law
took effect in July 3 and if we are going to come up with this revenue circular thereafter,
then I think our action would really be subject to question but we feel that . . .
Memorandum Circular Number 37-93 would really cover even similarly situated brands. 
And in fact, it was really because of the study, the short time that we were given to study
the matter that we could not include all the rest of the other brands that would have been
really classified as foreign brand if we went by the law itself.  I am sure that by the
reading of the law, you would without that ruling by Commissioner Tan they would
really have been included in the definition or in the classification of foregoing brands. 
These brands that you referred to or just read to us and in fact just for your information,
we really came out with a proposed revenue memorandum circular for those brands. 
(Italics supplied)

"Exhibit 'FF-2-C', pp. V-5 TO V-6, VI-1 to VI-3).

"x x x                                           x x x                                     x x x.

"MS. CHATO. x x x But I do agree with you now that it cannot and in fact that is why I
felt that we . . . I wanted to come up with a more extensive coverage and precisely why I
asked that revenue memorandum circular that would cover all those similarly situated
would be prepared but because of the lack of time and I came out with a study of RA
7654, it would not have been possible to really come up with the reclassification or the
proper classification of all brands that are listed there. x x x' (italics supplied) (Exhibit
'FF-2d', page IX-1)

"x x x                                           x x x                                     x x x.

"HON. DIAZ.  But did you not consider that there are similarly situated?

"MS. CHATO.  That is precisely why, Sir, after we have come up with this Revenue
Memorandum Circular No. 37-93, the other brands came about the would have also
clarified RMC 37-93 by I was saying really because of the fact that I was just recently
appointed and the lack of time, the period that was allotted to us to come up with the right
actions on the matter, we were really caught by the July 3 deadline.  But in fact, We have
already prepared a revenue memorandum circular clarifying with the other . . . does not
yet, would have been a list of locally manufactured cigarettes bearing a foreign brand
for excise tax purposes which would include all the other brands that were mentioned by
the Honorable Chairman.  (Italics supplied) (Exhibit 'FF-2-d,' par. IX-4)."18

All taken, the Court is convinced that the hastily promulgated RMC 37-93 has fallen
short of a valid and effective administrative issuance.

WHEREFORE, the decision of the Court of Appeals, sustaining that of the Court of Tax
Appeals, is AFFIRMED.  No costs.

SO ORDERED.

Kapunan, J., concurs.

Padilla, J., joins Justice Hermosisima, Jr., in his dissenting opinion.

Bellosillo, J., see separate opinion.

Hermosisima, Jr., J., see dissenting opinion.

Through Associate Justices Justo P. Torres, Jr. (ponente), Corona Ibay-Somera and
Conrado M. Vasquez, Jr. (members).

Penned by Presiding Judge Ernesto D. Acosta and concurred in by Associate Judges 

Ramon O. De Veyra and Manuel K. Gruba.

Underscoring supplied.  Rollo, pp. 55-56.

Since the institution of Executive Order No. 22 on 23 June 1986.

Rollo, p. 56

An Act Revising The Excise Tax Base, Allocating a Portion Of The Incremental Revenue
Collected For The Emergency Employment Program For Certain Workers Amending For
The Purpose Section 142 Of The National Internal Revenue Code, As Amended, And For
Other Purposes.

Official Gazette, Vol. 89., No. 32, 09 August 1993, p. 4476.

The petition was subsequently amended on 12 August 1993.

Rollo, pp. 115-116.

Rollo, pp. 21-22.

238 SCRA 63.

Italics supplied. At p. 69.

Rollo, pp. 65-66.

See Juan Luna Subdivision vs. Sarmiento, 91 Phil. 371.

City of Baguio vs. De Leon, 25 SCRA 938.

Ang Tibay vs. Court of Industrial Relations, 69 Phil. 635.

Rollo, pp. 97-98.

18 Rollo, pp. 98-100.

SECOND DIVISION
[G.R. No. 108524.  November 10, 1994]

MISAMIS ORIENTAL ASSOCIATION OF COCO TRADERS, INC., petitioner, vs.

DEPARTMENT OF FINANCE SECRETARY, COMMISSIONER OF THE BUREAU
OF INTERNAL REVENUE (BIR), AND REVENUE DISTRICT OFFICER, BIR
MISAMIS ORIENTAL, respondents.

DECISION

MENDOZA, J.:

This is a petition for prohibition and injunction seeking to nullify Revenue Memorandum
Circular No. 47-91 and enjoin the collection by respondent revenue officials of the Value
Added Tax (VAT) on the sale of copra by members of petitioner organization.

Petitioner Misamis Oriental Association of Coco Traders, Inc. is a domestic corporation

whose members, individually or collectively, are engaged in the buying and selling of
copra in Misamis Oriental.  The petitioner alleges that prior to the issuance of Revenue
Memorandum Circular 47-91 on June 11, 1991, which implemented VAT Ruling 190-90,
copra was classified as agricultural food product under § 103(b) of the National Internal
Revenue Code and, therefore, exempt from VAT at all stages of production or
distribution.

Respondents represent departments of the executive branch of government charged with

the generation of funds and the assessment, levy and collection of taxes and other
imposts.

The pertinent provision of the NIRC states:

SEC. 103.  Exempt Transactions.  – The following shall be exempt from the value-added
tax:

(a)  Sale of nonfood agricultural, marine and forest products in their original
state by the primary producer or the owner of the land where the same are
produced;

(b)  Sale or importation in their original state of agricultural and marine food
products, livestock and poultry of a kind generally used as, or yielding or
producing foods for human consumption, and breeding stock and genetic
material therefor;

Under § 103(a), as above quoted, the sale of agricultural non-food products in their
original state is exempt from VAT only if the sale is made by the primary producer or
owner of the land from which the same are produced.  The sale made by any other person
or entity, like a trader or dealer, is not exempt from the tax.  On the other hand, under §
103(b) the sale of agricultural food products in their original state is exempt from VAT at
all stages of production or distribution regardless of who the seller is.

The question is whether copra is an agricultural food or non-food product for purposes of
this provision of the NIRC.  On June 11, 1991, respondent Commissioner of Internal
Revenue issued the circular in question, classifying copra as an agricultural non-food
product and declaring it "exempt from VAT only if the sale is made by the primary
producer pursuant to Section 103(a) of the Tax Code, as amended."

The reclassification had the effect of denying to the petitioner the exemption it previously
enjoyed when copra was classified as an agricultural food product under § 103(b) of the
NIRC.  Petitioner challenges RMC No. 47-91 on various grounds, which will be
presently discussed although not in the order raised in the petition for prohibition.

First.  Petitioner contends that the Bureau of Food and Drug of the Department of Health
and not the BIR is the competent government agency to determine the proper
classification of food products.  Petitioner cites the opinion of Dr. Quintin Kintanar of the
Bureau of Food and Drug to the effect that copra should be considered "food" because it
is produced from coconut which is food and 80% of coconut products are edible.

On the other hand, the respondents argue that the opinion of the BIR, as the government
agency charged with the implementation and interpretation of the tax laws, is entitled to
great respect.

We agree with respondents.  In interpreting § 103(a) and (b) of the NIRC, the
Commissioner of Internal Revenue gave it a strict construction consistent with the rule
that tax exemptions must be strictly construed against the taxpayer and liberally in favor
of the state.  Indeed, even Dr. Kintanar said that his classification of copra as food was
based on "the broader definition of food which includes agricultural commodities and
other components used in the manufacture/processing of food." The full text of his letter
reads:

10 April 1991

Mr. VICTOR A. DEOFERIO, JR.

Chairman VAT Review Committee
Bureau of Internal Revenue
Diliman, Quezon City

Dear Mr. Deoferio:

This is to clarify a previous communication made by this Office about copra in a letter
dated 05 December 1990 stating that copra is not classified as food.  The statement was
made in the context of BFAD's regulatory responsibilities which focus mainly on foods
that are processed and packaged, and thereby copra is not covered.
However, in the broader definition of food which include agricultural commodities and
other components used in the manufacture/processing of food, it is our opinion that copra
should be classified as an agricultural food product since copra is produced from coconut
meat which is food and based on available information, more than 80% of products
derived from copra are edible products.

Very truly yours,

QUINTIN L.
KINTANAR,
M.D., Ph.D.
Director
Assistant
Secretary of
Health
for Standards
and
Regulations

Moreover, as the government agency charged with the enforcement of the law, the
opinion of the Commissioner of Internal Revenue, in the absence of any showing that it is
plainly wrong, is entitled to great weight.  Indeed, the ruling was made by the
Commissioner of Internal Revenue in the exercise of his power under § 245 of the NIRC
to "make rulings or opinions in connection with the implementation of the provisions of
internal revenue laws, including rulings on the classification of articles for sales tax and
similar purposes."

Second.  Petitioner complains that it was denied due process because it was not heard
before the ruling was made.  There is a distinction in administrative law between
legislative rules and interpretative rules. There would be force in petitioner's argument if
the circular in question were in the nature of a legislative rule.  But it is not.  It is a mere
interpretative rule.

The reason for this distinction is that a legislative rule is in the nature of subordinate
legislation, designed to implement a primary legislation by providing the details thereof. 
In the same way that laws must have the benefit of public hearing, it is generally required
that before a legislative rule is adopted there must be hearing.  In this connection, the
Administrative Code of 1987 provides:

Public Participation.  — If not otherwise required by law, an agency shall, as far as

practicable, publish or circulate notices of proposed rules and afford interested parties the
opportunity to submit their views prior to the adoption of any rule.

(2)  In the fixing of rates, no rule or final order shall be valid unless the proposed
rates shall have been published in a newspaper of general circulation at least
two (2) weeks before the first hearing thereon.
 (3)  In case of opposition, the rules on contested cases shall be observed.

In addition such rule must be published. On the other hand, interpretative rules are
designed to provide guidelines to the law which the administrative agency is in charge of
enforcing.

Accordingly, in considering a legislative rule a court is free to make three inquiries:  (i)
whether the rule is within the delegated authority of the administrative agency; (ii)
whether it is reasonable; and (iii) whether it was issued pursuant to proper procedure. 
But the court is not free to substitute its judgment as to the desirability or wisdom of the
rule for the legislative body, by its delegation of administrative judgment, has committed
those questions to administrative judgments and not to judicial judgments.  In the case of
an interpretative rule, the inquiry is not into the validity but into the correctness or
propriety of the rule.  As a matter of power a court, when confronted with an
interpretative rule, is free to (i) give the force of law to the rule; (ii) go to the opposite
extreme and substitute its judgment; or (iii) give some intermediate degree of
authoritative weight to the interpretative rule.

In the case at bar, we find no reason for holding that respondent Commissioner erred in
not considering copra as an "agricultural food product" within the meaning of § 103(b) of
the NIRC.  As the Solicitor General contends, "copra per se is not food, that is, it is not
intended for human consumption.  Simply stated, nobody eats copra for food." That
previous Commissioners considered it so, is not reason for holding that the present
interpretation is wrong.  The Commissioner of Internal Revenue is not bound by the
ruling of his predecessors. To the contrary, the overruling of decisions is inherent in the
interpretation of laws.

Third.  Petitioner likewise claims that RMC No. 47-91 is discriminatory and violative of
the equal protection clause of the Constitution because while coconut farmers and copra
producers are exempt, traders and dealers are not, although both sell copra in its original
state.  Petitioners add that oil millers do not enjoy tax credit out of the VAT payment of
traders and dealers.

The argument has no merit.  There is a material or substantial difference between coconut
farmers and copra producers, on the one hand, and copra traders and dealers, on the
other.  The former produce and sell copra, the latter merely sell copra.  The Constitution
does not forbid the differential treatment of persons so long as there is a reasonable basis
for classifying them differently.

It is not true that oil millers are exempt from VAT.  Pursuant to § 102 of the NIRC, they
are subject to 10% VAT on the sale of services.  Under § 104 of the Tax Code, they are
allowed to credit the input tax on the sale of copra by traders and dealers, but there is no
tax credit if the sale is made directly by the copra producer as the sale is VAT exempt.  In
the same manner, copra traders and dealers are allowed to credit the input tax on the sale
of copra by other traders and dealers, but there is no tax credit if the sale is made by the
producer.
Fourth.  It is finally argued that RMC No. 47-91 is counterproductive because traders and
dealers would be forced to buy copra from coconut farmers who are exempt from the
VAT and that to the extent that prices are reduced the government would lose revenues as
the 10% tax base is correspondingly diminished.

This is not so.  The sale of agricultural non-food products is exempt from VAT only
when made by the primary producer or owner of the land from which the same is
produced, but in the case of agricultural food products their sale in their original state is
exempt at all stages of production or distribution.  At any rate, the argument that the
classification of copra as agricultural non-food product is counterproductive is a question
of wisdom or policy which should be addressed to respondent officials and to Congress.

WHEREFORE, the petition is DISMISSED.

SO ORDERED.

Narvasa, C.J., (Chairman), Regalado, and Puno, JJ., concur.

The value-added tax is a percentage tax on the sale, barter, exchange or importation of
goods or services.  (NIRC, § 99) Insofar as the sale, barter or exchange of goods is
concerned, the tax is equivalent to 10% of the gross selling price or gross value in money
of the goods sold, bartered or exchanged, such tax to be paid by the seller or transferor. 
(§ 100(a)) The tax is determined as follows:

(d) Determination of the tax.  — (1) Tax billed as separate item in the invoice.  If
the tax is billed as a separate item in the invoice, the tax shall be based on the gross
selling price, excluding the tax.  "Gross selling price" means the total amount of money
or its equivalent which the purchaser pays or is obligated to pay to the seller in the
consideration of the sale, barter or exchange of the goods, excluding the value-added tax. 
The excise tax, if any, on such goods shall form part of the gross selling price.

(2) Tax not billed separately or is billed erroneously in the invoice.  — In case the
tax is not billed separately or is billed erroneously in the invoice, the tax shall be
determined by multiplying the gross selling price, including the amount intended by the
seller to cover the tax or the tax billed erroneously, by the factor 1/11 or such factor as
may be prescribed by regulations in case of persons partially exempt under special laws.

(3) Sales returns, allowances and sales discounts.  — The value of goods sold and
subsequently returned or for which allowances were granted by a VAT-registered person
may be deducted from the gross sales or receipts for the quarter in which a refund is
made or a credit memorandum or refund is issued.  Sales discounts granted and indicated
in the invoice at the time of sale may be excluded from the gross sales within the same
quarter.

(§ 100(d))
This circular is based on VAT Ruling No. 190-90 dated August 17, 1990 which revoked
VAT Ruling No. 009-88 and VAT Ruling No. 279-88, June 30,1988, classifying copra as
an agricultural food product.

See Victorias Milling Co. v. Social Security Commission, 114 Phil. 555 (1962);
Philippine Blooming Mills v. Social Security System, 124 Phil. 499 (1966).

Bk. VII, Ch. 2, § 9.

Tañada v. Tuvera, 146 SCRA 446 (1986).  See Victorias Milling Co. v. SSC, supra note
3.

K. DAVIS, ADMINISTRATIVE LAW 116 (1965).

Petitioner's claim that RMC No. 47-91 erroneously revoked irrelevant VAT rulings of the
BIR is not correct.  RMC No. 47-91 revoked VAT Rulings No. 009-88 and No. 279-88,
which dealt with the question whether copra is an agricultural food or nonfood product. 
VAT ruling No. 009-88 held that "copra as an agricultural product is exempt from VAT
in all stages of distribution." On the other hand, VAT Ruling No. 279-88 treated "copra . .
. as an agricultural food product in its original state" and, therefore, "exempt from VAT
under Section 103(b) of the TAX Code, as amended by EO 273 regardless of whether the
sale is made by producer or subsequent sale."

Kapatiran ng mga Naglilingkod sa Pamahalaan ng Pilipinas, Inc. v. Tan, 163 SCRA 371
(1988) (sustaining the validity of E.O. 273 adopting the VAT); Sison, Jr. v. Ancheta, 130
SCRA 653 (1984) (sustaining the validity of B.P. Blg. 135 providing for taxable income
taxation).

FIRST DIVISION

[G.R. No. 76633.  October 18, 1988]

EASTERN SHIPPING LINES, INC., petitioner, vs. PHILIPPINE OVERSEAS

EMPLOYMENT ADMINISTRATION (POEA), MINISTER OF LABOR AND
EMPLOYMENT, HEARING OFFICER ABDUL BASAR and KATHLEEN D. SACO,
respondents.

DECISION

CRUZ, J.:

The private respondent in this case was awarded the sum of P192,000.00 by the
Philippine Overseas Employment Administration (POEA) for the death of her husband. 
The decision is challenged by the petitioner on the principal ground that the POEA had
no jurisdiction over the case as the husband was not an overseas worker.
Vitaliano Saco was Chief Officer of the M/V Eastern Polaris when he was killed in an
accident in Tokyo, Japan, on March 15, 1985.  His widow sued for damages under
Executive Order No. 797 and Memorandum Circular No. 2 of the POEA.  The petitioner,
as owner of the vessel, argued that the complaint was cognizable not by the POEA but by
the Social Security System and should have been filed against the State Insurance Fund. 
The POEA nevertheless assumed jurisdiction and after considering the position papers of
the parties ruled in favor of the complainant.  The award consisted of P180,000.00 as
death benefits and P12,000.00 for burial expenses.

The petitioner immediately came to this Court, prompting the Solicitor General to move
for dismissal on the ground of non-exhaustion of administrative remedies.

Ordinarily, the decisions of the POEA should first be appealed to the National Labor
Relations Commission, on the theory inter alia that the agency should be given an
opportunity to correct the errors, if any, of its subordinates.  This case comes under one
of the exceptions, however, as the questions the petitioner is raising are essentially
questions of law. Moreover, the private respondent herself has not objected to the
petitioner's direct resort to this Court, observing that the usual procedure would delay the
disposition of the case to her prejudice.

The Philippine Overseas Employment Administration was created under Executive Order
No. 797, promulgated on May 1, 1982, to promote and monitor the overseas employment
of Filipinos and to protect their rights.  It replaced the National Seamen Board created
earlier under Article 20 of the Labor Code in 1974.  Under Section 4(a) of the said
executive order, the POEA is vested with "original and exclusive jurisdiction over all
cases, including money claims, involving employee-employer relations arising out of or
by virtue of any law or contract involving Filipino contract workers, including seamen."
These cases, according to the 1985 Rules and Regulations on Overseas Employment
issued by the POEA, include "claims for death, disability and other benefits" arising out
of such employment.

The petitioner does not contend that Saco was not its employee or that the claim of his
widow is not compensable.  What it does urge is that he was not an overseas worker but a
domestic employee and consequently his widow's claim should have been filed with the
Social Security System, subject to appeal to the Employees Compensation Commission.

We see no reason to disturb the factual finding of the POEA that Vitaliano Saco was an
overseas employee of the petitioner at the time he met with the fatal accident in Japan in
1985.

Under the 1985 Rules and Regulations on Overseas Employment, overseas is defined as
"employment of a worker outside the Philippines, including employment on board
vessels plying international waters, covered by valid contract." A contract worker is
described as "any person working or who has worked overseas under a valid employment
contract and shall include seamen" or "any person working overseas or who has been
employed by another which may be a local employer, foreign employer, principal or
partner under a valid employment contract and shall include seamen." These definitions
clearly apply to Vitaliano Saco for it is not disputed that he died while under a contract of
employment with the petitioner and alongside the petitioner's vessel, the M/V Eastern
Polaris, while berthed in a foreign country.

It is worth observing that the petitioner performed at least two acts which constitute
implied or tacit recognition of the nature of Saco's employment at the time of his death in
1985.  The first is its submission of its shipping articles to the POEA for processing,
formalization and approval in the exercise of its regulatory power over overseas
employment under Executive Order No. 797. The second is its payment of the
contributions mandated by law and regulations to the Welfare Fund for Overseas
Workers, which was created by P.D. No. 1694 "for the purpose of providing social and
welfare services to Filipino overseas workers."

Significantly, the office administering this fund, in the receipt it prepared for the private
respondent's signature, described the subject of the burial benefits as "overseas contract
worker Vitaliano Saco." While this receipt is certainly not controlling, it does indicate, in
the light of the petitioner's own previous acts, that the petitioner and the Fund to which it
had made contributions considered Saco to be an overseas employee.

The petitioner argues that the deceased employee should be likened to the employees of
the Philippine Air Lines who, although working abroad in its international flights, are not
considered overseas workers.  If this be so, the petitioner should not have found it
necessary to submit its shipping articles to the POEA for processing, formalization and
approval or to contribute to the Welfare Fund which is available only to overseas
workers.  Moreover, the analogy is hardly appropriate as the employees of the PAL
cannot under the definitions given be considered seamen nor are their appointments
coursed through the POEA.

The award of P180,000.00 for death benefits and P12,000.00 for burial expenses was
made by the POEA pursuant to its Memorandum Circular No. 2, which became effective
on February 1, 1984.  This circular prescribed a standard contract to be adopted by both
foreign and domestic shipping companies in the hiring of Filipino seamen for overseas
employment.  A similar contract had earlier been required by the National Seamen Board
and had been sustained in a number of cases by this Court. The petitioner claims that it
had never entered into such a contract with the deceased Saco, but that is hardly a serious
argument.  In the first place, it should have done so as required by the circular, which
specifically declared that "all parties to the employment of any Filipino seamen on board
any ocean-going vessel are advised to adopt and use this employment contract effective
01 February 1984 and to desist from using any other format of employment contract
effective that date." In the second place, even if it had not done so, the provisions of the
said circular are nevertheless deemed written into the contract with Saco as a postulate of
the police power of the State.

But the petitioner questions the validity of Memorandum Circular No. 2 itself as violative
of the principle of non-delegation of legislative power.  It contends that no authority had
been given the POEA to promulgate the said regulation; and even with such
authorization, the regulation represents an exercise of legislative discretion which, under
the principle, is not subject to delegation.

The authority to issue the said regulation is clearly provided in Section 4(a) of Executive
Order No. 797, reading as follows:

"x x x The governing Board of the Administration (POEA), as hereunder provided, shall
promulgate the necessary rules and regulations to govern the exercise of the adjudicatory
functions of the Administration (POEA)."

Similar authorization had been granted the National Seamen Board, which, as earlier
observed, had itself prescribed a standard shipping contract substantially the same as the
format adopted by the POEA.

 The second challenge is more serious as it is true that legislative discretion as to the
substantive contents of the law cannot be delegated.  What can be delegated is the
discretion to determine how the law may be enforced, not what the law shall be.  The
ascertainment of the latter subject is a prerogative of the legislature.  This prerogative
cannot be abdicated or surrendered by the legislature to the delegate.  Thus, in Ynot v.
Intermediate Appellate Court, which annulled Executive Order No. 626, this Court held:

“We also mark, on top of all this, the questionable manner of the disposition of the
confiscated property as prescribed in the questioned executive order.  It is there
authorized that the seized property shall ‘be distributed to charitable institutions and other
similar institutions as the Chairman of the National Meat Inspection Commission may see
fit, in the case of carabaos.’ (Emphasis supplied.) The phrase ‘may see fit’ is an
extremely generous and dangerous condition, if condition it is.  It is laden with perilous
opportunities for partiality and abuse, and even corruption.  One searches in vain for the
usual standard the reasonable guidelines, or better still, the limitations that the said
officers must observe when they make their distribution.  There is none.  Their options
are apparently boundless.  Who shall be the fortunate beneficiaries of their generosity and
by what criteria shall they be chosen?  Only the officers named can supply the answer,
they and they alone may choose the grantee as they see fit, and in their own exclusive
discretion.  Definitely, there is here a ‘roving commission,’ a wide and sweeping
authority that is not ‘canalized within banks that keep it from overflowing,’ in short a
clearly profligate and therefore invalid delegation of legislative powers."

There are two accepted tests to determine whether or not there is a valid delegation of
legislative power, viz., the completeness test and the sufficient standard test.  Under the
first test, the law must be complete in all its terms and conditions when it leaves the
legislature such that when it reaches the delegate the only thing he will have to do is
enforce it. Under the sufficient standard test, there must be adequate guidelines or
limitations in the law to map out the boundaries of the delegate's authority and prevent
the delegation from running riot. Both tests are intended to prevent a total transference of
legislative authority to the delegate, who is not allowed to step into the shoes of the
legislature and exercise a power essentially legislative.

