#56 G.R. No.

153660

June 10, 2003

PRUDENCIO BANTOLINO, NESTOR ROMERO, NILO ESPINA, EDDIE LADICA, ARMAN QUELING, ROLANDO NIETO, RICARDO BARTOLOME, ELUVER GARCIA, EDUARDO GARCIA and NELSON MANALASTAS, petitioners, vs. COCA-COLA BOTTLERS PHILS., INC., respondent. BELLOSILLO, J.: This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court assailing the Decision of the Court of Appeals1 dated 21 December 2001 which affirmed with modification the decision of the National Labor Relations Commission promulgated 30 March 2001.2 On 15 February 1995 sixty-two (62) employees of respondent Coca-Cola Bottlers, Inc., and its officers, Lipercon Services, Inc., People's Specialist Services, Inc., and Interim Services, Inc., filed a complaint against respondents for unfair labor practice through illegal dismissal, violation of their security of tenure and the perpetuation of the "Cabo System." They thus prayed for reinstatement with full back wages, and the declaration of their regular employment status. For failure to prosecute as they failed to either attend the scheduled mandatory conferences or submit their respective affidavits, the claims of fifty-two (52) complainant-employees were dismissed. Thereafter, Labor Arbiter Jose De Vera conducted clarificatory hearings to elicit information from the ten (10) remaining complainants (petitioners herein) relative to their alleged employment with respondent firm. In substance, the complainants averred that in the performance of their duties as route helpers, bottle segregators, and others, they were employees of respondent Coca-Cola Bottlers, Inc. They further maintained that when respondent company replaced them and prevented them from entering the company premises, they were deemed to have been illegally dismissed. In lieu of a position paper, respondent company filed a motion to dismiss complaint for lack of jurisdiction and cause of action, there being no employer-employee relationship between complainants and CocaCola Bottlers, Inc., and that respondents Lipercon Services, People's Specialist Services and Interim Services being bona fide independent contractors, were the real employers of the complainants.3 As regards the corporate officers, respondent insisted that they could not be faulted and be held liable for damages as they only acted in their official capacities while performing their respective duties. On 29 May 1998 Labor Arbiter Jose De Vera rendered a decision ordering respondent company to reinstate complainants to their former positions with all the rights, privileges and benefits due regular employees, and to pay their full back wages which, with the exception of Prudencio Bantolino whose back wages must be computed upon proof of his dismissal as of 31 May 1998, already amounted to an aggregate of P1,810,244.00.4 In finding for the complainants, the Labor Arbiter ruled that in contrast with the negative declarations of respondent company's witnesses who, as district sales supervisors of respondent company denied knowing the complainants personally, the testimonies of the complainants were more credible as they sufficiently supplied every detail of their employment, specifically identifying who their salesmen/drivers were, their places of assignment, aside from their dates of engagement and dismissal. On appeal, the NLRC sustained the finding of the Labor Arbiter that there was indeed an employeremployee relationship between the complainants and respondent company when it affirmed in toto the latter's decision. In a resolution dated 17 July 2001 the NLRC subsequently denied for lack of merit respondent's motion for consideration.

Respondent Coca-Cola Bottlers appealed to the Court of Appeals which, although affirming the finding of the NLRC that an employer-employee relationship existed between the contending parties, nonetheless agreed with respondent that the affidavits of some of the complainants, namely, Prudencio Bantolino, Nestor Romero, Nilo Espina, Ricardo Bartolome, Eluver Garcia, Eduardo Garcia and Nelson Manalastas, should not have been given probative value for their failure to affirm the contents thereof and to undergo cross-examination. As a consequence, the appellate court dismissed their complaints for lack of sufficient evidence. In the same Decision however, complainants Eddie Ladica, Arman Queling and Rolando Nieto were declared regular employees since they were the only ones subjected to cross-examination.5 Thus x x x (T)he labor arbiter conducted clarificatory hearings to ferret out the truth between the opposing claims of the parties thereto. He did not submit the case based on position papers and their accompanying documentary evidence as a full-blown trial was imperative to establish the parties' claims. As their allegations were poles apart, it was necessary to give them ample opportunity to rebut each other's statements through cross-examination. In fact, private respondents Ladica, Quelling and Nieto were subjected to rigid cross-examination by petitioner's counsel. However, the testimonies of private respondents Romero, Espina, and Bantolino were not subjected to cross-examination, as should have been the case, and no explanation was offered by them or by the labor arbiter as to why this was dispensed with. Since they were represented by counsel, the latter should have taken steps so as not to squander their testimonies. But nothing was done by their counsel to that effect.6 Petitioners now pray for relief from the adverse Decision of the Court of Appeals; that, instead, the favorable judgment of the NLRC be reinstated. In essence, petitioners argue that the Court of Appeals should not have given weight to respondent's claim of failure to cross-examine them. They insist that, unlike regular courts, labor cases are decided based merely on the parties' position papers and affidavits in support of their allegations and subsequent pleadings that may be filed thereto. As such, according to petitioners, the Rules of Court should not be strictly applied in this case specifically by putting them on the witness stand to be cross-examined because the NLRC has its own rules of procedure which were applied by the Labor Arbiter in coming up with a decision in their favor. In its disavowal of liability, respondent commented that since the other alleged affiants were not presented in court to affirm their statements, much less to be cross-examined, their affidavits should, as the Court of Appeals rightly held, be stricken off the records for being self-serving, hearsay and inadmissible in evidence. With respect to Nestor Romero, respondent points out that he should not have been impleaded in the instant petition since he already voluntarily executed a Compromise Agreement, Waiver and Quitclaim in consideration of P450,000.00. Finally, respondent argues that the instant petition should be dismissed in view of the failure of petitioners7 to sign the petition as well as the verification and certification of non-forum shopping, in clear violation of the principle laid down in Loquias v. Office of the Ombudsman.8 The crux of the controversy revolves around the propriety of giving evidentiary value to the affidavits despite the failure of the affiants to affirm their contents and undergo the test of cross-examination. The petition is impressed with merit. The issue confronting the Court is not without precedent in jurisprudence. The oft-cited case of Rabago v. NLRC9 squarely grapples a similar challenge involving the propriety of the use of affidavits without the presentation of affiants for cross-examination. In that case, we held that "the argument that the affidavit is hearsay because the affiants were not presented for crossexamination is not persuasive because the rules of evidence are not strictly observed in proceedings before administrative bodies like the NLRC where decisions may be reached on the basis of position papers only." In Rase v. NLRC,10 this Court likewise sidelined a similar challenge when it ruled that it was not necessary for the affiants to appear and testify and be cross-examined by counsel for the adverse party. To require otherwise would be to negate the rationale and purpose of the summary nature of the

proceedings mandated by the Rules and to make mandatory the application of the technical rules of evidence. Southern Cotabato Dev. and Construction Co. v. NLRC11 succinctly states that under Art. 221 of the Labor Code, the rules of evidence prevailing in courts of law do not control proceedings before the Labor Arbiter and the NLRC. Further, it notes that the Labor Arbiter and the NLRC are authorized to adopt reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law and procedure, all in the interest of due process. We find no compelling reason to deviate therefrom. To reiterate, administrative bodies like the NLRC are not bound by the technical niceties of law and procedure and the rules obtaining in courts of law. Indeed, the Revised Rules of Court and prevailing jurisprudence may be given only stringent application, i.e., by analogy or in a suppletory character and effect. The submission by respondent, citing People v. Sorrel,12 that an affidavit not testified to in a trial, is mere hearsay evidence and has no real evidentiary value, cannot find relevance in the present case considering that a criminal prosecution requires a quantum of evidence different from that of an administrative proceeding. Under the Rules of the Commission, the Labor Arbiter is given the discretion to determine the necessity of a formal trial or hearing. Hence, trial-type hearings are not even required as the cases may be decided based on verified position papers, with supporting documents and their affidavits. As to whether petitioner Nestor Romero should be properly impleaded in the instant case, we only need to follow the doctrinal guidance set by Periquet v. NLRC13 which outlines the parameters for valid compromise agreements, waivers and quitclaims Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represents a reasonable settlement, it is binding on the parties and may not later be disowned simply because of a change of mind. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the terms of settlement are unconscionable on its face, that the law will step in to annul the questionable transaction. But where it is shown that the person making the waiver did so voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and binding undertaking. In closely examining the subject agreements, we find that on their face the Compromise Agreement14 and Release, Waiver and Quitclaim15 are devoid of any palpable inequity as the terms of settlement therein are fair and just. Neither can we glean from the records any attempt by the parties to renege on their contractual agreements, or to disavow or disown their due execution. Consequently, the same must be recognized as valid and binding transactions and, accordingly, the instant case should be dismissed and finally terminated insofar as concerns petitioner Nestor Romero. We cannot likewise accommodate respondent's contention that the failure of all the petitioners to sign the petition as well as the Verification and Certification of Non-Forum Shopping in contravention of Sec. 5, Rule 7, of the Rules of Court will cause the dismissal of the present appeal. While the Loquias case requires the strict observance of the Rules, it however provides an escape hatch for the transgressor to avoid the harsh consequences of non-observance. Thus x x x x We find that substantial compliance will not suffice in a matter involving strict observance of the rules. The attestation contained in the certification on non-forum shopping requires personal knowledge by the party who executed the same. Petitioners must show reasonable cause for failure to personally sign the certification. Utter disregard of the rules cannot justly be rationalized by harking on the policy of liberal construction (underscoring supplied). In their Ex Parte Motion to Litigate as Pauper Litigants, petitioners made a request for a fifteen (15)-day extension, i.e., from 24 April 2002 to 8 May 2002, within which to file their petition for review in view of the absence of a counsel to represent them.16 The records also reveal that it was only on 10 July 2002 that

Atty. Arnold Cacho, through the UST Legal Aid Clinic, made his formal entry of appearance as counsel for herein petitioners. Clearly, at the time the instant petition was filed on 7 May 2002 petitioners were not yet represented by counsel. Surely, petitioners who are non-lawyers could not be faulted for the procedural lapse since they could not be expected to be conversant with the nuances of the law, much less knowledgeable with the esoteric technicalities of procedure. For this reason alone, the procedural infirmity in the filing of the present petition may be overlooked and should not be taken against petitioners. WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals is REVERSED and SET ASIDE and the decision of the NLRC dated 30 March 2001 which affirmed in toto the decision of the Labor Arbiter dated 29 May 1998 ordering respondent Coca-Cola Bottlers Phils., Inc., to reinstate Prudencio Bantolino, Nilo Espina, Eddie Ladica, Arman Queling, Rolando Nieto, Ricardo Bartolome, Eluver Garcia, Eduardo Garcia and Nelson Manalastas to their former positions as regular employees, and to pay them their full back wages, with the exception of Prudencio Bantolino whose back wages are yet to be computed upon proof of his dismissal, is REINSTATED, with the MODIFICATION that herein petition is DENIED insofar as it concerns Nestor Romero who entered into a valid and binding Compromise Agreement and Release, Waiver and Quitclaim with respondent company. SO ORDERED.

#57 G.R. No. 117680

February 9, 1996

FIRST LEPANTO CERAMICS, INC., petitioner, vs. HON. COURT OF APPEALS and MARIWASA MANUFACTURING, INC., respondents. DECISION VITUG, J.: Sought to be reversed by the Court is the 13th August 1993 decision of the Court of Appeals nullifying the approval,1 dated 10 December 1992, by the Board of Investments ("BOI") of the application of First Lepanto Ceramics, Inc., for an amendment of its Certificate of Registration No. EP 89-452 that would change the registered product from "glazed floor tiles" to "ceramic tiles." Petitioner First Lepanto Ceramics, Inc., was registered as a "non-pioneer enterprise" with public respondent BOI having been so issued, on 16 October 1989, a Certificate of Registration (No. EP 89-452) under Executive Order NO. 226, also known as the Omnibus Investments Code of 1987, in the manufacture of glazed floor tiles. Among the specific terms and conditions imposed on First Lepanto's registration were that: 1. 2. The enterprise shall export at least 50% of its production; (and) The enterprise shall produce only glazed floor tile.2

First Lepanto was, by virtue of its registration, granted non-fiscal and fiscal incentives by the BOI, including an exemption from taxes on raw materials and tax and duty exemption on its imported capital equipment. Private respondent Mariwasa Manufacturing, Inc., a competitor of First Lepanto, is also registered with the BOI as a non-pioneer producer of ceramic tiles (Certificate of Registration No. 89-427). In a letter, dated 10 August 1991, addressed to the BOI, First Lepanto requested for an amendment of its registered product to "ceramic tiles" in order to likewise enable it to manufacture ceramic wall tiles; however, before the BOI could act on First Lepanto's request for amendment, Mariwasa and Fil-Hispano Ceramics, Inc., already had on file their separate complaints with the BOI against First Lepanto for violating the terms and conditions of its registration by the use of its tax and duty-free equipment in the production of ceramic wall tiles. On 30 April 1992, the BOI rendered a decision finding First Lepanto guilty and imposing on the latter a fine of P797,950.40 without prejudice, however, 1) to an imposition of additional penalty should First Lepanto continue to commit the same violation; and 2) to the Board's authority to consider/ evaluate First Lepanto's request for an amendment of its certificate of registration, including, among other things, a change in its registered product from "glazed floor tiles" to "ceramic tiles."3 After paying the imposed fine, First Lepanto, on 20 June 1992, formally filed its application with the BOI (docketed BOI Case No. 92-005)4 to amend its registered product from "glazed floor tiles" to "ceramic tiles." On 06 August 1992, another verified complaint was filed by Mariwasa with the BOI (docketed BOI Case No. 92-004) which asseverated that, despite BOI's finding that First Lepanto had violated the terms and conditions of its registration, the latter still continued with its unauthorized production and sale of ceramic wall tiles. Respondent BOI dismissed the complaint for lack of merit.5 Its motion for reconsideration having been denied, Mariwasa appealed the case to the Office of the President.6

In the meantime, First Lepanto caused the publication, on 24 September 1992, in the Manila Bulletin of a notice on the official filing with the BOI of the aforementioned application for amendment of Certificate of Registration No. EP 89-452 (BOI Case No. 92-005).7 Mariwasa opposed the application. On 10 December 1992, respondent BOI handed down its decision approving First Lepanto's application. Mariwasa went to the Court of Appeals via a petition for review, with an application for a writ of preliminary injunction and/or temporary restraining order, assailing the decision of the BOI. On 17 February 1992, the appellate court issued a temporary restraining order enjoining the BOI and First Lepanto from enforcing or executing the assailed ruling. First Lepanto moved for the dismissal of the petition and to lift the restraining order. The motion was denied. On 13 August 1993, the Court of Appeals rendered its now disputed decision8 annulling the 10th December 1992 decision of the BOI. First Lepanto moved for a reconsideration but it was denied. Hence, the instant recourse. The Court grants the petition. The challenged decision of the appellate court, annulling the BOI decision in Case No. 92-005, is anchored mainly on the fact that the BOI did not hold in abeyance its action on First Lepanto's application for amendment of its certificate of registration until after BOI Case No. 92-004 would have been finally resolved. It has described the grant by the BOI of First Lepanto's application to be "premature" and "an exercise in futility" in the sense that "(i)f a decision is rendered in aforesaid BOI case (92-004) finding merit in the complaint, it is not farfetch that cancellation of (First Lepanto's) certificate of registration may be ordered." It is unacceptable, in our view, for the appellate court to base its peremptory judgment on a conjecture, i.e., the possibility that BOI Case No. 92-004 could be decided against petitioner, and to second-guess the BOI on what it would do in the event of such an adverse ruling. The appellate court itself has recognized that the final results of the controversy in BOI Case No. 92-004 cannot necessarily foreclose or circumscribe the action that may be had on First Lepanto's application for amendment. Under Chapter II, Art. 7(8) of E.O. No. 226,9 the BOI need not cancel the certificate of a registrant found to have infringed the terms and conditions of its registration. Rather significant is the fact that to hold the BOI from taking action on First Lepanto's application would be to defeat the declaration of investment policies expressed in the law; viz.: Art. 2. Declaration of Investment Policies. To accelerate the sound development of the national economy in consonance with the principles and objectives of economic nationalism and in pursuance of a planned economically feasible and practical dispersal of industries and the promotion of small and medium scale industries, under condition which will encourage competition and discourage monopolies.10 The BOI is the agency tasked with evaluating the feasibility of an investment project and to decide which investment might be compatible with its development plans. The exercise of administrative discretion is a policy decision and a matter that can best be discharged by the government agency concerned and not by the courts.11 BOI has allowed the amendment of First Lepanto's product line because that agency "believes that allowing First Lepanto to manufacture wall tiles as well will give it the needed technical and market flexibility, a key factor, to enable the firm to eventually penetrate the world market and meet its export requirements."12 In Felipe Ysmael, Jr. & Co., Inc. vs. Deputy Executive Secretary,13 we have already said and now still reiterate that . . . while the administration grapples with the complex and multifarious problems caused by unbridled exploitation of these resources, the judiciary will stand clear. A long line of cases establish the basic rule that the courts will not interfere in matters which are addressed to the sound discretion of government agencies entrusted with the regulation of activities coming under the special technical knowledge and training of such agencies.

WHEREFORE, the petition is GRANTED. The assailed decision of the Court of Appeals is hereby REVERSED and SET ASIDE and the decision of the Board of Investments is REINSTATED. No costs.

#58 G.R. No. 69871 August 24, 1990 ANITA VILLA, petitioner, vs. MANUEL LAZARO, as Presidential Assistant for Legal Affairs, Office of the President, and the HUMAN SETTLEMENTS REGULATORY COMMISSION, respondents. Eliseo P. Vencer II for petitioner.

NARVASA, J.: On January 18, 1980, Anita Villa was granted a building permit to construct a funeral parlor at Santiago Boulevard in Gen. Santos City. 1 The permit was issued by the City Engineer after the application was "processed by Engineer Dominador Solana of the City Engineer's Office, and on the strength of the Certification of Manuel Sales, City Planning and Development Coordinator that the "project was in consonance with the Land Use Plan of the City and within the full provision of the Zoning Ordinance". 2 With financing obtained from the Development Bank of the Philippines, Villa commenced construction of the building. In October of that same year, as the funeral parlor was nearing completion, a suit for injunction was brought against Villa by Dr. Jesus Veneracion, the owner of St. Elizabeth Hospital, standing about 132.36 meters from the funeral parlor. 3 The complaint sought the perpetual enjoinment of the construction because allegedly violative of the Zoning Ordinance of General Santos City. 4 A status quo order was issued. After appropriate proceedings and trial, judgment on the merits was rendered on November 17, 1981, dismissing Veneracion's complaint as well as the counterclaim pleaded by Villa. The Trial Court found that there was a falsified Zoning Ordinance, containing a provision governing funeral parlors, which had been submitted to and ratified by the Ministry of Human Settlements, but that ordinance had never been passed by the Sangguniang Panlungsod and that the genuine Zoning Ordinance of General Santos City contained no prohibition whatever relative to such parlors' "distance from hospitals, whether public or private". 5 Villa then resumed construction of her building and completed it. 6 Veneracion did not appeal from this adverse judgment which therefore became final. Instead, he brought the matter up with the Human Settlements Regulatory Commission. He lodged a complaint with that commission praying "that the funeral parlor be relocated because it was near the St. Elizabeth Hospital and Villa failed to secure the necessary locational clearance". 7 The complaint, as will at once be noted, is substantially the same as that filed by him with the Court of First Instance and dismissed after trial. Furthermore, neither he nor the Commission, as will hereafter be narrated, ever made known this second complaint to Villa until much, much later, after the respondent Commission had rendered several adverse rulings to her. 8 Two months after the rendition of the judgment against Veneracion, or more precisely on January 22, 1982, Villa received a telegram dated January 21 from Commissioner Raymundo R. Dizon of the Human Settlements Regulatory Commission reading as follows: 9 THE HUMAN SETTLEMENT REGULATORY COMMISSION REQUEST TRANSMITTAL OF PROOF OF LOCATIONAL CLEARANCE GRANTED BY THIS OFFICE IMMEDIATELY UPON RECEIPT OF THIS . . NOT LATER THAN 21ST JANUARY 1982 REGARDING YOUR ON GOING CONSTRUCTION OF A FUNERAL PARLOR AT SANTIAGO STREET CORNER NATIONAL HIGHWAY GENERAL SANTOS CITY AN OFFICIAL COMMUNICATION TO THE EFFECT FOLLOWS.

On the same day, January 22, 1982, Villa sent Dizon a reply telegram reading: "LOCATIONAL CLEARANCE BASED ON CERTIFICATION OF CITY PLANNING AND DEVELOPMENT COORDINATOR AND HUMAN SETTLEMENT OFFICER, COPIES MAIL . . ." 10 This she did on January 27,1982; under Registry Receipt No. 1227 (Gen. Santos City Post Office), 11 Villa sent to Dizon 1) the certification dated October 24, 1980 of Josefina E. Alaba (Human Settlements Officer, Gen. Santos City) to the following effect: 12 . . that per scrutiny of the documents presented by Mrs. Anita Villa on her application for a Funeral Parlor and inspection of lot No. 4997 along Santiago Boulevard where the building is to be constructed, the undersigned guarantees that the application passed the criteria of this office for this purpose. 2) and the certification of Manuel O. Sales, City Planning and Development Coordinator, dated December 27, 1979, 13 that: . . the proposed project (funeral Chapel) of Anita G. Villa, located at Lot No. 4997 along Santiago Boulevard is in consonance with the land Use Plan of the City and within the full provision of the Zoning Ordinance. On February 8, 1982 Villa received what was evidently the official communication" referred to in Commissioner Dizon's telegram of January 21, 1982, supra, an "Order to Present Proof of Locational Clearance" dated January 20, 1982. Knowing this and "considering also that she . . (had) already sent the (required) locational clearance on January 27, 1982," Villa made no response. 14 No doubt with no little discomfiture Villa received on June 2, 1982 a "Show Cause" Order dated April 28,1982, signed by one Ernesto L. Mendiola in behalf of the Commission, requiring her to show cause why a fine should not be imposed on her or a cease-and-desist order issued against her for her failure to show proof of locational clearance. 15 The order made no reference whatever to the documents she had already sent by registered mail as early as January 27, 1982. The following day Villa sent a telegram to Commissioner Dizon reading as follows: 16 LOCATIONAL CLEARANCE WAS MAILED THRU REGISTERED MAIL REGISTRY RECEIPT NUMBER 1227 DATED JANUARY 27, 1982, SENDING AGAIN THRU REGISTERED MAIL REGISTRY RECEIPT NO. 6899 JUNE 3, 1982. On the same day, she also sent to Commissioner Dizon by registered mail (Reg Receipt No. 6899), as indicated in her telegram, the same certifications earlier sent by her also by registered mail (Reg Receipt No. 1227), supra. If she thought the affair had thus been satisfactorily ended, she was sadly in error, of which she was very shortly made aware. On July 27, 1982, she received an Order of Commissioner Dizon dated June 29, 1982 imposing on her a fine of P10,000.00 and requiring her to cease operations until further orders from his office. 17 The order made no mention of the documents she had transmitted by registered mail on January 27, 1982 and June 3, 1982, or to her telegrams on the matter. Villa forthwith went to see the Deputized Zoning Administrator of General Santos City, Isidro M. Olmedo. The latter issued to her a "CERTIFICATE OF ZONING COMPLIANCE" No. 0087, dated July 28,1982, inter alia attesting that the land on which Villa's "proposed commercial building" was located in a vicinity in which the "dominant land uses" were "commercial/institutional/residential," and the project conformed "WITH THE LAND USE PLAN OF THE CITY." 18 This certificate Villa sent on the same day to Commissioner Dizon by registered mail (Reg. Receipt No. 1365 [Gen. Santos City P.O.]). 19 It is noteworthy that this Certificate No. 0087 is entirely consistent with the earlier certification dated November 27, 1979 of City Planning & Development Coordinator Sales that Villa's funeral chapel was "in consonance with the Land Use Plan of the City and within the full provision of the Zoning Ordinance," supra, 20 and that of Human Settlements Officer Alaba dated October 24, 1980, supra 21 that Villa's "application for a Funeral Parlor . . passed the criteria of this office for this purpose." Villa could perhaps be understandably considered justified in believing, at this time, that the matter had finally been laid to rest.

One can then only imagine her consternation and shock when she was served on November 16, 1982 with a writ of execution signed by Commissioner Dizon under the date of October 19, 1982 in implementation of his Order of June 29, 1982, above mentioned, imposing a fine of P10,000.00 on her. Again, this Order, like the others issuing from respondent Commission, made no advertence whatever to the documents Villa had already sent to respondent Commission by registered mail on January 27, June 29, and July 28, 1982, or her telegrams Be this as it may, she lost no time in moving for reconsideration, by letter dated November 22, 1982 to which she attached copies of the documents she had earlier sent to Commissioner Dizon, viz.: her telegram of January 22, 1982, 22 (2) the certification of the City Planning & Development Coordinator 23 (3) the certification of the Human Settlements Officer 24 (4) the telegram dated June 3, 1982, 25 and (5) the Certificate of Zoning Compliance dated July 28, 1982. 26 In addition, Villa executed a special power of attorney on December 10, 1982 authorizing Anastacio Basas to "deliver to the Human Settlements Regulatory Commission . . all my papers or documents required by the said Commission as requisites for the issuance to me and/or the Funeraria Villa . . (of) the locational clearance for the construction of my funeral parlor along Santiago boulevard, General Santos City. . . 27 pursuant to which on December 15, 1982, said Basas delivered to the Commission (Enforcement Office), thru one Betty Jimenez 28 copies of Villa's (1) building plan, (2) building permit, 29 (3) occupancy permit, 30 and (4) "the decision of the Court case involving the funeral parlor". 31 By Order dated January 21, 1983, Commissioner Dizon denied the reconsideration prayed for by Villa in her letter of November 22, 1982, opining that the plea for reconsideration had been presented out of time, 32 and the order of June 29, 1982 had become final and executory. 33 Villa then filed an appeal with "the Commission Proper, which denied it in an order dated September 7, 1983, also on account of the finality of the order of the Commissioner for Enforcement. Her subsequent motion for reconsideration . . (was also) denied in the order of June 7, 1984 . . 34 Villa then sought to take an appeal to the Office of the President. The matter was acted on by the Presidential Assistant for Legal Affairs, respondent Manuel M. Lazaro. In a Resolution dated September 21, 1984, respondent Lazaro denied the "appeal and (Villa's) motion for extension of time to submit an appeal memorandum". 35 It is noteworthy that Lazaro's resolution, like the orders of Commissioner Dizon and respondent Commission, contains no reference whatsoever to the telegrams and documents sent by Villa to the latter on various occasions evidencing her prompt responses to the orders of Dizon and the Commission, and her substantial compliance with the general requirement for her to present the requisite clearances or documents of authority for the erection of her funeral parlor. The very skimpy narration of facts set out in the resolution limits itself merely to a citation of the orders of Commissioner Dizon and the Commission; and on that basis, the resolution simplistically concludes that "no appeal was seasonably taken by Mrs. Anita Villa from the order of June 29, 1982, of the HSRC . . (and) (a)ccordingly, said order became final for which reason a writ of execution was issued . . (which) finality was confirmed in the subsequent orders of HSRC, dated January 21, 1983, and September 7, 1983." Villa filed a motion for reconsideration dated October 19, 1984, this time through counsel, contending that the resolution of September 21, 1984 was "not in conformity with the law and the evidence" and deprived her of due process of law. 36 But this, too, was denied (with finality) by respondent Lazaro, in a Resolution dated December 14, 1984 which again omitted to refer to the several attempts of Villa to comply with the order of Commissioner Dizon to present the requisite documents of authority anent her funeral parlor and adverted merely to the orders emanating from Dizon and the respondent Commission. 37 These facts present a picture of official incompetence of gross negligence and abdication of duty, if not of active bias and partiality, that is most reprehensible. The result has been to subvert and put to naught the Judgment rendered in a suit regularly tried and decided by a court of justice, to deprive one party of rights confirmed and secured thereby and to accord her adversary, in a different forum, the relief he had sought and been denied in said case.