The principle of non-delegation of powers is applicable to all the three major powers of
the Government but is especially important in the case of the legislative power because of
the many instances when its delegation is permitted.  The occasions are rare when
executive or judicial powers have to be delegated by the authorities to which they legally
pertain.  In the case of the legislative power, however, such occasions have become more
and more frequent, if not necessary.  This had led to the observation that the delegation of
legislative power has become the rule and its non-delegation the exception.

The reason is the increasing complexity of the task of government and the growing
inability of the legislature to cope directly with the myriad problems demanding its
attention.  The growth of society has ramified its activities and created peculiar and
sophisticated problems that the legislature cannot be expected reasonably to
comprehend.  Specialization even in legislation has become necessary.  To many of the
problems attendant upon present-day undertakings, the legislature may not have the
competence to provide the required direct and efficacious, not to say, specific solutions. 
These solutions may, however, be expected from its delegates, who are supposed to be
experts in the particular fields assigned to them.

The reasons given above for the delegation of legislative powers in general are
particularly applicable to administrative bodies.  With the proliferation of specialized
activities and their attendant peculiar problems, the national legislature has found it more
and more necessary to entrust to administrative agencies the authority to issue rules to
carry out the general provisions of the statute.  This is called the "power of subordinate
legislation."

With this power, administrative bodies may implement the broad policies laid down in a
statute by "filling in" the details which the Congress may not have the opportunity or
competence to provide.  This is effected by their promulgation of what are known as
supplementary regulations, such as the implementing rules issued by the Department of
Labor on the new Labor Code.  These regulations have the force and effect of law.

Memorandum Circular No. 2 is one such administrative regulation.  The model contract
prescribed thereby has been applied in a significant number of cases without challenge by
the employer.  The power of the POEA (and before it the National Seamen Board) in
requiring the model contract is not unlimited as there is a sufficient standard guiding the
delegate in the exercise of the said authority.  That standard is discoverable in the
executive order itself which, in creating the Philippine Overseas Employment
Administration, mandated it to protect the rights of overseas Filipino workers to "fair and
equitable employment practices."

Parenthetically, it is recalled that this Court has accepted as sufficient standards "public
interest" in People v. Rosenthal, "justice and equity" in Antamok Gold Fields v. CIR,
"public convenience and welfare" in Calalang v. Williams, and "simplicity, economy and
efficiency" in Cervantes v. Auditor General, to mention only a few cases.  In the United
States, the "sense and experience of men" was accepted in Mutual Film Corp. v.
Industrial Commission, and "national security" in Hirabayashi v. United States.

It is not denied that the private respondent has been receiving a monthly death benefit
pension of P514.42 since March 1985 and that she was also paid a P1,000.00 funeral
benefit by the Social Security System.  In addition, as already observed, she also received
a P5,000.00 burial gratuity from the Welfare Fund for Overseas Workers.  These
payments will not preclude allowance of the private respondent's claim against the
petitioner because it is specifically reserved in the standard contract of employment for
Filipino seamen under Memorandum Circular No. 2, Series of 1984, that -

"Section C.  Compensation and Benefits. -

 "1. In case of death of the seamen during the term of his Contract, the employer shall pay
his beneficiaries the amount of:

"a.  P220,000.00 for master and chief engineers

"b.  P180,000.00 for other officers, including radio operators and master
electricians

"c.  P130,000.00 for ratings.

"2.  It is understood and agreed that the benefits mentioned above shall be separate and
distinct from, and will be in addition to whatever benefits which the seaman is entitled to
under Philippine laws.  x  x     x.

"3.     x          x          x

"c.  If the remains of the seaman is buried in the Philippines, the owners shall
pay the beneficiaries of the seaman an amount not exceeding P18,000.00
for burial expenses."

The underscored portion is merely a reiteration of Memorandum Circular No. 22, issued
by the National Seamen Board on July 12, 1976, providing as follows:

"Income Benefits under this Rule Shall be Considered Additional Benefits.  -

"All compensation benefits under Title Il, Book Four of the Labor Code of the
Philippines (Employees Compensation and State Insurance Fund) shall be granted, in
addition to whatever benefits, gratuities or allowances that the seaman or his beneficiaries
may be entitled to under the employment contract approved by the NSB.  If applicable,
all benefits under the Social Security Law and the Philippine Medicare Law shall be
enjoyed by the seaman or his beneficiaries in accordance with such laws."
The above provisions are manifestations of the concern of the State for the working class,
consistently with the social justice policy and the specific provisions in the Constitution
calling for the protection of the working class and the promotion of its interest.

One last challenge of the petitioner must be dealt with to close this case.  Its argument
that it has been denied due process because the same POEA that issued Memorandum
Circular No. 2 has also sustained and applied it is an uninformed criticism of
administrative law itself.  Administrative agencies are vested with two basic powers, the
quasi-legislative and the quasi-judicial.  The first enables them to promulgate
implementing rules and regulations, and the second enables them to interpret and apply
such regulations.  Examples abound:  the Bureau of Internal Revenue adjudicates on its
own revenue regulations, the Central Bank on its own circulars, the Securities and
Exchange Commission on its own rules, as so too do the Philippine Patent Office and the
Videogram Regulatory Board and the Civil Aeronautics Administration and the
Department of Natural Resources and so on ad infinitum on their respective
administrative regulations.  Such an arrangement has been accepted as a fact of life of
modern governments and cannot be considered violative of due process as long as the
cardinal rights laid down by Justice Laurel in the landmark case of Ang Tibay v. Court of
Industrial Relations are observed.

Whatever doubts may still remain regarding the rights of the parties in this case are
resolved in favor of the private respondent, in line with the express mandate of the Labor
Code and the principle that those with less in life should have more in law.

When the conflicting interests of labor and capital are weighed on the scales of social
justice, the heavier influence of the latter must be counterbalanced by the sympathy and
compassion the law must accord the underprivileged worker.  This is only fair if he is to
be given the opportunity - and the right - to assert and defend his cause not as a
subordinate but as a peer of management, with which he can negotiate on even plane. 
Labor is not a mere employee of capital but its active and equal partner.

WHEREFORE, the petition is DISMISSED, with costs against the petitioner.  The
temporary restraining order dated December 10, 1986 is hereby LIFTED.  It is so
ordered.

Narvasa, (Chairman), Gancayco, Griño-Aquino, and Medialdea, JJ., concur.

Bagatsing v. Ramirez, 74 SCRA 306; Del Mar v. Phil. Veterans Administration, 51

SCRA 340; Aguilar v. Valencia, 40 SCRA 210; Begosa v. PVA, 32 SCRA 466; Tapales
v. President and Board of Regents, 7 SCRA 553; Pascual v. Nueva Ecija Provincial
Board, 106 Phil. 466; Mondano v. Silvosa, 97 Phil. 143.

Sec. 1(d), Rule I, Book VI (1985 Rules).

Sec. 1(x), Rule II, Book I (1985 Rules).

Sec. 1(g), Rule II, Book I (1985 Rules).

Sec. 1(g), Rule II, Book I (1984 Rules).

Rollo, p. 171 (POEA Decision, p. 8).

Ibid., pp. 169-170 (POEA Decision, pp. 6-7).

Rollo, pp. 213-217.

Annex "A" of Private Respondent's Comment (Rollo, p. 230).

Bagong Filipinas Overseas Corp. v. NLRC, 135 SCRA 278; Vir-gen v. NLRC, 125
SCRA 577; Norse Management v. NSB, et al., 117 SCRA 486; Vir-gen v. NLRC, 115
SCRA 347.

Stone v. Mississippi, 101 US 814.

148 SCRA 659.

People v. Vera, 65 Phil. 56.

Cervantes v. Auditor General, 91 Phil. 359; People v. Rosenthal, 68 Phil. 328.

Supra.

70 Phil. 340.

70 Phil. 726.

Supra.

236 U.S. 247.

320 U.S. 99.

69 Phil. 635.

EN BANC

[G.R. No. 100481.  January 22, 1997]

PHILIPPINE INTERISLAND SHIPPING ASSOCIATION OF THE PHILIPPINES,

CONFERENCE OF INTERISLAND SHIP-OWNERS AND OPERATORS, UNITED
PETROLEUM TANKER OPERATORS ASSOCIATION OF THE PHILIPPINES,
LIGHTERAGE ASSOCIATION OF THE PHILIPPINES and PILOTAGE
INTEGRATED SERVICES CORPORATION, petitioners, vs. COURT OF APPEALS,
UNITED HARBOR PILOTS' ASSOCIATION OF THE PHILIPPINES, INC. and
MANILA PILOTS' ASSOCIATION, respondents.

[G.R. Nos. 103716-17.  January 22, 1997]

HON. PETE NICOMEDES PRADO, in his capacity as Secretary of Transportation and

Communications and the PHILIPPINE PORTS AUTHORITY, petitioners, vs. COURT
OF APPEALS, UNITED HARBOR PILOTS' ASSOCIATION OF THE PHILIPPINES,
INC., respondents.

[G.R. No. 107720.  January 22, 1997]

HON. JESUS B. GARCIA, JR., in his capacity as Secretary of Transportation and

Communications and Chairman of the PHILIPPINE PORTS AUTHORITY,
COMMODORE ROGELIO A. DAYAN, in his capacity as General Manager of the
Philippine Ports Authority, and SIMEON T. SILVA, JR., in his capacity as the South
Harbor Manager, Philippine Ports Authority, petitioners, vs. HON. NAPOLEON R.
FLOJO, in his capacity as the Presiding Judge of Branch 2, Regional Trial Court -
Manila, UNITED HARBOR PILOTS' ASSOCIATION OF THE PHILIPPINES and the
MANILA PILOTS' ASSOCIATION, respondents.

DECISION

MENDOZA, J.:

Private respondent United Harbor Pilots' Association of the Philippines, Inc. (UHPAP) is
the umbrella organization of various groups rendering pilotage service in different ports
of the Philippines.  The service consists of navigating a vessel from a specific point,
usually about two (2) miles off shore, to an assigned area at the pier and vice versa. 
When a vessel arrives, a harbor pilot takes over the ship from its captain to maneuver it to
a berth in the port, and when it departs, the harbor pilot also maneuvers it up to a specific
point off shore.  The setup is required by the fact that each port has peculiar topography
with which a harbor pilot is presumed to be more familiar than a ship captain.

The Philippine Ports Authority (PPA) is the government agency which regulates pilotage.
Pursuant to Presidential Decree No. 857, it has the power "to supervise, control, regulate .
. . such services as are necessary in the ports vested in, or belonging to the Authority" and
to "control, regulate and supervise pilotage and the conduct of pilots in any Port District."
It also has the power "to impose, fix, prescribe, increase or decrease such rates, charges
or fees. . . for the services rendered by the Authority or by any private organization
within a Port District.”

These cases arose out of the efforts of harbor pilots to secure enforcement of Executive
Order No. 1088, which fixes the rates of pilotage service, and the equally determined
efforts of the PPA and its officials, the herein petitioners, to block enforcement of the
executive order, even as they promulgated their own orders which in the beginning fixed
lower rates of pilotage and later left the matter to self determination by parties to a
pilotage contract.

I.  THE FACTS

G.R. No. 103716

On February 3, 1986, shortly before the presidential elections, President Ferdinand E.

Marcos, responding to the clamor of harbor pilots for an increase in pilotage rates, issued
Executive Order No. 1088, PROVIDING FOR UNIFORM AND MODIFIED RATES
FOR PILOTAGE SERVICES RENDERED TO FOREIGN AND COASTWISE
VESSELS IN ALL PRIVATE AND PUBLIC PORTS. The executive order increased
substantially the rates of the existing pilotage fees previously fixed by the PPA.

However, the PPA refused to enforce the executive order on the ground that it had been
drawn hastily and without prior consultation; that its enforcement would create disorder
in the ports as the operators and owners of the maritime vessels had expressed opposition
to its implementation; and that the increase in pilotage, as mandated by it, was exorbitant
and detrimental to port operations.

The UHPAP then announced its intention to implement E.O. No. 1088 effective
November 16, 1986. This in turn drew a warning from the PPA that disciplinary
sanctions would be applied to those who would charge rates under E.O. No. 1088. The
PPA instead issued Memorandum Circular No. 43-86, fixing pilotage fees at rates lower
than those provided in E.O. No. 1088.

Consequently, the UHPAP filed on January 7, 1987 a complaint for injunction with the
Regional Trial Court of Manila, against the then Minister of Transportation and
Communications, Hernando Perez, and PPA General Manager, Primitivo S. Solis, Jr. It
sought a writ of preliminary mandatory injunction for the immediate implementation of
E.O. No. 1088, as well as a temporary restraining order to stop PPA officials from
imposing disciplinary sanctions against UHPAP members charging rates in accordance
with E.O. No. 1088.

The case, docketed as Civil Case No. 87-38913, was raffled to Branch 28 of the Regional
Trial Court of Manila which issued a temporary restraining order, enjoining the PPA
from threatening the UHPAP, its officers and its members with suspension and other
disciplinary action for collecting pilotage fees pursuant to E.O. No. 1088.

On March 16, 1987, the Chamber of Maritime Industries of the Philippines, William
Lines, Inc., Loadstar Shipping Co., Inc. and Delsen Transport Lines, Inc., after obtaining
leave, filed a joint answer in intervention.

On February 26, 1988, while the case was pending, the PPA issued Administrative Order
No. 02-88, entitled IMPLEMENTING GUIDELINES ON OPEN PILOTAGE SERVICE.
The PPA announced in its order that it was leaving to the contracting parties, i.e., the
shipping lines and the pilots, the fixing of mutually acceptable rates for pilotage services,
thus abandoning the rates fixed by it (PPA) under Memorandum Circular No. 43-86, as
well as those provided in E.O. No. 1088. The administrative order provided:

Section 3.  Terms/Conditions on Pilotage Service. — The shipping line or vessel's

agent/representative and the harbor pilot/firm chosen by the former shall agree between
themselves, among others, on what pilotage service shall be performed, the use of tugs
and their rates, taking into consideration the circumstances stated in Section 12 of PPA
AO No. 03-85, and such other conditions designed to ensure the safe movement of the
vessel in pilotage areas/grounds.

The PPA then moved to dismiss the case, contending that the issuance of its order had
rendered the case moot and academic and that consequently E.O. No. 1088 had ceased to
be effective. The UHPAP opposed the motion. Together with the Manila Pilots'
Association (MPA), it filed on May 25, 1988 a petition for certiorari and prohibition in
the RTC-Manila, questioning the validity of A.O. No. 02-88. This petition was docketed
as Civil Case No. 88-44726 (United Harbor Pilots' Association and Manila Pilots'
Association v. Hon. Rainerio Reyes, as Acting Secretary of the Department of
Transportation and Communications and Chairman of the Philippine Ports Authority
(PPA) and Maximo Dumlao, Jr., as General Manager of the Philippine Ports Authority
(PPA), et al.) and raffled to Branch 2 of RTC-Manila. The factual antecedents of this case
are discussed in G.R. No. 100481 below.

Meanwhile, in Civil Case 87-38913, the court, without resolving the motion to dismiss
filed by the PPA, rendered a decision holding that A.O. No. 02-88 did not render the case
moot and academic and that the PPA was under obligation to comply with E.O. No. 1088
because the order had the force of law which the PPA could not repeal.

The then Transportation Minister Hernando Perez and the PPA filed a petition for review.
The petition was filed in this Court which later referred the case to the Court of Appeals
where it was docketed as CA G.R. SP. No. 18072. On the other hand the intervenors
appealed to the Court of Appeals where this case was docketed as CA G.R. No. 21590.
The two cases were then consolidated.

In a decision rendered on October 4, 1991, the Twelfth Division of the Court of Appeals
affirmed the decision of the trial court, by dismissing CA G.R. No. 21590 and denying
CA G.R. SP. No. 18072. Hence, this petition by the Secretary of Transportation and
Communications and the PPA. The intervenor shipping lines did not appeal.

G.R. No. 100481

Meanwhile, in a petition for certiorari filed before RTC-Manila, Branch 2 (Civil Case
No. 88-44726), the UHPAP and the MPA sought the annulment of A.O. No. 02-88,
which in pertinent parts provided:
Section 1.  Statement of Policy. — It is hereby declared that the provision of pilotage in
ports/harbors/areas defined as compulsory in Section 8 of PPA Administrative Order No.
03-85, entitled, "Rules and Regulations Governing Pilotage Services, the Conduct of
Pilots and Pilotage Fees in Philippine Ports" shall be open to all licensed harbor
pilots/pilotage firms/associations appointed/accredited by this authority to perform
pilotage service.

Section 2.  Persons Authorized to Render Pilotage. — The following individuals, persons
or groups shall be appointed/accredited by this Authority to provide pilotage service:

a.  Harbor Pilots of the present Pilotage Associations of the different pilotage
districts in the Philippines. Their probationary training as required under Section
31 of PPA AO No. 03-85 shall be undertaken by any member of said Association.

b. Members/employees of any partnership/corporation or association, including

Filipino shipmasters/ captains of vessel (domestic/foreign) of Philippine Registry
and individuals who meet the minimum qualifications and comply with the
requirements prescribed in Sec. 29 of PPA AO No. 03-85, aforestated, and who
are appointed by said firm or association and accredited as harbor pilots by this
authority. New Harbor Pilots who wish to be appointed/accredited by PPA under
the open pilotage system either as an individual pilot or as a member of any
Harbor Pilot partnership/association shall be required to undergo a practical
examination, in addition to the written examination given by the Philippine Coast
Guard, prior to their appointment/ accreditation by this Authority.

The UHPAP and MPA, as petitioners below, contended (1) that A.O. No. 02-88 was
issued without the benefit of a public hearing; (2) that E.O. No. 1088 had not been
repealed by any other Executive Order or Presidential Decree and, therefore, should be
given effect; and (3) that A.O. No. 02-88 contravened P.D. No. 857.

On August 21, 1989, the Philippine Interisland Shipping Association, Conference of

Interisland Shipowners and Operators, United Petroleum Tanker Operators of the
Philippines, Lighterage Association of the Philippines, and Pilotage Integrated Services
Corp., were allowed to intervene.

On September 8, 1989, a writ of preliminary injunction was issued by the court, enjoining
the PPA from implementing A.O. No. 02-88 and, on October 26, 1989, judgment was
rendered in favor of the petitioners therein. The dispositive portion of the court's decision
reads:

WHEREFORE, for all of the foregoing, the petition is hereby granted.

1.  Respondents are hereby declared to have acted in excess of jurisdiction and with grave
abuse of discretion amounting to lack of jurisdiction in approving Resolution No. 860 and
in enacting Philippine Ports Authority Administrative Order No. 02-88, the subject of
which is "Implementing Guidelines on Open Pilotage Service";
2.  Philippine Ports Authority Administrative Order No. 02-88 is declared null and void;

3.  The preliminary injunction issued on September 8, 1989 is made permanent; and

4.  Without costs.

SO ORDERED.

Respondents and the intervenors below filed a joint petition for certiorari in the Court of
Appeals (CA G.R. SP No. 19570), assailing the decision of the trial court. But their
petition was dismissed for lack of jurisdiction on the ground that the issue raised was
purely legal.

The parties separately filed petitions for review before this Court. The first one, by the
PPA and its officers, was docketed as G.R. No. 100109 (Hon. Pete Nicomedes Prado,
Philippine Ports Authority and Commodore Rogelio Dayan v. United Harbor Pilots'
Association of the Philippines and Manila Pilots' Association), while the second one, by
the intervenors, was docketed as G.R. No. 100481 (Philippine Interisland Shipping
Association of the Philippines, Conference of Interisland Ship Owners and Operators,
United Petroleum Tanker Operators Association of the Philippines, Inc. v. The Court of
Appeals, United Harbor Pilots' Association of the Philippines and Manila Pilots'
Association.)

The petition filed by the government in G.R. No. 100109 was dismissed for failure of
petitioners to show that the Court of Appeals committed a reversible error. On the other
hand, the petition of the intervenors in G.R. No. 100481 was given due course.

G.R. No. 107720

Following the denial of its petition in G.R. No. 100109, the PPA issued on July 31, 1992,
Administrative Order No. 05-92, placing harbor pilots under the control of the PPA with
respect to the scheduling and assignment of service of vessels. The PPA cited as
justification "pilotage delays . . . under the set-up where private respondents (UHPAP &
MPA) assign the pilots. Intentionally or otherwise, several vessels do not receive the
pilotage service promptly, causing them operational disruptions and additional
expenses/costs."

Private respondents UHPAP and MPA viewed the matter differently. On October 28,
1992, they asked the RTC-Manila, Branch 2 which heard and decided Civil Case No. 88-
44726 to cite PPA officials in contempt of court. On the same day, the trial court issued
an order restraining the herein petitioners from implementing Administrative Order No.
05-92. However, the PPA proceeded to implement its order, prompting the UHPAP and
MPA to move again to cite petitioners in contempt, even as they questioned the validity
of A.O. No. 05-92. Accordingly the trial court issued another order on November 4,
1992, reiterating its previous order of October 28, 1992 to petitioners to refrain from
implementing A.O. No. 05-92 pending resolution of the petitions.
Making a special appearance, petitioners questioned the jurisdiction of the court and
moved for the dismissal of the petitions for contempt. Allegedly to prevent the disruption
of pilotage services, petitioners created a special team of reserve pilots to take over the
pilotage service in the event members of UHPAP/MPA refused to render pilotage
services.

For the third time respondents moved to cite petitioners in contempt of court. Again
petitioners questioned the court's jurisdiction and manifested that they were adopting
their previous motion to dismiss petitions for contempt filed against them.

On November 17, 1992, the trial court denied the petitioners' motion and set the contempt
petitions for hearing on November 19, 1992. Hence, this petition, which was docketed as
G.R. No. 107720 (Hon. Jesus B. Garcia, Jr. in his capacity as Secretary of Transportation
and Communications and Chairman of the Philippine Ports Authority, Commodore
Rogelio A. Dayan, in his capacity as General Manager of the Philippine Ports Authority
and Simeon T. Silva, Jr., in his capacity as the South Harbor Manager, Philippine Ports
Authority v. Hon. Napoleon Flojo, in his capacity as the Presiding Judge of Branch 2,
RTC, Manila, UHPAP and MPA).

Pending resolution of this case, the Court ordered the parties to maintain the status quo as
of October 31, 1992.

II.  THE ISSUES AND THEIR DISPOSITION

The issues raised are:

I.      WHETHER OR NOT RESPONDENT COURT OF APPEALS ERRED IN

AFFIRMING THE CHALLENGED DECISION OF RTC-MANILA,
BRANCH 41, WHICH RULED THAT:

(A)       CIVIL CASE NO. 87-38913 HAS NOT BECOME MOOT AND
ACADEMIC WITH THE ISSUANCE OF ADMINISTRATIVE ORDER
NO. 02-88; AND

(B)     HEREIN PETITIONERS ARE BOUND TO COMPLY WITH E.O. NO.

1088;

II.       WHETHER OR NOT THE COURT OF APPEALS COMMITTED

REVERSIBLE ERROR IN DISMISSING CA G.R. SP. NO. 19570 FOR
LACK OF JURISDICTION?

III.      WHETHER OR NOT RESPONDENT JUDGE NAPOLEON FLOJO

COMMITTED GRAVE ABUSE OF DISCRETION IN ASSUMING
JURISDICTION OVER THE PETITIONS FOR CONTEMPT FILED BY
PRIVATE RESPONDENTS AS A RESULT OF THE ISSUANCE OF A.O.
NO. 05-92?
These issues will be discussed in seriatim.

A.  Whether Executive Order No. 1088 is Valid and

Petitioners are Bound to Obey it
(G.R. Nos. 103716-17)

Executive Order No. 1088 reads:

EXECUTIVE ORDER No. 1088

PROVIDING FOR UNIFORM AND MODIFIED RATES FOR PILOTAGE

SERVICES RENDERED TO FOREIGN AND COASTWISE VESSELS IN
ALL PRIVATE OR PUBLIC PHILIPPINE PORTS.

WHEREAS, the United Harbor Pilots' Association of the Philippines has clamored for
the rationalization of pilotage service charges, through the imposition of uniform and
adjusted rates for foreign and coastwise vessels in all Philippine ports, whether public or
private;

WHEREAS, the plea of the Association has been echoed by a great number of Members
of Parliament and other persons and groups;

NOW, THEREFORE, I, FERDINAND E. MARCOS, President of the Philippines, by

virtue of the powers vested in me by the Constitution and by law, do hereby direct and
order:

Section 1.  The following shall be the rate of pilotage fees or charges based on tonnage
for services rendered to both foreign and coastwise vessels;

For Foreign Vessels                                             Rate in US $

or
                                                                                  its Peso
                                                                                  Equivalent

Less than        500GT                                                 $ 30.00

                500GT         to             2,500GT             43.33
                    2,500GT         to             5,000GT             71.33
                    5,000GT         to           10,000GT           133.67
                  10,000GT         to           15,000GT           181.67
                  15,000GT         to           20,000GT           247.00
                  20,000GT         to           30,000GT           300.00
                  30,000GT         to           40,000GT           416.67
                  40,000GT         to           60,000GT           483.33
                  60,000GT         to           80,000GT           550.00
                  80,000GT         to         100,000GT           616.67
                100,000GT         to         120,000GT           666.67
                
120,000GT         to         130,000GT           716.67
                130,000GT         to         140,000GT           766.67

Over 140,000 gross tonnage $0.05 or its peso equivalent every excess tonnage. Rate for
docking and undocking anchorage, conduction and shifting other related special services
is equal to 100%. Pilotage services shall be compulsory in government and private
wharves or piers,

              For Coastwise Vessels:                       Regular

     100  
and under   500           gross tons       P 41.70
     500  
and under   600           gross tons          55.60
     600  
and under 1,000          gross tons          69.60
  1,000  
and under 3,000          gross tons       139.20
  3,000  
and under 5,000          gross tons       300.00
  5,000   and over gross tons

SEC. 2.  With respect to foreign vessels, payment of pilotage services shall be made in
dollars or in pesos at the prevailing exchange rate.

SEC. 3.  All orders, letters of instruction, rules, regulations and other issuances
inconsistent with this Executive Order are hereby repealed or amended accordingly.

SEC. 4.  This Executive Order shall take effect immediately.

Done in the City of Manila, this 3rd day of February, in the year of our Lord, nineteen
hundred and eighty-six.

                                                                          (Sgd.) FERDINAND E. MARCOS

                                                                          President of the Philippines

By the President:

(Sgd.) JUAN C. TUVERA

Presidential Executive Assistant

Petitioners contend that E.O. No. 1088 was merely an administrative issuance of then
President Ferdinand E. Marcos and, as such, it could be superseded by an order of the
PPA. They argue that to consider E.O. No. 1088 a statute would be to deprive the PPA of
its power under its charter to fix pilotage rates.

The contention has no merit. The fixing of rates is essentially a legislative power. Indeed,
the great battle over the validity of the exercise of this power by administrative agencies
was fought in the 1920s on the issue of undue delegation precisely because the power
delegated was legislative. The growing complexity of modern society, the multiplication
of the subjects of governmental regulations and the increased difficulty of administering
the laws made the creation of administrative agencies and the delegation to them of
legislative power necessary.

There is no basis for petitioners' argument that rate fixing is merely an exercise of
administrative power; that if President Marcos had power to revise the rates previously
fixed by the PPA through the issuance of E.O. No. 1088, the PPA could in turn revise
those fixed by the President, as the PPA actually did in A.O. No. 43-86, which fixed
lower rates of pilotage fees, and even entirely left the fees to be paid for pilotage to the
agreement of the parties to a contract. The orders previously issued by the PPA were in
the nature of subordinate legislation, promulgated by it in the exercise of delegated
power. As such these could only be amended or revised by law, as the President did by
E.O. No. 1088.

It is not an answer to say that E.O. No. 1088 should not be considered a statute because
that would imply the withdrawal of power from the PPA. What determines whether an
act is a law or an administrative issuance is not its form but its nature. Here, as we have
already said, the power to fix the rates of charges for services, including pilotage service,
has always been regarded as legislative in character.

Nor is there any doubt of the power of the then President to fix rates. On February 3,
1986, when he issued E.O. No. 1088, President Marcos was authorized under
Amendment No. 6 of the 1973 Constitution to exercise legislative power, just as he was
under the original 1973 Constitution, when he issued P.D. NO. 857 which created the
PPA, endowing it with the power to regulate pilotage service in Philippine ports.
Although the power to fix rates for pilotage had been delegated to the PPA, it became
necessary to rationalize the rates of charges fixed by it through the imposition of uniform
rates. That is what the President did in promulgating E.O. No. 1088. As the President
could delegate the ratemaking power to the PPA, so could he exercise it in specific
instances without thereby withdrawing the power vested by P.D. No. 857, Section 20(a)
in the PPA "to impose, fix, prescribe, increase or decrease such rates, charges or fees...
for the services rendered by the Authority or by any private organization within a Port
District."

It is worthy to note that E.O. No. 1088 provides for adjusted pilotage service rates
without withdrawing the power of the PPA to impose, prescribe, increase or decrease
rates, charges or fees. The reason is because E.O. NO. 1088 is not meant simply to fix
new pilotage rates. Its legislative purpose is the "rationalization of pilotage service
charges, through the imposition of uniform and adjusted rates for foreign and coastwise
vessels in all Philippine ports."

The case presented is similar to the fixing of wages under the Wage Rationalization Act
(R.A. No. 6727) whereby minimum wages are determined by Congress and provided by
law, subject to revision by Wage Boards should later conditions warrant their revision. It
cannot be denied that Congress may intervene anytime despite the existence of
administrative agencies entrusted with wage-fixing powers, by virtue of the former's
plenary power of legislation. When Congress does so, the result is not the withdrawal of
the powers delegated to the Wage Boards but cooperative lawmaking in an area where
initiative and expertise are required. The Court of Appeals is correct in holding that —

The power of the PPA to fix pilotage rates and its authority to regulate pilotage still
remain notwithstanding the fact that a schedule for pilotage fees has already been
prescribed by the questioned executive order. PPA is at liberty to fix new rates of pilotage
subject only to the limitation that such new rates should not go below the rates fixed
under E.O. 1088. The rationale behind the limitation is no different from what has been
previously stated. Being a mere administrative agency, PPA cannot validly issue orders
or regulations that would have the effect of rendering nugatory the provisions of the
legislative issuance such as those of the executive order in question.(emphasis supplied)

Petitioners refused to implement E.O. No. 1088 on the ground that it was issued without
notice to the PPA and that it was nothing but a "political gimmick" resorted to by then
President Marcos. This perception obviously stemmed from the fact that E.O. No. 1088
was issued shortly before the presidential elections in 1986.

But lack of notice to the PPA is not proof that the necessary factual basis for the order
was wanting. To the contrary, the presumption is that the President had before him
pertinent data on which he based the rates prescribed in his order. Nor is the fact that the
order might have been issued to curry favor with the voters a reason for the PPA to refuse
to enforce the order in question. It is not unusual for lawmakers to have in mind partisan
political consideration in sponsoring legislation. Yet that is not a ground for invalidating
a statute.

Moreover, an inquiry into legislative motivation is not proper since the only relevant
question is whether in issuing it the President violated constitutional and statutory
restrictions on his power. The PPA did not have any objection to the order based on
constitutional ground. In fact the nearest to a challenge on constitutional grounds was that
mounted not by the PPA but by the intervenors below which claimed that the rates fixed
in E.O. NO. 1088 were exorbitant and unreasonable. However, both the trial court and
the Court of Appeals overruled the objections and the intervenors apparently accepted the
ruling because they did not appeal further to this Court.

There is, therefore, no legal basis for PPA's intransigence, after failing to get the new
administration of President Aquino to revoke the order by issuing it own order in the
form of A.O. NO. 02-88. It is noteworthy that if President Marcos had legislative power
under Amendment No. 6 of the 1973 Constitution so did President Aquino under the
Provisional (Freedom) Constitution who could, had she thought E.O. No. 1088 to be a
mere "political gimmick," have just as easily revoked her predecessor's order. It is
tempting to ask if the administrative agency would have shown the same act of defiance
of the President's order had there been no change of administration. What this Court said
in La Perla Cigar and Cigarette Factory v. Capapas," mutatis mutandis may be applied to
the cases at bar:
Was it within the powers of the then Collector Ang-angco to refuse to collect the duties
that must be paid? That is the crucial point of inquiry. We hold that it was not.

Precisely, he had to give the above legal provisions, quite explicit in character, force and
effect. His obligation was to collect the revenue for the government in accordance with
existing legal provisions, executive agreements and executive orders certainly not
excluded. He would not be living up to his official designation if he were permitted to act
otherwise. He was not named Collector of Customs for nothing. . . .

Certainly, if the President himself were called upon to execute the laws faithfully, a
Collector of Customs, himself a subordinate executive official, cannot be considered as
exempt in any wise from such an obligation of fealty. Similarly, if the President cannot
suspend the operation of any law, it would be presumptuous in the extreme for one in the
position of then Collector Ang-angco to consider himself as possessed of such a
prerogative. . . .

We conclude that E.O. No. 1088 is a valid statute and that the PPA is duty bound to
comply with its provisions. The PPA may increase the rates but it may not decrease them
below those mandated by E.O. No. 1088. Finally, the PPA cannot refuse to implement
E.O. No. 1088 or alter it as it did in promulgating Memorandum Circular No. 43-86.
Much less could the PPA abrogate the rates fixed and leave the fixing of rates for pilotage
service to the contracting parties as it did through A. O. No. 02-88, Section 3. Theretofore
the policy was one of governmental regulation of the pilotage business. By leaving the
matter to the determination of the parties, the PPA jettisoned this policy and changed it to
laissez-faire, something which only the legislature, or whoever is vested with lawmaking
authority, could do.

B.  Whether the Court of Appeals had Jurisdiction over the

Appeal of Intervenors from the Decision of the
Trial Court Invalidating Administrative Order
No. 02-88 of the PPA
(G.R. No. 100481)

The Court of Appeals dismissed the joint appeal of the government and the intervenors
from the trial court's decision in Civil Case No. 88-44726 on the ground that the issues
raised were purely legal questions. The appellate court stated:

After a painstaking review of the records We resolved to dismiss the petition for lack of
jurisdiction.

From the facts, it is clear that the main issue proffered by the appellant is whether or not
the respondent Philippine Ports Authority could validly issue rules and regulations
adopting the "open pilotage policy" pursuant to its charter (P.D. 857).

....
It must be noted that while the court a quo had clearly recognized the intricate legal issue
involved, it nevertheless decided it on the merits which apparently resolved only the
procedural aspect that justified it in declaring the questioned order as null and void.
While We recognize the basic requirements of due process, the same cannot take
precedence in the case at bar in lieu of the fact that the resolution of the present case is
purely a legal question.

Moreover, it appears that appellants in the court below had filed a manifestation and
motion waiving their presentation of evidence. Instead, they opted to submit a
comprehensive memorandum of the case on the ground that the pivotal issue raised in the
petition below is purely legal in character. (p. 231, Records)

At this juncture, We are at a loss why appellants had elevated the present action before
Us where at the outset they already noted that the issue is purely legal.

If in the case of Murillo v. Consul (UDK-9748, Resolution en banc, March 1, 1990) the
Supreme Court laid down the rule that "if an appeal by notice of appeal is taken from the
Regional Trial Court to the Court of Appeals, and in the latter Court, the appellant raised
naught but issues of law, the appeal should be dismissed for lack of jurisdiction (page 5,
Resolution in Murillo)," then with more reason where as in the case at bar public-
appellants thru the Office of the Solicitor General in their memorandum manifested that
the controversy has reference to the pure legal question of the validity of the questioned
administrative order. Consequently, We have no other recourse but to dismiss the petition
on the strength of these pronouncements.

As already stated, from this decision, both the government and the intervenors separately
brought petitions for review to this Court. In G.R. No. 100109, the government's petition
was dismissed for lack of showing that the appellate court committed reversible error.
The dismissal of the government's petition goes far to sustain the dismissal of the
intervenors' petition in G.R. No. 100481 for the review of the same decision of the Court
of Appeals. After all, the intervenors' petition is based on substantially the same grounds
as those stated in the government's petition. It is now settled that the dismissal of a
petition for review on certiorari is an adjudication on the merits of a controversy. Such
dismissal can only mean that the Supreme Court agrees with the findings and conclusions
of the Court of Appeals or that the decision sought to be reviewed is correct.

It is significant to note that the Secretary of Transportation and Communications and the
PPA, petitioners in G.R. No. 100109, have conceded the finality of the dismissal of their
appeal. Thus, the administrative policy, the validity of which herein petitioners seek to
justify by their appeal, has already been abandoned by the very administrative agency
which adopted it, with the result that the question of validity of A.O. No. 02-88 is now
moot and academic.

C.  Whether the Trial Court has Jurisdiction to Hear and

Decide the Contempt Charges
against Petitioners
(G.R. No. 107720)

As already noted, following the dismissal of the government's appeal in G.R. No.
100109, the PPA abandoned A.O. No. 02-88 which provided for "Open Pilotage
System." But it subsequently promulgated Administrative Order No. 05-92, under which
the PPA assumed the power of scheduling and assigning pilots to service vessels,
allegedly regardless of whether the pilots assigned are or are not members of the UHPAP
and the MPA which theretofore had been the exclusive agencies rendering pilotage
service in Philippine ports. The UHPAP and the MPA saw the adoption of this system as
a return to the "Open Pilotage System" and, therefore, a violation of the trial court's
decision invalidating the "Open Pilotage System." They considered this to be a contempt
of the trial court.

Petitioners moved to dismiss the motions for contempt against them. They contend that
even if the motions were filed as incidents of Civil Case No. 88-44726, the RTC-Manila,
Branch 2 did not have jurisdiction to hear them because the main case was no longer
before the court and the fact was that the contempt citation was not an incident of the
case, not even of its execution, but a new matter raising a new cause of action which must
be litigated in a separate action, even as petitioners denied they had committed any
contumacious act by the issuance of A.O. No. 05-92.

Private respondents maintained that their petitions were mere incidents of Civil Case No.
88-44726 and that the trial court has jurisdiction because in fact this Court had not yet
remanded the case to the court a quo for execution of its decision. Private respondents
complain that petitioners are trying to circumvent the final and executory decision of the
court in Civil Case No. 88-44726, through the issuance of A.O. No. 05-92.

As already noted, however, the decision of the trial court in Civil Case No. 88-44726
enjoined petitioners from implementing the so called "Open Pilotage System" embodied
in A O. No. 02-88. If, as alleged, A.O. No. 05-92 is in substance a reenactment of A.O.
No. 02-88, then there is basis for private respondents' invocation of the trial court's
jurisdiction to punish for contempt.

Still it is argued that the trial court lost jurisdiction over Civil Case No. 887426, upon the
perfection of their appeal from its decision. That is indeed true. "The appeal transfers the
proceedings to the appellate court, and this last court becomes thereby charged with the
authority to deal with contempt's committed after perfection of the appeal." The trial
court would have jurisdiction only in the event of an attempt to block execution of its
decision and that would be after the remand of the case to the trial court. Until then the
trial court would have no jurisdiction to deal with alleged contemptuous acts.

The fly in the ointment, however, is that by accepting the dismissal of their petition for
review in G.R. No. 100109, petitioners rendered execution of the decision of the trial
court superfluous. Any attempt by them, therefore, to disobey the court's final injunction
as embodied in its decision would be properly subject to punishment for contempt.
Petitioners' contention that private respondents' complaint must be the subject of a
separate action would nullify contempt proceedings as means of securing obedience to
the lawful processes of a court. Petitioners' theory would reward ingenuity and cunning in
devising orders which substantially are the same as the order previously prohibited by the
court.

We hold that the trial court has jurisdiction to hear the motions for contempt filed by
private respondent, subject to any valid defense which petitioners may interpose.

III.  JUDGMENT

WHEREFORE, the several petitions in these cases are DISMISSED.

SO ORDERED.

Narvasa, C.J., Padilla, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan,
Francisco, Hermosisima, Jr., Panganiban, and Torres, Jr., JJ., concur.

Regalado, J., no part – related to a counsel in G.R. No. 100481.

P.D. No. 857, §6(a)(ii).

Id., §6(a)(viii).

Id., §20(a).

Petition in G.R. No. 103716, p. 4; Rollo, p. 13.

Per Judge Domingo D. Panis.

Per Justice Cancio C. Garcia and concurred in by Justices Manuel Herrera (Chairman)
and Alfredo Benipayo.

Per Judge Napoleon R. Flojo.

Res., March 25, 1992.

Petition in G.R. No. 107720, p. 10; Rollo, p. 11.

See e.g., Ynchausti Steamship Co. v. Public Utility Commissioner, 42 Phil. 621, 624
(1922) ("the fixing of rates is a legislative and governmental power over which the
government has complete control."); Employers Confederation of the Philippines v.
National Wages and Productivity Commission, 201 SCRA 759,765 (1991) ("wage-fixing,
like rate-making, constitutes an act of Congress.")

As Justice Irene R. Cortes points out in her book, PHILIPPINE ADMINISTRATIVE

LAW 117 (1963):  "[T]hat the legislature may directly provide for these rates, wages, or
prices.  But while the legislature may deal directly with these subjects it has been found
more advantageous to place the performance of these functions in some administrative
agency.  The reason is that the legislature has not the time, the knowledge or the means
necessary to handle adequately these matters.  The needs for dispatch, for flexibility and
for technical know-how is better met by entrusting the rate-fixing to an agency other than
the legislature itself."

Legaspi v. Minister of Finance, 115 SCRA 418 (1982); Marcos v. Manlapus, 178 SCRA
760 (1989).

Maceda v. Macaraig, Jr., 223 SCRA 217 (1993).

28 SCRA 1085, 1091-1092 (1969) (emphasis supplied).

Per Justice Manuel C. Herrera (Chairman) and concurred in by Justices Alfredo L.

Benipayo and Fortunato A. Vailoces.

Commercial Union Assurance Limited v. Lepanto Consolidated Mining Company, 86

SCRA 79 (1978); Tayag v. Yuseco, 105 Phil. 484 (1959).

Smith Bell and Company (Phils.), Inc. v. Court of Appeals, 197 SCRA 201 (1991).

See discussion in G.R. 107720, infra.

People v. Alarcon, 69 Phil 265, 272 (1939). See People v. Godoy, 243 SCRA 64 (1995).

Philippine National Construction Corp. v. Court of Appeals, 228 SCRA 565 (1993); Shoji
v. Harvey, 43 Phil 333 (1922).

EN BANC

[G.R. No. 111812.  May 31, 1995]

DIONISIO M. RABOR, petitioner, vs. CIVIL SERVICE COMMISSION, respondent.

DECISION

FELICIANO, J.:

Petitioner Dionisio M. Rabor is a Utility Worker in the Office of the Mayor, Davao City. 
He entered the government service as a Utility Worker on 10 April 1978 at the age of 55
years.

Sometime in May 1991, Alma D. Pagatpatan, an official in the Office of the Mayor of
Davao City, advised Dionisio M. Rabor to apply for retirement, considering that he had
already reached the age of sixty-eight (68) years and seven (7) months, with thirteen (13)
years and one (1) month of government service.  Rabor responded to this advice by
exhibiting a "Certificate of Membership" issued by the Government Service Insurance
System ("GSIS") and dated 12 May 1988.  At the bottom of this "Certificate of
Membership" is a typewritten statement of the following tenor: "Service extended to
comply 15 years service reqts." This statement is followed by a non-legible initial with
the following date "2/28/91."

Thereupon, the Davao City Government, through Ms. Pagatpatan, wrote to the Regional
Director of the Civil Service Commission, Region XI, Davao City ("CSRO-XI"),
informing the latter of the foregoing and requesting advice "as to what action [should] be
taken on this matter."

In a letter dated 26 July 1991, Director Filemon B. Cawad of CSRO-XI advised Davao
City Mayor Rodrigo R. Duterte as follows:

"Please be informed that the extension of services of Mr. Rabor is contrary to M.C. No.
65 of the Office of the President, the relevant portion of which is hereunder quoted:

'Officials and employees who have reached the compulsory retirement age of 65 years
shall not be retained in the service, except for extremely meritorious reasons in which
case the retention shall not exceed six (6) months.'

IN VIEW WHEREFORE, please be advised that the services of Mr. Dominador [M.]
Rabor as Utility Worker in that office, is already non- extend[i]ble.”

Accordingly, on 8 August 1991, Mayor Duterte furnished a copy of the 26 July 1991
letter of Director Cawad to Rabor and advised him "to stop reporting for work effective
August 16, 1991."

Petitioner Rabor then sent to the Regional Director, CSRO-XI, a letter dated 14 August
1991, asking for extension of his services in the City Government until he "shall have
completed the fifteen (15) years service [requirement] in the Government so that [he]
could also avail of the benefits of the retirement laws given to employees of the
Government." The extension he was asking for was about two (2) years.  Asserting that
he was "still in good health and very able to perform the duties and functions of [his]
position as Utility Worker," Rabor sought "extension of [his] service as an exception to
Memorandum Circular No. 65 of the Office of the President." This request was denied by
Director Cawad on 15 August 1991.

Petitioner Rabor next wrote to the Office of the President on 29 January 1992 seeking
reconsideration of the decision of Director Cawad, CSRO-XI.  The Office of the
President referred Mr. Rabor's letter to the Chairman of the Civil Service Commission on
5 March 1992.
In its Resolution No. 92-594, dated 28 April 1992, the Civil Service Commission
dismissed the appeal of Mr. Rabor and affirmed the action of Director Cawad embodied
in the latter's letter of 26 July 1991.  This Resolution stated in part:

"In his appeal, Rabor requested that he be allowed to continue rendering services as
Utility Worker in order to complete the fifteen (15) year service requirement under P.D.
1146.

CSC Memorandum Circular No. 27, s. 1990 provides, in part:

'1.  Any request for extension of service of compulsory retirees to complete

the fifteen years service requirement for retirement shall be allowed only
to permanent appointees in the career service who are regular members
of the Government Service Insurance System (GSIS) and shall be
granted for a period of not exceeding one (1) year.'

Considering that as early as October 18, 1988, Rabor was already due for retirement, his
request for further extension of service cannot be given due course." (Underscoring in the
original)

On 28 October 1992, Mr. Rabor sought reconsideration of Resolution No. 92-594 of the
Civil Service Commission this time invoking the Decision of this Court in Cena v. Civil
Service Commission. Petitioner also asked for reinstatement with back salaries and
benefits, having been separated from the government service effective 16 August 1991. 
Rabor's motion for reconsideration was denied by the Commission.

Petitioner Rabor sent another letter dated 16 April 1993 to the Office of the Mayor,
Davao City, again requesting that he be allowed to continue rendering service to the
Davao City Government as Utility Worker in order to complete the fifteen (15) years
service requirement under P.D. No. 1146.  This request was once more denied by Mayor
Duterte in a letter to petitioner dated 19 May 1993.  In this letter, Mayor Duterte pointed
out that, under Cena, grant of the extension of service was discretionary on the part of the
City Mayor, but that he could not grant the extension requested.  Mayor Duterte's letter,
in relevant part, read:

"The matter was referred to the City Legal Office and the Chairman of the Civil Service
Commission, in the advent of the decision of the Supreme Court in the Cena vs. CSC, et
al. (G.R. No. 97419 dated July 3, 1992), for legal opinion.  Both the City Legal Officer
and the Chairman of the Civil Service Commission are one in these opinion that
extending you an appointment in order that you may be able to complete the fifteen-year
service requirement is discretionary [on the part of] the City Mayor.

Much as we desire to extend you an appointment but circumstances are that we can no
longer do so.  As you are already nearing your 70th birthday may no longer be able to
perform the duties attached to your position.  Moreover, the position you had vacated was
already filled up.
We therefore regret to inform you that we cannot act favorably on your request."
(Emphases supplied)

At this point, Mr. Rabor decided to come to this Court.  He filed a Letter/Petition dated 6
July 1993 appealing from Civil Service Resolution No. 92-594 and from Mayor Duterte's
letter of 10 May 1993.