There is no question that Dr. Jesus Veneracion had resorted to the proscribed practice of forum-shopping when, following adverse judgment of the Court of First Instance in his suit to enjoin the construction of Villa's funeral parlor, he had, instead of appealing that judgment, lodged a complaint with the respondent Commission on substantially the same ground litigated in the action. Also undisputed is that while the respondent Commission took cognizance of the complaint and by telegram required Villa to submit a locational clearance, said respondent did not then or at any time before issuance of the order and writ of execution complained of bother to put her on notice, formally or otherwise, of Veneracion's complaint. It was therefore wholly natural for Villa to assume, as it is apparent she did, that no formal adversarial inquiry was underway and that the telegram was what it purported to be on its face: a routinary request, issued motu proprio, to submit proof of compliance with locational requirements. And such assumption was doubtless fortified by petitioner's knowledge that she already had in her favor a judgment on the subject against which her opponent had taken no recourse by appeal or otherwise. Neither is there any serious dispute about what transpired thereafter, as already recounted and, in particular, about the fact that in response to that first and the subsequent demands sent by Commissioner Dizon, Villa not once but thrice furnished the Commission by registered mail with copies, variously, of official documents certifying to her compliance with the pertinent locational, zoning and land use requirements and plans. None of these documents appears to have made any impression on Commissioner Dizon, whose show-cause order of April 28, 1982 and order of June 29, 1982 imposing a P10,000.00 fine on petitioner made no mention of them whatsoever. Not even Villa's submission of said documents a fourth time to support her motion for reconsideration of a writ of execution could move Commissioner Dizon to stop acting as if said documents did not exist at all. True, only copies had been submitted, but ordinary prudence and fairness dictated at least some inquiry into their authenticity, and this would not have posed any great difficulty considering their purportedly official origins. The mischief done by Commissioner Dizon's baffling failure (or obdurate refusal) even to acknowledge the existence of the documents furnished by petitioner was perpetuated by the "Commissioner proper" and respondent Lazaro (Presidential Assistant on Legal Affairs), who threw out petitioner's appeals with no reference whatsoever thereto and thereby kept in limbo evidence that would have been decisive. The Solicitor General's brief Comment of September 3, 1985 38 neither admits nor denies Villa's claim of having submitted the required documents; it avoids any reference thereto and deals mainly with the question of the timeliness of her appeal to the respondent Commission and the propriety of the present petition. From such silence and upon what the record otherwise clearly shows, the Court remains in no doubt of the verity of said petitioner's claim that she had more than once submitted those requisite documents. There was absolutely no excuse for initiating what is held out as an administrative proceeding against Villa without informing her of the complaint which initiated the case; for conducting that inquiry in the most informal manner by means only of communications requiring submission of certain documents, which left the impression that compliance was all that was expected of her and with which directives she promptly and religiously complied; assuming that one of the documents thus successively submitted had been received, but given the fact that on at least two occasions, their transmission had been preceded by telegrams announcing that they would follow by mail, for failing to call Villa's attention to their non-receipt or to make any other attempt to trace their whereabouts; for ruling against Villa on the spurious premise that she had failed to submit the documents required; and for maintaining to the very end that pretense of lack of compliance even after being presented with a fourth set of documents and the decision in the court case upholding her right to operate her funeral parlor in its questioned location. Whether born of ineptitude negligence, bias or malice, such lapses are indefensible. No excuse can be advanced for avoiding all mention or consideration of certifications issued by respondent Commission's own officials in General Santos City, which included the very relevant one executed by Human Settlements Officer Josefina E. Alaba that petitioner's application for a funeral parlor at the questioned location had . . passed the criteria of this office for this purpose. 39 It was thus not even necessary for petitioner to bring that document to the notice of the Commission which, together with Commissioner Dizon, was chargeable with knowledge of its own workings and of all acts done in the performance of duty by its officials and employees. Petitioner is plainly the victim of either gross ignorance or negligence

or abuse of power, or a combination of both. All of the foregoing translate to a denial of due process against which the defense of failure to take timely appeal will not avail. Well-esconced in our jurisprudence is the rule: . . that administrative proceedings are not exempt from the operation of certain basic and fundamental procedural principles, such as the due process requirements in investigations and trials. And this administrative due process is recognized to include (a) the right to notice, be it actual or constructive, of the institution of the proceedings that may affect a person's legal right; (b) reasonable opportunity to appear and defend his rights, introduce witnesses and relevant evidence in his favor, (c) a tribunal so constituted as to give him reasonable assurance of honesty and impartiality, and one of competent jurisdiction; and (d) a finding or decision by that tribunal supported by substantial evidence presented at the hearing, or at least contained in the records or disclosed to the parties affected. 40 and, it being clear that some, at least, of those essential elements did not obtain or were not present in the proceedings complained of, any judgment rendered, or order issued, therein was null and void, could never become final, and could be attacked in any appropriate proceeding. The Court finds no merit in the proposition that relief is foreclosed to Villa because her motion for reconsideration of November 22, 1982 was filed out of time. The very informal character of the so-called administrative proceedings, an informality for which Commissioner Dizon himself was responsible and which he never sought to rectify, militates against imposing strict observance of the limiting periods applicable to proceedings otherwise properly initiated and regularly conducted. Indeed, considering the rather "off-the-cuff" manner in which the inquiry was carried out, it is not even certain that said petitioner is chargeable with tardiness in connection with any incident thereof. What the record shows is that she invariably responded promptly, at times within a day or two of receiving them, to orders of communications sent to her. At any rate, the Court will not permit the result of an administrative proceeding riddled with the serious defects already pointed out to negate an earlier judgment on the merits on the same matter regularly rendered by competent court. WHEREFORE, the petition is GRANTED. The proceedings complained of are ANNULLED and all orders, writs and resolutions issued in the course thereof, beginning with the show cause order of June 2, 1982 up to and including the challenged Resolutions of September 21, 1984 and December 14, 1984 of respondent Presidential Assistant Manuel Lazaro are VACATED and SET ASIDE, for having been taken and/or issued in violation of petitioner's right to due process, without pronouncement as to costs. SO ORDERED.

#59 G.R. Nos. 90660-61

January 21, 1991

UTE PATEROK, petitioner-appellant, vs. BUREAU OF CUSTOMS and HON. SALVADOR N. MISON, respondents-appellees. Untalan, Trinidad, Razon, Santos & Associate Law Offices for petitioner-appellant.

SARMIENTO, J.:p Before us is a special civil action for certiorari filed by Ute Paterok the petitioner herein, seeking the annulment of the decision 1 rendered by the public respondent, the Bureau of Customs, through its Commissioner, the Hon. Salvador N. Mison, approving the order 2 of forfeiture issued by the District Collector of Customs against the shipment of one (1) unit of Mercedes Benz of the petitioner in favor of the government. The antecedent facts are as follows: In March 1986, the petitioner shipped from Germany to the Philippines two (2) containers, one with used household goods and the other with two (2) used automobiles (one Bourgetti and one Mercedes Benz 450 SLC). The first container was released by the Bureau of Customs and later on, the Bourgetti car, too. The Mercedes Benz, however, remained under the custody of the said Bureau. In December 1987, after earnest efforts to secure the release of the said Mercedes Benz, the petitioner received a notice 3 of hearing from the legal officer of the Manila International Container Port, Bureau of Customs informing the former that seizure proceedings were being initiated against the said Mercedes Benz for violation of Batas Pambansa Blg. 73 in relation to Section 2530(F) of the Tariff and Customs Code of the Philippines (TCCP), as amended, and Central Bank Circular (CBC) 1069. While the said case was pending, the petitioner received only on April, 1988, a letter 4 informing her that a decision ordering the forfeiture of her Mercedes Benz had been rendered on December 16, 1986 by the District Collector of Customs. The petitioner had not been informed that a separate seizure case was filed on the same Mercedes Benz in question before the said District Collector, an office likewise under the Bureau of Customs. The petitioner later found out that on November 13, 1986, a Notice of Hearing set on December 2, 1986, concerning the said Mercedes Benz, was posted on the bulletin board of the Bureau of Customs at Port Area, Manila. The petitioner, thereafter, filed a motion for new trial 5 before the Collector of Customs, Port of Manila, but the latter, in an order 6 dated May 30, 1988, denied the same, invoking the failure of the former to appear in the said hearing despite the posting of the notice on the bulletin board. Moreover, the Collector of Customs contended that a reopening of the case was an exercise in futility considering that the forfeited property, a Mercedes Benz 450 SLC, had an engine displacement of more than 2800 cubic centimeters and therefore was under the category of prohibited importation pursuant to B.P. Blg. 73. Subsequently, the petitioner filed a petition for review 7 with the Department of Finance, which petition the latter referred to the public respondent. The petitioner likewise addressed a letter 8 to the Hon. Cancio Garcia, the Assistant Executive Secretary for Legal Affairs, Office of the President, Malacaang, requesting the latter's assistance for a speedy resolution of the said petition.

Finally, the public respondent rendered a decision on September 22, 1989 affirming the previous order of the Collector of Customs for the Forfeiture of the Mercedes Benz in question in favor of the government. Hence, this petition for certiorari alleging that: III-1. THE RESPONDENT-APPELLEE (Bureau of Customs) ERRED IN THE RULING THAT A NOTICE OF HEARING POSTED IN [sic] THE BULLETIN BOARD IS SUFFICIENT NOTICE AND FAILURE OF PETITIONER-APPELLANT TO APPEAR CAUSED HER DECLARATION IN DEFAULT; III-2. ERRED IN RULING THAT THEIR OFFICE WAS LEFT WITH NO ALTERNATIVE BUT TO FORFEIT THE SHIPMENT AS MANDATED BY BATAS PAMBANSA BLG. 73; III-3. ERRED IN RULING THAT THE RESPONDENT OF OFFICE FINDS THE RE-OPENING OF THE CASE AN EXERCISE IN FUTILITY AND THAT THERE IS NO POINT IN DISTURBING THE DECISION DECREEING THE FORFEITURE OF THE SHIPMENT. 9 As regards the first assignment of error, we agree with the petitioner that a notice of hearing posted on the bulletin board of the public respondent in a forfeiture proceeding where the owner of the alleged prohibited article is known does not constitute sufficient compliance with proper service of notice and procedural due process. Time and again, the Court has emphasized the imperative necessity for administrative agencies to observe the elementary rules of due process. 10 And no rule is better established under the due process clause of the Constitution than that which requires notice and opportunity to be heard before any person can be lawfully deprived of his rights. 11 In the present case, although there was a notice of hearing posted on the bulletin board, the said procedure is premised on the ground that the party or owner of the property in question is unknown. This is clear from the provisions of the TCCP relied upon by the public respondent, namely, Sections 2304 and 2306, captioned "Notification of Unknown Owner and "Proceedings in Case of Property Belonging to Unknown Parties," respectively, wherein the posting of the notice of hearing on the bulletin board is specifically allowed. But in the case at bar, the facts evidently show that the petitioner could not have been unknown. The petitioner had previous transactions with the Bureau of Customs and in fact, the latter had earlier released the first container consisting of household goods and the Bourgetti car to the former at her address (as stated in the Bill of Lading). Moreover, there was a similar seizure case 12 that had been instituted by the Manila International Container Port, docketed as S.I. No. 86-224, covering the same Mercedes Benz in question and involving the same owner, the petitioner herein. If only the public respondents had exercised some reasonable diligence to ascertain from their own records the identity and address of the petitioner as the owner and the consignee of the property in question, the necessary information could have been easily obtained which would have assured the sending of the notice of hearing properly and legally. Then, the petitioner would have been afforded the opportunity to be heard and to present her defense which is the essence of procedural due process. But the public respondent regrettably failed to perform such basic duty. Notwithstanding the procedural infirmity aforementioned, for which the Court expresses its rebuke, the petition nonetheless can not be granted. This brings us to the second and third assignments of error raised by the petitioner. Batas Pambansa Blg. 73, a law intended to promote energy conservation, provides that: Sec. 3. Towards the same end and to develop a more dynamic and effective program for the rational use of energy, the following acts are hereby prohibited:

(a) The importation, manufacture or assembling of gasoline-powered passenger motor cars with engine displacement of over 2,800 cubic centimeters or Kerbweight exceeding 1,500 kilograms, including accessories. 13 The petitioner does not dispute the fact that the motor car in question, a Mercedes Benz 450 SLC, has an engine displacement of over 2,800 cubic centimeters which clearly falls within the prohibited importation specified in the law aforequoted and as such, is liable for seizure and forfeiture by the public respondents. On the other hand, the petitioner claims that the said prohibition involves only "direct" and not 'indirect" importation as when both the shipper and the consignee are one and the same person which is the case at bar. Be that as it may, the law is clear and when it does not make any distinction on the term "importation", we likewise must not distinguish. "Ubi lex non distinguit nec nos distinguiere debemus." Finally, the petitioner invokes Sec. 2307 of the TCCP, as amended by Executive Order No. 38, dated August 6, 1986, which provides an alternative in lieu of the forfeiture of the property in question, that is, the payment of fine or redemption of the forfeited property. But the last paragraph of the said section, as amended, categorically states that: Redemption of forfeited property shall not be allowed in any case where the importation is absolutely prohibited or where the surrender of the property to the person offering to redeem the same would be contrary to law. (Emphasis ours) 14 Inasmuch as it would be contrary to law, i.e., B.P. Blg. 73, to allow the petitioner to redeem the Mercedes Benz in question, there is therefore no alternative, as correctly claimed by the public respondents, but to forfeit the same. We can not agree with the proposition that the Collector of Customs is authorized to release the motor vehicle in question to the petitioner which, in effect, would absolve the latter from any liability. In the matter of disposing of contrabands, Section 2609(c) of the Tariff and Customs Code specifically provides that the prerogative of the Collector of Customs is not the release of the contraband like the Mercedes Benz in question but its sale, which presupposes a prior custody pursuant to forfeiture and seizure proceedings as in the case at bar. As thus worded: Sec. 2609. Disposition of Contraband. Article of prohibited importation or exportation, known as contraband, shall, in the absence of special provision, be dealt with as follows: xxx xxx xxx

(c) Other contraband of commercial value and capable of legitimate use may be sold under such restrictions as will insure its use for legitimate purposes only . . . There is nothing in the Code that authorizes the Collector to release the contraband in favor of an importer. The Code, on the other hand, is clear that the thing may be disposed of by sale alone "under such restrictions as will insure its use for legitimate purposes." To be sure, the restrictions to be prescribed by the Collector must coincide with the purpose underlying Batas Blg. 73, that is, to conserve energy. Hence, he can not allow its use (after sale), in this case a Mercedes Benz with an engine displacement of more than 2,800 cubic centimeters, that would set at naught that purpose. He must make sure that the engine is changed before it is allowed to ply Philippine soil. In all cases, forfeiture is a must. WHEREFORE, the petition for certiorari is DISMISSED. No costs.

SO ORDERED.

#60 G.R. No. 117565

November 18, 1997

ARSENIO P. LUMIQUED (deceased), Regional Director, DAR CAR, Represented by his Heirs, Francisca A. Lumiqued, May A. Lumiqued, Arlene A. Lumiqued and Richard A. Lumiqued, petitioners, vs. Honorable APOLONIO G. EXEVEA, ERDOLFO V. BALAJADIA and FELIX T. CABADING, ALL Members of Investigating Committee, created by DOJ Order No. 145 on May 30, 1992; HON. FRANKLIN M. DRILON, SECRETARY OF JUSTICE, HON. ANTONIO T. CARPIO, CHIEF Presidential Legal Adviser/Counsel; and HON. LEONARDO A. QUISUMBING, Senior Deputy Executive Secretary of the Office of the President, and JEANNETTE OBAR-ZAMUDIO, Private Respondent, respondents.

ROMERO, J.: Does the due process clause encompass the right to be assisted by counsel during an administrative inquiry? Arsenio P. Lumiqued was the Regional Director of the Department of Agrarian Reform Cordillera Autonomous Region (DAR-CAR) until President Fidel V. Ramos dismissed him from that position pursuant to Administrative Order No. 52 dated May 12, 1993. In view of Lumiqued's death on May 19, 1994, his heirs instituted this petition for certiorari and mandamus, questioning such order. The dismissal was the aftermath of three complaints filed by DAR-CAR Regional Cashier and private respondent Jeannette Obar-Zamudio with the Board of Discipline of the DAR. The first affidavit-complaint dated November 16, 1989, 1 charged Lumiqued with malversation through falsification of official documents. From May to September 1989, Lumiqued allegedly committed at least 93 counts of falsification by padding gasoline receipts. He even submitted a vulcanizing shop receipt worth P550.00 for gasoline bought from the shop, and another receipt for P660.00 for a single vulcanizing job. With the use of falsified receipts, Lumiqued claimed and was reimbursed the sum of P44,172.46. Private respondent added that Lumiqued seldom made field trips and preferred to stay in the office, making it impossible for him to consume the nearly 120 liters of gasoline he claimed everyday. In her second affidavit-complaint dated November 22, 1989, 2 private respondent accused Lumiqued with violation of Commission on Audit (COA) rules and regulations, alleging that during the months of April, May, July, August, September and October, 1989, he made unliquidated cash advances in the total amount of P116,000.00. Lumiqued purportedly defrauded the government "by deliberately concealing his unliquidated cash advances through the falsification of accounting entries in order not to reflect on 'Cash advances of other officials' under code 8-70-600 of accounting rules." The third affidavit-complaint dated December 15, 1989, 3 charged Lumiqued with oppression and harassment. According to private respondent, her two previous complaints prompted Lumiqued to retaliate by relieving her from her post as Regional Cashier without just cause. The three affidavit-complaints were referred in due course to the Department of Justice (DOJ) for appropriate action. On May 20, 1992, Acting Justice Secretary Eduardo G. Montenegro issued Department Order No. 145 creating a committee to investigate the complaints against Lumiqued. The order appointed Regional State Prosecutor Apolinario Exevea as committee chairman with City Prosecutor Erdolfo Balajadia and Provincial Prosecutor Felix Cabading as members. They were mandated to conduct an investigation within thirty days from receipt of the order, and to submit their report and recommendation within fifteen days from its conclusion. The investigating committee accordingly issued a subpoena directing Lumiqued to submit his counteraffidavit on or before June 17, 1992. Lumiqued, however, filed instead an urgent motion to defer

submission of his counter-affidavit pending actual receipt of two of private respondent's complaints. The committee granted the motion and gave him a five-day extension. In his counter-affidavit dated June 23, 1992, 4 Lumiqued alleged, inter alia, that the cases were filed against him to extort money from innocent public servants like him, and were initiated by private respondent in connivance with a certain Benedict Ballug of Tarlac and a certain Benigno Aquino III. He claimed that the apparent weakness of the charge was bolstered by private respondent's execution of an affidavit of desistance. 5 Lumiqued admitted that his average daily gasoline consumption was 108.45 liters. He submitted, however, that such consumption was warranted as it was the aggregate consumption of the five service vehicles issued under his name and intended for the use of the Office of the Regional Director of the DAR. He added that the receipts which were issued beyond his region were made in the course of his travels to Ifugao Province, the DAR Central Office in Diliman, Quezon City, and Laguna, where he attended a seminar. Because these receipts were merely turned over to him by drivers for reimbursement, it was not his obligation but that of auditors and accountants to determine whether they were falsified. He affixed his signature on the receipts only to signify that the same were validly issued by the establishments concerned in order that official transactions of the DAR-CAR could be carried out. Explaining why a vulcanizing shop issued a gasoline receipt, Lumiqued said that he and his companions were cruising along Santa Fe, Nueva Vizcaya on their way to Ifugao when their service vehicle ran out of gas. Since it was almost midnight, they sought the help of the owner of a vulcanizing shop who readily furnished them with the gasoline they needed. The vulcanizing shop issued its own receipt so that they could reimburse the cost of the gasoline. Domingo Lucero, the owner of said vulcanizing shop, corroborated this explanation in an affidavit dated June 25, 1990. 6 With respect to the accusation that he sought reimbursement in the amount of P660.00 for one vulcanizing job, Lumiqued submitted that the amount was actually only P6.60. Any error committed in posting the amount in the books of the Regional Office was not his personal error or accountability. To refute private respondent's allegation that he violated COA rules and regulations in incurring unliquidated cash advances in the amount of P116,000.00, Lumiqued presented a certification 7 of DARCAR Administrative Officer Deogracias F. Almora that he had no outstanding cash advances on record as of December 31, 1989. In disputing the charges of oppression and harassment against him, Lumiqued contended that private respondent was not terminated from the service but was merely relieved of her duties due to her prolonged absences. While admitting that private respondent filed the required applications for leave of absence, Lumiqued claimed that the exigency of the service necessitated disapproval of her application for leave of absence. He allegedly rejected her second application for leave of absence in view of her failure to file the same immediately with the head office or upon her return to work. He also asserted that no medical certificate supported her application for leave of absence. In the same counter-affidavit, Lumiqued also claimed that private respondent was corrupt and dishonest because a COA examination revealed that her cash accountabilities from June 22 to November 23, 1989, were short by P30,406.87. Although private respondent immediately returned the amount on January 18, 1990, the day following the completion of the cash examination, Lumiqued asserted that she should be relieved from her duties and assigned to jobs that would not require handling of cash and money matters. Committee hearings on the complaints were conducted on July 3 and 10, 1992, but Lumiqued was not assisted by counsel. On the second hearing date, he moved for its resetting to July 17, 1992, to enable him to employ the services of counsel. The committee granted the motion, but neither Lumiqued nor his counsel appeared on the date he himself had chosen, so the committee deemed the case submitted for resolution.

On August 12, 1992, Lumiqued filed an urgent motion for additional hearing, 8 alleging that he suffered a stroke on July 10, 1992. The motion was forwarded to the Office of the State Prosecutor apparently because the investigation had already been terminated. In an order dated September 7, 1992, 9 State Prosecutor Zoila C. Montero denied the motion, viz: The medical certificate given show(s) that respondent was discharged from the Sacred Heart Hospital on July 17, 1992, the date of the hearing, which date was upon the request of respondent (Lumiqued). The records do not disclose that respondent advised the Investigating committee of his confinement and inability to attend despite his discharge, either by himself or thru counsel. The records likewise do not show that efforts were exerted to notify the Committee of respondent's condition on any reasonable date after July 17, 1992. It is herein noted that as early as June 23, 1992, respondent was already being assisted by counsel. Moreover an evaluation of the counter-affidavit submitted reveal(s) the sufficiency, completeness and thoroughness of the counter-affidavit together with the documentary evidence annexed thereto, such that a judicious determination of the case based on the pleadings submitted is already possible. Moreover, considering that the complaint-affidavit was filed as far back as November 16, 1989 yet, justice can not be delayed much longer. Following the conclusion of the hearings, the investigating committee rendered a report dated July 31, 1992, 10 finding Lumiqued liable for all the charges against him. It made the following findings: After a thorough evaluation of the evidences (sic) submitted by the parties, this committee finds the evidence submitted by the complainant sufficient to establish the guilt of the respondent for Gross Dishonesty and Grave Misconduct. That most of the gasoline receipts used by the respondent in claiming for the reimbursement of his gasoline expenses were falsified is clearly established by the 15 Certified Xerox Copies of the duplicate receipts (Annexes G-1 to G-15) and the certifications issued by the different gasoline stations where the respondent purchased gasoline. Annexes "G-1" to "G-15" show that the actual average purchase made by the respondent is about 8.46 liters only at a purchase price of P50.00, in contrast to the receipts used by the respondent which reflects an average of 108.45 liters at a purchase price of P550.00. Here, the greed of the respondent is made manifest by his act of claiming reimbursements of more than 10 times the value of what he actually spends. While only 15 of the gasoline receipts were ascertained to have been falsified, the motive, the pattern and the scheme employed by the respondent in defrauding the government has, nevertheless, been established. That the gasoline receipts have been falsified was not rebutted by the respondent. In fact, he had in effect admitted that he had been claiming for the payment of an average consumption of 108.45 liters/day by justifying that this was being used by the 4 vehicles issued to his office. Besides he also admitted having signed the receipts. Respondent's act in defrauding the government of a considerable sum of money by falsifying receipts constitutes not only Dishonesty of a high degree but also a criminal offense for Malversation through Falsification of Official Documents. This committee likewise finds that the respondent have (sic) unliquidated cash advances in the year 1989 which is in violation of established office and auditing rules. His cash advances totaling to about P116,000.00 were properly documented. The requests for obligation of allotments and the vouchers covering the amounts were all signed by him. The mere certification issued by the Administrative Officer of the DAR-CAR cannot therefore rebut these concrete evidences (sic). On the third complaint, this committee likewise believes that the respondent's act in relieving the complainant of her functions as a Regional Cashier on December 1, 1989 was an act of harassment. It is

noted that this was done barely two weeks after the complainant filed charges against her (sic). The recommendation of Jose G. Medina of the Commission on Audit came only on May 11, 1990 or almost six months after the respondent's order relieving the complainant was issued. His act in harassing a subordinate employee in retaliation to a complaint she filed constitute(s) Gross Misconduct on the part of the respondent who is a head of office. The affidavits of Joseph In-uyay and Josefina Guting are of no help to the respondent. In fact, this only show(s) that he is capable of giving bribes if only to have the cases against him dismissed. He could not have given a certain Benigno Aquino III the sum of P10,000.00 for any other purpose. Accordingly, the investigating committee recommended Lumiqued's dismissal or removal from office, without prejudice to the filing of the appropriate criminal charges against him. Acting on the report and recommendation, former Justice Secretary Franklin M. Drilon adopted the same in his Memorandum to President Fidel V. Ramos dated October 22, 1992. He added that the filing of the affidavit of desistance 11 would not prevent the issuance of a resolution on the matter considering that what was at stake was not only "the violation of complainant's (herein private respondent's) personal rights" but also "the competence and fitness of the respondent (Lumiqued) to remain in public office." He opined that, in fact, the evidence on record could call for "a punitive action against the respondent on the initiative of the DAR." On December 17, 1992, Lumiqued filed a motion for reconsideration of "the findings of the Committee" with the DOJ. 12 Undersecretary Ramon S. Esguerra indorsed the motion to the investigating committee. 13 In a letter dated April 1, 1993, the three-member investigating committee informed Undersecretary Esguerra that the committee "had no more authority to act on the same (motion for reconsideration) considering that the matter has already been forwarded to the Office of the President" and that their authority under Department Order No. 145 ceased when they transmitted their report to the DOJ. 14 Concurring with this view, Undersecretary Esguerra informed Lumiqued that the investigating committee could no longer act on his motion for reconsideration. He added that the motion was also prematurely filed because the Office of the President (OP) had yet to act on Secretary Drilon's recommendation. 15 On May 12, 1993, President Fidel V. Ramos himself issued Administrative Order No. 52 (A.O. No. 52), 16 finding Lumiqued administratively liable for dishonesty in the alteration of fifteen gasoline receipts, and dismissing him from the service, with forfeiture of his retirement and other benefits. Thus: That the receipts were merely turned over to him by his drivers and that the auditor and accountant of the DAR-CAR should be the ones to be held liable is untenable. The receipts in question were signed by respondent for the purpose of attesting that those receipts were validly issued by the commercial establishments and were properly disbursed and used in the official business for which it was intended. This Office is not about to shift the blame for all these to the drivers employed by the DAR-CAR as respondent would want us to do. The OP, however, found that the charges of oppression and harassment, as well as that of incurring unliquidated cash advances, were not satisfactorily established. In a "petition for appeal" 17 addressed to President Ramos, Lumiqued prayed that A.O. No. 52 be reconsidered and that he be reinstated to his former position "with all the benefits accorded to him by law and existing rules and regulations." This petition was basically premised on the affidavit dated May 27, 1993, of a certain Dwight L. Lumiqued, a former driver of the DAR-CAR, who confessed to having authored the falsification of gasoline receipts and attested to petitioner Lumiqued's being an "honest man" who had no "premonition" that the receipts he (Dwight) turned over to him were "altered." 18 Treating the "petition for appeal" as a motion for reconsideration of A.O. No. 52, the OP, through Senior Deputy Executive Secretary Leonardo A. Quisumbing, denied the same on August 31, 1993.

Undaunted, Lumiqued filed a second motion for reconsideration, alleging, among other things, that he was denied the constitutional right to counsel during the hearing. 19 On May 19, 1994, 20 however, before his motion could be resolved, Lumiqued died. On September 28, 1994, 21 Secretary Quisumbing denied the second motion for reconsideration for lack of merit. Hence, the instant petition for certiorari and mandamus praying for the reversal of the Report and Recommendation of the Investigating Committee, the October 22, 1992, Memorandum of then Justice Secretary Drilon, A.O. No. 52 issued by President Ramos, and the orders of Secretary Quisumbing. In a nutshell, it prays for the "payment of retirement benefits and other benefits accorded to deceased Arsenio Lumiqued by law, payable to his heirs; and the backwages from the period he was dismissed from service up to the time of his death on May 19, 1994." 22 Petitioners fault the investigating committee for its failure to inform Lumiqued of his right to counsel during the hearing. They maintain that his right to counsel could not be waived unless the waiver was in writing and in the presence of counsel. They assert that the committee should have suspended the hearing and granted Lumiqued a reasonable time within which to secure a counsel of his own. If suspension was not possible, the committee should have appointed a counsel de oficio to assist him. These arguments are untenable and misplaced. The right to counsel, which cannot be waived unless the waiver is in writing and in the presence of counsel, is a right afforded a suspect or an accused during custodial investigation. 23 It is not an absolute right and may, thus, be invoked or rejected in a criminal proceeding and, with more reason, in an administrative inquiry. In the case at bar, petitioners invoke the right of an accused in criminal proceedings to have competent and independent counsel of his own choice. Lumiqued, however, was not accused of any crime in the proceedings below. The investigation conducted by the committee created by Department Order No. 145 was for the purpose of determining if he could be held administratively liable under the law for the complaints filed against him. The order issued by Acting Secretary of Justice Montenegro states thus: In the interest of the public service and pursuant to the provisions of existing laws, a Committee to conduct the formal investigation of the administrative complaint for oppression, dishonesty, disgraceful and immoral conduct, being notoriously undesirable and conduct prejudicial to the best interest of the service against Mr. ARSENIO P. LUMIQUED, Regional Director, Department of Agrarian Reform, Cordillera Autonomous Region, is hereby created . . . 24 As such, the hearing conducted by the investigating committee was not part of a criminal prosecution. This was even made more pronounced when, after finding Lumiqued administratively liable, it hinted at the filing of a criminal case for malversation through falsification of public documents in its report and recommendation. Petitioners' misconception on the nature of the investigation 25 conducted against Lumiqued appears to have been engendered by the fact that the DOJ conducted it. While it is true that under the Administrative Code of 1987, the DOJ shall "administer the criminal justice system in accordance with the accepted processes thereof consisting in the investigation of the crimes, prosecution of offenders and administration of the correctional system, 26 conducting criminal investigations is not its sole function. By its power to "perform such other functions as may be provided by law," 27 prosecutors may be called upon to conduct administrative investigations. Accordingly, the investigating committee created by Department Order No. 145 was duty-bound to conduct the administrative investigation in accordance with the rules therefor. While investigations conducted by an administrative body may at times be akin to a criminal proceeding, the fact remains that under existing laws, a party in an administrative inquiry may or may not be assisted by counsel, irrespective of the nature of the charges and of the respondent's capacity to represent himself, and no duty rests on such a body to furnish the person being investigated with counsel. 28 In an administrative proceeding such as the one that transpired below, a respondent (such as Lumiqued) has the option of engaging the services of counsel or not. This is clear from the provisions of Section 32,

Article VII of Republic Act No. 2260 29 (otherwise known as the Civil Service Act) and Section 39, paragraph 2, Rule XIV (on Discipline) of the Omnibus Rules Implementing Book V of Executive Order No. 292 30 (otherwise known as the Administrative Code of 1987). Excerpts from the transcript of stenographic notes of the hearings attended by Lumiqued 31 clearly show that he was confident of his capacity and so opted to represent himself . Thus, the right to counsel is not imperative in administrative investigations because such inquiries are conducted merely to determine whether there are facts that merit disciplinary measures against erring public officers and employees, with the purpose of maintaining the dignity of government service. Furthermore, petitioners' reliance on Resolution No. 94-0521 of the Civil Service Commission on the Uniform Procedure in the Conduct of Administrative Investigation stating that a respondent in an administrative complaint must be "informed of his right to the assistance of a counsel of his choice," 32 is inappropriate. In the first place, this resolution is applicable only to cases brought before the Civil Service Commission. 33 Secondly, said resolution, which is dated January 25, 1994, took effect fifteen days following its publication in a newspaper of general circulation, 34 much later than the July 1992 hearings of the investigating committee created by Department Order No. 145. Thirdly, the same committee was not remiss in the matter of reminding Lumiqued of his right to counsel. Thus, at the July 3, 1992, hearing, Lumiqued was repeatedly appraised of his option to secure the services of counsel: RSP EXEVEA: This is an administrative case against Director Lumiqued. Director Lumiqued is present. The complainant is present, Janet Obar-Zamudio. Complainant has just been furnished with a copy of the counter-affidavit of the respondent. Do you have a counsel, Director? DIR. LUMIQUED: I did not bring anybody, Sir, because when I went to see him, he told me, Sir, that he has already set a hearing, morning and afternoon today. RSP EXEVEA: So, we will proceed with the hearing even without your counsel? You are willing to proceed with the hearing even without your counsel? DIR. LUMIQUED: Yes, I am confident. . . CP BALAJADIA: You are confident that you will be able to represent yourself? DIR. LUMIQUED: That is my concern. 35 (Emphasis supplied) In the course of private respondent's damaging testimony, the investigating committee once again reminded Lumiqued of his need for a counsel. Thus: CP BALAJADIA: Q. (To Director Lumiqued) You really wish to go through with this even without your counsel?