The Court required petitioner Rabor to comply with the formal requirements for
instituting a special civil action of certiorari to review the assailed Resolution of the Civil
Service Commission.  In turn, the Commission was required to comment on petitioner's
Letter/Petition. The Court subsequently noted petitioner's Letter of 13 September 1993
relating to compliance with the mentioned formal requirements and directed the Clerk of
Court to advise petitioner to engage the services of counsel or to ask for legal assistance
from the Public Attorney's Office (PAO).

The Civil Service Commission, through the Office of the Solicitor General, filed its
comment on 16 November 1993.  The Court then resolved to give due course to the
Petition and required the parties to file memoranda.  Both the Commission and Mr. Rabor
(the latter through PAO counsel) did so.

In this proceeding, petitioner Rabor contends that his claim falls squarely within the
ruling of this Court in Cena v. Civil Service Commission.

Upon the other hand, the Commission seeks to distinguish this case from Cena.  The
Commission, through the Solicitor General, stressed that in Cena, this Court had ruled
that the employer agency, the Land Registration Authority of the Department of Justice,
was vested with discretion to grant to Cena the extension requested by him.  The Land
Registration Authority had chosen not to exercise its discretion to grant or deny such
extension.  In contrast, in the instant case, the Davao City Government did exercise its
discretion on the matter and decided to deny the extension sought by petitioner Rabor for
legitimate reasons.

While the Cena decision is barely three (3) years old, the Court considers that it must
reexamine the doctrine of Cena and the theoretical and policy underpinnings thereof.

We start by recalling the factual setting of Cena.

Gaudencio Cena was appointed Registrar of the Register of Deeds of Malabon,

Metropolitan Manila, on 16 July 1987.  He reached the compulsory retirement age of
sixty-five (65) years on 22 January 1991.  By the latter date, his government service
would have reached a total of eleven (11) years, nine (9) months and six (6) days.  Before
reaching his 65th birthday, Cena requested the Secretary of Justice, through the
Administrator of the Land Registration Authority ("LRA") that he be allowed to extend
his service to complete the fifteen-year service requirement to enable him to retire with
the full benefit of an Old-Age Pension under Section 11 (b) of P.D. No. 1146.  If Cena's
request were granted, he would complete fifteen (15) years of government service on 15
April 1994, at the age of sixty-eight (68) years.

The LRA Administrator sought a ruling from the Civil Service Commission on whether
or not Cena's request could be granted considering that Cena was covered by Civil
Service Memorandum No. 27, Series of 1990.  On 17 October 1990, the Commission
allowed Cena a one (1) year extension of his service from 22 January 1991 to 22 January
1992 under its Memorandum Circular No. 27.  Dissatisfied, Cena moved for
reconsideration, without success.  He then came to this Court, claiming that he was
entitled to an extension of three (3) years, three (3) months and twenty-four (24) days to
complete the fifteen-year service requirement for retirement with full benefits under
Section 11 (b) of P.D. No. 1146.

This Court granted Cena's petition in its Decision of 3 July 1992.  Speaking through Mr.
Justice Medialdea, the Court held that a government employee who has reached the
compulsory retirement age of sixty-five (65) years, but at the same time has not yet
completed fifteen (15) years of government service required under Section 11 (b) of P.D.
No. 1146 to qualify for the Old-Age Pension Benefit, may be granted an extension of his
government service for such period of time as may be necessary to "fill up" or comply
with the fifteen (15)-year service requirement.  The Court also held that the authority to
grant the extension was a discretionary one vested in the head of the agency concerned. 
Thus the Court concluded:

"Accordingly, the Petition is GRANTED.  The Land Registration Authority (LRA) and
Department of Justice has the discretion to allow petitioner Gaudencio Cena to extend his
11 years, 9 months and 6 days of government service to complete the fifteen-year service
so that he may retire with full benefits under Section 11, paragraph (b) of P.D. 1146."
(Emphases supplied)

The Court reached the above conclusion primarily on the basis of the "plain and ordinary
meaning" of Section 11 (b) of P.D. No. 1146.  Section 11 may be quoted in its entirety:

"Sec. 11. Conditions for Old-Age Pension. --  (a) Old-Age Pension shall be paid to a
member who

(1)  has at least fifteen (15) years of service;

(2)  is at least sixty (60) years of age; and

(3)  is separated from the service.

(b)  unless the service is extended by appropriate authorities, retirement shall be

compulsory for an employee at sixty-five (65) years of age with at least fifteen
(15) years of service; Provided, that if he has less than fifteen (15) years of
service, he shall be allowed to continue in the service to complete the fifteen
(15) years." (Emphases supplied)
The Court went on to rely upon the canon of liberal construction which has often been
invoked in respect of retirement statutes:

"Being remedial in character, a statute granting a pension or establishing [a] retirement

plan should be liberally construed and administered in favor of persons intended to be
benefitted thereby.  The liberal approach aims to achieve the humanitarian purposes of
the law in order that efficiency, security and well-being of government employees may be
enhanced." (Citations omitted)

While Section 11 (b) appeared cast in verbally unqualified terms, there were (and still
are) two (2) administrative issuances which prescribe limitations on the extension of
service that may be granted to an employee who has reached sixty-five (65) years of age.

The first administrative issuance is Civil Service Commission Circular No. 27, Series of
1990, which should be quoted in its entirety:

"TO          :      ALL HEADS OF DEPARTMENTS, BUREAUS AND AGENCIES

OF THE NATIONAL/LOCAL GOVERNMENTS INCLUDING
GOVERNMENT-OWNED AND/OR CONTROLLED
CORPORATIONS WITH ORIGINAL CHARTERS

SUBJECT :     Extension of Service of Compulsory Retiree to Complete the Fifteen

Years Service Requirement for Retirement Purposes

Pursuant to CSC Resolution No. 90-454 dated May 21, 1990, the Civil Service
Commission hereby adopts and promulgates the following policies and guidelines in the
extension of services of compulsory retirees to complete the fifteen years service
requirement for retirement purposes:

1.   Any request for the extension of service of compulsory retirees to complete
the fifteen (15) years service requirement for retirement shall be allowed
only to permanent appointees in the career service who are regular members
of the Government Service Insurance System (GSIS), and shall be granted
for a period not exceeding one (1) year.

2.   Any request for the extension of service of compulsory retiree to complete
the fifteen (15) years service requirement for retirement who entered the
government service at 57 years of age or over upon prior grant of authority
to appoint him or her, shall no longer be granted.

3.   Any request for the extension of service to complete the fifteen (15) years
service requirement of retirement shall be filed not later than three (3) years
prior to the date of compulsory retirement.
 4.   Any request for the extension of service of a compulsory retiree who meets
the minimum number of years of service for retirement purposes may be
granted for six (6) months only with no further extension.

This Memorandum Circular shall take effect immediately." (Emphases supplied)

The second administrative issuance -- Memorandum Circular No. 65 of the Office of the
President, dated 14 June 1988 -- provides:

"x x x                                                 x x x                                                     x x x

WHEREAS, this Office has been receiving requests for reinstatement and/or retention in
the service of employees who have reached the compulsory retirement age of 65 years,
despite the strict conditions provided for in Memorandum Circular No. 163, dated March
5, 1968, as amended.

WHEREAS, the President has recently adopted a policy to adhere more strictly to the law
providing for compulsory retirement age of 65 years and, in extremely meritorious cases,
to limit the service beyond the age of 65 years to six (6) months only.

WHEREFORE, the pertinent provision of Memorandum Circular No. 163 on the

retention in the service of officials or employees who have reached the compulsory
retirement age of 65 years, is hereby amended to read as follows

'Officials or employees who have reached the compulsory retirement age of 65 years
shall not be retained in the service, except for extremely meritorious reasons in which
case the retention shall not exceed six (6) months.'

All heads of departments, bureaus, offices and instrumentalities of the government

including government-owned or controlled corporations, are hereby enjoined to require
their respective offices to strictly comply with this circular.

This Circular shall take effect immediately.

By
aut
hor
ity
of
the
Pre
sid
ent

(Sgd.)
 CA
TA
LI
N
O
M
AC
AR
AI
G,
JR.
Ex
ecu
tiv
e
Se
cre
tar
y

Manila, June 14, 1988." (Underscoring supplied)

Medialdea, J. resolved the challenges posed by the above two (2) administrative
regulations by, firstly, considering as invalid Civil Service Memorandum No. 27 and,
secondly, by interpreting the Office of the President's Memorandum Circular No. 65 as
inapplicable to the case of Gaudencio T. Cena.

We turn first to the Civil Service Commission's Memorandum Circular No. 27. 
Medialdea, J. wrote:

"The Civil Service Commission Memorandum Circular No. 27 being in the nature of an
administrative regulation, must be governed by the principle that administrative
regulations adopted under legislative authority by a particular department must be in
harmony with the provisions of the law, and should be for the sole purpose of carrying
into effect its general provisions (People v. Maceren, G.R. No. L-32166, October 18,
1977, 79 SCRA 450; Teoxon v. Members of the Board of Administrators, L-25619, June
30, 1970, 33 SCRA 585; Manuel v. General Auditing Office, L-28952, December 29,
1971, 42 SCRA 660; Deluao v. Casteel, L-21906, August 29, 1969, 29 SCRA 350).  x x
x.  The rule on limiting to one year the extension of service of an employee who has
reached the compulsory retirement age of sixty-five (65) years, but has less than fifteen
(15) years of service under Civil Service Memorandum Circular No. 27, S. 1990, cannot
likewise be accorded validity because it has no relationship or connection with any
provision of P.D. 1146 supposed to be carried into effect.  The rule was an addition to or
extension of the law, not merely a mode of carrying it into effect.  The Civil Service
Commission has no power to supply perceived omissions in P.D. 1146." (Underscoring
supplied)
It will be seen that Cena, in striking down Civil Service Commission Memorandum No.
27, took a very narrow view on the question of what subordinate rule-making by an
administrative agency is permissible and valid.  That restrictive view must be contrasted
with this Court's earlier ruling in People v. Exconde, where Mr. Justice J.B.L. Reyes said:

"It is well established in this jurisdiction that, while the making of laws is a non-
delegable activity that corresponds exclusively to Congress, nevertheless, the latter may
constitutionally delegate authority and promulgate rules and regulations to implement a
given legislation and effectuate its policies, for the reason that the legislature often finds
it impracticable (if not impossible) to anticipate and provide for the multifarious and
complex situations that may be met in carrying the law into effect.  All that is required is
that the regulation should be germane to the objects and purposes of the law; that the
regulation be not in contradiction with it, but conform to the standards that the law
prescribes." (Underscoring supplied)

In Tablarin v. Gutierrez, the Court, in sustaining the validity of a MECS Order which
established passing a uniform admission test called the National Medical Admission Test
(NMAT) as a prerequisite for eligibility for admission into medical schools in the
Philippines, said:

"The standards set for subordinate legislation in the exercise of rule making authority by
an administrative agency like the Board of Medical Education are necessarily broad and
highly abstract.  As explained by then Mr. Justice Fernando in Edu v. Ericta (35 SCRA
481 [1970]) --

'The standards may be either expressed or implied.  If the former, the non-delegation
objection is easily met.  The standard though does not have to be spelled out specifically. 
It could be implied from the policy and purpose of the act considered as a whole.  In the
Reflector Law, clearly the legislative objective is public safety.  What is sought to be
attained in Calalang v. William is "safe transit upon the roads." '

We believe and so hold that the necessary standards are set forth in Section 1 of the 1959
Medical Act: 'the standardization and regulation of medical education' and in Section 5
(a) and 7 of the same Act, the body of the statute itself, and that these considered together
are sufficient compliance with the requirements of the non-delegation principle."
(Citations omitted; underscoring partly in the original and partly supplied)

In Edu v. Ericta, then Mr. Justice Fernando stressed the abstract and very general nature
of the standards which our Court has in prior caselaw upheld as sufficient for purposes of
compliance with the requirements for validity of subordinate or administrative rule-
making:

"This Court has considered as sufficient standards, 'public welfare,' (Municipality of

Cardona v. Municipality of Binangonan, 36 Phil. 547 [1917]); 'necessary in the interest of
law and order,' (Rubi v. Provincial Board, 39 Phil. 660 [1919]); 'public interest,' (People
v. Rosenthal, 68 Phil. 328 [1939]); and 'justice and equity and substantial merits of the
case,' (International Hardwood v. Pangil Federation of Labor, 17 Phil. 602 [1940]).”
(Underscoring supplied)

Clearly, therefore, Cena when it required a considerably higher degree of detail in the
statute to be implemented, went against prevailing doctrine.  It seems clear that if the
governing or enabling statute is quite detailed and specific to begin with, there would be
very little need (or occasion) for implementing administrative regulations.  It is, however,
precisely the inability of legislative bodies to anticipate all (or many) possible detailed
situations in respect of any relatively complex subject matter, that makes subordinate,
delegated rule-making by administrative agencies so important and unavoidable.  All that
may be reasonably demanded is a showing that the delegated legislation consisting of
administrative regulations are germane to the general purposes projected by the
governing or enabling statute.  This is the test that is appropriately applied in respect of
Civil Service Memorandum Circular No. 27, Series of 1990, and to this test we now turn.

We consider that the enabling statute that should appropriately be examined is the present
Civil Service law -- found in Book V, Title I, Subtitle A, of Executive Order No. 292
dated 25 July 1987, otherwise known as the Administrative Code of 1987 -- and not alone
P.D. No. 1146, otherwise known as the "Revised Government Service Insurance Act of
1977." For the matter of extension of service of retirees who have reached sixty-five (65)
years of age is an area that is covered by both statutes and not alone by Section 11 (b) of
P.D. No. 1146.  This is crystal clear from examination of many provisions of the present
civil service law.

Section 12 of the present Civil Service law set out in the 1987 Administrative Code
provides, in relevant part, as follows:

"Sec. 12. Powers and Functions. -- The [Civil Service] Commission shall have the
following powers and functions:

x x x                                                              x x x                                                     x x x

(2)    Prescribe, amend and enforce rules and regulations for carrying into effect
the provisions of the Civil Service Law and other pertinent laws;

(3)    Promulgate policies, standards and guidelines for the Civil Service and
adopt plans  and programs to promote economical, efficient and effective
personnel administration in the government;

x x x                                                              x x x                                                     x x x

(10)   Formulate, administer and evaluate programs relative to the development

and retention of a qualified and competent work force in the public
service;
x x x                                                                          x x x                                                    
xxx

(14)   Take appropriate action on all appointments and other personnel matters
in the Civil Service including extension of service beyond retirement age;

x x x                                                                          x x x                                                    

xxx

(17)  Administer the retirement program for government officials and

employees, and accredit government services and evaluate qualifications
for retirement;

x x x                                                              x x x                                                     x x x

(19) Perform all functions properly belonging to a central personnel agency and
such other functions as may be provided by law." (Underscoring supplied)

It was on the bases of the above quoted provisions of the 1987 Administrative Code that
the Civil Service Commission promulgated its Memorandum Circular No. 27.  In doing
so, the Commission was acting as "the central personnel agency of the government
empowered to promulgate policies, standards and guidelines for efficient, responsive and
effective personnel administration in the government." It was also discharging its
function of "administering the retirement program for government officials and
employees" and of "evaluat[ing] qualifications for retirement."

In addition, the Civil Service Commission is charged by the 1987 Administrative Code
with providing leadership and assistance "in the development and retention of qualified
and efficient work force in the Civil Service" (Section 16 [10]) and with the "enforcement
of the constitutional and statutory provisions, relative to retirement and the regulation for
the effective implementation of the retirement of government officials and employees"
(Section 16 [14]).

We find it very difficult to suppose that the limitation of permissible extensions of service
after an employee has reached sixty-five (65) years of age has no reasonable relationship
or is not germane to the foregoing provisions of the present Civil Service Law.  The
physiological and psychological processes associated with ageing in human beings are in
fact related to the efficiency and quality of the service that may be expected from
individual persons.  The policy considerations which guided the Civil Service
Commission in limiting the maximum extension of service allowable for compulsory
retirees, were summarized by Griño-Aquino, J. in her dissenting opinion in Cena:

"Worth pondering also are the points raised by the Civil Service Commission that
extending the service of compulsory retirees for longer than one (1) year would: (1) give
a premium to late-comers in the government service and in effect discriminate against
those who enter the service at a younger age; (2) delay the promotion of the latter and of
next-in-rank employees; and (3) prejudice the chances for employment of qualified
young civil service applicants who have already passed the various government
examinations but must wait for jobs to be vacated by 'extendees' who have long passed
the mandatory retirement age but are enjoying extension of their government service to
complete 15 years so they may qualify for old-age pension." (Underscoring supplied)

Cena laid heavy stress on the interest of retirees or would be retirees, something that is, in
itself, quite appropriate.  At the same time, however, we are bound to note that there
should be countervailing stress on the interests of the employer agency and of other
government employees as a whole.  The results flowing from the striking down of the
limitation established in Civil Service Memorandum Circular No. 27 may well be "absurd
and inequitable," as suggested by Mme. Justice Griño-Aquino in her dissenting opinion. 
An employee who has rendered only three (3) years of government service at age sixty-
five (65) can have his service extended for twelve (12) years and finally retire at the age
of seventy-seven (77).  This reduces the significance of the general principle of
compulsory retirement at age sixty-five (65) very close to the vanishing point.

The very real difficulties posed by the Cena doctrine for rational personnel administration
and management in the Civil Service, are aggravated when Cena is considered together
with the case of Toledo v. Civil Service Commission. Toledo involved the provisions of
Rule III, Section 22, of the Civil Service Rules on Personnel Action and Policies
(CSRPAP) which prohibited the appointment of persons fifty-seven (57) years old or
above in government service without prior approval of the Civil Service Commission. 
Civil Service Memorandum Circular No. 5, Series of 1983 provided that a person fifty-
seven (57) years of age may be appointed to the Civil Service provided that the
exigencies of the government service so required and provided that the appointee
possesses special qualifications not possessed by other officers or employees in the Civil
Service and that the vacancy cannot be filled by promotion of qualified officers or
employees of the Civil Service.  Petitioner Toledo was appointed Manager of the
Education and Information Division of the Commission on Elections when he was almost
fifty-nine (59) years old.  No authority for such appointment had been obtained either
from the President of the Philippines or from the Civil Service Commission and the
Commission found that the other conditions laid down in Section 22 of Rule III,
CSRPAP, did not exist.  The Court nevertheless struck down Section 22, Rule III on the
same exceedingly restrictive view of permissible administrative legislation that Cena
relied on.

When one combines the doctrine of Toledo with the ruling in Cena, very strange results
follow.  Under these combined doctrines, a person sixty-four (64) years of age may be
appointed to the government service and one (1) year later may demand extension of his
service for the next fourteen (14) years; he would retire at age seventy-nine (79).  The net
effect is thus that the general statutory policy of compulsory retirement at sixty-five (65)
years is heavily eroded and effectively becomes unenforceable.  That general statutory
policy may be seen to embody the notion that there should be a certain minimum turn-
over in the government service and that opportunities for government service should be
distributed as broadly as possible, specially to younger people, considering that the bulk
of our population is below thirty (30) years of age.  That same general policy also reflects
the life expectancy of our people which is still significantly lower than the life
expectancy of, e.g., people in Northern and Western Europe, North America and Japan.

Our conclusion is that the doctrine of Cena should be and is hereby modified to this
extent: that Civil Service Memorandum Circular No. 27, Series of 1990, more
specifically paragraph (1) thereof, is hereby declared valid and effective.  Section 11 (b)
of P.D. No. 1146 must, accordingly, be read together with Memorandum Circular No.
27.  We reiterate, however, the holding in Cena that the head of the government agency
concerned is vested with discretionary authority to allow or disallow extension of the
service of an official or employee who has reached sixty-five (65) years of age without
completing fifteen (15) years of government service; this discretion is, nevertheless, to be
exercised conformably with the provisions of Civil Service Memorandum Circular No.
27, Series of 1990.

We do not believe it necessary to deal specifically with Memorandum Circular No. 65 of

the Office of the President dated 14 June 1988.  It will be noted from the text quoted
supra (pp. 11-12) that the text itself of Memorandum Circular No. 65 (and for that matter,
that of Memorandum Circular No. 163, also of the Office of the President, dated 5 March
1968) does not purport to apply only to officers or employees who have reached the age
of sixty-five (65) years and who have at least fifteen (15) years of government service. 
We noted earlier that Cena interpreted Memorandum Circular No. 65 as referring only to
officers and employees who have both reached the compulsory retirement age of sixty-
five (65) and completed the fifteen (15) years of government service.  Cena so interpreted
this Memorandum Circular precisely because Cena had reached the conclusion that
employees who have reached sixty-five (65) years of age, but who have less than fifteen
(15) years of government service, may be allowed such extension of service as may be
needed to complete fifteen (15) years of service.  In other words, Cena read
Memorandum Circular No. 65 in such a way as to comport with Cena's own conclusion
reached without regard to that Memorandum Circular.  In view of the conclusion that we
today reached in the instant case, this last ruling of Cena is properly regarded as merely
obiter.

We also do not believe it necessary to determine whether Civil Service Memorandum

Circular No. 27 is fully compatible with Office of the President's Memorandum Circular
No. 65; this question must be reserved for detailed analysis in some future justiciable
case.

Applying now the results of our reexamination of Cena to the instant case, we believe and
so hold that Civil Service Resolution No. 92-594 dated 28 April 1992 dismissing the
appeal of petitioner Rabor and affirming the action of CSRO-XI Director Cawad dated 26
July 1991, must be upheld and affirmed.

ACCORDINGLY, for all the foregoing, the Petition for Certiorari is hereby
DISMISSED for lack of merit.  No pronouncement as to costs.
SO ORDERED.

Narvasa, C.J., Regalado, Davide, Jr., Romero, Bellosillo, Melo, Puno, Vitug, Kapunan,
Mendoza, and Francisco, JJ., concur.

Padilla, J., vote to grant the petition for the same reasons stated in my concurring opinion
in Cena vs. CSC reported in 211 SCRA 192.

Quiason, J., on leave.

Annex "A," Letter/Petition, Rollo, p. 4.

Annex "A-1," Letter/Petition, Rollo, p. 5.

Annex "B," Letter/Petition, Rollo, p. 6.

Annex "B-1," Letter/Petition, Rollo, p. 7.

Annex "C," Letter/Petitioner, Rollo, p. 8.

CSC Resolution No. 92-594, Rollo, pp. 11-12.

211 SCRA 179 (1992).

Rollo, p. 3.

Supreme Court Resolution dated 24 August 1993, Rollo, p. 17.

Rollo, p. 40-A.

211 SCRA 179 (1992).

Two (2) Justices dissented -- Griño-Aquino and Romero, JJ. -- from the Cena decision.

211 SCRA at 192.

211 SCRA at 186.

211 SCRA at 200-201.

211 SCRA at 190.

101 Phil. 1125 (1957).

101 Phil. at 1129.

152 SCRA 730 (1987).

152 SCRA at 740-741.

35 SCRA 481 (1970).

35 SCRA at 497 (note 43).

See Addendum to Comment filed by Civil Service Commission dated 5 August 1991;
Cena Rollo, p. 91.

211 SCRA at 196.

202 SCRA 507 (1991). We are not here, of course, reexamining Toledo for this case is
not, strictly speaking, involved at present.  At the same time, we cannot disregard the
intellectual relevance of the doctrine in Toledo to the issues that we are presently
addressing.

Toledo held:

"[Section 22, Rule III] is entirely a creation of the Civil Service Commission,
having no basis in the law itself which it was meant to implement.  It cannot be related to
or connected with any specific provision of the law which it is meant to carry into effect,
such as a requirement, for instance, that age should be reckoned as a factor in the
employment or reinstatement of an individual, or a direction that there be a determination
of some point in a person's life at which he becomes unemployable or employable [only]
under specific conditions.  x x x [S]ince there is no prohibition or restriction on the
employment of fifty-seven (57) year old persons x x x there was nothing to carry into
effect through an implementing rule on the matter." (202 SCRA at 513-514, per Paras, J.;
underscoring supplied)

64 Official Gazette 3295 (1 April 1968).

CONCURRING AND
DISSENTING OPINION

PUNO, J.:

The case at bar involves two purely legal issues, one substantive and the other
procedural.  The substantive issue is whether the Energy Regulatory Commission (ERC)
has legal authority to grant provisional rate adjustments under the Electric Power Industry
Reform Act of 2001 (EPIRA); the procedural issue is whether the grant by the ERC of
the provisional rate adjustment to the Manila Electric Company (Meralco) was done in
accord with section 4 (e), Rule 3 of the Implementing Rules and Regulations of the
EPIRA law.  The reasonability of the rate increase applied for by Meralco and
provisionally granted by the ERC is not an issue before the Court and should not shade
our decision.  On the substantive issue, I join the majority without any hesitation.  On the
procedural issue, I beg to dissent.

I.          Facts

First, the facts without the fat.

On October 10, 2003, Meralco applied for a rate hike with the ERC and sought the ex-
parte grant of provisional authority to increase such rates in accordance with a schedule
attached to its application.[1] On the same date, Meralco published a notice of the
filing of the application for a rate hike in the Manila Times.[2] A day before filing its
application with the ERC, Meralco furnished the Sangguniang Panglungsod of Pasig
City with a copy of the application.[3]

With the public given such notice, the National Association of Electricity Consumers
for Reform (NASECORE), on October 14, 2003, manifested its intent with the ERC to
file an opposition to Meralco’s application.[4]

Other oppositors followed suit.  Mr. Genaro Lualhati filed a letter with the ERC on
October 24, 2003 demanding for the dismissal of Meralco’s application.[5]

On October 29, 2003, no less than petitioner Freedom from Debt Coalition (FDC) filed a
letter with the ERC expressing its intent to file an opposition to Meralco’s application.[6]
The ERC then directed FDC, Mr. Lualhati and NASECORE to file their comments on the
application.[7]

On November 11, 2003, NASECORE moved for the production of material documents
by Meralco.[8] On November 13, 2003, ERC ordered Meralco to comment on
NASECORE’s motion.[9] On November 19, 2003, it directed Meralco to submit certain
documents.[10]

On November 21, 2003, Mr. Lualhati filed his Opposition to Meralco’s application.[11]

On November 25, 2003, NASECORE, manifested that it still could not file its opposition
until the documents it had requested from Meralco had been produced.[12]  On the same
date, petitioner FDC filed a Motion for Production of Documents with the ERC to enable
it to submit a comment on Meralco’s application and reserved its right to oppose the
same.[13]

In an Order dated November 27, 2003 (the Questioned Order) issued ex-parte, the ERC
granted Meralco provisional authority to increase its rates by 12 centavos/kWh effective
January 2004,[14] the dispositive portion of which states as follows:

WHEREFORE, considering all the foregoing, this Commission, pursuant to Section 8 of

Executive Order No. 172 and Section 4 (e) of the Implementing Rules and Regulations of
the EPIRA (R.A. 9136), hereby provisionally authorizes applicant Manila Electric
Company (MERALCO) to adopt and implement the attached rate schedules embodying a
rate adjustment in the average amount of TWELVE (12) CENTAVOS per kWh, effective
with respect to its billing cycles beginning January 2004.  The impact of this approved
rate adjustment will vary from one customer class to another depending on the load
factors.

The rate adjustment authorized herein shall be subject to refund in the event that
this Commission finds, after completion of the hearings of this case, that the same is
unjust and unreasonable.

The hearing of this case is hereby set on December 22, 2003 at nine o’ clock in the
morning (9:00 A.M.) at the ERC Hearing Room, 15th Floor, Pacific Center Building, San
Miguel Avenue, Ortigas Center, Pasig City.  In this connection, MERALCO is hereby
directed to publish, at its own expense, the attached Notice of Public Hearing at least
twice (2) (sic) for two (2) successive weeks in two (2) newspapers of nationwide
circulation in the country, the last date of publication to be made not later than two (2)
weeks before the scheduled date of initial hearing.

Let copies of this Order and the attached Notice of Public Hearing be furnished all the
Municipal/City Mayors within the MERALCO’s franchise area for the appropriate
posting thereof on their respective bulletin boards.

Likewise, let copies of this Order and the attached Notice of Public Hearing be furnished
the Office of the Solicitor General (OSG), the Commission on Audit (COA) and the
Committees on Energy of both Houses of Congress who are hereby requested to have
their respective duly authorized representatives present at the aforesaid initial hearing…
[15] (emphasis supplied)

On December 2, 2003, Meralco filed a Motion for Extension of Time to submit the
documents indicated in the ERC’s Order of November 19, 2003.[16]

On December 3, 2003, Mr. Zosimo Yeban, filed a letter with the ERC objecting to the
rate increase granted to Meralco.[17]

On December 8, 2003, NASECORE filed with the ERC an Urgent Motion to Resolve
Motion for Production of Documents and Opposition to the Provisional Authority, while
the National Consumer Affairs Council filed a letter seeking reconsideration of the
ERC’s Questioned Order. [18]

On December 9, 2003, the Federation of Philippine Industries, Inc. likewise filed a

letter with the ERC seeking reconsideration of the Questioned Order.[19]

On December 11, 2003, Mr. Lualhati and the Philippine Consumers Watch (Bantay
Mamamayan) Foundation filed with the ERC a Motion to Resolve Opposition and
Manifestation Joining NASECORE in its Opposition and Motion for Production of
Documents, respectively.[20] A day later, Napocor Industrial Consumers Association,
Inc. (NICAI) filed an Urgent Motion to Suspend Implementation and Motion for
Reconsideration.[21]

On December 15, 2003, the Philippine Consumers Welfare Union, Atty. Ruperto
Estrada, Martsa ng Bayan Contra Meralco, Corazon Villa and Daday Tupay filed
oppositions asking ERC to reconsider the Questioned Order while Atty. Estrada filed a
motion for production of documents.[22]

On December 19, 2003, Meralco opposed the motion for production of material
documents on the ground that the documents sought by the petitioners were immaterial
and irrelevant to its application.[23]

On December 21, 2003, Mr. Arnulfo Paca also raised his objections and comments on the
provisional increase via e-mail sent to the ERC .[24]

On December 22, 2003, Mr. Lualhati filed a Motion for Reconsideration of the
Questioned Order.[25] On the same date, Bagong Alyansang Makabayan (BAYAN),
Kilusang Mayo Uno (KMU), Gabriela Women’s Partylist (GABRIELA), Anakpawis
Partylist, Kalipunan ng Damayang Mahihirap (KADAMAY), and Samahan ng
Nagtataguyod ng Agham at Teknolohiya Para sa Sambayanan (AGHAM) filed an
Opposition with Motion for Reconsideration.[26]

In the public hearing held on December 22, 2003, several oppositors, asked the ERC to
reconsider its Questioned Order.  The ERC refused insisting it has the power to issue
provisional orders.[27] Instead of seeking reconsideration, FDC filed with this Court on
December 23, 2003, a petition for certiorari, prohibition and injunction with prayer for
the issuance of a temporary restraining order or a status quo order.  Six days later, FDC
reiterated its prayer for a temporary restraining or status quo order.[28]

On December 30, 2003, Meralco filed a Consolidated Comment to the various

oppositions with the ERC.[29]

On January 13, 2004, this Court ordered the ERC and Meralco to comment on FDC’s
petition and enjoined them to observe the status quo prevailing before the filing of the
petition.  The case was set for oral arguments on January 27, 2004.[30]

Prior to and shortly after the January 13, 2004 status quo order of this Court, several
parties had, in the meantime, filed other pleadings with the ERC.   The Philippine
Chamber of Commerce and Industry filed a letter on January 5, 2004 requesting for a
public hearing before the grant of the provisional increase.[31] On January 6, 2004, Mr.
Lualhati filed a Rejoinder with Motion for Reconsideration, while Mr. Juan Paqueo III
filed a Petition to Suspend the Granting of Electric Power Increase Against Meralco
Company.[32] BAYAN, Bayan Muna Partylist, KMU, GABRIELA, Anakpawis Partylist,
KADAMAY, and AGHAM filed a Manifestation with Motion to Immediately Resolve
Motion for Reconsideration and to Suspend Provisional Authority on January 9, 2004.[33]
They also filed their Rejoinder to Meralco’s Consolidated Comment on January 13, 2004.
[34]In the meantime, NICAI and Mr. Yeban filed their respective Rejoinders to Meralco’s
Consolidated Comment on January 12, 2004.[35] On January 15, 2004, NASECORE filed
its Rejoinder.[36] The OSG filed an Urgent Motion to Resolve Pending Motions filed by
the Oppositors on January 29, 2004.[37] It sent a letter to the Commission on Audit (COA)
requesting assistance with regard to Meralco’s application on February 4, 2004[38] and
filed a motion with the ERC on February 16, 2004 seeking to direct the COA to conduct a
rate audit.[39]

Meralco, ERC and the OSG filed their respective comments with this Court on January
26, 2004.

The petitioners-in-intervention[40] filed a motion to intervene attaching thereto their

petition-in-intervention which this Court admitted in a Resolution dated January 27,
2004.[41]

During the oral arguments on January 27, 2004, the parties were required to file their
respective memoranda within a non-extendible period of twenty days.  Counsel for ERC
was ordered in open court to produce certain documents.

The parties (except for petitioner FDC) submitted their respective Memoranda dated
February 16, 2004.[42]

It will be noted that several motions assailing the Questioned Order remain pending
before the ERC for resolution as shown by the OSG’s Urgent Motion to Resolve
Pending Motions Filed by the Oppositors filed with the ERC on January 29, 2004.[43]
These pending motions are the following: a letter-complaint of Zosimo Yeban, Jr. filed
on December 3, 2003 objecting to the rate increase granted to Meralco;[44] an Urgent
Motion to Resolve Motion for Production of Documents and Opposition to the
Provisional Authority of the NASECORE approved by its President, Pete L. Ilagan, filed
on December 8, 2003;[45] a letter of the National Consumers Affairs Council filed on
December 8, 2003 seeking reconsideration of the provisional authority;[46] a letter of the
Federation of Philippine Industries, Inc. filed on December 9, 2003 asking
reconsideration of the ERC Order granting the provisional increase;[47] a Manifestation of
the Philippine Consumers Watch (Bantay Mamamayan) Foundation, represented by its
Chairman, Juan Ponce Enrile, filed on December 11, 2003, joining the NASECORE in its
opposition to the provisional authority and Motion for Production of Documents;[48] an
Urgent Motion to Suspend Implementation and Motion for Reconsideration of the
Napocor Industrial Consumers Association, Inc. (NICAI) filed on December 12, 2003;[49]
an Opposition of the Philippine Consumers Welfare Union (PCWU), Martsa ng Bayan
Kontra Meralco, Corazon Villa and Daday Tupas filed on December 15, 2003 asking the
ERC to reconsider its order granting the provisional increase;[50] an electronic mail
message of Michael Paca dated December 21, 2003 (and stamped received by the ERC
on January 8, 2004) with an attached write-up containing comments on the rate increase;
[51] a Motion for Reconsideration of Mr. Genaro C. Lualhati filed on December 22, 2003;
[52] a letter of the Philippine Chamber of Commerce and Industry filed on January 5, 2004
asking the ERC to conduct public hearings prior to the grant of provisional increase;[53] a
Petition of Juan B. Paqueo III filed on January 6, 2004 to suspend the grant of rate
increase to Meralco;[54] and a Manifestation (with motions to immediately resolve motion
for reconsideration and to suspend provisional authority) of BAYAN, KMU,
GABRIELA, KADAMAY and AGHAM filed on January 9, 2004.[55]

II.         Issues

The issues are strictly legal.

First, whether the ERC has legal authority to grant provisional rate adjustments under the
new EPIRA law.

Second, whether the grant by the ERC of the provisional rate adjustment to Meralco
violates the Implementing Rules and Regulations of the EPIRA law and hence constitutes
grave abuse of discretion amounting to lack or excess of jurisdiction.

Let me start with an overview of the . . .

III.        Statutory History of Electric Power

Regulation in the Philippines

Commonwealth Act No. 146 or the Public Service Act was passed into law on
November 7, 1936 creating the Public Service Commission (PSC) with jurisdiction,
supervision and control over public services such as those for electric light, heat and
power.[56] Under the Act, the PSC had authority to fix rates charged by a public service.
By express provision of law, the PSC could approve provisional rates ex-parte.[57]

Under the reorganization plan effected by Presidential Decree No. 1, as amended by

Presidential Decree No. 458 issued on May 16, 1974, jurisdiction, supervision and
control over public services related to electric light, power and waterworks vested in the
PSC were transferred to the Board of Power and Waterworks.

The Board of Power and Waterworks was abolished under Presidential Decree No.
1206 enacted on October 6, 1977.  Its powers and functions relative to power utilities,
including its authority to grant provisional relief,[58] were transferred to the Board of
Energy.[59]

On May 8, 1972, institutional reforms were made in the energy sector under Executive
Order No. 172 which created the Energy Regulatory Board (ERB).  Under the law, the
Board of Energy (BOE) was reconstituted into the ERB and the powers and functions of
the BOE under Republic Act No. 6173, as amended by Presidential Decree No. 1206,
were transferred to the ERB.[60]  The law expressly authorizes the ERB to grant
provisional relief.[61]

Most recently, Republic Act No. 9136, known as the Electric Power Industry Reform
Act of 2001 (EPIRA), was enacted on June 8, 2001 to provide a framework for
restructuring the electric power industry.[62]  One of the purposes of the EPIRA is to
establish a strong and purely independent regulatory body.[63]  The ERB was abolished[64]
and its powers and functions not inconsistent with the provisions of the EPIRA were
expressly transferred to the Energy Regulatory Commission (ERC).[65]

With due respect to the majority, I submit that . . .

IV.       ERC complied with the rules and did not act
with grave abuse of discretion in issuing the
Questioned Order.

This is the spearhead of my disagreement with the majority and I wish to address it
first.  I respectfully make the following submissions: (a) there is no violation of the
procedure set forth in the EPIRA’s Implementing Rules and Regulations when ERC
issued its Questioned Order; indeed, the oppositors had full opportunity to assail its
legality and propriety in a public hearing before its effectivity; (b) ex-parte orders issued
to protect the interest of the public are universally recognized as legitimate exercise of the
police power of the State; and (c) it is premature for the Court to strike down the
Questioned Order at this time since it is merely provisional and is pending
reconsideration before the ERC; in fine, there is an effective and available
administrative remedy before the ERC which no party should shortcircuit and which this
Court should allow to flow unimpeded.

The Questioned Order did not violate

the Implementing Rules and
Regulations of the EPIRA; there is
no denial of procedural due process.

The majority based its holding that the ERC committed grave abuse of discretion in
issuing the Questioned Order on the following ratiocination:

1.  Meralco failed to comply with the publication requirement provided in Section 4 (e),
Rule 3 of the Implementing Rules and Regulations.  It notes that the Notice of
Application, quoted in full below, which was published on October 10, 2003 in the
Manila Times does not contain the text of Meralco’s application, or at least a summary
thereof:

MANILA ELECTRIC COMPANY

Pasig City
NOTICE OF APPLICATION

Pursuant to paragraph (e), Section 4, Rule 3 of the Implementing Rules and Regulations
of R.A. 9136, notice is hereby given that an Application dated October 8, 2003, for the
approval of revised rate schedules and provisional authority, will be filed by the
MANILA ELECTRIC COMPANY with address at Meralco Center, Ortigas Avenue,
Pasig City, before the Energy Regulatory Commission.
Issued this 9th day of October 2003.

(Sgd.) GIL S. SAN DIEGO

Vice-President and Head
    Legal Services[66]

2.  The Questioned Order failed to consider the pleadings filed by parties who opposed
Meralco’s application, as required by Section 4 (e), Rule 3 of the Implementing Rules
and Regulations, and was based solely on Meralco’s application and its supporting
documents.

3.  The ERC issued the Questioned Order despite the pendency of several Motions for
Production of Documents filed by various oppositors and despite their manifestation that
they would oppose Meralco’s application.

These grounds relied upon by the majority cannot stand close scrutiny.  Sections 4 (e) and
(r), Rule 3 of the EPIRA’s Implementing Rules and Regulations set forth the procedure in
rate adjustment cases, viz:

(e)           Any application or petition for rate adjustment or for any relief affecting
the consumers must be verified; and accompanied with an acknowledgment of
receipt of a copy thereof by the LGU Legislative Body of the locality where the
applicant or petitioner principally operates together with the certification of the
notice of publication thereof in a newspaper of general circulation in the same
locality.

The ERC may grant provisionally or deny the relief prayed for not later than seventy five
(75) calendar days from the filing of the application or petition, based on the same and
the supporting documents attached thereto and such comments or pleadings the
consumers or the LGU concerned may have filed within thirty (30) calendar days from
receipt of a copy of the application or petition or from the publication thereof as the case
may be.

Thereafter, the ERC shall conduct a formal hearing on the application or petition, giving
proper notices to all parties concerned, with at least one public hearing in the affected
locality, and shall decide the matter on the merits not later than twelve (12) months from
the issuance of the aforementioned provisional order.

This Section 4(e) shall not apply to those applications or petitions already filed as of 26
December 2001 in compliance with Section 36 of the Act.

xxx                   xxx                   xxx

(r)           All notices of hearings to be conducted by the ERC for the purpose of
fixing rates or fees shall be published at least twice for two (2) successive weeks in
two (2) newspapers of nationwide circulation.
There are two publication requirements in the afore-cited rule.  The first is the notice
of publication of the petition or application in a newspaper of general circulation in
the locality where the petitioner principally operates.  The certification to this effect
must accompany the petition or application when filed.  The second refers to the
publication of all notices of hearing to be conducted by the ERC for the purpose of
fixing rates or fees.  The notices shall be published at least twice for two (2)
successive weeks in two (2) newspapers of nationwide circulation.

The majority assails Meralco’s failure to comply with the first publication requirement. 
It stresses that Meralco did not cause the publication of its petition or application in its
entirety.  It merely published a notice of the filing of application.  I respectfully submit
that the published notice sufficiently complies with the requirements of the rules.  The
application and its 17 annexes are hundreds of pages long and almost an inch thick. 
It would be absurd to require Meralco to publish the entirety of its application.  As
postulated by the ERC, the rules should not be given an unreasonable construction, viz:

Given that rate cases usually entail the filing of applications consisting of hundreds of
pages including all the attachments in support thereof, which often enough are made
integral parts thereof by reference, it is absurd to expect all the applicants to be able to
comply with the publication requirement if it were construed that the entirety of their
application must be the one published and not just the notice of the filing thereof.  With a
one-whole page advertisement in a newspaper of general circulation easily costing
hundreds of thousands of pesos, and with one application eating up more than ten pages
of newspaper space even with the smallest of fonts, it is simply too onerous and
inconvenient for the applicants, including the smallest debt-ridden and barely
surviving electric cooperative, to be required to shell out millions of pesos just so
that they could apply for some relief with respondent ERC.

This must not have been the intention of those luminaries that drafted and approved the
EPIRA Implementing Rules.  When the legislative intent of informing the public of
the filing of the application with respondent ERC is duly served by mere notice, as
this is in fact what due process requires, it must not have entered the minds of the
drafters of the Implementing Rules to expand such requirement by asking for something
close to impossibility (sic).[67] (emphases supplied)

The rationale for the first rule on publication is to ensure that the people in the locality
where the petitioner principally operates is informed of the notice of application. 
Once they receive the notice, they can then proceed to obtain copies of the entire
application in order to prepare their opposition or comments thereto.  In the case at bar,
it is undeniable that Meralco published its Notice of Application for provisional rate
increase.  It is also undeniable that various parties, including the petitioners in the case at
bar, secured copies of Meralco’s application after publication of its Notice of
Application.  It is also undeniable that various parties were able to oppose Meralco’s
application for provisional rate increase.  It cannot be gainsaid therefore that the
rationale for the rule has been satisfied.
The majority opines that at least a summary of the application should have been
published.[68] With due respect, the rules do not require the publication of a summary of
the application. The rules require that a certification of the notice of publication should
accompany the application. Indeed, a summary would not enable anyone to prepare
an intelligent opposition to the application.  Rate cases are, by nature, highly technical
and dependent on scientific data which do not easily lend themselves to summarization. 
Anyone seriously intending to comment or oppose the application needs to secure a copy
of the application and its annexes.

I respectfully reject the majority holding that the ERC failed to consider the
pleadings and comments of oppositors as required by the Implementing Rules and
Regulations before it issued its Questioned Order.  In the first place, there is no showing
that the ERC did not consider the oppositions filed by various parties to Meralco’s
application.  In the second place, the Rules do not expressly require any person to file a
comment or pleading on an application for provisional rate increase.  Section 4 (e), Rule
3 of the Implementing Rules and Regulations simply provides that the ERC should act on
the provisional relief (1) not later than seventy-five calendar days from the filing of the
application; (2) based on the application or petition; (3) based on documents supporting
the application or petition; and (4) based on comments or pleadings the consumers or
the LGU concerned may have filed within thirty (30) calendar days from receipt of a
copy of the application or petition or from the publication thereof as the case may
be.  In fine, the application for provisional rate increase can be acted upon by the ERC if
there are no comments or pleadings filed by the consumers or LGUs concerned.

We now determine whether the ERC ignored the comments of the consumers or the
LGUs concerned before it issued its Questioned Order.  The records will show that the
comments or pleadings pending before the ERC before it issued the Questioned Order
on November 27, 2003 are the following:

1.  NASECORE’s letter filed on October 14, 2003 placing it on record that it would
oppose Meralco’s application, its Motion for Production of Documents filed on
November 11, 2003, and Compliance filed on November 25, 2003 manifesting that it
could not file its opposition until the documents it requested were made available;

2.  Mr. Genaro Lualhati’s letter filed on October 24, 2003 asking for the dismissal of the
application and his Opposition filed on November 21, 2003;

3.  FDC’s letter filed on October 29, 2003 expressing its intent to oppose the application
and Motion for Production of Documents filed on November 27, 2003, the day the
Questioned Order was issued.

It will be noted that the only substantive opposition or comment filed with the ERC
from the time of the filing of Meralco’s petition on October 10 until the issuance of
the Questioned Order on November 27, 2003, is that filed by Mr. Genaro Lualhati. 
I respectfully submit that the ERC correctly gave Mr. Lualhati’s Opposition the
significance of a cipher.  To begin with, his opposition was filed way beyond the 30-day
period for opposing Meralco’s application.  And as pointed out by Meralco, Mr.
Lualhati’s arguments are mere reiterations of his arguments in ERC Case Nos. 2001-
900 and 2001-646, which the ERC had already rejected.[69] There is therefore nothing
tectonic about the arguments of Mr. Lualhati which would defeat the issuance of the
Questioned Order.

The majority also holds that the ERC failed to consider other pleadings such as Motions
for Production of Documents or letters of intent to file oppositions before it issued its
Questioned Order.  I respectfully reiterate that there is nothing in the rules requiring
the ERC to hold its provisional order in abeyance pending the resolution of such
motions as a Motion for Production of Documents.  As aforestressed, the ERC is
allowed by the Rules to grant or deny the relief prayed for based on the application and
its supporting documents, “and such comments or pleadings the consumers or the
LGU concerned may have filed within thirty (30) calendar days from receipt of a
copy of the application or petition or from the publication thereof as the case may
be.”[70] The ERC is mandated to consider only pleadings filed within 30 days counted
from the LGU or consumer’s receipt of the application or publication thereof, as the case
may be.  That is all.  It is not required to wait until all pleadings are submitted nor is
its power to issue provisional orders stayed by pending matters such as motions for
production of documents. To rule otherwise as the majority did is to hold ERC
hostage by the simple expedient of filing such motions as motions for production of
documents or letters of intent to file oppositions or comments.

It is beyond debate that the standard for interim orders is different from those used for
final orders.  The standards for interim orders are less stringent because such temporary
orders are “determined expeditiously, without such investigation as might be deemed
necessary to a determination of permanent cases.”[71]  If the standards for interim orders
are as strict as those for final orders, then interim orders could not be issued summarily. 
For this reason, the ERC, under the Implementing Rules and Regulations, has only
seventy-five days to provide provisional relief.  It is in this context, that the full
ventilation and resolution of a motion for production of documents should be viewed.  A
motion for production of documents is a mode of discovery utilized by one in order to be
fully apprised of the relevant details of a case.  Its use is more relevant in opposing a
final rate increase order which must be based on substantial evidence.  Consequently, a
motion for production of documents need not hinder the issuance of an order
granting a provisional rate increase.