DIRECTOR LUMIQUED:

A.

I think so, Sir.

CP BALAJADIA: Let us make it of record that we have been warning you to proceed with the assistance of counsel but you said that you can take care of yourself so we have no other alternative but to proceed. 36 (Emphasis supplied). Thereafter, the following colloquies transpired: CP BALAJADIA: We will suspend in the meantime that we are waiting for the supplemental affidavit you are going to present to us. Do you have any request from the panel of investigators, Director Lumiqued? DIRECTOR LUMIQUED: I was not able to bring a lawyer since the lawyer I requested to assist me and was the one who prepared my counter-affidavit is already engaged for a hearing and according to him he is engaged for the whole month of July. RSP EXEVEA: We cannot wait . . . CP BALAJADIA: Why don't you engage the services of another counsel. The charges against you are quite serious. We are not saying you are guilty already. We are just apprehensive that you will go through this investigation without a counsel. We would like you to be protected legally in the course of this investigation. Why don't you get the services of another counsel. There are plenty here in Baguio . . . DIRECTOR LUMIQUED: I will try to see, Sir . . . CP BALAJADIA: Please select your date now, we are only given one month to finish the investigation, Director Lumiqued. RSP EXEVEA: We will not entertain any postponement. With or without counsel, we will proceed. CP BALAJADIA: Madam Witness, will you please submit the document which we asked for and Director Lumiqued, if you have other witnesses, please bring them but reduce their testimonies in affidavit form so that we can expedite with the proceedings. 37 At the hearing scheduled for July 10, 1992, Lumiqued still did not avail of the services of counsel. Pertinent excerpts from said hearing follow: FISCAL BALAJADIA:

I notice also Mr. Chairman that the respondent is not being represented by a counsel. The last time he was asked to invite his lawyer in this investigation. May we know if he has a lawyer to represent him in this investigation? DIR. LUMIQUED: There is none Sir because when I went to my lawyer, he told me that he had set a case also at 9:30 in the other court and he told me if there is a possibility of having this case postponed anytime next week, probably Wednesday so we will have good time (sic) of presenting the affidavit. FISCAL BALAJADIA: Are you moving for a postponement Director? May I throw this to the panel. The charges in this case are quite serious and he should be given a chance to the assistance of a counsel/lawyer. RSP EXEVEA: And is (sic) appearing that the supplemental-affidavit has been furnished him only now and this has several documents attached to it so I think we could grant him one last postponement considering that he has already asked for an extension. DIR. LUMIQUED: Furthermore Sir, I am now being bothered by my heart ailment. 38 The hearing was reset to July 17, 1992, the date when Lumiqued was released from the hospital. Prior to said date, however, Lumiqued did not inform the committee of his confinement. Consequently because the hearing could not push through on said date, and Lumiqued had already submitted his counteraffidavit, the committee decided to wind up the proceedings. This did not mean, however, that Lumiqued was short-changed in his right to due process. Lumiqued, a Regional Director of a major department in the executive branch of the government, graduated from the University of the Philippines (Los Baos) with the degree of Bachelor of Science major in Agriculture, was a recipient of various scholarships and grants, and underwent training seminars both here and abroad. 39 Hence, he could have defended himself if need be, without the help of counsel, if truth were on his side. This, apparently, was the thought he entertained during the hearings he was able to attend. In his statement, "That is my concern," one could detect that it had been uttered testily, if not exasperatedly, because of the doubt or skepticism implicit in the question, "You are confident that you will be able to represent yourself?" despite his having positively asserted earlier, "Yes, I am confident." He was obviously convinced that he could ably represent himself. Beyond repeatedly reminding him that he could avail himself of counsel and as often receiving the reply that he is confident of his ability to defend himself, the investigating committee could not do more. One can lead a horse to water but cannot make him drink. The right to counsel is not indispensable to due process unless required by the Constitution or the law. In Nera v. Auditor General, 40 the Court said: . . . There is nothing in the Constitution that says that a party in a non-criminal proceeding is entitled to be represented by counsel and that, without such representation, he shall not be bound by such proceedings. The assistance of lawyers; while desirable, is not indispensable. The legal profession was not engrafted in the due process clause such that without the participation of its members, the safeguard is deemed ignored or violated. The ordinary citizen is not that helpless that he cannot validly act at all except only with a lawyer at his side. In administrative proceedings, the essence of due process is simply the opportunity to explain one's side. One may be heard, not solely by verbal presentation but also, and perhaps even much more creditably as

it is more practicable than oral arguments, through pleadings. 41 An actual hearing is not always an indispensable aspect of due process. 42 As long as a party was given the opportunity to defend his interests in due course; he cannot be said to have been denied due process of law, for this opportunity to be heard is the very essence of due process. 43 Moreover, this constitutional mandate is deemed satisfied if a person is granted an opportunity to seek reconsideration of the action or ruling complained of. 44 Lumiqued's appeal and his subsequent filing of motions for reconsideration cured whatever irregularity attended the proceedings conducted by the committee. 45 The constitutional provision on due process safeguards life, liberty and property. 46 In the early case of Cornejo v. Gabriel and Provincial Board of Rizal 47 the Court held that a public office is not property within the sense of the constitutional guarantee of due process of law for it is a public trust or agency. This jurisprudential pronouncement has been enshrined in the 1987 Constitution under Article XI, Section 1, on accountability of public officers, as follows: Sec. 1. Public office is a public trust. Public officers and employees must at all times be accountable to the people, serve them with utmost responsibility, integrity, loyalty, and efficiency, act with patriotism and justice, and lead modest lives. When the dispute concerns one's constitutional right to security of tenure, however, public office is deemed analogous to property in a limited sense; hence, the right to due process could rightfully be invoked. Nonetheless, the right to security of tenure is not absolute. Of equal weight is the countervailing mandate of the Constitution that all public officers and employees must serve with responsibility, integrity, loyalty and efficiency. 48 In this case, it has been clearly shown that Lumiqued did not live up to this constitutional precept. The committee's findings pinning culpability for the charges of dishonesty and grave misconduct upon Lumiqued were not, as shown above, fraught with procedural mischief. Its conclusions were founded on the evidence presented and evaluated as facts. Well-settled in our jurisdiction is the doctrine that findings of fact of administrative agencies must be respected as long as they are supported by substantial evidence, even if such evidence is not overwhelming or preponderant. 49 The quantum of proof necessary for a finding of guilt in administrative cases is only substantial evidence or such relevant evidence as a reasonable mind might accept as adequate to support a conclusion. 50 Consequently, the adoption by Secretary Drilon and the OP of the committee's recommendation of dismissal may not in any way be deemed tainted with arbitrariness amounting to grave abuse of discretion. Government officials are presumed to perform their functions with regularity. Strong evidence is not necessary to rebut that presumption, 51 which petitioners have not successfully disputed in the instant case. Dishonesty is a grave offense penalized by dismissal under Section 23 of Rule XIV of the Omnibus Rules Implementing Book V of the Administrative Code of 1987. Under Section 9 of the same Rule, the penalty of dismissal carries with it "cancellation of eligibility, forfeiture of leave credits and retirement benefits, and the disqualification for reemployment in the government service." The instant petition, which is aimed primarily at the "payment of retirement benefits and other benefits," plus back wages from the time of Lumiqued's dismissal until his demise, must, therefore, fail. WHEREFORE, the instant petition for certiorari and mandamus is hereby DISMISSED and Administrative Order no. 52 of the Office of the President is AFFIRMED. Costs against petitioners. SO ORDERED.

#61 HAYDEE C. CASIMIRO, in her capacity as Municipal Assessor of San Jose, Romblon, Province of Romblon, petitioner, vs. FILIPINO T. TANDOG, in his capacity as the Municipal Mayor of San Jose, Romblon, respondent. DECISION CHICO-NAZARIO, J.: This is a petition for review on certiorari of the Decision1 dated 31 May 2000 of the Court of Appeals and its Resolution dated 21 November 2000 in CA-G.R. SP No. 46952, which affirmed in toto Civil Service Commission (CSC) Resolution No. 973602 dated 12 August 1997. The said CSC Resolution affirmed the Decision of Municipal Mayor Filipino Tandog of San Jose, Romblon, finding petitioner Haydee Casimiro guilty of dishonesty and ordering her dismissal 3from the service. The relevant antecedents of the instant petition are as follows: Petitioner Haydee Casimiro began her service in the government as assessment clerk in the Office of the Treasurer of San Jose, Romblon. In August 1983, she was appointed Municipal Assessor. On 04 September 1996, Administrative Officer II Nelson M. Andres, submitted a report2 based on an investigation he conducted into alleged irregularities in the office of petitioner Casimero. The report spoke of an anomalous cancellation of Tax Declarations No. 0236 in the name of Teodulo Matillano and the issuance of a new one in the name of petitioners brother Ulysses Cawaling and Tax Declarations No. 0380 and No. 0376 in the name of Antipas San Sebastian and the issuance of new ones in favor of petitioners brother-in-law Marcelo Molina. Immediately thereafter, respondent Mayor Tandog issued Memorandum Order No. 133 dated 06 September 1996, placing the petitioner under preventive suspension for thirty (30) days. Three (3) days later, Mayor Tandog issued Memorandum Order No. 15, directing petitioner to answer the charge of irregularities in her office. In her answer,4 petitioner denied the alleged irregularities claiming, in essence, that the cancellation of the tax declaration in favor of her brother Ulysses Cawaling was done prior to her assumption to office as municipal assessor, and that she issued new tax declarations in favor of her brother-in-law Marcelo Molina by virtue of a deed of sale executed by Antipas San Seb astian in Molinas favor. On 23 October 1996, thru Memorandum Order No. 17,5 respondent Mayor extended petitioners preventive suspension for another thirty (30) days effective 24 October 1996 to give him more time to verify and collate evidence relative to the alleged irregularities. On 28 October 1996, Memorandum Order No. 186 was issued by respondent Mayor directing petitioner to answer in writing the affidavit-complaint of Noraida San Sebastian Cesar and Teodulo Matillano. Noraida San Sebastian Cesar7 alleged that Tax Declarations No. 0380 and No. 0376 covering parcels of land owned by her parents were transferred in the name of a certain Marcelo Molina, petitioners brother in-law, without the necessary documents. Noraida Cesar further claimed that Marcelo Molina had not yet paid the full purchase price of the land covered by the said Tax Declarations. For his part, Teodulo Matillano claimed8 that he never executed a deed of absolute sale over the parcel of land covered by Tax Declaration No. 0236 in favor of Ulysses Cawaling, petitioners brother. In response to Memorandum Order No. 18, petitioner submitted a letter9 dated 29 October 1996, stating that with respect to the complaint of Noraida San Sebastian Cesar, she had already explained her side in the letter dated 26 September 1996. As to the complaint of Teodulo Matillano, she alleged that it was a certain Lilia Barrientos who executed a deed of absolute sale over the parcel of land subject of the complaint in favor of her brother, Ulysses Cawaling.

Not satisfied, respondent Mayor created a fact-finding committee to investigate the matter. After a series of hearings, the committee, on 22 November 1996, submitted its report10 recommending petitioners separation from service, the dispositive portion of which reads: Evaluating the facts above portrayed, it is clearly shown that Municipal Assessor Haydee Casimero is guilty of malperformance of duty and gross dishonesty to the prejudice of the taxpayers of San Jose, Romblon who are making possible the payments of her salary and other allowances. Consequently, we are unanimously recommending her separation from service. Based on the above recommendation, respondent Mayor issued Administrative Order No. 111 dated 25 November 1996 dismissing petitioner, thus: Upon unanimous recommendations of the fact finding committee Chairmained (sic) by Municipal Administrator Nelson M. Andres, finding you (Haydee C. Casimero) guilty of Dishonesty and Malperformance of duty as Municipal Assessor of San Jose, Romblon, copy of which is hereto attached as Annex "A" and made as integral part hereof, you are hereby ordered separated from service as Municipal Assessor of San Jose, Romblon, effective upon request hereof. Undeterred by that setback, petitioner appealed to the CSC, which affirmed12 respondent Mayors order of dismissal. A motion for reconsideration13 was filed, but the same was denied.14 Dissatisfied, petitioner elevated her case to the Court of Appeals, which subsequently affirmed the CSC decision.15 Her motion for reconsideration was likewise denied. Petitioner now comes to us raising the lone issue16 of whether or not petitioner was afforded procedural and substantive due process when she was terminated from her employment as Municipal Assessor of San Jose, Romblon. An underpinning query is: Was petitioner afforded an impartial and fair treatment? She specifically points to bias and partiality on the members of the fact-finding committee. She avers that Lorna Tandog Vilasenor, a member of the fact-finding committee, is the sister of respondent Mayor. She further alludes that while the committee chairman, Nelson M. Andres, was appointed by the respondent Mayor to the position of Administrative Officer II only on 01 August 1996, no sooner was he given the chairmanship of the Committee. Further the affiants-complainants were not presented for cross examination. We find the present petition bereft of merit. The first clause of Section 1 of Article III of the Bill of Rights states that: SECTION 1. No person shall be deprived of life, liberty, or property without due process of law, . . . . In order to fall within the aegis of this provision, two conditions must concur, namely, that there is deprivation of life, liberty and property and such deprivation is done without proper observance of due process. When one speaks of due process, however, a distinction must be made between matters of procedure and matters of substance. In essence, procedural due process "refers to the method or manner by which the law is enforced."17 The essence of procedural due process is embodied in the basic requirement of notice and a real opportunity to be heard.18 In administrative proceedings, such as in the case at bar, procedural due process simply means the opportunity to explain ones side or the opportunity to seek a reconsideration of the action or ruling complained of.19 "To be heard" does not mean only verbal arguments in court; one may be heard also thru pleadings. Where opportunity to be heard, either through oral arguments or pleadings, is accorded, there is no denial of procedural due process.20 In administrative proceedings, procedural due process has been recognized to include the following: (1) the right to actual or constructive notice of the institution of proceedings which may affect a respondents

legal rights; (2) a real opportunity to be heard personally or with the assistance of counsel, to present witnesses and evidence in ones favor, and to defend ones rights; (3) a tribunal vested with competent jurisdiction and so constituted as to afford a person charged administratively a reasonable guarantee of honesty as well as impartiality; and (4) a finding by said tribunal which is supported by substantial evidence submitted for consideration during the hearing or contained in the records or made known to the parties affected.21 In the case at bar, what appears in the record is that a hearing was conducted on 01 October 1996, which petitioner attended and where she answered questions propounded by the members of the fact-finding committee. Records further show that the petitioner was accorded every opportunity to present her side. She filed her answer to the formal charge against her. After a careful evaluation of evidence adduced, the committee rendered a decision, which was affirmed by the CSC and the Court of Appeals, upon a move to review the same by the petitioner. Indeed, she has even brought the matter to this Court for final adjudication. Kinship alone does not establish bias and partiality.22 Bias and partiality cannot be presumed. In administrative proceedings, no less than substantial proof is required.23 Mere allegation is not equivalent to proof.24 Mere suspicion of partiality is not enough. There should be hard evidence to prove it, as well as manifest showing of bias and partiality stemming from an extrajudicial source or some other basis.25 Thus, in the case at bar, there must be convincing proof to show that the members of the fact-finding committee unjustifiably leaned in favor of one party over the other. In addition to palpable error that may be inferred from the decision itself, extrinsic evidence is required to establish bias.26 The petitioner miserably failed to substantiate her allegations. In effect, the presumption of regularity in the performance of duty prevails.27 Neither are we persuaded by petitioners argument that the affidavit is hearsay because the complainants were never presented for cross examination. In administrative proceedings, technical rules of procedure and evidence are not strictly applied; administrative due process cannot be fully equated to due process in its strict judicial sense.28 Nothing on record shows that she asked for cross examination. In our view, petitioner cannot argue that she has been deprived of due process merely because no cross examination took place. Again, it is well to note that due process is satisfied when the parties are afforded fair and reasonable opportunity to explain their side of the controversy or given opportunity to move for a reconsideration of the action or ruling complained of. In the present case, the record clearly shows that petitioner not only filed her letteranswer, she also filed a motion for reconsideration of the recommendation of the committee dated 22 November 1996. The essence of due process in the administrative proceedings is an opportunity to explain one side or an opportunity to seek reconsideration of the action or ruling complained of.29 The Court finds far little basis to petitioners protestations that she was deprived of due process of law and that the investigation conducted was far from impartial and fair. As to the substantive due process, it is obvious to us that what petitioner means is that the assailed decision was not supported by competent and credible evidence.30 The law requires that the quantum of proof necessary for a finding of guilt in administrative cases is substantial evidence or such relevant evidence as a reasonable mind may accept as adequate to support a conclusion.31 Well-entrenched is the rule that substantial proof, and not clear and convincing evidence or proof beyond reasonable doubt, is sufficient basis for the imposition of any disciplinary action upon an employee. The standard of substantial evidence is satisfied where the employer has reasonable ground to believe that the employee is responsible for the misconduct and his participation therein renders him unworthy of trust and confidence demanded by his position.32 In the case at bar, there is substantial evidence to prove petitioners dismissal.

Two alleged irregularities provided the dismissal from service of herein petitioner: 1. The cancellation of complainant Teodulo Matillanos tax declaration and the issuance of a new one in favor of petitioners brother Ulysses Cawaling; and 2. The cancellation of the tax declaration in the name of complainant Noraida San Sebastian Cesars parent in favor of petitioners brother-in-law, Marcelo Molina. On these points, we quote, with approval, the findings of the Court of Appeals for being supported by evidence on record. Going first to the alleged irregularity accompanying the issuance of tax declarations in favor of petitioners brother Ulysses Cawaling, the formers asseverations that she had nothing to do with the processing of the subject tax declarations is simply unacceptable. As municipal assessor, one of petitioners duties was to keep a correct record of all transfers, leases and mortgages of real property (par. [4] f, Sec. 159, Article VI, Chapter 3, Title II, Book II of the Local Government Code) within her jurisdiction. Thus, even if petitioner had no hand in the processing of her brothers tax declaration, she should have seen to it that the records pertaining thereto are in order. Furthermore, the annotation on her brothers tax dec laration that the same property is also declared in the name of another person and that all of them are paying the realty taxes thereon should have cautioned petitioner to take the necessary steps to set records right. Under par. [4] h, (ibid.) the municipal assessors, in such a situation, are suppose to cancel assessments, in case several assessments have been made for the same property, except the one properly made, but if any assessee or his representative shall object to the cancellation of the assessment made in his name, such assessment shall not be cancelled but the fact shall be noted on the tax declaration and assessment rolls and other property books of records. Preference, however, shall be given to the assessment of the person who has the best title to the property, or in default thereof, of the person who has possession of the property (id.). On this score alone, petitioner is already liable for gross neglect of duty, which is also penalized by dismissal at the first offense (Sec. 22 [b], Rule XIV of the Omnibus Rule [supra]). Secondly, petitioners vacillation on whether it was Teodulo Matillano or Leticia Barrientos Berbano who executed a deed of absolute sale in favor of her brother Ulysses Cawaling further weakens her defense. Petitioner, in her written answer, claimed that both Teodulo Matillano and Ulysses Cawaling have deeds of absolute sale over the same parcel of land (vide par. [4], Annex "G," supra). In the course of investigation, however, petitioner claimed before the investigating body that Teodulo Matillano executed a deed of absolute sale in favor of her brother (vide, p. 8, Annex "N," supra). Thereafter petitioner claimed that it was a certain Leticia Barrientos Berbano who executed the deed of absolute sale in favor of her brother (vide, Annex "J," supra). . . . With respect to the irregularity involving the tax declarations of petitioners brother -in-law, Marcelo Molina, no better evidence can be presented to support petitioners dismissal for dishonesty than the questioned tax declarations themselves (vide, pp. 87 & 88, ibid.). Both tax declarations indicated that the declarations therein where subscribed to under oath by the declarant before herein petitioner on August 15, 1996, in effect canceling Antipaz San Sebastians tax declaration on even date. However, the same tax declarations indicate that the taxes due thereon (i.e., land tax, transfer tax & capital gain tax) were paid only in October of the same year or two months after the tax declarations have already been issued in favor of petitioners brother-in-law. Under Article 224 [b] of the Rules and Regulations Implementing the Local Government Code, no tax declaration shall be cancelled and a new one issued in lieu thereof unless the transfer tax has first been paid. The issuance of new tax declarations in favor of petitioners brother and brother -in-law effectively cancels the tax declarations of the complainants. Article 299[c] of the Rules of Regulations Implementing the Local Government Code, provides that:

"In addition to the notice of transfer, the previous property owner shall likewise surrendered to the provincial, city, or municipal assessor concerned, the tax declaration covering the subject property in order that the same maybe cancelled from the assessment records of the LGU. x x x." Thus, the tax declaration of complainants Noraida San Sebastian and Teodulo Matillano must first be surrendered before herein petitioner could effectively cancel their respective tax declarations and issue new ones in favor of her brother and brother-in-law. Unfortunately, herein petitioner failed to present the complainants cancelled tax declarations. She did not even allege that the same had been surrendered to her for cancellation.33 In addition, petitioner admitted using the deed of sale allegedly executed by Lilia Barrientos in favor of Cawaling in transferring the Tax Declaration in the name of her brother Ulysses Cawaling. However, glaring in the record is the admission by the petitioner in her petition34 and memorandum35 that the property was still under litigation, as both Matillano and Barrientos continue to take their claims over it. Clearly, therefore, she had no right, or reason, to pre-empt judgment on who is the lots rightful owner who can legally dispose the same. Prudence dictates that, under the situation, she should have refrained from taking any course of action pending the courts final determination of this matter. In Philippine Amusement and Gaming Corporation v. Rilloza,36 dishonesty was understood to imply a "disposition to lie, cheat, deceive, or defraud; unworthiness; lack of integrity." Dishonesty is considered as a grave offense punishable by dismissal for the first offense under Section 23, Rule XIV of the Omnibus Rules Implementing Book V of Executive Order No. 292 and Other Pertinent Civil Service Laws. It is beyond cavil that petitioners acts displayed want of honesty. IN ALL, we affirm the finding of the Court of Appeals that petitioner is guilty of acts of dishonesty. Her acts of cancelling the tax declarations of Antipas San Sebastian and Teodulo Matillano in favor of her close relatives without complying with the requirements set under the law constitute grave acts of dishonesty. WHEREFORE, the instant petition is hereby DENIED. The Court of Appeals Decision dated 31 May 2000 and its subsequent Resolution dated 21 November 2000, dismissing petitioner from service, are hereby AFFIRMED. With costs. SO ORDERED.

#62 G.R. No. 143964

July 26, 2004

GLOBE TELECOM, INC., petitioner, vs. THE NATIONAL TELECOMMUNICATIONS COMMISSION, COMMISSIONER JOSEPH A. SANTIAGO, DEPUTY COMMISSIONERS AURELIO M. UMALI and NESTOR DACANAY, and SMART COMMUNICATIONS, INC. respondents.

DECISION

TINGA, J.: Telecommunications services are affected by a high degree of public interest.1 Telephone companies have historically been regulated as common carriers,2 and indeed, the 1936 Public Service Act has classified wire or wireless communications systems as a "public service," along with other common carriers.3 Yet with the advent of rapid technological changes affecting the telecommunications industry, there has been a marked reevaluation of the traditional paradigm governing state regulation over telecommunications. For example, the United States Federal Communications Commission has chosen not to impose strict common regulations on incumbent cellular providers, choosing instead to let go of the reins and rely on market forces to govern pricing and service terms.4 In the Philippines, a similar paradigm shift can be discerned with the passage of the Public Telecommunications Act of 1995 ("PTA"). As noted by one of the law's principal authors, Sen. John Osmea, under prior laws, the government regulated the entry of pricing and operation of all public telecommunications entities. The new law proposed to dismantle gradually the barriers to entry, replace government control on price and income with market instruments, and shift the focus of government's intervention towards ensuring service standards and protection of customers.5 Towards this goal, Article II, Section 8 of the PTA sets forth the regulatory logic, mandating that "a healthy competitive environment shall be fostered, one in which telecommunications carriers are free to make business decisions and to interact with one another in providing telecommunications services, with the end in view of encouraging their financial viability while maintaining affordable rates."6 The statute itself defines the role of the government to "promote a fair, efficient and responsive market to stimulate growth and development of the telecommunications facilities and services."7 The present petition dramatizes to a degree the clash of philosophies between traditional notions of regulation and the au corant trend to deregulation. Appropriately, it involves the most ubiquitous feature of the mobile phone, Short Messaging Service ("SMS")8 or "text messaging," which has been transformed from a mere technological fad into a vital means of communication. And propitiously, the case allows the Court to evaluate the role of the National Telecommunications Commission ("NTC") in this day and age. The NTC is at the forefront of the government response to the avalanche of inventions and innovations in the dynamic telecommunications field. Every regulatory action it undertakes is of keen interest not only to industry analysts and players but to the public at large. The intensive scrutiny is understandable given the high financial stakes involved and the inexorable impact on consumers. And its rulings are traditionally accorded respect even by the courts, owing traditional deference to administrative agencies equipped with special knowledge, experience and capability to hear and determine promptly disputes on technical matters.9 At the same time, judicial review of actions of administrative agencies is essential, as a check on the unique powers vested unto these instrumentalities.10 Review is available to reverse the findings of the specialized administrative agency if the record before the Court clearly precludes the agency's decision

from being justified by a fair estimate of the worth of the testimony of witnesses or its informed judgment on matters within its special competence, or both.11 Review may also be warranted to ensure that the NTC or similarly empowered agencies act within the confines of their legal mandate and conform to the demands of due process and equal protection.12 Antecedent Facts Globe and private respondent Smart Communications, Inc. ("Smart") are both grantees of valid and subsisting legislative franchises,13 authorizing them, among others, to operate a Cellular Mobile Telephone System ("CMTS"), utilizing the Global System for Mobile Communication ("GSM") technology.14 Among the inherent services supported by the GSM network is the Short Message Services (SMS),15 also known colloquially as "texting," which has attained immense popularity in the Philippines as a mode of electronic communication. On 4 June 1999, Smart filed a Complaint16 with public respondent NTC, praying that NTC order the immediate interconnection of Smart's and Globe's GSM networks, particularly their respective SMS or texting services. The Complaint arose from the inability of the two leading CMTS providers to effect interconnection. Smart alleged that Globe, with evident bad faith and malice, refused to grant Smart's request for the interconnection of SMS.17 On 7 June 1999, NTC issued a Show Cause Order, informing Globe of the Complaint, specifically the allegations therein that, "among othersdespite formal request made by Smart to Globe for the interconnection of their respective SMS or text messaging services, Globe, with evident bad faith, malice and to the prejudice of Smart and Globe and the public in general, refused to grant Smart's request for the interconnection of their respective SMS or text messaging services, in violation of the mandate of Republic Act 7925, Executive Order No. 39, and their respective implementing rules and regulations."18 Globe filed its Answer with Motion to Dismiss on 7 June 1999, interposing grounds that the Complaint was premature, Smart's failure to comply with the conditions precedent required in Section 6 of NTC Memorandum Circular 9-7-93,19 and its omission of the mandatory Certification of Non-Forum Shopping.20 Smart responded that it had already submitted the voluminous documents asked by Globe in connection with other interconnection agreements between the two carriers, and that with those voluminous documents the interconnection of the SMS systems could be expedited by merely amending the parties' existing CMTS-to-CMTS interconnection agreements.21 On 19 July 1999, NTC issued the Order now subject of the present petition. In the Order, after noting that both Smart and Globe were "equally blameworthy" for their lack of cooperation in the submission of the documentation required for interconnection and for having "unduly maneuvered the situation into the present impasse,"22 NTC held that since SMS falls squarely within the definition of "value-added service" or "enhanced-service" given in NTC Memorandum Circular No. 8-9-95 (MC No. 8-9-95) the implementation of SMS interconnection is mandatory pursuant to Executive Order (E.O.) No. 59.23 The NTC also declared that both Smart and Globe have been providing SMS without authority from it, in violation of Section 420 (f) of MC No. 8-9-95 which requires PTEs intending to provide value-added services (VAS) to secure prior approval from NTC through an administrative process. Yet, in view of what it noted as the "peculiar circumstances" of the case, NTC refrained from issuing a Show Cause Order with a Cease and Desist Order, and instead directed the parties to secure the requisite authority to provide SMS within thirty (30) days, subject to the payment of fine in the amount of two hundred pesos (P200.00) "from the date of violation and for every day during which such violation continues."24 Globe filed with the Court of Appeals a Petition for Certiorari and Prohibition25 to nullify and set aside the Order and to prohibit NTC from taking any further action in the case. It reiterated its previous arguments that the complaint should have been dismissed for failure to comply with conditions precedent and the non-forum shopping rule. It also claimed that NTC acted without jurisdiction in declaring that it had no authority to render SMS, pointing out that the matter was not raised as an issue before it at all. Finally, Globe alleged that the Order is a patent nullity as it imposed an administrative penalty for an offense for