Under the Rules, the application and its supporting documents, if sufficient, can provide
the basis for the ERC to issue an Order for a provisional rate increase.  It should not be
overlooked that the ERC is a special agency with a database of reliable information
which it has accumulated thru experience and its expertise.  It is free to resort to these
data without offending procedural due process.

I respectfully submit that the administrative process of rate making should not be overly
judicialized, otherwise, its very reason for existing will be subverted.  It will not be able
to address the needs for which it was created and for which the judicial process was
found lacking.

There is another reason why the majority cannot hold that ERC violated procedural due
process when it issued its Questioned Order.  It is familiar knowledge that due process
only demands opportunity to be heard. The Questioned Order was issued on
November 27, 2003 but the provisional rate increase was to be effective beginning
January 2004.  The public hearing on the provisional rate was set on December 22,
2003.  The oppositors were given all the opportunity to assail Meralco’s application in
the hearing of December 22, 2003. It cannot therefore be maintained that the oppositors
were denied the opportunity to be heard before the provisional rate increase order
became effective in January 2004. The majority cannot close its eyes to this reality.

Administrative agencies are allowed

to issue ex-parte orders when
required by public interest and as an
exercise of police power.

Further, the rationale behind the creation of administrative agencies and the State’s police
power explain the need for allowing them to issue ex- parte orders to protect public
interest.

History tells us that the rise of the administrative process, combining legislative and
judicial powers, was caused by the following:

1.  the development of an industrialized and complex society requiring

economic regulation;

2.  the need for specialization to develop the necessary expertise, flexible
regulation to parallel the changing needs of the regulated field, and continuity
of public policy; and

3.  the evident inability of the judicial process to perform the necessary
adjudication with regard to the vastly expanded scope of governmental
activity.[72]

With the complexity of modern life, government functions have to multiply as the areas
subject to regulations increased.[73] Different bodies were created to address these various
needs – agencies dealing with public health, transportation, commerce and even the
practice of professions were thus established.  In the different areas addressed by these
administrative bodies, subject specialists with expertise in their respective fields have to
be developed for effective regulation.  The demands of modern society likewise exposed
the inefficiency of traditional judicial processes to deal with the day-to-day requirements
of government.  Administrative processes stepped in as a more flexible means of speedily
and expeditiously dealing with various affairs that the stricter and more cumbersome
judicial processes cannot manage.  The advantage of specialized administrative bodies is
their expertise in regulatory adjudication in a narrowly defined area.[74] For all these
reasons, the administrative process has evolved into a more informal procedure
characterized by correspondence, conference and investigation.[75] As stated by President
Roosevelt,

The administrative tribunal or agency has been evolved in order to handle controversies
arising under particular statutes.  It is characteristic of these tribunals that simple and
non-technical hearings take the place of court trials, and informal proceedings supersede
rigid and formal pleadings and processes…[76]

Corrollarily, administrative agencies have also been conceded the power to grant
temporary measures ex-parte which are recognized as essential to take care of
problems that cannot be allowed to wait for the completion of formal proceedings.
[77] As explained by Davis:

If the contagion is spreading, or the unfit pilot is about to jeopardize the passengers, or
the harmful medicinal preparation is being sold to the public, summary administrative
action in advance of hearing is appropriate.[78] (emphasis supplied)

It is therefore clear that administrative bodies were created to be able to address the
multifarious concerns of society with speed and efficiency.  Thus, if poisoned meat has
entered our docks or a disease-carrying traveler has landed on our shores, it cannot
be doubted that the proper administrative authorities have sufficient power to
swiftly address these problems. If these administrators were hamstrung from taking
temporary measures, if they have to conduct hearings before they could take
measures to protect the public, the result would be tragedy to our people.  The power
to enact these interim measures is essential for the daily self-preservation of society.  The
power is indispensable to administrative bodies if we expect them to deal with unseen
emergencies and exigencies with effectiveness.

It bears emphasis that the regulatory power of administrative bodies should not be
niggardly given for it is rooted in the State’s police power.  Police power was
originally limited in scope.[79] It was “anchored in the limitations that the courts had
imposed upon individual rights…as embodied in the common law maxim, sic utere tuo
ut alienum non laedas,” meaning, use your own property in such a manner as not to
injure that of another. [80] Over the years, however, the range of police power was no
longer limited to the preservation of public health, safety and morals, which used to be
the primary social interests in earlier times.[81] Police power now requires the State to
“assume an affirmative duty to eliminate the excesses and injustices that are the
concomitants of an unrestrained industrial economy.”[82] Police power is now exerted “to
further the public welfare – a concept as vast as the good of society itself.”[83] Hence,
“police power is but another name for the governmental authority to further the welfare
of society that is the basic end of all government.”[84] When police power is delegated to
administrative bodies with regulatory functions, its exercise should be given a wide
latitude. Police power takes on an even broader dimension in developing countries such
as ours, where the State must take a more active role in balancing the many conflicting
interests in society.  The Questioned Order was issued by the ERC, acting as an agent of
the State in the exercise of police power.  We should have exceptionally good grounds
to curtail its exercise.  This approach is more compelling in the field of rate-regulation
of electric power rates.  Electric power generation and distribution is a traditional
instrument of economic growth that affects not only a few but the entire nation.  It is an
important factor in encouraging investment and promoting business.  The engines of
progress may come to a screeching halt if the delivery of electric power is impaired. 
Billions of pesos would be lost as a result of power outages or unreliable electric power
services.  The State thru the ERC should be able to exercise its police power with
great flexibility, when the need arises.  The power of the ERC to issue rate orders ex-
parte, pending the conduct of full-blown hearings for the issuance of final rates, should
not be denied except for the strongest reasons.  There is none in the case at bar except
its imagined perception that the Questioned Order denied oppositors procedural due
process.

It is Premature for the Court to

Interfere With the ERC’s Ruling at This Time since the Questioned
Order is Merely Provisional and can
be Corrected.

It should be emphasized that the ERC issued merely a provisional order, one that it
could modify or correct at any time.  The said Order is the subject of various motions
for reconsideration.  ERC is far from issuing decision on the merits of Meralco’s
application.  It is too early to fear that the Questioned Order will cause irreparable injury
to the consumers whose interest should be balanced with the interest of MERALCO. In
the balancing of interest, it should be the public interest that should prevail.  It should be
noted that there are numerous motions opposing the Questioned Order currently
pending before the ERC.  I respectfully submit that the ERC should first be given the
chance to consider the arguments raised by the oppositors in these motions.  A cursory
examination of the pleadings and oppositions to the Questioned Order which are still
pending resolution by the ERC shows that the expertise and specialized knowledge of
the ERC is necessary in order to deal with the various grounds that were raised.  These
grounds include the following:

1.  It is the obligation of Meralco’s stockholders, not the consumers, to finance Meralco’s
expansion projects and pay its financial obligations.[85]

2.  When Meralco was experiencing difficulties in raising funds for capital projects, it
should have divested its interests in businesses not directly connected to their primary
business as an electric power distribution utility.[86]

3.  The absence of a public hearing before the issuance of the Questioned Order shows
lack of transparency in the grant of the provisional authority.[87]

4.  Widespread opposition to the rate increase by the consuming public shows that they
believe that the increase has no legal basis.[88]
5.  President Gloria Macapagal-Arroyo, herself, has requested the ERC to reconsider its
decision in light of public outrage.[89]

6.  Any expansion project should be supported by a feasibility study showing the
projected additional revenues which would justify the cost of expansion.[90]

7.  Increased power rates would make industries and businesses located in Meralco’s
franchise area less competitive, resulting in their closure and termination of employment
for their employees.[91]

8.  Any capital expenditure by Meralco goes into the computation of its rate base,
thereafter, the legal return-on-rate-base (RORB) must be determined after proper
valuation and appraisal.  To make its customers advance the needed capital for Meralco’s
projects would be doubly injurious to its consumers as they are bound to subsequently
pay for the cost of these projects through their monthly billings despite the fact that they
financed the same in the first place.[92]

9.  Meralco failed to show proof of the urgent need for the issuance of the provisional
authority, viz:

a.       With regard to Meralco’s pending application before the ERC (Case No. 2003-389)
to increase capacity in its substations and to redesign/revamp and/or extend its
distribution, it was shown that financial difficulties did not hinder the timely
implementation of such projects.  The delay was caused by other factors, such as
coordinating with government agencies in the obtention of construction permits.[93]

b.       Though Meralco’s financial statements as audited for the year 2002 indicated a net
loss of P2.015 billion, it was recently granted a rate increase by the ERC in Case Nos.
2001-646 and 2001-900 resulting in the unbundling of rates.  Meralco did not present any
interim audited financial statements to the ERC showing losses in its utility operations
while taking into account the effects of the rate increase as an aftermath of the
unbundling of rates.  Further, the use of the year 2002 as a test year is questionable as the
effects of the most recent rate increase adjustments granted to Meralco are not reflected
in the year 2002 audited financial statements.[94]

10.           The provisional authority was granted by the ERC based on the asset appraisal
report of Meralco dated September 12, 2003, which has not yet been reviewed and
approved on the merits by the ERC.  This is a deviation from the accepted practice of
evaluating rate increases on the basis of approved asset appraisal reports.[95]

11.           The Questioned Order granting the provisional authority failed to present any
computation of Meralco’s most recent RORB, which is a basic presentation before any
rate adjustment of a regulated utility is granted.[96]

12.           The provisional authority is based on most of Meralco’s rate figures in its Rate
Design 1, which may not be the best rate format to reflect cost.  There is no reason to
believe that transmission charges should differ for customer classes when Meralco is
actually paying for the same charge to Transco for whatever class of customer it serves.
[97]

13.           The ERC’s issuance of a provisional authority to Meralco on the basis of the
latter’s failure to meet its maturing debt obligations indicated a cash-flow approach which
veers away from the RORB methodology for rate adjustments.  The ERC should look
into the cash flows to and from the books of Meralco and its sister companies to make
this approach more objective.[98]

14.           Meralco does not have a sincere desire to lower operating costs.  In the ERC’s
order dated May 30, 2003 approving the unbundling of rates in ERC Case Nos. 2001-646
and 2001-900, the ERC ordered Meralco to exert its best efforts to renegotiate with its
Independent Power Producers in order to mitigate the impact of increase rates.  However,
instead of complying with this directive, Meralco withdrew its application for approval of
contract amendments of its Power Purchase Agreement with Quezon Power (Phils.) Ltd.
which could have resulted in lower purchase power costs.  In fact, Meralco is even now
applying for upward adjustments of its power purchase rates with DURACOM in ERC
Case No. 2003-434.[99]

15.           If, as Meralco contends, its financial difficulties are due to the devaluation of
the peso, this can be mitigated by temporary adjustments using the ICERA[100]
mechanism which has been approved by the ERC.[101] 

16.           Meralco is unfit to operate a power utility service due to its inability to meets
its financial obligations to its creditors; gross mismanagement of the utility despite its
having a monopoly in the power distribution industry for around 50 years and providing
services to 70% of the country; losses due to pilferages for failure to have adequate
support services; failure to maintain its infrastructure; and having poor customer
relations.[102]

17.           Visayas Electric Company (VECO) charges its customers significantly less
than Meralco despite the inherent advantages of the Napocor-Transco-Meralco system
with its technologically more cost-effective power generation process.  VECO sources its
power mainly from thermal generating plants which generate more expensive electricity
compared to Meralco which sources cheaper electricity from hydroelectric and
geothermal plants.  It is possible that Meralco-serviced customers are being overcharged
or that within the generation/transmission/distribution system of Napocor, Transco and
Meralco there is wastage, inefficiency or unnecessary overheads which are being passed
on to customers.[103]

18.           Despite Meralco’s claim that it has not had a rate increase since 1994, its
billings have increased after the unbundling of its rates.[104]

19.           Even without any increase, the current rates as approved on May 30, 2003
already exceed Meralco’s adjusted revenue requirement for the year 2002 of
P27,474,325,672 by no less than P13,941,541,193 – even using the lower sales volume of
P21,880,741,000 kWh for the year 2002.[105]

20.           There is a prejudicial question in Case No. 77559, a petition for review of the
ERC’s order approving an allegedly excessive increase in Meralco’s rates, which is
pending before the Court of Appeals.[106]

21.           A hearing should be held prior to the issuance of a provisional authority as

there are issues which should be resolved, to wit:

a.       the audit, verification and approval of the value of Meralco’s assets for the year
2002;

b.       the basis of the rate increase, i.e., should this be based on actual operating
investments or on the value of investments needed for expansion prior to any actual
investment (in effect, would consumers be funding the expansion);

c.       the implementation of Meralco’s renegotiation with its Independent Power

Producers to remove or significantly reduce the P3.50 per kWh generation bill, among
which is Meralco’s application to implement the Generation Rate Adjustment Mechanism
or GRAM in ERC Case No. 2003-566, which would reduce the generation charge by
P0.1843 per kWh;

d.       Meralco’s refunds due to the industrial and commercial sectors; and

e.       the review of Meralco’s application of a higher rate of systems loss (16.5%) to
residential users compared to the legally allowed 9.5% to all customers across the board.
[107]

It is obvious to the eye that all the possible serious objections to the Questioned
Order have been raised by the consumers.  Nobody has raised the argument that he
has been denied the opportunity to oppose MERALCO’s application due to its non
publication in toto.  It is therefore purposeless for the majority to annul the Questioned
Order and require the republication of MERALCO’s application.  The better course of
action is to remand the case to the ERC so that it can review its provisional order in light
of the opposition to it.

I agree, however, with the majority that - - -

V.        The ERC Has Authority To Issue Provisional

Orders under the new EPIRA Law.

The Nature of Rate-Regulation

This Court discussed the nature of rate-regulation in Republic of the Philippines,
represented by the Energy Regulatory Board v. Manila Electric Company, G.R.
Nos. 141314 and 141369, promulgated on November 15, 2002, viz:

The regulation of rates to be charged by public utilities is founded upon the police powers
of the State and statutes prescribing rules for the control and regulation of public utilities
are a valid exercise thereof. When private property is used for a public purpose and is
affected with public interest, it ceases to be juris privati only and becomes subject to
regulation. The regulation is to promote the common good.  Submission to regulation
may be withdrawn by the owner by discontinuing use; but as long as use of the property
is continued, the same is subject to public regulation.

In regulating rates charged by public utilities, the State protects the public against
arbitrary and excessive rates while maintaining the efficiency and quality of services
rendered. However, the power to regulate rates does not give the State the right to
prescribe rates which are so low as to deprive the public utility of a reasonable return on
investment.  Thus, the rates prescribed by the State must be one that yields a fair return
on the public utility upon the value of the property performing the service and one that is
reasonable to the public for the services rendered. The fixing of just and reasonable
rates involves a balancing of the investor and the consumer interests. (emphases
supplied and footnotes omitted)

It is evident that rate-regulation is one of the more important aspects of public utility
regulation.  It allows the regulator sufficient power to protect consumers from
unreasonable charges while ensuring that the utility is able to maintain a viable business. 
As explained in Potomac Electric Power Company v. Public Service Commission of
the District of Columbia, “(t)his zone is bounded on the one side by the interests of
utility customers in not paying exorbitant rates… On the other side are the interests of
utility investors in achieving a rate of return sufficient to maintain the utility’s financial
integrity, to permit the utility to attract necessary capital at a reasonable cost, and fairly to
compensate themselves for the risks they have assumed.”[108]

Interim Rate-Regulation

Interim rate-regulation is a well-entrenched concept in utility regulation.  Interim rates

are defined as “rates charged by the utility for services or products pending the
establishment of a permanent rate, in emergency situations, or where a bond is
posted that guarantees a refund to consumers for any excess paid by them prior to
the Commission’s final determination.”[109]  It should be emphasized that interim rates
are not limited to emergency situations.  In one case, interim rates were allowed pending
the imposition of final rates when the previous rates were considered so low as to be
confiscatory.[110]  It has also been allowed to “alleviate financial problems whose
correction cannot safely await a decision on the proper level of permanent
rates.”[111]
Interim rate-regulation has also been viewed as a solution to the so-called “regulatory
lag” associated with full-blown hearings.[112] Regulatory lag is defined as “the loss of
proper earnings claimed by a utility between the time a petition for rate increase is
filed and the rate relief actually becomes effective by administrative or judicial
determination.”[113]

In the United States, numerous state public utilities commissions have generally
recognized and sanctioned “temporary rates” to meet emergencies or determine by
experiment or trial what rates would be just.[114] This has been applied to various types of
utilities such as those providing services for sanitation,[115] telephone,[116] and electric
power.[117]

To emphasize the importance of a regulator’s power to grant interim relief, many states
have even taken the position that interim rate-regulation is implied from the power to
fix final rates even in the absence of specific statutory authority.[118]

In the case of Far North Sanitation, Inc. v. Alaska Public Utilities, Inc.,[119] a company
engaged in garbage collection challenged the interim order of the Public Utilities
Commission declaring a rate refund.  The Supreme Court of Alaska held that the broad
powers of the Public Utilities Commission to establish fair and just rates implied its
authority to declare rates interim and refundable so long as the Commission provided
protection for the interests of both the utility and public.  While the Alaska Supreme
Court acknowledged the existence of conflicting case law on this question citing Electric
Dist. No. 1 which held that the plain language of the relevant law requiring the
commission to fix rates meant that it could only fix final rates, it was persuaded by the
weight of jurisprudence upholding the implied power of regulators to exercise interim
rate-regulation:

We think the better view is that the APUC has implied authority to set interim rates.
See Pueblo Del Sol Water Co. v. Arizona Corp. Comm'n, 160 Ariz. 285, 772 P.2d 1138,
1140 (App.1988) (although no express authority exists, it is only "logical" that
commission can impose interim rates subject to a decrease); United Tel. Co. of
Florida v. Mann, 403 So.2d 962 (Fla.1981); Grindstone Butte Mut. Canal Co. v. Idaho
Power Co., 98 Idaho 860, 574 P.2d 902, 906 (1978) (implied in an on-going
investigation is the power to set temporary rates); see also Potomac Elec. Power Co.
v. Public Serv. Comm'n of Dist. of Columbia, 457 A.2d 776, 780 n. 1 (D.C.App.1983)
(Commission's power to grant interim rate increases is "implied from Commission's
specifically granted statutory powers"). AS 42.05.141(a)(1)…[120] (emphases supplied)

In the 1977 case of Public Utility Commission of Texas et al. v. City of Corpus
Christi, a public utility commission and a power company appealed the decision of a
lower court enjoining the commission from enforcing an interim rate order and enjoining
the power company from imposing the rates arising from such order.[121]  The appellate
court ruled in favor of the commission and the power company, holding that the power of
the commission to set interim rates “is a power necessarily inferred from or incidental
to the express power to fix a permanent rate.”[122] The court stressed that this position
has been consistently upheld in other states.[123]

In the case of State ex rel. Laclede Gas Co. v. Public Service Commission of
Missouri, the issue before the Missouri Court of Appeals was whether the Laclede Gas
Company should have been granted an interim rate increase by the Public Service
Commission of Missouri pending the latter’s determination of whether a permanent rate
increase should be allowed.  The Court noted that the question presented was a recurring
one of great public concern requiring its consideration even though the Commission
subsequently granted a permanent increase.  The Court explained the well-established
doctrine of implied interim rate-making powers, viz:

The very real necessity of recognizing such a power in the regulatory agency has
long been recognized by courts throughout the country. Not a single case has been
cited by Jackson County nor found by independent research which has ever denied such a
power to a regulatory agency such as the Missouri Public Service Commission. On the
other hand, numerous cases from diverse jurisdictions have recognized and given effect
to such an implied power even in the absence of specific statutory authority: Omaha
& C.B. St. Ry. Co. v. Nebraska State Railway Commission, 103 Neb. 695, 173 N.W. 690
(1919) (decided prior to the present Nebraska statute expressly authorizing temporary
increases in an emergency); Muskogee Gas & Electric Co. v. State, 81 Okl. 176, 186 P.
730 (1920), City of Bartlesville v. Corporation Commission, 82 Okl. 160, 199 P. 396
(1921), and Oklahoma Gas & Electric Co. v. State Corporation Commission, 83 Okl.
281, 201 P. 505 (1921) (decided in the absence of any statute granting express power
to make interim increases); State ex rel. Puget Sound Navigation Co. v. Department of
Transportation of Washington, 33 Wash.2d 448, 206 P.2d 456 (banc 1949) (without
reliance upon any specific statutory power); Chesapeake & Potomac Tel. Co. v. Public
Service Commission, 330 A.2d 236 (D.C.App.1974) (authority found solely by
implication); City of New York v. New York Telephone Co., 115 Misc. 262, 189 N.Y.S.
701 (1921) (decided before the adoption of the present New York statute specifically
authorizing temporary increases); State ex rel. Utilities Commission v. Morgan, 16
N.C.App. 445, 192 S.E.2d 842 (1972) and State ex rel. Utilities Commission v. Edmisten,
26 N.C.App. 662, 217 S.E.2d 201 (1975) (decided under a file and suspend statute
substantially similar to that of Missouri and with no provision expressly permitting
temporary rates); Southern Bell Telephone & Telegraph Co. v. Bevis, 279 So.2d 285
(Fla.1973) (decided before adoption of the present Florida statute specifically authorizing
interim increases); Federal Power Commission v. Tennessee Gas Transmission Co., 371
U.S. 145, 150, 83 S.Ct. 211, 9 L.Ed.2d 199 (1962). [124] (emphases supplied)

The rationale for this position is best explained in the case of Muskogee Gas and
Electric Company v. State, viz:

The power lodged in the commission to promulgate rates is a legislative power, and its
exercise by the commission involves legislative discretion and policy. Any rule that
would require the commission, before it promulgates any order fixing a rate, to have
before it evidence that would establish to a mathematical certainty the
 reasonableness of the proposed rate, would greatly hinder, if not almost entirely
prevent, the commission from exercising that power .[125] (emphases supplied)

In Muskogee, the temporary rate schedules for electric service for Muskogee and Ft.
Gibson issued by the Corporation Commission was challenged as it was temporary and
experimental and was put into effect only until such time as the commission could secure
data upon which to make a valuation of the property of the company and prescribe a
permanent rate schedule.  In ruling for the public utility, the Court described the danger
arising from a situation where a “defanged” regulator has no power to grant
provisional relief:

The first contention strikes at the very foundation of the fundamental law creating the
commission and defining its duties, and, if sustained, must work a result quite as
surprising and disastrous to the appellant as to the patrons of the company and the general
public, for, if the commission were limited to prescribing rates to instances where it
had made a complete inventory and valuation, there could be little or no relief from
rapidly fluctuating prices brought about by war conditions and incident to the
reconstruction period.

This contention of the appellant fails to take into consideration the purpose for which
the commission was created and the powers conferred upon it through the
Constitution and the laws enacted by the Legislature. [126] (emphases supplied)

In the Philippines, interim rate-regulation has been consistently recognized.  The

statutory history of Philippine electric power regulation discussed earlier shows that
public utility regulators have always had statutory authority to grant provisional relief. 
As early as 1926, in the case of Madrigal y Compania et al. v. Cui, G.R. No. 19829,
November 28, 1922, the Court recognized the power of the Public Utility Commission to
grant temporary rate increases to ship owners transporting freight and passengers.   The
power of public utility regulators to grant interim rate increases has also been shown in
various regulated industries such as those relating to electric power distribution,[127]
petroleum products,[128] telecommunication services,[129] and toll rates.[130]  In terms of
provisional relief not related to rate-setting, the Court has upheld the power of the public
utility regulators to grant temporary permits in favor of ice plant operators,[131] auto-
truck operators,[132] and public utility vehicle operations.[133]

As shown by the foregoing discussions, the power to fix interim rates is necessarily
implied from the power to fix permanent rates, hence, the absence of an express
statutory provision in the EPIRA does not negate the ERC’s power to fix interim
rates.

It is given that the ERC has the power to fix rates of distribution utilities, such as
Meralco, under the EPIRA by virtue of the following provisions:

Sec. 25. Retail Rate. – The retail rates charged by distribution utilities for the supply
of electricity in their captive market shall be subject to regulation by the ERC based
on the principle of full recovery of prudent and reasonable economic costs incurred, or
such other principles that will promote efficiency as may be determined by the ERC…
(emphasis supplied)

Sec. 43. Functions of the ERC. — The ERC shall promote competition, encourage market
development, ensure customer choice and penalize abuse of market power in the
restructured electricity industry. In appropriate cases, the ERC is authorized to issue
cease and desist order after due notice and hearing. Towards this end, it shall be
responsible for the following key functions in the restructured industry:

xxx                   xxx                   xxx

(f) In the public interest, establish and enforce a methodology for setting transmission
and distribution wheeling rates and retail rates for the captive market of a
distribution utility, taking into account all relevant considerations, including the
efficiency or inefficiency of the regulated entities. The rate must be such as to allow
the recovery of just and reasonable costs and a reasonable return on rate base
(RORB) to enable the entity to operate viably. The ERC may adopt alternative forms
of internationally-accepted rate-setting methodology as it may deem appropriate. The
rate-setting methodology so adopted and applied must ensure a reasonable price of
electricity. The rates prescribed shall be non-discriminatory. To achieve this objective
and to ensure the complete removal of cross subsidies, the cap on the recoverable rate of
system losses prescribed in Section 10 of Republic Act No. 7832, is hereby amended and
shall be replaced by caps which shall be determined by the ERC based on load density,
sales mix, cost of service, delivery voltage and other technical considerations it may
promulgate. The ERC shall determine such form of rate-setting methodology, which shall
promote efficiency…

xxx                   xxx                   xxx

(u)            The ERC shall have the original and exclusive jurisdiction over all cases
contesting rates, fees, fines and penalties imposed by the ERC in the exercise of the
abovementioned powers, functions and responsibilities and over all cases involving
disputes between and among participants or players in the energy sector.

All notices of hearings to be conducted by the ERC for the purpose of fixing rates or fees
shall be published at least twice for two successive weeks in two (2) newspapers of
nationwide circulation. (emphases supplied)

In fact, Section 25, supra, does not even distinguish between final and temporary
rates.  Hence, this provision can be read as a broad grant of power to the ERC to fix
final and interim rates.

But even granting arguendo that the above-cited provisions of the EPIRA only
contemplate the fixing of permanent rates, the unbending doctrine set forth in the cases
discussed earlier (Far North Sanitation, Inc. v. Alaska Public Utilities,[134] Public
Utility Commission of Texas v. City of Corpus Christi,[135] State ex. Rel. Laclede Gas
Co. v. Public Service Commission of Missouri and AFC Industries, Inc.,[136] and
Muskogee Gas and Elec. Co. v. State[137]) holds that a Commission’s authority to grant
interim rates is necessarily implied from the express authority to regulate rates and
supervise public utilities.[138]

There is no reason to move away from the principle that when the legislature delegates
express powers to an administrative body, all incidental powers necessary to implement
such express powers are also deemed delegated.  As well stated in Matienzo v. Abellera,
viz:

It is a settled principle of law that in determining whether a board or commission

has a certain power, the authority given should be liberally construed in the light of
the purposes for which it was created, and that which is incidentally necessary to a
full implementation of the legislative intent should be upheld as being germane to
the law. Necessarily, too, where the end is required, the appropriate means are
deemed given…[139] (emphasis supplied)

Effective utility regulation requires that a responsive regulator should be able to swiftly
and flexibly respond to the exigencies of the times.  As explained in Ft. S. & W. Ry. Co.
v. State:

Any rule that would require the commission, before it promulgates any order
fixing a rate, to have before it evidence that would establish to a mathematical
certainty the reasonableness of the proposed rate, would greatly hinder, if not
almost entirely prevent, the commission from exercising that power. [140]
(emphasis supplied)

The dangers emanating from a regulatory environment with a toothless regulator is

illustrated by the Court of Appeals of Missouri in State ex. rel. Laclede Gas Co. v.
Public Service Commission of Missouri and AFC Industries, Inc., to wit:

The ravaging inflation of the past few years has demonstrated the practical need
for this power.[141] A striking example of the necessity for granting this type of
emergency relief to a utility was demonstrated in Sho-Me Power Corp., Case No.
17,381 (1972), in which the Commission allowed an interim rate increase where
the applicant was operating at a loss of over $70,000 per month and where it had
paid no dividends for a period of five years. So also in the Missouri Power & Light
Co. case, No. 17,815 (1973), the Commission found it appropriate to grant an
interim rate increase to halt a deteriorating financial situation which constituted a
threat to the company's ability to render adequate service. [142] (footnote supplied)

These clear dangers also stare at us in our own regulatory environment.  Our economic
history teaches us that the Philippines is vulnerable to the rapid fluctuations in the
exchange rate.   In recent years, we saw how numerous industries failed to survive the
Asian financial crisis fueled by the uncertainties of exchange rates.  All these have had
adverse financial impact on public utilities such as Meralco in terms of skyrocketing
costs of debt servicing, and maintenance and operating expenses.  A regulator such as the
ERC should have sufficient power to respond in real time to changes wrought by the
multifarious factors affecting public utilities.

This is not all.  The transferability clause of the EPIRA can lead to no other conclusion
that the powers of the ERB, the predecessor of the ERC, have been transferred to the
ERC.

SECTION 44.  Transfer of Powers and Functions. - The powers and functions of the
Energy Regulatory Board not inconsistent with the provisions of this Act are hereby
transferred to the ERC. The foregoing transfer of powers and functions shall include all
applicable funds and appropriations, records, equipment, property and personnel as may
be necessary. [143] (emphasis supplied)

It is undisputed that the ERB had the power to grant provisional relief:

SECTION 8. Authority to Grant Provisional Relief. - The Board may, upon the filing of
an application, petition or complaint or at any stage thereafter and without prior hearing,
on the basis of supporting papers duly verified or authenticated, grant provisional relief
on motion of a party in the case or on its own initiative, without prejudice to a final
decision after hearing, should the Board find that the pleadings, together with such
affidavits, documents and other evidence which may be submitted in support of the
motion, substantially support the provisional order: Provided, That the Board shall
immediately schedule and conduct a hearing thereon within thirty (30) days thereafter,
upon publication and notice to all affected parties.[144]

The next question is whether such power to grant provisional relief is inconsistent with
the other provisions of the EPIRA.  The petitioners argue that the power to grant
provisional rate adjustments is inconsistent with the EPIRA.[145] They contend that the
inconsistency lies in the declaration of policy of the EPIRA “to protect the public interest
as it is affected by the rates and services of electric and other providers of electric power”
and Section 75 of the law requiring a statutory construction in favor of “people
empowerment so that the widest participation of the people, whether directly or
indirectly, is ensured” vis-à-vis an interpretation to the effect that the powers transferred
to the ERC include the power to issue provisional  orders.[146] They submit that the power
to issue provisional orders would defeat the policy of the law to protect and empower the
public as such power would limit the public’s right to due process and would be in
derogation of the ERC’s responsibility of protecting public interest regarding utility
rates.  This reveals an unjustified mindset against interim rate-making.  It would appear
that interim rate-making is viewed as undesirable per se.  I respectfully submit,
however, that the protection of public interest in utility rate-regulation and the public’s
right to due process are not mutually exclusive with the regulatory body’s power to grant
interim rates.  Exercised properly, interim rate-making can ensure that the public utility
remains viable yet its service to the consuming public is unimpaired.  Interim rate-making
is no hobgoblin which will gobble up unwary consumers.  In the context of proper public
utility regulation, this power is meant to allow the regulator sufficient leeway to act under
exigent circumstances.

Further, an examination of the intent of the law supports the thesis that the legislators
did not intend to clip the powers of the ERC.  One of the EPIRA’s policies is to establish
a strong and purely independent regulatory body and system to ensure consumer
protection.[147] Hence it is illogical to deny the ERC’s power to conduct interim rate-
regulation because the inability of the ERC to respond to the needs of public utility
services would subvert the policy of the law to protect public interest under any and
all circumstances.

Accordingly, since the ERC has authority to grant interim rates under EPIRA, then
Section 4 (e), Rule 3 of the EPIRA’s Implementing Rules and Regulations on the ERC’s
power to provisionally grant applications for rate adjustment is valid. This provision in
the Implementing Rules and Regulations is pursuant to the Department of Energy’s
mandate to formulate such rules and regulations as may be necessary to implement the
objectives of the EPIRA.[148] This is also consistent with the doctrine of subordinate
legislation as explained in the case of Free Telephone Workers’ Union v. Minister of
Labor:

Accordingly, with the growing complexity of modern life, the multiplication of the
subjects of governmental regulation, and the increased difficulty of administering the
laws, there is a constantly growing tendency toward the delegation of greater powers by
the legislature and toward the approval of the practice by the courts. Consistency with the
conceptual approach requires the reminder that what is delegated is authority non-
legislative in character, the completeness of the statute when it leaves the hands of
Congress being assumed…Thus from Justice J.B.L. Reyes in People v. Exconde: It is
well established in this jurisdiction that, while the making of laws is a non-delegable
activity that corresponds exclusively to Congress, nevertheless the latter may
constitutionally delegate authority to promulgate rules and regulations to implement a
given legislation and effectuate its policies, for the reason that the legislature often finds
it impracticable (if not impossible) to anticipate and provide for the multifarious and
complex situations that may be met in carrying the law into effect. All that is required is
that the regulation should be germane to the objects and purposes of the law; that the
regulation be not in contradiction with it; but conform to the standards that the law
prescribes. [149] (emphasis supplied)

VI.       Summation

On the issue of whether the ERC has legal authority to grant provisional rate adjustments
under the EPIRA law, I concur with the majority.  The ERC has authority to grant
provisional adjustments by virtue of the express transfer from the ERB to the ERC of
the former’s power to grant provisional relief, the doctrine that interim rate-regulation is
implied from or incidental to the express power to fix a permanent rate, the broad
provisions of the EPIRA which make no distinction between interim or permanent rate-
regulation, and the intent of the EPIRA and rate-regulation.  Further, the provisional
relief may be granted even prior to a full hearing without violating the requirements
of due process.

On the issue of whether the grant by the ERC of the provisional rate adjustment to
Meralco was done with grave abuse of discretion amounting to lack or excess of
jurisdiction, I respectfully dissent from the majority.  First, there was no violation of
the procedure set forth in the EPIRA’s Implementing Rules and Regulation when ERC
issued its Questioned Order. The public was duly notified of Meralco’s application and
was able to assail its legality and propriety in a public hearing before the effectivity of the
Questioned Order.  Second, the issuance of ex-parte orders is universally recognized as a
legitimate exercise of the police power of the State and should not be niggardly
construed.  Third, it is premature for the Court to strike down the Questioned Order since
it is merely provisional and pending reconsideration before the ERC.  The Court should
allow the unimpeded flow of the effective and available administrative remedy before the
ERC.  Hence, the case at bar should be remanded to the ERC, which should be allowed to
resolve the pending motions assailing the propriety of the provisional rate increase in
favor of Meralco, especially its factual bases.

[1] Application of Meralco dated October 8, 2003; Rollo, p. 33.

[2]Comment of the ERC dated January 26, 2004, p. 15; Rollo, p. 372; and Memorandum
of Meralco dated February 16, 2004, p. 29; Rollo, p. 680.

[3] Comment of the ERC dated January 26, 2004, p. 15; Rollo, p. 372.

Comment of the Office of the Solicitor General (OSG) dated January 23, 2004, p. 7;
[4]
Rollo, p. 388.

[5] Id.

[6] Id.

[7] Id.

[8] Id., Annex 1.

[9] Id. at 8.

[10] Id., Annex 2.

[11] Id., Annex 3.

[12] Id.

Motion for Production of Documents of FDC, et al., filed with the ERC on November
[13]
25, 2003 and stamped received by the ERC’s Legal Service Department on November
27, 2003; Rollo, p. 54.

The ERC subsequently issued another Order on January 9, 2004 clarifying that the
[14]
provisional rate increase granted in the Questioned Order should apply to consumptions
beginning January 1, 2004.

[15] Order of the ERC dated November 27, 2003, pp. 8-9; Rollo, pp. 25-26.

[16] Comment of the OSG, dated January 23, 2004, p. 14, Annex 6; Rollo, p. 395.

[17] Id. at 15, Annex 7.

[18] Id., Annexes 8 and 9.

[19] Id., Annex 10.

[20] Id. at 16, Annexes 11 and 12.

[21] Id., Annex 13.

Id. at 16 and 17, Annexes 14 and 15.  Atty. Estrada filed a Supplemental Motion for
[22]
Production of Documents on December 16, 2003, Annex 16.

[23] Comment of Meralco dated December 17, 2003; Rollo, p. 503.

[24] Id. at 17, Annex 18.

[25] Id. at 17, Annex 19.

Memorandum of BAYAN, KMU, GABRIELA, KADAMAY and AGHAM dated

[26]
November 27, 2003, p. 3; Rollo, p. 626.

[27] Petition of FDC, et al., dated December 23, 2003, p. 4; Rollo, p. 6.

Urgent Motion to Grant Restraining or Status Quo Order of FDC, et al., dated
[28]
December 29, 2003; Rollo, p. 57.

[29] Comment of the OSG dated January 23, 2004, p. 18, Annex 20; Rollo, p. 399.

Resolution of the Supreme Court En Banc dated January 13, 2004; Rollo,
[30]
unnumbered.
[31] Comment of the OSG dated January 23, 2004, p. 19, Annex 21; Rollo, p. 401.

[32] Id. at 19, Annexes 22 and 23.

[33] Id., Annex 24.

[34] Id. at 20, Annex 27.

[35] Id. at 19 and 20, Annexes 25 and 26.

[36] Id. at 20, Annex 28.

[37] Memorandum of the OSG dated February 16, 2003, p. 12; Rollo, p. 885.

[38] Id.

[39] Id. at 13.

Bagong Alyansang Makabayan (BAYAN), Bayan Muna Partylist, Kilusang Mayo

[40]
Uno (KMU), Gabriela Women’s Partylist, Anakpawis Partylist, Kalipunan ng Damayang
Mahihirap (KADAMAY), and Samahan ng Nagtataguyod ng Agham at Teknolohiya
Para sa Sambayanan (AGHAM).

[41] Rollo, pp. 621-622.

The Memorandum of petitioners FDC, Ana Maria Nemenzo as President of FDC, Ma.
[42]
Teresa I. Diokno-Pascual, Rep. Loretta Ann Rosales (Partylist Akbayan), Rep. Jose
Virgilio Bautista (Partylist Sanlakas), and Rep. Renato Magtubo (Partylist Manggagawa),
was filed on February 24, 2004 after two Motions for Extension of Time to File
Memorandum were filed with the Court on February 17, 2004 and February 20, 2004.

The Urgent Motion to Resolve Pending Motions of the Office of the Solicitor General
[43]
dated January 28, 2004, attached as Annex A of the Memorandum of the Office of the
Solicitor General dated February 16, 2004 enumerates these pending motions; Rollo, p.
928.  Note that Atty. Ruperto J. Estrada’s Motion for Production of Documents dated
December 15, 2003 has been resolved by the ERC in an Order dated January 26, 2004.  A
copy of this order is attached as Annex 2 of the Manifestation of Meralco dated February
25, 2004; Rollo (temporary), unnumbered.

[44] Comment of the Office of the Solicitor General dated January 23, 2004, Annex 7.

[45]Id., Annex 8.  Note that the various Motions for Production of Documents filed by
NASECORE, FDC, Atty. Ruperto Estrada and The Philippine Consumers Welfare Union
have been resolved by the ERC in an Order dated January 26, 2004.  A copy of this order
is attached as Annex 2 of the Manifestation of Meralco dated February 25, 2004; Rollo
(temporary), unnumbered.
[46] Comment of the Office of the Solicitor General dated January 23, 2004, Annex 9.

[47] Id., Annex 10.

[48] Id., Annex 12.

[49] Id., Annex 13.

[50] Id., Annex 14.

[51] Id., Annex 18.

[52] Id., Annex 19.

[53] Id., Annex 21.

[54] Id., Annex 23.

[55] Id., Annex 24.

[56] Commonwealth Act No. 146, as amended, Section 13.

[57] Id., Section 16 (c).

[58] Presidential Decree No. 1206, Section 9.

[59] Id., Section 11 (e).

[60] Executive Order No. 172, Section 4 (a).

[61] Id., Section 8.

[62] EPIRA, Section 3.

[63] Id., Section 2 (j).

[64] Id., Section 38.

[65] Id., Section 44.

[66] Rollo, pp. 753-754.

[67] Memorandum of the ERC dated February 14, 2004, p. 49; Rollo, p. 740.

[68] Memorandum of the OSG dated February 16, 2004, p. 42; Rollo, p. 915.
[69] Id. at 32; Rollo, p. 683.

[70] Section 4 (e), Rule 3, EPIRA Implementing Rules and Regulations.

Appeal of the Office of the Consumer Advocate (New Hampshire Public Utilities
[71]
Commission), 597 A. 2d 528 (1991).

[72] Woll, Peter, Administrative Law: The Informal Process (1963), pp. 7-8.

[73] De Leon, Hector, Administrative Law, 2nd edition (1993), p. 12.

[74] Woll, Peter, Administrative Law: The Informal Process (1963), p. 5.

[75] Id. at 29.

[76] Id. at 25.

[77] Davis, Kenneth Culp, Handbook on Administrative Law (1951), p. 260.

[78] Id.

[79] Schwartz, Bernard, Constitutional Law: A Textbook (1972), p. 43.

[80] Id.

[81] Id. citing Miller v. Board of Public Works, 234 Pac. 381 (1925).

[82] Id. at 44.

[83] Id. citing Noble State Bank v. Haskell, 219 U.S. 104 (1911).

[84] Id. at 45, citing People v. Willi, 179 N.Y. Supp. 542 (1919).

[85]Urgent Motion to Resolve Motion for Production of Documents and Opposition to the
Provisional Authority of NASECORE, attached as Annex 8 of the Comment of the Office
of the Solicitor General dated January 23, 2004, pp. 2-3; Rollo, pp. 473-474; Letter of the
National Consumers Affairs Council dated December 5, 2003 seeking reconsideration of
the provisional authority, p. 1; Rollo, p. 478; Manifestation Joining the National
Association of Electricity Consumers for Reforms, Inc. in its Opposition to the
Provisional Authority and Motion for Production of Documents of Philippine Consumers
Watch (Bantay Mamamayan) Foundation dated December 12, 2003, attached as Annex
12 of the Comment of the Office of the Solicitor General dated January 23, 2004, p. 2;
Rollo, p. 484.

Urgent Motion to Resolve Motion for Production of Documents and Opposition to the
[86]
Provisional Authority of NASECORE, attached as Annex 8 of the Comment of the Office
of the Solicitor General dated January 23, 2004, pp. 3; Rollo, p. 474; Letter of the
National Consumers Affairs Council dated December 5, 2003 seeking reconsideration of
the provisional authority, p. 1; Rollo, p. 478.

[87]Urgent Motion to Resolve Motion for Production of Documents and Opposition to the
Provisional Authority of NASECORE, attached as Annex 8 of the Comment of the Office
of the Solicitor General dated January 23, 2004, p. 4; Rollo, p. 475; Letter of the
Federation of Philippine Industries, Inc. dated December 4, 2003, p. 1; Rollo, p. 480. Id.
at 4; Rollo, p. 475.

[88]Urgent Motion to Resolve Motion for Production of Documents and Opposition to the
Provisional Authority of NASECORE, attached as Annex 8 of the Comment of the Office
of the Solicitor General dated January 23, 2004, p. 4; Rollo, p. 475.

[89] Id.

[90] Id.

[91]Letter of the Federation of Philippine Industries, Inc. dated December 4, 2003,

attached as Annex 10 of the Comment of the Office of the Solicitor General dated
January 23, 2004; Rollo, p. 480; and Petition to Suspend the Granting of Electric Power
Increase Against Meralco Company of Juan B. Paqueo III dated December 22, 2003, p. 3;
Rollo, p. 551.

Manifestation Joining NASECORE in its Opposition to the Provisional Authority and

[92]
Motion for Production of Documents of Philippine Consumers Watch (Bantay
Mamamayan) Foundation dated December 12, 2003, attached as Annex 12 of the
Comment of the Office of the Solicitor General dated January 23, 2004, p. 2; Rollo, p.
484.

Urgent Motion to Suspend Implementation and Motion for Reconsideration of

[93]
Napocor Industrial Consumers Association (NICAI) dated December 11, 2003, attached
as Annex 13 of the Comment of the Office of the Solicitor General dated January 23,
2004, p. 2; Rollo, p. 488.

[94] Id.

[95] Id. at 3; Rollo, p. 489.

[96] Id.

[97] Id.

[98] Id.

[99] Id. at 4; Rollo, p. 490.

[100] Incremental Currency Exchange Rate Adjustment.

Urgent Motion to Suspend Implementation and Motion for Reconsideration of

[101]
Napocor Industrial Consumers Association (NICAI) dated December 11, 2003, attached
as Annex 13 of the Comment of the Office of the Solicitor General dated January 23,
2004, p. 4; Rollo, p. 490.

[102]Opposition of Philippine Consumers Welfare Union dated December 9, 2003,

attached as Annex 14 of the Comment of the Office of the Solicitor General dated
January 23, 2004, p. 2; Rollo, p. 494.

Electronic mail message of Michael Paca dated December 21, 2003 (and stamped
[103]
received by the ERC on January 8, 2004) with an attached write-up containing comments
on the rate increase, attached as Annex 18 of the Comment of the Office of the Solicitor
General dated January 23, 2004, p. 2; Rollo, p. 514.

[104] Id.

[105]Motion for Reconsideration of Genaro C. Lualhati dated December 22, 2003,

attached as Annex 19 of the Comment of the Office of the Solicitor General dated
January 23, 2004, p. 1; Rollo, p. 516.

[106] Id. at 2; Rollo, p. 517.

Letter of the Philippine Chamber of Commerce and Industry dated December 12,
[107]
2003, attached as Annex 21 of the Comment of the Office of the Solicitor General dated
January 23, 2004; Rollo, p. 545.

[108] 425 So. 2d 543 (1982).

Pueblo del Sol Water Company v. Arizona Corporation Commission, 772 P. 2d 1138
[109]
(1988).

Id., citing Arizona State Corporation Commission v. Mountain States Tel. & Tel.
[110]
Co., 228 P. 2d 749 (1951).

Potomac Electric Power Company v. Public Service Commission of the District of

[111]
Columbia, 457 A. 2d 776 (1983).

Citizens of the State of Florida v. Public Service Commission and Florida Power
[112]
Corporation, 425 So. 2d 534 (1982) and Florida Power Corporation v. Hawkins, 367 So.
2d 1011 (1979).

Louisiana Power and Light Company v. Louisiana Public Service Commission, 523
[113]
So. 2d 850 (1988).
[114] Muskogee Gas and Electric Company v. State, 186 P. 730 (1920).

[115] Far North Sanitation, Inc. v. Alaska Public Utilities, Inc., 825 P. 2d 867 (1992).

Chesapeake and Potomac Telephone Co. v. Public Service Commission of the

[116]
District of Columbia, 330 A. 2d 236 (1974).

Application of Kauai Electric. Division of Citizens Utilities Co., 590 P. 2d 524

[117]
(1978).

State ex. rel. Laclede Gas Co., v. Public Service Commission of Missouri & AFC
[118]
Industries, Inc., 535 S. W. 2d 561 (1976).

[119] 825 P. 2d 867 (1992).

[120] Id.

[121] 555 S.W.2d 509 (1977).

[122] Id.

[123]The decision cited the following cases: State ex rel. Laclede Gas Co. v. Public
Service Commission of Missouri, Mo.App., 535 S.W.2d 561; Muskogee Gas & Elec. Co.
v. State, 81 Okl. 176, 186 P. 730, 732; Chicago Rys. Co. v. City of Chicago, 292 Ill. 190,
126 N.E. 585, 590; Omaha & C. B. St. Ry. Co. v. Nebraska State Railway Comm., 103
Neb. 695, 173 N.W. 690; State ex rel. Puget Sound Navigation Co. v. Department of
Transportation of Washington, 33 Wash.2d 448, 206 P.2d 456; and Elliott v. Empire
Natural Gas Co., 123 Kan. 558, 256 P. 114.