which neither it nor Smart was sufficiently charged nor heard on in violation of their right to due process.26 The Court of Appeals issued a Temporary Restraining Order on 31 August 1999. In its Memorandum, Globe also called the attention of the appellate court to the earlier decision of NTC pertaining to the application of Isla Communications Co., Inc. ("Islacom") to provide SMS, allegedly holding that SMS is a deregulated special feature of the telephone network and therefore does not require the prior approval of NTC.27 Globe alleged that its departure from its ruling in the Islacom case constitutes a denial of equal protection of the law. On 22 November 1999, a Decision28 was promulgated by the Former Special Fifth Division of the Court of Appeals29 affirming in toto the NTC Order. Interestingly, on the same day Globe and Smart voluntarily agreed to interconnect their respective SMS systems, and the interconnection was effected at midnight of that day.30 Yet, on 21 December 1999, Globe filed a Motion for Partial Reconsideration,31 seeking to reconsider only the portion of the Decision that upheld NTC's finding that Globe lacked the authority to provide SMS and its imposition of a fine. Both Smart and NTC filed their respective comments, stressing therein that Globe indeed lacked the authority to provide SMS.32 In reply, Globe asserted that the more salient issue was whether NTC complied with its own Rules of Practice and Procedure before making the finding of want of authority and imposing the fine. Globe also reiterated that it has been legally operating its SMS system since 1994 and that SMS being a deregulated special feature of the telephone network it may operate SMS without prior approval of NTC. After the Court of Appeals denied the Motion for Partial Reconsideration,33 Globe elevated the controversy to this Court. Globe contends that the Court of Appeals erred in holding that the NTC has the power under Section 17 of the Public Service Law34 to subject Globe to an administrative sanction and a fine without prior notice and hearing in violation of the due process requirements; that specifically due process was denied Globe because the hearings actually conducted dwelt on different issues; and, the appellate court erred in holding that any possible violation of due process committed by NTC was cured by the fact that NTC refrained from issuing a Show Cause Order with a Cease and Desist Order, directing instead the parties to secure the requisite authority within thirty days. Globe also contends that in treating it differently from other carriers providing SMS the Court of Appeals denied it equal protection of the law. The case was called for oral argument on 22 March 2004. Significantly, Smart has deviated from its original position. It no longer prays that the Court affirm the assailed Decision and Order, and the twin rulings therein that SMS is VAS and that Globe was required to secure prior authority before offering SMS. Instead, Smart now argues that SMS is not VAS and that NTC may not legally require either Smart or Globe to secure prior approval before providing SMS. Smart has also chosen not to make any submission on Globe's claim of due process violations.35 As presented during the oral arguments, the central issues are: (1) whether NTC may legally require Globe to secure NTC approval before it continues providing SMS; (2) whether SMS is a VAS under the PTA, or special feature under NTC MC No. 14-11-97; and (3) whether NTC acted with due process in levying the fine against Globe.36 Another issue is also raised whether Globe should have first filed a motion for reconsideration before the NTC, but this relatively minor question can be resolved in brief. Necessity of Filing Motion for Reconsideration Globe deliberately did not file a motion for reconsideration with the NTC before elevating the matter to the Court of Appeals via a petition for certiorari. Generally, a motion for reconsideration is a prerequisite for the filing of a petition for certiorari.37 In opting not to file the motion for reconsideration, Globe asserted before the Court of Appeals that the case fell within the exceptions to the general rule.38 The appellate

court in the questioned Decision cited the purported procedural defect,39 yet chose anyway to rule on the merits as well. Globe's election to elevate the case directly to the Court of Appeals, skipping the standard motion for reconsideration, is not a mortal mistake. According to Globe, the Order is a patent nullity, it being violative of due process; the motion for reconsideration was a useless or idle ceremony; and, the issue raised purely one of law.40 Indeed, the circumstances adverted to are among the recognized exceptions to the general rule.41 Besides, the issues presented are of relative importance and novelty42 so much so that it is judicious for the Court to resolve them on the merits instead of hiding behind procedural fineries. The Merits Now, on to the merits of the petition. Deregulation is the mantra in this age of globalization. Globe invokes it in support of its claim that it need not secure prior authority from NTC in order to operate SMS. The claim has to be evaluated carefully. After all, deregulation is not a magic incantation that wards off the spectre of intrusive government with the mere invocation of its name. The principles, guidelines, rules and regulations that govern a deregulated system must be firmly rooted in the law and regulations that institute or implement the deregulation regime.43 The implementation must likewise be fair and evenhanded. Globe hinges its claim of exemption from obtaining prior approval from the NTC on NTC Memorandum Circular No. 14-11-97 ("MC No. 14-11-97"). Globe notes that in a 7 October 1998 ruling on the application of Islacom for the operation of SMS, NTC declared that the applicable circular for SMS is MC No. 14-1197.44 Under this ruling, it is alleged, NTC effectively denominated SMS as a "special feature" which under MC No. 14-11-97 is a deregulated service that needs no prior authorization from NTC. Globe further contends that NTC's requiring it to secure prior authorization violates the due process and equal protection clauses, since earlier it had exempted the similarly situated Islacom from securing NTC approval prior to its operation of SMS.45 On the other hand, the assailed NTC Decision invokes the NTC Implementing Rules of the PTA (MC No. 8-9-95) to justify its claim that Globe and Smart need to secure prior authority from the NTC before offering SMS. The statutory basis for the NTC's determination must be thoroughly examined. Our first level of inquiry should be into the PTA. It is the authority behind MC No. 8-9-95. It is also the law that governs all public telecommunications entities ("PTEs") in the Philippines.46 Public Telecommunications Act The PTA has not strictly adopted laissez-faire as its underlying philosophy to promote the telecommunications industry. In fact, the law imposes strictures that restrain within reason how PTEs conduct their business. For example, it requires that any access charge/revenue sharing arrangements between all interconnecting carriers that are entered into have to be submitted for approval to NTC.47 Each "telecommunication category"48 established in the PTA is governed by detailed regulations. Also, international carriers and operators of mobile radio services are required to provide local exchange service in unserved or underserved areas.49 At the same time, the general thrust of the PTA is towards modernizing the legal framework for the telecommunications services sector. The transmutation has become necessary due to the rapid changes as well within the telecommunications industry. As noted by Senator Osmea in his sponsorship speech: [D]ramatic developments during the last 15 years in the field of semiconductors have drastically changed the telecommunications sector worldwide as well as in the Philippines. New technologies have fundamentally altered the structure, the economics and the nature of competition in the telecommunications business. Voice telephony is perhaps the most popular face of telecommunications,

but it is no longer the only one. There are other faces such as data communications, electronic mail, voice mail, facsimile transmission, video conferencing, mobile radio services like trunked radio, cellular radio, and personal communications services, radio paging, and so on. Because of the mind-boggling developments in semiconductors, the traditional boundaries between computers, telecommunications, and broadcasting are increasingly becoming blurred.50 One of the novel introductions of the PTA is the concept of a "value-added service" ("VAS"). Section 11 of the PTA governs the operations of a "value-added service provider," which the law defines as "an entity which relying on the transmission, switching and local distribution facilities of the local exchange and inter-exchange operators, and overseas carriers, offers enhanced services beyond those ordinarily provided for by such carriers."51 Section 11 recognizes that VAS providers need not secure a franchise, provided that they do not put up their own network.52 However, a different rule is laid down for telecommunications entities such as Globe and PLDT. The section unequivocally requires NTC approval for the operation of a value-added service. It reads, viz: Telecommunications entities may provide VAS, subject to the additional requirements that: a) prior approval of the Commission is secured to ensure that such VAS offerings are not crosssubsidized from the proceeds of their utility operations; b) other providers of VAS are not discriminated against in rates nor denied equitable access to their facilities; and c) separate books of accounts are maintained for the VAS. (Emphasis supplied)53

Oddly enough, neither the NTC nor the Court of Appeals cited the above-quoted provision in their respective decisions, which after all, is the statutory premise for the assailed regulatory action. This failure is but a mere indicia of the pattern of ignorance or incompetence that sadly attends the actions assailed in this petition. It is clear that the PTA has left open-ended what services are classified as "value-added," prescribing instead a general standard, set forth as a matter of principle and fundamental policy by the legislature.54 The validity of this standard set by Section 11 is not put into question by the present petition, and there is no need to inquire into its propriety.55 The power to enforce the provisions of the PTA, including the implementation of the standards set therein, is clearly reposed with the NTC.56 It can also be gleaned from Section 11 that the requirement that PTEs secure prior approval before offering VAS is tied to a definite purpose, i.e., "to ensure that such VAS offerings are not crosssubsidized from the proceeds of their utility operations." The reason is related to the fact that PTEs are considered as public services,57 and mandated to perform certain public service functions. Section 11 should be seen in relation to E.O. 109, which mandates that "international gateway operators shall be required to provide local exchange service,"58 for the purpose of ensuring availability of reliable and affordable telecommunications service in both urban and rural areas of the country.59 Under E.O. No. 109, local exchange services are to be cross-subsidized by other telecommunications services within the same company until universal access is achieved.60 Section 10 of the PTA specifically affirms the requirements set by E.O. No. 109. The relevance to VAS is clear: public policy maintains that the offer of VAS by PTEs cannot interfere with the fundamental provision by PTEs of their other public service requirements. More pertinently to the case at bar, the qualification highlights the fact that the legal rationale for regulation of VAS is severely limited. There is an implicit recognition that VAS is not strictly a public service offering in the way that voice-to-voice lines are, for example, but merely supplementary to the basic service. Ultimately, the regulatory attitude of the State towards VAS offerings by PTEs is to treat its provisioning as a "business decision" subject to the discretion of the offeror, so long as such services do not interfere with mandatory public service requirements imposed on PTEs such as those under E.O. No. 109. Thus, non-PTEs are not similarly required to secure prior approval before offering VAS, as they are

not burdened by the public service requirements prescribed on PTEs.61 Due regard must be accorded to this attitude, which is in consonance with the general philosophy of deregulation expressed in the PTA. The Pertinent NTC Memorandum Circulars Next, we examine the regulatory framework devised by NTC in dealing with VAS. NTC relied on Section 420(f) of the Implementing Rules of the PTA ("Implementing Rules") as basis for its claim that prior approval must be secured from it before Globe can operate SMS. Section 420 of the Implementing Rules, contained in MC No. 8-9-95, states in full: VALUE ADDED SERVICES (VAS) (a) A non-PTE VAS provider shall not be required to secure a franchise from Congress. (b) A non-PTE VAS provider can utilize its own equipment capable only of routing, storing and forwarding messages in whatever format for the purpose of providing enhanced or augmented telecommunications services. It shall not put up its own network. It shall use the transmission network, toll or local distribution, of the authorized PTES. (c) The provision of VAS shall not in any way affect the cross subsidy to the local exchange network by the international and national toll services and CMTS service. (d) Entities intending to provide value added services only shall submit to the commission application for registration for approval. The application form shall include documents showing, among others, system configuration, mode of operation, method of charging rates, lease agreement with the PTE, etc. (e) The application for registration shall be acted upon by the Commission through an administrative process within thirty (30) days from date of application. (f) PTEs intending to provide value added services are required to secure prior approval by the Commission through an administrative process. (g) VAS providers shall comply strictly with the service performance and other standards prescribed commission. (Emphasis supplied.) Instead of expressly defining what VAS is, the Implementing Rules defines what "enhanced services" are, namely: "a service which adds a feature or value not ordinarily provided by a public telecommunications entity such as format, media conversion, encryption, enhanced security features, computer processing, and the like."62 Given that the PTA defines VAS as "enhanced services," the definition provided in the Implementing Rules may likewise be applied to VAS. Still, the language of the Implementing Rules is unnecessarily confusing. Much trouble would have been spared had the NTC consistently used the term "VAS" as it is used in the PTA. The definition of "enhanced services" in the Implementing Rules, while more distinct than that under the PTA, is still too sweeping. Rather than enumerating what possible features could be classified as VAS or enhanced services, the Implementing Rules instead focuses on the characteristics of these features. The use of the phrase "the like,"63 and its implications of analogy, presumes that a whole myriad of technologies can eventually be subsumed under the definition of "enhanced services." The NTC should not be necessarily faulted for such indistinct formulation since it could not have known in 199564 what possible VAS would be available in the future. The definition laid down in the Implementing Rules may validly serve as a guide for the NTC to determine what emergent offerings would fall under VAS. Still, owing to the general nature of the definition laid down in the Implementing Rules, the expectation arises that the NTC would promulgate further issuances defining whether or not a specific feature newly available in the market is a VAS. Such expectation is especially demanded if the NTC is to penalize PTEs

who fail to obtain prior approval in accordance with Section 11 of the PTA. To our knowledge, the NTC has yet to come out with an administrative rule or regulation listing which of the offerings in the market today fall under VAS or "enhanced services." Still, there is MC No. 14-11-97, entitled "Deregulating the Provision of Special Features in the Telephone Network." Globe invokes this circular as it had been previously cited by the NTC as applicable to SMS. On 2 October 1998, Islacom wrote a letter to the NTC, informing the agency that "it will be offering the special feature" of SMS for its CMTS, and citing therein that the notice was being given pursuant to NTC Memorandum Circular No. 14-11-97.65 In response, the NTC acknowledged receipt of the letter "informing" it of Islacom's "offering the special feature" of SMS for its CMTS, and instructed Islacom to "adhere to the provisions of MC No. 14-11-97."66 The clear implication of the letter is that NTC considers the Circular as applicable to SMS. An examination of MC No. 14-11-97 further highlights the state of regulatory confusion befalling the NTC. The relevant portions thereof are reproduced below: SUBJECT: DEREGULATING THE PROVISION OF SPECIAL FEATURES IN THE TELEPHONE NETWORK. For the purpose of exempting specific telecommunications service from rate or tariff regulations if the service has sufficient competition to ensure fair and reasonable rates or tariffs, the Commission hereby deregulates the provision of special features inherent to the Telephone Network. Section 1. For the purpose of this Circular, Special Feature shall refer to a feature inherent to the telephone network which may not be ordinarily provided by a Telephone Service Provider such as call waiting, call forwarding, conference calling, speed dialing, caller ID, malicious call ID, call transfer, charging information, call pick-up, call barring, recorded announcement, no double connect, warm line, wake-up call, hotline, voicemail, and special features offered to customers with PABXs such as direct inward dialing and number hunting, and the like; provided that in the provision of the feature, no law, rule, regulation or international convention on telecommunications is circumvented or violated. The Commission shall periodically update the list of special features in the Telephone Network which, including the charging of rates therefor, shall be deregulated. Section 2. A duly authorized Telephone Service Provider shall inform the Commission in writing of the special features it can offer and the corresponding rates thirty (30) days prior to launch date. xxx Section 4. Authorized Telephone Service Providers shall continue to charge their duly approved rates for special services for 3 months from the effectivity of this circular, after which they may set their own rates. xxx (Emphasis supplied) Just like VAS as defined under the PTA, "special features" are also "not ordinarily provided" by the telephone company. Considering that MC No. 14-11-97 was promulgated after the passage of the PTA, it can be assumed that the authors of the Circular were well aware of the regulatory scheme formed under the PTA. Moreover, MC No. 14-11-97 repeatedly invokes the word "deregulation," and it cannot be denied that the liberalization ethos was introduced by the PTA. Yet, the net effect of MC No. 14-11-97 is to add to the haze beclouding the NTC's rationale for regulation. The introduction of a new concept, "special feature," which is not provided for in the PTA just adds to the confusion, especially in light of the similarities between "special features" and VAS. Moreover, there is no requirement that a PTE seeking to offer "special features" must secure prior approval from the NTC. Is SMS a VAS, "enhanced service," or a "special feature"? Apparently, even the NTC is unsure. It had told Islacom that SMS was a "special feature," then subsequently held that it was a "VAS." However, the

pertinent laws and regulations had not changed from the time of the Islacom letter up to the day the Order was issued. Only the thinking of NTC did. More significantly, NTC never required ISLACOM to apply for prior approval in order to provide SMS, even after the Order to that effect was promulgated against Globe and Smart. This fact was admitted by NTC during oral arguments.67 NTC's treatment of Islacom, apart from being obviously discriminatory, puts into question whether or not NTC truly believes that SMS is VAS. NTC is unable to point out any subsequent rule or regulation, enacted after it promulgated the adverse order against Globe and Smart, affirming the newly-arrived determination that SMS is VAS. In fact, as Smart admitted during the oral arguments, while it did comply with the NTC Order requiring it to secure prior approval, it was never informed by the NTC of any action on its request.68 While NTC counters that it did issue a Certificate of Registration to Smart, authorizing the latter as a provider of SMS, such Certificate of Registration was issued only on 13 March 2003, or nearly four (4) years after Smart had made its request.69 This inaction indicates a lack of seriousness on the part of the NTC to implement its own rulings. Also, it tends to indicate the lack of belief or confusion on NTC's part as to how SMS should be treated. Given the abstract set of rules the NTC has chosen to implement, this should come as no surprise. Yet no matter how content the NTC may be with its attitude of sloth towards regulation, the effect may prove ruinous to the sector it regulates. Every party subject to administrative regulation deserves an opportunity to know, through reasonable regulations promulgated by the agency, of the objective standards that have to be met. Such rule is integral to due process, as it protects substantive rights. Such rule also promotes harmony within the service or industry subject to regulation. It provides indubitable opportunities to weed out the most frivolous conflicts with minimum hassle, and certain footing in deciding more substantive claims. If this results in a tenfold in administrative rules and regulations, such price is worth paying if it also results in clarity and consistency in the operative rules of the game. The administrative process will best be vindicated by clarity in its exercise.70 In short, the legal basis invoked by NTC in claiming that SMS is VAS has not been duly established. The fault falls squarely on NTC. With the dual classification of SMS as a special feature and a VAS and the varying rules pertinent to each classification, NTC has unnecessarily complicated the regulatory framework to the detriment of the industry and the consumers. But does that translate to a finding that the NTC Order subjecting Globe to prior approval is void? There is a fine line between professional mediocrity and illegality. NTC's byzantine approach to SMS regulation is certainly inefficient. Unfortunately for NTC, its actions have also transgressed due process in many ways, as shown in the ensuing elucidation. Penalized Via a Quasi-Judicial Process, Globe and Smart are Entitled to Corresponding Protections It is essential to understand that the assailed Order was promulgated by NTC in the exercise of its quasijudicial functions. The case arose when Smart had filed the initial complaint against Globe before NTC for interconnection of SMS.71 NTC issued a Show Cause Order requiring Globe to answer Smart's charges. Hearings were conducted, and a decision made on the merits, signed by the three Commissioners of the NTC, sitting as a collegial body.72 The initial controversy may have involved a different subject matter, interconnection, which is no longer contested. It cannot be denied though that the findings and penalty now assailed before us was premised on the same exercise of jurisdiction. Thus, it is not relevant to this case that the process for obtaining prior approval under the PTA and its Implementing Rules is administrative in nature. While this may be so, the assailed NTC's determination and corresponding penalty were rendered in the exercise of quasijudicial functions. Therefore, all the requirements of due process attendant to the exercise of quasijudicial power apply to the present case. Among them are the seven cardinal primary rights in justiciable

cases before administrative tribunals, as enumerated in Ang Tibay v. CIR.73 They are synthesized in a subsequent case, as follows: There are cardinal primary rights which must be respected even in proceedings of this character. The first of these rights is the right to a hearing, which includes the right of the party interested or affected to present his own case and submit evidence in support thereof. Not only must the party be given an opportunity to present his case and to adduce evidence tending to establish the rights which he asserts but the tribunal must consider the evidence presented. While the duty to deliberate does not impose the obligation to decide right, it does imply a necessity which cannot be disregarded, namely, that of having something to support its decision. Not only must there be some evidence to support a finding or conclusion, but the evidence must be substantial. The decision must be rendered on the evidence presented at the hearing, or at least contained in the record and disclosed to the parties affected.74 NTC violated several of these cardinal rights due Globe in the promulgation of the assailed Order. First. The NTC Order is not supported by substantial evidence. Neither does it sufficiently explain the reasons for the decision rendered. Our earlier discussion pertained to the lack of clear legal basis for classifying SMS as VAS, owing to the failure of the NTC to adopt clear rules and regulations to that effect. Muddled as the legal milieu governing SMS already is, NTC's attempt to apply its confusing standards in the case of Globe and Smart is even more disconcerting. The very rationale adopted by the NTC in its Order holding that SMS is VAS is short and shoddy. Astoundingly, the Court of Appeals affirmed the rationale bereft of intelligent inquiry, much less comment. Stated in full, the relevant portion of the NTC Order reads: xxx Getting down [to] the nitty-gritty, Globe's SMS involves the transmission of data over its CMTS which is Globe's basic service. SMS is not ordinarily provided by a CMTS operator like Globe, and since SMS enhances Globe's CMTS, SMS fits in to a nicety [sic] with the definition of "value-added-service" or "enhanced-service" under NTC Memorandum Circular 8-9-95 (Rule 001, Item 15).75 The Court usually accords great respect to the technical findings of administrative agencies in the fields of their expertise, even if they are infelicitously worded. However, the above-quoted "finding" is nothing more than bare assertions, unsupported by substantial evidence.76 The Order reveals that no deep inquiry was made as to the nature of SMS or what its provisioning entails. In fact, the Court is unable to find how exactly does SMS "fits into a nicety" with NTC M.C. No. 8-9-95, which defines "enhanced services" as analogous to "format, media conversion, encryption, enhanced security features, computer processing, and the like."77 The NTC merely notes that SMS involves the "transmission of data over [the] CMTS," a phraseology that evinces no causal relation to the definition in M.C. No. 8-9-95. Neither did the NTC endeavor to explain why the "transmission of data" necessarily classifies SMS as a VAS. In fact, if "the transmission of data over [the] CMTS" is to be reckoned as the determinative characteristic of SMS, it would seem that this is already sufficiently covered by Globe and Smart's respective legislative franchises.78 Smart is authorized under its legislative franchise to establish and operate integrated telecommunications/computer/ electronic services for public domestic and international communications,79 while Globe is empowered to establish and operate domestic telecommunications, and stations for transmission and reception of messages by means of electricity, electromagnetic waves or any kind of energy, force, variations or impulses, whether conveyed by wires, radiated through space or transmitted through other media and for the handling of any and all types of telecommunications services.80 The question of the proper legal classification of VAS is uniquely technical, tied as at is to the scientific and technological application of the service or feature. Owing to the dearth of substantive technical findings and data from the NTC on which a judicial review may reasonably be premised, it is not opportunely proper for the Court to make its own technical evaluation of VAS, especially in relation to SMS. Judicial fact-finding of the de novo kind is generally abhorred and the shift of decisional responsibility to the judiciary is not favored as against the substantiated and specialized determination of

administrative agencies.81 With greater reason should this be the standard for the exercise of judicial review when the administrative agency concerned has not in the first place come out with a technical finding based on evidence, as in this case. Yet at the same time, this absence of substantial evidence in support of the finding that SMS is VAS already renders reversible that portion of the NTC Order. Moreover, the Order does not explain why the NTC was according the VAS offerings of Globe and Smart a different regulatory treatment from that of Islacom. Indeed, to this day, NTC has not offered any sensible explanation why Islacom was accorded to a less onerous regulatory requirement, nor have they compelled Islacom to suffer the same burdens as Globe and Smart. While stability in the law, particularly in the business field, is desirable, there is no demand that the NTC slavishly follow precedent.82 However, we think it essential, for the sake of clarity and intellectual honesty, that if an administrative agency decides inconsistently with previous action, that it explain thoroughly why a different result is warranted, or if need be, why the previous standards should no longer apply or should be overturned.83 Such explanation is warranted in order to sufficiently establish a decision as having rational basis.84 Any inconsistent decision lacking thorough, ratiocination in support may be struck down as being arbitrary. And any decision with absolutely nothing to support it is a nullity.85 Second. Globe and Smart were denied opportunity to present evidence on the issues relating to the nature of VAS and the prior approval. Another disturbing circumstance attending this petition is that until the promulgation of the assailed Order Globe and Smart were never informed of the fact that their operation of SMS without prior authority was at all an issue for consideration. As a result, neither Globe or Smart was afforded an opportunity to present evidence in their behalf on that point. NTC asserts that since Globe and Smart were required to submit their respective Certificates of Public Convenience and Necessity and franchises, the parties were sufficiently notified that the authority to operate such service was a matter which NTC could look into. This is wrong-headed considering the governing law and regulations. It is clear that before NTC could penalize Globe and Smart for unauthorized provision of SMS, it must first establish that SMS is VAS. Since there was no express rule or regulation on that question, Globe and Smart would be well within reason if they submitted evidence to establish that SMS was not VAS. Unfortunately, no such opportunity arose and no such arguments were raised simply because Globe and Smart were not aware that the question of their authority to provide SMS was an issue at all. Neither could it be said that the requisite of prior authority was indubitable under the existing rules and regulations. Considering the prior treatment towards Islacom, Globe (and Smart, had it chosen to do so) had every right to rely on NTC's disposal of Islacom's initiative and to believe that prior approval was not necessary. Neither was the matter ever raised during the hearings conducted by NTC on Smart's petition. This claim has been repeatedly invoked by Globe. It is borne out by the records or the absence thereof. NTC could have easily rebuffed this claim by pointing to a definitive record. Yet strikingly, NTC has not asserted that the matter of Globe's authority was raised in any pleading or proceeding. In fact, Globe in its Consolidated Reply before this Court challenged NTC to produce the transcripts of the hearings it conducted to prove that the issue of Globe's authority to provide SMS was put in issue. The Court similarly ordered the NTC to produce such transcripts.86 NTC failed to produce any.87 The opportunity to adduce evidence is essential in the administrative process, as decisions must be rendered on the evidence presented, either in the hearing, or at least contained in the record and disclosed to the parties affected.88 The requirement that agencies hold hearings in which parties affected by the agency's action can be represented by counsel may be viewed as an effort to regularize this struggle for advantage within a legislative adversary framework.89 It necessarily follows that if no evidence is procured pertinent to a particular issue, any eventual resolution of that issue on substantive

grounds despite the absence of evidence is flawed. Moreover, if the parties did have evidence to counter the ruling but were wrongfully denied the opportunity to offer the evidence, the result would be embarrassing on the adjudicator. Thus, the comical, though expected, result of a definitive order which is totally unsupported by evidence. To this blatant violation of due process, this Court stands athwart. Third. The imposition of fine is void for violation of due process The matter of whether NTC could have imposed the fine on Globe in the assailed Order is necessarily related to due process considerations. Since this question would also call to fore the relevant provisions of the Public Service Act, it deserves its own extensive discussion. Globe claims that the issue of its authority to operate SMS services was never raised as an issue in the Complaint filed against it by Smart. Nor did NTC ever require Globe to justify its authority to operate SMS services before the issuance of the Order imposing the fine. The Court of Appeals, in its assailed decision, upheld the power of NTC to impose a fine and to make a pronouncement on Globe's alleged lack of operational authority without need of hearing, simply by citing the provision of the Public Service Act90 which enumerates the instances when NTC may act motu proprio. That is Section 17, paragraph (a), which reads thus: Sec. 17. Proceedings of [the National Telecommunications Commission] without previous hearing. The Commission shall have power, without previous hearing, subject to established limitations and exceptions and saving provisions to the contrary: (a) To investigate, upon its own initiative, or upon complaint in writing, any matter concerning any public service as regards matters under its jurisdiction; to require any public service to furnish safe, adequate, and proper service as the public interest may require and warrant; to enforce compliance with any standard, rule, regulation, order or other requirement of this Act or of the Commission, and to prohibit or prevent any public service as herein defined from operating without having first secured a certificate of public convenience or public necessity and convenience, as the case may be, and require existing public services to pay the fees provided for in this Act for the issuance of the proper certificate of public convenience or certificate of public necessity and convenience, as the case may be, under the penalty, in the discretion of the Commission, of the revocation and cancellation of any acquired rights. On the other hand, NTC itself, in the Order, cites Section 21 as the basis for its imposition of fine on Globe. The provision states: Sec. 21. Every public service violating or failing to comply with the terms and conditions of any certificate or any orders, decisions or regulations of the Commission shall be subject to a fine of not exceeding two hundred pesos per day for every day during which such default or violation continues; and the Commission is hereby authorized and empowered to impose such fine, after due notice and hearing. [Emphasis supplied.] Sections 17 and 21 of the Public Service Act confer two distinct powers on NTC. Under Section 17, NTC has the power to investigate a PTE compliance with a standard, rule, regulation, order, or other requirement imposed by law or the regulations promulgated by NTC, as well as require compliance if necessary. By the explicit language of the provision, NTC may exercise the power without need of prior hearing. However, Section 17 does not include the power to impose fine in its enumeration. It is Section 21 which adverts to the power to impose fine and in the same breath requires that the power may be exercised only after notice and hearing. Section 21 requires notice and hearing because fine is a sanction, regulatory and even punitive in character. Indeed, the requirement is the essence of due process. Notice and hearing are the bulwark of administrative due process, the right to which is among the primary rights that must be respected even in

administrative proceedings.91 The right is guaranteed by the Constitution itself and does not need legislative enactment. The statutory affirmation of the requirement serves merely to enhance the fundamental precept. The right to notice and hearing is essential to due process and its non-observance will, as a rule, invalidate the administrative proceedings.92 In citing Section 21 as the basis of the fine, NTC effectively concedes the necessity of prior notice and hearing. Yet the agency contends that the sanction was justified by arguing that when it took cognizance of Smart's complaint for interconnection, "it may very well look into the issue of whether the parties had the requisite authority to operate such services."93 As a result, both parties were sufficiently notified that this was a matter that NTC could look into in the course of the proceedings. The parties subsequently attended at least five hearings presided by NTC.94 That particular argument of the NTC has been previously disposed of. But it is essential to emphasize the need for a hearing before a fine may be imposed, as it is clearly a punitive measure undertaken by an administrative agency in the exercise of its quasi-judicial functions. Inherently, notice and hearing are indispensable for the valid exercise by an administrative agency of its quasi-judicial functions. As the Court held in Central Bank of the Phil. v. Hon. Cloribel:95 [T]he necessity of notice and hearing in an administrative proceeding depends on the character of the proceeding and the circumstances involved. In so far as generalization is possible in view of the great variety of administrative proceedings, it may be stated as a general rule that notice and hearing are not essential to the validity of administrative action where the administrative body acts in the exercise of executive, administrative, or legislative functions; but where a public administrative body acts in a judicial or quasi-judicial matter, and its acts are particular and immediate rather than general and prospective, the person whose rights or property may be affected by the action is entitled to notice and hearing.96 The requirement of notice and hearing becomes even more imperative if the statute itself demands it, as in the case of Section 21 of the Public Service Act. As earlier stated, the Court is convinced that prior to the promulgation of the assailed Order Globe was never notified that its authority to operate SMS was put in issue. There is an established procedure within NTC that provides for the steps that should be undertaken before an entity such as Globe could be subjected to a disciplinary measure. Section 1, Rule 10 of the NTC Rules of Procedure provides that any action, the object of which is to subject a holder of a certificate of public convenience or authorization, or any person operating without authority from NTC, to any penalty or a disciplinary or other measure shall be commenced by the filing of a complaint. Further, the complaint should state, whenever practicable, the provisions of law or regulation violated, and the acts or omissions complained of as constituting the offense.97 While a complaint was indeed filed against Globe by Smart, the lack of Globe's authority to operate SMS was not raised in the Complaint, solely predicated as it was on Globe's refusal to interconnect with Smart.98 Under the NTC Rules of Procedure, NTC is to serve a Show Cause Order on the respondent to the complaint, containing therein a "statement of the particulars and matters concerning which the Commission is inquiring and the reasons for such actions."99 The Show Cause Order served on Globe in this case gave notice of Smart's charge that Globe, acting in bad faith and contrary to law, refused to allow the interconnection of their respective SMS systems.100 Again, the lack of authority to operate SMS was not adverted to in NTC's Show Cause Order. The records also indicate that the issue of Globe's authority was never raised in the subsequent hearings on Smart's complaint. Quite noticeably, the respondents themselves have never asserted that the matter of Globe's authority was raised in any pleading or proceeding. In fact, Globe in its Consolidated Reply before this Court challenged NTC to produce the transcripts of the hearings it conducted to prove that the issue of Globe's authority to provide SMS was put in issue. It did not produce any transcript. Being an agency of the government, NTC should, at all times, maintain a due regard for the constitutional rights of party litigants.101 In this case, NTC blindsided Globe with a punitive measure for a reason Globe

was not made aware of, and in a manner that contravened express provisions of law. Consequently, the fine imposed by NTC on Globe is also invalid. Otherwise put, since the very basis for the fine was invalidly laid, the fine is necessarily void. Conclusion In summary: (i) there is no legal basis under the PTA or the memorandum circulars promulgated by the NTC to denominate SMS as VAS, and any subsequent determination by the NTC on whether SMS is VAS should be made with proper regard for due process and in conformity with the PTA; (ii) the assailed Order violates due process for failure to sufficiently explain the reason for the decision rendered, for being unsupported by substantial evidence, and for imputing violation to, and issuing a corresponding fine on, Globe despite the absence of due notice and hearing which would have afforded Globe the right to present evidence on its behalf. Thus, the Order effectively discriminatory and arbitrary as it is, was issued with grave abuse of discretion and it must be set aside. NTC may not legally require Globe to secure its approval for Globe to continue providing SMS. This does not imply though that NTC lacks authority to regulate SMS or to classify it as VAS. However, the move should be implemented properly, through unequivocal regulations applicable to all entities that are similarly situated, and in an even-handed manner. Concurrently, the Court realizes that the PTA is not intended to constrain the industry within a cumbersome regulatory regime.102 The policy as pre-ordained by legislative fiat renders the traditionally regimented business in an elementary free state to make business decisions, avowing that it is under this atmosphere that the industry would prosper.103 It is disappointing at least if the deregulation thrust of the law is skirted deliberately. But it is ignominious if the spirit is defeated through a crazy quilt of vague, overlapping rules that are implemented haphazardly. By no means should this Decision be interpreted as removing SMS from the ambit of jurisdiction and review by the NTC. The issue before the Court is only the prior approval requirement as imposed on Globe and Smart. The NTC will continue to exercise, by way of its broad grant, jurisdiction over Globe and Smart's SMS offerings, including questions of rates and customer complaints. Yet caution must be had. Much complication could have been avoided had the NTC adopted a proactive position, promulgating the necessary rules and regulations to cope up with the advent of the technologies it superintends. With the persistent advent of new offerings in the telecommunications industry, the NTC's role will become more crucial than at any time before. If NTC's behavior in the present case is but indicative of a malaise pervading this crucial regulatory arm of the State, the Court fears the resultant confusion within the industry and the consuming public. The credibility of an administrative agency entrusted with specialized fields subsists not on judicial doctrine alone, but more so on its intellectual strength, adherence to law, and basic fairness. WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated 22 November 1999, as well as its Resolution dated 29 July 2000, and the assailed Order of the NTC dated 19 July 1999 are hereby SET ASIDE. No cost. SO ORDERED.

#63 no need

#64 G.R. No. L-66683

April 23, 1990

RADIO COMMUNICATIONS OF THE PHILIPPINES, INC., PHILIPPINE TELEGRAPH & TELEPHONE CORPORATION and CLAVECILLA RADIO SYSTEM, petitioners, vs. NATIONAL TELECOMMUNICATIONS COMMISSION and PHILIPPINE LONG DISTANCE TELEPHONE COMPANY, respondents. Andres T. Velarde for petitioner Phil. Telegraph Corp. Quiason, Ermitao, Makalintal & Barot for petitioner RCPI. Williard S. Wong for Clavecilla Radio System. Regala & Del Pilar and Alampay, Alvero & Alampay for re- respondent PLDT.

BIDIN, J.: This is a petition for certiorari and prohibition with preliminary injunction and/or restraining order seeking to annul and set aside the January 25, 1984 order of the National Telecommunications Commission (hereinafter respondent Commission) in NTC Case No. 84-003 and to prohibit respondent Commission from taking cognizance of, and assuming jurisdiction over the "Application for Approval of Rates for Digital Transmission Service Facilities" of the Philippine Long Distance and Telephone Company (PLDT, for brevity), private respondent herein, for lack of jurisdiction. The decretal portion of the said order reads: IN VIEW OF THE FOREGOING, and finding prima facie that the rates and currency adjustment provision herein proposed are just and reasonable, and that these more modern telecommunications facilities should be made available to interested users, this Commission believes that in the public interest, the application of this case may be, as it is hereby PROVISIONALLY APPROVED with corresponding authority to apply a currency adjustments of 1% for every P10 increase or decrease of the peso to a dollar for these rates using as starting basis the currency adjustment level of P14.00 to US $1.00. This provisional authority may be revoked, revised or amended at any time in accordance with law. Applicant shall refund or credit to the account of its subscriber any amount found in excess of what should be authorized in the final resolution of this case. The Board Secretary of the Commission is hereby directed to set this case for hearing within the prescribed 30-day period allowed by law. The Order takes effect immediately. SO ORDERED. The factual antecedents are as follows: On January 4, 1984, private respondent PLDT filed an application with respondent Commission for the Approval of Rates for Digital Transmission Service Facilities under NTC Case No. 84-003. On January 25, 1984, the respondent Commission provisionally approved and set the case for hearing within the prescribed 30-day period allowed by law.

Later, on February 2, 1984, the respondent Commission issued a notice of hearing, setting private respondent PLDT's application for hearing on February 22, 1984 at 9:30 o'clock in the morning (Rollo, p. 37). In the aforementioned notice of hearing, herein petitioners except Philippine Telegraph and Telephone Corporation were not included in the list of affected parties (Rollo, p. 38). At the hearing, petitioner PT & T Co., along with other petitioners which came to know of the pending petition through the former, appeared and moved for some time within which to file an opposition or reply to said application. Petitioners alleged that neither respondent Commission nor private respondent PLDT informed them of the existence of this provisional authority (Rollo, p. 10). Hence, this petition. Petitioners raised the following assignment of errors: A THE RESPONDENT NATIONAL TELECOMMUNICATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO EXCESS OR LACK OF JURISDICTION IN ISSUING PROVISIONAL AUTHORITY TO PRIVATE RESPONDENT WITHOUT PRIOR NOTICE AND HEARING WHEN ITS APPLICATION IS NOT FOR RATE APPROVAL BUT FOR AUTHORITY TO ENGAGE IN SERVICES OUTSIDE ITS FRANCHISES. B THE RESPONDENT NATIONAL TELECOMMUNICATIONS COMMISSION GRAVELY ABUSED ITS DISCRETION AMOUNTING TO EXCESS OR LACK OF JURISDICTION IN ASSUMING JURISDICTION OVER THE APPLICATION OF PRIVATE RESPONDENT SINCE APPLICATION IS FOR NEW SERVICES NOT COVERED IN THE FRANCHISE AND CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY GRANTED TO PRIVATE RESPONDENT. (Rollo, p. 12) In the Resolution of March 21, 1984, the Second Division of this Court required respondents to comment, issued a temporary restraining order and transferred the case to the Court En Banc (Rollo, p. 40) which was accepted in the resolution of April 5, 1984 (Rollo, p. 52-a). On June 21, 1984, this Court resolved to consider respondents' comment as answer and the petition was given due course. The parties were required to file their respective memoranda (Rollo, p. 137). Petitioners filed their joint memorandum on August 13, 1984 while respondent PLDT filed its memorandum on August 15, 1984. The pivotal issue of this case is whether or not the respondent Commission gravely abused its discretion amounting to excess or lack of jurisdiction in issuing a provisional authority in favor of PLDT, without prior notice to the petitioners. In their petition, petitioners alleged that the application filed by respondent PLDT is not for approval of rates as its caption misleadingly indicates but for authority to engage in new services not covered by private respondent's franchise and certificate of public convenience and necessity. Petitioners further claimed that PLDT is limited by its legislative franchise to render only "radiotelephonic services," exclusive of "radiotelegraphic or record services." Therefore, the issuance of the provisional authority by the respondent Commission without notice and hearing constitutes grave abuse of discretion inasmuch as such power or prerogative exists only for rate cases under Section 16(c) of the Public Service Act. On the other hand, respondent PLDT refuted the facts alleged in the petition as grossly false and misrepresented. Respondent PLDT maintains that the act of the respondent Commission in having issued its order of January 25, 1984 is a valid exercise of its jurisdiction considering that the franchise of PLDT authorizes it to operate not only telephone system, domestic and international, but also transmission service facilities. In fact, PLDT pointed out that petitioners themselves with the exception of CLAVECILLA had been actual users of PLDT lines or channels for data transmission.

The petition is devoid of merit. Section 16(c) of the Public Service Act (C.A. No. 146) provides for the fixing of rates, by the Commission, which shall be imposed and observed by any public service, as follows: Sec. 16 (c). To fix and determine individual and joint rates, tolls, charges, classifications, or schedules thereof, as well as commutation, mileage, kilometrage, and other special rates which shall be imposed, observed and followed thereafter by any public service: Provided, That the Commission may, in its discretion, approve rates proposed by public services provisionally and without necessity of any hearing but it shall call a hearing thereon within thirty days, thereafter, upon publication and notice to the concerns operating in the territory affected: Provided, further That in case the public service equipment of an operator is used principally or secondarily for the promotion of a private business shall be considered in relation with the public service of such operator for the purpose of fixing the rates. (Emphasis supplied) The Public Service Commission found that the application involved in the present petition is actually an application for approval of rates for digital transmission service facilities which it may approve provisionally and without the necessity of any notice and hearing as provided in the above-quoted provision of law. Well-settled is the rule that the Public Service Commission now is empowered to approve provisionally rates of utilities without the necessity of a prior hearing (Republic v. Medina, 41 SCRA 643 [1971]). Under the Public Service Act, as amended (CA No. 146), the Board of Communications then, now the NTC, can fix a provisional amount for the subscriber's investment to be effective immediately, without hearing (par. 3 of Sec. 16, CA 146, as amended; Philippine Consumers Foundation, Inc. v. NTC, 131 SCRA 260 [1984]). Further, the Public Service Act makes no distinction between initial or revised rates. These rates are necessarily proposed merely, until the Commission approves them (Republic v. Medina, supra). Moreover, the Commission can hear and approve revised rates without published notices or hearing. The reason is easily discerned from the fact that provisional rates are by their nature temporary and subject to adjustment in conformity with the definitive rates approved after final hearing (Republic v. Medina, supra; Cordero v. Energy Regulatory Board, G.R. No. 83931, November 3, 1988, En Banc, Minute Resolution) and it was so stated in the case at bar, in the National Telecommunications Commission's order of January 25, 1984. The Commission did not grant the PLDT any authority to engage in new communication service, but merely in any new proved provisionally PLDT's proposed revision of its then authorized schedule of rates for the lease on availment by endusers of the digital full period leased lines or channels for data transmission which said company acquired, installed, and presently maintain in serviceable condition, a relief well within its power to grant. Undoubtedly, a public utility is entitled to a just compensation and a fair return upon the value of its property while it is being used in public service (Phil. Shipowners' Ass'n. v. Public Utility Commissioner, 43 Phil, 328 [1922]; Ynchausti Steamship Co., Public Utility Commissioner, 42 Phil. 624 [1922]). As to the required notice, it is impossible for the respondent (commission to give personal notice to all parties affected, not all of them being known to it. More than that, there is no dispute that the notice of hearing was published and as admitted by petitioners, one of them received the notice which in turn informed the others. In fact, the petitioners have timely opposed the petition in question, so that lack of notice was deemed cured. Under the circumstances, the Commission may be deemed to have substantially complied with the requirements (Matienzo v. Abellera, 162 SCRA 1 [1987]). In any event, the provisional nature of the authority and the fact that the primary application shall be given a full hearing are the safeguards against its abuse (Matienzo v. Abellera, supra). Moreover, the maximum rate fixed in a franchise which its holder is authorized to collect, is always subject to a revision and regulation by the Public Service Commission (now NTC). For if such maximum rate is not subject to alteration, the power of the Commission to review would be rendered nugatory, as it cannot be said that the power to revise may be exercised only where the franchise does not impose a limitation

(Manila Gas Corporation v. De Vera, et al., 70 Phil. 321 [1940]). Therefore, the authority of the Commission to issue ex parte a provisional permit to operate proposed public service is not absolute but is based on the superior and imperative necessity of meeting an urgent public need (Veneracion v. Congson Ice Plant & Cold Storage, Inc., 52 SCRA 119 [1973]). It is the duty of the PSC, (now NTC) to see to the needs and interest of the public (Dizon v. PSC, 50 SCRA 500 [1973]). Finally, there is a legal presumption that the rates are reasonable and it must be conceded that the fixing of rates by the government through its authorized agent, involves the exercise of reasonable discretion, and unless there is an abuse of that discretion, the courts will not interfere (Ynchausti Steamship Co. v. Public Utility Commissioner, supra; Manila Electric Company v. De Vera, et al., 66 Phil. 161 [1938]). Likewise, as a rule, the court does not interfere with administrative action prior to its completion on finality (Matienzo v. Abeller 162 SCRA 1 [1988]). A doctrine long recognized is that where the law confines in an administrative office the power to determine particular questions or matters upon the facts presented, the jurisdiction of such office shall prevail over the courts. Hence, findings of administrative officials and agencies who have acquired expertise because their jurisdiction is confined to specific matters are generally accorded not only respect but at times even finality if such findings are supported by substantial evidence. (Lianga Bay Logging Co., Inc. v. Enage, 152 SCRA 80-81 [1987]). A careful study of the records yields no cogent reason to disturb the findings and conclusions of the National Telecommunications Commission. WHEREFORE, the petition is Dismissed for lack of merit and the assailed order of the National Telecommunications Commission is Affirmed. The temporary restraining order issued on March 21, 1984 is Set Aside. SO ORDERED.

#65 G.R. No. 157581

December 1, 2004

MANILA INTERNATIONAL AIRPORT AUTHORITY, petitioner, vs. FRANCISCO BLANCAFLOR, appellant.

DECISION

QUISUMBING, J.: For review on certiorari is the Decision,1 dated February 17, 2003, of the Regional Trial Court of Makati City, Branch 58, in Civil Case No. 99-1293. The said Decision nullified herein petitioner's Resolutions Nos. 98-30 and 99-11 for want of notice and public hearing. The undisputed facts are as follows: Petitioner Manila International Airport Authority (MIAA) is a government-owned and controlled corporation created on March 4, 1982, by Executive Order No. 778. It owns, operates, and manages the Ninoy Aquino International Airport (NAIA). Petitioner's properties, facilities, and services are available for public use subject to such fees, charges, and rates as may be fixed in accordance with law. Herein respondents are the users, lessees and occupants of petitioner's properties, facilities, and services. The schedule of aggregate dues collectible for the use of petitioner's properties, facilities, and services are divided into: (1) aeronautical fees; (2) rentals; (3) business concessions; (4) other airport fees and charges; and (5) utilities.2 On May 19, 1997, petitioner issued Resolution No. 97-513 announcing an increase in the rentals of its terminal buildings, VIP lounge, other airport buildings and land, as well as check-in and concessions counters. Business concessions, particularly concessionaire privilege fees, were also increased. On April 2, 1998, petitioner passed Resolution No. 98-304 adopting twenty percent (20%) of the increase recommended by Punongbayan and Araullo,5 to take effect immediately on June 1, 1998. Thus, petitioner issued the corresponding Administrative Order No. 1, Series of 1998 to reflect the new schedule of fees, charges, and rates.6 On February 5, 1999, petitioner issued Resolution No. 99-11,7 which further increased the other airport fees and charges, specifically for parking and porterage services, and the rentals for hangars. Accordingly, petitioner amended Administrative Order No. 1, Series of 1998.8 Respondents requested that the implementation of the new fees, charges, and rates be deferred due to lack of prior notice and hearing.9 The request was denied. Petitioner likewise refused to renew the identification cards of respondents' personnel, and vehicle stickers to prevent entry to the premises. Hence, some of the respondents herein filed with the Regional Trial Court of Makati City, Branch 58, a Complaint10 for Injunction with Application for a Writ of Preliminary Injunction and/or Temporary Restraining Order, docketed as Civil Case No. 99-1293. After due hearing, the RTC issued a Writ of Preliminary Injunction in its Order of August 18, 1999, to wit: WHEREFORE, upon posting by plaintiffs of a bond in the amount of P1,000,000.00 each, let a writ of preliminary injunction issue enjoining defendant NAIA, its officers, employees, agents, assigns, and those acting on their behalf from denying or preventing entry or access to the NAIA premises, including the

General Aviation Area, of plaintiffs Airspan Corp.'s, LBC Express, Inc.'s, and General Aviation Supplies Trading Inc.'s respective officers and employees, until further orders from this Court. Accordingly, the hearing of the main case for Injunction is hereby set on September 02, 1999, at 8:30in the morning. SO ORDERED.11 A Complaint-In-Intervention12 was filed by Subic International Air Charter, Inc., Normal Holdings & Development Corp., and Columbian Motor Sales Corp. The RTC found that the intervenors were likewise entitled to the preliminary relief as the continuation of petitioner's acts would cause them irreparable damage and injury. Thus, in its Order dated August 31, 2001, the RTC decreed: ACCORDINGLY, this Temporary Restraining Order (TRO) is heretofore issued effective only for a period of twenty (20) days from service upon defendant MIAA enjoining said defendant, its assigns, agents and all persons acting on its behalf from and or denying entry of plaintiffs intervenors to its facilities and premises, from ejecting plaintiffs-intervenors from the leased premises and from doing, attempting or threatening to do such acts, things or deeds which may affect, hinder or impede in any manner whatsoever the business of plaintiffs-intervenors in the leased premises. Pursuant to Rule 58 of the 1997 Rules of Civil Procedure, defendant MIAA is hereby ordered to show cause, on September 05, 2001 at 1:30in the afternoon, why the injunction plaintiffs -intervenors pray for should not be granted. ... SO ORDERED.13 On February 17, 2003, after due hearing, the RTC rendered a summary judgment on the Complaint for Injunction. The decretal part of its Decision reads: WHEREFORE, judgment is hereby rendered NULLIFYING MIAA's resolutions Nos. 98-30 and 99-11 as well as their accompanying administrative orders for want of the required notice and public hearing. Defendant Agency is permanently enjoined from collecting the increases found therein and is ordered to refund to plaintiffs herein all amounts paid pursuant to the implementation of the assailed resolutions. SO ORDERED.14 The said Decision is the subject of the instant petition raising the following issues for our resolution: I WHETHER OR NOT PRIOR NOTICE AND CONDUCT OF PUBLIC HEARING ARE REQUIRED BEFORE PETITIONER CAN INCREASE ITS RATES AND CHARGES FOR THE USE OF ITS FACILITIES II WHETHER OR NOT THE INCREASES BROUGHT ABOUT BY PETITIONER'S RESOLUTIONS AND ADMINISTRATIVE ORDERS ARE FAIR AND REASONABLE15 Anent the first issue, petitioner contends that its charter authorizes it to increase its fees, charges, and rates without need of public hearing. It maintains that its service is not a public utility where fees, charges, and rates are subject to state regulation. Petitioner insists its fees, charges, and rates are contractual in nature such that if respondents are not amenable to any increase, they are free to terminate the lease.

Petitioner further argues that the charter which created it, being a special law, prevails over the Public Service Act and the Administrative Code, which are laws of general application. However, respondents counter that petitioner comes within the purview of the Administrative Code as an attached agency of the Department of Transportation and Communications (DOTC) and that in case of conflict with the charter of an attached agency, the Administrative Code prevails. Respondents insist that petitioner can only recommend a possible increase, but the same must first be approved by the head of the DOTC.16 On the second issue, petitioner claims that its charter authorizes it to increase its fees, charges, and rates in order to reflect current price levels. In addition, it asserts that the increases it imposed were duly approved, or validated, by an independent accountant. Petitioner also avers that its imposition of higher fees, charges, and rates will ultimately redound to the benefit of the country and should thus be upheld. Respondents, however, point out that the determination of the reasonableness of the subject increases is a question of fact, which is not allowed in a petition for review on certiorari. In any case, respondents allege that petitioner's private accountant erroneously based its recommendation on the price levels of other countries. Respondents also draw attention to the fact that the increases implemented by petitioner actually exceeded what its private accountants, Punongbayan and Araullo, recommended.17 In a petition for review on certiorari, only questions of law may be reviewed.18 The matter of whether the increases implemented by petitioner were fair and reasonable appears to be a factual issue, which had been discussed and ruled upon by the RTC, albeit collaterally. It is not now the province of this Court to make a binding determination as to the fairness and reasonableness of the disputed increases. The only pertinent issue for our resolution now is: Can petitioner MIAA validly raise without prior notice and public hearing the fees, charges, and rates subject of its Resolutions Nos. 98-30 and 99-11? The Charter of the Manila International Airport Authority,19 as amended by Executive Order No. 903,20 states that: SEC. 17. Increase or Decrease of Rates. The Authority may increase or decrease the rates of the dues, charges, fees or assessments collectible by the Authority to protect the interest of the Government and provide a satisfactory return on the Authority's assets, and may adjust the schedule of such rates so as to reflect the cost of facilities or services provided or rendered. The Authority may periodically review all dues, charges, fees or assessments collectible by the Authority, and shall make such adjustments to the schedule of rates as shall adequately reflect any increase in price levels and (in the case of concession rental) of volume of traffic through the Airport, subject to the provisions of Batas Pambansa Blg. 325, whenever practicable. (Underscoring supplied.) The last clause, which incorporated Batas Pambansa Blg. 325 into the MIAA Charter, did not appear in the original Charter of the MIAA. The clause was deliberately inserted by the amending law, E.O. No. 903. In this connection, B.P. Blg. 325,21 provides: SEC. 2. Determination of rates. The fees and charges shall be revised at just and reasonable rates sufficient to cover administrative costs and, wherever practicable, be uniform for similar or comparable services and functions. The revision of rates shall be determined by the respective ministry heads or equivalent functionaries conformably with the rules and regulations of the Ministry of Finance issued pursuant to Section 4 hereof, upon recommendation of the imposing and collecting authorities concerned, subject to the approval of the Cabinet. (Underscoring supplied). Thus, under the original Charter of the MIAA, petitioner was given blanket authority to adjust its fees, charges, and rates. However, E.O. No. 903 limited such authority to a mere recommendatory power. Hence, petitioner's Charter itself, as amended, directly vests the power to determine revision of fees, charges, and rates in the "ministry head" and even requires approval of the Cabinet.

Worth noting, its Charter22 established MIAA as an attached agency of the Ministry of Transportation and Communications (now Department of Transportation and Communications). Hence, the "ministry head" who has the power to determine the revision of fees, charges, and rates of the MIAA is now the DOTC Secretary. Clearly, petitioner has no authority to increase its fees, charges, or rates as the power to do so is vested solely in the DOTC Secretary, although petitioner's prerogative to recommend possible increases thereon is of course recognized. As an attached agency of the DOTC, the MIAA is governed by the Administrative Code of 1987.23 The Administrative Code specifically requires notice and public hearing in the fixing of rates: BOOK VII. Administrative Procedure SEC. 9. Public Participation. - (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. It follows that the rate increases imposed by petitioner are invalid for lack of the required prior notice and public hearing. They are also ultra vires because, to begin with, petitioner is not the official authorized to increase the subject fees, charges, or rates, but rather the DOTC Secretary. To conclude, petitioner's Resolutions Nos. 98-30 and 99-11 and the corresponding administrative orders, which increased the fees, charges, and rates specified therein, without the required prior notice and hearing as well as approval of the DOTC Secretary, are null and void. The RTC Decision, which permanently enjoined petitioner from collecting said increases and ordered refund to respondents of the amounts paid pursuant to the said Resolutions, must be upheld. However, any refund should cover only the differential brought about by the unauthorized increases contained in said Resolutions. In our view, considering the clear mandate of the applicable provisions of law, petitioner's theory that its fees, charges, and rates are contractual in nature and thus, respondents are free to terminate the lease contracts should they be unable to pay the increased dues is unacceptable. As the country's principal airport for both international and domestic air transport, petitioner's properties, facilities, and services are imbued with paramount public and even national interest. Petitioner is not at liberty to increase fees, charges, or rates at will, without due regard to parameters set by laws and regulations. Among the considerations mentioned in E.O. No. 903 are that fees and charges should reflect adequately the costs and increases in price levels and the volume of traffic. For any change in its fees, charges, or rates without due regard to valid limitations can create a profound impact on the country's economy in general and air transport in particular. In the same vein, we are unable to share petitioner's claim that the specified increases in fees, charges and rates would necessarily redound to the benefit of the country. Needless to stress, in our view, such increases will ultimately be passed on to the ordinary Filipino, either directly or indirectly. Conceivably, in extreme instances, the lessee corporations who are unable to pay exorbitant fees, charges, and rates imposed by petitioner could be left with no choice but to close shop leaving hundreds if not thousands of Filipinos jobless. No one needs reminding that higher prices and more unemployment are the last things our country's challenged economy needs at this time. Balancing of interests among the parties concerned, in a public hearing, is obviously called for. WHEREFORE, the petition is DENIED for lack of merit. The Decision, dated February 17, 2003, of the Regional Trial Court of Makati City, Branch 58, in Civil Case No. 99-1293, is AFFIRMED. No pronouncement as to costs. SO ORDERED.

#66 G.R. No. 88709 February 11, 1992 NICOS INDUSTRIAL CORPORATION, JUAN COQUINCO and CARLOS COQUINCO, petitioners, vs. THE COURT OF APPEALS, VICTORINO P. EVANGELISTA, in his capacity as Ex-Officio Sheriff of Bulacan, UNITED COCONUT PLANTERS BANK, MANUEL L. CO, GOLDEN STAR INDUSTRIAL CORPORATION and THE REGISTER OF DEEDS FOR THE PROVINCE OF BULACAN, respondents. Manuel T. Ubarra for petitioners. Encanto, Mabugat & Associates for UCPB. Mangalindan and Bermas Law Offices for private respondent. Federico Reyes for Manuel L. Co.