[124] 535 S.W.2d 561 (1976).

[125] 186 P. 730 (1920).

[126] Id.

Republic v. Medina, L-32068, October 4, 1971; and Bautista v. Board of Energy and
[127]
Meralco, G.R. No. 75016, January 13, 1989.

[128]Citizens’ Alliance for Consumer Protection v. Energy Regulatory Board, G.R. Nos.
78888-90, 79501-03, 79590-92, June 23, 1988; Maceda v. Energy Regulatory Board, et
al., G.R. Nos. 95203-05 and 95119-21, December 18, 1990.

Radio Communications of the Philippines, et al. v. National Telecommunications

[129]
Commission and Philippine Long Distance Telephone Company, G.R. No. 66683, April
23, 1990.
[130] Padua v. Rañada, et al., G.R. No. 141949, October 14, 2002.

[131] Javellana v. La Paz Ice Plant Co., G.R. No. 45577, October 30, 1937.

[132] Halili v. De la Cruz, L-3321, May 16, 1951.

[133] Matienzo v. Abellera, L-45839, June 1, 1988.

[134] 858 P.2d. 867 (1992).

[135] 555 S.W.2d 509 (1977).

[136] 535 S.W.2d 561 (1976).

[137] 186 P. 730 (1920).

See Potomac Electric Power Company v. Public Service Commission of the District
[138]
of Columbia, 457 A.2d 776 (1983); City of Pittsburgh v. Pennsylvania Public Utility
Commission, 423 A.2d 424 (1980); Grindstone Butte Mutual Canal Co. v. Idaho Power
Co., 574 P.2d 902 (1978); Chesapeake and Potomac Telephone Co. v. Public Service
Commission, 330 A.2d 236 (1974); Pueblo del Sol Water Company v. Arizona
Corporation Commission, 772 P.2d 1138 (1988); Application of Kauia Elec. Division of
Citizens Utilities Co., 590 P.2d 524 (1978); Kansas-Nebraska Natural Gas Company, Inc.
v. The State Corporate Commission of the State of Kansas, 538 P.2d 702 (1975); and
Oklahoma Gas and Electric Co. v. State Corporation Commission, 201 P. 505 (1921).

[139] G.R. No. L-45839, June 1, 1988.

[140] 108 P. 407 (1910).

[141] Referring to the power to grant interim rate increases.

[142] 535 S.W.2d 561 (1976).

[143] EPIRA.

[144] Executive Order No. 172 (1987).

[145] Petition of FDC, et al., dated December 23, 2003, p. 6; Rollo, p. 8.

[146] Id. at 21.

[147] Section 2 (j), EPIRA.

[148] Section 37 (p), EPIRA.

[149] G.R. No. 58184, October 30, 1981.

G.R. No. 166620 - ATTY. SYLVIA BANDA, ET AL., Petitioners, v.

EDUARDO R. ERMITA, in his capacity as Executive Secretary, the
Director General of the Philippine Information Agency and the
National Treasurer, Respondents.

                                                                   Promulgated:

                                                                   April 20, 2010

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

SEPARATE CONCURRING OPINION

 
 

CARPIO, J.:
 

          I concur in the result that Executive Order No. 378 (EO 378) is a valid
Presidential issuance, but not because it implements Section 31, Chapter 10,
Book II of the Administrative Code of 1987 (Section 31) or that it is
sanctioned by case law anchored on Presidential Decree No. 1416 (PD
1416), but because EO 378 merely implements Republic Act No. 9184 (RA
9184) regulating government procurement activities.

 
EO 378 Exceeds the Parameters of Section 31

Section 31, an executive legislation, grants to the executive a narrow

power to reorganize ringed with limitations on two fronts: (1) the branch of
the government covered and (2) the scope of authority delegated:

            Continuing Authority of the President to Reorganize his Office. ─

The President, subject to the policy in the Executive Office and in order to
achieve simplicity, economy and efficiency, shall have continuing
authority to reorganize the administrative structure of the Office of the
President.  For this purpose, he may take any of the following actions:
 
            (1)  Restructure the internal organization of the Office of the
President Proper, including the immediate Offices, the Presidential
Special Assistants/Advisers System and the Common Staff Support
System, by abolishing, consolidating or merging units thereof or
transferring functions from one unit to another;
  
            (2)  Transfer any function under the Office of the President to
any other Department or Agency as well as transfer functions to the
Office of the President from other Departments and Agencies; and
 
            (3)  Transfer any agency under the Office of the President to
any other department or agency as well as transfer agencies to the Office
of the President from other departments or agencies. (Emphasis supplied)

Section 31 limits Executive discretion to reorganize the Office of the

President and the enumerated ancillary offices along the following
functional and structural lines: (1) restructuring the internal organization  
of the Office of the President Proper by abolishing, consolidating or
merging units thereof or transferring functions from one unit to another;  
(2) transferring any function under the Office of the President to any other
Department/Agency or vice versa; or (3) transferring any agency under the
Office of the President to any other Department/Agency  or vice versa. This
listing is closed and admits of no other category of reorganization.

Tested against these three narrow categories of reorganization, EO

378 fails to pass muster. EO 378 effects two changes to the National Printing
Office (NPO): first, it reduces the NPO’s exclusive printing function to
cover election paraphernalia only, allowing private printing establishments
to bid for the right to print government standard and accountable forms and
second, it caps the NPO’s annual appropriation to its income. Although EO
378’s narrowing of the NPO’s functions arguably falls under Section 31(1)’s
ambit authorizing abolition of units, this power is limited to the Office of the
President Proper, defined under the 1987 Administrative Code as consisting
of “the Private Office, the Executive Office, the Common Staff Support
System, and the President Special Assistants/Advisers System x x x.” The
NPO is not part of the Office of the President Proper, being an agency
attached to the Office of the President, a bigger entity consisting “of the
Office of the President Proper and the agencies under it.” Thus, Section
31(1) is no basis to declare that the President has the power to “abolish
agencies under the Office of the President.” Section 31(1) limits this power
only to the Office of the President Proper.

Further, insofar as the “Office of the President” is concerned, the

President’s reorganization powers are limited to transferring any function or
any agency from that office to any department or agency and vice versa. No
amount of etymological stretching can make reduction of function and
capping of budget fit under the narrow concept of “transferring any function
or any agency.”

Case Law Cited No Authority to Validate EO 378

  

The cases the Decision cites furnish no bases to validate EO 378. The
leading case in this area, Larin v. Executive Secretary (reiterated in  Buklod
ng Kawaning EIIB v. Hon. Sec. Zamora and Tondo Medical Center
Employees Association v. Court of Appeals) relied on Section 20,  Chapter
7, Book II of the Administrative Code of 1987 in relation to PD 1416:

               
 
Another legal basis of E.O. No. 132 is Section 20, Book III of E.O.
No. 292 which states:
 
“Sec. 20. Residual Powers. — Unless Congress provides
otherwise, the President shall exercise such other powers
and functions vested in the President which are provided
for under the laws and which are not specifically
enumerated above or which are not delegated by the
President in accordance with law.” (italics ours)
 
This provision speaks of such other powers vested in the President
under the law. What law then which gives him the power to reorganize? It
is Presidential Decree No. 1772 which amended Presidential Decree No.
1416. These decrees expressly grant the President of the Philippines the
continuing authority to reorganize the national government, which
includes the power to group, consolidate bureaus and agencies, to abolish
offices, to transfer functions, to create and classify functions, services and
activities and to standardize salaries and materials. (Emphasis supplied)
 

Larin and its progeny cannot validate EO 378 because its statutory
basis, PD 1416, is an undue delegation of legislative power.

 
 It is an unquestioned attribute of the broad and undefined legislative
power of Congress to fashion Philippine bureaucracy by creating (and thus,
abolishing) public offices save for offices created by the Constitution. This
power, including its ancillary to reorganize, is exercised by the other
branches only as allowed by Congress under valid statutory delegation. Even
then, the delegated power only partakes of the original legislative power as
the other branches can only implement the legislature’s will. Thus, despite
their equally broad and undefined powers, neither the executive nor the
judiciary inherently possesses the power to reorganize its bureaucracy.

 A simple scanning of the list of powers PD 1416 vests on the

Executive shows that far from being a legislative delegation to implement
congressional will, PD 1416 surrenders to the Executive the core legislative
power to re-mold Philippine bureaucracy, with the ancillary privilege to
control funding, thus: 

1. The President of the Philippines shall have continuing authority to

reorganize the administrative structure of the National Government.
 
2. For this purpose, the President may, at his discretion, take the following
actions:
 
(a) Group, coordinate, consolidate or integrate departments, bureaus,
offices, agencies, instrumentalities and functions of the government;
 
(b) Abolish departments, offices, agencies or functions which may not be
necessary, or create those which are necessary, for the efficient conduct of
government functions services and activities;
 
 (c) Transfer functions, appropriations, equipment, properties, records
and personnel from one department, bureau, office, agency or
instrumentality to another;
 
(d) Create, classify, combine, split, and abolish positions; and
 
(e) Standardize salaries, materials and equipment. (Emphasis supplied)

         
 

Presidential Decree No. 1772 (PD 1772), amending PD 1416, enlarged the
scope of these powers by extending the President’s power to reorganize “to
x x x all agencies, entities, instrumentalities, and units of the National
Government, including all government-owned or controlled corporations, as
well as the entire range of the powers, functions, authorities, administrative
relationships, and related aspects pertaining to these agencies, entities,
instrumentalities, and units.” Further, PD 1772 clarified that the President’s
power to “create, abolish, group, consolidate, x x x or integrate” offices
relates to “entities, agencies, instrumentalities, and units of the National
Government.” 

The term “national government” has an established  meaning in

statutory and case law. Under the statute governing Philippine bureaucracy,
the Administrative Code of 1987, “national government” refers to “the
entire  machinery of the central government, as distinguished from the
different forms of local government.” Jurisprudence has interpreted this
provision of the Administrative Code to encompass “the three great
departments: the executive, the legislative, and the judicial.” By delegating
to the Executive the “continuing authority to reorganize the administrative
structure of the National Government” including the power to “create,
abolish, group, consolidate, x x x or integrate” the “entities, agencies,
instrumentalities, and units of the National Government,” PD 1416, as
amended, places under the Executive branch the vast – and undeniably
legislative – power  to constitute the entire Philippine Government in the
guise of “reorganization.”

Capping the unprecedented siphoning of legislative power to the

Executive, PD 1416, as amended, authorizes the Executive to “transfer
appropriations” and “standardize salaries” in the national government. The
authorization to “transfer appropriations” is a complete repugnancy to the
constitutional proscription that “No law shall be passed authorizing any
transfer of appropriations. x x x.” On the other hand, the Constitution
mandates that “The Congress shall provide for the standardization of
compensation of government officials and employees, x x x.” Indeed,
Congress, with the Executive’s acquiescence, has repeatedly exercised this
exclusive power to standardize public sector employees’ compensation by
enacting a law to that effect and exempting classes of employees from its
coverage.

Thus, much like the invalidated Section 68 of the previous Revised

Administrative Code delegating to the President the legislative power to
create municipalities, PD 1416, as amended, delegates to the President that
undefined legislative power to constitute the Philippine bureaucracy which
the sovereign people of this polity delegated to Congress only. This
subsequent delegation of the power to legislate offends the fundamental
precept in our scheme of government that delegated power cannot again be
delegated.

          The radical merger of legislative and executive powers PD 1416

sanctions makes sense in a parliamentary system of merged executive and
legislative branches. Indeed, PD 1416, issued in 1979, three years after
Amendment No. 6 vested legislative power to then President Marcos, was
precisely meant to operate within such system, as declared in PD 1416’s last
“Whereas” clause: “WHEREAS, the transition towards the parliamentary
form of government will necessitate flexibility in the organization of the
national government[.]” When the Filipino people ratified the 1987
Constitution on 2 February  1987, restoring the operation of the original tri-
branch system of government, PD 1416’s paradigm of merged executive and
legislative powers ceased to have relevance. Although then President
Aquino, by her revolutionary ascension to the Presidency, held and
exercised these two powers under the Provisional Constitution, her
legislative powers ceased when the post-EDSA Congress convened on      
27 July 1987 following the 1987 Constitution’s mandate that “The
incumbent President shall continue to exercise legislative powers until the
first Congress is convened.” Thus, even though the demands of modernity
and the imperatives of checks and balances may have blurred the
demarcation lines among the three branches, we remain a government of
separated powers, rooted in the conviction that division – not unity – of
powers prevents tyranny.  PD 1416, as amended, with its blending of
legislative and executive powers, is a vestige of an autrocratic era, totally
anachronistic to our present-day constitutional democracy.

Making sweeping statements that the President’s power to reorganize

“pertains only to the Office of the President and departments, offices, and
agencies of the executive branch and does not include the Judiciary, the
Legislature or constitutionally created or mandated bodies” and that “the
exercise by the President of the power to reorganize x x x must be in
accordance with the Constitution, relevant laws and jurisprudence” will not
erase PD 1416 and PD 1772 from our statute books.  If this Court found it
intolerable under our system of government for the President to demand
“obedience to all x x x decrees x x x promulgated by me personally or upon
my direction,” the same hostility should be directed against PD 1416’s
authorization for the President to “reorganize x x x the National
Government,” “transfer x x x appropriations” and “standardize salaries.”
These issuances all vest on the President unadulterated legislative power.

Hence, PD 1416, being repugnant to the 1987 Constitution in several

aspects, can no longer be given effect. At the very least, the exercise of
legislative powers by the President under PD 1416 ceased upon the
convening of the First Congress, as expressly provided in Section 6, Article
XVIII of the 1987 Constitution.

         
 Similarly, Anak Mindanao Party-List Group v. The Executive
Secretary (finding valid executive issuances transferring to a department two
offices under the Office of the President) is not in point because that case
involved a reorganization falling within the ambit of Section 31(3)
transferring offices from the Office of the President to another department. 

          Nor is Canonizado v. Aguirre authority for the proposition that the
power of the President to reorganize under Section 31 involves the
“alteration of the existing structure of government offices or units therein,
including the lines of control, authority and responsibility between them” or
the “reduction of personnel, consolidation of offices, or abolition thereof by
reason of economy or redundancy of functions.” Canonizado reviewed a
legislative reorganization (Republic Act No. 8851 reorganizing the
Philippine National Police) thus Section 31 never figured in its analysis.
Accordingly, the vast reach of Canonizado’s definition of the power to
reorganize relates to Congress, which is, after all, the original repository of
such power, as incident to its broad and all-encompassing power to legislate.

Doctrine of Presidential Control

Over the Executive Department No Basis

to Validate EO 378
  

The doctrine of presidential control over the executive department

likewise furnishes no basis to uphold the validity of EO 378. As
distinguished from supervision, the doctrine of control finds application in
altering acts of the President’s subordinates. It does not sanction structural
or functional changes even within the executive department.

EO 378 Valid for Implementing RA 9184

 
          RA 9184 mandates the conduct of competitive bidding in all the
procurement activities of the government including the acquisition of “items,
supplies, materials, and general support services x x x which may be needed
in the transaction of the public businesses or in the pursuit of any
government x x x activity” save for limited transactions. By opening
government’s procurement of standard and accountable forms to competitive
bidding (except for documents crucial to the conduct of clean elections
which has to be printed solely by government), EO 378 merely implements
RA 9184’s principle of promoting “competitiveness by extending equal
opportunity to enable private contracting parties who are eligible and
qualified to participate in public bidding.” Indeed, EO 378 is not so much a
“reorganization” move involving realignment of offices and personnel
movement as an issuance to “ensure that the government benefits from the
best services available from the market at the best price.” EO 378’s capping
of NPO’s budget to its income is a logical by-product of opening NPO’s
operations to the private sector — with the entry of market forces, there will
expectedly be a decrease in its workload, lowering its funding needs.

          Accordingly, I vote to DISMISS the petition.

                                                                   ANTONIO T. CARPIO

                                                                        Associate Justice

                                                                  

                              Executive Order No. 292.

                              The Government Procurement Reform Act.

               EO 292 was enacted by then President Aquino on  25 July 1987 in the exercise
of her legislative        power under Section 1, Article II of the Provisional Constitution.

                              Section 22, Chapter 8, Title  II, Book III of the Administrative Code of
1987 provides:

                   Office of the President Proper. - (1) The Office of the
President Proper shall consist of the Private Office, the Executive Office,
the Common Staff Support System, and the Presidential Special
Assistants/Advisers System;
 
                                 (2) The Executive Office refers to the Offices of the
Executive Secretary, Deputy Executive Secretaries and Assistant
Executive Secretaries;
 
                                (3) The Common Staff Support System embraces the
offices or units under the general categories of development and
management, general government administration and internal
administration; and
 
                                (4) The President Special Assistants/Advisers System
includes such special assistants or advisers as may be needed by the
President.

               Section 21, Chapter 8, Title  II, Book III of the Administrative Code of 1987
provides: “Organization. The Office of the President shall consist of the Office of
the President Proper and the agencies under it.”

                              Decision, p. 11.

               345 Phil. 962 (1997).

               413 Phil. 281 (2001) (upholding the validity of executive issuances deactivating
the Economic            Intelligence and Investigation Bureau, an agency under the Office of
the President).

               G.R. No. 167324, 17 July 2007, 527 SCRA 746.

             Supra note 7 at 730.

             See Canonizado v. Aguirre, G.R. No. 133132, 25 January 2000, 323 SCRA 312;
Buklod ng   Kawaning EIIB v. Zamora, G.R. Nos. 142801-802, 10 July 2001, 360 SCRA
718.

             We described this power, as exercised by Congress, as follows: “Reorganization

takes place when there is an alteration of the existing structure of government
offices or units therein, including the lines of control, authority and responsibility
between them. It involves a reduction of personnel, consolidation of offices, or
abolition thereof by reason of economy or redundancy of functions.”
(Canonizado v. Aguirre, G.R. No. 133132, 25 January 2000, 323 SCRA 312, 326;
internal citations omitted).

             The doctrine of non-delegation of legislative power admits of only two

exceptions under the Constitution, namely, the delegation to the local
governments (Section 3 and Section 20, Article X) and to the President on the
imposition of tariff rates, trade quotas, and shipping dues  (VI, § 28(2) and
adoption of measures during national emergency (Section 23(2), Article VI).
             For the Executive, this authorization is found in Section 31, Chapter 10, Book II
of the Administrative Code of 1987. For the judiciary, Section 43 of Batas
Pambansa Blg. 129 (The Judiciary Reorganization Act of 1980) required the
Supreme Court to  submit to the President the staffing pattern for courts
constituted under that law for issuance of relevant implementing rules. For the
reorganization of the Office of the Court Administrator, Section 7 of Presidential
Decree No. 828, as amended by Presidential Decree No. 842, delegated to the
Supreme Court the power to “create such offices, services, divisions and other
units in the Office of the Court Administrator, as may be necessary.”

             Last paragraph, Section 1, PD 1772.

             Section 2, PD 1772 (emphasis supplied).

             Section 2(2), Executive Order No. 292 (emphasis supplied). More  specialized
statutes, such as Section 4 of Republic Act No. 6758 (Compensation and Position
Classification Act of 1989) substantially hews to the Administrative Code’s
definition: “The term “government” refers to the Executive, the Legislative and
the Judicial Branches and the Constitutional Commissions and shall include all,
but shall not be limited to, departments, bureaus, offices, boards, commissions,
courts, tribunals, councils, authorities, administrations, centers, institutes, state
colleges and universities, local government units, and the armed forces. x x x”
(emphasis supplied).

                  Mactan Cebu International Airport Authority v. Marcos, G.R. No. 120082, 11
September 1996, 261 SCRA 667, 688-689, citing the following definition of 
“government” in Bacani v. NACOCO, 100 Phil. 468, 471-472 (1956):

                [W]e state that the term “Government” may be defined

as “that institution or aggregate of institutions by which an independent
society makes and carries out those rules of action which are necessary to
enable men to live in a social state, or which are imposed upon the people
forming that society by those who possess the power or authority of
prescribing them” This institution, when referring to the national
government, has reference to what our Constitution has established
composed of three great departments, the legislative, executive, and the
judicial, through which the powers and functions of government are
exercised. (Internal citation omitted; emphasis supplied)

             Article VI, Section 25(5), Constitution.

             Section 5, Article IX-B, Constitution. The entire provision reads: “The Congress shall provide for
the standardization of compensation of government officials and employees, including those in
government-owned or controlled corporations with original charters, taking into account the
nature of the responsibilities pertaining to, and the qualifications required for, their positions.”

             Republic Act No. 6758 (Compensation and Position Classification Act of 1989).
                 E.g.,  Republic Act No. 7907 (1995) for Land Bank of the Philippines;
Republic Act No. 8282 (1997) for Social Security System; Republic Act No. 8289
(1997) for Small Business Guarantee and Finance Corporation; Republic Act No.
8291 (1997) for Government Service Insurance System; Republic Act No. 8523
(1998) for Development Bank of the Philippines; Republic Act No. 8763 (2000)
for Home Guaranty Corporation; and Republic Act No. 9302 (2004) for
Philippine Deposit Insurance Corporation (PDIC).

             Struck down as unconstitutional in Pelaez v. Auditor General, No. L-23825, 24

December 1965,         15 SCRA 569.

             A  paradigmatic statement of the doctrine runs:

                The power to make laws — the legislative power — is

vested in a bicameral Legislature by the Jones Law (sec. 12) and in a
unicameral National Assembly by the Constitution (Act. VI, sec. 1,
Constitution of the Philippines). The Philippine Legislature or the
National Assembly may not escape its duties and responsibilities by
delegating that power to any other body or authority. Any attempt to
abdicate the power is unconstitutional and void, on the principle that
potestas delegata non delegare potest. This principle is said to have
originated with the glossators, was introduced into English law through a
misreading of Bracton, there developed as a principle of agency, was
established by Lord Coke in the English public law in decisions forbidding
the delegation of judicial power, and found its way into America as an
enlightened principle of free government. It has since become an accepted
corollary of the principle of separation of powers.  x x x x (People v. Vera,
65 Phil. 56, 112 (1937); emphasis supplied).

             Section 1, Article II.

             Section 6, Article XVIII. See also Association of Small Landowners in the
Philippines Inc. v.              Secretary of Agrarian Reform, G.R. No. 78742, 14 July 1989,
175 SCRA 343.

             The rise of the administrative state since the latter half of the last century saw the
blending of quasi-legislative and quasi-judicial powers in multifarious executive
offices, radically redefining the classical notion of separation of powers. (see
IRENE R. CORTES, PHILIPPINE ADMINISTRATIVE LAW: CASES AND 
MATERIALS 6-11 [2nd ed., 1984]) 

             Among the constitutionally permissible inter-branch encroachments  are the

President’s veto           power, Congress’ power of legislative inquiry and the judiciary’s
power of judicial review.
             This is a core theory justifying the separation of powers, undergirded by modern
political thinking, which found its way into the writings of the framers of the
United States’ Constitution, the blueprint of the present Philippine constitution.

             Decision, p. 20.

             Presidential Proclamation No. 1017 which was partially declared unconstitutional
in David v.               Arroyo, G.R. No. 171396, 3 May 2006, 489 SCRA 160.

             G.R. No. 166052, 29 August 2007, 531 SCRA 583.

             Department of Agrarian Reform.

                            G.R. No. 133132, 25 January 2000, 323 SCRA 312.

             Id. at 326.

             Citing De Leon and De Leon, Jr., The Law On Public Officers And Election Law
(1994 ed.), 365 and Dario v. Mison, G.R. No. 81954, 8 August 1989, 176 SCRA
84 (reviewing the constitutionality of Executive Order No. 127, reorganizing the
then Ministry of Finance, issued by President Corazon C. Aquino in the exercise
of her legislative powers under the Provisional Constitution).

             This is apparent from the following canonical distinction of the two doctrines:
“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 had done in the performance of his duties and to substitute the
judgment of the former for that of the latter.” (Mondano v. Silvosa, 97 Phil.
143, 147-148 [1955]) (Emphasis supplied).

             Section 4 in relation to Section 5(h).

             Section 10, Article IV in relation to Article XVI.

             Section 3(c).

             EO 378, second “Whereas” clause.