CRUZ, J.: We are asked once again to interpret the constitutional provision that no decision shall be rendered by any court without stating therein clearly and distinctly the facts and the law on which it is based, 1 this time in connection with an order of the trial court sustaining demurrer to the evidence. 2 The order has been affirmed by the respondent Court of Appeals, 3 and the appellant has come to this Court in this petition for review on certiorari, invoking the said provision and alleging several reversible errors. In the complaint filed by the petitioners before the Regional Trial Court of Bulacan, it was alleged that on January 24, 1980, NICOS Industrial Corporation obtained a loan of P2,000,000.00 from private respondent United Coconut Planters Bank and to secure payment thereof executed a real estate mortgage on two parcels of land located at Marilao, Bulacan. The mortgage was foreclosed for the supposed non-payment of the loan, and the sheriff's sale was held on July 11, 1983, without republication of the required notices after the original date for the auction was changed without the knowledge or consent of the mortgagor. UCPB was the highest and lone bidder and the mortgaged lands were sold to it for P3,558,547.64. On August 29, 1983, UCPB sold all its rights to the properties to private respondent Manuel Co, who on the same day transferred them to Golden Star Industrial Corporation, another private respondent, upon whose petition a writ of possession was issued to it on November 4, 1983. On September 6, 1984, NICOS and the other petitioners, as chairman of its board of directors and its executive vice-president, respectively, filed their action for "annulment of sheriff's sale, recovery of possession, and damages, with prayer for the issuance of a preliminary prohibitory and mandatory injunction." Golden Star and Victorino P. Evangelista, as ex officio sheriff of Bulacan, moved to dismiss the complaint on the grounds of lack of jurisdiction, prescription, estoppel, and regularity of the sheriff's sale. Co denied the allegations of the plaintiffs and, like the other defendants, counterclaimed for damages. In its answer with counterclaim, UCPB defended the foreclosure of the mortgage for failure of NICOS to pay the loan in accordance with its promissory note and insisted that the sheriff's sale had been conducted in accordance with the statutory requirements. The plaintiffs presented two witnesses, including petitioner Carlos Coquinco, who testified at three separate hearings. They also submitted 21 exhibits. On April 30, 1986, Golden Star and Evangelista filed a 7-page demurrer to the evidence where they argued that the action was a derivative suit that came under the jurisdiction of the Securities and Exchange Commission; that the mortgage had been validly foreclosed; that the sheriff's sale had been held in accordance with Act 3135; that the notices had been duly published in a newspaper of general circulation; and that the opposition to the writ of possession had

not been filed on time. No opposition to the demurrer having been submitted despite notice thereof to the parties, Judge Nestor F. Dantes considered it submitted for resolution and on June 6, 1986, issued the following ORDER Acting on the "Demurrer to Evidence" dated April 30, 1986 filed by defendants Victorino P. Evangelista and Golden Star Industrial Corporation to which plaintiff and other defendants did not file their comment/opposition and it appearing from the very evidence adduced by the plaintiff that the Sheriff's Auction Sale conducted on July 11, 1983 was in complete accord with the requirements of Section 3, Act 3135 under which the auction sale was appropriately held and conducted and it appearing from the allegations in paragraph 13 of the plaintiff's pleading and likewise from plaintiff Carlos Coquinco's own testimony that his cause is actually-against the other officers and stockholders of the plaintiff Nicos Industrial Corporation ". . . for the purpose of protecting the corporation and its stockholders, as well as their own rights and interests in the corporation, and the corporate assets, against the fraudulent ants and devices of the responsible officials of the corporation, in breach of the trust reposed upon them by the stockholders . . ." a subject matter not within the competent jurisdiction of the Court, the court finds the same to be impressed with merit. WHEREFORE, plaintiff's complaint is hereby dismissed. The Defendants' respective counterclaims are likewise dismissed. The Writ of Preliminary Injunction heretofore issued is dissolved and set aside. It is this order that is now assailed by the petitioners on the principal ground that it violates the aforementioned constitutional requirement. The petitioners claim that it is not a reasoned decision and does not clearly and distinctly explain how it was reached by the trial court. They also stress that the sheriff's sale was irregular because the notices thereof were published in a newspaper that did not have general circulation and that the original date of the sheriff's sale had been changed without its consent, the same having been allegedly given by a person not authorized to represent NICOS. It is also contended that the original P2 million loan had already been paid and that if there was indeed a second P2 million loan also secured by the real estate mortgage, it was for UCPB to prove this, as well as its allegation that NICOS had defaulted in the payment of the first quarterly installment on the first loan. The petitioners complain that there was no analysis of their testimonial evidence or of their 21 exhibits, the trial court merely confining itself to the pronouncement that the sheriff's sale was valid and that it had no jurisdiction over the derivative suit. There was therefore no adequate factual or legal basis for the decision that could justify its review and affirmance by the Court of Appeals. Rejecting this contention, the respondent court held: In their first assignment of error, appellants faults the court for its failure to state clearly and distinctly the facts and the law on which the order of dismissal is based, as required by Section 1, Rule 36, of the Rules of Court and the Constitution. An order granting a demurrer to the evidence is in fact an adjudication on the merits and consequently the requirements of Section 1, Rule 36, is applicable. We are not however prepared to hold that there is a reversible omission of the requirements of the rule in the Order appealed from, it appearing from a reading thereof that there is substantial reference to the facts and the law on which it is based. The Order which adverts to the Demurrer to the Evidence expressly referred to the evidence adduced by the plaintiff as showing that the Sheriff's auction sale conducted on July 11, 1983, was in complete accord with the requisites of Section 3, Act 3135 under which the auction sale was apparently held and conducted. It likewise makes reference to the allegations in paragraph 13 of plaintiff's pleadings and plaintiff Carlos Coquinco's own testimony that the case is actually against the other officers and

stockholders of plaintiff NICOS Industrial Corporation and concludes, rightly or wrongly, that the subject matter thereof is not within the competent jurisdiction of the Court. We hold that the order appealed from as framed by the court a quo while leaving much to be desired, substantially complies with the rules. This Court does not agree. The questioned order is an over-simplification of the issues, and violates both the letter and spirit of Article VIII, Section 14, of the Constitution. It is a requirement of due process that the parties to a litigation be informed of how it was decided, with an explanation of the factual and legal reasons that led to the conclusions of the court. The court cannot simply say that judgment is rendered in favor of X and against Y and just leave it at that without any justification whatsoever for its action. The losing party is entitled to know why he lost, so he may appeal to a higher court, if permitted, should he believe that the decision should be reversed. A decision that does not clearly and distinctly state the facts and the law on which it is based leaves the parties in the dark as to how it was reached and is especially prejudicial to the losing party, who is unable to pinpoint the possible errors of the court for review by a higher tribunal. It is important to observe at this point that the constitutional provision does not apply to interlocutory orders, such as one granting a motion for postponement or quashing a subpoena, because it "refers only to decisions on the merits and not to orders of the trial court resolving incidental matters." 4 As for the minute resolutions of this Court, we have already observed in Borromeo v. Court of Appeals 5 that The Supreme Court disposes of the bulk of its cases by minute resolutions and decrees them as final and executory, as where a case is patently without merit, where the issues raised are factual in nature, where the decision appealed from is supported by substantial evidence and is in accord with the facts of the case and the applicable laws, where it is clear from the records that the petitions were filed merely to forestall the early execution of judgment and for non-compliance with the rules. The resolution denying due course or dismissing a petition always gives the legal basis. xxx xxx xxx

The Court is not duty bound to render signed decisions all the time. It has ample discretion to formulate decisions and/or minute resolutions, provided a legal basis is given, depending on its evaluation of a case. The order in the case at bar does not come under either of the above exceptions. As it is settled that an order dismissing a case for insufficient evidence is a judgment on the merits, 6 it is imperative that it be a reasoned decision clearly and distinctly stating therein the facts and the law on which it is based. It may be argued that a dismissal based on lack of jurisdiction is not considered a judgment on the merits and so is not covered by the aforecited provision. There is no quarrel with this established principle. However, the rule would be applicable only if the case is dismissed on the sole ground of lack of jurisdiction and not when some other additional ground is invoked. A careful perusal of the challenged order will show that the complaint was dismissed not only for lack of jurisdiction but also because of the insufficiency of the evidence to prove the invalidity of the sheriff's sale. Regarding this second ground, all the trial court did was summarily conclude "from the very evidence adduced by the plaintiff" that the sheriff's sale "was in complete accord with the requirements of Section 3, Act 3135." It did not bother to discuss what that evidence was or to explain why it believed that the legal requirements had been observed. Its conclusion was remarkably threadbare. Brevity is doubtless an admirable trait, but it should not and cannot be substituted for substance. As the ruling on this second ground was unquestionably a judgment on the merits, the failure to state the factual and legal basis thereof was fatal to the order.

Significantly, the respondent court found that the trial court did have jurisdiction over the case after all. This made even more necessary the factual and legal explanation for the dismissal of the complaint on the ground that the plaintiff's evidence was insufficient. In People v. Escober, 7 the trial court in a decision that covered only one and a half pages, single spaced found the defendant guilty of murder and sentenced him to death. Holding that the decision violated the constitutional requirement, the Court observed through then Associate Justice Marcelo B. Fernan: The above-quoted decision falls short of this standard. The inadequacy stems primarily from the respondent judge's tendency to generalize and to form conclusions without detailing the facts from which such conclusions are deduced. Thus, he concluded that the material allegations of the Amended Information were the facts without specifying which of the testimonies or the exhibits supported this conclusion. He rejected the testimony of accused-appellant Escober because it was allegedly replete with contradictions without pointing out what these contradictions consist of or what "vital details" Escober could have recalled as a credible witness. He also found the crime to be attended by the aggravating circumstances of cruelty, nighttime, superior strength, treachery, in band, "among others" but did not particularly state the factual basis for such findings. While it is true that the case before us does not involve the life or liberty of the defendant, as in Escober, there is still no reason for the constitutional short-cut taken by the trial judge. The properties being litigated are not of inconsequential value; they were sold for three and a half million pesos in 1983 and doubtless have considerably appreciated since then, after more than eight years. These facts alone justified a more careful and thorough drafting of the order, to fully inform the parties and the courts that might later be called upon to review it of the reasons why the demurrer to the evidence was sustained and the complaint dismissed. In Romero v. Court of Appeals, 8 the Court, somewhat reluctantly, approved a memorandum decision of the Court of Appeals consisting of 4 pages, single-spaced, which adopted by reference the findings of fact and conclusions of law of the Court of Agrarian Relations. While holding that the decision could be considered substantial compliance with PD 946, Section 18, 9 and BP 129, Section 40, 10 Justice Jose Y. Feria nevertheless expressed the misgiving that "the tendency would be to follow the line of least resistance by just adopting the findings and conclusions of the lower court without thoroughly studying the appealed case." Obviously, the order now being challenged cannot qualify as a memorandum decision because it was not issued by an appellate court reviewing the findings and conclusions of a lower court. We note that, contrary to the impression of the respondent court, there is not even an incorporation by reference of the evidence and arguments of the parties, assuming this is permitted. No less importantly, again assuming arguendo that such reference is allowed and has been made, there is no immediate accessibility to the incorporated matters so as to insure their convenient examination by the reviewing court. In Francisco v. Permskul, 11 which is the latest decision of the Court on the issue now before us, we categorically required: . . . Although only incorporated by reference in the memorandum decision of the regional trial court, Judge Balita's decision was nevertheless available to the Court of Appeals. It is this circumstance, or even happenstance, if you will, that has validated the memorandum decision challenged in this case and spared it from constitutional infirmity. That same circumstance is what will move us now to lay down the following requirement, as a condition for the proper application of Section 40 of BP Blg. 129. The memorandum decision, to be valid, cannot incorporate the findings of fact and the conclusions of law of the lower court only by remote reference, which is to say that the challenged decision is not easily and immediately available to the person reading the memorandum decision. For the incorporation by reference to be allowed, it must provide for direct access to the facts and the law being adopted, which must be contained in a statement attached to the said decision. In other words, the memorandum decision authorized under Section 40 of BP Blg. 129

should actually embody the findings of fact and conclusions of law of the lower court in an annex attached to and made an indispensable part of the decision. It is expected that this requirement will allay the suspicion that no study was made of the decision of the lower court and that its decision was merely affirmed without a proper examination of the facts and the law on which it was based. The proximity at least of the annexed statement should suggest that such an examination has been undertaken. It is, of course, also understood that the decision being adopted should, to begin with, comply with Article VIII, Section 14 as no amount of incorporation or adoption will rectify its violation. In Escober, the Court observed that the flawed decision "should have been remanded to the court a quo for the rendition of a new judgment" but decided nevertheless to decide the case directly, the records being already before it and in deference to the right of the accused to a speedy trial as guaranteed by the Bill of Rights. However, we are not so disposed in the case now before us. It is not the normal function of this Court to rule on a demurrer to the evidence in the first instance; our task comes later, to review the ruling of the trial court after it is examined by the Court of Appeals and, when proper, its decision is elevated to us. In the present case, we find that the respondent court did not have an adequate basis for such examination because of the insufficiency of the challenged order. It must also be noted that we deal here only with property rights and, although we do not mean to minimize them, they do not require the same urgent action we took in Escober, which involved the very life of the accused. All things considered, we feel that the proper step is to remand this case to the court a quo for a revision of the challenged order in accordance with the requirements of the Constitution. Review by the Court of the other issues raised, most of which are factual, e.g., the allegation of default in the payment of the loan, the existence of a second loan, the nature of the newspapers where the notices of the sale were published, the authority of the person consenting to the postponement of the sale, etc., is impractical and unnecessary at this time. These matters should be discussed in detail in the revised order to be made by the trial court so that the higher courts will know what they are reviewing when the case is appealed. In one case, 12 this Court, exasperated over the inordinate length of a decision rife with irrelevant details, castigated the trial judge for his "extraordinary verbiage." Kilometric decisions without much substance must be avoided, to be sure, but the other extreme, where substance is also lost in the wish to be brief, is no less unacceptable either. The ideal decision is that which, with welcome economy of words, arrives at the factual findings, reaches the legal conclusions, renders its ruling and, having done so, ends. WHEREFORE, the challenged decision of the Court of Appeals is SET ASIDE for lack of basis. This case is REMANDED to the Regional Trial Court of Bulacan, Branch 10, for revision, within 30 days from notice, of the Order of June 6, 1986, conformably to the requirements of Article VIII, Section 14, of the Constitution, subject to the appeal thereof, if desired, in accordance with law. It is so ordered.

#67 VICENTE VILLAFLOR, substituted by his heirs, petitioner, vs. COURT OF APPEALS and NASIPIT LUMBER CO., INC., respondents.

PANGANIBAN, J.: In this rather factually complicated case, the Court reiterates the binding force and effect of findings of specialized administrative agencies as well as those of trial courts when affirmed by the Court of Appeals; rejects petitioner's theory of simulation of contracts; and passes upon the qualifications of private respondent corporation to acquire disposable public agricultural lands prior to the effectivity of the 1973 Constitution. The Case Before us is a petition for review on certiorari seeking the reversal of the Decision 1 of the Court of Appeals, dated September 27, 1990, in CA. G.R CV No. 09062, affirming the dismissal by the trial court of Petitioner Vicente Villaflor's complaint against Private Respondent Nasipit Lumber Co., Inc. The disposition of both the trial and the appellate courts are quoted in the statement of facts below. The Facts The facts of this case, as narrated in detail by Respondent Court of Appeals, are as follows: 2 The evidence, testimonial and documentary, presented during the trial show that on January 16, 1940, Cirilo Piencenaves, in a Deed of Absolute Sale (exh. A), sold to [petitioner], a parcel of agricultural land containing an area of 50 hectares, 3 more or less, and particularly described and bounded as follows: A certain parcel of agricultural land planted to abaca with visible concrete monuments marking the boundaries and bounded on the NORTH by Public Land now Private Deeds on the East by Serafin Villaflor, on the SOUTH by Public Land; and on the West by land claimed by H. Patete, containing an area of 60 hectares more or less, now under Tax Dec. 29451 in the (sic) of said Vicente Villaflor, the whole parcel of which this particular parcel is only a part, is assessed at P22,550.00 under the above said Tax Dec. Number. This deed states: That the above described land was sold to the said VICENTE VILLAFLOR, . . . on June 22, 1937, but no formal document was then executed, and since then until the present time, the said Vicente Villaflor has been in possession and occupation of (the same); (and) That the above described property was before the sale, of my exclusive property having inherited from my long dead parents and my ownership to it and that of my [sic] lasted for more than fifty (50) years, possessing and occupying same peacefully, publicly and continuously without interruption for that length of time. Also on January 16, 1940, Claudio Otero, in a Deed of Absolute Sale (exh. C) sold to Villaflor a parcel of agricultural land, containing an area of 24 hectares, more or less, and particularly described and bounded as follows: A certain land planted to corn with visible concrete measurements marking the boundaries and bounded on the North by Public Land and Tungao Creek; on the East by Agusan River; on the South by Serafin Villaflor and Cirilo Piencenaves; and on the West by land of Fermin Bacobo containing an area of 24 hectares more or less, under Tax Declaration No. 29451 in the name already of Vicente Villaflor, the

whole parcel of which this particular land is only a part, is assessed at P22,550.00 under the above said Tax Declaration No. 29451. This deed states: That the above described land was sold to the said VICENTE VILLAFLOR, . . . on June 22, 1937, but no sound document was then executed, however since then and until the present time, the said Vicente Villaflor has been in open and continuous possession and occupation of said land; (and) That the above described land was before the sale, my own exclusive property, being inherited from my deceased parents, and my ownership to it and that of my predecessors lasted more than fifty (50) years, possessing and occupying the same, peacefully, openly and interruption for that length of time. Likewise on January 16, 1940, Hermogenes Patete, in a Deed of Absolute Sale (exh. D), sold to Villaflor, a parcel of agricultural land, containing an area of 20 hectares, more or less, and particularly described and bounded as follows: A certain parcel of agricultural land planted to abaca and corn with visible concrete monuments marking the boundaries and bounded on the North by Public Land area-private Road; on the East by land claimed by Cirilo Piencenaves; on the South by Public Land containing an area of 20 hectares more or less, now under Tax Declaration No. 29451 in the name of Vicente Villaflor the whole parcel of which this particular parcel, is assessed at P22,550.00 for purposes of taxation under the above said Tax Declaration No. 29451. This deed states: . . . (O)n June 22, 1937 but the formal document was then executed, and since then until the present time, the said VICENTE VILLAFLOR has been in continuous and open possession and occupation of the same; (and) That the above described property was before the sale, my own and exclusive property, being inherited from my deceased parents and my ownership to it and that of my predecessors lasted more than fifty (50) years, possessing and occupying same, peacefully, openly and continuously without interruption for that length of time. On February 15, 1940, Fermin Bocobo, in a Deed of Absolute Sale (exh. B), sold to Villaflor, a parcel of agricultural land, containing an area of 18 hectares, more or less, and particularly described and bounded as follows: A certain parcel of agricultural land planted with abaca with visible part marking the corners and bounded on the North by the corners and bounded on the North by Public Land; on the East by Cirilo Piencenaves; on the South by Hermogenes Patete and West by Public Land, containing an area of 18 hectares more or less now under Tax Declaration No. 29451 in the name of Vicente Villaflor. The whole parcel of which this particular parcel is only a part is assessed as P22,550.00 for purposes of taxation under the above said Tax Declaration Number (Deed of Absolute Sale executed by Fermin Bocobo date Feb. 15, 1940). This document was annotated in Registry of Deeds on February 16, 1940). This deed states: That the above described property was before the sale of my own exclusive property, being inherited from my deceased parents, and my ownership to it and that of my predecessors lasted more than fifty (50) years, possessing and occupying the same peacefully, openly and continuously without interruption for that length of time. On November 8, 1946, Villaflor, in a Lease Agreement (exh. Q), 4 leased to Nasipit Lumber Co., Inc. a parcel of land, containing an area of two (2) hectares, together with all the improvements existing thereon,

for a period of five (5) years from June 1, 1946 at a rental of P200.00 per annum "to cover the annual rental of house and building sites for thirty three (33) houses or buildings." This agreement also provides: 5 3. During the term of this lease, the Lessee is authorized and empowered to build and construct additional houses in addition to the 33 houses or buildings mentioned in the next preceding paragraph, provided however, that for every additional house or building constructed the Lessee shall pay unto the Lessor an amount of fifty centavos (50) per month for every house or building. The Lessee is empowered and authorized by the Lessor to sublot (sic) the premises hereby leased or assign the same or any portion of the land hereby leased to any person, firm and corporation; (and) 4. The Lessee is hereby authorized to make any construction and/or improvement on the premises hereby leased as he may deem necessary and proper thereon, provided however, that any and all such improvements shall become the property of the Lessor upon the termination of this lease without obligation on the part of the latter to reimburse the Lessee for expenses incurred in the construction of the same. Villaflor claimed having discovered that after the execution of the lease agreement, that Nasipit Lumber "in bad faith . . . surreptitiously grabbed and occupied a big portion of plaintiff's property . . ."; that after a confrontation with the corporate's (sic) field manager, the latter, in a letter dated December 3, 1973 (exh. R), 6 stated recalling having "made some sort of agreement for the occupancy (of the property at Acacia, San Mateo), but I no longer recall the details and I had forgotten whether or not we did occupy your land. But if, as you say, we did occupy it, then (he is ) sure that the company is obligated to pay the rental." On July 7, 1948, in an "Agreement to Sell" (exh. 2), Villaflor conveyed to Nasipit Lumber, two (2) parcels of land . . . described as follows: 7 PARCEL ONE Bounded on the North by Public Land and Tungao Creek; on the East by Agusan River and Serafin Villaflor; on the South by Public Land, on the West by Public Land. Improvements thereon consist of abaca, fruit trees, coconuts and thirty houses of mixed materials belonging to the Nasipit Lumber Company. Divided into Lot Nos. 5412, 5413, 5488, 5490, 5491, 5492, 5850, 5849, 5860, 5855, 5851, 5854, 5855, 5859, 5858, 5857, 5853, and 5852. Boundaries of this parcel of land are marked by concrete monuments of the Bureau of Lands. Containing an area of 112,000 hectares. Assessed at P17,160.00 according to Tax Declaration No. V-315 dated April 14, 1946. PARCEL TWO Bounded on the North by Pagudasan Creek; on the East by Agusan River; on the South by Tungao Creek; on the West by Public Land. Containing an area of 48,000 hectares more or less. Divided into Lot Nos. 5411, 5410, 5409, and 5399. Improvements 100 coconut trees, productive, and 300 cacao trees. Boundaries of said land are marked by concrete monuments of the Bureau pf (sic) Lands. Assessed value P6,290.00 according to Tax No. 317, April 14, 1946. This Agreement to Sell provides: 3. That beginning today, the Party of the Second Part shall continue to occupy the property not anymore in concept of lessee but as prospective owners, it being the sense of the parties hereto that the Party of the Second Part shall not in any manner be under any obligation to make any compensation to the Party of the First Part, for the use, and occupation of the property herein before described in such concept of prospective owner, and it likewise being the sense of the parties hereto to terminate as they do hereby terminate, effective on the date of this present instrument, the Contract of Lease, otherwise known as Doc. No. 420, Page No. 36, Book No. II, Series of 1946 of Notary Public Gabriel R. Banaag, of the Province of Agusan.

4. That the Party of the Second Part has bound as it does hereby bind itself, its executors and administrators, to pay unto the party of the First Part the sum of Five Thousand Pesos (P5,000.00), Philippine Currency, upon presentation by the latter to the former of satisfactory evidence that: (a) The Bureau of Lands will not have any objection to the obtainment by the Party of the First Part of a Certificate of Torrens Title in his favor, either thru ordinary land registration proceedings or thru administrative means procedure. (b) That there is no other private claimant to the properties hereinbefore described.

5. That the Party of the First Part has bound as he does hereby bind to undertake immediately after the execution of these presents to secure and obtain, or cause to be secured and obtained, a Certificate of Torrens Title in his favor over the properties described on Page (One) hereof, and after obtainment of such Certificate of Torrens Title, the said Party of the First Part shall execute a (D)eed of Absolute Sale unto and in favor of the Party of the Second Part, its executors, administrators and assigns, it being the sense of the parties that the Party of the Second Part upon delivery to it of such deed of absolute sale, shall pay unto the Party of the First Part in cash, the sum of Twelve Thousand (P12,000.00) Pesos in Philippine Currency, provided, however, that the Party of the First Part, shall be reimbursed by the Party of the Second Part with one half of the expenses incurred by the Party of the First Part for survey and attorney's fees; and other incidental expenses not exceeding P300.00. On December 2, 1948, Villaflor filed Sales Application No. V-807 8 (exh. 1) with the Bureau of Lands, Manila, "to purchase under the provisions of Chapter V, XI or IX of Commonwealth Act. No. 141 (The Public Lands Act), as amended, the tract of public lands . . . and described as follows: "North by Public Land; East by Agusan River and Serafin Villaflor; South by Public Land and West by public land (Lot Nos. 5379, 5489, 5412, 5490, 5491, 5492, 5849, 5850, 5851, 5413, 5488, 5489, 5852, 5853, 5854, 5855, 5856, 5857, 5858, 5859 and 5860 . . . containing an area of 140 hectares . . . ." Paragraph 6 of the Application, states: "I understand that this application conveys no right to occupy the land prior to its approval, and I recognized (sic) that the land covered by the same is of public domain and any and all rights may have with respect thereto by virtue of continuous occupation and cultivation are hereby relinquished to the Government." 9 (exh. 1-D) On December 7, 1948, Villaflor and Nasipit Lumber executed an "Agreement" (exh 3). 10 This contract provides: 1. That the First Party is the possessor since 1930 of two (2) parcels of land situated in sitio Tungao, Barrio of San Mateo, Municipality of Butuan, Province of Agusan; 2. That the first parcel of land abovementioned and described in Plan PLS-97 filed in the office of the Bureau of Lands is made up of Lots Nos. 5412, 5413, 5488, 5490, 5491, 5492, 5849, 5850, 5851, 5852, 5853, 5854, 5855, 5856, 5857, 5858, 5859 and 5860 and the second parcel of land is made of Lots Nos. 5399, 5409, 5410 and 5411; 3. That on July 7, 1948, a contract of Agreement to Sell was executed between the contracting parties herein, covering the said two parcels of land, copy of said Agreement to Sell is hereto attached marked as Annex "A" and made an integral part of this document. The parties hereto agree that the said Agreement to Sell be maintained in full force and effect with all its terms and conditions of this present agreement and in no way be considered as modified. 4. That paragraph 4 of the Contract of Agreement to Sell, marked as annex, "A" stipulates as follows: Par. 4. That the Party of the Second Part has bound as it does hereby bind itself, its executors and administrators, to pay unto the Party of the First Part of the sum of FIVE THOUSAND PESOS (P5,000.00) Philippine Currency, upon presentation by the latter to the former of satisfactory evidence that:

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

5. That the First Party has on December 2, 1948, submitted to the Bureau of Lands, a Sales Application for the twenty-two (22) lots comprising the two abovementioned parcels of land, the said Sales Application was registered in the said Bureau under No. V-807; 6. That in reply to the request made by the First Party to the Bureau of Lands, in connection with the Sales Application No. V-807, the latter informed the former that action on his request will be expedited, as per letter of the Chief, Public Land Division, dated December 2, 1948, copy of which is hereto attached marked as annex "B" and made an integral part of this agreement: 7. That for and in consideration of the premises above stated and the amount of TWENTY FOUR THOUSAND (P24,000.00) PESOS that the Second Party shall pay to the First Party, by these presents, the First Party hereby sells, transfers and conveys unto the Second Party, its successors and assigns, his right, interest and participation under, an(d) by virtue of the Sales Application No. V-807, which he has or may have in the lots mentioned in said Sales Application No. V-807; 8. That the amount of TWENTY FOUR THOUSAND (P24,000.00) PESOS, shall be paid by the Second Party to the First Party, as follows: a) The amount of SEVEN THOUSAND (P7,000.00) PESOS, has already been paid by the Second Party to the First Party upon the execution of the Agreement to Sell, on July 7, 1948; b) The amount of FIVE THOUSAND (P5,000.00) PESOS shall be paid upon the signing of this present agreement; and c) The balance of TWELVE THOUSAND (P12,000.00) shall be paid upon the execution by the First Party of the Absolute Deed of Sale of the two parcels of land in question in favor of the Second Party, and upon delivery to the Second Party of the Certificate of Ownership of the said two parcels of land. 9. It is specially understood that the mortgage constituted by the First Party in favor of the Second Party, as stated in the said contract of Agreement to Sell dated July 7, 1948, shall cover not only the amount of SEVEN THOUSAND (P7,000.00) PESOS as specified in said document, but shall also cover the amount of FIVE THOUSAND (P5,000.00) PESOS to be paid as stipulated in paragraph 8, subparagraph (b) of this present agreement, if the First Party should fail to comply with the obligations as provided for in paragraphs 2, 4, and 5 of the Agreement to Sell; 10. It is further agreed that the First Party obligates himself to sign, execute and deliver to and in favor of the Second Party, its successors and assigns, at anytime upon demand by the Second Party such other instruments as may be necessary in order to give full effect to this present agreement; In the Report dated December 31, 1949 by the public land inspector, District Land Office, Bureau of Lands, in Butuan, the report contains an Indorsement of the aforesaid District Land Officer recommending rejection of the Sales Application of Villaflor for having leased the property to another even before he had acquired transmissible rights thereto. In a letter of Villaflor dated January 23, 1950, addressed to the Bureau of Lands, he informed the Bureau Director that he was already occupying the property when the Bureau's Agusan River Valley Subdivision Project was inaugurated, that the property was formerly claimed as private properties (sic), and that therefore, the property was segregated or excluded from disposition because of the claim of private ownership. In a letter of Nasipit Lumber dated February 22, 1950 (exh. X) 11 addressed to the Director of Lands, the corporation informed the Bureau that it recognized Villaflor as the real owner, claimant and

occupant of the land; that since June 1946, Villaflor leased two (2) hectares inside the land to the company; that it has no other interest on the land; and that the Sales Application of Villaflor should be given favorable consideration. xxx xxx xxx

On July 24, 1950, the scheduled date of auction of the property covered by the Sales Application, Nasipit Lumber offered the highest bid of P41.00 per hectare, but since an applicant under CA 141, is allowed to equal the bid of the highest bidder, Villaflor tendered an equal bid; deposited the equivalent of 10% of the bid price and then paid the assessment in full. xxx xxx xxx

On August 16, 1950, Villaflor executed a document, denominated as a "Deed of Relinquishment of Rights" (exh. N), 12 pertinent portion of which reads: 5. That in view of my present business in Manila, and my change in residence from Butuan, Agusan to the City of Manila, I cannot, therefore, develope (sic) or cultivate the land applied for as projected before; 6. That the Nasipit Lumber Company, Inc., a corporation duly organized . . . is very much interested in acquiring the land covered by the aforecited application . . . ; 7. That I believe the said company is qualified to acquire public land, and has the means to develop (sic) the above-mentioned land; xxx xxx xxx

WHEREFORE, and in consideration of the amount of FIVE THOUSAND PESOS (P5,000.00) to be reimbursed to me by the aforementioned Nasipit Lumber Company, Inc., after its receipt of the order of award, the said amount representing part of the purchase price of the land aforesaid, the value of the improvements I introduced thereon, and the expenses incurred in the publication of the Notice of Sale, I, the applicant, Vicente J. Villaflor, hereby voluntarily renounce and relinquish whatever rights to, and interests I have in the land covered by my above-mentioned application in favor of the Nasipit Lumber Company, Inc. Also on August 16, 1950, Nasipit Lumber filed a Sales Application over the two (2) parcels of land, covering an area of 140 hectares, more or less. This application was also numbered V-807 (exh. Y). On August 17, 1950 the Director of Lands issued an "Order of Award" 13 in favor of Nasipit Lumber Company, Inc., pertinent portion of which reads: 4. That at the auction sale of the land held on July 24, 1950 the highest bid received was that of Nasipit Lumber Company, Inc. which offered P41.00 per hectare or P5,740.00 for the whole tract, which bid was equaled by applicant Vicente J. Villaflor, who deposited the amount of P574.00 under Official Receipt No. B-1373826 dated July 24, 1950 which is equivalent to 10% of the bid. Subsequently, the said . . . Villaflor paid the amount of P5,160.00 in full payment of the purchase price of the above-mentioned land and for some reasons stated in an instrument of relinquishment dated August 16, 1950, he (Vicente J. Villaflor) relinquished his rights to and interest in the said land in favor of the Nasipit Lumber Company, Inc. who filed the corresponding application therefore. In view of the foregoing, and it appearing that the proceedings had . . . were in accordance with law and in [sic] existing regulations, the land covered thereby is hereby awarded to Nasipit Lumber Company, Inc. at P41.00 per hectare or P5,740.00 for the whole tract. This application should be entered in the record of this Office as Sales Entry No. V-407.

It is Villaflor's claim that he only learned of the Order of Award on January 16, 1974, or after his arrival to the Philippines, coming from Indonesia, where he stayed for more than ten (10) years; that he went to Butuan City in the latter part of 1973 upon the call of his brother Serafin Villaflor, who was then sick and learned that Nasipit Lumber (had) failed and refused to pay the agreed rentals, although his brother was able to collect during the early years; and that Serafin died three days after his (Vicente's) arrival, and so no accounting of the rentals could be made; that on November 27, 1973, Villaflor wrote a letter to Mr. G.E.C. Mears of Nasipit Lumber, reminding him of their verbal agreement in 1955 . . . that Mr. Mears in a Reply dated December 3, 1973, appears to have referred the matter to Mr. Noriega, the corporate general manager, but the new set of corporate officers refused to recognize (Villaflor's) claim, for Mr. Florencio Tamesis, the general manager of Nasipit Lumber, in a letter dated February 19, 1974, denied Villaflor's itemized claim dated January 5, 1974 (exh. V) to be without valid and legal basis. In the 5th January, 1974 letter, Villaflor claimed the total amount of P427,000.00 . . . . In a formal protest dated January 31, 1974 14 which Villaflor filed with the Bureau of Lands, he protested the Sales Application of Nasipit Lumber, claiming that the company has not paid him P5,000.00 as provided in the Deed of Relinquishment of Rights dated August 16, 1950. xxx xxx xxx

. . . (T)hat in a Decision dated August 8, 1977 (exh. 8), the Director of Lands found that the payment of the amount of P5,000.00 in the Deed . . . and the consideration in the Agreement to Sell were duly proven, and ordered the dismissal of Villaflor's protest and gave due course to the Sales Application of Nasipit Lumber. Pertinent portion of the Decision penned by Director of Lands, Ramon Casanova, in the Matter of SP No. V-807 (C-V-407) . . . reads: xxx xxx xxx

During the proceedings, Villaflor presented another claim entirely different from his previous claim this time, for recovery of rentals in arrears arising from a supposed contract of lease by Villaflor as lessor in favor of Nasipit as lessee, and indemnity for damages supposedly caused improvements on his other property . . . in the staggering amount of Seventeen Million (P17,000,000.00) Pesos. Earlier, he had also demanded from NASIPIT . . . (P427,000.00) . . . also as indemnity for damages to improvements supposedly caused by NASIPIT on his other real property as well as for reimbursement of realty taxes allegedly paid by him thereon. xxx xxx xxx

It would seem that . . . Villaflor has sought to inject so many collaterals, if not extraneous claims, into this case. It is the considered opinion of this Office that any claim not within the sphere or scope of its adjudicatory authority as an administrative as well as quasi-judicial body or any issue which seeks to delve into the merits of incidents clearly outside of the administrative competence of this Office to decide may not be entertained. There is no merit in the contention of Villaflor that owing to Nasipit's failure to pay the amount of . . . (P5,000.00) . . . (assuming that Nasipit had failed) the deed of relinquishment became null and void for lack of consideration. . . . . xxx xxx xxx

. . . The records clearly show, however, that since the execution of the deed of relinquishment . . . Villaflor has always considered and recognized NASIPIT as having the juridical personality to acquire public lands for agricultural purposes. . . . . xxx xxx xxx

Even this Office had not failed to recognize the juridical personality of NASIPIT to apply for the purchase of public lands . . . when it awarded to it the land so relinquished by Villaflor (Order of Award dated August 17, 1950) and accepted its application therefor. At any rate, the question whether an applicant is qualified to apply for the acquisition of public lands is a matter between the applicant and this Office to decide and which a third party like Villaflor has no personality to question beyond merely calling the attention of this Office thereto. xxx xxx xxx

Villaflor offered no evidence to support his claim of non-payment beyond his own self-serving assertions and expressions that he had not been paid said amount. As protestant in this case, he has the affirmative of the issue. He is obliged to prove his allegations, otherwise his action will fail. For, it is a well settled principle (') that if plaintiff upon whom rests the burden of proving his cause of action fails to show in a satisfactory manner the facts upon which he bases his claim, the defendant is under no obligation to prove his exceptions or special defenses (Belen vs. Belen, 13 Phil. 202; Mendoza vs. Fulgencio, 8 Phil. 243). xxx xxx xxx

Consequently, Villaflor's claim that he had not been paid must perforce fail. On the other hand, there are strong and compelling reasons to presume that Villaflor had already been paid the amount of Five Thousand (P5,000.00) Pesos. First, . . . What is surprising, however, is not so much his claims consisting of gigantic amounts as his having forgotten to adduce evidence to prove his claim of non-payment of the Five Thousand (P5,000.00) Pesos during the investigation proceedings when he had all the time and opportunity to do so. . . . The fact that he did not adduce or even attempt to adduce evidence in support thereof shows either that he had no evidence to offer . . . that NASIPIT had already paid him in fact. What is worse is that Villaflor did not even bother to command payment, orally or in writing, of the Five Thousand (P5,000.00) Pesos which was supposed to be due him since August 17, 1950, the date when the order of award was issued to Nasipit, and when his cause of action to recover payment had accrued. The fact that he only made a command (sic) for payment on January 31, 1974, when he filed his protest or twenty-four (24) years later is immediately nugatory of his claim for non-payment. But Villaflor maintains that he had no knowledge or notice that the order of award had already been issued to NASIPIT as he had gone to Indonesia and he had been absent from the Philippines during all those twenty-four (24) years. This of course taxes credulity. . . . . Second, it should be understood that the condition that NASIPIT should reimburse Villaflor the amount of Five Thousand (P5,000.00) Pesos upon its receipt of the order of award was fulfilled as said award was issued to NASIPIT on August 17, 1950. The said deed of relinquishment was prepared and notarized in Manila with Villaflor and NASIPIT signing the instrument also in Manila on August 16, 1950 (p. 77, (sic)). The following day or barely a day after that, or on August 17, 1950, the order of award was issued by this Office to NASIPIT also in Manila. Now, considering that Villaflor is presumed to be more assiduous in following up with the Bureau of Lands the expeditious issuance of the order of award as the payment of the Five Thousand (P5,000.00) Pesos (consideration) would depend on the issuance of said order to award NASIPIT, would it not be reasonable to believe that Villaflor was at hand when the award was issued to NASIPIT an August 17, 1950, or barely a day which (sic) he executed the deed of relinquishment on August 16, 1950, in Manila? . . . . Third, on the other hand, NASIPIT has in his possession a sort of "order" upon itself (the deed of relinquishment wherein he (sic) obligated itself to reimburse or pay Villaflor the . . . consideration of the relinquishment upon its receipt of the order of award) for the payment of the aforesaid amount the moment the order of award is issued to it. It is reasonable to presume that NASIPIT has paid the Five Thousand (P5,000.00) Pesos to Villaflor.

A person in possession of an order on himself for the payment of money, or the delivery of anything, has paid the money or delivered the thing accordingly. (Section 5(k) B-131 Revised Rules of Court. It should be noted that NASIPIT did not produce direct evidence as proof of its payment of the Five Thousand (P5,000.00) Pesos to Villaflor. Nasipit's explanation on this point is found satisfactory. . . . (I)t was virtually impossible for NASIPIT, after the lapse of the intervening 24 years, to be able to cope up with all the records necessary to show that the consideration for the deed of relinquishment had been fully paid. To expect NASIPIT to keep intact all records pertinent to the transaction for the whole quarter of a century would be to require what even the law does not. Indeed, even the applicable law itself (Sec. 337, National Internal Revenue Code) requires that all records of corporations be preserved for only a maximum of five years. NASIPIT may well have added that at any rate while "there are transactions where the proper evidence is impossible or extremely difficult to produce after the lapse of time . . . the law creates presumptions of regularity in favor of such transactions (20 Am. Jur. 232) so that when the basic fact is established in an action the existence of the presumed fact must be assumed by force of law. (Rule 13, Uniform Rules of Evidence; 9 Wigmore, Sec. 2491). Anent Villaflor's claim that the 140-hectare land relinquished and awarded to NASIPIT is his private property, little (need) be said. . . . . The tracks of land referred to therein are not identical to the lands awarded to NASIPIT. Even in the assumption that the lands mentioned in the deeds of transfer are the same as the 140-hectare area awarded to NASIPIT, their purchase by Villaflor (or) the latter's occupation of the same did not change the character of the land from that of public land to a private property. The provision of the law is specific that public lands can only be acquired in the manner provided for therein and not otherwise (Sec. 11, C.A. No. 141, as amended). The records show that Villaflor had applied for the purchase of the lands in question with this Office (Sales Application No. V-807) on December 2, 1948. . . . . There is a condition in the sales application signed by Villaflor to the effect that he recognizes that the land covered by the same is of public domain and any and all rights he may have with respect thereto by virtue of continuous occupation and cultivation are relinquished to the Government (paragraph 6, Sales Application No. V-807 . . .) of which Villaflor is very much aware. It also appears that Villaflor had paid for the publication fees appurtenant to the sale of the land. He participated in the public auction where he was declared the successful bidder. He had fully paid the purchase prive (sic) thereof (sic). It would be a (sic) height of absurdity for Villaflor to be buying that which is owned by him if his claim of private ownership thereof is to be believed. The most that can be said is that his possession was merely that of a sales applicant to when it had not been awarded because he relinquished his interest therein in favor of NASIPIT who (sic) filed a sales application therefor. xxx xxx xxx

. . . During the investigation proceedings, Villaflor presented as his Exhibit "(sic)" (which NASIPIT adopted as its own exhibit and had it marked in evidence as Exhibit "1") a duly notarized "agreement to Sell" dated July 7, 1948, by virtue of which Villaflor undertook to sell to Nasipit the tracts of land mentioned therein, for a consideration of Twenty-Four Thousand (P24,000.00) Pesos. Said tracts of land have been verified to be identical to the parcels of land formerly applied for by Villaflor and which the latter had relinquished in favor of NASIPIT under a deed of relinquishment executed by him on August 16, 1950. In another document executed on December 7, 1948 . . . Villaflor as "FIRST PARTY" and NASIPIT as "SECOND PARTY" confirmed the "Agreement to Sell" of July 7, 1948, which was maintained "in full force and effect with all its terms and conditions . . ." (Exh. "38-A"); and that "for and in consideration of . . . TWENTY FOUR THOUSAND (P24,000.00) PESOS that the Second Party shall pay to the First Party . . . the First Party hereby sells, transfers and conveys unto the Second Party . . . his right interest and participation under and by virtue of the Sales Application No. V-807" and, in its paragraph 8, it made stipulations as to when part of the said consideration . . . was paid and when the balance was to be paid, to wit:

a) the amount of SEVEN THOUSAND . . . PESOS has already been paid by the Second Party to the First Party upon the execution of the Agreement to Sell, on July 17, 1948; b) the amount of FIVE THOUSAND . . . PESOS shall be paid upon the signing of this present agreement; and c) the amount of TWELVE THOUSAND . . . PESOS, shall be paid upon the execution by the First Party of the Absolute Sale of the Two parcels of land in question in favor of the Second Party of the Certificate of Ownership of the said two parcels of land. (Exh. 38-B). (Emphasis ours) It is thus clear from this subsequent document marked Exhibit "38 ANALCO" that of the consideration of the "Agreement to Sell" dated July 7, 1948, involving the 140-hectare area relinquished by Villaflor in favor of NASIPIT, in the amount of Twenty-Four Thousand (P24,000.00) Pesos: (1) the amount of Seven Thousand (P7,000.00) Pesos was already paid upon the execution of the "Agreement to Sell" on July 7, 1948, receipt of which incidentally was admitted by Villaflor in the document of December 7, 1948; (2) the amount of Five Thousand (P5,000.00) Pesos was paid when said document was signed by Vicente J. Villaflor as the First Party and Nasipit thru its President, as the Second Party, on December 7, 1948; and (3) the balance of Twelve Thousand (P12,000.00) Pesos to be paid upon the execution by the First Party of the Absolute Deed of Sale of the two parcels of land in favor of the Second Party, and upon delivery to the Second Party of the Certificate of Ownership of the said two parcels of land. Villaflor contends that NASIPIT could not have paid Villaflor the balance of Twelve Thousand (P12,000.00) Pesos . . . consideration in the Agreement to Sell will only be paid to applicant-assignor (referring to Villaflor) upon obtaining a Torrens Title in his favor over the 140-hectare of land applied for and upon execution by him of a Deed of Absolute Sale in favor of Nasipit Lumber Company, Inc. . . . . Inasmuch as applicant-assignor was not able to obtain a Torrens Title over the land in question he could not execute an absolute Deed of (sic) Nasipit Lumber Co., Inc. Hence, the Agreement to Sell was not carried out and no Twelve Thousand (P12,000.00) Pesos was overpaid either to the applicant-assignor, much less to Howard J. Nell Company. (See MEMORANDUM FOR THE APPLICANT-ASSIGNOR, dated January 5, 1977). . . . . . . Villaflor did not adduce evidence in support of his claim that he had not been paid the . . . (P12,000.00) . . . consideration of the Agreement to Sell dated July 7, 1948 (Exh. "38 NALCO") beyond his mere uncorroborated assertions. On the other hand, there is strong evidence to show that said Twelve Thousand (P12,000.00) Pesos had been paid by (private respondent) to Edward J. Nell Company by virtue of the Deed of Assignment of Credit executed by Villaflor (Exh. "41 NALCO") for the credit of the latter. Atty. Gabriel Banaag, resident counsel of NASIPIT who is in a position to know the facts, testified for NASIPIT. He described that it was he who notarized the "Agreement to Sell" (Exh. "F"); that he knew about the execution of the document of December 7, 1948 (Exh. "38") confirming the said "Agreement to Sell" having been previously consulted thereon by Jose Fernandez, who signed said document on behalf of NASIPIT . . . that subsequently, in January 1949, Villaflor executed a Deed of Assignment of credit in favor of Edward J. Nell Company (Exh. "41 NALCO") whereby Villaflor ceded to the latter his receivable for NASIPIT corresponding to the remaining balance in the amount of Twelve Thousand . . . Pesos of the total consideration . . . stipulated in both the "Agreement to Sell" (Exh. "F") and the document dated December 7, 1948 (Exh. "39"); . . . . He further testified that the said assignment of credit was communicated to (private respondent) under cover letter dated January 24, 1949 (Exh. "41-A") and not long thereafter, by virtue of the said assignment of credit, (private respondent) paid the balance of Twelve Thousand . . . due to Villaflor to Edward J. Nell Company . . . . Atty. Banaag's aforesaid testimony stand unrebutted; hence, must be given

full weight and credit. . . . Villaflor and his counsel were present when Atty. Banaag's foregoing testimony was Villaflor did not demur, nor did he rebut the same, despite having been accorded full opportunity to do so. xxx xxx xxx

Having found that both the Five Thousand . . . consideration of the deed of Relinquishment . . . and that the remaining balance of . . . (P12,000.00) to complete the Twenty-Four Thousand (P24,000.00) Pesos consideration of both the Agreement to Sell dated July 7, 1948, and the document, dated December 7, 1948, executed by the former in favor of the latter, have been paid Villaflor the issue on prescription and laches becomes academic and needs no further discussion. But more than all the questions thus far raised and resolved is the question whether a sales patent can be issued to NASIPIT for the 140-hectare area awarded to it in the light of Section 11, Article XIV of the new Constitution which provides in its pertinent portion to wit: . . . No private corporation or association may hold alienable land of the public domain except by lease not to exceed one thousand hectares in area . . . . The Secretary of Justice had previous occasion to rule on this point in his opinion No. 140, s. 1974. Said the Honorable Justice Secretary: On the second question, (referring to the questions when may a public land be considered to have been acquired by purchase before the effectivity of the new Constitution posed by the Director of Lands in his query on the effect on pending applications for the issuance of sales patent in the light of Section 11, Art. XIV of the New Constitution aforecited), you refer to this Office's Opinion No. 64 series of 1973 in which I stated: On the other hand, with respect to sales applications ready for issuance of sales patent, it is my opinion that where the applicant had, before the Constitution took effect, fully complied with all this obligations under the Public Land Act in order to entitle him to a Sales patent, there would be no legal or equitable justification for refusing to issue or release the sales patent. With respect to the point as to when the Sales applicant has complied with all the terms and conditions which would entitle him to a sales patent, the herein above Secretary of Justice went on: That as to when the applicant has complied with all the terms and conditions which would entitle him to a patent is a questioned (sic) fact which your office would be in the best position to determine. However, relating this to the procedure for the processing of applications mentioned above, I think that as the applicant has fulfilled the construction/cultivation requirements and has fully paid the purchase price, he should be deemed to have acquired by purchase the particular tract of land and (sic) the area (sic) in the provision in question of the new constitution would not apply. From the decision of the Director of Lands, Villaflor filed a Motion for Reconsideration which was considered as an Appeal M.N.R. Case 4341, to the Ministry of Natural Resources. On June 6, 1979, the Minister of Natural Resources rendered a Decision (exh. 9), 15 dismissing the appeal and affirming the decision of the Director of Lands, pertinent portions of which reads: After a careful study of the records and the arguments of the parties, we believe that the appeal is not well taken. Firstly, the area in dispute is not the private property of appellant.

The evidence adduced by appellant to establish his claim of ownership over the subject area consists of deeds of absolute sale executed in his favor on January 16, and February 15, 1940, by four (4) different persons, namely, Cirilo Piencenaves, Fermin Balobo, Claudio Otero and Hermogenes Patete. However, an examination of the technical descriptions of the tracts of land subject of the deeds of sale will disclose that said parcels are not identical to, and do not tally with, the area in controversy. It is a basic assumption of our policy that lands of whatever classification belong to the state. Unless alienated in accordance with law, it retains its rights over the same as dominus, (Santiago vs. de los Santos, L-20241, November 22, 1974, 61 SCRA 152). For, it is well-settled that no public land can be acquired by private persons without any grant, express or implied from the government. It is indispensable then that there be showing of title from the state or any other mode of acquisition recognized by law. (Lee Hong Hok, et al. vs. David, et al., L-30389, December 27, 1972, 48 SCRA 379.) It is well-settled that all lands remain part of the public domain unless severed therefrom by state grant or unless alienated in accordance with law. We, therefore, believe that the aforesaid deeds of sale do not constitute clear and convincing evidence to establish that the contested area is of private ownership. Hence, the property must be held to be public domain. "There being no evidence whatever that the property in question was ever acquired by the applicants or their ancestors either by composition title from the Spanish Government or by possessory information title or by any other means for the acquisition of public lands, the property must be held to be public domain." (Lee Hong Hok, et al., vs. David , et al., L-30389 December 27, 1972, 48 SCRA 378-379 citing Heirs of Datu Pendatun vs. Director of Lands; see also Director of Lands vs. Reyes, L-27594, November 28, 1975, 68 SCRA 177). Be that as it may, appellant, by filing a sales application over the controverted land, acknowledged unequivocably [sic] that the same is not his private property. "As such sales applicant, appellant manifestly acknowledged that he does not own the land and that the same is a public land under the administration of the Bureau of Lands, to which the application was submitted, . . . All of its acts prior thereof, including its real estate tax declarations, characterized its possessions of the land as that of a "sales applicant" and consequently, as one who expects to buy it, but has not as yet done so, and is not, therefore, its owner." (Palawan Agricultural and Industrial Co., Inc. vs. Director of Lands, L-25914, March 21, 1972, 44 SCRA 20, 21). Secondly, appellant's alleged failure to pay the consideration stipulated in the deed of relinquishment neither converts said deed into one without a cause or consideration nor ipso facto rescinds the same. Appellant, though, has the right to demand payment with legal interest for the delay or to demand rescission. xxx xxx xxx

However, appellant's cause of action, either for specific performance or rescission of contract, with damages, lies within the jurisdiction of civil courts, not with administrative bodies. xxx xxx xxx

Lastly, appellee has acquired a vested right to the subject area and, therefore, is deemed not affected by the new constitutional provision that no private corporation may hold alienable land of the public domain except by lease.

xxx

xxx

xxx

Implementing the aforesaid Opinion No. 64 of the Secretary of Justice, the then Secretary of Agriculture and Natural Resources issued a memorandum, dated February 18, 1974, which pertinently reads as follows: In the implementation of the foregoing opinion, sales application of private individuals covering areas in excess of 24 hectares and those of corporations, associations, or partnership which fall under any of the following categories shall be given due course and issued patents, to wit: 1. Sales application for fishponds and for agricultural purposes (SFA, SA and IGPSA) wherein prior to January 17, 1973; a. the land covered thereby was awarded;

b. cultivation requirements of law were complied with as shown by investigation reports submitted prior to January 17, 1973; c. land was surveyed and survey returns already submitted to the Director of Lands for verification and approval; and d. purchased price was fully paid.

From the records, it is evident that the aforestated requisites have been complied with by appellee long before January 17, 1973, the effectivity of the New Constitution. To restate, the disputed area was awarded to appellee on August 17, 1950, the purchase price was fully paid on July 26, 1951, the cultivation requirements were complied with as per investigation report dated December 31, 1949, and the land was surveyed under Pls-97. On July 6, 1978, petitioner filed a complaint 16 in the trial court for "Declaration of Nullity of Contract (Deed of Relinquishment of Rights), Recovery of Possession (of two parcels of land subject of the contract), and Damages" at about the same time that he appealed the decision of the Minister of Natural Resources to the Office of the President. On January 28, 1983, petitioner died. The trial court ordered his widow, Lourdes D. Villaflor, to be substituted as petitioner. After trial in due course, the then Court of First Instance of Agusan del Norte and Butuan City, Branch III, 17 dismissed the complaint on the grounds that: (1) petitioner admitted the due execution and genuineness of the contract and was estopped from proving its nullity, (2) the verbal lease agreements were unenforceable under Article 1403 (2) (e) of the Civil Code, and (3) his causes of action were barred by extinctive prescription and/or laches. It ruled that there was prescription and/or laches because the alleged verbal lease ended in 1966, but the action was filed only on January 6, 1978. The six-year period within which to file an action on an oral contract per Article 1145 (1) of the Civil Code expired in 1972. The decretal portion 18 of the trial court's decision reads: WHEREFORE, the foregoing premises duly considered, judgment is hereby rendered in favor of the defendant and against the plaintiff. Consequently, this case is hereby ordered DISMISSED. The defendant is hereby declared the lawful actual physical possessor-occupant and having a better right of possession over the two (2) parcels of land in litigation described in par. 1.2 of the complaint as Parcel I and Parcel II, containing a total area of One Hundred Sixty (160) hectares, and was then the subject of the Sales Application No. V-807 of the plaintiff (Exhibits 1, 1-A, 1-B, pp. 421 to 421-A, Record), and now of the Sales Application No. 807, Entry No. V-407 of the defendant Nasipit Lumber Company (Exhibit Y, pp. 357-358, Record). The Agreements to Sell Real Rights, Exhibits 2 to 2-C, 3 to 3-B, and the Deed of Relinquishment of Rights, Exhibits N to N-1, over the two parcels of land in litigation are hereby declared binding between the plaintiff and the defendant, their successors and assigns. Double the costs against the plaintiff.

The heirs of petitioner appealed to Respondent Court of Appeals 19 which, however, rendered judgment against petitioner via the assailed Decision dated September 27, 1990 finding petitioner's prayers (1) for the declaration of nullity of the deed of relinquishment, (2) for the eviction of private respondent from the property and (3) for the declaration of petitioner's heirs as owners to be without basis. The decretal portion 20 of the assailed 49-page, single-spaced Decision curtly reads: WHEREFORE, the Decision appealed from, is hereby AFFIRMED, with costs against plaintiff-appellants. Not satisfied, petitioner's heirs filed the instant 57-page petition for review dated December 7, 1990. In a Resolution dated June 23, 1991, the Court denied this petition "for being late." On reconsideration upon plea of counsel that petitioners were "poor" and that a full decision on the merits should be rendered the Court reinstated the petition and required comment from private respondent. Eventually, the petition was granted due course and the parties thus filed their respective memoranda. The Issues Petitioner, through his heirs, attributes the following errors to the Court of Appeals: I. Are the findings of the Court of Appeals conclusive and binding upon the Supreme Court?

II. Are the findings of the Court of Appeals fortified by the similar findings made by the Director of Lands and the Minister of Natural Resources (as well as by the Office of the President)? III. Was there "forum shopping?".

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

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

The Court's Ruling The petition is bereft of merit. It basically questions the sufficiency of the evidence relied upon by the Court of Appeals, alleging that public respondent's factual findings were based on speculations, surmises and conjectures. Petitioner insists that a review of those findings is in order because they were allegedly (1) rooted, not on specific evidence, but on conclusions and inferences of the Director of Lands which were, in turn, based on misapprehension of the applicable law on simulated contracts; (2) arrived at whimsically totally ignoring the substantial and admitted fact that petitioner was not notified of the award in favor of private respondent; and (3) grounded on errors and misapprehensions, particularly those relating to the identity of the disputed area. First Issue: Primary Jurisdiction of the Director of Lands and Finality of Factual Findings of the Court of Appeals Underlying the rulings of the trial and appellate courts is the doctrine of primary jurisdiction; i.e., courts cannot and will not resolve a controversy involving a question which is within the jurisdiction of an administrative tribunal, especially where the question demands the exercise of sound administrative discretion requiring the special knowledge, experience and services of the administrative tribunal to determine technical and intricate matters of fact. 21 In recent years, it has been the jurisprudential trend to apply this doctrine to cases involving matters that demand the special competence of administrative agencies even if the question involved is also judicial in character. It applies "where a claim is originally cognizable in the courts, and comes into play whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body; in such case, the judicial process is suspended pending referral of such issues to the administrative body for its view." 22 In cases where the doctrine of primary jurisdiction is clearly applicable, the court cannot arrogate unto itself the authority to resolve a controversy, the jurisdiction over which is initially lodged with an administrative body of special competence. 23 In Machete vs. Court of Appeals, the Court upheld the primary jurisdiction of the Department of Agrarian Reform Adjudicatory Board (DARAB) in an agrarian dispute over the payment of back rentals under a leasehold contract. 24 In Concerned Officials of the Metropolitan Waterworks and Sewerage System vs. Vasquez, 25 the Court recognized that the MWSS was in the best position to evaluate and to decide which bid for a waterworks project was compatible with its development plan. The rationale underlying the doctrine of primary jurisdiction finds application in this case, since the questions on the identity of the land in dispute and the factual qualification of private respondent as an awardee of a sales application require a technical determination by the Bureau of Lands as the administrative agency with the expertise to determine such matters. Because these issues preclude prior judicial determination, it behooves the courts to stand aside even when they apparently have statutory power to proceed, in recognition of the primary jurisdiction of the administrative agency. 26 One thrust of the multiplication of administrative agencies is that the interpretation of contracts and the determination of private rights thereunder is no longer a uniquely judicial function, exercisable only by our regular courts. 27 Petitioner initiated his action with a protest before the Bureau of Lands and followed it through in the Ministry of Natural Resources and thereafter in the Office of the President. Consistent with the doctrine of

primary jurisdiction, the trial and the appellate courts had reason to rely on the findings of these specialized administrative bodies. The primary jurisdiction of the director of lands and the minister of natural resources over the issues regarding the identity of the disputed land and the qualification of an awardee of a sales patent is established by Sections 3 and 4 of Commonwealth Act No. 141, also known as the Public Land Act: Sec. 3. The Secretary of Agriculture and Commerce (now Secretary of Natural Resources) shall be the executive officer charged with carrying out the provisions of this Act through the Director of Lands, who shall act under his immediate control. Sec. 4. Subject to said control, the Director of Lands shall have direct executive control of the survey, classification, lease, sale or any other form of concession or disposition and management of the lands of the public domain, and his decision as to questions of fact shall be conclusive when approved by the Secretary of Agriculture and Commerce. Thus, the Director of Lands, in his decision, said: 28 . . . It is merely whether or not Villaflor has been paid the Five Thousand (P5,000.00) Pesos stipulated consideration of the deed of relinquishment made by him without touching on the nature of the deed of relinquishment. The administration and disposition of public lands is primarily vested in the Director of Lands and ultimately with the Secretary of Agriculture and Natural Resources (now Secretary of Natural Resources), and to this end Our Supreme Court has recognized that the Director of Lands is a quasi-judicial officer who passes on issues of mixed facts and law (Ortua vs. Bingson Encarnacion, 59 Phil 440). Sections 3 and 4 of the Public Land Law thus mean that the Secretary of Agriculture and Natural Resources shall be the final arbiter on questions of fact in public land conflicts (Heirs of Varela vs. Aquino, 71 Phil 69; Julian vs. Apostol, 52 Phil 442). The ruling of this Office in its order dated September 10, 1975, is worth reiterating, thus: . . . it is our opinion that in the exercise of his power of executive control, administrative disposition and allegation of public land, the Director of Lands should entertain the protest of Villaflor and conduct formal investigation . . . to determine the following points: (a) whether or not the Nasipit Lumber Company, Inc. paid or reimbursed to Villaflor the consideration of the rights in the amount of P5,000.00 and what evidence the company has to prove payment, the relinquishment of rights being part of the administrative process in the disposition of the land in question . . . . . . . . Besides, the authority of the Director of Lands to pass upon and determine questions considered inherent in or essential to the efficient exercise of his powers like the incident at issue, i.e. , whether Villaflor had been paid or not, is conceded bylaw. Reliance by the trial and the appellate courts on the factual findings of the Director of Lands and the Minister of Natural Resources is not misplaced. By reason of the special knowledge and expertise of said administrative agencies over matters falling under their jurisdiction, they are in a better position to pass judgment thereon; thus, their findings of fact in that regard are generally accorded great respect, if not finality, 29 by the courts. 30 The findings of fact of an administrative agency must be respected as long as they are supported by substantial evidence, even if such evidence might not be overwhelming or even preponderant. It is not the task of an appellate court to weigh once more the evidence submitted before the administrative body and to substitute its own judgment for that of the administrative agency in respect of sufficiency of evidence. 31 However, the rule that factual findings of an administrative agency are accorded respect and even finality by courts admits of exceptions. This is true also in assessing factual findings of lower courts. 32 It is incumbent on the petitioner to show that the resolution of the factual issues by the administrative agency

and/or by the trial court falls under any of the exceptions. Otherwise, this Court will not disturb such findings. 33 We mention and quote extensively from the rulings of the Bureau of Lands and the Minister of Natural Resources because the points, questions and issues raised by petitioner before the trial court, the appellate court and now before this Court are basically the same as those brought up before the aforesaid specialized administrative agencies. As held by the Court of Appeals: 34 We find that the contentious points raised by appellant in this action, are substantially the same matters he raised in BL Claim No. 873 (N). In both actions, he claimed private ownership over the land in question, assailed the validity and effectiveness of the Deed of Relinquishment of Rights he executed in August 16, 1950, that he had not been paid the P5,000.00 consideration, the value of the improvements he introduced on the land and other expenses incurred by him. In this instance, both the principle of primary jurisdiction of administrative agencies and the doctrine of finality of factual findings of the trial courts, particularly when affirmed by the Court of Appeals as in this case, militate against petitioner's cause. Indeed, petitioner has not given us sufficient reason to deviate from them. Land in Dispute Is Public Land Petitioner argues that even if the technical description in the deeds of sale and those in the sales application were not identical, the area in dispute remains his private property. He alleges that the deeds did not contain any technical description, as they were executed prior to the survey conducted by the Bureau of Lands; thus, the properties sold were merely described by reference to natural boundaries. His private ownership thereof was also allegedly attested to by private respondent's former field manager in the latter's February 22, 1950 letter, which contained an admission that the land leased by private respondent was covered by the sales application. This contention is specious. The lack of technical description did not prove that the finding of the Director of Lands lacked substantial evidence. Here, the issue is not so much whether the subject land is identical with the property purchased by petitioner. The issue, rather, is whether the land covered by the sales application is private or public land. In his sales application, petitioner expressly admitted that said property was public land. This is formidable evidence as it amounts to an admission against interest. In the exercise of his primary jurisdiction over the issue, Director of Lands Casanova ruled that the land was public: 35 . . . Even (o)n the assumption that the lands mentioned in the deeds of transfer are the same as the 140hectare area awarded to Nasipit, their purchase by Villaflor (or) the latter's occupation of the same did not change the character of the land from that of public land to a private property. The provision of the law is specific that public lands can only be acquired in the manner provided for therein and not otherwise (Sec. 11, C.A. No. 141, as amended). The records show that Villaflor had applied for the purchase of lands in question with this Office (Sales Application No. V-807) on December 2, 1948. . . . There is a condition in the sales application . . . to the effect that he recognizes that the land covered by the same is of public domain and any and all rights he may have with respect thereto by virtue of continuous occupation and cultivation are relinquished to the Government (paragraph 6, Sales Application No. V-807 of Vicente J. Villaflor, p. 21, carpeta) of which Villaflor is very much aware. It also appears that Villaflor had paid for the publication fees appurtenant to the sale of the land. He participated in the public auction where he was declared the successful bidder. He had fully paid the purchase prive (sic) thereor (sic). It would be a (sic) height of absurdity for Villaflor to be buying that which is owned by him if his claim of private ownership thereof is to be believed. . . . . This finding was affirmed by the Minister of Natural Resources: 36

Firstly, the area in dispute is not the private property of appellant (herein petitioner). The evidence adduced by (petitioner) to establish his claim of ownership over the subject area consists of deeds of absolute sale executed in his favor . . . . However, an examination of the technical descriptions of the tracts of land subject of the deeds of sale will disclose that said parcels are not identical to, and do not tally with, the area in controversy. It is a basic assumption of our policy that lands of whatever classification belong to the state. Unless alienated in accordance with law, it retains its rights over the same as dominus. (Santiago vs. de los Santos, L-20241, November 22, 1974, 61 SCRA 152). For it is well-settled that no public land can be acquired by private persons without any grant, express or implied from the government. It is indispensable then that there be showing of title from the state or any other mode of acquisition recognized by law. (Lee Hong Hok, et al. vs. David, et al., L-30389, December 27, 1972, 48 SCRA 379). xxx xxx xxx

We, therefore, believe that the aforesaid deeds of sale do not constitute clear and convincing evidence to establish that the contested area is of private ownership. Hence, the property must be held to be public domain. There being no evidence whatever that the property in question was ever acquired by the applicants or their ancestors either by composition title from the Spanish Government or by possessory information title or by any other means for the acquisition of public lands, the property must be held to be public domain. Be that as it may, [petitioner], by filing a sales application over the controverted land, acknowledged unequivocably [sic] that the same is not his private property. As such sales applicant manifestly acknowledged that he does not own the land and that the same is a public land under the administration of the Bureau of Lands, to which the application was submitted, . . . All of its acts prior thereof, including its real estate tax declarations, characterized its possessions of the land as that of a "sales applicant". And consequently, as one who expects to buy it, has not as yet done so, and is not, therefore, its owner." (Palawan Agricultural and Industrial Co., Inc. vs. Director of Lands, L25914, March 21, 1972, 44 SCRA 15). Clearly, this issue falls under the primary jurisdiction of the Director of Lands because its resolution requires "survey, classification, . . . disposition and management of the lands of the public domain." It follows that his rulings deserve great respect. As petitioner failed to show that this factual finding of the Director of Lands was unsupported by substantial evidence, it assumes finality. Thus, both the trial and the appellate courts correctly relied on such finding. 37 We can do no less. Second Issue: No Simulation of Contracts Proven Petitioner insists that contrary to Article 1371 38 of the Civil Code, Respondent Court erroneously ignored the contemporaneous and subsequent acts of the parties; hence, it failed to ascertain their true intentions. However, the rule on the interpretation of contracts that was alluded to by petitioner is used in affirming, not negating, their validity. Thus, Article 1373, 39 which is a conjunct of Article 1371, provides that, if the instrument is susceptible of two or more interpretations, the interpretation which will make it valid and effectual should be adopted. In this light, it is not difficult to understand that the legal basis urged by petitioner does not support his allegation that the contracts to sell and the deed of relinquishment are simulated and fictitious. Properly understood, such rules on interpretation even negate petitioner's thesis.

But let us indulge the petitioner awhile and determine whether the cited contemporaneous and subsequent acts of the parties support his allegation of simulation. Petitioner asserts that the relinquishment of rights and the agreements to sell were simulated because, first, the language and terms of said contracts negated private respondent's acquisition of ownership of the land in issue; and second, contemporaneous and subsequent communications between him and private respondent allegedly showed that the latter admitted that petitioner owned and occupied the two parcels; i.e., that private respondent was not applying for said parcels but was interested only in the two hectares it had leased, and that private respondent supported petitioner's application for a patent. Petitioner explains that the Agreement to Sell dated December 7, 1948 did not and could not transfer ownership because paragraph 8 (c) thereof stipulates that the "balance of twelve thousand pesos (12,000.00) shall be paid upon the execution by the First Party [petitioner] of the Absolute Deed of Sale of the two parcels of land in question in favor of the Second Party, and upon delivery to the Second Party [private respondent] of the Certificate of Ownership of the said two parcels of land." The mortgage provisions in paragraphs 6 and 7 of the agreement state that the P7,000.00 and P5,000.00 were "earnest money or a loan with antichresis by the free occupancy and use given to Nasipit of the 140 hectares of land not anymore as a lessee." If the agreement to sell transferred ownership to Nasipit, then why was it necessary to require petitioner, in a second agreement, to mortgage his property in the event of nonfulfillment of the prestations in the first agreement? True, the agreement to sell did not absolutely transfer ownership of the land to private respondent. This fact, however, does not show that the agreement was simulated. Petitioner's delivery of the Certificate of Ownership and execution of the deed of absolute sale were suspensive conditions, which gave rise to a corresponding obligation on the part of the private respondent, i.e., the payment of the last installment of the consideration mentioned in the December 7, 1948 Agreement. Such conditions did not affect the perfection of the contract or prove simulation. Neither did the mortgage. Simulation occurs when an apparent contract is a declaration of a fictitious will, deliberately made by agreement of the parties, in order to produce, for the purpose of deception, the appearance of a juridical act which does not exist or is different from that which was really executed. 40 Such an intention is not apparent in the agreements. The intent to sell, on the other hand, is as clear as daylight. Petitioner alleges further that the deed of relinquishment of right did not give full effect to the two agreements to sell, because the preliminary clauses of the deed allegedly served only to give private respondent an interest in the property as a future owner thereof and to enable respondent to follow up petitioner's sales application. We disagree. Such an intention is not indicated in the deed. On the contrary, a real and factual sale is evident in paragraph 6 thereof, which states: "That the Nasipit Lumber Co., Inc., . . . is very much interested in acquiring the land covered by the aforecited application to be used for purposes of mechanized, farming" and the penultimate paragraph stating: ". . . VICENTE J. VILLAFLOR, hereby voluntarily renounce and relinquish whatever rights to, and interests I have in the land covered by my above-mentioned application in favor of the Nasipit Lumber Co., Inc." We also hold that no simulation is shown either in the letter, dated December 3, 1973, of the former field manager of private respondent, George Mear. A pertinent portion of the letter reads: (a)s regards your property at Acacia, San Mateo, I recall that we made some sort of agreement for the occupancy, but I no longer recall the details and I had forgotten whether or not we actually did occupy your land. But if, as you say, we did occupy it, then I am sure that the Company is obligated to pay a rental. The letter did not contain any express admission that private respondent was still leasing the land from petitioner as of that date. According to Mear, he could no longer recall the details of his agreement with petitioner. This cannot be read as evidence of the simulation of either the deed of relinquishment or the agreements to sell. It is evidence merely of an honest lack of recollection.

Petitioner also alleges that he continued to pay realty taxes on the land even after the execution of said contracts. This is immaterial because payment of realty taxes does not necessarily prove ownership, much less simulation of said contracts. 41 Nonpayment of the Consideration Did Not Prove Simulation Petitioner insists that nonpayment of the consideration in the contracts proves their simulation. We disagree. Nonpayment, at most, gives him only the right to sue for collection. Generally, in a contract of sale, payment of the price is a resolutory condition and the remedy of the seller is to exact fulfillment or, in case of a substantial breach, to rescind the contract under Article 1191 of the Civil Code. 42 However, failure to pay is not even a breach, but merely an event which prevents the vendor's obligation to convey title from acquiring binding force. 43 Petitioner also argues that Respondent Court violated evidentiary rules in upholding the ruling of the Director of Lands that petitioner did not present evidence to show private respondent's failure to pay him. We disagree. Prior to the amendment of the rules on evidence on March 14, 1989, Section 1, Rule 131, states that each party must prove his or her own affirmative allegations. 44 Thus, the burden of proof in any cause rested upon the party who, as determined by the pleadings or the nature of the case, asserts the affirmative of an issue and remains there until the termination of the action. 45 Although nonpayment is a negative fact which need not be proved, the party seeking payment is still required to prove the existence of the debt and the fact that it is already due. 46 Petitioner showed the existence of the obligation with the presentation of the contracts, but did not present any evidence that he demanded payment from private respondent. The demand letters dated January 2 and 5, 1974 (Exhs. "J" and "U"), adduced in evidence by petitioner, were for the payment of back rentals, damages to improvements and reimbursement of acquisition costs and realty taxes, not payment arising from the contract to sell. Thus, we cannot fault Respondent Court for adopting the finding of the Director of Lands that petitioner "offered no evidence to support his claim of nonpayment beyond his own self-serving assertions," as he did not even demand "payment, orally or in writing, of the five thousand (P5,000.00) pesos which was supposed to be due him since August 17, 1950, the date when the order of award was issued to Nasipit, and when his cause of action to recover payment had accrued." Nonpayment of the consideration in the contracts to sell or the deed of relinquishment was raised for the first time in the protest filed with the Bureau of Lands on January 31, 1974. But this protest letter was not the demand letter required by law. Petitioner alleges that the assignment of credit and the letter of the former field manager of private respondent are contemporaneous and subsequent acts revealing the nonpayment of the consideration. He maintains that the P12,000.00 credit assigned pertains to the P5,000.00 and P7,000.00 initial payments in the December 7, 1948 Agreement, because the balance of P12,000.00 was not yet "due and accruing." This is consistent, he argues, with the representation that private respondent was not interested in filing a sales application over the land in issue and that Nasipit was instead supporting petitioner's application thereto in Mear's letter to the Director of Lands dated February 22, 1950 (Exh. "X") 47 This argument is too strained to be acceptable. The assignment of credit did not establish the nondelivery of these initial payments of the total consideration. First, the assignment of credit happened on January 19, 1949, or a month after the signing of the December 7, 1948 Agreement and almost six months after the July 7, 1948 Agreement to Sell. Second, it does not overcome the recitation in the Agreement of December 7, 1948: ". . . a) The amount of SEVEN THOUSAND (P7,000.00) PESOS has already been paid by the Second Party to the First Party upon the execution of the Agreement to Sell, on July 7, 1948; b) The amount of FIVE THOUSAND (P5,000.00) PESOS shall be paid upon the signing of this present agreement; . . . . "

Aside from these facts, the Director of Lands found evidence of greater weight showing that payment was actually made: 48 . . . (T)here is strong evidence to show that said . . . (P12,000.00) had been paid by NASIPIT to Edward J. Nell Company by virtue of the Deed of Assignment of Credit executed by Villaflor (Exh. "41 NALCO") for the credit of the latter. Atty. Gabriel Banaag, resident counsel of NASIPIT . . . declared that it was he who notarized the "Agreement to Sell" (Exh. "F"); . . . that subsequently, in January 1949, Villaflor executed a Deed of Assignment of credit in favor of Edward J. Nell Company (Exh. "41 NALCO") whereby Villaflor ceded to the latter his receivable for NASIPIT corresponding to the remaining balance in the amount of . . . (P12,000.00) . . . of the total consideration . . . . ; He further testified that the said assignment . . . was communicated to NASIPIT under cover letter dated January 24, 1949 (Exh. "41-A") and not long thereafter, by virtue of the said assignment of credit, NASIPIT paid the balance . . . to Edward J. Nell Company (p. 58, ibid). Atty. Banaag's aforesaid testimony stand unrebutted; hence, must be given full weight and credit. xxx xxx xxx

The Director of Lands also found that there had been payment of the consideration in the relinquishment of rights: 49 On the other hand, there are strong and compelling reasons to presume that Villaflor had already been paid the amount of Five Thousand (P5,000.00) Pesos. First, . . . What is surprising, however, is not so much his claims consisting of gigantic amounts as his having forgotten to adduce evidence to prove his claim of non-payment of the Five Thousand (P5,000.00) Pesos during the investigation proceedings when he had all the time and opportunity to do so. . . . . The fact that he did not adduce or even attempt to adduce evidence in support thereof shows either that he had no evidence to offer of that NASIPIT had already paid him in fact. What is worse is that Villaflor did not even bother to command payment, orally or in writing, of the Five Thousand (P5,000.00) Pesos which was supposed to be due him since August 17, 1950, the date when the order of award was issued to Nasipit, and when his cause of action to recover payment had accrued. The fact that he only made a command for payment on January 31, 1974, when he filed his protest or twenty-four (24) years later is immediately nugatory of his claim for non-payment. But Villaflor maintains that he had no knowledge or notice that the order of award had already been issued to NASIPIT as he had gone to Indonesia and he had been absent from the Philippines during all those twenty-four (24) years. This of course taxes credulity. . . . . . . It is more in keeping with the ordinary course of things that he should have acquired information as to what was transpiring in his affairs in Manila . . . . Second, it should be understood that the condition that NASIPIT should reimburse Villaflor the amount of Five Thousand (P5,000.00) Pesos upon its receipt of the order of award was fulfilled as said award was issued to NASIPIT on August 17, 1950. The said deed of relinquishment was prepared and notarized in Manila with Villaflor and NASIPIT signing the instrument also in Manila. Now, considering that Villaflor is presumed to be more assiduous in following up with the Bureau of Lands the expeditious issuance of the order of award as the (consideration) would depend on the issuance of said order to award NASIPIT, would it not be reasonable to believe that Villaflor was at hand when the award was issued to NASIPIT on August 17, 1950, or barely a day which he executed the deed of relinquishment on August 16, 1950, in Manila? . . . . Third, on the other hand, NASIPIT has in his possession a sort of "order" upon itself (the deed of relinquishment wherein he(sic) obligated itself to reimburse or pay Villaflor the . . . consideration of the relinquishment upon its receipt of the order of award) for the payment of the aforesaid amount the

moment the order of award is issued to it. It is reasonable to presume that NASIPIT has paid the (consideration) to Villaflor. xxx xxx xxx

. . . (I)t was virtually impossible for NASIPIT, after the lapse of the intervening 24 years, to be able to cope up with all the records necessary to show that the consideration for the deed of relinquishment had been fully paid. To expect NASIPIT to keep intact all records pertinent to the transaction for the whole quarter of a century would be to require what even the law does not. Indeed, even the applicable law itself (Sec. 337, National Internal Revenue Code) requires that all records of corporations be preserved for only a maximum of five years. NASIPIT may well have added that at any rate while there are transactions where the proper evidence is impossible or extremely difficult to produce after the lapse of time . . . the law creates presumptions of regularity in favor of such transactions (20 Am. Jur. 232) so that when the basic fact is established in an action the existence of the presumed fact must be assumed by force of law. (Rule 13, Uniform Rules of Evidence; 9 Wigmore, Sec. 2491). The Court also notes that Mear's letter of February 22, 1950 was sent six months prior to the execution of the deed of relinquishment of right. At the time of its writing, private respondent had not perfected its ownership of the land to be able to qualify as a sales applicant. Besides, although he was a party to the July 7, 1948 Agreement to Sell, Mear was not a signatory to the Deed of Relinquishment or to the December 7, 1948 Agreement to Sell. Thus, he cannot be expected to know the existence of and the amendments to the later contracts. These circumstances explain the mistaken representations, not misrepresentations, in said letter. Lack of Notice of the Award Petitioner insists that private respondent suppressed evidence, pointing to his not having been notified of the Order of Award dated August 17, 1950. 50 At the bottom of page 2 of the order, petitioner was not listed as one of the parties who were to be furnished a copy by Director of Lands Jose P. Dans. Petitioner also posits that Public Land Inspector Sulpicio A. Taeza irregularly received the copies for both private respondent and the city treasurer of Butuan City. The lack of notice for petitioner can be easily explained. Plainly, petitioner was not entitled to said notice of award from the Director of Lands, because by then, he had already relinquished his rights to the disputed land in favor of private respondent. In the heading of the order, he was referred to as sales applicant-assignor. In paragraph number 4, the order stated that, on August 16, 1950, he relinquished his rights to the land subject of the award to private respondent. From such date, the sales application was considered to be a matter between the Bureau of Lands and private respondent only. Considering these facts, the failure to give petitioner a copy of the notice of the award cannot be considered as suppression of evidence. 51 Furthermore, this order was in fact available to petitioner and had been referred to by him since January 31, 1974 when he filed his protest with the Bureau of Lands. 52 Third Issue: Private Respondent Qualified for an Award of Public Land Petitioner asserts that private respondent was legally disqualified from acquiring the parcels of land in question because it was not authorized by its charter to acquire disposable public agricultural lands under Sections 121, 122 and 123 of the Public Land Act, prior to its amendment by P.D. No. 763. We disagree. The requirements for a sales application under the Public Land Act are: (1) the possession of the qualifications required by said Act (under Section 29) and (2) the lack of the disqualifications mentioned therein (under Sections 121, 122, and 123). However, the transfer of ownership via the two agreements dated July 7 and December 7, 1948 and the relinquishment of rights, being private contracts, were binding only between petitioner and private respondent. The Public Land Act finds no relevance because the disputed land was covered by said Act only after the issuance of the order of award in favor of private respondent. Thus, the possession of any disqualification by private respondent under said Act is

immaterial to the private contracts between the parties thereto. (We are not, however, suggesting a departure from the rule that laws are deemed written in contracts.) Consideration of said provisions of the Act will further show their inapplicability to these contracts. Section 121 of the Act pertains to acquisitions of public land by a corporation from a grantee, but petitioner never became a grantee of the disputed land. On the other hand, private respondent itself was the direct grantee. Sections 122 and 123 disqualify corporations, which are not authorized by their charter, from acquiring public land; the records do not show that private respondent was not so authorized under its charter. Also, the determination by the Director of Lands and the Minister of Natural Resources of the qualification of private respondent to become an awardee or grantee under the Act is persuasive on Respondent Court. In Espinosa vs. Makalintal, 53 the Court ruled that, by law, the powers of the Secretary of Agriculture and Natural Resources regarding the disposition of public lands including the approval, rejection, and reinstatement of applications are of executive and administrative nature. (Such powers, however, do not include the judicial power to decide controversies arising from disagreements in civil or contractual relations between the litigants.) Consequently, the determination of whether private respondent is qualified to become an awardee of public land under C.A. 141 by sales application is included therein. All told, the only disqualification that can be imputed to private respondent is the prohibition in the 1973 Constitution against the holding of alienable lands of the public domain by corporations. 54 However, this Court earlier settled the matter, ruling that said constitutional prohibition had no retroactive effect and could not prevail over a vested right to the land. In Ayog vs. Cusi, Jr., 55 this Court declared: We hold that the said constitutional prohibition has no retroactive application to the sales application of Bian Development Co., Inc. because it had already acquired a vested right to the land applied for at the time the 1973 Constitution took effect. That vested right has to be respected. It could not be abrogated by the new Constitution. Section 2, Article XIII of the 1935 Constitution allows private corporations to purchase public agricultural lands not exceeding one thousand and twenty-four hectares. Petitioner's prohibition action is barred by the doctrine of vested rights in constitutional law. "A right is vested when the right to enjoyment has become the property of some particular person or persons as a present interest." (16 C.J.S. 1173). It is "the privilege to enjoy property legally vested, to enforce contracts, and enjoy the rights of property conferred by existing law" (12 C.J. 955, Note 46, No. 6) or "some right or interest in property which has become fixed and established and is no longer open to doubt or controversy" (Downs vs. Blount, 170 Fed. 15, 20, cited in Balboa vs. Farrales, 51 Phil. 498, 502). The due process clause prohibits the annihilation of vested rights. "A state may not impair vested rights by legislative enactment, by the enactment or by the subsequent repeal of a municipal ordinance, or by a change in the constitution of the State, except in a legitimate exercise of the police power" (16 C.J.S. 1177-78). It has been observed that, generally, the term "vested right" expresses the concept of present fixed interest, which in right reason and natural justice should be protected against arbitrary State action, or an innately just an imperative right which an enlightened free society, sensitive to inherent and irrefragable individual rights, cannot deny (16 C.J.S. 1174, Note 71, No. 5, citing Pennsylvania Greyhound Lines, Inc. vs. Rosenthal, 192 Atl. 2nd 587). Secretary of Justice Abad Santos in his 1973 opinion ruled that where the applicant, before the Constitution took effect, had fully complied with all his obligations under the Public Land Act in order to entitle him to a sales patent, there would seem to be no legal or equitable justification for refusing to issue or release the sales patent (p. 254, Rollo).

In Opinion No. 140, series of 1974, he held that as soon as the applicant had fulfilled the construction or cultivation requirements and has fully paid the purchase price, he should be deemed to have acquired by purchase the particular tract of land and to him the area limitation in the new Constitution would not apply. In Opinion No. 185, series of 1976, Secretary Abad Santos held that where the cultivation requirements were fulfilled before the new Constitution took effect but the full payment of the price was completed after January 17, 1973, the applicant was, nevertheless, entitled to a sales patent (p. 256, Rollo). Such a contemporaneous construction of the constitutional prohibition by a high executive official carries great weight and should be accorded much respect. It is a correct interpretation of section 11 of Article XIV. In the instant case, it is incontestable that prior to the effectivity of the 1973 Constitution the right of the corporation to purchase the land in question had become fixed and established and was no longer open to doubt or controversy. Its compliance with the requirements of the Public Land Law for the issuance of a patent had the effect of segregating the said land from the public domain. The corporation's right to obtain a patent for that land is protected by law. It cannot be deprived of that right without due process (Director of Lands vs. CA, 123 Phil. 919). The Minister of Natural Resources ruled, and we agree, that private respondent was similarly qualified to become an awardee of the disputed land because its rights to it vested prior to the effectivity of the 1973 Constitution: 56 Lastly, appellee has acquired a vested right to the subject area and, therefore, is deemed not affected by the new constitutional provision that no private corporation may hold alienable land of the public domain except by lease. It may be recalled that the Secretary of Justice in his Opinion No. 64, series of 1973, had declared, to wit: On the other hand, with respect to sales application ready for issuance of sales patent, it is my opinion that where the applicant had, before, the constitution took effect, fully complied with all his obligations under the Public Land act in order to entitle him to sales patent, there would seem to be not legal or equitable justification for refusing to issue or release the sales patent. Implementing the aforesaid Opinion No. 64 . . . , the then Secretary of Agriculture and Natural Resources issued a memorandum, dated February 18, 1974, which pertinently reads as follows: In the implementation of the foregoing opinion, sales application of private individuals covering areas in excess of 24 hectares and those of corporations, associations, or partnership which fall under any of the following categories shall be given due course and issued patents, to wit: Sales application for fishponds and for agricultural purposes (SFA, SA and IGPSA) wherein prior to January 17, 1973, a. the land covered thereby was awarded;

b. cultivation requirements of law were complied with as shown by investigation reports submitted prior to January 17, 1973; c. land was surveyed and survey returns already submitted to the Director of Lands for verification and approval; and d. purchase price was fully paid.

From the records, it is evident that the aforestated requisites have been complied with by appellee long before January 17, 1973, the effectivity of the New Constitution. To restate, the disputed area was awarded to appellee on August 17, 1950, the purchase price was fully paid on July 26, 1951, the cultivation requirements were complied with as per investigation report dated December 31, 1949, and the land was surveyed under Pls-97. The same finding was earlier made by the Director of Lands: 57 It is further contended by Villaflor that Nasipit has no juridical personality to apply for the purchase of public lands for agricultural purposes. The records clearly show, however, that since the execution of the deed of relinquishment of August 16, 1950, in favor of Nasipit, Villaflor has always considered and recognized Nasipit as having the juridical personality to acquire public lands for agricultural purposes. In the deed of relinquishment . . . , it is stated: 6. That the Nasipit Lumber Co., Inc., a corporation duly organized in accordance with the laws of the Philippines, . . . . Even this Office had not failed to recognize the juridical personality of Nasipit to apply for the purchase of public lands . . . when it awarded to it the land so relinquished by Villaflor (Order of Award dated August 17, 1950) and accepted its application therefor. At any rate, the question whether an applicant is qualified to apply for the acquisition of public lands is a matter between the applicant and this Office to decide and which a third party like Villaflor has no personality to question beyond merely calling the attention of this Office thereto. Needless to say, we also agree that the November 8, 1946 Lease Agreement between petitioner and private respondent had been terminated by the agreements to sell and the relinquishment of rights. By the time the verbal leases were allegedly made in 1951 and 1955, 58 the disputed land had already been acquired and awarded to private respondent. In any event, petitioner's cause of action on these alleged lease agreements prescribed long before he filed Civil Case No. 2072-III, as correctly found by the trial and appellate courts. 59 Thus, it is no longer important, in this case, to pass upon the issue of whether or not amendments to a lease contract can be proven by parol evidence. The same holds true as regards the issue of forum-shopping. All in all, petitioner has not provided us sufficient reason to disturb the cogent findings of the Director of Lands, the Minister of Natural Resources, the trial court and the Court of Appeals. WHEREFORE, the petition is hereby DISMISSED. SO ORDERED.